Document:

exv10w1

Exhibit 10.1

NORTHROP GRUMMAN CORPORATION

TERMS AND CONDITIONS APPLICABLE TO 2011 STOCK OPTIONS

GRANTED UNDER THE 2001 LONG-TERM INCENTIVE STOCK PLAN

     These Terms and Conditions (“Terms”) apply to certain stock options granted by Northrop
Grumman Corporation (the “Company”) in 2011. If you were granted a stock option by the Company in
2011, the date of grant of your stock option (your “Option”), the total number of shares of common
stock of the Company subject to your Option, and the per share exercise price of your Option are
set forth in the letter from the Company announcing your Option grant (your “Grant Letter”) and are
reflected in the electronic stock plan award recordkeeping system (“Stock Plan System”) maintained
by the Company or its designee. These Terms apply to your Option if referenced in your Grant
Letter and/or on the Stock Plan System with respect to your Option. If you were granted an Option,
you are referred to as the “Grantee” with respect to your Option. Capitalized terms are generally
defined in Section 10 below if not otherwise defined herein.

     The Option represents a right to purchase the number of shares of the Company’s Common Stock,
for the per share exercise price of the Option, each as stated in your Grant Letter and as
reflected in the Stock Plan System. The number of shares and exercise price of the Option are
subject to adjustment as provided herein. The Option is subject to all of the terms and conditions
set forth in these Terms, and is further subject to all of the terms and conditions of the Plan, as
it may be amended from time to time, and any rules adopted by the Committee, as such rules are in
effect from time to time.

	1.	 	Vesting; Exercise of Option.

     1.1 Vesting. The Option is exercisable only to the extent that it has vested and has not
expired or terminated. Subject to Sections 2 and 5 below, one-third (1/3) of the total number of
shares of Company Common Stock subject to the Option (subject to adjustment as provided in Section
5.1) shall vest and become exercisable upon each of the first, second and third anniversaries of
the Grant Date.

     1.2 Method of Exercise. In order to exercise the Option, the Grantee or such other person
as may be entitled to exercise the same shall (a) execute and deliver to the Corporate Secretary of
the Company a written notice indicating the number of shares subject to the Option to be exercised,
and/or (b) complete such other exercise procedure as may be prescribed by the Corporate Secretary
of the Company. The date of exercise of the Option shall be the day such notice is received by the
Corporate Secretary of the Company or the day such exercise procedures are satisfied, as
applicable; provided that in no event shall the Option be considered to have been exercised unless
the per share exercise price of the Option is paid in full (or provided for in accordance with
Section 1.3) for each of the shares to be acquired on such exercise and all required tax
withholding obligations with respect to such exercise have been satisfied or provided for in
accordance with Section 6 hereof. No fractional shares will be issued.

     1.3 Payment of Exercise Price. The exercise price shall be paid at the time of exercise.
Payment may be made (a) in cash; (b) in the sole discretion of the Committee and on such terms and
conditions as the Corporate Secretary of the Company may prescribe, either in whole or in part (i)
by a reduction in the number of shares of Common Stock otherwise deliverable

pursuant to the Option
(valued at their Fair Market Value on the date of exercise of the Option) or (ii) in Common Stock
of the Company (either actually or by attestation and valued at their Fair Market Value on the date
of exercise of the Option; (c) in a combination of payments under clauses (a) and (b); or (d)
pursuant to a cashless exercise arranged through a broker or other third party. Notwithstanding
the foregoing, the Committee may at any time (a) limit the ability of the Grantee to exercise the
Option through any method other than a cash payment, or (b) require the Grantee to exercise, to the
extent possible, the Option in the manner described in clauses (b)(i) and (b)(ii) of the preceding
sentence.

     1.4 Tax Status. The Option is not and shall not be deemed to be an incentive stock option
within the meaning of Section 422 of the Code.

	2.	 	Termination of Option; Termination of Employment.

     2.1 General. The Option, to the extent not previously exercised, and all other rights in
respect thereof, whether vested and exercisable or not, shall terminate and become null and void at
the close of business on the last business day preceding the seventh (7th) anniversary
of the Grant Date (the “Expiration Date”). The Option, to the extent not previously exercised, and
all other rights in respect thereof, whether vested and exercisable or not, shall terminate and
become null and void prior to the Expiration Date if and when (a) the Option terminates in
connection with a Change in Control pursuant to Section 5 below, or (b) except as provided below in
this Section 2 and in Section 5, the Grantee ceases to be an employee of the Company or one of its
subsidiaries.

     2.2 Termination of Employment Due to Retirement. If the Grantee ceases to be employed by
the

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Company or one of its subsidiaries due to the Grantee’s Early Retirement and such Early Retirement
occurs more than six months after the Grant Date, the next succeeding vesting installment of the
Option shall vest, and all installments under the Option which have vested may be exercised by the
Grantee (or, in the event of the Grantee’s death, by the Grantee’s Successor) until the fifth
anniversary of the Grantee’s Early Retirement, but in no event after the Expiration Date. Any
remaining unvested installments, after giving effect to the foregoing sentence, shall terminate
immediately upon the Grantee’s Early Retirement. If the Grantee ceases to be employed by the
Company or one of its subsidiaries due to the Grantee’s Normal Retirement and such Normal
Retirement occurs more than six months after the Grant Date, all remaining installments of the
Option shall vest, and all installments under the Option may be exercised by the Grantee (or, in
the event of the Grantee’s death, by the Grantee’s Successor) until the fifth anniversary of the
Grantee’s Normal Retirement, but in no event after the Expiration Date.

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

     2.3 Termination of Employment Due to Death or Disability. If the Grantee dies while
employed by the Company or a subsidiary and such death occurs more than six months after the Grant
Date, or if the Grantee’s employment by the Company and its subsidiaries terminates due to the
Grantee’s Disability and such termination occurs more than six months after the Grant

Date, the
next succeeding vesting installment of the Option shall vest, and all installments under the Option
which have vested may be exercised by the Grantee (or, in the case of the Grantee’s death, by the
Grantee’s Successor) until the fifth anniversary of the Grantee’s death or Disability, whichever
first occurs, but in no event after the Expiration Date. Any remaining unvested installments,
after giving effect to the foregoing sentence, shall terminate immediately upon the Grantee’s death
or Disability, as applicable.

