Document:

exv10w2

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Exhibit 10.2

BENEFITS AND COMPENSATION MATTERS AGREEMENT

DATED AS OF OCTOBER 25, 2011,

AMONG

ITT CORPORATION,

XYLEM INC.

AND

EXELIS INC.

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page	 
	1. EMPLOYEES
	 	 	1	 
	2. BENEFIT PROGRAM PARTICIPATION
	 	 	2	 
	3. DEFINED BENEFIT PLANS
	 	 	4	 
	4. DEFINED CONTRIBUTION PLANS
	 	 	8	 
	5. EMPLOYEE HEALTH AND WELFARE BENEFIT PLANS
	 	 	11	 
	6. INCENTIVE PLANS
	 	 	14	 
	7. STOCK OPTIONS AND OTHER AWARDS
	 	 	15	 
	8. COLI
	 	 	17	 
	9. DIRECTOR PLANS
	 	 	18	 
	10. COLLECTIVE BARGAINING AGREEMENTS
	 	 	18	 
	11. TRANSITION SERVICES
	 	 	19	 
	12. ALLOCATION OF BALANCE SHEET ACCOUNTS
	 	 	19	 
	13. ACCESS TO INFORMATION AND DATA EXCHANGE
	 	 	20	 
	14. NOTICES; COOPERATION
	 	 	21	 
	15. FURTHER ASSURANCES
	 	 	22	 
	16. INDEMNIFICATION
	 	 	22	 
	17. DISPUTE RESOLUTION
	 	 	23	 
	18. MISCELLANEOUS
	 	 	23	 
	19. DEFINITIONS
	 	 	1	 

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     BENEFITS AND COMPENSATION MATTERS AGREEMENT dated as of October 25, 2011, among
ITT CORPORATION, an Indiana corporation (which, together with its subsidiaries, is
herein referred to as “ITT”), Xylem Inc., an Indiana corporation, (which,
together with its subsidiaries, is herein referred to as “Water”), and
Exelis Inc., an Indiana corporation (which, together with its subsidiaries, is
herein referred to as “Defense”).

          WHEREAS, the Board of Directors of ITT (the “Board”) has determined that it is
appropriate, desirable and in the best interests of ITT, its shareholders and its other
constituents, to separate ITT into three separate, publicly traded companies, one for each of (i)
the ITT Retained Business, which shall be owned and conducted, directly or indirectly, by ITT, (ii)
the Defense Business, which shall be owned and conducted, directly or indirectly, by Defense and
(iii) the Water Business, which shall be owned and conducted, directly or indirectly, by Water;

          WHEREAS, the Board of Directors of ITT has determined that it is appropriate and desirable to
distribute to the holders of shares of common stock, par value $1.00 per share, of ITT (the
“ITT Common Stock”), on a pro rata basis (in each case without consideration being paid by
such shareholders) (A) all of the outstanding shares of common stock, par value $.01 per share, of
Water (the “Water Common Stock”) and (B) all of the outstanding shares of common stock, par
value $.01 per share, of Defense (the “Defense Common Stock”) (such transactions as they
may be amended or modified from time to time, the “Distribution”);

          WHEREAS, ITT, Water and Defense have executed a distribution agreement dated as of the date
hereof (the “Distribution Agreement”) to effectuate such Distribution and allocate and
assign certain responsibilities; and

          WHEREAS, each of ITT, Water and Defense has determined that it is necessary and desirable to
allocate and assign responsibility for certain employee benefit liabilities in respect of the
activities of the businesses of such entities on the Distribution Date (as defined herein) and
those liabilities in respect of other businesses and activities of ITT and its former subsidiaries
and certain other matters.

          NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, ITT,
Water and Defense agree as follows:

          1. EMPLOYEES. (a) General. Effective as of the Distribution Date, ITT shall transfer
all employees listed on Schedule 1(a)(i) to Water and all such employees shall become Water
Employees. Effective as of the Distribution Date, ITT shall transfer all employees listed on
Schedule 1(a)(ii) to Defense and all such employees shall become Defense Employees. All
Preexisting ITT Employees employed by legal entities that became legal entities of ITT following
the Distribution Date shall be ITT Employees. All Preexisting ITT Employees employed by legal
entities that became legal entities of Water following the Distribution Date shall be Water
Employees. All Preexisting ITT Employees employed by legal entities that became legal entities of
Defense following the Distribution Date shall be Defense Employees. Except as expressly identified
in this Agreement, Defense shall be liable for all liabilities, claims or controversies involving
Defense Employees, Water shall be liable for all liabilities, claims or

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controversies involving Water Employees and ITT shall be liable for all liabilities, claims or
controversies involving ITT Employees and ITT Retirees.

          (b) Schedule of Water Employees and Defense Employees. As of the date of this
Agreement, ITT, Water and Defense shall have in good faith determined which individuals who are
Preexisting ITT Employees shall become Water Employees and Defense Employees on no later than the
Distribution Date. Such lists may be modified only by written consent by each of ITT, Water and
Defense on or following the Distribution Date. Prior to the Distribution Date, ITT may modify such
lists without the consent of Water and Defense.

          (c) Non-Termination of Employment. Except as otherwise expressly provided herein and
in compliance with Section 2(d) of this Agreement, no provision of, or event arising under, this
Agreement, the Distribution Agreement or any of the Ancillary Agreements shall be construed to
create any right, or accelerate entitlement, to any compensation or benefit whatsoever on the part
of any Preexisting ITT Employee or other future, present, or former employee of ITT, Water or
Defense and any of their respective Subsidiaries.

          (d) Employment Agreements. As soon as practicable on or after the execution of this
Agreement, ITT, Water and Defense shall use their reasonable best efforts to enter into, or have in
place, an employment agreement with each of the Preexisting ITT Employees listed on Schedule 1(d)
attached hereto, which employment agreements shall become effective on the Close of the
Distribution Date. Water shall assume from ITT the employment agreement of Frank Jimenez, along
with the pension assets and liabilities identified in such agreement. Defense shall assume from
ITT the employment agreement of Chris Bernhardt. ITT shall continue to be bound by the employment
agreement of Denise Ramos.

          (e) No Solicit; No Hire. As described in Section 5.1 of the Distribution Agreement and
agreed to by ITT, Defense and Water, none of ITT, Water or Defense shall solicit or hire
Preexisting ITT Employees for such period following the Effective Time as specified therein,
without receiving the written consent of the affected prior employer. In respect of countries
whose local laws declare as invalid or unenforceable or prohibit any agreement between employers
not to hire employees of the other, ITT, Defense and Water will not have an agreement not to hire
employees of the other but agree not to actively solicit the services of each other’s employees for
such period following the Effective Time as specified in the Distribution Agreement.

          2. BENEFIT PROGRAM PARTICIPATION. (a) Except as specifically provided herein with respect to
particular compensation or benefit programs, all Water Employees and Defense Employees will cease
participation in all ITT benefit plans and programs no later than immediately prior to the
Distribution Date; provided that certain Water Employees who participate in the ITT Industries
Pension Plan for UK Expatriates, Godwin Pumps Limited Pension Scheme and ITT Retirement Savings
Plan, as identified as Items 23 and 24 on Schedule 3(a)(iii) and Item 14 of Schedule 4(a)(iii)
shall continue to participate in their respective plans following the Distribution Date, subject to
the terms of such plans. As soon as reasonably practicable, ITT will retain liability for all
incurred but not yet reported claims of Water Employees and Defense Employees who participate in
the ITT welfare benefit plans and programs through the earlier of (i) December 31, 2011 or (ii) the
date on which two separate

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liability accounts for Water and Defense are created. The separate liability accounts shall
correspond to the new bank accounts established by Water and by Defense for new incurred but not
yet reported claims. The balance of the new accounts shall be transferred as soon as reasonably
practicable following the Distribution Date.

          (b) (i) Water shall cause to be recognized each Water Employee’s service with ITT for purposes
of determining (x) eligibility for vacation benefits, short-term disability and severance benefits
and (y) eligibility for vesting under all other employee benefit plans and policies of Water
applicable to such Water Employees, to the extent such service was recognized by ITT for such
purposes.

          (ii) Defense shall cause to be recognized each Defense Employee’s service with ITT for purposes
of determining (x) eligibility for vacation benefits, short-term disability and severance benefits
and (y) eligibility for vesting under all other employee benefit plans and policies of Defense
applicable to such Defense Employees, to the extent such service was recognized by ITT for such
purposes.

          (c) Nothing in this Agreement shall be construed or interpreted to restrict ITT’s, Water’s or
Defense’s right or authority to amend or terminate any of its employee benefit plans, policies or
programs effective as of a date following the Distribution Date, except neither Defense nor any
successor entity to Defense may amend or alter the eligibility schedule described for Preexisting
ITT Employees under Sections 3(b)(vii) and 3(c)(iv) or the requirement not to reduce or eliminate
health benefits under Section 5(b)(ix).

          (d) Any Preexisting ITT Employee who, on the Distribution Date, is employed by ITT, Defense or
Water shall not be deemed either to have terminated employment or to be in retirement status under
any employee benefit plan operated by ITT, Water or Defense. Except to the extent required by law
and as otherwise stated in Section 3(b)(vii), any Preexisting ITT Employee who, on the Distribution
Date, is employed by ITT, Defense or Water shall not, solely as a result of the Distribution or
related transactions, be eligible to receive payment of, or exercise any portability rights in
respect of, his or her vested benefit or retirement allowance under any employee benefit plan
operated by ITT, Water or Defense; provided, that each Water Employee and each Defense Employee
shall receive credit for their service with ITT prior to the Distribution Date from Water or
Defense as provided in this Article II. As permitted by Final Treasury Regulation Section
1.409A-1(h)(4), ITT, Water and Defense agree that any employee and any other “service provider”
within the meaning of the term as defined in Section 409A of the Code who provides services to ITT
immediately before the transactions contemplated hereby and provides services to ITT, Water or
Defense after and in connection with such transactions shall not be treated as separating from
service for purposes of Section 409A of the Code.

          (e) Except as otherwise specified on any of the Schedules, which are specifically incorporated
by reference to this Agreement, (i) any ITT Plan maintained by ITT prior to the Distribution Date
will continue to be maintained by ITT following the Distribution Date, (ii) any Defense Plan
maintained by Defense prior to the Distribution Date will continue to be maintained by Defense
following the Distribution Date and (iii) any Water Plan maintained by Water prior to the
Distribution Date will continue to be maintained by Water following the Distribution Date. Unless
otherwise specified in this Agreement, all assets and liabilities of any

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Plan, Defense Plan or Water Plan will remain with and be assumed by the entity maintaining
such plan.

          3. DEFINED BENEFIT PLANS. (a) List of Defined Benefit Plans. (i) Certain current
and former employees of ITT, Water and Defense participate in ITT Group tax qualified defined
benefit pension plans made available for certain ITT Group employees in the United States. Schedule
3(a)(i) lists each defined benefit pension plan applicable to Preexisting ITT Employees (the
“US Qualified DB Plans”).

          (ii) Certain current and former employees of ITT, Water and Defense participate in ITT Group
tax non-qualified defined benefit pension plans made available for certain ITT Group employees in
the United States. Schedule 3(a)(ii) lists each defined benefit pension plan applicable to
Preexisting ITT Employees (the “US Non-Qualified DB Plans”).

          (iii) Certain current and former employees of ITT, Water and Defense participate in ITT Group
defined benefit pension plans made available for certain ITT Group employees outside of the United
States. Schedule 3(a)(iii) lists each defined benefit pension plan applicable to Preexisting ITT
Employees (the “Non-US DB Plans”).

          (b) US Qualified DB Plans. (i) Continuation of US Qualified DB Plans.
Following the Distribution Date, ITT shall continue to sponsor the ITT US Qualified DB Plans as so
identified on Schedule 3(a)(i). Following the Distribution Date, Defense shall continue to sponsor
the Defense US Qualified DB Plans as so identified on Schedule 3(a)(i). Following the Distribution
Date, Water shall continue to sponsor the Water US DB Qualified Plans as so identified on Schedule
3(a)(i). Each of ITT, Defense and Water shall assume all liabilities associated with such plans
that it sponsors following the Distribution Date, whether incurred prior to, on or following the
Distribution Date; provided, that Defense shall recognize the additional service credit as
specified in Section 3(b)(v) of this Agreement. Each of ITT, Defense and Water shall retain all
accrued benefits associated with such plans that it sponsors following the Distribution Date,
whether accrued prior to, on or following the Distribution Date.

          (ii) Adoption of US Qualified DB Plan. Effective as of the Distribution Date, Water
shall adopt New ITT Pension Plan for Bargaining Unit Employees, Seneca Falls, New York, which shall
have terms similar in all material respects to the ITT Pension Plan for Bargaining Unit Employees,
Seneca Falls, New York maintained by ITT and identified as Item 16 on Schedule 3(a)(i). As soon as
practicable on or after the Distribution Date, ITT shall transfer to Water the assets and
liabilities associated with Water Employees who participated in the ITT Pension Plan for Bargaining
Unit Employees, Seneca Falls, New York as identified as Item 16 on Schedule 3(a)(i). Such assets
will be transferred in kind to the maximum extent practicable. The plan actuary for such plan
shall be responsible for determining the appropriate amount of assets and liabilities to be
allocated per employee transferred, in each case in accordance with applicable law.

          (iii) Adoption of New Master Trusts. As soon as practicable on or after the
Distribution Date, Water shall adopt a new trust that is substantially similar in all material
respects to the Master Trust (the “New Water Trust”). Effective as of the Distribution
Date, ITT

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shall adopt a new trust that is substantially similar in all material respects to the Master
Trust (the “New ITT Trust”).

          (iv) Transfer of Master Trust and Assets. As soon as practicable on or after the
Distribution Date, ITT shall transfer to Defense the Master Trust, and Defense shall assume all
liabilities associated with such Master Trust. As soon as practicable on or after the Distribution
Date, the interests of the US Qualified DB Plans identified on Schedule 3(b)(iv) will be liquidated
and cash will be transferred from the Master Trust to the New Water Trust in the amount identified
on Schedule 3(b)(iv) and to the New ITT Trust in the amount identified on Schedule 3(b)(iv). All
other interests will remain in the Master Trust at Defense.

          (v) Transfer of US Qualified DB Plans to Defense. Effective as of the Distribution
Date, ITT shall transfer to Defense the defined benefit pension plans identified as Items 1-7 on
Schedule 3(a)(i), and Defense shall assume all liabilities associated with such plans, including
with respect to accrued benefits thereof.

          (vi) Transfer of US Qualified DB Plans to Water. Effective as of the Distribution
Date, ITT shall transfer to Water the ITT US Qualified DB Plans identified as Items 19-22 on
Schedule 3(a)(i), and Water shall assume all liabilities associated with such plans, including with
respect to accrued benefits thereof.

          (vii) Additional Retirement Eligibility. (A) Effective as of the Distribution Date,
any ITT Employee or any Water Employee who has accrued benefits under the ITT Salaried Retirement
Plan as reflected on that plan’s records as of the Distribution Date and who is eligible to receive
retirement benefits thereunder may elect to commence receipt of that person’s retirement benefits
under the ITT Salaried Retirement Plan on or after the Distribution Date. Any ITT Employee or
Water Employee shall cease earning additional eligibility service at the earliest of the fifth
anniversary of the Distribution Date, the date on which the employee is terminated, the date on
which benefits attributable to the Traditional Pension Plan formula commence, the date of death or
a Change in Control of ITT or Water, respectively (the “Eligibility End Date”). Any ITT
Employee or any Water Employee who is eligible to begin retirement as of the Distribution Date who
elects to commence receipt of that person’s retirement benefits under the ITT Salaried Retirement
Plan shall not continue to earn eligibility service following the later of the Distribution Date
and the last month preceding the annuity start date. Following the Eligibility End Date, no ITT
Employee or Water Employee will receive credit toward the retirement criteria specified in the ITT
Salaried Retirement Plan. Except as provided in this Section 3(b)(vii), all accrued benefits under
the ITT Salaried Retirement Plan will be frozen with respect to any ITT Employee or any Water
Employee as of the Distribution Date.

          (B) Effective as of the later of the Distribution Date and January 1, 2012, any Defense
Employee who has accrued benefits under the ITT Salaried Retirement Plan may make a one-time
irrevocable election either to (x) continue earning eligibility and benefit service under the
Traditional Pension Plan formula defined in the ITT Salaried Retirement Plan or (y) choose to begin
participation in the enhanced employer-contribution portion of the defined contribution plan
identified as Item 1 on Schedule 4(a)(i).

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          (C) Following the Distribution Date, all unvested benefits accrued by Preexisting ITT
Employees under the ITT Salaried Retirement Plan who have at least one year of service credit as of
the Distribution Date, which are attributable to ITT Employees and Water Employees (other than the
ability to continue earning eligibility service for up to five years as described above) shall be
vested as of the Distribution Date. Unvested benefits attributable to Defense Employees shall
remain unchanged and Defense shall remain liable for all benefits (unvested or vested) attributable
to Defense Employees.

          (c) US Non-Qualified DB Plans. (i) Continuation of US Non-Qualified DB Plans.
Following the Distribution Date, ITT shall continue to sponsor the ITT US Non-Qualified DB Plans as
so identified on Schedule 3(a)(ii). Following the Distribution Date, Defense shall sponsor the
Defense US Non-Qualified DB Plans as so identified on Schedule 3(a)(ii). Following the
Distribution Date, Water shall sponsor the Water US Non-Qualified DB Plans as so identified on
Schedule 3(a)(ii). Each of ITT, Defense and Water shall assume all liabilities associated with
such plans that it sponsors following the Distribution Date, whether incurred prior to, on or
following the Distribution Date; provided, that Defense shall recognize the additional service
credit as specified in Section 3(c)(iv) of this Agreement. Each of ITT, Defense and Water shall be
liable for all accrued benefits associated with such plans that it sponsors following the
Distribution Date, whether accrued prior to, on or following the Distribution Date.

          (ii) Excess Pension Plans. Effective as of the Distribution Date, ITT shall cause the
transfer of the sponsorship of the ITT US Non-Qualified DB Plans identified as Items 1-7 on
Schedule 3(a)(ii) to Defense; provided, that Defense shall recognize the additional service credit
as specified in Section 3(c)(iv) of this Agreement.

          Defense does hereby assume liability for all benefits accrued prior to the Distribution Date
under the ITT Excess Pension Plans, the ITT Enhanced Pension Plan, Federal Labs Unfunded 1, EDO
Excess Plan — SERP and the Retirement Plan for Non-Management Directors of ITT Corp. identified as
Items 1, 3-7 on Schedule 3(a)(ii) for all Preexisting ITT Employees, except as provided in the
Ancillary Agreements.

          (iii) Ex Gratia Plan. Effective as of the Distribution Date, ITT shall cause the
transfer of the Ex Gratia Plan to Defense identified as Item 2 on Schedule 3(a)(ii) along with all
liabilities accrued under the plan with the exception of any liabilities identified on Schedule
3(a)(ii).

          (iv) Additional Retirement Eligibility. Effective as of the Distribution Date, any
ITT Employee and any Water Employee who has accrued benefits under the ITT Excess Pension Plan
shall have his or her benefit accruals under the Excess Pension Plans cease as of the date
immediately preceding the Distribution Date; provided that, solely for purposes of determining the
amount of an employee’s Excess Pension Plans benefit under the Excess Pension Plans, such Water
Employee or ITT Employee shall be deemed to have incurred a Termination of Employment (as defined
in the Excess Pension Plans) as of the Distribution Date; provided however, that
for purposes of determining such employee’s eligibility for a benefit under the Excess Pension
Plans, such Water Employee or ITT Employee shall be credited with the same eligibility service he
or she is credited with under the ITT Salaried Retirement Plan as

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described in Section 3(b)(vii) herein. Notwithstanding the previous sentence, a Water
Employee shall not incur a Termination of Employment under the terms of the Excess Pension Plans
until such Water Employee incurs a Termination of Employment with Water and (b) an ITT Employee
shall not incur a Termination of Employment under the terms of the Excess Pension Plans until such
ITT Employee incurs a Termination of Employment with ITT.

          Effective as of the Distribution Date, all accrued benefits under the Excess Pension Plans for
ITT Employees and Water Employees who have at least one year of service credit as of the
Distribution Date shall become 100 percent vested and nonforfeitable as of the Distribution Date.
Unvested benefits attributable to Defense Employees shall remain unchanged and Defense shall be
liable for all benefits (unvested or vested) attributable to Defense Employees.

          (v) Springing Rabbi Trust. It is contemplated that Defense will enter into a rabbi
trust agreement following the Distribution Date that will, only in the event of a Change in Control
of Defense, be fully funded with the amounts payable under the US Non-Qualified DB Plans identified
as Items 1-7 on Schedule 3(a)(ii) and will pay to each participant the lump-sum amount payable
following a Change in Control in accordance with such plans.

          (d) Non-US DB Plans. (i) Continuation of Non-US DB Plans. Following the
Distribution Date, ITT shall continue to sponsor the ITT Non-US DB Plans as so identified on
Schedule 3(a)(iii). Following the Distribution Date, Defense shall continue to sponsor the Defense
Non-US DB Plans as so identified on Schedule 3(a)(iii). Following the Distribution Date, Water
shall continue to sponsor the Water Non-US DB Plans as so identified on Schedule 3(a)(iii). Each
of ITT, Defense and Water shall assume all liabilities associated with such plans that it sponsors
following the Distribution Date, whether incurred prior to, on or following the Distribution Date.
Each of ITT, Defense and Water shall retain all accrued benefits associated with such plans that it
sponsors following the Distribution Date, whether accrued prior to, on or following the
Distribution Date. For any ITT Non-US DB Plan not identified on Schedule 3(a)(iii), the entity
that maintained such ITT Non-US DB Plan prior to the Distribution Date shall continue to maintain
such plan and assume all liabilities associated with such plan following the Distribution Date.

          (ii) Adoption of Non-US DB Plan. Effective as of the Distribution Date, Water shall
adopt a benefits plan for Water Employees, which shall have terms similar in all material respects
to the benefit plan identified on Item 3 of Schedule 3(a)(iii). Each of ITT, Defense and Water
shall assume all liabilities associated with the plans that it sponsors following the Distribution
Date, whether incurred prior to, on or following the Distribution Date.

          (iii) Transfer of Non-US DB Plans. Effective as of the Distribution Date, ITT shall
transfer to Water the Non-US DB Plan identified as Item 22 of Schedule 3(a)(iii) (the “British
DB Plan”), and Water shall assume all liabilities associated with such plan; provided that the
transfer of such plan will be made in accordance with a deed of substitution between Lowara UK
Limited, ITT Industries Limited and Pension Trustee Management Limited and a scheme apportionment
arrangement deed between the Trustee and the employers participating in such plan.

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          (iv) Transfer of Non-US Assets and Liabilities. As soon as practicable on or after
the Distribution Date, ITT shall transfer to Water the assets and liabilities associated with Water
Employees who participated in the Non-US Pension Plans identified as Items 8, 23 and 24 of Schedule
3(a)(iii) prior to the Distribution. Such assets will be transferred in kind to the maximum extent
practicable. The plan actuary for each such transfer shall be responsible for determining the
appropriate amount of assets and liabilities to be allocated per employee transferred, in each case
in accordance with applicable local law.

          (v) Transfer of Other Non-US Assets. Notwithstanding any other provision of this
Article III, the Plan Actuary for each such Non-US DB Plan shall be responsible for determining the
appropriate amount of assets and liabilities to be allocated to comparable plans to be established
and adopted by the companies as required pursuant to the provisions of this Article III, in each
case in accordance with applicable local law.

          (vi) Canadian DB Plans. Effective as of the Distribution Date, any ITT Employee who
has accrued benefits under the Non-US DB Plans identified as Items 14 and 15 on Schedule 3(a)(iii)
(the “Canadian Salaried DB Plans”) will cease participation in the Canadian Salaried DB
Plans as of the Distribution Date, shall be vested as of the Distribution Date and shall cease to
accrue further benefits under the Canadian Salaried DB Plans following the Distribution Date.
Benefit entitlements of ITT Employees under the Canadian Salaried DB Plans shall be determined in
accordance with the terms of the plans and applicable local law.

          (vii) Additional Retirement Eligibility for British DB Plan. Effective as of September
30, 2011 (or as soon as reasonably practicable after this date), any ITT Employee, Defense Employee
or any Water Employee who has accrued benefits under the Non-US DB Plan identified as the British
DB Plan as Item 22 on Schedule 3(a)(iii) shall be vested and will be credited for benefit service
through December 31, 2011. Such plan will be frozen as of September 30, 2011 (or as soon as
reasonably practicable after this date) and Water will continue to sponsor and administer the plan.

          Effective as of the Distribution Date, all ITT Employees who participate in the Non-US DB Plan
identified as the British DB Plan as Item 22 on Schedule 3(a)(iii) will cease participation in the
British DB Plan as of the Distribution Date, shall be vested as of the Distribution Date and shall
not continue to earn eligibility service following the Distribution Date. Unvested benefits
attributable to Water Employees under the British DB Plan shall remain unchanged and Water shall
remain liable for all benefits (unvested or vested) attributable to Water Employees.

          4. DEFINED CONTRIBUTION PLANS.

          (a) List of Defined Contribution Plans. (i) Certain current and former employees of
ITT, Water and Defense participate in ITT Group tax qualified defined contribution plans made
available for certain ITT Group employees in the United States. Schedule 4(a)(i) lists each defined
contribution plan applicable to Preexisting ITT Employees (the “US Qualified DC Plans”).

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          (ii) Certain current and former employees of ITT, Water and Defense participate in ITT Group
non-tax qualified defined contribution plans made available for certain ITT Group employees in the
United States. Schedule 4(a)(ii) lists each defined contribution plan applicable to Preexisting ITT
Employees (the “US Non-Qualified DC Plans”).

          (iii) Certain current and former employees of ITT, Water and Defense participate in ITT Group
defined contribution plans made available for certain ITT Group employees outside of the United
States. Schedule 4(a)(iii) lists each defined contribution plan applicable to Preexisting ITT
Employees (the “Non-US DC Plans”).

          (b) US Qualified DC Plans. (i) Continuation of Existing US Qualified DC
Plans. Following the Distribution Date, ITT shall continue to sponsor the US Qualified DC
Plans so identified on Schedule 4(a)(i). Following the Distribution Date, Defense shall continue
to sponsor the US Qualified DC Plans so identified on Schedule 4(a)(i). Following the Distribution
Date, Water shall sponsor the US Qualified DC Plans so identified on Schedule 4(a)(i). All
employees who participate in the ITT Salaried Investment and Savings Plan identified as Item 1 on
Schedule 4(a)(i) shall be vested immediately on the Distribution Date.

          (ii) Adoption of New US Qualified DC Plans. Effective as of the Distribution Date, ITT
shall adopt a new defined contribution plan for ITT Employees who participated in the defined
contribution plan identified as Item 1 on Schedule 4(a)(i). Effective as of the Distribution Date,
Water shall adopt new defined contribution plans for Water Employees who participated in the
defined contribution plans identified as Items 1 and 14 on Schedule 4(a)(i).

          (iii) Transfer of US Qualified DC Plans. As soon as practicable on or after the
Distribution Date, ITT shall cause the transfer of the sponsorship of the ITT Salaried Investment
and Savings Plan identified as Item 1 on Schedule 4(a)(i) to Defense and Defense shall cause the
transfer of the accounts of all ITT Employees and Water Employees from such plan to the defined
contribution plans adopted by ITT and Water, as applicable.

          ITT shall cause the transfer of the accounts of all Water Employees from the Goulds Pumps,
Inc. Retirement Savings and Investment Plan identified as Item 14 on Schedule 4(a)(i) to a new
defined contribution plan maintained by Water. Assets attributable to the accounts identified in
this Section 4(b)(iii) will be transferred in kind to the maximum extent practicable. Each of ITT,
Defense and Water shall assume all liabilities associated with the plans that it sponsors following
the Distribution Date, whether incurred prior to, on or following the Distribution Date.

          (iv) ITT Stock Funds. As soon as practicable on or after the Distribution Date, each
U.S. Qualified DC Plan identified on Schedule 4(a)(i) that invests in ITT Common Stock will
maintain stock funds for each of ITT Common Stock, Water Common Stock and Defense Common Stock
(each as adjusted for the Distribution) for a period as determined by the fiduciaries of each such
U.S. Qualified DC Plan. Following the Distribution Date, the applicable fiduciaries of each such
U.S. Qualified DC Plan shall determine the proper treatment of the stock funds maintained in such
U.S. Qualified DC Plans and shall determine the timing of the disposition of shares held in such
stock funds and the treatment of the proceeds of sale of such shares.

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          (c) US Non-Qualified DC Plans. (i) Continuation of Existing US Non-Qualified DC
Plans. Following the Distribution Date, ITT shall continue to sponsor the defined contribution
plans so identified on Schedule 4(a)(ii). Following the Distribution Date, Defense shall sponsor
the defined contribution plans so identified on Schedule 4(a)(ii). Following the Distribution
Date, Water shall sponsor the defined contribution plans so identified on Schedule 4(a)(ii).

