Document:

exv10w8

	 	 	 	 	 

Exhibit 10.8

Non-Employee Director Compensation Program for the

Remainder of the 2011 Plan Year and for the 2012 Plan Year

          The following compensation program is available to non-employee directors for the
remainder of the plan year that runs from the conclusion of the 2010 Annual Stockholders’ Meeting
until the last day of fiscal 2011 (the “2011 Plan Year”) and for the plan year that runs
from the first day of fiscal 2012 to the last day of fiscal 2012 (the “2012 Plan Year”).

          Retainers and Fees for Non-Employee Directors Other than the Chairman:

	•	 	Effective on January 1, 2011, an annual Board membership retainer of $85,000 shall be
paid to each non-employee director (other than the Chairman of the Board).

o Prorated payments for the remainder of the 2011 Plan Year shall be payable (1) on January 3, 2011
in the total amount of $14,166.67, reflecting payment for January and February, and (2) on March 1,
2011 in the total amount of $21,250.00, reflecting payment for March, April, and May.

o Payments for the 2012 Plan Year will be made in advance in four equal installments on the first
trading day of each of the following months: June 2011, September 2011, December 2011, and March
2012.

o Each of January 3, 2011, March 1, 2011 and the first trading day of each of June 2011, September
2011, December 2011, and March 2012, is referred to herein as a “Payable Date”.

	•	 	Effective on January 1, 2011, an annual Committee Chair retainer of $15,000 shall be
paid to the Chair of each standing committee (other than the Executive Committee).
	 
	•	 	Prorated payments for the remainder of the 2011 Plan Year shall be payable (1) on January 3, 2011
in the total amount of $2,500.00, reflecting payment for January and February, and (2) on March 1,
2011 in the total amount of $3,750.00, reflecting payment for March, April, and May.

o Payments for the 2012 Plan Year will be made in advance in four equal installments on each
applicable Payable Date.

	•	 	Effective on January 1, 2011, in the event that a director’s attendance is required
at more than 24 Board and committee meetings during the 2011 Plan Year or the 2012 Plan
Year, meeting fees in the amount of $1,500 shall be paid to each non-employee director
(other than the Chairman) for each Board and committee meeting attended and at which a
director’s attendance was required in excess of 24 meetings for such Plan Year; fees
will be aggregated and payment will be made in arrears on the applicable Payable Date.
	 
	•	 	Directors who join the Board or who are elected to a Chairmanship after the start of
a quarter will receive a prorated retainer for that quarter based on the actual number
of days served. The prorated quarterly payment will be paid on the next Payable Date,
along with the installment due on that date.

          Equity Awards for Non-Employee Directors Other than the Chairman:

	•	 	Each non-employee director (other than the Chairman of the Board) shall receive a
grant of restricted stock units (the “RSUs”) with a value equal to $125,000 for
each plan year in which she or he serves. The number of RSUs granted shall be
equivalent to $125,000 divided by the average of the closing stock price of ConAgra
Foods, Inc. common stock on the NYSE for the thirty (30) trading days prior to (and not
including) the date of grant and rounding to the nearest share. The RSUs will be
granted upon the terms and conditions approved by the Board and consistent with the
ConAgra Foods 2009 Stock Plan.

o The grant date for the 2011 Plan Year shall be November 30, 2010.

o The grant date for the 2012 Plan Year shall be May 31, 2011, the first trading day of fiscal 2012.

          Chairman’s Compensation:

	•	 	For the 2012 Plan Year, in lieu of the cash and equity compensation described above
and payable to other non-employee directors, the Chairman shall receive a grant of RSUs
with a value equal to $375,000. The number of RSUs granted shall be equivalent to
$375,000 divided by the average of the closing stock price of ConAgra Foods, Inc. common
stock on the NYSE for the thirty (30) trading days prior to (and not including) the date
of grant and rounding to the nearest share. The RSUs will be granted upon the terms and conditions approved by
the Board and consistent with the ConAgra Foods 2009 Stock Plan. The grant date for the
2012 Plan Year shall be May 31, 2011, the first trading day of fiscal 2012.

65

 

RSU Terms

	•	 	Director RSUs will vest one year from the date of grant (100%), subject to continued
service during the entire term. Vesting will be accelerated in the event of death or
permanent disability or, in the event the director is no longer serving one year from
the date of grant (as a director or in the Chairman role), vesting will be prorated 25%
for each fiscal quarter during which the director served on the first day of the fiscal
quarter. Should a director be newly appointed after the annual equity grant is made,
then a prorata portion of the Board’s annual equity grant will be granted in connection
with appointment based on the number of months remaining for the applicable Plan Year.

Other Programs: The following additional programs are available.

	•	 	Non-Employee Directors’ Medical Plan: Non-employee directors are eligible to
participate in the medical plan in accordance with the plan’s terms, with premiums paid
by the directors.
	 
	•	 	Directors’ Deferred Compensation Plan: Non-employee directors may elect to
defer payment of their cash or stock compensation into the non-qualified deferred
compensation plan for non-employee directors in accordance with the plan’s terms.
	 
	•	 	ConAgra Foods Matching Gifts Program: ConAgra Foods will match up to $10,000
of each non-employee director’s gift(s) to eligible charitable organization(s) during
each of the 2011 Plan Year and the 2012 Plan Year.
	 
	•	 	Directors’ Charitable Award Program: Directors first elected to the Board
prior to 2003 continue to have grandfathered participation in the Directors’ Charitable
Award Program (which was discontinued in 2003).

66exv10w1

Exhibit 10.1

EXECUTION COPY

 

SEPARATION AND DISTRIBUTION AGREEMENT

among

NORTHROP GRUMMAN CORPORATION,

NEW P, INC.,

HUNTINGTON INGALLS INDUSTRIES, INC.,

NORTHROP GRUMMAN SHIPBUILDING, INC.,

and

NORTHROP GRUMMAN SYSTEMS CORPORATION

Dated as of March 29, 2011

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS
	 	 	2	 
	 
	 	 	 	 
	Section 1.1 Table of Definitions
	 	 	2	 
	Section 1.2 Certain Defined Terms
	 	 	3	 
	 
	 	 	 	 
	ARTICLE II THE SEPARATION
	 	 	19	 
	 
	 	 	 	 
	Section 2.1 Internal Reorganization; Transfer of Assets and Assumption of Liabilities
	 	 	19	 
	Section 2.2 Governmental Approvals and Consents; Transfers, Assignments and Assumptions Not Effected Prior to the Distribution
	 	 	20	 
	Section 2.3 Termination of Agreements
	 	 	21	 
	Section 2.4 Novation of Shipbuilding Liabilities
	 	 	22	 
	Section 2.5 Novation of Retained Liabilities
	 	 	23	 
	Section 2.6 Disclaimer of Representations and Warranties
	 	 	23	 
	Section 2.7 Treatment of Cash
	 	 	24	 
	Section 2.8 Replacement of Credit Support
	 	 	24	 
	 
	 	 	 	 
	ARTICLE III ACTIONS PENDING THE DISTRIBUTION
	 	 	25	 
	 
	 	 	 	 
	Section 3.1 Actions Prior to the Distribution
	 	 	25	 
	Section 3.2 Conditions to Distribution
	 	 	26	 
	 
	 	 	 	 
	ARTICLE IV THE DISTRIBUTION
	 	 	27	 
	 
	 	 	 	 
	Section 4.1 The Distribution
	 	 	27	 
	Section 4.2 Fractional Shares
	 	 	28	 
	Section 4.3 Sole Discretion of the Northrop Grumman Board and New NGC Board
	 	 	28	 
	 
	 	 	 	 
	ARTICLE V MUTUAL RELEASES; INDEMNIFICATION
	 	 	28	 
	 
	 	 	 	 
	Section 5.1 Release of Pre-Distribution Claims
	 	 	28	 
	Section 5.2 Indemnification by HII and NGSB
	 	 	30	 
	Section 5.3 Indemnification by New NGC and NGSC
	 	 	30	 
	Section 5.4 Indemnification Obligations Net of Insurance Proceeds and Other Amounts
	 	 	31	 
	Section 5.5 Third-Party Claims
	 	 	31	 
	Section 5.6 Additional Matters
	 	 	34	 
	Section 5.7 Remedies Cumulative
	 	 	34	 
	Section 5.8 Survival of Indemnities
	 	 	34	 
	Section 5.9 Limitation on Liability
	 	 	34	 

 

 

	 	 	 	 	 
	 	 	Page	 
	ARTICLE VI SHARED GAINS AND SHARED LIABILITIES
	 	 	35	 
	 
	 	 	 	 
	Section 6.1 Managing Party
	 	 	35	 
	Section 6.2 Allocation Committee
	 	 	35	 
	Section 6.3 Shared Gains
	 	 	36	 
	Section 6.4 Shared Liabilities
	 	 	37	 
	Section 6.5 Payments
	 	 	37	 
	 
	 	 	 	 
	ARTICLE VII EXCHANGE OF INFORMATION; CONFIDENTIALITY
	 	 	38	 
	 
	 	 	 	 
	Section 7.1 Agreement for Exchange of Information
	 	 	38	 
	Section 7.2 Ownership of Information
	 	 	39	 
	Section 7.3 Compensation for Providing Information
	 	 	39	 
	Section 7.4 Record Retention
	 	 	39	 
	Section 7.5 Limitation of Liability
	 	 	39	 
	Section 7.6 Other Agreements Providing for Exchange of Information
	 	 	39	 
	Section 7.7 Cooperation
	 	 	39	 
	Section 7.8 Confidentiality
	 	 	40	 
	Section 7.9 Protective Arrangements
	 	 	41	 
	 
	 	 	 	 
	ARTICLE VIII FURTHER ASSURANCES AND ADDITIONAL COVENANTS
	 	 	41	 
	 
	 	 	 	 
	Section 8.1 Further Assurances
	 	 	41	 
	Section 8.2 Amendment to NGC Certificate of Incorporation
	 	 	42	 
	Section 8.3 Credit Support
	 	 	42	 
	Section 8.4 Non-Compete
	 	 	43	 
	Section 8.5 Intercompany Work Orders
	 	 	43	 
	Section 8.6 IDIQ Vehicles
	 	 	43	 
	Section 8.7 Government Contract Matters
	 	 	44	 
	Section 8.8 Software Licenses
	 	 	46	 
	Section 8.9 Use of Names, Logos and Information
	 	 	46	 
	 
	 	 	 	 
	ARTICLE IX TERMINATION
	 	 	47	 
	 
	 	 	 	 
	Section 9.1 Termination
	 	 	47	 
	Section 9.2 Effect of Termination
	 	 	47	 
	 
	 	 	 	 
	ARTICLE X DISPUTE RESOLUTION
	 	 	47	 
	 
	 	 	 	 
	Section 10.1 Negotiation
	 	 	47	 
	Section 10.2 Mediation
	 	 	48	 
	Section 10.3 Arbitration
	 	 	48	 
	Section 10.4 Confidentiality of Arbitral Award and Documents and Information Exchanged and Submitted in the Course of Arbitration
	 	 	49	 
	Section 10.5 Treatment of Negotiations and Mediation
	 	 	49	 

ii

 

	 	 	 	 	 
	 	 	Page	 
	Section 10.6 Continuity of Service and Performance
	 	 	49	 
	Section 10.7 Consolidation
	 	 	49	 
	Section 10.8 Submission to Jurisdiction
	 	 	50	 
	Section 10.9 Enforcement
	 	 	50	 
	 
	 	 	 	 
	ARTICLE XI MISCELLANEOUS
	 	 	51	 
	 
	 	 	 	 
	Section 11.1 Corporate Power
	 	 	51	 
	Section 11.2 Coordination with Certain Ancillary Agreements; Conflicts
	 	 	51	 
	Section 11.3 Expenses
	 	 	51	 
	Section 11.4 Amendment and Modification
	 	 	52	 
	Section 11.5 Waiver
	 	 	52	 
	Section 11.6 Notices
	 	 	52	 
	Section 11.7 Interpretation
	 	 	54	 
	Section 11.8 Entire Agreement
	 	 	54	 
	Section 11.9 No Third Party Beneficiaries
	 	 	54	 
	Section 11.10 Governing Law
	 	 	55	 
	Section 11.11 Assignment
	 	 	55	 
	Section 11.12 Severability
	 	 	55	 
	Section 11.13 Waiver of Jury Trial
	 	 	55	 
	Section 11.14 Counterparts
	 	 	55	 
	Section 11.15 Facsimile Signature
	 	 	55	 
	Section 11.16 Payment
	 	 	55	 
	Section 11.17 Parties’ Obligations
	 	 	56	 

Annex I — Internal Reorganization

iii

 

SEPARATION AND DISTRIBUTION AGREEMENT

     SEPARATION AND DISTRIBUTION AGREEMENT, dated as of March 29, 2011 (this “Agreement”),
among Northrop Grumman Corporation, a Delaware corporation (“NGC”), New P, Inc., a Delaware
corporation (“New NGC”), Huntington Ingalls Industries, Inc., a Delaware corporation
(“HII”), Northrop Grumman Shipbuilding, Inc., a Virginia corporation (“NGSB”), and
Northrop Grumman Systems Corporation, a Delaware corporation (“NGSC”).

RECITALS

     A. NGC, acting through itself and its direct and indirect Subsidiaries (as defined below),
currently conducts the Shipbuilding Business (as defined below) and the Retained Business (as
defined below).

     B. The NGC Board (as defined below) has determined that it is appropriate, desirable and in
the best interests of NGC and its stockholders to separate NGC into two publicly traded companies:
(a) HII, which following the Distribution (as defined below) will own and conduct, directly and
indirectly, the Shipbuilding Business; and (b) New NGC, which following the Distribution will own
and conduct, directly and indirectly, the Retained Business.

     C. Prior to the date of this Agreement, NGC formed New NGC as a wholly owned direct
Subsidiary, HII as a wholly owned direct subsidiary of New NGC, and Titan Merger Sub Inc., a
Delaware corporation and a wholly owned indirect Subsidiary of New
NGC (“Merger Sub”).

     D. Prior to the Distribution, Merger Sub will merge with and into NGC in a merger pursuant to
Section 251(g) of the Delaware General Corporation Law, with NGC as the surviving entity and
renamed “Titan II Inc.” and with New NGC renamed “Northrop Grumman Corporation” (the “Holding
Company Reorganization”).

     E. After the Holding Company Reorganization and prior to the Distribution, the parties will
complete the Internal Reorganization (as defined below).

     F. On the Distribution Date (as defined below) and subject to the terms and conditions of this
Agreement, New NGC shall distribute to the Record Holders (as defined below), on a pro rata basis,
all the outstanding shares of common stock, par value $.01 per share, of HII (“HII Common
Stock”) owned by New NGC on the Distribution Date (the “Distribution”).

     G. The parties intend that, for U.S. federal income tax purposes, the Holding Company
Reorganization, the Internal Reorganization, and the Distribution shall qualify for Tax-Free Status
(as defined below) pursuant to Sections 351, 355, 361, 368(a) and related provisions of the Code
(as defined below).

 

 

AGREEMENT

     In consideration of the foregoing and the mutual covenants and agreements herein contained,
and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.1 Table of Definitions. The following terms have the meanings set forth on
the pages referenced below:

	 	 	 	 	 
	Definition	 	Page	 
	AAA
	 	 	48	 
	Action
	 	 	3	 
	Affiliate
	 	 	4	 
	Agent
	 	 	4	 
	Agreement
	 	 	1	 
	Agreement Disputes
	 	 	48	 
	Allocation Committee
	 	 	4	 
	Allowable Cost Audit
	 	 	44	 
	Ancillary Agreements
	 	 	4	 
	Applicable HII Proportion
	 	 	4	 
	Applicable New NGC Proportion
	 	 	4	 
	Applicable Proportion
	 	 	4	 
	Assets
	 	 	4	 
	Assigned Action
	 	 	6	 
	Business
	 	 	8	 
	Business Day
	 	 	6	 
	Change of Control
	 	 	6	 
	Change of Control Triggering Event
	 	 	7	 
	Code
	 	 	7	 
	Consents
	 	 	7	 
	Continuing Director
	 	 	7	 
	Credit Support Instruments
	 	 	7	 
	Determination Request
	 	 	7	 
	Dispute Notice
	 	 	48	 
	Distribution
	 	 	1	 
	Distribution Date
	 	 	7	 
	Distribution Ratio
	 	 	7	 
	Employee Matters Agreement
	 	 	7	 
	Environmental Laws
	 	 	7	 
	Environmental Liabilities
	 	 	8	 
	Exchange Act
	 	 	8	 
	Excluded Disputes
	 	 	48	 
	Excluded Retained Assets
	 	 	8	 
	Excluded Shipbuilding Assets
	 	 	8	 
	Fitch
	 	 	8	 
	Form 10
	 	 	8	 
	Former Business
	 	 	8	 
	Governmental Approvals
	 	 	9	 
	Governmental Authority
	 	 	9	 
	GO-Zone Bonds
	 	 	9	 
	GO-Zone Bonds Guarantee
	 	 	I-1	 
	Group
	 	 	9	 
	Hazardous Substances
	 	 	9	 
	HII
	 	 	1	 
	HII Assigned Action
	 	 	9	 
	HII Balance Sheet
	 	 	9	 
	HII Common Stock
	 	 	1	 
	HII Contribution
	 	 	I-2	 
	HII Credit Facility
	 	 	9	 
	HII Credit Support Instruments
	 	 	25	 
	HII Debt
	 	 	9	 
	HII Entities
	 	 	9	 
	HII Group
	 	 	9	 
	HII Indemnitees
	 	 	30	 
	HII Transferred Assets
	 	 	10	 
	Holding Company Reorganization
	 	 	1	 
	Holdings LLC
	 	 	I-1	 
	Holdings LP
	 	 	I-1	 
	Holdings LP Distribution
	 	 	I-2	 
	Indemnifying Party
	 	 	31	 
	Indemnitee
	 	 	31	 
	Indemnity Payment
	 	 	31	 
	Information
	 	 	10	 
	Information Statement
	 	 	10	 
	Ingalls Indemnity Agreement
	 	 	10	 
	Insurance Matters Agreement
	 	 	10	 
	Insurance Policies
	 	 	10	 
	Insurance Proceeds
	 	 	10	 

2

 

Table of Definitions (cont.)

