NORTHROP GRUMMAN
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
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Page
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ARTICLE I--DEFINITIONS .................................................................... 1
1.1 Definitions.............................................................. 1
ARTICLE II--PARTICIPATION ................................................................. 4
2.1 In General............................................................... 4
2.2 Disputes as to Employment Status......................................... 5
2.3 Cessation of Eligibility................................................. 5
ARTICLE III--DEFERRAL ELECTIONS............................................................ 5
3.1 Elections to Defer Compensation.......................................... 5
3.2 Investment Elections..................................................... 6
3.3 Investment Return Not Guaranteed......................................... 7
ARTICLE IV--ACCOUNTS AND TRUST FUNDING..................................................... 7
4.1 Accounts ................................................................ 7
4.2 Use of a Trust........................................................... 8
ARTICLE V--VESTING ........................................................................ 8
5.1 In General............................................................... 8
5.2 Exceptions............................................................... 8
ARTICLE VI--DISTRIBUTIONS ................................................................. 9
6.1 Distribution of Deferred Compensation Contributions...................... 9
6.2 Early Non-Scheduled Distributions........................................ 10
6.3 Hardship Distribution.................................................... 11
6.4 Payments Not Received At Death........................................... 11
6.5 Inability to Locate Participant.......................................... 11
6.6 Committee Rules.......................................................... 12
ARTICLE VII--ADMINISTRATION ............................................................... 12
(i)
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7.1 Committees........................................................ 12
7.2 Committee Action.................................................. 12
7.3 Powers and Duties of the Administrative Committee................. 12
7.4 Powers and Duties of the Investment Committee..................... 13
7.5 Construction and Interpretation................................... 13
7.6 Information....................................................... 13
7.7 Committee Compensation, Expenses and Indemnity.................... 14
7.8 Disputes ......................................................... 14
ARTICLE VIII--MISCELLANEOUS ........................................................ 15
8.1 Unsecured General Creditor........................................ 15
8.2 Restriction Against Assignment.................................... 16
8.3 Restriction Against Double Payment................................ 16
8.4 Withholding....................................................... 16
8.5 Amendment, Modification, Suspension or Termination................ 16
8.6 Governing Law..................................................... 16
8.7 Receipt or Release................................................ 17
8.8 Administrative Delays............................................. 17
8.9 Disputes About Payee.............................................. 17
8.10 Incorrect Payment of Benefits..................................... 17
8.11 Payments on Behalf of Persons Under Incapacity.................... 17
8.12 Limitation of Rights and Employment Relationship.................. 18
8.13 Headings ......................................................... 18
(ii)
NORTHROP GRUMMAN
DEFERRED COMPENSATION PLAN
WHEREAS, Northrop Grumman Corporation (the "Company") desires to
establish this unfunded Deferred Compensation Plan (the "Plan") for a select
group of management and highly compensated employees;
NOW, THEREFORE, effective as of December 1, 2000, this Plan is hereby
adopted to read as follows:
ARTICLE I
DEFINITIONS
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1.1 Definitions
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Whenever the following words and phrases are used in this
Plan, with the first letter capitalized, they shall have the meanings specified
below.
(a) "Account" shall mean the recordkeeping account set up for each
Participant to keep track of amounts to his or her credit.
(b) "Administrative Committee" means the committee in charge of Plan
administration, as described in Article VII.
(c) "Affiliated Companies" shall mean the Company and any entity
affiliated with the Company under Code sections 414(b) or (c).
(d) "Base Salary" shall mean a Participant's annual base salary,
excluding bonuses, commissions, incentive and all other remuneration for
services rendered to the Affiliated Companies and prior to reduction for any
salary contributions to a plan established pursuant to section 125 of the Code
or qualified pursuant to section 401(k) of the Code.
(e) "Beneficiary" or "Beneficiaries" shall mean the person or
persons, including a trustee, personal representative or other fiduciary, last
designated in writing by a Participant in accordance with procedures established
by the Administrative Committee to receive the benefits specified hereunder in
the event of the Participant's death.
(1) No Beneficiary designation shall become effective until it is
filed with the Administrative Committee.
(2) Any designation shall be revocable at any time through a
written instrument filed by the Participant with the Administrative Committee
with or without the consent of the previous Beneficiary.
(3) No designation of a Beneficiary other than the Participant's
spouse shall be valid unless consented to in writing by such spouse. If there is
no such designation or if there is no surviving designated Beneficiary, then the
Participant's surviving spouse shall be the Beneficiary. If there is no
surviving spouse to receive any benefits payable in accordance with the
preceding sentence, the duly appointed and currently acting personal
representative of the Participant's estate (which shall include either the
Participant's probate estate or living trust) shall be the Beneficiary. In any
case where there is no such personal representative of the Participant's estate
duly appointed and acting in that capacity within 90 days after the
Participant's death (or such extended period as the Administrative Committee
determines is reasonably necessary to allow such personal representative to be
appointed, but not to exceed 180 days after the Participant's death), then
Beneficiary shall mean the person or persons who can verify by affidavit or
court order to the satisfaction of the Administrative Committee that they are
legally entitled to receive the benefits specified hereunder.
(4) In the event any amount is payable under the Plan to a minor,
payment shall not be made to the minor, but instead be paid (a) to that person's
living parent(s) to act as custodian, (b) if that person's parents are then
divorced, and one parent is the sole custodial parent, to such custodial parent,
or (c) if no parent of that person is then living, to a custodian selected by
the Administrative Committee to hold the funds for the minor under the Uniform
Transfers or Gifts to Minors Act in effect in the jurisdiction in which the
minor resides. If no parent is living and the Administrative Committee decides
not to select another custodian to hold the funds for the minor, then payment
shall be made to the duly appointed and currently acting guardian of the estate
for the minor or, if no guardian of the estate for the minor is duly appointed
and currently acting within 60 days after the date the amount becomes payable,
payment shall be deposited with the court having jurisdiction over the estate of
the minor.
