Document:

exv10w4

Exhibit 10.4

ITT TRANSITIONAL TRADEMARK LICENSE AGREEMENT — EXELIS

          This ITT TRANSITIONAL TRADEMARK LICENSE AGREEMENT- EXELIS (this “Agreement”) dated as
of [_____], 2011 by and between ITT MANUFACTURING ENTERPRISES, INC., a Delaware corporation
(“ITT MEI”) and EXELIS INC., an Indiana corporation (“Exelis”; and
together with ITT MEI, the “Parties”, and each individually a “Party”) shall become
effective as of the Distribution Date.

          WHEREAS, ITT MEI, a Subsidiary of ITT Corporation, an Indiana corporation (“ITT”), is
the owner of the trademarks and service marks listed on Schedule A attached hereto
(“ITT Marks”);

          WHEREAS, pursuant to the Distribution Agreement, dated as of [____], 2011 (the
“Distribution Agreement”), ITT is distributing certain of its assets and liabilities to
Exelis and Xylem, Inc. (the “Distribution”);

          WHEREAS, after the Distribution, the Parties will no longer be affiliated, but Exelis wishes
to continue to use the ITT Marks for a limited transitional period in connection with the Defense
Business (as defined below) and ITT MEI has agreed to allow such use, subject to the terms and
conditions herein; and

          WHEREAS, this Agreement is a License Agreement that must be executed pursuant to Section
2.8 of the Distribution Agreement.

          NOW, THEREFORE, in consideration of the promises and of the mutual covenants and agreements
herein contained, and for good and valuable consideration, including that recited in the
Distribution Agreement, the receipt and adequacy of which is acknowledged by the Parties, the
Parties agree as follows:

ARTICLE 1 — DEFINITIONS

          1.1 Definitions. The following capitalized terms used in this Agreement shall have the
meanings set forth below. Unless otherwise defined herein, all other capitalized terms shall have
the meanings ascribed to them in the Distribution Agreement.

          “Affiliate” shall mean, when used with respect to a specified Person, a Person that
directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under
common control with the specified Person. For the purposes of this definition, “control”, when
used with respect to any specified Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or other interests. For purposes of this Agreement, no
Party or its Subsidiaries, shall be deemed to be “Affiliates” of any other Party and its
Subsidiaries.

          “Covered Affiliates” shall mean all (i) Current Affiliates of Exelis, (ii) future
Subsidiaries of Exelis and (iii) future Affiliates of Exelis formed as part of an internal
reorganization for tax or administrative purposes. For the avoidance of doubt, Covered Affiliates
shall not include any Affiliates of any third-party acquirer of Exelis and its Subsidiaries.

 

 

          “Current” shall mean with respect to Affiliates, Subsidiaries, products, fields or
uses, as applicable, those entities, products, fields or uses in existence as of the Distribution
Date.

          “Defense Business” shall mean the businesses conducted through the Electronic Systems,
Geospatial Systems, Information Systems and Mission Systems segments of ITT prior to the Effective
Time (as defined in the Distribution Agreement), including, for the avoidance of doubt, the
businesses of (i) the Defense Entities and the Defense Divisions and (ii) any other division,
Subsidiary, line of business or investment of ITT or any of its Subsidiaries managed or operated
prior to the Effective Time by any Defense Entity, unless such other division, Subsidiary, line of
business or investment is an ITT Retained Entity, an ITT Retained Division, a Water Entity or a
Water Division.

          “Legacy Products” shall mean (i) tactical radios, counter-IED jammers, radar systems,
night vision products, image processing software all currently in existence and being offered for
sale or having been sold to Exelis customers as of the Distribution Date, where one or more of the
ITT Marks are used in product molds, stamps, engineering drawings, instruction manuals, screen
displays, code listings, and the like; (ii) any versions of the foregoing products that are offered
for sale or sold after the Distribution Date and are modified to have improved performance or
functionality (but excluding any new generations of such products that require a new qualification
by any government customer) and (iii) other products solely as may be agreed by the Parties, in
their sole discretion, during the Unified License Term.

          “New Products” shall mean products that are first sold or offered for sale after the
Distribution Date, including new Legacy Products that require a new qualification by any government
customer.

