Exhibit 10(z)

 

EMPLOYMENT AGREEMENT

 

1. PARTIES: The Parties to this Employment Agreement (hereafter referred to as
the “Agreement”) are DONALD C. WINTER (hereafter referred to as “Executive”) and
NORTHROP GRUMMAN CORPORATION (hereafter referred to as “Northrop Grumman” or
“the Company”).

 

2. EMPLOYMENT: Northrop Grumman hereby agrees to employ Executive and Executive
hereby accepts such employment by Northrop Grumman upon the terms and conditions
herein set forth.

 

3.

TERM: The Company has entered into an agreement with TRW Inc., an Ohio
corporation (“TRW”) to effect a transaction (the “Merger”) pursuant to which TRW
will become a wholly owned subsidiary of the Company. The closing of the Merger
(the “Closing”) is expected to occur on or about December 11, 2002. The term of
this Agreement shall commence as of the date of the Closing (the “Effective
Date”) if such Closing occurs on or before December 31, 2002 and shall end four
years thereafter, unless sooner terminated pursuant to Section 8 or 9 hereof.
This Agreement is further subject to approval by the Compensation and Management
Development Committee of the Company’s Board of Directors. This Agreement shall
be of no force or effect if either (a) the Closing does not occur on or before
December 31, 2002, or (b) it is not approved by the

 

1

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

 

Compensation and Management Development Committee of the Company’s Board of
Directors by December 31, 2002.

 

4. POSITION AND DUTIES: During the period of Executive’s employment by Company
during the term hereof, Executive shall (a) serve as the Company’s Corporate
Vice President and President, Missions Systems Sector, (b) shall be principally
responsible for the Company’s Missions Systems Sector, and (c) shall report to a
member of the Company’s Office of the Chairman, such member to be determined by
the Company’s Chief Executive Officer from time to time. Notwithstanding the
preceding sentence, the Company may change Executive’s title and/or
responsibilities from time to time; provided that the Company may not (a)
diminish Executive’s title, (b) diminish Executive’s authority (when viewed in
the aggregate), or (c) cause Executive to report to anyone other than a member
of the Company’s Office of the Chairman. In his capacity as Corporate Vice
President and President, Mission Systems Sector, Executive will serve on the
Company’s Corporate Policy Council.

 

Executive shall, during the course of his employment by the Company during the
term hereof:

 

  (a)

attempt in good faith to do and perform all such acts and duties and furnish
such services, all as commensurate with his position, as the Company shall
reasonably request, reasonably cooperate with the

 

2

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

 

Company, and attempt in good faith to do and perform all acts in the ordinary
course of the Company’s business reasonably necessary and conducive to the
performance of his duties hereunder; and

 

  (b) devote his full time, energy and skill to the business of the Company and
to the promotion of the Company’s best interests, except for vacations and
absences made necessary because of illness or other traditionally approved leave
purposes; provided, that the foregoing shall not prevent Executive from managing
his and his family’s personal investments, being involved in charitable, civic
and professional activities (including serving on the boards of directors of
not-for-profit organizations) and, with the consent of the Chief Executive
Officer, serving on the boards of directors of for-profit entities so long as
such activities do not materially interfere with Executive’s performance of his
duties hereunder.

 

5.

TRW EMPLOYMENT CONTINUATION AGREEMENT: Executive currently has an Employment
Continuation Agreement with TRW (the “ECA”). Executive hereby waives and
relinquishes any and all rights and benefits he may have under his ECA, and
agrees not to make any claim, now or in the future, for benefits under the ECA.
Executive acknowledges that TRW is a third-party beneficiary of this provision.
Executive and the Company hereby agree to terminate the ECA in its entirety as
of the Effective Date. Executive further acknowledges and agrees that he has no
right to retention compensation, or

 

3

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

 

severance compensation or benefits under any other plan, program, policy or
arrangement of TRW, the Company, or either of their respective affiliates with
respect to his continuing employment or any termination of employment except as
may be expressly provided under this Agreement, Company plans or programs, or at
law. Without limiting the generality of the foregoing, Executive agrees that he
has no right to any compensation, benefits or other payment under or with
respect to any retention and/or severance agreement that he or she may have
previously entered into.

