Exhibit 10.1

 

 

 

EMPLOYEE MATTERS AGREEMENT

by and between

EXELIS INC.

and

VECTRUS, INC.

dated as of

September 25, 2014

 

 

 

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TABLE OF CONTENTS

 

         Page  

Article I DEFINITIONS

     1   

Section 1.1.

 

Definitions

     1   

Section 1.2.

 

Interpretation

     9   

Article II GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

     11   

Section 2.1.

 

General Principles

     11   

Section 2.2.

 

Service Credit

     12   

Section 2.3.

 

Plan Administration

     12   

Section 2.4.

 

No Duplication or Acceleration of Benefits

     13   

Section 2.5.

 

No Expansion of Participation

     13   

Section 2.6.

 

Special Provisions

     13   

Article III RETAINED LIABILITIES

     14   

Section 3.1.

 

Liability for Exelis Pension Plan and Exelis Excess Pension Plans

     14   

Section 3.2.

 

Exelis Retiree Medical Plan

     14   

Section 3.3.

 

Exelis Retiree Life Plan

     14   

Section 3.4.

 

Retirement Eligibility under the Exelis Pension Plan

     14   

Section 3.5.

 

Additional Retirement Eligibility under the Exelis Excess Pension Plans

     15   

Section 3.6.

 

Vesting Under the Exelis Pension Plan and the Exelis Excess Pension Plans

     15   

Article IV ASSIGNMENT OF EMPLOYEES

     15   

Section 4.1.

 

Active Employees

     15   

Section 4.2.

 

Employment Law Obligations

     16   

Section 4.3.

 

Employee Records

     17   

Article V EQUITY AND EQUITY-BASED COMPENSATION

     18   

Section 5.1.

 

General Principles

     18   

Section 5.2.

 

Stock Options

     19   

Section 5.3.

 

Treatment of Exelis RSAs Held by Exelis Directors

     20   

Section 5.4.

 

Restricted Stock Units

     20   

Section 5.5.

 

Section 16(b) of the Exchange Act

     21   

Section 5.6.

 

Liabilities for Settlement of Awards

     21   

Section 5.7.

 

Form S-8

     22   

Section 5.8.

 

Tax Reporting and Withholding for Equity-Based Awards

     22   

Section 5.9.

 

Cooperation

     22   

Article VI TOTAL SHAREHOLDER RETURN AWARDS

     23   

Section 6.1.

 

Treatment of 2012 TSR Awards for Vectrus Group Employees and Exelis Group
Employees

     23   

Section 6.2.

 

Treatment of 2013 TSR Awards

     23   

Article VII TREATMENT OF ANNUAL BONUSES FOR FISCAL YEAR 2014

     24   

Article VIII U.S. QUALIFIED DEFINED CONTRIBUTION PLANS

     24   

 

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Section 8.1.

 

Vectrus 401(k) Plan

     24   

Section 8.2.

 

Transfer of Exelis Savings Plan Assets

     24   

Section 8.3.

 

Treatment of Vectrus Common Stock and Exelis Common Stock

     24   

Section 8.4.

 

Tax Qualified Status

     25   

Article IX U.S. WELFARE PLANS

     25   

Section 9.1.

 

Establishment of Vectrus Welfare Plans

     25   

Section 9.2.

 

Transitional Matters Under Vectrus Welfare Plans and Exelis Welfare Plans;
Treatment of Claims Incurred and Other Miscellaneous Matters

     26   

Section 9.3.

 

Continuity of Benefits

     32   

Section 9.4.

 

Welfare Plan Implementation Date

     34   

Article X NON-U.S. WELFARE PLANS

     34   

Section 10.1.

 

Establishment of Non-U.S. Welfare Plans

     34   

Section 10.2.

 

Transitional Matters Under Vectrus Welfare Plans; Credit for Deductibles and
Other Limits

     35   

Article XI EXCESS SAVINGS PLAN

     36   

Section 11.1.

 

Vectrus Excess Savings Plan

     36   

Section 11.2.

 

Vectrus Springing Rabbi Trust

     36   

Article XII WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION

     36   

Section 12.1.

 

Vectrus Workers’ Compensation

     36   

Section 12.2.

 

Vectrus Unemployment Compensation

     36   

Section 12.3.

 

Exelis Workers’ Compensation

     36   

Section 12.4.

 

Exelis Unemployment Compensation

     37   

Section 12.5.

 

Assignment of Contribution Rights

     37   

Section 12.6.

 

Collateral

     37   

Section 12.7.

 

Cooperation

     37   

Article XIII SEVERANCE

     37   

Article XIV BENEFIT ARRANGEMENTS AND OTHER MATTERS

     38   

Section 14.1.

 

Termination of Participation

     38   

Section 14.2.

 

Restrictive Covenants in Employment and Other Agreements

     38   

Article XV GENERAL PROVISIONS

     39   

Section 15.1.

 

Preservation of Rights to Amend

     39   

Section 15.2.

 

Confidentiality

     39   

Section 15.3.

 

Administrative Complaints/Litigation

     39   

Section 15.4.

 

Reimbursement and Indemnification

     39   

Section 15.5.

 

Costs of Compliance with Agreement

     40   

Section 15.6.

 

Fiduciary Matters

     40   

Section 15.7.

 

Entire Agreement

     40   

Section 15.8.

 

Binding Effect; No Third-Party Beneficiaries; Assignment

     40   

Section 15.9.

 

Amendment; Waivers

     40   

Section 15.10.

 

Remedies Cumulative

     41   

 

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Section 15.11.

 

Notices

     41   

Section 15.12.

 

Counterparts

     41   

Section 15.13.

 

Severability

     41   

Section 15.14.

 

Governing Law

     41   

Section 15.15.

 

Dispute Resolution

     42   

Section 15.16.

 

Performance

     42   

Section 15.17.

 

Construction

     42   

Section 15.18.

 

Effect if Distribution Does Not Occur

     42   

Section 15.19.

 

Code Sections 162(m) and 409A

     42   

 

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EMPLOYEE MATTERS AGREEMENT

THIS EMPLOYEE MATTERS AGREEMENT, dated as of September 25, 2014, is entered into
by and between Exelis Inc. (“Exelis”), and Vectrus, Inc. (“Vectrus”). Exelis and
Vectrus are also referred to in this Agreement individually as a “Party” and
collectively as the “Parties.”

RECITALS

WHEREAS, Exelis has determined that it would be appropriate, desirable and in
the best interests of Exelis and the shareholders of Exelis to separate the
Vectrus Business from Exelis;

WHEREAS, Exelis and Vectrus have entered into the Separation and Distribution
Agreement, dated as of September 25, 2014 (the “Distribution Agreement”), in
connection with the separation of the Vectrus Business from Exelis (the
“Transaction”) and the Distribution of Vectrus Common Stock to shareholders of
Exelis;

WHEREAS, the Distribution Agreement also provides for the execution and delivery
of certain other agreements, including this Agreement, in order to facilitate
and provide for the separation of Vectrus and its subsidiaries from Exelis; and

WHEREAS, to ensure an orderly transition under the Distribution Agreement, it
will be necessary for the Parties to allocate between them Assets, Liabilities
and responsibilities with respect to certain employee compensation and benefit
plans and programs, and certain other employment matters.

NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth in this Section 1.1. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to such terms in the Distribution
Agreement.

“2012 TSR Award” means a cash-based award granted under an Exelis Equity Plan
that vests based upon total shareholder return over the performance period of
January 1, 2012 through December 31, 2014.

“2013 TSR Award” means a cash-based award granted under an Exelis Equity Plan
that vests based upon total shareholder return over the performance period of
January 1, 2013 through December 31, 2015.

“2012 TSR Proration Factor” means the quotient obtained by dividing the elapsed
time, measured in whole months, from January 1, 2012 through the last completed
fiscal month ending on or before the Distribution Date by 36.

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“2013 TSR Proration Factor” means the quotient obtained by dividing the elapsed
time, measured in whole months, from January 1, 2013 through the last completed
fiscal month ending on or before the Distribution Date by 36.

“Adjusted Exelis Option” has the meaning set forth in Section 5.2(b)(I).

“Adjusted Exelis RSU” has the meaning set forth in Section 5.4(a).

“Affiliate” has the meaning set forth in the Distribution Agreement.

“Agreement” means this Employee Matters Agreement, together with all schedules
hereto and all amendments, modifications, and changes hereto entered into
pursuant to Section 15.9.

“Assets” has the meaning set forth in the Distribution Agreement.

“Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of
the General Rules and Regulations under the Exchange Act.

“Benefit Management Records” has the meaning set forth in Section 4.3(b).

“Benefit Plan” means any contract, agreement, policy, practice, program, plan,
trust, commitment or arrangement providing for benefits, perquisites or
compensation of any nature to any Employee, or to any eligible family member,
dependent, or beneficiary of any such Employee, including pension plans
(qualified and nonqualified), thrift plans, deferred compensation plans
(qualified and nonqualified), supplemental pension plans and welfare plans, and
contracts, agreements, policies, practices, programs, plans, trusts, commitments
and arrangements providing for terms of employment, fringe benefits, severance
benefits, change in control protections or benefits, medical, retiree medical,
dental, vision, travel and accident, life, disability and accident insurance,
tuition reimbursement, travel reimbursement, vacation, sick, personal or
bereavement days, leaves of absences and holidays of Exelis or Vectrus, as
applicable.

“Business Day” means any day other than a Saturday or Sunday or a day on which
banking institutions in McLean, Virginia are authorized or requested by Law to
close.

“Change in Control” shall be deemed to have occurred as of the first day that
any one or more of the following conditions have been satisfied:

(a) a report on Schedule 13D shall be filed with the Securities and Exchange
Commission pursuant to Section 13(d) of the Exchange Act disclosing that any
Person, other than Vectrus or a Subsidiary or any employee benefit plan
sponsored by Vectrus or a Subsidiary (or related trust), is the Beneficial Owner
directly or indirectly of twenty percent (20%) or more of the outstanding shares
of Vectrus Common Stock;

(b) any Person, other than Vectrus or a Subsidiary, or any employee benefit plan
sponsored by Vectrus or a Subsidiary (or related trust), shall purchase shares
pursuant to a tender offer or exchange offer to acquire any shares of Vectrus
Common Stock (or securities convertible into shares of Vectrus Common Stock) for
cash, securities or any other consideration, provided that after consummation of
the offer, the Person in question is the Beneficial Owner, directly or
indirectly, of twenty percent (20%) or more of the outstanding shares of Vectrus
Common Stock (calculated as provided in paragraph (d) of Rule 13d-3 under the
Exchange Act in the case of rights to acquire shares of Vectrus Common Stock);

 

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(c) the consummation of:

(I) any consolidation, business combination or merger involving Vectrus, other
than a consolidation, business combination or merger involving Vectrus in which
holders of shares of Vectrus Common Stock immediately prior to the
consolidation, business combination or merger (x) hold fifty percent (50%) or
more of the combined voting power of Vectrus (or the corporation resulting from
the consolidation, business combination or merger or the parent of such
corporation) after the merger and (y) have the same proportionate ownership of
common stock of Vectrus (or the corporation resulting from the consolidation,
business combination or merger or the parent of such corporation), relative to
other holders of shares of Vectrus Common Stock immediately prior to the
consolidation, business combination or merger, immediately after the
consolidation, business combination or merger as immediately before;

(II) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all the assets of Vectrus; or

(III) there shall have been a change in a majority of the members of the board
of directors of Vectrus within a 12-month period unless the election or
nomination for election by Vectrus’s shareholders of each new director during
such 12-month period was approved by the vote of two-thirds of the directors
then still in office who (x) were directors at the beginning of such 12-month
period or (y) whose nomination for election or election as directors was
recommended or approved by a majority of the directors who were directors at the
beginning of such 12-month period; or

(d) any Person, other than Vectrus or a Subsidiary or any employee benefit plan
sponsored by Vectrus or a Subsidiary (or related trust), becomes the Beneficial
Owner of twenty percent (20%) or more of the shares of Vectrus Common Stock.

“COBRA” means the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985,
as codified at Section 601 et seq. of ERISA and at Section 4980B of the Code.

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.

“Disability Medical Benefits” means medical, dental and vision benefits provided
before the Welfare Plan Implementation Date by an Exelis Welfare Plan or, after
the Welfare Plan Implementation Date, by a Vectrus Welfare Plan, to Vectrus
Group Employees who are Former Management Benefitted Employees and who became
disabled under an Exelis Welfare Plan that provided long-term disability
benefits before the Welfare Plan Implementation Date.

“Distribution” has the meaning set forth in the Distribution Agreement.

 

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“Distribution Agreement” has the meaning set forth in the recitals to this
Agreement.

“Distribution Date” has the meaning set forth in the Distribution Agreement.

“Effective Time” means the effective time of the Distribution.

“Employee” means any Exelis Group Employee, Former Exelis Group Employee or
Vectrus Group Employee.

“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exelis” has the meaning set forth in the preamble to this Agreement.

“Exelis Benefit Plan” means any Benefit Plan sponsored or maintained by a member
of the Exelis Group immediately prior to the Effective Time, excluding any such
Benefit Plan that becomes a Vectrus Benefit Plan.

“Exelis Bonus Plan” means the Exelis Annual Incentive Plan for Executive
Officers or the Exelis Inc. 1997 Annual Incentive Plan, as applicable, as may be
amended from time to time.

“Exelis Common Stock” means the common stock, par value $0.01 per share, of
Exelis.

“Exelis Common Stock Unit Fund” means an investment fund in the Exelis Salaried
Investment and Savings Plan which holds Exelis Common Stock Units and cash.

“Exelis Common Stock Units” means units of the Exelis Common Stock Unit Fund.

“Exelis Director” means any individual who (a) is or was previously a
non-employee member of the board of directors of Exelis, or (b) was a member of
the board of directors of ITT Corporation prior to November 1, 2011.

“Exelis Entity” means any member of the Exelis Group.

“Exelis Equity Plan” means any equity incentive plan sponsored or maintained by
Exelis immediately prior to the Effective Time.

“Exelis Excess Pension Plans” means collectively, the Exelis Inc. Excess Pension
Plan IA, the Exelis Inc. Excess Pension Plan IIA, the Exelis Inc. Excess Pension
Plan IB, and the Exelis Inc. Excess Pension Plan IIB.

“Exelis Excess Savings Plan” means the Exelis Inc. Excess Savings Plan.

“Exelis FSA” has the meaning set forth in Section 9.3(a)(I).

“Exelis Group” has the meaning set forth in the Distribution Agreement.

 

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“Exelis Group Employee” means any individual who is or was previously employed
by a member of the Exelis Group immediately prior to the Effective Time,
excluding any Vectrus Group Employee.

“Exelis HRA” has the meaning set forth in Section 9.2(h)(I).

“Exelis HRA Participation Period” means any period of participation by a Vectrus
Welfare Plan Participant who is a Management Benefitted Employee in an Exelis
HRA during the plan year in which the Distribution occurs.

“Exelis Options” means options to purchase Exelis Common Stock granted pursuant
to any Exelis Equity Plan.

“Exelis Pension Plan” means the Exelis Salaried Retirement Plan.

“Exelis Post-Distribution Share Value” means the closing per share price of
Exelis Common Stock on the last Trading Day prior to the Distribution Date based
on “ex-distribution” trading on the NYSE during Regular Trading Hours.

“Exelis Pre-Distribution Share Value” means the closing per share price of
Exelis Common Stock on the last Trading Day prior to the Distribution Date based
on “regular way” trading on the NYSE during Regular Trading Hours.

“Exelis Ratio” means the quotient obtained by dividing the Exelis
Post-Distribution Share Value by the Exelis Pre-Distribution Share Value.

