NORTHROP GRUMMAN CORPORATION
SUPPLEMENTAL RETIREMENT REPLACEMENT PLAN
(Effective March 12, 2007)
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 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.
Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and
administered in a manner consistent with these intentions.
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 Companys Board of Directors or such other committee as may be
appointed by the Board of Directors from time to time.
means Northrop Grumman
Corporation or any successor corporation or other
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 its Affiliates if the Companys stock is publicly traded on an
established securities market or otherwise (i.e., a key employee (as defined in Code
section 416(i) without regard to paragraph (5) thereof)).
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.
Participation in the Plan shall be limited to the Participant.
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
For purposes of this Section:
Visteon Present Value means the lesser of (1) the estimated present value of the
Participants 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 Participants
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 as follows:
Mortality Table: GAR94 unisex
These are the assumptions used to calculate lump sum amounts under the Northrop Grumman
Supplemental Plan 2 as of March 12, 2007.
3.2 Distribution of Visteon Replacement Benefit
. Any benefit under section 3.1 shall
be distributed to the Particpant in a lump sum payment 30 days after the Participant Separates from
Service. In the event that the Participant is a Key Employee as of the date of his Separation from
Service, distribution to the Participant shall be made 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), along with interest on the delayed payment. 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
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 100% joint and survivor annuity, with the Participants spouse as of March
12, 2007 (the Spouse) as the survivor annuitant. If the Spouse predeceases the Participant, the
monthly benefit will increase to $10,219.57 and will be payable only for the life of the
(b) Post-Termination Benefit. The monthly benefit provided for under Section
3.3(a) shall continue to be paid under the same terms after the Participant ceases to be employed
by the Company and its affiliates .
(c) Forfeiture. The amount payable under Section 3.3(a) or (b) for a month will be
forfeited if an amount is 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).
(d) FICA Payment. In order to address FICA taxes he will owe on the monthly benefit
provided under this Section 3.3, the Participant will also receive a lump sum payment of $37,900.28
on June 15, 2007.
3.4 Acceleration of Boeing Replacement Benefit
. If a change in control event (as
described in IRS 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 Participants March 2004 Special Agreement,
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
3.5 Vesting. All benefits under this Plan shall be 100% vested at all times.
3.6 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.
3.7 Permitted Delays. Notwithstanding the foregoing, any payment to the Participant
under the Plan shall be delayed upon the Committees reasonable anticipation of one or more of the
||The Companys deduction with respect to such payment would be
eliminated by application of Code section 162(m); or
||The making of the payment would violate 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.
4.1. General Administration. The Committee shall be responsible for the operation and
administration of the Plan and for carrying out the provisions hereof. The Committee shall have
the full authority and discretion to make, amend, interpret, and enforce all appropriate rules and
regulations for the administration of this Plan and decide or resolve any and all questions,
including interpretations of this Plan, as may arise in connection with this Plan. Any such action
taken by the Committee shall be final and conclusive on any party. To the extent the Committee has
been granted discretionary authority under the Plan, the Committees prior exercise of such
authority shall not obligate it to exercise its authority in a like fashion thereafter. The
Committee shall be entitled to rely conclusively upon all tables, valuations, certificates,
opinions and reports furnished by any actuary, accountant, controller, counsel or other person
employed or engaged by the Company with respect to the Plan. The Committee may, from time to time,
employ agents and delegate to such agents, including employees of the Company, such administrative
or other 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 persons own gross negligence or willful
5.1 Administrative Committee Decides Claims. No benefits will be paid under the Plan
unless a proper claim is submitted to the Administrative Committee for them. The Administrative
Committee consists of at least three members appointed by the Compensation and Management
Development Committee of the Board of Directors of Northrop Grumman Corporation. The
Administrative Committee will meet from time to time to review applications for benefits submitted
to it. The Administrative Committee has discretionary authority to grant or deny benefits under
this Plan. Benefits under the Plan will be paid only if the Administrative Committee decides in
its discretion that the claimant is entitled o them. The procedures for claims denials and seeking
review of a denial or partial denial of a claim for benefits are described in this Article.
5.2 Claims Procedures.
(a) Notification to Claimant of Decision. Notice of decision on any claim for
benefits shall be furnished to the claimant within 60 days after receipt of the claim by the
Administrative Committee. In special cases, the Administrative Committee may notify the claimant
that it requires an additional 90 days to consider a claim. If an extension of time beyond the
initial 60-day period for processing the claim is required, written notice of the extension shall
be provided to the claimant before the initial 60-day period expires. The extension notice shall
indicate the special circumstances requiring an extension of time and the date by which the
Administrative Committee expects to render a final decision.