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

          “Source Indicators” shall mean trademarks, service marks, corporate names, trade
names, domain names, logos, slogans, designs, trade dress and other designations of source or
origin.

          “Subsidiary” shall mean with respect to any Person (i) a corporation, fifty percent
(50%) or more of the voting or capital stock of which is, as of the time in question, directly or
indirectly owned by such Person and (ii) any other Person in which such Person, directly or
indirectly, owns fifty percent (50%) or more of the equity or economic interest thereof or has the
power to elect or direct the election of fifty percent (50%) or more of the members of the
governing body of such entity.

          1.2 Terms Generally. The definitions in Section 1.1 shall apply equally to both
singular and plural forms of the terms defined. The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”, unless the context expressly
provides otherwise.

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ARTICLE 2 — GRANT OF LICENSE

          2.1 Grant of License to “ITT” for Use in Unified Brand Name.

          (a) Subject to the terms and conditions herein, ITT MEI grants to Exelis and its Covered
Affiliates a non-exclusive, worldwide, fully paid-up, non-assignable (subject to Section
6.1), and non-sublicensable (subject to Section 2.8) license to use the ITT Word Mark
(as set forth on Schedule A) as Source Indicators solely in combination with the name
“Exelis” (“New Brand Name”) to form the composite name “ITT Exelis” (the “Unified Brand
Name”) and solely in connection with the operation, advertisement, marketing, promotion and
support of the Defense Business, for three (3) years after the Distribution Date (the “Unified
Initial Term”).

          (b) Subject to the terms and conditions herein, ITT MEI hereby grants to Exelis and its
Covered Affiliates, effective as of the Distribution Date, a no-cost option to extend the term of
the license in Section 2.1(a) for the Unified Brand Name by one (1) year increments, up to
a maximum of two (2) additional years (the “Unified Renewal Term” and together with the
Unified Initial Term, the “Unified License Term”). Exelis may exercise this option by
providing written notice to ITT MEI at any time during the Unified Initial Term, and will provide
such written notice not later than three (3) months prior to the expiration of the Unified Initial
Term, unless otherwise agreed by the Parties.

          2.2 Grant of License to ITT Marks for Legacy Products. Subject to the terms and conditions
herein, ITT MEI grants to Exelis and its Covered Affiliates (those Covered Affiliates in
subsections (i) and (iii) only) a non-exclusive, worldwide, fully paid-up, non-assignable (subject
to Section 6.1), and non-sublicensable (subject to Section 2.8) license to use the
ITT Marks (as trademarks, service marks, logos, trade dress and the like, but not as domain names,
corporate names, trade names, d/b/a names and similar names) solely in connection with the
operation, advertisement, marketing, promotion and support of Legacy Products, and with respect to
advertising, marketing and promotion, solely in a manner consistent with their use prior to the
Distribution Date. This license for Legacy Products shall continue with respect to each Legacy
Product for so long as that Legacy Product remains in production. For the avoidance of doubt, the
license rights granted under this Section 2.2 shall not apply to any New Products. For the
avoidance of doubt, molds, tools and dyes that imprint or stamp any ITT Marks into spare parts for
Legacy Products discontinued before the Distribution Date or during the Unified License Term may be
used and such spare parts may be sold, until (i) the expiration of Exelis’s contractual obligations
to provide such spare parts or (ii) such spare parts become obsolete.

          2.3 Grant of General Transitional License for the ITT Marks (other than in connection with
Legacy Products). Subject to the terms and conditions herein, ITT MEI grants to Exelis and its
Covered Affiliates (those Covered Affiliates in subsections (i) and (iii) only) a non-exclusive,
worldwide, fully paid-up, non-assignable (subject to Section 6.1), and non-sublicensable
(subject to Section 2.8) license to use the ITT Marks as Source Indicators solely in
connection with the operation, advertisement, marketing and promotion of the Defense Business in a
manner consistent with Exelis and such Covered Affiliates’ use of such ITT Marks prior to the
Distribution Date, solely for the following purposes and solely until the end of each time periods
below. Exelis and its Covered Affiliates acknowledge that the licenses in this Section 2.3

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are transitional in nature, and that Exelis and its Covered Affiliates shall use
commercially reasonable efforts to transition away from substantially all of the following uses of
the ITT Marks promptly after the Distribution Date. Exelis and its Covered Affiliates shall not
unreasonably delay until each applicable deadline set forth in this Section 2.3 to
accomplish the actions specified therein.

