10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

or

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number: 001-35228

EXELIS INC.

 (Exact name of registrant as specified in its charter)

State of Indiana	45-2083813
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

1650 Tysons Boulevard, Suite 1700, McLean, Virginia 22102

(Address of Principal Executive Offices)

(703) 790-6300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes þ   No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   þ	Accelerated filer   ¨	Non-accelerated filer   ¨	Smaller reporting company  ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ

As of July 31, 2013 there were 188,310,730 shares of common stock ($0.01 par value per share) outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS	3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)	3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)	4
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)	5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)	6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	7
NOTE 1 BACKGROUND, BASIS OF PRESENTATION AND USE OF ESTIMATES	7
NOTE 2 RECENT ACCOUNTING PRONOUNCEMENTS	8
NOTE 3 RESTRUCTURING CHARGES, NET	8
NOTE 4 EARNINGS PER SHARE	9
NOTE 5 SHAREHOLDERS’ EQUITY	10
NOTE 6 ACCUMULATED OTHER COMPREHENSIVE LOSS	10
NOTE 7 INCOME TAXES	11
NOTE 8 RECEIVABLES, NET	11
NOTE 9 INVENTORIES, NET	12
NOTE 10 GOODWILL AND OTHER INTANGIBLE ASSETS, NET	12
NOTE 11 DEBT	13
NOTE 12 POSTRETIREMENT BENEFIT PLANS	14
NOTE 13 STOCK-BASED COMPENSATION	15
NOTE 14 RELATED PARTY TRANSACTIONS	16
NOTE 15 COMMITMENTS AND CONTINGENCIES	16
NOTE 16 SEGMENT INFORMATION	18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
OVERVIEW	20
DISCUSSION OF FINANCIAL RESULTS	22
LIQUIDITY AND CAPITAL RESOURCES	26
CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS	28
FORWARD-LOOKING AND CAUTIONARY STATEMENTS	28
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
ITEM 4. CONTROLS AND PROCEDURES	29
PART II. OTHER INFORMATION	30
ITEM 1. LEGAL PROCEEDINGS	30
ITEM 1A. RISK FACTORS	30
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	30
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	30
ITEM 4. MINE SAFETY DISCLOSURES	30
ITEM 5. OTHER INFORMATION	31
ITEM 6. EXHIBITS	31
SIGNATURE	32
EXHIBIT INDEX	33

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EXELIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Product revenue	$	518		$	620		$	1,017		$	1,273
Service revenue	733			759			1,419			1,527
Total revenue	1,251			1,379			2,436			2,800
Cost of product revenue	380			433			737			894
Cost of service revenue	594			654			1,171			1,328
Selling, general and administrative expenses	122			130			237			263
Research and development expenses	15			16			28			30
Restructuring charges, net	13			1			62			2
Operating income	127			145			201			283
Interest expense, net	10			11			18			20
Other expense (income), net	(3		)	(1		)	(1		)	7
Income from continuing operations before income tax expense	120			135			184			256
Income tax expense	42			49			62			100
Net income	$	78		$	86		$	122		$	156
Earnings Per Share
Basic
Net income	$	0.41		$	0.46		$	0.65		$	0.83
Diluted
Net income	$	0.41		$	0.46		$	0.64		$	0.83
Weighted average common shares outstanding – basic	188.2			187.5			188.2			187.1
Weighted average common shares outstanding – diluted	190.5			188.5			190.2			188.0
Cash dividends declared per common share	$	0.10		$	0.10		$	0.21		$	0.21

The accompanying notes are an integral part of the condensed consolidated financial statements.

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EXELIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(IN MILLIONS)

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net income	$	78		$	86		$	122		$	156
Other comprehensive income (loss), net of tax
Net foreign currency translation adjustments	(2		)	(6		)	(12		)	(1		)
Defined benefit plans
Net actuarial gain arising during the period	116			—			116			—
Amortization of actuarial loss included in net periodic benefit cost	18			13			36			26
Amortization of prior service cost included in net periodic benefit cost	—			—			1			—
Other comprehensive income (loss), net of tax	132			7			141			25
Total comprehensive income	$	210		$	93		$	263		$	181

The accompanying notes are an integral part of the condensed consolidated financial statements.

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EXELIS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(IN MILLIONS)

	June 30, 2013			December 31, 2012
Assets
Current assets
Cash and cash equivalents	$	259		$	292
Receivables, net	1,035			995
Inventories, net	297			283
Deferred tax asset	65			85
Other current assets	56			58
Total current assets	1,712			1,713
Plant, property and equipment, net	508			512
Goodwill	2,185			2,180
Other intangible assets, net	177			184
Deferred tax asset	470			556
Other non-current assets	65			67
Total non-current assets	3,405			3,499
Total assets	$	5,117		$	5,212
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	368		$	444
Advance payments and billings in excess of costs	327			322
Compensation and other employee benefits	219			246
Other accrued liabilities	249			203
Total current liabilities	1,163			1,215
Defined benefit plans	1,924			2,203
Long-term debt	649			649
Deferred tax liability	3			1
Other non-current liabilities	130			128
Total non-current liabilities	2,706			2,981
Total liabilities	3,869			4,196
Commitments and contingencies (Note 15)
Shareholders’ equity
Common stock	2			2
Additional paid-in capital	2,590			2,575
Treasury stock	(5		)	—
Retained earnings	355			274
Accumulated other comprehensive loss	(1,694		)	(1,835		)
Total shareholders’ equity	1,248			1,016
Total liabilities and shareholders’ equity	$	5,117		$	5,212

The accompanying notes are an integral part of the condensed consolidated financial statements.

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EXELIS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN MILLIONS)

	Six Months Ended June 30,
	2013			2012
Operating activities
Net income	$	122		$	156
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	56			63
Stock-based compensation	16			13
Restructuring charges, net	62			2
Payments for restructuring	(23		)	(11		)
Defined benefit plans expense	48			24
Defined benefit plans payments	(75		)	(275		)
Change in assets and liabilities
Change in receivables	(45		)	(114		)
Change in inventories	(13		)	(1		)
Change in other assets	(3		)	(2		)
Change in accounts payable	(76		)	(21		)
Change in advance payments and billings in excess of costs	6			(29		)
Change in deferred taxes	7			130
Change in other liabilities	(39		)	(44		)
Other, net	1			(1		)
Net cash provided by (used in) operating activities	44			(110		)
Investing activities
Capital expenditures	(36		)	(50		)
Proceeds from the sale of assets	9			1
Acquisitions, net of cash acquired	(16		)	(24		)
Other, net	(1		)	2
Net cash used in investing activities	(44		)	(71		)
Financing activities
Proceeds from commercial paper, net	—			257
Dividends paid	(19		)	(39		)
Common stock repurchased	(5		)	—
Proceeds from exercise of stock options	3			14
Other, net	(3		)	(2		)
Net cash (used in) provided by financing activities	(24		)	230
Exchange rate effects on cash and cash equivalents	(9		)	1
Net change in cash and cash equivalents	(33		)	50
Cash and cash equivalents – beginning of year	292			116
Cash and cash equivalents – end of period	$	259		$	166

The accompanying notes are an integral part of the condensed consolidated financial statements.

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EXELIS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(DOLLARS AND SHARE AMOUNTS IN MILLIONS, UNLESS OTHERWISE STATED)

NOTE 1

BACKGROUND, BASIS OF PRESENTATION AND USE OF ESTIMATES

Background

Exelis Inc. (“Exelis” or the “Company”) is a leader in Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) related products and systems and information and technical services, which it supplies to military, government and commercial customers in the United States and globally. Exelis provides mission-critical systems in the areas of networked communications, sensing and surveillance, electronic warfare, navigation, air traffic solutions and information systems, with growing positions in cyber-security, composite aerostructures, logistics and technical services. The Company’s customers include the U.S. Department of Defense (DoD), including the U.S. Army, Navy, Marines and Air Force, and its prime contractors, U.S. Government intelligence agencies, National Aeronautics and Space Administration (NASA), Federal Aviation Administration (FAA), allied foreign governments and domestic and foreign commercial customers. As a prime contractor, subcontractor, or preferred supplier, Exelis participates in many high priority defense and non-defense programs in the United States. Exelis conducts most of its business with the U.S. Government, principally the DoD.

Unless the context otherwise requires, references in these notes to “Exelis”, “we,” “us,” “our,” “the Company” and “our Company” refer to Exelis Inc. and its subsidiaries.

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements included in this Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. Certain information and note disclosures normally included in financial statements prepared annually in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such SEC rules. These financial statements should be read in conjunction with the audited Consolidated and Combined Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. We believe that the disclosures included in this Form 10-Q are adequate to make the information presented not misleading.

Our quarterly financial periods end on the Saturday closest to the last day of the calendar quarter, except for the last quarterly period of the fiscal year, which ends on December 31^st. For ease of presentation, the quarterly financial statements included herein are described as ending on the last day of the calendar quarter. The results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Estimates are revised as additional information becomes available. Estimates and assumptions are used for, but not limited to, revenue recognition, income taxes, contingency accruals and valuation allowances, fair value measurements, impairment of goodwill and other intangibles, postretirement obligations and certain contingent liabilities. Actual results could differ from these estimates.

During the performance of long-term sale contracts, estimated final contract prices and costs are reviewed periodically and revisions are made as required and recorded in income in the period in which they are determined. Changes in estimated revenues, cost of revenue and the related effect to operating income are recognized using a cumulative catch-up adjustment which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a contract’s percent complete. For the three and six months ended June 30, 2013, net favorable

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cumulative catch-up adjustments related to prior periods increased operating income by approximately $39 and $59, respectively, and diluted earnings per share by approximately $0.13 and $0.21, respectively. For the three and six months ended June 30, 2012, net favorable cumulative catch-up adjustments related to prior periods increased operating income by approximately $47 and $60, respectively, and diluted earnings per share by approximately $0.16 and $0.20, respectively.

NOTE 2

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued guidance intended to update the disclosure requirements for accumulated other comprehensive income (AOCI). This guidance does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The updated guidance requires an entity to disclose additional information about changes in AOCI balances by component and significant amounts reclassified out of AOCI by component. This guidance is effective prospectively for reporting periods beginning after December 15, 2012. We adopted this guidance on January 1, 2013 and have provided the additional required disclosures in the notes to these financial statements.

Pronouncements Not Yet Adopted

New pronouncements issued but not effective until after June 30, 2013 are not expected to have a material impact on our financial position, results of operations or cash flows.

NOTE 3

RESTRUCTURING CHARGES, NET

During the first quarter of 2013, we initiated an action to reduce the size of our workforce and consolidate our facilities footprint to align our cost structure more closely to customer and market conditions, which is expected to be completed by the end of 2013. Through voluntary and involuntary employee reductions, we are eliminating approximately 1,100 positions related to this action, which includes factory workers, administrative personnel and management employees. For the year ended December 31, 2013, we expect to incur aggregate restructuring charges in the range of $70 to $80 related to this action. During the three and six months ended June 30, 2013, charges incurred under this action primarily related to employee severance, and to a lesser extent, lease cancellation and other costs associated with the consolidation of certain facilities. During the three and six months ended June 30, 2013, we recorded net restructuring charges of $13 and $62, respectively, related to this action and none related to prior actions. We did not have any individually significant restructuring activities during the three and six months ended June 30, 2012.

The components of restructuring charges, net, are summarized in the table below.

	Three months ended June 30, 2013				Six months ended June 30, 2013
	2013		2012		2013		2012
By component
Severance charges	$	7	$	1	$	52	$	2
Other restructuring charges	6		—		10		—
Restructuring charges, net	$	13	$	1	$	62	$	2
By segment
C4ISR Electronics and Systems	$	10	$	1	$	50	$	2
Information and Technical Services	3		—		12		—
Restructuring charges, net	$	13	$	1	$	62	$	2

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The following table displays a roll-forward of restructuring accruals for the six months ended June 30, 2013 and details, by type and segment, of the restructuring accruals balance at June 30, 2013, which is presented on our Condensed Consolidated Balance Sheets within other accrued liabilities.

Balance at January 1, 2013	$	9
Charges for plans initiated during the year	62
Cash payments	(23		)
Balance at June 30, 2013	$	48
By accrual type
Severance accrual	$	37
Facility carrying and other costs accrual	11
By segment
C4ISR Electronics and Systems	$	38
Information and Technical Services	10

The following table displays a roll-forward of employee position eliminations associated with all restructuring activities for the six months ended June 30, 2013.

Planned reductions at January 1, 2013	46
Additional planned reductions	1,100
Actual reductions	(933	)
Planned reductions at June 30, 2013	213

NOTE 4

EARNINGS PER SHARE

The following table sets forth the reconciliation of basic and diluted weighted average shares outstanding for our earnings per share calculations:

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Weighted average common shares outstanding	188.2	186.7	188.0	186.0
Add: Weighted average restricted stock awards outstanding(a)	—	0.8	0.2	1.1
Basic weighted average common shares outstanding	188.2	187.5	188.2	187.1
Add: Dilutive impact of stock options	0.5	0.5	0.4	0.5
Add: Dilutive impact of restricted stock units	1.8	0.5	1.6	0.4
Diluted weighted average common shares outstanding	190.5	188.5	190.2	188.0

(a) Restricted stock awards containing rights to non-forfeitable dividends which participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share.

For the three and six months ended June 30, 2013, we excluded from our diluted share calculation 6.6 and 10.7 shares, respectively, related to stock options and zero shares related to restricted stock units, and for the three and six months ended June 30, 2012, we excluded 10.0 and8.9shares, respectively, related to stock options and less than 0.1shares for both periods related to restricted stock units, as their effect would have been antidilutive.

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NOTE 5

SHAREHOLDERS’ EQUITY

Capital Stock

Authorized capital was comprised of 750 shares of common stock ($0.01 par value per share (in whole dollars)) and 50 shares of preferred stock (no par value) on June 30, 2013 and December 31, 2012. There were 188.5 and 188.3 shares of common stock issued at June 30, 2013 and December 31, 2012, respectively, and 188.1 and 188.3 shares of common stock outstanding at June 30, 2013 and December 31, 2012, respectively. No preferred stock was issued and outstanding at June 30, 2013 and December 31, 2012.

During the three months ended June 30, 2013, we repurchased a total of 0.4 shares of our common stock under our share repurchase program for $5, and as of June 30, 2013 the Company had remaining authorization of $95 for future share repurchases through December 31, 2015. We account for shares repurchased as treasury stock under the cost method.

Dividends

On May 8, 2013, our Board of Directors declared a cash dividend of $0.10 per share, payable on July 1, 2013 to shareholders of record on May 24, 2013. During the six months ended June 30, 2013, we declared two quarterly cash dividends totaling $39 or $0.21 per share (in whole dollars).

NOTE 6

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents changes in accumulated other comprehensive loss, net of tax, by component, for the six months ended June 30, 2013:

	Net Foreign Currency Translation Adjustments			Unamortized Defined Benefit Plan Costs				Accumulated Other Comprehensive Loss
Balance at January 1, 2013	$	15		$	(1,850	)		$	(1,835	)
Other comprehensive income (loss) before reclassifications	(12		)	116				104
Amounts reclassified from accumulated other comprehensive loss	—			37			(a)	37
Net current period other comprehensive income (loss)	(12		)	153				141
Balance at June 30, 2013	$	3		$	(1,697	)		$	(1,694	)

(a) This accumulated other comprehensive loss component primarily relates to the amortization of net actuarial loss. For the three and six months ended June 30, 2013, the amortization of net actuarial loss was $18 (net of tax of $11) and $36 (net of tax of $24), respectively, which are included in the computation of net periodic benefit cost (Note 12).

Unamortized defined benefit plan costs consist primarily of net actuarial loss totaling $1,693 and $1,845, net of tax, as of June 30, 2013 and December 31, 2012, respectively. Net actuarial gains or losses principally arise from gains or losses on plan assets due to variations in the fair market value of the underlying assets and changes in the benefit obligation due to changes in actuarial assumptions.

Unamortized defined benefit plan costs included in accumulated other comprehensive loss in the unaudited Condensed Consolidated Balance Sheets were reduced by taxes of $1,111 and $1,211 as of June 30, 2013 and December 31, 2012, respectively. The changes in defined benefit plan costs included in other comprehensive income (loss) in the unaudited Condensed Consolidated Statements of Comprehensive Income were reduced by taxes of $88 and $100 for the three and six months ended June 30, 2013, respectively, and $9 and $17 for the three and six months ended June 30, 2012, respectively.

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NOTE 7

INCOME TAXES

Effective Tax Rate

Our quarterly income tax expense is measured using an estimated annual effective income tax rate, adjusted for discrete items within the period. The comparison of effective income tax rates between periods is significantly affected by discrete items recognized during the periods, the level and mix of earnings by tax jurisdiction and permanent differences.

For the three months ended June 30, 2013, the Company recorded an income tax provision of $42 or 35.0% of income from continuing operations before income tax expense as compared to $49 or 36.3% during the same prior year period. For the six months ended June 30, 2013, the Company recorded an income tax provision of $62 or 33.7% of income from continuing operations before income tax expense as compared to $100 or 39.1% during the same prior year period. The effective income tax rate varies from the federal statutory rate of 35% primarily due to the unfavorable impact of state taxes offset by the favorable impacts from the U.S. manufacturing deduction. The effective income tax rate for the six months ended June 30, 2013 also included the favorable impact of a discrete item related to the renewal of the 2012 federal research and development tax credit. The effective income tax rate for the six months ended June 30, 2012 also included the unfavorable impact of nondeductible separation costs.

Uncertain Tax Positions

As of June 30, 2013 and December 31, 2012, unrecognized tax benefits were $35 and $56, respectively. Unrecognized tax benefits are primarily related to the timing of certain income and deductions and we anticipate that these unrecognized tax benefits will significantly decrease within twelve months of the reporting date due to the expected filing and acceptance of accounting method changes, which will not impact income tax expense.

We classify interest relating to tax matters as a component of interest expense and tax penalties as a component of income tax expense in our unaudited Condensed Consolidated Statements of Operations. As of June 30, 2013 and December 31, 2012, we had no interest accrued for tax matters and $6 and $9, respectively, accrued for tax penalties.

NOTE 8

RECEIVABLES, NET

Receivables, net were comprised of the following:

	June 30, 2013			December 31, 2012
Billed receivables	$	501		$	429
Unbilled contract receivables	530			562
Other	8			7
Receivables, gross	1,039			998
Allowance for doubtful accounts	(4		)	(3		)
Receivables, net	$	1,035		$	995

Total billed receivables due from the U.S. Government, either directly or as a subcontractor with the U.S. Government, were $426 and $340 at June 30, 2013 and December 31, 2012, respectively. Because the Company’s receivables are primarily with the U.S. Government, the Company does not have a material credit risk exposure.

Unbilled contract receivables represent revenue recognized on long-term contracts in excess of amounts billed as of the balance sheet date. We expect to bill and collect substantially all of the June 30, 2013 unbilled contract receivables during the next twelve months as scheduled performance milestones are completed or units are delivered.