     2.4 Other Terminations of Employment. Subject to the following sentence, if the employment
of the Grantee with the Company or a subsidiary is terminated for any reason other than the
Grantee’s Early or Normal Retirement, death, or Disability, or in the event of a termination of the
Grantee’s employment with the Company or a subsidiary on or before the six-month anniversary of the
Grant Date due to the Grantee’s Early or Normal Retirement, death, or Disability, the Option may be
exercised (as to not more than the number of shares as to which the Grantee might have exercised
the Option on the date on which his or her employment terminated) only within 90 days from the date
of such termination of employment, but in no event after the Expiration Date; provided, however,
that if the Grantee is dismissed by the Company or a subsidiary for cause, the Option shall expire
forthwith. If the Grantee dies within 90 days after a termination of employment described in the
preceding sentence (other than a termination by the Company or a subsidiary for cause), the Option
may be exercised by the Grantee’s Successor for one year from the date of the Grantee’s death, but
in no event after the Expiration Date and as to not more than the number of shares as to which the
Grantee might have exercised the Option on the date on which his or her employment by the Company
or a subsidiary terminated. For purposes of this Section 2 and prior to a Change in Control, the
Company shall be the sole judge of “cause” unless such term is expressly defined in a written
employment agreement by and between the Grantee and either the Company or one of its subsidiaries,
in which case “cause” is used as defined in such employment agreement for purposes of this Section
2. Prior to a Change in Control, the definition of “Cause” in Section 10 does not apply for
purposes of this Section 2. With respect to a termination of employment upon or following a Change
in Control, the definition of “Cause” in Section 10 shall apply for purposes of this Section 2.

     2.5 Leave of Absence. Unless the Committee otherwise provides (at the time of the leave or
otherwise), if the Grantee is granted a leave of absence by the Company, the Grantee (a) shall not
be deemed to have incurred a termination of employment at the time such leave commences for
purposes of the Option, and (b) shall be deemed to be employed by the Company for the duration of
such approved leave of absence for purposes of the Option. A termination of employment

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shall be deemed to have occurred if the Grantee does not timely return to active employment upon
the expiration of such approved leave or if the Grantee commences a leave that is not approved by
the Company.

     2.6 Salary Continuation. Subject to Section 2.5 above, the term “employment” as used herein
means active employment by the Company and salary continuation without active employment (other
than a leave of absence approved by the Company and covered by Section 2.5) will not, in and of
itself, constitute “employment” for purposes hereof (in the case of salary continuation without
active employment, the Grantee’s cessation of active employee status shall, subject to Section 2.5,
be deemed to be a termination of “employment” for purposes hereof). Furthermore, salary
continuation will not, in and of itself, constitute a leave of absence approved by the Company for
purposes of the Option.

     2.7 Sale or Spinoff of Subsidiary or Business Unit. For purposes of the Option, a
termination of employment of the Grantee shall be deemed to have occurred if the Grantee is
employed by a subsidiary or business unit and that subsidiary or business unit is sold, spun off,
or otherwise divested, the Grantee does not otherwise continue to be employed by the Company after
such event, and the divested entity or business (or its successor or a parent company) does not
assume the Option in connection with such transaction. In the event of such a termination of
employment, the termination shall be deemed to be an Early Retirement unless the Grantee was
otherwise eligible at the time of termination for Normal Retirement (in which case, the termination
shall be considered a Normal Retirement).

     2.8 Continuance of Employment Required. Except as expressly provided in Sections 2.2 and
2.3 above, and Section 5 below, the vesting of the Option requires continued employment through
each vesting date as a condition to the vesting of the corresponding installment of the award.
Employment before or between the specified vesting dates, even if substantial, will not entitle the
Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon
or following a termination of employment. Nothing contained in these Terms, the Grant Letter, the
Stock Plan System, or the Plan constitutes an employment commitment by the Company or any
subsidiary, affects the Grantee’s status (if the Grantee is otherwise an at-will employee) as an
employee at will who is subject to termination without cause, confers upon the Grantee any right to
continue in the employ of the Company or any subsidiary, or interferes in any way with the right of
the Company or of any subsidiary to terminate such employment at any time.

	3.	 	Non-Transferability and Other Restrictions.

     3.1 Non-Transferability. The Option is non-transferable and shall not be subject in any
manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge. The
foregoing transfer restrictions shall not apply to: (a) transfers to the Company; (b) transfers by
will or the laws of descent and distribution; or (c) if the Grantee has suffered a disability,
permitted transfers to or exercises on behalf of the holder by his or her legal representative.
Notwithstanding the foregoing, the Company may honor any transfer required pursuant to the terms of
a court order in a divorce or similar domestic relations matter to the extent that such transfer
does not adversely affect the Company’s ability to register the offer and sale of the underlying
shares on a Form S-8 Registration Statement and such transfer is otherwise in compliance with all
applicable legal, regulatory and listing requirements.

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

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

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

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	5.	 	Adjustments; Change in Control.

     5.1 Adjustments. The number, type and price of shares subject to the Option, as well as the
per share exercise price of the Option, are subject to adjustment upon the occurrence of events
such as stock splits, stock dividends and other changes in capitalization in accordance with
Section 6(a) of the Plan. In the event of any adjustment, the Company will give the Grantee
written notice thereof which will set forth the nature of the adjustment.

     5.2 Possible Acceleration on Change in Control. Notwithstanding the acceleration provisions
of Section 2 hereof but subject to the limited exercise periods set forth therein, and further
subject to the Company’s ability to terminate the Option as provided in Section 5.3 below, the
outstanding and previously unvested portion of the Option shall become fully exercisable as of the
date of the Grantee’s termination of employment as follows:

	 	(a)	 	if the Grantee is covered by a Change in Control Severance Arrangement at the time of the
termination, if the termination of employment constitutes a “Qualifying Termination” (as
such term, or any similar successor term, is defined in such Change in Control Severance
Arrangement) that triggers the Grantee’s right to severance benefits under such Change in
Control Severance Arrangement.
	 
	 	(b)	 	if the Grantee is not covered by a Change in Control Severance Arrangement at the time of
the termination and if the termination occurs either within the Protected Period
corresponding to a Change in Control of the Company or within twenty-four (24) calendar
months following the date of a Change in Control of the Company, the Grantee’s employment by
the Company and its subsidiaries is involuntarily terminated by the Company and its
subsidiaries for reasons other than Cause or by the Grantee for Good Reason.

     Notwithstanding anything else contained herein to the contrary, the termination of the
Grantee’s employment (or other events giving rise to Good Reason) shall not entitle the Grantee to
any accelerated vesting pursuant to clause (b) above if there is objective evidence that, as of the
commencement of the Protected Period, the Grantee had specifically been identified by the Company
as an employee whose employment would be terminated as part of a corporate restructuring or
downsizing program that commenced prior to the Protected Period and such termination of employment
was expected at that time to occur within six (6) months. The applicable Change in Control
Severance Arrangement shall govern the matters addressed in this paragraph as to clause (a) above.

