Document:

exv4w5

Exhibit 4.5

EXELIS INC.

DEFERRED COMPENSATION PLAN

Effective as of October 31, 2011 including amendments effective as of January 1, 2012

 

 

EXELIS INC. DEFERRED COMPENSATION PLAN

The Exelis Inc. Deferred Compensation Plan (the “Plan”) first became effective as of October 31,
2011 (the “Effective Date”) following the spin-off of Exelis Inc. from ITT Corporation (the
“Predecessor Corporation”) on October 31, 2011. The Predecessor Corporation maintained a similar
plan (the “ITT Deferred Compensation Plan”) prior to the spin-off (the “Predecessor Plan”). Under
the terms of the Benefits and Compensation Matters Agreement, the Predecessor Corporation agreed
that the spinoff of Exelis Inc. from ITT Corporation would not trigger a separation from service
for purposes of IRC Section 409A for Exelis Employees. The Plan was created as a spin-off of the
Predecessor Plan to govern prior deferrals by Exelis Employees made under the Predecessor Plan and
to provide each Participant with a means of deferring compensation in accordance with the terms of
the Plan.

The Plan shall remain in effect as provided in Section 6.01 hereof, and Participants shall be
deemed to receive full credit for their service and participation with the Predecessor Corporation
as provided in Section 3.03 hereof. Further, the Plan shall not deprive a Participant of the right
to payment of deferred compensation credited as of the date of termination or amendment, in
accordance with the terms of the Plan as of the date of such termination or amendment.

The Plan is amended effective as of January 1, 2012, to include the deferral of Company
contributions that would have been made under the Exelis Salaried Investment and Savings Plan or
the Exelis Excess Savings Plan for certain eligible Participants had the bonus amount deferred
under the provisions of the Plan been paid directly to the Participant.

The Predecessor Plan was established by the Predecessor Corporation, effective January 1, 1995. The
purpose of the Predecessor Plan was to provide each Participant with a means of deferring
compensation in accordance with the terms of the Predecessor Plan.

Effective as of December 19, 1995, Predecessor Corporation split into three separate companies —
ITT Hartford Group, Inc., ITT Corporation, a Nevada corporation, and ITT Industries, Inc. an
Indiana corporation (the “Indiana Corporation”), which is the successor to Predecessor Corporation.

Under the Employee Benefits Service and Liability Agreement dated November 1, 1995 (the
“Agreement”) the Indiana Corporation agreed to continue the Predecessor Plan for eligible employees
of the Indiana Corporation or of any of its subsidiaries and to transfer the liabilities
attributable to participants who become employees of ITT Corporation, a Nevada corporation, on
December 19, 1995 to ITT Corporation.

Effective as of January 1, 1996, the Predecessor Plan was amended to accept the liabilities under
the ITT Industries Excess Savings Plan attributable to salary deferrals, excess matching
contributions, and excess floor contributions credited with respect to Base Salary deferred under
the Predecessor Plan and hold such amounts hereunder in accordance with the provisions of the ITT
Industries Excess Savings Plan as set forth in Appendix A, attached hereto and made part hereof of
this Plan.

 

 

Effective as of October 1, 1997, January 1, 1998, April 1, 1998, January 1, 1999, and November 1,
2000, the Predecessor Plan was further amended to make certain administration changes to unify the
form and timing of Predecessor Plan distributions, respectively. Effective as of March 1, 2004, the
Predecessor Plan was further amended to provide that a Participant may make a separate investment
election with respect to future deferrals. Effective as of July 1, 2004, the Predecessor Plan was
amended and restated to make certain administrative changes and to unify the definition of
Acceleration Event with other employee benefit plans of ITT Industries. Effective as of July 1,
2006, the Predecessor Plan’s name was revised to the ITT Deferred Compensation Plan.

The Predecessor Plan was amended and restated, effective as of December 31, 2008 to comply with the
provisions of Section 409A of the Internal Revenue Code and regulations promulgated thereunder.

The provisions of the Predecessor Plan as amended applied to amounts previously deferred on or
after January 1, 2005. Amounts previously deferred under the provisions of the Predecessor Plan
prior to January 1, 2005, which were vested as of December 31, 2004, shall be subject to the
provisions of the Predecessor Plan as in effect on October 3, 2004 (attached hereto as Appendix C
and made part hereof) without regard to any Predecessor Plan amendments after October 3, 2004 which
would constitute a material modification for Code Section 409A purposes, unless otherwise provided
in Appendix B attached hereto; provided, however, that the obligation to make all such payments
with respect to Exelis Employees have been assumed by Exelis Inc. under this Plan and shall be paid
by Exelis Inc.

All benefits payable under this Plan, which constitutes a nonqualified, unfunded deferred
compensation plan for a select group of management or highly-compensated employees under Title I of
ERISA, shall be paid out of the general assets of the Company.

 

 

EXELIS INC. DEFERRED COMPENSATION PLAN

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE 1 — DEFINITIONS 
	 	 	1	 
	1.01 Acceleration Event 
	 	 	1	 
	1.02 Administrative Committee 
	 	 	1	 
	1.03 Associated Company 
	 	 	1	 
	1.04 Base Salary 
	 	 	1	 
	1.05 Beneficiary 
	 	 	1	 
	1.06 Bonus 
	 	 	1	 
	1.07 Board of Directors or Board 
	 	 	2	 
	1.08 Change in Control 
	 	 	2	 
	1.09 Code 
	 	 	2	 
	1.10 Company 
	 	 	2	 
	1.11 Company Contribution Account 
	 	 	2	 
	1.12 Company Base Contribution Rate 
	 	 	2	 
	1.13 Compensation and Personnel Committee 
	 	 	2	 
	1.14 Corporation 
	 	 	2	 
	1.15 Deferral Account 
	 	 	2	 
	1.16 Deferral Agreement 
	 	 	3	 
	1.17 Deferrals 
	 	 	3	 
	1.18 Effective Date 
	 	 	3	 
	1.19 Eligible Executive 
	 	 	3	 
	1.20 Employee 
	 	 	3	 
	1.21 Executive 
	 	 	3	 
	1.22 ERISA 
	 	 	3	 
	1.23 Exelis Employee 
	 	 	3	 
	1.24 Grandfathered Deferral Account 
	 	 	4	 
	1.25 Participant 
	 	 	4	 
	1.26 Performance Based Compensation 
	 	 	4	 
	1.27 Performance Period 
	 	 	4	 
	1.28 Plan 
	 	 	4	 
	1.29 Plan Committee 
	 	 	5	 
	1.30 Plan Year 
	 	 	5	 
	1.31 Predecessor Corporation 
	 	 	5	 
	1.32 Predecessor Plan 
	 	 	5	 
	1.33 Prior Deferrals 
	 	 	5	 
	1.34 Reporting Date 
	 	 	5	 
	1.35 Retirement 
	 	 	5	 
	1.36 Savings Plan 
	 	 	6	 
	1.37 Special Purpose Subaccount(s) 
	 	 	6	 
	1.38 Specified Distribution Date 
	 	 	6	 
	1.39 Specified Employee 
	 	 	6	 
	1.40 Termination of Employment 
	 	 	6	 

 

 

	 	 	 	 	 
	 	 	Page	 
	1.41 Termination Subaccount 
	 	 	6	 
	 
	 	 	 	 
	ARTICLE 2 — PARTICIPATION 
	 	 	7	 
	2.01 Eligibility 
	 	 	7	 
	2.02 In General 
	 	 	7	 
	2.03 Termination of Participation 
	 	 	7	 
	 
	 	 	 	 
	ARTICLE 3 — DEFERRALS 
	 	 	9	 
	3.01 Filing Requirements 
	 	 	9	 
	3.02 Amount of Deferral 
	 	 	10	 
	3.03 Crediting to Deferral Account 
	 	 	11	 
	3.04 Excess Company Contribution 
	 	 	11	 
	3.05 Crediting to Company Contribution Account 
	 	 	12	 
	3.06 Vesting 
	 	 	12	 
	3.05 Unforeseeable Emergency 
	 	 	12	 
	 
	 	 	 	 
	ARTICLE 4 — MAINTENANCE OF ACCOUNTS 
	 	 	14	 
	4.01 Adjustment of Deferral and Grandfathered Deferral Accounts 
	 	 	14	 
	4.02 Investment Performance Elections 
	 	 	14	 
	4.03 Changing Investment Elections 
	 	 	15	 
	4.04 Adjustment of the Company Contribution Account 
	 	 	16	 
	4.05 Individual Accounts 
	 	 	16	 
	4.06 Valuation of Accounts 
	 	 	17	 
	4.07 Compliance with Securities Laws and Trading Policies and Procedures 
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 5 — PAYMENT OF BENEFITS 
	 	 	19	 
	5.01 Commencement of Payment 
	 	 	19	 
	5.02 Method of Payment 
	 	 	22	 
	5.03 Change of Distribution Election 
	 	 	24	 
	5.04 Death 
	 	 	26	 
	5.05 Hardship 
	 	 	26	 
	5.06 Payment upon the Occurrence of a Change in Control 
	 	 	27	 
	5.07 Acceleration of or Delay in Payments 
	 	 	27	 
	5.08 Designation of Beneficiary 
	 	 	28	 
	5.09 Debiting Accounts 
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 6 — AMENDMENT OR TERMINATION 
	 	 	29	 
	6.01 Right to Terminate 
	 	 	29	 
	6.02 Right to Amend 
	 	 	29	 
	 
	 	 	 	 
	ARTICLE 7 — GENERAL PROVISIONS 
	 	 	30	 
	7.01 Funding 
	 	 	30	 
	7.02 No Contract of Employment 
	 	 	30	 
	7.03 Unsecured Interest 
	 	 	30	 
	7.04 Facility of Payment 
	 	 	31	 
	7.05 Withholding Taxes 
	 	 	31	 

 

 

	 	 	 	 	 
	 	 	Page	 
	7.06 Nonalienation 
	 	 	31	 
	7.07 Transfers 
	 	 	31	 
	7.08 Claims Procedure 
	 	 	32	 
	7.09 Payment of Expenses 
	 	 	34	 
	7.10 Discharge of Corporation’s Obligation 
	 	 	34	 
	7.11 Successors 
	 	 	34	 
	7.12 Construction 
	 	 	34	 
	 
	 	 	 	 
	ARTICLE 8 — ADMINISTRATION 
	 	 	36	 
	8.01 Administration 
	 	 	36	 
	 
	 	 	 	 
	APPENDIX A 
	 	 	38	 
	 
	 	 	 	 
	APPENDIX B 
	 	 	41	 
	 
	 	 	 	 
	APPENDIX C 
	 	 	43	 

 

 

ARTICLE 1 — DEFINITIONS 

	1.01	 	“Acceleration Event” shall mean an “Acceleration Event” as such term is defined under the
provisions of the Predecessor Plan as effective on October 2, 2004.

	1.02	 	“Administrative Committee” shall mean the person or persons appointed to administer the Plan
as provided in Section 8.01.

	1.03	 	“Associated Company” shall mean any division, subsidiary or affiliated company of the
Corporation which is an Associated Company, as such term is defined in the Exelis Salaried
Retirement Plan, as amended from time to time.

	1.04	 	“Base Salary” shall mean the annual base fixed compensation paid periodically during the
calendar year, determined prior to any pre-tax contributions under a “qualified cash or
deferred arrangement” (as defined under Code Section 401(k) and its applicable regulations) or
under a “cafeteria plan” (as defined under Code Section 125 and its applicable regulations) or
a qualified transportation fringe benefit under Section 132(f) of the Code and any deferrals
under Article 3, Appendix A or another unfunded deferred compensation plan maintained by the
Corporation, but excluding any overtime, bonuses, foreign service allowances or any other form
of compensation, except to the extent otherwise deemed “Base Salary” for purposes of the Plan
under rules as are adopted by the Compensation and Personnel Committee.

	1.05	 	“Beneficiary” shall mean the person or persons designated by a Participant pursuant to the
provisions of Section 5.08 in a time and manner determined by the Administrative Committee to
receive the amounts, if any, payable under the Plan upon the death of the Participant.

	1.06	 	“Bonus” shall mean the cash amount, if any, awarded to an employee of the Company under the
Company’s executive bonus program, or other compensation program designated by the
Compensation and Personnel Committee as a bonus hereunder

Page 1

 

	1.07	 	“Board of Directors” or “Board” shall mean the Board of Directors of the Corporation.

	1.08	 	“Change in Control” shall mean a “Change in Control” as such term is defined in the Exelis
Inc. Excess Pension Plan IIA, as amended from time to time.

	1.09	 	“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

	1.10	 	“Company” shall mean the Corporation and any successor thereto, with respect to its employees
and any Participating Corporation or Participating Division (as such terms are defined in the
Savings Plan) authorized by the Compensation and Personnel Committee to participate in the
Plan with respect to their employees; provided, however, that for purposes of deferrals made
under the Predecessor Plan, Company shall mean the Predecessor Corporation as the original
recorder of the deferral.

	1.11	 	“Company Contribution Account” shall mean, effective on and after January 1, 2012, the
bookkeeping account (or subaccount(s)) maintained for each Participant to record all amounts
credited on his behalf under Section 3.04(a), and (b) and earnings on those amounts pursuant
to Section 3.05

	1.12	 	“Company Base Contribution Rate” shall mean the rate of Company Base Contributions (as such
term in defined under the provisions of the Savings Plan) for a particular Plan Year.

	1.13	 	“Compensation and Personnel Committee” shall mean the Compensation and Personnel Committee of
the Board of Directors.

	1.14	 	“Corporation” shall mean Exelis Inc., an Indiana corporation, or any successor by merger,
purchase, or otherwise.

