Document:

exv10w3

Exhibit 10.3

NORTHROP GRUMMAN CORPORATION

TERMS AND CONDITIONS APPLICABLE TO

2011 RESTRICTED STOCK RIGHTS

GRANTED 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 [________] in 2011. The date of grant
of the RSR award is [________, 2011] (the “Grant Date”). The number of RSRs applicable to the
award is [________]. 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 the 2011 RSR award identified above. You are
referred to as the “Grantee” with respect to your award. Capitalized terms are generally defined
in Section 10 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 hundred percent (100%) of the number of RSRs subject to
your award (subject to adjustment as provided in Section 5.1) shall vest upon the 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 fourth 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.

     2.1 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 Sections 2.6 and 2.7, and in
Section 5, the Grantee ceases for any reason to be an employee of the Company or one of its
subsidiaries.

     2.2 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.

     2.3 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.

     2.4 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 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, the Grantee does not otherwise continue to be employed by the Company
after such event, and the divested entity or business (or its successor or a parent company) does
not assume the award in connection with such transaction. In the event of such a termination of
employment, the termination shall be deemed to be an Early Retirement unless the Grantee was
otherwise eligible at the time of termination for Normal Retirement (in which case, the

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termination shall be considered a Normal Retirement) treated as provided for in Section 2.7
(subject to Section 5).

     2.5 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 the
fourth anniversary of the Grant Date as a condition to the vesting of any portion of the award.
Employment for only a portion of the vesting period, even if a substantial portion, 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.

     2.6 Death or Disability. If the Grantee dies or incurs a Disability while employed by the
Company or a subsidiary, the outstanding and previously unvested RSRs subject to the award shall
vest as of the date of the Grantee’s death or Disability, 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 earlier of (a) Grantee’s death or (b)
Grantee’s Disability. 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.

     2.7 Termination of Employment Due to Retirement. If the Grantee ceases to be employed by the
Company or one of its subsidiaries due to the Grantee’s Early Retirement and such Early Retirement
occurs more than six months after the Grant Date, the RSRs subject to the award shall vest on a
prorated basis. Such prorating of RSRs shall be determined based on the number of days the Grantee
was employed by the Company or a subsidiary in the period commencing with the Grant Date through
and including the date on which the Grantee is last employed by the Company or a subsidiary, over
the number of calendar days in the period commencing with the Grant Date through and including the
fourth anniversary of the Grant Date. Any remaining unvested RSRs, after giving effect to the
foregoing acceleration of vesting, shall terminate immediately upon the Grantee’s Early Retirement.
If the Grantee ceases to be employed by the Company or one of its subsidiaries due to the
Grantee’s Normal Retirement and such Normal

Retirement occurs more than six months after the Grant
Date, the RSRs subject to the award shall vest in full.

     Subject to the following provisions of this paragraph, 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 Grantee’s Separation from Service. However, in the
case of a Governmental Service Retirement by the Grantee, payment of the vested RSRs will be made
within 10 days after the Grantee’s Early or Normal Retirement. If the Grantee is a “specified
employee” within the meaning of United States Treasury Regulation Section 1.409A-1(i) as of the
date of the Grantee’s Separation from Service, the Grantee shall not be entitled to payment of his
vested RSRs pursuant to this Section until the earlier of (and payment shall be made upon or
promptly after, and in all events within thirty (30) days after, the first to occur of) (a) the
date which is six (6) months and one day after the Grantee’s Separation from Service, or (b) the
date of the Grantee’s death. The provisions of the preceding sentence shall only apply if, and to
the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Section
409A of the Code.