“Exelis Retiree Life Plan” means the Exelis Salaried Retiree Life Insurance
Plan.

“Exelis Retiree Medical Plan” means the Exelis Salaried Retiree Medical Plan.

“Exelis RSAs” means restricted stock awards issued under any Exelis Equity Plan.

“Exelis RSUs” means restricted share units granted under any Exelis Equity Plan.

“Exelis Savings Plan” means the Exelis Salaried Investment and Savings Plan.

“Exelis Springing Rabbi Trust” means the grantor trust established by Exelis
with Wells Fargo Bank, N.A. on November 2, 2011.

“Exelis Welfare Plan” means any Welfare Plan sponsored or maintained by any one
or more members of the Exelis Group as of immediately prior to the Effective
Time.

“FICA” has the meaning set forth in Section 4.1(f).

“FMLA” means the U.S. Family and Medical Leave Act, as amended, and the
regulations promulgated thereunder.

 

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“Former Exelis Group Employee” means all former employees of the Exelis Group
who have an employment end date on or before the Effective Time, excluding all
Vectrus Group Employees.

“Former Management Benefitted Employee” means a former Employee who (i) would
have been a Management Benefitted Employee, but instead becomes entitled to
long-term disability benefits under an Exelis Welfare Plan or (ii) who is or
would have been a Management Benefitted Employee, but instead experiences a
Qualifying Event prior to the Welfare Plan Implementation Date.

“Former TARS Employee” means a former Employee who (i) performed services to
Exelis Tethered Radar, LLC prior to the Effective Time and who is entitled to
long-term disability benefits under a Vectrus Welfare Plan or (ii) who is or was
a TARS Employee who experiences a Qualifying Event before the Welfare Plan
Implementation Date.

“FUTA” has the meaning set forth in Section 4.1(f).

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996,
as amended, and the regulations promulgated thereunder.

“IRS” means the Internal Revenue Service.

“Law” has the meaning set forth in the Distribution Agreement.

“Liabilities” has the meaning set forth in the Distribution Agreement.

“Management Benefitted Employee” means any Vectrus Group Employee who, as of the
Effective Time or after the Effective Time but before the Welfare Plan
Implementation Date, is providing or commences to provide, as the case may be,
services to Vectrus other than as a PP Employee, including without limitation,
each Vectrus Group Employee who resides or performs services primarily outside
of the United States.

“NYSE” means the New York Stock Exchange.

“Notice of Creditable Coverage” means a certificate of creditable coverage
issued in accordance with HIPAA.

“Party” or “Parties” has the meaning set forth in the preamble to this
Agreement.

“Person” has the meaning set forth in the Distribution Agreement.

“PP Employee” means any Vectrus Group Employee whose employment with Vectrus is
covered by a contract or collective bargaining agreement listed on Appendix A or
who works in a project management position identified on the then-attached
“Exhibit A” to Amendment Four to the Exelis Systems Corporation Retirement and
Savings Plan, including each Vectrus Group Employee who resides or performs
services primarily outside the United States.

 

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“Privacy Contract” means any contract entered into in connection with applicable
privacy protection Laws or regulations.

“Qualified Beneficiary” has the meaning set forth in Treasury Regulation
Section 54.4980B-3, Q&A-1.

“Qualifying Event” has the same meaning as set forth in Treasury Regulation
Section 54.4980B-4, Q&A-1.

“Regular Trading Hours” means the period beginning at 9:30 A.M. New York City
time and ending at 4:00 P.M. New York City time.

“Subsidiary” has the meaning set forth in the Distribution Agreement.

“TARS Employee” means any employee of Exelis actively providing services to
Exelis Tethered Radar LLC, a wholly owned subsidiary of Exelis, before
January 1, 2015, who is covered by a contract or collective bargaining agreement
listed on Appendix A or who works in a project management position, identified
in the then-attached “Exhibit A” to the Second Amendment to the Exelis Systems
Corporation Retirement and Savings Plan.

“Tax” has the meaning set forth in the Tax Matters Agreement.

“Tax Matters Agreement” means the Tax Matters Agreement, dated as of September
25, 2014 by and among Exelis and Vectrus.

“Trading Day” means the period of time during any given calendar day, commencing
with the determination of the opening price on the NYSE and ending with the
determination of the closing price on the NYSE, in which trading and settlement
in Exelis Common Stock or Vectrus Common Stock are permitted on the NYSE.

“Transaction” has the meaning set forth in the recitals to this Agreement.

“Transferred Group Entity” means each Exelis Entity that will become a Vectrus
Entity as of the Effective Time.

“Transition Services Agreement” has the meaning set forth in the Distribution
Agreement.

“TSR RSU” has the meaning set forth in Section 6.2(a).

“U.S.” means the United States of America.

“Vectrus” has the meaning set forth in the preamble to this Agreement.

“Vectrus 401(k) Plan” means the plan formerly known as Exelis Systems
Corporation Retirement and Savings Plan, as amended and restated effective as of
the Effective Time.

“Vectrus 401(k) Plan Beneficiaries” has the meaning set forth in Section 8.2.

 

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“Vectrus Benefit Plan” means any Benefit Plan sponsored or maintained by a
member of the Vectrus Group following the Effective Time.

“Vectrus Business” has the meaning set forth in the Distribution Agreement.

“Vectrus Common Stock” means the common stock, par value $0.01 per share, of
Vectrus.

“Vectrus Common Stock Unit Fund” means an investment fund in the Vectrus 401(k)
Plan that holds units of Vectrus Common Stock and cash.

“Vectrus Employee Option” has the meaning set forth in Section 5.2(b)(II).

“Vectrus Entity” means any member of the Vectrus Group, including any
Transferred Group Entity.

“Vectrus Equity Plan” means the plan adopted by Vectrus prior to the Effective
Time under which the Vectrus equity-based awards described in Article V shall be
issued.

“Vectrus Excess Savings Plan” means the excess savings plan to be adopted by
Vectrus as of the Effective Time, in accordance with Section 11.1.

“Vectrus Group” has the same meaning as the term “Vectrus Group” in the
Distribution Agreement.

“Vectrus Group Employee” means any individual employed by any member of the
Vectrus Group, including a Transferred Group Entity, immediately following the
Effective Time.

“Vectrus HRA” has the meaning set forth in Section 9.2(h).

“Vectrus Post-Distribution Share Value” means the opening per share price of
Vectrus Common Stock on the first Trading Day following the Effective Time based
on “regular way” trading on the NYSE during Regular Trading Hours.

“Vectrus Ratio” means the quotient obtained by dividing the Vectrus
Post-Distribution Share Value by the Exelis Pre-Distribution Share Value.

“Vectrus RSUs” has the meaning set forth in Section 5.4(b).

“Vectrus Welfare Plan” means any Welfare Plan sponsored or maintained by any one
or more members of the Vectrus Group immediately after the Effective Time.

“Vectrus Welfare Plan Participant” means each Management Benefitted Employee,
each PP Employee and each TARS Employee, and their eligible spouses, domestic
partners and dependents, as the case may be, who is a participant in any of the
Exelis Welfare Plans or the Vectrus Welfare Plans, as the case may be, prior to
a Welfare Plan Implementation Date.

 

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“WARN” means the U.S. Worker Adjustment and Retraining Notification Act, as
amended, and the regulations promulgated thereunder, and any applicable state or
local Law equivalent.

“Welfare Plan” means, where applicable, a “welfare plan” (as defined in
Section 3(1) of ERISA) or a “cafeteria plan” under Section 125 of the Code, and
any benefits offered thereunder, and any other plan offering health benefits
(including medical, funding mechanism for a health savings account, a health
care reimbursement account, wellness, prescription drug, dental, vision, and
mental health and substance abuse coverage), disability benefits, life,
accidental death and dismemberment or death benefits, business travel insurance,
medical and dependent care flexible spending arrangements (including any
associated group medial or dependent care plan), employee assistance programs,
and paid time off programs, as applicable.

“Welfare Plan Implementation Date” means, with respect to (a) each Vectrus
Welfare Plan, (i) for Management Benefitted Employees, January 1, 2015; and
(ii) for PP Employees, the later of (A) the Effective Time or (B) the date on
which Vectrus, or another Vectrus Entity, establishes and adopts the Vectrus
Welfare Plan and (b) each Exelis Welfare Plan for TARS Employees, January 1,
2015.

Section 1.2. Interpretation. In this Agreement, unless the context clearly
indicates otherwise:

(a) words used in the singular include the plural and words used in the plural
include the singular;

(b) if a word or phrase is defined in this Agreement, its other grammatical
forms, as used in this Agreement, shall have a corresponding meaning;

(c) reference to any gender includes the other gender and the neuter;

(d) the words “include,” “includes” and “including” shall be deemed to be
followed by the words “without limitation”;

(e) the words “shall” and “will” are used interchangeably and have the same
meaning;

(f) the word “or” shall have the inclusive meaning represented by the phrase
“and/or”;

(g) relative to the determination of any period of time, “from” means “from and
including,” “to” means “to but excluding” and “through” means “through and
including”;

(h) all references to a specific time of day in this Agreement shall be based
upon Eastern Standard Time or Eastern Daylight Saving Time, as applicable, on
the date in question;

(i) whenever this Agreement refers to a number of days, such number shall refer
to calendar days unless Business Days are specified;

 

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(j) accounting terms used herein shall have the meanings historically ascribed
to them by Exelis and its Subsidiaries, including Vectrus for this purpose, in
its and their internal accounting and financial policies and procedures in
effect immediately prior to the date of this Agreement;

(k) reference to any Article, Section or schedule means such Article or Section
of, or such schedule to, this Agreement, as the case may be, and references in
any Section or definition to any clause means such clause of such Section or
definition;

(l) the words “this Agreement,” “herein,” “hereunder,” “hereof,” “hereto” and
words of similar import shall be deemed references to this Agreement as a whole
and not to any particular Section or other provision of this Agreement;

(m) the term “commercially reasonable efforts” means efforts which are
commercially reasonable to enable a Party, directly or indirectly, to satisfy a
condition to, or otherwise assist in, the consummation of a desired result and
which do not require the performing Party to expend funds or assume Liabilities
other than expenditures and Liabilities which are customary and reasonable in
nature and amount in the context of a series of related transactions similar to
the Distribution;

(n) reference to any agreement, instrument or other document means such
agreement, instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof and not
prohibited by this Agreement;

(o) reference to any Law (including statutes and ordinances) means such Law
(including any and all rules and regulations promulgated thereunder) as amended,
modified, codified or reenacted, in whole or in part, and in effect at the time
of determining compliance or applicability;

(p) references to any Person include such Person’s successors and assigns but,
if applicable, only if such successors and assigns are permitted by this
Agreement; a reference to such Person’s “Affiliates” shall be deemed to mean
such Person’s Affiliates following the Distribution and any reference to a third
party shall be deemed to mean a Person who is not a Party or an Affiliate of a
Party;

(q) if there is any conflict between the provisions of the main body of this
Agreement and the schedules hereto, the provisions of the main body of this
Agreement shall control unless explicitly stated otherwise in such schedule;

(r) unless otherwise specified in this Agreement, all references to dollar
amounts herein shall be in respect of lawful currency of the U.S.;

(s) the titles to Articles and headings of Sections contained in this Agreement,
in any schedule and Exhibit and in the table of contents to this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of or to affect the meaning or interpretation of this Agreement; and

(t) any portion of this Agreement obligating a Party to take any action or
refrain from taking any action, as the case may be, shall mean that such Party
shall also be obligated to cause its relevant Subsidiaries to take such action
or refrain from taking such action, as the case may be.

 

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ARTICLE II

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

Section 2.1. General Principles. It is the intention of Exelis and Vectrus that
all employment-related Liabilities associated with Vectrus Group Employees,
whether prior to, on or after the Effective Time, are to be assumed by Vectrus,
except as otherwise specifically set forth herein. Each member of the Exelis
Group and each member of the Vectrus Group shall take any and all reasonable
action as shall be necessary or appropriate so that active participation in the
Exelis Benefit Plans by all Vectrus Group Employees shall terminate in
connection with the Distribution as and when provided under this Agreement (or
if not specifically provided under this Agreement, as of the Effective Time).

(a) Except as otherwise provided in this Agreement, effective as of the
Effective Time, one or more members of the Vectrus Group (as determined by
Vectrus) shall assume, or continue the sponsorship of, and no member of the
Exelis Group shall have any further Liability with respect to, or under, and
Vectrus shall indemnify each member of the Exelis Group, and the officers,
directors, and employees of each member of the Exelis Group, and hold them
harmless with respect to any and all:

(I) individual agreements entered into between any member of the Exelis Group
and any Vectrus Group Employee;

(II) agreements entered into between any member of the Exelis Group and any
individual who is an independent contractor, or leasing organization, providing
services primarily for the business activities of the Vectrus Group;

(III) collective bargaining agreements, collective agreements, trade union or
works council agreements entered into between any member of the Exelis Group and
any union, works council or other body representing only Vectrus Group
Employees;

(IV) wages, salaries, incentive compensation (as the same may be modified by
this Agreement), commissions, bonuses, and any other employee compensation or
benefits payable to or on behalf of any Vectrus Group Employees after the
Effective Time, without regard to when such wages, salaries, incentive
compensation, commissions, bonuses, or other employee compensation or benefits
are or may have been earned;

(V) moving expenses and obligations including those related to taxes (foreign
and home), relocation, repatriation, international assignments, transfers or
similar items incurred by or owed to any Vectrus Group Employees that have not
been paid prior to the Effective Time;

 

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(VI) immigration-related, visa, work application or similar rights, obligations
and Liabilities related to any Vectrus Group Employees;

(VII) Liabilities under any Vectrus Benefit Plan; and

(VIII) Liabilities and obligations whatsoever with respect to claims made by, or
with respect to any Vectrus Group Employees, in connection with any Exelis
Benefit Plan, including but not limited to, such Liabilities relating to actions
or omissions of or by any member of the Vectrus Group or any officer, director,
employee or agent thereof on or prior to the Effective Time.

(b) Except as otherwise provided in this Agreement, effective as of the
Effective Time, no member of the Vectrus Group shall have any further Liability
for, and Exelis shall indemnify each member of the Vectrus Group, and the
officers, directors, and employees of each member of the Vectrus Group, and hold
them harmless with respect to any and all Liabilities and obligations whatsoever
with respect to, claims made by or with respect to any Exelis Group Employees or
Former Exelis Group Employees in connection with any Exelis Benefit Plan (other
than with respect to Liabilities relating to Vectrus Group Employees), including
such Liabilities relating to actions or omissions of or by any member of the
Exelis Group or any officer, director, employee or agent thereof prior to, on or
after the Effective Time.

Section 2.2. Service Credit.

(a) Service for Eligibility, Vesting, and Benefit Purposes. Except as otherwise
provided in any other provision of this Agreement, the Vectrus Benefit Plans
shall, and Vectrus shall cause each member of the Vectrus Group to, recognize
each Vectrus Group Employee’s full service history with the Exelis Group for
purposes of eligibility, vesting, determination of level of benefits and, to the
extent applicable and subject to Section 2.4, benefit accruals under any Vectrus
Benefit Plan for such Vectrus Group Employee’s service with any member of the
Exelis Group on or prior to the Effective Time to the same extent such service
would be credited under the Exelis Benefit Plans, as applicable. Notwithstanding
anything to the contrary, in connection with any Employee’s break in service,
any determination as to service credit shall be made under and in accordance
with the applicable Vectrus Benefit Plan document, the terms of which shall
control in the case of any conflict with this Section 2.2.

