Document:

exv10w6

Exhibit 10.6

THE 2002 INCENTIVE COMPENSATION PLAN OF NORTHROP GRUMMAN

CORPORATION

As amended and restated effective January 1, 2009

SECTION I

PURPOSE

The purpose of this Plan is to promote the success of the Company and render its operations
profitable to the maximum extent by providing for the Senior Executives of the Company incentives
that continue to be dependent upon the overall successful performance of the Company. The Senior
Executives, for this purpose, are only those elected corporate officers who participate in making
the basic and strategic decisions which affect the corporate-wide performance of the Company,
together with those Senior Executives who are in charge of significant operating subsidiaries. The
Plan is designed to comply with the performance-based compensation exception under Section 162(m)
of the Internal Revenue Code of 1986, as amended.

SECTION II

DEFINITIONS

	1.	 	COMPANY—Northrop Grumman Corporation and such of its subsidiaries as are consolidated in its
consolidated financial statements.
	 
	2.	 	CODE—The Internal Revenue Code of 1986, as amended from time to time.
	 
	3.	 	COMMITTEE—The Compensation and Management Development Committee of the Board of Directors of
the Company. It shall be composed of not less than three members of the Board of Directors, no
one of whom shall be an officer or employee of the Company and it shall be constituted so as
to permit this Plan to comply with the “outside director” requirement of Code section 162(m).
	 
	4.	 	INCENTIVE COMPENSATION—Awards payable under this Plan.
	 
	5.	 	PERFORMANCE CRITERIA—Economic Earnings, and for purposes of this Plan, “Economic Earnings”
shall mean income from continuing operations before federal and foreign income taxes and the
cumulative effect of accounting changes and extraordinary items, less pension income (or plus
pension expense) plus amortization and impairment of goodwill and other purchased intangibles,
plus restructuring or similar charges to the extent they are separately disclosed in the
annual report.
	 
	6.	 	PERFORMANCE YEAR—The Year with respect to which an award of Incentive Compensation is
calculated and paid.
	 
	7.	 	PLAN—This 2002 Incentive Compensation Plan of Northrop Grumman Corporation, as amended and
restated effective January 1, 2009.

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	8.	 	SECTION 162(m) OFFICER—A Participant who is a “covered employee” as defined in Section
162(m) of the Code with respect to an award of Incentive Compensation under the Plan for a
Performance Year.
	 
	9.	 	YEAR—The fiscal year of Northrop Grumman Corporation.

SECTION III

PARTICIPATION

	1.	 	The persons eligible to receive Incentive Compensation awards under this Plan are elected
corporate officers of the rank of Vice President and above and the Presidents of those
consolidated subsidiaries that the Committee determines to be significant in the overall
corporate operations who are Section 162(m) Officers.
	 
	2.	 	“Participant” is a person granted or eligible to receive an Incentive Compensation award
under this Plan.
	 
	3.	 	Directors, as such, shall not participate in this Plan, but the fact that an elected
corporate officer or subsidiary President is also a Director shall not prevent his
participation.
	 
	4.	 	The death of a Participant shall not disqualify him for an Incentive Compensation award for
the Performance Year in which he dies or the preceding Performance Year. In the case of a
deceased Participant, the Incentive Compensation, if any, determined for him for the
Performance Year by the Committee shall be paid to his spouse, children, or legal
representatives as directed by the Committee.

SECTION IV

INCENTIVE COMPENSATION APPROPRIATIONS AND AWARDS

	1.	 	The amount to be appropriated to the Plan with respect to a Performance Year shall equal two
and one-half percent (2.5%) of the Performance Criteria for such Performance Year. The amount
appropriated to the Plan for a Performance Year based on the Performance Criteria set forth in
this Paragraph 1, SECTION IV shall be referred to as the “Tentative Appropriated Incentive
Compensation” for such Performance Year.
	 
