Document:

EX-10.63

 

EXHIBIT 10.63

Tower Group, Inc.

2004 Long Term Equity Compensation Plan

(as amended and restated, effective May 15, 2008)

Restricted Stock Units Award Agreement

SECTION 1. AWARD OF RESTRICTED STOCK UNITS

     (a) Restricted Stock Units. Subject to the terms and conditions set forth in the Notice of
Restricted Stock Units Award and this Restricted Stock Units Award Agreement (together, the
“Agreement”), the Company grants to the Grantee on the Grant Date the Restricted Stock Units (the
“RSUs” or “Award”) set forth in the Notice of Restricted Stock Units Award. The Award represents
the opportunity to receive Shares to the extent the RSUs are earned based on performance over the
Performance Period and the Grantee satisfies the requisite service requirements over the remaining
Period of Restriction. These performance and service conditions are described in Sections 2 and 3
hereof.

     (b) Plan and Defined Terms. The RSUs are granted pursuant to the Plan, a copy of which the
Grantee acknowledges having received. All terms and conditions applicable to the RSUs set forth in
the Plan and not set forth herein are hereby incorporated herein by reference. To the extent any
provision hereof is inconsistent with a provision of the Plan, the provision of the Plan will
govern. All capitalized terms used in this Agreement and not otherwise defined herein shall have
the meanings ascribed to them in the Plan.

SECTION 2. DETERMINATION OF NUMBER OF RESTRICTED STOCK UNITS EARNED

     (a) Performance Period. The number of Shares the Grantee has the opportunity to receive is
based on the number of RSUs earned over the Performance Period. The number of RSUs earned over the
Performance Period is determined pursuant to the formula in subsection (b) below.

     (b) Formula. The number of RSUs earned during the Performance Period (“Earned RSUs”) will vary
from 0% to 200% of the target number of RSUs awarded, as provided in the Notice of Restricted Stock
Units Award (the “Target Award”). The number of Earned RSUs will equal (i) a percentage of the
Target Award based on the Company’s diluted operating earnings per share as of December 31, 20___,
and (ii) a percentage of the Target Award based on the Company’s diluted book value per share as of
December 31, 20___, determined in accordance with the tables set forth below (performance results
between levels will be interpolated):

	 	 	 
	Diluted Operating Earnings Per Share	 	Shares Earned (% of Target)
	$___ and above	 	___%

	 	 	 

	$—	 	___%

	 	 	 

	$—	 	___%

	 	 	 

 

 

	 	 	 
	Diluted Operating Earnings Per Share	 	Shares Earned (% of Target)
	$—	 	__%

	 	 	 

	$—	 	__%

	 	 	 

	$__and below	 	__%

	 	 	 

	 	 	 
	Diluted Book Value Per Share	 	Shares Earned (% of Target)
	$___ and above	 	___%

	 	 	 

	$—	 	___%

	 	 	 

	$—	 	___%

	 	 	 

	$—	 	___%

	 	 	 

	$—	 	___%

	 	 	 

	$___ and below	 	___%

	 	 	 

     (c) Definitions. For purposes of Section 2(b) hereof, the Company’s “diluted operating
earnings per share” shall mean the Company’s diluted earnings per share as determined in accordance
with generally accepted accounting principles in the United States excluding gains and losses from
investments and extraordinary gains and losses and “diluted book value per share” shall mean the
Company’s total stockholders’ equity divided by the number of shares of common stock outstanding
plus the appropriate common stock equivalents of stock options, warrants and restricted stock using
the treasury stock method as determined in accordance with generally accepted accounting principles
in the United States.

SECTION 3. VESTING, FORFEITURE AND TRANSFER RESTRICTIONS

     (a) Vesting and Delivery of Shares. The Award shall become vested as to 1/3 of the Earned RSUs
on each of December 31, 20___, December 31, 20___, and December 31, 20_. For avoidance of doubt, any
RSUs not earned in accordance with Section 2 are deemed forfeited as of the end of the Performance
Period and the Grantee will not be eligible to vest in such forfeited RSUs. Subject to the terms of
the Plan and Sections 3(b), 3(f), 3(g), and 5(a) hereof, upon or as soon as practicable after
vesting of any Earned RSUs hereunder (but in no event later than March 15th of the
calendar year following the end of the Period of Restriction applicable to such RSUs), payment with
respect to the vested RSUs shall be made in Shares (one Share for each RSU earned), free of all
restrictions otherwise imposed by this Agreement.