          (ii) Deferred Compensation Plans. Effective as of the Distribution Date, ITT shall
remain liable for benefits accrued under the ITT Deferred Compensation Plan identified as Item 2 on
Schedule 4(a)(ii) prior to the Distribution Date with respect to ITT Employees and ITT Retirees.
Effective as of the Distribution Date, Water shall adopt the Water Deferred Compensation Plan
identified as Item 2 on Schedule 4(a)(ii), which shall be identical in all material respects to the
ITT Deferred Compensation Plan as in effect immediately prior to the Distribution Date. Effective
as of the Distribution Date, Defense shall adopt the Defense Deferred Compensation Plan, which
shall be identical in all material respects to the ITT Deferred Compensation Plan identified as
Item 2 on Schedule 4(a)(ii) as in effect immediately prior to the Distribution Date. ITT shall
cause the transfer of all liabilities for benefits accrued under the ITT Deferred Compensation Plan
for such Defense Employees and ITT Retirees listed on Schedule 4(c)(iii) to Defense and for such
Water Employees and ITT Retirees listed on Schedule 4(c)(iii) to Water as soon as practicable
following the Distribution Date.

          Water does hereby assume liability for benefits accrued prior to the Distribution Date under
the ITT Deferred Compensation Plan with respect to Water Employees and specific ITT Retirees listed
on Schedule 4(c)(iii), including without limitation, such liabilities incurred prior to 1995
identified in the 1995 Employee Matters Agreement. Defense does hereby assume liability for
benefits accrued prior to the Distribution Date under the ITT Deferred Compensation Plan with
respect to Defense Employees and specific ITT Retirees listed on Schedule 4(c)(iii), including
without limitation, such liabilities incurred prior to 1995 identified in the 1995 Employee Matters
Agreement.

          (iii) Excess Savings Plans. Effective as of the Distribution Date, ITT shall remain
liable for benefits accrued under the ITT Excess Savings Plan identified as Item 3 on Schedule
4(a)(ii) prior to the Distribution Date with respect to ITT Employees and ITT Retirees. Effective
as of the Distribution Date, Water shall adopt a new excess savings plan, which shall be identical
in all material respects to the ITT Excess Savings Plan identified as Item 3 on Schedule 4(a)(ii)
as in effect immediately prior to the Distribution Date. Effective as of the Distribution Date,
Defense shall adopt a new excess savings plan, which shall be identical in all material respects to
the ITT Excess Savings Plan identified as Item 3 on Schedule 4(a)(ii) as in effect immediately
prior to the Distribution Date. ITT shall cause the transfer of all liabilities for benefits
accrued under the ITT Excess Savings Plan for Defense Employees as reflected on the plan’s records
to Defense and for Water Employees as reflected on the plan’s records to Water as soon as
practicable following the Distribution Date. Water does hereby assume liability for benefits
accrued prior to the Distribution Date under the ITT Excess Savings Plan with respect to Water
Employees, and Defense does hereby assume liability for benefits accrued prior to the Distribution
Date under the ITT Excess Savings Plan with respect to Defense Employees.

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          (d) Non-US DC Plans. (i) Continuation of Non-US DC Plans. Following the
Distribution Date, ITT shall continue to sponsor the ITT Non-US DC Plans as so identified on
Schedule 4(a)(iii). Following the Distribution Date, Defense shall continue to sponsor the Defense
Non-US DC Plans as so identified on Schedule 4(a)(iii). Following the Distribution Date, Water
shall continue to sponsor the Water Non-US DC Plans as so identified on Schedule 4(a)(iii). Each
of ITT, Defense and Water shall assume all liabilities associated with such plans that it sponsors
following the Distribution Date, whether incurred prior to, on or following the Distribution Date.
Each of ITT, Defense and Water shall retain all accrued benefits associated with such plans that it
sponsors following the Distribution Date, whether accrued prior to, on or following the
Distribution Date. For any ITT Non-US DC Plan not identified on Schedule 4(a)(iii), the entity
that maintained such ITT Non-US DC Plan prior to the Distribution Date shall continue to maintain
such plan and assume all liabilities associated with such plan following the Distribution Date.

          (ii) Adoption of Non-US DC Plans. Effective as of the Distribution Date, ITT shall
adopt benefits plans for ITT Employees, which shall have terms similar in all material respects to
the benefit plans identified on Items 9, 10, 13 and 14 of Schedule 4(a)(iii). Effective as of the
Distribution Date, Defense shall adopt benefits plans for Defense Employees, which shall have terms
similar in all material respects to the benefit plan identified as the ITT Retirement Savings Plan
— ITT Industries (UK) on Item 14 of Schedule 4(a)(iii). Effective as of the Distribution Date,
Water shall adopt benefits plans for Water Employees, which shall have terms similar in all
material respects to the benefit plans identified on Items 2 and 3 of Schedule 4(a)(iii). Each of
ITT, Defense and Water shall assume all liabilities associated with the plans that it sponsors
following the Distribution Date, whether incurred prior to, on or following the Distribution Date.

          (iii) Transfer of Non-US Assets and Liabilities. As soon as practicable on or after
the Distribution Date, ITT shall transfer to Defense the assets and liabilities associated with
Defense ITT Group employees who participated in the Non-US DC Plan identified as the ITT Retirement
Savings Plan — ITT Industries (UK) as Item 14 of Schedule 4(a)(iii) prior to the Distribution,
unless any such employee elects otherwise. As soon as practicable on or after the Distribution
Date, ITT shall transfer to Water the assets and liabilities associated with Water ITT Group
employees who participated in the Non-US DC Plans identified as Items 2 and 3 of Schedule 4(a)(iii)
prior to the Distribution, unless any such employee elects otherwise. As soon as practicable on or
after the Distribution Date, Water shall transfer to ITT the assets and liabilities associated with
ITT Employees who participated in the Non-US DC Plans identified as Items 7, 8, 13 and 14 of
Schedule 4(a)(iii) prior to the Distribution, unless any such employee elects otherwise. Such
assets will be transferred in kind to the maximum extent practicable.

          5. EMPLOYEE HEALTH AND WELFARE BENEFIT PLANS.

          (a) List of Health and Welfare Plans. (i) Certain current and former employees of
ITT, Water and Defense participate in ITT Group health and welfare plans made available for certain
ITT Group employees in the United States. Schedule 5(a)(i) lists each health and welfare plan
applicable to Preexisting ITT Employees (the “US H&W Plans”).

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          (ii) Certain current and former employees of ITT, Water and Defense participate in ITT Group
health and welfare plans made available for certain ITT Group employees outside of the United
States. Schedule 5(a)(ii) lists each health and welfare plan applicable to Preexisting ITT
Employees (the “Non-US H&W Plans”).

          (b) US H&W Plans. (i) Continuation of Existing US H&W Plans. Following the
Distribution Date, ITT shall continue to sponsor the health and welfare plans so identified on
Schedule 5(a)(i). Following the Distribution Date, Defense shall continue to sponsor the health
and welfare plans so identified on Schedule 5(a)(i). Following the Distribution Date, Water shall
continue to sponsor the health and welfare plans so identified on Schedule 5(a)(i). Each of ITT,
Defense and Water shall retain all accrued benefits associated with such plans that it sponsors
following the Distribution Date, whether accrued prior to, on or following the Distribution Date.

          (ii) Adoption of New US H&W Plans. Effective on the earlier of the Distribution Date
and December 31, 2011, Defense shall adopt new health and welfare plans, which shall have terms
similar in all material respects to the health and welfare plans identified as Items 14, 21, 22,
23, 24, 26, 42, 43, 45 and 46 on Schedule 5(a)(i). Effective on the earlier of the Distribution
Date and December 31, 2011, Water shall adopt new health and welfare plans, which shall have terms
similar in all material respects to the health and welfare plans identified as Items 14, 21, 22,
23, 24, 26, 42, 43, 45, 46 and 47 on Schedule 5(a)(i).

          (iii) Goulds Plans. Effective as of the Distribution Date, Water shall adopt new
health and welfare plans substantially similar in all material ways to the Goulds Postretirement
Medical Plan and the Goulds Postretirement Life Plan, identified as Items 33 and 39 on Schedule
5(a)(i), respectively. As soon as practicable following the Distribution Date, ITT shall transfer
to Water 25% of the assets and 25% of the liabilities of the Goulds Postretirement Medical Plan and
the Goulds Postretirement Life Plan, and Water shall be liable for such assets and liabilities as
of the date of such transfer.

          (iv) Transfer of ITT Employee Benefit Trust. As soon as practicable on or after the
Distribution Date, ITT shall transfer to Defense the ITT Employee Benefit Trust, and Defense shall
assume all liabilities associated with such trust. As soon as practicable following the
Distribution Date, ITT shall transfer to Defense all of the assets and liabilities of the ITT
Employee Benefit Trust related to the retiree portion of the plan, and Defense shall be liable for
all such assets and liabilities as of the date of such transfer.

          (v) ITT Salaried Retiree Health Plan. Effective as of the Distribution Date, the ITT
Salaried Retiree Health Plan identified as Item 13 on Schedule 5(a)(i) will provide that for
purposes of determining eligibility for post-retirement medical benefits under the ITT Salaried
Retiree Health Plan with respect to an eligible salaried Preexisting ITT Employee who on the
Distribution Date, becomes a Water Employee or remains an ITT Employee, such Water Employee or ITT
Employee shall be credited with the same eligibility service he or she is credited with under the
ITT Salaried Retirement Plan as described in Section 3(b)(vii) herein.

          (vi) Severance. Effective as of the Distribution Date, each of ITT, Water and Defense
shall provide severance plans for all Preexisting ITT Employees which are substantially equivalent
to those ITT severance plans covering such employees immediately prior to the

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Distribution Date identified as Items 15-19 of Schedule 5(a)(i), with no restriction as to
modification by each of ITT, Water and Defense.

          (vii) Long-Term Disability Insurance. Effective as of the Distribution Date, Water and
Defense shall each adopt long-term disability plans, identical in all material respects to the ITT
Long-Term Disability Plan and the ITT Corporation Excess Long-Term Disability Plan identified as
Items 23 and 24 of Schedule 5(a)(i), each as in effect on the Distribution Date, covering eligible
Water Employees and Defense Employees, respectively.

          (viii) Liabilities. ITT shall transfer all liability to Defense with respect to, and
all Code Section 501(c)(9) assets attributable to, retiree life insurance and medical benefits
under the ITT employee welfare benefit plans, except that (x) ITT shall transfer to Water the
liability of ITT with respect to, and any assets attributable to, certain Preexisting ITT Employees
identified on Schedule 1(a)(i) whose employment is transferred to Water in connection with the
Distribution, and Water does hereby assume such liability, and (y) ITT shall transfer to Defense
the liability with respect to, and assets attributable to, certain Preexisting ITT Employees
identified on Schedule 1(a)(ii) whose employment is transferred to Defense in connection with the
Distribution, and Defense does hereby assume such liability.

          (ix) Change in Control. If there is a Change in Control of ITT, Water or Defense
during the five-year period following the Distribution Date, then the company in which such Change
in Control occurred shall not, during the balance of such five-year period, reduce or eliminate
health benefits in effect immediately prior to such Change in Control provided to former employees
who retired from ITT or any of its Affiliates on or prior to the Distribution Date (or as set forth
in the next succeeding sentence), or increase associated retiree contributions, unless the other
companies consent in writing to such a reduction, elimination or cost increase; provided, however,
that the company in which the Change in Control occurred may, in its sole discretion, modify such
benefits in accordance with the changes contemplated in the assumptions in effect immediately prior
to the Change in Control that are used to establish such company’s Accumulated Postretirement
Benefit Obligation (as defined in Financial Accounting Standards Board ASC 715). Persons who are
receiving severance payments in connection with the Distribution and who are or become eligible to
retire on or before the end of such severance period shall be afforded the treatment of this
Section 5(b)(ix).

          (x) Indemnity. In the event that any of ITT, Water or Defense is asked to
consent to a reduction, elimination or cost increase with respect to retiree health benefits after
a Change in Control as described in clause (iii) above, each such company shall determine whether
to provide such consent in its sole and absolute discretion. Each of ITT, Water and Defense does
hereby agree to indemnify any other company asked by it to provide such consent against any and all
liability that might arise with respect to the granting or withholding of such consent.

          (c) Non-US H&W Plans. (i) Continuation of Non-US H&W Plans. Following the
Distribution Date, ITT shall continue to sponsor the ITT Non-US H&W Plans as so identified on
Schedule 5(a)(ii). Following the Distribution Date, Defense shall continue to sponsor the Defense
Non-US H&W Plans as so identified on Schedule 5(a)(ii). Following the Distribution Date, Water
shall continue to sponsor the Water Non-US H&W Plans as so identified on Schedule 5(a)(ii). Each
of ITT, Defense and Water shall assume all liabilities associated with

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such plans that it sponsors following the Distribution Date, whether incurred prior to, on or
following the Distribution Date. Each of ITT, Defense and Water shall retain all accrued benefits
associated with such plans that it sponsors following the Distribution Date, whether accrued prior
to, on or following the Distribution Date. For any ITT Non-US H&W Plan not identified on Schedule
5(a)(ii), the entity that maintained such ITT Non-US H&W Plan prior to the Distribution Date shall
continue to maintain such plan and assume all liabilities associated with such plan following the
Distribution Date.

          (ii) Adoption of Non-US H&W Plans. Effective as of the Distribution Date, ITT shall
adopt benefits plans for ITT Employees, which shall have terms similar in all material respects to
the benefit plans identified on Items 27, 30-35 and 42 of Schedule 5(a)(ii). Effective as of the
Distribution Date, Defense shall adopt benefits plans for Defense Employees, which shall have terms
similar in all material respects to the benefit plans identified on Items 7, 8, 22 and 23 of
Schedule 5(a)(ii). Effective as of the Distribution Date, Water shall adopt benefits plans for
Water Employees, which shall have terms similar in all material respects to the benefit plans
identified on Items 7-11, 22 and 23 of Schedule 5(a)(ii). Each of ITT, Defense and Water shall
assume all liabilities associated with the plans that it sponsors following the Distribution Date,
whether incurred prior to, on or following the Distribution Date.

          6. INCENTIVE PLANS. (a) ITT currently maintains certain annual incentive plans and certain
long-term performance plans, each as listed on Schedule 6(a) (the “Incentive Plans”),
pursuant to which certain Preexisting ITT Employees employed by ITT might become entitled to
payments after the Distribution Date with respect to their performance with ITT prior to the
Distribution Date.

          (b) Effective as of the Distribution Date, ITT shall be and remain liable for all payments
accrued prior to the Distribution Date for ITT Employees under the Incentive Plans, including any
such payments to be made following the Distribution Date. Effective as of the Distribution Date,
Water shall be and remain liable for all payments accrued prior to the Distribution Date for Water
Employees under the Incentive Plans, including any such payments to be made following the
Distribution Date. Effective as of the Distribution Date, Defense shall be and remain liable for
all payments accrued prior to the Distribution Date for Defense Employees under the Incentive
Plans, including any such payments to be made following the Distribution Date. ITT, Water and
Defense shall cause any such payments under the Incentive Plans to be recognized as compensation
without regard to the source of such payments.

          As soon as practicable following the Distribution Date, ITT shall transfer any amounts accrued
under the Incentive Plans for (i) Water Employees to Water and (ii) Defense Employees to Defense.

          (c) All multi-year cash performance awards under the Incentive Plans (the “TSR
Awards”) shall be terminated effective as of the Distribution Date. ITT shall determine the
amount to be paid in cash, if any, to each eligible Preexisting ITT Employee under outstanding TSR
Awards as described in this Section 6(c). The amount to be paid under the TSR Awards shall be paid
in cash on the normal payment schedule of the original TSR Award. ITT shall be liable for and make
any such payments to ITT Employees, including any such payments to be made following the
Distribution Date. Water shall be liable for and make any such

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payments to Water Employees, including any such payments to be made following the Distribution
Date. Defense shall be liable for and make any such payments to Defense Employees, including any
such payments to be made following the Distribution Date.

          For the TSR Awards granted in 2009, ITT shall pay such award in cash to the extent payment is
earned according to the original vesting and payment schedule to each eligible Preexisting ITT
Employee based on (i) actual performance for the pro rata percentage of the performance period
completed on the Distribution Date and (ii) target value for the remaining uncompleted performance
period following the Distribution Date.

          For the TSR Awards granted in 2010, (i) ITT shall pay such award in cash to the extent payment
is earned to each eligible Preexisting ITT Employee based on actual performance for the pro rata
percentage of the performance period completed on the Distribution Date, which shall be paid
according to the original vesting and payment schedule, and (ii) following the Distribution Date,
ITT, Water or Defense shall award to such Preexisting ITT Employee (thereafter, an ITT Employee, a
Water Employee or Defense Employee, as applicable) a restricted stock unit (“RSU”) for the
remaining target value, which RSU shall vest on December 31, 2012 and shall be settled in ITT
shares, Water shares or Defense shares, as applicable.

          For the TSR Awards granted in 2011, (i) ITT shall pay such award in cash to the extent payment
is earned to each eligible Preexisting ITT Employee based on actual performance for the pro rata
percentage of the performance period completed on the Distribution Date, which shall be paid
according to the original vesting and payment schedule, and (ii) following the Distribution Date,
ITT, Water or Defense will award to such Preexisting ITT Employee (thereafter, an ITT Employee, a
Water Employee or Defense Employee, as applicable) an RSU for the remaining target value, which RSU
shall vest on December 31, 2013 and shall be settled in ITT shares, Water shares or Defense shares,
as applicable.

          (d) Effective as of the Distribution Date, ITT shall accrue, be and remain liable for all
payments for ITT Employees under the ITT Corporation Retention Program as identified on Item 4 of
Schedule 6(a). Effective as of the Distribution Date, Water shall accrue, be and remain liable for
all payments for Water Employees under the ITT Corporation Retention Program as identified on Item
4 of Schedule 6(a). Effective as of the Distribution Date, Defense shall accrue, be and remain
liable for all payments for Defense Employees under the ITT Corporation Retention Program as
identified on Item 4 of Schedule 6(a).

          7. STOCK OPTIONS AND OTHER AWARDS. (a) Effective as of the day following the Distribution
Date, outstanding stock options (whether vested or unvested), stock appreciation rights, RSUs and
restricted stock awards (together, “ITT stock awards”) under the ITT stock plans listed on
Schedule 7(a), as each plan may have been amended from time to time (the “ITT Stock
Plans”), shall be treated as follows:

          (i) ITT Employees; Retirees. ITT stock awards held by ITT Employees and ITT
Retirees shall be adjusted to reflect the Distribution, as provided pursuant to the terms of
the ITT Stock Plans, such that they retain ITT stock awards (but not stock awards payable in
Water or Defense shares) following the Distribution Date.

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          (ii) Water Employees. Water Employees holding ITT stock awards shall receive
substitute stock awards in respect of Water Common Stock (but not in respect of ITT Common
Stock or Defense Common Stock) pursuant to the terms of a stock plan to be adopted by Water
as of the Distribution Date (the “Water Stock Plan”), which are deemed adjusted to
reflect the Distribution, as provided pursuant to the terms of the ITT Stock Plans and as
described in Section 7(a)(i).

          (iii) Defense Employees. Defense Employees holding ITT stock awards shall
receive substitute stock awards in respect of Defense Common Stock (but not in respect of
ITT Common Stock or Water Common Stock) pursuant to the terms of a stock plan, to be adopted
by Defense as of the Distribution Date (the “Defense Stock Plan”), which are deemed
adjusted to reflect the Distribution, as provided pursuant to the terms of the ITT Stock
Plans and as described in Section 7(a)(i).

          (iv) ITT Non-Employee Directors. The Compensation and Personnel Committee of
the Board of Directors of ITT has approved the adjustment of any ITT stock awards held by
such non-employee directors that have not been exercised as of the Distribution Date to
reflect the Distribution, as provided pursuant to the terms of the ITT Stock Plans following
the conversion formula used for common shareholders of ITT stock. Such ITT stock awards
held by a non-employee director will be adjusted on an “as distributed basis” such that each
ITT stock award will be converted into a like number of ITT stock awards based on shares of
each of ITT, Water and Defense following the Distribution Date. Generally, vesting and
exercisability terms will remain the same, although certain adjustments may be made as the
Board of Directors of ITT or the applicable committee thereof shall approve.

          (v) Other Provisions. Effective as of the Distribution Date, Water Employees
and Defense Employees shall cease active participation in all ITT Stock Plans;
provided, however, that Water Employees and Defense Employees shall receive full
credit under any substitute stock awards in respect of Water Common Stock and Defense Common
Stock, respectively, for their service to ITT Group prior to the Distribution;
provided, further, that Water Employees and Defense Employees shall be deemed to
participate under the ITT Stock Plans through the day following the Distribution Date for
the purposes of any substitute stock awards they received in connection with the
Distribution. To the extent that any Preexisting ITT Employee continues to be entitled to
future ITT awards following the Distribution Date, such grants may be made in forms that are
acceptable to ITT, Water or Defense, as such entity deem adequate.

          (b) Manner of Substitution. (i) With respect to each cancelled ITT stock award, the
number and exercise price of substitute stock awards granted under the Water Stock Plan or the
Defense Stock Plan with respect thereto, and the other terms and conditions of the substitute stock
awards, shall be equitably determined to preserve the economic value of the cancelled ITT stock
award.

          (ii) Each holder of ITT Common Stock on the Distribution Record Date (or such holder’s
designated transferee or transferees) shall be entitled to receive in the Water

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Distribution a substitute stock award representing one (1) share of Water Common Stock granted
under the Water Stock Plan for every stock award representing one (1) share of ITT Common Stock
granted under the ITT Stock Plan held by such holder. No action by any such holder shall be
necessary for such holder to receive the applicable substitute stock award representing shares of
Water Common Stock such holder is entitled in the Water Distribution.

          (iii) Each holder of ITT Common Stock on the Distribution Record Date (or such holder’s
designated transferee or transferees) shall be entitled to receive in the Defense Distribution a
substitute stock award representing ones (1) share of Defense Common Stock granted under the
Defense Stock Plan for every stock award representing one (1) share of ITT Common Stock granted
under the ITT Stock Plan held by such holder. No action by any such holder shall be necessary for
such holder to receive the applicable substitute stock award representing shares of Defense Common
Stock such holder is entitled in the Defense Distribution.

          (c) Fractional Shares(d) . ITT holders of stock awards under ITT incentive plans on
the Distribution Record Date, which would entitle such holders to receive a substitute stock award
representing less than one whole share of Water Common Stock or Defense Common Stock, as the case
may be, in the applicable Distribution, shall receive (x) if such holders are entitled to receive a
substitute stock award representing less than one-half of a whole share of Water Common Stock or
Defense Common Stock, as the case may be, such number shall be rounded down to the next whole share
of Water Common Stock or Defense Common Stock, or (y) if such holders are entitled to receive a
substitute stock award representing at least one-half of a whole share of Water Common Stock or
Defense Common Stock, as the case may be, such number shall be rounded up to the next whole share
of Water Common Stock or Defense Common Stock, as the case may be. Fractional shares of Water
Common Stock or Defense Common Stock shall not be distributed in the Distribution nor credited to
book-entry accounts, provided however that fractional shares of ITT, Water or Defense held for the
benefit of employees in book-entry accounts with the Company’s external administrator may be
credited to such accounts. The Distribution Agent shall, as soon as practicable after the
Distribution Date distribute to each such holder, or for the benefit of each such beneficial owner,
such holder or owner’s ratable share of such stock awards, based upon the average gross selling
price per share of Water Common Stock or Defense Common Stock, as the case may be, after making
appropriate deductions for any amount required to be withheld for United States federal income tax
purposes. Notwithstanding the foregoing, in the event of any adjustment, stock split, reverse
stock split or other adjustment or change to the capitalization of shares of ITT, Water or Defense
that occurs at or following the Distribution, ITT, Water or Defense, as applicable, shall provide
for an adjustment of the applicable stock awards then held to reflect such adjustment, stock split,
reverse stock split or other adjustment or change to the capitalization of shares prior to the
subsequent distribution and the terms of the applicable equity incentive plans will continue to
apply to the applicable stock awards.

          8. COLI. (a) Effective as of the Distribution Date, the COLI policies underwritten by
Northwestern Mutual Life Insurance Company and New York Life covering certain Preexisting ITT
Employees who are eligible for participation in the ITT Deferred Compensation Plan shall be
allocated among the three companies in accordance with Schedule 8(a).

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          (b) Effective as of the Distribution Date, COLI policies underwritten by Penn Insurance and
Annuity Company as set forth in Schedule 8(b) purchased in connection with supplemental executive
life benefits known as “Options C and D” will remain with ITT.

          9. DIRECTOR PLANS. (a) Treatment of Current Director Plans. (i) Effective as of
the Distribution Date, ITT shall continue the director plans identified on Schedule 9(a) (the
“ITT Director Plans”). With respect to any non-employee director of ITT immediately
following the Distribution who is not also a director of Water or Defense at such time and who has
an accrued benefit under the suspended ITT Directors Retirement Plan, ITT shall provide such
accrued benefit in accordance with the terms of such plan, but only to the extent such accrued
benefit is not duplicated under a plan maintained by Water or Defense.

          (ii) Effective as of the Distribution Date, Defense shall adopt benefits plans for non-employee
directors of Defense, which shall have terms similar in all material respects to the ITT Director
Plans set forth on Schedule 9(a) (the “Defense Director Plans”), and Water shall adopt
benefits plans for non-employee directors of Defense, which shall have terms similar in all
material respects to the ITT Director Plans set forth on Schedule 9(a) (the “Water Director
Plans”).

          (iii) As soon as practicable on or after the Distribution Date, ITT shall cause the transfer of
the accounts of all non-employee directors of Defense from the ITT Directors Plans to the Defense
Director Plans. As soon as practicable on or after the Distribution Date, ITT shall cause the
transfer of the accounts of all non-employee directors of Water from the ITT Directors Plans to the
Water Director Plans. Such assets will be transferred in kind to the maximum extent practicable.

          (b) Adoption of Water Director Plans. Effective as of the Distribution Date, Water
shall adopt plans and programs for non-employee directors that are identical in all material
respects to the ITT Director Plans. With respect to any non-employee director of Water immediately
following the Distribution who has an accrued benefit under any ITT Director Plan, Water shall
provide such accrued benefit in accordance with the terms of such plan, but only to the extent such
accrued benefit is not duplicated under a plan maintained by ITT or Defense.

          (c) Adoption of Defense Director Plans. Effective as of the Distribution Date, Defense
shall adopt plans and programs for non-employee directors that are identical in all material
respects to the ITT Director Plans(d) . With respect to any non-employee director of Defense
immediately following the Distribution who has an accrued benefit under any suspended ITT Director
Plan, Defense shall provide such accrued benefit in accordance with the terms of such plan, but
only to the extent such accrued benefit is not duplicated under a plan maintained by ITT or Water.

          10. COLLECTIVE BARGAINING AGREEMENTS. (a) ITT Collective Bargaining Agreements. ITT
shall retain all collective bargaining agreements and associated liabilities so identified on
Schedule 10(a) and for each such collective bargaining agreement in effect as of the Distribution
Date. For each such collective bargaining agreement in effect as of the Distribution Date, ITT
shall continue to recognize the union which is a party to such

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collective bargaining agreement as the exclusive collective bargaining representative for the
ITT Employees covered under the terms of each such collective bargaining agreement.

          (b) Water Collective Bargaining Agreements. Water shall expressly assume all
collective bargaining agreements and associated liabilities so identified on Schedule 10(a)
effective as of the Distribution Date. For each such collective bargaining agreement in effect as
of the Distribution Date, Water agrees to recognize the union which is a party to each such
collective bargaining agreement as the exclusive collective bargaining representative for the Water
Employees covered under the terms of each such collective bargaining agreement.

          (c) Defense Collective Bargaining Agreements. Defense shall expressly assume all
collective bargaining agreements and associated liabilities so identified on Schedule 10(a)
effective as of the Distribution Date. For each such collective bargaining agreement in effect as
of the Distribution Date, Defense agrees to recognize the union which is a party to each such
collective bargaining agreement as the exclusive collective bargaining representative for the
Defense Employees covered under the terms of each such collective bargaining agreement.

          (d) EU Directive. Notwithstanding anything to the contrary in this Section 10, in
countries in which the European Union Acquired Rights Directive applies, collective bargaining
agreements and any other agreements with employee representatives will continue to apply after the
Distribution Date to the extent and in the manner provided for by local law.

          11. TRANSITION SERVICES. Each of ITT, Water and Defense shall provide such transition
services as required by the Transition Services Agreement.

          12. ALLOCATION OF BALANCE SHEET ACCOUNTS. Effective as of the Distribution Date, certain
balance sheet accounts attributable to employee benefit plans for which responsibility is being
transferred from ITT to Water and/or Defense shall be allocated to the balance sheets of Water or
Defense, as appropriate, on the following basis:

          (a) All accruals on the balance sheets of Water (including accruals on the balance sheet of
Water) and Defense (including accruals on the balance sheet of Defense) which relate to benefit
plans sponsored by the respective companies shall be unaffected by the provisions of this Section
12.

          (b) With regard to the liabilities recorded by ITT with respect to the ITT Excess Savings Plan
that will, in accordance with Section 4(c)(iii), be assumed by Water and Defense, respectively, ITT
shall allocate to the respective new employing entity an amount equal to the sum of the plan
balances for such affected employees.

          (c) For each category of balance sheet account enumerated in this Section 12, there has been
recorded a corresponding deferred tax debit or credit, as the case may be, which shall also be
allocated to the respective companies based on the amount allocated for the stated reason above.

