DELAWARE | 95-4840775 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification Number) |
Title of each class
|
Name of each exchange on which
registered
|
|
Common Stock, $1 par value
|
New York Stock Exchange | |
Series B Convertible Preferred Stock
|
New York Stock Exchange |
Yes x | No o |
Yes o | No x |
Yes x | No o |
Large accelerated filer
x
|
Accelerated filer o | Non-accelerated filer o |
Yes o | No x |
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PART III | ||||||||
110 | ||||||||
112 | ||||||||
112 | ||||||||
112 | ||||||||
112 | ||||||||
PART IV | ||||||||
112 | ||||||||
119 | ||||||||
120 | ||||||||
EXHIBIT 10.(g) | ||||||||
EXHIBIT 10.(i) | ||||||||
EXHIBIT 10.(i)(vi) | ||||||||
EXHIBIT 10.(i)(viii) | ||||||||
EXHIBIT 10.(i)(ix) | ||||||||
EXHIBIT 10.(i)(xi) | ||||||||
EXHIBIT 10.(i)(xiii) | ||||||||
EXHIBIT 10.(j) | ||||||||
EXHIBIT 10.(j)(i) | ||||||||
EXHIBIT 10.(j)(iii) | ||||||||
EXHIBIT 10.(j)(iv) | ||||||||
EXHIBIT 10.(k) | ||||||||
EXHIBIT 10.(l) | ||||||||
EXHIBIT 10.(m) | ||||||||
EXHIBIT 10.(p) | ||||||||
EXHIBIT 10.(q) | ||||||||
EXHIBIT 10.(t) | ||||||||
EXHIBIT 10.(u) | ||||||||
EXHIBIT 10.(v) | ||||||||
EXHIBIT 10.(w) | ||||||||
EXHIBIT 10.(aa) | ||||||||
EXHIBIT 10.(bb) | ||||||||
EXHIBIT 21 | ||||||||
EXHIBIT 23 | ||||||||
EXHIBIT 24 | ||||||||
EXHIBIT 31.1 | ||||||||
EXHIBIT 31.2 | ||||||||
EXHIBIT 32.1 | ||||||||
EXHIBIT 32.2 |
ii
Item 1. | Business |
n | In 1994, Northrop Corporation acquired Grumman Corporation (Grumman) and was renamed Northrop Grumman. 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, the company 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 1997, the company acquired Logicon, a provider of military and commercial information systems and services that met the needs of its national defense, civil and industrial customers. |
n | In 1999, the company acquired Teledyne Ryan (Ryan), a business unit of Allegheny-Teledyne, a world leader in the design, development and manufacture of unmanned airborne reconnaissance, surveillance, deception and target systems. In 1927, Ryan produced the Spirit of St. Louis , which Charles Lindbergh flew across the Atlantic. Ryan was also a pioneer in the development of Unmanned Aerial Vehicles (UAVs). |
n | In 2001, the company 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, Newport News Shipbuilding (Newport News) was added to the company. 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, Northrop Grumman acquired the space and mission systems businesses of 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. |
-1-
-2-
-3-
-4-
-5-
-6-
-7-
-8-
Owned | Pending | Total | ||||||||||
U.S. patents
|
3,572 | 708 | 4,280 | |||||||||
Foreign patents
|
2,464 | 1,767 | 4,231 | |||||||||
Total
|
6,036 | 2,475 | 8,511 | |||||||||
-9-
-10-
-11-
n | The Company Depends Heavily on a Single Customer, the U.S. Government, for a Substantial Portion of the Companys Business, Including Programs Subject to Security Classification Restrictions on Information. Changes Affecting this Customers Capacity to Do Business with the Company or the Effects of Competition in the Defense Industry Could Have a Material Adverse Effect On the Company or Its Prospects. |
n | Many of the Companys 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 the Companys Control. Failure to Meet These Obligations Could Adversely Affect the Companys Profitability and Future Prospects. |
-12-
n | Contract Cost Growth on Fixed-Price and Other Contracts That Cannot Be Justified as an Increase In Contract Value Due From Customers Exposes The Company to Reduced Profitability and the Potential Loss of Future Business. |
-13-
n | The Company Uses Estimates When Accounting for Contracts. Changes In Estimates Could Affect The Companys Profitability and Its Overall Financial Position. |
n | The Companys Operations Are Subject to Numerous Domestic and International Laws, Regulations and Restrictions, and Noncompliance With These Laws, Regulations and Restrictions Could Expose the Company to Fines, Penalties, Suspension or Debarment, Which Could Have a Material Adverse Effect on the Companys Profitability and Its Overall Financial Position. |
-14-
n | The Companys Business Is Subject to Disruption Caused By Issues With Its Suppliers, Subcontractors, Workforce, Natural Disasters and Other Factors That Could Adversely Affect the Companys Profitability and Its 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 the Companys Operating Income. |
-15-
n | The Company Is Subject to Various Claims and Litigation That Could Ultimately Be Resolved Against The Company Requiring Material Future Cash Payments and/or Future Material Charges Against the Companys Operating Income and Materially Impairing the Companys Financial Position. |
n | Pension and Medical Expense Associated with the Companys Retirement Benefit Plans May Fluctuate Significantly Depending Upon Changes in Actuarial Assumptions and Future Market Performance of Plan Assets. |
n | The Companys Insurance Coverage May Be Inadequate to Cover All of Its Significant Risks or Its Insurers May Deny Coverage of Material Losses Incurred By the Company, Which Could Adversely Affect The Companys Profitability and Overall Financial Position. |
n | Current Trends in U.S. Government Procurement May Adversely Affect Cash Flows or Program Profitability. |
Item 1B. | Unresolved Staff Comments |
-16-
n | future revenues; | |
n | expected program performance and cash flows; | |
n | returns on pension plan assets and variability of pension actuarial and related assumptions; | |
n | the outcome of litigation, claims, appeals and investigations; | |
n | hurricane-related insurance recoveries; | |
n | environmental remediation; | |
n | acquisitions and divestitures of businesses; | |
n | joint ventures and other business arrangements; | |
n | access to capital; | |
n | performance issues with key suppliers and subcontractors; | |
n | product performance and the successful execution of internal plans; | |
n | successful negotiation of contracts with labor unions; | |
n | allowability and allocability of costs under U.S. Government contracts; | |
n | effective tax rates and timing and amounts of tax payments; | |
n | the results of any audit or appeal process with the Internal Revenue Service; and | |
n | anticipated costs of capital investments. |
Item 2. | Properties |
-17-
U.S. Government
|
||||||||||||||||
Square feet (in thousands) | Owned | Leased | Owned/Leased | Total | ||||||||||||
Information & Services
|
||||||||||||||||
Mission Systems
|
652 | 5,768 | 6,420 | |||||||||||||
Information Technology
|
33 | 4,239 | 4,272 | |||||||||||||
Technical Services
|
156 | 1,365 | 62 | 1,583 | ||||||||||||
Aerospace
|
||||||||||||||||
Integrated Systems
|
3,974 | 3,021 | 2,023 | 9,018 | ||||||||||||
Space Technology
|
2,912 | 2,108 | 5,020 | |||||||||||||
Electronics
|
8,472 | 3,557 | 12,029 | |||||||||||||
Ships
|
13,177 | 3,907 | 80 | 17,164 | ||||||||||||
Corporate
|
809 | 622 | 1,431 | |||||||||||||
Total
|
30,185 | 24,587 | 2,165 | 56,937 | ||||||||||||
-18-
Item 3. | Legal Proceedings |
-19-
Item 4. | Submission of Matters to a Vote of Security Holders |
-20-
Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
(a) | Market Information. |
2007 | 2006 | |||||||||||||||||||||||
January to March
|
$ | 75.72 | to | $ | 66.95 | $ | 69.83 | to | $ | 59.63 | ||||||||||||||
April to June
|
$ | 77.87 | to | $ | 72.68 | $ | 71.23 | to | $ | 62.17 | ||||||||||||||
July to September
|
$ | 79.86 | to | $ | 74.67 | $ | 68.88 | to | $ | 63.05 | ||||||||||||||
October to December
|
$ | 84.48 | to | $ | 77.09 | $ | 69.71 | to | $ | 64.59 | ||||||||||||||
(b) | Holders. |
(c) | Dividends. |
2007 | 2006 | |||||||
January to March
|
$ | 0.37 | $ | 0.26 | ||||
April to June
|
0.37 | 0.30 | ||||||
July to September
|
0.37 | 0.30 | ||||||
October to December
|
0.37 | 0.30 | ||||||
$ | 1.48 | $ | 1.16 | |||||
(d) | Annual Meeting of Stockholders. |
-21-
(e) | Stock Performance Graph. |
(1) | Assumes $100 invested at the close of business on December 31, 2002, 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., L-3 Communications, Lockheed Martin Corporation, Northrop Grumman Corporation, Precision Castparts Corp., 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. | |
(5) | The Stock Performance Graph is not incorporated by reference and shall not be deemed to be filed. |
-22-
(f) | Purchases of Equity Securities by the Issuer and Affiliated Purchasers. |
Approximate Dollar
|
||||||||||||||||
Total Numbers of
|
Value of Shares that
|
|||||||||||||||
Shares Purchased as of
|
May Yet Be
|
|||||||||||||||
Total Number
|
Part of Publicly
|
Purchased Under
|
||||||||||||||
of Shares
|
Average Price
|
Announced Plans
|
the Plans or
|
|||||||||||||
Period | Purchased | Paid per Share | or Programs | Programs | ||||||||||||
October 1 through
October 31, 2007 |
$ | 82 million | ||||||||||||||
November 1 through
November 30, 2007 |
1,022,600 | $ | 79.11 | 1,022,600 | $ | | ||||||||||
December 1 through
December 31, 2007 |
$ | 2.5 billion | (1) | |||||||||||||
Total
|
1,022,600 | $ | 79.11 | 1,022,600 | $ | 2.5 billion | ||||||||||
(1) |
On December 19, 2007, the companys Board of Directors
authorized a share repurchase program of up to $2.5 billion
of its outstanding common stock. As of December 31, 2007,
the company has $2.5 billion authorized for share
repurchases.
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. |
(g) | Securities Authorized for Issuance Under Equity Compensation Plans. |
-23-
Item 6. | Selected Financial Data |
Year Ended December 31 | ||||||||||||||||||||
$ in millions except per share | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||||||||||
Sales and Service Revenues
|
||||||||||||||||||||
United States Government
|
$ | 28,700 | $ | 27,019 | $ | 27,021 | $ | 25,491 | $ | 22,063 | ||||||||||
Other customers
|
3,318 | 3,094 | 2,957 | 3,386 | 3,398 | |||||||||||||||
Total revenues
|
$ | 32,018 | $ | 30,113 | $ | 29,978 | $ | 28,877 | $ | 25,461 | ||||||||||
Operating margin
|
$ | 3,006 | $ | 2,464 | $ | 2,200 | $ | 1,985 | $ | 1,474 | ||||||||||
Income from continuing operations
|
1,803 | 1,573 | 1,396 | 1,079 | 771 | |||||||||||||||
Basic earnings per share, from continuing operations
|
$ | 5.28 | $ | 4.55 | $ | 3.92 | $ | 3.00 | $ | 2.11 | ||||||||||
Diluted earnings per share, from continuing operations
|
5.16 | 4.46 | 3.84 | 2.96 | 2.09 | |||||||||||||||
Cash dividends declared per common share
|
1.48 | 1.16 | 1.01 | .89 | .80 | |||||||||||||||
Year-End Financial Position
|
||||||||||||||||||||
Total assets
|
$ | 33,373 | $ | 32,009 | $ | 34,214 | $ | 33,303 | $ | 33,022 | ||||||||||
Notes payable to banks and long-term debt
|
4,055 | 4,162 | 5,145 | 5,158 | 5,891 | |||||||||||||||
Total long-term obligations and preferred stock
|
9,254 | 8,641 | 9,412 | 10,438 | 10,876 | |||||||||||||||
Financial Metrics
|
||||||||||||||||||||
Free cash flow from operations
|
$ | 2,068 | $ | 942 | $ | 1,804 | $ | 1,264 | $ | 161 | ||||||||||
Net working capital (deficit)
|
$ | 340 | $ | (28 | ) | $ | (418 | ) | $ | 692 | $ | (595 | ) | |||||||
Current ratio
|
1.05 to 1 | 1.00 to 1 | .95 to 1 | 1.11 to 1 | .91 to 1 | |||||||||||||||
Notes payable to banks and long-term debt as a percentage of
shareholders equity
|
22.9 | % | 25.0 | % | 30.6 | % | 30.9 | % | 37.3 | % | ||||||||||
Other Information
|
||||||||||||||||||||
Company-sponsored research and development expenses
|
$ | 537 | $ | 572 | $ | 536 | $ | 502 | $ | 429 | ||||||||||
Maintenance and repairs
|
337 | 360 | 430 | 396 | 242 | |||||||||||||||
Payroll and employee benefits
|
12,947 | 12,510 | 12,191 | 12,445 | 10,936 | |||||||||||||||
Number of employees at year-end
|
122,600 | 122,200 | 123,600 | 125,400 | 123,400 | |||||||||||||||
-24-
Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
n |
Sales increases 6 percent to record $32 billion.
|
|
n |
Operating margin increase of 22 percent over 2006.
|
|
n |
Cash from operations increases to record $2.9 billion after
$200 million pension pre-funding.
|
|
n |
Diluted earnings per share from continuing operations of $5.16
per share.
|
|
n |
Total backlog of $64.1 billion.
|
|
n |
Share repurchases totaling $1.2 billion.
|
|
n |
Business acquisitions totaling approximately
$690 million.
|
|
n |
Partial insurance settlement with all but one of the primary
insurers and recognition of $62 million in business
interruption recovery related to Hurricane Katrina. See
Notes 15 and 17 to the consolidated financial statements in
Part II, Item 8.
|
|
n |
Contract earnings rate charge on LHD 8 of approximately
$55 million following the strike at the Pascagoula
shipyard.
|
|
n | Adoption of a new tax accounting standard on accounting for uncertain tax positions see Note 12 to the consolidated financial statements in Part II, Item 8. |
-25-
-26-
-27-
-28-
U.S.
|
Other
|
Percent
|
||||||||||||||
($ in millions) | Government | Customers | Total | of Total | ||||||||||||
Flexibly priced
|
$ | 21,554 | $ | 746 | $ | 22,300 | 70 | % | ||||||||
Firm fixed-price
|
7,146 | 2,572 | 9,718 | 30 | % | |||||||||||
Total
|
$ | 28,700 | $ | 3,318 | $ | 32,018 | 100 | % | ||||||||
-29-
-30-
-31-
-32-
.25 Percentage
|
.25 Percentage
|
|||||||
$ in millions | Point Increase | Point Decrease | ||||||
(Decrease) Increase Due To Change In Assumptions Used To Determine Net Periodic Benefit Costs For The Year Ended December 31, 2007 | ||||||||
Discount rate
|
$ | (38 | ) | $ | 40 | |||
Expected long-term rate of return on plan assets
|
(54 | ) | 54 | |||||
(Decrease) Increase Due To Change In Assumptions Used To Determine Benefit Obligations For The Year Ended December 31, 2007 | ||||||||
Discount rate
|
$ | (741 | ) | $ | 774 | |||
1-Percentage-
|
1-Percentage-
|
|||||||
$ in millions | Point Increase | Point Decrease | ||||||
Increase (Decrease) From Change In Health Care Cost Trend
Rates To
|
||||||||
Postretirement benefit expense
|
$ | 9 | $ | (9 | ) | |||
Postretirement benefit liability
|
85 | (91 | ) | |||||
Year Ended December 31 | ||||||||||||
$ in millions, except per share | 2007 | 2006 | 2005 | |||||||||
Sales and service revenues
|
$ | 32,018 | $ | 30,113 | $ | 29,978 | ||||||
Cost of sales and service revenues
|
29,012 | 27,649 | 27,778 | |||||||||
Operating margin
|
3,006 | 2,464 | 2,200 | |||||||||
Interest expense, net
|
308 | 303 | 334 | |||||||||
Other, net
|
(12 | ) | 125 | 199 | ||||||||
Federal and foreign income taxes
|
883 | 713 | 669 | |||||||||
Diluted earnings per share from continuing operations
|
5.16 | 4.46 | 3.84 | |||||||||
Net cash provided by operating activities
|
2,890 | 1,756 | 2,627 | |||||||||
-33-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Product sales
|
$ | 18,730 | $ | 18,394 | $ | 19,471 | ||||||
Service revenues
|
13,288 | 11,719 | 10,507 | |||||||||
Sales and service revenues
|
$ | 32,018 | $ | 30,113 | $ | 29,978 | ||||||
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Cost of Sales and Service Revenues
|
||||||||||||
Cost of product sales
|
$ | 14,474 | $ | 14,380 | $ | 15,543 | ||||||
% of product sales
|
77.3 | % | 78.2 | % | 79.8 | % | ||||||
Cost of service revenues
|
11,330 | 10,242 | 9,355 | |||||||||
% of service revenues
|
85.3 | % | 87.4 | % | 89.0 | % | ||||||
General and administrative expenses
|
3,208 | 3,027 | 2,880 | |||||||||
% of total sales and service revenues
|
10.0 | % | 10.1 | % | 9.6 | % | ||||||
Cost of Sales and Service Revenues
|
$ | 29,012 | $ | 27,649 | $ | 27,778 | ||||||
-34-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Segment operating margin
|
$ | 3,103 | $ | 2,807 | $ | 2,421 | ||||||
Unallocated expenses
|
(224 | ) | (306 | ) | (200 | ) | ||||||
Net pension adjustment
|
127 | (37 | ) | (21 | ) | |||||||
Total operating margin
|
$ | 3,006 | $ | 2,464 | $ | 2,200 | ||||||
-35-
-36-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Sales and Service Revenues
|
||||||||||||
Information & Services
|
||||||||||||
Mission Systems
|
$ | 5,931 | $ | 5,494 | $ | 5,494 | ||||||
Information Technology
|
4,486 | 3,962 | 3,736 | |||||||||
Technical Services
|
2,177 | 1,858 | 1,617 | |||||||||
Aerospace
|
||||||||||||
Integrated Systems
|
5,067 | 5,500 | 5,489 | |||||||||
Space Technology
|
3,133 | 2,923 | 2,866 | |||||||||
Electronics
|
6,906 | 6,543 | 6,513 | |||||||||
Ships
|
5,788 | 5,321 | 5,786 | |||||||||
Intersegment eliminations
|
(1,470 | ) | (1,488 | ) | (1,523 | ) | ||||||
Sales and service revenues
|
$ | 32,018 | $ | 30,113 | $ | 29,978 | ||||||
Operating Margin
|
||||||||||||
Information & Services
|
||||||||||||
Mission Systems
|
$ | 566 | $ | 519 | $ | 424 | ||||||
Information Technology
|
329 | 342 | 322 | |||||||||
Technical Services
|
120 | 120 | 100 | |||||||||
Aerospace
|
||||||||||||
Integrated Systems
|
591 | 551 | 499 | |||||||||
Space Technology
|
261 | 245 | 219 | |||||||||
Electronics
|
813 | 754 | 709 | |||||||||
Ships
|
538 | 393 | 249 | |||||||||
Intersegment eliminations
|
(115 | ) | (117 | ) | (101 | ) | ||||||
Segment operating margin
|
$ | 3,103 | $ | 2,807 | $ | 2,421 | ||||||
-37-
-38-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Funded Contract Acquisitions
|
$ | 6,032 | $ | 6,108 | $ | 4,877 | ||||||
Sales and Service Revenues
|
5,931 | 5,494 | 5,494 | |||||||||
Segment Operating Margin
|
566 | 519 | 424 | |||||||||
As a percentage of segment sales
|
9.5 | % | 9.4 | % | 7.7 | % |
-39-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Funded Contract Acquisitions
|
$ | 4,400 | $ | 4,613 | $ | 3,700 | ||||||
Sales and Service Revenues
|
4,486 | 3,962 | 3,736 | |||||||||
Segment Operating Margin
|
329 | 342 | 322 | |||||||||
As a percentage of segment sales
|
7.3 | % | 8.6 | % | 8.6 | % |
-40-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Funded Contract Acquisitions
|
$ | 2,273 | $ | 2,292 | $ | 1,714 | ||||||
Sales and Service Revenues
|
2,177 | 1,858 | 1,617 | |||||||||
Segment Operating Margin
|
120 | 120 | 100 | |||||||||
As a percentage of segment sales
|
5.5 | % | 6.5 | % | 6.2 | % |
-41-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Funded Contract Acquisitions
|
$ | 4,986 | $ | 6,108 | $ | 4,544 | ||||||
Sales and Service Revenues
|
5,067 | 5,500 | 5,489 | |||||||||
Segment Operating Margin
|
591 | 551 | 499 | |||||||||
As a percentage of segment sales
|
11.7 | % | 10.0 | % | 9.1 | % |
-42-
-43-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Funded Contract Acquisitions
|
$ | 2,770 | $ | 3,916 | $ | 2,121 | ||||||
Sales and Service Revenues
|
3,133 | 2,923 | 2,866 | |||||||||
Segment Operating Margin
|
261 | 245 | 219 | |||||||||
As a percentage of segment sales
|
8.3 | % | 8.4 | % | 7.6 | % |
-44-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Funded Contract Acquisitions
|
$ | 8,776 | $ | 7,147 | $ | 6,250 | ||||||
Sales and Service Revenues
|
6,906 | 6,543 | 6,513 | |||||||||
Segment Operating Margin
|
813 | 754 | 709 | |||||||||
As a percentage of segment sales
|
11.8 | % | 11.5 | % | 10.9 | % |
-45-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Funded Contract Acquisitions
|
$ | 5,282 | $ | 10,045 | $ | 2,749 | ||||||
Sales and Service Revenues
|
5,788 | 5,321 | 5,786 | |||||||||
Segment Operating Margin
|
538 | 393 | 249 | |||||||||
As a percentage of segment sales
|
9.3 | % | 7.4 | % | 4.3 | % |
-46-
-47-
2007 | 2006 | |||||||||||||||||||||||
Total
|
Total
|
|||||||||||||||||||||||
$ in millions | Funded | Unfunded | Backlog | Funded | Unfunded | Backlog | ||||||||||||||||||
Information & Services
|
||||||||||||||||||||||||
Mission Systems
|
$ | 3,220 | $ | 8,985 | $ | 12,205 | $ | 3,119 | $ | 8,488 | $ | 11,607 | ||||||||||||
Information Technology
|
2,581 | 2,268 | 4,849 | 2,667 | 1,840 | 4,507 | ||||||||||||||||||
Technical Services
|
1,471 | 3,193 | 4,664 | 1,375 | 3,973 | 5,348 | ||||||||||||||||||
Aerospace
|
||||||||||||||||||||||||
Integrated Systems
|
4,204 | 4,525 | 8,729 | 4,285 | 4,934 | 9,219 | ||||||||||||||||||
Space Technology
|
1,260 | 8,266 | 9,526 | 1,623 | 7,138 | 8,761 | ||||||||||||||||||
Electronics
|
8,446 | 2,062 | 10,508 | 6,576 | 1,583 | 8,159 | ||||||||||||||||||
Ships
|
10,348 | 3,230 | 13,578 | 10,854 | 2,566 | 13,420 | ||||||||||||||||||
Total backlog
|
$ | 31,530 | $ | 32,529 | $ | 64,059 | $ | 30,499 | $ | 30,522 | $ | 61,021 | ||||||||||||
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Net income
|
$ | 1,790 | $ | 1,542 | $ | 1,400 | ||||||
Non-cash income and
expense
(1)
|
1,034 | 948 | 948 | |||||||||
Retiree benefit funding in excess of expense
|
(50 | ) | (772 | ) | (22 | ) | ||||||
Trade working capital reduction
|
142 | 144 | 49 | |||||||||
Other
|
(12 | ) | (28 | ) | 216 | |||||||
Cash used in discontinued operations
|
(14 | ) | (78 | ) | 36 | |||||||
Cash provided by operating activities
|
$ | 2,890 | $ | 1,756 | $ | 2,627 | ||||||
(1) | Includes depreciation & amortization, stock based compensation expense and deferred taxes. |
-48-
Year Ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Cash provided by operating activities
|
$ | 2,890 | $ | 1,756 | $ | 2,627 | ||||||
Less:
|
||||||||||||
Capital expenditures
|
(685 | ) | (737 | ) | (823 | ) | ||||||
Outsourcing contract & related software costs
|
(137 | ) | (77 | ) | ||||||||
Free cash flow from operations
|
$ | 2,068 | $ | 942 | $ | 1,804 | ||||||
-49-
-50-
Shares Repurchased
|
||||||||||||||||||||||||||
Amount
|
Total Shares
|
(in millions) | ||||||||||||||||||||||||
Authorized
|
Average Price
|
Retired
|
||||||||||||||||||||||||
Authorization Date | (in billions) | Per Share | (in millions) | Date Completed | 2007 | 2006 | 2005 | |||||||||||||||||||
October 26, 2004
|
$ | 1.0 | $ | 54.83 | 18.2 | September 2005 | 12.7 | |||||||||||||||||||
October 24, 2005
|
1.5 | 65.08 | 23.0 | February 2007 | 2.3 | 11.6 | 9.1 | |||||||||||||||||||
December 14, 2006
|
1.0 | 75.96 | 13.1 | November 2007 | 13.1 | |||||||||||||||||||||
December 20, 2007
|
2.5 | |||||||||||||||||||||||||
15.4 | 11.6 | 21.8 | ||||||||||||||||||||||||
Dollar Amount
|
||||||||||||||
Shares
|
Final Average
|
of Shares
|
||||||||||||
Repurchased
|
Purchase
|
Repurchased
|
||||||||||||
Agreement Date | (in millions) | Completion Date | Price Per Share | (in millions) | ||||||||||
November 4, 2005
|
9.1 | March 1, 2006 | $ | 59.05 | $ | 537 | ||||||||
March 6, 2006
|
11.6 | May 26, 2006 | 68.01 | 788 | ||||||||||
February 21, 2007
|
8.0 | June 7, 2007 | 73.86 | 592 | ||||||||||
July 30, 2007
|
6.5 | September 17, 2007 | 77.27 | 502 |
-51-
Standard &
|
||||||||||||
Fitch | Moodys | Poors | ||||||||||
Long-term: Northrop Grumman
|
BBB+ | Baa1 | BBB+ |
-52-
-53-
2009 -
|
2011 -
|
2013 and
|
||||||||||||||||||
$ in millions | Total | 2008 | 2010 | 2012 | beyond | |||||||||||||||
Long-term debt
|
$ | 3,989 | $ | 111 | $ | 564 | $ | 776 | $ | 2,538 | ||||||||||
Interest payments on long-term debt
|
3,793 | 290 | 530 | 406 | 2,567 | |||||||||||||||
Mandatorily redeemable convertible preferred stock
|
675 | 24 | 49 | 49 | 553 | |||||||||||||||
Operating leases
|
2,065 | 445 | 661 | 394 | 565 | |||||||||||||||
Purchase
obligations
(1)
|
6,405 | 4,274 | 1,649 | 423 | 59 | |||||||||||||||
Other long-term
liabilities
(2)
|
1,171 | 180 | 389 | 148 | 454 | |||||||||||||||
Total contractual obligations
|
$ | 18,098 | $ | 5,324 | $ | 3,842 | $ | 2,196 | $ | 6,736 | ||||||||||
(1) | A purchase obligation is defined as an agreement to purchase goods or services that is enforceable and legally binding on the company 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 accrued workers compensation, deferred compensation, and other miscellaneous liabilities, but excludes obligations for uncertain tax positions of $477 million and long-term deferred tax liabilities of $330 million, as the timing of the payments cannot be reasonably estimated. |
Program Name | Program Description | |
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. |
-54-
Program Name | Program Description | |
Advanced Extremely High Frequency (AEHF) | Provide the communication payload for the nations next generation military strategic and tactical relay systems that will deliver survivable, protected communications to U.S. forces and selected allies worldwide. | |
Automated Flats Sorting Machine (AFSM) automated induction (ai) Follow-On | Automated induction hardware deliveries to the U.S. Postal Service. Ai allows for the automated prep of flat mail into automation compatible trays and conveyed to the AFSM-100 in-feed line for sorting. | |
APG-66 | Provide engineering services, technical support, spares and repairs for the AN/APG-66 fire control radar that is utilized for the F-16 and other military aircraft. | |