     (b) Termination of Employment; Forfeiture.
If the Grantee’s employment is terminated for any
reason other than death, Disability (as defined below) or termination by the Company (or a
Subsidiary, as applicable) without Cause (as defined below), the Grantee shall forfeit any RSUs
that are subject to a Period of Restriction (not vested) at the time of such termination of
employment. If the Grantee’s employment terminates due to the Grantee’s death or Disability, or if
the Grantee’s employment is terminated by the Company (or a Subsidiary, as applicable) without
Cause at any time during the Performance Period, then the Grantee will be deemed to have earned a prorated portion of the
 Target Award and will receive a number of Shares equal to such amount as soon as
practicable (but no later than sixty (60) days) after the date of termination of employment. The amount of the
prorated award shall be determined by multiplying (i) the Target Award by (ii) a fraction, the numerator of which
 is the number of full months that had elapsed during the Performance Period as of the date of employment termination and the denominator of which is 12. If the Grantee’s
employment terminates due to the Grantee’s death or Disability, or if the Grantee’s employment is
terminated by the Company (or a Subsidiary, as applicable) without Cause at any time after the
Performance Period but during the Period of

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Restriction applicable to any portion of this Award, then any Earned RSUs then subject to the
Period of Restriction shall immediately vest on the date of the Grantee’s termination of
employment, and payment with respect to such RSUs shall be made in Shares as soon as practicable
(but no later than sixty (60) days) after the date of termination of employment.

     (c) Definition of “Cause.” If the Grantee has an employment agreement with the Company or a
Subsidiary, the term “Cause” shall have the meaning ascribed to such term in the Grantee’s
employment agreement. If the Grantee’s employment agreement does not define the term “Cause,” or if
the Grantee does not have an employment agreement with the Company or a Subsidiary, the term
“Cause” shall mean (i) the willful engaging by the Grantee in misconduct that is injurious to the
Company or a Subsidiary (monetarily or otherwise), (ii) the Grantee’s conviction of, or pleading
guilty or nolo contendere to, a crime involving moral turpitude or a felony, (iii) any serious or
continuing breach by the Grantee of any material term of any agreement with the Company or
Subsidiary or any confidentiality, non-solicitation, or non-competition covenant to which the
Grantee is subject, or (iv) the Grantee’s failure to perform, in a timely, professional and
competent manner, (A) the orders’ or requests of the Board; (B) the orders or requests of the CEO
or the Grantee’s direct supervisor; or (C) any material duties under any agreement with the Company
or a Subsidiary.

     (d) Definition of “Disability.” The Grantee’s employment shall be deemed to have terminated
due to the Grantee’s Disability if, in the Company’s sole discretion, the Grantee becomes unable to
engage in any substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, and the Grantee is entitled to long-term disability
benefits under the Company’s long-term disability plan or policy, as in effect on the date of
termination of Grantee’s employment, and as a result, the Grantee’s employment is terminated.

     (e) Transfer Restrictions. During the applicable Period of Restriction, the RSUs may not be
sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed
of.

     (f) Employment Agreement. Notwithstanding the foregoing, if the terms of any employment or
other agreement between the Grantee and the Company or a Subsidiary provides more favorable terms
concerning the impact of the Grantee’s termination of employment on the Grantee’s Award, the terms
of such employment or other agreement shall govern, subject to the following modifications. If the
Grantee’s employment terminates during the Performance Period, and the employment agreement or
other agreement provides for the acceleration of vesting of the Award
upon such termination, then the Grantee will be deemed to have had a termination of employment without Cause
and shall earn a prorated
portion of the Target
Award and will receive a
number of Shares equal to such amount as soon as practicable
(but no later than sixty (60) days) after the date of
termination. The amount of the prorated award shall be determined by multiplying (i)
 the Target Award by (ii) a fraction, the numerator of which is the number of full months that had elapsed during the Performance Period as of the date of
 employment termination and the denominator of which is 12. If the Grantee’s employment
terminates after the Performance Period, and the employment or other agreement provides for the
acceleration of vesting of the Award, then any Earned RSUs then subject to the Period of

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Restriction shall immediately vest on the date of the Grantee’s termination of employment, and
payment with respect to such RSUs shall be made in Shares as soon as practicable (but no later than sixty (60) days) after the date of
termination.

     (g) Six Month Delay for Specified Employees. To the extent Grantee is a “specified employee,”
as defined in Section 409A(a)(2)(B)(i) of the Code, notwithstanding the timing of payment provided
in any other section of this Agreement, no payment, distribution or benefit under this Agreement
that constitutes a distribution of “deferred compensation” (within the meaning of Treasury
Regulation Section 1.409A-1(b)) upon “separation from service” (within the meaning of Treasury
Regulation Section 1.409A-1(h)), after taking into account all available exemptions, that would
otherwise be payable during the six-month period after such separation from service, will be made
during such six-month period, and any such payment, distribution or benefit will instead be paid on
the first business day after such six-month period.

