x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December
31, 2009
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period
from to
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DELAWARE
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95-4840775 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification Number) |
Title of each class
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Name of each exchange on which
registered
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Common Stock, $1 par value
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New York Stock Exchange |
Yes x | No o |
Yes o | No x |
Yes x | No o |
Yes x | No o |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
Yes o | No x |
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EX-4.P | ||||||||
EX-10.i | ||||||||
EX-10.I.I | ||||||||
EX-10.I.II | ||||||||
EX-10.I.III | ||||||||
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EX-23 | ||||||||
EX-24 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 | ||||||||
EX-32.2 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
ii
n | In 1994, Northrop Corporation acquired Grumman Corporation (Grumman) and was renamed Northrop Grumman Corporation. Grumman was a premier military aircraft systems integrator and builder of the Lunar Module that first delivered men to the surface of the moon. |
n | In 1996, we acquired the defense and electronics businesses of Westinghouse Electric Corporation, a world leader in the development and production of sophisticated radar and other electronic systems for the nations defense, civil aviation, and other international and domestic applications. |
n | In 2001, we acquired Litton Industries (Litton), a global electronics and information technology enterprise, and one of the nations leading full-service design, engineering, construction, and life cycle supporters of major surface ships for the United States (U.S.) Navy, U.S. Coast Guard, and international navies. |
n | Also in 2001, we acquired Newport News Shipbuilding (Newport News). Newport News is the nations sole designer, builder and refueler of nuclear-powered aircraft carriers and one of only two companies capable of designing and building nuclear-powered submarines. |
n | In 2002, we acquired TRW Inc. (TRW), a leading developer of military and civil space systems and satellite payloads, as well as a leading global integrator of complex, mission-enabling systems and services. |
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-3-
-4-
-5-
-6-
Owned | Pending | Total | ||||||||||
U.S. patents
|
3,144 | 405 | 3,549 | |||||||||
Foreign patents
|
2,188 | 556 | 2,744 | |||||||||
Total
|
5,332 | 961 | 6,293 | |||||||||
-7-
-8-
-9-
n | We depend heavily on a single customer, the U.S. Government, for a substantial portion of our business, including programs subject to security classification restrictions on information, and changes affecting this customers capacity to do business with us could have a material adverse effect on us or our prospects. |
-10-
n | Contracts with the U.S. Government are subject to uncertain levels of funding, modification due to changes in customer priorities and potential termination. |
n | As a U.S. Government contractor, we are subject to a number of procurement regulations and could be adversely affected by changes in regulations or any negative findings from a U.S. audit or investigation. |
-11-
n | Competition within our markets and an increase in bid protests may reduce our revenues and market share. |
n | Our future success depends, in part, on our ability to develop new products and new technologies and maintain a qualified workforce to meet the needs of current and future customers. |
-12-
n | Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise or are dependent upon factors not wholly within our control. Failure to meet these obligations could adversely affect our profitability and future prospects. |
n | Contract cost growth on fixed-price and other contracts that cannot be justified as an increase in contract value due from customers exposes us to reduced profitability and the potential loss of future business. |
-13-
n | Our earnings and margins depend, in part, on our ability to perform under contracts and on subcontractor performance as well as raw material and component availability and pricing. |
-14-
n | Our business is subject to disruption caused by natural disasters and other factors that could adversely affect our profitability and our overall financial position. |
n | We use estimates when accounting for contracts. Changes in estimates could affect our profitability and our overall financial position. |
n | Our international business is subject to greater risks sometimes associated with doing business in foreign countries. |
n | Our reputation and our ability to do business may be impacted by the improper conduct of employees, agents or business partners. |
-15-
n | Our business could be negatively impacted by security threats and other disruptions. |
n | Our nuclear operations subject us to various environmental, regulatory, financial and other risks. |
n | potential liabilities relating to harmful effects on the environment and human health resulting from nuclear operations and the storage, handling and disposal of radioactive materials; | |
n | unplanned expenditures relating to maintenance, operation, security and repair, including repairs required by the Nuclear Regulatory Commission; | |
n | limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with nuclear operations; and | |
n | potential liabilities arising out of a nuclear incident whether or not it is within our control. |
n | Unforeseen environmental costs could have a material adverse effect on our financial condition or results of operations. |
-16-
n | We are subject to various claims and litigation that could ultimately be resolved against us requiring material future cash payments and/or future material charges against our operating income and materially impairing our financial position. |
n | We may be unable to adequately protect our intellectual property rights, which could affect our ability to compete. |
-17-
n | Our insurance coverage may be inadequate to cover all of our significant risks or our insurers may deny coverage of material losses we incur, which could adversely affect our profitability and overall financial position. |
n | Changes in future business conditions could cause business investments and/or recorded goodwill to become impaired, resulting in substantial losses and write-downs that would reduce our operating income. |
n | Anticipated benefits of mergers, acquisitions, joint ventures or strategic alliances may not be realized. |
n | Market volatility and adverse capital and credit market conditions may affect our ability to access cost-effective sources of funding and expose us to risks associated with the financial viability of suppliers and the ability of counterparties to perform on financial instruments. |
-18-
n | Pension and medical expenses associated with our retirement benefit plans may fluctuate significantly depending upon changes in actuarial assumptions, future market performance of plan assets, future trends in health care costs and legislative or other regulatory actions. |
n | Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability. |
-19-
U.S. Government
|
||||||||||||||||
Square feet (in thousands) | Owned | Leased | Owned/Leased | Total | ||||||||||||
Aerospace Systems
|
6,223 | 5,981 | 2,023 | 14,227 | ||||||||||||
Electronic Systems
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8,117 | 3,521 | 11,638 | |||||||||||||
Information Systems
|
684 | 7,863 | 8,547 | |||||||||||||
Shipbuilding
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13,724 | 3,210 | 163 | 17,097 | ||||||||||||
Technical Services
|
128 | 1,951 | 5 | 2,084 | ||||||||||||
Corporate
|
633 | 861 | 1,494 | |||||||||||||
Total
|
29,509 | 23,387 | 2,191 | 55,087 | ||||||||||||
-20-
-21-
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
2009 | 2008 | |||||||||||||||||||||||
January to March
|
$ | 49.72 | to | $ | 34.35 | $ | 82.57 | to | $ | 76.41 | ||||||||||||||
April to June
|
$ | 50.54 | to | $ | 43.98 | $ | 79.12 | to | $ | 66.53 | ||||||||||||||
July to September
|
$ | 52.75 | to | $ | 43.23 | $ | 71.68 | to | $ | 60.54 | ||||||||||||||
October to December
|
$ | 56.84 | to | $ | 49.59 | $ | 56.86 | to | $ | 34.20 | ||||||||||||||
2009 | 2008 | |||||||
January to March
|
$ | 0.40 | $ | 0.37 | ||||
April to June
|
0.43 | 0.40 | ||||||
July to September
|
0.43 | 0.40 | ||||||
October to December
|
0.43 | 0.40 | ||||||
$ | 1.69 | $ | 1.57 | |||||
-22-
(1) | Assumes $100 invested at the close of business on December 31, 2004, in Northrop Grumman Corporation common stock, Standard & Poors (S&P) 500 Index, and the S&P Aerospace Defense Index. | |
(2) | The cumulative total return assumes reinvestment of dividends. | |
(3) | The S&P Aerospace Defense Index is comprised of The Boeing Company, General Dynamics Corporation, Goodrich Corporation, Honeywell International Inc., ITT Corporation, L-3 Communications, Lockheed Martin Corporation, Northrop Grumman Corporation, Precision Castparts Corporation, Raytheon Company, Rockwell Collins, Inc., and United Technologies Corporation. | |
(4) | The total return is weighted according to market capitalization of each company at the beginning of each year. |
-23-
Approximate
|
||||||||||||||||
Dollar Value
|
||||||||||||||||
Total Numbers
|
of Shares
|
|||||||||||||||
of Shares
|
that May
|
|||||||||||||||
Purchased
|
Yet Be
|
|||||||||||||||
as Part
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Purchased
|
|||||||||||||||
of Publicly
|
Under the
|
|||||||||||||||
Total Number
|
Average Price
|
Announced
|
Plans or
|
|||||||||||||
of Shares
|
Paid per
|
Plans or
|
Programs
|
|||||||||||||
Period | Purchased (1) | Share (2) | Programs | ($ in millions) | ||||||||||||
October 1 through October 31, 2009
|
1,247,600 | $ | 51.01 | 1,247,600 | $ | 218 | ||||||||||
November 1 through November 30, 2009
|
2,744,855 | 55.13 | 2,744,855 | 1,167 | ||||||||||||
December 1 through December 31, 2009
|
4,361,050 | 55.70 | 4,361,050 | 924 | ||||||||||||
Total
|
8,353,505 | $ | 54.81 | 8,353,505 | $ | 924 | (1) | |||||||||
(1) | On December 19, 2007, our board of directors authorized a share repurchase program of up to $2.5 billion of our outstanding common stock. On November 5, 2009, our board of directors authorized an addition to the December 19, 2007, authorization in the amount of $1.1 billion. As of December 31, 2009, we have $924 million authorized for share repurchases. |
(2) | Includes commissions paid. |
-24-
Item 6. | Selected Financial Data |
Year Ended December 31 | ||||||||||||||||||||
$ in millions, except per share | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||
Sales and Service Revenues
|
||||||||||||||||||||
U.S. Government
|
$ | 31,037 | $ | 29,320 | $ | 27,361 | $ | 25,906 | $ | 26,130 | ||||||||||
Other customers
|
2,718 | 2,995 | 2,980 | 2,749 | 2,611 | |||||||||||||||
Total revenues
|
$ | 33,755 | $ | 32,315 | $ | 30,341 | $ | 28,655 | $ | 28,741 | ||||||||||
Goodwill impairment
|
$ | (3,060 | ) | |||||||||||||||||
Operating income (loss)
|
$ | 2,483 | (263 | ) | $ | 2,925 | $ | 2,405 | $ | 2,136 | ||||||||||
Earnings (loss) from continuing operations
|
1,573 | (1,379 | ) | 1,751 | 1,535 | 1,356 | ||||||||||||||
Basic earnings (loss) per share, from continuing operations
|
$ | 4.93 | $ | (4.12 | ) | $ | 5.12 | $ | 4.44 | $ | 3.80 | |||||||||
Diluted earnings (loss) per share, from continuing operations
|
4.87 | (4.12 | ) | 5.01 | 4.28 | 3.73 | ||||||||||||||
Cash dividends declared per common share
|
1.69 | 1.57 | 1.48 | 1.16 | 1.01 | |||||||||||||||
Year-End Financial Position
|
||||||||||||||||||||
Total assets
|
$ | 30,252 | $ | 30,197 | $ | 33,373 | $ | 32,009 | $ | 34,214 | ||||||||||
Notes payable to banks and long-term debt
|
4,294 | 3,944 | 4,055 | 4,162 | 5,145 | |||||||||||||||
Total long-term obligations and preferred
stock
(1)
|
10,580 | 10,828 | 9,235 | 8,622 | 9,399 | |||||||||||||||
Financial Metrics
|
||||||||||||||||||||
Free cash
flow
(2)
|
$ | 1,411 | $ | 2,420 | $ | 2,072 | $ | 947 | $ | 1,811 | ||||||||||
Notes payable to banks and long-term debt as a percentage of
shareholders equity
|
33.8 | % | 33.1 | % | 22.9 | % | 25.0 | % | 30.6 | % | ||||||||||
Other Information
|
||||||||||||||||||||
Company-sponsored research and development expenses
|
$ | 610 | $ | 564 | $ | 522 | $ | 559 | $ | 522 | ||||||||||
Maintenance and repairs
|
481 | 439 | 331 | 354 | 424 | |||||||||||||||
Payroll and employee benefits
|
14,751 | 13,036 | 12,301 | 11,918 | 11,654 | |||||||||||||||
Number of employees at year-end
|
120,700 | 123,600 | 121,700 | 121,400 | 122,800 | |||||||||||||||
(1) | In 2008, all of the shares of preferred stock were converted or redeemed. See Preferred Stock in Part II, Item 5 for more information. | |
(2) | Free cash flow is a non-GAAP financial measure and is calculated as net cash provided by operations less capital expenditures and outsourcing contract and related software costs. Outsourcing contract and related software costs are similar to capital expenditures in that the contract costs represent incremental external costs or certain specific internal costs that are directly related to the contract acquisition and transition/set-up. These outsourcing contract and related software costs are deferred and expensed over the contract life. See Liquidity and Capital Resources Free Cash Flow in Part II, Item 7 for more information on this measure. |
-25-
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
n | Contributed voluntary pension pre-funding amounts totaling $800 million. | |
n | Issued $850 million of unsecured senior obligations. | |
n | Repurchased 23.1 million common shares for $1.1 billion | |
n | Increased share repurchase authorization by $1.1 billion. |
n | Sold our Advisory Services Division (ASD) for $1.65 billion. | |
n | Delivered 6 ships in 6 different ship classes, USS Dewey (DDG 105), USS New York (LPD 21), USS Makin Island (LHD 8), New Mexico (SSN 779) and USS George H. W. Bush (CVN 77) to the U.S. Navy and USCGC Waesche (NSC 2) to the U.S Coast Guard. Completed the USS Carl Vinson (CVN 70) refueling and complex overhaul and redelivered the ship to the U.S. Navy. | |
n | Launched two Space Tracking and Surveillance System (STSS) Demonstrator satellites aboard a Delta II rocket. | |
n | Reached final settlement with the Internal Revenue Service (IRS) Office of Appeals on tax returns for the years ended 2001 through 2003. | |
n | Jointly settled the Department of Justice microelectronics claim and our claim against the U.S. Government for the termination of the TSSAM program. | |
n | Increased quarterly common stock dividend from $.40 per share to $.43 per share. | |
n | Streamlined our organizational structure from seven to five operating segments. |
-26-
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-29-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Sales and service revenues
|
$ | 1,536 | $ | 1,625 | $ | 1,691 | ||||||
Earnings from discontinued operations
|
149 | 146 | 60 | |||||||||
Income tax expense
|
(54 | ) | (55 | ) | (21 | ) | ||||||
Earnings, net of tax
|
$ | 95 | $ | 91 | $ | 39 | ||||||
Gain on divestitures
|
446 | 66 | ||||||||||
Income tax expense on gain
|
(428 | ) | (40 | ) | ||||||||
Gain from discontinued operations, net of tax
|
$ | 18 | $ | 26 | ||||||||
Earnings from discontinued operations, net of tax
|
$ | 113 | $ | 117 | $ | 39 | ||||||
-30-
U.S.
|
Other
|
Percent
|
||||||||||||||
($ in millions) | Government | Customers | Total | of Total | ||||||||||||
Flexibly priced
|
$ | 22,573 | $ | 149 | $ | 22,722 | 67 | % | ||||||||
Firm fixed-price
|
8,464 | 2,569 | 11,033 | 33 | % | |||||||||||
Total
|
$ | 31,037 | $ | 2,718 | $ | 33,755 | 100 | % | ||||||||
-31-
-32-
-33-
-34-
1-Percentage-
|
1-Percentage-
|
|||||||
$ in millions | Point Increase | Point Decrease | ||||||
Increase (Decrease) From Change In Health Care Cost Trend
Rates To
|
||||||||
Post-retirement benefit expense
|
$ | 7 | $ | (8 | ) | |||
Post-retirement benefit liability
|
81 | (91 | ) | |||||
Year Ended December 31 | ||||||||||||
$ in millions, except per share | 2009 | 2008 | 2007 | |||||||||
Sales and service revenues
|
$ | 33,755 | $ | 32,315 | $ | 30,341 | ||||||
Cost of sales and service revenues
|
28,130 | 26,375 | 24,354 | |||||||||
General and administrative expenses
|
3,142 | 3,143 | 3,062 | |||||||||
Goodwill impairment
|
3,060 | |||||||||||
Operating income (loss)
|
2,483 | (263 | ) | 2,925 | ||||||||
Interest expense
|
281 | 295 | 336 | |||||||||
Other, net
|
64 | 38 | 17 | |||||||||
Federal and foreign income taxes
|
693 | 859 | 855 | |||||||||
Diluted earnings (loss) per share from continuing operations
|
4.87 | (4.12 | ) | 5.01 | ||||||||
Net cash provided by operating activities
|
2,133 | 3,211 | 2,890 | |||||||||
-35-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Product sales
|
$ | 20,914 | $ | 19,634 | $ | 18,577 | ||||||
Service revenues
|
12,841 | 12,681 | 11,764 | |||||||||
Sales and service revenues
|
$ | 33,755 | $ | 32,315 | $ | 30,341 | ||||||
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Cost of Sales and Service Revenues
|
||||||||||||
Cost of product sales
|
$ | 16,591 | $ | 15,490 | $ | 14,340 | ||||||
% of product sales
|
79.3 | % | 78.9 | % | 77.2 | % | ||||||
Cost of service revenues
|
11,539 | 10,885 | 10,014 | |||||||||
% of service revenues
|
89.9 | % | 85.8 | % | 85.1 | % | ||||||
General and administrative expenses
|
3,142 | 3,143 | 3,062 | |||||||||
% of total sales and service revenues
|
9.3 | % | 9.7 | % | 10.1 | % | ||||||
Goodwill impairment
|
3,060 | |||||||||||
Cost of sales and service revenues
|
$ | 31,272 | $ | 32,578 | $ | 27,416 | ||||||
-36-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Segment operating income (loss)
|
$ | 2,929 | $ | (299 | ) | $ | 3,025 | |||||
Unallocated expenses
|
(111 | ) | (157 | ) | (209 | ) | ||||||
Net pension adjustment
|
(311 | ) | 263 | 127 | ||||||||
Royalty income adjustment
|
(24 | ) | (70 | ) | (18 | ) | ||||||
Total operating income (loss)
|
$ | 2,483 | $ | (263 | ) | $ | 2,925 | |||||
-37-
-38-
-39-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Sales and Service Revenues
|
||||||||||||
Aerospace Systems
|
$ | 10,419 | $ | 9,825 | $ | 9,234 | ||||||
Electronic Systems
|
7,671 | 7,048 | 6,466 | |||||||||
Information Systems
|
8,611 | 8,205 | 7,758 | |||||||||
Shipbuilding
|
6,213 | 6,145 | 5,788 | |||||||||
Technical Services
|
2,776 | 2,535 | 2,422 | |||||||||
Intersegment eliminations
|
(1,935 | ) | (1,443 | ) | (1,327 | ) | ||||||
Total sales and service revenues
|
$ | 33,755 | $ | 32,315 | $ | 30,341 | ||||||
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Operating Income (Loss)
|
||||||||||||
Aerospace Systems
|
$ | 1,071 | $ | 416 | $ | 919 | ||||||
Electronic Systems
|
969 | 947 | 809 | |||||||||
Information Systems
|
631 | 629 | 725 | |||||||||
Shipbuilding
|
299 | (2,307 | ) | 538 | ||||||||
Technical Services
|
161 | 144 | 139 | |||||||||
Intersegment eliminations
|
(202 | ) | (128 | ) | (105 | ) | ||||||
Total segment operating income (loss)
|
2,929 | (299 | ) | 3,025 | ||||||||
Non-segment factors affecting operating income (loss)
|
||||||||||||
Unallocated expenses
|
(111 | ) | (157 | ) | (209 | ) | ||||||
Net pension adjustment
|
(311 | ) | 263 | 127 | ||||||||
Royalty income adjustment
|
(24 | ) | (70 | ) | (18 | ) | ||||||
Total operating income (loss)
|
$ | 2,483 | $ | (263 | ) | $ | 2,925 | |||||
-40-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Sales and Service Revenues
|
$ | 10,419 | $ | 9,825 | $ | 9,234 | ||||||
Segment Operating Income
|
1,071 | 416 | 919 | |||||||||
As a percentage of segment sales
|
10.3 | % | 4.2 | % | 10.0 | % | ||||||
-41-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Sales and Service Revenues
|
$ | 7,671 | $ | 7,048 | $ | 6,466 | ||||||
Segment Operating Income
|
969 | 947 | 809 | |||||||||
As a percentage of segment sales
|
12.6 | % | 13.4 | % | 12.5 | % | ||||||
-42-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Sales and Service Revenues
|
$ | 8,611 | $ | 8,205 | $ | 7,758 | ||||||
Segment Operating Income
|
631 | 629 | 725 | |||||||||
As a percentage of segment sales
|
7.3 | % | 7.7 | % | 9.3 | % | ||||||
-43-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Sales and Service Revenues
|
$ | 6,213 | $ | 6,145 | $ | 5,788 | ||||||
Segment Operating Income
|
299 | (2,307 | ) | 538 | ||||||||
As a percentage of segment sales
|
4.8 | % | (37.5 | )% | 9.3 | % | ||||||
-44-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Sales and Service Revenues
|
$ | 2,776 | $ | 2,535 | $ | 2,422 | ||||||
Segment Operating Income
|
161 | 144 | 139 | |||||||||
As a percentage of segment sales
|
5.8 | % | 5.7 | % | 5.7 | % | ||||||
-45-
2009 | 2008 | |||||||||||||||||||||||
Total
|
Total
|
|||||||||||||||||||||||
$ in millions | Funded | Unfunded | Backlog | Funded | Unfunded | Backlog | ||||||||||||||||||
Aerospace Systems
|
$ | 8,320 | $ | 16,063 | $ | 24,383 | $ | 7,648 | $ | 22,883 | $ | 30,531 | ||||||||||||
Electronic Systems
|
7,591 | 2,784 | 10,375 | 8,391 | 2,124 | 10,515 | ||||||||||||||||||
Information Systems
|
4,319 | 4,508 | 8,827 | 4,480 | 3,865 | 8,345 | ||||||||||||||||||
Shipbuilding
|
11,294 | 9,151 | 20,445 | 14,205 | 8,148 | 22,353 | ||||||||||||||||||
Technical Services
|
2,352 | 2,804 | 5,156 | 1,840 | 2,831 | 4,671 | ||||||||||||||||||
Total backlog
|
$ | 33,876 | $ | 35,310 | $ | 69,186 | $ | 36,564 | $ | 39,851 | $ | 76,415 | ||||||||||||
-46-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Net earnings
|
$ | 1,686 | $ | (1,262 | ) | $ | 1,790 | |||||
(Earnings) from discontinued operations
|
(95 | ) | (91 | ) | (39 | ) | ||||||
Gain on sale of business
|
(446 | ) | (58 | ) | ||||||||
Impairment of goodwill
|
3,060 | |||||||||||
Other non-cash
items
(1)
|
951 | 993 | 1,038 | |||||||||
Retiree benefit funding in excess of expense
|
(20 | ) | (167 | ) | (50 | ) | ||||||
Trade working capital (increase) decrease
|
(45 | ) | 563 | 73 | ||||||||
Cash provided by discontinued operations
|
102 | 173 | 78 | |||||||||
Net cash provided by operating activities
|
$ | 2,133 | $ | 3,211 | $ | 2,890 | ||||||
(1) | Includes depreciation & amortization, stock based compensation expense and deferred taxes. |
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Net cash provided by operating activities
|
$ | 2,133 | $ | 3,211 | $ | 2,890 | ||||||
Less:
|
||||||||||||
Capital expenditures
|
(654 | ) | (681 | ) | (681 | ) | ||||||
Outsourcing contract & related software costs
|
(68 | ) | (110 | ) | (137 | ) | ||||||
Free cash flow from operations
|
$ | 1,411 | $ | 2,420 | $ | 2,072 | ||||||
-47-
-48-
Fitch | Moodys | Standard & Poors | ||||||||||
Northrop Grumman Corporation
|
BBB+ | Baa2 | BBB | |||||||||
Northrop Grumman Systems Corporation
|
BBB+ | Baa1 | BBB | + |
-49-
2011 -
|
2013 -
|
2015 and
|
||||||||||||||||||
$ in millions | Total | 2010 | 2012 | 2014 | beyond | |||||||||||||||
Long-term debt
|
$ | 4,258 | $ | 91 | $ | 780 | $ | 354 | $ | 3,033 | ||||||||||
Interest payments on long-term debt
|
3,535 | 285 | 481 | 452 | 2,317 | |||||||||||||||
Operating leases
|
1,700 | 382 | 542 | 342 | 434 | |||||||||||||||
Purchase
obligations
(1)
|
9,520 | 6,474 | 2,090 | 885 | 71 | |||||||||||||||
Other long-term
liabilities
(2)
|
1,472 | 305 | 484 | 250 | 433 | |||||||||||||||
Total contractual obligations
|
$ | 20,485 | $ | 7,537 | $ | 4,377 | $ | 2,283 | $ | 6,288 | ||||||||||
(1) | A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. These amounts are primarily comprised of open purchase order commitments to vendors and subcontractors pertaining to funded contracts. | |
(2) | Other long-term liabilities primarily consist of total accrued workers compensation and environmental reserves, deferred compensation, and other miscellaneous liabilities, of which $115 million and $265 million of the environmental and workers compensation reserves, respectively, are recorded in other current liabilities. It excludes obligations for uncertain tax positions of $423 million, as the timing of the payments, if any, cannot be reasonably estimated. |
-50-
Program Name | Program Description | |
Advanced Extremely High Frequency (AEHF) | Provide the communication payload for the nations next generation military strategic and tactical satellite relay systems that will deliver survivable, protected communications to U.S. forces and selected allies worldwide. | |
African Contingency Operations Training Assistance (ACOTA) | Provide peacekeeping training to militaries in African nations via the Department of State. The program is designed to improve the ability of African governments to respond quickly to crises by providing selected militaries with the training and equipment required to execute humanitarian or peace support operations. | |
Airborne and Maritime/Fixed Stations Joint Tactical Radio Systems (AMF JTRS) | AMF JTRS will develop a communications capability that includes two software-defined, multifunction radio form factors for use by the U.S. Department of Defense and potential use by the U.S. Department of Homeland Security. Northrop Grumman has the responsibility for leading the Joint Tactical Radio (JTR) integrated product team and co-development of the JTR small airborne (JTR-SA) hardware and software. The company will also provide common JTR software for two JTR form factors, wideband power amplifiers, and the use of Northrop Grummans Advanced Communications Test Center in San Diego as the integration and test site for the JTR-SA radio, waveforms and ancillaries. | |
Airborne Laser (ABL) | Design and develop the systems Chemical Oxygen Iodine Laser (COIL) and the Beacon Illuminator Laser (BILL) for Missile Defense Agencys Airborne Laser, providing a capability to destroy boost-phase missiles at very long range. | |
Airborne Warning and Control System radar (AWACS) | Provide all-weather surveillance, Command, Control and Communications needed by commanders of air tactical forces. | |
B-2 Stealth Bomber | Maintain strategic, long-range multi-role bomber with war- fighting capability that combines long range, large payload, all-aspect stealth, and near-precision weapons in one aircraft. | |
B-52 Sustainment | B-52 ALQ-155, ALQ-122, ALT-16, ALT-32 and ALR-20 Power Management Systems are legacy electronic countermeasures systems protecting the B-52 over a wideband frequency range. The program provides design and test products to resolve obsolescence and maintainability issues using modern digital receiver/exciter designs. | |
Battlefield Airborne Communications Node (BACN) | Install the BACN system in three Bombardier BD-700 Global Express aircraft for immediate fielding and install the BACN system into two Global Hawk Block 20 unmanned aerial vehicles. |
-51-
Program Name | Program Description | |
Broad Area Maritime Surveillance (BAMS) Unmanned Aircraft System | A maritime derivative of the Global Hawk that provides persistent maritime Intelligence, Surveillance, and Reconnaissance (ISR) data collection and dissemination capability to the Maritime Patrol and Reconnaissance Force. | |
Counter Narco-Terrorism Program Office (CNTPO) | Counter Narco Terrorism Program Office provides support to the U.S. Government, coalition partners, and host nations in Technology Development and Application Support; Training; Operations and Logistics Support; and Professional and Executive Support. The program provides equipment and services to research, develop, upgrade, install, fabricate, test, deploy, operate, train, maintain, and support new and existing federal Government platforms, systems, subsystems, items, and host- nation support initiatives. | |
DDG 51 | Build Aegis guided missile destroyer, equipped for conducting anti-air, anti-submarine, anti-surface and strike operations. | |
DDG 1000 Zumwalt -class Destroyer | Design in conjunction with General Dynamics, Bath Iron Works, the first class of U.S. navys multi- mission surface combatants tailored for land attack and littoral dominance and construct the ships integrated composite deckhouses, as well as portions of the ships peripheral vertical launch systems. | |
Distributed Common Ground System-Army (DCGS-A) Mobile Basic | DCGS-A Mobile Basic is the Armys latest in a series of DCGS-A systems designed to access and ingest multiple data types from a wide variety of intelligence sensors, sources and databases. This new system will also deliver greater operational and logistical advantages over the currently-fielded DCGS-A Version 3 and the nine ISR programs it replaces. | |
E-2 Hawkeye | The U.S. Navys airborne battle management command and control mission system platform providing airborne early warning detection, identification, tracking, targeting, and communication capabilities. The company is developing the next generation capability including radar, mission computer, vehicle, and other system enhancements, to support the U.S Naval Battle Groups and Joint Forces, called the E-2D. Recently the USN approved Milestone C for Low Rate Initial Production. | |
EA-6B | The EA-6B (Prowler) primary mission is to jam enemy radar and communications, thereby preventing them from directing hostile surface-to-air missiles at assets the Prowler protects. When equipped with the improved ALQ-218 receiver and the next generation ICAP III ( Increased Capability) Airborne Electronic Attack (AEA) suite the Prowler is able to provide rapid detection, precise classification, and highly accurate geolocation of electronic emissions and counter modern, frequency-hopping radars. A derivative/variant of the EA-6B ICAP III mission system is also being incorporated into the F/A- 18 platform and designated the EA-18G. | |
EA-18G | The EA-18G is the replacement platform for the EA6B Prowler, which is currently the armed services only offensive tactical radar jamming aircraft. The Increased Capability (ICAP) III mission system capability, developed for the EA-6B Prowler, will be in incorporated into an F/A-18 platform (designated the EA-18G). | |
-52-
Program Name | Program Description | |
F-16 Block 60 | Direct commercial firm fixed-price program with Lockheed Martin Aeronautics Company to develop and produce 80 Lot systems for aircraft delivery to the United Arab Emirates Air Force as well as test equipment and spares to be used to support in- country repairs of sensors. | |
F/A-18 | Produce the center and aft fuselage sections, twin vertical stabilizers, and integrate all associated subsystems for the F/A-18 Hornet strike fighters. | |
F-35 Development (Joint Strike Fighter) | Design, integration, and/or development of the center fuselage and weapons bay, communications, navigations, identification subsystem, systems engineering, and mission systems software as well as provide ground and flight test support, modeling, simulation activities, and training courseware. | |
Flats Sequencing System (FSS)/Postal Automation | Build systems for the U.S. Postal Service designed to further automate the flat mail stream, which includes large envelopes, catalogs and magazines. | |
Gerald R. Ford-class Aircraft Carrier | Design and construction for the new class of Aircraft Carriers. | |
Global Hawk High-Altitude Long-Endurance (HALE) Systems | Provide the Global Hawk HALE unmanned aerial system for use in the global war on terror and has a central role in Intelligence, Reconnaissance, and Surveillance supporting operations in Afghanistan and Iraq. | |
Global Linguists Solutions (GLS) | Provide interpretation, translation and linguist services in support of Operation Iraqi Freedom. | |
Ground/Air Task Oriented Radar (G/ATOR) | A development program to provide the next generation ground based multi-mission radar for the USMC. Provides Short Range Air Defense, Air Defense Surveillance, Ground Weapon Location and Air Traffic Control. Replaces five existing USMC single-mission radars. | |
Guardrail Common Sensor System IDIQ (GRCS-I) | Sole source IDIQ contract which will encompass efforts for the upgrade and modernization of the current field Guardrail systems. | |
Hunter Contractor Logistics Support (CLS) | Operate, maintain, train and sustain the multi-mission Hunter Unmanned Aerial System in addition to deploying Hunter support teams. | |
I-Kits | Supports Full Rate Production of FBCB2 Version 4 I-KITS (installation kits) for the US Army and Australian ground platform types. Services include Program Operations, Supply Chain Management, Procurement, Stores, Part Kitting and Engineering. | |
Inertial Navigation Programs | Consists of a wide variety of products across land, sea and space that address the customers needs for precise knowledge of position, velocity, attitude, and heading. These applications include platforms, such as the F-16, satellites and ground vehicles as well as for sensors such as radar, MP-RTIP, and EO/IR pods. Many inertial applications require integration with GPS to provide a very high level of precision and long term stability. | |
Intercontinental Ballistic Missile (ICBM) | Maintain readiness of the nations ICBM weapon system. | |
-53-
Program Name | Program Description | |
James Webb Space Telescope (JWST) | Design, develop, integrate and test a space-based infrared telescope satellite to observe the formation of the first stars and galaxies in the universe. | |
Joint Base Operations Support (JBOSC) | Provides all infrastructure support needed for launch and base operations at the NASA Spaceport. | |
Joint National Integration Center Research and Development Contract (JRDC) | Support the development and application of modeling and simulation, wargaming, test and analytic tools for air and missile defense. | |
Joint Surveillance Target Attack Radar System (Joint STARS) | Joint STARS detects, locates, classifies, tracks and targets hostile ground movements, communicating real-time information through secure data links with U.S. Air Force and Army command posts. | |
Joint Warfighting Center Support (JWFC) | Provide non-personal general and technical support to the USJFCOM Joint Force Trainer/Joint Warfighting Center to ensure the successful worldwide execution of the Joint Training and Transformation missions. | |
Kinetic Energy Interceptor (KEI) | Develop mobile missile-defense system with the unique capability to destroy a hostile missile during its boost, ascent or midcourse phase of flight. This program was terminated for the U.S. governments convenience in 2009. | |
Large Aircraft Infrared Counter measures (LAIRCM) | Infrared countermeasures systems for C-17 and C-130 aircraft. The IDIQ contract will further allow for the purchase of LAIRCM hardware for foreign military sales and other government agencies. | |
LHA | Amphibious assault ships that will provide forward presence and power projection as an integral part of joint, interagency, and multinational maritime expeditionary forces. | |
LHD | The multipurpose amphibious assault ship LHD is the centerpiece of an Expeditionary Strike Group (ESG). In wartime, these ships deploy very large numbers of troops and equipment to assault enemy-held beaches. Like LPD, only larger, in times of peace, these ships have ample space for non-combatant evacuations and other humanitarian missions. The program of record is 8 ships of which Makin Island (LHD 8) is the last. | |
LPD | The LPD 17 San Antonio Class is the newest addition to the U.S. Navys 21st Century amphibious assault force. The 684-foot-long, 105-foot-wide ships have a crew of 360 and are used to transport and land 700 to 800 Marines, their equipment, and supplies by embarked air cushion or conventional landing craft and assault vehicles, augmented by helicopters or other rotary wing aircraft. The ships will support amphibious assault, special operations, or expeditionary warfare & humanitarian missions. | |
MESA Korea | Consists of a 4 lot Multirole Electronically Scanned Array (MESA) radar/Identification Friend or Foe subsystem delivery. Our customer is the Boeing Company, with ultimate product delivery to the Republic of Korea Air Force. | |
-54-
Program Name | Program Description | |
MESA Peace Eagle | Joint program with Boeing to supply MESA radar antenna for AEW&C aircraft for the Turkish Air Force. | |
MESA Wedgetail | Joint program with Boeing to supply MESA radar antenna for AEW&C aircraft for the Royal Australian Air Force. | |
Multi-Platform Radar Technology Insertion Program (MP- RTIP) | Design, develop, fabricate and test modular, scalable 2-dimensional active electronically scanned array (2D-AESA) radars for integration on the Joint STARS and Global Hawk Airborne platforms. Also provides enhanced Wide Area Surveillance system capabilities. | |
National Level Exercise 2009 (NLE) | Provide program management and the necessary technical expertise to assist the FEMA National Exercise Division with planning, conducting and evaluating the FY09 Tier 1 National Level Exercise (NLE 09). | |
National Polar-orbiting Operational Environmental Satellite System (NPOESS) | Design, develop, integrate, test, and operate an integrated system comprised of two satellites with mission sensors and associated ground elements for providing global and regional weather and environmental data. | |
Navstar Global Positioning System Operational Control Segment (GPS OCX) | Navstar Global Positioning System Operational Control Segment (GPS OCX) Operational control system for existing and future GPS constellation. Includes all satellite C2, mission planning, constellation management, external interfaces, monitoring stations, and ground antennas. Phase A effort includes effort to accomplish a System Requirements Review (SRR), System Design Review (SDR), and development of a Mission Capabilities Engineering Model (MCEM) prototype. | |
Navy Unmanned Combat Air System Operational Assessment (N-UCAS) | Navy development/demonstration contract that will design, build and test two demonstration vehicles that will conduct a carrier demonstration. | |
National Security Cutter (NSC) | Detail design and construct the U.S. Coast Guards National Security Cutters equipped to carry out the core missions of maritime security, maritime safety, protection of natural resources, maritime mobility, and national defense. | |
New York City Wireless Network (NYCWiN) | Provide New York Citys broadband public- safety wireless network. | |
Saudi Arabian National Guard Modernization and Training (SANG) | Provide military training, logistics and support services to modernize the Saudi Arabian National Guards capabilities to unilaterally execute and sustain military operations. | |
Space Tracking and Surveillance System (STSS) | Develop a critical system for the nations missile defense architecture employing low-earth orbit satellites with onboard sensors to provide target acquisition, tracking, and discrimination of ballistic missile threats to the United States and its deployed forces and allies. The program includes delivery of two flight demonstration satellites and the ground processing segment. | |
Space Based Infrared System (SBIRS) | Space-based surveillance systems for missile warning, missile defense, battlespace characterization and technical intelligence. SBIRS will meet United Stated infrared space surveillance needs through the next 2-3 decades. | |
-55-
Program Name | Program Description | |
Trailer Mounted Support System (TMSS) | Trailer Mounted Support System is a key part of the Armys SICPS Program providing workspace, power distribution, lighting, environmental conditioning (heating and cooling) tables and a common grounding system for commanders and staff at all echelons. | |
Transformational Satellite Communication System (TSAT) Risk Reduction and System Definition (RR&SD) | Design, develop, brassboard and demonstrate key technologies to reduce risk in the TSAT space element and perform additional risk mitigation activities. This program was terminated in 2009. | |
USS Carl Vinson | Refueling and complex overhaul of the nuclear-powered aircraft carrier USS Carl Vinson (CVN 70). | |
USS Enterprise Extended Dry-docking Selected Restricted Availability (EDSRA) | Provide routine dry dock work, tank blasting and coating, hull preservation, propulsion and ship system repairs and limited enhancements to various hull, mechanical and electrical systems for the USS Enterprise. | |
USS George H. W. Bush | The 10th and final Nimitz-class aircraft carrier that will incorporate many new design features, commissioned in early 2009 (CVN 77). | |
USS Theodore Roosevelt | Refueling and complex overhaul of the nuclear-powered aircraft carrier USS Theodore Roosevelt (CVN 71). | |
USS Toledo Depot Modernization Period (DMP) | Provide routine dry dock work, tank blasting and coating, hull preservation, propulsion and ship system repairs and limited enhancements to various hull, mechanical and electrical systems for the USS Toledo . | |
Vehicular Intercommunications Systems (VIS) | Provide clear and noise-free communications between crew members inside combat vehicles and externally over as many as six combat net radios for the U.S. Army. The active noise- reduction features of VIS provide significant improvement in speech intelligibility, hearing protection, and vehicle crew performance. | |
Virginia-class Submarines | Construct the newest attack submarine in conjunction with General Dynamics Electric Boat. | |
Virginia IT Outsource (VITA) | Provide high-level IT consulting, IT infrastructure and services to Virginia state and local agencies including data center, help desk, desktop, network, applications and cross-functional services. |
-56-
-57-
/s/ | Deloitte & Touche LLP |
-58-
Year Ended December 31 | ||||||||||||
$ in millions, except per share amounts | 2009 | 2008 | 2007 | |||||||||
Sales and Service Revenues
|
||||||||||||
Product sales
|
$ | 20,914 | $ | 19,634 | $ | 18,577 | ||||||
Service revenues
|
12,841 | 12,681 | 11,764 | |||||||||
Total sales and service revenues
|
33,755 | 32,315 | 30,341 | |||||||||
Cost of Sales and Service Revenues
|
||||||||||||
Cost of product sales
|
16,591 | 15,490 | 14,340 | |||||||||
Cost of service revenues
|
11,539 | 10,885 | 10,014 | |||||||||
General and administrative expenses
|
3,142 | 3,143 | 3,062 | |||||||||
Goodwill impairment
|
3,060 | |||||||||||
Operating income (loss)
|
2,483 | (263 | ) | 2,925 | ||||||||
Other (expense) income
|
||||||||||||
Interest expense
|
(281 | ) | (295 | ) | (336 | ) | ||||||
Other, net
|
64 | 38 | 17 | |||||||||
Earnings (loss) from continuing operations before income taxes
|
2,266 | (520 | ) | 2,606 | ||||||||
Federal and foreign income taxes
|
693 | 859 | 855 | |||||||||
Earnings (loss) from continuing operations
|
1,573 | (1,379 | ) | 1,751 | ||||||||
Earnings from discontinued operations, net of tax
|
113 | 117 | 39 | |||||||||
Net earnings (loss)
|
$ | 1,686 | $ | (1,262 | ) | $ | 1,790 | |||||
Basic Earnings (Loss) Per Share
|
||||||||||||
Continuing operations
|
$ | 4.93 | $ | (4.12 | ) | $ | 5.12 | |||||
Discontinued operations
|
.35 | .35 | .12 | |||||||||
Basic earnings (loss) per share
|
$ | 5.28 | $ | (3.77 | ) | $ | 5.24 | |||||
Weighted-average common shares outstanding, in millions
|
319.2 | 334.5 | 341.7 | |||||||||
Diluted Earnings (Loss) Per Share
|
||||||||||||
Continuing operations
|
$ | 4.87 | $ | (4.12 | ) | $ | 5.01 | |||||
Discontinued operations
|
.34 | .35 | .11 | |||||||||
Diluted earnings (loss) per share
|
$ | 5.21 | $ | (3.77 | ) | $ | 5.12 | |||||
Weighted-average diluted shares outstanding, in millions
|
323.3 | 334.5 | 354.3 | |||||||||
Net earnings (loss) from above
|
$ | 1,686 | $ | (1,262 | ) | $ | 1,790 | |||||
Other comprehensive income (loss)
|
||||||||||||
Change in cumulative translation adjustment
|
31 | (24 | ) | 12 | ||||||||
Change in unrealized gain (loss) on marketable securities and
cash flow hedges, net of tax (expense) benefit of $(23) in 2009,
$22 in 2008 and $(1) in 2007
|
36 | (35 | ) | 1 | ||||||||
Change in unamortized benefit plan costs, net of tax (expense)
benefit of $(374) in 2009, $1,888 in 2008 and $(384) in 2007
|
561 | (2,884 | ) | 594 | ||||||||
Other comprehensive income (loss), net of tax
|
628 | (2,943 | ) | 607 | ||||||||
Comprehensive income (loss)
|
$ | 2,314 | $ | (4,205 | ) | $ | 2,397 | |||||
-59-
December 31 | December 31 | |||||||
$ in millions | 2009 | 2008 | ||||||
Assets
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$ | 3,275 | $ | 1,504 | ||||
Accounts receivable, net of progress payments
|
3,394 | 3,701 | ||||||
Inventoried costs, net of progress payments
|
1,170 | 1,003 | ||||||
Deferred tax assets
|
524 | 585 | ||||||
Prepaid expenses and other current assets
|
272 | 219 | ||||||
Assets of discontinued operations
|
1,231 | |||||||
Total current assets
|
8,635 | 8,243 | ||||||
Property, Plant, and Equipment
|
||||||||
Land and land improvements
|
649 | 619 | ||||||
Buildings and improvements
|
2,422 | 2,326 | ||||||
Machinery and other equipment
|
4,759 | 4,547 | ||||||
Capitalized software costs
|
624 | 530 | ||||||
Leasehold improvements
|
630 | 545 | ||||||
9,084 | 8,567 | |||||||
Accumulated depreciation
|
(4,216 | ) | (3,782 | ) | ||||
Property, plant, and equipment, net
|
4,868 | 4,785 | ||||||
Other Assets
|
||||||||
Goodwill
|
13,517 | 13,509 | ||||||
Other purchased intangibles, net of accumulated amortization of
$1,871 in 2009 and $1,767 in 2008
|
873 | 947 | ||||||
Pension and post-retirement plan assets
|
300 | 290 | ||||||
Long-term deferred tax assets
|
1,010 | 1,497 | ||||||
Miscellaneous other assets
|
1,049 | 926 | ||||||
Total other assets
|
16,749 | 17,169 | ||||||
Total assets
|
$ | 30,252 | $ | 30,197 | ||||
Liabilities and Shareholders Equity
|
||||||||
Current Liabilities
|
||||||||
Notes payable to banks
|
$ | 12 | $ | 24 | ||||
Current portion of long-term debt
|
91 | 477 | ||||||
Trade accounts payable
|
1,921 | 1,887 | ||||||
Accrued employees compensation
|
1,281 | 1,231 | ||||||
Advance payments and billings in excess of costs incurred
|
1,954 | 2,028 | ||||||
Other current liabilities
|
1,726 | 1,637 | ||||||
Liabilities of discontinued operations
|
165 | |||||||
Total current liabilities
|
6,985 | 7,449 | ||||||
Long-term debt, net of current portion
|
4,191 | 3,443 | ||||||
Pension and post-retirement plan liabilities
|
4,874 | 5,823 | ||||||
Other long-term liabilities
|
1,515 | 1,562 | ||||||
Total liabilities
|
17,565 | 18,277 | ||||||
Commitments and Contingencies (Note 15)
|
||||||||
Shareholders Equity
|
||||||||
Common stock, $1 par value; 800,000,000 shares
authorized; issued and outstanding: 2009306,865,201;
2008327,012,663
|
307 | 327 | ||||||
Paid-in capital
|
8,657 | 9,645 | ||||||
Retained earnings
|
6,737 | 5,590 | ||||||
Accumulated other comprehensive loss
|
(3,014 | ) | (3,642 | ) | ||||
Total shareholders equity
|
12,687 | 11,920 | ||||||
Total liabilities and shareholders equity
|
$ | 30,252 | $ | 30,197 | ||||
-60-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Operating Activities
|
||||||||||||
Sources of CashContinuing Operations
|
||||||||||||
Cash received from customers
|
||||||||||||
Progress payments
|
$ | 8,561 | $ | 6,219 | $ | 5,860 | ||||||
Collections on billings
|
25,099 | 26,938 | 24,570 | |||||||||
Insurance proceeds received
|
25 | 5 | 125 | |||||||||
Other cash receipts
|
37 | 83 | 34 | |||||||||
Total sources of cashcontinuing operations
|
33,722 | 33,245 | 30,589 | |||||||||
Uses of CashContinuing Operations
|
||||||||||||
Cash paid to suppliers and employees
|
(29,250 | ) | (28,817 | ) | (26,144 | ) | ||||||
Pension contributions
|
(858 | ) | (320 | ) | (342 | ) | ||||||
Interest paid, net of interest received
|
(269 | ) | (287 | ) | (334 | ) | ||||||
Income taxes paid, net of refunds received
|
(774 | ) | (712 | ) | (853 | ) | ||||||
Income taxes paid on sale of businesses
|
(508 | ) | (7 | ) | ||||||||
Excess tax benefits from stock-based compensation
|
(2 | ) | (48 | ) | (52 | ) | ||||||
Other cash payments
|
(30 | ) | (16 | ) | (52 | ) | ||||||
Total uses of cashcontinuing operations
|
(31,691 | ) | (30,207 | ) | (27,777 | ) | ||||||
Cash provided by continuing operations
|
2,031 | 3,038 | 2,812 | |||||||||
Cash provided by discontinued operations
|
102 | 173 | 78 | |||||||||
Net cash provided by operating activities
|
2,133 | 3,211 | 2,890 | |||||||||
Investing Activities
|
||||||||||||
Proceeds from sale of businesses, net of cash divested
|
1,650 | 175 | ||||||||||
Payments for businesses purchased
|
(33 | ) | (92 | ) | (690 | ) | ||||||
Additions to property, plant, and equipment
|
(654 | ) | (681 | ) | (681 | ) | ||||||
Payments for outsourcing contract costs and related software
costs
|
(68 | ) | (110 | ) | (137 | ) | ||||||
(Increase) decrease in restricted cash
|
(28 | ) | 61 | 59 | ||||||||
Other investing activities, net
|
21 | 19 | ||||||||||
Net cash provided by (used in) investing activities
|
867 | (626 | ) | (1,430 | ) | |||||||
Financing Activities
|
||||||||||||
Net borrowings under lines of credit
|
(12 | ) | (2 | ) | (69 | ) | ||||||
Proceeds from issuance of long-term debt
|
843 | |||||||||||
Principal payments of long-term debt
|
(474 | ) | (113 | ) | (90 | ) | ||||||
Proceeds from exercises of stock options and issuances of common
stock
|
51 | 103 | 274 | |||||||||
Dividends paid
|
(539 | ) | (525 | ) | (504 | ) | ||||||
Excess tax benefits from stock-based compensation
|
2 | 48 | 52 | |||||||||
Common stock repurchases
|
(1,100 | ) | (1,555 | ) | (1,175 | ) | ||||||
Net cash used in financing activities
|
(1,229 | ) | (2,044 | ) | (1,512 | ) | ||||||
Increase (decrease) in cash and cash equivalents
|
1,771 | 541 | (52 | ) | ||||||||
Cash and cash equivalents, beginning of year
|
1,504 | 963 | 1,015 | |||||||||
Cash and cash equivalents, end of year
|
$ | 3,275 | $ | 1,504 | $ | 963 | ||||||
-61-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Reconciliation of Net Earnings (Loss) to Net Cash Provided by
Operating Activities
|
||||||||||||
Net earnings (loss)
|
$ | 1,686 | $ | (1,262 | ) | $ | 1,790 | |||||
Net earnings from discontinued operations
|
(95 | ) | (91 | ) | (39 | ) | ||||||
Adjustments to reconcile to net cash provided by operating
activities
|
||||||||||||
Depreciation
|
585 | 567 | 570 | |||||||||
Amortization of assets
|
151 | 189 | 152 | |||||||||
Impairment of goodwill
|
3,060 | |||||||||||
Stock-based compensation
|
105 | 118 | 196 | |||||||||
Excess tax benefits from stock-based compensation
|
(2 | ) | (48 | ) | (52 | ) | ||||||
Pre-tax gain on sale of businesses
|
(446 | ) | (58 | ) | ||||||||
Pre-tax gain on sale of investments
|
(23 | ) | ||||||||||
(Increase) decrease in
|
||||||||||||
Accounts receivable
|
(6,313 | ) | (378 | ) | (6,439 | ) | ||||||
Inventoried costs
|
(291 | ) | (521 | ) | 4 | |||||||
Prepaid expenses and other current assets
|
(6 | ) | (20 | ) | 9 | |||||||
Increase (decrease) in
|
||||||||||||
Progress payments
|
6,655 | 764 | 6,513 | |||||||||
Accounts payable and accruals
|
(151 | ) | 383 | (2 | ) | |||||||
Deferred income taxes
|
112 | 167 | 195 | |||||||||
Income taxes payable
|
65 | 241 | (59 | ) | ||||||||
Retiree benefits
|
(20 | ) | (167 | ) | (50 | ) | ||||||
Other non-cash transactions, net
|
(4 | ) | 94 | 47 | ||||||||
Cash provided by continuing operations
|
2,031 | 3,038 | 2,812 | |||||||||
Cash provided by discontinued operations
|
102 | 173 | 78 | |||||||||
Net cash provided by operating activities
|
$ | 2,133 | $ | 3,211 | $ | 2,890 | ||||||
Non-Cash Investing and Financing Activities
|
||||||||||||
Investment in unconsolidated affiliate
|
$ | 30 | ||||||||||
Sale of businesses
|
||||||||||||
Liabilities assumed by purchaser
|
$ | 167 | $ | 18 | ||||||||
Purchase of businesses
|
||||||||||||
Liabilities assumed by the company
|
$ | 20 | $ | 136 | ||||||||
Mandatorily redeemable convertible preferred stock converted or
redeemed into common stock
|
$ | 350 | ||||||||||
Capital leases
|
$ | 35 | ||||||||||
Capital expenditures accrued in accounts payable
|
$ | 104 | $ | 84 | $ | 80 | ||||||
-62-
Year Ended December 31 | ||||||||||||
$ in millions, except per share amounts | 2009 | 2008 | 2007 | |||||||||
Common Stock
|
||||||||||||
At beginning of year
|
$ | 327 | $ | 338 | $ | 346 | ||||||
Common stock repurchased
|
(23 | ) | (21 | ) | (15 | ) | ||||||
Conversion of preferred stock
|
6 | |||||||||||
Employee stock awards and options
|
3 | 4 | 7 | |||||||||
At end of year
|
307 | 327 | 338 | |||||||||
Paid-in Capital
|
||||||||||||
At beginning of year
|
9,645 | 10,661 | 11,346 | |||||||||
Common stock repurchased
|
(1,098 | ) | (1,534 | ) | (1,160 | ) | ||||||
Conversion of preferred stock
|
344 | |||||||||||
Employee stock awards and options
|
110 | 174 | 475 | |||||||||
At end of year
|
8,657 | 9,645 | 10,661 | |||||||||
Retained Earnings
|
||||||||||||
At beginning of year
|
5,590 | 7,387 | 6,183 | |||||||||
Net earnings (loss)
|
1,686 | (1,262 | ) | 1,790 | ||||||||
Adoption of new GAAP accounting guidance
|
(3 | ) | (66 | ) | ||||||||
