Annual Report — Form 10-K
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2: EX-10 Material Contract 24± 70K
3: EX-10 Material Contract 82± 282K
4: EX-10 Material Contract 16± 55K
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6: EX-10 Material Contract 1 5K
7: EX-10 Material Contract 37± 128K
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13: EX-24 Power of Attorney 2± 12K
14: EX-27 Financial Data Schedule (Pre-XBRL) 1 7K
EX-10 — Material Contract
Exhibit 10(e)
NORTHROP SUPPLEMENTAL PLAN 2
EFFECTIVE DECEMBER 1, 1993
TABLE OF CONTENTS
Definitions 1
1.01 Affiliated Companies 1
1.02 Board of Directors 1
1.03 Code 1
1.04 Company 1
1.05 ERISA 1
1.06 Participant 1
1.07 Pension Plan 1
1.08 Plan 1
1.09 Program 1
1.10 Termination of Employment 1
General Provisions 3
2.01 In General 3
2.02 Forms and Times of Benefit Payments 3
2.03 Beneficiaries and Spouses 3
2.04 Amendment and Plan Termination 4
2.05 Not an Employment Agreement 5
2.06 Assignment of Benefits 6
2.07 Nonduplication of Benefits 6
2.08 Funding 6
2.09 Construction 7
2.10 Governing Law 7
2.11 Actions By Company 7
2.12 Plan Representatives 7
2.13 Number 7
Lump Sum Election 8
3.01 In General 8
3.02 Retirees Election 8
3.03 Retirees Lump Sum 9
3.04 Actives Election 11
3.05 Actives Lump Sum-Retirement Eligible 12
3.06 Actives Lump Sum-Not Retirement Eligible 14
3.07 Calculation of Lump Sum 14
3.08 Spousal consent 16
Northrop Supplemental Retirement Income Program For
Senior Executives 17
A.01 Purpose 17
A.02 Eligibility 17
A.03 Retirement Benefit 17
A.04 Amount of Retirement Benefit 17
A.05 Post-55 Preretirement Surviving Spouse
Benefit 18
A.06 Amount of Post-55 Spouse's Benefit 19
A.07 Payment of Post-55 Spouse's Benefit 19
A.08 Pre-55 Preretirement Surviving Spouse
Benefit 19
A.09 Amount of Pre-55 Spouse's Benefit 20
A.10 Payment of Pre-55 Spouse's Benefit 20
A.11 Waiver of Requirements 21
A.12 Effective Date 21
A.13 Vesting Service 21
ERISA Supplemental Program 2 22
B.01 Purpose 22
B.02 Eligibility 22
B.03 Amount of Benefit 22
B.04 Preretirement Surviving Spouse Benefit 23
B.05 Plan Termination 23
B.06 Pension Plan Benefits 23
Arthur F. Dauer Program 25
C.01 In General 25
C.02 Forfeiture of Benefits 25
C.03 Purpose 25
C.04 Amount of Life Benefit 25
C.05 Preretirement Surviving Spouse Benefit 26
C.06 No Other Supplemental Pensions 26
John Harrison Program 27
D.01 In General 27
D.02 Purpose 27
D.03 Conditions for Eligibility 27
D.04 Amount of Retirement Benefit 28
D.05 Benefit Limitation 28
D.06 Form and Duration of Benefits 28
D.07 Preretirement Survivor Benefit 28
D.08 Forfeiture 28
ARTICLE I
Definitions
For purposes of the Plan, the following terms,
when capitalized, will have the following
meanings:
1.01 Affiliated Companies. The Company and any other
entity related to the Company under the rules of
section 414 of the Code. The Affiliated Companies
include Northrop Corporation and its 80%-owned
subsidiaries and may include other entities as
well.
1.02 Board of Directors. The Board of Directors of the
Company.
1.03 Code. The Internal Revenue Code of 1986, as
amended.
1.04 Company. Northrop Corporation.
1.05 ERISA. The Employee Retirement Income Security Act
of 1974, as amended.
1.06 Participant. Any employee of the Company who is
eligible for benefits under a particular Program
and has not received full payment under the
Program.
1.07 Pension Plan and Pension Plans. The Northrop
Retirement Plan and/or the Retirement Plan of
Northrop Corporation, Electronic Systems
Division_Rolling Meadows Site.
1.08 Plan. The Northrop Supplemental Plan 2.
1.09 Program. One of the eligibility and benefit
structures described in the Appendices.
1.10 Termination of Employment. Complete termination of
employment with the Affiliated Companies.
(a) If a Participant leaves one Affiliated
Company to go to work for another, he or she
will not have a Termination of Employment.
(b) A Participant will have a Termination of
Employment if he or she leaves the Affiliated
Companies because the affiliate he or she
works for ceases to be an Affiliated Company
because it is sold or spunoff.