(5) Payment by the Affiliated Companies pursuant to any unrevoked
Beneficiary designation, or to the Participant's estate if no such designation
exists, of all benefits owed hereunder shall terminate any and all liability of
the Affiliated Companies.
(f) "Board" shall mean the Board of Directors of the Company.
(g) "Bonuses" shall mean the bonuses earned under the Company's
formal incentive plans as defined by the Administrative Committee.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(i) "Committees" shall mean the Committees appointed by the Board to
administer the Plan and investments in accordance with Article VII.
(j) "Company" shall mean Northrop Grumman Corporation and any
successor.
(k) "Compensation" shall be Base Salary plus Bonuses.
(l) "Disability" shall mean the Participant's inability to perform
each and every duty of his or her occupation or position of employment due to
illness or injury as determined in the sole and absolute discretion of the
Administrative Committee.
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(m) "Early Distribution" shall mean an election by a Participant
in accordance with Section 6.2 to receive a withdrawal of amounts from his or
her Account prior to the time at which such Participant would otherwise be
entitled to such amounts.
(n) "Employee" shall mean any common law employee of the
Affiliated Companies.
(o) "Effective Date" shall be December 1, 2000.
(p) "Eligible Employee" shall mean any Employee who meets the
following conditions:
(1) he or she is initially treated by the Affiliated
Companies as an Employee and not as an independent contractor; and
(2) he or she meets the eligibility criteria set by the
Administrative Committee.
(q) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as it may be amended from time to time.
(r) "Hardship Distribution" shall mean a severe financial
hardship to the Participant resulting from a sudden and unexpected illness or
accident of the Participant or of his or her dependent (as defined in Section
152(a) of the Code), loss of a Participant's property due to casualty, or other
similar or extraordinary and unforseeable circumstances arising as a result of
events beyond the control of the Participant. The circumstances that would
constitute an unforseeable emergency will depend upon the facts of each case,
but, in any case, a Hardship Distribution may not be made to the extent that
such hardship is or may be relieved (i) through reimbursement or compensation by
insurance or otherwise, (ii) by liquidation of the Participant's assets, to the
extent the liquidation of assets would not itself cause severe financial
hardship, or (iii) by cessation of deferrals under this Plan.
(s) "Initial Election Period" shall mean
(1) in the case of an employee who becomes an Eligible
Employee upon the Effective Date of the Plan, the 30-day period prior to the
Effective Date of the Plan;
(2) in the case of an Employee who becomes an Eligible
Employee after the Effective Date under Section 2.1(a)(2)(a new hire), the
30-day period following the time the Employee first becomes an Eligible
Employee; and
(3) in the case of an Employee who becomes an Eligible
Employee after the Effective Date under Section 2.1(b)(because of a raise or
promotion), the next Open Enrollment Period.
(t) "Investment Committee" means the committee in charge of
investment aspects of the Plan, as described in Article VII.
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(u) "Open Enrollment Period" means the period near the end of
each Plan Year designated by the Administrative Committee for electing deferrals
for the following Plan Year.
(v) "Participant" shall mean any Eligible Employee who becomes
a participant in this Plan in accordance with Article II and retains a positive
balance to his or her account under the Plan.
(w) "Payment Date" shall mean:
(1) for distributions upon early termination under Section
6.1(a), a date after the end of the month in which termination of employment
occurs;
(2) for distributions after Retirement, Disability or death
under Section 6.1(b), a date after the end of the month in which occurs
Retirement, the determination of Disability by the Administrative Committee, or
the notification of the Administrative Committee of the Participant's death (or
later qualification of the Beneficiary or Beneficiaries), as applicable; and
(3) for distributions with a scheduled withdrawal date under
Section 6.1(c), a date after the December 31 prior to the elected payment year,
the exact date in each case to be determined by the Administrative Committee to
allow time for administrative processing.
(x) "Plan" shall be the Northrop Grumman Deferred Compensation
Plan.
(y) "Plan Year" shall be the calendar year.
(z) "Retirement" shall mean termination of employment with the
Affiliated Companies after reaching age 55.
(aa) "Scheduled Withdrawal Date" shall mean the distribution date
elected by the Participant for an in-service withdrawal of amounts deferred in a
given Plan Year, and earnings and losses attributable thereto, as set forth on
the election form for such Plan Year.
ARTICLE II
PARTICIPATION
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2.1 In General
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(a) An Eligible Employee may become a Participant if he or she:
(1) is an Eligible Employee on the Effective Date, or
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(2) he or she is newly hired by the Affiliated Companies
after the Effective Date and he or she is an Eligible Employee as of the first
date of employment with the Affiliated Companies.
(b) Someone who becomes an Eligible Employee after the
Effective Date because he or she receives a raise or promotion will not be
entitled to participate in the Plan until the next Open Enrollment Period.
(c) Anyone eligible to participate under (a) or (b) may become
a Participant by complying with the procedures set out by the Administrative
Committee.
2.2 Disputes as to Employment Status
--------------------------------
(a) Because there may be disputes about an individual's proper
status as an Employee or non-Employee, this Section describes how such disputes
are to be handled with respect to Plan participation.
(b) The Affiliated Companies will make the initial
determination of an individual's employment status.
(1) If an individual is not treated by the Affiliated
Companies as a common law employee, then the Plan will not consider the
individual to be an "Eligible Employee" and he or she will not be entitled to
participate in the Plan.
