Document:

Form of Restricted Performance Stock Rights Agreement (non-officer)

 Exhibit 10.4 
  
 FORM A 
  
 NORTHROP GRUMMAN CORPORATION 
  
 TERMS AND CONDITIONS APPLICABLE TO 
 2005 RESTRICTED PERFORMANCE STOCK RIGHTS 
 GRANTED UNDER THE 2001 LONG-TERM INCENTIVE STOCK PLAN 
  
 These Terms and Conditions (“Terms”) apply to certain
“Restricted Performance Stock Rights” (“RPSRs”) granted by Northrop Grumman Corporation (the “Company”) in 2005. If you were granted an RPSR award by the Company in 2005, the date of grant of your RPSR award and the
target number of RPSRs applicable to your award are set forth in the letter from the Company announcing your RPSR award 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 RPSR award if referenced in your Grant Letter and/or on the Stock Plan System with respect to your award. If you were granted an RPSR award, you 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 RPSR 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 performance period applicable to your award is January 1, 2005 to December 31, 2007 (the “Performance Period”). The target number of RPSRs subject to your award are subject to adjustment as provided herein. The RPSR
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; Payment of RPSRs. 

  
 The RPSRs are subject to the vesting and payment provisions established (or to be established, as the case may be) by the Committee with respect to the
Performance Period. RPSRs that vest based on such provisions and any related Dividend Equivalents (as defined below) will be paid as provided below. No fractional shares will be issued. 
  
 1.1 Performance-Based Vesting of RPSRs. At the
conclusion of the Performance Period, the Committee shall determine whether and the extent to which the applicable performance criteria have been achieved for purposes of determining earnouts and RPSR payments. Based on its determination, the
Committee shall determine the percentage of RPSRs subject to the award (if any) that have vested for the Performance Period in accordance with the earnout schedule established (or to be established, as the case may be) by the Committee with respect
to the Performance Period (the “Earnout Percentage”). Except as provided in Section 1.2 below, any RPSRs subject to the award that are not vested as of the conclusion of the Performance Period after giving effect to the Committee’s
determinations under this Section 1.1 shall terminate and become null and void immediately following such determinations. 
  
 1.2 Minimum Vesting. The Earnout Percentage determined under Section 1.1 shall not be less than thirty (30) percent; provided,
however, that such minimum Earnout Percentage shall not apply if, as of the December 31 immediately preceding the start of the Performance Period, the Grantee is either the Chief Executive Officer of the Company, is otherwise a “Covered
Employee” (as defined for purposes of Section 162(m) of the Code) of the Company, or is one of the next three highest compensated employees (as determined by proxy convention) with respect to the Company. 
  
 1.3 Payment of RPSRs. The number of RPSRs payable at the
conclusion of the Performance Period (“Earned RPSRs”) shall be determined by multiplying the Earnout Percentage by the target number of RPSRs subject to the award. The Earned RPSRs may be paid out 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 each Earned RPSR 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 the Committee determines the extent to which the applicable RPSR performance criteria have been achieved. RPSRs will normally
be paid by March 30 following the end of the Performance Period. 
  
 1.4 Dividend Equivalents. At the conclusion of the Performance Period, the Grantee shall be entitled to payment for Dividend Equivalents (if any) with respect to the Earned RPSRs (if any). For purposes of these Terms,
“Dividend Equivalents” means the aggregate amount of dividends paid by the Company on a number of shares of Common Stock equivalent to the number of Earned RPSRs during the period from the beginning of the Performance Period until the date
the Earned RPSRs are paid (without interest or other adjustments to reflect the time value of money, but subject to adjustment 

  

 1 

 
pursuant to Section 5.1). For these purposes, any Earned RPSRs in excess of the target number of RPSRs subject to the award shall be considered to have been
granted at the beginning of the Performance Period. 
  
