Document:

exv10wxpy

 

Exhibit 10(p)

Severance Plan for

Elected and Appointed Officers of

Northrop Grumman Corporation

As amended and restated effective January 1, 2008

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1. Purpose of Plan. The purpose of the Plan is to provide severance benefits for eligible
Elected and Appointed Officers of Northrop Grumman Corporation who reside and work in the United
States. The terms of this amended and restated Plan are effective as of January 1, 2008.

2. Definitions. The terms defined in this section shall have the meaning given below:

	 	(a)	 	“Committee” means the Compensation and Management Development Committee
of the Board of Directors of the Company or any successor to the Committee.
	 
	 	(b)	 	“Code” means the Internal Revenue Code of 1986, as amended.
	 
	 	(c)	 	“Company” means Northrop Grumman Corporation.
	 
	 	(d)	 	“CPC” means the Corporate Policy Council
	 
	 	(e)	 	“Disability” means any disability of an Officer recognized as a
disability for purposes of the Company’s long-term disability plan, or similar plan
later adopted by the Company in place of such plan.
	 
	 	(f)	 	“Key Employee” means an employee treated as a “specified employee” as
of his Separation from Service under Code section 409A(a)(2)(B)(i) of the Company
or its affiliate (i.e., a key employee (as defined in Code section 416(i) without
regard to paragraph (5) thereof)) if the Company’s stock is publicly traded on an
established securities market or otherwise. The Company shall determine in
accordance with a uniform Company policy which Participants are Key Employees as of
each December 31 in accordance with IRS regulations or other guidance under Code
section 409A, provided that in determining the compensation of individuals for this
purpose, the definition of compensation in Treas. Reg. § 1.415(c)-2(d)(3) shall be
used. Such determination shall be effective for the twelve (12) month period
commencing on April 1 of the following year.
	 
	 	(g)	 	“Officer ” means an Elected or Appointed Officer of Northrop Grumman
Corporation who resides and works in the United States.
	 
	 	(h)	 	“Plan” means this Severance Plan for Elected and Appointed Officers of
Northrop Grumman Corporation, as it may be amended from time to time.
	 
	 	(i)	 	“Qualifying Termination” means any one of the following (i) an
Officer’s involuntary termination of employment with the Company, other than
Termination for Cause or mandatory retirement, (ii) an Officer’s election to
terminate employment with the Company in lieu of accepting a downgrade to a
non-Officer position or status, (iii) following a divestiture of the Officer’s
business unit, an Officer’s election to terminate employment with

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	 	 	 	the acquiring Company in lieu of accepting a relocation to a job site located more
than fifty miles from the Officer’s current work location, or (iv) if the Officer’s
position is affected by a divestiture, the Officer is not offered a position of
equivalent salary with the buyer at the time of such divestiture or is not offered
buyer’s annual bonus (or similar program) offered to similarly situation officers of
buyer. “Qualifying Termination” does not include any change in the Officer ‘s
employment status due to any transfer within the Company or to an affiliate,
Disability, voluntary termination or normal retirement.
	 
	 	(j)	 	“Separation from Service” or “Separate from Service” means a
“separation from service” within the meaning of Code section 409A.
	 
	 	(k)	 	“Termination for Cause” means an Officer ’s termination of employment
with the Company because of:

	 	(i)	 	The continued failure by the Officer to devote reasonable time
and effort to the performance of his duties (other than a failure resulting from
the Officer ‘s incapacity due to physical or mental illness) after written
demand for improved performance has been delivered to the Officer by the Company
which specifically identifies how the Officer has not devoted reasonable time
and effort to the performance of his duties;
	 
	 	(ii)	 	The willful engaging by Officer in misconduct which is
substantially injurious to the Company, monetarily or otherwise, or
	 
	 	(iii)	 	The Officer’s conviction for committing an act of fraud,
embezzlement, theft, or other act constituting a felony (other than traffic
related offences or as a result of vicarious liability).

A Termination for Cause shall not include a termination attributable to:

	 	(i)	 	Bad judgment or negligence on the part of the Officer other than
habitual negligence; or
	 
	 	(ii)	 	An act or omission believed by the Officer in good faith to have
been in or not opposed to the best interests of the Company and reasonably
believed by the Officer to be lawful.

3. Eligibility Requirements.

(a) Benefits under the Plan are subject to the Company’s sole discretion and approval.

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(b) To be considered to receive benefits under the Plan an Officer must meet the following
conditions:

	 	(i)	 	The Officer must experience a Qualifying Termination that results
in termination of employment. If, before termination of employment occurs due
to the Qualifying Termination event, the Officer voluntarily quits, retires, or
experiences a Termination for Cause, the Officer will not receive benefits under
this Plan.
	 
	 	(ii)	 	The Officer must sign a Confidential Separation Agreement and
General Release that will include, among other things, a release of any and all
claims that he may have against the Company.

4. Severance Benefits. Upon the Qualifying Termination of any eligible Officer, the terminated
Officer shall be entitled to the following benefits under the Plan: (a) a lump-sum severance cash
payment, (b) an extension of the Officer’s existing medical and dental coverage, (c) a prorated
annual cash bonus payment, and (d) certain other fringe benefits.

	 	(a)	 	Lump-sum cash severance payment. The designated Appendix describes the
lump sum severance benefit available to the Officer.
	 
	 	(b)	 	Extension of Medical and Dental Benefits. The Company will continue to
pay its portion of the Officer’s medical and dental benefits for the period of time
following the Officer’s termination date that is specified in the designated
Appendix. Such continuation coverage shall run concurrently with COBRA
continuation coverage (or similar state law). The Officer must continue to pay his
portion of the cost of this coverage with after-tax dollars. If rates for active
employees increase during this continuation period, the contribution amount will
increase proportionately. Also, if medical and dental benefits are modified,
terminated or changed in any way for active employees during this continuation
period the Officer will also be subject to such modification, termination or
change. Following the continuation period specified in the designated Appendix the
Officer will be eligible to receive COBRA benefits for any remaining portion of the
applicable COBRA period (typically 18 months) at normal COBRA rates. The COBRA
period starts the first day of the month following the end of the continuation
period.
	 