	 	 	 	 	 
	Definition	 	Page	 
	Intercompany Debt Receivable
	 	 	I-1	 
	Internal Reorganization
	 	 	10	 
	IP License Agreement
	 	 	10	 
	IRS Ruling
	 	 	10	 
	IWOs
	 	 	43	 
	Law
	 	 	11	 
	Letter Subcontracts
	 	 	43	 
	Liabilities
	 	 	11	 
	Litigation Management Agreement
	 	 	11	 
	Managing Party
	 	 	35	 
	Merger Sub
	 	 	1	 
	Moody’s
	 	 	11	 
	Navy Guarantees
	 	 	11	 
	New NGC
	 	 	1	 
	New NGC Assigned Action
	 	 	11	 
	New NGC Board
	 	 	11	 
	New NGC Common Stock
	 	 	12	 
	New NGC Credit Support Instruments
	 	 	24	 
	New NGC Entities
	 	 	12	 
	New NGC Group
	 	 	12	 
	New NGC Indemnitees
	 	 	30	 
	New NGC Transferred Assets
	 	 	12	 
	NGC
	 	 	1	 
	NGC Board
	 	 	12	 
	NGC Charter Amendment
	 	 	42	 
	NGC Charter Amendment Proposal
	 	 	42	 
	NGC Credit Agreement
	 	 	I-1	 
	NGC Distribution
	 	 	I-1	 
	NGSB
	 	 	1	 
	NGSC
	 	 	1	 
	NGTS
	 	 	12	 
	Non-Managing Party
	 	 	12	 
	Northrop Grumman
	 	 	12	 
	Northrop Grumman Board
	 	 	12	 
	Northrop Grumman Stockholders
	 	 	12	 
	NYSE
	 	 	12	 
	Opinion
	 	 	12	 
	P&I Agreements
	 	 	12	 
	Person
	 	 	13	 
	Rating Agencies
	 	 	13	 
	Rating Event
	 	 	13	 
	Record Date
	 	 	13	 
	Record Holders
	 	 	13	 
	Retained Assets
	 	 	13	 
	Retained Business
	 	 	14	 
	Retained Cash
	 	 	I-2	 
	Retained Liabilities
	 	 	14	 
	Rules
	 	 	48	 
	S&P
	 	 	15	 
	SEC
	 	 	15	 
	Security Interest
	 	 	15	 
	Separation
	 	 	15	 
	Settlement Asset
	 	 	44	 
	Settlement Liability
	 	 	44	 
	Shared Action
	 	 	15	 
	Shared Gain
	 	 	15	 
	Shared Liability
	 	 	15	 
	Shipbuilding Assets
	 	 	16	 
	Shipbuilding Business
	 	 	17	 
	Shipbuilding Liabilities
	 	 	17	 
	Solicitation
	 	 	43	 
	Subsidiary
	 	 	18	 
	Tax Matters Agreement
	 	 	19	 
	Taxes
	 	 	19	 
	Tax-Free Status
	 	 	19	 
	Team
	 	 	19	 
	Teaming Agreement
	 	 	19	 
	Third-Party Claim
	 	 	31	 
	Transferred Debt Proceeds
	 	 	I-2	 
	Transition Services Agreement
	 	 	19	 

     Section 1.2 Certain Defined Terms. For the purposes of this Agreement:

          “Action” means any claim, demand, action, suit, countersuit, audit, arbitration,
inquiry, proceeding or investigation by or before any Governmental Authority or any United States
or non-United States federal, state, local or international arbitration or mediation tribunal.

3

 

          “Affiliate” of any Person means a Person that controls, is controlled by, or is under
common control with such Person; provided, however, that for purposes of this
Agreement and the Ancillary Agreements, none of the New NGC Entities shall be deemed to be an
Affiliate of any HII Entity and none of the HII Entities shall be deemed to be an Affiliate of any
New NGC Entity. As used herein, “control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such entity, whether
through ownership of voting securities or other interests, by contract or otherwise.

          “Agent” means the distribution agent to be appointed by the New NGC Board to
distribute to the Record Holders the shares of HII Common Stock pursuant to the Distribution.

          “Allocation Committee” means a committee composed of one representative designated
from time to time by each of New NGC and HII that shall be established in accordance with Section
6.2.

          “Ancillary Agreements” means the Employee Matters Agreement, the Ingalls Indemnity
Agreement, the Insurance Matters Agreement, the IP License Agreement, the Litigation Management
Agreement, the P&I Agreements, the Tax Matters Agreement, the Transition Services Agreement and any
other instruments, assignments, documents and agreements executed in connection with the
implementation of the transactions contemplated by this Agreement, including the Internal
Reorganization.

          “Applicable HII Proportion” means the proportion of a Shared Gain or a Shared
Liability, as applicable, that relates to the Shipbuilding Business. With respect to any Shared
Liability identified on Schedule 1.1(a)(1) or any Shared Gain identified on Schedule
1.1(a)(2), the Applicable HII Proportion shall be as set forth under the heading “Applicable
HII Proportion” opposite such matter on such Schedule. With respect to any other Shared Liability
or Shared Gain, the Applicable HII Proportion shall be the extent to which such Shared Liability or
Shared Gain relates to the Shipbuilding Business and shall be determined in accordance with Section
6.2(b).

          “Applicable New NGC Proportion” means the proportion of a Shared Gain or a Shared
Liability, as applicable, that relates to the Retained Business. With respect to any Shared
Liability identified on Schedule 1.1(a)(1) or any Shared Gain identified on Schedule
1.1(a)(2), the Applicable New NGC Proportion shall be as set forth under the heading
“Applicable New NGC Proportion” opposite such matter on such Schedule. With respect to any other
Shared Liability or Shared Gain, the Applicable New NGC Proportion shall be the extent to which
such Shared Liability or Shared Gain relates to the Retained Business and shall be determined in
accordance with Section 6.2(b).

          “Applicable Proportion” means (a) as to New NGC, the Applicable New NGC Proportion,
and (b) as to HII, the Applicable HII Proportion.

          “Assets” means all assets, properties and rights (including goodwill), wherever
located (including in the possession of vendors or other third parties or

4

 

elsewhere), whether real, personal or mixed, tangible, intangible, corporeal, incorporeal or
contingent, in each case whether or not recorded or reflected or required to be recorded or
reflected on the books and records or financial statements of any Person, including the following:

          (a) all accounting and other books, records and files whether in paper, microfilm, microfiche,
computer tape or disc, magnetic tape or any other form;

          (b) all apparatus, computers and other electronic data processing equipment, fixtures,
machinery, equipment, furniture, office equipment, automobiles, trucks, aircraft, motor vehicles
and other transportation equipment, special and general tools, test devices, prototypes and models
and other tangible personal property;

          (c) all inventories of materials, parts, supplies, raw materials, work-in-process and finished
goods and products;

          (d) all interests in real property of whatever nature, including easements and rights of way,
whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor,
lessee, sublessee or otherwise, and copies of all related documentation;

          (e) all interests in any capital stock or other equity, partnership, membership, joint venture
or similar interests of any Subsidiary or any other Person, all bonds, notes, debentures or other
securities issued by any Subsidiary or any other Person, all loans, advances or other extensions of
credit or capital contributions to any Subsidiary or any other Person and all other investments in
securities of any Person;

          (f) all license agreements, leases of personal property, open purchase orders for raw
materials, supplies, parts or services, unfilled orders for the manufacture and sale of products
and other contracts, agreements or commitments;

          (g) all deposits, letters of credit, guarantees and performance and surety bonds;

          (h) all recorded scientific and technical information, data, specifications, research and
development information, engineering drawings, operating and maintenance manuals, studies, reports,
discoveries, ideas, concepts, know-how, techniques, designs, blueprints, diagrams, models,
prototypes, samples, and materials and analyses regardless of the form or method of the recording
whether prepared by a party’s employees or on behalf of a party by consultants and other third
parties;

          (i) all domestic and foreign patents, copyrights, trade names, trademarks, service marks and
registrations and applications for any of the foregoing, mask works, trade secrets, inventions,
other proprietary information and licenses from third parties granting the right to use any of the
foregoing;

          (j) all computer applications, programs and other software, including operating software,
network software, firmware, middleware, design software, design

5

 

tools, systems documentation, flow charts, instructions, source code, listings, object code
listings, design details, algorithms, processes, flow charts, formulae, and related material that
would enable the software to be reproduced, recreated or recompiled, and computer databases;

          (k) all cost information, sales and pricing data, customer prospect lists, supplier records,
customer and supplier lists, records pertaining to customers and customer accounts, customer and
vendor data, correspondence and lists, product literature, artwork, design, development and
manufacturing files, vendor and customer drawings, formulations and specifications, quality records
and reports and other books, records, studies, surveys, reports, plans and documents, in whatever
form;

          (l) all prepaid expenses, trade accounts and other accounts and notes receivable;

          (m) all rights under contracts, options or agreements, all claims or rights against any Person
arising from the ownership of any Asset, all rights in connection with any bids or offers and all
claims, choses in action or similar rights, whether accrued or contingent;

          (n) all insurance proceeds and rights under Insurance Policies and all rights in the nature of
insurance, indemnification or contribution;

          (o) all licenses, permits, approvals and authorizations that have been issued by any
Governmental Authority and all pending applications therefor;

          (p) all cash or cash equivalents, bank accounts, lock boxes and other deposit arrangements;

          (q) copies of all documentation related to Insurance Policies;

          (r) all interests in any public grants and subsidies of any kind received or applied for; and

          (s) all interest rate, currency, commodity or other swap, collar, cap or other hedging or
similar agreements or arrangements.

          “Assigned Action” has the meaning set forth in the Litigation Management Agreement.

          “Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.

          “Change of Control” means the occurrence of any of the following after the
Distribution: (a) the direct or indirect sale, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets of HII and its Subsidiaries taken as a whole to any
person (as used in Section 13(d)(3) of the Exchange Act) or group of related persons

6

 

for purposes of Section 13(d) of the Exchange Act other than HII or one of its Subsidiaries;
(b) the approval by the holders of HII’s common stock of any plan or proposal for the liquidation
or dissolution of HII or HII’s approval or making of any bankruptcy filing; (c) the consummation of
any transaction (including any merger or consolidation) the result of which is that any person (as
used in Section 13(d)(3) of the Exchange Act) or group of related persons for purposes of Section
13(d) of the Exchange Act other than HII or one of its Subsidiaries becomes the beneficial owner,
directly or indirectly, of more than 50% of the then outstanding number of shares of HII voting
stock; or (d) the first day on which a majority of the members of HII’s board of directors are not
Continuing Directors.

          “Change of Control Triggering Event” means the occurrence of both a Change of Control
and a Rating Event.

          “Code” means the Internal Revenue Code of 1986, as amended and as in effect for the
relevant period in question.

          “Consents” means any consents, waivers or approvals from, or notification requirements
to, any Person other than a member of either Group.

          “Continuing Director” means, as of any date of determination, any member of the board
of directors of HII who (a) was a member of such board of directors as of the Distribution; or (b)
was nominated for election or elected to such board of directors with the approval of a majority of
the Continuing Directors who were members of such board of directors at the time of such nomination
or election (either by a specific vote or by approval of the proxy statement in which such member
was named as a nominee for election as a director, without objection to such nomination).

          “Credit Support Instruments” means surety bonds, covenants, indemnities, undertakings,
letters of credit or similar assurances or other credit support.

          “Determination Request” means a written request made to the Allocation Committee for a
determination as to whether a Third-Party Claim specified in such request constitutes a Shared
Liability or whether any potential gain or right specified in such request constitutes a Shared
Gain.

          “Distribution Date” means the date, determined by the Northrop Grumman Board, on which
the Distribution occurs.

          “Distribution Ratio” means the number of shares of HII Common Stock to be distributed
in respect of each share of New NGC Common Stock in the Distribution, which ratio shall be
determined by the New NGC Board prior to the Record Date.

          “Employee Matters Agreement” means the Employee Matters Agreement, dated as of the
date hereof, among NGC, New NGC and HII, as may be amended or modified from time to time.

          “Environmental Laws” means all federal, state, local and foreign Laws, including all
judicial and administrative orders, determinations, and consent agreements or

7

 

decrees, that relate, in whole or in part, to Hazardous Substances, pollution, contaminants,
harmful substances, protection of the environment or human health, including those that regulate
the use, manufacture, generation, handling, labeling, testing, transport, treatment, storage,
processing, discharge, disposal, release, threatened release, control, or cleanup of harmful
substances, pollutants, contaminants, Hazardous Substances or materials containing such substances,
regardless of when enacted or effective.

          “Environmental Liabilities” means any Liabilities arising out of or relating to the
environment, human health, any Environmental Law, Hazardous Substances or exposure to Hazardous
Substances, pollutants, contaminants or other harmful substances, including (a) fines, penalties,
judgments, awards, settlements, losses, damages (including consequential damages), costs, fees
(including attorneys’ and consultants’ fees), expenses and disbursements, (b) costs of defense and
other responses to any administrative or judicial action (including notices, claims, complaints,
suits and other assertions of liability), (c) responsibility for any investigation, remediation,
monitoring or cleanup costs, injunctive relief, tort claims, natural resource damages, and any
other environmental compliance or remedial measures, in each case known or unknown, foreseen or
unforeseen, and (d) any claims, suits or actions (whether third-party or otherwise) for any
Liability, including personal injury or property damage.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, together with
the rules and regulations promulgated thereunder.

          “Excluded Retained Assets” means the Assets listed or described on Schedule
1.1(a)(3).

          “Excluded Shipbuilding Assets” means:

          (a) the Assets listed or described on Schedule 1.1(a)(4);

          (b) the New NGC Transferred Assets; and

          (c) the Transferred Debt Proceeds.

          “Fitch” means Fitch Ratings Ltd.

          “Form 10” means the registration statement on Form 10 filed by HII with the SEC to
effect the registration of HII Common Stock pursuant to the Exchange Act in connection with the
Distribution, as such registration statement may be amended or supplemented from time to time,
including any amendment or supplement thereto.

          “Former Business” means any corporation, partnership, entity, division, business unit
or business, including any business within the meaning of Rule 11-01(d) of Regulation S-X (in each
case, including any Assets and Liabilities comprising the same) (as used in this definition of
“Former Business,” a “Business”) that has been sold, conveyed, assigned, transferred or
otherwise disposed of or divested (in whole or in part) to a Person that is not a member of the New
NGC Group or the HII Group or the operations, activities or production of which has been
discontinued, abandoned, completed

8

 

or otherwise terminated (in whole or in part), in each case prior to the Distribution. For
the avoidance of doubt, any Business that has been sold, conveyed, assigned, transferred or
otherwise disposed of or divested (in whole or in part) by a member of one Group to a member of the
other Group shall not be deemed a Former Business of the first Group if such Business has
subsequently been sold, conveyed, assigned, transferred or otherwise disposed of or divested (in
whole or in part by a member of the second Group) to any Person that is not a member of the New NGC
Group or the HII Group.

          “GO-Zone Bonds” means the Gulf Opportunity Zone Industrial Development Revenue Bonds
(Northrop Grumman Ship Systems, Inc. Project) Series 2006 due 2028 issued by the Mississippi
Business Finance Corporation.

          “Governmental Approvals” means any notices, reports or other filings to be given to or
made with, or any releases, Consents, substitutions, approvals, amendments, registrations, permits
or authorizations to be obtained from, any Governmental Authority.

          “Governmental Authority” means any United States or non-United States federal, state,
local, territorial, tribal or international court, government, department, commission, board,
bureau, agency, official or other legislative, judicial, regulatory, administrative or governmental
authority.

          “Group” means the New NGC Group or the HII Group, as the context requires.

          “Hazardous Substances” means all materials, wastes or substances defined by, or
regulated under, any Environmental Laws now or in the future and any substance that can give rise
to any claim, suit or action (whether third-party or otherwise) for any Liabilities, including
personal injury or property damage.

          “HII Assigned Action” has the meaning set forth in the Litigation Management
Agreement.

          “HII Balance Sheet” means the audited pro forma consolidated balance sheet of HII,
including the notes thereto, as of December 31, 2010, included in the Information Statement.

          “HII Credit Facility” means the credit facility to be entered into prior to the
Distribution between HII, as borrower, and an agent or co-agents pursuant to which HII may borrow
funds.

          “HII Debt” means the debt issued by HII pursuant to a Rule 144A offering to be
completed prior to the Internal Reorganization and the term loan debt under the HII Credit
Facility.

          “HII Entities” means the members of the HII Group.

          “HII Group” means HII and each Person that will be a direct or indirect Subsidiary of
HII immediately prior to the Distribution (but after giving effect to the

9

 

Internal Reorganization) and each Person that is or becomes a member of the HII Group after
the Distribution, including in all circumstances the predecessor and successor entities of HII or
each such other Person. For the purposes of this Agreement and the Ancillary Agreements, New NGC
shall not be deemed to be a successor entity of NGC.

          “HII Transferred Assets” means those Assets of NGC (but not the Assets of any of its
Subsidiaries) that are listed on Schedule 1.1(a)(5).

          “Information” means information, including books and records, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms,
stored in any medium, including studies, reports, records, books, contracts, instruments, surveys,
discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints,
diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names, communications by or to
attorneys (including attorney-client privileged communications), memos and other materials prepared
by attorneys or under their direction (including attorney work product), and other technical,
financial, employee or business information or data.

          “Information Statement” means the Information Statement, attached as an exhibit to the
Form 10, to be sent to each holder of New NGC Common Stock in connection with the Distribution, as
such Information Statement may be amended from time to time, including any amendment or supplement
thereto.

          “Ingalls Indemnity Agreement” means the Ingalls Guaranty Performance, Indemnity and
Termination Agreement, dated as of the date hereof, among HII, NGSB and NGSC, as may be amended or
modified from time to time.

          “Insurance Matters Agreement” means the Insurance Matters Agreement, dated as of the
date hereof, among NGC, New NGC and HII, as may be amended or modified from time to time.

          “Insurance Policies” has the meaning set forth in the Insurance Matters Agreement.

          “Insurance Proceeds” means, with respect to any Liability to be reimbursed by an
Indemnifying Party that may be covered, in whole or in part, by Insurance Policies written by
third-party providers, the amount of insurance proceeds actually received in cash under such
Insurance Policy with respect to such Liability, net of any taxes and costs in seeking such
collection.

          “Internal Reorganization” means the transactions described in Annex I.

          “IP License Agreement” means the Intellectual Property License Agreement, dated as of
the date hereof, between NGSC and NGSB, as may be amended or modified from time to time.

          “IRS Ruling” has the meaning set forth in the Tax Matters Agreement.

10

 

          “Law” means any statute, law, regulation, ordinance, rule, judgment, rule of common
law, order, decree, government approval, concession, grant, franchise, license, agreement,
directive, guideline, policy, requirement or other governmental restriction or any similar form of
decision of, or determination by, or any interpretation or administration of any of the foregoing
by, any Governmental Authority, whether now or hereinafter in effect and, in each case, as amended.

          “Liabilities” means any and all losses, claims, charges, debts, demands, Actions,
damages, obligations, payments, costs and expenses, sums of money, bonds, indemnities and similar
obligations, penalties, covenants, contracts, controversies, agreements, promises, omissions,
guarantees, make whole agreements and similar obligations, and other liabilities, including all
contractual obligations, whether absolute or contingent, inchoate or otherwise, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising,
and including those arising under any Law, Action, threatened or contemplated Action (including the
costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto
and attorneys’ fees and any and all costs and expenses (including allocated costs of in-house
counsel and other personnel), whatsoever incurred in investigating, preparing or defending against
any such Actions or threatened or contemplated Actions), order or consent decree of any
Governmental Authority or any award of any arbitrator of any kind, and those arising under any
contract, commitment or undertaking, including those arising under this Agreement or any Ancillary
Agreement or incurred by a party hereto or thereto in connection with enforcing its rights to
indemnification hereunder or thereunder, in each case, whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial statements of any
Person.

          “Litigation Management Agreement” means the Litigation Management and Coordination
Agreement, dated as of the date hereof, among NGC, New NGC, HII, NGSB and NGSC, as may be amended
or modified from time to time.

