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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported)
March 29, 2011
Huntington Ingalls Industries, Inc.
(Exact name of registrant as specified in its charter)
         
Delaware   1-34910   90-0607005
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)
     
4101 Washington Avenue, Newport News, VA   23607
(Address of principal executive offices)   (Zip Code)
(757) 380-2000
Registrant’s telephone number, including area code
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


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ITEM 1.01 Entry into a Material Definitive Agreement
ITEM 2.01 Completion of Acquisition or Disposition of Assets
ITEM 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
ITEM 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
ITEM 8.01 Other Events
ITEM 9.01 Financial Statements and Exhibits
SIGNATURES
EX-3.1
EX-3.2
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-99.1


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ITEM 1.01 Entry into a Material Definitive Agreement.
On March 29, 2011, Huntington Ingalls Industries, Inc. (the “Company”) entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Northrop Grumman Corporation (now named Titan II Inc.), New P, Inc. (now named Northrop Grumman Corporation) (“Northrop Grumman”), Northrop Grumman Shipbuilding, Inc. (“NGSB”) and Northrop Grumman Systems Corporation (“NGSC”), pursuant to which the Company was legally and structurally separated from Northrop Grumman.
Pursuant to the terms of the Separation Agreement, (i) Northrop Grumman completed a corporate reorganization to create a new holding company structure, (ii) the Company and Northrop Grumman effected certain transfers of assets and assumed certain liabilities so that each of the Company and Northrop Grumman retained both the assets of and liabilities associated with their respective businesses, (iii) subject to certain exceptions, all agreements, arrangements, commitments and undertakings, including all intercompany accounts payable or accounts receivable, including intercompany indebtedness and intercompany work orders between the Company and Northrop Grumman, were terminated or otherwise satisfied, effective no later than March 31, 2011 (the “Distribution Date”), (iv) the Company and Northrop Grumman agreed to share certain gains and liabilities and (v) Northrop Grumman distributed, on a pro rata basis, all of the issued and outstanding shares of common stock of the Company to Northrop Grumman’s stockholders via a pro rata dividend (the “Spin-Off”).
Consummation of the Spin-Off was subject to customary closing conditions that were satisfied prior to the Spin-Off, including, among other things, that (i) the Securities and Exchange Commission (the “SEC”) declare effective the Company’s registration statement on Form 10 relating to the registration of the Company’s common stock under the Securities Exchange Act of 1934, (ii) no stop order of the SEC suspending effectiveness of the Form 10 be in effect prior to the Spin-Off and (iii) the Company’s common stock be authorized for listing on the New York Stock Exchange.
In addition to, and concurrently with, the Separation Agreement, the Company, Northrop Grumman and certain of their respective subsidiaries entered into certain ancillary agreements, including (i) an Employee Matters Agreement that sets forth agreements between the Company and Northrop Grumman as to certain employment, compensation and benefits matters, (ii) an Insurance Matters Agreement that allocates to the Company and Northrop Grumman rights regarding various policies of insurance, (iii) an Intellectual Property License Agreement pursuant to which NGSB and its affiliates license certain of its intellectual property to NGSC and its affiliates and NGSC and its affiliates license certain of its intellectual property to NGSB and its affiliates, (iv) a Tax Matters Agreement that governs rights and obligations after the Spin-Off with respect to matters regarding U.S. Federal, state, local and foreign income taxes and other taxes, including tax liabilities and benefits, attributes, returns and contests, and (v) a Transition Services Agreement under which Northrop Grumman or certain of its subsidiaries will provide the Company with certain services for a limited time to help ensure an orderly transition following the distribution.
The foregoing descriptions of the Separation Agreement, Employee Matters Agreement, Insurance Matters Agreement, Intellectual Property License Agreement, Tax Matters Agreement and Transition Services Agreements (the “Agreements”) are qualified in their entirety by reference to the full text of the Agreements, which are filed as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6 to this Current Report on Form 8-K.
ITEM 2.01 Completion of Acquisition or Disposition of Assets.
The information included in Item 1.01 is incorporated herein by reference.

 


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ITEM 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers .
Departure of Directors; Election of Directors
On March 30, 2011, the Board of Directors of the Company (the “Board”) elected C. Michael Petters, Robert Bruner, Artur Davis, Anastasia Kelly, Paul D. Miller and Tom Schievelbein as members of the Board, effective as of 11:59 p.m. on March 30, 2011. Ms. Kelly was appointed to serve as chair, and Mr. Davis and Thomas B. Fargo (who was previously appointed to serve as non-executive Chairman of the Company) were appointed to serve as members, of the Governance Committee of the Board. Admiral Miller was appointed to serve as chair, and Admiral Fargo was appointed to serve as a member, of the Compensation Committee of the Board (the “Compensation Committee”). Mr. Schievelbein and Dr. Bruner were appointed to serve as members of the Audit Committee along with Karl von der Heyden who was previously appointed to serve as chair of the committee. Information regarding each of these directors is included under the heading “Management” in the Company’s Information Statement, dated March 18, 2011, and attached hereto as Exhibit 99.1. Such information has not changed and is incorporated herein by reference. In addition, on March 30, 2011, each of Mark Rabinowitz and Malcolm S. Swift tendered his resignation from the Board, effective as of 11:59 p.m. on March 30, 2011.
Compensatory Arrangements of Non-Employee Directors
The members of the Board who are not employed by the Company or one of its subsidiaries (“non-employee directors”) will be compensated by the Company as follows:
Cash Compensation . Each non-employee director will be paid a cash retainer by the Company at an annualized rate of $100,000. A non-employee director who serves as non-executive chairman, a Board committee Chair and/or a member of certain Board committees, will be paid an additional annual cash retainer by the Company as follows:
         
Non-Executive Chairman Retainer
  $ 250,000  
Committee Chair Retainers
       
Audit Committee Chair
  $ 20,000  
Compensation Committee Chair
  $ 15,000  
Governance Committee Chair
  $ 15,000  
Audit Committee Member Retainer
  $ 15,000  
Compensation Committee Member Retainer
  $ 5,000  
Governance Committee Member Retainer
  $ 5,000  
Equity Compensation . Each non-employee director will also receive an award of restricted stock units (“RSUs”) under the Huntington Ingalls Industries, Inc. 2011 Long-Term Incentive Stock Plan (the “LTISP”) on the first trading day of each fiscal quarter of the Company, commencing with the second quarter of fiscal 2011. The number of RSUs awarded to a non-employee director for any such quarter will be determined by dividing (1) $25,000 by (2) the per share closing price (in regular trading) of a share of the Company’s common stock on the New York Stock Exchange on the date of grant, rounded down to the nearest whole unit.
Effective March 31, 2011, the Board also approved special initial long-term incentive awards to the non-employee directors in the form of an additional RSU award. Admiral Fargo was granted an initial award of 7,228 RSUs and Dr. Bruner, Ms. Kelly, Admiral Miller and Messrs. Davis, Schievelbein and von der Heyden each was granted an initial award of 4,819 RSUs.
Each non-employee director RSU award is fully vested at grant and will generally become payable within 30 days following the date the non-employee director ceases to provide services as a member of the Board. An RSU will be paid either in a share of Company common stock or, at the discretion of the Board, cash of equivalent value at the time of vesting (or a combination of cash and shares). Each non-employee director RSU

 


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award is subject to the Terms and Conditions applicable to Non-Employee Director Stock Units granted under the LTISP, which was approved by the Board, effective March 31, 2011, and is filed as Exhibit 10.7 to this Current Report on Form 8-K.
Appointment of Certain Officers
Effective March 31, 2011, the Board appointed Douglass Fontaine as the Company’s Corporate Vice President, Controller and Chief Accounting Officer.
Mr. Fontaine, 50, has served as Sector Vice President and Controller for NGSB since March 2008. In that position, he was responsible for accounting, financial planning and reporting, overhead budgets and rates, and Sarbanes-Oxley compliance for the sector. Previously, he served as Vice President and Business Manager of Estimating & Pricing, Operations, Engineering and Quality for Northrop Grumman Ship Systems from February 2006 through March 2008. In addition, since joining Northrop Grumman in 1988 as a financial analyst with the former Ingalls Shipbuilding, Mr. Fontaine has held a variety of other positions in business management for Northrop Grumman Ship Systems, including Vice President and Business Manager of Advanced Surface Combatants and Vice President of Finance. Mr. Fontaine is a certified public accountant and holds a bachelor’s degree in business management from the University of Mississippi.
In connection with his appointment, Mr. Fontaine will receive a base salary of $305,000 annually. Additionally, on March 31, 2011, Mr. Fontaine was granted 7,349 RPSRs (as defined below) and 9,036 RSRs (as defined below). Additionally, on March 31, 2011, Mr. Fontaine was granted an annual incentive compensation opportunity for 2011 under the Company’s annual incentive compensation programs (the Huntington Ingalls Industries, Inc. 2011 Annual Incentive Plan (For Non-Section 162(m) Officers) and The 2011 Incentive Compensation Plan of Huntington Ingalls Industries, Inc.) with a target bonus percentage of 45% of his base salary. The other terms of Mr. Fontaine’s RPSRs, RSRs and incentive compensation opportunity are identical to the terms of the awards to the named executive officers of the Company (the “NEOs”) described in further detail below under the heading “Compensation of Named Executive Officers.”
Compensation of Named Executive Officers
Base Salaries. The Company’s executive officers will receive base salaries as established by the Company from time to time. Effective March 31, 2011, the Compensation Committee approved the following initial annualized base salary rates for the NEOs:
             
Name   Position(s)   Base Salary
C. Michael Petters
  President and Chief Executive Officer   $ 900,000  
Barbara A. Niland
  Vice President and Chief Financial Officer   $ 550,000  
Irwin F. Edenzon
  Vice President and General Manager—Gulf Coast Operations   $ 500,000  
Matthew J. Mulherin
  Vice President and General Manager—Newport News Operations   $ 500,000  
William R. Ermatinger
  Vice President and Chief Human Resources Officer   $ 350,000  
Annual Incentive Compensation Opportunities. Also effective March 31, 2011, the Compensation Committee approved grants to the NEOs of incentive compensation opportunities under the Company’s annual incentive compensation programs (the Huntington Ingalls Industries, Inc. 2011 Annual Incentive Plan (For Non-Section 162(m) Officers) and The 2011 Incentive Compensation Plan of Huntington Ingalls Industries, Inc. (the “ICP”)). After the conclusion of the 2011 performance year, the Compensation Committee will base its determinations of the actual annual incentive amounts payable based on the performance of the Company and its business segments against certain metrics that have been established by the Compensation Committee. For Mr. Petters, Ms. Niland and Mr. Ermatinger, the relevant performance criteria include the Company’s operating margin and free cash flow for 2011. For Mr. Mulherin, the criteria include the Company’s operating margin and

 


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free cash flow for 2011, as well as operational criteria, return on sales criteria and free cash flow criteria for the Company’s Newport News segment for 2011. For Mr. Edenzon, the criteria include the Company’s operating margin and free cash flow for 2011, as well as operational criteria, return on sales criteria and free cash flow criteria for the Company’s Ingalls segment for 2011.
The target bonus percentages (each as a percentage of the NEO’s base salary for the year) for the annual incentive awards to the NEOs are as follows:
         
Name   Target Bonus Percentage
C. Michael Petters
    125 %
Barbara A. Niland
    70 %
Irwin F. Edenzon
    70 %
Matthew J. Mulherin
    70 %
William R. Ermatinger
    60 %
A NEO’s actual annual incentive compensation payment for a year will be determined by the Compensation Committee and may range from 0% to 150% of the NEO’s target bonus percentage based on performance against the applicable performance criteria referenced above, and the Committee’s assessment of the individual’s performance.
If a NEO’s compensation is subject to the deductibility limitations of Section 162(m) of the Internal Revenue Code for a particular year, the NEO’s annual incentive payment for that year may not exceed a limit determined under the ICP for that year. In general, the ICP limits the maximum aggregate annual incentive amounts that may be paid to all such executives subject to Section 162(m) with respect to a particular year, in the aggregate, to 2.5% of the Company’s 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) for that year.
Long-Term Equity Incentive Awards. In addition, effective March 31, 2011, the Compensation Committee approved grants of certain long-term equity incentive awards to the NEOs under the LTISP. The incentive awards consisted of a combination of restricted performance stock rights (“RPSRs”) and restricted stock rights (“RSRs”), with the RPSR awards subject to the Terms and Conditions applicable to 2011 RPSRs granted under the LTISP (the “RPSR Terms”) and the RSRs subject to the Terms and Conditions applicable to 2011 RSRs granted under the LTISP (the “RSR Terms”). The forms of the RPSR Terms and RSR Terms were approved by the Compensation Committee, effective March 31, 2011. Each NEO received a number of RPSRs and a number of RSRs as follows:
                 
Name   RPSRs     RSRs  
C. Michael Petters
    108,433       60,240  
Barbara A. Niland
    29,156       24,096  
Irwin F. Edenzon
    21,084       24,096  
Matthew J. Mulherin
    21,084       24,096  
William R. Ermatinger
    11,807       18,072  
The RPSR Terms provide that the RPSRs will vest based on the performance of the Company during the period of time from January 1, 2011 to December 31, 2013 (the “Performance Period”). Performance will be measured against operating margin criteria and free cash flow criteria that have been established by the Compensation Committee. Between 0% and 200% of the number of RPSRs subject to a particular award will vest based on actual Company performance during the Performance Period. To the extent that an RPSR vests, the holder will be entitled to receive from the Company an equivalent number of shares of the Company’s common stock, or, in the discretion of the Compensation Committee, cash of equivalent value at the time of vesting or a combination of shares of common stock and cash. RPSRs that vest will be paid in 2014. RPSRs subject to the award will terminate if the holder of the award ceases to be an employee of the Company or one of its

 


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subsidiaries before the end of the Performance Period, unless the holder’s employment terminates due to retirement, death or disability more than six months after the start of the Performance Period, in which case the holder will be entitled to prorated vesting at the end of the Performance Period of the portion of his or her RPSRs that would have vested based on Company performance at the end of the period had his or her employment continued through that time.
The RSR Terms provide that the RSRs will vest, subject to the award holder’s continued employment, on the third anniversary of the grant date. Each vested RSR will be paid within 90 days of vesting in a share of Company common stock, or, in the discretion of the Compensation Committee, cash of equivalent value at the time of vesting or a combination of shares of common stock and cash. RSRs subject to the award will terminate, to the extent not previously vested, if the holder of the award ceases to be an employee of the Company or one of its subsidiaries, unless the holder’s employment terminates due to death or disability, in which case the holder will be entitled to accelerated vesting of the award.
In addition, if the holder of an RPSR or RSR is an elected or appointed officer of the Company on the date the award is paid (or, if earlier, on the date the holder’s employment by the Company and its subsidiaries terminates for any reason), the holder is not permitted to sell or otherwise transfer 50% of the total number of shares of common stock the holder receives in payment of the award until the earlier of (1) the third anniversary of the date such shares of common stock are paid to the holder or (2) the date the holder’s employment by the Company and its subsidiaries terminates due to the holder’s death or disability. If the holder’s employment terminates other than due to death or disability, the holding period requirement will not apply as to any RPSRs that are paid more than one year after the holder’s termination of employment.
The foregoing descriptions of the RPSRs and the RSRs are qualified in their entirety by reference to the full text of the RPSR Terms and the RSR Terms, which are filed as Exhibits 10.8 and 10.9, respectively, to this Current Report on Form 8-K.
Effective March 31, 2011, the Compensation Committee also approved the form of Terms and Conditions applicable to 2011 Stock Options granted under the LTISP (the “Option Terms”). While the Company has not yet granted any stock options, a stock option granted under the LTISP (an “Option”) will be exercisable only to the extent that it has vested and has not expired or terminated. One-third of the total number of shares of common stock subject to an Option will vest and become exercisable upon each of the first, second and third anniversaries of the date of grant. An Option, to the extent not previously exercised, whether vested and exercisable or not, will terminate at the close of business on the last business day preceding the seventh anniversary of the grant date (the “Expiration Date”). An option may terminate prior to the Expiration Date if a holder ceases to be an employee of the Company or one of its subsidiaries.
The Option Terms further provide that any holder of an Option who is an elected or appointed officer of the Company on any date an Option is exercised (or, if earlier, on the date the holder’s employment is terminated for any reason) is not permitted to sell or otherwise transfer 50% of the total number of shares of common stock the holder receives upon any exercise of an Option until the earlier of (1) the third anniversary of the date of exercise or (2) the date the holder’s employment by the Company and its subsidiaries terminates due to the holder’s death or disability. If the holder’s employment terminates other than due to the holder’s death or disability, the holding period will not apply as to any shares acquired upon exercise of an Option to the extent the Option remains exercisable for more than one year after such termination of employment and the applicable Option exercise actually occurs more than one year after such termination of employment.
The foregoing description of the Option Terms is qualified in its entirety by reference to the full text of the Options Terms, which is filed as Exhibit 10.10 to this Current Report on Form 8-K.

 


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ITEM 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On March 14, 2011, the Board approved the Restated Certificate of Incorporation of the Company (the “Restated Certificate”). The Company’s sole stockholder, Northrop Grumman (formerly New P, Inc.), also approved the Restated Certificate on March 29, 2011. The Restated Certificate, which became effective at 11:59 p.m. on March 30, 2011, is filed as Exhibit 3.1 hereto.
On March 14, 2011, the Board approved the amendment and restatement of the bylaws of the Company (the “Bylaws”). The Bylaws, which became effective at 11:59 p.m. on March 30, 2011, are filed as Exhibit 3.2 hereto.
A description of the material provisions of the Restated Certificate and Bylaws can be found in the section entitled “Description of Capital Stock” in the Information Statement attached hereto as Exhibit 99.1.
ITEM 8.01 Other Events .
On March 31, 2011, Northrop Grumman announced that it had completed the previously announced Spin-Off of the Company. Effective as of 12:01 a.m. Eastern time on the Distribution Date, the common stock of the Company was distributed, on a pro rata basis, to Northrop Grumman’s stockholders of record as of the close of business of the New York Stock Exchange on March 30, 2011 (the “Record Date”). On the Distribution Date, each of Northrop Grumman’s stockholders received one share of common stock of the Company for every six shares of common stock of Northrop Grumman that he, she or it held on the Record Date and will receive cash in lieu of any fractional shares of common stock of the Company. The Spin-Off was completed pursuant to the Separation Agreement.
The Company’s Information Statement, dated March 18, 2011 (the “Information Statement”), which describes for stockholders the details of the distribution and provides information as to the business and management of the Company, is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The Information Statement was first mailed to Northrop Grumman’s stockholders on March 21, 2011.
ITEM 9.01 Financial Statements and Exhibits .
(d)   Exhibits
         
Exhibit No.   Description
       
 
  3.1    
Restated Certificate of Incorporation of Huntington Ingalls Industries, Inc.
       
 
  3.2    
Bylaws of Huntington Ingalls Industries, Inc.
       
 
  10.1    
Separation and Distribution Agreement, dated as of March 29, 2011, among Titan II Inc. (formerly Northrop Grumman Corporation), Northrop Grumman Corporation (formerly New P, Inc.), Huntington Ingalls Industries, Inc., Northrop Grumman Shipbuilding, Inc. and Northrop Grumman Systems Corporation
       
 
  10.2    
Employee Matters Agreement, dated as of March 29, 2011, among Titan II Inc. (formerly Northrop Grumman Corporation), Northrop Grumman Corporation (formerly New P, Inc.) and Huntington Ingalls Industries, Inc.
       
 
  10.3    
Insurance Matters Agreement, dated as of March 29, 2011, among Titan II Inc. (formerly Northrop Grumman Corporation), Northrop Grumman Corporation (formerly New P, Inc.) and Huntington Ingalls Industries, Inc.
       
 
  10.4    
Intellectual Property License Agreement, dated as of March 29, 2011, between Northrop Grumman Systems Corporation and Northrop Grumman Shipbuilding, Inc.

 


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Exhibit No.   Description
       
 
  10.5    
Tax Matters Agreement, dated as of March 29, 2011, among Northrop Grumman Corporation (formerly New P, Inc.), Huntington Ingalls Industries, Inc. and Titan II Inc. (formerly Northrop Grumman Corporation)
       
 
  10.6    
Transition Services Agreement, dated as of March 29, 2011, among Northrop Grumman Systems Corporation, Northrop Grumman Shipbuilding, Inc., Northrop Grumman Corporation (formerly New P, Inc.) and Huntington Ingalls Industries, Inc.
       
 
  10.7    
Terms and Conditions applicable to Non-Employee Director Stock Units Granted Under the 2011 Long-Term Incentive Stock Plan
       
 
  10.8    
Terms and Conditions Applicable to 2011 Restricted Performance Stock Rights Granted Under the 2011 Long-Term Incentive Stock Plan
       
 
  10.9    
Terms and Conditions Applicable to 2011 Restricted Stock Rights Granted Under the 2011 Long-Term Incentive Stock Plan
       
 
  10.10    
Terms and Conditions Applicable to 2011 Stock Options Granted Under the 2011 Long-Term Incentive Stock Plan
       
 
  99.1    
Information Statement, dated March 18, 2011

 


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  HUNTINGTON INGALLS INDUSTRIES, INC.

 
 
April 4, 2011  By:   /s/ C. Michael Petters    
(Date)    (Signature)    
    C. Michael Petters
President and Chief Executive Officer 
 
 

 

EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION OF
HUNTINGTON INGALLS INDUSTRIES, INC.
Pursuant to Sections 228, 242 and 245 of the
Delaware General Corporation Law
     Huntington Ingalls Industries, Inc. (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify as follows:
     1. The name of the Corporation is Huntington Ingalls Industries, Inc. The Corporation was originally incorporated under the name New S Holdco, Inc. by the filing of its original certificate of incorporation of the Corporation (the “Original Certificate of Incorporation”) with the office of the Secretary of State of the State of Delaware on August 4, 2010.
     2. This Restated Certificate of Incorporation (the “Certificate of Incorporation”), which both restates and integrates and further amends the provisions of the Original Certificate of Incorporation, as amended prior to the effective time of the filing of this Restated Certificate of Incorporation, was duly adopted by the Board of Directors of the Corporation (the “Board of Directors”) and by the sole stockholder of the Corporation in accordance with Sections 228, 242 and 245 of the DGCL.
     3. This Restated Certificate of Incorporation shall become effective at 11:59 p.m. (local time in Wilmington, Delaware) on March 30, 2011.
     4. The text of the Certificate of Incorporation is hereby amended and restated in its entirety as follows:
      FIRST: The name of the corporation is Huntington Ingalls Industries, Inc. (the “Corporation”).
      SECOND: The address of the registered office of the Corporation in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware, 19801. The Corporation’s registered agent at such address is The Corporation Trust Company.
      THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the General Corporation Law of the State of Delaware.
      FOURTH:
     1. The total number of shares of stock which the Corporation shall have authority to issue is One Hundred Sixty Million (160,000,000), and shall be divided into two classes, consisting of One Hundred Fifty Million (150,000,000) shares of Common Stock, par

 


 

value of $.01 per share (the “Common Stock”), and Ten Million (10,000,000) shares of Preferred Stock, par value of $.01 per share (the “Preferred Stock”). The number of authorized shares of Common Stock and Preferred Stock may be increased or decreased, but not below the number of shares of each such respective class then outstanding, in each case by the affirmative vote of a majority in voting power of the capital stock of the Corporation outstanding and entitled to vote thereon, voting together as a single class and irrespective of Section 242(b)(2) of the DGCL. Upon the effective time of the filing of the Restated Certificate of Incorporation inserting this sentence, each share of common stock of the Corporation, par value $1.00 per share, outstanding immediately prior to such effective time shall be reclassified and changed into one share of Common Stock of the Corporation, par value $.01 per share.
     2. Shares of Preferred Stock may be issued from time to time in one or more series, each of which series shall have such distinctive designation or title as shall be fixed by resolution of the Board of Directors of the Corporation (the “Board of Directors”) (or an authorized committee thereof) prior to the issuance of any shares thereof. Each such series of Preferred Stock shall have such powers (including voting powers, full or limited, or no voting powers), and such designations, preferences and relative, participating, optional or other rights and such qualifications, limitations or restrictions thereof, if any, as shall be fixed from time to time by the Board of Directors (or an authorized committee thereof) prior to the issuance of any shares thereof pursuant to the authority hereby expressly vested in it, all in accordance with the laws of the State of Delaware.
      FIFTH: In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to adopt, repeal, rescind, alter or amend in any respect the bylaws of the Corporation (the “Bylaws”).
      SIXTH: The Bylaws may also be adopted, repealed, rescinded, altered or amended in any respect by the stockholders of the Corporation, but only by the affirmative vote of the holders of not less than a majority in voting power of all outstanding shares of capital stock entitled to vote thereon, voting as a single class, and by the holders of any one or more classes or series of capital stock entitled to vote thereon as a separate class pursuant to one or more resolutions adopted by the Board of Directors (or an authorized committee thereof) in accordance with Section 2 of Article Fourth hereof; provided , however , that in addition to any requirements of law and notwithstanding any other provision of this Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding any other provision of this Certificate of Incorporation, the Bylaws of the Corporation or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of the holders of at least 66 2 / 3 % in voting power of the issued and outstanding stock entitled to vote thereon, voting together as a single class, shall be required for the stockholders to amend or repeal, or adopt any provision inconsistent with, Section 2.08, Section 3.02, Section 3.04, Section 3.05, Section 3.06, Section 3.07, Article V and Section 7.04 of the Bylaws of the Corporation.
      SEVENTH: The business and affairs of the Corporation shall be managed by and under the direction of the Board of Directors. Except as may otherwise be provided pursuant to Section 2 of Article Fourth hereof in connection with rights to elect additional directors under specified circumstances which may be granted to the holders of any class or series of Preferred Stock, the Board of Directors shall consist of not less than five or more than fifteen members, the exact

 


 

number of which will be fixed from time to time exclusively by resolution adopted by the Board of Directors.
      EIGHTH:
     1. The Board of Directors (other than those directors elected by the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of Article FOURTH hereof (the “Preferred Stock Directors”)) shall be divided into three classes, designated Class I, Class II and Class III. Class I directors shall initially serve for a term expiring the first annual meeting of stockholders following the effective time of the filing of the Restated Certificate of Incorporation inserting this sentence; Class II directors shall initially serve for a term expiring the second annual meeting of stockholders following such effective time; and Class III directors shall initially serve for a term expiring the third annual meeting of stockholders following such effective time. Commencing with the first annual meeting of stockholders following such effective time, directors of each class the term of which shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting of stockholders held after their election. Subject to any provisions relating to Preferred Stock Directors, directors shall remain in office until the election and qualification of their respective successors in office or until their earlier death, resignation or removal. The Board of Directors is authorized to assign members of the Board of Directors already in office to Class I, Class II or Class III, with such assignment effective as of the effective time of the filing of the Restated Certificate of Incorporation inserting this sentence.
     2. Except for such additional directors, if any, as are elected by the holders of any series of Preferred Stock as provided for or fixed pursuant to the provisions of Article FOURTH hereof, any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 66 2/3% of the total voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class.
     3. Except as otherwise expressly required by law or this Certificate of Incorporation (including any resolution adopted by the Board of Directors (or an authorized committee thereof) fixing the terms of any series of Preferred Stock), (i) a majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, and (ii) the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. “Whole Board” means the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.
      NINTH: Except as may otherwise be provided pursuant to Section 2 of Article Fourth hereof in connection with rights to elect additional directors under specified circumstances which may be granted to the holders of any series of Preferred Stock, newly created directorships resulting from any increase in the authorized number of directors, or any vacancies on the Board of Directors resulting from death, resignation, removal or other causes, shall be filled solely by the affirmative vote of a majority of the remaining directors then in office and entitled to vote thereon, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the next election of the class for which such director shall be chosen and shall remain in office until his successor shall be elected

 


 

and qualified or until such director’s death, resignation or removal, whichever first occurs. No decrease in the authorized number of directors shall shorten the term of any incumbent director.
      TENTH : RESERVED.
      ELEVENTH: Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual meeting or at a special meeting of stockholders of the Corporation, unless the Board of Directors (or an authorized committee thereof) authorizes such action to be taken by the written consent of the holders of outstanding shares of capital stock having not less than the minimum voting power that would be necessary to authorize or take such action at a meeting of stockholders at which all shares entitled to vote thereon were present and voted, provided all other requirements of applicable law and this Certificate of Incorporation have been satisfied.
      TWELFTH: An annual meeting of the stockholders for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date and at such time as the Board of Directors (or an authorized committee thereof) shall fix. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation. The directors of the Corporation need not be elected by written ballot unless the bylaws so provide. Subject to the terms of any class or series of Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the Board of Directors (or an authorized committee thereof) or the Chairperson of the Board of Directors. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting.
      THIRTEENTH: Meetings of stockholders of the Corporation may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision of applicable law) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws.
      FOURTEENTH: The Corporation reserves the right to adopt, repeal, rescind, alter or amend in any respect any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by applicable law, and all rights conferred on stockholders herein are granted subject to this reservation; provided , however , that in addition to any requirements of law and any other provision of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of the holders of at least 66 2 / 3 % in voting power of the issued and outstanding stock entitled to vote thereon, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, Article Sixth, Article Seventh, Article Eighth, Article Ninth, Article Eleventh, Article Twelfth, Article Fourteenth and Article Fifteenth of this Certificate of Incorporation.
      FIFTEENTH: A director of the Corporation shall not be personally liable to the Corporation or to its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or to its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or

 


 

a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derives any improper personal benefit. If, after approval of this Article by the stockholders of the Corporation, the General Corporation Law of the State of Delaware is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.
     Any repeal or modification of this Article by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

 


 

IN WITNESS WHEREOF, this Restated Certificate of Incorporation which restates and integrates and further amends the provisions of the Original Certificate of Incorporation of this Corporation, as amended prior to the effective time of the filing of this Restated Certificate of Incorporation, and which has been duly adopted in accordance with Sections 228, 242 and 245 of the Delaware General Corporation Law, has been executed by its duly authorized officer as of the date set forth below.
         
  HUNTINGTON INGALLS INDUSTRIES, INC.
 
 
Date: March 30, 2011  By:   /s/ C. Michael Petters    
  Name:   C. Michael Petters   
  Title:   President and Chief Executive Officer   

 

         
EXHIBIT 3.2
RESTATED BYLAWS
OF
HUNTINGTON INGALLS INDUSTRIES, INC.
(A Delaware Corporation)
ARTICLE I
OFFICES
      Section 1.01 Registered Office . The registered office of Huntington Ingalls Industries, Inc. (the “Corporation”) shall be fixed in the Certificate of Incorporation of the Corporation.
      Section 1.02 Principal Executive Office . The principal executive office of the Corporation shall be located at 4101 Washington Avenue, Newport News, Virginia, 23607. The Board of Directors of the Corporation (the “Board of Directors”) may change the location of said principal executive office from time to time.
      Section 1.03 Other Offices . The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board of Directors may from time to time determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
      Section 2.01 Annual Meetings . The annual meeting of stockholders of the Corporation shall be held on such date and at such time as the Board of Directors shall determine. At each annual meeting of stockholders, directors shall be elected in accordance with the provisions of Section 3.04 hereof and any proper business may be transacted in accordance with the provisions of Section 2.08 hereof.
      Special Meetings . Subject to the terms of any class or series of Preferred Stock, special meetings of the stockholders of the Corporation may be called by the Board of Directors (or an authorized committee thereof) or the Chairperson of the Board of Directors. Except as otherwise required by law or provided by the terms of any class or series of Preferred Stock, special meetings of stockholders of the Corporation may not be called by any other person or persons. Business transacted at any special meeting shall be limited to the purposes stated in the notice of such meeting.
      Place of Meetings .
     (a) Each annual or special meeting of stockholders shall be held at such location as may be determined by the Board of Directors. Notwithstanding the foregoing, the Board of Directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 2.03(b).

 


 

     (b) If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, stockholders and proxy holders not physically present at a meeting of stockholders may, by means of remote communication:
     (1) participate in a meeting of stockholders; and
     (2) be deemed present in person and vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by means of remote communication; provided that (A) the Corporation implements reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxy holder, (B) the Corporation implements reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (C) if any stockholder or proxy holder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action is maintained by the Corporation.
      Notice of Meetings .
     (c) Unless otherwise required by law, written notice of each annual or special meeting of stockholders stating the date and time when, the place, if any, where it is to be held, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, the information required to gain access to the list of stockholders entitled to vote, if such list is to be open for examination on a reasonably accessible electronic network, and the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, shall be given not less than 10 nor more than 60 days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting except as otherwise provided herein or required by law. The purpose or purposes for which the meeting is called may, in the case of an annual meeting, and shall, in the case of a special meeting, also be stated. If mailed, notice is given when it is deposited in the United States mail, postage prepaid, directed to a stockholder at such stockholder’s address as it shall appear on the records of the Corporation.
     (d) Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation of the Corporation (the “Certificate”) or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholders to whom notice is given, as provided in Section 232 of DGCL. For purposes of these Bylaws, “electronic transmission” means any form of communication not directly involving the physical transmission of paper that

 


 

creates a record the recipient may retain, retrieve and review and reproduce in paper form through an automated process.
     (e) Without limiting the manner by which notice otherwise may be given effectively to stockholders, notice shall be deemed to have been given to all stockholders of record who share an address if notice is given in accordance with the “householding” rules pursuant to Rule 14a-3(e) under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “Exchange Act”) and Section 233 of the DGCL.
      Section 2.02 Waiver of Notice . Whenever notice is required to be given under any provision of the DGCL or the Certificate or these Bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting will constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting need be specified in any written waiver of notice or waiver by electronic transmission unless required by the Certificate.
      Section 2.03 Adjourned Meetings . When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than 30 days after the date for which the meeting was originally noticed, then notice of the place, if any, date and time of the adjourned meeting and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting, shall be given in conformity herewith. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board of Directors shall fix a new record date for notice of such adjourned meeting in accordance with Section 213(a) of the DGCL, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.
      Section 2.04 Conduct of Meetings . All annual and special meetings of stockholders shall be conducted in accordance with such rules and procedures as the Board of Directors may determine subject to the requirements of applicable law and, as to matters not governed by such rules and procedures, as the chairperson of such meeting shall determine. Such rules or procedures, whether adopted by the Board of Directors or prescribed by the chairperson of such meeting, may include without limitation the following: (a) the establishment of an agenda or order of business for the meeting, (b) rules and procedures for maintaining order at the meeting and the safety of those present, (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies and such other persons as the chairperson of the meeting shall determine, (d) restrictions on entry to the meeting

 


 

after the time fixed for commencement thereof, and (e) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairperson of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
     The chairperson of any annual or special meeting of stockholders shall be either the Chairperson of the Board of Directors or any person designated by the Chairperson of the Board of Directors. The Secretary, or in the absence of the Secretary, a person designated by the chairperson of the meeting, shall act as secretary of the meeting.
      Section 2.05 Notice of Stockholder Business and Nominations . Nominations of persons for election to the Board of Directors and the proposal of business to be transacted by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the Corporation’s proxy materials with respect to such meeting, (b) by or at the direction of the Board of Directors or (c) by any stockholder of record of the Corporation (the “Record Stockholder”) at the time of the giving of the notice required in the following paragraph, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this section. For the avoidance of doubt, the foregoing clause (c) shall be the exclusive means for a stockholder to bring nominations or business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Exchange Act).
     For nominations or business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of the foregoing paragraph, (1) the Record Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, (2) any such business must be a proper matter for stockholder action under applicable law, and (3) the Record Stockholder and the beneficial owner, if any, on whose behalf any such proposal or nomination is made, must have acted in accordance with the representations set forth in the Solicitation Statement required by these Bylaws. To be timely, a Record Stockholder’s notice shall be received by the Secretary at the principal executive offices of the Corporation not less than 90 or more than 120 days prior to the one-year anniversary (the “Anniversary”) of the date on which the Corporation first mailed its proxy materials; provided, however, that if the annual meeting is convened more than 30 days prior to or delayed by more than 30 days after the Anniversary of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, notice by the Record Stockholder to be timely must be so received not later than the close of business on the later of (i) the 135th day before such annual meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation. Notwithstanding anything in the preceding sentence to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board made by the Corporation at least 10 days before the last day a Record Stockholder may deliver a notice of nomination in accordance with the preceding sentence, a Record Stockholder’s notice required by this bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day

 


 

following the day on which such public announcement is first made by the Corporation. In no event shall an adjournment of an annual meeting, or the postponement of an annual meeting for which notice has been given, commence a new time period for the giving of a stockholder’s notice as described herein.
     Such Record Stockholder’s notice shall set forth: (a) if such notice pertains to the nomination of directors, as to each person whom the Record Stockholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Exchange Act and such person’s written consent to serve as a director if elected; (b) as to any business that the Record Stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any substantial interest (within the meaning of Item 5 of Schedule 14A under the Exchange Act) in such business of such Record Stockholder and the beneficial owner (within the meaning of Section 13(d) of the Exchange Act), if any, on whose behalf the proposal is made; and (c) as to (1) the Record Stockholder giving the notice and (2) the beneficial owner, if any, on whose behalf the nomination or proposal is made (each, a “party”) (i) the name and address of each such party, as they appear on the Corporation’s books; (ii) the class, series and number of shares of the Corporation that are owned beneficially and of record by each such party (which information set forth in this clause shall be supplemented by such stockholder or such beneficial owner, as the case may be, not later than 10 days after the record date for determining the stockholders entitled to notice of the meeting to disclose such ownership as of such record date); (iii) a description of any agreement, arrangement or understanding with respect to the nomination between or among such stockholder and such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing; (iv) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder’s notice by, or on behalf of, such Record Stockholder or such beneficial owners, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder and such beneficial owner, with respect to shares of stock of the Corporation (which information set forth in this clause shall be supplemented by such party not later than 10 days after the record date for determining the stockholders entitled to notice of the meeting to disclose such ownership as of such record date); (v) any other information relating to each such party that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act; (vi) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting; and (vii) a statement whether or not each such party will deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of voting power of all of the shares of capital stock of the Corporation required under applicable law to carry the proposal or, in the case of a nomination or nominations, at least the percentage of voting power of all of the shares of capital stock of the Corporation reasonably believed by the Record Stockholder or the

 


 

beneficial holder, as the case may be, to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder and/or intends otherwise to solicit proxies from stockholders in support of such proposal or nomination (such statement, a “Solicitation Statement”).
     Only persons nominated in accordance with the procedures set forth in this Section 2.08 shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.08. The chairperson of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defectively proposed business or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.
     Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting in accordance with Section 2.02. The notice of such special meeting shall include the purpose for which the meeting is called. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of record of the Corporation at the time of giving of notice provided for in this paragraph, who shall be entitled to vote in the election of directors and who delivers a written notice to the Secretary setting forth the information set forth in clauses (a) and (c) of the third paragraph of this Section 2.08. Nominations by stockholders of persons for election to the Board of Directors may be made at a special meeting of stockholders only if such stockholder’s notice required by the preceding sentence shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 135 th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall an adjournment of a special meeting, or a postponement of a special meeting for which a notice has been given, commence a new time period for the giving of a record stockholder’s notice. A person shall not be eligible for election or reelection as a director at a special meeting unless the person is nominated (i) by or at the direction of the Board of Directors or (ii) by a record stockholder in accordance with the notice procedures set forth in this Section 2.08.
     For purposes of this section, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

 


 

     Notwithstanding the foregoing provisions of this Section 2.08, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 2.08. Nothing in this Section 2.08 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.
      Section 2.06 Quorum . At any meeting of stockholders, the presence, in person or by proxy, of the holders of record of a majority of the voting power of the shares then issued and outstanding and entitled to vote at the meeting shall constitute a quorum for the transaction of business. Where a separate vote by a class or classes or series is required, the holders of a majority of the voting power of the shares of such class or classes or series then issued and outstanding and entitled to vote on such matter present in person or represented by proxy shall constitute a quorum with respect to the vote on that matter. In the absence of a quorum, the chairperson of the meeting may adjourn the meeting from time to time. At any reconvened meeting following such an adjournment at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting.
      Section 2.07 Votes Required . When a quorum is present at a meeting, a matter submitted for stockholder action shall be approved if the votes cast “for” the matter exceed the votes cast “against” such matter, unless a greater or different vote is required by statute, any applicable law or regulation (including the applicable rules of any stock exchange), the rights of any authorized class of stock, the Certificate or these Bylaws. Unless the Certificate or a resolution of the Board of Directors adopted in connection with the issuance of shares of any class or series of stock provides for a greater or lesser number of votes per share, or limits or denies voting rights, each outstanding share of stock, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders.
      Section 2.08 Proxies . A stockholder may vote the shares owned of record by such stockholder either in person or by proxy in any manner permitted by law, including by execution of a proxy in writing or by telex, telegraph, cable, facsimile or electronic transmission, by the stockholder or by the duly authorized officer, director, employee or agent of such stockholder. No proxy shall be voted or acted upon after 3 years from its date, unless the proxy provides for a longer period. A duly executed proxy will be irrevocable if it states it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally.
     Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

 


 

      Section 2.09 Stockholder Action . Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual meeting or special meeting of stockholders of the Corporation, unless the Board of Directors authorizes such action to be taken by the written consent of the holders of outstanding shares of stock having not less than the minimum voting power that would be necessary to authorize or take such action at a meeting of stockholders at which all shares entitled to vote thereon were present and voted, provided all other requirements of applicable law and the Certificate have been satisfied.
      Section 2.10 List of Stockholders . The Secretary of the Corporation shall, in the manner provided by law, prepare and make (or cause to be prepared and made) a complete list of stockholders entitled to vote at any meeting of stockholders, provided, however, that if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the 10th day before the meeting date, arranged in alphabetical order and showing the address of, and the number of shares registered in the name of, each stockholder. Nothing contained in this section shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting in the manner provided by law. A list of the stockholders entitled to vote at the meeting shall also be produced and kept at the time and place, if any, of the meeting during the duration thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list will also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list will be provided with the notice of the meeting.
     The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders or to vote in person or by proxy at any meeting of stockholders.
      Section 2.11 Inspectors of Election . In advance of any meeting of stockholders, the Board of Directors may appoint Inspectors of Election to act at such meeting or at any adjournment or adjournments thereof. The Corporation may designate one or more alternate inspectors to replace any inspector who fails to act. If such inspectors are not so appointed or fail or refuse to act, the chairperson of any such meeting may (and, to the extent required by law, shall) make such an appointment. The number of Inspectors of Election shall be 1 or 3. If there are 3 Inspectors of Election, the decision, act or certificate of a majority shall be effective and shall represent the decision, act or certificate of all. No such inspector need be a stockholder of the Corporation. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.
     The Inspectors of Election shall have such duties and responsibilities as required under Section 231 of the DGCL (or any successor provision thereof).

 


 

ARTICLE III
DIRECTORS
      Section 3.01 Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
      Section 3.02 Number . Except as otherwise fixed pursuant to the provisions of Section 2 of Article Fourth of the Certificate in connection with rights to elect additional directors under specified circumstances which may be granted to the holders of any class or series of Preferred Stock, the Board of Directors shall consist of not less than five or more than fifteen members, and the exact number of directors of the Corporation shall be fixed from time to time exclusively by a resolution duly adopted by the Board of Directors.
      Section 3.03 Lead Independent Director . At any time the Chairperson of the Board of Directors is not independent as that term is defined under the then applicable rules and regulations of each national securities exchange upon which shares of the stock of the Corporation are listed for trading and of the Securities and Exchange Commission, the independent directors may designate from among them a Lead Independent Director having the duties and responsibilities set forth in the applicable rules of each such national securities exchange and as otherwise determined by the Board of Directors from time to time.
      Section 3.04 Election and Term of Office . Except as provided in Section 3.07 hereof and subject to the right to elect additional directors under specified circumstances which may be granted, pursuant to the provisions of Section 2 of Article Fourth of the Certificate, to the holders of any class or series of Preferred Stock, directors shall be elected by a plurality of the shares present and entitled to vote at the stockholders’ annual meeting.
      Section 3.05 Resignations . Any director may resign at any time by submitting a resignation to the Corporation in writing or by electronic transmission. Such resignation shall take effect at the time of its receipt by the Corporation unless such resignation is effective at a future time or upon the happening of a future event or events in which case it shall be effective at such time or upon the happening of such event or events. Unless the resignation provides otherwise, the acceptance of a resignation shall not be required to make it effective.
      Section 3.06 Removal . Any director may be removed from office as set forth in the Certificate of Incorporation.
      Section 3.07 Vacancies and Additional Directorships . Except as otherwise provided pursuant to Section 2 of Article Fourth of the Certificate in connection with rights to elect additional directors under specified circumstances which may be granted to the holders of any class or series of Preferred Stock, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of

 


 

Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office until the next election of the class for which such director shall be chosen and until his successor shall be elected and qualified or until such director’s death, resignation or removal, whichever first occurs. No decrease in the authorized number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
      Section 3.08 Meetings . Promptly after, and on the same day as, each annual election of directors by the stockholders, the Board of Directors shall, if a quorum be present, meet in a meeting (the “Organizational Meeting”) to elect a Chairperson of the Board of Directors, elect a Lead Independent Directors, if any, appoint members of the standing committees of the Board of Directors, elect officers of the Corporation and conduct other business as appropriate. Additional notice of such meeting need not be given if such meeting is conducted promptly after the annual meeting to elect directors and if the meeting is held in the same location where the election of directors was conducted. Regular meetings of the Board of Directors shall be held at such times and places as the Board of Directors shall determine and as shall be publicized among all directors.
     Directors may participate in regular or special meetings of the Board of Directors or any committee designated by the Board of Directors by means of conference telephone or other communications equipment by means of which all other persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
      Section 3.09 Notice of Meetings . A notice of each regular meeting of the Board of Directors shall not be required. A special meeting of the Board of Directors may be called by the Chairperson of the Board of Directors, the Chief Executive Officer or a majority of the directors then in office and shall be held at such place, if any, on such date and at such time as the person or persons calling such meeting may fix. Notice of special meetings shall be either (i) mailed to each director at least 5 days before the meeting, addressed to the director’s usual place of business or to his or her residence address or to an address specifically designated by the director or (ii) given by telephone, telegraph, telex, facsimile or electronic transmission not less than 24 hours before the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive office) nor the purpose of the meeting, unless otherwise required by law. Unless otherwise indicated in the notice of a meeting, any and all business may be transacted at a meeting of the Board of Directors. Notice of any meeting may be waived in writing, or by electronic transmission, at any time before or after the meeting, and attendance of any director at a meeting shall constitute a waiver of notice of such meeting, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the busincess to be transacted at, nor the purpose of, any meeting need be specified in any written waiver of notice or waiver by electronic transmission, unless required by the Certificate.

 


 

      Section 3.10 Action without Meeting . Unless otherwise restricted by the Certificate, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing, or by electronic transmission and such writing or writings or electronic transmission are filed with the minutes of the proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
      Section 3.11 Quorum . Except as otherwise provided by law, the Certificate or these Bylaws, at all meetings of the Board of Directors, a majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. “Whole Board” means the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. In the absence of a quorum, the directors present, by majority vote and without notice or waiver thereof, may adjourn the meeting to another date, place, if any, and time. At any reconvened meeting following such an adjournment at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.
      Section 3.12 Votes Required . Except as otherwise required by applicable law, the Certificate or these Bylaws, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors.
      Section 3.13 Place and Conduct of Meetings . Other than the Organizational Meeting, each meeting of the Board of Directors shall be held at the location determined by the person or persons calling such meeting. At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board of Directors may from time to time determine. The chairperson of any regular or special meeting shall be the Chairperson of the Board of Directors, or in the absence of the Chairperson a person designated by the Board of Directors. The Secretary, or in the absence of the Secretary a person designated by the chairperson of the meeting, shall act as secretary of the meeting.
      Section 3.14 Fees and Compensation . Directors shall be paid such compensation as may be fixed from time to time by resolutions of the Board of Directors. Compensation may be in the form of an annual retainer fee or a fee for attendance at meetings, or both, or in such other form or on such basis as the resolutions of the Board of Directors shall fix. Directors shall be reimbursed for all reasonable expenses incurred by them in attending meetings of the Board of Directors and committees appointed by the Board of Directors and in performing compensable extraordinary services. Nothing contained herein shall be construed to preclude any director from serving the Corporation in any other capacity, such as an officer, agent, employee, consultant or otherwise, and receiving compensation therefor.
      Section 3.15 Committees of the Board of Directors . The Board of Directors may, by resolution, from time to time designate committees of the Board of Directors, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board of Directors and shall, for those committees and any others

 


 

provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member.
      Section 3.16 Meetings of Committees . Each committee of the Board of Directors shall fix its own rules of procedure and shall act in accordance therewith, except as otherwise provided herein or required by applicable law and any resolutions of the Board of Directors governing such committee. A majority of the members of each committee shall constitute a quorum thereof, except that when a committee consists of one or two members then one member shall constitute a quorum.
      Section 3.17 Subcommittees . Unless otherwise provided in the Certificate or the resolutions of the Board of Directors establishing a committee, or in the charter of a committee, a committee may create one or more subcommittees, which consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
ARTICLE IV
OFFICERS
      Section 4.01 Designation, Election and Term of Office . The Corporation shall have a Chief Executive Officer, a Secretary and a Treasurer and such other officers as the Board of Directors deems appropriate, including to the extent deemed appropriate by the Board of Directors, a President, a Chief Financial Officer, a Chief Legal Officer and one more Executive Vice Presidents, Senior Vice Presidents and Vice Presidents. These officers shall be elected annually by the Board of Directors at the Organizational Meeting immediately following the annual meeting of stockholders and each such officer shall hold office until a successor is elected or until his or her earlier resignation, death or removal. Any vacancy in any of the above offices may be filled for an unexpired portion of the term by the Board of Directors at any meeting thereof. The Chief Executive Officer may, by a writing filed with the Secretary, designate titles for employees and agents, as, from time to time, may appear necessary or advisable in the conduct of the affairs of the Corporation and, in the same manner, terminate or change such titles.
      Section 4.02 Chairperson of the Board of Directors . The Board of Directors shall designate the Chairperson of the Board of Directors from among its members. The Chairperson of the Board of Directors shall preside at all meetings of the Board of Directors, and shall perform such other duties as shall be delegated to him or her by the Board of Directors.