	 	 	 	Example: A Non-CPC Officer receives a layoff notice on June 15, 2004, and his last
day of work is June 30, 2004. The Officer’s 18-month COBRA period commences July
1, 2004. The Officer will continue to receive medical and dental coverage from
July 1, 2004 through June 30, 2005, as long as the Officer continues to pay the
appropriate contribution. Full COBRA rates will apply to the Officer from July 1,
2005 until the end of the remaining COBRA period on December 31, 2005.

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If the Officer is not covered by medical and dental benefits at the time of his
termination, this section 4(b) will not apply and no continuation coverage will be offered.
No health or welfare benefits other than medical and dental will be continued pursuant to
the Plan, including but not limited to disability benefits.

The medical and dental benefits to be provided or payments to be made under this section
4(b) shall be reduced to the extent that the Officer is eligible for benefits or payments
for the same occurrence under another employer sponsored plan to which the Officer is
entitled because of his employment subsequent to the Qualifying Termination.

To the extent the benefits under this section 4(b) are, or ever become, taxable to the
Officer and to the extent the benefits continue beyond the period in which the Officer
would be entitled (or would, but for the Plan, be entitled) to COBRA continuation coverage
if the Officer elected such coverage and paid the applicable premiums, the Company shall
administer such continuation of coverage consistent with the following additional
requirements as set forth in Treas. Reg. § 1.409A-3(i)(1)(iv):

	 	(i)	 	Officer’s eligibility for benefits in one year will not affect
Officer’s eligibility for benefits in any other year;
	 
	 	(ii)	 	Any reimbursement of eligible expenses will be made on or before
the last day of the year following the year in which the expense was incurred;
and
	 
	 	(iii)	 	Officer’s right to benefits is not subject to liquidation or
exchange for another benefit.

In the event the preceding sentence applies and the Officer is a Key Employee, provision of
these benefits after the COBRA period shall commence on the first day of the seventh month
following the Officer’s Separation from Service (or, if earlier, the first day of the month
after the Officer’s death).

	 	(c)	 	Company Performance Related Payment. The Officer will be
eligible for a pro-rated cash payment for the current performance year, in addition
to the lump-sum cash severance payment described in section 4(a). This severance
payment will be equal in amount to the Officer’s annual bonus calculation using the
Company-achieved Unit Performance Factor with an Individual Performance Factor set
at 100, prorated from the beginning of the performance period (January 1st) to the
Officer’s date of termination. This severance payment will be paid when the annual
bonuses are paid to active employees.
	 
	 	(d)	 	Other Fringe Benefits. All reimbursements will be within the
limits

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	 	 	 	established in the Executive Perquisite Program. These perquisites will cease as of
the date of termination except for the following:

	 	(i)	 	Financial Planning and Tax Preparation. If an Officer
is eligible for financial planning reimbursement at the time of termination,
the Officer will be reimbursed for any financial planning fees incurred before
his termination date. If an Officer is eligible for tax preparation
reimbursement at the time of termination, he will be reimbursed for any income
tax preparation fees incurred for income earned during the year in which he
terminated employment with the Company. All such reimbursements shall be
administered consistent with the following additional requirements as set forth
in Treas. Reg. § 1.409A-3(i)(1)(iv): (1) Officer’s eligibility for benefits in
one year will not affect Officer’s eligibility for benefits in any other year;
(2) any reimbursement of eligible expenses will be made on or before the last
day of the year following the year in which the expense was incurred; and (3)
Officer’s right to benefits is not subject to liquidation or exchange for
another benefit. In addition, no reimbursements shall be made to an Officer
who is a Key Employee for six months following the Officer’s Separation from
Service.
	 
	 	 	 	Example: If an Officer’s employment is terminated during the calendar
year 2003, the Officer will receive reimbursement for income tax
preparation that would normally be incurred during the beginning of 2004.
Such reimbursement must be paid no later than December 31, 2005.
	 
	 	(ii)	 	Automobile Allowance. If an Officer has an automobile
allowance at the time of termination, the Officer will receive a lump sum
payment equal to the value specified on the designated Appendix.
	 
	 	(iii)	 	Outplacement Service. The Officer will be reimbursed
for the cost of reasonable outplacement services provided by the Company’s
outplacement service provider for services provided within one year after the
Officer’s date of termination; provided, however, that the total reimbursement
shall be limited to an amount equal to fifteen percent (15%) of the Officer’s
base salary as of the date of termination. All services will be subject to the
current contract with the provider, and all such expenses shall be reimbursed as
soon as practicable, but in no event later than the end of the year following
the year the Officer Separates from Service.

	 	(e)	 	Time and Form of Payment. The severance benefits under
sections 4(a) and 4(d)(ii) will be paid to the eligible Officer in a lump sum as
soon as practicable following the Officer’s Separation from Service, but in no
event

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	 	 	 	beyond thirty (30) days from such date, provided the Officer signs the requisite
release. Notwithstanding the foregoing, if the Officer is a Key Employee, the lump
sum payment shall be made on the first day of the seventh month following the
Officer’s Separation from Service (or, if earlier, the first day of the month after
the Officer’s death). This amount will be paid after all regular taxes and
withholdings have been deducted. No payment made pursuant to the Plan is eligible
compensation under any of the Company’s benefit plans, including without limitation,
pension, savings, or deferred compensation plans.

5. Limitation of Plan Benefits. If the total amount of benefits, including Plan benefits,
provided to the Officer results in an “excess parachute payment” within the meaning of Code section
280G, the Company, in its sole discretion, may reduce the benefits provided under the Plan so that
the total payment will not result in the making of an excess parachute payment to the Officer.

