Document:

exv10wxiyxxiiiy

 

Exhibit 10(i)(xiii)

NORTHROP GRUMMAN CORPORATION

TERMS AND CONDITIONS APPLICABLE TO SPECIAL 2007

RESTRICTED STOCK RIGHTS GRANTED TO JAMES F. PALMER

UNDER THE 2001 LONG-TERM INCENTIVE STOCK PLAN

     These Terms and Conditions (“Terms”) apply to certain “Restricted Stock Rights” (“RSRs”)
granted by Northrop Grumman Corporation (the “Company”) to James F. Palmer in 2007 in
connection with his employment with the Company. The date of grant of the RSR award is March 12,
2007 (the “Grant Date”). The number of RSRs applicable to the award is 40,000. The date of grant
and number of RSRs are also reflected in the electronic stock plan award recordkeeping system
(“Stock Plan System”) maintained by the Company or its designee. These Terms apply only with
respect to Mr. Palmer’s Special 2007 RSR award. You (Mr. Palmer) are referred to as the “Grantee”
with respect to your award. Capitalized terms are generally defined in Section 9 below if not
otherwise defined herein.

     Each RSR represents a right to receive one share of the Company’s Common Stock, or cash of
equivalent value as provided herein, subject to vesting as provided herein. The number of RSRs
subject to your award is subject to adjustment as provided herein. The RSR award 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; Issuance of Shares.

     Subject to Sections 2 and 5 below, one-fourth of the number of RSRs subject to your award
(subject to adjustment as provided in Section 5.1) shall vest upon the first, second, third and
fourth anniversary of the Grant Date.

     Except as otherwise provided below, the Company shall pay a vested RSR within 90 days
following the vesting of the RSR on the applicable anniversary of the Grant Date. The Company
shall pay such vested RSRs in either an equivalent number of shares of Common Stock, or, in the
discretion of the Committee, in cash or in a combination of shares of Common Stock and cash. In
the event of a cash payment, the amount of the payment for vested RSR to be paid in cash (subject
to tax withholding as provided in Section 6 below) will equal the Fair Market Value (as defined
below) of a share of Common Stock as of the date that such RSR became vested. No fractional shares
will be issued.

			
	2.	 	Early Termination of Award; Termination of Employment.

     General. The RSRs subject to the award, to the extent not previously vested, shall terminate
and become null and void if and when (a) the award terminates in connection with a Change in
Control pursuant to Section 5 below, or (b) except as provided in Section 2.6 and in Section 5, the
Grantee ceases for any reason to be an employee of the Company or one of its subsidiaries.

     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 award, and (b) shall be deemed to be employed by the Company for the duration of
such approved leave of absence for purposes of the award. 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.

     Salary Continuation. Subject to Section 2.2 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 that is covered by Section 2.2) 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 2.2,
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 award.

     Sale or Spinoff of Subsidiary or Business Unit. For purposes of the RSRs subject to the
award, a termination of employment of the Grantee shall be

1

 

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
otherwise continue to be employed by the Company after such event.

     Continuance of Employment Required. Except as expressly provided in Section 2.6 and in
Section 5, the vesting of the RSRs subject to the award requires continued employment through each
vesting date as a condition to the vesting of the corresponding installment of the award.
Employment before or between 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 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.

     Death, Disability or Qualifying Termination. If (i) the Grantee dies while employed by the
Company or a subsidiary, or (ii) the Grantee’s employment by the Company and its subsidiaries
terminates due to the Grantee’s Disability, or (iii) the Grantee undergoes a Qualifying
Termination, then the outstanding and previously unvested RSRs subject to the award shall vest as
of the date of the Grantee’s death , Disability or Qualifying Termination, as applicable. RSRs
vesting under this Section shall be paid in the calendar year containing the 75th day
(and generally will be paid on or about such 75th day) following the earliest of (a)
Grantee’s death, (b) Grantee’s Disability, or (c) Grantee’s Separation from Service. If an RSR is
to be paid upon a Grantee’s Separation from Service and the Grantee is a Key Employee at the time
of Separation from Service, payment shall be made six months after the Separation from Service.

     In the event of the Grantee’s death prior to the delivery of shares or other payment with
respect to any vested RSRs, the Grantee’s Successor shall be entitled to any payments to which the
Grantee would have been entitled under this Agreement with respect to such vested and unpaid RSRs.

			
	3.	 	Non-Transferability and Other Restrictions.

     The award, as well as the RSRs subject to the award, are 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;
or (b) transfers pursuant to a qualified domestic relations order (as defined in the Code).
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 make any payments or issue any shares with respect to the award 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 exchange upon
which stock of the Company may be listed. The Grantee shall not have the rights and privileges of
a stockholder with respect to any shares which may be issued in respect of the RSRs until the date
appearing on the certificate(s) for such shares (or, in the case of shares entered in book entry
form, the date that the shares are actually recorded in such form for the benefit of the Grantee),
if such shares become deliverable.

			
	5.	 	Adjustments; Change in Control.

     Adjustments. The RSRs and the shares subject to the award 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.

     Possible Acceleration on Change in Control. Notwithstanding the Company’s ability to
terminate the award as provided in Section 5.3 below, the outstanding and previously unvested RSRs
subject to the award shall become fully vested as of the date of the Grantee’s termination of
employment in the following circumstances:

	 	(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.

2

 

	 	(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.

     Payment of any amount due under this Section will be made within 90 days of the anniversary of
the Grant Date on which the RSRs would otherwise have vested under Section 1.

     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 award following the
Change in Control, or if for any other reason the award would not continue after the Change in
Control, then upon the Change in Control the outstanding and previously unvested RSRs subject to
the award shall vest fully and completely. Unless the Committee expressly provides otherwise in
the circumstances, no acceleration of vesting of the award 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 award. The award shall terminate, subject to such acceleration
provisions, upon a Change in Control triggered by clause (iii) or (iv) of the definition thereof in
which 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 award

following 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 award 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 RSRs; provided, however, that, the Committee may reinstate the original terms of the
award if the related event does not actually occur.