          “Moody’s” means Moody’s Investors Service, Inc.

          “Navy Guarantees” means (a) the Performance Guaranty, dated as of April 11, 2002, by
NGC, as guarantor, to the United States of America, Naval Sea Systems Command as beneficiary, (b)
the Performance Guaranty, dated 2006, by NGC, as guarantor, to the United States of America, Naval
Sea Systems Command as beneficiary, (c) the Performance Guaranty, dated as of April 24, 2007, by
NGC, as guarantor, to the United States of America, Naval Sea Systems Command as beneficiary and
(d) any other similar guarantee pursuant to which NGC has guaranteed the performance of NGSB (or an
Affiliate) under shipbuilding construction contracts with the United States Department of the Navy
or a command or other division thereof.

          “New NGC Assigned Action” has the meaning set forth in the Litigation Management
Agreement.

          “New NGC Board” means the board of directors of New NGC or an authorized committee
thereof.

11

 

          “New NGC Common Stock” means the common stock, par value $1.00 per share, of New NGC.

          “New NGC Entities” means the members of the New NGC Group.

          “New NGC Group” means New NGC and each Person that will be a direct or indirect
Subsidiary of New NGC immediately after the Distribution and each Person that is or becomes a
member of the New NGC Group after the Distribution, including in all circumstances the predecessor
and successor entities of New NGC or each such other Person. For the purposes of this Agreement
and the Ancillary Agreements, NGC shall not be deemed to be a predecessor entity of New NGC.

          “New NGC Transferred Assets” means all of the Assets of NGC (but not the Assets of any
of its Subsidiaries) including those Assets listed or described on Schedule 1.1(a)(6),
other than (a) the HII Transferred Assets and (b) the capital stock in NGSC and NGSB.

          “NGC Board” means the board of directors of NGC or an authorized committee thereof.

          “NGTS” means Northrop Grumman Technical Services, Inc., an Oklahoma corporation,
member of the New NGC Group and party to the Teaming Agreement.

          “Non-Managing Party” means, as between HII and New NGC, the party that is not the
Managing Party with respect to any Shared Gain or Shared Liability.

          “Northrop Grumman” means (a) at all times prior to the effectiveness of the Holding
Company Reorganization, NGC, and (b) at all times at or after the effectiveness of the Holding
Company Reorganization, New NGC.

          “Northrop Grumman Board” means (a) at all times prior to the effectiveness of the
Holding Company Reorganization, the NGC Board, and (b) at all times at or after the effectiveness
of the Holding Company Reorganization, the New NGC Board.

          “Northrop Grumman Stockholders” means (a) at all times prior to the effectiveness of
the Holding Company Reorganization, the stockholders of NGC, and (b) at all times at or after the
effectiveness of the Holding Company Reorganization, the stockholders of New NGC.

          “NYSE” means the New York Stock Exchange.

          “Opinion” has the meaning set forth in the Tax Matters Agreement.

          “P&I Agreements” means the Performance and Indemnity Agreements, to be executed and
delivered in connection with the Internal Reorganization, between HII and NGC, as may be amended or
modified from time to time.

12

 

          “Person” means an individual, corporation, partnership, limited liability company,
limited liability partnership, syndicate, person, trust, association, organization or other entity,
including any Governmental Authority, and including any successor, by merger or otherwise, of any
of the foregoing.

          “Rating Agencies” means (a) each of Fitch, Moody’s and S&P and (b) if Fitch, Moody’s
and S&P all cease to rate HII or all fail to make a rating of HII publicly available for reasons
outside of HII’s control, a “nationally recognized statistical rating organization” within the
meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by HII (as certified by a
resolution of the board of directors of HII) as a replacement agency.

          “Rating Event” means HII’s corporate rating is downgraded to “B” or “B2” or below, as
applicable, by any of the Rating Agencies on any date from and after the date of the public notice
of an arrangement that could result in a Change of Control until the end of the 60-day period
following public notice of the consummation of the Change of Control (which 60-day period shall be
extended so long as the rating of HII is under publicly announced consideration for possible
downgrade by any of the Rating Agencies).

          “Record Date” means the close of business on the date determined by the New NGC Board
as the record date for determining the stockholders of New NGC entitled to receive shares of HII
Common Stock in the Distribution. The Record Date shall occur after completion of the Holding
Company Reorganization.

          “Record Holders” means the holders of New NGC Common Stock on the Record Date.

          “Retained Assets” means:

          (a) the Assets listed or described on Schedule 1.1(a)(7), the New NGC Transferred
Assets and all other Assets that are expressly and specifically provided in this Agreement or any
Ancillary Agreement as Assets to be transferred to New NGC or any other member of the New NGC
Group;

          (b) all interests in the capital stock of, or any other equity, partnership, membership, joint
venture or similar interests in, the Subsidiaries of New NGC (other than any member of the HII
Group) immediately prior to the Distribution (after giving effect to the Internal Reorganization)
and any capital stock of, or equity, partnership, membership, joint venture or similar interests
in, any other Person (other than any member of the HII Group) owned by any member of the New NGC
Group immediately prior to the Distribution (after giving effect to the Internal Reorganization);

          (c) any recovery or other Assets (net of any expenses) received by any member of either Group
with respect to any New NGC Assigned Action;

          (d) the Applicable New NGC Proportion of any Shared Gain; and

13

 

          (e) all other Assets owned or held immediately prior to the Distribution (after giving effect
to the Internal Reorganization) by New NGC or any of its Subsidiaries (including for the avoidance
of doubt, HII and its Subsidiaries) that are not Shipbuilding Assets, including the Transferred
Debt Proceeds.

          Notwithstanding the foregoing, the Retained Assets shall not include any items expressly
governed by the Tax Matters Agreement or the Excluded Retained Assets. In the event of any
inconsistency or conflict that may arise in the application or interpretation of any of the
foregoing provisions, for the purpose of determining what is and is not a Retained Asset, any item
explicitly included on a Schedule referred to in this definition of “Retained Assets” shall take
priority over any provision of the text hereof.

          “Retained Business” means:

          (a) any businesses or operations conducted by any member of the New NGC Group (other than any
businesses or operations to the extent conducted through the ownership of, on behalf of or for the
benefit of any member of the HII Group prior to the Distribution), including any Former Business of
any member of the New NGC Group and any Former Business of NGC that is not also a Former Business
of any other member of the HII Group, in all cases including those businesses set forth on
Schedule 1.1(a)(8), but excluding those businesses set forth on Schedule 1.1(a)(9);

          (b) the businesses or operations, including Former Businesses, conducted by any member of the
HII Group (including NGC) prior to the Distribution to the extent that they do not relate to the
Shipbuilding Business; and

          (c) any other businesses or operations conducted through the use of the Retained Assets to the
extent that they do not relate to the Shipbuilding Business.

          “Retained Liabilities” means:

          (a) all of the following Liabilities:

               (i) the Liabilities listed or described on Schedule 1.1(a)(10);

               (ii) all other Liabilities that are expressly and specifically provided by this Agreement as
Liabilities to be wholly assumed by New NGC or any member of the New NGC Group, and all obligations
of New NGC or any other member of the New NGC Group under this Agreement or any of the Ancillary
Agreements;

               (iii) all other Liabilities that are both wholly unrelated to the Shipbuilding Business and
are not otherwise Shipbuilding Liabilities; and

          (b) the Applicable New NGC Proportion of any Shared Liability.

          Notwithstanding the foregoing, the Retained Liabilities shall not include any items expressly
governed by the Tax Matters Agreement or the Ingalls Indemnity Agreement.

14

 

          In the event of any inconsistency or conflict that may arise in the application or
interpretation of any of the foregoing provisions, for the purpose of determining what is and is
not a Retained Liability, any item explicitly included on a Schedule referred to in this definition
of “Retained Liabilities” shall take priority over any provision of the text hereof.

          “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc.

          “SEC” means the Securities and Exchange Commission.

          “Security Interest” means any mortgage, security interest, pledge, lien, charge,
claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition,
easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.

          “Separation” means (a) the Internal Reorganization, (b) any other actions to be taken
pursuant to Article II and (c) any other transfers of Assets and assumptions of Liabilities, in
each case, between a member of one Group and a member of the other Group, provided for in this
Agreement or any Ancillary Agreement.

          “Shared Action” has the meaning set forth in the Litigation Management Agreement.

          “Shared Gain” means any claim or right of a member of the New NGC Group or the HII
Group, whenever discovered, against any Person (other than a member of the New NGC Group or the HII
Group) that relates to both the Retained Business and the Shipbuilding Business or is listed or
described on Schedule 1.1(a)(11), other than any claim or right described on Schedule
1.1(a)(12), in all cases to the extent that such claim or right accrued as of the Distribution
or relates to events or circumstances that occurred or existed prior to the Distribution.
Notwithstanding anything to the contrary in this definition of “Shared Gain,” Shared Gains shall
not include any Settlement Assets, which shall be governed by Section 8.7, or any claims or rights
related to, attributable to or arising in connection with Taxes or Tax Returns, which are expressly
governed by the Tax Matters Agreement.

          “Shared Liability” means any of the following:

          (a) any Liability that relates to both the Shipbuilding Business and the Retained Business and
that is not listed in a subclause of clause (a) of the definition of “Shipbuilding Liabilities;”
and

          (b) any Liability listed or described on Schedule 1.1(a)(13).

          Notwithstanding anything to the contrary in this definition of “Shared Liability,” Shared
Liabilities shall not include any Settlement Liabilities, which shall be governed by Section 8.7,
or any Liabilities related to, attributable to or arising in

15

 

connection with Taxes or Tax Returns, which are expressly governed by the Tax Matters
Agreement.

          “Shipbuilding Assets” means:

          (a) the Assets listed or described on Schedule 1.1(a)(14), the HII Transferred Assets
and all other Assets that are expressly and specifically provided in this Agreement or any
Ancillary Agreement as Assets to be transferred to HII or any other member of the HII Group;

          (b) all interests in the capital stock of, or any other equity, partnership, membership, joint
venture or similar interests in, the Subsidiaries of HII immediately prior to the Distribution
(after giving effect to the Internal Reorganization) and any capital stock of, or equity,
partnership, membership, joint venture or similar interests in, any other Person owned by any
member of the HII Group immediately prior to the Distribution (after giving effect to the Internal
Reorganization);

          (c) all Assets reflected as assets of HII and the other members of the HII Group on the HII
Balance Sheet and any Assets acquired by or for HII or any other member of the HII Group subsequent
to the date of the HII Balance Sheet that, had they been acquired on or before such date and owned
as of such date, would have been reflected on the HII Balance Sheet if prepared on a consistent
basis, subject to any dispositions of any such Assets subsequent to the date of the HII Balance
Sheet;

          (d) any recovery or other Assets (net of any Taxes and expenses) received by any member of
either Group in any HII Assigned Action;

          (e) all other Assets not expressly covered in clauses (a) through (d) of this definition of
“Shipbuilding Assets” that are wholly owned immediately prior to the Distribution (after giving
effect to the Internal Reorganization) by HII or any of its Subsidiaries;

          (f) all patents, copyrights, trade secrets, know-how and other confidential and proprietary
information and all other intellectual property rights, whether arising under the laws of the
United States or the laws of any other jurisdiction, and all registrations and applications for
registration of any of the foregoing, that were created, devised or otherwise developed (i)
exclusively by the HII Employees and HII Retirees (each as defined in the Employee Matters
Agreement) (other than any of the foregoing that were developed specifically for the Retained
Business) or (ii) in whole or in part, by employees of any member of the New NGC Group or third
parties exclusively for the Shipbuilding Business, whether or not such intellectual property rights
had been assigned to NGC during its ownership of the Shipbuilding Business; and

          (g) the Applicable HII Proportion of any Shared Gain.

          Notwithstanding the foregoing, the Shipbuilding Assets shall not include any items expressly
governed by the Tax Matters Agreement or the Excluded Shipbuilding Assets. In the event of any
inconsistency or conflict that may arise in the application or

16

 

interpretation of any of the foregoing provisions, for the purpose of determining what is and
is not a Shipbuilding Asset, any item explicitly included on a Schedule referred to in this
definition of “Shipbuilding Assets” shall take priority over any provision of the text hereof.

          “Shipbuilding Business” means:

          (a) any businesses or operations conducted by any member of the HII Group (other than any
businesses or operations to the extent conducted through the ownership of, on behalf of or for the
benefit of any member of the New NGC Group prior to the Distribution), including the businesses and
operations that are described in the Information Statement and any Former Business of any member of
the HII Group (other than NGC and not any other entity), in each case including those businesses
set forth on Schedule 1.1(a)(9), but excluding those businesses set forth on Schedule
1.1(a)(8);

          (b) any other businesses or operations (including joint ventures) conducted through the use of
or with the Shipbuilding Assets;

          (c) the HII Employees and HII Retirees and any other person employed by any member of the HII
Group after the Distribution; and

          (d) the businesses or operations, including Former Businesses, conducted by NGC (but not any
other entity) or any member of the New NGC Group prior to the Distribution, in all cases to the
extent that they relate to the businesses or operations and Former Businesses described in clauses
(a) through (c) of this definition of “Shipbuilding Business.”

          “Shipbuilding Liabilities” means:

          (a) all of the following Liabilities:

               (i) the Liabilities listed or described on Schedule 1.1(a)(15);

               (ii) all other Liabilities that are expressly provided by this Agreement or any Ancillary
Agreement as Liabilities to be wholly assumed by HII or any other member of the HII Group, and all
obligations of HII or any other member of the HII Group under this Agreement or any of the
Ancillary Agreements;

               (iii) all Liabilities reflected as liabilities or obligations on the HII Balance Sheet, and
all Liabilities arising or assumed after the date of the HII Balance Sheet that, had they arisen or
been assumed on or before such date and been existing obligations as of such date, would have been
reflected on the HII Balance Sheet if prepared on a consistent basis, subject to any discharge of
such Liabilities subsequent to the date of the HII Balance Sheet;

               (iv) all Environmental Liabilities relating to (A) the use of any property by the Shipbuilding
Business at any time, regardless of whether such property is or is not owned or leased by HII or
any of its Subsidiaries or Affiliates (including any

17

 

properties set forth on Schedule 1.1(a)(16)), including any property where the
Shipbuilding Business contracted or arranged for disposal of wastes at any time whatsoever, or (B)
the operation or conduct of the Shipbuilding Business or activities related to the Shipbuilding
Business (including all Liabilities relating to any Shipbuilding Asset or any act or failure to act
by any director, officer, employee, agent or representative (whether or not such act or failure to
act is or was within such Person’s authority) which act or failure to act relates to the
Shipbuilding Business);

               (v) all Liabilities relating to the HII Employees and HII Retirees and any person employed by
any member of the HII Group after the Distribution, and the conduct of all such persons;

               (vi) all Liabilities relating to the use of any property by the Shipbuilding Business at any
time, regardless of whether such property is or is not owned or leased by HII or any of its
Subsidiaries or Affiliates (including any properties set forth on Schedule 1.1(a)(16)),
including any property where the Shipbuilding Business contracted or arranged for disposal of
wastes at any time whatsoever;

               (vii) all Liabilities relating to the Navy Guarantees, including all Liabilities that NGC or
any other party to this Agreement (including their Subsidiaries and Affiliates) has or may be found
to have under or in any way in connection with the Navy Guarantees;

               (viii) all other Liabilities relating to the operation or conduct of the Shipbuilding Business
or activities related to the Shipbuilding Business (including all Liabilities relating to any
Shipbuilding Asset or any act or failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or was within such Person’s authority)
which act or failure to act relates to the Shipbuilding Business) that do not also relate to the
operation or conduct of the Retained Business; and

               (ix) all other Liabilities that are wholly unrelated to the Retained Business and that are not
otherwise Retained Liabilities; and

          (b) the Applicable HII Proportion of any Shared Liability.

          Notwithstanding the foregoing, the Shipbuilding Liabilities shall not include any items
expressly governed by the Tax Matters Agreement or the Ingalls Indemnity Agreement.

          In the event of any inconsistency or conflict that may arise in the application or
interpretation of any of the foregoing provisions, for the purpose of determining what is and is
not a Shipbuilding Liability, any item explicitly included on a Schedule referred to in this
definition of “Shipbuilding Liabilities” shall take priority over any provision of the text hereof.

          “Subsidiary” of any Person means any corporation or other organization, whether
incorporated or unincorporated, of which at least a majority of the securities or interests having
by the terms thereof ordinary voting power to elect at least a majority of

18

 

the board of directors or others performing similar functions with respect to such corporation
or other organization is directly or indirectly owned or controlled by such Person or by any one or
more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided,
however, that no Person that is not directly or indirectly wholly owned by any other Person
shall be a Subsidiary of such other Person unless such other Person controls, or has the right,
power or ability to control, that Person.

          “Tax-Free Status” has the meaning set forth in the Tax Matters Agreement.

          “Tax Matters Agreement” means the Tax Matters Agreement, dated as of the date hereof,
among New NGC, HII and NGC, as may be amended or modified from time to time.

          “Tax” has the meaning set forth in the Tax Matters Agreement.

          “Team” has the meaning set forth in the Teaming Agreement.

          “Teaming Agreement” means the teaming agreement listed on Schedule 1.1(a)(17).

          “Transition Services Agreement” means the Transition Services Agreement, dated as of
the date hereof, among NGSC, NGSB, New NGC and HII, as may be amended or modified from time to
time.

ARTICLE II

THE SEPARATION

     Section 2.1 Internal Reorganization; Transfer of Assets and Assumption of Liabilities.

          (a) Prior to the Distribution, the parties shall cause the Internal Reorganization to be
completed.

          (b) Prior to the Distribution, the parties shall, and shall cause their respective
Subsidiaries to, (i) execute such instruments of assignment and transfer and take such other
corporate actions as are necessary to transfer to one or more members of the HII Group all of the
right, title and interest of the New NGC Group in and to all Shipbuilding Assets after giving
effect to the Internal Reorganization and (ii) take all actions necessary to cause one or more
members of the HII Group to assume all of the Shipbuilding Liabilities to the extent such
Shipbuilding Liabilities would otherwise remain obligations of any member of the New NGC Group
after giving effect to the Internal Reorganization.

          (c) Prior to the Distribution, the parties shall, and shall cause their respective
Subsidiaries to, (i) execute such instruments of assignment and transfer and take such other
corporate actions as are necessary to transfer to one or more members of the New NGC Group all of
the right, title and interest of the HII Group in and to all Retained Assets after giving effect to
the Internal Reorganization and (ii) take all actions necessary to cause one or more members of the
New NGC Group to assume all of the Retained

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Liabilities to the extent such Retained Liabilities would otherwise remain obligations of any
member of the HII Group after giving effect to the Internal Reorganization.

     Section 2.2 Governmental Approvals and Consents; Transfers, Assignments and Assumptions
Not Effected Prior to the Distribution.

          (a) To the extent that any of the transactions contemplated by this Agreement or any Ancillary
Agreement requires any Governmental Approval or Consent, the parties will use their reasonable best
efforts to obtain such Governmental Approval or Consent.