6. Offset for Other Benefits Received. The benefits under the Plan are in lieu of, and not in
addition to, any other severance or separation benefits for which the Officer is eligible under any
Company plan, policy or arrangements (including but not limited to, severance benefits provided
under any employment agreement, retention incentive agreement, or similar benefits under any
individual change in control agreements, plans, policies, arrangements and change in control
agreements of acquired companies or business units) (collectively, “severance plans”). If an
Officer receives any benefit under any severance plan, such benefit shall cause a corresponding
reduction in benefits under this Plan. If, despite any release that the Officer signs in connection
with the Plan, such Officer is later awarded and receives benefits under any other severance
plan(s), any benefits that the Officer receives under the Plan will be treated as having been
received under those other severance plans for purposes of calculating total benefits received
under those other severance plans (that is, benefits under those other severance plans will be
reduced by amounts received under the Plan).

7. Administration. The Plan shall be administered by the Chief Human Resources Officer of the
Company (the “administrator”). The administrator has sole and absolute discretion to interpret the
terms of the Plan, eligibility for benefits, and determine questions of fact. The administrator may
delegate any of his duties or authority to any individual or entity. Authority to hear appeals has
been delegated to the corporate Severance Plan Review Committee.

8. Claims and Appeals Procedures

Claims Procedure. If an Officer believes that he or she is entitled to benefits under the
Plan and has not received them, the Officer or his authorized representative (each, a “claimant”)
may file a claim for benefits by writing to the Chief Human Resources Officer, in care of the
Company. The letter must state the reason why the claimant believes the Officer is entitled to
benefits, and the letter must be received no later than 90 days after the Officer’s termination of
employment, or 90 days after a payment was due, whichever comes first.

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If the claim is denied, in whole or in part, the claimant will receive a written response within 90
days. This response will include (i) the reason(s) for the denial, (ii) reference(s) to the
specific Plan provisions on which denial is based, (iii) a description of any additional
information necessary to perfect the claim, and (iv) a description of the Plan’s claims and appeals
procedures. In some cases more than 90 days may be needed to make a decision, in which case the
claimant will be notified prior to the expiration of the 90 days that more time is needed to review
the claim and the date by which the Plan expects to render the decision. In no event will the
extension be for more than an additional 90 days.

Appeal of Denied Claim. The claimant may appeal a denied claim by filing an appeal with
the corporate Severance Plan Review Committee within 60 days after the claim is denied. The appeal
should be sent to the Severance Plan Review Committee c/o the Company. As part of the appeal
process the claimant will be given the opportunity to submit written comments and information and
be provided, upon request and free or charge, with copies of documents and other information
relevant to the claim. The review on appeal will take into account all information submitted on
appeal, whether or not it was provided for in the initial benefit determination. A decision will
be made on the appeal within 60 days, unless additional time is needed. If more time is needed,
the claimant will be notified prior to the expiration of the 60 days that up to an additional 60
days is needed and the date by which the Plan expects to render the decision. If the claim is
denied, in whole or in part, on appeal the claimant will receive a written response which will
include (i) the reason(s) for the denial, (ii) references to the specific Plan provisions on which
the denial is based, (iii) a statement that the claimant is entitled to receive, upon request and
free of charge, copies of all documents and other information relevant to the claim on appeal, and
(iv) a description of the Plan’s claims and appeals procedures.

If the claim is denied on appeal, the Officer has the right to bring an action under Section 502(a)
of the Employee Retirement Income Security Act of 1974, as amended. Any claimant must pursue all
claims and appeals procedures described in the Plan document before seeking any other legal
recourse with respect to Plan benefits. In addition, any lawsuit must be filed within six months
from the date of the denied appeal, or two years from the Officer’s termination date, whichever
occurs first.

9. Amendment. The Company (acting through the Committee) reserves the right at any time to
terminate or amend this Plan in any respect and without the consent of any Officer.

10. Unfunded Obligations. All benefits due an Officer or the Officer’s beneficiary under this
Plan are unfunded and unsecured and are payable out of the general funds of the Company. The
Company, in its sole and absolute discretion, may establish a trust associated with the payment of
Plan benefits, provided that the trust does not alter the characterization of the Plan as an
“unfunded plan” for purposes of the Employee

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Retirement Income Security Act, as amended. Any such trust shall make distributions in accordance
with the terms of the Plan.

11. Transferability of Benefits. The right to receive payment of any benefits under this Plan
shall not be transferred, assigned or pledged except by beneficiary designation or by will or under
the laws of descent and distribution.

12. Taxes. The Company may withhold from any payment due under this Plan any taxes required to be
withheld under applicable federal, state or local tax laws or regulations.

13. Gender. The use of masculine pronouns in this Plan shall be deemed to include both males and
females.

14. Construction, Governing Laws. The Plan is intended as (i) a pension plan within the meaning
of Section 3(2) of the Employee Retirement Income Security Act, as amended (“ERISA”), and (ii) an
unfunded pension plan maintained by the Company for a select group of management or highly
compensated employees within the meaning of Department of Labor Regulation 2520.104-23 promulgated
under ERISA, and Sections 201, 301, and 401 of ERISA. Nothing in this Plan creates a vested right
to benefits in any employee or any right to be retained in the employ of the Company. Except to
the extent that federal legislation or applicable regulation shall govern, the validity and
construction of the Plan and each of its provisions shall be subject to and governed by the laws of
the State of California.

15. Severability. If any provision of the Plan is found, held or deemed to be void, unlawful or
unenforceable under any applicable statute or other controlling law, the remainder of the Plan
shall continue in full force and effect.

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Appendix for Corporate Policy Council (CPC) Officers

The following benefits shall apply for purposes of eligible Officers who are members of the CPC:

Section 4(a). Lump-sum Cash Severance Payment. The lump sum cash severance
payment shall equal two times the sum of (A) one year’s base salary as in effect on the
effective date of the Officer’s termination, plus (B) the greater of (i) the Officer’s
target annual bonus established under the Company’s Performance Achievement Plan or
Incentive Compensation Plan bonus program (or any successor bonus program) for the fiscal
year in which the date of termination occurs, or (ii) the average of the Officer’s bonus
earned under the Company’s Performance Achievement Plan or Incentive Compensation Plan (or
a successor bonus program) for the three full fiscal years prior to the date of the
Officer’s termination. No supplemental bonuses or other bonuses will be combined with the
executive’s annual bonus for purposes of this computation.