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NOTE 9

INVENTORIES, NET

Inventories, net were comprised of the following:

	June 30, 2013			December 31, 2012
Production costs of contracts in process	$	270		$	253
Less progress payments	(17		)	(22		)
Production costs of contracts in process, net	253			231
Product inventory	44			52
Inventories, net	$	297		$	283

NOTE 10

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

As of June 30, 2013 and December 31, 2012, goodwill was $2,185 and $2,180, respectively. As of June 30, 2013 and December 31, 2012, goodwill for our C4ISR Electronics and Systems segment was $1,801 and $1,802, respectively, and goodwill for our Information and Technical Services segment was $384 and $378, respectively.

During the first quarter of 2013, the Company acquired C4i Pty. Ltd. for an aggregate purchase price of approximately $16, net of cash acquired, resulting in an increase to goodwill of $7 and other intangible assets of $7. The operating results of the business are reported in the Information and Technical Services segment from the date of acquisition. The assets, liabilities and results of operations for the acquired business were not material to the Company.

Other Intangible Assets, Net

Information regarding our other intangible assets was as follows:

	June 30, 2013							December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Net Intangibles		Gross Carrying Amount		Accumulated Amortization			Net Intangibles
Customer and distributor relationships	$	525	$	(360	)	$	165	$	524	$	(348	)	$	176
Proprietary technology	29		(20		)	9		25		(18		)	7
Trademark, patents and other	7		(4		)	3		5		(4		)	1
Total other intangible assets	$	561	$	(384	)	$	177	$	554	$	(370	)	$	184

Amortization expense related to other intangible assets for the three and six months ended June 30, 2013 was $6 and $13, respectively, and $10 and $19 for the three and six months ended June 30, 2012, respectively.

Estimated amortization expense for the remaining six months of 2013 and each of the five succeeding years and thereafter is as follows:

Remaining 2013	$	13
2014	23
2015	21
2016	19
2017	16
2018 and thereafter	85
Total	$	177

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NOTE 11

DEBT

Debt consisted of the following:

	June 30, 2013			December 31, 2012
Long-term debt	$	650		$	650
Unamortized debt discount	(1		)	(1		)
Total long-term debt	$	649		$	649

The following table provides a summary of interest rates, carrying amounts and estimated fair values of outstanding long-term debt:

			June 30, 2013				December 31, 2012
	Interest rate		Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt
Senior notes (due 2016)	4.25	%	$	250	$	264	$	250	$	262
Senior notes (due 2021)	5.55	%	400		408		400		437
Total			$	650	$	672	$	650	$	699

The fair value of our notes was determined using prices in secondary markets for identical and similar securities (Level 2 inputs) obtained from external pricing sources.

Commercial Paper

The Company’s commercial paper program generally enables the Company to borrow short-term funds at competitive rates. The commercial paper program is fully supported by available borrowing capacity under our Credit Facility. As of June 30, 2013 and December 31, 2012, there was no commercial paper outstanding under our commercial paper program.

Credit Facility

The Company has a competitive advance and revolving credit facility agreement (“Credit Facility”) with a consortium of lenders, which is available for working capital, capital expenditures and other general corporate purposes. The Credit Facility provides for a four year maturity, expiring October 25, 2015, with a one year extension option upon satisfaction of certain conditions, and comprises an aggregate principal amount of up to $600 of revolving loans, competitive advances and letters of credit in a face amount up to $100. Borrowings under the Credit Facility bear interest at rates based, at our option, on a Eurodollar rate or an alternate base rate, as defined in the Credit Facility. As of June 30, 2013 and December 31, 2012, there were no borrowings or letters of credit outstanding under the Credit Facility.

The Credit Facility contains customary affirmative and negative covenants that, among other things, limit or restrict our ability to: incur additional debt or issue guarantees of indebtedness; create liens; enter into certain sale and lease-back transactions; merge or consolidate with another person; sell, transfer, lease or otherwise dispose of assets; liquidate or dissolve; and enter into restrictive covenants. Additionally, the Credit Facility requires us not to permit the ratio of combined total indebtedness to combined EBITDA (leverage ratio) to exceed 3.50 to 1.00 at any time.

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Senior Notes

The Company has outstanding long-term debt of $250 aggregate principal amount of 4.25% senior notes due October 1, 2016 and $400 aggregate principal amount of 5.55% senior notes due October 1, 2021 (together the “Notes”). As of June 30, 2013 and December 31, 2012, accrued interest payable on the Notes, included in other accrued liabilities, was $8 and $8, respectively, and is payable on April 1 and October 1 of each year.

The Notes have covenants that restrict our ability to, subject to exceptions, incur indebtedness secured by liens or engage in sale and leaseback transactions. The Notes also have customary events of default, including, but not limited to, non-payment of principal and interest, and certain events of bankruptcy, insolvency or reorganization of the Company. Under the terms of the Notes, we have the option to redeem the Notes prior to maturity, and we will be required to make an offer to purchase the Notes if a change of control triggering event (as defined in the Notes indenture) occurs.

NOTE 12

POSTRETIREMENT BENEFIT PLANS

The following table provides the components of net periodic benefit cost for our defined benefit plans, including defined benefit pension plans and other postretirement defined benefit plans:

	Three Months Ended June 30,
	2013									2012
	Pension			Other Benefits			Total			Pension			Other Benefits			Total
Net periodic benefit cost
Service cost	$	19		$	—		$	19		$	19		$	1		$	20
Interest cost	60			4			64			66			5			71
Expected return on plan assets	(86		)	(5		)	(91		)	(95		)	(6		)	(101		)
Amortization of net actuarial loss	26			3			29			18			4			22
Amortization of prior service cost (credit)	1			—			1			—			—			—
Net periodic benefit cost	$	20		$	2		$	22		$	8		$	4		$	12

	Six Months Ended June 30,
	2013									2012
	Pension			Other Benefits			Total			Pension			Other Benefits			Total
Net periodic benefit cost
Service cost	$	38		$	1		$	39		$	38		$	2		$	40
Interest cost	120			9			129			132			11			143
Expected return on plan assets	(171		)	(11		)	(182		)	(191		)	(11		)	(202		)
Amortization of net actuarial loss	54			6			60			36			7			43
Amortization of prior service cost (credit)	2			—			2			1			(1		)	—
Net periodic benefit cost	$	43		$	5		$	48		$	16		$	8		$	24

We contributed $62 and $261 to our qualified defined benefit pension plans during the six months ended June 30, 2013 and 2012, respectively. We currently anticipate making additional contributions to our qualified defined benefit pension plans in the range of $80 to $90 during the remainder of 2013.

During the second quarter of 2013, the U.S. Salaried Retirement Plan (U.S. SRP) and related Excess Pension Plans were amended to freeze all future benefit accruals effective December 31, 2016. As a result, the assets and liabilities of the U.S. SRP and related plans were re-measured as of May 31, 2013, improving the funded status of the plans by approximately $190 due to a reduced projected benefit obligation primarily caused by the use of a higher discount rate and lower projected actuarial loss. The re-measurement will reduce net periodic benefit costs by approximately $14 in 2013 primarily due to lower service costs.

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NOTE 13

STOCK-BASED COMPENSATION

The Company maintains an equity incentive plan to govern awards granted to Exelis employees and directors, including awards of non-qualified stock options (NQOs), restricted stock units (RSUs), total shareholder return (TSR) awards, and other awards.

The following table provides the impact of these costs in our unaudited Condensed Consolidated Statements of Operations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Compensation cost for equity-based awards	$	8	$	7	$	13	$	12
Compensation cost for liability-based awards	3		1		3		1
Total compensation costs, pre-tax	$	11	$	8	$	16	$	13
Future tax benefit	$	4	$	3	$	5	$	5

At June 30, 2013, total unrecognized compensation costs related to equity-based awards and liability-based awards were $31 and $7, respectively, which are expected to be recognized ratably over a weighted-average period of 2.2 years and 2.1 years, respectively.

The following table provides a summary of the activities for NQOs and restricted stock, including RSUs and restricted stock awards, for the three months ended June 30, 2013:

	Stock Options				Restricted Stock
	Shares		Weighted  Average Exercise Price(a)		Shares		Weighted  Average Grant Date Fair value (a)
Outstanding at January 1, 2013	11.36		$	11.06	3.56		$	11.67
Granted	2.89		11.11		1.13		11.14
Exercised	(0.38	)	8.29		—		—
Vested	—		—		(0.79	)	12.00
Forfeited, canceled or expired	(0.61	)	11.96		(0.13	)	11.21
Outstanding at June 30, 2013	13.26		$	11.11	3.77		$	11.45

(a) In whole dollars.

During the six months ended June 30, 2013, we granted long-term incentive awards to employees consisting of 2.9 NQOs and 1.1 RSUs with respective weighted average grant date fair values (in whole dollars) of $1.93 and $11.14. The NQOs vest annually in three equal installments and have a ten-year expiration period. RSUs vest on the completion of a three-year service period. We also granted TSR awards with an aggregate target value of $4 that are cash settled at the end of a three-year performance period.

The fair values of NQOs are estimated on the date of grant using the Black-Scholes model. The fair values of RSUs are determined based on the closing price of Exelis common stock on the date of grant. The fair values of TSR awards are measured quarterly based on the Company’s performance relative to the performance of a concentrated group of our peer companies and the S&P 1500 Aerospace and Defense index. Depending on the Company’s performance during the three-year performance period, payment can range from 0% to 200% of the target value.

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The following table details the weighted average assumptions utilized in determining the fair value of the NQOs granted during the first six months of 2013.

Dividend yield	3.72		%
Expected volatility	27.0		%
Expected life (in years)	7.0
Risk-free rates	1.40		%
Grant date fair value (in whole dollars)	$	1.93

NOTE 14

RELATED PARTY TRANSACTIONS

Separation Agreements

On October 31, 2011, ITT Corporation ("ITT") completed the spin-off (the “Spin-off”) of Exelis and Exelis began operating as a stand-alone publicly traded corporation. Prior to the Spin-off, Exelis operated as the Defense and Information Solutions Segment of ITT.

In order to govern certain ongoing relationships between Exelis and ITT following the Spin-off and to provide mechanisms for an orderly transition, on October 25, 2011, Exelis, ITT, and Xylem Inc. executed the various agreements that govern the ongoing relationships between and among the three companies after the Spin-off and provide for the allocation of employee benefits, income taxes, and certain other liabilities and obligations attributable to periods prior to the Spin-off. The executed agreements include the Distribution Agreement, Benefits and Compensation Matters Agreement, Tax Matters Agreement, several real estate matters agreements, and Master Transition Services Agreement.

The Distribution Agreement provides for certain indemnifications and cross-indemnifications among Exelis, ITT and Xylem Inc. The indemnifications address a variety of subjects, including indemnification by ITT of Exelis in respect of certain asserted and unasserted asbestos or silica liability claims. Certain intercompany work orders and/or informal intercompany commercial arrangements were converted into third-party contracts based on ITT’s standard terms and conditions.

For the three and six months ended June 30, 2013, charges incurred for services provided to Exelis by ITT and Xylem Inc. under the separation agreements, net of costs passed through to third parties, were $0.4 and $1, respectively, and $1 and $1, for the three and six months ended June 30, 2012, respectively. For the three and six months ended June 30, 2013, charges related to these agreements for services provided by Exelis to ITT and Xylem Inc., net of costs passed through to third parties, were $0.4 and $1, respectively, and $1 and $1, for the three and six months ended June 30, 2012, respectively. At June 30, 2013 and December 31, 2012, total payables due from Exelis to ITT and Xylem Inc. were $4 and $3, respectively and total receivables due to Exelis from ITT and Xylem Inc. were $7 and $7, respectively.

NOTE 15

COMMITMENTS AND CONTINGENCIES

General

From time to time, we are involved in legal proceedings that are incidental to the operation of our businesses. Some of these proceedings seek remedies relating to environmental matters, personal injury claims, employment and pension matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures.

Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claim, we do not expect that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material adverse effect on our cash flow, results of operations, or financial condition.

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Environmental

In the ordinary course of business, we are subject to federal, state, local, and foreign environmental laws and regulations. We are responsible, or are alleged to be responsible, for ongoing environmental investigation and remediation of multiple sites. These sites are in various stages of investigation and/or remediation and in many of these proceedings our liability is considered de minimis. We have received notification from the U.S. Environmental Protection Agency, and from similar environmental agencies, that a number of sites formerly or currently owned and/or operated by Exelis, and other properties or water supplies that may be or have been impacted from those operations, contain disposed or recycled materials or wastes and require environmental investigation and/or remediation. These sites include instances where we have been identified as a potentially responsible party under federal and state environmental laws and regulations.

Accruals for environmental matters are recorded on a site by site basis when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies available to us. Our accrued liabilities for these environmental matters represent our best estimates related to the investigation and remediation of environmental media such as water, soil, soil vapor, air and structures, as well as related legal fees. These estimates, and related accruals, are reviewed quarterly and updated for progress of investigation and remediation efforts and changes in facts and legal circumstances. Liabilities for these environmental expenditures are recorded on an undiscounted basis.

It is difficult to estimate the final costs of investigation and remediation due to various factors, including incomplete information regarding particular sites and other potentially responsible parties, uncertainty regarding the extent of investigation or remediation and our share, if any, of liability for such conditions, the selection of alternative remedial approaches, and changes in environmental standards and regulatory requirements. We have estimated and accrued $27 and $27 as of June 30, 2013 and December 31, 2012, respectively, for environmental matters. In our opinion, the total amount accrued is appropriate based on existing facts and circumstances.

The following table illustrates the range of estimated loss and number of active sites for these environmental matters:

	June 30, 2013		December 31, 2012
Low-end range	$	24	$	24
High-end range	$	45	$	47
Number of active environmental investigations and remediation sites	21		22

U.S. Government Contracts, Investigations and Claims

The Company has U.S. Government contracts that are funded incrementally on a year-to-year basis. Changes in government policies, priorities or funding levels through agency or program budget reductions by the U.S. Congress or executive agencies could have a material adverse effect on the Company’s financial condition or results of operations. Furthermore, contracts with the U.S. Government may be terminated or suspended by the U.S. Government at any time, with or without cause. Such contract suspensions or terminations could result in un-reimbursable expenses or charges or otherwise adversely affect the Company’s financial condition and/or results of operations.

Departments and agencies of the U.S. Government have the authority to investigate various transactions and operations of the Company, and the results of such investigations may lead to administrative, civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or compensatory or treble damages. U.S. Government regulations provide that certain findings against a contractor may lead to suspension or debarment from future U.S. Government contracts or the loss of export privileges for a company or an operating division or subdivision. Suspension or debarment could have a material adverse effect on the Company because of its reliance on government contracts.

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U.S. Government agencies, including the Defense Contract Audit Agency (DCAA) and others, routinely audit and review a contractor’s performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. Accordingly, costs billed or billable to the U.S. Government customers are subject to potential adjustment upon audit by such agencies. They also review the adequacy of the contractor’s compliance with government standards for its accounting and management internal control systems, including: control environment and accounting system, general information technology system, budget and planning system, purchasing system, material management and accounting system, compensation system, labor system, indirect and other direct costs system, billing system and estimating system. Audits currently underway include the Company’s control environment and accounting, billing, purchasing, and indirect and other direct cost systems, as well as reviews of the Company’s compliance with certain U.S. Government Cost Accounting Standards.

From time to time, customers advise the Company of claims and penalties concerning certain potential disallowed costs. When such findings are presented, Exelis and the U.S. Government representatives engage in discussions to enable Exelis to evaluate the merits of these claims as well as to assess the amounts being claimed. Where appropriate, provisions are made to reflect the expected exposure to the matters raised by the U.S. Government representatives and such provisions are reviewed on a quarterly basis for sufficiency based on the most recent information available.

Indemnifications

As part of the Spin-off, Exelis, ITT and Xylem Inc. indemnify one another with respect to such parties’ assumed or retained liabilities under the Distribution Agreement and breaches of the Distribution Agreement or related Spin-off agreements. Exelis expects ITT and Xylem Inc. to fully perform under the terms of the Distribution Agreement and therefore we have not recorded a liability for matters for which we are indemnified. In addition, we are not aware of any claims or other circumstances that would give rise to material payments to ITT or Xylem Inc. under the indemnity that we provide to them.

Letters of Credit

In the ordinary course of business, we use standby letters of credit, guarantees issued by commercial banks and surety bonds issued by insurance companies, as well as self-guarantees, principally to guarantee our performance on certain contracts and to support our self-insured workers’ compensation plans. At June 30, 2013, there was an aggregate of approximately $109 in surety bonds, guarantees and stand-by letters of credit outstanding.

Rabbi Trust

The Company maintains a grantor trust (“Rabbi Trust”) for the purpose of assisting the Company with the payment of certain nonqualified deferred compensation obligations in the event of a change in control of the Company. The Company is obligated to contribute an amount equal to 110 percent of the Company’s obligations under eight nonqualified deferred compensation plans at the time of an “Acceleration Event,” as defined in such plans and the Rabbi Trust.

NOTE 16

SEGMENT INFORMATION

The Company’s segments are reported on the same basis used internally for evaluating performance and for allocating resources. We operate in two segments: C4ISR Electronics and Systems, and Information and Technical Services. Assets of the business segments exclude general corporate assets, which principally consist of cash, deferred tax assets, certain plant, property, and equipment, and certain other assets.

C4ISR Electronics and Systems

This segment provides communications, sensing and surveillance, space and advanced engineering equipment and systems for government and commercial customers around the world.

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Information and Technical Services

This segment provides a broad range of systems integration, operations, sustainment, advanced engineering, logistics, space launch and range-support solutions for a wide variety of U.S. military and government agency customers.

Segment financial results were as follows:

	Three Months Ended June 30,
	2013						2012
	Product Revenue		Service Revenue		Total Revenue		Product Revenue		Service Revenue		Total Revenue
C4ISR Electronics and Systems	$	518	$	—	$	518	$	620	$	—	$	620
Information and Technical Services	—		733		733		—		759		759
Total	$	518	$	733	$	1,251	$	620	$	759	$	1,379
	Six Months Ended June 30,
	2013						2012
	Product Revenue		Service Revenue		Total Revenue		Product Revenue		Service Revenue		Total Revenue
C4ISR Electronics and Systems	$	1,017	$	—	$	1,017	$	1,273	$	—	$	1,273
Information and Technical Services	—		1,419		1,419		—		1,527		1,527
Total	$	1,017	$	1,419	$	2,436	$	1,273	$	1,527	$	2,800

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Operating Income
C4ISR Electronics and Systems	$	40		$	86		$	59		$	177
Information and Technical Services	87			59			142			106
Total Operating Income	$	127		$	145		$	201		$	283
Operating Margin
C4ISR Electronics and Systems	7.7		%	13.9		%	5.8		%	13.9		%
Information and Technical Services	11.9		%	7.8		%	10.0		%	6.9		%
Total Operating Margin	10.2		%	10.5		%	8.3		%	10.1		%

	June 30, 2013		December 31, 2012
Assets
C4ISR Electronics and Systems	$	3,049	$	3,078
Information and Technical Services	1,261		1,186
Corporate and Other	807		948
Total Assets	$	5,117	$	5,212

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(In millions, except per share amounts, unless otherwise stated)

You should read the following discussion of our results of operations and financial condition together with the unaudited Condensed Consolidated Financial Statements and notes thereto included in this quarterly report on Form 10-Q, as well as the audited Consolidated and Combined Financial Statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012, which provides additional information regarding the Company, our products and services, industry outlook and forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward looking statements.