          (a) Exelis must file (or cause to be filed) to change all of its and its Covered Affiliates’
corporate names, trade names, d/b/a names and similar names to names that do not contain any ITT
Marks, within six (6) months after the Unified License Term, and promptly and diligently prosecute
all such changes to completion;

          (b) Except as permitted under the licenses of Sections 2.1 and 2.2, Exelis must remove
(or cause to be removed) all uses of ITT Marks as Source Indicators from all of its and its Covered
Affiliates’ websites and electronic media that are promoted to third parties and under Exelis’s or
its Covered Affiliates’ possession or control within one-hundred-eighty (180) days after the
Distribution Date and the use of ITT as part of the name of substantially invisible internal
servers shall be ceased within a commercially reasonable time period;

          (c) Except as permitted under the licenses of Sections 2.1 and 2.2, Exelis must use
commercially reasonable efforts to remove (or cause to be removed) all of its and its Covered
Affiliates’ uses of ITT Marks as Source Indicators in all channels, pages and other designated
areas of social networks and social media that are publicly affiliated with Exelis within
one-hundred-eighty (180) days after the Distribution Date;

          (d) Except as permitted under the licenses of Sections 2.1 and 2.2, after the
Distribution Date, Exelis and its Covered Affiliates must (i) not create any new
personal property or disposable materials, including signage, advertising, promotional materials,
brochures, catalogues, operation and instruction manuals, datasheets, software, packaging,
stationery, business cards, invoices, receipts, forms, literature other similar items bearing the
ITT Marks and (ii) cease commercial use of any of the foregoing materials in existence as of the
Distribution Date within one-hundred-eighty (180) days after the Distribution Date;

          (e) Except as permitted under the licenses of Sections 2.1 and 2.2, Exelis must remove
(or cause to be removed) all ITT Marks from any of its or its Covered Affiliates’ heavy machinery,
tools, equipment, and substantially permanent building signage (including etched glass, engraved
marble and the like) (i) that are visible to third parties, within two (2) years from the
Distribution Date or (ii) that are not visible to third parties, when such items are replaced in
the ordinary course of business; and

          (f) Except as may be permitted by the licenses of Sections 2.1 and 2.2 Exelis must
discontinue (or cause to be discontinued) the use of all of its or its Covered Affiliates’ molds,
tools and dyes that imprint or stamp any ITT Marks into products visible to third parties within
two (2) years after Unified Initial Term or within one (1) year after Unified Renewal Term.
Approaching the end of the License Term, Exelis and its Covered Affiliates must not create amounts
of product that are imprinted or stamped with the ITT Marks at rates that materially exceed the
ordinary course of business consistent with past practice. Exelis and its Covered Affiliates may
sell any products created pursuant to the foregoing until three (3) years

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after the Unified Initial Term or until two (2) years after Unified Renewal Term. For the
avoidance of doubt, molds, tools and dyes that imprint or stamp any ITT Marks into spare parts for
products discontinued before the Distribution Date or during the Unified License Term may be used,
and such imprinted or stamped spare parts may be sold, until (i) the expiration of Exelis’s
contractual obligations to provide such imprinted or stamped spare parts or (ii) such spare parts
become obsolete; and

          (g) Except as permitted under the licenses of Sections 2.1 and 2.2, Exelis and its
Covered Affiliates must cease all other uses of the ITT Marks within one-hundred-eighty (180) days
after the Distribution Date, or as mutually agreed by the Parties.

          2.4 Restrictions on ITT MEI. Subject to the terms and conditions herein, during the
Unified License Term, ITT MEI shall not license the ITT Marks for use in connection with any
Defense Business to any entities other than ITT Corporation (or to ITT Corporation for use in its
Aerospace Controls and Interconnect Solutions businesses), without the prior written approval of
Exelis, such approval not to be unreasonably withheld.