Section 4(b). Extension of Medical and Dental Benefits. The Company will continue
to pay its portion of the Officer’s medical and dental benefits for two years following the
Officer’s termination date.

Section 4(d)(ii). Automobile Allowance. If an Officer has an automobile
allowance, the Officer will receive a lump sum payment equal to the value of a twenty-four
month car allowance.

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Appendix for non-CPC Officers

The following benefits shall apply for purposes of eligible Officers who are not members of the
CPC:

Section 4(a). Lump-sum Cash Severance Payment. The lump sum cash severance payment
shall equal the sum of (A) one year’s base salary as in effect on the effective date of the
Officer’s termination, plus (B) the greater of (i) the Officer’s target annual bonus
established under the Company’s Performance Achievement Plan or Incentive Compensation Plan
bonus program (or any successor bonus program) for the fiscal year in which the date of
termination occurs, or (ii) the average of the Officer’s bonus earned under the Company’s
Performance Achievement Plan or Incentive Compensation Plan (or a successor bonus program)
for the three full fiscal years prior to the date of the Officer’s termination. No
supplemental bonuses or other bonuses will be combined with the executive’s annual bonus
for purposes of this computation.

Section 4(b). Extension of Medical and Dental Benefits. The Company will continue
to pay its portion of the Officer’s medical and dental benefits for one year following the
Officer’s termination date.

Section 4(d)(ii). Automobile Allowance. If an Officer has an automobile
allowance, the Officer will receive a lump sum payment equal to the value of a twelve month
car allowance.

11exv10wxqy

 

Exhibit 10(q)

NORTHROP GRUMMAN CORPORATION

NON-EMPLOYEE DIRECTORS EQUITY PARTICIPATION PLAN

As Amended and Restated January 1, 2008

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 
	 	 	 	 
	ARTICLE 1—Introduction
	 	 	1	 
	Section 1.01. Purpose
	 	 	1	 
	Section 1.02. Effective Date
	 	 	1	 
	 
	 	 	 	 
	ARTICLE 2—Definitions
	 	 	1	 
	Section 2.01. Accrual
	 	 	1	 
	Section 2.02. Annual Accrual
	 	 	1	 
	Section 2.03. Annual Retainer Fee
	 	 	1	 
	Section 2.04. Board
	 	 	1	 
	Section 2.05. Change in Control
	 	 	1	 
	Section 2.06. Common Stock
	 	 	1	 
	Section 2.07. Company
	 	 	1	 
	Section 2.08. Conversion Date
	 	 	1	 
	Section 2.09. Debilitating Illness
	 	 	1	 
	Section 2.10. Director
	 	 	1	 
	Section 2.11. Dividend Equivalent
	 	 	1	 
	Section 2.12. Electing Outside Director
	 	 	2	 
	Section 2.13. Equity Participation Account
	 	 	2	 
	Section 2.14. Fair Market Value Of The Common Stock
	 	 	2	 
	Section 2.15. Outside Director
	 	 	2	 
	Section 2.16. Participant
	 	 	2	 
	Section 2.17. Plan
	 	 	2	 
	Section 2.18. Retired Outside Director
	 	 	2	 
	Section 2.19. Retirement Plan
	 	 	2	 
	Section 2.20. Special Accrual
	 	 	2	 
	Section 2.21. Surviving Spouse
	 	 	2	 
	Section 2.22. Total Disability
	 	 	3	 
	Section 2.23. Unit
	 	 	3	 
	Section 2.24. Year Of Service
	 	 	3	 
	 
	 	 	 	 
	ARTICLE 3—Participation
	 	 	3	 
	Section 3.01. In General
	 	 	3	 
	 
	 	 	 	 
	ARTICLE 4—Entitlement To Benefits
	 	 	3	 
	Section 4.01. Normal Benefit
	 	 	3	 
	Section 4.02. Partial Benefit
	 	 	4	 
	Section 4.03. Change in Control Benefit
	 	 	4	 
	Section 4.04. Better-Of Benefit
	 	 	4	 
	Section 4.05. Surviving Spouse Benefit
	 	 	4	 
	Section 4.06. Other Participants
	 	 	4	 

 

 

	 	 	 	 	 
	ARTICLE 5—Amount Of Benefit
	 	 	4	 
	Section 5.01. Normal Benefit Amount
	 	 	4	 
	Section 5.02. Partial Benefit Amount
	 	 	4	 
	Section 5.03. Change in Control Benefit Amount
	 	 	5	 
	Section 5.04. Better-Of Benefit Amount
	 	 	5	 
	 
	 	 	 	 
	ARTICLE 6—Accounts
	 	 	5	 
	Section 6.01. Equity Participation Accounts
	 	 	5	 
	Section 6.02. Annual Accruals
	 	 	5	 
	Section 6.03. Special Accruals
	 	 	6	 
	Section 6.04. Conversion Of Accruals Into Units
	 	 	6	 
	Section 6.05. Dividend Equivalents
	 	 	6	 
	Section 6.06. Change in the Common Stock
	 	 	6	 
	Section 6.07. Benefit Accrual Freeze Effective June 1, 2005
	 	 	6	 
	 
	 	 	 	 
	ARTICLE 7—Distributions
	 	 	7	 
	Section 7.01. In General
	 	 	7	 
	Section 7.02. Amount of Installments
	 	 	8	 
	Section 7.03. Conversion of Units into Dollars
	 	 	8	 
	Section 7.04. T-Bond Election
	 	 	8	 
	Section 7.05. Payment to a Trust
	 	 	9	 
	 