(2) This will be so even if the individual is told he or
she is entitled to participate in the Plan and given a summary plan description
and enrollment forms or other actions are taken indicating that he or she may
participate.
(c) Disputes may arise as to an individual's employment status.
As part of the resolution of the dispute, an individual's status may be changed
by the Affiliated Companies from non-Employee to Employee. Such Employees are
not Eligible Employees.
2.3 Cessation of Eligibility
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If the Administrative Committee determines or reasonably believes
that a Participant has ceased to be a management or highly compensated employee
within the meaning of ERISA Title I, the Participant will no longer be able to
defer any further compensation under the Plan.
ARTICLE III
DEFERRAL ELECTIONS
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3.1 Elections to Defer Compensation
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(a) Initial Election Period. Subject to the provisions of
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Article II, each Eligible Employee may elect to defer an amount of Compensation
by filing an election with the Administrative Committee no later than the last
day of his or her Initial Election Period.
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(b) General Rule. The amount of Compensation which an Eligible
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Employee may elect to defer is such Compensation earned after the time at which
the Eligible Employee elects to defer in accordance with Section 3.1(a). The
Administrative Committee may set limits and other requirements on the amount
which may be deferred as well as procedures for elections. The Administrative
Committee may change these rules from time to time. The minimum contribution
which may be made in any Plan Year by an Eligible Employee shall not be less
than $5,000, provided such minimum contribution can be satisfied from any
element of Compensation.
(c) Initial and Subsequent Elections. An Eligible Employee's
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initial election to defer Compensation must be made by the Effective Date and is
to be effective with respect to Compensation received in 2001.
(1) In the case of an Employee who becomes an Eligible
Employee after the Effective Date under Section 2.1(a)(2) (a new hire), such
Eligible Employee shall have 30 days from the date he or she has become an
Eligible Employee to make an initial election with respect to Compensation. Such
election shall be for Compensation earned during the remainder of the Plan Year,
in the event the Plan Year has commenced.
(2) In the case of an Employee who becomes an Eligible
Employee after the Effective Date under Section 2.1(b) (because of a raise or
promotion), such Eligible Employee may make an initial election to defer
Compensation earned in the following Plan Year during the next Open Enrollment
Period.
(3) Participants may maintain, increase, decrease or
terminate a deferral election with respect to Compensation for any subsequent
Plan Year by filing a new election in the Open Enrollment Period each year.
(4) These elections for a Plan Year are irrevocable.
(d) Committee Rules. All elections must be made in accordance
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with the rules, procedures and utilizing the forms prescribed by the
Administrative Committee. The Administrative Committee may change the rules,
procedures and forms from time to time and without prior notice to Participants.
3.2 Investment Elections
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(a) The Investment Committee will establish a number of
different types of investment for the Plan. The Investment Committee may change
the investments from time to time, without prior notice to Participants.
(b) Participants may elect how their future contributions and
existing account balances will be invested in the various types of investment
and may change their elections from time to time.
(c) Although the Participants may designate the type of
investments, the Investment Committee is not bound to invest in any particular
investment. The Investment Committee will select from time to time, in its sole
and absolute discretion, commercially
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available investments of each of the types offered. All investments remain the
property of the Affiliated Companies (or the rabbi trust under Section 4.2) and
are not Plan assets. Investments are used solely for purposes of measuring the
deemed earnings and losses in Participants' Accounts under Section 4.1.
(d) Selections of the types of investments, changes and
transfers must be made according to the rules and procedures of the
Administrative Committee.
(1) The Administrative Committee may prescribe rules which
may include, among other matters, limitations on the amounts which may be
transferred and procedures for electing transfers.
(2) The Administrative Committee may prescribe rules for
valuing accounts for purposes of transfers. Such rules may, in the
Administrative Committee's discretion, use averaging methods to determine values
and accrue estimated expenses.
(3) The Administrative Committee may prescribe the periods
and frequency with which Participants may change investment elections and make
transfers.
(4) The Administrative Committee may change its rules from
time to time and without prior notice to Participants.
3.3 Investment Return Not Guaranteed
--------------------------------
Investment performance under the Plan is not guaranteed at any
level. Participants may lose all or a portion of their contributions due to poor
investment performance.
ARTICLE IV
ACCOUNTS AND TRUST FUNDING
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4.1 Accounts
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The Administrative Committee shall establish and maintain an
Account for each Participant under the Plan. Each Participant's Account shall be
further divided into separate subaccounts ("investment subaccounts"), each of
which corresponds to an investment type elected by the Participant pursuant to
Section 3.2(a). A Participant's Account shall be credited as follows:
(a) The Administrative Committee shall credit the investment
subaccounts of the Participant's Account with an amount equal to Compensation
deferred by the Participant in accordance with the Participant's election under
Section 3.2(b); that is, the portion of the Participant's deferred Compensation
that the Participant has elected to be deemed to be invested in a certain type
of investment shall be credited to the investment subaccount corresponding to
that investment type.
(b) The investment subaccounts of Participants' Accounts will
be credited with earnings or losses based on the earnings or losses of the
corresponding investments selected
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by the Investment Committee and valued in accordance with the rules and
procedures of the Administrative Committee.
(1) The Administrative Committee may set regular valuation dates
and times and also use special valuation dates and times and procedures from
time to time under unusual circumstances and to protect the financial integrity
of the Plan.
(2) The Administrative Committee may use averaging methods to
determine values and accrue estimated expenses.
(3) The Administrative Committee may change its valuation rules
and procedures from time to time and without prior notice to Participants.
(c) In the event that a Participant elects for a given Plan Year's
deferral of Compensation to have a Scheduled Withdrawal Date, all amounts
attributed to the deferral of Compensation for such Plan Year shall be accounted
for in a manner which allows separate accounting for the deferral of
Compensation and investment gains and losses associated with such Plan Year's
deferral of Compensation.
