Exhibit 10.7

 

EMPLOYMENT AGREEMENT

 

1. PARTIES: The parties to this Employment Agreement (hereafter referred to as
this “Agreement”) are CHARLES H. NOSKI (hereafter referred to as “Executive”)
and NORTHROP GRUMMAN CORPORATION (hereafter referred to as “Northrop Grumman” or
“the Company”).

 

2. EMPLOYMENT: Northrop Grumman wishes to offer Executive employment as its
Corporate Vice President and Chief Financial Officer, and Executive wishes to
accept such employment, upon the terms and conditions set forth in this
Agreement.

 

3. TERM: The term of this Agreement shall commence as of December 1, 2003 (the
“Effective Date”) and shall end at the close of business on the day before the
fifth anniversary of the Effective Date, unless sooner terminated as hereinafter
provided and subject to extension as provided in the next sentence. Commencing
with the day before the fifth anniversary of the Effective Date and on each
subsequent annual anniversary of such date, the term of this Agreement shall
automatically be extended for an additional one-year period unless the Executive
or the Company has provided the other party hereto at least 120 days’ prior
written notice that the term of this Agreement shall not be so extended (or
further extended, as the case may be). Notwithstanding anything else contained
herein to the contrary, the term of this Agreement shall not extend beyond, and
shall terminate on or before, the last day of the month in which the Executive
attains his sixty-fifth (65th) birthday.

 

4. POSITION AND DUTIES: Executive shall serve as Corporate Vice President and
Chief Financial Officer of the Company and shall be an elected officer of the
Company throughout the term of this Agreement. Executive will also continue as a
member of the Company’s Board of Directors (the “Board”) throughout the term of
this Agreement (each such member, a “Director”). Executive also agrees to serve
on any Company subsidiary Board of Directors to which he has been or may in the
future be elected. Executive shall, during the term hereof:

 

A. be responsible to the Chief Executive Officer (“CEO”) for the management and
supervision of all financial matters of the Company and for providing for the
financial growth and stability of the Company, and shall have such other duties
and responsibilities as the CEO shall designate that are consistent with
Executive’s position as Corporate Vice President and Chief Financial Officer.
Executive shall perform all of such duties and responsibilities in accordance
with the legal directives of the CEO and in accordance with the practices and
policies of the Company as in effect from time to time. While employed as
Corporate Vice President and Chief Financial Officer of the Company, Executive
shall report exclusively to the CEO.

 

B. devote all of his business time (excluding periods of vacations and absences
made necessary because of illness, injury or other traditionally approved leave
purposes), energy and skill in the performance of his duties with the Company;
provided, however, that the foregoing will not prevent Executive from reasonably
(i) participating in charitable, civic, educational, professional, community or
industry affairs or serving on the boards of directors or advisory boards of
other companies, and (ii) managing his and his family’s personal investments.

 

5. COMPENSATION AND BENEFITS: During the term of this Agreement, the following
terms shall apply:

 

A. Base Salary: Executive’s base salary during the term of this Agreement shall
be no less than $750,000 per year, which amount shall be subject to periodic
increases, but not decreases, in accordance with the Company’s normal salary
review process during and after March 2005.

 

B. ICP Bonus: Executive shall participate in the Incentive Compensation Plan
(“ICP”), a bonus plan for certain elected officers of the Company. His ICP
target bonus shall be at least 50% of his base salary. His actual bonus shall be
adjusted upwards or downwards depending on the Company’s performance and his
performance in accordance with the terms of the ICP.

 

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C. Benefits: Except as provided in Section 5.D, for the term of this Agreement,
Executive shall participate in the Northrop Grumman welfare and pension plans in
which Northrop Grumman’s elected officers (not including the CEO) participate,
as such plans may be amended from time to time. These plans currently include,
but are not limited to, the Northrop Grumman Pension Plan (the”NG Pension
Plan”), the Northrop Grumman Savings Plan and the Northrop Grumman Executive
Medical Plan. Executive acknowledges that the NG Pension Plan was amended
effective July 1, 2003 and that he will not be eligible for the grandfathered
terms applicable to participants in the NG Pension Plan employed by the Company
before such date but not those hired thereafter. Executive further acknowledges
and agrees that with respect to retiree medical, he will not be able to select
the Special Officer Retiree Medical Plan (“SORMP”) in effect before October 1,
2003 but rather will be a participant in the SORMP in effect as of October 1,
2003.

 

D. Special Pension Benefit: Instead of participating in any of the CPC
Supplemental Executive Retirement Program, the Northrop Grumman Supplemental
Plan I or the ERISA Supplemental Program 2 (Appendix B under the Northrop
Grumman Supplemental Plan 2) pension plans, Executive shall participate in the
supplemental pension plan attached hereto as Exhibit A. With regard to
Executive’s qualified and non-qualified defined benefit pension plan benefits
earned while employed by Hughes Electronics Corporation, its predecessors, or
any affiliates of either, on written request of the Company, Executive shall
inform the Company of the date such benefits commence, the amount of such
benefits, and the form in which such benefits are distributed. For purposes of
the Special Agreement referenced in Section 9 of this Agreement, the special
pension benefit provided by this Section 5.D shall be considered a supplemental
defined benefit retirement plan.

 

E. Stock and Stock Options: In addition to the special stock grants set forth in
Section 6 of this Agreement, Executive shall be eligible to receive grants of
stock and stock options under the Company’s 2001 Long Term Incentive Stock Plan
(“LTISP”) in accordance with the Company’s normal practice of awarding such
grants to elected officers. Such grants shall be subject to the terms and
conditions of the LTISP and the grant certificates to be provided to Executive
to evidence such grants (which certificates shall be in substantially the same
form as the forms of certificate customarily used by the Company for grants to
elected officers, modified to reflect the special provisions herein (as
applicable), including Sections 6.B and 6.C, and making reference to Executive’s
rights under Section 14 of this Agreement (which to the extent applicable shall
override any other provisions in such certificates), and further modified to
provide that if Executive ceases to be an employee but continues as a Director,
any equity or equity-related awards or grants that would otherwise be forfeited
upon such cessation of employment shall continue to vest while Executive is a
Director, and the post-employment exercise period of any options shall commence
when Executive ceases to be a Director) (“elected officer grant certificates”).

 

F. Early Retirement: With respect to any employee benefit or equity plan or
program in which Executive participates and as to which members of the Corporate
Policy Council (“CPC”) have rights or benefits upon early retirement, Executive
shall have the same early retirement rights or benefits after having been
employed by the Company or its affiliates for six or more years (unless
treatment of Executive as an early retiree under any such plan or program is
prohibited by applicable law, including any provision of the Internal Revenue
Code creating adverse tax effects because of such treatment; in which case the
Company shall provide benefits or rights with equivalent after-tax economic
value to Executive in an alternative manner, including, for example, outside the
plan or program).

 

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6. SPECIAL STOCK GRANTS:

 

A. Executive shall be given the following special grants under the LTISP as of
the Effective Date:

 

  •   45,000 non-qualified stock options. The strike price of these options
shall be the closing price of the Company’s stock on the New York Stock Exchange
as of the Effective Date;

 

  •   33,000 restricted stock rights (“RSRs”) that vest in equal annual
installments over three years; and

 

  •   24,000 restricted performance stock rights (“RPSRs”). The Performance
Period for these RPSRs shall be January 1, 2004–December 31, 2006.

 

These special stock grants shall be governed by the LTISP and, except as set
forth in this Section 6 and Section 14 of this Agreement, by the terms and
conditions of the elected officer grant certificates.

 

B. The grant certificates with respect to stock options provided to Executive
pursuant to Sections 5 and 6 of this Agreement shall substitute for the
otherwise applicable definition of “Early Retirement”:

 

“Early Retirement” means that the Grantee terminates employment after six or
more years of service (other than in connection with a termination by the
Company or a subsidiary for cause) and other than a Normal Retirement.

 

C. The grant certificates with respect to restricted performance stock rights
provided to Executive pursuant to Sections 5 and 6 of this Agreement shall
substitute for the otherwise applicable definition of “Retirement”:

 

“Retirement” means that the Grantee terminates employment after six or more
years of service (other than in connection with a termination by the Company or
a subsidiary for cause).

 

7. PERQUISITES: For the term of this Agreement, Executive shall be eligible for
Company perquisites that are, in the aggregate, no less favorable than the
perquisites provided by the Company to any other elected officer (other than the
CEO). The perquisites provided to the Company’s elected officers (other than the
CEO), as currently in effect, are listed on Exhibit B of this Agreement. The
perquisites provided by the Company are subject to change from time to time. In
addition, Executive shall be entitled to no less than four weeks vacation per
year.

 

8. RETIREE MEDICAL BENEFIT: Executive shall be eligible to participate in the
SORMP on the same terms and conditions as other elected officers, except that
Executive’s eligibility for, and election of, benefits under Section 1.03 of the
SORMP shall be conditioned upon retiring from Northrop Grumman Corporation on or
after six years of service (rather than age 55 with ten (10) years of service);
provided, however, that if Executive’s employment terminates at or after five
years of service but before six years of service he shall be entitled to
coverage (partially Company paid) under the SORMP commencing at age 65. In the
event that the Executive terminates from employment at any time and is not
immediately eligible to receive medical benefits under the SORMP, the Company
will make the benefits otherwise provided under such program available to
Executive and his eligible dependents (during the lifetime of each) without a
medical exam, provided that the Executive (or, after his death, his spouse)
reimburses the Company for the full cost (including employee and Company share)
for such coverage; provided, however, that if such termination occurs after the
Executive has more than five years of service but less than six, then when the
Executive reaches age 65 the coverage shall be partially Company paid.

 

9. SPECIAL AGREEMENT: Executive shall be provided a March 2004 Special Agreement
to provide him with protection in the event of a change in control of the
Company, except that the term of the

 

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Special Agreement shall commence as of December 1, 2003 instead of March 1,
2004. For purposes of the Special Agreement, Executive’s title and position
shall be Corporate Vice President and Chief Financial Officer and Director or
any greater title or position he may then hold. The form of this Special
Agreement is attached hereto as Exhibit C.

 

10. TERMINATION OF EMPLOYMENT BY THE COMPANY:

 

A. The Company shall have the right to terminate the term of this Agreement and
Executive’s employment at any time, with or without Cause, upon giving at least
10 day’s advance written notice to the Executive of the date when such
termination shall become effective. If the Company terminates Executive’s
employment without “Cause” (as that term is defined below) during the term of
this Agreement, then Executive shall receive, within 30 days after he signs a
release (substantially in the form of Exhibit D hereto) which is not revoked,
the Accrued Obligations (as defined below) (with the exception of certain
benefits under Accrued Obligations, which will be paid as soon as
administratively practicable), and all of the Special Severance Benefits set
forth in Section 14 of this Agreement.

 

For purposes of this Agreement, “Cause” shall mean the occurrence of either or
both of the following: (i) the willful misconduct by the Executive with regard
to the Company that is significantly injurious to the Company, provided,
however, that no act or failure to act on the Executive’s part shall be
considered “willful” unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that his action or omission was in the
best interests of the Company; or (ii) the conviction of the Executive of (or
the pleading by the Executive of nolo contendere to) any felony (other than
traffic related offenses or as a result of vicarious liability).

 

B. Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless the provisions of this paragraph B are complied
with. Executive shall be given written notice by the CEO of the intention to
terminate him for Cause, and he shall then be entitled to a meeting before the
Company’s Board to present his position, provided he requests in writing such a
meeting within ten calendar days of his receipt of the written notice from the
CEO of the intention to terminate him. Following such a meeting, if Executive is
then furnished written notice by the Board confirming that, in its judgment,
grounds for Cause on the basis of the original notice exist, Executive shall
thereupon be terminated for Cause, which determination shall be subject to
review by the arbitrator referred to in Section 25 of this Agreement on a de
novo basis.

 

C. In the event that Executive is terminated for “Cause,” Executive will be
entitled to receive only (w) any unpaid base salary through the date of
termination and any accrued and unpaid vacation; (x) any unpaid bonus for
services rendered during the calendar year prior to the calendar year in which
the termination occurs; (y) reimbursement for any unreimbursed expenses incurred
through the date of termination; and (z) all other payments, benefits or fringe
benefits to which Executive may be entitled subject to, and in accordance with,
the terms of any applicable compensation arrangement or benefit, equity or
fringe benefit plan or program or grant (including, but not limited to, any then
vested stock options, RPSRs or RSRs or other equity or equity-related grants,
rights under Company pension plans (including the special pension benefit
referenced in Section 5.D) and the rights set forth in Section 8 hereof)
(collectively, (w) through (z) are referred to as “Accrued Obligations”), and
will not receive any of the Special Severance Benefits set forth in Section 14
of this Agreement.

 

11. TERMINATION OF EMPLOYMENT BY DEATH OR DISABILITY OF EXECUTIVE:

 

A. Death: In the event that Executive dies during the term of this Agreement,
this Agreement shall automatically terminate as of the date of death without
further obligation on the part of the Company, except that the Company shall pay
to Executive’s estate, within 30 days of death, the Accrued Obligations (with
the exception of certain benefits under certain Accrued Obligations, which shall
be paid as soon as administratively practicable), all of the Special Severance
Benefits set forth in Section 14 of this Agreement and the continuation of
benefits set forth in Sections 14.B, 14.C and 14.D shall apply to his eligible
dependents commencing as of the date of death.

 

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B. Disability: If the Executive’s employment terminates by reason of his
Disability (as defined below) during the term of this Agreement, this Agreement
shall terminate without further obligation to Executive, except that the Company
shall provide to Executive, within 30 days after he signs a release
(substantially in the form of Exhibit D hereto) which is not revoked, the
Accrued Obligations (with the exception of certain benefits under Accrued
Obligations, which shall be paid as soon as administratively practicable), and
all of the Special Severance Benefits set forth in Section 14 of this Agreement.
For purposes of this Agreement, “Disability” shall be defined as the inability
of the Executive to perform his material duties hereunder due to the same or a
related physical or mental injury, infirmity or incapacity for 180 days in any
365-day period. The Company may terminate the Executive for a Disability as of
the end of the aforementioned period or at any time thereafter during which the
Disability continues upon 30 days prior written notice provided the Executive
has not returned to full time employment prior to the end of such 30-day period.

 

12. TERMINATION OF EMPLOYMENT BY EXECUTIVE FOR GOOD REASON:

 

Executive shall have the right to terminate the term of this Agreement and his
employment with Northrop Grumman for “Good Reason” as that term is defined
below. If Executive terminates his employment for “Good Reason” during the term
of this Agreement, Executive shall receive, within 30 days after he signs a
release (substantially in the form of Exhibit D hereto) which is not revoked,
the Accrued Obligations (with the exception of certain benefits under Accrued
Obligations which shall be paid as soon as administratively practicable), and
all of the Special Severance Benefits set forth in Section 14 of this Agreement.
For purposes of this Agreement, “Good Reason” shall mean without the Executive’s
express written consent, the occurrence of any one or more of the following:

 

A. any reduction or diminution in the Executive’s then titles or positions
(including as a Director or as a member of the Corporate Policy Council or
successor senior management council), a material reduction in the nature or
status of the Executive’s then authorities, duties, and/or responsibilities
(when such authorities, duties, and/or responsibilities are viewed in the
aggregate), other than an insubstantial and inadvertent act that is remedied by
the Company promptly after receipt of notice thereof given by the Executive;
provided that Good Reason will be deemed to exist if the Executive’s reporting
relationship is changed such that the Executive (x) does not report solely to
the CEO or (y) the Company becomes a direct or indirect subsidiary of another
corporation without his becoming Corporate Vice President and Chief Financial
Officer and a Director of the ultimate parent company;

 

B. a reduction by the Company of the Executive’s base salary as in effect on the
Effective Date, or as the same shall be increased from time to time;

 

C. any material failure by the Company to comply with any of the provisions of
this Agreement, other than isolated and inadvertent failure(s) not occurring in
bad faith and remedied by the Company promptly after receipt of notice thereof
given by the Executive; or

 

D. the failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform the Company’s
obligations under this Agreement, as contemplated in Section 19 herein.

 

E. notice by the Company (pursuant to Section 3 of this Agreement) of the
non-extension of this Agreement.

 

F. Executive’s ceasing to accrue benefits under the special pension benefit plan
referenced in Section 5.D because of the dissolution of the Corporate Policy
Council (or successor senior management council).

 

Should Executive desire to terminate his employment for “Good Reason,” he shall
first give at least 30 days prior written notice of his intent to so terminate
to the CEO of the Company and give the Company an opportunity to promptly cure
the event giving rise to “Good Reason” during such notice period. In addition,
such written notice must describe the event(s) constituting “Good Reason” and
must be given to the CEO within six months of the event(s).

 

 

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13. TERMINATION OF EMPLOYMENT WITHOUT GOOD REASON: The Executive shall have the
right to terminate the term of this Agreement and his employment with Northrop
Grumman at any time without Good Reason by giving written notice to the CEO at
least thirty days in advance of such termination. In the event that Executive’s
employment with the Company is terminated during the term of this Agreement by
Executive without Good Reason, Executive shall not be entitled to any additional
payments or benefits hereunder, other than the Accrued Obligations.

 

14. SPECIAL SEVERANCE BENEFITS: In the event Executive’s employment terminates
due to his death or Disability, or if he is terminated by Northrop Grumman
without “Cause,” or if he terminates employment for “Good Reason,” then he shall
be entitled to receive the following Special Severance Benefits, provided,
however, that he first signs a release of claims (in a form substantially
similar to Exhibit D) which is not revoked:

 

A. Salary and Bonus: A payment equal to two times the sum of (i) the Executive’s
annual base salary in effect at the time of termination of the Executive’s
employment and (ii) the greater of: (x) Executive’s annual target bonus
percentage established under the ICP for the fiscal year in which the date of
termination occurs multiplied by his base salary at the time of termination, or
(y) the average of the Executive’s ICP bonus earned for the three full fiscal
years prior to the date of termination (or such lesser period Executive earned
ICP bonuses). No supplemental bonuses or other bonuses will be combined with the
Executive’s annual bonus for purposes of this computation. In addition, the
Company shall pay Executive a Pro Rata Bonus. The “Pro Rata Bonus” shall equal
the product of (x) Executive’s actual bonus under the ICP (based on actual
Company performance but using an IPF of 1.0) for the calendar year in which
Executive’s termination occurs, and (y) a fraction, the numerator of which is
the number of days during the calendar year in which the termination occurs up
to and including the date on which Executive’s employment by the Company
terminates, and the denominator of which is 365. The Pro Rata bonus shall be
paid in the year following the year in which Executive’s employment terminates,
at the same time that ICP bonuses are paid to elected officers during that year.
“IPF” shall have the meaning set forth in the Annual Incentive Plan.

