Document:

Form of Note for the Company's 2.900% Notes due December 8, 2021.

 Exhibit 4.01 

FORM OF NOTE 
 This Note is a
Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of the Depository named below or a nominee of the Depository. This Note is not exchangeable for Notes registered in the name of a Person
other than the Depository or its nominee except in the limited circumstances described herein and in the Indenture, and no transfer of this Note (other than a transfer of this Note as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in the limited circumstances described herein. 

Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (the
“Depository”), to the Company or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of
the Depository (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of the Depository), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 CITIGROUP INC. 

2.900% Notes due December 8, 2021 
  

			
	REGISTERED	  	REGISTERED
		
		  	CUSIP: 172967LC3
		  	ISIN: US172967LC35
		  	Common Code: 153155879
		
	No. R-00*	  	$500,000,000

 CITIGROUP INC., a Delaware corporation (the “Company”, which term includes any successor Person
under the Indenture), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of $500,000,000 on December 8, 2021 and to pay interest thereon from and including December 8, 2016 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for, semi-annually, on June 8 and December 8 of each year, commencing June 8, 2017 at the rate of 2.900% per annum, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note is registered at the close of business on
the Record Date for such interest, which shall be the Business Day immediately preceding such Interest Payment Date. 

 Any such interest not so punctually paid or duly provided for will forthwith cease to be payable
to the holder on such Record Date and may either be paid to the Person in whose name this Note is registered at the close of business on a subsequent Record Date, such subsequent Record Date to be not less than ten days prior to the date of payment
of such defaulted interest, notice whereof shall be given to holders of Notes of this series not less than ten days prior to such subsequent Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. 

Interest hereon will be calculated on the basis of a 360-day year comprised of twelve 30-day months. 

If either an Interest Payment Date or the Maturity of the Notes falls on a day that is not a Business Day, such Interest Payment Date or
Maturity will be the next succeeding Business Day, and no further interest will accrue in respect of such postponement. If a date for payment of interest or principal on the Notes falls on a day that is not a business day in the place of
payment, such payment will be made on the next succeeding business day in such place of payment as if made on the date the payment was due. No interest will accrue on any amounts payable for the period from and after the due date for payment of
such principal or interest. For these purposes, “Business Day” means any day which is a day on which commercial banks settle payments and are open for general business in The City of New York. 

Payment of the principal of and interest on this Note will be made at the office or agency of the Trustee maintained for that purpose in The
City of New York. 
 Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set forth at this place. 
 Unless the certificate of authentication hereon
has been executed by the Trustee or by an authenticating agent on behalf of the Trustee by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 

 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its
corporate seal. 
 Dated: December 8, 2016 
  

					
	CITIGROUP INC.
		
	By:	 	  

		 	Name:	 	Joseph Bonocore
		 	Title:	 	Deputy Treasurer

  

					
	ATTEST:
		
	By:	 	  

		 	Name:	 	Karen Wang
		 	Title:	 	Assistant Secretary

 This is one of the Notes of the series issued under the within-mentioned Indenture. 

Dated: December 8, 2016 
  

					
	THE BANK OF NEW YORK MELLON,
	as Trustee
		
	By:	 	  

		 	Name:	 	
		 	Title:	 	
	
	-or-
	
	CITIBANK, N.A.,
	as Authenticating Agent
		
	By:	 	  

		 	Name:	 	
		 	Title:	 	

 This Note is one of a duly authorized issue of Securities of the Company (the “Notes”),
issued and to be issued in one or more series under the Indenture, dated as of November 13, 2013 (as amended and supplemented from time to time, the “Indenture”), between the Company and The Bank of New York Mellon, as Trustee (the
“Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee and the holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one of the series designated on the face hereof, initially limited in
aggregate principal to $2,250,000,000. 
 If an event of default (as defined in the Indenture) with respect to Notes of this series shall
occur and be continuing, the principal of the Notes of this series may be declared due and payable in the manner and with the effect provided in the Indenture. 

Sections 12.02 and 12.03 of the Indenture containing provisions for defeasance apply to this Note. At any time the entire indebtedness of this
Note may be defeased upon compliance by the Company with certain conditions set forth in Section 12.04 of the Indenture. 
 The Indenture
contains provisions permitting the Company and the Trustee, without the consent of the holders of the Securities, to establish, among other things, the form and terms of any series of Securities issuable thereunder by one or more supplemental
indentures, and, with the consent of the holders of a majority in aggregate principal amount of Securities at the time outstanding which are affected thereby, to modify the Indenture or any supplemental indenture or the rights of the holders of
Securities of such series to be affected, provided that no such modification will (i) extend the fixed maturity of any Securities, reduce the rate or extend the time of payment of interest thereon, reduce the principal amount thereof or the premium,
if any, thereon, reduce the amount of the principal of Original Issue Discount Securities payable on any date, change the currency in which Securities are payable, or impair the right to institute suit for the enforcement of any such payment on or
after the maturity thereof, without the consent of the holder of each Security so affected, or (ii) reduce the aforesaid percentage of Securities of any series the consent of the holders of which is required for any such modification without the
consent of the holders of all Securities of such series then outstanding, or (iii) modify the rights, duties or immunities of the Trustee unless the Trustee agrees to such modification. 

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed. 

This Note is a Global Security registered in the name of a nominee of the Depository. This Note is exchangeable for Notes registered in the
name of a person other than the Depository or its nominee only in the limited circumstances hereinafter described. Unless and until it is exchanged in whole or in part for definitive Notes in certificated form, this Note may not be transferred
except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository. 