ARTICLE II
General Provisions
2.01 In General. The Plan contains a number of
different benefit Programs which are set forth in
the Appendices. The Appendices describe the
eligibility conditions and the amount of benefits
payable under the Programs.
2.02 Forms and Times of Benefit Payments. Unless
particular rules regarding the form and timing of
benefit payments are set forth in a Program, the
Company will determine the form and timing of
benefit payments in its sole discretion, except
where a lump sum election under Article III is
applicable.
For payments made to supplement those of a
particular tax-qualified retirement or savings
plan, the Company will only select among the
options available under that plan, using the same
actuarial adjustments used in that plan, except in
cases of lump sums.
Whenever the present value of the amount payable
under the Plan does not exceed $10,000, it will be
paid in the form of a single lump sum as of the
first of the month following Termination of
Employment. The lump sum will be calculated using
the factors and methodology described in Section
3.07 below.
No payments will commence under this Plan until a
Participant has a Termination of Employment, even
in cases where benefits have commenced under a
Pension Plan for Participants over age 70-1/2.
2.03 Beneficiaries and Spouses. If the Company selects
a form of payment which includes a survivor
benefit, the Participant may make a beneficiary
designation, which may be changed at any time
prior to commencement of benefits. A beneficiary
designation must be in writing and will be
effective only when received by the Company.
If a Participant is married on the date his or her
benefits are scheduled to commence, his or her
beneficiary will be his or her spouse unless some
other beneficiary is named with spousal consent.
Spousal consent, to be effective, must be
submitted in writing before benefits commence and
must be witnessed by a Plan representative or
notary public. No spousal consent is necessary if
the Company determines that there is no spouse or
that the spouse cannot be found.
With respect to Programs designed to supplement
tax-qualified retirement or savings plans, the
Participant's spouse will be the spouse as
determined under the underlying tax-qualified
plan. Otherwise, the Participant's spouse will be
determined by the Company in its sole discretion.
2.04 Amendment and Plan Termination. The Company may,
in its sole discretion, by written resolution
adopted by the Board of Directors or its delegate,
terminate, suspend or amend this Plan at any time
or from time to time, in whole or in part.
(a) Except as provided in (f) and Section 2.08,
no amendment, suspension or termination of
the Plan may, without the consent of a
Participant, affect the Participant's right
or the right of the surviving spouse to
receive benefits in accordance with this Plan
as in effect on the date the employee becomes
a Participant.
(b) The Participant's rights to benefits
following any amendment which are preserved
by (a) will be determined as if he or she
terminated employment immediately prior to
the adoption of the amendment (or its
effective date, if later). The determination
in the preceding sentence will be based on
the relevant factors at that time, such as
the Participant's compensation history,
service credits and Code limitations on
benefits.
(c) However, the determination in (b) will be
adjusted to take into account any post-
amendment increases in benefits provided by
the Company's tax-qualified retirement and
savings plans, to the extent such benefits
are also a factor in the benefits due under
this Plan.
Example: Assume an amendment eliminates all
future benefits under a particular Program.
Assume that the Program provides a level of
benefits reduced by benefits paid under a tax-
qualified plan. Assume further that as of the
date of the amendment, a Participant's level
of benefits under the Program is $150/month
less a tax-qualified plan benefit of
$100/month, leaving the Participant a net
benefit of $50. Under paragraph (b), the
Participant's right to that $50 would be
preserved.
However, assume that later the Participant's
tax-qualified plan benefit increases to
$130/month. Under the provisions of this
paragraph (c), for future months, the
Participant would only be entitled to $20
under this Plan.
(d) In addition, the determination in (b) will
also be adjusted to take into account post-
amendment decreases in a Participant's
compensation.
(e) The rights of surviving spouses claiming
benefits under the Plan with respect to a
Participant will be preserved and limited in
the same fashion as a Participant's benefits.
(f) The Company may, in its sole discretion, by
written resolution adopted by the Board of
Directors or its delegate, amend or eliminate
any of the provisions of the Plan with
respect to lump sum distributions at any
time, including the calculation factors of
Section 3.07. This applies whether or not a
Participant has already made a lump sum
election.
2.05 Not an Employment Agreement. Nothing contained in
this Plan gives any Participant the right to be
retained in the service of the Company, nor does
it interfere with the right of the Company to
discharge or otherwise deal with Participants
without regard to the existence of this Plan.
2.06 Assignment of Benefits. A Participant, surviving
spouse or beneficiary may not, either voluntarily
or involuntarily, assign, anticipate, alienate,
commute, sell, transfer, pledge or encumber any
benefits to which he or she is or may become
entitled under the Plan, nor may Plan benefits be
subject to attachment or garnishment by any of
their creditors or to legal process.