Advanced Self Protection Integrated Suite (ASPIS) II | Subcontract to Raytheon to design, develop, fabricate, test, qualify, deliver and support the AN/ALR-93(V) Radar Warning Receiver/Electronic Warfare Suite Controller (RWR/EWSC) Systems. | |
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. | |
Battle Command Training | Operates the computer-based simulations, models and automated tools used for the collection and analysis of information used by U.S. Army Battle Command Training Program. | |
Biohazard Detection System (BDS ) | BDS flat mail screening to rapidly analyze and detect potential biological threats at postal service mail-sorting facilities. | |
National Team Battle Management Command and Control (BMC2) | Provide technical talent and corporate reach back to the industry team tasked to develop, field, and sustain a global C2BM system for ballistic missile defense. | |
U.S. Citizenship and Immigration Services | Operate and maintain the Application Support Center facilities for the U.S. Citizenship and Immigration Services, including biometric capture, background check, application scheduling, and facility leasing and maintenance. | |
Coast Guards Deepwater Program | Design, develop, construct and deploy surface assets to recapitalize the Coast Guard. | |
Command Post Platform (CPP) | Provide a family of vehicles that host multiple battle command and support software suites as well as communications equipment that interface with digitized vehicles. | |
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 the first in a class of the U.S. Navys multi-mission surface combatants tailored for land attack and littoral dominance. | |
E-2D Advanced Hawkeye | The E-2D builds upon the Hawkeye 2000 configuration with significant radar improvement performance. The E-2D provides over the horizon |
-55-
Program Name | Program Description | |
airborne early warning (AEW), surveillance, tracking, and command and control capability to the U.S. Naval Battle Groups and Joint Forces. | ||
E-10A | Mission Execution Program (MEP) to continue to mature the technologies of the E-10A Battle Management/Command and Control capabilities. | |
E/A-18G | Provide the Airborne Electronic Attack suite to Boeing which includes the ALQ-218 (V2) receiving system, the ALQ-227 communications countermeasures system and the Electronic Attack Unit that interfaces with the legacy F/A-18 air vehicle. | |
Electro Optical & Infrared Countermeasures | Provides protection against the ground launched man portable (MANPAD) infrared missile threat by automatically detecting missile launch and jamming the missiles guidance system with a laser beam, causing a miss. The AAQ-24 is a stand-alone electronic warfare system installed on over 380 USAF and international transport aircraft and helicopters, is fully operational with the USAF and Royal Air Force (RAF), and is the only laser DIRCM system available in the world. | |
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-15 Repairs at Warner Robins | Avionics component repair, modifications, build to print, DMS resolution, ATE builds, engineering services, and personnel augmentation for the F-15. | |
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-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. | |
F-22 | Joint venture with Raytheon to design, develop and produce the F-22 radar system. Northrop Grumman is responsible for the overall design of the AN/APG-77 and AN/APG-77(V) 1 radar systems, including the control and signal processing software and responsibility for the AESA radar systems integration and test activities. In addition, Northrop Grumman is responsible for overall design and integration of the F- 22 Communication, Navigation, and Identification (CNI) system. | |
Falcon Edge | Provide an integrated Electronic Warfare suite that leverages the latest radio frequency (RF) and digital technologies for air warfare. | |
Force XXI Battle Brigade and Below (FBCB2) | Install in Army vehicles a system of computer hardware and software that forms a wireless, tactical Internet for near-real- time situational awareness and command and control on the battlefield. | |
Ford Class | Design and construction for the new class of Aircraft Carriers. |
-56-
Program Name | Program Description | |
Flats Sequencing System/Postal Automation | Build systems for the U.S. Postal Service designed to further automate the flats mail stream, which includes large envelopes, catalogs and magazines. | |
Ft. Irwin Logistics Support Services (LSS) | Operate and manage a large-scale maintenance and repair program involving tracked and wheeled vehicles, basic issue items, communications equipment, and weapons needed for desert training. | |
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. | |
George H. W. Bush (CVN 77) | The 10 th and final Nimitz -class aircraft carrier that will incorporate many new design features, with expected delivery to the Navy in late 2008. | |
Ground-Based Midcourse Defense Fire Control and Communications (GFC/C) | Develop software to coordinate sensor and interceptor operations during missile flight. | |
Hunter CLS | Operate, maintain, train and sustain the multi-mission Hunter Unmanned Aerial System in addition to deploying Hunter support teams. | |
Global Hawk High-Altitude, Long-Endurance Systems (HALE) | 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. | |
Intercontinental Ballistic Missile (ICBM) | ICBM weapon systems by ensuring the systems total performance. | |
Joint National Integration Center Research & Development (JRDC) | Support the development and application of modeling and simulation, wargaming, test and analytic tools for air and missile defense. | |
Joint Base Operations Support | Provides all infrastructure support needed for launch and base operations at the NASA Spaceport. | |
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. | |
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. | |
Kinetic Energy Interceptor | Develop mobile missile-defense system with the unique capability to destroy a hostile missile during its boost, ascent or midcourse phase of flight. | |
Large Aircraft Infrared Counter-measures Indefinite Delivery and Indefinite Quantity (LAIRCM IDIQ) | 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. |
-57-
Program Name | Program Description | |
LHA | Detail design and construct amphibious assault ships for use as an integral part of joint, interagency, and multinational maritime forces. | |
LHD | Build multipurpose amphibious assault ships. | |
Lightweight Laser Designator Rangefinder (LLDR) | Provide LLDRs to the U.S. Army for use in targeting enemy positions in day/night/obscurant conditions which, in turn, provides information to other members on the battlefield. | |
Longbow Missile | All-weather fire and forget precision strike weapon that uses a millimeter-wave radar. The Longbow Missile is launched from the Apache AH-64 helicopter. To date over 13,000 missiles have been built for the U.S. Army and several international customers. | |
LPD | Build amphibious transport dock ships. | |
Mark VIIE | The next generation electro-optical day/night hand held target location system used by Ground Forces. | |
MESA Korea | Consists of a 4 lot Multirole Electronically Scanned Array (MESA) radar/Identification Friend or Foe subsystem delivery with limited non-recurring engineering. The program also includes associated spares, support equipment and installation & check out activities, with direct and indirect offset projects. Northrop Grummans customer is the Boeing Company, with ultimate product delivery to the Republic of Korea 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 E-10A and Global Hawk Airborne platforms. Also provides enhanced Wide Area Surveillance system capabilities. | |
New York City Wireless | Provide New York Citys broadband public- safety wireless network. | |
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 Geospatial- Intelligence Agency Enterprise Engineering (NGA EE) | Deliver engineering services necessary to direct the planning, development and implementation of all NGAs activities and systems comprising the National System for Geospatial Intelligence. | |
Network Centric Solution | Provide Network-Centric Information Technology, Networking, Telephony and Security, Voice, Video and Data Communications Commercial-off-the-Shelf products, system solutions, hardware and software. | |
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. |
-58-
Program Name | Program Description | |
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. | |
Nevada Test Site (NTS) | Manage and operate the Nevada Test Site facility and provide infrastructure support, including management of the nuclear explosives safety team, support of hazardous chemical spill testing, emergency response training and conventional weapons testing. | |
Peace Eagle | Joint program with Boeing to supply MESA radar antenna for Turkeys Peace Eagle 737 airborne early warning and control aircraft. | |
San Diego County IT Outsourcing | Provide high-level IT consulting and services to San Diego County including data center, help desk, desktop, network, applications and cross-functional services. | |
Saudi Arabian National Guard (SANG) | Provides military training, logistics and support services to modernize the Saudi Arabian National Guards capabilities to unilaterally execute and sustain military operations. | |
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. | |
Space Based Space Surveillance (SBSS) | Develop initial capability for space-based surveillance of resident space objects for missions such as deep space and near earth object detection and tracking, deep space search, space object identification, and monitoring of satellites. | |
Space Tracking and Surveillance System (STSS) | Develop a critical system for the nations missile defense architecture employing low-earth orbit satellites with onboard infrared sensors to detect, track and discriminate ballistic missiles. The program includes two flight demonstration satellites with subsequent development and production blocks of satellites. | |
Treasury Communication System (TCS) | Provide telecommunications infrastructure for collaboration, communication and computing as required by the U.S. Department of Treasury. | |
USS Carl Vinson | Refueling and complex overhaul of the nuclear-powered aircraft carrier USS Carl Vinson (CVN 70). | |
USS Toledo | Depot Modernization Period (DMP) being performed at Newport News for this 688-class submarine. A DMP is a midlife availability for extensive modernization to improve war fighting capabilities and maintenance to ensure the ship remains certified for unrestricted operations to design test depth. | |
UK AWACS | Provide aircraft-maintenance and design-engineering support services. | |
Virginia IT outsourcing | Provide high-level IT consulting and services to Virginia state and local agencies including data center, help desk, desktop, network, applications and cross-functional services. |
-59-
Program Name | Program Description | |
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 Electric Boat. | |
Warner Robins Fleet Sustainment Engineering | Sustains legacy weapons systems through the application of engineering capabilities, including systems engineering, hardware design, software development and maintenance, logistics, electronic warfare, automated test equipment, and avionics engineering. | |
Wedgetail | Joint program with Boeing to supply MESA radar antenna for AEW&C aircraft. |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
-60-
Item 8. | Financial Statements and Supplementary Data |
/s/ | Deloitte & Touche LLP |
-61-
Year ended December 31 | ||||||||||||
$ in millions, except per share | 2007 | 2006 | 2005 | |||||||||
Sales and Service Revenues
|
||||||||||||
Product sales
|
$ | 18,730 | $ | 18,394 | $ | 19,471 | ||||||
Service revenues
|
13,288 | 11,719 | 10,507 | |||||||||
Total sales and service revenues
|
32,018 | 30,113 | 29,978 | |||||||||
Cost of Sales and Service Revenues
|
||||||||||||
Cost of product sales
|
14,474 | 14,380 | 15,543 | |||||||||
Cost of service revenues
|
11,330 | 10,242 | 9,355 | |||||||||
General and administrative expenses
|
3,208 | 3,027 | 2,880 | |||||||||
Operating margin
|
3,006 | 2,464 | 2,200 | |||||||||
Other Income (Expense)
|
||||||||||||
Interest income
|
28 | 44 | 54 | |||||||||
Interest expense
|
(336 | ) | (347 | ) | (388 | ) | ||||||
Other, net
|
(12 | ) | 125 | 199 | ||||||||
Income from continuing operations before income taxes
|
2,686 | 2,286 | 2,065 | |||||||||
Federal and foreign income taxes
|
883 | 713 | 669 | |||||||||
Income from continuing operations
|
1,803 | 1,573 | 1,396 | |||||||||
(Loss) gain from discontinued operations, net of tax
|
(13 | ) | (31 | ) | 4 | |||||||
Net income
|
$ | 1,790 | $ | 1,542 | $ | 1,400 | ||||||
Basic Earnings (Loss) Per Share
|
||||||||||||
Continuing operations
|
$ | 5.28 | $ | 4.55 | $ | 3.92 | ||||||
Discontinued operations
|
(.04 | ) | (.09 | ) | .01 | |||||||
Basic earnings per share
|
$ | 5.24 | $ | 4.46 | $ | 3.93 | ||||||
Weighted-average common shares outstanding, in millions
|
341.7 | 345.7 | 356.5 | |||||||||
Diluted Earnings (Loss) Per Share
|
||||||||||||
Continuing operations
|
$ | 5.16 | $ | 4.46 | $ | 3.84 | ||||||
Discontinued operations
|
(.04 | ) | (.09 | ) | .01 | |||||||
Diluted earnings per share
|
$ | 5.12 | $ | 4.37 | $ | 3.85 | ||||||
Weighted-average diluted shares outstanding, in millions
|
354.3 | 358.6 | 363.2 | |||||||||
-62-
December 31, | December 31, | |||||||
$ in millions | 2007 | 2006 | ||||||
Assets:
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$ | 963 | $ | 1,015 | ||||
Accounts receivable, net
|
3,813 | 3,562 | ||||||
Inventoried costs, net
|
1,045 | 1,176 | ||||||
Deferred income taxes
|
542 | 706 | ||||||
Prepaid expenses and other current assets
|
409 | 266 | ||||||
Total current assets
|
6,772 | 6,725 | ||||||
Property, Plant, and Equipment
|
||||||||
Land and land improvements
|
605 | 588 | ||||||
Buildings
|
2,249 | 2,079 | ||||||
Machinery and other equipment
|
4,775 | 4,415 | ||||||
Leasehold improvements
|
526 | 447 | ||||||
8,155 | 7,529 | |||||||
Accumulated depreciation
|
(3,440 | ) | (3,004 | ) | ||||
Property, plant, and equipment, net
|
4,715 | 4,525 | ||||||
|
||||||||
Other Assets
|
||||||||
Goodwill
|
17,672 | 17,219 | ||||||
Other purchased intangibles, net of accumulated amortization of
$1,687 in 2007 and $1,555 in 2006
|
1,074 | 1,139 | ||||||
Pension and postretirement benefits asset
|
2,080 | 1,349 | ||||||
Miscellaneous other assets
|
1,060 | 1,052 | ||||||
Total other assets
|
21,886 | 20,759 | ||||||
Total assets
|
$ | 33,373 | $ | 32,009 | ||||
-63-
December 31, | December 31, | |||||||
$ in millions | 2007 | 2006 | ||||||
Liabilities and Shareholders Equity:
|
||||||||
Current Liabilities
|
||||||||
Notes payable to banks
|
$ | 26 | $ | 95 | ||||
Current portion of long-term debt
|
111 | 75 | ||||||
Trade accounts payable
|
1,901 | 1,682 | ||||||
Accrued employees compensation
|
1,180 | 1,176 | ||||||
Advance payments and billings in excess of costs incurred
|
1,563 | 1,571 | ||||||
Income tax payable
|
535 | |||||||
Other current liabilities
|
1,651 | 1,619 | ||||||
Total current liabilities
|
6,432 | 6,753 | ||||||
Long-term debt, net of current portion
|
3,918 | 3,992 | ||||||
Mandatorily redeemable preferred stock
|
350 | 350 | ||||||
Pension and postretirement benefits liability
|
3,008 | 3,302 | ||||||
Other long-term liabilities
|
1,978 | 997 | ||||||
Total liabilities
|
15,686 | 15,394 | ||||||
Commitments and Contingencies (Note 16)
|
||||||||
Shareholders Equity
|
||||||||
Common stock, $1 par value; 800,000,000 shares
authorized; issued and outstanding: 2007337,834,561;
2006345,921,809
|
338 | 346 | ||||||
Paid-in capital
|
10,661 | 11,346 | ||||||
Retained earnings
|
7,387 | 6,183 | ||||||
Accumulated other comprehensive loss
|
(699 | ) | (1,260 | ) | ||||
Total shareholders equity
|
17,687 | 16,615 | ||||||
Total liabilities and shareholders equity
|
$ | 33,373 | $ | 32,009 | ||||
-64-
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Net income
|
$ | 1,790 | $ | 1,542 | $ | 1,400 | ||||||
Other Comprehensive Income (Loss)
|
||||||||||||
Change in cumulative translation adjustment
|
12 | 22 | (14 | ) | ||||||||
Change in unrealized gain (loss) on marketable securities, net
of tax (expense) benefit of ($1) in 2007 and $2 in 2006
|
1 | (5 | ) | (1 | ) | |||||||
Reclassification adjustment on write-down of marketable
securities, net of tax of ($5)
|
10 | |||||||||||
Reclassification adjustment on sale of marketable securities,
net of tax of $19
|
(29 | ) | ||||||||||
Additional minimum pension liability adjustment, net of tax of
($32)
|
40 | |||||||||||
Change in unamortized benefit plan costs, net of tax of ($384)
|
594 | |||||||||||
Other comprehensive income (loss), net of tax
|
607 | 67 | (44 | ) | ||||||||
Comprehensive income
|
$ | 2,397 | $ | 1,609 | $ | 1,356 | ||||||
-65-
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Operating Activities
|
||||||||||||
Sources of CashContinuing Operations
|
||||||||||||
Cash received from customers
|
||||||||||||
Progress payments
|
$ | 7,490 | $ | 6,797 | $ | 6,644 | ||||||
Other collections
|
24,570 | 23,303 | 23,622 | |||||||||
Insurance proceeds received
|
125 | 100 | 89 | |||||||||
Income tax refunds received
|
52 | 60 | 88 | |||||||||
Interest received
|
21 | 45 | 78 | |||||||||
Other cash receipts
|
34 | 42 | 51 | |||||||||
Total sources of cashcontinuing operations
|
32,292 | 30,347 | 30,572 | |||||||||
Uses of CashContinuing Operations
|
||||||||||||
Cash paid to suppliers and employees
|
(28,024 | ) | (27,389 | ) | (27,028 | ) | ||||||
Interest paid
|
(355 | ) | (366 | ) | (404 | ) | ||||||
Income taxes paid
|
(905 | ) | (678 | ) | (419 | ) | ||||||
Excess tax benefits from stock-based compensation
|
(52 | ) | (57 | ) | ||||||||
Payments for litigation settlements
|
(33 | ) | (11 | ) | (99 | ) | ||||||
Other cash payments
|
(19 | ) | (12 | ) | (31 | ) | ||||||
Total uses of cashcontinuing operations
|
(29,388 | ) | (28,513 | ) | (27,981 | ) | ||||||
Cash provided by continuing operations
|
2,904 | 1,834 | 2,591 | |||||||||
Cash (used in) provided by discontinued operations
|
(14 | ) | (78 | ) | 36 | |||||||
Net cash provided by operating activities
|
2,890 | 1,756 | 2,627 | |||||||||
Investing Activities
|
||||||||||||
Proceeds from sale of businesses, net of cash divested
|
43 | 57 | ||||||||||
Payments for businesses purchased, net of cash acquired
|
(690 | ) | (361 | ) | ||||||||
Proceeds from sale of property, plant, and equipment
|
22 | 21 | 11 | |||||||||
Additions to property, plant, and equipment
|
(685 | ) | (737 | ) | (823 | ) | ||||||
Proceeds from insurance carrier
|
4 | 117 | 38 | |||||||||
Proceeds from sale of investments
|
209 | 238 | ||||||||||
Payment for purchase of investment
|
(35 | ) | ||||||||||
Restriction of cash, net of restrictions released
|
59 | (127 | ) | |||||||||
Payments for outsourcing contract costs
|
(137 | ) | (77 | ) | ||||||||
Other investing activities, net
|
(3 | ) | (15 | ) | (15 | ) | ||||||
Net cash used in investing activities
|
(1,430 | ) | (601 | ) | (855 | ) | ||||||
Financing Activities
|
||||||||||||
Borrowings under lines of credit
|
315 | 47 | 62 | |||||||||
Repayment of borrowings under lines of credit
|
(384 | ) | (3 | ) | (21 | ) | ||||||
Proceeds from issuance of long-term debt
|
200 | |||||||||||
Principal payments of long-term debt
|
(90 | ) | (1,212 | ) | (32 | ) | ||||||
Proceeds from exercises of stock options and issuances of common
stock
|
274 | 393 | 163 | |||||||||
Dividends paid
|
(504 | ) | (402 | ) | (359 | ) | ||||||
Excess tax benefits from stock-based compensation
|
52 | 57 | ||||||||||
Common stock repurchases
|
(1,175 | ) | (825 | ) | (1,210 | ) | ||||||
Net cash used in financing activities
|
(1,512 | ) | (1,745 | ) | (1,397 | ) | ||||||
(Decrease) increase in cash and cash equivalents
|
(52 | ) | (590 | ) | 375 | |||||||
Cash and cash equivalents, beginning of year
|
1,015 | 1,605 | 1,230 | |||||||||
Cash and cash equivalents, end of year
|
$ | 963 | $ | 1,015 | $ | 1,605 | ||||||
-66-
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Reconciliation of Net Income to Net Cash Provided by
Operating Activities
|
||||||||||||
Net Income
|
$ | 1,790 | $ | 1,542 | $ | 1,400 | ||||||
Adjustments to reconcile to net cash provided by operating
activities
|
||||||||||||
Depreciation
|
578 | 569 | 556 | |||||||||
Amortization of assets
|
152 | 136 | 216 | |||||||||
Stock-based compensation
|
196 | 184 | 172 | |||||||||
Excess tax benefits from stock-based compensation
|
(52 | ) | (57 | ) | ||||||||
Loss on disposals of property, plant, and equipment
|
19 | 6 | 21 | |||||||||
Impairment of property, plant, and equipment damaged by
Hurricane Katrina
|
37 | 61 | ||||||||||
Amortization of long-term debt premium
|
(11 | ) | (14 | ) | (18 | ) | ||||||
Net gain on investments
|
(23 | ) | (96 | ) | (165 | ) | ||||||
Decrease (increase) in
|
||||||||||||
Accounts receivable
|
(6,487 | ) | (2,222 | ) | (5,314 | ) | ||||||
Inventoried costs
|
8 | (76 | ) | (234 | ) | |||||||
Prepaid expenses and other current assets
|
9 | (10 | ) | (85 | ) | |||||||
Increase (decrease) in
|
||||||||||||
Progress payments
|
6,513 | 2,261 | 5,249 | |||||||||
Accounts payable and accruals
|
108 | 181 | 348 | |||||||||
Deferred income taxes
|
175 | 183 | 105 | |||||||||
Income taxes payable
|
(59 | ) | (68 | ) | 295 | |||||||
Retiree benefits
|
(50 | ) | (772 | ) | (22 | ) | ||||||
Other non-cash transactions, net
|
38 | 50 | 6 | |||||||||
Cash provided by continuing operations
|
2,904 | 1,834 | 2,591 | |||||||||
Cash (used in) provided by discontinued operations
|
(14 | ) | (78 | ) | 36 | |||||||
Net cash provided by operating activities
|
$ | 2,890 | $ | 1,756 | $ | 2,627 | ||||||
Non-Cash Investing and Financing Activities
|
||||||||||||
Investment in unconsolidated affiliate
|
$ | 30 | ||||||||||
Sales of businesses
|
||||||||||||
Liabilities assumed by purchaser
|
$ | 41 | ||||||||||
Purchase of businesses
|
||||||||||||
Fair value of assets acquired, including goodwill
|
$ | 879 | $ | 399 | ||||||||
Cash paid for businesses purchased
|
(690 | ) | (361 | ) | ||||||||
Non-cash consideration given for businesses purchased
|
(53 | ) | ||||||||||
Liabilities assumed
|
$ | 136 | $ | 38 | ||||||||
Capital leases
|
$ | 35 | $ | 9 | ||||||||
-67-
Year ended December 31 | ||||||||||||
$ in millions, except per share | 2007 | 2006 | 2005 | |||||||||
Common Stock
|
||||||||||||
At beginning of year
|
$ | 346 | $ | 347 | $ | 364 | ||||||
Common stock repurchased
|
(15 | ) | (12 | ) | (22 | ) | ||||||
Employee stock awards and options
|
7 | 11 | 5 | |||||||||
At end of year
|
338 | 346 | 347 | |||||||||
Paid-in Capital
|
||||||||||||
At beginning of year
|
11,346 | 11,571 | 12,426 | |||||||||
Common stock repurchased
|
(1,160 | ) | (813 | ) | (1,165 | ) | ||||||
Employee stock awards and options
|
475 | 588 | 310 | |||||||||
At end of year
|
10,661 | 11,346 | 11,571 | |||||||||
Retained Earnings
|
||||||||||||
At beginning of year
|
6,183 | 5,055 | 4,014 | |||||||||
Net income
|
1,790 | 1,542 | 1,400 | |||||||||
Adjustment to initially apply FIN 48
|
(66 | ) | ||||||||||
Dividends
|
(520 | ) | (414 | ) | (359 | ) | ||||||
At end of year
|
7,387 | 6,183 | 5,055 | |||||||||
Accumulated Other Comprehensive Loss
|
||||||||||||
At beginning of year
|
(1,260 | ) | (145 | ) | (101 | ) | ||||||
Other comprehensive income (loss), net of tax
|
607 | 67 | (44 | ) | ||||||||
Adjustment to initially apply SFAS No. 158, net of tax
of $838
|
(1,182 | ) | ||||||||||
Adjustment to deferred tax benefit recorded on adoption of
SFAS No. 158
|
(46 | ) | ||||||||||
At end of year
|
(699 | ) | (1,260 | ) | (145 | ) | ||||||
Total shareholders equity
|
$ | 17,687 | $ | 16,615 | $ | 16,828 | ||||||
Cash dividends declared per share
|
$ | 1.48 | $ | 1.16 | $ | 1.01 | ||||||
-68-
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
-69-
-70-
-71-
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 | |||
-72-
December 31 | ||||||||
$ in millions | 2007 | 2006 | ||||||
Cumulative translation adjustment
|
$ | 34 | $ | 22 | ||||
Unrealized gain on marketable securities, net of tax expense of
($2) in 2007, and ($1) in 2006
|
3 | 2 | ||||||
Unamortized benefit plan costs, net of tax benefit of $470 as of
December 31, 2007 and $900 at December 31, 2006
|
(736 | ) | (1,284 | ) | ||||
Total accumulated other comprehensive loss
|
$ | (699 | ) | $ | (1,260 | ) | ||
-73-
2. | NEW ACCOUNTING STANDARDS |
-74-