 The Notes represented by this Global Security are exchangeable for definitive Notes in
certificated form of like tenor as such Notes in denominations of $1,000 and whole multiples of $1,000 in excess thereof only if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Notes and
the Company is unable to appoint a successor depository or (ii) the Depository ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, or (iii) the Company in its sole discretion decides to allow the Notes to
be exchanged for definitive Notes in registered form. Any Notes that are exchangeable pursuant to the preceding sentence are exchangeable for certificated Notes issuable in authorized denominations and registered in such names as the Depository
shall direct. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of definitive Notes in certificated form is registrable in the register maintained by the Company in The City of New York for such purpose,
upon surrender of the definitive Note for registration of transfer at the office or agency of the registrar, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the registrar duly executed by,
the holder thereof or his attorney duly authorized in writing, and thereupon one or more new Notes of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee
or transferees. Subject to the foregoing, this Note is not exchangeable, except for a Global Security or Global Securities of this issue of the same principal amount to be registered in the name of the Depository or its nominee. 

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith. 
 Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary. 
 The Company will pay additional amounts (“Additional Amounts”)
to the beneficial owner of any Note that is a non-United States person in order to ensure that every net payment on such Note will not be less, due to payment of U.S. withholding tax, than the amount then due
and payable. For this purpose, a “net payment” on a Note means a payment by the Company or a paying agent, including payment of principal and interest, after deduction for any present or future tax, assessment or other governmental charge
of the United States. These Additional Amounts will constitute additional interest on the Note. 
 The Company will not be required to pay Additional
Amounts, however, in any of the circumstances described in items (1) through (13) below. 
 (1) Additional Amounts will not be payable if a
payment on a Note is reduced as a result of any tax, assessment or other governmental charge that is imposed or withheld solely by reason of the beneficial owner: 

(a) having a relationship with the United States as a citizen, resident or otherwise; 

(b) having had such a relationship in the past or 

(c) being considered as having had such a relationship. 

 (2) Additional Amounts will not be payable if a payment on a Note is reduced as a result of any
tax, assessment or other governmental charge that is imposed or withheld solely by reason of the beneficial owner: 
 (a) being treated as
present in or engaged in a trade or business in the United States; 
 (b) being treated as having been present in or engaged in a trade or
business in the United States in the past or 
 (c) having or having had a permanent establishment in the United States. 

(3) Additional Amounts will not be payable if a payment on a Note is reduced as a result of any tax, assessment or other governmental charge
that is imposed or withheld in whole or in part by reason of the beneficial owner being or having been any of the following (as such terms are defined in the Internal Revenue Code of 1986, as amended): 

(a) personal holding company; 

(b) foreign private foundation or other foreign tax-exempt organization; 

(c) passive foreign investment company; 

(d) controlled foreign corporation or 

(e) corporation which has accumulated earnings to avoid United States federal income tax. 

(4) Additional Amounts will not be payable if a payment on a Note is reduced as a result of any tax, assessment or other governmental charge
that is imposed or withheld solely by reason of the beneficial owner owning or having owned, actually or constructively, 10 percent or more of the total combined voting power of all classes of stock of the Company entitled to vote or by reason of
the beneficial owner being a bank that has invested in a Note as an extension of credit in the ordinary course of its trade or business. 
 For purposes of
items (1) through (4) above, “beneficial owner” means a fiduciary, settlor, beneficiary, member or shareholder of the holder if the holder is an estate, trust, partnership, limited liability company, corporation or other entity, or a
person holding a power over an estate or trust administered by a fiduciary holder. 
 (5) Additional Amounts will not be payable to any
beneficial owner of a Note that is a: 
 (a) fiduciary; 

(b) partnership; 
 (c) limited
liability company or 
 (d) other fiscally transparent entity 

or that is not the sole beneficial owner of the Note, or any portion of the Note. However, this exception to the obligation to pay Additional
Amounts will only apply to the extent that a beneficiary or settlor in relation to the fiduciary, or a beneficial owner or member of the partnership, limited liability company or other fiscally transparent entity, would not have been entitled to the
payment of an Additional Amount had the beneficiary, settlor, beneficial owner or member received directly its beneficial or distributive share of the payment. 

(6) Additional Amounts will not be payable if a payment on a Note is reduced as a result of any tax, assessment or other governmental charge
that is imposed or withheld solely by reason of the failure of the beneficial owner or any other person to comply with applicable certification, 

 
identification, documentation or other information reporting requirements. This exception to the obligation to pay Additional Amounts will only apply if compliance with such reporting
requirements is required by statute or regulation of the United States or by an applicable income tax treaty to which the United States is a party as a precondition to exemption from such tax, assessment or other governmental charge. 

(7) Additional Amounts will not be payable if a payment on a Note is reduced as a result of any tax, assessment or other governmental charge
that is collected or imposed by any method other than by withholding from a payment on a Note by the Company or a paying agent. 
 (8)
Additional Amounts will not be payable if a payment on a Note is reduced as a result of any tax, assessment or other governmental charge that is imposed or withheld by reason of a change in law, regulation, or administrative or judicial
interpretation that becomes effective more than 15 days after the payment becomes due or is duly provided for, whichever occurs later. 

(9) Additional Amounts will not be payable if a payment on a Note is reduced as a result of any tax, assessment or other governmental charge
that is imposed or withheld by reason of the presentation by the beneficial owner of a Note for payment more than 30 days after the date on which such payment becomes due or is duly provided for, whichever occurs later. 