4.2 Use of a Trust
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The Company may set up a trust to hold any assets or insurance
policies under the Plan. Any trust set up will be a rabbi trust.
ARTICLE V
VESTING
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5.1 In General
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A Participant's interest in his or her Account will be nonforfeitable.
5.2 Exceptions
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The following exceptions apply to the vesting rule:
(a) Forfeitures on account of a lost payee. See Section 6.4.
(b) Forfeitures under an escheat law. See Section 6.4.
(c) Recapture of amounts improperly credited to a Participant's
Account or improperly paid to or with respect to a Participant.
(d) Expenses paid from a Participant's Account.
(e) Investment losses.
(f) Forfeitures resulting from early withdrawals. See Section 6.2.
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ARTICLE VI
DISTRIBUTIONS
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6.1 Distribution of Deferred Compensation Contributions
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(a) Distributions Upon Early Termination.
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(1) Voluntary Termination. If a Participant voluntarily
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terminates employment with the Affiliated Companies before age 55 or Disability,
distribution of his or her Account will be made in a lump sum on the
Participant's Payment Date.
(2) Involuntary Termination. If a Participant involuntarily
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terminates employment with the Affiliated Companies before age 55, distribution
of his or her Account will generally be made in quarterly installments over a 5,
10 or 15-year period, commencing on the Participant's Payment Date, in
accordance with the Participant's original election on his or her deferral
election form. Payment will be made in a lump sum if the Participant had
originally elected a lump sum, if the Account balance is $50,000 or less, or if
the Administrative Committee so requires.
(b) Distribution After Retirement, Disability or Death. In the case of
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a Participant who separates from service with the Affiliated Companies on
account of Retirement, Disability or death and has an Account balance of more
than $50,000, the Account shall be paid to the Participant (and after his or her
death to his or her Beneficiary) in substantially equal quarterly installments
over 10 years commencing on the Participant's Payment Date.
(1) An optional form of benefit may be elected by the
Participant, on the form provided by Administrative Committee, during his or her
Initial Election Period from among those listed below:
(A) A lump sum distribution on the Participant's Payment
Date.
(B) Quarterly installments over 5 years beginning on the
Participant's Payment Date.
(C) Quarterly installments over 15 years beginning on the
Participant's Payment Date.
(2) A Participant from time to time may modify the form of
benefit that he or she has previously elected. Upon his or her separation from
service under this Section, the most recently elected form of distribution
submitted at least 12 months prior to separation will govern. If no such
election exists, distributions will be paid under the 10-year installment
method.
(3) In the case of a Participant who terminates employment with
the Affiliated Companies on account of Retirement, Disability or death with an
Account balance of $50,000 or less, the Account shall be paid to the Participant
in a lump sum distribution on the Participant's Payment Date.
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(4) In general, upon the Participant's death, payment of any
remaining Account balance will be made to the Beneficiary in a lump sum on the
Payment Date. But the Beneficiary will receive any remaining installments
(starting on the Payment Date) if the Participant was receiving installments, or
if the Participant died on or after age 55 with an Account balance over $50,000
and with an effective installment payout election in place. In such cases, the
Beneficiary may still elect a lump sum payment of the remaining Account balance,
but only with the Administrative Committee's consent.
(5) The Participant's Account shall continue to be credited with
earnings pursuant to Section 4.1 of the Plan until all amounts credited to his
or her Account under the Plan have been distributed.
(c) Distribution With Scheduled Withdrawal Date. A Participant who
-------------------------------------------
has elected a Scheduled Withdrawal Date for a distribution while still in the
employ of the Affiliated Companies, will receive the designated portion of his
or her Account as follows:
(1) A Participant's Scheduled Withdrawal Date can be no earlier
than two years from the last day of the Plan Year for which the deferrals of
Compensation are made.
(2) A Participant may extend the Scheduled Withdrawal Date for
any Plan Year, provided such extension occurs at least one year before the
Scheduled Withdrawal Date and is for a period of not less than two years from
the Scheduled Withdrawal Date. The Participant shall have the right to twice
modify any Scheduled Withdrawal Date.
(3) Payments under this subsection may be in the form of a lump
sum, or 2, 3, 4 or 5-year quarterly installments. The default form will be a
lump sum. If the Account balance to be distributed is $25,000 or less, payment
will automatically be made in a lump sum. Payments will commence on the
Scheduled Withdrawal Date.
(4) In the event a Participant terminates employment with the
Affiliated Companies prior to the commencement or completion of a distribution
under this subsection, the portion of the Participant's Account associated with
a Scheduled Withdrawal Date which has not been distributed prior to such
termination shall be distributed in accordance with Section 6.1(a) and (b) along
with the remainder of the Account.
6.2 Early Non-Scheduled Distributions
---------------------------------
A Participant shall be permitted to elect an Early Distribution from
his or her Account prior to a Payment Date under Section 6.1, subject to the
following restrictions:
(a) The election to take an Early Distribution shall be made by
filing a form provided by and filed with the Administrative Committee prior to
the end of any calendar month.
(b) The amount of the Early Distribution shall equal up to 90% of his
or her Account balance.
(c) The amount described in subsection (b) above shall be paid in a
lump sum as of a date after the receipt by the Administrative Committee of the
request for a withdrawal
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under this Section. The exact date will be determined by the Administrative
Committee to allow time for administrative processing.
(d) A Participant shall forfeit 10% of the amount of the requested
distribution. The Affiliated Companies shall have no obligation to the
Participant or his or her Beneficiary with respect to such forfeited amount.
(1) Example 1: A Participant requests a distribution of 100% of
---------
the Account. The Participant receives 90%. The amount forfeited is 10% of the
Account.