     Payment of any amount due under this Section will be made within 90 days of the anniversary of
the Grant Date on which the RSRs would otherwise have vested under Section 1.

			
	6.	 	Tax Matters.

     Tax Withholding. The Company or the subsidiary which employs the Grantee shall be entitled to
require, as a condition of making any payments or issuing any shares upon vesting of the RSRs, that
the Grantee or other person entitled to such shares or other payment 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 award (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).

     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
RSRs.

     Compliance with Code. The Committee shall administer and construe the award, and may amend
the Terms of the award, in a manner designed to comply with the Code and to avoid adverse tax
consequences under Code Section 409A or otherwise.

			
	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 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 Stock
Plan System, the Plan, or any other applicable rules shall be within the absolute discretion of the

3

 

Committee and shall be conclusive and binding on all persons.

			
	8.	 	Plan; Amendment.

     The RSRs are 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, the Certificate 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 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 govern.

			
	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:

     “Affiliated Companies” means the Company and any other entity related to the Company under the
rules of section 414 of the Code. The Affiliated Companies include Northrop Grumman Corporation and
its 80%-owned subsidiaries and may include other entities as well.

     “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
	 
	 	(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, with respect to a Grantee, that the Grantee: (i) is unable to engage in
any substantial gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last for a continuous
period of not less than twelve months; or (ii) is, by reason of any medically determinable physical
or mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than twelve months, receiving income replacement benefits for a
period of not less than three months under an accident and health plan covering employees of the
Grantee’s employer; all construed and interpreted consistent with the definition of “Disability”
set forth in Code Section 409A(a)(2)(C).

     “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 award 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

4

 

	 	 	 	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. The Company may retain a nationally-recognized executive placement firm
for purposes of making the determination required by the preceding sentence and the written
opinion of the firm thus selected shall be conclusive as to this issue.
	 
	 	(ii)	 	A reduction by the Company in the Grantee’s annualized rate of base salary as in effect
on the date of grant of the award or as the same shall be increased from time to time.
	 
	 	(iii)	 	A significant reduction by the Company of the Grantee’s aggregate incentive
opportunities under the Company’s short and/or long-term incentive programs, as such
opportunities exist on the date of grant of the award, or as such opportunities may be
increased after the date of grant of the award. For this purpose, a significant reduction
in the Grantee’s incentive opportunities shall be deemed to have occurred in the event the
Grantee’s targeted annualized award opportunities and/or the degree of probability of
attainment of such annualized award opportunities are diminished by the Company from the
levels and probability of attainment that existed as of the date of grant of the award.
	 
	 	(iv)	 	The failure of the Company to maintain (x) the Grantee’s relative level of coverage and
accruals under the Company’s employee benefit and/or retirement plans, policies, practices,
or arrangements in which the Grantee participates as of the date of grant of the award, both
in terms of the amount of benefits provided, and amounts accrued and (y) the relative level
of the Grantee’s participation in such plans, policies, practices, or arrangements on a
basis at least as beneficial as, or substantially equivalent to, that on which the Grantee
participated in such plans immediately prior to the date of grant of the award. For this
purpose, the Company may eliminate and/or modify existing programs and coverage levels;
provided, however, that the Grantee’s level of coverage under all such programs must be at
least as great as is provided to executives who have the same or lesser levels of reporting
responsibilities within the Company’s organization.
	 
	 	(v)	 	The 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.

     “Key Employee” means an employee treated as a “specified employee” under Code section
409A(a)(2)(B)(i) of the Company or the Affiliated Companies (i.e., a key employee (as defined in
Code section 416(i) without regard to paragraph (5) thereof)) if the Company’s or an Affiliated
Company’s stock is publicly traded on an established securities market or otherwise. The Company
shall determine in accordance with a uniform Company policy which employees are Key Employees as of
each December 31 in accordance with IRS regulations or other guidance under Code section 409A,
provided that in determining the compensation of individuals for this purpose, the definition of
compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be used. Such determination shall be
effective for the twelve (12) month period commencing on April 1 of the following year.

     “Plan” means the Northrop Grumman 2001 Long-Term Incentive Stock Plan, as it may be amended
form 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 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

5

 

	 	 	 	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.

     “Qualifying Termination” shall have the same meaning as in the Company’s Severance Plan for
Elected and Appointed Officers of Northrop Grumman Corporation.

     “Separation from Service” means a “separation from service” within the meaning of Code section
409A.

     “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.

6exv10wxjy

 

Exhibit 10(j)

NORTHROP GRUMMAN

SUPPLEMENTAL PLAN 2

(Amended and Restated Effective as of January 1, 2005)