          2.5 Website Disclaimer. Exelis and its Covered Affiliates shall display on their
respective websites a mutually-agreed upon disclaimer as to their lack of current affiliation with
ITT after the Distribution Date, for so long as any such website contains an ITT Mark.

          2.6 Fair Use. Notwithstanding anything in this Agreement to the contrary, Exelis and its
Covered Affiliates may use the ITT Marks at all times after the Distribution Date (i) in a neutral,
non-trademark use to describe the history of their business; or (ii) as required or permitted by
applicable law.

          2.7 Destruction. At ITT MEI’s request, at the end of the time periods in Section
2.3, Exelis shall (i) destroy or permanently modify (or cause to destroy or permanently modify)
all of the materials bearing the ITT Marks in the possession or control of Exelis and its Covered
Affiliates that are capable of destruction or permanent modification; and/or (ii) certify in
writing to ITT MEI that such destruction or permanent modification is complete.

          2.8 Sublicensing. Exelis and its Covered Affiliates may sublicense the license in
Section 2.3 without ITT MEI’s consent, solely to advertisers, distributors, vendors,
dealers, suppliers and other Persons for use in connection with the operation of Exelis and its
Covered Affiliates’ businesses, but not for such Persons’ unrelated use. Provided
that Exelis and its Covered Affiliates had authorized or permitted such Persons to use the
ITT Marks for such purposes prior to the Distribution Date, Exelis and its Covered Affiliates shall
terminate such authorization or permission granted according to the deadlines set forth in
Section 2.3. All other sublicenses of the license in Section 2.3 require the prior
written consent of ITT MEI in its sole discretion. Exelis shall be liable to ITT MEI for any act
or omission by a sublicensee that would constitute a breach hereof if committed by Exelis.

          2.9 Use by Covered Affiliates. Any obligations upon, or rights granted to, Exelis
hereunder shall also apply to its Covered Affiliates. Exelis shall be liable hereunder for any act
or omission by its Covered Affiliates as if committed by Exelis.

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          2.10 Reservation of Rights. All rights in the ITT Marks not expressly granted to Exelis
and its Covered Affiliates herein are reserved to ITT MEI.

          2.11 Consideration. The Parties agree that the consideration for the licenses in
Sections 2.1- 2.3 is a portion of the consideration set forth in the Distribution
Agreement, and that no further royalties are therefore due under this Agreement.

ARTICLE 3 — QUALITY CONTROL/OWNERSHIP/ENFORCEMENT

          3.1 Quality Control. Exelis shall use the ITT Marks solely: (i) in good faith, in a
dignified manner and in accordance with good trademark practice in all applicable countries and
jurisdictions and (ii) in connection with activities, products, and services that reflect favorably
upon the high levels of quality associated with ITT’s operation of the ITT business prior to the
Distribution Date. ITT MEI agrees that, in view of the Parties’ status immediately prior to the
Distribution Date as part of one corporate organization, each Party’s knowledge of standards and
procedures for ensuring consistent quality and Exelis’s history of providing high-quality goods and
services, ITT MEI accepts Exelis’s Current use of the ITT Marks and adherence to Current standards
of quality as satisfying this Section 3.1(i) and (ii). With respect to its use of
the ITT Marks under the transitional license of Section 2.3, Exelis agrees to use the ITT
Marks in accordance with all style, use, advertising, website and similar guidelines provided by
ITT MEI, provided that ITT MEI shall not impose any burdens upon Exelis that are
inconsistent with or disproportionate to those practices employed by ITT and its own Affiliates.
Exelis and its Covered Affiliates shall not take any action (or fail to take any action) that harms
or jeopardizes the value, validity or goodwill of the ITT brand. ITT MEI agrees that Exelis’s use
of the ITT Marks as of the Distribution Date complies with this Section 3.1.

          3.2 Compliance with Laws. Exelis shall (i) use all commercially reasonable efforts to
comply with all applicable statutes, laws, regulations, rules and good industry practice
(“Laws”) wherever it uses any ITT Marks and (ii) use all notices and legends required by
applicable Laws and/or that are reasonably requested by ITT MEI so as to preserve and maintain the
validity of and ITT MEI’s rights in the ITT Marks, provided that any notice
requirements of ITT MEI shall not (x) impose any burdens upon Exelis that are inconsistent with or
disproportionate to those employed by ITT and its own Affiliates and/or (y) confuse consumers as to
the Parties’ non-affiliation after the Distribution Date, and/or (z) be inconsistent with any US
Government regulations or requirements.