          (b) To the extent that any transfer or assignment of Assets or assumption of Liabilities
contemplated by this Agreement or any Ancillary Agreement shall not have been consummated prior to
the Distribution, the parties shall use reasonable best efforts to effect such transfers as
promptly following the Distribution as shall be practicable. Nothing herein shall be deemed to
require the transfer of any Assets or the assumption of any Liabilities that by their terms or
operation of law cannot or should not be transferred. In the event that any such transfer of
Assets or assumption of Liabilities has not been consummated, from and after the Distribution until
such time as such Asset is transferred or such Liability is assumed (i) the party retaining such
Asset shall thereafter hold such Asset for the use and benefit of the party entitled thereto (at
the expense of the party entitled thereto) and (ii) the party intended to assume such Liability
shall, or shall cause the applicable member of its Group to, pay or reimburse the party retaining
such Liability for all amounts paid or incurred in connection with the retention of such Liability.
In addition, the party retaining such Asset or Liability shall, insofar as reasonably practicable
and to the extent permitted by applicable Law, treat such Asset or Liability in the ordinary course
of business consistent with past practice and take such other actions as may be reasonably
requested by the party entitled to such Asset or by the party intended to assume such Liability in
order to place such party, insofar as reasonably practicable, in the same position as if such Asset
or Liability had been transferred or assumed as contemplated hereby and so that all the benefits
and burdens relating to such Asset or Liability, including possession, use, risk of loss, potential
for gain, and control over such Asset or Liability, are to inure from and after the Distribution to
the member or members of the New NGC Group or the HII Group entitled to such Asset or intended to
assume such Liability. In furtherance of the foregoing, the parties agree that, as of the
Distribution, each party shall be deemed to have acquired beneficial ownership over all of the
Assets, together with all rights and privileges incident thereto, and shall be deemed to have
assumed all of the Liabilities, and all duties, obligations and responsibilities incident thereto,
that such party is entitled to acquire or intended to assume pursuant to the terms of this
Agreement or the applicable Ancillary Agreement.

          (c) If and when the Consents, Governmental Approvals and/or conditions, the absence or
non-satisfaction of which caused the deferral of transfer or assignment of any Asset or the
deferral of the assumption of any Liability pursuant to Section 2.2(b) are obtained or satisfied,
the transfer or assumption of the applicable Asset or Liability shall be effected in accordance
with and subject to the terms of this Agreement or the applicable Ancillary Agreement.

20

 

          (d) The party retaining any Asset or Liability due to the deferral of the transfer of such
Asset or the deferral of the assumption of such Liability pursuant to Section 2.2(b) or otherwise
shall not be obligated, in connection with the foregoing, to expend any money unless the necessary
funds are advanced or agreed to be reimbursed by the party entitled to such Asset or the party
intended to assume such Liability. The party retaining such Asset or Liability shall use its
reasonable best efforts timely to notify the party entitled to such Asset or intended to assume
such Liability of the need for such expenditure.

          (e) The parties agree to treat, for U.S. federal, state and local income tax purposes, any
Asset or Liability that is not transferred prior to the Distribution and is subject to the
provisions of Section 2.2(b) as owned by the member of the Group to which such Asset or Liability
was intended to be transferred from and after the Distribution, and shall not take any position
inconsistent therewith unless otherwise required by applicable Law.

     Section 2.3 Termination of Agreements.

          (a) Except as set forth in Section 2.3(b), the HII Entities, on the one hand, and the New NGC
Entities, on the other hand, hereby terminate any and all agreements, arrangements, commitments or
understandings (including intercompany work orders), whether or not in writing, between or among
any HII Entity, on the one hand, and any New NGC Entity, on the other hand, effective as of the
Distribution. No such terminated agreement, arrangement, commitment or understanding (including
any provision thereof that purports to survive termination) shall be of any further force or effect
from and after the Distribution. Each party shall, at the reasonable request of any other party,
take, or cause to be taken, such other actions as may be necessary to effect the foregoing.

          (b) The provisions of Section 2.3(a) shall not apply to any of the following agreements,
arrangements, commitments or understandings (or to any of the provisions thereof):

               (i) this Agreement and the Ancillary Agreements (and each other agreement or instrument
expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of
the parties or any HII Entities and New NGC Entities);

               (ii) any agreements, arrangements, commitments or understandings to which any non-wholly owned
Subsidiary or non-wholly owned Affiliate of New NGC or HII, as the case may be, is a party (it
being understood that directors’ qualifying shares or similar interests will be disregarded for
purposes of determining whether a Subsidiary is wholly owned);

               (iii) any other agreements, arrangements, commitments or understandings that this Agreement or
any Ancillary Agreement expressly contemplates will survive the Distribution;

21

 

               (iv) any confidentiality or non-disclosure agreements among any members of either Group or
employees of any member of either Group, including any obligation not to disclose proprietary or
privileged information; and

               (v) any agreements, arrangements, commitments or understandings listed or described on
Schedule 2.3(b)(v).

          (c) Except as otherwise expressly and specifically provided in this Agreement or any Ancillary
Agreement, all intercompany receivables, payables, loans and other accounts between any New NGC
Entity, on the one hand, and any HII Entity, on the other hand, in existence as of immediately
prior to the Distribution and after giving effect to the Internal Reorganization shall be satisfied
and/or settled by the relevant members of the New NGC Group and the New HII Group no later than the
Distribution by (i) forgiveness by the relevant obligor or (ii) one or a related series of
repayments, distributions of and/or contributions to capital, in each case as determined by
Northrop Grumman.

     Section 2.4 Novation of Shipbuilding Liabilities.

          (a) Each of New NGC and HII, at the written request of the other party, shall use its
reasonable best efforts to obtain, or to cause to be obtained, any release, Consent, substitution
or amendment required to novate or assign all rights and obligations under any agreements, leases,
licenses and other obligations or Liabilities of any nature whatsoever that constitute Shipbuilding
Liabilities, or to obtain in writing the unconditional release of all parties to such arrangements
other than any HII Entities, so that, in any such case, HII and the other HII Entities will be
solely responsible for such Shipbuilding Liabilities; provided, however, that none
of the New NGC Entities or the HII Entities shall be obligated to pay any significant (relative to
the underlying agreement, lease, license or obligation) consideration or surrender, release or
modify any material rights or material remedies therefor to any third party from whom such
releases, Consents, substitutions and amendments are requested except as expressly set forth in
this Agreement or any Ancillary Agreement.

          (b) If New NGC or HII is unable to obtain, or to cause to be obtained, any required release,
Consent, substitution or amendment, the applicable New NGC Entity may continue to be bound by the
applicable underlying agreement, lease, license or other obligation or other Liabilities and,
unless not permitted by Law, HII shall, or shall cause another HII Entity to, as agent or
subcontractor for such New NGC Entity, pay, perform and discharge fully all the obligations or
other Liabilities of such New NGC Entity thereunder. HII shall indemnify each New NGC Indemnitee
and hold it harmless against any Liabilities arising in connection therewith. New NGC shall pay
and remit, or cause to be paid or remitted, to the applicable HII Entity, all money, rights and
other consideration received by any New NGC Entity (net of any applicable expenses) in respect of
such performance by such HII Entity (unless any such consideration is a Retained Asset). If and
when any such release, Consent, substitution or amendment shall be obtained or such agreement,
lease, license or other rights, obligations or other Liabilities shall otherwise become assignable
or able to be novated, New NGC shall thereafter assign, or cause to be

22

 

assigned, all the New NGC Entities’ rights, obligations and other Liabilities thereunder to
the applicable HII Entity without payment of any further consideration and the applicable HII
Entity shall, without the payment of any further consideration, assume such rights, obligations and
other Liabilities.

     Section 2.5 Novation of Retained Liabilities.

          (a) Each of New NGC and HII, at the written request of the other party, shall use its
reasonable best efforts to obtain, or to cause to be obtained, any release, Consent, substitution
or amendment required to novate or assign all rights and obligations under any agreements, leases,
licenses and other obligations or Liabilities of any nature whatsoever that constitute Retained
Liabilities, or to obtain in writing the unconditional release of all parties to such arrangements
other than any New NGC Entities, so that, in any such case, New NGC and the other New NGC Entities
will be solely responsible for such Retained Liabilities; provided, however, that
none of the New NGC Entities or the HII Entities shall be obligated to pay any significant
(relative to the underlying agreement, lease, license or obligation) consideration or surrender,
release or modify any material rights or material remedies therefor to any third party from whom
such releases, Consents, substitutions and amendments are requested except as expressly set forth
in this Agreement or any Ancillary Agreement.

          (b) If New NGC or HII is unable to obtain, or to cause to be obtained, any required release,
Consent, substitution or amendment, the applicable HII Entity may continue to be bound by the
applicable underlying agreement, lease, license or other obligation or other Liabilities and,
unless not permitted by Law or the terms thereof, New NGC shall, or shall cause another New NGC
Entity to, as agent or subcontractor for such HII Entity, pay, perform and discharge fully all the
obligations or other Liabilities of such HII Entity thereunder. New NGC shall indemnify each HII
Indemnitee and hold it harmless against any Liabilities arising in connection therewith. HII shall
pay and remit, or cause to be paid or remitted, to the applicable New NGC Entity, all money, rights
and other consideration received by any HII Entity (net of any applicable expenses) in respect of
such performance by such New NGC Entity (unless any such consideration is a Shipbuilding Asset).
If and when any such release, Consent, substitution, approval or amendment shall be obtained or
such agreement, lease, license or other rights, obligations or other Liabilities shall otherwise
become assignable or able to be novated, HII shall thereafter assign, or cause to be assigned, all
the HII Entities’ rights, obligations and other Liabilities thereunder to the applicable New NGC
Entity without payment of any further consideration and the applicable New NGC Entity shall,
without the payment of any further consideration, assume such rights, obligations and other
Liabilities.

     Section 2.6 Disclaimer of Representations and Warranties. Each of New NGC (on behalf
of itself and each other New NGC Entity) and HII (on behalf of itself and each other HII Entity)
understands and agrees that, except as expressly set forth herein or in any Ancillary Agreement, no
party (including its Affiliates) to this Agreement, any Ancillary Agreement or any other agreement
or document contemplated by this Agreement, any Ancillary Agreement or otherwise, is making any
representations or warranties relating in any way to the Assets, businesses or Liabilities
transferred or assumed as contemplated

23

 

hereby or thereby, to any Consent required in connection therewith, to the value or freedom
from any Security Interests of, or any other matter concerning, any Assets of such party, or to the
absence of any defenses or right of setoff or freedom from counterclaim with respect to any claim
or other Asset, including any accounts receivable, of any party, or to the legal sufficiency of any
assignment, document or instrument delivered hereunder to convey title to any Asset or thing of
value upon the execution, delivery and filing hereof or thereof. Except as may expressly be set
forth herein or in any Ancillary Agreement, (a) all such Assets are being transferred on an “as
is,” “where is” basis, (b) any implied warranty of merchantability, fitness for a specific purpose
or otherwise is hereby expressly disclaimed, (c) the respective transferees shall bear the economic
and legal risks that any conveyance shall prove to be insufficient to vest in the transferee good
and marketable title, free and clear of any Security Interest and (d) none of the New NGC Entities
or the HII Entities (including their Affiliates) or any other Person makes any representation or
warranty with respect to any information, documents or material made available in connection with
the Separation or the Distribution, or the entering into of this Agreement or any Ancillary
Agreement or the transactions contemplated hereby or thereby, except as expressly set forth in this
Agreement or any Ancillary Agreement.

     Section 2.7 Treatment of Cash.

          (a) Prior to the Distribution, each of the HII Entities shall make capital and other
expenditures and operate its cash management, accounts payable and receivables collection systems
in the ordinary course consistent with prior practice.

          (b) From the date of this Agreement until the HII Contribution, NGC (prior to the Holding
Company Reorganization) and New NGC (after the Holding Company Reorganization) shall be entitled to
use, retain or otherwise dispose of all cash generated by the Shipbuilding Business and the
Shipbuilding Assets in accordance with the ordinary course operation of NGC’s and New NGC’s
respective cash management systems. All such cash shall be a Retained Asset.

     Section 2.8 Replacement of Credit Support.

          (a) New NGC shall use reasonable best efforts to arrange, at its cost and expense and
effective at or prior to the Distribution, the replacement of all Credit Support Instruments
relating exclusively to the Retained Business and provided by or through NGC or any other member of
the HII Group exclusively for the benefit of any member of the New NGC Group (the “New NGC
Credit Support Instruments”) with alternate arrangements that do not require any credit support
from NGC or any other member of the HII Group, and shall use reasonable best efforts to obtain from
the beneficiaries of such New NGC Credit Support Instruments written releases indicating that NGC
or such other member of the HII Group will, effective upon the Distribution, have no liability with
respect to such New NGC Credit Support Instruments. In the event that New NGC is unable to obtain
any such alternative arrangements for any New NGC Credit Support Instrument prior to the
Distribution, it shall have responsibility for the payment and performance of the obligations
underlying such New NGC Credit Support Instrument.

24

 

          (b) HII shall use reasonable best efforts to arrange, at its cost and expense and effective at
or prior to the Distribution, the replacement of certain Credit Support Instruments identified on
Schedule 2.8(b) relating to the Shipbuilding Business and provided by or through NGC or any
member of the New NGC Group for the benefit of any member of the HII Group (other than NGC) (the
“HII Credit Support Instruments”) with alternate arrangements that do not require any
credit support from New NGC or any member of the New NGC Group, and shall use reasonable best
efforts to obtain from the beneficiaries of such HII Credit Support Instruments written releases
indicating that NGC or any member of the New NGC Group will, effective upon the Distribution, have
no liability with respect to such HII Credit Support Instruments. In the event that HII is unable
to obtain any such alternative arrangements for any HII Credit Support Instrument prior to the
Distribution, it shall have responsibility for the payment and performance of the obligations
underlying such HII Credit Support Instrument.

ARTICLE III

ACTIONS PENDING THE DISTRIBUTION

     Section 3.1 Actions Prior to the Distribution.

          (a) Subject to the conditions specified in Section 3.2 and subject to Section 4.3, each of the
parties shall use its reasonable best efforts to consummate the Distribution. Such actions shall
include those specified in this Section 3.1.

          (b) Prior to the Distribution, each of the parties will execute and deliver all Ancillary
Agreements to which it is a party, and will cause the other New NGC Entities and HII Entities, as
applicable, to execute and deliver any Ancillary Agreements to which such Persons are parties.

          (c) Prior to the Distribution, HII shall mail the Information Statement to the Record Holders.

          (d) HII shall prepare, file with the SEC and use its reasonable best efforts to cause to
become effective any registration statements or amendments thereto required to effect the
establishment of, or amendments to, any employee benefit and other plans necessary or appropriate
in connection with the transactions contemplated by this Agreement or any of the Ancillary
Agreements.

          (e) Each of the parties shall take all such actions as may be necessary or appropriate under
the securities or blue sky Laws of the states or other political subdivisions of the United States
or of other foreign jurisdictions in connection with the Distribution.

          (f) HII shall prepare and file, and shall use reasonable best efforts to have approved prior
to the Distribution, an application for the listing on the NYSE of the HII Common Stock to be
distributed in the Distribution, subject to official notice of listing.

          (g) Prior to the Distribution, the existing directors of HII shall duly elect the individuals
listed as members of the HII board of directors in the Information

25

 

Statement, and such individuals shall become the members of the HII board of directors
effective as of no later than immediately prior to the Distribution.

          (h) Prior to the Distribution, New NGC shall deliver or cause to be delivered to HII the
resignation from each applicable HII Entity, effective as of no later than immediately prior to the
Distribution, of each individual who will be an employee of any New NGC Entity after the
Distribution and who is an officer or director of any HII Entity immediately prior to the
Distribution.

          (i) Immediately prior to the Distribution, the Restated Certificate of Incorporation and
Restated Bylaws of HII, each in substantially the form filed as an exhibit to the Form 10, shall be
in effect.

          (j) The parties shall, subject to Section 4.3, take all reasonable steps necessary and
appropriate to cause the conditions set forth in Section 3.2 to be satisfied and to effect the
Distribution on the Distribution Date.

     Section 3.2 Conditions to Distribution. The obligations of the parties to consummate
the Distribution shall be conditioned on the satisfaction, or waiver by the Northrop Grumman Board,
of the following conditions:

          (a) The Northrop Grumman Board shall, in its sole and absolute discretion, have authorized and
approved the Separation and the Distribution and not withdrawn such authorization and approval.

          (b) The New NGC Board shall have declared the dividend of HII Common Stock to the Record
Holders.

          (c) Each Ancillary Agreement shall have been executed by each party thereto.

          (d) The SEC shall have declared the Form 10 effective, no stop order suspending the
effectiveness of the Form 10 shall be in effect, and no proceedings for such purpose shall be
pending before or threatened by the SEC.

          (e) The HII Common Stock shall have been accepted for listing on the NYSE or another national
securities exchange approved by the Northrop Grumman Board, subject to official notice of issuance.

          (f) The Internal Reorganization shall have been completed.

          (g) New NGC shall have received the IRS Ruling and the Opinion, each of which shall remain in
full force and effect, that the Holding Company Reorganization, the Internal Reorganization, and
the Distribution will qualify for Tax-Free Status.

          (h) HII shall have (i) entered into the HII Credit Facility, (ii) received the net proceeds
from the HII Debt and (iii) made the HII Contribution.

26

 

          (i) No order, injunction or decree that would prevent the consummation of the Distribution
shall be threatened, pending or issued (and still in effect) by any Governmental Authority of
competent jurisdiction, no other legal restraint or prohibition preventing the consummation of the
Distribution shall be in effect, and no other event outside the control of Northrop Grumman shall
have occurred or failed to occur that prevents the consummation of the Distribution.

          (j) No other events or developments shall have occurred prior to the Distribution that, in the
judgment of the Northrop Grumman Board, would result in the Distribution having a significant
adverse effect on Northrop Grumman or the Northrop Grumman Stockholders.

          (k) The actions set forth in Sections 3.1(c), (h) and (i) shall have been completed.

          (l) HII shall have delivered to New NGC a certificate signed by the chief financial officer of
HII, dated as of the Distribution Date, certifying that the HII Entities have complied with Section
2.7(a).

     The foregoing conditions may only be waived by the Northrop Grumman Board, in its sole and
absolute discretion, are for the sole benefit of Northrop Grumman and shall not give rise to or
create any duty on the part of the Northrop Grumman Board to waive or not waive such conditions or
in any way limit the right of termination of this Agreement set forth in Article IX or alter the
consequences of any such termination from those specified in Article IX. Any determination made by
the Northrop Grumman Board prior to the Distribution concerning the satisfaction or waiver of any
or all of the conditions set forth in this Section 3.2 shall be conclusive.

ARTICLE IV

THE DISTRIBUTION

     Section 4.1 The Distribution.

          (a) HII shall cooperate with Northrop Grumman to accomplish the Distribution and shall, at the
direction of Northrop Grumman, use its reasonable best efforts to promptly take any and all actions
necessary or desirable to effect the Distribution. Each of the parties will provide, or cause the
applicable member of its Group to provide, to the Agent all documents and information required to
complete the Distribution.