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE I Definitions	 	 	1	 
	1.01
	 	Affiliated Companies 	 	 	1	 
	1.02
	 	Board of Directors 	 	 	1	 
	1.03
	 	CIC Plans 	 	 	1	 
	1.04
	 	Code 	 	 	1	 
	1.05
	 	Company 	 	 	1	 
	1.06
	 	Deferred Compensation Plan 	 	 	1	 
	1.07
	 	ERISA 	 	 	1	 
	1.08
	 	Grandfathered Amounts 	 	 	1	 
	1.09
	 	Key Employee 	 	 	1	 
	1.10
	 	Participant 	 	 	2	 
	1.11
	 	Payment Date 	 	 	2	 
	1.12
	 	Pension Plan 	 	 	2	 
	1.13
	 	Plan 	 	 	2	 
	1.14
	 	Program 	 	 	2	 
	1.15
	 	Qualified Plan 	 	 	2	 
	1.16
	 	Separation from Service or Separates from Service 	 	 	2	 
	1.17
	 	Termination of Employment 	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE II General Provisions	 	 	4	 
	2.01
	 	In General 	 	 	4	 
	2.02
	 	Treatment of 2000 Ad Hoc Increases for Retirees 	 	 	4	 
	2.03
	 	Forms and Times of Benefit Payments 	 	 	4	 
	2.04
	 	Beneficiaries and Spouses 	 	 	4	 
	2.05
	 	Mandatory Cashout 	 	 	5	 
	2.06
	 	Optional Payment Forms 	 	 	5	 
	2.07
	 	Amendment and Plan Termination 	 	 	6	 
	2.08
	 	Not an Employment Agreement 	 	 	6	 
	2.09
	 	Assignment of Benefits 	 	 	6	 
	2.10
	 	Nonduplication of Benefits 	 	 	6	 
	2.11
	 	Funding 	 	 	7	 
	2.12
	 	Construction 	 	 	7	 
	2.13
	 	Governing Law 	 	 	7	 
	2.14
	 	Actions by Company 	 	 	7	 
	2.15
	 	Plan Representatives 	 	 	7	 
	2.16
	 	Number 	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE III Lump Sum Election	 	 	9	 
	3.01
	 	In General 	 	 	9	 
	3.02
	 	Election 	 	 	9	 
	3.03
	 	Lump Sum—Retirement Eligible 	 	 	10	 
	3.04
	 	Lump Sum—Not Retirement Eligible 	 	 	11	 
	3.05
	 	Lump Sums with CIC Severance Plan Election 	 	 	11	 
	3.06
	 	Calculation of Lump Sum 	 	 	12	 
	3.07
	 	Spousal consent 	 	 	13	 
	 
	 	 	 	 	 	 
	APPENDIX 1 — 2005-2007 TRANSITION RULES	 	 	14	 
	1.01
	 	Election 	 	 	14	 
	1.02
	 	2005 Commencements 	 	 	14	 
	1.03
	 	2006 and 2007 Commencements 	 	 	15	 

i

 

	 	 	 	 	 	 	 
	APPENDIX 2 — POST 2007 DISTRIBUTION OF 409A AMOUNTS	 	 	16	 
	2.01
	 	Time of Distribution 	 	 	16	 
	2.02
	 	Special Rule for Key Employees 	 	 	16	 
	2.03
	 	Forms of Distribution 	 	 	16	 
	2.04
	 	Death 	 	 	16	 
	2.05
	 	Actuarial Assumptions 	 	 	17	 
	2.06
	 	Accelerated Lump Sum Payouts 	 	 	17	 
	2.07
	 	Effect of Early Taxation 	 	 	18	 
	2.08
	 	Permitted Delays 	 	 	18	 
	2.09
	 	Special Tax Distribution 	 	 	18	 

Note: All of the following Appendices are saved as separate documents.

Confidential documents may be requested from Benefits Strategy & Design.

APPENDIX A Northrop Supplemental Retirement Income Program For Senior Executives

APPENDIX B ERISA Supplemental Program 2

APPENDIX C Arthur F. Dauer Program (Confidential)

APPENDIX D Nelson Gibbs, Jr. Program (Confidential)

APPENDIX E Oliver Boileau Program (Confidential)

APPENDIX F CPC Supplemental Executive Retirement Program

APPENDIX G Officers Supplemental Executive Retirement Program

APPENDIX H Robert P. Iorizzo Program

ii

 

          The Northrop Grumman Supplemental Plan 2 (the “Plan”) is hereby amended and restated effective
as of January 1, 2005. This restatement amends the October 1, 2004 restatement of the Plan to
address the requirements of Code section 409A and certain other changes.

          The Plan is intended to comply with Code section 409A and official guidance issued thereunder
(except for Grandfathered Amounts). Notwithstanding any other provision of this Plan, this Plan
shall be interpreted, operated and administered in a manner consistent with this intention.

ARTICLE I

Definitions

          For purposes of the Plan, the following terms, when capitalized, will have the following
meanings:

	1.01	 	Affiliated Companies. The Company and any other entity related to the Company under
the rules of section 414 of the Code. The Affiliated Companies include Northrop Grumman
Corporation and its 80%-owned subsidiaries and may include other entities as well.
	 
	1.02	 	Board of Directors. The Board of Directors of the Company.
	 
	1.03	 	CIC Plans. Northrop Grumman Corporation Change-In-Control Severance Plan (effective
August 1, 1996, as amended) or the Northrop Grumman Corporation March 2000 Change-In-Control
Severance Plan.
	 
	1.04	 	Code. The Internal Revenue Code of 1986, as amended.
	 
	1.05	 	Company. Northrop Grumman Corporation.
	 
	1.06	 	Deferred Compensation Plan. The Northrop Grumman Deferred Compensation Plan and the
Northrop Grumman Savings Excess Plan.
	 
	1.07	 	ERISA. The Employee Retirement Income Security Act of 1974, as amended.
	 
	1.08	 	Grandfathered Amounts. Plan benefits that were earned and vested as of December 31,
2004 within the meaning of Code section 409A and official guidance thereunder.
	 
	1.09	 	Key Employee. An employee treated as a “specified employee” under Code section
409A(a)(2)(B)(i) of the Company or
the Affiliated Companies (i.e., a key employee (as defined in Code section 416(i) without
regard to paragraph (5) thereof)) if the Company’s or an Affiliated Company’s stock is
publicly traded on an established securities market or otherwise. The Company shall
determine in accordance with a uniform Company policy which Participants are Key

 

 

	 	 	Employees
as of each December 31 in accordance with IRS regulations or other guidance under Code
section 409A, provided that in determining the compensation of individuals for this
purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be used.
Such determination shall be effective for the twelve (12) month period commencing on April
1 of the following year.
	 