Dividends declared
|
(539 | ) | (532 | ) | (520 | ) | ||||||
At end of year
|
6,737 | 5,590 | 7,387 | |||||||||
Accumulated Other Comprehensive Loss
|
||||||||||||
At beginning of year
|
(3,642 | ) | (699 | ) | (1,260 | ) | ||||||
Other comprehensive income (loss), net of tax
|
628 | (2,943 | ) | 607 | ||||||||
Adjustment to deferred tax benefit recorded on adoption of
accounting standard
|
(46 | ) | ||||||||||
At end of year
|
(3,014 | ) | (3,642 | ) | (699 | ) | ||||||
Total shareholders equity
|
$ | 12,687 | $ | 11,920 | $ | 17,687 | ||||||
Cash dividends declared per share
|
$ | 1.69 | $ | 1.57 | $ | 1.48 | ||||||
-63-
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
-64-
-65-
-66-
-67-
Years | ||||
Land improvements
|
2-45 | |||
Buildings and improvements
|
2-45 | |||
Machinery and other equipment
|
2-25 | |||
Capitalized software costs
|
3-5 | |||
Leasehold improvements
|
Length of lease | |||
-68-
December 31 | ||||||||
$ in millions | 2009 | 2008 | ||||||
Cumulative translation adjustment
|
$ | 41 | $ | 10 | ||||
Net unrealized gain (loss) on marketable securities and cash
flow hedges, net of tax (expense) benefit of $(3) as of
December 31, 2009 and $20 as of December 31, 2008
|
4 | (32 | ) | |||||
Unamortized benefit plan costs, net of tax benefit of $1,984 as
of December 31, 2009 and $2,358 as of December 31, 2008
|
(3,059 | ) | (3,620 | ) | ||||
Total accumulated other comprehensive loss
|
$ | (3,014 | ) | $ | (3,642 | ) | ||
2. | ACCOUNTING STANDARD UPDATES |
-69-
3. | DIVIDENDS ON COMMON STOCK AND CONVERSION OF PREFERRED STOCK |
-70-
4. | BUSINESS ACQUISITIONS |
-71-
5. | BUSINESS DISPOSITIONS |
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Sales and service revenues
|
$ | 1,536 | $ | 1,625 | $ | 1,691 | ||||||
Earnings from discontinued operations
|
149 | 146 | 60 | |||||||||
Income tax expense
|
(54 | ) | (55 | ) | (21 | ) | ||||||
Earnings, net of tax
|
$ | 95 | $ | 91 | $ | 39 | ||||||
Gain on divestitures
|
446 | 66 | ||||||||||
Income tax expense on gain
|
(428 | ) | (40 | ) | ||||||||
Gain from discontinued operations, net of tax
|
$ | 18 | $ | 26 | ||||||||
Earnings from discontinued operations, net of tax
|
$ | 113 | $ | 117 | $ | 39 | ||||||
6. | SEGMENT INFORMATION |
-72-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Sales and Service Revenues
|
||||||||||||
Aerospace Systems
|
$ | 10,419 | $ | 9,825 | $ | 9,234 | ||||||
Electronic Systems
|
7,671 | 7,048 | 6,466 | |||||||||
Information Systems
|
8,611 | 8,205 | 7,758 | |||||||||
Shipbuilding
|
6,213 | 6,145 | 5,788 | |||||||||
Technical Services
|
2,776 | 2,535 | 2,422 | |||||||||
Intersegment eliminations
|
(1,935 | ) | (1,443 | ) | (1,327 | ) | ||||||
Total sales and service revenues
|
$ | 33,755 | $ | 32,315 | $ | 30,341 | ||||||
-73-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Operating Income (Loss)
|
||||||||||||
Aerospace Systems
|
$ | 1,071 | $ | 416 | $ | 919 | ||||||
Electronic Systems
|
969 | 947 | 809 | |||||||||
Information Systems
|
631 | 629 | 725 | |||||||||
Shipbuilding
|
299 | (2,307 | ) | 538 | ||||||||
Technical Services
|
161 | 144 | 139 | |||||||||
Intersegment eliminations
|
(202 | ) | (128 | ) | (105 | ) | ||||||
Total segment operating income (loss)
|
2,929 | (299 | ) | 3,025 | ||||||||
Non-segment factors affecting operating income (loss)
|
||||||||||||
Unallocated expenses
|
(111 | ) | (157 | ) | (209 | ) | ||||||
Net pension adjustment
|
(311 | ) | 263 | 127 | ||||||||
Royalty income adjustment
|
(24 | ) | (70 | ) | (18 | ) | ||||||
Total operating income (loss)
|
$ | 2,483 | $ | (263 | ) | $ | 2,925 | |||||
-74-
December 31 | ||||||||
$ in millions | 2009 | 2008 | ||||||
Assets
|
||||||||
Aerospace Systems
|
$ | 6,291 | $ | 6,199 | ||||
Electronic Systems
|
4,950 | 5,024 | ||||||
Information Systems
|
7,499 | 9,069 | ||||||
Shipbuilding
|
4,585 | 4,427 | ||||||
Technical Services
|
1,295 | 1,184 | ||||||
Segment assets
|
24,620 | 25,903 | ||||||
Corporate
|
5,632 | 4,294 | ||||||
Total assets
|
$ | 30,252 | $ | 30,197 | ||||
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Capital Expenditures
|
||||||||||||
Aerospace Systems
|
$ | 211 | $ | 224 | $ | 209 | ||||||
Electronic Systems
|
168 | 148 | 119 | |||||||||
Information Systems
|
69 | 62 | 84 | |||||||||
Shipbuilding
|
181 | 218 | 247 | |||||||||
Technical Services
|
3 | 4 | 10 | |||||||||
Corporate
|
22 | 25 | 12 | |||||||||
Total capital expenditures
|
$ | 654 | $ | 681 | $ | 681 | ||||||
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Depreciation and Amortization
|
||||||||||||
Aerospace Systems
|
$ | 238 | $ | 238 | $ | 239 | ||||||
Electronic Systems
|
140 | 149 | 175 | |||||||||
Information Systems
|
144 | 153 | 115 | |||||||||
Shipbuilding
|
186 | 193 | 170 | |||||||||
Technical Services
|
8 | 8 | 8 | |||||||||
Corporate
|
20 | 15 | 15 | |||||||||
Total depreciation and amortization
|
$ | 736 | $ | 756 | $ | 722 | ||||||
7. | EARNINGS (LOSS) PER SHARE |
-75-
Year Ended December 31 | ||||||||||||
$ in millions, except per share | 2009 | 2008 | 2007 | |||||||||
Diluted Earnings (Loss) Per Share From Continuing
Operations
|
||||||||||||
Earnings (loss) from continuing operations
|
$ | 1,573 | $ | (1,379 | ) | $ | 1,751 | |||||
Add dividends on mandatorily redeemable convertible preferred
stock
|
24 | |||||||||||
Earnings (loss) from continuing operations available to common
shareholders
|
$ | 1,573 | $ | (1,379 | ) | $ | 1,775 | |||||
Weighted-average common shares outstanding
|
319.2 | 334.5 | 341.7 | |||||||||
Dilutive effect of stock options, stock awards, and mandatorily
redeemable convertible preferred stock
|
4.1 | 12.6 | ||||||||||
Weighted-average diluted common shares outstanding
|
323.3 | 334.5 | 354.3 | |||||||||
Diluted earnings (loss) per share from continuing
operations
|
$ | 4.87 | $ | (4.12 | ) | $ | 5.01 | |||||
Amount
|
Total Shares
|
Shares Repurchased
|
||||||||||||||||||||||||
Authorized
|
Average Price
|
Retired
|
(In millions) | |||||||||||||||||||||||
Authorization Date | (In millions) | Per Share(2) | (In millions) | Date Completed | 2009 | 2008 | 2007 | |||||||||||||||||||
October 24, 2005
|
$ | 1,500 | $ | 65.08 | 23.0 | February 2007 | 2.3 | |||||||||||||||||||
December 14, 2006
|
1,000 | 75.96 | 13.1 | November 2007 | 13.1 | |||||||||||||||||||||
December 19,
2007
(1)
|
3,600 | 60.15 | 44.5 | 23.1 | 21.4 | |||||||||||||||||||||
23.1 | 21.4 | 15.4 | ||||||||||||||||||||||||
(1) | On December 19, 2007, our board of directors authorized a share repurchase program of up to $2.5 billion of the companys common stock. On November 5, 2009, the board of directors authorized an additional $1.1 billion to the December 19, 2007 authorization. | |
Share repurchases take place at managements discretion or under pre-established non-discretionary programs from time to time, depending on market conditions, in the open market, and in privately negotiated transactions. The company retires its common stock upon repurchase and has not made any purchases of common stock other than in connection with these publicly announced repurchase programs. | ||
(2) | Includes commissions paid. |
-76-
8. | ACCOUNTS RECEIVABLE, NET |
December 31 | ||||||||
$ in millions | 2009 | 2008 | ||||||
Due From U.S. Government
|
||||||||
Amounts billed
|
$ | 1,078 | $ | 1,177 | ||||
Recoverable costs and accrued profit on progress
completed unbilled
|
1,980 | 1,747 | ||||||
3,058 | 2,924 | |||||||
Due From Other Customers
|
||||||||
Amounts billed
|
318 | 419 | ||||||
Recoverable costs and accrued profit on progress
completed unbilled
|
342 | 658 | ||||||
660 | 1,077 | |||||||
Total accounts receivable
|
3,718 | 4,001 | ||||||
Allowances for doubtful amounts
|
(324 | ) | (300 | ) | ||||
Total accounts receivable, net
|
$ | 3,394 | $ | 3,701 | ||||
9. | INVENTORIED COSTS, NET |
December 31 | ||||||||
$ in millions | 2009 | 2008 | ||||||
Production costs of contracts in process
|
$ | 2,698 | $ | 2,393 | ||||
General and administrative expenses
|
175 | 221 | ||||||
2,873 | 2,614 | |||||||
Progress payments received
|
(1,909 | ) | (1,864 | ) | ||||
964 | 750 | |||||||
Product inventory
|
206 | 253 | ||||||
Total inventoried costs, net
|
$ | 1,170 | $ | 1,003 | ||||
-77-
10. | GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS |
Aerospace
|
Electronic
|
Information
|
Technical
|
|||||||||||||||||||||
$ in millions | Systems | Systems | Systems | Shipbuilding | Services | Total | ||||||||||||||||||
Balance as of January 1, 2008
|
$ | 3,873 | $ | 2,514 | $ | 5,852 | $ | 3,614 | $ | 810 | $ | 16,663 | ||||||||||||
Goodwill transferred due to segment realignment
|
505 | (47 | ) | (458 | ) | |||||||||||||||||||
Goodwill related to business sold
|
(47 | ) | (47 | ) | ||||||||||||||||||||
Goodwill acquired
|
78 | 78 | ||||||||||||||||||||||
Fair value adjustments to net assets acquired
|
(60 | ) | 8 | (82 | ) | 17 | (8 | ) | (125 | ) | ||||||||||||||
Goodwill Impairment
|
(570 | ) | (2,490 | ) | (3,060 | ) | ||||||||||||||||||
Balance as of December 31, 2008
|
$ | 3,748 | $ | 2,428 | $ | 5,390 | $ | 1,141 | $ | 802 | $ | 13,509 | ||||||||||||
Goodwill transferred due to segment realignment
|
41 | (26 | ) | (138 | ) | 123 | ||||||||||||||||||
Goodwill acquired
|
5 | 5 | ||||||||||||||||||||||
Other
|
7 | (4 | ) | 3 | ||||||||||||||||||||
Balance as of
December 31, 2009 |
$ | 3,801 | $ | 2,402 | $ | 5,248 | $ | 1,141 | $ | 925 | $ | 13,517 | ||||||||||||
-78-
December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||
$ in millions | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||
Contract and program intangibles
|
$ | 2,644 | $ | (1,793 | ) | $ | 851 | $ | 2,614 | $ | (1,692 | ) | $ | 922 | ||||||||||
Other purchased intangibles
|
100 | (78 | ) | 22 | 100 | (75 | ) | 25 | ||||||||||||||||
Total
|
$ | 2,744 | $ | (1,871 | ) | $ | 873 | $ | 2,714 | $ | (1,767 | ) | $ | 947 | ||||||||||
$ in millions | ||||
Year ending December 31
|
||||
2010
|
$ | 92 | ||
2011
|
56 | |||
2012
|
56 | |||
2013
|
48 | |||
2014
|
36 | |||
11. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
-79-
2009 | 2008 | |||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
$ in millions | Amount | Value | Amount | Value | ||||||||||||
Cash surrender value of life insurance policies
|
$ | 242 | $ | 242 | $ | 240 | $ | 240 | ||||||||
Long-term debt
|
(4,282 | ) | (4,825 | ) | (3,920 | ) | (4,369 | ) | ||||||||
-80-
12. | INCOME TAXES |
-81-
Year Ended December 31 | ||||||||||||
$ in millions | 2009 | 2008 | 2007 | |||||||||
Income tax (benefit) expense on continuing operations at
statutory rate
|
$ | 793 | $(183 | ) | $ | 912 | ||||||
Goodwill impairment
|
1,071 | |||||||||||
Manufacturing deduction
|
(24 | ) | (19 | ) | (19 | ) | ||||||
Research tax credit
|
(17 | ) | (13 | ) | (14 | ) | ||||||
Settlement of IRS appeals cases, net of additional uncertain tax
position accruals
|
(75 | ) | (35 | ) | (22 | ) | ||||||
Other, net
|
16 | 38 | (2 | ) | ||||||||
Total federal and foreign income taxes
|
$ | 693 | $859 | $ | 855 | |||||||
December 31 | ||||||||
$ in millions | 2009 | 2008 | ||||||
Unrecognized tax benefit at beginning of the year
|
$ | 416 | $ | 488 | ||||
Additions based on tax positions related to the current year
|
12 | 5 | ||||||
Additions for tax positions of prior years
|
61 | 15 | ||||||
Statute expiration
|
(9 | ) | ||||||
Settlements
|
(60 | ) | (83 | ) | ||||
Net change in unrecognized tax benefits
|
13 | (72 | ) | |||||
Unrecognized tax benefit at end of the year
|
$ | 429 | $ | 416 | ||||
-82-
December 31 | ||||||||
$ in millions | 2009 | 2008 | ||||||
Deferred Tax Assets
|
||||||||
Retirement benefit plan expense
|
$ | 2,094 | $ | 2,558 | ||||
Provision for accrued liabilities
|
718 | 727 | ||||||
Tax credits and capital loss carryforwards
|
33 | |||||||
Other
|
399 | 377 | ||||||
Gross deferred tax assets
|
3,211 | 3,695 | ||||||
Less valuation allowance
|
(33 | ) | ||||||
Net deferred tax assets
|
3,211 | 3,662 | ||||||
Deferred Tax Liabilities
|
||||||||
Contract accounting differences
|
252 | 307 | ||||||
Purchased intangibles
|
253 | 225 | ||||||
Depreciation and amortization
|
550 | 478 | ||||||
Goodwill amortization
|
622 | 570 | ||||||
Gross deferred tax liabilities
|
1,677 | 1,580 | ||||||
Total net deferred tax assets
|
$ | 1,534 | $ | 2,082 | ||||
December 31 | ||||||||
$ in millions | 2009 | 2008 | ||||||
Net current deferred tax assets
|
$ | 524 | $ | 585 | ||||
Net non-current deferred tax assets
|
1,010 | 1,497 | ||||||
Total net deferred tax assets
|
$ | 1,534 | $ | 2,082 | ||||
-83-
13. | NOTES PAYABLE TO BANKS AND LONG-TERM DEBT |
-84-
December 31 | ||||||||
$ in millions | 2009 | 2008 | ||||||
Notes and debentures due 2010 to 2036, rates from 3.7% to 9.375%
|
$ | 3,964 | $ | 3,600 | ||||
Other indebtedness due 2010 to 2028, rates from 4.55% to 8.5%
|
318 | 320 | ||||||
Total long-term debt
|
4,282 | 3,920 | ||||||
Less current portion
|
91 | 477 | ||||||
Long-term debt, net of current portion
|
$ | 4,191 | $ | 3,443 | ||||
$ in millions | ||||
Year Ending December 31
|
||||
2010
|
$ | 91 | ||
2011
|
778 | |||
2012
|
2 | |||
2013
|
2 | |||
2014
|
352 | |||
Thereafter
|
3,033 | |||
Total principal payments
|
4,258 | |||
Unamortized premium on long-term debt, net of discount
|
24 | |||
Total long-term debt
|
$ | 4,282 | ||
14. | LITIGATION |
-85-
-86-
15. | COMMITMENTS AND CONTINGENCIES |
-87-
-88-
-89-
16. | RETIREMENT BENEFITS |
-90-
Medical and
|
||||||||||||||||||||||||
Pension Benefits | Life Benefits | |||||||||||||||||||||||
$ in millions | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | ||||||||||||||||||
Components of Net Periodic Benefit Cost
|
||||||||||||||||||||||||
Service cost
|
$ | 661 | $ | 721 | $ | 786 | $ | 48 | $ | 55 | $ | 52 | ||||||||||||
Interest cost
|
1,350 | 1,335 | 1,250 | 164 | 166 | 164 | ||||||||||||||||||
Expected return on plan assets
|
(1,559 | ) | (1,895 | ) | (1,774 | ) | (48 | ) | (64 | ) | (58 | ) | ||||||||||||
Amortization of
|
||||||||||||||||||||||||
Prior service cost (credit)
|
50 | 40 | 40 | (59 | ) | (65 | ) | (65 | ) | |||||||||||||||
Net loss from previous years
|
337 | 24 | 48 | 28 | 22 | 25 | ||||||||||||||||||
Other
|
17 | 2 | ||||||||||||||||||||||
Net periodic benefit cost
|
$ | 856 | $ | 225 | $ | 352 | $ | 133 | $ | 114 | $ | 118 | ||||||||||||
-91-
Pension
|
Medical and
|
|||||||||||
$ in millions | Benefits | Life Benefits | Total | |||||||||
Changes in Unrecognized Benefit Plan Costs
|
||||||||||||
Net actuarial loss
|
$ | 4,558 | $ | 132 | $ | 4,690 | ||||||
Prior service cost
|
73 | 30 | 103 | |||||||||
Amortization of
|
||||||||||||
Prior service (cost) credit
|
(40 | ) | 65 | 25 | ||||||||
Net loss from previous years
|
(24 | ) | (22 | ) | (46 | ) | ||||||
Tax benefits related to above items
|
(1,807 | ) | (81 | ) | (1,888 | ) | ||||||
Changes in unrecognized benefit plan costs 2008
|
$ | 2,760 | $ | 124 | $ | 2,884 | ||||||
Net actuarial gain
|
$ | (524 | ) | $ | (60 | ) | $ | (584 | ) | |||
Prior service cost (credit)
|
5 | 5 | ||||||||||
Amortization of
|
||||||||||||
Prior service (cost) credit
|
(50 | ) | 59 | 9 | ||||||||
Net loss from previous years
|
(337 | ) | (28 | ) | (365 | ) | ||||||
Tax benefits related to above items
|
363 | 11 | 374 | |||||||||
Changes in unrecognized benefit plan costs
2009
|
$ | (543 | ) | $ | (18 | ) | $ | (561 | ) | |||
-92-
Medical and
|
||||||||||||||||
Pension Benefits | Life Benefits | |||||||||||||||
$ in millions | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Change in Projected Benefit Obligation
|
||||||||||||||||
Projected benefit obligation at beginning of year
|
$ | 22,147 | $ | 22,069 | $ | 2,716 | $ | 2,812 | ||||||||
Service cost
|
661 | 721 | 48 | 55 | ||||||||||||
Interest cost
|
1,350 | 1,335 | 164 | 166 | ||||||||||||
Plan participants contributions
|
16 | 14 | 106 | 78 | ||||||||||||
Plan amendments
|
5 | 73 | 30 | |||||||||||||
Actuarial loss (gain)
|
869 | (818 | ) | 15 | (170 | ) | ||||||||||
Benefits paid
|
(1,359 | ) | (1,179 | ) | (289 | ) | (269 | ) | ||||||||
Acquisitions, curtailments, divestitures and other
|
34 | (68 | ) | 20 | 14 | |||||||||||
Projected benefit obligation at end of year
|
23,723 | 22,147 | 2,780 | 2,716 | ||||||||||||
Change in Plan Assets
|
||||||||||||||||
Fair value of plan assets at beginning of year
|
18,501 | 22,891 | 718 | 951 | ||||||||||||
Gain / (loss) on plan assets
|
2,945 | (3,500 | ) | 126 | (238 | ) | ||||||||||
Employer contributions
|
858 | 320 | 162 | 181 | ||||||||||||
Plan participants contributions
|
16 | 14 | 106 | 78 | ||||||||||||
Benefits paid
|
(1,359 | ) | (1,179 | ) | (289 | ) | (269 | ) | ||||||||
Acquisitions, curtailments, divestitures and other
|
12 | (45 | ) | 20 | 15 | |||||||||||
Fair value of plan assets at end of year
|
20,973 | 18,501 | 843 | 718 | ||||||||||||
Funded status
|
$ | (2,750 | ) | $ | (3,646 | ) | $ | (1,937 | ) | $ | (1,998 | ) | ||||
Amounts Recognized in the Consolidated Statements of
Financial Position
|
||||||||||||||||
Non-current assets
|
$ | 264 | $ | 266 | $ | 36 | $ | 24 | ||||||||
Current liability
|
(47 | ) | (45 | ) | (66 | ) | (66 | ) | ||||||||
Non-current liability
|
(2,967 | ) | (3,867 | ) | (1,907 | ) | (1,956 | ) | ||||||||
Pension
|
Medical and
|
|||||||
$ in millions | Benefits | Life Benefits | ||||||
Amounts Expected to be Recognized in 2010 Net Periodic
Benefit Cost
|
||||||||
Net loss
|
$ | 244 | $ | 26 | ||||
Prior service cost (credit)
|
47 | (60 | ) | |||||
-93-
Pension Benefits | Medical and Life Benefits | |||||||||||||||
$ in millions | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Amounts Recorded in Accumulated Other Comprehensive Loss
|
||||||||||||||||
Net actuarial loss
|
$ | (4,648 | ) | $ | (5,509 | ) | $ | (451 | ) | $ | (539 | ) | ||||
Prior service cost and net transition obligation
|
(242 | ) | (287 | ) | 298 | 357 | ||||||||||
Income tax benefits related to above items
|
1,923 | 2,286 | 61 | 72 | ||||||||||||
Unamortized benefit plan costs
|
$ | (2,967 | ) | $ | (3,510 | ) | $ | (92 | ) | $ | (110 | ) | ||||
December 31 | ||||||||
$ in millions | 2009 | 2008 | ||||||
Projected benefit obligation
|
$ | 20,687 | $ | 19,926 | ||||
Accumulated benefit obligation
|
19,162 | 18,217 | ||||||
Fair value of plan assets
|
17,739 | 16,036 | ||||||
Medical and
|
||||||||||||||||
Pension Benefits | Life Benefits | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Assumptions Used to Determine Benefit Obligation at December
31
|
||||||||||||||||
Discount rate
|
6.03 | % | 6.25 | % | 5.80 | % | 6.25 | % | ||||||||
Rate of compensation increase
|
3.75 | % | 4.00 | % | ||||||||||||
Initial health care cost trend rate assumed for the next year
|
7.00 | % | 7.50 | % | ||||||||||||
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate)
|
5.00 | % | 5.00 | % | ||||||||||||
Year that the rate reaches the ultimate trend rate
|
2014 | 2014 | ||||||||||||||
Assumptions Used to Determine Benefit Cost for the Year Ended
December 31
|
||||||||||||||||
Discount rate
|
6.25 | % | 6.22 | % | 6.25 | % | 6.12 | % | ||||||||
Expected long-term return on plan assets
|
8.50 | % | 8.50 | % | 6.95 | % | 6.85 | % | ||||||||
Rate of compensation increase
|
4.00 | % | 4.25 | % | ||||||||||||
Initial health care cost trend rate assumed for the next year
|
7.50 | % | 8.00 | % | ||||||||||||
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate)
|
5.00 | % | 5.00 | % | ||||||||||||
Year that the rate reaches the ultimate trend rate
|
2014 | 2012 | ||||||||||||||
-94-
1-Percentage-
|
1-Percentage-
|
|||||||
$ in millions | Point Increase | Point Decrease | ||||||
Increase (Decrease) From Change In Health Care Cost Trend
Rates To
|
||||||||
Post-retirement benefit expense
|
$ | 7 | $ | (8 | ) | |||
Post-retirement benefit liability
|
81 | (91 | ) | |||||
Asset Allocation Ranges | ||||
Domestic equities
|
10 30 | % | ||
International equities
|
5 25 | % | ||
Fixed income securities
|
35 50 | % | ||
Real estate and other
|
20 30 | % | ||
-95-
$ in millions | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Asset Category
|
||||||||||||||||
Domestic equities
|
$ | 3,671 | $ | 2 | $ | 3,673 | ||||||||||
International equities
|
1,516 | $ | 1,571 | 3,087 | ||||||||||||
Fixed income securities
|
||||||||||||||||
Cash & cash
equivalents
(1)
|
139 | 2,122 | 2,261 | |||||||||||||
U.S. Treasuries
|
1,307 | 1,307 | ||||||||||||||
Other U.S. Government Agency Securities
|
738 | 738 | ||||||||||||||
Non-U.S. Government Securities
|
219 | 219 | ||||||||||||||
Corporate debt
|
4,575 | 4,575 | ||||||||||||||
Asset backed
|
808 | 4 | 812 | |||||||||||||
High yield debt
|
560 | 67 | 627 | |||||||||||||
Bank loans
|
104 | 104 | ||||||||||||||
Real estate and other
|
||||||||||||||||
Hedge funds
|
1,470 | 1,470 | ||||||||||||||
Private equities
|
1,893 | 1,893 | ||||||||||||||
Real estate
|
997 | 997 | ||||||||||||||
Other
(2)
|
53 | 53 | ||||||||||||||
Fair value of plan assets at end of year
|
$ | 5,326 | $ | 12,057 | $ | 4,433 | $ | 21,816 | ||||||||
(1) | Cash & cash equivalents are predominantly held in money market funds | |
(2) | Other includes futures, swaps, options, swaptions, insurance contracts and net payable for unsettled trades at year end. |
Domestic
|
Asset
|
High yield
|
Hedge
|
Private
|
||||||||||||||||||||||||
$ in millions | equities | Backed | debt | funds | equities | Real estate | Total | |||||||||||||||||||||
Balance as of December 31, 2008
|
$ | 1 | $ | 4 | $ | 46 | $ | 1,321 | $ | 1,874 | $ | 1,316 | $ | 4,562 | ||||||||||||||
Actual return on plan assets:
|
||||||||||||||||||||||||||||
Assets still held at reporting date
|
21 | 187 | (125 | ) | (439 | ) | (356 | ) | ||||||||||||||||||||
Assets sold during the period
|
(11 | ) | 1 | (11 | ) | (21 | ) | |||||||||||||||||||||
Purchases, sales, and settlements
|
1 | (27 | ) | 143 | 131 | 248 | ||||||||||||||||||||||
Balance as of December 31, 2009
|
$ | 2 | $ | 4 | $ | 67 | $ | 1,470 | $ | 1,893 | $ | 997 | $ | 4,433 | ||||||||||||||
-96-
Medical and
|
||||||||
$ in millions | Pension Plans | Life Plans | ||||||
Year Ending December 31
|
||||||||
2010
|
$ | 1,195 | $ | 191 | ||||
2011
|
1,264 | 195 | ||||||
2012
|
1,322 | 198 | ||||||
2013
|
1,396 | 204 | ||||||
2014
|
1,478 | 211 | ||||||
2015 through 2019
|
8,739 | 1,154 | ||||||
17. | STOCK COMPENSATION PLANS |
-97-
-98-
2009 | 2008 | 2007 | ||||||||||
Dividend yield
|
3.6 | % | 1.8 | % | 2.0 | % | ||||||
Volatility rate
|
25 | % | 20 | % | 20 | % | ||||||
Risk-free interest rate
|
1.7 | % | 2.8 | % | 4.6 | % | ||||||
Expected option life (years)
|
5-6 | 6 | 6 |
Shares
|
Weighted-
|
Weighted-Average
|
Aggregate
|
|||||||||||||
Under Option
|
Average
|
Remaining
|
Intrinsic Value
|
|||||||||||||
(in thousands) | Exercise Price | Contractual Term | ($ in millions) | |||||||||||||
Outstanding at January 1, 2009
|
13,481 | $ | 54 | 4.2 years | $ | 18 | ||||||||||
Granted
|
2,711 | 45 | ||||||||||||||
Exercised
|
(1,241 | ) | 42 | |||||||||||||
Cancelled and forfeited
|
(509 | ) | 55 | |||||||||||||
Outstanding at December 31, 2009
|
14,442 | $ | 53 | 3.8 years | $ | 88 | ||||||||||
Vested and expected to vest in the future at December 31,
2009
|
14,252 | $ | 53 | 3.8 years | $ | 87 | ||||||||||
Exercisable at December 31, 2009
|
10,646 | $ | 53 | 3.1 years | $ | 59 | ||||||||||
Available for grant at December 31, 2009
|
8,936 | |||||||||||||||
-99-
Stock
|
Weighted-Average
|
Weighted-Average
|
|||||||||||
Awards
|
Grant Date
|
Remaining
|
|||||||||||
(in thousands) | Fair Value | Contractual Term | |||||||||||
Outstanding at January 1, 2007
|
7,364 | $ | 57 | 1.3 years | |||||||||
Granted
|
1,759 | 72 | |||||||||||
Vested
|
(3,695 | ) | 50 | ||||||||||
Forfeited
|
(284 | ) | 63 | ||||||||||
Outstanding at December 31, 2007
|
5,144 | $ | 67 | 1.3 years | |||||||||
Granted
|
1,505 | 80 | |||||||||||
Vested
|
(2,950 | ) | 64 | ||||||||||
Forfeited
|
(423 | ) | 65 | ||||||||||
Outstanding at December 31, 2008
|
3,276 | $ | 75 | 1.4 years | |||||||||
Granted
|
2,356 | 45 | |||||||||||
Vested
|
(1,645 | ) | 71 | ||||||||||
Forfeited
|
(329 | ) | 66 | ||||||||||
Outstanding at December 31, 2009
|
3,658 | $ | 58 | 1.6 years | |||||||||
Available for grant at December 31, 2009
|
4,011 | ||||||||||||
-100-
18. | UNAUDITED SELECTED QUARTERLY DATA |
2009
|
||||||||||||||||
$ in millions, except per share | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | ||||||||||||
Sales and services revenues as previously reported
|
$ | 8,320 | $ | 8,957 | $ | 8,726 | ||||||||||
Discontinued operations
|
(385 | ) | (412 | ) | (376 | ) | ||||||||||
Sales and services revenues
|
$ | 7,935 | $ | 8,545 | $ | 8,350 | $ | 8,925 | ||||||||
Operating income as previously reported
|
$ | 655 | $ | 653 | $ | 655 | ||||||||||
Discontinued operations
|
(36 | ) | (39 | ) | (36 | ) | ||||||||||
Operating income
|
$ | 619 | $ | 614 | $ | 619 | $ | 631 | ||||||||
Earnings from continuing operations as previously reported
|
$ | 389 | $ | 394 | $ | 487 | ||||||||||
Discontinued operations
|
(23 | ) | (26 | ) | (23 | ) | ||||||||||
Earnings from continuing operations
|
$ | 366 | $ | 368 | $ | 464 | $ | 375 | ||||||||
Net earnings
|
$ | 389 | $ | 394 | $ | 490 | $ | 413 | ||||||||
Basic earnings per share from continuing operations as
previously reported
|
$ | 1.19 | $ | 1.22 | $ | 1.54 | ||||||||||
Discontinued operations
|
(0.07 | ) | (0.08 | ) | (0.08 | ) | ||||||||||
Basic earnings per share from continuing operations
|
$ | 1.12 | $ | 1.14 | $ | 1.46 | $ | 1.20 | ||||||||
Basic earnings per share
|
$ | 1.19 | $ | 1.22 | $ | 1.55 | $ | 1.32 | ||||||||
Diluted earnings per share from continuing operations as
previously reported
|
$ | 1.17 | $ | 1.21 | $ | 1.52 | ||||||||||
Discontinued operations
|
(0.07 | ) | (0.08 | ) | (0.07 | ) | ||||||||||
Diluted earnings per share from continuing operations
|
$ | 1.10 | $ | 1.13 | $ | 1.45 | $ | 1.19 | ||||||||
Diluted earnings per share
|
$ | 1.17 | $ | 1.21 | $ | 1.53 | $ | 1.31 | ||||||||
-101-
2008
|
||||||||||||||||
$ in millions, except per share | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | ||||||||||||
Sales and services revenues as previously reported
|
$ | 7,724 | $ | 8,628 | $ | 8,381 | $ | 9,154 | ||||||||
Discontinued operations
|
(372 | ) | (414 | ) | (407 | ) | (379 | ) | ||||||||
Sales and services revenues
|
$ | 7,352 | $ | 8,214 | $ | 7,974 | $ | 8,775 | ||||||||
Operating income (loss) as previously reported
|
$ | 464 | $ | 806 | $ | 771 | $ | (2,152 | ) | |||||||
Discontinued operations
|
(35 | ) | (41 | ) | (37 | ) | (39 | ) | ||||||||
Operating income (loss)
|
$ | 429 | $ | 765 | $ | 734 | $ | (2,191 | ) | |||||||
Earnings (loss) from continuing operations as previously reported
|
$ | 263 | $ | 483 | $ | 509 | $ | (2,536 | ) | |||||||
Discontinued operations
|
(22 | ) | (26 | ) | (25 | ) | (25 | ) | ||||||||
Earnings (loss) from continuing operations
|
$ | 241 | $ | 457 | $ | 484 | $ | (2,561 | ) | |||||||
Net earnings (loss)
|
$ | 264 | $ | 495 | $ | 512 | $ | (2,533 | ) | |||||||
Basic earnings (loss) per share from continuing operations
as previously reported |
$ | 0.78 | $ | 1.42 | $ | 1.52 | $ | (7.76 | ) | |||||||
Discontinued operations
|
(0.07 | ) | (0.07 | ) | (0.07 | ) | (0.07 | ) | ||||||||
Basic earnings (loss) per share from continuing operations
|
$ | 0.71 | $ | 1.35 | $ | 1.45 | $ | (7.83 | ) | |||||||
Basic earnings (loss) per share
|
$ | 0.78 | $ | 1.46 | $ | 1.53 | $ | (7.75 | ) | |||||||
Diluted earnings (loss) per share from continuing operations
as previously reported |
$ | 0.76 | $ | 1.40 | $ | 1.50 | $ | (7.76 | ) | |||||||
Discontinued operations
|
(0.07 | ) | (0.07 | ) | (0.08 | ) | (0.07 | ) | ||||||||
Diluted earnings (loss) per share from continuing operations
|
$ | 0.69 | $ | 1.33 | $ | 1.42 | $ | (7.83 | ) | |||||||
Diluted earnings (loss) per share
|
$ | 0.76 | $ | 1.44 | $ | 1.51 | $ | (7.75 | ) | |||||||
-102-
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
Item 9B. | Other Information |
-103-
/s/ | Wesley G. Bush |
/s/ | James F. Palmer |
-104-
/s/ | Deloitte & Touche LLP |
-105-
Item 10. | Directors, Executive Officers, and Corporate Governance |
Name | Age | Office Held | Since | Prior Business Experience (Last Five Years) | ||||||||
Wesley G. Bush
|
48 | Chief Executive Officer and President | 2010 | President and Chief Operating Officer (2007-2009); Prior to March 2007, President and Chief Financial Officer (2006-2007); Corporate Vice President and Chief Financial Officer (2005-2006); Corporate Vice President and President, Space Technology (2003-2005) | ||||||||
James L. Cameron
|
52 | Corporate Vice President and President, Technical Services | 2006 | Vice President and General Manager of Defensive and Navigation Systems Divisions, Electronic Systems Sector (2005); Prior to February 2005, Vice President and General Manager, Defensive Systems Division, Electronic Systems (2003-2005) | ||||||||
Gary W. Ervin
|
52 | Corporate Vice President and President, Aerospace Systems | 2009 | Corporate Vice President and President, Integrated Systems (2008); Prior to 2008, Corporate Vice President (2007-2008); Vice President, Western Region, Integrated Systems (2005-2007); Vice President, Air Combat Systems, Integrated Systems (2002-2005) | ||||||||
Darryl M. Fraser
|
51 | Corporate Vice President, Communications | 2008 | Sector Vice President of Business Development and Strategic Initiatives, Mission Systems (2007-March 2008); Prior to May 2007, Sector Vice President, Strategic Initiatives, Mission Systems (2007); Vice President, Washington Operations, Mission Systems and Space Technology (2005-2007); Vice President, Washington Operations, Mission Systems (2002-2005) | ||||||||
Kenneth N. Heintz
|
63 | Corporate Vice President, Controller and Chief Accounting Officer | 2005 | Independent Financial Consultant (2004-2005) | ||||||||
Robert W. Helm
|
58 | Corporate Vice President, Government Relations | 1994 | |||||||||
Alexis C. Livanos
|
61 | Corporate Vice President and Chief Technology Officer | 2009 | Corporate Vice President and President, Space Technology (2005-2008) |
-106-
Name | Age | Office Held | Since | Prior Business Experience (Last Five Years) | ||||||||
Linda A. Mills
|
60 | Corporate Vice President and President, Information Systems | 2009 | Corporate Vice President and President, Information Technology (2008); Prior to 2008, President of the Civilian Agencies business group, Information Technology (2007-2008); Vice President for Operations and Processes, Information Technology (2005-2007); Vice President, Mission Assurance/Six Sigma, Mission Systems (2003-2005) | ||||||||
James F. Palmer
|
60 | Corporate Vice President and Chief Financial Officer | 2007 | Executive Vice President and Chief Financial Officer, Visteon Corporation (2004-2007) | ||||||||
C. Michael Petters
|
50 | Corporate Vice President and President, Shipbuilding | 2008 | Corporate Vice President and President, Newport News (2004-January 2008) | ||||||||
James F. Pitts
|
58 | Corporate Vice President and President, Electronic Systems | 2005 | Vice President and General Manager of Aerospace Systems Division, Electronic Systems (2001-2005) | ||||||||
Mark Rabinowitz
|
48 | Corporate Vice President and Treasurer | 2007 | Vice President and Assistant Treasurer (2006-2007); Prior to June 2006, Corporate Director and Assistant Treasurer, Banking and Capital Markets (2003-2006) | ||||||||
Stephen D. Yslas
|
62 | Corporate Vice President and General Counsel | 2009 | Corporate Vice President, Secretary and Deputy General Counsel (2006-2008); Prior to 2006, Corporate Vice President and Deputy General Counsel (2001-2006) | ||||||||
Ian V. Ziskin
|
51 | Corporate Vice President and Chief Human Resources and Administrative Officer | 2006 | Corporate Vice President, Human Resources and Leadership Strategy (2003-2005) |
-107-
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
-108-
3(a)
|
Restated Certificate of Incorporation of Northrop Grumman Corporation effective May 18, 2006 (incorporated by reference to Exhibit 3.1 to Form 8-K dated and filed May 19, 2006) | |
3(b)
|
Bylaws of Northrop Grumman Corporation, as amended September 17, 2008 (incorporated by reference to Exhibit 3.2 to Form 8-K dated September 17, 2008 and filed September 23, 2008), and October 20, 2008 (incorporated by reference to Exhibit 3.2 to Form 8-K dated October 20, 2008 and filed October 23, 2008) | |
4(a)
|
Registration Rights Agreement dated as of January 23, 2001, by and among Northrop Grumman Corporation (now Northrop Grumman Systems Corporation), NNG, Inc. (now Northrop Grumman Corporation) and Unitrin, Inc. (incorporated by reference to Exhibit(d)(6) to Amendment No. 4 to Schedule TO filed January 31, 2001) | |
4(b)
|
Indenture dated as of October 15, 1994, between Northrop Grumman Corporation (now Northrop Grumman Systems Corporation) and The Chase Manhattan Bank (National Association), Trustee (incorporated by reference to Exhibit 4.1 to Form 8-K dated October 20, 1994, and filed October 25, 1994) | |
4(c)
|
Form of Officers Certificate (without exhibits) establishing the terms of Northrop Grumman Corporations (now Northrop Grumman Systems Corporations) 7.75 percent Debentures due 2016 and 7.875 percent Debentures due 2026 (incorporated by reference to Exhibit 4-3 to Form S-4 Registration Statement No. 333-02653 filed April 19, 1996) | |
4(d)
|
Form of Northrop Grumman Corporations (now Northrop Grumman Systems Corporations) 7.75 percent Debentures due 2016 (incorporated by reference to Exhibit 4-5 to Form S-4 Registration Statement No. 333-02653 filed April 19, 1996) | |
4(e)
|
Form of Northrop Grumman Corporations (now Northrop Grumman Systems Corporations) 7.875 percent Debentures due 2026 (incorporated by reference to Exhibit 4-6 to Form S-4 Registration Statement No. 333-02653 filed April 19, 1996) | |
4(f)
|
Form of Officers Certificate establishing the terms of Northrop Grumman Corporations (now Northrop Grumman Systems Corporations) 7.125 percent Notes due 2011 and 7.75 percent Debentures due 2031 (incorporated by reference to Exhibit 10.9 to Form 8-K dated and filed April 17, 2001) | |
4(g)
|
Indenture dated as of April 13, 1998, between Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and The Bank of New York, as trustee, under which its 6.75 percent Senior Debentures due 2018 were issued (incorporated by reference to Exhibit 4.1 to the Form 10-Q of Litton Industries, Inc. for the quarter ended April 30, 1998, filed June 15, 1998) | |
4(h)
|
Supplemental Indenture with respect to Indenture dated April 13, 1998, dated as of April 3, 2001, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation), Northrop Grumman Corporation, Northrop Grumman Systems Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.5 to Form 10-Q for the quarter ended March 31, 2001, filed May 10, 2001) | |
4(i)
|
Supplemental Indenture with respect to Indenture dated April 13, 1998, dated as of December 20, 2002, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation), Northrop Grumman Corporation, Northrop Grumman Systems Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4(q) to Form 10-K for the year ended December 31, 2002, filed March 24, 2003) | |
4(j)
|
Senior Indenture dated as of December 15, 1991, between Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and The Bank of New York, as trustee, under which its 7.75 percent and 6.98 percent debentures due 2026 and 2036 were issued, and specimens of such debentures (incorporated by reference to Exhibit 4.1 to the Form 10-Q of Litton Industries, Inc. for the quarter ended April 30, 1996, filed June 11, 1996) |
-109-
4(k)
|
Supplemental Indenture with respect to Indenture dated December 15, 1991, dated as of April 3, 2001, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation), Northrop Grumman Corporation, Northrop Grumman Systems Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.7 to Form 10-Q for the quarter ended March 31, 2001, filed May 10, 2001) | |
4(l)
|
Supplemental Indenture with respect to Indenture dated as of December 20, 2002, among Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation), Northrop Grumman Corporation, Northrop Grumman Systems Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4(t) to Form 10-K for the year ended December 31, 2002, filed March 24, 2003) | |
4(m)
|
Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and Mellon Bank, N.A., as trustee, dated as of May 1, 1986 (incorporated by reference to Exhibit 2 to the Form 8-A Registration Statement of TRW Inc. dated July 3, 1986) | |
4(n)
|
First Supplemental Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and Mellon Bank, N.A., as trustee, dated as of August 24, 1989 (incorporated by reference to Exhibit 4(b) to Form S-3 Registration Statement No. 33-30350 of TRW Inc.) | |
4(o)
|
Fifth Supplemental Indenture between TRW Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) and The Chase Manhattan Bank, as successor trustee, dated as of June 2, 1999 (incorporated by reference to Exhibit 4(f) to Form S-4 Registration Statement No. 333-83227 of TRW Inc. filed July 20, 1999) | |
*4(p)
|
Ninth Supplemental Indenture dated as of December 31, 2009 among Northrop Grumman Space & Mission Systems Corp. (predecessor in-interest to Northrop Grumman Systems Corporation); The Bank of New York Mellon, as successor trustee; Northrop Grumman Corporation; and Northrop Grumman Systems Corporation | |
4(q)
|
Indenture dated as of November 21, 2001, between Northrop Grumman Corporation and JPMorgan Chase Bank, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K dated and filed November 21, 2001) | |
4(r)
|
First Supplemental Indenture dated as of July 30, 2009, between Northrop Grumman Corporation and The Bank of New York Mellon, as successor trustee, to Indenture dated as of November 21, 2001 (incorporated by reference to Exhibit 4(a) to Form 8-K dated and filed July 30, 2009) | |
4(s)
|
Form of Northrop Grumman Corporations 3.70 percent Senior Note due 2014 (incorporated by reference to Exhibit 4(b) to Form 8-K dated and filed July 30, 2009) | |
4(t)
|
Form of Northrop Grumman Corporations 5.05 percent Senior Note due 2019 (incorporated by reference to Exhibit 4(c) to Form 8-K dated and filed July 30, 2009) | |
10(a)
|
Form of Amended and Restated Credit Agreement dated as of August 10, 2007, among Northrop Grumman Corporation, as Borrower; Northrop Grumman Systems Corporation and Northrop Grumman Space & Mission Systems Corp. (predecessor in-interest to Northrop Grumman Systems Corporation), as Guarantors; the Lenders party thereto; JPMorgan Chase Bank, N.A., as Payment Agent, an Issuing Bank, Swingline Lender and Administrative Agent; Credit Suisse, as Administrative Agent; Citicorp USA, Inc., as Syndication Agent; Deutsche Bank Securities Inc. and The Royal Bank of Scotland PLC, as Documentation Agents; and BNP Paribas as Co-Documentation Agent (incorporated by reference to Exhibit 10.1 to Form 8-K dated and filed August 13, 2007) | |
10(b)
|
Form of Guarantee dated as of April 3, 2001, by Northrop Grumman Corporation of the indenture indebtedness issued by Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) (incorporated by reference to Exhibit 10.10 to Form 8-K dated and filed April 17, 2001) |
-110-
10(c)
|
Form of Guarantee dated as of April 3, 2001, by Northrop Grumman Corporation of Northrop Grumman Systems Corporation indenture indebtedness (incorporated by reference to Exhibit 10.11 to Form 8-K dated and filed April 17, 2001) | |
10(d)
|
Form of Guarantee dated as of March 27, 2003, by Northrop Grumman Corporation, as Guarantor, in favor of JP Morgan Chase Bank, as trustee, of certain debt securities issued by the former Northrop Grumman Space & Mission Systems Corp. (predecessor-in-interest to Northrop Grumman Systems Corporation) (incorporated by reference to Exhibit 4.2 to Form 10-Q for the quarter ended March 31, 2003, filed May 14, 2003) | |
10(e)
|
Northrop Grumman 1993 Long-Term Incentive Stock Plan, as amended and restated (incorporated by reference to Exhibit 4.1 to Form S-8 Registration Statement No. 333-68003 filed November 25, 1998) | |
10(f)
|
Northrop Grumman Corporation 1993 Stock Plan for Non-Employee Directors (as Amended and Restated January 1, 2010) (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended June 30, 2009, filed July 23, 2009) | |
10(g)
|
Northrop Grumman Corporation 1995 Stock Plan for Non-Employee Directors, as Amended as of May 16, 2007 (incorporated by reference to Exhibit A to Schedule 14A filed April 12, 2007) | |
10(h)
|
Northrop Grumman 2001 Long-Term Incentive Stock Plan (As amended September 17, 2003) (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2003, filed November 6, 2003), as amended by First Amendment to the Northrop Grumman 2001 Long-Term Incentive Stock Plan dated December 19, 2007 (incorporated by reference to Exhibit 10(i) to Form 10-K for the year ended December 31, 2007, filed February 20, 2008) | |
(i) Form of Notice of Non-Qualified Grant of Stock Options
and Option Agreement (incorporated by reference to
Exhibit 10.5 to
Form S-4
Registration Statement
No. 333-83672
filed March 4, 2002)
|
||
(ii) Form of Agreement for 2005 Stock Options (officer)
(incorporated by reference to Exhibit 10(d)(v) to
Form 10-K
for the year ended December 31, 2004, filed March 4,
2005)
|
||
(iii) Form of letter from Northrop Grumman Corporation
regarding Stock Option Retirement Enhancement (incorporated by
reference to Exhibit 10.2 to
Form 8-K
dated March 14, 2005 and filed March 15, 2005)
|
||
(iv) Form of Agreement for 2006 Stock Options (officer)
(incorporated by reference to Exhibit 10(d)(viii) to
Form 10-K
for the year ended December 31, 2005, filed
February 17, 2006)
|
||
(v) 2006 CPC Incentive Restricted Stock Rights Agreement of
Wesley G. Bush dated May 16, 2006, as amended (incorporated
by reference to Exhibit 10(i)(ix) to
Form 10-K
for the year ended December 31, 2007, filed
February 20, 2008)
|
-111-
(vi) Form of Restricted Performance Stock Rights Agreement,
applicable to 2007 Restricted Performance Stock Rights, as
amended (incorporated by reference to Exhibit 10(i)(xi) to
Form 10-K
for the year ended December 31, 2007, filed
February 20, 2008)
|
||
(vii) Form of Agreement for 2007 Stock Options (officers)
(incorporated by reference to Exhibit 10(2)(ii) to
Form 10-Q
for the quarter ended March 31, 2007, filed April 24,
2007)
|
||
(viii) Terms and Conditions Applicable to Special 2007
Restricted Stock Rights Granted to James F. Palmer dated
March 12, 2007, as amended (incorporated by reference to
Exhibit 10(i)(xiii) to
Form 10-K
for the year ended December 31, 2007, filed
February 20, 2008)
|
||
(ix) Form of Agreement for 2008 Stock Options (officer)
(incorporated by reference to Exhibit 10(4)(i) to
Form 10-Q
for the quarter ended March 31, 2008, filed April 24,
2008)
|
||
(x) Form of Agreement for 2008 Restricted Performance Stock
Rights (incorporated by reference to Exhibit 10(4)(ii) to
Form 10-Q
for the quarter ended March 31, 2008, filed April 24,
2008)
|
||
(xi) Form of Agreement for 2009 Stock Options (incorporated
by reference to Exhibit 10.2(i) to
Form 10-Q
for the quarter ended March 31, 2009, filed April 22,
2009)
|
||
(xii) Form of Agreement for 2009 Restricted Performance
Stock Rights (incorporated by reference to Exhibit 10.2(ii)
to
Form 10-Q
for the quarter ended March 31, 2009, filed April 22,
2009)
|
||
*10(i)
|
Northrop Grumman Supplemental Plan 2 (Amended and Restated Effective as of January 1, 2009) | |
*(i) Appendix A: Northrop Supplemental Retirement
Income Program for Senior Executives (Amended and Restated
Effective as of January 1, 2009)
|
||
*(ii) Appendix B: ERISA Supplemental Program 2
(Amended and Restated Effective as of January 1, 2009)
|
||
*(iii) Appendix F: CPC Supplemental Executive
Retirement Program (Amended and Restated Effective as of
January 1, 2009)
|
||
*(iv) Appendix G: Officers Supplemental Executive
Retirement Program (Amended and Restated Effective as of
January 1, 2009)
|
||
*(v) Appendix I: Officers Supplemental Executive
Retirement Program II (Effective as of January 1, 2010)
|
||
*10(j)
|
Northrop Grumman ERISA Supplemental Plan (Amended and Restated Effective as of January 1, 2009) | |
*10(k)
|
Northrop Grumman Supplementary Retirement Income Plan (formerly TRW Supplementary Retirement Income Plan) (Amended and Restated Effective January 1, 2009) | |
*10(l)
|
Northrop Grumman Electronic Systems Executive Pension Plan (Amended and Restated Effective as of January 1, 2009) | |
10(m)
|
Form of Northrop Grumman Corporation January 2009 Change in Control Severance Plan (incorporated by reference to Exhibit 10(n) to Form 10-K for the year ended December 31, 2008, filed February 10, 2009) | |
10(n)
|
Form of Northrop Grumman Corporation January 2009 Special Agreement (relating to severance program for change-in-control) (incorporated by reference to Exhibit 10.1 to Form 8-K dated November 7, 2008 and filed November 13, 2008) | |
10(o)
|
Form of Northrop Grumman Corporation January 2010 Special Agreement (relating to severance program for change-in-control) (incorporated by reference to Exhibit 10.1 to Form 8-K dated and filed October 8, 2009) |
-112-
*10(p)
|
Northrop Grumman Corporation January 2010 Change in Control Severance Plan (effective as of January 1, 2010) | |
10(q)
|
Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation as amended and restated effective October 1, 2009 (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2009, filed October 21, 2009) | |
10(r)
|
Non-Employee Director Compensation Term Sheet, effective October 1, 2008 (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2008, filed October 22, 2008) | |
10(s)
|
Non-Employee Director Compensation Term Sheet, effective January 1, 2010 (incorporated by reference to Exhibit 10.1 to Form 8-K dated December 15, 2009 and filed December 21, 2009) | |
10(t)
|
Form of Indemnification Agreement between Northrop Grumman Corporation and its directors and executive officers (incorporated by reference to Exhibit 10.39 to Form S-4 Registration Statement No. 333-83672 filed March 4, 2002) | |
*10(u)
|
Northrop Grumman Deferred Compensation Plan (Amended and Restated Effective as of January 1, 2009) | |
10(v)
|
The 2002 Incentive Compensation Plan of Northrop Grumman Corporation, As Amended and Restated effective January 1, 2009 (incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended March 31, 2009, filed April 22, 2009) | |
10(w)
|
Northrop Grumman 2006 Annual Incentive Plan and Incentive Compensation Plan (for Non-Section 162(m) Officers), as amended and restated effective January 1, 2009 (incorporated by reference to Exhibit 10.7 to Form 10-Q for the quarter ended March 31, 2009, filed April 22, 2009) | |
*10(x)
|
Northrop Grumman Savings Excess Plan (Amended and Restated Effective as of January 1, 2009) | |
*10(y)
|
Northrop Grumman Officers Retirement Account Contribution Plan (Effective as of October 1, 2009) | |
10(z)
|
Compensatory Arrangements of Certain Officers (Named Executive Officers) for 2009 (incorporated by reference to Form 8-K dated February 17, 2009 and filed February 23, 2009) | |
10(aa)
|
Offering letter dated February 1, 2007 from Northrop Grumman Corporation to James F. Palmer relating to position of Corporate Vice President and Chief Financial Officer (incorporated by reference to Exhibit 10(3) to Form 10-Q for the quarter ended March 31, 2007, filed April 24, 2007), as amended by Amendment to Letter Agreement between Northrop Grumman Corporation and James F. Palmer dated December 17, 2008 (incorporated by reference to Exhibit 10.3 to Form 8-K dated December 17, 2008 and filed December 19, 2008) | |
*10(bb)
|
Litton Industries, Inc. Restoration Plan 2 (Amended and Restated Effective as of January 1, 2009) | |
*10(cc)
|
Litton Industries, Inc. Restoration Plan (Amended and Restated Effective as of January 1, 2009) | |
10(dd)
|
Litton Industries, Inc. Supplemental Executive Retirement Plan as amended and restated effective October 1, 2004 (incorporated by reference to Exhibit 10(ee) to Form 10-K for the year ended December 31, 2004, filed March 4, 2005) | |
10(ee)
|
Northrop Grumman Supplemental Retirement Replacement Plan, as Restated, dated January 1, 2008 between Northrop Grumman Corporation and James F. Palmer (incorporated by reference to Exhibit 10.4 to Form 8-K dated December 17, 2008 and filed December 19, 2008) | |
10(ff)
|
Northrop Grumman Corporation Special Officer Retiree Medical Plan (As Amended and Restated Effective January 1, 2008) (incorporated by reference to Exhibit 10(2) to Form 10-Q for the quarter ended March 31, 2008, filed April 24, 2008) |
-113-
10(gg)
|
Executive Life Insurance Policy (incorporated by reference to Exhibit 10(gg) to Form 10-K for the year ended December 31, 2004, filed March 4, 2005) | |
10(hh)
|
Executive Accidental Death, Dismemberment and Plegia Insurance Policy Terms applicable to Executive Officers dated January 1, 2009 (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2009, filed April 22, 2009) | |
10(ii)
|
Executive Long-Term Disability Insurance Policy as amended by Amendment No. 2 dated June 19, 2008 and effective as of October 4, 2007 (incorporated by reference to Exhibit 10(2) to Form 10-Q for the quarter ended June 30, 2008, filed July 29, 2008) | |
10(jj)
|
Executive Dental Insurance Policy Group Numbers 5134 and 5135 (incorporated by reference to Exhibit 10(m) to Form 10-K for the year ended December 31, 1995, filed February 22, 1996), as amended by action of the Compensation Committee of the Board of Directors of Northrop Grumman Corporation effective July 1, 2009 (incorporated by reference to Item 5.02(e) of Form 8-K dated May 19, 2009 and filed May 26, 2009) | |
10(kk)
|
Group Personal Excess Liability Policy (incorporated by reference to Exhibit 10(ll) to Form 10-K for the year ended December 31, 2004, filed March 4, 2005) | |
10(ll)
|
Northrop Grumman Executive Health Plan Matrix effective July 1, 2008 (incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended March 31, 2009, filed April 22, 2009), as amended by action of the Compensation Committee of the Board of Directors of Northrop Grumman Corporation effective July 1, 2009 (incorporated by reference to Item 5.02(e) of Form 8-K dated May 19, 2009 and filed May 26, 2009) | |
10(mm)
|
Letter dated December 16, 2009 from Northrop Grumman Corporation to Wesley G. Bush regarding compensation effective January 1, 2010 (incorporated by reference to Exhibit 10.2 to Form 8-K dated December 15, 2009 and filed December 21, 2009) | |
10(nn)
|
Letter agreement dated December 17, 2008 between Northrop Grumman Corporation and Ronald D. Sugar relating to termination of Employment Agreement dated February 19, 2003 (incorporated by reference to Exhibit 10.2 to Form 8-K dated December 17, 2008 and filed December 19, 2008) | |
10(oo)
|
Letter dated September 16, 2009 from Northrop Grumman Corporation to Dr. Ronald D. Sugar regarding Retirement and Transition (incorporated by reference to Exhibit 99.1 to Form 8-K dated September 16, 2009 and filed September 17, 2009) | |
10(pp)
|
Consultant Contract dated December 22, 2008 between Northrop Grumman Corporation and W. Burks Terry(incorporated by reference to Exhibit 10.5 to Form 10-Q for the quarter ended March 31, 2009, filed April 22, 2009) | |
*10(qq)
|
Consultant Contract dated February 3, 2010 between Northrop Grumman Corporation and W. Burks Terry | |
*12(a)
|
Computation of Ratio of Earnings to Fixed Charges | |
*21
|
Subsidiaries | |
*23
|
Consent of Independent Registered Public Accounting Firm | |
*24
|
Power of Attorney | |
*31.1
|
Rule 13a-15(e)/15d-15(e) Certification of Wesley G. Bush (Section 302 of the Sarbanes-Oxley Act of 2002) | |
*31.2
|
Rule 13a-15(e)/15d-15(e) Certification of James F. Palmer (Section 302 of the Sarbanes-Oxley Act of 2002) | |
**32.1
|
Certification of Wesley G. Bush pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
-114-
**32.2
|
Certification of James F. Palmer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
**101
|
Northrop Grumman Corporation Annual Report on Form 10-K for the fiscal year ended December 31, 2009, formatted in XBRL (Extensible Business Reporting Language); (i) the Consolidated Statements of Operations, (ii) Consolidated Statements of Financial Position, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Changes in Shareholders Equity, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text |
*
|
Filed with this Report | |||
**
|
Furnished with this Report |
-115-
By: |
/s/
Kenneth N. Heintz
|
Signature
|
Title
|
|||
Lewis W. Coleman* |
Non-Executive Chairman
|
|||
Wesley G. Bush* |
Chief Executive Officer and President (Principal Executive
Officer), and Director
|
|||
James F. Palmer* |
Corporate Vice President and Chief Financial Officer (Principal
Financial Officer)
|
|||
Thomas B. Fargo* |
Director
|
|||
Victor H. Fazio* |
Director
|
|||
Donald E. Felsinger* |
Director
|
|||
Stephen E. Frank* |
Director
|
|||
Bruce S. Gordon* |
Director
|
|||
Madeleine Kleiner* |
Director
|
|||
Karl J. Krapek* |
Director
|
|||
Richard B. Myers* |
Director
|
|||
Aulana L. Peters* |
Director
|
|||
Kevin W. Sharer* |
Director
|
|||
*By: |
/s/
Joseph F. Coyne, Jr.