     5.3 Automatic Acceleration; Early Termination. If the Company undergoes a Change in Control
triggered by clause (iii) or (iv) of the definition thereof and the Company is not the surviving
entity and the successor to the Company (if any) (or a Parent thereof) does not agree in writing
prior to the occurrence of the Change in Control to continue and assume the Option following the
Change in Control, or if for any other reason the Option would not continue after the Change in
Control, then upon the Change in Control the outstanding and previously unvested portion of the
Option shall vest fully and completely, any and all restrictions on exercisability or otherwise
shall lapse, and it shall be fully exercisable. Unless the Committee expressly provides otherwise
in the circumstances, no acceleration of vesting or exercisability of the Option shall occur
pursuant to this Section 5.3 in connection with a Change in Control if either (a) the Company is
the surviving entity, or (b) the successor to the Company (if any) (or a Parent thereof) agrees in
writing prior to the Change in Control to assume the Option. If the Option is fully vested or
becomes fully vested as provided in this Section 5.3 but is not exercised prior to a Change in
Control triggered by clause (iii) or (iv) of the definition thereof and the Company is not the
surviving entity and the successor to the Company (if any) (or a Parent thereof) does not agree in
writing prior to the occurrence of the Change in Control to continue and assume the Option
following the Change in Control, or if for any other reason the Option would not continue after the
Change in Control, then the Committee may provide for the settlement in cash of the award (such
settlement to be calculated as though the Option was exercised simultaneously with the Change in
Control and based upon the then Fair Market Value of a share of Common Stock). The Option, if so
settled by the Committee, shall automatically terminate. If, in such circumstances, the Committee
does not provide for the cash settlement of the Option, then upon the Change in Control the Option
shall terminate, subject to any provision that has been made by the Committee through a plan of
reorganization or otherwise for the survival, substitution or exchange of the Option; provided that
the Grantee shall be given reasonable notice of such intended termination and an opportunity to
exercise the Option prior to or upon the Change in Control. The Committee may make adjustments
pursuant to Section 6(a) of the Plan and/or deem an acceleration of vesting of the Option pursuant
to this Section 5.3 to occur sufficiently prior to an event if necessary or deemed appropriate to
permit the Grantee to realize the benefits intended to be conveyed with respect to the shares
underlying the Option; provided, however, that, the Committee may reinstate the original terms of
the Option if the related event does not actually occur. The provisions in this Section 5.3 for
the early termination of the Option in connection with a Change in Control of the Company supercede
any other provision hereof that would otherwise allow for a longer Option term.

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	6.	 	Tax Matters.

     6.1 Tax Withholding. The Company or the subsidiary which employs the Grantee shall be
entitled to require, as a condition of issuing shares upon exercise of the Option, that the Grantee
or other person exercising the Option pay any sums required to be withheld by federal, state or
local tax law with respect to such vesting or payment. Alternatively, the Company or such
subsidiary, in its discretion, may make such provisions for the withholding of taxes as it deems
appropriate (including, without limitation, withholding the taxes due from compensation otherwise
payable to the Grantee or reducing the number of shares otherwise deliverable with respect to the
Option (valued at their then Fair Market Value) by the amount necessary to satisfy such withholding
obligations at the flat percentage rates applicable to supplemental wages).

     6.2 Transfer Taxes. The Company will pay all federal and state transfer taxes, if any, and
other fees and expenses in connection with the issuance of shares in connection with the vesting of
the Option.

	7.	 	Committee Authority.

     The Committee has the discretionary authority to determine any questions as to the date when
the Grantee’s employment terminated and the cause of such termination and to interpret any
provision of these Terms, the Grant Letter, the Stock Plan System, the Plan, and any other
applicable rules. Any action taken by, or inaction of, the Committee relating to or pursuant to
these Terms, the Grant Letter, the Stock Plan System, the Plan, or any other applicable rules shall
be within the absolute discretion of the Committee and shall be conclusive and binding on all
persons.

	8.	 	Plan; Amendment.

     The Option is governed by, and the Grantee’s rights are subject to, all of the terms and
conditions of the Plan and any other rules adopted by the Committee, as the foregoing may be
amended from time to time. The Grantee shall have no rights with respect to any amendment of these
Terms or the Plan unless such amendment is in writing and signed by a duly authorized officer of
the Company. In the event of a conflict between the provisions of the Grant Letter and/or the
Stock Plan System and the provisions of these Terms and/or the Plan, the provisions of these Terms
and/or the Plan, as applicable, shall control.

	9.	 	Required Holding Period.

     The holding requirements of this Section 9 shall apply to any Grantee who is an elected or
appointed officer of the Company on any date the Option is exercised (or, if earlier, on the date
the Grantee’s

employment by the Company and its subsidiaries terminates for any reason). Any
Grantee subject to this Section 9 shall not be permitted to sell, transfer, anticipate, alienate,
assign, pledge, encumber or charge 50% of the total number of shares of Common Stock the Grantee
receives upon any exercise of the Option until the earlier of (A) the third anniversary of the date
of exercise, or (B) the date of the Grantee’s death or Disability. Should the Grantee’s employment
by the Company and its subsidiaries terminate (regardless of the reason for such termination, but
other than due to the Grantee’s death or Disability), such holding period requirement shall not
apply as to any shares acquired upon exercise of the Option to the extent the Option remains
exercisable for more than one year after such termination of employment and such exercise actually
occurs more than one year after such termination of employment. (For purposes of clarity, in such
circumstances the holding period requirement will apply as to any shares acquired upon exercise of
the Option within one year after such a termination of employment.) For purposes of this Section
9, the total number of shares of Common Stock the Grantee receives upon exercise shall be
determined on a net basis after taking into account any shares otherwise deliverable with respect
to the Option that the Company withholds (or that are sold through a broker in a cashless exercise
of the Option, as the case may be) to satisfy the exercise price of the Option or tax obligations
pursuant to Section 6.1. Any shares of Common Stock received in respect of shares that are
covered by the holding period requirements of this Section 9 (such as shares received in respect of
a stock split or stock dividend) shall be subject to the same holding period requirements as the
shares to which they relate.

	10.	 	Definitions.

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

     “Board” means the Board of Directors of the Company.

     “Cause” means the occurrence of either or both of the following:

	 	(i)	 	The Grantee’s conviction for committing an act of fraud, embezzlement, theft, or other
act constituting a felony (other than traffic related offenses or as a result of vicarious
liability); or
	 
	 	(ii)	 	The willful engaging by the Grantee in misconduct that is significantly injurious to the
Company. However, no act, or failure to act, on the Grantee’s part shall be considered
“willful” unless done, or omitted to be done, by the

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	 	 	 	Grantee not in good faith and without reasonable belief that his action or omission was in
the best interest of the Company.