     SECTION 4. RIGHTS OF THE GRANTEE

     The Grantee shall not have any privileges of a holder of Shares of the Company with respect to
the Shares payable hereunder, including without limitation any right to vote such Shares, to
receive dividends, to receive Dividend Equivalents, or to receive other distributions in respect
thereof, until the date of the issuance of Shares to the Grantee. Nothing in the Agreement shall
confer upon the Grantee any right to continue as an employee of the Company or any Subsidiary or to
interfere in any way with any right of the Company to terminate the Grantee’s employment at any
time.

     SECTION 5. MISCELLANEOUS PROVISIONS

     (a) Tax Withholding. In accordance with Article 17 of the Plan (or a successer provision), the
Committee shall have the power and the right to deduct or withhold, or require the Grantee to remit
to the Company, an amount sufficient to satisfy any federal, state and local taxes (including the
Grantee’s FICA obligations) required by law to be withheld with respect to this Award. The Grantee
may elect that, upon the lapse of a Performance Period, the withholding requirement be satisfied by
directing the Company to withhold from the Shares that would otherwise be delivered hereunder a
number of Shares having a Fair Market Value equal to the minimum statutory withholding that could
be imposed on the transaction. Any such election by a Grantee shall be irrevocable, made in writing
and signed by the Grantee.

     (b) Ratification of Actions. By accepting this Agreement, the Grantee and each person claiming
under or through the Grantee shall be conclusively deemed to have indicated the Grantee’s
acceptance and ratification of, and consent to, any action taken under the Plan or this Agreement
by the Company, the Board, the Committee or any designee thereof.

     (c) Notice. Any notice to be served hereunder shall be given personally in writing to the
Grantee or to the Secretary of the Company (as the case may be) or shall be couriered or posted by
registered mail to the Company (to the attention of its Secretary) at its principal executive
office or to the Grantee at the address that he most recently provided in writing to the Company.
Any such notice sent by post shall be deemed served three days after it is posted, and, in proving
such service, it shall be sufficient to prove that the notice was properly addressed and put in the
post or couriered.

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     (d) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, as such laws are applied to contracts entered into and performed in
such jurisdiction, without giving effect to conflicts of law principles.

     (e) Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same
instrument.

     (f) Modification or Amendment. This Agreement may only be modified or amended by written
agreement executed by the parties hereto; provided, however, that the adjustments permitted
pursuant to Section 4.3 of the Plan (or a successor provision) may be made without such written
agreement.

     (g) Severability. In the event any provision of this Agreement shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of
this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid
provision had not been included.

     (h) References to Plan. All references to the Plan shall be deemed references to the Plan as
may be amended from time to time.

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Exhibit 10.1

SEPARATION AGREEMENT

AND GENERAL RELEASE

	1.0	 	PARTIES: The parties to this Separation Agreement and General Release
(“Agreement”) are JAMES R. O’NEILL (“Mr. O’NEILL”) and NORTHROP GRUMMAN SYSTEMS CORPORATION
(“Northrop Grumman” or “the Company”).
	 
	2.0	 	RECITALS: This Agreement is made regarding the following facts:

	 	2.1.	 	Mr. O’NEILL is currently employed by Northrop Grumman as Corporate Vice
President and President, Information Technology. He has determined to resign from
employment effective April 30, 2008.
	 
	 	2.2.	 	Northrop Grumman has offered Mr. O’NEILL the severance benefits set forth
below in exchange for his agreement to all the terms and conditions of this Agreement.
	 
	 	2.3.	 	Mr. O’NEILL has decided to accept the Company’s offer of severance benefits
and to enter into this Agreement.

	3.0	 	CONSIDERATION: In exchange for Mr. O’NEILL’s promise to abide by all of the
terms of this Agreement, the Company agrees to provide the following consideration:

	 	3.1.	 	Lump-sum Cash Severance. The Company agrees to pay Mr. O’NEILL the
sum of $2,406,667, less applicable withholding. This amount will be paid to Mr.
O’NEILL in a single lump sum payment within 30 calendar days of the later of the
following two events: (A) the expiration of the Revocation Period set forth in Section
14 of this Agreement, or (B) the date Mr. O’NEILL’s employment with the Company ends
(“Separation Date”), but in no event later than March 15, 2009.
	 
	 	3.2.	 	Pro-Rata Bonus for 2008. Mr. O’NEILL will be paid a pro-rata Annual
Incentive Plan bonus for his service during 2008, in addition to the lump-sum cash
severance payment described in Section 3.1. This pro-rata bonus will be based on the
Company Performance Factor (“CPF”) representing 80% of the score and the Individual
Performance Factor (“IPF”) at 1.0 representing 20% of the score. It will be paid when
annual bonuses are paid to active employees in February or March of 2009, but in no
event will the payment be made later than March 15, 2009.

