NORTHROP GRUMMAN
EXECUTIVE DEFERRED COMPENSATION PLAN
1. Purpose.
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The purpose of the Plan is to provide an arrangement whereby executives can
elect to defer receipt of compensation for which a deduction to the Corporation
would otherwise be disallowed for federal income tax purposes under Section
162(m) of the Internal Revenue Code of 1986, as amended ("Code"). The Plan as
amended and restated herein is effective November 2, 2000.
2. Definitions.
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(a) "Committee" is the Compensation and Management Development Committee (or
its successor) of the Board of Directors of Northrop Grumman Corporation.
(b) "Company" means Northrop Grumman Corporation and any of its
subsidiaries or affiliates.
(c) "Compensation" means salary and other items of includible compensation
paid to a Participant from the Company or a calendar year.
(d) "Corporation" means Northrop Grumman Corporation.
(e) "Disability" means a permanent and total disability for which a
Participant is currently receiving benefits from a long-term disability plan
sponsored by the Company.
(f) "Effective Date" means December 30, 1994, or such other date as
specified by the Board of Directors.
(g) "Eligible Employee" means an employee who meets the conditions for
eligibility under Section 3 of this Plan.
(h) "Estate Enhancement Program Election" means an election made by a
participant to participate in the Northrop Grumman Estate Enhancement Program
under which the Participant elects to have all or any portion of his or her
deferral account balance converted to an Estate Enhancement Program Account.
Northrop Grumman Executive Deferred Compensation Plan
(i) "Estate Enhancement Program Account" means all or any portion of the
Participant's Plan account balance with respect to which the Participant has
made an Estate Enhancement Program Election.
(j) "Participant" means an Eligible Employee who makes an election to defer
Compensation under this Plan.
(k) "Plan" means the Executive Deferred Compensation Plan of the Northrop
Grumman Corporation as set forth herein and as from time to time amended.
(l) "Plan Year" means the calendar year.
(m) "Retirement" means retirement pursuant to one or more of the qualified
pension or profit-sharing plans maintained by the Company.
(n) "Section 162(m) limit" means the limit on deductibility of salary and
other compensation imposed by Section 162(m) of the Code, and any subsequent or
superseding provisions of the Code.
(o) "Termination" means a complete separation from service by the
Participant from the Company.
3. Eligibility.
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An employee of the Company who is eligible to receive Compensation in excess of
the Section 162(m) limit may be eligible to participate in this Plan for that
year, upon approval of his eligibility by the Committee.
4. Participation.
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(a) An Eligible Employee may become a Participant by electing to defer some
or all of his Compensation under this Plan, on a form and in the manner
specified by the Committee.
(b) Eligible Employees must make a separate election to participate with
respect to each Plan Year. Any deferral made under this Plan shall only be
effective with respect to the Plan Year to which it relates.
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Northrop Grumman Executive Deferred Compensation Plan
5. Time of Deferral.
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(a) An election to defer Compensation under this Plan shall be made no
later than December 31 preceding the calendar year in which the services are
performed to which the Compensation relates.
(b) Any deferral election under this Plan shall be binding with respect to
the period for which it was made and shall be irrevocable with respect to that
period.
6. Deferral Account.
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There shall be established on the books of the Corporation a deferral account
for each Participant, and all amounts deferred by the Participant under this
Plan for all years of participation shall be credited to that account, together
with any interest or earnings on such amounts.
7. Investment options.
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(a) During the first full Plan Year, interest will be credited to deferral
accounts at a rate equal to 115-percent of the fourth quarter monthly rate of
Moody's Average Corporate Bond rate.
(b) With respect to subsequent Plan Years, the Committee, in its sole
discretion, may make available one or more investment options under this Plan in
which Participants may elect to direct investment of their deferral accounts. In
addition, the Committee may determine that one or more of the accounts shall
earn interest at a stated rate over a specified term.
(c) Notwithstanding the other provisions of this Section 7, amounts in an
Estate Enhancement Program Account shall not be credited with any interest or
other investment earnings or losses.