3. | COMMON STOCK DIVIDENDS |
4. | BUSINESS ACQUISITIONS |
-75-
5. | BUSINESS DISPOSITIONS |
-76-
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Sales and service revenues
|
$ | 14 | $ | 191 | $ | 743 | ||||||
Loss from discontinued operations
|
(20 | ) | (39 | ) | (21 | ) | ||||||
Income tax benefit
|
7 | 14 | 8 | |||||||||
Loss from discontinued operations, net of tax
|
(13 | ) | (25 | ) | (13 | ) | ||||||
(Loss) gain from divestitures
|
11 | 24 | ||||||||||
Income tax expense
|
(17 | ) | (7 | ) | ||||||||
(Loss) gain from discontinued operations, net of tax
|
$ | (13 | ) | $ | (31 | ) | $ | 4 | ||||
6. | SEGMENT INFORMATION |
-77-
-78-
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Sales and Service Revenues
|
||||||||||||
Information & Services
|
||||||||||||
Mission Systems
|
||||||||||||
United States Government
|
$ | 5,441 | $ | 5,021 | $ | 5,019 | ||||||
Other customers
|
89 | 54 | 46 | |||||||||
Intersegment sales
|
401 | 419 | 429 | |||||||||
5,931 | 5,494 | 5,494 | ||||||||||
Information Technology
|
||||||||||||
United States Government
|
3,298 | 3,063 | 2,921 | |||||||||
Other customers
|
1,042 | 761 | 683 | |||||||||
Intersegment sales
|
146 | 138 | 132 | |||||||||
4,486 | 3,962 | 3,736 | ||||||||||
Technical Services
|
||||||||||||
United States Government
|
1,793 | 1,483 | 1,282 | |||||||||
Other customers
|
92 | 103 | 80 | |||||||||
Intersegment sales
|
292 | 272 | 255 | |||||||||
2,177 | 1,858 | 1,617 | ||||||||||
Aerospace
|
||||||||||||
Integrated Systems
|
||||||||||||
United States Government
|
4,789 | 5,277 | 5,272 | |||||||||
Other customers
|
205 | 169 | 170 | |||||||||
Intersegment sales
|
73 | 54 | 47 | |||||||||
5,067 | 5,500 | 5,489 | ||||||||||
Space Technology
|
||||||||||||
United States Government
|
3,022 | 2,800 | 2,785 | |||||||||
Other customers
|
67 | 87 | 66 | |||||||||
Intersegment sales
|
44 | 36 | 15 | |||||||||
3,133 | 2,923 | 2,866 | ||||||||||
Electronics
|
||||||||||||
United States Government
|
4,608 | 4,112 | 4,015 | |||||||||
Other customers
|
1,798 | 1,872 | 1,813 | |||||||||
Intersegment sales
|
500 | 559 | 685 | |||||||||
6,906 | 6,543 | 6,513 | ||||||||||
Ships
|
||||||||||||
United States Government
|
5,749 | 5,263 | 5,727 | |||||||||
Other customers
|
25 | 48 | 57 | |||||||||
Intersegment sales
|
14 | 10 | 2 | |||||||||
5,788 | 5,321 | 5,786 | ||||||||||
Intersegment eliminations
|
(1,470 | ) | (1,488 | ) | (1,523 | ) | ||||||
Total sales and service revenues
|
$ | 32,018 | $ | 30,113 | $ | 29,978 | ||||||
-79-
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Operating Margin
|
||||||||||||
Information & Services
|
||||||||||||
Mission Systems
|
$ | 566 | $ | 519 | $ | 424 | ||||||
Information Technology
|
329 | 342 | 322 | |||||||||
Technical Services
|
120 | 120 | 100 | |||||||||
Aerospace
|
||||||||||||
Integrated Systems
|
591 | 551 | 499 | |||||||||
Space Technology
|
261 | 245 | 219 | |||||||||
Electronics
|
813 | 754 | 709 | |||||||||
Ships
|
538 | 393 | 249 | |||||||||
Intersegment eliminations
|
(115 | ) | (117 | ) | (101 | ) | ||||||
Total Segment Operating Margin
|
3,103 | 2,807 | 2,421 | |||||||||
Non-segment factors affecting operating margin
|
||||||||||||
Unallocated expenses
|
(224 | ) | (306 | ) | (200 | ) | ||||||
Net pension adjustment
|
127 | (37 | ) | (21 | ) | |||||||
Total operating margin
|
$ | 3,006 | $ | 2,464 | $ | 2,200 | ||||||
December 31, | ||||||||||||
$ in millions | 2007 | 2006 | ||||||||||
Assets
|
||||||||||||
Information & Services
|
||||||||||||
Mission Systems
|
$ | 5,856 | $ | 4,789 | ||||||||
Information Technology
|
3,576 | 3,289 | ||||||||||
Technical Services
|
1,133 | 1,108 | ||||||||||
Aerospace
|
||||||||||||
Integrated Systems
|
2,217 | 2,202 | ||||||||||
Space Technology
|
3,993 | 4,453 | ||||||||||
Electronics
|
5,315 | 5,454 | ||||||||||
Ships
|
6,874 | 6,946 | ||||||||||
Segment assets
|
28,964 | 28,241 | ||||||||||
Corporate
|
4,409 | 3,768 | ||||||||||
Total assets
|
$ | 33,373 | $ | 32,009 | ||||||||
-80-
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Capital Expenditures
|
||||||||||||
Information & Services
|
||||||||||||
Mission Systems
|
$ | 43 | $ | 49 | $ | 70 | ||||||
Information Technology
|
42 | 32 | 35 | |||||||||
Technical Services
|
9 | 4 | 5 | |||||||||
Aerospace
|
||||||||||||
Integrated Systems
|
100 | 119 | 142 | |||||||||
Space Technology
|
108 | 103 | 107 | |||||||||
Electronics
|
124 | 130 | 165 | |||||||||
Ships
|
247 | 287 | 266 | |||||||||
Corporate
|
12 | 13 | 33 | |||||||||
Total capital expenditures
|
$ | 685 | $ | 737 | $ | 823 | ||||||
Depreciation and Amortization
|
||||||||||||
Information & Services
|
||||||||||||
Mission Systems
|
$ | 59 | $ | 40 | $ | 66 | ||||||
Information Technology
|
64 | 46 | 49 | |||||||||
Technical Services
|
7 | 7 | 8 | |||||||||
Aerospace
|
||||||||||||
Integrated Systems
|
108 | 110 | 102 | |||||||||
Space Technology
|
127 | 126 | 133 | |||||||||
Electronics
|
180 | 211 | 247 | |||||||||
Ships
|
170 | 153 | 155 | |||||||||
Corporate
|
15 | 12 | 12 | |||||||||
Total depreciation and amortization
|
$ | 730 | $ | 705 | $ | 772 | ||||||
7. | EARNINGS PER SHARE |
-81-
December 31, | ||||||||||||
in millions, except per share | 2007 | 2006 | 2005 | |||||||||
Diluted Earnings Per Share From Continuing Operations
|
||||||||||||
Income from continuing operations
|
$ | 1,803 | $ | 1,573 | $ | 1,396 | ||||||
Add dividends on mandatorily redeemable convertible preferred
stock
|
24 | 24 | ||||||||||
Income from continuing operations available to common
shareholders
|
$ | 1,827 | $ | 1,597 | $ | 1,396 | ||||||
Weighted-average common shares outstanding
|
341.7 | 345.7 | 356.5 | |||||||||
Dilutive effect of stock options, awards, and mandatorily
redeemable convertible preferred stock
|
12.6 | 12.9 | 6.7 | |||||||||
Weighted-average diluted common shares outstanding
|
354.3 | 358.6 | 363.2 | |||||||||
Diluted earnings per share from continuing operations
|
$ | 5.16 | $ | 4.46 | $ | 3.84 | ||||||
Amount
|
Total Shares
|
Shares Repurchased
|
||||||||||||||||||||||||
Authorized
|
Average Price
|
Retired
|
(in millions) | |||||||||||||||||||||||
Authorization Date | (in billions) | Per Share | (in millions) | Date Completed | 2007 | 2006 | 2005 | |||||||||||||||||||
October 26, 2004
|
$ | 1.0 | $ | 54.83 | 18.2 | September 2005 | 12.7 | |||||||||||||||||||
October 24, 2005
|
1.5 | 65.08 | 23.0 | February 2007 | 2.3 | 11.6 | 9.1 | |||||||||||||||||||
December 14, 2006
|
1.0 | 75.96 | 13.1 | November 2007 | 13.1 | |||||||||||||||||||||
December 20, 2007
|
2.5 | |||||||||||||||||||||||||
15.4 | 11.6 | 21.8 | ||||||||||||||||||||||||
Dollar Amount
|
||||||||||||||
Shares
|
of Shares
|
|||||||||||||
Repurchased
|
Final Average Purchase
|
Repurchased
|
||||||||||||
Agreement Date | (in millions) | Completion Date | Price Per Share | (in millions) | ||||||||||
November 4, 2005
|
9.1 | March 1, 2006 | $ | 59.05 | $ | 537 | ||||||||
March 6, 2006
|
11.6 | May 26, 2006 | 68.01 | 788 | ||||||||||
February 21, 2007
|
8.0 | June 7, 2007 | 73.86 | 592 | ||||||||||
July 30, 2007
|
6.5 | September 17, 2007 | 77.27 | 502 |
-82-
December 31, | ||||||||
$ in millions | 2007 | 2006 | ||||||
Due From U.S. Government, Long-Term Contracts
|
||||||||
Billed
|
$ | 1,158 | $ | 1,054 | ||||
Unbilled
|
38,867 | 33,004 | ||||||
Progress payments received
|
(37,477 | ) | (31,637 | ) | ||||
2,548 | 2,421 | |||||||
Due From Other Customers, Long-Term Contracts
|
||||||||
Billed
|
305 | 212 | ||||||
Unbilled
|
3,228 | 2,975 | ||||||
Progress payments received
|
(2,712 | ) | (2,390 | ) | ||||
821 | 797 | |||||||
Total due, long-term contracts
|
3,369 | 3,218 | ||||||
Trade And Other Accounts Receivable
|
||||||||
Due from U.S. Government
|
544 | 477 | ||||||
Due from other customers
|
472 | 233 | ||||||
Progress payments received
|
(286 | ) | (58 | ) | ||||
Total due, trade and other
|
730 | 652 | ||||||
4,099 | 3,870 | |||||||
Allowances for doubtful amounts
|
(286 | ) | (308 | ) | ||||
Total accounts receivable, net
|
$ | 3,813 | $ | 3,562 | ||||
9. | INVENTORIED COSTS, NET |
December 31, | ||||||||
$ in millions | 2007 | 2006 | ||||||
Production costs of contracts in process
|
$ | 1,910 | $ | 1,951 | ||||
General and administrative expenses
|
172 | 184 | ||||||
2,082 | 2,135 | |||||||
Progress payments received
|
(1,348 | ) | (1,226 | ) | ||||
734 | 909 | |||||||
Product inventory
|
311 | 267 | ||||||
Total inventoried costs, net
|
$ | 1,045 | $ | 1,176 | ||||
-83-
10. | GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS |
Mission
|
Information
|
Technical
|
Integrated
|
Space
|
||||||||||||||||||||||||||||
$ in millions | Systems | Technology | Services | Systems | Technology | Electronics | Ships | Total | ||||||||||||||||||||||||
Balance as of January 1, 2006
|
$ | 4,256 | $ | 2,649 | $ | 992 | $ | 3,295 | $ | 2,575 | $ | 3,616 | $ | 17,383 | ||||||||||||||||||
Goodwill transferred due to segment realignment
|
(336 | ) | (403 | ) | $ | 792 | (13 | ) | (40 | ) | | |||||||||||||||||||||
Fair value adjustments
to net assets acquired |
(37 | ) | (27 | ) | (5 | ) | (3 | ) | (41 | ) | (19 | ) | (32 | ) | (164 | ) | ||||||||||||||||
Balance as of December 31, 2006
|
3,883 | 2,219 | 787 | 976 | 3,254 | 2,516 | 3,584 | 17,219 | ||||||||||||||||||||||||
Goodwill transferred due to segment realignment
|
346 | 34 | (380 | ) | | |||||||||||||||||||||||||||
Goodwill acquired
|
522 | 47 | 37 | 57 | 663 | |||||||||||||||||||||||||||
Adjustment to initially apply FIN 48
|
(22 | ) | (7 | ) | (3 | ) | (18 | ) | (1 | ) | (12 | ) | (63 | ) | ||||||||||||||||||
Fair value adjustments
to net assets acquired |
(52 | ) | (28 | ) | (8 | ) | (2 | ) | (41 | ) | (1 | ) | (15 | ) | (147 | ) | ||||||||||||||||
Balance as of December 31, 2007
|
$ | 4,677 | $ | 2,184 | $ | 810 | $ | 1,021 | $ | 2,852 | $ | 2,514 | $ | 3,614 | $ | 17,672 | ||||||||||||||||
-84-
December 31, 2007 | December 31, 2006 | |||||||||||||||||||||||
Gross
|
Net
|
Gross
|
Net
|
|||||||||||||||||||||
Carrying
|
Accumulated
|
Carrying
|
Carrying
|
Accumulated
|
Carrying
|
|||||||||||||||||||
$ in millions | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||
Contract and program intangibles
|
$ | 2,661 | $ | (1,616 | ) | $ | 1,045 | $ | 2,594 | $ | (1,487 | ) | $ | 1,107 | ||||||||||
Other purchased intangibles
|
100 | (71 | ) | 29 | 100 | (68 | ) | 32 | ||||||||||||||||
Total
|
$ | 2,761 | $ | (1,687 | ) | $ | 1,074 | $ | 2,694 | $ | (1,555 | ) | $ | 1,139 | ||||||||||
$ in millions | ||||
Year ending December 31
|
||||
2008
|
$ | 122 | ||
2009
|
112 | |||
2010
|
92 | |||
2011
|
54 | |||
2012
|
52 | |||
11. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
2007 | 2006 | |||||||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
$ in millions | Amount | Value | Amount | Value | ||||||||||||
Cash and cash equivalents
|
$ | 963 | $ | 963 | $ | 1,015 | $ | 1,015 | ||||||||
Investments in marketable securities
|
258 | 258 | 208 | 208 | ||||||||||||
Cash surrender value of life insurance policies
|
315 | 315 | 290 | 290 | ||||||||||||
Short-term notes payable
|
(26 | ) | (26 | ) | (95 | ) | (95 | ) | ||||||||
Long-term debt
|
(4,029 | ) | (4,488 | ) | (4,067 | ) | (4,562 | ) | ||||||||
Mandatorily redeemable preferred stock
|
(350 | ) | (510 | ) | (350 | ) | (459 | ) | ||||||||
Interest rate swaps
|
4 | 4 | (8 | ) | (8 | ) | ||||||||||
Foreign currency forward contracts
|
4 | 4 | ||||||||||||||
-85-
12. | INCOME TAXES |
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Income Taxes on Continuing Operations
|
||||||||||||
Currently Payable
|
||||||||||||
Federal income taxes
|
$ | 671 | $ | 528 | $ | 503 | ||||||
Foreign income taxes
|
42 | 27 | 27 | |||||||||
Total federal and foreign income taxes currently payable
|
713 | 555 | 530 | |||||||||
Change in deferred federal and foreign income taxes
|
170 | 158 | 139 | |||||||||
Total federal and foreign income taxes
|
$ | 883 | $ | 713 | $ | 669 | ||||||
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Domestic income
|
$ | 2,595 | $ | 2,214 | $ | 1,990 | ||||||
Foreign income
|
91 | 72 | 75 | |||||||||
Income from continuing operations before income taxes
|
$ | 2,686 | $ | 2,286 | $ | 2,065 | ||||||
-86-
Year ended December 31 | ||||||||||||
$ in millions | 2007 | 2006 | 2005 | |||||||||
Income tax expense on continuing operations at statutory rate
|
$ | 940 | $ | 801 | $ | 723 | ||||||
Manufacturing deduction
|
(19 | ) | (9 | ) | (9 | ) | ||||||
Research tax credit
|
(14 | ) | (3 | ) | (3 | ) | ||||||
Extraterritorial income exclusion/foreign sales corporation
|
(6 | ) | (6 | ) | ||||||||
Wage credit
|
(18 | ) | ||||||||||
Settlement of IRS appeals cases
|
(22 | ) | (55 | ) | (27 | ) | ||||||
Other, net
|
(2 | ) | 3 | (9 | ) | |||||||
Total federal and foreign income taxes
|
$ | 883 | $ | 713 | $ | 669 | ||||||
Unrecognized
|
||||
$ in millions | Tax Benefit | |||
Balance at January 1, 2007
|
$ | 459 | ||
Additions based on tax positions related to the current year
|
18 | |||
Additions for tax positions of prior years
|
85 | |||
Reductions for tax positions of prior years
|
(57 | ) | ||
Settlements
|
(17 | ) | ||
Net change in unrecognized tax benefits
|
29 | |||
Balance at December 31, 2007
|
$ | 488 | ||
-87-
-88-
December 31, | ||||||||
$ in millions | 2007 | 2006 | ||||||
Deferred Tax Assets
|
||||||||
Retirement benefit plan expense
|
$ | 610 | $ | 1,067 | ||||
Provision for accrued liabilities
|
796 | 693 | ||||||
Tax credits and carryforwards
|
||||||||
Capital loss
|
592 | 1,120 | ||||||
Foreign income tax credit
|
180 | |||||||
Other
|
462 | 415 | ||||||
Gross deferred tax assets
|
2,460 | 3,475 | ||||||
Less valuation allowance
|
(592 | ) | (1,300 | ) | ||||
Net deferred tax assets
|
1,868 | 2,175 | ||||||
Deferred Tax Liabilities
|
||||||||
Provision for accrued liabilities
|
61 | 37 | ||||||
Contract accounting differences
|
284 | |||||||
Purchased intangibles
|
327 | 292 | ||||||
Depreciation and amortization
|
418 | 533 | ||||||
Goodwill amortization
|
505 | 444 | ||||||
Gross deferred tax liabilities
|
1,595 | 1,306 | ||||||
Total net deferred tax assets
|
$ | 273 | $ | 869 | ||||
December 31, | ||||||||
$ in millions | 2007 | 2006 | ||||||
Net current deferred tax assets
|
$ | 542 | $ | 706 | ||||
Net non-current deferred tax assets
|
65 | 165 | ||||||
Net current deferred tax liabilities
|
(4 | ) | (2 | ) | ||||
Net non-current deferred tax liabilities
|
(330 | ) | ||||||
Total net deferred tax assets
|
$ | 273 | $ | 869 | ||||
-89-
13. | NOTES PAYABLE TO BANKS AND LONG-TERM DEBT |
-90-
December 31, | ||||||||
$ in millions | 2007 | 2006 | ||||||
Notes and debentures due 2008 to 2036, rates from 6.25% to 9.375%
|
$ | 3,705 | $ | 3,777 | ||||
Other indebtedness due 2008 to 2028, rates from 4.55% to 8.5%
|
324 | 290 | ||||||
Total long-term debt
|
4,029 | 4,067 | ||||||
Less current portion
|
111 | 75 | ||||||
Long-term debt, net of current portion
|
$ | 3,918 | $ | 3,992 | ||||
$ in millions | ||||
Year Ending December 31
|
||||
2008
|
$ | 111 | ||
2009
|
473 | |||
2010
|
91 | |||
2011
|
773 | |||
2012
|
3 | |||
Thereafter
|
2,538 | |||
Total principal payments
|
3,989 | |||
Unamortized premium on long-term debt, net of discount
|
40 | |||
Total long-term debt
|
$ | 4,029 | ||
14. | MANDATORILY REDEEMABLE SERIES B CONVERTIBLE PREFERRED STOCK |
-91-
15. | LITIGATION |
-92-
16. | COMMITMENTS AND CONTINGENCIES |
-93-
-94-
17. | IMPACT FROM HURRICANE KATRINA |
-95-
-96-
18. | RETIREMENT BENEFITS |
-97-
Medical and
|
||||||||||||||||||||||||
Pension Benefits | Life Benefits | |||||||||||||||||||||||
$ in millions | 2007 | 2006 | 2005 | 2007 | 2006 | 2005 | ||||||||||||||||||
Components of Net Periodic Benefit Cost
|
||||||||||||||||||||||||
Service cost
|
$ | 786 | $ | 755 | $ | 675 | $ | 52 | $ | 69 | $ | 66 | ||||||||||||
Interest cost
|
1,250 | 1,159 | 1,091 | 164 | 183 | 183 | ||||||||||||||||||
Expected return on plan assets
|
(1,774 | ) | (1,572 | ) | (1,468 | ) | (58 | ) | (52 | ) | (49 | ) | ||||||||||||
Amortization of
|
||||||||||||||||||||||||
Prior service cost (credit)
|
40 | 35 | 53 | (65 | ) | (16 | ) | (1 | ) | |||||||||||||||
Net loss from previous years
|
48 | 91 | 59 | 25 | 31 | 27 | ||||||||||||||||||
Other
|
2 | (13 | ) | |||||||||||||||||||||
Net periodic benefit cost
|
$ | 352 | $ | 468 | $ | 410 | $ | 118 | $ | 215 | $ | 213 | ||||||||||||
Pension
|
Medical and
|
|||||||||||
$ in millions | Benefits | Life Benefits | Total | |||||||||
Changes in Unrecognized Benefit Plan Costs
|
||||||||||||
Net actuarial gain
|
$ | (854 | ) | $ | (90 | ) | $ | (944 | ) | |||
Prior service cost (credit)
|
17 | (3 | ) | 14 | ||||||||
Amortization of
|
||||||||||||
Prior service (cost) credit
|
(40 | ) | 65 | 25 | ||||||||
Net loss from previous years
|
(48 | ) | (25 | ) | (73 | ) | ||||||
Tax benefits related to above items
|
365 | 19 | 384 | |||||||||
Changes in unrecognized benefit plan costs
|
$ | (560 | ) | $ | (34 | ) | $ | (594 | ) | |||
-98-
Medical and
|
||||||||||||||||
Pension Benefits | Life Benefits | |||||||||||||||
$ in millions | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Change in Benefit Obligation
|
||||||||||||||||
Benefit obligation at beginning of year
|
$ | 21,484 | $ | 20,692 | $ | 2,867 | $ | 3,341 | ||||||||
Service cost
|
786 | 755 | 52 | 69 | ||||||||||||
Interest cost
|
1,250 | 1,159 | 164 | 183 | ||||||||||||
Plan participants contributions
|
24 | 29 | 84 | 88 | ||||||||||||
Plan amendments
|
18 | 40 | (2 | ) | (464 | ) | ||||||||||
Actuarial gain
|
(357 | ) | (119 | ) | (103 | ) | (64 | ) | ||||||||
Benefits paid
|
(1,157 | ) | (1,112 | ) | (250 | ) | (281 | ) | ||||||||
Acquisitions, divestitures, transfers and other
|
21 | 40 | (5 | ) | ||||||||||||
Benefit obligation at end of year
|
22,069 | 21,484 | 2,812 | 2,867 | ||||||||||||
Change in Plan Assets
|
||||||||||||||||
Fair value of plan assets at beginning of year
|
21,407 | 18,867 | 880 | 780 | ||||||||||||
Gain on plan assets
|
2,275 | 2,444 | 46 | 95 | ||||||||||||
Employer contributions
|
342 | 1,157 | 191 | 198 | ||||||||||||
Plan participants contributions
|
24 | 29 | 84 | 88 | ||||||||||||
Benefits paid
|
(1,157 | ) | (1,112 | ) | (250 | ) | (281 | ) | ||||||||
Acquisitions, divestitures, transfers and other
|
22 | |||||||||||||||
Fair value of plan assets at end of year
|
22,891 | 21,407 | 951 | 880 | ||||||||||||
Funded status
|
$ | 822 | $ | (77 | ) | $ | (1,861 | ) | $ | (1,987 | ) | |||||
Amounts Recognized in the Consolidated Statements of Financial Position | ||||||||||||||||
Non-current assets
|
$ | 2,033 | $ | 1,303 | $ | 47 | $ | 46 | ||||||||
Current liability
|
(43 | ) | (41 | ) | (68 | ) | (70 | ) | ||||||||
Non-current liability
|
(1,168 | ) | (1,339 | ) | (1,840 | ) | (1,963 | ) | ||||||||
Pension
|
Medical and
|
|||||||
$ in millions | Benefits | Life Benefits | ||||||
Amounts Expected to be Recognized in 2008 Net Periodic
Benefit Cost
|
||||||||
Net loss
|
$ | 25 | $ | 22 | ||||
Prior service cost (credit)
|
40 | (65 | ) | |||||
-99-
Pension Benefits | Medical and Life Benefits | |||||||||||||||
$ in millions | 2007 | 2006 | 2007 | 2006 | ||||||||||||
Amounts Recorded in Accumulated Other Comprehensive Loss
|
||||||||||||||||
Net actuarial loss
|
$ | (975 | ) | (1,877 | ) | $ | (429 | ) | (545 | ) | ||||||
Prior service cost and net transition obligation
|
(254 | ) | (277 | ) | 452 | 515 | ||||||||||
Income tax benefits related to above items
|
479 | 890 | (9 | ) | 10 | |||||||||||
Unamortized benefit plan costs
|
$ | (750 | ) | (1,264 | ) | $ | 14 | (20 | ) | |||||||
December 31, | ||||||||
$ in millions | 2007 | 2006 | ||||||
Projected benefit obligation
|
$ | 1,772 | $ | 2,055 | ||||
Accumulated benefit obligation
|
1,407 | 1,601 | ||||||
Fair value of plan assets
|
722 | 946 | ||||||
Medical and
|
||||||||||||||||
Pension Benefits | Life Benefits | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Assumptions Used to Determine Benefit Obligation at December
31
|
||||||||||||||||
Discount rate
|
6.22 | % | 5.97 | % | 6.12 | % | 5.91 | % | ||||||||
Rate of compensation increase
|
4.25 | % | 4.25 | % | ||||||||||||
Initial health care cost trend rate assumed for the next year
|
8.00 | % | 8.75 | % | ||||||||||||
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
|
2012 | 2010 | ||||||||||||||
Assumptions Used to Determine Benefit Cost for the Year Ended December 31 | ||||||||||||||||
Discount rate
|
5.97 | % | 5.71 | % | 5.91 | % | 5.67 | % | ||||||||
Expected long-term return on plan assets
|
8.50 | % | 8.50 | % | 6.75 | % | 6.75 | % | ||||||||
Rate of compensation increase
|
4.25 | % | 4.00 | % | ||||||||||||
Initial health care cost trend rate assumed for the next year
|
8.75 | % | 10.00 | % | ||||||||||||
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
|
2010 | 2010 | ||||||||||||||
-100-
1-Percentage-
|
1-Percentage-
|
|||||||
$ in millions | Point Increase | Point Decrease | ||||||
Increase (Decrease) From Change In Health Care Cost Trend
Rates To
|
||||||||
Postretirement benefit expense
|
$ | 9 | $ | (9 | ) | |||
Postretirement benefit liability
|
85 | (91 | ) | |||||
Medical and Life
|
||||||||||||||||
Pension Plan Assets | Benefits Plan Assets | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Equity securities
|
48 | % | 57 | % | 74 | % | 74 | % | ||||||||
Debt securities
|
34 | 31 | 20 | 22 | ||||||||||||
Real estate
|
6 | 4 | 2 | 1 | ||||||||||||
Other
|
12 | 8 | 4 | 3 | ||||||||||||
Total
|
100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Asset Allocation Ranges | ||||
U.S. equity
|
30 40 | % | ||
International equity
|
15 25 | |||
Long bonds
|
25 35 | |||
Real estate and other
|
10 20 | |||
-101-
Pension Plans | Medical and Life Plans | |||||||||||
Benefit
|
Benefit
|
Subsidy
|
||||||||||
$ in millions | Payments | Payments | receipts | |||||||||
Year Ending December 31
|
||||||||||||
2008
|
$ | 1,176 | $ | 215 | $ | 11 | ||||||
2009
|
1,224 | 221 | 10 | |||||||||
2010
|
1,281 | 227 | 9 | |||||||||
2011
|
1,344 | 232 | 8 | |||||||||
2012
|
1,410 | 234 | 9 | |||||||||
2013 through 2017
|
8,189 | 1,233 | 46 | |||||||||
19. | STOCK COMPENSATION PLANS |
-102-
-103-
2007 | 2006 | 2005 | ||||||||||
Dividend yield
|
2.0 | % | 1.6 | % | 1.8 | % | ||||||
Volatility rate
|
20 | % | 25 | % | 28 | % | ||||||
Risk-free interest rate
|
4.6 | % | 4.6 | % | 4.0 | % | ||||||
Expected option life (years)
|
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, 2007
|
19,888 | $ | 49 | 5.0 years | $ | 367 | ||||||||||
Granted
|
902 | 73 | ||||||||||||||
Exercised
|
(5,879 | ) | 49 | |||||||||||||
Cancelled and forfeited
|
(28 | ) | 43 | |||||||||||||
Outstanding at December 31, 2007
|
14,883 | $ | 51 | 4.6 years | $ | 416 | ||||||||||
Vested and expected to vest in the future at December 31,
2007
|
14,820 | $ | 51 | 4.6 years | $ | 415 | ||||||||||
Exercisable at December 31, 2007
|
13,320 | $ | 49 | 4.1 years | $ | 398 | ||||||||||
Available for grant at December 31, 2007
|
11,978 | |||||||||||||||
-104-
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 (including performance adjustment on shares vested)
|
3,584 | 63 | ||||||||||
Vested
|
(5,520 | ) | 50 | |||||||||
Forfeited
|
(284 | ) | 63 | |||||||||
Outstanding at December 31, 2007
|
5,144 | $ | 67 | 1.3 years | ||||||||
Available for grant at December 31, 2007
|
5,142 | |||||||||||
Year ended
|
||||
December 31, | ||||
$ in millions, except per share | 2005 | |||
Net income as reported
|
$ | 1,400 | ||
Stock-based compensation, net of tax, included in net income as
reported
|
117 | |||
Stock-based compensation, net of tax, that would have been
included in net income, if the fair value method had been
applied to all awards
|
(196 | ) | ||
Pro-forma net income using the fair value method
|
$ | 1,321 | ||
Basic Earnings Per Share
|
||||
As reported
|
$ | 3.93 | ||
Pro-forma
|
$ | 3.71 | ||
Diluted Earnings Per Share
|
||||
As reported
|
$ | 3.85 | ||
Pro-forma
|
$ | 3.64 |
-105-
20. | UNAUDITED SELECTED QUARTERLY DATA |
$ in millions, except per share | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | ||||||||||||
Sales and service revenues
|
$ | 7,340 | $ | 7,926 | $ | 7,928 | $ | 8,824 | ||||||||
Operating margin
|
685 | 754 | 807 | 760 | ||||||||||||
Income from continuing operations
|
390 | 466 | 490 | 457 | ||||||||||||
Net income
|
387 | 460 | 489 | 454 | ||||||||||||
Basic earnings per share from continuing operations
|
1.13 | 1.36 | 1.44 | 1.35 | ||||||||||||
Basic earnings per share
|
1.12 | 1.34 | 1.44 | 1.34 | ||||||||||||
Diluted earnings per share from continuing operations
|
1.11 | 1.33 | 1.41 | 1.32 | ||||||||||||
Diluted earnings per share
|
1.10 | 1.31 | 1.41 | 1.31 | ||||||||||||