(2) Example 2: A Participant requests a distribution of 50% of
---------
the Account. The Participant receives 45%. The amount forfeited is 5% of the
Account.
(e) If a Participant receives an Early Distribution of either all or
a part of his or her Account, the Participant will be ineligible to participate
in the Plan for the balance of the Plan Year and the following Plan Year. All
distributions shall be made on a pro rata basis from among a Participant's
investment subaccounts.
6.3 Hardship Distribution
---------------------
A Participant shall be permitted to elect a Hardship Distribution from
his or her Account prior to a Payment Date under Section 6.1, subject to the
following restrictions:
(a) The election to take a Hardship Distribution shall be made by
filing a form provided by and filed with the Administrative Committee prior to
the end of any calendar month.
(b) The Administrative Committee shall have made a determination that
the requested distribution constitutes a Hardship Distribution.
(c) The amount determined by the Administrative Committee as a
Hardship Distribution shall be paid in a lump sum as of a date after the
approval by the Administrative Committee of the request for a withdrawal under
this Section. The exact date will be determined by the Administrative Committee
to allow time for administrative processing.
6.4 Payments Not Received At Death
------------------------------
In the event of the death of a Participant before receiving a payment,
payment will be made to his or her estate if death occurs on or after the date
of a check which has been issued by the Plan. Otherwise, payment of the amount
will be made to the Participant's Beneficiary.
6.5 Inability to Locate Participant
-------------------------------
In the event that the Administrative Committee is unable to locate a
Participant or Beneficiary within two years following the required Payment Date,
the amount allocated to the Participant's Deferral Account shall be forfeited.
If, after such forfeiture, the Participant or Beneficiary later claims such
benefit, such benefit shall be reinstated without interest or earnings for the
forfeiture period.
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6.6 Committee Rules
---------------
All distributions are subject to the rules and procedures of the
Administrative Committee. The Administrative Committee may also require the use
of particular forms. The Administrative Committee may change its rules,
procedures and forms from time to time and without prior notice to Participants.
ARTICLE VII
ADMINISTRATION
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7.1 Committees
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A Deferred Compensation Administrative Committee and an Investment
Committee (together, the "Committees"), each of one or more persons, shall be
appointed by, and serve at the pleasure of, the Board. The number of members
comprising the Committees shall be determined by the Board, which may from time
to time vary the number of members. A member of the Committees may resign by
delivering a written notice of resignation to the Board. The Board may remove
any member by delivering a certified copy of its resolution of removal to such
member. Vacancies in the membership of the Committees shall be filled promptly
by the Board.
7.2 Committee Action
----------------
Each Committee shall act at meetings by affirmative vote of a majority
of the members of that Committee. Any action permitted to be taken at a meeting
may be taken without a meeting if, prior to such action, a written consent to
the action is signed by all members of the Committee and such written consent is
filed with the minutes of the proceedings of the Committee. A member of the
Committees shall not vote or act upon any matter which relates solely to himself
or herself as a Participant. The Chairman or any other member or members of each
Committee designated by the Chairman may execute any certificate or other
written direction on behalf of the Committee of which he or she is a member.
7.3 Powers and Duties of the Administrative Committee
-------------------------------------------------
The Administrative Committee, shall enforce the Plan in accordance
with its terms, shall be charged with the general administration of the Plan,
and shall have all powers necessary to accomplish its purposes, including, but
not by way of limitation, the following:
(a) To construe and interpret the terms and provisions of this Plan;
(b) To compute and certify to the amount and kind of benefits payable
to Participants and their Beneficiaries;
(c) To maintain all records that may be necessary for the
administration of the Plan;
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(d) To provide for the disclosure of all information and the filing
or provision of all reports and statements to Participants, Beneficiaries or
governmental agencies as shall be required by law;
(e) To make and publish such rules for the regulation of the Plan and
procedures for the administration of the Plan as are not inconsistent with the
terms hereof;
(f) To appoint a Plan administrator or any other agent, and to
delegate to them such powers and duties in connection with the administration of
the Plan as the Administrative Committee may from time to time prescribe
(including the power to subdelegate);
(g) To exercise powers granted the Administrative Committee under
other Sections of the Plan; and
(h) To take all actions necessary for the administration of the Plan,
including determining whether to hold or discontinue insurance policies
purchased in connection with the Plan.
7.4 Powers and Duties of the Investment Committee
---------------------------------------------
The Investment Committee, shall have all powers necessary to
accomplish its purposes, including, but not by way of limitation, the following:
(a) To select types of investment and the actual investments against
which earnings and losses will be measured;
(b) To oversee the rabbi trust; and
(c) To appoint agents, and to delegate to them such powers and duties
in connection with its duties as the Investment Committee may from time to time
prescribe (including the power to subdelegate).
7.5 Construction and Interpretation
-------------------------------
The Administrative Committee shall have full discretion to construe
and interpret the terms and provisions of this Plan and to remedy possible
inconsistencies and omissions. The Administrative Committee's 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 Administrative Committee 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.
7.6 Information
-----------
To enable the Committees to perform their functions, the Affiliated
Companies adopting the Plan shall supply full and timely information to the
Committees on all matters relating to the Compensation of all Participants,
their death or other events which cause
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termination of their participation in this Plan, and such other pertinent facts
as the Committees may require.
7.7 Committee Compensation, Expenses and Indemnity
----------------------------------------------
(a) The members of the Committees shall serve without compensation
for their services hereunder.
(b) The Committees are authorized to employ such legal counsel as
they may deem advisable to assist in the performance of their duties hereunder.