 


 

      Section 4.03 Chief Executive Officer . Subject to the direction of the Board of Directors, the Chief Executive Officer shall be responsible for the general supervision, direction and control of the business and affairs of the Corporation.
      Section 4.04 President . The President shall perform such duties and have such responsibilities as may from time to time be delegated or assigned to him or her by the Board of Directors or the Chief Executive Officer.
      Section 4.05 Chief Financial Officer . The Chief Financial Officer of the Corporation shall be responsible to the Chief Executive Officer for the management and supervision of all financial matters and to provide for the financial growth and stability of the Corporation. The Chief Financial Officer shall also perform such additional duties as may be assigned to the Chief Financial Officer from time to time by the Board of Directors or the Chief Executive Officer.
      Section 4.06 Chief Legal Officer . The Chief Legal Officer of the Corporation shall be the General Counsel who shall be responsible to the Chief Executive Officer for the management and supervision of all legal matters. The Chief Legal Officer shall also perform such additional duties as may be assigned to the Chief Legal Officer from time to time by the Board of Directors or the Chief Executive Officer.
      Section 4.07 Secretary . The Secretary shall keep the minutes of the meetings of the stockholders, the Board of Directors and all committee meetings. The Secretary shall be the custodian of the corporate seal and shall affix it to all documents that the Secretary is authorized by law or the Board of Directors to sign and seal. The Secretary also shall perform such other duties as may be assigned to the Secretary from time to time by the Board of Directors or the Chief Executive Officer.
      Section 4.08 Treasurer . The Treasurer shall be accountable to the Chief Financial Officer, and shall perform such duties as may be assigned to the Treasurer from time to time by the Board of Directors, the Chief Executive Officer, the Chief Financial Officer or the Senior Vice President, Finance.
      Section 4.09 Executive Vice Presidents, Senior Vice Presidents and Vice Presidents . Executive vice presidents, senior vice presidents, vice presidents and other officers of the Corporation that are elected by the Board of Directors shall perform such duties as may be assigned to them from time to time by the Chief Executive Officer.
      Section 4.10 Appointed Officers . The Board of Directors or the Chief Executive Officer may appoint one or more Corporate Staff Vice Presidents, officers of groups or divisions or assistant secretaries, assistant treasurers and such other assistant officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as may be specified from time to time by the Board of Directors or the Chief Executive Officer.
      Section 4.11 Absence or Disability of an Officer . In the case of the absence or disability of an officer of the Corporation, the Board of Directors, or any officer designated by it, or the Chief Executive Officer may, for the time of the absence or

 


 

disability, delegate such officer’s duties and powers to any other officer of the Corporation.
      Section 4.12 Officers Holding Two or More Offices . The same person may hold any two or more of the above-mentioned offices except that the Secretary shall not be the same person as the Chief Executive Officer or the President.
      Section 4.13 Compensation . The Board of Directors shall have the power to fix the compensation of all officers and employees of the Corporation and to delegate such power to a committee of the Board of Directors.
      Section 4.14 Resignations . Any officer may resign at any time by submitting a resignation to the Corporation in writing or by electronic transmission. Any such resignation shall take effect at the time of receipt by the Corporation unless such resignation is effective at a future time or upon the happening of a future event or events, in which case it shall be effective at such time or upon the happening of such event or events. Unless the resignation provides otherwise, the acceptance of a resignation shall not be required to make it effective.
      Section 4.15 Removal . The Board of Directors may remove any elected officer of the Corporation, with or without cause. Any appointed officer of the Corporation may be removed, with or without cause, by the Chief Executive Officer or the Board of Directors.
      Section 4.16 Delegation of Authority . The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer, employee or agent, notwithstanding any provisions hereof.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
      Section 5.01 Right to Indemnification . Each person who was or is made a party, or is threatened to be made a party, to any actual or threatened action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a “proceeding”), by reason of the fact that (i) he or she is or was a director, officer, employee, or agent of the Corporation or (ii) he or she is or was serving at the request of the Board of Directors or an executive officer (as such term is defined in Section 16 of the Exchange Act) of the Corporation as a director, officer, employee, agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an “indemnitee”) shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, or by other applicable law as then in effect, against all expense, liability, and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) actually and

 


 

reasonably incurred or suffered by such indemnitee in connection therewith. The right to indemnification provided by this Article shall apply whether or not the basis of such proceeding is alleged action in an official capacity as such director, officer, employee or agent or in any other capacity while serving as such director, officer, employee or agent. Notwithstanding anything in this Section 5.01 to the contrary, except as provided in Section 5.03 with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors.
      Section 5.02 Advancement of Expenses . The right to indemnification conferred in Section 5.01, shall include the right to have the expenses incurred in defending or preparing for any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”) paid by the Corporation; provided, however, that if the DGCL requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is to be rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking containing such terms and conditions, including the requirement of security, as the Board of Directors deems appropriate (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Article or otherwise. The Corporation shall not be obligated to advance fees and expenses to a director, an officer, employee or agent in connection with a proceeding instituted by the Corporation against such person.
      Section 5.03 Right of Indemnitee to Bring Suit . If a claim under Section 5.01 or 5.02 is not paid in full by the Corporation within 60 calendar days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses under Section 5.02, in which case the applicable period shall be 30 calendar days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If the indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the indemnitee has not met any applicable standard of conduct for indemnification set forth in the DGCL, and (ii) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard of conduct for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the

 


 

applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article V or otherwise shall be on the Corporation.
      Section 5.04 Nonexclusivity of Rights .
     (a) The rights to indemnification and to the advancement of expenses conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any law, provisions of the Certificate, Bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
     (b) The Corporation may maintain insurance, at its expense, to protect itself and any past or present director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. The Corporation may enter into contracts with any indemnitee in furtherance of the provisions of this Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article.
     (c) The Corporation may without reference to Sections 5.01 through 5.04 (a) and (b) hereof, pay the expenses, including attorneys’ fees, incurred by any director, officer, employee or agent of the Corporation who is subpoenaed, interviewed or deposed as a witness or otherwise incurs expenses in connection with any civil, arbitration, criminal or administrative proceeding or governmental or internal investigation to which the Corporation is a party, target, or potentially a party or target, or of any such individual who appears as a witness at any trial, proceeding or hearing to which the Corporation is a party, if the Corporation determines that such payments will benefit the Corporation and if, at the time such expenses are incurred by such individual and paid by the Corporation, such individual is not a party, and is not threatened to be made a party, to such proceeding or investigation.
      Section 5.05 Additional Indemnification of Employees and Agents of the Corporation . The Corporation may grant additional rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent permitted by the law. The Corporation may, by action of its Board of Directors, authorize one or more officers to grant rights of indemnification or the advancement of

 


 

expenses to employees or agents of the Corporation on such terms and conditions as the officers deem appropriate.
      Section 5.06 Nature of Rights . The rights conferred upon indemnitees in this Article V shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the indemnitee’s heirs, executors and administrators. Any amendment, alteration or repeal of this Article V that adversely affects any right of an indemnitee or its successors shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.
ARTICLE VI
STOCK
      Section 6.01 Shares of Stock . The Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the capital stock of the Corporation shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation (or, if such certificate has been lost, stolen or destroyed, the procedures required by the Corporation in Section 6.07 shall have been followed). To the extent shares of capital stock are represented by certificates, such certificates shall be signed by the Chairperson of the Board of Directors, the President or a vice president, together with the Secretary or assistant secretary, or the Treasurer or assistant treasurer. Any or all of the signatures on any certificate may be facsimile. A stockholder that holds a certificate representing shares of any class or series of the capital stock of the Corporation for which the Board of Directors has authorized uncertificated shares may request that the Corporation cancel such certificate and issue such shares in an uncertificated form, provided that the Corporation shall not be obligated to issue any uncertificated shares of capital stock to such stockholder until such certificate representing such shares of capital stock shall have been surrendered to the Corporation (or, if such certificate has been lost, stolen or destroyed, the procedures required by the Corporation in Section 6.07 shall have been followed).
     With respect to certificated shares of capital stock, the Secretary or an assistant secretary of the Corporation or the transfer agent thereof shall mark every certificate exchanged, returned or surrendered to the Corporation with “Cancelled” and the date of cancellation.
     In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The Corporation shall not have power to issue a certificate in bearer form.

 


 

     If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 6.04 or Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. In the case of uncertificated shares, within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section, Sections 6.02(b), 6.04 and 6.05 of these Bylaws and Sections 156, 202(a) and 218(a) of the DGCL, or with respect to this section and Section 151 of the DGCL a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
      Issuance of Stock; Lawful Consideration.
     (a) Shares of stock may be issued for such consideration, having a value not less than the par value thereof, as determined from time to time by the Board of Directors. Treasury shares may be disposed of by the Corporation for such consideration as may be determined from time to time by the Board of Directors. The consideration for subscriptions to, or the purchase of, the capital stock to be issued by the Corporation shall be paid in such form and in such manner as the Board of Directors shall determine. The Board of Directors may authorize capital stock to be issued for consideration consisting of cash, any tangible or intangible property or any benefit to the Corporation, or any combination thereof. In the absence of actual fraud in the transaction, the judgment of the Board of Directors as to the value of such consideration shall be conclusive. The capital stock so issued shall be deemed to be fully paid and nonassessable stock upon receipt by the Corporation of such consideration; provided, however, nothing contained herein shall prevent the Board of Directors from issuing partly paid shares in accordance with Section 6.02(b) and Section 156 of the DGCL.
     (b) The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

 


 

      Section 6.02 Transfer Agents and Registrars . The Corporation may have one or more transfer agents and one or more registrars of its stock whose respective duties the Board of Directors or the Secretary may, from time to time, define. No certificate of stock shall be valid until countersigned by a transfer agent, if the Corporation has a transfer agent, or until registered by a registrar, if the Corporation has a registrar. The duties of transfer agent and registrar may be combined.
      Section 6.03 Restrictions on Transfer and Ownership of Securities . A written restriction or restrictions on the transfer or registration of transfer of a security of the Corporation, or on the amount of the Corporation’s securities that may be owned by any person or group of persons, if permitted by Section 202 of the DGCL and noted conspicuously on the certificate or certificates representing the security or securities so restricted or, in the case of uncertificated shares, contained in the notice or notices sent pursuant to Section 6.02 of these Bylaws and Section 151(f) of the DGCL, may be enforced against the holder of the restricted security or securities or any successor or transferee of the holder including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder. Unless noted conspicuously on the certificate or certificates representing the security or securities so restricted or, in the case of uncertificated shares, contained in the notice or notices sent pursuant to Section 6.02 of these Bylaws and Sections 151(f) of the DGCL, a restriction, even though permitted by Section 202 of the DGCL, is ineffective except against a person with actual knowledge of the restriction.
      Section 6.04 Voting Trusts and Voting Agreements . One stockholder or two or more stockholders may by agreement in writing deposit capital stock of the Corporation of an original issue with or transfer capital stock of the Corporation to any person or persons, or entity or entities authorized to act as trustee, for the purpose of vesting in such person or persons, entity or entities, who may be designated voting trustee, or voting trustees, the right to vote thereon for any period of time determined by such agreement, upon the terms and conditions stated in such agreement. The agreement may contain any other lawful provisions not inconsistent with such purpose. After the filing of a copy of the agreement in the registered office of the Corporation in the State of Delaware, which copy shall be open to the inspection of any stockholder of the Corporation or any beneficiary of the trust under the agreement daily during business hours, certificates of stock or uncertificated stock shall be issued to the voting trustee or trustees to represent any stock of an original issue so deposited with such voting trustee or trustees, and any certificates of stock or uncertificated stock so transferred to the voting trustee or trustees shall be surrendered and cancelled and new certificates or uncertificated stock shall be issued therefor to the voting trustee or trustees. In the certificate so issued, if any, it shall be stated that it is issued pursuant to such agreement, and that fact shall also be stated in the stock ledger of the Corporation. The voting trustee or trustees may vote the stock so issued or transferred during the period specified in the agreement. Stock standing in the name of the voting trustee or trustees may be voted either in person or by proxy, and in voting the stock, the voting trustee or trustees shall incur no responsibility as stockholder, trustee or otherwise, except for their own individual malfeasance. In any case where two or more persons or entities are designated as voting trustees, and the right and method of voting any stock standing in their names at

 


 

any meeting of the Corporation are not fixed by the agreement appointing the trustees, the right to vote the stock and the manner of voting it at the meeting shall be determined by a majority of the trustees, or if they be equally divided as to the right and manner of voting the stock in any particular case, the vote of the stock in such case shall be divided equally among the trustees.
      Section 6.05 Transfer of Shares . Registration of transfer of shares of stock of the Corporation may be effected on the books of the Corporation in the following manner:
     (a)  Certificated Shares . In the case of certificated shares, upon authorization by the registered holder of share certificates representing such shares of stock, or by his attorney authorized by a power of attorney duly executed and filed with the Secretary or with a designated transfer agent or transfer clerk, and upon surrender to the Corporation or any transfer agent of the corporation of the certificate being transferred, which certificate shall be properly and fully endorsed or accompanied by a duly executed stock transfer power, and otherwise in proper form for transfer, and the payment of all transfer taxes thereon. Whenever a certificate is endorsed by or accompanied by a stock power executed by someone other than the person or persons named in the certificate, evidence of authority to transfer shall also be submitted with the certificate. Notwithstanding the foregoing, such surrender, proper form for transfer or payment of taxes shall not be required in any case in which the officers of the Corporation determine to waive such requirement.
     (b)  Uncertificated Shares . In the case of uncertificated shares of stock, upon receipt of proper and duly executed transfer instructions from the registered holder of such shares, or by his attorney authorized by a power of attorney duly executed and filed with the Secretary or with a designated transfer agent or transfer clerk, the payment of all transfer taxes thereon, and compliance with appropriate procedures for transferring shares in uncertificated form. Whenever such transfer instructions are executed by someone other than the person or persons named in the books of the Corporation as the holder thereof, evidence of authority to transfer shall also be submitted with such transfer instructions. Notwithstanding the foregoing, such payment of taxes or compliance shall not be required in any case in which the officers of the Corporation determine to waive such requirement.
     No transfer of shares of capital stock shall be made on the books of this Corporation if such transfer is in violation of a lawful restriction noted conspicuously on the certificate. No transfer of shares of capital stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.
      Section 6.06 Lost, Stolen or Destroyed Share Certificates . The Corporation may issue a new certificate of stock or uncertificated shares in place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it

 


 

against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares; but the Corporation, in its discretion, may refuse to issue a new certificate of stock unless the Corporation is ordered to do so by a court of competent jurisdiction.
      Section 6.07 Stock Ledgers . Original or duplicate stock ledgers, containing the names and addresses of the stockholders of the Corporation and the number of shares of each class of stock held by them, shall be kept at the principal executive office of the Corporation or at the office of its transfer agent or registrar.
      Section 6.08 Record Dates . In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may, except as otherwise required by law, fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of and to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determining the stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determining the stockholders entitled to vote at such adjourned meeting in accordance with the foregoing provisions of this Section 6.09 at the adjourned meeting.
     In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 


 

ARTICLE VII
SUNDRY PROVISIONS
      Section 7.01 Fiscal Year . The fiscal year of the Corporation shall end on the 31st day of December of each year.
      Section 7.02 Seal . The seal of the Corporation shall bear the name of the Corporation and the words “Delaware” and “Incorporated August 4, 2010.”
      Section 7.03 Voting of Stock in Other Corporations . Any shares of stock in other corporations or associations, which may from time to time be held by the Corporation, may be represented and voted in person or by proxy, at any of the stockholders’ meetings thereof by the Chief Executive Officer or the designee of the Chief Executive Officer. The Board of Directors, however, may by resolution appoint some other person or persons to vote such shares, in which case such person or persons shall be entitled to vote such shares.
      Section 7.04 Amendments . These Bylaws may be adopted, repealed, rescinded, altered or amended only as provided in Articles Fifth and Sixth of the Certificate.
      Section 7.05 Form of Records . Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device, or method provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records under the DGCL.
     As amended, March 30, 2011.

 

Exhibit 10.1
EXECUTION COPY
 
SEPARATION AND DISTRIBUTION AGREEMENT
among
NORTHROP GRUMMAN CORPORATION,
NEW P, INC.,
HUNTINGTON INGALLS INDUSTRIES, INC.,
NORTHROP GRUMMAN SHIPBUILDING, INC.,
and
NORTHROP GRUMMAN SYSTEMS CORPORATION
Dated as of March 29, 2011
 

 


 

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

 


 

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

ii


 

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

iii


 

SEPARATION AND DISTRIBUTION AGREEMENT
     SEPARATION AND DISTRIBUTION AGREEMENT, dated as of March 29, 2011 (this “ Agreement ”), among Northrop Grumman Corporation, a Delaware corporation (“ NGC ”), New P, Inc., a Delaware corporation (“ New NGC ”), Huntington Ingalls Industries, Inc., a Delaware corporation (“ HII ”), Northrop Grumman Shipbuilding, Inc., a Virginia corporation (“ NGSB ”), and Northrop Grumman Systems Corporation, a Delaware corporation (“ NGSC ”).
RECITALS
     A. NGC, acting through itself and its direct and indirect Subsidiaries (as defined below), currently conducts the Shipbuilding Business (as defined below) and the Retained Business (as defined below).
     B. The NGC Board (as defined below) has determined that it is appropriate, desirable and in the best interests of NGC and its stockholders to separate NGC into two publicly traded companies: (a) HII, which following the Distribution (as defined below) will own and conduct, directly and indirectly, the Shipbuilding Business; and (b) New NGC, which following the Distribution will own and conduct, directly and indirectly, the Retained Business.
     C. Prior to the date of this Agreement, NGC formed New NGC as a wholly owned direct Subsidiary, HII as a wholly owned direct subsidiary of New NGC, and Titan Merger Sub Inc., a Delaware corporation and a wholly owned indirect Subsidiary of New NGC (“ Merger Sub ”).
     D. Prior to the Distribution, Merger Sub will merge with and into NGC in a merger pursuant to Section 251(g) of the Delaware General Corporation Law, with NGC as the surviving entity and renamed “Titan II Inc.” and with New NGC renamed “Northrop Grumman Corporation” (the “ Holding Company Reorganization ”).
     E. After the Holding Company Reorganization and prior to the Distribution, the parties will complete the Internal Reorganization (as defined below).
     F. On the Distribution Date (as defined below) and subject to the terms and conditions of this Agreement, New NGC shall distribute to the Record Holders (as defined below), on a pro rata basis, all the outstanding shares of common stock, par value $.01 per share, of HII (“ HII Common Stock ”) owned by New NGC on the Distribution Date (the “ Distribution ”).
     G. The parties intend that, for U.S. federal income tax purposes, the Holding Company Reorganization, the Internal Reorganization, and the Distribution shall qualify for Tax-Free Status (as defined below) pursuant to Sections 351, 355, 361, 368(a) and related provisions of the Code (as defined below).

 


 

AGREEMENT
     In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
     Section 1.1 Table of Definitions . The following terms have the meanings set forth on the pages referenced below:
         
Definition   Page  
AAA
    48  
Action
    3  
Affiliate
    4  
Agent
    4  
Agreement
    1  
Agreement Disputes
    48  
Allocation Committee
    4  
Allowable Cost Audit
    44  
Ancillary Agreements
    4  
Applicable HII Proportion
    4  
Applicable New NGC Proportion
    4  
Applicable Proportion
    4  
Assets
    4  
Assigned Action
    6  
Business
    8  
Business Day
    6  
Change of Control
    6  
Change of Control Triggering Event
    7  
Code
    7  
Consents
    7  
Continuing Director
    7  
Credit Support Instruments
    7  
Determination Request
    7  
Dispute Notice
    48  
Distribution
    1  
Distribution Date
    7  
Distribution Ratio
    7  
Employee Matters Agreement
    7  
Environmental Laws
    7  
Environmental Liabilities
    8  
Exchange Act
    8  
Excluded Disputes
    48  
Excluded Retained Assets
    8  
Excluded Shipbuilding Assets
    8  
Fitch
    8  
Form 10
    8  
Former Business
    8  
Governmental Approvals
    9  
Governmental Authority
    9  
GO-Zone Bonds
    9  
GO-Zone Bonds Guarantee
    I-1  
Group
    9  
Hazardous Substances
    9  
HII
    1  
HII Assigned Action
    9  
HII Balance Sheet
    9  
HII Common Stock
    1  
HII Contribution
    I-2  
HII Credit Facility
    9  
HII Credit Support Instruments
    25  
HII Debt
    9  
HII Entities
    9  
HII Group
    9  
HII Indemnitees
    30  
HII Transferred Assets
    10  
Holding Company Reorganization
    1  
Holdings LLC
    I-1  
Holdings LP
    I-1  
Holdings LP Distribution
    I-2  
Indemnifying Party
    31  
Indemnitee
    31  
Indemnity Payment
    31  
Information
    10  
Information Statement
    10  
Ingalls Indemnity Agreement
    10  
Insurance Matters Agreement
    10  
Insurance Policies
    10  
Insurance Proceeds
    10  

2


 

Table of Definitions (cont.)
         
Definition   Page  
Intercompany Debt Receivable
    I-1  
Internal Reorganization
    10  
IP License Agreement
    10  
IRS Ruling
    10  
IWOs
    43  
Law
    11  
Letter Subcontracts
    43  
Liabilities
    11  
Litigation Management Agreement
    11  
Managing Party
    35  
Merger Sub
    1  
Moody’s
    11  
Navy Guarantees
    11  
New NGC
    1  
New NGC Assigned Action
    11  
New NGC Board
    11  
New NGC Common Stock
    12  
New NGC Credit Support Instruments
    24  
New NGC Entities
    12  
New NGC Group
    12  
New NGC Indemnitees
    30  
New NGC Transferred Assets
    12  
NGC
    1  
NGC Board
    12  
NGC Charter Amendment
    42  
NGC Charter Amendment Proposal
    42  
NGC Credit Agreement
    I-1  
NGC Distribution
    I-1  
NGSB
    1  
NGSC
    1  
NGTS
    12  
Non-Managing Party
    12  
Northrop Grumman
    12  
Northrop Grumman Board
    12  
Northrop Grumman Stockholders
    12  
NYSE
    12  
Opinion
    12  
P&I Agreements
    12  
Person
    13  
Rating Agencies
    13  
Rating Event
    13  
Record Date
    13  
Record Holders
    13  
Retained Assets
    13  
Retained Business
    14  
Retained Cash
    I-2  
Retained Liabilities
    14  
Rules
    48  
S&P
    15  
SEC
    15  
Security Interest
    15  
Separation
    15  
Settlement Asset
    44  
Settlement Liability
    44  
Shared Action
    15  
Shared Gain
    15  
Shared Liability
    15  
Shipbuilding Assets
    16  
Shipbuilding Business
    17  
Shipbuilding Liabilities
    17  
Solicitation
    43  
Subsidiary
    18  
Tax Matters Agreement
    19  
Taxes
    19  
Tax-Free Status
    19  
Team
    19  
Teaming Agreement
    19  
Third-Party Claim
    31  
Transferred Debt Proceeds
    I-2  
Transition Services Agreement
    19  
     Section 1.2 Certain Defined Terms . For the purposes of this Agreement:
          “ Action ” means any claim, demand, action, suit, countersuit, audit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority or any United States or non-United States federal, state, local or international arbitration or mediation tribunal.

3


 

          “ Affiliate ” of any Person means a Person that controls, is controlled by, or is under common control with such Person; provided , however , that for purposes of this Agreement and the Ancillary Agreements, none of the New NGC Entities shall be deemed to be an Affiliate of any HII Entity and none of the HII Entities shall be deemed to be an Affiliate of any New NGC Entity. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.
          “ Agent ” means the distribution agent to be appointed by the New NGC Board to distribute to the Record Holders the shares of HII Common Stock pursuant to the Distribution.
          “ Allocation Committee ” means a committee composed of one representative designated from time to time by each of New NGC and HII that shall be established in accordance with Section 6.2.
          “ Ancillary Agreements ” means the Employee Matters Agreement, the Ingalls Indemnity Agreement, the Insurance Matters Agreement, the IP License Agreement, the Litigation Management Agreement, the P&I Agreements, the Tax Matters Agreement, the Transition Services Agreement and any other instruments, assignments, documents and agreements executed in connection with the implementation of the transactions contemplated by this Agreement, including the Internal Reorganization.
          “ Applicable HII Proportion ” means the proportion of a Shared Gain or a Shared Liability, as applicable, that relates to the Shipbuilding Business. With respect to any Shared Liability identified on Schedule 1.1(a)(1) or any Shared Gain identified on Schedule 1.1(a)(2) , the Applicable HII Proportion shall be as set forth under the heading “Applicable HII Proportion” opposite such matter on such Schedule. With respect to any other Shared Liability or Shared Gain, the Applicable HII Proportion shall be the extent to which such Shared Liability or Shared Gain relates to the Shipbuilding Business and shall be determined in accordance with Section 6.2(b).
          “ Applicable New NGC Proportion ” means the proportion of a Shared Gain or a Shared Liability, as applicable, that relates to the Retained Business. With respect to any Shared Liability identified on Schedule 1.1(a)(1) or any Shared Gain identified on Schedule 1.1(a)(2) , the Applicable New NGC Proportion shall be as set forth under the heading “Applicable New NGC Proportion” opposite such matter on such Schedule. With respect to any other Shared Liability or Shared Gain, the Applicable New NGC Proportion shall be the extent to which such Shared Liability or Shared Gain relates to the Retained Business and shall be determined in accordance with Section 6.2(b).
          “ Applicable Proportion ” means (a) as to New NGC, the Applicable New NGC Proportion, and (b) as to HII, the Applicable HII Proportion.
          “ Assets ” means all assets, properties and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or

4


 

elsewhere), whether real, personal or mixed, tangible, intangible, corporeal, incorporeal or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person, including the following:
          (a) all accounting and other books, records and files whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape or any other form;
          (b) all apparatus, computers and other electronic data processing equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks, aircraft, motor vehicles and other transportation equipment, special and general tools, test devices, prototypes and models and other tangible personal property;
          (c) all inventories of materials, parts, supplies, raw materials, work-in-process and finished goods and products;
          (d) all interests in real property of whatever nature, including easements and rights of way, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise, and copies of all related documentation;
          (e) all interests in any capital stock or other equity, partnership, membership, joint venture or similar interests of any Subsidiary or any other Person, all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person, all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person and all other investments in securities of any Person;
          (f) all license agreements, leases of personal property, open purchase orders for raw materials, supplies, parts or services, unfilled orders for the manufacture and sale of products and other contracts, agreements or commitments;
          (g) all deposits, letters of credit, guarantees and performance and surety bonds;
          (h) all recorded scientific and technical information, data, specifications, research and development information, engineering drawings, operating and maintenance manuals, studies, reports, discoveries, ideas, concepts, know-how, techniques, designs, blueprints, diagrams, models, prototypes, samples, and materials and analyses regardless of the form or method of the recording whether prepared by a party’s employees or on behalf of a party by consultants and other third parties;
          (i) all domestic and foreign patents, copyrights, trade names, trademarks, service marks and registrations and applications for any of the foregoing, mask works, trade secrets, inventions, other proprietary information and licenses from third parties granting the right to use any of the foregoing;
          (j) all computer applications, programs and other software, including operating software, network software, firmware, middleware, design software, design

5


 

tools, systems documentation, flow charts, instructions, source code, listings, object code listings, design details, algorithms, processes, flow charts, formulae, and related material that would enable the software to be reproduced, recreated or recompiled, and computer databases;
          (k) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, records pertaining to customers and customer accounts, customer and vendor data, correspondence and lists, product literature, artwork, design, development and manufacturing files, vendor and customer drawings, formulations and specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents, in whatever form;
          (l) all prepaid expenses, trade accounts and other accounts and notes receivable;
          (m) all rights under contracts, options or agreements, all claims or rights against any Person arising from the ownership of any Asset, all rights in connection with any bids or offers and all claims, choses in action or similar rights, whether accrued or contingent;
          (n) all insurance proceeds and rights under Insurance Policies and all rights in the nature of insurance, indemnification or contribution;
          (o) all licenses, permits, approvals and authorizations that have been issued by any Governmental Authority and all pending applications therefor;
          (p) all cash or cash equivalents, bank accounts, lock boxes and other deposit arrangements;
          (q) copies of all documentation related to Insurance Policies;
          (r) all interests in any public grants and subsidies of any kind received or applied for; and
          (s) all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar agreements or arrangements.
          “ Assigned Action ” has the meaning set forth in the Litigation Management Agreement.
          “ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.
          “ Change of Control ” means the occurrence of any of the following after the Distribution: (a) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of HII and its Subsidiaries taken as a whole to any person (as used in Section 13(d)(3) of the Exchange Act) or group of related persons

6


 

for purposes of Section 13(d) of the Exchange Act other than HII or one of its Subsidiaries; (b) the approval by the holders of HII’s common stock of any plan or proposal for the liquidation or dissolution of HII or HII’s approval or making of any bankruptcy filing; (c) the consummation of any transaction (including any merger or consolidation) the result of which is that any person (as used in Section 13(d)(3) of the Exchange Act) or group of related persons for purposes of Section 13(d) of the Exchange Act other than HII or one of its Subsidiaries becomes the beneficial owner, directly or indirectly, of more than 50% of the then outstanding number of shares of HII voting stock; or (d) the first day on which a majority of the members of HII’s board of directors are not Continuing Directors.
          “ Change of Control Triggering Event ” means the occurrence of both a Change of Control and a Rating Event.
          “ Code ” means the Internal Revenue Code of 1986, as amended and as in effect for the relevant period in question.
          “ Consents ” means any consents, waivers or approvals from, or notification requirements to, any Person other than a member of either Group.
          “ Continuing Director ” means, as of any date of determination, any member of the board of directors of HII who (a) was a member of such board of directors as of the Distribution; or (b) was nominated for election or elected to such board of directors with the approval of a majority of the Continuing Directors who were members of such board of directors at the time of such nomination or election (either by a specific vote or by approval of the proxy statement in which such member was named as a nominee for election as a director, without objection to such nomination).
          “ Credit Support Instruments ” means surety bonds, covenants, indemnities, undertakings, letters of credit or similar assurances or other credit support.
          “ Determination Request ” means a written request made to the Allocation Committee for a determination as to whether a Third-Party Claim specified in such request constitutes a Shared Liability or whether any potential gain or right specified in such request constitutes a Shared Gain.
          “ Distribution Date ” means the date, determined by the Northrop Grumman Board, on which the Distribution occurs.
          “ Distribution Ratio ” means the number of shares of HII Common Stock to be distributed in respect of each share of New NGC Common Stock in the Distribution, which ratio shall be determined by the New NGC Board prior to the Record Date.
          “ Employee Matters Agreement ” means the Employee Matters Agreement, dated as of the date hereof, among NGC, New NGC and HII, as may be amended or modified from time to time.
          “ Environmental Laws ” means all federal, state, local and foreign Laws, including all judicial and administrative orders, determinations, and consent agreements or

7


 

decrees, that relate, in whole or in part, to Hazardous Substances, pollution, contaminants, harmful substances, protection of the environment or human health, including those that regulate the use, manufacture, generation, handling, labeling, testing, transport, treatment, storage, processing, discharge, disposal, release, threatened release, control, or cleanup of harmful substances, pollutants, contaminants, Hazardous Substances or materials containing such substances, regardless of when enacted or effective.
          “ Environmental Liabilities ” means any Liabilities arising out of or relating to the environment, human health, any Environmental Law, Hazardous Substances or exposure to Hazardous Substances, pollutants, contaminants or other harmful substances, including (a) fines, penalties, judgments, awards, settlements, losses, damages (including consequential damages), costs, fees (including attorneys’ and consultants’ fees), expenses and disbursements, (b) costs of defense and other responses to any administrative or judicial action (including notices, claims, complaints, suits and other assertions of liability), (c) responsibility for any investigation, remediation, monitoring or cleanup costs, injunctive relief, tort claims, natural resource damages, and any other environmental compliance or remedial measures, in each case known or unknown, foreseen or unforeseen, and (d) any claims, suits or actions (whether third-party or otherwise) for any Liability, including personal injury or property damage.
          “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.
          “ Excluded Retained Assets ” means the Assets listed or described on Schedule 1.1(a)(3) .
          “ Excluded Shipbuilding Assets ” means:
          (a) the Assets listed or described on Schedule 1.1(a)(4) ;
          (b) the New NGC Transferred Assets; and
          (c) the Transferred Debt Proceeds.
          “ Fitch ” means Fitch Ratings Ltd.
          “ Form 10 ” means the registration statement on Form 10 filed by HII with the SEC to effect the registration of HII Common Stock pursuant to the Exchange Act in connection with the Distribution, as such registration statement may be amended or supplemented from time to time, including any amendment or supplement thereto.
          “ Former Business ” means any corporation, partnership, entity, division, business unit or business, including any business within the meaning of Rule 11-01(d) of Regulation S-X (in each case, including any Assets and Liabilities comprising the same) (as used in this definition of “Former Business,” a “ Business ”) that has been sold, conveyed, assigned, transferred or otherwise disposed of or divested (in whole or in part) to a Person that is not a member of the New NGC Group or the HII Group or the operations, activities or production of which has been discontinued, abandoned, completed

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or otherwise terminated (in whole or in part), in each case prior to the Distribution. For the avoidance of doubt, any Business that has been sold, conveyed, assigned, transferred or otherwise disposed of or divested (in whole or in part) by a member of one Group to a member of the other Group shall not be deemed a Former Business of the first Group if such Business has subsequently been sold, conveyed, assigned, transferred or otherwise disposed of or divested (in whole or in part by a member of the second Group) to any Person that is not a member of the New NGC Group or the HII Group.
          “ GO-Zone Bonds ” means the Gulf Opportunity Zone Industrial Development Revenue Bonds (Northrop Grumman Ship Systems, Inc. Project) Series 2006 due 2028 issued by the Mississippi Business Finance Corporation.
          “ Governmental Approvals ” means any notices, reports or other filings to be given to or made with, or any releases, Consents, substitutions, approvals, amendments, registrations, permits or authorizations to be obtained from, any Governmental Authority.
          “ Governmental Authority ” means any United States or non-United States federal, state, local, territorial, tribal or international court, government, department, commission, board, bureau, agency, official or other legislative, judicial, regulatory, administrative or governmental authority.
          “ Group ” means the New NGC Group or the HII Group, as the context requires.
          “ Hazardous Substances ” means all materials, wastes or substances defined by, or regulated under, any Environmental Laws now or in the future and any substance that can give rise to any claim, suit or action (whether third-party or otherwise) for any Liabilities, including personal injury or property damage.
          “ HII Assigned Action ” has the meaning set forth in the Litigation Management Agreement.
          “ HII Balance Sheet ” means the audited pro forma consolidated balance sheet of HII, including the notes thereto, as of December 31, 2010, included in the Information Statement.
          “ HII Credit Facility ” means the credit facility to be entered into prior to the Distribution between HII, as borrower, and an agent or co-agents pursuant to which HII may borrow funds.
          “ HII Debt ” means the debt issued by HII pursuant to a Rule 144A offering to be completed prior to the Internal Reorganization and the term loan debt under the HII Credit Facility.
          “ HII Entities ” means the members of the HII Group.
          “ HII Group ” means HII and each Person that will be a direct or indirect Subsidiary of HII immediately prior to the Distribution (but after giving effect to the

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Internal Reorganization) and each Person that is or becomes a member of the HII Group after the Distribution, including in all circumstances the predecessor and successor entities of HII or each such other Person. For the purposes of this Agreement and the Ancillary Agreements, New NGC shall not be deemed to be a successor entity of NGC.
          “ HII Transferred Assets ” means those Assets of NGC (but not the Assets of any of its Subsidiaries) that are listed on Schedule 1.1(a)(5) .
          “ Information ” means information, including books and records, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.
          “ Information Statement ” means the Information Statement, attached as an exhibit to the Form 10, to be sent to each holder of New NGC Common Stock in connection with the Distribution, as such Information Statement may be amended from time to time, including any amendment or supplement thereto.
          “ Ingalls Indemnity Agreement ” means the Ingalls Guaranty Performance, Indemnity and Termination Agreement, dated as of the date hereof, among HII, NGSB and NGSC, as may be amended or modified from time to time.
          “ Insurance Matters Agreement ” means the Insurance Matters Agreement, dated as of the date hereof, among NGC, New NGC and HII, as may be amended or modified from time to time.
          “ Insurance Policies ” has the meaning set forth in the Insurance Matters Agreement.
          “ Insurance Proceeds ” means, with respect to any Liability to be reimbursed by an Indemnifying Party that may be covered, in whole or in part, by Insurance Policies written by third-party providers, the amount of insurance proceeds actually received in cash under such Insurance Policy with respect to such Liability, net of any taxes and costs in seeking such collection.
          “ Internal Reorganization ” means the transactions described in Annex I .
          “ IP License Agreement ” means the Intellectual Property License Agreement, dated as of the date hereof, between NGSC and NGSB, as may be amended or modified from time to time.
          “ IRS Ruling ” has the meaning set forth in the Tax Matters Agreement.

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          “ Law ” means any statute, law, regulation, ordinance, rule, judgment, rule of common law, order, decree, government approval, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether now or hereinafter in effect and, in each case, as amended.
          “ Liabilities ” means any and all losses, claims, charges, debts, demands, Actions, damages, obligations, payments, costs and expenses, sums of money, bonds, indemnities and similar obligations, penalties, covenants, contracts, controversies, agreements, promises, omissions, guarantees, make whole agreements and similar obligations, and other liabilities, including all contractual obligations, whether absolute or contingent, inchoate or otherwise, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, and including those arising under any Law, Action, threatened or contemplated Action (including the costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all costs and expenses (including allocated costs of in-house counsel and other personnel), whatsoever incurred in investigating, preparing or defending against any such Actions or threatened or contemplated Actions), order or consent decree of any Governmental Authority or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking, including those arising under this Agreement or any Ancillary Agreement or incurred by a party hereto or thereto in connection with enforcing its rights to indemnification hereunder or thereunder, in each case, whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person.
          “ Litigation Management Agreement ” means the Litigation Management and Coordination Agreement, dated as of the date hereof, among NGC, New NGC, HII, NGSB and NGSC, as may be amended or modified from time to time.
          “ Moody’s ” means Moody’s Investors Service, Inc.
          “ Navy Guarantees ” means (a) the Performance Guaranty, dated as of April 11, 2002, by NGC, as guarantor, to the United States of America, Naval Sea Systems Command as beneficiary, (b) the Performance Guaranty, dated 2006, by NGC, as guarantor, to the United States of America, Naval Sea Systems Command as beneficiary, (c) the Performance Guaranty, dated as of April 24, 2007, by NGC, as guarantor, to the United States of America, Naval Sea Systems Command as beneficiary and (d) any other similar guarantee pursuant to which NGC has guaranteed the performance of NGSB (or an Affiliate) under shipbuilding construction contracts with the United States Department of the Navy or a command or other division thereof.
          “ New NGC Assigned Action ” has the meaning set forth in the Litigation Management Agreement.
          “ New NGC Board ” means the board of directors of New NGC or an authorized committee thereof.

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          “ New NGC Common Stock ” means the common stock, par value $1.00 per share, of New NGC.
          “ New NGC Entities ” means the members of the New NGC Group.
          “ New NGC Group ” means New NGC and each Person that will be a direct or indirect Subsidiary of New NGC immediately after the Distribution and each Person that is or becomes a member of the New NGC Group after the Distribution, including in all circumstances the predecessor and successor entities of New NGC or each such other Person. For the purposes of this Agreement and the Ancillary Agreements, NGC shall not be deemed to be a predecessor entity of New NGC.
          “ New NGC Transferred Assets ” means all of the Assets of NGC (but not the Assets of any of its Subsidiaries) including those Assets listed or described on Schedule 1.1(a)(6) , other than (a) the HII Transferred Assets and (b) the capital stock in NGSC and NGSB.
          “ NGC Board ” means the board of directors of NGC or an authorized committee thereof.
          “ NGTS ” means Northrop Grumman Technical Services, Inc., an Oklahoma corporation, member of the New NGC Group and party to the Teaming Agreement.
          “ Non-Managing Party ” means, as between HII and New NGC, the party that is not the Managing Party with respect to any Shared Gain or Shared Liability.
          “ Northrop Grumman ” means (a) at all times prior to the effectiveness of the Holding Company Reorganization, NGC, and (b) at all times at or after the effectiveness of the Holding Company Reorganization, New NGC.
          “ Northrop Grumman Board ” means (a) at all times prior to the effectiveness of the Holding Company Reorganization, the NGC Board, and (b) at all times at or after the effectiveness of the Holding Company Reorganization, the New NGC Board.
          “ Northrop Grumman Stockholders ” means (a) at all times prior to the effectiveness of the Holding Company Reorganization, the stockholders of NGC, and (b) at all times at or after the effectiveness of the Holding Company Reorganization, the stockholders of New NGC.
          “ NYSE ” means the New York Stock Exchange.
          “ Opinion ” has the meaning set forth in the Tax Matters Agreement.
          “ P&I Agreements ” means the Performance and Indemnity Agreements, to be executed and delivered in connection with the Internal Reorganization, between HII and NGC, as may be amended or modified from time to time.

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          “ Person ” means an individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, organization or other entity, including any Governmental Authority, and including any successor, by merger or otherwise, of any of the foregoing.
          “ Rating Agencies ” means (a) each of Fitch, Moody’s and S&P and (b) if Fitch, Moody’s and S&P all cease to rate HII or all fail to make a rating of HII publicly available for reasons outside of HII’s control, a “nationally recognized statistical rating organization” within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, selected by HII (as certified by a resolution of the board of directors of HII) as a replacement agency.
          “ Rating Event ” means HII’s corporate rating is downgraded to “B” or “B2” or below, as applicable, by any of the Rating Agencies on any date from and after the date of the public notice of an arrangement that could result in a Change of Control until the end of the 60-day period following public notice of the consummation of the Change of Control (which 60-day period shall be extended so long as the rating of HII is under publicly announced consideration for possible downgrade by any of the Rating Agencies).
          “ Record Date ” means the close of business on the date determined by the New NGC Board as the record date for determining the stockholders of New NGC entitled to receive shares of HII Common Stock in the Distribution. The Record Date shall occur after completion of the Holding Company Reorganization.
          “ Record Holders ” means the holders of New NGC Common Stock on the Record Date.
          “ Retained Assets ” means:
          (a) the Assets listed or described on Schedule 1.1(a)(7) , the New NGC Transferred Assets and all other Assets that are expressly and specifically provided in this Agreement or any Ancillary Agreement as Assets to be transferred to New NGC or any other member of the New NGC Group;
          (b) all interests in the capital stock of, or any other equity, partnership, membership, joint venture or similar interests in, the Subsidiaries of New NGC (other than any member of the HII Group) immediately prior to the Distribution (after giving effect to the Internal Reorganization) and any capital stock of, or equity, partnership, membership, joint venture or similar interests in, any other Person (other than any member of the HII Group) owned by any member of the New NGC Group immediately prior to the Distribution (after giving effect to the Internal Reorganization);
          (c) any recovery or other Assets (net of any expenses) received by any member of either Group with respect to any New NGC Assigned Action;
          (d) the Applicable New NGC Proportion of any Shared Gain; and

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          (e) all other Assets owned or held immediately prior to the Distribution (after giving effect to the Internal Reorganization) by New NGC or any of its Subsidiaries (including for the avoidance of doubt, HII and its Subsidiaries) that are not Shipbuilding Assets, including the Transferred Debt Proceeds.
          Notwithstanding the foregoing, the Retained Assets shall not include any items expressly governed by the Tax Matters Agreement or the Excluded Retained Assets. In the event of any inconsistency or conflict that may arise in the application or interpretation of any of the foregoing provisions, for the purpose of determining what is and is not a Retained Asset, any item explicitly included on a Schedule referred to in this definition of “Retained Assets” shall take priority over any provision of the text hereof.
          “ Retained Business ” means:
          (a) any businesses or operations conducted by any member of the New NGC Group (other than any businesses or operations to the extent conducted through the ownership of, on behalf of or for the benefit of any member of the HII Group prior to the Distribution), including any Former Business of any member of the New NGC Group and any Former Business of NGC that is not also a Former Business of any other member of the HII Group, in all cases including those businesses set forth on Schedule 1.1(a)(8) , but excluding those businesses set forth on Schedule 1.1(a)(9) ;
          (b) the businesses or operations, including Former Businesses, conducted by any member of the HII Group (including NGC) prior to the Distribution to the extent that they do not relate to the Shipbuilding Business; and
          (c) any other businesses or operations conducted through the use of the Retained Assets to the extent that they do not relate to the Shipbuilding Business.
          “ Retained Liabilities ” means:
          (a) all of the following Liabilities:
               (i) the Liabilities listed or described on Schedule 1.1(a)(10) ;
               (ii) all other Liabilities that are expressly and specifically provided by this Agreement as Liabilities to be wholly assumed by New NGC or any member of the New NGC Group, and all obligations of New NGC or any other member of the New NGC Group under this Agreement or any of the Ancillary Agreements;
               (iii) all other Liabilities that are both wholly unrelated to the Shipbuilding Business and are not otherwise Shipbuilding Liabilities; and
          (b) the Applicable New NGC Proportion of any Shared Liability.
          Notwithstanding the foregoing, the Retained Liabilities shall not include any items expressly governed by the Tax Matters Agreement or the Ingalls Indemnity Agreement.

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          In the event of any inconsistency or conflict that may arise in the application or interpretation of any of the foregoing provisions, for the purpose of determining what is and is not a Retained Liability, any item explicitly included on a Schedule referred to in this definition of “Retained Liabilities” shall take priority over any provision of the text hereof.
          “ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.
          “ SEC ” means the Securities and Exchange Commission.
          “ Security Interest ” means any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever.
          “ Separation ” means (a) the Internal Reorganization, (b) any other actions to be taken pursuant to Article II and (c) any other transfers of Assets and assumptions of Liabilities, in each case, between a member of one Group and a member of the other Group, provided for in this Agreement or any Ancillary Agreement.
          “ Shared Action ” has the meaning set forth in the Litigation Management Agreement.
          “ Shared Gain ” means any claim or right of a member of the New NGC Group or the HII Group, whenever discovered, against any Person (other than a member of the New NGC Group or the HII Group) that relates to both the Retained Business and the Shipbuilding Business or is listed or described on Schedule 1.1(a)(11) , other than any claim or right described on Schedule 1.1(a)(12) , in all cases to the extent that such claim or right accrued as of the Distribution or relates to events or circumstances that occurred or existed prior to the Distribution. Notwithstanding anything to the contrary in this definition of “Shared Gain,” Shared Gains shall not include any Settlement Assets, which shall be governed by Section 8.7, or any claims or rights related to, attributable to or arising in connection with Taxes or Tax Returns, which are expressly governed by the Tax Matters Agreement.
          “ Shared Liability ” means any of the following:
          (a) any Liability that relates to both the Shipbuilding Business and the Retained Business and that is not listed in a subclause of clause (a) of the definition of “Shipbuilding Liabilities;” and
          (b) any Liability listed or described on Schedule 1.1(a)(13) .
          Notwithstanding anything to the contrary in this definition of “Shared Liability,” Shared Liabilities shall not include any Settlement Liabilities, which shall be governed by Section 8.7, or any Liabilities related to, attributable to or arising in

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connection with Taxes or Tax Returns, which are expressly governed by the Tax Matters Agreement.
          “ Shipbuilding Assets ” means:
          (a) the Assets listed or described on Schedule 1.1(a)(14) , the HII Transferred Assets and all other Assets that are expressly and specifically provided in this Agreement or any Ancillary Agreement as Assets to be transferred to HII or any other member of the HII Group;
          (b) all interests in the capital stock of, or any other equity, partnership, membership, joint venture or similar interests in, the Subsidiaries of HII immediately prior to the Distribution (after giving effect to the Internal Reorganization) and any capital stock of, or equity, partnership, membership, joint venture or similar interests in, any other Person owned by any member of the HII Group immediately prior to the Distribution (after giving effect to the Internal Reorganization);
          (c) all Assets reflected as assets of HII and the other members of the HII Group on the HII Balance Sheet and any Assets acquired by or for HII or any other member of the HII Group subsequent to the date of the HII Balance Sheet that, had they been acquired on or before such date and owned as of such date, would have been reflected on the HII Balance Sheet if prepared on a consistent basis, subject to any dispositions of any such Assets subsequent to the date of the HII Balance Sheet;
          (d) any recovery or other Assets (net of any Taxes and expenses) received by any member of either Group in any HII Assigned Action;
          (e) all other Assets not expressly covered in clauses (a) through (d) of this definition of “Shipbuilding Assets” that are wholly owned immediately prior to the Distribution (after giving effect to the Internal Reorganization) by HII or any of its Subsidiaries;
          (f) all patents, copyrights, trade secrets, know-how and other confidential and proprietary information and all other intellectual property rights, whether arising under the laws of the United States or the laws of any other jurisdiction, and all registrations and applications for registration of any of the foregoing, that were created, devised or otherwise developed (i) exclusively by the HII Employees and HII Retirees (each as defined in the Employee Matters Agreement) (other than any of the foregoing that were developed specifically for the Retained Business) or (ii) in whole or in part, by employees of any member of the New NGC Group or third parties exclusively for the Shipbuilding Business, whether or not such intellectual property rights had been assigned to NGC during its ownership of the Shipbuilding Business; and
          (g) the Applicable HII Proportion of any Shared Gain.
          Notwithstanding the foregoing, the Shipbuilding Assets shall not include any items expressly governed by the Tax Matters Agreement or the Excluded Shipbuilding Assets. In the event of any inconsistency or conflict that may arise in the application or

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interpretation of any of the foregoing provisions, for the purpose of determining what is and is not a Shipbuilding Asset, any item explicitly included on a Schedule referred to in this definition of “Shipbuilding Assets” shall take priority over any provision of the text hereof.
          “ Shipbuilding Business ” means:
          (a) any businesses or operations conducted by any member of the HII Group (other than any businesses or operations to the extent conducted through the ownership of, on behalf of or for the benefit of any member of the New NGC Group prior to the Distribution), including the businesses and operations that are described in the Information Statement and any Former Business of any member of the HII Group (other than NGC and not any other entity), in each case including those businesses set forth on Schedule 1.1(a)(9) , but excluding those businesses set forth on Schedule 1.1(a)(8) ;
          (b) any other businesses or operations (including joint ventures) conducted through the use of or with the Shipbuilding Assets;
          (c) the HII Employees and HII Retirees and any other person employed by any member of the HII Group after the Distribution; and
          (d) the businesses or operations, including Former Businesses, conducted by NGC (but not any other entity) or any member of the New NGC Group prior to the Distribution, in all cases to the extent that they relate to the businesses or operations and Former Businesses described in clauses (a) through (c) of this definition of “Shipbuilding Business.”
          “ Shipbuilding Liabilities ” means:
          (a) all of the following Liabilities:
               (i) the Liabilities listed or described on Schedule 1.1(a)(15) ;
               (ii) all other Liabilities that are expressly provided by this Agreement or any Ancillary Agreement as Liabilities to be wholly assumed by HII or any other member of the HII Group, and all obligations of HII or any other member of the HII Group under this Agreement or any of the Ancillary Agreements;
               (iii) all Liabilities reflected as liabilities or obligations on the HII Balance Sheet, and all Liabilities arising or assumed after the date of the HII Balance Sheet that, had they arisen or been assumed on or before such date and been existing obligations as of such date, would have been reflected on the HII Balance Sheet if prepared on a consistent basis, subject to any discharge of such Liabilities subsequent to the date of the HII Balance Sheet;
               (iv) all Environmental Liabilities relating to (A) the use of any property by the Shipbuilding Business at any time, regardless of whether such property is or is not owned or leased by HII or any of its Subsidiaries or Affiliates (including any

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properties set forth on Schedule 1.1(a)(16) ), including any property where the Shipbuilding Business contracted or arranged for disposal of wastes at any time whatsoever, or (B) the operation or conduct of the Shipbuilding Business or activities related to the Shipbuilding Business (including all Liabilities relating to any Shipbuilding Asset or any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority) which act or failure to act relates to the Shipbuilding Business);
               (v) all Liabilities relating to the HII Employees and HII Retirees and any person employed by any member of the HII Group after the Distribution, and the conduct of all such persons;
               (vi) all Liabilities relating to the use of any property by the Shipbuilding Business at any time, regardless of whether such property is or is not owned or leased by HII or any of its Subsidiaries or Affiliates (including any properties set forth on Schedule 1.1(a)(16) ), including any property where the Shipbuilding Business contracted or arranged for disposal of wastes at any time whatsoever;
               (vii) all Liabilities relating to the Navy Guarantees, including all Liabilities that NGC or any other party to this Agreement (including their Subsidiaries and Affiliates) has or may be found to have under or in any way in connection with the Navy Guarantees;
               (viii) all other Liabilities relating to the operation or conduct of the Shipbuilding Business or activities related to the Shipbuilding Business (including all Liabilities relating to any Shipbuilding Asset or any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority) which act or failure to act relates to the Shipbuilding Business) that do not also relate to the operation or conduct of the Retained Business; and
               (ix) all other Liabilities that are wholly unrelated to the Retained Business and that are not otherwise Retained Liabilities; and
          (b) the Applicable HII Proportion of any Shared Liability.
          Notwithstanding the foregoing, the Shipbuilding Liabilities shall not include any items expressly governed by the Tax Matters Agreement or the Ingalls Indemnity Agreement.
          In the event of any inconsistency or conflict that may arise in the application or interpretation of any of the foregoing provisions, for the purpose of determining what is and is not a Shipbuilding Liability, any item explicitly included on a Schedule referred to in this definition of “Shipbuilding Liabilities” shall take priority over any provision of the text hereof.
          “ Subsidiary ” of any Person means any corporation or other organization, whether incorporated or unincorporated, of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of

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the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided , however , that no Person that is not directly or indirectly wholly owned by any other Person shall be a Subsidiary of such other Person unless such other Person controls, or has the right, power or ability to control, that Person.
          “ Tax-Free Status ” has the meaning set forth in the Tax Matters Agreement.
          “ Tax Matters Agreement ” means the Tax Matters Agreement, dated as of the date hereof, among New NGC, HII and NGC, as may be amended or modified from time to time.
          “ Tax ” has the meaning set forth in the Tax Matters Agreement.
          “ Team ” has the meaning set forth in the Teaming Agreement.
          “ Teaming Agreement ” means the teaming agreement listed on Schedule 1.1(a)(17) .
          “ Transition Services Agreement ” means the Transition Services Agreement, dated as of the date hereof, among NGSC, NGSB, New NGC and HII, as may be amended or modified from time to time.
ARTICLE II
THE SEPARATION
     Section 2.1 Internal Reorganization; Transfer of Assets and Assumption of Liabilities .
          (a) Prior to the Distribution, the parties shall cause the Internal Reorganization to be completed.
          (b) Prior to the Distribution, the parties shall, and shall cause their respective Subsidiaries to, (i) execute such instruments of assignment and transfer and take such other corporate actions as are necessary to transfer to one or more members of the HII Group all of the right, title and interest of the New NGC Group in and to all Shipbuilding Assets after giving effect to the Internal Reorganization and (ii) take all actions necessary to cause one or more members of the HII Group to assume all of the Shipbuilding Liabilities to the extent such Shipbuilding Liabilities would otherwise remain obligations of any member of the New NGC Group after giving effect to the Internal Reorganization.
          (c) Prior to the Distribution, the parties shall, and shall cause their respective Subsidiaries to, (i) execute such instruments of assignment and transfer and take such other corporate actions as are necessary to transfer to one or more members of the New NGC Group all of the right, title and interest of the HII Group in and to all Retained Assets after giving effect to the Internal Reorganization and (ii) take all actions necessary to cause one or more members of the New NGC Group to assume all of the Retained

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Liabilities to the extent such Retained Liabilities would otherwise remain obligations of any member of the HII Group after giving effect to the Internal Reorganization.
     Section 2.2 Governmental Approvals and Consents; Transfers, Assignments and Assumptions Not Effected Prior to the Distribution .
          (a) To the extent that any of the transactions contemplated by this Agreement or any Ancillary Agreement requires any Governmental Approval or Consent, the parties will use their reasonable best efforts to obtain such Governmental Approval or Consent.
          (b) To the extent that any transfer or assignment of Assets or assumption of Liabilities contemplated by this Agreement or any Ancillary Agreement shall not have been consummated prior to the Distribution, the parties shall use reasonable best efforts to effect such transfers as promptly following the Distribution as shall be practicable. Nothing herein shall be deemed to require the transfer of any Assets or the assumption of any Liabilities that by their terms or operation of law cannot or should not be transferred. In the event that any such transfer of Assets or assumption of Liabilities has not been consummated, from and after the Distribution until such time as such Asset is transferred or such Liability is assumed (i) the party retaining such Asset shall thereafter hold such Asset for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto) and (ii) the party intended to assume such Liability shall, or shall cause the applicable member of its Group to, pay or reimburse the party retaining such Liability for all amounts paid or incurred in connection with the retention of such Liability. In addition, the party retaining such Asset or Liability shall, insofar as reasonably practicable and to the extent permitted by applicable Law, treat such Asset or Liability in the ordinary course of business consistent with past practice and take such other actions as may be reasonably requested by the party entitled to such Asset or by the party intended to assume such Liability in order to place such party, insofar as reasonably practicable, in the same position as if such Asset or Liability had been transferred or assumed as contemplated hereby and so that all the benefits and burdens relating to such Asset or Liability, including possession, use, risk of loss, potential for gain, and control over such Asset or Liability, are to inure from and after the Distribution to the member or members of the New NGC Group or the HII Group entitled to such Asset or intended to assume such Liability. In furtherance of the foregoing, the parties agree that, as of the Distribution, each party shall be deemed to have acquired beneficial ownership over all of the Assets, together with all rights and privileges incident thereto, and shall be deemed to have assumed all of the Liabilities, and all duties, obligations and responsibilities incident thereto, that such party is entitled to acquire or intended to assume pursuant to the terms of this Agreement or the applicable Ancillary Agreement.
          (c) If and when the Consents, Governmental Approvals and/or conditions, the absence or non-satisfaction of which caused the deferral of transfer or assignment of any Asset or the deferral of the assumption of any Liability pursuant to Section 2.2(b) are obtained or satisfied, the transfer or assumption of the applicable Asset or Liability shall be effected in accordance with and subject to the terms of this Agreement or the applicable Ancillary Agreement.