	2.	 	The amount of the Tentative Appropriated Incentive Compensation for a Performance Year may be
reduced (but not increased) by the Committee, in its sole discretion, after taking into
account an appraisal of individual and overall Company performance in the attainment of such
predetermined financial and non-financial objectives as are selected by the Committee and set
forth in writing within the first 90 days of a Performance Year, at a time when it is
substantially uncertain whether a Participant will earn any amount of Incentive Compensation.
The amount appropriated to the Plan for a Performance Year by the Committee under this
Paragraph 2, SECTION IV shall be referred to herein as the “Appropriated Incentive
Compensation” for such Performance Year. In no event shall Incentive Compensation payable to
Participants for a Performance Year exceed the Appropriated Incentive Compensation under the
Plan for such Performance Year. Any

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	 	 	Tentative Appropriated Incentive Compensation for a Performance Year, which is not actually
appropriated to the Plan for such Year, shall be forfeited.
	 
	3.	 	Incentive Compensation Awards to Section 162(m) Officer:

	 	(a)	 	Notwithstanding any other provisions of this Plan, any Incentive Compensation
award for a Performance Year under this Plan payable to a Section 162(m) Officer must
satisfy the requirements of this Paragraph 3, SECTION IV. The purpose of this Paragraph
3 is to ensure compliance by the Plan with the requirements of Section 162(m) of the
Code relating to performance-based compensation. Incentive Compensation awards to
Section 162(m) Officers under this Plan are subject to:

	 	(i)	 	Approval of this Plan and the criteria stated in Paragraph 3(b)
of this SECTION IV by the shareholders of the Company;
	 
	 	(ii)	 	The maximum amount that may be awarded to any Section 162(m)
Officer under the Plan for any Performance Year as stated in Paragraph 3(b) of
this SECTION IV; and
	 
	 	(iii)	 	Approval by the Committee.

	 	(b)	 	The maximum potential amount of Appropriated Incentive Compensation (as defined
in Paragraph 2 of this SECTION IV) payable to any Participant as an Incentive
Compensation award for any single Performance Year shall be limited to no more than
thirty percent (30%) for the CEO and seventeen and one-half percent (17.5%) for each of
the other four (4) Participants for such Performance Year.
	 
	 	(c)	 	The Performance Criteria established in Paragraph 5 of SECTION II on which
Incentive Compensation awards under the Plan are based shall first apply in the
Performance Year 2002, but such Performance Criteria and any Incentive Compensation
awards based thereon shall be conditional upon a vote of the shareholders of the
Company approving the Plan and the Performance Criteria and performance goals stated
herein.
	 
	 	(d)	 	Prior to the payment of any Incentive Compensation awards for a Performance
Year, the Committee shall make a determination and certification in writing as to
whether the Section 162(m) Officers have met the Performance Criteria, performance
goals, and any other material terms of the Plan for each Performance Year. The
Committee may, in its sole discretion, exercise negative discretion by reducing amounts
of Incentive Compensation awards to all or any of the Section 162(m) Officers from the
maximum potential awards payable by application of Paragraph 3(b) of this SECTION IV.
No such reduction shall increase the amount of the maximum award payable to any other
Section 162(m) Officer. The Committee shall determine the amount of any reduction in a
Section 162(m) Officer’s Incentive Compensation award on the basis of such factors as
it deems relevant, and it shall not be required to establish any allocation or
weighting

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	 	 	 	component with respect to the factors it considers. The Committee shall have no
discretion to increase any Incentive Compensation award for a Performance Year above
the amount determined by application of Paragraph 3(b) of this SECTION IV.

	4.	 	After the end of a Performance Year, in determining each Participant’s Incentive Compensation
award for such Year, the Committee may make a downward adjustment after considering such
factors as it deems relevant, which shall include but not be limited to the following factors:

	 	(a)	 	The evaluation of the Participant’s performance during that Performance Year in
relation to the Participant’s predetermined objectives and the Participant’s
contribution during such Year to the success or profit of the Company.
	 
	 	(b)	 	The classification of the Participant’s position, relative to the position of
all Participants. The Committee shall make the final determination of each
Participant’s Incentive Compensation award for a Performance Year.