	 	 	 	 
	ARTICLE 8—Miscellaneous Provisions
	 	 	9	 
	Section 8.01. Amendment And Termination
	 	 	9	 
	Section 8.02. Plan Unfunded
	 	 	9	 
	Section 8.03. No Assignments
	 	 	9	 
	Section 8.04. No Double Payment
	 	 	10	 
	Section 8.05. No Other Rights
	 	 	10	 
	Section 8.06. Successors of the Company
	 	 	10	 
	Section 8.07. Law Governing
	 	 	10	 
	Section 8.08. Actions By Company
	 	 	10	 
	Section 8.09. Plan Representatives
	 	 	10	 
	Section 8.10. Construction
	 	 	10	 
	 
	 	 	 	 
	APPENDIX A—Change In Control Benefits
	 	 	11	 
	Section A.01. In General
	 	 	11	 
	Section A.02. Change In Control
	 	 	11	 
	Section A.03. Override by Board
	 	 	12	 
	Section A.04. February, 1998 Vote
	 	 	12	 
	Section A.05. Vesting at Change in Control
	 	 	12	 
	Section A.06. Limitation on Amendment Authority
	 	 	12	 

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ARTICLE 1

Introduction

     Section 1.01. Purpose. The purposes of the Plan are to enable the Company to
attract and retain outstanding individuals to serve as non-employee directors of the Company, and
to further align the interests of non-employee directors with the interests of the other
shareholders of the Company by making the amount of the compensation of non-employee directors
dependent in part on the value and appreciation over time of the Common Stock of the Company.

     Section 1.02. Effective Date. This restatement of the Plan is effective as of
January 1, 2008. The Plan was originally effective March 19, 1997.

ARTICLE 2

Definitions

     The following terms when used and capitalized in the Plan will have the following meanings:

     Section 2.01. Accrual. Any dollar amounts credited to the Equity Participation
Account, including any Special Accrual, Annual Accruals, Additional Accruals and Dividend
Equivalents.

     Section 2.02. Annual Accrual. This is defined in Section 6.02.

     Section 2.03. Annual Retainer Fee. That fixed amount paid to Directors
exclusive of travel expenses, meeting fees, committee fees, or any other similar remuneration.

     Section 2.04. Board. The Board of Directors of the Company.

     Section 2.05. Change in Control. This is defined in Sections A.02-A.04.

     Section 2.06. Common Stock. The Common Stock of the Company.

     Section 2.07. Company. Northrop Grumman Corporation.

     Section 2.08. Conversion Date. The date the Outside Director’s service as a
member of the Board terminates for any reason, including death.

     Section 2.09. Debilitating Illness. Any physical or mental condition which
renders an individual unable to carry on the normal duties of his or her active business career.

     Section 2.10. Director. A member of the Board.

     Section 2.11. Dividend Equivalent. An amount equal to the cash dividend per
share which is payable on any dividend payment date for the Common Stock.

 

 

     Section 2.12. Electing Outside Director. An Outside Director participating in
the Retirement Plan who, at the inception of this Plan, elected to terminate participation in the
Retirement Plan and to participate in this Plan instead.

     Section 2.13. Equity Participation Account. An unfunded bookkeeping account
maintained by the Company for a Participant to which amounts are credited under the Plan.

     Section 2.14. Fair Market Value Of The Common Stock. This is determined as
follows:

     (a) for relevant Accruals and Conversion Dates that occur on or before February 18, 1998, the
closing price of a share of Common Stock as reported on the composite tape for securities listed on
the New York Stock Exchange (the “Exchange”) for the date in question. If no sales of Common Stock
were made on the Exchange on that date, the closing price of a share of Common Stock as reported on
said composite tape for the preceding day on which sales of Common Stock were made on the Exchange
shall be substituted; and

     (b) for relevant Accruals and Conversion Dates that occur after February 18, 1998, the average
of the daily closing prices of a share of Common Stock as reported on the composite tape for
securities listed on the Exchange for the 20 trading days (counting as trading days only days on
which sales of Common Stock are reported) ending with the date in question.

     Section 2.15. Outside Director. A Director who is not a common law employee of
the Company.

     Section 2.16. Participant. Each current or former Outside Director eligible
for benefits under the Plan who has not yet received a complete distribution of his or her benefits
under the Plan, other than a former Outside Director who terminated service with the Board without
any entitlement to benefits under Sections 4.01-4.03.

     Section 2.17. Plan. The Northrop Grumman Corporation Non-Employee Directors
Equity Participation Plan.

     Section 2.18. Retired Outside Director. An Outside Director whose service as a
member of the Board for any reason has terminated and who is entitled to receive a distribution.

     Section 2.19. Retirement Plan. The Northrop Grumman Corporation Board of
Directors Retirement Plan.

     Section 2.20. Special Accrual. This is defined in Section 6.03.

     Section 2.21. Surviving Spouse. A person who:

	 	(a)	 	was legally married to the Participant for at least one year prior to the date
the Participant ceases to serve on the Board (including death while serving on the
Board), and
	 
	 	(b)	 	outlives the deceased Participant by at least 30 calendar days,

2

 

to the extent he or she is not prevented from receiving benefits under the Plan by a court order or
property settlement at the time payments would otherwise be due.

     Section 2.22. Total Disability. Total disability as defined in the Northrop
Grumman Long-Term Disability Insurance Plan.

     Section 2.23. Unit. An equivalent to a share of Common Stock, which is the
denomination into which all dollar Accruals to any Equity Participation Account are to be
converted.

     Section 2.24. Year Of Service. A 12-consecutive-month period of service as an
Outside Director.

ARTICLE 3

Participation

     Section 3.01. In General. A Director is eligible to participate in the Plan if
he or she:

     (a) becomes an Outside Director after March 19, 1997, or

     (b) is an Electing Outside Director.

ARTICLE 4

Entitlement To Benefits

     Section 4.01. Normal Benefit. Each Participant who terminates service on the
Board will be entitled to receive a benefit under Section 5.01 if he or she satisfies (a) or (b):

     (a) He or she completes at least three consecutive Years of Service.

     (b) He or she retires from the Board as a result of Total Disability or a Debilitating
Illness.