(b) Evidence of Prior Service. Notwithstanding anything to the contrary, but
subject to applicable Law, upon reasonable request by one Party to the other
Party, the first Party will provide to the other Party copies of any records
reasonably available to the first Party to document such service, plan
participation and membership of such Employees and reasonably cooperate with the
first Party to resolve any discrepancies or obtain any missing data for purposes
of determining benefit eligibility, participation, vesting and calculation of
benefits with respect to any Employee.

Section 2.3. Plan Administration.

(a) Transition Services. The Parties acknowledge that the Exelis Group or the
Vectrus Group may provide administrative services for certain of the other
Party’s benefit programs for a transitional period under the terms of the
Transition Services Agreement. The Parties agree to enter into a business
associate agreement (if required by HIPAA or other applicable health information
privacy Laws) in connection with such Transition Services Agreement.

 

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(b) Participant Elections and Beneficiary Designations. Prior to the Effective
Time, each participant in a Vectrus Benefit Plan shall execute such elections
and beneficiary designations as are promulgated by the administrator of each
Vectrus Benefit Plan. Notwithstanding the foregoing, if and to the extent a
Vectrus Benefit Plan participant has failed to execute and file an updated
election and/or designation, the participant elections and beneficiary
designations made under any corresponding Exelis Benefit Plan prior to the
Effective Time with respect to which Assets or Liabilities are transferred or
allocated to Vectrus Benefit Plans in accordance with this Agreement shall
continue in effect under the applicable Vectrus Benefit Plan to the extent
permitted under the applicable Vectrus Benefit Plan, including deferral and
payment form elections, dividend elections, coverage options and levels,
beneficiary designations and the rights of alternate payees under qualified
domestic relations orders, in each case, to the extent allowed by applicable
Law.

Section 2.4. No Duplication or Acceleration of Benefits. Notwithstanding
anything to the contrary in this Agreement or the Distribution Agreement, no
participant in the Vectrus Benefit Plans shall receive benefits that duplicate
benefits provided by the corresponding Exelis Benefit Plan. Furthermore, unless
expressly provided for in this Agreement, the Distribution Agreement or required
by applicable Law, no provision in this Agreement shall be construed to create
any right to accelerate vesting, distribution of benefits or entitlements to any
compensation or Benefit Plan on the part of any Exelis Group Employee, Former
Exelis Group Employee, or Vectrus Group Employee.

Section 2.5. No Expansion of Participation. Unless otherwise expressly provided
in this Agreement, as otherwise determined or agreed to by Exelis and Vectrus,
as required by applicable Law, or as explicitly set forth in a Vectrus Benefit
Plan, a Vectrus Group Employee shall be entitled to participate in the Vectrus
Benefit Plans only to the extent that such Employee was entitled to participate
in the corresponding Exelis Benefit Plan as in effect immediately prior to the
Effective Time, with it being the intent of the Parties that this Agreement does
not result in any expansion of the number of Vectrus Group Employees
participating or the participation rights therein that they had prior to the
Effective Time.

Section 2.6. Special Provisions. Notwithstanding any other provision in this
Agreement to the contrary, each of the Chief Executive Officer and President,
Senior Vice President and Chief Human Resources Officer, and Senior Vice
President, Chief Legal Officer and Corporate Secretary of Exelis shall have the
discretion, power and authority to adopt and implement special provisions, rules
or procedures applicable to the employment, compensation and benefit
arrangements of one or more individuals as are deemed equitable, necessary or
advisable to give effect to the intentions of this Agreement, including without
limitation, special provisions relating to (i) different equitable adjustments
than as set forth in Article V, in the case of a grantee who has outstanding
equity-based awards granted under any Exelis Equity Plan, where such grantee’s
circumstances warrant a different treatment (including, but not limited to,
grantees in jurisdictions outside of the U.S., to the extent applicable) to the
extent that such Chief Executive Officer and President, Senior Vice President
and Chief Human Resources Officer, and Senior Vice President, Chief Legal
Officer and Corporate Secretary of Exelis deem such different treatment to be
equitable, necessary or advisable, based on the advice of counsel; (ii) the good
faith determination of the employer or former employer, as applicable, of each
Employee; (iii) errors in the timing of employment transfers; (iv) issues
pertaining to immigration Law requirements; (v) compliance with foreign, state
and/or local Laws and (vi) any other decisions regarding the employment,
compensation and benefit arrangements of one or more individuals as are deemed
equitable, necessary or advisable that are not otherwise contemplated by this
Agreement.

 

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ARTICLE III

RETAINED LIABILITIES

Section 3.1. Liability for Exelis Pension Plan and Exelis Excess Pension Plans.
Notwithstanding anything in Section 2.1 to the contrary, Exelis shall completely
retain all Liabilities under the Exelis Pension Plan and the Exelis Excess
Pension Plans, as well as any future benefits of any kind whatsoever, relating
to Vectrus Group Employees, and no member of the Vectrus Group shall have any
obligations or rights to any future benefits of any kind whatsoever, with
respect thereto.

Section 3.2. Exelis Retiree Medical Plan. Notwithstanding anything in
Section 2.1 to the contrary, Exelis shall retain all Liabilities under the
Exelis Retiree Medical Plan relating to Vectrus Group Employees, and no member
of the Vectrus Group shall have any obligations with respect thereto. Prior to
the Effective Time, Exelis and Vectrus shall identify the Vectrus Group
Employees who may become eligible to participate in the Exelis Retiree Medical
Plan. For purposes of eligibility only and not towards the Exelis subsidy, the
Exelis Retiree Medical Plan shall take into account the periods of service of
the Vectrus Group Employee that Vectrus credits to the individual through the
earliest of (1) the last day of the month preceding the date as of which
payments from the Exelis Pension Plan begin, (2) the individual’s termination of
employment with Vectrus and its Affiliates, (3) a Change in Control or
(4) December 31, 2016. During the period from the Effective Time through
December 31, 2016, Vectrus Systems Corporation shall provide to Exelis an
updated record of service with Vectrus for each Vectrus Group Employee who is
entitled to benefits under the Exelis Retiree Medical Plans.

Section 3.3. Exelis Retiree Life Plan. Notwithstanding anything in Section 2.1
to the contrary, all Liabilities under the Exelis Retiree Life Plan relating to
Vectrus Group Employees shall be retained solely by Exelis, and no member of the
Vectrus Group shall have any obligations with respect thereto. All eligibility
service ends at the Effective Time and no future services with Vectrus will be
recognized.

Section 3.4. Retirement Eligibility under the Exelis Pension Plan. Benefit
accruals for Vectrus Group Employees under the Exelis Pension Plan shall end at
the Effective Time. Each Vectrus Group Employee who has accrued a vested benefit
under the Exelis Pension Plan may elect to begin distribution of his or her
benefit following the Effective Time, subject to the terms of the Exelis Pension
Plan as in effect at the time of such distribution or distributions. For
purposes of determining an individual’s eligibility to receive a subsidized
retirement benefit from the Exelis Pension Plan, the Exelis Pension Plan shall
take into account the periods of service of the Vectrus Group Employee that
Vectrus credits to the individual through the earliest of (1) the last day of
the month preceding the date as of which payments from the Exelis Pension Plan
begin, (2) the individual’s termination of employment with Vectrus and its
Affiliates, (3) the individual’s death, (4) a Change in Control or
(5) December 31, 2016. During the period from the Effective Time through
December 31, 2016, Vectrus Systems Corporation shall provide to Exelis an
updated record of each Vectrus Group Employee’s service with Vectrus through
December 31, 2016.

 

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Section 3.5. Additional Retirement Eligibility under the Exelis Excess Pension
Plans. Benefit accruals under the Exelis Excess Pension Plans shall stop for
Vectrus Group Employees at the Effective Time. For purposes of determining an
individual’s eligibility to receive a subsidized retirement benefit from the
Exelis Excess Pension Plans, the Exelis Excess Pension Plans shall take into
account the periods of service of the Vectrus Group Employee that Vectrus
credits to the individual through the earliest of (1) the last day of the month
preceding the date as of which payments from the Exelis Excess Pension Plans
begin, (2) the individual’s termination of employment with Vectrus and its
Affiliates, (3) a Change in Control or (4) December 31, 2016. Notwithstanding
the foregoing, no payments of benefits in respect of a Vectrus Group Employee
shall be made or begin until the individual has incurred a separation from
service from the Vectrus Group under the terms of the applicable Exelis Excess
Pension Plans. During the period from the Effective Time through December 31,
2016, Vectrus Systems Corporation shall provide to Exelis an updated record of
service with Vectrus for each Vectrus Group Employee who is entitled to benefits
under the Exelis Excess Pension Plans through December 31, 2016.

Section 3.6. Vesting Under the Exelis Pension Plan and the Exelis Excess Pension
Plans. The accrued benefits of a Vectrus Group Employee who has been credited
with at least one year of service before the Effective Time under the Exelis
Pension Plan and the Exelis Excess Pension Plans shall become fully vested and
nonforfeitable at the Effective Time.

ARTICLE IV

ASSIGNMENT OF EMPLOYEES

Section 4.1. Active Employees.

(a) Vectrus Group Employees. Except as otherwise set forth in this Agreement,
effective not later than immediately preceding the Effective Time, the
employment of each Vectrus Group Employee shall be continued by a member of the
Vectrus Group or shall be assigned and transferred to a member of the Vectrus
Group (in each case, with such member as determined by Vectrus).

(b) Exelis Group Employees. Except as otherwise set forth in this Agreement,
effective not later than immediately preceding the Effective Time, the
employment of each Exelis Group Employee shall be continued by a member of the
Exelis Group or shall be assigned and transferred to a member of the Exelis
Group (in each case as determined by Exelis).

(c) At-Will Status. Notwithstanding the above or any other provision of this
Agreement, nothing in this Agreement shall create any obligation on the part of
any member of the Exelis Group or any member of the Vectrus Group to
(i) continue the employment of any Employee or permit the return from a leave of
absence for any period following the date of this Agreement or the Effective
Time (except as required by applicable Law) or (ii) change the employment status
of any Employee from “at will,” to the extent such Employee is an “at will”
employee under applicable Law.

 

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(d) Severance. The Parties acknowledge and agree that the Distribution and the
assignment, transfer or continuation of the employment of Employees as
contemplated by this Section 4.1 shall not be deemed a severance of employment
of any Employee for purposes of this Agreement or any Benefit Plan of any member
of the Exelis Group or any member of the Vectrus Group.

(e) Not a Change of Control/Change in Control. The Parties acknowledge and agree
that neither the consummation of the Distribution nor any transaction in
connection with the Distribution shall be deemed a “change of control,” “change
in control,” “acceleration event” or term of similar import for purposes of any
Exelis Benefit Plan, Vectrus Benefit Plan, Exelis Equity Plan or Vectrus Equity
Plan.

(f) Payroll and Related Taxes. With respect to each Vectrus Group Employee,
Exelis and Vectrus shall, and shall cause their respective Affiliates to (to the
extent permitted by applicable Law and practicable) (a) treat Vectrus (or the
applicable Vectrus Entity) as a “successor employer” and Exelis (or the
applicable Exelis Entity) as a “predecessor,” within the meaning of Sections
3121(a)(1) and 3306(b)(1) of the Code, to the extent appropriate, for purposes
of Taxes imposed under the United States Federal Insurance Contributions Act, as
amended (“FICA”), or the United States Federal Unemployment Tax Act, as amended
(“FUTA”) and (b) file tax returns, exchange wage payment information, and report
wage payments made by the respective predecessor and successor employer on
separate IRS Forms W-2 or similar earnings statements to each such Vectrus Group
Employee for the tax year in which the Effective Time occurs, in a manner
provided in Section 4.02(l) of Revenue Procedure 2004-53. For the avoidance of
doubt, the collection of payroll taxes under FICA and FUTA will not restart upon
or following the Effective Time with respect to each Vectrus Group Employee for
the tax year during which the Effective Time occurs.

(g) Employment and Severance Arrangements; Expatriate Obligations. Vectrus will
assume and honor, or will cause a Vectrus Entity to assume and honor, any
agreements to which any Vectrus Group Employee is party with either any Exelis
Entity or any joint venture with an Exelis Entity, including any (i) employment
contract or (ii) retention or severance arrangement.

Section 4.2. Employment Law Obligations.

(a) WARN. After the Effective Time, (i) Exelis shall be responsible for
providing any necessary WARN notice (and meeting any similar state Law notice
requirements) with respect to any termination of employment of any Exelis Group
Employee and (ii) Vectrus shall be responsible for providing any necessary WARN
notice (and meeting any similar state Law notice requirements) with respect to
any termination of employment of any Vectrus Group Employee.

(b) Compliance with Employment Laws. On and after the Effective Time, (i) each
member of the Exelis Group shall be responsible for adopting and maintaining any
policies or practices, and for all other actions and inactions, necessary to
comply with employment-related Laws and requirements relating to the employment
of Exelis Group Employees and the treatment of any applicable Former Exelis
Group Employees in respect of their former employment, and (ii) each member of
the Vectrus Group shall be responsible for adopting and maintaining any policies
or practices, and for all other actions and inactions, necessary to comply with
employment-related Laws and requirements relating to the employment of Vectrus
Group Employees.

 

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Section 4.3. Employee Records.

(a) Sharing of Information. Subject to any limitations imposed by applicable
Law, Exelis and Vectrus (acting directly or through members of the Exelis Group
or the Vectrus Group, respectively) shall provide to the other and their
respective agents and vendors all information necessary for the Parties to
perform their respective duties under this Agreement. The Parties also hereby
agree to enter into any business associate arrangements that may be required for
the sharing of any information pursuant to this Agreement to comply with the
requirements of HIPAA.

(b) Transfer of Personnel Records and Authorization. Subject to any limitation
imposed by applicable Law, as of the Effective Time or as soon as
administratively practicable thereafter, Exelis shall transfer and assign to
Vectrus all personnel records, all immigration documents, including I-9 forms
and work authorizations, all payroll deduction authorizations and elections,
whether voluntary or mandated by Law, including but not limited to W-4 forms and
deductions for benefits under the applicable Vectrus Benefit Plan and all
absence management records, Family and Medical Leave Act records, insurance
beneficiary designations, flexible spending account enrollment confirmations,
attendance, and return to work information relating to Vectrus Group Employees
who participate in Vectrus Benefit Plans (“Benefit Management Records”). Subject
to any limitations imposed by applicable Law, Exelis, however, may retain
originals of, copies of, or access to personnel records, immigration records,
payroll forms and Benefit Management Records as long as necessary to provide
services to Vectrus (acting on its behalf pursuant to the Transition Services
Agreement between the Parties entered into as of the date of this Agreement).
Immigration records will, if and as appropriate, become a part of Vectrus’s
public access file. Vectrus will use personnel records, payroll forms and
Benefit Management Records for lawful purposes only, including calculation of
withholdings from wages and personnel management. It is understood that
following the Effective Time, Exelis records so transferred and assigned may be
maintained by Vectrus (acting directly or through one of its Subsidiaries)
pursuant to Vectrus’s applicable records retention policy.

(c) Access to Records. To the extent not inconsistent with this Agreement and
any applicable privacy protection Laws or regulations or Privacy Contracts,
reasonable access to Employee-related records after the Effective Time will be
provided to members of the Exelis Group and members of the Vectrus Group
pursuant to the terms and conditions of Sections 5.4 and 6.4 of the Distribution
Agreement. In addition, notwithstanding anything to the contrary, Vectrus shall
provide Exelis with reasonable access to those records necessary for its
administration of any Benefit Plans or programs, or employment and compensation
matters, on behalf of Exelis Group Employees and Former Exelis Group Employees
after the Effective Time as permitted by any applicable privacy protection Laws
or regulations or Privacy Contracts. Exelis shall also be permitted to retain
copies of all restrictive covenant agreements with any Vectrus Group Employee in
which any member of the Exelis Group has a valid business interest. In addition,
Exelis shall provide Vectrus with reasonable access to those records necessary
for its administration of any Benefit Plans or programs, or employment and
compensation matters, on behalf of Vectrus Group Employees after the Effective
Time as permitted by any applicable privacy protection Laws or regulations or
Privacy Contracts. Vectrus shall also be permitted to retain copies of all
restrictive covenant agreements with any Exelis Group Employee in which any
member of the Vectrus Group has a valid business interest.