Corporate Vice President, Deputy General Counsel, and Secretary Attorney-in-Fact pursuant to a power of attorney |
-116-
Balance at
|
Changes
|
Balance at
|
||||||||||||||
Beginning
|
Additions
|
Add
|
End
|
|||||||||||||
Description | of Period | At Cost | (Deduct) | of Period | ||||||||||||
Year ended December 31,
2007
(2)
|
||||||||||||||||
Reserves and allowances deducted from asset
accounts
(1)
|
||||||||||||||||
Allowances for doubtful amounts
|
$ | 304 | $ | 124 | $ | (143 | ) | $ | 285 | |||||||
Valuation allowance on deferred tax assets
|
1,300 | 3 | (711 | ) | 592 | |||||||||||
Year ended December 31,
2008
(2)
|
||||||||||||||||
Reserves and allowances deducted from asset
accounts
(1)
|
||||||||||||||||
Allowances for doubtful amounts
|
$ | 285 | $ | 121 | $ | (106 | ) | $ | 300 | |||||||
Valuation allowance on deferred tax assets
|
592 | (559 | ) | 33 | ||||||||||||
Year ended December 31,
2009
(2)
|
||||||||||||||||
Reserves and allowances deducted from asset
accounts
(1)
|
||||||||||||||||
Allowances for doubtful amounts
|
$ | 300 | $ | 222 | $ | (198 | ) | $ | 324 | |||||||
Valuation allowance on deferred tax assets
|
33 | (33 | ) |
(1) | Uncollectible amounts written off, net of recoveries. | |
(2) | Certain prior-period information has been reclassified to conform to the current years presentation. |
-117-
1. | Assumption of Obligations by NGSC and Guarantee of the Obligations by NGC . | ||
NGSC hereby agrees that upon consummation of the Merger, NGSC shall assume the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture to be performed, observed or satisfied by the Company. NGC understands and agrees that under Section 2(f) of the Guarantee, its obligations under the Guarantee remain absolute and unconditional irrespective of any change or termination of the existence of the Company, and that upon consummation of the Merger, the Guarantee shall continue in full force and effect. NGSC hereby represents that immediately after the Merger, no Event of Default shall have occurred or be continuing and that it shall not immediately after the Merger have outstanding any secured Debt not permitted by Section 5.05 of the Indenture. |
2. | Acknowledgement of Trustee . | ||
The Trustee hereby acknowledges receipt of the following documents pursuant to the provisions of the Indenture: |
(a) | An Officers Certificate of the Company as required by Sections 12.04 and 15.05 of the Indenture and an Opinion of Counsel as required by Sections 11.03, 12.04 and 15.05 of the Indenture. | ||
(b) | A copy of a Board Resolution of each of the Company and NGSC authorizing the execution of this Ninth Supplemental Indenture, as required by Section 11.01 of the Indenture. |
3. | Incorporation by Reference . | ||
This Ninth Supplemental Indenture shall be construed as supplemental to the Indenture and shall form a part of it, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. |
Page 2 of 5
4. | Headings . | ||
The headings of this Ninth Supplemental Indenture are for reference only and shall not limit or otherwise affect the meaning hereof. | |||
5. | Successors and Assigns . | ||
All covenants and agreements in this Ninth Supplemental Indenture by NGC, NGSC and the Company shall bind their successors and assigns, whether so expressed or not. | |||
6. | Severability . | ||
In case any provision of one or more of the provisions contained in this Ninth Supplemental Indenture shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Ninth Supplemental Indenture, but this Ninth Supplemental Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. | |||
7. | Governing Law . | ||
THIS NINTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. | |||
8. | Additional Supplemental Indentures . | ||
Nothing contained herein shall impair the rights of the parties to enter into one or more additional supplemental indentures in the manner provided in the Indenture. | |||
9. | Counterparts . | ||
This Ninth Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. | |||
10. | Trustee Not Responsible for Recitals . | ||
The recitals herein contained are made by the Company, NGC and NGSC, and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Ninth Supplemental Indenture. | |||
11. | Notice to Trustee . | ||
NGSC shall give the Trustee prompt notice of the consummation of the Merger. |
Page 3 of 5
12. | Notices . | ||
For purposes of Section 15.03 of the Indenture, the address of NGSC shall be as follows: | |||
Northrop Grumman Systems Corporation
1840 Century Park East Los Angeles, CA 90067 Attention: Mark Rabinowitz, Corporate Vice President and Treasurer |
NORTHROP GRUMMAN SPACE & MISSION SYSTEMS CORP. | ||||||
|
||||||
|
/s/ Mark Rabinowitz | |||||
|
By: | Mark Rabinowitz | ||||
|
Its: | Treasurer |
Attest: | ||||
|
||||
|
/s/ Kathleen M. Salmas | |||
By:
|
Kathleen M. Salmas | |||
Its:
|
Secretary |
NORTHROP GRUMMAN CORPORATION | ||||||
|
||||||
|
/s/ Mark Rabinowitz | |||||
|
By: | Mark Rabinowitz | ||||
|
Its: | Corporate Vice President and Treasurer |
Attest: | ||||
|
||||
|
/s/ Kathleen M. Salmas | |||
By:
|
Kathleen M. Salmas | |||
Its:
|
Assistant Secretary |
Page 4 of 5
NORTHROP GRUMMAN SYSTEMS CORPORATION | ||||||
|
||||||
|
/s/ Mark Rabinowitz | |||||
|
By: | Mark Rabinowitz | ||||
|
Its: | Treasurer |
Attest: | ||||
|
||||
|
/s/ Kathleen M. Salmas | |||
By:
|
Kathleen M. Salmas | |||
Its:
|
Secretary |
THE BANK OF NEW YORK MELLON, as Trustee | ||||||
|
||||||
|
/s/ Lawrence J. OBrien | |||||
|
By: | Lawrence J. OBrien | ||||
|
Its: | Vice President |
Page 5 of 5
ARTICLE I Definitions
|
1 | |||
1.01 Affiliated Companies
|
1 | |||
1.02 Board of Directors
|
1 | |||
1.03 CIC Plans
|
1 | |||
1.04 Code
|
1 | |||
1.05 Company
|
1 | |||
1.06 Deferred Compensation Plan
|
1 | |||
1.07 ERISA
|
1 | |||
1.08 Grandfathered Amounts
|
1 | |||
1.09 Key Employee
|
1 | |||
1.10 Participant
|
2 | |||
1.11 Payment Date
|
2 | |||
1.12 Pension Plan
|
2 | |||
1.13 Plan
|
2 | |||
1.14 Program
|
2 | |||
1.15 Qualified Plan
|
2 | |||
1.16 Separation from Service or Separates from Service
|
2 | |||
1.17 Termination of Employment
|
2 | |||
ARTICLE II General Provisions
|
4 | |||
2.01 In General
|
4 | |||
2.02 Treatment of 2000 Ad Hoc Increases for Retirees
|
4 | |||
2.03 Forms and Times of Benefit Payments
|
4 | |||
2.04 Beneficiaries and Spouses
|
4 | |||
2.05 Mandatory Cashout
|
5 | |||
2.06 Optional Payment Forms
|
5 | |||
2.07 Special Tax Distribution
|
6 | |||
2.08 Amendment and Plan Termination
|
6 | |||
2.09 Not an Employment Agreement
|
6 | |||
2.10 Assignment of Benefits
|
7 | |||
2.11 Nonduplication of Benefits
|
7 | |||
2.12 Funding
|
7 | |||
2.13 Construction
|
8 | |||
2.14 Governing Law
|
8 | |||
2.15 Actions by Company and Claims Procedures
|
8 | |||
2.16 Plan Representatives
|
8 | |||
2.17 Number
|
8 | |||
ARTICLE III Lump Sum Election
|
9 | |||
3.01 In General
|
9 | |||
3.02 Election
|
9 | |||
3.03 Lump SumRetirement Eligible
|
10 | |||
3.04 Lump SumNot Retirement Eligible
|
11 | |||
3.05 Lump Sums with CIC Severance Plan Election
|
11 | |||
3.06 Calculation of Lump Sum
|
12 | |||
3.07 Spousal consent
|
13 | |||
APPENDIX 1 2005-2007 TRANSITION RULES
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14 | |||
1.01 Election
|
14 |
i
1.02 2005 Commencements
|
14 | |||
1.03 2006 and 2007 Commencements
|
15 | |||
APPENDIX 2 POST 2007 DISTRIBUTION OF 409A AMOUNTS
|
16 | |||
2.01 Time of Distribution
|
16 | |||
2.02 Special Rule for Key Employees
|
16 | |||
2.03 Forms of Distribution
|
16 | |||
2.04 Death
|
16 | |||
2.05 Actuarial Assumptions
|
17 | |||
2.06 Accelerated Lump Sum Payouts
|
17 | |||
2.07 Effect of Early Taxation
|
18 | |||
2.08 Permitted Delays
|
18 |
ii
1.01 | Affiliated Companies . The Company and any other entity related to the Company under the rules of section 414 of the Code. The Affiliated Companies include Northrop Grumman Corporation and its 80%-owned subsidiaries and may include other entities as well. | |
1.02 | Board of Directors . The Board of Directors of the Company. | |
1.03 | CIC Plans . Northrop Grumman Corporation Change-In-Control Severance Plan (effective August 1, 1996, as amended) or the Northrop Grumman Corporation March 2000 Change-In-Control Severance Plan. | |
1.04 | Code . The Internal Revenue Code of 1986, as amended. | |
1.05 | Company . Northrop Grumman Corporation. | |
1.06 | Deferred Compensation Plan . The Northrop Grumman Deferred Compensation Plan and the Northrop Grumman Savings Excess Plan. | |
1.07 | ERISA . The Employee Retirement Income Security Act of 1974, as amended. | |
1.08 | Grandfathered Amounts . Plan benefits that were earned and vested as of December 31, 2004 within the meaning of Code section 409A and official guidance thereunder. | |
1.09 | Key Employee . An employee treated as a specified employee under Code section 409A(a)(2)(B)(i) of the Company or the Affiliated Companies (i.e., a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)) if the Companys or an Affiliated Companys stock is publicly traded on an established securities market or otherwise. The Company shall determine in accordance with a uniform Company policy which Participants are Key |
Employees as of each December 31 in accordance with IRS regulations or other guidance under Code section 409A, provided that in determining the compensation of individuals for this purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be used. Such determination shall be effective for the twelve (12) month period commencing on April 1 of the following year. | ||
1.10 | Participant . Any employee of the Company who is eligible for benefits under a particular Program and has not received full payment under the Program. | |
1.11 | Payment Date . The 1st of the month coincident with or following the later of (a) the date the Participant attains age 55, or (b) the date the Participant Separates from Service. | |
1.12 | Pension Plan . |
(a) | The Northrop Grumman Pension Plan (subject to the special effective dates noted below for the following merged plans) |
o | The Northrop Grumman Retirement Value Plan (effective as of January 1, 2000) | ||
o | The Northrop Grumman Commercial Aircraft Division Salaried Retirement Plan (effective as of July 1, 2000) | ||
o | The Grumman Pension Plan (effective as of July 1, 2003) |
(b) | The Northrop Grumman Electronic Systems Space Division Consolidated Pension Plan (effective as of October 22, 2001) | ||
(c) | The Northrop Grumman Norden Systems Employee Retirement Plan (effective July 1, 2003) |
1.13 | Plan . The Northrop Grumman Supplemental Plan 2. | |
1.14 | Program . One of the eligibility and benefit structures described in the Appendices. | |
1.15 | Qualified Plan . The Northrop Grumman Pension Plan and Cash Balance Plans (as defined under the Northrop Grumman Pension Plan). | |
1.16 | Separation from Service or Separates from Service . A separation from service within the meaning of Code section 409A. | |
1.17 | Termination of Employment . Complete termination of employment with the Affiliated Companies. |
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(a) | If a Participant leaves one Affiliated Company to go to work for another, he or she will not have a Termination of Employment. | ||
(b) | A Participant will have a Termination of Employment if he or she leaves the Affiliated Companies because the affiliate he or she works for ceases to be an Affiliated Company because it is sold or spunoff. |
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2.01 | In General . The Plan contains a number of different benefit Programs which are set forth in the Appendices. The Appendices describe the eligibility conditions and the amount of benefits payable under the Programs. The Company, in its sole discretion, will determine all eligibility conditions, make all benefit determinations, and otherwise exercise sole authority to interpret the Plan and Programs. | |
2.02 | Treatment of 2000 Ad Hoc Increases for Retirees . In no event, however, (1) will this Plan pay any amount of a Participants retirement benefit, if any, attributable to the 2000 Ad Hoc Increase for Retirees Appendix added to certain of the Companys tax-qualified plans pursuant to the Board of Directors resolution adopted May 17, 2000, or (2) will a Participant be entitled to a benefit (or an increased benefit) from or as a result of participation in this Plan under the Board of Directors resolution adopted May 17, 2000. | |
2.03 | Forms and Times of Benefit Payments . This Section only applies to Grandfathered Amounts. The Company will determine the form and timing of benefit payments in its sole discretion unless particular rules regarding the form and timing of benefit payments are set forth in a Program or where a lump sum election under Article III is applicable. |
(a) | For payments made to supplement those of a particular tax-qualified retirement or savings plan, the Company will only select among the options available under that plan, using the same actuarial adjustments used in that plan, except in cases of lump sums. | ||
(b) | Whenever the present value of the amount payable under a particular Program does not exceed $10,000, it will be paid in the form of a single lump sum as of the first of the month following Termination of Employment. The lump sum will be calculated using the factors and methodology described in Section 3.06 below (See Section 2.05 for the rule that applies as of January 1, 2008). | ||
(c) | No payments will commence under this Plan until a Participant has a Termination of Employment, even in cases where benefits have commenced under a qualified retirement plan for Participants over age 70 1 / 2 , or for any other reason. |
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Participant may make a beneficiary designation, which may be changed at any time prior to commencement of benefits. A beneficiary designation must be in writing and will be effective only when received by the Company. |
(a) | If a Participant is married on the date his or her benefits are scheduled to commence, his or her beneficiary will be his or her spouse unless some other beneficiary is named with spousal consent. Spousal consent, to be effective, must be submitted in writing before benefits commence and must be witnessed by a Plan representative or notary public. No spousal consent is necessary if the Company determines that there is no spouse or that the spouse cannot be found. | ||
(b) | With respect to Programs designed to supplement tax-qualified retirement or savings plans, the Participants spouse will be the spouse as determined under the underlying tax-qualified plan. Otherwise, the Participants spouse will be determined by the Company in its sole discretion. |
(a) | Post-2007 Terminations . Participants who have a Termination of Employment after 2007 will receive a lump sum distribution of the present value of their Grandfathered Amounts under a Program within two months of Termination of Employment (without interest), if such present value is below the Code section 402(g) limit in effect at the Termination of Employment. | ||
(b) | Pre-2008 Terminations . Participants who had a Termination of Employment before 2008 will receive a lump sum distribution of the present value of their Grandfathered Amounts under a Program within two months of the time they commence payment of their underlying qualified pension plan benefits (without interest), if such present value is below the Code section 402(g) limit in effect at the time such payments commence. |
For purposes of calculating present values under this Section, the actual assumptions and calculation procedures for lump sum distributions under the Northrop Grumman Pension Plan shall be used. | ||
2.06 | Optional Payment Forms . Participants with Grandfathered Amounts shall be permitted to elect (a) or (b) below: |
(a) | To receive their Grandfathered Amounts in any form of distribution available under the Plan at October 3, 2004, provided that form remains |
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available under the underlying qualified pension plan at the time payment of the Grandfathered Amounts commences. The conversion factors for these distribution forms will be based on the factors or basis in effect under this Plan on October 3, 2004. | |||
(b) | To receive their Grandfathered Amounts in any life annuity form not included in (a) above but included in the underlying qualified pension plan distribution options at the time payment of the Grandfathered Amounts commences. The conversion factors will be based on the following actuarial assumptions: |
|
Interest Rate: 6% | |||
|
||||
|
Mortality Table: RP-2000 Mortality Table projected 15 years for future standardized cash balance factors |
2.07 | Special Tax Distribution . On the date a Participants retirement benefit is reasonably ascertainable within the meaning of IRS regulations under Code section 3121(v)(2), an amount equal to the Participants portion of the FICA tax withholding will be distributed in a single lump sum payment. This payment will be based on all benefits under the Plan, including Grandfathered Amounts. This payment will reduce the Participants future benefit payments under the Plan on an actuarial basis. | |
2.08 | Amendment and Plan Termination . The Company may, in its sole discretion, terminate, suspend or amend this Plan at any time or from time to time, in whole or in part for any reason. This includes the right to amend or eliminate any of the provisions of the Plan with respect to lump sum distributions, including any lump sum calculation factors, whether or not a Participant has already made a lump sum election. Notwithstanding the foregoing, no amendment or termination of the Plan shall reduce the amount of a Participants accrued benefit under the Plan as of the date of such amendment or termination. | |
No amendment of the Plan shall apply to the Grandfathered Amounts, unless the amendment specifically provides that it applies to such amounts. The purpose of this restriction is to prevent a Plan amendment from resulting in an inadvertent material modification to the Grandfathered Amounts. | ||
The Company may, in its sole discretion, seek reimbursement from the Companys tax-qualified plans to the extent this Plan pays tax-qualified plan benefits to which Participants were entitled to or became entitled to under the tax-qualified plans. | ||
2.09 | Not an Employment Agreement . Nothing contained in this Plan gives any Participant the right to be retained in the service of the Company, nor does it interfere with the right of the Company to discharge or otherwise deal with Participants without regard to the existence of this Plan. |
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2.10 | Assignment of Benefits . A Participant, surviving spouse or beneficiary may not, either voluntarily or involuntarily, assign, anticipate, alienate, commute, sell, transfer, pledge or encumber any benefits to which he or she is or may become entitled under the Plan, nor may Plan benefits be subject to attachment or garnishment by any of their creditors or to legal process. | |
Notwithstanding the foregoing, all or a portion of a Participants benefit may be paid to another person as specified in a domestic relations order that the plan administrator determines is qualified (a Qualified Domestic Relations Order). For this purpose, a Qualified Domestic Relations Order means a judgment, decree, or order (including the approval of a settlement agreement) which is: |
(1) | issued pursuant to a States domestic relations law; | ||
(2) | relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of the Participant; | ||
(3) | creates or recognizes the right of a spouse, former spouse, child or other dependent of the Participant to receive all or a portion of the Participants benefits under the Plan; and | ||
(4) | meets such other requirements established by the plan administrator. |
The plan administrator shall determine whether any document received by it is a Qualified Domestic Relations Order. In making this determination, the plan administrator may consider the rules applicable to the domestic relations orders under Code section 414(p) and ERISA section 206(d), and such other rules and procedures as it deems relevant. | ||
2.11 | Nonduplication of Benefits . This Section applies if, despite Section 2.10, with respect to any Participant (or his or her beneficiaries), the Company is required to make payments under this Plan to a person or entity other than the payees described in the Plan. In such a case, any amounts due the Participant (or his or her beneficiaries) under this Plan will be reduced by the actuarial value of the payments required to be made to such other person or entity. |
(a) | Actuarial value will be determined using the factors and methodology described in Section 3.06 below (in the case of lump sums) and using the actuarial assumptions in the underlying Pension Plan in all other cases. | ||
(b) | In dividing a Participants benefit between the Participant and another person or entity, consistent actuarial assumptions and methodologies will be used so that there is no increased actuarial cost to the Company. |
2.12 | Funding . Participants have the status of general unsecured creditors of the Company and the Plan constitutes a mere promise by the Company to make |
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benefit payments in the future. The Company may, but need not, fund benefits under the Plan through a trust. If it does so, any trust created by the Company and any assets held by the trust to assist it in meeting its obligations under the Plan will conform to the terms of the model trust, as described in Internal Revenue Service Revenue Procedure 92-64, but only to the extent required by Internal Revenue Service Revenue Procedure 92-65. It is the intention of the Company and Participants that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA. | ||
Any funding of benefits under this Plan will be in the Companys sole discretion. The Company may set and amend the terms under which it will fund and may cease to fund at any time. | ||
2.13 | Construction . The Company shall have full discretion to construe and interpret the terms and provisions of this Plan, to make factual determinations and to remedy possible inconsistencies and omissions. The Companys interpretations, constructions and remedies shall be final and binding on all parties, including but not limited to the Affiliated Companies and any Participant or beneficiary. The Company shall administer such terms and provisions in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the Plan. | |
2.14 | Governing Law . This Plan shall be governed by the law of the State of California, except to the extent superseded by federal law. | |
2.15 | Actions by Company and Claims Procedures . Any powers exercisable by the Company under the Plan shall be utilized by written resolution adopted by the Board of Directors or its delegate. The Board of Directors may by written resolution delegate any of the Companys powers under the Plan and any such delegations may provide for subdelegations, also by written resolution. | |
The Companys standardized Northrop Grumman Nonqualified Retirement Plans Claims and Appeals Procedures shall apply in handling claims and appeals under this Plan. | ||
2.16 | Plan Representatives . Those authorized to act as Plan representatives will be designated in writing by the Board of Directors or its delegate. | |
2.17 | Number . The singular, where appearing in this Plan, will be deemed to include the plural, unless the context clearly indicates the contrary. |
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3.01 | In General . This Article sets forth the rules under which Participants may elect to receive their benefits in a lump sum. Except as provided in Section 3.05, this Article does not apply to employees in cases where benefits under a particular Program are automatically payable in lump sum form under Article II. This Article will not apply if a particular Program so provides. |
3.02 | Election . Participants may elect to have their benefits paid in the form of a single lump sum under this Section. |
(a) | An election to take a lump sum may be made at any time during the 60-day period prior to Termination of Employment and covers both |
(1) | Benefits payable to the Participant during his or her lifetime, and | ||
(2) | Survivor benefits (if any) payable to the Participants beneficiary, including preretirement death benefits (if any) payable to the Participants spouse. |
(b) | An election does not become effective until the earlier of: |
(1) | the Participants Termination of Employment, or | ||
(2) | the Participants death. |
(c) | Before the election becomes effective, it may be revoked. | ||
(d) | If a Participant does not have a Termination of Employment within 60 days after making an election, the election will never take effect. | ||
(e) | An election may only be made once. If it fails to become effective after 60 days or is revoked before becoming effective, it cannot be made again at a later time. | ||
(f) | After a Participant has a Termination of Employment, no election can be made. | ||
(g) | If a Participant dies before making a lump sum election, his or her spouse may not make a lump sum election with respect to any benefits which may be due the spouse. |
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(h) | Elections to receive a lump sum must be made in writing and must include spousal consent if the Participant is married. Elections and spousal consent must be witnessed by a Plan representative or a notary public. |
3.03 | Lump SumRetirement Eligible . If a Participant with a valid lump sum election in effect under Section 3.02 has a Termination of Employment after he or she is entitled to commence benefits under the Pension Plans, payments will be made in accordance with this Section. |
(a) | Monthly benefit payments will be made for up to 12 months, commencing the first of the month following Termination of Employment. Payments will be made: |
(1) | in the case of a Participant who is not married on the date benefits are scheduled to commence, based on a straight life annuity for the Participants life and ceasing upon the Participants death should he or she die before the 12 months elapse, or | ||
(2) | in the case of a Participant who is married on the date benefits are scheduled to commence, based on a joint and survivor annuity form |
(A) | with the survivor benefit equal to 50% of the Participants benefit; | ||
(B) | with the Participants spouse as the survivor annuitant; | ||
(C) | determined by using the contingent annuitant option factors used to convert straight life annuities to 50% joint and survivor annuities under the Northrop Grumman Retirement Plan; and | ||
(D) | with all payments ceasing upon the death of both the Participant and his or her spouse should they die before the 12 months elapse. |
(b) | As of the first of the 13th month, the present value of the remaining benefit payments will be paid in a single lump sum. Payment of the lump sum will be made to the Participant if he or she is still alive, or, if not, to his or her surviving spouse, if any. | ||
(c) | No lump sum payment will be made if: |
(1) | The Participant is receiving monthly benefit payments in the form of a straight life annuity and the Participant dies before the time the lump sum payment is due. |
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(2) | The Participant is receiving monthly benefit payments in a joint and survivor annuity form and the Participant and his or her spouse both die before the time the lump sum payment is due. |
(d) | A lump sum will be payable to a Participants spouse as of the first of the month following the date of the Participants death, if: |
(1) | the Participant dies after making a valid lump sum election but prior to commencement of any benefits under this Plan; | ||
(2) | the Participant is survived by a spouse who is entitled to a preretirement surviving spouse benefit under this Plan; and | ||
(3) | the spouse survives to the first of the month following the date of the Participants death. |
3.04 | Lump SumNot Retirement Eligible . If a Participant with a valid lump sum election in effect under Section 3.02 has a Termination of Employment before he or she is entitled to commence benefits under the Pension Plans, payments will be made in accordance with this Section. |
(a) | No monthly benefit payments will be made. | ||
(b) | Following Termination of Employment, a single lump sum payment of the benefit will be made on the first of the month following 12 months after the date of the Participants Termination of Employment. | ||
(c) | A lump sum will be payable to a Participants spouse as of the first of the month following the date of the Participants death, if: |
(1) | the Participant dies after making a valid lump sum election but prior to commencement of any benefits under this Plan; | ||
(2) | the Participant is survived by a spouse who is entitled to a preretirement surviving spouse benefit under this Plan; and | ||
(3) | the spouse survives to the first of the month following the date of the Participants death. |
(d) | No lump sum payment will be made if the Participant is unmarried at the time of death and dies before the time the lump sum payment is due. |
3.05 | Lump Sums with CIC Severance Plan Election . A Participant who elects lump sum payments of all his or her nonqualified benefits under the CIC Plans is entitled to have his or her benefits paid as a lump sum calculated under the terms of the applicable CIC Plan. Otherwise, benefit payments are governed by the |
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general provisions of this Article, which provide different rules for calculating the amount of lump sum payments. | ||
3.06 | Calculation of Lump Sum . |
(a) | The factors to be used in calculating the lump sum are as follows: |
(1) | Interest : Whichever of the following two rates that produces the smaller lump sum: |
(A) | the discount rate used by the Company for purposes of Statement of Financial Accounting Standards No. 87 of the Financial Accounting Standards Board as disclosed in the Companys annual report to shareholders for the year end immediately preceding the date of distribution, or | ||
(B) | the applicable interest rate that would be used to calculate a lump sum value for the benefit under the Pension Plans. |
(2) | Mortality : the applicable mortality table, which would be used to calculate a lump sum value for the benefit under the Pension Plans. | ||
(3) | Increase in Section 415 Limit : 4% per year. | ||
(4) | Age : Age rounded to the nearest month on the date the lump sum is payable. | ||
(5) | Variable Unit Values : Variable Unit Values are presumed not to increase for future periods after the date the lump sum is payable. |
(b) | The annuity to be converted to a lump sum will be the remaining annuity currently payable to the Participant or his or her beneficiary at the time the lump sum is due. |
(1) | For example, assume a Participant is receiving benefit payments in the form of a 50% joint and survivor annuity. | ||
(2) | If the Participant and the survivor annuitant are both still alive at the time the lump sum payment is due, the present value calculation will be based on the remaining benefits that would be paid to both the Participant and the survivor in the annuity form. | ||
(3) | If only the survivor is alive, the calculation will be based solely on the remaining 50% survivor benefits that would be paid to the survivor. | ||
(4) | If only the Participant is alive, the calculation will be based solely on the remaining benefits that would be paid to the Participant. |
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(5) | In the case of a Participant who dies prior to commencement of benefits under this Plan so that only a preretirement surviving spouse benefit (if any) is payable, the lump sum will be based solely on the value of the preretirement surviving spouse benefit. |
(c) | In the case of a lump-sum under Section 3.05 (related to lump sums with a CIC Severance Plan election), the lump-sum amount will be calculated as described in that section and the rules of this Section 3.06 are not used. |
3.07 | Spousal consent . Spousal consent, as required for elections as described above, need not be obtained if the Company determines that there is no spouse or the spouse cannot be located. |
NORTHROP GRUMMAN CORPORATION | ||||||
|
||||||
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By: | /s/ Debora L. Catsavas | ||||
|
||||||
Debora L. Catsavas | ||||||
Vice President, Compensation, Benefits & International |
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1.01 | Election . Participants scheduled to commence payments during 2005 may elect to receive both pre-2005 benefit accruals and 2005 benefit accruals in any optional form of benefit available under the Plan as of December 31, 2004. Participants electing optional forms of benefits under this provision will commence payments on the Participants selected benefit commencement date. |
1.02 | 2005 Commencements . Pursuant to IRS Notice 2005-1, Q&A-19 & Q&A-20, Participants commencing payments in 2005 from the Plan may elect a form of distribution from among those available under the Plan on December 31, 2004, and benefit payments shall begin at the time elected by the Participant. |
(a) | Key Employees . A Key Employee Separating from Service on or after July 1, 2005, with Plan distributions subject to Code section 409A scheduled to be paid in 2006 and within six months of his date of Separation from Service, shall have such distributions delayed for six months from the Key Employees date of Separation from Service. The delayed distributions shall be paid as a single sum with interest at the end of the six month period and Plan distributions will resume as scheduled at such time. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such period (i.e., the rate may change in the event the period spans two calendar years). Alternatively, the Key Employee may elect under IRS Notice 2005-1, Q&A-20 to have such distributions accelerated and paid in 2005 without the interest adjustment, provided, such election is made in 2005. |
(b) | Lump Sum Option . During 2005, a temporary immediate lump sum feature shall be available as follows: |
(i) | In order to elect a lump sum payment pursuant to IRS Notice 2005-1, Q&A-20, a Participant must be an elected or appointed officer of the Company and eligible to commence payments under the underlying qualified pension plan on or after June 1, 2005 and on or before December 1, 2005; | ||
(ii) | The lump sum payment shall be made in 2005 as soon as feasible after the election; and | ||
(iii) | Interest and mortality assumptions and methodology for calculating lump sum amount shall be based on the Plans procedures for calculating lump sums as of December 31, 2004. |
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1.03 | 2006 and 2007 Commencements . Pursuant to IRS transition relief, for all benefit commencement dates in 2006 and 2007 (provided election is made in 2006 or 2007), distribution of Plan benefits subject to Code section 409A shall begin 12 months after the later of: (a) the Participants benefit election date, or (b) the underlying qualified pension plan benefit commencement date (as specified in the Participants benefit election form). Payments delayed during this 12-month period will be paid at the end of the period with interest. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such period (i.e., the rate may change in the event the period spans two calendar years). |
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2.01 | Time of Distribution . Subject to the special rules provided in this Appendix 2, distributions to a Participant of his vested retirement benefit shall commence as of the Payment Date. |
2.02 | Special Rule for Key Employees . If a Participant is a Key Employee and age 55 or older at his Separation from Service, distributions to the Participant shall commence on the first day of the seventh month following the date of his Separation from Service (or, if earlier, the date of the Participants death). Amounts otherwise payable to the Participant during such period of delay shall be accumulated and paid on the first day of the seventh month following the Participants Separation from Service, along with interest on the delayed payments. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such delay (i.e., the rate may change in the event the delay spans two calendar years). |
2.03 | Forms of Distribution . Subject to the special rules provided in this Appendix 2, a Participants vested retirement benefit shall be distributed in the form of a single life annuity. However, a Participant may elect an optional form of benefit up until the Payment Date. The optional forms of payment are: |
(a) | 50% joint and survivor annuity | ||
(b) | 75% joint and survivor annuity | ||
(c) | 100% joint and survivor annuity. |
If a Participant is married on his Payment Date and elects a joint and survivor annuity, his survivor annuitant will be his spouse unless some other survivor annuitant is named with spousal consent. Spousal consent, to be effective, must be submitted in writing before the Payment Date and must be witnessed by a Plan representative or notary public. No spousal consent is necessary if the Company determines that there is no spouse or that the spouse cannot be found. | ||
2.04 | Death . If a married Participant dies before the Payment Date, a death benefit will be payable to the Participants spouse commencing 90 days after the Participants death. The death benefit will be a single life annuity in an amount equal to the survivor portion of a Participants vested retirement benefit based on a 100% joint |
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and survivor annuity determined on the Participants date of death. This benefit is also payable to a Participants domestic partner who is properly registered with the Company in accordance with procedures established by the Company. | ||
2.05 | Actuarial Assumptions . Except as provided in Section 2.06 of this Appendix 2, all forms of payment under this Appendix 2 shall be actuarially equivalent life annuity forms of payment, and all conversions from one such form to another shall be based on the following actuarial assumptions: |
|
Interest Rate: 6% | |||
|
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|
Mortality Table: RP-2000 Mortality Table projected 15 years for future standardized cash balance factors |
2.06 | Accelerated Lump Sum Payouts . |
(a) | Post-2007 Separations . Notwithstanding the provisions of this Appendix 2, for Participants who Separate from Service on or after January 1, 2008, if the present value of (a) the vested portion of a Participants retirement benefit and (b) other vested amounts under nonaccount balance plans that are aggregated with the retirement benefit under Code section 409A, determined on the first of the month coincident with or following the date of his Separation from Service, is less than or equal to $25,000, such benefit amount shall be distributed to the Participant (or his spouse or domestic partner, if applicable) in a lump sum payment. Subject to the special timing rule for Key Employees under Section 2.02 of this Appendix 2, the lump sum payment shall be made within 90 days after the first of the month coincident with or following the date of the Participants Separation from Service. | ||
(b) | Pre-2008 Separations . Notwithstanding the provisions of this Appendix 2, for Participants who Separate from Service before January 1, 2008, if the present value of (a) the vested portion of a Participants retirement benefit and (b) other vested amounts under nonaccount balance plans that are aggregated with the retirement benefit under Code section 409A, determined on the first of the month coincident with or following the date the Participant attains age 55, is less than or equal to $25,000, such benefit amount shall be distributed to the Participant (or his spouse or domestic partner, if applicable) in a lump sum payment within 90 days after the first of the month coincident with or following the date the Participant attains age 55, but no earlier that January 1, 2008. | ||
(c) | Conflicts of Interest . The present value of a Participants vested retirement benefit shall also be payable in an immediate lump sum to the extent required under conflict of interest rules for government service and permissible under Code section 409A. |
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(d) | Present Value Calculation . The conversion of a Participants retirement benefit into a lump sum payment and the present value calculations under this Section 2.06 of this Appendix 2 shall be based on the actuarial assumptions in effect under the Northrop Grumman Pension Plan for purposes of calculating lump sum amounts, and will be based on the Participants immediate benefit if the Participant is 55 or older at Separation from Service. Otherwise, the calculation will be based on the benefit amount the Participant will be eligible to receive at age 55. |
2.07 | Effect of Early Taxation . If the Participants benefits under the Plan are includible in income pursuant to Code section 409A, such benefits shall be distributed immediately to the Participant. |
2.08 | Permitted Delays . Notwithstanding the foregoing, any payment to a Participant under the Plan shall be delayed upon the Companys reasonable anticipation of one or more of the following events: |
(a) | The Companys deduction with respect to such payment would be eliminated by application of Code section 162(m); or | ||
(b) | The making of the payment would violate Federal securities laws or other applicable law; |
provided, that any payment delayed pursuant to this Section 2.08 of this Appendix 2 shall be paid in accordance with Code section 409A. |
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A.01 | Purpose . The purpose of this Program is to provide minimum pension and death benefits to senior executives participating in the Pension Plans who have only had a short period of service with the Company prior to retirement. | |
A.02 | Eligibility . Officers of the Company may become Participants under this Program only if they are designated as such by the Board of Directors. |
(a) | Effective as of April 1, 2003, Kent Kresa ceased being an active Participant under this Program and entered pay-status. | ||
(b) | Effective as of January 1, 2002, the Board of Directors has determined that Dr. Ronald D. Sugar (the Executive) will be eligible to participate in this Program. | ||
(c) | There are no other Participants in this Program as of July 1, 2003. |
A.03 | Retirement Benefit . A Participant is eligible for the benefit under Section A.04 upon voluntary or involuntary Termination of Employment with the Company (other than by death) at or after age 55 with 10 or more years of Vesting Service. | |
A.04 | Amount of Retirement Benefit . The amount of the retirement benefit under this Appendix is the amount in (a), reduced by (b), where: |
(a) | is the greater of |
(1) | the amount of the Participants retirement income under the Pension Plans on a straight life annuity basis, computed: |
(A) | without regard to the limitations on benefits and the cap on counted compensation imposed by Code sections 415 and 401(a)(17), and | ||
(B) | using Eligible Pay as defined in subsection (c) below, or |
(2) | the amount of a straight life annuity with annual payments equal to the participants Final Average Salary (as defined below) in effect on the date of his or her Termination of Employment multiplied by the appropriate percentage shown in the following schedule: |
Percentage of Final Average Salary at | ||
Age at Termination Date* | Termination Date** | |
55
|
30% | |
56
|
34% | |
57
|
38% | |
58
|
42% | |
59
|
46% | |
60
|
50% | |
61
|
52% | |
62
|
54% | |
63
|
56% | |
64
|
58% | |
65 and over
|
60% |
(b) | is the sum of (1) and (2) below, where: |
(1) | is the amount of the Participants retirement income payable to the Participant, including all early retirement subsidies, supplements, and other such benefits, under the following plans and programs: |
(A) | the Qualified Plans, including any predecessor plans, taking into account the limitations on benefits and the cap on counted compensation imposed by Code sections 415 and 401(a)(17); | ||
(B) | the CPC Supplemental Executive Retirement Program set forth in Appendix F; | ||
(C) | the Northrop Grumman ERISA Supplemental Plan; | ||
(D) | the ERISA Supplemental Program 2 set forth in Appendix B; and | ||
(E) | any defined benefit retirement plans, programs, and arrangements (whether qualified or nonqualified) maintained by TRW Inc. or Litton Industries, Inc., their predecessors, or any affiliates of |
* | Calculated to years and completed months on the Termination Date. | |
** | The applicable percentage shall be straight line interpolation depending on the Participants age on his termination date. The percentage thus determined shall be rounded to the nearest hundredth. For example, if a Participant terminates when he is 55 years and 8 months old, the applicable percentage is 30.00% + 2.67% = 32.67%. |
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either in which the Executive participated prior to the commencement of his employment with the Company; and |
(2) | is an annual benefit of $124,788 which represents a portion of the retirement benefits previously received by the Executive from certain plans previously maintained by Litton Industries, Inc. |
(c) | Final Average Salary. |
(1) |
Final Average Salary for any Plan Year is the Participants
average Eligible Pay for the highest three of the last ten consecutive Plan
Years. For this purpose, years will be deemed to be consecutive even though a
break in service year(s) intervenes.