	1.10	 	Participant. Any employee of the Company who is eligible for benefits under a
particular Program and has not received full payment under the Program.
	 
	1.11	 	Payment Date. The 1st of the month coincident with or following the later of (a) the
date the Participant attains age 55, or (b) the date the Participant Separates from Service.
	 
	1.12	 	Pension Plan.

	 	(a)	 	The Northrop Grumman Pension Plan (subject to the special effective dates
noted below for the following merged plans)

	 	•	 	The Northrop Grumman Retirement Value Plan (effective as of
January 1, 2000)
	 
	 	•	 	The Northrop Grumman Commercial Aircraft Division Salaried
Retirement Plan (effective as of July 1, 2000)
	 
	 	•	 	The Grumman Pension Plan (effective as of July 1, 2003)

	 	(b)	 	The Northrop Grumman Electronic Systems — Space Division Consolidated
Pension Plan (effective as of October 22, 2001)
	 
	 	(c)	 	The Northrop Grumman Norden Systems Employee Retirement Plan (effective July
1, 2003)

	1.13	 	Plan. The Northrop Grumman Supplemental Plan 2.
	 
	1.14	 	Program. One of the eligibility and benefit structures described in the Appendices.
	 
	1.15	 	Qualified Plan. The Northrop Grumman Pension Plan and Cash Balance Plans (as defined
under the Northrop Grumman Pension Plan).
	 
	1.16	 	Separation from Service or Separates from Service. A “separation from
service” within the meaning of Code section 409A.
	 
	1.17	 	Termination of Employment. Complete termination of employment with the Affiliated
Companies.

-2-

 

	 	(a)	 	If a Participant leaves one Affiliated Company to go to work for another, he
or she will not have a Termination of Employment.
	 
	 	(b)	 	A Participant will have a Termination of Employment if he or she leaves the
Affiliated Companies because the affiliate he or she works for ceases to be an
Affiliated Company because it is sold or spunoff.

-3-

 

ARTICLE II

General Provisions

	2.01	 	In General. The Plan contains a number of different benefit Programs which are set
forth in the Appendices. The Appendices describe the eligibility conditions and the amount of
benefits payable under the Programs. The Company, in its sole discretion, will determine all
eligibility conditions, make all benefit determinations, and otherwise exercise sole authority
to interpret the Plan and Programs.
	 
	2.02	 	Treatment of 2000 Ad Hoc Increases for Retirees. In no event, however, (1) will this
Plan pay any amount of a Participant’s retirement benefit, if any, attributable to the “2000
Ad Hoc Increase for Retirees” Appendix added to certain of the Company’s tax-qualified plans
pursuant to the Board of Directors resolution adopted May 17, 2000, or (2) will a Participant
be entitled to a benefit (or an increased benefit) from or as a result of participation in
this Plan under the Board of Directors resolution adopted May 17, 2000.
	 
	2.03	 	Forms and Times of Benefit Payments. This Section only applies to Grandfathered
Amounts. The Company will determine the form and timing of benefit payments in its sole
discretion unless particular rules regarding the form and timing of benefit payments are set
forth in a Program or where a lump sum election under Article III is applicable.

	 	(a)	 	For payments made to supplement those of a particular tax-qualified
retirement or savings plan, the Company will only select among the options available
under that plan, using the same actuarial adjustments used in that plan, except in
cases of lump sums.
	 
	 	(b)	 	Whenever the present value of the amount payable under a particular Program
does not exceed $10,000, it will be paid in the form of a single lump sum as of the
first of the month following Termination of Employment. The lump sum will be
calculated using the factors and methodology described in Section 3.06 below (See
Section 2.05 for the rule that applies as of January 1, 2008).
	 
	 	(c)	 	No payments will commence under this Plan until a Participant has a
Termination of Employment, even in cases where benefits have commenced under a
qualified retirement plan for Participants over age 701/2, or for any other reason.

See Appendix 1 and Appendix 2 for the rules that apply to other benefits earned under the
Plan.

	2.04	 	Beneficiaries and Spouses. This Section only applies to Grandfathered Amounts. If
the Company selects a form of payment which includes a survivor benefit, the Participant may
make a beneficiary designation, which may be changed at any

-4-

 

	 	 	time prior to commencement of
benefits. A beneficiary designation must be in writing and will be effective only when
received by the Company.

	 	(a)	 	If a Participant is married on the date his or her benefits are scheduled to
commence, his or her beneficiary will be his or her spouse unless some other
beneficiary is named with spousal consent. Spousal consent, to be effective, must be
submitted in writing before benefits commence and must be witnessed by a Plan
representative or notary public. No spousal consent is necessary if the Company
determines that there is no spouse or that the spouse cannot be found.
	 
	 	(b)	 	With respect to Programs designed to supplement tax-qualified retirement or
savings plans, the Participant’s spouse will be the spouse as determined under the
underlying tax-qualified plan. Otherwise, the Participant’s spouse will be determined
by the Company in its sole discretion.

See Appendix 1 and Appendix 2 for the rules that apply to other benefits earned under the
Plan.

	2.05	 	Mandatory Cashout. Notwithstanding any other provisions in the Plan, Participants
with Grandfathered Amounts who have not commenced payment of such benefits prior to January 1,
2008 will be subject to the following rules:

	 	(a)	 	Post-2007 Terminations. Participants who have a Termination of
Employment after 2007 will receive a lump sum distribution of the present value of
their Grandfathered Amounts within two months of Termination of Employment (without
interest), if such present value is below the Code section 402(g) limit in effect at
the Termination of Employment.
	 