 

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(d) Maintenance of Records. With respect to retaining, destroying, transferring,
sharing, copying and permitting access to all Employee-related information,
Exelis and Vectrus shall comply with all applicable Laws, regulations and
internal policies, and shall indemnify and hold harmless each other from and
against any and all Liability, claims, actions, and damages that arise from a
failure (by the indemnifying party or its Subsidiaries or their respective
agents) to so comply with all applicable Laws, regulations, Privacy Contracts
and internal policies applicable to such information.

(e) Confidentiality. Except as otherwise set forth in this Agreement, all
records and data relating to Employees shall, in each case, be subject to the
confidentiality provisions of the Distribution Agreement and any other
applicable agreement and applicable Law, and the provisions of this Section 4.3
shall be in addition to, and not in derogation of, the provisions of the
Distribution Agreement governing confidential information, including Section 8.6
of the Distribution Agreement.

(f) Cooperation. Each Party shall use commercially reasonable efforts to
cooperate in sharing, retaining, and maintaining data and records that are
necessary or appropriate to further the purposes of this Section 4.3 and for
each Party to administer its respective Benefit Plans to the extent consistent
with this Agreement and applicable Law, and each Party agrees to cooperate as
long as is reasonably necessary to further the purposes of this Section 4.3. No
Party shall charge another Party a fee for such cooperation.

(g) Labor Relations. To the extent required by applicable Law or any agreement
with a labor union, works council or similar employee organization, Vectrus
shall provide notice, engage in consultation and take any similar action which
may be required on its part in connection with the Distribution and shall fully
indemnify Exelis against any Liabilities arising from its failure to comply with
such requirements.

ARTICLE V

EQUITY AND EQUITY-BASED COMPENSATION

Section 5.1. General Principles.

(a) Exelis and Vectrus shall take any and all reasonable actions as shall be
necessary and appropriate to further the provisions of this Article V,
including, to the extent practicable, providing written notice or similar
communication to each Employee or director who holds one or more awards granted
under any Exelis Equity Plan informing such Employee or director, as applicable,
of (i) the actions contemplated by this Article V with respect to such awards
and (ii) whether (and during what time period) any “blackout” period shall be
imposed upon holders of awards granted under any Exelis Equity Plan during which
time awards may not be exercised or settled, as the case may be.

 

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(b) Following the Effective Time, a grantee who has outstanding equity-based
awards under one or more of the Exelis Equity Plans and/or replacement
equity-based awards under the Vectrus Equity Plan shall be considered to have
been employed by the applicable plan sponsor before and after the Effective Time
for purposes of (i) vesting and (ii) determining the date of termination of
employment as it applies to any such award.

(c) No award described in this Article V, whether outstanding or to be issued,
adjusted, substituted or cancelled by reason of or in connection with the
Distribution, shall be adjusted, settled, cancelled, or exercisable, until in
the judgment of the administrator of the applicable plan or program such action
is consistent with all applicable Laws, including federal securities Laws. With
respect to each outstanding stock option, the period during which such option is
exercisable and the ultimate expiration date of the option will not be extended.

(d) From and after the Effective Time, all awards adjusted pursuant to this
Article V shall be subject to the terms and conditions set forth in the
applicable Exelis Equity Plan or Vectrus Equity Plan and corresponding award
agreements. Without limiting the generality of the foregoing, from and after the
Effective Time, all references to the applicable company in such Exelis Equity
Plan or Vectrus Equity Plan, as applicable, including but not limited to,
“Acceleration Event” and other administrative provisions requiring
interpretation shall refer to the appropriate company to reflect the Transaction
(e.g., the definition of “Acceleration Event” under the applicable Vectrus
Equity Plan and corresponding award agreement shall mean an Acceleration Event
with respect to Vectrus rather than Exelis).

(e) The adjustment or conversion of Exelis Options and Exelis RSUs shall be
effected in a manner that is intended to avoid the imposition of any
accelerated, additional, penalty or other Taxes on the holders thereof pursuant
to Section 409A of the Code.

Section 5.2. Stock Options.

(a) General Principles. The adjustments provided for in this Section 5.2 with
respect to the Exelis Options and Vectrus Options are intended to be effected in
a manner compliant with Section 424(a) of the Code.

(b) Treatment of Stock Options Held by Exelis Employees, Former Exelis Group
Employees and Exelis Directors.

(I) Exelis Group Employees, Former Exelis Group Employees and Exelis Directors.
Each Exelis Option held by an Exelis Group Employee, a Former Exelis Group
Employee or an Exelis Director shall remain an option to purchase Exelis Common
Stock issued under the Exelis Equity Plan (each such option, an “Adjusted Exelis
Option”). Subject to Section 5.1, each Adjusted Exelis Option shall be subject
to the same terms and conditions from and after the Effective Time as the terms
and conditions applicable to the corresponding Exelis Option immediately prior
to the Effective Time; provided, however, that from and after the Effective
Time:

(x) the number of Exelis Common Stock subject to each such Adjusted Exelis
Option shall be equal to (A) the number of Exelis Common Stock subject to the
corresponding Exelis Option immediately prior to the Effective Time divided by
(B) the Exelis Ratio, with any fractional share rounded down to the nearest
whole share; and

 

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(y) the per-share exercise price of each such Adjusted Exelis Option shall be
equal to (A) the per-share exercise price of the corresponding Exelis Option
immediately prior to the Effective Time multiplied by (B) the Exelis Ratio,
rounded up to the fourth decimal place.

(II) Vectrus Group Employees. Each Exelis Option held by a Vectrus Group
Employee immediately prior to the Effective Time shall be converted as of the
Effective Time into an option to purchase Vectrus Common Stock (each such award,
a “Vectrus Employee Option”) pursuant to the terms of the Vectrus Equity Plan,
subject to Section 5.1, subject to the same terms and conditions from and after
the Effective Time as the terms and conditions applicable to the corresponding
Exelis Option immediately prior to the Effective Time; provided, however, that
from and after the Effective Time:

(x) the number of Vectrus Common Stock subject to each such Vectrus Employee
Option shall be equal to (A) the number of Exelis Common Stock subject to the
corresponding Exelis Option immediately prior to the Effective Time divided by
(B) the Vectrus Ratio, with any fractional share rounded down to the nearest
whole share; and

(y) the per-share exercise price or base price, as applicable, of each such
Vectrus Employee Option shall be equal to (A) the per-share exercise price of
the corresponding Exelis Option immediately prior to the Effective Time
multiplied by (B) the Vectrus Ratio, rounded up to the fourth decimal place.

Section 5.3. Treatment of Exelis RSAs Held by Exelis Directors. Each outstanding
Exelis RSA held immediately prior to the Effective Time by an Exelis Director
shall participate in the Distribution on the same basis as other shares of
Exelis Common Stock in accordance with the terms of the Distribution Agreement;
provided, however, that any shares of Vectrus Common Stock received in
connection with the Distribution shall be subject to the same vesting
conditions, as applicable, to such Exelis RSA.

Section 5.4. Restricted Stock Units.

(a) Treatment of Exelis RSUs Held by Exelis Group Employees, Former Exelis Group
Employees and Exelis Directors. Exelis RSUs held by an Exelis Group Employee, a
Former Exelis Group Employee or an Exelis Director immediately prior to the
Effective Time shall be adjusted by dividing (i) the number of Exelis RSUs
subject to each grant by (ii) the Exelis Ratio (each such RSU, an “Adjusted
Exelis RSU”). If the resulting quotient includes a fractional share, then the
number of Exelis RSUs shall be rounded down to the nearest whole share. Subject
to Section 5.1, the Adjusted Exelis RSUs shall be subject to the same terms and
conditions from and after the Effective Time as the terms and conditions
applicable to the corresponding Exelis RSUs immediately prior to the Effective
Time.

 

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(b) Treatment of Exelis RSUs Held by Vectrus Group Employees. Exelis RSUs held
by a Vectrus Group Employee immediately prior to the Effective Time shall be
replaced with an award under the Vectrus Equity Plan of a number of Vectrus
restricted stock units (the “Vectrus RSUs”) determined by dividing (i) the
number of Exelis RSUs subject to each grant by (ii) the Vectrus Ratio. If the
resulting quotient includes a fractional share, then the number of Vectrus RSUs
shall be rounded down to the nearest whole share. Subject to Section 5.1, the
Vectrus RSUs shall be subject to the same terms and conditions (including, to
the extent applicable, any Exelis dividend equivalent rights that have accrued
on or prior to August 29, 2014) from and after the Effective Time as the terms
and conditions applicable to the corresponding Exelis RSUs immediately prior to
the Effective Time.

Section 5.5. Section 16(b) of the Exchange Act. By approving the adoption of
this Agreement, the respective Board of Directors of each of Exelis and Vectrus
intend to exempt from the short-swing profit recovery provisions of
Section 16(b) of the Exchange Act, by reason of the application of Rule 16b-3
thereunder, all acquisitions and dispositions of equity incentive awards by
directors and officers of each of Exelis and Vectrus, and the respective Boards
of Directors of Exelis and Vectrus also intend expressly to approve, in respect
of any equity-based award, the use of any method for the payment of an exercise
price and the satisfaction of any applicable Tax withholding (specifically
including the actual or constructive tendering of shares in payment of an
exercise price and the withholding of option shares from delivery in
satisfaction of applicable Tax withholding requirements) to the extent such
method is permitted under the applicable Exelis Equity Plan, Vectrus Equity Plan
and any award agreement.

Section 5.6. Liabilities for Settlement of Awards.

(a) Settlement of Exelis Options. Exelis shall be responsible for all
Liabilities associated with Exelis Options (regardless of the holder of such
awards), including any option exercise, share delivery, registration or other
obligations related to the exercise of the Exelis Options.

(b) Settlement of Vectrus Options. Vectrus shall be responsible for all
Liabilities associated with Vectrus Options (regardless of the holder of such
awards), including any option exercise, share delivery, registration or other
obligations related to the exercise of the Vectrus Options.

(c) Settlement of Exelis RSAs and Exelis RSUs. Exelis shall be responsible for
all Liabilities associated with Exelis RSAs and Exelis RSUs, including any share
delivery, registration or other obligations related to the settlement of the
Exelis RSAs and Exelis RSUs.

(d) Settlement of Vectrus RSAs and Vectrus RSUs. Vectrus shall be responsible
for all Liabilities associated with Vectrus RSAs and Vectrus RSUs, including any
share delivery, registration or other obligations related to the settlement of
the Vectrus RSAs and Vectrus RSUs.

 

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Section 5.7. Form S-8. Upon or as soon as reasonably practicable and subject to
applicable Law, Vectrus shall prepare and file with the Securities Exchange
Commission a registration statement on Form S-8 (or another appropriate form)
registering under the Exchange Act the offering of a number of Vectrus Common
Stock at a minimum equal to the number of shares subject to the Vectrus RSUs and
the Vectrus Options. Vectrus shall use commercially reasonable efforts to cause
any such registration statement to be kept effective (and the current status of
the prospectus or prospectuses required thereby to be maintained) as long as any
Vectrus RSUs and Vectrus Options remain outstanding.

Section 5.8. Tax Reporting and Withholding for Equity-Based Awards. Unless
otherwise required by applicable Law, Exelis (or one of its Subsidiaries) will
be responsible for all income, payroll, fringe benefit, social, payment on
account or other tax reporting related to income of or otherwise owed by Exelis
Group Employees or Former Exelis Group Employees from equity-based awards, and
Vectrus (or one of its Subsidiaries) will be responsible for all income,
payroll, fringe benefit, social, payment on account or other tax reporting
related to or otherwise owed on income of Vectrus Group Employees from
equity-based awards. Further, Exelis (or one of its Subsidiaries) shall be
responsible for remitting applicable tax withholdings and related payments for
Exelis Group Employees to each applicable taxing authority, and Vectrus (or one
of its Subsidiaries) shall be responsible for remitting applicable tax
withholdings and related payments for Vectrus Group Employees to each applicable
taxing authority; provided, however, that to the extent necessary (and
permissible) to effectuate the foregoing, either Exelis or Vectrus may act as
agent for the other company by remitting amounts withheld in the form of shares
or in conjunction with an exercise transaction and related payments to an
appropriate taxing authority. For non-employee directors of Exelis or Vectrus,
all compensation income realized from either Exelis equity-based awards or
Vectrus equity-based awards will be reflected by a Form 1099 provided to such
non-employee director by Exelis or Vectrus, as applicable, for each year. There
will be no tax withholding made by either Exelis or Vectrus with respect to any
equity-based awards for non-employee directors of Exelis or Vectrus.

Section 5.9. Cooperation. Each Party acknowledges and agrees to use commercially
reasonable efforts to cooperate with each other and with third-party providers
to effect withholding and remittance of Taxes, as well as required tax
reporting, in a timely, efficient and appropriate manner to further the purposes
of this Article V and to administer all employee equity awards that are
outstanding immediately following the Effective Time (including all such equity
awards that are adjusted in accordance with this Article V) to the extent
consistent with this Agreement and applicable Law, for as long as is reasonably
necessary to further the purposes of this Article V. No Party shall charge
another Party a fee for such cooperation.

 

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ARTICLE VI

TOTAL SHAREHOLDER RETURN AWARDS

Section 6.1. Treatment of 2012 TSR Awards for Vectrus Group Employees and Exelis
Group Employees. On the Distribution Date, each 2012 TSR Award shall be
converted into the right to receive (a) a cash payment, if any, equal to the
product of (i) the 2012 TSR Proration Factor multiplied by (ii) the value of the
2012 TSR Award based on actual total shareholder return through the last
completed fiscal month ending on or before the Distribution Date, and (b) a cash
payment, if any, equal to the product of (i) (x) one (1) minus the (y) 2012 TSR
Proration Factor multiplied by (ii) the value of the 2012 TSR Award based on
assumed total shareholder return being achieved at target (i.e., 100%).
Following the Distribution Date, the 2012 TSR Award, as adjusted pursuant to
this Section 6.1, shall be paid at the time or times the 2012 TSR Award would
otherwise have been paid in the ordinary course had the adjustments contemplated
hereby and Distribution not occurred, in accordance with the terms of the
applicable Exelis Equity Plan and corresponding 2012 award agreement.

Section 6.2. Treatment of 2013 TSR Awards.

(a) Treatment of 2013 TSR Awards for Vectrus Group Employees. On the
Distribution Date, each 2013 TSR Award shall be converted into the right to
receive (a) a cash payment, if any, equal to the product of (i) the 2013 TSR
Proration Factor multiplied by (ii) the value of the 2013 TSR Award based on
Exelis’ actual total shareholder return through the last completed fiscal month
ending on or before the Distribution Date, and (b) Vectrus RSUs, to be approved
no later than the first meeting of the compensation committee of the board of
directors of Vectrus that is held following the Distribution Date, covering a
number of shares of Vectrus Common Stock equal to the quotient of (i) the
product of (x) (A) one (1) minus (B) the 2013 TSR Proration Factor multiplied by
(y) the value of the 2013 TSR Award based on assumed total shareholder return
being achieved at target divided by (ii) the closing fair market value of
Vectrus Common Stock on the date such Vectrus RSU is granted (the “TSR RSU”).
Following the Distribution Date, the 2013 TSR Award, as adjusted pursuant to
this Section 6.2 (if any), shall, subject to the corresponding 2013 award
agreement, vest on December 4, 2015. The cash payment with respect to the 2013
TSR Proration Factor (for the completed portion of the 2013 award) will be paid
at the time or times the corresponding original 2013 TSR Award would otherwise
have been paid in the ordinary course had the adjustments contemplated hereby
and the Distribution not occurred, in accordance with the terms of the
applicable Exelis Equity Plan and corresponding 2013 award agreement.