 

B. Extension of Medical and Dental Benefits: The Company will continue to pay
its portion of the Executive’s medical and dental benefits for two years
following the Executive’s termination date. Such continuation coverage shall run
concurrently with COBRA continuation coverage (or similar state law). The
Executive must continue to pay his portion of the cost of this coverage with
after-tax dollars. If rates for active employees increase during this
continuation period, the contribution amount will increase proportionately.
Also, if medical and dental benefits are modified, terminated or changed in any
way for active elected officers during this continuation period the Executive
will also be subject to such modification, termination or change. Following the
two-year continuation period, the Executive will be eligible to receive COBRA
benefits for any remaining portion of the applicable COBRA period at normal
COBRA rates. Executive shall be eligible for the lifetime retiree medical
benefit set forth in the first sentence of Section 8 of this Agreement as if his
termination of employment constituted a retirement qualifying him for full
benefits under the SORMP.

 

C. Stock Grant Protection: With respect to stock grants made to Executive in
Section 6 of this Agreement only (and not other stock grants except as otherwise
noted in Section 14.C.i), the better of the following and the provisions that
would have applied in the absence of this Section 14.C:

 

  i. Two years from date of Executive’s termination to exercise any vested
options (including all options granted to Executive) (subject to the maximum 10
year term of the awards, and subject to the Company’s authority, to the extent
set forth in the elected officer grant certificate(s) governing the options, to
terminate the vested options in exchange for cash in the event of a change in
control).

 

  ii. Acceleration of all unvested RSRs granted in Section 6 of this Agreement.

 

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  iii. Pro-rata vesting of any unvested RPSRs granted in Section 6 of this
Agreement. This pro-rata calculation will be based on the number of full months
of Executive’s employment during the Performance Period divided by 36.

 

D. Other Benefits: In addition to the benefits noted above, the following
additional benefits shall be paid Executive: (i) a lump sum payment equal to two
times the value of his annual car allowance; (ii) continuation of his then
current financial planning benefits for financial planning fees incurred before
his termination date; (iii) the income tax preparation reimbursement benefit for
preparation of tax returns for the year in which he terminates employment; (iv)
reimbursement for outplacement services provided by the Company’s outplacement
service provider for services provided within one year after Executive’s date of
termination, provided, however that the total reimbursement shall be limited to
an amount equal to 15% of Executive’s annual base salary as of his termination
date; and (v) any benefits to which Executive is entitled pursuant to Sections 8
or 9 of this Agreement.

 

The foregoing severance benefits shall be offset by any severance benefits
Executive is entitled to receive under any other Company plan, program, practice
or agreement, including the Special Agreement, but specifically excluding any
Company defined benefit or 401(k) pension plans, including without limitation
the plan attached hereto as Exhibit A.

 

15. NO MITIGATION; NO OFFSET EXCEPT FOR CIC BENEFITS: Except as set forth in
this Agreement and under the terms of the employee benefit plans in which
Executive may participate, the Company’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including without
limitation, set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Executive or others; provided,
however, that any severance benefits Executive may receive as a result of a
change in control of the Company under the Special Agreement (or successor
thereto) shall offset any similar types of severance benefits Executive is
eligible to receive under this Agreement. In no event shall the Executive be
obliged to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement, nor shall the amount of any payment thereunder be reduced by any
compensation earned by the Executive as a result of employment by another
employer.

 

16. TRADE SECRETS: In the course of performing his duties for the Company,
Executive will receive confidential information, including without limitation,
information not available to competitors relating to the Company’s existing and
contemplated financial plans, products, business plans, operating plans,
research and development information, and customer information, all of which is
hereinafter referred to as “Trade Secrets.” Executive agrees that he will not,
either during his employment or subsequent to the termination of his employment
with the Company, directly or indirectly disclose, publish or otherwise divulge
any Northrop Grumman Trade Secrets to anyone outside the Company, or use such
information in any manner which would adversely affect the business or business
prospects of the Company; provided, however, that the foregoing shall not
preclude Executive from complying with due legal process or governmental inquiry
or from taking actions or making disclosures while employed by the Company in
good faith performance of his duties and obligations hereunder. Executive
further agrees that if, at the time of the termination of his employment with
the Company, he is in possession of any documents or other written or electronic
materials constituting, containing or reflecting Trade Secrets, he will return
and surrender all such documents and materials to the Company upon leaving its
employ. The restrictions and protection provided for in this paragraph shall be
in addition to any protection afforded to Trade Secrets by law or equity.

 

17. INVENTIONS: Executive agrees that all inventions, discoveries and
improvements, and all new ideas for manufacturing and marketing products or
services of the Company, which Executive may conceive while employed by the
Company, whether during or outside business hours, on the premises of the
Company or elsewhere, alone or in collaboration with others, or which he has
acquired or may acquire from others, whether or not the same can be patented or
registered under patent, copyright, or trademark laws, shall be and become the
sole and exclusive property of the Company. Executive agrees to promptly
disclose and fully acquaint his management with any such inventions,
discoveries,

 

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improvements and ideas which he has conceived, made or acquired, and shall, at
the request of the Company, make a written disclosure of the same and execute
such applications, assignments, and other written instruments as may reasonably
be required to grant to the Company sole and exclusive right, title and interest
thereto and therein and to enable the Company to obtain and maintain patent,
copyright and trademark protection therefore.

 

18. NON-SOLICITATION AND NON-DISPARAGEMENT:

 

A. For a period of one year following the termination of Executive’s employment
with the Company, Executive shall not, directly or indirectly, through aid,
assistance or counsel, on his own behalf or on behalf of another person or
entity (i) solicit or offer to hire any person who was, within a period of six
months prior to Executive’s termination, employed by the Company, or (ii) by any
means issue or communicate any public statement that may be critical or
disparaging of the Company, its products, services, officers, directors or
employees; provided the foregoing shall not apply to truthful statements made in
compliance with legal process or governmental inquiry.

 

B. For a period of one year following the termination of Executive’s employment
with the Company, the Company shall not by any means issue or communicate any
public statement that may be critical or disparaging of the Executive, provided
the foregoing shall not apply to truthful statements made in compliance with
legal process, governmental inquiry or as required by legal filing or disclosure
requirements.

 

19. ASSIGNMENT: This Agreement is personal to Executive and shall not be
assigned by him. However, this Agreement shall be binding upon any entity
succeeding to all or substantially all of the assets or business of the Company,
whether by merger, consolidation, acquisition or otherwise and may not otherwise
be assigned by the Company.

 

20. TAX WITHHOLDING: The Company shall be entitled to withhold from any amounts
payable pursuant to this Agreement all taxes as legally shall be required
(including without limitation United States federal taxes, and any other state,
city or local taxes).

 

21. SAVINGS CLAUSE: If any provision under this Agreement or its application is
adjudicated to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision or application of this Agreement which can
be given effect without the invalid or unenforceable provision or application.

 

22. ENTIRE AGREEMENT: This Agreement represents the complete agreement and
understanding between Executive and the Company pertaining to the subject
matters contained herein, and supersedes all prior agreements or understandings,
written or oral, between the Parties with respect to such subject matters. The
Special Agreement is outside of the scope of the preceding sentence.

 

23. INDEMNIFICATION: The Company hereby covenants and agrees to indemnify
Executive and hold him harmless to the fullest extent permitted by law and under
the By-laws of the Company against and in respect to any and all actions, suits,
proceedings, claims, demands, judgments, costs, expenses (including attorney’s
fees), losses, and damages resulting from the Executive’s good faith performance
of his duties and obligations with the Company (including, without limitation,
in his capacity as a Director). The Company, within 30 days of presentation of
invoices, shall, to the extent permitted by law, advance to Executive
reimbursement of all legal fees and disbursements incurred by Executive in
connection with any potentially indemnifiable matter; provided, however, that in
order to receive such advanced fees and disbursements, Executive must first sign
an undertaking reasonably satisfactory to the Company that he will promptly
repay the Company all advanced fees and disbursements in the event it is finally
determined that Executive cannot be indemnified for the matter at issue under
applicable law or Company By-laws; and provided further, that Executive shall
consult with the Company prior to selecting his counsel and shall make a
reasonable effort to select counsel reasonably acceptable to the Company.

 

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24. LIABILITY INSURANCE: The Company shall cover Executive under directors and
officers liability insurance both during and, while potential liability exists
(but no less than six years), after the term of this Agreement in the same
amount and to the same extent, if any, as the Company covers its other officers
and directors.

 

25. ARBITRATION: Any dispute or controversy arising under or in connection with
this Agreement or arising out of or in connection with Executive’s employment
shall be settled exclusively by arbitration, conducted before a single
arbitrator (who is a retired federal or state court judge) in the State of
California (in the major city nearest Executive’s residence) in accordance with
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association then in effect. The decision of the arbitrator will be
final and binding upon the parties hereto. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. The arbitrator may, but
need not, award the prevailing party in any dispute (as determined by the
arbitrator) its or his legal fees and expenses.

 

26. SURVIVAL OF CERTAIN PROVISIONS: The following provisions of this Agreement
shall survive and continue to be in effect to the extent applicable following
Executive’s termination of employment and any purported termination of the term
of this Agreement: Section 5.D (special pension benefit); Section 5.F (early
retirement) (but without regard to changes to the terms and conditions of plans
or programs subsequent to the date of Executive’s termination); Section 6
(special stock grants); Section 8 (retiree medical benefit); Section 9 (Special
Agreement); Section 10 (termination of employment by the Company); Section 11
(termination of employment by reason of death or disability of Executive);
Section 12 (termination of employment by Executive for Good Reason); Section 13
(termination of employment without Good Reason); Section 14 (special severance
benefits); Section 15 (no mitigation; no offset); Section 16 (trade secrets);
Section 17 (inventions); Section 18 (non-solicitation and non-disparagement);
Section 20 (tax withholding); Section 23 (indemnification); Section 24
(liability insurance); Section 25 (arbitration); this Section 26 (survival of
certain provisions); Section 27 (cooperation with the Company); and Section 28
(governing law).

 

27. COOPERATION WITH THE COMPANY: During and after the expiration of this
Agreement, the Executive shall reasonably cooperate with the Company in regard
to any matter, dispute or controversy in which the Company is involved, or may
become involved, and of which the Executive may have knowledge as a result of
his employment by the Company. Such cooperation at a time when the Executive is
no longer employed by the Company or a member of the Board shall be subject to
further agreement providing for legally appropriate compensation.

 

9

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28. GOVERNING LAW: This Agreement shall be construed in accordance with and
governed by the laws of the State of California without regard to principles of
conflict of law.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of October 16,
2003:

 

EXECUTIVE

/s/    Charles H. Noski        

--------------------------------------------------------------------------------

By:

  Charles H. Noski NORTHROP GRUMMAN CORPORATION

By:

 

/s/    J. Michael Hateley        

--------------------------------------------------------------------------------

Print Name: J. Michael Hateley

Its: Corporate Vice President and Chief Human Resources and Administrative
Officer

 

10

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EXHIBIT A TO EMPLOYMENT AGREEMENT

SPECIAL PENSION BENEFIT

 

Charles H. Noski Executive Retirement Plan

 

1.01 Purpose. The purpose of this Plan is to give enhanced retirement benefits
to Charles H. Noski (the “Participant”). This Plan is intended to supplement
benefits that are otherwise available under the Northrop Grumman Pension Plan
(the “NGPP”).

 

1.02 Definitions and Construction.

 

  (a) Capitalized terms used in this Plan which are not defined in this Plan are
taken from Appendix F of the Northrop Grumman Supplemental Plan 2 (the “CPC
SERP”) and, to the extent they are incorporated into the CPC SERP, Article 1 of
the Northrop Grumman Supplemental Plan 2 (“ERISA 2”) and the NGPP, the
applicable terms of which are attached as Exhibits hereto in accordance with
Section 1.09.

 

  (b) The benefits under this Plan are designed to supplement benefits under the
NGPP, and are therefore to be construed utilizing the same principles and
benefit calculation methodologies applicable under the NGPP except where
expressly modified below.

 

1.03 Eligibility and Vesting. Eligibility for benefits under this Plan will be
limited to Charles H. Noski. Except as otherwise provided in Section 1.04(d),
the Participant will not be entitled to receive any benefits under this Plan
unless he becomes vested under Section 2.62 of the NGPP (see Exhibit A).

 

1.04 Benefit Amount.

 

  (a) The Participant’s annual benefit, subject to the limit described in
Section 1.05 below, under this Plan equals 1/12 of 5% multiplied by the
Participant’s Final Average Salary (as defined in (e) below) multiplied by the
Participant’s completed Months of Benefit Service (determined in the same manner
as Months of Benefit Service are determined for accrual purposes under the CPC
SERP (see Exhibit A); provided, however, that Months of Benefit Service also
shall be determined by reference to periods of membership on a successor
management council to the CPC, if any), but in no event (except as otherwise
provided in the following sentence) shall the Participant’s accrued benefit
exceed 60% of his Final Average Salary. In the event the CPC SERP is amended in
the future to provide, for all participants, a multiplier that exceeds 60% of
Final Average Salary, this Plan will be amended accordingly to provide a
corresponding benefit increase under this Section.

 

  (b) The normal form of benefits payable is a single, straight life annuity
benefit for the Participant commencing on the first day of the month coinciding
with or next following the attainment of age 65 (the “Normal Retirement Date”),
assuming an annual benefit equal to the benefit formula amount in (a). The form
of benefit will be determined under Section 1.06.

 

  (c) Benefits, Eligible Pay and Final Average Salary (as defined in (e) below)
will be calculated without regard to the limits in sections 401(a)(17) and 415
of the Code.

 

  (d)

Subject to (d)(1) through (d)(3) below, benefits under this Plan shall commence
as of the later of the Participant’s termination of employment with Northrop
Grumman Corporation (the “Company”) and all of its affiliates (collectively
referred to along with the Company as the “Affiliated Companies”) or the
Participant’s Normal Retirement Date. In the event

 

A-1

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benefits under this Plan are to be distributed to the Participant, or his
surviving spouse, prior to the Participant’s Normal Retirement Date, the amount
of such benefits shall be determined as follows:

 

  (1) If, upon or prior to the expiration of the employment agreement entered
into between the Participant and the Company on October 16, 2003 (the
“Agreement”), the Participant experiences a termination of employment with all
Affiliated Companies due to death, “Disability” (as defined in Section 11.B. of
the Agreement), termination by the Participant for “Good Reason” (as defined in
Section 12 of the Agreement), or termination by the Company without “Cause” (as
defined in Section 10 of the Agreement), the Participant, or his surviving
spouse in the event of the Participant’s death, will be entitled to an immediate
distribution of the benefit calculated under Section 1.04(a) above, subject to
the limitation described in Section 1.05 below, but unreduced for early
commencement. If the Participant’s employment with all Affiliated Companies is
terminated by the Participant for “Good Reason” during the period following the
expiration of the Agreement in which the Participant may continue to exercise
his right to terminate his employment for “Good Reason” pursuant to the
Agreement, the Participant will be entitled to an immediate distribution of the
benefit calculated under Section 1.04(a) above, subject to the limitation
described in Section 1.05 below, but unreduced for early commencement.

 

  (2) If, at any time prior to the date on which the Participant completes 72
Months of Benefit Service, his employment with all Affiliated Companies is
terminated for any reason other than those enumerated in paragraph (d)(1) above,
no benefit will be payable under the Plan to the Participant or his surviving
spouse until the Participant attains, or would have attained, age 65 or such
earlier time that commencement of benefit payments would be permitted under the
NGPP.

 

  (3) If the Participant’s employment terminates for any reason whatsoever under
this Plan on or after the date on which he completes 72 Months of Benefit
Service, the benefit, reduced (if applicable) in accordance with the following
chart, will be immediately distributed to the Participant following the
determination of the offset in Section 1.05 below.

 

Completed Months

of Benefit Service

--------------------------------------------------------------------------------

 

Reduction

--------------------------------------------------------------------------------

72 but less than 84

  15%

84 but less than 96

  10%

96 but less than 108

  5%

108 or more

  0%

 

If the Participant qualifies for an early benefit under both this (d)(3) and
under (d)(1) above, he shall be entitled to the unreduced benefit under (d)(1).

 

  (e) Final Average Salary for any Plan Year (currently defined under the NGPP
as the calendar year) is the Participant’s average Eligible Pay (as defined in
(f) below) for the highest three of the last ten consecutive Plan Years in which
the Participant was a covered employee. For this purpose, years will be deemed
to be consecutive even though a break in service year intervenes.

 

A-2

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  (f) Eligible Pay for any Plan Year will be determined by reference to Sections
2.28 and 7.03 and Exhibit B of the NGPP, current versions of which are all
attached hereto as Exhibit B, and to Section 1.04(c) above. In addition,
Eligible Pay shall include compensation deferred under the Northrop Grumman
Deferred Compensation Plan and all other nonqualified plans to which the
Participant makes deferrals; provided, however, that any compensation deferred
shall only be treated as compensation for Plan benefit calculation purposes in
the year(s) payment would otherwise have been made and not in the year(s) of
actual payment.

 

1.05 Benefit Limit. Accruals under Section 1.04 will be limited as provided in
this Section.

 

  (a) Accruals under this Plan may not exceed the amount calculated under
Section 1.04, offset for benefits identified in (a)(1) and (a)(2) below.

 

  (1) The amounts calculated under 1.04 above will be reduced by the retirement
benefits the Participant is entitled to under all defined benefit retirement
plans, programs, and arrangements maintained by the Company, whether qualified
or nonqualified (but not contributory or defined contribution plans, programs or
arrangements), including, but not limited to, the following:

 

  (i) the NGPP and any other defined benefit plan qualified under section 401(a)
of the Code which is maintained by the Affiliated Companies, was maintained by
any other employer while it was an Affiliated Company, or was maintained by an
Affiliated Company prior to being acquired by the Company; provided, however,
that the foregoing shall not apply to any plan or program heretofore maintained
by any former employer of Participant other than as set forth in Section
1.05(a)(2) below;

 

  (ii) any pension benefit enhancements under change-in-control special
agreements (including enhancements for age and service) that the Participant has
entered into with the Company; and

 

  (iii) any other Company plan, program, arrangement or individual contract
which provides a nonqualified, defined benefit pension.

 

  (2) The amounts calculated under 1.04 above will be further reduced by all
benefits the Participant is entitled to under all qualified and nonqualified
defined benefit plans, programs, and arrangements maintained by Hughes
Electronics Corporation, its predecessors, or any affiliates of either,
multiplied by a fraction (the value of which shall not exceed one) the numerator
of which is the Participant’s Months of Benefit Service (as determined for CPC
SERP accrual purposes) and the denominator of which is 60.

 

  (b) For purposes of calculating the Participant’s net benefit and applying the
offset described in subsection (a):

 

  (1) This paragraph (1) applies to the extent the Participant commences
benefits under plans and programs included in (a)(1) and (a)(2) above
simultaneously with the commencement of benefits under this Plan. In such case,
the net benefit will be determined by subtracting the amount in (ii) from the
amount described in (i), as follows, where (i) and (ii) are:

 

A-3

--------------------------------------------------------------------------------

  (i) The Participant’s gross accrued benefit under this Plan calculated in
accordance with Section 1.04 (including any early retirement subsidies,
supplements, and other such benefits), expressed in the form of a single life
annuity commencing at the time benefits are to be paid under this Plan.