          (d) To the extent that a balance sheet account requiring allocation among the companies exists
that is not specifically included in this Section 12, ITT shall make the

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allocation on a reasonable basis, subject to the agreement of the party in whose favor the
allocation is being made.

          13. ACCESS TO INFORMATION AND DATA EXCHANGE. (a) Provision of Corporate Records. (i)
Consistent with Section 6.3 of the Distribution Agreement, upon the prior written request by Water
or Defense for specific and identified agreements, documents, books, records or files including,
without limitation, computer files, microfiche, tape recordings and photographs (collectively,
“Records”), relating to or affecting Water or Defense, as applicable, ITT shall arrange, as
soon as reasonably practicable following the receipt of such request, for the provision of
appropriate copies of such Records (or the originals thereof if the party making the request has a
reasonable need for such originals) in the possession of ITT or any of its Subsidiaries, but only
to the extent such items are not already in the possession of the requesting party;
provided, however, that as soon as practicable following the Distribution Date, ITT
shall provide copies of all necessary employee documentation for the Water Employees listed on
Schedule 1(a)(i) to Water and shall provide copies of all necessary employee documentation for the
Water Employees listed on Schedule 1(a)(ii) to Defense.

          (ii) After the Distribution Date, upon the prior written request by ITT or Defense for
specific and identified Records relating to or affecting ITT or Defense, as applicable,
Water shall arrange, as soon as reasonably practicable following the receipt of such
request, for the provision of appropriate copies of such Records (or the originals thereof
if the party making the request has a need for such originals) in the possession of Water or
any of its Subsidiaries, but only to the extent such items are not already in the possession
of the requesting party.

          (iii) After the Distribution Date, upon the prior written request by ITT or Water for
specific and identified Records relating to or affecting ITT or Water, as applicable,
Defense shall arrange, as soon as reasonably practicable following the receipt of such
request, for the provision of appropriate copies of such Records (or the originals thereof
if the party making the request has a need for such originals) in the possession of Defense
or any of its Subsidiaries, but only to the extent such items are not already in the
possession of the requesting party.

          (b) Access to Information. (i) From and after the Distribution Date and consistent
with Section 6.3 of the Distribution Agreement, each of ITT, Water and Defense shall afford to the
other and its authorized accountants, counsel and other designated representatives reasonable
access during normal business hours, subject to appropriate restrictions for classified, privileged
or confidential information, to the personnel, properties, books and Records of such party and its
Subsidiaries insofar as such access is reasonably required by the other party.

          (ii) Without limiting the generality of the foregoing clause (i), except as otherwise
provided by law, each party hereto shall furnish, or shall cause to be furnished to the
other parties, a list of all benefit plan participants and employee data or information in
its possession which is necessary for such other parties to maintain and implement any
benefit plan or arrangement covered by this Agreement, or to comply with the provisions of
this Agreement, and which is not otherwise readily available to such other party.

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          (c) Reimbursement; Other Matters. (i) Except to the extent otherwise specifically
identified by the Distribution Agreement or any Ancillary Agreement, a party providing Records or
access to information to the other party under this Section 13 shall be entitled to receive from
the recipient, upon the presentation of invoices therefore, payments for such amounts, relating to
supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in
providing such Records or access to information.

          (ii) The parties hereto shall comply with those document retention policies, cost
sharing arrangements, expense reimbursement procedures and request procedures as shall be
established and agreed to in writing by their respective authorized officers on or prior to
the Distribution Date in respect of Records and related matters.

          (d) Confidentiality. Each of (i) ITT and its Subsidiaries, (ii) Water and its
Subsidiaries and (iii) Defense and its Subsidiaries shall not use or permit the use of (without the
prior written consent of the other) and shall hold, and shall cause its consultants and advisors to
hold, in strict confidence, all information concerning the other parties in its possession, its
custody or under its control (except to the extent that (A) such information has been in the public
domain through no fault of such party or (B) such information has been later lawfully acquired from
other sources by such party or (C) the Distribution Agreement, this Agreement or any other
Ancillary Agreement or any other agreement entered into pursuant hereto permits the use or
disclosure of such information or (D) as may be required under the USA Patriot Act) to the extent
such information (x) relates to the period up to the Effective Time, (y) relates to the
Distribution Agreement or any Ancillary Agreement or (z) is obtained in the course of performing
services for the other party pursuant to the Distribution Agreement or any Ancillary Agreement, and
each party shall not (without the prior written consent of the other) otherwise release or disclose
such information to any other person, except such party’s auditors and attorneys, unless compelled
to disclose such information by judicial or administrative process or unless such disclosure is
required by law and such party has used commercially reasonable efforts to consult with the other
affected party or parties prior to such disclosure. To the extent that a party hereto is compelled
by judicial or administrative process to disclose such information under circumstances in which any
evidentiary privilege would be available, such party agrees to assert such privilege in good faith
prior to making such disclosure. Each of the parties hereto agrees to consult with each relevant
other party in connection with any such judicial or administrative process, including, without
limitation, in determining whether any privilege is available, and further agrees to allow each
such relevant party and its counsel to participate in any hearing or other proceeding (including,
without limitation, any appeal of an initial order to disclose) in respect of such disclosure and
assertion of privilege. Notwithstanding anything to the contrary contained herein, each party shall
be entitled to use information disclosed pursuant to this Agreement to the extent reasonably
necessary for the administration of its employee benefit plans in accordance with applicable law.

          14. NOTICES; COOPERATION. Notwithstanding anything in this Agreement to the contrary, all
actions contemplated herein with respect to benefit plans which are to be consummated pursuant to
this Agreement shall be subject to such notices to, and/or approvals by, the Internal Revenue
Service (or other governmental agency or entity) as are required or deemed appropriate by such
benefit plan’s sponsor. Each of ITT, Water and Defense agrees to use its commercially reasonable
efforts to cause all such notices and/or approvals to be

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filed or obtained, as the case may be, in a timely fashion. Each party hereto shall reasonably
cooperate with the other parties with respect to any government filings, employee notices or any
other actions reasonably necessary to maintain and implement the employee benefit arrangements
covered by this Agreement.

          15. FURTHER ASSURANCES. From time to time, as and when reasonably requested by any other party
hereto, each party hereto shall execute and deliver, or cause to be executed and delivered, all
such documents and instruments and shall take, or cause to be taken, all such further or other
actions as such other party may reasonably deem necessary or desirable to effect the purposes of
this Agreement and the transactions contemplated hereunder.

          16. INDEMNIFICATION. (a) Indemnification by ITT. Except as otherwise specifically
set forth in this Agreement or in Article VII of the Distribution Agreement, ITT shall indemnify,
defend and hold harmless the Water Indemnitees and the Defense Indemnitees from and against any and
all Indemnifiable Losses of the Water Indemnitees and the Defense Indemnitees, respectively,
arising out of, by reason of or otherwise in connection with (i) any employee benefit plan, policy,
program or arrangement established or adopted by ITT effective on or after the Distribution Date,
(ii) any and all liabilities relating primarily to, arising primarily out of or resulting primarily
from the operation or conduct of any ITT Plan or any individual identified as an ITT Employee,
(iii) any liability assumed or retained by ITT pursuant to the terms and conditions set forth on
Schedule 16(a) of this Agreement or (iv) the breach by ITT of any provision of this Agreement.

          (b) Indemnification by Water. Except as otherwise specifically set forth in this
Agreement or in Article VII of the Distribution Agreement, Water shall indemnify, defend and hold
harmless the ITT Indemnitees and the Defense Indemnitees from and against any and all Indemnifiable
Losses of the ITT Indemnitees and the Defense Indemnitees, respectively, arising out of, by reason
of or otherwise in connection with (i) any employee benefit plan, policy, program or arrangement
established or adopted by Water effective on or after the Distribution Date, (ii) any and all
liabilities relating primarily to, arising primarily out of or resulting primarily from the
operation or conduct of any Water Plan or any individual identified as a Water Employee, (iii) any
liability assumed or retained by Water pursuant to the terms and conditions set forth on Schedule
16(b) of this Agreement or (iv) the breach by Water of any provision of this Agreement.

          (c) Indemnification by Defense. Except as otherwise specifically set forth in this
Agreement or in Article VII of the Distribution Agreement, Defense shall indemnify, defend and hold
harmless the ITT Indemnitees and the Water Indemnitees from and against any and all Indemnifiable
Losses of the ITT Indemnitees and the Water Indemnitees, respectively, arising out of, by reason of
or otherwise in connection with (i) any employee benefit plan, policy, program or arrangement
established or adopted by Defense effective on or after the Distribution Date, (ii) any and all
liabilities relating primarily to, arising primarily out of or resulting primarily from the
operation or conduct of any Defense Plan or any individual identified as a Defense Employee, (iii)
any liability assumed or retained by Defense pursuant to the terms and conditions set forth on
Schedule 16(c) of this Agreement or (iv) the breach by Defense of any provision of this Agreement.

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          (d) Limitations on Indemnification Obligations. (i) The amount that any party (an
“Indemnifying Party”) is or may be required to pay to any other person (an
“Indemnitee”) pursuant to paragraphs (a), (b) or (c) of this Section 16, as applicable,
shall be reduced (retroactively or prospectively) by any Insurance Proceeds or other amounts
actually recovered by or on behalf of such Indemnitee in respect of the related Indemnifiable Loss.
If an Indemnitee shall have received the payment required by this Agreement from an Indemnifying
Party in respect of an Indemnifiable Loss and shall subsequently actually receive Insurance
Proceeds or other amounts in respect of such Indemnifiable Loss, then such Indemnitee shall pay to
such Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other amounts
actually received, up to the aggregate amount of any payments received from such Indemnifying Party
pursuant to this Agreement in respect of such Indemnifiable Loss.

          (ii) An Indemnifying Party shall not be required to indemnify or pay an Indemnitee
pursuant to paragraphs (a), (b) or (c) of this Section 16, as applicable, for any
Indemnifiable Losses relating to or associated with any employee benefit plan, policy,
program or arrangement of the Indemnifying Party arising out of, by reason of or otherwise
in connection with any act or failure to act on the part of such Indemnitee (including for
this purpose any subsidiaries, businesses or operations which become associated with the
Indemnitee by virtue of or in connection with the Distribution) with respect to or in
connection with such employee benefit plan, policy, program or arrangement, including,
without limitation, any such act or failure to act in connection with the administration by
the Indemnitee of such employee benefit plan, policy, program or arrangement.

          (e) Survival of Indemnities. The obligations of ITT, Water and Defense under this
Section 16 shall survive the sale or other transfer by any of them of any assets or businesses or
the assignment by any of them of any Liabilities, with respect to any Indemnifiable Loss of the
other related to such assets, businesses or Liabilities.

          17. DISPUTE RESOLUTION. In the event of a controversy, dispute or claim arising out of, in
connection with, or in relation to the interpretation, performance, nonperformance, validity or
breach of this Agreement or otherwise arising out of, or in any way related to this Agreement,
including, without limitation, any claim based on contract, tort, statute or constitution, the
relevant parties shall adhere to the dispute resolution procedures as described in the Distribution
Agreement.

          18. MISCELLANEOUS. (a) Complete Agreement; Construction. This Agreement, including
the Schedules and the Distribution Agreement, shall constitute the entire agreement between the
parties with respect to the subject matter hereof and shall supersede all previous negotiations,
commitments, course of dealings and writings with respect to such subject matter. In the event of
any inconsistency between this Agreement and any Schedule hereto, the Schedule shall prevail. In
the event and to the extent that there shall be a conflict between the provisions of this Agreement
and the provisions of the Distribution Agreement, this Agreement shall control unless specifically
stated otherwise in the Distribution Agreement.

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          (b) Ancillary Agreements. Except as expressly set forth herein, this Agreement is not
intended to address, and should not be interpreted to address, the matters specifically and
expressly covered by the Ancillary Agreements.

          (c) Counterparts. This Agreement may be executed in more than one counterpart, all of
which shall be considered one and the same agreement, and shall become effective when one or more
such counterparts have been signed by each of the parties and delivered to the other parties.

          (d) Survival of Agreements. Except as otherwise contemplated by this Agreement, all
covenants and agreements of the parties contained in this Agreement shall survive the Effective
Time and remain in full force and effect in accordance with their applicable terms.

          (e) Expenses. Except as specifically listed on Schedule 18(e), all out-of-pocket fees
and expenses incurred, or to be incurred and directly related to the transactions contemplated
hereby shall be paid as described in the Distribution Agreement.

          (f) Notices. All notices, requests, claims, demands and other communications under
this Agreement shall be made as described in the Distribution Agreement.

          (g) Waivers. Any consent required or permitted to be given by any party to the other
parties under this Agreement shall be in writing and signed by the party giving such consent and
shall be effective only against such party.

          (h) Assignment. This Agreement shall not be assignable, in whole or in part, directly
or indirectly, by any party hereto without the prior written consent of the other parties, and any
attempt to assign any rights or obligations arising under this Agreement without such consent shall
be void. Notwithstanding the foregoing, this Agreement shall be assignable in whole in connection
with a merger or consolidation or the sale of all or substantially all the assets of a party hereto
so long as the resulting, surviving or transferee entity assumes all the obligations of the
relevant party hereto by operation of law or pursuant to an agreement in form and substance
reasonably satisfactory to the other parties to this Agreement.

          (i) Successors and Assigns. The provisions of this Agreement and the obligations and
rights hereunder shall be binding upon, inure to the benefit of and be enforceable by (and against)
the parties and their respective successors and permitted transferees and assigns.

          (j) Termination and Amendment. This Agreement may be terminated, amended, modified or
amended and the Distribution may be modified or abandoned at any time prior to the Effective Time
by and in the sole discretion of ITT without the approval of Water, Defense or the shareholders of
ITT. In the event of such termination, no party shall have any liability of any kind to any other
party or any other person. After the Effective Time, this Agreement may not be terminated, modified
or amended except by an agreement in writing signed by ITT, Water and Defense.

          (k) Payment Terms. Except as expressly provided to the contrary in this Agreement,
any amount to be paid or reimbursed by any party, on the one hand, to any other

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party or parties, on the other hand, under this Agreement shall be paid or reimbursed
hereunder within sixty (60) days after presentation of an invoice or a written demand therefor and
setting forth, or accompanied by, reasonable documentation or other reasonable explanation
supporting such amount. Except as expressly provided to the contrary in this Agreement, any amount
not paid when due pursuant to this Agreement (and any amount billed or otherwise invoiced or
demanded and properly payable that is not paid within sixty (60) days of such bill, invoice or
other demand) shall bear interest at a rate per annum equal to LIBOR, from time to time in effect,
calculated for the actual number of days elapsed, accrued from the date on which such payment was
due up to the date of the actual receipt of payment.

          (l) No Circumvention. The parties agree not to directly or indirectly take any
actions, act in concert with any person who takes an action, or cause (including the failure to
take a reasonable action) such that the resulting effect is to materially undermine the
effectiveness of any of the provisions of this Agreement.

          (m) Subsidiaries. Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth herein to be
performed by any Subsidiary of such party or by any entity that becomes a Subsidiary of such party
at the Effective Time, to the extent such Subsidiary remains a Subsidiary of the applicable party.

          (n) Third Party Beneficiaries. This Agreement is solely for the benefit of the parties
hereto and should not be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing without reference to this
Agreement.

          (o) Title and Headings. Titles and headings to Sections herein are inserted for the
convenience of reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.

          (p) Schedules. The Schedules shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein. Nothing in the
Schedules constitutes an admission of any liability or obligation of ITT, Water or Defense or any
of their respective Affiliates to any third party, nor, with respect to any third party, an
admission against the interests of ITT, Water or Defense or any of their respective Affiliates. The
inclusion of any item or liability or category of item or liability on any Schedule is made solely
for purposes of allocating potential liabilities among the parties and shall not be deemed as or
construed to be an admission that any such liability exists.

          (q) 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 ITT,
Defense and Water, as the case may be.

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          (r) Consent to Jurisdiction. Subject to the provisions of Article XVI hereof, each of
the parties irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State
of New York, New York County, or (b) the United States District Court for the Southern District of
New York (the “New York Courts”), for the purposes of any suit, action or other proceeding
to compel arbitration or for provisional relief in aid of arbitration in accordance with Article IX
of the Distribution Agreement or to prevent irreparable harm, and to the non-exclusive jurisdiction
of the New York Courts for the enforcement of any award issued thereunder. Each of the parties
further agrees that service of any process, summons, notice or document by U.S. registered mail to
such party’s respective address set forth above shall be effective service of process for any
action, suit or proceeding in the New York Courts with respect to any matters to which it has
submitted to jurisdiction in this Section 18(r). Each of the parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in the New York Courts, and
hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.

          (s) Waiver of Jury Trial. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 18(S).

          (t) Severability. In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable provisions.

          (u) Force Majeure. No party (or any person acting on its behalf) shall have any
liability or responsibility for failure to fulfill any obligation (other than a payment obligation)
under this Agreement, so long as and to the extent to which the fulfillment of such obligation is
prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. A
party claiming the benefit of this provision shall, as soon as reasonably practicable after the
occurrence of any such event: (a) notify the other applicable parties of the nature and extent of
any such Force Majeure condition and (b) use due diligence to remove any such causes and resume
performance under this Agreement as soon as feasible.

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          (v) Interpretation. The parties have participated jointly in the negotiation and
drafting of this Agreement. This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or causing any instrument
to be drafted.

          (w) No Duplication; No Double Recovery. Nothing in this Agreement is intended to
confer to or impose upon any party a duplicative right, entitlement, obligation or recovery with
respect to any matter arising out of the same facts and circumstances.

          (x) No Waiver. No failure to exercise and no delay in exercising, on the part of any
party, any right, remedy, power or privilege hereunder shall operate as a waiver hereof or thereof;
nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.

          (y) No Admission of Liability. The allocation of assets and liabilities herein
(including on the Schedules hereto) is solely for the purpose of allocating such assets and
liabilities among ITT, Water and Defense and is not intended as an admission of liability or
responsibility for any alleged liabilities vis a vis any third party, including with respect to the
Liabilities of any non-wholly owned subsidiary of ITT, Water or Defense.

          (z) Definitions. Capitalized terms used herein shall have the respective meanings
specified in the Appendix attached hereto unless otherwise herein defined or the context hereof
shall otherwise require.

[Signature Page Follows]

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          IN WITNESS WHEREOF, the parties have duly executed and entered into this Agreement, as of
the date first above written.

	 	 	 	 	 	 	 

	 	 	ITT Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Aris C. Chicles	 	 
	 

	 	Name:
	 	 

Aris C. Chicles
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Xylem Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Frank R. Jimenez	 	 
	 

	 	Name:
	 	 

Frank R. Jimenez
	 	 
	 

	 	Title:
	 	Vice President, General Counsel & Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	Exelis Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ann D. Davidson	 	 
	 

	 	Name:
	 	 

Ann D. Davidson
	 	 
	 

	 	Title:
	 	Vice President, General Counsel & Secretary	 	 

[Signature Page]

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          19. DEFINITIONS.

          As used in the Agreement, the following terms have the following meanings:

          “1995 Employee Matters Agreement” means the Employee Benefit Services and Liability
Agreement dated as of November 1, 1995, among ITT Corporation, a Delaware corporation, ITT
Destinations, Inc., a Nevada corporation, and ITT Hartford Group, Inc., a Delaware corporation.

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

          “Ancillary Agreements” means all of the written agreements, instruments,
understandings, assignments or other written arrangements (other than this Agreement and the
Distribution Agreement) entered into in connection with the transactions contemplated hereby,
including, without limitation, the Conveyancing and Assumption Instruments, the Transition Services
Agreement, the Tax Matters Agreement, the License Agreements, the IP Assignments, the Supply
Agreement[s], the Master Lease Agreement and the Master Sublease Agreement.

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

          “British DB Plan” has the meaning set forth in Section 3 of this Agreement.

          “Canadian Salaried DB Plans” has the meaning set forth in Section 3 of this Agreement.

          “Change in Control” means (i) where reference is made to a particular ITT Plan
(including, without limitation, the 2003 ITT Equity Incentive Plan), the definition of “Change in
Control” or “Acceleration Event” in such ITT Plan and (ii) where no reference is made to a
particular ITT Plan, with respect to ITT, Defense or Water (each, a “Company” for the
purposes of this definition), 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 the
Company or a Subsidiary or any employee benefit plan sponsored by the Company or a Subsidiary (or
related trust), is the beneficial owner directly or indirectly of twenty percent (20%) or more of
the outstanding shares of stock of the Company; (b) any person, other than the Company or a
Subsidiary, or any employee benefit plan sponsored by the Company or a Subsidiary (or related
trust), shall purchase shares pursuant to a tender offer or exchange offer to acquire any of the
shares of stock of the Company (or securities convertible into stock of the Company) 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 (calculated as provided in paragraph (d) of Rule 13d-3 under the Exchange Act in
the case of rights to acquire shares); (c) the consummation of (i) any consolidation, business
combination or merger involving the Company, other than a consolidation, business combination or
merger involving the Company in which holders of shares immediately prior to the consolidation,
business combination or merger (x) hold fifty percent (50%) or more of the combined voting power of
the Company (or the corporation resulting from the consolidation, business combination or merger or
the parent of such

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corporation) after the merger and (y) have the same proportionate ownership of common stock of
the Company (or the corporation resulting from the consolidation, business combination or merger or
the parent of such corporation), relative to other holders of shares immediately prior to the
consolidation, business combination or merger, immediately after the consolidation, business
combination or merger as immediately before; or (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
the Company; (d) there shall have been a change in a majority of the members of the board of
directors of the Company within a 12-month period unless the election or nomination for election by
the Company’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 (e) any person, other than the Company or a Subsidiary or any employee benefit plan
sponsored by the Company or a Subsidiary (or related trust), becomes the beneficial owner of twenty
percent (20%) or more of the shares.

          “Conveyancing and Assumption Instruments” has the meaning set forth in the
Distribution Agreement.

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

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

          “Defense Common Stock” has the meaning set forth in the recitals to this Agreement.

          “Defense Director Plans” has the meaning set forth in Article IX of this Agreement.

          “Defense Employees” means persons who, immediately after the Distribution Date, are
employed by Defense, including such persons identified on Schedule 1(a)(ii) and such persons absent
from work at Defense by reason of layoff, leave of absence or disability.

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

          “Defense Plans” means such plans, programs and arrangements maintained for the benefit
of Defense Employees prior to the Distribution Date.

          “Defense Stock Plan” has the meaning set forth in Article VII of this Agreement.

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

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

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

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

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

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

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

          “Eligibility End Date” has the meaning set forth in Article III of this Agreement.

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

          “Incentive Plan” has the meaning set forth in Article VI of this Agreement.

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

          “Indemnifying Party” has the meaning set forth in Section 16(d) of this Agreement.

          “Indemnitee” has the meaning set forth in Section 16(d) of this Agreement.

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

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

          “ITT Common Stock” has the meaning set forth in the recitals to this Agreement.

          “ITT Director Plans” has the meaning set forth in Article IX of this Agreement.

          “ITT Employees” means persons who, immediately after the Distribution Date, are
employed by ITT, including such persons absent from work at ITT by reason of layoff, leave of
absence or disability.

          “ITT Group” means ITT and its affiliates prior to the Distribution.

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

          “ITT Plans” means the ITT Deferred Compensation Plan, the ITT Defined Benefit Plans,
the ITT Defined Contribution Plans, the ITT Director Plan, the ITT Excess Pension Plan, the ITT
Excess Savings Plan, the ITT Non-Qualified Plans, the ITT Non-US H&W Plans, the ITT Non-US Pension
Plans, the ITT Non-US Unfunded Plans, the ITT Long-Term Disability Plan, the ITT Stock Plans and
any other plan, program or arrangement maintained for the benefit of ITT Employees prior to the
Distribution Date.

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

          “ITT Retiree” means any retired employee of ITT or any of its predecessors.

          “ITT stock awards” has the meaning set forth in Section 7 of this Agreement.

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          “ITT Stock Plans” has the meaning set forth in Section 7 of this Agreement.

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

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

          “Master Trust” means the trust established by ITT and maintained by Northern Trust as
the trustee to hold the assets of all US Qualified DB Plans.

          “New ITT Trust” has the meaning set forth in Section 3 of this Agreement.

          “New Water Trust” has the meaning set forth in Section 3 of this Agreement.

          “New York Courts” has the meaning set forth in Article XVIII of this Agreement.

          “Non-US DB Plans” has the meaning set forth in Article III of this Agreement.

          “Non-US DC Plans” has the meaning set forth in Article IV of this Agreement.

          “Non-US H&W Plans” has the meaning set forth in Article V of this Agreement.

          “party” means ITT, Water and Defense.

          “person” means any natural person, corporation, business trust, joint venture,
association, company, partnership or government, or any agency or political subdivision thereof.

          “Plan Actuary” means the plan actuary for each Non-US DB Plan, Non-US DC Plan or
Non-US H&W Plan prior to the Distribution Date or the third-party individual who determined the
liability under such plan prior to, on or after the Distribution Date.

          “Preexisting ITT Employees” means persons actively employed by the ITT Group
immediately prior to the Distribution; and persons who are absent from work to the ITT Group
immediately prior to the Distribution by reason of layoff, leave of absence or disability.

          “Records” has the meaning set forth in Article 13 of this Agreement.

          “RSUs” has the meaning set forth in Article VII of this Agreement.

          “Schedule” or “Schedules” means the Schedules Relating to Benefits and
Compensation Matters Agreement, dated as of October 25, 2011, among ITT Corporation, Exelis Inc.
and Xylem Inc., as they may be amended from time to time.

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

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

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

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5

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

          “TSR Awards” has the meaning set forth in Article VI of this Agreement.

          “USA Patriot Act” means the Uniting and Strengthening America By Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001, and any
amendments thereto.

          “US H&W Plans” has the meaning set forth in Article V of this Agreement.

          “US Non-Qualified DB Plans” has the meaning set forth in Article III of this
Agreement.

          “US Non-Qualified DC Plans” has the meaning set forth in Article IV of this Agreement.

          “US Qualified DB Plans” has the meaning set forth in Article III of this Agreement.

          “US Qualified DC Plans” has the meaning set forth in Article IV of this Agreement.

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

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

          “Water Common Stock” has the meaning set forth in the recitals to this Agreement.

          “Water Director Plan” has the meaning set forth in Article IX of this Agreement.

          “Water Employees” means persons who, immediately after the Distribution Date, are
employed by Water, including such persons identified on Schedule 1(a)(i) and such persons absent
from work at Water by reason of layoff, leave of absence or disability.

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

          “Water Plans” means such plans, programs and arrangements maintained for the benefit
of Water Employees prior to the Distribution Date.

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SCHEDULES RELATING TO

BENEFITS AND COMPENSATION MATTERS AGREEMENT

DATED AS OF OCTOBER 25, 2011,

AMONG

ITT CORPORATION,

XYLEM INC.

AND

EXELIS INC.

 

Table of Contents

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	Schedule 1(a)(i): ITT Employees to Water
	 	 	1	 
	Schedule 1(a)(ii): ITT Employees to Defense
	 	 	3	 
	Schedule 1(d): Employment Agreements
	 	 	5	 
	Schedule 3(a)(i): List of US Qualified Defined Benefit Plans
	 	 	6	 
	Schedule 3(a)(ii): List of US Non-Qualified Defined Benefit Plans
	 	 	7	 
	Schedule 3(a)(iii): List of Non-US Defined Benefit Plans
	 	 	8	 
	Schedule 3(b)(iv): Master Trust Interest
	 	 	10	 
	Schedule 4(a)(i): List of US Qualified Defined Contribution Plans
	 	 	11	 
	Schedule 4(a)(ii): List of US Non-Qualified Defined Contribution Plans
	 	 	12	 
	Schedule 4(a)(iii): List of Non-US Defined Contribution Plans
	 	 	13	 
	Schedule 4(c)(iii): Employees Under Deferred Compensation Plan
	 	 	14	 
	Schedule 4(c)(iv): Employees Under Excess Savings Plan
	 	 	15	 
	Schedule 5(a)(i): List of US Health & Welfare Plans
	 	 	16	 
	Schedule 5(a)(ii): List of Non-US Health & Welfare Plans
	 	 	18	 
	Schedule 6(a): List of Incentive Plans
	 	 	20	 
	Schedule 7(a): List of ITT Stock Plans
	 	 	21	 
	Schedule 8(a): COLI Policies
	 	 	22	 
	Schedule 8(b): Executive Life Policies
	 	 	23	 
	Schedule 9(a): List of ITT Director Plans
	 	 	24	 
	Schedule 10(a): List of Collective Bargaining Agreements
	 	 	25	 
	Schedule 16(a): Liabilities Assumed by ITT
	 	 	27	 
	Schedule 16(b): Liabilities Assumed by Water
	 	 	27	 
	Schedule 16(c): Liabilities Assumed by Defense
	 	 	27	 
	Schedule 18(e): Miscellaneous Expenses
	 	 	28	 

i

Table of Contents

1

Schedule 1(a)(i): ITT Employees to Water

Individuals listed on Schedule 1(a)(i) are listed as of 9/22/11, which will be adjusted to the date
coincident with, or the end of the month following, the Distribution Date.