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          (d) The party retaining any Asset or Liability due to the deferral of the transfer of such Asset or the deferral of the assumption of such Liability pursuant to Section 2.2(b) or otherwise shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced or agreed to be reimbursed by the party entitled to such Asset or the party intended to assume such Liability. The party retaining such Asset or Liability shall use its reasonable best efforts timely to notify the party entitled to such Asset or intended to assume such Liability of the need for such expenditure.
          (e) The parties agree to treat, for U.S. federal, state and local income tax purposes, any Asset or Liability that is not transferred prior to the Distribution and is subject to the provisions of Section 2.2(b) as owned by the member of the Group to which such Asset or Liability was intended to be transferred from and after the Distribution, and shall not take any position inconsistent therewith unless otherwise required by applicable Law.
     Section 2.3 Termination of Agreements .
          (a) Except as set forth in Section 2.3(b), the HII Entities, on the one hand, and the New NGC Entities, on the other hand, hereby terminate any and all agreements, arrangements, commitments or understandings (including intercompany work orders), whether or not in writing, between or among any HII Entity, on the one hand, and any New NGC Entity, on the other hand, effective as of the Distribution. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof that purports to survive termination) shall be of any further force or effect from and after the Distribution. Each party shall, at the reasonable request of any other party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.
          (b) The provisions of Section 2.3(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof):
               (i) this Agreement and the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by any of the parties or any HII Entities and New NGC Entities);
               (ii) any agreements, arrangements, commitments or understandings to which any non-wholly owned Subsidiary or non-wholly owned Affiliate of New NGC or HII, as the case may be, is a party (it being understood that directors’ qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned);
               (iii) any other agreements, arrangements, commitments or understandings that this Agreement or any Ancillary Agreement expressly contemplates will survive the Distribution;

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               (iv) any confidentiality or non-disclosure agreements among any members of either Group or employees of any member of either Group, including any obligation not to disclose proprietary or privileged information; and
               (v) any agreements, arrangements, commitments or understandings listed or described on Schedule 2.3(b)(v) .
          (c) Except as otherwise expressly and specifically provided in this Agreement or any Ancillary Agreement, all intercompany receivables, payables, loans and other accounts between any New NGC Entity, on the one hand, and any HII Entity, on the other hand, in existence as of immediately prior to the Distribution and after giving effect to the Internal Reorganization shall be satisfied and/or settled by the relevant members of the New NGC Group and the New HII Group no later than the Distribution by (i) forgiveness by the relevant obligor or (ii) one or a related series of repayments, distributions of and/or contributions to capital, in each case as determined by Northrop Grumman.
     Section 2.4 Novation of Shipbuilding Liabilities .
          (a) Each of New NGC and HII, at the written request of the other party, shall use its reasonable best efforts to obtain, or to cause to be obtained, any release, Consent, substitution or amendment required to novate or assign all rights and obligations under any agreements, leases, licenses and other obligations or Liabilities of any nature whatsoever that constitute Shipbuilding Liabilities, or to obtain in writing the unconditional release of all parties to such arrangements other than any HII Entities, so that, in any such case, HII and the other HII Entities will be solely responsible for such Shipbuilding Liabilities; provided , however , that none of the New NGC Entities or the HII Entities shall be obligated to pay any significant (relative to the underlying agreement, lease, license or obligation) consideration or surrender, release or modify any material rights or material remedies therefor to any third party from whom such releases, Consents, substitutions and amendments are requested except as expressly set forth in this Agreement or any Ancillary Agreement.
          (b) If New NGC or HII is unable to obtain, or to cause to be obtained, any required release, Consent, substitution or amendment, the applicable New NGC Entity may continue to be bound by the applicable underlying agreement, lease, license or other obligation or other Liabilities and, unless not permitted by Law, HII shall, or shall cause another HII Entity to, as agent or subcontractor for such New NGC Entity, pay, perform and discharge fully all the obligations or other Liabilities of such New NGC Entity thereunder. HII shall indemnify each New NGC Indemnitee and hold it harmless against any Liabilities arising in connection therewith. New NGC shall pay and remit, or cause to be paid or remitted, to the applicable HII Entity, all money, rights and other consideration received by any New NGC Entity (net of any applicable expenses) in respect of such performance by such HII Entity (unless any such consideration is a Retained Asset). If and when any such release, Consent, substitution or amendment shall be obtained or such agreement, lease, license or other rights, obligations or other Liabilities shall otherwise become assignable or able to be novated, New NGC shall thereafter assign, or cause to be

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assigned, all the New NGC Entities’ rights, obligations and other Liabilities thereunder to the applicable HII Entity without payment of any further consideration and the applicable HII Entity shall, without the payment of any further consideration, assume such rights, obligations and other Liabilities.
     Section 2.5 Novation of Retained Liabilities .
          (a) Each of New NGC and HII, at the written request of the other party, shall use its reasonable best efforts to obtain, or to cause to be obtained, any release, Consent, substitution or amendment required to novate or assign all rights and obligations under any agreements, leases, licenses and other obligations or Liabilities of any nature whatsoever that constitute Retained Liabilities, or to obtain in writing the unconditional release of all parties to such arrangements other than any New NGC Entities, so that, in any such case, New NGC and the other New NGC Entities will be solely responsible for such Retained Liabilities; provided , however , that none of the New NGC Entities or the HII Entities shall be obligated to pay any significant (relative to the underlying agreement, lease, license or obligation) consideration or surrender, release or modify any material rights or material remedies therefor to any third party from whom such releases, Consents, substitutions and amendments are requested except as expressly set forth in this Agreement or any Ancillary Agreement.
          (b) If New NGC or HII is unable to obtain, or to cause to be obtained, any required release, Consent, substitution or amendment, the applicable HII Entity may continue to be bound by the applicable underlying agreement, lease, license or other obligation or other Liabilities and, unless not permitted by Law or the terms thereof, New NGC shall, or shall cause another New NGC Entity to, as agent or subcontractor for such HII Entity, pay, perform and discharge fully all the obligations or other Liabilities of such HII Entity thereunder. New NGC shall indemnify each HII Indemnitee and hold it harmless against any Liabilities arising in connection therewith. HII shall pay and remit, or cause to be paid or remitted, to the applicable New NGC Entity, all money, rights and other consideration received by any HII Entity (net of any applicable expenses) in respect of such performance by such New NGC Entity (unless any such consideration is a Shipbuilding Asset). If and when any such release, Consent, substitution, approval or amendment shall be obtained or such agreement, lease, license or other rights, obligations or other Liabilities shall otherwise become assignable or able to be novated, HII shall thereafter assign, or cause to be assigned, all the HII Entities’ rights, obligations and other Liabilities thereunder to the applicable New NGC Entity without payment of any further consideration and the applicable New NGC Entity shall, without the payment of any further consideration, assume such rights, obligations and other Liabilities.
     Section 2.6 Disclaimer of Representations and Warranties . Each of New NGC (on behalf of itself and each other New NGC Entity) and HII (on behalf of itself and each other HII Entity) understands and agrees that, except as expressly set forth herein or in any Ancillary Agreement, no party (including its Affiliates) to this Agreement, any Ancillary Agreement or any other agreement or document contemplated by this Agreement, any Ancillary Agreement or otherwise, is making any representations or warranties relating in any way to the Assets, businesses or Liabilities transferred or assumed as contemplated

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hereby or thereby, to any Consent required in connection therewith, to the value or freedom from any Security Interests of, or any other matter concerning, any Assets of such party, or to the absence of any defenses or right of setoff or freedom from counterclaim with respect to any claim or other Asset, including any accounts receivable, of any party, or to the legal sufficiency of any assignment, document or instrument delivered hereunder to convey title to any Asset or thing of value upon the execution, delivery and filing hereof or thereof. Except as may expressly be set forth herein or in any Ancillary Agreement, (a) all such Assets are being transferred on an “as is,” “where is” basis, (b) any implied warranty of merchantability, fitness for a specific purpose or otherwise is hereby expressly disclaimed, (c) the respective transferees shall bear the economic and legal risks that any conveyance shall prove to be insufficient to vest in the transferee good and marketable title, free and clear of any Security Interest and (d) none of the New NGC Entities or the HII Entities (including their Affiliates) or any other Person makes any representation or warranty with respect to any information, documents or material made available in connection with the Separation or the Distribution, or the entering into of this Agreement or any Ancillary Agreement or the transactions contemplated hereby or thereby, except as expressly set forth in this Agreement or any Ancillary Agreement.
     Section 2.7 Treatment of Cash .
          (a) Prior to the Distribution, each of the HII Entities shall make capital and other expenditures and operate its cash management, accounts payable and receivables collection systems in the ordinary course consistent with prior practice.
          (b) From the date of this Agreement until the HII Contribution, NGC (prior to the Holding Company Reorganization) and New NGC (after the Holding Company Reorganization) shall be entitled to use, retain or otherwise dispose of all cash generated by the Shipbuilding Business and the Shipbuilding Assets in accordance with the ordinary course operation of NGC’s and New NGC’s respective cash management systems. All such cash shall be a Retained Asset.
     Section 2.8 Replacement of Credit Support .
          (a) New NGC shall use reasonable best efforts to arrange, at its cost and expense and effective at or prior to the Distribution, the replacement of all Credit Support Instruments relating exclusively to the Retained Business and provided by or through NGC or any other member of the HII Group exclusively for the benefit of any member of the New NGC Group (the “ New NGC Credit Support Instruments ”) with alternate arrangements that do not require any credit support from NGC or any other member of the HII Group, and shall use reasonable best efforts to obtain from the beneficiaries of such New NGC Credit Support Instruments written releases indicating that NGC or such other member of the HII Group will, effective upon the Distribution, have no liability with respect to such New NGC Credit Support Instruments. In the event that New NGC is unable to obtain any such alternative arrangements for any New NGC Credit Support Instrument prior to the Distribution, it shall have responsibility for the payment and performance of the obligations underlying such New NGC Credit Support Instrument.

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          (b) HII shall use reasonable best efforts to arrange, at its cost and expense and effective at or prior to the Distribution, the replacement of certain Credit Support Instruments identified on Schedule 2.8(b) relating to the Shipbuilding Business and provided by or through NGC or any member of the New NGC Group for the benefit of any member of the HII Group (other than NGC) (the “ HII Credit Support Instruments ”) with alternate arrangements that do not require any credit support from New NGC or any member of the New NGC Group, and shall use reasonable best efforts to obtain from the beneficiaries of such HII Credit Support Instruments written releases indicating that NGC or any member of the New NGC Group will, effective upon the Distribution, have no liability with respect to such HII Credit Support Instruments. In the event that HII is unable to obtain any such alternative arrangements for any HII Credit Support Instrument prior to the Distribution, it shall have responsibility for the payment and performance of the obligations underlying such HII Credit Support Instrument.
ARTICLE III
ACTIONS PENDING THE DISTRIBUTION
     Section 3.1 Actions Prior to the Distribution .
          (a) Subject to the conditions specified in Section 3.2 and subject to Section 4.3, each of the parties shall use its reasonable best efforts to consummate the Distribution. Such actions shall include those specified in this Section 3.1.
          (b) Prior to the Distribution, each of the parties will execute and deliver all Ancillary Agreements to which it is a party, and will cause the other New NGC Entities and HII Entities, as applicable, to execute and deliver any Ancillary Agreements to which such Persons are parties.
          (c) Prior to the Distribution, HII shall mail the Information Statement to the Record Holders.
          (d) HII shall prepare, file with the SEC and use its reasonable best efforts to cause to become effective any registration statements or amendments thereto required to effect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the transactions contemplated by this Agreement or any of the Ancillary Agreements.
          (e) Each of the parties shall take all such actions as may be necessary or appropriate under the securities or blue sky Laws of the states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the Distribution.
          (f) HII shall prepare and file, and shall use reasonable best efforts to have approved prior to the Distribution, an application for the listing on the NYSE of the HII Common Stock to be distributed in the Distribution, subject to official notice of listing.
          (g) Prior to the Distribution, the existing directors of HII shall duly elect the individuals listed as members of the HII board of directors in the Information

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Statement, and such individuals shall become the members of the HII board of directors effective as of no later than immediately prior to the Distribution.
          (h) Prior to the Distribution, New NGC shall deliver or cause to be delivered to HII the resignation from each applicable HII Entity, effective as of no later than immediately prior to the Distribution, of each individual who will be an employee of any New NGC Entity after the Distribution and who is an officer or director of any HII Entity immediately prior to the Distribution.
          (i) Immediately prior to the Distribution, the Restated Certificate of Incorporation and Restated Bylaws of HII, each in substantially the form filed as an exhibit to the Form 10, shall be in effect.
          (j) The parties shall, subject to Section 4.3, take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 3.2 to be satisfied and to effect the Distribution on the Distribution Date.
     Section 3.2 Conditions to Distribution . The obligations of the parties to consummate the Distribution shall be conditioned on the satisfaction, or waiver by the Northrop Grumman Board, of the following conditions:
          (a) The Northrop Grumman Board shall, in its sole and absolute discretion, have authorized and approved the Separation and the Distribution and not withdrawn such authorization and approval.
          (b) The New NGC Board shall have declared the dividend of HII Common Stock to the Record Holders.
          (c) Each Ancillary Agreement shall have been executed by each party thereto.
          (d) The SEC shall have declared the Form 10 effective, no stop order suspending the effectiveness of the Form 10 shall be in effect, and no proceedings for such purpose shall be pending before or threatened by the SEC.
          (e) The HII Common Stock shall have been accepted for listing on the NYSE or another national securities exchange approved by the Northrop Grumman Board, subject to official notice of issuance.
          (f) The Internal Reorganization shall have been completed.
          (g) New NGC shall have received the IRS Ruling and the Opinion, each of which shall remain in full force and effect, that the Holding Company Reorganization, the Internal Reorganization, and the Distribution will qualify for Tax-Free Status.
          (h) HII shall have (i) entered into the HII Credit Facility, (ii) received the net proceeds from the HII Debt and (iii) made the HII Contribution.

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          (i) No order, injunction or decree that would prevent the consummation of the Distribution shall be threatened, pending or issued (and still in effect) by any Governmental Authority of competent jurisdiction, no other legal restraint or prohibition preventing the consummation of the Distribution shall be in effect, and no other event outside the control of Northrop Grumman shall have occurred or failed to occur that prevents the consummation of the Distribution.
          (j) No other events or developments shall have occurred prior to the Distribution that, in the judgment of the Northrop Grumman Board, would result in the Distribution having a significant adverse effect on Northrop Grumman or the Northrop Grumman Stockholders.
          (k) The actions set forth in Sections 3.1(c), (h) and (i) shall have been completed.
          (l) HII shall have delivered to New NGC a certificate signed by the chief financial officer of HII, dated as of the Distribution Date, certifying that the HII Entities have complied with Section 2.7(a).
     The foregoing conditions may only be waived by the Northrop Grumman Board, in its sole and absolute discretion, are for the sole benefit of Northrop Grumman and shall not give rise to or create any duty on the part of the Northrop Grumman Board to waive or not waive such conditions or in any way limit the right of termination of this Agreement set forth in Article IX or alter the consequences of any such termination from those specified in Article IX. Any determination made by the Northrop Grumman Board prior to the Distribution concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 3.2 shall be conclusive.
ARTICLE IV
THE DISTRIBUTION
     Section 4.1 The Distribution .
          (a) HII shall cooperate with Northrop Grumman to accomplish the Distribution and shall, at the direction of Northrop Grumman, use its reasonable best efforts to promptly take any and all actions necessary or desirable to effect the Distribution. Each of the parties will provide, or cause the applicable member of its Group to provide, to the Agent all documents and information required to complete the Distribution.
          (b) Subject to the terms and conditions set forth in this Agreement, (i) on or prior to the Distribution Date, for the benefit of and distribution to the Record Holders, New NGC will deliver to the Agent all of the issued and outstanding shares of HII Common Stock then owned by New NGC or any other New NGC Entity and book-entry authorizations for such shares and (ii) on the Distribution Date, New NGC shall instruct the Agent to distribute, by means of a pro rata dividend, to each Record Holder (or such Record Holder’s bank or brokerage firm on such Record Holder’s behalf) electronically, by direct registration in book-entry form, the number of whole shares of HII Common Stock

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to which such Record Holder is entitled based on the Distribution Ratio. The Distribution shall be effective at 12:01 a.m. Eastern time on the Distribution Date. On or as soon as practicable after the Distribution Date, the Agent will mail an account statement indicating the number of shares of HII Common Stock that have been registered in book-entry form in the name of each Record Holder.
          (c) With respect to the shares of HII Common Stock remaining with the Agent 180 days after the Distribution Date, the Agent shall deliver any such shares as directed by HII, with the consent of New NGC (which consent shall not be unreasonably withheld or delayed).
     Section 4.2 Fractional Shares . The Agent and New NGC shall, as soon as practicable after the Distribution Date, (a) determine the number of whole shares and fractional shares of HII Common Stock allocable to each Record Holder, (b) aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions at then-prevailing trading prices on behalf of Record Holders that would otherwise be entitled to fractional share interests and (c) distribute to each such Record Holder, or for the benefit of each beneficial owner of fractional shares, such Record Holder’s or beneficial owner’s ratable share of the net proceeds of such sales, based upon the average gross selling price per share of HII Common Stock after making appropriate deductions for any amount required to be withheld under applicable Tax Law and less any transfer Taxes. HII will be responsible for payment of any brokerage fees associated with such sales. The Agent, in its sole discretion, will determine the timing and method of selling such shares, the selling price of such shares and the broker-dealer to which such shares will be sold; provided , however , that the designated broker-dealer is not an Affiliate of New NGC or HII. Neither New NGC nor HII will pay any interest on the proceeds from the sale of such shares.
     Section 4.3 Sole Discretion of the Northrop Grumman Board and New NGC Board . Subject to the last sentence of this Section 4.3, the Northrop Grumman Board shall, in its sole and absolute discretion, determine the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition, and notwithstanding anything to the contrary set forth below, the Northrop Grumman Board, in its sole and absolute discretion, may at any time and from time to time until the Distribution decide to abandon the Distribution or modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution. The New NGC Board shall determine the Record Date.
ARTICLE V
MUTUAL RELEASES; INDEMNIFICATION
     Section 5.1 Release of Pre-Distribution Claims .
          (a) Except (i) as provided in Section 5.1(c), (ii) as may be otherwise provided in this Agreement or any Ancillary Agreement and (iii) for any matter for which any HII Indemnitee is entitled to indemnification pursuant to this Article V, effective as of

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the Distribution, HII does hereby, for itself and each other HII Entity and their respective Affiliates, predecessors, successors and assigns, and, to the extent HII legally may, all Persons that at any time prior or subsequent to the Distribution have been stockholders, directors, officers, members, agents or employees of HII or any other HII Entity (in each case, in their respective capacities as such), remise, release and forever discharge each New NGC Entity, their respective Affiliates, successors and assigns, and all Persons that at any time prior to the Distribution have been stockholders, directors, officers, members, agents or employees of New NGC or any other New NGC Entity (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity, whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from or relating to any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Date, whether or not known as of the Distribution Date, including any claims with respect to the sufficiency or condition of the Shipbuilding Assets or the allocation of Liabilities to the HII Group.
          (b) Except (i) as provided in Section 5.1(c), (ii) as may be otherwise provided in this Agreement or any Ancillary Agreement and (iii) for any matter for which any New NGC Indemnitee is entitled to indemnification pursuant to this Article V, New NGC does hereby, for itself and each other New NGC Entity and their respective Affiliates, successors and assigns, and, to the extent New NGC legally may, all Persons that at any time prior to the Distribution have been stockholders, directors, officers, members, agents or employees of New NGC or any other New NGC Entity (in each case, in their respective capacities as such), remise, release and forever discharge each HII Entity, their respective Affiliates, successors and assigns, and all Persons that at any time prior to the Distribution have been stockholders, directors, officers, members, agents or employees of HII or any other HII Entity (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity, whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Distribution Date, whether or not known as of the Distribution Date.
          (c) Nothing contained in Section 5.1(a) or 5.1(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement, including the applicable Schedules hereto and thereto, or any arrangement that is not to terminate as of the Distribution, as specified in Section 2.3(b). Nothing contained in Section 5.1(a) or 5.1(b) shall release any Person from:
               (i) any Liability provided in or resulting from any agreement among any New NGC Entities and any HII Entities that is not to terminate as of the Distribution, as specified in Section 2.3(b), or any other Liability that is not to terminate as of the Distribution, as specified in Section 2.3(b);

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               (ii) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any Ancillary Agreement; or
               (iii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 5.1; provided that the parties agree not to bring suit or permit any of their Subsidiaries to bring suit against any Person with respect to any Liability to the extent that such Person would be released with respect to such Liability by this Section 5.1 but for the provisions of this clause (iii).
          (d) HII shall not make, and shall not permit any other HII Entity to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim for indemnification, against any New NGC Entity, or any other Person released pursuant to Section 5.1(a), with respect to any Liabilities released pursuant to Section 5.1(a). New NGC shall not, and shall not permit any other New NGC Entity, to make any claim or demand, or commence any Action asserting any claim or demand, including any claim for indemnification, against any HII Entity, or any other Person released pursuant to Section 5.1(b), with respect to any Liabilities released pursuant to Section 5.1(b).
          (e) At any time, at the request of any other party, each party shall cause each member of its respective Group to execute and deliver releases in form reasonably satisfactory to the other party reflecting the provisions of this Section 5.1.
     Section 5.2 Indemnification by HII and NGSB . Subject to Section 5.4, following the Distribution, HII and NGSB shall jointly and severally indemnify, defend and hold harmless New NGC, each New NGC Entity and each of their respective current, former and future directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ New NGC Indemnitees ”), from and against any and all Liabilities of the New NGC Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):
          (a) the Shipbuilding Liabilities; and
          (b) any breach by any HII Entity of this Agreement or any of the Ancillary Agreements (other than the Tax Matters Agreement and the Ingalls Indemnity Agreement, which shall be subject to the provisions contained therein).
     Section 5.3 Indemnification by New NGC and NGSC . Subject to Section 5.4, following the Distribution, New NGC and NGSC shall jointly and severally indemnify, defend and hold harmless HII, each HII Entity and each of their respective current, former and future directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ HII Indemnitees ”), from and against any and all Liabilities of the HII Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):
          (a) the Retained Liabilities; and

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          (b) any breach by any New NGC Entity of this Agreement or any of the Ancillary Agreements (other than the Tax Matters Agreement and the Ingalls Indemnity Agreement, which shall be subject to the provisions contained therein).
     Section 5.4 Indemnification Obligations Net of Insurance Proceeds and Other Amounts .
          (a) The parties intend that any Liability subject to indemnification or reimbursement pursuant to this Agreement will be net of Insurance Proceeds and other amounts received that actually reduce the amount of the Liability for which indemnification is sought. Accordingly, the amount which any party (an “ Indemnifying Party ”) is required to pay to any Person entitled to indemnification or reimbursement under this Agreement (an “ Indemnitee ”) will be reduced by any Insurance Proceeds and other amounts theretofore actually recovered by or on behalf of the Indemnitee in reduction of the related Liability. If an Indemnitee receives a payment (an “ Indemnity Payment ”) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds or other amounts therefor, then the Indemnitee will promptly pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or other amounts had been received, realized or recovered before the Indemnity Payment was made.
          (b) In the case of any Shared Liability, any Insurance Proceeds actually received, realized or recovered by any party in respect of the Shared Liability will be shared between the New NGC Group and the HII Group in accordance with their respective Applicable Proportions, regardless of which Group may actually receive, realize or recover such Insurance Proceeds.
          (c) An insurer that would otherwise be obligated to defend or make payment in response to any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to a “windfall” (i.e., a benefit it would not be entitled to receive in the absence of the indemnification provisions of this Agreement) by virtue of the indemnification provisions hereof.
     Section 5.5 Third-Party Claims .
          (a) If an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) that is not a New NGC Entity or a HII Entity of any claim (including environmental claims and demands or requests for investigation or remediation of contamination) or of the commencement by any such Person of any Action with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to this Agreement or any Ancillary Agreement (collectively, a “ Third-Party Claim ”), such Indemnitee shall give such Indemnifying Party written notice thereof as soon as promptly practicable, but no later than 20 days after becoming aware of such Third-Party Claim. Any such notice shall

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describe the Third-Party Claim in reasonable detail and contain written correspondence received from the third party that relates to the Third-Party Claim. Notwithstanding the foregoing, the failure of any Indemnitee to give notice as provided in this Section 5.5(a) shall not relieve the related Indemnifying Party of its obligations under this Article V, except to the extent that such Indemnifying Party is prejudiced by such failure to give notice.
          (b) With respect to any Third-Party Claim that is or may be a Shared Liability:
               (i) If the Indemnifying Party receiving any notice pursuant to Section 5.5(a) or the Indemnitee believes that the Third-Party Claim is or may be a Shared Liability, such Indemnifying Party or Indemnitee may make a Determination Request within 30 days after the notice given by the Indemnitee to the Indemnifying Party pursuant to Section 5.5(a). Upon the making of a Determination Request, the applicable Indemnitee shall assume the defense of such Third-Party Claim until a determination as to whether such Third-Party Claim is a Shared Liability. In the event of such assumption of defense, such Indemnitee shall be entitled to reimbursement of all the costs and expenses of such defense once a final determination or acknowledgement is made that such Indemnitee is entitled to indemnification with respect to such Third-Party Claim; provided , that if such Third-Party Claim is determined to be a Shared Liability, such costs and expenses shall be shared as provided in Section 5.5(b)(ii). If it is determined by New NGC and HII or by the Allocation Committee that the Third-Party Claim is a Shared Liability, the Managing Party (as determined in accordance with Section 6.1(a)) shall assume the defense of such Third-Party Claim as soon as reasonably practicable following such determination.
               (ii) A party’s costs and expenses of assuming the defense of (subject to Section 5.5(b)(i)), and/or seeking to settle or compromise (subject to Section 5.5(b)(iv)), any Third-Party Claim that is a Shared Liability shall be included in the calculation of the amount of the applicable Shared Liability in determining the obligations of the parties with respect thereto pursuant to Section 6.4.
               (iii) The Managing Party shall consult with the Non-Managing Party prior to taking any action with respect to any Third-Party Claim that is a Shared Liability if the Managing Party’s action could reasonably be expected to have a significant adverse impact (financial or non-financial) on the Non-Managing Party, including a significant adverse impact on the rights, obligations, operations, standing or reputation of the Non-Managing Party (or its Subsidiaries or Affiliates), and the Managing Party shall not take such action without the prior written consent of the Non-Managing Party, which consent shall not be unreasonably withheld or delayed.
               (iv) The Managing Party shall promptly give notice to the Non-Managing Party regarding the substance of any settlement related discussions with respect to any Third-Party Claim that is a Shared Liability if (A) the Non-Managing Party is required to share in any significant aspect of the costs and expenses, proceeds or obligations resulting from such settlement or (B) the settlement can reasonably be expected to have a significant impact (financial or nonfinancial) on the Non-Managing Party. In

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such instances, the Managing Party shall not settle such Third-Party Claim without the prior written consent of the Non-Managing Party, which consent shall not be unreasonably withheld or delayed.
          (c) With respect to any Third-Party Claim that is not a Shared Liability:
               (i) Unless the parties otherwise agree, within 30 days after the receipt of notice from an Indemnitee in accordance with Section 5.5(a), an Indemnifying Party shall defend (and, unless the Indemnifying Party has specified any reservations or exceptions, may seek to settle or compromise), at such Indemnifying Party’s own cost and expense and by such Indemnifying Party’s own counsel, any Third-Party Claim that is not a Shared Liability. The applicable Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel shall be the expense of such Indemnitee. Notwithstanding the foregoing, the Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnitee (A) for any period during which the Indemnifying Party has not assumed the defense of such Third-Party Claim (other than during any period in which the Indemnitee shall have failed to give notice of the Third-Party Claim in accordance with Section 5.5(a)) or (B) to the extent that such engagement of counsel is as a result of a conflict of interest, as reasonably determined by the Indemnitee acting in good faith.
               (ii) No Indemnifying Party shall consent to entry of any judgment or enter into any settlement of any Third-Party Claim that is not a Shared Liability without the consent of the applicable Indemnitee; provided , however , that such Indemnitee shall be required to consent to such entry of judgment or to such settlement that the Indemnifying Party may recommend if the judgment or settlement (A) contains no finding or admission of any violation of Law or any violation of the rights of any Person, (B) involves only monetary relief which the Indemnifying Party has agreed to pay and could not reasonably be expected to have a significant adverse impact (financial or non-financial) on the Indemnitee, including a significant adverse impact on the rights, obligations, operations, standing or reputation of the Indemnitee (or any of its Subsidiaries or Affiliates), and (C) includes a full and unconditional release of the Indemnitee. Notwithstanding the foregoing, in no event shall an Indemnitee be required to consent to any entry of judgment or settlement if the effect thereof is to permit any injunction, declaratory judgment, other order or other nonmonetary relief to be entered, directly or indirectly, against any Indemnitee.
          (d) Whether or not the Indemnifying Party assumes the defense of a Third-Party Claim, no Indemnitee shall admit any liability with respect to, or settle, compromise or discharge, such Third-Party Claim without the Indemnifying Party’s prior written consent, which consent shall not be unreasonably withheld or delayed.
          (e) Notwithstanding anything to the contrary in this Section 5.5 or in Article VI, the additional provisions of the Litigation Management Agreement shall govern with respect to all Third-Party Claims (including Shared Actions) specifically set forth therein or covered by the terms thereof, and the Litigation Management Agreement shall

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control over any inconsistent provisions of this Section 5.5 and Article VI as to such Third-Party Claims.
     Section 5.6 Additional Matters .
          (a) Any claim on account of a Liability that does not result from a Third-Party Claim shall be timely asserted by written notice given by the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall have a period of 30 days after the receipt of such notice within which to respond thereto. If such Indemnifying Party does not respond within such 30-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such 30-day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue remedies as specified by this Agreement and the Ancillary Agreements.
          (b) In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.
          (c) In the event of an Action in which the Indemnifying Party is not a named defendant, if either the Indemnitee or the Indemnifying Party shall so request, the parties shall endeavor to substitute the Indemnifying Party for the named defendant, if reasonably practicable. If such substitution or addition cannot be achieved or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in this Agreement and the Litigation Management Agreement and the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’ fees, experts’ fees and all other external expenses, and the allocated costs of in-house counsel and other personnel), the costs of any judgment or settlement, and the cost of any interest or penalties relating to any judgment or settlement.
     Section 5.7 Remedies Cumulative . The remedies provided in this Article V shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.
     Section 5.8 Survival of Indemnities . The rights and obligations of each of New NGC, NGSC, HII, NGSB and their respective Indemnitees under this Article V shall survive the sale or other transfer by any party of any Assets or businesses or the assignment by it of any Liabilities.
     Section 5.9 Limitation on Liability . Except as may expressly be set forth in this Agreement, none of New NGC, NGSC, HII, NGSB or any other member of either Group

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shall in any event have any Liability to the other or to any other member of the other’s Group, or to any other New NGC Indemnitee or HII Indemnitee, as applicable, under this Agreement (a) to the extent that any such Liability resulted from any willful violation of Law or fraud by the party seeking indemnification or (b) for any indirect, punitive or consequential damages. Notwithstanding the foregoing, the provisions of this Section 5.9 shall not limit an Indemnifying Party’s indemnification obligations with respect to any Liability that any Indemnitee may have to any third party not affiliated with any member of the New NGC Group or the HII Group.
ARTICLE VI
SHARED GAINS AND SHARED LIABILITIES
     Section 6.1 Managing Party .
          (a) With respect to any Shared Gain or Shared Liability, either HII or New NGC shall be the “ Managing Party .” With respect to any Shared Gain identified on Schedule 1.1(a)(2) or any Shared Liability identified on Schedule 1.1(a)(1) , the Managing Party shall be the party with the higher Applicable Proportion as set forth on such Schedule, and, with respect to specified Shared Actions under the Litigation Management Agreement, the Managing Party shall be as set forth therein. In all other cases, the Managing Party shall be selected by the Allocation Committee in accordance with Sections 6.1(b) and 6.2.
          (b) In determining which party shall be the Managing Party, the Allocation Committee shall consider as the primary factor in such a determination which party is subject to the greater financial, operational and reputational risk or exposure in connection with such Shared Gain or Shared Liability, including the relative Applicable Proportion of each Group with respect to such Shared Gain or Shared Liability. The Allocation Committee shall also consider such other factors as the Allocation Committee deems appropriate, including if applicable, which party has control over the potentially relevant documentation and possible witnesses with respect to such Shared Gain or Shared Liability.
     Section 6.2 Allocation Committee .
          (a) New NGC and HII will form the Allocation Committee for the following purposes:
               (i) resolving whether (A) any claim or right is a Shared Gain or (B) any Liability is a Shared Liability, in each case if not otherwise agreed between New NGC and HII;
               (ii) except with respect to the matters described on Schedule 1.1(a)(1) or Schedule 1.1(a)(2) , determining the Applicable New NGC Proportion and the Applicable HII Proportion of any Shared Gains and Shared Liabilities; and

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               (iii) determining whether HII or New NGC shall be the Managing Party of any Shared Gain or Shared Liability.
          (b) New NGC and HII shall refer (i) any Shared Liability not identified on Schedule 1.1(a)(1) and any Shared Gain not identified on Schedule 1.1(a)(2) or in the Litigation Management Agreement to the Allocation Committee to determine the Applicable New NGC Proportion and the Applicable HII Proportion of such Shared Gain or Shared Liability, and the Managing Party of such Shared Gain or Shared Liability, and (ii) any potential Shared Gains or Shared Liabilities that New NGC and HII are not able to agree are Shared Gains or Shared Liabilities to the Allocation Committee for resolution of the status thereof. If the Allocation Committee reaches a determination (which shall be made within 30 days after such referral on a matter submitted to the Allocation Committee by any of New NGC or HII), then that determination shall be binding on New NGC and HII and their respective successors and assigns.
          (c) In the event that the Allocation Committee cannot reach a determination within 30 days after the referral pursuant to Section 6.2(b) as to (i) the appropriate allocation of Shared Gains or Shared Liabilities between the New NGC Group and the HII Group, (ii) the nature or status of any such Shared Liabilities or Shared Gains or (iii) the Managing Party of any such Shared Liabilities or Shared Gains or any other matter under consideration by the Allocation Committee, then the procedures set forth in Article X of this Agreement shall govern.
     Section 6.3 Shared Gains .
          (a) If either HII or New NGC becomes aware of any claim or right that may reasonably be expected to be a Shared Gain, it shall notify the other party in writing as soon as promptly practicable, but no later than 20 days after becoming aware of such potential Shared Gain, which notice shall describe the potential Shared Gain in reasonable detail. Such other party may make a Determination Request within 30 days after receipt of such notice.
          (b) Any benefit that may be received from any Shared Gain shall be shared between New NGC and HII in proportion to the Applicable New NGC Proportion and the Applicable HII Proportion, respectively, and shall be paid in accordance with Section 6.5. The Managing Party of any Shared Gain shall have the authority to commence, prosecute, settle, manage, waive, release, discharge and otherwise determine all matters with respect to such Shared Gain. The Non-Managing Party of such Shared Gain shall not take, or permit any member of its Group to take, any action (including commencing any claim) that would interfere with such rights and powers of the Managing Party, except as required by applicable Law or contract (in which case the Non-Managing Party shall provide advance notice of such action to the Managing Party and shall give the Managing Party the opportunity to consult with respect to such action). The Managing Party of such Shared Gain shall use its reasonable best efforts to notify the Non-Managing Party promptly in the event that it commences an Action with respect to a Shared Gain. The Managing Party of any Shared Gain may elect not to pursue such Shared Gain for any reason whatsoever (including a different assessment of the merits of any Action, claim or

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right than the other party or any business reasons that are in the best interests of the Managing Party or a member of the Managing Party’s Group, without regard to the best interests of any member of the other Group) and no member of the Managing Party’s Group with a majority interest in such Shared Gain shall have any liability to any Person (including any member of the other Group) as a result of any such determination. In the event that the Managing Party of any Shared Gain elects not to pursue such Shared Gain, the Non-Managing Party may request in writing to the Managing Party that the Non-Managing Party have the right to pursue such Shared Gain on behalf of the Non-Managing Party and the Managing Party (in which case, the Non-Managing Party shall be treated as the Managing Party for purposes of such Shared Gain); provided , however , that the Managing Party may refuse such request in its sole discretion.
          (c) Upon the making of a Determination Request, New NGC alone may, but shall not be obligated to, commence prosecution or other assertion of the claim or right that is subject to such Determination Request pending resolution of the status of such claim or right. In the event that New NGC commences any such prosecution or assertion and, upon resolution of the Determination Request, it is determined hereunder that any such claim or right of HII is not a Shared Gain or that HII is the Managing Party of such Shared Gain, New NGC shall discontinue the prosecution or assertion of such claim or right and transfer the control thereof to HII as soon as reasonably practicable. In such event, if HII elects not to continue the prosecution of such claim or right, HII will reimburse New NGC for all costs and expenses incurred prior to resolution of such dispute in the prosecution or assertion of such claim or right.
     Section 6.4 Shared Liabilities . Each of New NGC and HII shall be responsible for its Applicable Proportion of any Shared Liability. The Managing Party shall be responsible for managing, and shall have the authority to manage, the defense or prosecution, as applicable, and resolution of a Shared Liability. It shall not be a defense to any obligations by any party to pay any amount in respect of any Shared Liability that such party was not consulted in the response to or defense thereof (except to the extent such consultation was required under this Agreement or the Litigation Management Agreement), that such party’s views or opinions as to the conduct of such response to or defense or the reasonableness of any settlement were not accepted or adopted, that such party does not approve of the quality or manner of the response to or defense thereof or that such Shared Liability was incurred by reason of a settlement rather than by a judgment or other determination of liability (even if, subject to Section 5.5(b)(iv) and the applicable provisions of the Litigation Management Agreement, such settlement was effected without the consent or over the objection of such party).
     Section 6.5 Payments . Any amount owed in respect of (a) any Shared Liabilities (including reimbursement for the cost or expense of defense of any Third-Party Claim that is a Shared Liability) or (b) any Shared Gains (including reimbursement for the costs or expenses to commence, prosecute or settle matters with respect to a Shared Gain), pursuant to this Article VI shall be remitted within 30 days after the party entitled to such amount provides an invoice (including reasonable supporting information with respect thereto) to the party owing such amount; provided , however , that the Applicable

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Proportion of any amounts recovered with respect to any Shared Gain or Shared Liability shall be payable within 30 days after receipt thereof by the party recovering such amount.
ARTICLE VII
EXCHANGE OF INFORMATION; CONFIDENTIALITY
     Section 7.1 Agreement for Exchange of Information .
          (a) Except in the case of an adversarial Action or threatened adversarial Action related to a request hereunder by any member of either the New NGC Group or the HII Group against any member of the other Group (which shall be governed by such discovery rules as may be applicable thereto), and subject to Section 7.1(b), each of New NGC and HII, on behalf of the members of its respective Group, shall use reasonable best efforts to provide (except as otherwise provided in this Agreement or any Ancillary Agreement, at the sole cost and expense of the requesting party), or cause to be provided, to the other Group, at any time before or after the Distribution, as soon as reasonably practicable after written request therefor, any Information in the possession or under the control of the members of such respective Group that the requesting party reasonably requests (i) in connection with reporting, disclosure, filing or other requirements imposed on the requesting party (including under applicable securities, defense contracting or Tax Laws) by a Governmental Authority having jurisdiction over the requesting party, (ii) for use in any other judicial, regulatory, administrative, Tax, insurance or other proceeding or in order to satisfy audit, accounting, claims, regulatory, investigation, litigation, Tax or other similar requirements, or (iii) to comply with its obligations under this Agreement or any Ancillary Agreement. The receiving party shall use any Information received pursuant to this Section 7.1(a) solely to the extent reasonably necessary to satisfy the applicable obligations or requirements described in the immediately preceding sentence and shall otherwise take reasonable steps to protect such Information. Nothing in this Section 7.1 shall be construed as obligating a party to create Information not already in its possession or control.
          (b) In the event that any party determines that the exchange of any Information pursuant to Section 7.1(a) is reasonably likely to violate any Law or binding agreement, or waive or jeopardize any attorney-client privilege, or attorney work product protection, such party shall not be required to provide access to or furnish such Information to the other party; provided , however , that the parties shall take all reasonable measures to permit compliance with Section 7.1(a) in a manner that avoids any such harm or consequence. New NGC and HII intend that any provision of access to or the furnishing of Information that would otherwise be within the ambit of any legal privilege shall not operate as a waiver of such privilege.
          (c) After the Distribution, each of New NGC and HII shall maintain in effect systems and controls reasonably intended to enable the members of the other Group to satisfy their respective known reporting, accounting, disclosure, audit and other obligations.

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     Section 7.2 Ownership of Information . Any Information owned by a member of one Group that is provided to a requesting party pursuant to Section 7.1 shall be deemed to remain the property of the providing party. Except as specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.
     Section 7.3 Compensation for Providing Information . The party requesting Information pursuant to Section 7.1 agrees to reimburse the party providing such Information for the reasonable costs, if any, of creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the requesting party. Except as may be otherwise specifically provided elsewhere in this Agreement or in any other agreement between the parties, such costs shall be computed in accordance with the providing party’s standard methodology and procedures.
     Section 7.4 Record Retention . Except for the matters addressed specifically in Section 8.7, to facilitate the possible exchange of Information pursuant to this Article VII and other provisions of this Agreement from and after the Distribution, each of the parties agrees to use reasonable best efforts to retain all Information in accordance with its record retention policy as in effect immediately prior to the Distribution or as modified in good faith thereafter; provided , however , that to the extent any Ancillary Agreement provides for a longer period of retention of certain Information, such longer period shall control. Each party agrees to retain any Information that, prior to the Distribution, is subject to a subpoena or a “do not destroy” notice issued by NGC or any of its Subsidiaries prior to the Distribution until such subpoena or notice is no longer applicable to such Information.
     Section 7.5 Limitation of Liability . No party shall have any liability to any other party in the event that any Information exchanged or provided pursuant to this Agreement that is an opinion, estimate or forecast, or that is based on an opinion, estimate or forecast, is found to be inaccurate, in the absence of willful misconduct by the party providing such Information. No party shall have any liability to any other party if any Information is destroyed after reasonable best efforts by such party to comply with the provisions of Section 7.4.
     Section 7.6 Other Agreements Providing for Exchange of Information . The rights and obligations granted under this Article VII shall be subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of Information set forth in any Ancillary Agreement.
     Section 7.7 Cooperation .
          (a) From and after the Distribution, except in the case of an adversarial Action or threatened adversarial Action by any member of either the New NGC Group or the HII Group against any member of the other Group (which shall be governed by such discovery rules as may be applicable thereto), each party, upon reasonable written request of the other party, shall use reasonable efforts to cooperate and consult in good faith with the other party to the extent such cooperation and consultation is reasonably necessary with respect to (i) any Action, (ii) this Agreement or any of the Ancillary Agreements or any of

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the transactions contemplated hereby or thereby or (iii) any audit, investigation or any other legal requirement, and, upon reasonable written request of the other party, shall use reasonable efforts to make available to such other party the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group (whether as witnesses or otherwise).
          (b) Notwithstanding the foregoing, Section 7.7(a) shall not require a party to take any step that would significantly interfere, or that such party reasonably determines could significantly interfere, with its business.
          (c) Except in the case of any Assigned Action or Shared Action, the requesting party shall bear all costs and expenses in connection therewith.
          (d) The obligations set forth in this Section 7.7 shall survive until the tenth anniversary thereof, except in the case of any Assigned Action or Shared Action, in which case such obligations shall survive until the final resolution of such Actions.
     Section 7.8 Confidentiality .
          (a) Except as provided in Section 8.7 and subject to Section 7.9, each of New NGC and HII, on behalf of itself and each member of its Group, shall hold, and shall cause its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives to hold, in strict confidence and not release or disclose, with at least the same degree of care, but no less than a reasonable degree of care, that it applies to its own business sensitive and proprietary information, all Information concerning the other Group or its business that is either in its possession (including Information in its possession prior to the Distribution) or furnished by any member of such other Group or its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives at any time pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not use any such Information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such Information is (i) in the public domain through no fault of such party or any member of such Group or any of their respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives, (ii) later lawfully acquired from other sources by such party (or any member of such party’s Group), which sources are not themselves bound by a confidentiality obligation, or (iii) independently generated without reference to any proprietary or confidential Information of the disclosing party or its Group.
          (b) Except as provided in Section 8.7, no receiving party shall release or disclose, or permit to be released or disclosed, any such Information concerning the other Group to any other Person, except its directors, officers, employees, agents, accountants, counsel and other advisors and representatives who need to know such Information (who shall be advised of their obligations hereunder with respect to such Information), except in compliance with Section 7.9. Without limiting the foregoing, when any Information concerning the other Group or its business is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each disclosing party will,

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promptly after the request of the receiving party, either return to the disclosing party all Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the disclosing party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon).
     Section 7.9 Protective Arrangements . Except as provided in Section 8.7, in the event that any party or any member of its Group either determines on the advice of its counsel that it should disclose any Information pursuant to applicable Law or receives any demand under lawful process or from any Governmental Authority or properly constituted arbitral authority to disclose or provide Information of any other party (or any member of any other party’s Group) that is subject to the confidentiality provisions hereof, the Person required to disclose the Information shall give the applicable Person prompt, and to the extent reasonably practicable, prior written notice of such disclosure and an opportunity to contest such disclosure, and shall use reasonable best efforts to cooperate, at the expense of the requesting Person, in seeking any reasonable protective arrangements requested by such Person. In the event that such appropriate protective arrangement or order or other remedy is not obtained, the Person that is required to disclose such Information shall furnish, or cause to be furnished, only that portion of such Information that is legally required to be disclosed and shall use reasonable best efforts to ensure that confidential treatment is accorded such Information. This Section 7.9 shall not apply to the disclosure of any Information to any Governmental Authority that is reasonably necessary to respond to any inquiry by any Governmental Authority.
ARTICLE VIII
FURTHER ASSURANCES AND ADDITIONAL COVENANTS
     Section 8.1 Further Assurances .
          (a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties shall use its reasonable best efforts, prior to, on and after the Distribution Date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Law, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.
          (b) Without limiting the foregoing, prior to, on and after the Distribution Date, each party shall cooperate with the other parties, and without any further consideration, but at the expense of the requesting party, to (i) execute and deliver, or use its reasonable best efforts to cause to be executed and delivered, all instruments, including any instruments of conveyance, assignment and transfer as such party may be reasonably requested to execute and deliver to the other party, (ii) make, or cause to be made, all filings with, and to obtain, or cause to be obtained, all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument, (iii) seek, obtain, or cause to be obtained, any Governmental Approvals or other Consents required to effect the Separation or the Distribution and (iv) take all such other actions as such party may reasonably be requested to take by any other party from time to time, consistent with the terms of this

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Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the transfers of the Shipbuilding Assets and the Retained Assets and the assignment and assumption of the Shipbuilding Liabilities and the Retained Liabilities and the other transactions contemplated hereby and thereby. Without limiting the foregoing, each party will, at the reasonable request, cost and expense of any other party, take such other actions as may be reasonably necessary to vest in such other party good and marketable title, if and to the extent it is practicable to do so.
          (c) On or prior to the Distribution Date, New NGC and HII in their respective capacities as direct and indirect stockholders of their respective Subsidiaries, shall each ratify any actions that are reasonably necessary or desirable to be taken by New NGC and HII or any other Subsidiary of New NGC, as the case may be, to effectuate the transactions contemplated by this Agreement.
          (d) The parties agree to cooperate, both prior to and after the Distribution, and use reasonable best efforts to take all acts reasonably necessary to accomplish the registration and transfer, to the extent transferable and to the extent that any registration or transfer is required in connection with the Distribution, of any export or import license, permit, technical assistance agreement, manufacturing license agreement and other authorization utilized by either Group, including those granted under the U.S. International Traffic in Arms Regulations, the U.S. Export Administration Regulations, the U.S. Customs and Border Protection Regulation and foreign export/import Laws, as applicable.
     Section 8.2 Amendment to NGC Certificate of Incorporation . As promptly as practicable (and in any event within five Business Days) after the Holding Company Reorganization, NGC shall approve an amendment to its Certificate of Incorporation (as amended in the Holding Company Reorganization) to eliminate the requirement for the Northrop Grumman Stockholders to approve certain actions by or involving NGC as required by Section 251(g) of the Delaware General Corporation Law (the “ NGC Charter Amendment ”) and obtain the approval of HII, as sole stockholder of NGC, of the NGC Charter Amendment. New NGC shall use its reasonable best efforts to (a) include in the proxy statement for the 2012 annual meeting of Northrop Grumman Stockholders (or any earlier meeting of such stockholders as determined by the Northrop Grumman Board) a proposal to approve the NGC Charter Amendment (the “ NGC Charter Amendment Proposal ”), along with a recommendation of the Northrop Grumman Board that Northrop Grumman Stockholders approve the NGC Charter Amendment Proposal, and (b) solicit the approval of the Northrop Grumman Stockholders of the NGC Charter Amendment Proposal. In the event that the NGC Charter Amendment Proposal is not approved at such annual meeting, New NGC shall use its reasonable best efforts to obtain the approval of the NGC Charter Amendment Proposal at each subsequent annual meeting of Northrop Grumman Stockholders until such approval is obtained.
     Section 8.3 Credit Support . Upon a Change of Control Triggering Event prior to the fifth anniversary of the Distribution, HII promptly shall provide notice to New NGC describing in reasonable detail the circumstances surrounding the Change of Control

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Triggering Event. Immediately after such Change of Control Triggering Event, HII shall provide credit support in the form of one or more standby letters of credit in an amount equal to $250 million (the other terms and provisions of which shall be reasonably satisfactory to New NGC) to support HII’s obligations under Section 5.2.
     Section 8.4 Non-Compete .
          (a) For a period of one year following the Distribution, HII shall not, and shall cause the other members of the HII Group not to, directly or indirectly through any Person or contractual arrangement, whether independently or as part of a team, compete in any way against any member of the New NGC Group or the Team for any work covered by the solicitation described on Schedule 8.4(a) (the “ Solicitation ”) and shall not take any steps to join any team that is competing or will compete against any member of the New NGC Group or the Team for any of the work covered by the Solicitation.
          (b) After the Distribution, New NGC shall cause NGTS to in good faith (i) endeavor to modify the Teaming Agreement to make clear that, except with respect to the restrictions set forth in Section 8.4(a), there are no restrictions on any member of the HII Group and (ii) consider NGSB and its Subsidiaries as a potential subcontractor to the Team for work covered by the Solicitation.
     Section 8.5 Intercompany Work Orders . Schedule 8.5 sets forth certain intercompany work orders (“ IWOs ”) that will be terminated in accordance with Section 2.3. Immediately after the Distribution, NGSB shall issue to NGSC, or such other member of the New NGC Group designated on Schedule 8.5 and NGSC shall issue to NGSB, or such other member of the HII Group designated on Schedule 8.5 , as applicable, letter subcontracts for the performance of follow-on work to be performed for the applicable terminated IWOs, as each of the parties shall then deem appropriate (such letter agreements, “ Letter Subcontracts ”). Each Letter Subcontract shall contain sufficient terms, conditions and rights to permit the designated member of the New NGC Group or the HII Group, as applicable, to perform and be compensated for work performed pending the negotiation of definitive subcontract agreements between the parties with what it concludes is appropriate protection. Following the Distribution, the parties shall negotiate, in good faith, to reach agreement on final price, statement of work, schedule and terms and conditions of definitive subcontracts for the terminated IWOs. The additional provisions set forth on Schedule 8.5 shall apply with respect to the Letter Subcontracts.
     Section 8.6 IDIQ Vehicles . The New NGC Group shall use reasonable efforts to continue to make the IDIQ (Indefinite Delivery Indefinite Quantity) vehicles listed on Schedule 8.6 available for the benefit of the HII Group on the terms set forth on Schedule 8.6 , for the period that begins on the date of the Distribution until the earlier of (a) the date that is 12 months after the date of the Distribution and (b) the date that the HII Group obtains its own such vehicles. The additional provisions set forth on Schedule 8.6 shall apply with respect to such IDIQ vehicles.