     Notwithstanding any provision of the Plan to the contrary, a Participant that terminates
service on the Board without satisfying either (a) or (b) above will be entitled to receive a
benefit under Section 5.01 if:

     (i) He or she terminated service on the Board for the sole purpose of pursuing or accepting a
position (whether appointed, elected, or otherwise) with a federal, state, or local governmental
entity or for some other purpose that is determined by the Company to constitute public service;
and

     (ii) He or she recommences service on the Board as an Outside Director within a reasonably
practicable period following the termination of, or termination of the pursuit of, the governmental
or public service position and the Participant’s total service before and after the

3

 

termination and recommencement of service on the Board, when aggregated, equals at least three Years of Service.

     Section 4.02. Partial Benefit. A Participant will be entitled to receive a
partial benefit under Section 5.02 if:

     (a) he or she terminates service on the Board prior to completing three consecutive Years of
Service, and

     (b) his or her termination occurs because he or she will have attained age 70 prior to the
Annual Meeting of Shareholders.

     Section 4.03. Change in Control Benefit. A Participant who is not entitled to
benefits under Section 4.01 will be entitled to receive a Change in Control benefit under Section
5.03 if the conditions described in Appendix A are met.

     Section 4.04. Better-Of Benefit. A Participant entitled to a benefit under
Sections 4.01-4.03 will be entitled to “better-of” benefits under Section 5.04 if he or she:

     (a) was a Participant in the Plan and a current Outside Director as of March 1, 1998, and

     (b) terminates service on account of death, Debilitating Illness or Total Disability.

     Section 4.05. Surviving Spouse Benefit. Upon a Participant’s death, his or her
Surviving Spouse, if any, will be eligible to receive the remainder of the payments due the
Participant. If there is no Surviving Spouse, all payments will cease.

     Section 4.06. Other Participants. No benefits will be paid with respect to a
Participant who terminates service with the Board unless the eligibility conditions of Section
4.01, 4.02 or 4.03 are satisfied.

ARTICLE 5

Amount Of Benefit

     Section 5.01. Normal Benefit Amount. The normal benefit amount is the full
balance of the Participant’s Equity Participation Account.

     Section 5.02. Partial Benefit Amount. The partial benefit amount is the
Participant’s Equity Participation Account multiplied by a fraction.

     (a) The numerator of the fraction is the number of the Participant’s completed consecutive
Years of Service and the denominator is three.

     (b) For purposes of (a), completed Years of Service include completed months of service
(rounded up to the nearest month) expressed as a fraction of a year to the nearest quarter.

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     Section 5.03. Change in Control Benefit Amount. The Change in Control benefit
is equal to the full balance of the Participant’s Equity Participation Account.

     Section 5.04. Better-Of Benefit Amount. A Participant entitled to “better-of”
benefits will have his or her benefits determined under this Section if that would result in
greater benefits than those provided under Sections 5.01-5.03, as applicable.

     (a) The benefit under this Section equals the benefit the Participant would receive (if any)
if he or she were a participant under the Retirement Plan.

     (b) If a Participant would not be entitled to any benefit under the Retirement Plan (e.g.,
because he or she failed to meet the five years of service requirement), this Section will not
provide any alternative benefits.

     (c) The Retirement Plan benefit will be considered greater for purposes of this Section if the
present value of the projected Retirement Plan benefit is greater than the Participant’s balance in
his or her Equity Participation Account at the Conversion Date.

     (d) For purposes of determining the present value of the Retirement Plan benefit, the
following assumptions will be used:

          (1) An interest rate assumption of 6.5% will be used.

          (2) No mortality factor will be applied. The Participant will be assumed to get all payments
before dying.

          (3) The Annual Retainer Fee used by the Retirement Plan will be assumed to remain constant for
all future years.

ARTICLE 6

Accounts

     Section 6.01. Equity Participation Accounts. An Equity Participation Account
will be maintained for each Participant having an amount to his or her credit under the Plan. The
account will keep track of Accruals and payments for a Participant’s benefit.

     Section 6.02. Annual Accruals. On each March 19, the Company will credit an
amount equal to 50% of the Annual Retainer Fee in effect on that date (an “Annual Accrual”) to the
Equity Participation Account of each Participant who provided a full Year of Service in the
immediately preceding 12-month period.

     (a) No accrual will be made for any Outside Director who has provided at least ten consecutive
Years of Service.

     (b) Participants who have provided less than a full Year of Service for the immediately
preceding 12-month period will receive a pro rated portion of the normal Annual Accrual based on
their months of service for the period (rounded up to the nearest month) divided by 12.

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     Section 6.03. Special Accruals. As of March 19, 1997, the Company credited to
the Equity Participation Account of each Electing Outside Director a special, one-time credit (a
“Special Accrual”). The dollar amount of the Special Accrual was equal to the present value
(calculated at a 6.5% discount rate) of the accrued benefits of an Electing Outside Director under
the Retirement Plan.

     Section 6.04. Conversion Of Accruals Into Units. Each Accrual will be
converted into Units by dividing the dollar amount of the Accrual by the Fair Market Value of the
Common Stock on the day the Accrual is made. Units will be calculated and recorded in Equity
Participation Accounts rounded to the third decimal place.

     Section 6.05. Dividend Equivalents. On each date on which cash dividends are
paid on shares of the Common Stock, Equity Participation Accounts will be credited with one
Dividend Equivalent for each Unit credited to such Account.

     (a) Each fraction of a Unit will be credited with a like fraction of a Dividend Equivalent on
such date.

     (b) Dividend Equivalents credited to each Equity Participation Account will be converted into
Units by dividing the dollar amount of the Dividend Equivalent by the Fair Market Value of the
Common Stock on the date the Dividend Equivalent is accrued.

     Section 6.06. Change in the Common Stock. In the event of any stock dividend,
stock split, recapitalization, distribution of property, merger, split-up, spin-off, or other
change affecting or distribution with respect to the Common Stock of the Company (other than cash
dividends), the Units in each Account will be adjusted in the same manner and proportion as the
change to the Common Stock.

