exv10w12






Exhibit 10.12




APPENDIX I

TO THE NORTHROP GRUMMAN SUPPLEMENTAL PLAN 2




Officers Supplemental Executive Retirement Program II



(Amended and Restated Effective as of January 1, 2011)


Appendix I to the Northrop Grumman Supplemental Plan 2 (the “Appendix”) is hereby amended and
restated effective as of January 1, 2011. This restatement amends a prior version of the Appendix
which was also effective January 1, 2011.





	I.01	 	Purpose. The purpose of this Program is to give enhanced retirement benefits to
eligible officers of the Company.
	 
	I.02	 	Definitions and Construction.






	 	(a)	 	Capitalized terms used in this Appendix that are not defined in this Appendix
or Article I of the Plan are taken from the Qualified Plans, and are intended to have
the same meaning.
	 
	 	(b)	 	“Cash Balance Program” means the Northrop Grumman Corporation Cash Balance
Program, or any successor thereto.
	 
	 	(c)	 	Eligible Pay. Subject to paragraphs (1) through (3) below, Eligible Pay will be
based on the eligible pay a Participant would have under the Cash Balance Program if
(i) the Participant was eligible to participate in the Cash Balance Program, (ii) there
were no limits on eligible pay under the Cash Balance Program under applicable
limitations of the Code, including section 401(a)(17), and (iii) amounts deferred under
the Northrop Grumman Deferred Compensation Plan and the Northrop Grumman Savings Excess
Plan counted as eligible pay under the Cash Balance Program.






	 	(1)	 	If a Participant experiences a Termination of Employment before
December 31 or is hired after January 1 of any year, Eligible Pay for the year
in which the Participant’s Termination of Employment or date of hire occurs is
determined in accordance with the Standard Annualization Procedure in Article 2
of the Cash Balance Program.
	 
	 	(2)	 	The following shall not be considered as Eligible Pay for
purposes of determining the amount of any benefit under the Program:






	 	(A)	 	any payment authorized by the Compensation
Committee that is (1) calculated pursuant to the method for determining
a bonus amount under the Annual Incentive Plan (AIP) for a given year,
and (2) paid in lieu of such bonus in the year prior to the year the
bonus would otherwise be paid under the AIP, and




 









 






	 	(B)	 	any award payment under the Northrop Grumman
Long-Term Incentive Cash Plan.






	 	(3)	 	Eligible Pay shall include amounts earned after a Participant
attains age 65.






	 	(d)	 	Final Average Salary for any Plan Year is the Participant’s average Eligible
Pay for the highest three Plan Years in which the Participant was an employee of an
Affiliated Company.
	 
	 	(e)	 	Months of Benefit Service.






	 	(1)	 	Except as provided in (2) and (3) below, a Participant shall be
credited with a Month of Benefit Service for each month that would count as
Credited Service under the Cash Balance Program if the Participant was eligible
to participate in the Cash Balance Program.
	 
	 	(2)	 	Months of Benefit Service will continue to be counted for a
Participant until cessation of the Participant’s status as an elected or
appointed officer of the Company (except as otherwise provided in Section
I.04(f)).
	 
	 	(3)	 	Months of Benefit Service shall not include any time that
counts as service under any portion of a plan spun out of the Company’s
controlled group, if the service would no longer be treated as benefit accrual
service under the Cash Balance Program if the Participant was eligible to
participate in the Cash Balance Program.
	 
	 	(4)	 	Months of Benefit Service shall continue to be earned after a
Participant has attained age 65.






	 	(f)	 	Benefits are calculated without regard to the limits in sections 401(a)(17) and
415 of the Code.






	I.03	 	 Eligibility. Eligibility for benefits under this Program is limited to the elected or
appointed officers of the Company hired or rehired after June 2008 and on or before December
31, 2009 and designated for participation in the Program by the Vice President, Compensation,
Benefits & International (as such title may be modified from time to time).
	 
	I.04	 	 Benefit Amount.






