Document:

1995 Amended Stock Option Plan for Non-Employee Directors

 Exhibit 10.1 
  
 NORTHROP GRUMMAN CORPORATION 
 1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS, 
 AS AMENDED 
  
 Section 1:    Purpose 
  
 The Northrop Grumman Corporation 1995 Stock Option Plan for Non-Employee
Directors (“Plan”) has been adopted to promote the longer-term growth and financial success of the Company by (1) enhancing its ability to attract and retain nonaffiliated individuals of outstanding ability as members of the Board and (2)
promoting a greater identity of interest between non-employee members of the Board and shareholders. 
  
 Section 2:    Definitions 
  
 As used in the Plan, the following terms have these respective meanings: 
  

	 	(a)	“Board” means the Company’s Board of Directors. 

  

	 	(b)	“Common Stock” means the Company’s Common Stock, par value $1.00 per share, or any successor stock issued by the Company in replacement or conversion thereof.

  

	 	(c)	“Company” means Northrop Grumman Corporation, a corporation established under the laws of the State of Delaware. 

  

	 	(d)	“Fair Market Value” means for any given day the closing sales price on such date of a share of Common Stock as reported on the principal securities exchange on which such
shares of Common Stock are then listed or admitted to trading or as reported on the National Association of Securities Dealers Automated Quotation (“NASDAQ”) National Market System, if not so listed or admitted. If no sales of Common Stock
were made on such exchange or reported on the NASDAQ system on that date, the closing price of a share of Common Stock for the preceding day of such exchange or as reported by NASDAQ shall be substituted. 

  

	 	(e)	“Grant Date” means the third business day following the Company’s Annual Meeting of Shareholders. 

  

	 	(f)	“Participant” means for each Grant Date any director of the Company who is not an employee of the Company or any subsidiary or affiliate of the Company on the applicable
Grant Date. 

  

	 	(g)	“Plan” means the Northrop Grumman Corporation 1995 Stock Option Plan for Non-Employee Directors. 

  

	 	(h)	“Stock Option” means a right to purchase shares of Common Stock at the applicable Fair Market Value. 

  

	 	(i)	“1934 Act” means the Securities Exchange Act of 1934. 

  
 Section 3:    Effective Date 
  
 The Plan shall be effective beginning on the date it is approved by the Company’s shareholders and shall remain in effect for each applicable Grant
Date until terminated by the Board. If the Plan is terminated, the terms of the Plan shall continue to apply to all outstanding Stock Options granted prior to such termination. 
  
 Section 4:    Plan Operation 
  
 The Plan is intended to meet the requirements of Rule 16b-3(c)(2)(ii) adopted under the 1934 Act and accordingly is intended
to be self-governing. To this end, the Plan is intended to require no discretionary action by any administrative body with regard to any transaction under the Plan except as specified in Section 5(b) of the Plan. 

 Section 5:    Common Stock Available for Stock Options 
  

	(a)	Number of Shares. A maximum of 300,000 shares of Common Stock may be issued upon the exercise of Stock Options granted under the Plan. Shares of Common Stock shall not be
deemed issued until the applicable Stock Option has been exercised and, accordingly, any shares of Common Stock represented by Stock Options which expire unexercised or which are cancelled shall remain available for issuance under the Plan.

  

	(b)	Adjustments. The Board, as it deems appropriate to meet the intent of the Plan, may make such adjustments to the number of shares available under the Plan to the number of
Stock Options to purchase shares to be granted on each Grant Date and to any outstanding Stock Options, provided such adjustments are consistent with the effect on other shareholders arising from any corporate restructuring or similar action. Such
actions may include, but are not limited to, any stock dividend, stock split, combination or exchange of shares, merger, consolidation, recapitalization, spin-off or other distribution (other than normal cash dividends) of Company assets to
shareholders, or any other change affecting the Common Stock. The Board may also, when similarly appropriate, make such adjustment in the exercise price of outstanding Stock Options as it deems necessary to preserve the rights of Participants under
the Plan. 