     “Change in Control” is used as defined in the Plan.

     “Change in Control Severance Arrangement” means a “Special Agreement” entered into by and
between the Grantee and the Company that provides severance protections in the event of certain
changes in control of the Company or the Company’s Change-in-Control Severance Plan, as each may be
in effect from time to time, or any similar successor agreement or plan that provides severance
protections in the event of a change in control of the Company.

     “Code” means the United States Internal Revenue Code of 1986, as amended.

     “Committee” means the Company’s Compensation Committee or any successor committee appointed by
the Board to administer the Plan.

     “Disability” means disabled pursuant to the provisions of the Company’s (or one of its
subsidiary’s) Long Term Disability Plan applicable to the Grantee; or, if the Grantee is not
covered by such a Long Term Disability Plan, the incapacity of the Grantee, due to injury, illness,
disease, or bodily or mental infirmity, to engage in the performance of substantially all of the
usual duties of employment with the Company or the subsidiary which employs the Grantee, such
disability to be determined by the Committee upon receipt and in reliance on competent medical
advice from one or more individuals, selected by the Committee, who are qualified to give such
professional medical advice.

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

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

In the case of a Grantee who is an officer of the Company subject to the Company’s mandatory
retirement at age 65 policy and who, at the applicable time, is not otherwise eligible for Early
Retirement as defined in the preceding sentence or for Normal Retirement, “Early Retirement” as to
that Grantee means that the Grantee’s employment is terminated pursuant to such mandatory
retirement policy (regardless of the Grantee’s years of service and other than in connection with a
termination by the Company or a subsidiary for cause).

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

     “Fair Market Value” is used as defined in the Plan; provided, however, the Committee in
determining such Fair Market Value for purposes of the Option may utilize such other exchange,
market, or listing as it deems appropriate. For purposes of a cashless exercise, the Fair Market
Value of the shares shall be the price at which the shares in payment of the exercise price are
sold.

     “Good Reason” means, without the Grantee’s express written consent, the occurrence of any one
or more of the following:

	 	(i)	 	A material and substantial reduction in the nature or status of the Grantee’s authorities
or responsibilities (when such authorities and/or responsibilities are viewed in the
aggregate) from their level in effect on the day immediately prior to the start of the
Protected Period, other than (A) an inadvertent act that is remedied by the Company promptly
after receipt of notice thereof given by the Grantee, and/or (B) changes in the nature or
status of the Grantee’s authorities or responsibilities that, in the aggregate, would
generally be viewed by a nationally-recognized executive placement firm as resulting in the
Grantee having not materially and substantially fewer authorities and responsibilities
(taking into consideration the Company’s industry) when compared to the authorities and
responsibilities applicable to the position held by the Grantee immediately prior to the
start of the Protected Period. The Company may retain a nationally-recognized executive
placement firm for purposes of making the determination required by the preceding sentence
and the written opinion of the firm thus selected shall be conclusive as to this issue.
	 
	 	 	 	In addition, if the Grantee is a vice president, the Grantee’s loss of vice-president status
will constitute “Good Reason”; provided that the loss of the title of “vice president” will
not, in and of itself, constitute Good Reason if the Grantee’s lack of a vice president title
is generally

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	 	 	 	consistent with the manner in which the title of vice president is used within the Grantee’s
business unit or if the loss of the title is the result of a promotion to a higher level
office. For the purposes of the preceding sentence, the Grantee’s lack of a vice-president
title will only be considered generally consistent with the manner in which such title is
used if most persons in the business unit with authorities, duties, and responsibilities
comparable to those of the Grantee immediately prior to the commencement of the Protected
Period do not have the title of vice-president.
	 
	 	(ii)	 	A reduction by the Company in the Grantee’s annualized rate of base salary as in effect
on the Grant Date or as the same shall be increased from time to time.
	 
	 	(iii)	 	A material reduction in the aggregate value of the Grantee’s level of participation in
any of the Company’s short and/or long-term incentive compensation plans (excluding
stock-based incentive compensation plans), employee benefit or retirement plans, or
policies, practices, or arrangements in which the Grantee participates immediately prior to
the start of the Protected Period provided; however, that a reduction in the aggregate value
shall not be deemed to be “Good Reason” if the reduced value remains substantially
consistent with the average level of other employees who have positions commensurate with
the position held by the Grantee immediately prior to the start of the Protected Period.
	 
	 	(iv)	 	A material reduction in the Grantee’s aggregate level of participation in the Company’s
stock-based incentive compensation plans from the level in effect immediately prior to the
start of the Protected Period; provided, however, that a reduction in the aggregate level of
participation shall not be deemed to be “Good Reason” if the reduced level of participation
remains substantially consistent with the average level of participation of other employees
who have positions commensurate with the position held by the Grantee immediately prior to
the start of the Protected Period.
	 
	 	(v)	 	The Grantee is informed by the Company that his or her principal place of employment for
the Company will be relocated to a location that is greater than fifty (50) miles away from
the Grantee’s principal place of employment for the Company at the start of the
corresponding Protected Period; provided that, if the Company communicates an intended
effective date for such relocation, in no event shall Good Reason exist

	 	 	 	
pursuant to this
clause (v) more than ninety (90) days before such intended effective date.

     The Grantee’s right to terminate employment for Good Reason shall not be affected by the
Grantee’s incapacity due to physical or mental illness. The Grantee’s continued employment shall
not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting
Good Reason herein.

     “Grant Date” means the date that the Committee approved the grant of the Option.

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

     “Parent” is used as defined in the Plan.

     “Plan” means the Northrop Grumman 2001 Long-Term Incentive Stock Plan, as it may be amended
from time to time.

     The “Protected Period” corresponding to a Change in Control of the Company shall be a period
of time determined in accordance with the following:

	 	(i)	 	If the Change in Control is triggered by a tender offer for shares of the Company’s stock
or by the offeror’s acquisition of shares pursuant to such a tender offer, the Protected
Period shall commence on the date of the initial tender offer and shall continue through and
including the date of the Change in Control; provided that in no case will the Protected
Period commence earlier than the date that is six (6) months prior to the Change in Control.
	 
	 	(ii)	 	If the Change in Control is triggered by a merger, consolidation, or reorganization of
the Company with or involving any other corporation, the Protected Period shall commence on
the date that serious and substantial discussions first take place to effect the merger,
consolidation, or reorganization and shall continue through and including the date of the
Change in Control; provided that in no case will the Protected Period commence earlier than
the date that is six (6) months prior to the Change in Control.
	 