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	 	3.3.	 	Medical and Dental Coverage Continuation. Mr. O’NEILL may elect to
continue his medical and dental coverage in effect as of the Separation Date for two
years, provided he pays his portion of the cost of such coverage with after-tax
dollars, and provided further that he will pay no more for such coverage than
similarly situated active employees pay for comparable medical and dental coverage.
The Company will continue to pay its portion of the cost of Mr. O’NEILL’s medical and
dental benefits for the two-year period. In the event that Mr. O’NEILL becomes
eligible to enroll in another employer sponsored health plan on account of his
employment subsequent to the Separation Date, Mr. O’NEILL shall enroll in such plan on
the earliest date he is eligible to enroll and the benefits or payments to be made
under this Company coverage shall be reduced to the extent that Mr. O’NEILL is
eligible for benefits or payments for the same occurrence under such other employer
sponsored plan (whether or not he has enrolled in such other plan). Mr. O’NEILL shall
cooperate with the Company in relation to any such coordination of benefits and notify
the Company promptly of any new or additional coverage available to him after the
Separation Date. If rates for active employees increase during this continuation
period, Mr. O’NEILL’s contribution will increase proportionately. Also, if medical
and dental benefits are modified or terminated for elected officers during this
continuation period, Mr. O’NEILL’s benefits shall be subject to this modification or
termination. This continuation coverage shall run concurrently with coverage under
the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) (or similar state
law coverage) and shall be in lieu of such COBRA coverage. Following the continuation
period, Mr. O’NEILL shall be eligible to receive (i) coverage pursuant to Section 3.6
of this Agreement or (ii) COBRA continuation coverage for benefits provided pursuant
to this Section 3.3 for any remaining portion of the applicable COBRA period at normal
COBRA rates.
	 
	 	3.4.	 	Other Fringe Benefits. Pursuant to the terms of the Executive
Perquisite Program for elected officers (the “Program”), Mr. O’NEILL will be
reimbursed for any eligible financial planning fees incurred before his Separation
Date. He will also be reimbursed for any eligible income tax preparation fees
incurred for preparation of tax returns for calendar year 2008 in accordance with the
terms of the Program, but the combination of financial planning fees and income tax
preparation fees shall not exceed a total of $15,000. Except as provided in this
Section 3.4, all perquisites shall cease as of the Separation Date.

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	 	3.5.	 	Equity Grants.

	 	3.5.1	 	Stock Options. As of his Separation Date, Mr.
O’NEILL will have unvested options from three separate option grants dated
June 14, 2004, February 15, 2006 and February 28, 2007, respectively.
Effective as of his Separation Date the next succeeding vesting installment
for each of these grants shall vest. All other unvested portions of these
options shall terminate and be forfeited as of the Separation Date. Mr.
O’NEILL shall have the lesser of five years following his Separation Date or
until the respective Expiration Date of each of his vested options to exercise
those options (subject, in the case of a change of control of the Company, to
earlier termination pursuant to the change in control provisions applicable to
the options).
	 
	 	3.5.2	 	RPSRs. As of the Separation Date, Mr. O’NEILL will
have unvested Restricted Performance Stock Rights (RPSRs) from two separate
grants dated February 15, 2006 and February 28, 2007, respectively. Mr.
O’NEILL will be entitled to pro-rata treatment of these grants as if he had
met the Retirement provisions defined in the grant certificates. Consistent
with that treatment, payout of the pro-rata portion of these grants remains
subject to the performance based conditions of the grant, and any payout will
be made at the end of the Performance Period (as defined in the grant
certificates) for each respective grant at the same time that payouts are made
to similarly situated grantees. Any unvested RPSRs will terminate and be
forfeited as of the Separation Date. As of the Separation Date, Mr. O’NEILL
will have vested RPSRs from a grant dated February 28, 2005.

	 	3.6	 	Retiree Medical Benefits. Mr. O’NEILL shall be granted additional
Vesting Service such that as of the Separation Date, he satisfies the Vesting Service
requirements to become a Vested Participant and eligible to commence benefits pursuant
to Section 4.02 (“Early Commencement of Benefits”) of the Northrop Grumman Corporation
Special Officer Retiree Medical Plan (As Amended and Restated Effective April 1, 2007)
(the “SORMP”); provided, however, that such eligibility shall commence upon the
expiration of eligibility for coverage described in Section 3.3 of this Agreement
instead of age 55. (Italicized terms used in this Section 3.6 are defined in the
SORMP.) In the event that Mr. O’NEILL becomes eligible to enroll in another employer
sponsored health plan on account of his employment subsequent to the Separation Date,
Mr. O’NEILL shall enroll in such plan on the earliest date he is eligible to enroll and
the benefits or payments to be made under the SORMP coverage shall be reduced to the
extent that Mr. O’NEILL is eligible for benefits or payments for the same occurrence
under such other employer sponsored plan (whether or not he has enrolled in such other
plan). Mr. O’NEILL shall cooperate with the Company in relation to such