  
 Section 6:    Stock Option
Terms 
  

	(a)	Granting of Stock Options. Each participant shall be granted a Stock Option to purchase 3000 shares on each Grant Date that the Plan is in effect. 

 

	(b)	Duration and Exercisability. Each Stock Option shall have a term of ten years and shall become immediately exercisable on the Grant Date. 

  

	(c)	Termination of Directorship. When a Participant ceases to be a member of the Board, each Stock Option or portions thereof, held by such Participant shall continue to be
exercisable for the lesser of five years or until the end of the original term. Notwithstanding the foregoing, if a Participant is terminated as a member of the Board for cause, any exercisable Stock Option shall cease to be exercisable on the date
of termination. 

	

	(d)	Exercise of Stock Options. Stock Options may be exercised by giving written notice to the Secretary of the Company stating the number of shares of Common Stock with respect
to which the Stock Option is being exercised and tendering payment therefor. Payment for shares of Common Stock shall be made in full at the time that a Stock Option, or any part thereof, is exercised. Payment may be made (i) in cash, or (ii) by
delivery of shares of Common Stock of the Company held by the Participant, which shares shall be valued for purposes of payment, at their Fair Market Value on the date of payment, or (iii) by a combination of (i) and (ii) above, or (iv) by ensuring
receipt by the Company of an executed exercise notice coupled with an irrevocable instruction to a broker to execute a “same day” sale and deliver the sale exercise price to the Company, or (v) by directing the Company to withhold from the
shares that would otherwise be issued upon exercise of the Stock Option that number of whole shares having a fair market value equal to the aggregate option price for the optioned shares issuable on exercise of the Stock Option. Shares of the
Company’s Common Stock so withheld shall be valued at their Fair Market Value at the close of the last business day immediately preceding the date of exercise of the Stock Option. The Participant agrees that, in the event the exercise of any
Stock Options granted in this Plan or the disposition of shares following exercise of such options results in the Participant’s realization of income which for federal, state or local income tax purposes is, in the opinion of counsel for the
Company, subject to withholding of tax at source by the Company, the Participant will pay to the Company an amount equal to such withholding tax (i) in cash or (ii) by delivery of Common Stock already owned by the Participant prior to delivery to
the Participant of certificates representing the shares purchased or transferred or (iii) upon issuance of any stock under this Plan, allow the Company to withhold such shares otherwise issuable by the amount necessary to satisfy the
Participant’s federal, state and local tax withholding requirements. 

	Section	7: General Provisions 

  

	(a)	Non-Transferability of Stock Options. So long as restrictions on transferability of Stock Options are required by Rule 16b-3 or any successor rule adopted pursuant to the
1934 Act, a Stock Option granted under the Plan may not be transferred otherwise than as permitted by Rule 16b-3 or any successor rule. Rule 16b-3 currently permits transfers only by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act, or the rules thereunder. 

  

	(b)	Documentation of Grants. Stock Options shall be evidenced by written agreements. 

  

	(c)	Plan Amendment. The Board may amend or terminate the Plan provided that (i) stockholder approval shall be required for any amendment whenever such approval is necessary to
allow this Plan to meet the conditions of Rule 16b-3 (or any successor rule) under the 1934 Act, and (ii) no amendment may impair any Participant’s rights with respect to an outstanding Stock Option without the consent of the Participant. The
Plan may not be amended more than once every six months, other than to comport with the changes in the Internal Revenue Code, the Employee Retirement Income Security Act or the rules thereunder. 

  

	(d)	Future Rights. Neither the Plan nor the granting of Stock Options nor any such action taken pursuant to the Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company shall retain a Participant for any period of time, or at any particular rate of compensation as a member of the Board. Nothing in this Plan shall in any way limit or effect the right of the Board
or the shareholders of the Company to remove any Participant from the Board or otherwise terminate his or her service as a member of the Board. 