	1.15	 	“Deferral Account” shall mean the bookkeeping account maintained for each Participant to
record the amount of Bonus deferred by a Participant in accordance with Article 3, adjusted
pursuant to Article 4 and with respect to an individual who became a Participant

Page 2

 

	      	 	on the Effective Date and who immediately prior to the Effective Date was a participant in
the Predecessor Plan, the amounts deferred under Article 3 of the Predecessor Plan on or
after January 1, 2005 by such Participant adjusted pursuant to Article 4. The Deferral
Account shall contain subaccounts, such as a Termination Subaccount, Special Purpose
Subaccount(s), a Deferral 2005 Subaccount or any other subaccount established by the
Administrative Committee.

	1.16	 	“Deferral Agreement” shall mean the completed agreement, including any amendments,
attachments and appendices thereto, in such form approved by the Administrative Committee,
between an Eligible Executive and the Company, under which the Eligible Executive agrees to
defer a portion of his Bonus.

	1.17	 	“Deferrals” shall mean the amount of deferrals credited to a Participant pursuant to Section
3.02.

	1.18	 	“Effective Date” shall mean October 31, 2011

	1.19	 	“Eligible Executive” shall mean an Executive who is eligible to participate in the Plan as
provided in Section 2.01.

	1.20	 	“Employee” shall mean a person who is employed by the Company.

	1.21	 	“Executive” shall mean an Employee of the Company whose Base Salary equals or exceeds
$200,000 (or as adjusted from time to time by the Administrative Committee).

	1.22	 	“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time
to time.

	1.23	 	“Exelis Employee” shall mean an Employee who is employed by or assigned to Exelis Inc.
following the spin-off of Exelis Inc. from the Predecessor Corporation, including

Page 3

 

	      	 	former Employees of the Predecessor Corporation who are determined by the Predecessor
Corporation to be associated with Exelis Inc.

	1.24	 	“Grandfathered Deferral Account” shall mean the bookkeeping account maintained for each
Participant to record the amount of Bonus and/or Base Salary deferred prior to January 1, 2005
by a Participant in accordance with Article 3 of the Predecessor Plan as in effect on or prior
to October 3, 2004, adjusted pursuant to Article 4.

	1.25	 	“Participant” shall mean, except as otherwise provided in Article 2, each Eligible Executive
who has executed a Deferral Agreement pursuant to the requirements of Section 2.02 and is
credited with an amount under Section 3.03 and each individual who was a participant in the
Predecessor Plan immediately prior to the October 31, 2011 and had amounts transferred on his
behalf from the Predecessor Plan to this Plan effective as of the Effective Date.

	1.26	 	“Performance Based Compensation” shall mean a bonus where the amount of, or entitlement to,
the bonus is contingent on the satisfaction of pre-established organizational or individual
performance criteria relating to a performance period of at least twelve (12) consecutive
months. Organizational or individual performance criteria are considered pre-established if
established in writing by not later than ninety (90) days after the commencement of the period
of service to which the criteria relate, provided that the outcome is substantially uncertain
at the time the criteria are established. The determination of whether a Bonus qualifies as
“Performance-Based Compensation” will be made in accordance with Treas. Reg. Section
1.409A-1(e) and subsequent guidance.

	1.27	 	“Performance Period” shall mean the period of a least twelve (12) months over which an
individual or a company’s performance is measured for purposes of the Company’s bonus program.

	1.28	 	“Plan” shall mean the Exelis Inc. Deferred Compensation Plan as set forth in this document
and the appendices and schedules thereto, as it may be amended from time to

Page 4

 

	      	 	time; provided, however, that the term “Plan” shall include the Predecessor Plan with
respect to all prior service and participation by a Participant with the Predecessor
Corporation and preserving all rights by Participants to the Grandfathered Deferral
Accounts.

	1.29	 	“Plan Committee” shall mean the Exelis Pension Fund Trust and Investment Committee
established from time to time pursuant to the terms of the Exelis Salaried Retirement Plan.

	1.30	 	“Plan Year” shall mean the calendar year.

	1.31	 	“Predecessor Corporation” shall mean Corporation as such terms was defined under the
Predecessor Plan immediately prior to the Effective Date.

	1.32	 	“Predecessor Plan” shall mean the ITT Deferred Compensation Plan as in effect prior to the
October 31, 2011.

	1.33	 	“Prior Deferrals” shall mean the amount attributable to Deferrals initially credited to a
Participant pursuant to Section 3.02 of the Predecessor Plan and not yet distributed as of the
Effective Date.

	1.34	 	“Reporting Date” shall mean each business day on which the New York Stock Exchange is open or
such other business day as the Administrative Committee may determine.

	1.35	 	“Retirement” shall mean, with respect to an Eligible Executive, any termination of employment
by an Eligible Executive after the date the Eligible Executive is eligible for an early,
normal or postponed retirement benefit under the Exelis Salaried Retirement Plan, or would
have been eligible had he been a participant in such Plan.

Page 5

 

	1.36	 	“Savings Plan” shall mean, effective as of the October 31, 2011, the Exelis Salaried
Investment and Savings Plan (formerly known as the ITT Salaried Investment and Savings Plan)
as amended from time to time.

	1.37	 	“Special Purpose Subaccount(s)” shall mean the bookkeeping account(s) described in Section
5.01(a) maintained to record deferrals that a Participant has elected to have paid pursuant to
clause (ii) of Section 5.01(a), adjusted pursuant to Article 4.

	1.38	 	“Specified Distribution Date” shall mean the specific date designated by a Participant
pursuant to clause (ii) of Section 5.01(a).

	1.39	 	“Specified Employee” shall mean a “Specified Employee” as such term is defined in the Exelis
Inc. Excess Pension Plan IIA, as amended from time to time.

	1.40	 	“Termination of Employment” shall mean “Termination of Employment” as such term is defined in
the Exelis Inc. Excess Pension Plan IIA, as amended from time to time.

	1.41	 	“Termination Subaccount” shall mean the bookkeeping account described in Section 5.01(a)
maintained to record deferrals that a Participant has elected to have paid pursuant to clause
(i) of Section 5.01(a), adjusted pursuant to Article 4.

Page 6

 

ARTICLE 2 — PARTICIPATION

	2.01	 	Eligibility

	 	 	An Employee who is an Executive as of the last business day in October of a calendar year
(or such later date in that calendar year as determined by the Administrative Committee)
shall be an Eligible Executive with respect to the Plan Year following such calendar year,
and thereby eligible to participate in this Plan and execute a Deferral Agreement
authorizing Deferrals under this Plan with respect to his Bonus earned in such Plan Year.

	2.02	 	In General

	 	(a)	 	An individual who is determined to be an Eligible Executive with respect to a
Plan Year and who desires to have deferrals credited on his behalf pursuant to Article
3 for such Plan Year must execute a Deferral Agreement with the Administrative
Committee authorizing Deferrals under this Plan for such year in accordance with the
provisions of Sections 3.01 and 3.02.
	 
	 	(b)	 	The Deferral Agreement shall be in writing and be properly completed in the
manner approved by the Administrative Committee, which shall be the sole judge of the
proper completion thereof. Such Deferral Agreement shall provide, subject to the
provisions of Section 3.02, for the deferral of a portion of the Eligible Executive’s
Bonus. The Deferral Agreement shall include such other provisions as the Administrative
Committee deems appropriate.
	 
	 	(c)	 	An Eligible Executive shall become a Participant when Deferrals are first
credited on his behalf pursuant to Article 3. However, an Employee who was a
participant in the Predecessor Plan immediately prior to the Effective Date shall
become a Participant of this Plan on the Effective Date.

Page 7

 

	2.03	 	Termination of Participation

	 	(a)	 	Participation shall cease when all benefits to which a Participant is entitled
to hereunder are distributed to him.
	 
	 	(b)	 	Subject to the provisions of Section 3.01, a Participant shall only be eligible
to have Deferrals credited on his behalf in accordance with Article 3 for as long as he
remains an Eligible Executive.
	 
	 	(c)	 	If a former Participant who has incurred a Termination of Employment and whose
participation in the Plan ceased under Section 2.03(a) is reemployed as an Eligible
Executive, the former Participant may again become a Participant in accordance with the
provisions of Section 2.02.

Page 8

 

ARTICLE 3 — DEFERRALS

	3.01	 	Filing Requirements

	 	(a)	 	Subject to the following provisions of this Section, prior to the close of an
annual enrollment period established by the Administrative Committee, an Eligible
Executive who is employed by the Company as of the last day of such annual enrollment
period (or such other date prior to the close of the Plan Year as determined by the
Administrative Committee), may elect to defer a portion of his Bonus earned in the
following Plan Year, provided the Deferral Agreement is filed with the Administrative
Committee (or its delegates) by the date established by the Administrative Committee,
but not later than the last day of the calendar year preceding the Plan Year in which
such Bonus is earned (the “Deferral Election Deadline”).
	 
	 	(b)	 	A Participant’s election to defer a portion of his Bonus for any calendar year
shall become irrevocable on the last day the deferral of such Bonus may be elected
under Section 3.01(a), except as otherwise provided in Section 3.02(b) or 3.07. A
Participant may revoke or change his election to defer a portion of Bonus at any time
prior to the date the election becomes irrevocable. Any such revocation or change shall
be made in a form and manner determined by the Administrative Committee.
	 
	 	(c)	 	Subject to the provisions of Section 3.02, an Eligible Executive must file, in
accordance with the provisions of Section 3.01(a), a new Deferral Agreement for each
calendar year the Eligible Executive is eligible for and elects to defer a portion of
his Bonus.
	 
	 	(d)	 	Notwithstanding any provision of the Plan to the contrary, an Eligible
Executive’s election to defer Bonus shall only be effective if (1) the Eligible
Executive files the Deferral Agreement with respect to such Bonus no later than the
applicable Deferral

Page 9

 

	 	 	 	Election Deadline (as defined in paragraph (a) above), and (2) he is an Eligible
Executive as of such Deferral Election Deadline.
	 
	 	(e)	 	If a Participant ceases to be an Eligible Executive but continues to be
employed by the Company or an Associated Company, he shall continue to be a Participant
and his Deferral Agreement currently in effect for the Plan Year shall remain in force
for the remainder of such Plan Year, but such Participant shall not be eligible to
defer any portion of his Bonus earned in a subsequent Plan Year until such time as he
shall once again become an Eligible Executive.
	 
	 	(f)	 	The Eligible Executive shall submit the Deferral Agreement in the manner
specified by the Administrative Committee and a Deferral Agreement that is not timely
filed shall be considered void and shall have no effect. The Administrative Committee
shall establish procedures that govern deferral elections under the Plan.

	3.02	 	Amount of Deferral

	 	(a)	 	The Administrative Committee may establish maximum or minimum limits on the
amount of any Bonus which may be deferred and/or the timing of such Deferral. Eligible
Executives shall be given written notice of any such limits prior to the date they take
effect.
	 
	 	(b)	 	Notwithstanding anything in this Plan to the contrary, if an Eligible
Executive:

	 	(i)	 	receives a withdrawal of deferred cash contributions on account of
hardship from any plan which is maintained by the Company or an Associated
Company and which meets the requirements of Code Section 401(k) (or any successor
thereto), and
	 
	 	(ii)	 	is precluded from making contributions to such 401(k) plan for at
least 6 months after receipt of the hardship withdrawal,

	 	 	the Eligible Executive’s Deferral Agreement with respect to Bonus in effect at that time
shall be cancelled, and any subsequent Bonus payment which would have been deferred

Page 10

 

	 	 	pursuant to that Deferral Agreement but for the application of this Section 3.02(c) shall be
paid to the Eligible Executive as if he had not entered into the Deferral Agreement.

	3.03	 	Crediting to Deferral Account

	 	 	The amount of Deferrals shall be credited to such Participant’s Deferral Account on the day
such Bonus would have otherwise been paid to the Participant in the absence of a Deferral
Agreement. Deferrals credited to a Participant’s Deferral Account which are deemed invested
in a Corporation phantom stock fund will be credited based on the fair market value of the
Corporation’s common stock on that day.

3.04 Excess Company Contributions

	 	(a)	 	Excess Matching Contributions
	 
	 	 	 	With respect to Plan Years commencing on and after January 1, 2012, the amount of
Excess Matching Contributions credited to a Participant’s Company Contribution Account
for each particular Plan Year shall be equal to the Company Matching Contributions, if
any, (as defined under the provisions of the Savings Plan) for each particular Plan
Year that would have otherwise been credited on the Eligible Executive’s behalf under
the terms of the Savings Plan or the Exelis Excess Savings Plan, as applicable, had
the portion of an Eligible Executive’s Bonus that would have otherwise been paid in
that particular Plan Year not been deferred under the provisions of Section 3.01(a)
above.
	 
	 	(b)	 	Excess Base Contributions
	 
	 	 	 	With respect to Plan Years commencing on and after January 1, 2012, the amount of
Excess Base Contributions credited to a Participant’s Company Contribution Account for
each particular Plan Year shall be equal to the Company Base Contribution Rate, if
any, applicable to the Eligible Executive in that particular Plan Year multiplied by
the Eligible Executive’s Bonus that would have otherwise been paid in that particular
Plan Year had it not been deferred under the provisions of Section 3.01(a) above.
	 
	 	(c)	 	For the avoidance of doubt, Excess Matching Contributions and Excess Base

Page 11

 

	 	 	 	Contributions and particular Plan Year shall only be credited on behalf of a
Participant who is eligible to receive Company Base Contributions under the terms of
the Savings Plan in that year.

	3.05	 	Crediting to Company Contribution Account

	 	 	The contributions credited on a Participant’s behalf pursuant to Section 3.04(a) and (b)
above shall be credited to a Participant’s Company Contribution Accounts at the same time as
they would have been credited to his accounts under the Savings Plan if not for the
Participant’s election to defer said Bonus under the terms of this Plan.

