Document:

Annual Incentive Plan and Incentive Compensation Plan

 Exhibit 10.3 
 NORTHROP GRUMMAN 2006 ANNUAL INCENTIVE PLAN 
 AND 
 INCENTIVE COMPENSATION PLAN (for NON-SECTION 162(m) OFFICERS) 
 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 two incentive plans that use common financial and business performance criteria: 

 

	 	•	 	The Incentive Compensation Plan (ICP) 

  

	 	•	 	The Annual Incentive Plan (AIP) 

 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. 

  

	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.	Plans—Collectively, the Incentive Compensation Plan (ICP); and/or the Annual Incentive Plan (AIP). 

  

	9.	Plan Year—The fiscal year of Northrop Grumman Corporation. 

  

	10.	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. 

 SECTION III 
 PARTICIPATION 
 Employees may be eligible for incentive
compensation under one of the Northrop Grumman incentive plans as described below. 
  

	1.	Incentive Compensation Plan (ICP): 

  

	 	a.	 Employees eligible to receive incentive compensation under the ICP are elected corporate officers of the rank of vice president and above and the presidents of
those consolidated subsidiaries that the 

  

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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 the ICP.

  

	 	b.	Directors, as such, shall not participate in the ICP, but the fact that an elected corporate officer or subsidiary president is also a director of the Company shall not prevent
participation. 

  

	2.	Annual Incentive Plan (AIP): 

  

	 	a.	Employees eligible to receive incentive compensation awards under the AIP are appointed vice presidents, senior management, 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 the AIP if they have specific individual goals that directly contribute to the
attainment of their respective business unit’s operating goals or if employees are considered “high performing” and are in a position to make measurable and significant contributions to the success of the Company.

  

	 	b.	At the beginning of, or prior to, a performance year, the Company’s CEO approves the number of participants eligible for participation in the AIP. 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 the AIP during any performance year does not imply nor guarantee participation in the AIP in future years. 

  

	3.	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 that he/she participated in each plan. 

  

	 	b.	A participant will not be eligible to receive any incentive compensation award from either of these plans if the employee is a participant in the Company’s 2002 Incentive
Compensation Plan for 162(m) Officers. 

  

	4.	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. 
  

	5.	Employment Status 

 Except as provided in Section III 4
(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 and administrative officer. 
  

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 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 each performance year, until
otherwise determined by the Committee, financial and non-financial objectives will be established by the Committee in its sole discretion. 
  

	2.	Financial Measures 

  

	 	a.	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. 

  

	 	b.	The Committee approves a performance threshold, a target level and a maximum performance level for each of the financial measures for the performance year. 

 

	3.	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. 
  

	4.	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 
 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. 
 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. 
  

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 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 UPF for these plans. 
 SECTION VI 
 INCENTIVE COMPENSATION APPROPRIATIONS 
  

	1.	The amount appropriated for the plans for a performance year is based on the CEO’s determination of the UPF (as approved or modified by the Committee) and applied to the
individual incentive targets of participants. These 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 for the plans as approved by the Committee.

  

	3.	Any appropriated incentive compensation for a performance year, which is not actually distributed to the participants as awards for such year, cannot be transferred to the following
performance year. 

 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/her 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 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 that participant’s incentive compensation award.

  

	2.	ICP Awards: 

  

	 	a.	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.	AIP 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. 

  

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 SECTION VIII 
 ADMINISTRATION OF THE PLANS 
  

	1.	ICP: The Committee shall be responsible for the administration of the Plan. The Committee shall: 

  

	 	a.	Interpret the ICP, make any rules and regulations relating to that 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 ICP, after such investigation or hearing as the Committee may deem appropriate. 

  

	 	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 ICP, except that in making awards the Committee may, in its discretion, request and consider the
recommendations of the CEO and others whom it may designate. 

  

	 	d.	Any decisions made by the Committee under the provisions of this SECTION VIII, as well as any interpretations of the ICP by the Committee, shall be conclusive and binding on all
parties concerned. 

  

	2.	AIP: The CEO shall be responsible for the administration of this plan. The CEO shall: 

  

	 	a.	Interpret the AIP, make any rules and regulations relating to the plan, and determine factual questions arising in connection with the AIP. 

