NORTHROP GRUMMAN CORPORATION
SUPPLEMENTAL RETIREMENT REPLACEMENT PLAN
(Effective March 12, 2007; Restated effective January 1,
2008)
The Northrop
Grumman Corporation Supplemental Retirement Replacement Plan
(“Plan”) is hereby adopted effective March 12,
2007 by Northrop Grumman Corporation to provide supplemental
retirement benefits to James F. Palmer pursuant to the terms and
provisions set forth below. The Plan is hereby amended and
completely restated effective January 1, 2008.
The Plan is
intended (1) to comply with Code section 409A and official
guidance issued thereunder, and (2) to be a plan which is
unfunded and is maintained by an employer primarily for the purpose
of providing deferred compensation for a select group of management
or highly compensated employees within the meaning of sections
201(2), 301(a)(3) and 401(a)(1) of ERISA.
Wherever used
herein the following terms shall have the meanings hereinafter set
forth:
“
Affiliate ” means any corporation or other entity that
is treated as a single employer with the Company under section 414
of the Code.
“
Code ” means the Internal Revenue Code of 1986, as
amended.
“
Committee ” means the Company’s Board of
Directors or such other committee as may be appointed by the Board
of Directors from time to time.
“
Company ” means Northrop Grumman Corporation or any
successor corporation or other entity.
“
ERISA ” means the Employee Retirement Income Security
Act of 1974, as amended.
“ Key
Employee ” means an employee treated as a
“specified employee” under Code section
409A(a)(2)(B)(i) of the Company or the Affiliates (i.e., a key
employee (as defined in Code section 416(i) without regard to
paragraph (5) thereof)) if the Company’s or an
Affiliate’s stock is publicly traded on an established
securities market or otherwise. The Company shall determine in
accordance with a uniform Company 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.
“
Participant ” means James F. Palmer.
“
Plan ” means the Northrop Grumman Corporation
Supplemental Retirement Replacement Plan, as set forth herein and
as amended from time to time.
“
Separation from Service ” or “ Separates from
Service ” means a “separation from service,”
within the meaning of Code section 409A, with the Company and all
Affiliates.
Participation in
the Plan shall be limited to the Participant.
ARTICLE III
PLAN BENEFITS AND DISTRIBUTIONS
3.1 Visteon
Replacement Benefit . The amount of the benefit, if any,
payable under this section 3.1 to the Participant shall be equal to
the amount by which the Visteon Present Value exceeds the Northrop
Grumman Present Value.
For purposes of
this Section:
“
Visteon Present Value ” means the lesser of
(1) the estimated present value of the Participant’s
non-vested Visteon Corporation supplemental and qualified pension
benefits at March 12, 2007, and (2) $588,500.
“
Northrop Grumman Present Value ” means the present
value as of the Participant’s Separation from Service of all
vested qualified and nonqualified defined benefit pension benefits
payable to Participant by the Company, excluding the Boeing
Replacement Benefits described in section 3.3 below.
The actuarial
assumptions used to calculate present values under this Section
shall be the assumptions specified in Section F.09 of the
Northrop Grumman CPC Supplemental Executive Retirement Program, or
any successor thereto.
3.2
Distribution of Visteon Replacement Benefit . Any benefit
under Section 3.1 shall be paid in accordance with the terms
of Appendix A hereto.
3.3 Boeing
Replacement Benefit .
(a)
In-Service Benefit . Beginning April 1, 2007,
Participant will receive $8,632.01 monthly in the form of a joint
and 100% survivor annuity, with the Participant’s spouse on
March 12, 2007 (the “ Spouse ”) as the survivor
annuitant. If the Spouse predeceases the Participant, the monthly
benefit to the Participant will increase to $10,219.57 and will be
payable only for the life of the Participant.
(b)
Post-Termination Benefit . The monthly benefit provided for
under Section 3.3(a) shall continue to be paid under the same
terms as set forth in Section 3.3(a) after the Participant
ceases to be employed by the Company and its Affiliates.
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(c)
Forfeiture . The amount payable under Section 3.3(a) or
(b) for a month will be reduced by the amount, if any,
actually paid to the Participant or the Spouse in the same month
from the Supplemental Executive Retirement Plan for Employees of
the Boeing Company (“ Boeing SERP ”).
3.4
Acceleration of Boeing Replacement Benefit . If a change in
ownership or effective control event (as described in Treasury
regulations or other guidance under Code section 409A(a)(2)(A)(v))
occurs that also qualifies as a change in control as defined in the
Participant’s March 2004 Special Agreement (as it may be
amended or replaced), the Participant will receive a lump sum
payment equal to the present value of all remaining benefits under
Section 3.3. The lump sum amount will be paid 60 days
after the change in control event and will be calculated based on
the actuarial assumptions used to calculate lump sums under the
Northrop Grumman CPC Supplemental Executive Retirement Program at
the time of the change in control event.
3.5 Vesting
. All benefits under this Plan shall be 100% vested at all
times.
3.6 Effect of
Early Taxation . If the Participant’s benefits under the
Plan are includible in income pursuant to Code section 409A, such
benefits shall be distributed immediately to the
Participant.
3.7 Permitted
Delays . Notwithstanding the foregoing, any payment to the
Participant under the Plan shall be delayed if the making of the
payment at such time would be prohibited by Federal securities laws
or other applicable law; provided, that any payment delayed
pursuant to this Section 3.7 shall be paid in accordance with
Code section 409A.
ARTICLE IV
ADMINISTRATION
4.1. General
Administration . The Committee shall be responsible for the
operation and administration of the Plan and for carrying out the
provisions hereof, subject to Participant’s reservation of
all rights, in the event of a dispute, under applicable legal
process. The Committee may, from time to time, employ agents and
delegate to such agents, including employees of the Company, such
administrative duties as it sees fit.
4.2.
Indemnification . To the extent not covered by insurance,
the Company shall indemnify the Committee, each employee, officer,
director, and agent of the Company, and all persons formerly
serving in such capacities, against any and all liabilities or
expenses, including all legal fees relating thereto, arising in
connection with the exercise of their duties and responsibilities
with respect to the Plan, provided however that the Company shall
not indemnify any person for liabilities or expenses due to that
person’s own gross negligence or willful
misconduct.
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ARTICLE V
AMENDMENT AND TERMINATION
5.1 Amendment
or Termination . The Company reserves the right to amend or
terminate the Plan with the prior written consent of
Participant.
5.2 Effect of
Amendment or Termination . Upon termination of the Plan,
distribution of Plan benefits shall be made to Participant, his
Spouse and any other beneficiary(s) in the manner and at the time
described in
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