 

TRW and Putnam Fiduciary Trust Company entered into a Rabbi Trust Agreement on
or about December 5, 2002. Executive acknowledges and agrees that he is not
entitled to any payment or benefit from the trust (the “Trust”) formed pursuant
to such agreement and the Payment Schedule pursuant to such agreement is hereby
so amended. In the event that Executive receives any payment from the Trust,
such payment shall offset on a dollar for dollar basis any obligation of the
Company to Executive under this Agreement. Executive further acknowledges and
agrees that the payment required pursuant to Section 6(b) below may be made from
the Trust (in lieu of payment from the Company or TRW) and, in the event such
payment is made in full from the Trust, the Company and TRW shall have no
further obligation to Executive pursuant to Section 6(b).

 

4

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

6. COMPENSATION AND BENEFITS:

 

  (a) Base Salary: Executive’s base salary for the course of his employment by
the Company during the term hereof shall be no less than $500,000 per year (pro
rated for any period of service less than a full year). Executive’s base salary
shall not be increased for 2003, but such salary shall be subject to increases
(but not decreases) in accordance with the Company’s normal salary review
process for 2004 and any subsequent year during the course of his employment by
the Company during the term hereof.

 

  (b) Consideration in Lieu of ECA Payment: The Company (unless such amount is
paid by TRW or by the Trust) shall pay Executive a special bonus of $4,400,000
within thirty days after the Closing in lieu of any and all rights that
Executive may have under the ECA. Such compensation shall not be taken into
consideration (for benefit determination purposes or otherwise) under any
pension, supplemental pension, savings or other benefit plan or program of the
Company or TRW notwithstanding any provision of any such plan or program to the
contrary.

 

  (c)

TRW Incentive Pay: Executive’s 2002 bonus under the TRW Operational Incentive
Plan (the “OIP”) shall equal $572,400, and such amount shall be pension eligible
under the TRW pension plans. Any portion of such bonus

 

5

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

 

not paid by TRW shall be paid by the Company no later than January 15, 2003.
Executive shall not have any right to receive any new award or accrue any
additional benefit under the OIP, the TRW Strategic Incentive Program (the
“SIP”) or any other TRW incentive program. Any compensation related to the OIP,
the SIP or any other TRW incentive program shall not be taken into consideration
(for benefit determination purposes or otherwise) under any Company pension,
supplemental pension, savings or other benefit plan or program notwithstanding
any provision of any such plan or program to the contrary; provided that OIP
compensation shall be taken into consideration for purposes of the TRW benefit
plans and programs in which Executive participates in accordance with the usual
rules of such plans and programs.

 

  (d) ICP Bonus: Commencing on January 1, 2003 and for the balance of the period
of Executive’s employment by the Company during the term hereof as an elected
officer, Executive shall participate in the Company’s Incentive Compensation
Plan (“ICP”), a bonus plan for elected Company officers. Executive’s target
bonus under such plan shall be at least 50% of his base salary for the relevant
period, provided however, that Executive’s actual bonus will be determined in
accordance with the terms of the ICP and may be more or less than 50% of his
base salary.

 

6

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

  (e)

Benefits: Executive is currently covered by the benefit plans of TRW. Executive
shall continue to be covered by the TRW pension and welfare benefit plans until
January 1, 2003 (or as soon as administratively practical thereafter that he can
be moved into the Company benefit plans). Effective January 1, 2003 or as soon
as administratively practical thereafter, Executive shall no longer accrue
benefits under the TRW pension plans nor participate in the TRW welfare plans,
but rather shall commence participation in the Northrop Grumman welfare plans
and commence benefit accruals under the Northrop Grumman pension plans in which
Northrop Grumman elected officers who are direct reports to a member of the
Company’s Office of the Chairman participate. These plans include, but are not
limited to, the Northrop Grumman Retirement Plan, the Northrop Grumman Savings
and Investment Plan, the Northrop Grumman Deferred Compensation Plan, and three
non-qualified supplemental executive retirement plans known as “ERISA 1”, “ERISA
2” and the “CPC SERP.” As of January 1, 2003, Executive shall be credited with
years of vesting service (but not benefit service) under the Northrop Grumman
Retirement Plan, the Northrop Grumman Savings and Investment Plan, and the three
Company non-qualified supplemental executive retirement plans for his years of
service with TRW. Notwithstanding the foregoing, compensation earned on or after
January 1, 2003 shall be recognized under the TRW nonqualified Supplementary
Retirement Income Plan (“SRIP”) for purposes of determining Executive’s