(b) Treatment of 2013 TSR Award for Exelis Group Employees. With respect to
Exelis Group Employees, the original performance period to which the 2013 TSR
Award relates shall continue and, subject to Section 5.1, be subject to the same
terms and conditions of the 2013 TSR Award as in effect immediately prior to the
Distribution Date; provided, however, that for purposes of determining whether
the applicable total shareholder return previously approved for such 2013 TSR
Award has been achieved, the Distribution shall be deemed to be a stock dividend
with such proceeds reinvested in Exelis Common Stock.

 

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ARTICLE VII

TREATMENT OF ANNUAL BONUSES FOR FISCAL YEAR 2014

As of the Effective Time, with respect to each Vectrus Group Employee who is
eligible to receive an annual bonus pursuant to the terms of the Exelis Bonus
Plan immediately prior to the Effective Time, Vectrus will (a) assume any such
annual bonus liability, and (b) establish a new annual bonus plan with the same
financial metrics applicable to each Vectrus Group Employee, payment provisions
and other terms and conditions, in each case, as in effect under the Exelis
Bonus Plan immediately prior to the Distribution, such that, subject to the
required determinations by the compensation committee of the board of directors
of Vectrus, such annual bonuses shall be paid to each Vectrus Group Employee in
accordance with the terms of such annual bonus plan.

ARTICLE VIII

U.S. QUALIFIED DEFINED CONTRIBUTION PLANS

Section 8.1. Vectrus 401(k) Plan. At the Effective Time, Vectrus shall have
assumed as the plan sponsor the Vectrus

401(k) Plan and shall take all action necessary to make each Vectrus Entity
employing Vectrus Group Employees a participating employer in the Vectrus 401(k)
Plan. Vectrus (acting directly or through its Affiliates) shall be responsible
for any and all Liabilities and other obligations with respect to the Vectrus
401(k) Plan.

Section 8.2. Transfer of Exelis Savings Plan Assets. Not later than ninety
(90) days following the Effective Time (or such later time as mutually agreed by
the Parties), Exelis shall cause the accounts (including any outstanding loan
balances) in the Exelis Savings Plan attributable to (A) Management Benefitted
Employees who will participate in the Vectrus 401(k) Plan and (B) PP Employees
who have account balances in the Exelis Savings Plan (collectively, the “Vectrus
401(k) Plan Beneficiaries”) and all of the assets in the Exelis Savings Plan
related thereto to be transferred to the Vectrus 401(k) Plan, and Vectrus shall
cause the Vectrus 401(k) Plan to accept such transfer of accounts and underlying
assets and, effective as of the date of such transfer, to assume and to fully
perform, pay, and discharge, all obligations of the Exelis Savings Plan relating
to the accounts of the Vectrus 401(k) Plan Beneficiaries (to the extent the
assets related to those accounts are actually transferred from the Exelis
Savings Plan to the Vectrus 401(k) Plan). The transfer of assets invested in the
Exelis Savings Plan shall be conducted in accordance with Section 414(l) of the
Code, Treasury Regulation Section 1.414(1)-1, and Section 208 of ERISA.

Section 8.3. Treatment of Vectrus Common Stock and Exelis Common Stock.

(a) Vectrus Common Stock Unit Fund; Vectrus Common Stock Held in Exelis Savings
Plan Accounts. The Vectrus 401(k) Plan will provide, effective as of the
Effective Time: (i) for the establishment of a Vectrus Common Stock Unit Fund;
and (ii) that such Vectrus Common Stock Unit Fund shall receive a transfer of
and hold all Vectrus Common Stock distributed in connection with the
Distribution in respect of Exelis Common Stock Units held in Exelis Savings Plan
accounts of Vectrus 401(k) Plan Beneficiaries. Vectrus Common Stock distributed
in connection with the Distribution in respect of Exelis Common Stock Units held
in Exelis Savings Plan accounts of Exelis Group Employees or Former Exelis Group
Employees who participate in the Exelis Savings Plan shall be deposited in a
Vectrus Common Stock Unit Fund under the Exelis Savings Plan. Any Vectrus Common
Stock Units held in Exelis Savings Plan accounts of Vectrus 401(k) Plan
Beneficiaries shall be transferred in kind to the trust underlying the Vectrus

401(k) Plan pursuant to Section 8.2 of this Agreement.

 

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(b) Exelis Common Stock Units in Vectrus 401(k) Plan Accounts. Without limiting
the generality of the provisions of Section 8.2, Exelis Common Stock Units held
in Exelis Savings Plan accounts of Vectrus 401(k) Plan Beneficiaries prior to
the Effective Time shall be transferred in kind to an Exelis Common Stock Unit
Fund under the Vectrus 401(k) Plan pursuant to Section 8.2 of this Agreement.

Section 8.4. Tax Qualified Status. Vectrus will take all steps and make any
necessary filings with the IRS to maintain the Vectrus 401(k) Plan so that such
plan remains qualified under Section 401(a) of the Code and the related trust
remains tax-exempt under Section 501(a) of the Code, including timely seeking
and obtaining a favorable determination letter from the IRS as to such
qualification at the times prescribed under Revenue Procedure 2007-44, 2007-28
I.R.B. 54, or corresponding successor guidance.

ARTICLE IX

U.S. WELFARE PLANS

Section 9.1. Establishment of Vectrus Welfare Plans.

(a) Management Benefitted Employees. On the Welfare Plan Implementation Date,
Vectrus or another Vectrus Entity shall cause the Vectrus Welfare Plan
Participants who are Management Benefitted Employees to become covered by a
corresponding Vectrus Welfare Plan under terms and conditions that are similar
to those of the Exelis Welfare Plans. The Exelis Welfare Plans shall cover the
Vectrus Welfare Plan Participants who are Management Benefitted Employees for
the portion of the 2014 calendar year following the Effective Time, as set forth
in this Article IX, and to the extent not set forth in this Article IX, pursuant
to a Transition Services Agreement, so that Management Benefitted Employees
shall not experience an interruption in coverage. Schedule 9.1(a) sets forth all
Vectrus Welfare Plans, all Exelis Welfare Plans and identifies the participating
employers in each, before and after the Welfare Plan Implementation Date.

(b) PP Employees and TARS Employees. Vectrus or another Vectrus Entity shall
ratify the adoption of the Vectrus Welfare Plans and assume sponsorship of the
Vectrus Welfare Plans no later than the Effective Time. The Vectrus Welfare
Plans shall cover the Vectrus Welfare Plan Participants who are PP Employees
and, for the remainder of the 2014 calendar year, pursuant to a Transition
Services Agreement, TARS Employees, so that there shall be no interruption of
coverage. On the Welfare Plan Implementation Date, Exelis or another Exelis
Entity shall cause the Vectrus Welfare Plan Participants who are TARS Employees
to become covered by corresponding Exelis Welfare Plans.

(c) Coordination for Cessation of Coverages. For the avoidance of doubt, Vectrus
Welfare Plan Participants who are:

(I) Subject to the conditions set forth in Section 9.2(a) and notwithstanding
Section 9.2(i)(III), Management Benefitted Employees shall not participate in
any Exelis Welfare Plan on or after the relevant Welfare Plan Implementation
Date that applies to a corresponding Vectrus Welfare Plan;

 

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(II) TARS Employees shall begin participating in Exelis Welfare Plans on
January 1, 2015;

(III) PP Employees shall not participate in any Exelis Welfare Plans on and
after the Effective Time;

(IV) Subject to the condition set forth in Section 9.2(b) and notwithstanding
Section 9.2(i)(VIII), TARS Employees shall not participate in any Vectrus
Welfare Plans after December 31, 2014; and

(V) Except as provided in subsection (II) above, Exelis Group Employees shall
not participate in any Vectrus Welfare Plans at any time on or after the
Effective Time.

Section 9.2. Transitional Matters Under Vectrus Welfare Plans and Exelis Welfare
Plans; Treatment of Claims Incurred and Other Miscellaneous Matters.

(a) Liability for Claims Incurred Under Exelis Welfare Plans. The applicable
Exelis Welfare Plans shall remain responsible for the adjudication and/or
payment of unpaid covered claims that any Management Benefitted Employee incurs
under any of the Exelis Welfare Plans before the Welfare Plan Implementation
Date. Exelis shall cause such Exelis Welfare Plans to fully perform, pay and
discharge all such claims. Claims for ongoing care for a Management Benefitted
Employee under any of the Exelis Welfare Plans shall be allocated as follows:

(I) Outpatient Care. The applicable Exelis Welfare Plan shall be liable for the
portion of ongoing outpatient care that is provided before the Welfare Plan
Implementation Date, and the applicable Vectrus Welfare Plan shall be
responsible for the portion of ongoing outpatient care that is provided after
the Welfare Plan Implementation Date.

(II) Inpatient Care. The applicable Exelis Welfare Plan shall be liable for
ongoing inpatient care (such as continuous hospitalization) that is provided
without interruption before and after the Welfare Plan Implementation Date.

(III) Claims Incurred. For purposes of this Section 9.2(a), a claim or expense
is deemed to be incurred (A) with respect to medical (including continuous
hospitalization), dental, vision and/or prescription drug benefits, upon the
rendering of health services giving rise to such claim or expense; (B) with
respect to life insurance, accidental death and dismemberment and business
travel accident insurance, upon the occurrence of the event giving rise to such
claim or expense; and (C) with respect to long-term disability benefits, upon
the date of an individual’s disability, as determined by the disability benefit
insurance carrier or claims administrator, giving rise to such claim or expense.

 

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(b) Liability for Claims Incurred Under Vectrus Welfare Plans. The applicable
Vectrus Welfare Plans shall remain responsible for the adjudication and/or
payment of unpaid covered claims that any TARS Employee incurs under any of the
Vectrus Welfare Plans before the Welfare Plan Implementation Date. Vectrus shall
cause such Vectrus Welfare Plans to fully perform, pay and discharge all such
claims. Claims for ongoing care for a TARS Employee under any of the Vectrus
Welfare Plans that are also group medical plans shall be allocated as follows:

(I) Outpatient Care. The applicable Vectrus Welfare Plan shall be liable for the
portion of ongoing outpatient care that is provided before the Welfare Plan
Implementation Date, and the applicable Exelis Welfare Plan shall be responsible
for the portion of ongoing outpatient care that is provided after the Welfare
Plan Implementation Date.

(II) Inpatient Care. The applicable Vectrus Welfare Plan shall be liable for
ongoing inpatient care (such as continuous hospitalization) that is provided
without interruption before and after the Welfare Plan Implementation Date.

(III) Claims Incurred. For purposes of this Section 9.2(b) a claim or expense is
deemed to be incurred (A) with respect to medical (including continuous
hospitalization), dental, vision and/or prescription drug benefits, upon the
rendering of health services giving rise to such claim or expense; (B) with
respect to life insurance, accidental death and dismemberment and business
travel accident insurance, upon the occurrence of the event giving rise to such
claim or expense; and (C) with respect to long-term disability benefits, upon
the date of an individual’s disability, as determined by the disability benefit
insurance carrier or claims administrator, giving rise to such claim or expense.

(c) For the avoidance of doubt, there shall be no allocation between Exelis and
Vectrus with respect to unpaid covered claims that are either incurred but not
processed or that are incurred but unreported prior to the Welfare Plan
Implementation Date for any of the PP Employees participating in the Vectrus
Welfare Plans.

(d) Credit for Deductibles and Other Limits.

(I) With respect to each Management Benefitted Employee, Vectrus and Exelis
shall use reasonable efforts to provide that for purposes of any maximum benefit
payable under any of the Vectrus Welfare Plans, the Vectrus Welfare Plans will
recognize any expenses paid or reimbursed by the Exelis Welfare Plans with
respect to such participant before the Welfare Plan Implementation Date, to the
same extent such expense payments or reimbursements would be recognized in
respect of an active plan participant under any of the applicable Exelis Welfare
Plans.

(II) With respect to each TARS Employee, Exelis and Vectrus shall use reasonable
efforts to provide that for purposes of any maximum benefit payable under any of
the Exelis Welfare Plans, the Exelis Welfare Plans will recognize any expenses
paid or reimbursed by the Vectrus Welfare Plans with respect to such participant
before the Welfare Plan Implementation Date, to the same extent such expense
payments or reimbursements would be recognized in respect of an active plan
participant under any of the applicable Vectrus Welfare Plans.

 

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(III) For the avoidance of doubt, PP Employees and TARS Employees shall remain
in all Vectrus Welfare Plans as of the Effective Time. With regard to the plan
year in which the Effective Time occurs, no credit toward deductibles,
out-of-pocket maximums, limits on number of services or visits, or other similar
limitations shall be given to a PP Employee or a TARS Employee, to the extent
such amounts and usages are taken into account under the Vectrus Welfare Plans.
Furthermore no special credits against any lifetime maximum benefit limit under
any of the Vectrus Welfare Plans shall be made for any PP Employee or before the
Welfare Plan Implementation Date, TARS Employees, because the Vectrus Welfare
Plans will recognize any expenses paid or reimbursed by the Vectrus Welfare
Plans with respect to such participant before the Effective Time.

(e) COBRA.

(I) Exelis shall be responsible for complying with the group health coverage
continuation requirements of COBRA for Qualifying Events occurring before the
Welfare Plan Implementation Date affecting a Management Benefitted Employee or a
Former Management Benefitted Employee or his or her Qualified Beneficiaries with
respect to each Management Benefitted Employee and Former Management Benefitted
Employee who becomes a Qualified Beneficiary before the Welfare Plan
Implementation Date.

(II) Vectrus shall be responsible for complying with the group health coverage
continuation requirements of COBRA for Qualifying Events occurring before the
Welfare Plan Implementation Date affecting a TARS Employee or a Former TARS
Employee or his or her Qualified Beneficiaries with respect to each TARS
Employee and Former TARS Employee who becomes a Qualified Beneficiary before the
Welfare Plan Implementation Date.

(III) Exelis shall be responsible for complying with the group health coverage
continuation requirements of COBRA for Qualifying Events occurring on or after
the Welfare Plan Implementation Date affecting a TARS Employee or his or her
Qualified Beneficiaries with respect to each TARS Employee who becomes a
Qualified Beneficiary on or after the Welfare Plan Implementation Date.

(IV) Vectrus shall be responsible for complying with the group health coverage
continuation requirements of COBRA for Qualifying Events occurring on or after
the Welfare Plan Implementation Date affecting a Management Benefitted Employee
or his or her Qualified Beneficiaries with respect to each Management Benefitted
Employee who becomes a Qualified Beneficiary on or after the Welfare Plan
Implementation Date.

 

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(V) For the avoidance of doubt, Vectrus shall be responsible for complying with
the group health care coverage requirements of COBRA for Qualifying Events with
respect to each PP Employee or his or her Qualified Beneficiaries with respect
to each PP Employee who becomes a Qualified Beneficiary on or after the
Effective Time.

(VI) For the avoidance of doubt, Exelis and Vectrus shall cause such Exelis
Welfare Plans or Vectrus Welfare Plans, as the case may be, to fully perform,
pay and discharge all such claims for any Management Benefitted Employees, PP
Employees and TARS Employees as set forth under subsections (I) through (V) of
this subsection (e) for the duration of COBRA continuation coverage, as
determined pursuant to Treasury Regulation Section 4980B-7, so that the Vectrus
Welfare Plans shall not be liable for the payment of claims incurred under the
Exelis Welfare Plans pursuant to subsections (I) and (III) of this subsection
(e) and the Exelis Welfare Plans shall not be liable for the payment of claims
incurred under the Vectrus Welfare Plans for claims incurred pursuant to
subsections (II), (IV) and (V) of this subsection (e).