	 	(iii)	 	In the case of any Change in Control not described in clause (i) or (ii) above, the
Protected Period shall commence on the date that is six (6) months prior to the Change in
Control and shall continue through and including the date of the Change in Control.

7

 

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

8exv10w2

Exhibit 10.2

NORTHROP GRUMMAN CORPORATION

TERMS AND CONDITIONS APPLICABLE TO

2011 RESTRICTED PERFORMANCE STOCK RIGHTS

GRANTED UNDER THE 2001 LONG-TERM INCENTIVE STOCK PLAN

     These Terms and Conditions (“Terms”) apply to certain “Restricted Performance Stock
Rights” (“RPSRs”) granted by Northrop Grumman Corporation (the “Company”) in 2011. If you were
granted an RPSR award by the Company in 2011, the date of grant of your RPSR award and the target
number of RPSRs applicable to your award are set forth in the letter from the Company announcing
your RPSR award grant (your “Grant Letter”) and are also reflected in the electronic stock plan
award recordkeeping system (“Stock Plan System”) maintained by the Company or its designee. These
Terms apply only with respect to your 2011 RPSR award. If you were granted an RPSR award, you are
referred to as the “Grantee” with respect to your award. Capitalized terms are generally defined
in Section 10 below if not otherwise defined herein.

     Each RPSR represents a right to receive one share of the Company’s Common Stock, or cash of
equivalent value as provided herein, subject to vesting as provided herein. The performance
period applicable to your award is January 1, 2011 to December 31, 2013 (the “Performance
Period”). The target number of RPSRs subject to your award is subject to adjustment as
provided herein. The RPSR award is subject to all of the terms and conditions set forth in
these Terms, and is further subject to all of the terms and conditions of the Plan, as it may
be amended from time to time, and any rules adopted by the Committee, as such rules are in
effect from time to time.

	1.	 	Vesting; Payment of RPSRs.

     The RPSRs are subject to the vesting and payment provisions established (or to be established,
as the case may be) by the Committee with respect to the Performance Period. RPSRs that vest based
on such provisions will be paid as provided below. No fractional shares will be issued.

     1.1 Performance-Based Vesting of RPSRs. At the conclusion of the Performance Period, the
Committee shall determine whether and the extent to which the applicable performance criteria have
been achieved for purposes of determining earnouts and RPSR payments. Based on its determination,
the Committee shall determine the percentage of target RPSRs subject to the award (if any) that
have vested for the Performance Period in accordance with the earnout schedule established (or to
be established, as the case may be) by the Committee with respect to the Performance Period (the
“Earnout Percentage”). Any RPSRs subject to the award that are not vested as of the conclusion of
the Performance Period after giving effect to the Committee’s determinations under this Section 1.1
shall terminate and become null and void immediately following such determinations.

     1.2 Payment of RPSRs. The number of RPSRs payable at the conclusion of the Performance
Period (“Earned RPSRs”) shall be determined by multiplying the Earnout Percentage by the target
number of RPSRs subject to the award. The Earned RPSRs may be paid out in either an equivalent
number of shares of Common Stock, or, in the discretion of the Committee, in cash or in a
combination of shares of Common Stock and cash. In the event of a cash payment, the amount of the

 

payment for each Earned RPSR to be paid in cash will equal the Fair Market Value of a share of
Common Stock as of the date the Committee determines the extent to which the applicable RPSR
performance criteria have been achieved. RPSRs will be paid in the calendar year following the
calendar year containing the last day of the Performance Period (and generally will be paid in the
first 75 days of such year).

	2.	 	Early Termination of Award; Termination of Employment.

     2.1 General. The RPSRs subject to the award shall terminate and become null and void prior
to the conclusion of the Performance Period if and when (a) the award terminates in connection with
a Change in Control pursuant to Section 5 below, or (b) except as provided below in this Section 2
and in Section 5, the Grantee ceases for any reason to be an employee of the Company or one of its
subsidiaries.

     2.2 Termination of Employment Due to Retirement, Death or Disability. The number of RPSRs
subject to the award shall vest on a prorated basis as provided herein if the Grantee’s employment
by the Company and its subsidiaries terminates due to the Grantee’s Retirement, death, or
Disability and, in each case, only if the Grantee has completed at least six (6)
consecutive calendar months of employment with the Company or a subsidiary during the three-year
Performance Period. Such prorating of RPSRs shall be based on the number of full months the
Grantee was actually employed by the Company or one of its subsidiaries out of the thirty-six month
Performance Period. Partial months of employment during the Performance Period, even if
substantial, shall not be

1

 

counted for purposes of prorated vesting. Any RPSRs subject to the award that do not vest in
accordance with this Section 2.2 upon a termination of the Grantee’s employment due to Retirement,
death or Disability shall terminate immediately upon such termination of employment.

     Death or Disability. In the case of death or Disability (a) the Performance Period used to
calculate the Grantee’s Earned RPSRs will be deemed to have ended as of the most recent date that
performance has been measured by the Company with respect to the RPSRs (but in no event shall such
date be more than one year before the Grantee’s termination of employment), (b) the Earnout
Percentage of the Grantee’s RPSRs will be determined based on actual performance for that short
Performance Period, and (c) payment of Earned RPSRs will be made in the calendar year containing
the 75th day following the date of the Grantee’s death or Disability (and generally will
be paid on or about such 75th day).

     Retirement in General. Subject to the following provisions of this Section 2.2, in the case
of Retirement, (a) the entire Performance Period will be used to calculate the Grantee’s Earned
RPSRs, (b) the Earnout Percentage of the Grantee’s RPSRs will be determined based on actual
performance for the Performance Period, and (c) payment of Earned RPSRs will be made in the
calendar year following the calendar year containing the last day of the Performance Period (and
generally will be paid in the first 75 days of such year).

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

determine whether the Grantee’s service prior to the acquisition will be included in determining
service for such purposes.

     Retirement Due to Government Service. In the case of a Governmental Service Retirement by the
Grantee (a) the Performance Period used to calculate the Grantee’s Earned RPSRs will be deemed to
have ended as of the most recent date that performance has been measured by the Company with
respect to the RPSRs prior to the Grantee’s Retirement (but in no event shall such date be more
than one year before the Grantee’s Retirement), (b) the Earnout Percentage of the Grantee’s RPSRs
will be determined based on actual performance for that short Performance Period, and (c) payment
of Earned RPSRs will be made within 10 days after Retirement.