$ in millions, except per share | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | ||||||||||||
Sales and service revenues
|
$ | 7,075 | $ | 7,596 | $ | 7,429 | $ | 8,013 | ||||||||
Operating margin
|
606 | 686 | 549 | 623 | ||||||||||||
Income from continuing operations
|
363 | 445 | 308 | 457 | ||||||||||||
Net income
|
357 | 430 | 302 | 453 | ||||||||||||
Basic earnings per share from continuing operations
|
1.06 | 1.29 | .89 | 1.32 | ||||||||||||
Basic earnings per share
|
1.04 | 1.25 | .88 | 1.31 | ||||||||||||
Diluted earnings per share from continuing operations
|
1.03 | 1.27 | .88 | 1.29 | ||||||||||||
Diluted earnings per share
|
1.02 | 1.23 | .86 | 1.28 | ||||||||||||
-106-
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
Item 9B. | Other Information |
-107-
/s/ | Ronald D. Sugar |
/s/ | James F. Palmer |
-108-
/s/ | Deloitte & Touche LLP |
-109-
Item 10. | Directors, Executive Officers, and Corporate Governance |
Name | Age | Office Held | Since | Prior Business Experience (Last Five Years) | ||||||||
Ronald D. Sugar
|
59 | Chairman and Chief Executive Officer | 2006 | Chairman, Chief Executive Officer and President (2003-2006); Prior to April 2003, Chief Executive Officer and President; President and Chief Operating Officer (2001-2003) | ||||||||
Jerry B. Agee
|
64 | Corporate Vice President and President, Mission Systems Sector | 2005 | Vice President and Deputy Sector President, Mission Systems Sector (2004-2005); Prior to June 2004, Vice President and General Manager, Systems-Missile Defense, Mission Systems Sector (2002-2004) | ||||||||
Wesley G. Bush
|
46 | President and Chief Operating Officer | 2007 | President and Chief Financial Officer (2006-2007); Prior to March 2007, Corporate Vice President and Chief Financial Officer (2005-2006); Corporate Vice President and President, Space Technology Sector (2003-2005); Corporate Vice President of Northrop Grumman Corporation (2002-2003) | ||||||||
James L. Cameron
|
50 | Corporate Vice President and President, Technical Services Sector | 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 Sector (2003-2005); President, ITT Systems Defense Group (2000-2003) | ||||||||
Gary W. Ervin
|
50 | Corporate Vice President and President, Integrated Systems Sector | 2008 | Corporate Vice President (2007); Prior to September 2007, Vice President, Western Region, Integrated Systems Sector (2005-2007); Vice President, Air Combat Systems, Integrated Systems Sector (2002-2005) | ||||||||
Kenneth N. Heintz
|
61 | Corporate Vice President, Controller and Chief Accounting Officer | 2005 | Independent Financial Consultant (2004-2005); Prior to June 2004, Corporate Vice President, Hughes Electronics Corporation (now The DIRECTV Group, Inc. (2000-2004)) | ||||||||
Robert W. Helm
|
56 | Corporate Vice President, Business Development and Government Relations | 1994 |
-110-
Name | Age | Office Held | Since | Prior Business Experience (Last Five Years) | ||||||||
Alexis C. Livanos
|
59 | Corporate Vice President and President, Space Technology Sector | 2005 | Vice President and General Manager of Systems Development and Technology and Space Sensors Divisions, and Vice President and General Manager of Navigation and Space Sensors Division, Electronics Sector (2003-2005); Prior to February 2003, Executive Vice President, Boeing Satellite Systems (2000-2003) | ||||||||
Linda A. Mills
|
58 | Corporate Vice President and President, Information Technology Sector | 2008 | President of the Civilian Agencies business group, Information Technology Sector (2007-January 2008); Prior to February 2007, Vice President for Operations and Processes, Information Technology Sector (2005-2007); Vice President, Mission Assurance/Six Sigma, Mission Systems Sector (2003-2005) | ||||||||
Rosanne P. OBrien
|
64 | Corporate Vice President, Communications | 2000 | |||||||||
James R. ONeill
|
54 | Corporate Vice President | 2008 | Corporate Vice President and President, Information Technology Sector (2004-January 2008); Prior to May 2004, President, TASC, Inc. (2002-2004) | ||||||||
James F. Palmer
|
58 | Corporate Vice President and Chief Financial Officer | 2007 | Executive Vice President and Chief Financial Officer, Visteon Corporation (2004-2007); Prior to June 2004, Senior Vice President, The Boeing Company and President, Boeing Capital Corporation (2000-2004) | ||||||||
C. Michael Petters
|
48 | Corporate Vice President and President, Northrop Grumman Shipbuilding Sector | 2008 | Corporate Vice President and President, Newport News Sector (2004-January 2008); Prior to November 2004, Vice President, Human Resources, Administration and Trades, Newport News Sector (2001-2004) | ||||||||
James F. Pitts
|
56 | Corporate Vice President and President, Electronics Sector | 2005 | Vice President and General Manager of Aerospace Systems Division, Electronics Sector (2001-2005) | ||||||||
Mark Rabinowitz
|
46 | 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) | ||||||||
Scott J. Seymour
|
57 | Corporate Vice President | 2008 | Corporate Vice President and President, Integrated Systems Sector (2002-2007) | ||||||||
Philip A. Teel
|
59 | Corporate Vice President and Sector President-Elect, Mission Systems Sector | 2008 | Corporate Vice President and President, Ship Systems Sector (2005- January 2008); Prior to July 2005, Vice President, Airborne Early Warning & Electronic Warfare Systems, Integrated Systems Sector (2000-2005) | ||||||||
W. Burks Terry
|
57 | Corporate Vice President and General Counsel | 2000 |
-111-
Name | Age | Office Held | Since | Prior Business Experience (Last Five Years) | ||||||||
Ian V. Ziskin
|
49 | Corporate Vice President and Chief Human Resources and Administrative Officer | 2006 | Corporate Vice President, Human Resources and Leadership Strategy (2003-2005); Prior to June 2003, President and Founder, Executive Excellence Group (2002-2003) |
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 Schedule |
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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 May 16, 2006 and filed May 19, 2006) | ||||
3 | (b) | Bylaws of Northrop Grumman Corporation, as amended February 9, 2007 (incorporated by reference to Exhibit 3.1 to Form 8-K dated February 9, 2007 and filed February 13, 2007) | ||||
4 | (a) | Registration Rights Agreement dated as of January 23, 2001, by and among Northrop Grumman Systems Corporation, 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) | Certificate of Designations, Preferences and Rights of Series B Preferred Stock of Northrop Grumman Corporation (incorporated by reference to Exhibit C to the Definitive Proxy Statement on Schedule 14A filed April 13, 2001) | ||||
4 | (c) | Indenture dated as of October 15, 1994, between Northrop Grumman Systems Corporation and JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K dated October 20, 1994, and filed October 25, 1994) | ||||
4 | (d) | Form of Officers Certificate (without exhibits) establishing the terms of 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 | (e) | Form of 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 | (f) | Form of 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 | (g) | Form of Officers Certificate establishing the terms of 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 | (h) | 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, and filed June 15, 1998) | ||||
4 | (i) | 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) |
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4 | (j) | 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 | (k) | 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) | ||||
4 | (l) | 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 | (m) | Supplemental Indenture with respect to Indenture dated December 15, 1991, 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 | (n) | Form of Exchange Security for the $400,000,000 8 percent senior notes due 2009 of Litton Industries, Inc. (predecessor-in-interest to Northrop Grumman Systems Corporation) (incorporated by reference to Exhibit 4.3 to the Form 10-Q of Litton Industries, Inc. for the quarter ended April 30, 2000, filed June 9, 2000) | ||||
4 | (o) | Indenture between TRW Inc. (now named Northrop Grumman Space & Mission Systems Corp.) and The Chase Manhattan Bank, as successor 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 | (p) | First Supplemental Indenture between TRW Inc. (now named Northrop Grumman Space & Mission Systems Corp.) and The Chase Manhattan Bank, as successor 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 | (q) | Fourth Supplemental Indenture between TRW Inc. (now named Northrop Grumman Space & Mission Systems Corp.) and The Chase Manhattan Bank, as successor Trustee, dated as of June 2, 1999 (incorporated by reference to Exhibit 4(e) to Form S-4 Registration Statement No. 333-83227 of TRW Inc. filed July 20, 1999) | ||||
4 | (r) | Fifth Supplemental Indenture between TRW Inc. (now named Northrop Grumman Space & Mission Systems Corp.) 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) | ||||
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., 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 the former Litton Industries, Inc. (incorporated by reference to Exhibit 10.10 to Form 8-K dated and filed April 17, 2001) |
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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 (formerly The Chase Manhattan Bank), as trustee, of certain debt securities of Northrop Grumman Space & Mission Systems Corp. (formerly TRW Inc.) (incorporated by reference to Exhibit 4.2 to Form 10-Q for the quarter ended March 31, 2003, filed May 14, 2003) | ||||
10 | (e) | Form of Guarantee dated as of January 9, 2003, by Northrop Grumman Space & Mission Systems Corp. (formerly TRW Inc.) of Northrop Grumman Systems Corporation indenture indebtedness (incorporated by reference to Exhibit 10(qq) to Form 10-K for the year ended December 31, 2002, filed March 24, 2003) | ||||
10 | (f) | 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 | (g) | Northrop Grumman Corporation 1993 Stock Plan for Non-Employee Directors (as Amended and Restated January 1, 2008) | ||||
10 | (h) | 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 | (i) | 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 | ||||
(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 Restricted Performance Stock Rights Agreement (officer), as amended May 16, 2005, applicable to 2005 Restricted Performance Stock Rights (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended June 30, 2005, filed July 28, 2005) | |||||
(iii) | 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) | |||||
(iv) | Form of letter from Northrop Grumman Corporation regarding Stock Option and RPSR Retirement Enhancement (incorporated by reference to Exhibit 10.2 to Form 8-K dated March 14, 2005 and filed March 15, 2005) | |||||
(v) | Form of Restricted Performance Stock Rights Agreement (non-officer), as amended May 16, 2005, applicable to 2005 Restricted Performance Stock Rights (incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended June 30, 2005, filed July 28, 2005) | |||||
*(vi) | Form of Restricted Performance Stock Rights Agreement applicable to 2006 Restricted Performance Stock Rights, as amended | |||||
(vii) | 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) | |||||
*(viii) | Form of Restricted Stock Rights Agreement applicable to 2006 Restricted Stock Rights, as amended | |||||
*(ix) | 2006 CPC Incentive Restricted Stock Rights Agreement of Wesley G. Bush dated May 16, 2006, as amended |
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(x) | 2006 CPC Incentive Restricted Stock Rights Agreement of Scott J. Seymour dated May 16, 2006 (incorporated by reference to Exhibit 10.5 to Form 10-Q for the quarter ended June 30, 2006, filed July 27, 2006) | |||||
*(xi) | Form of Restricted Performance Stock Rights Agreement, applicable to 2007 Restricted Performance Stock Rights, as amended | |||||
(xii) | 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) | |||||
*(xiii) | Terms and Conditions Applicable to Special 2007 Restricted Stock Rights Granted to James F. Palmer dated March 12, 2007, as amended | |||||
*10 | (j) | Northrop Grumman Supplemental Plan 2 (Amended and Restated Effective as of January 1, 2005) | ||||
*(i) | Appendix A: Northrop Supplemental Retirement Income Program for Senior Executives (Amended and Restated Effective as of January 1, 2005) | |||||
(ii) | Appendix B: ERISA Supplemental Program 2 as amended and restated effective October 1, 2004 (incorporated by reference to Exhibit 10(j)(ii) of Form 10-K for the year ended December 31, 2004, filed March 4, 2005) | |||||
*(iii) | Appendix F: CPC Supplemental Executive Retirement Program (Amended and Restated Effective as of January 1, 2005) | |||||
*(iv) | Appendix G: Officers Supplemental Executive Retirement Program (Amended and Restated Effective as of January 1, 2005) | |||||
*10 | (k) | Northrop Grumman ERISA Supplemental Plan (Amended and Restated Effective as of January 1, 2005) | ||||
*10 | (l) | Northrop Grumman Supplementary Retirement Income Plan (formerly TRW Supplementary Retirement Income Plan) (Amended and Restated Effective January 1, 2005) | ||||
*10 | (m) | Northrop Grumman Electronic Systems Executive Pension Plan (Amended and Restated Effective as of January 1, 2005) | ||||
10 | (n) | Northrop Grumman Corporation March 2004 Change-in-Control Severance Plan (incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended September 30, 2003, filed November 6, 2003) | ||||
10 | (o) | Form of Northrop Grumman Corporation March 2004 Special Agreement (relating to severance program for change in control) (incorporated by reference to Exhibit 10.5 to Form 10-Q for the quarter ended September 30, 2003, filed November 6, 2003) | ||||
*10 | (p) | Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation As amended and restated effective January 1, 2008 | ||||
*10 | (q) | Northrop Grumman Corporation Non-Employee Directors Equity Participation Plan, as Amended and Restated January 1, 2008 | ||||
10 | (r) | Non-Employee Director Compensation Term Sheet, effective October 24, 2007 (incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2007, filed October 24, 2007) | ||||
10 | (s) | 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 | (t) | Northrop Grumman Deferred Compensation Plan (Amended and Restated Effective as of January 1, 2005) | ||||
*10 | (u) | The 2002 Incentive Compensation Plan of Northrop Grumman Corporation, As amended and restated effective as of January 1, 2008 | ||||
*10 | (v) | Northrop Grumman 2006 Annual Incentive Plan and Incentive Compensation Plan (for Non-Section 162(m) Officers), as amended and restated effective January 1, 2008 |
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*10 | (w) | Northrop Grumman Savings Excess Plan (Amended and Restated Effective as of January 1, 2005) | ||||
10 | (x) | Employment Agreement dated February 19, 2003, between Northrop Grumman Corporation and Dr. Ronald D. Sugar (incorporated by reference to Exhibit 10(nn) to Form 10-K for the year ended December 31, 2002, filed March 24, 2003) | ||||
10 | (y) | Employment Agreement between Dr. Ronald D. Sugar and Northrop Grumman Corporation dated September 19, 2001 (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended September 30, 2001, filed November 5, 2001) | ||||
10 | (z) | Letter Agreement dated June 21, 2000, between Litton Industries, Inc. and Ronald D. Sugar (incorporated by reference to Exhibit 10.1 to Form 8-K of Litton Industries, Inc. (LII) dated and filed June 22, 2000), and Letter Agreement dated December 21, 2000, between Northrop Grumman Corporation and Ronald D. Sugar (incorporated by reference to Exhibit 99(e)(7) to Schedule 14D-9 of LII filed January 5, 2001), as amended by Amendment dated January 31, 2001, between Northrop Grumman Corporation and Ronald D. Sugar (incorporated by reference to Exhibit 99(e)(16) to Amendment No. 3 to Schedule 14D-9 of LII filed February 1, 2001) | ||||
*10 | (aa) | Litton Industries, Inc. Restoration Plan 2 (Amended and Restated Effective as of January 1, 2005) | ||||
*10 | (bb) | Litton Industries, Inc. Restoration Plan (Amended and Restated Effective as of January 1, 2005) | ||||
10 | (cc) | 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 | (dd) | Northrop Grumman Corporation Supplemental Retirement Replacement Plan (Effective March 12, 2007) for James F. Palmer (incorporated by reference to Exhibit 10(2) to Form 10-Q for the quarter ended June 30, 2007, filed July 24, 2007) | ||||
10 | (ee) | Northrop Grumman Corporation Special Officer Retiree Medical Plan (As Amended and Restated Effective April 1, 2007) (incorporated by reference to Exhibit 10(5) to Form 10-Q for the quarter ended March 31, 2007, filed April 24, 2007) | ||||
10 | (ff) | 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 | (gg) | Executive Accidental Death, Dismemberment and Plegia Insurance Policy (incorporated by reference to Exhibit 10(hh) to Form 10-K for the year ended December 31, 2004, filed March 4, 2005) | ||||
10 | (hh) | Executive Long-Term Disability Insurance Policy (incorporated by reference to Exhibit 10(ii) to Form 10-K for the year ended December 31, 2004, filed March 4, 2005) | ||||
10 | (ii) | 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) | ||||
10 | (jj) | 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 | (kk) | Northrop Grumman Executive Medical Plan Benefit Matrix effective July 1, 2006 (incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended June 30, 2006, filed July 27, 2006) | ||||
10 | (ll) | Retirement Transition Agreement dated October 2, 2007 between Northrop Grumman Corporation and Scott J. Seymour (incorporated by reference to Exhibit 10.1 to Form 8-K dated and filed October 5, 2007) | ||||
10 | (mm) | Consultant Contract dated October 5, 2007 between Northrop Grumman Corporation and Scott J. Seymour (incorporated by reference to Exhibit 10.2 to Form 8-K dated and filed October 5, 2007) |
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10 | (nn) | 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) | ||||
*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 Ronald D. Sugar (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 Ronald D. Sugar pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||||
**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 | ||||
|
||||||
* | Filed with this Report | |||||
** | Furnished with this Report |
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By: |
/s/
Kenneth N. Heintz
|
Signature
|
Title
|
|||
Ronald D. Sugar* |
Chairman and Chief Executive Officer (Principal Executive
Officer), and Director
|
|||
James F. Palmer* |
Corporate Vice President and Chief Financial Officer (Principal
Financial Officer)
|
|||
Lewis W. Coleman* |
Director
|
|||
Vic Fazio* |
Director
|
|||
Donald E. Felsinger* |
Director
|
|||
Stephen Frank* |
Director
|
|||
Phillip Frost* |
Director
|
|||
Charles R. Larson* |
Director
|
|||
Richard B. Myers* |
Director
|
|||
Phillip A. Odeen* |
Director
|
|||
Aulana L. Peters* |
Director
|
|||
Kevin W. Sharer* |
Director
|
|||
*By: |
/s/
Stephen D. Yslas
Corporate Vice President, Secretary, and Deputy General Counsel Attorney-in-Fact pursuant to a power of attorney |
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Balance at
|
Changes
|
Balance at
|
||||||||||||||
Beginning
|
Additions
|
Add
|
End
|
|||||||||||||
Description | of Period | At Cost | (Deduct) | of Period | ||||||||||||
Year ended December 31, 2005
|
||||||||||||||||
Reserves and allowances
deducted
(1)
from asset accounts: |
||||||||||||||||
Allowances for doubtful amounts
|
$ | 264 | $ | 56 | $ | (97 | ) | $ | 223 | |||||||
Valuation allowance on deferred tax assets
|
1,375 | (36 | ) | 1,339 | ||||||||||||
Year ended December 31, 2006
|
||||||||||||||||
Reserves and allowances
deducted
(1)
from asset accounts: |
||||||||||||||||
Allowances for doubtful amounts
|
$ | 223 | $ | 171 | $ | (86 | ) | $ | 308 | |||||||
Valuation allowance on deferred tax assets
|
1,339 | (39 | ) | 1,300 | ||||||||||||
Year ended December 31, 2007
|
||||||||||||||||
Reserves and allowances
deducted
(1)
from asset accounts: |
||||||||||||||||
Allowances for doubtful amounts
|
$ | 308 | $ | 124 | $ | (146 | ) | $ | 286 | |||||||
Valuation allowance on deferred tax assets
|
1,300 | 3 | (711 | ) | 592 |
(1) | Uncollectible amounts written off, net of recoveries. |
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1. | Purpose; Effect of Plan Restatement |
2. | Term |
3. | Plan Operation |
4. | Eligibility |
5. | Shares of Common Stock Subject to the Plan |
6. | Adjustments and Reorganizations |
7. | Fair Market Value |
8. | Grants of Stock Units |
2
9. | Payment of Stock Units |
3
10. | Dividend Equivalents |
11. | Restrictions on Transfer |
12. | Issuance of Certificates |
4
13. | Plan Amendment |
14. | Unfunded Plan |
15. | Future Rights |
16. | Governing Law |
17. | Successors and Assigns |
5
18. | Rights as a Stockholder |
19. | Construction |
6
1. | Vesting; Payment of RPSRs . |
1
2. | Early Termination of Award; Termination of Employment . |
2
3. | Non-Transferability and Other Restrictions . |
4. | Compliance with Laws; No Stockholder Rights Prior to Issuance . |
5. | Adjustments; Change in Control . |
3
(a) | if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, and the termination of employment constitutes a Qualifying Termination (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantees right to severance benefits under such Change in Control Severance Arrangement. | ||
(b) | if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination, the termination occurs either 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, and the Grantees employment by the Company and its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. |
4
6. | Tax Matters . |
7. | Committee Authority . |
8. | Plan; Amendment . |
9. | Definitions . |
(i) | The Grantees 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 Grantee in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Grantees part shall be considered willful unless done, or omitted to be done, by the Grantee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. |
5
(i) | A material and substantial reduction in the nature or status of the Grantees 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 Grantee, and/or (B) changes in the nature or status of the Grantees authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee 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 Grantee |
immediately prior to the start of the Protected Period. The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. | |||
In addition, if the Grantee is a vice president, the Grantees 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 Grantees lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the Grantees 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 Grantees 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 Grantee 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 Grantees annualized rate of base salary as in effect on the first to occur of the start of the Performance Period or the start of the Protected Period, or as the same shall be increased from time to time. | ||
(iii) | A material reduction in the aggregate value of the Grantees 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 Grantee 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 Grantee immediately prior to the start of the Protected Period. | ||
(iv) | A material reduction in the Grantees 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, 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 |
6
substantially consistent with the average level of participation of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. | |||
(v) | The Grantee 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 Grantees 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 (v) more than ninety (90) days before such intended effective date. |
(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 include the date of the Change in Control. |
7
1. | Vesting; Payment . |
2. | Early Termination of Award; Termination of Employment . |
1
3. | Non-Transferability and Other Restrictions . |
4. | Compliance with Laws; No Stockholder Rights Prior to Issuance . |
5. | Adjustments; Change in Control . |
2
(a) | if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, and the termination of employment constitutes a Qualifying Termination (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantees right to severance benefits under such Change in Control Severance Arrangement. | ||