(f) HIPAA Notices of Creditable Coverage.

(I) The Exelis Welfare Plans shall be responsible for providing Notices of
Creditable Coverage to all Management Benefitted Employees prior to the Welfare
Plan Implementation Date. The Vectrus Welfare Plans shall be responsible for
providing Notices of Creditable Coverage to all Management Benefitted Employees
on and after the Welfare Plan Implementation Date; provided, however, that for
periods during which coverage for Management Benefitted Employees under the
Exelis Welfare Plans is at issue, Exelis will cooperate and use commercially
reasonable efforts to provide Vectrus with information necessary for the Vectrus
Welfare Plans to issue correct and complete Notices of Creditable Coverage.

(II) The Vectrus Welfare Plans shall be responsible for providing Notices of
Creditable Coverage to all TARS Employees prior to the Welfare Plan
Implementation Date. The Exelis Welfare Plans shall be responsible for providing
Notices of Creditable Coverage to all TARS Employees on and after the Welfare
Plan Implementation Date; provided, however, that for periods during which
coverage for TARS Employees under the Vectrus Welfare Plans is at issue, Vectrus
will cooperate and use commercially reasonable efforts to provide Exelis with
information necessary for the Exelis Welfare Plans to issue correct and complete
Notices of Creditable Coverage.

(III) For the avoidance of doubt, the Vectrus Welfare Plans shall be responsible
for providing Notices of Creditable Coverage to all PP Employees on and after
the Effective Time.

(g) Assumption of Liability for Disability Medical Benefits. Effective as of the
Welfare Plan Implementation Date, any liability to provide Disability Medical
Benefits to any Former Management Benefitted Employees who, under
Section 9.2(i)(III) began receiving long-term disability benefits under an
Exelis Welfare Plan before the Welfare Plan Implementation Date, shall be
transferred to Vectrus, and no member of the Exelis Group shall have any
obligations with respect thereto; provided, however, that neither Vectrus nor
any member of the Vectrus Group shall have any obligation pursuant to the terms
of this Agreement to continue any Disability Medical Benefits on or after the
Welfare Plan Implementation Date.

 

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(h) Additional Details Regarding HRA. Pursuant to Section 9.1, Vectrus or
another Vectrus Entity shall establish and adopt Vectrus Welfare Plans that will
no later than the Welfare Plan Implementation Date provide HRA benefits to
eligible Vectrus Welfare Plan Participants who are Management Benefitted
Employees. To the extent that any of the Vectrus Welfare Plans provides HRA
benefits (each, a “Vectrus HRA”), such Vectrus Welfare Plans shall be effective
as of the Welfare Plan Implementation Date.

(I) It is the intention of the Parties that all activity under an HRA
attributable to a Vectrus Welfare Plan Participant who is a Management
Benefitted Employee for the plan year prior to the plan year in which the
Welfare Plan Implementation Date occurs, be deemed to be activity under the
Exelis Welfare Plans providing HRA benefits (each, an “Exelis HRA”).
Accordingly, (A) the Exelis HRA Participation Period will be deemed to include a
period when the Vectrus Welfare Plan Participant who is a Management Benefitted
Employee participated in the corresponding Exelis HRA; (B) pursuant to
Section 9.1(a), Exelis shall cause its wellness program benefits and incentives
to be continued for Vectrus Welfare Plan Participants who are Management
Benefitted Employees until August 31, 2014, under a Transition Services
Agreement; (C) effective January 1, 2015, Vectrus shall, or shall cause another
Vectrus Entity to, adopt its wellness program and incentives to extend benefits
in satisfaction of Section 9.1(a) and Section 9.1(b); (D) all expenses incurred
during the Exelis HRA Participation Period will be deemed to be incurred for
Management Benefitted Employees under the corresponding Exelis HRA; and (E) any
balance accrued under an Exelis HRA as of the Welfare Plan Implementation Date
shall become a balance under the Vectrus HRA.

Notwithstanding anything in this Section 9.2(h), at and after the relevant
Welfare Plan Implementation Date, the Vectrus Group shall assume, and cause the
Vectrus Welfare Plans to be solely responsible for, all claims by Vectrus
Welfare Plan Participants under the applicable Exelis HRA that were incurred but
not paid, whether incurred prior to, on, or after the later of the Effective
Time or the Welfare Plan Implementation Date, that have not been paid in full as
of the Welfare Plan Implementation Date.

(i) Employees on Vacation, Leave or Disability.

(I) As of the Effective Time, Vectrus shall assume all Liabilities with respect
to any Vectrus Group Employee who is a Management Benefitted Employee and, as of
or following the Effective Time and prior to the Welfare Plan Implementation
Date, who is or goes on vacation or who is on or commences an approved leave of
absence, whether paid or unpaid (including leave under FMLA or corresponding
state Law, short-term disability, military leave and other approved leave,
including Liabilities for salary continuation, paid leave or continuing Benefit
Plans).

(II) As of the Effective Time and until the Welfare Plan Implementation Date,
Exelis shall cause the Exelis Welfare Plans to treat any Vectrus Group Employee
who is a Management Benefitted Employee and, as of or following the Effective
Time and prior to the Welfare Plan Implementation Date, who is or goes on
vacation or who is on or commences an approved leave of absence, whether paid or
unpaid (including leave under FMLA or corresponding state Law, short-term
disability, military leave and other approved leave, including Liabilities for
salary continuation, paid leave or continuing Benefit Plans) the same as an
Exelis Group Employee or Former Exelis Group Employee would be treated under the
Exelis Welfare Plans in the same or similar circumstance.

 

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(III) For the avoidance of doubt, any Vectrus Group Employees who are Former
Management Benefitted Employees and who qualify before the Welfare Plan
Implementation Date for long-term disability benefits under an Exelis Welfare
Plan shall remain in such long-term disability plan.

(IV) Notwithstanding subsections (I) and (II) above, any individual residing in
California or another jurisdiction with specific rules that are not reflected in
this provision and that must be followed, as the case may be, who would have
become a Vectrus Group Employee as of the Effective Time but was on an approved
leave of absence at the Effective Time shall become a Vectrus Group Employee
following the conclusion of his or her approved leave or as Exelis and Vectrus
shall agree pursuant to Section 2.6, as the case may be.

(V) As of the Effective Time, Vectrus shall assume and satisfy all Liabilities
with respect to any Vectrus Group Employee who is a PP Employee and, as of or
following the Effective Time, who is or goes on vacation or who is on or
commences an approved leave of absence, whether paid or unpaid (including leave
under FMLA or corresponding state Law, short-term disability, military leave and
other approved leave, including Liabilities for salary continuation, paid leave
or continuing Benefit Plans).

(VI) As of the Effective Time, Exelis shall assume all Liabilities with respect
to any Exelis Group Employee who is a TARS Employee and, as of or following the
Effective Time and prior to the Welfare Plan Implementation Date, who is or goes
on vacation or who is on or commences an approved leave of absence, whether paid
or unpaid (including leave under FMLA or corresponding state Law, short-term
disability, military leave and other approved leave, including Liabilities for
salary continuation, paid leave or continuing Benefit Plans).

(VII) As of the Effective Time and until the Welfare Plan Implementation Date,
Vectrus shall cause the Vectrus Welfare Plans to treat any Exelis Group Employee
who is a TARS Employee and, as of or following the Effective Time and prior to
the Welfare Plan Implementation Date, who is on or goes on vacation or who is on
or commences an approved leave of absence, whether paid or unpaid (including
leave under FMLA or corresponding state Law, short-term disability, military
leave and other approved leave, including Liabilities for salary continuation,
paid leave or continuing Benefit Plans) the same as a PP Employee would be
treated under the Vectrus Welfare Plans in the same or similar circumstance.

 

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(VIII) For the avoidance of doubt, any Vectrus Group Employees who are PP
Employees or Former TARS Employees and who qualify before the Welfare Plan
Implementation Date for long-term disability benefits provided under a Vectrus
Welfare Plan shall remain in such long-term disability plan.

(IX) Notwithstanding subsections (V), (VI) and (VII) above, any individual
residing in California or another jurisdiction with specific rules that are not
reflected in this provision and that must be followed, as the case may be, who
would have become a Vectrus Group Employee as of the Effective Time but was on
an approved leave of absence at the Effective Time shall become a Vectrus Group
Employee following the conclusion of his or her approved leave or as Exelis and
Vectrus shall agree pursuant to Section 2.6, as the case may be.

Section 9.3. Continuity of Benefits.

(a) Additional Details Regarding Flexible Spending Accounts.

(I) Pursuant to Section 9.1, Exelis shall cause its health care flexible
spending account or dependent care flexible spending account (each, an “Exelis
FSA”) benefits to be continued for Vectrus Welfare Plan Participants who are
Management Benefitted Employees through December 31, 2014, pursuant to a
Transition Services Agreement. Exelis shall bear the burden of experience losses
and the benefit of experience gains for each Exelis FSA for the entirety of
2014.

(II) Effective as of the Effective Time, Vectrus or another Vectrus Entity shall
withhold payroll deductions made pursuant to the terms of the Exelis FSAs as in
effect prior to and after the Effective Time and remit such amounts to the
Exelis FSAs within the period required by Labor Regulation
Section 2510.3-102(a)(1) and any other applicable guidance for the health care
flexible spending account and as soon as practicable for the dependent care
flexible spending account.

(III) Effective January 1, 2015, Vectrus or another Vectrus Entity shall cause
Vectrus Welfare Plan Participants who are Management Benefitted Employees to
become eligible for health care flexible spending account benefits and dependent
care flexible spending account benefits.

(IV) Vectrus or another Vectrus Entity shall establish and adopt Vectrus Welfare
Plans that will provide health care flexible spending account benefits and
dependent care flexible spending account benefits to Vectrus Welfare Plan
Participants who are PP Employees and, pursuant to a Transition Services
Agreement, all TARS Employees, effective as of the Effective Time. Vectrus shall
bear the burden of experience losses and the benefit of experience gains with
respect to the PP Employees and TARS Employees for the entirety of 2014.

(b) Additional Details Regarding Health Savings Accounts.

(I) Exelis shall cause its health savings account benefits to be continued for
Vectrus Welfare Plan Participants who are Management Benefitted Employees
through December 31, 2014 under the terms of a Transition Services Agreement.

 

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(II) Pursuant to Section 9.1, Vectrus or another Vectrus Entity shall establish
and adopt Vectrus Welfare Plans no later than the relevant Welfare Plan
Implementation Date for each plan and will coordinate with a health savings
account custodian to make available a health savings account option for eligible
Vectrus Welfare Plan Participants who are Management Benefitted Employees. The
health savings account option will provide health savings account benefits to
eligible Management Benefitted Employees similar to the benefits provided to
eligible participants in the Health Savings Plan option of the Exelis Welfare
Plans. The health savings account made available in connection with the Vectrus
Welfare Plans shall be effective as of the Welfare Plan Implementation Date.

(III) Pursuant to Section 9.1 and no later than the Effective Time, Vectrus or
another Vectrus Entity shall ratify the adoption of the Vectrus Welfare Plans
and assume sponsorship of the Vectrus Welfare Plans and will coordinate with a
health savings account custodian to make available a health savings account
option for eligible Vectrus Welfare Plan Participants who are PP Employees and,
pursuant to a Transition Services Agreement, TARS Employees. The eligible
Vectrus Welfare Plan Participants who are PP Employees or TARS Employees will
remain covered by the Vectrus Welfare Plans without interruption of coverage.

(c) Employer Non-Elective Contributions.

(I) As of the Effective Time, Vectrus shall cause any Vectrus Welfare Plans that
constitute a “cafeteria plan” under Section 125 of the Code to recognize and
give effect to all non-elective employer contributions credited toward coverage
of a Vectrus Welfare Plan Participant who is either a Management Benefitted
Employee or a PP Employee under the corresponding Exelis Welfare Plan that is a
cafeteria plan under Section 125 of the Code for the applicable plan year.

(II) For the avoidance of doubt, Vectrus shall cause all contributions for
coverage made before the Welfare Plan Implementation Date for all Vectrus
Welfare Plan Participants who are Management Benefitted Employees participating
in Exelis Welfare Plans to be remitted to Exelis within the period required by
Labor Regulation Section 2510.3-102(a)(1) and any other applicable guidance.

(d) Waiver of Conditions or Restrictions.

(I) Unless prohibited by applicable Law, the Vectrus Welfare Plans will waive
all limitations, exclusions, service conditions, waiting period limitations or
evidence of insurability requirements that would otherwise be applicable to a
Vectrus Welfare Plan Participant who is a Management Benefitted Employee
following the Welfare Plan Implementation Date to the extent that such Employee
had previously satisfied such limitations under the corresponding Exelis Welfare
Plans.

 

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(II) Unless prohibited by applicable Law, the Exelis Welfare Plans will waive
all limitations, exclusions, service conditions, waiting period limitations or
evidence of insurability requirements that would otherwise be applicable to a
Vectrus Welfare Plan Participant who is a TARS Employee following the Welfare
Plan Implementation Date to the extent that such Employee had previously
satisfied such limitations under the corresponding Exelis Welfare Plans.

Section 9.4. Welfare Plan Implementation Date. For the avoidance of doubt, the
Parties may vary the Welfare Plan Implementation Date for each of the Vectrus
Welfare Plans.

ARTICLE X

NON-U.S. WELFARE PLANS.

Section 10.1. Establishment of Non-U.S. Welfare Plans.

(a) Management Benefitted Employees. On the Welfare Plan Implementation Date,
Vectrus or another Vectrus Entity shall cause the Vectrus Welfare Plan
Participants who are Management Benefitted Employees and who reside or work
outside the United States to become covered by Vectrus Welfare Plans set forth
in Schedule 10.1(a). The Exelis Welfare Plans shall cover for the portion of the
2014 calendar year following the Effective Time the Vectrus Welfare Plan
Participants who are Management Benefitted Employees and who reside or work
outside the United States as set forth in this Article X and to the extent not
set forth in this Article X, pursuant to a Transition Services Agreement, so
that there shall be no interruption of coverage. To the extent such coverage
does not commence until following the Effective Time, Vectrus shall indemnify
Exelis for any continued participation by such employee in the corresponding
Exelis Welfare Plan. Exelis will reasonably cooperate with Vectrus in complying
with the immediately preceding sentence. Schedule 10.1(a) may be updated by
mutual written consent of Exelis and Vectrus.

(b) PP Employees. Effective as of the Effective Time (or as soon as practicable
thereafter), Vectrus, or another Vectrus Entity, shall ratify the adoption of
the Vectrus Welfare Plans set forth in Schedule 10.1(a) and assume sponsorship
of the Vectrus Welfare Plans no later than the Effective Time. The Vectrus
Welfare Plans set forth in Schedule 10.1(a) shall cover the Vectrus Welfare Plan
Participants who are PP Employees and who reside or work outside the United
States and, for the remainder of 2014, pursuant to a Transition Services
Agreement, TARS Employees who reside or work outside the United States so that
there shall be no interruption of coverage. Exelis shall indemnify Vectrus for
any continued participation by such TARS Employees in the corresponding Vectrus
Welfare Plan. Vectrus will reasonably cooperate with Exelis in complying with
the immediately preceding sentence. Schedule 10.1(a) may be updated by mutual
written consent of Exelis and Vectrus at any time up to 60 days after the
Effective Time.