	3.06	 	Vesting

	 	 	A Participant shall at all times be 100% vested in his Deferral and his Company Contribution
Accounts. Notwithstanding any other provision of the Plan to the contrary, all prior
service and participation by a Participant with the Predecessor Corporation prior to the
Effective Date shall be deemed credited in full towards a Participant’s service and
participation with the Company.

	3.07	 	Unforeseeable Emergency

	 	 	Notwithstanding the foregoing provisions of this Article 3, the Compensation and Personnel
Committee may completely cease Deferrals made under all Deferral Agreements then in effect
with respect to the Participant upon the Participant’s providing the Compensation and
Personnel Committee with such evidence of an Unforeseeable Emergency (as defined in Section
5.05) as the Compensation and Personnel Committee may deem appropriate. In the event the
Compensation and Personnel Committee finds the Participant has incurred an Unforeseeable
Emergency (as defined in Section 5.05), the Participant’s Deferral Agreement in effect at
that time shall be cancelled and subsequent Deferrals and any corresponding Excess Company
Contributions shall cease as of the first practicable payroll period following the
Compensation and Personnel Committee’s decision. In the event the Participant wishes to
recommence Deferrals starting in a subsequent calendar year, the Participant may do so by
duly completing, executing, and filing the appropriate Deferral Agreement with the
Administrative Committee in

Page 12

 

	 	 	accordance with Section 3.01, provided said Participant is an Eligible Executive at that
time.

Page 13

 

ARTICLE 4 — MAINTENANCE OF ACCOUNTS

	4.01	 	Adjustment of Deferral and Grandfathered Deferral Accounts

	 	(a)	 	As of each Reporting Date, each Deferral Account (or subaccount thereof) and/or
Grandfathered Deferral Account shall be credited or debited with the amount of earnings
or losses with which such Deferral Account (or subaccounts thereof) and/or
Grandfathered Deferral Account would have been credited or debited, assuming it had
been invested in one or more investment funds, or earned the rate of return of one or
more indices of investment performance, designated by the Plan Committee and elected by
the Participant pursuant to Section 4.02 for purposes of measuring the investment
performance of such Accounts. Any portion of a Participant’s Deferral Account (or
subaccount thereof) and/or Grandfathered Deferral Account deemed invested in a
Corporation phantom stock fund shall be credited with dividend equivalents, as and when
dividends are paid on the Corporation’s common stock, which shall be deemed invested in
additional shares of such phantom stock.
	 
	 	(b)	 	The Plan Committee shall designate at least one investment fund or index of
investment performance and may designate other investment funds or investment indices
(including a Corporation phantom stock fund) to be used to measure the investment
performance of a Participant’s Deferral Account and/or Grandfathered Deferral Account.
The designation of any such investment funds or indices shall not require the
Corporation to invest or earmark their general assets in any specific manner. The Plan
Committee may change the designation of investment funds or indices from time to time,
in its sole discretion, and any such change shall not be deemed to be an amendment
affecting Participants’ rights under Section 6.02.

	4.02	 	Investment Performance Elections
	 
	 	 	In the event the Plan Committee designates more than one investment fund or index of
investment performance under Section 4.01, each Participant shall file an investment

Page 14

 

	 	 	election with the Administrative Committee or its delegate with respect to the investment of
his Deferral Account (or subaccount thereof) and/or Grandfathered Deferral Account within
such time period and in such manner as the Administrative Committee may prescribe. The
election shall designate the investment fund or funds or index or indices of investment
performance which shall be used to measure the investment performance of the Participant’s
Deferral Account (or subaccount thereof) and/or Grandfathered Deferral Account.
	 
	4.03	 	Changing Investment Elections
	 
	 	 	In the event the Plan Committee designates more than one investment fund or index of
investment performance under Section 4.01, a Participant may change his election of the
investment fund or funds or index or indices of investment performance used to measure the
future investment performance of the existing account balance of his Deferral Account (or
subaccount thereof) and/or his Grandfathered Deferral Account, by filing an appropriate
written notice with the Administrative Committee or its delegate within such time periods
and in such manner as prescribed by the Administrative Committee, in advance of the date
such election is effective. The election shall be effective as soon as administratively
practicable after the date on which notice is timely filed or at such other time as
prescribed by the Administrative Committee on a basis uniformly applicable to all
Participants similarly situated.
	 
	 	 	A Participant may change his or her election of the investment fund or funds or index or
indices of investment performance used to measure the future investment performance of his
future Deferrals within such time periods and in such manner prescribed by the
Administrative Committee. The election shall be effective as soon as administratively
practicable after the date in which notice is timely filed or at such other time as the
Administrative Committee shall determine. In the absence of such an election, the
Participant’s future Deferrals will be invested in accordance with his existing investment
election with respect to the current balance of his Deferral Account (or subaccount
thereof), provided, however, if such Participant is an “insider” (as defined in Section 16
of the Securities Exchange Act of 1934) and his existing investment elections include an

Page 15

 

	 	 	investment in the Corporation’s phantom stock fund, his future Deferrals shall be allocated
pro rata among the other funds or indices on his existing investment election based on the
proportions as designated on such existing investment election.
	 
	4.04	 	Adjustment of the Company Contribution Account
	 
	 	 	A Participant shall have no choice or election with respect to the investments of his
Company Contribution Account. As of each Reporting Date, there shall be credited or debited
an amount of earnings or losses on the balance of the Participant’s Company Contribution
Account as of such Reporting Date which would have been credited had the Participant’s
Company Contribution Account been invested in the Stable Value Fund maintained under the
Savings Plan or such other investment fund or funds designated by the Plan Committee.
	 
	4.05	 	Individual Accounts

	 	(a)	 	The Administrative Committee shall maintain, or cause to be maintained on the
books of the Corporation, records showing the individual balance of each Participant’s
Deferral Account, Company Contribution Account and/or Grandfathered Deferral Account.
The Participant’s Deferral Account (or subaccount thereof) shall be credited with the
Deferrals made by the Participant pursuant to the provisions of Article 3 and the
Participant’s Deferral Account (or subaccount thereof), and/or Grandfathered Deferral
Account shall be credited and debited, as the case may be, with hypothetical investment
results determined pursuant to this Article 4. Effective with respect to Plan Years
commencing on and after January 1, 2012, a Participant’s Company Contribution Account
shall be credited with Excess Company Contributions pursuant to the provisions of
Section 3.04 and shall be credited and debited, as the case may be, with hypothetical
investment results determined pursuant to Section 4.04
	 
	 	 	 	At least once a year each Participant shall be furnished with a statement setting
forth the value of his Deferral Account (or subaccount thereof), his Company
Contribution Account and/or Grandfathered Deferral Account.

Page 16

 

	 	(b)	 	Within each Participant’s Deferral Account, Company Contribution Account and/or
Grandfathered Deferral Account, separate subaccounts shall be maintained to the extent
necessary for the administration of the Plan.
	 
	 	(c)	 	The accounts established under this Article shall be hypothetical in nature and
shall be maintained for bookkeeping purposes only so that hypothetical gains or losses
on the deferrals made to the Plan can be credited or debited, as the case may be.

	4.06	 	Valuation of Accounts

	 	(a)	 	The Administrative Committee shall value or cause to be valued each
Participant’s Deferral Account, Company Contribution Account and/or Grandfathered
Deferral Account at least monthly. On each Reporting Date there shall be allocated to
the Deferral Account and/or Grandfathered Deferral Account of each Participant the
appropriate amount determined in accordance with Sections 4.01, 4.02 and 4.03, and with
respect to his Company Contribution Account, the appropriate amount determined in
accordance with Section 4.04.
	 
	 	(b)	 	Whenever an event requires a determination of the value of a Participant’s
Deferral Account, Company Contribution Account and/or Grandfathered Deferral Account,
the value shall be computed as of the Reporting Date immediately preceding the date of
the event, except as otherwise specified in this Plan.

	4.07	 	Compliance with Securities Laws and Trading Policies and Procedures
	 
	 	 	A Participant’s ability to direct investments into or out of a Corporation phantom stock
fund shall be subject to such terms, conditions and procedures as the Plan Administrator may
prescribe from time to time to assure compliance with Rule 16b-3 promulgated under Section
16(b) of the Securities Exchange Act of 1934, as amended (“Rule 16b-3”), and other
applicable requirements. Such procedures also may limit or restrict a Participant’s ability
to make (or modify previously made) Deferrals and distribution elections under the Plan. In
furtherance, and not in limitation, of the foregoing, to the

Page 17

 

	 	 	extent a Participant acquires any interest in an equity security under the Plan for purposes
of Section 16(b), the Participant shall not dispose of that interest within six (6) months,
unless such disposition is exempted by Section 16(b) or any rules or regulations promulgated
thereunder or with respect thereto. Any election by a Participant to invest any amount in a
Corporation phantom stock fund, and any elections to transfer amounts from or to the
Corporation phantom stock fund to or from any other investment fund or indices, shall be
subject to all applicable securities law requirements, including but not limited to the
those reflected in the prior sentence and Rule 16b-3, as well as all applicable stock
trading policies and procedures of the Corporation. To the extent any election violates any
securities law requirement, applicable trading policies and procedures of the Corporation,
or any terms or conditions established from time to time by the Administrative Committee
relating to such elections (whether or not reflected in the Plan), the election shall be
void.

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ARTICLE 5 — PAYMENT OF BENEFITS

	5.01	 	Commencement of Payment

	 	(a)	 	Subject to the limitations in Section 5.01(b) and except as otherwise provided
below, each time a Participant completes a Deferral Agreement, a Participant shall
designate on each applicable Deferral Agreement whether the related Deferrals, adjusted
in accordance with Article 4, will be allocated to one of the following subaccounts:

	 	(i)	 	Termination Subaccount
	 
	 	 	 	Except as otherwise provided in the Plan, amounts allocated to the Termination
Subaccount (after adjustment pursuant to Article 4) will be paid on the first
business day of the seventh month following the Participant’s Termination of
Employment.
	 
	 	(ii)	 	Special Purpose Subaccount
	 
	 	 	 	Except as otherwise provided in the Plan, amounts allocated to the Special
Purpose Subaccount (after adjustment pursuant to Article 4) will be paid as
elected by the Participant, on either (1) the date specified by the Participant,
or (2) the earlier of the date specified by the Participant or the first
business day of the seventh month following the Participant’s Termination of
Employment. The Specified Distribution Date for the Special Purpose Subaccount
shall be the month and year designated by the Participant on his or her initial
Deferral Agreement establishing that Special Purpose Subaccount, unless
otherwise modified in accordance with the provisions of Section 5.03.

	 	 	A Participant may elect to have his entire deferred Bonus allocated to the Termination
Retirement Subaccount or the Special Purpose Subaccount or to have a specified portion of
his Bonus allocated to one or more Subaccounts.
	 
	 	 	Prior Deferrals will be allocated to the Participant’s Retirement Subaccount and/or Special
Purpose Subaccount as of the Effective Date based on the election(s) then in

Page 19

 

	 	 	effect with respect to such Prior Deferrals. If a Participant’s payment election(s) in
effect with respect to Prior Deferrals as of the Effective Date provides for payment at a
specified distribution date that specified distribution date shall be the Participant’s
“Specified Distribution Date” for the Participant’s Special Purpose Subaccount(s).

	 	(b)	 	A Participant’s ability to elect to have his deferred Bonus allocated to the
Special Purpose Subaccount and the Participant’s selection of a Specified Distribution
Date shall be subject to the following limitations:

	 	(i)	 	deferred Bonus may only be allocated to the Participant’s Special
Purpose Subaccount if the Specified Distribution Date applicable to that
subaccount is at least twelve (12) months after the day of the Plan Year in which
the Bonus being deferred was earned; and
	 
	 	(ii)	 	a Participant may have only five Special Purpose Subaccounts
established on his behalf (and only one Specified Distribution Date applicable to
each Special Purpose Subaccount) at any one time.
	 
	    (c)	(i)	 	Except as otherwise provided below, and notwithstanding the foregoing with
respect to an Eligible Executive who completed a Deferral Agreement under the
Predecessor Plan with respect to the Plan Year beginning as of January 1, 2005, the
distribution of the Participant’s Deferral 2005 Subaccount (as defined below) shall
commence, pursuant to Section 5.02, on the occurrence of the distribution event made
available under procedures established from time to time by the Administrative
Committee and as designated by the Participant on his 2005 Deferral Agreement (“Common
Distribution Date”). For purposes of this Article a Participant Deferral 2005
Subaccount shall mean the bookkeeping account maintained for each Participant to record
the amount of Bonus deferred in 2005 by a Participant in accordance with Article 3,
adjusted as provided in Article 4.

Page 20

 

	 	(ii)	 	Notwithstanding the foregoing, in the event a Participant incurs a
Termination of Employment for reasons other than Retirement prior to his Common
Distribution Date, the distribution of his Deferral 2005 SubAccount shall
commence, pursuant to Section 5.02, on the first business day of the seventh
month following his Termination of Employment; provided, however, if a
Participant has prior to the date of his Termination of Employment, in accordance
with the procedures prescribed by the Administrative Committee, made a special
termination election, the distribution of his Deferral 2005 Account shall
commence, pursuant to Section 5.02, on the later of (1) the occurrence of the
Termination Distribution Date designated by the Participant on the appropriate
special termination election form prescribed by the Administrative Committee
(“Special Effective Termination Distribution Date”) or (2) the first business day
of the seventh month following such Participant’s Termination of Employment.
	 
	 	(iii)	 	In the event a Participant elects pursuant to the foregoing
provisions of this paragraph (c) to defer to a specific calendar date in a
specific calendar year, he may not elect a calendar date which occurs prior to
the close of the calendar year following the calendar year in which he executed
the Deferral Agreement.