 

  (ii) The Participant’s benefits under the plans and programs included in
(a)(1) and (a)(2) above, taking into account any early retirement factors,
subsidies, supplements, and any other such benefits, converted to a single life
annuity commencing at the time benefits are to be paid under this Plan. The
conversion to a single life annuity shall be made using the actuarial
assumptions under the NGPP which are included in Exhibit C of this Plan (or the
actuarial assumptions specified under the CPC SERP (attached hereto in Exhibit
C) if the payment form elected under the other plan does not correspond with a
payment form offered under the NGPP).

 

  (2) This paragraph (2) applies to the extent the Participant commences
benefits under plans and programs included in (a)(1) and (a)(2) above after the
commencement of benefits under this Plan. In such case, the net benefit will be
determined by subtracting, at the time benefits commence under such other plans,
the amount in (ii) from the amount described in (i), as follows, where (i) and
(ii) are:

 

  (i) The Participant’s gross accrued benefit under this Plan calculated in
accordance with Section 1.04 (including any early retirement subsidies,
supplements, and other such benefits), expressed in the form of a single life
annuity commencing at the time benefits are to be paid under this Plan.

 

  (ii) The Participant’s benefits under the plans and programs included in
(a)(1) and (a)(2) above, taking into account any early retirement factors,
subsidies, supplements, and any other such benefits, converted to a single life
annuity commencing at the time benefits are to be paid under such other plans.
The conversion to a single life annuity shall be made using the actuarial
assumptions under the NGPP which are included in Exhibit C of this Plan (or the
actuarial assumptions specified under the CPC SERP (attached hereto in Exhibit
C) if the payment form elected under the other plan does not correspond with a
payment form offered under the NGPP).

 

  (3) This paragraph (3) applies to the extent a benefit under any plan or
program included in (a)(1) and (a)(2) commences prior to the receipt by the
Participant of benefits under this Plan. In such case, the net benefit will be
determined by subtracting, at the time benefits commence under this Plan, the
amount in (ii) from the amount described in (i), as follows, where (i) and (ii)
are:

 

  (i) The Participant’s gross accrued benefit under this Plan calculated in
accordance with Section 1.04 (including any early retirement subsidies,
supplements, and other such benefits), expressed in the form of a single life
annuity commencing at the time benefits are to be paid under this Plan.

 

  (ii)

The Participant’s benefits under the plans and programs included in (a)(1) and
(a)(2) above, taking into account any early retirement factors, subsidies,
supplements, and any other such benefits, converted to a single life annuity
commencing at the time benefits were paid under such

 

A-4

--------------------------------------------------------------------------------

 

other plans. The conversion to a single life annuity shall be made using the
actuarial assumptions under the NGPP which are included in Exhibit C of this
Plan (or the actuarial assumptions specified under the CPC SERP (attached hereto
in Exhibit C) if the payment form elected under the other plan does not
correspond with a payment form offered under the NGPP). An adjustment for
payments already received due to differing commencement dates of the
Participant’s various benefits shall be made using the actuarial assumptions
under the CPC SERP.

 

  (4) Notwithstanding paragraphs (1), (2), and (3) above, this paragraph (4)
applies to the extent the Participant elects to receive his Plan benefit under
the lump-sum option described in Article 3 of ERISA 2. In such case, the net
benefit will be determined by subtracting, at the time benefits commence under
this Plan, the amount in (ii) from the amount described in (i), as follows,
where (i) and (ii) are:

 

  (i) The Participant’s gross accrued benefit under this Plan calculated in
accordance with Section 1.04 (including any early retirement subsidies,
supplements, and other such benefits), expressed in the form of a single life
annuity commencing at the time benefits are to be paid under this Plan.

 

  (ii) The Participant’s benefits under the plans and programs included in
(a)(1) and (a)(2) above, taking into account any early retirement factors,
subsidies, supplements, and any other such benefits, converted to a single life
annuity.

 

  (A) To the extent the benefits under such other plans commence simultaneously
with or prior to the benefits under this Plan, this conversion shall be made in
accordance with the rules found in paragraphs (1) or (3) above as appropriate.

 

  (B) To the extent benefits under such other plans have not commenced by the
date the Participant commences benefits under this Plan, the conversion shall be
made assuming that the benefits under such other plans will be paid at the
earliest possible commencement date (but not prior to commencement of benefits
under this Plan) and under the normal form of payment provided under such plans.
The conversion to a single life annuity shall be made using the actuarial
assumptions under the NGPP which are included in Exhibit C of this Plan (or the
actuarial assumptions specified under the CPC SERP (attached hereto in Exhibit
C) if the payment form elected under the other plan does not correspond with a
payment form offered under the NGPP).

 

  (c) The Participant’s resulting net benefit under this Plan, determined in
accordance with (b), will then be converted, in the manner elected by the
Participant, to the appropriate payment form in accordance with the provisions
of Section 1.06.

 

  (d) Example: The Participant elects to receive an early retirement benefit
with 81 Months of Benefit Service and Final Average Salary equal to $1,500,000.
The Participant has accrued a monthly benefit under the Northrop Grumman Pension
Plan (the “NGPP”) equal to a monthly single life annuity of $1,000 commencing at
age 65 and a Hughes Electronics Corporation executive pension plan (the “Hughes
EPP”) benefit equal to a single life annuity of $5,000 commencing at age 60.

 

A-5

--------------------------------------------------------------------------------

The Participant’s pre-offset benefit under this Plan, calculated in accordance
with Section 1.04, will equal 33.7% of the Participant’s Final Average Salary
($1,500,000) x 85% to account for the early retirement reduction under Section
1.04(d). This will result in a monthly gross benefit under this Plan, prior to
the application of the Benefit Limit, equal to $35,806.25. The Participant’s
total net benefit will be calculated, taking into account the offset under (a)
above, by reducing the gross benefit by the following amounts at the following
times:

 

  (1) the participant will receive an unreduced monthly benefit equal to
$35,806.25 from age 58 through reaching age 60;

 

  (2) the benefit will be reduced by the $5,000 monthly benefit under the Hughes
EPP upon reaching age 60 leaving a total monthly benefit of $30,806.25; and

 

  (3) the benefit under this Plan will once again be reduced upon commencement
of the $1,000 normal monthly retirement benefit under the NGPP that will be
payable upon reaching age 65 leaving a monthly benefit of $29,806.25.

 

1.06 Payment of Benefits.

 

  (a) Benefits will be paid in accordance with Section 2.02 of ERISA 2 (See
Exhibit E), including the lump-sum option governed by Article 3 of ERISA 2 and
the applicable forms of benefit described in Sections 10.06 through 10.11 of the
NGPP (see Exhibit E). The lump-sum option under Article 3 of ERISA 2 shall be
calculated using the actuarial assumptions contained therein. The benefit forms
available under the NGPP shall be calculated utilizing the actuarial assumptions
and conversion methodologies utilized therein.

 

  (b) If a Participant dies after commencement of benefits, any survivor
benefits will be paid in accordance with the form of benefit selected by the
Participant. If the Participant dies prior to commencement of benefits, payment
will be made under Section 1.07.

 

1.07 Preretirement Death Benefits. If a Participant dies before commencement of
benefits, preretirement surviving spouse benefits will be payable under this
Plan on behalf of the Participant regardless of whether his spouse would be
eligible for a qualified preretirement survivor annuity from the NGPP.

 

  (a) The death benefit will be the survivor benefit portion of a 100%
joint-and-survivor annuity based on the benefit in Section 1.04, as adjusted for
early commencement under Section 1.04(d)(1) or (3) and as limited by Section
1.05.

 

  (b) Benefits will commence effective the first of the month following the
death of the Participant or, if later, effective as of the earliest date a
benefit would otherwise have commenced with respect to the Participant under the
Plan. If, however, the Participant dies upon or prior to the expiration of the
Agreement, the surviving spouse will immediately begin receiving the
distribution of an unreduced benefit under the Plan effective as of the first of
the month following the Participant’s death.

 

  (c) Notwithstanding any provision of (b) above to the contrary, the Company
may delay payment in the event there is a dispute as to whom payment is due
until the dispute is settled.

 

  (d) The benefit in (a) will be determined without regard to the limits in
sections 401(a)(17) and 415 of the Code.

 

  (e) No benefit will be payable under this Plan with respect to a spouse after
the death of that spouse.

 

A-6

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1.08 Claims Procedures. No benefits will be paid under the Plan unless a proper
claim is submitted to the Company for them. The procedures for claims, denials,
and the review of a denial or partial denial of a claim for benefits under this
Plan are described in the regulations promulgated by the Department of Labor
under section 503 of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), and Sections 15.15 through 15.17 of the NGPP (which are set
forth as Exhibit F to this Plan) except that, following the exhaustion by the
Participant of all mandatory appeals, he may, prior to filing suit under ERISA,
voluntarily seek to have his denial reviewed in accordance with the arbitration
provision included as Section 25 of the Agreement. Any such review under Section
25 of the Agreement shall be on a de novo basis.

 

1.09 Exhibits. Except as otherwise provided herein, all references in this Plan
to exhibits shall be interpreted as references to the Exhibits attached to this
document. Without exception, the Exhibits attached hereto are included solely
for purposes of providing the Participant with a copy of any definitions and
other provisions referenced in this Plan as they currently appear in the NGPP,
ERISA 2, and CPC SERP. The provisions found in the Exhibits are subject to
change in accordance with amendments that are adopted by the Company with
respect to the underlying plans and programs in which such provisions are found;
provided, however, that the application of any such amendment to this Plan is
subject to Section 1.10. In addition, all references in the Exhibits to other
sections, articles, exhibits, or appendices are, except as otherwise noted,
references to portions of the underlying plans and programs from which the
excerpts were taken and are not intended as references to sections or provisions
of this Plan.

 

1.10 Amendment, Administration, Funding, and Other Related Matters. Except as
otherwise provided in this Plan, the provisions of ERISA 2, as may be amended
from time to time, shall apply with respect to the operation of this Plan. The
Plan shall be amended in accordance with and in conjunction with amendments that
are adopted with respect to the CPC SERP, provided, however, that no such
amendment shall apply to this Plan to the extent that it would materially
diminish the calculation of the Participant’s accrued benefit or other
significant rights under this Plan. For example, the Company may amend the Plan
to reduce or eliminate benefit payment options available under the Plan so long
as the Participant, at a minimum, continues to have the ability to elect to
receive his Plan benefit from among at least the following options: lump-sum
payment; single life annuity; or at least one joint and survivor annuity at
100%. In addition, the Company has the right to amend the Plan, as may be deemed
advisable, in accordance with changes in the law or to the extent otherwise
legally-required, including, but not limited to, conforming the Plan to all
applicable statutes, regulations, and administrative authority. If a Plan
amendment materially diminishes the calculation of the Participant’s accrued
benefit or other significant rights under this Plan, the Company shall provide
benefits or rights with equivalent after-tax economic value to Executive in an
alternative manner, including, for example, outside the Plan.

 

A-7

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EXHIBIT A

 

Vesting and Determining Service

 

Section 2.62 of the NGPP currently provides:

 

2.62 Vested. A Participant who has acquired and retains a nonforfeitable right
to benefits under the Plan.

 

  (a) Except as otherwise provided in the Plan, an Employee is 100 percent
Vested in his or her Accrued Benefit under the Plan upon being credited with
five Years of Vesting Service. Until then, Employees are vested in no portion of
any benefits earned under this Plan.

 

  (b) This term does not include anyone who has received a distribution of his
or her full Accrued Benefit unless he or she is rehired.

 

Appendix G2 of the NGPP currently provides:

 

G2.01 In General. This Article provides the rules for determining the amount of
an Employee’s Vesting Service.

 

G2.02 Year of Vesting Service. A year of Vesting Service is each calendar year
in which the Employee is credited with 1,000 or more Vesting Hours.

 

G2.03 Vesting Hours. Vesting Hours are generally determined for all Employees in
the same manner as Benefit Hours for active Participants in accordance with
G1.03 (see below), subject to the following modifications.

 

  (a) No more than 501 Benefit Hours are required to be credited under G1.03(b)
to a Covered Employee on account of any single continuous period during which he
or she performs no duties (whether or not that period occurs in a single
computation period).

 

  (b) Benefit Hours for back pay awarded or agreed to for periods described in
G1.03(b) are subject to the limitations in G1.03(b). For example, no more than
501 Benefit Hours are required to be credited for payments of back pay to the
extent the back pay is agreed to or awarded for a period during which an
Employee did not or would not have performed duties.

 

G2.04 Service With Various Employers.

 

  (a) All employment with the Affiliated Companies is taken into account in
determining an Employee’s Vesting Hours and years of Vesting Service.

 

  (b) See Articles G3 and G4 for rules governing pre-acquisition service with
employers that have become Affiliated Companies through merger or acquisition.

 

  (c) An Employee will not receive Vesting Service after he or she leaves the
Affiliated Companies as part of a sale or disposition. However, upon rehire by
the Affiliated Companies, all service standing to the Employee’s credit under
the last Northrop Grumman pension plan in which he or she most recently
participated will be credited under the plan in which he or she first
participates after rehire.

 

A-8

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G2.05 Leased Employee Service.

 

  (a) In General. Although Leased Employees may not participate in the Plan,
service as a Leased Employee counts as Vesting Service, but not as Benefit
Service or Credited Service. An Employee’s service as an Employee and as a
Leased Employee is added together to determine his or her total Vesting Service.
But service as a Leased Employee is relevant in determining eligibility for an
Employee’s benefit under the Plan only if the Leased Employee service is
followed by a period of common law employment.

 

  (b) Early Retirement Eligibility Service

 

  (1) Early Retirement Eligibility. Because Leased Employee service counts as
Vesting Service, it also counts toward eligibility for early retirement
benefits.

 

  (2) Amount of Early Retirement Benefits. Leased Employee Service does not
count toward the amount of an early retirement subsidy with respect to the
Accrued Benefit components attributable to the Predecessor Plan Accrued Benefit
or the Historical Transition Benefit.

 

G2.06 Vesting Service Limited. No more than one year of Vesting Service may be
credited to an Employee for any Plan Year.

 

G2.07 Transfers and Initial Service Credit. See Sections G3.02(a), G3.03(a), and
G3.04(a).

 

G2.08 Pre-Acquisition Vesting Service. See Articles G3 and G4.

 

G2.09 Loss of Vesting Service. An Employee may lose Vesting Hours and years of
Vesting Service under the Break in Service rules in Article G5. Vesting Service
may be restored upon an Employee’s rehire under the rules in Article G6.

 

G2.10 Rehires. See Article G6 for rules on the rehire of Participants.

 

Section F.04 of the CPC SERP currently provides:

 

  (a) Only Months of Benefit Service after the commencement of a Participant’s
tenure on the Corporate Policy Council will be counted, as set forth in Exhibit
A [to the CPC SERP which identifies plan participants by name].

 

  (b) Months of Benefit Service will continue to be counted for a Participant
until the earlier of (1) and (2):

 

  (1) The date the Participant ceases to earn benefit accrual service under
either the Qualified Plans or some other defined benefit plan of the Affiliated
Companies which is qualified under section 401(a) of the Code (“Successor
Qualified Plan”).

 

  (2) Cessation of the officer’s membership on the Corporate Policy Council
(whether because of termination of his membership or dissolution of the
Council).

 

  (3) Examples: The following examples assume that the Participant continues to
earn Months of Benefit Service under the Qualified Plans or a Successor
Qualified Plan until termination of employment with the Affiliated Companies.

 

Example 1: Officer A terminates employment with the Affiliated Companies on
March 31, 1999. At that time, he is still a member of the CPC. His service under
this Program ceases to accrue on March 31.

 

A-9

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Example 2: The CPC is never dissolved, and Officer B continues to be a member of
the CPC until December 31, 2005, though continuing to work for the Affiliated
Companies after that date. His service under this Program ceases to accrue on
December 31, 2005.

 

(c) Months of Benefit Service will be determined under the rules of the
Qualified Plans for determining service after June 30, 2003 or the date after
which the Participant is covered by a cash balance plan, if later. For periods
of service prior to becoming a participant in a Cash Balance Plan, Benefit
Service will be computed using the Special Elapsed Time Method.

 

Appendix G1 of the NGPP currently provides:

 

G1.02 Months of Benefit Service. A Participant is credited with one month of
Benefit Service for each calendar month in which he or she earns one Benefit
Hour.

 

G1.03 Benefit Hours. A Benefit Hour is determined as follows.

 

  (a) A Benefit Hour is each hour for which an Employee is paid, or entitled to
payment, for the performance of duties as a Covered Employee for the
Participating Companies during the applicable computation period.

 

  (b) A Benefit Hour is each hour for which an Employee is paid, or entitled to
payment by the Participating Companies as a Covered Employee on account of a
period during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday, illness,
Incapacity, lay-off, jury duty, military duty or leave of absence.
Notwithstanding the preceding sentence:

 

  (1) An hour for which a Covered Employee is directly or indirectly paid, or
entitled to payment, on account of a period during which no duties are performed
is not required to be credited to him or her if such payment is made or due
under a plan maintained solely for the purpose of complying with applicable
workmen’s compensation, or unemployment compensation or disability insurance
laws; and

 

  (2) Benefit Hours are not required to be credited for a payment that
reimburses an Employee solely for medical or medically related expenses incurred
by the Employee.

 

  (c) For purposes of (b), a payment is deemed to be made by or due from the
Participating Companies regardless of whether the payment is made by or due from
the Participating Companies directly, or indirectly through, among others, a
trust, fund, or insurer to which the Participating Companies contribute or pay
premiums and regardless of whether contributions made or due to the trust, fund,
insurer or other entity are for the benefit of particular Employees or are on
behalf of a group of Employees in the aggregate.

 

  (d) A Benefit Hour is each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by the Participating Companies with
respect to a period during which the individual was a Covered Employee. The same
Benefit Hours shall not be credited both under (a) or (b), as the case may be,
and under this subsection (d). Thus, for example, a Covered Employee who
receives a back pay award following a determination that he or she was paid at
an unlawful rate for Benefit Hours previously credited will not be entitled to
additional credit for the same Benefit Hours.

 

  (e) A Benefit Hour includes any other hour that must be credited for benefit
purposes under Department of Labor Regulations at 29 C.F.R. § 2530.200b-2, or
any successor provision. Those regulations are incorporated by reference.

 

A-10

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  (f) Certain Leaves of Absence.

 

  (1) For Disability Leave commencing after June 30, 2003, a Participant is
credited with one month of Benefit Service for each calendar month or partial
month of leave, up to a maximum of 24 months of Benefit Service.

 

  (2) For Disability Leave commencing before July 1, 2003, Benefit Service is
determined under the plan that applied to the Participant as of the date the
leave commenced.

 

  (3) For unpaid leaves of absence for periods of Incapacity, 8 Benefit Hours
are awarded for each day of the leave, but only during the first 12 months of
the leave. No more than 501 Benefit Hours are required to be credited to a
Covered Employee on account of any single continuous period during which he or
she performs no duties (whether or not that period occurs in a single
computation period).