 1.5
Payment of Dividend Equivalents. Dividend Equivalents (if any) will be paid at the same time as the Earned RPSRs to which they relate are paid. Dividend Equivalents will be paid in cash or, in the discretion of the Committee,
distributed in shares of Company Common Stock or a combination of cash and shares. If distributed in shares, the number of shares to be issued (subject to tax withholding) will be determined by (a) determining the aggregate cash amount of the
Dividend Equivalents payable, and (b) dividing such amount by the average closing price of a share of Common Stock on the composite tape of the New York Stock Exchange for trading days during the last month of the Performance Period. Fractional
shares will not be paid. 
  

	2.	Early Termination of Award; Termination of Employment. 

  
 2.1 General. The RPSRs and related Dividend Equivalents subject to the award shall terminate and
become null and void prior to the conclusion of the Performance Period if and when (a) the award 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 for any reason to be an employee of the Company or one of its subsidiaries. 
  
 2.2 Termination of Employment Due to Retirement, Death or Disability. The number of RPSRs (and related Dividend Equivalents) subject to the award that would otherwise be paid if the Grantee had
remained employed by the Company or a subsidiary through the entire Performance Period shall vest on a prorated basis as provided herein if the Grantee’s employment by the Company and its subsidiaries terminates due to the Grantee’s
Retirement, death, or Disability and, in each case, only if the Grantee has completed at least six (6) consecutive calendar months of employment with the Company or a subsidiary during the three-year Performance Period. Such prorating of
RPSRs (and related Dividend Equivalents) shall be based on the number of full months the Grantee was actually employed by the Company or one of its subsidiaries out of the thirty-six month Performance Period. Partial months of employment during the
Performance Period, even if substantial, shall not be counted for purposes of prorated vesting. Any RPSRs (and related Dividend Equivalents) subject to the award that do not vest in accordance with this Section 2.2 upon a termination of the
Grantee’s employment due to Retirement, death or Disability shall terminate immediately upon such termination of employment. 
  
 In the case of Retirement, the number of Earned RPSRs subject to prorating shall be calculated based on the entire Performance Period in accordance with
Section 1 above as if the Grantee had not terminated employment. In the case of death or Disability (a) the Performance Period used to calculate the Grantee’s Earned RPSRs will be deemed to have ended as of the most recent date that performance
has been measured by the Company with respect to the RPSRs (but in no event shall such date be more than one year before the Grantee’s termination of employment), (b) the Earnout Percentage of the Grantee’s RPSRs will be determined based
on actual performance for that short Performance Period, and (c) payment of Earned RPSRs (and Dividend Equivalents thereon) will normally be made by the end of the third month following the month of the Grantee’s death or Disability. The
Earnout Percentage shall be determined after giving effect to Section 1.2, if applicable. Notwithstanding the preceding sentences of this paragraph, for the purpose of computing the number of Earned RPSRs, and for purposes of the time and manner of
payment of the Grantee’s Earned RPSRs, the termination of employment by the Grantee on account of Retirement shall be treated as a termination on account of death or Disability, if: (a) contemporaneous with such Retirement the Grantee accepts
employment with a not-for-profit entity; federally funded research and development center; local, state or federal government; public or private college or university, or other, similar entity; and (b) the Committee determines in its discretion that
such employment may likely give rise to a conflict of interest or appearance thereof. 
  
 In the event of the Grantee’s death subsequent to a termination of employment due to Retirement or Disability, the Grantee’s Successor shall be entitled to any payments to which the Grantee would have been
entitled under this Agreement. 
  
 2.3 Other
Terminations of Employment. Subject to Section 5.2, all RPSRs subject to the award and related Dividend Equivalents terminate immediately upon a termination of the Grantee’s employment: (a) for any reason other than due to the
Grantee’s Retirement, death or Disability; or (b) for Retirement, death or Disability, if the six-month employment requirement under Section 2.2 above is not satisfied. 
  
 2.4 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 

  

 2 

 
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. 

 
 2.5 Salary Continuation. Subject to Section 2.4
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 2.4) 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 2.4, 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. 
  