          (b) Subject to the terms and conditions set forth in this Agreement, (i) on or prior to the
Distribution Date, for the benefit of and distribution to the Record Holders, New NGC will deliver
to the Agent all of the issued and outstanding shares of HII Common Stock then owned by New NGC or
any other New NGC Entity and book-entry authorizations for such shares and (ii) on the Distribution
Date, New NGC shall instruct the Agent to distribute, by means of a pro rata dividend, to each
Record Holder (or such Record Holder’s bank or brokerage firm on such Record Holder’s behalf)
electronically, by direct registration in book-entry form, the number of whole shares of HII Common
Stock

27

 

to which such Record Holder is entitled based on the Distribution Ratio. The Distribution
shall be effective at 12:01 a.m. Eastern time on the Distribution Date. On or as soon as
practicable after the Distribution Date, the Agent will mail an account statement indicating the
number of shares of HII Common Stock that have been registered in book-entry form in the name of
each Record Holder.

          (c) With respect to the shares of HII Common Stock remaining with the Agent 180 days after the
Distribution Date, the Agent shall deliver any such shares as directed by HII, with the consent of
New NGC (which consent shall not be unreasonably withheld or delayed).

     Section 4.2 Fractional Shares. The Agent and New NGC shall, as soon as
practicable after the Distribution Date, (a) determine the number of whole shares and fractional
shares of HII Common Stock allocable to each Record Holder, (b) aggregate all such fractional
shares into whole shares and sell the whole shares obtained thereby in open market transactions at
then-prevailing trading prices on behalf of Record Holders that would otherwise be entitled to
fractional share interests and (c) distribute to each such Record Holder, or for the benefit of
each beneficial owner of fractional shares, such Record Holder’s or beneficial owner’s ratable
share of the net proceeds of such sales, based upon the average gross selling price per share of
HII Common Stock after making appropriate deductions for any amount required to be withheld under
applicable Tax Law and less any transfer Taxes. HII will be responsible for payment of any
brokerage fees associated with such sales. The Agent, in its sole discretion, will determine the
timing and method of selling such shares, the selling price of such shares and the broker-dealer to
which such shares will be sold; provided, however, that the designated
broker-dealer is not an Affiliate of New NGC or HII. Neither New NGC nor HII will pay any interest
on the proceeds from the sale of such shares.

     Section 4.3 Sole Discretion of the Northrop Grumman Board and New NGC Board.
Subject to the last sentence of this Section 4.3, the Northrop Grumman Board shall, in its sole and
absolute discretion, determine the Distribution Date and all terms of the Distribution, including
the form, structure and terms of any transactions and/or offerings to effect the Distribution and
the timing of and conditions to the consummation thereof. In addition, and notwithstanding
anything to the contrary set forth below, the Northrop Grumman Board, in its sole and absolute
discretion, may at any time and from time to time until the Distribution decide to abandon the
Distribution or modify or change the terms of the Distribution, including by accelerating or
delaying the timing of the consummation of all or part of the Distribution. The New NGC Board
shall determine the Record Date.

ARTICLE V

MUTUAL RELEASES; INDEMNIFICATION

     Section 5.1 Release of Pre-Distribution Claims.

          (a) Except (i) as provided in Section 5.1(c), (ii) as may be otherwise provided in this
Agreement or any Ancillary Agreement and (iii) for any matter for which
any HII Indemnitee is entitled to indemnification pursuant to this Article V, effective as of

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the Distribution, HII does hereby, for itself and each other HII Entity and their respective
Affiliates, predecessors, successors and assigns, and, to the extent HII legally may, all Persons
that at any time prior or subsequent to the Distribution have been stockholders, directors,
officers, members, agents or employees of HII or any other HII Entity (in each case, in their
respective capacities as such), remise, release and forever discharge each New NGC Entity, their
respective Affiliates, successors and assigns, and all Persons that at any time prior to the
Distribution have been stockholders, directors, officers, members, agents or employees of New NGC
or any other New NGC Entity (in each case, in their respective capacities as such), and their
respective heirs, executors, administrators, successors and assigns, from any and all Liabilities
whatsoever, whether at law or in equity, whether arising under any contract or agreement, by
operation of law or otherwise, existing or arising from or relating to any acts or events occurring
or failing to occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Distribution Date, whether or not known as of
the Distribution Date, including any claims with respect to the sufficiency or condition of the
Shipbuilding Assets or the allocation of Liabilities to the HII Group.

          (b) Except (i) as provided in Section 5.1(c), (ii) as may be otherwise provided in this
Agreement or any Ancillary Agreement and (iii) for any matter for which any New NGC Indemnitee is
entitled to indemnification pursuant to this Article V, New NGC does hereby, for itself and each
other New NGC Entity and their respective Affiliates, successors and assigns, and, to the extent
New NGC legally may, all Persons that at any time prior to the Distribution have been stockholders,
directors, officers, members, agents or employees of New NGC or any other New NGC Entity (in each
case, in their respective capacities as such), remise, release and forever discharge each HII
Entity, their respective Affiliates, successors and assigns, and all Persons that at any time prior
to the Distribution have been stockholders, directors, officers, members, agents or employees of
HII or any other HII Entity (in each case, in their respective capacities as such), and their
respective heirs, executors, administrators, successors and assigns, from any and all Liabilities
whatsoever, whether at law or in equity, whether arising under any contract or agreement, by
operation of law or otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged
to have existed on or before the Distribution Date, whether or not known as of the Distribution
Date.

          (c) Nothing contained in Section 5.1(a) or 5.1(b) shall impair any right of any Person to
enforce this Agreement, any Ancillary Agreement, including the applicable Schedules hereto and
thereto, or any arrangement that is not to terminate as of the Distribution, as specified in
Section 2.3(b). Nothing contained in Section 5.1(a) or 5.1(b) shall release any Person from:

               (i) any Liability provided in or resulting from any agreement among any New NGC Entities and
any HII Entities that is not to terminate as of the Distribution, as specified in Section 2.3(b),
or any other Liability that is not to terminate as of the Distribution, as specified in Section
2.3(b);

29

 

               (ii) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to
the Group of which such Person is a member in accordance with, or any other Liability of any member
of any Group under, this Agreement or any Ancillary Agreement; or

               (iii) any Liability the release of which would result in the release of any Person other than
a Person released pursuant to this Section 5.1; provided that the parties agree not to bring suit
or permit any of their Subsidiaries to bring suit against any Person with respect to any Liability
to the extent that such Person would be released with respect to such Liability by this Section 5.1
but for the provisions of this clause (iii).

          (d) HII shall not make, and shall not permit any other HII Entity to make, any claim or
demand, or commence any Action asserting any claim or demand, including any claim for
indemnification, against any New NGC Entity, or any other Person released pursuant to Section
5.1(a), with respect to any Liabilities released pursuant to Section 5.1(a). New NGC shall not,
and shall not permit any other New NGC Entity, to make any claim or demand, or commence any Action
asserting any claim or demand, including any claim for indemnification, against any HII Entity, or
any other Person released pursuant to Section 5.1(b), with respect to any Liabilities released
pursuant to Section 5.1(b).

          (e) At any time, at the request of any other party, each party shall cause each member of its
respective Group to execute and deliver releases in form reasonably satisfactory to the other party
reflecting the provisions of this Section 5.1.

     Section 5.2 Indemnification by HII and NGSB. Subject to Section 5.4, following the
Distribution, HII and NGSB shall jointly and severally indemnify, defend and hold harmless New NGC,
each New NGC Entity and each of their respective current, former and future directors, officers and
employees, and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the “New NGC Indemnitees”), from and against any and all Liabilities of the
New NGC Indemnitees relating to, arising out of or resulting from any of the following items
(without duplication):

          (a) the Shipbuilding Liabilities; and

          (b) any breach by any HII Entity of this Agreement or any of the Ancillary Agreements (other
than the Tax Matters Agreement and the Ingalls Indemnity Agreement, which shall be subject to the
provisions contained therein).

     Section 5.3 Indemnification by New NGC and NGSC. Subject to Section 5.4, following
the Distribution, New NGC and NGSC shall jointly and severally indemnify, defend and hold harmless
HII, each HII Entity and each of their respective current, former and future directors, officers
and employees, and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the “HII Indemnitees”), from and against any and all Liabilities of the HII
Indemnitees relating to, arising out of or resulting from any of the following items (without
duplication):

          (a) the Retained Liabilities; and

30

 

          (b) any breach by any New NGC Entity of this Agreement or any of the Ancillary Agreements
(other than the Tax Matters Agreement and the Ingalls Indemnity Agreement, which shall be subject
to the provisions contained therein).

     Section 5.4 Indemnification Obligations Net of Insurance Proceeds and Other Amounts.

          (a) The parties intend that any Liability subject to indemnification or reimbursement pursuant
to this Agreement will be net of Insurance Proceeds and other amounts received that actually reduce
the amount of the Liability for which indemnification is sought. Accordingly, the amount which any
party (an “Indemnifying Party”) is required to pay to any Person entitled to
indemnification or reimbursement under this Agreement (an “Indemnitee”) will be reduced by
any Insurance Proceeds and other amounts theretofore actually recovered by or on behalf of the
Indemnitee in reduction of the related Liability. If an Indemnitee receives a payment (an
“Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of
any Liability and subsequently receives Insurance Proceeds or other amounts therefor, then the
Indemnitee will promptly pay to the Indemnifying Party an amount equal to the excess of the
Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the
Insurance Proceeds or other amounts had been received, realized or recovered before the Indemnity
Payment was made.

          (b) In the case of any Shared Liability, any Insurance Proceeds actually received, realized or
recovered by any party in respect of the Shared Liability will be shared between the New NGC Group
and the HII Group in accordance with their respective Applicable Proportions, regardless of which
Group may actually receive, realize or recover such Insurance Proceeds.

          (c) An insurer that would otherwise be obligated to defend or make payment in response to any
claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the
indemnification provisions hereof, have any subrogation rights with respect thereto, it being
expressly understood and agreed that no insurer or any other third party shall be entitled to a
“windfall” (i.e., a benefit it would not be entitled to receive in the absence of the
indemnification provisions of this Agreement) by virtue of the indemnification provisions hereof.

     Section 5.5 Third-Party Claims.

          (a) If an Indemnitee shall receive notice or otherwise learn of the assertion by a Person
(including any Governmental Authority) that is not a New NGC Entity or a HII Entity of any claim
(including environmental claims and demands or requests for investigation or remediation of
contamination) or of the commencement by any such Person of any Action with respect to which an
Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to this
Agreement or any Ancillary Agreement (collectively, a “Third-Party Claim”), such Indemnitee
shall give such Indemnifying Party written notice thereof as soon as promptly practicable, but no
later than 20 days after becoming aware of such Third-Party Claim. Any such notice shall

31

 

describe the Third-Party Claim in reasonable detail and contain written correspondence
received from the third party that relates to the Third-Party Claim. Notwithstanding the
foregoing, the failure of any Indemnitee to give notice as provided in this Section 5.5(a) shall
not relieve the related Indemnifying Party of its obligations under this Article V, except to the
extent that such Indemnifying Party is prejudiced by such failure to give notice.

          (b) With respect to any Third-Party Claim that is or may be a Shared Liability:

               (i) If the Indemnifying Party receiving any notice pursuant to Section 5.5(a) or the
Indemnitee believes that the Third-Party Claim is or may be a Shared Liability, such Indemnifying
Party or Indemnitee may make a Determination Request within 30 days after the notice given by the
Indemnitee to the Indemnifying Party pursuant to Section 5.5(a). Upon the making of a
Determination Request, the applicable Indemnitee shall assume the defense of such Third-Party Claim
until a determination as to whether such Third-Party Claim is a Shared Liability. In the event of
such assumption of defense, such Indemnitee shall be entitled to reimbursement of all the costs and
expenses of such defense once a final determination or acknowledgement is made that such Indemnitee
is entitled to indemnification with respect to such Third-Party Claim; provided, that if
such Third-Party Claim is determined to be a Shared Liability, such costs and expenses shall be
shared as provided in Section 5.5(b)(ii). If it is determined by New NGC and HII or by the
Allocation Committee that the Third-Party Claim is a Shared Liability, the Managing Party (as
determined in accordance with Section 6.1(a)) shall assume the defense of such Third-Party Claim as
soon as reasonably practicable following such determination.

               (ii) A party’s costs and expenses of assuming the defense of (subject to Section 5.5(b)(i)),
and/or seeking to settle or compromise (subject to Section 5.5(b)(iv)), any Third-Party Claim that
is a Shared Liability shall be included in the calculation of the amount of the applicable Shared
Liability in determining the obligations of the parties with respect thereto pursuant to Section
6.4.

               (iii) The Managing Party shall consult with the Non-Managing Party prior to taking any action
with respect to any Third-Party Claim that is a Shared Liability if the Managing Party’s action
could reasonably be expected to have a significant adverse impact (financial or non-financial) on
the Non-Managing Party, including a significant adverse impact on the rights, obligations,
operations, standing or reputation of the Non-Managing Party (or its Subsidiaries or Affiliates),
and the Managing Party shall not take such action without the prior written consent of the
Non-Managing Party, which consent shall not be unreasonably withheld or delayed.

               (iv) The Managing Party shall promptly give notice to the Non-Managing Party regarding the
substance of any settlement related discussions with respect to any Third-Party Claim that is a
Shared Liability if (A) the Non-Managing Party is required to share in any significant aspect of
the costs and expenses, proceeds or obligations resulting from such settlement or (B) the
settlement can reasonably be expected to have a significant impact (financial or nonfinancial) on
the Non-Managing Party. In

32

 

such instances, the Managing Party shall not settle such Third-Party Claim without the prior
written consent of the Non-Managing Party, which consent shall not be unreasonably withheld or
delayed.

          (c) With respect to any Third-Party Claim that is not a Shared Liability:

               (i) Unless the parties otherwise agree, within 30 days after the receipt of notice from an
Indemnitee in accordance with Section 5.5(a), an Indemnifying Party shall defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, may seek to settle or compromise),
at such Indemnifying Party’s own cost and expense and by such Indemnifying Party’s own counsel, any
Third-Party Claim that is not a Shared Liability. The applicable Indemnitee shall have the right
to employ separate counsel and to participate in (but not control) the defense, compromise, or
settlement thereof, but the fees and expenses of such counsel shall be the expense of such
Indemnitee. Notwithstanding the foregoing, the Indemnifying Party shall be liable for the fees and
expenses of counsel employed by the Indemnitee (A) for any period during which the Indemnifying
Party has not assumed the defense of such Third-Party Claim (other than during any period in which
the Indemnitee shall have failed to give notice of the Third-Party Claim in accordance with Section
5.5(a)) or (B) to the extent that such engagement of counsel is as a result of a conflict of
interest, as reasonably determined by the Indemnitee acting in good faith.

               (ii) No Indemnifying Party shall consent to entry of any judgment or enter into any settlement
of any Third-Party Claim that is not a Shared Liability without the consent of the applicable
Indemnitee; provided, however, that such Indemnitee shall be required to consent to
such entry of judgment or to such settlement that the Indemnifying Party may recommend if the
judgment or settlement (A) contains no finding or admission of any violation of Law or any
violation of the rights of any Person, (B) involves only monetary relief which the Indemnifying
Party has agreed to pay and could not reasonably be expected to have a significant adverse impact
(financial or non-financial) on the Indemnitee, including a significant adverse impact on the
rights, obligations, operations, standing or reputation of the Indemnitee (or any of its
Subsidiaries or Affiliates), and (C) includes a full and unconditional release of the Indemnitee.
Notwithstanding the foregoing, in no event shall an Indemnitee be required to consent to any entry
of judgment or settlement if the effect thereof is to permit any injunction, declaratory judgment,
other order or other nonmonetary relief to be entered, directly or indirectly, against any
Indemnitee.

          (d) Whether or not the Indemnifying Party assumes the defense of a Third-Party Claim, no
Indemnitee shall admit any liability with respect to, or settle, compromise or discharge, such
Third-Party Claim without the Indemnifying Party’s prior written consent, which consent shall not
be unreasonably withheld or delayed.

          (e) Notwithstanding anything to the contrary in this Section 5.5 or in Article VI, the
additional provisions of the Litigation Management Agreement shall govern with respect to all
Third-Party Claims (including Shared Actions) specifically set forth therein or covered by the
terms thereof, and the Litigation Management Agreement shall

33

 

control over any inconsistent provisions of this Section 5.5 and Article VI as to such
Third-Party Claims.

     Section 5.6 Additional Matters.

          (a) Any claim on account of a Liability that does not result from a Third-Party Claim shall be
timely asserted by written notice given by the Indemnitee to the related Indemnifying Party. Such
Indemnifying Party shall have a period of 30 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 30-day period, such
Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If
such Indemnifying Party does not respond within such 30-day period or rejects such claim in whole
or in part, such Indemnitee shall be free to pursue remedies as specified by this Agreement and the
Ancillary Agreements.

          (b) In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in
connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall
stand in the place of such Indemnitee as to any events or circumstances in respect of which such
Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any
claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and
expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

          (c) In the event of an Action in which the Indemnifying Party is not a named defendant, if
either the Indemnitee or the Indemnifying Party shall so request, the parties shall endeavor to
substitute the Indemnifying Party for the named defendant, if reasonably practicable. If such
substitution or addition cannot be achieved or is not requested, the named defendant shall allow
the Indemnifying Party to manage the Action as set forth in this Agreement and the Litigation
Management Agreement and the Indemnifying Party shall fully indemnify the named defendant against
all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’
fees, experts’ fees and all other external expenses, and the allocated costs of in-house counsel
and other personnel), the costs of any judgment or settlement, and the cost of any interest or
penalties relating to any judgment or settlement.

     Section 5.7 Remedies Cumulative. The remedies provided in this Article V shall be
cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of
any and all other remedies against any Indemnifying Party.

     Section 5.8 Survival of Indemnities. The rights and obligations of each of New NGC,
NGSC, HII, NGSB and their respective Indemnitees under this Article V shall survive the sale or
other transfer by any party of any Assets or businesses or the assignment by it of any Liabilities.

     Section 5.9 Limitation on Liability. Except as may expressly be set forth in this
Agreement, none of New NGC, NGSC, HII, NGSB or any other member of either Group

34

 

shall in any event have any Liability to the other or to any other member of the other’s
Group, or to any other New NGC Indemnitee or HII Indemnitee, as applicable, under this Agreement
(a) to the extent that any such Liability resulted from any willful violation of Law or fraud by
the party seeking indemnification or (b) for any indirect, punitive or consequential damages.
Notwithstanding the foregoing, the provisions of this Section 5.9 shall not limit an Indemnifying
Party’s indemnification obligations with respect to any Liability that any Indemnitee may have to
any third party not affiliated with any member of the New NGC Group or the HII Group.

ARTICLE VI

SHARED GAINS AND SHARED LIABILITIES

     Section 6.1 Managing Party.

          (a) With respect to any Shared Gain or Shared Liability, either HII or New NGC shall be the
“Managing Party.” With respect to any Shared Gain identified on Schedule 1.1(a)(2)
or any Shared Liability identified on Schedule 1.1(a)(1), the Managing Party shall be the
party with the higher Applicable Proportion as set forth on such Schedule, and, with respect to
specified Shared Actions under the Litigation Management Agreement, the Managing Party shall be as
set forth therein. In all other cases, the Managing Party shall be selected by the Allocation
Committee in accordance with Sections 6.1(b) and 6.2.