	 	(a)	 	A Participant’s annual Normal Retirement Benefit under this Program equals the
sum of (1) through (3) below, subject to the limit described in Section I.05:






	 	(1)	 	2.0% x Final Average Salary x Months of Benefit Service up to
120 months ÷ 12




- 2 -









 






	 	(2)	 	1.5% x Final Average Salary x Months of Benefit Service in
excess of 120 months up to 240 months ÷ 12
	 
	 	(3)	 	1.0% x Final Average Salary x Months of Benefit Service in
excess of 240 months up to 540 months ÷ 12






	 	(b)	 	The total benefit payable is a straight life annuity commencing at age 65,
assuming an annual benefit equal to the gross benefit under (a). The form of benefit
and timing of commencement will be determined under Section I.06.
	 
	 	(c)	 	If a Participant’s benefit is paid under this Program before age 65, the
benefit will be adjusted as follows. The Early Retirement Benefit is a monthly benefit
equal to the Normal Retirement Benefit reduced by the lesser of:






	 	(1)	 	1/12th of 2.5% for each calendar month the payment of benefits
begins before age 65; or
	 
	 	(2)	 	2.5% for each benefit point less than 85 where the
Participant’s benefit points (truncated to reach a whole number) equal the sum
of:






	 	(A)	 	his or her age (computed to the nearest 1/12th
of a year) at the annuity starting date, and
	 
	 	(B)	 	1/12th of his or her Months of Benefit Service
(also computed to the nearest 1/12th of a year) as of the date his or
her employment terminated.






	 	(d)	 	Except as provided otherwise in this Appendix I, no benefit will be paid under
this Program if a Participant experiences a Termination of Employment before (1)
attaining age 55 and completing 120 Months of Benefit Service, or (2) attaining age 65
and completing 60 Months of Benefit Service.
	 
	 	(e)	 	A Participant shall be entitled to benefits notwithstanding the Participant’s
failure to meet the requirements of Section I.04(d) if the following requirements are
satisfied:






	 	(1)	 	the Participant has been involuntarily terminated or terminated
due to the divestiture of his business unit;
	 
	 	(2)	 	the Participant has reached age 53 and completed 10 years of
early retirement eligibility service, or has accumulated 75 points, as of the
date of termination, all as determined under the terms of the Northrop Grumman
Pension Plan (assuming the Participant were eligible to participate in such
plan); and
	 
	 	(3)	 	the Participant is actively accruing benefits under the Program
as of the date of termination.




- 3 -









 












	 	 	 	If a Participant receives a notice of an involuntary termination and then transfers
to another related entity instead of being involuntarily terminated, the Participant
will not qualify for vesting under this subsection (e). If an involuntarily
terminated Participant is rehired by the Company, vesting under this subsection (e)
would not apply unless the Participant is subsequently terminated and meets the
requirements described above.
	 
	 	 	 	All benefits payable pursuant to this subsection (e) shall be subject to reduction
for early retirement as applicable under Section I.04(c).
	 
	 	(f)	 	The rules set forth in this Section I.04(f) shall apply in the event a
Participant ceases to satisfy the eligibility requirements of Section I.03 (the
“eligibility requirements”) because the Participant is no longer an elected or
appointed officer of the Company:






	 	(1)	 	for purposes of calculating the Participant’s benefit amount
pursuant to Section I.04(a), “Eligible Pay” and “Months of Benefit Service”
shall not reflect amounts paid or service on or after the date the Participant
ceases to satisfy the eligibility requirements, except that in the event the
Participant subsequently satisfies the eligibility requirements, “Eligible Pay”
and “Months of Benefit Service” shall reflect all pay and past service to the
extent consistent with the terms of this Program in effect for newly eligible
employees at the time the Participant satisfies the eligibility requirements
for the second time;
	 
	 	(2)	 	for purposes of applying the 60% limitation pursuant to Section
I.05, “Eligible Pay” shall include amounts paid on or after the date the
Participant ceases to satisfy the eligibility requirements;
	 
	 	(3)	 	for purposes of applying Sections I.04(d) and I.04(e), service
on or after the date the Participant ceases to satisfy the eligibility
requirements shall continue to count as service;
	 
	 	(4)	 	for purposes of applying the reduction for early retirement
pursuant to Section I.04(c), service on or after the date the Participant
ceases to satisfy the eligibility requirements shall continue to count as
service.