 

7

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

 

benefits thereunder. Executive shall retain all rights under the TRW SRIP (other
than the special enhancement provided by the ECA), Benefit Equalization Plan,
and Deferred Compensation Plan.

 

  (f) Retiree Medical Benefit: Executive shall be eligible to participate in the
Elected Officer Retiree Medical Program on the same terms and conditions as
other elected officers of similar status.

 

  (g) Stock and Stock Options: At the next meeting of the Compensation and
Management Development Committee of the Company’s Board of Directors (“Initial
Grant Date”), Executive shall be granted (a) a non-qualified stock option
covering 15,000 shares of Company common stock with a per share exercise price
equal to the Fair Market Value (as defined in the Guide) of a share of Company
common stock on the date of grant, and (b) 8,000 restricted performance stock
rights (“RPSRs”). When elected officers of the Company generally are granted
equity-based incentives in or around August 2003, if Executive is then employed
by the Company, Executive shall be granted (a) a non-qualified stock option
covering no less than an additional 15,000 shares of Company common stock with a
per share exercise price equal to the Fair Market Value (as defined in the
Guide) of a share of Company common stock on the date of grant, and (b) no less
than an additional 8,000 RPSRs.

 

8

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

The options and RPSRs granted to Executive shall be awarded under and shall be
subject to the terms and conditions of the Company’s 2001 Long Term Incentive
Stock Plan, as amended from time to time (the “LTISP”), the Guide to
Administration for the LTISP, as amended from time to time (the “Guide”), and
the grant certificates provided to Executive.

 

The foregoing share and RPSR numbers are subject to adjustment for stock splits
and similar events in accordance with the adjustment provisions of the LTISP.

 

Each option granted to Executive on the Initial Grant Date shall have a maximum
term of ten years and shall vest in four substantially equal installments, with
an installment becoming vested, subject to Executive’s continued employment
through the respective vesting date, on each of the first through fourth
anniversaries of the respective date of grant of the option.

 

The RPSRs granted as of the Initial Grant Date shall have a January 1, 2003
through December 31, 2005 performance period. Performance targets for the grant
shall be established by the Company.

 

9

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

The options and RPSRs granted in or around August 2003 shall be on terms
otherwise similar to the terms applicable to other Company elected officer
grants made at that time

 

Notwithstanding any contrary death, Disability (as defined in the Guide), or
involuntary separation vesting or RPSR payment provision that may customarily
apply with respect to awards under the LTISP, the following special vesting and
RPSR payment provisions shall apply with respect to Executive’s option and RPSR
grants made as of the Initial Grant Date (but not the contemplated August 2003
awards or any other subsequent award) in the event that Executive’s employment
terminates in the circumstances described: in the event that Executive’s
employment with the Company terminates due to Executive’s death or Disability
(as defined in the Guide) or in the event that Executive’s employment is
terminated by the Company other than for Cause (as defined in Section 8 or by
Executive for Good Reason (as defined in Section 9), then (a) the portion of
Executive’s options granted on the Effective Date that are then outstanding and
otherwise unvested shall thereupon become fully vested (but such options shall
otherwise be subject to any limited post-termination exercise period that may
apply), and (b) Executive’s RPSRs granted on the Effective Date shall be paid in
accordance with their usual terms as though Executive’s employment by the
Company had not terminated (without pro ration) except that the 30% minimum
payment provisions

 

10

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

applicable to certain RPSRs shall not apply (accordingly, no payment of such
RPSRs shall be made unless and until payments with respect to such RPSRs are
made to participants who continue to be employed by the Company).