  

	(e)	Governing Law. The validity, construction and effect of the Plan and any such actions taken under or relating to the Plan shall be determined in accordance with the laws of
the State of California and applicable Federal law. 

  
 As in Effect May, 2004Amended form of non-qualified stock option agreement

 
Exhibit 10.2 
  
 NORTHROP GRUMMAN CORPORATION 
 TERMS AND CONDITIONS APPLICABLE TO 2004 STOCK
OPTIONS 
 GRANTED UNDER THE 2001 LONG-TERM INCENTIVE STOCK PLAN 
  
 These Terms and Conditions (“Terms”) apply to certain stock options granted by Northrop Grumman Corporation
(the “Company”) in 2004. If you were granted a stock option by the Company in 2004, the date of grant of your stock option (your “Option”), the total number of shares of common stock of the Company subject to your Option, and the
per share exercise price of your Option are set forth in the letter from the Company announcing your Option grant (your “Grant Letter”) and are reflected in the electronic stock plan award recordkeeping system (“Stock Plan
System”) maintained by the Company or its designee. These Terms apply to your Option if referenced in your Grant Letter and/or on the Stock Plan System with respect to your Option. If you were granted an Option, you are referred to as the
“Grantee” with respect to your Option. Capitalized terms are generally defined in Section 9 below if not otherwise defined herein. 
  
 The Option represents a right to purchase the number of shares of the Company’s Common Stock, for the per share exercise price of the Option, each as
stated in your Grant Letter and as reflected in the Stock Plan System. The number of shares and exercise price of the Option are subject to adjustment as provided herein. The Option is subject to all of the terms and conditions set forth in these
Terms, and is further subject to all of the terms and conditions of the Plan, as it may be amended from time to time, and any rules adopted by the Committee, as such rules are in effect from time to time. 
  
 1.    Vesting; Exercise of Option. 
  
 1.1    Vesting.  The Option is exercisable only to the extent that it has vested and has not expired or terminated. Subject to Sections 2 and 5 below, one-fourth ( 1/4) of the total number of shares of Company Common Stock subject to the Option (subject to adjustment as provided in
Section 5.1) shall vest and become exercisable upon each of the first, second, third and fourth anniversaries of the Grant Date. 
  
 1.2    Method of Exercise.  In order to exercise the Option, the Grantee or such other person as may be
entitled to exercise the same shall (a) execute and deliver to the Corporate Secretary of the Company a written notice indicating the number of shares subject to the Option to be exercised, and/or (b) complete such other exercise procedure as may be
prescribed by the Corporate Secretary of the Company. The date of exercise of the Option shall be the day such notice is received by the Corporate Secretary of the Company or the day such exercise procedures are satisfied, as applicable; provided
that in no event shall the Option be considered to have been exercised unless the per share exercise price of the Option is paid in full (or provided for in accordance with Section 1.3) for each of the shares to be acquired on such exercise and all
required tax withholding obligations with respect to such exercise have been satisfied or provided for in accordance with Section 6 hereof. No fractional shares will be issued. 
  
 1.3    Payment of Exercise
Price.  The exercise price shall be paid at the time of exercise. Payment may be made (a) in cash; (b) in the sole discretion of the Committee and on such terms and conditions as the Corporate Secretary of the Company may
prescribe, either in whole or in part in Common Stock of the Company (either actually or by attestation and valued at their Fair Market Value on the date of exercise of the Option, provided, however, that any previously-acquired shares of Common
Stock used to pay the exercise price of the Option that have been acquired directly from the Company must have been owned by the Grantee for at least six (6) months before the date of such exercise); (c) in a combination of payments under clauses
(a) and (b); or (d) pursuant to a cashless exercise arranged through a broker or other third party. Notwithstanding the foregoing, the Committee may at any time (a) limit the ability of the Grantee to exercise the Option through any method other
than a cash payment, or (b) require the Grantee to exercise, to the extent possible, the Option in the manner described in clause (b) of the preceding sentence. 
  