(b) | if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination, the termination occurs either 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, and the Grantees employment by the Company and its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. |
6. | Tax Matters . |
3
7. | Committee Authority . |
8. | Plan; Amendment . |
9. | Definitions . |
(i) | The Grantees 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 Grantee in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Grantees part shall be considered willful unless done, or omitted to be done, by the Grantee not in good faith and without reasonable |
belief that his action or omission was in the best interest of the Company. |
(i) | A material and substantial reduction in the nature or status of the Grantees 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 |
4
Company promptly after receipt of notice thereof given by the Grantee, and/or (B) changes in the nature or status of the Grantees authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee 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 Grantee immediately prior to the start of the Protected Period. The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. | |||
In addition, if the Grantee is a vice president, the Grantees 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 Grantees lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the Grantees 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 Grantees 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 Grantee 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 Grantees annualized rate of base salary as in effect on the first to occur of the Date of Grant or the start of the Protected Period, or as the same shall be increased from time to time. | ||
(iii) | A material reduction in the aggregate value of the Grantees 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 Grantee 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 |
Grantee immediately prior to the start of the Protected Period. | |||
(iv) | A material reduction in the Grantees 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, 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 Grantee immediately prior to the start of the Protected Period. | ||
(v) | The Grantee 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 Grantees 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 (v) more than ninety (90) days before such intended effective date. |
5
(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 include the date of the Change in Control. |
6
1. | Vesting; Issuance of Shares . |
2. | Early Termination of Award; Termination of Employment . |
1
3. | Non-Transferability and Other Restrictions . |
4. | Compliance with Laws; No Stockholder Rights Prior to Issuance . |
5. | Adjustments; Change in Control . |
(a) | if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, if the termination of employment constitutes a Qualifying Termination (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantees right to severance benefits under such Change in Control Severance Arrangement. | ||
(b) | if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination and if the termination occurs either 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, the Grantees employment by the Company and its subsidiaries is involuntarily |
2
terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. |
6. | Tax Matters . |
7. | Committee Authority . |
8. | Plan; Amendment . |
3
9. | Definitions . |
(i) | The Grantees 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 Grantee in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Grantees part shall be considered willful unless done, or omitted to be done, by the Grantee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. |
(i) | A material and substantial reduction in the nature or status of the Grantees 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 Grantee, and/or (B) changes in the nature or status of the Grantees authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee 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 Grantee immediately prior to the start of the Protected Period. The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. | ||
(ii) | A reduction by the Company in the Grantees annualized rate of base salary as in effect on the date of grant of the award or as the same shall be increased from time to time. | ||
(iii) | A significant reduction by the Company of the Grantees aggregate incentive opportunities under the Companys short and/or long-term incentive programs, as such opportunities exist |
4
on the date of grant of the award, or as such opportunities may be increased after the date of grant of the award. For this purpose, a significant reduction in the Grantees incentive opportunities shall be deemed to have occurred in the event the Grantees targeted annualized award opportunities and/or the degree of probability of attainment of such annualized award opportunities are diminished by the Company from the levels and probability of attainment that existed as of the date of grant of the award. | |||
(iv) | The failure of the Company to maintain (x) the Grantees relative level of coverage and accruals under the Companys employee benefit and/or retirement plans, policies, practices, or arrangements in which the Grantee participates as of the date of grant of the award, both in terms of the amount of benefits provided, and amounts accrued and (y) the relative level of the Grantees participation in such plans, policies, practices, or arrangements on a basis at least as beneficial as, or substantially equivalent to, that on which the Grantee participated in such plans immediately prior to the date of grant of the award. For this purpose, the Company may eliminate and/or modify existing programs and coverage levels; provided, however, that the Grantees level of coverage under all such programs must be at least as great as is provided to executives who have the same or lesser levels of reporting responsibilities within the Companys organization. | ||
(v) | The Grantee 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 Grantees 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 (v) more than ninety (90) days before such intended effective date. |
(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. |
5
1. | Vesting; Payment of RPSRs . |
1
2. | Early Termination of Award; Termination of Employment . |
2
3. | Non-Transferability and Other Restrictions . |
4. | Compliance with Laws; No Stockholder Rights Prior to Issuance . |
5. | Adjustments; Change in Control . |
3
(a) | if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, and the termination of employment constitutes a Qualifying Termination (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantees right to severance benefits under such Change in Control Severance Arrangement. | ||
(b) | if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination, the termination occurs either 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, and the Grantees employment by the Company and its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. |
4
6. | Tax Matters . |
7. | Committee Authority . |
8. | Plan; Amendment . |
9. | Definitions . |
(i) | The Grantees 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 Grantee in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Grantees part shall be considered willful unless done, or omitted to be done, by the Grantee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. |
5
(i) | A material and substantial reduction in the nature or status of the Grantees 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 Grantee, and/or (B) changes in the nature or status of the Grantees authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee 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 Grantee immediately prior to the start of the Protected |
Period. The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. | ||
In addition, if the Grantee is a vice president, the Grantees 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 Grantees lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the Grantees 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 Grantees 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 Grantee 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 Grantees annualized rate of base salary as in effect on the first to occur of the start of the Performance Period or the start of the Protected Period, or as the same shall be increased from time to time. | |
(iii) | A material reduction in the aggregate value of the Grantees 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 Grantee 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 Grantee immediately prior to the start of the Protected Period. | |
(iv) | A material reduction in the Grantees 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, 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 |
6
participation of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. | |||
(v) | The Grantee 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 Grantees 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 (v) more than ninety (90) days before such intended effective date. |
(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 include the date of the Change in Control. |
7
1. | Vesting; Issuance of Shares . |
2. | Early Termination of Award; Termination of Employment . |
1
3. | Non-Transferability and Other Restrictions . |
4. | Compliance with Laws; No Stockholder Rights Prior to Issuance . |
5. | Adjustments; Change in Control . |
(a) | if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, if the termination of employment constitutes a Qualifying Termination (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantees right to severance benefits under such Change in Control Severance Arrangement. |
2
(b) | if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination and if the termination occurs either 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, the Grantees employment by the Company and its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. |
6. | Tax Matters . |
7. | Committee Authority . |
3
8. | Plan; Amendment . |
9. | Definitions . |
(i) | The Grantees 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 Grantee in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Grantees part shall be considered willful unless done, or omitted to be done, by the Grantee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. |
(i) | A material and substantial reduction in the nature or status of the Grantees 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 Grantee, and/or (B) changes in the nature or status of the Grantees authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee having not materially and substantially fewer authorities and responsibilities (taking into |
4
consideration the Companys industry) when compared to the authorities and responsibilities applicable to the position held by the Grantee immediately prior to the start of the Protected Period. The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. | |||
(ii) | A reduction by the Company in the Grantees annualized rate of base salary as in effect on the date of grant of the award or as the same shall be increased from time to time. | ||
(iii) | A significant reduction by the Company of the Grantees aggregate incentive opportunities under the Companys short and/or long-term incentive programs, as such opportunities exist on the date of grant of the award, or as such opportunities may be increased after the date of grant of the award. For this purpose, a significant reduction in the Grantees incentive opportunities shall be deemed to have occurred in the event the Grantees targeted annualized award opportunities and/or the degree of probability of attainment of such annualized award opportunities are diminished by the Company from the levels and probability of attainment that existed as of the date of grant of the award. | ||
(iv) | The failure of the Company to maintain (x) the Grantees relative level of coverage and accruals under the Companys employee benefit and/or retirement plans, policies, practices, or arrangements in which the Grantee participates as of the date of grant of the award, both in terms of the amount of benefits provided, and amounts accrued and (y) the relative level of the Grantees participation in such plans, policies, practices, or arrangements on a basis at least as beneficial as, or substantially equivalent to, that on which the Grantee participated in such plans immediately prior to the date of grant of the award. For this purpose, the Company may eliminate and/or modify existing programs and coverage levels; provided, however, that the Grantees level of coverage under all such programs must be at least as great as is provided to executives who have the same or lesser levels of reporting responsibilities within the Companys organization. | ||
(v) | The Grantee 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 |
Grantees 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 (v) more than ninety (90) days before such intended effective date. |
(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 |
5
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. |
6
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
|
Amendment and Plan Termination | 6 | ||||
2.08
|
Not an Employment Agreement | 6 | ||||
2.09
|
Assignment of Benefits | 6 | ||||
2.10
|
Nonduplication of Benefits | 6 | ||||
2.11
|
Funding | 7 | ||||
2.12
|
Construction | 7 | ||||
2.13
|
Governing Law | 7 | ||||
2.14
|
Actions by Company | 7 | ||||
2.15
|
Plan Representatives | 7 | ||||
2.16
|
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 | 14 | |||||
1.01
|
Election | 14 | ||||
1.02
|
2005 Commencements | 14 | ||||
1.03
|
2006 and 2007 Commencements | 15 |
i
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 | ||||
2.09
|
Special Tax Distribution | 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) |
| The Northrop Grumman Retirement Value Plan (effective as of January 1, 2000) | ||
| The Northrop Grumman Commercial Aircraft Division Salaried Retirement Plan (effective as of July 1, 2000) | ||
| 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. |
-2-
(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. |
-3-
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. |
2.04 | Beneficiaries and Spouses . This Section only applies to Grandfathered Amounts. If the Company selects a form of payment which includes a survivor benefit, the Participant may make a beneficiary designation, which may be changed at any |
-4-
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. |
2.05 | 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. |
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 available under the underlying qualified pension plan at the time payment of the Grandfathered Amounts commences. The conversion factors for |
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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: |
2.07 | 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. | ||
2.08 | 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. | |
2.09 | 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. | |
2.10 | Nonduplication of Benefits . This Section applies if, despite Section 2.09, 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 |
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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. |
2.11 | 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. | ||
2.12 | 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. | |
2.13 | Governing Law . This Plan shall be governed by the law of the State of California, except to the extent superseded by federal law. | |
2.14 | Actions by Company . 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. | |
2.15 | Plan Representatives . Those authorized to act as Plan representatives will be designated in writing by the Board of Directors or its delegate. |
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2.16 | Number . The singular, where appearing in this Plan, will be deemed to include the plural, unless the context clearly indicates the contrary. |
-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 3.05, 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 general provisions of this Article, which provide different rules for calculating the amount of lump sum payments. |
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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. | ||
(5) | In the case of a Participant who dies prior to commencement of benefits under this Plan so that only a preretirement surviving |
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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
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation,
Benefits and HRIS |
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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. |
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 and survivor annuity determined on the Participants date of death. This benefit is |
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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. | ||
(d) | Present Value Calculation . The conversion of a Participants retirement benefit into a lump sum payment and the present value calculations under |
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this Section 2.06 of this Appendix 2 shall be based on the GATT assumptions in effect under the Northrop Grumman Pension Plan, 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; |
2.09 | 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 reduce the Participants future benefit payments under the Plan. This reduction shall be calculated using GATT assumptions in effect under the Northrop Grumman Pension Plan and a cost of living adjustment of 4%. |
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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 either in which the Executive participated prior to the commencement of his employment with the Company; and |
* | 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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(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. | ||
(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 |
(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. |
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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. |
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. |
* | 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.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 and HRIS |
||||
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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 (3) 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 |
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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. |
(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. | ||
(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 and Management Development 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. | |
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 |
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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. |
(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. | ||
(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 |
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(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. | ||
(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. |
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(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. |
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- |
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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); | ||
(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). |
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(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). | ||
(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: |
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NORTHROP GRUMMAN CORPORATION
|
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By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation,
Benefits and HRIS |
||||
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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 (3) 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. |
(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. | ||
(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. |
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(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. |
(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 (1) through (5) below, eligibility for benefits under this Program is limited to elected or appointed officers of the Company, other than Charles H. Noski. |
(1) | Employees of Newport News Shipbuilding Inc. will be eligible to participate under this Program effective January 1, 2004. | ||
(2) | No employees of Northrop Grumman Space & Mission Systems Corp. (formerly TRW Inc.), Component Technologies, or Premier America Credit Union are eligible for benefits under this Program. | ||
(3) | 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 in Section G.08. | ||
(4) | 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. |
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G.03 | Eligibility . Except as otherwise provided in (1) through (5) below, eligibility for benefits under this Program is limited to elected or appointed officers of the Company, other than Charles H. Noski. |
(1) | Employees of Newport New Shipbuilding, Inc. will be eligible to participate under this Program effective January 1, 2004. | ||
(2) | No employees of Vinnell Corporation, Component Technologies, or Premier America Credit Union are eligible for benefits under this Program. | ||
(3) | 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 in Section G.08. | ||
(4) | No individual who is, was, or will be eligible to participate in and received benefits under Appendix F of the Plan (the CPC SERP) is eligible to participate under this Program. | ||
(5) | 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. |
G.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 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. |
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(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 under Sections G.06(c) and G.07, no benefit will be paid under this Program if a Participant: |
(1) | experiences a Termination of Employment before attaining age 55 and completing 120 Months of Benefit Service; or | ||
(2) | is not an active Participant in the Plan at the time of his or her Termination of Employment. |
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. |
G.05 | Benefit Limit . Accruals under Section G.04 will be limited as provided in this Section. |
(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. |
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(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: |
(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 |
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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 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. |
G.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 |
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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). | ||
(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 |
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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. |
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. |
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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: | |
Interest : Five percent (5%) |
Increase in Code Section 415 Limit : 2.8% per year. |
NORTHROP GRUMMAN CORPORATION
|
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By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation,
Benefits and HRIS |
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INTRODUCTION
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1 | |||
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Article I Definitions
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2 | |||