	 	(d)	 	A Participant shall not change his designation of the distribution event made
pursuant to the foregoing provisions of this Section 5.01 which entitles him to a
distribution of his Deferral Account, except as otherwise provided in Section 5.03
below.
	 
	 	(e)	 	Notwithstanding any Plan provisions to the contrary, the distribution of a
Participant’s Grandfathered Deferral Account shall be made in accordance with
provisions of the Plan as in effect on October 3, 2004, as modified in Appendix B and
without regard to any Plan amendments after that date which would constitute a material
modification for Code Section 409A purposes.

Page 21

 

	 	(f)	 	Except as otherwise provided in Section 5.04, a Participant shall be entitled
to receive payment of his Company Contribution Account upon his Termination of
Employment with the Company and all Associated Companies for any reason, other than
death. The distribution of his Company Contribution Account shall be made in the
seventh month following the date the Participant’s Termination of Employment occurs.

	5.02	 	Method of Payment

	 	(a)	 	Except as otherwise provided in paragraphs (b) and (c) below:

	 	(i)	 	At the time a Participant makes an election of his distribution
event pursuant to the provisions of Sections 5.01(a) or (c) the Participant shall
elect that the portion of his Deferral Account (or any subaccount thereof) to
which such distribution event is applicable shall be made payable as of such
distribution event under one of the following methods of payment:

	 	(1)	 	ratable annual cash installments for a period of years,
not to exceed fifteen (15) years, designated by the Participant on his
Deferral Agreement, or
	 
	 	(2)	 	a single lump sum cash payment.

	 	(ii)	 	Notwithstanding the foregoing, at the time a Participant makes an
election of a Special Effective Termination Distribution Date pursuant to the
provisions of Section 5.01(c)(ii), the Participant shall elect that the portion
of his Deferral Account be distributed on his Special Effective Termination
Distribution Date shall be made payable under one of the following methods of
payment:

	 	(1)	 	ratable annual cash installments for a period of five
(5) years, or
	 
	 	(2)	 	a single lump sum cash payment.

	 	 	 	During an installment payment period, the Participant’s Deferral Account (or
subaccounts thereof) shall continue to be credited with earnings or losses as
described in Section 4.01. The value of the first installment or lump sum payment

Page 22

 

	 	 	 	shall be determined as of the first Reporting Date coincident with or next following
the distribution event designated pursuant to Section 5.01 or 5.03 with respect to
that portion of his Deferral Account. Subsequent installments, if any, shall be paid
on the first business day following the anniversary of said distribution event in the
following calendar year and each subsequent year of the installment period. The amount
of each installment shall equal the balance in the applicable portion of the
Participant’s Deferral Account (or subaccounts) as of each Reporting Date of
determination divided by the number of remaining installments (including the
installment being determined).
	 
	 	(b)	 	Notwithstanding the foregoing, in the event payment of a Participant’s Deferral
2005 Subaccount is to be made pursuant to Section 5.01(c) to a Participant who does not
have a Special Effective Termination Distribution Date election in effect as of his
date of Termination of Employment, a lump sum payment of his Deferral 2005 Subaccount
shall be made as of the first business day of the seventh month following the
Participant’s Termination of Employment.
	 
	 	(c)	 	A Participant shall not change his method of payment, except as otherwise
provided in Section 5.03.
	 
	 	(d)	 	Notwithstanding any Plan provision to the contrary, the form of distribution of
a Participant’s Grandfathered Deferral Account shall be made in accordance with the
provisions of the Plan as in effect on October 3, 2004, as modified in Appendix B and
without regard to any Plan amendments after that date which would constitute a material
modification for Code Section 409A purposes.
	 
	 	(e)	 	Notwithstanding any Plan provision to the contrary, payment of a Participant’s
Company Contribution Account shall be made in a single lump sum payment.

Page 23

 

	5.03	 	Change of Distribution Election

	 	(a)	 	Changes in Election
	 
	 	 	 	In accordance with such procedures as the Administrative Committee may prescribe, a
Participant may elect to delay the payment of Deferrals by specifying a new Common
Distribution Date, a Special Effective Termination Distribution Date or a Specified
Distribution Date applicable to a portion of his Deferral Account (or subaccounts
thereof) payable at said dates by duly completing, executing and filing with the
Administrative Committee a new election, on an appropriate form designated by the
Administrative Committee, subject to the following limitations:

	 	(i)	 	such new election must be made at least twelve (12) months prior to
the Common Distribution Date, Special Effective Termination Distribution Date or
Specified Distribution Date, whichever is then in effect with respect to that
portion of his Deferral Account (or subaccounts thereof), and such election will
not become effective until at least twelve (12) months after the date on which
the new election is made, and
	 
	 	(ii)	 	the new Common Distribution Date, Special Effective Termination
Distribution Date or Specified Distribution Date, whichever is applicable, shall
be a date that is not less than five (5) years from the Common Distribution Date,
Special Effective Termination Distribution Date or Specified Distribution Date
then in effect.

	 	 	A Participant may elect to delay a Common Distribution Date, Special Effective Termination
Distribution Date or Specified Distribution Date applicable to a specified portion of his
Deferral Account pursuant to this Section 5.03(a) more than once, provided that all such
elections comply with the provisions of this Section 5.03(a).

	 	(b)	 	In accordance with such procedures as the Administrative Committee may
prescribe, a Participant may elect to change the form of payment election under Section
5.02 applicable to the portion of his Deferral Account (or subaccounts

Page 24

 

	 	 	 	thereof) that is deferred to a Common Distribution Date, Special Effective Termination
Distribution Date or Specified Distribution Date by duly completing, executing and
filing with the Administrative Committee a new form of payment election, subject to
the following limitations:

	 	(i)	 	such new election must be made at least twelve (12) months prior to
the Common Distribution Date, Special Effective Termination Distribution Date or
Specified Distribution Date, whichever is then in effect with respect to that
portion of his Deferral Account (or subaccounts thereof), and such election will
not become effective until at least twelve (12) months after the date on which
the election is made, and
	 
	 	(ii)	 	the distribution of that portion of his Deferral Account (or
subaccounts thereof) shall be deferred for five (5) years from the date such
amount would otherwise have been paid absent this new election.

	 	(c)	 	A Participant may change the election as applicable to his Grandfathered
Deferral Accounts pursuant to the provisions of the Plan as in effect on October 3,
2004, as modified in Appendix B and without regard to any Plan amendments after that
date which would constitute a material modification for Code Section 409A purposes.
	 
	 	(d)	 	It is the Company’s intent that the provisions of Section 5.03(a) and Section
5.03(b) comply with the subsequent election provisions in Code Section 409A(a)(4)(C),
related regulations and other applicable guidance, and this Section 5.03(a) and Section
5.03(b) shall be interpreted accordingly. The Administrative Committee may impose
additional restrictions or conditions on a Participant’s ability to elect a new
specified distribution year pursuant to this Section 5.03(a) and Section 5.03(b). The
Participant may revoke or change his election pursuant to this Section 5.03(a) and
Section 5.03(b) at any time prior to the deadline for making such election, subject to
such restrictions as the Administrative Committee may establish from time to time. Any
such revocation or change shall be made in a form and manner determined by the
Administrative Committee. For avoidance of doubt, a Participant

Page 25

 

	 	 	 	may not elect to change the form of payment or delay payment of amounts deferred to
Retirement or Termination of Employment. In addition a Participant may not transfer
amounts between his Termination Subaccount and any Special Purpose Subaccount, or
between Special Purposes Subaccounts.

	5.04	 	Death
	 
	 	 	Notwithstanding any Plan provisions to the contrary, if a Participant dies before payment of
the entire balance of his Deferral Account and his Company Contribution Account, an amount
equal to the unpaid portion thereof as of the date of his death shall be payable in one lump
sum to his Beneficiary. Such payment will be made in the month following the month the
Participant’s death occurs.
	 
	5.05	 	Hardship
	 
	 	 	Notwithstanding anything in the Plan or in a Deferral Agreement to the contrary, the
Administrative Committee may, if it determines an Unforeseeable Emergency exists which
cannot be satisfied from other sources, approve a request by the Participant for a
withdrawal from his Deferral Account. Such request shall be made in a time and manner
determined by the Administrative Committee. The payment made from a Deferral Account
pursuant to the provisions of this Section 5.05 shall be limited to the amount reasonably
necessary to satisfy the emergency need (which may include amounts necessary to pay any
Federal, state, local or foreign income taxes or penalties reasonably anticipated to result
from the distribution). Determinations of amounts necessary to satisfy the emergency need
must take into account any additional compensation that is available, other than additional
compensation that, due to the Unforeseeable Emergency, is available under another
nonqualified deferred compensation plan but that has not actually been paid. This Section
5.05 is intended to comply with Code Section 409A, related regulations and any other
applicable guidance and shall be interpreted accordingly so that distributions shall be
permitted under this Section 5.05 only to the extent they comply with Code Section 409A and
the regulations promulgated thereunder. For purposes of this Section 5.05 an “Unforeseeable
Emergency” shall mean a severe financial hardship to a Participant resulting from (a) an
illness or accident of the

Page 26

 

	 	 	Participant or the Participant’s spouse, beneficiary or dependent (as defined in Code
Section 152, without regard to Section 152(b)(1), (b)(2) and (d)(1)(B)), (b) loss of the
Participant’s property due to casualty (including the need to rebuild a home following
damage to the home not otherwise covered by insurance) or (c) other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond the control of the
Participant; provided, however, that an Unforeseeable Emergency shall only exist to the
extent the severe financial hardship would constitute an Unforeseeable Emergency under Code
Section 409A, related regulations and other applicable guidance. Such payments shall be paid
in a single lump sum within ninety (90) days of the date the Unforeseeable Emergency payment
is approved by the Administrative Committee.
	 
	5.06	 	Payment upon the Occurrence of a Change in Control
	 
	 	 	Notwithstanding the foregoing provisions of this Article 5, upon the occurrence of a Change
in Control, every Participant who is an Eligible Executive or a former Eligible Executive
shall automatically receive the entire balance of his Deferral Accounts and his Company
Contribution Account in a single lump sum payment. Such lump sum payment shall be made as
soon as practicable on or after the Change in Control. If such Participant dies after such
Change in Control, but before receiving such payment, it shall be made to his Beneficiary.
	 
	 	 	For avoidance of doubt, upon the occurrence of an Acceleration Event (either prior, after or
simultaneously with the occurrence of a Change of Control), the provisions of Section 5.06
of the Plan as in effect on October 3, 2004 without regard to any Plan amendments after
October 3, 2004 which would constitute a material modification for Code Section 409A
purposes, shall be applicable to a Participant’s Grandfathered Deferral Account.
	 
	5.07	 	Acceleration of or Delay in Payments
	 
	 	 	The Administrative Committee, in its sole and absolute discretion, may elect to accelerate
the time or form of payment of a benefit owed to the Participant hereunder, provided such
acceleration is permitted under Treas. Reg. Section 1.409A-3(j)(4). The Administrative
Committee may also, in its sole and absolute discretion, delay the time for payment of a

Page 27

 

	 	 	benefit owed to the Participant hereunder, to the extent permitted under Treas. Reg. Section
1.409A-2(b)(7).
	 
	5.08	 	Designation of Beneficiary
	 
	 	 	Each Participant shall file with the Administrative Committee a written designation of one
or more persons as the Beneficiary who shall be entitled to receive the amount, if any,
payable under the Plan upon his death pursuant to Section 5.04 or 5.06. A Participant may,
from time to time, revoke or change his Beneficiary designation without the consent of any
prior Beneficiary by filing a new designation with the Administrative Committee. The last
such designation received by the Administrative Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be effective unless
received by the Administrative Committee prior to the Participant’s death, and in no event
shall it be effective as of a date prior to such receipt. If no such Beneficiary designation
is in effect at the time of a Participant’s death, or if no designated Beneficiary survives
the Participant, the Participant’s surviving spouse, if any, shall be his Beneficiary,
otherwise the person designated as beneficiary by the Participant under the Exelis Inc.
Salaried Group Life Insurance Plan shall be his Beneficiary, and shall receive the payment
of the amount, if any, payable under the Plan upon his death; provided, however, that if the
life insurance benefit has been assigned, the Beneficiary shall be the Participant’s estate.
	 
	5.09	 	Debiting Accounts
	 
	 	 	Any amounts debited from a Participant’s Deferral Account, Company Contribution Account, or
Grandfathered Deferral Account by reason of a distribution, withdrawal, or otherwise under
this Article 5, shall be debited from the Participant’s Deferral Account, Company
Contribution Account, and/or Grandfathered Deferral Account and the investment options under
which such amount is credited, and such other accounts, subaccounts, options, or other
allocations, as determined by the Administrative Committee on a basis uniformly applicable
to all Participants similarly situated.

Page 28

 

ARTICLE 6 — AMENDMENT OR TERMINATION

	6.01	 	Right to Terminate
	 
	 	 	Notwithstanding any Plan provision to the contrary, the Corporation may, by action of the
Board of Directors, terminate this Plan and the related Deferral Agreements at any time. To
the extent consistent with the rules relating to plan terminations and liquidations in
Treasury Regulation Section 1.409A-3(j)(4)(ix) or otherwise consistent with Code Section
409A, the Board may provide that, without the prior written consent of Participants, all of
the Participants’ Deferral Accounts and Company Contribution Account shall be distributed in
a lump sum upon termination of the Plan. Unless so distributed, in the event of a Plan
termination, the Corporation shall continue to maintain the Deferral Accounts until
distributed pursuant to the terms of the Plan and Participants shall remain 100% vested in
all amounts credited to their Deferral Accounts and their Company Contribution Account. For
avoidance of doubt, in the event of a Plan termination, distribution of a Grandfathered
Deferral Account shall be governed by the provisions of the Predecessor Plan as in effect on
October 3, 2004.
	 