8. No Guarantee of Payment; No Funding.
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(a) Participants in this Plan shall have no rights on account of this Plan
in or to any specific assets of the Company, and any rights that a Participant
shall
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Northrop Grumman Executive Deferred Compensation Plan
have on account of this Plan shall be no greater than those of a general,
unsecured creditor of the Corporation.
(b) The Corporation in no way guarantees the principal, or any other
portion of a Participant deferral account and any earnings thereon. Any and all
investments remain the property of the Corporation.
(c) The Corporation, in its sole discretion, may establish a separate
rabbi trust for the purpose of funding its obligations under this Plan, and may
also fund its obligations under a rabbi trust which funds other nonqualified
benefit obligations of the Corporation. However, nothing contained herein shall
require the establishment or funding of any such trust with respect to benefit
obligations or liabilities under this Plan.
(d) This Plan is intended to qualify as an unfunded plan maintained
primarily for the purpose of providing deferred compensation for a select group
of management and highly compensated employees ("a Top-Hat Plan"), for purposes
of Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). In the event of any change in law which the Committee determines, in
its discretion, will cause the Plan to fail to qualify as a Top-Hat Plan, the
Committee may terminate the participation of such Participants as it deems
necessary to preserve or restore the Plan's status, and may take such other
action, including the acceleration of payment of Participant deferral accounts,
if necessary to preserve or restore the Plan's status as a Top-Hat Plan.
9. Form and Timing of Distributions.
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(a) At the time a Participant makes a deferral election under this Plan,
he or she shall also make an election with respect to the form of payment of
that deferral (a "Distribution Election"). Each Distribution Election shall be
effective only with respect to the deferral elected for that period (and
pro-rata earnings on that deferral, if any), and a separate Distribution
Election shall be made for any subsequent deferrals.
(b) A Distribution Election shall consist of one of the following:
(1) A lump sum payment to be made in the year following the earliest
to occur of the Participant's Termination, Retirement or
Disability; and
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Northrop Grumman Executive Deferred Compensation Plan
(2) Annual installment payments for a period of five or ten years,
beginning in the year following the earliest to occur of the
Participant's Termination, Retirement or Disability.
(c) Distributions shall be paid in January of each year or as soon
thereafter as administratively possible.
(d) The death of a Participant prior to his Retirement or Disability shall
be treated as a Termination of employment for purposes of the distribution of
benefits under this Plan. In the event that a Participant receiving installment
distributions dies prior to the receipt of all such installments, installment
payments shall continue to the Participant's beneficiary or beneficiaries, as
designated under this Plan.
(e) Notwithstanding the other provisions of this Section 9, any amounts in
a Participant's Estate Enhancement Program Account shall be paid in a single sum
within sixty (60) days after the Participant's death (or the death of the
survivor of the Participant and the Participant's spouse, if the life insurance
policy issued pursuant to the Participant's Estate Enhancement Program Election
is a survivorship policy insuring the Participant and the Participant's spouse).
10. Beneficiary Designation.
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(a) At the time of deferral election or any time thereafter, a Participant
may designate one or more beneficiaries to receive any benefits due upon death.
In the absence of any designation under this Plan, the beneficiary of a married
Participant shall be the Participant's spouse to whom he was married at the time
of death, and the beneficiary of an unmarried Participant shall be his estate.
(b) The Participant can elect to change his beneficiary at any time up to
the date of distribution, and no consent shall be required for a married
Participant to designate a non-spouse beneficiary.
(c) A Participant who has an Estate Enhancement Program Account shall
designate one or more beneficiaries to receive any benefits payable from such
account upon death, and a beneficiary designation made with respect to any such
amounts before such amounts are converted to the Estate Enhancement Program
Account shall not be effective with respect to such amounts. In the absence of
any
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Northrop Grumman Executive Deferred Compensation Plan
such designation, amounts in the Estate Enhancement Program Account shall be
paid in a single sum to the estate of the Participant (or, if the insurance
policy issued pursuant to the Participant's Estate Enhancement Program Election
is a survivorship policy insuring the Participant and the Participant's spouse,
the estate of the survivor of the Participant and the Participant's spouse).