          (b) In determining which party shall be the Managing Party, the Allocation Committee shall
consider as the primary factor in such a determination which party is subject to the greater
financial, operational and reputational risk or exposure in connection with such Shared Gain or
Shared Liability, including the relative Applicable Proportion of each Group with respect to such
Shared Gain or Shared Liability. The Allocation Committee shall also consider such other factors
as the Allocation Committee deems appropriate, including if applicable, which party has control
over the potentially relevant documentation and possible witnesses with respect to such Shared Gain
or Shared Liability.

     Section 6.2 Allocation Committee.

          (a) New NGC and HII will form the Allocation Committee for the following purposes:

               (i) resolving whether (A) any claim or right is a Shared Gain or (B) any Liability is a Shared
Liability, in each case if not otherwise agreed between New NGC and HII;

               (ii) except with respect to the matters described on Schedule 1.1(a)(1) or
Schedule 1.1(a)(2), determining the Applicable New NGC Proportion and the Applicable HII
Proportion of any Shared Gains and Shared Liabilities; and

35

 

               (iii) determining whether HII or New NGC shall be the Managing Party of any Shared Gain or
Shared Liability.

          (b) New NGC and HII shall refer (i) any Shared Liability not identified on Schedule
1.1(a)(1) and any Shared Gain not identified on Schedule 1.1(a)(2) or in the Litigation
Management Agreement to the Allocation Committee to determine the Applicable New NGC Proportion and
the Applicable HII Proportion of such Shared Gain or Shared Liability, and the Managing Party of
such Shared Gain or Shared Liability, and (ii) any potential Shared Gains or Shared Liabilities
that New NGC and HII are not able to agree are Shared Gains or Shared Liabilities to the Allocation
Committee for resolution of the status thereof. If the Allocation Committee reaches a
determination (which shall be made within 30 days after such referral on a matter submitted to the
Allocation Committee by any of New NGC or HII), then that determination shall be binding on New NGC
and HII and their respective successors and assigns.

          (c) In the event that the Allocation Committee cannot reach a determination within 30 days
after the referral pursuant to Section 6.2(b) as to (i) the appropriate allocation of Shared Gains
or Shared Liabilities between the New NGC Group and the HII Group, (ii) the nature or status of any
such Shared Liabilities or Shared Gains or (iii) the Managing Party of any such Shared Liabilities
or Shared Gains or any other matter under consideration by the Allocation Committee, then the
procedures set forth in Article X of this Agreement shall govern.

     Section 6.3 Shared Gains.

          (a) If either HII or New NGC becomes aware of any claim or right that may reasonably be
expected to be a Shared Gain, it shall notify the other party in writing as soon as promptly
practicable, but no later than 20 days after becoming aware of such potential Shared Gain, which
notice shall describe the potential Shared Gain in reasonable detail. Such other party may make a
Determination Request within 30 days after receipt of such notice.

          (b) Any benefit that may be received from any Shared Gain shall be shared between New NGC and
HII in proportion to the Applicable New NGC Proportion and the Applicable HII Proportion,
respectively, and shall be paid in accordance with Section 6.5. The Managing Party of any Shared
Gain shall have the authority to commence, prosecute, settle, manage, waive, release, discharge and
otherwise determine all matters with respect to such Shared Gain. The Non-Managing Party of such
Shared Gain shall not take, or permit any member of its Group to take, any action (including
commencing any claim) that would interfere with such rights and powers of the Managing Party,
except as required by applicable Law or contract (in which case the Non-Managing Party shall
provide advance notice of such action to the Managing Party and shall give the Managing Party the
opportunity to consult with respect to such action). The Managing Party of such Shared Gain shall
use its reasonable best efforts to notify the Non-Managing Party promptly in the event that it
commences an Action with respect to a Shared Gain. The Managing Party of any Shared Gain may elect
not to pursue such Shared Gain for any reason whatsoever (including a different assessment of the
merits of any Action, claim or

36

 

right than the other party or any business reasons that are in the
best interests of the Managing Party or a member of the Managing Party’s Group, without regard to
the best interests of any member of the other Group) and no member of the Managing Party’s
Group with a majority interest in such Shared Gain shall have any liability to any Person
(including any member of the other Group) as a result of any such determination. In the event that
the Managing Party of any Shared Gain elects not to pursue such Shared Gain, the Non-Managing Party
may request in writing to the Managing Party that the Non-Managing Party have the right to pursue
such Shared Gain on behalf of the Non-Managing Party and the Managing Party (in which case, the
Non-Managing Party shall be treated as the Managing Party for purposes of such Shared Gain);
provided, however, that the Managing Party may refuse such request in its sole
discretion.

          (c) Upon the making of a Determination Request, New NGC alone may, but shall not be obligated
to, commence prosecution or other assertion of the claim or right that is subject to such
Determination Request pending resolution of the status of such claim or right. In the event that
New NGC commences any such prosecution or assertion and, upon resolution of the Determination
Request, it is determined hereunder that any such claim or right of HII is not a Shared Gain or
that HII is the Managing Party of such Shared Gain, New NGC shall discontinue the prosecution or
assertion of such claim or right and transfer the control thereof to HII as soon as reasonably
practicable. In such event, if HII elects not to continue the prosecution of such claim or right,
HII will reimburse New NGC for all costs and expenses incurred prior to resolution of such dispute
in the prosecution or assertion of such claim or right.

     Section 6.4 Shared Liabilities. Each of New NGC and HII shall be responsible for its
Applicable Proportion of any Shared Liability. The Managing Party shall be responsible for
managing, and shall have the authority to manage, the defense or prosecution, as applicable, and
resolution of a Shared Liability. It shall not be a defense to any obligations by any party to pay
any amount in respect of any Shared Liability that such party was not consulted in the response to
or defense thereof (except to the extent such consultation was required under this Agreement or the
Litigation Management Agreement), that such party’s views or opinions as to the conduct of such
response to or defense or the reasonableness of any settlement were not accepted or adopted, that
such party does not approve of the quality or manner of the response to or defense thereof or that
such Shared Liability was incurred by reason of a settlement rather than by a judgment or other
determination of liability (even if, subject to Section 5.5(b)(iv) and the applicable provisions of
the Litigation Management Agreement, such settlement was effected without the consent or over the
objection of such party).

     Section 6.5 Payments. Any amount owed in respect of (a) any Shared Liabilities
(including reimbursement for the cost or expense of defense of any Third-Party Claim that is a
Shared Liability) or (b) any Shared Gains (including reimbursement for the costs or expenses to
commence, prosecute or settle matters with respect to a Shared Gain), pursuant to this Article VI
shall be remitted within 30 days after the party entitled to such amount provides an invoice
(including reasonable supporting information with respect thereto) to the party owing such amount;
provided, however, that the Applicable

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Proportion of any amounts recovered with
respect to any Shared Gain or Shared Liability shall be payable within 30 days after receipt
thereof by the party recovering such amount.

ARTICLE VII

EXCHANGE OF INFORMATION; CONFIDENTIALITY

     Section 7.1 Agreement for Exchange of Information.

          (a) Except in the case of an adversarial Action or threatened adversarial Action related to a
request hereunder by any member of either the New NGC Group or the HII Group against any member of
the other Group (which shall be governed by such discovery rules as may be applicable thereto), and
subject to Section 7.1(b), each of New NGC and HII, on behalf of the members of its respective
Group, shall use reasonable best efforts to provide (except as otherwise provided in this Agreement
or any Ancillary Agreement, at the sole cost and expense of the requesting party), or cause to be
provided, to the other Group, at any time before or after the Distribution, as soon as reasonably
practicable after written request therefor, any Information in the possession or under the control
of the members of such respective Group that the requesting party reasonably requests (i) in
connection with reporting, disclosure, filing or other requirements imposed on the requesting party
(including under applicable securities, defense contracting or Tax Laws) by a Governmental
Authority having jurisdiction over the requesting party, (ii) for use in any other judicial,
regulatory, administrative, Tax, insurance or other proceeding or in order to satisfy audit,
accounting, claims, regulatory, investigation, litigation, Tax or other similar requirements, or
(iii) to comply with its obligations under this Agreement or any Ancillary Agreement. The
receiving party shall use any Information received pursuant to this Section 7.1(a) solely to the
extent reasonably necessary to satisfy the applicable obligations or requirements described in the
immediately preceding sentence and shall otherwise take reasonable steps to protect such
Information. Nothing in this Section 7.1 shall be construed as obligating a party to create
Information not already in its possession or control.

          (b) In the event that any party determines that the exchange of any Information pursuant to
Section 7.1(a) is reasonably likely to violate any Law or binding agreement, or waive or jeopardize
any attorney-client privilege, or attorney work product protection, such party shall not be
required to provide access to or furnish such Information to the other party; provided,
however, that the parties shall take all reasonable measures to permit compliance with
Section 7.1(a) in a manner that avoids any such harm or consequence. New NGC and HII intend that
any provision of access to or the furnishing of Information that would otherwise be within the
ambit of any legal privilege shall not operate as a waiver of such privilege.

          (c) After the Distribution, each of New NGC and HII shall maintain in effect systems and
controls reasonably intended to enable the members of the other Group to satisfy their respective
known reporting, accounting, disclosure, audit and other obligations.

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     Section 7.2 Ownership of Information. Any Information owned by a member of one Group
that is provided to a requesting party pursuant to Section 7.1 shall be deemed to remain the
property of the providing party. Except as specifically set forth herein, nothing
contained in this Agreement shall be construed as granting or conferring rights of license or
otherwise in any such Information.

     Section 7.3 Compensation for Providing Information. The party requesting Information
pursuant to Section 7.1 agrees to reimburse the party providing such Information for the reasonable
costs, if any, of creating, gathering and copying such Information, to the extent that such costs
are incurred for the benefit of the requesting party. Except as may be otherwise specifically
provided elsewhere in this Agreement or in any other agreement between the parties, such costs
shall be computed in accordance with the providing party’s standard methodology and procedures.

     Section 7.4 Record Retention. Except for the matters addressed specifically in
Section 8.7, to facilitate the possible exchange of Information pursuant to this Article VII and
other provisions of this Agreement from and after the Distribution, each of the parties agrees to
use reasonable best efforts to retain all Information in accordance with its record retention
policy as in effect immediately prior to the Distribution or as modified in good faith thereafter;
provided, however, that to the extent any Ancillary Agreement provides for a longer
period of retention of certain Information, such longer period shall control. Each party agrees to
retain any Information that, prior to the Distribution, is subject to a subpoena or a “do not
destroy” notice issued by NGC or any of its Subsidiaries prior to the Distribution until such
subpoena or notice is no longer applicable to such Information.

     Section 7.5 Limitation of Liability. No party shall have any liability to any other
party in the event that any Information exchanged or provided pursuant to this Agreement that is an
opinion, estimate or forecast, or that is based on an opinion, estimate or forecast, is found to be
inaccurate, in the absence of willful misconduct by the party providing such Information. No party
shall have any liability to any other party if any Information is destroyed after reasonable best
efforts by such party to comply with the provisions of Section 7.4.

     Section 7.6 Other Agreements Providing for Exchange of Information. The rights and
obligations granted under this Article VII shall be subject to any specific limitations,
qualifications or additional provisions on the sharing, exchange or confidential treatment of
Information set forth in any Ancillary Agreement.

     Section 7.7 Cooperation.

          (a) From and after the Distribution, except in the case of an adversarial Action or threatened
adversarial Action by any member of either the New NGC Group or the HII Group against any member of
the other Group (which shall be governed by such discovery rules as may be applicable thereto),
each party, upon reasonable written request of the other party, shall use reasonable efforts to
cooperate and consult in good faith with the other party to the extent such cooperation and
consultation is reasonably necessary with respect to (i) any Action, (ii) this Agreement or any of
the Ancillary Agreements or any of

39

 

the transactions contemplated hereby or thereby or (iii) any
audit, investigation or any other legal requirement, and, upon reasonable written request of the
other party, shall use reasonable efforts to make available to such other party the former, current
and future
directors, officers, employees, other personnel and agents of the members of its respective
Group (whether as witnesses or otherwise).

          (b) Notwithstanding the foregoing, Section 7.7(a) shall not require a party to take any step
that would significantly interfere, or that such party reasonably determines could significantly
interfere, with its business.

          (c) Except in the case of any Assigned Action or Shared Action, the requesting party shall
bear all costs and expenses in connection therewith.

          (d) The obligations set forth in this Section 7.7 shall survive until the tenth anniversary
thereof, except in the case of any Assigned Action or Shared Action, in which case such obligations
shall survive until the final resolution of such Actions.

     Section 7.8 Confidentiality.

          (a) Except as provided in Section 8.7 and subject to Section 7.9, each of New NGC and HII, on
behalf of itself and each member of its Group, shall hold, and shall cause its respective
directors, officers, employees, agents, accountants, counsel and other advisors and representatives
to hold, in strict confidence and not release or disclose, with at least the same degree of care,
but no less than a reasonable degree of care, that it applies to its own business sensitive and
proprietary information, all Information concerning the other Group or its business that is either
in its possession (including Information in its possession prior to the Distribution) or furnished
by any member of such other Group or its respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives at any time pursuant to this Agreement,
any Ancillary Agreement or otherwise, and shall not use any such Information other than for such
purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the
extent that such Information is (i) in the public domain through no fault of such party or any
member of such Group or any of their respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives, (ii) later lawfully acquired from
other sources by such party (or any member of such party’s Group), which sources are not themselves
bound by a confidentiality obligation, or (iii) independently generated without reference to any
proprietary or confidential Information of the disclosing party or its Group.

          (b) Except as provided in Section 8.7, no receiving party shall release or disclose, or permit
to be released or disclosed, any such Information concerning the other Group to any other Person,
except its directors, officers, employees, agents, accountants, counsel and other advisors and
representatives who need to know such Information (who shall be advised of their obligations
hereunder with respect to such Information), except in compliance with Section 7.9. Without
limiting the foregoing, when any Information concerning the other Group or its business is no
longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each
disclosing party will,

40

 

promptly after the request of the receiving party, either return to the
disclosing party all Information in a tangible form (including all copies thereof and all notes,
extracts or
summaries based thereon) or certify to the disclosing party that it has destroyed such
Information (and such copies thereof and such notes, extracts or summaries based thereon).

     Section 7.9 Protective Arrangements. Except as provided in Section 8.7, in the event
that any party or any member of its Group either determines on the advice of its counsel that it
should disclose any Information pursuant to applicable Law or receives any demand under lawful
process or from any Governmental Authority or properly constituted arbitral authority to disclose
or provide Information of any other party (or any member of any other party’s Group) that is
subject to the confidentiality provisions hereof, the Person required to disclose the Information
shall give the applicable Person prompt, and to the extent reasonably practicable, prior written
notice of such disclosure and an opportunity to contest such disclosure, and shall use reasonable
best efforts to cooperate, at the expense of the requesting Person, in seeking any reasonable
protective arrangements requested by such Person. In the event that such appropriate protective
arrangement or order or other remedy is not obtained, the Person that is required to disclose such
Information shall furnish, or cause to be furnished, only that portion of such Information that is
legally required to be disclosed and shall use reasonable best efforts to ensure that confidential
treatment is accorded such Information. This Section 7.9 shall not apply to the disclosure of any
Information to any Governmental Authority that is reasonably necessary to respond to any inquiry by
any Governmental Authority.

ARTICLE VIII

FURTHER ASSURANCES AND ADDITIONAL COVENANTS

     Section 8.1 Further Assurances.

          (a) In addition to the actions specifically provided for elsewhere in this Agreement, each of
the parties shall use its reasonable best efforts, prior to, on and after the Distribution Date, to
take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably
necessary, proper or advisable under applicable Law, regulations and agreements to consummate and
make effective the transactions contemplated by this Agreement and the Ancillary Agreements.

          (b) Without limiting the foregoing, prior to, on and after the Distribution Date, each party
shall cooperate with the other parties, and without any further consideration, but at the expense
of the requesting party, to (i) execute and deliver, or use its reasonable best efforts to cause to
be executed and delivered, all instruments, including any instruments of conveyance, assignment and
transfer as such party may be reasonably requested to execute and deliver to the other party, (ii)
make, or cause to be made, all filings with, and to obtain, or cause to be obtained, all consents,
approvals or authorizations of, any Governmental Authority or any other Person under any permit,
license, agreement, indenture or other instrument, (iii) seek, obtain, or cause to be obtained, any
Governmental Approvals or other Consents required to effect the Separation or the Distribution and
(iv) take all such other actions as such party may reasonably be requested to take by any other
party from time to time, consistent with the terms of this

41

 

Agreement and the Ancillary Agreements,
in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements
and the transfers of the
Shipbuilding Assets and the Retained Assets and the assignment and assumption of the
Shipbuilding Liabilities and the Retained Liabilities and the other transactions contemplated
hereby and thereby. Without limiting the foregoing, each party will, at the reasonable request,
cost and expense of any other party, take such other actions as may be reasonably necessary to vest
in such other party good and marketable title, if and to the extent it is practicable to do so.

          (c) On or prior to the Distribution Date, New NGC and HII in their respective capacities as
direct and indirect stockholders of their respective Subsidiaries, shall each ratify any actions
that are reasonably necessary or desirable to be taken by New NGC and HII or any other Subsidiary
of New NGC, as the case may be, to effectuate the transactions contemplated by this Agreement.

          (d) The parties agree to cooperate, both prior to and after the Distribution, and use
reasonable best efforts to take all acts reasonably necessary to accomplish the registration and
transfer, to the extent transferable and to the extent that any registration or transfer is
required in connection with the Distribution, of any export or import license, permit, technical
assistance agreement, manufacturing license agreement and other authorization utilized by either
Group, including those granted under the U.S. International Traffic in Arms Regulations, the U.S.
Export Administration Regulations, the U.S. Customs and Border Protection Regulation and foreign
export/import Laws, as applicable.

     Section 8.2 Amendment to NGC Certificate of Incorporation. As promptly as practicable
(and in any event within five Business Days) after the Holding Company Reorganization, NGC shall
approve an amendment to its Certificate of Incorporation (as amended in the Holding Company
Reorganization) to eliminate the requirement for the Northrop Grumman Stockholders to approve
certain actions by or involving NGC as required by Section 251(g) of the Delaware General
Corporation Law (the “NGC Charter Amendment”) and obtain the approval of HII, as sole
stockholder of NGC, of the NGC Charter Amendment. New NGC shall use its reasonable best efforts to
(a) include in the proxy statement for the 2012 annual meeting of Northrop Grumman Stockholders (or
any earlier meeting of such stockholders as determined by the Northrop Grumman Board) a proposal to
approve the NGC Charter Amendment (the “NGC Charter Amendment Proposal”), along with a
recommendation of the Northrop Grumman Board that Northrop Grumman Stockholders approve the NGC
Charter Amendment Proposal, and (b) solicit the approval of the Northrop Grumman Stockholders of
the NGC Charter Amendment Proposal. In the event that the NGC Charter Amendment Proposal is not
approved at such annual meeting, New NGC shall use its reasonable best efforts to obtain the
approval of the NGC Charter Amendment Proposal at each subsequent annual meeting of Northrop
Grumman Stockholders until such approval is obtained.