OVERVIEW

Exelis is a leader in Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) related products and systems and information and technical services, which it supplies to military, government and commercial customers in the United States and globally. Exelis provides mission-critical systems in the areas of networked communications, sensing and surveillance, electronic warfare, navigation, air traffic solutions and information systems, with growing positions in cyber-security, composite aerostructures, logistics and technical services. The Company’s customers include the U.S. Department of Defense (DoD), including the U.S. Army, Navy, Marines and Air Force, and its prime contractors, U.S. Government intelligence agencies, National Aeronautics and Space Administration (NASA), Federal Aviation Administration (FAA), allied foreign governments and domestic and foreign commercial customers. As a prime contractor, subcontractor, or preferred supplier, Exelis participates in many high priority defense and non-defense programs in the United States. Exelis conducts most of its business with the U.S. Government, principally the DoD.

Our business is reported in two segments: C4ISR Electronics and Systems, and Information and Technical Services. Our C4ISR Electronics and Systems segment provides engineered electronic systems and equipment, including force protection, electronic warfare systems, reconnaissance and surveillance systems, and integrated structures. Our Information and Technical Services segment is a provider of logistics, infrastructure, and sustainment support, while also providing a diverse set of technical services.

Economic Opportunities, Challenges, and Risks

The United States continues to face significant economic and fiscal challenges, including slow GDP growth, high unemployment and persistent U.S. federal government budget deficits. Concerns over fiscal deficits and the national debt continue to drive political debate, while current budget resolutions provide only short-term clarity on defense and other federal spending, making longer-term funding targets and priorities unclear.

The uncertainty surrounding fiscal year 2013 federal government spending ended with the enactment of a full year Continuing Resolution and several appropriations bills as part of the Consolidated and Further Continuing Appropriations Act, 2013 (the Appropriations Act). This action came following the passage of a December 2012 Taxpayer Relief Act, with an estimated $620 billion in new tax revenue, and the triggering of automatic budget cuts, "Sequestration," under the Budget Control Act of 2011 on March 1, 2013. Sequestration requires a reduction in anticipated fiscal year 2013 federal government spending of $85 billion. The Appropriations Act gave full year enacted appropriations for five of the twelve federal appropriations measures. Two of those five full year appropriations bills, which include the defense appropriations bill, contain most of the programs where Exelis is under contract or competing for additional business. The appropriations bills result in line by line program specific funding subject to additional Sequestration reductions. The Sequestration reduction required for fiscal year 2013 for defense is approximately $43 billion.

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The full year Sequestration target for fiscal year 2014 is $109 billion with 50% of that coming from discretionary defense programs and accounts. Without a repeal of Sequestration, we believe a potential scenario is that fiscal year 2014 appropriations bills may be enacted in the months following the September 30, 2013 budget deadline with the discretionary top line spending levels continuing to be subject to the automatic second year Sequestration reductions.

Companies which derive substantial revenues from federal contracting will benefit from a comprehensive agreement which implements fundamental multi-year changes that would prevent Sequestration from continuing. The debate over how and when a solution may be reached over the as-yet unresolved Sequestration matter remains a significant issue for the defense industry.

We believe that spending on recapitalization, modernization and maintenance of defense and security assets will continue despite possible reductions to some defense programs in which we participate or for which we expect to compete. We expect ongoing DoD emphasis to be placed on our areas of strength, such as intelligence, surveillance and reconnaissance (ISR) and data analytics, critical network development and operation, electronic warfare, precision navigation and timing, and cyber solutions. However, uncertainty related to potential changes in appropriations and strategic priorities could materially impact our business.

The information provided above does not represent a complete list of known trends and uncertainties that could impact our business in either the near or long-term. It should, however, be considered along with the risk factors identified in Part 1, Item 1A under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012 and our disclosure under the caption “Forward-Looking and Cautionary Statements” at the end of this section.

Executive Summary

Exelis reported revenue of $1.3 billion for the quarter ended June 30, 2013, a decrease of 9% compared to the corresponding period in 2012. The decrease in revenue was driven by revenue declines of 16% in our C4ISR Electronics and Systems segment primarily due to lower demand for Night Vision products and counter-IED jammer products. Revenue also declined 3% within our Information and Technical Services segment primarily due to lower activity on our Middle East programs.

Operating income for the three months ended June 30, 2013 was $127, reflecting a decrease of $18 or 12% compared to the corresponding prior year period primarily due to lower revenue and higher restructuring charges. Overall, operating margin decreased quarter-over-quarter to 10.2% from 10.5% primarily due to higher restructuring charges.

Further details related to the quarter are contained in the Discussion of Financial Results section.

Key Performance Indicators and Non-GAAP Measures

Management reviews key performance indicators including revenue, segment operating income and margins, orders growth, and backlog, among others metrics on a regular basis. In addition, we consider certain additional measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives, including, but not limited to, acquisitions and debt repayment. These metrics, however, are not measures of financial performance under accounting principles generally accepted in the United States of America (GAAP) and should not be considered a substitute for revenue, operating income, income from continuing operations, or net cash from continuing operations as determined in accordance with GAAP. We consider the following non-GAAP measure, which may not be comparable to similarly titled measures reported by other companies, to be a key performance indicator:

• “Adjusted net income” defined as net income, adjusted to exclude items that include, but are not limited to significant charges or credits that impact current results, but are not related to our ongoing operations, unusual and infrequent non-operating items and non-operating tax settlements or adjustments. A reconciliation of adjusted net income is provided below.

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	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Net income	$	78	$	86	$	122	$	156
Separation costs, net of tax	—		1		—		15
Separation related tax items	—		—		—		4
Adjusted net income	$	78	$	87	$	122	$	175

DISCUSSION OF FINANCIAL RESULTS

THREE AND SIX MONTHS ENDED JUNE 30, 2013 COMPARED TO THREE AND SIX MONTHS ENDED JUNE 30, 2012

Selected financial highlights are presented in the table below:

	Three Months Ended June 30,								Six Months Ended June 30,
	2013			2012			Change		2013			2012			Change
Product and service revenue	$	1,251		$	1,379		(9.3	)%	$	2,436		$	2,800		(13.0	)%
Cost of product and service revenue	974			1,087			(10.4	)%	1,908			2,222			(14.1	)%
Operating expense	150			147			2.0	%	327			295			10.8	%
Operating income	127			145			(12.4	)%	201			283			(29.0	)%
Operating margin	10.2		%	10.5		%			8.3		%	10.1		%
Interest expense, net	10			11			(9.1	)%	18			20			(10.0	)%
Other expense (income), net	(3		)	(1		)	200	%	(1		)	7			(114	)%
Income tax expense	42			49			(14.3	)%	62			100			(38.0	)%
Effective income tax rate	35.0		%	36.3		%			33.7		%	39.1		%
Net income	$	78		$	86		(9.3	)%	$	122		$	156		(21.8	)%

Revenue

Revenue for the three and six months ended June 30, 2013 decreased $128 or 9.3% and $364 or 13.0%, respectively, as compared to the same prior year periods. The following table illustrates revenue for our segments:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013		2012		Change		2013		2012		Change
C4ISR Electronics and Systems	$	518	$	620	(16.5	)%	$	1,017	$	1,273	(20.1	)%
Information and Technical Services	733		759		(3.4	)%	1,419		1,527		(7.1	)%
Total Revenue	$	1,251	$	1,379	(9.3	)%	$	2,436	$	2,800	(13.0	)%

Revenue from our C4ISR Electronics and Systems segment decreased $102 and $256 for the three and six months ended June 30, 2013, respectively, as compared with the same periods in 2012. The decrease in revenue for the three and six months ended June 30, 2013 was primarily due to volume declines in Night Vision products of approximately $60 and $103, respectively, and counter-IED jammer products, including CREW related products and other counter-IED systems, of approximately $54 and $86, respectively. Additionally, for the three and six months ended June 30, 2013, revenue decreased on our Worldview-3 satellite imaging program by approximately $23 and $34, respectively, as this program nears completion. For the six months ended June 30, 2013, revenue also decreased due to lower volume in Integrated Defensive Electronic Countermeasures (IDECM) products for military aircraft of approximately $29. The decrease in revenue for the three and six months ended June 30, 2013 was partially offset by higher revenue on our Single Channel Ground and Airborne Radio Systems (SINCGARS) products of approximately $19 and our Advance Integrated Defensive Electronic Warfare Suite (AIDEWS) products for international military aircraft of approximately $14, respectively.

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Revenue from our Information and Technical Services segment decreased $26 and $108 for the three and six months ended June 30, 2013, respectively, as compared with the same periods in 2012. The decrease in revenue for the three and six months ended June 30, 2013 was primarily due to lower activity on our Middle East programs of approximately $27 and $49, respectively. For the six months ended June 30, 2013, revenue also decreased due to lower activity on our Total Army Communications for Southwest Asia, Central Asia and Africa (TACSWACAA) contract of approximately $28 and our Advanced Information Systems programs of approximately $18. The decrease in revenue for the three and six months ended June 30, 2013 was partially offset by higher revenue on our Automated Dependent Surveillance-Broadcast (ADS-B) contract of approximately $6 and $14, respectively.

Cost of Revenue and Operating Expenses

Cost of product and service revenue and other operating expenses are comprised of the following:

	Three Months Ended June 30,								Six Months Ended June 30,
	2013			2012			Change		2013			2012			Change
Cost of product revenue	$	380		$	433		(12.2	)%	$	737		$	894		(17.6	)%
% of product revenue	73.4		%	69.8		%			72.5		%	70.2		%
Cost of service revenue	594			654			(9.2	)%	1,171			1,328			(11.8	)%
% of service revenue	81.0		%	86.2		%			82.5		%	87.0		%
Selling, general and administrative expenses	122			130			(6.2	)%	237			263			(9.9	)%
% of total revenue	9.8		%	9.4		%			9.7		%	9.4		%
Research and development expenses	15			16			(6.3	)%	28			30			(6.7	)%
% of total revenue	1.2		%	1.2		%			1.1		%	1.1		%
Restructuring charges, net	13			1			1,200	%	62			2			3,000	%
% of total revenue	1.0		%	0.1		%			2.5		%	0.1		%

Cost of Product and Service Revenue

The decrease in cost of product revenue of $53 or 12.2% and $157 or 17.6% for the three and six months ended June 30, 2013, respectively, as compared to the same periods in 2012 was primarily due to volume declines within our C4ISR Electronics and Systems segment. The cost of product revenue as a percentage of product revenue increased for the three and six months ended June 30, 2013 as compared to the corresponding periods in 2012 primarily due to a net sales mix of lower margin products.

The decrease in cost of service revenue of $60 or 9.2% and $157 or 11.8% for the three and six months ended June 30, 2013, respectively, as compared to the same periods in 2012 was primarily due to productivity improvements and lower activity, respectively, within our Information and Technical Services segment. The cost of service revenue as a percentage of service revenue decreased for the three and six months ended June 30, 2013 as compared to the corresponding periods in 2012 primarily due to productivity improvements that decreased the cost of service revenue and contract pricing adjustments, including improved incentive and award fees and contract modifications, that increased revenue on several contracts within our Air Traffic Management, Afghanistan and Middle East program areas.

Selling, General & Administrative (SG&A) Expenses

SG&A expenses as a percent of total revenue were 9.8% and 9.7% for three and six months ended June 30, 2013, respectively, compared to 9.4% during the same periods in 2012. The increase in SG&A expenses as a percent of total revenue as compared to the same periods in 2012 was due to lower revenue, partially offset by lower SG&A expenses. For the three and six months ended June 30, 2013, SG&A expenses decreased as compared to the same periods in 2012 primarily due to cost reductions resulting from prior year restructuring actions in our C4ISR Electronics and Systems segment and other cost saving initiatives, partially offset by higher net periodic benefit costs of $10 and $24, respectively.

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Research and Development (R&D) Expenses

The decrease in R&D expenses of $1 or 6.3% and $2 or 6.7% for the three and six months ended June 30, 2013, respectively, as compared to the same periods in 2012 was not significant.

Restructuring Charges, Net

The increase in restructuring charges, net, of $12 and $60 for the three and six months ended June 30, 2013, respectively, as compared to the same periods in 2012 was primarily due to a restructuring action started in the first quarter of 2013 to reduce the size of our workforce and consolidate our facilities footprint to align our cost structure more closely to customer and market conditions, which is expected to be completed by the end of 2013. Through voluntary and involuntary employee reductions, we are eliminating approximately 1,100 positions. For the year ended December 31, 2013, we expect to incur aggregate restructuring charges in the range of $70 to $80 related to this action. During the three and six months ended June 30, 2013, charges incurred under this action primarily related to employee severance, and to a lesser extent, lease cancellation and other costs associated with the consolidation of certain facilities.

Operating Income

The following table illustrates the operating income results of our business segments, including operating margin results.

	Three Months Ended June 30,								Six Months Ended June 30,
	2013			2012			Change		2013			2012			Change
C4ISR Electronics and Systems	$	40		$	86		(53.5	)%	$	59		$	177		(66.7	)%
Operating margin	7.7		%	13.9		%			5.8		%	13.9		%
Information and Technical Services	87			59			47.5	%	142			106			34.0	%
Operating margin	11.9		%	7.8		%			10.0		%	6.9		%
Total operating income	$	127		$	145		(12.4	)%	$	201		$	283		(29.0	)%
Total operating margin	10.2		%	10.5		%			8.3		%	10.1		%

Operating income at our C4ISR Electronics and Systems segment for the three and six months ended June 30, 2013 decreased $46 or 53.5% and $118 or 66.7%, respectively, as compared to the same periods in 2012. Operating income as a percentage of revenue for the three and six months ended June 30, 2013 was 7.7% and 5.8%, respectively, as compared to 13.9% for the same periods in 2012. The decrease in operating margin was primarily due to higher cost of product revenue as a percentage of product revenue and higher restructuring charges for the three and six months ended June 30, 2013 as compared to the same periods in 2012.

Operating income at our Information and Technical Services segment for the three and six months ended June 30, 2013 increased $28 or 47.5% and $36 or 34.0%, respectively, as compared to the same periods in 2012. Operating income as a percentage of revenue for the three and six months ended June 30, 2013 was 11.9% and 10.0%, respectively, as compared to 7.8% and 6.9%, respectively, for the same periods in 2012. The increase in operating margin was primarily due to lower cost of service revenue as a percentage of service revenue, partially offset by higher restructuring charges, for the three and six months ended June 30, 2013 as compared to the same periods in 2012.

During the performance of long-term sale contracts, estimated final contract prices and costs are reviewed periodically and revisions are made as required and recorded in income in the period in which they are determined. Changes in estimated revenues, cost of revenue and the related effect to operating income are recognized using a cumulative catch-up adjustment which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a contract’s percent complete. Net favorable cumulative catch-up adjustments related to prior periods increased operating income by approximately $39 and $59 for the three and six months ended June 30, 2013, respectively, and by approximately $47 and $60 for the three and six months ended June 30, 2012 . Productivity improvements and contract pricing adjustments primarily contributed to the net favorable cumulative catch-up adjustments in the current three and six month periods.

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Impact to Operating Income from Defined Benefit Plan Expense

The Company recorded net periodic benefit costs of $22 and $48 for the three and six months ended June 30, 2013, respectively, as compared to $12 and $24 in the same periods in 2012. The increase in net periodic benefit costs was primarily attributable to the effect of a lower expected long-term rate of return on plan assets and higher amortization of net actuarial losses, partially offset by lower interest costs due to a decrease in the discount rate, for the three and six months ended June 30, 2013 as compared to the same periods in 2012.

During the second quarter of 2013, the U.S. Salaried Retirement Plan (U.S. SRP) and related Excess Pension Plans were amended to freeze all future benefit accruals effective December 31, 2016. As a result, the assets and liabilities of the U.S. SRP and related plans were re-measured as of May 31, 2013. The re-measurement will reduce net periodic benefit costs by approximately $14 in 2013 primarily due to lower service costs.

Interest Expense, Net

The Company recorded interest expense, net, of $10 and $18 for the three and six months ended June 30, 2013, respectively, as compared to $11 and $20, respectively, during the same periods in 2012. Interest expense, net, is primarily related to our senior notes.

Other Expense (Income), Net

The Company recorded other income, net, of $3 for the three months ended June 30, 2013 as compared to $1 in the same period in 2012. The Company recorded other income, net, of $1 for the six months ended June 30, 2013 as compared to other expense, net, of $7, during the same period in 2012. The period-over-period changes were not significant.

Income Tax Expense

For the three and six months ended June 30, 2013, the Company recorded income tax provisions of $42 and $62, respectively, which represents effective tax rates of 35.0% and 33.7%, respectively, as compared to $49 or 36.3% and $100 or 39.1%, respectively, during the same prior year periods. The decrease in the 2013 quarterly and year-to-date effective income tax rates as compared to the same periods in 2012 was primarily due to an increase in the U.S. manufacturing deduction. The decrease in the 2013 year-to-date effective income tax rate was also due to the favorable impact of a discrete item related to the renewal of the 2012 federal research and development tax credit. The 2012 year-to-date effective income tax rate also included the unfavorable impact of nondeductible separation costs.

Backlog

Total backlog includes both funded backlog (firm orders for which funding is contractually obligated by the customer) and unfunded backlog (firm orders for which funding is not currently contractually obligated by the customer) and represents firm orders and potential options on multi-year contracts, excluding potential orders under indefinite delivery / indefinite quantity (IDIQ) contracts. Backlog is converted into revenue as work is performed or deliveries are made. The level of order activity related to defense programs can be affected by the timing of government funding authorizations and project evaluation cycles. Year-over-year comparisons could, at times, be impacted by these factors, among others.

Funded orders received increased $0.1 billion, to $2.5 billion, during the six months ended June 30, 2013 as compared to the same period in 2012, primarily due to higher product orders for Electronic Warfare Systems, Surveillance and Reconnaissance Systems and composite aerostructure products within our C4ISR Electronics and Systems segment. At June 30, 2013, total backlog was $9.4 billion compared to $9.5 billion at December 31, 2012. The decrease in total backlog relates primarily to lower backlog for previously awarded Advanced Information Systems programs within our Information and Technical Services segment.

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Backlog consisted of the following:

(In billions)	June 30, 2013		December 31, 2012
Funded backlog	$	2.9	$	2.9
Unfunded backlog	6.5		6.6
Total backlog	$	9.4	$	9.5

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

We expect to fund our ongoing working capital, capital expenditures, strategic investments, and financing requirements through cash flows from operations, cash on hand and access to capital markets. If our cash flows from operations are less than we expect, we may need to access the short or long-term capital markets. We believe our $600 credit facility and commercial paper program will permit us to finance our operations on acceptable terms and conditions.

Our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including: (i) our credit ratings or absence of a credit rating, (ii) the liquidity of the overall capital markets, and (iii) the current state of the economy. We cannot assure that such financing will be available to us on acceptable terms or that such financing will be available at all.

A significant portion of our cash is held by our foreign subsidiaries. We manage our cash requirements considering available funds among our subsidiaries and the cost effectiveness with which those funds can be accessed. We continue to look for opportunities to access cash balances in excess of local operating requirements to meet liquidity needs in a cost-efficient manner.