(c) To the extent permitted by ERISA and applicable state law, the
Company shall indemnify and hold harmless the Committees and each member
thereof, the Board and any delegate of the Committees who is an employee of the
Affiliated Companies against any and all expenses, liabilities and claims,
including legal fees to defend against such liabilities and claims arising out
of their discharge in good faith of responsibilities under or incident to the
Plan, other than expenses and liabilities arising out of willful misconduct.
This indemnity shall not preclude such further indemnities as may be available
under insurance purchased by the Company or provided by the Company under any
bylaw, agreement or otherwise, as such indemnities are permitted under ERISA and
state law.
7.8 Disputes
--------
(a) Claims
------
A person who believes that he or she is being denied a benefit to
which he or she is entitled under this Plan (hereinafter referred to as
"Claimant") must file a written request for such benefit with the Administrative
Committee, setting forth his or her claim.
(b) Claim Decision
--------------
Upon receipt of a claim, the Administrative Committee shall advise the
Claimant that a reply will be forthcoming within ninety (90) days and shall, in
fact, deliver such reply within such period. The Administrative Committee may,
however, extend the reply period for an additional ninety (90) days for special
circumstances.
If the claim is denied in whole or in part, the Administrative
Committee shall inform the Claimant in writing, using language calculated to be
understood by the Claimant, setting forth: (A) the specific reason or reasons
for such denial; (B) specific references to pertinent provisions of this Plan on
which such denial is based; (C) a description of any additional material or
information necessary for the Claimant to perfect his or her claim and an
explanation of why such material or such information is necessary; (D)
appropriate information as to the steps to be taken if the Claimant wishes to
submit the claim for review; and (E) the time limits for requesting a review
under subsection (c).
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(c) Request For Review
------------------
Within sixty (60) days after the receipt by the Claimant of the
written opinion described above, the Claimant may request in writing that the
Administrative Committee review the initial claim determination. The Claimant or
his or her duly authorized representative may, but need not, review the
pertinent documents and submit issues and comments in writing for consideration
by the Administrative Committee. If the Claimant does not request a review
within such sixty (60) day period, he or she shall be barred and estopped from
challenging the initial determination.
(d) Review of Decision
------------------
Within sixty (60) days after the Administrative Committee's receipt of
a request for review, after considering all materials presented by the Claimant,
the Administrative Committee will inform the Participant in writing, in a manner
calculated to be understood by the Claimant, the decision setting forth the
specific reasons for the decision containing specific references to the
pertinent provisions of this Plan on which the decision is based. If special
circumstances require that the sixty (60) day time period be extended, the
Administrative Committee will so notify the Claimant and will render the
decision as soon as possible, but no later than one hundred twenty (120) days
after receipt of the request for review.
(e) Limitation on Claims
--------------------
No action may be brought in court on a claim for benefits under this
Plan after the later of:
(1) Two years after the claim arose, or
(2) One year after the decision on appeal under this Section (or
one year after the expiration of the time to take an appeal if no appeal is
taken).
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Unsecured General Creditor
--------------------------
Participants and their Beneficiaries, heirs, successors, and assigns
shall have no legal or equitable rights, claims, or interest in any specific
property or assets of the Affiliated Companies. No assets of the Affiliated
Companies shall be held in any way as collateral security for the fulfilling of
the obligations of the Affiliated Companies under this Plan. Any and all of the
Affiliated Companies' assets shall be, and remain, the general unpledged,
unrestricted assets of the Affiliated Companies. The obligation under the Plan
of the Affiliated Companies adopting the Plan shall be merely that of an
unfunded and unsecured promise of those Affiliated Companies to pay money in the
future, and the rights of the Participants and Beneficiaries shall be no greater
than those of unsecured general creditors. It is the intention of the Affiliated
Companies that this Plan be unfunded for purposes of the Code and for purposes
of Title I of ERISA.
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8.2 Restriction Against Assignment
------------------------------
(a) The Company shall pay all amounts payable hereunder only to the
person or persons designated by the Plan and not to any other person or
corporation. No part of a Participant's Accounts shall be liable for the debts,
contracts, or engagements of any Participant, his or her Beneficiary, or
successors in interest, nor shall a Participant's Accounts be subject to
execution by levy, attachment, or garnishment or by any other legal or equitable
proceeding, nor shall any such person have any right to alienate, anticipate,
sell, transfer, commute, pledge, encumber, or assign any benefits or payments
hereunder in any manner whatsoever. If any Participant, Beneficiary or successor
in interest is adjudicated bankrupt or purports to anticipate, alienate, sell,
transfer, commute, assign, pledge, encumber or charge any distribution or
payment from the Plan, voluntarily or involuntarily, the Administrative
Committee, in its discretion, may cancel such distribution or payment (or any
part thereof) to or for the benefit of such Participant, Beneficiary or
successor in interest in such manner as the Administrative Committee shall
direct.
(b) The actions considered exceptions to the vesting rule under
Section 5.2 will not be treated as violations of this Section.
8.3 Restriction Against Double Payment
----------------------------------
If a court orders an assignment of benefits despite the previous
Section, the affected Participant's benefits will be reduced accordingly. The
Administrative Committee may use any reasonable actuarial assumptions to
accomplish the offset under this Section.
8.4 Withholding
-----------
There shall be deducted from each payment made under the Plan or any
other Compensation payable to the Participant (or Beneficiary) all taxes which
are required to be withheld by the Affiliated Companies in respect to such
payment or this Plan. The Affiliated Companies shall have the right to reduce
any payment (or compensation) by the amount of cash sufficient to provide the
amount of said taxes.