	 	(b)	 	Pre-2008 Terminations. Participants who had a Termination of
Employment before 2008 will receive a lump sum distribution of the present value of
their Grandfathered Amounts within two months of the time they commence payment of
their underlying qualified pension plan benefits (without interest), if such present
value is below the Code section 402(g) limit in effect at the time such payments
commence.

For purposes of calculating present values under this Section, the actual assumptions and
calculation procedures for lump sum distributions under the Northrop Grumman Pension Plan
shall be used.

	2.06	 	Optional Payment Forms. Participants with Grandfathered Amounts shall be permitted
to elect (a) or (b) below:

	 	(a)	 	To receive their Grandfathered Amounts in any form of distribution available
under the Plan at October 3, 2004, provided that form remains available under the
underlying qualified pension plan at the time payment of the Grandfathered Amounts
commences. The conversion factors for

-5-

 

	 	 	 	these distribution forms will be based on the
factors or basis in effect under this Plan on October 3, 2004.
	 
	 	(b)	 	To receive their Grandfathered Amounts in any life annuity form not included
in (a) above but included in the underlying qualified pension plan distribution
options at the time payment of the Grandfathered Amounts commences. The conversion
factors will be based on the following actuarial assumptions:

Interest Rate:          6%

Mortality Table:     RP-2000 Mortality Table projected 15 years for future standardized
cash balance factors

	2.07	 	Amendment and Plan Termination. The Company may, in its sole discretion, terminate,
suspend or amend this Plan at any time or from time to time, in whole or in part for any
reason. This includes the right to amend or eliminate any of the provisions of the Plan with
respect to lump sum distributions, including any lump sum calculation factors, whether or not
a Participant has already made a lump sum election. Notwithstanding the foregoing, no
amendment or termination of the Plan shall reduce the amount of a Participant’s accrued
benefit under the Plan as of the date of such amendment or termination.
	 
	 	 	No amendment of the Plan shall apply to the Grandfathered Amounts, unless the amendment
specifically provides that it applies to such amounts. The purpose of this restriction is
to prevent a Plan amendment from resulting in an inadvertent “material modification” to the
Grandfathered Amounts.
	 
	 	 	The Company may, in its sole discretion, seek reimbursement from the Company’s
tax-qualified plans to the extent this Plan pays tax-qualified plan benefits to which
Participants were entitled to or became entitled to under the tax-qualified plans.
	 
	2.08	 	Not an Employment Agreement. Nothing contained in this Plan gives any Participant the
right to be retained in the service of the Company, nor does it interfere with the right of
the Company to discharge or otherwise deal with Participants without regard to the existence
of this Plan.
	 
	2.09	 	Assignment of Benefits. A Participant, surviving spouse or beneficiary may not,
either voluntarily or involuntarily, assign, anticipate, alienate, commute, sell, transfer,
pledge or encumber any benefits to which he or she is or may become entitled under the Plan,
nor may Plan benefits be subject to attachment or garnishment by any of their creditors or to
legal process.
	 
	2.10	 	Nonduplication of Benefits. This Section applies if, despite Section 2.09, with
respect to any Participant (or his or her beneficiaries), the Company is required to make
payments under this Plan to a person or entity other than the payees described in the Plan. In
such a case, any amounts due the Participant (or his or

-6-

 

	 	 	her beneficiaries) under this Plan
will be reduced by the actuarial value of the payments required to be made to such other
person or entity.

	 	(a)	 	Actuarial value will be determined using the factors and methodology
described in Section 3.06 below (in the case of lump sums) and using the actuarial
assumptions in the underlying Pension Plan in all other cases.
	 
	 	(b)	 	In dividing a Participant’s benefit between the Participant and another
person or entity, consistent actuarial assumptions and methodologies will be used so
that there is no increased actuarial cost to the Company.

	2.11	 	Funding. Participants have the status of general unsecured creditors of the Company
and the Plan constitutes a mere promise by the Company to make benefit payments in the future.
The Company may, but need not, fund benefits under the Plan through a trust. If it does so,
any trust created by the Company and any assets held by the trust to assist it in meeting its
obligations under the Plan will conform to the terms of the model trust, as described in
Internal Revenue Service Revenue Procedure 92-64, but only to the extent required by Internal
Revenue Service Revenue Procedure 92-65. It is the intention of the Company and Participants
that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA.
	 
	 	 	Any funding of benefits under this Plan will be in the Company’s sole discretion. The
Company may set and amend the terms under which it will fund and may cease to fund at any
time.
	 
	2.12	 	Construction. The Company shall have full discretion to construe and interpret the
terms and provisions of this Plan, to make factual determinations and to remedy possible
inconsistencies and omissions. The Company’s interpretations, constructions and remedies shall
be final and binding on all parties, including but not limited to the Affiliated Companies and
any Participant or beneficiary. The Company shall administer such terms and provisions in a
uniform and nondiscriminatory manner and in full accordance with any and all laws applicable
to the Plan.
	 
	2.13	 	Governing Law. This Plan shall be governed by the law of the State of California,
except to the extent superseded by federal law.
	 
	2.14	 	Actions by Company. Any powers exercisable by the Company under the Plan shall be
utilized by written resolution adopted by the Board of Directors or its delegate. The Board of
Directors may by written resolution delegate any of the Company’s powers under the Plan and
any such delegations may provide for subdelegations, also by written resolution.
	 
	2.15	 	Plan Representatives. Those authorized to act as Plan representatives will be
designated in writing by the Board of Directors or its delegate.

-7-

 

	2.16	 	Number. The singular, where appearing in this Plan, will be deemed to include the
plural, unless the context clearly indicates the contrary.

-8-

 

ARTICLE III

Lump Sum Election

          This Article only applies with respect to Grandfathered Amounts. See Appendix 1 and Appendix
2 for the distribution rules that apply to other benefits earned under the Plan.