(10) Additional Amounts will not be payable if a payment on a Note is reduced as a result of any: 

(a) estate tax; 
 (b)
inheritance tax; 
 (c) gift tax; 

(d) sales tax; 
 (e) excise tax;

 (f) transfer tax; 
 (g)
wealth tax; 
 (h) personal property tax or 

(i) any similar tax, assessment, withholding, deduction or other governmental charge. 

(11) Additional Amounts will not be payable if a payment on a Note is reduced as a result of any tax, assessment, or other governmental charge
required to be withheld by any paying agent from a payment of principal or interest on a Note if such payment can be made without such withholding by any other paying agent. 

(12) Additional amounts will not be payable if a payment on a Note is reduced as a result of any withholding, deduction, tax, duty assessment
or other governmental charge that would not have been imposed but for a failure by the holder or beneficial owner of a Note (or any financial institution through which the holder or beneficial owner holds the Note or through which payment on the
Note is made) to take any action (including entering into an agreement with the Internal Revenue Service, or a governmental authority of another jurisdiction if the holder is entitled to the benefits of an intergovernmental agreement between that
jurisdiction and the United States) or to comply with any applicable certification, documentation, information or other reporting requirement or agreement concerning accounts maintained by the holder or beneficial owner (or any such financial
institution), or concerning ownership of the holder or beneficial owner, or any substantially similar requirement or agreement. 
 (13)
Additional Amounts will not be payable if a payment on a Note is reduced as a result of any combination of items (1) through (12) above. 

 Except as specifically provided herein, the Company will not be required to make any payment of
any tax, assessment or other governmental charge imposed by any government or a political subdivision or taxing authority of such government. 

As used in this Note, “United States person” means: 
  

	 	(a)	any individual who is a citizen or resident of the United States; 

  

	 	(b)	any corporation, partnership or other entity created or organized in or under the laws of the United States; 

  

	 	(c)	any estate if the income of such estate falls within the federal income tax jurisdiction of the United States regardless of the source of such income and 

 

	 	(d)	any trust if (i) a United States court is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of the substantial decisions of the trust;
or (ii) it has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. 

Additionally, “non-United States person” means a person who is not a United States person,
and “United States” means the states of the United States of America and the District of Columbia, but excluding its territories and its possessions. 

Except as provided below, the Notes may not be redeemed prior to maturity. 

 

	 	(1)	The Company may, at its option, redeem the Notes if: 

  

	 	(a)	the Company becomes or will become obligated to pay Additional Amounts as described above; 

  

	 	(b)	the obligation to pay Additional Amounts arises as a result of any change in the laws, regulations or rulings of the United States, or an official position regarding the application or interpretation of such laws,
regulations or rulings, which change is announced or becomes effective on or after December 1, 2016; and 

  

	 	(c)	the Company determines, in its business judgment, that the obligation to pay such Additional Amounts cannot be avoided by the use of reasonable measures available to it, other than substituting the obligor under the
Notes or taking any action that would entail a material cost to the Company. 

  

	 	(2)	The Company may also redeem the Notes, at its option, if: 

  

	 	(a)	any act is taken by a taxing authority of the United States on or after December 1, 2016 whether or not such act is taken in relation to the Company or any affiliate, that results in a substantial probability that the
Company will or may be required to pay Additional Amounts as described above; 

	 	(b)	the Company determines, in its business judgment, that the obligation to pay such Additional Amounts cannot be avoided by the use of reasonable measures available to it, other than substituting the obligor under the
Notes or taking any action that would entail a material cost to the Company and 

  

	 	(c)	the Company receives an opinion of independent counsel to the effect that an act taken by a taxing authority of the United States results in a substantial probability that the Company will or may be required to pay the
Additional Amounts described above, and delivers to the Trustee a certificate, signed by a duly authorized officer, stating that based on such opinion the Company is entitled to redeem the Notes pursuant to their terms. 

Any redemption of the Notes as set forth in clauses (1) or (2) above shall be in whole, and not in part, and will be made at a redemption price equal to 100%
of the principal amount of the Notes Outstanding plus accrued interest thereon to the date of redemption.
  

	 	(3)	The Company may also redeem the Notes, at its option, in whole at any time or in part from time to time, on or after June 8, 2017 and prior to November 8, 2021, at a redemption price equal to the sum of (i) 100% of the
principal amount of the Notes being redeemed plus accrued and unpaid interest thereon to, but excluding the date of redemption; and (ii) the Make-Whole Amount, if any, with respect to such Notes. The Reinvestment Rate will equal the Treasury Yield
calculated to November 8, 2021, plus 0.200%. 

  

	 	•	 	“Make-Whole Amount” means the excess, if any, of: (i) the aggregate present value as of the date of such redemption of each dollar of principal being redeemed and the amount of interest (exclusive of interest
accrued to the date of redemption) that would have been payable in respect of each such dollar if such redemption had not been made, determined by discounting, on a semi-annual basis, such principal and interest at the Reinvestment Rate (as defined
below) (determined on the third business day preceding the date that notice of such redemption is given) from the respective dates on which such principal and interest would have been payable if such redemption had not been made, to the date of
redemption, over (ii) the aggregate principal amount of the debt securities being redeemed. 