	6.02	 	Right to Amend
	 
	 	 	The Compensation and Personnel Committee or its delegate may amend or modify this Plan and
the related Deferral Agreements in any way either retroactively or prospectively. However,
except that without the consent of the Participant or Beneficiary, if applicable, no
amendment or modification shall reduce or diminish such person’s right to receive any
benefit accrued hereunder prior to the date of such amendment or modification, and after the
occurrence of an Acceleration Event, no modification or amendment shall be made to Section
5.06 or Section 6.01 under Appendix A, attached hereto and made part hereof. A change in any
investment fund or index under Section 4.01 or 4.04 shall not be deemed to adversely affect
any Participant’s rights to his Deferral Account, Company Contribution Account or
Grandfathered Deferral Account. Notice of an amendment or modification to the Plan shall be
given in writing to each Participant and Beneficiary of a deceased Participant having an
interest in the Plan.

Page 29

 

ARTICLE 7 — GENERAL PROVISIONS

	7.01	 	Funding
	 
	 	 	All amounts payable in accordance with this Plan shall constitute a general unsecured
obligation of the Corporation. Such amounts, as well as any administrative costs relating to
the Plan, shall be paid out of the general assets of the Corporation. The Administrative
Committee may decide that a Participant’s Deferral Account, Company Contribution Account
and/or Grandfather Deferral Account may be reduced to reflect allocable administrative
expenses.
	 
	7.02	 	No Contract of Employment
	 
	 	 	The Plan is not a contract of employment and the terms of employment of any Participant
shall not be affected in any way by this Plan or related instruments, except as specifically
provided therein. The establishment of the Plan shall not be construed as conferring any
legal rights upon any person for a continuation of employment, nor shall it interfere with
the rights of the Company to discharge any person and to treat him without regard to the
effect which such treatment might have upon him under this Plan. Each Participant and all
persons who may have or claim any right by reason of his participation shall be bound by the
terms of this Plan and all Deferral Agreements entered into pursuant thereto.
	 
	7.03	 	Unsecured Interest
	 
	 	 	Neither the Corporation, the Company nor the Compensation and Personnel Committee nor the
Administrative Committee nor the Plan Committee in any way guarantees the performance of the
investment funds or indices a Participant may designate under Article 4. No special or
separate fund shall be established, and no segregation of assets shall be made, to assure
the payments thereunder. No Participant hereunder shall have any right, title, or interest
whatsoever in any specific assets of the Corporation. Nothing contained in this Plan and no
action taken pursuant to its provisions shall create or be construed to create a trust of
any kind or a fiduciary relationship between the Corporation and a Participant or any other
person. To the extent that any person acquires a right to receive

Page 30

 

	 	 	payments under this Plan, such right shall be no greater than the right of any unsecured
creditor of the Corporation.
	 
	7.04	 	Facility of Payment
	 
	 	 	In the event that the Administrative Committee shall find that a Participant or Beneficiary
is incompetent to care for his affairs, or if a Beneficiary is a minor, the Administrative
Committee may direct that any benefit payment due him, unless claim shall have been made
therefore by a duly appointed legal representative, be paid on his behalf to his spouse, a
child, a parent or other relative, and any such payment so made shall thereby be a complete
discharge of the liability of the Corporation, the Company and the Plan for that payment.
	 
	7.05	 	Withholding Taxes
	 
	 	 	The Corporation shall have the right to deduct from each payment to be made under the Plan
any required withholding taxes.
	 
	7.06	 	Nonalienation
	 
	 	 	Subject to any applicable law, no benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt to do so shall be void, nor shall any such benefit be in any manner liable for or
subject to garnishment, attachment, execution or levy, or liable for or subject to the
debts, contracts, liabilities, engagements or torts of a person entitled to such benefits.
	 
	7.07	 	Transfers

	 	(a)	 	Notwithstanding any Plan provision to the contrary, in the event the
Corporation (i) sells, causes the sale of, or sold the stock or assets of any employing
company in the controlled group of the Corporation to a third party or (ii) distributes
or distributed to the holders of shares of the Corporation’s common stock all of the
outstanding shares of common stock of a subsidiary or subsidiaries of the Corporation
and, as a result of such sale or distribution, such company or its employees are no
longer eligible to participate hereunder, the Compensation and Personnel Committee, in
its

Page 31

 

	 	 	 	sole discretion, may treat such event as not constituting a Termination of Employment
and direct that the liabilities with respect to the benefits accrued under this Plan
for a Participant who, as a result of such sale or distribution, is no longer eligible
to participate in this Plan, shall (with the approval of the new employer), be
transferred to a similar plan of such new employer and become a liability thereunder,
provided that no provisions of such new plan or amendment thereof shall reduce the
balance of the Participants’ Deferral Accounts, Company Contribution Account and/or
Grandfathered deferral Accounts as of the date of such transfer, as adjusted for
investment gains or losses. Upon such transfer (and acceptance thereof), the
liabilities for such transferred benefits shall become the obligation of the new
employer and the liability under this Plan for such benefits shall cease.
	 
	 	(b)	 	Notwithstanding any Plan provision to the contrary, at the discretion and
direction of the Corporation, liabilities with respect to benefits accrued by a
Participant under a plan maintained by such Participant’s former employer may be
transferred to this Plan and upon such transfer become the obligation of the
Corporation.

	7.08	 	Claims Procedure

	 	(a)	 	Submission of Claims
	 
	 	 	 	Claims for benefits under the Plan shall be submitted in writing to the Administrative
Committee or to an individual designated by the Administrative Committee for this
purpose.
	 
	 	(b)	 	Denial of Claim
	 
	 	 	 	If any claim for benefits is wholly or partially denied, the claimant shall be given
written notice within ninety (90) days following the date on which the claim is filed,
which notice shall set forth the following:

	 	(i)	 	The specific reason or reasons for the denial;
	 
	 	(ii)	 	Specific reference to pertinent Plan provisions on which the denial
is based;

Page 32

 

	 	(iii)	 	A description of any additional material or information necessary
for the claimant to perfect the claim and an explanation of why such material or
information is necessary;
	 
	 	(iv)	 	An explanation of the Plan’s claim review procedure; and
	 
	 	(v)	 	The time limits for requesting a review under this Section.

	 	 	 	If special circumstances require an extension of time for processing the claim,
written notice of an extension shall be furnished to the claimant prior to the end of
the initial period of ninety (90) days following the date on which the claim is filed.
Such an extension may not exceed a period of ninety (90) days beyond the end of said
initial period.
	 
	 	 	 	If the claim has not been granted and written notice of the denial of the claim, or
that an extension has been granted is not furnished within ninety (90) days following
the date on which the claim is filed, the claim shall be deemed denied for the purpose
of proceeding to the claim review procedure.
	 
	 	(c)	 	Claim Review Procedure
	 
	 	 	 	The claimant or his authorized representative shall have sixty (60) days after receipt
of written notification of denial of a claim to request a review of the denial by
making written request to the Administrative Committee, and may review pertinent
documents and submit issues and comments in writing within such 60-day period.
	 
	 	 	 	Not later than sixty (60) days after receipt of the request for review, the persons
designated by the Company to hear such appeals (the “Appeals Committee”) shall render
and furnish to the claimant a written decision, which shall include specific reasons
for the decision and shall make specific references to pertinent Plan provisions on
which it is based. If special circumstances require an extension of time for
processing, the decision shall be rendered as soon as possible, but not later than 120
days after receipt of the request for review, provided that written notice and
explanation of the delay are given to the claimant prior to commencement of

Page 33

 

	 	 	 	the extension. Such decision by the Appeals Committee shall not be subject to further
review. If a decision on review is not furnished to a claimant within the specified
time period, the claim shall be deemed to have been denied on review.
	 
	 	(d)	 	Exhaustion of Remedy
	 
	 	 	 	No claimant shall institute any action or proceeding in any state or federal court
of law or equity or before any administrative tribunal or arbitrator for a claim for
benefits under the Plan until the claimant has first exhausted the procedures set
forth in this section.

	7.09	 	Payment of Expenses
	 
	 	 	All administrative expenses of the Plan and all benefits under the Plan shall be paid from
the general assets of the Corporation, except as otherwise may be provided herein.
	 
	7.10	 	Discharge of Corporation’s Obligation
	 
	 	 	The payment by the Corporation of the benefits due under each and every Deferral Agreement
and/or Section 3.04 to the Participant or his Beneficiary shall discharge the Corporation’s
obligation under the Plan, and the Participant or Beneficiary shall have no further rights
under this Plan or the Deferral Agreements upon receipt by the appropriate person of all
such benefits.
	 
	7.11	 	Successors
	 
	 	 	The Plan shall be binding upon the successors and assigns of the Corporation, whether such
succession is by purchase, merger or otherwise.
	 
	7.12	 	Construction

	 	(a)	 	The Plan is intended to constitute an unfunded deferred compensation
arrangement for a select group of management or highly compensated employees and,
therefore, is exempt from the requirements of parts 2, 3 and 4 of Subtitle B of Title I
of ERISA (pursuant to Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA), and all
rights hereunder shall be governed by ERISA. Subject to the preceding sentence,

Page 34

 

	 	 	 	the Plan shall be construed, regulated and administered in accordance with the laws of
the State of New York, subject to the provisions of applicable federal laws.
	 
	 	(b)	 	The masculine pronoun shall mean the feminine wherever appropriate.
	 
	 	(c)	 	The illegality of any particular provision of this document shall not affect
the other provisions, and the document shall be construed in all respects as if such
invalid provision were omitted.

Page 35

 

ARTICLE 8 — ADMINISTRATION

8.01 Administration

	 	(a)	 	The Administrative Committee shall mean the Exelis Benefits Administration
Committee established from time to time pursuant to the terms of the Exelis Salaried
Retirement Plan. The Administrative Committee shall have the exclusive responsibility
and complete discretionary authority to control the operation, management and
administration of the Plan, with all powers necessary to enable it properly to carry
out such responsibilities, including, but not limited to, the power to interpret the
Plan and any related documents, to establish procedures for making any elections called
for under the Plan, to make factual determinations regarding any and all matters
arising hereunder, including, but not limited to, the right to determine eligibility
for benefits, the right to construe the terms of the Plan, the right to remedy possible
ambiguities, inequities, inconsistencies or omissions, and the right to resolve all
interpretive, equitable or other questions arising under the Plan. The decisions of the
Administrative Committee or such other party as is authorized under the terms of any
grantor trust on all matters shall be final, binding and conclusive on all persons to
the extent permitted by law.
	 
	 	(b)	 	To the extent permitted by law, all agents and representatives of the
Administrative Committee shall be indemnified by the Corporation and held harmless
against any claims and the expenses of defending against such claims, resulting from
any action or conduct relating to the administration of the Plan, except claims arising
from gross negligence, willful neglect or willful misconduct.
	 
	 	(c)	 	With respect to benefits hereunder subject to Code Section 409A, the Plan is
intended to comply with the requirements of Code Section 409A and the provisions hereof
shall be interpreted in a manner that satisfies the requirements of Code Section 409A
and the regulations thereunder, and the Plan shall be operated accordingly. If any
provision of the Plan would otherwise frustrate or conflict with

Page 36

 

	 	 	 	this intent, the provision will be interpreted and deemed amended so as to avoid this
conflict.

Page 37

 

APPENDIX A 

SPECIAL PROVISIONS APPLICABLE TO CERTAIN PARTICIPANTS

WHO DEFERRED BASE SALARY UNDER THE PREDECESSOR PLAN

This Appendix A constitutes a part of this Plan and is applicable only with respect to a
Participant who deferred all or a portion of his Base Salary under the provisions of the
Predecessor Plan and who (i) lost matching or other employer contributions under the ITT Industries
Investment and Savings Plan for Salaried Employees (or any predecessor plan) due to the deferral of
his Base Salary under this Plan, or (ii) had salary deferrals attributable to such Base Salary
credited on his behalf to the ITT Industries Excess Savings Plan (or a predecessor plan) prior to
January 1, 1996.

SECTION 1. — DEFINITIONS

	1.01	 	“Accounts” shall mean the Deferred Account, Floor Contribution Account and the Matching
Contribution Account.

	1.02	 	“Deferred Account” shall mean the bookkeeping account maintained for each Participant covered
under this Appendix A to record the portion of Base Salary deferred under this Plan which was
credited as a Salary Deferral under the ITT Industries Excess Savings Plan (or any predecessor
plan) prior to January 1, 1996.
	 
	1.03	 	“Matching Contribution Account” shall mean the bookkeeping account maintained for each
Participant covered under this Appendix A to record the Excess Matching Contribution (as
defined under the ITT Industries Excess Savings Plan) credited on such Participant’s behalf
due to his deferral of Base Salary under this Plan.
	 
	1.04	 	“Floor Contribution Account” shall mean the bookkeeping account maintained for each
Participant covered under this Appendix A to record the Excess Floor Contributions (as defined
under the ITT Industries Excess Savings Plan) credited on such Participant’s behalf due to his
deferral of Base Salary under this Plan.

Page 38

 

SECTION 2. — INVESTMENT OF ACCOUNTS

	2.01	 	A Participant shall have no choice or election with respect to the investments of his
Accounts. There shall be credited or debited an amount of earnings or losses on the balance of
the Participant’s Accounts which would have been credited had the Participant’s Accounts been
invested in the Stable Value Fund maintained under the ITT Salaried Investment and Savings
Plan.

SECTION 3. — VESTING OF ACCOUNTS

	3.01	 	A Participant shall be fully vested .in his Deferred Account and Floor Contribution Account.
The Participant shall vest in the amounts credited to his Matching Contribution Account at the
same rate and under the same conditions at which such contributions would have vested under
the ITT Salaried Investment and Savings Plan had they been contributed thereunder. In the
event the Participant terminates employment prior to vesting in all or any part of the amount
credited on his behalf to his Matching Contribution Account, such contributions and earnings
thereon shall be forfeited and shall not be restored in the event the Participant is
subsequently reemployed by the Company.
	 