2.07 Nonduplication of Benefits. This Section applies
if, despite Section 2.06, with respect to any
Participant (or his or her beneficiaries), the
Company is required to make payments under this
Plan to a person or entity other than the payees
described in the Plan. In such a case, any amounts
due the Participant (or his or her beneficiaries)
under this Plan will be reduced by the actuarial
value of the payments required to be made to such
other person or entity.
Actuarial value will be determined using the
factors and methodology described in Section
3.07 below (in the case of lump sums) and
using the actuarial assumptions in the
underlying Pension Plan in all other cases.
In dividing a Participant's benefit between
the Participant and another person or entity,
consistent actuarial assumptions and
methodologies will be used so that there is
no increased actuarial cost to the Company.
2.08 Funding. Participants have the status of general
unsecured creditors of the Company and the Plan
constitutes a mere promise by the Company to make
benefit payments in the future. The Company may,
but need not, fund benefits under the Plan through
a trust. If it does so, any trust created by the
Company and any assets held by the trust to assist
it in meeting its obligations under the Plan will
conform to the terms of the model trust, as
described in Internal Revenue Service Revenue
Procedure 92-64, but only to the extent required
by Internal Revenue Service Revenue Procedure 92-
65. It is the intention of the Company and
Participants that the Plan be unfunded for tax
purposes and for purposes of Title I of ERISA.
Any funding of benefits under this Plan will be in
the Company's sole discretion. The Company may set
and amend the terms under which it will fund and
may cease to fund at any time.
To the extent the Company gives Participants and
beneficiaries enforceable rights to funding, those
rights must be determined under the terms of other
documents. No such rights exist under this Plan
document and the restrictions on amendments in
this Plan document will in no case apply to
restrict the Company's right to cease or alter the
terms of any funding.
2.09 Construction. The Company shall have full
discretionary authority to determine eligibility
and to construe and interpret the terms of the
Plan, including the power to remedy possible
ambiguities, inconsistencies or omissions.
2.10 Governing Law. This Plan shall be governed by the
law of the State of California, except to the
extent superseded by federal law.
2.11 Actions By Company. Any powers exercisable by the
Company under the Plan shall be utilized by
written resolution adopted by the Board of
Directors or its delegate. The Board may by
written resolution delegate any of the Company's
powers under the Plan and any such delegations may
provide for subdelegations, also by written
resolution.
2.12 Plan Representatives. Those authorized to act as
Plan representatives will be designated in writing
by the Board of Directors or its delegate.
2.13 Number. The singular, where appearing in this
Plan, will be deemed to include the plural, unless
the context clearly indicates the contrary.
ARTICLE III
Lump Sum Election
3.01 In General. This Article sets forth the rules
under which Participants may elect to receive
their benefits in a lump sum. This Article does
not apply to active employees (as defined in
Section 3.04) in cases where benefits do not
exceed $10,000 and so are automatically payable in
lump sum form under Section 2.02.
This Article will not be applicable if a
particular Program so provides.
3.02 Retirees Election. Participants and Participants'
beneficiaries already receiving monthly benefits
under the Plan at its inception will be given a
one-time opportunity to elect a lump sum payout of
future benefit payments.
(a) The election must be made within a 45-day
period determined by the Company. Within its
discretion, the Company may delay the
commencement of the 45-day period in
instances where the Company is unable to
timely communicate with a particular payee.
(b) The determination as to whether a payee is
already receiving monthly benefits will be
made at the beginning of the 45-day period.
(c) An election to take a lump sum must be
accompanied by a waiver of the existing
retiree medical benefits by those
Participants (and their covered spouses or
surviving spouses) entitled either to have
such benefits entirely paid for by the
Company or to receive such benefits as a
result of their classification as an employee
under Executive Class Code II.
Following the waiver, waiving
Participants (and covered spouses or
surviving spouses) will be entitled to
the coverage offered to employees who
are eligible for Senior Executive
Retirement Insurance Benefits in effect
as of July 1, 1993. The cost charged to
the retirees for this coverage will be
determined as if the retiree had been
employed 20 or more years by the
Company.
(d) If the person receiving payments as of the
beginning of the 45-day period dies prior to
making a lump sum election, his or her
beneficiary, if any, may not make the lump
sum election.
(e) Elections to receive a lump sum (and waivers
under (c)) must be made in writing and must
include spousal consent if the payee (whether
the Participant or beneficiary) is married.
Elections and spousal consent must be
witnessed by a Plan representative or a
notary public.
(f) An election (with spousal consent, where
required) to receive the lump sum made at any
time during the 45-day period will be
irrevocable. If no proper election has been
made by the end of the 45-day period,
payments will continue unchanged in the
monthly form that had previously been
applicable.