	 	(g)	 	If a Participant experiences a Termination of Employment after earning at least
three Years of Vesting Service and is not vested in benefits under the Program under
subsection (d), (e), or (f) above, he shall be entitled to a benefit equal to the
benefit he would have received had he participated in the Cash Balance Program from his
date of hire to the date of his Termination of Employment and if there were no Code
limits on compensation or benefits under the Cash Balance Program. This benefit will be
payable in accordance with Section I.06. Any
Participant entitled to a benefit under this subsection (g) shall not be entitled to
a benefit under subsection (a).




- 4 -









 












	I.05	 	Benefit Limit. A Participant’s total accrued benefits under all defined benefit
retirement plans, programs, and arrangements maintained by the Affiliated Companies, whether
qualified or nonqualified (but not contributory or defined contribution plans, programs, or
arrangements) in which he or she participates, including the benefit accrued under Section
I.04, may not exceed 60% of his or her Final Average Salary. If this limit is exceeded, the
Participant’s benefit accrued under this Program will be reduced to the extent necessary to
satisfy the limit.






	 	(a)	 	The Participant’s Final Average Salary will be reduced for early retirement
applying the factors in Sections I.04(c) and I.09.
	 
	 	(b)	 	The limit in this subsection may not be exceeded even after the benefits under
this Program have been enhanced under any Special Agreements.






	I.06	 	Payment of Benefits. Benefits will be paid in accordance with Appendix 2.
	 
	I.07	 	Death Benefits. Any payments to be made upon the death of a Participant shall be determined under and distributed in
accordance with Appendix 2.
	 
	I.08	 	Individual Arrangements. This Section applies to a Participant who has an individually-negotiated arrangement with the
Company for supplemental retirement pension benefits. Notwithstanding any other provision to the contrary, this Section
does not apply to any individually-negotiated arrangements between a Participant and the Company concerning severance
payments.






	 	(a)	 	This Section is intended 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 I.04 or
I.07 (as limited by I.05).
	 
	 	(b)	 	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 benefit under an individually-negotiated arrangement exceeds 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 I.05).
	 
	 	(d)	 	To determine which benefit is greater, all benefits will be compared, subject
to adjustment for early retirement using the applicable factors and methodologies under
Section I.04(c).
	 
	 	(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.




- 5 -









 












	I.09	 	Actuarial Assumptions. The following defined terms and actuarial assumptions will be
used to the extent necessary under Sections I.05 and I.08 to convert benefits to straight life
annuity form commencing upon the Participant reaching age 65:
	 
	 	 	Interest: Five percent (5%)
	 
	 	 	Mortality: The applicable mortality table 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 benefit.
	 
	I.10	 	Forfeiture of Benefits. Notwithstanding any other provision of this Program, this
Section applies to a Participant’s total accrued benefit under this Program earned after 2010.






	 	(a)	 	Determination of a Forfeiture Event. The Compensation Committee or its
delegate will, in its sole discretion, determine whether a Forfeiture Event (as defined
in subsection (b)) has occurred; provided that no Forfeiture Event shall be incurred by
a Participant who has a termination of employment due to mandatory retirement pursuant
to Company policy. Such a determination may be made by the Compensation Committee or
its delegate for up to one year following the date that the Compensation Committee has
actual knowledge of the circumstances that could constitute a Forfeiture Event.
	 
	 	(b)	 	Forfeiture Event Defined. A “Forfeiture Event” means that, while
employed by any of the Affiliated Companies or at any time in the two year period
immediately following the Participant’s last day of employment by one of the Affiliated
Companies, the Participant, either directly or indirectly through any other person, is
employed by, renders services (as a director, consultant or otherwise) to, has any
ownership interest in, or otherwise participates in the financing, operation,
management or control of, any business that is then in competition with the business of
any of the Affiliated Companies. A Participant will not, however, be considered to have
incurred a Forfeiture Event solely by reason of owning up to (and not more than) two
percent (2%) of any class of capital stock of a corporation that is registered under
the Securities Exchange Act of 1934.