          3.3 Ownership/No Contest. Exelis acknowledges and agrees that, as between the Parties,
ITT MEI owns all right, title, and interest in the ITT Marks. Exelis will not challenge or contest
such ownership or the validity of any ITT Marks, including in any claim, dispute, action, suit,
arbitration, inquiry or proceeding (“Action”). Exelis shall be considered a “related
company” under Section 5 of the U.S. Lanham Act, 15 U.S.C. § 1055, such that its use of the ITT
Marks and the goodwill generated thereby shall inure to the sole benefit of ITT MEI.
Notwithstanding the foregoing, to the extent Exelis is deemed to have any ownership rights in the
ITT Marks, at ITT MEI’s request, Exelis shall cause such rights to be assigned to ITT MEI or its
designee for no consideration.

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          3.4 New Registrations by Exelis. If Exelis wishes to request ITT MEI to apply for a new
registration for (i) an ITT Mark in the Defense Business in any additional country or jurisdiction
and/or (ii) in connection with new products or services in the Defense Business (in each case, a
“New Mark”), Exelis shall notify ITT MEI in writing, and the Parties will negotiate in good
faith to establish appropriate procedures and coverage of costs associated with such New Marks.
Neither Party shall file to register the Unified Brand Name as a Source Indicator without the other
Party’s prior written consent.

          3.5 Enforcement. During the License Term, each Party shall promptly notify the other
Party after it becomes aware of any actual or threatened infringement, misappropriation, dilution
or other unauthorized use (“Infringement”) of the ITT Marks in connection with the Defense
Business. ITT MEI will be responsible for enforcement of the ITT Marks, and shall pay for all
enforcement, unless otherwise agreed to by the parties for any specific matters. The parties
anticipate that ITT MEI and/or ITT Corporation will continue to protect the ITT Marks with the same
level of care historically used but in no event less than commercially reasonable standard of care.
The Parties shall cooperate in good faith in all Actions brought pursuant to this Section
3.5 with Exelis providing reasonable assistance (without being required to incur out-of-pocket
costs) with respect to such enforcement and the Parties shall keep each other informed of all
material developments relating thereto. The Parties will fully cooperate to enforce the Unified
Brand Name against infringement or dilution by third parties.

          3.6 Cooperation. During the License Term and for a period of five (5) years thereafter,
Exelis and its Covered Affiliates shall, upon the request of ITT MEI, use commercially reasonable
efforts to provide free of charge and without undue delay, evidence of use of the ITT Marks that
may be reasonably required to support the maintenance or renewal of relevant trademark
registrations and/or defend ITT Marks against challenges for lack of use (e.g., copies of sales &
marketing material, customer invoices and shipping documents); provided that if
Exelis no longer desires to store such materials for a product line after the Term it may notify
ITT MEI of the same and deliver (at Exelis’s cost) electronic media samples of such materials to
ITT MEI and upon acknowledgment by ITT MEI of receipt of such materials, and the obligations of
this Section 3.6 for this product line shall cease thereafter.

ARTICLE 4 — TERM AND TERMINATION/SURVIVAL

          4.1 Term. The term of the license in Section 2.1 is for the Unified License Term.
The term of the license in Section 2.2 is as set forth therein. The term of each license
in Section 2.3, commences upon the date of the Distribution, and ends upon the date
specified therein. The term of this Agreement (“Term”) commences on the Distribution Date
and continues until the last license deadline (including any post-termination transitional periods)
in Article 2 expires.

          4.2 Termination. ITT MEI has the right to terminate this Agreement, effective upon notice
to Exelis, if Exelis or its Covered Affiliates commit an intentional material breach of this
Agreement that materially harms the goodwill of the ITT Marks and does not cure same within thirty
(30) days after notice from ITT MEI.