Funding of Pension Plans

Funding requirements under applicable laws and regulations are a major consideration in making contributions to our U.S. pension plans. While the Company has significant discretion in making voluntary contributions, the Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006 and further amended by the Worker, Retiree, and Employer Recovery Act of 2008, the Moving Ahead for Progress in the 21st Century Act and applicable Internal Revenue Code regulations, mandate minimum funding thresholds. Failure to satisfy the minimum funding thresholds could result in restrictions on our ability to amend the plan or make benefit payments. With respect to U.S. qualified pension plans, we intend to contribute annually not less than the required minimum funding thresholds.

At December 31, 2012, our defined benefit pension plans were underfunded by $2.0 billion. During the six months ended June 30, 2013, we made total contributions of $62 to our qualified pension plans. We currently anticipate making additional contributions to our qualified pension plans in the range of $80 to $90 during the remainder of 2013.

Future required contributions will depend primarily on the actual annual return on assets and the discount rate used to measure the benefit obligation at the end of each year. Depending on these factors, and the resulting funded status of our pension plans, the level of future statutory minimum contributions could be material.

Dividends

Our Board of Directors will review and approve the declaration and distribution of any future dividends based on an analysis of many factors, including our operating performance and outlook, financial condition, available liquidity, and expected future requirements for cash and capital resources. Moreover, if we determine to pay any dividend in the future, there can be no assurance that we will continue to pay such dividends.

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On May 8, 2013, the Board of Directors declared a cash dividend of $0.10 per share, payable on July 1, 2013 to shareholders of record on May 24, 2013. During the six months ended June 30, 2013, we declared two quarterly dividends totaling $39 or $0.21 per share.

Sources and Uses of Liquidity

The following table provides the net cash provided by or used in operating activities, investing activities and financing activities.

	Six Months Ended June 30,
	2013			2012
Operating Activities	$	44		$	(110	)
Investing Activities	(44		)	(71		)
Financing Activities	(24		)	230
Foreign Exchange	(9		)	1
Net change in cash and cash equivalents	$	(33	)	$	50

Net cash provided by operating activities increased $154 for the six months ended June 30, 2013 as compared to the same period in 2012, primarily due to a $200 decrease in defined benefit plans payments, changes in receivables of $69, partially offset by changes in deferred taxes of $123. Payments to our defined benefit plans decreased due to lower required minimum funding thresholds resulting from provisions of the Moving Ahead for Progress in the 21st Century Act.

Net cash used in investing activities decreased $27 for the six months ended June 30, 2013 as compared to the same period in 2012, primarily due to lower capital expenditures of $14 and lower net cash paid for acquisitions of $8.

Net cash used in financing activities increased $254 for the six months ended June 30, 2013 as compared to the same period in 2012, primarily due to net proceeds from the issuance of commercial paper of $257 during the first six months of 2012 that did not reoccur during the same period in 2013. Cash on hand at December 31, 2012 was adequate to fund operating and investing activities during the six months ended June 30, 2013.

Capital Resources

At June 30, 2013, the Company held cash and cash equivalents of $259, which included $141 held by foreign subsidiaries, and had a $600 revolving credit facility which expires in October 2015. There were no borrowings outstanding under the credit facility and there was no commercial paper outstanding under our commercial paper program as of June 30, 2013.

Borrowings under the credit facility would be unsecured and bear interest at rates based, at our option, on the Eurodollar rate or a bank defined alternative base rate. Each bank’s obligation to make loans under the credit facility is subject to, among other things, our compliance with various representations, warranties and covenants.

We expect to continue to issue commercial paper periodically. The Company’s commercial paper program generally enables the Company to borrow short-term funds at competitive rates. The commercial paper program is fully supported by available borrowing capacity under our credit facility. As with all other financing programs, our access to the commercial paper market will be impacted by many factors, including our credit ratings, liquidity of the capital markets, and state of the economy. As such, we cannot assure that we will have continued access to the commercial paper market or that the terms of the commercial paper will be acceptable to us.

We have outstanding long-term debt of $250 of 4.25% senior notes due in 2016 and $400 of 5.55% senior notes due in 2021. Interest on the senior notes is payable on April 1 and October 1 of each year. The senior notes are senior unsecured obligations and rank equally with all of our existing and future senior unsecured indebtedness. The senior notes have covenants that restrict our ability to, subject to exceptions, incur indebtedness secured by liens or engage in sale and leaseback transactions and the senior notes are subject to customary events of default.

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The credit facility, commercial paper and senior notes are discussed further in Note 11, “Debt,” in the notes to the unaudited Condensed Consolidated Financial Statements.

Contractual Obligations

There have been no material changes to our contractual obligations from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2012.

Off-Balance Sheet Arrangements

At June 30, 2013, we had no significant off-balance sheet arrangements other than operating leases and certain indemnifications. We do not have a liability recorded for our historic indemnifications and are not aware of any claims or other information that we believe would give rise to material payments under such indemnities. We are not aware of any claims or other circumstances that would give rise to material payments to ITT or Xylem Inc. under the indemnities that we provide to them pursuant to various separation arrangements entered into in connection with the Spin-off.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Estimates are revised as additional information becomes available. Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results in these areas could differ from management’s estimates under different assumptions or conditions.

There have been no significant changes in our critical accounting policies, estimates and judgments as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2012.

Recent Accounting Pronouncements and Accounting Standards Updates

See Note 2, “Recent Accounting Pronouncements,” to the unaudited Condensed Consolidated Financial Statements for information related to recent accounting pronouncements.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

Some of the information included herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 (the “Act”). Whenever used, words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” "may," "could," "outlook" and other terms of similar meaning are intended to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent unpredictable, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed in, or implied from, such forward-looking statements. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Item 1A, “Risk Factors,” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2012, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our market risk as discussed in our Annual Report on Form 10-K for the year ended December 31, 2012.

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ITEM 4. CONTROLS AND PROCEDURES

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of June 30, 2013. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2013, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in reports the Company files or submits under the Exchange Act are (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) accumulated and communicated to management to allow their timely decisions regarding required disclosure.

We have evaluated the changes in our internal control over financial reporting that occurred during the three months ended June 30, 2013 and concluded that no change occurred in our internal control over financial reporting that materially affected, or is likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in legal proceedings that are incidental to the operation of our businesses. Some of these proceedings seek remedies relating to environmental matters, personal injury claims, employment and pension matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures.

Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claim, we do not expect that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material adverse effect on our cash flow, results of operations, or financial condition.

See Note 15, “Commitments and Contingencies,” to the unaudited Condensed Consolidated Financial Statements for further information.

ITEM 1A. RISK FACTORS

The “Risk Factors” section, under Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2012 describes risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects. We do not believe that there have been any material changes to the risk factors previously disclosed.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no sales of unregistered equity securities during the quarter ended June 30, 2013.

The following table provides information about our repurchases of our common stock that is registered pursuant to Section 12 of the Securities Exchange Act of 1934 during the quarter ended June 30, 2013.

DOLLARS AND SHARE AMOUNTS IN MILLIONS, UNLESS OTHERWISE STATED
Period	Total  Number of  Shares  Purchased		Average Price Paid Per Share (in whole dollars)			Total Number of  Shares Purchased  as Part of Publicly  Announced Plans  or Programs		Amount  Available for  Future Share  Repurchases  Under the Plans or Programs  (a)
April 1, 2013 – April 30, 2013		—		—			—		—
May 1, 2013 – May 31, 2013		—		—			—		—
June 1, 2013 – June 30, 2013		0.43		$	12.62		0.43		$	94.6
Total		0.43		$	12.62		0.43		$	94.6

(a) On December 11, 2012, our Board of Directors approved a share repurchase program for the repurchase of our outstanding common stock, from time-to-time, up to an authorized amount of $100. Under the program, management has discretion to determine the dollar amount of shares to be repurchased and the timing of any repurchases in compliance with applicable law and regulation. The share repurchase program expires on December 31, 2015. As of June 30, 2013, we had repurchased a total of 0.4 shares of our common stock under the program for $5, and had remaining authorization of $95 for future share repurchases.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

See the Exhibit Index for a list of exhibits filed herewith.

Page | 31

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EXELIS INC.
	(Registrant)
August 2, 2013	/s/    GREGORY P. KUDLA
(Date)	Gregory P. Kudla
	Chief Accounting Officer
	(Principal Accounting Officer)

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EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION	LOCATION
(3.1)	Amended and Restated Articles of Incorporation of Exelis Inc.	Incorporated by reference to Exhibit 3.1 of Exelis Inc.’s Form 8-K Current Report filed on October 14, 2011 (CIK No. 1524471, File No. 1-35228).
(3.2)	Amended and Restated By-laws of Exelis Inc.	Incorporated by reference to Exhibit 3.1 of Exelis Inc.’s Form 8-K Current Report filed on May 11, 2012 (CIK No. 1524471, File No. 1-35228).
(4.1)	Indenture, dated as of September 20, 2011, between Exelis Inc., ITT Corporation, as initial guarantor, and Union Bank, N.A., as trustee	Incorporated by reference to Exhibit 4.1 of ITT Corporation’s Form 8-K Current Report filed on September 21, 2011 (CIK No. 216228, File No. 1-5672).
(4.2)	Form of Exelis Inc. 4.250% Senior Notes due 2016	Incorporated by reference to Exhibit 4.5 of Exelis Inc.’s Form S-4 Registration Statement filed on May 25, 2012 (CIK No. 1524471, File No. 333-181682).
(4.3)	Form of Exelis Inc. 5.550% Senior Notes due 2021	Incorporated by reference to Exhibit 4.5 of Exelis Inc.’s Form S-4 Registration Statement filed on May 25, 2012 (CIK No. 1524471, File No. 333-181682).
(10.18)	Exelis Excess Pension Plan IA (formerly known as The ITT Excess Pension Plan IA and the ITT Industries excess Pension Plan IA). Originally effective as of July 1, 1975. Amended and restated as of December 31, 2008, and further amended and restated as of October 31, 2011.	Filed herewith.
(10.19)	Exelis Excess Pension Plan IB (formerly known as The ITT Excess Pension Plan IB and the ITT Industries excess Pension Plan IB). Originally effective as of January 1, 1996. Amended and restated as of December 31, 2008, and further amended and restated as of October 31, 2011.	Filed herewith.
(10.20)	Exelis Excess Pension Plan IIA (formerly known as the ITT Excess Pension Plan IIA, the ITT Excess Pension Plan II, and the ITT Industries Excess Pension Plan II, as amended and restated as of July 13, 2004).  Originally effective as of January 1, 1998. Amended and restated as of December 31, 2008, and further amended and restated as of October 31, 2011.	Filed herewith.
(10.21)	Exelis Excess Pension Plan IIB (formerly known as the ITT Excess Pension Plan IIB). Effective as of January 1, 2008. Amended and restated as of December 21, 2008, and further amended and restated as of October 31, 2011.	Filed herewith.

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EXHIBIT NUMBER	DESCRIPTION	LOCATION
(11)	Statement re computation of per share earnings	Information required to be presented in Exhibit 11 is provided under “Earnings Per Share” in Note 4 to the Condensed Consolidated Financial Statements in Part I, Item 1 “Financial Statements” of Exelis Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2013 in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification 260, Earnings Per Share.
(12)	Statement re computation of ratios	Filed herewith.
(31.1)	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
(31.2)	Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
(32.1)	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.
(32.2)	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.
(101)	The following materials from Exelis Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.	Submitted electronically with this Report.

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EX-10.18

EXHIBIT 10.18

EXELIS EXCESS PENSION PLAN IA

Effective as of July 1, 1975As Amended and Restated as of October 31, 2011

EXELIS EXCESS PENSION PLAN IA

The ITT Excess Benefit Plan I (the “Plan”) was effective as of July 1, 1975. The purpose of the Plan was to provide those employees participating in the Retirement Plan for Salaried Employees of ITT Corporation or any successor thereto (the “Retirement Plan”) benefits which would have been payable under the Retirement Plan but for the limitations imposed on qualified plans by Section 415 of the Internal Revenue Code of 1986, as amended (the “Code”).

Effective as of October 7, 1986, the ITT Select Management Plan I was authorized by the Board of Directors of ITT Corporation (the “Corporation”) to pay supplemental benefits to certain select management or highly compensated employees who have qualified for benefits under the Retirement Plan. As of December 19, 1995, the ITT Select Management Plan I was merged into the ITT Excess Benefit Plan I and the surviving Plan was renamed the ITT Industries Excess Pension Plan I. In addition, as of December 19, 1995, the Plan was amended to transfer the liabilities under the ITT Industries Excess Pension Plan I attributable to all participants thereunder other than former or current Presidents, Chairmen, Chief Executive Officers, Chief Operating Officers or Executive Vice Presidents of ITT Industries, Inc. into the ITT Industries Excess Pension Plan II.

As of January 1, 1996, the Plan was amended to provide solely to individuals who are designated Eligible Employees (as defined herein) under the Plan on and after December 19, 1995 benefits which would have been payable on their behalf under the Retirement Plan but for the limitations on benefits imposed by Sections 415 and 401(a)(17) of the Code, to transfer all liabilities not attributable to such excess benefits into the ITT Industries Excess Pension Plan IB (which was authorized to be effective as of January 1, 1996) and to rename the Plan, as amended, the ITT Industries Excess Pension Plan IA. The Plan was amended, effective as of January 1, 2000, to reflect the changes in the Retirement Plan formula.

Effective as of July 13, 2004, the Plan was amended and restated to make certain administrative changes and to unify the definition of Acceleration Event (as defined herein) with other employee benefit plans of the Corporation. Effective as of July 13, 2004, the Plan was further amended to eliminate approval by the Compensation and Personnel Committee of the Board of Directors for lump-sum payments made on or after September 1, 2004, and to revise the interest rate assumption utilized to calculate the amount of an elective lump-sum payment available upon retirement to a Participant who becomes an Eligible Employee after January 1, 2005. Effective as of July 1, 2006, the Plan’s name was revised to the ITT Excess Pension Plan IA.

Effective as of January 1, 2008, the Plan was amended to freeze participation and to eliminate the election of lump-sum distribution after December 31, 2008. Effective as of December 31, 2008, the Plan was amended and restated to comply with the provisions of Section 409A of the Code and the regulations promulgated thereunder.

The benefits accrued and vested under the provisions of the Plan by a Participant (as defined herein) who terminated employment with the Corporation and all its Associated Companies (as defined herein) prior to January 1, 2005, shall be subject to the provisions of the ITT Industries Excess Pension Plan IA as in effect on October 3, 2004, (attached hereto as Appendix B and made a part thereof). In addition, with respect to a Participant who was employed by the Corporation or one of

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its Associated Companies on January 1, 2005, the portion of his benefit payable under the provisions of this Plan equal to his Grandfathered Pre-2005 Benefit (as defined herein) shall be subject to the provisions of the ITT Industries Excess Pension Plan IA as in effect on October 3, 2004, without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code, unless otherwise provided in Appendix A.

Effective as of October 31, 2011, ITT Corporation restructured into three separate, publicly-traded companies named ITT Corporation, Exelis Inc., and Xylem Inc. In connection with the restructuring, the Plan is being amended, effective as of October 31, 2011, to reflect the restructuring and transfer of the Plan sponsorship to Exelis Inc. When used hereinafter, the term Corporation shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation.

Effective as of October 31, 2011, the Plan is being renamed the Exelis Excess Pension Plan IA. When used hereinafter, the term Plan shall collectively include the Exelis Excess Pension Plan IA and, for the period prior to October 31, 2011, the ITT Excess Benefit Plan IA and prior versions thereof. Effective December 31, 2016, the Plan is amended to cease all future accruals.

All benefits payable under this Plan, which is intended to constitute both an unfunded excess benefit plan under Section 3(36) of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and 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 Corporation. The Corporation may establish a trust in order to aid it in providing benefits due under the Plan.

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EXELIS EXCESS PENSION PLAN IA

TABLE OF CONTENTS

		Page
ARTICLE I.	DEFINITIONS	1
1.01	Acceleration Event	1
1.02	Annuity Starting Date	1
1.03	Associated Company	1
1.04	Beneficiary	1
1.05	Board of Directors	1
1.06	Change in Control	1
1.07	Code	1
1.08	Committee	1
1.09	Company	1
1.10	Company Pension Plan	2
1.11	Corporation	2
1.12	Disability or Disabled	2
1.13	Eligible Employee	2
1.14	ERISA	2
1.15	Excess Benefit Portion	2
1.16	Grandfathered Pre-2005 Benefit	2
1.17	Participant	2
1.18	Plan	2
1.19	Plan Administrator	2
1.20	Retirement Plan	2
1.21	Select Management Portion	2
1.22	Supplemental Benefit	3
1.23	409A Supplemental Benefit	3
1.24	Termination of Employment	3
ARTICLE II.	PARTICIPATION: AMOUNT AND PAYMENT OF BENEFITS	4
2.01	Participation	4
2.02	Amount of Supplemental Benefits	4
2.03	Vesting	6
2.04	Payment of Benefits	6
2.05	Payment Upon the Occurrence of a Change in Control	13
2.06	Reemployment of Former Participant or Retired Participant	14
ARTICLE III.	GENERAL PROVISIONS	15
3.01	Funding	15
3.02	Duration of Benefits	15
3.03	Discontinuance and Amendment	15
3.04	Termination of Plan	16
3.05	Plan Not a Contract of Employment	16

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3.06	Facility of Payment	16
3.07	Withholding Taxes	17
3.08	Nonalienation	17
3.09	Forfeiture for Cause	17
3.10	Transfers	17
3.11	Acceleration of or Delay in Payments	18
3.12	Indemnification	18
3.13	Claims Procedure	18
3.14	Construction	20
ARTICLE IV.	PLAN ADMINISTRATION	21
4.01	Responsibility for Benefit Determination	21
4.02	Duties of Committee	21
4.03	Procedure for Payment of Benefits Under the Plan	21
4.04	Compliance	22
APPENDIX A		23
APPENDIX B		26

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EXELIS EXCESS PENSION PLAN IA

ARTICLE I.DEFINITIONS

The following terms when capitalized herein shall have the meanings assigned below.

1.01 Acceleration Event shall mean “Acceleration Event” as that term is defined under the provisions of the Plan as in effect on October 3, 2004.

1.02 Annuity Starting Date shall mean, unless the Plan expressly provides otherwise, the first day of the first period for which an amount is due as an annuity or any other form. However, if a Change in Control occurs, the Annuity Starting Date of a Participant with regard to his 409A Supplemental Benefit shall be the date such Change in Control occurs.

1.03 Associated Company shall mean any division, subsidiary or affiliated company of the Corporation not participating in the Plan which is an Associated Company, as defined in the Retirement Plan.