     2.3 Other Terminations of Employment. Subject to Section 5.2, all RPSRs subject to the
award terminate immediately upon a termination of the Grantee’s employment: (a) for any reason
other than due to the Grantee’s Retirement, death or Disability; or (b) for Retirement, death or
Disability, if the six-month employment requirement under Section 2.2 above is not satisfied.

     2.4 Leave of Absence. Unless the Committee otherwise provides (at the time of the leave or
otherwise), if the Grantee is granted a leave of absence by the Company, the Grantee (a) shall not
be deemed to have incurred a termination of employment at the time such leave commences for
purposes of the award, and (b) shall be deemed to be employed by the Company for the duration of
such approved leave of absence for purposes of the award. A termination of employment shall be
deemed to have occurred if the Grantee does not timely return to active employment upon the
expiration of such approved leave or if the Grantee commences a leave that is not approved by the
Company.

     2.5 Salary Continuation. Subject to Section 2.4 above, the term “employment” as used herein
means active employment by the Company and salary continuation without active employment (other
than a leave of absence approved by the Company that is covered by Section 2.4) will not, in and of
itself, constitute “employment” for purposes hereof (in the case of salary continuation without
active employment, the Grantee’s cessation of active employee status shall, subject to Section 2.4,
be deemed to be a termination of “employment” for purposes hereof). Furthermore, salary
continuation will not, in and of itself, constitute a leave of absence approved by the Company for
purposes of the award.

     2.6 Sale or Spinoff of Subsidiary or Business Unit. For purposes of the RPSRs subject to
the award, a termination of employment of the Grantee shall be deemed to have occurred if the
Grantee is employed by a

2

 

subsidiary or business unit and that subsidiary or business unit is sold, spun off, or otherwise
divested, the Grantee does not otherwise continue to be employed by the Company or one of its
subsidiaries after such event, and the divested entity or business (or its successor or a parent
company) does not assume the award in connection with such transaction. In the event of such a
termination of employment, the termination shall be deemed to be a Retirement treated as provided
for in Section 2.2 (subject to Section 5).

     2.7 Continuance of Employment Required. Except as expressly provided in Sections 2.2 and
2.4 above and in Section 5 below, the vesting of the RPSRs subject to the award requires continued
employment through the last day of the Performance Period as a condition of the payment of such
RPSRs. Employment for only a portion of the Performance Period, even if a substantial portion,
will not entitle the Grantee to any proportionate vesting or avoid or mitigate a termination of
rights and benefits upon or following a termination of employment. Nothing contained in these
Terms, the Grant Letter, the Stock Plan System, or the Plan constitutes an employment commitment by
the Company or any subsidiary, affects the Grantee’s status (if the Grantee is otherwise an
at-will employee) as an employee at will who is subject to termination without cause,
confers upon the Grantee any right to continue in the employ of the Company or any subsidiary, or
interferes in any way with the right of the Company or of any subsidiary to terminate such
employment at any time.

     2.8 Death. In the event of the Grantee’s death subsequent to the vesting of RPSRs but prior
to the delivery of shares or other payment with respect to such RPSRs, the Grantee’s Successor
shall be entitled to any payments to which the Grantee would have been entitled under this
Agreement with respect to such RPSRs.

	3.	 	Non-Transferability and Other Restrictions.

     3.1 Non-Transferability. The award, as well as the RPSRs subject to the award, are
non-transferable and shall not be subject in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance or charge. The foregoing transfer restrictions shall
not apply to transfers to the Company. Notwithstanding the foregoing, the Company may honor any
transfer required pursuant to the terms of a court order in a divorce or similar domestic relations
matter to the extent that such transfer does not adversely affect the Company’s ability to register
the offer and sale of the underlying shares on a Form S-8 Registration Statement and such transfer
is otherwise in compliance with all applicable legal, regulatory and listing requirements.

     3.2 Recoupment of Awards. Any payments or issuances of shares with respect to the award are
subject

 

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

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

     The Company’s obligation to make any payments or issue any shares with respect to the award is
subject to full compliance with all then applicable requirements of law, the Securities and
Exchange Commission, the Commissioner of Corporations of the State of California, or other
regulatory agencies having jurisdiction over the Company and its shares, and of any exchange upon
which stock of the Company may be listed. The Grantee shall not have the rights and privileges of
a stockholder, including without limitation the right to vote or receive dividends, with respect to
any shares which may be issued in respect of the RPSRs until the date appearing on the
certificate(s) for such shares (or, in the case of shares entered in book entry form, the date that
the shares are actually recorded in such form for the benefit of the Grantee), if such shares
become deliverable.

	5.	 	Adjustments; Change in Control.

     5.1 Adjustments. The RPSRs and the shares subject to the award are subject to adjustment
upon the occurrence of events such as stock splits, stock dividends and other changes in
capitalization in accordance with Section 6(a) of the Plan. In addition, for RPSRs that do not use
a relative total shareholder return metric as the applicable performance criterion, the Committee
shall adjust the applicable performance criteria to eliminate the effects of the gain, loss, income
or expense or other extraordinary items resulting from (i) changes in accounting principles that
become effective during the Performance Period, (ii) the purchase or disposition of a business
during the Performance Period, and (iii) extraordinary charges not foreseen at the date of grant of
the RPSRs, provided that the Committee shall have the discretion not to make any such adjustment if
not making such adjustment would result in a reduction in the number of Earned RPSRs. In the event
of any adjustment, the Company will give the Grantee written notice thereof which will set forth
the nature of the adjustment.

 

3

 

     5.2 Possible Acceleration on Change in Control. Notwithstanding the provisions of Section 2
hereof, and further subject to the Company’s ability to terminate the award as provided in Section
5.3 below, the Grantee shall be entitled to vesting of the award as provided below in the event of
the Grantee’s termination of employment in the following circumstances:

	 	(a)	 	if the Grantee is covered by a Change in Control Severance Arrangement at the time of the
termination, and the termination of employment constitutes a “Qualifying Termination” (as
such term, or any similar successor term, is defined in such Change in Control Severance
Arrangement) that triggers the Grantee’s right to severance benefits under such Change in
Control Severance Arrangement.
	 
	 	(b)	 	if the Grantee is not covered by a Change in Control Severance Arrangement at the time of
the termination, the termination occurs either within the Protected Period corresponding to
a Change in Control of the Company or within twenty-four (24) calendar months following the
date of a Change in Control of the Company, and the Grantee’s employment by the Company and
its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons
other than Cause or by the Grantee for Good Reason.