 

  (h) Gross-Up: In the event that any compensation or benefits paid to Executive
pursuant to this Agreement or by TRW or from the Trust are subject to Excise Tax
(as defined in Exhibit B hereto) as a result of the Merger, then the Gross-Up
Provisions of Exhibit B shall apply. This provision shall survive the
termination of this Agreement.

 

  (i) New CIC Agreement: Executive shall be provided with a March 2000 Special
Agreement with the Company providing the same protection for Executive in the
event of a change in control (as defined in such agreement) of the Company as is
provided to other elected officers of the Company. Consistent with the terms of
such Special Agreement, the Merger does not constitute a change in control
pursuant to such Special Agreement.

 

7.

PERQUISITES: For the course of his employment by the Company during the term
hereof, Executive shall be eligible for the perquisites provided to Company
officers who are direct reports to a member of the Company’s Office of the

 

11

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

 

Chairman. The perquisites currently provided are listed on Appendix A of this
Agreement.

 

8.

TERMINATION OF EMPLOYMENT BY THE COMPANY: The Company shall have the right to
terminate Executive’s employment at any time, with or without cause, upon giving
at least 14 days advance written notice to 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), then Executive shall
be entitled to participate in the Company’s Officer Severance Plan and the
Company shall have no further obligation under this Agreement, except for rights
under Section 6(b), tax gross-up under Section 6(h), amounts and benefits due
under any plan, arrangement or grant (including as provided under Section 6(g))
and rights of indemnification and directors and officers liability insurance
under Sections 13 and 14 (the “Protected Rights”). If the Company terminates
Executive’s employment for Cause, the Company shall have no further obligation
to Executive under this Agreement, except for the Protected Rights other than
rights under Section 6(b) For purposes of this Section 8 and Section 9(c),
“Cause” shall mean the occurrence of either or both of the following: (i)
Executive’s conviction for committing a felony involving an act of fraud,
embezzlement or; or (ii) the willful engaging by Executive in misconduct with
regard to the Company having a significant adverse effect on the Company;
provided, however, that no act or failure to act on Executive’s part shall be
considered “willful” unless done, or omitted to be done, by Executive not in
good

 

12

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

 

faith and without reasonable belief that his action or omission was in the best
interests of the Company.

 

9. TERMINATION OF EMPLOYMENT BY EXECUTIVE OR BY REASON OF EXECUTIVE’S DEATH OR
DISABILITY:

 

  (a) Death: In the event that Executive dies during the term of this Agreement,
Executive’s employment by the Company shall automatically terminate as of the
date of death and the Company shall have no further obligation under this
Agreement, except the Protected Rights.

 

  (b) Disability: If Executive’s employment terminates by reason of his
Disability (as defined in the Guide) during the term of this Agreement, the
Company shall have no further obligation under this Agreement, except the
Protected Rights.

 

  (c) By the Executive: Executive may terminate his employment at any time by
written notice to the Company with or without Good Reason.

 

(i) Good Reason: If Executive terminates employment for Good Reason (as defined
below), then Executive shall be entitled to participate in the Company’s Officer
Severance Plan and the Company shall have no further obligation under this
Agreement except for the Protected Rights. For purposes of this Section 9(c),
“Good Reason” shall mean the occurrence of any of the following: (i) the Company
changes Executive’s reporting relationship such that he no longer reports to a
member of the Company’s Office of the Chairman, (ii) the Company materially
breaches

 

13

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

its obligations under Section 4 of this Agreement, (iii) the Company relocates
Executive’s principal place of employment without Executive’s prior written
consent, or (iv) the Company purports to terminate Executive’s employment for
Cause (as defined in Section 8 above) when Cause does not, in fact, exist. Prior
to exercising his right to terminate for “Good Reason”, Executive shall give the
Company at least 30 days written notice of his intent to terminate and of the
facts which he believes give rise to “Good Reason”, and the Company shall have
an opportunity to cure during this 30 day period.

 

  (d) Other: The Company shall have no further obligation under this Agreement
if Executive terminates employment for any other reason, other than the
Protected Rights

 

10.