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	 	 	 	coordination of benefits and notify the Company promptly of any new or additional
coverage available to him after the Separation Date. For the avoidance of doubt,
whether or not Mr. O’NEILL is covered by another employer’s plan will not affect Mr.
O’NEILL’s eligibility for retiree medical benefits under the SORMP for himself and his
spouse for life but will affect the amount of benefits he receives while he is covered
(or is eligible to be covered) by such other employer’s plan.
	 
	 	3.7	 	Not Pension Eligible Compensation. None of the consideration or payments
made pursuant to this Agreement shall be eligible as compensation under any Company
retirement, pension, savings or other benefit plan.
	 
	 	3.8	 	Other Benefits. Notwithstanding the foregoing Mr. O’NEILL is entitled to
benefits under the following tax-qualified and nonqualified pension, savings, retirement
and deferred compensation plans:
	 
	 	 	 	Northrop Grumman Savings Plan
	 
	 	 	 	Northrop Grumman Retirement Value Plan (a sub-plan of Northrop Grumman Pension
Plan)
	 
	 	 	 	Northrop Grumman Pension Plan (cash balance)
	 
	 	 	 	Northrop Grumman Savings Excess Plan
	 
	 	 	 	Northrop Grumman Deferred Compensation Plan
	 
	 	 	 	Northrop Grumman Supplemental Plan 2 — ERISA Supplemental Program 2 (“ERISA 2”)
	 
	 	 	 	Northrop Grumman CPC Supplemental Executive Retirement Program (“CPC SERP”)

	4.0	 	SEPARATION FROM EMPLOYMENT: Mr. O’NEILL’s employment with the Company will
terminate on April 30, 2008. This shall be his Separation Date.

	5.0	 	COMPLETE RELEASE: In exchange for the consideration described in Section 3, Mr.
O’NEILL releases the Company from liability for any claims, demands or causes of action
(except as described in Section 5.5). This Release applies not only to the “Company” itself,
but also to all Northrop Grumman parent, subsidiaries, affiliates, related companies,
predecessors, successors, its or their employee benefit plans, trustees, fiduciaries and
administrators, and any and all of its and their respective past or present officers,
directors, agents and employees (“Released Parties”). For purposes of this Release, the term
“Mr. O’NEILL” includes not only Mr. O’NEILL himself, but also his heirs, current spouse,
executors and agents. Except as described in Section 5.5, this Release extinguishes all of
Mr. O’NEILL’s claims, demands or causes of action, known or unknown, against the Company and
the Released Parties, based on anything occurring on or before the date Mr. O’NEILL signs this
Agreement.

	 	5.1	 	This Release includes, but is not limited to, claims relating to Mr.
O’NEILL’s employment or separation from employment with the Company and any Released
Party, any rights of continued employment, reinstatement or reemployment by the Company and any Released Party, claims
relating to or arising under Company or Released Party dispute resolution
procedures, claims for any costs or attorneys’ fees incurred by

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	 	 	 	Mr. O’NEILL, and claims for severance benefits under any plan, policy or agreement.
	 
	 	5.2	 	This Release includes, but is not limited to, claims arising under the
Age Discrimination in Employment Act, the Employee Retirement Income Security Act, the
False Claims Act, Executive Order No. 11246, the Civil Rights Act of 1991, and 42
U.S.C. § 1981. It also includes, but is not limited to, claims under Title VII of the
Civil Rights Act of 1964, which prohibits discrimination in employment based on race,
color, religion, sex or national origin, and retaliation; the Americans with
Disabilities Act, which prohibits discrimination in employment based on disability,
and retaliation; any applicable state human rights statutes including the Virginia
Human Rights Act, which prohibits discrimination based on race, color, religion,
national origin, sex, pregnancy, childbirth or related medical conditions, age,
marital status or disability, and retaliation; the Fairfax County Human Rights
Ordinance, which also prohibits discrimination based on age, race, color, religion,
sex, national origin, marital status, or disability, and retaliation; and any other
federal, state or local laws, ordinances, regulations and common law, to the fullest
extent permitted by law.
	 
	 	5.3	 	This Release also includes, but is not limited to, any rights, claims, causes of
action, demands, damages or costs arising under or in relation to the personnel
policies or employee handbooks of the Company and any Released Party, or any oral or
written representations or statements made by the Company and any Released Party, past
and present, or any claim for wrongful discharge, breach of contract (including any
employment agreement), breach of the implied covenant of good faith and fair dealing,
intentional or negligent infliction of emotional distress, intentional or negligent
misrepresentation, or defamation.
	 