1.04 Beneficiary shall mean the person designated pursuant to the provisions of the Retirement Plan to receive benefits under said Retirement Plan after a Participant’s death. In the absence of a beneficiary designation under the provisions of the Retirement Plan, the Participant’s Beneficiary shall be his spouse (or Registered Domestic Partner (as defined in the Retirement Plan)), if any, otherwise his estate. Notwithstanding the foregoing, with respect to any survivor benefit payable pursuant to the provision of Section 2.04(c)(ii) based on the Participant’s 409A Supplemental Benefit attributable to the Traditional Pension Plan (“TPP”) formula (as defined in Section 4.01(b) of the Retirement Plan), in the absence of a beneficiary designation under the provisions of the Retirement Plan, the Participant’s Beneficiary shall be his spouse (or Registered Domestic Partner), if any, otherwise the person or persons named as his beneficiary (or beneficiaries) under the Exelis Salaried Investment and Savings Plan, if any, or if none, then the person or persons named as his beneficiary (or beneficiaries) under the Company’s life insurance program.

1.05 Board of Directors shall mean the Board of Directors of Exelis Inc. or any successor thereto.

1.06 Change in Control shall mean “Change in Control” as such term is defined under the terms of the Exelis Excess Pension Plan IIA, as amended from time to time.

1.07 Code shall mean the Internal Revenue Code of 1986, as amended from time to time.

1.08 Committee shall mean the Benefits Administration Committee under the Retirement Plan.

1.09 Company shall mean, effective October 31, 2011, Exelis Inc. or any successor by merger or purchase or otherwise and any Participating Unit (as that term is defined in the Retirement Plan) authorized by the Corporation to participate in the Plan with respect to its employees. When used herein, the term Company shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation, and any Participating Unit.

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1.10 Company Pension Plan shall mean any tax qualified defined benefit plan other than the Retirement Plan maintained by the Company or an Associated Company.

1.11 Corporation shall mean, effective October 31, 2011, Exelis Inc., an Indiana corporation, or any successor by merger, purchase or otherwise. When used herein, the term Corporation shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation.

1.12 Disability or Disabled shall mean “Disability” or “Disabled” as such terms are defined under the terms of the Exelis Excess Pension Plan IIA, as amended from time to time.

1.13 Eligible Employee shall mean a member of the Retirement Plan who occupied on or prior to December 31, 2007, a position of senior management with the Corporation at the Vice President level or higher.

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

1.15 Excess Benefit Portion shall mean the portion of the Plan which is intended to constitute an unfunded excess benefit plan under Sections 3(36) and 4(b)(5) of Title I of ERISA which provides benefits not otherwise payable under the Retirement Plan due to restrictions imposed by Section 415 of the Code.

1.16 Grandfathered Pre-2005 Benefit shall mean the portion of the Participant’s Supplemental Benefit, if any, that was accrued and vested before January 1, 2005, determined under the provisions of the Plan without regard to any amendments after October 3, 2004, which would cause a material modification for purposes of Section 409A of the Code, adjusted for the passage of time based on actuarial equivalent assumptions and procedures established by the Committee in accordance with the provisions of Treas. Reg. § 1.409A-6(a)(3)(iv).

1.17 Participant shall mean an Eligible Employee who is participating in the Plan pursuant to Section 2.01 hereof.

1.18 Plan shall mean the Exelis Excess Pension Plan IA, as set forth herein or as amended from time to time.

1.19 Plan Administrator shall mean the Benefits Administration Committee (as defined in the Retirement Plan) or in the case of an appeal under Section 3.13(c), the Appeals Committee (as defined in the Retirement Plan).

1.20 Retirement Plan shall mean the Exelis Salaried Retirement Plan, which was formerly known prior to October 31, 2011, as the ITT Salaried Retirement Plan and prior to that the ITT Industries Salaried Retirement Plan, as amended from time to time.

1.21 Select Management Portion shall mean the portion of the Plan, other than the Excess Benefit Portion, which is intended to constitute an unfunded deferred compensation plan for a select group of management or highly compensated employees under Title I of ERISA.

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1.22 Supplemental Benefit shall mean the monthly benefit payable to a Participant as determined under Section 2.02, which shall include a Participant’s Excess Benefit Portion and Select Management Portion as determined pursuant to Section 2.02 of this Plan.

1.23 409A Supplemental Benefit shall mean the portion of a Participant’s Supplemental Benefit, if any, in excess of his Grandfathered Pre-2005 Benefit.

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

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ARTICLE II.PARTICIPATION; AMOUNT AND PAYMENT OF BENEFITS

2.01 Participation

(a) Each Eligible Employee who is a Participant in the Plan as of October 31, 2011, shall continue to be a Participant in the Plan, subject to the provisions of paragraph (d) below. Effective as of January 1, 2008, participation in the Plan was frozen and the admission of new Participants in the Plan on or after that date was prohibited.

(b) Each Eligible Employee’s annual retirement allowance or vested benefit which at the time of payment under the Retirement Plan exceeds the limitations imposed by Section 415(b) of the Code (or prior to January 1, 2000, Section 415(e) of the Code) shall be payable from the Excess Benefit Portion of the Plan.

(c) Each Eligible Employee’s annual retirement allowance or vested benefit which at the time of payment under the Retirement Plan is limited by reason of the limitation on Compensation (as that term is defined in the Retirement Plan) under Section 401(a)(17) of the Code shall be payable from the Select Management Portion of the Plan.

(d) A Participant’s participation in the Plan shall terminate upon the Participant’s death or other Termination of Employment with the Company and all Associated Companies, unless a benefit is payable under the Plan with respect to the Participant or his Beneficiary under the provisions of this Article II.

2.02 Amount of Supplemental Benefits

(a) A Participant’s Supplemental Benefit under this Article II shall be equal to the excess, if any, of (i) over (ii) as determined below:

(i) the monthly retirement allowance or vested benefit determined as of such Participant’s Termination of Employment which would have been payable to the Participant under Section 4.02, 4.03, 4.04, 4.05 or 4.06 of the Retirement Plan, whichever is applicable, assuming such benefit commences on the date set forth in Section 2.04(a)(i), (ii) or (iv) of this Plan, whichever is applicable, and

(1) prior to the application of any offset required pursuant to Section 4.10 or to an applicable Appendix of the Retirement Plan with regard to benefits payable under any other Company Pension Plan;

(2) without regard to the provisions contained in Section 415 of the Code relating to the maximum limitation on benefits, as incorporated into the Retirement Plan; and

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(3) without regard to the annual limitation on Compensation contained in Section 401(a)(17) of the Code, as incorporated into the Retirement Plan;

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(ii) the monthly retirement allowance or vested benefit which would have been payable for the Participant’s lifetime under Section 4.02, 4.03, 4.04, 4.05 or 4.06 of the Retirement Plan, whichever is applicable, assuming such benefit commences on the date set forth in Section 2.04(a)(i), (ii) or (iv), whichever is applicable, and determined

(1) prior to the application of any offset required pursuant to Section 4.10 or an applicable Appendix of the Retirement Plan with regard to benefits payable under any other Company Pension Plan;

(2) with regard to the provisions contained in Section 415 of the Code relating to maximum limitation benefits as incorporated into the Retirement Plan; and

(3) with regard to the annual limitation on Compensation contained in Section 401(a)(17) of the Code, as incorporated into the Retirement Plan.

(b) Except as otherwise provided below, if, after a Participant’s Annuity Starting Date, changes to the Code or ERISA permit the Retirement Plan to provide for payment of a Participant’s monthly retirement allowance or vested benefit in an amount greater than that permissible at that particular Annuity Starting Date, the Participant’s monthly benefit under this Plan shall be reduced by the portion of his retirement allowance or vested benefit actually paid from the Retirement Plan. This provision shall not be applicable to any portion of a Participant’s Supplemental Benefit received in the form of a lump-sum payment.

(c) Notwithstanding anything to the contrary in Section 2.01 or Section 2.02(a), a Participant who on October 31, 2011, continued in employment with ITT Corporation or commenced employment with Xylem Inc. shall be treated for purposes of determining his Supplemental Benefit as though he earns Eligibility Service (as defined in the Retirement Plan) for Plan purposes until the earlier of October 31, 2016, the date such Participant terminates employment with ITT Corporation or Xylem Inc., the date on which the benefits under the Retirement Plan attributable to the TPP Formula commence, the date of his death or a Change in Control of ITT Corporation or Xylem Inc., as the case may be.

(d) Notwithstanding anything to the contrary in Section 2.01 or 2.01(a), effective as of October 31, 2011, with respect to a Participant who on October 31, 2011, continued in employment with ITT Corporation or commenced employment with Xylem Inc.,

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the interest rate credited per annum on the Pension Equity Plan (“PEP”) (as defined in Section 4.01(c) of the Retirement Plan) lump-sum value of the portion of a Participant’s Supplemental Benefit payable under Section 2.02 attributable to the PEP formula during the period beginning on October 31, 2011 and ending on the Participant’s Annuity Starting Date shall be the greater of the 10-year Treasury rate as in effect on December 31 of the prior calendar year or 3.25 percent.

(e) Notwithstanding anything to the contrary in Section 2.01 or this Section 2.02, effective December 31, 2016, Benefit Service (as defined under the Retirement Plan) and Compensation used to determine a Participant’s Supplemental Benefits under this Plan shall be frozen.

2.03 Vesting

Effective October 31, 2011, each Participant is vested in, and has a nonforfeitable right to, the benefit payable under this Article II.

2.04 Payment of Benefits

(a) Timing of Payment

(i) Subject to the provisions of clause (iii) below, the portion of any Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the TPP formula, to the extent vested pursuant to Section 2.03, shall commence as of the first day of the month following (1) the Participant’s Termination of Employment or (2) if the Participant is not at least age 50 on such date of Termination of Employment and his age and Eligibility Service as of such date does not equal 80 or more, the Participant’s attainment of age 55, if later.

(ii) Notwithstanding the foregoing provisions of clause (i) above and subject to the provisions of clause (iii) below, the portion of any Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the PEP formula, to the extent vested pursuant to Section 2.03, shall commence as of the first day of the month following the Participant’s Termination of Employment.

(iii) Notwithstanding the foregoing, the actual payment of a 409A Supplemental Benefit payable under Section 2.02 due to the Participant’s Termination of Employment for reasons other than death or Disability shall not commence prior to the first day of the seventh month following the Participant’s Termination of Employment. Any payment due the Participant which he would have otherwise received under Section 2.02 during the six-month period immediately following such Participant’s Termination of Employment shall be accumulated, with interest, at the IRS Interest Rate (as defined in the Retirement Plan) in accordance with procedures

6

established by the Committee. For the avoidance of doubt, the provisions of this clause (iii) shall not apply to a 409A Supplemental Benefit payable under (1) Section 2.04(c) due to the death of the Participant or (2) Section 2.04(d) due to the Participant’s Disability.

(iv) Notwithstanding the foregoing, in the event a Participant who incurred a Termination of Employment prior to January 1, 2009, has not commenced payment of his 409A Supplemental Benefit as of January 1, 2009, such Participant’s 409A Supplemental Benefit shall commence as of January 1, 2009, or, if later, the date specified in clause (i), (ii) or (iii) above, whichever is applicable.

(v) A Participant’s Grandfathered Pre-2005 Benefit shall commence in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(b) Form of Benefit

(i) Unless a Participant has a valid election under clause (ii) or (iii) below in effect, the portion of the Participant’s 409A Supplemental Benefit determined under Section 2.02 attributable to the TPP formula shall be paid in the form of a single life annuity for the life of the Participant, if the Participant is not married on his Annuity Starting Date, or in the form of a 50% joint & survivor annuity, if the Participant is married (or has a Registered Domestic Partner) on his Annuity Starting Date.

(ii) Subject to the provisions of clause (iv) below, a Participant may elect to convert his 409A Supplemental Benefit payable under Section 2.02 attributable to the TPP formula into an optional annuity of equivalent actuarial value available to that Participant under the provisions of Section 4.07(b) of the Retirement Plan as of his Annuity Starting Date, provided said optional annuity satisfies the definition of “life annuity” as provided in Treas. Reg. § 1.409A-(2)(b)(2)(ii) and any further guidance thereto. Such equivalent actuarial value shall be based on the applicable factors set forth in Appendix A of the Retirement Plan.

(iii) Notwithstanding the foregoing provisions of clauses (i) and (ii) above, a Participant may, subject to the timing limitations and other restrictions as shall be prescribed by the Committee, elect, by written notice received by the Committee, to receive the portion of his entire Supplemental Benefit payable under this Plan attributable to the TPP formula in the form of a single lump-sum payment if upon his Termination of Employment he retires under the provisions of the Retirement Plan at his Postponed Retirement Date, Normal Retirement Date, Standard Early Retirement Date or Special

7

Early Retirement Date (as such terms are defined under the Retirement Plan). Such election must have been completed and filed with the Plan Committee no later than December 31, 2008, and became irrevocable as of January 1, 2009. However, if the Participant dies after his Early, Normal or Postponed Retirement Date but prior to receiving his lump-sum payment, the payment shall be made to the Participant’s Beneficiary with the calculation of such payment based on the assumption that payment had been made immediately preceding the Participant’s date of death. For avoidance of doubt, if a Participant has not satisfied the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance upon his Termination of Employment, the election of a lump-sum payment under the provisions of the clause (iii) shall not be effective.

Such lump-sum payment shall be calculated on an actuarial equivalent basis using the interest rate assumption for immediate annuities used by the Pension Benefit Guaranty Corporation (“PBGC”) for valuing benefits for single employer plans as published by the PBGC for the month in which the payment is effective and the mortality table utilized as of such date under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. Notwithstanding the preceding sentence, with respect to a Participant who becomes an Eligible Employee after January 1, 2005, such lump-sum payment shall be calculated on an actuarial equivalent basis using the IRS Interest Rate as published in the fourth month prior to the month following the month in which the Participant’s Termination of Employment occurs and the mortality table utilized as of such date under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. The calculation of a lump-sum payment under this clause (iii) shall be based on the Participant’s benefit determined pursuant to Section 2.02 attributable to the TPP formula portion of such benefit as if it were paid in the form of a single life annuity to the Participant. The calculation of a lump-sum payment hereunder shall be made without regard to the possibility of any future changes after the Participant’s Annuity Starting Date in the amount of benefits payable under the Retirement Plan because of future changes in the limitations referred to in Section 2.02. This lump-sum payment plus any payment made pursuant to the provisions of clause (v) below represents a complete settlement of all 409A Supplemental Benefits due on the Participant’s behalf under the Plan.

(iv) Notwithstanding the foregoing and subject to the provisions of Section 409A of the Code, a Participant’s election to receive his 409A Supplemental Benefit attributable to the TPP formula in an optional annuity form of payment as described in clause (ii) above shall be effective as of the Participant’s Annuity Starting Date applicable to that portion of his 409A Supplemental Benefit, provided the Participant makes and submits to the

8

Committee in the manner prescribed by the Committee, his election of such optional annuity form prior to such applicable Annuity Starting Date. Unless otherwise provided under clause (iii) above, a Participant who fails to elect an optional annuity form of benefit applicable to the TPP formula portion of his 409A Supplemental Benefit in a timely manner shall receive such benefit in accordance with the provisions of clause (i) above.

(v) Notwithstanding the foregoing provisions of this Section 2.04(b), the portion of a Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the PEP formula shall be payable in the form of a single lump-sum payment. Such lump-sum payment shall be calculated on the same basis as provided in Section 4.07(b)(v) of the Retirement Plan except as otherwise provided in Section 2.02(d).

(vi) The portion of the Participant’s Grandfathered Pre-2005 Benefit payable under Section 2.02 attributable to the TPP formula shall commence and the form of payment of such benefit shall be determined in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any Plan amendments after that date which would constitute a material modification for purposes of Section 409A of the Code, unless a Participant has a valid election under clause (iii) above in effect as of his date of Termination of Employment. The portion of the Participant’s Grandfathered Pre-2005 Benefit payable under Section 2.02 attributable to the PEP formula shall be payable in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(c) Death Prior to a Participant’s Annuity Starting Date

(i) If a Participant entitled to a vested benefit under the Retirement Plan dies (1) before meeting the eligibility requirements for an Automatic Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan and while in active service with the Company or any Associated Company or while Disabled but before his Annuity Starting Date, or (2) after Termination of Employment with entitlement to a vested benefit hereunder but prior to his Annuity Starting Date, the Participant’s spouse (or Registered Domestic Partner) shall receive a monthly payment for life equal to the monthly income which would have been payable to such spouse (or Registered Domestic Partner) under Section 4.08(a) of the Retirement Plan based on the hypothetical benefit attributable to his Supplemental Benefit as calculated under Section 2.02 hereof assuming payments commence as of the first day of the month following the Participant’s date of death, or attainment of age 55, if later. The portion of such survivor benefit attributable

9

to the Participant’s 409A Supplemental Benefit shall commence as of the first day of the month following the later of the Participant’s date of death, or the Participant’s attainment of age 55 (or in the event clause (iv) is applicable, the date specified in clause (iv)). Notwithstanding the foregoing, the portion of any benefit payable under this clause (i) attributable to the PEP formula portion of the benefit which would have been payable to the spouse (or Registered Domestic Partner) based on the hypothetical 409A Supplemental Benefit as calculated under Section 2.02 shall be determined assuming that portion of the survivor benefit commences as of the first day of the month following the Participant’s date of death (or the date specified in clause (iv), if later) and such benefit shall be payable in the form of a single lump-sum payment as of the first day of the month following the Participant’s date of death. This lump-sum payment shall be calculated on the same basis as provided in Section 4.08(a)(iii) of the Retirement Plan using the IRS Mortality Table (as defined in the Retirement Plan) and IRS Interest Rate. Notwithstanding any Plan provision to the contrary, the portion of any survivor benefit payable under this clause (i) attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be payable in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(ii) Except as otherwise provided below or in clause (iii) of this Section 2.04(c), in the event a Participant who has satisfied the eligibility requirements for the Automatic Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan, dies (1) while in active service with the Company or any Associated Company or (2) after his Termination of Employment or the date he becomes Disabled, if earlier, but prior to his Annuity Starting Date, the Participant’s Beneficiary, if any, shall receive a monthly payment for the life of the Beneficiary equal to the monthly income which would have been payable to such Beneficiary under Section 4.08(b) of the Retirement Plan based on the hypothetical retirement benefit attributable to his Supplemental Benefit as calculated under Section 2.02 hereof assuming payments commence on the first day of the month following the Participant’s death (or the date specified in clause (iv), if later). Notwithstanding the foregoing, the portion of any benefit payable under this clause (ii) attributable to the PEP formula portion of the benefit which would have been payable to the Beneficiary based on the hypothetical 409A Supplemental Benefit as calculated under Section 2.02 hereof shall be payable in the form of a single lump-sum payment. This lump-sum payment shall be calculated on the same basis as provided in Section 4.08(b)(iii) of the Retirement Plan except as otherwise provided in Section 2.02(d). The portion of any benefit payable under this clause (ii) attributable to a Participant’s 409A Supplemental Benefit as calculated under Section 2.02

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hereof shall commence on the first day of the month following the Participant’s death.

The portion of such survivor benefit payable under this clause (ii) of paragraph (c) attributable to the Participant’s Grandfathered Pre-2005 Benefit shall commence in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(iii) Notwithstanding the foregoing, in the event a Participant, who has satisfied the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance, has filed a valid election to receive a lump-sum payment of benefits under the provisions of Section 2.04(b)(iii), dies on or after age 55 and prior to his Annuity Starting Date, the Beneficiary of such Participant shall receive a single lump-sum amount determined as follows:

(A) In the event of the Participant’s death (i) prior to his Termination of Employment or (ii) after he becomes Disabled but prior to his Annuity Starting Date, the lump-sum payment shall be equal to the value of the Participant’s benefit attributable to his Supplemental Benefit, if any, accrued to his date of death as determined under the provisions of Section 2.02 hereof.