 

  (4) A Participant is credited with one month of Benefit Service for each month
or partial month during which the Participant is on Military Leave. This applies
only if the Participant was a Covered Employee when he or she left on Military
Leave and he or she returns to employment with the Affiliated Companies while
his or her employment rights are still protected by federal law. This paragraph
(4) is intended to provide service credit only to the extent required by Code
section 414(u).

 

A-11

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EXHIBIT B

 

Eligible Pay

 

Section 2.28 of the NGPP currently provides:

 

2.28 Eligible Pay. Eligible Pay includes only certain types of compensation from
a Participating Business Unit. See Article 7.

 

Section 7.03 of the NGPP currently provides:

 

7.03 Eligible Pay. This Section provides rules for determining how much Eligible
Pay an Employee has for purposes of determining his or her benefits under this
Article 7.

 

  (a) In General. Eligible Pay means amounts paid or made available to a Covered
Employee by one of the Affiliated Companies for services performed for a
Participating Business Unit.

 

  (1) Although Benefit Credits are earned only when Eligible Pay is actually
paid, compensation’s status as Eligible Pay is determined when it is earned. So
if compensation is earned when an individual is Covered Employee, it is Eligible
Pay regardless of when it is paid.

 

  (2) Eligible Pay includes base pay and other elements of pay described in
Exhibit B to the NGPP which lists the items that are included and excluded from
the definition of Eligible Pay.

 

  (b) Eligible Pay Limit. Compensation counted under this Plan will be limited
to the extent required by section 401(a)(17) of the Code. The amount, as so
limited, can be taken into account at any time during the Plan Year.

 

  (1) This Section is only intended to implement section 401(a)(17) of the Code
and is to be interpreted accordingly.

 

  (2) Compensation may not exceed $200,000, as indexed under the Code.

 

  (3) If section 401(a)(17) of the Code is amended, any additional limitations
on counted compensation will automatically be applied without any further
amendment of this Plan.

 

  (c) Disability Leave.

 

  (1) For a Participant on Disability Leave commencing after June 30, 2003,
Benefit Credits continue to apply even if the Participant is not receiving his
or her regular pay. During such a period, Eligible Pay is deemed to be the
Participant’s daily rate of pay in effect on the last day of the month before
the month in which the Disability leave began. In addition, Eligible Pay during
the Disability Leave includes overtime pay and bonuses paid during the leave.

 

  (2) No amount will be imputed as Eligible Pay for any month following the
earliest of: (i) 24 consecutive months of Disability Leave; (ii) the Employee’s
return to active employment; (iii) the Employee’s termination of employment
(determined in accordance with the Affiliated Companies’ payroll records); and
(iv) the Employee’s death.

 

A-12

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  (3) For Disability Leave commencing before July 1, 2003, see the provisions of
the applicable plan in effect as of the date the leave commenced. Those
provisions govern continuous periods of Disability Leave until the Employee
returns to active service with the Affiliated Companies. Any subsequent periods
of Disability Leave are subject to this Plan’s rules.

 

  (d) Military Leave. See Section E.03(b) [of the NGPP].

 

  (e) Other Leaves of Absence. For layoffs and leaves of absence not described
in (c) or (d), a Participant receives Eligible Pay only to the extent that he or
she receives compensation through the Company payroll. Accordingly, such a
Participant will receive an allocation to his or her Benefit Credit Account only
for those months during the leave in which pay is actually received.

 

  (f) Transfers. See Section G3.06 [of the NGPP].

 

Exhibit B to the NGPP currently provides:

 

“Eligible Pay” includes the following items:

 

• At sea pay

 

• Automatic rate progressions

 

• Base pay

 

• Bereavement

 

• Commissions

 

• Completion of work awards

 

• Cost of living adjustments for domestic hourly employees

 

• Disability leave pay

 

• Domestic and international hardship adjustments

 

• Domestic field bonus

 

• Domestic Nonstandard work week pay

 

• Employee retention incentive (ERI) pay

 

• Extended work week pay

 

• Flight pay or flight time bonus

 

• Holiday pay

 

• Incentive bonuses, including ProPay

 

• Incentive Compensation Plan (ICP) bonus for elected officers

 

• International hardship allowance

 

• International hazardous duty allowance

 

• Jury duty leave pay

 

• Key employee achievement program (KEAP) pay

 

• Key employee retention plan (KERP) pay

 

• Location allowance (international allowance incentive payments)

 

• Lump sum payments in lieu of a salary increase to the base rate

 

A-13

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• MAP/TAP/PAP awards

 

• Military leave pay

 

• Overseas allowance

 

• Overtime pay

 

• Personal absence pay

 

• Personal leave pay

 

• Pooled time off pay

 

• Premium pay, including but not limited to:

 

  • Domestic field premium

 

  • Domestic firefighter premium

 

  • Domestic perimeter premium

 

  • Offsite premium-incentive only

 

  • Remote work site premium-incentives only

 

  • Team Leader Premium

 

• Program development bonus

 

• Program management bonus

 

• Results sharing bonus payments

 

• Retention bonuses

 

• Special performance awards, including but not limited to:

 

  • Acquisition bonuses

 

  • Patent/Inventor awards

 

  • Program bonuses

 

  • Suggestion awards

 

• Transition project bonuses

 

• Shift differentials

 

• Sick leave pay

 

• Vacation pay

 

• Voting leave pay

 

The following items are specifically excluded from “Eligible Pay”:

 

• Area differential pay

 

• Car allowance and miscellaneous expenses

 

• Compensation deferred by (or paid to) the Participant under a nonqualified
deferred compensation plan (including, but not necessarily limited to, the
Northrop Grumman Deferred Compensation Plan)

 

• Education/tuition reimbursement or payments

 

• Executive perquisites

 

• Expense reimbursement or allowances

 

• Flex benefit dollars and opt-out dollars for medical/dental coverage

 

A-14

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• Foreign cost-of-living adjustments (overseas allowance, if used for COLA
purposes)

 

• Foreign shelter, furniture, transportation, and miscellaneous allowances

 

• Gross up payments

 

• Hiring and signing bonus

 

• Home retention allowance

 

• Imputed income

 

• Instructor fees/stipends

 

• Insurance allowances

 

• Mileage and relocation reimbursement

 

• Moving expenses (including home sale)

 

• Overtime meal reimbursement

 

• Parking reimbursement

 

• Per diem reimbursement or allowance

 

• Permanent separation allowance — payments or lump sum

 

• Referral payments

 

• Retention payment made pursuant to an agreement entered into by a
Participating Business Unit with an Employee in exchange for the Employee’s
agreement to waive his/her rights to a change in control severance plan or
special agreement

 

• Severance pay of all kinds, including change in control severance payments

 

• Rideshare incentives

 

• Sick pay excess carryover limit pay

 

• Sick pay off during layoff/ termination

 

• Stock option compensation and other stock based compensation

 

• Special assignment incentive pay

 

• Spousal travel reimbursement or allowance

 

• Tax return preparation reimbursement

 

• Travel expenses reimbursements

 

• Uniform allowance

 

• Vacation excess carryover limit pay

 

• Vacation pay off during layoff/ termination

 

• Vacation reimbursement for unused purchased vacation

 

• Value of any non-cash awards

 

• Vanpool driver allowance

 

Any other item not specifically included in Eligible Pay will be excluded from
Eligible Pay

 

A-15

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EXHIBIT C

 

Actuarial Assumptions

 

Section A.04 of the NGPP currently provides:

 

A.04 Actuarial Assumptions. For purposes of this Appendix A and Section D.02,
the interest and mortality assumptions for distributions shall be the Applicable
Interest Rate and the Applicable Mortality Table, as provided in the Uruguay
Round Agreements Act, Public Law 103-465.

 

  (a) The Applicable Interest Rate is the average annual rate of interest under
Code section 417(e)(3)(A)(ii)(II) for the fourth month immediately preceding the
first day of the stability period.

 

  (b) The stability period is the Plan Month that contains the Annuity Starting
Date for the distribution. During the stability period, the applicable interest
rate remains constant.

 

  (c) The Applicable Mortality Table is the mortality table described in Code
section 415(b)(2)(E)(v).

 

Appendix D of the NGPP currently provides:

 

D.01 Annuity Actuarial Equivalents. The following table shall be used to
determine the Actuarial Equivalent of the Normal, Postponed and Early Retirement
Benefits where payment is made in some form other than a lump sum as well as for
determining the amount of the death benefits under Article 11. All factors shall
be interpolated based upon age computed in accordance with the 16-day rule in
Section 7.05(b). The factors are as follows:

 

Joint and Survivor Annuity, Contingent Annuitant and

 

Ten-Year Certain and Continuous Factors

 

Nearest

Age

--------------------------------------------------------------------------------

 

100%

--------------------------------------------------------------------------------

 

50%

--------------------------------------------------------------------------------

 

10-Year C&C

--------------------------------------------------------------------------------

55

  .8700   .9300   .9810

56

  .8650   .9270   .9790

57

  .8600   .9240   .9770

58

  .8550   .9210   .9740

59

  .8500   .9180   .9710

60

  .8450   .9150   .9670

61

  .8400   .9120   .9630

62

  .8350   .9090   .9590

63

  .8300   .9060   .9540

64

  .8250   .9030   .9490

65

  .8200   .9000   .9420

66

  .8150   .8970   .9350

67

  .8100   .8940   .9270

68

  .8050   .8910   .9190

69

  .8000   .8880   .9100

70

  .7950   .8850   .8990

71

  .7900   .8820   .8880

72

  .7850   .8790   .8750

73

  .7800   .8760   .8610

74

  .7750   .8730   .8460

 

A-16

--------------------------------------------------------------------------------

Nearest
Age

--------------------------------------------------------------------------------

 

100%

--------------------------------------------------------------------------------

 

50%

--------------------------------------------------------------------------------

 

10-Year C&C

--------------------------------------------------------------------------------

75

  .7700   .8700   .8300

76

  .7650   .8670   .8130

77

  .7600   .8640   .7950

78

  .7550   .8610   .7760

79

  .7500   .8580   .7560

80

  .7450   .8550    

81

  .7400   .8520    

82

  .7350   .8490    

83

  .7300   .8460    

84

  .7250   .8430    

85

  .7200   .8400    

86

  .7150   .8370    

87

  .7100   .8340    

88

  .7050   .8310    

89

  .7000   .8280    

90

  .6950   .8250    

91

  .6900   .8220    

92

  .6850   .8190    

93

  .6800   .8160    

94

  .6750   .8130    

95

  .6700   .8100    

96

  .6650   .8070    

97

  .6600   .8040    

98

  .6550   .8010    

99

  .6500   .7980    

100

  .6450   .7950    

 

Increase or decrease .01 for each year contingent annuitant is more than five
years older or younger than the participant. The total factor may not exceed
1.0000.

 

Level Income Option Factors

 

Level income option factors to Age 62 and Age 65 should be interpolated and
rounded to four decimals.

 

Level Income to Age 62 and Age 65 Option

--------------------------------------------------------------------------------

Age

--------------------------------------------------------------------------------

 

To Age 62

--------------------------------------------------------------------------------

 

To Age 65

--------------------------------------------------------------------------------

55

  .5900   .4600

56

  .6300   .4900

57

  .6800   .5300

58

  .7300   .5700

59

  .7900   .6200

60

  .8500   .6700

61

  .9200   .7200

62

  1.000   .7800

63

  —     .8500

64

  —     .9200

65

  —     1.000

 

A-17

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D.02 Lump Sum Actuarial Equivalents. In determining lump sum Actuarial
Equivalents, the interest and mortality assumptions described in Section A.04
[generally, the applicable interest rate and applicable mortality table under
sections 417 and 415 of the Internal Revenue Code] shall be used.

 

Section F.09 of the CPC SERP currently provides:

 

F.09 Actuarial Assumptions: The following defined terms and actuarial
assumptions will be used to the extent necessary to convert benefits to straight
life annuity form commencing at the Participant’s Normal Retirement Date under
Sections F.05 [concerning the limitation on benefits] and F.08 [concerning
individual arrangements]:

 

Interest: Five percent (5%)

 

Mortality: The applicable mortality table under section 417(e)(3) of the Code,
which would be used to calculate a lump sum value for the benefit under the
Qualified Plans.

 

Increase in Code Section 415 Limit: 2.8% per year.

 

Variable Unit Values: Variable Unit Values are presumed not to increase for
future periods after commencement of benefits.

 

Section F.05 of the CPC SERP currently provides:

 

F.05 Benefit Limit. Accruals under Section F.04 will be limited as provided in
this Section.

 

  (a) Accruals for a Participant under this Program may not exceed the lesser of
(1) or (2) below, adjusted as described in (b):

 

  (1) 60% of Final Average Salary; or

 

  (2) the amount calculated under Section G.04 above.

 

  (b) The amounts calculated under (1) and (2) above will be multiplied by any
applicable early retirement factor and further reduced by the early retirement
benefits the participant is eligible for, including all early retirement
subsidies, supplements, and other such benefits, under all plans, programs, and
arrangements maintained by the Company, whether qualified (excluding all defined
contribution plans) or nonqualified (excluding contributory plans), including,
but not limited to, the following:

 

  (1) the Qualified Plans and any other defined benefit plan qualified under
section 401(a) of the Code which is maintained by the Affiliated Companies, was
maintained by any other employer while it was an Affiliated Company, or was
maintained by an Affiliated Company prior to being acquired by the Company;

 

  (2) the Northrop Grumman ERISA Supplemental Plan 1 and the Northrop Grumman
Supplemental Plan 2, including the ERISA Supplemental Program 2 described in
Appendix B of that plan;

 

A-18

--------------------------------------------------------------------------------

  (3) the Grumman Corporation Supplemental Retirement Plan and the Grumman
Excess Plan;

 

  (4) the Litton Restoration Plan (Part I benefits only), the Litton Restoration
Plan II (Part I benefits only), and the Litton Supplemental Executive Retirement
Plan;

 

  (5) any benefit enhancements under change-in-control Special Agreements
(including enhancements for age and service) that Participants have entered into
with the Company (“Special Agreements”) for those entitled to it; and

 

  (6) any other Company plan, program, arrangement or individual contract which
provides a nonqualified, defined benefit pension benefit.

 

  (c) The limits in (a) may not be exceeded even after the benefits under this
Program have been enhanced by the benefit under Special Agreements enhancing age
and service.

 

  (d) For purposes of the offset in (b):

 

  (1) in the event a Participant’s benefit under this Program commences prior to
reaching age 65, benefits under this Program will be offset for the plans
described in (b) by converting the benefits paid or payable from such plans to
an actuarially equivalent single life annuity benefit commencing upon the
earliest retirement age under this Program. For this purpose, the benefit will
be converted to an early retirement benefit under each applicable plan’s terms
and adjusted for different normal forms of benefits or different commencement
dates using the actuarial assumptions of Section F.09;

 

  (2) in the event a Participant’s benefit under this Program or any plan
described in (b) commences upon reaching age 65, benefits under all the plans
will be compared on the basis of a single, straight life annuity commencing at
age 65 using the assumptions stated in Section F.09; or

 

  (3) in the event a participant has previously received a distribution from one
of the applicable Qualified Plans for a period of prior service that is included
for purposes of calculating a benefit under this Program, that previously
received benefit will not true-up with any other plan upon retirement, but will
be treated as accrued separately for all purposes and included for purposes of
the Benefit Limit.

 

  (e) For purposes of this Section, Final Average Salary will be calculated
without regard to the limits in section 401(a)(17) of the Code.

 

  (f) Grandfathered Minimum Benefit. For active Participants under the Program
as of June 30, 2003, their benefit at any point in time will never be less than
the benefit as computed under the terms of the Program, as they existed on June
30, 2003.

 

Section F.08 of the CPC SERP currently provides:

 

F.08 Individual Arrangements: This Section applies to a Participant who has an
individually-negotiated arrangement with the Company for supplemental retirement
benefits.

 

  (a) Intent: It is the intent of this Section to coordinate the benefits under
this Program with those of any individually-negotiated arrangement. Participants
with such arrangements will be paid the better of the benefits under the
arrangement or under Sections F.04 or F.07 (as limited by F.05).

 

A-19

--------------------------------------------------------------------------------

  (b) No duplication of benefits: In no case will duplicate benefits be paid
under this Program and such an individual arrangement. Any payments under this
Program will be counted toward the Company’s obligations under an individual
arrangement, and vice-versa.

 

  (c) If the individually-negotiated arrangement provides a benefit in excess of
the one payable under this Program, then the individual benefit will be
substituted as the benefit payable under this Program (even if it exceeds the
limit under F.05).

 

  (d) In order to determine which benefit is greater, all benefits will be
compared on the basis of an actuarial equivalent single, straight life annuity
commencing at the Participant’s Normal Retirement Date.

 

  (e) For purposes of (d), the individually-negotiated benefit will be
determined in accordance with all of its terms and conditions. Nothing in this
Section is meant to alter any of those terms and conditions.

 

  (f) This Section does not apply to the Special Agreements.

 

A-20

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EXHIBIT D

 

Lump Sum Election

 

Article 3 of ERISA 2 currently provides:

 

3.01 In General. This Article sets forth the rules under which Participants may
elect to receive their benefits in a lump sum. Except as provided in Section
3.07, 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 apply 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-21

--------------------------------------------------------------------------------

  (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:

 

A-22

--------------------------------------------------------------------------------

  (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:

 

A-23

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  (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 Lump Sums with CIC Severance Plan Election. A Participant who elects lump
sum payments of all his or her nonqualified benefits under the CIC Plans is
entitled to have his or her benefits paid as a lump sum calculated under the
terms of the applicable CIC Plan. Otherwise, benefit payments are governed by
the general provisions of this Article, which provide different rules for
calculating the amount of lump sum payments.

 

3.08 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:

 

A-24

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  (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 applicable interest rate under section 417(e)(3) of the Code that
would be used to calculate a lump sum value for the benefit under the Pension
Plans.

 

Mortality: the applicable mortality table under section 417(e)(3) of the Code,
which would be used to calculate a lump sum value for the benefit under the
Pension Plans.

 

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.

 

In the case of a lump-sum under Section 3.07 (related to lump sums with a CIC
Severance Plan election), the lump-sum amount will be calculated as described in
that section and the rules of this Section 3.08 are not used.

 

3.09 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.

 

A-25

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EXHIBIT E

 

Optional Forms of Payment

 

Section 2.02 of ERISA 2 currently provides:

 

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 [containing the rules regarding the
election of a lump-sum distribution under the CPC SERP] 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.

 

Sections 10.06 through 10.11 of the NGPP currently provide:

 

10.06 50% Joint and Survivor Option. Under this option, the Participant is paid
a reduced monthly benefit for life and then, if the Participant’s spouse is
still alive, a benefit equal to 50% of the Participant’s monthly benefit is paid
to the spouse for the remainder of his or her life. If the spouse is not still
alive when the Participant dies, no further payments are made.