  

	 	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 determined 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 such 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, as well as any interpretation of the AIP by the CEO, 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. Except as provided below in this Section IX and subject to any applicable deferred compensation election to
the contrary, payment of the incentive compensation award with respect to a given performance year shall be made by March 15 of the year following such performance year. 

  

	 	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 determine and (in the
case of installments) to the extent consistent with Section 409A of the code. 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 ICP. 

  

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	 	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 and (in the case of installments) to the extent consistent with Section 409A of the code. 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 ICP. 

  

	 	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 the ICP. 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 the ICP any federal, state, or local taxes required by law to be withheld with respect to such payments.

  

	 	i.	No participant or any other party claiming an interest in amounts earned under the ICP 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 ICP, such right shall be equivalent to that of an unsecured general creditor of the Company. Awards payable under the plan shall be payable in shares or from the general assets of Northrop
Grumman, and no special or separate reserve, fund or deposit shall be made to assure payment of such awards. 

  

	2.	AIP Payments 

  

	 	a.	The amount of incentive compensation award determined for each participant with respect to a given performance year shall be paid in cash no later than March 15 of the year
following that performance year. 

  

	 	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 AIP 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. Awards payable under the AIP shall be payable in shares or from the general assets of Northrop
Grumman, and no special or separate reserve, fund or deposit shall be made to assure payment of such awards. 

  

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 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. 
 Without limiting the generality of the preceding paragraph, the Committee reserves the right to adjust
performance measures, the applicable performance goals and performance results with respect to either or both of the plans to the extent the Committee determines such adjustment is reasonably necessary or advisable to preserve the intended
incentives and benefits under the plans to reflect (1) any change in capitalization, any corporate transaction (such as a reorganization, combination, separation, merger, acquisition, or any combination of the foregoing), or any complete or
partial liquidation, (2) any change in accounting policies or practices, or (3) the effects of any special charges to earnings, or (4) any other similar special circumstances. 
 SECTION XI 
 EFFECTIVE DATE 
 These plans shall be effective for performance years commencing with and following 2006 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 Section 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 of the participant to remain in the employ of and to render his/her services to the Company, or of the 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. 

  

	6.	The rights of a participant or any other person to any payment or other benefits under either of the plans may not be assigned, transferred, pledged, or encumbered except by will or
the laws of decent or distribution. 

 Neither of the plans constitutes a contract. Neither of the plans confers upon any person any right to
receive a bonus or any other payment or benefit. There is no commitment or obligation on the part of Northrop Grumman (or any affiliate) to continue any bonus plan (similar to the plans or otherwise) in any particular year. 
  

 7 of 72006 CPC Incentive Restricted Stock Rights Agreement of Wesley G. Bush

 
Exhibit 10.4 
 NORTHROP GRUMMAN
CORPORATION 
 TERMS AND CONDITIONS APPLICABLE TO 2006 CPC INCENTIVE 
 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 Wesley G. Bush in 2006. The date of grant of the RSR award is May 16, 2006 (the “Grant Date”). The number of RSRs applicable to the award is 40,000. The date of grant
and number of RSRs are also reflected in the electronic stock plan award recordkeeping system (“Stock Plan System”) maintained by the Company or its designee. These Terms apply only with respect to Mr. Bush’s 2006 RSR award. You
(Mr. Bush) are referred to as the “Grantee” with respect to your award. Capitalized terms are generally defined in Section 9 below if not otherwise defined herein. 
 Each RSR represents a right to receive one share of the Company’s Common Stock, or cash of equivalent value as provided herein, subject to vesting
as provided herein. The number of RSRs subject to your award is subject to adjustment as provided herein. The RSR award is subject to all of the terms and conditions set forth in these Terms, and is further subject to all of the terms and conditions
of the Plan, as it may be amended from time to time, and any rules adopted by the Committee, as such rules are in effect from time to time. 
  