Notwithstanding the foregoing, for Participants whose employment ceases after 2005, all Plan Years after 1996 (not just the last ten) shall be considered in determining the highest three years of Eligible Pay. All benefits resulting from this change in determining the highest three years of Eligible Pay shall be subject to Code section 409A. |
||
(2) | Eligible Pay will be determined under the rules of Appendix F. |
A.05 | Post-55 Preretirement Surviving Spouse Benefit . If a Participant dies: |
(a) | after age 55; | ||
(b) | while credited with 10 or more years of Vesting Service; | ||
(c) | prior to Termination of Employment; and | ||
(d) | his or her spouse is entitled to a survivor annuity under the Pension Plans, | ||
then the Participants spouse will be entitled to the benefit under Section A.06. |
A.06 | Amount of Post-55 Spouses Benefit . The Participants surviving spouse benefit under this Section shall be equal in value to the sum of (a) and (b), with such sum then reduced by (c) where: |
(a) | is the amount of retirement income that the Participant would have received under the 100% Joint and Survivor Option under the Qualified Plan in which he or she was participating had the Participant retired on the date of death, | ||
(b) | is the amount of the benefit under this Program, after the offset of the benefits included in Section A.04(b), the Participant would have received if he or she had retired on the date of his or her death with this 100% Joint and Survivor Option in effect, and |
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(c) | is the amount of the annuity benefit payable to the surviving spouse under the Qualified Plans (even if the annuity is commuted to a lump sum). |
A.07 | Payment of Post-55 Spouses Benefit . The spouses benefit described in Section A.06 will be payable commencing the first day of the month next following the Participants date of death and shall terminate on the date of death of the surviving spouse. |
A.08 | Pre-55 Preretirement Surviving Spouse Benefit . If a Participant dies: |
(a) | before age 55; | ||
(b) | while credited with 10 or more years of Vesting Service; and | ||
(c) |
prior to Termination of Employment,
then the Participants spouse will be entitled to the benefit under Section A.09. |
A.09 | Amount of Pre-55 Spouses Benefit . The Participants surviving spouse benefit under this Section shall be equal in value to the benefit standing to the credit of the Participant under the Pension Plans as of the date of his or her death, actuarially reduced in accordance with the factors in the following table: |
Factor to be Applied to the Earned | ||
Age of Participant at Date of Death* | Benefit** | |
55
|
.431 | |
54
|
.399 | |
53
|
.370 | |
52
|
.343 | |
51
|
.319 | |
50
|
.297 | |
49
|
.276 | |
48
|
.257 | |
47
|
.240 | |
46
|
.223 | |
45
|
.208 |
Any extension of the above table below age 45 shall be based on the following assumptions (i) Mortality 1971 Towers, Perrin, Forster & Crosby Forecast Mortality Table, and (ii) Interest 6% compounded annually. |
* | Calculated to years and completed months on date of death. | |
** | The applicable factor shall be determined by straight line interpolation depending on Participants age at date of death. |
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A.10 | Payment of Pre-55 Spouses Benefit . The spouses benefit described in Section A.09 will be payable commencing the first day of the month next following the Participants date of death and will terminate on the date of death of the surviving spouse. |
A.11 | Effective Date. This Program first became effective on July 18, 1973 and will be effective as to each Participant on the date the Board of Directors takes the action designating him or her as a Participant under this Program. | |
A.12 | Vesting Service. |
(a) | In General. Vesting Service is generally determined under the Qualified Plans. | ||
(b) | Special Rule for the Executive. The Executive is deemed to have earned 5 years of Vesting Service as of January 1, 2002. For service performed after December 31, 2001, the Executives Vesting Service is determined under the Qualified Plans. |
NORTHROP GRUMMAN CORPORATION | ||||||
|
||||||
|
By: | /s/ Debora L. Catsavas | ||||
|
||||||
Debora L. Catsavas | ||||||
Vice President, Compensation, Benefits & International |
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B.01 | Purpose . The purpose of the Program is: |
(a) | to restore benefits lost under the Pension Plans as a result of the compensation limit in Code section 401(a)(17), or any successor provision; and | ||
(b) | to include compensation deferred under a Deferred Compensation Plan and deferrals required in connection with participation under the Northrop Grumman Electronic Systems Executive Pension Plan. |
B.02 | Eligibility . An employee of the Company, other than Charles H. Noski, is eligible to receive a benefit under this Program if he or she: |
(a) | retires on or after January 1, 1989; | ||
(b) | has vested in Pension Plan benefits that are reduced because of one or both of the following: |
(1) | the Code section 401(a)(17) limit on compensation; or | ||
(2) | participation in a Deferred Compensation Plan. |
B.03 | Amount of Benefit . |
(a) | The benefit payable under this Program with respect to a Participant who commences benefits during his or her lifetime will equal the amounts described in (1) through (3) below. |
(1) | Cash Balance Piece . Effective for periods after June 30, 2003, a Participant whose retirement benefit is determined under the terms of a Cash Balance Plan is credited under this Program with Benefit Credits (as defined under the Participants Cash Balance Plan) he or she would have received: |
(A) | but for the restrictions of Code sections 401(a)(17) or 415, as those limits are described by the applicable Cash Balance Plan; and | ||
(B) | but for the fact the Participant made deferrals to a Deferred Compensation Plan. |
For purposes of (B), the Benefit Credits earned are credited in accordance with the terms of the Cash Balance Plan applicable to Eligible Pay in excess of the Social Security Wage Base and any compensation deferred is only treated as compensation for benefit calculation purposes under this Program in the year(s) payment would otherwise have been made and not in the year(s) of actual payment. | |||
(2) | Historical and Transition Piece . Effective for periods prior to July 1, 2003 the Participant is credited with the retirement benefit, if any, that would have been payable under the terms of the Pension Plan: |
(A) | but for the restrictions of Code sections 401(a)(17) or 415, as those limits are described by the applicable Pension Plan; and | ||
(B) | but for the fact that the Participant deferred compensation under either a Deferred Compensation Plan or in connection with the Northrop Grumman Electronic Systems Executive Pension Plan. |
For purposes of (B), any compensation deferred is only treated as compensation for benefit calculation purposes under this Program in the year(s) payment would otherwise have been made and not in the year(s) of actual payment. | |||
(3) | For Participants whose employment ceases after 2005, all Plan Years after 1996 (not just the last ten) shall be considered in determining the highest three years of eligible pay for purposes of calculating benefit amounts. All benefits resulting from this change in determining the highest three years of eligible pay shall be subject to Code section 409A. |
(b) | The benefit payable under this Program will be reduced by the combined amounts of Pension Plan Benefits and the Northrop Grumman ERISA Supplemental Plan benefits attributable to the applicable Pension Plan. | ||
(c) | Notwithstanding any other provision of the Program, in accordance with Section G.05, a Participants total accrued benefits under all plans, programs, and arrangements in which he or she participates, including the benefit accrued under Section B.03, may not exceed 60% of his or her Final Average Salary (as defined in Section G.02(c)), reduced for early retirement using the factors in Section G.09. If this limit is exceeded, the Participants accrued benefit under Appendix F or G, whichever is applicable, will be reduced first, and the Participants accrued |
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benefit under this Program will then be reduced to the extent necessary to satisfy the limit. | |||
(d) | Minimum Normal Retirement Benefits for Designated Participants. |
(1) | Minimum Normal Retirement Benefits for Designated Participants are benefits provided only in the Pension Plan appendices (i.e., benefits in excess of the benefits provided by other portions of the Pension Plans). |
(A) | These extra benefits are meant to partially restore benefits lost because of Code section 401(a)(17). | ||
(B) | Therefore, they are not included in the retirement benefit in (a), but they are included for purposes of the offset in (b). |
(2) | Example . An employee is initially entitled to an $85,000 annual benefit under the Pension Plans. The employee would be entitled, but for section 401(a)(17), to a $100,000 annual benefit under the Pension Plans, so that $15,000 is payable under this Program. The Company then adds the minimum normal retirement benefit appendices under the Pension Plans, which are intended to pay all or a portion of the benefits previously payable by this Program under the Pension Plans instead. Assume this results in the employee being entitled to an additional $10,000 annual benefit under the appendices to the Pension Plans, so that the Pension Plans now pay a total of $95,000. This Program restores to the employee only the difference between $100,000 and $95,000, or a $5,000 annual benefit. |
(e) | Benefits under this Program will only be paid to supplement benefit payments actually made from a Pension Plan. If benefits are not payable under a Pension Plan because the Participant has failed to vest or for any other reason, no payments will be made under this Program with respect to such Pension Plan. | ||
(f) | The following shall not be considered as compensation for purposes of determining the amount of any benefit under the Program: |
(1) | any payment authorized by the Compensation Committee that is (1) calculated pursuant to the method for determining a bonus amount under the Annual Incentive Plan (AIP) for a given year, and (2) paid in lieu of such bonus in the year prior to the year the bonus would otherwise be paid under the AIP, and | ||
(2) | any award payment under the Northrop Grumman Long-Term Incentive Cash Plan. |
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B.04 | Preretirement Surviving Spouse Benefit . |
(a) | Preretirement surviving spouse benefits will be payable under this Program on behalf of a Participant if such Participants surviving spouse is eligible for benefits payable from a Pension Plan. | ||
(b) | The benefit payable will be: |
(1) | for periods after June 30, 2003, the amount which would have been payable under the Cash Balance Plan: |
(A) | but for the restrictions of Code sections 401(a)(17) and 415 (or any successor sections), as those limits are described by the applicable Cash Balance Plan; and | ||
(B) | but for the fact that the Participant deferred compensation under a Deferred Compensation Plan (with Benefit Credits determined by reference to amounts exceeding the Social Security Wage Base); and |
(2) | for periods prior to July 1, 2003, the amount which would have been payable under the Pension Plan: |
(A) | but for the restrictions of Code sections 401(a)(17) and 415 (or any successor sections), as those limits are described by the applicable Pension Plan; and | ||
(B) | but for the fact that the Participant deferred compensation under either a Deferred Compensation Plan or in connection with the Northrop Grumman Electronic Systems Executive Pension Plan. |
(3) | For Participants whose employment ceases after 2005, all Plan Years after 1996 (not just the last ten) shall be considered in determining the highest three years of eligible pay for purposes of calculating benefit amounts. All benefits resulting from this change in determining the highest three years of eligible pay shall be subject to Code section 409A. |
(c) | For purposes of paragraph (b)(2) above, any compensation deferred will only be treated as compensation for benefit calculation purposes under this Program in the year(s) payment would otherwise have been made and not in the year(s) of actual payment. | ||
(d) | The benefit payable under this Program will be reduced by the combined amounts of the Pension Plan Benefits and the Northrop Grumman Corporation ERISA Supplemental Plan benefits attributable to the applicable Pension Plan. |
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(e) | No benefit will be payable under this Program with respect to a spouse after the death of that spouse. | ||
(f) | The following shall not be considered as compensation for purposes of determining the amount of any benefit under the Program: |
(1) | any payment authorized by the Compensation Committee that is (1) calculated pursuant to the method for determining a bonus amount under the Annual Incentive Plan (AIP) for a given year, and (2) paid in lieu of such bonus in the year prior to the year the bonus would otherwise be paid under the AIP, and | ||
(2) | any award payment under the Northrop Grumman Long-Term Incentive Cash Plan. |
B.05 | Plan Termination. No further benefits may be earned under this Program with respect to a particular Pension Plan after the termination of such Pension Plan. | |
B.06 | Pension Plan Benefits. For purposes of this Appendix, the term Pension Plan Benefits generally means the benefits actually payable to a Participant, spouse, beneficiary or contingent annuitant under a Pension Plan. However, this Program is only intended to remedy pension reductions caused by the operation of section 401(a)(17) and not reductions caused for any other reason. In those instances where pension benefits are reduced for some other reason, the term Pension Plan Benefits shall be deemed to mean the benefits that actually would have been payable but for such other reason. | |
Examples of such other reasons include, but are not limited to, the following: |
(a) | A reduction in pension benefits as a result of a distress termination (as described in ERISA § 4041(c) or any comparable successor provision of law) of a Pension Plan. In such a case, the Pension Plan Benefits will be deemed to refer to the payments that would have been made from the Pension Plan had it terminated on a fully funded basis as a standard termination (as described in ERISA § 4041(b) or any comparable successor provision of law). | ||
(b) | A reduction of accrued benefits as permitted under Code section 412(c)(8), as amended, or any comparable successor provision of law. | ||
(c) | A reduction of pension benefits as a result of payment of all or a portion of a Participants benefits to a third party on behalf of or with respect to a Participant. |
B.07 | ISA Excess Plan Participants . |
(a) | Background . Effective as of the ISA Eligibility Date, all liabilities for benefits accrued after that date under the Northrop Grumman Integrated Systems & Aerostructures (ISA) Sector ERISA Excess Plan (the ISA Plan) are transferred to this Plan. This Section describes the treatment of those liabilities ( Transferred |
- 5 -
Liabilities ) and the Participants to whom those liabilities relate ( Transferred Participants ). | |||
The ISA Eligibility Date is July 1, 2000. |
(b) | Transferred Participants . This Section B.07 applies only to employees who: (1) were active participants in the ISA Plan as of the day before the ISA Eligibility Date; and (2) accrued a benefit under the terms of the ISA Plan on or after the ISA Eligibility Date. | ||
(c) | Treatment of Transferred Liabilities . The Transferred Liabilities consist of any post-ISA Eligibility Date accruals under Article III of the ISA Plan. Those liabilities are treated as if they were accrued under Section B.03 of this Plan. Other provisions of this Plan govern as provided below. | ||
(d) | Distributions . Distributions of benefits attributable to the Transferred Liabilities are generally made under Articles II and III of this Plan. | ||
(e) | Other Provisions . The Transferred Liabilities and the Transferred Participants are fully subject to Articles I-III and Appendix B of this Plan. The amount of the Transferred Liabilities is, however, determined under Article III of the ISA Plan. |
B.08 | Grumman Excess Plan Spinoff . |
(a) | Background . Effective as of the Grumman Spinoff Date, all liabilities for benefits accrued by Transferred Participants under the Northrop Grumman Excess Plan for the Grumman Pension Plan (the Grumman Plan) were transferred to this Plan. This Section describes the treatment of those liabilities ( Transferred Liabilities ) under this Plan. | ||
The Grumman Spinoff Date is July 1, 2003. | |||
(b) | Treatment of Transferred Liabilities . The Transferred Liabilities will generally be treated under the Plan like any other benefits under B.03. | ||
(c) | Transferred Participants . The Transferred Participants are active employees who were eligible to participate in the Grumman Plan as of June 30, 2003. Grumman Plan benefits of individuals who terminated employment before July 1, 2003 remain subject to the Grumman Plan, and this Plan assumes no liabilities for those benefits. | ||
(d) | Distributions . Distributions of amounts corresponding to the Transferred Liabilities will generally be made under Articles II and III. | ||
(e) | Other Provisions . The Transferred Liabilities and the Transferred Participants are fully subject to Articles I-III and Appendix B. |
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NORTHROP GRUMMAN CORPORATION | ||||||
|
||||||
|
By: | /s/ Debora L. Catsavas | ||||
|
||||||
Debora L. Catsavas | ||||||
Vice President, Compensation, Benefits & International |
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F.01 | Purpose . The purpose of this Program is to give enhanced retirement benefits to eligible elected officers of the Companys Corporate Policy Council. This Program is intended to supplement benefits that are otherwise available under the Qualified Plans. | |
F.02 | Definitions and Construction . |
(a) | Capitalized terms used in this Appendix that are not defined in this Appendix or Article I of the Plan are taken from the Qualified Plans and are intended to have the same meaning. | ||
(b) | CPC Service. |
(1) | Months of CPC Service will be determined under the rules of the Qualified Plans for determining Credited Service. | ||
(2) | Only months of Credited Service after the commencement of a Participants tenure on the Corporate Policy Council will be counted. | ||
(3) | Months of CPC Service will continue to be counted for a Participant until the earlier of (A) and (B): |
(A) | The date the Participant ceases to earn benefit accrual service under either the Qualified Plans or some other defined benefit plan of the Affiliated Companies that is qualified under section 401(a) of the Code (Successor Qualified Plan). | ||
(B) | Cessation of the officers membership on the Corporate Policy Council (whether because of termination of his membership or dissolution of the Council). | ||
(C) | Examples : The following examples assume that the Participant continues to earn months of CPC Service under the Qualified Plans until termination of employment. |
Example 1 : Officer A terminates employment with the Affiliated Companies on March 31, 2004. At that time, he is still a member of the CPC. His service under this Program ceases to accrue on March 31, 2004. | |||
Example 2 : Officer B ceases to be a member of the CPC on December 31, 2005, though continuing to work for the Affiliated Companies after that date. His service under this Program ceases to accrue on December 31, 2005. |
(4) | If a Participant is transferred to a position with an Affiliated Company not covered by a Qualified Plan, CPC Service will be determined as the Credited Service under the Participants last Qualified Plan. |
(A) | If such a transfer occurs, the Participant will continue to earn deemed service credits as if he or she were still participating under the Qualified Plan. | ||
(B) | Those deemed service credits will not be considered as earned under the Qualified Plan for purposes of determining: |
(i) | benefits under the Qualified Plan or supplements to the Qualified Plan other than this Program, or | ||
(ii) | the offset under Section F.04(b) below, including the early retirement factors associated with the plans included in the offset. |
(c) | Eligible Pay. Subject to paragraphs (1) through (4) below, Eligible Pay will generally be determined under the rules of the Participants supplemental benefit plan (for section 401(a)(17) purposes). |
(1) | For periods during which a Participant did not participate in a supplemental benefit plan, Eligible Pay will be determined by reference to the applicable qualified defined benefit retirement plan under which the Participant benefits. |
(A) | Eligible Pay will be calculated without regard to any otherwise applicable limitations under the Code, including section 401(a)(17). | ||
(B) | Eligible Pay will include compensation deferred under a Deferred Compensation Plan and in connection with the Northrop Grumman Electronic Systems Executive Pension Plan. | ||
(C) | For purposes of (B), any compensation deferred will only be treated as compensation for Plan benefit calculation purposes in |
-2-
the year(s) payment would otherwise have been made and not in the year(s) of actual payment. |
(2) | For periods during which a Participant did not participate in a supplemental benefit plan or a qualified defined benefit retirement plan, Eligible Pay will be his or her annualized base pay (determined in accordance with the Northrop Grumman Retirement Plan), plus any bonuses received. |
(A) | Annualized base pay is calculated without regard to any otherwise applicable limitations under the Code, including section 401(a)(17). | ||
(B) | Annualized base pay includes compensation deferred under a deferred compensation arrangement with those deferrals treated as compensation for Plan benefit calculation purposes in the year(s) payment would otherwise have been made and not in the year(s) of actual payment. |
(3) | If a Participant experiences a Termination of Employment before December 31 of any year, Eligible Pay for the year in which the Participants Termination of Employment occurs is determined in accordance with the Standard Annualization Procedure in Article 2 of the Standard Definitions and Procedures for Certain Northrop Grumman Corporation Retirement Plans. |
(4) | The following shall not be considered as Eligible Pay for purposes of determining the amount of any benefit under the Program: |
(A) | any payment authorized by the Compensation Committee that is (1) calculated pursuant to the method for determining a bonus amount under the Annual Incentive Plan (AIP) for a given year, and (2) paid in lieu of such bonus in the year prior to the year the bonus would otherwise be paid under the AIP, and |
(B) | any award payment under the Northrop Grumman Long-Term Incentive Cash Plan. |
(d) | Final Average Salary will mean the Participants average Eligible Pay for the highest three of the last ten consecutive Plan Years. For this purpose, years will be deemed to be consecutive even though a break in service year(s) intervenes. | ||
Notwithstanding the foregoing, for Participants whose employment ceases after 2005, all Plan Years after 1996 (not just the last ten) shall be considered in determining the highest three years of Eligible Pay. All benefits resulting from this change in determining the highest three years of Eligible Pay shall be subject to Code section 409A. |
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(e) | The benefits under this Program are designed to supplement benefits under the Qualified Plans and are therefore to be construed utilizing the same principles and benefit calculation methodologies applicable under the Qualified Plans except where expressly modified. | ||
(f) | Benefits under this Program will be calculated without regard to the limits in sections 401(a)(17) and 415 of the Code. |
F.03 | Eligibility . Eligibility for benefits under this Program will be limited to those elected officers of the Companys Corporate Policy Council, other than Charles H. Noski, designated as Participants by the Companys Board of Directors or Compensation Committee. No Participant will be entitled to any benefits under this Appendix F until he or she becomes Vested under the Qualified Plans, except to the extent provided in Section F.08. | |
No individuals shall become eligible to participate in the Program after June 2009. | ||
F.04 | Benefit Amount . A Participants total accrued benefit under this Program is his or her gross benefit under (a), reduced by (b) (as modified by (c)), and adjusted under (d). The benefit calculated under this Section F.04 will be subject to the benefit limit under Section F.05. |
(a) | A Participants gross annual benefit under this Program will equal 3.33% x Final Average Salary x months of CPC Service ÷ 12. | ||
Effective July 1, 2009, a Participants gross annual benefit under this Program will equal the sum of (A), (B) and (C) below: |
(A) | 3.33% x Final Average Salary x months of CPC Service up to 120 months ÷ 12, | ||
(B) | 1.50% x Final Average Salary x months of CPC Service in excess of 120 months up to 240 months ÷ 12, and | ||
(C) | 1.00% x Final Average Salary x months of CPC Service in excess of 240 ÷ 12. |
Notwithstanding the foregoing, if a Participant had 120 months or more of CPC Service on July 1, 2009, his gross annual benefit under this Program will equal his gross annual benefit under this Program on June 30, 2009 plus accruals in accordance with (B) and (C) above based on CPC Service after June 30, 2009. |
(1) | The benefit payable is a single, straight life annuity commencing on the Participants Normal Retirement Date. The form of benefit and timing of commencement will be determined under Section F.06. |
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(2) | If a Participants benefit is paid under this Program before his Normal Retirement Date, the gross benefit will be adjusted for early commencement in accordance with Section G.04(c). |
(b) | The gross benefit under (a) above (multiplied by any applicable early retirement factor) is reduced by the retirement benefits the participant is entitled to receive (including all early retirement subsidies, supplements, and other such benefits) under all defined benefit retirement plans, programs, and arrangements maintained by the Affiliated Companies, whether qualified or nonqualified (but not contributory or defined contribution plans, programs, or arrangements). | ||
(c) | For purposes of the offset adjustment in subsection (b): |
(1) | The Participants gross benefit under subsection (a) will be reduced only by the benefits accrued under the plans described in (b) for the period during which the Participant earns CPC Service. |
(A) | No offset will be made for accruals earned before (or after) participation in this Program. | ||
(B) | Offsets will be made for benefits accrued under any plan while a Participant: |
(i) | is employed by the Affiliated Companies; or | ||
(ii) | was employed by a company before it became an Affiliated Company. |
(C) | The offset under (b) includes any benefit enhancements under change-in-control Special Agreements (including enhancements for age and service) that Participants have entered into with the Company (Special Agreements). | ||
(D) | The offset under (b) does not include: |
(i) | benefits accrued under the Supplemental Retirement Income Program for Senior Executives described in Appendix A; or | ||
(ii) | Part II benefits under the Litton Restoration Plan and Litton Restoration Plan II. |
(2) | If a Participants benefit under this Program commences upon reaching age 65, benefits under all the plans and programs described in (b) above will be compared on the basis of a single, straight life annuity commencing at age 65 using the assumptions in Section F.09. |
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(3) | If a Participants benefit under this Program commences before age 65, benefits under this Program will be offset for the plans described in (b) above by converting the benefits paid or payable from those plans to an actuarially equivalent single life annuity benefit commencing upon retirement. For this purpose, the benefit will be converted to an early retirement benefit under each applicable plans terms and further adjusted, if necessary, for different normal forms of benefits or different commencement dates using the actuarial assumptions in Section F.09. |
(d) | A Participants benefit under this Program will be no less than the benefit that would have been accrued under Appendix G had the Participant been eligible to participate in that Program. |
(1) | If the net benefit calculated under Appendix G would be greater than the benefit determined in accordance with Sections F.04(a) through (c), the Participant will receive an additional amount under this Program equal to the difference between the net benefit calculated under Appendix G and the benefit calculated under Sections F.04(a) through (c). | ||
(2) | The above comparison will be made following the application of the applicable early retirement factors and offset adjustments under this Program and Appendix G. |
F.05 | Benefit Limit . A Participants total accrued benefits under all plans, programs, and arrangements in which he or she participates, including the benefit accrued under Section F.04 and all plans included in Section F.04(b), may not exceed 60% of his or her Final Average Salary. If this limit is exceeded, the Participants benefit accrued under this Program will be reduced to the extent necessary to satisfy the limit. |
(a) | The accrued benefits a Participant has earned under the plans included in Section F.04(b) that are taken into account for purposes of this Section are not limited to those benefits accrued during the time he or she participated in this Program (as described in Section F.04(c)(1)), but instead will count all service with the Affiliated Companies. | ||
(b) | If a participant has previously received a distribution from one of the plans included in Section F.04(b), that previously received benefit applies toward the limit in this Section. | ||
(c) | The Participants Final Average Salary is reduced for early retirement applying the factors in Section G.04(c). | ||
(d) | The limit in this Section may not be exceeded even after the benefits under this Program have been enhanced under any Special Agreements. |
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F.06 | Payment of Benefits . |
(a) | Benefits will generally be paid in accordance with Section 2.03 of the Plan. | ||
In addition to all other benefit forms otherwise available under this Program, effective as of January 1, 2004, a Participant may elect to have his or her benefits paid in the form of a 75% Joint and Survivor Option. Under this option, the Participant is paid a reduced monthly benefit for life and then, if the Participants spouse is still alive, a benefit equal to 75% of the Participants monthly benefit is paid to the spouse for the remainder of his or her life. If the spouse is not still alive when the Participant dies, no further payments are made. The determination of the benefit payable under this option will be made utilizing the factors for a 75% Joint and Survivor Option under the provisions of the Northrop Grumman Retirement Plan. | |||
(b) | Except as provided in subsection (c), benefits will commence as of the first day of the month following the Participants Termination of Employment or, if later, as of the date the Participants early retirement benefit commences under the Qualified Plans. | ||
(c) | If a Participant has a Termination of Employment because of Disability before the Participant is eligible for an early retirement benefit from a Qualified Plan, benefits may commence immediately, subject to adjustment for early commencement using the applicable factors and methodologies under Sections F.04(a)(2) and F.04(c)(3). | ||
(d) | If a Participant dies after commencement of benefits, any survivor benefits will be paid in accordance with the form of benefit selected by the Company. If a Participant dies prior to commencement of benefits, payment will be made under Section F.07. |
F.07 | Preretirement Death Benefits . If a Participant dies before benefits commence, preretirement surviving spouse benefits are payable under this Program if his or her surviving spouse is eligible for a qualified preretirement survivor annuity (as required under section 401(a)(11) of the Code) from a Qualified Plan. |
(a) | Amount and Form of Preretirement Death Benefit. A preretirement death benefit paid to a surviving spouse is the survivor benefit portion of a 100% joint-and-survivor annuity calculated using the survivor annuity factors under the Northrop Grumman Pension Plan in an amount determined as follows: |
(1) | First, the Participants gross benefit under Section F.04(a) will be calculated and reduced, as necessary, for early retirement using the factors in Section F.04(a)(2) and adjusted, as necessary, in accordance with Section F.04(d); |
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(2) | Second, the target preretirement death benefit under this Program will be calculated by applying the appropriate 100% joint-and-survivor annuity factor (as provided in the Northrop Grumman Pension Plan) to the amount determined in (1); and | ||
(3) | Third, the target preretirement death benefit determined in (2) will be reduced by the preretirement death benefits, if any, payable under all defined benefit retirement plans, programs, and arrangements maintained by the Affiliated Companies, whether qualified or nonqualified, that are otherwise included in the offsets described under Section F.04(b) such that the sum of the preretirement death benefit payments made to the surviving spouse under all plans, including this Program, will equal, at all times, the level of payments determined to be the target preretirement death benefit (subject to the benefit limit described in Section G.05(a)). |
(b) | Timing of Preretirement Death Benefit. |
(1) | Benefits commence as of the first day of the month following the death of the Participant, subject to adjustment for early commencement using the applicable factors under G.04(c). | ||
(2) | If there is a dispute as to whom payment is due, the Company may delay payment until the dispute is settled. |
(c) | No benefit is payable under this Program with respect to a spouse after the spouse dies. |
F.08 | Individual Arrangements . This Section applies to a Participant who has an individually-negotiated arrangement with the Company for supplemental retirement benefits. |
(a) | This Section is intended to coordinate the benefits under this Program with those of any individually-negotiated arrangement. Participants with such arrangements will be paid the better of the benefits under the arrangement or under Sections F.04 or F.07 (as limited by F.05). | ||
(b) | In no case will duplicate benefits be paid under this Program and such an individual arrangement. Any payments under this Program will be counted toward the Companys obligations under an individual arrangement, and vice-versa. | ||
(c) | If the benefit under an individually-negotiated arrangement exceeds the one payable under this Program, then the individual benefit will be substituted as the benefit payable under this Program (even if it exceeds the limit under F.05). |
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(d) | To determine which benefit is greater, all benefits will be compared, subject to adjustment for early retirement using the applicable factors and methodologies under Sections F.04(a)(2) and F.04(c)(3). | ||
(e) | For purposes of (d), the individually-negotiated benefit will be determined in accordance with all of its terms and conditions. Nothing in this Section is meant to alter any of those terms and conditions. | ||
(f) | This Section does not apply to the Special Agreements. |
F.09 | Actuarial Assumptions : The following defined terms and actuarial assumptions will be used to the extent necessary to convert benefits to straight life annuity form commencing at the Participants Normal Retirement Date under Sections F.04 and F.08: |
NORTHROP GRUMMAN CORPORATION | ||||||
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By: | /s/ Debora L. Catsavas | ||||
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Debora L. Catsavas | ||||||
Vice President, Compensation, Benefits & International |
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G.01 | Purpose. The purpose of this Program is to give enhanced retirement benefits to eligible officers of the Company. This Program is intended to supplement benefits that are otherwise available under the Qualified Plans. | |
G.02 | Definitions and Construction. |
(a) | Capitalized terms used in this Appendix that are not defined in this Appendix or Article I of the Plan are taken from the Qualified Plans, and are intended to have the same meaning. | ||
(b) | Eligible Pay. Subject to paragraphs (1) through (5) below, Eligible Pay will generally be determined under the rules of the Participants supplemental benefit plan (for section 401(a)(17) purposes). |
(1) | For periods during which a Participant did not participate in a supplemental benefit plan, Eligible Pay will be determined by reference to the applicable qualified defined benefit retirement plan under which the Participant benefits. |
(A) | Eligible Pay will be calculated without regard to any otherwise applicable limitations under the Code, including section 401(a)(17). | ||
(B) | Eligible Pay will include compensation deferred under a Deferred Compensation Plan and in connection with the Northrop Grumman Electronic Systems Executive Pension Plan. | ||
(C) | For purposes of (B), any compensation deferred will only be treated as compensation for Plan benefit calculation purposes in the year(s) payment would otherwise have been made and not in the year(s) of actual payment. |
(2) | Special Rules for Certain Participants. |
(A) | Former Northrop Grumman Electronic Systems Executive Pension Plan Participants. For years prior to 2002, Eligible Pay is determined by reference to the Participants total base salary under the Northrop Grumman Electronic Systems Pension Plan plus any bonuses that were received or would have been received had the Participant not elected to have the amounts deferred under a deferred compensation arrangement. No compensation of any kind paid or otherwise earned while employed by an entity prior to that entity becoming an Affiliated Company will be included in the Participants Eligible Pay. | ||
(B) | Employees of Newport News Shipbuilding, Inc. For the period beginning on January 1, 1994 and ending December 31, 2003, Eligible Pay is determined by reference to the Participants total base salary plus any bonuses that were received or would have been received had the Participant not elected to have the amounts deferred under a deferred compensation arrangement. |
(3) | If a Participant experiences a Termination of Employment before December 31 of any year, Eligible Pay for the year in which the Participants Termination of Employment occurs is determined in accordance with the Standard Annualization Procedure in Article 2 of the Standard Definitions and Procedures for Certain Northrop Grumman Corporation Retirement Plans. | ||
(4) | The following shall not be considered as Eligible Pay for purposes of determining the amount of any benefit under the Program: |
(A) | any payment authorized by the Compensation Committee that is (1) calculated pursuant to the method for determining a bonus amount under the Annual Incentive Plan (AIP) for a given year, and (2) paid in lieu of such bonus in the year prior to the year the bonus would otherwise be paid under the AIP, and | ||
(B) | any award payment under the Northrop Grumman Long-Term Incentive Cash Plan. |
(5) | Eligible Pay shall include amounts earned after a Participant attains age 65, provided any benefits based on such compensation shall be subject to Code section 409A. |
(c) | Final Average Salary for any Plan Year is the Participants average Eligible Pay for the highest three of the last ten consecutive Plan Years in which the Participant was an employee of an Affiliated Company and a participant in a qualified defined benefit retirement plan. For this purpose, years will be deemed to be consecutive even though a break in service year(s) intervenes. |
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Notwithstanding the foregoing, for Participants whose employment ceases after 2005, all Plan Years after 1996 (not just the last ten) shall be considered in determining the highest three years of Eligible Pay. All benefits resulting from this change in determining the highest three years of Eligible Pay shall be subject to Code section 409A. |
(d) | Months of Benefit Service. |
(1) | Months of Benefit Service will be determined under the rules of the Qualified Plans for determining Credited Service. | ||
(2) | Months of Benefit Service will continue to be counted for a Participant until the earlier of (A) or (B): |
(A) | The date the Participant ceases to earn benefit accrual service under either the Qualified Plans or some other defined benefit plan of the Affiliated Companies that is qualified under section 401(a) of the Code (Successor Qualified Plan). | ||
(B) | Cessation of the Participants status as an elected or appointed officer of the Company (except as otherwise provided in Section G.04(f)). |
(3) | If a Participant is transferred to a position with an Affiliated Company not covered by a Qualified Plan, Months of Benefit Service will be determined as the Credited Service in the Participants last Qualified Plan. |
(A) | If such a transfer occurs, the Participant will continue to earn deemed service credits as if he or she were still participating under the Qualified Plan. | ||
(B) | Those deemed service credits will not be considered as earned under the Qualified Plan for purposes of determining: |
(i) | benefits under the Qualified Plan or supplements to the Qualified Plan other than this Program, or | ||
(ii) | the offset under Section G.05 below, including the early retirement factors associated with the plans included in the offset. |
(4) | For Participants who become eligible to participate in the Program on or after March 10, 2006, Months of Benefit Service shall not include any time that counts as service under any portion of a plan spun out of the Companys controlled group, if the service is no longer treated as benefit accrual service under a qualified plan in the Companys controlled group. |
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(5) | Months of Benefit Service shall continue to be earned after a Participant has attained age 65, provided that any benefits based on such service shall be subject to Code section 409A. |
(e) | The benefits under this Program are designed to supplement benefits under the Qualified Plans and are to be construed using the same principles and benefit calculation methodologies applicable under the Qualified Plans except where expressly modified in this Program. | ||
(f) | Benefits are calculated without regard to the limits in sections 401(a)(17) and 415 of the Code. |
G.03 | Eligibility . Except as otherwise provided in (a) through (f) below, eligibility for benefits under this Program is limited to elected or appointed officers of the Company, other than Charles H. Noski. |
(a) | Employees of Newport New Shipbuilding, Inc. will be eligible to participate under this Program effective January 1, 2004. | ||
(b) | No employees of Vinnell Corporation, Component Technologies, or Premier America Credit Union are eligible for benefits under this Program. | ||
(c) | No Participant is entitled to any benefits under this Appendix G until he or she becomes Vested under the Qualified Plans, except to the extent provided otherwise in this Appendix G. | ||
(d) | No individual who is, was, or will be eligible to participate in and receive benefits under Appendix F of the Plan (the CPC SERP) is eligible to participate under this Program. | ||
(e) | Notwithstanding any other provisions of this Program to the contrary, elected and appointed officers of the Companys Mission Systems and Space Technology Sectors will be eligible to participate under this Program effective as of January 1, 2005. | ||
(f) | After June 2008, the only employees who shall become eligible to participate in the Program shall be: |
(1) | individuals who become elected or appointed officers of the Company after June 2008 due to rehire or promotion, provided they have been and continue to be actively accruing benefits under a Company-sponsored qualified defined benefit pension plan, and | ||
(2) | any other individuals designated for participation in writing by the Vice President, Compensation, Benefits and International (as such title may be modified from time to time). |
G.04 | Benefit Amount . |
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(a) | A Participants annual Normal Retirement Benefit under this Program equals the sum of (1) through (3) below, subject to the limit described in Section G.05: |
(1) | 2.0% x Final Average Salary x Months of Benefit Service up to 120 months ÷ 12 | ||
(2) | 1.5% x Final Average Salary x Months of Benefit Service in excess of 120 months up to 240 months ÷ 12 | ||
(3) | 1.0% x Final Average Salary x Months of Benefit Service in excess of 240 months up to 540 months ÷ 12 |
However, if an employee performs service during his or her career in covered positions under both this Appendix G and the CPC SERP: the employees entire benefit will be calculated under Section F.04 of the CPC SERP and payable under the terms of that program; all benefits accrued under this Program will be eliminated; and no amounts will be payable under this Appendix G. | |||
(b) | The total benefit payable is a single, straight life annuity commencing at age 65, assuming an annual benefit equal to the gross benefit under (a). The form of benefit and timing of commencement will be determined under Section G.06. | ||
(c) | If a Participants benefit is paid under this Program before age 65, the benefit will be adjusted as follows. The Early Retirement Benefit is a monthly benefit equal to the Normal Retirement Benefit reduced by the lesser of: |
(1) | 1/12th of 2.5% for each calendar month the payment of benefits begins before age 65; or | ||
(2) | 2.5% for each Benefit Point less than 85 where the Participants Benefit Points (truncated to reach a whole number) equal the sum of: |
(A) | his or her age (computed to the nearest 1/12th of a year) at the annuity starting date and | ||
(B) | 1/12th of his or her months of Credited Service under the applicable Qualified Plan (also computed to the nearest 1/12th of a year) as of the date his or her employment terminated. |
A Participants Vesting Service and months of Credited Service earned under the Qualified Plans (or deemed earned in the event of a transfer) are used to determine whether the Early Retirement Benefit provisions apply and to calculate the early retirement reduction. | |||
(d) | Except as provided otherwise in this Appendix G, no benefit will be paid under this Program if a Participant experiences a Termination of Employment before (1) |
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attaining age 55 and completing 120 Months of Benefit Service, or (2) attaining age 65 and completing 60 Months of Benefit Service. | |||
Notwithstanding any other provision of the Program to the contrary, a Participant who otherwise satisfies the requirements of this subsection (d) is not required to retire and commence benefits under this Program upon his or her Termination of Employment. This provision applies to Grandfathered Amounts only. | |||
(e) | A Participant shall be entitled to benefits notwithstanding the Participants failure to meet the requirements of Section G.04(d) if the following requirements are satisfied: |
(1) | the Participant has been involuntarily terminated without cause or terminated due to the divestiture of his business unit; | ||
(2) | the Participant has reached age 53 and completed 10 years of early retirement eligibility service, or has accumulated 75 points, as of the date of termination, all as determined under the terms of the Northrop Grumman Pension Plan; and | ||
(3) | the Participant is actively accruing benefits under the Program as of the date of termination. |
If a Participant receives a notice of an involuntary termination and then transfers to another related entity instead of being involuntarily terminated, the Participant will not qualify for vesting under this subsection (e). If an involuntarily terminated Participant is rehired by the Company, vesting under this subsection (e) would not apply unless the Participant is subsequently terminated and meets the requirements described above. | |||
All benefits payable pursuant to this subsection (e) shall be subject to reduction for early retirement as applicable under Section G.04(c). All benefits payable under this subsection (e) shall be subject to section 409A of the Code. |
(f) | The rules set forth in this Section G.04(f) shall apply in the event a Participant ceases to satisfy the eligibility requirements of Section G.03 (the eligibility requirements) because the Participant is no longer an elected or appointed officer of the Company: |
(1) | for purposes of calculating the Participants benefit amount pursuant to Section G.04(a), Eligible Pay and Months of Benefit Service shall not reflect amounts paid or service on or after the date the Participant ceases to satisfy the eligibility requirements, except that in the event the Participant subsequently satisfies the eligibility requirements, Eligible Pay and Months of Benefit Service shall reflect all pay and past service to the extent consistent with the terms of this Program in effect for newly eligible employees at the time the Participant satisfies the eligibility requirements for the second time; |
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(2) | for purposes of applying the 60% limitation pursuant to Section G.05(a), Eligible Pay shall include amounts paid on or after the date the Participant ceases to satisfy the eligibility requirements; | ||
(3) | for purposes of applying the offset provision of Section G.05(b), benefits accrued under other plans shall reflect pay and service on or after the date the Participant ceases to satisfy the eligibility requirements; | ||
(4) | for purposes of applying Sections G.04(d) and G.04(e), service on or after the date the Participant ceases to satisfy the eligibility requirements shall continue to count as service, provided that if the Participant would not otherwise receive benefits if not for the application of this paragraph (4), all benefits shall be subject to section 409A of the Code; | ||
(5) | for purposes of applying the reduction for early retirement pursuant to Section G.04(c), service on or after the date the Participant ceases to satisfy the eligibility requirements shall continue to count as service. |
(a) | A Participants total accrued benefits under all plans, programs, and arrangements in which he or she participates, including the benefit accrued under Section G.04 and all plans included in Section G.05(b), may not exceed 60% of his or her Final Average Salary. If this limit is exceeded, the Participants benefit accrued under this Program will be reduced to the extent necessary to satisfy the limit. |
(1) | The Participants Final Average Salary will be reduced for early retirement applying the factors in Section G.04(c). | ||
(2) | The limit in this subsection may not be exceeded even after the benefits under this Program have been enhanced under any Special Agreements. |
(b) | The gross benefit calculated under Section G.04 above (multiplied by any applicable early retirement factor) is reduced by the retirement benefits the participant is entitled to receive (including all early retirement subsidies, supplements, and other such benefits) under all defined benefit retirement plans, programs, and arrangements maintained by the Affiliated Companies, whether qualified or nonqualified (but not contributory or defined contribution plans, programs, or arrangements). | ||
(c) | For purposes of the offset in subsection (b): |
(1) | Offsets will be made: |
(A) | with respect to: |
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(i) | benefits accrued under any plan while a Participant is employed by the Affiliated Companies; and | ||
(ii) | benefits accrued under any plan while a Participant was employed by a company before it became an Affiliated Company; |
(B) | with respect to any benefit enhancements under change-in-control Special Agreements (including enhancements for age and service) that Participants have entered into with the Company (Special Agreements); and | ||
(C) | without regard to: |
(i) | benefits accrued under the Supplemental Retirement Income Program for Senior Executives described in Appendix A; | ||
(ii) | Part II benefits under the Litton Restoration Plan and Litton Restoration Plan II; or | ||
(iii) | benefits accrued under the Companys Pilots Transition Plan. |
(2) | If a Participants benefit under this Program commences upon reaching age 65, the Participants benefits under all the plans and programs described in (b) above will be compared on the basis of a single, straight life annuity commencing at age 65 using the assumptions stated in Section G.09. | ||
(3) | If a Participants benefit under this Program commences before age 65, benefits under this Program will be offset for the plans described in (b) above by converting the benefits paid or payable from those plans to an actuarially equivalent single life annuity benefit commencing upon retirement. For this purpose, the benefit will be converted to an early retirement benefit under each applicable plans terms and further adjusted, if necessary, for different normal forms of benefits or different commencement dates using the actuarial assumptions of Section G.09. | ||
(4) | If a Participant previously received a distribution under one of the plans described in (b) above for a period of service that counts as Months of Benefit Service, that previously received benefit applies toward the limit under this Section. |
(e) | Example: A Participant elects to receive an early retirement benefit at age 55 after completing 240 Months of Benefit Service with Final Average Salary equal to $250,000. The Participant has accrued monthly benefits under the Northrop Grumman Electronic Systems Pension Plan (the ES Plan) equal to $2,550 |
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payable at age 55, the Northrop Grumman ERISA Supplemental Program 2 (ERISA 2) equal to $600 payable at age 55, and the Northrop Grumman Electronic Systems Executive Pension Plan (the ES EPP) equal to $600 payable at age 65. | |||
The Participants pre-offset benefit under this Program, calculated in accordance with Section G.04, equals 35% of the Participants Final Average Salary ($250,000) x 75% to account for the early retirement reduction under Section G.04(c). This results in a monthly gross benefit under this Program, before the benefit limit is applied, equal to $5,468.75. The Participants total net benefit is calculated, taking into account the offset under (b) above, by reducing the gross benefit by the following: |
(1) | the $2,550 monthly benefit under the ES Plan payable at age 55, subject to that plans conversion factors; and | ||
(2) | the $600 ERISA 2 early retirement single life annuity payable at age 55. | ||
(3) | No offset results from the ES EPP, however, because the Participant is not eligible to receive a benefit at age 55 under that plan. | ||
This results in a monthly gross benefit under this Program equal to $2,318.75. |
(a) | Benefits will generally be paid in accordance with Section 2.03 of the Plan. | ||
In addition to all other benefit forms otherwise available under this Program, effective as of January 1, 2004, a Participant may elect to have his or her benefits paid in the form of a 75% Joint and Survivor Option. Under this option, the Participant is paid a reduced monthly benefit for life and then, if the Participants spouse is still alive, a benefit equal to 75% of the Participants monthly benefit is paid to the spouse for the remainder of his or her life. If the spouse is not still alive when the Participant dies, no further payments are made. The determination of the benefit payable under this option will be made utilizing the factors for a 75% Joint and Survivor Option under the provisions of the Northrop Grumman Retirement Plan. | |||
(b) | Except as provided in (c), benefits will commence as of the first day of the month following the Participants Termination of Employment or, if later, as of the date the Participants early retirement benefit commences under the Qualified Plans. | ||
(c) | If a Participant has a Termination of Employment because of disability before the Participant is eligible for an early retirement benefit from a Qualified Plan, benefits may commence immediately, subject to adjustment for early commencement using the applicable factors and methodologies under Sections G.04(c) and G.05(c)(3). |
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(d) | If a Participant dies after commencement of benefits, any survivor benefits will be paid in accordance with the form of benefit selected by the Company. If a Participant dies prior to commencement of benefits, payment will be made under Section G.07. |
G.07 | Preretirement Death Benefits . If a Participant dies before benefits commence, preretirement surviving spouse benefits are payable under this Program on behalf of the Participant if his or her surviving spouse is eligible for a qualified preretirement survivor annuity (as required under section 401(a)(11) of the Code) from a Qualified Plan. |
(a) | Amount and Form of Preretirement Death Benefit. A preretirement death benefit paid to a surviving spouse is the survivor benefit paid to a surviving spouse is the survivor benefit portion of a 100% joint and survivor annuity calculated using the survivor annuity factors under the Northrop Grumman Pension Plan in an amount determined as follows: |
(1) | First, the Participants gross benefit under Section G.04(a) will be calculated and reduced, as necessary, for early retirement using the factors in Section G.04(c); | ||
(2) | Second, the target preretirement death benefit under this Program will be calculated by applying the appropriate 100% joint-and-survivor annuity factor (as provided in the Northrop Grumman Pension Plan) to the amount determined in (1); and | ||
(3) | Third, the target preretirement death benefit determined in (2) will be reduced by the preretirement death benefits, if any, payable under all defined benefit retirement plans, programs, and arrangements maintained by the Affiliated Companies, whether qualified or nonqualified, that are otherwise included in the offsets described under Section G.05(b) such that the sum of the preretirement death benefit payments made to the surviving spouse under all plans, including this Program, will equal, at all times, the level of payments determined to be the target preretirement death benefit (subject to the benefit limit described in Section G.05(a)). |
(b) | Timing of Preretirement Death Benefit. |
(1) | Benefits commence as of the first day of the month following the death of the Participant, subject to adjustment for early commencement using the applicable factors under G.04(c). | ||
(2) | If there is a dispute as to whom payment is due, the Company may delay payment until the dispute is settled. |
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(c) | No benefit is payable under this Program with respect to a spouse after the spouse dies. |
G.08 | Individual Arrangements . This Section applies to a Participant who has an individually-negotiated arrangement with the Company for supplemental retirement pension benefits. Notwithstanding any other provision to the contrary, this Section does not apply to any individually-negotiated arrangements between a Participant and the Company concerning severance payments. |
(a) | This Section is intended to coordinate the benefits under this Program with those of any individually-negotiated arrangement. Participants with such arrangements will be paid the better of the benefits under the arrangement or under Sections G.04 or G.07 (as limited by G.05). | ||
(b) | In no case will duplicate benefits be paid under this Program and such an individual arrangement. Any payments under this Program will be counted toward the Companys obligations under an individual arrangement, and vice-versa. | ||
(c) | If the benefit under an individually-negotiated arrangement exceeds the one payable under this Program, then the individual benefit will be substituted as the benefit payable under this Program (even if it exceeds the limit under G.05). | ||
(d) | To determine which benefit is greater, all benefits will be compared, subject to adjustment for early retirement using the applicable factors and methodologies under Sections G.04(c) and G.05(c)(3). | ||
(e) | For purposes of (d), the individually-negotiated benefit will be determined in accordance with all of its terms and conditions. Nothing in this Section is meant to alter any of those terms and conditions. | ||
(f) | This Section does not apply to the Special Agreements. |
G.09 | Actuarial Assumptions . The following defined terms and actuarial assumptions will be used to the extent necessary under Sections G.05 and G.08 to convert benefits to straight life annuity form commencing upon the Participant reaching age 65: |
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G.10 | Grumman SRP Participants . The following special rules shall apply to Participants who are entitled to benefits under the Northrop Grumman Corporation Supplemental Retirement Plan (the SRP). Any additional accrued benefits resulting from these special rules shall be subject to Code Section 409A. |
(a) | The offset provided for in Section G.05(b) related to an SRP benefit shall be based on the amount payable under the 15-year certain payment form in the SRP, not the actuarially equivalent single life annuity amount. | ||
(b) | The offset for the SRP amount shall be applied after the benefit under this Program has been converted into any optional form of payment elected. | ||
(c) | When payments cease under the SRP after 15 years, the annual benefit under this Program shall increase by the amount of the annual benefit that was being paid under the SRP. |
G.11 | TASC Participants . Participants who are actively employed in a TASC Entity: 254 or 255 on the date the entities are transferred to an unrelated buyer (TASC Closing Date) will be 100% vested in their benefit under the Program on the TASC Closing Date. No pay or service after the TASC Closing Date will count for purposes of determining the amount of such a Participants benefit under the Program. The offsets that apply to a Participants benefit under Section G.05(b) shall be determined on the date the Participants benefits payments commence under the Program. All benefits that become vested under this Section G.11 shall be subject to section 409A of the Code. |
NORTHROP GRUMMAN CORPORATION
|
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By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation,
Benefits & International |
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I.01 | Purpose . The purpose of this Program is to give enhanced retirement benefits to eligible officers of the Company. |
I.02 | Definitions and Construction . |
(a) | Capitalized terms used in this Appendix that are not defined in this Appendix or Article I of the Plan are taken from the Qualified Plans, and are intended to have the same meaning. | ||
(b) | Cash Balance Program means the Northrop Grumman Corporation Cash Balance Program, or any successor thereto. | ||
(c) | Eligible Pay. Subject to paragraphs (1) through (3) below, Eligible Pay will be based on the eligible pay a Participant would have under the Cash Balance Program if (i) the Participant was eligible to participate in the Cash Balance Program, (ii) there were no limits on eligible pay under the Cash Balance Program under applicable limitations of the Code, including section 401(a)(17), and (iii) amounts deferred under the Northrop Grumman Deferred Compensation Plan and the Northrop Grumman Savings Excess Plan counted as eligible pay under the Cash Balance Program. |
(1) | If a Participant experiences a Termination of Employment before December 31 or is hired after January 1 of any year, Eligible Pay for the year in which the Participants Termination of Employment or date of hire occurs is determined in accordance with the Standard Annualization Procedure in Article 2 of the Cash Balance Program. | ||
(2) | The following shall not be considered as Eligible Pay for purposes of determining the amount of any benefit under the Program: |
(A) | any payment authorized by the Compensation Committee that is (1) calculated pursuant to the method for determining a bonus amount under the Annual Incentive Plan (AIP) for a given year, and (2) paid in lieu of such bonus in the year prior to the year the bonus would otherwise be paid under the AIP, and |
(B) | any award payment under the Northrop Grumman Long-Term Incentive Cash Plan. |
(3) | Eligible Pay shall include amounts earned after a Participant attains age 65. |
(d) | Final Average Salary for any Plan Year is the Participants average Eligible Pay for the highest three Plan Years in which the Participant was an employee of an Affiliated Company. |
(e) | Months of Benefit Service. |
(1) | Except as provided in (2) and (3) below, a Participant shall be credited with a Month of Benefit Service for each month that would count as Credited Service under the Cash Balance Program if the Participant was eligible to participate in the Cash Balance Program. | ||
(2) | Months of Benefit Service will continue to be counted for a Participant until cessation of the Participants status as an elected or appointed officer of the Company (except as otherwise provided in Section I.04(f)). | ||
(3) | Months of Benefit Service shall not include any time that counts as service under any portion of a plan spun out of the Companys controlled group, if the service would no longer be treated as benefit accrual service under the Cash Balance Program if the Participant was eligible to participate in the Cash Balance Program. | ||
(4) | Months of Benefit Service shall continue to be earned after a Participant has attained age 65. |
(f) | Benefits are calculated without regard to the limits in sections 401(a)(17) and 415 of the Code. |
I.03 | Eligibility . Eligibility for benefits under this Program is limited to the elected or appointed officers of the Company hired after June 2008 and on or before January 5, 2009 and designated for participation in the Program by the Vice President, Compensation, Benefits & International (as such title may be modified from time to time). |
I.04 | Benefit Amount . |
(a) | A Participants annual Normal Retirement Benefit under this Program equals the sum of (1) through (3) below, subject to the limit described in Section I.05: |
(1) | 2.0% x Final Average Salary x Months of Benefit Service up to 120 months ÷ 12 |
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(2) | 1.5% x Final Average Salary x Months of Benefit Service in excess of 120 months up to 240 months ÷ 12 |
(3) | 1.0% x Final Average Salary x Months of Benefit Service in excess of 240 months up to 540 months ÷ 12 |
(b) | The total benefit payable is a straight life annuity commencing at age 65, assuming an annual benefit equal to the gross benefit under (a). The form of benefit and timing of commencement will be determined under Section I.06. |
(c) | If a Participants benefit is paid under this Program before age 65, the benefit will be adjusted as follows. The Early Retirement Benefit is a monthly benefit equal to the Normal Retirement Benefit reduced by the lesser of: |
(1) | 1/12th of 2.5% for each calendar month the payment of benefits begins before age 65; or |
(2) | 2.5% for each benefit point less than 85 where the Participants benefit points (truncated to reach a whole number) equal the sum of: |
(A) | his or her age (computed to the nearest 1/12th of a year) at the annuity starting date, and |
(B) | 1/12th of his or her Months of Benefit Service (also computed to the nearest 1/12th of a year) as of the date his or her employment terminated. |
(d) | Except as provided otherwise in this Appendix I, no benefit will be paid under this Program if a Participant experiences a Termination of Employment before (1) attaining age 55 and completing 120 Months of Benefit Service, or (2) attaining age 65 and completing 60 Months of Benefit Service. |
(e) | A Participant shall be entitled to benefits notwithstanding the Participants failure to meet the requirements of Section I.04(d) if the following requirements are satisfied: |
(1) | the Participant has been involuntarily terminated or terminated due to the divestiture of his business unit; |
(2) | the Participant has reached age 53 and completed 10 years of early retirement eligibility service, or has accumulated 75 points, as of the date of termination, all as determined under the terms of the Northrop Grumman Pension Plan (assuming the Participant were eligible to participate in such plan); and |
(3) | the Participant is actively accruing benefits under the Program as of the date of termination. |
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If a Participant receives a notice of an involuntary termination and then transfers to another related entity instead of being involuntarily terminated, the Participant will not qualify for vesting under this subsection (e). If an involuntarily terminated Participant is rehired by the Company, vesting under this subsection (e) would not apply unless the Participant is subsequently terminated and meets the requirements described above. | |||
All benefits payable pursuant to this subsection (e) shall be subject to reduction for early retirement as applicable under Section I.04(c). | |||
(f) | The rules set forth in this Section I.04(f) shall apply in the event a Participant ceases to satisfy the eligibility requirements of Section I.03 (the eligibility requirements) because the Participant is no longer an elected or appointed officer of the Company: |
(1) | for purposes of calculating the Participants benefit amount pursuant to Section I.04(a), Eligible Pay and Months of Benefit Service shall not reflect amounts paid or service on or after the date the Participant ceases to satisfy the eligibility requirements, except that in the event the Participant subsequently satisfies the eligibility requirements, Eligible Pay and Months of Benefit Service shall reflect all pay and past service to the extent consistent with the terms of this Program in effect for newly eligible employees at the time the Participant satisfies the eligibility requirements for the second time; | ||