 2.6 Sale or Spinoff of Subsidiary or Business Unit. For purposes of the RPSRs (and related Dividend
Equivalents) subject to the award, 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. 
  
 2.7 Continuance of Employment Required. Except as expressly provided in Sections 2.2 and 2.4 above and
in Section 5 below, the vesting of the RPSRs and related Dividend Equivalents subject to the award requires continued employment through the last day of the Performance Period as a condition of the payment of such RPSRs and Dividend Equivalents.
Employment for only a portion of the Performance Period, 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 award, as well as the RPSRs and Dividend Equivalents 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 RPSRs and/or Dividend Equivalents 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. 

  
 5.1 Adjustments. The RPSRs, Dividend Equivalents, related performance criteria, 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. 
  
 5.2
Possible Acceleration on Change in Control. Notwithstanding the provisions of Section 2 hereof, and further subject to the Company’s ability to terminate the award as provided in Section 5.3 below, the Grantee shall be
entitled to proportionate vesting of the award as provided below if the Grantee is not otherwise entitled to a pro-rata payment pursuant to Section 2 and in the event 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 

  

 3 

	 	 
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. 
  
 In the event the Grantee is entitled to a prorated payment in accordance with the foregoing provisions of this Section 5.2, then the Grantee will be
eligible for a prorated portion of the RPSRs (and related Dividend Equivalents) determined in accordance with the following formula: (a) the Earnout Percentage determined in accordance with Section 1 but calculated based on performance for the
portion of the three-year Performance Period ending on the last day of the month coinciding with or immediately preceding the date of the termination of the Grantee’s employment, multiplied by (b) the target number of RPSRs subject to the
award, multiplied by (c) a fraction the numerator of which is the total number of full months that the Grantee was an employee of the Company or a subsidiary on and after the beginning of the Performance Period and through the date of the
termination of the Grantee’s employment (but not in excess of 36 months) and the denominator of which is 36. Accumulated Dividend Equivalents through the date of the termination shall be paid to the Grantee with respect to the Grantee’s
RPSRs which are paid. Payment will be made no later than 60 days after the later of the Change in Control of the Company or the termination of the Grantee’s employment. 
  
 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 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 Grantee shall be entitled to a prorated payment of the RPSRs as provided
below. Unless the Committee expressly provides otherwise in the circumstances, no acceleration of vesting or exercisability 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 prorated payment 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 award; provided, however, that, the Committee may reinstate the original terms of
the award if the related event does not actually occur. 
  
 In the
event the Grantee is entitled to a prorated payment in accordance with the foregoing provisions of this Section 5.3, then the Grantee will, be eligible for a prorated portion of the RPSRs (and related Dividend Equivalents) determined in accordance
with the following formula: (a) the Earnout Percentage determined in accordance with Section 1 but calculated based on performance for the portion of the three-year Performance Period ending on the date of the Change in Control of the Company,
multiplied by (b) the target number of RPSRs subject to the award, multiplied by (c) a fraction the numerator of which is the total number of full months that the Grantee was an employee of the Company or a subsidiary on and after the beginning of
the Performance Period and before the occurrence of the Change in Control (but not in excess of 36 months) and the denominator of which is 36. Accumulated Dividend Equivalents through the date of the Change in Control shall be paid to the Grantee
with respect to the Grantee’s RPSRs which are paid. Payment will be made no later than 60 days after the Change in Control. 
  

 4 

	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
making any payments or issuing any shares upon vesting of the RPSRs or related Dividend Equivalents, 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). 
  
 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 RPSRs or related
Dividend Equivalents. 
  

	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 RPSRs and Dividend Equivalents subject to the award 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 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 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: 
  
 “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 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 

  

 5 

 
individuals, selected by the Committee, who are qualified to give such professional medical advice. 
  
 “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 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 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. 
  
 “Parent” is used as defined in the Plan. 
  
 “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 

  

 6 

	 	 
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. 

  
 “Retirement” or “Retire” 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). 
  
 “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. 
  

