Business Environment (1998) Environment Failing Merger Reduced DOD Spending / B-2 Phase-Down Resulting In… Major Decline in Business Base Driving… Excess Assets Across … Multiple Sites With Diverse Processes, Systems, Policies Requiring… Rationalization and “Return” to Growing Shareholder Value Situation Consolidate Integrate Streamline Consolidate Integrate Streamline MAD CAD ESID Business (4) No. Sites (17) Population (31,000) Transform to a New Industry Paradigm 6, ,700 6,300 Mandate For Transformation B-2 9,000 3

Bringing Together... The Enterprise’s Capabilities on a New Scale Common Systems Shared Services LEAN Enterprise Concept Technology Leveraging ACS (MAD & B-2) ACS (MAD & B-2) Systems & Subsystems Design, Manufacturing & Support Systems & Subsystems Design, Manufacturing & Support AGS & BM AGS & BM AEW & EW AEW & EW Aerostructures Prime Systems Contractor for Advanced Surveillance & Precision Strike Platforms Expertise as Structures & Subsystems Tier 1 Integrator Strengthened Alignment of Core Competencies Reduced Operating Cost Increased Critical Mass Prime Systems Contractor for Advanced Surveillance & Precision Strike Platforms Expertise as Structures & Subsystems Tier 1 Integrator Strengthened Alignment of Core Competencies Reduced Operating Cost Increased Critical Mass Synergistic Combination of Programs & Capabilities New Sector Greater Than The Sum of Its Parts (Integrated Systems)

Leading Change Focus Areas Sustain Operational Excellence Throughout Transition Program Management Leadership Development Customer Advocacy Technology / New Concept Development Strategic Make / Buy Organic Capabilities Supplier Relationships Core Functional Competencies Business Processes/Systems Learning / Knowledge Sharing GoodGood Operating Principles GreatGreat

Perform, Position and Grow Managed Defense Downturn ( )  Sales Volume Reduced 16% – Population Reduced 43% – Facilities Footprint Reduced 4.3M Sq. Ft. – PP&E Dispositions of $560M – Labs / DP Infrastructure Down 50%  Invested in New Technology / Capabilities Managed Defense Downturn ( )  Sales Volume Reduced 16% – Population Reduced 43% – Facilities Footprint Reduced 4.3M Sq. Ft. – PP&E Dispositions of $560M – Labs / DP Infrastructure Down 50%  Invested in New Technology / Capabilities Facilities Sq. Ft 15M 11M 9M Downturn Baseline  Emerged from drawdown positioned for future growth  Major SDD transition to early production / significant ’07-’08 new business opportunities  Emerged from drawdown positioned for future growth  Major SDD transition to early production / significant ’07-’08 new business opportunities New Business Global Hawk EMD / Prod. F-35 SDD MP-RTIP / E-10A F/A-18 / B-2 RMP E-2D / ICAP III / EA-18

Executing the Sector Plan Sq. Ft. (M) Facilities Sq Ft PP&E Disposition 0 Book Value ($B) Population (000) Data Processing* ($M) M Sq. Ft. Reduction (37%) 5.6M Sq. Ft. Reduction (37%) $1.1B Disposition (75%) $1.1B Disposition (75%) ,500 Total Reduction (39%) 9,500 Total Reduction (39%) $63M / Yr Reduction (35%) $63M / Yr Reduction (35%) * Excludes IES Non-Recurring

Delivering Enterprise Growth & Return Change Sales $3,135 $5,500 75% R&D % times Margin $301 $551 83% Avg. Assets -37% ROAE times Solid sales, margin and cash expansions driven by technology and core business growth Managing business mix change and delivering results Significant new product investment …focus on asset utilization Maintaining strong balance sheet Financial Results (ROAE)

Summary  Successfully managed the disruption associated with dramatic change  Transformed itself into a new paradigm within the Aerospace Industry  Consistently Produced outstanding operating results  Positioned the business strategically for growth  Continuous change adopted as a cultural norm Contributed to the Redefinition of Northrop Grumman