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          4.3 Termination of Section 2.1 License Upon Acquisition. Should Exelis be acquired by any
third party, (i) if the acquisition occurs during the Unified License Term, the license in
Section 2.1 shall terminate ninety (90) days from the closing date of such acquisition,
subject to a mutually-agreed reasonable extension for items for which brand transition is not
commercially practicable within ninety (90) days and (ii) the licenses in Sections 2.2 and
2.3 shall continue in full force and effect.

          4.4 Survival. All provisions of this Agreement, that, by their nature, are intended to
survive the expiration of the Term or the termination of this Agreement shall survive such event.

ARTICLE 5 — REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION

          5.1 By Each Party. Each Party represents and warrants to the other Party that: (i) the
warranting Party has full power and authority to execute and deliver this Agreement and to perform
its obligations under this Agreement and (ii) this Agreement has been duly executed and delivered
by the warranting Party and, assuming the due execution and delivery of this Agreement by both
Parties, constitutes a valid and binding agreement of the warranting Party enforceable against the
warranting Party in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of
creditors’ rights generally and general equitable principles.

          5.2 Disclaimer. Except as expressly set forth in Section 5.1, the licenses in
Section 2.1, Section 2.2 and Section 2.3 are granted to Exelis and its
Covered Affiliates on an “as is,” “where is” basis, and ITT MEI disclaims any additional
representations and warranties, either express or implied, with respect thereto, including any
warranties of title, ownership, value, suitability, condition, merchantability, fitness for use or
non-infringement of third-party rights. 

          5.3 Indemnification. Exelis shall (and shall cause each member of the Defense Group to)
indemnify, defend and hold harmless the ITT Indemnitees from and against any and all Indemnifiable
Losses relating to any third-party Action brought against any ITT Indemnitee for property damage or
personal injury relating to the operation of the Defense Business by the Defense Group, to the
extent any such Action is brought against any ITT Indemnitee due to ITT MEI’s ownership of the ITT
Marks. Section 7.5 of the Distribution Agreement shall apply to the indemnification
procedures herein as applicable, mutatis mutandis.

ARTICLE 6 — MISCELLANEOUS

          6.1 Assignment. ITT MEI may assign this Agreement to any Person who acquires the ITT
Marks, and any such acquirer must assume in writing all of ITT MEI’s obligations herein. Exelis may
assign this Agreement to any Person who acquires Exelis and its Subsidiaries, provided
that the licenses herein shall continue in effect only for Exelis and its Subsidiaries and
may not be extended to such acquirer or any of its other Affiliates. Further, each Party may
assume this Agreement in bankruptcy and may assign this Agreement to an Affiliate as part of an
internal reorganization for tax or administrative purposes. All other assignments of this
Agreement by a Party require the prior written consent of the non-assigning

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Party, which will not be unreasonably withheld. Any purported transaction in violation of this
Section 6.1 or Section 2.8 shall be null and void ab initio and of no force and
effect. In the event of a permitted assignment, this Agreement shall be binding upon and inure to
the benefit of the Parties and their respective permitted successors and assigns.

          6.2 Notice. Any notice hereunder shall be in writing and delivered by reputable overnight
courier, facsimile or email to the address below (which may be amended pursuant to due notice
herein):

     if to Exelis, to:

Exelis Inc.

Deputy General Counsel and Chief Intellectual Property Counsel

1650 Tysons Blvd., Suite 1700

McLean, VA 22102

Facsimile: +1 703 790 6364

Email: Tom.Blasey@itt.com

     if to ITT MEI, to:

ITT Manufacturing Enterprises, Inc.

1105 N. Market Street

Wilmington, DE 19801

Facsimile: +49 7151 699 401

Email: Wolfgang.Esser@itt.com

With a copy to ITT:

Intellectual Property Counsel

ITT Corporation

1133 Westchester Avenue, Suite 2000

White Plains, NY 10604

Facsimile: +1 914 696 2970

Email: trademarks@itt.com

          6.3 Amendments and Waivers. Any provision of this Agreement may be amended solely by a
writing signed by both Parties. No failure or delay by any Party in exercising any right hereunder
shall operate as a waiver of any other or further exercise thereof or the exercise of any other
right herein. The rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by Law.