(2) | for purposes of applying the 60% limitation pursuant to Section I.05, Eligible Pay shall include amounts paid on or after the date the Participant ceases to satisfy the eligibility requirements; | ||
(3) | for purposes of applying Sections I.04(d) and I.04(e), service on or after the date the Participant ceases to satisfy the eligibility requirements shall continue to count as service; | ||
(4) | for purposes of applying the reduction for early retirement pursuant to Section I.04(c), service on or after the date the Participant ceases to satisfy the eligibility requirements shall continue to count as service. |
(g) | If a Participant experiences a Termination of Employment after earning at least three Years of Vesting Service and is not vested in benefits under the Program under subsection (d), (e), or (f) above, he shall be entitled to a benefit equal to the benefit he would have received had he participated in the Cash Balance Program from his date of hire to the date of his Termination of Employment and if there were no Code limits on compensation or benefits under the Cash Balance Program. This benefit will be payable in accordance with Section I.06. Any Participant entitled to a benefit under this subsection (g) shall not be entitled to a benefit under subsection (a). |
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I.05 | Benefit Limit . A Participants total accrued benefits under all defined benefit retirement plans, programs, and arrangements maintained by the Affiliated Companies, whether qualified or nonqualified (but not contributory or defined contribution plans, programs, or arrangements) in which he or she participates, including the benefit accrued under Section I.04, may not exceed 60% of his or her Final Average Salary. If this limit is exceeded, the Participants benefit accrued under this Program will be reduced to the extent necessary to satisfy the limit. |
(a) | The Participants Final Average Salary will be reduced for early retirement applying the factors in Sections I.04(c) and I.09. | ||
(b) | The limit in this subsection may not be exceeded even after the benefits under this Program have been enhanced under any Special Agreements. |
I.06 | Payment of Benefits . Benefits will be paid in accordance with Appendix 2. | |
I.07 | Death Benefits . Any payments to be made upon the death of a Participant shall be determined under and distributed in accordance with Appendix 2. | |
I.08 | Individual Arrangements . This Section applies to a Participant who has an individually-negotiated arrangement with the Company for supplemental retirement pension benefits. Notwithstanding any other provision to the contrary, this Section does not apply to any individually-negotiated arrangements between a Participant and the Company concerning severance payments. |
(a) | This Section is intended to coordinate the benefits under this Program with those of any individually-negotiated arrangement. Participants with such arrangements will be paid the better of the benefits under the arrangement or under Sections I.04 or I.07 (as limited by I.05). | ||
(b) | In no case will duplicate benefits be paid under this Program and such an individual arrangement. Any payments under this Program will be counted toward the Companys obligations under an individual arrangement, and vice-versa. | ||
(c) | If the benefit under an individually-negotiated arrangement exceeds the one payable under this Program, then the individual benefit will be substituted as the benefit payable under this Program (even if it exceeds the limit under I.05). | ||
(d) | To determine which benefit is greater, all benefits will be compared, subject to adjustment for early retirement using the applicable factors and methodologies under Section I.04(c). | ||
(e) | For purposes of (d), the individually-negotiated benefit will be determined in accordance with all of its terms and conditions. Nothing in this Section is meant to alter any of those terms and conditions. | ||
(f) | This Section does not apply to the Special Agreements. |
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I.09 | Actuarial Assumptions . The following defined terms and actuarial assumptions will be used to the extent necessary under Sections I.05 and I.08 to convert benefits to straight life annuity form commencing upon the Participant reaching age 65: | |
Interest : Five percent (5%) | ||
Mortality : The applicable mortality table which would be used to calculate a lump sum value for the benefit under the Qualified Plans. | ||
Increase in Code Section 415 Limit : 2.8% per year. | ||
Variable Unit Values : Variable Unit Values are presumed not to increase for future periods after commencement of benefit. | ||
I.10 | TASC Participants . Participants who are actively employed in a TASC Entity: 254 or 255 on the date the entities are transferred to an unrelated buyer (TASC Closing Date) will be 100% vested in their benefit determined under Section I.04(a), (b) and (c) of the Program on the TASC Closing Date. No pay or service after the TASC Closing Date will count for purposes of determining the amount of such a Participants benefit under the Program. If the TASC Closing Date occurs before 2010, the TASC Closing Date shall be deemed to be January 1, 2010 for purposes of determining the rights of Participants. |
NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation,
Benefits & International |
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INTRODUCTION
|
1 | |||
|
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Article I Definitions
|
2 | |||
1.01 Affiliated Companies
|
2 | |||
1.02 CIC Plans
|
2 | |||
1.03 Code
|
2 | |||
1.04 Company
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2 | |||
1.05 Grandfathered Amounts
|
2 | |||
1.06 Key Employee
|
2 | |||
1.07 Participant
|
2 | |||
1.08 Payment Date
|
2 | |||
1.09 Plan
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2 | |||
1.10 Pension Plan Benefits
|
2 | |||
1.11 Pension Plan
|
2 | |||
1.12 Separation from Service
|
3 | |||
1.13 Termination of Employment
|
3 | |||
|
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Article II Eligibility for and Amount of Benefits
|
4 | |||
2.01 Purpose
|
4 | |||
2.02 Eligibility
|
4 | |||
2.03 Amount of Benefit
|
4 | |||
2.04 Preretirement Surviving Spouse Benefit
|
5 | |||
2.05 Forms and Times of Benefit Payments
|
5 | |||
2.06 Beneficiaries and Spouses
|
6 | |||
2.07 Plan Termination
|
6 | |||
2.08 Pension Plan Benefits
|
6 | |||
2.09 Mandatory Cashout
|
7 | |||
2.10 Optional Payment Forms
|
7 | |||
2.11 Special Tax Distribution
|
7 | |||
|
||||
Article III Lump Sum Election
|
9 | |||
3.01 In General
|
9 | |||
3.02 Retirees Election
|
9 | |||
3.03 Retirees Lump Sum
|
10 | |||
3.04 Actives Election
|
10 | |||
3.05 Actives Lump Sum Retirement Eligible
|
11 | |||
3.06 Actives Lump Sum Not Retirement Eligible
|
13 | |||
3.07 Lump Sums with CIC Severance Plan Election
|
13 | |||
3.08 Calculation of Lump Sum
|
13 | |||
3.09 Spousal Consent
|
14 |
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|
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Article IV Miscellaneous
|
15 | |||
4.01 Amendment and Plan Termination
|
15 | |||
4.02 Not an Employment Agreement
|
15 | |||
4.03 Assignment of Benefits
|
15 | |||
4.04 Nonduplication of Benefits
|
16 | |||
4.05 Funding
|
16 | |||
4.06 Construction
|
16 | |||
4.07 Governing Law
|
16 | |||
4.08 Actions By Company and Claims Procedures
|
16 | |||
4.09 Plan Representatives
|
17 | |||
4.10 Number
|
17 | |||
4.11 2001 Reorganization
|
17 | |||
|
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APPENDIX A 2005-2007 TRANSITION RULES
|
19 | |||
A.01 Election
|
19 | |||
A.02 2005 Commencements
|
19 | |||
A.03 2006 and 2007 Commencements
|
20 | |||
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APPENDIX B POST 2007 DISTRIBUTION OF 409A AMOUNTS
|
21 | |||
B.01 Time of Distribution
|
21 | |||
B.02 Special Rule for Key Employees
|
21 | |||
B.03 Forms of Distribution
|
21 | |||
B.04 Death
|
21 | |||
B.05 Actuarial Assumptions
|
22 | |||
B.06 Accelerated Lump Sum Payouts
|
22 | |||
B.07 Effect of Early Taxation
|
23 | |||
B.08 Permitted Delays
|
23 |
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1.01 | Affiliated Companies . The Company and any other entity related to the Company under the rules of section 414 of the Code. The Affiliated Companies include Northrop Grumman Corporation and its 80%-owned subsidiaries and may include other entities as well. | |
1.02 | CIC Plans . Northrop Grumman Corporation Change-In-Control Severance Plan (effective August 1, 1996, as amended) or the Northrop Grumman Corporation March 2000 Change-In-Control Severance Plan. | |
1.03 | Code . The Internal Revenue Code of 1986, as amended. | |
1.04 | Company . The Company as designated in the Pension Plans. | |
1.05 | Grandfathered Amounts . Plan benefits that were earned and vested as of December 31, 2004 within the meaning of Code section 409A and official guidance thereunder. | |
1.06 | Key Employee . An employee treated as a specified employee under Code section 409A(a)(2)(B)(i) of the Company or the Affiliated Companies (i.e., a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)) if the Companys or an Affiliated Companys stock is publicly traded on an established securities market or otherwise. The Company shall determine in accordance with a uniform Company policy which Participants are Key Employees as of each December 31 in accordance with IRS regulations or other guidance under Code section 409A, provided that in determining the compensation of individuals for this purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be used. Such determination shall be effective for the twelve (12) month period commencing on April 1 of the following year. | |
1.07 | Participant . Any employee who (a) is eligible for benefits under one or both Pension Plans, (b) meets the eligibility requirements of Section 2.02 of this Plan and (c) and has not received full payment under the Plan. | |
1.08 | Payment Date . The 1st of the month coincident with or following the later of (a) the date the Participant attains age 55, or (b) the date the Participant Separates from Service. | |
1.09 | Plan . The Northrop Grumman ERISA Supplemental Plan, formerly known as the Northrop Corporation ERISA Supplemental Plan 1. | |
1.10 | Pension Plan Benefits . This term is defined in Section 2.08 of this Plan. | |
1.11 | Pension Plan and Pension Plans . Any of the following: |
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1.12 | Separation from Service or Separates from Service . A separation from service within the meaning of Code section 409A. |
1.13 | Termination of Employment . Complete termination of employment with the Affiliated Companies. |
(a) | If a Participant leaves one Affiliated Company to go to work for another, he or she will not have a Termination of Employment. |
(b) | A Participant will have a Termination of Employment if he or she leaves the Affiliated Companies because the affiliate he or she works for ceases to be an Affiliated Company because it is sold or spunoff. |
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2.01 | Purpose . The purpose of this Plan is simply to restore to employees of the Company the benefits they lose under the Pension Plans as a result of the benefit limits in Code section 415, as amended, or any successor section (section 415), as the benefit limits are described in the applicable Pension Plan. |
2.02 | Eligibility . Each Participant is eligible to receive a benefit under this Plan if: |
(a) | he or she has vested in benefits under one or more of the Pension Plans; | ||
(b) | he or she has vested benefits reduced because of the application of section 415; | ||
(c) | he or she is not eligible to receive a benefit under the Northrop Corporation Supplemental Retirement Income Program for Senior Executives or any other plan or program which bars an employee from participation in this Plan; and | ||
(d) | he or she is not a Participant in the Charles H. Noski Executive Retirement Plan as that term is defined under that plan. |
2.03 | Amount of Benefit . The benefit payable from the Company under this Plan to a Participant will equal the retirement benefit, if any, which would have been payable to the Participant under the terms of a Pension Plan but for the restrictions of section 415 (as described in the applicable Pension Plan). | |
The benefit payable under this Plan will be reduced by the amount of Pension Plan Benefits attributable to the applicable Pension Plan. | ||
Benefits under this Plan will only be paid to supplement benefit payments actually made from a Pension Plan. If benefits are not payable under a Pension Plan because the Participant has failed to vest or for any other reason, no payments will be made under this Plan with respect to such Pension Plan. | ||
In no event, however, (1) will this Plan pay any amount of a Participants retirement benefit, if any, attributable to the 2000 Ad Hoc Increase for Retirees Appendix added to certain of the Companys tax-qualified plans pursuant to the Board of Directors resolution adopted May 17, 2000, or (2) will a Participant be entitled to a benefit (or an increased benefit) from or as a result of participation in this Plan under the Board of Directors resolution adopted May 17, 2000. | ||
The following shall not be considered as compensation for purposes of determining the amount of any benefit under the Plan: |
(1) | any payment authorized by the Compensation Committee that is (a) calculated pursuant to the method for determining a bonus amount under the Annual |
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Incentive Plan (AIP) for a given year, and (b) paid in lieu of such bonus in the year prior to the year the bonus would otherwise be paid under the AIP, and | |||
(2) | any award payment under the Northrop Grumman Long-Term Incentive Cash Plan. |
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(a) | A reduction in pension benefits as a result of a distress termination (as described in ERISA § 4041(c) or any comparable successor provision of law) of a Pension Plan. In such a case, the Pension Plan Benefits will be deemed to refer to the payments that would have been made from the Pension Plan had it terminated on a fully funded basis as a standard termination (as described in ERISA § 4041(b) or any comparable successor provision of law). | ||
(b) | A reduction of accrued benefits as permitted under Code section 412(c)(8), as amended, or any comparable successor provision of law. | ||
(c) | A reduction of pension benefits as a result of payment of all or a portion of a Participants benefits to a third party on behalf of or with respect to a Participant. |
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2.09 | Mandatory Cashout . Notwithstanding any other provisions in the Plan, Participants with Grandfathered Amounts who have not commenced payment of such benefits prior to January 1, 2008 will be subject to the following rules: |
(a) | Post-2007 Terminations . Participants who have a Termination of Employment after 2007 will receive a lump sum distribution of the present value of their Grandfathered Amounts within two months of Termination of Employment (without interest), if such present value is below the Code section 402(g) limit in effect at the Termination of Employment. |
(b) | Pre-2008 Terminations . Participants who had a Termination of Employment before 2008 will receive a lump sum distribution of the present value of their Grandfathered Amounts within two months of the time they commence payment of their underlying qualified pension plan benefits (without interest), if such present value is below the Code section 402(g) limit in effect at the time such payments commence. |
For purposes of calculating present values under this Section, the actual assumptions and calculation procedures for lump sum distributions under the Northrop Grumman Pension Plan shall be used. | ||
2.10 | Optional Payment Forms . Participants with Grandfathered Amounts shall be permitted to elect (a) or (b) below: |
(a) | To receive their Grandfathered Amounts in any form of distribution available under the Plan at October 3, 2004, provided that form remains available under the underlying qualified pension plan at the time payment of the Grandfathered Amounts commences. The conversion factors for these distribution forms will be based on the factors or basis in effect under this Plan on October 3, 2004. |
(b) | To receive their Grandfathered Amounts in any life annuity form not included in (a) above but included in the underlying qualified pension plan distribution options at the time payment of the Grandfathered Amounts commences. The conversion factors will be based on the following actuarial assumptions: |
Interest Rate:
|
6% | |||
|
||||
Mortality Table:
|
RP-2000 Mortality Table projected 15 years for future standardized cash balance factors |
2.11 | Special Tax Distribution . On the date a Participants retirement benefit is reasonably ascertainable within the meaning of IRS regulations under Code section 3121(v)(2), an amount equal to the Participants portion of the FICA tax withholding will be distributed in a single lump sum payment. This |
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payment will be based on all benefits under the Plan, including Grandfathered Amounts. This payment will reduce the Participants future benefit payments under the Plan on an actuarial basis. |
- 8 -
3.01 | In General . This Article sets forth the rules under which Participants may elect to receive their benefits in a lump sum. Except as provided in Section 3.08, this Article does not apply to active employees (as defined in Section 3.04) in cases where benefits are automatically payable in lump sum form under Article II. |
3.02 | Retirees Election . Participants and Participants beneficiaries already receiving monthly benefits under the Plan at its inception will be given a one-time opportunity to elect a lump sum payout of future benefit payments. |
(a) | The election must be made within a 60-day period determined by the Company. Within its discretion, the Company may delay the commencement of the 60-day period in instances where the Company is unable to timely communicate with a particular payee. | ||
(b) | The determination as to whether a payee is already receiving monthly benefits will be made at the beginning of the 60-day period. | ||
(c) | An election to take a lump sum must be accompanied by a waiver of the existing retiree medical benefits by those Participants (and their covered spouses or surviving spouses) entitled either to have such benefits entirely paid for by the Company or to receive such benefits as a result of their classification as an employee under Executive Class Code II. | ||
Following the waiver, waiving Participants (and covered spouses or surviving spouses) will be entitled to the coverage offered to employees who are eligible for Senior Executive Retirement Insurance Benefits in effect as of July 1, 1993. | |||
(d) | If the person receiving payments as of the beginning of the 60-day period dies prior to making a lump sum election, his or her beneficiary, if any, may not make the lump sum election. | ||
(e) | Elections to receive a lump sum (and waivers under (c)) must be made in writing and must include spousal consent if the payee (whether the Participant or beneficiary) is married. Elections and spousal consent must be witnessed by a Plan representative or a notary public. | ||
(f) | An election (with spousal consent, where required) to receive the lump sum made at any time during the 60-day period will be irrevocable. If no proper election has been made by the end of the 60-day period, payments will continue unchanged in the monthly form that had previously been applicable. |
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3.03 | Retirees Lump Sum . If a retired Participant or beneficiary makes a valid election under Section 3.02 within the 60-day period, monthly payments will continue in the previously applicable form for 12 months (assuming the payees live that long). |
(a) | As of the first of the 13 th month, the present value of the remaining benefit payments will be paid in a single lump sum to the Participant, if alive, or, if not, to the beneficiary under the previously applicable form of payment. |
(b) | No lump sum payment will be made if: |
(1) | The Participant is receiving monthly benefit payments in a form that does not provide for survivor benefits and the Participant dies before the time the lump sum payment is due. | ||
(2) | The Participant is receiving monthly benefit payments in a form that does provide for survivor benefits but the Participant and the beneficiary die before the time the lump sum payment is due. |
(c) | The following rules apply where payment is being made in the form of a 10-year certain and continuous life annuity option: |
(1) | If the Participant is deceased at the commencement of the 60-day election period, the surviving beneficiary may not make the election if there are less than 13 months left in the 10-year certain period. |
(2) | If the Participant elects the lump sum and dies prior to the first of the 13th month: |
(A) | if the 10-year certain period has already ended, all monthly payments will cease at the Participants death and no lump sum payment will be made; | ||
(B) | if the 10-year certain period ends after the Participants death and before the beginning of the 13 th month, monthly payments will end at the end of the 10-year certain period and no lump sum payment will be made; and | ||
(C) | if the 10-year certain period ends after the beginning of the 13 th month, monthly payments will continue through the 12 th month, and a lump sum payment will be made as of the first of the 13 th month, equal to the present value of the remaining benefit payments. |
3.04 | Actives Election . Active Participants may elect to have their benefits paid in the form of a single lump sum under this Section. |
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(a) | A Participant is considered to be Active under this Section if he or she is still employed by the Affiliated Companies on or after the beginning of the initial 60-day period referred to in Section 3.02. |
(b) | An election to take a lump sum may be made at any time during the 60-day period prior to Termination of Employment and covers both |
(1) | Benefits payable to the Participant during his or her lifetime, and |
(2) | Survivor benefits (if any) payable to the Participants beneficiary, including preretirement death benefits (if any) payable to the Participants spouse. |
(c) | An election does not become effective until the earlier of |
(1) | the Participants Termination of Employment, or |
(2) | the Participants death. |
Before the election becomes effective, it may be revoked. |
If a Participant does not have a Termination of Employment within 60 days after making an election, the election will never take effect. | |||
(d) | An election may only be made once. If it fails to become effective after 60 days or is revoked before becoming effective, it cannot be made again at a later time. | ||
(e) | After a Participant has a Termination of Employment, no election can be made. | ||
(f) | If a Participant dies before making a lump sum election, his or her spouse may not make a lump sum election with respect to any benefits which may be due the spouse. | ||
(g) | Elections to receive a lump sum must be made in writing and must include spousal consent if the Participant is married. Elections and spousal consent must be witnessed by a Plan representative or a notary public. |
3.05 | Actives Lump Sum Retirement Eligible . If a Participant with a valid lump sum election in effect under Section 3.04 has a Termination of Employment after he or she is entitled to commence benefits under the Pension Plans, payments will be made in accordance with this Section. |
(a) | Monthly benefit payments will be made for up to 12 months, commencing the first of the month following Termination of Employment. Payments will be made: |
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(1) | in the case of a Participant who is not married on the date benefits are scheduled to commence, based on a straight life annuity for the Participants life and ceasing upon the Participants death should he or she die before the 12 months elapse, or |
(2) | in the case of a Participant who is married on the date benefits are scheduled to commence, based on a joint and survivor annuity form |
(A) | with the survivor benefit equal to 50% of the Participants benefit; | ||
(B) | with the Participants spouse as the survivor annuitant; | ||
(C) | determined by using the contingent annuitant option factors used to convert straight life annuities to 50% joint and survivor annuities under the Northrop Retirement Plan; and | ||
(D) | with all payments ceasing upon the death of both the Participant and his or her spouse should they die before the 12 months elapse. |
(b) | As of the first of the 13 th month, the present value of the remaining benefit payments will be paid in a single lump sum. Payment of the lump sum will be made to the Participant if he or she is still alive, or, if not, to his or her surviving spouse, if any. | ||
(c) | No lump sum payment will be made if: |
(1) | The Participant is receiving monthly benefit payments in the form of a straight life annuity and the Participant dies before the time the lump sum payment is due. |
(2) | The Participant is receiving monthly benefit payments in a joint and survivor annuity form and the Participant and his or her spouse both die before the time the lump sum payment is due. |
(d) | A lump sum will be payable to a Participants spouse as of the first of the month following the date of the Participants death, if: |
(1) | the Participant dies after making a valid lump sum election but prior to commencement of any benefits under this Plan; | ||
(2) | the Participant is survived by a spouse who is entitled to a preretirement surviving spouse benefit under this Plan; and |
(3) | the spouse survives to the first of the month following the date of the Participants death. |
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3.06 | Actives Lump Sum Not Retirement Eligible . If a Participant with a valid lump sum election in effect under Section 3.04, has a Termination of Employment before he or she is entitled to commence benefits under the Pension Plans, payments will be made in accordance with this Section. |
(a) | No monthly benefit payments will be made. | ||
(b) | Following Termination of Employment, a single lump sum payment of the benefit will be made on the first of the month following 12 months after the date of the Participants Termination of Employment. | ||
(c) | A lump sum will be payable to a Participants spouse as of the first of the month following the date of the Participants death, if: |
(1) | the Participant dies after making a valid lump sum election but prior to commencement of any benefits under this Plan; | ||
(2) | the Participant is survived by a spouse who is entitled to a preretirement surviving spouse benefit under this Plan; and | ||
(3) | the spouse survives to the first of the month following the date of the Participants death. |
(d) | No lump sum payment will be made if the Participant is unmarried at the time of death and dies before the time the lump sum payment is due. |
3.07 | Lump Sums with CIC Severance Plan Election . A Participant who elects lump sum payments of all his or her nonqualified benefits under the CIC Plans is entitled to have his or her benefits paid as a lump sum calculated under the terms of the applicable CIC Plan. Otherwise, benefit payments are governed by the general provisions of this Article, which provide different rules for calculating the amount of lump sum payments. |
3.08 | Calculation of Lump Sum . The factors to be used in calculating the lump sum are as follows: |
Interest : Whichever of the following two rates that produces the smaller lump sum: |
(1) | the discount rate used by the Company for purposes of Statement of Financial Accounting Standards No. 87 of the Financial Accounting Standards Board as disclosed in the Companys annual report to shareholders for the year end immediately preceding the date of distribution, or | ||
(2) | the applicable interest rate that would be used to calculate a lump sum value for the benefit under the Pension Plans. |
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Mortality : the applicable mortality table that would be used to calculate a lump sum value for the benefit under the Northrop Grumman Retirement Plan. | |||
Increase in Section 415 Limit : 4% per year. | |||
Age : Age rounded to the nearest month on the date the lump sum is payable. | |||
Variable Unit Values : Variable Unit Values are presumed not to increase for future periods after the date the lump sum is payable. |
The annuity to be converted to a lump sum will be the remaining annuity currently payable to the Participant or his or her beneficiary at the time the lump sum is due. |
For example, assume a Participant is receiving benefit payments in the form of a 50% joint and survivor annuity. | |||
If the Participant and the survivor annuitant are both still alive at the time the lump sum payment is due, the present value calculation will be based on the remaining benefits that would be paid to both the Participant and the survivor in the annuity form. | |||
If only the survivor is alive, the calculation will be based solely on the remaining 50% survivor benefits that would be paid to the survivor. | |||
If only the Participant is alive, the calculation will be based solely on the remaining benefits that would be paid to the Participant. |
In the case of a Participant who dies prior to commencement of benefits under this Plan so that only a preretirement surviving spouse benefit (if any) is payable, the lump sum will be based solely on the value of the preretirement surviving spouse benefit. | ||
In the case of a lump-sum under Section 3.07 (related to lump sums with a CIC Severance Plan election), the lump-sum amount will be calculated as described in that section and the rules of this Section 3.08 are not used. | ||
3.09 | Spousal Consent . Spousal consent, as required for elections as described above, need not be obtained if the Company determines that there is no spouse or the spouse cannot be located. |
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4.01 | Amendment and Plan Termination . The Company may, in its sole discretion, terminate, suspend or amend this Plan at any time or from time to time, in whole or in part for any reason. This includes the right to amend or eliminate any of the provisions of the Plan with respect to lump sum distributions, including any lump sum calculation factors, whether or not a Participant has already made a lump sum election. Notwithstanding the foregoing, no amendment or termination of the Plan shall reduce the amount of a Participants accrued benefit under the Plan as of the date of such amendment or termination. | |
No amendment of the Plan shall apply to the Grandfathered Amounts, unless the amendment specifically provides that it applies to such amounts. The purpose of this restriction is to prevent a Plan amendment from resulting in an inadvertent material modification to the Grandfathered Amounts. | ||
The Company may, in its sole discretion, seek reimbursement from the Pension Plans to the extent this Plan pays Pension Plan Benefits to which Participants were entitled to or became entitled to under the Pension Plans. | ||
4.02 | Not an Employment Agreement . Nothing contained in this Plan gives any Participant the right to be retained in the service of the Company, nor does it interfere with the right of the Company to discharge or otherwise deal with Participants without regard to the existence of this Plan. | |
4.03 | Assignment of Benefits . A Participant, surviving spouse or beneficiary may not, either voluntarily or involuntarily, assign, anticipate, alienate, commute, sell, transfer, pledge or encumber any benefits to which he or she is or may become entitled under the Plan, nor may Plan benefits be subject to attachment or garnishment by any of their creditors or to legal process. | |
Notwithstanding the foregoing, all or a portion of a Participants benefit may be paid to another person as specified in a domestic relations order that the plan administrator determines is qualified (a Qualified Domestic Relations Order). For this purpose, a Qualified Domestic Relations Order means a judgment, decree, or order (including the approval of a settlement agreement) which is: |
(1) | issued pursuant to a States domestic relations law; | ||
(2) | relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of the Participant; | ||
(3) | creates or recognizes the right of a spouse, former spouse, child or other dependent of the Participant to receive all or a portion of the Participants benefits under the Plan; and |
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(4) | meets such other requirements established by the plan administrator. |
The plan administrator shall determine whether any document received by it is a Qualified Domestic Relations Order. In making this determination, the plan administrator may consider the rules applicable to domestic relations orders under Code section 414(p) and ERISA section 206(d), and such other rules and procedures as it deems relevant. |
4.04 | Nonduplication of Benefits . This Section applies if, despite Section 4.03, with respect to any Participant (or his or her beneficiaries), the Company is required to make payments under this Plan to a person or entity other than the payees described in the Plan. In such a case, any amounts due the Participant (or his or her beneficiaries) under this Plan will be reduced by the actuarial value of the payments required to be made to such other person or entity. |
Actuarial value will be determined using the factors and methodology described in Section 3.08 above (in the case of lump sums) and using the actuarial assumptions in the underlying Pension Plan in all other cases. |
In dividing a Participants benefit between the Participant and another person or entity, consistent actuarial assumptions and methodologies will be used so that there is no increased actuarial cost to the Company. |
4.05 | Funding . Participants have the status of general unsecured creditors of the Company and the Plan constitutes a mere promise by the Company to make benefit payments in the future. The Company may, but need not, fund benefits under the Plan through a trust. If it does so, any trust created by the Company and any assets held by the trust to assist it in meeting its obligations under the Plan will conform to the terms of the model trust, as described in Internal Revenue Service Revenue Procedure 92-64, but only to the extent required by Internal Revenue Service Revenue Procedure 92-65. It is the intention of the Company and Participants that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA. |
Any funding of benefits under this Plan will be in the Companys sole discretion. The Company may set and amend the terms under which it will fund and may cease to fund at any time. |
4.06 | Construction . The Company shall have full discretionary authority to determine eligibility and to construe and interpret the terms of the Plan, including the power to remedy possible ambiguities, inconsistencies or omissions. |
4.07 | Governing Law . This Plan shall be governed by the law of the State of California, except to the extent superseded by federal law. |
4.08 | Actions By Company and Claims Procedures . Any powers exercisable by the Company under the Plan shall be utilized by written resolution adopted by the Board of Directors or its delegate. The Board may by written resolution delegate any of the Companys powers |
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under the Plan and any such delegations may provide for subdelegations, also by written resolution. | ||
The Companys standardized Northrop Grumman Nonqualified Retirement Plans Claims and Appeals Procedures shall apply in handling claims and appeals under this Plan. |
4.09 | Plan Representatives . Those authorized to act as Plan representatives will be designated in writing by the Board of Directors or its delegate. |
4.10 | Number . The singular, where appearing in this Plan, will be deemed to include the plural, unless the context clearly indicates the contrary. |
4.11 | 2001 Reorganization . Effective as of the 2001 Reorganization Date in (d), the corporate structure of Northrop Grumman Corporation and its affiliates was modified. Effective as of the Litton Acquisition Date in (e), Litton Industries, Inc. was acquired and became a subsidiary of the Northrop Grumman Corporation (the Litton Acquisition). |
(a) | The former Northrop Grumman Corporation was renamed Northrop Grumman Systems Corporation. It became a wholly-owned subsidiary of the new parent of the reorganized controlled group. | ||
(b) | The new parent corporation resulting from the restructuring is called Northrop Grumman Corporation. All references in this Plan to the former Northrop Grumman Corporation and its Board of Directors now refer to the new parent corporation bearing the same name and its Board of Directors. | ||
(c) | As of the 2001 Reorganization Date, the new Northrop Grumman Corporation became the sponsor of this Plan, and its Board of Directors assumed authority over this Plan. | ||
(d) | 2001 Reorganization Date . The date as of which the corporate restructuring described in (a) and (b) occurred. | ||
(e) | Litton Acquisition Date . The date as of which the conditions for the completion of the Litton Acquisition were satisfied in accordance with the Amended and Restated Agreement and Plan of Merger Among Northrop Grumman Corporation, Litton Industries, Inc., NNG, Inc., and LII Acquisition Corp. |
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NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation, Benefits & International | ||||
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A.01 | Election . Participants scheduled to commence payments during 2005 may elect to receive both pre-2005 benefit accruals and 2005 benefit accruals in any optional form of benefit available under the Plan as of December 31, 2004. Participants electing optional forms of benefits under this provision will commence payments on the Participants selected benefit commencement date. | |
A.02 | 2005 Commencements . Pursuant to IRS Notice 2005-1, Q&A-19 & Q&A-20, Participants commencing payments in 2005 from the Plan may elect a form of distribution from among those available under the Plan on December 31, 2004, and benefit payments shall begin at the time elected by the Participant. |
(a) | Key Employees . A Key Employee Separating from Service on or after July 1, 2005, with Plan distributions subject to Code section 409A scheduled to be paid in 2006 and within six months of his date of Separation from Service, shall have such distributions delayed for six months from the Key Employees date of Separation from Service. The delayed distributions shall be paid as a single sum with interest at the end of the six month period and Plan distributions will resume as scheduled at such time. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such period (i.e., the rate may change in the event the period spans two calendar years). Alternatively, the Key Employee may elect under IRS Notice 2005-1, Q&A-20 to have such distributions accelerated and paid in 2005 without the interest adjustment, provided, such election is made in 2005. | ||
(b) | Lump Sum Option . During 2005, a temporary immediate lump sum feature shall be available as follows: |
(i) | In order to elect a lump sum payment pursuant to IRS Notice 2005-1, Q&A-20, a Participant must be an elected or appointed officer of the Company and eligible to commence payments under the underlying qualified pension plan on or after June 1, 2005 and on or before December 1, 2005; | ||
(ii) | The lump sum payment shall be made in 2005 as soon as feasible after the election; and | ||
(iii) | Interest and mortality assumptions and methodology for calculating lump sum amount shall be based on the Plans procedures for calculating lump sums as of December 31, 2004. |
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A.03 | 2006 and 2007 Commencements . Pursuant to IRS transition relief, for all benefit commencement dates in 2006 and 2007 (provided election is made in 2006 or 2007), distribution of Plan benefits subject to Code section 409A shall begin 12 months after the later of: (a) the Participants benefit election date, or (b) the underlying qualified pension plan benefit commencement date (as specified in the Participants benefit election form). Payments delayed during this 12-month period will be paid at the end of the period with interest. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such period (i.e., the rate may change in the event the period spans two calendar years). |
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B.01 | Time of Distribution . Subject to the special rules provided in this Appendix B, distributions to a Participant of his vested retirement benefit shall commence as of the Payment Date. | |
B.02 | Special Rule for Key Employees . If a Participant is a Key Employee and age 55 or older at his Separation from Service, distributions to the Participant shall commence on the first day of the seventh month following the date of his Separation from Service (or, if earlier, the date of the Participants death). Amounts otherwise payable to the Participant during such period of delay shall be accumulated and paid on the first day of the seventh month following the Participants Separation from Service, along with interest on the delayed payments. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such delay (i.e., the rate may change in the event the delay spans two calendar years). | |
B.03 | Forms of Distribution . Subject to the special rules provided in this Appendix B, a Participants vested retirement benefit shall be distributed in the form of a single life annuity. However, a Participant may elect an optional form of benefit up until the Payment Date. The optional forms of payment are: |
(a) | 50% joint and survivor annuity | ||
(b) | 75% joint and survivor annuity | ||
(c) | 100% joint and survivor annuity. |
If a Participant is married on his Payment Date and elects a joint and survivor annuity, his survivor annuitant will be his spouse unless some other survivor annuitant is named with spousal consent. Spousal consent, to be effective, must be submitted in writing before the Payment Date and must be witnessed by a Plan representative or notary public. No spousal consent is necessary if the Company determines that there is no spouse or that the spouse cannot be found. |
B.04 | Death . If a married Participant dies before the Payment Date, a death benefit will be payable to the Participants spouse commencing 90 days after the Participants death. The death benefit will be a single life annuity in an amount equal to the survivor portion of a Participants vested retirement benefit based on a 100% joint and survivor annuity determined on the Participants date of death. This benefit is also payable to a |
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Participants domestic partner who is properly registered with the Company in accordance with procedures established by the Company. | ||
B.05 | Actuarial Assumptions. Except as provided in Section B.06, all forms of payment under this Appendix B shall be actuarially equivalent life annuity forms of payment, and all conversions from one such form to another shall be based on the following actuarial assumptions: |
Interest Rate: 6%
|
||||
|
||||
Mortality Table: RP-2000 Mortality Table projected 15 years for future standardized cash
balance factors
|
B.06 | Accelerated Lump Sum Payouts . |
(a) | Post-2007 Separations . Notwithstanding the provisions of this Appendix B, for Participants who Separate from Service on or after January 1, 2008, if the present value of (a) the vested portion of a Participants retirement benefit and (b) other vested amounts under nonaccount balance plans that are aggregated with the retirement benefit under Code section 409A, determined on the first of the month coincident with or following the date of his Separation from Service, is less than or equal to $25,000, such benefit amount shall be distributed to the Participant (or his spouse or domestic partner, if applicable) in a lump sum payment. Subject to the special timing rule for Key Employees under Section B.02, the lump sum payment shall be made within 90 days after the first of the month coincident with or following the date of the Participants Separation from Service. | ||
(b) | Pre-2008 Separations . Notwithstanding the provisions of this Appendix B, for Participants who Separate from Service before January 1, 2008, if the present value of (a) the vested portion of a Participants retirement benefit and (b) other vested amounts under nonaccount balance plans that are aggregated with the retirement benefit under Code section 409A, determined on the first of the month coincident with or following the date the Participant attains age 55, is less than or equal to $25,000, such benefit amount shall be distributed to the Participant (or his spouse or domestic partner, if applicable) in a lump sum payment within 90 days after the first of the month coincident with or following the date the Participant attains age 55, but no earlier that January 1, 2008. | ||
(c) | Conflicts of Interest . The present value of a Participants vested retirement benefit shall also be payable in an immediate lump sum to the extent required under conflict of interest rules for government service and permissible under Code section 409A. | ||
(d) | Present Value Calculation . The conversion of a Participants retirement benefit into a lump sum payment and the present value calculations under this Section B.06 shall be based on the actuarial assumptions in effect under the Northrop Grumman Pension Plan for purposes of calculating lump sum amounts, and will |
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be based on the Participants immediate benefit if the Participant is 55 or older at Separation from Service. Otherwise, the calculation will be based on the benefit amount the Participant will be eligible to receive at age 55. |
B.07 | Effect of Early Taxation . If the Participants benefits under the Plan are includible in income pursuant to Code section 409A, such benefits shall be distributed immediately to the Participant. | |
B.08 | Permitted Delays . Notwithstanding the foregoing, any payment to a Participant under the Plan shall be delayed upon the Companys reasonable anticipation of one or more of the following events: |
(a) | The Companys deduction with respect to such payment would be eliminated by application of Code section 162(m); or | ||
(b) | The making of the payment would violate Federal securities laws or other applicable law; |
provided, that any payment delayed pursuant to this Section B.08 shall be paid in accordance with Code section 409A. |
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NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation,
Benefits & International |
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a. | 50% joint and survivor annuity | ||
b. | 75% joint and survivor annuity | ||
c. | 100% joint and survivor annuity. |
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a. | NGSMSCs deduction with respect to such payment would be eliminated by application of Code section 162(m); or | ||
b. | The making of the payment would violate Federal securities laws or other applicable law; |
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i
INTRODUCTION
|
1 | |||
|
||||
ARTICLE I DEFINITIONS
|
2 | |||
|
||||
ARTICLE II DESIGNATION OF COVERED EXECUTIVES
|
4 | |||
|
||||
ARTICLE III RETIREMENT BENEFITS
|
5 | |||
3.01 Retirement Allowance on Normal or Postponed Retirement Date
|
5 | |||
3.02 Retirement Allowance on Early Retirement Date
|
5 | |||
3.03 Payment of Retirement Allowance
|
6 | |||
3.04 Retirement Allowance Payable to Surviving Spouse of a Covered Executive
|
6 | |||
3.05 Deeming Rule
|
6 | |||
|
||||
ARTICLE IV TERMINATION OF SERVICE
|
7 | |||
4.01 Termination Benefits
|
7 | |||
4.02 Early Commencement of Deferred Retirement Allowance
|
7 | |||
4.03 Applicable Provisions
|
7 | |||
|
||||
ARTICLE V DEATH BENEFITS
|
8 | |||
5.01 Benefits on Covered Executives Death Prior to Retirement
|
8 | |||
5.02 Benefits on a Former Covered Executives Death Prior to Retirement
|
8 | |||
|
||||
ARTICLE VI DISABILITY BENEFITS
|
10 | |||
6.01 Disabled Covered Executives
|
10 | |||
6.02 Disability Retirement
|
10 | |||
6.03 Applicable Provisions
|
10 | |||
|
||||
ARTICLE VII ADMINISTRATION
|
11 | |||
|
||||
ARTICLE VIII AMENDMENT OR TERMINATION OF THE PLAN
|
12 | |||
|
||||
ARTICLE IX CLAIMS REVIEW PROCEDURE
|
13 | |||
9.01 Denial of Benefits
|
13 | |||
9.02 Notice
|
13 | |||
9.03 Appeals Procedure
|
13 | |||
9.04 Review
|
13 |
ii
ARTICLE X GENERAL
|
14 | |||
10.01 No Employment Rights
|
14 | |||
10.02 No Claim Against the Company
|
14 | |||
10.03 Incompetence
|
14 | |||
10.04 Nonassignability
|
14 | |||
10.05 Continuance of Payments
|
14 | |||
10.06 Notice
|
15 | |||
10.07 Gender and Number
|
15 | |||
10.08 Corporate Successors
|
15 | |||
10.09 Unclaimed Benefits
|
15 | |||
10.10 Withholding; Employment Taxes
|
15 | |||
10.11 Validity
|
15 | |||
10.12 Applicable Law
|
15 |
iii
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ARTICLE 1Introduction
|
2 | |||
Section 1.01. Introduction
|
2 | |||
Section 1.02. Effective Date
|
2 | |||
Section 1.03. Sponsor
|
2 | |||
Section 1.04. Predecessor Plan
|
2 | |||
Section 1.05. 2001 Reorganization
|
2 | |||
|
||||
ARTICLE 2Definitions
|
3 | |||
Section 2.01. Affiliated Companies
|
3 | |||
Section 2.02. Annual Incentive Programs
|
3 | |||
Section 2.03. Average Annual Compensation
|
3 | |||
Section 2.04. Board
|
3 | |||
Section 2.05. Code
|
3 | |||
Section 2.06. Committee
|
3 | |||
Section 2.07. Company
|
3 | |||
Section 2.08. Defined Contribution Plan
|
3 | |||
Section 2.09. Designated Entity
|
3 | |||
Section 2.10. ERISA
|
3 | |||
Section 2.11. ES Pension Plan
|
3 | |||
Section 2.12. Executive
|
3 | |||
Section 2.13. Executive Benefit Service
|
4 | |||
Section 2.14. Executive Pension Base
|
4 | |||
Section 2.15. Executive Pension Supplement
|
4 | |||
Section 2.16. Grandfathered Amounts
|
4 | |||
Section 2.17. Key Employee
|
4 | |||
Section 2.18. Maximum Contribution
|
5 | |||
Section 2.19. Participating Company
|
5 | |||
Section 2.20. Payment Date
|
5 | |||
Section 2.21. Pension Plan and Pension Plans
|
5 | |||
Section 2.22. Plan
|
6 | |||
Section 2.23. Qualified Plan Benefit
|
6 | |||
Section 2.24. Retirement Eligible
|
6 | |||
Section 2.25. Separation from Service or Separates from Service
|
7 | |||
Section 2.26. Westinghouse
|
7 | |||
Section 2.27. Westinghouse Acquisition
|
7 | |||
Section 2.28. Westinghouse Plan
|
7 | |||
|
||||
ARTICLE 3Qualification for Benefits; Mandatory Retirement
|
8 | |||
Section 3.01. Qualification for Benefits
|
8 | |||
Section 3.02. Mandatory Retirement
|
8 | |||
Section 3.03. Certain Transfers
|
8 | |||
|
||||
ARTICLE 4Calculation of Executive Pension Supplement
|
10 | |||
Section 4.01. In General
|
10 |
Section 4.02. Amount
|
10 | |||
|
||||
ARTICLE 5Death in Active Service
|
11 | |||
Section 5.01. Eligibility For an Immediate Benefit
|
11 | |||
Section 5.02. Calculation of Immediate Benefit
|
11 | |||
Section 5.03. Eligibility For a Deferred Benefit
|
11 | |||
Section 5.04. Calculation of Deferred Benefit
|
11 | |||
|
||||
ARTICLE 6Executive Pension Base
|
12 | |||
Section 6.01. In General
|
12 | |||
Section 6.02. Executive Pension Base
|
12 | |||
Section 6.03. Average Annual Compensation
|
12 | |||
Section 6.04. Annual Incentive Programs
|
13 | |||
Section 6.05. Executive Benefit Service
|
13 | |||
|
||||
ARTICLE 7Payment of Benefits
|
15 | |||
Section 7.01. Limitation on Benefits
|
15 | |||
Section 7.02. Normal Form and Commencement of Benefits
|
15 | |||
Section 7.03. Guaranteed Benefit
|
15 | |||
Section 7.04. Guaranteed Surviving Spouse Benefit
|
15 | |||
Section 7.05. Lump Sum Payments
|
15 | |||
Section 7.06. Mandatory Cashout
|
16 | |||
Section 7.07. Optional Payment Forms
|
16 | |||
Section 7.08. Rehires
|
17 | |||
Section 7.09. Special Tax Distribution
|
17 | |||
|
||||
ARTICLE 8Conditions to Receipt of Executive Pension Supplement
|
18 | |||
Section 8.01. Non-Competition Condition
|
18 | |||
Section 8.02. Breach of Condition
|
18 | |||
Section 8.03. Waiver After 65
|
18 | |||
|
||||
ARTICLE 9Administration
|
19 | |||
Section 9.01. Committee
|
19 | |||
Section 9.02. Claims Procedures
|
19 | |||
Section 9.03. Trust
|
19 | |||
|
||||
ARTICLE 10Modification or Termination
|
20 | |||
Section 10.01. Amendment and Plan Termination
|
20 | |||
|
||||
ARTICLE 11Miscellaneous
|
21 | |||
Section 11.01. Benefits Not Assignable
|
21 | |||
Section 11.02. Facility of Payment
|
21 | |||
Section 11.03. Committee Rules
|
22 | |||
Section 11.04. Limitation on Rights
|
22 | |||
Section 11.05. Benefits Unsecured
|
22 | |||
Section 11.06. Governing Law
|
22 | |||
Section 11.07. Severability
|
22 |
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Section 11.08. Expanded Benefits
|
22 | |||
Section 11.09. Plan Costs
|
22 | |||
Section 11.10. Termination of Participation
|
22 | |||
|
||||
ARTICLE 12Change in Control
|
23 | |||
Section 12.01. Definition
|
23 | |||
Section 12.02. Vesting and Funding Rules
|
24 | |||
Section 12.03. Special Retirement Provisions
|
24 | |||
Section 12.04. Calculation of Present Value
|
24 | |||
Section 12.05. Calculation of Offset
|
25 | |||
Section 12.06. Limitation on Amendment, Suspension and Termination
|
25 | |||
|
||||
APPENDIX AExecutive Buyback
|
26 | |||
Section A.01. Introduction
|
26 | |||
Section A.02. Buy Back Offer
|
26 | |||
Section A.03. One-Time Opportunity
|
26 | |||
Section A.04. Payment
|
26 | |||
Section A.05. Refund of Buy Back Payment
|
26 | |||
Section A.06. Effective Date
|
27 | |||
|
||||
APPENDIX BRehired Executives
|
28 | |||
Section B.01. Retired Executives Rehired as Executives
|
28 | |||
Section B.02. Former Executives with Vested Pensions Rehired as Executives
|
29 | |||
Section B.03. Retired Executives Rehired in Non-Executive Positions
|
29 | |||
Section B.04. Events That Span Westinghouse Acquisition
|
30 | |||
Section B.05. Breaks Spanning March 1, 1996
|
30 | |||
|
||||
APPENDIX CCoordination With Westinghouse Plan
|
32 | |||
Section C.01. In General
|
32 | |||
Section C.02. Pre-Acquisition Benefits
|
32 | |||
Section C.03. Coordination of Pre and Post-Acquisition Benefits
|
32 | |||
Section C.04. No Duplication of Benefits
|
32 | |||
|
||||
APPENDIX D 2005-2007 Transition Rules
|
33 | |||
Section D.01. Election
|
33 | |||
Section D.02. 2005 Commencements
|
33 | |||
Section D.03. 2006 and 2007 Commencements
|
34 | |||
|
||||
APPENDIX E Post 2007 Distribution of 409A Amounts
|
35 | |||
Section E.01. Time of Distribution
|
35 | |||
Section E.02. Special Rule for Key Employees
|
35 | |||
Section E.03. Forms of Distribution
|
35 | |||
Section E.04. Death
|
35 | |||
Section E.05. Actuarial Assumptions
|
36 | |||
Section E.06. Accelerated Lump Sum Payouts
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Section E.07. Effect of Early Taxation
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Section E.08. Permitted Delays
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(a) | The Northrop Grumman Retirement Plan | ||
(b) | The Northrop Grumman Retirement PlanRolling Meadows Site | ||
(c) | The Northrop Grumman Retirement Value Plan (effective as of January 1, 2000) | ||
(d) | The Northrop Grumman Electronics Systems Space Division Salaried Employees Pension Plan (effective as of the Aerojet Closing Date) | ||
(e) | The Northrop Grumman Electronics Systems Space Division Union Employees Pension Plan (effective as of the Aerojet Closing Date) |
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(1) | the annual amount of pension the Executive has accrued under the ES Pension Plan and any applicable defined benefit pension plan of a Designated Entity based on Benefit Service accumulated up to the earlier of the Executives actual retirement date or death; | ||
(2) | the amount the Executive is entitled to receive on a life annuity basis for retirement under any applicable Defined Contribution Plan of a Designated Entity; | ||
(3) | in any case where service included in the Executives Vesting Service also entitles that Executive to benefits under one or more retirement plans (whether a defined benefit or Defined Contribution Plan or both) of another company, the amount the Executive is entitled to receive on a life annuity basis for retirement from those plans; and | ||
(4) | the amount of any Qualified Plan Benefits taken into account under the Westinghouse Plan (or which would have been taken into account, but for the Westinghouse Acquisition) with respect to plans that were not acquired by the Affiliated Companies as part of the Westinghouse Acquisition; |
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Interest Rate: | 6% | |
Mortality Table: | RP-2000 Mortality Table projected 15 years for future standardized cash balance factors |
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NORTHROP GRUMMAN CORPORATION
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By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation,
Benefits & International |
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Interest Rate: | 6% | |
Mortality Table: | RP-2000 Mortality Table projected 15 years for future standardized cash balance factors |
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(a) | Base Salary means the salary of record paid to a Participant by the Company as annual salary (whether or not deferred), but excludes amounts received under incentive or other bonus plans. | ||
(b) | Beneficial Owner shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. | ||
(c) | Beneficiary in the event of a Participants death means the Participants devisee, legatee, or other designee, or if there is no such designee, the Participants estate. | ||
(d) | Board means the Board of Directors of the Company. | ||
(e) | Cause means the occurrence of either or both of the following: |
(i) | The Participants conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses or as a result of vicarious liability); or | ||
(ii) | The willful engaging by the Participant in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Participants part shall be considered willful unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that his or her action or omission was in the best interest of the Company. |
(f) | Change in Control of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied: |
(i) | Any Person (other than those Persons in control of the Company as of the Effective Date, or other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any affiliate of the Company or a successor) becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of either (1) the then-outstanding shares of common stock of the Company (the Outstanding Company Common Stock) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the Outstanding Company Voting Securities); provided, however, that for purposes of this clause (i): (A) Person or group shall not include |
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underwriters acquiring newly issued voting securities (or securities convertible into voting securities) directly from the Company with a view towards distribution, (B) creditors of the Company who become stockholders of the Company in connection with any bankruptcy of the Company under the laws of the United States shall not, by virtue of such bankruptcy, be deemed a group or a single Person for the purposes of this clause (i) (provided that any one of such creditors may trigger a Change in Control pursuant to this clause (i) if such creditors ownership of Company securities equals or exceeds the foregoing threshold), and (C) an acquisition shall not constitute a Change in Control if made by an entity pursuant to a transaction that is covered by and does not otherwise constitute a Change in Control under clause (iii) below; |
(ii) | On any day after the Effective Date (the Measurement Date), Continuing Directors cease for any reason to constitute either: (1) if the Company does not have a Parent, a majority of the Board; or (2) if the Company has a Parent, a majority of the Board of Directors of the Controlling Parent. A director is a Continuing Director if he or she either: |
(1) | was a member of the Board on the applicable Initial Date (an Initial Director); or | ||
(2) | was elected to the Board (or the Board of Directors of the Controlling Parent, as applicable), or was nominated for election by the Companys or the Controlling Parents stockholders, by a vote of at least two-thirds (2/3) of the Initial Directors then in office. |
A member of the Board (or Board of Directors of the Controlling Parent, as applicable) who was not a director on the applicable Initial Date shall be deemed to be an Initial Director for purposes of clause (2) above if his or her election, or nomination for election by the Companys or the Controlling Parents stockholders, was approved by a vote of at least two-thirds (2/3) of the Initial Directors (including directors elected after the applicable Initial Date who are deemed to be Initial Directors by application of this provision) then in office. | |||
Initial Date means the later of (1) the Effective Date or (2) the date that is two (2) years before the Measurement Date. | |||
(iii) | Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a Business Combination), in each case unless, following such Business |
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Combination, (1) all or substantially all of the individuals and entities that were the Beneficial Owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination Beneficially Own, directly or indirectly, more than sixty percent (60%) of the then- outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, is a Parent of the Company or the successor of the Company) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or a Parent of the Company or any successor of the Company or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or a Parent of the Company or the successor entity) Beneficially Owns, directly or indirectly, twenty-five percent (25%) or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of twenty-five percent (25%) existed prior to the Business Combination, and (3) a Change in Control is not triggered pursuant to clause (ii) above with respect to the Company (including any successor entity) or any Parent of the Company (or the successor entity). | |||
(iv) | A complete liquidation or dissolution of the Company other than in the context of a transaction that does not constitute a Change in Control of the Company under clause (iii) above. |
Notwithstanding the foregoing, in no event shall a transaction or other event that occurred prior to the Effective Date constitute a Change in Control. Notwithstanding anything in clause (iii) above to the contrary, a change in ownership of the Company resulting from creditors of the Company becoming stockholders of the Company in connection with any bankruptcy of the Company under the laws of the United States shall not trigger a Change in Control pursuant to clause (iii) above. | |||
(g) | Code means the United States Internal Revenue Code of 1986, as amended. | ||
(h) | Committee means the Compensation Committee of the Board, or any other committee appointed by the Board to perform the functions of the Compensation Committee. | ||
(i) | Company means Northrop Grumman Corporation, a Delaware corporation (including, for purposes of determining whether a Participant is employed by the |
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Company, any and all subsidiaries specified by the Committee), or any successor thereto as provided in Article 10. Notwithstanding any other provision of this Plan to the contrary, the term Company shall mean, for the following purposes, the Company and any entity with respect to which the Company, directly or indirectly, has majority voting control (the NGC Group): (i) with respect to determining a Participants total Base Salary, bonus and other compensation; (ii) the Participant shall not have a termination of employment, including a Qualifying Termination, unless he or she is no longer employed by any member of the NGC Group (any transfer of a Participant from one member of the NGC Group to another member of the NGC Group shall not cause the Participant to cease being covered by this Plan); and (iii) with respect to any reference to a benefit or compensation plan or program maintained by the Company. |
(j) | Controlling Parent means the Companys Parent so long as a majority of the voting stock or voting power of that Parent is not Beneficially Owned, directly or indirectly through one or more subsidiaries, by any other Person. In the event that the Company has more than one Parent, then Controlling Parent shall mean the Parent of the Company the majority of the voting stock or voting power of which is not Beneficially Owned, directly or indirectly through one or more subsidiaries, by any other Person. | ||
(k) | Disability with respect to a particular Participant means disability as defined in the Companys long-term disability plan in which the Participant participates at the relevant time or, if the Participant does not participate in a Company long-term disability plan at the relevant time, as such term is defined in the Companys principal long-term disability plan that generally covers the Companys senior-level executives at that time. | ||
(l) | Effective Date means January 1, 2010. | ||
(m) | Effective Date of Termination means the date on which a Qualifying Termination occurs. | ||
(n) | ERISA means the Employee Retirement Income Security Act of 1974, as amended. | ||
(o) | Exchange Act means the United States Securities Exchange Act of 1934, as amended. | ||
(p) | Good Reason means, without the Participants express written consent, the occurrence of any one or more of the following: |
(i) | A material and substantial reduction in the nature or status of the Participants authorities or responsibilities (when such authorities and/or responsibilities are viewed in the aggregate) from their level in effect on the day immediately prior to the start of the Protected Period, other than (A) an inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Participant, and/or (B) changes in the |
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nature or status of the Participants authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm resulting in the participant having not materially and substantially fewer authorities and responsibilities (taking into consideration the Companys industry) when compared to the authorities and responsibilities applicable to the position held by the Participant immediately prior to the start of the Protected Period. For the purpose of the preceding test, the Participant and the Company shall mutually agree on a nationally-recognized consulting firm; provided that, if agreement cannot timely be reached, the Company and the Participant shall each timely choose a nationally recognized firm and representatives of these two firms shall promptly choose a third firm, which third firm will make the determination referred to in the preceding sentence. The written opinion of the firm thus selected may be admitted in any arbitration pursuant to Section 9.4 and shall be conclusive as to this issue. | |||
In addition, if the Participant is a vice president, the Participants loss of vice-president status will constitute Good Reason; provided that the loss of the title of vice president will not, in and of itself, constitute Good Reason if the Participants lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the Participants business unit or if the loss of the title is the result of a promotion to a higher level office. For the purposes of the preceding sentence, the Participants lack of a vice-president title will only be considered generally consistent with the manner in which such title is used if most persons in the business unit with authorities, duties, and responsibilities comparable to those of the Participant immediately prior to the commencement of the Protected Period do not have the title of vice-president. |
(ii) | A reduction by the Company in the Participants Base Salary as in effect on the Effective Date or as the same shall be increased from time to time. | ||
(iii) | A material reduction in the aggregate value of the Participants level of participation in any of the Companys short and/or long-term incentive compensation plans (excluding stock-based incentive compensation plans), employee benefit or retirement plans, or policies, practices, or arrangements in which the Participant participates immediately prior to the start of the Protected Period provided; however, that a reduction in the aggregate value shall not be deemed to be Good Reason if the reduced value remains substantially consistent with the average level of other employees who have positions commensurate with the position held by the Participant immediately prior to the start of the Protected Period. | ||
(iv) | A material reduction in the Participants aggregate level of participation in the Companys stock-based incentive compensation plans from the level in effect immediately prior to the start of the Protected Period; provided, |
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however, that a reduction in the aggregate level of participation shall not be deemed to be Good Reason if the reduced level of participation remains substantially consistent with the average level of participation of other employees who have positions commensurate with the position held by the Participant immediately prior to the start of the Protected Period. |
(v) | The failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Plan, as required in Article 10. | ||
(vi) | Any purported termination by the Company of the Participants employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 4.8 and for purposes of this Plan, no such purported termination shall be effective. | ||
(vii) | The Participant is informed by the Company that his or her principal place of employment for the Company will be relocated to a location that is greater than fifty (50) miles away from the Participants principal place of employment for the Company at the start of the corresponding Protected Period; provided that, if the Company communicates an intended effective date for such relocation, in no event shall Good Reason exist pursuant to this clause (vii) more than ninety (90) days before such intended effective date. | ||
(viii) | The Company or any successor company repudiates or breaches any of the provisions of this Plan. |
The Participants right to terminate employment for Good Reason shall not be affected by the Participants incapacity due to physical or mental illness. The Participants continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason herein. | |||