     1. Individuals employed by the following legal entities:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CURRENT OFFICIAL LEGAL ENTITY	 	 	 	 	 	CURRENT	 	 	 	CYCLE	 	PAYROLL	 	NEWCO LEGAL	 	 	 	NEW	 	 
	NAME	 	CURRENT FEIN	 	EMPLOYER NAME	 	INFINIUM	 	VC	 	CODE	 	NAME	 	ENTITY	 	NEWCO FEIN	 	INFINIUM	 	COUNTRY
	COMMON PARENT CORPORATION
ITT
CORPORATION

	 	13-5158950
	 	ITT FLUID TECHNOLOGY
	 	 	800	 	 	FC
	 	FLOBW
	 	FLOJET Bl WEEKLY
	 	Flow Control LLC
	 	45-2115170
	 	 	891	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	COMMON PARENT CORPORATION

 ITT CORPORATION

	 	13-5158950
	 	ITT FLUID TECHNOLOGY
	 	 	800	 	 	RCW
	 	BGSAL
	 	BELL & GOSSETT
	 	Fluid Handling, LLC
	 	45-2237289
	 	 	894	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	COMMON PARENT CORPORATION

ITT CORPORATION

	 	13-5158950
	 	ITT FLUID TECHNOLOGY
	 	 	800	 	 	RCW
	 	BGUN
	 	BELL& GOSSETT
	 	Fluid Handling, LLC
	 	45-2237289
	 	 	894	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	COMMON PARENT CORPORATION

ITT CORPORATION

	 	13-5158950
	 	ITT FLUID TECHNOLOGY
	 	 	800	 	 	RCW
	 	HTSAL
	 	HEAT TRANSFER
	 	Fluid Handling, LLC
	 	45-2237289
	 	 	893	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	COMMON PARENT CORPORATION

ITT CORPORATION

	 	13-5158950
	 	ITT FLUID TECHNOLOGY
	 	 	800	 	 	RCW
	 	HTUN
	 	HEAT

TRANSFER
	 	Fluid Handling, LLC
	 	45-2237289
	 	 	893	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	COMMON PARENT CORPORATION

ITT CORPORATION

	 	13-5158950
	 	ITT FLUID TECHNOLOGY
	 	 	800	 	 	RCW
	 	RCSAL
	 	R&CW HQ
	 	Fluid Handling, LLC
	 	45-2237289
	 	 	890	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ITT WATER & WASTEWATER
USA INC. [FORMERLY WEDECO,

	 	23-2914590
	 	ADVANCED WATER TREATMENT
	 	 	870	 	 	RCW
	 	WPC
	 	WATER POLUTION
	 	Water Co US, Inc.
	 	45-2080074
	 	 	870	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ITT WATER & WASTEWATER
USA INC. [FORMERLY WEDECO,

	 	23-2914590
	 	ITT FLYGT CORPORATION
	 	 	850	 	 	WWW
	 	CPSAL
	 	CUSTOM PUMPS
	 	Water Co US, Inc.
	 	45-2080074
	 	 	850	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ITT WATER & WASTEWATER
USA, INC. [FQRMERLY WEDECO,

	 	23-2914590
	 	ITT FLYGT CORPORATION
	 	 	850	 	 	WWW
	 	FLSAL
	 	FLYGT SALARY
	 	Water Co US, Inc.
	 	45-2080074
	 	 	850	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ITT WATER & WASTEWATER
USA, INC. [FORMERLY WEDECO,

	 	23-2914590
	 	WEDECO INC
	 	 	874	 	 	WWW
	 	WEDBW
	 	WEDECO

BW
	 	Water Co US, Inc.
	 	45-2080074
	 	 	874	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	RULE INDUSTRIES, INC.

	 	04-2384630
	 	ITT FLOW CONTROL, AMERICAS/RULE
	 	 	860	 	 	FC
	 	RUSAL
	 	RULE
SALARY
	 	Flow Control LLC
	 	45-2115170
	 	 	860	 	 	US
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 
	ITT
WATER  TECHNOLOGY (TX), LP/LLC

	 	75-2623429
	 	ITT GOULDS 

PUMPS TEXAS
	 	 	830	 	 	RCW
	 	H9WSA
	 	TX
TURBINE &
	 	Texas Turbine, LLC
	 	45-2116251
	 	 	830	 	 	US
	 
	 	 
	 

	 	 	 	Goulds Pumps Canada (IPG)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 CGO	 	 	CANADA
	 
	 	 
	 

	 	 	 	Ontario Pro Service Center
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 CON	 	 	CANADA

     2. Individuals associated with the following entities that will transfer to Water:

	 	 	 	 	 	 	 	 	 

	Chile

	 	 	1	 	 	RCW
	 	 
	 
	 	 	 	 	 	 	 	 
	India

	 	 	120	 	 	Water	 	 
	 
	 	 	 	 	 	 	 	 
	Mexico (Chihuahu

	 	 	5	 	 	FC	 	 
	 
	 	 	 	 	 	 	 	 
	Mexico (Nogales)

	 	 	80	 	 	FC	 	 
	 
	 	 	 	 	 	 	 	 
	Singapore

	 	 	15	 	 	RCW	 	 
	 
	 	 	 	 	 	 	 	 
	South Korea

	 	 	3	 	 	RCW	 	 
	 
	 	 	 	 	 	 	 	 
	Taiwan

	 	 	1	 	 	RCW	 	 
	 
	 	 	 	 	 	 	 	 
	Thailand

	 	 	2	 	 	RCW	 	 
	 
	 	 	 	 	 	 	 	 
	United Kingdom

	 	 	15	 	 	SS	 	 
	 
	 	 	 	 	 	 	 	 
	United Kingdom (Basingsto ke)

	 	 	3	 	 	IT	 	 
	 
	 	 	 	 	 	 	 	 
	United Kingdom (Whiteley, Letchwort

	 	 	168	 	 	FC	 	 

	 	 	 	 	 	 	 	 	 

	ITT High Precision Manufactured
Products (Wuxi) Co., Ltd

	 	 	63	 	 	FC
	 	ITT Water & Waste (Shenyang) Co., Ltd, Wuxi Branch -
Assets will also transfer
	 
	 	 	 	 	 	 	 	 
	ITT (China) Investment, Shanghai Branch

	 	 	51	 	 	Water HQ
	 	ITT (Shanghai) Trading Co., Ltd — Assets will transfer
	 
	 	 	 	 	 	 	 	 
	ITT (China) Investment

	 	 	3	 	 	 	 	ITT (Shanghai) Trading Co., Ltd,
	 
	 	 	 	 	 	 	 	 
	ITT (China) Investment

	 	 	2	 	 	 	 	ITT (Shanghai) Trading Co., Ltd, Beijing Branch
	 
	 	 	 	 	 	 	 	 
	ITT (China) Investment, Shanghai Branch

	 	 	2	 	 	 	 	ITT (Shanghai) Trading Co., Ltd Beijing Branch
	 
	 	 	 	 	 	 	 	 
	ITT (China) Investment, Shanghai Branch

	 	 	1	 	 	 	 	ITT (Nanjing) CO., Ltd
	 
	 	 	 	 	 	 	 	 
	ITT (China) Investment

	 	 	1	 	 	 	 	ITT (Shanghai) Trading Co., Ltd,

 

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	3. Individual employees identified below:

 

Table of Contents

	3. Individual employees identified below:

 

Table of Contents

	Schedule 1(a)(ii): ITT Employees to Defense Individuals listed on Schedule 1 (a)
(ii) are listed as of 9/22/11, which will be adjusted to the
date coincident with, or the end of the month following, the Distribution Date.
1. Individuals employed by the following legal entities:
2. Individuals associated with the following entities that will transfer to defense:

 

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5

Schedule 1(d): Employment Agreements

Defense Employment Agreements

	 	1.	 	Christopher C. Bernhardt

ITT Employment Agreements

	 	2.	 	Denise Ramos

Water Employment Agreements

	 	3.	 	Frank Jimenez

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6

Schedule 3(a)(i): List of US Qualified Defined Benefit Plans

The US Qualified DB Plans consist of the Defense US Qualified DB Plans, the ITT US Qualified DB
Plans and the Water US Qualified DB Plans.

Defense US Qualified DB Plans

	1.	 	357- ITT Systems Corporation Pension Plan for Hourly Employees at Pacific Missile Range
Facility
	 
	2.	 	501- ITT Salaried Retirement Plan
	 
	3.	 	505- ITT Avionics Division & ITT Aerospace/Communications Division Pension Plan
	 
	4.	 	591- ITT Gilfillan Pension Plan for Hourly Employees
	 
	5.	 	611- ITT Electronic Systems Pension Plan for Employees in the Bargaining Unit
	 
	6.	 	630- Pension Plan for the Roanoke Plant Hourly Employees of ITT Night Vision
	 
	7.	 	758- EDO Corporation Employees Pension Plan (frozen plan for former EDO employees)

ITT US Qualified DB Plans

	8.	 	346- Engineered Valves CA Pure Flo Solutions Group Pension Plan for Hourly Employees at Simi
Valley, CA
	 
	9.	 	521- ITT Cannon Employees Retirement Plan for Hourly Non-Bargaining Production and
Maintenance Employees
	 
	10.	 	571- ITT Aerospace Controls Pension Plan for Hourly Employees
	 
	11.	 	577- ITT Consolidated Hourly Pension Plan
	 
	12.	 	638- ITT Conoflow Pension Plan for Non-Clerical, Non-Rep. Hourly Employees
	 
	13.	 	640- ITT Engineered Valves Pension Plan for Hourly Employees at Amory, MS
	 
	14.	 	642- ITT Engineered Valves Pension Plan for Local 36 Hourly Employees at Lancaster, PA
	 
	15.	 	698- ITT Control Technologies Pension Plan for Hourly Employees
	 
	16.	 	724- ITT Pension Plan for Bargaining Unit Employees Seneca Falls, New York [Xylem to
replicate]
	 
	17.	 	727- ITT Pension Plan for Hourly Employees at Vertical Pump Division, City of Industry,
California
	 
	18.	 	730- ITT Pension Plan for Bargaining Unit Employees, Ashland Operations, Ashland, PA

Water US Qualified DB Plans

	19.	 	520- ITT Bell & Gossett Hydonics Pension Plan for Hourly Employees
	 
	20.	 	696- ITT Standard Hourly (Bargaining Unit) Pension Plan
	 
	21.	 	728- ITT Pension Plan for Hourly Employees, Water Technologies Group-America, Turbine
Division, Lubbock, TX
	 
	22.	 	757- Retirement Plan for ITT Water & Wastewater Leopold Inc. For Hourly Paid Employees

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7

Schedule 3(a)(ii): List of US Non-Qualified Defined Benefit Plans

The US Non-Qualified DB Plans consist of the Defense US Non-Qualified DB Plans, the ITT US
Non-Qualified DB Plans and the Water US Non-Qualified DB Plans.

Defense US Non-Qualified DB Plans

	 	1.	 	680- ITT Excess Plan, which includes the following plans: ITT Excess Pension Plan 1A,
ITT Excess Pension Plan 1B, ITT Excess Pension Plan IIA and ITT Excess Pension Plan IIB
	 
	 	2.	 	ITT Ex-Gratia Plan (with the exception of the liability accrued under the Plan for
Steven R. Loranger, which shall remain with ITT)
	 
	 	3.	 	682- Federal Labs Unfunded 1
	 
	 	4.	 	719- ITT Enhanced Pension Plan
	 
	 	5.	 	759- EDO Excess Plan — SERP
	 
	 	6.	 	Retirement Plan for Non-Management Directors of ITT Corp. (frozen as of October 1,
1995)
	 
	 	7.	 	656- Expatriate

ITT US Non-Qualified DB Plans

	 	8.	 	718- Cranston Unfunded
	 
	 	9.	 	ITT Ex-Gratia Plan (only the liability accrued under the Plan for Steven R. Loranger,
which shall remain with ITT)

Water US Non-Qualified DB Plans

	 	10.	 	None

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8

Schedule 3(a)(iii): List of Non-US Defined Benefit Plans

The Non-US DB Plans consist of the Defense Non-US DB Plans, the ITT Non-US DB Plans and the Water
Non-US DB Plans.

Defense Non-US DB Plans

	 	1.	 	None

ITT Non-US DB Plans

	 	2.	 	325- ITT Belgium — Cannon (Belgium)
	 
	 	3.	 	Gratuity Benefit Program (India)[Xylem to replicate]
	 
	 	4.	 	128- Cannon GmbH (Germany) [Unfunded]
	 
	 	5.	 	378- Cannon GmbH (Germany) [Unfunded]
	 
	 	6.	 	340- Cannon Japan (Japan) [Unfunded]
	 
	 	7.	 	735- Industries Management GmbH, Bad Camberg and former Fechenheim (Germany)
[Unfunded]
	 
	 	8.	 	Salary Sacrifice e.V Plan — ITTG (Germany)

Water Non-US DB Plans

	 	9.	 	323- ITT Belgium — ITT Industries (Belgium)
	 
	 	10.	 	324- ITT Belgium Pension Plan (Belgium)
	 
	 	11.	 	166- Pension Plan for Union Employees of ITT Automotive, a division of ITT Industries
of Canada Ltd. [Electrical Systems, North America] (Canada)
	 
	 	12.	 	200- Pension Plan for Hourly Employees of ITT Residential & Commercial Water (R&CW), a
Division of ITT Industries of Canada L.P (Canada)
	 
	 	13.	 	203- Pension Plan for Hourly Employees of ITT Automotive, a division of ITT Industries
of Canada Ltd. [Structural Systems and Components, North America (Toronto Stamping Plant)]
(Canada)
	 
	 	14.	 	205- ITT Industries Canadian Pension Plan for Salaried Employees (Canada)
	 
	 	15.	 	350- ITT Canadian Excess Benefit Plan — Unregistered (Canada)
	 
	 	16.	 	209- Pension Plan for Hourly Employees of ITT Fabri-Valve, a Division of ITT Industries
of Canada Ltd. (Canada)
	 
	 	17.	 	221- Pension Plan for Union Employees of Ontario Malleable Iron Company Limited
(Canada)
	 
	 	18.	 	223- Pension Plan for Union Employees of ITT Cannon, a Division of ITT Industries of
Canada Ltd.(Canada)
	 
	 	19.	 	744- Pension Plan of ITT Water & Wastewater, a Division of ITT Industries of Canada
L.P.(Canada)
	 
	 	20.	 	369- Industries Management GmbH, Ebernhahn (Division KONI) (Germany)
	 
	 	21.	 	756- Flygt Ireland (Ireland)
	 
	 	22.	 	186- ITT Industries General Pension Plan (UK)
	 
	 	23.	 	189- ITT Industries Pension Plan for UK Expatriates (UK)
	 
	 	24.	 	190- Godwin Pumps Limited Pension Scheme (UK)
	 
	 	25.	 	125- Industriebeteiligungsgesellschaft mbH (Germany) [Unfunded]
	 
	 	26.	 	738- DITTHA GmbH, Kempen (Germany) [Unfunded]
	 
	 	27.	 	126- DITTHA GmbH. Kempen (Germany) [Unfunded]

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9

	28.	 	366- Industries Management GmbH, Ebernhahn (Division KONI) (Germany)[Unfunded]
	 
	29.	 	111- ITT Flygt Pumpen GmbH, Langenhagen, jetzt ITT Water & Wastewater (Germany)
[Unfunded]
	 
	30.	 	Deutschland GmbH (Germany)[Unfunded]
	 
	31.	 	116- ITT Industriebeteiligungsgesellschaft mbH (Germany)[Unfunded]
	 
	32.	 	755- ITT Water & Wastewater, Herford (Germany)[Unfunded]
	 
	33.	 	760- Jabsco GmbH (Germany)[Unfunded]
	 
	34.	 	761- ebro Electronic GmbH & Co. KG (Germany)[Unfunded]
	 
	35.	 	762- SI Analytics GmbH Mainz Deferred Comp (Germany)[Unfunded]
	 
	36.	 	763- SI-FAS Pension Valuation (Germany)[Unfunded]
	 
	37.	 	764- WTW FAS Pension Plan (Germany)[Unfunded]
	 
	38.	 	765- ebro Electronics Instruments GmbH Ingolstadt Pension Plan (Germany)
[Unfunded]
	 
	39.	 	370- Industries Management GmbH,former Regelungstechnik (Germany)[Unfunded]
	 
	40.	 	720- Industries Management GmbH,former Regelungstechnik (Germany)[Unfunded]
	 
	41.	 	731- Industries Management GmbH (Germany)[Unfunded]
	 
	42.	 	732- Industries Management GmbH (Germany)[Unfunded]
	 
	43.	 	734- Industries Management GmbH (Germany)[Unfunded]
	 
	44.	 	736- Industries Management GmbH, Bad Camberg and former Fechenheim (Germany)
[Unfunded]
	 
	45.	 	713- Flygt S.p.a. Flygt Italy Plan (Italy)[Unfunded]
	 
	46.	 	766- ADIN Pension 28229 NOK (Norway)[Unfunded]
	 
	47.	 	767- ADI Storebrand 27835 NOK (Norway)[Unfunded]
	 
	48.	 	768- Storebrand 25000 NOK (Norway)[Unfunded]
	 
	49.	 	118- Grindex AB (Sweden)[Unfunded]
	 
	50.	 	120- Water & Wastewater AB General Pension Plan (ITP-Plan) (Sweden)[Unfunded]
	 
	51.	 	121- Water & Wastewater AB Individual Contracts (Not FPG/PRI) (Sweden)
[Unfunded]
	 
	52.	 	754- Industries Holding AB General Pension Plan (ITP-Plan) (Sweden)[Unfunded]

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10

Schedule 3(b)(iv): Master Trust Interest

Amounts listed on Schedule 3(b)(iv) are listed as of 7/31/11, which will be adjusted to the date
coincident with, or the end of the month following, the Distribution Date.

Water Interest

	 	 	 	 	 	 	 	 	 
	Plan Name	 	Plan #	 	7/31/2011 Balance
	ITT Bell
— Gossett
	 	 	520	 	 	 	26,179,521	 
	ITT Standard Hourly
	 	 	696	 	 	 	14,215,802	 
	Goulds Division Lubbock
	 	 	728	 	 	 	5,415,891	 
	Leopold
	 	 	757	 	 	 	2,444,161	 
	Total Xylem
	 	 	 	 	 	 	48,255,375	 

ITT Interest

	 	 	 	 	 	 	 	 	 
	Plan Name	 	Plan #	 	7/31/2011 Balance
	ITT Shertec Simi Valley
	 	 	346	 	 	 	376,902	 
	ITT Cannon Electric
	 	 	521	 	 	 	25,380,063	 
	ITT Aerospace Controls
	 	 	571	 	 	 	12,399,734	 
	Consolidated Hourly Plans
	 	 	577	 	 	 	66,737,221	 
	ITT Grinell — Non-clerical
	 	 	638	 	 	 	1,280,183	 
	ITT Fluid Tech. — Lancaster
	 	 	642	 	 	 	5,743,973	 
	ITT Fluid Tech. — Amory Hourly
	 	 	640	 	 	 	2,040,563	 
	ITT Control Technologies
	 	 	698	 	 	 	289326.82	 
	Goulds Beginning Unit Employees
	 	 	724	 	 	 	69,070,531	 
	Goulds Vertical Pump Division
	 	 	727	 	 	 	4,191,936	 
	Goulds Bargaining Unit Employees
	 	 	730	 	 	 	12,709,847	 
	 
	 	 	 	 	 	 	 	 
	Total ITT
	 	 	 	 	 	 	200,220,281	 

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11

Schedule 4(a)(i): List of US Qualified Defined Contribution Plans

The US Qualified DC Plans consist of the Defense US Qualified DC Plans, the ITT US Qualified DC
Plans and the Water US Qualified DC Plans.

Defense US Qualified DC Plans

	1.	 	100- ITT Salaried Investment and Savings Plan
	 
	2.	 	178- ITT Avionics Division & ITT Aerospace/Communications Division Bargaining Unit Savings
Plan
	 
	3.	 	209- ITT Night Vision Savings Plan for Hourly Employees
	 
	4.	 	227- ITT Electronic Systems Savings Plan for Hourly Employees
	 
	5.	 	013- ITT Systems Corporation Retirement/Savings Plan
	 
	6.	 	235- ITT Systems Corporation Pacific Missile Range Facility Savings Plan for Hourly Employees
	 
	7.	 	ITT Research Systems Inc. Employees’ Savings Plan
	 
	8.	 	237- ITT Advanced Engineering and Sciences Professional Benefits Employees’ Savings Plan
	 
	9.	 	003- EDO Corporation Employee Investment Plan
	 
	10.	 	200- ITT Gilfillan Savings Plan for Hourly Employees

ITT US Qualified DC Plans

	11.	 	193- ITT Aerospace Controls Savings Plan for Hourly Employees
	 
	12.	 	196- ITT Cannon Savings Plan for Hourly Employees
	 
	13.	 	216- ITT Engineered Valves — Lancaster Savings Plan for Hourly Employees
	 
	14.	 	009- Goulds Pumps, Inc. Retirement Savings and Investment Plan [Xylem to replicate]
	 
	15.	 	201- ITT Conoflow Savings Plan for Hourly Employees
	 
	16.	 	215- ITT Engineered Valves — Fabri Savings Plan for Hourly Emp. At Amory, MS
	 
	17.	 	225- ITT Engineered Valves CA Pure Flo Solutions Group Savings Plan for Hourly Employees
	 
	18.	 	236- ITT BIW Connector Systems Employees Savings Plan
	 
	19.	 	010- Procast And Goulds Pump Service Center Employee Savings Plan
	 
	20.	 	240- Pure-Flo Precision Savings Plan for Hourly Employees
	 
	21.	 	239- ITT Koni Friction Products Savings Plan for Hourly Employees
	 
	22.	 	238- ITT Control Technologies Savings Plan for Hourly Employees
	 
	23.	 	Evolutionary Concepts Profit Sharing Plan (YE 6/30/2010)
	 
	24.	 	ECI/Alcon 401(k) Plan

Water US Qualified DC Plans

	25.	 	002- ITT Rule Savings Plan for Hourly Employees
	 
	26.	 	203- ITT Bell & Gossett Savings Plan for Hourly Employees
	 
	27.	 	226- ITT Heat Transfer Savings Plan for Hourly Employees
	 
	28.	 	231- ITT Hydro Air Savings Plan for Hourly Employees
	 
	29.	 	241- Flojet Corporation 401(k) Plan
	 
	30.	 	001- F.B. Leopold Co., Inc. Savings Plan for Hourly Employees
	 
	31.	 	001- F.B. Leopold Company, Inc. Retirement Savings Plan
	 
	32.	 	001- Laing Thermotech, Inc. 401(k) Profit Sharing Plan
	 
	33.	 	Godwin Pumps of America, Inc. Profit Sharing Plan and Trust

Table of Contents

12

Schedule 4(a)(ii): List of US Non-Qualified Defined Contribution Plans

The US Non-qualified DC Plans consist of the Defense US Non-qualified DC Plans, the ITT US
Non-qualified DC Plans and the Water US Non-qualified DC Plans.

Defense US Non-Qualified DC Plans

	 	1.	 	EDO Deferred Compensation Plan

ITT US Non-Qualified DC Plans

	 	2.	 	ITT Deferred Compensation Plan [Water and Defense will replicate]
	 
	 	3.	 	ITT Excess Savings Plan [Water and Defense will replicate]

Water US Non-Qualified DC Plans

	 	4.	 	None

Table of Contents

13

Schedule 4(a)(iii): List of Non-US Defined Contribution Plans

The Non-US DC Plans consist of the Defense Non-US DC Plans, the ITT Non-US DC Plans and the Water
Non-US DC Plans.

Defense Non-US DC Plans

	 	1.	 	None

ITT Non-US DC Plans

	 	2.	 	Superannuation Benefit Program — ITT India (India) [Xylem to replicate]
	 
	 	3.	 	Provident Fund — ITT India (India) [Xylem to replicate]
	 
	 	4.	 	Retirement — IP (Taiwan)
	 
	 	5.	 	C&K Switches Limited Pension Plan (UK)
	 
	 	6.	 	C&K Switches Executive Pension Plan (UK)
	 
	 	7.	 	Direct Insurance — ITTG (Germany) [Exelis and Xylem to replicate]

Water Non-US DC Plans

	 	8.	 	Superannuation Fund — WWW (Australia)
	 
	 	9.	 	ITT Industries Canadian Investment Savings Plan for Salaried Employees — ITT Canada
(Canada) [ITT to replicate]
	 
	 	10.	 	Insured Retirement- WWW (Denmark) [ITT to replicate]
	 
	 	11.	 	Plan d’Epargne Enterprise (PEE) — ITT France (France)
	 
	 	12.	 	Insured Retirement — WWW (Netherlands)
	 
	 	13.	 	Retirement — WWW (South Africa) [ITT to replicate]
	 
	 	14.	 	ITT Retirement Savings Plan — ITT Industries (UK) [Exelis and ITT to
replicate]
	 
	 	15.	 	Wedeco Executive Pension Plan (UK)
	 
	 	16.	 	Direct Insurance — WWW (Germany)

Table of Contents

14

Schedule 4(c)(iii): Employees Under Deferred Compensation Plan

Water Employees

	 	1.	 	15 individuals identified as Water Employees or ITT Retirees on the records of the ITT
Deferred Compensation Plan

Defense Employees

	 	2.	 	36 individuals identified as Defense Employees or ITT Retirees on the records of the
ITT Deferred Compensation Plan

Table of Contents

15

Schedule 4(c)(iv): Employees Under Excess Savings Plan

Participants listed on Schedule 4(c)(iv) are listed as of 7/31/11, which will be adjusted to the
date coincident with, or the end of the month following, the Distribution Date.

Water Employees

	 	1.	 	13 individuals identified as Water Employees on the records of the Excess Savings Plan

Defense Employees

	 	2.	 	13 individuals identified as Defense Employees on the records of the Excess Savings
Plan

Table of Contents

16

Schedule 5(a)(i): List of US Health & Welfare Plans

The US H&W Plans consist of the Defense US H&W Plans, the ITT US H&W Plans and the Water US H&W
Plans.

Defense US H&W Plans

	1.	 	940- ITT Avionics Severance Plan for Exempt and Non-Exempt Salaried Employees
	 
	2.	 	903- Avionics Postretirement Medical Plan
	 
	3.	 	918- Avionics Postretirement Life Plan
	 
	4.	 	942- ITT Night Vision Term. Pay for Salaried Exempt Employees
	 
	5.	 	951- ITT A/CD Severance Pay Plan for Ex. And Non-Ex. Salaried Employees
	 
	6.	 	502- EDO Corporation Medical, Dental, Vision and Salary Benefit Plan
	 
	7.	 	503- EDO Corporation Life and Travel Accident Plan
	 
	8.	 	506- EDO Corporation Sickness, STD, and LTD Plan
	 
	9.	 	914- EDO Postretirement Medical & Life Plan
	 
	10.	 	302- ITT Employee Benefit Trust
	 
	11.	 	911- Space Systems Division Postretirement Medical
	 
	12.	 	923- Space Systems Division Postretirement Life
	 
	13.	 	ITT Salaried Retiree Health Plan

ITT US H&W Plans

	14.	 	594- ITT Salaried Medical and Dental Program [Exelis and Xylem to replicate]
	 
	15.	 	ITT Corporation Special Senior Executive Severance Pay Plan
	 
	16.	 	ITT Corporation Enhanced Severance Pay
	 
	17.	 	ITT Corporation Senior Executive Severance Pay Plan
	 
	18.	 	ITT Industries Corporate Policies- Severance Policy 30-08
	 
	19.	 	ITT Corporation Severance Plan
	 
	20.	 	529- ITT Cannon Severance Pay Plan for Exempt and Non-Exempt Salaried Employees
	 
	21.	 	717- ITT Salaried Voluntary Accident Plan [Exelis and Xylem to replicate]
	 
	22.	 	801- Group Accident Insurance Plan for Salaried Employees [Exelis and Xylem to replicate]
	 
	23.	 	802- ITT Corporation Long-Term Disability Plan for Salaried Employees [Exelis and Xylem to
replicate]
	 
	24.	 	ITT Corporation Excess Long-Term Disability Plan [Exelis and Xylem to replicate]
	 
	25.	 	999- ITT Corporate Welfare Plan
	 
	26.	 	717- ITT Salaried Voluntary Travel Accident Plan [Exelis and Xylem to replicate]
	 
	27.	 	514- Kentucky Carbon Corporation Sickness and Accident Plan (YE 10/31/2009)
	 
	28.	 	503- ITT Carbon Employee Benefit Trust (YE 10/31/2009)
	 
	29.	 	503- Moog Controls Inc. Voluntary Employees Beneficiary Trust
	 
	30.	 	902- AC Pump Postretirement Medical Plan
	 
	31.	 	905- Cannon Postretirement Medical Plan
	 
	32.	 	906- Carbon Postretirement Medical Plan
	 
	33.	 	907- Goulds Postretirement Medical Plan
	 
	34.	 	908- Higbie Postretirement Medical Plan
	 
	35.	 	909- Jackson Postretirement Medical Plan

Table of Contents

17

	36.	 	916- ITT Salaried Options C&D
	 
	37.	 	917- AC Pump Postretirement Life Plan
	 
	38.	 	920- Carbon Postretirement Life Plan
	 
	39.	 	921- Goulds Postretirement Life plan
	 
	40.	 	925- Engineered Products Postretirement Life Plan
	 
	41.	 	926- Engineered Valve Postretirement Life Plan
	 
	42.	 	Active Salaried Life Insurance [Exelis and Xylem to replicate]
	 
	43.	 	Active Salaried Voluntary Plans [Exelis and Xylem to replicate]
	 
	44.	 	Active Salaried Long Term Care Plan
	 
	45.	 	Active Salaried United Healthcare/PacifiCare Plan [Exelis and Xylem to replicate]
	 
	46.	 	Active Salaried Kaiser Plan [Exelis and Xylem to replicate]
	 
	47.	 	Active Salaried Excellus BluePoint POS Plan [Xylem to replicate]

Water US H&W Plans

	48.	 	520- ITT Water Technology, Inc. Health Reimbursement Arrangement
	 
	49.	 	504- The F.B. Leopold Company, Inc. Welfare Benefits Plan
	 
	50.	 	904- Bell & Gossett Postretirement Medical Plan
	 
	51.	 	910- Leopold Postretirement Medical Plan
	 
	52.	 	912- ITT Standard (Heat Transfer) Postretirement Medical Plan
	 
	53.	 	918- Bell & Gossett Postretirement Life Plan
	 
	54.	 	922- Leopold Postretirement Life Plan
	 
	55.	 	924- ITT Standard (Heat Transfer) Postretirement Life Plan

Table of Contents

18

Schedule 5(a)(ii): List of Non-US Health & Welfare Plans 

The Non-US H&W Plans consist of the Defense Non-US H&W Plans, the ITT Non-US H&W Plans and the
Water Non-US H&W Plans.