	3.02	 	Notwithstanding any provisions of this Plan or Appendix A to the contrary, upon the
occurrence of an Acceleration Event, (as such term is defined in Article I of the Plan) a
Participant shall become fully vested in the amounts credited to his Matching Contribution
Account.

SECTION 4. — COMMENCEMENT OF PAYMENT

	4.01	 	A Participant shall be entitled to receive payment of his Deferred Account, Floor
Contribution Account and the vested portion of his Matching Contribution Account, as
determined under Section 3.01, upon his termination of employment for any reason, other than
death. The distribution of such Accounts shall be made as soon as practicable following such
termination of employment.

Page 39

 

	4.02	 	In the event of the death of a Participant prior to the full payment of his Accounts, the
unpaid portion of his Accounts shall be paid to his Beneficiary (as defined in Section 1.05 of
the Plan) as soon as practicable following his date of death.

SECTION 5. — METHOD OF PAYMENT

	5.01	 	Payment of a Participant’s Deferred Account, Floor Contribution Account, and the vested
portion of his Matching Contribution Account shall be made in a single lump sum payment.

SECTION
6. — PAYMENT UPON THE OCCURRENCE OF AN ACCELERATION EVENT

	6.01	 	Upon the occurrence of an Acceleration Event, all Participants shall automatically receive
the entire balance of their Accounts in a single lump sum payment. Such lump sum payment shall
be made as soon as practicable on or after the Acceleration Event. If the Participant dies
after such Acceleration Event, but before receiving such payment, it shall be made to his
Beneficiary.

Page 40

 

APPENDIX B 

PROVISIONS APPLICABLE TO A PARTICIPANT’S

GRANDFATHERED DEFERRAL ACCOUNT

This Appendix B constitutes an integral part of the Plan and is applicable with respect to the
Grandfathered Deferral Account of those individuals who were Participants in the Predecessor Plan
on December 31, 2004. The Grandfathered Deferral Account is subject to all the terms and conditions
of the Predecessor Plan as set forth on October 3, 2004, without regard to any plan amendments
after October 3, 2004, which would constitute a material modification for Code Section 409A.
Section references in this Appendix B correspond to appropriate Sections of the Predecessor Plan as
in effect on October 3, 2004 as set forth in Appendix C.

ARTICLE 1. — DEFINITIONS

	1.13	 	“Deferral Account” means the Participant’s Grandfathered Deferral Account as set forth in
Section 1.21 of the foregoing provisions of the Plan.

ARTICLE 3. — DEFERRALS

	 	 	The provisions of Section 3.03, 3.04 and 3.05 shall continue to apply to a Participant’s
Grandfathered Deferral Account.

ARTICLE 5. — MAINTENANCE OF ACCOUNTS

	 	 	The provisions of Section 4 as set forth in the foregoing provisions of the Plan as amended
and restated effective as December 31, 2008, shall be applicable to a Participant’s
Grandfathered Deferral Account on and after January 1, 2009.

ARTICLE 5. — PAYMENT OF BENEFITS

	 	 	For purposes of this Article 5 — Payment of Benefits, the term “termination of employment”
or any other similar language means, with respect to a Participant, the complete cessation
of providing service to the Company and all Associated Companies as an employee.

Page 41

 

	 	 	Except as provided in the preceding sentence and below, the provisions of Article 5 shall
continue to apply to a Participant’s Grandfathered Deferral Account.

	5.04	 	Hardship
	 
	 	 	A distribution shall not be made pursuant to this Section 5.04, unless the Participant
incurs an “unforeseeable emergency” as such term is defined in Section 5.06 of the foregoing
provisions of this Plan.
	 
	5.07	 	Designation of Beneficiary
	 
	 	 	The provisions of Section 5.07 as set forth in the foregoing provisions of the Plan as
amended and restated effective as December 31, 2008, shall be applicable to a Participant’s
Grandfathered Deferral Account on and after January 1, 2009.
	 
	5.08	 	Debiting Accounts
	 
	 	 	The provisions of Section 5.08 as set forth in the foregoing provisions of the Plan as
amended and restated effective as December 31, 2008, shall be applicable to a Participant’s
Grandfathered Deferral Account on and after January 1, 2009.

Page 42

 

APPENDIX C 

PROVISIONS OF THE PLAN AS IN EFFECT ON OCTOBER 3, 2004

This Appendix C constitutes a part of this Plan and contains the Predecessor Plan provisions as in
effect on October 3, 2004.

Page 43exv4w3

Exhibit 4.3

Xylem 

2011 OMNIBUS INCENTIVE PLAN

ESTABLISHMENT, PURPOSE, AND DURATION

Article 1.

1.1 Establishment

 Xylem Inc., an Indiana corporation (hereinafter
 referred to as the “Company”),
establishes an incentive compensation plan to be known as the Xylem  2011 Omnibus Incentive Plan
(hereinafter referred to as the “Plan”), as set forth in this document. The Plan permits
the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (SARs),
Restricted Stock, Restricted Stock Units and Other Awards.

The Plan first became effective October 31, 2011 (the “Effective Date”) following the
spin-off of Xylem Inc. from ITT Corporation (the “Predecessor Corporation”) on October 31,
2011. The Predecessor Corporation maintained a similar plan prior to the spin-off (the
“Predecessor Plan”), and the Plan was created to govern the awards under the Predecessor
Plan, as revised to reflect the spin-off from the Predecessor Corporation. The Plan shall remain
in effect as provided in Section 1.3 hereof, and Participants shall receive full credit for their
service and participation with the Predecessor Corporation as provided in Section 5.3 hereof.

1.2 Purpose of the Plan

. The purpose of the Plan is to promote the long-term interests of the Company and its shareholders
by strengthening the Company’s ability to attract and retain Employees of the Company and its
Affiliates and members of the Board of Directors upon whose judgment, initiative, and efforts the
financial success and growth of the business of the Company largely depend, and to provide an
additional incentive for such individuals through share ownership and other rights that promote and
recognize the financial success and growth of the Company and create value for shareholders.

1.3 Duration of the Plan

. The Plan shall commence as of the Effective Date, as described in Section 1.1 hereof, and shall
remain in effect, subject to the right of the Compensation and Personnel Committee of the Board,
(the “Committee”) to amend or terminate the Plan at any time pursuant to Article 14 hereof, until
all Shares subject to it shall have been purchased or acquired according to the Plan’s provisions.

 

 

Article 2. DEFINITIONS

Whenever used in the Plan, the following terms shall have the meanings set forth below, and when
the meaning is intended, the initial letter of the word shall be capitalized.

2.1 “Acceleration Event”

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

     (a) a report on Schedule 13D shall be filed with the Securities and Exchange Commission
pursuant to Section 13(d) of the Exchange Act disclosing that any Person, other than 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;

     (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 Shares (or securities convertible into
Shares) 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
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 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.

2.2 “Affiliate”

means any Subsidiary and any other Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with, the Person
specified.

2.3 “Award”

means, individually or collectively, a grant under this Plan of Nonqualified Stock Options,
Incentive Stock Options, SARs, Restricted Stock, Restricted Stock Units, Converted Awards and Other
Awards.

2.4 “Award Agreement”

means either (i) an agreement entered into by the Company and a Participant setting forth the
terms and provisions applicable to Awards granted under this Plan, or (ii) a statement issued by
the Company to a Participant describing the terms and conditions of such Award.

2.5 “Beneficial Owner”

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

2.6 “Benefits and Compensation Matters Agreement”

means the Benefits and Compensation Matters Agreement by and among the Company, the
Predecessor Corporation and Exelis Inc.

2.7 “Board”

or “Board of Directors” means the Board of Directors of the Company.

2.8 “Code”

means the U.S. Internal Revenue Code of 1986, as amended from time to time.

2.9 “Committee”

means the Compensation and Personnel Committee of the Board.

 

 

2.10 “Company”

means Xylem Inc., an Indiana corporation, and any successor thereto as provided in Article 16
herein; provided, however, that for purposes of grants made under the Predecessor Plan, Company
shall mean the Predecessor Corporation as the original grantor.

2.11 “Converted Award”

means Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Restricted
Stock Units and Other Awards denominated in Shares that were originally granted to a Participant
under any of the Predecessor Corporation Equity Plans, as adjusted pursuant to the terms of the
Benefits and Compensation Matters Agreement.

2.12 “Covered Employee”

means a Participant who is a “Covered Employee,” as defined in Code Section 162(m) and the
regulations promulgated under Code Section 162(m), or any successor statute.

2.13 “Director”

means any individual who is a member of the Board of Directors.

2.14 “Employee”

means any employee of the Company or its Affiliates.

2.15 “Exchange Act”

means the Securities Exchange Act of 1934, as amended from time to time, or any successor act
thereto.

2.16 “Fair Market Value”

means a price that is based on the opening, closing, actual, high, low, or average selling
prices of a Share on the New York Stock Exchange (“NYSE”) or other established stock
exchange (or exchanges) on the applicable date, the preceding trading day, the next succeeding
trading day, or an average of trading days, as determined by the Committee in its discretion.

Such definition of Fair Market Value may differ depending on whether Fair Market Value is in
reference to the grant, exercise, vesting, or settlement or payout of an Award. If, however, the
accounting standards used to account for equity awards granted to Participants are substantially
modified subsequent to the Effective Date of the Plan, the Committee shall have the ability to
determine an Award’s Fair Market Value based on the relevant facts and circumstances. If Shares are
not traded on an established stock

 

 

exchange, Fair Market Value shall be determined by the Committee
based on objective criteria.

2.17 “Freestanding SAR”

means a SAR that is granted independently of any Options, as described in Article 7 herein.

2.18 “Full Value Award”

means an Award other than an Option granted with an Option Price equal to at least Fair Market
Value on the date of grant or a SAR with a Grant Price equal to at least Fair Market Value on the
date of grant.

2.19 “Grant Price”

means the amount to which the Fair Market Value of a Share is compared pursuant to Section 7.6
to determine the amount of payment that should be made upon exercise of a SAR.

2.20 “Incentive Stock Option”

or “ISO” means an Option that meets the requirements of Code Section 422, or any successor
provision, and that is not designated as a Nonqualified Stock Option.

2.21 “Insider”

means an individual who is, on the relevant date, an officer, Director, or more than ten
percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered
pursuant to Section 12 of the Exchange Act, as determined by the Board or the Committee in
accordance with Section 16 of the Exchange Act.

2.22 “Nonqualified Stock Option

” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or
that otherwise does not meet such requirements.

2.23 “Option”

means an Incentive Stock Option or a Nonqualified Stock Option to purchase Shares, as
described in Article 6 herein.

2.24 “Option Price”

means the price at which a Share may be purchased by a Participant pursuant to an Option.

 

 

2.25 “Other Award”

means an Award granted to a Participant pursuant to Article 9 herein.

2.26 “Participant”

means an Employee or Director who has been selected to receive an Award or who has an
outstanding Award granted under the Plan.

2.27 “Performance-Based Compensation”

means an Award that is qualified as Performance-Based Compensation under Code Section 162(m).

2.28 “Performance Measures”

means measures as described in Article 10, the attainment of which may determine the amount of
payout and/or vesting with respect to Awards.

2.29 “Performance Period”

means the period of time during which the performance goals must be met in order to determine
the amount of payout and/or vesting with respect to an Award.

2.30 “Period of Restriction”

means the period when Restricted Stock or Restricted Stock Units are subject to a substantial
risk of forfeiture (based on the passage of time, the achievement of performance goals, or upon the
occurrence of other events as determined by the Committee, at its discretion) and transfer
restrictions, as provided in Article 8 herein.

2.31 “Person”

shall have the meaning given in Section 3(a) (9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof.

2.32 “Plan Year”

means the fiscal year of the Company.

2.33 “Plan”

means the Xylem  2011 Omnibus Incentive Plan; provided, however, that for purposes of grants made
under the Predecessor Plan, Plan shall mean the Predecessor Plan as it existed on the date of such
grant.

2.34 “Predecessor Corporation Equity Plan”

means any of the plans maintained by the Predecessor Corporation under which equity or
equity-based awards were granted, including the ITT 2003 Equity Incentive Plan, ITT Corporation
1997 Long-Term Incentive Plan, 1994 ITT Incentive Stock Plan, ITT 1996

 

 

Restricted Stock Plan for
Non-Employee Directors, and 2002 ITT Stock Option Plan for Non-Employee Directors.

2.35 “Restricted Stock”

means an Award granted to a Participant pursuant to Article 8 herein.

2.36 “Restricted Stock Unit”

means an Award granted to a Participant pursuant to Article 8 herein.

2.37 “Share”

means a share of common stock of the Company, $1.00 par value per share.

2.38 “Stock Appreciation Right”

or “SAR” means an Award granted to a Participant pursuant to Article 7 herein.

2.39 “Subsidiary”

means any corporation, partnership, joint venture, limited liability company, or other entity
(other than the Company) in an unbroken chain of entities beginning with the Company if each of the
entities other than the last entity in the unbroken chain owns at least fifty percent (50%) of the
total combined voting power in one of the other entities in such chain.

2.40 “Tandem SAR”

means a SAR that is granted in connection with a related Option pursuant to Article 7.

Article 3. ADMINISTRATION

3.1 General

. The Committee shall be responsible for administering the Plan. The Committee may employ
attorneys, consultants, accountants, and other persons, and the Committee, the Company, and its
officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any
such persons. All actions taken and all interpretations and determinations made by the Committee
shall be final and binding upon the Participants, the Company, and all other interested persons.