     Notwithstanding anything else contained herein to the contrary, the termination of the
Grantee’s employment (or other events giving rise to Good Reason) shall not entitle the Grantee to
any accelerated vesting pursuant to clause (b) above if there is objective evidence that, as of the
commencement of the Protected Period, the Grantee had specifically been identified by the Company
as an employee whose employment would be terminated as part of a corporate restructuring or
downsizing program that commenced prior to the Protected Period and such termination of employment
was expected at that time to occur within six (6) months. The applicable Change in Control
Severance Arrangement shall govern the matters addressed in this paragraph as to clause (a) above.

In the event the Grantee is entitled to payment in accordance with the foregoing provisions of this
Section 5.2, then the Grantee will be eligible for payment of a number of RPSRs determined in
accordance with the following formula: (a) the Earnout Percentage determined in accordance with
Section 1 but calculated based on performance for the portion of the three-year Performance Period
ending on the last day of the month coinciding with or immediately preceding the date of the
termination of the Grantee’s employment, multiplied by (b) the target number of RPSRs subject to
the award. Payment of any amount due under this Section 5.2 will

 

be made in the calendar year
following the calendar year containing the last day of the Performance Period (and generally will
be paid in the first 75 days of such year) unless: (i) the Grantee dies or has a Disability, in
which case such payment will be made in the calendar year containing the 75th day
following the date of the Grantee’s death or Disability, as the case may be (and generally will be
paid on or about such 75th day), or (ii) a Governmental Service Retirement by the
Grantee, in which case payment will be made within 10 days after Retirement. In the event the
Grantee is entitled to payment in accordance with the foregoing provisions of this Section 5.2,
then this Section 5.2 shall control as to the amount and timing of the payment of the award
notwithstanding anything in Section 2.2 to the contrary.

     5.3 Automatic Acceleration; Early Termination. If the Company undergoes a Change in Control
triggered by clause (iii) or (iv) of the definition thereof and the Company is not the surviving
entity and the successor to the Company (if any) (or a Parent thereof) does not agree in writing
prior to the occurrence of the Change in Control to continue and assume the award following the
Change in Control, or if for any other reason the award would not continue after the Change in
Control, then upon the Change in Control the Grantee shall be entitled to a payment of the RPSRs as
provided below and the award shall terminate. Unless the Committee expressly provides otherwise in
the circumstances, no acceleration of vesting of the award shall occur pursuant to this Section 5.3
in connection with a Change in Control if either (a) the Company is the surviving entity, or (b)
the successor to the Company (if any) (or a Parent thereof) agrees in writing prior to the Change
in Control to assume the award. The Committee may make adjustments pursuant to Section 6(a) of the
Plan and/or deem an acceleration of vesting of the award pursuant to this Section 5.3 to occur
sufficiently prior to an event if necessary or deemed appropriate to permit the Grantee to realize
the benefits intended to be conveyed with respect to the shares underlying the award; provided,
however, that, the Committee may reinstate the original terms of the award if the related event
does not actually occur.

     In the event the Grantee is entitled to a payment in accordance with the foregoing provisions
of this Section 5.3, then the Grantee will be eligible for payment of a number of RPSRs determined
in accordance with the following formula: (a) the Earnout Percentage determined in accordance with
Section 1 but calculated based on performance for the portion of the three-year Performance Period
ending on the date of the Change in Control of the Company, multiplied by (b) the target number of
RPSRs subject to the award. Payment of any amount due under this Section 5.3 will be made in the
calendar year following the calendar year containing the last day of the Performance Period (and
generally will be paid in the first 75 days of such year) unless: (i) the

4

 

Grantee dies or has a Disability, in which case such payment will be made in the calendar year
containing the 75th day following the date of the Grantee’s death or Disability, as the
case may be (and generally will be paid on or about such 75th day), or (ii) a
Governmental Service Retirement by the Grantee, in which case payment will be made within 10 days
after Retirement. In the event the Grantee is employed by the Company or a subsidiary immediately
prior to the Change in Control and is entitled to payment in accordance with the foregoing
provisions of this Section 5.3, then this Section 5.3 shall control as to the amount and timing of
the payment of the award notwithstanding anything in Section 2.2 or 5.2 to the contrary. In the
event of the Grantee’s Retirement pursuant to Section 2.2 prior to a Change in Control described in
the first paragraph of this Section 5.3 in which the award is to be terminated, the Earnout
Percentage shall no longer be based on the portion of the Performance Period otherwise considered
for purposes of Section 2.2 but shall instead be calculated based on performance for the portion of
the three-year Performance Period ending on the date of the Change in Control of the Company.

	6.	 	Tax Matters.

     6.1 Tax Withholding. The Company or the subsidiary which employs the Grantee shall be
entitled to require, as a condition of making any payments or issuing any shares upon vesting of
the RPSRs, that the Grantee or other person entitled to such shares or other payment pay any sums
required to be withheld by federal, state, local or other applicable tax law with respect to such
vesting or payment. Alternatively, the Company or such subsidiary, in its discretion, may make
such provisions for the withholding of taxes as it deems appropriate (including, without
limitation, withholding the taxes due from compensation otherwise payable to the Grantee or
reducing the number of shares otherwise deliverable with respect to the award (valued at their then
Fair Market Value) by the amount necessary to satisfy such withholding obligations).

     6.2 Transfer Taxes. The Company will pay all federal and state transfer taxes, if any, and
other fees and expenses in connection with the issuance of shares in connection with the vesting of
the RPSRs.

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

     6.4 Unfunded Arrangement. The right of the Grantee to receive payment under the award shall
be an unsecured contractual claim against the Company. As such, neither the Grantee nor any
Successor shall have any rights in or against any specific assets of the

 

Company based on the
award. Awards shall at all times be considered entirely unfunded for tax purposes.

	7.	 	Committee Authority.

     The Committee has the discretionary authority to determine any questions as to the date when
the Grantee’s employment terminated and the cause of such termination and to interpret any
provision of these Terms, the Grant Letter, the Stock Plan System, the Plan, and any other
applicable rules. Any action taken by, or inaction of, the Committee relating to or pursuant to
these Terms, the Grant Letter, the Stock Plan System, the Plan, or any other applicable rules shall
be within the absolute discretion of the Committee and shall be conclusive and binding on all
persons.

	8.	 	Plan; Amendment.

     The RPSRs subject to the award are governed by, and the Grantee’s rights are subject to, all
of the terms and conditions of the Plan and any other rules adopted by the Committee, as the
foregoing may be amended from time to time. The Grantee shall have no rights with respect to any
amendment of these Terms or the Plan unless such amendment is in writing and signed by a duly
authorized officer of the Company. In the event of a conflict between the provisions of the Grant
Letter and/or the Stock Plan System and the provisions of these Terms and/or the Plan, the
provisions of these Terms and/or the Plan, as applicable, shall control.