1.01 Affiliated Companies
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2 | |||
1.02 CIC Plans
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2 | |||
1.03 Code
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2 | |||
1.04 Company
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2 | |||
1.05 Grandfathered Amounts
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2 | |||
1.06 Key Employee
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2 | |||
1.07 Participant
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2 | |||
1.08 Payment Date
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2 | |||
1.09 Plan
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2 | |||
1.10 Pension Plan Benefits
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2 | |||
1.11 Pension Plan
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2 | |||
1.12 Separation from Service
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3 | |||
1.13 Termination of Employment
|
3 | |||
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Article II Eligibility for and Amount of Benefits
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4 | |||
2.01 Purpose
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4 | |||
2.02 Eligibility
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4 | |||
2.03 Amount of Benefit
|
4 | |||
2.04 Preretirement Surviving Spouse Benefit
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4 | |||
2.05 Forms and Times of Benefit Payments
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5 | |||
2.06 Beneficiaries and Spouses
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5 | |||
2.07 Plan Termination
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6 | |||
2.08 Pension Plan Benefits
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6 | |||
2.09 Mandatory Cashout
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6 | |||
2.10 Optional Payment Forms
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7 | |||
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Article III Lump Sum Election
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8 | |||
3.01 In General
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8 | |||
3.02 Retirees Election
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8 | |||
3.03 Retirees Lump Sum
|
9 | |||
3.04 Actives Election
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9 | |||
3.05 Actives Lump Sum Retirement Eligible
|
10 | |||
3.06 Actives Lump Sum Not Retirement Eligible
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12 | |||
3.07 Lump Sums with CIC Severance Plan Election
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12 | |||
3.08 Calculation of Lump Sum
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12 | |||
3.09 Spousal Consent
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13 | |||
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Article IV Miscellaneous
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14 | |||
4.01 Amendment and Plan Termination
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14 |
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4.02 Not an Employment Agreement
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14 | |||
4.03 Assignment of Benefits
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14 | |||
4.04 Nonduplication of Benefits
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14 | |||
4.05 Funding
|
15 | |||
4.06 Construction
|
15 | |||
4.07 Governing Law
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15 | |||
4.08 Actions By Company
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15 | |||
4.09 Plan Representatives
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15 | |||
4.10 Number
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15 | |||
4.11 2001 Reorganization
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15 | |||
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APPENDIX A 2005-2007 TRANSITION RELIEF
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17 | |||
A.01 Election
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17 | |||
A.02 2005 Commencements
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17 | |||
A.03 2006 and 2007 Commencements
|
18 | |||
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APPENDIX B POST 2007 DISTRIBUTION OF 409A AMOUNTS
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19 | |||
B.01 Time of Distribution
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19 | |||
B.02 Special Rule for Key Employees
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19 | |||
B.03 Forms of Distribution
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19 | |||
B.04 Death
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19 | |||
B.05 Actuarial Assumptions
|
20 | |||
B.06 Accelerated Lump Sum Payouts
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20 | |||
B.07 Effect of Early Taxation
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21 | |||
B.08 Permitted Delays
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21 | |||
B.09 Special Tax Distribution
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21 |
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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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(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) |
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 both 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. | ||
2.04 | Preretirement Surviving Spouse Benefit . This Section only applies to Grandfathered Amounts. |
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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. |
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 |
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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. |
2.10 | 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 |
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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 3.08, 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. |
(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: |
(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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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. | |
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. |
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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 . 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 under the Plan and any such delegations may provide for subdelegations, also by written resolution. | |
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. |
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(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. |
NORTHROP GRUMMAN CORPORATION | ||||||
|
||||||
|
By: |
/s/ Debora L. Catsavas
|
||||
Debora L. Catsavas
Vice President, Compensation, Benefits and HRIS |
- 16 -
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. |
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 GATT assumptions in effect under the Northrop Grumman Pension Plan, and will be based on the Participants immediate benefit |
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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; |
B.09 | 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 reduce the Participants future benefit payments under the Plan. This reduction shall be calculated using GATT assumptions in effect under the Northrop Grumman Pension Plan and a cost of living adjustment of 4%. |
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|
Interest Rate: 6% | |||||
|
||||||
|
Mortality Table: RP-2000 Mortality Table projected 15 years for future standardized cash balance factors |
NORTHROP GRUMMAN CORPORATION | ||||||
|
||||||
|
By: |
/s/ Debora L. Catsavas
|
||||
Debora L. Catsavas
Vice President, Compensation, Benefits and HRIS |
a. | 50% joint and survivor annuity | ||
b. | 75% joint and survivor annuity | ||
c. | 100% joint and survivor annuity. |
|
Interest Rate: 6% | |||||
|
||||||
|
Mortality Table: RP-2000 Mortality Table projected 15 years for future standardized cash balance factors |
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; |
i
INTRODUCTION
|
1 | |||
|
||||
ARTICLE I DEFINITIONS | 2 | |||
|
||||
ARTICLE II DESIGNATION OF COVERED EXECUTIVES | 4 | |||
|
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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 | ||
|
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ARTICLE VII ADMINISTRATION | 11 | |||
|
||||
ARTICLE VIII AMENDMENT OR TERMINATION OF THE PLAN | 12 | |||
|
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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 |
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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 | 14 | ||
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 |
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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 | |||
|
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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 | |||
|
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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 |
|
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ARTICLE 4Calculation of Executive Pension Supplement
|
10 | |||
Section 4.01. In General
|
10 | |||
Section 4.02. Amount
|
10 | |||
|
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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 | |||
|
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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 | |||
|
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ARTICLE 7Payment of Benefits
|
14 | |||
Section 7.01. Limitation on Benefits
|
14 | |||
Section 7.02. Normal Form and Commencement of Benefits
|
14 | |||
Section 7.03. Guaranteed Benefit
|
14 | |||
Section 7.04. Guaranteed Surviving Spouse Benefit
|
14 | |||
Section 7.05. Lump Sum Payments
|
14 | |||
Section 7.06. Mandatory Cashout
|
15 | |||
Section 7.07. Optional Payment Forms
|
15 | |||
Section 7.08. Rehires
|
16 | |||
|
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ARTICLE 8Conditions to Receipt of Executive Pension Supplement
|
17 | |||
Section 8.01. Non-Competition Condition
|
17 | |||
Section 8.02. Breach of Condition
|
17 | |||
Section 8.03. Waiver After 65
|
17 | |||
|
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ARTICLE 9Administration
|
18 | |||
Section 9.01. Committee
|
18 | |||
Section 9.02. Claims Procedures
|
18 | |||
Section 9.03. Trust
|
18 | |||
|
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ARTICLE 10Modification or Termination
|
19 | |||
Section 10.01. Amendment and Plan Termination
|
19 | |||
|
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ARTICLE 11Miscellaneous
|
20 | |||
Section 11.01. Benefits Not Assignable
|
20 | |||
Section 11.02. Facility of Payment
|
20 | |||
Section 11.03. Committee Rules
|
20 | |||
Section 11.04. Limitation on Rights
|
20 | |||
Section 11.05. Benefits Unsecured
|
20 | |||
Section 11.06. Governing Law
|
20 |
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Section 11.07. Severability
|
20 | |||
Section 11.08. Expanded Benefits
|
21 | |||
Section 11.09. Plan Costs
|
21 | |||
Section 11.10. Termination of Participation
|
21 | |||
|
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ARTICLE 12Change in Control
|
22 | |||
Section 12.01. Definition
|
22 | |||
Section 12.02. Vesting and Funding Rules
|
23 | |||
Section 12.03. Special Retirement Provisions
|
23 | |||
Section 12.04. Calculation of Present Value
|
23 | |||
Section 12.05. Calculation of Offset
|
24 | |||
Section 12.06. Limitation on Amendment, Suspension and Termination
|
24 | |||
|
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APPENDIX AExecutive Buyback
|
25 | |||
Section A.01. Introduction
|
25 | |||
Section A.02. Buy Back Offer
|
25 | |||
Section A.03. One-Time Opportunity
|
25 | |||
Section A.04. Payment
|
25 | |||
Section A.05. Refund of Buy Back Payment
|
25 | |||
Section A.06. Effective Date
|
26 | |||
|
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APPENDIX BRehired Executives
|
27 | |||
Section B.01. Retired Executives Rehired as Executives
|
27 | |||
Section B.02. Former Executives with Vested Pensions Rehired
as Executives
|
28 | |||
Section B.03. Retired Executives Rehired in Non-Executive Positions
|
28 | |||
Section B.04. Events That Span Westinghouse Acquisition
|
29 | |||
Section B.05. Breaks Spanning March 1, 1996
|
29 | |||
|
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APPENDIX CCoordination With Westinghouse Plan
|
31 | |||
Section C.01. In General
|
31 | |||
Section C.02. Pre-Acquisition Benefits
|
31 | |||
Section C.03. Coordination of Pre and Post-Acquisition Benefits
|
31 | |||
Section C.04. No Duplication of Benefits
|
31 | |||
|
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APPENDIX D 2005-2007 Transition Rules
|
32 | |||
Section D.01. Election
|
32 | |||
Section D.02. 2005 Commencements
|
32 | |||
Section D.03. 2006 and 2007 Commencements
|
33 | |||
|
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APPENDIX E Post 2007 Distribution of 409A Amounts
|
34 | |||
Section E.01. Time of Distribution
|
34 | |||
Section E.02. Special Rule for Key Employees
|
34 | |||
Section E.03. Forms of Distribution
|
34 | |||
Section E.04. Death
|
34 | |||
Section E.05. Actuarial Assumptions
|
35 | |||
Section E.06. Accelerated Lump Sum Payouts
|
35 |
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Section E.07. Effect of Early Taxation
|
36 | |||
Section E.08. Permitted Delays
|
36 | |||
Section E.09. Special Tax Distribution
|
36 |
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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; |
(a) | has attained age 65 and completed five or more years of Vesting Service; | ||
(b) | has attained age 60 and completed 10 or more years of Vesting Service; |
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(c) | has attained age 58 and completed 30 or more years of Vesting Service; or | ||
(d) | has satisfied the requirements for an immediate pension under the Special Retirement Benefit provisions of the ES Pension Plan. |
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(1) | has attained age 60 and completed 10 or more years of Vesting Service, | ||
(2) | has attained age 65, or | ||
(3) | has satisfied the eligibility requirements for an immediate pension under the Special Retirement Benefit provisions of the ES Pension Plan, |
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(1) | the Executives actual retirement date, | ||
(2) | the date of the Executives death, or | ||
(3) | the Executives Normal Retirement Date. |
(1) | the Executives date of death, | ||
(2) | the Executives actual retirement date, or | ||
(3) | the Executives Normal Retirement Date; |
(1) | the year of the Executives death, | ||
(2) | the year of the Executives actual retirement date, or | ||
(3) | the year of the Executives Normal Retirement Date. |
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(l) | the Executive was making the Maximum Contribution during each of those years; or | ||
(2) | the use of the Executive Buy Back process has been authorized by the Committee and the Executive: |
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(a) | Post-2007 Terminations . Executives 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 . Executives 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. |
(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 |
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NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation,
Benefits and HRIS |
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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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Interest Rate: | 6% | |
Mortality Table: | RP-2000 Mortality Table projected 15 years for future standardized cash balance factors |
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1
(a) | Committee means the Compensation and Management Development Committee of the Board of Directors of the Company or any successor to the Committee. | ||
(b) | Code means the Internal Revenue Code of 1986, as amended. | ||
(c) | Company means Northrop Grumman Corporation. | ||
(d) | CPC means the Corporate Policy Council | ||
(e) | Disability means any disability of an Officer recognized as a disability for purposes of the Companys long-term disability plan, or similar plan later adopted by the Company in place of such plan. | ||
(f) | Key Employee means an employee treated as a specified employee as of his 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 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. | ||
(g) | Officer means an Elected or Appointed Officer of Northrop Grumman Corporation who resides and works in the United States. | ||
(h) | Plan means this Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation, as it may be amended from time to time. | ||
(i) | Qualifying Termination means any one of the following (i) an Officers involuntary termination of employment with the Company, other than Termination for Cause or mandatory retirement, (ii) an Officers election to terminate employment with the Company in lieu of accepting a downgrade to a non-Officer position or status, (iii) following a divestiture of the Officers business unit, an Officers election to terminate employment with |
2
the acquiring Company in lieu of accepting a relocation to a job site located more than fifty miles from the Officers current work location, or (iv) if the Officers position is affected by a divestiture, the Officer is not offered a position of equivalent salary with the buyer at the time of such divestiture or is not offered buyers annual bonus (or similar program) offered to similarly situation officers of buyer. Qualifying Termination does not include any change in the Officer s employment status due to any transfer within the Company or to an affiliate, Disability, voluntary termination or normal retirement. | |||
(j) | Separation from Service or Separate from Service means a separation from service within the meaning of Code section 409A. | ||
(k) | Termination for Cause means an Officer s termination of employment with the Company because of: |
(i) | The continued failure by the Officer to devote reasonable time and effort to the performance of his duties (other than a failure resulting from the Officer s incapacity due to physical or mental illness) after written demand for improved performance has been delivered to the Officer by the Company which specifically identifies how the Officer has not devoted reasonable time and effort to the performance of his duties; | ||
(ii) | The willful engaging by Officer in misconduct which is substantially injurious to the Company, monetarily or otherwise, or | ||
(iii) | The Officers conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offences or as a result of vicarious liability). |
(i) | Bad judgment or negligence on the part of the Officer other than habitual negligence; or | ||
(ii) | An act or omission believed by the Officer in good faith to have been in or not opposed to the best interests of the Company and reasonably believed by the Officer to be lawful. |
3
(i) | The Officer must experience a Qualifying Termination that results in termination of employment. If, before termination of employment occurs due to the Qualifying Termination event, the Officer voluntarily quits, retires, or experiences a Termination for Cause, the Officer will not receive benefits under this Plan. | ||
(ii) | The Officer must sign a Confidential Separation Agreement and General Release that will include, among other things, a release of any and all claims that he may have against the Company. |
(a) | Lump-sum cash severance payment. The designated Appendix describes the lump sum severance benefit available to the Officer. | ||
(b) | Extension of Medical and Dental Benefits. The Company will continue to pay its portion of the Officers medical and dental benefits for the period of time following the Officers termination date that is specified in the designated Appendix. Such continuation coverage shall run concurrently with COBRA continuation coverage (or similar state law). The Officer must continue to pay his portion of the cost of this coverage with after-tax dollars. If rates for active employees increase during this continuation period, the contribution amount will increase proportionately. Also, if medical and dental benefits are modified, terminated or changed in any way for active employees during this continuation period the Officer will also be subject to such modification, termination or change. Following the continuation period specified in the designated Appendix the Officer will be eligible to receive COBRA benefits for any remaining portion of the applicable COBRA period (typically 18 months) at normal COBRA rates. The COBRA period starts the first day of the month following the end of the continuation period. | ||
Example: A Non-CPC Officer receives a layoff notice on June 15, 2004, and his last day of work is June 30, 2004. The Officers 18-month COBRA period commences July 1, 2004. The Officer will continue to receive medical and dental coverage from July 1, 2004 through June 30, 2005, as long as the Officer continues to pay the appropriate contribution. Full COBRA rates will apply to the Officer from July 1, 2005 until the end of the remaining COBRA period on December 31, 2005. |
4
(i) | Officers eligibility for benefits in one year will not affect Officers eligibility for benefits in any other year; | ||
(ii) | 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 | ||
(iii) | Officers right to benefits is not subject to liquidation or exchange for another benefit. |
(c) | Company Performance Related Payment . The Officer will be eligible for a pro-rated cash payment for the current performance year, in addition to the lump-sum cash severance payment described in section 4(a). This severance payment will be equal in amount to the Officers annual bonus calculation using the Company-achieved Unit Performance Factor with an Individual Performance Factor set at 100, prorated from the beginning of the performance period (January 1st) to the Officers date of termination. This severance payment will be paid when the annual bonuses are paid to active employees. | ||
(d) | Other Fringe Benefits . All reimbursements will be within the limits |
5
established in the Executive Perquisite Program. These perquisites will cease as of the date of termination except for the following: |
(i) | Financial Planning and Tax Preparation. If an Officer is eligible for financial planning reimbursement at the time of termination, the Officer will be reimbursed for any financial planning fees incurred before his termination date. If an Officer is eligible for tax preparation reimbursement at the time of termination, he will be reimbursed for any income tax preparation fees incurred for income earned during the year in which he terminated employment with the Company. All such reimbursements shall be administered consistent with the following additional requirements as set forth in Treas. Reg. § 1.409A-3(i)(1)(iv): (1) Officers eligibility for benefits in one year will not affect Officers eligibility for benefits in any other year; (2) 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 (3) Officers right to benefits is not subject to liquidation or exchange for another benefit. In addition, no reimbursements shall be made to an Officer who is a Key Employee for six months following the Officers Separation from Service. | ||
Example: If an Officers employment is terminated during the calendar year 2003, the Officer will receive reimbursement for income tax preparation that would normally be incurred during the beginning of 2004. Such reimbursement must be paid no later than December 31, 2005. | |||
(ii) | Automobile Allowance . If an Officer has an automobile allowance at the time of termination, the Officer will receive a lump sum payment equal to the value specified on the designated Appendix. | ||
(iii) | Outplacement Service . The Officer will be reimbursed for the cost of reasonable outplacement services provided by the Companys outplacement service provider for services provided within one year after the Officers date of termination; provided, however, that the total reimbursement shall be limited to an amount equal to fifteen percent (15%) of the Officers base salary as of the date of termination. All services will be subject to the current contract with the provider, and 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 Officer Separates from Service. |