 7Northrop Grumman 2002 Annual Incentive Plan

 Exhibit 10.5 
  
 NORTHROP GRUMMAN 2002 ANNUAL INCENTIVE PLAN 
 Amended and Restated as of May 16, 2005 
  
 INCENTIVE COMPENSATION PLAN (for NON-SECTION 162(m) OFFICERS) 
 PERFORMANCE
ACHIEVEMENT PLAN 
 INCENTIVE MANAGEMENT ACHIEVEMENT PLAN 
  
 SECTION I 
  
 PURPOSE 
  
 Northrop Grumman has an annual incentive program to promote the success of the Company and render its operations profitable to the maximum extent by
providing incentives to key employees. Participating employees have varying degrees of impact on the overall success and performance of the Company. To facilitate the appropriate incentive level for each Participant, Northrop Grumman utilizes three
incentive plans that use common financial and business performance criteria: 
  

	 	•	 	The Incentive Compensation Plan (ICP) 

  

	 	•	 	The Performance Achievement Plan (PAP) 

  

	 	•	 	The Incentive Management Achievement Plan (IMAP). 

  
 SECTION II 
  
 DEFINITIONS 
  
 1. COMPANY -
Northrop Grumman Corporation and such of its subsidiaries as are consolidated in its consolidated financial statements. 
  
 2. CODE – The Internal Revenue Code of 1986, as amended from time to time. 
  

3. COMMITTEE - The Compensation and Management Development Committee of the Board of Directors of the Company. 
  
 4. INCENTIVE COMPENSATION – Awards payable under these plans. 
  
 5. PARTICIPANT – An employee of the Company granted or eligible to receive Incentive
Compensation award under one of these Plans. 
  

  
 1 of 11 

 6. PERFORMANCE CRITERIA – The performance criteria is a weighted combination of various financial and non-financial
factors approved by the Committee for the Performance Year. 
  
 7. PERFORMANCE
YEAR – The year with respect to which an award of Incentive Compensation is calculated and paid. 
  
 8. PLAN – Any of the following plans, individually or in combination: the Incentive Compensation Plan (ICP); the Performance Achievement Plan (PAP); and/or the Incentive Management Achievement Plan (IMAP).

  
 9. SECTION 162(m) OFFICER – An employee who is a “covered
employee” as defined in Section 162(m) of the Code with respect to an award of Incentive Compensation under the 2002 Incentive Compensation Plan for any Performance Year. 
  
 10. YEAR - The fiscal year of Northrop Grumman Corporation. 
  
 SECTION III 
  
 PARTICIPATION 
  
 Employees may be eligible for Incentive Compensation under one of the Northrop Grumman incentive Plans. Several factors are taken into consideration when
determining in which Plan an employee may be eligible to participate: 
  
 1.
Incentive Compensation Plan (ICP): 
  
 a. Employees eligible to
receive Incentive Compensation under this Plan are elected corporate officers of the rank of Vice President and above and the Presidents of those consolidated subsidiaries that the Committee determines to be significant in the overall corporate
operations that are not Section 162(m) Officers for the Performance Year. If an executive receives or is eligible to receive an Incentive Compensation award under the 2002 Incentive Compensation Plan for 162(m) Officers, then the executive will not
be eligible and shall not receive an Incentive Compensation award under this Plan. 
  
 b. Directors, as such, shall not participate in this Plan, but the fact that an elected corporate officer or subsidiary President is also a Director of the Company shall not prevent participation. 
  
 2. Performance Achievement Plan (PAP): 
  
 a. Employees eligible to receive Incentive Compensation awards under this
Plan are Appointed Vice Presidents, senior management as well as high-level individual contributors who are in a position to make measurable and significant contributions to the success of the Company. 
  

  
 2 of 11 

 b. At the beginning of or prior to a Performance Year, the Company’s CEO approves the number of
Participants to be eligible in this Plan. Participants are then selected by their management based on an assessment of their position relative to other candidates, their performance, and their potential impact on achievement of business unit and the
Company goals. 
  
 c. Participation in this Plan during any
Performance Year does not imply nor guarantee participation in the Plan in future years. 
  