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     Section 8.7 Government Contract Matters .
          (a) For the purposes of this Section 8.7 only, the following definitions apply:
               (i) “ Allowable Cost Audit ” means any Defense Contract Audit Agency or other Governmental Authority audit or other negotiations with contracting officers of any Governmental Authority, with respect to any period (or portion thereof) ending at or prior to the Distribution.
               (ii) “ Settlement Asset ” means a net increase in assets due to the final agreement of claims or rights arising out of the settlement of an Allowable Cost Audit, including: (A) final indirect cost and rates for government contracts; (B) Cost Accounting Standards (CAS) matters; (C) defective pricing matters; or (D) advance agreements with the U.S. Government.
               (iii) “ Settlement Liability ” means a net liability due to the final agreement of claims or rights arising out of the settlement of an Allowable Cost Audit, including: (A) final indirect cost and rates for government contracts; (B) Cost Accounting Standards (CAS) matters; (C) defective pricing matters; or (D) advance agreements with the U.S. Government.
A Settlement Asset or Settlement Liability shall be computed as the total impact on the net amount to be paid or received upon final contract settlement, including direct and indirect costs, fees and profits. Where Settlement Assets and Settlement Liabilities arise from the settlement of an Allowable Cost Audit, the baseline costs for calculating Settlement Assets and Settlement Liabilities shall be the costs included in Inter-company Accounting Transfers (IATs) for periods through the Distribution Date.
          (b) Shipbuilding Business Cost and Pricing Pre-Distribution . HII is responsible for the settlement of and the consequences of any Settlement Assets or Settlement Liabilities associated with costs and pricing incurred prior to the Distribution by the Shipbuilding Business for government contracts, including those arising from Allowable Cost Audits for work in support of other NGC entities, but not including those Settlement Assets and Settlement Liabilities covered by Section 8.7(c).
          (c) New NGC Cost and Pricing Pre-Distribution . New NGC is responsible for the settlement of and the consequences of any Settlement Assets and Settlement Liabilities relating to NGC matters associated with and allocable to government contracts with any member of the HII Group arising out of:
               (i) the settlement of final direct and indirect cost rates for costs incurred by NGC prior to the Distribution, including: corporate office expenses, group insurance, post-retirement benefits, pensions, state taxes, insurance, deferred compensation, environmental costs, legal, internal audit, enterprise shared services (ESS) costs, information technology services (ITS), and the settlement of IWOs and other costs incurred by NGC prior to the Distribution;

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               (ii) Cost Accounting Standards (CAS) Settlement Assets or Settlement Liabilities for allocations made by NGC prior to the Distribution, contracts priced or based upon projected NGC incurred costs prior to the Distribution, or resulting from an Allowable Cost Audit;
               (iii) defective pricing Settlement Liabilities for costs incurred by NGC resulting from an Allowable Cost Audit; and
               (iv) advance agreements with the U.S. Government.
          (d) Reimbursement of Settlement Assets and Settlement Liabilities . New NGC will reimburse HII for any Settlement Liabilities of NGC described in Section 8.7(c) and paid or to be paid to any Governmental Authority by HII upon presentation of documentation deemed adequate by HII and New NGC. HII shall reimburse New NGC for any Settlement Assets of NGC accruing to HII under Section 8.7(c) upon presentation of documentation deemed adequate by HII and New NGC. HII will reimburse New NGC for any Settlement Liabilities of HII under Section 8.7(b) and paid or to be paid to any Governmental Authority by New NGC upon presentation of documentation deemed adequate by New NGC and HII. New NGC shall reimburse HII for any Settlement Assets of HII accruing to New NGC under Section 8.7(b) upon presentation of documentation deemed adequate by HII and New NGC.
          (e) Administration of Government Contract Matters . The parties shall make available, upon reasonable notice and at reasonable times during regular business hours, any of the parties’ or their Affiliates’ personnel whose assistance or participation is reasonably required by either New NGC or HII or their Affiliates in connection with any government audit or contract administration activity, including matters involving either party’s indirect cost proposals, the Cost Accounting Standards (CAS) and defective pricing. New NGC and HII will each be responsible for all of its own costs, both direct and indirect, including any required travel, associated with (i) providing access to their respective records and making any reasonable number of copies requested thereof and (ii) making the requested personnel reasonably available to support government contract audits and administrative processes for cost negotiations with the government or other matters, such as administration of Cost Accounting Standards (CAS). In addition, if a Contract Disputes Act dispute concerning a Retained Liability or Retained Asset arises out of or relates to a federal contract held by HII or its Affiliates, HII or its Affiliate, as applicable, shall agree to sponsor a claim against the U.S. Government on behalf of New NGC. In such event, New NGC shall have the right at its expense and in its sole discretion, acting in the name of HII or its Affiliate, to (w) certify or submit any such claim to the appropriate U.S. Government contracting officer; (x) appeal any adverse contracting officer’s final decision or deemed denial of New NGC’s claim to the appropriate agency board of contract appeals or U.S. Court of Federal Claims; (y) control the litigation of any such appeal; and (z) pursue a further appeal to the U.S. Court of Appeals for the Federal Circuit.
          (f) Pre-Distribution Cost and Pricing Data . New NGC and HII shall provide each other with updates of pre-Distribution cost and pricing data relevant to each

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other, including (i) revisions and updates to cost proposals and (ii) revisions and updates to pre-Distribution “Billing and Bidding Guidance,” consistent with the practices of NGC and NGSB prior to the Distribution.
          (g) Release of Contract Audit and Contract Administration Information . Disclosure of cost, pricing and billing information to government auditors and contracting officers in connection with final indirect costs and rates, administration of Cost Accounting Standards (CAS) and advance agreements and other customary contract audit and administration matters are exceptions to the requirements of Sections 7.8 and 7.9 of this Agreement. For avoidance of doubt, disclosure of cost, pricing and billing information in connection with customary contract audit and administration matters by HII or New NGC will not require prior notification to each other.
          (h) Litigation Management Agreement . Notwithstanding anything to the contrary in this Agreement or the Litigation Management Agreement, in the event of any conflict or inconsistency between this Section 8.7 and any provision of the Litigation Management Agreement, this Section 8.7 shall control over such inconsistent provision of the Litigation Management Agreement as to the matters specifically addressed in this Section 8.7.
     Section 8.8 Software Licenses . From and after the Distribution, New NGC shall provide reasonable cooperation and assistance to HII (and any member of its Group) in connection with the provision of replacement licenses for third-party software licenses that were procured by NGC for the benefit of the HII Group prior to the Distribution but that are included in the New NGC Transferred Assets. Such cooperation shall be at the sole cost and expense of HII. The cooperation and assistance provided for in this Section 8.8 shall not be required to the extent such cooperation and assistance would result in an undue burden on New NGC or would unreasonably interfere with any of its employees’ normal functions and duties.
     Section 8.9 Use of Names, Logos and Information .
          (a) As soon as practicable (and in any event within five days) after the Distribution, HII shall cause to be filed with the Secretary of State (or other appropriate Governmental Authority) of the states in which its Subsidiaries are located or are doing business, an amendment to their certificates of incorporation or similar governing documents or qualification to do business to change the name of any Subsidiary with “Northrop Grumman” in its name to a new name not confusingly similar to the current name.
          (b) As soon as reasonably practicable (and in any event within 90 days) after the Distribution (or such longer or shorter period with respect to each of the items identified on Schedule 8.9(b) ), HII shall use reasonable best efforts to remove, and HII shall cause each member of the HII Group to remove, from their websites, and any other publicly distributed material (other than material required to be submitted for the purpose of regulatory filings and other similar documentation), any reference to Northrop Grumman Corporation, and its business lines and plans and any names, logos, or

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trademarks associated therewith. HII and each other member of the HII Group shall cease all use of the “Northrop Grumman” name (and any name confusingly similar thereto) and all trademarks and service marks associated therewith as soon as practicable and in any event within 90 days after the Distribution; provided that, if any member of the HII Group is unable to comply with the foregoing requirements of this Section 8.9(b) for reasons outside of its reasonable control, HII may request NGC to grant an extension of time beyond such 90-day period within which to cease all use of the “Northrop Grumman” name, as reasonably necessary for such member of the HII Group to cease all such use, and New NGC agrees not to unreasonably withhold or delay the granting of any such requested extension. Nothing in this Section 8.9(b) shall preclude HII or its Subsidiaries from using the Northrop Grumman name to indicate that HII and members of the HII Group were formerly associated with Northrop Grumman Corporation, or from referring to Northrop Grumman Corporation by its name for non-trademark and non-branding purposes as is permitted by applicable Law.
          (c) HII shall not, and shall cause each member of the HII Group not to, take any action, purport to take any action or otherwise hold itself out as having any authority to act on behalf of or represent in any way any member of the New NGC Group. HII shall indemnify, defend and hold harmless each of the New NGC Indemnitees from and against any and all Liabilities of the New NGC Indemnitees relating to, arising out of or resulting from a breach of this Section 8.9(c).
ARTICLE IX
TERMINATION
     Section 9.1 Termination . This Agreement may be terminated by the Northrop Grumman Board at any time prior to the Distribution.
     Section 9.2 Effect of Termination . In the event of any termination of this Agreement prior to the Distribution, no party (or any of its directors or officers) shall have any Liability or further obligation to any other party with respect to this Agreement.
ARTICLE X
DISPUTE RESOLUTION
     Section 10.1 Negotiation . In the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity or breach of this Agreement or any Ancillary Agreement or any other agreement entered into by any New NGC Entity or HII Entity pursuant to this Agreement or any Ancillary Agreement or otherwise arising out of, or in any way related to this Agreement or any Ancillary Agreement or any other agreement entered into by any New NGC Entity or any HII Entity pursuant to this Agreement or any Ancillary Agreement or the transactions contemplated hereby or thereby, including any claim based on contract, tort, statute or constitution (but excluding (i) any controversy, dispute or claim brought by or against a third party or involving a third party who would be subject to joinder as described in Federal Rule of Civil Procedure 19 and arising out of any contract, including this Agreement or any Ancillary Agreement, and/or relating to the use or lease of

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real property if any third party is a claimant or defendant in such controversy, dispute or claim and (ii) any dispute under any of the IP License Agreement, the Tax Matters Agreement, the Letter Subcontracts and the Ingalls Indemnity Agreement, which shall be subject to the provisions contained therein ((i) and (ii) collectively, “ Excluded Disputes ”)) (collectively, “ Agreement Disputes ”), one or more senior executive officers of New NGC and HII, with authority to settle, designated by each of New NGC and HII, shall negotiate to settle such Agreement Dispute. Unless otherwise agreed by the relevant parties in writing, if within 45 days from the time of receipt by the New NGC Entity or the HII Entity of the written notice of an Agreement Dispute (“ Dispute Notice ”), the Agreement Dispute has not been resolved, the Agreement Dispute shall be resolved in accordance with Section 10.2. In the event of any arbitration or litigation in accordance with this Article X, the relevant New NGC Entities and HII Entities shall not assert any defenses of or similar to statute of limitations and laches that arise after the date of receipt of the Dispute Notice if the Dispute Notice was served prior to the expiration of the applicable limitations period and provided the prosecuting party complies with the contractual time period or deadline under this Agreement or any Ancillary Agreement to which such Agreement Dispute relates.
     Section 10.2 Mediation . If, within 45 days after delivery of a Dispute Notice, a negotiated resolution of the Agreement Dispute under Section 10.1 has not been reached, New NGC and HII agree to seek to settle the Agreement Dispute by mediation administered by the American Arbitration Association (“ AAA ”) under its Commercial Mediation Procedures, and to bear equally the costs of the mediation; provided , however , that each New NGC Entity and HII Entity shall bear its own costs in connection with such mediation. If the Agreement Dispute has not been resolved through mediation within 90 days after the date of service of the Dispute Notice, or such longer period as the parties may mutually agree in writing, each party shall be entitled to refer the dispute to arbitration in accordance with Section 10.3.
     Section 10.3 Arbitration . If the Agreement Dispute has not been resolved for any reason within 90 days after the date of service of the Dispute Notice, such Agreement Dispute shall be settled, at the request of any relevant party, by arbitration administered by the AAA under its Commercial Arbitration Rules, conducted in New York City, except as modified herein (the “ Rules ”). There shall be three arbitrators. If there are only two parties to the arbitration, each of New NGC and HII shall appoint one arbitrator within 20 days after receipt by respondent of a copy of the demand. The two party-appointed arbitrators shall have 20 days from the appointment of the second arbitrator to agree on a third arbitrator who shall chair the arbitral tribunal. Any arbitrator not timely appointed by the parties under this Section 10.3 shall be appointed in accordance with AAA Rule R. 11, and in any such procedure, each party shall be given four strikes, excluding strikes for cause. If there are multiple claimants and/or multiple respondents to the effect that there are more than three parties to the arbitration, all claimants and/or all respondents shall attempt to agree upon their respective appointments. If such multiple parties fail to nominate an arbitrator within 30 days, the AAA shall appoint an arbitrator on their behalf. In such circumstances, any existing nomination of the arbitrator chosen by the party or parties on the other side of the proposed arbitration shall be unaffected, and the remaining arbitrators shall be appointed in accordance with AAA Rules 12 and 13. Any controversy

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concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation or enforceability of this Article X shall be determined by the arbitrators. New NGC and HII intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable, and any award rendered by the arbitrators shall be final and binding on the parties. New NGC and HII agree to comply and cause the members of their applicable Group to comply with any award made in any such arbitration proceedings and agree to enforcement of or entry of judgment upon such award, in any court of competent jurisdiction, including any New York State or federal court sitting in the Borough of Manhattan in The City of New York. The arbitrators shall be entitled, if appropriate, to award monetary damages and other remedies, subject to the provisions of Section 5.9. The parties shall use their reasonable best efforts to encourage the arbitrators to resolve any arbitration related to any Agreement Dispute as promptly as practicable.
     Section 10.4 Confidentiality of Arbitral Award and Documents and Information Exchanged and Submitted in the Course of Arbitration . Subject to applicable Law, including disclosure or reporting requirements, or the parties’ agreement, the parties shall maintain the confidentiality of the arbitration. Unless agreed to by all the parties or required by applicable Law, including disclosure or reporting requirements, the arbitrators and the parties shall maintain the confidentiality of all information, records, reports, or other documents obtained in the course of the arbitration, and of all awards, orders, or other arbitral decisions rendered by the arbitrators.
     Section 10.5 Treatment of Negotiations and Mediation . Without limiting the provisions of the Rules, unless otherwise agreed in writing or permitted by this Agreement, New NGC and HII shall keep, and shall cause the members of their applicable Group to keep confidential all matters relating to this Article X and any negotiation, mediation, conference, arbitration, or discussion pursuant to this Article X shall be treated as compromise and settlement negotiations for purposes of Rule 408 of the Federal Rules of Evidence and comparable state rules; provided , that such matters may be disclosed (a) to the extent reasonably necessary in any proceeding brought to enforce the award or for entry of a judgment upon the award and (b) to the extent otherwise required by applicable Law, including disclosure or reporting requirements. Nothing said or disclosed, nor any document produced, in the course of any negotiations, conferences and discussions under Sections 10.1 and 10.2 that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose in any current or future arbitration.
     Section 10.6 Continuity of Service and Performance . Unless otherwise agreed in writing, New NGC and HII shall continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article X with respect to all matters not subject to such dispute resolution.
     Section 10.7 Consolidation . The arbitrators may consolidate an arbitration under this Agreement with any arbitration arising under or relating to the Ancillary Agreements or any other agreement between the parties entered into pursuant hereto or thereto, as the

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case may be, if the subject of the Agreement Disputes thereunder arise out of or relate essentially to the same set of facts or transactions. Such consolidated arbitration shall be determined by the arbitrators appointed for the arbitration proceeding that was commenced first in time.
     Section 10.8 Submission to Jurisdiction . Each of the parties to this Agreement irrevocably agrees that any legal action or proceeding arising out of or relating to any Excluded Dispute brought by any other party to this Agreement or its successors or assigns shall be brought and determined in any federal court sitting in the Borough of Manhattan in The City of New York (or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal court), and each of the parties to this Agreement hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any Excluded Dispute. Each of the parties to this Agreement agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in New York, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in New York as described in this Section 10.8. Each of the parties to this Agreement hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to the Excluded Dispute, (a) any claim that it is not personally subject to the jurisdiction of the courts in New York as described herein, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) the subject matter of the Excluded Dispute, may not be enforced in or by such courts.
     Section 10.9 Enforcement . Solely with respect to the Excluded Disputes, the parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement and the Ancillary Agreements were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to specific performance of the terms hereof and thereof, including an injunction or injunctions to prevent breaches of this Agreement and the Ancillary Agreements and to enforce specifically the terms and provisions of this Agreement and the Ancillary Agreements in any New York State or federal court sitting in the Borough of Manhattan in The City of New York (or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal court), this being in addition to any other remedy to which such party is entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any Law to post security as a prerequisite to obtaining equitable relief.

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ARTICLE XI
MISCELLANEOUS
     Section 11.1 Corporate Power . New NGC represents on behalf of itself and each other New NGC Entity and HII represents on behalf of itself and each other HII Entity, and NGC represents on behalf of itself, that:
          (a) each such Person is a corporation or other entity duly incorporated or formed, validly existing and in good standing under the Laws of the state or other jurisdiction of its incorporation or formation, and has all material corporate or other similar powers required to carry on its business as currently conducted;
          (b) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and each other Ancillary Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and
          (c) this Agreement and each Ancillary Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of such Person enforceable in accordance with the terms hereof and thereof.
     Section 11.2 Coordination with Certain Ancillary Agreements; Conflicts .
          (a) Notwithstanding anything in this Agreement to the contrary, (i) the Ingalls Indemnity Agreement shall be the exclusive agreement among the parties for the matters expressly set forth therein following the Distribution and (ii) except for those Tax matters specifically addressed in this Agreement or in any Ancillary Agreement, the Tax Matters Agreement shall be the exclusive agreement among the parties with respect to all Tax matters, including dispute resolution and indemnification and payments among the parties in respect of Tax matters.
          (b) Except as provided in Section 8.7(h), in the event of any conflict or inconsistency between any provision of any of the Ancillary Agreements and any provision of this Agreement, the applicable Ancillary Agreement shall control over the inconsistent provisions of this Agreement as to the matters specifically addressed in such Ancillary Agreement.
     Section 11.3 Expenses .
          (a) Except as expressly set forth in this Agreement or in any Ancillary Agreement, all fees, costs and expenses paid or incurred in connection with the Separation and the Distribution and the performance of this Agreement and any Ancillary Agreement, whether performed by a third party or internally, will be paid by the party incurring such fees or expenses, whether or not the Distribution is consummated, or as otherwise agreed by the parties. For the avoidance of doubt, (i) New NGC will be responsible for any transfer fees (including any pricing increases) related to the transfer of any Retained Assets (including any transferred third-party software licenses) to any member of the New NGC Group and the cost of any replacement for any Asset that is not a Retained Asset

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(including any replacement third-party software licenses), (ii) HII will be responsible for any fees to the NYSE and any transfer fees (including any pricing increases) related to the transfer of any Shipbuilding Assets (including any transferred third-party software licenses) to any member of the HII Group and the cost of any replacement for any Asset that is not a Shipbuilding Asset (including any replacement third-party software licenses) and (iii) New NGC shall bear the costs and expenses directly related to the mailing of the Information Statement to NGC stockholders and the fees and expenses of the Agent in connection with the Distribution.
          (b) Except where context otherwise requires, references in this Agreement and the Litigation Management Agreement to “costs and expenses” include the relevant party’s allocated costs of employees (including in-house counsel and other personnel), fringe benefit costs, general and administrative costs, overhead, document processing vendors, litigation support, including e-discovery consultants, testifying and non-testifying experts, and other consultants.
     Section 11.4 Amendment and Modification . This Agreement and the Ancillary Agreements may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each party.
     Section 11.5 Waiver . No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have hereunder. Any agreement on the part of any party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party.
     Section 11.6 Notices . All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile, upon written confirmation of receipt by facsimile, e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

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  (i)   if to New NGC or any other New NGC Entity prior to the date on which New NGC relocates its corporate headquarters, to both:
 
      Northrop Grumman Corporation
1840 Century Park East
Los Angeles, CA 90067-2199
Attention: General Counsel
Facsimile: (310) 556-4910
 
      and:
 
      Northrop Grumman Corporation
1840 Century Park East
Los Angeles, CA 90067-2199
Attention: Treasurer
Facsimile: (310) 201-3088
 
  (ii)   if to New NGC or any other New NGC Entity on or after the date on which New NGC relocates its corporate headquarters, to both:
 
      Northrop Grumman Corporation
2980 Fairview Park Drive
Falls Church, VA 22042
Attention: General Counsel
Facsimile: (703) 875-1852
 
      and:
 
      Northrop Grumman Corporation
2980 Fairview Park Drive
Falls Church, VA 22042
Attention: Treasurer
Facsimile: to be provided at relevant time
 
  (iii)   if to HII or any other HII Entity, to:
 
      Huntington Ingalls Industries, Inc.
4101 Washington Avenue
Newport News, VA 23607
Attention: Office of the General Counsel
Facsimile: (757) 688-1408
 
      with a copy (which shall not constitute notice) to:
 
      Huntington Ingalls Industries, Inc.
4101 Washington Avenue

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      Newport News, VA 23607
Attention: General Counsel
Facsimile: (757) 688-1408
     Section 11.7 Interpretation . When a reference is made in this Agreement to a Section, Article or Exhibit such reference shall be to a Section, Article, Annex or Exhibit of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement or in any Exhibit are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized terms used in any Schedule, Annex or Exhibit but not otherwise defined therein shall have the meaning as defined in this Agreement or the Ancillary Agreement to which such Schedule, Annex or Exhibit is attached, as applicable. All Schedules, Annexes and Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless otherwise specified. The word “day” when used in this Agreement shall mean “calendar day,” unless otherwise specified.
     Section 11.8 Entire Agreement . This Agreement and the Ancillary Agreements and the Annexes, Exhibits, Schedules and Appendices hereto and thereto constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings among the parties with respect to the subject matter hereof. None of this Agreement or any of the Ancillary Agreements shall be deemed to contain or imply any restriction, covenant, representation, warranty, agreement or undertaking of any party with respect to the transactions contemplated hereby and thereby other than those expressly set forth herein or therein or in any document required to be delivered hereunder or thereunder. Notwithstanding any oral agreement or course of action of the parties or their representatives to the contrary, no party to this Agreement shall be under any legal obligation to enter into or complete the transactions contemplated hereby unless and until this Agreement shall have been executed and delivered by each of the parties.
     Section 11.9 No Third Party Beneficiaries . Except for the indemnification rights under this Agreement of any New NGC Indemnitee (other than any current, former or future employee of any New NGC Entity that is not or was not, as of any relevant time of determination, also a current or former officer of any New NGC Entity) or HII Indemnitee (other than any current, former or future employee of any HII Entity that is not or was not, as of any relevant time of determination, also a current or former officer of any HII Entity) in their respective capacities as such, and except as specifically provided in the Employee Matters Agreement, nothing in this Agreement or the Ancillary Agreements, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement or the Ancillary Agreements.

54


 

     Section 11.10 Governing Law . This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal Laws of the State of New York, without regard to the Laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York (other than Section 5-1401 of the New York General Obligations Law).
     Section 11.11 Assignment . Except as specifically provided in any Ancillary Agreement, none of this Agreement, any of the Ancillary Agreements or any of the rights, interests or obligations hereunder or thereunder may be assigned or delegated, in whole or in part, by operation of law or otherwise, by any party without the prior written consent of the other parties, and any such assignment without such prior written consent shall be null and void. If any party (or any of its successors or permitted assigns) (a) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (b) shall transfer all or substantially all of its properties and/or assets to any Person, then, and in each such case, the party (or its successors or permitted assigns, as applicable) shall ensure that such Person assumes all of the obligations of such party (or its successors or permitted assigns, as applicable) under this Agreement and all applicable Ancillary Agreements.
     Section 11.12 Severability . Whenever possible, each provision or portion of any provision of this Agreement and the Ancillary Agreements shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this Agreement or the Ancillary Agreements is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement or the Ancillary Agreements shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
     Section 11.13 Waiver of Jury Trial . EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
     Section 11.14 Counterparts . This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.
     Section 11.15 Facsimile Signature . This Agreement may be executed by facsimile signature and a facsimile signature shall constitute an original for all purposes.
     Section 11.16 Payment . Except as expressly provided in this Agreement or any Ancillary Agreement, any amount payable pursuant to this Agreement or any Ancillary Agreement by one party (or any member of such Party’s Group) shall be paid within 30

55


 

days after presentation of an invoice or a written demand by the party entitled to receive such payments. Such demand shall include documentation setting forth the basis for the amount payable. Any payment not made within 30 days of the written demand for such payment shall accrue interest at a rate per annum equal to the rate in effect for underpayments pursuant to Section 6621 of the Code from such date.
     Section 11.17 Parties’ Obligations . Except where specifically provided otherwise, a party’s obligations under this Agreement shall include obligations of its employees and Subsidiaries. Each of NGSB and NGSC hereby agrees to take any actions, or refrain from taking any actions, to the extent required pursuant to this Agreement or any of the Ancillary Agreements.
[The remainder of this page is intentionally left blank.]

56


 

     IN WITNESS WHEREOF, the parties have caused this Separation and Distribution Agreement to be executed by their duly authorized representatives.
         
  NORTHROP GRUMMAN CORPORATION
 
 
  By:   /s/ Mark Rabinowitz    
    Name:   Mark Rabinowitz   
    Title:   Corporate Vice President & Treasurer   
 
  NEW P, INC.
 
 
  By:   /s/ Mark Rabinowitz    
    Name:   Mark Rabinowitz   
    Title:   President & Treasurer   
 
  HUNTINGTON INGALLS INDUSTRIES, INC.
 
 
  By:   /s/ C. Michael Petters    
    Name:   C. Michael Petters   
    Title:   President and Chief Executive Officer   
 
  NORTHROP GRUMMAN SHIPBUILDING, INC.
 
 
  By:   /s/ C. Michael Petters    
    Name:   C. Michael Petters   
    Title:   President and Chief Executive Officer   
 
  NORTHROP GRUMMAN SYSTEMS CORPORATION
 
 
  By:   /s/ Mark Rabinowitz    
    Name:   Mark Rabinowitz   
    Title:   President and Treasurer   
 
[Signature Page to Separation and Distribution Agreement]

 


 

Annex I — Internal Reorganization
     The Internal Reorganization will take place in the following steps, all of which have occurred or will occur prior to the Distribution in the following order, unless otherwise determined by the Northrop Grumman Board:
     
Step 1:
  NGC has formed (a) New NGC, (b) HII, (c) Titan Holdings I, LLC, a Delaware limited liability company (“ Holdings LLC ”), (d) Titan Holdings II, L.P., a Delaware limited partnership (“ Holdings LP ”), and (e) Merger Sub. New NGC initially will own all the stock of HII, the sole membership interest in Holdings LLC and the sole general partner interest in Holdings LP. Holdings LLC will initially own the sole limited partner interest in Holdings LP. Holdings LP will initially own all of the stock of Merger Sub.
 
   
Step 2:
  Pursuant to that certain Transfer of Guarantees, dated as of March 28, 2011, between NGC and HII, NGC transferred to HII the Navy Guarantees and HII assumed and agreed to perform all of the obligations and liabilities of NGC under the Navy Guarantees.
 
   
Step 3:
  NGC will contribute all of the HII Transferred Assets to NGSB (or to one or more members of the HII Group other than HII) and all of the New NGC Transferred Assets to NGSC (or to one or more members of the New NGC Group other than New NGC). New NGC (or one or more other members of the New NGC Group) will assume all of the Retained Liabilities of NGC except for NGC’s obligations under the Amended and Restated Credit Agreement, dated as of August 10, 2007, between NGC, the lenders party thereto from time to time, JPMorgan Chase Bank, N.A. and the other parties named therein (the NGC Credit Agreement ”), and HII (or one or more other members of the HII Group) will assume all of the Shipbuilding Liabilities of NGC except NGC’s obligations under the guarantee of the GO-Zone Bonds (the “ GO-Zone Bonds Guarantee ”).
 
   
Step 4:
  Each of NGSB’s Subsidiaries will distribute to NGSB all of the open account debt owed to it by NGSC, if any. NGSB will distribute to NGC all of the open account debt owed to it by NGSC, including such debt distributed to it by its Subsidiaries (all such debt, the “ Intercompany Debt Receivable ”).
 
   
Step 5:
  The parties will consummate the Holding Company Reorganization.
 
   
Step 6:
  New NGC will contribute its membership interest in Holdings LLC and its partnership interest in Holdings LP to HII.
 
   
Step 7:
  NGC will distribute (the “ NGC Distribution ”) to Holdings LP all of NGC’s Assets (including the stock of NGSC and NGSB), and Holdings LP will assume all of NGC’s Liabilities and other obligations (including NGC’s

I-1


 

     
 
  obligations under the NGC Credit Agreement) except NGC’s obligations under the GO-Zone Bonds Guarantee.
 
   
Step 8:
  Concurrent with the NGC Distribution, HII will enter into the P&I Agreements pursuant to which HII will agree to perform all of NGC’s obligations under the Navy Guarantees, if any, and the GO-Zone Bonds Guarantee and indemnify NGC for any costs arising from such obligations.
 
   
Step 9:
  Holdings LP will distribute to Holdings LLC, its limited partner, and HII, its general partner, all of the stock of NGSB and NGC (the “ Holdings LP Distribution ”).
 
   
Step 10:
  Holdings LLC will distribute to HII the shares of NGC and NGSB that it received in the Holdings LP Distribution.
 
   
Step 11:
  HII will receive the net cash proceeds from the HII Debt. $300,000,000 of such net cash proceeds will be retained by HII (the “ Retained Cash ”). Such cash proceeds less the Retained Cash are referred to as the “ Transferred Debt Proceeds ”.
 
   
Step 12:
  HII will contribute (a) to Holdings LLC a portion of the Transferred Debt Proceeds equal to Holdings LLC’s proportionate interest in Holdings LP (approximately $714,500,000) and (b) to Holdings LP the remaining amount of the Transferred Debt Proceeds (approximately $714,500,000).
 
   
Step 13:
  Holdings LLC will contribute to Holdings LP the amount of the Transferred Debt Proceeds contributed to it by HII, and Holdings LP will contribute to NGSC the entire amount of the Transferred Debt Proceeds and the Intercompany Debt Receivable (such contributions, together with the contributions in Step 12, the “ HII Contribution ”).
 
   
Step 14:
  HII will distribute all of its membership interest in Holdings LLC and all of its partnership interest in Holdings LP to New NGC.

I-2

Exhibit 10.2
EXECUTION COPY
 
EMPLOYEE MATTERS AGREEMENT
among
NORTHROP GRUMMAN CORPORATION,
NEW P, INC.,
and
HUNTINGTON INGALLS INDUSTRIES, INC.
Dated as of March 29, 2011
 

 


 

TABLE OF CONTENTS
         
    Page  
 
       
ARTICLE I DEFINITIONS
    1  
 
       
Section 1.1 Table of Definitions
    1  
Section 1.2 Certain Defined Terms
    2  
Section 1.3 Other Capitalized Terms
    5  
 
       
ARTICLE II GENERAL PRINCIPLES; EMPLOYEE TRANSFERS
    5  
 
       
Section 2.1 Assumption of HII Employee Liabilities
    5  
Section 2.2 Allocation of Liabilities With Respect to Benefit Plans and Employment Agreements
    5  
Section 2.3 HII Benefit Plans and HII Employment Agreements
    6  
Section 2.4 Plan-Related Litigation
    6  
Section 2.5 Vacation and Sick Pay
    7  
Section 2.6 Employee Transfers
    7  
Section 2.7 Annual Bonuses
    7  
 
       
ARTICLE III SERVICE CREDIT
    7  
 
       
Section 3.1 Service Credit for Employee Transfers
    7  
Section 3.2 HII Benefit Plans
    8  
 
       
ARTICLE IV CERTAIN WELFARE BENEFIT PLAN MATTERS
    8  
 
       
Section 4.1 HII Retained Welfare Plans
    8  
Section 4.2 HII Spinoff Welfare Plans
    8  
Section 4.3 Continuation of Elections
    9  
Section 4.4 Deductibles and Other Cost-Sharing Provisions
    9  
Section 4.5 Flexible Spending Account Treatment
    9  
Section 4.6 Health Reimbursement Arrangement Treatment
    9  
Section 4.7 Workers’ Compensation
    10  
 
       
ARTICLE V TAX-QUALIFIED DEFINED BENEFIT PLANS
    10  
 
       
Section 5.1 HII Retained Defined Benefit Plans
    10  
Section 5.2 HII Spinoff DB Plans
    10  
Section 5.3 Continuation of Elections
    13  
 
       
ARTICLE VI U.S. TAX-QUALIFIED DEFINED CONTRIBUTION PLANS
    13  
 
       
Section 6.1 HII Retained Defined Contribution Plans
    13  
Section 6.2 HII Spinoff DC Plans
    13  

i


 

TABLE OF CONTENTS
(Continued)
         
    Page  
 
       
Section 6.3 Continuation of Elections
    15  
Section 6.4 Contributions Due
    15  
 
       
ARTICLE VII NONQUALIFIED RETIREMENT PLANS
    15  
 
       
Section 7.1 HII Retained Nonqualified Plans
    15  
Section 7.2 HII Spinoff Nonqualified Plans
    15  
Section 7.3 No Distributions On Separation
    17  
Section 7.4 Section 409A
    17  
Section 7.5 Continuation of Elections 17
       
Section 7.6 Delayed Transfer Employees
    17  
 
       
ARTICLE VIII NEW NGC EQUITY COMPENSATION AWARDS
    18  
 
       
Section 8.1 General Treatment of Outstanding New NGC Equity Compensation Awards
    18  
Section 8.2 Tax Withholding and Reporting
    19  
 
       
ARTICLE IX BENEFIT PLAN REIMBURSEMENTS, BENEFIT PLAN THIRD-PARTY CLAIMS
    19  
 
       
Section 9.1 General Principles
    19  
Section 9.2 Benefit Plan Third-Party Claims
    20  
 
       
ARTICLE X COOPERATION
    20  
 
       
Section 10.1 Cooperation
    20  
 
       
ARTICLE XI MISCELLANEOUS
    21  
 
       
Section 11.1 Vendor Contracts
    21  
Section 11.2 Further Assurances
    21  
Section 11.3 Employment Tax Reporting Responsibility
    21  
Section 11.4 Data Privacy
    21  
Section 11.5 Employee Badges
    21  
Section 11.6 Third Party Beneficiaries
    21  
Section 11.7 Effect if Distribution Does Not Occur
    22  
Section 11.8 Incorporation of Separation Agreement Provisions
    22  
Section 11.9 No Representation or Warranty
    22  

ii


 

EMPLOYEE MATTERS AGREEMENT
     EMPLOYEE MATTERS AGREEMENT, dated as of March 29, 2011 (this “ Employee Matters Agreement ”), among Northrop Grumman Corporation, a Delaware corporation (“ NGC ”), New P, Inc., a Delaware corporation (“ New NGC ”), and Huntington Ingalls Industries, Inc., a Delaware corporation (“ HII ”).
RECITALS
     A. The parties to this Employee Matters Agreement, together with certain Subsidiaries of NGC, have entered into the Separation and Distribution Agreement (the “ Separation Agreement ”), dated as of the date hereof, pursuant to which New NGC intends to distribute to its stockholders its entire interest in HII by way of a stock dividend.
     B. The parties wish to set forth their agreements as to certain matters regarding employment, compensation and employee benefits.
AGREEMENT
     In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
     Section 1.1 Table of Definitions . The following terms have the meanings set forth on the pages referenced below:
         
Definition   Page  
Applicable Transfer Date
    7  
Benefit Plan
    2  
Converted HII Equity Compensation Award
    18  
Delayed Transfer Employee
    7  
Employee Matters Agreement
    1  
Employment Agreement
    2  
ERISA
    2  
Estimated Retirement Plan Transfer Amount
    11  
Exchange Ratio
    18  
Final Nonqualified Plan Transfer Amount
    16  
Final Nonqualified Plan Transfer Date
    16  
Final Retirement Plan Transfer Amount
    11  
Final Transfer Date
    11  
HII
    1  
HII Benefit Plans
    2  
HII Common Stock
    18  
HII Employee
    3  
HII Employee Liabilities
    3  
HII Employment Agreement
    3  
HII Group
    3  
HII Master Trust
    10  
HII Retained Benefit Plan
    3  
HII Retained DB Plans
    10  
HII Retained DC Plans
    13  
HII Retained Nonqualified Plans
    15  
HII Retained Welfare Plans
    8  
HII Retiree
    3  
HII Spinoff DB Plans
    10  
HII Spinoff DC Plans
    13  
HII Spinoff Nonqualified Plans
    16  
HII Spinoff Plans
    4  
HII Spinoff Welfare Plans
    8  

 


 

Table of Definitions (cont.)
         
Definition   Page  
HII Welfare Plan
    4  
HRA
    9  
Initial Nonqualified Plan Transfer Amount
    16  
New NGC
    1  
New NGC Benefit Plan
    4  
New NGC CPU
    18  
New NGC Employee Liabilities
    4  
New NGC Employment Agreement
    4  
New NGC Equity Compensation Award
    18  
New NGC Grantor Trust
    15  
New NGC Group
    4  
New NGC Option
    18  
New NGC Retiree
    4  
New NGC RPSR
    18  
New NGC RSR
    18  
New NGC Welfare Plan
    4  
NGC
    1  
Nonqualified Plan True-Up Amount
    17  
Original Group
    7  
Plan Payee
    4  
Separation Agreement
    1  
Split DB Plans
    10  
Split DC Plans
    13  
Split Nonqualified Plans
    16  
Split Plans
    4  
Split Welfare Plans
    8  
True-Up Amount
    11  
Vendor Contract
    21  
Welfare Plan
    5  
Workers’ Compensation Event
    5  
     Section 1.2 Certain Defined Terms . For the purposes of this Employee Matters Agreement:
          “ Benefit Plan ” means, with respect to an entity, each plan, program, policy, agreement, arrangement or understanding that is a deferred compensation, executive compensation, incentive bonus or other bonus, pension, profit sharing, savings, retirement, severance pay, salary continuation, life, death benefit, health, hospitalization, sick leave, vacation pay, disability or accident insurance or other employee benefit plan, program, agreement or arrangement, including any “employee benefit plan” (as defined in Section 3(3) of ERISA) sponsored, maintained or contributed to by such entity or to which such entity is a party or under which such entity has any obligation; provided that no New NGC Equity Compensation Award, nor any plan under which any such New NGC Equity Compensation Award is granted, shall constitute a “Benefit Plan” under this Employee Matters Agreement. In addition, no Employment Agreement shall constitute a Benefit Plan for purposes hereof.
          “ Employment Agreement ” means any individual employment, retention, consulting, change in control, split dollar life insurance, sale bonus, incentive bonus, severance or other individual compensatory agreement between any current or former employee and NGC or any of its Affiliates or a member of the New NGC Group or the HII Group.
          “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.
          “ HII Benefit Plans ” means the HII Retained Benefit Plans and the HII Spinoff Plans.

2


 

          “ HII Employee ” means each individual who, as of the Distribution, is employed by a member of the HII Group (including, for the avoidance of doubt, any such individual who is on a leave of absence, whether paid or unpaid, from which such employee is permitted to return (in accordance with HII’s personnel policies)).
          “ HII Employee Liabilities ” means all potential or actual employment and employee benefits-related or other Liabilities, whether arising before, on or after the Distribution Date, with respect to: (a) HII Employees and HII Retirees and any other persons employed by the HII Group (and their respective Plan Payees, including, without limitation, for any deferred vested benefits under any Benefit Plan); (b) any other individuals asserting rights or obligations stemming from their services to or in connection with the Shipbuilding Business; (c) HII Employment Agreements; and (d) the HII Benefit Plans (including, for avoidance of doubt, Liabilities that arise or are alleged to have arisen prior to Distribution under a Split Plan from which an HII Spinoff Plan assumed Liabilities hereunder).
          “ HII Employment Agreement ” means any Employment Agreement to which any member of the HII Group is a party and to which no member of the New NGC Group or NGC is a party. The HII Employment Agreements shall be the sole responsibility of one or more members of the HII Group following the Distribution.
          “ HII Group ” is defined in the Separation Agreement, but for convenience is duplicated here, provided that the definition in the Separation Agreement controls. HII Group means HII and each Person that will be a direct or indirect Subsidiary of HII immediately prior to the Distribution (but after giving effect to the Internal Reorganization) and each Person that is or becomes a member of the HII Group after the Distribution, including in all circumstances the predecessor and successor entities of each such Person. For the purposes of this Employee Matters Agreement, (a) New NGC shall not be deemed to be a successor entity of NGC and (b) NGC shall not be deemed to be a member of the HII Group.
          “ HII Retained Benefit Plan ” means any Benefit Plan that, as of the Distribution, is sponsored or maintained solely by any member of the HII Group. HII Retained Benefit Plan shall also mean any multiemployer plan (as defined in Section 3(37) of ERISA) to which any member of the HII Group contributes for the benefit of its employees. For the avoidance of doubt, no member of the HII Group shall be deemed to sponsor or maintain any Benefit Plan if its relationship to such Benefit Plan is solely to administer such Benefit Plan or provide to New NGC any reimbursement in respect of such Benefit Plan. The HII Retained Benefit Plans (excluding any multiemployer plans) shall be sponsored solely by one or more members of the HII Group following the Distribution.
          “ HII Retiree ” means each former employee of NGC or its Affiliates (or the predecessors thereof), including, without limitation, any such individual with deferred vested benefits under any Benefit Plan, whose last employment prior to the Distribution was with the HII Group or the Shipbuilding Business.

3


 

          “ HII Spinoff Plans ” means the HII Spinoff DB Plans, HII Spinoff DC Plans, HII Spinoff Nonqualified Plans and HII Spinoff Welfare Plans.
          “ HII Welfare Plan ” means each HII Benefit Plan that is a Welfare Plan.
          “ New NGC Benefit Plan ” means any Benefit Plan sponsored or maintained by any member of the New NGC Group or NGC. New NGC Benefit Plan shall also mean any multiemployer plan (as defined in Section 3(37) of ERISA) to which any member of the New NGC Group or NGC contributes for the benefit of its employees. For the avoidance of doubt, no member of the New NGC Group shall be deemed to sponsor or maintain any Benefit Plan if its relationship to such Benefit Plan is solely to administer such Benefit Plan or provide to HII any reimbursement in respect of such Benefit Plan. The New NGC Benefit Plans (excluding any multiemployer plans) shall be those Benefit Plans sponsored solely by one or more members of the New NGC Group following the Distribution.
          “ New NGC Employee Liabilities ” means all potential or actual employment and employee benefits-related or other Liabilities with respect to current employees and former employees of NGC and the New NGC Group, whether arising before, on or after the Distribution Date, but excluding any HII Employee Liabilities.
          “ New NGC Employment Agreement ” means any Employment Agreement to which any member of the New NGC Group or NGC is a party and to which no member of the HII Group (other than NGC) is or was a party or beneficiary. The New NGC Employment Agreements shall be the responsibility of one or more members of the New NGC Group following the Distribution.
          “ New NGC Group ” is defined in the Separation Agreement, but for convenience is duplicated here, provided that the definition in the Separation Agreement controls. New NGC Group means New NGC and each Person that will be a direct or indirect Subsidiary of New NGC immediately after the Distribution and each Person that is or becomes a member of the New NGC Group after the Distribution, including in all circumstances the predecessor and successor entities of each such Person. For the purposes of this Employee Matters Agreement, NGC shall not be deemed to be a predecessor entity of New NGC.
          “ New NGC Retiree ” means each former employee of NGC, any of its Affiliates and the New NGC Group, who is not an HII Retiree.
          “ New NGC Welfare Plan ” means each New NGC Benefit Plan that is a Welfare Plan.
          “ Plan Payee ” means, as to an individual who participates in a Benefit Plan, such individual’s dependents, beneficiaries, alternate payees and alternate recipients, as applicable under such Benefit Plan.
          “ Split Plans ” means the Split Welfare Plans, Split DB Plans, Split DC Plans and Split Nonqualified Plans.

4


 

          “ Welfare Plan ” means each Benefit Plan that provides life insurance, health care, dental care, vision care, employee assistance programs (EAP), accidental death and dismemberment insurance, disability, severance, vacation or other group welfare or fringe benefits and is an “employee welfare benefit plan” as described in Section 3(1) of ERISA.
          “ Workers’ Compensation Event ” means the event, injury, illness or condition giving rise to a workers’ compensation claim.
     Section 1.3 Other Capitalized Terms . Capitalized terms not defined in this Employee Matters Agreement shall have the meanings ascribed to them in the Separation Agreement.
ARTICLE II
GENERAL PRINCIPLES; EMPLOYEE TRANSFERS
     Section 2.1 Assumption of HII Employee Liabilities . Effective as of the Distribution, except as otherwise specifically provided in this Employee Matters Agreement, (a) the HII Group shall be solely responsible for all HII Employee Liabilities and the New NGC Group shall not retain any HII Employee Liabilities and (b) the New NGC Group shall be solely responsible for all New NGC Employee Liabilities and the HII Group shall not retain any New NGC Employee Liabilities.
     Section 2.2 Allocation of Liabilities With Respect to Benefit Plans and Employment Agreements . Except as otherwise specifically provided in this Employee Matters Agreement, effective as of the Distribution, each HII Employee and HII Retiree (and each such individual’s Plan Payees) shall cease participation in all New NGC Benefit Plans and, as of such time, HII shall or shall cause another member of the HII Group to have in effect such HII Benefit Plans as are necessary to comply with its obligations pursuant to this Employee Matters Agreement.
          (a) Effective as of the Distribution, except as otherwise specifically provided in this Employee Matters Agreement, New NGC shall, or shall cause one or more members of the New NGC Group to, retain, pay, perform, fulfill and discharge in due course all Liabilities arising out of or relating to all New NGC Employment Agreements.
          (b) Effective as of the Distribution, except as otherwise specifically provided in this Employee Matters Agreement, HII shall, or shall cause one or more members of the HII Group to, retain, pay, perform, fulfill and discharge in due course (i) all Liabilities arising out of or relating to all HII Benefit Plans, (ii) all Liabilities arising out of or relating to all HII Employment Agreements, (iii) all Liabilities arising out of or relating to the Converted HII Equity Compensation Awards (including, without limitation, any and all Liabilities with respect to any equity award of NGC or New NGC that, through assumption and conversion, becomes a Converted HII Equity Compensation Award, as well as any and all Liabilities with respect to the assumption and conversion of such an award), and (iv) all Liabilities with respect to the employment, service, termination of employment or termination of service of all HII Employees, HII Retirees, their respective Plan Payees, and other service providers (including any individual who is, or was, an

5


 

independent contractor, temporary employee, temporary service worker, consultant, freelancer, agency employee, leased employee, on-call worker, incidental worker, or nonpayroll worker of any member of the HII Group or in any other employment, non-employment, or retainer arrangement, or relationship with any member of the HII Group), in each case to the extent arising in connection with or as a result of employment with or the performance of services for any member of the HII Group or the Shipbuilding Business. For the avoidance of doubt, from and after the Distribution, in no event will HII be required to issue, grant or award any compensation relating to HII Common Stock to any employee who is a member of the New NGC Group, and, subject to the treatment of the New NGC Equity Compensation Awards that are outstanding as of the Distribution and held by any HII Employee or HII Retiree as provided in Section 8.1, in no event will New NGC be required to issue, grant or award any compensation relating to New NGC Common Stock to any employee who is a member of the HII Group.
     Section 2.3 HII Benefit Plans and HII Employment Agreements . Schedule 2.3 sets forth a complete list of all material HII Benefit Plans and HII Employment Agreements. Effective as of the Distribution, HII or another member of the HII Group shall, as applicable in accordance with this Employee Matters Agreement, adopt, continue or, to the extent necessary, assume sponsorship of each HII Benefit Plan and HII Employment Agreement, and the New NGC Group shall use reasonable efforts to transfer or cause to be transferred to HII all plan documents, trust agreements, insurance policies, administrative agreements, and other agreements and instruments reasonably required for the maintenance and administration of the HII Benefit Plans and the HII Employment Agreements. To facilitate HII’s establishment of the HII Spinoff Plans, New NGC shall, prior to Distribution, provide HII with draft plan documents of the HII Spinoff Plans for HII’s review and consideration. New NGC shall endeavor to ensure that such draft plan documents accurately replicate the material terms of the respective Split DC Plans, Split DB Plans, Split Welfare Plans and Split Nonqualified Plans, but New NGC makes no representation or warranty that the draft plan documents do so or that draft plan documents satisfy any applicable legal requirements and New NGC expressly disclaims any and all liability related to the draft HII Spinoff Plans.
     Effective on the Distribution Date, the HII Group shall be exclusively responsible for administering each HII Benefit Plan and each HII Employment Agreement in accordance with its terms and for all obligations and liabilities with respect to the HII Benefit Plans and HII Employment Agreements and all benefits owed to participants in the HII Benefit Plans and individuals who are parties to the HII Employment Agreements, whether arising before, on or after the Distribution Date. Except as specifically provided herein, HII shall not assume sponsorship, maintenance or administration of any Benefit Plan or Employment Agreement that is not an HII Benefit Plan or an HII Employment Agreement or receive or assume any assets or liabilities in connection with any such Benefit Plan or Employment Agreement.
     Section 2.4 Plan-Related Litigation . Notwithstanding anything herein to the contrary, the management of the defense of all litigation related to the New NGC Benefit Plans, the New NGC Employment Agreements, the HII Benefit Plans and the HII Employment Agreements shall be governed by the Litigation Management Agreement, and

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this Employee Matters Agreement shall govern the allocation of Liabilities related to any such litigation.
     Section 2.5 Vacation and Sick Pay . HII shall assume responsibility for accrued vacation and sick pay and any other paid time off attributable to HII Employees and HII Retirees as of the Distribution, or Applicable Transfer Date.
     Section 2.6 Employee Transfers . Upon mutual agreement of HII and New NGC any employee whose employment transfers within 45 days after the Distribution from the New NGC Group to the HII Group or from the HII Group to the New NGC Group because they were inadvertently and erroneously treated as employed by the wrong employer on the Distribution Date, and who was continuously employed by a member of the HII Group or the New NGC Group (as applicable) from the Distribution through the date such employee commences active employment with a member of the New NGC Group or HII Group (as applicable) shall be a “ Delayed Transfer Employee .” Except as otherwise specifically provided in this Employee Matters Agreement, such Delayed Transfer Employees shall be treated in the same manner as HII Employees as specified in this Employee Matters Agreement, to the extent practicable in compliance with applicable Law and the Employee Plans. For purposes of this Employee Matters Agreement, the date on which a Delayed Transfer Employee actually commences employment with the HII Group or the New NGC Group (as applicable) is referred to as such individual’s “ Applicable Transfer Date ” and such Applicable Transfer Date shall, except as expressly provided herein and in compliance with Law applicable to the Employee Plans, be treated as the Distribution Date for Delayed Transfer Employees where the Distribution Date is referenced in this Employee Matters Agreement. Notwithstanding anything herein to the contrary, the mutual agreement with respect to, and Applicable Transfer Date of, any Delayed Transfer Employee must occur on or before 45 days after Distribution.
     Section 2.7 Annual Bonuses . HII shall be solely responsible for all annual bonuses earned by HII Employees and HII Retirees with respect to periods ending on or after January 1, 2011.
ARTICLE III
SERVICE CREDIT
     Section 3.1 Service Credit for Employee Transfers . The Benefit Plans shall provide the following service crediting rules effective as of the Distribution:
          (a) If a Delayed Transfer Employee becomes employed by a member of the New NGC Group or HII Group on or before 45 days after the Distribution then such Delayed Transfer Employee’s service with the HII Group or the New NGC Group (as applicable) following the Distribution shall be recognized for purposes of eligibility, vesting and pension credit under the appropriate Benefit Plans, subject to the terms of those plans.
          (b) If a former employee of HII Group or New NGC Group (such Group, the “ Original Group ”) (whether or not a Delayed Transfer Employee) becomes

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employed by a member of the other Group (such Group, the “Transferee Group”) either (i) later than 45 days after the Distribution or (ii) without having been continuously employed by a member of the Original Group from the Distribution through the date such former employee commences active employment with a member of the Transferee Group, then the Benefits Plans of the Transferee Group will not recognize for any purpose such individual’s service with the Original Group before or after the Distribution, except to the extent required by Law. If a former employee is rehired by his or her Original Group then all such individual’s service shall be recognized by the Benefit Plans of the Original Group to the extent required by Law.
     Section 3.2 HII Benefit Plans . From and after the Distribution, or Applicable Transfer Date, HII shall, and shall cause its affiliates and successors to, provide credit under the HII Benefit Plans to HII Employees and HII Retirees for their service with HII and its predecessors and affiliates (including but not limited to NGC and any of its Affiliates, HII Group, New NGC and the New NGC Group) for all purposes to the same extent that such service was recognized under the relevant New NGC Benefit Plans. For avoidance of doubt, service shall be credited for all purposes, including but not limited to, benefit accrual, determining eligibility to participate, vesting, eligibility to retire, and eligibility for subsidized post-retirement welfare benefits and the amount of such subsidy; provided , however , that service shall not be recognized to the extent that such recognition would result in the duplication of benefits.
ARTICLE IV
CERTAIN WELFARE BENEFIT PLAN MATTERS
     Section 4.1 HII Retained Welfare Plans . HII shall cause a member of the HII Group to retain, or to the extent necessary, assume sponsorship of any HII retained welfare plans (the “ HII Retained Welfare Plans ”) and take all necessary actions to continue contributions to the HII Retained Benefit Plans that are multiemployer Welfare Plans. To the extent necessary, prior to the Distribution, HII shall cause a member of the HII Group to assume sponsorship of the HII Retained Welfare Plans. New NGC shall use reasonable efforts to transfer or cause to be transferred to a member of the HII Group all plan documents, trust agreements, insurance policies, administrative agreements and other agreements and instruments reasonably required for the maintenance and administration of the HII Retained Welfare Plans. From and after the Distribution, the HII Group shall be exclusively responsible for all obligations and liabilities with respect to the HII Retained Welfare Plans, and all benefits owed to participants in the HII Retained Welfare Plans, whether accrued before, on or after the Distribution.
     Section 4.2 HII Spinoff Welfare Plans . Effective not later than the Distribution, HII or a member of the HII Group shall establish certain welfare benefit plans (such plans, the “ HII Spinoff Welfare Plans ”). Each HII Spinoff Welfare Plan shall have terms and features (including benefit coverage options and employer contribution provisions) that are substantially identical to one of the Benefit Plans listed on Schedule 4.2 (such Benefit Plans, the “ Split Welfare Plans ”) such that (for avoidance of doubt), each Split Welfare Plan is substantially replicated by an HII Spinoff Welfare Plan. Each HII Spinoff Welfare Plan shall assume all liability from the corresponding Split Welfare Plan with respect to,

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and shall provide benefits to, those HII Employees and HII Retirees and their respective Plan Payees who immediately prior to the Distribution were participating in, or entitled to present or future benefits under the corresponding Split Welfare Plan. From and after the Distribution, HII and the HII Group shall be solely and exclusively responsible for all obligations and liabilities with respect to, or in any way related to, the HII Spinoff Welfare Plans, whether accrued before, on or after the Distribution. For avoidance of doubt, the HII Spinoff Welfare Plans shall have the sole obligation to provide benefits attributable to any lost participants who were formerly employed in the Shipbuilding Business.
     Section 4.3 Continuation of Elections . As of the Distribution, HII shall cause the HII Spinoff Welfare Plans to recognize and maintain all elections and designations (including, without limitation, all coverage and contribution elections and beneficiary designations) in effect with respect to HII Employees, HII Retirees and Delayed Transfer Employees prior to the Distribution under the corresponding Split Welfare Plan and apply such elections and designations under the HII Spinoff Welfare Plans for the remainder of the period or periods for which such elections or designations are by their original terms effective.
     Section 4.4 Deductibles and Other Cost-Sharing Provisions . As of the Distribution (or Applicable Transfer Date with respect to a Delayed Transfer Employee), HII shall cause the HII Spinoff Welfare Plans to recognize all amounts applied to deductibles, co-payments and out-of-pocket maximums with respect to HII Employees, HII Retirees and Delayed Transfer Employees under the corresponding Split Welfare Plan during the plan year in which the Distribution or Applicable Transfer Date occurs, and the HII Spinoff Welfare Plans will not impose any limitations on coverage for preexisting conditions other than such limitations as were applicable under the comparable Benefit Plans prior to the Distribution or Applicable Transfer Date.
     Section 4.5 Flexible Spending Account Treatment . With respect to the portion of a Split Welfare Plan that consists of medical and dependent care flexible spending accounts, as of the Distribution, HII shall be solely responsible for all liabilities with respect thereto, and the applicable HII Spinoff Welfare Plan shall, as required under Section 4.3, give effect to the elections of HII Employees and HII Retirees that were in effect under the Split Welfare Plan as of the Distribution.
     Section 4.6 Health Reimbursement Arrangement Treatment . With respect to the portion of a Split Welfare Plan that is a health reimbursement arrangement (as defined in IRS Notice 2002-45) (“ HRA ”), as of the Distribution, HII shall cause the applicable HII Spinoff Welfare Plan to credit each HII Employee and HII Retiree who had an HRA balance under the Split Welfare Plan immediately prior to the Distribution with an HRA balance equal to the HRA balance he or she had under the Split Welfare Plan immediately prior to the Distribution. With respect to a Delayed Transfer Employee who had an HRA balance under the Split Welfare Plan immediately prior to his or her Applicable Transfer Date, HII shall cause the applicable HII Spinoff Welfare Plan to credit to the Delayed Transfer Employee with an HRA balance equal to the HRA balance he or she had under the Split Welfare Plan immediately prior to his or her Applicable Transfer Date.