TRADE SECRETS: In the course of performing his duties for TRW and for the
Company, Executive will receive, and acknowledges that he 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.” Executive agrees that he will not, either during
his employment or subsequent to the termination of his employment with the
Company, directly or indirectly (i) disclose, publish or otherwise divulge any
Northrop Grumman or TRW Trade Secret to anyone outside the Company or its
affiliates,, without prior

 

14

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

 

written authorization from the Company to do so, except in the good faith
performance of his duties or in order to comply with legal process or
governmental inquiry, or (ii) use such information in any manner which would
adversely affect the business or business prospects of the Company, except in or
to comply with legal process or governmental inquiry. 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 the paragraph shall be
in addition to any protection afforded to Trade Secrets by law or equity. This
Section 10 shall survive any purported termination of this Agreement
notwithstanding anything else contained herein to the contrary.

 

11.

INVENTIONS: Executive agrees that all inventions, discoveries and improvements,
and all new ideas for manufacturing and marketing products of the Company, which
Executive has conceived during his employment with TRW or 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

 

15

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

 

management with any such inventions, discoveries, 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. This Section 11 shall survive any purported
termination of this Agreement notwithstanding anything else contained herein to
the contrary.

 

12.

NON-SOLICITATION AND NON-DISPARAGEMENT: For a period of one year following
Executive’s termination of employment, Executive shall not, directly or
indirectly, through aid, assistance or counsel, on his own behalf or on behalf
of another person or entity, solicit for hire or offer to hire any person who
was, within a period of six months prior to Executive’s termination, employed by
the Company. For a period of one year following Executive’s termination of
employment, neither Executive, on the one hand, nor the Company formally, a
member of the Board of Directors of the Company or a member of the Company’s
Corporate Policy Council, on the other hand, shall, directly or indirectly, with
intent to damage the other, issue or communicate any public statement or
statement likely to become public that is critical of or damaging to the other
(or in the case of the Company, also its officers, directors or employees and,
except in a competitive situation if Executive is working for a competitor or a

 

16

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

 

customer, its products or services). The foregoing shall not be violated by
truthful responses to legal process or governmental inquiry. This Section 12
shall survive any purported termination of this Agreement notwithstanding
anything else contained herein to the contrary.

 

13. 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 Executive’s good faith performance of
his duties and obligations with the Company or with TRW (including service prior
to the Effective Date hereof). The Company, within 30 days of presentation of
invoices, shall advance to Executive reimbursement of all legal fees and
disbursements reasonably 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. This provision shall
survive the termination of this Agreement.

 

17

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

14. 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.

 

15. ASSIGNMENT: This Agreement is personal to Executive and shall not be
assigned by him. However, this Agreement may be assigned by the Company only to
any entity succeeding to all or substantially all of the assets or business of
the Company, whether by merger, consolidation, acquisition or otherwise (upon
which entity the Agreement shall be binding), and only if the Company promptly
delivers to Executive a written assumption of the Agreement and the obligations
hereunder by such entity.

 

16. TAX WITHHOLDING: The Company shall be entitled to withhold from any amounts
payable or 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).

 

17. 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.

 

18

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

18. LEGAL FEES: The Company shall pay Executive’s reasonable legal fees incurred
in connection with negotiating this Agreement.

 

19. SEVERANCE PLAN: Any provision of the Company Severance Plan shall not place
burdens on Executive with regard to matters of the same nature as those covered
by Sections 10, 11 and 12 hereof that are broader than those set forth in such
Sections.

 

20. 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;
provided that this Agreement does not supersede any trade secret or invention
obligations of Executive under any prior agreement. Notwithstanding the
foregoing, Executive shall (a) retain all rights to receive his accrued benefits
under the TRW SRIP, Benefit Equalization Plan, and Deferred Compensation Plan,
in accordance with the terms of those plans (other than any special enhancements
to those plans which may be provided for solely under the ECA), (b) be entitled
to receive all amounts due to him under the TRW SIP (other than the special
enhancement provided for solely under the ECA), and (c) have all of his TRW
stock option and restricted stock grants vest, and, to the extent he has not
cashed them out, assumed by the Company.

 

19

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

21. GOVERNING LAW: This Agreement shall be construed in accordance with and
governed by the laws of the State of Virginia.