3.2 Authority of the Committee

. The Committee shall have full and exclusive discretionary power to interpret the terms and the
intent of the Plan and to determine eligibility for Awards and to adopt such rules, regulations,
and guidelines for administering the Plan as the Committee may deem necessary or proper. Such
authority shall include, but not be limited to, selecting Award recipients, establishing all Award
terms and conditions and, subject to Article 14,

 

 

adopting modifications and amendments to the Plan
or any Award Agreement, including without limitation, any that are necessary to comply with the
laws of the countries in which the Company and its Affiliates operate.

3.3 Delegation

. The Committee may delegate to one or more of its members or to one or more agents or advisors
such administrative duties as it may deem advisable, and the Committee or any person to whom it has
delegated duties as aforesaid may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. The Committee may, by
resolution, authorize one or more officers of the Company to do one or both of the following: (a)
designate Employees and Directors to be recipients of Awards; and (b) determine the size of the
Award; provided, however, the Committee shall not delegate such responsibilities to
any such officer for Awards granted to an Employee that is considered an
elected officer of the Company, or to the extent it would unintentionally cause Performance-Based
Compensation to lose its status as such.

Article 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

4.1 Number of Shares Available for Awards

. Subject to adjustment as provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be eighteen million (18,000,000). For purposes of the
prior sentence, Shares subject to outstanding awards under the Predecessor Plan shall not be
considered available for issuance under the Predecessor Plan. Any Shares related to Awards under
the Plan or awards under the Predecessor Plan that terminate by expiration, forfeiture,
cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of
Shares, or are exchanged with the Committee’s permission for Awards not involving Shares, shall be
available again for grant under the Plan. Notwithstanding the foregoing, (a) upon the
exercise of a stock-settled Stock Appreciation Right or net-settled Option, the number of Shares
subject to the Award (or portion of the Award) that is then being exercised shall be counted
against the maximum aggregate number of Shares that may be issued under the Plan as provided above,
on the basis of one Share for every Share subject thereto, regardless of the actual number of
Shares issued upon exercise and (b) any Shares withheld with respect to an Award (or, with respect
to Restricted Stock, returned) in satisfaction of tax withholding obligations shall be counted as
Shares issued.

In addition, any Shares related to Full Value Awards under the Plan or the Predecessor Plan that
terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such
Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission for
Awards not involving Shares, shall be available again for grant of Full Value Awards under the
Plan.

All of the reserved Shares may be used as ISOs.

The Shares available for issuance under the Plan may be authorized and unissued Shares or treasury
Shares.

 

 

The following limits (“Award Limits”) shall apply to Awards (other than Converted Awards),
dividends and dividend equivalent intended to qualify as Performance-Based Compensation:

     (a) Options: The maximum aggregate number of Shares that may be granted in the form of
Options, pursuant to any Award granted in any one Plan Year to any one Participant shall be
three million (3,000,000).

     (b) SARs: The maximum number of Shares that may be granted in the form of Stock
Appreciation Rights, pursuant to any Award granted in any one Plan Year to any one
Participant shall be three million (3,000,000).

     (c) Restricted Stock or Restricted Stock Units: The maximum aggregate grant with
respect to Awards of Restricted Stock or Restricted Stock Units granted in any one Plan Year
to any one Participant shall be one million (1,000,000).

     (d) Other Awards: The maximum aggregate number of Shares with respect to which Other
Awards may be granted in any one Plan Year to any one Participant shall be one million
(1,000,000) and the maximum aggregate cash that may be payable with respect to Other Awards
granted in any one Plan Year to any one Participant shall be fifteen million ($15,000,000)
dollars.

     (e) Dividends and Dividend Equivalents: The maximum aggregate value of cash dividends
(other than large, nonrecurring cash dividends) or dividend equivalents that any one
Participant may receive pursuant to Awards in any one Plan Year shall not exceed six million
($6,000,000) dollars.

4.2 Adjustments in Authorized Shares

. In the event of any equity restructuring (within the meaning of FASB Accounting Standards
Codification (ASC) 718 (formerly FAS 123R) that causes the per share value of Shares to change,
such as a stock dividend, stock split, spin off, rights offering, or recapitalization through a
large, nonrecurring cash dividend, the Committee shall cause there to be made an equitable
adjustment to: (a) the number and, if applicable, kind of shares that may be issued under the Plan
or pursuant to any type of Award under the Plan, (b) the Award Limits, (c) the number and, if
applicable, kind of shares subject to outstanding Awards and (d) as applicable, the Option Price or
Grant Price of any then outstanding Awards. In the event of any other change in corporate structure
or capitalization, such as a merger, consolidation, any reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the Code) or any partial
or complete liquidation of the Company, the Committee, in its sole discretion, in order to prevent
dilution or enlargement of Participants’ rights under the Plan, shall cause there to be made such
equitable adjustments described in the foregoing sentence. Any fractional shares resulting from
adjustments made pursuant to this Section 4.2 shall be eliminated. Any adjustment made pursuant to
this Section 4.2 shall be conclusive and binding for all purposes of the Plan.

 

 

Except to the extent it would unintentionally cause Performance Based Compensation to fail to
qualify for the performance based exception to Code Section 162(m), appropriate adjustments may
also be made by the Committee in the terms of any Awards under the Plan to reflect such changes or
distributions and to modify any other terms of outstanding Awards on an equitable basis, including
modifications of performance goals and changes in the length of Performance Periods. The
determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under the Plan.

Subject to the provisions of Article 13, without affecting the number of Shares reserved or
available hereunder, the Committee may authorize the issuance or assumption of benefits under this
Plan in connection with any merger, consolidation, acquisition of property or stock, share
exchange, amalgamation, reorganization or similar transaction upon such terms and conditions as it
may deem appropriate; provided, however, that no such issuance or assumption shall be made without
affecting the number of Shares reserved or available hereunder if it would prevent the granting of
ISOs under the Plan.

Article 5. ELIGIBILITY AND PARTICIPATION

5.1 Eligibility

. Individuals eligible to participate in this Plan include all Employees and Directors.

5.2 Actual Participation

. Subject to the provisions of the Plan, the Committee may, from time to time, select from all
eligible individuals, those to whom Awards shall be granted and shall determine the form and amount
of each Award.

5.3 Prior Participation

. Notwithstanding any other provision of the Plan to the contrary, all prior service and
participation by a Participant with the Predecessor Corporation shall be credited in full towards a
Participant’s service and participation with the Corporation.

Article 6.
STOCK OPTIONS

6.1 Grant of Options

. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such
number, and upon such terms, and at any time and from time to time as shall be determined by the
Committee.

ISOs may not be granted following the ten-year (10) anniversary of the date the Plan was last
approved by shareholders in a manner that satisfies the shareholder approval requirements
applicable to ISOs. ISOs may be granted only to Employees.

 

 

6.2 Award Agreement

. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price,
the duration of the Option, the number of Shares to which the Option pertains, the conditions upon
which an Option shall become vested and exercisable, and such other provisions as the Committee
shall determine which are not inconsistent with the terms of the Plan. The Award Agreement also
shall specify whether the Option is intended to be an ISO or an NQSO.

6.3 Option Price

. The Option Price for each grant of an Option under this Plan shall be as determined by the
Committee; provided, however, the Option Price shall not be less than one hundred percent (100%) of
the Fair Market Value of a Share on the date the Option is granted.

6.4 Duration of Options

. Each Option granted to a Participant shall expire at such time as the Committee shall determine
at the time of grant; provided, however, no Option shall be exercisable later than the tenth (10th)
anniversary of its grant.

6.5 Exercise of Options

. Options granted under this Article 6 shall be exercisable at such times and be subject to such
terms and conditions as the Committee shall in each instance approve, which need not be the same
for each grant or for each Participant.

6.6 Payment

. Options granted under this Article 6 shall be exercised by the delivery of notice of exercise to
an agent designated by the Company or by complying with any alternative procedures which may be
authorized by the Committee, setting forth the number of Shares with respect to which the Option is
to be exercised.

A condition of the issuance of the Shares as to which an Option shall be exercised shall be the
payment of the Option Price. The Option may be exercised (and the Option Price may be satisfied) by
(a) delivering cash or its equivalent, (b) tendering (either by actual delivery or attestation)
previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to
the Option Price, (c) broker-assisted cashless exercise, (d) net exercise, (e) a combination of the
foregoing or (f) by any other method approved by the Committee in its sole discretion. The
Committee shall determine acceptable methods for tendering Shares as payment upon exercise of an
Option and may impose such limitations and prohibitions on the use of Shares to exercise an Option
as it deems appropriate.

Subject to any governing rules or regulations, as soon as practicable after receipt of written
notification of exercise and full payment (including satisfaction of any applicable tax
withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon
the Participant’s request, Share certificates in an appropriate amount based upon the number of
Shares purchased under the Option(s).

 

 

Unless otherwise determined by the Committee, all payments under the methods indicated above shall
be paid in United States dollars.

6.7 Restrictions on Share Transferability

. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an
Option granted under this Article 6 as it may deem advisable, including, without limitation,
restrictions under applicable federal securities laws, under the requirements of any stock exchange
or market upon which such Shares are then listed and/or traded, and under any blue sky or state
securities laws applicable to such Shares.

6.8 Termination of Employment or Service as a Director

. The impact of a termination of a Participant’s employment on an Option’s vesting and exercise
period shall be determined by the Committee, in its sole discretion, in the Participant’s Award
Agreement, and need not be uniform among Option grants or Participants. The impact of a termination
on a Participant’s service as a Director on an Option’s vesting and exercise period shall be
determined by the Committee, in its sole discretion, in the Participant’s Award Agreement, and need
not be uniform among Option grants or Participants.

6.9 Transferability of Options

. During his or her lifetime, only the Participant shall have the right to exercise the Options.
After the Participant’s death, the Participant’s estate or beneficiary shall have the right to
exercise such Options.

     (a) Incentive Stock Options. No ISO granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws
of descent and distribution.

     (b) Nonqualified Stock Options. Except as otherwise provided in a Participant’s Award
Agreement, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or by the laws of descent and
distribution. Under no circumstances may an NQSO be transferable for value or consideration.

6.10 Notification of Disqualifying Disposition

. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO
under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying
dispositions), such Participant shall notify the Company of such disposition within ten (10) days
thereof.

Article 7. STOCK APPRECIATION RIGHTS

 

 

7.1 Grant of SARs

. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time
and from time to time as shall be determined by the Committee. The Committee may grant Freestanding
SARs, Tandem SARs, or any combination of these forms of SARs.

Subject to the terms and conditions of the Plan, the Committee shall have complete discretion in
determining the number of SARs granted to each Participant and, consistent with the provisions of
the Plan, in determining the terms and conditions pertaining to such SARs.

The SAR Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and
shall be specified in the Award Agreement. The SAR Grant Price shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share on the date the SAR is granted. The Grant Price
of Tandem SARs shall be equal to the Option Price of the related Option.

7.2 SAR Agreement

. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the
term of the SAR, and such other provisions as the Committee shall determine.

7.3 Term of SAR

. The term of a SAR granted under the Plan shall be determined by the Committee, in its sole
discretion, provided that, no SAR shall be exercisable later than the tenth (10th) anniversary of
its grant.

7.4 Exercise of Freestanding SARs

. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole
discretion, imposes upon them; provided, however, such terms and conditions shall be subject to
Section 7.1 as to grant price and Section 7.3 as to the term of the SAR.

7.5 Exercise of Tandem SARs

. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the
surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may
be exercised only with respect to the Shares for which its related Option is then exercisable.

Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR
granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of
the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more
than one hundred percent (100%) of the difference between the Option Price of the underlying ISO
and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is
exercised; and (c) the

 

 

Tandem SAR may be exercised only when the Fair Market Value of the Shares
subject to the ISO exceeds the Option Price of the ISO.

7.6 Payment of SAR Amount

     (a). Upon the exercise of a SAR, a Participant shall be entitled to receive payment
from the Company in an amount determined by multiplying:

     The difference between the Fair Market Value of a Share on the date of exercise over
the Grant Price; by

     (b) The number of Shares with respect to which the SAR is exercised.

At the discretion of the Committee, the payment upon a SAR exercise may be in cash, in Shares of
equivalent value, in some combination thereof, or in any other manner approved by the Committee at
its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set
forth in the Award Agreement pertaining to the grant of the SAR.

7.7 Termination of Employment or Service as a Director

. The impact of a termination of a Participant’s employment on a SAR’s vesting and exercise period
shall be determined by the Committee, in its sole discretion, in the Participant’s Award Agreement,
and need not be uniform among SAR grants or Participants. The impact of a termination on a
Participant’s service as a Director on a SAR’s vesting and exercise period shall be determined by
the Committee, in its sole discretion, in the Participant’s Award Agreement, and need not be
uniform among SAR grants or Participants.

7.8 Nontransferability of SARs

. Except as otherwise provided in a Participant’s Award Agreement, no SAR granted under the Plan
may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution. Under no circumstances may a SAR be transferable
for value or consideration. Further, except as otherwise provided in a Participant’s Award
Agreement, all SARs granted to a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant.

7.9 Other Restrictions

. The Committee shall impose such other conditions and/or restrictions on any Shares received upon
exercise of a SAR granted pursuant to the Plan as it may deem advisable. This includes, but is not
limited to, requiring the Participant to hold the Shares received upon exercise of a SAR for a
specified period of time.

 

 

Article 8.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS

8.1 Grant of Restricted Stock or Restricted Stock Units

. Subject to the terms and conditions of the Plan, the Committee, at any time and from time to
time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such
amounts as the Committee shall determine. Restricted Stock Units shall be similar to Restricted
Stock except that no Shares are actually awarded to the Participant on the date of grant.