	3.01	 	In General. This Article sets forth the rules under which Participants may elect to
receive their benefits in a lump sum. Except as provided in Section 3.05, this Article does
not apply to employees in cases where benefits under a particular Program are automatically
payable in lump sum form under Article II. This Article will not apply if a particular
Program so provides.
	 
	3.02	 	Election. Participants may elect to have their benefits paid in the form of a single
lump sum under this Section.

	 	(a)	 	An election to take a lump sum may be made at any time during the 60-day
period prior to Termination of Employment and covers both—

	 	(1)	 	Benefits payable to the Participant during his or her
lifetime, and
	 
	 	(2)	 	Survivor benefits (if any) payable to the Participant’s
beneficiary, including preretirement death benefits (if any) payable to the
Participant’s spouse.

	 	(b)	 	An election does not become effective until the earlier of:

	 	(1)	 	the Participant’s Termination of Employment, or
	 
	 	(2)	 	the Participant’s death.

	 	(c)	 	Before the election becomes effective, it may be revoked.
	 
	 	(d)	 	If a Participant does not have a Termination of Employment within 60 days
after making an election, the election will never take effect.
	 
	 	(e)	 	An election may only be made once. If it fails to become effective after 60
days or is revoked before becoming effective, it cannot be made again at a later time.
	 
	 	(f)	 	After a Participant has a Termination of Employment, no election can be made.
	 
	 	(g)	 	If a Participant dies before making a lump sum election, his or her spouse
may not make a lump sum election with respect to any benefits which may be due the
spouse.

-9-

 

	 	(h)	 	Elections to receive a lump sum must be made in writing and must include
spousal consent if the Participant is married. Elections and spousal consent must be
witnessed by a Plan representative or a notary public.

	3.03	 	Lump Sum—Retirement Eligible. If a Participant with a valid lump sum election in
effect under Section 3.02 has a Termination of Employment after he or she is entitled to
commence benefits under the Pension Plans, payments will be made in accordance with this
Section.

	 	(a)	 	Monthly benefit payments will be made for up to 12 months, commencing the
first of the month following Termination of Employment. Payments will be made:

	 	(1)	 	in the case of a Participant who is not married on the date
benefits are scheduled to commence, based on a straight life annuity for the
Participant’s life and ceasing upon the Participant’s death should he or she
die before the 12 months elapse, or
	 
	 	(2)	 	in the case of a Participant who is married on the date
benefits are scheduled to commence, based on a joint and survivor annuity
form—

	 	(A)	 	with the survivor benefit equal to 50% of
the Participant’s benefit;
	 
	 	(B)	 	with the Participant’s spouse as the
survivor annuitant;
	 
	 	(C)	 	determined by using the contingent
annuitant option factors used to convert straight life annuities to
50% joint and survivor annuities under the Northrop Grumman
Retirement Plan; and
	 
	 	(D)	 	with all payments ceasing upon the death of
both the Participant and his or her spouse should they die before the
12 months elapse.

	 	(b)	 	As of the first of the 13th month, the present value of the remaining benefit
payments will be paid in a single lump sum. Payment of the lump sum will be made to
the Participant if he or she is still alive, or, if not, to his or her surviving
spouse, if any.
	 
	 	(c)	 	No lump sum payment will be made if:

	 	(1)	 	The Participant is receiving monthly benefit payments in the
form of a straight life annuity and the Participant dies before the time the
lump sum payment is due.

-10-

 

	 	(2)	 	The Participant is receiving monthly benefit payments in a
joint and survivor annuity form and the Participant and his or her spouse both
die before the time the lump sum payment is due.

	 	(d)	 	A lump sum will be payable to a Participant’s spouse as of the first of the
month following the date of the Participant’s death, if:

	 	(1)	 	the Participant dies after making a valid lump sum election
but prior to commencement of any benefits under this Plan;
	 
	 	(2)	 	the Participant is survived by a spouse who is entitled to a
preretirement surviving spouse benefit under this Plan; and
	 
	 	(3)	 	the spouse survives to the first of the month following the
date of the Participant’s death.

	3.04	 	Lump Sum—Not Retirement Eligible. If a Participant with a valid lump sum election in
effect under Section 3.02 has a Termination of Employment before he or she is entitled to
commence benefits under the Pension Plans, payments will be made in accordance with this
Section.

	 	(a)	 	No monthly benefit payments will be made.
	 
	 	(b)	 	Following Termination of Employment, a single lump sum payment of the benefit
will be made on the first of the month following 12 months after the date of the
Participant’s Termination of Employment.
	 
	 	(c)	 	A lump sum will be payable to a Participant’s spouse as of the first of the
month following the date of the Participant’s death, if:

	 	(1)	 	the Participant dies after making a valid lump sum election
but prior to commencement of any benefits under this Plan;
	 
	 	(2)	 	the Participant is survived by a spouse who is entitled to a
preretirement surviving spouse benefit under this Plan; and
	 
	 	(3)	 	the spouse survives to the first of the month following the
date of the Participant’s death.

	 	(d)	 	No lump sum payment will be made if the Participant is unmarried at the time
of death and dies before the time the lump sum payment is due.

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

-11-

 

	3.06	 	Calculation of Lump Sum.

	 	(a)	 	The factors to be used in calculating the lump sum are as follows:

	 	(1)	 	Interest: Whichever of the following two rates that
produces the smaller lump sum:

	 	(A)	 	the discount rate used by the Company for
purposes of Statement of Financial Accounting Standards No. 87 of the
Financial Accounting Standards Board as disclosed in the Company’s
annual report to shareholders for the year end immediately preceding
the date of distribution, or
	 
	 	(B)	 	the applicable interest rate that would be
used to calculate a lump sum value for the benefit under the Pension
Plans.

	 	(2)	 	Mortality: the applicable mortality table, which
would be used to calculate a lump sum value for the benefit under the Pension
Plans.
	 