(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
||the specific reason or reasons for the denial;
||reference to the specific Plan provisions on
which the denial is based;
||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
||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 (d)
and (e) and a statement of the claimants right to bring a civil action
under Section 502(a) of ERISA following a denial of the claim upon
(c) Review Procedure. A claimant whose claim has been denied in whole or in part or
his or her duly authorized representative may:
||request a review of the denied claim upon
written application to the Administrative Committee setting forth:
||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
||any issues or comments which the
applicant deems pertinent to his or her application; and
||review or receive copies, upon request and free
of charge, any documents, records or other information relevant
||meaning of Department of Labor Regulation Section
2560.503-1(m)(8)) to the claimants claim.
(d) 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.
(e) Decision on Review.
(1) The Administrative Committee shall take into account all comments, documents,
records and other information submitted by the claimant relating to the claim, without
regard to whether such information was submitted or considered in the initial review of the
claim. A decision by the Administrative Committee shall be made promptly, and shall not
ordinarily be made later than 60 days after the Administrative Committees receipt of a
request for review. In special cases, the Administrative Committee may notify the claimant
that it requires an additional 60 days to consider a claim. If an extension of time beyond
the initial 60-day period for processing the claim is required, written notice of the
extension shall be provided to the claimant before the initial 60-day period expires. The
extension notice shall indicate the special circumstances requiring an extension of time and
the date by which the Administrative Committee expects to render a final decision.
(2) The decision on review shall be in writing and
||specific reasons for the
decision, written in a manner calculated to be understood by the
||references to the specific
provisions of the Plan or other documents governing the Plan on
which the decision is based;
||a statement that the claimant is
entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records or other
information relevant to the claimants claim; and
||a statement of the claimants
right to bring a civil action under Section 502(a) of ERISA
following a wholly or partially denied claim for benefits.
(3) The decision of the Administrative Committee on any application for benefits shall
be final and conclusive upon all persons.
5.3 Hearings. In appropriate cases, the Administrative 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 Administrative Committee
5.4 Exhaustion Requirement.
(a) A claimant must exhaust the claims procedures described in Section 5.2 before he may bring
a legal action in court against any of the Plan Parties.
(b) This Section 5.4 applies if a claimant does not receive payment of the benefits he
believes he is entitled to under the Plan or has any other grievance with respect to his benefits
under the Plan.
(c) Plan Parties means the Plan, the Committee, Northrop Grumman Corporation and any
affiliated company and their respective boards of directors, any trustee, the Administrative
Committee, and the employees or agents of these entities.
5.5 Time Limitations.
(a) A claimant may not file a claim in accordance with Section 5.2 later than one year from
the time the claim arises under (d).
(b) A claimant may not bring a legal action against the Plan Parties in court after the latest
||one year from the time the claim arises (within
the meaning of (d));
||one year after the date this provision took
||if a claim is made in accordance with Section
5.2 within the time periods described in Section 5.5(b)(1) or Section
5.5(b)(2), 90 days from the final disposition of the claim by the
(c) If the statute of limitations period for filing suit on a claim expires prior to the time
limit in (b), this Section is not intended to permit suit to be filed after the end of the statute
of limitations period. In other words, suit must be filed by the earlier of the end of the statute
of limitations period or the time limit in (b).
(d) When a Claim Arises.
(1) A claim arises no later than the earliest of the following:
||for any claimant, the
Administrative Committees initial denial of the claimants
claim for benefits;
||for any claimant, the
commencement of the claimants benefits; or
||the later of:
||in the case of a
Participants (or former Participants) claim, his
termination of employment; or
||in the case of
any claimant, 90 days after the first statement of
pension benefits is furnished to him.
(2) To the extent the claim of a beneficiary or alternate payee is based on the amount
of benefits a Participant had earned, the claim arises at the same time for the beneficiary
or alternate payee as it would for the Participant. This does not apply to the extent the
claim relates only to the beneficiarys or alternate payees rights.
Example 1: A beneficiary claims that his survivor benefit should be larger because the
Participants benefit should have been larger. In this case, the beneficiarys claim arises
no later than a claim by the Participant would have arisen.
Example 2: A beneficiary claims that she should get the Participants survivor benefit
rather than some other person. This claim arises only by reference to the beneficiary
herself and so is not subject to the same time limits as a claim by the Participant.
(3) This subsection only sets the latest date a claim will be deemed to arise. A claim
may arise earlier, at the time a claim arises for statute of limitations purposes.
5.6 Disclosure of Claim Procedures. All Plan participants will be given a description
of the claims procedures, within a reasonable time after joining the Plan.
AMENDMENT AND TERMINATION
6.1 Amendment or Termination. The Company reserves the right to amend or terminate
the Plan when, in the sole discretion of the Company, such amendment or termination is advisable.
6.2 Effect of Amendment or Termination. No amendment or termination of the Plan shall
adversely affect the rights of a Participant to his accrued benefit under the Plan as of the date
of such amendment or termination. Upon termination of the Plan, distribution of Plan benefits
shall be made to Participants and beneficiaries in the manner and at the time described in Article
III, unless the Company determines in its sole discretion that all such amounts shall be
distributed upon termination in accordance with the requirements under Code section 409A. Upon
termination of the Plan, no further benefit accruals shall occur.