8.2 Restricted Stock or Restricted Stock Unit Agreement

. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Award Agreement
that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the
number of Restricted Stock Units granted, and such other provisions as the Committee shall
determine.

8.3 Transferability

. Except as provided in this Article 8, the Shares of Restricted Stock and/or Restricted Stock
Units granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable Period of Restriction established by the Committee and
specified in the Award Agreement (and in the case of Restricted Stock Units until the date of
delivery or other payment), or upon earlier satisfaction of any other conditions, as specified by
the Committee, in its sole discretion, and set forth in the Award Agreement.

8.4 Other Restrictions

. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted
Stock or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including,
without limitation, a requirement that Participants pay a stipulated purchase price for each Share
of Restricted Stock or each Restricted Stock Unit, restrictions based upon the achievement of
specific performance goals, time-based restrictions on vesting following the
attainment of the performance goals, time-based restrictions, and/or restrictions under applicable
federal or state securities laws.

To the extent deemed appropriate by the Committee, the Company may retain the certificates
representing Shares of Restricted Stock in the Company’s possession until such time as all
conditions and/or restrictions applicable to such Shares have been satisfied or lapse.

Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each
Restricted Stock Award shall become freely transferable by the Participant after all conditions and
restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any
applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, Shares,
or a combination of cash and Shares as the Committee, in its sole discretion shall determine.

 

 

8.5 Voting Rights

. To the extent permitted or required by law, as determined by the Committee, Participants holding
Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting
rights with respect to those Shares during the Period of Restriction. A Participant shall have no
voting rights with respect to any Restricted Stock Units granted hereunder.

8.6 Dividends and Other Distributions

. During the Period of Restriction, Participants holding Shares of Restricted Stock or Restricted
Stock Units granted hereunder may, if the Committee so determines, be credited with dividends paid
with respect to the underlying Shares or dividend equivalents while they are so held in a manner
determined by the Committee in its sole discretion. The Committee may apply any restrictions to the
dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole
discretion, may determine the time and form of payment of dividends or dividend equivalents,
including cash, Shares, Restricted Stock, or Restricted Stock Units; provided, however, that if
dividends or dividend equivalents are granted with respect to any Shares of Restricted Stock or
Restricted Share Units that are subject to performance goals, the dividends or dividend equivalents
shall be accumulated or reinvested and paid following the time such performance goals are met, as
set forth by the Committee in the applicable Award Agreement.

8.7 Termination of Employment or Service as a Director

. The impact of a termination of a Participant’s employment on a Restricted Stock or Restricted
Stock Unit’s vesting and settlement shall be determined by the Committee, in its sole discretion,
in the Participant’s Award Agreement, and need not be uniform among Restricted Stock or Restricted
Stock Unit grants or Participants. The impact of a termination of a Participant’s service as a
Director on a Restricted Stock or Restricted Stock Unit’s vesting and settlement shall be
determined by the Committee, in its sole discretion, in the Participant’s Award Agreement, and need
not be uniform among Restricted Stock or Restricted Stock Unit grants or Participants.

8.8 Section 83(b) Election

. The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned
upon the Participant making or refraining from making an election with respect to the Award under
Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code
concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of
such election with the Company.

Article 9. OTHER AWARDS

The Committee may grant Other Awards, which may include, without limitation, unrestricted Shares,
the payment of Shares in lieu of cash, the payment of cash based on attainment of Performance
Goals, service conditions or other goals established by the

 

 

Committee and the payment of Shares in
lieu of cash under other Company incentive or bonus programs. Payment under or settlement of any
such Other Awards shall be made in such manner, at such times and subject to such terms and
conditions as the Committee may determine.

Article 10. PERFORMANCE MEASURES

Unless and until the Committee proposes for shareholder vote and the shareholders approve a change
in the general Performance Measures set forth in this Article 10, the performance goals upon which
the payment or vesting of an Award to a Covered Employee that is intended to qualify as
Performance-Based Compensation shall be limited to one or more of the following Performance
Measures:

     (a) Net earnings;

     (b) Earnings per share;

     (c) Net sales growth;

     (d) Net income (before or after taxes);

     (e) Net operating profit;

     (f) Return measures (including, but not limited to, return on assets, capital, equity,
or sales);

     (g) Cash flow (including, but not limited to, operating cash flow and free cash flow);

     (h) Cash flow return on capital;

     (i) Earnings before or after taxes, interest, depreciation, and/or amortization;

     (j) Gross or operating margins;

     (k) Productivity ratios;

     (l) Share price (including, but not limited to, growth measures and total shareholder
return);

     (m) Expense targets;

     (n) Margins;

     (o) Operating efficiency;

     (p) Customer satisfaction;

 

 

     (q) Employee satisfaction metrics;

     (r) Human resources metrics;

     (s) Working capital targets; and

     (t) EVA®.

Any Performance Measure(s) may be used to measure the performance of the Company or an Affiliate as
a whole or any business unit of the Company or an Affiliate or any combination thereof, as the
Committee may deem appropriate, or any of the above Performance Measures as compared to the
performance of a group of comparator companies, or published or special index that the Committee,
in its sole discretion, deems appropriate, or the Company may select Performance Measure (l) above
as compared to various stock market indices. The Committee also has the authority to provide for
accelerated vesting of any Award based on the achievement of performance goals pursuant to the
Performance Measures specified in this Article 10.

The Committee may provide in any such Award that any evaluation of performance may include or
exclude any of the following events that occurs during a Performance
Period: (a) asset write—downs,
(b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting
principles, or other laws or provisions affecting reported results, (d) any reorganization and
restructuring programs, (e) extraordinary nonrecurring items as described in Accounting Principles
Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and
results of operations appearing in the Company’s annual report to shareholders for the applicable
year, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent
such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a
form that meets the requirements of Code Section 162(m) for deductibility.

Awards that are designed to qualify as Performance-Based Compensation, and that are held by Covered
Employees, may not be adjusted upward. The Committee shall retain the discretion to adjust such
Awards downward.

In the event that applicable tax and/or securities laws change to permit Committee discretion to
alter the governing Performance Measures without obtaining shareholder approval of such changes,
the Committee shall have sole discretion to make such changes without obtaining shareholder
approval.

Article 11. BENEFICIARY DESIGNATION

Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who
may be named contingently or successively) to whom any benefit under the Plan is to be paid in case
of his or her death before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing with the Company
during the Participant’s

 

 

 lifetime. In the absence of any such designation, benefits remaining
unpaid at the Participant’s death shall be paid to the Participant’s estate.

Article 12. RIGHTS OF PARTICIPANTS

12.1 Employment

. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of
the Company and/or its Affiliates to terminate any Participant’s employment or of the Board of
Directors to terminate service as a Director at any time or for any reason not prohibited by law,
nor confer upon any Participant any right to continue his or her employment or service as a
Director for any specified period of time.

Neither an Award nor any benefits arising under this Plan shall constitute an employment contract
with the Company and, accordingly, subject to Article 3 and Section 14.1, this Plan and the
benefits hereunder may be terminated at any time in the sole and exclusive discretion of the
Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or
its Subsidiaries.

12.2 Participation

. No individual shall have the right to be selected to receive an Award under this Plan, or, having
been so selected, to be selected to receive a future Award.

12.3 Rights as a Shareholder

. Except as otherwise provided in Section 8 of the Plan or in an Award Agreement, a Participant
shall have none of the rights of a shareholder with respect to Shares covered by any Award until
the Participant becomes the record holder of such Shares.

Article 13. ACCELERATION EVENT

The Compensation Committee shall specify in each Participant’s Award Agreement the treatment of
outstanding Awards upon an Acceleration Event; provided that any Converted Award will continue to
apply the definition of “change in control” or “acceleration event” as provided in the Predecessor
Corporation Equity Plan under which such Converted Award was originally granted, as adjusted
pursuant to the terms of the Benefits and Compensation Matters Agreement.

Article 14. AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION

14.1 Amendment, Modification, Suspension, and Termination

. Subject to Section 14.3, the Committee may, at any time and from time to time, alter, amend,
modify, suspend, or terminate the Plan and any Award Agreement in whole or in part;
provided, however, that, except for a change or adjustment made pursuant to Section
4.2, no Option Price of an outstanding Option or Grant Price of an outstanding SAR shall

 

 

be reduced
(whether through amendment, cancellation or replacement of Awards with other Awards or other
payments of cash or property) without shareholder approval.

14.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events

. The Committee may make adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without limitation, the events
described in Section 4.2 hereof) affecting the Company or the financial statements of the Company
or of changes in applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent unintended dilution or
enlargement of the benefits or potential benefits intended to be made available under the Plan. The
determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under the Plan.

14.3 Awards Previously Granted

. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment,
suspension, or modification of the Plan or an Award Agreement shall adversely affect in any
material way any Award previously granted under the Plan, without the written consent of the
Participant holding such Award.

Article 15. WITHHOLDING

15.1 Tax Withholding

. The Company shall have the power and the right to deduct or withhold, or require a Participant to
remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.

15.2 Share Withholding

. With respect to withholding required upon the exercise of Options, or SARs, upon the lapse of
restrictions on Restricted Stock and Restricted Stock Units, or any other taxable event arising as
a result of Awards granted hereunder, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by having the Company
withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the
minimum statutory total tax that could be imposed on the transaction. All such elections shall be
irrevocable, made in writing, and signed by the Participant, and shall be subject to any
restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

Article 16. SUCCESSORS

All obligations of the Company under the Plan with respect to Awards granted hereunder shall be
binding on any successor to the Company, whether the existence of such

 

 

 successor is the result of a
direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.

Article 17. GENERAL PROVISIONS

17.1 Forfeiture Events

. The Committee may specify in an Award Agreement that the Participant’s rights, payments, and
benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or
recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable
vesting or performance conditions of an Award. Such events shall include, but shall not be limited
to, termination of employment for cause, violation of material Company and/or Affiliate policies,
breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the
Participant, or other conduct by the Participant that is detrimental to the business or reputation
of the Company and/or its Affiliates.

17.2 Legend

. The certificates for Shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer of such Shares.

17.3 Gender and Number

. Except where otherwise indicated by the context, any masculine term used herein also shall
include the feminine, the plural shall include the singular, and the singular shall include the
plural.

17.4 Severability

. In the event any provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been included.

17.5 Requirements of Law

. The granting of Awards and the issuance of Shares under the Plan shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.

17.6 Securities Law Compliance

. With respect to Insiders, transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successor under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.

 

 

17.7 Registration and Listing

. The Company may use reasonable endeavors to register Shares allotted pursuant to the exercise of
an Award with the United States Securities and Exchange Commission or to effect compliance with the
registration, qualification, and listing requirements of any national securities laws, stock
exchange, or automated quotation system.

17.8 Delivery of Title

. The Company shall have no obligation to issue or deliver evidence of title for Shares issued
under the Plan prior to:

     (a) Obtaining any approvals from governmental agencies that the Company determines are
necessary or advisable; and

     (b) Completion of any registration or other qualification of the Shares under any
applicable national or foreign law or ruling of any governmental body that the Company
determines to be necessary or advisable.

17.9 Inability to Obtain Authority

. The inability of the Company to obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to
issue or sell such Shares as to which such requisite authority shall not have been obtained.

17.10 Employees or Directors Based Outside of the United States

. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in
other countries in which the Company and its Affiliates operate or have Employees or Directors, the
Committee, in its sole discretion, shall have the power and authority to:

     (a) Determine which Affiliates shall be covered by the Plan;

     (b) Determine which Employees and/or Directors outside the United States are eligible
to participate in the Plan;

     (c) Modify the administrative terms and conditions of any Award granted to Employees
and/or Directors outside the United States to comply with applicable foreign laws;

     (d) Establish subplans and modify exercise procedures and other terms and procedures,
to the extent such actions may be necessary or advisable. Any subplans and
modifications to Plan terms and procedures established under this Section 17.10 by the
Committee shall be attached to this Plan document as appendices; and

 

 

     (e) Take any action, before or after an Award is made, that it deems advisable to
obtain approval or comply with any necessary local government regulatory exemptions or
approvals.

Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be
granted, that would violate the Exchange Act, the Code, any securities law, or governing statute or
any other applicable law.

17.11 Uncertificated Shares

. To the extent that the Plan provides for issuance of certificates to reflect the transfer of
Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not
prohibited by applicable law or the rules of any stock exchange.

17.12 Unfunded Plan

. Participants shall have no right, title, or interest whatsoever in or to any investments that the
Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the
Plan, and no action taken pursuant to its provisions, shall create or be construed to create a
trust of any kind, or a fiduciary relationship between the Company and any Participant,
beneficiary, legal representative, or any other person. To the extent that any person acquires a
right to receive payments from the Company under the Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company. All payments to be made hereunder shall be
paid from the general funds of the Company and no special or separate fund shall be established and
no segregation of assets shall be made to assure payment of such amounts except as expressly set
forth in the Plan. The Plan is not subject to ERISA.

17.13 No Fractional Shares

. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu
of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or
otherwise eliminated.

17.14 Retirement and Welfare Plans

. The value of compensation paid under this Plan will not be included as “compensation” for
purposes of computing the benefits payable to any participant under the Company’s retirement plans
(both qualified and non-qualified) or welfare benefit plans unless such other plan expressly
provides that such compensation shall be taken into account in computing a participant’s benefit.

17.15 Governing Law

. The Plan and each Award Agreement shall be governed by the laws of the State of New York,
excluding any conflicts or choice of law rule or principle that might otherwise refer construction
or interpretation of the Plan to the substantive law of another jurisdiction.

 

 

 Unless otherwise
provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the
exclusive jurisdiction and venue of the federal or state courts of New York, to resolve any and all
issues that may arise out of or relate to the Plan or any related Award Agreement.

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