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     Section 4.7 Workers’ Compensation . The HII Group shall be responsible for processing all workers’ compensation claims of HII Employees and HII Retirees, regardless of when the Workers’ Compensation Event occurred. Coverage for such claims shall be as specified in the Insurance Matters Agreement.
ARTICLE V
TAX-QUALIFIED DEFINED BENEFIT PLANS
     Section 5.1 HII Retained Defined Benefit Plans . Prior to the Distribution, HII shall cause a member of the HII Group to retain or, to the extent necessary, assume sponsorship of the HII Retained Defined Benefit Plans (and their related trusts) set forth on Schedule 5.1 (the “ HII Retained DB Plans ”) and take all necessary actions to continue contributions to the HII Retained DB Plans that are multiemployer defined benefit pension plans. New NGC shall use reasonable efforts to transfer or cause to be transferred to a member of the HII Group all plan documents, trust agreements, insurance policies, administrative agreements and other agreements and instruments reasonably required for the maintenance and administration of the HII Retained DB Plans. From and after the Distribution, the HII Group shall be exclusively responsible for all obligations and liabilities with respect to the HII Retained DB Plans, all assets of the HII Retained DB Plans, and all benefits owed to participants in the HII Retained DB Plans, whether accrued before, on or after the Distribution.
     Section 5.2 HII Spinoff DB Plans .
          (a) Effective as of the Distribution, HII or another member of the HII Group shall establish certain defined benefit plans that qualify under Code Section 401(a), along with a related master trust or trusts that is exempt under Code Section 501(a) (such plans and trusts, the “ HII Spinoff DB Plans ”). Each HII Spinoff DB Plan shall have terms and features (including benefit accrual provisions) that are substantially identical to one of the Benefit Plans listed on Schedule 5.2(a) (such Benefit Plans, the “ Split DB Plans ”), such that (for avoidance of doubt), each Split DB Plan is substantially replicated by a corresponding HII Spinoff DB Plan. Each HII Spinoff DB Plan shall assume liability for all benefits accrued or earned (whether or not vested) by HII Employees and HII Retirees and their respective Plan Payees under the corresponding Split DB Plan as of the Distribution. HII or a member of the HII Group shall be solely responsible for taking all necessary, reasonable, and appropriate actions (including the submission of the HII Spinoff DB Plans to the Internal Revenue Service for a determination of tax-qualified status) to establish, maintain and administer the HII Spinoff DB Plans so that they are qualified under Section 401(a) of the Code and that the related trusts thereunder are exempt under Section 501(a) of the Code. The portion of liabilities relating to HII Employees, HII Retirees and Delayed Transfer Employees and their respective Plan Payees shall cease to be liabilities of the applicable Split DB Plan, and shall be assumed by the corresponding HII Spinoff DB Plan in accordance with this Section and Section 414(l) of the Code, Treasury Regulation Section 1.414(l)-1, and Section 208 of ERISA.
          (b) A master trust (the “ HII Master Trust ”) has been established to hold the assets of the HII Spinoff DB Plans and the HII Retained Plans, and NGC has caused

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certain marketable securities to be transferred to the HII Master Trust. The HII Spinoff Plans currently participating in the HII Master Trust as of the date of this Employee Matters Agreement are specified on Schedule 5.2(b)(i) . New NGC or a member of the New NGC Group shall cause its actuary to determine the estimated value, as of December 31, 2010, of the assets required to be held on behalf of each HII Spin-Off DB Plan in accordance with the assumptions and valuation methodology set forth on Schedule 5.2(b)(ii) (the “ Estimated Retirement Plan Transfer Amount ” for each such plan). Prior to or as of the Distribution, New NGC or a member of the New NGC Group shall cause the trust for each Split DB Plan to transfer to the HII Master Trust on behalf of each corresponding HII Spinoff DB Plan an amount in cash or in-kind equal to the Estimated Retirement Plan Transfer Amount for such plan, as adjusted for earnings based on (i) actual earnings of the applicable Split DB Plan from January 1, 2011 through February 28, 2011, and (ii) the daily interest rate on 90-day Treasury securities as of February 28, 2011 for the period from March 1, 2011 through the actual date of transfer, less amounts already held by the HII Master Trust as of the Distribution on behalf of the applicable HII Spinoff DB Plan. With respect to amounts included in the Estimated Retirement Plan Transfer Amount for private equity, real estate, infrastructure and hedge fund partnerships, New NGC shall cause the trust(s) in which the Split DB Plans participate to transfer to the HII Master Trust the cash value of such assets, as determined as of the end of the month prior to the month in which the Distribution occurs, adjusted to reflect interest in accordance with the methodology set forth on Schedule 5.2(b)(iii) from such month-end through the day before the day such cash transfer is made (which shall be no later than forty-five (45) days after the Distribution Date).
          (c) Within twelve (12) months following the Distribution, New NGC or a member of the New NGC Group shall cause its actuary to provide HII with a revised calculation of the value, as of the Distribution, of the assets to be transferred to each HII Spinoff DB Plan determined in accordance with the assumptions and valuation methodology determined by New NGC using the assumptions specified on Schedule 5.2(b)(ii) and reflecting any Delayed Transfer Employees and their respective Applicable Transfer Dates and any demographic updates (the “ Final Retirement Plan Transfer Amount ” for each such plan).
          (d) Within 45 days of the receipt from the actuary of the determination of the Final Retirement Plan Transfer Amount, New NGC shall cause each Split DB Plan to transfer to the corresponding HII Spinoff DB Plan (the date of each such transfer, the “ Final Transfer Date ” for each such plan) an amount in cash or in kind equal to (i) the Final Retirement Plan Transfer Amount, minus (ii) the sum of (A) the Estimated Retirement Plan Transfer Amount and (B) the aggregate amount of payments made from the Split DB Plan to HII Employees, HII Retirees and Delayed Transfer Employees and their respective Plan Payees in order to satisfy any benefit obligation with respect to such participants following the Distribution, or Applicable Transfer Date for Delayed Transfer Employees, plus (iii) any payments made from an HII Spinoff DB Plan to a Delayed Transfer Employee prior to when such Delayed Transfer Employee transferred from the HII Group to the New NGC Group (such amount the “ True-Up Amount ”). However, if the True-Up Amount is a negative number with respect to any HII Spinoff DB Plan, New NGC shall not be required to cause any such additional transfer and instead HII shall be required to

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cause a transfer of cash within 45 days of the receipt of written notification by New NGC from such HII Spinoff DB Plan to the corresponding Split DB Plan the amount by which the sum of clauses (ii)(A) and (B) above, minus the amount in (iii) above, exceeds the Final Retirement Plan Transfer Amount. The True-Up Amount or the amount described in the immediately-preceding sentence shall be adjusted to reflect earnings or losses as described on Schedule 5.2(d) . The parties hereto acknowledge that the Split DB Plans’ transfer of the True-Up Amounts to the corresponding HII Spinoff DB Plans shall be in full settlement and satisfaction of the obligations of New NGC and the Split DB Plans to transfer assets to the HII Spinoff DB Plans pursuant to this Section.
               The True-Up Amount shall be paid from each Split DB Plan to the corresponding HII Spinoff DB Plan in cash according to the principles described in Section 5.2(b), and adjusted to reflect earnings or losses and expenses during the period from the Distribution (or Applicable Transfer Date with respect to Delayed Transfer Employees) to the day before the Final Transfer Date. Such earnings or losses shall be determined in accordance with the methodology set forth on Schedule 5.2(d) from the Distribution Date through the date the True-Up Amount is paid. In the event that HII is obligated to cause any HII Spinoff DB Plan to reimburse the corresponding Split DB Plan pursuant to this Section (or with respect to any earnings calculation attributable to individuals rehired by New NGC in accordance with this Section), such reimbursement or earnings calculation shall be performed in accordance with the same principles set forth herein (including, without limitation, earnings or losses in accordance with the methodology set forth on Schedule 5.2(d) ) with respect to the payment of the True-Up Amount.
          (e) To the extent that a Split DB Plan includes a retiree medical account under Section 401(h) of the Code, assets relating to such account shall be transferred to the applicable HII Spinoff DB Plan, with the amount of such transfer equal to a pro rata share of the total prefunded plan assets for the related retiree medical plan. The pro rata share is equal to the total amount of prefunded assets from the related retiree medical plan’s respective VEBA account and the 401(h) account, multiplied by a fraction. The numerator of the fraction is the actuarial accrued liability for the transferred employees and the denominator of which is the total actuarial accrued liability for the total plan participants; the actuarial accrued liability is determined based on the ongoing funding assumptions for purposes of the CAS funding for the retiree medical plan. Such transfer shall be made at the same time as the transfer of the Estimated Retirement Plan Transfer Amount, and the transfer amount shall be subject to subsequent adjustment under the principles specified in Sections 5.2(c) and 5.2(d).
          (f) From and after the Distribution, HII and the members of the HII Group shall be solely and exclusively responsible for all obligations and liabilities with respect to, or in any way related to, the HII Spinoff DB Plans, whether accrued before, on or after the Distribution. For avoidance of doubt, the HII Spinoff DB Plans shall have the sole and exclusive obligation to restore the unvested accrued benefits attributable to any individual who becomes employed by a member of the HII Group and whose employment with NGC or any of its Affiliates or a member of the New NGC Group terminated on or before the Distribution at a time when such individual’s benefits under the Split DB Plan were not fully vested. Furthermore, the HII Spinoff DB Plans shall have the sole

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obligation to restore accounts attributable to any lost participants who were formerly employed in the Shipbuilding Business.
     Section 5.3 Continuation of Elections . As of the Distribution Date, HII (acting directly or through a member of the HII Group) shall cause the HII Spinoff DB Plans to recognize and maintain all existing elections, including, but not limited to, beneficiary designations, payment form elections and rights of alternate payees under qualified domestic relations orders with respect to HII Employees, HII Retirees and Delayed Transfer Employees and their respective Plan Payees under the corresponding Split DB Plan.
ARTICLE VI
U.S. TAX-QUALIFIED DEFINED CONTRIBUTION PLANS
     Section 6.1 HII Retained Defined Contribution Plans . Prior to the Distribution, HII shall cause a member of the HII Group to retain or, to the extent necessary, assume sponsorship of the HII Retained Defined Contribution Plans (and their related trusts) set forth on Schedule 6.1 (the “ HII Retained DC Plans ”) and take all necessary actions to continue contributions to the HII Retained DC Plans that are multiemployer defined contribution pension plans. New NGC shall use reasonable efforts to transfer or cause to be transferred to a member of the HII Group all plan documents, trust agreements, insurance policies, administrative agreements and other agreements and instruments reasonably required for the maintenance and administration of the HII Retained DC Plans. From and after the Distribution, the HII Group shall be exclusively responsible for all obligations and liabilities with respect to the HII Retained DC Plans, all assets of the HII Retained DC Plans, and all benefits owed to participants in the HII Retained DC Plans, whether accrued before, on or after the Distribution.
     Section 6.2 HII Spinoff DC Plans .
          (a) Effective as of the Distribution, HII or another member of the HII Group shall establish certain defined contribution plans that qualify under Code Section 401(a), and a related master trust or trusts exempt under Code Section 501(a) (such plans and trusts, the “ HII Spinoff DC Plans ”). Each HII Spinoff DC Plan shall have terms and features (including employer contribution provisions) that are substantially identical to one of the Benefit Plans listed on Schedule 6.2 (such Benefit Plans, the “ Split DC Plans ”) such that (for avoidance of doubt), each Split DC Plan is substantially replicated by a corresponding HII Spinoff DC Plan. HII or a member of the HII Group shall be solely responsible for taking all necessary, reasonable, and appropriate actions (including the submission of the HII Spinoff DC Plans to the Internal Revenue Service for a determination of tax-qualified status) to establish, maintain and administer the HII Spinoff DC Plans so that they are qualified under Section 401(a) of the Code and that the related trusts thereunder are exempt under Section 501(a) of the Code. Each HII Spinoff DC Plan shall assume liability for all benefits accrued or earned (whether or not vested) by HII Employees and HII Retirees and their respective Plan Payees under the corresponding Split DC Plan as of the Distribution.

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          (b) On or as soon as reasonably practicable following the Distribution, New NGC or a member of the New NGC Group shall cause each Split DC Plan to transfer to the applicable HII Spinoff DC Plan, and HII or another member of the HII Group shall cause such HII Spinoff DC Plan to accept the transfer of, the accounts, liabilities and related assets in such Split DC Plan attributable to HII Employees and HII Retirees and their respective Plan Payees. The transfer of assets shall be in cash or in kind (as determined by the transferor) and include outstanding loan balances and amounts forfeited by HII Retirees that have not yet been reallocated or applied to the payment of contributions or expenses and be conducted in accordance with Code Section 414(l) and Treasury Regulation Section 1.414(1)-1, and Section 208 of ERISA.
          (c) As soon as reasonably practicable (but not later than 30 days) following the Applicable Transfer Date of a Delayed Transfer Employee who transfers employment from a member of the New NGC Group to a member of the HII Group within 45 days following the Distribution, New NGC or a member of the New NGC Group shall cause the accounts, related liabilities, and related assets in the corresponding Split DC Plan(s) attributable to such Delayed Transfer Employee and their respective Plan Payees (including any outstanding loan balances) to be transferred in cash or in kind (as determined by the transferor) (in accordance with Code Section 414(l) and Treasury Regulation Section 1.414(l)-1, and Section 208 of ERISA) to the applicable HII Spinoff DC Plan(s) and HII or a member of the HII Group shall cause the applicable HII Spinoff DC Plan(s) to accept such transfer of accounts, liabilities and assets.
          (d) In the event a Delayed Transfer Employee is an HII Employee who returns to employment with New NGC or a member of the New NGC Group, then, as soon as reasonably practicable (but not later than 30 days thereafter), HII or a member of the HII Group shall cause the accounts, related liabilities, and related assets in the corresponding HII Spinoff DC Plan(s) attributable to such Delayed Transfer Employee and their respective Plan Payees (including any outstanding loan balances) to be transferred in cash or in-kind (as determined by the transferor) in accordance with Code Section 414(l) and Treasury Regulation Section 1.414(l)-1, and Section 208 of ERISA to the applicable Split DC Plan(s). New NGC or a member of the New NGC Group shall cause the applicable Split DC Plan(s) to accept such transfer of accounts, liabilities and assets.
          (e) From and after the Distribution, except as specifically provided in paragraph (d) above, HII and the HII Group shall be solely and exclusively responsible for all obligations and liabilities with respect to, or in any way related to, the HII Spinoff DC Plans, whether accrued before, on or after the Distribution. For avoidance of doubt, the HII Spinoff DC Plans shall have the sole and exclusive obligation to restore the unvested portion of any account attributable to any individual who becomes employed by a member of the HII Group and whose employment with NGC or any of its Affiliates, or a member of the New NGC Group terminated on or before the Distribution at a time when such individual’s benefits under the Split DC Plans were not fully vested. Furthermore, the HII Spinoff DC Plans shall have the sole obligation to restore accounts attributable to any lost participants who were formerly employed in the Shipbuilding Business.

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     Section 6.3 Continuation of Elections . As of the Distribution, HII (acting directly or through a member of the HII Group) shall cause the HII Spinoff DC Plans to recognize and maintain all elections, including, but not limited to, deferral, investment and payment form elections, beneficiary designations, and the rights of alternate payees under qualified domestic relations orders with respect to HII Employees, HII Retirees and Delayed Transfer Employees and their respective Plan Payees under the corresponding Split DC Plan; provided , that, investment elections relating to the Northrop Grumman stock fund shall be deemed to apply to the specified default investment fund.
     Section 6.4 Contributions Due . All contributions payable to the Split DC Plans with respect to employee deferrals, matching contributions and employer contributions for HII Employees through the Distribution Date, determined in accordance with the terms and provisions of the Split DC Plans, ERISA and the Code, shall be paid by New NGC or a member of the New NGC Group to the appropriate Split DC Plan prior to the date of any asset transfer described in Section 6.2.
ARTICLE VII
NONQUALIFIED RETIREMENT PLANS
     Section 7.1 HII Retained Nonqualified Plans .
          (a) Prior to the Distribution, HII shall cause a member of the HII Group to retain or, to the extent necessary, assume sponsorship of the HII Retained Nonqualified Plans set forth on Schedule 7.1(a) (the “ HII Retained Nonqualified Plans ”). New NGC shall use reasonable efforts to transfer or cause to be transferred to a member of the HII Group all plan documents, administrative agreements and other agreements and instruments reasonably required for the maintenance and administration of the HII Retained Nonqualified Plans. From and after the Distribution, the HII Group shall be exclusively responsible for all obligations and liabilities with respect to the HII Retained Nonqualified Plans, and all benefits owed to participants in the HII Retained Nonqualified Plans, whether accrued before, on or after the Distribution.
          (b) Unless New NGC and HII agree otherwise before the Distribution, prior to or on the Distribution Date, New NGC shall cause to be transferred, to one or more grantor trusts established or maintained by HII as designated by HII, cash and/or in kind securities equal to the amount of the assets held under any grantor trust maintained by a member of the New NGC Group (each a “ New NGC Grantor Trust ”) that are allocated in the records of such New NGC Grantor Trust to pay benefits under the HII Retained Nonqualified Plans specified on Schedule 7.1(b) . The amount of assets to be so transferred shall be determined by the actuary selected by the New NGC Group. If the New NGC Grantor Trust has any residual balances at the end of the month in which the Distribution Date occurs, such balances will be settled by transfer of cash.
     Section 7.2 HII Spinoff Nonqualified Plans .
          (a) Effective as of the Distribution, HII or another member of the HII Group shall establish certain nonqualified retirement plans (such plans, the “ HII Spinoff

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Nonqualified Plans ”). Each HII Spinoff Nonqualified Plan shall have terms and features (including employer contribution provisions) that are substantially identical to one of the NGC Benefit Plans listed on Schedule 7.2(a) (such plans, the “ Split Nonqualified Plans ”) such that (for avoidance of doubt), each Split Nonqualified Plan is substantially replicated by a corresponding HII Spinoff Nonqualified Plan. Except as specifically provided in Section 7.6, HII or a member of the HII Group shall be solely responsible for taking all necessary, reasonable, and appropriate actions to establish, maintain and administer the HII Spinoff Nonqualified Plans so that they do not result in adverse tax consequences under Code Section 409A. Each HII Spinoff Nonqualified Plan shall assume liability for all benefits accrued or earned (whether or not vested) by HII Employees and HII Retirees and their respective Plan Payees under the corresponding Split Nonqualified Plan as of the Distribution. From and after the Distribution, HII and the HII Group shall be solely and exclusively responsible for all obligations and liabilities with respect to, or in any way related to, the HII Spinoff Nonqualified Plans, whether accrued before, on or after the Distribution. Furthermore, HII and the HII Group shall have the sole obligation to restore in the HII Spinoff Nonqualified Plans benefits under the Split Nonqualified Plans attributable to any lost participants who were formerly employed in the Shipbuilding Business.
          (b) Unless New NGC and HII agree otherwise before the Distribution, prior to or on the Distribution Date, New NGC or a member of the New NGC Group shall cause its actuary to determine the estimated value, as of the Distribution, of the amount of assets to be transferred from the New NGC Grantor Trusts to one or more grantor trusts established or maintained by HII as designated by HII with respect to the HII Spinoff Nonqualified Plans specified on Schedule 7.2(b) (the “ Initial Nonqualified Plan Transfer Amount ”). The Initial Nonqualified Plan Transfer Amount shall equal the amount determined as specified on Schedule 7.2(b) .
          (c) Within twelve (12) months following the Distribution, New NGC or a member of the New NGC Group shall cause its actuary to provide HII with a revised calculation of the value, as of the Distribution, of the assets to be transferred with respect to each HII Spinoff Nonqualified Plan specified on Schedule 7.2(b) , as determined by the actuary selected by the New NGC Group, and reflecting any Delayed Transfer Employees and their respective Applicable Transfer Dates and any demographic updates (the “ Final Nonqualified Plan Transfer Amount ” for each such plan).
          (d) Within forty-five (45) days of the receipt from the actuary of the determination of the Final Nonqualified Plan Transfer Amount, New NGC shall cause the applicable New NGC Grantor Trust to transfer to a grantor trust specified by HII (the date of each such transfer, the “ Final Nonqualified Plan Transfer Date ” for each such plan) an amount in cash equal to (i) the Final Nonqualified Plan Transfer Amount, minus (ii) the sum of (A) the Initial Nonqualified Plan Transfer Amount and (B) the aggregate amount of payments made pursuant to the Split Nonqualified Plan to HII Employees, HII Retirees and Delayed Transfer Employees and their respective Plan Payees in order to satisfy any benefit obligation with respect to such participants following the Distribution, or Applicable Transfer Date for Delayed Transfer Employees, plus (iii) any payments made from an HII Spinoff Nonqualified Plan specified on Schedule 7.2(b) to a Delayed Transfer

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Employee prior to when such Delayed Transfer Employee transferred from the HII Group to the New NGC Group (such amount the “ Nonqualified Plan True-Up Amount ”). However, if the Nonqualified Plan True-Up Amount is a negative number with respect to any HII Spinoff Nonqualified Plan, New NGC shall not be required to cause any such additional transfer and instead HII shall be required to cause a transfer of cash within forty-five (45) days of the receipt of written notification by New NGC from the relevant HII grantor trust to the New NGC Grantor Trust specified by New NGC the amount by which the sum of clauses (ii)(A) and (B) above, minus the amount in (iii) above, exceeds the Final Nonqualified Plan Transfer Amount. The Nonqualified Plan True-Up Amount or the amount described in the immediately-preceding sentence shall be adjusted to reflect earnings or losses as described on Schedule 7.2(d) . The parties hereto acknowledge that the New NGC Grantor Trusts’ transfer of the Nonqualified Plan True-Up Amounts to an HII grantor trust shall be in full settlement and satisfaction of the obligations of New NGC and the New NGC Grantor Trusts to transfer assets to HII or any HII grantor trust pursuant to this Section 7.2(d).
     Section 7.3 No Distributions On Separation . New NGC and HII acknowledge that neither the Distribution nor any of the other transactions contemplated by this Employee Matters Agreement, the Separation Agreement or the other Ancillary Agreements will trigger a payment or distribution of compensation under any Benefit Plan that is a nonqualified retirement plan for any HII Employee or HII Retiree and, consequently, that the payment or distribution of any compensation to which any HII Employee or HII Retiree is entitled under any HII Retained Nonqualified Plan or HII Spinoff Nonqualified Plan will occur upon such HII Employee’s or HII Retiree’s separation from service from the HII Group or at such other time as provided in such HII Retained Nonqualified Plan or HII Spinoff Nonqualified Plan or such HII Employee’s or HII Retiree’s deferral election.
     Section 7.4 Section 409A . New NGC and HII shall cooperate in good faith so that the Distribution will not result in adverse tax consequences under Code Section 409A to any current or former employee of any member of the New NGC Group or any member of the HII Group, or their respective Plan Payees, in respect of his or her benefits under any New NGC Benefit Plan or HII Benefit Plan.
     Section 7.5 Continuation of Elections . As of the Distribution, HII (acting directly or through a member of the HII Group) shall cause each HII Spinoff Nonqualified Plan to recognize and maintain all elections, including, but not limited to, deferral, investment and payment form elections, beneficiary designations, and the rights of alternate payees under qualified domestic relations orders with respect to HII Employees, HII Retirees and their Plan Payees under the corresponding Split Nonqualified Plan; provided , that investment elections relating to a Northrop Grumman stock fund under a Split Nonqualified Plan shall be deemed to apply to the specified default investment fund.
     Section 7.6 Delayed Transfer Employees . Any Delayed Transfer Employee who transfers to the HII Group within 45 days following the Distribution shall be treated in the same manner as an HII Employee under this Article VII. As indicated in Section 2.6, such a Delayed Transfer Employee’s Applicable Transfer Date shall be treated as the

17


 

Distribution Date. In addition, if a Delayed Transfer Employee transfers from the HII Group to the New NGC Group within 45 days following the Distribution, the New NGC Group shall assume and be solely responsible, pursuant to the terms of the applicable Split Nonqualified Plan, for any benefits accrued by such individual under any HII Spinoff Nonqualified Plan, and the HII Group shall have no liability with respect thereto.
ARTICLE VIII
NEW NGC EQUITY COMPENSATION AWARDS
     Section 8.1 General Treatment of Outstanding New NGC Equity Compensation Awards . Notwithstanding any other provision of this Employee Matters Agreement or the Separation Agreement to the contrary, from and after the Distribution, each outstanding option award to purchase New NGC Common Stock (“ New NGC Option ”) and each restricted performance stock right award with respect to New NGC Common Stock that relates to a performance period ending after January 1, 2011 (“ New NGC RPSR ”), restricted stock right award with respect to New NGC Common Stock (“ New NGC RSR ”) and cash performance unit award subject to the terms of a New NGC long-term incentive cash plan (“ New NGC CPU ”), in each case that was granted under or pursuant to any equity compensation plan or arrangement of New NGC (each such New NGC Option, New NGC RPSR, New NGC RSR or New NGC CPU, a “ New NGC Equity Compensation Award ”), that, as of the Distribution, is held by any HII Employee (which for purposes of this Section 8.1, shall not include any Delayed Transfer Employees) or HII Retiree, shall be assumed by HII (each such assumed New NGC Equity Compensation Award, a “ Converted HII Equity Compensation Award ”). Except for cash performance unit awards, in connection with the assumption by HII, each Converted HII Equity Compensation Award shall be adjusted into an option award, restricted performance stock right award or restricted stock right award, as applicable, with respect to shares of HII common stock, par value $0.01 per share (“ HII Common Stock ”), having the same intrinsic value as the applicable New NGC Equity Compensation Award using an exchange ratio (the “ Exchange Ratio ”) equal to the closing price of a share of New NGC Common Stock on the last regular trading day immediately prior to the Distribution Date based on “regular way” trading divided by the closing price of a share of HII Common Stock on the first day on or after the Distribution Date on which HII Common Stock trades on a “regular way” basis, with such adjustments subject to appropriate rounding and to be effective upon the Distribution. The per share exercise price of any Converted HII Equity Compensation Award that is a stock option shall also be adjusted effective upon the Distribution by dividing the applicable per share exercise price of the stock option as in effect immediately prior to the Distribution by the Exchange Ratio, with the result rounded up to the nearest whole cent. The performance criteria applicable to any Converted HII Equity Compensation Awards that are restricted performance stock rights and cash performance unit awards shall also be adjusted so that the applicable performance criteria are measured based on New NGC performance criteria through December 31, 2010, and HII performance criteria following such date through the end of the applicable performance period. Prior to the Distribution, HII shall establish equity compensation plans, so that upon the Distribution, HII shall have in effect an equity compensation plan containing substantially the same terms as each original New NGC equity compensation plan under which any Converted HII Equity Compensation Award was granted. From and after the

18


 

Distribution, each Converted HII Equity Compensation Award shall be subject to the terms of the applicable HII equity compensation plan, the award agreement governing such Converted HII Equity Compensation Award and any Employment Agreement to which the applicable HII Employee or HII Retiree is a party. From and after the Distribution, HII shall retain, pay, perform, fulfill and discharge all Liabilities arising out of or relating to the Converted HII Equity Compensation Awards. Effective as of the Distribution, each HII Employee and HII Retiree shall cease participation in all New NGC equity compensation plans. In all events, the adjustments to the Converted HII Equity Compensation Awards provided for in this Section 8.1 shall be made in a manner that, as determined by New NGC, avoids adverse tax consequences under Code Section 409A.
     Section 8.2 Tax Withholding and Reporting . Effective from and after the Distribution, HII shall be solely responsible for all Tax withholding obligations with respect to the Converted HII Equity Compensation Awards.
ARTICLE IX
BENEFIT PLAN REIMBURSEMENTS, BENEFIT PLAN THIRD-PARTY CLAIMS
     Section 9.1 General Principles .
          (a) With respect to costs relating to Welfare Plan benefits (including, for the avoidance of doubt, claim costs, insurance premiums and administrative fees) provided to HII Employees and HII Retirees prior to Distribution that were not previously charged to a member of the HII Group, the HII Group shall reimburse New NGC within 30 days following receipt of an invoice from New NGC accompanied by reasonable documentation of such cost; provided that: (i) New NGC shall reduce such cost to reflect the receipt by New NGC after Distribution of amounts under the Medicare Part D Retiree Drug Subsidy Program or Early Retiree Reimbursement Program in respect of pre-Distribution claim costs of HII Retirees, with the amount of such reduction determined by New NGC using the allocation method historically applied by New NGC with respect to such amounts prior the Distribution; (ii) New NGC shall further reduce such cost to reflect any subrogation or reimbursement or similar recovery received by New NGC or a New NGC Benefit Plan after Distribution with respect to pre-Distribution claims incurred by HII Employees and HII Retirees; (iii) no such Welfare Plan costs shall be charged to, or adjustment amounts described in (ii) and (iii) credited to, the HII Group after March 31, 2013; and (iv) if, as of March 31, 2013, the adjustment amounts determined under (i) and (ii) exceed the costs chargeable to the HII Group as of that date, the New NGC Group shall reimburse the HII Group the amount of such excess.
          (b) From and after the Distribution, any services that a member of the New NGC Group shall provide to the members of the HII Group relating to any Benefit Plans shall be set forth in the Transition Services Agreement (and, to the extent provided therein, a member of the New NGC Group shall provide administrative services referred to in this Employee Matters Agreement).

19


 

          (c) From and after the Distribution, the members of the New NGC Group shall reimburse the members of the HII Group for any rebates or reimbursements received by a member of the New NGC Group from any third party (whether from a vendor, a taxing authority or any other third party) that relates to amounts paid by a member of the HII Group prior to the Distribution in connection with participation by HII Employees and HII Retirees in any New NGC Benefit Plan.
     Section 9.2 Benefit Plan Third-Party Claims . In the event of any conflict or inconsistency between the following provision on the one hand, and the Separation Agreement or any of the Ancillary Agreements on the other hand, the following provision shall control over the inconsistent provisions to the extent of the inconsistency:
     If a Third-Party Claim relates solely to the Benefit Plan of the Indemnifying Party, HII and New NGC shall take all actions necessary to substitute the Indemnifying Party and/or the relevant Benefit Plan of the Indemnifying Party as the proper party for such Third-Party Claim. If the Third-Party Claim relates to both an HII Benefit Plan and a New NGC Benefit Plan, HII and New NGC shall take all actions necessary to separate or otherwise partition the Third-Party Claim so as to allow each party to solely defend the claim relating to its own Benefit Plan (unless the parties mutually agree that such a separation or partition is unnecessary or inadvisable). If the Third-Party Claim cannot be transferred to the Indemnifying Party or separated or partitioned so as to allow each party to solely defend the claim relating to its own Benefit Plan, then New NGC shall defend the Third-Party Claim and HII may elect to participate in (but not control) the defense, compromise, or settlement of any such Third-Party Claim at its own expense (including allocated costs of HII in-house counsel and other HII personnel).
ARTICLE X
COOPERATION
     Section 10.1 Cooperation . Following the date of this Employee Matters Agreement, New NGC and HII shall, and shall cause their respective Subsidiaries to, use reasonable best efforts to cooperate with respect to any employee compensation or benefits matters that New NGC or HII, as applicable, reasonably determines require the cooperation of both New NGC and HII in order to accomplish the objectives of this Employee Matters Agreement. Without limiting the generality of the preceding sentence, (a) New NGC and HII shall cooperate in coordinating each of their respective payroll systems in connection with the transfers of HII Employees to the HII Group and the Distribution, and (b) New NGC shall transfer records to HII as reasonably necessary for the proper administration of HII Benefit Plans, to the extent such records are in New NGC’s possession. The obligations of the HII Group and the New NGC Group to cooperate pursuant to this Section 10.1 shall remain in effect until all audits of all Benefit Plans with respect to which the other party may have information have been completed or the applicable statute of limitations with respect to such audits has expired.

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ARTICLE XI
MISCELLANEOUS
     Section 11.1 Vendor Contracts . Prior to the Distribution, New NGC and HII shall use reasonable best efforts to (a) negotiate with the current third-party providers to separate and assign the applicable rights and obligations under each group insurance policy, health maintenance organization, administrative services contract, third-party administrator agreement, letter of understanding or arrangement that pertains to one or more New NGC Benefit Plans and one or more HII Benefit Plans (each, a “ Vendor Contract ”) to the extent that such rights or obligations pertain to HII Employees and HII Retirees and their respective Plan Payees or, in the alternative, to negotiate with the current third-party providers to provide substantially similar services to the HII Benefit Plans on substantially similar terms under separate contracts with HII or the HII Benefit Plans and (b) to the extent permitted by the applicable third-party provider, obtain and maintain pricing discounts or other preferential terms under the Vendor Contracts.
     Section 11.2 Further Assurances . Prior to the Distribution, if either party identifies any commercial or other service that is needed to ensure a smooth and orderly transition of its business in connection with the consummation of the transactions contemplated hereby, and that is not otherwise governed by the provisions of this Employee Matters Agreement, the parties will cooperate in determining whether there is a mutually acceptable arm’s-length basis on which the other party will provide such service.
     Section 11.3 Employment Tax Reporting Responsibility . HII and New NGC hereby agree to follow the standard procedure for United States employment tax withholding as provided in Section 4 of Rev. Proc. 2004-53, I.R.B. 2004-35.
     Section 11.4 Data Privacy . The parties agree that any applicable data privacy Laws and any other obligations of the HII Group and the New NGC Group to maintain the confidentiality of any employee information or information held by any Benefit Plans in accordance with applicable Law shall govern the disclosure of employee information among the parties under this Employee Matters Agreement. HII and New NGC shall ensure that they each have in place appropriate technical and organizational security measures to protect the personal data of the HII Employees and HII Retirees.
     Section 11.5 Employee Badges . HII shall use reasonable best efforts to cause HII Employees to remove references to NGC from such individuals’ security badges, effective as of the Distribution Date.
     Section 11.6 Third Party Beneficiaries . Nothing contained in this Employee Matters Agreement shall be construed to create any third-party beneficiary rights in any individual, including without limitation any HII Employee, New NGC Employee, New NGC Retiree or HII Retiree (including any dependent or beneficiary thereof) nor shall this Employee Matters Agreement be deemed to amend any Benefit Plan or to prohibit New NGC, HII or their respective Affiliates from amending or terminating any Benefit Plan.

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     Section 11.7 Effect if Distribution Does Not Occur . If the Distribution does not occur, then all actions and events that are, under this Employee Matters Agreement, to be taken or occur effective as of the Distribution, or otherwise in connection with the Distribution shall not be taken or occur except to the extent specifically agreed by the parties.
     Section 11.8 Incorporation of Separation Agreement Provisions . The following provisions of the Separation Agreement are hereby incorporated herein by reference, and unless otherwise expressly specified herein, such provisions shall apply as if fully set forth herein (references in this Section 11.8 to an “Article” or “Section” shall mean Articles or Sections of the Separation Agreement, and references in the material incorporated herein by reference shall be references to the Separation Agreement): Article V (relating to Mutual Releases; Indemnification); Article VI (relating to Shared Gains and Shared Liabilities); Article VII (relating to Exchange of Information; Confidentiality); Article VIII (relating to Further Assurances and Additional Covenants); Article IX (relating to Termination); Article X (relating to Dispute Resolution); and Article XI (relating to Miscellaneous).
     Section 11.9 No Representation or Warranty . New NGC makes no representation or warranty with respect to any matter in this Employee Matters Agreement, including, without limitation, any representation or warranty with respect to the legal or tax status or compliance of any Benefit Plan, compensation arrangement or Employment Agreement, and New NGC disclaims any and all liability with respect thereto.
[The remainder of this page is intentionally left blank.]

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     IN WITNESS WHEREOF, the parties have caused this Employee Matters Agreement to be executed by their duly authorized representatives.
             
    NORTHROP GRUMMAN CORPORATION    
 
           
 
  By:   /s/ Mark Rabinowitz    
 
           
 
      Name: Mark Rabinowitz    
 
      Title: Corporate Vice President & Treasurer    
 
           
    NEW P, INC.    
 
           
 
  By:   /s/ Mark Rabinowitz    
 
           
 
      Name: Mark Rabinowitz    
 
      Title: President & Treasurer    
 
           
    HUNTINGTON INGALLS INDUSTRIES, INC.    
 
           
 
  By:   /s/ C. Michael Petters    
 
           
 
      Name: C. Michael Petters    
 
      Title: President and Chief Executive Officer    
[Signature Page to Employee Matters Agreement]

Exhibit 10.3
EXECUTION COPY
 
INSURANCE MATTERS AGREEMENT
among
NORTHROP GRUMMAN CORPORATION,
NEW P, INC.,
and
HUNTINGTON INGALLS INDUSTRIES, INC.
Dated as of March 29, 2011
 

 


 

TABLE OF CONTENTS
         
    Page  
ARTICLE I DEFINITIONS
    1  
Section 1.1 Table of Definitions
    1  
Section 1.2 Certain Defined Terms
    2  
Section 1.3 Other Capitalized Terms
    2  
 
       
ARTICLE II SHIPBUILDING INSURANCE POLICIES
    2  
Section 2.1 Assignment of Shipbuilding Insurance Policies
    2  
Section 2.2 Assumption of Risk
    3  
Section 2.3 Assumption of Amounts Payable
    3  
Section 2.4 Further Assurances
    3  
Section 2.5 Pending Claims
    3  
 
       
ARTICLE III RETAINED INSURANCE POLICIES
    3  
Section 3.1 Assignment of Retained Insurance Policies
    3  
Section 3.2 Pre-Distribution Occurrences
    4  
Section 3.3 HII’s Financial Obligations for the Retained Insurance Policies
    4  
Section 3.4 Assumption of Risk
    4  
Section 3.5 Directors’ and Officers’ Insurance
    4  
Section 3.6 Northrop Grumman Risk Management Inc. Insurance Policies
    5  
Section 3.7 Replacement Insurance Policies
    5  
Section 3.8 Insurance Company Bankruptcy or Insolvency
    5  
 
       
ARTICLE IV COOPERATION
    5  
Section 4.1 Cooperation in Claims Handling
    5  
Section 4.2 Information
    5  
Section 4.3 Retention of Insurance Policies
    6  
Section 4.4 Certain Actions
    6  
Section 4.5 Allocation of Amounts
    6  
Section 4.6 No Agreement to Provide Insurance Management or Risk Management Services
    6  
Section 4.7 Outside-Entity Insurance Policies
    6  
 
       
ARTICLE V GENERAL PROVISIONS
    6  
Section 5.1 Effect if Distribution Does Not Occur
    6  
Section 5.2 Incorporation of Separation Agreement Provisions
    7  

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     INSURANCE MATTERS AGREEMENT, dated as of March 29, 2011 (this “ Insurance Matters Agreement ”), among Northrop Grumman Corporation, a Delaware corporation (“ NGC ”), New P, Inc., a Delaware corporation (“ New NGC ”), and Huntington Ingalls Industries, Inc., a Delaware corporation (“ HII ”).
RECITALS
     A. The parties to this Insurance Matters Agreement, together with certain Subsidiaries of NGC, have entered into the Separation and Distribution Agreement (the “ Separation Agreement ”), dated as of the date hereof.
     B. Pursuant to the Separation Agreement, the business of NGC will be separated into two publicly traded companies: (a) HII, which following the Separation (as defined in the Separation Agreement) will own and conduct, directly and indirectly, the Shipbuilding Business (as defined in the Separation Agreement), and (b) New NGC, which following the Separation will own and conduct, directly and indirectly, the Retained Business (as defined in the Separation Agreement).
     C. NGC, its Subsidiaries, and their respective predecessors have historically maintained various Insurance Policies (as defined below) providing coverage for the Shipbuilding Business and the Retained Business.
     D. The parties desire to enter into this Insurance Matters Agreement to allocate, among themselves, rights in the Insurance Policies and related coverages.
AGREEMENT
     In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to become legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
    Section 1.1 Table of Definitions . The following terms have the meanings set forth on the pages referenced below:
         
Definition   Page  
Current Retained Insurance Policies
    2  
HII
    1  
Insurance Matters Agreement
    1  
Insurance Policies
    2  
New NGC
    1  
NGC
    1  
Outside-Entity Insurance Policies
    2  
Retained Insurance Policies
    2  
Separation Agreement
    1  
Shipbuilding Insurance Policies
    2  

 


 

     Section 1.2 Certain Defined Terms . For the purposes of this Insurance Matters Agreement:
          “ Current Retained Insurance Policies ” means Retained Insurance Policies in effect as of the Distribution Date.
          “ Insurance Policies ” means insurance contracts of any kind, including, without limitation, first-party property, primary liability, excess liability, self-insurance, captive insurance company arrangements, reinsurance, surety bonds, and certificates of insurance naming or benefiting NGC or one of its pre-Distribution Subsidiaries, together with the rights, benefits, and privileges that arise thereunder or by virtue of law, except that “Insurance Policies” excludes life and employee benefits insurance. “Insurance Policies” includes insurance contracts issued to Subsidiaries of NGC before NGC acquired such Subsidiaries.
          “ Outside-Entity Insurance Policies ” means any Insurance Policies that (a) are acquired by any entity that is not a member of either Group and (b) name or benefit any New NGC Entity or any HII Entity.
          “ Retained Insurance Policies ” means the Insurance Policies identified on the memorandum exchanged between the parties to this Insurance Matters Agreement entitled “Listing of Retained Insurance Policies.”
          “ Shipbuilding Insurance Policies ” means the Insurance Policies identified on the memorandum exchanged between the parties to this Insurance Matters Agreement entitled “Listing of Shipbuilding Insurance Policies.”
     Section 1.3 Other Capitalized Terms . Capitalized terms not defined in this Insurance Matters Agreement shall have the meanings ascribed to them in the Separation Agreement.
ARTICLE II
SHIPBUILDING INSURANCE POLICIES
     Section 2.1 Assignment of Shipbuilding Insurance Policies . Effective as of the date of the Internal Reorganization, to the extent not already assigned, transferred, conveyed and delivered prior to such date and subject to Section 2.2 of the Separation Agreement, NGC hereby assigns, transfers, conveys and delivers to HII and HII hereby accepts and assumes NGC’s rights and obligations in the Shipbuilding Insurance Policies to the extent that the Shipbuilding Insurance Policies cover Shipbuilding Liabilities. NGC shall use reasonable best efforts to obtain written confirmation from its insurance broker that the Shipbuilding Insurance Policies may be assigned to HII or an HII Entity and shall use reasonable best efforts to obtain any necessary consents identified by its insurance broker to assign the Shipbuilding Insurance Policies. Nothing in this Section shall be construed to mean that NGC or New NGC believes that the consent by an insurer to the

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assignment of any particular Insurance Policy or right or obligation in or under any particular Insurance Policy is required by Law to make such assignment effective.
     Section 2.2 Assumption of Risk . In the event that NGC does not have the right to completely assign the Shipbuilding Insurance Policies to HII, HII shall bear the risk that such coverage is not available and will be obligated at its own expense to obtain replacement coverage, but New NGC shall use reasonable best efforts to assist HII to the extent reasonably necessary to provide HII access to the benefits of the Shipbuilding Insurance Policies. HII shall nonetheless be responsible for handling its own claims and coverage disputes. New NGC shall promptly notify HII if New NGC receives notice from any insurance carrier that NGC does not have the right to assign the Shipbuilding Insurance Policies to HII.
     Section 2.3 Assumption of Amounts Payable . HII shall pay or cause to be paid any self-insured retentions, deductibles, premiums, retrospective premium adjustments, or other amounts payable after the Distribution relating to the Shipbuilding Insurance Policies.
     Section 2.4 Further Assurances . Under the Separation Agreement, HII has assumed or will assume the Shipbuilding Liabilities and is solely responsible for such. HII nevertheless agrees to use its reasonable best efforts to provide the New NGC Group the benefit of the Shipbuilding Insurance Policies to the extent any Person seeks to collect any Shipbuilding Liability against any New NGC Entity. HII shall not cancel, terminate, or amend the Shipbuilding Insurance Policies in a manner that adversely affects coverage for the New NGC Group. HII shall pay all amounts necessary to exhaust or otherwise satisfy all applicable self-insured retentions, deductibles, and retrospective premium adjustments for the Shipbuilding Insurance Policies and related to any Shipbuilding Liability, as well as similar amounts not covered by the Shipbuilding Insurance Policies and related to any of the Shipbuilding Liabilities. New NGC shall not be responsible for letters of credit or surety bonds required to maintain the Shipbuilding Insurance Policies.
     Section 2.5 Pending Claims . Unless otherwise provided in the Separation Agreement, New NGC shall pay to HII all net recoveries received on claims filed by NGC on behalf of the Shipbuilding Business under the Shipbuilding Insurance Policies when such claims were filed prior to the Distribution Date. New NGC shall make payments (net of expenses) to HII within 30 days of receiving the insurance proceeds related to the claims.
ARTICLE III
RETAINED INSURANCE POLICIES
     Section 3.1 Assignment of Retained Insurance Policies . Effective as of the date of the Internal Reorganization, to the extent not already assigned, transferred, conveyed and delivered prior to such date and subject to Section 2.2 of the Separation Agreement, NGC hereby assigns, transfers, conveys and delivers to New NGC and New NGC hereby accepts and assumes NGC’s rights and obligations in the Retained Insurance Policies. NGC shall use reasonable best efforts to obtain written confirmation from its

3


 

insurance broker that the Retained Insurance Policies may be assigned to New NGC and its Subsidiaries and Affiliates and shall use reasonable best efforts to obtain any necessary consents identified by its insurance broker to assign the Retained Insurance Policies. Nothing in this Section shall be construed to mean that NGC or New NGC believes that the consent by an insurer to the assignment of any particular Insurance Policy or right or obligation in or under any particular Insurance Policy is required by Law to make such assignment effective.
     Section 3.2 Pre-Distribution Occurrences . New NGC shall use reasonable best efforts to provide HII the benefit of the Retained Insurance Policies for occurrences, losses, circumstances and other acts or events occurring prior to the Distribution. HII shall make claims under the Retained Insurance Policies directly to the insurer and shall provide New NGC contemporaneous written notice of any such claim. HII may negotiate settlement of such claims under the Retained Insurance Policies independently of the New NGC Group, but shall keep New NGC reasonably advised concerning the status of any such negotiation. HII shall obtain the prior written consent of New NGC, which shall not be unreasonably withheld or delayed, before initiating coverage litigation against any insurer or initiating any legal action against a broker of the Retained Insurance Policies. In no event will HII initiate coverage litigation directly against any New NGC Entity.
     Section 3.3 HII’s Financial Obligations for the Retained Insurance Policies . After the Distribution Date, HII shall, independently and without the involvement of the New NGC Group, pay all amounts necessary to exhaust or otherwise satisfy all applicable self-insured retentions, deductibles, fronted policy program repayments, and any other amounts not covered by the Retained Insurance Policies and related to any claim made on the Retained Insurance Policies by HII. HII also shall pay its proportionate share of any retrospective premium adjustments for the Retained Insurance Policies, according to the protocols which have historically been followed prior to the Distribution. HII shall not be responsible for letters of credit or surety bonds required to maintain the Retained Insurance Policies.
     Section 3.4 Assumption of Risk . In the event that New NGC does not have the right under the Retained Insurance Policies to provide HII the benefit of such Insurance Policies, HII shall bear the risk that such coverage is not available, but New NGC shall at its own cost and expense use reasonable best efforts to assist HII to the extent reasonably necessary to provide HII access to the benefits of the Retained Insurance Policies. HII shall nonetheless be responsible for its own claims handling. New NGC shall promptly notify HII if New NGC receives notice from any insurance carrier that NGC does not have the right to provide HII with the benefits of the Retained Insurance Policies.
     Section 3.5 Directors’ and Officers’ Insurance . For the six-year period commencing immediately after the Distribution, New NGC shall maintain in effect directors’ and officers’ liability Insurance Policies providing coverage for acts or omissions occurring prior to the Distribution with respect to those Persons who are currently covered by NGC’s directors’ and officers’ liability Insurance Policies, including such Persons who become officers, directors or employees of HII, on terms and at limits no less favorable

4


 

than New NGC’s directors’ and officers’ liability Insurance Policies in any given policy year.
     Section 3.6 Northrop Grumman Risk Management Inc. Insurance Policies . Notwithstanding Section 3.2 of this Insurance Matters Agreement, HII shall retain coverage under certain self-insurance policies issued by Northrop Grumman Risk Management Inc. until March 15, 2011, but only to the extent that Northrop Grumman Risk Management Inc. has reinsurance contracts covering losses incurred by HII during that period. HII shall, independently and without the involvement of the New NGC Group, pay all amounts necessary to exhaust or otherwise satisfy all applicable self-insured retentions, deductibles, fronted policy program repayments, and any other amounts not covered by reinsurance and related to any claim made on Northrop Grumman Risk Management Inc. Insurance Policies.
     Section 3.7 Replacement Insurance Policies . Except as expressly set forth above, the policy period of all Current Retained Insurance Policies shall be deemed to end as to HII as of the Distribution. HII has arranged and shall be obligated to maintain its own separate replacement Insurance Policies for the period that commences as of the Distribution, and such insurance arrangements shall be separate and apart from the insurance programs of New NGC and its Subsidiaries.
     Section 3.8 Insurance Company Bankruptcy or Insolvency . With regards to the Retained Insurance Policies only, the parties shall use their best efforts to cooperate with one another to maximize the total recovery in the event of any future settlement or other disposition of the liabilities of any insurance company, which shall become insolvent or otherwise seek to avail itself of any scheme of arrangement or bankruptcy proceeding. In addition, the parties shall use their best efforts to allocate to HII any portion of any such recovery which pertains to the Shipbuilding Liabilities.
ARTICLE IV
COOPERATION
     Section 4.1 Cooperation in Claims Handling . Each of New NGC and HII, at the request of the other and at its own cost and expense, shall cooperate with and use reasonable best efforts to assist the other in processing or presenting claims made under any Insurance Policy for the benefit of any insured party.
     Section 4.2 Information . Each of New NGC and HII and their respective Groups shall share such information as is reasonably necessary in order to permit the other to manage and conduct its insurance matters in an orderly fashion. On or before the Distribution, New NGC will provide to HII the best available listing of historic Insurance Policies that provide coverage to HII for occurrences, claims, losses, circumstances and other acts or events on or after April 3, 2001 and electronic copies of all such Insurance Policies in its possession. HII shall be solely responsible for maintaining this information and New NGC shall not be obligated to provide duplicative or additional information following the Distribution.