3.03 Retirees Lump Sum. If a retired Participant or
beneficiary makes a valid election under Section
3.02 within the 45-day period, monthly payments
will continue in the previously applicable form
for 12 months (assuming the payees live that
long).
(a) As of the first of the 13th month, the
present value of the remaining benefit
payments will be paid in a single lump sum to
the Participant, if alive, or, if not, to the
beneficiary under the previously applicable
form of payment.
(b) No lump sum payment will be made if:
(1) The Participant is receiving monthly
benefit payments in a form that does not
provide for survivor benefits and the
Participant dies before the time the
lump sum payment is due.
(2) The Participant is receiving monthly
benefit payments in a form that does
provide for survivor benefits but the
Participant and the beneficiary die
before the time the lump sum payment is
due.
(c) The following rules apply where payment is
being made in the form of a 10-year certain
and continuous life annuity option:
(1) If the Participant is deceased at the
commencement of the 45-day election
period, the surviving beneficiary may
not make the election if there are less
than 13 months left in the 10-year
certain period.
(2) If the Participant elects the lump sum
and dies prior to the first of the 13th
month:
(A) if the 10-year certain period has
already ended, all monthly payments
will cease at the Participant's
death and no lump sum payment will
be made;
(B) if the 10-year certain period ends
after the Participant's death and
before the beginning of the 13th
month, monthly payments will end at
the end of the 10-year certain
period and no lump sum payment will
be made; and
(C) if the 10-year certain period ends
after the beginning of the 13th
month, monthly payments will
continue through the 12th month,
and a lump sum payment will be made
as of the first of the 13th month,
equal to the present value of the
remaining benefit payments.
3.04 Actives Election. Active Participants may elect to
have their benefits paid in the form of a single
lump sum under this Section.
(a) A Participant is considered to be "Active"
under this Section if he or she is still
employed by the Affiliated Companies on or
after the beginning of the initial 45-day
period referred to in Section 3.02.
(b) An election to take a lump sum may be made at
any time during the 60-day period prior to
Termination of Employment and covers both_
(1) Benefits payable to the Participant
during his or her lifetime, and
(2) Survivor benefits (if any) payable to
the Participant's beneficiary, including
preretirement death benefits (if any)
payable to the Participant's spouse.
(c) An election does not become effective until
the earlier of:
(1) the Participant's Termination of
Employment, or
(2) the Participant's death.
Before the election becomes effective, it may
be revoked.
If a Participant does not have a Termination
of Employment within 60 days after making an
election, the election will never take
effect.
(d) An election may only be made once. If it
fails to become effective after 60 days or is
revoked before becoming effective, it cannot
be made again at a later time.
(e) After a Participant has a Termination of
Employment, no election can be made.
(f) If a Participant dies before making a lump
sum election, his or her spouse may not make
a lump sum election with respect to any
benefits which may be due the spouse.
(g) Elections to receive a lump sum must be made
in writing and must include spousal consent
if the Participant is married. Elections and
spousal consent must be witnessed by a Plan
representative or a notary public.
3.05 Actives Lump Sum_Retirement Eligible. If a
Participant with a valid lump sum election in
effect under Section 3.04 has a Termination of
Employment after he or she is entitled to commence
benefits under the Pension Plans, payments will be
made in accordance with this Section.
(a) Monthly benefit payments will be made for up
to 12 months, commencing the first of the
month following Termination of Employment.
Payments will be made:
(1) in the case of a Participant who is not
married on the date benefits are
scheduled to commence, based on a
straight life annuity for the
Participant's life and ceasing upon the
Participant's death should he or she die
before the 12 months elapse, or
(2) in the case of a Participant who is
married on the date benefits are
scheduled to commence, based on a joint
and survivor annuity form_
(A) with the survivor benefit equal to
50% of the Participant's benefit;
(B) with the Participant's spouse as
the survivor annuitant;
(C) determined by using the contingent
annuitant option factors used to
convert straight life annuities to
50% joint and survivor annuities
under the Northrop Retirement Plan;
and
(D) with all payments ceasing upon the
death of both the Participant and
his or her spouse should they die
before the 12 months elapse.
(b) As of the first of the 13th month, the
present value of the remaining benefit
payments will be paid in a single lump sum.
Payment of the lump sum will be made to the
Participant if he or she is still alive, or,
if not, to his or her surviving spouse, if
any.
(c) No lump sum payment will be made if:
(1) The Participant is receiving monthly
benefit payments in the form of a
straight life annuity and the
Participant dies before the time the
lump sum payment is due.
(2) The Participant is receiving monthly
benefit payments in a joint and survivor
annuity form and the Participant and his
or her spouse both die before the time
the lump sum payment is due.