Defense Non-US H&W Plans

	1.	 	None

ITT Non-US H&W Plans 

	2.	 	Medical — Cannon (Belgium)
	 
	3.	 	Life / AD&D — IP (Brazil)
	 
	4.	 	Medical — IP (Brazil)
	 
	5.	 	Life Insurance — IP (Chile)
	 
	6.	 	Medical — IP (Chile)
	 
	7.	 	Direct Insurance — ITTG (Germany) [Exelis and Xylem to replicate]
	 
	8.	 	Accidental Insurance — ITTG (Germany) [Exelis and Xylem to replicate]
	 
	9.	 	Employee Compensation Insurance — ITT India (India) [Xylem to replicate]
	 
	10.	 	Personal Accident — ITT India (India) [Xylem to replicate]
	 
	11.	 	Medical — ITT India (India) [Xylem to replicate]
	 
	12.	 	Life Insurance — ICS (Mexico)
	 
	13.	 	Medical — ICS (Mexico)
	 
	14.	 	Medical — IP (Mexico)
	 
	15.	 	AD&D — IP (Singapore)
	 
	16.	 	Medical — IP (Singapore)
	 
	17.	 	AD&D — IP (South Korea)
	 
	18.	 	AD&D — IP (Taiwan)
	 
	19.	 	Medical — IP (Taiwan)
	 
	20.	 	AD&D — IP (Thailand)
	 
	21.	 	Medical — IP (Thailand)
	 
	22.	 	ITT Life Assurance — ITT Industires (UK) [Exelis and Xylem to replicate]
	 
	23.	 	Medical — ITT Industries (UK) [Exelis and Xylem to replicate]

Water Non-US H&W Plans 

	24.	 	Medical — WWW (Belgium)
	 
	25.	 	Life / AD&D — WWW (Brazil)
	 
	26.	 	Medical — WWW (Brazil)
	 
	27.	 	ITT Canadian Salaried Group Insurance Program — ITT Canada (Canada) [ITT to
replicate]
	 
	28.	 	Life Insurance — WWW (Chile)
	 
	29.	 	Medical — WWW (Chile)
	 
	30.	 	Employer Liability Insurance — ITT China (China) [ITT to replicate]
	 
	31.	 	Life Insurance / AD&D — ITT China (China) [ITT to replicate]
	 
	32.	 	Medical/Dental — ITT China (China) [ITT to replicate]
	 
	33.	 	Medical — WWW (Denmark) [ITT to replicate]
	 
	34.	 	Life / AD&D / Disability (France) [ITT to replicate]
	 
	35.	 	Medical / Dental (France) [ITT to replicate]
	 
	36.	 	Direct Insurance — WWW (Germany)

Table of Contents

19

	37.	 	Accidental Insurance — WWW (Germany)
	 
	38.	 	Life Insurance — WWW (Mexico)
	 
	39.	 	Medical — WWW (Mexico)
	 
	40.	 	Medical — WWW (Russia)
	 
	41.	 	AD&D — WWW (Singapore)
	 
	42.	 	Life / AD&D — WWW (South Africa) [ITT to replicate]

Table of Contents

20

Schedule 6(a): List of Incentive Plans

	1.	 	1997 ITT Industries Annual Incentive Plan
	 
	2.	 	1997 Long-Term Incentive Plan
	 
	3.	 	ITT Corporation Annual Incentive Plan for Executive Officers
	 
	4.	 	ITT Corporation Retention Program

Table of Contents

21

Schedule 7(a): List of ITT Stock Plans

	1.	 	1994 ITT Incentive Stock Plan
	 
	2.	 	ITT 1996 Restricted Stock Plan for Non-Employee Directors
	 
	3.	 	2002 ITT Stock Option Plan for Non-Employee Directors
	 
	4.	 	2003 ITT Equity Incentive Plan
	 
	5.	 	2011 ITT Omnibus Incentive Plan
	 
	6.	 	Industries Ltd Share Incentive Plan (UK)
	 
	7.	 	ITT Flygt Ltd Share Incentive Plan (UK)

Table of Contents

22

Schedule 8(a): COLI Policies

Individuals listed on Schedule 8(a) are listed as of 7/02/11, which will be adjusted to the date
coincident with, or the end of the month following, the Distribution Date.

ITT

	 	 	 	 	 
	Policy	 	 	 	 
	Number	 	Carrier	 	 
	18395400

	 	NM Life
	 	 
	19127919

	 	NM Life	 	 
	18395404

	 	NM Life	 	 
	19127921

	 	NM Life	 	 
	19127923

	 	NM Life	 	 
	17448846

	 	NM Life	 	 
	56906286

	 	NYLife	 	 
	18696673

	 	NM Life	 	 
	18395408

	 	NM Life	 	 
	18696674

	 	NM Life	 	 
	18395409

	 	NM Life	 	 
	18395411

	 	NM Life	 	 
	18395414

	 	NM Life	 	 
	56906287

	 	NYLife	 	 
	17448847

	 	NM Life	 	 
	17448853

	 	NM Life	 	 
	56906297

	 	NYLife	 	 
	17961894

	 	NM Life	 	 
	19127922

	 	NM Life	 	 
	18696675

	 	NM Life	 	 
	19127925

	 	NM Life	 	 
	17448836

	 	NM Life	 	 
	17616521

	 	NM Life	 	 
	17448845

	 	NM Life	 	 
	17961899

	 	NM Life	 	 

Water

	 	 	 	 	 
	Policy Number	 	Carrier	 	 
	17961895

	 	NM Life
	 	 
	18395405

	 	NM Life	 	 
	17616524

	 	NM Life	 	 
	191279241

	 	NM Life	 	 
	56906275

	 	NYLife	 	 
	18395401

	 	NM Life	 	 

Defense

	 	 	 	 	 
	Policy Number	 	Carrier	 	 
	17616519

	 	NM Life
	 	 
	56906274

	 	NYLife	 	 
	17448842

	 	NM Life	 	 
	56906282

	 	NYLife	 	 
	19127920

	 	NM Life	 	 
	56906285

	 	NYLife	 	 
	18395406

	 	NM Life	 	 
	18395407

	 	NM Life	 	 
	56906292

	 	NYLife	 	 
	17448852

	 	NM Life	 	 
	56906294

	 	NYLife	 	 
	18395412

	 	NM Life	 	 
	19127926

	 	NM Life	 	 
	56906301

	 	NYLife	 	 
	17448856

	 	NM Life	 	 
	56906273

	 	NYLife	 	 
	56906276

	 	NYLife	 	 
	56906283

	 	NYLife	 	 
	56906290

	 	NYLife	 	 
	56906291

	 	NYLife	 	 

Table of Contents

23

Schedule 8(b): Executive Life Policies

Amounts listed on Schedule 8(b) are listed as of 6/30/11, which will be adjusted to the date
coincident with, or the end of the month following, the Distribution Date.

ITT

	 	 	 	 	 	 	 
	Block 1	 	Policy	 	 
	1

	 	 	9061446	 	 	 
	2

	 	 	9061445	 	 	 
	3

	 	 	9061444	 	 	 
	4

	 	 	9061438	 	 	 
	5

	 	 	9061443	 	 	 
	6

	 	 	9061452	 	 	 
	7

	 	 	9061450	 	 	 
	8

	 	 	9061440	 	 	 
	9

	 	 	9061433	 	 	 
	10

	 	 	9061434	 	 	 
	11

	 	 	9061435	 	 	 
	12

	 	 	9061447	 	 	 
	 
	 	 
	Block 2	 	Policy	 	 
	1

	 	 	9096216	 	 	 

Table of Contents

24

Schedule 9(a): List of ITT Director Plans

	1.	 	ITT Corporation Deferred Compensation Plan for Non-Employee Directors
	 
	2.	 	ITT Group Accident Program that provides 24 hour accidental death and dismemberment coverage

Additionally, the ITT 1996 Restricted Stock Plan for Non-Employee Directors and the 2002 ITT Stock
Option Plan for Non-Employee Directors, each as listed on Schedule 7(a) apply to non-employee
directors of ITT.

Table of Contents

25

Schedule 10(a): List of Collective Bargaining Agreements

The Collective Bargaining Agreements consist of the Defense Collective Bargaining Agreements, the
ITT Collective Bargaining Agreements and the Water Collective Bargaining Agreements. Works
councils and collective bargaining agreements from jurisdictions other than the US and Canada are
expressly excluded from this schedule and will continue with their respective company by transfer
of law.

Defense Collective Bargaining Agreements

	1.	 	Agreement dated August 28, 2010 between ITT Corporation, Electronic Systems, Fort Wayne, IN,
a Division of ITT Corporation, Inc., and IUE, the industrial division of the Communication
Workers of America, AFL CIO in behalf of and in conjunction with the IUE the industrial
division of the Communication Workers of America, AFL CIO Local 84999
	 
	2.	 	Agreement dated October 1, 2009 between ITT Electronics Systems/Integrated Electronic Warfare
Systems and ITT Communications Systems and the I.U.E./CWA and its Local Union 81447
	 
	3.	 	Agreement dated May 22, 2011 between ITT Corporation, Night Vision Roanoke Plant and IUE, the
Industrial Division of the Communications Workers of America AFL-CIO and Local 82162
	 
	4.	 	Agreement dated December 15, 2009 between Systems-Benning and Columbus Metal Trades Council
	 
	5.	 	Agreement dated December 15, 2009 between Systems-Benning and Sheet Metal Workers, Local 85
 — Security Guards
	 
	6.	 	Agreement dated November 1, 2009 between Systems — DSN and IBEW Local 543
	 
	7.	 	Agreement dated March 31, 2011 between Systems — K-Town and (Ver.di) Vereinte
Dienstleistungsgewerkschaft
	 
	8.	 	Agreement dated December 1, 2010 between Systems — PMRF and IBEW Local 1260 Main
	 
	9.	 	Agreement dated December 1, 2010 between Systems — PMRF and IBEW Local 1260 Security
	 
	10.	 	Agreement dated December 1, 2010 between Systems — PMRF and IBU
	 
	11.	 	Agreement dated November 1, 2007 between Systems — SLRS and IBEW Local 2088
	 
	12.	 	Agreement dated September 1, 2007 between Systems — SLRS and IAM Local 815
	 
	13.	 	Agreement dated October 31, 2007 between Systems — SLRS and IBT Local 381
	 
	14.	 	Agreement dated October 1, 2008 between Systems — TARS and CWA Local 3177
	 
	15.	 	Agreement dated October 1, 2008 between Systems — TARS (Rio Grande City, TX) and IBEW Local
66
	 
	16.	 	Agreement dated October 1, 2008 between Systems — TARS (Eagle Pass, TX) and IBEW Local 66
	 
	17.	 	Agreement dated October 1, 2008 between Systems — TARS and IBEW Local 583
	 
	18.	 	Agreement dated October 1, 2008 between Systems — TARS and IBEW Local 611
	 
	19.	 	Agreement dated October 1, 2008 between Systems — TARS (Ft. Huachuca, AZ) and IBEW Local 570
	 
	20.	 	Agreement dated October 1, 2008 between Systems — TARS (Yuma, AZ) and IBEW Local 570
	 
	21.	 	Agreement dated December 1, 2010 between Systems — Maxwell and USW Local 13350
	 
	22.	 	Agreement dated July 1, 2009 between Systems — Maxwell and USW Local 8405

Table of Contents

26

	23.	 	Agreement dated August 27, 2010 between Systems — Wallops Island and IAM Local 2552 (Two
units)
	 
	24.	 	Agreement dated April 9, 2011 between Systems — White Sands and IAM Local 2515
	 
	25.	 	Agreement dated December 1, 2010 between Systems — TARS (Lajas, PR) and IUSW 6135

ITT Collective Bargaining Agreements

	26.	 	Agreement dated March 1, 2011 between IP Pro shop and Steelworkers
	 
	27.	 	Agreement between IP/SFO and Steelworkers through July 28, 2012
	 
	28.	 	Agreement dated May 16, 2009 between Industrial Process (Lancaster, Pennsylvania), a unit of
ITT Corporation, and the Glass, Molders, Pottery and Plastics & Allied Workers International
Union, Local No. 36, AFL-CIO, CLC.

Water Collective Bargaining Agreements 

	29.	 	Agreement dated August 1, 2010, between WATER SYSTEMS OPERTIONS (WSO) a unit of ITT Water
Technology, Inc.*, and its successors, and the UNITED STEELWORKERS on behalf of itself and
members of LOCAL UNION No. 3298
	 
	30.	 	Agreement dated August 15, 2010, by and between ITT Residential & Commercial Water located in
the Village of Morton Grove, and INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND
AGRICULTURAL IMPLEMENT WORKERS OF AMERICA and its LOCAL UNION NO. 890
	 
	31.	 	Agreement between ITT RCW Heat Transfer, Buffalo, New York, and UNITED STEELWORKERS,
AFL-CIO-CLC Local Number 897, 2010-2013
	 
	32.	 	Agreement dated September 23, 2010 between ITT R&CW, a division of ITT Industries of Canada
L.P. (for hourly union employees in Guelph, ON) and United Steel, Paper and Forestry, Rubber,
Manufacturing, Energy, Allied Industrial and Service Workers International Union (United
Steelworkers) — Local 8614-05
	 
	33.	 	Agreement dated April 22, 2010 between ITT W&WW, a division of ITT Industries of Canada L.P.
(for hourly union shop employees in Pointe-Claire, QC) and National Automobile, Aerospace and
Agricultural Implement Workers Union of Canada (CAW Canada) — Local 698
	 
	34.	 	Agreement dated May 1, 2010 between ITT W&WW, a division of ITT Industries of Canada L.P.
(for hourly union shop employees in Surrey, BC) and International Union of Operating Engineers
(IUOE) — Local 115
	 
	35.	 	Agreement dated May 1, 2008 between ITT W&WW, a division of ITT Industries of Canada L.P.
(for salaried union office employees in Surrey, BC) and Canadian Office and Professional
Employee’s Union (COPE) — Local 15

Table of Contents

27

Schedule 16(a): Liabilities Assumed by ITT

	1.	 	None

Schedule 16(b): Liabilities Assumed by Water

	2.	 	None

Schedule 16(c): Liabilities Assumed by Defense

	3.	 	None

Table of Contents

28

Schedule 18(e): Miscellaneous Expenses

	1.	 	Noneexv10w3

Exhibit
10.3

TAX MATTERS AGREEMENT

by and among

ITT CORPORATION,

XYLEM INC.,

and

EXELIS INC.

Dated as of October 25, 2011

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS AND INTERPRETATION
	 	 	2	 
	 
	 	 	 	 
	Section 1.1 Definitions
	 	 	2	 
	Section 1.2 References; Interpretation
	 	 	11	 
	Section 1.3 Effective Time
	 	 	11	 
	 
	 	 	 	 
	ARTICLE II PREPARATION AND FILING OF TAX RETURNS
	 	 	12	 
	 
	 	 	 	 
	Section 2.1 Responsibility of ITT to Prepare and File Tax Returns
	 	 	12	 
	Section 2.2 Responsibility of Parties to Prepare and File Covered Water
Separate U.S. Income Tax Returns and Covered Defense Separate U.S. Income Tax
Returns
	 	 	12	 
	Section 2.3 Responsibility of Parties to Prepare and File
Post-Distribution Income Tax Returns, Non-U.S. Income Tax Returns, and
Non-Income Tax Returns
	 	 	14	 
	Section 2.4 Time of Filing Tax Returns; Manner of Tax Return Preparation
	 	 	14	 
	Section 2.5 Costs and Expenses
	 	 	14	 
	 
	 	 	 	 
	ARTICLE III RESPONSIBILITY FOR PAYMENT OF TAXES
	 	 	15	 
	 
	 	 	 	 
	Section 3.1 Responsibility of ITT for Taxes
	 	 	15	 
	Section 3.2 Responsibility of Defense for Taxes
	 	 	15	 
	Section 3.3 Responsibility of Water for Taxes
	 	 	15	 
	Section 3.4 Timing of Payments of Taxes
	 	 	16	 
	 
	 	 	 	 
	ARTICLE IV REFUNDS, CARRYBACKS AND AMENDED TAX RETURNS
	 	 	16	 
	 
	 	 	 	 
	Section 4.1 Refunds
	 	 	16	 
	Section 4.2 Carrybacks
	 	 	16	 
	Section 4.3 Amended Tax Returns
	 	 	16	 
	 
	 	 	 	 
	ARTICLE V DISTRIBUTION TAXES
	 	 	17	 
	 
	 	 	 	 
	Section 5.1 Liability for Distribution Taxes
	 	 	17	 
	Section 5.2 Definition of Fault
	 	 	17	 
	Section 5.3 Limits on Proposed Acquisition Transactions and Other
Transactions During Restricted Period
	 	 	18	 
	Section 5.4 IRS Ruling, Tax Representation Letters, and Tax Opinions;
Consistency
	 	 	19	 
	Section 5.5 Timing of Payment of Taxes
	 	 	19	 
	 
	 	 	 	 
	ARTICLE VI GAIN RECOGNITION AGREEMENTS
	 	 	19	 
	 
	 	 	 	 
	Section 6.1 Gain Recognition Agreement Compliance
	 	 	19	 

i

 

	 	 	 	 	 
	 	 	Page	 
	Section 6.2 Gain Recognition Agreement Taxes
	 	 	20	 
	Section 6.3 Timing of Payment of Taxes
	 	 	20	 
	 
	 	 	 	 
	ARTICLE VII INDEMNIFICATION
	 	 	20	 
	 
	 	 	 	 
	Section 7.1 Indemnification Obligations of ITT
	 	 	20	 
	Section 7.2 Indemnification Obligations of Water
	 	 	20	 
	Section 7.3 Indemnification Obligations of Defense
	 	 	21	 
	 
	 	 	 	 
	ARTICLE VIII PAYMENTS
	 	 	21	 
	 
	 	 	 	 
	Section 8.1 Payments
	 	 	21	 
	Section 8.2 Treatment of Payments made Pursuant to Tax Matters Agreement
	 	 	21	 
	Section 8.3 Payments Net of Tax Benefit Actually Realized and Tax Cost
	 	 	22	 
	 
	 	 	 	 
	ARTICLE IX AUDITS
	 	 	22	 
	 
	 	 	 	 
	Section 9.1 Notice
	 	 	22	 
	Section 9.2 Audits
	 	 	22	 
	Section 9.3 Payment of Audit Amounts
	 	 	25	 
	 
	 	 	 	 
	ARTICLE X COOPERATION AND EXCHANGE OF INFORMATION
	 	 	29	 
	 
	 	 	 	 
	Section 10.1 Cooperation and Exchange of Information
	 	 	29	 
	Section 10.2 Retention of Records
	 	 	30	 
	 
	 	 	 	 
	ARTICLE XI ALLOCATION OF TAX ATTRIBUTES AND OTHER TAX MATTERS
	 	 	30	 
	 
	 	 	 	 
	Section 11.1 Allocation of Tax Attributes
	 	 	30	 
	Section 11.2 Allocation of Tax Items
	 	 	31	 
	 
	 	 	 	 
	ARTICLE XII DEFAULTED AMOUNTS
	 	 	31	 
	 
	 	 	 	 
	Section 12.1 General
	 	 	31	 
	Section 12.2 Subsidiary Funding
	 	 	32	 
	 
	 	 	 	 
	ARTICLE XIII DISPUTE RESOLUTION
	 	 	32	 
	 
	 	 	 	 
	Section 13.1 Resolution in Accordance with Distribution Agreement
	 	 	32	 
	 
	 	 	 	 
	ARTICLE XIV MISCELLANEOUS
	 	 	32	 
	 
	 	 	 	 
	Section 14.1 Counterparts
	 	 	32	 
	Section 14.2 Survival
	 	 	32	 
	Section 14.3 Notices
	 	 	33	 
	Section 14.4 Waivers
	 	 	33	 
	Section 14.5 Assignment
	 	 	33	 
	Section 14.6 Successors and Assigns
	 	 	33	 
	Section 14.7 Termination and Amendment
	 	 	34	 

ii

 

	 	 	 	 	 
	 	 	Page	 
	Section 14.8 No Circumvention
	 	 	34	 
	Section 14.9 Subsidiaries
	 	 	34	 
	Section 14.10 Third Party Beneficiaries
	 	 	34	 
	Section 14.11 Title and Headings
	 	 	34	 
	Section 14.12 Exhibits and Schedules
	 	 	34	 
	Section 14.13 Governing Law
	 	 	34	 
	Section 14.14 Consent to Jurisdiction
	 	 	34	 
	Section 14.15 Waiver of Jury Trial
	 	 	35	 
	Section 14.16 Force Majeure
	 	 	35	 
	Section 14.17 Interpretation
	 	 	35	 
	Section 14.18 Changes in Law
	 	 	35	 
	Section 14.19 Severability
	 	 	36	 
	Section 14.20 Tax Sharing Agreements
	 	 	36	 
	Section 14.21 Exclusivity
	 	 	36	 
	Section 14.22 No Waiver
	 	 	36	 
	Section 14.23 No Duplication; No Double Recovery
	 	 	36	 

Schedules

	 	 	 

	Schedule 1.1(6)

	 	List of ATOB Entities
	Schedule 1.1(27)

	 	List of Distributions
	Schedule 1.1(88)

	 	List of Section 355 Entities
	Schedule 6.1

	 	List of GRAs

iii

 

TAX MATTERS AGREEMENT

     THIS TAX MATTERS AGREEMENT (this “Agreement”) is made and entered into as of the day of
October 25, 2011, by and among ITT Corporation, an Indiana corporation (“ITT”), Xylem
Inc., an Indiana corporation (“Water”), and Exelis Inc., an Indiana corporation
(“Defense”). Each of ITT, Water, and Defense is sometimes referred to herein as a “Party” and
collectively, as the “Parties”.

WITNESSETH:

     WHEREAS, ITT, acting through its direct and indirect Subsidiaries, currently conducts a number
of businesses, including (i) the Water Business (as defined herein), (ii) the Defense Business (as
defined herein), and (iii) the ITT Retained Business (as defined herein);

     WHEREAS, the Board of Directors of ITT has determined that it is appropriate, desirable and in
the best interests of ITT and its shareholders to separate ITT into three separate, publicly traded
companies, one for each of (i) the Water Business, which shall be owned and conducted, directly or
indirectly, by Water, (ii) the Defense Business, which shall be owned and conducted, directly or
indirectly, by Defense, and (iii) the ITT Retained Business which shall be owned and conducted,
directly or indirectly, by ITT;

     WHEREAS, in order to effect such separation, the Board of Directors of ITT has determined that
it is appropriate, desirable and in the best interests of ITT and its shareholders (i) to enter
into a series of transactions whereby (A) ITT and/or one or more members of the ITT Group will,
collectively, own all of the ITT Retained Assets and assume (or retain) all of the ITT Retained
Liabilities, (B) Water and/or one or more members of the Water Group will, collectively, own all of
the Water Assets and assume (or retain) all of the Water Liabilities, and (C) Defense and/or one or
more members of the Defense Group will, collectively, own all of the Defense Assets and assume (or
retain) all of the Defense Liabilities and (ii) for ITT to distribute to the holders of ITT Common
Stock on a pro rata basis (in each case without consideration being paid by such shareholders) (A)
all of the outstanding shares of common stock, par value $.01 per share, of Water (the “Water
Common Stock”), and (B) all of the outstanding shares of common stock, par value $.01 per share, of
Defense (the “Defense Common Stock”) (such transactions as they may be amended or modified from
time to time, collectively, the “Plan of Separation”);

     WHEREAS, it is the intention of the Parties that each of the contributions of assets to, and
the assumption of liabilities by, Water and Defense together with the corresponding distribution of
all of the Water Common Stock and the Defense Common Stock, respectively, shall qualify as a
reorganization within the meaning of Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of
1986, as amended (the “Code”);

     WHEREAS, it is the intention of the Parties that each of the distribution of Water Common
Stock and Defense Common Stock, respectively, to the shareholders of ITT will qualify as a tax-free
under Section 355(a) of the Code to such shareholders and as tax-free to ITT under Section 361(c)
of the Code;

 

 

     WHEREAS, notwithstanding the implementation of certain internal transactions undertaken
preparatory to and in contemplation of aligning and properly capitalizing the Water Business, the
Defense Business, and the ITT Retained Business prior to the Distributions, it is the intention of
the Parties that the shared responsibility for certain Tax liabilities (including certain
Distribution Tax liabilities) be given effect no earlier than and only upon the Effective Time, all
as described more fully herein; and

     WHEREAS, in connection with the Plan of Separation, the Parties desire to set forth their
agreement on the rights and obligations with respect to handling and allocating Taxes and related
matters.

     NOW, THEREFORE, in consideration of the foregoing and the terms, conditions, covenants and
provisions of this Agreement, each of the Parties mutually covenant and agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

          Section 1.1 Definitions. As used in this Agreement, the following terms shall have the following meanings:

     (1) “Active Business” means the business conducted by each of the ATOB Entities as of
the applicable distribution date.

     (2) “Affiliate” means a Person that directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with, a specified Person.
A Person shall be deemed to control another Person if such first Person possesses, directly or
indirectly, the power to direct, or cause the direction of, the management and policies of such
other Person, whether through the ownership of voting securities, by contract or otherwise. For
purposes hereof, none of the Parties or their respective Subsidiaries shall be considered an
“Affiliate” of any of the other Parties or their respective Subsidiaries (determined on the same
basis).

     (3) “Agreement” has the meaning set forth in the preamble hereto.

     (4) “Ancillary Agreements” has the meaning set forth in the Distribution Agreement.

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

     (6) “ATOB Entities” mean the entities listed on Schedule 1.1(6).

     (7) “Audit” means any audit (including a determination of the status of qualified and
non-qualified employee benefit plans), assessment of Taxes, other examination by or on behalf of
any Taxing Authority (including notices), proceeding, or appeal of such a proceeding relating to
Taxes, whether administrative or judicial, including proceedings relating to competent authority
determinations initiated by a Party or any of its Subsidiaries.

2

 

     (8) “Audit Management Party” means the Party responsible for administering and
controlling an Audit pursuant to Section 9.2(a)(i) or (b)(ii).

     (9) “Audit Representative” means the Chief Tax Officer of each Party (or such other
officer of a Party that may be designated by that Party’s Chief Financial Officer from time to
time).

     (10) “Audit True-Up Date” means fifteen (15) days after the earlier of (i) the date
that is ten (10) years following the Distribution Date and (ii) the expiration of all applicable
statute of limitations periods for any ITT Federal Income Tax Returns, ITT U.S. State Income Tax
Returns, and ITT Non-U.S. Income Tax Returns.

     (11) “Big Four Accounting Firm” means each of Deloitte & Touche LLP, Ernst & Young
LLP, KPMG LLP, and Pricewaterhouse Coopers LLP.

     (12) “Business Day” means any day other than a Saturday, Sunday or a day on which
banks are required to be closed in New York, New York.

     (13) “Change of Control” has the meaning set forth in the Joint Defense Agreement.

     (14) “Claiming Party” has the meaning set forth in Section 11.2(b).

     (15) “Code” has the meaning referred to in the recitals to this Agreement.

     (16) “Covered Defense Separate U.S. Income Tax Returns” means any Defense Separate
U.S. Income Tax Return required to be filed (i) for a Pre-Distribution Tax Period, (ii) for a
Straddle Tax Period, or (iii) for a Stub Tax Period.

     (17) “Covered Water Separate U.S. Income Tax Returns” means any Water Separate U.S.
Income Tax Return required to be filed (i) for a Pre-Distribution Tax Period, (ii) for a Straddle
Tax Period, or (iii) for a Stub Tax Period.

     (18) “Defense” has the meaning set forth in the recitals hereto.

     (19) “Defense Assets” has the meaning set forth in the Distribution Agreement.

     (20) “Defense Business” has the meaning set forth in the Distribution Agreement.

     (21) “Defense Common Stock” has the meaning set forth in the recitals hereto.

     (22) “Defense Group” has the meaning set forth in the Distribution Agreement.

     (23) “Defense Separate U.S. Income Tax Return” means any U.S. federal, state, or local
Income Tax Return (including any consolidated, combined, unitary, or similar return) (i) that is
not an ITT Combined U.S. Income Tax Return and (ii) that Defense or any member of the Defense Group
is responsible under applicable Law for filing.