8.5 Amendment, Modification, Suspension or Termination
--------------------------------------------------
The Administrative Committee may amend, modify, suspend or terminate
the Plan in whole or in part, except that no amendment, modification, suspension
or termination may reduce a Participant's Account balance below its dollar value
as determined under Section 4.1(b) immediately prior to the amendment. The
preceding sentence is not intended to protect Participants against investment
losses. In the event that this Plan is terminated, the amounts allocated to a
Participant's Account shall be distributed to the Participant or, in the event
of his or her death, to his or her Beneficiary in a lump sum.
8.6 Governing Law
-------------
To the extent not preempted by ERISA, this Plan shall be construed,
governed and administered in accordance with the laws of Delaware.
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8.7 Receipt or Release
------------------
Any payment to a Participant or the Participant's Beneficiary in
accordance with the provisions of the Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Committees and the Affiliated
Companies. The Administrative Committee may require such Participant or
Beneficiary, as a condition precedent to such payment, to execute a receipt and
release to such effect.
8.8 Administrative Delays
---------------------
If the amount of any payment cannot be determined by the date it is
supposed to be paid, or if it is not possible to make payments on time because
the Administrative Committee cannot find the payee, or adequate information is
not available to make the distribution, or the payee has failed to file the
applicable forms with the Administrative Committee, or because of other legal,
financial or administrative obstacles, payments may be made no later than 60
days after the date payment becomes possible.
8.9 Disputes About Payee
--------------------
In the event that the Administrative Committee determines that there
is some uncertainty as to whom any Plan payment is due, the Administrative
Committee is authorized to delay payment, seek agreements from the interested
parties, make payment to an appropriate judicial forum and allow the court to
determine the identity of the proper payee, and/or take any other necessary or
appropriate steps to protect the Plan and the interested parties.
8.10 Incorrect Payment of Benefits
-----------------------------
If the Administrative Committee determines in its full discretion that
the Plan made an incorrect payment of benefits, and that a correction is
necessary or desirable under the law, then:
(a) If the Plan makes an overpayment of the amount of any benefits
due any payee under the Plan, the Plan may recover the amounts either by
requiring the payee to return the excess to the Plan, by reducing any future
Plan payments to the payee, or by any other method deemed reasonable by the
Administrative Committee.
(b) If the Plan makes a late payment or an underpayment of the amount
of any benefits due any payee under the Plan, correct payment will be made as
soon as possible after the late payment or underpayment is discovered.
8.11 Payments on Behalf of Persons Under Incapacity
----------------------------------------------
In the event that any amount becomes payable under the Plan to a
person who, in the sole judgment of the Administrative Committee, is considered
by reason of physical or mental condition to be unable to give a valid receipt
therefore, the Administrative Committee may direct that such payment be made to
any person found by the Committee, in its sole judgment, to have assumed the
care of such person. Any payment made pursuant to such
-17-
determination shall constitute a full release and discharge of the
Administrative Committee and the Company.
8.12 Limitation of Rights and Employment Relationship
------------------------------------------------
Neither the establishment of the Plan and Trust nor any modification
thereof, nor the creating of any fund or account, nor the payment of any
benefits shall be construed as giving to any Participant, or Beneficiary or
other person any legal or equitable right against the Affiliated Companies or
any trustee except as provided in the Plan and any trust agreement; and in no
event shall the terms of employment of any Employee or Participant be modified
or in any way be affected by the provisions of the Plan and any trust agreement.
8.13 Headings
--------
Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.
-18-
FIRST AMENDMENT TO THE
NORTHROP GRUMMAN
DEFERRED COMPENSATION PLAN
The following changes to the Northrop Grumman Deferred Compensation Plan
effective December 1, 2000 (the "Plan"), as described below, are intended to
provide for the acceptance of a transfer of certain liabilities from the
Northrop Grumman Executive Deferred Compensation Plan, effective March 1, 2001.
1. A new Appendix A is added as follows:
APPENDIX A
TRANSFER OF LIABILITIES
-----------------------
A.1 Background
----------
Effective March 1, 2001, all liabilities under the Northrop
Grumman Executive Deferred Compensation Plan other than the Estate
Enhancement Program Account, were transferred to this Plan. This Appendix
describes the treatment of those liabilities (plus earnings) ("Transferred
Liabilities") and the Participant to whom those liabilities are owed
("Transferred Participant").
A.2 Treatment of Transferred Liabilities
------------------------------------
The Transferred Liabilities will generally be treated under the Plan
like Compensation deferred in accordance with Article III.
A.3 Investments
-----------
The Transferred Participant may make investment elections for the
Transferred Liabilities in accordance with Section 3.2. Section 3.3 will also
apply.
A.4 Distributions
-------------
Distributions of amounts corresponding to the Transferred Liabilities
will generally be made in accordance with the provisions of Article VI. The
following exceptions and special rules apply:
(a) Section 6.1.
-----------
(1) For purposes of Sections 6.1(a)(2) and 6.1(b)(1), the
Transferred Participant will be deemed to have made an election of 5 or 10-year
installments corresponding to his elections of 5 or 10-year installments under
Section 9(b)(2) of the Northrop Grumman Executive Deferred Compensation Plan.
(2) The Transferred Participant may utilize Section 6.1(b)(2) to
vary the form of his distribution.
(3) Distributions under Section 6.1(c) are not available.
2
(b) Section 6.2. The Early Non-Scheduled Distribution election
-----------
is available. The Transferred Liabilities will be aggregated with any other
amounts in the Transferred Participant's Account for purposes of distributions
under Section 6.2.
(c) Sections 6.3-6.6. These Sections are fully applicable.
----------------
A.5 Other Provisions
----------------
The Transferred Liabilities and the Transferred Participant will
be fully subject to the provisions of Articles IV, V, VII and VIII.