 

Dated:

 

12/12/02

     

/s/ Donald C. Winter

            Donald C. Winter

Dated:

 

12/12/02

     

/s/ Patricia H. Summers

            Northrop Grumman Corporation              

By:

 

Vice President

           

Compensation, Benefits and Executive

           

Development

 

20

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

 

Exhibit A: Executive Perquisites as of the Effective Date

 

Life and AD&D Insurance

 

The noncontributory life insurance coverage provided to you is three times your
annual base salary, with a maximum of $600,000. Accidental death and
dismemberment coverage is six times your annual base salary, with a maximum of
$1,000,000.

 

Long-term Disability

 

Benefit is 65% of base salary, with a maximum of $15,000 per month, including
your Social Security benefit.

 

Medical Care

 

Provided you have not enrolled in the Safety Net Plan, you and your eligible
dependents are covered by a supplemental plan which provides for reimbursement
of 100% of allowable reasonable and customary charges, with an annual maximum of
$10,000 per person. You will still be responsible for the deductible and
required contributions.

 

Dental Care

 

Provided you have not enrolled in the Preventive Plan, you are covered by a
supplemental plan which provides you and your family with 100% reimbursement of
allowable reasonable and customary charges, with an annual maximum of $2,000.
You will still be responsible for the deductible and required contributions.

 

Comprehensive Personal Liability

 

To help provide financial protection against potentially devastating effects of
lawsuits, you have $5,000,000 comprehensive personal liability coverage to
supplement your personal, nonbusiness coverage. There is a minimum personal
coverage requirement, as well as a small deductible amount in some cases.
Coverage is also extended to lawsuits arising out of ownership of such items as
animals, swimming pools, boats, and all registered vehicles, excluding aircraft.

 

Executive Physical Program

 

Because Northrop Grumman regards the periodic physical examination of key
personnel as being important to both the executive and the company, you are
entitled to an annual, company-paid, comprehensive physical examination. This
examination may be obtained from one of several designated medical centers.

 

Company Car/Allowance

 

Recognizing that most executives desire to have an attractive, comfortable
automobile for their use, you will be paid an annual car allowance (currently
$15,000), in increments with each regular paycheck. This allowance is designed
to reimburse you for the cost of a new automobile every three years, plus
insurance and maintenance costs. Reimbursements for gasoline and car washes will
also be provided.

 

21

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

Financial Planning and Income Tax Return Preparation

 

In order to fully maximize the value of your executive compensation package, and
to keep you abreast of current estate planning and related tax considerations,
reimbursement will be made for financial planning assistance and income tax
return preparation from a reputable firm of your choice. You will be reimbursed
up to $9,000 per year for these services.

 

Air Travel

 

For air travel of two hours or longer, you may fly first class. The company will
reimburse you for membership in two airline clubs.

 

Clubs

 

The company will reimburse you for membership (initiation fees, monthly dues,
and general club assessments) in two clubs, with an annual maximum of $5,000.

 

(The foregoing are only brief summaries of these perquisites. The actual terms
of the perquisites are governed by the formal plan documents and Company
policies. In the event of any inconsistency between the foregoing summaries and
the terms of any applicable plan document or Company policy, the plan document
or Company policy will control. The Company must and does reserve the right to
modify or eliminate these perquisites and amend the applicable plan documents
and Company policy from time to time. To the extent that any perquisite
constitutes taxable income to Executive, Executive will be responsible for any
resulting tax liability and the Company shall withhold from such perquisite or
other compensation such amounts as may be required.)

 

22

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

 

Exhibit B: Gross-Up Provisions

 

(a) If it shall be determined (as hereafter provided) that any payment or
distribution by the Company or TRW to or for the benefit of Executive, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a “Payment”) either before or after any purported
termination of this Agreement, would be subject to the excise tax imposed by
Section 4999 (or any successor thereto) of the Internal Revenue Code of 1986, as
amended (the “Code”), with respect to a change in control triggered by the
Merger, or any interest or penalties with respect to such excise tax (such
excise tax related to a change in control triggered by the Merger, together with
any such interest and penalties related thereto, are hereafter collectively
referred to as the “Excise Tax”), then Executive shall be entitled to receive an
additional payment or payments (collectively, a “Gross-Up Payment”); provided,
however, that no Gross-Up Payment shall be made with respect to the Excise Tax,
if any, attributable to (i) any incentive stock option, as defined by Section
422 of the Code (“ISO”) granted prior to the execution of this Agreement, or
(ii) any stock appreciation or similar right, whether or not limited, granted in
tandem with any ISO described in clause (i). The Gross-Up Payment shall be in an
amount such that, after payment by Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