  

	 	•	 	“Reinvestment Rate” means the yield on Treasury securities at a constant maturity corresponding to the remaining life (as of the date of redemption, and rounded to the nearest month) to November 8, 2021, of
the principal being redeemed (the “Treasury Yield”), plus 0.200%. For purposes of the Notes, the Treasury Yield shall be equal to the arithmetic mean of the yields published in the Statistical Release under the heading “Week
Ending” for “U.S. Government Securities — Treasury Constant Maturities” with a maturity equal to such remaining life; provided that if no published maturity exactly corresponds to such remaining life, then the Treasury Yield
shall be interpolated or extrapolated on a straight-line basis from the arithmetic means of the yields for the next shortest and next longest published maturities. For purposes of calculating the Reinvestment Rate, the most recent Statistical
Release published prior to the date of determination of the Make-Whole Amount shall be used. If the format or content of the Statistical Release changes in a manner that precludes determination of the Treasury Yield in the above manner, then the
Treasury Yield shall be determined in the manner that most closely approximates the above manner, as reasonably determined by the Company. 

	 	•	 	“Statistical Release” means the statistical release designated “H.15(519)” or any successor publication which is published weekly by the Federal Reserve and which reports yields on actively traded
United States government securities adjusted to constant maturities or, if such statistical release is not published at the time of any determination under the Indenture, then such other reasonably comparable index which shall be designated by the
Company. 

  

	 	(4)	The Company may also redeem the Notes, at its option, in whole, but not in part, on or after November 8, 2021 at a redemption price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest
thereon to, but excluding, the date of redemption. 

 Holders shall be given not less than 15 days nor more than 60 days prior notice by the
Trustee of the date fixed for such redemption described in (1) through (4) above. 
 All terms used in this Note which are defined in the
Indenture shall have the meanings assigned to them in the Indenture. The Notes are governed by the laws of the State of New York. 

 Schedule 1 

Redemptions and Amount of Securities 
  

													
	 Date of partial redemption
	  	Aggregate
principal amount
of Securities then
redeemed	 	  	Remaining
principal amount
of this Global
Security	 	  	Authorized SignatureExhibit

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into by and between Kratos Defense & Security Solutions, Inc., a Delaware corporation (“Company”) and Phil Carrai, an individual (“Executive”), effective as of January 1, 2017 (“Effective Date”).  Certain terms used in this Agreement denoted by initial capital letters are defined in Section 17, to the extent not defined elsewhere in the Agreement.
RECITALS
A.    The Company wishes to continue to employ Executive upon the terms and conditions contained in this Employment Agreement (the “Agreement”), and Executive wishes to enter into the Agreement and agrees to perform his obligations hereunder in consideration of his employment and salary, benefits and other terms described herein.

NOW, THEREFORE, in the consideration of the mutual covenants and agreements set forth herein, the Company and Executive, intending to be legally bound, hereby agree as follows:    

AGREEMENT
1.Employment.  The Company shall employ Executive as President of the Company’s Technology and Training Solutions (“TTS”) Division (the “Position”), and Executive accepts such employment and agrees to perform services for the Company, for the period and upon the terms and conditions set forth in this Agreement. 
2.Term. The term of Executive’s employment hereunder shall be for a period commencing on the Effective Date and ending on December 31, 2019 (the “Term”), subject to earlier termination as hereinafter specified.  
3.Position and Duties.  During the term of this Agreement, Executive shall perform all duties and functions customarily performed by the Position of a business of the size and nature similar to that of the Company, and such other related employment duties as the President and CEO of the Company or his designee (the “President”) shall reasonably assign to him from time to time.  Executive shall perform his duties principally at the executive offices of TTS, with such travel to such other locations from time to time as the President may reasonably require.  Except as may otherwise be approved in advance by the President, and except during vacation periods and reasonable periods of absence due to sickness, personal injury or other disability, Executive shall devote his full working time to the services required of him hereunder.  Executive shall use his reasonable best efforts, judgment and energy to improve and advance the business and interest of the Company and its subsidiaries and Affiliates, if applicable, in a manner consistent with the duties of his position and with the Company’s Code of Legal and Ethical Conduct.  Executive hereby confirms that he is under no contractual commitments inconsistent with his obligations set forth in this Agreement, and that during his employment, he will not render or perform services, or enter into any contract to do so, for any other corporation, firm, entity or person which are inconsistent with the provisions of this Agreement.
4.Compensation.
4.1    Base Salary.  As compensation for all services to be rendered by Executive under this Agreement, the Company shall pay to Executive a base annual salary of Four Hundred Fifty Thousand Dollars ($450,000.00) (the “Base Salary”), which shall be paid on a regular basis in accordance with the Company’s 