 3. Incentive Management Achievement Plan (IMAP): 
  
 a. Employees eligible to receive Incentive Compensation awards under this Plan include middle management and individual key contributors (employees normally in a position that customarily perform quasi-management or
team leadership duties). In addition, employees may be eligible to participate in this Plan if they have specific individual goals that directly contribute to the attainment of their respective business unit and operating goals or if the person is a
“high performing” employee. 
  
 b. At the beginning of
or prior to a Performance Year, the Company’s CEO approves the number of Participants to be eligible in this Plan. Participants are then selected by their management based on an assessment of their position relative to other candidates, their
performance and their potential impact on achievement of business unit and the Company goals. 
  
 c. Participation in this Plan during any Performance Year does not imply nor guarantee participation in the Plan in future years. 
  
 4. Non-Duplication of Awards 
  
 a. A Participant may not receive an Incentive Compensation award under more than one of the above Plans for the Performance Year. The only exception to
this is in the event that an individual is a Participant in a particular Plan for a portion of the Performance Year and then is selected to participate in one of the other Plans for the remainder of that Performance Year. In this event, an
individual may receive pro-rated awards based on the time the individual participated in each Plan. 
  
 b. A Participant will not be eligible to receive any Incentive Compensation award from any of these Plans if the employee is a Participant in the
Company’s 2002 Incentive Compensation Plan for 162(m) Officers. 
  
 5. Death,
Disability, or Retirement 
  
 A Participant may
be eligible to receive a pro-rated Incentive Compensation award in the event of the employee’s death, disability, or retirement. In the case of a deceased Participant, such Incentive Compensation award will be paid to the Participant’s
estate. 
  

  
 3 of 11 

 For the purpose of this section, retirement requires a Participant to be age 55 or older
with at least 10 years of service. Notwithstanding any other provisions of this Plan, if contemporaneous with the Participant’s retirement, (1) the Participant accepts employment with a not-for-profit entity; federally funded research and
development center; local, state or federal government; public or private college or university, or other, similar entity, and (2) the Committee determines in its discretion that such employment may likely give rise to a conflict of interest or
appearance thereof, then the Committee may determine that a pro-rated Incentive Compensation award shall be paid within 10 business days of retirement. For the purpose of computing the prorated award, the Unit Performance Factor (see Section V)
shall be the greater of (1) 1.0 or (2) the average of the Unit Performance Factors for the three calendar years completed before retirement (or for two years or one year, if the Participant does not have Unit Performance Factors for three years).
For the purpose of computing the prorated award, the Individual Performance Factor (see Section VII) shall be the average of the Individual Performance Factors for the three calendar years completed before retirement (or for two years or one year,
if the Participant does not have Individual Performance Factors for three years). 
  
 6. Employment Status 
  
 Except as
provided in 5 (see above), in order to be eligible to receive a payment from these plans, a Participant must be an active employee of the Company as of December 31 of the plan year unless an exception is approved in writing by the Company’s
Chief Human Resources Officer. 
  
 SECTION IV 
  
 GOAL SETTING AND PERFORMANCE CRITERIA 
  
 Goal setting and performance planning are essential elements of Plan
administration. This requires establishing Performance Criteria, such as annual goals, goal weights, and performance measures. Except as provided in the Plan, the Committee approves annual business and financial goals for the Company no later than
the end of the first quarter of the annual performance period. 
  
 1. Corporation
Goals 
  
 For the Performance Year - 2002 and for
all future Performance Years until otherwise determined by the Committee, financial and non-financial objectives may, in the sole discretion of the Committee, will be established. 
  
 Refer the Appendix A for the specific Performance Year Goals approved by the Committee. 
  