(c) Coordination for Cessation of Coverages. For the avoidance of doubt, Vectrus
Welfare Plan Participants who immediately prior to the Effective Time reside or
work outside the United States and participate in a Vectrus Welfare Plan shall
be treated as follows:

(I) Management Benefitted Employees shall not participate in an Exelis Welfare
Plan on or after the relevant Welfare Plan Implementation Date for a
corresponding Vectrus Welfare Plan;

 

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(II) TARS Employees shall begin participating in Exelis Welfare Plans on
January 1, 2015;

(III) PP Employees shall not participate in any Exelis Welfare Plans on and
after the Effective Time;

(IV) TARS Employees shall not participate in any Vectrus Welfare Plans after
December 31, 2014; and

(V) Except as provided in subsection (II) above, Exelis Group Employees shall
not participate in any Vectrus Welfare Plans at any time on or after the
Effective Time.

Section 10.2. Transitional Matters Under Vectrus Welfare Plans; Credit for
Deductibles and Other Limits.

(a) Management Benefitted Employees. With respect to each Management Benefitted
Employee who resides or works outside the United States and participates in an
Exelis Welfare Plan listed on Schedule 10.1(a) immediately prior to the
Effective Time, Vectrus and Exelis shall use reasonable efforts to provide that
for purposes of any lifetime maximum benefit limit payable under any of the
Vectrus Welfare Plans listed on Schedule 10.1(a), such Vectrus Welfare Plans
will recognize any expenses paid or reimbursed by the Exelis Welfare Plans
listed on Schedule 10.1(a) with respect to such participant before the Welfare
Plan Implementation Date to the same extent such expense payments or
reimbursements would be recognized in respect of an active plan participant
under any of the applicable Exelis Welfare Plans listed on Schedule 10.1(a).

(b) TARS Employees. With respect to each TARS Employee who resides or works
outside the United States and participates in a Vectrus Welfare Plan listed on
Schedule 10.1(a) immediately prior to the Effective Time, Vectrus and Exelis
shall use reasonable efforts to provide that for purposes of any lifetime
maximum benefit limit payable under any of the Vectrus Welfare Plans listed on
Schedule 10.1(a), the applicable Exelis Welfare Plans will recognize any
expenses paid or reimbursed by the Vectrus Welfare Plans listed on Schedule
10.1(a) with respect to such participant before the Welfare Plan Implementation
Date to the same extent such expense payments or reimbursements would be
recognized in respect of an active plan participant under any of the applicable
Exelis Welfare Plans listed on Schedule 10.1(a).

(c) PP Employees. For the avoidance of doubt, PP Employees who reside or work
outside the United States and participate in a Vectrus Welfare Plan listed on
Schedule 10.1(a) immediately prior to the Effective Time shall remain in all
Vectrus Welfare Plans listed on Schedule 10.1(a) as of the Effective Time. No
additional credit shall be given for the plan year in which the Effective Time
occurs for any amount paid, number of services obtained or provider visits by
such PP Employee toward deductibles, out-of-pocket maximums, limits on number of
services or visits, or other similar limitations to the extent such amounts have
already been taken into account under the Vectrus Welfare Plans set forth in
Schedule 10.1(a). Any PP Employee who resides or works outside the United States
shall not be credited with any additional lifetime maximum benefit limit under
any of the Vectrus Welfare Plans set forth in Schedule 10.1(a) to the extent the
Vectrus Welfare Plans have recognized expenses paid or reimbursed such expenses
for such participant prior to the Effective Time.

 

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ARTICLE XI

EXCESS SAVINGS PLAN

Section 11.1. Vectrus Excess Savings Plan. Effective as of the Effective Time,
Vectrus shall, or shall cause another Vectrus Entity to, establish and adopt the
Vectrus Excess Savings Plan. As of the Effective Time, no Vectrus Group Employee
shall participate in the Exelis Excess Savings Plan, and any liabilities to a
Vectrus Group Employee under the Exelis Excess Savings Plan shall be transferred
to the Vectrus Excess Savings Plan. Any benefits payable from the Vectrus Excess
Savings Plan shall be paid in accordance with the terms of that plan. To the
extent that the benefits transferred to the Vectrus Excess Savings Plan are only
payable upon a separation from service as determined under Treasury Regulation
Section 1.409A-1(h), such benefits shall be payable only after the Vectrus
Excess Savings Plan participant has incurred a separation from service from the
Vectrus Group.

Section 11.2. Vectrus Springing Rabbi Trust. As soon as practicable following
the Effective Time, Vectrus shall, or shall cause another Vectrus Entity to,
adopt one or more grantor trusts in a form or forms that are substantially
comparable to the Exelis Springing Rabbi Trust as in effect immediately prior to
the Effective Time.

ARTICLE XII

WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION

Section 12.1. Vectrus Workers’ Compensation. Effective as of the Effective Time,
Vectrus, acting through the Vectrus Group Entity employing each Vectrus Group
Employee, will be responsible for (and, to the extent it has not previously had
such obligations, such Vectrus Entity shall assume): (a) the obligations for all
claims and Liabilities relating to unemployment compensation benefits for all
Vectrus Group Employees employed by that Vectrus Entity and (b) obtaining
workers’ compensation insurance, including providing all collateral required by
the insurance carriers.

Section 12.2. Vectrus Unemployment Compensation. Effective as of the Effective
Time, the Vectrus Entity employing each Vectrus Group Employee shall have (and,
to the extent it has not previously had such obligations, such Vectrus Entity
shall assume) the obligations for all claims and Liabilities relating to
unemployment compensation benefits for all Vectrus Group Employees employed by
that Vectrus Entity. Effective as of the Effective Time, Vectrus, acting through
the Vectrus Group Entity employing each Vectrus Group Employee, will be
responsible for establishing new or transferred unemployment insurance employer
accounts, policies and claims handling contracts with the applicable government
agencies.

Section 12.3. Exelis Workers’ Compensation. Effective as of the Effective Time,
the Exelis Entity employing each Exelis Group Employee shall have (and, to the
extent it has not previously had such obligations, such Exelis Entity shall
assume) the obligations for all claims and Liabilities relating to workers’
compensation for all Exelis Group Employees and Former Exelis Group Employees.
Effective as of the Effective Time, the Exelis Entity formerly employing each
Exelis Group Employee shall have (and, to the extent it has not previously had
such obligations, such Exelis Entity shall assume) the obligations for all
claims and Liabilities relating to workers’ compensation for all Former Exelis
Group Employees.

 

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Section 12.4. Exelis Unemployment Compensation. Effective as of the Effective
Time, the Exelis Entity employing each Exelis Group Employee shall have (and, to
the extent it has not previously had such obligations, such Exelis Entity shall
assume) the obligations for all claims and Liabilities relating to unemployment
compensation benefits for all Exelis Group Employees and Former Exelis Group
Employees. Effective as of the Effective Time, the Exelis Entity formerly
employing each Exelis Group Employee shall have (and, to the extent it has not
previously had such obligations, such Exelis Entity shall assume) the
obligations for all claims and Liabilities relating to unemployment compensation
benefits for all Former Exelis Group Employees.

Section 12.5. Assignment of Contribution Rights. Exelis will transfer and assign
(or cause another member of the Exelis Group to transfer and assign) to a member
of the Vectrus Group all rights to seek contribution or damages from any
applicable third party (such as a third party who aggravates an injury to a
worker who makes a workers’ compensation claim) with respect to any workers’
compensation claim for which Vectrus is responsible pursuant to this Article
XII. Vectrus will transfer and assign (or cause another member of the Vectrus
Group to transfer and assign) to a member of the Exelis Group all rights to seek
contribution or damages from any applicable third party (such as a third party
who aggravates an injury to a worker who makes a workers’ compensation claim)
with respect to any workers’ compensation claim for which Exelis is responsible
pursuant to this Article XII.

Section 12.6. Collateral. On and after the Effective Time, Vectrus (acting
directly or through a member of the Vectrus Group) shall be responsible for
providing all collateral required by insurance carriers in connection with
workers’ compensation claims for which Liability is allocated to the Vectrus
Group under this Article XII. Exelis (acting directly or through a member of the
Exelis Group) shall be responsible for providing all collateral required by
insurance carriers in connection with workers’ compensation claims for which
Liability is allocated to the Exelis Group under this Article XII.

Section 12.7. Cooperation. Vectrus and Exelis shall use commercially reasonable
efforts to provide that workers’ compensation and unemployment insurance costs
are not adversely affected for either of them by reason of the Distribution.

ARTICLE XIII

SEVERANCE

Exelis shall have no Liability or obligation under any Exelis severance plan(s)
or policies with respect to Vectrus Group Employees who did not have a
termination event prior to the Effective Time giving rise to a severance payment
under such Exelis severance plan(s) or policies. Vectrus shall be liable for all
severance payments to be paid to any Vectrus Group Employee under the applicable
Exelis severance plan(s) or policies in which such Vectrus Group Employee
participated immediately prior to the Effective Time, if, and to the extent
that, the events giving rise to such severance payments occurred prior to the
Effective Time. By no later than the Effective Time, Vectrus shall, or shall
cause another Vectrus Entity to, adopt severance plan(s) or policies under which
Vectrus Group Employees who, immediately prior to the Effective Time, shall be
eligible to participate immediately following the Effective Time. Such Vectrus
severance plan(s) or policies will provide terms and conditions for Vectrus
Group Employees who are severed from the Vectrus Group following the Effective
Time that are substantially similar to the terms and conditions provided under
the applicable Exelis severance plan(s) or policies in which such Vectrus Group
Employees participated immediately prior to the Effective Time. For the
avoidance of doubt, the Distribution and the assignment, transfer or
continuation of the employment of Vectrus Group Employees contemplated by
Section 4.1 shall not be deemed a severance of employment for purposes of this
Agreement and, effective as of the Effective Time, Vectrus Group Employees shall
not be eligible to receive any severance payments or other benefits under any
Exelis severance arrangements, plans, policies or guidelines, or agreements.

 

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ARTICLE XIV

BENEFIT ARRANGEMENTS AND OTHER MATTERS

Section 14.1. Termination of Participation. Except as otherwise provided under
this Agreement, effective as of immediately after the Effective Time, Vectrus
Group Employees shall not be eligible to participate in any Exelis Benefit Plan.

Section 14.2. Restrictive Covenants in Employment and Other Agreements. To the
fullest extent permitted by the agreements described in this Section 14.2 and
applicable Law, Exelis shall assign, or cause an applicable member of the Exelis
Group to assign, to Vectrus or a member of the Vectrus Group, as designated by
Vectrus, all agreements containing restrictive covenants (including
confidentiality, non-competition and non-solicitation provisions) between a
member of the Exelis Group and a Vectrus Group Employee, with such assignment to
be effective as of the Effective Time. To the extent that assignment of such
agreements is not permitted, effective as of the Effective Time, each member of
the Vectrus Group shall be considered to be a successor to each member of the
Exelis Group for purposes of, and a third-party beneficiary with respect to, all
agreements containing restrictive covenants (including confidentiality,
non-competition and non-solicitation provisions) between a member of the Exelis
Group and a Vectrus Group Employee, such that each member of the Vectrus Group
shall enjoy all the rights and benefits under such agreements (including rights
and benefits as a third-party beneficiary), with respect to the business
operations of the Vectrus Group; provided, however, that in no event shall
Exelis be permitted to enforce such restrictive covenant agreements against
Vectrus Group Employees for action taken in their capacity as employees of a
member of the Vectrus Group; provided, further, that for three years following
the Effective Time, Exelis and Vectrus shall not be considered competitors under
any non-competition provision applicable to any Exelis Group Employee or Vectrus
Group Employee.

 

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ARTICLE XV

GENERAL PROVISIONS

Section 15.1. Preservation of Rights to Amend. The rights of each member of the
Exelis Group and each member of the Vectrus Group to amend, waive, or terminate
any Benefit Plan shall not be limited in any way by this Agreement.

Section 15.2. Confidentiality. Each Party agrees that any information conveyed
or otherwise received by or on behalf of a Party in conjunction herewith that is
not otherwise public through no fault of such Party is confidential and is
subject to the terms of the confidentiality provisions set forth herein and in
the Distribution Agreement, including Section 4.3(e) of this Agreement and
Section 8.6 of the Distribution Agreement.

Section 15.3. Administrative Complaints/Litigation. Except as otherwise provided
in this Agreement, on and after the Effective Time, Vectrus shall assume, and be
solely liable for, the handling, administration, investigation, and defense of
actions, including ERISA, occupational safety and health, employment standards,
union grievances, wrongful dismissal, discrimination or human rights, and
unemployment compensation claims asserted at any time against Exelis or any
member of the Exelis Group by any Vectrus Group Employee (including any
dependent or beneficiary of any such Employee) or any other person, to the
extent such actions or claims arise out of or relate to employment or the
provision of services (whether as an employee, contractor, consultant, or
otherwise) to or with respect to the business activities of any member of the
Vectrus Group after the Effective Time. To the extent that any legal action
relates to a putative or certified class of plaintiffs, which includes both
Exelis Group Employees (or Former Exelis Group Employees) and Vectrus Group
Employees and such action involves employment or benefit plan related claims,
reasonable costs and expenses incurred by the Parties in responding to such
legal action shall be allocated among the Parties equitably in proportion to a
reasonable assessment of the relative proportion of Employees included in or
represented by the putative or certified plaintiff class. The procedures
contained in the indemnification and related litigation cooperation provisions
of the Distribution Agreement shall apply with respect to each Party’s
indemnification obligations under this Section 15.3.

Section 15.4. Reimbursement and Indemnification. Each Party agrees to reimburse
the other Party, within 30 days of receipt from the other Party of reasonable
verification or except as otherwise provided in the Transition Services
Agreement, for all costs and expenses which the other Party may incur on its
behalf as a result of any of the respective Exelis and Vectrus Welfare Plans,
401(k) plans, savings plans, retirement plans, Benefit Plans, and pension plans
and, as contemplated by Article XIII, any termination or severance payments or
benefits. All Liabilities retained, assumed, or indemnified against by Vectrus
pursuant to this Agreement, and all Liabilities retained, assumed, or
indemnified against by Exelis pursuant to this Agreement, shall in each case be
subject to the indemnification provisions of the Distribution Agreement.
Notwithstanding anything to the contrary, (i) no provision of this Agreement
shall require any member of the Vectrus Group to pay or reimburse to any member
of the Exelis Group any benefit-related cost item that a member of the Vectrus
Group has paid or reimbursed to any member of the Exelis Group prior to the
Effective Time; and (ii) no provision of this Agreement shall require any member
of the Exelis Group to pay or reimburse to any member of the Vectrus Group any
benefit-related cost item that a member of the Exelis Group has paid or
reimbursed to any member of the Vectrus Group prior to the Effective Time.

 

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Section 15.5. Costs of Compliance with Agreement. Except as otherwise provided
in this Agreement, each Party shall pay its own expenses in fulfilling its
obligations under this Agreement.

Section 15.6. Fiduciary Matters. Exelis and Vectrus each acknowledges that
actions required to be taken pursuant to this Agreement may be subject to
fiduciary duties or standards of conduct under ERISA or other applicable Law,
and no Party shall be deemed to be in violation of this Agreement if it fails to
comply with any provisions hereof based upon its good-faith determination (as
supported by advice from counsel experienced in such matters) that to do so
would violate such a fiduciary duty or standard. Each Party shall be responsible
for taking such actions as are deemed necessary and appropriate to comply with
its own fiduciary responsibilities and shall fully release and indemnify the
other Party for any Liabilities caused by the failure to satisfy any such
responsibility.