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     Section 4.3 Retention of Insurance Policies . Each of New NGC Entities and HII Entities will use reasonable best efforts to prevent the destruction of any Insurance Policy, to notify the other Group of the proposed destruction of any Insurance Policy, and to give such other Group reasonable opportunity to take possession of such Insurance Policy prior to such destruction.
     Section 4.4 Certain Actions . Except to the extent provided in this Insurance Matters Agreement, no New NGC Entity or HII Entity shall take any action that would compromise, jeopardize, or otherwise interfere with either Group’s rights under any Insurance Policy. Except as otherwise contemplated by the Separation Agreement, this Insurance Matters Agreement, or any other Ancillary Agreement, after the Distribution, no New NGC Entity or HII Entity shall, without the prior written consent of the other Group, which such consent shall not be unreasonably withheld or delayed, provide any insurance carrier with a release, or amend, modify, settle, compromise, or waive any rights under any Insurance Policy, if such release, amendment, modification or waiver would adversely affect any rights or potential rights of any member of the other Group thereunder. However, nothing in this Section 4.4 shall (a) preclude any member of any Group from presenting any claim or from exhausting any policy limit, (b) require any member of any Group to pay any premium or other amount or to incur any Liability or (c) require any member of any Group to renew, extend or continue any Insurance Policy.
     Section 4.5 Allocation of Amounts . For purposes of the exhaustion of any limits that apply to coverage available under the Insurance Policies, amounts shall be allocated to the Insurance Policies on a first come/first served basis. That means that amounts covered by such Insurance Policies shall be allocated to such Insurance Policies in the order in which such amounts were paid by the insurance companies.
     Section 4.6 No Agreement to Provide Insurance Management or Risk Management Services . Nothing in this Insurance Matters Agreement shall be construed as providing for or creating an obligation to provide insurance management or risk management services.
     Section 4.7 Outside-Entity Insurance Policies . Outside-Entity Insurance Policies are unaffected by this transaction. It will be the responsibility of each Group to monitor and renew any Outside-Entity Insurance Policies benefiting that Group without the involvement of the other Group. However, the parties shall, each at its own cost and expense, use their reasonable best efforts to cooperate and assist one another to assure that appropriate name change amendments are made to any Outside-Entity Insurance Policies necessary to assure that said Outside-Entity Insurance Policies insure the entity that has the Liabilities to which the insurance relates.
ARTICLE V
GENERAL PROVISIONS
     Section 5.1 Effect if Distribution Does Not Occur . If the Distribution does not occur, then all actions and events that are, under this Insurance Matters Agreement, to be taken or occur effective as of the Distribution, or otherwise in connection with the

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Distribution shall not be taken or occur, except to the extent specifically agreed by the parties.
     Section 5.2 Incorporation of Separation Agreement Provisions . The following provisions of the Separation Agreement are hereby incorporated herein by reference, and unless otherwise expressly specified herein, such provisions shall apply as if fully set forth herein (references in this Section 5.2 to an “Article” or “Section” shall mean Articles or Sections of the Separation Agreement, and references in the material incorporated herein by reference shall be references to the Separation Agreement): Article V (relating to Mutual Releases; Indemnification); Article VI (relating to Shared Gains and Shared Liabilities); Article VII (relating to Exchange of Information; Confidentiality); Article VIII (relating to Further Assurances and Additional Covenants); Article IX (relating to Termination); Article X (relating to Dispute Resolution); and Article XI (relating to Miscellaneous). In the event of any conflict or inconsistency between any of the foregoing provisions of the Separation Agreement and any provision of this Insurance Matters Agreement, this Insurance Matters Agreement shall prevail with respect to matters governed by this Insurance Matters Agreement.
[The remainder of this page is intentionally left blank.]

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     IN WITNESS WHEREOF, the parties have caused this Insurance Matters Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
         
  NORTHROP GRUMMAN CORPORATION
 
 
  By:   /s/ Mark Rabinowitz    
    Name:   Mark Rabinowitz   
    Title:   Corporate Vice President & Treasurer   
 
         
  NEW P, INC.
 
 
  By:   /s/ Mark Rabinowitz    
    Name:   Mark Rabinowitz   
    Title:   President & Treasurer   
 
         
  HUNTINGTON INGALLS INDUSTRIES, INC.
 
 
  By:   /s/ C. Michael Petters  
    Name:   C. Michael Petters   
    Title:   President and Chief Executive Officer   
 
[Signature Page to Insurance Matters Agreement]

 

Exhibit 10.4
EXECUTION COPY
 

INTELLECTUAL PROPERTY LICENSE AGREEMENT
between
NORTHROP GRUMMAN SYSTEMS CORPORATION
and
NORTHROP GRUMMAN SHIPBUILDING, INC.
Dated as of March 29, 2011
 

 


 

TABLE OF CONTENTS
         
    Page  
ARTICLE I DEFINITIONS
    1  
 
       
Section 1.1 Table of Definitions
    1  
Section 1.2 Certain Defined Terms
    2  
 
       
ARTICLE II GRANT OF LICENSES
    4  
 
       
Section 2.1 Grant of Licenses
    4  
Section 2.2 Have Made Rights
    5  
Section 2.3 Right to Sublicense
    5  
Section 2.4 Licensed Software
    5  
Section 2.5 Delivery of Embodiments of IP
    6  
Section 2.6 Jointly Developed Intellectual Property
    6  
Section 2.7 Use of Intellectual Property in Connection with Certain Intercompany Arrangements
    6  
Section 2.8 License to Use Background Intellectual Property
    7  
 
       
ARTICLE III OWNERSHIP
    8  
 
       
Section 3.1 Ownership
    8  
Section 3.2 Ownership of Improvements and Derivative Works
    8  
Section 3.3 No Other License
    8  
Section 3.4 Prosecution and Maintenance
    8  
 
       
ARTICLE IV CONFIDENTIALITY
    8  
 
       
Section 4.1 Proprietary Information
    8  
Section 4.2 Confidentiality
    9  
Section 4.3 Limited Exception
    10  
Section 4.4 Unauthorized Disclosure
    10  
 
       
ARTICLE V REPRESENTATIONS; DISCLAIMER
    10  
 
       
Section 5.1 Mutual Representations
    10  
Section 5.2 Disclaimer
    11  
Section 5.3 Limitations on Liability
    11  
Section 5.4 Indemnification
    11  
 
       
ARTICLE VI TERM
    11  
 
       
Section 6.1 Term
    11  

 


 

TABLE OF CONTENTS
(Continued)
         
    Page  
ARTICLE VII TRANSFERABILITY
    12  
 
       
Section 7.1 Assignment
    12  
 
       
ARTICLE VIII GENERAL PROVISIONS
    12  
 
       
Section 8.1 Amendment and Modification
    12  
Section 8.2 Waiver
    12  
Section 8.3 Notices
    13  
Section 8.4 Interpretation
    13  
Section 8.5 Entire Agreement
    14  
Section 8.6 No Third-Party Beneficiaries
    14  
Section 8.7 Governing Law
    14  
Section 8.8 Submission to Jurisdiction
    14  
Section 8.9 Enforcement
    15  
Section 8.10 Severability
    15  
Section 8.11 Waiver of Jury Trial
    15  
Section 8.12 Counterparts
    15  
Section 8.13 Facsimile Signature
    15  
Section 8.14 Effect if Distribution Does Not Occur
    16  

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INTELLECTUAL PROPERTY LICENSE AGREEMENT
     INTELLECTUAL PROPERTY LICENSE AGREEMENT, dated as of March 29, 2011 (this “ License Agreement ”), between Northrop Grumman Systems Corporation, a Delaware corporation (“ NGSC ”) and Northrop Grumman Shipbuilding, Inc., a Virginia corporation (“ NGSB ”).
RECITALS
     A. NGSC, NGSB, Northrop Grumman Corporation, a Delaware corporation (“ NGC ”), New P, Inc., a Delaware corporation (“ New NGC ”), and Huntington Ingalls Industries, Inc., a Delaware corporation (“ HII ”), have entered into the Separation and Distribution Agreement (the “ Separation Agreement ”), dated as of the date hereof, pursuant to which New NGC intends to distribute to its stockholders its entire interest in HII by way of a stock dividend (the “ Distribution ”).
     B. Following the Distribution, NGSC will be a wholly owned subsidiary of New NGC (which will be renamed “Northrop Grumman Corporation”) and NGSB will be a wholly owned subsidiary of HII.
     C. The parties wish to set forth their agreements as to certain matters regarding Intellectual Property (as defined below) under which each party shall grant to the other a non-exclusive license of the Intellectual Property owned by such party or any of its Affiliates that is used by the other party in the conduct of their respective businesses and within the Field of Use (as defined below).
AGREEMENT
     In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
     Section 1.1 Table of Definitions . The following terms have the meanings set forth on the pages referenced below:
         
Definition   Page  
Affiliate
    2  
Background Intellectual Property
    7  
Background IP Owner
    7  
Business Day
    2  
Designated Intellectual Property
    2  
Disclosing Party
    8  
Distribution
    1  
Field of Use
    2  
Foreground Intellectual Property
    7  

 


 

         
Definition   Page  
Foreground IP Owner
    7  
Governmental Authority
    3  
HII
    1  
Improved Software
    5  
Indemnifying Party
    11  
Intellectual Property
    3  
License Agreement
    1  
Licensed Intellectual Property
    3  
Licensee
    3  
Licensor
    3  
Licensor Indemnitees
    11  
Line of Business
    3  
New NGC
    1  
NGC
    1  
NGSB
    1  
NGSC
    1  
Person
    3  
Proprietary Information
    8  
Receiving Party
    8  
Relevant Usage Period
    4  
Separation Agreement
    1  
Software
    4  
Subsidiary
    4  
     Section 1.2 Certain Defined Terms . For the purposes of this License Agreement:
          “ Affiliate ” of any Person means a Person that controls, is controlled by, or is under common control with such Person; provided , however , that for purposes of this License Agreement, none of the New NGC Entities (as defined in the Separation Agreement) shall be deemed to be an Affiliate of any HII Entity (as defined in the Separation Agreement) and none of the HII Entities shall be deemed to be an Affiliate of any New NGC Entity. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.
          “ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.
          “ Designated Intellectual Property ” means the Intellectual Property identified on Schedule C .
          “ Field of Use ” means, (a) as to any Licensed Intellectual Property other than the Designated Intellectual Property, the use of such Intellectual Property that the Licensee

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has made in the ordinary course of its business in the Relevant Usage Period prior to and including the Distribution, including the general manner and scope of such use in the Line of Business for which the Intellectual Property has been used during such Relevant Usage Period and (b) as to any Designated Intellectual Property, the applicable field of use specified on Schedule C . In the event of a dispute between the parties as to whether a particular use by a Licensee of Licensed Intellectual Property licensed to such Licensee is within the applicable Field of Use, the Licensee will have the burden of proof by a preponderance of the evidence. For the avoidance of doubt, the general manner and scope of such use shall include broad uses of the Intellectual Property, such as use in customer proposals.
          “ Governmental Authority ” means any United States or non-United States federal, state, local, territorial, tribal or international court, government, department, commission, board, bureau, agency, official or other legislative, judicial, regulatory, administrative or governmental authority.
          “ Intellectual Property ” or “ IP ” means all of the following intellectual property rights, whether arising under the laws of the United States or the laws of any other jurisdiction: (a) patents, (b) copyrights, (c) trade secrets, know-how and other confidential and proprietary information, and (d) all registrations and applications for registration of any of the foregoing, but excluding (e) trademarks, service marks, domain names and similar rights.
          “ Licensed Intellectual Property ” means (a) all Intellectual Property owned by a party or any of its Affiliates as of the Distribution that, in the Relevant Usage Period prior to or at the time of the Distribution, has been or is being used by the other party or any of its Affiliates in the ordinary course of such other party’s or any of its Affiliate’s businesses, excluding any such Intellectual Property that prior to the Distribution, has been or is being used by the other party or any of the other party’s Affiliates solely in connection with such other party or such other party’s Affiliate performing as a party to an intercompany teaming agreement, intercompany work order or similar intercompany agreement with such party or any of its Affiliates and (b) the Designated Intellectual Property.
          “ Licensee ” means, collectively, a party and its Affiliates in their capacity as licensees to which a license of Licensed Intellectual Property is granted by Licensor hereunder.
          “ Licensor ” means, collectively, a party and its Affiliates in their capacity as licensors of Licensed Intellectual Property that is licensed to Licensee hereunder.
          “ Line of Business ” means a set of one or more highly related products which service a particular business need.
          “ Person ” means an individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, organization or

3


 

other entity, including any Governmental Authority, and including any successor, by merger or otherwise, of any of the foregoing.
          “ Relevant Usage Period ” means the 12-month period prior to the Distribution.
          “ Software ” means computer software and databases, together with, as applicable, object code, source code, firmware and embedded versions thereof and documentation related thereto.
          “ Subsidiary ” of any Person means any corporation or other organization, whether incorporated or unincorporated, of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided , however , that no Person that is not directly or indirectly wholly owned by any other Person shall be a Subsidiary of such other Person unless such other Person controls, or has the right, power or ability to control, that Person.
ARTICLE II
GRANT OF LICENSES
     Section 2.1 Grant of Licenses .
          (a) Subject to the terms and conditions of this License Agreement, each Licensor hereby grants to the respective Licensee a non-exclusive, worldwide, fully paid, non-transferable (except as expressly provided in Article VII), irrevocable and perpetual license, solely within such Licensee’s Field of Use, to:
               (i) make (including the right to use any apparatus and practice any method in making), have made, make improvements on, use, import, offer for sale, lease, sell and/or otherwise transfer products and provide services under the patents included in such Licensor’s Licensed Intellectual Property (including any patents that hereafter issue on patent applications that are pending as of the Distribution);
               (ii) use, reproduce, distribute, prepare derivative works of, and publicly perform and publicly display any original works of authorship (or any derivative works based thereon) that are the subject of any of the copyrights included in such Licensor’s Licensed Intellectual Property; and
               (iii) use and exploit any know-how or other trade secrets or proprietary information included in such Licensor’s Licensed Intellectual Property, subject to compliance with the confidentiality obligations set forth in Article IV.
          (b) Each party shall cause its Affiliates to grant the licenses contemplated to be granted by such Affiliates hereunder and to perform all of their

4


 

obligations imposed hereunder, including the confidentiality obligations set forth in Article IV.
          (c) Each Licensee will, and will cause its Affiliates to, comply with the Field of Use and all other limitations or restrictions imposed under this License Agreement with respect to its and its Affiliates’ use of the Licensed Intellectual Property licensed to it and its Affiliates hereunder.
     Section 2.2 Have Made Rights . The licenses granted in Sections 2.1(a)(i) by the applicable Licensor to the applicable Licensee to have products made by a third party or to import products: (a) apply only when the specifications for such Licensee’s products were created by or specifically for Licensee (either solely or jointly with one or more third parties), (b) extend only to those claims of Licensor’s licensed patents, the infringement of which would be necessitated by compliance with such specifications and (c) do not apply to any methods used, or any products in substantially the same form manufactured or marketed, by such third party, prior to Licensee’s furnishing of such specifications.
     Section 2.3 Right to Sublicense . Except as otherwise provided on Schedule C with respect to the Designated Intellectual Property, each Licensee shall have the right to sublicense freely the rights and licenses granted by the applicable Licensor pursuant to Section 2.1(a) to Licensee’s contractors, sub-contractors and agents for use solely in connection with the operation of Licensee’s business and within the Field of Use. Each Licensee shall ensure that all such permitted sublicensees shall abide by the terms and conditions of this License Agreement, to the extent applicable, and all such grants of sublicenses shall be made in writing and executed by all parties thereto.
     Section 2.4 Licensed Software . The parties agree and acknowledge that any Software that is licensed under this License Agreement shall be licensed only in the form in which it is being used by the Licensee in the ordinary course of its business in the Relevant Usage Period prior to and including the Distribution; provided that, in the case of any Software included in the Designated Intellectual Property, such Software will be licensed in the form specified on Schedule C . Accordingly, in the case of Software that is not included in the Designated Intellectual Property, if a Licensee is using any source code of any Software licensed to it hereunder by the Licensor in the ordinary course of its business in the Relevant Usage Period prior to and including the Distribution, such Licensee will be permitted to retain such source code and the licenses granted under Section 2.1(a) to such Licensee shall extend to such source code. Notwithstanding the foregoing, for the Software identified on Schedule B hereto that is undergoing improvement or as to which a derivative work is being prepared (“ Improved Software ”), the parties agree and acknowledge that any such Improved Software that is licensed under this License Agreement shall be licensed in such form existing immediately after successful completion of testing of the improvement and/or derivative works that is in process of being made or prepared as of the Distribution, even if such form comes into existence after the Distribution. The respective Licensor hereby agrees to deliver such Improved Software in the licensed form, as soon as practicable after successful completion of testing of the improvement and/or derivative work. Thereafter, the Licensor shall have no further obligation to deliver any improvements or derivative works of such Improved

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Software to each Licensee under this License Agreement. Accordingly, for such Improved Software that has been used by the Licensee in source code form in the ordinary course of its business in the Relevant Usage Period prior to and including the Distribution, such Licensee will be permitted to obtain such source code in the form existing immediately after such successful completion of testing and the licenses granted under Section 2.1(a) to such Licensee shall extend to such source code. For the avoidance of doubt, this License Agreement provides for the licensing of Intellectual Property that is owned by a party or an Affiliate thereof and nothing in this License Agreement provides for any sublicensing of Software or any other Intellectual Property that is owned by a third party or any assignment of any license of Software or any other Intellectual Property that is owned by a third party.
     Section 2.5 Delivery of Embodiments of IP . To the extent that a Licensee is not in possession as of the Distribution of any embodiment of Licensed Intellectual Property licensed to such Licensee hereunder, the respective Licensor hereby agrees to deliver to such Licensee upon request, as soon as practicable after the Distribution, copies of all such embodiments of such Licensed Intellectual Property. Thereafter, each Licensor shall have no further obligation to deliver any Licensed Intellectual Property, or copies thereof, to each Licensee under this License Agreement. Each Licensor shall have no further access to, or any obligation to maintain or service, any electronic copies of such Licensed Intellectual Property that is delivered to the Licensee.
     Section 2.6 Jointly Developed Intellectual Property . If either party or any of its Affiliates materially contributed to the development of any Intellectual Property that is owned by the other party or any of the other party’s Affiliates as of the Distribution, and such Intellectual Property does not constitute Licensed Intellectual Property that is licensed to such party and such party’s Affiliates hereunder, the other party agrees that, if such party requests that it and its Affiliates be granted a license to use such Intellectual Property within the scope of their Lines of Business existing as of the Distribution, the other party will consider in good faith granting such requested license.
     Section 2.7 Use of Intellectual Property in Connection with Certain Intercompany Arrangements . Any Intellectual Property that, at the time of the Distribution, (a) is owned by any member of the New NGC Group (as defined in the Separation Agreement), but is in the possession of, or is being used by, a member of the HII Group (as defined in the Separation Agreement) in connection with such member of the HII Group performing as a party to an intercompany teaming agreement, intercompany work order or similar intercompany agreement with a member of the New NGC Group, shall be licensed by such member of the New NGC Group to such member of the HII Group pursuant to the terms of any intellectual property license granted to such member of the HII Group in the applicable intercompany agreement or, if the applicable intercompany agreement does not set forth the terms of such intellectual property license, then pursuant to the terms of an intellectual property license that such member of the New NGC Group and such member of the HII Group shall negotiate in good faith promptly after the Distribution, or (b) is owned by any member of the HII Group, but is in the possession of, or is being used by, a member of the New NGC Group in connection with such member of the New NGC Group performing as a party to an intercompany teaming agreement,

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intercompany work order or similar intercompany agreement with a member of the HII Group, shall be licensed by such member of the HII Group to such member of the New NGC Group pursuant to the terms of any intellectual property license granted to such member of the New NGC Group in the applicable intercompany agreement or, if the applicable intercompany agreement does not set forth the terms of such intellectual property license, then pursuant to the terms of an intellectual property license that such member of the HII Group and such member of the New NGC Group shall negotiate in good faith promptly after the Distribution.
     Section 2.8 License to Use Background Intellectual Property .
          (a) “ Background Intellectual Property ” means, with respect to an Intellectual Property asset owned by one party or any of its Affiliates (“ Foreground Intellectual Property ”), Intellectual Property that was owned by the other party or any of the other party’s Affiliates prior to the creation or development of such Foreground Intellectual Property, and that is essential to the effective use or practice of such Foreground Intellectual Property.
          (b) “ Background IP Owner ” means the party or any of its Affiliates that owns the Background Intellectual Property.
          (c) “ Foreground IP Owner ” means the party or its Affiliates that owns or has been licensed the Foreground Intellectual Property.
          (d) The Background IP Owner hereby grants to the Foreground IP Owner a non-exclusive, worldwide, fully paid, irrevocable and perpetual license to use or practice and have had practiced such Background Intellectual Property of the Background IP Owner that is essential to the effective use or practice of the Foreground Intellectual Property.
          (e) The licenses granted in Section 2.8(d) shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Notwithstanding any other provisions in this License Agreement, the Foreground IP Owner shall not assign (in whole or in part) or sublicense any licensed Background Intellectual Property to any known competitor of the Background IP Owner in the technical field of such Background Intellectual Property.
          (f) As a further limitation on the provisions of Section 4.2(a), in the case of licensed Background Intellectual Property, in maintaining the confidentiality of Proprietary Information of the Disclosing Party related to such Background Intellectual Property, the Foreground IP Owner shall not disclose or give access to any such Proprietary Information to any known competitor of the Background IP Owner in the technical field of such Background Intellectual Property.

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ARTICLE III
OWNERSHIP
     Section 3.1 Ownership . Each Licensee acknowledges that, as between the parties, each Licensor owns all right, title and interest in and to its Licensed Intellectual Property. Each Licensee agrees that it shall not, directly or indirectly, challenge the validity, enforceability or ownership of the respective Licensor’s Licensed Intellectual Property.
     Section 3.2 Ownership of Improvements and Derivative Works . Each party or its applicable Affiliate will own exclusively all improvements and derivative works created or developed by such party or its Affiliate that are derived from or based on any Licensed Intellectual Property licensed from the other party hereunder, subject to the other party’s retained ownership of the Licensed Intellectual Property on which such improvements and derivative works are based or from which they are derived. Other than for Improved Software as provided in Section 2.4, neither party (nor any Affiliate thereof) shall have any obligation to disclose or license any such improvements or derivative works to the other party.
     Section 3.3 No Other License . Except as expressly provided in this License Agreement, nothing herein shall be construed as granting to a party any license or other rights under any other Intellectual Property rights of the other party whether by implication or estoppel. Nothing herein shall grant either party, in selling or promoting the sale of products or services, the right to directly or indirectly use or refer to the trademarks or trademark type rights of the other party or trademarks or other marks and names similar thereto.
     Section 3.4 Prosecution and Maintenance . Each Licensor shall have the sole and exclusive right, but not the obligation, at its sole cost and expense: (a) to file, prosecute, obtain and maintain, throughout the world, any patents, patent applications and other registrations or applications for registration included in the Licensed Intellectual Property owned by such Licensor, and (b) to conduct or participate, throughout the world, in any interference, reexaminaton, opposition, cancellation, nullification and other interpartes, ex partes or other types of proceedings before the U.S. Patent & Trademark Office and similar authorities, registries or agencies, and all appeals thereof (regardless of forum) involving or relating to such Licensed Intellectual Property. The manner in which any such filing, prosecution, maintenance or any other action is conducted by such Licensor under this Section 3.4 shall be in such Licensor’s sole control and discretion.
ARTICLE IV
CONFIDENTIALITY
     Section 4.1 Proprietary Information . For the purposes hereof, “ Proprietary Information ” of a party (the “ Disclosing Party ”) means all business sensitive and/or proprietary information of the Disclosing Party disclosed to, or in the possession of, the other party (the “ Receiving Party ”), whether disclosed orally, verbally, visually, electronically, in tangible form or otherwise, and regardless of whether marked, denoted or

8


 

otherwise indicated as “business sensitive,” “proprietary,” “private” or words of similar import. Proprietary Information of Licensor shall include trade secrets and other business sensitive and proprietary information included in the Licensed Intellectual Property, as well as any business and/or sensitive information that has been made available by a Party or any of its Affiliates to the other party or any of the other party’s Affiliates in connection with such other party or such other party’s Affiliate performing as a party to an intercompany teaming agreement, intercompany work order or similar intercompany agreement.
     Section 4.2 Confidentiality .
          (a) In maintaining the confidentiality of Proprietary Information of the Disclosing Party, the Receiving Party shall exercise the same degree of care that it exercises with its own Proprietary Information, but in no event less than a reasonable degree of care. Without limiting any of the foregoing, the Receiving Party shall not disclose or give access to any such Proprietary Information to any third party, other than its personnel, sublicensees or customers pursuant to contract requirements, without the prior written consent of the Disclosing Party. The Receiving Party shall restrict access to such Proprietary Information to those of its personnel and sublicensees having a strict need for access thereto, and shall use commercially reasonable efforts to ensure that each of its personnel and sublicensees holds in confidence the Proprietary Information of the Disclosing Party in accordance with the terms and conditions hereof. The Receiving Party shall, and shall cause its personnel and sublicensees to, make no use, directly or indirectly, of any Proprietary Information of the Disclosing Party for any purpose other than as authorized hereunder. The Receiving Party shall not copy or reproduce the Proprietary Information or any portion thereof, or remove any tangible copies of the Proprietary Information or any portion thereof from the Receiving Party’s facilities except as reasonably required in connection with exercising the rights licensed hereunder or as expressly permitted by the Disclosing Party.
          (b) As a further limitation on the provisions of Section 4.2(a), in the case of assets listed as Designated Intellectual Property, if Schedule C includes sublicensing limitations for an asset and such sublicensing limitations prohibit sublicensing of such asset to known competitors except under strict non-disclosure agreement, then in maintaining the confidentiality of Proprietary Information of the Disclosing Party related to such asset, the Receiving Party shall ensure that the strict non-disclosure agreement meets the non-disclosure requirements set forth at the end of Schedule C .
          (c) The confidentiality obligations contained in Section 4.2(a) and (b) and Section 2.8(f) shall not apply to any information that contemporaneous written records of the Receiving Party demonstrate (a) was lawfully disclosed to the Receiving Party without restriction by an unrelated third party who does not have any obligations of confidentiality to the Disclosing Party, (b) the Receiving Party independently developed such information prior to the Distribution without any use of or reference to the Proprietary Information of the Disclosing Party or (c) is or becomes part of the public domain through no fault of the Receiving Party, it being understood that if only a portion of any such information is or becomes part of the public domain (including by way of issued patents or

9


 

published patent applications), the confidentiality obligations of the Receiving Party with respect to the rest of the Proprietary Information shall remain intact without modification.
     Section 4.3 Limited Exception . The obligation of confidentiality and non-disclosure contained in this License Agreement shall not apply to the extent that the Receiving Party is required to disclose any Proprietary Information of the Disclosing Party by a valid subpoena, order or regulation of a governmental agency or a court of competent jurisdiction having jurisdiction over the Receiving Party; provided , however , that the Receiving Party shall not intentionally make any such disclosure without (a) first notifying the Disclosing Party and allowing the Disclosing Party a reasonable opportunity to prevent or limit such disclosure (either by challenging or quashing any such subpoena, order or regulation or obtaining injunctive relief from, or a protective order with respect to, the obligation to make such disclosure), and (b) reasonably cooperating, at Disclosing Party’s expense, with the Disclosing Party’s efforts to prevent or limit such disclosure.
     Section 4.4 Unauthorized Disclosure . The Receiving Party acknowledges and confirms that the Proprietary Information of the Disclosing Party constitutes proprietary information and trade secrets valuable to the Disclosing Party, and that the unauthorized use, loss or outside disclosure of such Proprietary Information shall cause irreparable injury to the Disclosing Party. The Receiving Party shall notify the Disclosing Party immediately upon discovery of any unauthorized use or disclosure of such Proprietary Information, and will cooperate with the Disclosing Party in every reasonable way to help regain possession of such Proprietary Information and to prevent its further unauthorized use. The Receiving Party acknowledges and agrees that monetary damages may not be a sufficient remedy for unauthorized disclosure of Proprietary Information of the Disclosing Party and that the Disclosing Party shall be entitled, without waiving other rights or remedies, to such injunctive or equitable relief as may be deemed proper by a court of competent jurisdiction. The prevailing party shall be entitled to recover reasonable attorney’s fees incurred by it in connection with any action commenced by the Disclosing Party against the Receiving Party arising out of or relating to any alleged disclosure of Proprietary Information of the Disclosing Party by the Receiving Party in breach of this License Agreement.
ARTICLE V
REPRESENTATIONS; DISCLAIMER
     Section 5.1 Mutual Representations . Each party represents and warrants that (a) it has the power and authority to enter into this License Agreement and has taken all necessary corporate action to authorize its performance under this License Agreement; (b) this License Agreement, when executed and delivered, will constitute a legal, valid and binding obligation of each such party, enforceable in accordance with its terms; (c) no consent or authorization of, filing with, or notice to any governmental authority is required in connection with its performance under this License Agreement; and (d) its entering into this License Agreement or performance by it hereunder will not violate any federal, state or local licensing or other statute, rule or regulation, or any contractual obligation of such party. Each party agrees to comply with all applicable Laws, rules and regulations in connection with its activities under this License Agreement.

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     Section 5.2 Disclaimer . Except as expressly set forth in this License Agreement, each of the licenses of Licensed Intellectual Property granted by a Licensor hereunder are made “as-is” and “where-is.” Each Licensor hereby disclaims all representations or warranties of any kind, either express or implied, including any warranty of merchantability, fitness for a particular purpose, non-infringement or any other matter with respect to any Licensed Intellectual Property licensed by such Licensor, whether used alone or combined with other products or services.
     Section 5.3 Limitations on Liability . Except for any willful breach of Articles III and IV, under no circumstances shall either party be liable to the other party for indirect, incidental, consequential, punitive or exemplary damages (even if such other party has been advised of the possibility of such damages) arising from a claim for breach of any provision of this License Agreement. Notwithstanding the foregoing, the provisions of this Section 5.3 shall not limit an Indemnifying Party’s indemnification obligations with respect to any Liability that any Licensor Indemnitee may have to any third party that is not an Affiliate of any party.
     Section 5.4 Indemnification . Following the Distribution, each Licensee (an “ Indemnifying Party ”) shall indemnify, defend and hold harmless the respective Licensor and such Licensor’s Affiliates and its and their respective current, former and future directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “ Licensor Indemnitees ”), from and against any and all (a) Third Party Claims (as defined in the Separation Agreement) asserted or brought against any of the Licensor Indemnitees based on or relating to the exercise by the Indemnifying Party or any of its Affiliates of the license to use the Licensed Intellectual Property that is granted to such Licensee or any such Affiliates hereunder or otherwise relating to the Indemnifying Party’s or any of its Affiliates’ use of the Licensed Intellectual Property licensed hereunder and (b) all Liabilities relating to, arising out of or resulting from any such Third Party Claims. The notice and other indemnification procedures set forth in Sections 5.4, 5.5 (other than Section 5.5(b)), 5.6, 5.7 and 5.8 of the Separation Agreement that apply to indemnification claims arising under Article V of the Separation Agreement are hereby incorporated by reference and shall apply to any indemnification claims arising under this Section 5.4.
ARTICLE VI
TERM
     Section 6.1 Term . The rights granted to each party under this License Agreement shall be irrevocable and perpetual and shall not be terminable by either party, and such rights shall continue in full force and effect notwithstanding any breach by the other party hereunder; provided that, if any Licensee breaches any limitations or restrictions imposed on it in Sections 2.1, 2.2, 2.3 or 2.8 with respect to its use of any Intellectual Property licensed to it hereunder, or materially breaches any confidentiality obligations set forth in Article IV with respect to its use of any Intellectual Property licensed to it hereunder, then, effective upon 30 days’ prior written notice by the Licensor to the Licensee, such Intellectual Property thereafter shall be excluded from the Intellectual Property licensed to the Licensee hereunder and, upon the expiration of such 30-day

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period, Licensee shall cease any and all use of such Intellectual Property unless, prior to expiration of such 30-day period, Licensee has fully cured such breach.
ARTICLE VII
TRANSFERABILITY
     Section 7.1 Assignment . This License Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign this License Agreement without the prior written consent of the other party. Notwithstanding the foregoing, either party may assign or otherwise transfer this License Agreement or its rights hereunder, in whole or in part, to any of its Affiliates or to a third party in connection with the sale of all or substantially all of the assets of such party or any of its Affiliates to which this License Agreement pertains or in connection with a merger, consolidation, corporate reorganization or any change of control of such party or any of its Affiliates or a sale or divestiture of any of the product lines, operating units or business divisions of such party or any of its Affiliates; provided that (a) the assigning party shall provide written notice to the other party of any such assignment, and (b) such assignee shall agree to assume all applicable obligations of the assigning party hereunder, and to be subject to the terms of this License Agreement. For the avoidance of doubt, any permitted assignee of any license granted under Article II of this License Agreement is subject to the Field of Use and all other limitations or restrictions imposed under this License Agreement with respect to such license, including in particular the Field of Use limitation that limits use of Licensed Intellectual Property to use by and in the Line of Business where and as the Licensed Intellectual Property was used during the Relevant Usage Period prior to the Distribution; provided further that, in the case of Designated Intellectual Property, the applicable Field of Use limitation and the applicable Sublicensing Limitations will continue to be as specified on Schedule C .
ARTICLE VIII
GENERAL PROVISIONS
     Section 8.1 Amendment and Modification . This License Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing specifically designated as an amendment hereto, signed on behalf of each party.
     Section 8.2 Waiver . No failure or delay of any party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the parties hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have hereunder. Any agreement on the part of any party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party.

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     Section 8.3 Notices . All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile, upon written confirmation of receipt by facsimile, e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
         
 
  (i)   if to NGSC prior to the date on which New NGC relocates its corporate headquarters, to:
 
       
 
      c/o Northrop Grumman Corporation
 
      1840 Century Park East
 
      Los Angeles, CA 90067-2199
 
      Attention: General Counsel
 
      Facsimile: (310) 556-4910
 
       
 
  (ii)   if to NGSC after the date on which New NGC relocates its corporate headquarters, to:
 
       
 
      c/o Northrop Grumman Corporation
 
      2980 Fairview Park Drive
 
      Falls Church, VA 22042
 
      Attention: General Counsel
 
      Facsimile: (703) 875-1852
 
       
 
  (iii)   if to NGSB, to:
 
       
 
      c/o Huntington Ingalls Industries, Inc.
 
      4101 Washington Avenue
 
      Newport News, VA 23607
 
      Attention: General Counsel
 
      Facsimile: (757) 688-1408
     Section 8.4 Interpretation . When a reference is made in this License Agreement to a Section, Article or Exhibit such reference shall be to a Section, Article or Exhibit of this License Agreement unless otherwise indicated. The table of contents and headings contained in this License Agreement or in any Exhibit are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this License Agreement. All words used in this License Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized terms used in any Exhibit but not otherwise defined therein shall have the meaning as defined in this License Agreement. All Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this License Agreement as if set forth herein. The word “including” and words of similar import when used in this License Agreement shall mean “including, without limitation,” unless otherwise specified. Where either party’s consent is required

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hereunder, except as otherwise specified herein, such party’s consent may be granted or withheld in such party’s sole and absolute discretion. The word “day” when used in this License Agreement shall mean “calendar day,” unless otherwise specified.
     Section 8.5 Entire Agreement . This License Agreement, the Separation Agreement and the Exhibits, Schedules and Appendices hereto and thereto constitute the entire agreement, and supersedes all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings among the parties with respect to the subject matter hereof. This License Agreement shall not be deemed to contain or imply any restriction, covenant, representation, warranty, agreement or undertaking of any party with respect to the transactions contemplated hereby other than those expressly set forth herein or in any document required to be delivered hereunder. Notwithstanding any oral agreement or course of action of the parties or their representatives to the contrary, no party to this License Agreement shall be under any legal obligation to enter into or complete the transactions contemplated hereby unless and until this License Agreement shall have been executed and delivered by each of the parties.
     Section 8.6 No Third-Party Beneficiaries . Nothing in this License Agreement, express or implied, is intended to or shall confer upon any Person other than the parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature under or by reason of this License Agreement.
     Section 8.7 Governing Law . This License Agreement and all disputes or controversies arising out of or relating to this License Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York (other than Section 5-1401 of the New York General Obligations Law).
     Section 8.8 Submission to Jurisdiction . Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this License Agreement brought by any other party or its successors or assigns shall be brought and determined in any federal court sitting in the Borough of Manhattan in the City of New York (or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal court), and each of the parties hereby irrevocably submits to the exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this License Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in New York, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in New York as described herein. Each of the parties further agrees that notice as provided in Section 8.3 shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this License Agreement or the

14


 

transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in New York as described herein, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this License Agreement, or the subject matter hereof, may not be enforced in or by such courts.
     Section 8.9 Enforcement . The parties agree that irreparable damage would occur in the event that any of the provisions of this License Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this License Agreement and to enforce specifically the terms and provisions of this License Agreement in any federal court sitting in the Borough of Manhattan in the City of New York (or, if such court lacks subject matter jurisdiction, in any appropriate New York State or federal court), this being in addition to any other remedy to which such party is entitled at law or in equity. Each of the parties hereby further waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief.
     Section 8.10 Severability . Whenever possible, each provision or portion of any provision of this License Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision or portion of any provision of this License Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this License Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
     Section 8.11 Waiver of Jury Trial . EACH OF THE PARTIES TO THIS LICENSE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS LICENSE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
     Section 8.12 Counterparts . This License Agreement may be executed in one or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.
     Section 8.13 Facsimile Signature . This License Agreement may be executed by facsimile signature and a facsimile signature shall constitute an original for all purposes.

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     Section 8.14 Effect if Distribution Does Not Occur . If the Distribution does not occur, then this License Agreement shall automatically be terminated and all actions and events that are, under this License Agreement, to be taken or occur effective as of the Distribution, or otherwise in connection with the Distribution shall not be taken or occur except to the extent specifically agreed by the parties.
[The remainder of this page is intentionally left blank.]

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     IN WITNESS WHEREOF, the parties have caused this License Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
         
  NORTHROP GRUMMAN SYSTEMS CORPORATION
 
 
  By:   /s/ Mark Rabinowitz    
    Name:   Mark Rabinowitz   
    Title:   President and Treasurer   
 
  NORTHROP GRUMMAN SHIPBUILDING, INC.
 
 
  By:   /s/ C. Michael Petters    
    Name:   C. Michael Petters   
    Title:   President and Chief Executive Officer   
 
[Signature Page to Intellectual Property License Agreement]

 

Exhibit 10.5
EXECUTION COPY
 
TAX MATTERS AGREEMENT
by and among
NEW P, INC.
(to be renamed NORTHROP GRUMMAN CORPORATION),
HUNTINGTON INGALLS INDUSTRIES, INC.
and
NORTHROP GRUMMAN CORPORATION
(to be renamed TITAN II INC.)
Dated as of March 29, 2011
 

 


 

TABLE OF CONTENTS
         
ARTICLE 1 DEFINITIONS
    2  
 
       
Section 1.1 Definitions
    2  
Section 1.2 Table of Additional Defined Terms
    7  
 
       
ARTICLE 2 PREPARATION AND FILING OF TAX RETURNS, PAYMENT OF TAXES DUE AFTER THE DISTRIBUTION DATE, AND ADJUSTMENT REQUESTS
    8  
 
       
Section 2.1 Current Tax Group Federal Consolidated Returns
    8  
Section 2.2 New NGC Non-Federal Tax Returns
    8  
Section 2.3 HII Tax Returns
    8  
Section 2.4 Adjustment Requests
    9  
Section 2.5 Procedures
    9  
 
       
ARTICLE 3 GENERAL INDEMNIFICATION FOR TAXES
    9  
 
       
Section 3.1 Indemnification by New NGC
    9  
Section 3.2 Indemnification by HII
    10  
 
       
ARTICLE 4 REFUNDS AND CARRYBACKS
    10  
 
       
Section 4.1 Refunds
    10  
Section 4.2 Carrybacks
    10  
 
       
ARTICLE 5 TAX PROCEEDINGS
    12  
 
       
Section 5.1 Control of Tax Proceedings
    12  
Section 5.2 Notices Relating to Tax Proceedings
    13  
Section 5.3 Statute of Limitations
    14  
 
       
ARTICLE 6 PAYMENTS BETWEEN HII AND NEW NGC FOR CERTAIN INCOME TAX ADJUSTMENTS
    14  
 
       
Section 6.1 Payments by HII to New NGC
    14  
Section 6.2 Payments by New NGC to HII
    15  
Section 6.3 Threshold Amount
    16  
Section 6.4 Separate Entity Provisions
    16  
Section 6.5 Acknowledgement
    17  
 
       
ARTICLE 7 ALLOCATION, CHARACTER, AND TREATMENT OF CERTAIN TAX ITEMS AND TRANSACTIONS
    17  
 
       
Section 7.1 Allocation of Certain Tax Items
    17  
Section 7.2 Tax Treatment of Payments between the Parties
    18  
Section 7.3 Tax Treatment of Novations of Shipbuilding Liabilities and Retained Liabilities
    18  
Section 7.4 Accounting Methods
    19  
Section 7.5 Indemnification for Taking Contrary Tax Treatment
    20  
Section 7.6 Tax Attributes
    21  

 


 

TABLE OF CONTENTS
(Continued)
         
ARTICLE 8 TAX-FREE STATUS OF THE TRANSACTIONS
    21  
 
       
Section 8.1 Covenants, Undertakings, Agreements, Representations, and Warranties
    21  
Section 8.2 Restrictions Relating to the Distribution
    23  
Section 8.3 Procedures Regarding Rulings and Opinions
    26  
Section 8.4 Indemnification
    27  
 
       
ARTICLE 9 COOPERATION
    28  
 
       
Section 9.1 General Cooperation
    28  
Section 9.2 Retention of Records
    29  
Section 9.3 Confidentiality
    29  
 
       
ARTICLE 10 NGC AS CURRENT TAX GROUP AGENT
    29  
 
       
Section 10.1 Purpose
    29  
Section 10.2 NGC Tax Officer
    29  
Section 10.3 Payments of Tax and Receipt of Refunds
    31  
Section 10.4 Indemnification
    31  
Section 10.5 Designation of Substitute Current Tax Group Agent
    32  
 
       
ARTICLE 11 MISCELLANEOUS
    32  
 
       
Section 11.1 Timing of Payments; Interest
    32  
Section 11.2 Dispute Resolution
    32  
Section 11.3 Survival of Covenants
    34  
Section 11.4 Termination of Agreements, Arrangements and Policies
    34  
Section 11.5 Severability
    34  
Section 11.6 Entire Agreement
    35  
Section 11.7 Assignment
    35  
Section 11.8 No Third-Party Beneficiaries
    35  
Section 11.9 Specific Performance and Other Equitable Relief
    35  
Section 11.10 Waiver of Jury Trial
    35  
Section 11.11 Governing Law
    36  
Section 11.12 Amendment
    36  
Section 11.13 Rules of Construction
    36  
Section 11.14 Notices
    36  
Section 11.15 Counterparts
    39  
Section 11.16 Coordination with the Employee Matters Agreement
    39  
Section 11.17 Conflict or Inconsistency Between Agreements
    39  
Section 11.18 Termination of this Agreement
    39  
 
       
EXHIBITS
       
 
       
Exhibit A            Form of Letter Waiving Conflict of Interest
       
Exhibit B            Form of Designation of Substitute Agent
       

ii


 

TAX MATTERS AGREEMENT
     THIS TAX MATTERS AGREEMENT, dated as of March 29, 2011 (this “ Agreement ”), is made by and among NEW P, INC., a Delaware corporation (“ New NGC ”), HUNTINGTON INGALLS INDUSTRIES, INC., a Delaware corporation (“ HII ”), and NORTHROP GRUMMAN CORPORATION, a Delaware corporation (“ NGC ”). Each of New NGC, HII and NGC is sometimes referred to herein as a “ Party ”, and, collectively, New NGC, HII and NGC are referred to as the “ Parties ”.
RECITALS
     A. NGC, acting through itself and its direct and indirect Subsidiaries, currently conducts the Shipbuilding Business and the Retained Business.
     B. The board of directors of NGC has determined that it is appropriate, desirable and in the best interests of NGC and its stockholders to separate NGC into two publicly traded companies: (a) HII, which following the Distribution, will own and conduct, directly and indirectly, the Shipbuilding Business, and (b) New NGC, which, following the Distribution, will own and conduct, directly and indirectly, the Retained Business.
     C. The Parties have entered into the Separation and Distribution Agreement, dated as of March 24, 2011 (the “ Separation and Distribution Agreement ”), pursuant to which they will undertake the Holding Company Reorganization, the Internal Reorganization, and the Distribution (each as defined in the Separation and Distribution Agreement) (collectively, the “ Transactions ”).
     D. The Parties have entered into the Ancillary Agreements (as defined in the Separation and Distribution Agreement), pursuant to which they will undertake certain other transactions and arrangements relating to the separation of the Shipbuilding Business from the Retained Business.
     E. Prior to the Distribution, NGC will be renamed “Titan II Inc.” and New NGC will be renamed “Northrop Grumman Corporation.”
     F. NGC is the common parent of an affiliated group of corporations that files consolidated U.S. federal Income Tax Returns (the “ Current Federal Tax Group ”) and consolidated and combined Tax Returns in certain other jurisdictions (each a “ Current Non-Federal Tax Group ” and, collectively with the Current Federal Tax Group, the “ Current Tax Group ”), and NGC is the Current Tax Group Agent for the Current Tax Group Members.
     G. Following the Distribution, HII will be the common parent of an affiliated group of corporations that files consolidated U.S. federal Income Tax Returns and consolidated or combined Tax Returns in certain other jurisdictions (the “ HII Tax Group ”), and HII will be the agent for the HII Tax Group Members.
     H. Following the Distribution, the Current Federal Tax Group and certain Current Non-Federal Tax Groups will remain in existence with all their respective previous Members other than the HII Group Members.

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     I. Following the Distribution, (1) New NGC will be the common parent of the Current Tax Group and will be the Current Tax Group Agent with respect to U.S. federal Income Tax matters for Taxable Periods ending December 31, 2011 and thereafter; and (2) New NGC will be the common parent of certain Current Non-Federal Tax Groups and will be the Current Tax Group Agent with respect to certain Tax matters (other than U.S. federal Income Tax matters) for certain Post-Distribution Taxable Periods.
     J. Following the Distribution, and until NGC’s corporate existence terminates (or until the relevant Tax Authority consents to or requires the appointment of a substitute Current Tax Group Agent), (1) NGC will continue to be the Current Tax Group Agent with respect to U.S. federal Income Tax matters for Taxable Periods ending on or prior to December 31, 2010; and (2) NGC will continue to be the Current Tax Group Agent with respect to certain Tax matters (other than U.S. federal Income Tax matters) for certain Pre-Distribution Taxable Periods.
     K. The Parties intend that, for U.S. federal Income Tax purposes, the Transactions shall qualify for Tax-Free Status pursuant to Sections 351, 355, 361, 368(a) and related provisions of the Code, and, in furtherance of such intent NGC has obtained the IRS Ruling and entered into the IRS Closing Agreement.
     L. The Parties wish to provide for the payment of Tax liabilities and entitlement to refunds thereof, to allocate responsibility for, and cooperation in, the filing of Tax Returns, to set forth covenants, undertakings, agreements, representations, warranties, and indemnities relating to the Tax-Free Status of the Transactions, to provide for the exercise of NGC’s functions as Current Tax Group Agent, and to provide for certain other matters relating to Taxes.
AGREEMENT
     In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
      Section 1.1 Definitions .
     For the purposes of this Agreement:
     “ Accounting Method ” means a method of accounting under Section 446 of the Code.
     “ Adjustment Request ” means any formal or informal written claim or request made to a Tax Authority by an NGC Group Member, a New NGC Group Member, or an HII Group Member for an adjustment to Taxes, whether such adjustment is positive or negative (by refund, credit, offset, or otherwise), including (i) an amended Tax Return claiming an adjustment to Taxes as reported on the originally filed Tax Return or, if applicable, as previously adjusted or (ii) a self-initiated adjustment or similar claim made, during the course of a Tax Proceeding or otherwise. Such term shall not include an adjustment to Tax initiated by a Tax Authority during a Tax Proceeding.