(B) In the event of any other Participant’s death after his Termination of Employment and prior to his Annuity Starting Date, the lump-sum payment shall be equal to the value of the Participant’s Supplemental Benefit accrued to the Participant’s Termination of Employment as determined under the provisions of Section 2.02 hereof.

The portion of the lump-sum payment under this clause (iii) attributable to the PEP formula portion of his 409A Supplemental Benefit, if any, shall be calculated on the same basis as provided in Section 4.08(b)(iii) of the Retirement Plan except as otherwise provided in Section 2.02(d). The portion of the lump-sum payment under this clause (iii) attributable to the TPP formula portion of the Participant’s 409A Supplemental Benefit shall be (1) based on the Participant’s Plan benefit attributable to the TPP formula portion as if it were paid in the form of a single life annuity to the Participant and (2) calculated on an actuarial equivalent basis using the interest rate assumption for immediate annuities used by the PBGC for valuing benefits for single employer plans as published by the PBGC for the month following the Participant’s date of Termination of Employment or, if earlier, the date of his death and the mortality table utilized as of such date under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. Notwithstanding the preceding sentence, with respect to a

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Participant who becomes an Eligible Employee after January 1, 2005, the lump-sum payment in the preceding sentence shall be calculated on an actuarial equivalent basis using the IRS Interest Rate as published in the fourth month prior to the month in which the Participant’s Termination of Employment or, if earlier, date of death occurs and the mortality table utilized as of such date under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. The calculation of a lump-sum payment hereunder shall be made without regard to the possibility of any future changes after the Participant’s death in the amount of benefits payable under the Retirement Plan because of future changes in the limitations referred to in Section 2.02.

Notwithstanding the foregoing, the portion of such survivor benefit attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any Plan amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

Notwithstanding the foregoing, a total lump-sum payment under this clause (iii) shall be made to the Participant’s Beneficiary only if the Participant has filed an election to receive a lump-sum payment of any benefits under the provisions of Section 2.04(a)(iii) in accordance with the timing limitations and other restrictions prescribed by the Committee. Payment shall be made to the Participant’s Beneficiary as soon as practicable after the Participant’s date of death. The lump-sum payment under this clause (iii) represents a complete settlement of all benefits due the Beneficiary on the Participant’s behalf under the Plan.

(iv) Notwithstanding the foregoing, in the event the survivor benefit payable under this Section 2.04(c) to the spouse or Beneficiary of a Participant who died prior to January 1, 2009, has not commenced as of January 1, 2009, such survivor benefit shall commence as of January 1, 2009, or, if later, the date specified in clauses (i), (ii) or (iii) above, whichever is applicable.

(d) Disability prior to Termination of Employment

(i) Notwithstanding any Plan provision to the contrary, in the event a Participant becomes Disabled prior to his Termination of Employment, the Participant shall be entitled to a Disability Supplemental Benefit equal to the amount determined under the provisions of Section 2.02(a) based on his years of Benefit Service, accrued under the Retirement Plan to the date he became Disabled plus the years of Benefit Service, if any, such Participant accrues under the terms of the Retirement Plan after the date he becomes Disabled and prior to the earlier of his attainment of age 65 or December 31, 2016.

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(ii) The portion of the Disability Supplemental Benefit determined under the provisions of clause (i) in excess of the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of paragraph (b) above and payments shall commence on the first day of the month following the month in which the Participant attains age 65.

(iii) Notwithstanding the foregoing, the portion of the Disability Supplemental Benefit attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

2.05 Payment Upon the Occurrence of a Change in Control

Upon the occurrence of a Change in Control, (i) all retired Participants then receiving or then entitled to receive a 409A Supplemental Benefit under the Plan, (ii) all former Participants then receiving or then entitled to receive a 409A Supplemental Benefit hereunder, and (iii) all Participants who are then still in active service shall automatically receive, in a single lump-sum payment, the 409A Supplemental Benefit remaining due as of the Change in Control to any such retired or former Participant or the benefit, if any, accrued by such active Participant up to the Change in Control event and as determined under Section 2.02 hereof. The amount of such lump-sum payment attributable to the PEP formula portion of the Participant’s 409A Supplemental Benefit payable under this Plan not in payment status as of the occurrence of a Change in Control event shall be calculated on the same basis as provided in Section 4.07(b)(v) of the Retirement Plan using the IRS Mortality Table and IRS Interest Rate determined as if the date the Change in Control event occurs is the Participant’s Annuity Starting Date. The amount of the lump-sum payment attributable to the TPP formula portion of the Participant’s 409A Supplemental Benefit payable under this Plan shall be calculated on an actuarial equivalent basis using (i) the interest rate assumption used by the PBGC for valuing benefits for single employer plans as published by the PBGC for the month in which such Change in Control event occurs and (ii) the mortality table utilized as of the day immediately preceding the date the Change in Control event occurs under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. The interest rate for immediate annuities will be used, if the Participant has met the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance as of the Change in Control or is then in receipt of monthly payments under this Plan. Otherwise the Plan shall use the interest rate assumption for deferred annuities to the earliest date the Participant could have commenced payment of such benefit or, if it results in a larger lump sum, his Normal Retirement Date (as defined under the Retirement Plan). If the Participant is not in receipt of his monthly 409A Supplemental Benefit payments under this Plan as of the Change in Control, the calculation of a lump-sum payment hereunder of the portion of the Participant’s accrued benefit payable under this Plan attributable to the TPP formula portion shall be based on the Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to such

13

TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on the Participant’s Annuity Starting Date; provided, however, if the Participant has not met the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance, the calculation of such lump-sum payment shall be based on the Participant’s accrued 409A Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on the earliest date he could have commenced payment of such benefit. In no event, however, shall the lump-sum payment determined under the preceding sentence be less than the lump-sum payment based on the Participant’s accrued 409 Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on his Normal Retirement Date. The calculation of a lump-sum payment hereunder shall be made on the basis of the Participant’s age (and Beneficiary’s age, if applicable) at the Change in Control and without regard to the possibility of any future changes after the Change in Control in the amount of benefits payable hereunder because of future changes in the limitations referred to in Section 2.02. The lump-sum payment shall be made within 90 days following the date the Change in Control event occurs. In the event the Participant dies after such Change in Control event occurs but before receiving such payment, the lump-sum payment shall be made to his Beneficiary. This lump-sum payment represents a complete settlement of all benefits on the Participant’s behalf under the Plan.

For avoidance of doubt, upon the occurrence of an Acceleration Event, either prior to after or simultaneously with, the occurrence of a Change in Control, the provisions of Section 2.05 of the Plan as in effect on October 3, 2004, without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code shall be applicable to a Participant’s Grandfathered Pre-2005 Benefit.

2.06 Reemployment of Former Participant or Retired Participant

If a Participant who retired or otherwise terminated employment with the Company and all Associated Companies is reemployed as an employee by the Company or an Associated Company, such reemployment shall have no impact on the payment or timing of payment of any 409A Supplement Benefits earned prior to reemployment.

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ARTICLE III.GENERAL PROVISIONS

3.01 Funding

(f) 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, to the extent not paid from the assets of any trust established pursuant to paragraph (b) below.

(g) The Corporation may, for administrative reasons, establish a grantor trust for the benefit of Participants in the Plan. The assets placed in said trust shall be held separate and apart from other Corporation funds and shall be used exclusively for the purposes set forth in the Plan and the applicable trust agreement, subject to the following conditions:

(i) the creation of said trust shall not cause the Plan to be other than “unfunded” for purposes of Title I of ERISA;

(ii) the Corporation shall be treated as “grantor” of said trust for purposes of Section 677 of the Code; and

(iii) the agreement of said trust shall provide that its assets may be used upon the insolvency or bankruptcy of the Corporation to satisfy claims of the Company’s general creditors and that the rights of such general creditors are enforceable by them under federal and state law.

(h) To the extent that any person acquires a right to receive payments under the Plan, such right shall be no greater than the right of any unsecured creditor of the Corporation.

3.02 Duration of Benefits

Subject to Section 2.02(e), benefits shall accrue under the Plan on behalf of a Participant only for so long as the provisions of Sections 415 or 401(a)(17) of the Code limit the benefits that are payable under the Retirement Plan.

3.03 Discontinuance and Amendment

The Board of Directors reserves the right to modify, amend, or discontinue in whole or in part, benefit accruals under the Plan at any time. However, no modification, amendment, or discontinuance shall adversely affect the right of any Participant to receive the benefits accrued as of the date of such modification, amendment or discontinuance and after the occurrence of an Acceleration Event, no modification or amendment shall be made to Sections 2.03 or 2.05. Notwithstanding the foregoing, following any amendment and except

15

as provided in Article II with respect to lump-sum payments hereunder, benefits may be adjusted as required to take into account the amount of benefits payable under the Retirement Plan after the application of the limitations referred to in Section 2.02.

3.04 Termination of Plan

The Board of Directors reserves the right to terminate the Plan at any time, provided, however, that no termination shall be effective retroactively. As of the effective date of termination of the Plan,

(a) the benefits of any Participant or Beneficiary whose benefit payments have commenced shall continue to be paid, but only to the extent such benefits are not otherwise payable under the Retirement Plan because of the limitations referred to in Section 2.02; and

(b) no further benefits shall accrue on behalf of any Participant whose benefits have not commenced, and such Participant and his Beneficiary shall retain the right to benefits hereunder; provided that, on or after the effective date of termination,

(v) the Participant is vested under the Retirement Plan or pursuant to Section 2.03(b) or (c) above; and

(vi) such benefits are not at any time otherwise payable under the Retirement Plan because of the limitations imposed by Sections 415 or 401(a)(17) of the Code.

All other provisions of this Plan shall remain in effect.

3.05 Plan Not a Contract of Employment

This 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 this 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 Corporation 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 agreements entered into pursuant thereto.

3.06 Facility of Payment

In the event that the Committee shall find that a Participant is unable to care for his affairs because of illness or accident or is a minor or has died, the Committee may, unless claim shall have been made therefore by a duly appointed legal representative, direct that any benefit payment due him, to the extent not payable from a grantor trust, be paid on his behalf to his spouse, a child, a parent or other blood relative, or to a person with whom he resides,

16

and any such payment so made shall be a complete discharge of the liabilities of the Corporation and the Plan therefore.

3.07 Withholding Taxes

The Company and an Associated Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes.

3.08 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 the person entitled to such benefits.

3.09 Forfeiture for Cause

In the event that a Participant shall at any time be convicted of a crime involving dishonesty or fraud on the part of such Participant in his relationship with the Company or an Associated Company, all benefits that would otherwise be payable to him or to a Beneficiary under the Plan shall be forfeited.

3.10 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 subsidiary) or its employees are no longer eligible to participate hereunder, 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, at the discretion and direction of the Corporation (and approval by the new employer), be transferred to a similar plan of such new employer and become a liability thereunder. Upon such transfer (and acceptance thereof by such new employer) the liabilities for such transferred benefits shall become the obligation of the new employer and the liability under this Plan for such benefits shall then 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 shall become the obligation of the Corporation.

17

3.11 Acceleration of or Delay in Payments

The 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. § 1.409A-3(j)(4). The Committee may also, in its sole and absolute discretion, delay the time for payment of a benefit owed to the Participant hereunder, to the extent permitted under Treas. Reg. § 1.409A-2(b)(7).

3.12 Indemnification

The members of the Committee, and the officers, employees and agents of the Company shall, unless prohibited by any applicable law, be indemnified against any and all liabilities arising by reason of any act or failure to act in relation to the Plan including, without limitation, expenses reasonably incurred in the defense of any claim relating to the Plan, amounts paid in any compromise or settlement relating to the Plan and any civil penalty or excise tax imposed by any applicable statute, if

(a) the act or failure to act shall have occurred

(i) in the course of the person’s service as an officer, employee or agent of the Company or as a member of the Committee, or as the Plan Administrator; or

(ii) in connection with a service provided with or without charge to the Plan or to the Participants or Beneficiaries of the Plan, if such service was requested by the Committee or the Plan Administrator; and

(b) the act or failure to act is in good faith and in, or not opposed to, the best interests of the Corporation.

This determination shall be made by the Corporation and, if such determination is made in good faith and not arbitrarily or capriciously, shall be conclusive.

The foregoing indemnification shall be from the assets of the Corporation. However, the Corporation’s obligation hereunder shall be offset to the extent of any otherwise applicable insurance coverage under a policy maintained by the Corporation or any other person, or other source of indemnification.

3.13 Claims Procedure

(a) Submission of Claims

Claims for benefits under the Plan shall be submitted in writing to the Committee or to an individual designated by the Committee for this purpose.

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(b) Denial of Claim

If any claim for benefits is wholly or partially denied, the claimant shall be given written notice within 90 days following the date on which the claim is filed, which notice shall set forth:

(i) the specific reason or reasons for the denial;

(ii) specific reference to pertinent Plan provisions on which the denial is based;

(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; and

(iv) an explanation of the Plan’s claim review procedure, including information as to the steps to be taken if the claimant wishes to submit the claim for review and the time limits for requesting a review.

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 90 days following the date on which the claim is filed. Such an extension may not exceed a period of 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 is not furnished within 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 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 Committee, and may review pertinent documents and submit issues and comments in writing within such 60-day period.

Not later than 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 the extension. Such decision by an 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.

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(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.

3.14 Construction

(a) The Plan is intended to constitute both an excess benefit arrangement and an unfunded deferred compensation arrangement maintained for a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA, and all rights under this Plan shall be governed by ERISA. Subject to the preceding sentence, the Plan shall be construed, regulated and administered under the laws of the State of New York, to the extent such laws are not superseded by applicable federal law.

(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.

(d) The headings and subheadings in the Plan have been inserted for convenience of reference only, and are to be ignored in any construction of the provisions thereof.

(e) 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.

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ARTICLE IV.PLAN ADMINISTRATION

4.01 Responsibility for Benefit Determination

The benefit of a Participant or Beneficiary under this Plan shall be determined either by the Committee or the Appeals Committee, as provided in Section 4.02 below, or such other party as is authorized under the terms of any grantor trust.

4.02 Duties of Committee

The Committee shall cause to be calculated, in accordance with Article II, the benefit of each Participant or Beneficiary under the Plan. To the extent a Participant’s, spouse’s or Beneficiary’s benefit are payable from the Plan, the Committee and as authorized in Section 3.13(c), the Appeals Committee, shall have full discretionary authority to resolve any question which shall arise under the Plan as to any person’s eligibility for benefits, the calculation of benefits, the form, commencement date, frequency, duration of payment, or the identity of the Beneficiary. Such question shall be resolved by the Committee and the Appeals Committee under rules uniformly applicable to all person(s) or employee(s) similarly situated. It is the intent of the Corporation that the provisions of the Plan comply with the provisions of Section 409A of the Code, any regulations and other guidance promulgated with respect thereto and the provisions of the Plan shall be interpreted to be consistent therewith.

4.03 Procedure for Payment of Benefits Under the Plan

With respect to any benefit to which a Participant or Beneficiary is entitled under this Plan which is not payable under any applicable grantor trust established by the Corporation to pay benefits under the Plan, the Committee (i) shall direct the commencement of benefit payments hereunder in accordance with the applicable procedures established by the Corporation, the Company and/or the Committee regarding the disbursement of amounts from the general funds of the Corporation and (ii) shall arrange, in conjunction with any other applicable excess benefit plan, for the payment of benefits under this Plan and/or any other applicable excess benefit plan.

With respect to any benefit to which a Participant or Beneficiary is entitled under this Plan which is payable under any applicable grantor trust established by the Corporation to pay benefits under the Plan, the Committee, acting for the Corporation and in accordance with the terms of any applicable grantor trust established by the Corporation to pay benefits under the Plan, shall forward the calculation of the Participant’s or Beneficiary’s benefit under Article II of the Plan to the Participant or Beneficiary for concurrence. Upon obtaining concurrence, the Committee, acting for the Corporation, shall forward such calculation and concurrence to the trustee of the grantor trust established by the Corporation to pay benefits under the Plan for the purpose of commencing payment of benefits in accordance with any applicable grantor trust. Any question that shall arise with regard to the benefits payable to

21

a Participant or Beneficiary under any applicable grantor trust shall be resolved in accordance with the provisions of said trust.

4.04 Compliance

With respect to benefits hereunder subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code and the provisions hereof shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code and the regulations thereunder, and the Plan shall be operated accordingly. If any provision of the Plan would otherwise frustrate or conflict with this intent, the provision will be interpreted and deemed amended so as to avoid this conflict. The Plan has been administered in good faith compliance with Section 409A of the Code and the guidance issued thereunder beginning on January 1, 2005.

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APPENDIX A

Provisions Applicable to a Participant’s Grandfathered Pre-2005 Supplemental Benefit

This Appendix A constitutes an integral part of the Plan and is applicable with respect to the Grandfathered Pre-2005 Benefit of those individuals who were Participants in the Plan on December 31, 2004. The portion of a Participant’s Benefit, if any, determined under the provisions of Section 2.02 and Section 2.04(d) of the foregoing provisions of the Plan equal to his Grandfathered Pre-2005 Benefit is subject to the provisions of the Plan as in effect on October 3, 2004, modified as set forth in this Appendix A and without regard to any Plan amendments after October 3, 2004, which would constitute a material modification for Code Section 409A purposes. Section references in this Appendix A correspond to appropriate Sections of the said Plan as in effect on October 3, 2004, as set forth in Appendix B.

Article II — Participation Amount and Payment of Benefits

For purposes of Article II, the terms/phrases “termination of employment,” “terminates employment,” “retirement”, “employment is terminated” or other similar language shall mean, with respect to a Participant, the complete cessation of providing services to the Company and all Associated Companies as an employee.

Section 2.04 Payment of Benefits

(a) Retirement or Termination of Employment Effective on and After December 31, 1995

(i) Following a Participant’s retirement or termination of employment with the Company and all Associated Companies other than by reason of death, a Participant shall receive his Grandfathered Pre-2005 Benefit in the same form and at the same time as the Participant receives his corresponding retirement allowance or vested benefit under the Retirement Plan, except as otherwise provided below.

If a Participant becomes Disabled prior to his Termination of Employment, the portion of his Disability Supplemental Benefit equal to his Grandfathered Pre-2005 Benefit shall be paid at the same time and in the same form as his Retirement Plan benefit is paid.

(ii) Notwithstanding the foregoing provisions of clause (i) above, the portion of his Grandfathered Pre-2005 Benefit attributable to the PEP formula shall be payable in the form of a lump-sum payment and effective as of January 1, 2008 the Participant’s right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

(iii) Notwithstanding any provisions the of Plan to the contrary, the provisions of clause (iii) of Section 2.04(a) shall only apply if the Participant completed

23

and filed such lump-sum election with the Committee on or prior to December 31, 2008 in accordance with procedures established by the Committee of the Plan. In the event a Participant has made a valid lump-sum election under the provisions of this clause (iii), his Grandfathered Pre-2005 Benefit attributable to the TPP formula shall be paid in accordance with the provisions of this clause (iii).