          6.4 Governing Law. This Agreement shall be governed by and construed in accordance with
the law of the State of Delaware and, any dispute arising out of this Agreement shall be resolved
solely in the state or federal courts located in Delaware. EACH PARTY UNCONDITIONALLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN CONNECTION WITH THE FOREGOING.

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          6.5 Specific Performance. Each Party acknowledges and agrees that the other Party would
be irreparably damaged if any of the provisions of this Agreement are not performed in accordance
with their specific terms and that any breach of this Agreement could not be adequately compensated
in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to
which any Party may be entitled at law or in equity, each Party shall be entitled to enforce any
provision of this Agreement by a decree of specific performance and to temporary, preliminary and
permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of
this Agreement, without posting any bond or other undertaking.

          6.6 Counterparts. This Agreement may be signed in counterparts (including by facsimile or
other electronic transmission).

          6.7 Third-Party Beneficiaries. Except as expressly provided herein, no provision of this
Agreement shall confer upon any person other than the Parties hereto any rights or remedies
hereunder.

          6.8 Relationship. The Parties hereto are and shall remain independent contractors.
Nothing herein shall be deemed to establish a partnership, joint venture or agency relationship
between the parties. Neither party shall have the right to obligate or bind the other party in any
manner to any third party.

          6.9 Severability. If any provision of this Agreement is held to be unenforceable under
applicable Law, such provision shall be deemed to be excluded from this Agreement and the balance
of this Agreement shall be interpreted as if such provision were so excluded and shall be enforced
to the maximum extent permitted by Law.

          6.10 Interpretation. The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement. This Agreement shall be
construed as if drafted jointly by the Parties.

          6.11 Further Assurances. The Parties agree to execute such further documents and perform
such further actions as may be reasonably requested by the other Party to evidence and effectuate
further the purposes and intents set forth in this Agreement.

[Remainder of page intentionally left blank]

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

	 	 	 	 	 
	 	ITT MANUFACTURING ENTERPRISES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	EXELIS INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:exv10w5

Exhibit 10.5

Exelis Inc.

2011 OMNIBUS INCENTIVE REPLACEMENT PLAN

ESTABLISHMENT, PURPOSE, AND DURATION

Article 1.

1.1 Establishment. Exelis Inc., an Indiana corporation (hereinafter referred to as the
“Company”), establishes an incentive compensation plan to be known as the 2011 Omnibus
Incentive Replacement 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 [ ], 2011 (the “Effective Date”) following the
spin-off of Exelis Inc. from ITT Corporation (the “Predecessor Corporation”) on [
], 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 Exelis 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” 2.12 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.

2.13 “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.

2.14 “Director” means any individual who is a member of the Board of Directors.

2.15 “Employee” means any employee of the Company or its Affiliates.

 

 

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

2.17 “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.

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

2.19 “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.

2.20 “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.

2.21 “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.

2.22 “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.

2.23 “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.

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

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

 

 

2.26 “Other Award” means an Award granted to a Participant pursuant to Article 9 herein.

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

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

2.29 “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.

2.30 “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.

2.31 “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.

2.32 “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.

2.33 “Plan Year” means the fiscal year of the Company.

2.34 “Plan” means the 2011 Equity Incentive Replacement 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.

2.35 “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.

2.36 “Restricted Stock” means an Award granted to a Participant pursuant to Article 8 herein.

2.37 “Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 8 herein.

2.38 “Share” means a share of common stock of the Company, $1.00 par value per share.

 

 

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

2.40 “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.

2.41 “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 [nine
million two hundred thousand (9,200,000)]. For purposes of the prior sentence, Shares subject to
outstanding awards under the Prior Plan shall not be

 

 

considered available for issuance under the Prior Plan. Any Shares related to Awards under the Plan
or awards under the Prior 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.

Subject to adjustment as provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance under the Plan for Full Value Awards (other than Converted Awards) shall not exceed [four
million six hundred thousand (4,600,000)]. In addition, any Shares related to Full Value Awards
under the Plan or the Prior 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 five hundred thousand (3,500,000)].

     (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 five hundred thousand (3,500,000)].

     (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 [seven hundred thousand (700,000)].

     (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 [seven hundred thousand (700,000)] 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. 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 on 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 on a
Participant’s employment of 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 on a Participant’s service as a Director of 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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