(e) | Time and Form of Payment . The severance benefits under sections 4(a) and 4(d)(ii) will be paid to the eligible Officer in a lump sum as soon as practicable following the Officers Separation from Service, but in no event |
6
beyond thirty (30) days from such date, provided the Officer signs the requisite release. Notwithstanding the foregoing, if the Officer is a Key Employee, the lump sum payment shall be made on the first day of the seventh month following the Officers Separation from Service (or, if earlier, the first day of the month after the Officers death). This amount will be paid after all regular taxes and withholdings have been deducted. No payment made pursuant to the Plan is eligible compensation under any of the Companys benefit plans, including without limitation, pension, savings, or deferred compensation plans. |
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8
9
10
11
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ARTICLE 1Introduction
|
1 | |||
Section 1.01. Purpose
|
1 | |||
Section 1.02. Effective Date
|
1 | |||
|
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ARTICLE 2Definitions
|
1 | |||
Section 2.01. Accrual
|
1 | |||
Section 2.02. Annual Accrual
|
1 | |||
Section 2.03. Annual Retainer Fee
|
1 | |||
Section 2.04. Board
|
1 | |||
Section 2.05. Change in Control
|
1 | |||
Section 2.06. Common Stock
|
1 | |||
Section 2.07. Company
|
1 | |||
Section 2.08. Conversion Date
|
1 | |||
Section 2.09. Debilitating Illness
|
1 | |||
Section 2.10. Director
|
1 | |||
Section 2.11. Dividend Equivalent
|
1 | |||
Section 2.12. Electing Outside Director
|
2 | |||
Section 2.13. Equity Participation Account
|
2 | |||
Section 2.14. Fair Market Value Of The Common Stock
|
2 | |||
Section 2.15. Outside Director
|
2 | |||
Section 2.16. Participant
|
2 | |||
Section 2.17. Plan
|
2 | |||
Section 2.18. Retired Outside Director
|
2 | |||
Section 2.19. Retirement Plan
|
2 | |||
Section 2.20. Special Accrual
|
2 | |||
Section 2.21. Surviving Spouse
|
2 | |||
Section 2.22. Total Disability
|
3 | |||
Section 2.23. Unit
|
3 | |||
Section 2.24. Year Of Service
|
3 | |||
|
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ARTICLE 3Participation
|
3 | |||
Section 3.01. In General
|
3 | |||
|
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ARTICLE 4Entitlement To Benefits
|
3 | |||
Section 4.01. Normal Benefit
|
3 | |||
Section 4.02. Partial Benefit
|
4 | |||
Section 4.03. Change in Control Benefit
|
4 | |||
Section 4.04. Better-Of Benefit
|
4 | |||
Section 4.05. Surviving Spouse Benefit
|
4 | |||
Section 4.06. Other Participants
|
4 |
ARTICLE 5Amount Of Benefit
|
4 | |||
Section 5.01. Normal Benefit Amount
|
4 | |||
Section 5.02. Partial Benefit Amount
|
4 | |||
Section 5.03. Change in Control Benefit Amount
|
5 | |||
Section 5.04. Better-Of Benefit Amount
|
5 | |||
|
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ARTICLE 6Accounts
|
5 | |||
Section 6.01. Equity Participation Accounts
|
5 | |||
Section 6.02. Annual Accruals
|
5 | |||
Section 6.03. Special Accruals
|
6 | |||
Section 6.04. Conversion Of Accruals Into Units
|
6 | |||
Section 6.05. Dividend Equivalents
|
6 | |||
Section 6.06. Change in the Common Stock
|
6 | |||
Section 6.07. Benefit Accrual Freeze Effective June 1, 2005
|
6 | |||
|
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ARTICLE 7Distributions
|
7 | |||
Section 7.01. In General
|
7 | |||
Section 7.02. Amount of Installments
|
8 | |||
Section 7.03. Conversion of Units into Dollars
|
8 | |||
Section 7.04. T-Bond Election
|
8 | |||
Section 7.05. Payment to a Trust
|
9 | |||
|
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ARTICLE 8Miscellaneous Provisions
|
9 | |||
Section 8.01. Amendment And Termination
|
9 | |||
Section 8.02. Plan Unfunded
|
9 | |||
Section 8.03. No Assignments
|
9 | |||
Section 8.04. No Double Payment
|
10 | |||
Section 8.05. No Other Rights
|
10 | |||
Section 8.06. Successors of the Company
|
10 | |||
Section 8.07. Law Governing
|
10 | |||
Section 8.08. Actions By Company
|
10 | |||
Section 8.09. Plan Representatives
|
10 | |||
Section 8.10. Construction
|
10 | |||
|
||||
APPENDIX AChange In Control Benefits
|
11 | |||
Section A.01. In General
|
11 | |||
Section A.02. Change In Control
|
11 | |||
Section A.03. Override by Board
|
12 | |||
Section A.04. February, 1998 Vote
|
12 | |||
Section A.05. Vesting at Change in Control
|
12 | |||
Section A.06. Limitation on Amendment Authority
|
12 |
2
(a) | was legally married to the Participant for at least one year prior to the date the Participant ceases to serve on the Board (including death while serving on the Board), and | ||
(b) | outlives the deceased Participant by at least 30 calendar days, |
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7
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9
10
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Page | ||||||
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ARTICLE I DEFINITIONS | 2 | |||||
1.1
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Definitions | 2 | ||||
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||||||
ARTICLE II PARTICIPATION | 6 | |||||
2.1
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In General | 6 | ||||
2.2
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Disputes as to Employment Status | 6 | ||||
2.3
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Cessation of Eligibility | 6 | ||||
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ARTICLE III DEFERRAL ELECTIONS | 7 | |||||
3.1
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Elections to Defer Compensation | 7 | ||||
3.3
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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 | ||||
|
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ARTICLE VII ADMINISTRATION | 14 | |||||
7.1
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Committees | 14 | ||||
7.2
|
Committee Action | 14 | ||||
7.3
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Powers and Duties of the Administrative Committee | 14 | ||||
7.4
|
Powers and Duties of the Investment Committee | 15 | ||||
7.5
|
Construction and Interpretation | 15 | ||||
7.6
|
Information | 16 |
Page | ||||||
7.7
|
Committee Compensation, Expenses and Indemnity | 16 | ||||
7.8
|
Disputes | 16 | ||||
|
||||||
ARTICLE VIII MISCELLANEOUS | 18 | |||||
8.1
|
Unsecured General Creditor | 18 | ||||
8.2
|
Restriction Against Assignment | 18 | ||||
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 or 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 | ||||
8.11
|
2001 Reorganization | 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 | ||||
B.2
|
Early Non-Scheduled Distributions | B2 | ||||
B.3
|
Hardship Distribution | B3 | ||||
B.4
|
Plan Termination | B3 | ||||
|
||||||
APPENDIX C TRANSFER OF LIABILITIES NORTHROP GRUMMAN EXECUTIVE DEFERRED COMPENSATIONPLAN | C1 | |||||
C.1
|
Background | C1 | ||||
C.2
|
Treatment of Transferred Liabilities | C1 | ||||
C.3
|
Investments | C1 | ||||
C.4
|
Distributions | C1 | ||||
C.5
|
Other Provisions | C1 |
(a) | to provide for the acceptance of a transfer of certain liabilities from the Northrop Grumman Executive Deferred Compensation Plan, effective March 1, 2001; | ||
(b) | to account for the acquisition of Litton Industries, Inc. and the associated corporate reorganization, effective December 1, 2000; | ||
(c) | to provide for the acceptance of a transfer of certain liabilities from certain nonqualified deferred compensation plans of Aerojet-General Corporation, effective December 1, 2000; | ||
(d) | to provide the Plans administrative committee with additional discretion in determining whether and when employees may participate in the Plan, effective January 1, 2002; and | ||
(e) | to provide for the acceptance of a transfer of certain liabilities from the TASC, Inc. Supplemental Retirement Plan, generally effective March 28, 2003. |
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NORTHROP GRUMMAN CORPORATION
|
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By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation, Benefits and HRIS | ||||
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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. |
-A 1-
B.1 | Distribution of Contributions |
-B 1-
B.2 | Early Non-Scheduled Distributions |
-B 2-
B.3 | Hardship Distribution |
B.4 | Plan Termination |
-B 3-
C.1 | Background |
C.2 | Treatment of Transferred Liabilities |
C.3 | Investments |
C.4 | Distributions |
-C 1-
C.5 | Other Provisions |
-C 2-
D.1 | Background |
-D 1-
D.2 | Treatment of Transferred Liabilities |
D.3 | Investments |
D.4 | Distributions |
D.5 | Other Provisions |
-D 2-
E.1 | Background |
E.2 | Treatment of Transferred Liabilities |
E.3 | Investments |
E.4 | Distributions |
E.5 | Other Provisions |
-E 1-
| The Incentive Compensation Plan (ICP) | ||
| The Annual Incentive Plan (AIP) |
1. | CompanyNorthrop Grumman Corporation and such of its subsidiaries as are consolidated in its consolidated financial statements. | |
2. | CodeThe Internal Revenue Code of 1986, as amended from time to time. | |
3. | CommitteeThe Compensation and Management Development Committee of the Board of Directors of the Company. | |
4. | Incentive CompensationAwards payable under these plans. | |
5. | ParticipantAn employee of the Company granted or eligible to receive Incentive Compensation award under one of these Plans. | |
6. | Performance CriteriaThe performance criteria is a weighted combination of various financial and non-financial factors approved by the Committee for the Performance Year. | |
7. | Performance YearThe year with respect to which an award of Incentive Compensation is calculated and paid. | |
8. | PlansCollectively, the Incentive Compensation Plan (ICP); and/or the Annual Incentive Plan (AIP). | |
9. | Plan YearThe fiscal year of Northrop Grumman Corporation. | |
10. | Section 162(m) OfficerAn employee who is a covered employee as defined in Section 162(m) of the Code with respect to an award of Incentive Compensation under the 2002 Incentive Compensation Plan for any Performance Year. |
1. | Incentive Compensation Plan (ICP): |
a. | Employees eligible to receive incentive compensation under the ICP are elected corporate officers of the rank of vice president and above and the presidents of those consolidated subsidiaries that the committee determines to be significant in the overall corporate operations that are not section 162(m) officers for the performance year. If an executive receives or is eligible to receive an |
1
incentive compensation award under the 2002 Incentive Compensation Plan for 162(m) officers, then the executive will not be eligible and shall not receive an incentive compensation award under the ICP. |
b. | Directors, as such, shall not participate in the ICP, but the fact that an elected corporate officer or subsidiary president is also a director of the Company shall not prevent participation. |
2. | Annual Incentive Plan (AIP): |
a. | Employees eligible to receive incentive compensation awards under the AIP are appointed vice presidents, senior management, middle management and individual key contributors (employees normally in a position that customarily perform quasi-management or team leadership duties). In addition, employees may be eligible to participate in the AIP if they have specific individual goals that directly contribute to the attainment of their respective business units operating goals or if employees are considered high performing and are in a position to make measurable and significant contributions to the success of the Company. | ||
b. | At the beginning of, or prior to, a performance year, the Companys CEO approves the number of participants eligible for participation in the AIP. Participants are then selected by their management based on an assessment of their position relative to other candidates, their performance, and their potential impact on achievement of business unit and the Company goals. | ||
c. | Participation in the AIP during any performance year does not imply nor guarantee participation in the AIP in future years. |
3. | Non-Duplication of Awards |
a. | A participant may not receive an incentive compensation award under more than one of the above plans for the performance year. The only exception to this is in the event that an individual is a participant in a particular plan for a portion of the performance year and then is selected to participate in one of the other plans for the remainder of that performance year. In this event, an individual may receive pro-rated awards based on the time that he/she participated in each plan. | ||
b. | A participant will not be eligible to receive any incentive compensation award from either of these plans if the employee is a participant in the Companys 2002 Incentive Compensation Plan for 162(m) Officers. |
4. | Death, Disability, or Retirement | |
A participant may be eligible to receive a pro-rated incentive compensation award in the event of the employees death, disability, or retirement. In the case of a deceased participant, such incentive compensation award will be paid to the participants estate. |
5. | Employment Status | |
Except as provided in Section III 4 (see above), in order to be eligible to receive a payment from these plans, a participant must be an active employee of the Company as of December 31 of the plan year, unless an exception is approved in writing by the Companys chief human resources and administrative officer. |
2
1. | Corporation Goals | |
For each performance year, until otherwise determined by the Committee, financial and non-financial objectives will be established by the Committee in its sole discretion. |
2. | Financial Measures |
a. | The CEOs recommended goals are reviewed and amended as appropriate, and established by the Committee at its sole discretion. Measures may include, but are not limited to: cash management, cash flow, return on investment, debt reduction, revenue growth, net earnings, and return on equity. | ||
b. | The Committee approves a performance threshold, a target level and a maximum performance level for each of the financial measures for the performance year. |
3. | Supplemental Goals | |
Supplemental goals may be either qualitative or quantitative such as, but not limited to: customer satisfaction, contract acquisition, delivery schedule, cycle-time improvement, productivity, quality, workforce diversity, and environmental management. The CEO recommends the supplemental goals based on sector goals contained in Annual Operating Plans and corporate office goals established prior to the beginning of each year. Supplemental goals have stated milestones and weights. The CEOs recommended supplemental goals are reviewed and amended as appropriate, and established by the Committee at its sole discretion. |
4. | Individual Goals | |
Each year participants develop individual goals that support achievement of the Companys business plan and the specific goals established by the Committee in the three aforementioned corporation goals. Individual goals are prepared, approved and documented. The employees manager reviews these goals with each participant to ensure they are aggressive, coordinated and focused on attainment of Company business objectives. |
1. | The amount appropriated for the plans for a performance year is based on the CEOs determination of the UPF (as approved or modified by the Committee) and applied to the individual incentive targets of participants. These performance-adjusted targets are aggregated into the Appropriated Incentive Compensation for the performance year. | |
2. | In no event shall incentive compensation payable to participants for a performance year exceed the appropriated incentive compensation for the plans as approved by the Committee. |
3
3. | Any appropriated incentive compensation for a performance year, which is not actually distributed to the participants as awards for such year, cannot be transferred to the following performance year. |
1. | Individual Award Factors |
a. | Target award percentageis established annually and is a percentage of annual aggregate salary that reflects the varying impact of participants positions on business results. Generally vice presidents will have higher target award percentages than senior middle managers and so forth. | ||
b. | Individual performanceprior to the submission of recommended incentive compensation awards, each participant will be evaluated by his management in relation to the participants achievement of predetermined individual goals and his/her relative contribution during the performance year compared to other participants to the success or profit of the Company. This assessment of performance (the individual performance factor or IPF) is stated numerically and is a performance multiplier for individual incentive targets. The IPF may range from 0 to 1.5. | ||
c. | Both the IPF and the UPF are multipliers for the individual participants target award percentage to determine that participants incentive compensation award. |
2. | ICP Awards: |
a. | The Committee shall review the CEOs recommendations and make the final determination of each individual ICP participants incentive compensation award for the performance year. |
3. | AIP Awards: |
a. | Prior to the payment of any incentive compensation awards for a performance year, the CEO, or his delegate, may in his sole discretion, adjust or reduce to zero recommended amounts of incentive compensation awards to all or any of the participants. | ||
b. | The CEO or his delegate shall determine the amount of any adjustment in a participants incentive compensation award on the basis of such factors as he deems relevant, and shall not be required to establish any allocation or weighting component with respect to the factors he considers. |
1. | ICP: The Committee shall be responsible for the administration of the Plan. The Committee shall: |
a. | Interpret the ICP, make any rules and regulations relating to that plan, determine which consolidated subsidiaries are significant for the purpose of the first paragraph of SECTION III, and determine factual questions arising in connection with the ICP, after such investigation or hearing as the Committee may deem appropriate. | ||
b. | As soon as feasible after the close of each performance year and prior to the payment of any incentive compensation for such performance year, review the performance of each participant and determine the amount of each participants individual incentive compensation award, if any, with respect to that performance year. | ||
c. | Have sole discretion in determining incentive compensation awards under the ICP, except that in making awards the Committee may, in its discretion, request and consider the recommendations of the CEO and others whom it may designate. | ||
d. | Any decisions made by the Committee under the provisions of this SECTION VIII, as well as any interpretations of the ICP by the Committee, shall be conclusive and binding on all parties concerned. |
4
2. | AIP: The CEO shall be responsible for the administration of this plan. The CEO shall: |
a. | Interpret the AIP, make any rules and regulations relating to the plan, and determine factual questions arising in connection with the AIP. | ||
b. | As soon as feasible after the close of each performance year and prior to the payment of any incentive compensation for such performance year, review the recommended awards of selected participants, as determined by the CEO, to determine if the award is appropriate with respect to that performance year, making any adjustments as he deems necessary and approving each such award. | ||
c. | Review and approve the total incentive compensation award expenditure of each sector and the Company overall. | ||
d. | Any decisions made by the CEO under the provisions of this Section VIII, as well as any interpretation of the AIP by the CEO, shall be conclusive and binding on all parties concerned. |
1. | ICP Payments |
a. | The amount of incentive compensation award determined for each participant with respect to a given performance year shall be paid in cash or in common stock of the Company (Northrop Grumman common stock) or partly in cash and partly in Northrop Grumman common stock, as the Committee may determine. Subject to any applicable deferred compensation election to the contrary, payment of the Incentive Compensation award with respect to a given Performance Year shall be made in a lump sum payment between February 15 and March 15 of the year following such Performance Year. | ||
b. | The Committee may impose such conditions, including forfeitures and restrictions, as the Committee believes will best serve the interests of the Company and the purposes of the ICP. | ||
c. | In making awards of Northrop Grumman common stock, the Committee shall first determine all incentive compensation awards in terms of dollars. The total dollar amount of all incentive compensation awards for a particular year shall not exceed the appropriated incentive compensation for that performance year under the ICP. After fixing the total amount of each Participants incentive compensation award in terms of dollars, then if some or all of the award is to be paid in Northrop Grumman common stock, the dollar amount of the incentive compensation award so to be paid shall be converted into shares of Northrop Grumman common stock by using the fair market value of such stock on the date of the award. Fair market value shall be the closing price of such stock on the New York Stock Exchange on the date of the award, or, if no sales of such stock occurred on that date, then on the last preceding date on which such sales occurred. No fractional share shall be issued. | ||
d. | If an incentive compensation award is paid in Northrop Grumman common stock, the number of shares shall be appropriately adjusted for any stock splits, stock dividends, re-capitalization or other relevant changes in capitalization effective after the date of award and prior to the date as of which the participant becomes the record owner of the shares received in payment of the award. All such adjustments thereafter shall accrue to the participant as the record owner of the shares. | ||
e. | Northrop Grumman common stock issued in payment of incentive compensation awards may, at the option of the Board of Directors, be either originally issued shares or treasury shares. | ||
f. | Distribution of awards shall be governed by the terms and conditions applicable to such awards, as determined by the Committee or its delegate. An award, the payment of which is to be deferred pursuant to the terms of an employment agreement, shall be paid as provided by the terms of such agreement. Awards or portions thereof deferred pursuant to the Northrop Grumman Deferred |
5
Compensation Plan, the Northrop Grumman Savings Excess Plan, or any other deferred compensation plan or deferral arrangement shall be paid as provided in such plan or arrangement. | |||
g. | The Company shall have the right to deduct from all payments under the ICP any federal, state, or local taxes required by law to be withheld with respect to such payments. | ||
h. | No participant or any other party claiming an interest in amounts earned under the ICP shall have any interests whatsoever in any specific asset of the Company. To the extent that any party acquires a right to receive payments under the ICP, such right shall be equivalent to that of an unsecured general creditor of the Company. Awards payable under the plan shall be payable in shares or from the general assets of Northrop Grumman, and no special or separate reserve, fund or deposit shall be made to assure payment of such awards. |
2. | AIP Payments |
a. | The amount of incentive compensation award determined for each participant with respect to a given performance year shall be paid in cash between February 15 and March 15 of the year following that performance year. | ||
b. | The Company shall have the right to deduct from all payments under this plan any federal, state, or local taxes required by law to be withheld with respect to such payments. | ||