  
 4 of 11 

	 	a)	Financial Measures 

  

	 	i)	The CEO’s recommended goals are reviewed and amended as appropriate, and established by the Committee at its sole discretion. Measures may include, but are not limited to: cash
management, cash flow, return on investment, debt reduction, revenue growth, net earnings, and return on equity. 

  

	 	ii)	The Committee approves a performance threshold, a target level and a maximum performance level for each of the Financial Measures for the Performance Year. 

 

	 	b)	Supplemental Goals 

  
 Supplemental Goals may be either qualitative or quantitative such as, but not limited to: customer satisfaction, contract acquisition,
delivery schedule, cycle-time improvement, productivity, quality, workforce diversity, and environmental management. The CEO recommends the Supplemental Goals based on sector goals contained in Annual Operating Plans and Corporate Office Goals
established prior to the beginning of each year. Supplemental Goals have stated milestones and weights. The CEO’s recommended Supplemental Goals are reviewed and amended as appropriate, and established by the Committee at its sole discretion.

  
 2. Individual Goals 
  
 Each year Participants develop individual goals that support
achievement of the Company’s business plan and the specific goals established by the Committee in the three aforementioned Corporation Goals. Individual goals are prepared, approved and documented. The employee’s manager reviews these
goals with each Participant to ensure they are aggressive, coordinated and focused on attainment of Company business objectives. 
  
 SECTION V 
  
 PERFORMANCE DETERMINATION 
  
 1. At the end of the Performance Year the CEO evaluates the performance of each of the operating units and that of the overall Company against the financial and business goals established at the beginning of the Performance Year and submits
his assessment to the Committee. 
  

  
 5 of 11 

 2. The CEO’s final evaluation of performance (the “Unit Performance Factor” or “UPF”) is stated
numerically and is a performance multiplier for individual incentive targets. The UPF will vary from 0.0 to a maximum as approved by the Committee. 
  
 3. The Committee, in its sole discretion, after taking into account its appraisal of the overall performance of the Company in the attainment of such predetermined
financial and non-financial objectives, may either increase or decrease the Company Unit Performance Factor for these Plans. 
  
 SECTION VI 
  
 INCENTIVE COMPENSATION APPROPRIATIONS 
  
 1. The amount appropriated for all three Plans for a Performance Year is based on the CEO’s determination of the Unit Performance Factor and applied to the individual incentive targets of Participants. The
performance-adjusted targets are aggregated into the “Appropriated Incentive Compensation” for the Performance Year. 
  
 2. In no event shall Incentive Compensation payable to Participants for a Performance Year exceed the Appropriated Incentive Compensation under the Plans for such
Performance Year unless the Committee, in its sole discretion, deems that performance was greater than CEO’s evaluation in the Unit Performance Factor in accordance with paragraph 3 of SECTION V. 
  
 3. Any Appropriated Incentive Compensation for a Performance Year, which is not actually
distributed to the Participants as awards for such year, shall be forfeited. 
  
 SECTION VII 
  
 INCENTIVE
COMPENSATION AWARDS 
  
 1. Individual Award Factors 
  

	 	a)	Target Award Percentage – is established annually and is a percentage of annual aggregate salary that reflects the varying impact of participant’s positions on business
results. Generally Vice Presidents will have higher Target Award Percentages than senior middle managers and so forth. 

  

	 	b)	 Individual Performance – Prior to the submission of recommended Incentive Compensation awards, each Participant will be evaluated by his management in relation
to the Participant’s achievement of predetermined individual goals and his relative contribution during the Performance Year compared to other participants to the success or profit of the Company. This assessment of performance (the
“Individual Performance Factor” or “IPF”) is stated numerically 

  

  
 6 of 11 

	 	 
and is a performance multiplier for individual incentive targets. The IPF may range from 0 to 1.5. 

  

	 	c)	Both the IPF and the UPF are multipliers for the individual participant’s Target Award Percentage to determine the Incentive Compensation award. 