	 	5.4	 	Mr. O’NEILL agrees that his Release includes claims which he did not know of
or suspect to exist at the time he signed this Agreement, and that the Release
extinguishes all known and unknown claims.
	 
	 	5.5	 	However, this Release does not include any rights Mr. O’NEILL may
have: (1) to enforce this Agreement; (2) to indemnification and advancement rights Mr.
O’NEILL may have for expenses or losses (i) incurred in the course and scope of his
employment, (ii) in connection with any dispute over the enforcement of Mr. O’NEILL’s
rights under this Agreement, or (iii) in connection with Mr. O’NEILL’s rights to
reasonable attorney’s fees and costs under Section 16.0; (3) to test the knowing and
voluntary nature of this Agreement under The Older Workers Benefit Protection Act; (4)
to workers’ compensation benefits; (5) to earned, banked or accrued but unused
vacation pay; (6) to rights under minimum wage and overtime laws; (7) to vested
benefits under any pension or savings plan; (8) to continued benefits in accordance
with COBRA; (9) to government-provided unemployment insurance; (10) to

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	 	 	 	file a claim or charge with any government administrative agency (although Mr.
O’NEILL is releasing any rights he may have to recover damages or other relief in
connection with the filing of such a claim or charge); (11) to claims that cannot
lawfully be released; or (12) to claims arising after the date Mr. O’NEILL signs
this Agreement.

	6.0	 	ARBITRATION: If either the Company or Mr. O’NEILL decides to sue the
other over the enforceability of this Agreement or for violating this Agreement, all such
claims will be determined through final and binding arbitration, in accordance with
Northrop Grumman Corporate Procedure H103A. Notwithstanding the provisions of H103A, the
Company and Mr. O’NEILL agree that the prevailing party in the arbitration shall be
entitled to receive from the losing party reasonably incurred attorney’s fees and costs
incurred in enforcing this Agreement, except in any challenge by Mr. O’NEILL to the
validity of this Agreement under the Age Discrimination in Employment Act and/or Older
Workers Benefit Protection Act.

	7.0	 	RETURN OF COMPANY PROPERTY: Mr. O’NEILL agrees to return any and all
property and equipment of the Company and any Released Party that he may have in his
possession no later than the Separation Date, except to the extent this Agreement
explicitly provides to the contrary.

	8.0	 	FULL DISCLOSURE: Mr. O’NEILL acknowledges that he is not aware of, or has fully
disclosed to the Company any matters for which he was responsible or came to his
attention as an employee, which might give rise to any claim or cause of action against
the Company and any Released Party. Mr. O’NEILL has reported to the Company all
work-related injuries, if any, that he has suffered or sustained during his employment
with the Company and any Released Party. Mr. O’NEILL has properly reported all hours he
worked and has been paid all wages, compensation, benefits or other amounts that the
Company or any Released Party should have paid Mr. O’NEILL in the past.

	9.0	 	COVENANT NOT TO COMPETE: In consideration for the covenants made in this
agreement by Northrop Grumman, and in deference to Mr. O’NEILL’s access to, knowledge of
and personal role in development of Northrop Grumman’s trade secrets, proprietary
information and confidential marketing strategy, Mr. O’NEILL agrees that for a period of
twelve (12) months from his Separation Date, he will not (i) engage in or accept
employment by any business in competition with Northrop Grumman in the United States or
Canada, or (ii) render services or act on behalf of any entity which provides the same
or competitive products or services as Northrop Grumman provides in the United States or
Canada, or (iii) solicit any

Page 6 of 10

 

	 	 	customer or teammate of Northrop Grumman with whom Mr. O’NEILL came into contact,
either directly or indirectly, while employed by Northrop Grumman, for purposes of
providing products or services in competition with Northrop Grumman; provided,
however, that exceptions to this covenant not to compete may be made in writing by the
Company’s Chief Human Resources and Administrative Officer. The Company will review
any requests for exceptions in good faith, and will not unreasonably withhold consent
to a requested exception. Mr. O’NEILL agrees that these restrictions are reasonable.
However, if any portion of this covenant is deemed overbroad or unenforceable due to
challenge by him, he consents to either return all consideration provided him under
Paragraph 3 of this Agreement or to authorize the Arbitrator to fashion an enforceable
substitute for any restriction deemed overbroad or unenforceable. In addition, Mr.
O’NEILL agrees that for a period of twenty-four (24) months from his Separation Date,
he will not engage in or accept employment by the following companies: Lockheed
Martin, General Dynamics, IBM, SAIC, EDS, CSC, Raytheon, or Unisys. It shall not be a
violation of this Section 9 for Mr. O’NEILL to (i) become the registered or beneficial
owner of up to five percent (5%) of any class of the capital stock of a corporation in
competition with the Company that is registered under the Securities Exchange Act of
1934, as amended, provided that Mr. O’NEILL does not otherwise participate in the
business of such corporation, or (ii) be employed by or otherwise involved with a
subsidiary or division, which is not competitive with the business of Northrop Grumman
in the United States or Canada, of a company that is otherwise competitive with the
business of Northrop Grumman in the United States or Canada, so long as Mr. O’NEILL
does not advise or otherwise participate in the division or business that is
competitive with the business of Northrop Grumman in the United States or Canada.
	 