Section 15.7. Entire Agreement. This Agreement, together with the documents
referenced herein (including the Distribution Agreement and the Benefit Plans),
constitutes the entire agreement and understanding among the Parties with
respect to the subject matter hereof and supersedes all prior written and oral
and all contemporaneous oral agreements and understandings with respect to the
subject matter hereof. To the extent any provision of this Agreement conflicts
with the provisions of the Distribution Agreement, the provisions of this
Agreement shall be deemed to control with respect to the subject matter hereof.

Section 15.8. Binding Effect; No Third-Party Beneficiaries; Assignment. This
Agreement shall inure to the benefit of and be binding upon the Parties and
their respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, this Agreement is solely for the benefit of the
Parties and should not be deemed to confer upon any third parties any remedy,
claim, liability, reimbursement, cause of action, or other right in excess of
those existing without reference to this Agreement. Nothing in this Agreement is
intended to amend any Benefit Plan or affect the applicable plan sponsor’s right
to amend or terminate any Benefit Plan pursuant to the terms of such plan. The
provisions of this Agreement are solely for the benefit of the Parties, and no
current or former Employee, officer, director, or independent contractor or any
other individual associated therewith shall be regarded for any purpose as a
third-party beneficiary of this Agreement. This Agreement may not be assigned by
any Party, except with the prior written consent of the other Parties.

Section 15.9. Amendment; Waivers. No change or amendment may be made to this
Agreement except by an instrument in writing signed on behalf of each of the
Parties. Any Party may, at any time, (i) extend the time for the performance of
any of the obligations or other acts of another Party, (ii) waive any
inaccuracies in the representations and warranties of another Party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
by another Party with any of the agreements, covenants, or conditions contained
herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by an authorized person of the Party to be bound
thereby. No failure or delay on the part of any Party in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant, or
agreement contained herein, nor shall any single or partial exercise of any such
right preclude other or further exercises thereof or of any other right.

 

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Section 15.10. Remedies Cumulative. All rights and remedies existing under this
Agreement or the schedules attached hereto are cumulative to, and not exclusive
of, any rights or remedies otherwise available.

Section 15.11. Notices. Unless otherwise expressly provided herein, all notices,
claims, certificates, requests, demands and other communications hereunder shall
be in writing and shall be deemed to be duly given: (i) when personally
delivered, (ii) if mailed by registered or certified mail, postage prepaid,
return receipt requested, on the date the return receipt is executed or the
letter is refused by the addressee or its agent, (iii) if sent by overnight
courier which delivers only upon the executed receipt of the addressee, on the
date the receipt acknowledgment is executed or refused by the addressee or its
agent, or (iv) if sent by facsimile or electronic mail, on the date confirmation
of transmission is received (provided that a copy of any notice delivered
pursuant to this clause (iv) shall also be sent pursuant to clause (i), (ii) or
(iii)), addressed to the attention of the addressee’s General Counsel at the
address of its principal executive office or to such other address or facsimile
number for a Party as it shall have specified by like notice.

Section 15.12. Counterparts. This Agreement, including the schedules hereto and
the other documents referred to herein, may be executed in multiple
counterparts, each of which when executed shall be deemed to be an original but
all of which together shall constitute one and the same agreement.

Section 15.13. Severability. If any term or other provision of this Agreement or
the schedules attached hereto is determined by a non-appealable decision by a
court, administrative agency, or arbitrator to be invalid, illegal, or incapable
of being enforced by any rule of Law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any Party. Upon such
determination that any term or other provision is invalid, illegal, or incapable
of being enforced, the court, administrative agency, or arbitrator shall
interpret this Agreement so as to effect the original intent of the Parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the fullest extent possible. If any
sentence in this Agreement is so broad as to be unenforceable, the provision
shall be interpreted to be only so broad as is enforceable.

Section 15.14. Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws, but not the Laws governing conflicts of Laws (other
than Sections 5-1401 and 5-1402 of the New York General Obligations Law), of the
State of New York; provided that the Indiana Business Corporation Law, including
the provisions thereof governing the fiduciary duties of directors of a Indiana
corporation, shall govern, as applicable, the internal affairs of Exelis and
Vectrus, as the case may be.

 

41

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Section 15.15. Dispute Resolution; Consent to Jurisdiction and Waiver of Jury
Trial. The procedures for negotiation and binding arbitration set forth in
Article IX and Sections 11.18 and 11.19 of the Distribution Agreement shall
apply to any dispute, controversy or claim (whether sounding in contract, tort
or otherwise) that arises out of or relates to this Agreement, any breach or
alleged breach hereof, the transactions contemplated hereby (including all
actions taken in furtherance of the transactions contemplated hereby on or prior
to the date hereof), or the construction, interpretation, enforceability, or
validity hereof.

Section 15.16. Performance. Each of Exelis and Vectrus shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any member of the Exelis Group
and any member of the Vectrus Group, respectively. The Parties each agree to
take such further actions and to execute, acknowledge, and deliver, or to cause
to be executed, acknowledged, and delivered, all such further documents as are
reasonably requested by the other for carrying out the purposes of this
Agreement or of any document delivered pursuant to this Agreement.

Section 15.17. Construction. This Agreement shall be construed as if jointly
drafted by the Parties and no rule of construction or strict interpretation
shall be applied against any Party.

Section 15.18. Effect if Distribution Does Not Occur. Notwithstanding anything
in this Agreement to the contrary, if the Distribution Agreement is terminated
prior to the Effective Time, this Agreement shall be of no further force and
effect and shall be void ab initio.

Section 15.19. Code Sections 162(m) and 409A. Notwithstanding anything in this
Agreement to the contrary (including the treatment of non-qualified deferred
compensation plans, outstanding long-term incentive awards and annual incentive
awards as described herein), Exelis and Vectrus agree to negotiate in good faith
regarding the need for any treatment different from that otherwise provided
herein to ensure that (i) a federal income tax deduction for the payment of any
non-qualified deferred compensation plan, long-term incentive award, annual
incentive award or other compensation is, to the extent prescribed under the
terms of the applicable plan and award agreement, not limited by reason of
Section 162(m) of the Code, and (ii) the treatment of any non-qualified deferred
compensation plan, long-term incentive award, annual incentive award or other
compensation does not cause the imposition of a penalty tax under Section 409A
of the Code.

 

42

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in
their names by a duly authorized officer as of the date first written above.

 

EXELIS INC. By:  

/s/ Janet McGregor

  Name: Janet McGregor   Title: Corporate Vice President and Treasurer VECTRUS,
INC. By:  

/s/ Michele Tyler

  Name: Michele Tyler   Title: Vice President, General Counsel and Secretary

[Signature Page to Employee Matters Agreement]

--------------------------------------------------------------------------------

Schedule 9.1(a)

to the

EMPLOYEE MATTERS AGREEMENT

by and between

EXELIS INC.

and

VECTRUS, INC.

dated as of

September 25, 20141

 

Name of Arrangement

  

Sponsoring Employer

Exelis Health Plan (EHP) – Cigna    Exelis Exelis Health Savings Plan (EHSP) –
Cigna    Exelis Health Savings Account (HSA) – Cigna    Exelis Health Savings
Account Catch-Up Cigna    Exelis Prescription Program – Express Script (Medco)
   Exelis Healthcare Flexible Spending Account (FSA) – Cigna    Exelis Dependent
Care Flexible Spending Account (DFSA) – Cigna    Exelis Everyone Assistance
Program (EAP)    Exelis LiveHealthier (Wellness Portal) (Plan Year Ends
08/31/2014)    Exelis Virgin Pulse (Plan Year Ends 08/31/2014)    Exelis HMSA
Hawaii Plan (HMO)(BCBS)    Exelis HMSA Hawaii Plan (PPO)(BCBS)    Exelis Cigna
Group High Deductible Health Plan    VSC2 Cigna Group High PPO Health Plan   
VSC Cigna Group Low PPO Health Plan    VSC Medical Bridge Plan – Colonial    VSC
HMSA Hawaii Plan (HMO)(BCBS)    VSC HMSA Hawaii Plan (PPO)(BCBS)    VSC Health
Savings Account (HSA) – Cigna    VSC Health Savings Account Catch-Up – Cigna   
VSC Health Care Flexible Spending Account (HFSA) - TASC    VSC Dependent Care
Flexible Spending Account (DFCA) – TASC    VSC National EyeMed Vision Plan   
Exelis EyeMed Plan C    VSC EyeMed Plan H    VSC National MetLife Dental PPO
Plan    Exelis Delta Dental    VSC Short-Term Disability (Payroll
Practice)(MetLife Determination)    Exelis Long-Term Disability – MetLife   
Exelis Individual Disability Insurance – UNUM    Exelis Short-Term Disability –
Base (Cigna)    VSC Short-Term Disability – Buy Up (Cigna)    VSC

 

1  Terms not defined herein are defined in the Employee Matters Agreement.
Except as noted herein, the participating employers in each arrangement are the
same before and after the Welfare Plan Implementation Date.

2  “VSC” refers to Vectrus Systems Corporation, a wholly owned subsidiary of
Vectrus. It is contemplated that VSC will ratify the adoption of the Vectrus
Welfare Plans and assume sponsorship of the Vectrus Welfare Plans no later than
the Effective Time in satisfaction of the condition set forth in Section 9.1(b)
of the Employee Matters Agreement.

--------------------------------------------------------------------------------

Name of Arrangement

  

Sponsoring Employer

Disability Medical Benefits3    VSC Cigna Voluntary Short-Term Disability
Enhanced Professional    VSC Short-Term Disability (Payroll Practice)(Cigna
Determination)    VSC Cigna Voluntary Long-Term Disability – Base Plan    VSC
Cigna Voluntary Long-Term Disability Buy Up Plan    VSC Cigna Voluntary
Long-Term Disability Enhanced Professional    VSC Cigna Voluntary Long-Term
Disability for MBEs    VSC Life Insurance Plan – Basic MetLife    Exelis Life
Plus Program4    Exelis Life Insurance Plan – Cigna    VSC Life Plus Program5   
VSC Accidental Death and Dismemberment Plan – MetLife    Exelis Voluntary
Accident and Insurance (VIA) Plan – Nat’l Union6    Exelis Voluntary Accident
and Insurance (VIA) Plan - MetLife    Exelis Business Travel Accident Insurance
Plan – Nat’l. Union    Exelis Accidental Death and Dismemberment – MetLife   
VSC Accident Plan – Colonial    VSC Cancer Plan – Allstate    VSC Business
Travel and Accident Insurance – AIG7    VSC Exelis Discount Mall Program   
Exelis Vectrus Discount Mall Program8    VSC Exelis Group Auto and Home
Insurance Plan    Exelis Vectrus Group Auto and Home Insurance Plan9    VSC
Exelis Legal Assistance Plan – Hyatt    Exelis Vectrus Legal Assistance Plan –
TBD10    VSC Excellus Medicare Blue Choice    Exelis Aetna Golden Medicare Plan
– NJ    Exelis Aetna Golden Medicare Plan – NY    Exelis Aetna Golden Medicare
Plan – Southern CA    Exelis Emblem Health Metro NY    Exelis Emblem Health
Nassau    Exelis Health First Health Plans    Exelis

 

3  As set forth in Section 9.2(g) of the Employee Matters Agreement, Vectrus is
assuming a liability in connection with providing Disability Medical Benefits.
Exelis Systems Corporation does not currently provide Disability Medical
Benefits to the PP Employees or TARS Employees. Neither Vectrus nor VSC plans to
expand this benefit.

4  This plan is currently sponsored by Exelis. As of October 1, 2014, all
current Management Benefitted Employees will move to direct bill with MetLife,
as Exelis is terminating this arrangement effective September 30, 2014. VSC
anticipates continuing this arrangement.

5  Effective as of the Welfare Plan Implementation Date, VSC plans to offer an
updated life insurance arrangement similar to the “Life Plus Program” sponsored
by Exelis.

6  Exelis is terminating this coverage in favor of Voluntary Accident and
Insurance insured through MetLife. It is currently unknown whether Nat’l. Union
will continue the program for the Management Benefitted Employees until the
Welfare Plan Implementation Date. If not, the Management Benefitted Employees
will be covered by the replacement policy issued by MetLife until the Welfare
Plan Implementation Date.

7  VSC has arranged to add this coverage in lieu of Business Travel Accident
Insurance Plan – Nat’l. Union sponsored by Exelis. Management Benefitted
Employees and PP Employees have already transitioned to this coverage.

8  VSC does not intend to expand its benefit offerings to include a similar
program.

9  Id.

10  Id.

 

2

--------------------------------------------------------------------------------

Name of Arrangement

  

Sponsoring Employer

HealthNet Seniority Plus    Exelis Horizon BCBS Medicare Blue    Exelis Humana
Gold Plus - Daytona    Exelis Humana Gold Plus - Palm Beach    Exelis Humana
Gold Plus - South Florida    Exelis Humana Gold Plus - Tampa    Exelis Kaiser
Northern CA (Pre-65)    Exelis Kaiser Senior Advantage - Northern CA    Exelis
Kaiser Senior Advantage - Southern CA    Exelis Kaiser Southern CA (Pre-65)   
Exelis Preferred Gold HMO – SSD    Exelis Preferred Gold HMO Salaried    Exelis
United Healthcare - AZ    Exelis United Healthcare - CA    Exelis United
HealthCare Medicare Complete - Arizona    Exelis United HealthCare Medicare
Complete - Florida    Exelis United HealthCare Medicare Complete - Nevada   
Exelis United HealthCare Medicare Complete - New England/Rhode Island    Exelis
United HealthCare Medicare Complete - North Carolina    Exelis United HealthCare
Medicare Complete - Northern CA    Exelis United HealthCare Medicare Complete -
Ohio    Exelis United HealthCare Medicare Complete - Southern CA    Exelis Cigna
Pre-65 Exelis Health Plan    Exelis Cigna Pre-65 Exelis Health Savings Plan   
Exelis Cigna Post-65 Exelis Health Plan    Exelis Exelis Salaried Retiree Life
Insurance Plan    Exelis

 

3

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Schedules 10.1(a) and (b)

to the

EMPLOYEE MATTERS AGREEMENT

by and between

EXELIS INC.

and

VECTRUS, INC.

dated as of

September 25, 20141

 

Name of Arrangement

  

Sponsoring Employer

Aetna Global Medical    Exelis Aetna Global Dental    Exelis Major Medical Plan
(Puerto Rico) – Triple S2    Exelis Dental DA20 (Puerto Rico) – Triple S3   
Exelis Open Access Plus (OAP) Global Plan    VSC4 Open Access Plus (OAP)
Catastrophic Plan - Cigna    VSC Open Access Plus (OAP) Other Country National
(OCN) Plan – Cigna    VSC Open Access Plan (OAP) Other Country National
Catastrophic Plan – Cigna    VSC Open Access Plus (OAP) Short-Term Abroad (STA)
– Cigna    VSC CIEB International Dental Plan    VSC Dental OCN – Cigna
International    VSC Major Medical Plan (Puerto Rico) – Triple S5    VSC Dental
DA20 (Puerto Rico) – Triple S6    VSC

 

1  Terms not defined herein are defined in the Employee Matters Agreement.

2  Prior to the Welfare Plan Implementation Date, VSC (as defined below) will
sponsor this arrangement for TARS Employees. As of the Welfare Plan
Implementation Date, Exelis will assume sponsorship of this arrangement.

3  Id.

4  “VSC” refers to Vectrus Systems Corporation, a wholly owned subsidiary of
Vectrus. It is contemplated that VSC will ratify the adoption of the Vectrus
Welfare Plans and assume sponsorship of the Vectrus Welfare Plans no later than
the Effective Time in satisfaction of the condition set forth in Section 10.1(b)
of the Employee Matters Agreement.

5  Prior to the Welfare Plan Implementation Date, VSC will sponsor this
arrangement for TARS Employees. As of the Welfare Plan Implementation Date,
Exelis will assume sponsorship of this arrangement.

6  Id.