     Section 8.3 Credit Support. Upon a Change of Control Triggering Event prior to the
fifth anniversary of the Distribution, HII promptly shall provide notice to New NGC describing in
reasonable detail the circumstances surrounding the Change of Control

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Triggering Event.
Immediately after such Change of Control Triggering Event, HII shall provide credit support in the
form of one or more standby letters of credit in an amount
equal to $250 million (the other terms and provisions of which shall be reasonably
satisfactory to New NGC) to support HII’s obligations under Section 5.2.

     Section 8.4 Non-Compete.

          (a) For a period of one year following the Distribution, HII shall not, and shall cause the
other members of the HII Group not to, directly or indirectly through any Person or contractual
arrangement, whether independently or as part of a team, compete in any way against any member of
the New NGC Group or the Team for any work covered by the solicitation described on Schedule
8.4(a) (the “Solicitation”) and shall not take any steps to join any team that is
competing or will compete against any member of the New NGC Group or the Team for any of the work
covered by the Solicitation.

          (b) After the Distribution, New NGC shall cause NGTS to in good faith (i) endeavor to modify
the Teaming Agreement to make clear that, except with respect to the restrictions set forth in
Section 8.4(a), there are no restrictions on any member of the HII Group and (ii) consider NGSB and
its Subsidiaries as a potential subcontractor to the Team for work covered by the Solicitation.

     Section 8.5 Intercompany Work Orders. Schedule 8.5 sets forth certain
intercompany work orders (“IWOs”) that will be terminated in accordance with Section 2.3.
Immediately after the Distribution, NGSB shall issue to NGSC, or such other member of the New NGC
Group designated on Schedule 8.5 and NGSC shall issue to NGSB, or such other member of the
HII Group designated on Schedule 8.5, as applicable, letter subcontracts for the
performance of follow-on work to be performed for the applicable terminated IWOs, as each of the
parties shall then deem appropriate (such letter agreements, “Letter Subcontracts”). Each
Letter Subcontract shall contain sufficient terms, conditions and rights to permit the designated
member of the New NGC Group or the HII Group, as applicable, to perform and be compensated for work
performed pending the negotiation of definitive subcontract agreements between the parties with
what it concludes is appropriate protection. Following the Distribution, the parties shall
negotiate, in good faith, to reach agreement on final price, statement of work, schedule and terms
and conditions of definitive subcontracts for the terminated IWOs. The additional provisions set
forth on Schedule 8.5 shall apply with respect to the Letter Subcontracts.

     Section 8.6 IDIQ Vehicles. The New NGC Group shall use reasonable efforts to continue
to make the IDIQ (Indefinite Delivery Indefinite Quantity) vehicles listed on Schedule 8.6
available for the benefit of the HII Group on the terms set forth on Schedule 8.6, for the
period that begins on the date of the Distribution until the earlier of (a) the date that is 12
months after the date of the Distribution and (b) the date that the HII Group obtains its own such
vehicles. The additional provisions set forth on Schedule 8.6 shall apply with respect to
such IDIQ vehicles.

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     Section 8.7 Government Contract Matters.

          (a) For the purposes of this Section 8.7 only, the following definitions apply:

               (i) “Allowable Cost Audit” means any Defense Contract Audit Agency or other
Governmental Authority audit or other negotiations with contracting officers of any Governmental
Authority, with respect to any period (or portion thereof) ending at or prior to the Distribution.

               (ii) “Settlement Asset” means a net increase in assets due to the final agreement of
claims or rights arising out of the settlement of an Allowable Cost Audit, including: (A) final
indirect cost and rates for government contracts; (B) Cost Accounting Standards (CAS) matters; (C)
defective pricing matters; or (D) advance agreements with the U.S. Government.

               (iii) “Settlement Liability” means a net liability due to the final agreement of
claims or rights arising out of the settlement of an Allowable Cost Audit, including: (A) final
indirect cost and rates for government contracts; (B) Cost Accounting Standards (CAS) matters; (C)
defective pricing matters; or (D) advance agreements with the U.S. Government.

A Settlement Asset or Settlement Liability shall be computed as the total impact on the net amount
to be paid or received upon final contract settlement, including direct and indirect costs, fees
and profits. Where Settlement Assets and Settlement Liabilities arise from the settlement of an
Allowable Cost Audit, the baseline costs for calculating Settlement Assets and Settlement
Liabilities shall be the costs included in Inter-company Accounting Transfers (IATs) for periods
through the Distribution Date.

          (b) Shipbuilding Business Cost and Pricing Pre-Distribution. HII is responsible for
the settlement of and the consequences of any Settlement Assets or Settlement Liabilities
associated with costs and pricing incurred prior to the Distribution by the Shipbuilding Business
for government contracts, including those arising from Allowable Cost Audits for work in support of
other NGC entities, but not including those Settlement Assets and Settlement Liabilities covered by
Section 8.7(c).

          (c) New NGC Cost and Pricing Pre-Distribution. New NGC is responsible for the
settlement of and the consequences of any Settlement Assets and Settlement Liabilities relating to
NGC matters associated with and allocable to government contracts with any member of the HII Group
arising out of:

               (i) the settlement of final direct and indirect cost rates for costs incurred by NGC prior to
the Distribution, including: corporate office expenses, group insurance, post-retirement benefits,
pensions, state taxes, insurance, deferred compensation, environmental costs, legal, internal
audit, enterprise shared services (ESS) costs, information technology services (ITS), and the
settlement of IWOs and other costs incurred by NGC prior to the Distribution;

44

 

               (ii) Cost Accounting Standards (CAS) Settlement Assets or Settlement Liabilities for
allocations made by NGC prior to the Distribution, contracts priced or based upon projected NGC
incurred costs prior to the Distribution, or resulting from an Allowable Cost Audit;

               (iii) defective pricing Settlement Liabilities for costs incurred by NGC resulting from an
Allowable Cost Audit; and

               (iv) advance agreements with the U.S. Government.

          (d) Reimbursement of Settlement Assets and Settlement Liabilities. New NGC will
reimburse HII for any Settlement Liabilities of NGC described in Section 8.7(c) and paid or to be
paid to any Governmental Authority by HII upon presentation of documentation deemed adequate by HII
and New NGC. HII shall reimburse New NGC for any Settlement Assets of NGC accruing to HII under
Section 8.7(c) upon presentation of documentation deemed adequate by HII and New NGC. HII will
reimburse New NGC for any Settlement Liabilities of HII under Section 8.7(b) and paid or to be paid
to any Governmental Authority by New NGC upon presentation of documentation deemed adequate by New
NGC and HII. New NGC shall reimburse HII for any Settlement Assets of HII accruing to New NGC
under Section 8.7(b) upon presentation of documentation deemed adequate by HII and New NGC.

          (e) Administration of Government Contract Matters. The parties shall make available,
upon reasonable notice and at reasonable times during regular business hours, any of the parties’
or their Affiliates’ personnel whose assistance or participation is reasonably required by either
New NGC or HII or their Affiliates in connection with any government audit or contract
administration activity, including matters involving either party’s indirect cost proposals, the
Cost Accounting Standards (CAS) and defective pricing. New NGC and HII will each be responsible
for all of its own costs, both direct and indirect, including any required travel, associated with
(i) providing access to their respective records and making any reasonable number of copies
requested thereof and (ii) making the requested personnel reasonably available to support
government contract audits and administrative processes for cost negotiations with the government
or other matters, such as administration of Cost Accounting Standards (CAS). In addition, if a
Contract Disputes Act dispute concerning a Retained Liability or Retained Asset arises out of or
relates to a federal contract held by HII or its Affiliates, HII or its Affiliate, as applicable,
shall agree to sponsor a claim against the U.S. Government on behalf of New NGC. In such event,
New NGC shall have the right at its expense and in its sole discretion, acting in the name of HII
or its Affiliate, to (w) certify or submit any such claim to the appropriate U.S. Government
contracting officer; (x) appeal any adverse contracting officer’s final decision or deemed denial
of New NGC’s claim to the appropriate agency board of contract appeals or U.S. Court of Federal
Claims; (y) control the litigation of any such appeal; and (z) pursue a further appeal to the U.S.
Court of Appeals for the Federal Circuit.

          (f) Pre-Distribution Cost and Pricing Data. New NGC and HII shall provide each other
with updates of pre-Distribution cost and pricing data relevant to each

45

 

other, including (i)
revisions and updates to cost proposals and (ii) revisions and updates to pre-Distribution “Billing
and Bidding Guidance,” consistent with the practices of NGC and NGSB prior to the Distribution.

          (g) Release of Contract Audit and Contract Administration Information. Disclosure of
cost, pricing and billing information to government auditors and contracting
officers in connection with final indirect costs and rates, administration of Cost Accounting
Standards (CAS) and advance agreements and other customary contract audit and administration
matters are exceptions to the requirements of Sections 7.8 and 7.9 of this Agreement. For
avoidance of doubt, disclosure of cost, pricing and billing information in connection with
customary contract audit and administration matters by HII or New NGC will not require prior
notification to each other.

          (h) Litigation Management Agreement. Notwithstanding anything to the contrary in this
Agreement or the Litigation Management Agreement, in the event of any conflict or inconsistency
between this Section 8.7 and any provision of the Litigation Management Agreement, this Section 8.7
shall control over such inconsistent provision of the Litigation Management Agreement as to the
matters specifically addressed in this Section 8.7.

     Section 8.8 Software Licenses. From and after the Distribution, New NGC shall provide
reasonable cooperation and assistance to HII (and any member of its Group) in connection with the
provision of replacement licenses for third-party software licenses that were procured by NGC for
the benefit of the HII Group prior to the Distribution but that are included in the New NGC
Transferred Assets. Such cooperation shall be at the sole cost and expense of HII. The
cooperation and assistance provided for in this Section 8.8 shall not be required to the extent
such cooperation and assistance would result in an undue burden on New NGC or would unreasonably
interfere with any of its employees’ normal functions and duties.

     Section 8.9 Use of Names, Logos and Information.

          (a) As soon as practicable (and in any event within five days) after the Distribution, HII
shall cause to be filed with the Secretary of State (or other appropriate Governmental Authority)
of the states in which its Subsidiaries are located or are doing business, an amendment to their
certificates of incorporation or similar governing documents or qualification to do business to
change the name of any Subsidiary with “Northrop Grumman” in its name to a new name not confusingly
similar to the current name.

          (b) As soon as reasonably practicable (and in any event within 90 days) after the Distribution
(or such longer or shorter period with respect to each of the items identified on Schedule
8.9(b)), HII shall use reasonable best efforts to remove, and HII shall cause each member of
the HII Group to remove, from their websites, and any other publicly distributed material (other
than material required to be submitted for the purpose of regulatory filings and other similar
documentation), any reference to Northrop Grumman Corporation, and its business lines and plans and
any names, logos, or

46

 

trademarks associated therewith. HII and each other member of the HII Group
shall cease all use of the “Northrop Grumman” name (and any name confusingly similar thereto) and
all trademarks and service marks associated therewith as soon as practicable and in any event
within 90 days after the Distribution; provided that, if any member of the HII Group is
unable to comply with the foregoing requirements of this Section 8.9(b) for reasons outside of its
reasonable control, HII may request NGC to grant an extension of time
beyond such 90-day period within which to cease all use of the “Northrop Grumman” name, as
reasonably necessary for such member of the HII Group to cease all such use, and New NGC agrees not
to unreasonably withhold or delay the granting of any such requested extension. Nothing in this
Section 8.9(b) shall preclude HII or its Subsidiaries from using the Northrop Grumman name to
indicate that HII and members of the HII Group were formerly associated with Northrop Grumman
Corporation, or from referring to Northrop Grumman Corporation by its name for non-trademark and
non-branding purposes as is permitted by applicable Law.

          (c) HII shall not, and shall cause each member of the HII Group not to, take any action,
purport to take any action or otherwise hold itself out as having any authority to act on behalf of
or represent in any way any member of the New NGC Group. HII shall indemnify, defend and hold
harmless each of the New NGC Indemnitees from and against any and all Liabilities of the New NGC
Indemnitees relating to, arising out of or resulting from a breach of this Section 8.9(c).

ARTICLE IX

TERMINATION

     Section 9.1 Termination. This Agreement may be terminated by the Northrop Grumman
Board at any time prior to the Distribution.

     Section 9.2 Effect of Termination. In the event of any termination of this Agreement
prior to the Distribution, no party (or any of its directors or officers) shall have any Liability
or further obligation to any other party with respect to this Agreement.

ARTICLE X

DISPUTE RESOLUTION

     Section 10.1 Negotiation. In the event of a controversy, dispute or claim arising out
of, in connection with, or in relation to the interpretation, performance, nonperformance, validity
or breach of this Agreement or any Ancillary Agreement or any other agreement entered into by any
New NGC Entity or HII Entity pursuant to this Agreement or any Ancillary Agreement or otherwise
arising out of, or in any way related to this Agreement or any Ancillary Agreement or any other
agreement entered into by any New NGC Entity or any HII Entity pursuant to this Agreement or any
Ancillary Agreement or the transactions contemplated hereby or thereby, including any claim based
on contract, tort, statute or constitution (but excluding (i) any controversy, dispute or claim
brought by or against a third party or involving a third party who would be subject to joinder as
described in Federal Rule of Civil Procedure 19 and arising out of any contract, including this
Agreement or any Ancillary Agreement, and/or relating to the use or lease of

47

 

real property if any
third party is a claimant or defendant in such controversy, dispute or claim and (ii) any dispute
under any of the IP License Agreement, the Tax Matters Agreement, the Letter Subcontracts and the
Ingalls Indemnity Agreement, which shall be subject to the provisions contained therein ((i) and
(ii) collectively, “Excluded Disputes”)) (collectively, “Agreement Disputes”), one
or more senior executive officers of New NGC and HII, with authority to settle, designated by each
of New NGC and HII, shall negotiate
to settle such Agreement Dispute. Unless otherwise agreed by the relevant parties in writing,
if within 45 days from the time of receipt by the New NGC Entity or the HII Entity of the written
notice of an Agreement Dispute (“Dispute Notice”), the Agreement Dispute has not been
resolved, the Agreement Dispute shall be resolved in accordance with Section 10.2. In the event of
any arbitration or litigation in accordance with this Article X, the relevant New NGC Entities and
HII Entities shall not assert any defenses of or similar to statute of limitations and laches that
arise after the date of receipt of the Dispute Notice if the Dispute Notice was served prior to the
expiration of the applicable limitations period and provided the prosecuting party complies with
the contractual time period or deadline under this Agreement or any Ancillary Agreement to which
such Agreement Dispute relates.

     Section 10.2 Mediation. If, within 45 days after delivery of a Dispute Notice, a
negotiated resolution of the Agreement Dispute under Section 10.1 has not been reached, New NGC and
HII agree to seek to settle the Agreement Dispute by mediation administered by the American
Arbitration Association (“AAA”) under its Commercial Mediation Procedures, and to bear
equally the costs of the mediation; provided, however, that each New NGC Entity and
HII Entity shall bear its own costs in connection with such mediation. If the Agreement Dispute
has not been resolved through mediation within 90 days after the date of service of the Dispute
Notice, or such longer period as the parties may mutually agree in writing, each party shall be
entitled to refer the dispute to arbitration in accordance with Section 10.3.

     Section 10.3 Arbitration. If the Agreement Dispute has not been resolved for any
reason within 90 days after the date of service of the Dispute Notice, such Agreement Dispute shall
be settled, at the request of any relevant party, by arbitration administered by the AAA under its
Commercial Arbitration Rules, conducted in New York City, except as modified herein (the
“Rules”). There shall be three arbitrators. If there are only two parties to the
arbitration, each of New NGC and HII shall appoint one arbitrator within 20 days after receipt by
respondent of a copy of the demand. The two party-appointed arbitrators shall have 20 days from
the appointment of the second arbitrator to agree on a third arbitrator who shall chair the
arbitral tribunal. Any arbitrator not timely appointed by the parties under this Section 10.3
shall be appointed in accordance with AAA Rule R. 11, and in any such procedure, each party shall
be given four strikes, excluding strikes for cause. If there are multiple claimants and/or
multiple respondents to the effect that there are more than three parties to the arbitration, all
claimants and/or all respondents shall attempt to agree upon their respective appointments. If
such multiple parties fail to nominate an arbitrator within 30 days, the AAA shall appoint an
arbitrator on their behalf. In such circumstances, any existing nomination of the arbitrator
chosen by the party or parties on the other side of the proposed arbitration shall be unaffected,
and the remaining arbitrators shall be appointed in accordance with AAA Rules 12 and 13. Any
controversy

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concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether
arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to
the interpretation or enforceability of this Article X shall be determined by the arbitrators. New
NGC and HII intend that the provisions to arbitrate set forth herein be valid, enforceable and
irrevocable, and any award rendered by the arbitrators shall be final and binding on the parties.
New NGC and HII agree to comply and cause the members of
their applicable Group to comply with any award made in any such arbitration proceedings and
agree to enforcement of or entry of judgment upon such award, in any court of competent
jurisdiction, including any New York State or federal court sitting in the Borough of Manhattan in
The City of New York. The arbitrators shall be entitled, if appropriate, to award monetary damages
and other remedies, subject to the provisions of Section 5.9. The parties shall use their
reasonable best efforts to encourage the arbitrators to resolve any arbitration related to any
Agreement Dispute as promptly as practicable.

     Section 10.4 Confidentiality of Arbitral Award and Documents and Information Exchanged and
Submitted in the Course of Arbitration. Subject to applicable Law, including disclosure or
reporting requirements, or the parties’ agreement, the parties shall maintain the confidentiality
of the arbitration. Unless agreed to by all the parties or required by applicable Law, including
disclosure or reporting requirements, the arbitrators and the parties shall maintain the
confidentiality of all information, records, reports, or other documents obtained in the course of
the arbitration, and of all awards, orders, or other arbitral decisions rendered by the
arbitrators.

     Section 10.5 Treatment of Negotiations and Mediation. Without limiting the provisions
of the Rules, unless otherwise agreed in writing or permitted by this Agreement, New NGC and HII
shall keep, and shall cause the members of their applicable Group to keep confidential all matters
relating to this Article X and any negotiation, mediation, conference, arbitration, or discussion
pursuant to this Article X shall be treated as compromise and settlement negotiations for purposes
of Rule 408 of the Federal Rules of Evidence and comparable state rules; provided, that
such matters may be disclosed (a) to the extent reasonably necessary in any proceeding brought to
enforce the award or for entry of a judgment upon the award and (b) to the extent otherwise
required by applicable Law, including disclosure or reporting requirements. Nothing said or
disclosed, nor any document produced, in the course of any negotiations, conferences and
discussions under Sections 10.1 and 10.2 that is not otherwise independently discoverable shall be
offered or received as evidence or used for impeachment or for any other purpose in any current or
future arbitration.

     Section 10.6 Continuity of Service and Performance. Unless otherwise agreed in
writing, New NGC and HII shall continue to provide service and honor all other commitments under
this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the
provisions of this Article X with respect to all matters not subject to such dispute resolution.