- 6 -









 






	 	(c)	 	Forfeiture of Benefits.






	 	(1)	 	If the Compensation Committee or its delegate determines that a
Forfeiture Event has occurred, the relevant Participant may forfeit up to 100%
of his or her total accrued benefit under this Program earned after 2010. The
amount forfeited, if any, will be determined by the Compensation Committee or
its delegate in its sole discretion, and may consist of all or a portion of the
Program benefits earned after 2010 and not yet paid.
	 
	 	(2)	 	Program benefits earned by a Participant after 2010 shall be
deemed to constitute a proportionate share of each payment of benefits for
purposes of determining the portion of each such payment to be forfeited under
subsection (1).
	 
	 	(3)	 	Any forfeiture pursuant to this Section will also apply with
respect to survivor benefits or benefits assigned under a Qualified Domestic
Relations Order.






	 	(d)	 	Coordination with 60% Benefit Limit. For purposes of applying the 60%
of Final Average Salary benefit limit of Section I.05, or any other similar provision
in other plans, programs and arrangements of the Affiliated Companies, such benefit
limit will be applied as if no forfeiture occurred under this Section I.10.
	 
	 	(e)	 	Notice and Claims Procedure.






	 	(1)	 	The Company will provide timely notice to any Participant who
incurs a forfeiture pursuant to this Section I.10. Any delay by the Company in
providing such notice will not otherwise affect the amount or timing of any
forfeiture determined by the Compensation Committee or its delegate.
	 
	 	(2)	 	The procedures set forth in the Company’s standardized Northrop
Grumman Nonqualified Plans Claims and Appeals Procedures (“Claims Procedures”)
will apply to any claims and appeals arising out of or related to any
forfeiture under this Section I.10, except as provided below:






	 	(A)	 	The Compensation Committee, or its delegate,
will serve in place of the designated decision-makers on any such
claims and appeals.
	 
	 	(B)	 	After a claimant has exhausted his remedies
under the Claims Procedures, including the appeal stage, the claimant
forgoes any right to file a civil action under ERISA section 502(a),
but instead may present any claims arising out of or related to any
forfeiture under this Section I.10 to final and binding arbitration in
the manner described below:






	 	(i)	 	A claimant must file a demand for
arbitration no later than one year following a final decision on
the appeal under the




- 7 -









 






	 	 	 	Claims Procedures. After such period, no claim for
arbitration may be filed, and the decision becomes final. A
claimant must deliver a demand for arbitration to the
Company’s General Counsel.
	 
	 	(ii)	 	Any claims presented shall be
settled by arbitration consistent with the Federal Arbitration
Act, and consistent with the then-current Arbitration Rules and
Procedures for Employment Disputes, or equivalent, established
by JAMS, a provider of private dispute resolution services.
	 
	 	(iii)	 	The parties will confer to
identify a mutually acceptable arbitrator. If the parties are
unable to agree on an arbitrator, the parties will request a
list of proposed arbitrators from JAMS and:






	 	(a)	 	If there is an
arbitrator on the list acceptable to both parties, that
person will be selected. If there is more than one
arbitrator on the list acceptable to both parties, each
party will rank each arbitrator in order of preference,
and the arbitrator with the highest combined ranking
will be selected.
	 
	 	(b)	 	If there is no
arbitrator acceptable to both parties on the list, the
parties will alternately strike names from the list
until only one name remains, who will be selected.






	 	(iv)	 	The fees and expenses of the
arbitrator will be borne equally by the claimant and the
Company. Each side will be entitled to use a representative,
including an attorney, at the arbitration. Each side will bear
its own deposition, witness, expert, attorneys’ fees, and other
expenses to the same extent as if the matter were being heard in
court. If, however, any party prevails on a claim, which (if
brought in court) affords the prevailing party attorneys’ fees
and/or costs, then the arbitrator may award reasonable fees
and/or costs to the prevailing party to the same extent as would
apply in court. The arbitrator will resolve any dispute as to
who is the prevailing party and as to the reasonableness of any
fee or cost.
	 