3
SECOND AMENDMENT TO THE
NORTHROP GRUMMAN DEFERRED COMPENSATION PLAN
This amendment to the Northrop Grumman Deferred Compensation Plan effective
December 1, 2000 ("Plan"), as described below, changes the Plan to account for
the acquisition of Litton Industries, Inc. and the associated corporate
reorganization. The changes in this amendment are effective upon adoption.
1. A new Section 8.14 is added to read as follows:
8.14 2001 Reorganization
-------------------
Effective as of the 2001 Reorganization Date in (d), the corporate
structure of Northrop Grumman Corporation and its affiliates was modified.
Effective as of the Litton Acquisition Date in (e), Litton Industries, Inc. was
acquired and became a subsidiary of the Northrop Grumman Corporation (the
"Litton Acquisition").
(a) The former Northrop Grumman Corporation was renamed Northrop Grumman
Systems Corporation. It became a wholly-owned subsidiary of the new parent of
the reorganized controlled group.
(b) The new parent corporation resulting from the restructuring is called
Northrop Grumman Corporation. All references in this Plan to the former Northrop
Grumman Corporation and its Board of Directors now refer to the new parent
corporation bearing the same name and its Board of Directors.
(c) As of the 2001 Reorganization Date, the new Northrop Grumman
Corporation became the sponsor of this Plan, and its Board of Directors assumed
authority over this Plan.
(d) 2001 Reorganization Date. The date as of which the corporate
------------------------
restructuring described in (a) and (b) occurred.
(e) Litton Acquisition Date. The date as of which the conditions for the
-----------------------
completion of the Litton Acquisition were satisfied in accordance with the
"Amended and Restated Agreement and Plan of Merger Among Northrop Grumman
Corporation, Litton Industries, Inc., NNG, Inc., and LII Acquisition Corp."
2
THIRD AMENDMENT TO THE
NORTHROP GRUMMAN
DEFERRED COMPENSATION PLAN
The following changes to the Northrop Grumman Deferred Compensation Plan
effective December 1, 2000 (the "Plan"), as described below, are intended to
provide for the acceptance of a transfer of certain liabilities from certain
nonqualified deferred compensation plans of Aerojet-General Corporation,
effective as of the Closing Date specified in the April 19, 2001 Asset Purchase
Agreement by and Between Aerojet-General Corporation and Northrop Grumman
Systems Corporation.
1. A new Appendix B is added as follows:
APPENDIX B
AEROJET-GENERAL LIABILITIES
---------------------------
B.1 Background
----------
(a) Effective as of the Closing Date specified in the April 19,
2001 Asset Purchase Agreement by and Between Aerojet-General Corporation
and Northrop Grumman Systems Corporation (the "APA"), certain liabilities
("Transferred Liabilities") under the Benefits Restoration Plan for
Salaried Employees of GenCorp Inc. and Certain Subsidiary Companies and the
GenCorp Inc. and Participating Subsidiaries Deferred Bonus Plan were
transferred to this Plan.
(b) The transfer took place pursuant to section 10.6 of the APA,
under which Northrop Grumman acquired the Azusa and Colorado Operations
units from Aerojet-General Corporation. That section reads:
* * * * *
10.6 Unfunded Deferred Compensation
------------------------------
(a) Subject to legal requirements for employee
acquiescence, as of the effective time of the Closing, the Purchaser
shall assume any and all obligations of the Seller to pay any and all
unfunded deferred compensation as set forth on Schedule 10.6 for all
Transferring Employees, provided such benefits are adequately
reflected on the Balance Sheet.
(b) The Seller shall retain any and all legal obligation to
pay any and all unfunded deferred compensation for all Aerojet
Employees that are not Transferring Employees.
* * * * *
(c) This Appendix is intended to effectuate the assumption of
certain of the liabilities contemplated by section 10.6 of the APA. It
describes the treatment of those liabilities (plus earnings) and the
Participants to whom those liabilities are owed ("Transferred
Participants").
2
(d) The only liabilities assumed by this Plan are:
(1) those from the GenCorp Inc. and Participating
Subsidiaries Deferred Bonus Plan, and
(2) those liabilities under the Benefits Restoration Plan
for Salaried Employees of GenCorp Inc. and Certain Subsidiary Companies
which represent supplements with respect to an Aerojet defined contribution
plan. No liabilities are assumed which represent supplements with respect
to an Aerojet defined benefit plan.
(e) The assumed liabilities will be represented by starting
Account balances for the Transferred Participants, determined in the
discretion of the Administrative Committee.
B.2 Treatment of Transferred Liabilities
------------------------------------
The Transferred Liabilities will generally be treated under the
Plan like Compensation deferred in accordance with Article III.
B.3 Investments
-----------
The Transferred Participants may make investment elections for
the Transferred Liabilities in accordance with Section 3.2. Section 3.3
will also apply.
B.4 Distributions
-------------
Distributions of amounts corresponding to the Transferred
Liabilities will generally be made in accordance
3
with the provisions of Article VI. The following exceptions and special
rules apply:
(a) Section 6.1.
-----------
(1) For purposes of Sections 6.1(a)(2) and 6.1(b)(1), the
Transferred Participants will be deemed to have made an election of 10-year
installments.
(2) The Transferred Participants may utilize Section
6.1(b)(2) to vary the form of their distributions.
(3) Distributions under Section 6.1(c) are not available.
(b) Section 6.2. The Early Non-Scheduled Distribution election
-----------
is available. The Transferred Liabilities will be aggregated with any other
amounts in the Transferred Participants' Accounts for purposes of
distributions under Section 6.2.
(c) Sections 6.3-6.6. These Sections are fully applicable.
----------------
B.5 Other Provisions
----------------
The Transferred Liabilities and the Transferred Participants will
be fully subject to the provisions of Articles IV, V, VII and VIII.
4