SECTION V

ADMINISTRATION OF THE PLAN

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

	1.	 	Interpret the Plan, make any rules and regulations relating to the Plan, determine which
consolidated subsidiaries are significant for the purpose of the first paragraph of SECTION
III, and determine factual questions arising in connection with the Plan, after such
investigation or hearing as the Committee may deem appropriate.

	2.	 	As soon as practicable after the close of each Performance Year and prior to the payment of
any Incentive Compensation for such Performance Year, review the performance of each
Participant and determine the amount of each Participant’s individual Incentive Compensation
award, if any, with respect to that Performance Year.

	3.	 	Have sole discretion in determining Incentive Compensation awards under the Plan, except that
in making awards the Committee may, in its discretion, request and consider the
recommendations of the Chief Executive Officer of the Company and others whom it may
designate.

Any decisions made by the Committee under the provisions of this SECTION V shall be conclusive and
binding on all parties concerned. Except as otherwise specifically provided in this Plan, the
provisions of this Plan shall be interpreted and administered by the Committee in a manner
consistent with the requirements for exemption of Incentive Compensation awards granted to
Participants who are Section 162(m) Officers as “performance-based compensation” under Code Section
162(m) and regulations and other interpretations issued by the Internal Revenue Service thereunder.

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SECTION VI

METHOD OF PAYMENT OF INCENTIVE COMPENSATION TO INDIVIDUALS

	1.	 	The amount of Incentive Compensation award determined for each Participant with respect to a
given Performance Year shall be paid in cash or in Common Stock of the Company (“Northrop
Grumman Common Stock”) or partly in cash and partly in Northrop Grumman Common Stock, as the
Committee may determine. Payment of an Incentive Compensation award, in cash or in Northrop
Grumman Common Stock, with respect to a given Performance Year shall be made in a lump sum
between February 15 and March 15 of the year following such Performance Year.

	2.	 	The Committee may impose such conditions, including forfeitures and restrictions, as the
Committee believes will best serve the interests of the Company and the purposes of the Plan.

	3.	 	In making awards of Northrop Grumman Common Stock, the Committee shall first determine all
Incentive Compensation awards in terms of dollars. The total dollar amount of all Incentive
Compensation awards for a particular Performance Year shall not exceed the Appropriated
Incentive Compensation for that Performance Year under this Plan. In the case of Section
162(m) Officers, the total dollar amount of an Incentive Compensation award for a particular
Performance Year shall be no greater than the maximum potential awards payable by application
of Paragraph 3(b) of SECTION IV. After fixing the total amount of each Participant’s Incentive
Compensation award in terns of dollars, then if some or all of the award is to be paid in
Northrop Grumman Common Stock, the dollar amount of the Incentive Compensation award so to be
paid shall be converted into shares of Northrop Grumman Common Stock by using the fair market
value of such stock on the date of the award. “Fair market value” shall be the closing price
of such stock on the New York Stock Exchange on the date of the award, or, if no sales of such
stock occurred on that date, then on the last preceding date on which such sales occurred. No
fractional share shall be issued.

	4.	 	If an Incentive Compensation award is paid in Northrop
Grumman Common Stock, the number of shares shall be appropriately adjusted for any stock splits, stock dividends,
recapitalizations or other relevant changes in capitalization effective after the date of
award and prior to the date as of which the Participant becomes the record owner of the shares
received in payment of the award. All such adjustments thereafter shall accrue to the
Participant as the record owner of the shares.

	5.	 	Northrop Grumman Common Stock issued in payment of Incentive Compensation awards may, at the
option of the Board of Directors, be either originally issued shares or treasury shares.

	6.	 	Distribution of awards shall be governed by the terms and conditions applicable to such
awards, as determined by the Committee or its delegate. An award, the payment of which is to
be deferred pursuant to the terms of an employment agreement, shall be paid as provided by the
terms of such agreement. Awards or portions thereof deferred pursuant to

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	 	 	the Northrop Grumman Deferred Compensation Plan, the Northrop Grumman Savings Excess Plan,
or any other deferred compensation plan or deferral arrangement shall be paid as provided in
such plan or arrangement.
	 
	7.	 	The Company shall have the right to deduct from all payments under this Plan any federal,
state, or local taxes required by law to be withheld with respect to such payments.
	 