(b) Death Prior to a Participant’s Annuity Starting Date

(i) The portion of the death benefit determined under Section 2.04(b)(i) of the foregoing provisions of this Plan attributable to a Participant’s Grandfathered Pre-2005 Benefit payable to a Participant’s spouse (or Registered Domestic Partner) shall be paid in the same form and at the same time said spouse (or Registered Domestic Partner) receives payment under the Automatic Vested Spouse Benefit of the Retirement Plan. Notwithstanding the foregoing, effective on and after January 1, 2008, the portion of any benefit payable under this clause (i) attributable to the PEP formula based on his Grandfathered Pre-2005 Benefit shall be payable in a single lump-sum payment and effective as of January 1, 2008, the spouse’s (or Registered Domestic Partner’s) right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

(ii) Except as therein provided in clause (iii) of this Section 2.04(b), the portion of the death benefit determined under Section 2.04(b)(ii) of the foregoing provisions of the Plan attributable to a Participant’s Grandfathered Pre-2005 Benefit shall be payable to the Participant’s Beneficiary at the same time said Beneficiary would have received a Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan, provided, however, the portion of such survivor benefit attributable to the PEP formula shall be paid in a single lump-sum payment and effective as of January 1, 2008, the Beneficiary’s right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

Notwithstanding any provisions of the Plan to the contrary, the provisions of clause (iii) of Section 2.04(b) shall only apply if the Participant completed and filed such lump-sum election with the Committee on or prior to December 31, 2008 in accordance with procedures established by the Committee of the Plan. In the event a Participant has made a valid lump-sum election under the provisions of said clause (iii), his Grandfathered Pre-2005 Benefit attributable to the TPP formula shall be paid in accordance with the provisions of said clause (iii).

Section 2.05 Payment Upon the Occurrence of an Acceleration Event

In the event an Acceleration Event occurs, regardless of whether or not such event satisfies the definition of a Change in Control event as defined in the foregoing provisions of this Plan, the

24

provisions of this Section 2.05, which appears in Appendix B below, shall apply to the Participant’s Grandfathered Pre-2005 Benefit.

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APPENDIX B

Provisions of the Plan as in effect on October 3, 2004

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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EX-10.19

EXHIBIT 10.19

EXELIS EXCESS PENSION PLAN IB

Effective as of January 1, 1996As Amended and Restated as of October 31, 2011

EXELIS EXCESS PENSION PLAN IB

The ITT Industries Excess Pension Plan IB (the “Plan”) was authorized and adopted by the Board of Directors of ITT Industries, Inc. (the “Corporation”) to be effective as of January 1, 1996. The purpose of the Plan is to provide certain supplemental benefits to certain select management or highly compensated employees who qualify for benefits under the ITT Salaried Retirement Plan (the “Retirement Plan”).

Effective as of January 1, 1996, the ITT Industries Excess Pension Plan I was amended (i) to provide solely to individuals who are eligible employees thereunder on and after December 19, 1995, the excess benefits which would have been payable under the Retirement Plan but for the limitations imposed by Sections 415 and 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) to transfer into the ITT Industries Excess Pension Plan IB all liabilities not attributable to such excess benefits.

The Plan was amended, effective as of January 1, 2000, to reflect the changes in the Retirement Plan formula.

Effective as of July 13, 2004, the Plan was amended and restated to make certain administrative changes and to unify the definition of Acceleration Event (as defined herein) with other employee benefit plans of ITT Corporation (formerly known as ITT Industries, Inc.). Effective as of July 13, 2004, the Plan was further amended to eliminate approval by the Compensation and Personnel Committee of the Board of Directors for lump-sum payments made on or after September 1, 2004, and to revise the interest rate assumption utilized to calculate the amount of an elective lump-sum payment available upon retirement to a Participant who becomes an Eligible Employee (as defined herein) after January 1, 2005.

Effective as of July 1, 2006, the Plan’s name was revised to the ITT Excess Pension Plan IB.

Effective as of January 1, 2008, the Plan was amended to freeze participation and to eliminate the election of lump-sum distribution after December 31, 2008. Effective as of December 21, 2008, the Plan was amended and restated to comply with the provisions of Section 409A of the Code and the regulations promulgated thereunder.

The benefits accrued and vested under the provisions of the Plan by a Participant (as defined herein) who terminated employment with the Corporation and all its Associated Companies prior to January 1, 2005, shall be subject to the provisions of the ITT Excess Pension Plan I as in effect on October 3, 2004, (attached hereto as Appendix B and made a part hereof). In addition, with respect to a Participant who was employed by the Corporation or one of its Associated Companies (as defined herein) on January 1, 2005, the portion of his benefit payable under the provisions of this Plan equal to his Grandfathered Pre-2005 Benefit (as defined herein) shall be subject to the provisions of the ITT Excess Pension Plan II as in effect on October 3, 2004, without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code, unless otherwise provided in Appendix A.

i

Effective as of October 31, 2011, ITT Corporation restructured into three separate, publicly-traded companies named ITT Corporation, Exelis Inc., and Xylem Inc. In connection with the restructuring, the Plan is being amended, effective as of October 31, 2011, to reflect the restructuring and transfer of the Plan sponsorship to Exelis Inc. When used hereinafter, the term Corporation shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation.

Effective as of October 31, 2011, the Plan is being renamed the Exelis Excess Pension Plan IB. When used hereinafter, the term Plan shall collectively include the Exelis Excess Pension Plan IB and, for the period prior to October 31, 2011, the ITT Excess Benefit Plan IB and prior versions thereof. Effective December 31, 2016, the Plan is amended to cease all future accruals.

All benefits payable under this Plan, which is intended to constitute a nonqualified, unfunded deferred compensation plan for a select group of management or highly compensated employees under Title I of the Employee Retirement Income Security Act of 1974, as amended, shall be paid out of the general assets of the Corporation. The Corporation may establish a trust in order to aid it in providing benefits due under the Plan.

ii

EXELIS EXCESS PENSION PLAN IB

TABLE OF CONTENTS

		Page
ARTICLE I.	DEFINITIONS	1
1.01	Acceleration Event	1
1.02	Annuity Starting Date	1
1.03	Associated Company	1
1.04	Beneficiary	1
1.05	Board of Directors	1
1.06	Change in Control	1
1.07	Code	1
1.08	Committee	1
1.09	Company	1
1.10	Company Pension Plan	2
1.11	Corporation	2
1.12	Deferred Compensation Program	2
1.13	Disability or Disabled	2
1.14	Eligible Employee	2
1.15	ERISA	2
1.16	Grandfathered Pre-2005 Benefit	2
1.17	Participant	2
1.18	Plan	2
1.19	Plan Administrator	2
1.20	Retirement Plan	2
1.21	Supplemental Benefit	2
1.22	409A Supplemental Benefit	2
1.23	Termination of Employment	3
ARTICLE II.	PARTICIPATION: AMOUNT AND PAYMENT OF BENEFITS	4
2.01	Participation	4
2.02	Amount of Supplemental Benefits	4
2.03	Vesting	5
2.04	Payment of Benefits	6
2.05	Payment Upon the Occurrence of a Change in Control	13
2.06	Reemployment of Former Participant or Retired Participant	14
ARTICLE III.	GENERAL PROVISIONS	15
3.01	Funding	15
3.02	Duration of Benefits	15
3.03	Discontinuance and Amendment	15
3.04	Termination of Plan	16
3.05	Plan Not a Contract of Employment	16
3.06	Facility of Payment	16

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3.07	Withholding Taxes	17
3.08	Nonalienation	17
3.09	Forfeiture for Cause	17
3.10	Transfers	17
3.11	Acceleration of or Delay in Payments	17
3.12	Indemnification	18
3.13	Claims Procedure	18
3.14	Construction	20
ARTICLE IV.	PLAN ADMINISTRATION	21
4.01	Responsibility for Benefit Determination	21
4.02	Duties of Committee	21
4.03	Procedure for Payment of Benefits Under the Plan	21
4.04	Compliance	22
APPENDIX A		23
APPENDIX B		26

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EXELIS EXCESS PENSION PLAN IB

ARTICLE I.DEFINITIONS

The following terms when capitalized herein shall have the meanings assigned below.

1.01 Acceleration Event shall mean “Acceleration Event” as that term is defined under the provisions of the Plan as in effect on October 3, 2004.

1.02 Annuity Starting Date shall mean, unless the Plan expressly provides otherwise, the first day of the first period for which an amount is due as an annuity or any other form. However, if a Change in Control occurs, the Annuity Starting Date of a Participant with regard to his 409A Supplemental Benefit shall be the date such Change in Control occurs.

1.03 Associated Company shall mean any division, subsidiary or affiliated company of the Corporation not participating in the Plan which is an Associated Company, as defined in the Retirement Plan.

1.04 Beneficiary shall mean the person designated pursuant to the provisions of the Retirement Plan to receive benefits under said Retirement Plan after a Participant’s death. In the absence of a beneficiary designation under the provisions of the Retirement Plan, the Participant’s Beneficiary shall be his spouse (or Registered Domestic Partner (as defined in the Retirement Plan)), if any, otherwise his estate. Notwithstanding the foregoing, with respect to any survivor benefit payable pursuant to the provision of Section 2.04(c)(ii) based on the Participant’s 409A Supplemental Benefit attributable to the Traditional Pension Plan (“TPP”) formula (as defined in Section 4.01(b) of the Retirement Plan), in the absence of a beneficiary designation under the provisions of the Retirement Plan, the Participant’s Beneficiary shall be his spouse (or Registered Domestic Partner), if any, otherwise the person or persons named as his beneficiary (or beneficiaries) under the Exelis Salaried Investment and Savings Plan, if any, or if none, then the person or persons named as his beneficiary (or beneficiaries) under the Company’s life insurance program.

1.05 Board of Directors shall mean the Board of Directors of Exelis Inc. or any successor thereto.

1.06 Change in Control shall mean “Change in Control” as such term is defined under the terms of the Exelis Excess Pension Plan IIA, as amended from time to time.

1.07 Code shall mean the Internal Revenue Code of 1986, as amended from time to time.

1.08 Committee shall mean the Benefits Administration Committee under the Retirement Plan.

1.09 Company shall mean, effective October 31, 2011, Exelis Inc. or any successor by merger or purchase or otherwise, and any Participating Unit (as that term is defined in the Retirement Plan) authorized by the Corporation to participate in the Plan with respect to its employees. When used herein, the term Company shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation and any Participating Unit.

1.10 Company Pension Plan shall mean any tax qualified defined benefit plan other than the Retirement Plan maintained by the Company or an Associated Company.

1.11 Corporation shall mean, effective October 31, 2011, Exelis Inc., an Indiana corporation, or any successor by merger, purchase or otherwise. When used herein, the term Corporation shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation.

1.12 Deferred Compensation Program shall mean any nonqualified deferred compensation plan maintained by the Company or an Associated Company.

1.13 Disability or Disabled shall mean “Disability” or “Disabled” as such terms are defined in the Exelis Excess Pension Plan IIA as amended from time to time.

1.14 Eligible Employee shall mean a member of the Retirement Plan who occupied on or prior to December 31, 2007, a position of senior management with the Corporation at the Vice President level or higher.

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

1.16 Grandfathered Pre-2005 Benefit shall mean the portion of the Participant’s Supplemental Benefit, if any, that was accrued and vested before January 1, 2005, determined under the provisions of the Plan without regard to any amendments after October 3, 2004, which would cause a material modification for purposes of Section 409A of the Code, adjusted for the passage of time based on actuarial equivalent assumptions and procedures established by the Committee in accordance with the provisions of Treas. Reg. § 1.409A-6(a)(3)(iv).

1.17 Participant shall mean an Eligible Employee who is participating in the Plan pursuant to Section 2.01 hereof.

1.18 Plan shall mean the Exelis Excess Pension Plan IB, as set forth herein or as amended from time to time.

1.19 Plan Administrator shall mean the Benefits Administration Committee (as defined in the Retirement Plan) or in the case of an appeal under Section 3.13(c), the Appeals Committee (as defined in the Retirement Plan).

1.20 Retirement Plan shall mean the Exelis Salaried Retirement Plan, which was formerly known prior to October 31, 2011, as the ITT Salaried Retirement Plan and prior to that the ITT Industries Salaried Retirement Plan, as amended from time to time.

1.21 Supplemental Benefit shall mean the monthly benefit payable to a Participant as determined under Section 2.02.

1.22 409A Supplemental Benefit shall mean the portion of a Participant’s Supplemental Benefit, if any, in excess of his Grandfathered Pre-2005 Benefit.

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1.23 Termination of Employment shall mean a “Separation from Service” as such term is defined in the Exelis Excess Pension Plan IIA.

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1.24

ARTICLE II.PARTICIPATION; AMOUNT AND PAYMENT OF BENEFITS

2.01 Participation

(a) Each Eligible Employee who is a Participant in the Plan as of October 31, 2011, shall continue to be a Participant in the Plan, subject to the provisions of paragraph (b) below. Effective as of January 1, 2008, participation in the Plan was frozen and the admission of new Participants in the Plan on or after that date was prohibited.

(b) A Participant’s participation in the Plan shall terminate upon the Participant’s death or other Termination of Employment with the Company and all Associated Companies, unless a benefit is payable under the Plan with respect to the Participant or his Beneficiary under the provisions of this Article II.

2.02 Amount of Supplemental Benefits

(a) A Participant’s Supplemental Benefit under this Article II shall be equal to the excess, if any, of (i) over (ii) as determined below:

(i) the monthly retirement allowance or vested benefit determined as of such Participant’s Termination of Employment which would have been payable to the Participant under Section 4.02, 4.03, 4.04, 4.05 or 4.06 of the Retirement Plan, whichever is applicable, assuming such benefit commences on the date set forth in Section 2.04(a)(i), (ii) or (iv) of this Plan, whichever is applicable, and

(1) prior to the application of any offset required pursuant to Section 4.10 or to an applicable Appendix of the Retirement Plan with regard to benefits payable under any other Company Pension Plan;

(2) without regard to the provisions contained in Section 415 of the Code relating to the maximum limitation on benefits, as incorporated into the Retirement Plan;

(3) without regard to the annual limitation on Compensation (as defined in the Retirement Plan) contained in Section 401(a)(17) of the Code, as incorporated into the Retirement Plan; and

(4) without regard to deferrals of compensation made pursuant to the Deferred Compensation Program.

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(ii) the monthly retirement allowance or vested benefit which would have been payable for the Participant’s lifetime under Section 4.02, 4.03, 4.04, 4.05 or 4.06 of the Retirement Plan, whichever is applicable, assuming such benefit commences on the date set forth in Section 2.04(a)(i), (ii) or (iv), whichever is applicable, and determined

(1) prior to the application of any offset required pursuant to Section 4.10 or an applicable Appendix of the Retirement Plan with regard to benefits payable under any other Company Pension Plan;

(2) without regard to the provisions contained in Section 415 of the Code relating to maximum limitation benefits as incorporated into the Retirement Plan; and

(3) without regard to the annual limitation on Compensation contained in Section 401(a)(17) of the Code, as incorporated into the Retirement Plan.

(b) Notwithstanding anything to the contrary in Section 2.01 or Section 2.02(a), a Participant who on October 31, 2011, continued in employment with ITT Corporation or commenced employment with Xylem Inc. shall be treated for purposes of determining his Supplemental Benefit as though he earns Eligibility Service (as defined in the Retirement Plan) for Plan purposes until the earlier of October 31, 2016, the date such Participant terminates employment with ITT Corporation or Xylem Inc., the date on which the benefits under the Retirement Plan attributable to the TPP Formula commence, the date of his death or a Change in Control of ITT Corporation or Xylem Inc., as the case may be.

(c) Notwithstanding anything to the contrary in Section 2.01 or 2.01(a), effective as of October 31, 2011, with respect to a Participant who on October 31, 2011, continued in employment with ITT Corporation or commenced employment with Xylem Inc., the interest rate credited per annum on the Pension Equity Plan (“PEP”) (as defined in Section 4.01(c) of the Retirement Plan) lump-sum value of the portion of a Participant’s Supplemental Benefit payable under Section 2.02 attributable to the PEP formula during the period beginning on October 31, 2011 and ending on the Participant’s Annuity Starting Date shall be the greater of the 10-year Treasury rate as in effect on December 31 of the prior calendar year or 3.25 percent.

(d) Notwithstanding anything to the contrary in Section 2.01 or this Section 2.02, effective December 31, 2016, Benefit Service (as defined under the Retirement Plan) and Compensation used to determine a Participant’s Supplemental Benefits under this Plan shall be frozen.

2.03 Vesting

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Effective October 31, 2011, each Participant is vested in, and has a nonforfeitable right to, the benefit payable under this Article II.

2.04 Payment of Benefits

(a) Timing of Payment

(i) Subject to the provisions of clause (iii) below, the portion of any Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the TPP formula, to the extent vested pursuant to Section 2.03, shall commence as of the first day of the month following (1) the Participant’s Termination of Employment or (2) if the Participant is not at least age 50 on such date of Termination of Employment and his age and Eligibility Service as of such date does not equal 80 or more, the Participant’s attainment of age 55, if later.

(ii) Notwithstanding the foregoing provisions of clause (i) above and subject to the provisions of clause (iii) below, the portion of any Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the PEP, to the extent vested pursuant to Section 2.03, shall commence as of the first day of the month following the Participant’s Termination of Employment.

(iii) Notwithstanding the foregoing, the actual payment of a 409A Supplemental Benefit payable under Section 2.02 due to the Participant’s Termination of Employment for reasons other than death or Disability shall not commence prior to the first day of the seventh month following the Participant’s Termination of Employment. Any payment due the Participant which he would have otherwise received under Section 2.02 during the six-month period immediately following such Participant’s Termination of Employment shall be accumulated, with interest, at the IRS Interest Rate (as defined in the Retirement Plan) in accordance with procedures established by the Committee. For the avoidance of doubt, the provisions of this clause (iii) shall not apply to a 409A Supplemental Benefit payable under (1) Section 2.04(c) due to the death of the Participant or (2) Section 2.04(d) due to the Participant’s Disability.

(iv) Notwithstanding the foregoing, in the event a Participant who incurred a Termination of Employment prior to January 1, 2009, has not commenced payment of his 409A Supplemental Benefit as of January 1, 2009, such Participant’s 409A Supplemental Benefit shall commence as of January 1, 2009, or, if later, the date specified in clause (i), (ii) or (iii) above, whichever is applicable.

(v) A Participant’s Grandfathered Pre-2005 Benefit shall commence in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any amendments

6

after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(b) Form of Benefit

(i) Notwithstanding any provisions of the Plan to the contrary, the portion of the Participant’s 409A Supplemental Benefit determined under Section 2.02 attributable to the TPP formula shall be paid in the same form as the Participant’s supplemental benefit determined under the provisions of the Exelis Excess Pension Plan IA attributable to the TPP formula, if any, is paid. However, if the Participant is not entitled to a supplemental benefit under the provisions of the Exelis Excess Pension Plan IA attributable to the TPP formula, then unless the Participant has a valid election under clause (ii) or (iii) below in effect, the portion of the Participant’s 409A Supplemental Benefit determined under Section 2.02 attributable to the TPP formula shall be paid in the form of a single life annuity for the life of the Participant, if the Participant is not married on his Annuity Starting Date, or in the form of a 50% joint & survivor annuity, if the Participant is married (or has a Registered Domestic Partner) on his Annuity Starting Date.