	 	(3)	 	Increase in Section 415 Limit: 4% per year.
	 
	 	(4)	 	Age: Age rounded to the nearest month on the date the
lump sum is payable.
	 
	 	(5)	 	Variable Unit Values: Variable Unit Values are
presumed not to increase for future periods after the date the lump sum is
payable.

	 	(b)	 	The annuity to be converted to a lump sum will be the remaining annuity
currently payable to the Participant or his or her beneficiary at the time the lump
sum is due.

	 	(1)	 	For example, assume a Participant is receiving benefit
payments in the form of a 50% joint and survivor annuity.
	 
	 	(2)	 	If the Participant and the survivor annuitant are both still
alive at the time the lump sum payment is due, the present value calculation
will be based on the remaining benefits that would be paid to both the
Participant and the survivor in the annuity form.
	 
	 	(3)	 	If only the survivor is alive, the calculation will be based
solely on the remaining 50% survivor benefits that would be paid to the
survivor.
	 
	 	(4)	 	If only the Participant is alive, the calculation will be
based solely on the remaining benefits that would be paid to the Participant.
	 
	 	(5)	 	In the case of a Participant who dies prior to commencement
of benefits under this Plan so that only a preretirement surviving

-12-

 

	 	 	 	spouse
benefit (if any) is payable, the lump sum will be based solely on the value of
the preretirement surviving spouse benefit.

	 	(c)	 	In the case of a lump-sum under Section 3.05 (related to lump sums with a CIC
Severance Plan election), the lump-sum amount will be calculated as described in that
section and the rules of this Section 3.06 are not used.

	3.07	 	Spousal consent. Spousal consent, as required for elections as described above, need
not be obtained if the Company determines that there is no spouse or the spouse cannot be
located.

* * *

          IN WITNESS WHEREOF, this Amendment and Restatement is hereby executed by a duly authorized
officer on this 21st day of December, 2007.

	 	 	 	 	 
	 	NORTHROP GRUMMAN CORPORATION

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

Benefits and HRIS 	 

-13-

 

	 	 	 	 	 

APPENDIX 1 — 2005-2007 TRANSITION RULES

          This Appendix 1 provides the distribution rules that apply to the portion of benefits under
the Plan subject to Code section 409A for Participants with benefit commencement dates after
January 1, 2005 and before January 1, 2008.

	1.01	 	Election. Participants scheduled to commence payments during 2005 may elect to
receive both pre-2005 benefit accruals and 2005 benefit accruals in any optional form of
benefit available under the Plan as of December 31, 2004. Participants electing optional
forms of benefits under this provision will commence payments on the Participant’s selected
benefit commencement date.
	 
	1.02	 	2005 Commencements. Pursuant to IRS Notice 2005-1, Q&A-19 & Q&A-20, Participants
commencing payments in 2005 from the Plan may elect a form of distribution from among those
available under the Plan on December 31, 2004, and benefit payments shall begin at the time
elected by the Participant.

	 	(a)	 	Key Employees. A Key Employee Separating from Service on or after
July 1, 2005, with Plan distributions subject to Code section 409A scheduled to be
paid in 2006 and within six months of his date of Separation from Service, shall have
such distributions delayed for six months from the Key Employee’s date of Separation
from Service. The delayed distributions shall be paid as a single sum with interest
at the end of the six month period and Plan distributions will resume as scheduled at
such time. Interest shall be computed using the retroactive annuity starting date
rate in effect under the Northrop Grumman Pension Plan on a month-by-month basis
during such period (i.e., the rate may change in the event the period spans two
calendar years). Alternatively, the Key Employee may elect under IRS Notice 2005-1,
Q&A-20 to have such distributions accelerated and paid in 2005 without the interest
adjustment, provided, such election is made in 2005.
	 
	 	(b)	 	Lump Sum Option. During 2005, a temporary immediate lump sum feature
shall be available as follows:

	 	(i)	 	In order to elect a lump sum payment pursuant to IRS Notice
2005-1, Q&A-20, a Participant must be an elected or appointed officer of the
Company and eligible to commence payments under the underlying qualified
pension plan on or after June 1, 2005 and on or before December 1, 2005;
	 
	 	(ii)	 	The lump sum payment shall be made in 2005 as soon as
feasible after the election; and
	 
	 	(iii)	 	Interest and mortality assumptions and methodology for
calculating lump sum amount shall be based on the Plan’s procedures for
calculating lump sums as of December 31, 2004.

-14-

 

	1.03	 	2006 and 2007 Commencements. Pursuant to IRS transition relief, for all benefit
commencement dates in 2006 and 2007 (provided election is made in 2006 or 2007), distribution
of Plan benefits subject to Code section 409A shall begin 12 months after the later of: (a)
the Participant’s benefit election date, or (b) the underlying qualified pension plan benefit
commencement date (as specified in the Participant’s benefit election form). Payments delayed
during this 12-month period will be paid at the end of the period with interest. Interest
shall be computed using the retroactive annuity starting date rate in effect under the
Northrop Grumman Pension Plan on a month-by-month basis during such period (i.e., the rate may
change in the event the period spans two calendar years).

-15-

 

APPENDIX 2 — POST 2007 

DISTRIBUTION OF 409A AMOUNTS

          The provisions of this Appendix 2 shall apply only to the portion of benefits under the Plan
that are subject to Code section 409A with benefit commencement dates on or after January 1, 2008.
Distribution rules applicable to the Grandfathered Amounts are set forth in Articles II and III,
and Appendix 1 addresses distributions of amounts subject to Code section 409A with benefit
commencement dates after January 1, 2005 and prior to January 1, 2008.

	2.01	 	Time of Distribution. Subject to the special rules provided in this Appendix 2,
distributions to a Participant of his vested retirement benefit shall commence as of the
Payment Date.
	 