1.4    Tax Status.  The Option is not and shall not be deemed to be an incentive stock option within
the meaning of Section 422 of the Code. 
  

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2.    Termination of Option; Termination of Employment. 
  
 2.1    General.  The Option, to the extent not previously exercised, and
all other rights in respect thereof, whether vested and exercisable or not, shall terminate and become null and void at the close of business on the last business day preceding the tenth (10th) anniversary of the Grant Date (the “Expiration Date”). The Option, to the extent not previously exercised, and all other rights in respect thereof,
whether vested and exercisable or not, shall terminate and become null and void prior to the Expiration Date if and when (a) the Option terminates in connection with a Change in Control pursuant to Section 5 below, or (b) except as provided below in
this Section 2 and in Section 5, the Grantee ceases to be an employee of the Company or one of its subsidiaries. 
  
 2.2    Termination of Employment Due to Retirement.  If the Grantee ceases to be employed by the
Company or one of its subsidiaries due to the Grantee’s Early Retirement and such Early Retirement occurs more than six months after the Grant Date, the next succeeding vesting installment of the Option shall vest, and all installments under
the Option which have vested may be exercised by the Grantee (or, in the event of the Grantee’s death, by the Grantee’s Successor) until the fifth anniversary of the Grantee’s Early Retirement, but in no event after the Expiration
Date. Any remaining unvested installments, after giving effect to the foregoing sentence, shall terminate immediately upon the Grantee’s Early Retirement. If the Grantee ceases to be employed by the Company or one of its subsidiaries due to the
Grantee’s Normal Retirement and such Normal Retirement occurs more than six months after the Grant Date, all remaining installments of the Option shall vest, and all installments under the Option may be exercised by the Grantee (or, in the
event of the Grantee’s death, by the Grantee’s Successor) until the fifth anniversary of the Grantee’s Normal Retirement, but in no event after the Expiration Date. 
  
 2.3    Termination of Employment Due to Death or Disability.  If the
Grantee dies while employed by the Company or a subsidiary and such death occurs more than six months after the Grant Date, or if the Grantee’s employment by the Company and its subsidiaries terminates due to the Grantee’s Disability and such termination occurs more than six months after the Grant Date, the next succeeding vesting installment of the Option shall vest, and all installments under the Option which have
vested may be exercised by the Grantee (or, in the case of the Grantee’s death, by the Grantee’s Successor) until the fifth anniversary of the Grantee’s death or Disability, whichever first occurs, but in no event after the Expiration
Date. Any remaining unvested installments, after giving effect to the foregoing sentence, shall terminate immediately upon the Grantee’s death or Disability, as applicable. 
  
 2.4    Other Terminations of Employment.   Subject to the following
sentence, if the employment of the Grantee with the Company or a subsidiary is terminated for any reason other than the Grantee’s Early or Normal Retirement, death, or Disability, or in the event of a termination of the Grantee’s
employment with the Company or a subsidiary on or before the six-month anniversary of the Grant Date due to the Grantee’s Early or Normal Retirement, death, or Disability, the Option may be exercised (as to not more than the number of shares as
to which the Grantee might have exercised the Option on the date on which his or her employment terminated) only within 90 days from the date of such termination of employment, but in no event after the Expiration Date; provided, however, that if
the Grantee is dismissed by the Company or a subsidiary for cause, the Option shall expire forthwith. If the Grantee dies within 90 days after a termination of employment described in the preceding sentence (other than a termination by the Company
or a subsidiary for cause), the Option may be exercised by the Grantee’s Successor for one year from the date of the Grantee’s death, but in no event after the Expiration Date and as to not more than the number of shares as to which the
Grantee might have exercised the Option on the date on which his or her employment by the Company or a subsidiary terminated. For purposes of this Section 2 and prior to a Change in Control, the Company shall be the sole judge of “cause”
unless such term is expressly defined in a written employment agreement by and between the Grantee and either the Company or one of its subsidiaries, in which case “cause” is used as defined in such employment agreement for purposes of
this Section 2. Prior to a Change in Control, the definition of “Cause” in Section 9 does not apply for purposes of this Section 2. With respect to termination of employment upon or following a Change in Control, 

  

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the definition of “Cause” in Section 9 shall apply for purposes of this Section 2. 
  