customary payroll procedures and policies.  Executive will be eligible for annual increases to the Base Salary in accordance with the Company’s then current compensation policies.
4.2    Incentive Compensation.  As incentive compensation for services rendered hereunder, Executive may, at the sole and absolute discretion of the Company, be entitled to receive additional annual compensation of up to sixty percent (60%) of the Base Salary (“Incentive Compensation”).
4.3    Equity Incentives. Executive will be eligible for equity incentive grants at the discretion of Kratos’ President and the Compensation Committee of the Board of Directors. 
4.4    Participation in Benefit Plans.  Executive and eligible family members shall be eligible to participate in, subject to his affirmative election to enroll in such plans requiring enrollment, to the extent eligible thereunder in any and all plans of the Company providing general benefits for the Company’s employees, including, but not limited to, any group life insurance, hospitalization, disability, paid time off, medical, dental, pension, profit sharing, savings and stock bonus plans.  Executive’s participation in any such plan or program shall be subject to the provisions, rules, and regulations applicable thereto.  Nothing in this Agreement shall impose on the Company any affirmative obligation to establish any benefit plan.  The Company reserves the right to prospectively terminate or change benefit plans and programs it offers to its employees at any time, provided, however, that the Company will not reduce or discontinue Executive’s benefits in place on the date hereof unless such reduction or discontinuance is applied proportionately to all other employees of the Company. 
4.5    Expenses.  In accordance with the Company’s policies established from time to time, the Company will pay or reimburse Executive for all reasonable and necessary out-of-pocket expenses incurred by him in the performance of the Position, subject to the presentment of appropriate receipts or expense reports in connection with the Company’s policies and procedures.  The following provisions shall be in effect for any reimbursements (and in-kind benefits) to which Executive otherwise becomes entitled under this Agreement, in order to assure that such reimbursements (and benefits) do not create a deferred compensation arrangement subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Code”):
(a)    The amount of reimbursements (or in-kind benefits) to which Executive may become entitled in any one calendar year shall not affect the amount of expenses eligible for reimbursement (or in-kind benefits) hereunder in any other calendar year.
(b)    Each reimbursement to which Executive becomes entitled shall be made by the Company as soon as administratively practicable following Executive’s submission of the supporting documentation, but in no event later than the close of business of the calendar year following the calendar year in which the reimbursable expense is incurred.
(c)    Executive’s right to reimbursement (or in-kind benefits) cannot be liquidated or exchanged for any other benefit or payment.
4.6    Taxes and Other Withholding.  The Company may withhold from any benefits or amounts payable (including any Severance Payment or Change in Control Severance Payment, as defined below) under this Agreement all federal, state, city or other taxes and other amounts as shall be required pursuant to any law or governmental regulation or ruling or as elected by Executive.  
5.Annual Leave.  Executive shall earn paid time off and shall maintain paid time off balances in accordance with the Company’s standard policies. 
6.Compensation upon Termination.  Executive shall be entitled to the following payments, if any, upon the termination of his employment by the Company.  The compensation described in this Section 6 shall be in lieu of any separation or severance compensation offered to Executive under any general policies of the Company.

6.1    Misconduct or Cause.  In the event Executive is terminated by the Company for Misconduct or Cause pursuant to Section 11.1, Executive shall not be entitled to any compensation other than Base Salary accrued through the date of termination, plus accrued but unused paid time off.
6.2    Resignation.  In the event Executive resigns from the Company voluntarily pursuant to Section 11.2, Executive shall be entitled to receive Executive’s Base Salary accrued through the effective date of termination, plus accrued but unused paid time off. Should Executive resign his employment upon thirty (30) days’ advance written notice, Company reserves the right to immediately relieve Executive of all job duties and provide Executive with payment of thirty (30) days Base Salary in lieu of any portion of the notice period.
6.3    Without Cause.  In the event Executive is terminated by the Company Without Cause pursuant to Section 11.3, the Company shall pay to Executive (i) any Base Salary accrued through the date of termination, (ii) any accrued but unused paid time off; and (iii) continued payment of the Base Salary for a period of twelve (12) months (the “Severance Period”); and (iv) any Incentive Compensation which is earned as of the date of termination pursuant to the terms of any then existing Incentive Compensation Agreement.  The payment provided by Subsection (iii) of this Section 6.3 shall be referred to as a “Severance Payment.”  Except as otherwise provided herein, the Severance Payment shall be paid to Executive on a regular basis in accordance with the Company’s regular payroll procedures and policies.
6.4    Disability.  If Executive becomes physically, emotionally or mentally disabled during the term of this Agreement and such disability continues for a period of three hundred and sixty five (365)  days, the Company may, to the extent permitted by applicable law after the expiration of such period, terminate this Agreement by giving written notice to Executive.  For purpose of this Agreement, the term “disabled” shall be defined as Executive’s inability through physical, emotional, or mental illness, to perform all of the duties which Executive is required to perform under this Agreement with or without reasonable accommodation as such terms are defined under the Americans with Disabilities Act.  In the event that the Executive is terminated pursuant to this section, the Company shall pay to Executive (i) Executive’s Base Salary through the date that he is terminated; and (ii) any accrued but unused paid time off.  
6.5    Upon Change of Control.  In the event Executive’s employment is terminated by the Company without Cause upon a Change of Control of the Company as defined in the Company’s Restricted Stock Agreement, the Company shall pay to Executive: (i) any Base Salary accrued through the date of termination, (ii) any accrued but unused vacation time; and (iii) continued payment of the Base Salary for a period of twelve (12) months (the “Change of Control Severance Period”).  Subsection (iii), above, of this Section 6.5 shall be referred to as a “Change in Control Severance Payment.” 
6.6    Release. The receipt of the Severance Payment, Change in Control Severance Payment or other benefits pursuant to this Section 6 will be subject to Executive signing and not revoking a customary and standard employee release of claims agreement in a form prescribed by the Company, and such release becoming effective and irrevocable within forty-five (45) days of Executive’s termination.  No severance or other benefits will be paid or provided until the release of claims agreement becomes effective, and any severance amounts or benefits otherwise payable between the date of Executive’s termination and the date such release becomes effective shall be paid on the effective date of such release, subject to the delay in the following paragraph.  If the termination occurs after November 15, no payments shall be made until the first payroll date of the following calendar year, after the release has become effective, subject to the delay in the following paragraph.
6.7    Delay of Payment; Other 409A Matters.   Notwithstanding any other provision of this Agreement whatsoever, the Company, in its sole discretion, shall have the right to construe this Agreement in a manner that complies with Section 409A of the Code (relating to deferred compensation arrangements) and any related administrative guidance issued by the Internal Revenue Service.  Notwithstanding any 