	8.	 	No Participant or any other party claiming an interest in amounts earned under the Plan shall
have any interest whatsoever in any specific asset of the Company. To the extent that any
party acquires a right to receive payments under the Plan, such right shall be equivalent to
that of an unsecured general creditor of the Company.
	 
	9.	 	The Committee shall have the exclusive right to interpret the provisions of this SECTION VI,
to determine all questions arising under it or in connection with its administration, and to
issue regulations and take actions implementing its provisions.

SECTION VII

AMENDMENT OR TERMINATION OF PLAN

The Board of Directors of the Company shall have the right to terminate or amend this Plan at any
time and to discontinue further appropriations thereto, except that no amendment to the Plan shall
be made without the approval of the Shareholders, which would (i) increase the amount authorized
for appropriation pursuant to Section IV of this Plan, (ii) permit a member of the Committee to
participate in the Plan, or (iii) modify the right of the Committee to make the appropriations or
allocations set forth in this Plan.

SECTION VIII

EFFECTIVE DATE

This Plan was first effective for Performance Years commencing in 2002, and was amended and
restated effective for Performance Years commencing with and following 2008. No appropriations will
be made, and no Incentive Compensation shall be paid, under the Plan for Performance Years after
2001 if the Plan is not approved by the Shareholders.

SECTION IX

RECOUPMENT

     Any payment of an Incentive Compensation award is 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, and the Participant shall promptly make any reimbursement requested by
the Board of Directors of the Company or the Committee pursuant to such policy with respect to any
Incentive Compensation award payments. Further, the Participant agrees, by accepting an Incentive
Compensation award, that the Company and its affiliates may deduct from any amounts it may owe the
Participant from time to time (such as

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wages or other compensation) to the extent of any amounts the Participant is required to
reimburse the Company pursuant to such policy with respect to the award.

SECTION X

MISCELLANEOUS

	1.	 	Participation in the Plan shall not constitute an agreement (1) of the Participant to remain
in the employ of and to render his/her services to the Company, or (2) of the Company to
continue to employ such Participant, and the Company may terminate the employment of a
Participant at any time with or without cause.

	2.	 	In the event any provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall
be construed and enforced as if the illegal or invalid provision had not been included.

	3.	 	All costs of implementing and administering the Plan shall be borne by the Company.

	4.	 	All obligations of the Company under the Plan shall be binding upon and inure to the benefit
of any successor to the Company, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all
of the business and/or assets of the Company.

	5.	 	The Plan, and any agreements hereunder, shall be governed by and construed in accordance with
the state of Delaware.

7exv10w7

Exhibit 10.7

NORTHROP GRUMMAN 2006 ANNUAL INCENTIVE PLAN

AND

INCENTIVE COMPENSATION PLAN (for NON-SECTION 162(m) OFFICERS)

As amended and restated effective January 1, 2009

SECTION I

PURPOSE

Northrop Grumman has an annual incentive program to promote the success of the Company and render
its operations profitable to the maximum extent by providing incentives to key employees.
Participating employees have varying degrees of impact on the overall success and performance of
the Company. To facilitate the appropriate incentive level for each Participant, Northrop Grumman
utilizes two incentive plans that use common financial and business performance criteria:

	 	•	 	The Incentive Compensation Plan (ICP)
	 
	 	•	 	The Annual Incentive Plan (AIP)

SECTION II

DEFINITIONS

	1.	 	Company—Northrop Grumman Corporation and such of its subsidiaries as are consolidated in its
consolidated financial statements.
	 
	2.	 	Code—The Internal Revenue Code of 1986, as amended from time to time.
	 
	3.	 	Committee—The Compensation and Management Development Committee of the Board of Directors of
the Company.
	 
	4.	 	Incentive Compensation—Awards payable under these plans.
	 
	5.	 	Participant—An employee of the Company granted or eligible to receive Incentive Compensation
award under one of these Plans.
	 
	6.	 	Performance Criteria—The performance criteria is a weighted combination of various financial
and non-financial factors approved by the Committee for the Performance Year.
	 