 

10.07 100% Joint and Survivor Option. Under this option, the Participant is paid
a reduced monthly benefit for life and then, if the Participant’s spouse is
still alive, a benefit equal to 100% of the Participant’s monthly benefit is
paid to the spouse for the remainder of his or her life. If the spouse is not
still alive when the Participant dies, no further payments are made.

 

10.08 Contingent Annuitant Option. Under this option, the Participant is paid a
reduced monthly benefit for life and then, if the Participant’s beneficiary is
still alive, a monthly benefit is paid to the beneficiary for the remainder of
his or her life which is equal to 50% or 100% of the monthly benefit paid to the
Participant. If the beneficiary is not still alive when the Participant dies, no
further payments are made.

 

10.09 Straight Life Annuity Option. Under this option, the Participant is paid a
monthly benefit for life. No payments are made after the Participant dies.

 

10.10 Ten-Year Certain and Continuous Option. Under this option, the Participant
is paid a reduced monthly benefit for life with the provision that should the
Participant die within ten years of his or her retirement date, the
Participant’s beneficiary will receive the same monthly payment that the
Participant was receiving for the balance of the 10-year period that began with
the Participant’s retirement date.

 

  (a) Payments to the beneficiary will end as of the 10th anniversary of the
Participant’s retirement date. If the last beneficiary dies before all payments
owing to him or her have been made, the remainder shall be paid in a lump sum to
his or her estate.

 

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  (b) If the beneficiary dies while the Participant is still alive and before
the end of the 10-year period, the Participant may name another beneficiary.

 

  (1) The naming of a new beneficiary is subject to the spousal consent
requirements if the Participant is married.

 

  (2) If the Participant was married at the Annuity Starting Date and is not
married to the same person at the time of the beneficiary’s death, the
Participant must obtain the consent of the spouse to whom he or she was married
at the Annuity Starting Date to name a new beneficiary, unless otherwise
provided in a Qualified Domestic Relations Order, or unless that spouse has died
or spousal consent need not be obtained under Section 10.13(b). If spousal
consent is not necessary under the preceding sentence, the Participant may name
a new beneficiary without spousal consent, even if the Participant is married at
the time he or she names a new beneficiary. If spousal consent must be obtained
and is not obtained, any benefits due the beneficiary will be paid in a lump sum
to the Participant’s estate.

 

  (c) If the Participant does not die within 10 years after his or her
retirement date, payments will continue to the Participant for the rest of his
or her life in the same amount and no payments will be made to anyone following
the Participant’s death.

 

10.11 Level Income Option. Under this option, a Participant is paid an adjusted
monthly benefit for life with payments before age 62 (or age 65, if the
Participant so elects) which are higher than those made after that age.

 

  (a) The purpose of this option is to provide (on an Actuarial Equivalent
basis) monthly payments before age 62 (or age 65) approximately equal to the sum
of the monthly payment from the Plan after age 62 (or age 65) and the
Participant’s Social Security benefit. For purposes of calculating the option,
the Participant is assumed to commence Social Security benefits at age 62 (or
age 65). No payments are made after the Participant dies. This option may not be
elected if the benefit at age 62 (or age 65) would be $25 per month or less.

 

  (b) This option is available only to Participants who terminate employment
after attaining Early Retirement Age and commence benefits before age 65. Thus,
this option is not available for a Deferred Vested Retirement Benefit.

 

  (c) Special Rule for Prorating Amount of Social Security Benefits.

 

  (1) In General. Except as provided in (2), the monthly payments under this
option are computed using the estimated total amount of a Participant’s Social
Security benefits at age 62 (or age 65).

 

  (2) Special Proration Rule.

 

  (A) For Participants described in (B), a prorated amount of the Participant’s
Social Security benefits is taken into account for each component of the
Participant’s Accrued Benefit. For this purpose, a Participant’s Accrued Benefit
consists of three components: the Predecessor Plan Accrued Benefit, the
Transition Period Accrued Benefit, and the Projected Cash Balance Benefit. The
amount taken into account is the amount bearing approximately the same ratio to
the Participant’s total Social Security benefits that each component of the
Participant’s monthly benefits under this Plan bears to all of his or her
monthly benefits under this Plan.

 

A-27

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  (B) The special proration rule in (A) applies to a Participant who has an
Accrued Benefit attributable to the Projected Cash Balance Benefit and to one or
both of the Predecessor Plan Accrued Benefit and the Transition Period Accrued
Benefit.

 

A-28

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EXHIBIT F

 

Claims Procedures

 

Sections 15.15 through 15.17 of the NGPP currently provide:

 

15.15 Claims Procedures. No benefits will be paid under the Plan unless a proper
claim is submitted to the Committee for them. The Committee will meet from time
to time to review applications for benefits submitted to it. The procedures for
claims denials and seeking review of a denial or partial denial of a claim for
benefits are described in this Section.

 

  (a) Notification to claimant of decision. Notice of decision on any claim for
benefits shall be furnished to the claimant within 60 days after receipt of the
claim by the Committee. A claimant may deem his or her claim to be denied for
purposes of further review described below in the event a decision is not
furnished to the claimant within such 60-day period.

 

  (b) Content of notice. Every claimant who is denied a claim for benefits in
whole or in part shall receive a written notice setting forth in a manner
calculated to be understood by the claimant:

 

  (1) The specific reason or reasons for the denial;

 

  (2) Specific reference to pertinent Plan provisions on which the denial is
based;

 

  (3) A description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and

 

  (4) Appropriate information as to the steps to be taken if the participant or
beneficiary wishes to submit his or her claim for review including the time
limits set forth in subsections (e) and (f).

 

  (c) Review procedure. A claimant whose claim has been denied in whole or in
part or his or her duly authorized representative may:

 

  (1) Request a review of the denied claim upon written application to the
Committee setting forth:

 

  (A) All of the grounds upon which his or her request for review is based and
any facts in support of his or her request, and

 

  (B) Any issues or comments which the applicant deems pertinent to his or her
application; and

 

  (2) Review pertinent documents.

 

(d) Hearings. In appropriate cases, the Committee may provide for a hearing to
be conducted with respect to the review of any claim. In such event, the
Committee shall give notice of such hearing to the claimant affected, as well as
the procedures for the hearing, such as the length of the hearing, whether
witnesses may be presented, whether cross-examination will be allowed and any
other matters which the Committee considers pertinent.

 

A-29

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  (e) Time For Seeking Review. A claimant may seek review of a denied claim
within 65 days after receipt by the claimant of written notification of the
denial or partial denial of the claim. Under extraordinary circumstances, the
Plan may extend this time period.

 

  (f) Decision on review.

 

  (1) A decision by the Committee shall be made promptly, and shall not
ordinarily be made later than 60 days after the Committee’s receipt of a request
for review.

 

  (2) The decision on review shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be understood by the
claimant, as well as specific references to the pertinent provisions of the Plan
or other documents governing the Plan on which the decision is based.

 

  (3) The decision on review shall be furnished to the claimant within the
appropriate time described in paragraph (1) of this subsection. If the decision
on review is not furnished within such time, the claim shall be deemed denied on
review.

 

  (4) The decision of the Committee on any application for benefits shall be
final and conclusive upon all persons if supported by substantial evidence in
the record.

 

  (g) Disclosure of Claim Procedures. All Plan participants will be given a
description of the claims procedures, which shall include a description of the
time limits set forth in (a), (e) and (f), within a reasonable time after
joining the Plan.

 

15.16 Exhaustion Requirement.

 

  (a) A claimant must exhaust the claims procedures described in Section 15.15
before he may bring a legal action in court against any of the Plan Parties.

 

  (b) This Section 15.16 applies if Section 15.15(a) applies; that is, if a
claimant does not receive payment of the benefits he believes he is entitled to
under the Plan or has any other grievance with respect to his benefits under the
Plan.

 

  (c) “Plan Parties” means the Plan, the Company and any Affiliated Company and
their respective boards of directors, the Trustee, the Committee, the Investment
Committee, and the employees or agents of these entities.

 

15.17 Time Limitations.

 

  (a) A claimant may not file a claim in accordance with Section 15.15 later
than three years from the time the claim arises under (d).

 

  (b) A claimant may not bring a legal action against the Plan Parties (as
defined in Section 15.16(c)) in court after the latest of:

 

  (1) Three years from the time the claim arises (within the meaning of (d));

 

  (2) July 1, 2004 (one year after the date this provision took effect); and

 

  (3) If a claim is made in accordance with Section 15.15 within the time
periods described in (b)(1) or (b)(2) above, 90 days from the final disposition
of the claim by the Committee.

 

A-30

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  (c) If the statute of limitations period for filing suit on a claim expires
prior to the time limit in (b), this Section is not intended to permit suit to
be filed after the end of the statute of limitations period. In other words,
suit must be filed by the earlier of the end of the statute of limitations
period or the time limit in (b).

 

  (d) When a Claim Arises.

 

  (1) A claim arises no later than the earliest of the following:

 

  (A) For any claimant, the Committee’s initial denial of the claimant’s claim
for benefits (whether the denial is in writing or because the review period
expires without any action);

 

  (B) For any claimant, the commencement of the claimant’s benefits; or

 

  (C) The latest of:

 

  (i) In the case of a Participant’s (or former Participant’s) claim, his Normal
Retirement Date;

 

  (ii) In the case of a Participant’s (or former Participant’s) claim, his
termination of employment; or

 

  (iii) In the case of any claimant, 90 days after the first statement of
pension benefits is furnished to him.

 

  (2) To the extent the claim of a beneficiary or alternate payee is based on
the amount of benefits a Participant had earned, the claim arises at the same
time for the beneficiary or alternate payee as it would for the Participant.
This does not apply to the extent the claim relates only to the beneficiary’s or
alternate payee’s rights.

 

Example 1: A Beneficiary claims that his survivor benefit should be larger
because the Participant’s benefit should have been larger. In this case, the
Beneficiary’s claim arises no later than a claim by the Participant would have
arisen.

 

Example 2: A Beneficiary claims that she should get the Participant’s survivor
benefit rather than some other person. This claim arises only by reference to
the beneficiary herself and so is not subject to the same time limits as a claim
by the Participant.

 

  (3) This subsection only sets the latest date a claim will be deemed to arise.
A claim may arise earlier, at the time a claim arises for statute of limitations
purposes.

 

 

A-31

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Exhibit B to Employment Agreement

 

EXECUTIVE PERQUISITE SUMMARY

 

EXECUTIVE VEHICLE ALLOWANCE

 

The Allowance includes consideration for the cost of vehicle insurance,
licensing, inspections, routine maintenance (such as oil changes), normal wear
(such as tires and brakes) and nominal business use. No separate reimbursement
for business use of your vehicle will be provided.

 

The Allowance amount is currently $15,000 annually, payable in pay period
increments (weekly, semi-monthly, etc.). The Company will also reimburse
expenses for fuel and washes.

 

FINANCIAL PLANNING AND INCOME TAX RETURN PREPARATION

 

The Financial Planning and Income Tax Return Preparation Program can assist you
in developing your personal financial plans. Under this program, you may select
any reputable professional financial planning, tax return preparation, or
accounting firm.

 

The program provides reimbursement of billed charges for financial planning
and/or income tax return preparation services. This includes fees incurred for
the preparation or revision of trusts, wills and related legal documents. There
is a maximum payment of $9,000 per year of program participation.

 

CLUB MEMBERSHIPS

 

Club Membership reimbursement under the Executive Perquisite Program provides
you reimbursement of certain costs of membership in a social, luncheon, athletic
or country club.

 

Under this program, the company will reimburse the cost, to a maximum of $5,000
per year, for initiation fees, monthly dues, and general club assessments for
two clubs. Locker fees, greens fees, cart rentals, apparel or accessories, food
(including food reserves or minimums), lessons and the like will not be
reimbursed.

 

TRAVEL BENEFITS

 

First-Class Air Travel

 

For air travel of two hours or longer, you may fly first class.

 

Airline Clubs

 

The company will reimburse you for membership in two airline clubs.

 

PERSONAL LIABILITY INSURANCE

 

The personal liability insurance under the Executive Perquisite Program provides
you with $5,000,000 coverage anywhere in the world. As with all insurance
policies, there are certain requirements and limitations of which you should be
aware.

 

The liability coverage provided by this program requires that you obtain and
maintain specified minimum underlying coverage through your current personal
insurance policies.

 

EXECUTIVE PHYSICAL EXAMINATIONS

 

Each year you may have a comprehensive physical examination at the location of
your choice. You may also elect to go to your personal physician. Your medical
plan covers up to $1,500 for the exam or one of the alternatives listed below.

 

B-1

--------------------------------------------------------------------------------

INSURANCE

 

AD& D - 6 x salary to $1,000,000 maximum

 

LIFE - 3 x salary to $2,000,000 maximum

 

LTD - 75% of salary to a maximum of $25,000 per month

 

MEDICAL

 

Fully insured 100% coverage, no deductible, no co-pays for executive and
eligible dependents. $2,000,000 lifetime maximum. Requires employee premium
contributions.

 

DENTAL

 

Fully insured 100% coverage, no deductible, no co-pays for executive and
eligible dependents. $4,000 annual maximum. Requires employee premium
contributions.

 

VISION

 

Reimbursement to $250 per year.

 

B-2

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EXHIBIT C TO EMPLOYMENT AGREEMENT

 

NORTHROP GRUMMAN CORPORATION

MARCH 2004 SPECIAL AGREEMENT

 

THIS AGREEMENT is made and entered into by and between Northrop Grumman
Corporation, a Delaware corporation (hereinafter referred to as the “Company”)
and Charles H. Noski (hereinafter referred to as the “Executive”).

 

RECITALS

 

The Board of Directors of the Company has approved the Company entering into a
severance agreement with the Executive.

 

The Executive is a key executive of the Company.

 

Should the possibility of a Change in Control of the Company arise, the Board
believes it imperative that the Company and the Board should be able to rely
upon the Executive to continue in his position, and that the Company should be
able to receive and rely upon the Executive’s advice, if requested, as to the
best interests of the Company and its stockholders without concern that the
Executive might be distracted by the personal uncertainties and risks created by
the possibility of a Change in Control.

 

Should the possibility of a Change in Control arise, in addition to his regular
duties, the Executive may be called upon to assist in the assessment of such
possible Change in Control, advise management and the Board as to whether such
Change in Control would be in the best interests of the Company and its
stockholders, and to take such other actions as the Board might determine to be
appropriate.

 

NOW THEREFORE, to assure the Company that it will have the continued dedication
of the Executive and the availability of his advice and counsel notwithstanding
the possibility, threat, or occurrence of a Change in Control of the Company,
and to induce the Executive to remain in the employ of the Company in the face
of these circumstances and for other good and valuable consideration, the
Company and the Executive agree as follows:

 

Article 1. Term

 

This Agreement shall be effective as of December 1, 2003 (the “Effective Date”).
This Agreement will continue in effect through February 28, 2007. However, at
the end of such period and, if extended, at the end of each additional year
thereafter, the term of this Agreement shall be extended automatically for one
(1) additional year, unless the Committee delivers written notice at least six
(6) months prior to the end of such term, or extended term, to the Executive
that this Agreement will not be extended, and if such notice is timely given
this Agreement will terminate at the end of the term then in progress; provided,
however, that this provision for automatic extension shall have no application
following a Change in Control.

 

However, in the event a Change in Control occurs during the original or any
extended term, this Agreement will remain in effect for the longer of: (i)
twenty-four (24) months beyond the month in which such Change in Control
occurred; or (ii) until all obligations of the Company hereunder have been
fulfilled, and until all benefits required hereunder have been paid to the
Executive. Any subsequent Change in Control (“Subsequent Change in Control”)
that occurs during the original or any extended term shall also continue the
term of this Agreement until the later of: (i) twenty-four (24) months beyond
the month in which such Subsequent Change in Control occurred; or (ii) until all
obligations of the Company hereunder have been fulfilled, and until all benefits
required hereunder have been paid to the Executive; provided, however, that if a
Subsequent Change in Control occurs, it shall only be considered a Change in
Control under this Agreement if it occurs no later than twenty-four (24) months
after the immediately preceding Change in Control or Subsequent Change in
Control.

 

C-1

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Article 2. ERISA

 

This Agreement is intended as part of a severance program of the Company that
constitutes (i) a pension plan within the meaning of Section 3(2) of ERISA, and
(ii) an unfunded pension plan maintained by the Company for a select group of
management or highly compensated employees within the meaning of Department of
Labor Regulation 2520.104-23 promulgated under ERISA, and Sections 201, 301, and
401 of ERISA.

 

Article 3. Definitions

 

Whenever used in this Agreement, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word is
capitalized:

 

  (a) “Agreement” means this March 2004 Special Agreement.

 

  (b) “Base Salary” means the salary of record paid to the Executive by the
Company as annual salary (whether or not deferred), but excludes amounts
received under incentive or other bonus plans.

 

  (c) “Beneficial Owner” shall have the meaning ascribed to such term in Rule
13d-3 of the General Rules and Regulations under the Exchange Act.

 

  (d) “Beneficiary” means the persons or entities designated or deemed
designated by the Executive pursuant to Section 11.2.

 

  (e) “Board” means the Board of Directors of the Company.

 

  (f) “Cause” shall mean the occurrence of either or both of the following:

 

  (i) The Executive’s conviction for committing an act of fraud, embezzlement,
theft, or other act constituting a felony (other than traffic related offenses
or as a result of vicarious liability); or

 

  (ii) The willful engaging by the Executive in misconduct that is significantly
injurious to the Company. However, no act, or failure to act, on the Executive’s
part shall be considered “willful” unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company.

 

  (g) “Change in Control” of the Company shall be deemed to have occurred as of
the first day that any one or more of the following conditions shall have been
satisfied:

 

  (i)

Any Person (other than those Persons in control of the Company as of the
Effective Date, or other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any affiliate of the Company or
a successor) becomes the Beneficial Owner, directly or indirectly, of securities
of the Company representing twenty-five percent (25%) or more of either (1) the
then-outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (2) the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that
for purposes of this clause (i): (A) “Person” or “group” shall not

 

C-2

--------------------------------------------------------------------------------

 

include underwriters acquiring newly issued voting securities (or securities
convertible into voting securities) directly from the Company with a view
towards distribution, (B) creditors of the Company who become stockholders of
the Company in connection with any bankruptcy of the Company under the laws of
the United States shall not, by virtue of such bankruptcy, be deemed a “group”
or a single Person for the purposes of this clause (i) (provided that any one of
such creditors may trigger a Change in Control pursuant to this clause (i) if
such creditor’s ownership of Company securities equals or exceeds the foregoing
threshold), and (C) an acquisition shall not constitute a Change in Control if
made by an entity pursuant to a transaction that is covered by and does not
otherwise constitute a Change in Control under clause (iii) below;

 

  (ii) On any day after the Effective Date (the “Measurement Date”) Continuing
Directors cease for any reason to constitute either: (1) if the Company does not
have a Parent, a majority of the Board; or (2) if the Company has a Parent, a
majority of the Board of Directors of the Controlling Parent. A director is a
“Continuing Director” if he or she either:

 

  (1) was a member of the Board on the applicable Initial Date (an “Initial
Director”); or

 

  (2) was elected to the Board (or the Board of Directors of the Controlling
Parent, as applicable), or was nominated for election by the Company’s or the
Controlling Parent’s stockholders, by a vote of at least two-thirds (2/3) of the
Initial Directors then in office.