  
 2. ICP Awards: 
  

	 	a)	The performance criteria established in accordance with SECTION IV on which all Incentive Compensation awards under the Plans are based shall first apply in the Performance Year
2002, but such performance criteria and any Incentive Compensation awards based thereon shall be conditional upon the Committee approving the Plan, the Performance Criteria, and performance goals stated herein. 

  

	 	b)	The Committee shall review the CEO’s recommendations and make the final determination of each individual ICP Participant’s Incentive Compensation award for the Performance
Year. 

  
 3. PAP and IMAP Awards: 
  

	 	a)	Prior to the payment of any Incentive Compensation awards for a Performance Year, the CEO, or his delegate, may in his sole discretion, adjust or reduce to zero recommended amounts
of Incentive Compensation awards to all or any of the Participants. 

  

	 	b)	The CEO or his delegate shall determine the amount of any adjustment in a Participant’s Incentive Compensation award on the basis of such factors as he deems relevant, and
shall not be required to establish any allocation or weighting component with respect to the factors he considers. 

  
 SECTION VIII 
  
 ADMINISTRATION OF THE PLANS 
  
 1. Incentive Compensation Plan (ICP): The Committee shall be responsible for the administration of the Plan. The Committee shall: 
  
 a. Interpret the Plan, make any rules and regulations relating to the Plan, determine which consolidated subsidiaries are significant for the purpose of
the first paragraph of SECTION III, and determine factual questions arising in connection with the Plan, after such investigation or hearing as the Committee may deem appropriate. 
  

  
 7 of 11 

 b. As soon as feasible after the close of each Performance Year and prior to the payment of any Incentive
Compensation for such Performance Year, review the performance of each Participant and determine the amount of each Participant’s individual Incentive Compensation award, if any, with respect to that Performance Year. 
  
 c. Have sole discretion in determining Incentive Compensation awards under
the Plan, except that in making awards the Committee may, in its discretion, request and consider the recommendations of the CEO of the Company and others whom it may designate. 
  
 d. Any decisions made by the Committee under the provisions of this SECTION VIII shall be conclusive and binding on all
parties concerned. 
  
 2. PAP and IMAP: The CEO shall be responsible for the
administration of these plans. The CEO shall: 
  
 a. Interpret the
Plans, make any rules and regulations relating to the Plans, and determine factual questions arising in connection with the Plans. 
  
 b. As soon as feasible after the close of each Performance Year and prior to the payment of any Incentive Compensation for such Performance Year, review
the recommended awards of selected Participants, as established by the CEO, to determine if the award is appropriate with respect to that Performance Year, making any adjustments as he deems necessary and approving each award. 
  
 c. Review and approve the total Incentive Compensation award expenditure of
each sector and the Company overall. 
  
 d. Any decisions made by
the CEO under the provisions of this SECTION VIII shall be conclusive and binding on all parties concerned. 
  
 SECTION IX 
  
 METHOD OF PAYMENT OF INCENTIVE 
 COMPENSATION TO INDIVIDUALS 
  
 1. ICP Payments: 
  
 a. The amount of Incentive Compensation award determined for each Participant with respect to a given Performance Year shall be paid in cash or in common
stock of the Company (“Northrop Grumman common stock”) or partly in cash and partly in Northrop Grumman common stock, as the Committee may determine. 
  

b. Payments in cash may be made in a lump sum with respect to an Incentive Compensation award for a Performance Year, or in installments, as the
Committee may 

  

  
 8 of 11 

 
determine. In either event, the Committee may impose such conditions, including forfeitures and restrictions as the Committee believes will best serve the
interests of the Company and the purposes of the Plan. 
  
 c.
Payments in Northrop Grumman common stock may be made in full with respect to an Incentive Compensation award for a Performance Year, or in installments, as the Committee may determine. In either event, the Committee may impose such conditions,
including forfeitures and restrictions, as the Committee believes will best serve the interests of the Company and the purposes of the Plan. 
  