(d) A lump sum will be payable to a Participant's
spouse as of the first of the month following
the date of the Participant's death, if:
(1)the Participant dies after making a valid
lump sum election but prior to
commencement of any benefits under this
Plan;
(2)the Participant is survived by a spouse
who is entitled to a preretirement
surviving spouse benefit under this Plan;
and
(3)the spouse survives to the first of the
month following the date of the
Participant's death.
3.06 Actives Lump Sum_Not Retirement Eligible. If a
Participant with a valid lump sum election in
effect under Section 3.04, has a Termination of
Employment before he or she is entitled to
commence benefits under the Pension Plans,
payments will be made in accordance with this
Section.
(a) No monthly benefit payments will be made.
(b) Following Termination of Employment, a single
lump sum payment of the benefit will be made
on the first of the month following 12 months
after the date of the Participant's
Termination of Employment.
(c) A lump sum will be payable to a Participant's
spouse as of the first of the month following
the date of the Participant's death, if:
(1)the Participant dies after making a valid
lump sum election but prior to
commencement of any benefits under this
Plan;
(2)the Participant is survived by a spouse
who is entitled to a preretirement
surviving spouse benefit under this Plan;
and
(3)the spouse survives to the first of the
month following the date of the
Participant's death.
(d) No lump sum payment will be made if the
Participant is unmarried at the time of death
and dies before the time the lump sum payment
is due.
3.07 Calculation of Lump Sum. The factors to be used in
calculating the lump sum are as follows:
Interest: Whichever of the following two
rates that produces the smaller lump sum:
(1) the discount rate used by the Company
for purposes of Statement of Financial
Accounting Standards No. 87 of the
Financial Accounting Standards Board as
disclosed in the Company's annual report
to shareholders for the year end
immediately preceding the date of
distribution, or
(2) the Pension Benefit Guaranty Corporation
(PBGC) interest rate (or rates) that
would be used to calculate a lump sum
value for the benefit under the Northrop
Retirement Plan_
(A) using 120% of the PBGC rate for
lump sums over $25,000, and
(B) substituting the PBGC rate (or
rates) in effect for the time for
distribution (even if actual
payment is delayed for some reason)
instead of the rate for the first
day of the calendar year of
distribution.
Mortality: 1983 Group Annuity Mortality table
for males with a 2-year setback.
Increase in Section 415 Limit: 4% per year.
Age: Age rounded to the nearest month on the
date the lump sum is payable.
Variable Unit Values: Variable Unit Values
are presumed not to increase for future
periods after the date the lump sum is
payable.
The annuity to be converted to a lump sum will be
the remaining annuity currently payable to the
Participant or his or her beneficiary at the time
the lump sum is due.
For example, assume a Participant is
receiving benefit payments in the form of a
50% joint and survivor annuity.
If the Participant and the survivor annuitant
are both still alive at the time the lump sum
payment is due, the present value calculation
will be based on the remaining benefits that
would be paid to both the Participant and the
survivor in the annuity form.
If only the survivor is alive, the
calculation will be based solely on the
remaining 50% survivor benefits that would be
paid to the survivor.
If only the Participant is alive, the
calculation will be based solely on the
remaining benefits that would be paid to the
Participant.
In the case of a Participant who dies prior to
commencement of benefits under this Plan so that
only a preretirement surviving spouse benefit (if
any) is payable, the lump sum will be based solely
on the value of the preretirement surviving spouse
benefit.
3.08 Spousal consent. Spousal consent, as required for
elections as described above, need not be obtained
if the Company determines that there is no spouse
or the spouse cannot be located.
APPENDIX A
Northrop Supplemental Retirement Income Program For Senior
Executives
A.01 Purpose. The purpose of this Program is to provide
minimum pension and death benefits to senior
executives participating in the Northrop
Retirement Plan ("Retirement Plan") who have only
had a short period of service with the Company
prior to retirement.
A.02 Eligibility. Officers of the Company may become
Participants under this Program only if they are
designated as such by the Board of Directors.
A.03 Retirement Benefit. Upon voluntary or involuntary
Termination of Employment with the Company (other
than by death), at or after age 55 and with 10 or
more years of Vesting Service, a Participant will
be entitled to the benefit described in Section
A.04.
A.04 Amount of Retirement Benefit. A Participant
entitled to a benefit under Section A.03 will
receive a benefit equal in value to the excess of
(a) over (b) as follows:
(a) is the greater of
(1) the amount of the Participant's
retirement income under the Retirement
Plan on a straight life annuity basis,
computed without regard to the
limitations on benefits and the cap on
counted compensation imposed by Code
sections 415 and 401(a)(17), or
(2) the amount of a straight life annuity
with annual payments equal to the
Participant's Final Average Salary (as
defined by the Retirement Plan) in
effect on the date of his or her
Termination of Employment multiplied by
the appropriate percentage shown in the
following schedule:
Percentage of Final Average
Age at Termination Date* Salary at Termination Date**
55 30%
56 34%
57 38%
58 42%
59 46%
60 50%
61 52%
62 54%
63 56%
64 58%
65 and over 60%
(b) is the amount of the Participant's retirement
income under the Retirement Plan on a
straight life annuity basis, computed as of
his or her Termination of Employment, taking
into account the limitations on benefits and
the cap on counted compensation imposed by
Code sections 415 and 401(a)(17).