 2.5    Leave of Absence.  Unless the Committee otherwise provides (at the
time of the leave or otherwise), if the Grantee is granted a leave of absence by the Company, the Grantee (a) shall not be deemed to have incurred a termination of employment at the time such leave commences for purposes of the Option, and (b) shall
be deemed to be employed by the Company for the duration of such approved leave of absence for purposes of the Option. A termination of employment shall be deemed to have occurred if the Grantee does not timely return to active employment upon the
expiration of such approved leave or if the Grantee commences a leave that is not approved by the Company. 
  
 2.6    Salary Continuation.  Subject to Section 2.5 above, the term “employment” as used
herein means active employment by the Company and salary continuation without active employment (other than a leave of absence approved by the Company and covered by Section 2.5) will not, in and of itself, constitute “employment” for
purposes hereof (in the case of salary continuation without active employment, the Grantee’s cessation of active employee status shall, subject to Section 2.5, be deemed to be a termination of “employment” for purposes hereof).
Furthermore, salary continuation will not, in and of itself, constitute a leave of absence approved by the Company for purposes of the Option. 
  
 2.7    Sale or Spinoff of Subsidiary or Business Unit.  For purposes of the Option, a termination of
employment of the Grantee shall be deemed to have occurred if the Grantee is employed by a subsidiary or business unit and that subsidiary or business unit is sold, spun off, or otherwise divested and the Grantee does not Retire upon or immediately
before such event and the Grantee does not otherwise continue to be employed by the Company after such event. 
  
 2.8    Continuance of Employment Required.   Except as expressly provided in Sections 2.2 and 2.3
above, and Section 5 below, the vesting of the Option requires continued employment through each vesting date as a condition to the vesting of the corresponding installment of the award. Employment before or between the specified vesting dates, even
if substantial, will not entitle the Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment. Nothing contained in
these Terms, the Grant Letter, the Stock Plan System, or the Plan constitutes an employment commitment by the Company or any subsidiary, affects the Grantee’s status (if the Grantee is otherwise an at-will employee) as an employee at will who
is subject to termination without cause, confers upon the Grantee any right to continue in the employ of the Company or any subsidiary, or interferes in any way with the right of the Company or of any subsidiary to terminate such employment at any
time. 
  
 3.    Non-Transferability and Other
Restrictions. 
  
 The Option is non-transferable
and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge. The foregoing transfer restrictions shall not apply to: (a) transfers to the Company; (b) transfers by will or the laws of
descent and distribution; or (c) if the Grantee has suffered a disability, permitted transfers to or exercises on behalf of the holder by his or her legal representative. Notwithstanding the foregoing, the Company may honor any transfer required
pursuant to the terms of a court order in a divorce or similar domestic relations matter to the extent that such transfer does not adversely affect the Company’s ability to register the offer and sale of the underlying shares on a Form S-8
Registration Statement and such transfer is otherwise in compliance with all applicable legal, regulatory and listing requirements. 
  
 4.    Compliance with Laws; No Stockholder Rights Prior to Issuance. 
  
 The Company’s obligation to issue any shares with respect to the Option
is subject to full compliance with all then applicable requirements of law, the Securities and Exchange Commission, the Commissioner of Corporations of the State of California, or other regulatory agencies having jurisdiction over the Company and
its shares, and of any exchanges upon which stock of the Company may be listed. The Grantee shall not have the rights and privileges of a stockholder with respect to shares subject to or purchased under the Option until the date appearing on the
certificate(s) for such shares (or, in the case of shares entered in book entry form, 

  

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the date that the shares are actually recorded in such form for the benefit of the Grantee) issued upon the exercise of the Option. 
  