(q) | Key Employee means an employee treated as a specified employee as of his or her Separation from Service under Code section 409A(a)(2)(B)(i) of the Company or its affiliate (i.e., a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)) if the Companys stock is publicly traded on an established securities market or otherwise. The Company shall determine in accordance with a uniform Company policy which individuals are Key Employees as of each December 31 in accordance with IRS regulations or other guidance under Code section 409A, provided that in determining the compensation of individuals for this purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be used. Such determination shall be effective for the twelve (12) month period commencing on April 1 of the following year. | ||
(r) | Parent means an entity that Beneficially Owns a majority of the voting stock or voting power of the Company, or all or substantially all of the Companys assets, directly or indirectly through one or more subsidiaries. |
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(s) | Participant means an employee of the Company who fulfills the eligibility and participation requirements, as provided in Article 3. | ||
(t) | Person shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a group as defined in Section 13(d) thereof. | ||
(u) | Plan means this Northrop Grumman Corporation January 2010 Change In Control Severance Plan. | ||
(v) | Qualifying Termination has the meaning given to such term in Section 4.3(a). | ||
(w) | Separation from Service or Separate from Service means a separation from service within the meaning of Section 409A of the Code. | ||
(x) | Severance Benefits means the payments and/or benefits provided in Section 4.4. |
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(a) | Subject to Sections 4.3(c), 4.3(d), 4.5, 4.6 and 4.7, the occurrence of any one or more of the following events within the Protected Period corresponding to a Change in Control of the Company, or within twenty-four (24) calendar months following the date of a Change in Control of the Company shall constitute a Qualifying Termination: |
(i) | An involuntary termination of the Participants employment by the Company for reasons other than Cause; or | ||
(ii) | A voluntary termination of employment by the Participant for Good Reason. |
If more than one of the events set forth in this Section 4.3(a) occurs, such events shall constitute but a single Qualifying Termination and the Participant shall be entitled to but a single payment of the Severance Benefits. |
(b) | The Protected Period corresponding to a Change in Control of the Company shall be a period of time determined in accordance with the following: |
(i) | If the Change in Control is triggered by a tender offer for shares of the Companys stock or by the offerors acquisition of shares pursuant to such a tender offer, the Protected Period shall commence on the date of the initial tender offer and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control. | ||
(ii) | If the Change in Control is triggered by a merger, consolidation, or reorganization of the Company with or involving any other corporation, the Protected Period shall commence on the date that serious and substantial discussions first take place to effect the merger, consolidation, or reorganization and shall continue through and including the date of the Change in Control; provided that in no case will the Protected Period commence earlier than the date that is six (6) months prior to the Change in Control. | ||
(iii) | In the case of any Change in Control not described in clause (i) or (ii) above, the Protected Period shall commence on the date that is six (6) months prior to the Change in Control and shall continue through and including the date of the Change in Control. |
(c) | Notwithstanding anything else contained herein to the contrary, a Participants termination of employment on account of reaching mandatory retirement age, as such age may be defined from time to time in policies adopted by the Company prior to the commencement of the Protected Period, and consistent with applicable law, shall not be a Qualifying Termination. |
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(d) | Notwithstanding anything else contained herein to the contrary, the termination of a Participants employment (or other events giving rise to Good Reason) shall not constitute a Qualifying Termination if there is objective evidence that, as of the commencement of the Protected Period, the Participant had specifically been identified by the Company as an employee whose employment would be terminated as part of a corporate restructuring or downsizing program that commenced prior to the Protected Period and such termination of employment was expected at that time to occur within six (6) months. | ||
(e) | Notwithstanding anything else contained herein to the contrary (other than those provisions that contain an express exception to this Section 4.3(e)), a Participants Severance Benefits under this Plan shall be reduced by the severance benefits (including, without limitation, any other change in control severance benefits and any other severance benefits generally) that the Participant may be entitled to under any other plan, program, agreement or other arrangement with the Company (including, without limitation, any such benefits provided for by an employment agreement, a current or any prior Northrop Grumman Corporation Special Agreement, a current or any prior Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation, or under any predecessor Northrop Grumman Corporation Change-In-Control Severance Plan); provided that (i) if the Participant is otherwise entitled to receive Severance Benefits under this Plan and under a Northrop Grumman Corporation Special Agreement (version January 2010 or later), benefits shall be paid under the Northrop Grumman Corporation Special Agreement rather than under this Plan and (ii) if the Participant is otherwise entitled to receive Severance Benefits under this Plan and severance benefits under the Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation (version October 2009 or later), benefits shall be paid under this Plan rather than under such plan. For purposes of the foregoing, any cash severance benefits payable to the Participant under any other plan, program, agreement or other arrangement with the Company shall offset the cash severance benefits otherwise payable to the Participant under this Plan on a dollar-for-dollar basis. For purposes of the foregoing, non-cash severance benefits to be provided to the Participant under any other plan, program, agreement or other arrangement with the Company shall offset any corresponding benefits otherwise to be provided to the Participant under this Plan or, if there are no corresponding benefits otherwise to be provided to the Participant under this Plan, the value of such benefits shall offset the cash severance benefits otherwise payable to the Participant under this Plan on a dollar-for-dollar basis. If the amount of other benefits to be offset against the cash severance benefits otherwise payable to the Participant under this Plan in accordance with the preceding two sentences exceeds the amount of cash severance benefits otherwise payable to the Participant under this Plan, then the excess may be used to offset other non-cash severance benefits otherwise to be provided to the Participant under this Plan on a dollar-for-dollar basis. For purposes of this Section 4.3(e), the Company shall reasonably determine the value of any non-cash benefits. |
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(a) | An amount equal to two (2) times the highest rate of the Participants annualized Base Salary in effect at any time in the two (2) year period ending on the Effective Date of Termination. | ||
(b) | An amount equal to two (2) times the Participants target annual bonus established under the Companys Annual Incentive Plan (or any successor bonus program) for the fiscal year in which the Change in Control of the Company occurs (the Bonus Amount). Special bonuses or bonus enhancements that would otherwise be included for purposes of the calculation pursuant to the first sentence of this Section 4.4(b), but that are related to a merger, acquisition, consolidation, reorganization, spin-off or similar event and that are not part of the Companys customary on-going program of Annual Incentive Plan (or any successor bonus program) bonuses shall be excluded for purposes of such calculation. | ||
(c) | An amount in settlement of the Participants bonus opportunity under the Companys Annual Incentive Plan (or a successor bonus program) for the fiscal year in which the Effective Date of Termination occurs, such amount determined as follows: |
(i) | Subject to clause (iii) below, if the Effective Date of Termination occurs in the fiscal year in which the Change in Control of the Company occurs, then such amount shall equal the sum of: |
(A) | the greater of (X) or (Y) multiplied by a fraction, the numerator of which is the number of days completed in the fiscal year through the date of the Change in Control of the Company and the denominator of which is three hundred sixty-five (365), where (X) is the Participants target annual bonus established under the Companys Annual Incentive Plan (or any successor bonus program) for that fiscal year and (Y) is the amount of bonus that the Participant would be entitled to under the Companys Annual Incentive Plan (or any successor bonus program) for that fiscal year assuming that the Participants employment had not terminated and based on performance through the date of the Change in Control of the Company relative to the pre-approved performance goals for that year; plus | ||
(B) | the Participants Bonus Amount multiplied by a fraction, the numerator of which is the number of days completed in the fiscal year following the date of the Change in Control of the Company through the Effective Date of Termination and the denominator of which is three hundred sixty-five (365). |
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(ii) | Subject to clause (iii) below, if the Effective Date of Termination occurs in a fiscal year following the fiscal year in which the Change in Control of the Company occurs, then such amount shall equal the Participants Bonus Amount multiplied by a fraction, the numerator of which is the number of days completed in the fiscal year in which the Effective Date of Termination occurs through the Effective Date of Termination and the denominator of which is three hundred sixty-five (365). | ||
(iii) | If the Participants bonus opportunity for the fiscal year in which the Effective Date of Termination occurs is covered by the Companys Incentive Compensation Plan (or similar successor bonus program designed to comply with the performance-based compensation exception under Section 162(m) of the Code), then the Participants amount determined pursuant to clause (i) or (ii) above, as applicable, shall not exceed the maximum bonus the Participant would have been entitled to receive under the Companys Incentive Compensation Plan for that fiscal year, assuming the Participant had been employed through the date bonuses are paid under such plan for that year, and otherwise calculated under the terms of such plan based on actual performance for that fiscal year (but without giving effect to any discretion of the plan administrator to reduce the bonus amount from the maximum otherwise determined in accordance with such plan). |
(d) | A continuation of the Participants medical coverage, dental coverage, and group term life insurance (the Welfare Benefits) for the Participant, his or her spouse, and his or her eligible dependents for the two (2) years following the Participants Effective Date of Termination; provided that such continuation of coverage shall run concurrently with COBRA continuation or similar state law continuation periods; and provided further that the continuation of such coverage shall be discontinued prior to the end of the two (2) year period in the event the Participant has available substantially similar benefits from a subsequent employer, as reasonably determined by the Committee. Except as provided in the next sentence, such benefits shall be provided to the Participant at the same premium cost, and at the same coverage level, as in effect as of the Participants Effective Date of Termination. However, in the event the premium cost and/or level of coverage shall change for all employees of the Company, the cost and/or coverage level, likewise, shall change for each Participant in a corresponding manner. The continuation of coverage for the period contemplated by this Section 4.4(d) shall be coordinated with and paid secondary to any benefits that the Participant, his or her spouse, or his or her dependent receives from another employer or from Medicare (following the Participants, his or her spouses, and/or his or her dependents entitlement to Medicare benefits) to the maximum extent permissible under relevant law. Notwithstanding the foregoing provisions of this Section 4.4(d), if the Participant is eligible to commence benefits under the Companys Special Officer Retiree Medical Plan (SORMP) as of the Effective Date of Termination, then the Participant shall receive medical and dental continuation coverage pursuant to the SORMP instead of the continuation |
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coverage contemplated by the foregoing provisions of this Section 4.4(d). Any other continuation of medical, dental, or group term life insurance that the Participant may otherwise be entitled to upon or following his or her Effective Date of Termination in accordance with the express terms of a Company welfare benefit plan shall not give rise to an offset pursuant to Section 4.3(e) and shall not be deemed to duplicate the benefits of the continuation coverage contemplated by this Section 4.4(d). |
The Welfare Benefits provided pursuant to this Section 4.4(d) shall, to the maximum extent possible, be provided in such a manner that results in such Welfare Benefits (and any costs and premiums thereof) being excluded from the Participants income for federal and state income tax purposes. | |||
However, to the extent the Welfare Benefits provided pursuant to this Section 4.4(d) are, or ever become, taxable to the Participant and to the extent the Welfare Benefits continue beyond the period in which the Participant would be entitled (or would, but for this Plan, be entitled) to COBRA continuation coverage if the Participant elected such coverage and paid the applicable premiums, the Company shall administer such provision of Welfare Benefits consistent with the following additional requirements as set forth in Treas. Reg. § 1.409A-3(i)(1)(iv): (A) the Participants eligibility for Welfare Benefits in one year will not affect the Participants eligibility for Welfare Benefits in any other year, (B) any reimbursement of eligible expenses will be made on or before the last day of the year following the year in which the expense was incurred, and (C) the Participants right to Welfare Benefits is not subject to liquidation or exchange for another benefit. | |||
(e) | A lump-sum cash amount equal to (i) minus (ii), with (i) and (ii) determined as follows: |
(i) | equals the actuarial present value equivalent of the aggregate benefits accrued by the Participant as of his or her Effective Date of Termination under the qualified defined benefit pension plan or plans in which the Participant participates (the qualified plan), and under any and all supplemental defined benefit retirement plans in which the Participant participates, calculated as if the Participants employment continued for two (2) full years following the Participants Effective Date of Termination ( i.e. , the Participant receives two (2) additional years of vesting and benefit accruals, including, in the case of a Participant in a cash balance plan, two years of projected post-termination interest credits based on the interest rate in effect at termination, and his or her age is also increased two (2) years from his or her age as of his or her Effective Date of Termination); provided, however, that for purposes of determining Final Average Pay under such plans, the Participants actual pay history as of the Effective Date of Termination shall be used; and |
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(ii) | equals the actuarial present value equivalent of the aggregate benefits payable to the Participant as of his or her Effective Date of Termination under the qualified plan and under any and all supplemental defined benefit retirement plans in which the Participant participates, calculated assuming that the Participant retired and went into pay status under the terms of such plans on or as soon as possible after his or her Effective Date of Termination. |
The intent of this Section 4.4(e) is that the qualified plan and any supplemental defined benefit retirement plan benefits will be paid in the normal course under the terms of those plans, with the additional benefits payable as a result of the imputation of age and service under this provision being paid from this Plan. The Participant shall also be entitled to an additional two (2) years of age and service to count towards eligibility under one or more of the Company retiree medical programs for which the Participant would have been eligible absent any such termination. | |||
(f) | Reimbursement by the Company for the costs of all reasonable outplacement services obtained by the Participant within the one (1) year period after the Effective Date of Termination; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Participants Base Salary as of the Effective Date of Termination. All such expenses shall be reimbursed as soon as practicable, but in no event later than the end of the year following the year the Participant Separates from Service. |
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Article 5. | Form and Timing of Severance Benefits; Tax Withholding; Funding of Rabbi Trust |
Article 6. | Excise Tax Limitation |
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Article 7. | The Companys Payment Obligation |
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Article 8. | Trade Secrets; Non-Solicitation and Non-Disparagement |
(a) | In the course of performing his or her duties for the Company, the Participant will receive, and acknowledges that he or she has received, confidential information, including without limitation, information not available to competitors relating to the Companys existing and contemplated financial plans, products, business plans, operating plans, research and development information, and customer information, all of which is hereinafter referred to as Trade Secrets. The Participant agrees that he or she will not, either during his or her employment or subsequent to the termination of his or her employment with the Company, directly or indirectly disclose, publish or otherwise divulge any Trade Secret of the Company or any of its affiliates to anyone outside the Company, or use such information in any manner which would adversely affect the business or business prospects of the Company, without prior written authorization from the Company to do so. The Participant further agrees that if, at the time of the termination of his or her employment with the Company, he or she is in possession of any documents or other written or electronic materials constituting, containing or reflecting Trade Secrets, the Participant will return and surrender all such documents and materials to the Company upon leaving its employ. The restrictions and protection provided for in this Section 8(a) shall be in addition to any protection afforded to Trade Secrets by law or equity and in addition to any protection afforded to Trade Secrets by any other agreement between the Participant and the Company. | ||
(b) | For a period of one year following the termination of the Participants employment with the Company, the Participant shall not, directly or indirectly through aid, assistance or counsel, on the Participants own behalf or on behalf of another person or entity (i) contact, solicit or offer to hire any person who was, within a period of six months prior to the termination of the Participants employment with the Company, employed by the Company or one of its subsidiaries, or (ii) by any means issue or communicate any private or public statement that may be critical or disparaging of the Company or any of its affiliates, or any of their respective products, services, officers, directors or employees. |
18
Article 9. | Claims Procedures |
(a) | that the Claimants requested determination has been made, and that the claim has been allowed in full; or | ||
(b) | that the Committee has reached a conclusion contrary, in whole or in part, to the Claimants requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: |
(i) | the specific reason(s) for the denial of the claim, or any part of it; | ||
(ii) | specific reference(s) to pertinent provisions of this Plan upon which such denial was based; | ||
(iii) | a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; | ||
(iv) | a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the Claimants claim for benefits; and | ||
(v) | a statement of the Claimants right to seek arbitration pursuant to Section 9.4. |
19
20
Article 10. | Successors and Assignment |
Article 11. | Miscellaneous |
21
22
Page | ||||
|
||||
ARTICLE I DEFINITIONS
|
2 | |||
|
||||
1.1 Definitions
|
2 | |||
|
||||
ARTICLE II PARTICIPATION
|
6 | |||
|
||||
2.1 In General
|
6 | |||
2.2 Disputes as to Employment Status
|
6 | |||
2.3 Cessation of Eligibility
|
6 | |||
|
||||
ARTICLE III DEFERRAL ELECTIONS
|
7 | |||
|
||||
3.1 Elections to Defer Compensation
|
7 | |||
3.2 Crediting of Deferrals
|
7 | |||
3.3 Investment Elections
|
7 | |||
3.4 Investment Return Not Guaranteed
|
8 | |||
|
||||
ARTICLE IV ACCOUNTS AND TRUST FUNDING
|
9 | |||
|
||||
4.1 Accounts
|
9 | |||
4.2 Use of a Trust
|
9 | |||
|
||||
ARTICLE V VESTING
|
10 | |||
|
||||
5.1 In General
|
10 | |||
5.2 Exceptions
|
10 | |||
|
||||
ARTICLE VI DISTRIBUTIONS
|
11 | |||
|
||||
6.1 Distribution of Deferred Compensation Contributions
|
11 | |||
6.2 Pre-2005 Deferrals
|
12 | |||
6.3 Withdrawals for Unforeseeable Emergency
|
13 | |||
6.4 Payments Not Received At Death
|
13 | |||
6.5 Inability to Locate Participant
|
13 | |||
6.6 Committee Rules
|
13 | |||
|
||||
ARTICLE VII ADMINISTRATION
|
14 | |||
|
||||
7.1 Committees
|
14 | |||
7.2 Committee Action
|
14 | |||
7.3 Powers and Duties of the Administrative Committee
|
14 | |||
7.4 Powers and Duties of the Investment Committee
|
15 | |||
7.5 Construction and Interpretation
|
15 |
Page | ||||
|
||||
7.6 Information
|
16 | |||
7.7 Committee Compensation, Expenses and Indemnity
|
16 | |||
7.8 Disputes
|
16 | |||
|
||||
ARTICLE VIII MISCELLANEOUS
|
17 | |||
|
||||
8.1 Unsecured General Creditor
|
17 | |||
8.2 Restriction Against Assignment
|
17 | |||
8.3 Restriction Against Double Payment
|
18 | |||
8.4 Withholding
|
18 | |||
8.5 Amendment, Modification, Suspension or Termination
|
18 | |||
8.6 Governing Law
|
19 | |||
8.7 Receipt or Release
|
19 | |||
8.8 Payments on Behalf of Persons Under Incapacity
|
19 | |||
8.9 Limitation of Rights and Employment Relationship
|
19 | |||
8.10 Headings
|
19 | |||
8.11 2001 Reorganization
|
19 | |||
|
||||
APPENDIX A 2005 TRANSITION RELIEF
|
1 | |||
|
||||
A.1 Cash Out
|
1 | |||
A.2 Elections
|
1 | |||
A.3 Key Employees
|
1 | |||
|
||||
APPENDIX B DISTRIBUTION RULES FOR PRE-2005 AMOUNTS
|
1 | |||
|
||||
B.1 Distribution of Contributions
|
1 | |||
B.2 Early Non-Scheduled Distributions
|
2 | |||
B.3 Hardship Distribution
|
3 | |||
B.4 Plan Termination
|
3 | |||
|
||||
APPENDIX C TRANSFER OF LIABILITIES
NORTHROP GRUMMAN
EXECUTIVE DEFERRED COMPENSATION PLAN |
1 | |||
|
||||
C.1 Background
|
1 | |||
C.2 Treatment of Transferred Liabilities
|
1 | |||
C.3 Investments
|
1 | |||
C.4 Distributions
|
1 | |||
C.5 Other Provisions
|
2 | |||
|
||||
APPENDIX D TRANSFER OF LIABILITIES AEROJET-GENERAL LIABILITIES
|
1 | |||
|
||||
D.1 Background
|
1 | |||
D.2 Treatment of Transferred Liabilities
|
2 | |||
D.3 Investments
|
2 |
-ii-
Page | ||||
|
||||
D.4 Distributions
|
2 | |||
D.5 Other Provisions
|
2 | |||
|
||||
APPENDIX E TRANSFER OF LIABILITIES TASC, INC. SUPPLEMENTAL RETIREMENT PLAN
|
1 | |||
|
||||
E.1 Background
|
1 | |||
E.2 Treatment of Transferred Liabilities
|
1 | |||
E.3 Investments
|
1 | |||
E.4 Distributions
|
1 | |||
E.5 Other Provisions
|
1 | |||
|
||||
APPENDIX F 2008 TRANSITION RELIEF
|
1 |
-iii-
-1-
-2-
-3-
-4-
-5-
-6-
-7-
-8-
-9-
-10-
-11-
-12-
-13-
-14-
-15-
-16-
-17-
-18-
-19-
NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation, Benefits & International | ||||
-20-
I. | Delay the distributions described above for six months from the date of Separation from Service. The delayed payments will be paid as a single sum with interest at the end of the six month period, with the remaining payments resuming as scheduled. | ||
II. | Accelerate the distributions described above into a payment in 2005 without interest adjustments. | ||
III. | Key Employees must elect I or II during 2005. |
-A 1-
-B 1-
-B 2-
-B 3-
-C 1-
-C 2-
-D 1-
-D 2-
-E 1-
-F 1-
INTRODUCTION | 1 | |||||
|
||||||
ARTICLE I DEFINITIONS | 2 | |||||
1.1
|
Definitions | 2 | ||||
|
||||||
ARTICLE II PARTICIPATION | 6 | |||||
2.1
|
In General | 6 | ||||
2.2
|
Disputes as to Employment Status | 6 | ||||
|
||||||
ARTICLE III DEFERRAL ELECTIONS | 7 | |||||
3.1
|
Elections to Defer Eligible Compensation | 7 | ||||
3.2
|
Contribution Amounts | 7 | ||||
3.3
|
Crediting of Deferrals | 8 | ||||
3.4
|
Investment Elections | 8 | ||||
3.5
|
Investment Return Not Guaranteed | 9 | ||||
|
||||||
ARTICLE IV ACCOUNTS | 10 | |||||
4.1
|
Accounts | 10 | ||||
4.2
|
Valuation of Accounts | 10 | ||||
4.3
|
Use of a Trust | 10 | ||||
|
||||||
ARTICLE V VESTING AND FORFEITURES | 11 | |||||
5.1
|
In General | 11 | ||||
5.2
|
Exceptions | 11 | ||||
|
||||||
ARTICLE VI DISTRIBUTIONS | 12 | |||||
6.1
|
Distribution Rules for Non-RAC Amounts | 12 | ||||
6.2
|
Distribution Rules for RAC Subaccount | 13 | ||||
6.3
|
Effect of Taxation | 13 | ||||
6.4
|
Permitted Delays | 13 | ||||
6.5
|
Pre-2005 Deferrals | 13 | ||||
6.6
|
Payments Not Received At Death | 13 | ||||
6.7
|
Inability to Locate Participant | 13 | ||||
6.8
|
Committee Rules | 14 | ||||
|
||||||
ARTICLE VII ADMINISTRATION | 15 | |||||
7.1
|
Committees | 15 | ||||
7.2
|
Committee Action | 15 | ||||
7.3
|
Powers and Duties of the Administrative Committee | 16 | ||||
7.4
|
Powers and Duties of the Investment Committee | 16 | ||||
7.5
|
Construction and Interpretation | 17 | ||||
7.6
|
Information | 17 | ||||
7.7
|
Committee Compensation, Expenses and Indemnity | 17 | ||||
7.8
|
Disputes | 17 | ||||
|
||||||
ARTICLE VIII MISCELLANEOUS | 18 | |||||
8.1
|
Unsecured General Creditor | 18 | ||||
8.2
|
Restriction Against Assignment | 18 |
i
8.3
|
Restriction Against Double Payment | 19 | ||||
8.4
|
Withholding | 19 | ||||
8.5
|
Amendment, Modification, Suspension or Termination | 19 | ||||
8.6
|
Governing Law | 20 | ||||
8.7
|
Receipt and Release | 20 | ||||
8.8
|
Payments on Behalf of Persons Under Incapacity | 20 | ||||
8.9
|
Limitation of Rights and Employment Relationship | 20 | ||||
8.10
|
Headings | 20 | ||||
|
||||||
APPENDIX A 2005 TRANSITION RELIEF | A1 | |||||
A.1
|
Cash-Out | A1 | ||||
A.2
|
Elections | A1 | ||||
A.3
|
Key Employees | A1 | ||||
|
||||||
APPENDIX B DISTRIBUTION RULES FOR PRE-2005 AMOUNTS | B1 | |||||
B.1
|
Distribution of Contributions | B1 | ||||
|
||||||
APPENDIX C MERGED PLANS | C1 | |||||
C.1
|
Plan Mergers | C1 | ||||
C.2
|
Merged Plans General Rule | C1 |
ii
1
1.1 | Definitions |
2
3
4
5
2.1 | In General |
2.2 | Disputes as to Employment Status |
6
3.1 | Elections to Defer Eligible Compensation |
3.2 | Contribution Amounts |
7
3.3 | Crediting of Deferrals |
3.4 | Investment Elections |
8
3.5 | Investment Return Not Guaranteed |
9
4.1 | Accounts |
4.2 | Valuation of Accounts |
4.3 | Use of a Trust |
10
5.1 | In General |
5.2 | Exceptions |
11
6.1 | Distribution Rules for Non-RAC Amounts |
12
6.2 | Distribution Rules for RAC Subaccount |
6.3 | Effect of Taxation |
6.4 | Permitted Delays |
6.5 | Pre-2005 Deferrals |
6.6 | Payments Not Received At Death |
6.7 | Inability to Locate Participant |
13
6.8 | Committee Rules |
14
7.1 | Committees |
7.2 | Committee Action |
15
7.3 | Powers and Duties of the Administrative Committee |
7.4 | Powers and Duties of the Investment Committee |
16
7.5 | Construction and Interpretation |
7.6 | Information |
7.7 | Committee Compensation, Expenses and Indemnity |
7.8 | Disputes |
17
8.1 | Unsecured General Creditor |
8.2 | Restriction Against Assignment |
18
8.3 | Restriction Against Double Payment |
8.4 | Withholding |
8.5 | Amendment, Modification, Suspension or Termination |
19
8.6 | Governing Law |
8.7 | Receipt and Release |
8.8 | Payments on Behalf of Persons Under Incapacity |
8.9 | Limitation of Rights and Employment Relationship |
8.10 | Headings |
20
NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas
Vice President, Compensation, Benefits & International |
21
A.1 Cash-Out |
A.2 Elections |
A.3 Key Employees |
I. | Delay the distributions described above for six months from the date of Separation from Service. The delayed payments will be paid as a single sum with interest at the end of the six month period, with the remaining payments resuming as scheduled. | ||
II. | Accelerate the distributions described above into a payment in 2005 without interest adjustments. | ||
III. | Key Employees must elect I or II during 2005. |
A1
B.1 Distribution of Contributions |
B1
B2
C.1 | Plan Mergers |
Name of Merged Plans | Merger Effective | Merged Account Names | ||||||
Dates | ||||||||
|
||||||||
Northrop Grumman Benefits
Equalization Plan
|
December 10, 2004 | NG BEP Account | ||||||
|
||||||||
Northrop Grumman Space &
Mission Systems Corp.
Deferred Compensation Plan
|
December 10, 2004 |
S & MS Deferred
Compensation Account |
||||||
|
||||||||
BDM International, Inc. 1997
Executive Deferred
Compensation Plan (BDM
Plan)
|
April 29, 2005 | BDM Account | ||||||
C.2 | Merged Plans General Rule |
C1
C2
C3
C4
INTRODUCTION | 1 | |||||
|
||||||
ARTICLE I DEFINITIONS | 1 | |||||
1.1
|
Definitions | 1 | ||||
|
||||||
ARTICLE II PARTICIPATION | 4 | |||||
2.1
|
In General | 4 | ||||
2.2
|
Disputes as to Employment Status | 4 | ||||
|
||||||
ARTICLE III CREDITS TO ACCOUNTS | 4 | |||||
3.1
|
Accounts | 4 | ||||
3.2
|
Company Contribution Credits | 5 | ||||
3.3
|
Earnings Credits | 5 | ||||
3.4
|
Valuation of Accounts | 5 | ||||
3.5
|
Use of a Trust | 5 | ||||
3.6
|
Investment Return Not Guaranteed | 5 | ||||
|
||||||
ARTICLE IV VESTING AND FORFEITURES | 6 | |||||
4.1
|
In General | 6 | ||||
4.2
|
Exceptions | 6 | ||||
|
||||||
ARTICLE V DISTRIBUTIONS | 6 | |||||
5.1
|
Normal Distribution Rules | 6 | ||||
5.2
|
Effect of Taxation | 6 | ||||
5.3
|
Permitted Delays | 6 | ||||
5.4
|
Payments Not Received At Death | 7 | ||||
5.5
|
Inability to Locate Participant | 7 | ||||
5.6
|
Committee Rules | 7 | ||||
|
||||||
ARTICLE VI ADMINISTRATION | 7 | |||||
6.1
|
Committees | 7 | ||||
6.2
|
Committee Action | 8 | ||||
6.3
|
Powers and Duties of the Administrative Committee | 8 | ||||
6.4
|
Powers and Duties of the Investment Committee | 9 | ||||
6.5
|
Construction and Interpretation | 9 | ||||
6.6
|
Information | 9 | ||||
6.7
|
Committee Compensation, Expenses and Indemnity | 9 | ||||
6.8
|
Claims | 10 | ||||
|
||||||
ARTICLE VII MISCELLANEOUS | 10 | |||||
7.1
|
Unsecured General Creditor | 10 | ||||
7.2
|
Restriction Against Assignment | 10 | ||||
7.3
|
Restriction Against Double Payment | 11 | ||||
7.4
|
Withholding | 11 | ||||
7.5
|
Amendment, Modification, Suspension or Termination | 11 | ||||
7.6
|
Governing Law | 12 | ||||
7.7
|
Receipt and Release | 12 | ||||
7.8
|
Payments on Behalf of Persons Under Incapacity | 12 |
i
7.9
|
Limitation of Rights and Employment Relationship | 12 | ||||
7.10
|
Headings | 12 |
ii
1.1 | Definitions |
1
2
3
2.1 | In General |
2.2 | Disputes as to Employment Status |
3.1 | Accounts |
4
3.2 | Company Contribution Credits |
3.3 | Earnings Credits |
3.4 | Valuation of Accounts |
3.5 | Use of a Trust |
3.6 | Investment Return Not Guaranteed |
5
4.1 | In General |
4.2 | Exceptions |
The following exceptions apply to the vesting rule: | ||
(a) Forfeitures on account of a lost payee. See Section 5.5. | ||
(b) Forfeitures under an escheat law. | ||
(c) Recapture of amounts improperly credited to a Participants Account or improperly paid to or with respect to a Participant. | ||
(d) Expenses charged to a Participants Account. | ||
(e) Investment losses. |
5.1 | Normal Distribution Rules |
5.2 | Effect of Taxation |
5.3 | Permitted Delays |
6
5.4 | Payments Not Received At Death |
5.5 | Inability to Locate Participant |
5.6 | Committee Rules |
6.1 | Committees |
7
6.2 | Committee Action |
6.3 | Powers and Duties of the Administrative Committee |
8
6.4 | Powers and Duties of the Investment Committee |
6.5 | Construction and Interpretation |
6.6 | Information |
6.7 | Committee Compensation, Expenses and Indemnity |
9
6.8 | Claims |
7.1 | Unsecured General Creditor |
7.2 | Restriction Against Assignment |
10
7.3 | Restriction Against Double Payment |
7.4 | Withholding |
7.5 | Amendment, Modification, Suspension or Termination |
11
7.6 | Governing Law |
7.7 | Receipt and Release |
7.8 | Payments on Behalf of Persons Under Incapacity |
7.9 | Limitation of Rights and Employment Relationship |
7.10 | Headings |
12
IN WITNESS WHEREOF, this Plan is hereby executed by a duly authorized officer on this 17 th day of Dec., 2009. |
NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation, Benefits & International | ||||
13
INTRODUCTION
|
1 | |||
|
||||
ARTICLE I Definitions
|
1 | |||
1.01 Active Participant
|
1 | |||
1.02 Affiliated Companies
|
1 | |||
1.03 Avondale Plan
|
1 | |||
1.04 Board of Directors
|
1 | |||
1.05 Code
|
1 | |||
1.06 Company
|
1 | |||
1.07 ERISA
|
1 | |||
1.08 FSSP
|
1 | |||
1.09 Grandfathered Amounts
|
1 | |||
1.10 Key Employee
|
2 | |||
1.11 Ingalls Salaried Plan
|
2 | |||
1.12 Participant
|
2 | |||
1.13 Payment Date
|
2 | |||
1.14 Pension Plan and Pension Plans
|
2 | |||
1.15 Plan
|
3 | |||
1.16 Plan Year
|
3 | |||
1.17 Program
|
3 | |||
1.18 Retirement Plan and Retirement Plans
|
3 | |||
1.19 Retirement Plan B
|
3 | |||
1.20 Separation from Service or Separates from Service
|
3 | |||
1.21 Termination of Employment
|
3 | |||
|
||||
ARTICLE II General Provisions
|
4 | |||
2.01 In General
|
4 | |||
2.02 Forms and Times of Benefit Payments
|
4 | |||
2.03 Mandatory Cashout
|
5 | |||
2.04 Optional Payment Forms
|
5 | |||
2.05 Beneficiaries and Spouses
|
6 | |||
2.06 Amendment and Plan Termination
|
6 | |||
2.07 Not an Employment Agreement
|
7 | |||
2.08 Assignment of Benefits
|
7 | |||
2.09 Nonduplication of Benefits
|
7 | |||
2.10 Funding
|
8 | |||
2.11 Construction
|
8 | |||
2.12 Governing Law
|
8 | |||
2.13 Actions By Company and Claims Procedures
|
8 | |||
2.14 Plan Representatives
|
9 | |||
2.15 Number
|
9 | |||
2.16 Special Tax Distribution.
|
9 | |||
2.17 Benefit Limit
|
9 |
ARTICLE III Lump Sum Election
|
10 | |||
3.01 In General
|
10 | |||
3.02 Retirees Election
|
10 | |||
3.03 Retirees Lump Sum
|
11 | |||
3.04 Actives Election
|
12 | |||
3.05 Actives Lump SumRetirement Eligible
|
13 | |||
3.06 Actives Lump SumNot Retirement Eligible
|
14 | |||
3.07 Calculation of Lump Sum
|
15 | |||
3.08 Spousal Consent
|
16 | |||
|
||||
APPENDIX A Litton Restoration Program Post April 3, 2001 through June 30, 2003
|
1 | |||
A.01 Purpose
|
1 | |||
A.02 Definitions
|
1 | |||
A.03 Eligibility
|
1 | |||
A.04 Amount of Benefit
|
2 | |||
A.05 Preretirement Surviving Spouse Benefit
|
3 | |||
A.06 Plan Termination
|
4 | |||
A.07 Retirement Plan Benefits
|
4 | |||
|
||||
APPENDIX B Litton Cash Balance Restoration Program
|
1 | |||
B.01 Purpose
|
1 | |||
B.02 Eligibility
|
1 | |||
B.03 Amount of Benefit
|
1 | |||
B.04 Preretirement Survivor Benefit
|
1 | |||
B.05 Plan Termination
|
2 | |||
B.06 Retirement Plan Benefits
|
2 | |||
|
||||
APPENDIX C 2005-2007 Transition Rules
|
1 | |||
C.01 Election
|
1 | |||
C.02 2005 Commencements
|
1 | |||
C.03 2006 and 2007 Commencements
|
2 | |||
|
||||
APPENDIX D Post 2007 Distribution of 409A Amounts
|
1 | |||
D.01 Time of Distribution
|
1 | |||
D.02 Special Rule for Key Employees
|
1 | |||
D.03 Forms of Distribution
|
1 | |||
D.04 Death
|
2 | |||
D.05 Actuarial Assumptions
|
2 | |||
D.06 Accelerated Lump Sum Payouts
|
2 | |||
D.07 Effect of Early Taxation
|
3 | |||
D.08 Permitted Delays
|
3 |
ii
1.01 | Active Participant . This term is defined in Section 3.04(a). | ||
1.02 | Affiliated Companies . The Company and any other entity related to the Company under the rules of section 414 of the Code. The Affiliated Companies include Northrop Grumman Corporation and its 80%-owned subsidiaries and may also include other entities. | ||
1.03 | Avondale Plan . The Avondale Industries, Inc. Non-Represented Employees Pension Plan. | ||
1.04 | Board of Directors . The Board of Directors of Northrop Grumman Corporation. | ||
1.05 | Code . The Internal Revenue Code of 1986, as amended. | ||
1.06 | Company . Litton Industries, Inc. | ||
1.07 | ERISA . The Employee Retirement Income Security Act of 1974, as amended. | ||
1.08 | FSSP . The Northrop Grumman Financial Security and Savings Program. | ||
1.09 | Grandfathered Amounts . Plan benefits that were earned and vested as of December 31, 2004 within the meaning of Code section 409A and official guidance thereunder. |
1.10 | Key Employee . An employee treated as a specified employee under Code section 409A(a)(2)(B)(i) of the Company or the Affiliated Companies (i.e., a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)) if the Companys or an Affiliated Companys stock is publicly traded on an established securities market or otherwise. The Company shall determine in accordance with a uniform Company policy which Participants are Key Employees as of each December 31 in accordance with IRS regulations or other guidance under Code section 409A, provided that in determining the compensation of individuals for this purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be used. Such determination shall be effective for the twelve (12) month period commencing on April 1 of the following year. | ||
1.11 | Ingalls Salaried Plan . The Ingalls Shipbuilding, Inc. Salaried Employees Retirement Plan. | ||
1.12 | Participant . Any employee of the Company who is eligible for benefits under a particular Program and has not received full payment under the Program. However, no employees of the Component Technologies Sector or Premier America Credit Union may be Participants. | ||
1.13 | Payment Date . The 1st of the month coincident with or following the later of (a) the date the Participant attains age 55, or (b) the date the Participant Separates from Service. | ||
1.14 | Pension Plan and Pension Plans . Any of the following: |
(a) | The Northrop Grumman Retirement Plan | ||
(b) | The Northrop Grumman Retirement PlanRolling Meadows Site | ||
(c) | The Northrop Grumman Retirement Value Plan (effective as of January 1, 2000) | ||
(d) | The Northrop Grumman Electronics Systems Space Division Salaried Employees Pension Plan (effective as of the Aerojet Closing Date) | ||
(e) | The Northrop Grumman Electronics Systems Space Division Union Employees Pension Plan (effective as of the Aerojet Closing Date) |
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1.15 | Plan . The Litton Industries, Inc. Restoration Plan 2. | ||
1.16 | Plan Year . A 12-month period ending on December 31. | ||
1.17 | Program . One of the eligibility and benefit structures described in the Appendices. | ||
1.18 | Retirement Plan and Retirement Plans . |
(a) | For periods after April 3, 2001 and before July 1, 2003, the FSSP, Retirement Plan B, and the Ingalls Salaried Plan. Appendix A provides the Program for this period. | ||
(b) | For periods after June 30, 2003, Retirement Plan B, the Avondale Plan, and the Ingalls Salaried Plan. Appendix B provides the Program for this period. |
1.19 | Retirement Plan B . This term refers to the benefit structure described in the plan document entitled Northrop Grumman Retirement Plan B or one of its predecessor plans. It does not include any benefit structures described in other plan documents, even if part of the legal plan named Northrop Grumman Retirement Plan B (for example, Northrop Grumman Retirement Plan A, the Ingalls Salaried Plan, and the Avondale Plan). | ||
1.20 | Separation from Service or Separates from Service . A separation from service within the meaning of Code section 409A. | ||
1.21 | Termination of Employment . Complete termination of employment with the Affiliated Companies. |
(a) | If a Participant ceases to perform services for one Affiliated Company to begin performing services for another, he or she will not have a Termination of Employment. | ||
(b) | A Participant will have a Termination of Employment if he or she leaves the Affiliated Companies because the affiliate he or she works for ceases to be an Affiliated Company because it is sold or spun off. |
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2.01 | In General . The Plan contains two different benefit Programs, which are described in Appendices A and B. Appendices A and B provide the eligibility conditions and the amount of benefits payable under the Programs. |
(a) | See Appendix A for the Program that applies to benefits earned for services performed after April 3, 2001 and before July 1, 2003. | ||
(b) | See Appendix B for the Program that applies to benefits earned for services performed after June 30, 2003. |
(a) | any payment authorized by the Northrop Grumman Corporation Compensation Committee that is (1) calculated pursuant to the method for determining a bonus amount under the Annual Incentive Plan (AIP) for a given year, and (2) paid in lieu of such bonus in the year prior to the year the bonus would otherwise be paid under the AIP, and | ||
(b) | any award payment under the Northrop Grumman Long-Term Incentive Cash Plan. |
2.02 | Forms and Times of Benefit Payments . Unless a Program provides rules concerning the form and timing of benefit payments, the Company will determine the form and timing of benefit payments in its sole discretion, except where a lump sum election under Article III applies. | ||
For payments made to supplement those of a particular tax-qualified retirement or savings plan, the Company will only select among the options available under that plan, using the same actuarial adjustments used in that plan, except in cases of lump sums. | |||
Whenever the present value of the amount payable under the Plan does not exceed $10,000, it will be paid in the form of a single lump sum as of the first of the month following Termination of Employment. The lump sum will be calculated using the factors and methodology described in Section 3.07 below. (See Section 2.03 for the rule that applies as of January 1, 2008.) |
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No payments will commence under this Plan until a Participants Termination of Employment, even if benefits have commenced under a Retirement Plan for Participants over age 70 1 / 2 . | |||
The distribution rules of this Section only apply to Grandfathered Amounts. See Appendix C and Appendix D for the rules that apply to other benefits earned under the Plan. | |||
2.03 | Mandatory Cashout . Notwithstanding any other provision in the Plan, Participants with Grandfathered Amounts who have not commenced payment of such benefits prior to January 1, 2008 will be subject to the following rules: |
(a) | Post-2007 Terminations . Participants who have a Termination of Employment after 2007 will receive a lump sum distribution of the present value of their Grandfathered Amounts within two months of Termination of Employment (without interest), if such present value is below the Code section 402(g) limit in effect at the Termination of Employment. | ||
(b) | Pre-2008 Terminations . Participants who had a Termination of Employment before 2008 will receive a lump sum distribution of the present value of their Grandfathered Amounts within two months of the time they commence payment of their underlying qualified pension plan benefits (without interest), if such present value is below the Code section 402(g) limit in effect at the time such payments commence. |
2.04 | Optional Payment Forms . Participants with Grandfathered Amounts shall be permitted to elect (a) or (b) below: |
(a) | To receive their Grandfathered Amounts in any form of distribution available under the Plan at October 3, 2004, provided that form remains available under the underlying qualified pension plan at the time payment of the Grandfathered Amounts commences. The conversion factors for these distribution forms will be based on the factors or basis in effect under this Plan on October 3, 2004. | ||
(b) | To receive their Grandfathered Amounts in any life annuity form not included in (a) above but included in the underlying qualified pension plan distribution options at the time payment |
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of the Grandfathered Amounts commences. The conversion factors will be based on the following actuarial assumptions: | |||
Interest Rate: 6% | |||
Mortality Table: RP-2000 Mortality Table projected 15 years for future standardized cash balance factors |
2.05 | Beneficiaries and Spouses . The Participant may designate a beneficiary if the Company selects a form of payment that includes a survivor benefit. The Participant may change this designation at any time before benefits commence. A beneficiary designation must be in writing and will be effective only when received by the Company. | ||
The beneficiary of a Participant who is married on the date his or her benefits are scheduled to commence will be the Participants spouse unless some other beneficiary is named with spousal consent. To be effective, spousal consent must be submitted in writing before benefits commence and must be witnessed by a Plan representative or notary public. Spousal consent is not necessary if the Company determines that there is no spouse or that the spouse cannot be found. | |||
With respect to Programs designed to supplement tax-qualified retirement or savings plans, the Participants spouse will be the spouse as determined under the underlying tax-qualified plan. Otherwise, the Company has full discretionary authority to determine the identity of the Participants spouse. | |||
The distribution rules of this Section only apply to Grandfathered Amounts. See Appendix C and Appendix D for the rules that apply to other benefits earned under the Plan. | |||
2.06 | Amendment and Plan Termination . The Company may, in its sole discretion, terminate, suspend or amend this Plan at any time or from time to time, in whole or in part for any reason. This includes the right to amend or eliminate any of the provisions of the Plan with respect to lump sum distributions, including any lump sum calculation factors, whether or not a Participant has already made a lump sum election. Notwithstanding the foregoing, no amendment or termination of the Plan shall reduce the amount of a Participants accrued benefit under the Plan as of the date of such amendment or termination. | ||
No amendment of the Plan shall apply to the Grandfathered Amounts, unless the amendment specifically provides that it applies to such amounts. The purpose of this restriction is to prevent a Plan amendment |
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from resulting in an inadvertent material modification to the Grandfathered Amounts. | |||
The Company may, in its sole discretion, seek reimbursement from the Companys tax-qualified plans to the extent this Plan pays tax-qualified plan benefits to which Participants were entitled or became entitled under the tax-qualified plans. | |||
2.07 | Not an Employment Agreement . Nothing contained in this Plan gives any Participant the right to be retained in the service of the Company, nor does it interfere with the right of the Company to discharge or otherwise deal with Participants without regard to the existence of this Plan. | ||
2.08 | Assignment of Benefits . A Participant, surviving spouse or beneficiary may not, either voluntarily or involuntarily, assign, anticipate, alienate, commute, sell, transfer, pledge or encumber any benefits to which he or she is or may become entitled under the Plan, nor may Plan benefits be subject to legal process or to attachment or garnishment by a Participants creditors. | ||
Notwithstanding the foregoing, all or a portion of a Participants benefit may be paid to another person as specified in a domestic relations order that the Company determines is qualified (a Qualified Domestic Relations Order). For this purpose, a Qualified Domestic Relations Order means a judgment, decree, or order (including the approval of a settlement agreement) which is: |
(a) | Issued pursuant to a States domestic relations law; | ||
(b) | Relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of the Participant; | ||
(c) | Creates or recognizes the right of a spouse, former spouse, child or other dependent of the Participant to receive all or a portion of the Participants benefits under the Plan; and | ||
(d) | Meets such other requirements established by the Company. |
2.09 | Nonduplication of Benefits . This Section applies if, despite Section 2.08, the Company is required to make payments under this Plan to a person or |
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entity other than the payees described in the Plan. In such a case, any amounts due a Participant or beneficiary under this Plan will be reduced by the actuarial value of the payments made to another person or entity with respect to that Participant or beneficiary. |
2.10 | Funding . Participants have the status of general unsecured creditors of the Company, and the Plan constitutes a mere promise by the Company to pay benefits in the future. The Company may, but need not, fund benefits under the Plan through a trust. If it does so, any trust created by the Company and any assets held by the trust to assist it in meeting its obligations under the Plan will conform to the terms of the model trust, as described in Internal Revenue Service Revenue Procedure 92-64, but only to the extent required by Internal Revenue Service Revenue Procedure 92-65. The Company and Participants intend that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA. | ||
Any funding of benefits under this Plan will be in the Companys sole discretion. The Company may set and amend the terms under which it will fund and may cease to fund at any time. | |||
2.11 | Construction . The Company has full discretionary authority to determine eligibility and to construe and interpret the terms of the Plan, including the power to remedy possible ambiguities, inconsistencies or omissions. | ||
2.12 | Governing Law . This Plan is governed by the law of the State of California, except to the extent superseded by federal law. | ||
2.13 | Actions By Company and Claims Procedures . The Companys powers under the Plan will be exercised by written resolution of the Board of Directors or its delegate. The Board may by written resolution delegate any of the Companys powers under the Plan and any such delegations may provide for subdelegations, also by written resolution. | ||
The standardized Northrop Grumman Nonqualified Retirement Plans Claims and Appeals Procedures shall apply in handling claims and appeals under this Plan. |
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2.14 | Plan Representatives . Those authorized to act as Plan representatives will be designated in writing by the Board of Directors or its delegate. | ||
2.15 | Number . The singular, where appearing in this Plan, will be deemed to include the plural, unless the context clearly indicates the contrary. | ||
2.16 | Special Tax Distribution . On the date a Participants retirement benefit is reasonably ascertainable within the meaning of IRS regulations under Code section 3121(v)(2), an amount equal to the Participants portion of the FICA tax withholding will be distributed in a single lump sum payment. This payment will be based on all benefits under the Plan, including Grandfathered Amounts. This payment will reduce the Participants future benefit payments under the Plan on an actuarial basis. | ||
2.17 | Benefit Limit . The amount of the benefit under this Plan will be limited as provided below: |
(a) | A Participants total accrued benefits under all defined benefit plans, programs, and arrangements maintained by Northrop Grumman Corporation and its affiliates (as determined under Code section 414) in which he or she participates, including the Plan, may not exceed 60% of his or her Final Average Salary. If this limit is exceeded, the Participants benefit accrued under the Plan will be reduced to the extent necessary to satisfy the limit. |
(1) | For this purpose, Final Average Salary has the meaning provided under Appendix G to the Northrop Grumman Supplemental Plan 2 (the OSERP). | ||
(2) | The Participants Final Average Salary will be reduced for early retirement applying the factors in the OSERP. | ||
(3) | The limit in this subsection may not be exceeded even after the benefits under the Plan have been enhanced under any change in control agreements or Northrop Grumman Corporation Special Agreements. |
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3.01 | In General . This Article provides the rules under which Participants may elect to receive their Plan benefits in a lump sum. Except as provided in Section 3.07, this Article does not apply to Active Participants (as defined in Section 3.04) whose benefits are automatically payable in lump sum form under Article II. | ||
This Article will not apply if a particular Program so provides. | |||
3.02 | Retirees Election . Participants and Participants beneficiaries already receiving monthly benefits under the Plan at its inception will be given a one-time opportunity to elect a lump sum payout of future benefit payments. |
(a) | The election must be made within a 45-day period determined by the Company. Within its discretion, the Company may delay the commencement of the 45-day period in instances where the Company is unable to timely communicate with a particular payee. | ||
(b) | The determination as to whether a payee is already receiving monthly benefits will be made at the beginning of the 45-day period. | ||
(c) | An election to take a lump sum must be accompanied by a waiver of the existing retiree medical benefits by those Participants (and their covered spouses or surviving spouses) entitled either to have such benefits entirely paid for by the Company or to receive such benefits as a result of their classification as an employee under Executive Class Code II. |
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(d) | If the person receiving payments as of the beginning of the 45-day period dies before electing a lump sum, his or her beneficiary, if any, may not elect a lump sum. | ||
(e) | Elections to receive a lump sum (and waivers under (c)) must be made in writing and must include spousal consent if the payee (whether the Participant or beneficiary) is married. Elections and spousal consent must be witnessed by a Plan representative or a notary public. | ||
(f) | An election (with spousal consent, where required) to receive the lump sum made at any time during the 45-day period will be irrevocable. If no proper election has been made by the end of the 45-day period, payments will continue unchanged in the monthly form that previously applied. |
3.03 | Retirees Lump Sum . If a retired Participant or beneficiary makes a valid election under Section 3.02 within the 45-day period, monthly payments will continue in the previously applicable form for 12 months (assuming the payees live that long). |
(a) | As of the first of the 13th month, the present value of the remaining benefit payments will be paid in a single lump sum to the Participant, if alive, or, if not, to the beneficiary under the previously applicable form of payment. | ||
(b) | No lump sum payment will be made if: |
(1) | The Participant is receiving monthly benefit payments in a form that does not provide for survivor benefits and the Participant dies before the lump sum payment is due. | ||
(2) | The Participant is receiving monthly benefit payments in a form that does provide for survivor benefits, but the Participant and beneficiary die before the lump sum payment is due. |
(c) | The following rules apply where payment is being made in the form of a 10-year certain and continuous life annuity option: |
(1) | If the Participant is deceased at the commencement of the 45-day election period, the surviving beneficiary may not make the election if there are less than 13 months left in the 10-year certain period. | ||
(2) | If the Participant elects the lump sum and dies before the first of the 13th month and: |
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(A) | if the 10-year certain period has already ended, all monthly payments will cease at the Participants death and no lump sum will be paid; | ||
(B) | if the 10-year certain period ends after the Participants death and before the beginning of the 13th month, monthly payments will end at the end of the 10-year certain period and no lump sum will be paid; and | ||
(C) | if the 10-year certain period ends after the beginning of the 13th month, monthly payments will continue through the 12th month, and a lump sum equal to the present value of the remaining benefit payments will be paid as of the first of the 13th month. |
3.04 | Actives Election . Active Participants may elect to have their benefits paid in the form of a single lump sum under this Section. |
(a) | A Participant is an Active Participant if he or she is still employed by the Affiliated Companies on or after the beginning of the initial 45-day period referred to in Section 3.02. | ||
(b) | An election to take a lump sum may be made at any time during the 60-day period before Termination of Employment and covers both |
(1) | Benefits payable to the Participant during his or her lifetime, and | ||
(2) | Survivor benefits (if any) payable to the Participants beneficiary, including preretirement death benefits (if any) payable to the Participants spouse. |
(c) | An election does not become effective until the earlier of: |
(1) | the Participants Termination of Employment, or | ||
(2) | the Participants death. |
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(d) | An election may only be made once. It cannot be made again if it fails to become effective after 60 days or is revoked before becoming effective. | ||
(e) | No election can be made after a Participants Termination of Employment. | ||
(f) | If a Participant dies before making a lump sum election, his or her spouse may not make a lump sum election with respect to any benefits that may be due the spouse. | ||
(g) | Elections to receive a lump sum must be made in writing and must include spousal consent if the Participant is married. Elections and spousal consent must be witnessed by a Plan representative or notary public. |
3.05 | Actives Lump SumRetirement Eligible . If a Participant with a valid lump sum election in effect under Section 3.04 has a Termination of Employment after he or she is entitled to commence benefits under the Retirement Plans, payments will be made in accordance with this Section. |
(a) | Monthly benefit payments will be made for up to 12 months, commencing the first of the month following Termination of Employment. Payments will be made: |
(1) | for a Participant who is not married on the date benefits are scheduled to commence, based on a straight life annuity for the Participants life and ceasing upon the Participants death should he or she die before the 12 months elapse, or | ||
(2) | for a Participant who is married on the date benefits are scheduled to commence, based on a joint and survivor annuity form |
(A) | with the survivor benefit equal to 50% of the Participants benefit; | ||
(B) | with the Participants spouse as the survivor annuitant; | ||
(C) | determined by using the contingent annuitant option factors used to convert straight life annuities to 50% joint and survivor annuities under the Northrop Grumman Retirement Plan B; and |
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(D) | with all payments ceasing upon the death of both the Participant and his or her spouse should they die before the 12 months elapse. |
(b) | As of the first of the 13th month, the present value of the remaining benefit payments will be paid in a single lump sum. Payment of the lump sum will be made to the Participant if he or she is still alive, or, if not, to his or her surviving spouse, if any. | ||
(c) | No lump sum payment will be made if: |
(1) | The Participant is receiving monthly benefit payments in the form of a straight life annuity and the Participant dies before the time the lump sum payment is due. | ||
(2) | The Participant is receiving monthly benefit payments in a joint and survivor annuity form and the Participant and his or her spouse both die before the time the lump sum payment is due. |
(d) | A lump sum will be payable to a Participants spouse as of the first of the month following the date of the Participants death, if: |
(1) | the Participant dies after making a valid lump sum election but before commencement of any benefits under this Plan; | ||
(2) | the Participant is survived by a spouse who is entitled to a preretirement surviving spouse benefit under this Plan; and | ||
(3) | the spouse survives to the first of the month following the date of the Participants death. |
3.06 | Actives Lump SumNot Retirement Eligible . If a Participant with a valid lump sum election in effect under Section 3.04 has a Termination of Employment before he or she is entitled to commence benefits under the Retirement Plans, payments will be made in accordance with this Section. |
(a) | No monthly benefit payments will be made. | ||
(b) | Following Termination of Employment, a single lump sum payment of the benefit will be made on the first of the month following 12 months after the date of the Participants Termination of Employment. | ||
(c) | A lump sum will be payable to a Participants spouse as of the first of the month following the date of the Participants death, if: |
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(1) | the Participant dies after making a valid lump sum election but before commencing benefits under this Plan; | ||
(2) | the Participant is survived by a spouse who is entitled to a preretirement surviving spouse benefit under this Plan; and | ||
(3) | the spouse survives to the first of the month following the date of the Participants death. |
(d) | No lump sum payment will be made if the Participant is unmarried at the time of death and dies before the time the lump sum payment is due. |
3.07 | Calculation of Lump Sum . The factors to be used in calculating the lump sum are as follows: |
(1) | the discount rate used by the Company for purposes of Statement of Financial Accounting Standards No. 87 of the Financial Accounting Standards Board as disclosed in the Companys annual report to shareholders for the year end immediately preceding the date of distribution, or | ||
(2) | the applicable interest rate that would be used to calculate a lump sum value for the benefit under the Retirement Plans. |
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In the case of a Participant who dies before commencing benefits under this Plan so that only a preretirement surviving spouse benefit (if any) is payable, the lump sum will be based solely on the value of the preretirement surviving spouse benefit. | |||
3.08 | Spousal Consent . Spousal consent for the elections described above is not necessary if the Company determines that there is no spouse or the spouse cannot be located. |
NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation, Benefits & International | ||||
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A.01 | Purpose . The purpose of this Program is simply to restore to employees of the Company the benefits they lose under the Retirement Plans as a result of the compensation limit in Code section 401(a)(17) and/or the limit on deferrals in Code section 402(g), or any successor provisions. This Appendix applies to benefits earned for service performed after April 3, 2001 and before July 1, 2003. | ||
A.02 | Definitions . The following terms have the meanings below for purposes of this Appendix. |
(a) | Annual Compensation . Compensation paid during the calendar year, subject to the following: |
(1) | For compensation paid before July 1, 2003, Annual Compensation means Compensation as defined in the FSSP. | ||
(2) | For compensation paid after June 30, 2003, Annual Compensation means Compensation as defined in the Northrop Grumman Savings Plan (NGSP) for participants who transfer to that plan only in the year of transfer. | ||
(3) | Compensation does not include retention bonuses paid as a result of the acquisition of Litton Industries, Inc. by Northrop Grumman Corporation. | ||
(4) | Compensation does not include amounts paid for service performed before January 1, 2001 or after December 31, 2003. | ||
(5) | Transfers . For anyone who transferred from the FSSP to the NGSP before 2003, the rule under (1) applies to pre-transfer periods, and the rules under (2) apply to periods after the transfer. |
(b) | Annuity Equivalent . Annuity Equivalent determined in the same manner as the prior version of this Program. |
A.03 | Eligibility . An employee of the Company or one of its subsidiaries is eligible to receive a benefit under this Program if he or she: |
(a) | retires on or after May 1, 2001; |
(b) | has vested in benefits under one or more of the Retirement Plans that are reduced because of the application of Code section 401(a)(17) and/or Code section 402(g); and | ||
(c) | is not eligible to receive a benefit under the Northrop Corporation Supplemental Retirement Income Program for Senior Executives, the Litton Industries, Inc. Restoration Plan, or any other plan or program that bars an employee from participation in this Program. | ||
(d) | Has deposited the maximum amount of pretax Employee Deposits under the FSSP, including the Basic Contributions under the NGSP in a transfer year (excluding any age 50 catch-up contributions). |
A.04 | Amount of Benefit . |
(a) | General . The benefit payable under this Program with respect to a Participant who commences benefits during his or her lifetime is intended to make up for the retirement benefit, if any, that would have been payable to the Participant under the terms of a Retirement Plan, but for the restrictions of Code sections 401(a)(17) and/or 402(g), or any successor section as those limits are described by the applicable Retirement Plan. | ||
(b) | Benefit Formula . The benefit payable under this Program with respect to a Participant who commences benefits during his or her lifetime equals the sum of all of his or her annual Part I Excess Benefits and annual Part II Excess Benefits for each year in which the individual was a Participant. | ||
(c) | Part I Excess Benefit . A Participants annual Part I Excess Benefit equals (4), where: |
(1) | equals the Participants Annual Compensation multiplied by 4%; | ||
(2) | equals the actual amount of the Participants pretax Employee Deposits under the FSSP or Tax-Deferred Contributions under the NGSP for the Plan Year (as limited by Code sections 401(a)(17) and/or 402(g)); | ||
(3) | equals (1) minus (2); and | ||
(4) | equals 85% of (3), minus the Annuity Equivalent of (3). |
(d) | Part II Excess Benefit . A Participants annual Part II Excess Benefit equals (4), where: |
2
(1) | equals the Participants Annual Compensation multiplied by 6%; | ||
(2) | equals the actual amount of the Participants Matched Deposits under the FSSP and Basic Contributions under the NGSP for the Plan Year (as limited by Code sections 401(a)(17) and/or 402(g)); | ||
(3) | equals (1) minus (2); | ||
(4) | equals the Annuity Equivalent of 50% of (3). |
(e) | Partial Year 2003 . Subsections (c) and (d) above are modified as provided in this subsection for Participants who are eligible for an accrual under this Program in Plan Year 2003. |
(1) | The benefit will be calculated based on a full year of Annual Compensation. | ||
(2) | The total benefit in subsections (c) and (d) above are offset by the benefit amount earned from July 1, 2003 to December 31, 2003 under Appendix B. |
(f) | Vested Benefits . Benefits under this Program will only be paid to supplement benefit payments actually made from a Retirement Plan. If benefits are not payable under a Retirement Plan because the Participant has failed to vest or for any other reason, no payments will be made under this Program with respect to such Retirement Plan. | ||
(g) | No duplication of benefits. In any year in which a Participant earns benefits in two or more qualified defined benefit plans, the benefits from this plan will be reduced for any restoration plan benefits paid from the other defined benefit plan. |
A.05 | Preretirement Surviving Spouse Benefit . Preretirement surviving spouse benefits will be payable under this Program on behalf of a Participant if such Participants surviving spouse is eligible for benefits payable from a Retirement Plan. The amount of the preretirement surviving spouse benefit is the amount under A.04, adjusted as follows: |
(a) | Death on or After Normal Retirement Age . The Participants surviving spouse will receive a 100% survivor annuity calculated assuming the employee commenced receiving normal retirement benefits the day before death. |
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(b) | Death on or After Early Retirement Age, But Before Normal Retirement Age . The Participants surviving spouse will receive a 100% survivor annuity calculated assuming the employee commenced receiving early retirement benefits the day before death. | ||
(c) | Death Before Early Retirement Age . The Participants surviving spouse will receive a 100% survivor annuity calculated assuming the employee terminated employment and survived to normal (or early) retirement age and commenced receiving a joint and survivor annuity. |
No benefit will be payable under this Program with respect to a spouse after the death of that spouse. | |||
A.06 | Plan Termination . No further benefits may be earned under this Program with respect to a particular Retirement Plan after the termination of such Retirement Plan. | ||
A.07 | Retirement Plan Benefits . For purposes of this Appendix, the term Retirement Plan Benefits generally means the benefits actually payable to a Participant, spouse, beneficiary or contingent annuitant under a Retirement Plan. However, this Program is only intended to remedy pension reductions caused by the operation of section 401(a)(17) and/or 402(g) and not reductions caused for any other reason. In those instances where pension benefits are reduced for some other reason, the term Retirement Plan Benefits shall be deemed to mean the benefits that actually would have been payable but for such other reason. | ||
Examples of such other reasons include, but are not limited to, the following: |