     (24) “Defense Federal Sharing Percentage” means thirty percent (30%).

3

 

     (25) “Defense U.S. State Sharing Percentage” means twenty-nine percent (29%).

     (26) “Dispute” has the meaning set forth in Section 13.1.

     (27) “Distribution” or “Distributions” means, individually or collectively:

          (a) the distribution on the Distribution Date to holders of record of shares of ITT Common
Stock as of the Distribution Date of the Defense Common Stock and the Water Common Stock owned by
ITT, and

          (b) the distributions listed on Schedule 1.1(27).

     (28) “Distribution Agreement” means the Distribution Agreement by and among
ITT, Water, and Defense, dated as of October 25, 2011.

     (29) “Distribution Date” means the date on which the Distributions to holders of
record of shares of ITT Common Stock of the Defense Common Stock and the Water Common Stock owned
by ITT are effectuated pursuant to the Distribution Agreement.

     (30) “Distribution Sharing Percentages” means, with respect to ITT, twenty-one percent
(21%), with respect to Water, forty percent (40%), and with respect to Defense, thirty-nine percent
(39%).

     (31) “Distribution Taxes” mean any and all Taxes (a) required to be paid by or imposed
on a Party or any of its Affiliates (determined on a “with and without” basis) resulting from, or
directly arising in connection with, the failure of the Distributions to qualify under Section
355(a) or (c) of the Code or, if applicable, Section 361(c) of the Code, or the application of
Section 355(d) or (e) of the Code to the Distributions (or the failure to qualify under or the
application of corresponding provisions of the Laws of U.S. state or local jurisdictions).

     (32) “Due Date” means the date (taking into account all valid extensions) upon which a
Tax Return is required to be filed with or Taxes are required to be paid to a Taxing Authority,
whichever is applicable.

     (33) “Effective Time” has the meaning set forth in the Distribution Agreement.

     (34) “Fault” has the meaning set forth in Section 5.2.

     (35) “Federal Sharing Percentages” means, with respect to ITT, the ITT Federal Sharing
Percentage, with respect to Water, the Water Federal Sharing Percentage, and with respect to
Defense, the Defense Federal Sharing Percentage.

     (36) “Final Determination” means the final resolution of liability for any Tax for any
taxable period, by or as a result of:

          (a) a final decision, judgment, decree or other order by any court of competent jurisdiction
that can no longer be appealed;

4

 

          (b) a final settlement with the IRS, a closing agreement or accepted offer in compromise under
Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of other jurisdictions,
which resolves the liability for the Taxes addressed in such agreement for any taxable period;

          (c) any allowance of a refund or credit in respect of an overpayment of Tax, but only after
the expiration of all periods during which such refund may be recovered by the jurisdiction
imposing the Tax; or

          (d) any other final disposition, including by reason of the expiration of the applicable
statute of limitations.

     (37) “GRA” means any “gain recognition agreement” as such term is used in Treasury
Regulations Section 1.367(a)-8 or defined in Treasury Regulations Section 1.367(a)-8T(a)(1)(v), as
applicable.

     (38) “Group” means the ITT Group, the Water Group, or the Defense Group.

     (39) “Income Taxes” mean:

          (a) all Taxes based upon, measured by, or calculated with respect to (i) net income or profits
(including, but not limited to, any capital gains, minimum tax or any Tax on items of tax
preference, but not including sales, use, real, or personal property, gross or net receipts, value
added, excise, leasing, transfer or similar Taxes), or (ii) multiple bases (including, but not
limited to, corporate franchise, doing business and occupation Taxes) if one or more bases upon
which such Tax is determined is described in clause (a)(i) above; and

          (b) all U.S., state, local or non-U.S. franchise Taxes.

     (40) “Income Tax Returns” mean all Tax Returns that relate to Income Taxes.

     (41) “Indemnified Party” means the Party which is or may be entitled pursuant to this
Agreement to receive any payments (including reimbursement for Taxes or costs and expenses) from
another Party or Parties to this Agreement.

     (42) “Indemnifying Party” means the Party which is or may be required pursuant to this
Agreement to make indemnification or other payments (including reimbursement for Taxes and costs
and expenses) to another Party to this Agreement.

     (43) “IRS” means the United States Internal Revenue Service or any successor thereto,
including, but not limited to its agents, representatives, and attorneys.

     (44) “IRS Ruling” means the requests submitted to the IRS for all private letter
rulings to be obtained by ITT from the IRS in connection with the Plan of Separation, and any
supplemental materials submitted to the IRS relating thereto, and the IRS private letter rulings
received by ITT with respect to the Plan of Separation.

     (45) “ITT” has the meaning set forth in the preamble of this Agreement.

5

 

     (46) “ITT Combined or ITT Separate U.S. Income Tax Return” means (i) any ITT Combined
U.S. Income Tax Return and (ii) any ITT Separate U.S. Income Tax Return required to be filed for
any Pre-Distribution Tax Period or Straddle Tax Period.

     (47) “ITT Combined U.S. Income Tax Return” means any U.S. federal, state, or local
consolidated, combined, unitary or similar Income Tax Return that actually includes, by election or
otherwise, one or more members of the ITT Group together with one or more members of either the
Water Group or the Defense Group.

     (48) “ITT Common Stock” has the meaning set forth in the Distribution Agreement.

     (49) “ITT Federal Income Tax Return” means any U.S. federal consolidated Income Tax
Return that actually includes, by election or otherwise, one or more members of the ITT Group
together with one or more members of either the Water Group or the Defense Group.

     (50) “ITT Federal Income Tax Audit” means any Audit of any ITT Federal Income Tax
Return.

     (51) “ITT Federal Income Tax Audit Amount” has the meaning set forth in Section
9.3(a).

     (52) “ITT Federal Sharing Percentage” means nineteen percent (19%).

     (53) “ITT Group” has the meaning set forth in the Distribution Agreement.

     (54) “ITT Income Tax Audit Amount” means the sum of the ITT Federal Income Tax Audit
Amount, the ITT U.S. State Income Tax Audit Amount, and the ITT Non-U.S. Income Tax Audit Amount.

     (55) “ITT Non-U.S. Income Tax Audit” means any Audit of any ITT Non-U.S. Income Tax
Return.

     (56) “ITT Non-U.S. Income Tax Audit Amount” has the meaning set forth in Section
9.3(c).

     (57) “ITT Non-U.S. Income Tax Return” means any Non-U.S. Income Tax Return (including
any consolidated, combined, unitary, or similar return) that includes, by election or otherwise,
one or more members of the ITT Group and that is required to be filed for any Pre-Distribution Tax
Period or Straddle Tax Period.

     (58) “ITT Non-U.S. Sharing Percentage” means eighty-four percent (84%).

     (59) “ITT Retained Assets” has the meaning set forth in the Distribution Agreement.

     (60) “ITT Retained Business” has the meaning set forth in the Distribution Agreement.

6

 

     (61) “ITT Retained Liabilities” has the meaning set forth in the Distribution
Agreement.

     (62) “ITT Separate U.S. Income Tax Return” means any U.S. federal, state, or local
Income Tax Return (including any consolidated, combined, unitary, or similar return) (i) that is
not an ITT Combined U.S. Income Tax Return and (ii) that ITT or any member of the ITT Group is
responsible under applicable Law for filing.

     (63) “ITT U.S. State Income Tax Audit Amount” has the meaning set forth in Section
9.3(b).

     (64) “ITT U.S. State Income Tax Return” means any U.S. state or local Income Tax
Return (including any consolidated, combined, unitary, or similar return) that includes, by
election or otherwise, one or more members of the ITT Group required to be filed for any
Pre-Distribution Tax Period or Straddle Tax Period.

     (65) “ITT U.S. State Sharing Percentage” means sixty-five percent (65%).

     (66) “Law” means any U.S. or non-U.S. federal, national, supranational, state,
provincial, local or similar statute, law, ordinance, regulation, rule, code, administrative
pronouncement, order, requirement or rule of law (including common law), or any income tax treaty.

     (67) “LIBOR” has the meaning set forth in the Distribution Agreement.

     (68) “Losses” has the meaning assigned to the term “Indemnifiable Losses” in the
Distribution Agreement.

     (69) “Majority of the Parties” means the consent of at least two of the Parties.

     (70) “New York Courts” has the meaning set forth in Section 14.14.

     (71) “Non-Income Tax Returns” mean all Tax Returns other than Income Tax Returns.

     (72) “Non-U.S. Income Tax Returns” means all Income Tax Returns required to be filed
with any Taxing Authority of any jurisdiction outside the U.S.

     (73) “Non-U.S. Sharing Percentages” means, with respect to ITT, the ITT Non-U.S.
Sharing Percentage, and, with respect to Water, the Water Non-U.S. Sharing Percentage.

     (74) “Participating Party” has the meaning set forth in Section 9.2(c)(i).

     (75) “Party” has the meaning set forth in the preamble hereto.

     (76) “Paying Party” has the meaning set forth in Section 11.2(b).

7

 

     (77) “Person” means any natural person, firm, individual, corporation, business trust,
joint venture, association, company, limited liability company, partnership, or other organization
or entity, whether incorporated or unincorporated, or any governmental entity.

     (78) “Plan of Separation” has the meaning set forth in the recitals hereto.

     (79) “Post-Distribution Income Tax Returns” mean, collectively, all Income Tax Returns
required to be filed by a Party or its Affiliates for a Post-Distribution Tax Period.

     (80) “Post-Distribution Payment Tax Benefit” has the meaning set forth in Section
11.2(b).

     (81) “Post-Distribution Ruling” has the meaning set forth in Section 5.3.

     (82) “Post-Distribution Tax Period” means a Tax period beginning and ending after the
Distribution Date.

     (83) “Pre-Distribution Tax Period” means a Tax period beginning and ending on or
before the Distribution Date.

     (84) “Proposed Acquisition Transaction” means a transaction or series of transactions
(or any agreement, understanding, arrangement, or substantial negotiations within the meaning of
Section 355(e) of the Code and the Treasury Regulations promulgated thereunder, to enter into a
transaction or series of related transactions), (i) as a result of which any of the Parties or any
of the Section 355 Entities (or any successor thereto) would merge or consolidate with any other
Person, or (ii) as a result of which any Person or any group of Persons would (directly or
indirectly) acquire, or have the right to acquire (through an option or otherwise), from any of the
Parties or any of their Affiliates (or any successor thereto) and/or one or more holders of their
stock, respectively, any amount of stock of any of the Parties or any of the Section 355 Entities,
as the case may be, that would, when combined with any other changes in ownership of the stock of
such Party or any of the Section 355 Entities, result in a shift of more than thirty-five percent
(35%) of (a) the value of all outstanding stock of such Party or any of the Section 355 Entities as
of the date of such transaction, or in the case of a series of transactions, the date of the last
transaction of such series, or (b) the total combined voting power of all outstanding stock of such
Party or any of the Section 355 Entities as of the date of such transaction, or in the case of a
series of transactions, the date of the last transaction of such series. For purposes of
determining whether a transaction constitutes an indirect acquisition for purposes of the first
sentence of this definition, any recapitalization or other action resulting in a shift of voting
power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of
stock by the non-exchanging shareholders. This definition and the application thereof is intended
to monitor compliance with Section 355(e) of the Code and the Treasury Regulations promulgated
thereunder and shall be interpreted accordingly by the Parties in good faith.

     (85) “Qualified Tax Advisor” means any Big Four Accounting Firm or any law firm of
nationally recognized standing.

     (86) “Requesting Party” shall have the meaning set forth in Section 5.3.

8

 

     (87) “Restricted Period” means the period beginning at the Effective Time and ending
on the two-year anniversary of the day after the Distribution Date.

     (88) “Section 355 Entities” mean the entities listed on Schedule 1.1(88).

     (89) “Simpson” means Simpson Thacher & Bartlett LLP.

     (90) “Spinco Parties” mean, each individually and collectively, Water and Defense.

     (91) “Straddle Tax Period” means a Tax period beginning before the Distribution Date
and ending after the Distribution Date.

     (92) “Stub Tax Period” means a short Tax period beginning immediately following the
Distribution Date.

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

     (94) “Tax” or “Taxes” means (i) all taxes, charges, fees, imposts, levies or
other assessments, including all net income, gross receipts, capital, sales, use, gains, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes, custom duties, fees, assessments and charges of any kind whatsoever,
(ii) liability for the payment of any amount of the type described in clause (i) above arising
as a result of being (or having been) a member of any group or being (or having been) included or
required to be included in any Tax Return related thereto, and (iii) liability for the payment of
any amount of the type described in clauses (i) or (ii) above as a result of any express or implied
obligation to indemnify or otherwise assume or succeed to the liability of any other Person.
Whenever the term “Tax” or “Taxes” is used it shall include penalties, fines, additions to tax and
interest thereon.

     (95) “Tax Attributes” mean for U.S. federal, state, local, and non-U.S. Income Tax
purposes, earnings and profits, tax basis, net operating and capital loss carryovers or carrybacks,
alternative minimum Tax credit carryovers or carrybacks, general business credit carryovers or
carrybacks, income tax credits or credits against income tax, disqualified interest and excess
limitation carryovers or carrybacks, overall foreign losses, research and experimentation credit
base periods, and all other items that are determined or computed on an affiliated group basis (as
defined in Section 1504(a) of the Code determined without regard to the exclusion contained in
Section 1504(b)(3) of the Code), or similar Tax items determined under applicable Tax law.

     (96) “Tax Benefit Actually Realized” means with respect to a Party and its
Subsidiaries a reduction in the amount of Taxes that are required to be paid or an increase in
refund due, whether resulting from a deduction, from reduced gain or increased loss from
disposition of an asset, or otherwise, such reduction or increase in refund due determined on an
“actually realized” basis. For purposes of this definition, a Party or its Subsidiaries will be
deemed to have “actually realized” such reduction or increase in refund due at the time the amount
of Taxes such Party or any of its Subsidiaries is required to pay is reduced or the amount of any
refund due is increased. The amount of any Tax Benefit Actually Realized shall be computed on a
“with and without” basis.

9

 

     (97) “Tax-Free Status” means the qualification of a Distribution or any other
transaction contemplated by the IRS Ruling or any Tax Opinion as a transaction in which gain or
loss is not recognized, in whole or in part, and no amount is included in income, including by
reason of Distribution Taxes, for U.S. federal, state, and local income tax purposes (other than
intercompany items, excess loss accounts or other items required to be taken into account pursuant
to Treasury Regulations promulgated under Section 1502 of the Code).

     (98) “Taxing Authority” means any governmental authority or any subdivision, agency,
commission, or authority thereof or any quasi-governmental or private body having jurisdiction over
the assessment, determination, collection, or imposition of any Tax (including the IRS).

     (99) “Tax Opinions” mean certain Tax opinions and supporting memoranda rendered by
Simpson to ITT or any of its Affiliates in connection with the Plan of Separation.

     (100) “Tax Package” means Tax data and information relating to the operations of a
Spinco Party and/or its Subsidiaries, the Water Business (in the case of Water), or the Defense
Business (in the case of Defense) that is reasonably necessary to prepare and file any ITT Combined
or ITT Separate U.S. Income Tax Return, Covered Water Separate U.S. Income Tax Return, or Covered
Defense Separate U.S. Income Tax Return, as applicable, and is consistent with the content and
format of Tax data and information submitted by Affiliates of Water or Water Business divisions (in
the case of Water) or Affiliates of Defense or Defense Business divisions (in the case of Defense)
to ITT for Tax Returns (both U.S. and non-U.S.) for Tax periods prior to 2011.

     (101) “Tax Representation Letter” means any letter containing certain representations
and covenants issued by ITT or any of its Affiliates to Simpson in connection with the Tax
Opinions.

     (102) “Tax Returns” mean any return, report, certificate, form or similar statement or
document (including any related or supporting information or schedule attached thereto and any
information return, amended tax return, claim for refund, or declaration of estimated tax) required
to be supplied to, or filed with, a Taxing Authority in connection with the determination,
assessment or collection of any Tax or the administration of any Laws, regulations, or
administrative requirements relating to any Taxes.

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

     (104) “Treasury Regulations” mean the income tax and administrative regulations
promulgated from time to time under the Code, as in effect for the relevant Tax Period.

     (105) “Unqualified Tax Opinion” means an unqualified “will” opinion of a Qualified Tax
Advisor, which opinion is reasonably acceptable to each of the Parties and upon which each of the
Parties may rely to confirm that a transaction (or transactions) will not result in Distribution
Taxes.

     (106) “U.S.” means the United States.

10

 

     (107) “U.S. State Sharing Percentages” means, with respect to ITT, the ITT U.S. State
Sharing Percentage, with respect to Water, the Water U.S. State Sharing Percentage, and with
respect to Defense, the Defense U.S. State Sharing Percentage.

     (108) “Water” has the meaning set forth in the recitals to this Agreement.

     (109) “Water Assets” has the meaning set forth in the Distribution Agreement.

     (110) “Water Business” has the meaning set forth in the Distribution Agreement.

     (111) “Water Common Stock” has the meaning set forth in the recitals hereto.

     (112) “Water Federal Sharing Percentage” means fifty-one percent (51%).

     (113) “Water Group” has the meaning set forth in the Distribution Agreement.

     (114) “Water Liabilities” has the meaning set forth in the Distribution Agreement.

     (115) “Water Non-U.S. Sharing Percentage” means sixteen percent (16%).

     (116) “Water Separate U.S. Income Tax Return” means any U.S. federal, state, or local
Income Tax Return (including any consolidated, combined, unitary, or similar return) (i) that is
not an ITT Combined U.S. Income Tax Return and (ii) that Water or any member of the Water Group is
responsible under applicable Law for filing.

     (117) “Water U.S. State Sharing Percentage” means six percent (6%).

          Section 1.2 References; Interpretation.

          (a) Terms not otherwise defined herein shall have the meaning ascribed to them in the
Distribution Agreement. References in this Agreement to any gender include references to all
genders, and references to the singular include references to the plural and vice versa. Unless the
context otherwise requires, the words “include”, “includes”, and “including” when used in this
Agreement shall be deemed to be followed by the phrase “without limitation”. Unless the context
otherwise requires, references in this Agreement to Articles, Sections, Exhibits and Schedules
shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this
Agreement. Unless the context otherwise requires, the words “hereof”, “hereby”, and “herein” and
words of similar meaning when used in this Agreement refer to this Agreement in its entirety and
not to any particular Article, Section or provision of this Agreement.

          Section 1.3 Effective Time.

          (a) The Parties acknowledge that the Plan of Separation contemplates a series of interrelated
and intermediate internal transactions undertaken preparatory to and in contemplation of the
Distributions that must be completed prior to the Effective Time in order to align and properly
capitalize the Water Business, the Defense Business, and the ITT Retained Business.

11

 

          (b) Notwithstanding that these interrelated and intermediate internal transactions must be
given effect prior to the Distributions, the agreements contained herein, including, but not
limited to, the manner in which Taxes are shared amongst the Parties, shall be effective no earlier
than and only upon the Effective Time.

ARTICLE II

PREPARATION AND FILING OF TAX RETURNS

          Section 2.1 Responsibility of ITT to Prepare and File Tax Returns.

          (a) General. To the extent not previously filed and subject to the rights and
obligations of each of the Parties set forth herein, ITT shall prepare or cause to be prepared all
(i) Tax Returns required to be filed (taking into account any applicable extensions) on or prior to
the Distribution Date, (ii) ITT Combined or ITT Separate U.S. Income Tax Returns, and (iii) ITT
Non-U.S. Income Tax Returns. ITT shall file or cause to be filed all such Tax Returns with the
applicable Taxing Authority. To the extent any member of the Water Group or the Defense Group could
be liable after the Distribution Date for Taxes with respect to such Tax Returns (taking into
account any provision under this Agreement), ITT shall be required to prepare such Tax Returns in a
manner consistent with the past practice of ITT and its Affiliates (unless otherwise modified by a
Final Determination or required by applicable Law). All Tax Returns filed under this Section 2.1
shall be filed in a manner consistent with (and the Parties and their Affiliates shall not take any
position inconsistent with) the IRS Ruling, the Tax Representation Letters, and the Tax Opinions.
Subject to the foregoing standards, ITT shall have the right with respect to any Tax Return filed
under this Section 2.1, to determine: (a) except as provided in Section 11.2(a), the manner in
which such Tax Return will be prepared and filed, including the elections, method of accounting,
positions, conventions, and principles of taxation to be used and the manner in which any Tax item
will be reported; (b) whether any extensions may be requested; and (c) except as provided in
Section 11.2(a), the elections that will be made by ITT, any member of the ITT Group, any member of
the Water Group, or any member of the Defense Group on such Tax Return.

          (b) Tax Package. To the extent not previously provided, Water and Defense shall (at
their own cost and expense), to the extent that an ITT Combined or ITT Separate U.S. Income Tax
Return includes items of that Party or its Affiliates, the Water Business (in the case of Water),
or the Defense Business (in the case of Defense), prepare and provide or cause to be prepared and
provided to ITT a Tax Package relating to such Tax Return. Such Tax Package shall be provided in a
timely manner consistent with the past practices of the Parties and their Affiliates. In the event
a Party does not fulfill its obligations pursuant to this Section 2.1(b), ITT shall be entitled, at
the sole cost and expense of such Party, to prepare or cause to be prepared the information
required to be included in the Tax Package for purposes of preparing any such ITT Combined or ITT
Separate U.S. Income Tax Return.

          Section 2.2 Responsibility of Parties to Prepare and File Covered Water Separate U.S.
Income Tax Returns and Covered Defense Separate U.S. Income Tax Returns.

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          (a) General. Subject to the rights and obligations of each of the Parties set forth
herein, ITT shall prepare or cause to be prepared all Covered Water Separate U.S. Income Tax
Returns and all Covered Defense Separate U.S. Income Tax Returns required to be filed after the
Distribution Date. Water shall file or cause to be filed all such Covered Water Separate U.S.
Income Tax Returns with the applicable Taxing Authority, and Defense shall file or cause to be
filed all such Covered Defense Separate U.S. Income Tax Returns with the applicable Taxing
Authority. All such Tax Returns shall be prepared in a manner (i) consistent with the past practice
of the Parties and their Affiliates unless otherwise modified by a Final Determination or required
by applicable Law; (ii) consistent with (and the Parties and their Affiliates shall not take any
position inconsistent with) the IRS Ruling, the Tax Representation Letters, and the Tax Opinions;
and (iii) consistent with any ITT Combined U.S. Income Tax Returns.

          (b) Tax Package. To the extent not previously provided, Water and Defense shall (at
their own cost and expense), prepare and provide or cause to be prepared and provided to ITT a Tax
Package relating to any Covered Water Separate U.S. Income Tax Return (in the case of Water) or
Covered Defense Separate U.S. Income Tax Return (in the case of Defense). Such Tax Package shall be
provided in a timely manner consistent with the past practices of the Parties and their Affiliates.
In the event a Party does not fulfill its obligations pursuant to this Section 2.2(b), ITT shall be
entitled, at the sole cost and expense of such Party, to prepare or cause to be prepared the
information required to be included in the Tax Package for purposes of preparing any such Covered
Water Separate U.S. Income Tax Return or Covered Defense Separate U.S. Income Tax Return.

          (c) Procedures Relating to the Preparation and Filing of Covered Water Separate U.S.
Income Tax Returns and Covered Defense Separate U.S. Income Tax Returns.

               (i) In the case of Covered Water Separate U.S. Income Tax Returns and Covered Defense Separate
U.S. Income Tax Returns required to be filed after the Distribution Date, no later than forty-five
(45) days prior to the Due Date of each such Tax Return (reduced to twenty (20) days for state or
local Tax Returns), ITT shall make available or cause to be made available drafts of such Tax
Returns to Water or Defense, respectively. Water or Defense (as the case may be) shall have access
to any and all data and information reasonably necessary for the preparation of all such Tax
Returns, and ITT and Water or Defense (as the case may be) shall cooperate fully in the preparation
and review of such Tax Returns. Subject to the preceding sentence, no later than fifteen (15) days
after receipt of such Tax Returns (reduced to five (5) days for state or local Tax Returns), Water
shall have a right to object to such Covered Water Separate U.S. Income Tax Return (or items with
respect thereto) by written notice to ITT and Defense shall have a right to object to such Covered
Defense Separate U.S. Income Tax Return (or items with respect thereto) by written notice to ITT;
such written notice shall contain such disputed item (or items) and the basis for its objection.

               (ii) With respect to a Covered Water Separate U.S. Income Tax Return or Covered Defense
Separate U.S. Income Tax Return submitted by ITT to another Party pursuant to Section 2.2(c)(i), if
the other Party does not object by proper written notice within the time period described, such Tax
Return shall be deemed to have been accepted and agreed upon, and to be final and conclusive, for
purposes of this Section 2.2(c)(ii). If a Party does object by proper written notice within such
applicable time period, ITT shall reflect such Party’s comments

13

 

on such Tax Return; provided, however, that ITT shall not be required to
reflect comments to the extent such comments are inconsistent with the standards set forth in
Section 2.2(a). The Parties shall act in good faith to resolve any such dispute as promptly as
practicable. If the Parties have not reached a final resolution with respect to all disputed items
for which proper written notice was given within ten (10) days (reduced to two (2) days for state
or local Tax Returns) prior to the Due Date for such Tax Return, such Tax Return shall be filed as
prepared pursuant to this Section 2.2 (revised to reflect all initially disputed items that the
Parties have agreed upon prior to such date).

               (iii) In the event that a Covered Water Separate U.S. Income Tax Return or Covered Defense
Separate U.S. Income Tax Return required to be filed after the Distribution Date is filed that
includes any disputed item for which proper notice was given pursuant to this Section 2.2(c) that
was not finally resolved and agreed upon, such disputed item (or items) shall be resolved in
accordance with Article XIII. In the event that the resolution of such disputed item (or items) in
accordance with Article XIII with respect to a Covered Water Separate U.S. Income Tax Return or
Covered Defense Separate U.S. Income Tax Return is inconsistent with such Tax Return as filed, the
Party entitled under applicable Law to amend such Tax Return (with cooperation from the other
Parties) shall, as promptly as practicable, amend such Tax Return to properly reflect the final
resolution of the disputed item (or items). In the event that the amount of Taxes shown to be due
and owing on a Covered Water Separate U.S. Income Tax Return or Covered Defense Separate U.S.
Income Tax Return required to be filed after the Distribution Date is adjusted as a result of a
resolution pursuant to Article XIII, proper adjustment shall be made to the amounts previously paid
or required to be paid by the Parties in accordance with Article III in a manner that reflects such
resolution.

          Section 2.3 Responsibility of Parties to Prepare and File Post-Distribution Income Tax
Returns, Non-U.S. Income Tax Returns, and Non-Income Tax Returns. The Party or its Affiliate responsible under applicable Law for filing a Post-Distribution
Income Tax Return (other than a Tax Return for a Stub Tax Period), a Non-U.S. Income Tax Return
(other than an ITT Non-U.S. Income Tax Return), or a Non-Income Tax Return (in each case required
to be filed after the Distribution Date) shall prepare and file or cause to be prepared and filed
that Tax Return (at that Party’s own cost and expense). All such Tax Returns shall be filed in a
manner (i) consistent with (and the Parties and their Affiliates shall not take any position
inconsistent with) the IRS Ruling, the Tax Representation Letters, and the Tax Opinions and (ii)
consistent with any ITT Combined U.S. Income Tax Returns.

          Section 2.4 Time of Filing Tax Returns; Manner of Tax Return Preparation. Each Tax Return shall be filed on or prior to the Due Date for such Tax Return by the Party
responsible for filing such Tax Return hereunder. Unless otherwise required by a Taxing Authority
pursuant to a Final Determination, the Parties hereto shall prepare and file or cause to be
prepared and filed all Tax Returns and take all other actions in a manner consistent with (and
shall not take any position inconsistent with) any assumptions, representations, warranties,
covenants, and conclusions provided by the Parties in connection with the Plan of Separation.

          Section 2.5 Costs and Expenses. Unless otherwise provided in this Agreement, the party responsible for preparing any Tax Return
under Section 2.1, 2.2, or 2.3 shall be responsible for the costs and expenses associated with
preparing such Tax Returns.

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Notwithstanding the foregoing, the external costs and expenses associated with preparing all ITT
Combined or ITT Separate U.S. Income Tax Returns, Covered Water Separate U.S. Income Tax Returns,
and Covered Defense Separate U.S. Income Tax Returns shall be shared on an equal one-third (1/3)
basis by each of the Parties; provided, however, if ITT determines that such shared
external costs and expenses are reasonably expected to exceed $1,500,000, then at such time the
Chief Executive Officer of ITT shall notify the Chief Executive Officers of each of Xylem and
Exelis of such expected overage, and the Parties shall use their good faith efforts to determine
within thirty (30) days the amount of the additional shared external costs and expenses that are
reasonably necessary for the preparation of such Tax Returns.

ARTICLE III

RESPONSIBILITY FOR PAYMENT OF TAXES

          Section 3.1 Responsibility of ITT for Taxes. Except as otherwise provided in this Agreement, ITT shall be liable for and shall pay or
cause to be paid the following Taxes to the applicable Taxing Authority:

          (a) any Taxes due and payable on all Tax Returns required to be filed (taking into account any
applicable extensions) on or prior to the Distribution Date;

          (b) any Taxes due and payable on all ITT Combined or ITT Separate U.S. Income Tax Returns;

          (c) any Taxes due and payable on all ITT Non-U.S. Income Tax Returns; and

          (d) any Taxes due and payable on all Post-Distribution Income Tax Returns, Non-U.S. Income Tax
Returns, and Non-Income Tax Returns that ITT is required to file or cause to be filed with such
Taxing Authority pursuant to Section 2.3.

