Summary
Northrop Grumman Corporation (NOC) filed an 8-K report on November 13, 2008, primarily detailing changes to executive change-in-control agreements. These new agreements, effective January 1, 2009, supersede previous agreements for key executives Wesley G. Bush (President and COO) and James F. Palmer (CFO). The modifications are designed to ensure compliance with Section 409A and Section 162(m) of the U.S. Internal Revenue Code, reflecting an effort to align executive compensation and severance terms with current tax regulations. Key changes include the removal of a voluntary termination provision for severance benefits post-change in control, the elimination of lump-sum perquisite valuations, and adjustments to how bonus amounts are calculated for severance purposes.
Key Highlights
- 1Northrop Grumman entered into new change-in-control agreements with President & COO Wesley G. Bush and CFO James F. Palmer, effective January 1, 2009.
- 2These agreements replace prior agreements from March 2004.
- 3The primary purpose of the new agreements is to ensure compliance with Section 409A of the U.S. Internal Revenue Code regarding deferred compensation.
- 4A significant change is the removal of the provision allowing executives to voluntarily terminate and receive severance benefits 13 months after a change in control.
- 5The definition of 'bonus' for severance calculation purposes has been altered from the highest of the last three years earned to the target bonus in the year of the change in control.
- 6Perquisite valuations will no longer be provided as a lump sum under the new agreements.
- 7Amendments also address Section 162(m) tax compliance related to executive compensation.