inconsistent provision of this Agreement, if Executive is a “specified employee” within the meaning of Section 409A of the Code at the time of Executive’s termination, then only that portion of the Severance Payment or Change in Control Severance Payment, together with any other severance payments or benefits that, in each case, are nonqualified deferred compensation under Code Section 409A, which (a) do not exceed the Section 409A Limit (as defined below), and (b) which qualify as separation pay under Treasury Regulation Section 1. 409A-1(b)(9)(iii), may be paid within the first six (6) months following Executive’s termination. Otherwise, the portion of the Severance Payment, together with any other severance payments or benefits that, in each case, are nonqualified deferred compensation under Section 409A, that would otherwise be payable within the six (6) month period following Executive’s termination will instead be paid in a lump sum on the date six (6) months and one (1) day following the date of Executive’s termination (or the next business day if such date is not a business day), provided Executive has complied with the requirements for such payment. For purposes of this Agreement, “Section 409A Limit” means the lesser of two (2) times: (i)Executive’s “annualized compensation” as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1), or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year of the termination, or such successor limit as may apply. Each payment specified hereunder is designated a separate payment for purposes of Section 409A.  The Company shall have no liability to Executive for any adverse tax or other consequences related to the payments provided hereunder and to the extent any payment or benefit would result in adverse or other tax consequences under Section 409A, Executive shall have no legally enforceable right to such payment or benefit.  For purposes of this Agreement, termination of employment and similar phrases mean a “separation from service” within the meaning of Section 409A.
7.    Proprietary Matter; Ownership.
7.1    Except as permitted or directed by the Company or as required by law, Executive shall not during the term of his employment or at any time thereafter knowingly divulge, furnish, disclose or make accessible (other than in the ordinary course of the business of the Company) to anyone for use in any way any confidential, secret, or proprietary knowledge or information of the Company or its Affiliates that is not in the public domain (“Proprietary Matter”) which Executive has acquired or become acquainted with or will acquire or become acquainted with during his employment with the Company and its Affiliates, whether developed by himself or by others, including, but not limited to, any trade secrets, confidential or secret designs, processes, formulae, software or computer programs, plans, devices, or material (whether or not patented or patentable, copyrighted or copyrightable) directly or indirectly useful in any aspect of the business of the Company and its Affiliates, any confidential customer, distributor or supplier lists of the Company or its Affiliates, any confidential or secret development or research work of the Company or its Affiliates, or other confidential, secret or non-public aspects of the business of the Company or its Affiliates.  Executive acknowledges that the Proprietary Matter constitutes a unique and valuable asset of the Company or its Affiliates, acquired at great time and expense by the Company or such Affiliates, and that any disclosure or other use of the Proprietary Matter other than for the sole benefit of the Company  or such Affiliates would be wrongful and could cause irreparable harm to the Company or such Affiliates.  The foregoing obligations of confidentiality, however, shall not apply to any knowledge or information which is now published or which subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Agreement by Executive or the breach of any obligation of confidentiality by any other person.         
7.2    Executive agrees that he will fully inform and disclose to the Company from time to time all inventions, designs, improvements, enhancements, developments and discoveries which he now has, or may hereafter have, during the Term which pertain or relate to the business of the Company or its Affiliates or to any experimental work carried on by the Company or its Affiliates.  All such inventions, designs, improvements, enhancements, developments and discoveries shall be the exclusive property of the Company or its Affiliates.  Executive hereby assigns the rights to all such inventions, designs, improvements, enhancements, developments and discoveries to the Company or its Affiliates.  Executive shall reasonably 

assist the Company or its Affiliates in obtaining patents on all such inventions, designs, improvements, enhancements, developments and discoveries deemed patentable by the Company or its Affiliates and shall execute all documents (including assignments and related affidavits) and do all things reasonably necessary to obtain such patents.  This provision shall not apply to any inventions for which no equipment, supplies, facilities or trade secret information of the Company or its Affiliates was used and which was developed on Executive’s own time without using any of the Company’s or its Affiliates’ equipment, supplies, facilities or trade secret information, except for those inventions which either: (a) related at the time of conception or reduction to practice of the invention to the Company’s or its Affiliates’ respective businesses, or actual or demonstrably anticipated research or development of the Company or its Affiliates, or (b) resulted from any work performed by Executive for the Company or its Affiliates.
7.3    Executive acknowledges and understands that, pursuant to the Defend Trade Secrets Act, an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.  Further, if an employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the employee may disclose the trade secret to the employee’s attorney and use the trade secret information in the court proceeding, if the employee (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.  In the event that disclosure of Company trade secrets was not done in good faith pursuant to the above, the employee may be subject to substantial damages, including punitive damages and attorneys’ fees.
8.    Ventures.  If, during the term of this Agreement, Executive is engaged in or associated with the planning or implementing of any project, program or venture directly related to the business of the Company or its Affiliates and a third party or parties, all rights in the project, program or venture shall belong to the Company and shall constitute a corporate opportunity belonging exclusively to the Company.  Except as expressly approved in writing by the Company, Executive shall not be entitled to any interest in such project, program or venture or to any commission, finder’s fee or other compensation in connection therewith, other than the compensation to be paid to Executive as provided in this Agreement.
9.    Noninterference With Business.   
9.1    During his employment and for the Restricted Period (as defined in Section 17.5), Executive agrees not to, whether on his own behalf or as a partner, officer, director, employee, agent or consultant of any other person or entity,  directly or indirectly, engage or attempt to engage in any business that is similar to the type of business conducted by the TTS Division  for the purpose of improperly diverting or taking away business from the TTS Division or the Company in any geographic area in which the TTS Division was engaged in business as of the date of termination of  Executive’s employment with the Company (except by ownership of five percent (5%) or less of the outstanding stock of any publicly held corporation).  
9.2    During his employment and for the Restricted Period, Executive agrees not to (a) directly or indirectly contact any of the TTS Division’s then current customers or prospective customers with whom the TTS Division is then engaged in discussions or proposal negotiations for the purpose of improperly diverting or taking away business from the TTS Division or the Company; or (b) otherwise interfere with, impair, disrupt or damage the TTS Division or the Company’s relationship with any of its then current or prospective customers with whom the TTS Division was engaged in discussions or proposal negotiations during Executive’s employment with the Company. 
9.3    During his employment and for two (2) years following the termination of his employment for any reason, Executive agrees not to knowingly directly or indirectly solicit, induce or 