5

 

	9.	 	Required Holding Period.

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

	10.	 	Definitions.

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

     “Board” means the Board of Directors of the Company.

     “Cause” means the occurrence of either or both of the following:

	 	(i)	 	The Grantee’s conviction for committing an act of fraud, embezzlement, theft, or other
act constituting a felony (other than traffic related offenses or as a result of vicarious
liability); or

	 
	 	(ii)	 	The willful engaging by the Grantee in misconduct that is significantly injurious to the
Company. However, no act, or failure to act, on the Grantee’s part shall be considered
“willful” unless done, or omitted to be done, by the Grantee not in good faith and without
reasonable belief that his action or omission was in the best interest of the Company.

     “Change in Control” is used as defined in the Plan.

     “Change in Control Severance Arrangement” means a “Special Agreement” entered into by and
between the Grantee and the Company that provides severance protections in the event of certain
changes in control of the Company or the Company’s Change-in-Control Severance Plan, as each may be
in effect from time to time, or any similar successor agreement or plan that provides severance
protections in the event of a change in control of the Company.

     “Code” means the United States Internal Revenue Code of 1986, as amended.

     “Committee” means the Company’s Compensation Committee or any successor committee appointed by
the Board to administer the Plan.

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

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

     “Fair Market Value” is used as defined in the Plan; provided, however, the Committee in
determining such Fair Market Value for purposes of the award may utilize such other exchange,
market, or listing as it deems appropriate.

     “Good Reason” means, without the Grantee’s express written consent, the occurrence of any one
or more of the following:

	 	(i)	 	A material and substantial reduction in the nature or status of the Grantee’s authorities
or

6

 

	 	 	 	responsibilities (when such authorities and/or responsibilities are viewed in the aggregate)
from their level in effect on the day immediately prior to the start of the Protected Period,
other than (A) an inadvertent act that is remedied by the Company promptly after receipt of
notice thereof given by the Grantee, and/or (B) changes in the nature or status of the
Grantee’s authorities or responsibilities that, in the aggregate, would generally be viewed
by a nationally-recognized executive placement firm as resulting in the Grantee having not
materially and substantially fewer authorities and responsibilities (taking into
consideration the Company’s industry) when compared to the authorities and responsibilities
applicable to the position held by the Grantee immediately prior to the start of the
Protected Period. The Company may retain a nationally-recognized executive placement firm
for purposes of making the determination required by the preceding sentence and the written
opinion of the firm thus selected shall be conclusive as to this issue.
	 
	 	 	 	In addition, if the Grantee is a vice president, the Grantee’s loss of vice-president status
will constitute “Good Reason”; provided that the loss of the title of “vice president” will
not, in and of itself, constitute Good Reason if the Grantee’s lack of a vice president title
is generally consistent with the manner in which the title of vice president is used within
the Grantee’s business unit or if the loss of the title is the result of a promotion to a
higher level office. For the purposes of the preceding sentence, the Grantee’s lack of a
vice-president title will only be considered generally consistent with the manner in which
such title is used if most persons in the business unit with authorities, duties, and
responsibilities comparable to those of the Grantee immediately prior to the commencement of
the Protected Period do not have the title of vice-president.
	 
	 	(ii)	 	A reduction by the Company in the Grantee’s annualized rate of base salary as in effect
on the first to occur of the start of the Performance Period or the start of the Protected
Period, or as the same shall be increased from time to time.
	 
	 	(iii)	 	A material reduction in the aggregate value of the Grantee’s level of participation in
any of the Company’s short and/or long-term incentive compensation plans (excluding
stock-based incentive compensation plans), employee benefit or retirement plans, or
policies, practices, or arrangements in which the Grantee participates immediately prior to
the start of the Protected Period provided; however, that a reduction in the

 

	 	 	 	
aggregate value
shall not be deemed to be “Good Reason” if the reduced value remains substantially
consistent with the average level of other employees who have positions commensurate with
the position held by the Grantee immediately prior to the start of the Protected Period.
	 
	 	(iv)	 	A material reduction in the Grantee’s aggregate level of participation in the Company’s
stock-based incentive compensation plans from the level in effect immediately prior to the
start of the Protected Period; provided, however, that a reduction in the aggregate level of
participation shall not be deemed to be “Good Reason” if the reduced level of participation
remains substantially consistent with the average level of participation of other employees
who have positions commensurate with the position held by the Grantee immediately prior to
the start of the Protected Period.
	 
	 	(v)	 	The Grantee is informed by the Company that his or her principal place of employment for
the Company will be relocated to a location that is greater than fifty (50) miles away from
the Grantee’s principal place of employment for the Company at the start of the
corresponding Protected Period; provided that, if the Company communicates an intended
effective date for such relocation, in no event shall Good Reason exist pursuant to this
clause (v) more than ninety (90) days before such intended effective date.

     The Grantee’s right to terminate employment for Good Reason shall not be affected by the
Grantee’s incapacity due to physical or mental illness. The Grantee’s continued employment shall
not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting
Good Reason herein.

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

     “Parent” is used as defined in the Plan.

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

     The “Protected Period” corresponding to a Change in Control of the Company shall be a period
of time determined in accordance with the following:

7

 

	 	(i)	 	If the Change in Control is triggered by a tender offer for shares of the Company’s stock
or by the offeror’s acquisition of shares pursuant to such a tender offer, the Protected
Period shall commence on the date of the initial tender offer and shall continue through and
including the date of the Change in Control; provided that in no case will the Protected
Period commence earlier than the date that is six (6) months prior to the Change in Control.
	 
	 	(ii)	 	If the Change in Control is triggered by a merger, consolidation, or reorganization of
the Company with or involving any other corporation, the Protected Period shall commence on
the date that serious and substantial discussions first take place to effect the merger,
consolidation, or reorganization and shall continue through and including the date of the
Change in Control; provided that in no case will the Protected Period commence earlier than
the date that is six (6) months prior to the Change in Control.
	 
	 	(iii)	 	In the case of any Change in Control not described in clause (i) or (ii) above, the
Protected Period shall commence on the date that is six (6) months prior to the Change in
Control and shall continue through and include the date of the Change in Control.

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

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

In the case of a Grantee who is an officer of the Company subject to the Company’s mandatory
retirement at age 65 policy, “Retirement” or “Retire” shall also include as to that Grantee
(without limiting the Grantee’s ability to Retire pursuant to the preceding sentence) a termination
of the Grantee’s employment pursuant to such mandatory retirement policy (regardless of the
Grantee’s years of service and other than in connection with a termination by the Company or a
subsidiary for cause).

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

8

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