 5.    Adjustments; Change in Control. 
  
 5.1    Adjustments.  The
number, type and price of shares subject to the Option, as well as the per share exercise price of the Option, are subject to adjustment upon the occurrence of events such as stock splits, stock dividends and other changes in capitalization in
accordance with Section 6(a) of the Plan. In the event of any adjustment, the Company will give the Grantee written notice thereof which will set forth the nature of the adjustment. 
  
 5.2    Possible Acceleration on Change in Control.  Notwithstanding the
acceleration provisions of Section 2 hereof but subject to the limited exercise periods set forth therein, and further subject to the Company’s ability to terminate the Option as provided in Section 5.3 below, the outstanding and previously
unvested portion of the Option shall become fully exercisable as of the date of the Grantee’s termination of employment as follows: 
  

	 	(a)	if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, if the termination of employment constitutes a “Qualifying
Termination” (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantee’s right to severance benefits under such Change in Control Severance Arrangement.

  

	 	(b)	if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination and if the termination occurs either 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, the Grantee’s employment by the Company and its subsidiaries is involuntarily terminated by
the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. 

  
 Notwithstanding anything else contained herein to the contrary, the termination of the Grantee’s employment (or other events giving rise to Good Reason) shall not entitle the Grantee to any accelerated vesting pursuant to clause (b) above if there is objective evidence that, as of the commencement of the Protected Period, the Grantee
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. The applicable Change in Control Severance Arrangement shall govern the matters addressed in this paragraph as to clause (a) above. 
  
 5.3    Automatic Acceleration; Early Termination.  If the Company
undergoes a Change in Control triggered by clause (iii) or (iv) of the definition thereof and the Company is not the surviving entity and the successor to the Company (if any) (or a Parent thereof) does not agree in writing prior to the occurrence
of the Change in Control to continue and assume the Option following the Change in Control, or if for any other reason the Option would not continue after the Change in Control, then upon the Change in Control the outstanding and previously unvested
portion of the Option shall vest fully and completely, any and all restrictions on exercisability or otherwise shall lapse, and it shall be fully exercisable. Unless the Committee expressly provides otherwise in the circumstances, no acceleration of
vesting or exercisability of the Option shall occur pursuant to this Section 5.3 in connection with a Change in Control if either (a) the Company is the surviving entity, or (b) the successor to the Company (if any) (or a Parent thereof) agrees in
writing prior to the Change in Control to assume the Option. If the Option is fully vested or becomes fully vested as provided in this Section 5.3 but is not exercised prior to a Change in Control triggered by clause (iii) or (iv) of the definition
thereof and the Company is not the surviving entity and the successor to the Company (if any) (or a Parent thereof) does not agree in writing prior to the occurrence of the Change in Control to continue and assume the Option following the Change in
Control, or if for any other reason the Option would not continue after the Change in Control, then the Committee may provide for the settlement in cash of the award (such settlement to be calculated as though the Option was exercised 

  

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simultaneously with the Change in Control and based upon the then Fair Market Value of a share of Common Stock). The Option, if so settled by the Committee,
shall automatically terminate. If, in such circumstances, the Committee does not provide for the cash settlement of the Option, then upon the Change in Control the Option shall terminate, subject to any provision that has been made by the Committee
through a plan of reorganization or otherwise for the survival, substitution or exchange of the Option; provided that the Grantee shall be given reasonable notice of such intended termination and an opportunity to exercise the Option prior to or
upon the Change in Control. The Committee may make adjustments pursuant to Section 6(a) of the Plan and/or deem an acceleration of vesting of the Option pursuant to this Section 5.3 to occur sufficiently prior to an event if necessary or deemed
appropriate to permit the Grantee to realize the benefits intended to be conveyed with respect to the shares underlying the Option; provided, however, that, the Committee may reinstate the original terms of the Option if the related event does not
actually occur. The provisions in this Section 5.3 for the early termination of the Option in connection with a Change in Control of the Company supercede any other provision hereof that would otherwise allow for a longer Option term. 
  