c. | No participant or any other party claiming an interest in amounts earned under the AIP shall have any interest whatsoever in any specific asset of the Company. To the extent that any party acquires a right to receive payments under the plan, such right shall be equivalent to that of an unsecured general creditor of the Company. Awards payable under the AIP shall be payable in shares or from the general assets of Northrop Grumman, and no special or separate reserve, fund or deposit shall be made to assure payment of such awards. |
1. | Participation in any plan shall not constitute an agreement of the participant to remain in the employ of |
6
and to render his/her services to the Company, or of the Company to continue to employ such participant, and the Company may terminate the employment of a participant at any time with or without cause. |
2. | In the event any provision of the plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the plans, and the plans shall be construed and enforced as if the illegal or invalid provision had not been included. | |
3. | All costs of implementing and administering the plans shall be borne by the Company. | |
4. | All obligations of the Company under the plans shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. | |
5. | The plans and any agreements hereunder, shall be governed by and construed in accordance with the laws of the state of Delaware. | |
6. | The rights of a participant or any other person to any payment or other benefits under either of the plans may not be assigned, transferred, pledged, or encumbered except by will or the laws of decent or distribution. |
7
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 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 | 12 | ||||
6.2
|
Pre-2005 Deferrals | 13 | ||||
6.3
|
Payments Not Received At Death | 13 | ||||
6.4
|
Inability to Locate Participant | 13 | ||||
6.5
|
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 | 15 | ||||
7.4
|
Powers and Duties of the Investment Committee | 15 | ||||
7.5
|
Construction and Interpretation | 16 | ||||
7.6
|
Information | 16 | ||||
7.7
|
Committee Compensation, Expenses and Indemnity | 16 | ||||
7.8
|
Disputes | 16 | ||||
|
||||||
ARTICLE VIII MISCELLANEOUS
|
19 | |||||
8.1
|
Unsecured General Creditor | 19 | ||||
8.2
|
Restriction Against Assignment | 19 | ||||
8.3
|
Restriction Against Double Payment | 20 | ||||
8.4
|
Withholding | 20 | ||||
8.5
|
Amendment, Modification, Suspension or Termination | 20 |
i
8.6
|
Governing Law | 21 | ||||
8.7
|
Receipt and Release | 21 | ||||
8.8
|
Payments on Behalf of Persons Under Incapacity | 21 | ||||
8.9
|
Limitation of Rights and Employment Relationship | 21 | ||||
8.10
|
Headings | 21 | ||||
|
||||||
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 | ||||
|
||||||
APPENDIX C MERGED PLANS
|
1 | |||||
C.1
|
Plan Mergers | 1 | ||||
C.2
|
Merged Plans General Rule | 1 |
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
NORTHROP GRUMMAN CORPORATION
|
||||
By: | /s/ Debora L. Catsavas | |||
Debora L. Catsavas | ||||
Vice President, Compensation, Benefits and HRIS | ||||
22
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
B1
B2
Merger Effective | Merged Account | |||
Name of Merged Plans | Dates | Names | ||
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 |
C1
C2
C3
C4
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 | 2 | ||||
1.09
|
Grandfathered Amounts | 2 | ||||
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 | 3 | ||||
1.19
|
Retirement Plan B | 3 | ||||
1.20
|
Separation from Service or Separates from Service | 3 | ||||
1.21
|
Termination of Employment | 4 | ||||
|
||||||
Article II General Provisions | 5 | |||||
2.01
|
In General | 5 | ||||
2.02
|
Forms and Times of Benefit Payments | 5 | ||||
2.03
|
Mandatory Cashout | 6 | ||||
2.04
|
Optional Payment Forms | 6 | ||||
2.05
|
Beneficiaries and Spouses | 7 | ||||
2.06
|
Amendment and Plan Termination | 8 | ||||
2.07
|
Not an Employment Agreement | 8 | ||||
2.08
|
Assignment of Benefits | 8 | ||||
2.09
|
Nonduplication of Benefits | 8 | ||||
2.10
|
Funding | 9 |
i
2.11
|
Construction | 9 | ||||
2.12
|
Governing Law | 9 | ||||
2.13
|
Actions By Company | 10 | ||||
2.14
|
Plan Representatives | 10 | ||||
2.15
|
Number | 10 | ||||
|
||||||
Article III Lump Sum Election | 11 | |||||
3.01
|
In General | 11 | ||||
3.02
|
Retirees Election | 11 | ||||
3.03
|
Retirees Lump Sum | 12 | ||||
3.04
|
Actives Election | 14 | ||||
3.05
|
Actives Lump SumRetirement Eligible | 15 | ||||
3.06
|
Actives Lump SumNot Retirement Eligible | 16 | ||||
3.07
|
Calculation of Lump Sum | 17 | ||||
3.08
|
Spousal Consent | 19 | ||||
|
||||||
Appendix A Litton Restoration Program June 1, 2001 through June 30, 2003 | 20 | |||||
A.01
|
Purpose | 20 | ||||
A.02
|
Definitions | 20 | ||||
A.03
|
Eligibility | 21 | ||||
A.04
|
Amount of Benefit | 21 | ||||
A.05
|
Preretirement Surviving Spouse Benefit | 23 | ||||
A.06
|
Plan Termination | 24 | ||||
A.07
|
Retirement Plan Benefits | 24 | ||||
|
||||||
Appendix B Litton Cash Balance Restoration Program | 26 | |||||
B.01
|
Purpose | 26 | ||||
B.02
|
Eligibility | 26 | ||||
B.03
|
Amount of Benefit | 26 | ||||
B.04
|
Preretirement Survivor Benefit | 27 | ||||
B.05
|
Plan Termination | 27 | ||||
B.06
|
Retirement Plan Benefits | 27 | ||||
|
||||||
Appendix C 2005-2007 Transition Rules | 29 | |||||
C.01
|
Election | 29 | ||||
C.02
|
2005 Commencements | 29 | ||||
C.03
|
2006 and 2007 Commencements | 30 | ||||
|
||||||
Appendix D Post 2007 Distribution of 409A Amounts | 31 | |||||
D.01
|
Time of Distribution | 31 | ||||
D.02
|
Special Rule for Key Employees | 31 |
ii
D.03
|
Forms of Distribution | 31 | ||||
D.04
|
Death | 32 | ||||
D.05
|
Actuarial Assumptions | 32 | ||||
D.06
|
Accelerated Lump Sum Payouts | 32 | ||||
D.07
|
Effect of Early Taxation | 34 | ||||
D.08
|
Permitted Delays | 34 | ||||
D.09
|
Special Tax Distribution | 34 |
iii
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
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 |
2
(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) |
Aerojet Closing Date means the Closing Date specified in the April 19, 2001 Asset Purchase Agreement by and Between Aerojet-General Corporation and Northrop Grumman Systems Corporation. |
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). |
3
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. |
4
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. |
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.) | ||
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 . |
5
(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. | ||
2.04 | 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 |
6
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 |
2.05 | 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. |
7
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 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. | |
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 entity other than the payees described in the Plan. In such a case, any amounts due a Participant or |
8
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. |
The actuarial value of lump sums will be determined using the factors and methodology described in Section 3.07 below. In all other cases, actuarial value will be determined using the actuarial assumptions in the underlying Retirement Plan. | |||
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. |
2.10 | 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. |
9
2.13 | Actions By Company . 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. | |
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. |
10
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. |
11
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. The cost charged to the retirees for this coverage will be determined as if the retiree had been employed 20 or more years by the Company. |
(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: |
12
(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: |
(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. |
13
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. |
A Participants election may be revoked before it is effective. | |||
A Participants election will never take effect if the Participant does not have a Termination of Employment within 60 days after making the election. | |||
(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. |
14
(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 |
15
(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 |
16
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: |
(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: |
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 |
17
(2) | the applicable interest rate that would be used to calculate a lump sum value for the benefit under the Retirement Plans. |
Mortality : The applicable mortality table that would be used to calculate a lump sum value for the benefit under the Retirement Plans. | |||
Increase in Section 415 Limit : 4% per year. | |||
Age : Age rounded to the nearest month on 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 when 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 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. |
18
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 and HRIS |
19
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. |
20
(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 |
21
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: |
(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. |
22
(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. | ||
(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 |
23
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. |
24
(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. |
25
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 |
26
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 |
27
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. | ||
(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. |
28
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 |
29
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). |
30
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. |
31
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 |
32
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 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 GATT assumptions in effect under the Northrop Grumman Pension Plan, 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 |
33
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; |
provided, that any payment delayed pursuant to this Section D.08 shall be paid in accordance with Code section 409A. | ||
D.09 | 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 reduce the Participants future benefit payments under the Plan. This reduction shall be calculated using GATT assumptions in effect under the Northrop Grumman Pension Plan and a cost of living adjustment of 4%. |
34
Section | Page | |||||
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Section 1 General | ||||||
1.1
|
Purpose | 1 | ||||
1.2
|
Coverage | 1 | ||||
|
||||||
Section 2 Participating Divisions and Subsidiaries | ||||||
2.1
|
Participating Division or Subsidiary | 1 | ||||
|
||||||
Section 3 Definitions | ||||||
3.1
|
Actuarial Equivalent | 1 | ||||
3.2
|
Affected Employee | 1 | ||||
3.3
|
Affiliate Company | 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 | 7 | ||||
3.31
|
Spouse | 7 | ||||
3.32
|
Termination of Employment | 7 |
Section | (ii) | Page | ||||
3.33
|
Trust | 7 | ||||
3.34
|
Trust Agreement | 7 | ||||
3.35
|
Trustee | 7 | ||||
3.36
|
Year(s) of Service | 7 | ||||
|
||||||
Section 4 Participation | ||||||
4.1
|
Participation | 7 | ||||
|
||||||
Section 5 Retirement Dates | ||||||
5.1
|
Normal Retirement Date | 8 | ||||
5.2
|
Early-Retirement Date | 8 | ||||
5.3
|
Disability Retirement Date | 8 | ||||
|
||||||
Section 6 Amount of Retirement Income | ||||||
6.1
|
Normal Retirement Benefit | 8 | ||||
6.2
|
Early Retirement Benefit | 9 | ||||
6.3
|
Disability Retirement Benefit | 9 | ||||
6.4
|
Vesting Schedule | 10 | ||||
6.5
|
Initial and Subsequent Payment Dates | 10 | ||||
|
||||||
Section 7 Death Benefit | ||||||
7.1
|
Pre-Retirement Spouse Benefit | 10 | ||||
7.2
|
Death After Retirement | 11 | ||||
|
||||||
Section 8 Termination of Employment | ||||||
8.1
|
Rights of Affected Employees | 11 | ||||
8.2
|
Transfer of Employment | 11 | ||||
|
||||||
Section 9 Forms of Retirement Income | ||||||
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 | ||||
|
||||||
Section 10 Miscellaneous | ||||||
10.1
|
Receipt and Release for Payments | 14 | ||||
10.2
|
Dispute as to Benefit Payments | 14 | ||||
10.3
|
No Contract of Employment | 15 | ||||
10.4
|
Commutation of Benefit | 15 | ||||
|
||||||
Section 11 Amendment or Discontinuance | ||||||
11.1
|
Amendment of Plan | 15 | ||||
11.2
|
Freezing Plan Benefits | 15 |
Section | (iii) | Page | |||||
11.3
|
Termination of Plan | 15 | |||||
11.4
|
Merger or Consolidation | 16 | |||||
|
|||||||
Section 12 Plan Administration | |||||||
12.1
|
Plan Administrator | 16 | |||||
|
|||||||
Section 13 Change of Control Provisions | |||||||
13.1
|
Change of Control | 16 | |||||
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 |
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 deemed to have a Retirement Account Restricted Amount of zero for such Plan Year) 8% |
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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. |
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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 |
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(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 |
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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. |
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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. |
(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) |
Aerojet Closing Date means the Closing Date specified in the April 19, 2001 Asset Purchase Agreement by and Between Aerojet-General Corporation and Northrop Grumman Systems Corporation. | ||
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 |
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retirement benefit under the Plan except that any Affected Employee who continues to be 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 |
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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: | |||
(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. |
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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 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. |
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 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 |
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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. | |
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. |
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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. |
(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, |
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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: |
(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. |
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(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 |
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. |
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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. | ||
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. |
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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; | ||
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. |
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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. |
(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 |
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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). |
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. |
13.5 | Payments to Trust |
(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 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. |
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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 |
(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, |
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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 and HRIS |
||||
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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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|
||
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. |
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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. |
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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), distribution of Plan benefits subject to Code section 409A shall begin 12 months after the |
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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). |
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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 |
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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 GATT assumptions in effect under the |
-28-
Northrop Grumman Pension Plan, 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; |
C.09 | 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 reduce the Affected Employees future benefit payments under the Plan. This reduction shall be calculated using GATT assumptions in effect under the Northrop Grumman Pension Plan and a cost of living adjustment of 4%. |
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Appendix Regarding Acquisition Of Litton Industries, Inc. |
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: |
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(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. |
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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 |
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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. |
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(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. |
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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. |
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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; |
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(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 . No benefits will be paid under the Plan unless a proper claim is submitted to the Administrative Committee. The Committee will meet periodically to review applications for benefits submitted to it. The procedures for claim denials and for seeking review of a denial or partial denial of a claim for benefits are described in this section of the Appendix. |
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(a) | Notification to claimant of decision . Notice of decision on any claim for benefits shall be furnished to the claimant within 90 days after receipt of the claim by the Committee. A claimant may deem his or her claim to be denied for purposes of further review described below in the event a decision is not furnished to the claimant within such 90-day period. | ||
(b) | Content of notice . Every claimant who is denied a claim for benefits in whole or in part shall receive a written notice setting forth in a manner calculated to be understood by the claimant: |
(1) | The specific reason or reasons for the denial; | ||
(2) | Specific reference to pertinent Plan provisions on which the denial is based; | ||
(3) | 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; and | ||
(4) | Appropriate information as to the steps to be taken if the participant or beneficiary wishes to submit his or her claim for review including the time limits set forth in subsections (e) and (f). |
(c) | Review procedure . A claimant whose claim has been denied in whole or in part, or his or her duly authorized representative, may: |
(1) | Request a review of the denied claim upon written application to the Committee setting forth: |
(A) | All of the grounds upon which his or her request for review is based and any facts in support of his or her request, and | ||
(B) | Any issues or comments which the applicant deems pertinent to his or her application; and |
(2) | Review pertinent documents. |
(d) | Hearings . In appropriate cases, the Committee may provide for a hearing to be conducted with respect to the review of any claim. In such event, the Committee shall give notice of such hearing to the claimant affected, as well as the procedures for the hearing, such as the length of the hearing, whether witnesses may be presented, whether cross-examination will be allowed, and any other matters which the Committee considers pertinent. | ||
(e) | Time For Seeking Review . A claimant may seek review of a denied claim within 65 days after receipt by the claimant of written notification of the denial or partial denial of the claim. Under extraordinary circumstances, the Plan may extend this time period. |
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(f) | Decision on review . |
(1) | A decision by the Committee shall be made promptly, and shall not ordinarily be made later than 60 days after the Committees receipt of a request for review. | ||
(2) | The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as specific references to the pertinent provisions of the Plan or other documents governing the Plan on which the decision is based. | ||
(3) | The decision on review shall be furnished to the claimant within the appropriate time described in paragraph (1) of this subsection. If the decision on review is not furnished within such time, the claim shall be deemed denied on review. | ||
(4) | The decision of the Committee on any application for benefits shall be final and conclusive upon all persons if supported by substantial evidence in the record. |
(g) | Disclosure of Claim Procedures . All Plan participants shall be given a description of the claims procedures, which shall include a description of the time limits set forth in subsections (a), (e) and (f), within a reasonable time after commencing participation in the Plan. | ||
(h) | Delegation . The Committee may delegate its responsibilities under this subsection to a subcommittee, individual, or other person. |
16. | Qualified Domestic Relations Orders . The Administrative Committee shall establish procedures for handling domestic relations orders. | |
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; |
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(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. |
(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. |
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Jurisdiction of
|
Ownership
|
|||||||
Name of Subsidiary | Incorporation | Percentage | ||||||
Northrop Grumman Systems Corporation (formerly Northrop Grumman
Corporation)
|
Delaware | 100 | % | |||||
Newport News Shipbuilding and Dry Dock Company
|
Virginia | 100 | % | |||||
Northrop Grumman Space & Mission Systems Corp.
(formerly TRW Inc.)
|
Ohio | 100 | % |
/s/ | Deloitte & Touche LLP |
/s/ Ronald D. Sugar
|
Chairman of the Board, Chief Executive Officer, and
Director
(Principal Executive Officer) |
|
/s/ Lewis W. Coleman
|
Director | |
/s/ Vic Fazio
|
Director | |
/s/ Donald E. Felsinger
|
Director | |
/s/ Stephen E. Frank
|
Director | |
/s/ Philip Frost
|
Director | |
/s/ Charles R. Larson
|
Director | |
/s/ Richard B. Myers
|
Director |
/s/ Philip A. Odeen
|
Director | |
/s/ Aulana L. Peters
|
Director | |
/s/ Kevin W. Sharer
|
Director | |
/s/ James F. Palmer
|
Corporate Vice President and Chief Financial Officer
(Principal Financial Officer) |
|
/s/ Kenneth N. Heintz
|
Corporate Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer) |
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 20, 2008 |
/s/
Ronald D. Sugar
Chairman and Chief Executive 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 20, 2008 |
/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 20, 2008 |
/s/
Ronald D. Sugar
Chairman and Chief Executive 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 20, 2008 |
/s/
James F. Palmer
Corporate Vice President and Chief Financial Officer |