     Section 6.07. Benefit Accrual Freeze Effective June 1, 2005. Notwithstanding
any other provision of this Plan, no further Accruals shall be credited to any Participant’s Equity
Participation Account under this Plan at any time after May 31, 2005; provided, however, that
Dividend Equivalents will continue to be credited to a Participant’s Equity Participation Account
after such date in accordance with Section 6.05. Accordingly, each Participant shall be entitled
to the benefit he or she earned under this Plan through and including May 31, 2005, but, except
with respect to Dividend Equivalents, shall not be credited with any additional Accruals or other
benefits following May 31, 2005. No person shall become a Participant under this Plan at any time
after May 31, 2005. Notwithstanding the foregoing provisions, a Participant shall continue to be
credited with Years of Service for periods of service as an Outside Director after May 31, 2005.”

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ARTICLE 7

Distributions

     Section 7.01. In General.

     (a) All distributions of Equity Participation Accounts to Participants will be made in cash.

     (b) The Equity Participation Account of each Retired Outside Director will be paid in a number
of annual installments equal to the number of full Years of Service for which benefits have been
accrued (not to exceed ten), subject to (e).

     (c) Payments will commence on the 20th business day following the Conversion Date for such
Equity Participation Account.

     (d) Notwithstanding (c), all Section 409A Payments shall commence on the 20th
business day following a Participant’s Separation from Service. However, if a Participant is a Key
Employee as of his Separation from Service, payment shall commence on the first day of the seventh
month following the date of his Separation from Service (or, if earlier, the date of his death).
Amounts otherwise payable to the Participant during such period of delay shall be accumulated and
paid on the first day of the seventh month following the Participant’s Separation from Service,
along with interest on the delayed payments. Interest shall be computed using the retroactive
annuity starting date rate in effect under the Northrop Grumman Pension Plan on a month-by-month
basis during such delay (i.e., the rate may change in the event the delay spans two calendar
years).

     For purposes of this Section, the following terms shall have the meanings indicated below:

Affiliated Company. The Company and any other entity related to the Company under
the rules of section 414 of the Code. The Affiliated Companies include Northrop Grumman
Corporation and its 80%-owned subsidiaries and may include other entities as well.

Code. The Internal Revenue Code of 1986, as amended.

Key Employee. An employee treated as a “specified employee” under Code section
409A(a)(2)(B)(i) of the Company or an Affiliated Company (i.e., a key employee (as defined
in Code section 416(i) without regard to paragraph (5) thereof)) if the Company’s or an
Affiliated Company’s stock is publicly traded on an established securities market or
otherwise. The Company shall determine in accordance with a uniform Company policy which
participants are Key Employees as of each December 31 in accordance with IRS regulations or
other guidance under Code section 409A, provided that in determining the compensation of
individuals for this purpose, the definition of compensation in Treas. Reg. §
1.415(c)-2(d)(3) shall be used. Such determination shall be effective for the twelve (12)
month period commencing on April 1 of the following year.

7

 

     Section 409A Payments. Payments related to Plan benefits that were not earned and
vested as of December 31, 2004 within the meaning of Code section 409A and official guidance
thereunder.

     Separation from Service. A “separation from service” within the meaning of Code
section 409A.

     (e) All payments will cease no later than:

          (1) upon the death of the Surviving Spouse, or

          (2) if there is no Surviving Spouse, upon the death of the Participant.

     Any payment that would have been payable to the Participant or a Surviving Spouse absent death
that is not payable as a result of this subsection (e) shall be forfeited.

     Section 7.02. Amount of Installments. Each installment will be in an amount
equal to the total dollar value of the Equity Participation Account as of the payment date divided
by the number of installments remaining to be paid.

     Section 7.03. Conversion of Units into Dollars. The total dollar value of the
Equity Participation Account will be determined by multiplying the number of Units then in the
account by the Fair Market Value of the Common Stock on the payment date. The number of Units in
the account will be reduced by the Unit equivalent of each payment.

     Section 7.04. T-Bond Election: If a Participant makes an election under this
section, the amount of each payment will be determined under this section rather than under Section
7.03. The timing and number of payments will still be determined under Section 7.01.

     (a) Account Balance: If a Participant makes an election under this section, his or her
Equity Participation Account will be converted to a deemed principal amount at the Conversion Date
which will earn deemed interest on the remaining balance. The Account will be increased for deemed
interest and reduced for payments made. The Account will no longer be based on the value of the
Common Stock.

     (b) Initial Principal Amount: The initial principal amount for any Participant will be
determined on the Conversion Date by multiplying the number of Units in the Participant’s Equity
Participation Account by the Fair Market Value of the Common Stock on the Conversion Date.

     (c) Initial Payment: The initial payment will be equal to the Initial Principal Amount
divided by the total number of installments to be paid.

     (d) Later Payments: Each annual installment after the Initial Payment will be equal to
the remaining Account balance at the applicable payment date divided by the number of remaining
installments.

8

 

     (e) Interest Credits: Interest will be credited on the amount remaining after the
Initial Payment and future account balances at the rate specified in (f), compounded daily.

     (f) T-Bond Rate: The interest rate will be equal to the average interest rate on
10-year U.S. Treasury bonds for the 52 weeks ending immediately prior to the applicable payment
date.

     (g) Elections: An election under this subsection may be made only by delivering a
written election of this T-Bond option to the Secretary of Northrop Grumman Corporation (or its
successor), on a form specified by the Secretary:

          (1) no later than March 1, 1998, in the case of Participants who were Outside Directors as of
February 18, 1998, or

          (2) no later than 30 days after becoming an Outside Director with respect to Participants who
become Outside Directors after March 1, 1998.

After the relevant date in (1) or (2), an election (or failure to make an election) under this
Section will become irrevocable.

     Section 7.05. Payment to a Trust. The Participant may elect that payments
under this Article be made to a trust. Any payments due will be made to the trust as long as the
election by the Participant remains in effect.

ARTICLE 8

Miscellaneous Provisions

     Section 8.01. Amendment And Termination. The Board may at any time, or from
time to time, amend or terminate the Plan.