A.05 Post-55 Preretirement Surviving Spouse Benefit. If
a Participant dies--
(a) after age 55;
(b) while credited with 10 or more years of
Vesting Service;
(c) prior to Termination of Employment; and
(d) his or her spouse is entitled to a survivor
annuity under the Retirement Plan,
then the Participant's spouse will be entitled to
the benefit under Section A.06.
A.06 Amount of Post-55 Spouse's Benefit. The
Participant's surviving spouse benefit under this
Section shall be equal in value to the sum of (a)
and (b), with such sum then reduced by (c) where:
(a) is the amount of retirement income that the
Participant would have received under the
100% Contingent Annuitant Option under the
Retirement Plan had the Participant retired
on the date of death,
(b) is the amount of the benefit under this
Program after the offset of the Retirement
Plan benefit the Participant would have
received if he or she had retired on the date
of his or her death with said 100% Contingent
Annuitant Option in effect, and
(c) is the amount of the annuity benefit payable
to the surviving spouse under the Retirement
Plan (even if the annuity is commuted to a
lump sum).
A.07 Payment of Post-55 Spouse's Benefit. The spouse's
benefit described in Section A.06 will be payable
commencing the first day of the month next
following the Participant's date of death and
shall terminate on the date of death of the
surviving spouse.
A.08 Pre-55 Preretirement Surviving Spouse Benefit. If
a Participant dies--
(a) before age 55;
(b) while credited with 10 or more years of
Vesting Service; and
(c) prior to Termination of Employment,
then the Participant's spouse will be entitled to
the benefit under Section A.09.
A.09 Amount of Pre-55 Spouse's Benefit. The
Participant's surviving spouse benefit under this
Section shall be equal in value to the benefit
standing to the credit of the Participant under
the Retirement Plan as of the date of his or her
death, actuarially reduced in accordance with the
factors in the following table:
Age of Participant Factor to be Applied
at Date of Death* to the Earned Benefit**
55 .431
54 .399
53 .370
52 .343
51 .319
50 .297
49 .276
48 .257
47 .240
46 .223
45 .208
Any extension of the above table below age 45
shall be based on the following assumptions (i)
Mortality - 1971 Towers, Perrin, Forster & Crosby
Forecast Mortality Table, and (ii) Interest - 6%
compounded annually.
A.10 Payment of Pre-55 Spouse's Benefit. The spouse's
benefit described in Section A.09 will be payable
commencing the first day of the month next
following the Participant's date of death and will
terminate on the date of death of the surviving
spouse.
A.11 Waiver of Requirements. The President of the
Company or its Chief Executive Officer may, in his
or her discretion,
(a) waive the requirement of 10 years of Vesting
Service in any one or all of Sections A.03,
A.05, and A.08, and
(b) with respect to Section A.05, waive the
requirement that the Participant's spouse be
entitled to a survivor annuity under the
Retirement Plan only by virtue of the fact
that such Participant has not yet accumulated
sufficient years of Vesting Service as of the
date of death.
This waiver authority includes the authority to
have benefits under the Program pro rated based on
Vesting Service for Participants receiving a
waiver (e.g., benefits under the Program will be
multiplied by an amount equal to the Participant's
years of Vesting Service divided by 10). Any
waiver will specify whether or not the pro rating
of benefits will be applicable.
A.12 Effective Date. This Program first became
effective on July 18, 1973 and will be effective
as to each Participant on the date the Board of
Directors takes the action designating him or her
as a Participant under this Program.
A.13 Vesting Service. For purposes of this Program,
Vesting Service will be determined under the
Retirement Plan.
APPENDIX B
ERISA Supplemental Program 2
B.01 Purpose. The purpose of this Program is simply to
restore to employees of the Company the benefits
they lose under the Pension Plans as a result of
the compensation limit in Code section 401(a)(17)
("section 401(a)(17)"), or any successor
provision.
B.02 Eligibility. An employee of the Company is
eligible to receive a benefit under this Program
if he or she:
(a) retires on or after January 1, 1989;
(b) has vested in benefits under one or both
Pension Plans which are reduced because of
the application of section 401(a)(17); and
(c) is not eligible to receive a benefit under
the Northrop Corporation Supplemental
Retirement Income Program for Senior
Executives or any other plan or program which
bars an employee from participation in this
Program.