11. Emergency Benefit.
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If a Participant suffers an unforeseeable and immediate financial emergency, the
Committee, in its sole discretion and upon the written application of the
Participant, may distribute to the Participant at such time as the Committee may
prescribe that portion of his deferral account, if any, which the Committee
determines is necessary to meet the financial emergency. A financial emergency
shall include major uninsured medical expenses or such other circumstances as
the Committee may, in its discretion, determine, provided that the Participant
demonstrates to the Committee's satisfaction that he lacks available resources
to meet the emergency. Any such distribution shall reduce the balance in the
Participants deferral account available for distribution. Notwithstanding the
foregoing, no portion of a Participant's Estate Enhancement Program Account is
eligible to be distributed to a Participant as an emergency benefit.
12. Administration of the Plan.
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(a) The Committee shall be the Administrator of the Plan, and it may
delegate responsibilities therefor to the Vice President, Human Resources, or
his delegates.
(b) The Committee shall have the full and exclusive authority to interpret
the Plan, to construe ambiguities and to decide all matters under the Plan in
its discretion. Such interpretation and decision shall be final, conclusive and
binding on all Participants and any person claiming under or through any
Participant.
(c) The Committee shall have full discretionary authority to interpret and
administer the Plan, and to make such rules and regulations as it deems
necessary or appropriate to carry out its responsibilities under this Plan as
well as the purposes for which it was established, including any rules relating
to the availability of investment options for deferral accounts.
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Northrop Grumman Executive Deferred Compensation Plan
13. Taxes.
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The Corporation may withhold from any distribution under this Plan any and all
amounts necessary for the payment of any taxes, including without limitation,
income and employment taxes, and the amounts payable to Participants shall be
reduced by the tax so withheld.
14. Amendment and Termination.
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(a) The Committee may at any time amend the Plan in any manner (including
any method for determining earnings on deferral accounts), provided that no such
amendment shall reduce the amounts previously credited to a deferral account of
any Participant for periods prior to the amendment.
(b) The Plan shall continue in effect until terminated by action of the
Board of Directors of the Corporation. Upon termination of the Plan, no further
deferrals of Compensation shall be made, and distribution of any amounts
credited to deferral accounts shall be made in accordance with rules of the
Committee.
15. No Assignment of Benefits.
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Participants rights to benefit payments under the Plan are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Participant or the
Participant's beneficiary.
16. Future Rights.
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No person shall have any claim or right under this Plan to be retained in the
employ of the Company, or to remain eligible for any Compensation able to be
deferred under this Plan.
17. Governing Law
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The terms of this Plan shall be construed in accordance with the laws of the
State of Delaware, to the extent not preempted by federal law.
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Northrop Grumman Executive Deferred Compensation Plan
18. Forfeitures.
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Notwithstanding anything in this Plan to the contrary, any benefit payable to a
Participant hereunder may be forfeited, discontinued or reduced if the
Participant is discharged for gross misconduct of a type which is or was
directly or indirectly harmful to the business or reputation of the Corporation.
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FIRST AMENDMENT TO THE
NORTHROP GRUMMAN
EXECUTIVE DEFERRED COMPENSATION PLAN
The following changes to the Northrop Grumman Executive Deferred
Compensation Plan effective November 2, 2000 (the "Plan"), as described below,
are intended to transfer certain liabilities to the Northrop Grumman Deferred
Compensation Plan, effective March 1, 2001.
1. A new Section 19 is added as follows:
19. Transfer of Liabilities.
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Effective March 1, 2001, all liabilities under this Plan, other than the
Estate Enhancement Program Account, are transferred to the Northrop Grumman
Deferred Compensation Plan. After the transfer, those liabilities will be
governed by the terms of that plan, and the provisions of this Plan will
cease to apply. After the transfer, any assets set aside for these
liabilities in a rabbi trust will instead be set aside for the liabilities
under the Northrop Grumman Deferred Compensation Plan.
Executive Deferred Compensation Plan - Northrop Grumman Corp.
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