 6.    Tax Matters. 
  
 6.1    Tax
Withholding.  The Company or the subsidiary which employs the Grantee shall be entitled to require, as a condition of issuing shares upon exercise of the Option, that the Grantee or other person exercising the Option pay any
sums required to be withheld by federal, state or local tax law with respect to such vesting or payment. Alternatively, the Company or such subsidiary, in its discretion, may make such provisions for the withholding of taxes as it deems appropriate
(including, without limitation, withholding the taxes due from compensation otherwise payable to the Grantee or reducing the number of shares otherwise deliverable with respect to the Option (valued at their then Fair Market Value) by the amount
necessary to satisfy such withholding obligations at the flat percentage rates applicable to supplemental wages). 
  
 6.2    Transfer Taxes.  The Company will pay all federal and state transfer taxes, if any, and other
fees and expenses in connection with the issuance of shares in connection with the vesting of the Option. 
  
 7.    Committee Authority. 
  
 The Committee has the discretionary authority to determine any questions as to the date when the Grantee’s employment terminated and the cause of
such termination and to interpret any provision of these Terms, the Grant Letter, the Stock Plan System, the Plan, and any other applicable rules. Any action taken by, or inaction of, the Committee relating to or pursuant to these Terms, the Grant
Letter, the Stock Plan System, the Plan, or any other applicable rules shall be within the absolute discretion of the Committee and shall be conclusive and binding on all persons. 
  
 8.    Plan; Amendment. 
  
 The Option is governed by, and the Grantee’s rights are subject to, all of the terms and conditions of the Plan and any
other rules adopted by the Committee, as the foregoing may be amended from time to time. The Grantee shall have no rights with respect to any amendment of these Terms or the Plan unless such amendment is in writing and signed by a duly authorized
officer of the Company. In the event of a conflict between the provisions of the Grant Letter and/or the Stock Plan System and the provisions of these Terms and/or the Plan, the provisions of these Terms and/or the Plan, as applicable, shall
control. 
  
 9.    Definitions. 
  
 Whenever used in these Terms, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial letter of the word is capitalized: 
  
 “Board” means the Board of Directors of the Company. 
  
 “Cause” means the occurrence of either or both of the following: 
  

	 	(i)	The Grantee’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 

  

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

  
 “Change in Control” is used as defined in the Plan.

  
 “Change in Control Severance Arrangement”
means a “Special Agreement” entered into by and between the Grantee and the Company that provides severance protections in the event of certain changes in control of the Company or the Company’s Change-in-Control Severance Plan, as
each may be in effect from time to time, or any similar successor agreement or plan that provides severance protections in the event of a change in control of the Company. 
  
 “Code” means the United States Internal Revenue Code of 1986, as amended. 
  
 “Committee” means the Company’s Compensation and
Management Development Committee or any successor committee appointed by the Board to administer the Plan. 
  
 “Disability” means disabled pursuant to the provisions of the Company’s (or one of its subsidiary’s) Long Term Disability Plan
applicable to the Grantee; or, if the Grantee is not covered by such a Long Term Disability Plan, the incapacity of the Grantee, due to injury, illness, disease, or bodily or mental infirmity, to engage in the performance of substantially all of the
usual duties of employment with the Company or the subsidiary which employs the Grantee, such disability to be determined by the Committee upon receipt and in reliance on competent medical advice from one or more individuals, selected by the
Committee, who are qualified to give such professional medical advice. 
  
 “Early Retirement” means that the Grantee terminates employment after attaining age 55 with at least 10 years of service (other than in connection with a termination by the Company or a subsidiary for cause) and other than
a Normal Retirement. 
 “Exchange Act” means the United States Securities Exchange Act of 1934, as amended. 
  