B.03 Amount of Benefit. The benefit payable under this
Program with respect to a Participant who
commences benefits during his or her lifetime will
equal the retirement benefit, if any, which would
have been payable to the Participant under the
terms of a Pension Plan, but for the restrictions
of Code sections 401(a)(17) and 415 ("section
415"), or any successor section.
The benefit payable under this Program will be
reduced by the combined amounts of Pension Plan
Benefits and the Northrop Corporation ERISA
Supplemental Plan 1 benefits attributable to the
applicable Pension Plan.
Benefits under this Program will only be paid to
supplement benefit payments actually made from a
Pension Plan. If benefits are not payable under a
Pension Plan because the Participant has failed to
vest or for any other reason, no payments will be
made under this Program with respect to such
Pension Plan.
B.04 Preretirement Surviving Spouse Benefit.
Preretirement surviving spouse benefits will be
payable under this Program on behalf of a
Participant if such Participant's surviving spouse
is eligible for benefits payable from a Pension
Plan. The benefit payable will be the amount which
would have been payable under the Pension Plan but
for the restrictions of section 401(a)(17) and
section 415.
The benefit payable under this Program will be
reduced by the combined amounts of the Pension
Plan Benefits and the Northrop Corporation ERISA
Supplemental Plan 1 benefits attributable to the
applicable Pension Plan.
No benefit will be payable under this Program with
respect to a spouse after the death of that
spouse.
B.05 Plan Termination. No further benefits may be
earned under this Program with respect to a
particular Pension Plan after the termination of
such Pension Plan.
B.06 Pension Plan Benefits. For purposes of this
Appendix, the term "Pension Plan Benefits"
generally means the benefits actually payable to a
Participant, spouse, beneficiary or contingent
annuitant under a Pension Plan. However, this
Program is only intended to remedy pension
reductions caused by the operation of section
401(a)(17) and not reductions caused for any other
reason. In those instances where pension benefits
are reduced for some other reason, the term
"Pension Plan Benefits" shall be deemed to mean
the benefits that actually would have been payable
but for such other reason.
Examples of such other reasons include, but are
not limited to, the following:
(a) A reduction in pension benefits as a result
of a distress termination (as described in
ERISA 4041(c) or any comparable successor
provision of law) of a Pension Plan. In such
a case, the Pension Plan Benefits will be
deemed to refer to the payments that would
have been made from the Pension Plan had it
terminated on a fully funded basis as a
standard termination (as described in ERISA
4041(b) or any comparable successor
provision of law).
(b) A reduction of accrued benefits as permitted
under Code section 412(c)(8), as amended, or
any comparable successor provision of law.
(c) A reduction of pension benefits as a result
of payment of all or a portion of a
Participant's benefits to a third party on
behalf of or with respect to a Participant.
APPENDIX C
Arthur F. Dauer Program
C.01 In General. Arthur F. Dauer will be entitled to a
supplemental benefit in accordance with the
provisions of this Appendix.
C.02 Forfeiture of Benefits. Mr. Dauer may forfeit
benefits under this Appendix in accordance with
the provisions of a document entitled, "Separation
Agreement, General Release And Covenant Not To
Sue", between Mr. Dauer and Northrop Corporation,
which was executed by both parties on February 14,
1994 ("Separation Agreement").
C.03 Purpose. This Appendix is intended merely to
implement the provisions of section 3(d) of the
Separation Agreement and no more. Accordingly, the
provisions of this Appendix are to be construed
and limited in accordance with all of the
provisions of the Separation Agreement.
C.04 Amount of Life Benefit. The benefit payable under
this Program if Mr. Dauer commences his benefits
during his lifetime will be in the form of a joint
and 50% survivor annuity, commencing July 1, 1994,
with Mr. Dauer's current spouse (as of July 1,
1994) as the survivor annuitant.
The annual benefit payable to Mr. Dauer during his
lifetime will be $97,593, with 50% of that amount
continuing to his current spouse for life if she
should survive him.
Commencing August 1, 2001, the annual benefit
payable under this Section will be reduced by the
annual benefit payable under the Northrop
Retirement Plan assuming it commenced on August 1,
2001 in the form of a joint and 50% survivor
annuity with Mr. Dauer's current spouse (as of
July 1, 1994) as the survivor annuitant.
C.05 Preretirement Surviving Spouse Benefit. If Mr.
Dauer should die before July 1, 1994, his spouse,
should she survive him, will be entitled to an
annuity for life with an annual benefit of 50% of
$97,593, commencing July 1, 1994, reduced by the
amount of any benefits payable to her under the
Northrop Retirement Plan.
