<PAGE>   1
[LITTON LOGO]
                                                                  EXHIBIT 10.16
                                GROUP BONUS PLAN

I.      PURPOSE

        The purpose of this Group Bonus Plan is to reward Group Executives and
        other key Group personnel for achieving Group financial performance
        consistent with Litton corporate goals. The participants are expected to
        conduct their business in an ethical manner, consistent with the Litton
        Standards of Conduct and to make decisions that ensure the long-term
        viability of the Group as well as the success of the current plan
        period. For this reason, the Litton Chief Executive Officer and the
        Litton President and Chief Operating Officer will eliminate or reduce
        bonus payments under this Group Bonus Plan if they believe that a
        participant has sacrificed long-term objectives to make short-term
        profits.

II.     PARTICIPANTS

        Group Executives and other key Group personnel.

        Group Executives are eligible to receive 50% of their bonus opportunity
        in accordance with the terms of this Group Bonus Plan and 50% in
        accordance with the terms of the Litton Industries, Inc. Performance
        Award Plan.

III.    BONUS PLAN

        Each Group Executive will be informed of the maximum percent of base
        salary (target bonus) that can be earned as a bonus. The base salary is
        the salary on the first day of the fiscal year that this Group Bonus
        Plan covers. The base salary can be adjusted for salary increases that
        are retroactive to the beginning of the fiscal year. The maximum percent
        of base salary will vary as a function of Group size, number of
        divisions and other factors. Each Group Executive, Group Controller and
        Group Vice President-Marketing will be given their individual target
        bonuses by the Litton President and Chief Operating Officer. The earned
        bonus percent of this target is a function of Group Return on Capital
        Utilized, as provided for in Paragraph V.

IV.     PARTICIPATION LEVEL

        Individual bonuses will be determined at the discretion of the Litton
        Chief Executive Officer and the Litton President and Chief Operating
        Officer.

<PAGE>   2
V.      FINANCIAL PERFORMANCE

        A minimum Group Return on Capital Utilized of 15% (ROCU) must be made
        before any bonuses can be earned. After which, bonuses will be earned
        pro rata, linearly as follows:

<TABLE>
<CAPTION>
                                             EARNED BONUS PERCENT
        MINIMUM                                        OF
         ROCU                                     TARGET BONUS
        -------                         ----------------------------------
                                                                ALL OTHER
                                        GROUP EXECUTIVES      PARTICIPANTS 
                                        ----------------      ------------
        <S>                                    <C>                   <C>  
        15%                                    25%                  50%
        28%                                    50%                 100%
</TABLE>

VI.     BONUS PAYMENTS

        Each year earned bonus will be paid to participants in the December
        following the close of the fiscal year of performance. Participants must
        be employed by Litton on the payment date to be eligible for any bonus
        payment. 

        A.      Approved Leaves--A participant who leaves Litton: (1) to enter
                any of the Armed Services of the United States; (2) on an
                approved leave of absence; (3) on sick leave of absence in
                excess of thirty (30) days; or (4) upon termination due to
                retirement or disability, either during the fiscal year or after
                the close of the fiscal year, but prior to the bonus payment
                date, shall share in the Group Bonus Plan. In any such case,
                such employee will participate through the date of the month in
                which he or she is transferred or terminates employment.

        B.      Deceased Participant--In the event of the death of a participant
                prior to the payment date, Litton will pay the pro rata portion
                of the bonus to date of death to the beneficiary as stipulated
                on the participant's group insurance card, and payment will be
                made on the regular payment date.

                                       2
<PAGE>   3
VII.    AGREEMENT

        It is understood that this Group Bonus Plan does not constitute a
        contract between Litton and the participating personnel and may be
        changed, modified, amended, or terminated at any time by the
        Compensation and Selection Committee of the Board of Directors of
        Litton. It is also understood that a participant's performance during
        the plan period will have a bearing on the actual bonus paid regardless
        of the potential target bonus percentage.

                                       3