	7.	 	Performance Year—The year with respect to which an award of Incentive Compensation is
calculated and paid.
	 
	8.	 	Plans—Collectively, the Incentive Compensation Plan (ICP); and/or the Annual Incentive Plan
(AIP).
	 
	9.	 	Plan Year—The fiscal year of Northrop Grumman Corporation.
	 
	10.	 	Section 162(m) Officer— An employee who is a “covered employee” as defined in Section 162(m)
of the Code with respect to an award of Incentive Compensation under the 2002 Incentive
Compensation Plan for any Performance Year.

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SECTION III

PARTICIPATION

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

	1.	 	Incentive Compensation Plan (ICP):

	 	a.	 	Employees eligible to receive incentive compensation under the ICP are elected
corporate officers of the rank of vice president and above and the presidents of those
consolidated subsidiaries that the committee determines to be significant in the
overall corporate operations that are not section 162(m) officers for the performance
year. If an executive receives or is eligible to receive an incentive compensation
award under the 2002 Incentive Compensation Plan for 162(m) officers, then the
executive will not be eligible and shall not receive an incentive compensation award
under the ICP.
	 
	 	b.	 	Directors, as such, shall not participate in the ICP, but the fact that an
elected corporate officer or subsidiary president is also a director of the Company
shall not prevent participation.

	2.	 	Annual Incentive Plan (AIP):

	 	a.	 	Employees eligible to receive incentive compensation awards under the AIP are
appointed vice presidents, senior management, middle management and individual key
contributors (employees normally in a position that customarily perform
quasi-management or team leadership duties). In addition, employees may be eligible to
participate in the AIP if they have specific individual goals that directly contribute
to the attainment of their respective business unit’s operating goals or if employees
are considered “high performing” and are in a position to make measurable and
significant contributions to the success of the Company.
	 
	 	b.	 	At the beginning of, or prior to, a performance year, the Company’s CEO
approves the number of participants eligible for participation in the AIP.
Participants are then selected by their management based on an assessment of their
position relative to other candidates, their performance, and their potential impact on
achievement of business unit and the Company goals.
	 
	 	c.	 	Participation in the AIP during any performance year does not imply nor
guarantee participation in the AIP in future years.

	3.	 	Non-Duplication of Awards

	 	a.	 	A participant may not receive an incentive compensation award under more than
one of the above plans for the performance year. The only exception to this is in the
event that an individual is a participant in a particular plan for a portion of the
performance year and then is selected to participate in one of the other plans for the
remainder of that performance year. In this event, an individual may receive pro-rated
awards based on the time that he/she participated in each plan.

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

	4.	 	Death, Disability, or Retirement
	 
	 	 	A participant may be eligible to receive a pro-rated incentive compensation award in the
event of the employee’s death, disability, or retirement. In the case of a deceased
participant, such incentive compensation award will be paid to the participant’s estate.
	 
	5.	 	Employment Status
	 
	 	 	Except as provided in Section III 4 (see above), in order to be eligible to receive a
payment from these plans, a participant must be an active employee of the Company as of
December 31 of the plan year, unless an exception is approved in writing by the Company’s
chief human resources and administrative officer.

SECTION IV

GOAL SETTING AND PERFORMANCE CRITERIA

Goal setting and performance planning are essential elements of plan administration. This requires
establishing performance criteria, such as annual goals, goal weights, and performance measures.
The Committee approves the annual business and financial goals for the Company, as described below,
in writing within the first 90 days of a Performance Year, at a time when it is substantially
uncertain whether the Participant will earn any amount of Incentive Compensation.

	1.	 	Corporation Goals
	 
	 	 	For each performance year, until otherwise determined by the Committee, financial and
non-financial objectives will be established by the Committee in its sole discretion.
	 
	2.	 	Financial Measures

	 	a.	 	The CEO’s recommended goals are reviewed and amended as appropriate, and
established by the Committee at its sole discretion. Measures may include, but are not
limited to: cash management, cash flow, return on investment, debt reduction, revenue
growth, net earnings, and return on equity.
	 
	 	b.	 	The Committee approves a performance threshold, a target level and a maximum
performance level for each of the financial measures for the performance year.