 

A member of the Board (or Board of Directors of the Controlling Parent, as
applicable) who was not a director on the applicable Initial Date shall be
deemed to be an Initial Director for purposes of clause (2) above if his or her
election, or nomination for election by the Company’s or the Controlling
Parent’s stockholders, was approved by a vote of at least two-thirds (2/3) of
the Initial Directors (including directors elected after the applicable Initial
Date who are deemed to be Initial Directors by application of this provision)
then in office.

 

“Initial Date” means the later of (1) the Effective Date or (2) the date that is
two (2) years before the Measurement Date.

 

  (iii)

Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any of
its subsidiaries, a sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or stock of another entity
by the Company or any of its subsidiaries (each, a “Business Combination”), in
each case unless, following such Business Combination, (1) all or substantially
all of the individuals and entities that were the Beneficial Owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination Beneficially Own, directly or
indirectly, more than sixty percent (60%) of the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the entity resulting from such Business Combination (including,
without limitation, an entity that, as a result of such transaction, is a Parent
of the Company or the successor of the Company) in substantially the same
proportions as their ownership immediately prior to such Business Combination of
the Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding any entity resulting
from such Business Combination or a Parent of the Company or any

 

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successor of the Company or any employee benefit plan (or related trust) of the
Company or such entity resulting from such Business Combination or a Parent of
the Company or the successor entity) Beneficially Owns, directly or indirectly,
twenty-five percent (25%) or more of, respectively, the then-outstanding shares
of common stock of the entity resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such entity,
except to the extent that the ownership in excess of twenty-five percent (25%)
existed prior to the Business Combination, and (3) a Change in Control is not
triggered pursuant to clause (ii) above with respect to the Company (including
any successor entity) or any Parent of the Company (or the successor entity).

 

  (iv) A complete liquidation or dissolution of the Company other than in the
context of a transaction that does not constitute a Change in Control of the
Company under clause (iii) above.

 

Notwithstanding the foregoing, in no event shall a transaction or other event
that occurred prior to the Effective Date constitute a Change in Control.
Notwithstanding anything in clause (iii) above to the contrary, a change in
ownership of the Company resulting from creditors of the Company becoming
stockholders of the Company in connection with any bankruptcy of the Company
under the laws of the United States shall not trigger a Change in Control
pursuant to clause (iii) above.

 

  (h) “Code” means the United States Internal Revenue Code of 1986, as amended.

 

  (i) “Committee” means the Compensation and Management Development Committee of
the Board, or any other committee appointed by the Board to perform the
functions of the Compensation and Management Development Committee.

 

  (j) “Company” means Northrop Grumman Corporation, a Delaware corporation
(including, for purposes of determining whether the Executive is employed by the
Company, any and all subsidiaries specified by the Committee), or any successor
thereto as provided in Article 10.

 

  (k) “Controlling Parent” means the Company’s Parent so long as a majority of
the voting stock or voting power of that Parent is not Beneficially Owned,
directly or indirectly through one or more subsidiaries, by any other Person. In
the event that the Company has more than one “Parent,” then “Controlling Parent”
shall mean the Parent of the Company the majority of the voting stock or voting
power of which is not Beneficially Owned, directly or indirectly through one or
more subsidiaries, by any other Person.

 

  (l) “Disability” means disability as defined in the Company’s long-term
disability plan in which the Executive participates at the relevant time or, if
the Executive does not participate in a Company long-term disability plan at the
relevant time, as such term is defined in the Company’s principal long-term
disability plan that generally covers the Company’s senior-level executives at
that time.

 

  (m) “Effective Date” means December 1, 2003.

 

  (n) “Effective Date of Termination” means the date on which a Qualifying
Termination occurs.

 

  (o) “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

 

  (p) “Exchange Act” means the United States Securities Exchange Act of 1934, as
amended.

 

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  (q) “Executive” means the individual identified in the first sentence, and on
the signature page, of this Agreement.

 

  (r) “Good Reason” means, without the Executive’s express written consent, the
occurrence of any one or more of the following:

 

  (i) A material reduction in the nature or status of the Executive’s
authorities, duties, and/or responsibilities, (when such authorities, duties,
and/or responsibilities are viewed in the aggregate) from their level in effect
on the day immediately prior to the start of the Protected Period, other than an
insubstantial and inadvertent act that is remedied by the Company promptly after
receipt of notice thereof given by the Executive; provided that if the Executive
is a vice president, for purposes of the preceding phrase the Executive’s loss
of vice president status (other than a promotion to a higher level officer) will
constitute Good Reason. In addition, Good Reason will be deemed to exist if the
Executive’s reporting relationship is diminished from the Executive’s reporting
relationship in effect on the day immediately prior to the start of the
Protected Period (for example, if the Executive reports directly to the
Company’s Chief Executive Officer on the day immediately prior to the start of
the Protected Period, Good Reason will be deemed to exist if the Executive’s
reporting relationship is changed such that the Executive no longer reports
directly to the Chief Executive Officer of the Company or any Parent or directly
to the Board of Directors of the Company or any Parent).

 

  (ii) A reduction by the Company in the Executive’s Base Salary as in effect on
the Effective Date or as the same shall be increased from time to time.

 

  (iii) A significant reduction by the Company of the Executive’s aggregate
incentive opportunities under the Company’s short and/or long-term incentive
programs, as such opportunities exist on the Effective Date, or as such
opportunities may be increased after the Effective Date. For this purpose, a
significant reduction in the Executive’s incentive opportunities shall be deemed
to have occurred in the event his targeted annualized award opportunities and/or
the degree of probability of attainment of such annualized award opportunities
are diminished by the Company from the levels and probability of attainment that
existed as of the Effective Date.

 

  (iv) The failure of the Company to maintain (x) the Executive’s relative level
of coverage and accruals under the Company’s employee benefit and/or retirement
plans, policies, practices, or arrangements in which the Executive participates
as of the Effective Date, both in terms of the amount of benefits provided, and
amounts accrued and (y) the relative level of the Executive’s participation in
such plans, policies, practices, or arrangements on a basis at least as
beneficial as, or substantially equivalent to, that on which the Executive
participated in such plans immediately prior to the Effective Date. For this
purpose, the Company may eliminate and/or modify existing programs and coverage
levels; provided, however, that the Executive’s level of coverage under all such
programs must be at least as great as is provided to executives who have the
same or lesser levels of reporting responsibilities within the Company’s
organization.

 

  (v) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Article 10.

 

  (vi) Any purported termination by the Company of the Executive’s employment
that is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 4.8 and for purposes of this Agreement, no such
purported termination shall be effective.

 

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  (vii) The Executive is informed by the Company that his or her principal place
of employment for the Company will be relocated to a location that is greater
than fifty (50) miles away from the Executive’s principal place of employment
for the Company at the start of the corresponding Protected Period; provided
that, if the Company communicates an intended effective date for such
relocation, in no event shall Good Reason exist pursuant to this clause (vii)
more than ninety (90) days before such intended effective date.

 

The Executive’s right to terminate employment for Good Reason shall not be
affected by the Executive’s incapacity due to physical or mental illness. The
Executive’s continued employment shall not constitute a consent to, or a waiver
of rights with respect to, any circumstances constituting Good Reason herein.

 

  (s) “Parent” means an entity that Beneficially Owns a majority of the voting
stock or voting power of the Company, or all or substantially all of the
Company’s assets, directly or indirectly through one or more subsidiaries.

 

  (t) “Person” shall have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
“group” as defined in Section 13(d) thereof.

 

  (u) “Qualifying Termination” has the meaning given to such term in Sections
4.3(a) and 4.3(b).

 

  (v) “Severance Benefits” means the payments and/or benefits provided in
Section 4.4.

 

Article 4. Severance Benefits

 

4.1. Right to Severance Benefits. The Executive shall be entitled to receive
from the Company Severance Benefits, as described in Section 4.4, if the
Executive has incurred a Qualifying Termination.

 

The Executive shall not be entitled to receive Severance Benefits if his
employment terminates (regardless of the reason) before the Protected Period (as
such term is defined in Section 4.3(d)) corresponding to a Change in Control of
the Company or more than twenty-four (24) months after the date of a Change in
Control of the Company.

 

4.2. Services During Certain Events. In the event a Person begins a tender or
exchange offer, circulates a proxy to stockholders of the Company, or takes
other steps seeking to effect a Change in Control, the Executive agrees that he
will not voluntarily leave the employ of the Company and will continue to render
services until the later of (i) the date such Person has abandoned or terminated
his or its efforts to effect a Change in Control, and (ii) the date that is six
(6) months after a Change in Control has occurred. Notwithstanding the
foregoing, the Company may terminate the Executive’s employment for Cause at any
time, and the Executive may terminate his employment at any time after the
Change in Control for Good Reason.

 

4.3. Qualifying Termination.

 

  (a) Subject to Sections 4.3(e), 4.3(f), 4.5, 4.6 and 4.7, the occurrence of
any one or more of the following events within the Protected Period
corresponding to a Change in Control of the Company, or within twenty-four (24)
calendar months following the date of a Change in Control of the Company shall
constitute a “Qualifying Termination”:

 

 

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  (i) An involuntary termination of the Executive’s employment by the Company
for reasons other than Cause;

 

  (ii) A voluntary termination of employment by the Executive for Good Reason;

 

  (iii) A successor company fails or refuses to assume by written instrument the
Company’s obligations under this Agreement, as required by Article 10; or

 

  (iv) The Company or any successor company repudiates or breaches any of the
provisions of this Agreement.

 

  (b) Subject to Sections 4.3(e), the Executive shall also be deemed to have had
a “Qualifying Termination” if each of the following conditions is satisfied:

 

  (i) A Change in Control of the Company occurs; and

 

  (ii) At any time after the start of the Protected Period corresponding to such
Change in Control and on or before the last day of the twelfth (12th) month
following the month in which the Change in Control occurs, the Chief Executive
Officer of the Company on the day immediately prior to the start of such
Protected Period ceases for any reason (other than due to either (a) the death
of the Chief Executive Officer, (b) the Chief Executive Officer’s termination of
employment due to his or her disability (within the meaning of the Company’s
long-term disability plan in which the Chief Executive Officer participates at
the relevant time or, if the Chief Executive Officer does not participate in a
Company long-term disability plan at the relevant time, as such term is defined
in the Company’s principal long-term disability plan that generally covers the
Company’s senior-level executives at that time), or (c) the Chief Executive
Officer’s termination of employment on account of reaching mandatory retirement
age (as such age may be defined from time to time in policies adopted by the
Company prior to the commencement of the Protected Period, and consistent with
applicable law)) to be the Chief Executive Officer of the Company or of a
Parent; and

 

  (iii) The Executive remains continuously employed by the Company through the
last day of the twelfth (12th) month following the month in which the first
Change in Control of the Company occurs; and

 

  (iv) The Executive terminates employment with the Company (whether or not for
Good Reason, but other than due to the Executive’s death) during the thirteenth
(13th) month following the month in which the first Change in Control of the
Company occurs; and

 

  (v) The Company does not have Cause to terminate the Executive’s employment at
the time of the Executive’s termination; provided that if the Company intends to
assert that it had Cause to terminate the Executive’s employment it must
promptly deliver a written Notice of Termination to the Executive pursuant to
Section 11.6 setting forth its claimed basis for Cause even if such notice is
delivered after the termination of employment by the Executive.

 

  (c) If more than one of the events set forth in Sections 4.3(a) and 4.3(b)
occurs, such events shall constitute but a single Qualifying Termination and the
Executive shall be entitled to but a single payment of the Severance Benefits.

 

  (d) The “Protected Period” corresponding to a Change in Control of the Company
shall be a period of time determined in accordance with the following:

 

 

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  (i) If the Change in Control is triggered by a tender offer for shares of the
Company’s stock or by the offeror’s acquisition of shares pursuant to such a
tender offer, the Protected Period shall commence on the date of the initial
tender offer and shall continue through and including the date of the Change in
Control; provided that in no case will the Protected Period commence earlier
than the date that is six (6) months prior to the Change in Control.

 

  (ii) If the Change in Control is triggered by a merger, consolidation, or
reorganization of the Company with or involving any other corporation, the
Protected Period shall commence on the date that serious and substantial
discussions first take place to effect the merger, consolidation, or
reorganization and shall continue through and including the date of the Change
in Control; provided that in no case will the Protected Period commence earlier
than the date that is six (6) months prior to the Change in Control.

 

  (iii) In the case of any Change in Control not described in clause (i) or (ii)
above, the Protected Period shall commence on the date that is six (6) months
prior to the Change in Control and shall continue through and including the date
of the Change in Control.

 

  (e) Notwithstanding anything else contained herein to the contrary, the
Executive’s termination of employment on account of reaching mandatory
retirement age, as such age may be defined from time to time in policies adopted
by the Company prior to the commencement of the Protected Period, and consistent
with applicable law, shall not be a Qualifying Termination.

 

  (f) Notwithstanding anything else contained herein to the contrary, the
termination of the Executive’s employment (or other events giving rise to Good
Reason) shall not constitute a Qualifying Termination if there is objective
evidence that, as of the commencement of the Protected Period, the Executive had
specifically been identified by the Company as an employee whose employment
would be terminated as part of a corporate restructuring or downsizing program
that commenced prior to the Protected Period and such termination of employment
was expected at that time to occur within six (6) months.

 

  (g)

Notwithstanding anything else contained herein to the contrary (other than those
provisions that contain an express exception to this Section 4.3(g)), the
Executive’s Severance Benefits under this Agreement shall be reduced by the
severance benefits (including, without limitation, any other change-in-control
severance benefits and any other severance benefits generally) that the
Executive may be entitled to under any other plan, program, agreement or other
arrangement with the Company (including, without limitation, any such benefits
provided for by an employment agreement, a prior Northrop Grumman Corporation
Special Agreement, a Northrop Grumman Corporation March 2000 Special Agreement,
under the prior Northrop Grumman Corporation Change-In-Control Severance Plan,
or under the Northrop Grumman Corporation March 2000 Change-In-Control Severance
Plan); provided that if the Executive is otherwise entitled to receive Severance
Benefits under this Agreement and severance benefits under the Northrop Grumman
Corporation March 2004 Change-In-Control Severance Plan, benefits shall be paid
under this Agreement rather than under such plan. For purposes of the foregoing,
any cash severance benefits payable to the Executive under any other plan,
program, agreement or other arrangement with the Company shall offset the cash
severance benefits otherwise payable to the Executive under this Agreement on a
dollar-for-dollar basis. For purposes of the foregoing, non-cash severance
benefits to be provided to the Executive under any other plan, program,
agreement or other arrangement with the Company shall offset any corresponding
benefits otherwise to be provided to the Executive under this Agreement or, if
there are no corresponding benefits otherwise to be provided to the Executive
under this Agreement, the value of such

 

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benefits shall offset the cash severance benefits otherwise payable to the
Executive under this Agreement on a dollar-for-dollar basis. If the amount of
other benefits to be offset against the cash severance benefits otherwise
payable to the Executive under this Agreement in accordance with the preceding
two sentences exceeds the amount of cash severance benefits otherwise payable to
the Executive under this Agreement, then the excess may be used to offset other
non-cash severance benefits otherwise to be provided to the Executive under this
Agreement on a dollar-for-dollar basis. For purposes of this paragraph, the
Company shall reasonably determine the value of any non-cash benefits.

 

4.4. Description of Severance Benefits. In the event that the Executive becomes
entitled to receive Severance Benefits, as provided in Sections 4.1 and 4.3, the
Company shall pay to the Executive and provide him or her with the following:

 

  (a) An amount equal to three (3) times the highest rate of the Executive’s
annualized Base Salary in effect at any time up to and including the Effective
Date of Termination.

 

  (b) An amount equal to three (3) times the greater of: (i) the highest of the
Executive’s bonus earned under the Company’s Performance Achievement Plan or
Incentive Compensation Plan (or a successor bonus program) for any one of the
three (3) full fiscal years prior to the date of the Change in Control of the
Company; or (ii) the Executive’s target annual bonus established under the
Company’s Performance Achievement Plan or Incentive Compensation Plan bonus
program (or any successor bonus program) for the fiscal year in which the Change
in Control of the Company occurs. (The greater of the amount determined pursuant
to clause (i) or clause (ii) in the preceding sentence with respect to the
Executive is referred to as the Executive’s “Bonus Amount.”) Special bonuses or
bonus enhancements that would otherwise be included for purposes of the
calculation pursuant to the first sentence of this Section 4.4(b), but that are
related to a merger, acquisition, consolidation, reorganization, spin-off or
similar event and that are not part of the Company’s customary on-going program
of Performance Achievement Plan or Incentive Compensation Plan (or any successor
bonus program) bonuses shall be excluded for purposes of such calculation.

 

  (c) An amount in settlement of the Executive’s bonus opportunity under the
Company’s Performance Achievement Plan or Incentive Compensation Plan (or a
successor bonus program) for the fiscal year in which the Effective Date of
Termination occurs, such amount determined as follows:

 

  (i) If the Effective Date of Termination occurs in the fiscal year in which
the Change in Control of the Company occurs, then such amount shall equal the
sum of:

 

  (A) the greater of (X) or (Y) multiplied by a fraction, the numerator of which
is the number of days completed in the fiscal year through the date of the
Change in Control of the Company and the denominator of which is three hundred
sixty-five (365), where (X) is the Executive’s target annual bonus established
under the Company’s Performance Achievement Plan or Incentive Compensation Plan
(or any successor bonus program) for that fiscal year and (Y) is the amount of
bonus that the Executive would be entitled to under the Company’s Performance
Achievement Plan or Incentive Compensation Plan (or any successor bonus program)
for that fiscal year assuming that the Executive’s employment had not terminated
and based on performance through the date of the Change in Control of the
Company relative to the pre-approved performance goals for that year; plus

 

 

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  (B) the Executive’s Bonus Amount multiplied by a fraction, the numerator of
which is the number of days completed in the fiscal year following the date of
the Change in Control of the Company through the Effective Date of Termination
and the denominator of which is three hundred sixty-five (365).

 

  (ii) If the Effective Date of Termination occurs in a fiscal year following
the fiscal year in which the Change in Control of the Company occurs, then such
amount shall equal the Executive’s Bonus Amount multiplied by a fraction, the
numerator of which is the number of days completed in the fiscal year in which
the Effective Date of Termination occurs through the Effective Date of
Termination and the denominator of which is three hundred sixty-five (365).