	1.	Vesting; Issuance of Shares. 

 Subject
to Sections 2 and 5 below, one 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. 
 The Company shall pay a vested RSR as soon as practicable following the vesting of the RSR and no later than March 15th of the year following the year of vesting. 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 

  

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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 and the Grantee does not otherwise continue to be employed by the
Company after such event. 
 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 while employed by the Company or a subsidiary, or if the Grantee’s employment by
the Company and its subsidiaries terminates due to the Grantee’s Disability, 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. In the event of
the Grantee’s death prior to the delivery of shares or other payment with respect to any vested RSRs, the Grantee’s Successor shall be entitled to any payments to which the Grantee would have been entitled under this Agreement with respect
to such vested and unpaid RSRs. 
  

	3.	Non-Transferability and Other Restrictions. 

 The award, as well as the RSRs subject to the award, are non-transferable and shall not be subject 

 
in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge. The foregoing transfer restrictions shall not apply to:
(a) transfers to the Company; or (b) transfers pursuant to a qualified domestic relations order (as defined in the Code). Notwithstanding the foregoing, the Company may honor any transfer required pursuant to the terms of a court order in
a divorce or similar domestic relations matter to the extent that such transfer does not adversely affect the Company’s ability to register the offer and sale of the underlying shares on a Form S-8 Registration Statement and such transfer is
otherwise in compliance with all applicable legal, regulatory and listing requirements. 
  

	4.	Compliance with Laws; No Stockholder Rights Prior to Issuance. 

 The Company’s obligation to make any payments or issue any shares with respect to the award is subject to full compliance with all then applicable requirements of law, the Securities and Exchange Commission, the
Commissioner of Corporations of the State of California, or other regulatory agencies having jurisdiction over the Company and its shares, and of any exchange upon which stock of the Company may be listed. The Grantee shall not have the rights and
privileges of a stockholder with respect to any shares which may be issued in respect of the RSRs until the date appearing on the certificate(s) for such shares (or, in the case of shares entered in book entry form, the date that the shares are
actually recorded in such form for the benefit of the Grantee), if such shares become deliverable. 
  

	5.	Adjustments; Change in Control. 

 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, 

  

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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. 
 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. 
  

	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 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 

  

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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. 
  

	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, the Certificate or the Plan unless such amendment is in writing and signed by a duly authorized officer of the Company. In the event of a conflict between the provisions of the Stock Plan System and the provisions of these Terms
and/or the Plan, the provisions of these Terms and/or the Plan, as applicable, shall govern. 
  

	9.	Definitions. 

 Whenever used in these
Terms, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: 
 “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 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. 

  

 4 

 
“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 significant reduction by the Company of the Grantee’s aggregate incentive opportunities under the Company’s short 

	 	 
and/or long-term incentive programs, as such opportunities exist on the date of grant of the award, or as such opportunities may be increased after the date
of grant of the award. For this purpose, a significant reduction in the Grantee’s incentive opportunities shall be deemed to have occurred in the event the Grantee’s targeted annualized award opportunities and/or the degree of probability
of attainment of such annualized award opportunities are diminished by the Company from the levels and probability of attainment that existed as of the date of grant of the award. 

  

	 	(iv)	The failure of the Company to maintain (x) the Grantee’s relative level of coverage and accruals under the Company’s employee benefit and/or retirement plans,
policies, practices, or arrangements in which the Grantee participates as of the date of grant of the award, both in terms of the amount of benefits provided, and amounts accrued and (y) the relative level of the Grantee’s participation in
such plans, policies, practices, or arrangements on a basis at least as beneficial as, or substantially equivalent to, that on which the Grantee participated in such plans immediately prior to the date of grant of the award. For this purpose, the
Company may eliminate and/or modify existing programs and coverage levels; provided, however, that the Grantee’s level of coverage under all such programs must be at least as great as is provided to executives who have the same or lesser levels
of reporting responsibilities within the Company’s organization. 

  

	 	(v)	The Grantee is informed by the Company that his or her principal place of employment for the Company will be relocated to a location that is greater than fifty (50) miles away
from the Grantee’s principal place of employment for the Company at the start of the corresponding Protected Period; provided that, if the Company communicates an intended effective date for such relocation, in no event shall Good Reason exist
pursuant to this clause (v) more than ninety (90) days before such intended effective date. 

  

 5 

 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. 
 “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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