 

(b) Subject to the provisions of clause (e) below, all determinations required
to be made under this Exhibit B, including whether an Excise Tax is payable by
Executive and the amount of such Excise Tax and whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment, shall be made by a nationally
recognized firm of certified public accountants (the “Accounting Firm”) selected
by Executive in his sole discretion. Executive shall direct the Accounting Firm
to submit its determination and detailed supporting calculations to both the
Company and Executive within 15 calendar days after the date that Executive’s
employment with the Company terminates, if applicable, or such earlier time or
times as may be requested by the Company or Executive. If the Accounting Firm
determines that any Excise Tax is payable by Executive, the Company shall pay
the required Gross-Up Payment to Executive within five business days after
receipt of the aforesaid determination and calculations. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it shall, at the same
time as it makes such determination, furnish Executive with an opinion that he
has substantial authority not to report any Excise Tax on his federal income tax
return. Any determination by the Accounting Firm as to the amount of the
Gross-Up Payment to be paid by the Company within such 15 calendar-day period
shall be binding upon the Company and Executive. As a result of the uncertainty
in the application of Section 4999 (or any successor thereto) of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (“Underpayment”), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 6(e) thereof and Executive thereafter is required
to make a payment of any Excise Tax, Executive shall direct the

 

23

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

Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both the
Company and Executive as promptly as possible. Any such Underpayment shall be
promptly paid by the Company to or for the benefit of Executive within three
calendar days after receipt of such determination and calculations.

 

(c) The Company and Executive shall each cooperate with the Accounting Firm in
connection with the preparation and issuance of the determination provided for
in clause (b) above. Such cooperation shall include without limitation providing
the Accounting Firm access to and copies of any books, records and documents in
the possession of the Company or Executive, as the case may be, that are
reasonably requested by the Accounting Firm.

 

(d) The fees and expenses of the Accounting Firm for its services in connection
with the determinations and calculations provided for in clause (b) above shall
be paid by Executive. The Company shall reimburse Executive for his payment of
such costs and expenses within five business days after receipt from Executive
of a statement therefore and evidence of his payment thereof.

 

(e) Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of
a Gross-Up Payment. Such notification shall be given as soon as practicable but
no later than 10 business days after Executive receives notice of such claim and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. Executive shall not pay such claim prior to the
earlier of (i) the expiration of the 30 calendar-day period following the date
on which it gives such notice to the Company or (ii) the date that any payment
of taxes with respect to such claim is due. If the Company notifies Executive in
writing prior to the expiration of such period that it desires to contest such
claim, Executive shall:

 

(i) give the Company any information reasonably requested by the Company
relating to such claim;

 

(ii) 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 reasonably selected by the Company;

 

(iii) cooperate with the Company in good faith in order effectively to contest
such claim; and

 

(iv) permit the Company to participate in any proceedings relating to such
claim;

 

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and

 

24

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

shall indemnify and hold Executive harmless, on an after-tax basis, for any
Excise Tax or income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this clause (e), the Company
shall control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conference with the taxing authority in respect of
such claim (but Executive may participate therein at his own cost and expense)
and may, at its sole option, either direct Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and 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 Executive to pay the tax claimed and sue for a refund, the Company shall
advance the amount of such payment to Executive on an interest-free basis and
shall indemnify and hold Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of Executive
with respect to which the contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company’s control of such
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder, and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

 

(f) If, after the receipt by Executive of an amount advanced by the Company
pursuant to clause (e) hereof, Executive receives any refund with respect to
such claim, Executive shall (subject to the Company’s complying with the
requirements of clause (e) hereof) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by Executive of an amount advanced by
the Company pursuant to clause (e) hereof, a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

 

25