          Section 3.2 Responsibility of Defense for Taxes. Except as otherwise provided in this Agreement, Defense shall be liable for and shall pay
or cause to be paid the following Taxes to the applicable Taxing Authority:

          (a) any Taxes due and payable on all Covered Defense Separate U.S. Income Tax Returns required
to be filed after the Distribution Date; and

          (b) any Taxes due and payable on all Post-Distribution Income Tax Returns, Non-U.S. Income Tax
Returns, and Non-Income Tax Returns that Defense is required to file or cause to be filed with such
Taxing Authority pursuant to Section 2.3.

          Section 3.3 Responsibility of Water for Taxes. Except as otherwise provided in this agreement, Water shall be liable for and shall pay or
cause to be paid the following Taxes to the applicable Taxing Authority:

          (a) any Taxes due and payable on all Covered Water Separate U.S. Income Tax Returns required
to be filed after the Distribution Date; and

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          (b) any Taxes due and payable on all Post-Distribution Income Tax Returns, Non-U.S. Income Tax
Returns, and Non-Income Tax Returns that Water is required to file or cause to be filed with such
Taxing Authority pursuant to Section 2.3.

          Section 3.4 Timing of Payments of Taxes. All Taxes required to be paid or caused to be paid by a Party to a Taxing Authority
pursuant to this Article III shall be paid or caused to be paid by such Party on or prior to the
Due Date of such Taxes. All amounts required to be paid by one Party to another Party (including
obligations arising under Article VII) pursuant to this Article III shall be paid or caused to be
paid by such first Party to such other Party in accordance with Article VIII.

ARTICLE IV

REFUNDS, CARRYBACKS AND AMENDED TAX RETURNS

          Section 4.1 Refunds.

          (a) Each Party shall be entitled to refunds (including any similar credit or offset of Taxes)
that relate to Taxes for which it is liable hereunder in accordance with Article III, Article V, or
Article VI; provided, however, that (i) any refunds of Taxes (other than Taxes for
which a Party is responsible pursuant to Article V or Article VI) received in connection with any
ITT Federal Income Tax Audit, an ITT U.S. State Income Tax Audit, or ITT Non-U.S. Income Tax Audit
by a member of the ITT Group for a Pre-Distribution Tax Period or that relate to the portion of a
Straddle Tax Period ending on the Distribution Date (as determined under Section 11.2(a)) shall be
treated as reducing the ITT Federal Income Tax Audit Amount, ITT U.S. State Income Tax Audit
Amount, or ITT Non-U.S. Income Tax Audit Amount, as applicable (but only to the extent that a
member of the ITT Group is entitled to retain such refund after application of clause (ii) below or
otherwise) and (ii) the Party that receives such refund shall make payments to the other Parties in
accordance with their Federal Sharing Percentages, U.S. State Sharing Percentages, or Non-U.S.
Sharing Percentages, as applicable, to reflect the their prior liability, if any, for additional
Taxes under Section 9.3.

          (b) Any refund or portion thereof to which a Party is entitled pursuant to this Section 4.1
that is received or deemed to have been received as described herein by another Party, shall be
paid by such other Party to such first Party in immediately available funds in accordance with
Article VIII.

          Section 4.2 Carrybacks. The Spinco Parties agree and will cause their Subsidiaries not to carry back any Tax
Attribute for any taxable period ending after the Distribution Date to an ITT Combined U.S. Income
Tax Return, except as is required by applicable Law.

          Section 4.3 Amended Tax Returns.

          (a) Notwithstanding Sections 2.1 and 2.2, a Party or its Subsidiary that is entitled to file
an amended Tax Return for a Pre-Distribution Tax Period or a Straddle Tax Period for members of its
Group shall be permitted to prepare and file an amended Tax Return at its own cost and expense;
provided, however, that (i) such amended Tax Return shall be prepared in

16

 

a manner (x) consistent with the past practice of the Parties and their Affiliates unless
otherwise modified by a Final Determination or required by applicable Law; (y) consistent with (and
the Parties and their Affiliates shall not take any position inconsistent with) the IRS Ruling, the
Tax Representation Letters, and the Tax Opinions; and (z) consistent with any ITT Combined U.S.
Income Tax Returns; and (ii) if such amended Tax Return could result in one or more other Parties
becoming responsible for a payment of Taxes pursuant to Article III or a payment to a Party
pursuant to Article IX, such amended Tax Return shall be permitted only if the consent of such
other Parties is obtained. The consent of such other Parties shall not be withheld unreasonably and
shall be deemed to be obtained in the event that a Party or its Subsidiary is required to file an
amended Tax Return as a result of an Audit adjustment that arose in accordance with Article IX.

          (b) A Party or its Subsidiary that is entitled to file an amended Tax Return for a
Post-Distribution Tax Period shall be permitted to do so without the consent of any Party.

          (c) A Party that is permitted (or whose Subsidiary is permitted) to file an amended Tax Return
shall not be relieved of any liability for payments pursuant to this Agreement notwithstanding that
another Party consented thereto.

ARTICLE V

DISTRIBUTION TAXES

          Section 5.1 Liability for Distribution Taxes. In the event that Distribution Taxes become due and payable to a Taxing Authority pursuant
to a Final Determination, then, notwithstanding anything to the contrary in this Agreement:

          (a) No Fault. If such Distribution Taxes are not attributable to the Fault of any
Party or any of its Affiliates, the responsibility for such Distribution Taxes shall be shared by
the Parties in accordance with their Distribution Sharing Percentages. Notwithstanding anything to
the contrary in this Agreement, such Distribution Taxes shall not be subject to Section 9.3
(including for purposes of determining the ITT Federal Income Tax Audit Amount or ITT U.S. State
Income Tax Audit Amount).

          (b) Fault. If such Distribution Taxes are attributable to the Fault of one or more
Parties or any of their Affiliates, the responsibility for such Distribution Taxes shall reside
with the Party or Parties at Fault. If more than one Party is at Fault, the responsibility for the
Distribution Taxes shall be allocated equally among all of the Parties at Fault. Notwithstanding
anything to the contrary in this Agreement, such Distribution Taxes shall not be subject to Article
III or Section 9.3 (including for purposes of determining the ITT Federal Income Tax Audit Amount
or ITT U.S. State Income Tax Audit Amount).

          Section 5.2 Definition of Fault. For purposes of this Agreement, Distribution Taxes shall be deemed to result from the fault
(“Fault”) of a Party if such Distribution Taxes are directly attributable to, or result from:

          (a) any act, or failure or omission to act, by such Party or any of such Party’s Affiliates
following the Distributions that results in one or more Parties (or any of their

17

 

Affiliates) being responsible for such Distribution Taxes pursuant to a Final Determination,
regardless of whether such act or failure to act (i) is covered by a Post-Distribution Ruling,
Unqualified Tax Opinion, or waiver in accordance with Section 5.3, or (ii) occurs during or after
the Restricted Period, or

          (b) the direct or indirect acquisition of all or a portion of the stock of such Party or of
any of the Section 355 Entities (or any transaction or series of related transactions that is
deemed to be such an acquisition for purposes of Section 355(e) of the Code and the Treasury
Regulations promulgated thereunder) by any means whatsoever by any person including pursuant to an
issuance of stock by such Party or any of its Affiliates.

          Section 5.3 Limits on Proposed Acquisition Transactions and Other Transactions During
Restricted Period. During the Restricted Period, no Party shall:

          (a) enter into any Proposed Acquisition Transaction, approve any Proposed Acquisition
Transaction for any purpose, or allow any Proposed Acquisition Transaction to occur with respect to
any of the Section 355 Entities;

          (b) merge or consolidate with any other Person or liquidate or partially liquidate; or approve
or allow any merger, consolidation, liquidation, or partial liquidation of any of the Section 355
Entities or the ATOB Entities;

          (c) approve or allow the discontinuance, cessation, or sale or other transfer (to an Affiliate
or otherwise) of any Active Business;

          (d) approve or allow the sale, issuance, or other disposition (to an Affiliate or otherwise),
directly or indirectly, of any share of, or other equity interest or an instrument convertible into
an equity interest in, any of the ATOB Entities;

          (e) sell or otherwise dispose of more than 35 percent (35%) of its consolidated gross or net
assets, or approve or allow the sale or other disposition (to an Affiliate or otherwise) of more
than 35 percent (35%) of the consolidated gross or net assets of any of the Section 355 Entities
(in each case, excluding sales in the ordinary course of business and measured based on fair market
values as of the date of the applicable Distribution or other transaction);

          (f) amend its certificate of incorporation (or other organizational documents), or take any
other action or approve or allow the taking of any action, whether through a stockholder vote or
otherwise, affecting the voting rights of the stock of such Party or any of the Section 355
Entities;

          (g) purchase, directly or through any Affiliate, any of its outstanding stock after the
Distributions, other than through stock purchases meeting the requirements of Section 4.05(1)(b) of
Revenue Procedure 96-30;

          (h) take any action or fail to take any action, or permit any of its Affiliates to take any
action or fail to take any action, that is inconsistent with the representations and covenants made
in the IRS Ruling or in the Tax Representation Letters, or that is inconsistent with any rulings or
opinions in the IRS Ruling or any Tax Opinion; or

18

 

          (i) take any action or permit any of its Affiliates to take any action that, in the aggregate
(taking into account other transactions described in this Section 5.3) would be reasonably likely
to jeopardize Tax-Free Status;

provided, however, that a Party (the “Requesting Party”) shall be permitted to take
such action or one or more actions set forth in the foregoing clauses (a) through (g) if, prior to
taking any such actions: (1) such Requesting Party or ITT shall have received a favorable private
letter ruling from the IRS, or a ruling from another Taxing Authority (a “Post-Distribution
Ruling”), in form and substance reasonably satisfactory to the other Parties that confirms that
such action or actions will not result in Distribution Taxes, taking into account such actions and
any other relevant transactions in the aggregate; (2) such Requesting Party shall have received an
Unqualified Tax Opinion in form and substance reasonably satisfactory to the other Parties that
confirms that such action or actions will not result in Distribution Taxes, taking into account
such actions and any other relevant transactions in the aggregate; or (3) such Requesting Party
shall have received a written statement from each of the other Parties that provides that such
other Party waives the requirement to obtain a Post-Distribution Ruling or Unqualified Tax Opinion
described in this paragraph. The Requesting Party shall bear all costs and expenses of securing any
such Post-Distribution Ruling or Unqualified Tax Opinion.

          Section 5.4 IRS Ruling, Tax Representation Letters, and Tax Opinions; Consistency. Each Party represents that the information and representations furnished by it in or with
respect to the IRS Ruling, the Tax Representation Letters, or the Tax Opinions are accurate and
complete as of the Effective Time. Each Party covenants that if, after the Effective Time, it or
any of its Affiliates obtains information indicating, or otherwise becomes aware, that any such
information or representations is or may be inaccurate or incomplete, to promptly inform the other
Parties. The Parties shall not take any action or fail to take any action, or permit any of their
Affiliates to take any action or fail to take any action, that is or is reasonably likely to be
inconsistent with the IRS Ruling, the Tax Representation Letters, or the Tax Opinions.

          Section 5.5 Timing of Payment of Taxes. All Distribution Taxes required to be paid or caused to be paid by a Party to a Taxing
Authority under applicable Law shall be paid or caused to be paid by such Party on or prior to the
Due Date of such Distribution Taxes. All amounts required to be paid by one Party to another Party
(including obligations arising under Article VII) pursuant to this Article V shall be paid or
caused to be paid by such first Party to such other Party in accordance with Article VIII.

ARTICLE VI

GAIN RECOGNITION AGREEMENTS

          Section 6.1 Gain Recognition Agreement Compliance. Each Party and its Affiliates shall take any action reasonably necessary to prevent the
transactions that are part of the Plan of Separation from constituting “triggering events” with
respect to the GRAs listed in Schedule 6.1 or any related new or amended GRAs (including amending
existing GRAs or entering into new GRAs as well as complying with any related requirements).

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          Section 6.2 Gain Recognition Agreement Taxes. In the event that any Taxes become due and payable to a Taxing Authority with respect to the
GRAs listed in Schedule 6.1 or any related new or amended GRAs, then, notwithstanding anything to
the contrary in this Agreement:

          (a) Non-Compliance. If such Taxes are attributable to one or more Parties’ or any of
their Affiliates’ failure to comply with Section 6.1, the responsibility for such Taxes shall
reside with such Party or Parties. If more than one Party or any of its Affiliates has failed to
comply to with Section 6.1, the responsibility for such Taxes shall be allocated equally among all
such Parties. Notwithstanding anything to the contrary in this Agreement, such Taxes shall not be
subject to Article III or Section 9.3 (including for purposes of determining the ITT Federal Income
Tax Audit Amount or ITT U.S. State Income Tax Audit Amount).

          (b) Post-Distribution Actions. If such Taxes are not covered by Section 6.2(a) and
are attributable to any action of a Party or any of its Affiliates after the Distributions, the
responsibility for such Taxes shall reside with such Party. Notwithstanding anything to the
contrary in this Agreement, such Taxes shall not be subject to Article III or Section 9.3
(including for purposes of determining the ITT Federal Income Tax Audit Amount or ITT U.S. State
Income Tax Audit Amount).

          Section 6.3 Timing of Payment of Taxes. All Taxes subject to Section 6.2 required to be paid or caused to be paid by a Party to a
Taxing Authority under applicable Law shall be paid or caused to be paid by such Party on or prior
to the Due Date of such Taxes. All amounts required to be paid by one Party to another Party
(including obligations arising under Article VII) pursuant to this Article VI shall be paid or
caused to be paid by such first Party to such other Party in accordance with Article VIII.

ARTICLE VII

INDEMNIFICATION

          Section 7.1 Indemnification Obligations of ITT. ITT shall indemnify Water and Defense and hold them harmless from and against (without
duplication):

          (a) all Taxes and other amounts for which the ITT Group is responsible under this Agreement;
and

          (b) all Taxes and Losses attributable to a breach of any representation, covenant, or
obligation of ITT under this Agreement.

          Section 7.2 Indemnification Obligations of Water. Water shall indemnify ITT and Defense and hold them harmless from and against (without
duplication):

          (a) all Taxes and other amounts for which the Water Group is responsible under this Agreement;
and

          (b) all Taxes and Losses attributable to a breach of any representation, covenant, or
obligation of Water under this Agreement.

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          Section 7.3 Indemnification Obligations of Defense. Defense shall indemnify ITT and Water and hold them harmless from and against (without
duplication):

          (a) all Taxes and other amounts for which the Defense Group is responsible under this
Agreement; and

          (b) all Taxes and Losses attributable to a breach of any representation, covenant or
obligation of Defense under this Agreement.

ARTICLE VIII

PAYMENTS

          Section 8.1 Payments.

          (a) General. In the event that an Indemnifying Party is required to make a payment to
an Indemnified Party pursuant to this Agreement, such payment shall be made to the Indemnified
Party within the time prescribed for payment in this Agreement, or if no period is prescribed,
within twenty (20) days after delivery of written notice of payment owing together with a
computation of the amounts due. If the Indemnifying Party fails to make a payment to the
Indemnified Party within the time period set forth in this Section 8.1 or as otherwise provided in
this Agreement, such Indemnifying Party shall pay to the Indemnified Party interest that accrues
(at a rate equal to LIBOR) on the amount of such payment from the time that such payment was due to
the Indemnified Party until the date that payment is actually made to the Indemnified Party;
provided, however, that this provision for interest shall not be construed to give the
Indemnifying Party the right to defer payment beyond the due date hereunder.

          (b) Right of Setoff. It is expressly understood that an Indemnifying Party is hereby
authorized to set off and apply any and all amounts required to be paid to an Indemnified Party
pursuant to this Section 8.1 against any and all of the obligations of the Indemnified Party to the
Indemnifying Party arising under Section 8.1 of this Agreement that are then either due and payable
or past due, irrespective of whether such Indemnifying Party has made any demand for payment with
respect to such obligations.

          Section 8.2 Treatment of Payments made Pursuant to Tax Matters Agreement. Unless otherwise required by a Final Determination or this Agreement or otherwise agreed to
among the Parties, for U.S. federal Tax purposes, any payment (other than payments of interest
pursuant to Section 8.1(a)) made pursuant to this Agreement by:

          (a) a Spinco Party to ITT shall be treated for all Tax purposes as a distribution by such
Spinco Party to ITT with respect to stock of the Spinco Party occurring after the Spinco Party is
directly owned by ITT and immediately before the applicable Distribution;

          (b) ITT to either of the Spinco Parties shall be treated for all Tax purposes as a tax-free
contribution by ITT to the appropriate Spinco Party with respect to its stock occurring after the
Spinco Party is directly owned by ITT and immediately before the applicable Distribution;

21

 

          (c) a Spinco Party to another Spinco Party shall be treated for all Tax purposes as a
distribution by the first Spinco Party to ITT with respect to stock of that Spinco Party occurring
after the Spinco Party is directly owned by ITT and immediately before the applicable Distribution
followed by a tax-free contribution by ITT to the recipient Spinco Party with respect to its stock
occurring after the Spinco Party is directly owned by ITT and immediately before the applicable
Distribution; and

          (d) in each case, none of the Parties shall take any position inconsistent with such
treatment. In the event that a Taxing Authority asserts that a Party’s treatment of a payment
pursuant to this Agreement should be other than as required pursuant to this Agreement (ignoring
any potential inconsistent or adverse Final Determination), such Party shall use its commercially
reasonable efforts to contest such challenge.

          Section 8.3 Payments Net of Tax Benefit Actually Realized and Tax Cost. All amounts required to be paid by one Party to another pursuant to this Agreement or the
Distribution Agreement shall be reduced by the Tax Benefit Actually Realized by the Indemnified
Party or its Subsidiaries in the taxable year the payment is made or any prior taxable year as a
result of the claim giving rise to the payment. If the receipt or accrual of any such payment
(other than payments of interest pursuant to Section 8.1(a) or Section 11.11 of the Distribution
Agreement) results in taxable income to the Indemnified Party or its Subsidiaries, such payment
shall be increased so that, after the payment of any Taxes with respect to the payment, the
Indemnified Party or its Subsidiaries shall have realized the same net amount it would have
realized had the payment not resulted in taxable income.

ARTICLE IX

AUDITS

          Section 9.1 Notice. Within fifteen (15) Business Days after a Party or any of its Affiliates receives a written
notice from a Taxing Authority (reduced to five (5) Business Days for written notices received from
a state or local Taxing Authority) of the existence of an Audit that may require indemnification
pursuant to this Agreement, that Party shall notify the other Parties of such receipt and send such
notice to the other Parties via overnight mail. The failure of one Party to notify the other
Parties of an Audit shall not relieve such other Party of any liability and/or obligation that it
may have under this Agreement, except to the extent that the Indemnifying Party’s rights under this
Agreement are materially prejudiced by such failure.

          Section 9.2 Audits.

          (a) Determination of Administering Party.

               (i) Subject to Sections 9.2(b) and 9.2(c), ITT and its Subsidiaries shall administer and
control all ITT Federal Income Tax Audits, ITT U.S. State Income Tax Audits, and ITT Non-U.S.
Income Tax Audits.

               (ii) Audits of Water Separate U.S. Income Tax Returns, Defense Separate U.S. Income Tax
Returns, Post-Distribution Income Tax Returns, Non-U.S. Income Tax Returns (other than ITT Non-U.S.
Income Tax Returns), and Non-Income Tax Returns shall

22

 

be administered and controlled by the Party and its Subsidiaries that would be primarily
liable under applicable Law to pay to the applicable Taxing Authority the Taxes resulting from such
Audits. Such Audits shall not be subject to Sections 9.2(b) and 9.2(c).

          (b) Administration and Control; Cooperation.

               (i) Subject to Sections 9.2(b)(ii) and 9.2(c), the Audit Management Party shall have absolute
authority to make all decisions (determined in its sole discretion) with respect to the
administration and control of such Audit, including the selection of all external advisors. In that
regard, the Audit Management Party (a) may in its sole discretion settle or otherwise determine not
to continue to contest any issue related to such Audit without the consent of the other Parties,
and (b) shall, as soon as reasonably practicable and prior to settlement of an issue that could
cause one or more other Parties to become responsible for Taxes under Section 9.3, notify the Audit
Representatives of such other Parties of such settlement. The other Parties shall (and shall cause
their Affiliates to) undertake all actions and execute all documents (including an extension of the
applicable statute of limitations) that are determined in the sole discretion of the Audit
Management Party to be necessary to effectuate such administration and control. The Parties shall
act in good faith and use their reasonable best efforts to cooperate fully with each other Party
(and their Affiliates) in connection with such Audit and shall provide or cause their Subsidiaries
to provide such information to each other as may be necessary or useful with respect to such Audit
in a timely manner, identify and provide access to potential witnesses, and other persons with
knowledge and other information within its control and reasonably necessary to the resolution of
the Audit.

               (ii) In the case of any Audit in respect of Distribution Taxes for which a Party could be
liable pursuant to Section 5.1(b) or Taxes for which a Party could be liable pursuant to Section
6.2, such Party shall have the right to administer and control such Audit (and shall have any
rights, and be subject to any limitations or obligations, set forth in Section 9.2 applicable to
the Audit Management Party); provided, however, that such Audit Management Party
shall not settle such Audit without the prior written consent of any other Party if such settlement
could have a material adverse impact on such Party or any of its Affiliates. In event more than
one Party would be liable under Section 5.1(b) or Section 6.2, such Parties shall each have the
right to jointly act as Audit Management Party with respect to such Audit in accordance with this
Section 9.2(b)(ii), and such Parties may agree upon additional terms to govern such joint
responsibility.

          (c) Participation Rights of Parties and Information Sharing with respect to Audits.

               (i) Each Party that would be responsible under Section 9.3 for Taxes resulting from an Audit
(other than the Audit Management Party) (a “Participating Party”) shall have limited participation
rights as set forth in this Section 9.2(c) with respect to such Audit. Upon the reasonable request
of a Participating Party, the Audit Management Party shall make available relevant personnel and
external advisors to meet with the Participating Party and its independent auditor in order to
review the status of the Audits. The Participating Parties shall provide the Audit Management Party
with reasonable notice of such requested meetings or information.

23

 

               (ii) Each Participating Party shall have access to any written documentation in the possession
of the Audit Management Party that pertains to the Audit (including any written summaries of issues
that the Audit Management Party has developed in the context of evaluating the financial reporting
of the Audit); provided, however, that if documentation was prepared solely by or
on behalf of a Party, then the documentation must relate to the joint defense of the Audit. Copies
of the documentation will be made available to the Participating Parties at their sole cost and
expense.

               (iii) The Participating Parties are encouraged to provide consultation to the Audit Management
Party in regards to Audit strategy and shall, upon request of the Audit Management Party, provide
such consultation. The Participating Party may elect to employ separate counsel to advise the
Participating Party as additional counsel in or in connection with an Audit, but in that event, the
fees and expenses of the separate counsel shall be paid solely by the Participating Party. The
Audit Management Party shall in good faith consider all advice and other input received from the
Participating Parties in connection with their consultations with respect to an Audit. However, the
Audit Management Party shall retain the sole authority to make all Audit decisions. In that regard,
the Participating Parties and their separate counsels shall not be allowed to participate in any
Audit-related meetings other than those described in (i) or (ii) above (unless such a meeting is
attended by the personnel of a Participating Party, in which case that Participating Party may
attend the meeting but may not actively participate), respond directly to a Taxing Authority
conducting the Audit, or in any manner control resolution of the Audit.

          (d) Sharing of Certain Audit-related Internal and External Costs and Expenses.

               (i) External Costs and Expenses. All external costs and expenses (including all costs
and expenses of calculating Taxes and other amounts payable hereunder) that are incurred by the
Audit Management Party with respect to any ITT Federal Income Tax Audit, ITT U.S. State Income Tax
Audit, or ITT Non-U.S. Income Tax Audit (including any external costs and expenses incurred as a
result of any reporting obligations that arise out of an Audit, such as the reporting of any Audit
adjustments to the various U.S. states) shall (a) if incurred in 2012, be borne by the Audit
Management Party to the extent such external costs and expenses do not exceed $500,000 and
thereafter be shared on an equal one-third (1/3) basis by each of the Parties, (b) if incurred in
2013, be borne by the Audit Management Party to the extent such external costs and expenses do not
exceed $600,000 and thereafter be shared on an equal one-third (1/3) basis by each of the Parties,
(c) if incurred in 2014, be borne by the Audit Management Party to the extent such external costs
and expenses do not exceed $600,000 and thereafter be shared on an equal one-third (1/3) basis by
each of the Parties, and (d) if incurred after 2014, be shared on an equal one-third (1/3) basis
by each of the Parties; provided, however, that any external costs and expenses
incurred by any Party in respect of an Audit in respect of Distribution Taxes for which a Party
could be liable pursuant to Section 5.1(b) or Taxes for which a Party could be liable pursuant to
Section 6.2 shall be borne by the Party incurring such external costs and expenses and shall not be
subject to the foregoing arrangements. The Audit Management Party shall provide to the other
Parties at the end of each calendar year an invoice for each other Party’s share of the external
costs (along with supporting invoices received from the external service providers), and each other
Party shall remit, within sixty (60) days after

24

 

receipt of the invoice, payment of their share of the external costs to the Audit Management
Party.

               (ii) Internal Costs and Expenses. All internal costs and expenses incurred by any
Party with respect to any ITT Federal Income Tax Audit, ITT U.S. State Income Tax Audit, or ITT
Non-U.S. Income Tax Audit shall be borne by such Party.

          (e) Power of Attorney/Officer Signature. Each Party hereby appoints (and shall cause
its Subsidiaries to appoint) the Audit Management Party (and its designated representatives) as its
agent and attorney-in-fact to take the actions the Audit Management Party deems necessary or
appropriate to implement the responsibilities of the Audit Management Party under this Agreement.
Each Party also shall (or shall cause its Subsidiaries to) execute and deliver to the Audit
Management Party a power of attorney, and such other documents as are reasonably requested from
time to time by the Audit Management Party (or its designee).

          Section 9.3 Payment of Audit Amounts.

          (a) ITT Federal Income Tax Audits. In connection with any ITT Federal Income Tax
Audit:

               (i) ITT shall pay all additional Taxes due and payable as a result of such Audit that relate
to the portion of a Straddle Tax Period (as determined under Section 11.2(a)) beginning after the
Distribution Date.

               (ii) To the extent that the aggregate amount of additional Taxes due and payable with respect
to all ITT Federal Income Tax Audits for a Pre-Distribution Tax Period or that relate to the
portion of a Straddle Tax Period ending on the Distribution Date (as determined under Section
11.2(a)) (the “ITT Federal Income Tax Audit Amount”) does not exceed $27,100,000, ITT shall be
liable for and shall pay or cause to be paid to the applicable Taxing Authority all additional
Taxes due and payable as a result of such Audit for a Pre-Distribution Tax Period or that relate to
the portion of a Straddle Tax Period ending on the Distribution Date (as determined under Section
11.2(a)).

               (iii) To the extent that the ITT Federal Income Tax Audit Amount exceeds $27,100,000:

	 	1)	 	ITT shall be
liable for and shall pay or cause to be paid to the
applicable Taxing Authority an amount equal to the ITT
Federal Sharing Percentage of the additional Taxes due
and payable as a result of such Audit for a
Pre-Distribution Tax Period or that relate to the
portion of a Straddle Tax Period ending on the
Distribution Date (as determined under Section 11.2(a)).
	 
	 	2)	 	Defense shall be
liable for and shall pay or cause to be paid to ITT an
amount equal to the Defense Federal Sharing Percentage
of the additional Taxes

25

 

	 	 	 	due and payable as a result of such Audit for a
Pre-Distribution Tax Period or that relate to the
portion of a Straddle Tax Period ending on the
Distribution Date, as determined under Section
11.2(a) (and ITT shall pay or cause to be paid such
amounts to the applicable Taxing Authority).
	 
	 	3)	 	Water shall be
liable for and shall pay or cause to be paid to ITT an
amount equal to the Water Federal Sharing Percentage of
the additional Taxes due and payable as a result of such
Audit for a Pre-Distribution Tax Period or that relate
to the portion of a Straddle Tax Period ending on the
Distribution Date, as determined under Section 11.2(a)
(and ITT shall pay or cause to be paid such amounts to
the applicable Taxing Authority).

          (b) ITT U.S. State Income Tax Audits. In connection with any ITT U.S. State Income
Tax Audit:

               (i) ITT shall pay all additional Taxes due and payable as a result of such Audit that relate
to the portion of a Straddle Tax Period (as determined under Section 11.2(a)) beginning after the
Distribution Date.

               (ii) To the extent that the aggregate amount of additional Taxes due and payable with respect
to all ITT U.S. State Income Tax Audits for a Pre-Distribution Tax Period or that relate to the
portion of a Straddle Tax Period ending on the Distribution Date (as determined under Section
11.2(a)) (the “ITT U.S. State Income Tax Audit Amount”) does not exceed $8,600,000, ITT shall be
liable for and shall pay or cause to be paid to the applicable Taxing Authority all additional
Taxes due and payable as a result of such Audit for a Pre-Distribution Tax Period or that relate to
the portion of a Straddle Tax Period ending on the Distribution Date (as determined under Section
11.2(a)).