	3.	 	Supplemental Goals
	 
	 	 	Supplemental goals may be either qualitative or quantitative such as, but not limited to:
customer satisfaction, contract acquisition, delivery schedule, cycle-time improvement,
productivity, quality, workforce diversity, and environmental management. The CEO
recommends the supplemental goals based on sector goals contained in Annual Operating Plans
and corporate office goals established prior to the beginning of each year. Supplemental
goals have stated milestones and weights. The CEO’s recommended supplemental goals are
reviewed and amended as appropriate, and established by the Committee at its sole
discretion.

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	4.	 	Individual Goals
	 
	 	 	Each year participants develop individual goals that support achievement of the Company’s
business plan and the specific goals established by the Committee in the three
aforementioned corporation goals. Individual goals are prepared, approved and documented.
The employee’s manager reviews these goals with each participant to ensure they are
aggressive, coordinated and focused on attainment of Company business objectives.

SECTION V

PERFORMANCE DETERMINATION

At the end of the performance year the CEO evaluates the performance of each of the operating units
and that of the overall Company against the financial and business goals established at the
beginning of the performance year and submits his assessment to the Committee.

The CEO’s final evaluation of performance (the “unit performance factor” or “UPF”) is stated
numerically and is a performance multiplier for individual incentive targets. The UPF will vary
from 0.0 to a maximum as approved by the Committee.

The Committee, in its sole discretion, after taking into account its appraisal of the overall
performance of the Company in the attainment of such predetermined financial and non-financial
objectives, may either increase or decrease the company UPF for these plans.

SECTION VI

INCENTIVE COMPENSATION APPROPRIATIONS

	1.	 	The amount appropriated for the plans for a performance year is based on the CEO’s
determination of the UPF (as approved or modified by the Committee) and applied to the
individual incentive targets of participants. These performance-adjusted targets are
aggregated into the “Appropriated Incentive Compensation” for the performance year.
	 
	2.	 	In no event shall incentive compensation payable to participants for a performance year
exceed the appropriated incentive compensation for the plans as approved by the Committee.
	 
	3.	 	Any appropriated incentive compensation for a performance year, which is not actually
distributed to the participants as awards for such year, cannot be transferred to the
following performance year.

SECTION VII

INCENTIVE COMPENSATION AWARDS

	1.	 	Individual Award Factors

	 	a.	 	Target award percentage—is established annually and is a percentage of annual
aggregate salary that reflects the varying impact of participant’s positions on
business results. Generally vice presidents will have higher target award percentages
than senior middle managers and so forth.
	 
	 	b.	 	Individual performance—prior to the submission of recommended incentive
compensation awards, each participant will be evaluated by his management in

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	 	 	 	relation to the participant’s achievement of predetermined individual goals and
his/her relative contribution during the performance year compared to other
participants to the success or profit of the Company. This assessment of
performance (the “individual performance factor” or “IPF”) is stated numerically and
is a performance multiplier for individual incentive targets. The IPF may range
from 0 to 1.5.
	 
	 	c.	 	Both the IPF and the UPF are multipliers for the individual participant’s
target award percentage to determine that participant’s incentive compensation award.

	2.	 	ICP Awards:

	 	a.	 	The Committee shall review the CEO’s recommendations and make the final
determination of each individual ICP participant’s incentive compensation award for the
performance year.

	3.	 	AIP Awards:

	 	a.	 	Prior to the payment of any incentive compensation awards for a performance
year, the CEO, or his delegate, may in his sole discretion, adjust or reduce to zero
recommended amounts of incentive compensation awards to all or any of the participants.
	 
	 	b.	 	The CEO or his delegate shall determine the amount of any adjustment in a
participant’s incentive compensation award on the basis of such factors as he deems
relevant, and shall not be required to establish any allocation or weighting component
with respect to the factors he considers.