 “Fair Market Value” is used as defined in the Plan;
provided, however, the Committee in determining such Fair Market Value for purposes of the Option may utilize such other exchange, market, or listing as it deems appropriate. For purposes of a cashless exercise, the Fair Market Value of the shares
shall be the price at which the shares in payment of the exercise price are sold. 
  
 “Good Reason” means, without the Grantee’s express written consent, the occurrence of any one or more of the following: 
  

	 	(i)	A material and substantial reduction in the nature or status of the Grantee’s authorities or responsibilities (when such authorities 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 (A) an inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Grantee, and/or (B)
changes in the nature or status of the Grantee’s authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee having not materially and
substantially fewer authorities and responsibilities (taking into consideration the Company’s industry) when compared to the authorities and responsibilities applicable to the position held by the Grantee immediately prior to the start of the
Protected Period. For the purpose of the preceding test, the Grantee and the Company shall mutually agree on a nationally-recognized consulting firm; provided that, if agreement cannot timely be reached, the Company and the Grantee shall each timely
choose a nationally-recognized firm and representatives of these two firms shall promptly choose a third firm, which third firm will make the determination referred to in the preceding sentence. The written opinion of the firm thus selected shall be
conclusive as to this issue. 

  

 6 

 
In addition, if the Grantee is a vice president, the Grantee’s loss of vice-president status will constitute “Good Reason”; provided that the
loss of the title of “vice president” will not, in and of itself, constitute Good Reason if the Grantee’s lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the
Grantee’s business unit or if the loss of the title is the result of a promotion to a higher level office. For the purposes of the preceding sentence, the Grantee’s lack of a vice-president title will only be considered generally
consistent with the manner in which such title is used if most persons in the business unit with authorities, duties, and responsibilities comparable to those of the Grantee immediately prior to the commencement of the Protected Period do not have
the title of vice-president. 
  

	 	(ii)	A reduction by the Company in the Grantee’s annualized rate of base salary as in effect on the Grant Date or as the same shall be increased from time to time.

  

	 	(iii)	A material reduction in the aggregate value of the Grantee’s level of participation in any of the Company’s short and/or long-term incentive compensation plans (excluding
stock-based incentive compensation plans), employee benefit or retirement plans, or policies, practices, or arrangements in which the Grantee participates immediately prior to the start of the Protected Period provided; however, that a reduction in
the aggregate value shall not be deemed to be “Good Reason” if the reduced value remains substantially consistent with the average level of other employees who have positions commensurate with the position held by the Grantee immediately
prior to the start of the Protected Period. 

  

	 	(iv)	A material reduction in the Grantee’s aggregate level of participation in the Company’s stock-based incentive compensation plans from the level in effect immediately prior
to the start of the Protected Period; provided, however, that a reduction in the aggregate level of participation shall not be deemed to be “Good Reason” if the reduced level of participation
remains substantially consistent with the average level of participation of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. 

  

	 	(v)	The Grantee 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 Grantee’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 (v) more than ninety (90) days before such intended effective date. 

  
 The Grantee’s right to terminate employment for Good Reason shall not be affected by the Grantee’s incapacity due to physical or mental illness.
The Grantee’s continued employment shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason herein. 
  
 “Grant Date” means the date that the Committee approved the grant of the Option. 
  
 “Normal Retirement” means that the Grantee terminates
employment after attaining age 65 with at least 10 years of service (other than in connection with a termination by the Company or a subsidiary for cause). 
  
 “Plan” means the Northrop Grumman 2001 Long-Term Incentive Stock Plan, as it may be amended from time to time. 
  
 The “Protected Period” corresponding to a Change in Control
of the Company shall be a period of time determined in accordance with the following: 
  

	 	(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 

  

 7 

	 	 
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. 

  
 “Successor” means the person acquiring a Grantee’s rights to a grant under the Plan by will or by the laws of descent or distribution. 
  

 8

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