               (iii) To the extent that the ITT U.S. State Income Tax Audit Amount exceeds $8,600,000:

	 	1)	 	ITT shall be
liable for and shall pay or cause to be paid to the
applicable Taxing Authority an amount equal to the ITT
U.S. State Sharing Percentage of the additional Taxes
due and payable as a result of such Audit for a
Pre-Distribution Tax Period or that relate to the
portion of a Straddle Tax Period ending on the
Distribution Date (as determined under Section 11.2(a)).
	 
	 	2)	 	Defense shall be
liable for and shall pay or cause to be paid to ITT an
amount equal to the Defense U.S.

26

 

	 	 	 	State Sharing Percentage of the additional Taxes due
and payable as a result of such Audit for a
Pre-Distribution Tax Period or that relate to the
portion of a Straddle Tax Period ending on the
Distribution Date, as determined under Section
11.2(a) (and ITT shall pay or cause to be paid such
amounts to the applicable Taxing Authority).
	 
	 	3)	 	Water shall be
liable for and shall pay or cause to be paid to ITT an
amount equal to the Water U.S. State Sharing Percentage
of the additional Taxes due and payable as a result of
such Audit for a Pre-Distribution Tax Period or that
relate to the portion of a Straddle Tax Period ending on
the Distribution Date, as determined under Section
11.2(a) (and ITT shall pay or cause to be paid such
amounts to the applicable Taxing Authority).

          (c) ITT Non-U.S. Income Tax Audits. In connection with any ITT Non-U.S. Income Tax
Audit:

               (i) ITT shall pay all additional Taxes due and payable as a result of such Audit that relate
to the portion of a Straddle Tax Period (as determined under Section 11.2(a)) beginning after the
Distribution Date.

               (ii) To the extent that the aggregate amount of additional Taxes due and payable with respect
to all ITT Non-U.S. Income Tax Audits for a Pre-Distribution Tax Period or that relate to the
portion of a Straddle Tax Period ending on the Distribution Date (as determined under Section
11.2(a)) (the “ITT Non-U.S. Income Tax Audit Amount”) does not exceed $10,600,000, ITT shall be
liable for and shall pay or cause to be paid to the applicable Taxing Authority all additional
Taxes due and payable as a result of such Audit for a Pre-Distribution Tax Period or that relate to
the portion of a Straddle Tax Period ending on the Distribution Date (as determined under Section
11.2(a)).

               (iii) To the extent that the ITT Non-U.S. Income Tax Audit Amount exceeds $10,600,000:

	 	1)	 	ITT shall be
liable for and shall pay or cause to be paid to the
applicable Taxing Authority an amount equal to the ITT
Non-U.S. Sharing Percentage of the additional Taxes due
and payable as a result of such Audit for a
Pre-Distribution Tax Period or that relate to the
portion of a Straddle Tax Period ending on the
Distribution Date (as determined under Section 11.2(a)).

27

 

	 	2)	 	Water shall be
liable for and shall pay or cause to be paid to ITT an
amount equal to the Water Non-U.S. Sharing Percentage of
the additional Taxes due and payable as a result of such
Audit for a Pre-Distribution Tax Period or that relate
to the portion of a Straddle Tax Period ending on the
Distribution Date, as determined under Section 11.2(a)
(and ITT shall pay or cause to be paid such amounts to
the applicable Taxing Authority).

          (d) Audit True-Up Payment. If on the Audit True-Up Date the ITT Income Tax Audit
Amount is below $46,300,000, then ITT shall pay or cause to be paid (i) to Water an amount equal to
(a) thirty-five percent (35%) multiplied by (b) the amount of the difference between the ITT Income
Tax Audit Amount and $46,300,000 and (ii) to Defense an amount equal to (a) twenty-three percent
(23%) multiplied by (b) the amount of the difference between the ITT Income Tax Audit Amount and
$46,300,000. Any additional Taxes in connection with an ITT Federal Income Tax Audit, ITT U.S.
State Income Tax Audit, or ITT Non-U.S. Income Tax Audit that are due and payable after the Audit
True-Up Date shall be subject to Section 9.3(a)(iii), Section 9.3(b)(iii), or Section 9.3(c)(iii),
as the case may be.

          (e) Audits of Water Separate U.S. Income Tax Returns, Defense Separate U.S. Income Tax
Returns, Post-Distribution Income Tax Returns, Non-U.S. Income Tax Returns, and Non-Income Tax
Returns. In connection with any Audits of ITT Separate U.S. Income Tax Returns, Water Separate
U.S. Income Tax Returns, Defense Separate U.S. Income Tax Returns, Post-Distribution Income Tax
Returns, Non-U.S. Income Tax Returns (other than ITT Non-U.S. Income Tax Returns), and Non-Income
Tax Returns, the Party whose Group contains the entity that is primarily liable under applicable
Law for the relevant Taxes shall be liable for and shall pay or cause to be paid to the applicable
Taxing Authority the amounts due and payable as a result of such Final Determination.

          (f) Payment Procedures. In connection with any Audit or the determination of the ITT
Income Tax Audit Amount pursuant to Section 9.3(d) that results in an amount to be paid pursuant to
Section 9.3, (b), (c), or (d), the Audit Management Party shall, within thirty (30) Business Days
following a final resolution of such Audit or such determination pursuant to Section 9.3(d), submit
in writing to the other Parties a preliminary determination (calculated and explained in detail
reasonably sufficient to enable the Parties to fully understand the basis for such determination
and to permit such Parties and their Affiliates to satisfy their financial reporting requirements)
of the portion of such amount to be paid by each of the Parties pursuant to Section 9.3(a), (b),
(c), or (d), as applicable. Each of the Parties and its Affiliates shall have access to all data
and information necessary to calculate such amounts and the Parties and their Affiliates shall
cooperate fully in the determination of such amounts. Within twenty (20) Business Days following
the receipt by a Party of the information described in this Section 9.3(f), such Party shall have
the right to object only to the calculation of the amount of the payment (but not the basis for the
payment) by written notice to the other Parties; such written notice shall contain such disputed
item or items and the basis for its objection. If no Party objects by proper written notice to the
other Parties within the time period described in this Section 9.3(f), the calculation of the
amounts due and owing from each Party shall be deemed to have

28

 

been accepted and agreed upon, and final and conclusive, for purposes of this Section 9.3(f).
If any Party objects by proper written notice to the other Parties within such time period, the
Parties shall act in good faith to resolve any such dispute as promptly as practicable in
accordance with Article XIII. The Party or its Affiliate responsible for paying to the applicable
Taxing Authority under applicable Law amounts owed shall make such payments to such Taxing
Authority prior to the Due Date for such payments. The other Parties shall reimburse the paying
Party in accordance with Article VIII for the portion of such payments for which such other Parties
are liable pursuant to this Section 9.3. The time periods specified above for submitting a
preliminary determination and objecting may be shortened to a time period determined by a Majority
of the Parties if these Parties ascertain that such shortened time period is necessary to meet the
Audit obligations of the Parties and their Affiliates.

          (g) Third Party Indemnity Payments. For the avoidance of doubt, any amounts in
respect of Taxes covered by this Article IX that are received by any of the Parties (or their
Subsidiaries) from third parties pursuant to any contractual indemnity agreement entered into prior
to the Distribution Date shall be for the account of the Party responsible for such Taxes hereunder
and shall reduce the amount of the Taxes treated as paid by such Party for purposes of this
Agreement.

ARTICLE X

COOPERATION AND EXCHANGE OF INFORMATION

          Section 10.1 Cooperation and Exchange of Information. The Parties shall each cooperate fully (and each shall cause its respective Affiliates to
cooperate fully) and in a timely manner (considering the other Party’s normal internal processing
or reporting requirements) with all reasonable requests from another Party hereto, or from an
agent, representative, or advisor to such Party, in connection with the preparation and filing of
Tax Returns, claims for refund, Audits, determinations of Tax Attributes and the calculation of
Taxes or other amounts required to be paid hereunder, and any applicable financial reporting
requirements of a Party or its Affiliates, in each case, related or attributable to or arising in
connection with Taxes or Tax Attributes of any of the Parties or their respective Subsidiaries
covered by this Agreement. Such cooperation shall include, without limitation:

          (a) the retention until the expiration of the applicable statute of limitations or, if later,
until the expiration of all relevant Tax Attributes (in each case taking into account all waivers
and extensions), and the provision upon request, of Tax Returns of the Parties and their respective
Subsidiaries for periods up to and including the Distribution Date, books, records (including
information regarding ownership and Tax basis of property), documentation, and other information
relating to such Tax Returns, including accompanying schedules, related work papers, and documents
relating to rulings or other determinations by Taxing Authorities;

          (b) the execution of any document that may be necessary or reasonably helpful in connection
with any Audit of any of the Parties or their respective Subsidiaries, or the filing of a Tax
Return or refund claim of the Parties or any of their respective Subsidiaries (including the
signature of an officer of a Party or its Subsidiary);

29

 

          (c) the use of the Party’s reasonable best efforts to obtain any documentation and provide
additional facts, insights or views as requested by another Party that may be necessary or
reasonably helpful in connection with any of the foregoing (including without limitation any
information contained in Tax or other financial information databases); and

          (d) the use of the Party’s reasonable best efforts to obtain any Tax Returns (including
accompanying schedules, related work papers, and documents), documents, books, records, or other
information that may be necessary or helpful in connection with any Tax Returns of any of the
Parties or their Affiliates.

     Each Party shall make its and its Subsidiaries’ employees and facilities available on a
reasonable and mutually convenient basis in connection with the foregoing matters. Except for costs
and expenses otherwise allocated among the Parties pursuant to this Agreement, including costs
incurred under Article II and Article IX, no reimbursement shall be made for costs and expenses
incurred by the Parties as a result of cooperating pursuant to this Section 10.1.

     Water and Defense shall have the right to access, retrieve, and utilize any and all Tax data
and information as it relates to members of the Water Group and Defense Group, respectively, from
ITT’s existing Tax data and information systems until the time each establishes its own Tax data
and information systems.

          Section 10.2 Retention of Records. Subject to Section 10.1, if any of the Parties or their respective Subsidiaries intends to
dispose of any documentation relating to the Taxes of the Parties or their respective Subsidiaries
for which another Party to this Agreement may be responsible pursuant to the terms of this
Agreement (including, without limitation, Tax Returns, books, records, documentation, and other
information, accompanying schedules, related work papers, and documents relating to rulings or
other determinations by Taxing Authorities), such Party shall or shall cause written notice to the
other Parties describing the documentation to be destroyed or disposed of sixty (60) Business Days
prior to taking such action. The other Parties may arrange to take delivery of the documentation
described in the notice at their expense during the succeeding sixty (60) day period.

ARTICLE XI

ALLOCATION OF TAX ATTRIBUTES

AND OTHER TAX MATTERS

          Section 11.1 Allocation of Tax Attributes. ITT shall in good faith advise each Spinco in writing of the portion, if any, of any Tax
Attributes, earnings and profits, or other consolidated, combined or unitary attribute that ITT
determines shall be allocated or apportioned to each Group under applicable Law; provided, however,
that such determination shall be made in a manner that is (a) reasonably consistent with the past
practices of the Parties; (b) in accordance with the rules prescribed by applicable Law, including
the Code and the Treasury Regulations; and (c) consistent with the IRS Ruling, the Tax
Representation Letters, and the Tax Opinions. ITT agrees to provide the other Parties with all of
the information supporting the Tax Attribute and other determinations made by ITT pursuant to this
Section 11.1.

30

 

          Section 11.2 Allocation of Tax Items.

          (a) All determinations for purposes of Section 4.1 and Section 9.3 regarding the allocation of
Tax items (other than Tax items arising after the Distribution Date outside the ordinary course of
business) between the portion of a Straddle Tax Period that ends on the Distribution Date and the
portion that begins the day after the Distribution Date shall be made based on a closing of the
books method unless the Parties unanimously agree otherwise. Any such allocation of Tax items shall
initially be made by ITT. To the extent that Defense or Water disagrees with such determination,
the dispute shall be resolved pursuant to the provisions of Article XIII. For purposes of
preparing any Income Tax Returns for the year of the Distributions that require an allocation of
Tax items between a Pre-Distribution Tax Period and a Post-Distribution Tax Period, Tax items shall
be allocated based on a closing of the books method unless the Parties unanimously agree otherwise.

          (b) Notwithstanding anything to the contrary in this Agreement, if any Party or any of its
Affiliates is responsible for and pays any amount after the Distribution Date but on or before
September 15, 2012 (the “Paying Party”) that gives rise to a Tax Benefit Actually Realized for
another Party or any of its Affiliates (the “Claiming Party”), then the Claiming Party shall be
required to promptly pay to the Paying Party an amount equal to such Tax Benefit Actually Realized
(a “Post-Distribution Payment Tax Benefit”). Such payment shall only be required to be paid with
respect to a given item if and when the Tax Benefit Actually Realized attributable to such item
exceeds $10,000,000 in the aggregate, provided that an amount equal to the entire Tax
Benefit Actually Realized (and not merely the excess over $10,000,000) shall be required to be paid
in such event. Subsequent payments shall be made between the Parties if necessary to reflect any
subsequent increase or decrease in the amount of the Post-Distribution Payment Tax Benefit realized
by the Claiming Party. The Paying Party and the Claiming Party agree to consult with each other
regarding the determination and calculation of any Post-Distribution Payment Tax Benefit. In the
event such Parties are unable to agree on the amount of any Post-Distribution Payment Tax Benefit,
then any disputed issues shall be submitted to an independent Big Four Accounting Firm for a final
binding resolution. The fees and expenses of such Big Four Accounting Firm shall be shared equally
between the Paying Party and the Claiming Party.

ARTICLE XII

DEFAULTED AMOUNTS

          Section 12.1 General. In the event that one or more Parties defaults on its obligation to pay Distribution Taxes
for which it is liable pursuant to Article V to another Party, then each non-defaulting Party shall
be required to pay an equal portion of such Distribution Taxes to such other Party;
provided, however, that no payment obligation shall exist under this Section 12.1
with respect to Distribution Taxes that are attributable to the Fault of one or more Parties;
provided, further, that any payment of Distribution Taxes by a non-defaulting Party pursuant to
this Section 12.1 shall in no way release the defaulting Party from its obligations to pay such
Distribution Taxes and any non-defaulting Party may exercise any available legal remedies available
against such defaulting Party; provided, further, that interest shall accrue on any such payment by
a non-defaulting Party at a rate per annum equal to the then applicable

31

 

LIBOR. In connection with the foregoing, it is expressly understood that any defaulting
Party’s rights to any amounts to be received by such defaulting Party hereunder may be used via a
right of offset to satisfy, in whole or in part, the obligations of such defaulting Party to pay
the Distribution Taxes that are borne by the non-defaulting Parties; such rights of offset shall be
applied in favor of the non-defaulting Party or Parties in proportion to the additional amounts
paid by any such non-defaulting Party or Parties.

          Section 12.2 Subsidiary Funding. Without limitation of the Parties’ rights and obligations otherwise set forth in this
Agreement and provided that no other Party has defaulted on any of its obligations pursuant to this
Agreement, each Party agrees to provide or cause to be provided such funding as is necessary to
ensure that its respective Subsidiaries are able to satisfy their respective Tax liabilities to a
Taxing Authority that arise as a result of a Final Determination under Section 9.3 of this
Agreement, including any such Tax liabilities that, upon default by a Party’s Subsidiary, may
result in another Party’s Subsidiary paying or being required to pay the defaulted Tax liabilities
to a Taxing Authority.

ARTICLE XIII

DISPUTE RESOLUTION

          Section 13.1 Resolution in Accordance with Distribution Agreement. In the event of a controversy, dispute or claim arising out of, in connection with, or in
relation to the interpretation, performance, nonperformance, validity or breach of this Agreement
or otherwise arising out of, or in any way related to this Agreement or the transactions
contemplated hereby, including any claim based on contract, tort, statute or constitution
(“Dispute”), such Dispute shall be subject to the provisions of Article IX of the Distribution
Agreement.

ARTICLE XIV

MISCELLANEOUS

          Section 14.1 Counterparts. This Agreement may be executed in more than one counterpart, all of which shall be
considered one and the same agreement, and shall become effective when one or more such
counterparts have been signed by each of the Parties and delivered to the other Parties.

          Section 14.2 Survival. Except as otherwise contemplated by this Agreement or the Distribution Agreement, all
covenants and agreements of the Parties contained in this Agreement shall survive the Distribution
Date and remain in full force and effect in accordance with their applicable terms;
provided, however, that all indemnification for Taxes shall survive until ninety
(90) days following the expiration of the applicable statute of limitations (taking into account
all extensions thereof), if any, of the Tax that gave rise to the indemnification; provided,
further, that, in the event that notice for indemnification has been given within the applicable
survival period, such indemnification shall survive until such time as such claim is finally
resolved.

32

 

          Section 14.3 Notices. All notices, requests, claims, demands, and other communications under this Agreement shall
be in English, shall be in writing and shall be given or made (and shall be deemed to have been
duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile
with receipt confirmed (followed by delivery of an original via overnight courier service), or by
registered or certified mail (postage prepaid, return receipt requested) to the respective Parties
at the following addresses (or at such other address for a Party as shall be specified in a notice
given in accordance with this Section 14.3):

     To ITT:

ITT Corporation

1133 Westchester Avenue, Suite 3000

White Plains, NY 10604

Attn: General Counsel

Facsimile: (914) 696-2970

     To Water:

Xylem Inc.

1133 Westchester Avenue, Suite 2000

White Plains, NY 10604

Attn: General Counsel

Facsimile: (914) 323-5800

     To Defense:

Exelis Inc.

1650 Tysons Boulevard, Suite 200

McLean, VA 22102

Attn: General Counsel

Facsimile: (703) 790-6407

          Section 14.4 Waivers. Any consent required or permitted to be given by any Party to the other Parties under this
Agreement shall be in writing and signed by the Party giving such consent and shall be effective
only against such Party (and its Group).

          Section 14.5 Assignment. This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any
Party hereto without the prior written consent of the other Parties, and any attempt to assign any
rights or obligations arising under this Agreement without such consent shall be void.
Notwithstanding the foregoing, this Agreement shall be assignable in whole in connection with a
merger or consolidation or the sale of all or substantially all the assets of a Party hereto so
long as the resulting, surviving or transferee entity assumes all the obligations of the relevant
Party hereto by operation of law or pursuant to an agreement in form and substance reasonably
satisfactory to the other Parties to this Agreement.

          Section 14.6 Successors and Assigns. The provisions of this Agreement and the obligations and rights hereunder shall be binding
upon, inure to the benefit of and be enforceable by (and against) the Parties and their respective
successors and permitted transferees and assigns.

33

 

          Section 14.7 Termination and Amendment. This Agreement (including indemnification obligations hereunder) may be terminated, modified
or amended and each Distribution may be amended, modified or abandoned at any time prior to the
Effective Time by and in the sole discretion of ITT without the approval of Water or Defense or the
shareholders of ITT. In the event of such termination, no Party shall have any liability of any
kind to any other Party or any other Person. After the Effective Time, this Agreement may not be
terminated except by an agreement in writing signed by a duly authorized representative of each of
ITT, Water, and Defense.

          Section 14.8 No Circumvention. The Parties agree not to directly or indirectly take any actions, act in concert with any
Person who takes an action, or cause or allow any member of any such Party’s Group to take any
actions (including the failure to take a reasonable action) such that the resulting effect is to
materially undermine the effectiveness of any of the provisions of this Agreement, the Distribution
Agreement or any other Ancillary Agreement (including adversely affecting the rights or ability of
any Party to successfully pursue indemnification or payment pursuant to the provisions of this
Agreement).

          Section 14.9 Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the performance of,
all actions, agreements and obligations set forth herein to be performed by any Subsidiary of such
Party or by any entity that becomes a Subsidiary of such Party on and after the Effective Time, to
the extent such Subsidiary remains a Subsidiary of the applicable Party.

          Section 14.10 Third Party Beneficiaries. This Agreement is solely for the benefit of the Parties and should not be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.

          Section 14.11 Title and Headings. Titles and headings to sections herein are inserted for the convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

          Section 14.12 Exhibits and Schedules. The Exhibits and Schedules shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim herein.

          Section 14.13 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 ITT, Exelis and Xylem, as the
case may be.

          Section 14.14 Consent to Jurisdiction. Subject to the provisions of Article XIII, each of the Parties irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County, or (b)
the United States District Court for the Southern District of New York (the “New York Courts”), for
the purposes of any suit, action, or

34

 

other proceeding to compel arbitration or for provisional relief in aid of arbitration in
accordance with Article XIII or to prevent irreparable harm, and to the non-exclusive jurisdiction
of the New York Courts for the enforcement of any award issued thereunder. Each of the Parties
further agrees that service of any process, summons, notice, or document by U.S. registered mail to
such Party’s respective address set forth above shall be effective service of process for any
action, suit, or proceeding in the New York Courts with respect to any matters to which it has
submitted to jurisdiction in this Section 14.14. Each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit, or proceeding
arising out of this Agreement or the transactions contemplated hereby in the New York Courts, and
hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.

          Section 14.15 Waiver of Jury Trial. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 14.15.

          Section 14.16 Force Majeure. No Party (or any Person acting on its behalf) shall have any liability or responsibility
for failure to fulfill any obligation (other than a payment obligation) under this Agreement so
long as and to the extent to which the fulfillment of such obligation is prevented, frustrated,
hindered, or delayed as a consequence of circumstances of Force Majeure (as defined in the
Distribution Agreement). A Party claiming the benefit of this provision shall, as soon as
reasonably practicable after the occurrence of any such event: (a) notify the other applicable
Parties of the nature and extent of any such Force Majeure condition and (b) use due diligence to
remove any such causes and resume performance under this Agreement as soon as feasible.

          Section 14.17 Interpretation. The Parties have participated jointly in the negotiation and drafting of this Agreement.
This Agreement shall be construed without regard to any presumption or rule requiring construction
or interpretation against the party drafting or causing any instrument to be drafted.

          Section 14.18 Changes in Law.

          (a) Any reference to a provision of the Code, Treasury Regulations, or a Law of another
jurisdiction shall include a reference to any applicable successor provision or Law.

35

 

          (b) If, due to any change in applicable Law or regulations or their interpretation by any
court of Law or other governing body having jurisdiction subsequent to the date hereof, performance
of any provision of this Agreement or any transaction contemplated hereby shall become
impracticable or impossible, the Parties hereto shall use their commercially reasonable best
efforts to find and employ an alternative means to achieve the same or substantially the same
result as that contemplated by such provision.

          Section 14.19 Severability. In the event any one or more of the provisions contained in this Agreement should be held
invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be affected or impaired
thereby. The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

          Section 14.20 Tax Sharing Agreements. All Tax sharing, indemnification and similar agreements, written or unwritten, as between
any of the Parties or their respective Subsidiaries, on the one hand, and any other Party or its
respective Subsidiaries, on the other hand (other than this Agreement or in any other Ancillary
Agreement), shall be or shall have been terminated as of the Distribution Date and, after the
Distribution Date, none of such Parties (or their Subsidiaries) to any such Tax sharing,
indemnification or similar agreement shall have any further rights or obligations under any such
agreement.

          Section 14.21 Exclusivity. Except as specifically set forth herein or in the Distribution Agreement or any other
Ancillary Agreement, all matters related to Taxes or Tax Returns of the Parties and their
respective Subsidiaries shall be governed exclusively by this Agreement; provided, all
contractual obligations to make payments to, or contractual rights to receive payments from, third
parties in respect of Taxes that relate to a business or entity disposed of by ITT (or any of its
Subsidiaries, without giving effect to the Distributions) prior to the Distribution Date shall not
be treated as “Taxes” for purposes of this Agreement or the Distribution Agreement and shall
instead be treated as other Assets or Liabilities (each as defined in the Distribution Agreement),
as applicable, governed by the Distribution Agreement. In the event of a conflict between this
Agreement, the Distribution Agreement or any Ancillary Agreement with respect to such matters, this
Agreement shall govern and control.

          Section 14.22 No Waiver. No failure to exercise and no delay in exercising, on the part of any Party, any right,
remedy, power or privilege hereunder shall operate as a waiver hereof or thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or privilege.

          Section 14.23 No Duplication; No Double Recovery. Nothing in this Agreement is intended to confer to or impose upon any Party a duplicative right,
entitlement, obligation, or recovery with respect to any matter arising out of the same facts and
circumstances.

36

 

     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed the day and
year first above written.

	 	 	 	 	 
	 	ITT CORPORATION

 	 
	 	/s/ Aris C. Chicles
 	 
	 	Name:  	Aris C. Chicles 	 
	 	Title:  	Senior Vice President 	 
	 
	 	EXELIS INC.

 	 
	 	/s/ Ann D. Davidson
 	 
	 	Name:  	Ann D. Davidson 	 
	 	Title:  	Vice President, General Counsel &
Secretary 	 
	 
	 	XYLEM INC.

 	 
	 	/s/ Frank R. Jimenez
 	 
	 	Name:  	Frank R. Jimenez 	 
	 	Title:  	Vice President, General Counsel &
Secretary 	 
	 

 

 

Schedules to the

TAX MATTERS AGREEMENT

by and among

ITT CORPORATION,

XYLEM INC.,

and

EXELIS INC.

Dated as of October 25, 2011

 

 

Schedule 1.1(6)

List of ATOB Entities

1. ITT Italia Srl

2. ITT Water & Wastewater AB

3. ITT Defence Ltd.

4. Goulds Pumps (Philippines), Inc.

5. Goulds Pumps, Inc.

6. Evolutionary Concepts, Inc.

7. ITT Enidine, Inc.

 

 

Schedule 1.1(27)

List of Distributions

	 	 	 	 	 
	Equity Distributed	 	Distributing Entity	 	Distributee(s)
	Common stock and convertible preferred equity certificates of Remainco International Sàrl

	 	ITT Industries Sàrl
	 	ITT International Sàrl
	Common stock and convertible preferred equity certificates of Missions Systems International Sàrl

	 	ITT Industries Sàrl
	 	ITT International Sàrl
	Common stock and convertible preferred equity certificates of Remainco International Sàrl

	 	ITT International Sàrl
	 	ITT Water Technology Delaware, Inc.
	Common stock and convertible preferred equity certificates of Missions Systems International Sàrl

	 	ITT International Sàrl
	 	ITT Water Technology Delaware, Inc.
	Common stock of ITT International Holdings, Inc.

	 	ITT Water Technology Delaware, Inc.
	 	ITT Industries Holdings, Inc.
	Common stock of ITT Water Technology Delaware, Inc.

	 	ITT Industries Holdings, Inc.
	 	ITT Corporation
	Common stock of Exelis Inc.

	 	ITT Water Technology Delaware, Inc.
	 	ITT Corporation
	Common stock of Xylem Inc.

	 	ITT Corporation
	 	ITT Corporation shareholders
	Common stock of Exelis Inc.

	 	ITT Corporation
	 	ITT Corporation shareholders
	Common stock of Water Technology Philippines Holding, Inc.

	 	Goulds Pumps, Inc.
	 	GP Holding Company, Inc.
	Common stock of Water Technology Philippines Holding, Inc.

	 	GP Holding Company, Inc.
	 	ITT Corporation
	Common stock of Evolutionary Concepts, Inc.

	 	International Motion Control, Inc.
	 	ITT Corporation

 

 

Schedule 1.1(88)

List of Section 355 Entities

1. ITT Corporation

2. Xylem Inc.

3. Exelis Inc.

4. Remainco International Sàrl

5. Missions Systems International Sàrl

6. ITT Industries Sàrl

7. ITT International Sàrl

8. ITT International Holdings, Inc.

9. ITT Water Technology Delaware, Inc.

10. ITT Industries Holdings, Inc.

11. Water Technology Philippines Holding, Inc.

12. Goulds Pumps, Inc.

13. GP Holding Company, Inc.

14. Evolutionary Concepts, Inc.

15. International Motion Control, Inc.

 

 

Schedule 6.1

List of GRAs

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Name of Transferred
	Date of Transfer	 	Name of Transferor	 	Name of Transferee	 	Entity
	January 5, 2009

	 	ITT Corporation
	 	ITT International Sàrl
	 	ITT Canada Company
	January 7, 2009, and December 21, 2009

	 	ITT Water Technology Delaware, Inc.
	 	ITT International Sàrl
	 	ITT Industries Sàrl
	July 23, 2009

	 	ITT Water Technology Delaware, Inc.
	 	ITT Germany GmbH
	 	BVE Controls GmbH
	July 23, 2009

	 	ITT Water Technology Delaware, Inc.
	 	ITT Germany GmbH
	 	Enidine Trading Company GmbH (later merged with BVE Controls GmbH)
	July 23, 2009

	 	ITT Water Technology Delaware, Inc.
	 	ITT Germany GmbH
	 	ITT Control Technologies GmbH (f/k/a Cleveland Motion Controls GmbH)
	July 30, 2009

	 	ITT Water Technology Delaware, Inc.
	 	ITT International Sàrl
	 	ITT Germany GmbH (f/k/a Enidine GmbH)
	December 12, 2010

	 	Nova Analytics Corporation
	 	ITT International Sàrl
	 	ITT Analytics Deutschland GmbH

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