7.1 Rights Unsecured. The right of a Participant or his beneficiary to receive a
distribution hereunder shall be an unsecured (but legally enforceable) claim against the general
assets of the Company, and neither the Participant nor his beneficiary shall have any rights in or
against any specific assets of the Company. Thus, the Plan at all times shall be considered
entirely unfunded for ERISA and tax purposes. Any funds set aside by the Company for the purpose
of meeting its obligations under the Plan, including any amounts held by a trustee, shall continue
for all purposes to be part of the general assets of the Company and shall be available to its
general creditors in the event of the Companys bankruptcy or insolvency. The Companys obligation
under this Plan shall be that of an unfunded and unsecured promise to pay money in the future.
7.2 Benefits Not Treated as Compensation. Benefits payable under the Plan shall not
be considered compensation for any purposes under any benefit plan sponsored by the Company or its
Affiliates, including qualified and nonqualified retirement plans.
7.3 No Guarantee of Benefits. Nothing contained in the Plan shall constitute a
guarantee by the Company or any other person or entity that the assets of the Company will be
sufficient to pay any benefits hereunder.
7.4 No Enlargement of Rights. No Participant or beneficiary shall have any right to
receive a distribution under the Plan except in accordance with the terms of the Plan.
Establishment of the Plan shall not be construed to give any Participant the right to continue to
be employed by or provide services to the Company.
7.5 Spendthrift Provision. No interest of any person in, or right to receive a
distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest
or right to receive a distribution be taken, either voluntarily or involuntarily for the
satisfaction of the debts of, or other obligations or claims against, such person.
Notwithstanding the foregoing, all or a portion of a Participants benefit under the Plan may
be paid to another person as specified in a domestic relations order that the Committee determines
meets certain requirements (a Domestic Relations Order). For this purpose, a Domestic Relations
Order means a judgment, decree, or order (including the approval of a settlement agreement) which
||issued pursuant to a States domestic relations law;
||relates to the provision of child support, alimony payments or
marital property rights to a spouse, former spouse, child or other dependent of
||creates or recognizes the right of a spouse, former spouse,
child or other dependent of the Participant to receive all or a portion of the
Participants benefits under the Plan; and
||meets such other requirements established by the Committee.
The Committee shall determine whether any document received by it is a Domestic Relations
Order. In making this determination, the Committee may consider the rules applicable to domestic
relations orders under Code section 414(p) and ERISA section 206(d), and such other rules and
procedures as it deems relevant.
7.6 Applicable Law
. To the extent not preempted by federal law, the Plan shall be
governed by the laws of the State of California
7.7 Incapacity of Recipient. If any person entitled to a distribution under the Plan
is deemed by the Committee to be incapable of personally receiving and giving a valid receipt for
such payment, then, unless and until a claim for such payment shall have been made by a duly
appointed guardian or other legal representative of such person, the Committee may provide for such
payment or any part thereof to be made to any other person or institution then contributing toward
or providing for the care and maintenance of such person. Any such payment shall be a payment for
the account of such person and a complete discharge of any liability of the Company and the Plan
with respect to the payment.
7.8 Taxes. The Company or other payor may withhold from a benefit payment under the
Plan or a Participants wages, or the Company may reduce a Participants accrued benefit under the
Plan, in order to meet any federal, state, or local tax withholding obligations with respect to
Plan benefits. The Company or other payor shall report Plan payments and other Plan-related
information to the appropriate governmental agencies as required under applicable laws.
7.9 Corporate Successors. The Plan and the obligations of the Company under the
Plan shall become the responsibility of any successor to the Company by reason of a transfer
sale of substantially all of the assets of the Company or by the merger or consolidation of the
Company into or with any other corporation or other entity.
7.10 Unclaimed Benefits. Each Participant shall keep the Committee informed of his
current address and the current address of his designated beneficiary. The Committee shall not be
obligated to search for the whereabouts of any person if the location of a person is not made known
to the Committee.
7.11 Severability. In the event any provision of the Plan shall be held invalid or
illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the
Plan, but the Plan shall be construed and enforced as if the illegal or invalid provision had never
7.12 Words and Headings. Words in the masculine gender shall include the feminine and
the singular shall include the plural, and vice versa, unless qualified by the context. Any
headings used herein are included for ease of reference only, and are not to be construed so as to
alter the terms hereof.
* * *
IN WITNESS WHEREOF, this Plan is hereby executed by a duly authorized officer on this
13th day of July, 2007.
||NORTHROP GRUMMAN CORPORATION
||/s/ Debora L. Catsavas for
||Corporate Vice President, Chief Human Resources and Administrative Officer