 

  (d) A continuation of the Executive’s medical coverage, dental coverage, and
group term life insurance for the Executive, his spouse, and his eligible
dependents for the three (3) years following the Executive’s Effective Date of
Termination; provided that such continuation of coverage shall run concurrently
with COBRA continuation or similar state law continuation periods; and provided
further that the continuation of such coverage shall be discontinued prior to
the end of the three (3) year period in the event the Executive has available
substantially similar benefits from a subsequent employer, as reasonably
determined by the Committee. Except as provided in the next sentence, such
benefits shall be provided to the Executive at the same premium cost, and at the
same coverage level, as in effect as of the Executive’s Effective Date of
Termination. However, in the event the premium cost and/or level of coverage
shall change for all employees of the Company, the cost and/or coverage level,
likewise, shall change for the Executive in a corresponding manner. The
continuation of coverage for the period contemplated by this Section 4.4(d)
shall be coordinated with and paid secondary to any benefits that the Executive,
his spouse, or his dependent receives from another employer or from Medicare
(following the Executive’s, his spouse’s, and/or his dependent’s entitlement to
Medicare benefits) to the maximum extent permissible under relevant law.
Notwithstanding the foregoing provisions of this Section 4.4(d), if the
Executive is eligible to commence benefits under the Company’s Special Officer
Retiree Medical Plan (“SORMP”) as of the Effective Date of Termination, then the
Executive shall receive medical and dental continuation coverage pursuant to the
SORMP instead of the continuation coverage contemplated by the foregoing
provisions of this Section 4.4(d). Any other continuation of medical, dental, or
group term life insurance that the Executive may otherwise be entitled to upon
or following his Effective Date of Termination in accordance with the express
terms of a Company welfare benefit plan shall not give rise to an offset
pursuant to Section 4.4(g) and shall not be deemed to duplicate the benefits of
the continuation coverage contemplated by this Section 4.4(d).

 

  (e) A lump-sum cash amount equal to (i) minus (ii), with (i) and (ii)
determined as follows:

 

  (i) equals the actuarial present value equivalent of the aggregate benefits
accrued by the Executive as of his Effective Date of Termination under the
qualified defined benefit pension plan or plans in which the Executive
participates (the “qualified plan”), and under any and all supplemental defined
benefit retirement plans in which the Executive participates, calculated as if
the Executive’s employment continued for three (3) full years following the
Executive’s Effective Date of Termination (i.e., the Executive receives three
(3) additional years of vesting and benefit accruals, including, if the
Executive is a participant in a cash balance plan, three years of projected
post-termination interest credits based on the interest rate in effect at
termination, and his age is also increased three (3) years from his age as of
his Effective Date of Termination); provided, however, that for purposes of
determining “Final Average Pay” under such plans, the Executive’s actual pay
history as of the Effective Date of Termination shall be used; and

 

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  (ii) equals the actuarial present value equivalent of the aggregate benefits
payable to the Executive as of his Effective Date of Termination under the
qualified plan and under any and all supplemental defined benefit retirement
plans in which the Executive participates, calculated assuming that the
Executive retired and went into pay status under the terms of such plans on or
as soon as possible after his Effective Date of Termination.

 

The intent of this Section 4.4(e) is that the qualified plan and any
supplemental defined benefit retirement plan benefits will be paid in the normal
course under the terms of those plans, with the additional benefits payable as a
result of the imputation of age and service under this provision being paid from
this Agreement. The Executive shall also be entitled to an additional three (3)
years of age and service to count towards eligibility under one or more of the
Company retiree medical programs for which the Executive would have been
eligible absent any such termination.

 

  (f) Reimbursement by the Company for the costs of all outplacement services
obtained by the Executive within the one (1) year period after the Effective
Date of Termination; provided, however, that the total reimbursement shall be
limited to an amount equal to fifteen percent (15%) of the Executive’s Base
Salary as of the Effective Date of Termination.

 

  (g) An amount equal to three (3) times the greater of: (i) the annual value of
the perquisites provided to the Executive under the Company’s Executive
Perquisite Program as such program is in effect at the start of the Protected
Period corresponding to the Change in Control of the Company, or (ii) the annual
value of the perquisites provided to the Executive under the Company’s Executive
Perquisite Program as such program is in effect immediately before the Effective
Date of Termination. The Company shall determine the annual value of such
perquisites on a reasonable basis. This Section 4.4(g) is not intended to
provide for the duplication of any welfare benefits that are otherwise provided
by Section 4.4(d) or which would otherwise continue for three (3) years or more
following the Executive’s Effective Date of Termination. For example, if a
welfare benefit otherwise provided by Section 4.4(d) is also included in the
Executive Perquisite Program, such welfare benefit shall be excluded from the
Executive Perquisite Program for purposes of the calculations pursuant to this
Section 4.4(g).

 

4.5. Termination for Total and Permanent Disability. Except as provided in
Section 4.3(b), termination of the Executive’s employment due to Disability is
not a Qualifying Termination. However, if immediately prior to the condition or
event leading to, or the commencement of, the Disability of the Executive, the
Executive would have experienced a Qualifying Termination if he had terminated
at that time, then upon termination of his employment for Disability he shall be
entitled to the benefits provided by this Agreement for a Qualifying
Termination.

 

4.6. Termination for Retirement or Death. Termination of the Executive’s
employment due to death or, except as provided in Section 4.3(b), retirement is
not a Qualifying Termination. However, if immediately prior to the Executive’s
retirement (but not death), the Executive would have experienced a Qualifying
Termination if he had terminated at that time, then upon his retirement he shall
(subject to Section 4.3(e)) be entitled to the benefits provided by this
Agreement for a Qualifying Termination.

 

4.7. Termination for Cause or by the Executive Other Than for Good Reason.
Termination of the Executive’s employment by the Company for Cause or, except as
provided in Section 4.3(b), by the Executive other than for Good Reason does not
constitute a Qualifying Termination.

 

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4.8. Notice of Termination. Any termination by the Company for Cause or by the
Executive for Good Reason shall be communicated by a Notice of Termination. For
purposes of this Agreement, a “Notice of Termination” shall mean a written
notice which shall indicate the specific termination provision in this Agreement
relied upon, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s
employment under the provision so indicated.

 

Article 5. Form and Timing of Severance Benefits; Tax Withholding; Funding of
Rabbi Trust

 

5.1. Form and Timing of Severance Benefits. The Severance Benefits described in
Section 4.4(a), 4.4(b), 4.4(c), 4.4(e), and 4.4(g) shall be paid in cash to the
Executive in a single lump sum as soon as practicable following the Effective
Date of Termination, but in no event beyond thirty (30) days from such date.

 

5.2. Withholding of Taxes. The Company shall be entitled to withhold from any
amounts payable under or pursuant to this Agreement all taxes as legally shall
be required (including, without limitation, any United States Federal taxes, and
any other state, city, or local taxes).

 

5.3. Funding of Rabbi Trust. To the extent the Company is obligated to make a
contribution to any rabbi trust, pursuant to the express terms of such trust,
upon or with respect to a Protected Period or the occurrence of a Change in
Control, the Company shall make such required contribution in accordance with
the terms of such trust.

 

Article 6. Excise Tax Gross-Up

 

6.1. Equalization Payment. If upon or following a Change in Control, the tax
imposed by Section 4999 of the Code or any similar or successor tax (the “Excise
Tax”) applies, solely because of the Change in Control, to any payments,
benefits and/or amounts received by the Executive as Severance Benefits or
otherwise, including, without limitation, any fees, costs and expenses paid
under Article 9 of this Agreement and/or any amounts received or deemed
received, within the meaning of any provision of the Code, by the Executive as a
result of (and not by way of limitation) any automatic vesting, lapse of
restrictions and/or accelerated target or performance achievement provisions, or
otherwise, applicable to outstanding grants or awards to the Executive under any
of the Company’s incentive plans, including without limitation, the 2001
Long-Term Incentive Stock Plan, the 1993 Long Term Incentive Stock Plan, the
1987 Long Term Incentive Plan and the 1981 Long-Term Incentive Plan, the Company
shall pay in cash to the Executive or for the Executive’s benefit as provided
below an additional amount or amounts (the “Gross-Up Payment(s)”) such that the
net amount retained by the Executive after the deduction of any Excise Tax on
such payments, benefits and/or amounts so received and any Federal, state and
local income tax and Excise Tax upon the Gross-Up Payment(s) provided for by
this Section 6.1 shall be equal to such payments, benefits and/or amounts so
received had they not been subject to the Excise Tax. Such payment(s) shall be
made by the Company to the Executive or applicable taxing authority on behalf of
the Executive as soon as practicable following the receipt or deemed receipt of
any such payments, benefits and/or amounts so received, and may be satisfied by
the Company making a payment or payments on Executive’s account in lieu of
withholding for tax purposes but in all events shall be made within thirty (30)
days of the receipt or deemed receipt by the Executive of any such payment,
benefit and/or amount.

 

6.2. Calculation of Gross-Up Payment. The determination of whether a Gross-Up
Payment is required pursuant to this Article 6 and the amount of any such
Gross-Up Payment shall be determined in writing (the “Determination”) by a
nationally-recognized certified public accounting firm selected by the Company
(the “Accounting Firm”). The Accounting Firm shall provide its Determination in
writing, together with detailed supporting calculations and documentation and
any assumptions used in making such computation, to the Company and the
Executive within twenty (20) days of the Effective Date of Termination. Within
twenty (20) days following delivery of the Accounting Firm’s Determination, the
Executive shall have the right, at the Company’s expense, to obtain the opinion
of an “outside counsel,” which opinion need not be unqualified, which sets
forth: (i) the amount of the Executive’s “annualized includible compensation for
the base period” (as defined in Code Section 280G(d) (1)); (ii) the present

 

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value of the Total Payments; (iii) the amount and present value of any “excess
parachute payment;” and (iv) detailed supporting calculations and documentation
and any assumptions used in making such computations. The opinion of such
outside counsel shall be supported by the opinion of a nationally-recognized
certified public accounting firm and, if necessary or required by the Company, a
firm of nationally-recognized executive compensation consultants. The outside
counsel’s opinion shall be binding upon the Company and the Executive and shall
constitute the “Determination” for purposes of this Article 6 instead of the
initial determination by the Accounting Firm. The Company shall pay (or, to the
extent paid by the Executive, reimburse the Executive for) the certified public
accounting firm’s and, if applicable, the executive compensation consultant’s
reasonable and customary fees for rendering such opinion. For purposes of this
Section 6.2, “outside counsel” means a licensed attorney selected by the
Executive who is recognized in the field of executive compensation and has
experience with respect to the calculation of the Excise Tax; provided that the
Company must approve the Executive’s selection, which approval shall not be
unreasonably withheld.

 

6.3. Computation Assumptions. For purposes of determining whether any payments,
benefits and/or amounts, including amounts paid as Severance Benefits, will be
subject to Excise Tax, and the amount of any such Excise Tax:

 

  (a) Any other payments, benefits and/or amounts received or to be received by
the Executive in connection with or contingent upon a Change in Control of the
Company or the Executive’s termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with the
Company, or with any Person whose actions result in a Change in Control of the
Company or any Person affiliated with the Company or such Persons) shall be
combined to determine whether the Executive has received any “parachute payment”
within the meaning of Section 280G(b)(2) of the Code, and if so, the amount of
any “excess parachute payments” within the meaning of Section 280G(b)(1) that
shall be treated as subject to the Excise Tax, unless in the opinion of the
person or firm rendering the Determination, such other payments, benefits and/or
amounts (in whole or in part) do not constitute parachute payments, or such
excess parachute payments represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code in excess
of the base amount within the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax;

 

  (b) The value of any non-cash benefits or any deferred payment or benefit
shall be determined by the person or firm rendering the Determination in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

 

  (c) The compensation and benefits provided for in Section 4.4 herein, and any
other compensation earned prior to the Effective Date of Termination by the
Executive pursuant to the Company’s compensation programs (if such payments
would have been made in the future in any event, even though the timing of such
payment is triggered by the Change in Control), shall for purposes of the
calculation pursuant to this Section 6.3 be deemed to be reasonable; and

 

  (d)

The Executive shall be deemed to pay Federal income taxes at the highest
marginal rate of Federal income taxation in the calendar year in which the
Gross-Up Payment is to be made. Furthermore, the computation of the Gross-Up
Payment shall assume (and adjust for the fact) that (i) there is a loss of
miscellaneous itemized deductions under Section 67 of the Code (or analogous
federal or state provisions) on account of the Gross-Up Payment and (ii) a loss
of itemized deductions under Section 68 of the Code (or analogous federal or
state provisions) on account of the Gross-Up Payment. The computation of the
Gross-Up Payment shall take into account any reduction in the Gross-Up Payment
due to the Executive’s share of the hospital insurance portion of FICA and any
state withholding taxes (other than any state withholding tax for income tax
liability). The computation of the state and local income taxes applicable to
the Gross-Up Payment

 

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shall be based on the highest marginal rate of taxation in the state and
locality of the Executive’s residence on the Effective Date of Termination, and
shall take into account the maximum reduction in Federal income taxes that could
be obtained from the deduction of such state and local taxes.

 

6.4. Executive’s Obligation to Notify Company. The Executive shall promptly
notify the Company in writing of any claim by the Internal Revenue Service (or
any successor thereof) or any state or local taxing authority (individually or
collectively, the “Taxing Authority”) that, if successful, would require the
payment by the Company of a Gross-Up Payment in excess of any Gross-Up Payment
as originally set forth in the Determination. If the Company notifies Executive
in writing that it desires to contest such claim, the Executive shall: (a) give
the Company any information reasonably requested by the Company relating to such
claim; (b) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney selected by the Company that is reasonably acceptable to Executive;
(c) cooperate with the Company in good faith in order to effectively contest
such claim; and (d) permit the Company to participate in any proceedings
relating to such claim; provided that the Company shall bear and pay directly
all attorneys fees, costs and expenses (including additional interest, penalties
and additions to tax) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for all taxes
(including, without limitation, income and excise taxes), interest, penalties
and additions to tax imposed in relation to such claim and in relation to the
payment of such costs and expenses or indemnification. Without limitation on the
foregoing provisions of this Section 6.4, and to the extent its actions do not
unreasonably interfere with or prejudice the Executive’s disputes with the
Taxing Authority as to other issues, the Company shall control all proceedings
taken in connection with such contest and, in its reasonable discretion, may
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the Taxing Authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax, interest or penalties
claimed and sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance an amount equal to such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from all taxes (including, without limitation, income and
excise taxes), interest, penalties and additions to tax imposed with respect to
such advance or with respect to any imputed income with respect to such advance,
as any such amounts are incurred; and, further, provided, that any extension of
the statute of limitations relating to payment of taxes, interest, penalties or
additions to tax for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount; and, provided, further, that any settlement of any claim shall be
reasonably acceptable to the Executive and the Company’s control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder, and the Executive shall be entitled to settle or contest, as
the case may be, any other issue.

 

6.5. Subsequent Recalculation. In the event of a binding or uncontested
determination by the Taxing Authority that adjusts the computation set forth in
the Determination so that the Executive did not receive the greatest net benefit
required pursuant to Section 6.1, the Company shall reimburse the Executive as
provided herein for the full amount necessary to place the Executive in the same
after-tax position as he would have been in had no Excise Tax applied. In the
event of a binding or uncontested determination by the Taxing Authority that
adjusts the computation set forth in the Determination so that the Executive
received a payment or benefit in excess of the amount required pursuant to
Section 6.1, then the Executive shall promptly pay to the Company (without
interest) the amount of such excess.

 

Article 7. The Company’s Payment Obligation

 

7.1. Payment of Obligations Absolute. Except as provided in Sections 4.3(g) and
5.2 and in Article 6, the Company’s obligation to make the payments and the
arrangements provided for herein shall be absolute and unconditional, and shall
not be affected by any circumstances, including, without

 

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limitation, any offset, counterclaim, recoupment, defense, or other right which
the Company may have against the Executive or anyone else. All amounts payable
by the Company hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Company shall be final, and the Company shall not
seek to recover all or any part of such payment from the Executive or from
whomsoever may be entitled thereto, for any reasons whatsoever, except as
otherwise provided in Article 6 or Article 9.

 

The Executive shall not be obligated to seek other employment in mitigation of
the amounts payable or arrangements made under any provision of this Agreement,
and the obtaining of any such other employment shall in no event effect any
reduction of the Company’s obligations to make the payments and arrangements
required to be made under this Agreement, except to the extent provided in
Section 4.4(d).

 

7.2. Contractual Right to Benefits. This Agreement establishes and vests in the
Executive a contractual right to the benefits to which he or she is entitled
hereunder. The Company expressly waives any ability, if possible, to deny
liability for any breach of its contractual commitment hereunder upon the
grounds of lack of consideration, accord and satisfaction or any other defense.
In any dispute arising after a Change in Control as to whether the Executive is
entitled to benefits under this Agreement, there shall be a presumption that the
Executive is entitled to such benefits and the burden of proving otherwise shall
be on the Company. However, nothing herein contained shall require or be deemed
to require, or prohibit or be deemed to prohibit, the Company to segregate,
earmark, or otherwise set aside any funds or other assets, in trust or
otherwise, to provide for any payments to be made or required hereunder.

 

7.3. Pension Plans; Duplicate Benefits. All payments, benefits and amounts
provided under this Agreement shall be in addition to and not in substitution
for any pension rights under the Company’s tax-qualified pension plan,
supplemental retirement plans, nonqualified deferred compensation plans, and any
disability, workers’ compensation or other Company benefit plan distribution
that the Executive is entitled to at his or her Effective Date of Termination.
Notwithstanding the foregoing, this Agreement shall not create an inference that
any duplicate payments shall be required. No payments made pursuant to this
Agreement shall be considered compensation for purposes of any such benefit
plan; provided that any amount paid pursuant to Section 4.4(c) shall not be
subject to such limitation. Payment of the Executive’s accrued and unpaid Base
Salary and accrued vacation pay through the Executive’s Effective Date of
Termination shall be deemed to not duplicate any benefit contemplated by this
Agreement and shall not result in an offset pursuant to Section 4.3(g). Any
acceleration of vesting, lapse of restrictions and/or payout occasioned by a
Change in Control pursuant to the provisions of any long-term incentive plan
and/or individual award agreement under such a long-term incentive plan shall be
deemed to not duplicate any benefit contemplated by this Agreement and shall not
result in an offset pursuant to Section 4.3(g).

 

Article 8. Trade Secrets; Non-Solicitation and Non-Disparagement

 

By executing this Agreement and again by receiving any benefits provided for by
this Agreement, the Executive agrees as follows:

 

  (a)

In the course of performing his or her duties for the Company, the Executive
will receive, and acknowledges that he or she has received, confidential
information, including without limitation, information not available to
competitors relating to the Company’s existing and contemplated financial plans,
products, business plans, operating plans, research and development information,
and customer information, all of which is hereinafter referred to as “Trade
Secrets.” The Executive agrees that he or she will not, either during his or her
employment or subsequent to the termination of his or her employment with the
Company, directly or indirectly disclose, publish or otherwise divulge any Trade
Secret of the Company or any of its affiliates to anyone outside the Company, or
use such information in any manner which would adversely affect the business or
business prospects of the Company, without prior written authorization from the
Company to do so.