She may elect to have her annuity under this
Section commence on the first of any month after
his death and prior to July 1, 1994. If she elects
early commencement, her annual benefit will be
reduced to equal an unsubsidized actuarial
equivalent of the benefit in the preceding
paragraph, using the actuarial assumptions in the
Northrop Retirement Plan.
C.06 No Other Supplemental Pensions: Mr. Dauer, his
spouse and his beneficiaries will not be entitled
to any benefits under Northrop Corporation ERISA
Supplemental Plan 1 or ERISA Supplemental Program
2.
APPENDIX D
John Harrison Program
D.01 In General. As described in this Appendix, John
Harrison will be entitled to a supplemental pension
benefit upon his retirement from the Company on or
after his attainment of age 65.
D.02 Purpose. The purpose of this Program is to provide Mr.
Harrison, following his retirement from the Company on
or after the attainment of age 65, a supplement to the
retirement benefit that he would otherwise be eligible
for from the Grumman Supplemental Retirement Plan, as
in effect on October 31, 1995 (the "Grumman SRP"), the
ERISA Plan 1 and Plan 2, the Grumman Pension Plan and
any other qualified pension plan maintained by Northrop
Grumman or members of its controlled group of
corporations. A copy of the Grumman SRP, as in effect
October 31, 1995, is attached hereto. It is intended
that any amendment or modification of the Grumman SRP
after October 31, 1995, including any changes in the
vesting schedule or benefit increases, shall not result
in any changes to benefit paid to or payable on behalf
of Mr. Harrison under this Appendix.
D.03 Conditions for Eligibility. In order to be eligible
for the benefit provided in this Appendix, Mr. Harrison
must have "Continuous Service" from the date of the
adoption of this Appendix through his termination of
employment from the Company on or after his attainment
of age 65. The term "Continuous Service" shall have
the meaning it had under the Grumman Pension Plan prior
to its amendment and restatement effective December 31,
1994. However, nothing in this Appendix generally, and
nothing in this paragraph F.03 in particular, shall be
construed to be a contract of employment between Mr.
Harrison and Grumman Corporation or Northrop Grumman
Corporation.
D.04 Amount of Retirement Benefit. If Mr. Harrison retires
from the Company on or after his attainment of age 65,
Mr. Harrison will receive a benefit under this Program
equal to (a) minus (b), where (a) equals the benefit
Mr. Harrison would have received under the Grumman SRP
calculated as if he had 25 years of "Continuous
Service" credited under the Grumman SRP, and (b) equals
the benefit to which he is actually entitled under the
Grumman SRP.
D.05 Benefit Limitation. The benefit limitation of Section
VII of the Grumman SRP is incorporated herein by
reference, and shall be applied to benefits payable to
Mr. Harrison and/or his beneficiaries by taking into
account benefits payable to him under this Program.
Thus, if the total retirement benefits taken into
account in that Section VII, plus the benefits payable
under this Program, exceed the 60-percent limit
otherwise payable on behalf of Mr. Harrison, then the
benefits payable under this Program shall be reduced or
eliminated so that the total retirement benefits
payable on behalf of Mr. Harrison (including benefits
under this Program) shall not exceed that Section VII
limitation. If the total retirement benefits payable
to Mr. Harrison still exceed that limit, then his
benefits shall be reduced according to the procedures
specified in the Grumman SRP.
D.06 Form and Duration of Benefits. Benefits payable under
this Program shall be payable in the time and manner as
benefits are payable under the Grumman SRP; and if
payable, shall commence as soon as administratively
possible after Mr. Harrison's "Annuity Starting Date"
(as that term is defined in the Grumman Pension Plan,
restated effective January 1, 1995) under the qualified
defined benefit plan from which he retires.
D.07 Preretirement Survivor Benefit. If Mr. Harrison dies
before his "Annuity Starting Date" and leaves a
surviving spouse, the surviving spouse shall be
eligible for the Preretirement Death Benefit payable
under Section VI of the Grumman SRP, and she shall not
be entitled to any additional benefits as a result of
this Appendix.
D.08 Forfeiture. If, under the Forfeiture provisions of
Section VIII of the Grumman SRP, no benefit shall be payable
to Mr. Harrison under that Plan, then no benefit shall be
payable to or on behalf of Mr. Harrison under this Appendix.
_______________________________
* Calculated to years and completed months on the
Termination Date.
** The applicable percentage shall be straight line
interpolation depending on the Participant's age on his
termination date. The percentage thus determined shall be
rounded to the nearest hundredth. For example, if a
Participant terminates when he is 55 years and 8 months old,
the applicable percentage is 30.00% + 2.67% = 32.67%.
* Calculated to years and completed months on date of death.
** The applicable factor shall be determined by straight
line interpolation depending on Participant's age at date of
death.
Dates Referenced Herein and Documents Incorporated by Reference
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