 d. In making awards of Northrop Grumman common stock, the Committee shall first determine all Incentive Compensation awards in terms of dollars. The total
dollar amount of all Incentive Compensation awards for a particular year shall not exceed the Appropriated Incentive Compensation for that Performance Year under this Plan. After fixing the total amount of each Participant’s Incentive
Compensation award in terms of dollars, then if some or all of the award is to be paid in Northrop Grumman common stock, the dollar amount of the Incentive Compensation award so to be paid shall be converted into shares of Northrop Grumman common
stock by using the fair market value of such stock on the date of the award. “Fair Market Value” shall be the closing price of such stock on the New York Stock Exchange on the date of the award, or, if no sales of such stock occurred on
that date, then on the last preceding date on which such sales occurred. No fractional share shall be issued. 
  
 e. If an Incentive Compensation award is paid in Northrop Grumman common stock, the number of shares shall be appropriately adjusted for any stock splits,
stock dividends, re-capitalization or other relevant changes in capitalization effective after the date of award and prior to the date as of which the Participant becomes the record owner of the shares received in payment of the award. All such
adjustments thereafter shall accrue to the Participant as the record owner of the shares. 
  
 f. Northrop Grumman common stock issued in payment of Incentive Compensation awards may, at the option of the Board of Directors, be either originally issued shares or treasury shares. 
  
 g. Distribution of awards shall be governed by the terms and conditions
applicable to such awards, as determined by the Committee or its delegate. An award, the payment of which is to be deferred pursuant to the terms of an employment agreement, shall be paid as provided by the terms of such agreement. Awards or
portions thereof deferred pursuant to any other deferred compensation plan or deferral arrangement shall be paid as provided in such plan or arrangement. Any other awards the payment of which has been deferred, in whole or in part, shall be paid as
determined by the Committee. 
  
 h. The Company shall have the
right to deduct from all payments under this Plan any federal, state, or local taxes required by law to be withheld with respect to such payments. 
  

  
 9 of 11 

 i. No Participant or any other party claiming an interest in amounts earned under the Plan shall have any
interests whatsoever in any specific asset of the Company. To the extent that any party acquires a right to receive payments under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company. 
  
 2. PAP and IMAP Payments: 
  
 a. The amount of Incentive Compensation award determined for each Participant with respect to a given Performance Year shall
be paid in cash. 
  
 b. The Company shall have the right to deduct
from all payments under this Plan any federal, state, or local taxes required by law to be withheld with respect to such payments. 
  
 c. No Participant or any other party claiming an interest in amounts earned under the Plan shall have any interest whatsoever in any specific asset of the
Company. To the extent that any party acquires a right to receive payments under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company. 
  
 SECTION X 
  
 AMENDMENT OR TERMINATION OF PLANS 
  
 The Committee shall have the right to terminate or amend these Plans at any time and to discontinue further appropriations to the Plans. 
  
 SECTION XI 
  
 EFFECTIVE DATE 
  
 These Plans shall be effective for Performance Years commencing with and following 2002 and shall stay in effect until amended, modified or terminated by
the Committee. The provisions of these Plans, together with those of the 2002 Incentive Compensation Plan for 162(m) Officers, shall supersede and replace those of prior plan documents. 
  
 SECTION XII 
  
 MISCELLANEOUS 
  
 1. Participation in any Plan shall not constitute an agreement (1) of the Participant to remain in the employ of and to render his/her services to the Company, or (2) of the 

  

  
 10 of 11 

 
Company to continue to employ such Participant, and the Company may terminate the employment of a Participant at any time with or without cause. 

 
 2. In the event any provision of the Plan shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the remaining parts of the Plans, and the Plans shall be construed and enforced as if the illegal or invalid provision had not been included. 
  
 3. All costs of implementing and administering the Plans shall be borne by the Company. 
  
 4. All obligations of the Company under the Plans shall be binding upon and inure to the
benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

  
 5. The Plans and any agreements hereunder, shall be governed by and construed
in accordance with the laws of the state of Delaware. 
  

  
 11 of 11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00088-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00088-of-00352.parquet"}]]