encourage any employee of the Company to terminate or breach an employment relationship with the Company.  
9.4    Executive and the Company agree that the restrictions in this Section 9 are reasonably necessary to protect the Company’s legitimate business interests, including, without limitation, the preservation of its valuable trade secret and confidential information and the preservation of its goodwill and customer relationships.  Executive and the Company further agree that the geographic scope stated herein is reasonable because the TTS Division operates throughout the United States and in various places throughout the world.
10.    Non-Disparagement.  Executive expressly agrees that during his employment by the Company and for two (2) years following the termination of such employment for any reason, he will make no statement and take no actions of any kind, verbal or written, that directly or indirectly disparages the Company or the Related Parties, injures their general reputation or interferes with the Company’s or its Affiliates’ operations, except as required by applicable law.  Nothing in this Section 10 shall restrict Executive from cooperating or communicating with any government or listing entity.
11.    Termination Prior to Expiration of the Term.
11.1    Termination for Misconduct or Cause.  The Company may terminate Executive’s employment at any time for “Misconduct” or for “Cause” (each as defined in Section 17) immediately upon written notice to Executive.  Such written notice shall set forth with reasonable specificity the Company’s basis for such termination.
11.2    Resignation.  Executive’s employment shall be terminated on the earlier of the date that is thirty (30) days following the submission of Executive’s written resignation to the Company or the date such resignation is accepted by the Company.
11.3    Termination Without Cause.  The Company may terminate Executive’s employment Without Cause upon written notice to Executive.  Termination “Without Cause” shall mean termination of employment by the Company on any basis other than termination of Executive’s employment hereunder pursuant to 11.1 or 11.2.
12.    Surrender of Records and Property.  Upon termination of his employment for any reason, Executive shall deliver promptly to the Company all records, manuals, books, blank forms, documents, letters, licenses, briefings, memoranda, notes, notebooks, reports, data, tables, and calculations or copies thereof, which are the property of the Company and which relate in any way to the business, customers, products, practices or techniques of the Company, and all other property of the Company and Proprietary Matter, including, but not limited to, all documents which in whole or in part, contain any trade secrets or confidential information of the Company, which in any of these cases are in his possession or under his control.  If Executive purchases any record book, ledger, or similar item to be used for keeping records of or information regarding the business of the Company or its customers, Executive shall immediately notify the Company and provide documentation of such purchase, which shall then immediately reimburse Executive for the expense of such purchase.
13.    Assignment.  This Agreement shall not be assignable, in whole or in part, by Executive.  The Company may, upon notice to Executive, assign its rights and obligations under this Agreement to an Affiliate of the Company or any purchaser of substantially all of the Company’s assets.  
Upon such assignment by the Company, this Agreement shall be enforceable by the Executive and the assignee respectively.  After any such assignment by the Company, Executive and the Company shall be discharged from all further liability hereunder to each other.
14.    Injunctive Relief.  Executive agrees that it would be difficult to compensate the Company fully for damages for any violation of the provisions of this Agreement, including, without limitation, the 

provisions of Sections 7, 9, 10 and 12. Accordingly, Executive specifically agrees that the Company shall be entitled to temporary and permanent injunctive relief to enforce the provisions of this Agreement.  This provision with respect to injunctive relief shall not, however, diminish the right of the Company to claim and recover damages in addition to injunctive relief. 
15.    Arbitration.
15.1    Claims Covered.  The parties shall resolve by arbitration all statutory, contractual and/or common law claims or controversies (“Claims”) that the Company may have against Executive, or that Executive may have against the Company or any of its officers, directors, employees or agents in their capacity as such or otherwise.  Claims subject to arbitration include claims for breach of any contract (express or implied).
15.2    Claims Not Covered.  The arbitration of Claims shall not apply to (i) claims by Executive for workers’ compensation or unemployment insurance; (ii) claims which even in the absence of these arbitration provisions could not have been litigated in court or before any administrative proceeding under applicable federal, state or local law; (iii) claims by the Company for injunctive and/or other equitable relief;  (iv) claims for which arbitration is prohibited under applicable rules in the Federal Acquisition Regulation or the Defense Federal Acquisition Regulation Supplement and (v) claims for employee benefits under any employee benefit plan subject to ERISA.
15.3    Procedures.  Claims shall be settled by arbitration by a single, neutral arbitrator in accordance with the employment arbitration rules then in effect of Judicial Arbitration and Mediation Services (JAMS) which can be found at www.jamsadr.com/rules-employment-arbitration.  The arbitrator shall determine all questions of fact and law relating to any Claim, including but not limited to, whether or not any such Claim is subject to the arbitration provisions contained herein.  The parties shall be permitted to engage in such pre-hearing discovery as the arbitrator shall permit.  The arbitrator shall issue a written arbitration decision which shall include essential findings and conclusions on which any award is based.  The decision shall remain confidential between the parties and shall not be published by the arbitrator or JAMS.  Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction.  Each party shall pay the fees of its own attorneys, the expenses of its witnesses and all other expenses connected with presenting its case, except insofar as such fees or expenses are otherwise recoverable pursuant to a statutory claim or cause of action.  The Company shall bear the other costs of the arbitration, including the cost of any record or transcript of the arbitration, administrative fees, the fee of the arbitrator, and all other fees and costs.
15.4    Remedies; Waiver of Jury Trial.  Executive understands that Executive is waiving the right to seek certain remedies in court, including the right to a jury trial.  The arbitrator shall be empowered to award any relief which might have been available in a court of law or equity.
15.5    Required Notice and Statute of Limitations.  Arbitration shall be initiated by serving or mailing a written notice to the other party within the applicable statutory limitations period.  Any notice to be sent to the Company shall be delivered to the Company President with a mandatory copy to Kratos’ General Counsel, 4820 Eastgate Mall, Ste. 200, San Diego, CA 92121, facsimile 858-812-7303.  The notice shall identify and describe the nature of all claims asserted and the facts upon which such claims are based.
16. Miscellaneous.
16.1    Governing Law and Venue.  This Agreement is made under and shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflicts of law provisions, and all proceedings shall be brought in the courts or arbitral forums located in located in Northern Virginia (Washington, D.C. metropolitan area), San Diego, California, or some other location as agreed by the parties.