(a) | A reduction in pension benefits as a result of a distress termination (as described in ERISA § 4041(c) or any comparable successor provision of law) of a Retirement Plan. In such a case, the Retirement Plan Benefits will be deemed to refer to the payments that would have been made from the Retirement Plan had it terminated on a fully funded basis as a standard termination (as described in ERISA § 4041(b) or any comparable successor provision of law). | ||
(b) | A reduction of accrued benefits as permitted under Code section 412(c)(8), as amended, or any comparable successor provision of law. |
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(c) | A reduction of pension benefits as a result of payment of all or a portion of a Participants benefits to a third party on behalf of or with respect to a Participant. |
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B.01 | Purpose . The purpose of this Program is simply to restore to employees of the Company the benefits they lose under Retirement Plan B and the Avondale Plan after June 30, 2003 as a result of the compensation limit in Code section 401(a)(17) and/or the benefit limit in Code section 415(b), or any successor provisions. | ||
B.02 | Eligibility . An employee of the Company is eligible to receive a benefit under this Program if he or she: |
(a) | retires on or after July 1, 2003; | ||
(b) | has vested in benefits under Retirement Plan B, the Ingalls Salaried Plan, or the Avondale Plan that are reduced because of the application of Code section 401(a)(17) and/or Code section 415(b); and | ||
(c) | is not eligible to receive a benefit under the Northrop Corporation Supplemental Retirement Income Program for Senior Executives or any other plan or program which bars an employee from participation in this Program. |
B.03 | Amount of Benefit . The benefit payable under this Program with respect to a Participant who commences benefits during his or her lifetime will equal the retirement benefit, if any, that would have been payable to the Participant under the terms of a Retirement Plan, but for the restrictions of Code section 401(a)(17) and/or Code section 415(b) (or any successor sections) as those limits are described by the applicable Retirement Plan. Compensation is defined by the pension plans and includes the amount that would have been counted under the Qualified plans except that it was deferred under The Northrop Grumman Deferred Compensation plan. | ||
Benefits under this Program will only be paid to supplement benefit payments actually made from Retirement Plan B or the Avondale Plan. If benefits are not payable under Retirement Plan B or the Avondale Plan because the Participant has failed to vest or for any other reason, no payments will be made under this Program with respect to those plans. | |||
B.04 | Preretirement Survivor Benefit . Preretirement survivor benefits will be payable under this Program on behalf of a Participant if the Participants beneficiary is eligible for benefits payable from Retirement Plan B or the Avondale Plan. The benefit payable will be the amount that would have been payable under the Retirement Plan but for the restrictions of section 401(a)(17) (or any successor section), as that limit is described in the applicable Retirement Plan. |
The benefit payable under this Program will be paid in a lump sum to nonspouse beneficiaries and in either a lump sum or single life annuity to spouse beneficiaries. Notwithstanding the foregoing, the timing and form of the payment of benefits described in this Section that relate to amounts other than Grandfathered Amounts shall be determined in accordance with Appendix C and Appendix D. | |||
The benefit payable under this Program will be reduced by the combined amounts of the Retirement Plan Benefits and the Northrop Grumman Corporation ERISA Supplemental Plan 1 benefits attributable to the applicable Retirement Plan. | |||
No benefit will be payable under this Program with respect to a spouse after the death of that spouse. | |||
B.05 | Plan Termination . No further benefits may be earned under this Program with respect to a particular Retirement Plan after the termination of the Retirement Plan. | ||
B.06 | Retirement Plan Benefits . For purposes of this Appendix, the term Retirement Plan Benefits generally means the benefits actually payable to a Participant, spouse, beneficiary or contingent annuitant under a Retirement Plan. However, this Program is only intended to remedy pension reductions caused by the operation of section 401(a)(17) and not reductions caused for any other reason. Where pension benefits are reduced for some other reason, the term Retirement Plan Benefits shall be deemed to mean the benefits that actually would have been payable but for such other reason. | ||
Examples of such other reasons include, but are not limited to, the following: |
(a) | A reduction in pension benefits as a result of a distress termination (as described in ERISA § 4041(c) or any comparable successor provision of law) of a Retirement Plan. In such a case, the Retirement Plan Benefits will be deemed to refer to the payments that would have been made from the Retirement Plan had it terminated on a fully funded basis as a standard termination (as described in ERISA § 4041(b) or any comparable successor provision of law). | ||
(b) | A reduction of accrued benefits as permitted under Code section 412(c)(8), as amended, or any comparable successor provision of law. |
2
(c) | A reduction of pension benefits as a result of payment of all or a portion of a Participants benefits to a third party on behalf of or with respect to a Participant. | ||
(d) | No duplication of benefits. If the participant is eligible for restoration plan benefits another Excess plan for the same period of service, the benefit under this plan will be reduced accordingly to prevent a duplication of benefits. |
3
C.01 | Election . Participants scheduled to commence payments during 2005 may elect to receive both pre-2005 benefit accruals and 2005 benefit accruals in any optional form of benefit available under the Plan as of December 31, 2004. Participants electing optional forms of benefits under this provision will commence payments on the Participants selected benefit commencement date. | ||
C.02 | 2005 Commencements . Pursuant to IRS Notice 2005-1, Q&A-19 & Q&A-20, Participants commencing payments in 2005 from the Plan may elect a form of distribution from among those available under the Plan on December 31, 2004, and benefit payments shall begin at the time elected by the Participant. |
(a) | Key Employees . A Key Employee Separating from Service on or after July 1, 2005, with Plan distributions subject to Code section 409A scheduled to be paid in 2006 and within six months of his date of Separation from Service, shall have such distributions delayed for six months from the Key Employees date of Separation from Service. The delayed distributions shall be paid as a single sum with interest at the end of the six month period and Plan distributions will resume as scheduled at such time. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such period (i.e., the rate may change in the event the period spans two calendar years). Alternatively, the Key Employee may elect under IRS Notice 2005-1, Q&A-20 to have such distributions accelerated and paid in 2005 without the interest adjustment, provided, such election is made in 2005. | ||
(b) | Lump Sum Option . During 2005, a temporary immediate lump sum feature shall be available as follows: |
(i) | In order to elect a lump sum payment pursuant to IRS Notice 2005-1, Q&A-20, a Participant must be an elected or appointed officer of the Company and eligible to commence payments under the underlying qualified pension plan on or after June 1, 2005 and on or before December 1, 2005; |
(ii) | The lump sum payment shall be made in 2005 as soon as feasible after the election; and | ||
(iii) | Interest and mortality assumptions and methodology for calculating lump sum amount shall be based on the Plans procedures for calculating lump sums as of December 31, 2004. |
C.03 | 2006 and 2007 Commencements . Pursuant to IRS transition relief, for all benefit commencement dates in 2006 and 2007 (provided election is made in 2006 or 2007), distribution of Plan benefits subject to Code section 409A shall begin 12 months after the later of: (a) the Participants benefit election date, or (b) the underlying qualified pension plan benefit commencement date (as specified in the Participants benefit election form). Payments delayed during this 12-month period will be paid at the end of the period with interest. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such period (i.e., the rate may change in the event the period spans two calendar years). |
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D.01 | Time of Distribution . Subject to the special rules provided in this Appendix D, distributions to a Participant of his vested retirement benefit shall commence as of the Payment Date. | ||
D.02 | Special Rule for Key Employees . If a Participant is a Key Employee and age 55 or older at his Separation from Service, distributions to the Participant shall commence on the first day of the seventh month following the date of his Separation from Service (or, if earlier, the date of the Participants death). Amounts otherwise payable to the Participant during such period of delay shall be accumulated and paid on the first day of the seventh month following the Participants Separation from Service, along with interest on the delayed payments. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such delay (i.e., the rate may change in the event the delay spans two calendar years). | ||
D.03 | Forms of Distribution . Subject to the special rules provided in this Appendix D, a Participants vested retirement benefit shall be distributed in the form of a single life annuity. However, a Participant may elect an optional form of benefit up until the Payment Date. The optional forms of payment are: |
(a) | 50% joint and survivor annuity | ||
(b) | 75% joint and survivor annuity | ||
(c) | 100% joint and survivor annuity. |
If a Participant is married on his Payment Date and elects a joint and survivor annuity, his survivor annuitant will be his spouse unless some other survivor annuitant is named with spousal consent. Spousal consent, to be effective, must be submitted in writing before the Payment Date and must be witnessed by a Plan representative or notary public. No spousal consent is necessary if the Company determines that there is no spouse or that the spouse cannot be found. |
D.04 | Death . If a married Participant dies before the Payment Date, a death benefit will be payable to the Participants spouse commencing 90 days after the Participants death. The death benefit will be a single life annuity in an amount equal to the survivor portion of a Participants vested retirement benefit based on a 100% joint and survivor annuity determined on the Participants date of death. This benefit is also payable to a Participants domestic partner who is properly registered with the Company in accordance with procedures established by the Company. | ||
D.05 | Actuarial Assumptions . Except as provided in Section D.06, all forms of payment under this Appendix D shall be actuarially equivalent life annuity forms of payment, and all conversions from one such form to another shall be based on the following actuarial assumptions: | ||
Interest Rate: 6% | |||
Mortality Table: RP-2000 Mortality Table projected 15 years for future standardized cash balance factors | |||
D.06 | Accelerated Lump Sum Payouts . |
(a) | Post-2007 Separations . Notwithstanding the provisions of this Appendix D, for Participants who Separate from Service on or after January 1, 2008, if the present value of (a) the vested portion of a Participants retirement benefit and (b) other vested amounts under nonaccount balance plans that are aggregated with the retirement benefit under Code section 409A, determined on the first of the month coincident with or following the date of his Separation from Service, is less than or equal to $25,000, such benefit amount shall be distributed to the Participant (or his spouse or domestic partner, if applicable) in a lump sum payment. Subject to the special timing rule for Key Employees under Section D.02, the lump sum payment shall be made within 90 days after the first of the month coincident with or following the date of the Participants Separation from Service. | ||
(b) | Pre-2008 Separations . Notwithstanding the provisions of this Appendix D, for Participants who Separate from Service before January 1, 2008, if the present value of (a) the vested portion of a Participants retirement benefit and (b) other vested amounts under nonaccount balance plans that are aggregated with the retirement benefit under Code section 409A, determined on the first of the month coincident with or following the date the Participant attains age 55, is less than or equal to $25,000, such benefit amount shall be distributed to the Participant (or his spouse or domestic partner, if applicable) in a lump sum payment within 90 days after the first |
2
of the month coincident with or following the date the Participant attains age 55, but no earlier that January 1, 2008. | |||
(c) | Conflicts of Interest . The present value of a Participants vested retirement benefit shall also be payable in an immediate lump sum to the extent required under conflict of interest rules for government service and permissible under Code section 409A. | ||
(d) | Present Value Calculation . The conversion of a Participants retirement benefit into a lump sum payment and the present value calculations under this Section D.06 shall be based on the actuarial assumptions in effect under the Northrop Grumman Pension Plan for purposes of calculating lump sum amounts, and will be based on the Participants immediate benefit if the Participant is 55 or older at Separation from Service. Otherwise, the calculation will be based on the benefit amount the Participant will be eligible to receive at age 55. |
D.07 | Effect of Early Taxation . If the Participants benefits under the Plan are includible in income pursuant to Code section 409A, such benefits shall be distributed immediately to the Participant. | ||
D.08 | Permitted Delays . Notwithstanding the foregoing, any payment to a Participant under the Plan shall be delayed upon the Companys reasonable anticipation of one or more of the following events: |
(a) | The Companys deduction with respect to such payment would be eliminated by application of Code section 162(m); or | ||
(b) | The making of the payment would violate Federal securities laws or other applicable law; |
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Section
|
Page | |||
Section 1 General
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1 | |||
1.1 Purpose
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1 | |||
1.2 Coverage
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1 | |||
|
||||
Section 2 - Participating Divisions and Subsidiaries
|
1 | |||
2.1 Participating Division or Subsidiary
|
1 | |||
|
||||
Section 3 Definitions
|
1 | |||
3.1 Actuarial Equivalent
|
1 | |||
3.2 Affected Employee
|
1 | |||
3.3 Affiliate Company or Affiliated Companies
|
2 | |||
3.4 Annual Benefit
|
2 | |||
3.5 Annual Benefit Statement
|
2 | |||
3.6 Annual Compensation
|
2 | |||
3.7 Beneficiary
|
2 | |||
3.8 Board
|
2 | |||
3.9 Break in Service Period
|
2 | |||
3.10 Change in Control
|
3 | |||
3.11 Code
|
4 | |||
3.12 Committee
|
4 | |||
3.13 Coverage Date
|
5 | |||
3.14 Designated Foreign Corporation
|
5 | |||
3.15 Director
|
5 | |||
3.16 Grandfathered Amount
|
5 | |||
3.17 Interest
|
5 | |||
3.18 Key Employee
|
5 | |||
3.19 Litton
|
5 | |||
3.20 Mandatory Contribution
|
6 | |||
3.21 Payment Date
|
6 | |||
3.22 Pension Plan and Pension Plans
|
6 | |||
3.23 Plan
|
6 | |||
3.24 Plan Administrator
|
6 | |||
3.25 Plan Year
|
6 | |||
3.26 Restricted Amount
|
6 | |||
3.27 Retirement
|
6 | |||
3.28 Retirement Account Restricted Amount
|
7 | |||
3.29 Savings Account Restricted Amount
|
7 | |||
3.30 Separation from Service or Separates from Service
|
7 | |||
3.31 Spouse
|
7 | |||
3.32 Termination of Employment
|
7 |
Section
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Page | |||
3.33 Trust
|
7 | |||
3.34 Trust Agreement
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7 | |||
3.35 Trustee
|
7 | |||
3.36 Year(s) of Service
|
7 | |||
|
||||
Section 4 - Participation
|
7 | |||
4.1 Participation
|
7 | |||
|
||||
Section 5 - Retirement Dates
|
7 | |||
5.1 Normal Retirement Date
|
8 | |||
5.2 Early-Retirement Date
|
8 | |||
5.3 Disability Retirement Date
|
8 | |||
|
||||
Section 6 - Amount of Retirement Income
|
8 | |||
6.1 Normal Retirement Benefit
|
8 | |||
6.2 Early Retirement Benefit
|
9 | |||
6.3 Disability Retirement Benefit
|
9 | |||
6.4 Vesting Schedule
|
9 | |||
6.5 Initial and Subsequent Payment Dates
|
10 | |||
6.6 Compensation Considered
|
10 | |||
|
||||
Section 7 - Death Benefits
|
10 | |||
7.1 Pre-Retirement Spouse Benefit
|
10 | |||
7.2 Death After Retirement
|
11 | |||
|
||||
Section 8 - Termination of Employment
|
11 | |||
8.1 Rights of Affected Employees
|
11 | |||
8.2 Transfer of Employment
|
11 | |||
|
||||
Section 9 - Forms of Retirement Income
|
11 | |||
9.1 Joint and Survivor Income Annuity
|
11 | |||
9.2 Straight Life Annuity
|
12 | |||
9.3 Spousal Death Within Two Years After Retirement
|
12 | |||
9.4 Annuity Options
|
12 | |||
9.5 Mandatory Cashout
|
13 | |||
9.6 Optional Payment Forms
|
14 | |||
9.7 Special Tax Distribution
|
14 | |||
|
||||
Section 10 - Miscellaneous
|
15 | |||
10.1 Receipt and Release for Payments
|
15 | |||
10.2 Dispute as to Benefit Payments
|
15 | |||
10.3 No Contract of Employment
|
15 | |||
10.4 Commutation of Benefit
|
15 |
Section
|
Page | |||
|
||||
Section 11 - Amendment or Discontinuance
|
15 | |||
11.1 Amendment of Plan
|
15 | |||
11.2 Freezing Plan Benefits
|
16 | |||
11.3 Termination of Plan
|
16 | |||
11.4 Merger or Consolidation
|
16 | |||
|
||||
Section 12 - Plan Administration
|
16 | |||
12.1 Plan Administrator
|
16 | |||
|
||||
Section 13 Change of Control Provisions
|
17 | |||
13.1 Change of Control
|
17 | |||
13.2 Eligibility for Retirement Benefits
|
17 | |||
13.3 Vesting Change of Control
|
17 | |||
13.4 Benefit Forms after April 2, 2001
|
17 | |||
13.5 Payments to Trust
|
18 | |||
13.6 Administrative Procedures
|
19 | |||
13.7 Enforcement
|
19 | |||
|
||||
Appendices
|
||||
Appendix 1 Participating Divisions and Subsidiaries
|
||||
Appendix A Assumptions to Calculate the Present Value of Remaining
Restoration Plan Benefits
|
||||
Appendix B 2005-2007 Transition Rules
|
||||
Appendix C Post 2007 Distribution of 409A Amounts
|
||||
Appendix Regarding Acquisition Of Litton Industries, Inc.
|
||||
Appendix Regarding Investment Matters
|
||||
Appendix Regarding Plan Administration
|
1.1 | Purpose The purpose of the Plan is to provide, on an unfunded basis, the aggregate amount of Annual Benefits earned by the Affected Employees of the Participating Divisions and Subsidiaries of Litton Industries, Inc., a Delaware corporation, and any unit thereof, enumerated in Section 2 and hereinafter referred to collectively as the Company. The Plan is intended to comply with Code section 409A and official guidance issued thereunder (except for Grandfathered Amounts). Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and administered in a manner consistent with this intention. | |
1.2 | Coverage |
A. | Unless otherwise provided, the provisions of the Plan shall apply to any Affected Employee who incurs a Termination of Employment on or after January 1, 1989. | ||
B. | Any subsequent amendment to this Plan shall apply only to an Affected Employee who incurs a Termination of Employment on or after the effective date of said amendment, unless said amendment provides otherwise. |
2.1 | Participating Division or Subsidiary The Participating Divisions and Subsidiaries and their respective participation dates are listed in Appendix 1 attached hereto. When the name or status of a Participating Division or Subsidiary is changed, the change shall be effective for Plan purposes. |
As used in the Plan, the following terms shall have the meanings defined below. | ||
3.1 | Actuarial Equivalent Except as otherwise provided by the next sentence, the definition of such term under the Litton Industries, Inc. Retirement Plan B, as amended. On or after a Change of Control, an Affected Employees benefit, a Spouses benefit, or a Beneficarys benefit, shall be computed using the actuarial factors set forth in Appendix A hereof. | |
3.2 | Affected Employee An Affected Employee, for any particular Plan Year, is an individual employed as a common law employee by the Company (except that an individual who is a participant under the Litton Supplemental Retirement Plan, as amended, for such Plan Year shall, notwithstanding any other provision of the Plan, be |
- 1 -
deemed to have a Retirement Account Restricted Amount of zero for such Plan Year) 8% of whose Annual Compensation for that particular Plan Year exceeds the maximum amount of elective deferrals available to such Affected Employee to a Code section 401(k) plan for such Plan Year and who was a participant in the Litton Financial Security and Savings Program, as amended from time to time, (the FSSP) for such Plan Year and who contributed his legally permissable maximum amount to the FSSP for such Plan Year. | ||
3.3 | Affiliate Company or Affiliated Companies Each company fifty percent (50%) or more of whose voting stock is owned directly or indirectly by Litton Industries, Inc., its successors or assigns, and which company is not a participating division or subsidiary of the Plan. | |
3.4 | Annual Benefit The portion of the total annual retirement benefit that an Affected Employee is entitled to with respect to a particular Plan Year, determined in accordance with Section 6.1, Section 6.2, or Section 6.3, whichever is applicable. | |
3.5 | Annual Benefit Statement The statement given to an Affected Employee for each Plan Year such Affected Employee is entitled to an Annual Benefit under the Plan. All such Annual Benefit Statements shall be in the form prescribed by the Plan Administrator. | |
3.6 | Annual Compensation An Affected Employees wages paid or deferred by the Company (limited, however, to wages paid or deferred by the Company on or after the date the Participating Division or Subsidiary by which the Affected Employee is employed became a Participating Division or Subsidiary), as determined under section 3121 of the Code without regard to the dollar limitation of section 3121(a)(1) of the Code, excluding therefrom any amount so paid which represents (a) reimbursed expenses, (b) wages not paid in cash, (c) cash received pursuant to the exercise of a stock appreciation right, or (d) certain other wage items as may be agreed to from time to time between the Company and one or more Affected Employees. | |
Wages deferred by an Affected Employee shall be treated as Annual Compensation only for the Plan Year of deferral and not for the Plan Year of actual payment. | ||
3.7 | Beneficiary means the Spouse of an Affected Employee or, if there is no surviving Spouse at the time of the Affected Employees death or if the Spouse has previously given written consent, such other person(s) designated by the Affected Employee on a form provided by the Plan Administrator to receive any payment or payments becoming due to a Beneficiary under the Plan. Such designation may be changed from time to time, except that a designated Beneficiary may not be changed after the commencement of retirement benefits. Any spousal consent required hereunder shall be invalid unless signed by the Spouse and witnessed by the Plan Administrator, his representative or a notary public. | |
3.8 | Board The Board of Directors of Litton Industries, Inc., a Delaware corporation. | |
3.9 | Break in Service Period The definition of such term under the Litton Industries, Inc. Retirement Plan B, as amended from time to time. |
- 2 -
3.10 | Change in Control shall mean |
(a) | The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) (a Person) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of either (1) the then outstanding shares of common stock of the Company (the Outstanding Company Common Stock) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of Directors (the Outstanding Company Voting Securities); provided, however, that for purposes of this Section 3.10(a), the following acquisitions of stock shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (1), (2) and (3) of Section 3.10(c); or | ||
(b) | Individuals who, as of the date hereof, constitute the Board (the Incumbent Board) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a Director subsequent to the date hereof whose election, or nomination subsequent to the date hereof whose election, or nomination for election by the Companys shareholders, was approved by a vote of a least a majority of the Directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or | ||
(c) | Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a Business Combination), in each case, unless following such Business Combination, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly more than sixty percent (60%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Companys assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no person |
- 3 -
(excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or | |||
(d) | Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. |
3.11 | Code The Internal Revenue Code of 1986, as amended. | |
3.12 | Committee shall mean |
(a) | The Compensation and Selection Committee of the Board. | ||
(b) | Notwithstanding Section 3.12(a), upon a Change of Control, the Committee shall mean exclusively the special administrators. The special administrators shall be the individuals who constituted the Committee immediately prior to the Change of Control. The special administrators shall constitute the Committee until the last day of the eighteenth month following the month in which the Change of Control occurred. The special administrators shall have all rights and authority reserved to the Committee under this Plan. | ||
(c) | If a special administrator dies, becomes disabled, or resigns as special administrator during the period that the special administrators constitute the Committee, the remaining special administrator(s) shall continue to serve as the Committee without interruption. A successor special administrator shall be required only if there are less than three (3) remaining special administrators. If a successor special administrator is required, the successor shall be the individual who, at that time, (1) is not already a special administrator, and (2) is not a Participant or currently an employee of the Company, and (3) was the member of the Board immediately prior to the Change of Control with the longest period of service on the Board, and (4) agrees to serve as a special administrator. | ||
(d) | If a successor special administrator is required and there are no individuals remaining who satisfy the criteria described in Section 3.12(c), then a successor special administrator shall either be appointed by the Trustee or, in the Trustees discretion, the Trustee shall submit the selection of the special administrator(s) to an arbitrator, the costs of which shall be borne fully by the Company, to be decided in accordance with the American Arbitration Association Commercial Arbitration Rules then in effect. If at any time, there are no remaining special |
- 4 -
administrators, the Trustee shall act as the special administrator until the successor(s) is selected. |
3.13 | Coverage Date January 1, 1987, or the date an employee of the Company first becomes an Affected Employee, if later. | |
3.14 | Designated Foreign Corporation An entity: (a) created under the laws of a country other than the United States; (b) of which a majority of the voting shares are owned directly or indirectly by Litton Industries, Inc.; and (c) with respect to which the Company has entered into an agreement under section 3121(l) of the Code, and has satisfied the provisions of section 406 of the Code. | |
3.15 | Director shall mean a member of the Board of Directors of Litton Industries, Inc. | |
3.16 | Grandfathered Amount Plan benefits that were earned and vested as of December 31, 2004 within the meaning of Code section 409A and official guidance thereunder. | |
3.17 | Interest The amount of interest (based on a stated rate of interest, compounded annually, as determined by the Board or its delegate) with respect to the Retirement Account and Savings Account Restricted Amounts of all Affected Employees for a particular Plan Year with such rate of interest to be fixed for all of such Restricted Amounts and to commence on the first day of the Plan Year succeeding such particular Plan Year and to continue for all Plan Years thereafter; but such interest shall cease with respect to the Retirement Account and Savings Account Restricted Amounts of any particular Affected Employee upon the later of: (i) the last day of the month such Affected Employee is projected to attain his Normal Retirement Date for purposes of determining the amount of such Affected Employees annual retirement benefit pursuant to Section 6.1; or (ii) if such Affected Employee attains Retirement after his Normal Retirement Date, the last day of the month such Affected Employee attains Retirement. | |
3.18 | Key Employee An employee treated as a specified employee under Code section 409A(a)(2)(B)(i) of Litton or the Affiliated Companies (i.e., a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)) if Littons or an Affiliated Companys stock is publicly traded on an established securities market or otherwise. Litton shall determine in accordance with a uniform Litton policy which employees are Key Employees as of each December 31 in accordance with IRS regulations or other guidance under Code section 409A, provided that in determining the compensation of individuals for this purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be used. Such determination shall be effective for the twelve (12) month period commencing on April 1 of the following year. For purposes of this Section only, Affiliated Company means Litton and any other entity related to Litton under the rules of Code section 414. The Affiliated Companies include Northrop Grumman Corporation and its 80%-owned subsidiaries and may include other entities as well. | |
3.19 | Litton Litton Industries, Inc. or any successor thereto. |
- 5 -
3.20 | Mandatory Contribution shall mean, as of a Change of Control, an amount equal to the excess of A over B, where |
(a) | A is one hundred twenty percent (120%) of the present value of all vested benefits under the Plan determined under the factors set forth in Appendix A; and | ||
(b) | B is the current value of the Trust as determined by the Trustee on the business day immediately preceding the day that a Mandatory Contribution is paid to the Trustee. |
3.21 | Payment Date The 1st of the month coincident with or following the later of (a) the date the Affected Employee attains age 55, or (b) the date the Affected Employee Separates from Service. | |
3.22 | Pension Plan and Pension Plans Any of the following: |
(a) | The Northrop Grumman Retirement Plan | ||
(b) | The Northrop Grumman Retirement PlanRolling Meadows Site | ||
(c) | The Northrop Grumman Retirement Value Plan (effective as of January 1, 2000) | ||
(d) | The Northrop Grumman Electronics Systems Space Division Salaried Employees Pension Plan (effective as of the Aerojet Closing Date) | ||
(e) | The Northrop Grumman Electronics Systems Space Division Union Employees Pension Plan (effective as of the Aerojet Closing Date) |
3.23 | Plan Litton Industries, Inc. Restoration Plan. | |
3.24 | Plan Administrator The person appointed to administer the Plan pursuant to Section 12. | |
3.25 | Plan Year January 1, 1987 to December 31, 1987 and each calendar year thereafter. | |
3.26 | Restricted Amount As applied for any particular Plan Year to a particular Affected Employee, the Restricted Amount of such Affected Employee shall be the amount, if any, by which 8% of such Affected Employees Annual Compensation for the particular Plan Year under consideration exceeds the maximum amount of elective deferrals available to such Affected Employee to a Code section 401(k) plan for such Plan Year. | |
3.27 | Retirement An Affected Employee who incurs a Termination of Employment attains Retirement under the Plan when he is eligible to and elects to receive his annual retirement benefit under the Plan except that any Affected Employee who continues to be |
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employed by the Company after his Normal Retirement Date shall attain Retirement immediately upon his Termination of Employment. | ||
3.28 | Retirement Account Restricted Amount As applied for any particular Plan Year to a particular Affected Employee, the Retirement Account Restricted Amount, if any, shall be that portion of such Affected Employees Restricted Amount for such Plan Year which is equal to the excess, if any, of 4% of such Affected Employees Annual Compensation for such Plan Year over 4% of such Affected Employees Annual Compensation for such Plan Year where such Annual Compensation is limited to the annual compensation limit perscribed under Code section 401(a)(17) for such Plan Year. | |
3.29 | Savings Account Restricted Amount As applied for any particular Plan Year to a particular Affected Employee, the Savings Account Restricted Amount of such Affected Employee shall equal one-half of the excess of 8% of such Affected Employees Annual Compensation for such Plan Year over 4% of such Affected Employees Annual Compensation for such Plan Year where such Annual Compensation is limited to the Annual Compensation limit prescribed under Code section 401(a)(17) for such Plan Year. | |
3.30 | Separation from Service or Separates from Service A separation from service within the meaning of Code section 409A. | |
3.31 | Spouse A person who has been married to the Affected Employee throughout the one-year period ending on the earlier of the date the Affected Employees annual retirement benefit commences under the Plan, or the date of the Affected Employees death. | |
3.32 | Termination of Employment When an Affected Employee is discharged or quits from the Company; but such term shall not include an authorized leave of absence from the Company. | |
3.33 | Trust shall mean the Litton Industries, Inc., Restoration Plan Trust, as amended from time to time. | |
3.34 | Trust Agreement shall mean the terms of the agreement entered into between Litton Industries, Inc., and the Trustee that establish the Trust. | |
3.35 | Trustee shall mean the trustee of the Trust. | |
3.36 | Year(s) of Service The definition of such term under the Litton Industries, Inc. Retirement Plan B, as amended. |
4.1 | Participation Effective January 1, 1987, each Affected Employee of the Company shall be a participant in the Plan. |
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5.1 | Normal Retirement Date An Affected Employees sixty-fifth (65th) birthday. | |
5.2 | Early Retirement Date The date that an eligible Affected Employee elects to retire and receive an early retirement benefit prior to his Normal Retirement Date. Except as otherwise provided in the following sentence with respect to the surviving Spouse of a deceased Affected Employee, an Affected Employee may not elect to receive an early retirement benefit unless he is age fifty-five (55) or older and has at least five (5) Years of Service. In the case of determining whether a Pre-Retirement Spouse benefit is payable in accordance with Section 7.1 of the Plan, the Early Retirement Date of the deceased Affected Employee shall be the date on which such Affected Employee would have attained age fifty-five (55) or older had he lived. | |
5.3 | Disability Retirement Date The date that an eligible Affected Employee elects to retire and receive a disability retirement benefit prior to his Normal Retirement Date. An Affected Employee may not elect to receive a disability retirement benefit unless he is an Affected Employee who becomes totally and permanently disabled while employed by the Company and who has attained age fifty-five (55). An Affected Employee shall be deemed totally and permanently disabled for the purpose of the Plan only when he will be in the opinion of a qualified physician permanently, continuously and wholly prevented by bodily injuries or disease for life from engaging in any occupation or employment for wage or profit, as long as he is also entitled to disability benefits under the Federal Social Security Act. |
6.1 | Normal Retirement Benefit |
(a) | Any person who was an Affected Employee with respect to one or more Plan Years and who attains Retirement on or after his Normal Retirement Date shall be entitled to receive an annual retirement benefit which will be equal to (i) multiplied by (ii), wherein: (i) is equal to the aggregate amount of such Affected Employees Annual Benefit amounts with respect to all Plan Years during which such Affected Employee was an Affected Employee, with each such amount being computed for each such Plan Year in accordance with paragraphs (b)(1) and (2) below; and, wherein (ii) is equal to the vested percentage of such Affected Employee, determined in accordance with Section 6.4, in his annual retirement benefit. |
(b) | (1) | For any particular Plan Year, an Affected Employees Annual Benefit attributable to his Retirement Account Restricted Amount, if any, for such Plan Year shall be equal to eighty-five percent (85%) of the Retirement Account Restricted Amount of such Affected Employee for such Plan Year reduced by [[the sum of (i) plus (ii)] multipled by (iii)], wherein: (i) is equal to the Retirement Account Restricted Amount of such Affected Employee for such Plan Year; wherein (ii) is equal to the amount of Interest with respect of (i) above; and, wherein (iii) is equal to either: |
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(a)the Actuarial Equivalent factor, for such Plan Year, applicable under the Litton Industries, Inc. Retirement Plan B, as amended, with respect to such Affected Employees projected age at his Normal Retirement Date; or (b) if such Affected Employee attains Retirement after his Normal Retirement Date, the Actuarial Equivalent factor, for such Plan Year, under the Litton Industries, Inc. Retirement Plan B, as amended, with respect to such Affected Employees age when he attains Retirement. | |||
(2) | For any particular Plan Year, an Affected Employees Annual Benefit attributable to his Savings Account Restricted Amount shall be equal to [[the sum of (i) plus (ii)] multiplied by (iii)], wherein: (i) is equal to the Savings Account Restricted Amount of such Affected Employee for such Plan Year; wherein (ii) is equal to the amount of Interest with respect to (i) above; and, wherein (iii) is equal to either: (a) the Actuarial Equivalent factor, for such Plan Year, applicable under the Litton Industries, Inc. Retirement Plan B, as amended, with respect to such Affected Employees projected age at his Normal Retirement Date; or (b) if such Affected Employee attains Retirement after his Normal Retirement Date, the Actuarial Equivalent factor, for such Plan Year, under the Litton Industries, Inc. Retirement Plan B, as amended, with respect to such Affected Employees age when he attains Retirement. |
6.2 | Early Retirement Benefit At his Early Retirement Date an Affected Employee who attains Retirement, or his surviving Spouse if a benefit is payable pursuant to Section 7.1 of the Plan, shall be entitled to an annual early retirement benefit which will be equal to the annual retirement benefit amount calculated pursuant to Section 6.1(b)(1) and (2) above for such Affected Employee reduced by one-half percent (1/2%) for each full month by which his Early Retirement Date precedes (i) his Normal Retirement Date, or (ii) attainment of age sixty-two (62) for any Affected Employee who incurred a Termination of Employment on or after January 1, 1997 and who has attained both age fifty-five (55) or more at such time and who has at least seven (7) Years of Service (five (5) Years of Service for any Affected Employee whose annual retirement benefit commences on or after January 1, 1999) at such time. | |
6.3 | Disability Retirement Benefit At his Disability Retirement Date an Affected Employee who attains Retirement shall be entitled to an annual disability benefit which will be equal to the normal benefit amount calculated pursuant to Section 6.1 (b)(1) and (2) above for such Affected Employee reduced by one-half percent (1/2%) for each full month by which his Disability Retirement Date precedes his Normal Retirement Date. | |
6.4 | Vesting Schedule An Affected Employee shall be vested in his annual retirement benefit under the Plan according to the Company purchased retirement benefit vesting schedule under the Litton Industries, Inc. Retirement Plan B, as amended from time to time, except that: (i) for purposes of this Plan only, on the Disability Retirement Date of any Affected Employee, such Affected Employee shall become one hundred percent (100%) vested in his annual disability retirement benefit, notwithstanding his actual number of |
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Year(s) of Service; and (ii) for purposes of this Plan only, if an Affected Employee should die prior to incurring a Termination of Employment, such Affected Employees Spouse, if any, shall become one hundred percent (100%) vested in his annual retirement benefit, notwithstanding such Affected Employees actual number of Year(s) of Service at the time of his death. | ||
6.5 | Initial and Subsequent Payment Dates An Affected Employees annual retirement benefit shall be payable in twelve (12) equal monthly installments commencing effective the first of the month following the month the Affected Employee attains Retirement and the first payment shall be made no later than sixty (60) days following the end of the Plan Year in which the Affected Employee attains Retirement, except that no payment shall be made until the date that an Affected Employee files with the Company a request for payment of an annual retirement benefit on a form prescribed by the Plan Administrator. | |
The distribution rules of this Section only apply to Grandfathered Amounts. See Appendix B and Appendix C for the distribution rules that apply to other benefits earned under the Plan. | ||
6.6 | Compensation Considered The following shall not be considered as compensation for purposes of determining the amount of benefits under the Plan: |
(a) | any payment authorized by the Northrop Grumman Corporation Compensation Committee that is (a) calculated pursuant to the method for determining a bonus amount under the Annual Incentive Plan (AIP) for a given year, and (b) paid in lieu of such bonus in the year prior to the year the bonus would otherwise be paid under the AIP, and | ||
(b) | any award payment under the Northrop Grumman Long-Term Incentive Cash Plan. |
7.1 | Pre-Retirement Spouse Benefit If a married Affected Employee dies after becoming either wholly or partially vested under this Plan and before commencing to receive an annual retirement benefit, his surviving spouse shall be entitled to receive an annual benefit, commencing on the first day of the month following the later of the date of death of the Affected Employee or the date the Affected Employee would have attained his Early Retirement Date, and terminating with the last monthly payment preceding the surviving Spouses death. In the case of an Affected Employee who dies before commencing to receive an annual retirement benefit, but after he has attained his Early Retirement Date, the amount of annual benefit to which such Affected Employees surviving Spouse shall be entitled shall be equal to the amount which would have been payable to the surviving Spouse had the Affected Employee commenced receiving an annual retirement benefit pursuant to Section 6.1 or Section 6.2, whichever is applicable, on the day before his death, in the form of a joint and survivor income annuity computed in accordance with Section 9.1. In the case of an Affected Employee who dies before |
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commencing to receive an annual retirement benefit and before he has attained his Early Retirement Date, the amount of such annual benefit to which such Affected Employees surviving Spouse shall be entitled shall be equal to the amount which would have been payable had the Affected Employee incurred a Termination of Employment on the date of his death, (or the date of his actual Termination of Employment, if earlier) survived to his Normal Retirement Date under Section 5.1 or to his Early Retirement Date under Section 5.2, if applicable, and commenced receiving his annual retirement benefit in the form of a joint and survivor income annuity computed in accordance with Section 9.1 on his Normal Retirement Date or his Early Retirement Date, whichever is applicable, and died immediately thereafter. | ||
The distribution rules of this Section only apply to Grandfathered Amounts. See Appendix B and Appendix C for the distribution rules that apply to other benefits earned under the Plan. | ||
7.2 | Death After Retirement Upon the death of an Affected Employee after he has attained Retirement, his surviving Spouse shall be entitled to an annual benefit determined in accordance with Section 9.1. |
8.1 | Rights of Affected Employees In the event that an Affected Employee incurs a Termination of Employment, any part of his accrued benefit which is not then vested in accordance with Section 6.4 shall be forfeited. Such amount forfeited shall not be restored unless such Affected Employee is reemployed by the Company and has not incurred a Break in Service Period prior to such reemployment by the Company. | |
8.2 | Transfer of Employment If an Affected Employee transfers from a category of employment covered by the Plan to a category of employment not covered by the Plan with Litton Industries, Inc., with any Affiliate Company or Designated Foreign Corporation, said Affected Employee shall be deemed not to have incurred a Termination of Employment. |
9.1 | Joint and Survivor Income Annuity The annual retirement benefit of an Affected Employee who is married at the time he attains Retirement shall be payable to the Affected Employee in twelve (12) equal monthly payments commencing with the first calendar month after the Affected Employee attains Retirement for his life, and shall continue to be payable monthly to his surviving Spouse, following the death of the Affected Employee, for the life of the surviving Spouse. Payments will cease with the last payment made prior to the date of the death of the surviving Spouse. Such annual retirement benefit shall be the Actuarial Equivalent of a straight life annuity computed in accordance with Section 6.1, Section 6.2, or Section 6.3, whichever is applicable, payable for the life of the Affected Employee. Any such survivor benefit shall be equal to one hundred percent (100%) of the annual retirement benefit payable during the joint lives of the Affected Employee and his surviving Spouse. |
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The distribution rules of this Section only apply to Grandfathered Amounts. See Appendix B and Appendix C for the distribution rules that apply to other benefits earned under the Plan. |
9.2 | Straight Life Annuity If an Affected Employee does not have a Spouse at the time he attains Retirement, his annual retirement benefit will be payable in the form of a straight life annuity for the life of the Affected Employee and shall be payable in twelve (12) equal monthly payments commencing with the first calendar month after the Affected Employee attains Retirement. Payments will cease with the last payment made prior to the date of death of the Affected Employee. The amount of the annual retirement benefit will be computed in accordance with Section 6.1, Section 6.2, or Section 6.3, whichever is applicable. | |
The distribution rules of this Section only apply to Grandfathered Amounts. See Appendix B and Appendix C for the distribution rules that apply to other benefits earned under the Plan. | ||
9.3 | Spousal Death Within Two Years After Retirement Notwithstanding Section 9.1, if the Spouse of an Affected Employee who is married at the time he attains Retirement and after he commences to receive an annual retirement benefit pursuant to Section 9.1 should predecease such Affected Employee not more than two (2) years after he commences to receive a retirement benefit under Section 9.1, such annual retirement benefit shall, commencing with the first retirement benefit payment payable as of the first day of the calendar month after the calendar month during which the death of his Spouse occurred, be converted to an annual retirement benefit computed pursuant to Section 9.2 in an annual amount equal to the amount of the annual retirement benefit the Affected Employee would have received at the time of and based on his age at the date of his Retirement. | |
The distribution rules of this Section only apply to Grandfathered Amounts. See Appendix B and Appendix C for the distribution rules that apply to other benefits earned under the Plan. | ||
9.4 | Annuity Options | |
An Affected Employee may elect in writing to the Plan Administrator, within the ninety (90) day period prior to his commencement of benefits, to be paid in an optional form of annuity other than that provided under Section 9.1 or 9.2 above. With respect to an Affected Employee who is married at the time he attains Retirement, in no event shall an election of any such optional benefit form be effective unless it is made in connection with the express written consent of his Spouse in a form and manner satisfactory to the Plan Administrator. |
(a) | A married Affected Employee may elect, with the consent of his Spouse, a life annuity pursuant to Section 9.1. |
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(b) | (i) | A married Affected Employee may elect, with the consent of his Spouse an optional form of joint and surviving spousal annuity which is the Actuarial Equivalent of the annuity provided for under Section 9.2 but which provides a reduced monthly benefit to the Affected Employee for his life, and, upon his death, an annuity for the life of his surviving Spouse in a monthly amount equal to one of the following: fifty percent (50%) or seventy-five percent (75%) of the amount payable to the Affected Employee during his life. |
(ii) | This annuity option is available only to an Affected Employee who is married to a Spouse within the meaning of Section 3.26. |
(c) | Ten-Year Certain and Continuous Annuity means an annuity that is the Actuarial Equivalent of the normal form of annuity that provides a reduced monthly benefit to the Affected Employee for life. Upon his death, if he has not received one hundred twenty (120) monthly payments, a monthly benefit, equal to that payable to the Affected Employee during his life, shall be paid to his designated Beneficiary until the number of monthly payments received by the Affected Employee and his designated Beneficiary equals one hundred and twenty (120). The designated Beneficiary may elect an additional Beneficiary to receive any monthly payment then still owing in the event of the death of the first Beneficiary prior to the number of monthly payments equaling one hundred and twenty. If there is ever a circumstance where no Beneficiary is alive for purposes of receiving payments pursuant to this Subsection 9.4(c) of the Plan then the estate of the last named Beneficiary may elect to receive the then Actuarial Equivalent, determined in accordance with Subsection 6.05(c) of the Litton Industries, Inc. Retirement Plan B, of any remaining payments in a lump sum amount which will be payable by the Plan as soon as practicable thereafter. | ||
(d) | Contingent Annuitant Annuity means an annuity that is the Actuarial Equivalent of the form of annuity provided under Section 9.2 which provides a reduced monthly benefit to the Affected Employee for life, and, upon his death, an annuity for the life of his designated Beneficiary in a monthly amount equal to one of the following: fifty percent (50%), seventy-five percent (75%), or one hundred percent (100%) of the amount payable to the Affected Employee during his life. |
The distribution rules of this Section only apply to Grandfathered Amounts. See Appendix B and Appendix C for the distribution rules that apply to other benefits earned under the Plan. | ||
9.5 | Mandatory Cashout Notwithstanding any other provisions in the Plan, Affected Employees with Grandfathered Amounts who have not commenced payment of such benefits prior to January 1, 2008 will be subject to the following rules: |
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(a) | Post-2007 Terminations. Affected Employees who have a complete termination of employment with the Affiliated Companies after 2007 will receive a lump sum distribution of the present value of their Grandfathered Amounts within two months of such termination (without interest), if such present value is below the Code section 402(g) limit in effect at the termination. | ||
(b) | Pre-2008 Terminations. Affected Employees who had a complete termination of employment with the Affiliated Companies before 2008 will receive a lump sum distribution of the present value of their Grandfathered Amounts within two months of the time they commence payment of their underlying qualified pension plan benefits (without interest), if such present value is below the Code section 402(g) limit in effect at the time such payments commence. |
For this purpose, Affiliated Companies shall mean Litton and any other entity related to Litton under the rules of Code section 414. The Affiliated Companies include Northrop Grumman Corporation and its 80%-owned subsidiaries and may include other entities as well. | ||
9.6 | Optional Payment Forms Affected Employees with Grandfathered Amounts shall be permitted to elect (a) or (b) below: |
(a) | To receive their Grandfathered Amounts in any form of distribution available under the Plan at October 3, 2004, provided that form remains available under the underlying qualified pension plan at the time payment of the Grandfathered Amounts commences. The conversion factors for these distribution forms will be based on the factors or basis in effect under this Plan on October 3, 2004. | ||
(b) | To receive their Grandfathered Amounts in any life annuity form not included in (a) above but included in the underlying qualified pension plan distribution options at the time payment of the Grandfathered Amounts commences. The conversion factors will be based on the following actuarial assumptions: | ||
Interest Rate: 6% | |||
Mortality Table: RP-2000 Mortality Table projected 15 years for future standardized cash balance factor |
9.7 | Special Tax Distribution On the date an Affected Employees retirement benefit is reasonably ascertainable within the meaning of IRS regulations under Code section 3121(v)(2), an amount equal to the Affected Employees portion of the FICA tax withholding will be distributed in a single lump sum payment. This payment will be based on all benefits under the Plan, including Grandfathered Amounts. This payment will reduce the Affected Employees future benefit payments under the Plan on an actuarial basis. |
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10.1 | Receipt and Release for Payments Any payment to any Affected Employee, his surviving Spouse or to his legal representative or to any committee appointed for such Affected Employee or surviving Spouse in accordance with the provisions of this Plan shall, to the extent thereof, be in full satisfaction of such benefit claim under the Plan. As a condition precedent to the payment, such Affected Employee, surviving Spouse, legal representative or committee may be required to execute a receipt and release therefor in such form as shall be determined by the Plan Administrator. | |
10.2 | Dispute as to Benefit Payments Upon written notice to the Plan Administrator that there is a dispute as to the proper recipient of any benefits not yet distributed under the Plan, the Plan Administrator may in his sole discretion enter into any arrangement necessary to prevent the benefits from being paid to the wrong party until the dispute shall have been determined by a court of competent jurisdiction or settled by the claimants concerned. | |
10.3 | No Contract of Employment Nothing herein contained shall be construed as giving any Affected Employee the right to be retained in the service of the Company, nor upon dismissal or upon his voluntary Termination of Employment, to have any right or interest in this Plan other than as provided herein. | |
10.4 | Commutation of Benefit If the amount of the annual retirement benefit payable hereunder to any Affected Employee or his surviving Spouse is less than five thousand dollars ($5,000) per year, payment of the Actuarial Equivalent of such payments may be made in a lump sum in full settlement of all sums payable hereunder. (See Section 9.5 for the rule that applies as of January 1, 2008). | |
The distribution rules of this Section only apply to Grandfathered Amounts. See Appendix B and Appendix C for the distribution rules that apply to other benefits earned under the Plan. |
11.1 | Amendment of Plan Litton may, in its sole discretion, terminate, suspend or amend this Plan at any time or from time to time, in whole or in part for any reason. This includes the right to amend or eliminate any of the provisions of the Plan with respect to lump sum distributions, including any lump sum calculation factors, whether or not an Affected Employee has already made a lump sum election. Notwithstanding the foregoing, no amendment or termination of the Plan shall reduce the amount of an Affected Employees accrued benefit under the Plan as of the date of such amendment or termination. | |
No amendment of the Plan shall apply to the Grandfathered Amounts, unless the amendment specifically provides that it applies to such amounts. The purpose of this restriction is to prevent a Plan amendment from resulting in an inadvertent material modification to the Grandfathered Amounts. |
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11.2 | Freezing Plan Benefits The Company intends and expects to continue the Plan indefinitely, but necessarily reserves the right at any time to discontinue, in whole or part, future benefits under the Plan. No Affected Employee shall have any rights to benefits beyond the freeze date. Solely for purposes of computing the Affected Employees vesting under Section 6.4, Year(s) of Service, if any, with the Company after the freeze date shall be taken into account. | |
11.3 | Termination of Plan The Company intends and expects to continue the Plan indefinitely, but necessarily reserves the right at any time or times to terminate the Plan (including the partial termination of the Plan). If the Plan is so terminated and is not continued by a successor employer or merged into another plan of the Company or a successor employer, each Affected Employee who is employed by the Company at such time shall be vested one hundred percent (100%) in his annual retirement benefit, notwithstanding the actual number of his Year(s) of Service. | |
11.4 | Merger or Consolidation In the event of any merger or consolidation of the Plan with, any other plan of deferred compensation maintained or to be established for the benefit of all or some of the Affected Employees of this Plan, each Affected Employee shall (if either this Plan or the other Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated). |
12.1 | Plan Administrator |
(a) | General Except as otherwise provided by Section 13.6, a Plan Administrator appointed by and serving at the pleasure of the Board of the Company shall be responsible for the supervision and control of the operation and administration of the Plan. The Plan Administrator shall not have the right to alter or change any terms of the Plan, such right being retained solely by the Board of the Company. | ||
(b) | Specific Powers and Duties The Plan Administrator shall have all powers and duties, express and implied, necessary to carry out the supervision and control of the Plan, as provided above, which shall include, but not by way of limitation, the following: |
1. | To interpret the Plan and to decide any and all matters arising hereunder; including the right to remedy possible ambiguities, inconsistencies or omissions; provided, however, that all such interpretations and decisions shall be applied in a uniform manner to all Affected Employees similarly situated; | ||
2. | To compute the amount of retirement benefit which shall be payable to any Affected Employee, Spouse, or Beneficiary in accordance with the provisions of the Plan; |
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3. | To authorize payments under the Plan; and | ||
4. | To establish a claims procedure to provide each Affected Employee or Beneficiary a full and fair review of any denial, in whole or part, of a claim for benefits. |
13.1 | Change of Control On or after a Change of Control, no additional Affected Employees shall be provided benefits under the Plan. | |
13.2 | Eligibility for Retirement Benefits |
(a) | Change of Control Except as otherwise provided by Section 13.2(e) below, as of a Change of Control, an Affected Employee shall be fully vested in his or her benefit in accordance with Section 13.3 and there shall be a waiver of any condition concerning eligibility for payment of an Annual Benefit that requires (1) the filing of any election, (2) the attainment of a specified age, (3) an agreement not to engage in competitive activities with the Company, (4) satisfaction of any other terms or conditions or the application of any benefit reductions otherwise provided, and (5) termination of employment with the Company in order to begin receiving an Annual Benefit. | ||
(b) | Benefits Accrued After a Change of Control The provisions of Section 13.2(d) above shall apply to any benefits accrued by an Affected Employee after a Change of Control except that the waiver of the conditions of having to file an appropriate election and to incur a termination of employment with the Company shall not apply with respect to any benefits accrued by an Affected Employee after a Change of Control. |
13.3 | Vesting Change of Control Upon a Change of Control and thereafter, an Affected Employee shall be vested in his or her Annual Benefit regardless of his or her years of Year(s) of Service or age. | |
13.4 | Benefit Forms after April 2, 2001 This Section applies to benefits paid under this Plan after April 3, 2001. It applies to a Participants entire Plan benefit, regardless of when it accrued. |
(a) | Affected Employees who had Attained Retirement as of April 3, 2001 . For any Affected Employee (or beneficiary of an Affected Employee) who had attained Retirement as of April 3, 2001, benefit payments under this Plan will continue to be paid in the benefit form described in (1) below, unless he or she elects otherwise under (2) below. |
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(1) | Default Form . Unless otherwise elected under (2), a Participant described in (a) will continue to receive his or her Plan benefits in the form in which they were being paid as of April 2, 2001. | ||
(2) | Alternative Form . A Participant described in (a) may receive his or her Plan benefits in a lump sum if he or she timely elects to do so in a manner prescribed by the Plan Administrator and subject to the Plan Administrators discretion to pay the benefit in another form. |
(b) | Active Affected Employees as of April 3, 2001 Who Terminate Before October 1, 2003 . For any Affected Employee who was accruing a benefit under the Plan as of April 3, 2001 and terminates employment with the Northrop Grumman Corporation controlled group before October 1, 2003, Plan benefits accrued before April 3, 2001 are payable in the benefit form described in (1) below, unless he or she elects otherwise under (2) below. Plan benefits accrued after April 2, 2001 are payable only under (1) for Affected Employees described in this subsection. |
(1) | Default Form . Unless otherwise elected under (2), an Affected Employee described in (b) will receive his or her Plan benefits in a lump sum. | ||
(2) | Alternative Form . An Affected Employee described in (b) may receive his or her Plan benefits in a benefit form described in Section 9 if he or she timely elects to do so in a manner prescribed by the Plan Administrator. |
(c) | Active Affected Employees as of April 3, 2001 Who Have a Termination of Employment After September 30, 2003 . For any Affected Employee who was actively accruing a Plan benefit as of April 3, 2001 and who terminates employment with the Northrop Grumman Corporation controlled group after September 30, 2003, Plan benefits accrued after April 2, 2001 are payable under Section 9.1 or 9.2, whichever applies, unless the Participant timely elects, in accordance with the Plan Administrators rules, to receive Plan benefits in another form described in Section 9 or one of the forms provided in the Litton Industries, Inc. Restoration Plan 2. Plan benefits accrued before April 3, 2001 are payable in the benefit form described in (b)(1), unless he or she elects otherwise under (b)(2). |
(a) | Mandatory Contribution Upon a Change of Control, the Company shall make Mandatory Contributions to the Trustee by wire transfer in immediately available funds of United States dollars. A Mandatory Contribution shall be made as soon as possible upon the Change of Control, but in no event more than ten days from the date of the Change of Control. In addition, a Mandatory Contribution shall be |
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made every six months thereafter, provided that the calculation of the Mandatory Contribution on the sixth-month date yields a positive dollar amount. Mandatory Contributions shall continue to be required semi-annually until all Annual Benefits have been paid to all Affected Employees and Beneficiaries. The Company shall immediately notify the Committee in writing when payment of the Mandatory Contribution is made to the Trustee. | |||
(b) | Continuing Obligation of Company Subsequent to the payment of a Mandatory Contribution, Affected Employees, retired Affected Employees and, to the extent they are entitled to benefit payments, their Beneficiaries shall be paid benefits under the Plan from the Trust pursuant to the Trust Agreement, but in no event shall the making of a Mandatory Contribution relieve the Company of its obligation under this Plan. |
13.6 | Administrative Procedures These Administrative Procedures only take effect upon and after Change of Control. In all other cases, the Administrative Procedures of Section 12 of the Plan shall be those used. |
(a) | Notice of Denial If the Committee determines that any person who had submitted a claim for payment of benefits under the Plan is not eligible for payment of benefits or, if applicable, is not eligible for payment of benefits in the form requested, then the Committee shall, within a reasonable period of time, but no later than 90 days after receipt of the written claim, notify the claimant of the denial of the claim. Such notice of denial: (1) shall be in writing; (2) shall be written in a manner calculated to be understood by the claimant; and (3) shall contain (A) the specific reason or reasons for denial of claim; (B) a specific reference to the pertinent Plan provisions or administrative rules and regulations upon which the denial is based; (C) a description of any additional material or information necessary for the claimant to perfect the claim; and (D) an explanation of the Plans appeal procedures. | ||
(b) | Review Procedures Within 90 days of the receipt by the claimant of the written notice of denial of the claim, or if the claim has not been granted or denied within 120 days of the claimants original claim, the claimant may file a written request with the Board that it conduct a full and fair review of the denial of the claimants claim for benefits. The claimants written request must include a statement of the grounds on which the claimant appeals the original claim denial. The Board shall deliver to the claimant a written decision on the claim promptly, but not later than 60 days after the receipt of the claimants request for review, except that if there are special circumstances that require an extension of time for processing, the 60-day period shall be extended to 120 days, in which case written notice of the extension shall be furnished to the claimant prior to the end of the 60-day period. |
13.7 | Enforcement |
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(a) | Right to Enforce The Companys obligations under the Plan may be enforced by the filing of an action by any Affected Employee or by any Affected Employees Spouse, Beneficiary, or personal representative. | ||
(b) | Attorneys Fees and Costs If, on or after a Change of Control, any claimant is denied a claim for benefits under the Plan, and the claimant requests a review under the procedures described in Section 13.6(b), or files a claim in a court of law or any other tribunal to enforce any obligation of the Company under this Plan, which is based on a failure to administer the Plan in accordance with its terms, including the requirement that the Company make a Mandatory Contribution to the Trust, the Company shall pay such claimant all attorneys fees and costs incurred in connection with the claim, regardless of the outcome of the claim, provided that the claim is not frivolous. All attorneys fees and costs under this Section 13.7(b) shall be paid by the Company as they are incurred by the claimant, but no later than thirty (30) days from the date that the claimant submits a bill or other statement to the Company. | ||
(c) | Interest If any claimant prevails in a review procedure described in Section 13.7(b), or if a claimant prevails in an action in a court of law or any other tribunal to enforce the payment of benefits under the Plan, the Company shall pay interest to the claimant on any unpaid benefits accruing from the date that benefit payments should have commenced and continuing until the date that such owed and unpaid benefits are paid to the claimant in full. For purposes of the preceding sentence, interest shall accrue at an annual rate equal to one percent, plus the prime rate reported by the Wall Street Journal. |
NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation, Benefits & International | ||||
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1.1 | The Participating Divisions and Subsidiaries which comprise the Company and their respective participating dates are as described in Section 1.3. | |
1.2 | When the name or status of a Participating Division or Subsidiary is changed, the change shall be deemed to have been made automatically in the Plan. |
1.3 | Participating Division and Subsidiaries | Participating Date | ||||||
Litton Industries Inc.