	10.0	 	NON-DISPARAGEMENT:

	 	A.	 	Mr. O’NEILL agrees to not make any public statement or release or
contribute to any statements to the press or industry representatives concerning
Northrop Grumman, its business objectives, its management practices or other
sensitive information without Northrop Grumman’s written approval in advance.
Mr. O’NEILL further agrees to take no action or make any statement which
disparages Northrop Grumman, its officers, agents or employees, or which causes
Northrop Grumman, or its officers, agents and employees, to be held in disrepute
within the industry or the general public. Nothing in this provision shall be
construed to prevent or restrict Mr. O’NEILL from providing truthful testimony
about the Company to any government or regulatory agency, or in any court
proceeding.
	 
	 	B.	 	The Company shall not by any means issue or communicate any public
statements that may be critical or disparaging of Mr. O’NEILL

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	 	 	 	provided the foregoing shall not apply to truthful statements made in compliance
with legal process, governmental inquiry or as required by legal filing or
disclosure requirements.

	11.0	 	NON-SOLICITATION/HIRE: Mr. O’NEILL agrees that for a period of twenty four (24)
months after his Separation Date, he will not contact any current employee of Northrop
Grumman for purposes of prospective employment, or interview, offer employment to, hire,
approve for employment or otherwise solicit, directly or indirectly, any Northrop Grumman
employee for any position providing services, directly or indirectly, in competition with
Northrop Grumman. Notwithstanding the foregoing, any current employee of Northrop
Grumman may be solicited and/or hired after that employee has been separated from
Northrop Grumman for at least four months.
	 
	12.0	 	WITHHOLDING OF TAXES: The Company shall be entitled to withhold from any
amounts payable or pursuant to this Agreement all taxes as legally shall be required
(including, without limitation, United States federal taxes, and any other state, city or
local taxes).
	 
	13.0	 	ADVICE OF COUNSEL; PERIOD FOR REVIEW AND CONSIDERATION OF AGREEMENT: The
Company encourages Mr. O’NEILL to seek and receive advice about this Agreement from an
attorney of his choosing. Mr. O’NEILL has twenty-one (21) calendar days from his receipt
of this Agreement to review and consider it. Mr. O’NEILL understands that he may use as
much of this review period as he wishes before signing this Agreement.
	 
	14.0	 	RIGHT TO REVOKE AGREEMENT: Mr. O’NEILL may revoke this Agreement within seven
(7) calendar days of signing it. To do so, Mr. O’NEILL must deliver a written revocation
notice to Ian Ziskin, Corporate Vice President and Chief Human Resources and
Administrative Officer, Northrop Grumman Corporation, 1840 Century Park East, Los
Angeles, CA 90067. Mr. O’NEILL must deliver the notice to Mr. Ziskin no later than 4:30
p.m. (PST) on the seventh (7th) calendar day after Mr. O’NEILL signs this
Agreement. If Mr. O’NEILL revokes this Agreement, it shall not be effective or
enforceable, and Mr. O’NEILL will not receive the benefits described in Section 3 of this
Agreement.
	 
	15.0	 	DENIAL OF WRONGDOING: Neither party, by signing this Agreement, admits any
wrongdoing or liability to the other. Both the Company and Mr. O’NEILL deny any such
wrongdoing or liability.