SECTION VIII

ADMINISTRATION OF THE PLANS

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

	 	a.	 	Interpret the ICP, make any rules and regulations relating to that plan,
determine which consolidated subsidiaries are significant for the purpose of the first
paragraph of SECTION III, and determine factual questions arising in connection with
the ICP, after such investigation or hearing as the Committee may deem appropriate.
	 
	 	b.	 	As soon as feasible after the close of each performance year and prior to the
payment of any incentive compensation for such performance year, review the performance
of each participant and determine the amount of each participant’s individual incentive
compensation award, if any, with respect to that performance year.
	 
	 	c.	 	Have sole discretion in determining incentive compensation awards under the
ICP, except that in making awards the Committee may, in its discretion, request and
consider the recommendations of the CEO and others whom it may designate.
	 
	 	d.	 	Any decisions made by the Committee under the provisions of this SECTION VIII,
as well as any interpretations of the ICP by the Committee, shall be conclusive and
binding on all parties concerned.

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

	 	a.	 	Interpret the AIP, make any rules and regulations relating to the plan, and
determine factual questions arising in connection with the AIP.
	 
	 	b.	 	As soon as feasible after the close of each performance year and prior to the
payment of any incentive compensation for such performance year, review the recommended
awards of selected participants, as determined by the CEO, to determine if the award is
appropriate with respect to that performance year, making any adjustments as he deems
necessary and approving each such award.
	 
	 	c.	 	Review and approve the total incentive compensation award expenditure of each
sector and the Company overall.
	 
	 	d.	 	Any decisions made by the CEO under the provisions of this Section VIII, as
well as any interpretation of the AIP by the CEO, shall be conclusive and binding on
all parties concerned.

SECTION IX

METHOD OF PAYMENT OF INCENTIVE

COMPENSATION TO INDIVIDUALS

	1.	 	ICP Payments

	 	a.	 	The amount of incentive compensation award determined for each participant with
respect to a given performance year shall be paid in cash or in common stock of the
Company (“Northrop Grumman common stock”) or partly in cash and partly in Northrop
Grumman common stock, as the Committee may determine. Subject to any applicable
deferred compensation election to the contrary, payment of the Incentive Compensation
award with respect to a given Performance Year shall be made in a lump sum payment
between February 15 and March 15 of the year following such Performance Year.
	 
	 	b.	 	The Committee may impose such conditions, including forfeitures and
restrictions, as the Committee believes will best serve the interests of the Company
and the purposes of the ICP.
	 
	 	c.	 	In making awards of Northrop Grumman common stock, the Committee shall first
determine all incentive compensation awards in terms of dollars. The total dollar
amount of all incentive compensation awards for a particular year shall not exceed the
appropriated incentive compensation for that performance year under the ICP. After
fixing the total amount of each Participant’s incentive compensation award in terms of
dollars, then if some or all of the award is to be paid in Northrop Grumman common
stock, the dollar amount of the incentive compensation award so to be paid shall be
converted into shares of Northrop Grumman common stock by using the fair market value
of such stock on the date of the award. “Fair market value” shall be the closing price
of such stock on the New York Stock Exchange on the date of the award, or, if no sales
of such stock occurred on that date, then on the last preceding date on which such
sales occurred. No fractional share shall be issued.

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	 	d.	 	If an incentive compensation award is paid in Northrop Grumman common stock,
the number of shares shall be appropriately adjusted for any stock splits, stock
dividends, re-capitalization or other relevant changes in capitalization effective
after the date of award and prior to the date as of which the participant becomes the
record owner of the shares received in payment of the award. All such adjustments
thereafter shall accrue to the participant as the record owner of the shares.
	 
	 	e.	 	Northrop Grumman common stock issued in payment of incentive compensation
awards may, at the option of the Board of Directors, be either originally issued shares
or treasury shares.
	 
	 	f.	 	Distribution of awards shall be governed by the terms and conditions applicable
to such awards, as determined by the Committee or its delegate. An award, the payment
of which is to be deferred pursuant to the terms of an employment agreement, shall be
paid as provided by the terms of such agreement. Awards or portions thereof deferred
pursuant to the Northrop Grumman Deferred Compensation Plan, the Northrop Grumman
Savings Excess Plan, or any other deferred compensation plan or deferral arrangement
shall be paid as provided in such plan or arrangement.
	 