	 	(v)	 	The arbitrator will take into
account all comments, documents, records, other information,
arguments, and theories submitted by the claimant relating to
the claim, or considered by the Compensation Committee or its
delegate relating to the claim, but only to the extent that it
was




- 8 -









 






	 	 	 	previously provided as part of the initial decision or appeal
request on the claim.
	 
	 	 	 	The arbitrator may grant a claimant’s claim only if the
arbitrator determines it is justified based on: (a) the
Compensation Committee, or its delegate erred upon an issue
of law in the appeal request, or (b) the Compensation
Committee’s, or its delegate’s, findings of fact during the
appeal process were not supported by the evidence.
	 
	 	(vi)	 	The arbitrator shall issue a
written opinion to the parties stating the essential findings
and conclusions upon which the arbitrator’s award is based. The
decision of the arbitrator will be final and binding upon the
claimant and the Company. A reviewing court may only confirm,
correct, or vacate an award in accordance with the standards set
forth in the Federal Arbitration Act, 9 U.S.C. §§ 1-16.
	 
	 	(vii)	 	In the event any court finds any
portion of this procedure to be unenforceable, the unenforceable
section(s) or provision(s) will be severed from the rest, and
the remaining section(s) or provisions(s) will be otherwise
enforced as written.






	 	(f)	 	Application. Should a Forfeiture Event occur, this Section I.10 is in
addition to, and does not in any way limit, any other right or remedy of the Affiliated
Companies, at law or otherwise, in connection with such Forfeiture Event.






	I.11	 	TASC Participants. Participants who are actively employed in a TASC Entity: 254 or
255 on the date the entities are transferred to an unrelated buyer (“TASC Closing Date”) will
be 100% vested in their benefit determined under Section I.04(a), (b) and (c) of the Program
on the TASC Closing Date. No pay or service after the TASC Closing Date will count for
purposes of determining the amount of such a Participant’s benefit under the Program. If the
TASC Closing Date occurs before 2010, the TASC Closing Date shall be deemed to be January 1,
2010 for purposes of determining the rights of Participants.
	 
	I.12	 	Special Rules for Certain Participants. The Vice President, Compensation, Benefits &
International (as such title may be modified from time to time) may designate certain
Participants who were rehired in 2009 as subject to the following special rules
notwithstanding anything in the Program to the contrary.






	 	(a)	 	Service Credit. For vesting and benefit accrual purposes, the
Participant will be credited with Months of Benefit Service from the Participant’s
original date of hire through the Participant’s original termination date and from the
Participant’s rehire date through December 31, 2010. After 2010, for vesting and
benefit accrual purposes, the Participant will be credited with Months of Benefit
Service




- 9 -









 






	 	 	 	in accordance with the terms of the Program. The Participant’s rehire date will be
considered the Participant’s date of hire for purposes of Section I.04(g).
	 
	 	(b)	 	Benefit Amount. The amount of the Participant’s benefit under the
Program will be reduced by all benefits accrued as of December 31, 2010 under Company
qualified and nonqualified defined benefit retirement plans. Offset procedures shall
follow those established in Section G.05(c) of Appendix G.






	I.13	 	Transfer of Liabilities to HII. Northrop Grumman Corporation distributed its interest
in Huntington Ingalls Industries, Inc. (“HII”) to its shareholders on March 31, 2011 (the “HII
Distribution Date”). Pursuant to an agreement between Northrop Grumman Corporation and HII,
on the HII Distribution Date certain employees and former employees of HII ceased to
participate in the Program and the liabilities for these participants’ benefits under the
Program were transferred to HII. On and after the HII Distribution Date, the Company and the
Program, and any successors thereto, shall have no further obligation or liability to any such
participant with respect to any benefit, amount, or right due under the Program.





*   *   *




                     IN WITNESS WHEREOF, this Amendment and Restatement is hereby executed by a duly
authorized officer on this 27th day of June, 2011.



	 	 	 	 	 
	 	NORTHROP GRUMMAN CORPORATION

 	 
	 	By:  	/s/ Debora L. Catsavas
 	 
	 	Debora L. Catsavas 	 
	 	Vice President, Compensation,

Benefits & International 	 




- 10 -