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     “ Affiliate ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Agency Regulations ” means Treasury Regulations Section 1.1502-77 and any similar regulation in another Tax jurisdiction.
     “ Business Day ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Code ” means the Internal Revenue Code of 1986, as amended.
     “ Current Tax Group Agent ” means the sole agent authorized to act in its own name for Members of the Current Tax Group with respect to matters relating to liability for U.S. federal Income Taxes and any other Taxes to which such agency applies.
     “ Current Tax Group Federal Consolidated Return ” means a U.S. federal Income Tax Return filed or required to be filed by NGC or New NGC as the common parent of the Current Tax Group.
     “ Current Tax Group Member ” means a member of a Current Tax Group for a relevant Taxable Period (or portion of a Taxable Period).
     “ Distribution ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Distribution Date ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Employee Matters Agreement ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Final Determination ” means the final resolution of liability for any Tax, for any issue and for any Taxable Period, by or as a result of (i) IRS Form 870-AD (or any successor form) or a comparable form under any state, local or foreign law on the date of acceptance by or on behalf of the relevant Tax Authority, except that a Form 870-AD or comparable form that reserves the right of the taxpayer to file a claim for refund and/or the right of the Tax Authority to assert a further deficiency shall not constitute a Final Determination with respect to the item or items so reserved, (ii) a final decision, judgment, decree or other order by any court of competent jurisdiction that can no longer be appealed or reheard, (iii) a closing agreement or similar agreement entered into with a Tax Authority in connection with an administrative or judicial proceeding, (iv) an allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods of limitations during which such refund or credit may be recovered by the jurisdiction imposing the Tax, (v) any other final resolution, including by reason of the expiration of the applicable period of limitations or the execution of a pre-filing agreement with the applicable Tax Authority, or (vi) the occurrence of any event which the parties agree in writing is a Final Determination.
     “ HII Group ” means, for any relevant time beginning immediately after the Distribution, HII and each Subsidiary of HII at such time.

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     “ HII Group Member ” means HII, each Person that is a Subsidiary of HII immediately after the Distribution (including NGC), and each Person that becomes a Subsidiary of HII after the Distribution.
     “ HII Tax Group Member ” means a member of the HII Tax Group for a relevant Taxable Period (or portion of a Taxable Period).
     “ HII Tax Return ” means a Tax Return filed or required to be filed by an HII Group Member after the Distribution Date (excluding a Tax Return filed or required to be filed by NGC for a Pre-Distribution Taxable Period or a Straddle Taxable Period and, for avoidance of doubt, excluding a New NGC Non-Federal Tax Return and a Current Tax Group Federal Consolidated Return).
     “ Holding Company Reorganization ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Income Tax ” means a Tax based upon, measured by, or calculated with respect to (i) net income or profits or net receipts (including, but not limited to, any capital gains, minimum Tax or any Tax on items of Tax preference, but not including sales, use, real or personal property, or transfer or similar Taxes) or (ii) multiple bases (including corporate franchise, doing business and occupation Taxes) if one or more bases upon which such Tax may be based, by which such Tax may be measured, or with respect to which such Tax may be calculated, is described in clause (i).
     “ Income Tax Adjustment ” means any change in any Income Tax Item, whether resulting from a Tax Proceeding or an Adjustment Request; provided , however , that a claim for refund resulting from a carryback of a loss, credit or other Tax Attribute in a Post-Distribution Taxable Period to a Pre-Distribution Taxable Period or a Straddle Taxable Period is not an Income Tax Adjustment.
     “ Income Tax Item ” means any item of income, gain, loss, deduction, credit, recapture of credit, or any other item (including the adjusted basis of property) relating to the determination of Income Taxes payable in any Taxable Period.
     “ Income Tax Return ” means any Tax Return relating to Income Taxes.
     “ Independent Firm ” means a nationally recognized law firm or accounting firm which, at the relevant time, does not provide, and within the preceding two years has not provided, substantial services to any of the Parties.
     “ Information ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Internal Reorganization ” has the meaning set forth in the Separation and Distribution Agreement.
     “ IRS ” means the U.S. Internal Revenue Service or any successor thereto.

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     “ IRS Closing Agreement ” means the closing agreement, effective February 14, 2011, between NGC (as parent of the Current Federal Tax Group), HII (as the parent of the HII Tax Group) and the IRS, entered into in connection with the Transactions and the IRS Ruling.
     “ IRS Ruling ” means the U.S. federal income tax private letter ruling, issued October 14, 2010, and the supplement thereto, issued February 14, 2011, by the IRS in connection with the Transactions.
     “ Law ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Member ” refers to an NGC Group Member, a Current Tax Group Member, an HII Group Member, an HII Tax Group Member or a New NGC Group Member, as the case may be.
     “ New NGC Group ” means, for any relevant time beginning immediately after the Distribution, New NGC and each Subsidiary of New NGC at such time.
     “ New NGC Group Member ” means New NGC, each Person that is a Subsidiary of New NGC immediately after the Distribution, and each Person that becomes a Subsidiary of New NGC after the Distribution.
     “ New NGC Non-Federal Tax Return ” means a Tax Return (other than a Current Tax Group Federal Consolidated Return) (i) that is filed or required to be filed by a New NGC Group Member after the Distribution Date or (ii) that is filed or required to be filed after the Distribution Date and includes an Income Tax Item or an asset of a New NGC Group Member, or otherwise relates to the Retained Business (which shall include a Tax Return that is required to be filed after the Distribution Date that includes an Income Tax Item or an asset of a New NGC Group Member and an Income Tax Item or an asset of an HII Group Member).
     “ NGC Group ” means, for any relevant time ending immediately before the Holding Company Reorganization, NGC and each Subsidiary of NGC at such time.
     “ NGC Group Member ” means NGC and each Subsidiary of NGC at any time before the Holding Company Reorganization.
     “ NGC Non-Federal Tax Return ” means a Tax Return, other than a Current Tax Group Federal Consolidated Return, required to be filed by an NGC Group Member prior to or on the Distribution Date.
     “ NGC Tax Officer ” means the officer of NGC with full authority with respect to Tax matters.
     “ Opinion ” means the opinion of Tax Counsel, dated March 14, 2011, with respect to certain Tax aspects of the Transactions.
     “ Person ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Post-Distribution Taxable Period ” means any Taxable Period (or portion thereof) beginning after the Distribution Date.

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     “ Pre-Distribution Taxable Period ” means any Taxable Period (or portion thereof) ending on or before the Distribution Date.
     “ Refund ” means any refund of Taxes (including any overpayment of Taxes that can be refunded or, alternatively, applied to other Taxes payable), including any interest paid on or with respect to such refund of Taxes.
     “ Retained Business ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Retained Liabilities ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Shared Gain ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Shared Liability ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Shipbuilding Business ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Shipbuilding Liabilities ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Straddle Taxable Period ” means a Taxable Period that begins on or before and ends after the Distribution Date.
     “ Subsidiary ” has the meaning set forth in the Separation and Distribution Agreement.
     “ Tax ” means (i) a tax, charge, fee, duty, levy, impost or other similar assessment, imposed by any U.S. federal, state or local or foreign governmental authority, including, but not limited to, income, gross receipts, excise, property, sales, use, license, stock, franchise, payroll, employment, withholding, social security, transfer, value added and other taxes, (ii) interest attributable thereto, (iii) a penalty or addition attributable thereto or to a failure to file a Tax Return or a form, schedule or information properly includible thereon, and (iv) a liability in respect of any item described in clause (i), (ii) or (iii), payable by reason of assumption, transferee or successor liability, operation of Law or several liability pursuant to Treasury Regulations Section 1.1502-6(a).
     “ Tax Attribute ” means a net operating loss, capital loss, earnings and profits, overall foreign loss, previously taxed income, separate limitation loss, and any other Tax attribute.
     “ Tax Authority ” means a governmental authority or subdivision, agency, commission or entity thereof or a quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of a Tax (including the IRS).
     “ Tax Counsel ” means Ivins, Phillips & Barker, Chartered.

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     “ Tax-Free Status ” means the Tax treatment accorded to the Transactions as set forth in the IRS Ruling and the Opinion.
     “ Tax Group ” means any U.S. federal, state, local or foreign affiliated, consolidated, combined, unitary or similar group or fiscal unity that joins in the filing of a single Tax Return.
     “ Tax Materials ” means, collectively, (i) the IRS Ruling, (ii) the IRS Closing Agreement, (iii) each submission to the IRS in connection with the IRS Ruling, (iv) the Opinion, (v) the representation letters from NGC, New NGC and HII, addressed to Tax Counsel supporting the Opinion, and (vi) any other materials delivered or deliverable by NGC, New NGC or HII in connection with the issuance of the IRS Ruling, the negotiation, drafting, execution and approval of the IRS Closing Agreement and the rendering of the Opinion.
     “ Tax Matters Dispute ” means a dispute arising in connection with this Agreement between the Parties, other than a Tax Proceeding (except to the extent provided in Section 5.1) or a Tax Agency Dispute.
     “ Tax Proceeding ” means any audit, examination, investigation, action, suit, claim, assessment, appeal, Adjustment Request, or other administrative or judicial proceeding relating to Taxes.
     “ Tax Return ” means (i) a return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, or declaration of estimated Tax) required to be supplied to, or filed with, a Tax Authority in connection with the payment, determination, assessment or collection of a Tax or the administration of a Law relating to a Tax or (ii) an amended Tax Return.
     “ Taxable Period ” means any period for which a liability for Tax is determined.
     “ Transactions Tax ” means a Tax imposed on the Holding Company Reorganization, the Internal Reorganization, or the Distribution, or by reason of a failure of the Holding Company Reorganization, the Internal Reorganization, or the Distribution to qualify for Tax-Free Status (including an intercompany transaction triggered by reason of such failure).
     “ Treasury Regulations ” means the final and temporary (but not proposed) Income Tax regulations promulgated under the Code, as in effect at the relevant time (including any successor regulation or rule of law), and any similar regulation or rule of law promulgated by another relevant jurisdiction.
     “ Unqualified Tax Opinion ” means a “will” opinion, without substantive qualification, rendered by a nationally recognized law firm, which law firm is reasonably acceptable to New NGC, to the effect that a transaction or event, or a series of transactions and/or events, will not affect the Tax-Free Status of the Transactions.
      Section 1.2 Table of Additional Defined Terms .
     The following terms have the meanings set forth in the Sections referenced below:

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Definition   Section
Agreement
  Preamble
Carryback Election Request
  Section 4.2(b)(i)
Current Federal Tax Group
  Recital F
Current Non-Federal Tax Group
  Recital F
Current Tax Group
  Recital F
HII
  Preamble
HII Restricted Action
  Section 8.2(c)
HII Tax Group
  Recital G
New NGC
  Preamble
NGC
  Preamble
Parties
  Preamble
Party
  Preamble
Payee Party
  Section 6.3(a)
Payor Party
  Section 6.3(a)
Restriction Period
  Section 8.2(c)
Separation and Distribution Agreement
Recital C
Tax Arbitrator
  Section 11.2(b)
Threshold Amount
  Section 6.3(a)
Transactions
  Recital C
ARTICLE 2
PREPARATION AND FILING OF TAX RETURNS,
PAYMENT OF TAXES DUE AFTER THE DISTRIBUTION DATE,
AND ADJUSTMENT REQUESTS
      Section 2.1 Current Tax Group Federal Consolidated Returns .
     New NGC shall be responsible for preparing and filing all Current Tax Group Federal Consolidated Returns filed or required to be filed after the Distribution Date and for paying all Taxes shown payable on all such Tax Returns.
      Section 2.2 New NGC Non-Federal Tax Returns .
     New NGC shall be responsible for preparing and filing, or causing the relevant New NGC Group Member to prepare and file, all New NGC Non-Federal Tax Returns and for paying or causing such New NGC Group Member to pay all Taxes shown as payable on all New NGC Non-Federal Tax Returns.
      Section 2.3 HII Tax Returns .
     HII shall be responsible for preparing and filing, or causing the relevant HII Group Member to prepare and file, all HII Tax Returns. HII shall pay or cause such HII Group Member to pay to the appropriate Tax Authority all Taxes shown as payable on all HII Tax Returns.

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      Section 2.4 Adjustment Requests .
     (a)  New NGC Adjustment Requests . New NGC shall, in its sole discretion, be permitted to make, or to decline to make, an Adjustment Request relating to an NGC Non-Federal Tax Return, a Current Tax Group Federal Consolidated Return or a New NGC Non-Federal Tax Return, subject, in each case, to ARTICLE 5.
     (b)  HII Adjustment Requests . HII shall, in its sole discretion, be permitted to make, or to decline to make, an Adjustment Request relating to any HII Tax Return.
      Section 2.5 Procedures .
     (a) In connection with the preparation of any Current Tax Group Federal Consolidated Return pursuant to Section 2.1, any New NGC Non-Federal Tax Return pursuant to Section 2.2, or any Adjustment Request pursuant to Section 2.4, HII shall, at its own cost and expense, provide pro forma Tax Returns or equivalent financial and other data relating to HII and any relevant HII Group Member, to be used in the preparation of such Tax Return or Adjustment Request, in accordance with past practices, procedures, Accounting Methods, elections, and conventions, and shall assist and cooperate with New NGC in any other manner reasonably requested by New NGC.
     (b) To the extent provided in ARTICLE 10, New NGC shall perform the actions described in Section 2.1, Section 2.2, and Section 2.4(a) through NGC, the NGC Tax Officer and persons designated by the NGC Tax Officer, at New NGC’s sole cost and expense.
     (c) In connection with the preparation of any HII Tax Return filed pursuant to Section 2.3, New NGC shall, at its own cost and expense, assist and cooperate with HII in any manner reasonably requested by HII.
     (d) Except as otherwise provided in this Agreement, each Party shall bear its own costs and expenses incurred in connection with this ARTICLE 2.
ARTICLE 3
GENERAL INDEMNIFICATION FOR TAXES
      Section 3.1 Indemnification by New NGC .
     New NGC shall be responsible for paying, and shall indemnify and hold each HII Group Member harmless from and against, (a) Taxes shown as payable on, and any increase in Taxes payable with respect to, NGC Non-Federal Tax Returns, Current Tax Group Federal Consolidated Returns, and New NGC Non-Federal Tax Returns, and (b) any other Taxes payable by New NGC Group Members or relating to the Retained Business; provided , however , that New NGC’s obligations pursuant to this Section 3.1 shall be separate from New NGC’s obligations to HII pursuant to Section 6.2, Section 7.5, Section 8.4(b), and Section 10.4; provided further , that New NGC’s obligations pursuant to this Section 3.1 shall not affect HII’s obligations to New NGC pursuant to Section 6.1, Section 7.5, Section 8.4(a), and Section 10.4.

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      Section 3.2 Indemnification by HII .
     HII shall be responsible for paying, and shall indemnify and hold each New NGC Group Member harmless from and against, (a) Taxes shown as payable on, and any increase in Taxes payable with respect to, HII Tax Returns and (b) any other Taxes payable by HII Group Members or relating to the Shipbuilding Business for any Post-Distribution Taxable Period; provided , however , that HII’s obligations pursuant to this Section 3.2 shall be separate from HII’s obligations to New NGC pursuant to Section 6.1, Section 7.5, Section 8.4(a), and Section 10.4(a); provided further that HII’s obligations pursuant to this Section 3.2 shall not affect New NGC’s obligations to HII pursuant to Section 6.2, Section 7.5, Section 8.4(b), and Section 10.4.
ARTICLE 4
REFUNDS AND CARRYBACKS
      Section 4.1 Refunds .
     (a) New NGC shall be entitled to any Refund due with respect to an NGC Non-Federal Tax Return, a Current Tax Group Federal Consolidated Return, and a New NGC Non-Federal Tax Return; provided , however , that New NGC’s receipt of a Refund with respect to any such Tax Return shall not affect New NGC’s obligations to HII pursuant to Section 6.2, Section 7.5, or Section 8.4(b) and shall not affect HII’s obligations to New NGC pursuant to Section 6.1, Section 7.5, or Section 8.4(a). If a Refund due with respect to an NGC Non-Federal Tax Return, a Current Tax Group Federal Consolidated Return, or a New NGC Non-Federal Tax Return is paid to an HII Group Member (including NGC) by a Tax Authority, such Member shall remit such Refund to New NGC.
     (b) HII shall be entitled to any Refund due with respect to an HII Tax Return; provided , however , that HII’s receipt of a Refund with respect to any such Tax Return shall not affect HII’s obligations to New NGC pursuant to Section 6.1, Section 7.5, or Section 8.4(a) and shall not affect New NGC’s obligations to HII pursuant to Section 6.2, Section 7.5, or Section 8.4(b). Except as provided in Section 4.2(b), if a Refund due with respect to an HII Tax Return is paid to a New NGC Group Member by a Tax Authority, such Member shall remit such Refund to HII.
     (c) To the extent provided in ARTICLE 10, New NGC shall perform the actions described in this ARTICLE 4 through NGC, the NGC Tax Officer and persons designated by the NGC Tax Officer, at New NGC’s sole cost and expense.
      Section 4.2 Carrybacks .
     (a)  New NGC Carrybacks .
     (i) If the Current Tax Group or a New NGC Group Member realizes a loss, credit, or other Tax Attribute that may be carried back to a Pre-Distribution Taxable Period or a Straddle Taxable Period (whether by (i) electing to carry back such loss, credit, or other Tax Attribute to a Pre-Distribution Taxable Period or a Straddle Taxable Period, or (ii) not electing to waive the carryback of such loss, credit, or other Tax Attribute to a Pre-Distribution Taxable Period or a Straddle Taxable Period), the Current Tax Group or such

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Member may, in its sole discretion, carry back such loss, credit, or other Tax Attribute to such Pre-Distribution Taxable Period or a Straddle Taxable Period. HII shall cooperate with New NGC in seeking any Refund resulting from such carryback, at New NGC’s cost and expense. New NGC shall be entitled to any Refund resulting from a carryback pursuant to this Section 4.2(a)(i). If any such Refund is paid to an HII Group Member (including NGC) by a Tax Authority, such Member shall remit such Refund to New NGC.
     (ii) Notwithstanding Section 4.2(a)(i), if by Law the New NGC Group or a New NGC Group Member may utilize a loss, credit, or other Tax Attribute only by a carryback of such loss, credit, or other Tax Attribute to a Pre-Distribution Taxable Period or a Straddle Taxable Period, HII shall cooperate with New NGC in seeking any Refund resulting from such carryback, at New NGC’s cost and expense. New NGC shall be entitled to any Refund resulting from a carryback pursuant to this Section 4.2(a)(ii).
     (b)  HII Carrybacks .
     (i) If the HII Group or an HII Group Member realizes a loss, credit or other Tax Attribute in a Post-Distribution Taxable Period that may be carried back to a Pre-Distribution Taxable Period or a Straddle Taxable Period (whether by (i) electing to carry back such loss, credit, or other Tax Attribute to a Pre-Distribution Taxable Period or a Straddle Taxable Period, or (ii) not electing to waive the carryback of such loss, credit, or other Tax Attribute to a Pre-Distribution Taxable Period or a Straddle Taxable Period), and HII wishes to carry back such loss, credit, or other Tax Attribute to a Pre-Distribution Taxable Period or a Straddle Taxable Period, HII shall notify New NGC in writing of HII’s wish to carry back such loss, credit, or other Tax Attribute (a “ Carryback Election Request ”). A Carryback Election Request shall include a computation of the amount of such loss, credit, or other Tax Attribute, and a certification by an appropriate officer of HII setting forth HII’s belief (together with supporting analysis) that the Tax treatment of such loss, credit, or other Tax Attribute is more likely than not correct. New NGC shall have sole discretion to deny a Carryback Election Request.
     (ii) New NGC may consent to the carryback of a loss, credit, or other Tax Attribute set forth in the Carryback Election Request upon New NGC’s determination (in its sole discretion) that the Parties have agreed to (A) the procedures for carrying back such loss, credit, or other Tax Attribute (including by making an Adjustment Request, at HII’s cost and expense), (B) the determination of the amount or portion of any Refund resulting from such carryback that shall be paid to HII pursuant to this Section 4.2(b)(ii), and (C) the timing of any payment to be made by New NGC to HII with respect to such carryback and any interest that shall accrue on any late payment. To the extent any Refund subject to this Section 4.2(b)(ii) is later reduced in a Final Determination, the Parties shall use their best efforts to agree to the amount of such Refund that HII shall repay to New NGC, together with any interest, fines, additions to Tax, penalties, or any additional amounts imposed by a Tax Authority relating thereto.
     (iii) Notwithstanding Section 4.2(b)(ii), if by Law the HII Group or an HII Group Member may utilize a loss, credit, or other Tax Attribute only by a carryback of such loss, credit, or other Tax Attribute from a Post-Distribution Taxable Period to a New NGC

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Non-Federal Tax Return or an NGC Non-Federal Tax Return for a Pre-Distribution Taxable Period or a Straddle Taxable Period, New NGC shall cooperate with HII in carrying back such loss, credit, or other Tax Attribute (including by filing of an amended Current Tax Group Federal Consolidated Tax Return, NGC Non-Federal Tax Return, or New NGC Non-Federal Tax Return or making an Adjustment Request with respect to any such Tax Return, which shall be at HII’s cost and expense). The Parties shall use their best efforts to agree with respect to the matters set forth in clauses (A), (B) and (C) of Section 4.2(b)(ii). To the extent any Refund subject to this Section 4.2(b)(iii) is later reduced in a Final Determination, the Parties shall use their best efforts to agree to the amount of such Refund that HII shall repay to New NGC, together with any interest, fines, additions to Tax, penalties, or any additional amounts imposed by a Tax Authority relating thereto.
ARTICLE 5
TAX PROCEEDINGS
      Section 5.1 Control of Tax Proceedings .
     (a)  Control by New NGC .
     (i) New NGC shall be entitled to control and settle any Tax Proceeding relating to (A) an NGC Non-Federal Tax Return, (B) a Current Tax Group Federal Consolidated Return, or (C) a New NGC Non-Federal Tax Return (including, in each case, any Tax Proceedings relating to a Transactions Tax).
     (ii) New NGC may take any and all actions necessary or incident to the control and settlement of any Tax Proceeding relating to (A) an NGC Non-Federal Tax Return, (B) a Current Tax Group Federal Consolidated Return (subject to the IRS Closing Agreement), or (C) a New NGC Non-Federal Tax Return (including, in each case, any Tax Proceedings relating to a Transactions Tax).
     (iii) To the extent provided in ARTICLE 10, New NGC shall perform any actions under this ARTICLE 5 through NGC, the NGC Tax Officer and persons designated by the NGC Tax Officer.
     (iv) If a settlement of a Tax Proceeding within the control of New NGC pursuant to this ARTICLE 5 (or an action proposed to be taken with respect thereto) reasonably could be expected to give rise to a payment by HII pursuant to Section 6.1, Section 7.5, or Section 8.4(a), or could be expected to give rise to a payment to HII pursuant to Section 6.2, Section 7.5, or Section 8.4(b), then New NGC shall (and, if such Tax Proceeding is subject to ARTICLE 10, shall cause NGC and the NGC Tax Officer to) provide copies of all correspondence and all filings to be submitted to a Tax Authority or judicial authority in connection with such Tax Proceeding for review by HII prior to submission to the Tax Authority or judicial authority; provided , however , that failure by New NGC to provide such correspondence to HII shall not relieve HII of any obligation pursuant to Section 6.1, Section 7.5, or Section 8.4(a), except to the extent HII is actually prejudiced by such failure.

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     (v) New NGC shall (and, if such Tax Proceeding is subject to ARTICLE 10, shall cause NGC and the NGC Tax Officer to) provide written notice to HII of any settlement with a Tax Authority that reasonably could be expected to give rise to a payment by HII pursuant to Section 6.1, Section 7.5, or Section 8.4(a), or a payment to HII pursuant to Section 6.2, Section 7.5, or Section 8.4(b). HII shall not have the right to prevent any such settlement but shall have the right to contest the amount of its liability to New NGC pursuant to Section 6.1, Section 7.5, or Section 8.4(a) or the amount of its payment from New NGC pursuant to Section 6.2, Section 7.5, or Section 8.4(b) resulting from such settlement. HII shall provide written notice to New NGC of its intention to contest the amount of its obligation to New NGC pursuant to Section 6.1, Section 7.5, or Section 8.4(a) or the amount of New NGC’s obligation to HII pursuant to Section 6.2, Section 7.5, or Section 8.4(b) prior to the time such settlement is entered into (but in any event HII shall have no less than 10 days from the time it receives notice of such settlement from New NGC to provide notice to New NGC of its intent to contest such settlement). Any contest by HII pursuant to this Section 5.1(a)(v) shall be conducted as a Tax Matters Dispute under the procedures set forth in Section 11.2. If the negotiations required thereby are not successful, the Tax Arbitrator shall determine the amount of a settlement with the relevant Tax Authority that would most accurately reflect the litigation risk of the relevant issue. HII shall be liable to New NGC, or New NGC shall be liable to HII, as the case may be, based solely on the determination of the Tax Arbitrator as if a settlement implementing such determination had actually occurred, without regard to the actual settlement with the Tax Authority. Neither HII nor New NGC shall be required to pay any obligation arising from a contested settlement subject to this Section 5.1(a)(v) until the contest is either decided by the Tax Arbitrator or resolved between the parties; provided , however , that, pursuant to Section 11.1 interest shall accrue with respect to such obligation with the written notice pursuant to this Section 5.1(a)(v) treated as a demand for such payment.
     (b)  Control by HII . HII shall be entitled to control, contest, compromise and settle any adjustment proposed, asserted or assessed pursuant to any Tax Proceeding relating to any HII Tax Return.
      Section 5.2 Notices Relating to Tax Proceedings .
     (a) Except as otherwise provided in Section 5.2(b), if any Party becomes aware of the commencement of a Tax Proceeding that may give rise to Taxes for which another Party is responsible pursuant to ARTICLE 3 or which may give rise to a payment obligation under ARTICLE 6, Section 7.5, or Section 8.4, the Party that so becomes aware shall notify such other Party of such Tax Proceeding within 10 days after so becoming aware and thereafter shall promptly provide to such other Party copies of notices and communications relating to such Tax Proceeding.
     (b) If an HII Group Member (including NGC) receives a notice or correspondence relating to a Tax Proceeding subject to Section 5.2(a), such HII Group Member shall promptly provide a copy of such notice or correspondence to the NGC Tax Officer so as to allow New NGC to exercise the control over such Tax Proceedings through NGC and the NGC Tax Officer, as provided in ARTICLE 10.

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     (c) A failure by a Party to notify the other Party of the commencement of any such Tax Proceeding or to forward any notice or communication, in either case in a timely manner, shall not relieve the other Party of any obligation it may have pursuant to this Agreement, except to the extent such Party is actually prejudiced by such failure.
      Section 5.3 Statute of Limitations .
     Any extension of the statute of limitations for any Taxes or a Tax Return for any Pre-Distribution Taxable Period or a Straddle Taxable Period may be made only by the Party responsible for the preparation and filing of such Tax Return pursuant to ARTICLE 2.
ARTICLE 6
PAYMENTS BETWEEN HII AND NEW NGC
FOR CERTAIN INCOME TAX ADJUSTMENTS
      Section 6.1 Payments by HII to New NGC .
     (a)  General . Except as otherwise provided in Section 7.5 and Section 8.4(a), upon a Final Determination resulting in an Income Tax Adjustment to (i) a Current Tax Group Federal Consolidated Return, (ii) an NGC Non-Federal Tax Return, or (iii) a New NGC Non-Federal Tax Return, in each case for a Pre-Distribution Taxable Period or a Straddle Taxable Period, HII shall pay to New NGC the amount set forth in Section 6.1(b) (subject to the limitations in Section 6.1(c) and Section 6.2(d)).
     (b)  Payment by HII to New NGC for Income Tax Adjustments to Current Tax Group Federal Consolidated Returns . In the event of an Income Tax Adjustment relating to an Income Tax Item of an HII Group Member (except NGC) on a Current Tax Group Federal Consolidated Return for a Pre-Distribution Taxable Period, the amount payable by HII to New NGC hereunder shall be 35 percent of any increase, by reason of such Income Tax Adjustment, in (i) the taxable income of such Member for such Pre-Distribution Taxable Period (as determined pursuant to Section 7.1(a)) or Straddle Taxable Period (to the extent attributable to the portion of such Straddle Period ending on or before the Distribution Date as determined pursuant to Section 7.1(b)) over (ii) the taxable income of such Member that was included in the determination of Tax shown as payable (or the Refund shown as due) on such Tax Return, as last filed before the Distribution Date and modified by any subsequent Adjustment Request made before the Distribution Date.
     (c)  Limitation on Payment Obligation . An Income Tax Adjustment resulting in an increase in taxable income of an HII Group Member on a Current Tax Group Federal Consolidated Return for a Pre-Distribution Taxable Period or a Straddle Taxable Period shall not result in a payment obligation by HII pursuant to Section 6.1(b), unless such Income Tax Adjustment is of a nature that could result in a correlative reduction in the taxable income of an HII Group Member for a Post-Distribution Taxable Period (as determined pursuant to Section 7.1(a)) or a Straddle Taxable Period (to the extent attributable to the portion of such Straddle Taxable Period beginning on or after the Distribution Date as determined pursuant to Section 7.1(b)). In determining whether such an increase in taxable income of an HII Group Member is of a nature that could result in a reduction in taxable income of an HII Group Member for a Post-

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Distribution Period or a Straddle Period (to the extent attributable to the portion of the Straddle Period beginning on or after the Distribution Date as determined pursuant to Section 7.1(b), the actual availability to the HII Group or such Member of any Tax benefit attributable thereto (whether due to losses incurred by the HII Group in a Post-Distribution Taxable Period or a Straddle Period, Income Tax Adjustments relating to non-depreciable, non-amortizable assets, or otherwise) shall not be taken into account. This Section 6.1(c) shall not apply to any payment due under Section 7.5 or Section 8.4.
     (d)  Tax Adjustments to NGC Non-Federal Tax Returns and New NGC Non-Federal Tax Returns . Payments relating to adjustments for non-federal Taxes on NGC Non-Federal Tax Returns and New NGC Non-Federal Tax Returns shall be determined solely in accordance with Section 8.7 of the Separation and Distribution Agreement (relating to “Government Contract Matters”).
      Section 6.2 Payments by New NGC to HII .
     (a)  General . Except as otherwise provided in Section 7.5 and Section 8.4(b), upon a Final Determination resulting in an Income Tax Adjustment to (i) a Current Tax Group Federal Consolidated Return, (ii) an NGC Non-Federal Tax Return, or (iii) a New NGC Non-Federal Tax Return, in each case for a Pre-Distribution Taxable Period, New NGC shall pay to HII the amount set forth in Section 6.2(b) (subject to the limitations in Section 6.2(c) and Section 6.2(d)).
     (b)  Payment by New NGC to HII for Income Tax Adjustments to Current Tax Group Federal Consolidated Returns . In the event of an Income Tax Adjustment relating to an Income Tax Item of an HII Group Member on a Current Tax Group Federal Consolidated Return for a Pre-Distribution Taxable Period or a Straddle Taxable Period, the amount payable by New NGC to HII hereunder shall be 35 percent of any decrease, by reason of such Income Tax Adjustment, in (i) the taxable income of such Member for such Pre-Distribution Taxable Period (as determined pursuant to Section 7.1(a)) or a Straddle Taxable Period (to the extent attributable to the portion of such Straddle Period ending on or before the Distribution Date as determined pursuant to Section 7.1(b)) from (ii) the taxable income of such Member that was included in the determination of Tax shown as payable (or the Refund shown as due) on such Tax Return, as last filed before the Distribution Date and modified by any subsequent Adjustment Request made before the Distribution Date.
     (c)  Limitation on Payment Obligations . An Income Tax Adjustment resulting in a decrease in taxable income of an HII Group Member on a Current Tax Group Federal Consolidated Return for a Pre-Distribution Taxable Period or a Straddle Taxable Period shall not result in a payment obligation by New NGC pursuant to Section 6.2(b), unless such Income Tax Adjustment is of a nature that could result in a correlative increase in the taxable income of an HII Group Member for a Post-Distribution Taxable Period (as determined pursuant to Section 7.1(a)) or a Straddle Taxable Period (to the extent attributable to the portion of such Straddle Taxable Period beginning on or after the Distribution Date as determined pursuant to Section 7.1(b). In determining whether such a decrease in taxable income of an HII Group Member is of a nature that could result in an increase in taxable income of an HII Group Member for a Post-Distribution Period or a Straddle Period, the actual incurrence by the HII Group or such Member

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of any Tax detriment attributable thereto shall not be taken into account. This Section 6.2(c) shall not apply to any payment due under Section 7.5, Section 8.4, or Section 10.4.
     (d)  Tax Adjustments to NGC Non-Federal Tax Returns and New NGC Non-Federal Tax Returns . Payments relating to adjustments for non-federal Taxes on NGC Non-Federal Tax Returns and New NGC Non-Federal Tax Returns shall be determined solely in accordance with Section 8.7 of the Separation and Distribution Agreement (relating to “Government Contract Matters”).
      Section 6.3 Threshold Amount .
     (a) HII shall not have an obligation to make a payment under Section 6.1(a), and New NGC shall not have a payment obligation under Section 6.2(a), unless and until the aggregate amount of payments otherwise due by such Party (the “ Payor Party ”) to the other Party (the “ Payee Party ”) under Section 6.1(a) and Section 6.2(a) exceeds by more than $5,000,000 (the “ Threshold Amount ”) the aggregate amount of payments otherwise due by the Payee Party to the Payor Party under Section 6.1(a) and Section 6.2(a).
     (b) If the Threshold Amount is exceeded, the Payor Party shall be liable under Section 6.1(a) and Section 6.2(a) only for a payment or payments in excess of the Threshold Amount.
     (c) If, after a payment becomes due under Section 6.1(a) and Section 6.2(a), a subsequent payment becomes due under Section 6.1(a) and Section 6.2(a) by either the Payor Party or the Payee Party (not taking account the Threshold Amount in Section 6.3(a)), the amount of the subsequent payment due between the Parties shall be adjusted to effectuate the aggregate nature of the Parties’ payment obligations under Section 6.1(a) and Section 6.2(a), including the Threshold Amount in Section 6.3(a).
     (d) Section 6.3(a) shall not apply to any payment due under Section 7.5, Section 8.4, or Section 10.4.
      Section 6.4 Separate Entity Provisions .
     (a) For purposes of computing the taxable income of an HII Group Member in determining the amount payable in Section 6.1 or Section 6.2:
     (i) each HII Group Member shall be treated as a stand-alone corporation that filed a separate Income Tax Return based solely on the Income Tax Items and apportionment factors of such Member (but reflecting elections and Accounting Methods used by the NGC Group for the relevant Current Tax Group Federal Consolidated Return, NGC Non-Federal Tax Return, or New NGC Non-Federal Tax Return);
     (ii) no net operating loss, net capital loss, or other loss carryover or carryback deduction shall be taken into account; and

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     (iii) a decrease in an amount of net operating loss or capital loss shall be treated as an increase in taxable income, and an increase in an amount of net operating loss or capital loss shall be treated as a decrease in taxable income.
     (b) This Section 6.4 shall not apply to any payment due under Section 7.5, Section 8.4, or Section 10.4.
      Section 6.5 Acknowledgement .
     New NGC and HII acknowledge and agree that the reason for the methodology for determining payments as set forth in Section 6.1 or Section 6.2 is that the precise computation of actual Tax detriment or Tax benefit resulting from an Income Tax Adjustment or combinations of Income Tax Adjustments to taxable income may be difficult or impossible to determine and that the payments provided for in Section 6.1 or Section 6.2 are in lieu of any payments or indemnities relating to the actual amount of adjustment to Taxes.
ARTICLE 7
ALLOCATION, CHARACTER, AND TREATMENT
OF CERTAIN TAX ITEMS AND TRANSACTIONS
      Section 7.1 Allocation of Certain Tax Items .
     (a)  Allocation Between Taxable Periods . If applicable law requires the Taxable Period of any HII Group Member that was a member of the Current Tax Group to end as of the close of the Distribution Date, Income Tax Items shall be included in each Taxable Period in accordance with Treasury Regulations Section 1.1502-76(b)(2)(i) with no election under Treasury Regulations Section 1.1502-76(b)(2)(ii) or (iii).
     (b)  Allocation Within a Straddle Taxable Period . If applicable law does not require the Taxable Period of HII and each HII Group Member that was a member of the Current Tax Group to end as of the close of the Distribution Date, then the amount of Income Tax Items attributable to each portion of the Straddle Taxable Period shall be determined by means of a closing of the books and records of such HII Group Member as of the close of the Distribution Date; provided , however , that exemptions, allowances or deductions that are calculated on an annual or periodic basis shall be allocated between such portions in proportion to the number of days in each such portion.
     (c)  Extraordinary Transactions . Notwithstanding anything to the contrary in this Agreement, for all Tax purposes, New NGC and HII each shall report any transaction that is outside the ordinary course of the normal day-to-day operations of the Shipbuilding Business that is undertaken, caused, or permitted by any HII Group Member that occurs on the Distribution Date but after the Distribution as occurring on the day after the Distribution Date pursuant to Treasury Regulations Section 1.1502-76(b)(1)(ii)(B) or any similar or analogous provision of state, local or foreign Law. New NGC shall not make a ratable allocation election pursuant to Treasury Regulations Section 1.1502-76(b)(2)(ii)(D) or any similar or analogous provision of state, local or foreign Law.

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      Section 7.2 Tax Treatment of Payments between the Parties .
     (a)  Payments Pursuant to this Agreement . Each of New NGC and HII covenants and agrees that it will, and will cause each of its respective Subsidiaries to, treat the payments described below in the following manner for all Tax purposes:
     (i) A payment by HII to New NGC under Section 6.1, Section 7.5, Section 8.4, or Section 10.4 and a payment by NGC to New NGC under Section 10.3(b) shall be treated as a distribution by HII to New NGC immediately prior to the Distribution.
     (ii) A payment by New NGC to HII under Section 6.2, Section 7.5, Section 8.4, or Section 10.4 and a payment by New NGC to NGC under Section 10.3(a) shall be treated as a contribution by New NGC to HII immediately prior to the Distribution.
     (iii) A payment of interest under Section 11.1 shall be treated as taxable or deductible, as the case may be, in either case except as otherwise required by applicable Law.
     (b)  Payments Pursuant to Separation and Distribution Agreement and Ancillary Agreements .
     (i) In General . New NGC and HII each covenants and agrees that it will, and will cause each of its respective Subsidiaries to, treat an indemnity payment pursuant to the Separation and Distribution Agreement (other than payments made with respect to Shared Gains or Shared Liabilities) or any Ancillary Agreement, to the extent attributable to a Pre-Distribution Taxable Period or the portion of such Straddle Period ending on or before the Distribution Date as determined pursuant to Section 7.1(b), as a contribution by New NGC to HII or a distribution by HII to New NGC, as the case may be, immediately prior to the Distribution.
     (ii) Shared Gains and Shared Liabilities . Consistent with Section 9.1, the Parties shall consult and negotiate in determining the tax treatment of Shared Gains and Shared Liabilities, as allocated in the Separation and Distribution Agreement, and of any indemnity payments between the Parties with respect thereto. In such consultations and negotiations, the Parties shall seek to achieve consistency in their respective Tax treatment and reporting of such matters and, to the extent allowed by Law, Tax treatment that is consistent with the economic benefits and burdens of such allocations and indemnities.
      Section 7.3 Tax Treatment of Novations of Shipbuilding Liabilities and Retained Liabilities .
     Each Party covenants and agrees that it will, and will cause each of its respective Subsidiaries to, treat the novation of the Shipbuilding Liabilities and the Retained Liabilities pursuant to Section 2.4 and 2.5 of the Separation and Distribution Agreement, respectively as (a) a distribution by HII to New NGC immediately prior to the Distribution or (b) a contribution by New NGC to HII immediately prior to the Distribution.

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      Section 7.4 Accounting Methods .
     (a) No HII Group Member shall take any action with the IRS (whether by making an Adjustment Request, filing a request for a change in Accounting Method, or otherwise) that would adversely affect the application of any Accounting Method for any HII Group Member for any Pre-Distribution Taxable Period, unless such action is required by the IRS in a Final Determination.
     (b) Each HII Group Member shall continue the use of any Accounting Method in effect immediately prior to the Distribution Date for such Member (including the Accounting Methods described in the IRS ruling letter dated February 26, 2010 relating to CVN 78), unless such Member either (i) is required by the IRS to change such Accounting Method in a Post-Distribution Taxable Period, or (ii) requests and receives consent from the IRS to change such Accounting Method in a Post-Distribution Taxable Period.
     (c) Each HII Group Member shall continue the use of any Accounting Method agreed to by NGC or New NGC and the IRS for such HII Group Member as a result of any Final Determination with respect to Current Tax Group Federal Consolidated Returns for a Pre-Distribution Taxable Period or a Straddle Taxable Period, unless such HII Group Member Group receives consent from, or is required by, the IRS to change such Accounting Method in a Post-Distribution Taxable Period; provided , however , that if such consent reasonably would be expected to have material adverse impact on New NGC (including through an increase in Taxes or a reduction of a Tax Attribute, regardless of whether or when such Tax Attribute otherwise would have been used), the HII Tax Group (or such Member) shall not seek such consent.
     (d) Each HII Group Member that was granted permission by IRS to implement a change in Accounting Method prior to the Distribution Date (including changes pursuant to IRS automatic consent procedures) shall comply with all terms of the Accounting Method change consent agreement or the terms imposed by the automatic consent procedure, including (i) the accounting method change request relating to long-term contract accounting methods filed on behalf Northrop Grumman Shipbuilding, Inc. on December 22, 2009 and for which consent was granted by the IRS in a ruling letter dated July 19, 2010, and (ii) the automatic accounting method change, relating to contracts with the Navy pursuant to Section 2203 of the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006, Pub. L. No. 109-234, filed on behalf of Northrop Grumman Shipbuilding, Inc. on January 27, 2010.
     (e) The Parties acknowledge and agree that any “long-term contract” (within the meaning of Section 460(f) of the Code) being performed by any HII Group Member on the Distribution Date is subject to Treasury Regulations Section 1.460-4(k)(3), relating to step-in-the-shoes transactions.
     (f) The Parties acknowledge and agree that any interest any HII Group Member owes to IRS, or is owed by IRS, in a Post-Distribution Taxable Period under the look-back rules of Section 460(b)(2), (i) is payable by, or shall be payable to, respectively, such HII Group Member, and (ii) shall not result in any payment obligation by any Party under ARTICLE 6,

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notwithstanding the fact that some period of contract performance covered by the look-back calculation occurred during a Pre-Distribution Taxable Period or a Straddle Taxable Period.
     (g) The Parties acknowledge and agree that any adjustment to taxable income of any HII Group Member in a Post-Distribution Taxable Period resulting from an adjustment under Section 481 of the Code relating to an Accounting Method change effective as of a date prior to the Distribution Date shall not result in any payment obligation by any Party under ARTICLE 6, notwithstanding the fact that the adjustment period may have commenced in a Pre-Distribution Taxable Period or Straddle Taxable Period.
     (h) The Parties acknowledge and agree that any adjustment to taxable income of any HII Group Member in a Post-Distribution Taxable Period resulting from an adjustment under Section 481 of the Code relating to an Accounting Method change effective as of a date subsequent to the Distribution Date shall not result in any payment obligation by any Party under ARTICLE 6, notwithstanding the fact that the adjustment may take into account the taxable income reported on an Accounting Method in a Pre-Distribution Taxable Period or a Straddle Taxable Period.
     (i) The Parties acknowledge and agree that any increase in the tax liability of any HII Group Member in a Post-Distribution Taxable Period resulting from the recapture of any tax benefit under Section 708(b) of the American Jobs Creation Act of 2004, Pub. L. No. 108—357 shall not result in any payment obligation by New NGC under Section 6.2, notwithstanding the fact that such recapture may relate to taxable income of qualified naval ship contracts that would have been recognized by such Member during a Pre-Distribution Taxable Period but for the application of Section 708(a) thereof.
      Section 7.5 Indemnification for Taking Contrary Tax Treatment .
     (a) If either New NGC or HII or any of its Subsidiaries fails to comply with any covenant, agreement, or undertaking in this ARTICLE 7, such Party shall indemnify and hold harmless the other Party and each of its Subsidiaries from and against any (i) increase in Taxes resulting from a Final Determination that the treatment of a Income Tax Item differs from the treatment of such Income Tax Item described in this ARTICLE 7 and (ii) legal, accounting, or other fees and expenses incurred in connection with a Tax Proceeding relating to the treatment of such Income Tax Item.
     (b) A Party’s obligation under this ARTICLE 7 to treat a receipt, payment or item of income, gain, loss, deduction or credit in a prescribed manner (including timing) shall be satisfied if such Party files all relevant Tax Returns and Adjustment Requests in a manner consistent with such prescribed treatment.
     (c) For the purposes of this Section 7.5, any increase in Taxes shall be determined in accordance with the methodology set forth in Section 6.1(b) and Section 6.1(d), on the one hand, or Section 6.2(b) and Section 6.2(d), on the other; provided , however , that the limitations under Section 6.1(c), Section 6.2(c), and Section 6.3 shall not apply to the indemnities under this Section 7.5, it being the intention of the parties that any indemnity under this Section 7.5 shall be determined without any minimum amount and without regard to the presence or absence of any

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possible future Tax benefit or Tax detriment to any member of the HII Group or any member of the New NGC Group.
     (d) Any obligations of a Party pursuant to this Section 7.5 shall be separate from and shall not affect the obligations of any Party to another Party pursuant to Section 6.1, Section 6.2, Section 8.4(b), or Section 10.4.
      Section 7.6 Tax Attributes .
     (a) New NGC shall cooperate with HII, each at its own cost and expense, in determining the allocation of Tax Attributes between the Current Tax Group and the HII Tax Group arising in Pre-Distribution Taxable Periods or Straddle Taxable Periods in accordance with the Code and Treasury Regulations (and any applicable state, local, and foreign Laws). New NGC and HII hereby agree to compute all Taxes for Post-Distribution Taxable Periods and Straddle Taxable Periods consistently with that determination unless otherwise required by a Final Determination.
     (b) To the extent that the amount of any Tax Attribute is later reduced or increased by a Tax Authority, Tax Proceeding, or carrybacks of Tax Attributes from Post-Distribution Taxable Periods of either the Current Tax Group or the HII Group, such reduction or increase shall be allocated to the Party to which such Tax Attribute was allocated pursuant to Section 7.6(a).
ARTICLE 8
TAX-FREE STATUS OF THE TRANSACTIONS
      Section 8.1 Covenants, Undertakings, Agreements, Representations, and Warranties .
     (a)  HII Covenants, Undertakings, Agreements, Representations, and Warranties .
     (i) HII represents and warrants as follows:
     (A) All the facts presented and representations made in the Tax Materials (singly and in combination), to the extent descriptive of the HII Group, any HII Group Member, or the actions or intentions of any of them, at all times have been, and as of the date of this Agreement are, true, correct, fairly presented and complete in all respects and are not misleading in any respect.
     (B) No HII Group Member is aware of any respect in which any fact presented or representation made in the Tax Materials (singly or in combination) is misleading in any respect or is other than true, correct, fairly presented and complete in all respects.
     (ii) HII covenants, undertakes and agrees as follows:
     (A) Each HII Group Member shall use its best efforts to ensure that the facts presented and representations made in the Tax Materials (singly and in

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combination) will be true, correct, fairly presented and complete in all respects, and not misleading in any respect, through and including the Distribution Date and thereafter as relevant.
     (B) If an HII Group Member becomes aware that any fact presented or representation made in the Tax Materials (singly or in combination) is, may be, or may become misleading or other than true, correct, fairly presented and complete in all respects, HII shall promptly notify the appropriate management personnel of NGC (before the Distribution Date) or New NGC (after the Distribution Date) of the situation in writing, and shall use its best efforts and fully cooperate in any efforts by NGC and/or New NGC to correct the situation, all at its own expense.
     (C) No HII Group Member will take a position on a Tax Return (including on Schedule UTP or any similar schedule or form) that could be reasonably likely to be inconsistent in any respect with the rulings set forth in the IRS Ruling, the rights and obligations set forth in the IRS Closing Agreement, the conclusions set forth in the Opinion, or the Tax-Free Status of the Transactions.
     (b)  New NGC Covenants, Undertakings, Agreements, Representations, and Warranties .
     (i) New NGC represents and warrants as follows:
     (A) It has delivered complete and accurate copies of the Tax Materials to HII.
     (B) All the facts presented and representations made in the Tax Materials (singly and in combination) at all times have been, and are as of the date of this Agreement, true, correct, fairly presented and complete in all respects, and are not misleading in any respect.
     (C) No New NGC Group Member is aware of any respect in which any fact presented or representation made in the Tax Materials (singly or in combination) is misleading in any respect or is other than true, correct, fairly presented and complete in all respects.
     (ii) New NGC covenants, undertakes and agrees as follows:
     (A) Each New NGC Group Member shall use its best efforts to ensure that the facts presented and representations made in the Tax Materials (singly and in combination) will be true, correct, fairly presented and complete in all respects, and will not be misleading in any respect, through and including the Distribution, and thereafter as relevant.
     (B) If a New NGC Group Member becomes aware that any fact presented or representation made in the Tax Materials (singly or in combination) is, may be, or may become misleading in any respect or other than true, correct, fairly presented and complete in all respects, New NGC shall promptly inform the

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appropriate management personnel of HII of the situation in writing, shall use its best efforts, and shall fully cooperate in any efforts by HII, to correct the situation, all at its own cost and expense.
     (C) No New NGC Group Member will take a position on a Tax Return (including on Schedule UTP or any similar schedule or form) that could be reasonably likely to be inconsistent in any respect with the rulings set forth in the IRS Ruling, the rights and obligations set forth in the IRS Closing Agreement, the conclusions set forth in the Opinion, or the Tax-Free Status of the Transactions.
     (c)  No Contrary Knowledge . Each of New NGC and HII represents and warrants that it knows of no fact (after due inquiry) that could be reasonably likely to cause the Tax treatment of the Transactions to be other than the Tax-Free Status of the Transactions.
     (d)  No Contrary Plan . Each of New NGC and HII represents and warrants that neither it nor any of its Affiliates has any plan or intent to take any action that could be reasonably likely to be inconsistent with any statement or representation in the Tax Materials.
      Section 8.2 Restrictions Relating to the Distribution .
     (a)  General . Neither New NGC nor HII shall take, or permit any New NGC Group Member or HII Group Member to take, any action that could be reasonably likely to be inconsistent with any of the Tax Materials or to jeopardize all or any part of the Tax-Free Status of the Transactions.
     (b)  IRS Closing Agreement . Neither New NGC nor HII shall take, or permit any New NGC Group Member or HII Group Member to take, any action that could be reasonably likely to be inconsistent with any provision of the IRS Closing Agreement.
     (c)  HII Restricted Actions . HII shall not take, and shall not permit any HII Group Member to take, any action described in paragraphs (i) through (vi) (each a “ HII Restricted Action ”) prior to the first day following the second anniversary of the Distribution (the “ Restriction Period ”).
     (i) No Liquidation or Dissolution . HII shall not take, and shall not permit any HII Group Member to take, any action that reasonably could be expected to result in a dissolution or liquidation (including any action that is a liquidation for federal Income Tax purposes, whether or not as part of a reorganization within the meaning of Section 368(a) of the Code) of any HII Group Member, except NGC, or a merger in which any HII Group Member, except NGC, is a party but not the surviving corporation.
     (ii) Continuation of Shipbuilding Business . HII shall not, and shall not permit any HII Group Member to, take any action that could be reasonably likely to be inconsistent with the continuation of the Shipbuilding Business as described in the Tax Materials; provided , however , that the winding down or cessation of the HII Group’s shipbuilding facilities in Avondale, Louisiana shall not be considered inconsistent with the continuation of the Shipbuilding Business.