	 	g.	 	The Company shall have the right to deduct from all payments under the ICP any
federal, state, or local taxes required by law to be withheld with respect to such
payments.
	 
	 	h.	 	No participant or any other party claiming an interest in amounts earned under
the ICP shall have any interests whatsoever in any specific asset of the Company. To
the extent that any party acquires a right to receive payments under the ICP, such
right shall be equivalent to that of an unsecured general creditor of the Company.
Awards payable under the plan shall be payable in shares or from the general assets of
Northrop Grumman, and no special or separate reserve, fund or deposit shall be made to
assure payment of such awards.

	2.	 	AIP Payments

	 	a.	 	The amount of incentive compensation award determined for each participant with
respect to a given performance year shall be paid in cash between February 15 and March
15 of the year following that performance year.
	 
	 	b.	 	The Company shall have the right to deduct from all payments under this plan
any federal, state, or local taxes required by law to be withheld with respect to such
payments.
	 
	 	c.	 	No participant or any other party claiming an interest in amounts earned under
the AIP shall have any interest whatsoever in any specific asset of the Company. To
the extent that any party acquires a right to receive payments under the plan, such
right shall be equivalent to that of an unsecured general creditor of the Company.
Awards payable under the AIP shall be payable in shares or from the general assets of
Northrop Grumman, and no special or separate reserve, fund or deposit shall be made to
assure payment of such awards.

7

 

SECTION X

AMENDMENT OR TERMINATION OF PLANS

The Committee shall have the right to terminate or amend these plans at any time and to discontinue
further appropriations to the plans.

Without limiting the generality of the preceding paragraph, the Committee reserves the right to
adjust performance measures, the applicable performance goals and performance results with respect
to either or both of the plans to the extent the Committee determines such adjustment is reasonably
necessary or advisable to preserve the intended incentives and benefits under the plans to reflect
(1) any change in capitalization, any corporate transaction (such as a reorganization, combination,
separation, merger, acquisition, or any combination of the foregoing), or any complete or partial
liquidation, (2) any change in accounting policies or practices, or (3) the effects of any special
charges to earnings, or (4) any other similar special circumstances.

SECTION XI

EFFECTIVE DATE

These plans were first effective for performance years commencing with 2006, and were amended and
restated effective for performance years commencing with and following 2008 and shall stay in
effect until amended, modified or terminated by the Committee. The provisions of these plans,
together with those of the 2002 Incentive Compensation Plan for Section 162(m) Officers, shall
supersede and replace those of prior plan documents.

SECTION XII

RECOUPMENT

     Any payment of an incentive compensation award is 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, and the participant shall promptly make any reimbursement requested by
the Board of Directors of the Company or the Committee pursuant to such policy with respect to any
incentive compensation award payments. Further, the participant agrees, by accepting an incentive
compensation award, that the Company and its affiliates may deduct from any amounts it may owe the
participant from time to time (such as wages or other compensation) to the extent of any amounts
the participant is required to reimburse the Company pursuant to such policy with respect to the
award.

SECTION XIII

MISCELLANEOUS

	1.	 	Participation in any plan shall not constitute an agreement of the participant to remain in
the employ of and to render his/her services to the Company, or of the Company to continue to
employ such participant, and the Company may terminate the employment of a participant at any
time with or without cause.
	 
	2.	 	In the event any provision of the plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the plans, and the plans
shall be construed and enforced as if the illegal or invalid provision had not been included.

8

 

	3.	 	All costs of implementing and administering the plans shall be borne by the Company.
	 
	4.	 	All obligations of the Company under the plans shall be binding upon and inure to the benefit
of any successor to the Company, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all
of the business and/or assets of the Company.
	 
	5.	 	The plans and any agreements hereunder, shall be governed by and construed in accordance with
the laws of the state of Delaware.
	 
	6.	 	The rights of a participant or any other person to any payment or other benefits under either
of the plans may not be assigned, transferred, pledged, or encumbered except by will or the
laws of decent or distribution.

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

9

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