     In determining the Grantee’s eligibility for Early or Normal Retirement, service is measured
by dividing (a) the number of days the Grantee was employed by the Company or a subsidiary in the
period commencing with his or her last date of hire by the Company or a subsidiary through and
including the date on which the Grantee is last employed by the Company or a subsidiary, by (b)
365. If the Grantee ceased to be employed by the Company or a subsidiary and was later rehired by
the Company or a subsidiary, the Grantee’s service prior to the break in service shall be
disregarded in determining service for such purposes; provided that, if the Grantee’s employment
with the Company or a subsidiary had terminated due to the Grantee’s Early Retirement, Normal
Retirement, or by the Company as part of a reduction in force (in each case, other than a
termination by the Company or a subsidiary for cause) and, within the two-year period following
such termination of employment (the “break in service”) the Grantee was subsequently rehired by the
Company or a subsidiary, then the Grantee’s period of service with the Company or a subsidiary
prior to and ending with the break in service will be included in determining service for such
purposes. In the event the Grantee is employed by a business that is acquired by the Company or a
subsidiary, the Company shall have discretion to determine whether the Grantee’s service prior to
the acquisition will be included in determining service for such purposes.

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	3.	 	Non-Transferability and Other Restrictions.

     3.1 Non-Transferability. 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 transfers to the Company. 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.

     3.2 Recoupment of Awards. Any payments or issuances of shares with respect to the award are
subject to recoupment pursuant to the Company’s Policy Regarding the Recoupment of Certain
Performance-Based Compensation Payments as in effect from time to time, as well as any recoupment
or similar provisions of applicable law, and the Grantee shall promptly make any reimbursement
requested by the Board or Committee pursuant to such policy or applicable law with respect to the
award. Further, the Grantee agrees, by accepting the award, that the Company and its affiliates
may deduct from any amounts it may owe the Grantee from time to time (such as wages or other
compensation) to the extent of any amounts the Grantee is required to reimburse the Company
pursuant to such policy or applicable law with respect to the award.

	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, including without limitation the right to vote or receive dividends, 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.

     5.1 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.

     5.2 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.
	 
	 	(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 RSRs that vest under this Section will be made at the time provided for in
Section 2.7 as though the termination of the Grantee’s employment was due to a Normal Retirement.

     5.3 Automatic Acceleration; Early Termination. If the Company undergoes a Change in Control
triggered

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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 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 RSRs that vest under this Section 5.3 will be made within 90 days of the fourth
anniversary of the Grant Date unless: (i) the Grantee dies or has a Disability, in which case such
payment will be made in the calendar year containing the 75th day following the date of
the Grantee’s death or Disability, as the case may be (and generally will be paid on or about such
75th day), or (ii) the Grantee has a Separation from Service, in which case such payment
will be made at the time provided for in Section 2.7 as though the termination of the Grantee’s
employment was due to a Normal Retirement.

	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 RSRs, that the Grantee or other person entitled to such shares or other payment pay any sums
required to be withheld by federal, state, local or other applicable 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 RSRs.

     6.3 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.

     6.4 Unfunded Arrangement. The right of the Grantee to receive payment under the award shall be
an unsecured contractual claim against the Company. As such, neither the Grantee nor any Successor
shall have any rights in or against any specific assets of the Company based on the award. Awards
shall at all times be considered entirely unfunded for tax purposes.

	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
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 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.

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	9.	 	Required Holding Period.

     The holding requirements of this Section 9 shall apply to any Grantee who is an elected or
appointed officer of the Company on the date vested RSRs are paid (or, if earlier, on the date the
Grantee’s employment by the Company and its subsidiaries terminates for any reason). Any Grantee
subject to this Section 9 shall not be permitted to sell, transfer, anticipate, alienate, assign,
pledge, encumber or charge 50% of the total number (if any) of shares of Common Stock the Grantee
receives as payment for vested RSRs until the earlier of (A) the third anniversary of the date such
shares of Common Stock are paid to the Grantee, or (B) the date the Grantee’s employment by the
Company and its subsidiaries terminates due to the Grantee’s death or Disability. For purposes of
this Section 9, the total number of shares of Common Stock the Grantee receives as payment for
vested RSRs shall be determined on a net basis after taking into account any shares otherwise
deliverable with respect to the award that the Company withholds to satisfy tax obligations
pursuant to Section 6.1. Any shares of Common Stock received in respect of shares that are
covered by the holding period requirements of this Section 9 (such as shares received in respect of
a stock split or stock dividend) shall be subject to the same holding period requirements as the
shares to which they relate.