     Section 10.7 Consolidation. The arbitrators may consolidate an arbitration under this
Agreement with any arbitration arising under or relating to the Ancillary Agreements or any other
agreement between the parties entered into pursuant hereto or thereto, as the

49

 

case may be, if the
subject of the Agreement Disputes thereunder arise out of or relate essentially to the same set of
facts or transactions. Such consolidated arbitration shall be determined by the arbitrators
appointed for the arbitration proceeding that was commenced first in time.

     Section 10.8 Submission to Jurisdiction. Each of the parties to this Agreement
irrevocably agrees that any legal action or proceeding arising out of or relating to any Excluded
Dispute brought by any other party to this Agreement or its successors or assigns shall be brought
and determined in any federal court sitting in the Borough of Manhattan in The City of New York
(or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal
court), and each of the parties to this Agreement hereby irrevocably submits to the exclusive
jurisdiction of the aforesaid courts for itself and with respect to its property, generally and
unconditionally, with regard to any Excluded Dispute. Each of the parties to this Agreement agrees
not to commence any action, suit or proceeding relating thereto except in the courts described
above in New York, other than actions in any court of competent jurisdiction to enforce any
judgment, decree or award rendered by any such court in New York as described in this Section 10.8.
Each of the parties to this Agreement hereby irrevocably and unconditionally waives, and agrees
not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or
proceeding arising out of or relating to the Excluded Dispute, (a) any claim that it is not
personally subject to the jurisdiction of the courts in New York as described herein, (b) that it
or its property is exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i)
the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper or (iii) the subject matter of the Excluded
Dispute, may not be enforced in or by such courts.

     Section 10.9 Enforcement. Solely with respect to the Excluded Disputes, the parties
agree that irreparable damage would occur in the event that any of the provisions of this Agreement
and the Ancillary Agreements were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, each of the parties shall be entitled to specific performance of
the terms hereof and thereof, including an injunction or injunctions to prevent breaches of this
Agreement and the Ancillary Agreements and to enforce specifically the terms and provisions of this
Agreement and the Ancillary Agreements in any New York State or federal court sitting in
the Borough of Manhattan in The City of New York (or, if such court lacks subject matter
jurisdiction, in any appropriate New York State or federal court), this being in addition to any
other remedy to which such party is entitled at law or in equity. Each of the parties hereby
further waives (a) any defense in any action for specific performance that a remedy at law would be
adequate and (b) any requirement under any Law to post security as a prerequisite to obtaining
equitable relief.

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ARTICLE XI

MISCELLANEOUS

     Section 11.1 Corporate Power. New NGC represents on behalf of itself and each other
New NGC Entity and HII represents on behalf of itself and each other HII Entity, and NGC represents
on behalf of itself, that:

          (a) each such Person is a corporation or other entity duly incorporated or formed, validly
existing and in good standing under the Laws of the state or other jurisdiction of its
incorporation or formation, and has all material corporate or other similar powers required to
carry on its business as currently conducted;

          (b) each such Person has the requisite corporate or other power and authority and has taken
all corporate or other action necessary in order to execute, deliver and perform this Agreement and
each other Ancillary Agreement to which it is a party and to consummate the transactions
contemplated hereby and thereby; and

          (c) this Agreement and each Ancillary Agreement to which it is a party has been duly executed
and delivered by it and constitutes a valid and binding agreement of such Person enforceable in
accordance with the terms hereof and thereof.

     Section 11.2 Coordination with Certain Ancillary Agreements; Conflicts.

          (a) Notwithstanding anything in this Agreement to the contrary, (i) the Ingalls Indemnity
Agreement shall be the exclusive agreement among the parties for the matters expressly set forth
therein following the Distribution and (ii) except for those Tax matters specifically addressed in
this Agreement or in any Ancillary Agreement, the Tax Matters Agreement shall be the exclusive
agreement among the parties with respect to all Tax matters, including dispute resolution and
indemnification and payments among the parties in respect of Tax matters.

          (b) Except as provided in Section 8.7(h), in the event of any conflict or inconsistency
between any provision of any of the Ancillary Agreements and any provision of this Agreement, the
applicable Ancillary Agreement shall control over the inconsistent provisions of this Agreement as
to the matters specifically addressed in such Ancillary Agreement.

     Section 11.3 Expenses.

          (a) Except as expressly set forth in this Agreement or in any Ancillary Agreement, all fees,
costs and expenses paid or incurred in connection with the Separation and the Distribution and the
performance of this Agreement and any Ancillary Agreement, whether performed by a third party or
internally, will be paid by the party incurring such fees or expenses, whether or not the
Distribution is consummated, or as otherwise agreed by the parties. For the avoidance of doubt,
(i) New NGC will be responsible for any transfer fees (including any pricing increases) related to
the transfer of any Retained Assets (including any transferred third-party software licenses) to
any member of the New NGC Group and the cost of any replacement for any Asset that is not a
Retained Asset

51

 

(including any replacement third-party software licenses), (ii) HII will be
responsible for any fees to the NYSE and any transfer fees (including any pricing increases)
related to the transfer of any Shipbuilding Assets (including any transferred third-party software
licenses) to any member of the HII Group and the cost of any replacement for any Asset that is not
a Shipbuilding Asset (including any replacement third-party software licenses) and (iii) New NGC
shall bear the costs and expenses directly related to the mailing of the
Information Statement to NGC stockholders and the fees and expenses of the Agent in connection
with the Distribution.

          (b) Except where context otherwise requires, references in this Agreement and the Litigation
Management Agreement to “costs and expenses” include the relevant party’s allocated costs of
employees (including in-house counsel and other personnel), fringe benefit costs, general and
administrative costs, overhead, document processing vendors, litigation support, including
e-discovery consultants, testifying and non-testifying experts, and other consultants.

     Section 11.4 Amendment and Modification. This Agreement and the Ancillary Agreements
may not be amended, modified or supplemented in any manner, whether by course of conduct or
otherwise, except by an instrument in writing specifically designated as an amendment hereto,
signed on behalf of each party.

     Section 11.5 Waiver. No failure or delay of any party in exercising any right or
remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce such right or power,
or any course of conduct, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the parties hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have hereunder. Any agreement on the
part of any party to any such waiver shall be valid only if set forth in a written instrument
executed and delivered by a duly authorized officer on behalf of such party.

     Section 11.6 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if
by facsimile, upon written confirmation of receipt by facsimile, e-mail or otherwise, (b) on the
first Business Day following the date of dispatch if delivered utilizing a next-day service by a
recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day
following the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth
below, or pursuant to such other instructions as may be designated in writing by the party to
receive such notice:

52

 

	 	(i)	 	if to New NGC or any other New NGC Entity prior to the date
on which New NGC relocates its corporate headquarters, to both:
	 
	 	 	 	Northrop Grumman Corporation

1840 Century Park East

Los Angeles, CA 90067-2199

Attention: General Counsel

Facsimile: (310) 556-4910
	 
	 	 	 	and:
	 
	 	 	 	Northrop Grumman Corporation

1840 Century Park East

Los Angeles, CA 90067-2199

Attention: Treasurer

Facsimile: (310) 201-3088
	 
	 	(ii)	 	if to New NGC or any other New NGC Entity on or after the
date on which New NGC relocates its corporate headquarters, to both:
	 
	 	 	 	Northrop Grumman Corporation

2980 Fairview Park Drive

Falls Church, VA 22042

Attention: General Counsel

Facsimile: (703) 875-1852
	 
	 	 	 	and:
	 
	 	 	 	Northrop Grumman Corporation

2980 Fairview Park Drive

Falls Church, VA 22042

Attention: Treasurer

Facsimile: to be provided at relevant time
	 
	 	(iii)	 	if to HII or any other HII Entity, to:
	 
	 	 	 	Huntington Ingalls Industries, Inc.

4101 Washington Avenue

Newport News, VA 23607

Attention: Office of the General Counsel

Facsimile: (757) 688-1408

	 
	 	 	 	with a copy (which shall not constitute notice) to:
	 
	 	 	 	Huntington Ingalls Industries, Inc.

4101 Washington Avenue

53

 

	 	 	 	Newport News, VA 23607

Attention: General Counsel

Facsimile: (757) 688-1408

     Section 11.7 Interpretation. When a reference is made in this Agreement to a Section,
Article or Exhibit such reference shall be to a Section, Article, Annex or Exhibit of this
Agreement unless otherwise indicated. The table of contents and headings contained in this
Agreement or in any Exhibit are for convenience of reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. All words used in this Agreement will be
construed to be of such gender or number as the
circumstances require. Any capitalized terms used in any Schedule, Annex or Exhibit but not
otherwise defined therein shall have the meaning as defined in this Agreement or the Ancillary
Agreement to which such Schedule, Annex or Exhibit is attached, as applicable. All Schedules,
Annexes and Exhibits annexed hereto or referred to herein are hereby incorporated in and made a
part of this Agreement as if set forth herein. The word “including” and words of similar import
when used in this Agreement shall mean “including, without limitation,” unless otherwise specified.
The word “day” when used in this Agreement shall mean “calendar day,” unless otherwise specified.

     Section 11.8 Entire Agreement. This Agreement and the Ancillary Agreements and the
Annexes, Exhibits, Schedules and Appendices hereto and thereto constitute the entire agreement, and
supersede all prior written agreements, arrangements, communications and understandings and all
prior and contemporaneous oral agreements, arrangements, communications and understandings among
the parties with respect to the subject matter hereof. None of this Agreement or any of the
Ancillary Agreements shall be deemed to contain or imply any restriction, covenant, representation,
warranty, agreement or undertaking of any party with respect to the transactions contemplated
hereby and thereby other than those expressly set forth herein or therein or in any document
required to be delivered hereunder or thereunder. Notwithstanding any oral agreement or course of
action of the parties or their representatives to the contrary, no party to this Agreement shall be
under any legal obligation to enter into or complete the transactions contemplated hereby unless
and until this Agreement shall have been executed and delivered by each of the parties.

     Section 11.9 No Third Party Beneficiaries. Except for the indemnification rights
under this Agreement of any New NGC Indemnitee (other than any current, former or future employee
of any New NGC Entity that is not or was not, as of any relevant time of determination, also a
current or former officer of any New NGC Entity) or HII Indemnitee (other than any current, former
or future employee of any HII Entity that is not or was not, as of any relevant time of
determination, also a current or former officer of any HII Entity) in their respective capacities
as such, and except as specifically provided in the Employee Matters Agreement, nothing in this
Agreement or the Ancillary Agreements, express or implied, is intended to or shall confer upon any
Person other than the parties and their respective successors and permitted assigns any legal or
equitable right, benefit or remedy of any nature under or by reason of this Agreement or the
Ancillary Agreements.

54

 

     Section 11.10 Governing Law. This Agreement and all disputes or controversies arising
out of or relating to this Agreement or the transactions contemplated hereby shall be governed by,
and construed in accordance with, the internal Laws of the State of New York, without regard to the
Laws of any other jurisdiction that might be applied because of the conflicts of laws principles of
the State of New York (other than Section 5-1401 of the New York General Obligations Law).

     Section 11.11 Assignment. Except as specifically provided in any Ancillary Agreement,
none of this Agreement, any of the Ancillary Agreements or any of the rights, interests or
obligations hereunder or thereunder may be assigned or delegated, in whole or in part, by operation
of law or otherwise, by any party without the prior written consent of
the other parties, and any such assignment without such prior written consent shall be null
and void. If any party (or any of its successors or permitted assigns) (a) shall consolidate with
or merge into any other Person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (b) shall transfer all or substantially all of its properties
and/or assets to any Person, then, and in each such case, the party (or its successors or permitted
assigns, as applicable) shall ensure that such Person assumes all of the obligations of such party
(or its successors or permitted assigns, as applicable) under this Agreement and all applicable
Ancillary Agreements.

     Section 11.12 Severability. Whenever possible, each provision or portion of any
provision of this Agreement and the Ancillary Agreements shall be interpreted in such manner as to
be effective and valid under applicable Law, but if any provision or portion of any provision of
this Agreement or the Ancillary Agreements is held to be invalid, illegal or unenforceable in any
respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or portion of any provision in such
jurisdiction, and this Agreement or the Ancillary Agreements shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of
any provision had never been contained herein.

     Section 11.13 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, ANY OF THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.

     Section 11.14 Counterparts. This Agreement and each Ancillary Agreement may be
executed in one or more counterparts, all of which shall be considered one and the same instrument
and shall become effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.

     Section 11.15 Facsimile Signature. This Agreement may be executed by facsimile
signature and a facsimile signature shall constitute an original for all purposes.

     Section 11.16 Payment. Except as expressly provided in this Agreement or any
Ancillary Agreement, any amount payable pursuant to this Agreement or any Ancillary Agreement by
one party (or any member of such Party’s Group) shall be paid within 30

55

 

days after presentation of
an invoice or a written demand by the party entitled to receive such payments. Such demand shall
include documentation setting forth the basis for the amount payable. Any payment not made within
30 days of the written demand for such payment shall accrue interest at a rate per annum equal to
the rate in effect for underpayments pursuant to Section 6621 of the Code from such date.

     Section 11.17 Parties’ Obligations. Except where specifically provided otherwise, a
party’s obligations under this Agreement shall include obligations of its employees and
Subsidiaries. Each of NGSB and NGSC hereby agrees to take any actions, or refrain from taking any
actions, to the extent required pursuant to this Agreement or any of the Ancillary Agreements.

[The remainder of this page is intentionally left blank.]

56

 

     IN WITNESS WHEREOF, the parties have caused this Separation and Distribution Agreement to be
executed by their duly authorized representatives.

	 	 	 	 	 
	 	NORTHROP GRUMMAN CORPORATION

 	 
	 	By:  	/s/ Mark Rabinowitz
 	 
	 	 	Name:  	Mark Rabinowitz 	 
	 	 	Title:  	Corporate Vice President & Treasurer 	 
	 
	 	NEW P, INC.

 	 
	 	By:  	/s/ Mark Rabinowitz
 	 
	 	 	Name:  	Mark Rabinowitz 	 
	 	 	Title:  	President & Treasurer 	 
	 
	 	HUNTINGTON INGALLS INDUSTRIES, INC.

 	 
	 	By:  	/s/ C. Michael Petters
 	 
	 	 	Name:  	C. Michael Petters 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	NORTHROP GRUMMAN SHIPBUILDING, INC.

 	 
	 	By:  	/s/ C. Michael Petters
 	 
	 	 	Name:  	C. Michael Petters 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	NORTHROP GRUMMAN SYSTEMS CORPORATION

 	 
	 	By:  	/s/ Mark Rabinowitz
 	 
	 	 	Name:  	Mark Rabinowitz 	 
	 	 	Title:  	President and Treasurer 	 
	 

[Signature Page to Separation and Distribution Agreement]

 

 

Annex I — Internal Reorganization

     The Internal Reorganization will take place in the following steps, all of which have occurred
or will occur prior to the Distribution in the following order, unless otherwise determined by the
Northrop Grumman Board:

	 	 	 

	Step 1:

	 	NGC has formed (a) New NGC, (b) HII, (c) Titan Holdings I, LLC, a
Delaware limited liability company (“Holdings LLC”), (d) Titan
Holdings II, L.P., a Delaware limited partnership (“Holdings
LP”),
and (e) Merger Sub. New NGC initially will own all the stock of
HII, the sole membership interest in Holdings LLC and the sole
general partner interest in Holdings LP. Holdings LLC will
initially own the sole limited partner interest in Holdings LP.
Holdings LP will initially own all of the stock of Merger Sub.
	 
	 	 
	Step 2:

	 	Pursuant to that certain Transfer of Guarantees, dated as of March
28, 2011, between NGC and HII, NGC transferred to HII the Navy
Guarantees and HII assumed and agreed to perform all of the
obligations and liabilities of NGC under the Navy Guarantees.
	 
	 	 
	Step 3:

	 	NGC will contribute all of the HII Transferred Assets to NGSB (or
to one or more members of the HII Group other than HII) and all of
the New NGC Transferred Assets to NGSC (or to one or more members
of the New NGC Group other than New NGC). New NGC (or one or more
other members of the New NGC Group) will assume all of the
Retained Liabilities of NGC except for NGC’s obligations under the
Amended and Restated Credit Agreement, dated as of August 10,
2007, between NGC, the lenders party thereto from time to time,
JPMorgan Chase Bank, N.A. and the other parties named therein (the “NGC Credit Agreement”), and HII (or one or more other members of
the HII Group) will assume all of the Shipbuilding Liabilities of
NGC except NGC’s obligations under the guarantee of the GO-Zone
Bonds (the “GO-Zone Bonds Guarantee”).
	 
	 	 
	Step 4:

	 	Each of NGSB’s Subsidiaries will distribute to NGSB all of the
open account debt owed to it by NGSC, if any. NGSB will
distribute to NGC all of the open account debt owed to it by NGSC,
including such debt distributed to it by its Subsidiaries (all
such debt, the “Intercompany Debt Receivable”).
	 
	 	 
	Step 5:

	 	The parties will consummate the Holding Company Reorganization.
	 
	 	 
	Step 6:

	 	New NGC will contribute its membership interest in Holdings LLC
and its partnership interest in Holdings LP to HII.
	 
	 	 
	Step 7:

	 	NGC will distribute (the
“NGC Distribution”) to Holdings LP all of
NGC’s Assets (including the stock of NGSC and NGSB), and Holdings
LP will assume all of NGC’s Liabilities and other obligations
(including NGC’s

I-1

 

	 	 	 

	 

	 	obligations under the NGC Credit Agreement) except NGC’s obligations under the
GO-Zone Bonds Guarantee.
	 
	 	 
	Step 8:

	 	Concurrent with the NGC Distribution, HII will enter
into the P&I Agreements pursuant to which HII will
agree to perform all of NGC’s obligations under the
Navy Guarantees, if any, and the GO-Zone Bonds
Guarantee and indemnify NGC for any costs arising
from such obligations.
	 
	 	 
	Step 9:

	 	Holdings LP will distribute to Holdings LLC, its
limited partner, and HII, its general partner, all of
the stock of NGSB and NGC (the “Holdings LP
Distribution”).
	 
	 	 
	Step 10:

	 	Holdings LLC will distribute to HII the shares of NGC
and NGSB that it received in the Holdings LP
Distribution.
	 
	 	 
	Step 11:

	 	HII will receive the net cash proceeds from the HII
Debt. $300,000,000 of such net cash proceeds will be
retained by HII (the “Retained Cash”). Such cash
proceeds less the Retained Cash are referred to as
the “Transferred Debt Proceeds”.
	 
	 	 
	Step 12:

	 	HII will contribute (a) to Holdings LLC a portion of
the Transferred Debt Proceeds equal to Holdings LLC’s
proportionate interest in Holdings LP (approximately
$714,500,000) and (b) to Holdings LP the remaining
amount of the Transferred Debt Proceeds
(approximately $714,500,000).
	 
	 	 
	Step 13:

	 	Holdings LLC will contribute to Holdings LP the
amount of the Transferred Debt Proceeds contributed
to it by HII, and Holdings LP will contribute to NGSC
the entire amount of the Transferred Debt Proceeds
and the Intercompany Debt Receivable (such
contributions, together with the contributions in
Step 12, the “HII Contribution”).
	 
	 	 
	Step 14:

	 	HII will distribute all of its membership interest in
Holdings LLC and all of its partnership interest in
Holdings LP to New NGC.

I-2

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