 

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       The Executive further agrees that if, at the time of the termination of
his or her employment with the Company, he or she is in possession of any
documents or other written or electronic materials constituting, containing or
reflecting Trade Secrets, the Executive will return and surrender all such
documents and materials to the Company upon leaving its employ. The restrictions
and protection provided for in this Section 8(a) shall be in addition to any
protection afforded to Trade Secrets by law or equity and in addition to any
protection afforded to Trade Secrets by any other agreement between the
Executive and the Company.

 

  (b) For a period of one year following the termination of the Executive’s
employment with the Company, the Executive shall not, directly or indirectly
through, aid, assistance or counsel, on the Executive’s own behalf or on behalf
of another person or entity (i) contact, solicit or offer to hire any person who
was, within a period of six months prior to the termination of the Executive’s
employment with the Company, employed by the Company or one of its subsidiaries,
or (ii) by any means issue or communicate any private or public statement that
may be critical or disparaging of the Company or any of its affiliates, or any
of their respective products, services, officers, directors or employees.

 

Article   9. Claims Procedure

 

9.1. Committee Review. The Executive or, in the event of the Executive’s death,
the Executive’s Beneficiary (as applicable, the “Claimant”) may deliver to the
Committee a written claim for a determination with respect to the amounts
distributable to such Claimant from this Agreement. Such claim shall be
delivered to the Committee care of the Company in accordance with the notice
provisions of Section 11.6. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within sixty (60) days after
such notice was received by the Claimant. All other claims must be made within
two hundred and seventy (270) days of the date on which the event that caused
the claim to arise occurred. The claim must state with particularity the
determination desired by the Claimant.

 

9.2. Notification of Decision. The Committee shall consider a Claimant’s claim
pursuant to Section 9.1 within a reasonable time, but no later than ninety (90)
days after receiving the claim. If the Committee determines that special
circumstances require an extension of time for processing the claim, written
notice of the extension shall be furnished to the Claimant prior to the
termination of the initial ninety (90) day period. In no event shall such
extension exceed a period of ninety (90) days from the end of the initial
period. The extension notice shall indicate the special circumstances requiring
an extension of time and the date by which the Committee expects to render the
benefit determination. The Committee shall notify the Claimant in writing:

 

  (a) that the Claimant’s requested determination has been made, and that the
claim has been allowed in full; or

 

  (b) that the Committee has reached a conclusion contrary, in whole or in part,
to the Claimant’s requested determination, and such notice must set forth in a
manner calculated to be understood by the Claimant:

 

  (i) the specific reason(s) for the denial of the claim, or any part of it;

 

  (ii) specific reference(s) to pertinent provisions of this Agreement upon
which such denial was based;

 

  (iii) a description of any additional material or information necessary for
the Claimant to perfect the claim, and an explanation of why such material or
information is necessary;

 

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  (iv). a statement that the Claimant is entitled to receive, upon request and
free of charge, reasonable access to and copies of, all documents, records and
other information relevant (as defined in applicable ERISA regulations) to the
Claimant’s claim for benefits; and

 

  (v) a statement of the Claimant’s right to seek arbitration pursuant to
Section 9.4.

 

9.3. Pre and Post-Change in Control Procedures. With respect to claims made
prior to the occurrence of a Change in Control, a Claimant’s compliance with the
foregoing provisions of this Article 9 is a mandatory prerequisite to a
Claimant’s right to commence arbitration pursuant to Section 9.4 with respect to
any claim for benefits under this Agreement. With respect to claims made upon
and after the occurrence of a Change in Control, the Claimant may proceed
directly to arbitration in accordance with Section 9.4 and need not first
satisfy the foregoing provisions of this Article 9.

 

9.4. Arbitration of Claims. All claims or controversies arising out of or in
connection with this Agreement, that the Company may have against any Claimant,
or that any Claimant may have against the Company or against its officers,
directors, employees or agents acting in their capacity as such, shall, subject
to the initial review provided for in the foregoing provisions of this Article 9
that are effective with respect to claims brought prior to the occurrence of a
Change in Control, be resolved through arbitration as provided in this Section
9.4. The decision of an arbitrator on any issue, dispute, claim or controversy
submitted for arbitration, shall be final and binding upon the Company and the
Claimant and that judgment may be entered on the award of the arbitrator in any
court having proper jurisdiction. The arbitrator shall review de novo any claim
previously considered by the Committee pursuant to Section 9.1.

 

All expenses of such arbitration, including the fees and expenses of the counsel
for the Executive, shall be advanced and borne by the Company; provided,
however, that if it is finally determined that the Claimant did not commence the
arbitration in good faith and had no reasonable basis therefore, the Claimant
shall repay all advanced fees and expenses and shall reimburse the Company for
its reasonable legal fees and expenses in connection therewith.

 

Except as otherwise provided in this procedure or by mutual agreement of the
parties, any arbitration shall be administered: (1) in accordance with the
then-current Model Employment Arbitration Procedures of the American Arbitration
Association (“AAA”) before an arbitrator who is licensed to practice law in the
state in which the arbitration is convened; or (2) if locally available, the
Judicial Arbitration & Mediation Services, Inc. (“JAMS”), in accordance with the
JAMS procedures then in effect. The party who did not initiate the claim can
designate between JAMS or AAA (the “Tribunal”). The arbitration shall be held in
the city in which the Claimant is or was last employed by the Company in the
nearest Tribunal office or at a mutually agreeable location. Pre-hearing and
post-hearing procedures may be held by telephone or in person as the arbitrator
deems necessary.

 

The arbitrator shall be selected as follows: if the parties cannot agree on an
arbitrator, the Tribunal (JAMS or AAA) shall then provide the names of nine (9)
available arbitrators experienced in business employment matters along with
their resumes and fee schedules. Each party may strike all names on the list it
deems unacceptable. If more than one common name remains on the list of all
parties, the parties shall strike names alternately until only one remains. The
party who did not initiate the claim shall strike first. If no common name
remains on the lists of the parties, the Tribunal shall furnish an additional
list or lists until an arbitrator is selected.

 

The arbitrator shall interpret this Agreement, any applicable Company policy or
rules and regulations, any applicable substantive law (and the law of remedies,
if applicable) of the state in which the claim arose, or applicable federal law.
In reaching his or her decision, the arbitrator shall have no authority to
change or modify any lawful Company policy, rule or regulation, or this
Agreement. The arbitrator, and not any federal, state or local court or agency,
shall have exclusive and broad authority to resolve any dispute relating to the
interpretation, applicability, enforceability or formation of this Agreement,
including but not limited to, any claim that all or any part of this Agreement
is voidable.

 

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The arbitrator shall have authority to entertain a motion to dismiss and/or
motion for summary judgment by any party and shall apply the standards governing
such motions under the Federal Rules of Civil Procedure.

 

Each party shall have the right to take the deposition of one individual and any
expert witness(es) designated by another party. Each party shall also have the
opportunity to obtain documents from another party through one request for
production of documents. Additional discovery may be had only when the
arbitrator so orders upon a showing of substantial need. Any disputes regarding
depositions, requests for production of documents or other discovery shall be
submitted to the arbitrator for determination.

 

Each party shall have the right to subpoena witnesses and documents for the
arbitration hearing by requesting a subpoena from the arbitrator. Any such
request shall be served on all other parties, who shall advise the arbitrator in
writing of any objections that the party may have to issuance of the subpoena
within ten (10) calendar days of receipt of the request.

 

At least thirty (30) calendar days before the arbitration, the parties must
exchange lists of witnesses, including any expert(s), and copies of all exhibits
intended to be used at the arbitration.

 

Article  10.   Successors and Assignment

 

10.1. Successors to the Company. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) of all or
substantially all of the business and/or assets of the Company or of any
division or subsidiary thereof (the business and/or assets of which constitute
at least fifty percent (50%) of the total business and/or assets of the Company)
to expressly assume and agree to perform the Company’s obligations under this
Agreement in the same manner and to the same extent that the Company would be
required to perform them if such succession had not taken place. Failure of the
Company to obtain such assumption and agreement in a written instrument prior to
the effective date of any such succession shall be a breach of this Agreement
and shall entitle the Executive to compensation from the Company in the same
amount and on the same terms as they would be entitled to hereunder if they had
terminated their employment with the Company voluntarily for Good Reason. Except
for the purpose of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Executive’s Effective Date of
Termination if the Executive so elects, but any delay or failure by the
Executive to so elect shall not be a waiver or release of any rights hereunder
which may be asserted at any time.

 

10.2. Assignment by the Executive. This Agreement shall inure to the benefit of
and be enforceable by the Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If the Executive dies while any amount would still be payable to him
or her hereunder had he or she continued to live, all such amounts, unless
otherwise provided herein, shall be paid to the Executive’s Beneficiary in
accordance with the terms of this Agreement. If the Executive has not named a
Beneficiary, then such amounts shall be paid to the Executive’s devisee,
legatee, or other designee, or if there is no such designee, to the Executive’s
estate.

 

Article  11.   Miscellaneous

 

11.1. Employment Status. Except as may be provided under any other written
agreement between the Executive and the Company, the employment of the Executive
by the Company is “at will,” and, prior to the effective date of a Change in
Control, may be terminated by either the Executive or the Company at any time,
subject to applicable law.

 

11.2. Beneficiaries. The Executive may designate one or more persons or entities
as the primary and/or contingent Beneficiaries of any Severance Benefits owing
to the Executive under this Agreement. The Executive may make or change such
designation at any time, provided that any designation or change thereto must be
in the form of a signed writing acceptable to and received by the Committee.

 

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11.3. Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.

 

11.4. Severability. In the event any provision of this Agreement shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Agreement, and this Agreement shall be construed and
enforced as if the illegal or invalid provision had not been included. Further,
the captions of this Agreement are not part of the provisions hereof and shall
have no force and effect.

 

11.5. Modification. No provision of this Agreement may be modified, waived, or
discharged unless as to the Executive such modification, waiver, or discharge is
agreed to in writing and signed by each affected Executive and by an authorized
member of the Committee or its designee, or by the respective parties’ legal
representatives and successors.

 

11.6. Notice. For purposes of this Agreement, notices, including a Notice of
Termination, and all other communications provided for in this Agreement shall
be in writing and shall be deemed to have been duly given when delivered or on
the date stamped as received by the U.S. Postal Service for delivery by
certified or registered mail, postage prepaid and addressed: (i) if to the
Executive, to his latest address as reflected on the records of the Company, and
(ii) if to the Company: Northrop Grumman Corporation, 1840 Century Park East,
Los Angeles, California 90067, Attn: Chief Human Resources Officer, or to such
other address as the Company may furnish to the Executive in writing with
specific reference to this Agreement and the importance of the notice, except
that notice of change of address shall be effective only upon receipt.

 

11.7. Applicable Law. To the extent not preempted by the laws of the United
States, the laws of the State of California shall be the controlling law in all
matters relating to this Agreement. Any statutory reference in this Agreement
shall also be deemed to refer to all applicable final rules and final
regulations promulgated under or with respect to the referenced statutory
provision.

 

IN WITNESS WHEREOF, the parties have executed this Agreement on this 16th day of
October, 2003.

 

Northrop Grumman Corporation

  

Executive

By:

  

J. Michael Hateley

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Charles H. Noski

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EXHIBIT D

 

RELEASE AGREEMENT

 

1. PARTIES: The parties to this Release Agreement (referred to hereafter as
“Agreement”) are MR. CHARLES H. NOSKI (referred to hereafter as “Executive”) and
NORTHROP GRUMMAN CORPORATION (referred to hereafter as “Northrop Grumman” or the
“Company”).

 

2. RECITALS: This Agreement is made with reference to the following facts:

 

2.1 Executive and Northrop Grumman are parties to an Employment Agreement, one
of the terms of which provides Executive, under certain conditions, with Special
Severance Benefits in exchange for a release.

 

2.2 This Agreement is the release Executive is required to sign in order to
receive those Special Severance Benefits.

 

3. CONSIDERATION: In exchange for the Executive’s agreement to abide by all of
the terms of this Agreement, Northrop Grumman will provide Executive with the
Special Severance Benefits set forth in Section 14 of the Employment Agreement.

 

4. COMPLETE RELEASE: In consideration of the promises contained herein, and for
other good and valuable consideration the receipt of which is hereby
acknowledged, Executive does hereby acknowledge full and complete satisfaction
of and does hereby agree to release, absolve and discharge Releasees (as defined
below) from all claims, causes of action, demands, damages or costs he may have
against Releasees on behalf of himself or others arising prior to the date he
signs this Agreement. “Releasees” shall mean the Company, its subsidiaries,
affiliated and related companies, past, present and future, and each of them, as
well as its and their employees, officers, directors, and agents (in their
capacities as employees, officers, directors and agents), past and present, and
each of them in such capacities.

 

4.1 This waiver and release includes, but is not limited to, any rights, claims,
causes of action, demands, damages or costs arising under the Age Discrimination
in Employment Act, which prohibits discrimination in employment based on age,
and retaliation; Title VII of the Civil Rights Act of 1964, which prohibits
discrimination in employment based on race, color, religion, sex or national
origin, and retaliation; the Americans with Disabilities Act, which prohibits
discrimination based on disability and retaliation; the California Fair
Employment and Housing Act, which prohibits discrimination in employment based
on race, color, religion, sex, sexual orientation, national origin, ancestry,
physical disability, mental disability, medical condition, marital status or
age, and retaliation; or any other federal, state or local laws or regulations
prohibiting employment discrimination or retaliation whether such claim be based
upon an action filed by Executive or by any governmental agency.

 

4.2 This waiver and release also includes, but is not limited to, any rights,
claims, causes of action, demands, damages or costs arising under Executive’s
Employment Agreement, or in relation to the Company’s employee handbook and
personnel policies, or any oral or written representations or statements made by
officers, directors, lawyers, employees or agents of the Company, past and
present, and each of them, or under any state or federal law regulating wages,
hours, compensation or employment, or any claim for retaliation, wrongful
discharge, breach of contract, breach of the implied covenant of good faith and
fair dealing, intentional or negligent infliction of emotional distress,
intentional or negligent misrepresentation, or defamation.

 

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4.3 This waiver and release also includes, but is not limited to, any rights,
claims, causes of action, demands, damages or costs arising under or in relation
to any severance plan, program, or arrangement.

 

4.4 This waiver and release also includes, but is not limited to, any rights,
claims, causes of action, demands, damages or costs arising under the federal
False Claims Act.

 

4.5 This release covers both claims that Executive knows about and those he may
not know about. Executive hereby specifically waives and relinquishes all rights
and benefits provided by Section 1542 of the Civil Code of the State of
California, and does so understanding and acknowledging the significance of this
specific waiver of Section 1542. Section 1542 of the Civil Code of the State of
California states as follows:

 

“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.”

 

4.6 Notwithstanding the provisions of Section 1542 and for the purpose of
implementing a full and complete release, Executive expressly acknowledges that
this Agreement is intended to include all claims which he does not know or
suspect to exist in his favor at the time of his signature on the Agreement, and
that this Agreement will extinguish any such claims

 

4.7 Notwithstanding anything to the contrary herein, this Agreement does not
waive or release: (i) any rights or claims which Executive may have under the
Age Discrimination in Employment Act or other laws which arise after the date he
signs this Agreement, (ii) any rights or claims Executive may have under his
Employment Agreement with the Company which survive termination of employment or
termination of his Employment Agreement; (iii) any rights Executive may have for
indemnification from the Company; (iv) any rights which Executive may have under
the Company’s Directors and Officers liability insurance policy; (v) any rights
Executive may have under stock option, RPSR, RSR or other stock incentive grants
provided to him by the Company; (vi) any rights Executive may have as a
shareholder of Northrop Grumman; and (vii) any rights Executive may have to
vested benefits under any Company employee benefit plan, including, without
limitation, any Company pension plan (including the Special Pension Benefit in
Section 5.D of the Executive’s Employment Agreement).

 

5. ARBITRATION: Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration, conducted before a
single arbitrator in the State of California (in the major city nearest
Executive’s residence) in accordance with the National Rules for the Resolution
of Employment Disputes of the American Arbitration Association then in effect.
The decision of the arbitrator will be final and binding upon the parties
hereto. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction. The arbitrator may, but need not, award the prevailing party in
any dispute (as determined by the arbitrator) its or his legal fees and
expenses.

 

6. PERIOD FOR REVIEW AND CONSIDERATION OF AGREEMENT; ADVICE OF COUNSEL:
Executive agrees and understands that he has been given a period of twenty-one
(21) calendar days from his receipt of this Agreement to review and consider
this Agreement before signing it. Executive further understands that he may use
as much of this review period as he wishes prior to signing; he can sign this
Agreement at any time prior to the expiration of the twenty-one calendar day
period. At the end of this period, this offer of Special Severance Benefits will
be deemed automatically withdrawn if not earlier signed by Executive and
delivered to the Company. Executive is advised and encouraged to consult with
his own legal counsel prior to signing this Agreement.

 

7. RIGHT TO REVOKE AGREEMENT: Executive may revoke this Agreement within seven
(7) calendar days of signing it. Revocation can be made by delivering a written
notice of revocation to Chief Human Resources Officer, Northrop Grumman
Corporation, 1840 Century Park East, Los Angeles, CA 90067. For this revocation
to be effective, written notice must be received by the Chief Human

 

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Resources Officer no later than 5:00 p.m. PST on the seventh calendar day after
Executive signs this Agreement. If Executive revokes this Agreement, it shall
not be effective or enforceable, and Executive will not receive the benefits
described in Section 3 of this Agreement.

 

8. NON-ADMISSION OF LIABILITY: Nothing contained herein shall be construed as an
admission by either Executive or by Northrop Grumman of liability of any kind.

 

9. SEVERABILITY: The provisions of this Agreement are severable, and if any part
of it is found to be illegal or invalid and thereby unenforceable, the validity
of the remaining parts, terms or provisions shall not be affected and shall
remain fully enforceable. The unenforceable part, term or provision shall be
deemed not to be a part of this Agreement.

 

10. SOLE AND ENTIRE AGREEMENT: Except as otherwise expressly set forth herein,
this Agreement sets forth the entire agreement between the parties hereto, and
fully supersedes any and all discussions, prior agreements or understandings
between the parties hereto pertaining to the subject matter of this Agreement.

 

11. GOVERNING LAW: This Agreement shall be interpreted and enforced in
accordance with the laws of the State of California without regard to rules
regarding conflicts of law.

 

EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS, CONFER
WITH COUNSEL, AND TO CAREFULLY CONSIDER ALL OF THE PROVISIONS OF THIS AGREEMENT
BEFORE SIGNING IT. HE FURTHER AGREES THAT HE HAS READ THIS AGREEMENT,
UNDERSTANDS IT, AND IS VOLUNTARILY ENTERING INTO IT.

 

PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS.

 

        EXECUTIVE

DATED:

 

 

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BY:

 

 

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            CHARLES H. NOSKI             NORTHROP GRUMMAN CORPORATION

DATED:

 

 

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BY:

 

 

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TITLE:

 

 

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