	10.	 	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 Committee or any successor committee appointed by
the Board to administer the Plan.

     “Common Stock” means the Company’s common stock.

     “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).

     “Early Retirement” means that the Grantee’s employment terminates in any of the following
circumstances, and other than a termination of employment that constitutes a Normal Retirement or
occurs in connection with a termination by the Company or a subsidiary for cause:

	 	(i)	 	a termination of employment after the Grantee has attained age 55 with at least
10 years of service.
	 
	 	(ii)	 	a termination of employment by the Company or a subsidiary as part of a reduction in
force and, at the time of such termination, the Grantee has attained age 53 with at least 10
years of service.
	 
	 	(iii)	 	a termination of employment by the Company or a subsidiary as part of a reduction in
force and, at the time of such termination, the sum of the Grantee’s age and years of
service is at least 75.

In the case of a Grantee who is an officer of the Company subject to the Company’s mandatory
retirement at age 65 policy and who, at the applicable

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time, is not otherwise eligible for Early Retirement as defined in the preceding sentence or for
Normal Retirement, “Early Retirement” as to that Grantee means that the Grantee’s employment is
terminated pursuant to such mandatory retirement policy (regardless of the Grantee’s years of
service and other than in connection with a termination by the Company or a subsidiary for cause).

     “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.

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

 

	 	 	 	 business unit with authorities, duties, and
responsibilities comparable to those of the Grantee immediately prior to the commencement of
the Protected Period do not have the title of vice-president.
	 
	 	(ii)	 	A reduction by the Company in the Grantee’s annualized rate of base salary as in effect
at the start of the Protected Period, 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

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consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason
herein.

     “Governmental Service Retirement” means an Early or Normal Retirement by the Grantee where the
Grantee accepts a position in the federal government or a state or local government and an
accelerated distribution under the award is permitted under Code Section 409A based on such
government employment and related ethics rules.

     “Normal Retirement” means that the Grantee terminates employment after attaining age 65 with
at least 10 years of service (other than in connection with a termination by the Company or a
subsidiary for cause).

     “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 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.

     “Separation from Service” means when the Grantee dies, retires, or otherwise has a termination
of employment with the Company and its subsidiaries that constitutes a “separation from service”
within the

 

meaning of United States Treasury Regulation Section 1.409A-1(h)(1), without regard to
the optional alternative definitions available thereunder.

     “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.

7exv10w4

Exhibit 10.4

NORTHROP GRUMMAN CORPORATION

TERMS AND CONDITIONS APPLICABLE TO

2011 RESTRICTED STOCK RIGHTS

GRANTED 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 [________] in 2011. The date of grant
of the RSR award is [________, 2011] (the “Grant Date”). The number of RSRs applicable to the
award is [________]. 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 the 2011 RSR award identified above. You are
referred to as the “Grantee” with respect to your award. Capitalized terms are generally defined
in Section 10 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 hundred percent (100%) of the number of RSRs subject to
your award (subject to adjustment as provided in Section 5.1) shall vest upon the 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 fourth 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.

     2.1 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.

     2.2 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.

     2.3 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.

     2.4 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 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, the Grantee does not otherwise continue to be employed by the Company
after such event, and the divested entity or business (or its successor or a parent company) does
not assume the award in connection with such transaction.

     2.5 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

1

 

requires continued employment through the fourth anniversary of the Grant Date as a condition
to the vesting of any portion of the award. Employment for only a portion of the vesting period,
even if a substantial portion, 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.