	2.02	 	Special Rule for Key Employees. If a Participant is a Key Employee and age 55 or
older at his Separation from Service, distributions to the Participant shall commence on the
first day of the seventh month following the date of his Separation from Service (or, if
earlier, the date of the Participant’s death). Amounts otherwise payable to the Participant
during such period of delay shall be accumulated and paid on the first day of the seventh
month following the Participant’s Separation from Service, along with interest on the delayed
payments. Interest shall be computed using the retroactive annuity starting date rate in
effect under the Northrop Grumman Pension Plan on a month-by-month basis during such delay
(i.e., the rate may change in the event the delay spans two calendar years).
	 
	2.03	 	Forms of Distribution. Subject to the special rules provided in this Appendix 2, a
Participant’s vested retirement benefit shall be distributed in the form of a single life
annuity. However, a Participant may elect an optional form of benefit up until the Payment
Date. The optional forms of payment are:

	 	(a)	 	50% joint and survivor annuity
	 
	 	(b)	 	75% joint and survivor annuity
	 
	 	(c)	 	100% joint and survivor annuity.

If a Participant is married on his Payment Date and elects a joint and survivor annuity,
his survivor annuitant will be his spouse unless some other survivor annuitant is named
with spousal consent. Spousal consent, to be effective, must be submitted in writing
before the Payment Date and must be witnessed by a Plan representative or notary public.
No spousal consent is necessary if the Company determines that there is no spouse or that
the spouse cannot be found.

	2.04	 	Death. If a married Participant dies before the Payment Date, a death benefit will
be payable to the Participant’s spouse commencing 90 days after the Participant’s death. The
death benefit will be a
single life annuity in an amount equal to the survivor portion of a Participant’s vested
retirement benefit based on a 100% joint and survivor annuity determined on the
Participant’s date of death. This benefit is

-16-

 

	 	 	also payable to a Participant’s domestic
partner who is properly registered with the Company in accordance with procedures
established by the Company.
	 
	2.05	 	Actuarial Assumptions. Except as provided in Section 2.06 of this Appendix 2, all
forms of payment under this Appendix 2 shall be actuarially equivalent life annuity forms of
payment, and all conversions from one such form to another shall be based on the following
actuarial assumptions:
	 
	 	 	Interest Rate:           6%
	 
	 	 	Mortality Table:      RP-2000 Mortality Table projected 15 years for future standardized cash
balance factors

	2.06	 	Accelerated Lump Sum Payouts.

	 	(a)	 	Post-2007 Separations. Notwithstanding the provisions of this
Appendix 2, for Participants who Separate from Service on or after January 1, 2008, if
the present value of (a) the vested portion of a Participant’s retirement benefit and
(b) other vested amounts under nonaccount balance plans that are aggregated with the
retirement benefit under Code section 409A, determined on the first of the month
coincident with or following the date of his Separation from Service, is less than or
equal to $25,000, such benefit amount shall be distributed to the Participant (or his
spouse or domestic partner, if applicable) in a lump sum payment. Subject to the
special timing rule for Key Employees under Section 2.02 of this Appendix 2, the lump
sum payment shall be made within 90 days after the first of the month coincident with
or following the date of the Participant’s Separation from Service.
	 
	 	(b)	 	Pre-2008 Separations. Notwithstanding the provisions of this
Appendix 2, for Participants who Separate from Service before January 1, 2008, if the
present value of (a) the vested portion of a Participant’s retirement benefit and (b)
other vested amounts under nonaccount balance plans that are aggregated with the
retirement benefit under Code section 409A, determined on the first of the month
coincident with or following the date the Participant attains age 55, is less than or
equal to $25,000, such benefit amount shall be distributed to the Participant (or his
spouse or domestic partner, if applicable) in a lump sum payment within 90 days after
the first of the month coincident with or following the date the Participant attains
age 55, but no earlier that January 1, 2008.
	 
	 	(c)	 	Conflicts of Interest. The present value of a Participant’s vested
retirement benefit shall also be payable in an immediate lump sum to the extent
required under conflict of interest rules for government service and permissible
under Code section 409A.
	 
	 	(d)	 	Present Value Calculation. The conversion of a Participant’s
retirement benefit into a lump sum payment and the present value calculations under

-17-

 

	 	 	 	this Section 2.06 of this Appendix 2 shall be based on the GATT assumptions in effect
under the Northrop Grumman Pension Plan, and will be based on the Participant’s
immediate benefit if the Participant is 55 or older at Separation from Service.
Otherwise, the calculation will be based on the benefit amount the Participant will be
eligible to receive at age 55.

	2.07	 	Effect of Early Taxation. If the Participant’s benefits under the Plan are
includible in income pursuant to Code section 409A, such benefits shall be distributed
immediately to the Participant.
	 
	2.08	 	Permitted Delays. Notwithstanding the foregoing, any payment to a Participant under
the Plan shall be delayed upon the Company’s reasonable anticipation of one or more of the
following events:

	 	(a)	 	The Company’s deduction with respect to such payment would be eliminated by
application of Code section 162(m); or
	 
	 	(b)	 	The making of the payment would violate Federal securities laws or other
applicable law;

provided, that any payment delayed pursuant to this Section 2.08 of this Appendix 2 shall
be paid in accordance with Code section 409A.

	2.09	 	Special Tax Distribution. On the date a Participant’s retirement benefit is
reasonably ascertainable within the meaning of IRS regulations under Code section 3121(v)(2),
an amount equal to the Participant’s portion of the FICA tax withholding will be distributed
in a single lump sum payment. This payment will reduce the Participant’s future benefit
payments under the Plan. This reduction shall be calculated using GATT assumptions in effect
under the Northrop Grumman Pension Plan and a cost of living adjustment of 4%.

-18-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}]]