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     (iii) Dispositions of Assets . HII shall not, and shall not permit any HII Group Member to, sell, transfer, or otherwise dispose of or agree to, sell, transfer or otherwise dispose (including in any transaction treated for federal Income Tax purposes as a sale, exchange, transfer or disposition) of assets (including shares of stock of any HII Group Member) in one or more transactions that, in the aggregate, could be reasonably likely to constitute more than 30 percent of the consolidated gross assets of the HII Group. The percentage of the consolidated gross assets of the HII Group sold, transferred or otherwise disposed of shall be based on the fair market value of all relevant assets as of the Distribution Date, or, if fair market value of any asset or group of assets is not readily determinable, based on the net book value of such asset or group of assets under Generally Accepted Accounting Principles, as of such date. The restrictions in this paragraph shall not apply to (A) sales, transfers, or dispositions of assets for cash or cash equivalents in the ordinary course of normal day-to-day operations of the Shipbuilding Business, (B) acquisitions of assets from unrelated Persons in arm’s-length transactions, (C) transfers of assets to Persons that are disregarded as entities separate from the transferors for federal Income Tax purposes, (D) mandatory or optional payments (including pre-payments) of interest or principal with respect to indebtedness of an HII Group Member, (E) redemptions or repurchases of HII stock or rights to acquire stock for cash or cash equivalents within the restrictions set forth in Section 8.2(c)(iv), (F) normal quarterly dividends, or (G) sales of assets in connection with the winding down and cessation of the HII Group’s shipbuilding facilities in Avondale, Louisiana.
     (iv) Redemptions and Other Acquisitions of HII Stock . HII shall not redeem or otherwise acquire (directly or through an Affiliate) any HII stock or rights to acquire stock of HII, except to the extent that such acquisitions (separately and together with any other such acquisitions) are within the limitations described in the IRS Ruling; provided , however , that an acquisition of a right to acquire stock in a transaction subject to Safe Harbor VIII of Treasury Regulations Section 1.355-7(d) shall not constitute an HII Restricted Action.
     (v) Transactions Implicating Section 355(e) of the Code .
     (A) HII shall not enter into a transaction described in Section 8.2(c)(v)(B) (and, to the extent any HII Group Member has the right or authority to prevent any such transaction, shall not permit any such transaction to occur), if in the aggregate such transactions could be reasonably likely to cause or permit one or more Persons (whether or not acting in concert) to acquire, directly or indirectly, a number of shares of HII stock that would, when combined with any other changes in ownership of HII stock, comprise 40 percent or more of either (I) the value of all outstanding shares of stock of HII as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (II) the total combined voting power of all outstanding shares of voting stock of HII as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series. For purposes of this Section 8.2(c)(v), a reference to an acquisition of stock and any similar term or variation thereof includes an agreement, understanding or arrangement or substantial negotiations, within the meaning of Treasury

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Regulations Section 1.355-7 regarding any such transaction or series of transactions or any similar transaction or series of transactions.
     (B) Subject to Section 8.2(c)(v)(C) and Section 8.2(c)(v)(D), a transaction described in this Section 8.2(c)(v)(B) includes a transaction or part of a series of transactions as a result of which (I) HII or any HII Group Member would merge or consolidate with any other Person (except a merger or consolidation of two HII Group Members), or (II) one or more Persons would (directly or indirectly) acquire, or have the right to acquire, shares of HII stock from HII and/or one or more holders of outstanding shares of HII stock. Such a transaction constitutes an HII Restricted Action regardless of whether it is supported by HII’s board of directors, management or shareholders, is a hostile acquisition, or otherwise.
     (C) For purposes of Section 8.2(c)(v)(B), (I) a recapitalization, amendment to a certificate of incorporation (or other organizational documents), or any other action, whether through a stockholder vote or otherwise, affecting the relative voting rights of stock (including through conversion of any stock into another class of stock) shall be treated as an acquisition of stock, and (II) a redemption of stock (directly or, as appropriate, indirectly through Affiliates) shall be treated as an indirect acquisition of stock by the non-redeeming shareholders.
     (D) A transaction described in Section 8.2(c)(v)(B) shall not include (I) an adoption by HII of a shareholder rights or “poison pill” plan (of the type described in Revenue Ruling 90-11), (II) an acquisition of HII stock that satisfies Safe Harbor VII of Treasury Regulations Section 1.355-7(d) or (III) an issuance of stock or a grant of an option to acquire stock by HII that satisfies Safe Harbor VIII or Safe Harbor IX of such regulation.
     (vi) Section 355(a)(1)(B) of the Code . HII shall not take any action or actions and, to the extent any HII Group Member has the right or authority to prevent such action, shall not permit any action (in either case, whether or not inconsistent with any of the Tax Materials), if, in the aggregate, such actions could be reasonably likely to cause or permit one or more Persons (whether or not acting in concert) to dispose, directly or indirectly, of a number of shares of HII stock that, when combined with any other changes in ownership of HII stock pertinent for purposes of Section 355(a)(1)(B) of the Code, could be reasonably likely to comprise 20 percent or more of the value of all of the outstanding shares of stock of HII as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series.
     (d)  Permitted Actions . Notwithstanding Section 8.2(c), during the Restriction Period HII may take an HII Restricted Action, if the conditions set forth in Section 8.2(d)(i), Section 8.2(d)(ii), or Section 8.2(d)(iii) are satisfied. For purposes of such provisions, in determining whether a ruling or opinion is satisfactory, New NGC may consider, among other factors, the appropriateness of any underlying assumptions or representations used as a basis for the ruling or

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opinion and the views of New NGC’s outside tax advisors on the substantive merits of the matters addressed in such ruling or opinion.
     (i) The conditions set forth in this Section 8.2(d)(i) shall be satisfied if HII shall have requested New NGC to obtain a supplemental ruling in accordance with Section 8.3 to the effect that such action or transaction will not affect the Tax-Free Status of the Transactions, and New NGC shall have received such a supplemental ruling in form and substance satisfactory to New NGC.
     (ii) The conditions set forth in this Section 8.2(d)(ii) shall be satisfied if HII shall have provided to New NGC an Unqualified Tax Opinion in form and substance satisfactory to New NGC.
     (iii) Solely with respect to the Restricted Actions described in Section 8.2(c)(i), the conditions of this Section 8.2(d)(iii) shall be satisfied if HII notifies New NGC in writing of the proposed dissolution, liquidation, or merger involving the relevant HII Group Member, and New NGC consents, in writing, to such dissolution, liquidation, or merger, which consent shall not be unreasonably withheld, conditioned or delayed; provided , however , that this Section 8.2(d)(iii) shall not apply to a dissolution or liquidation of HII or to a merger to which HII is a party.
     (e)  Restrictions Relating to NGC . HII shall not, and shall not permit any HII Group Member to, (i) sell, convey, assign or otherwise transfer any shares of capital stock of NGC, (ii) transfer any asset to NGC, or (iii) take any action that could be reasonably likely to cause NGC to engage in any business activity or otherwise to be inconsistent with the liquidation of NGC in the Transactions for federal Income Tax purposes; provided , however , that nothing in this Section 8.2(e) shall prevent HII or NGC from taking any action pursuant to ARTICLE 10 of this Agreement or from approving the amendment to NGC’s Certificate of Incorporation as contemplated by Section 8.2 of the Separation and Distribution Agreement.
      Section 8.3 Procedures Regarding Rulings and Opinions .
     (a) If HII notifies New NGC that it desires to undertake, or to cause an HII Group Member to undertake, an HII Restricted Action, New NGC shall cooperate with HII and use its reasonable best efforts to seek to obtain, as expeditiously as possible, at New NGC’s election, either a supplemental ruling from the IRS or an Unqualified Tax Opinion for the purpose of permitting HII to take such Restricted Action. HII shall bear its own costs and expenses and shall reimburse New NGC for all reasonable costs and expenses incurred by the Current Tax Group in attempting to obtain a supplemental ruling or an Unqualified Tax Opinion requested by HII.
     (b) Notwithstanding Section 8.3(a), New NGC shall have no obligation (i) to request a supplemental or other ruling if, upon consultation with appropriate IRS personnel, New NGC reasonably determines that IRS likely would not issue such ruling or (ii) to take any action to obtain a supplemental or other ruling or an Unqualified Tax Opinion with respect to any HII Restricted Action, if New NGC reasonably determines that such HII Restricted Action or the

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process to attempt to obtain such ruling or opinion reasonably could be expected to have a significant adverse effect on any New NGC Group Member.
     (c) Except in accordance with Section 8.3(a), no HII Group Member shall contact or seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) at any time concerning the Transactions (including guidance as to the impact of any other transaction on the Transactions).
     (d) New NGC shall have the right to obtain a ruling, determination or other guidance from any Tax Authority (including a supplemental IRS Ruling) or an opinion, including an Unqualified Tax Opinion, in its sole and absolute discretion and at any time. If New NGC decides to obtain such guidance or opinion, HII shall, and shall cause the HII Group Members to, cooperate with New NGC and take any and all actions reasonably requested by New NGC in connection with obtaining such guidance or opinion. Such cooperation shall include the making of any reasonable representation, warranty, undertaking or covenant, or the providing of any materials requested by the Tax Authority or the law firm issuing such opinion; provided, that HII shall not be required to make (or cause an Affiliate to make) any representation, warranty, undertaking or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control. In connection with obtaining a ruling or determination from a Tax Authority, New NGC shall apply for such ruling or determination and shall have sole and exclusive control over the process of obtaining such ruling or determination, including the right to modify or withdraw such request at any time. New NGC and HII each shall bear its own costs and expenses in obtaining a ruling, determination or Tax Opinion requested by New NGC; provided , however , that, if HII incurs reasonable legal or accounting fees in excess of $50,000, with prior consent of New NGC (which shall not be unreasonably withheld, conditioned or delayed), in connection with a request by New NGC for guidance or an opinion subject to this Section 8.1(d), and if such guidance or opinion does not relate to an HII Restricted Action, New NGC shall reimburse HII for such excess amount.
      Section 8.4 Indemnification .
     (a)  Indemnification by HII . HII shall indemnify and hold each New NGC Group Member harmless from and against any loss, cost or expense (including Transactions Taxes and legal, accounting and other fees and other expenses incurred in connection with any Tax Proceeding) resulting from (1) a failure by any HII Group Member to comply with any covenant, agreement, undertaking, representation or warranty made by HII in Section 8.1 or Section 8.2; or (2) the taking of any HII Restricted Action during the Restriction Period (whether or not HII shall have received a ruling or Unqualified Tax Opinion pursuant to Section 8.2(d) and Section 8.3).
     (b)  Indemnification by New NGC . New NGC shall indemnify and hold each HII Group Member harmless from and against any loss, cost or expense (including Transactions Taxes and legal, accounting and other fees and other expenses incurred in connection with any Tax Proceeding) resulting from a failure by any New NGC Group Member to comply with any covenant, agreement, undertaking, representation or warranty made by New NGC in Section 8.1 or Section 8.2.

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     (c)  Interaction with ARTICLE 6 . Transaction Taxes shall be determined without reference to the methodology or limitations set forth in ARTICLE 6.
     (d)  Interaction with Other Indemnities . Any obligations of a Party pursuant to this Section 8.4 shall be separate from and shall not affect the obligations of any Party to another Party pursuant to Section 6.1, Section 6.2, Section 7.5, or Section 10.4.
ARTICLE 9
COOPERATION
      Section 9.1 General Cooperation .
     Each of the Parties shall cooperate fully (and each shall cause its respective Subsidiaries to cooperate fully) with all reasonable requests in writing from another Party, or from a representative or advisor to such Party, in connection with the preparation and filing of Tax Returns, Adjustment Requests, claims for Refund, Tax Proceedings and calculations of amounts required to be paid pursuant to this Agreement, in each case, related or attributable to or arising in connection with Taxes of any of the Parties or their respective Subsidiaries covered by this Agreement and the establishment of any reserve required in connection with any financial reporting. The Parties shall continue to cooperate with one another with respect to such matters without regard to the time limitation set forth in Section 7.7(d) of the Separation and Distribution Agreement. Except as provided in Section 7.3 of the Separation and Distribution Agreement, each Party shall make its employees, advisors and facilities available, without charge, on a reasonable and mutually convenient basis in connection with the foregoing matters, and the cooperation required by this Section 9.1 shall include the providing of any information reasonably necessary or helpful in connection with such matters and shall include, without limitation, at such Party’s own cost and expense:
     (a) the providing of Tax Returns of the Parties and their respective Subsidiaries, books, records (including information regarding ownership and Tax basis of property), documentation and other information relating to such Tax Returns, including accompanying schedules, related work papers, and documents relating to rulings or other determinations by Tax Authorities;
     (b) the execution of documents (including powers of attorney) in connection with any Tax Proceedings of any of the Parties or their respective Subsidiaries, or the filing of Tax Returns or a Refund claims of the Parties or their respective Subsidiaries;
     (c) the use of the Party’s reasonable best efforts to obtain any documentation in connection with a Tax Matter; and
     (d) the use of the Party’s reasonable best efforts to obtain any Tax Returns (including accompanying schedules, related work papers, and documents), documents, books, records or other information in connection with the filing of any Tax Returns of any of the Parties or their Subsidiaries.

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      Section 9.2 Retention of Records .
     In addition to complying with their respective obligations as set forth in Article VII of the Separation and Distribution Agreement, (a) each of the Parties shall retain or cause to be retained all Tax Returns, schedules and workpapers, and all material records or other documents relating thereto in their possession, until sixty (60) days after the expiration of the applicable statute of limitations (including any waivers or extensions thereof) of the Taxable Periods to which such Tax Returns and other documents relate or until the expiration of any additional period that any Party reasonably requests, in writing, with respect to specific material records or documents; (b) a Party intending to destroy any material records or documents shall provide the other Parties with reasonable advance notice and the opportunity to copy or take possession of such records and documents; and (c) each of the Parties shall notify the other Parties in writing of any waivers or extensions of the applicable statute of limitations that may affect the Taxable Period for which the foregoing records or other documents must be retained.
      Section 9.3 Confidentiality .
     Section 7.8 and Section 7.9 of the Separation and Distribution Agreement shall apply to all Information provided by the Parties to one another pursuant to this Agreement. Provided, however , that, if a Party receiving such Information reasonably determines that any such Information will be helpful in the resolution of a Tax Proceeding if disclosed to a Tax Authority, then, upon request of such Party, the Party providing such Information shall promptly permit such disclosure unless such Party reasonably determines that such disclosure is likely to have a significant adverse effect on such Party or any of its Affiliates.
ARTICLE 10
NGC AS CURRENT TAX GROUP AGENT
      Section 10.1 Purpose .
     The purpose of this ARTICLE 10 is to ensure that matters relating to the Current Tax Group’s U.S. federal Income Taxes and other Taxes for Pre-Distribution Taxable Periods with respect to which NGC is, and after the Distribution will remain, the Current Tax Group Agent are managed and administered, and Tax Proceedings with respect to such Tax matters are conducted, in an efficient and orderly manner and in the interest of the New NGC Group, notwithstanding the fact that NGC will be a Subsidiary of HII after the Distribution but will continue to be the Current Tax Group Agent for the Current Tax Group’s U.S. federal Income Taxes and certain other Taxes for Pre-Distribution Taxable Periods. It is the Parties’ intent that no Party shall obtain any advantage or sustain any disadvantage vis-à-vis any other Party as a result of NGC, instead of a New NGC Group Member, being the Current Tax Group Agent.
      Section 10.2 NGC Tax Officer .
     (a) NGC shall appoint and retain as the NGC Tax Officer the individual designated by New NGC from time to time. It is expected but not required that New NGC shall designate its Vice President — Tax as the NGC Tax Officer. HII shall cause the NGC Tax Officer to be appointed as Vice President — Tax of NGC.

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     (b) The NGC Tax Officer shall have sole authority and responsibility to manage, administer, make decisions for and bind NGC with respect to all matters within the scope of NGC’s authority and responsibility as Current Tax Group Agent. Such matters shall include the matters listed in the Agency Regulations as subject to agency and all similar matters, including the following:
     (i) Preparation, signing and filing of Tax Returns for NGC as the Current Tax Group Agent,
     (ii) Making payments to Tax Authorities on behalf of NGC as the Current Tax Group Agent,
     (iii) Conducting Tax Proceedings and agreeing to settlements thereof on behalf of NGC as the Current Tax Group Agent,
     (iv) Obtaining the services of other officers and employees of New NGC Group Members on behalf of NGC as the Current Tax Group Agent, and
     (v) Retaining and granting powers of attorney to professional advisers, representatives, experts and other individuals or professional service firms on behalf of NGC as the Current Tax Group Agent.
     (c) The authority, responsibility and duties of the NGC Tax Officer shall be limited to matters described in Section 10.2(b). The NGC Tax Officer shall have no authority with respect to Tax matters of the HII Tax Group or any member of the HII Group other than NGC. With respect to NGC, the authority, responsibility and duties of the NGC Tax Officer shall be limited to matters relating to Tax Returns and Taxable Periods as to which NGC is the Current Tax Group Agent.
     (d) HII shall, and shall cause the other HII Group Members (including NGC) to, cooperate with the NGC Tax Officer in the performance of his or her responsibilities as described in Section 10.2(b). Upon request of the NGC Tax Officer, the board of directors and the officers of NGC shall promptly take any action and execute any documents as reasonably requested by the NGC Tax Officer for the purpose of conducting or settling a Tax Proceeding within the scope of this ARTICLE 10 (including documents in connection with settlement of a Tax Proceeding, even if HII may demand arbitration under Section 5.1(a)(v) with respect to such settlement).
     (e) The NGC Tax Officer shall act in the interest of the New NGC Group regarding all Tax matters, even if any such action is or may be contrary to the interest of the HII Group or its Members, under this Agreement or otherwise. Each of the HII Group Members hereby waives any conflict of interest that may arise from the activities and responsibilities of the NGC Tax Officer, and HII and NGC each has executed a letter to such effect in the form attached as Exhibit A. Upon request of New NGC, HII shall execute, or cause any HII Group Member (including NGC) to execute, a letter to similar effect in form or substance requested by a Tax Authority.

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     (f) New NGC shall employ and be solely responsible for paying the costs and expenses incurred in connection with the employment of the NGC Tax Officer and his or her activities, including cost of compensation paid and benefits accorded to the Tax Officer, liability insurance coverage and all costs associated with the use of services provided by other officers or employees of New NGC and other Current Group Members and by outside advisers, representatives or experts.
      Section 10.3 Payments of Tax and Receipt of Refunds .
     (a) In accordance with Section 2.1 and Section 2.2, New NGC shall pay all Tax liabilities incurred by NGC as Current Tax Group Agent (including any liability for Tax attributable to the activities of NGC during a Pre-Distribution Taxable Period).
     (b) In accordance with Section 4.1(a) and Section 4.2, promptly upon receipt by NGC of a Refund from a Tax Authority relating to a Tax Return for which NGC is the Current Tax Group Agent, NGC shall (and HII shall cause NGC to) remit the full amount of such Refund to New NGC.
      Section 10.4 Indemnification .
     (a) HII shall indemnify and hold harmless all New NGC Group Members from and against any loss, cost or expense (including Taxes and professional fees) resulting from a breach by NGC or any other HII Group Member of an obligation under this ARTICLE 10.
     (b) New NGC shall indemnify and hold harmless all HII Group Members from and against any loss, cost or expense (including Taxes and professional fees) resulting from—
     (i) any breach (including a delay in taking any action) by New NGC or any other New NGC Group Member of an obligation under this ARTICLE 10, and
     (ii) any act or omission (including a delay in taking an action) by the NGC Tax Officer (or by any person acting under direction of the NGC Tax Officer), arising out of or related to this ARTICLE 10; provided , however , that this Section 10.4(b)(ii) shall have no effect on any indemnity or payment obligation under ARTICLE 3, ARTICLE 4, ARTICLE 6, ARTICLE 7, or ARTICLE 8.
     (c) No act or omission (including a delay in taking an action) by the NGC Tax Officer within the scope of his or her authority and responsibility, under Section 10.2, shall result in any indemnity under Section 10.4(b) due to such act or omission being contrary to the interest of the HII Group or its Members, under this Agreement or otherwise.
     (d) Except as otherwise provided in ARTICLE 3, ARTICLE 4, ARTICLE 6, ARTICLE 7, and ARTICLE 8, New NGC shall indemnify and hold harmless all HII Group Members from and against any Taxes for which NGC is or becomes liable with respect to any Pre-Distribution Taxable Period and any Straddle Taxable Period (and from and against any costs or expenses, including professional fees, attributable to the determination of any such liability for Taxes).

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     (e) Any indemnity obligation under this ARTICLE 10 shall be separate from and in addition to the indemnities and other payment obligations between the Parties under ARTICLE 3, ARTICLE 4, ARTICLE 6, ARTICLE 7, and ARTICLE 8. None of the limitations or methodologies for computing any such obligations in any of such Articles shall apply to the indemnities under this ARTICLE 10.
      Section 10.5 Designation of Substitute Current Tax Group Agent .
     (a) NGC hereby designates Northrop Grumman Systems Corporation, a Delaware corporation, as successor Current Tax Group Agent in the form attached hereto as Exhibit B of even date herewith. Such designation shall become effective immediately upon the termination of NGC’s corporate existence (or, if sooner, upon the relevant Tax Authority’s consenting to or requiring such designation). Within a reasonable time after the Distribution, the NGC Tax Officer shall execute a designation in a form substantially identical to the form in Exhibit B and shall file such designation with the IRS. If the IRS does not accept such filing at such time, the NGC Tax Officer shall use his or her reasonable best efforts to file such designation at the earliest opportunity. The NGC Tax Officer shall provide HII with a copy of the designation and any related correspondence with the IRS.
     (b) Upon request of New NGC, HII shall cause NGC or any other HII Group Member to execute any additional document or documents to effect or facilitate the designation of a substitute Current Tax Group Agent selected by New NGC prior to the termination of NGC’s corporate existence. The NGC Tax Officer shall be responsible for filing any such document with the IRS in a manner consistent with Section 10.5(a).
     (c) HII agrees to cause the termination of NGC’s corporate existence, within the meaning of Treasury Regulations Section 1.1502-77(e), so as to facilitate the designation pursuant to Section 10.5(a), as soon as such termination can be accomplished with no significant adverse effect with respect to any contract between any HII Group Member and the United States Navy, and so long as the IRS accepts a substitute designee. HII agrees to keep New NGC informed of the status of these matters.
ARTICLE 11
MISCELLANEOUS
      Section 11.1 Timing of Payments; Interest .
     Amounts payable pursuant to this Agreement shall be paid within 30 days of the written demand by the Party entitled to receive such payments. Such demand shall include documentation setting forth the basis for the amount payable. Any payment not made within 30 days of the written demand for such payment shall accrue interest at a rate per annum equal to the rate in effect for underpayments pursuant to Section 6621(a)(2) of the Code (without taking into account increased rates under Section 6621(c)) from such date, compounded annually.
      Section 11.2 Dispute Resolution .
     (a)  Negotiations . New NGC and HII each shall endeavor, and shall cause their respective Affiliates to endeavor, to resolve any Tax Matters Dispute in an amicable manner

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through negotiations in good faith for not less than 21 days involving senior executives of the Parties who have authority resolve the matter.
     (b)  Appointment of Tax Arbitrator by the Parties . Upon written notice by New NGC to HII, or by HII to New NGC, after 21-day period provided in Section 11.2(a), such Parties shall jointly select, retain and appoint one individual to resolve the Tax Matters Dispute (the “ Tax Arbitrator ”). The Tax Arbitrator shall be a nationally-recognized tax attorney and shall be either a current or retired member of an Independent Firm or a former or retired judge or government official. In choosing a Tax Arbitrator, such Parties may consider, among other matters, the professional expertise of each prospective Tax Arbitrator, such individual’s independence from the Parties, the cost of retaining such individual and the availability of such individual to perform the services of Tax Arbitrator on a timely basis. Neither of such Parties will unreasonably withhold or delay giving consent to the appointment of any qualified individual as Tax Arbitrator.
     (c)  Appointment of Tax Arbitrator by Individuals Selected by the Parties . If, having determined that the Tax Matters Dispute must be referred to a Tax Arbitrator, the Parties cannot, after 21 days, retain a Tax Arbitrator who is acceptable to the Parties in good faith, then, upon written notice by New NGC to HII, or by HII to New NGC, each such Party shall, within seven days thereafter, designate and retain at its own expense an individual who shall have the qualifications described in Section 11.2(b). Such individuals shall agree upon and appoint as the Tax Arbitrator an individual (not either of such individuals or any member of a firm of which either of such individuals is a member or a retired member) who shall have such qualifications and who shall have agreed to serve as Tax Arbitrator at a cost no greater than the normal and customary charges for tax services imposed by such individual (or the Independent Firm of which he or she is a member or a retied member). Such individuals shall use reasonable best efforts to select the Tax Arbitrator within 14 days of their being selected by the Parties and shall not consult with either of the Parties prior to agreeing upon and appointing the Tax Arbitrator. The appointment of the Tax Arbitrator by such individuals shall be final and binding on the Parties, except if they agree otherwise.
     (d)  Appointment of Tax Arbitrator by Tax Section Chair . If, having determined that the Tax Matters Dispute must be referred to a Tax Arbitrator, (i) the Parties cannot appoint a Tax Arbitrator pursuant to Section 11.2(b), and (ii) the individuals selected by the Parties pursuant to Section 11.2(c) are unwilling or unable to agree upon and appoint a Tax Arbitrator in a timely manner, then the Parties shall jointly request that the individual then serving as Chair of the New York State Bar Association Tax Section appoint the Tax Arbitrator. If such individual is unable or unwilling to appoint the Tax Arbitrator, then the Parties shall jointly request that the individual then serving as Chair of the American Bar Association Tax Section appoint the Tax Arbitrator. Each such individual, as the case may be, shall use reasonable best efforts to select the Tax Arbitrator within 14 days and shall not consult with either of the Parties prior to appointing the Tax Arbitrator. The appointment of the Tax Arbitrator by either such individual, as the case may be, shall be final and binding on the Parties, except if they agree otherwise.
     (e)  Proceedings Before Tax Arbitrator . The Tax Arbitrator shall decide all points relating to the Tax Matters Dispute. Except to the extent jointly determined by agreement of the Parties, the Tax Arbitrator shall conduct proceedings necessary to reach a decision, as he or she

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reasonably determines, and may, in his or her reasonable discretion, obtain the services of any individual (including other members or employees of an Independent Firm of which the Tax Arbitrator is a current or retired member) to assist in deciding the Tax Matters Dispute. The Tax Arbitrator shall use his or her best efforts to resolve the dispute as quickly as is reasonably possible, and the Parties shall cooperate in efforts to do so. In the case of a dispute relating to NGC’s role as the Current Tax Group Agent, the powers of the NGC Tax Officer, or otherwise relating to any provision of ARTICLE 10, the Tax Arbitrator shall use his or her best efforts to resolve all matters within 60 days after his or her appointment. All fees and expenses of the Tax Arbitrator shall be shared equally by New NGC and HII.
     (f)  Tax Arbitrator’s Written Decision . As soon as practicable after proceedings are complete, the Tax Arbitrator shall furnish a written decision to the Parties. Such decision shall set forth the decision of the Tax Matters Dispute but shall not include any rationale therefor, discussion thereof or citations of legal authority, except to the extent necessary to make the terms of the decision clear to the Parties. The decision of the Tax Arbitrator shall be final and binding on the Parties, and the Parties shall take, or cause to be taken, any action necessary to implement the decision.
      Section 11.3 Survival of Covenants .
     Except as otherwise contemplated by this Agreement, all covenants and agreements of the Parties contained in this Agreement shall survive the Distribution and remain in full force and effect in accordance with their applicable terms, provided , however , that the representations and warranties and all indemnification for Taxes shall survive until 60 days following the expiration of the applicable limitations period (taking into account all extensions thereof), if any, for the Tax that gave rise to the indemnification, provided, further , that, in the event that notice for indemnification has been given within the applicable survival period, such indemnification shall survive until such time as such claim is finally resolved.
      Section 11.4 Termination of Agreements, Arrangements and Policies .
     Except for this Agreement and except as otherwise provided herein, all tax allocation agreements, arrangements or policies in effect between or among NGC Members shall be terminated effective as of the Distribution Date, and thereafter no party (or any of its directors or officers) shall have any liability or further obligation to any other party with respect to any such agreement, arrangement or policy.
      Section 11.5 Severability .
     If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced pursuant to any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties to this Agreement shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner.

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      Section 11.6 Entire Agreement .
     Except as otherwise expressly provided in this Agreement, this Agreement constitutes the entire agreement of the Parties hereto with respect to the subject matter of this Agreement and supersedes all prior agreements and undertakings, both written and oral, between or on behalf of the Parties hereto with respect to the subject matter of this Agreement.
      Section 11.7 Assignment .
     This Agreement shall not be assigned by either New NGC or HII without the prior written consent of the other such Party hereto, except that New NGC and HII each may assign (i) any or all of its rights and obligations pursuant to this Agreement to another New NGC Group Member or HII Group Member, as the case may be, and (ii) any or all of its rights and obligations pursuant to this Agreement in connection with a sale or disposition of any assets or entities or lines of business; provided , however , that no such assignment shall release the assigning Party from any liability or obligation pursuant to this Agreement.
      Section 11.8 No Third-Party Beneficiaries .
     This Agreement is for the sole benefit of the Parties, their respective Subsidiaries and the permitted successors and assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever pursuant to or by reason of this Agreement, provided, however, that the NGC Tax Officer shall be a third-party beneficiary with respect to his or her rights under ARTICLE 10.
      Section 11.9 Specific Performance and Other Equitable Relief .
     In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party who is or is to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its rights pursuant to this Agreement (whether relating to a Tax Matters Dispute subject to arbitration under Section 11.2), in its sole discretion, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by the Parties to this Agreement.
      Section 11.10 Waiver of Jury Trial .
     EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

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      Section 11.11 Governing Law .
     This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal Laws of the State of New York, without regard to the Laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York (other than Section 5-1401 of the New York General Obligations Law).
      Section 11.12 Amendment .
     No provision of this Agreement may be amended or modified except by a written instrument signed by the Parties to this Agreement. No waiver by any Party of any provision of this Agreement shall be effective unless explicitly set forth in writing and executed by the Party so waiving. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach.
      Section 11.13 Rules of Construction .
     Interpretation of this Agreement shall be governed by the following rules of construction: (i) words in the singular shall be held to include the plural and vice versa; (ii) words of one gender shall be held to include the other gender as the context requires; (iii) references to the terms Article, Section, paragraph, or clause, are references to the Articles, Sections, paragraphs, or clauses of this Agreement unless otherwise specified; (iv) the terms “hereof,” “herein,” “hereby,” “hereto,” and derivative or similar words refer to this entire Agreement; (v) the word “including” and words of similar import shall mean “including without limitation,” unless otherwise specified; (vi) references to “written” or “in writing” include in electronic form; (vii) the table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (viii) a reference to any Person includes such Person’s successors and permitted assigns; (ix) a reference to a provision of the Code, Treasury Regulations or any other Law mean the provision, or the successor provision thereto, as in effect for the relevant period or periods; and (x) a reference to a Party’s taking an action shall include the Party’s failure to take an action having the same result as the action referred to.
      Section 11.14 Notices .
     All notices, notifications, requests, and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or if by facsimile, upon written confirmation of receipt by facsimile, e-mail or otherwise, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All such notices, notifications, requests, and other communications shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such communication:

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     (a) if to New NGC or to any other New NGC Group Member, before the date New NGC relocates its corporate headquarters, to:
Northrop Grumman Corporation
1840 Century Park East
Los Angeles CA 90067-2199
Attention: Vice President — Tax
Facsimile: (310) 556-4546
with a copy (which shall not constitute notice) to:
Northrop Grumman Corporation
1840 Century Park East
Los Angeles CA 90067-2199
Attention: General Counsel
Facsimile: (310) 556-4910
     (b) if to New NGC or any other New NGC Group Member on or after the date New NGC relocates its corporate headquarters, to:
Northrop Grumman Corporation
2980 Fairview Park Drive
Falls Church VA 22042
Attention: Vice President — Tax
Facsimile: To be provided at relevant time
with a copy (which shall not constitute notice) to:
Northrop Grumman Corporation
2980 Fairview Park Drive
Falls Church VA 22042
Attention: General Counsel
Facsimile: (703) 875-1852
     (c) if to HII or any HII Group Member (other than NGC), to:
Huntington Ingalls Industries, Inc.
4101 Washington Avenue
Newport News VA 23607
Attention: Chief Financial Officer
Facsimile: (757) 688-0350

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with a copy (which shall not constitute notice) to:
Huntington Ingalls Industries, Inc.
4101 Washington Avenue
Newport News VA 23607
Attention: General Counsel
Facsimile: (757) 688-1408
     (d) if by HII to NGC, before the date New NGC relocates its corporate headquarters, to:
Titan II Inc.
c/o Northrop Grumman Corporation
1840 Century Park East
Los Angeles CA 90067-2199
Attention: Vice President — Tax
Facsimile: (310) 556-4546
with a copy (which shall not constitute notice) to:
Northrop Grumman Corporation
1840 Century Park East
Los Angeles CA 90067-2199
Attention: General Counsel
Facsimile: 310) 556-4910
     (e) if by HII to NGC, on or after the date New NGC relocates its corporate headquarters, to:
Titan II Inc.
c/o Northrop Grumman Corporation
2980 Fairview Park Drive
Falls Church VA 22042
Attention: Vice President — Tax
Facsimile: To be provided at relevant time
with a copy (which shall not constitute notice) to:
Northrop Grumman Corporation
2980 Fairview Park Drive
Falls Church VA 22042
Attention: General Counsel
Facsimile: (703) 875-1852

38


 

     (f) if by New NGC to NGC, to:
Titan II Inc.
4101 Washington Avenue
Newport News VA 23607
Attention: Chief Financial Officer
Facsimile: (757) 688-0350
with a copy (which shall not constitute notice) to:
Huntington Ingalls Industries, Inc.
4101 Washington Avenue
Newport News VA 23607
Attention: General Counsel
Facsimile: (757) 688-1408
      Section 11.15 Counterparts.
     This Agreement may be executed in one or more counterparts each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or portable document format (PDF) shall be as effective as delivery of a manually executed counterpart of any such Agreement.
      Section 11.16 Coordination with the Employee Matters Agreement.
     To the extent any covenants or agreements between the Parties with respect to employment Taxes are set forth in the Employee Matters Agreement, such matters shall be governed exclusively by the Employee Matters Agreement and not by this Agreement.
      Section 11.17 Conflict or Inconsistency Between Agreements.
     In the event of any conflict or inconsistency between any provision of this Agreement and any provision of either the Separation and Distribution Agreement or any of the other Ancillary Agreements, the applicable provision of this Agreement shall prevail.
      Section 11.18 Termination of this Agreement.
     This Agreement may be terminated by NGC at any time prior to the effectiveness of the Holding Company Reorganization or by New NGC at any time at or after the effectiveness of the Holding Company Reorganization and prior to the Distribution. In the event of termination of this Agreement prior to the Distribution, no party (or any of its directors or officers) shall have any Liability or further obligation to any other party with respect to this Agreement.
[The remainder of this page is intentionally left blank.]

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     IN WITNESS WHEREOF, the Parties have caused this Tax Matters Agreement to be duly executed by their duly authorized representatives as of the day and year first above written.
         
  NEW P, INC.
 
 
  By:   /s/ Mark Rabinowitz    
    Name:   Mark Rabinowitz   
    Title:   President & Treasurer   
 
  HUNTINGTON INGALLS INDUSTRIES, INC.
 
 
  By:   /s/ C. Michael Petters    
    Name:   C. Michael Petters   
    Title:   President and Chief Executive Officer   
 
  NORTHROP GRUMMAN CORPORATION
 
 
  By:   /s/ Mark Rabinowitz    
    Name:   Mark Rabinowitz   
    Title:   Corporate Vice President & Treasurer   
 
[Signature Page to Tax Matters Agreement]

 

Exhibit 10.6
EXECUTION COPY
 
TRANSITION SERVICES AGREEMENT
among
NORTHROP GRUMMAN SYSTEMS CORPORATION,
NORTHROP GRUMMAN SHIPBUILDING, INC.,
NEW P, INC.
and
HUNTINGTON INGALLS INDUSTRIES, INC.
Dated as of March 29, 2011
 

 


 

TABLE OF CONTENTS
         
    Page  
ARTICLE I DEFINITIONS
    1  
 
Section 1.1 Table of Definitions
    1  
Section 1.2 Certain Defined Terms
    2  
Section 1.3 Other Capitalized Terms
    2  
 
ARTICLE II SERVICES
    2  
 
Section 2.1 Provision of Services
    2  
Section 2.2 Standard of Care; Means of Providing Services
    2  
Section 2.3 Additional Services
    3  
Section 2.4 Services Not Provided by NGSC
    3  
Section 2.5 Use of Services
    3  
Section 2.6 Third-Party Providers
    3  
Section 2.7 Non-Exclusivity
    4  
Section 2.8 Cooperation
    4  
Section 2.9 Limitation on Services
    4  
Section 2.10 Personnel
    4  
Section 2.11 Right to Determine Priority
    5  
Section 2.12 Independent Contractor
    5  
Section 2.13 Independence
    5  
Section 2.14 Temporary Shutdowns for Maintenance
    5  
Section 2.15 Access
    5  
Section 2.16 Disclaimer of Warranty
    6  
Section 2.17 Duty of Good Faith and Fair Dealing
    6  
Section 2.18 Program Managers
    6  
 
ARTICLE III COMPENSATION
    6  
 
Section 3.1 Service Charge
    6  
Section 3.2 Invoicing and Payments
    6  
Section 3.3 Taxes
    7  
Section 3.4 Disputed Amounts
    7  
Section 3.5 Company’s Employees
    8  
Section 3.6 Third-Party Obligations
    8  
Section 3.7 Books and Records
    8  
 
ARTICLE IV TERM AND TERMINATION
    8  
 
Section 4.1 Term
    8  
Section 4.2 Extension of Term
    8  
Section 4.3 Termination
    9  
Section 4.4 Breach of Transition Services Agreement
    9  

i


 

TABLE OF CONTENTS
(Continued)
         
    Page  
Section 4.5 Sums Due
    9  
Section 4.6 Effect of Termination
    9  
Section 4.7 Return of Records
    9  
 
ARTICLE V FORCE MAJEURE
    9  
 
Section 5.1 Event of Force Majeure
    9  
Section 5.2 Reasonable Efforts
    10  
 
ARTICLE VI LIABILITIES
    10  
 
Section 6.1 Punitive and Consequential Damages
    10  
Section 6.2 Limitation of Liability
    10  
Section 6.3 Obligation to Re-Perform
    10  
Section 6.4 Release and Indemnity
    10  
 
ARTICLE VII CONFIDENTIALITY; TITLE TO DATA; INFORMATION SYSTEMS
    11  
 
Section 7.1 Confidentiality
    11  
Section 7.2 Title to Data
    12  
Section 7.3 Intellectual Property
    12  
Section 7.4 Use of NGSC’s Information Systems
    13  
 
ARTICLE VIII GENERAL PROVISIONS
    13  
 
Section 8.1 Effect if Distribution Does Not Occur
    13  
Section 8.2 Incorporation of Separation Agreement Provisions
    13  
Section 8.3 Parties’ Obligations
    14  
     
Schedule A
  Statement of Work
Schedule B
  Confidentiality
Schedule C
  Business Associate Agreement

ii


 

TRANSITION SERVICES AGREEMENT
     TRANSITION SERVICES AGREEMENT, dated as of March 29, 2011 (this “ Transition Services Agreement ”), among Northrop Grumman Systems Corporation, a Delaware corporation (“ NGSC ”), Northrop Grumman Shipbuilding, Inc., a Virginia corporation (“ NGSB ”), New P, Inc., a Delaware corporation (“ New NGC ”), and Huntington Ingalls Industries, Inc., a Delaware corporation (“ HII ”).
RECITALS
     A. The parties and Northrop Grumman Corporation, a Delaware corporation (“ NGC ”), have entered into the Separation and Distribution agreement (the “ Separation Agreement ”), dated as of the date hereof.
     B. Pursuant to the Separation Agreement, the business of NGC will be separated into two publicly traded companies: (a) HII, which following the Separation (as defined in the Separation Agreement) will own and conduct, directly and indirectly, the Shipbuilding Business (as defined in the Separation Agreement), and (b) New NGC, which following the Separation will own and conduct, directly and indirectly, the Retained Business (as defined in the Separation Agreement).
     C. NGSB desires to purchase certain services from NGSC during a transition period, for the benefit of NGSB’s operation of the Shipbuilding Business.
AGREEMENT
     In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
     Section 1.1 Table of Definitions . The following terms have the meanings set forth on the pages referenced below:
         
Definition   Page  
Authorized Users
    13  
HII
    1  
New NGC
    1  
NGC
    1  
NGSB
    2  
NGSC
    2  
NGSC Indemnitees
    10  
NGSC’s Banner
    13  
NGSC’s Network
    13  
Program Manager
    6  
Separation Agreement
    1  
Service
    2  
Service Charge
    6  
Services
    2  
Services IP
    12  
Term
    8  
Third-Party Products and Services
    3  
Third-Party Providers
    3  
Transition Services Agreement
    1  


 

     Section 1.2 Certain Defined Terms . For purposes of this Transition Services Agreement:
          “ NGSB ” has the meaning set forth in the preamble, and shall include its Subsidiaries and successor(s) or, unless context otherwise requires, any of NGSB’s Affiliates (including HII) when that Affiliate receives the Services listed and described on Schedule A .
          “ NGSC ” has the meaning set forth in the preamble or, unless context otherwise requires, any of NGSC’s Subsidiaries when that Subsidiary performs the Services listed and described on Schedule A .
          “ Service ” or “ Services ” means those services described on Schedule A or otherwise provided by NGSC pursuant to Article II.
     Section 1.3 Other Capitalized Terms . Capitalized terms not defined in this Transition Services Agreement shall have the meanings ascribed to them in the Separation Agreement.
ARTICLE II
SERVICES
     Section 2.1 Provision of Services .
          (a) NGSC shall provide or cause one of its Subsidiaries to provide to NGSB the services listed and as specified on Schedule A , attached hereto.
          (b) For each Service, the parties have set forth on Schedule A , the time period during which the Service will be provided (if different from the Term), a description of the Service and certain related obligations, a dollar amount commensurate with the Services provided and certain other terms applicable thereto.
     Section 2.2 Standard of Care; Means of Providing Services .
          (a) Subject to the limitations set forth in this Article II or unless otherwise agreed by the parties, the Services shall be performed by NGSC for NGSB’s operation of the Shipbuilding Business at a level of service that is substantially the same as the level of service in which such Services were generally performed prior to the Distribution and NGSB shall use such Services for substantially the same purposes and in

2


 

substantially the same manner and level of service as NGSB had used such Services prior to the date hereof.
          (b) Subject to Section 2.2(a), NGSC shall, in its sole discretion, determine the means, manner and resources used to provide the Services in accordance with its reasonable business judgment. Without limiting the foregoing, NGSC may elect to modify or replace at any time (i) its policies and procedures, (ii) any Subsidiaries and/or third parties that provide any Services, (iii) the location from which any Service is provided or (iv) the intellectual property rights, information technology, products and services used to provide the Services.
     Section 2.3 Additional Services . Schedule A may be amended at any time by amendment of this Transition Services Agreement to add additional services.
     Section 2.4 Services Not Provided by NGSC . No services provided under this Transition Services Agreement shall be construed as accounting, legal or tax advice or shall create any fiduciary obligations on the part of NGSC or any of its Subsidiaries or Affiliates to any Person, including to NGSB or any of its Subsidiaries or Affiliates, or to any plan trustee or any customer of any of them.
     Section 2.5 Use of Services . NGSC shall be required to provide Services only to NGSB in connection with NGSB’s operation of the Shipbuilding Business. NGSB shall not resell any Services to any Person whatsoever or permit the use of the Services by any Person other than in connection with the conduct of business in the ordinary course by NGSB. This provision shall not, however, prevent recovery by NGSB of all or any costs of such Services under any contract to which the NGSB is a party.
     Section 2.6 Third-Party Providers . Each of NGSB and NGSC shall use commercially reasonable efforts (a) to obtain any required consents of the providers (“ Third-Party Providers ”) of any products or services to be used by NGSC in providing the Services (“ Third-Party Products and Services ”) and (b) where necessary, to obtain new licenses or similar agreements, to permit NGSC to use or receive the benefit of the Third-Party Products and Services during the term of this Transition Services Agreement to provide the Services; provided , however , that NGSC shall exclusively conduct all negotiations with Third-Party Providers in connection with (a) and (b), and that NGSB shall provide reasonable cooperation to NGSC in connection with such negotiations. Pursuant to Section 3.2, NGSB shall pay for any additional Third-Party Products and Services, including payments for any licenses, and any additional fees imposed by such Third-Party Providers, including any fees for services related to “knowledge transfer,” in each case reasonably necessary for NGSC to provide the Services. The parties understand and agree that provision of any Services requiring the use of any Third-Party Products and Services shall be subject to receipt of any required consents of the applicable Third-Party Providers. For the avoidance of doubt, the licenses and agreements referred to in this Transition Services Agreement refer only to those licenses and agreements necessary to permit NGSC to provide and for NGSB to receive Services under this Transition Services Agreement. New licenses and agreements necessary for HII or NGSB to stand up or separately operate its business after completion of the Services are not provided for herein and are the sole responsibility of HII and NGSB.

3


 

     Section 2.7 Non-Exclusivity . Subject to the provisions of Section 4.1(a) governing the termination of Services, nothing in this Transition Services Agreement shall preclude NGSB from obtaining, in whole or in part, services of any nature that may be obtainable from NGSC, from its own employees or from providers other than NGSC.
     Section 2.8 Cooperation . NGSB shall, in a timely manner, take all such actions as may be reasonably necessary or desirable in order to enable or assist NGSC in the provision of Services to NGSB, including providing necessary information and specific written authorizations and consents, and NGSC shall be relieved of its obligations hereunder to the extent that NGSB fails to take any such action, or NGSB’s failure to conclude or maintain any such action renders performance or ongoing performance by NGSC of such obligations unlawful, impracticable or unreasonable, in NGSC’s sole determination. NGSB shall be liable to NGSC and its Subsidiaries and Affiliates for any Liabilities resulting from, arising out of or relating to NGSB’s failure to comply with the obligations set forth in this Section 2.8.
     Section 2.9 Limitation on Services . Unless expressly provided otherwise on Schedule A :
          (a) NGSC shall only be required to provide the Services to or for the benefit of the Shipbuilding Business as conducted immediately prior to the date of this Transition Services Agreement;
          (b) NGSB shall not use the Services other than in a manner directly related to the operation of the Shipbuilding Business as conducted immediately prior to the date of this Transition Services Agreement;
          (c) NGSC shall not be required to expand its facilities, incur new long-term capital expenses or employ additional personnel or maintain the employment of any specific employee in order to provide the Services to NGSB;
          (d) NGSC shall not be required to provide Services hereunder that are greater in nature and scope than the comparable services provided by NGSC to NGSB prior to the Distribution; and
          (e) NGSC shall not be obligated to provide any Services to the extent inconsistent with applicable law or contract.
     Section 2.10 Personnel . In providing the Services, NGSC, as it deems necessary or appropriate in its reasonable judgment, may (a) use the personnel of NGSC or its Affiliates and (b) employ the services a Third-Party Provider to the extent the relevant Third-Party Products and Services are routinely utilized to provide similar services to other businesses of any member of the New NGC Group or are reasonably necessary for the efficient performance of any of such Services; provided that if NGSC obtains the services of a Third-Party Provider not routinely utilized to provide similar services to other business of NGSC, that NGSB consents prior to the use of such Third-Party Provider, which consent shall not be unreasonably withheld. NGSC will only employ the services of Third-Party Providers who have entered into non-disclosure agreements that obligate such third

4


 

parties to maintain the confidentiality of HII’s and NGSB’s proprietary and business sensitive information and that prohibit the Third-Party Provider from using such proprietary and business sensitive information for any purpose other than in connection with providing the Services.
     Section 2.11 Right to Determine Priority . If there is an unavoidable conflict between the immediate needs of NGSC and those of NGSB as to the use of or access to a particular Service to be provided by NGSC, NGSC shall have the right, in its sole discretion, to establish reasonable priorities, at particular times and under particular circumstances, as between NGSC and NGSB. In any such situation, NGSC shall provide notice to NGSB of any such changes at the earliest practicable time.
     Section 2.12 Independent Contractor . NGSC shall act under this Transition Services Agreement solely as an independent contractor and not as an agent of NGSB.
     Section 2.13 Independence . Unless otherwise agreed in writing, all employees and representatives of NGSC who provide Services under this Transition Services Agreement shall be deemed for purposes of all compensation and employee benefits matters to be employees or representatives of NGSC and not employees or representatives of NGSB. In performing the Services, such employees and representatives shall be under the direction, control and supervision of NGSC (and not NGSB) and NGSC shall have the sole right to exercise all authority with respect to the employment (including termination of employment), assignment and compensation of such employees and representatives.
     Section 2.14 Temporary Shutdowns for Maintenance . NGSC shall have the right to shut down temporarily for maintenance purposes the operation of the information technology resources, networks, related infrastructure and facilities providing any Service whenever in its judgment, reasonably exercised, such action is necessary; provided , however , that NGSC shall notify NGSB at least 20 days prior to any scheduled maintenance, to the extent reasonably practicable. In the event that it is not reasonably practicable to schedule the maintenance 20 days or more in advance, NGSB shall be notified that maintenance is required. NGSC shall give NGSB as much advance notice of any such shutdown as is reasonably practicable. When feasible, this notice shall be given in writing. When written notice is not feasible, oral notice shall be given and promptly confirmed in writing. NGSC shall be relieved of its obligations to provide Services during the period that its facilities are so shut down but shall use reasonable efforts to minimize each period of shutdown for such purpose and to schedule such shutdown so as not to inconvenience or disrupt NGSB’s conduct of its business.
     Section 2.15 Access . NGSB shall make available on a timely basis to NGSC all information and materials reasonably requested by NGSC to enable it to provide the Services. NGSB shall give NGSC reasonable access, during regular business hours and at such other times as are reasonably required, to the business premises for the purposes of providing Services. NGSB shall fully inform NGSC of all of its applicable security and safety rules and regulations, and when accessing NGSB’s business premises, NGSC shall use reasonable efforts to comply with all of NGSB’s security and safety rules and regulations as described to NGSC.

5


 

     Section 2.16 Disclaimer of Warranty . Except as expressly set forth in this Transition Services Agreement, the Services and products to be purchased under this Transition Services Agreement are furnished as is, where is, with all faults and without warranty of any kind, express or implied, including any warranty of merchantability or fitness for any particular purpose. NGSC does not make any warranty that any service complies with any law, domestic or foreign.
     Section 2.17 Duty of Good Faith and Fair Dealing . The parties recognize that prior to the Distribution, NGSC was a provider of certain critical services necessary to the operations of the Shipbuilding Business. If the parties failed to list a service on Schedule A that is critical and essential to the Shipbuilding Business, then they agree to consider in good faith whether they can reasonably modify Schedule A to include such service.
     Section 2.18 Program Managers . Each of NGSB and NGSC shall appoint a program manager who will be responsible for managing the relationship between the parties (each a “ Program Manager ”). The Program Managers shall be the preferred and primary points of contact for the parties in relation to this Transition Services Agreement. The responsibilities for the Program Managers shall include, and the Program Managers shall have the authority to:
          (a) manage and resolve any disputes that arise under this Transition Services Agreement; and
          (b) disseminate information obtained in their role as Program Managers, as appropriate, throughout their respective organizations.
In the event that the Program Managers cannot resolve any dispute that arises under this Transition Services Agreement within 30 days, then the dispute resolutions procedures set forth in Article X of the Separation Agreement shall govern such dispute.
ARTICLE III
COMPENSATION
     Section 3.1 Service Charge . As consideration for the provision of the Services, NGSB shall, for each Service performed, pay NGSC the applicable dollar amount for such Service set forth on Schedule A (the “ Service Charge ”). In addition to the Service Charge for such Services, NGSC shall also be entitled to reimbursement from NGSB upon receipt of reasonable supporting documentation for all reasonable and necessary third-party and out-of-pocket expenses incurred in connection with NGSC’s provision of the Services that are not included as part of the Service Charge. In the event the Service is terminated, the Service Charge will be prorated for the number of days of Service received in the calendar month (based on a 30-day month) in which the Service is terminated.
     Section 3.2 Invoicing and Payments .
          (a) Invoices . Except as the parties shall otherwise agree, after the end of each month, NGSC shall submit an invoice to NGSB for the costs it incurred under this Transition Services Agreement for that month. Each invoice shall include a line item level

6


 

of detail for the previously agreed-upon Services for which there is a Service Charge, together with documentation supporting each of the invoiced amounts so that NGSB can make appropriate cost settlements to each business unit and cost center. NGSB shall pay all amounts due and payable under such invoice in accordance with Section 3.2(c).
          (b) Notice . All invoices shall be in writing and shall be delivered by first class mail, facsimile or e-mail to the attention of NGSB at the following address, or pursuant to such other instructions as may be designated in writing by NGSB:
Northrop Grumman Shipbuilding, Inc.
4101 Washington Avenue
Newport News, VA 23607
Attention: Accounts Payable
Facsimile: (757) 688-8842
E-mail: accountspayable@hii-co.com
          (c) Payment . All payments described in this Section 3.2 shall be made by electronic funds transmission in U.S. Dollars to an account designated by NGSC or NGSB, as applicable, without any offset or deduction of any nature whatsoever, within 30 days of the date of receipt of any properly submitted invoice. Invoices unpaid as of such date shall accrue interest at a rate equal to the daily average one-month LIBOR plus one percent (1%); provided , however , that interest shall not accrue for a period of up to one-month on past-due unpaid invoices if the delay or failure to pay results from causes beyond NGSB’s reasonable control, including any strikes, lock-outs or other labor difficulties, acts of any government, riot, insurrection or other hostilities, embargo, fuel or energy shortage, fire, flood, acts of God, wrecks or transportation delays, or inability to obtain necessary labor, materials or utilities. If NGSB fails to pay any amount due hereunder when due, NGSC shall have the right, without any liability to NGSB, or anyone claiming by or through NGSB, to cease providing any or all of the Services provided by NGSC to NGSB unless NGSB cures such a failure to make payment within five days of NGSC’s providing written