     2.6 Death or Disability. If the Grantee dies or incurs a Disability while employed by the
Company or a subsidiary and such death or Disability occurs more than six months after the Grand
Date, the outstanding and previously unvested RSRs subject to the award shall vest as of the date
of the Grantee’s death or Disability, as applicable. Any remaining unvested RSRs, after giving
effect to the foregoing sentence, shall terminate immediately upon the Grantee’s death or
Disability. 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
earlier of (a) Grantee’s death or (b) Grantee’s Disability. 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.

     3.1 Non-Transferability. 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.

     3.2 Recoupment of Awards. Any payments or issuances of shares with respect to the award are
subject to recoupment pursuant to the Company’s Policy

Regarding the Recoupment of Certain
Performance-Based Compensation Payments as in effect from time to time, as well as any recoupment
or similar provisions of applicable law, and the Grantee shall promptly make any reimbursement
requested by the Board or Committee pursuant to such policy or applicable law with respect to the
award. Further, the Grantee agrees, by accepting the award, that the Company and its affiliates
may deduct from any amounts it may owe the Grantee from time to time (such as wages or other
compensation) to the extent of any amounts the Grantee is required to reimburse the Company
pursuant to such policy or applicable law with respect to the award.

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, including without limitation the right to vote or receive dividends, 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.

     5.1 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.

     5.2 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

2

 

	 	 	 	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.

     Payment of any amount due under this Section will be made within 90 days of the fourth
anniversary of the Grant Date.

     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 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 fourth
anniversary of the Grant Date.

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 RSRs, that the Grantee or other person entitled to such shares or other payment pay any sums
required to be withheld by federal, state, local or other applicable 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 RSRs.

     6.3 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.

     6.4 Unfunded Arrangement. The right of the Grantee to receive payment under the award shall be
an unsecured contractual claim against the Company. As such, neither the Grantee nor any Successor
shall have any rights in or against any specific assets of the Company based on the award. Awards
shall at all times be considered entirely unfunded for tax purposes.

3

 

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
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 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. Required Holding Period.

     The holding requirements of this Section 9 shall apply to any Grantee who is an elected or
appointed officer of the Company on the date vested RSRs are paid (or, if earlier, on the date the
Grantee’s employment by the Company and its subsidiaries terminates for any reason). Any Grantee
subject to this Section 9 shall not be permitted to sell, transfer, anticipate, alienate, assign,
pledge, encumber or charge 50% of the total number (if any) of shares of Common Stock the Grantee
receives as payment for vested RSRs until the earlier of (A) the third anniversary of the date such
shares of Common Stock are paid to the Grantee, or (B) the date the Grantee’s employment by the
Company and its subsidiaries terminates due to the Grantee’s death or Disability. For purposes of
this Section 9, the total number of shares of Common Stock the Grantee receives as payment for
vested RSRs shall be determined on a net basis after taking into account any shares otherwise
deliverable with respect to the award that the Company withholds to satisfy tax obligations
pursuant to Section 6.1. Any shares of Common Stock received in respect of shares that are
covered by the holding period requirements of this Section 9 (such as shares received in respect of
a stock split or stock dividend) shall be subject to the same holding period requirements as the
shares to which they relate.

10. 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.

4

 

     “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 Committee or any successor committee appointed by
the Board to administer the Plan.

     “Common Stock” means the Company’s common stock.

     “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).

     “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.

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

5

 

	 	 	 	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 than the date that is six (6) months prior to the Change in Control.
	 
	 	(ii)	 	If the Change in Control is triggered by a merger, consolidation, or reorganization of
the Company with or involving any other corporation, the Protected Period shall commence on
the date that serious and substantial discussions first take place to effect the merger,
consolidation, or reorganization and shall continue through and including the date of the
Change in Control; provided that in no case will the Protected Period

	 	 	 	
commence earlier than
the date that is six (6) months prior to the Change in Control.
	 
	 	(iii)	 	In the case of any Change in Control not described in clause (i) or (ii) above, the
Protected Period shall commence on the date that is six (6) months prior to the Change in
Control and shall continue through and including the date of the Change in Control.

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

6

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