|
||||||||
Corporate Office
|
January 1, 1987 | |||||||
Erie Marine
|
January 1, 1987 | |||||||
Ingalls Shipbuilding, Inc. Salaried Employees
|
January 1, 1987 | |||||||
Litton Italia, S.P.A.
|
January 1, 1987 | |||||||
Litton International Development Corporation
|
||||||||
Data Command Systems
|
January 1, 1987 | |||||||
Litton Worldwide Services
|
||||||||
Aero Products Division
|
January 1, 1987 | |||||||
Litton Korea, Ltd.
|
||||||||
All U.S. Employees
|
January 1, 1987 | |||||||
Litton Precision Products International U.K.
|
||||||||
All U.S. Employees
|
January 1, 1987 | |||||||
Litton Systems, Inc.
|
||||||||
Advanced Circuitry
|
January 1, 1987 | |||||||
Aero Products
|
January 1, 1987 | |||||||
Airtron Division
|
January 1, 1987 | |||||||
Amecom Division
|
January 1, 1987 | |||||||
Clifton Encoder
|
January 1, 1987 | |||||||
Clifton Instruments & Life Support
|
||||||||
Non-Union
|
January 1, 1987 | |||||||
Union
|
May 1, 1987 | |||||||
Clifton Precision
|
January 1, 1987 | |||||||
Data Systems
|
January 1, 1987 | |||||||
Electronic Devices
|
January 1, 1987 | |||||||
Guidance and Control Systems Division
|
January 1, 1987 | |||||||
Kester Solder
|
January 1, 1987 | |||||||
Laser Systems
|
January 1, 1987 |
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1.3 | Participating Division and Subsidiaries | Participating Date | ||||||
Litton Computer Services
|
||||||||
Woodland Hills, Mountain View, Reston
|
January 1, 1987 | |||||||
Lexington
|
August 3, 1987 | |||||||
Poly-Scientific
|
January 1, 1987 | |||||||
Potentiometer
|
January 1, 1987 | |||||||
Systems Administration
|
January 1, 1987 | |||||||
VEAM
|
January 1, 1987 | |||||||
Winchester Electronics
|
January 1, 1987 | |||||||
Winchester/USECO
|
January 1, 1987 | |||||||
Litton Industrial Automation Systems, Inc.
|
||||||||
Automated Guided Vehicles
|
January 1, 1987 | |||||||
Automated Systems, Hebron, Kentucky
|
January 1, 1987 | |||||||
Diamond & CBN Products
|
January 1, 1987 | |||||||
Engineered Systems
|
January 1, 1987 | |||||||
Industrial Automation Systems
|
January 1, 1987 | |||||||
Integrated Automation
|
September 30, 1987 | |||||||
Integrated Systems, Florence, Kentucky
|
January 1, 1987 | |||||||
Kimball Systems
|
January 1, 1987 | |||||||
Lamb Technicon
|
July 1, 1987 | |||||||
Litton Industrial Services, Inc.
|
January 1, 1987 | |||||||
Lucas Machine
|
January 1, 1987 | |||||||
New Britain Machine
|
January 1, 1987 | |||||||
Process Conveyor
|
January 1, 1987 | |||||||
Software Systems
|
January 1, 1987 | |||||||
Unit Handling Systems/Conveyor Systems
|
January 1, 1987 |
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ITEM | PAYMENT ASSUMPTIONS | OTHER REQUIRED DATA | ||
Age at Retirement (for accrued benefits)
|
Current Age | |||
|
||||
Mortality (Post-retirement only)
|
83 GAM (Unisex) | |||
|
||||
Present Value Interest Rate
|
See Note 1 | Calculation Date | ||
|
||||
Retirement Age
|
Earliest ages to receive unreduced benefits | |||
|
||||
Form of Payment
|
Single Life Annuity/Lump Sum | For retirees with other than Life Annuity: Spouse DOB; J&S %; 10-Year certain data (commencement date) | ||
|
||||
Interest Rate of Annuity Equivalent
|
See Note 1 | Litton Industries, Inc. Retirement Plan B, Interest Rate, Qualified Plan J & S Factor Tables, LRP and FSSP Annuity Equivalent factors. |
- 23 -
FORMULA
|
Retirement Account Restoration Plan Benefit plus the Savings Account Restoration Plan Benefit both multiplied by the Present Value Factor | |
|
||
WHERE
|
Part I Restoration Plan Benefit equals 85% multiplied by the Retirement Account Restricted Amount minus (Retirement Account Annuity Equivalent Factor for age at Retirement multiplied by the Retirement Account Restricted Amount with Interest) | |
|
||
|
Savings Account Annuity Equivalent Factor for age at Retirement multiplied by the Savings Account Restricted Amount with Interest. | |
|
||
|
Present Value Factor equals Deferred to Retirement Age Actuarial Factor Based on the Present Value Interest Rate and the Form of Payment Specified Above. |
Note 1: | For benefits payable as a lump sum, the interest rate shall be the average yield on non-callable, coupon 10-Year AAA California Municipal Bonds offered to retail investors by Bonds Online (http://www.bonds-online.com) as of 1p.m. EST immediately after the completion of the Change of Control. For benefits payable as an annuity, the interest rate shall be the discount rate used for funding purposes by the Litton Industries, Inc. Retirement Plan B as of the Change of Control Date. |
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B.01 | Election. Affected Employees scheduled to commence payments during 2005 may elect to receive both pre-2005 benefit accruals and 2005 benefit accruals in any optional form of benefit available under the Plan as of December 31, 2004. Affected Employees electing optional forms of benefits under this provision will commence payments on the Affected Employees selected benefit commencement date. | |
B.02 | 2005 Commencements. Pursuant to IRS Notice 2005-1, Q&A-19 & Q&A-20, Affected Employees commencing payments in 2005 from the Plan may elect a form of distribution from among those available under the Plan on December 31, 2004, and benefit payments shall begin at the time elected by the Affected Employee. |
(a) | Key Employees. A Key Employee Separating from Service on or after July 1, 2005, with Plan distributions subject to Code section 409A scheduled to be paid in 2006 and within six months of his date of Separation from Service, shall have such distributions delayed for six months from the Key Employees date of Separation from Service. The delayed distributions shall be paid as a single sum with interest at the end of the six month period and Plan distributions will resume as scheduled at such time. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such period (i.e., the rate may change in the event the period spans two calendar years). Alternatively, the Key Employee may elect under IRS Notice 2005-1, Q&A-20 to have such distributions accelerated and paid in 2005 without the interest adjustment, provided, such election is made in 2005. | ||
(b) | Lump Sum Option. During 2005, a temporary immediate lump sum feature shall be available as follows: |
(i) | In order to elect a lump sum payment pursuant to IRS Notice 2005-1, Q&A-20, an Affected Employee must be an elected or appointed officer of Litton and eligible to commence payments under the underlying qualified pension plan on or after June 1, 2005 and on or before December 1, 2005; | ||
(ii) | The lump sum payment shall be made in 2005 as soon as feasible after the election; and | ||
(iii) | Interest and mortality assumptions and methodology for calculating lump sum amount shall be based on the Plans procedures for calculating lump sums as of December 31, 2004. |
B.03 | 2006 and 2007 Commencements. Pursuant to IRS transition relief, for all benefit commencement dates in 2006 and 2007 (provided election is made in 2006 or 2007), |
- 25 -
distribution of Plan benefits subject to Code section 409A shall begin 12 months after the later of: (a) the Affected Employees benefit election date, or (b) the underlying qualified pension plan benefit commencement date (as specified in the Affected Employees benefit election form). Payments delayed during this 12-month period will be paid at the end of the period with interest. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such period (i.e., the rate may change in the event the period spans two calendar years). |
- 26 -
C.01 | Time of Distribution. Subject to the special rules provided in this Appendix C, distributions to an Affected Employee of his vested retirement benefit shall commence as of the Payment Date. | |
C.02 | Special Rule for Key Employees. If an Affected Employee is a Key Employee and age 55 or older at his Separation from Service, distributions to the Affected Employee shall commence on the first day of the seventh month following the date of his Separation from Service (or, if earlier, the date of the Affected Employees death). Amounts otherwise payable to the Affected Employee during such period of delay shall be accumulated and paid on the first day of the seventh month following the Affected Employees Separation from Service, along with interest on the delayed payments. Interest shall be computed using the retroactive annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis during such delay (i.e., the rate may change in the event the delay spans two calendar years). | |
C.03 | Forms of Distribution. Subject to the special rules provided in this Appendix C, an Affected Employees vested retirement benefit shall be distributed in the form of a single life annuity. However, an Affected Employee may elect an optional form of benefit up until the Payment Date. The optional forms of payment are: |
(a) | 50% joint and survivor annuity | ||
(b) | 75% joint and survivor annuity | ||
(c) | 100% joint and survivor annuity. |
C.04 | Death. If a married Affected Employee dies before the Payment Date, a death benefit will be payable to the Affected Employees spouse commencing 90 days after the Affected Employees death. The death benefit will be a single life annuity in an amount equal to the survivor portion of an Affected Employees vested retirement benefit based on a 100% joint and survivor annuity determined on the Affected Employees date of death. This |
- 27 -
benefit is also payable to an Affected Employees domestic partner who is properly registered with Litton in accordance with procedures established by Litton. | ||
C.05 | Actuarial Assumptions. Except as provided in Section C.06, all forms of payment under this Appendix C shall be actuarially equivalent life annuity forms of payment, and all conversions from one such form to another shall be based on the following actuarial assumptions: | |
Interest Rate: 6% | ||
Mortality Table: RP-2000 Mortality Table projected 15 years for future standardized cash balance factors | ||
C.06 | Accelerated Lump Sum Payouts. |
(a) | Post-2007 Separations. Notwithstanding the provisions of this Appendix C, for Affected Employees who Separate from Service on or after January 1, 2008, if the present value of (a) the vested portion of an Affected Employees retirement benefit and (b) other vested amounts under nonaccount balance plans that are aggregated with the retirement benefit under Code section 409A, determined on the first of the month coincident with or following the date of his Separation from Service, is less than or equal to $25,000, such benefit amount shall be distributed to the Affected Employee (or his spouse or domestic partner, if applicable) in a lump sum payment. Subject to the special timing rule for Key Employees under Section C.02, the lump sum payment shall be made within 90 days after the first of the month coincident with or following the date of the Affected Employees Separation from Service. | ||
(b) | Pre-2008 Separations. Notwithstanding the provisions of this Appendix C, for Affected Employees who Separate from Service before January 1, 2008, if the present value of (a) the vested portion of an Affected Employees retirement benefit and (b) other vested amounts under nonaccount balance plans that are aggregated with the retirement benefit under Code section 409A, determined on the first of the month coincident with or following the date the Affected Employee attains age 55, is less than or equal to $25,000, such benefit amount shall be distributed to the Affected Employee (or his spouse or domestic partner, if applicable) in a lump sum payment within 90 days after the first of the month coincident with or following the date the Affected Employee attains age 55, but no earlier that January 1, 2008. | ||
(c) | Conflicts of Interest. The present value of an Affected Employees vested retirement benefit shall also be payable in an immediate lump sum to the extent required under conflict of interest rules for government service and permissible under Code section 409A. | ||
(d) | Present Value Calculation. The conversion of an Affected Employees retirement benefit into a lump sum payment and the present value calculations under this Section C.06 shall be based on the actuarial assumptions in effect under the |
- 28 -
Northrop Grumman Pension Plan for purposes of calculating lump sum amounts, and will be based on the Affected Employees immediate benefit if the Affected Employee is 55 or older at Separation from Service. Otherwise, the calculation will be based on the benefit amount the Affected Employee will be eligible to receive at age 55. |
C.07 | Effect of Early Taxation. If the Affected Employees benefits under the Plan are includible in income pursuant to Code section 409A, such benefits shall be distributed immediately to the Affected Employee. | |
C.08 | Permitted Delays. Notwithstanding the foregoing, any payment to an Affected Employee under the Plan shall be delayed upon Littons reasonable anticipation of one or more of the following events: |
(a) | Littons deduction with respect to such payment would be eliminated by application of Code section 162(m); or | ||
(b) | The making of the payment would violate Federal securities laws or other applicable law; |
- 29 -
1. | In General . This Appendix provides special rules concerning the acquisition by Northrop Grumman Corporation of Litton Industries, Inc. (the Litton Acquisition). |
(a) | Purpose . This Appendix prevents employees of the Northrop Grumman Group from receiving coverage or any credit for service or compensation under this Plan until the Plan and this Appendix are explicitly amended to provide otherwise. | ||
(b) | General Override . The provisions of this Appendix override any contrary provisions elsewhere in the documents governing the Plan, except to the extent prohibited by change-in-control provisions. | ||
(c) | Definitions . For purposes of this Appendix: |
(1) | The term Northrop Grumman Group generally means Northrop Grumman Corporation and any entity affiliated with it under sections 414(b), (c), (m) or (o) of the Internal Revenue Code. |
(A) | With reference to periods before the Litton Acquisition Date, the term Northrop Grumman Group means the entire affiliated group. | ||
(B) | With reference to periods after the Litton Acquisition Date, the term Northrop Grumman Group means the entire affiliated group, but not including Litton Industries, Inc. (and any successor entity) and its subsidiaries. |
(2) | The term Litton Acquisition Date means the date on which Northrop Grumman Corporation purchased a majority interest in the shares of Litton Industries, Inc. pursuant to the exchange offer filed with the Securities and Exchange Commission on Form S-4. |
2. | Acquisition of Litton Industries, Inc . Effective as of the Litton Acquisition Date, Litton Industries, Inc. was acquired and became a subsidiary of Northrop Grumman Corporation. | |
3. | Plan Sponsor . As of the Litton Acquisition Date, Northrop Grumman Corporation adopted and became the sponsor of the Plan. | |
4. | Corporate Authority . During the period on and after the Litton Acquisition Date, all Plan references to the Board of Directors of Litton Industries, Inc. will instead be deemed to refer to the Board of Directors of Northrop Grumman Corporation. | |
5. | Amendment and Termination Authority . As of the Litton Acquisition Date: |
- 30 -
(a) | Northrop Grumman Corporation through its Board of Directors will have sole authority to amend the Plan in its discretion. This authority may be delegated and redelegated. | ||
(b) | Northrop Grumman Corporation will have sole authority to terminate the Plan. |
6. | Coverage . No individuals who were employees of the Northrop Grumman Group immediately before the Litton Acquisition Date may participate in this Plan. No individuals who became employees of the Northrop Grumman Group after the Litton Acquisition Date may participate in this Plan. | |
7. | Service With the Northrop Grumman Group . Service with the Northrop Grumman Group before or after the Litton Acquisition Date will not be counted as service for any purpose. | |
8. | Compensation . No compensation for services performed for the Northrop Grumman Group will be treated as compensation under this Plan. | |
9. | Nonduplication . Employees are not covered by this Plan for any Plan Year or portion of a Plan Year if they are actively participating under a similar plan of the Northrop Grumman Group. |
(a) | Solely for purposes of this section, employees are active participants in another plan if they are generally eligible to make or receive contributions or accrue benefits under the plan, or would be, but for limits in the plan. | ||
(b) | If an employee could be covered by two plans, both of which include this provision (or a similar provision), the plan administrators will resolve the discrepancy to allow eligibility for one plan or another but not both. |
10. | Termination of Employment . No termination of employment will be deemed to occur as a result of the Litton Acquisition, any corporate reorganization incident to the Litton Acquisition, any later liquidation of Litton Industries, Inc. (or any successor entity) or its subsidiaries or any transfer of assets or liabilities between members of the group consisting of Northrop Grumman Corporation and its subsidiaries. |
(a) | Similarly, there will be no separation from service or severance from service or event described by a similar term. | ||
(b) | The provisions of this Section are not intended to modify any service-counting provisions in the Plan, to extend service credits when they would not otherwise be given, nor to override Section 7 above. |
- 31 -
1. | In General . This Appendix gives responsibility for investment and trust matters (other than trustee duties) in connection with the Plan to an Investment Committee, as described below. The provisions of this Appendix override any contrary provision elsewhere in the documents governing the Plan, unless prohibited by change-in-control provisions or collective bargaining agreements. | |
2. | Investment Fiduciary . The named fiduciary for investment and trust matters (other than trustee duties) is the Investment Committee. | |
3. | The Investment Committee . The Investment Committee shall consist of not less than three persons appointed from time to time by the Board of Directors described in (a) (for purposes of this Appendix, the Board) or its delegate. |
(a) | The Board for purposes of this Appendix means the Board of Directors with any power to amend the Plan. If a corporation rather than a Board of Directors has the power to amend, then Board refers to the Board of Directors of that corporation. | ||
(b) | The members of the Investment Committee shall elect one of their members as Chairman and shall appoint a Secretary and such other officers as the Investment Committee may deem necessary. | ||
(c) | The Investment Committee may employ such advisors, including investment advisors, as it may require in carrying out the provisions hereof. | ||
(d) | Except as otherwise provided in these resolutions, each member of the Investment Committee shall continue in office until the expiration of three years from the date of his or her latest appointment or reappointment to the Committee. A member may be reappointed annually. | ||
(e) | If at the end of his or her latest three year term, a member is not reappointed, he or she will continue to serve until the date his or her successor is appointed. | ||
(f) | A member may resign at any time by delivering a written resignation to the Corporate Secretary of Northrop Grumman Corporation and to the Secretary of the Investment Committee. | ||
(g) | A member may be removed by the Board at any time for any reason. |
4. | Alternate Members . The Board may from time to time appoint one or more persons as alternate members of the Investment Committee to serve in the absence of members of the Investment Committee, in the manner hereinafter stated, with the same effect as if they were members. |
(a) | The Chairman of the Investment Committee, in his or her discretion, shall designate which of the alternate members shall attend any particular meeting of |
- 32 -
the Investment Committee for the purpose of obtaining a quorum or full attendance as the Chairman may elect. | |||
(b) | Each alternate member shall have all the rights, powers and obligations of a member in respect to the business of meetings which he or she so attends. |
5. | Actions by the Committee . A majority in number of the members of the Investment Committee at the time in office, represented at a meeting by members or alternate members or both, shall constitute a quorum for the transaction of business. Any determination or action of the Investment Committee, including allocations and delegations of responsibilities, may be made or taken by a majority of a quorum present at any meeting thereof, or without a meeting, by resolution or written memorandum signed by a majority of the members then in office. | |
6. | Investment Responsibilities . |
(a) | The Investment Committee, in its capacity as named fiduciary for investment matters, may, in its discretion, appoint one or more investment managers who shall have, until terminated by the Investment Committee, the power to manage, acquire and dispose of all or any part of the assets of the Plans allocated to an investment manager by the Investment Committee. | ||
(b) | The Investment Committee shall have the power to hire and terminate trustees. | ||
(c) | The Investment Committee shall periodically review and evaluate the investment performance of each trustee and investment manager and shall advise the Board of such review and evaluation. | ||
(d) | In the event that investment powers are divided among two or more trustees or investment managers, the Investment Committee shall formulate investment policies for such trustees and investment managers to diversify the investments of the Plans so as to minimize the risk of large losses, unless under the circumstances it is prudent not to do so. | ||
(e) | The Investment Committee shall establish a funding policy and method to carry out the Plans objectives. This procedure is to enable the Plans fiduciaries to determine the Plans short- and long-term financial needs and to communicate these requirements to the appropriate persons. |
7. | Liability and Indemnity . |
(a) | No Investment Committee member who has a fiduciary responsibility, or to whom such responsibility is allocated, as provided in these resolutions, by appointment or otherwise, shall be liable for any act or omission or investment policy of any other fiduciary except as provided in Section 405 of Employee Retirement Income Security Act of 1974. |
- 33 -
(b) | To the extent permitted by law, Northrop Grumman Corporation shall indemnify and hold harmless members of the Board and the Investment Committee and employees of Northrop Grumman Corporation or its subsidiaries who act for the Investment Committee, as well as former members and former employees, with respect to their investment responsibilities. |
- 34 -
1. | In General . This Appendix gives responsibility for plan administration (other than investment and trust matters) to an Administrative Committee, as described below. The provisions of this Appendix override any contrary provision elsewhere in the documents governing the Plan, except to the extent prohibited by change-in-control provisions or collective bargaining agreements. | |
2. | Plan Administrator . The general administration of the Plan is the responsibility of the Administrative Committee. The Committee is the plan administrator, and the Committee and each of its members are named fiduciaries. Committee members and all other Plan fiduciaries may serve in more than one fiduciary capacity with respect to the Plan. | |
3. | The Administrative Committee . The Administrative Committee consists of at least three members appointed by the Board of Directors described in (a) (for purposes of this Appendix, the Board) or its delegate. The members of the Committee shall serve without compensation for such service, unless otherwise determined by the Board. |
(a) | The Board for purposes of this Appendix means the Board of Directors with any power to amend the Plan. If a corporation rather than a Board of Directors has the power to amend, then Board refers to the Board of Directors of that corporation. | ||
(b) | Except as otherwise provided in this Appendix, each member of the Committee shall continue in office until the expiration of 3 years from the date of his or her latest appointment or reappointment to the Committee. A member may be reappointed. | ||
(c) | If at the end of his or her latest term as a member of the Committee, a member is not reappointed, he or she will continue to serve on the Committee until the date his or her successor is appointed. | ||
(d) | A member may be removed by the Board at any time and for any reason. |
4 | Resignation of Committee Members . A member of the Administrative Committee may resign at any time by delivering a written resignation to the Secretary of the corporation and to the Secretary of the Committee. The members resignation will be effective as of the date of delivery or, if later, the date specified in the notice of resignation. | |
5. | Conduct of Business . The Administrative Committee shall elect a Chairman from among its members and a Secretary who may or may not be a member. The Committee shall conduct its business according to the provisions of this Appendix and shall hold meetings from time to time in any convenient location. | |
6. | Quorum . A majority of all of the members of the Administrative Committee constitutes a quorum and has power to act for the entire Committee. |
- 35 -
7. | Voting . All actions taken by the Administrative Committee shall be by majority vote of the members attending a meeting, whether physically present or through remote communications. In addition, actions may be taken by written consent of a majority of the Committee members without a meeting. The agreement or disagreement of any member may be by means of any form of written or oral communications. | |
8. | Records and Reports of the Committee . The Administrative Committee shall keep such written records as it shall deem necessary or proper, which records shall be open to inspection by the Board. | |
9. | Powers of the Committee . The Administrative Committee shall have all powers necessary or incident to its office as plan administrator. Such powers include, but are not limited to, full discretionary authority to: |
(a) | prescribe rules for the operation of the Plan; | ||
(b) | determine eligibility; | ||
(c) | comply with the requirements of reporting and disclosure under ERISA and any other applicable law, and to prepare and distribute other communications to participants (and, if applicable, beneficiaries) as a part of Plan operations; | ||
(d) | prescribe forms to facilitate the operation of the Plan; | ||
(e) | secure government approvals for the Plan (if applicable); | ||
(f) | construe and interpret the terms of the Plan, including the power to remedy possible ambiguities, inconsistencies or omissions, and to determine the facts underlying any claim for benefits; | ||
(g) | determine the amount of benefits, and authorize payments from the trust; | ||
(h) | maintain records; | ||
(i) | litigate, settle claims, and respond to and comply with court proceedings and orders on the Plans behalf; | ||
(j) | enter into contracts on the Plans behalf; | ||
(k) | employ counsel and others to render advice about any responsibility that the Committee has under the Plan; | ||
(l) | exercise all other powers given to the plan administrator under other provisions of the Plan. |
10. | Allocation or Delegation of Duties and Responsibilities . The Administrative Committee and the Board may: |
(a) | Employ agents to carry out nonfiduciary responsibilities; |
- 36 -
(b) | Employ agents to carry out fiduciary responsibilities (other than trustee responsibilities as defined in section 405(c)(3) of ERISA) under the rules of section 11 of this Appendix; | ||
(c) | Consult with counsel, who may be counsel to Northrop Grumman Corporation; | ||
(d) | Provide for the allocation of fiduciary responsibilities (other than trustee responsibilities as defined in section 405(c)(3) of ERISA) among their members under the rules of section 11 of this Appendix; and | ||
(e) | In particular, designate one or more officers as having responsibility for designing and implementing administrative procedures for the Plan. |
11. | Procedure for the Allocation or Delegation of Fiduciary Duties . The rules of this section of the Appendix are as follows: |
(a) | Any allocation or delegation of fiduciary responsibilities must be approved by majority vote of the members of the Administrative Committee, in a resolution approved by the majority. | ||
(b) | The vote cast by each member of the Administrative Committee for or against the adoption of such resolution must be recorded and made a part of the written record of the proceedings. | ||
(c) | Any delegation or allocation of fiduciary responsibilities may be changed or ended only under the rules of (a) and (b) of this section of the Appendix. |
12. | Expenses of the Plan . All reasonable and proper expenses of administration of the Plan including counsel fees will be paid by the employers participating in the Plan. | |
13. | Indemnification . Northrop Grumman Corporation agrees to indemnify and reimburse, to the fullest extent permitted by law, members and former members of the Board; members and former members of the Administrative Committee; employees and former employees of Northrop Grumman Corporation or its subsidiaries who act (or acted) for the Committee, Northrop Grumman Corporation or another employer participating in the Plan for any and all expenses, liabilities, or losses arising out of any act or omission relating to the rendition of services for or the management and administration of the Plan, except in instances of gross misconduct. | |
14. | Extensions of Time Periods . For good cause shown, the Administrative Committee may extend any period set forth in the Plan for taking any action required of any participant or beneficiary to the extent permitted by law. | |
15. | Claims Procedures . The standardized Northrop Grumman Nonqualified Retirement Plans Claims and Appeals Procedures shall apply in handling claims and appeals under this Plan. |
- 37 -
16. | Qualified Domestic Relations Orders . All or a portion of an Affected Employees benefit may be paid to another person as specified in a domestic relations order that the Administrative Committee determines is qualified (a Qualified Domestic Relations Order). For this purpose, a Qualified Domestic Relations Order means a judgment, decree, or order (including the approval of a settlement agreement) which is: |
(1) | issued pursuant to a States domestic relations law; | ||
(2) | relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of the Affected Employee; | ||
(3) | creates or recognizes the right of a spouse, former spouse, child or other dependent of the Affected Employee to receive all or a portion of the Affected Employees benefits under the Plan; and | ||
(4) | meets such other requirements established by the Administrative Committee. |
The Administrative Committee shall determine whether any document received by it is a Qualified Domestic Relations Order. In making this determination, the Administrative Committee may consider the rules applicable to domestic relations orders under Code section 414(p) and ERISA section 206(d), and such other rules and procedures as it deems relevant. | ||
17. | Amendments . The Administrative Committee may amend the Plan through written resolution to make the changes identified in subsection (a). Any amendments must be made in accordance with the rules of subsections (b), (c) and (d). |
(a) | The Committee may amend the Plan: |
(1) | to the extent necessary to keep the Plan in compliance with law; | ||
(2) | to make clarifying changes; | ||
(3) | to correct drafting errors; | ||
(4) | to otherwise conform the Plan documents to the companys intent; | ||
(5) | to change the participation and eligibility provisions; | ||
(6) | to change plan definitions, formulas or employee transfer rules; | ||
(7) | with respect to administrative, procedural and technical matters including benefit calculation procedures, distribution elections and timing, other elections, waivers, notices, and other ministerial matters; and | ||
(8) | with respect to management of funds. |
- 38 -
(b) | Before adopting any Plan amendment, the Committee must obtain: |
(1) | a cost analysis of the proposed amendment; | ||
(2) | a legal opinion that the amendment does not violate ERISA or other applicable legal requirements; | ||
(3) | a tax opinion that the amendment will not result in the Plans disqualification; | ||
(4) | approval of the amendment from the Corporate Vice President and Chief Financial Officer of Northrop Grumman Corporation; and | ||
(5) | approval of the amendment from the Corporate Vice President and Chief Human Resources and Administrative Officer of Northrop Grumman Corporation. |
(c) | The Committee must refer to the Board for approval any amendments that: |
(1) | will result in an increase in costs on an annual basis in excess of $5,000,000; or | ||
(2) | will result in a decrease in costs on an annual basis in excess of $5,000,000. |
(d) | The Committees amendment authority may not be delegated. | ||
(e) | Nothing in this section 17 of the Appendix is intended to modify the amendment authority of any company, board or directors, officer or other committee. |
- 39 -
I. |
ENGAGEMENT
|
II. |
PLACE OF ENGAGEMENT
|
III. |
TERM OF ENGAGEMENT
|
IV. |
COMPENSATION
|
2
V. |
TRADE SECRETS AND PROPRIETARY INFORMATION
|
3
VI. |
PRESERVATION OF TRADE NAMES, TRADE MARKS AND PATENT RIGHTS
|
VII. |
COOPERATION WITH NORTHROP
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VIII. |
INDEMNIFICATION
|
IX. |
INDEPENDENT CONTRACTOR
|
4
X. |
TAXES
|
XI. |
OBSERVANCE OF APPLICABLE LAWS AND REGULATIONS
|
A. |
United States Laws.
Consultant shall comply with and do all things
necessary for NGC to comply with United States laws and regulations and express
policies of the United States Government, including but not limited to the requirements
of the Foreign Corrupt Practices Act, 15 U.S.C. Section 78 dd-1
et
seq.,
the Federal Acquisition Regulations, 48 CFR section 1.101
et
seq.,
(FAR), the International Traffic In Arms Regulations, 22 CFR Parts 120
through 130 and applicable regulations; the Byrd Amendment (31 U.S.C. Section 1352) and
applicable regulations; the Office of Federal Procurement Policy Act (41 U.S.C. Section
423) and applicable regulations; and the DoD Joint Ethics Regulation (DoD 5500.7-R).
No part of any compensation or fee paid by NGC will be used directly or indirectly to
make any kickbacks to any person or entity, or to make payments, gratuities, emoluments
or to confer any other benefit to an official of any government or any political party.
Consultant shall not seek, nor relay to NGC, any classified, proprietary or source
selection information not generally available to the public. Consultant shall also
comply with and do all things necessary for NGC to comply with provisions of contracts
between agencies of the United States Government or their contractors and NGC which
relate either to patent rights or the safeguarding of information pertaining to the
security of the United States. This entire Agreement and/or the contents thereof may
be disclosed to the United States Government.
|
5
XII. |
ASSIGNMENT OF RIGHTS
|
XIII. |
MODIFICATION
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XIV. |
USE OR EMPLOYMENT OF THIRD PARTIES
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6
XV. |
CONFLICTS OF INTEREST
|
XVI. |
TERMINATION
|
7
XVII. SEVERABILITY OF PROVISIONS |
XVIII. |
EXCLUSIVITY OF SERVICES
|
XIX. |
AVAILABILITY OF EQUITABLE REMEDIES
|
XX. |
GOVERNING LAW
|
XXI. |
SETTLEMENT OF DISPUTES
|
8
9
XXII. |
NOTICE
|
|
Northrop Grumman Corporation | |
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1840 Century Park East | |
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Los Angeles, CA 90067-2199 | |
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Attention: Lori Milburn | |
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or to Consultant:
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W. Burks Terry |
10
XXIII. |
COMPLETE AGREEMENT
|
By:
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/s/ Stephen D. Yslas | |||
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Stephen D. Yslas | |||
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Corporate Vice President and | |||
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General Counsel | |||
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Date:
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1/31/10 | |||
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CONSULTANT
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By:
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/s/ W. Burks Terry | |||
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W. Burks Terry | |||
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Date:
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Feb. 3, 2010 | |||
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TIN:
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11
B-1 of 2
B-2 of 2
1. |
In past dealings with Northrop Grumman Corporation (NGC) or other clients,
Consultant has complied with all applicable laws, rules, regulations and express
policies of the United States and the State or territory in which services were
performed.
|
||
2. |
In performing the services under this Agremeent, Consultant will comply with
all applicable laws, rules, regulations and express policies of the United States and
the State or territory in which services will be performed.
|
||
3. |
There have been no kick-backs or other payments made, either directly or
indirectly, to any NGC director, employee or consultant or to the family of any NGC
director, employee or consultant.
|
||
4. |
No kick-backs or other payments will be made, either directly or indirectly,
to any NGC director, employee or consultant or to the family of any NGC director,
employee or consultant.
|
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5. |
Consultant has not used and will not use any part of the compensation paid by
NGC to make payments, gratuities, emoluments or to confer any other benefit to an
official of any government, or any political party, or official of any political
party.
|
||
6. |
No person or selling agency has been or will be employed or retained to
solicit or secure any contract, including but not limited to a United States
government contract, upon an agreement or understanding for a commission, percentage,
brokerage, or contingent fee, excepting bona fide employees or bona fide established
commercial selling agencies maintained by the Consultant for the purpose of receiving
business.
|
C-1 of 2
7. |
No classified, proprietary, source selection or procurement sensitive
information has been or will be solicited on behalf of or conveyed to NGC.
|
||
8. |
Consultant has not influenced or attempted to influence and will not
influence or attempt to influence any United States government official or employee in
connection with the award, extension, continuation, renewal, amendment or modification
of a federal contract or otherwise engage in non-exempt services within the meaning
of the Byrd Amendment, 31 U.S.C. Section 1352.
|
||
9. |
Consultant has not utilized or employed and will not utilize or employ any
third party, individual or entity, in connection with the performance of services on
behalf of NGC, except as follows:
(if none, state None) None
|
||
10. |
No business or legal conflicts of interest exist between services performed
or to be performed by Consultant on behalf of NGC and by Consultant on behalf of any
other client, the identities of which Consultant has fully disclosed to NGC.
|
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Signed: | /s/ W. Burks Terry | Date: Feb. 3, 2010 | |||
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(consultants name) |
C-2 of 2
Name
of
Company
|
Responsibilities/Duties | |||
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||||
None |
Name
of
Company
|
Services/Duties | |||
|
||||
Northrop Grumman | See above |
Signature: | /s/ W. Burks Terry | |||||||
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Date: | Feb. 3, 2010 | ||||||
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Name | Office | Inclusive Dates of Services | ||
None
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Signed: | /s/ W. Burks Terry | ||||||
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Date: | Feb. 3, 2010 | ||||||
|
Year Ended December 31, | ||||||||||||||||||||
$ in millions | 2009 (1) | 2008 (1) | 2007 (1) | 2006 (1) | 2005 (1) | |||||||||||||||
Earnings:
|
||||||||||||||||||||
Earnings (loss) from continuing operations before
income taxes
|
$ | 2,266 | $ | (520 | ) | $ | 2,606 | $ | 2,226 | $ | 2,001 | |||||||||
Fixed Charges:
|
||||||||||||||||||||
Interest expense, including amortization of debt premium
|
281 | 295 | 336 | 346 | 388 | |||||||||||||||
Portion of rental expenses on operating leases deemed to be
representative of the interest factor:
|
183 | 190 | 189 | 174 | 169 | |||||||||||||||
Earnings (loss) from continuing operations before income taxes,
less fixed charges
|
2,730 | (35 | ) | 3,131 | 2,746 | 2,558 | ||||||||||||||
Fixed Charges:
|
464 | 485 | 525 | 520 | 557 | |||||||||||||||
Ratio of earnings to fixed
charges
(2)
|
5.9 | 6.0 | 5.3 | 4.6 | ||||||||||||||||
(1) | Certain prior-period information has been reclassified to conform to the current years presentation. | |
(2) | For the year ended December 31, 2008, the companys earnings were insufficient to cover fixed charges by $520 million. This loss was entirely due to the non-cash goodwill impairment charge of $3.1 billion recorded during the fourth quarter at Aerospace Systems and Shipbuilding. |
Jurisdiction of
|
Ownership
|
|||||||
Name of Subsidiary | Incorporation | Percentage | ||||||
Northrop Grumman Systems Corporation (formerly Northrop Grumman
Corporation)
|
Delaware | 100 | % | |||||
Northrop Grumman Shipbuilding, Inc. (formerly Newport News
Shipbuilding and Dry Dock Company)
|
Virginia | 100 | % |
/s/ | Deloitte & Touche LLP |
|
||
/s/ Lewis W. Coleman
|
Non-Executive Chairman | |
Lewis W. Coleman
|
||
|
||
/s/ Thomas B. Fargo
|
Director | |
Thomas B. Fargo
|
||
|
||
/s/ Victor H. Fazio
|
Director | |
Victor H. Fazio
|
||
|
||
/s/ Donald E. Felsinger
|
Director | |
Donald E. Felsinger
|
||
|
||
/s/ Stephen E. Frank
|
Director | |
Stephen E. Frank
|
||
|
||
/s/ Bruce S. Gordon
|
Director | |
Bruce S. Gordon
|
||
|
||
/s/ Madeleine Kleiner
|
Director | |
Madeleine Kleiner
|
||
|
||
/s/ Karl J. Krapek
|
Director | |
Karl J. Krapek
|
|
||
/s/ Richard B. Myers
|
Director | |
Richard B. Myers
|
||
|
||
/s/ Aulana L. Peters
|
Director | |
Aulana L. Peters
|
||
|
||
/s/ Kevin W. Sharer
|
Director | |
Kevin W. Sharer
|
||
|
||
/s/ Wesley G. Bush
|
Chief Executive Officer, President and Director | |
Wesley G. Bush
|
(Principal Executive Officer) | |
|
||
/s/ James F. Palmer
|
Corporate Vice President and Chief Financial Officer | |
James F. Palmer
|
(Principal Financial Officer) | |
|
||
/s/ Kenneth N. Heintz
|
Corporate Vice President, Controller and | |
Kenneth N. Heintz
|
Chief Accounting Officer (Principal Accounting Officer) |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. | The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the companys internal control over financial reporting that occurred during the companys most recent fiscal quarter (the companys fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. | The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys Board of Directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
Date: February 8, 2010 |
/s/
Wesley G. Bush
Chief Executive Officer and President |
1. | I have reviewed this report on Form 10-K of Northrop Grumman Corporation (company); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. | The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the companys internal control over financial reporting that occurred during the companys most recent fiscal quarter (the companys fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. | The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys Board of Directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
Date: February 8, 2010 |
/s/
James F. Palmer
Corporate Vice President and Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13a-15(e)/15d-15(e) of the Securities Exchange Act of 1934, as amended; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company. |
Date: February 8, 2010 |
/s/
Wesley G. Bush
Chief Executive Officer and President |
(1) | The Report fully complies with the requirements of Section 13a-15(e)/15d-15(e) of the Securities Exchange Act of 1934, as amended; and | |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company. |
Date: February 8, 2010 |
/s/
James F. Palmer
Corporate Vice President and Chief Financial Officer |