16.2    Prior Agreements.  This Agreement, coupled with Executive’s Proprietary Information Agreement, contains the entire agreement of the parties relating to the subject matter hereof and supersedes all prior agreements and understandings with respect to such subject matter. The parties have made no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein.
16.3    Successors.  The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees on the one hand, and by any successor or assignee of the Company on the other hand.
16.4    Amendments.  No amendment or modification of this Agreement shall be deemed effective unless made in writing signed by the parties.
16.5    No Waiver.  No term or condition of this Agreement shall be deemed to have been waived nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is sought.  Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
16.6    Severability and Reformation.  To the extent any provision of this Agreement shall be considered by a court or arbitrator to be invalid or unenforceable, the provision shall be considered deleted here from and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect.  Each of the parties recognizes that the restrictions contained in this Agreement are properly required for the adequate protection of the Company’s business and that in the event any covenant or other provision contained herein shall be deemed to be illegal, unenforceable or unreasonable by a court or other tribunal of competent jurisdiction, each of the parties agrees and submits to the reduction of said restrictions to such duration and/or scope as said court or tribunal shall deem reasonable.
16.7    Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all which together shall be deemed to be one and the same instrument.
16.8    Notices.  All notices required or permitted hereunder shall be in writing and shall be deemed effectively given or received: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed facsimile if sent during normal business hours of the recipient upon confirmed receipt, if not, then on the next business day, (c) five (5) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the Company and Executive at their respective addresses as set forth on the signature page hereof or at such other address as the Company or Executive may designate by ten (10) days advance written notice to the other party.
17. Definition of Terms.  The following terms referred to in this Agreement shall have the following meanings:
17.1    Affiliate.  “Affiliate” with respect to any person or entity, means a person or entity that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, such person or entity.
17.2    Cause.  Termination for “Cause” means termination due to any of the following reasons: (i) Executive’s willful violation of posted policy or rules of the Company; (ii) Executive’s willful refusal to follow the lawful directions given by Executive’s direct supervisor or the President of the Company 

from time to time or breach of any material covenant or obligation under this Agreement or other agreement with the Company; or (iii) Executive’s breach of the duty of loyalty to the Company that causes or is reasonably likely to cause injury to the Company.
17.3    Misconduct.  “Misconduct” means:
17.3.1    Indictment or conviction of a felony or for an act of fraud, embezzlement or other act of gross misconduct against the Company in the performance of duties hereunder.
17.3.2    Misuse, misappropriation or disclosure of any of the Proprietary Matter, directly or indirectly, or use of it in any way, except as required or permitted in the course of Executive’s employment.
17.3.3    Knowing misappropriation, concealment, or conversion of any money or property of the Company that causes or could cause injury to the Company.
17.3.4    Reckless conduct which endangers or is reasonably likely to endanger the safety of persons or property during the course of employment or while on Company premises.
17.3.5    A material violation of the Company’s Code of Legal and Ethical Conduct.
17.4    Related Parties.  “Related Parties” means each of the Company’s present and former directors, officers, employees, trustees, agents, attorneys, insurers, shareholders, representatives, predecessors, successors and assigns, and if any, its parent corporations, subsidiaries, divisions, related and affiliated companies and entities.
17.5    Restricted Period.  The “Restricted Period” means a period of (a) two (2)  years after the termination of Executive’s employment due to Misconduct or Cause or (b) one (1) year after the termination of Executive’s employment for any other reason.  

IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the Effective Date.
    
		
	THE COMPANY:
	EXECUTIVE:

Kratos Defense & Security Solutions, Inc.

		
	By: /s/ Marie Mendoza for Eric DeMarco
	/s/ Phil Carrai

		
	Name:  Eric DeMarco
	Phil Carrai    

		
	Title:  President and CEO
	Title:  President, TTS

		
	Date:  12/5/2016
	Date:  11/22/2016    

        
		
	Address for Notice:
	Address for Notice:

4820 Eastgate Mall, Suite 200    
San Diego, CA 92121    
Attn:    Law Department

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