Page 8 of 10

 

	16.0	 	COOPERATION: Mr. O’NEILL agrees that, for at least two (2) years following the
Separation Date, he will reasonably cooperate with the Company and any Released Party
regarding requests for assistance by serving as a witness or providing information about
matters connected with Mr. O’NEILL’s prior employment with the Company or any Released Party.
The Company or the Released Party requesting assistance shall reimburse Mr. O’NEILL for any
reasonable out-of-pocket expenses incurred as a direct result of Mr. O’NEILL’s providing
cooperation pursuant to this Section, including without limitation travel, lodging and meals,
promptly upon Mr. O’NEILL’s presentation of receipts for such expenses. Without waiving any
of the Company’s rights under this Section 16, to the extent practicable, the Company agrees
that cooperation shall occur via telephone and in such a manner as to minimize interference
with Mr. O’NEILL’s other work and personal obligations. In the event that as a result of
cooperating with the Company pursuant to this provision (i) Mr. O’NEILL is subpoenaed as a
witness, or is specifically requested by the Company to be a witness, in connection with a
matter involving his employment with the Company, and (ii) Mr. O’NEILL determines that he
would benefit from the advice of counsel in connection therewith, then the Company will, to
the full extent permitted by its By-Laws and applicable law, reimburse Mr. O’NEILL for
reasonable attorney’s fees and costs incurred in connection therewith. The Company will
advance these fees and costs if requested by Mr. O’NEILL, but only if Mr. O’NEILL first
provides the Company with an undertaking (as that term is defined in the Company’s By-Laws)
and complies with all the terms and conditions of the By-Laws regarding advancement of
expenses.
	 
	17.0	 	CONTINUING INDEMNIFICATION RIGHTS: Notwithstanding any other provision hereof,
the Company hereby agrees to defend, hold harmless and indemnify Mr. O’NEILL in any suits
or claims arising from actions arising from or during the course of Mr. O’NEILL’s
employment on the same basis as with other similarly situated officers and directors and
in accordance with, and subject to the terms of, the Company’s By-Laws and applicable
law, and to advance any related expenses (including attorneys’ fees and disbursements)
upon the terms and conditions set forth in the Company’s By-Laws. The Company further
agrees to maintain and continue in place all officers’ and directors’ liability insurance
covering Mr. O’NEILL in a manner consistent with the Company’s indemnification
arrangements with respect to other similarly situated officers and directors for at least
six years following his Separation Date.
	 
	18.0	 	NO MITIGATION: The amounts paid or payable to Mr. O’NEILL hereunder shall not
be subject to mitigation, offset, or reduction by any compensation earned by Mr. O’NEILL
from any subsequent employment or any other venture.
	 
	19.0	 	ATTORNEYS’ FEES: The Company shall reimburse Mr. O’NEILL for reasonable legal
fees and disbursements incurred by Mr. O’NEILL in

Page 9 of 10

 

	 	 	connection with the negotiation and preparation of this Agreement through February 19, 2008. Fees and disbursements incurred after that date will not be
reimbursed.
	 
	20.0	 	SEVERABILITY: The provisions of this Agreement are severable. If any part of
this Agreement, other than Section 5, is found to be illegal or invalid and thereby
unenforceable, then the unenforceable part shall be removed, and the rest of the
Agreement shall remain valid and enforceable.
	 
	21.0	 	SOLE AND ENTIRE AGREEMENT: This Agreement expresses the entire understanding
between the Company and Mr. O’NEILL on the matters it covers. It supersedes all prior
discussions, agreements, understandings and negotiations between the parties on these
matters, except that any writing between the Company and Mr. O’NEILL relating to
protection of Company trade secrets or intellectual property shall remain in effect.
	 
	22.0	 	MODIFICATION: Once this Agreement takes effect, it may not be cancelled or
changed, unless done so in a document signed by both Mr. O’NEILL and an authorized
Company representative.
	 
	23.0	 	GOVERNING LAW: This Agreement shall be interpreted and enforced in accordance
with the law of the Commonwealth of Virginia without regard to rules regarding conflicts
of law.
	 
	24.0	 	ADVICE OF COUNSEL; VOLUNTARY AGREEMENT:
	 
	 	 	MR. O’NEILL ACKNOWLEDGES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS, CONFER WITH
COUNSEL, AND CONSIDER ALL OF THE PROVISIONS OF THIS AGREEMENT BEFORE SIGNING IT. HE
FURTHER AGREES THAT HE HAS READ THIS AGREEMENT CAREFULLY, THAT HE UNDERSTANDS
IT, AND THAT HE IS VOLUNTARILY ENTERING INTO IT. MR. O’NEILL UNDERSTANDS AND
ACKNOWLEDGES THAT THIS AGREEMENT CONTAINS HIS RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

	 	 	 	 	 
	 	 	 
	DATED: 3/5/008 	BY:  	
/s/  James R. O’Neill
 	 
	 	 	JAMES R.O’NEILL                                                    	 
	 	 	 	 
	 	 	 
	DATED: 3/10/08 	BY:  	/s/  Ian V. Ziskin
 	 
	 	 	NORTHROP GRUMMAN SYSTEMS CORPORATION                               	 
	 	 	TITLE:  CVP,CHIEF HR & ADMINISTRATIVE OFFICER 	 
	 

Page 10 of 10

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