     (a) No such amendment or termination may reduce Plan benefits which accrued prior to the
amendment or termination without the prior written consent of each person entitled to receive
benefits under the Plan who is adversely affected by such action.

     (b) The amendment and termination power of this Section is also subject to the provisions of
Section A.06.

     Section 8.02. Plan Unfunded. The Plan is unfunded. Benefits under the Plan
represent only a general contractual conditional obligation of the Company to pay in accordance
with the provisions of the Plan.

     Section 8.03. No Assignments. All payments under the Plan will be made only to
the Participant, to his or her Surviving Spouse, or to any trust designated by the Participant
under Section 7.05. The right to receive payments under the Plan may not otherwise be assigned or
transferred by, and is not subject to the claims of creditors of, any Participant or his or her
Surviving Spouse.

9

 

     Section 8.04. No Double Payment. This Section applies if, despite the prior
Section, with respect to any Participant (or his or her Surviving Spouse), the Company is required
to make payments under this Plan to a person or entity other than the proper payees described in
the Plan. In such a case, any amounts due the Participant (or his or her Surviving Spouse) under
this Plan will be reduced by the actuarial value of the payments required to be made to such other
person or entity.

     (a) Actuarial value will be determined using the following actuarial assumptions specified by
Treas. Reg. § 1.417(e)-1(d)(2)-(4) (or any successor regulation). The stability period will be one
calendar month and the lookback month will be the second calendar month preceding the stability
period.

     (b) In dividing a Participant’s benefit between the Participant and another person or entity,
consistent actuarial assumptions and methodologies will be used so that there is no increased cost
to the Company on an actuarial basis.

     Section 8.05. No Other Rights. Neither the establishment of the Plan, nor any
action taken under it, will in any way obligate the Company to nominate an Outside Director for
re-election or continue to retain an Outside Director on the Board or confer upon any Outside
Director any other rights with respect to the Company.

     Section 8.06. Successors of the Company. The Plan will be binding upon any
successor to the Company, whether by merger, acquisition, consolidation or otherwise.

     Section 8.07. Law Governing. The Plan will be governed by the laws of the
State of California.

     Section 8.08. Actions By Company. Any powers exercisable by the Company under
the Plan will be utilized by written resolution adopted by the Board or its delegate. The Board may
by written resolution delegate any of the Company’s powers under the Plan and any such delegations
may provide for subdelegations, also by written resolution.

     Section 8.09. Plan Representatives. Those authorized to act as Plan
representatives will be designated in writing by the Board or its delegate.

     Section 8.10. Construction. The Plan shall be construed and interpreted to
comply with section 409A of the Internal Revenue Code. Notwithstanding Section 8.01 above, the Company reserves the right to amend the Plan to the
extent it reasonably determines is necessary in order to preserve the intended tax consequences of
the Plan in light of section 409A and any regulations or other guidance promulgated thereunder.

10

 

APPENDIX A

Change In Control Benefits

     Section A.01. In General. This Appendix provides for accelerated vesting of
benefits in the event of a Change of Control.

     Section A.02. Change In Control. Except as provided in Sections A.03 and A.04,
a Change in Control occurs under any of the following circumstances:

     (a) Any “person” as such term is used in Sections 13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (“Exchange Act”) or any successor provisions, other than a trustee
or other fiduciary holding securities under any other employee benefit plan of the Company or an
Affiliate, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act or any
successor provisions), directly or indirectly, of securities of the Company representing fifteen
percent (15%) or more of the combined voting power of the Company’s then outstanding securities
(unless the event causing the fifteen percent (15%) threshold to be crossed is an acquisition of
securities directly from the Company).

     (b) During any period of two consecutive years, “Continuing Directors”, as described in (2),
cease for any reason to constitute at least a majority of the Board.

          (1) The period of two consecutive years does not include any period prior to the adoption of
this Plan on March 19, 1997.

          (2) The term “Continuing Directors”, for purposes of this Appendix, means:

               (A) individuals who at the beginning of the two-consecutive-year period constitute the Board,
and

               (B) any new director whose nomination by the Board or election by the Company’s shareholders
was approved by a vote of at least two-thirds of the directors then still in office who either were
directors at the beginning of the two-consecutive-year period or whose election or nomination for
election was previously so approved. This clause (B) does not include a director designated by a
person who has entered into an agreement with the Company to effect a transaction described in (a)
or (c) of this Section.

     (c) The shareholders of the Company approve a merger or consolidation of the Company with any
other corporation, but only if the transaction closes or is otherwise effectuated. This subsection
(c) does not cover a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) at least 80% of
the combined voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation.

11

 

     (d) The shareholders of the Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition of the Company or all or substantially all of the
Company’s assets, but only if the transaction closes or is otherwise effectuated.

     Section A.03. Override by Board. Transactions described in the previous
Section do not constitute Changes in Control if, immediately prior to the change in ownership,
merger, consolidation, sale or other disposition, liquidation or change in the Board, the Board
shall pass a resolution approved by a vote of the majority of the Continuing Directors to the
effect that it has determined that such transaction does not constitute a Change in Control within
the intention of this definition. In addition, if a Change in Control has occurred, no subsequent
event shall result in another Change in Control.

     Section A.04. February, 1998 Vote. No Change in Control will be deemed to have
occurred by virtue of the vote of shareholders on February 26, 1998 to merge with Lockheed Martin
Corporation unless and until that merger closes.

     Section A.05. Vesting at Change in Control. Any Participant serving as an
Outside Director at the time of a Change in Control will immediately become entitled to Change in
Control benefits under Section 5.03. Actual payment of benefits will not commence until termination
of his or her service in accordance with Section 7.01.

     Section A.06. Limitation on Amendment Authority. The Plan may not be amended,
terminated, or otherwise modified or interpreted to eliminate, reduce or defer Change in Control
benefits with respect to the circumstances described in Section A.02(c) or (d), between the date of
the shareholder vote and the closing or other effectuation of the transaction. This Section is not
intended to reduce the Board’s authority under Section A.03.

12

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