(ii) Subject to the provisions of clause (iv) below, a Participant who is not entitled to a supplemental benefit under the provisions of the Exelis Excess Pension Plan IA attributable to the TPP formula may elect to convert his 409A Supplemental Benefit payable under Section 2.02 attributable to the TPP formula into an optional annuity of equivalent actuarial value available to that Participant under the provisions of Section 4.07(b) of the Retirement Plan as of his Annuity Starting Date, provided said optional annuity satisfies the definition of “life annuity” as provided in Treas. Reg. § 1.409A-(2)(b)(2)(ii) and any further guidance thereto. Such equivalent actuarial value shall be based on the applicable factors set forth in Appendix A of the Retirement Plan.

(iii) Notwithstanding the foregoing provisions of clause (ii) above, a Participant who is not entitled to a supplemental benefit under the provisions of the Exelis Excess Pension Plan IA attributable to the TPP formula may, subject to the timing limitations and other restrictions as shall be prescribed by the Committee, elect, by written notice received by the Committee, to receive the portion of his entire Supplemental Benefit payable under this Plan attributable to the TPP formula in the form of a single lump-sum payment if upon his Termination of Employment he retires under the provisions of the Retirement Plan at his Postponed Retirement Date, Normal Retirement Date, Standard Early Retirement Date or Special Early Retirement Date (as such terms are defined under the Retirement Plan). Such election must have been completed and filed with the Plan Committee no later than December 31, 2008, and became irrevocable as of January 1, 2009.

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However, if the Participant who has made a valid election under the provisions of this Section 2.04(b)(iii) or under Section 2.04(b)(iii) of the Exelis Excess Pension Plan IA dies after his Early, Normal or Postponed Retirement Date but prior to receiving his lump-sum payment, the payment shall be made to the Participant’s Beneficiary with the calculation of such payment based on the assumption that payment had been made immediately preceding the Participant’s date of death. For avoidance of doubt, if a Participant has not satisfied the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance upon his Termination of Employment, the election of a lump-sum payment under the provisions of the clause (iii) shall not be effective.

Such lump-sum payment shall be calculated on an actuarial equivalent basis using the interest rate assumption for immediate annuities used by the Pension Benefit Guaranty Corporation (“PBGC”) for valuing benefits for single employer plans as published by the PBGC for the month in which the payment is effective and the mortality table utilized as of such date under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. Notwithstanding the preceding sentence, with respect to a Participant who becomes an Eligible Employee after January 1, 2005, such lump-sum payment shall be calculated on an actuarial equivalent basis using the IRS Interest Rate as published in the fourth month prior to the month following the month in which the Participant’s Termination of Employment occurs and the mortality table utilized as of such date under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. The calculation of a lump-sum payment under this clause (iii) shall be based on the Participant’s benefit determined pursuant to Section 2.02 attributable to the TPP formula portion of such benefit as if it were paid in the form of a single life annuity to the Participant. The calculation of a lump-sum payment hereunder shall be made without regard to the possibility of any future changes after the Participant’s Annuity Starting Date in the amount of benefits payable under the Retirement Plan because of future changes in the limitations referred to in Section 2.02. This lump-sum payment plus any payment made pursuant to the provisions of clause (v) below represents a complete settlement of all 409A Supplemental Benefits due on the Participant’s behalf under the Plan.

(iv) Notwithstanding the foregoing and subject to the provisions of Section 409A of the Code, a Participant’s election to receive his 409A Supplemental Benefit attributable to the TPP formula in an optional annuity form of payment as described in clause (ii) above shall be effective as of the Participant’s Annuity Starting Date applicable to that portion of his 409A Supplemental Benefit, provided the Participant makes and submits to the Committee in the manner prescribed by the Committee, his election of such optional annuity form prior to such applicable Annuity Starting Date. Unless

8

otherwise provided under clause (iii) above, a Participant who fails to elect an optional annuity form of benefit applicable to the TPP formula portion of his 409A Supplemental Benefit in a timely manner shall receive such benefit in accordance with the provisions of clause (i) above.

(v) Notwithstanding the foregoing provisions of this Section 2.04(b), the portion of a Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the PEP formula shall be payable in the form of a single lump-sum payment. Such lump-sum payment shall be calculated on the same basis as provided in Section 4.07(b)(v) of the Retirement Plan except as otherwise provided in Section 2.02(d).

(vi) The portion of the Participant’s Grandfathered Pre-2005 Benefit payable under Section 2.02 attributable to the TPP formula shall commence and the form of payment of such benefit shall be determined in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any Plan amendments after that date which would constitute a material modification for purposes of Section 409A of the Code, unless a Participant has a valid election under either clause (iii) above or Section 2.04(b)(ii) of the Exelis Excess Pension Plan IA in effect as of his date of Termination of Employment. The portion of the Participant’s Grandfathered Pre-2005 Benefit payable under Section 2.02 attributable to the PEP formula shall be payable in accordance with the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(c) Death Prior to a Participant’s Annuity Starting Date

(i) If a Participant entitled to a vested benefit under the Retirement Plan dies (1) before meeting the eligibility requirements for an Automatic Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan and while in active service with the Company or any Associated Company or while Disabled but before his Annuity Starting Date, or (2) after Termination of Employment with entitlement to a vested benefit hereunder but prior to his Annuity Starting Date, the Participant’s spouse (or Registered Domestic Partner) shall receive a monthly payment for life equal to the monthly income which would have been payable to such spouse (or Registered Domestic Partner) under Section 4.08(a) of the Retirement Plan based on the hypothetical benefit attributable to his Supplemental Benefit as calculated under Section 2.02 hereof assuming payments commence as of the first day of the month following the Participant’s date of death or attainment of age 55, if later. The portion of such survivor benefit attributable to the Participant’s 409A Supplemental Benefit shall commence as of the

9

first day of the month following the later of the Participant’s date of death or the Participant’s attainment of age 55 (or in the event clause (iv) is applicable, the date specified in clause (iv)). Notwithstanding the foregoing, the portion of any benefit payable under this clause (i) attributable to the PEP formula portion of the benefit which would have been payable to the spouse (or Registered Domestic Partner) based on the hypothetical 409A Supplemental Benefit as calculated under Section 2.02 shall be determined assuming that portion of the survivor benefit commences as of the first day of the month following the Participant’s date of death (or the date specified in clause (iv), if later) and such benefit shall be payable in the form of a single lump-sum payment as of the first day of the month following the Participant’s date of death. This lump-sum payment shall be calculated on the same basis as provided in Section 4.08(a)(iii) of the Retirement Plan using the IRS Mortality Table (as defined in the Retirement Plan) and IRS Interest Rate. Notwithstanding any Plan provision to the contrary, the portion of any survivor benefit payable under this clause (i) attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be payable in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(ii) Except as otherwise provided below or in clause (iii) of this Section 2.04(c), in the event a Participant who has satisfied the eligibility requirements for the Automatic Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan, dies (1) while in active service with the Company or any Associated Company or (2) after his Termination of Employment or the date he becomes Disabled, if earlier, but prior to his Annuity Starting Date, the Participant’s Beneficiary, if any, shall receive a monthly payment for the life of the Beneficiary equal to the monthly income which would have been payable to such Beneficiary under Section 4.08(b) of the Retirement Plan based on the hypothetical retirement benefit attributable to his Supplemental Benefit as calculated under Section 2.02 hereof assuming payments commence on the first day of the month following the Participant’s death (or the date specified in clause (iv), if later). Notwithstanding the foregoing, the portion of any benefit payable under this clause (ii) attributable to the PEP formula portion of the benefit which would have been payable to the Beneficiary based on the hypothetical 409A Supplemental Benefit as calculated under Section 2.02 hereof shall be payable in the form of a single lump-sum payment. This lump-sum payment shall be calculated on the same basis as provided in Section 4.08(b)(iii) of the Retirement Plan except as otherwise provided in Section 2.02(d). The portion of any benefit payable under this clause (ii) attributable to a Participant’s 409A Supplemental Benefit as calculated under Section 2.02

10

hereof shall commence on the first day of the month following the Participant’s death.

The portion of such survivor benefit payable under this clause (ii) of paragraph (c) attributable to the Participant’s Grandfathered Pre-2005 Benefit shall commence in accordance with the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(iii) Notwithstanding the foregoing, in the event a Participant, who has satisfied the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance, has filed a valid election to receive a lump-sum payment of benefits under the provisions of (1) Section 2.04(b)(iii) above or (2) Section 2.04(b)(iii) of the Exelis Excess Pension Plan IA, dies on or after age 55 and prior to his Annuity Starting Date, the Beneficiary of such Participant shall receive a single lump-sum amount determined as follows:

(A) In the event of the Participant’s death (i) prior to his Termination of Employment or (ii) after he becomes Disabled but prior to his Annuity Starting Date, the lump-sum payment shall be equal to the value of the Participant’s benefit attributable to his Supplemental Benefit, if any, accrued to his date of death as determined under the provisions of Section 2.02 hereof.

(B) In the event of any other Participant’s death after his Termination of Employment and prior to his Annuity Starting Date, the lump-sum payment shall be equal to the value of the Participant’s Supplemental Benefit accrued to the Participant’s Termination of Employment as determined under the provisions of Section 2.02 hereof.

The portion of the lump-sum payment under this clause (iii) attributable to the PEP formula portion of his 409A Supplemental Benefit, if any, shall be calculated on the same basis as provided in Section 4.08(b)(iii) of the Retirement Plan except as otherwise provided in Section 2.02(d). The portion of the lump-sum payment under this clause (iii) attributable to the TPP formula portion of the Participant’s 409A Supplemental Benefit shall be (1) based on the Participant’s Plan benefit attributable to the TPP formula portion as if it were paid in the form of a single life annuity to the Participant and (2) calculated on an actuarial equivalent basis using the interest rate assumption for immediate annuities used by the PBGC for valuing benefits for single employer plans as published by the PBGC for the month following the Participant’s date of Termination of Employment or, if earlier, the date of his death and the mortality table utilized as of such date under the

11

provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. Notwithstanding the preceding sentence, with respect to a Participant who becomes an Eligible Employee after January 1, 2005, the lump-sum payment in the preceding sentence shall be calculated on an actuarial equivalent basis using the IRS Interest Rate as published in the fourth month prior to the month in which the Participant’s Termination of Employment or, if earlier, date of death occurs and the mortality table utilized as of such date under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. The calculation of a lump-sum payment hereunder shall be made without regard to the possibility of any future changes after the Participant’s death in the amount of benefits payable under the Retirement Plan because of future changes in the limitations referred to in Section 2.02.

Notwithstanding the foregoing, the portion of such survivor benefit attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any Plan amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

Notwithstanding the foregoing, a total lump-sum payment under this clause (iii) shall be made to the Participant’s Beneficiary only if the Participant has filed an election to receive a lump-sum payment of any benefits under the provisions of (i) Section 2.04(a)(iii) or (ii) Section 2.04(a)(iii) of the Exelis Excess Pension Plan IA in accordance with the timing limitations and other restrictions prescribed by the Committee. Payment shall be made to the Participant’s Beneficiary as soon as practicable after the Participant’s date of death. The lump-sum payment under this clause (iii) represents a complete settlement of all benefits due the Beneficiary on the Participant’s behalf under the Plan.

(iv) Notwithstanding the foregoing, in the event the survivor benefit payable under this Section 2.04(c) to the spouse or Beneficiary of a Participant who died prior to January 1, 2009, has not commenced as of January 1, 2009, such survivor benefit shall commence as of January 1, 2009, or, if later, the date specified in clauses (i), (ii) or (iii) above, whichever is applicable.

(d) Disability prior to Termination of Employment

(i) Notwithstanding any Plan provision to the contrary, in the event a Participant becomes Disabled prior to his Termination of Employment, the Participant shall be entitled to a Disability Supplemental Benefit equal to the amount determined under the provisions of Section 2.02(a) based on his years of Benefit Service, accrued under the Retirement Plan to the date he became Disabled plus the years of Benefit Service, if any, the Participant accrues

12

under the terms of the Retirement Plan after the date he becomes Disabled and prior to the earlier of his attainment of age 65 or December 31, 2016.

(ii) The portion of the Disability Supplemental Benefit determined under the provisions of clause (i) in excess of the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of paragraph (b) above and payments shall commence on the first day of the month following the month in which the Participant attains age 65.

(iii) Notwithstanding the foregoing, the portion of the Disability Supplemental Benefit attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

2.05 Payment Upon the Occurrence of a Change in Control

Upon the occurrence of a Change in Control, (i) all retired Participants then receiving or then entitled to receive a 409A Supplemental Benefit under the Plan, (ii) all former Participants then receiving or then entitled to receive a 409A Supplemental Benefit hereunder, and (iii) all Participants who are then still in active service shall automatically receive, in a single lump-sum payment, the 409A Supplemental Benefit remaining due as of the Change in Control to any such retired or former Participant or the benefit, if any, accrued by such active Participant up to the Change in Control event and as determined under Section 2.02 hereof. The amount of such lump-sum payment attributable to the PEP formula portion of the Participant’s 409A Supplemental Benefit payable under this Plan not in payment status as of the occurrence of a Change in Control event shall be calculated on the same basis as provided in Section 4.07(b)(v) of the Retirement Plan using the IRS Mortality Table and IRS Interest Rate determined as if the date the Change in Control event occurs is the Participant’s Annuity Starting Date. The amount of the lump-sum payment attributable to the TPP formula portion of the Participant’s 409A Supplemental Benefit payable under this Plan shall be calculated on an actuarial equivalent basis using (i) the interest rate assumption used by the PBGC for valuing benefits for single employer plans as published by the PBGC for the month in which such Change in Control event occurs and (ii) the mortality table utilized as of the day immediately preceding the date the Change in Control event occurs under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. The interest rate for immediate annuities will be used, if the Participant has met the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance as of the Change in Control or is then in receipt of monthly payments under this Plan. Otherwise the Plan shall use the interest rate assumption for deferred annuities to the earliest date the Participant could have commenced payment of such benefit or, if it results in a larger lump sum, his Normal Retirement Date (as defined under the Retirement Plan). If the Participant is not in receipt of his monthly 409A Supplemental Benefit payments under this Plan as of the Change in Control, the calculation of a lump-sum payment hereunder of the portion of the Participant’s accrued

13

benefit payable under this Plan attributable to the TPP formula portion shall be based on the Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on the Participant’s Annuity Starting Date; provided, however, if the Participant has not met the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance, the calculation of such lump-sum payment shall be based on the Participant’s accrued 409A Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on the earliest date he could have commenced payment of such benefit. In no event, however, shall the lump-sum payment determined under the preceding sentence be less than the lump-sum payment based on the Participant’s accrued 409 Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on his Normal Retirement Date. The calculation of a lump-sum payment hereunder shall be made on the basis of the Participant’s age (and Beneficiary’s age, if applicable) at the Change in Control and without regard to the possibility of any future changes after the Change in Control in the amount of benefits payable hereunder because of future changes in the limitations referred to in Section 2.02. The lump-sum payment shall be made within 90 days following the date the Change in Control event occurs. In the event the Participant dies after such Change in Control event occurs but before receiving such payment, the lump-sum payment shall be made to his Beneficiary. This lump-sum payment represents a complete settlement of all benefits on the Participant’s behalf under the Plan.

For avoidance of doubt, upon the occurrence of an Acceleration Event, either prior to, after or simultaneously with, the occurrence of a Change in Control, the provisions of Section 2.05 of the Excess Plan II as in effect on October 3, 2004, without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code shall be applicable to a Participant’s Grandfathered Pre-2005 Benefit.

2.06 Reemployment of Former Participant or Retired Participant

If a Participant who retired or otherwise terminated employment with the Company and all Associated Companies is reemployed as an employee by the Company or an Associated Company, such reemployment shall have no impact on the payment or timing of payment of any 409A Supplement Benefits earned prior to reemployment.

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ARTICLE III.GENERAL PROVISIONS

3.01 Funding

(e) 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, to the extent not paid from the assets of any trust established pursuant to paragraph (b) below.

(f) The Corporation may, for administrative reasons, establish a grantor trust for the benefit of Participants in the Plan. The assets placed in said trust shall be held separate and apart from other Corporation funds and shall be used exclusively for the purposes set forth in the Plan and the applicable trust agreement, subject to the following conditions:

(iv) the creation of said trust shall not cause the Plan to be other than “unfunded” for purposes of Title I of ERISA;

(v) the Corporation shall be treated as “grantor” of said trust for purposes of Section 677 of the Code; and

(vi) the agreement of said trust shall provide that its assets may be used upon the insolvency or bankruptcy of the Corporation to satisfy claims of the Company’s general creditors and that the rights of such general creditors are enforceable by them under federal and state law.

(g) To the extent that any person acquires a right to receive payments under the Plan, such right shall be no greater than the right of any unsecured creditor of the Corporation.

3.02 Duration of Benefits

Subject to Section 2.02(d), benefits shall accrue under the Plan on behalf of a Participant only for so long as the deferrals of compensation under a Deferred Compensation Program or other restrictions referred to in Section 2.02 reduce the Participant’s accrual of benefits under the Retirement Plan.

3.03 Discontinuance and Amendment

The Board of Directors reserves the right to modify, amend, or discontinue in whole or in part, benefit accruals under the Plan at any time. However, no modification, amendment, or discontinuance shall adversely affect the right of any Participant to receive the benefits accrued as of the date of such modification, amendment or discontinuance and after the occurrence of an Acceleration Event, no modification or amendment shall be made to

15

Sections 2.03 or 2.05. Notwithstanding the foregoing, following any amendment and except as provided in Article II with respect to lump-sum payments hereunder, benefits may be adjusted as required to take into account the amount of benefits payable under the Retirement Plan after the application of the limitations referred to in Section 2.02.

3.04 Termination of Plan

The Board of Directors reserves the right to terminate the Plan at any time, provided, however, that no termination shall be effective retroactively. As of the effective date of termination of the Plan,

(a) the benefits of any Participant or Beneficiary whose benefit payments have commenced shall continue to be paid, but only to the extent such benefits are not otherwise payable under the Retirement Plan because of the limitations referred to in Section 2.02; and

(b) no further benefits shall accrue on behalf of any Participant whose benefits have not commenced, and such Participant and his Beneficiary shall retain the right to benefits hereunder; provided that, on or after the effective date of termination:

(v) the Participant is vested under the Retirement Plan or pursuant to Section 2.03(b) or (c) above; and

(vi) such benefits are not at any time otherwise payable under the Retirement Plan because of the deferral of compensation under a Deferred Compensation Program.

All other provisions of this Plan shall remain in effect.

3.05 Plan Not a Contract of Employment

This 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 this 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 Corporation 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 agreements entered into pursuant thereto.

3.06 Facility of Payment

In the event that the Committee shall find that a Participant is unable to care for his affairs because of illness or accident or is a minor or has died, the Committee may, unless claim shall have been made therefore by a duly appointed legal representative, direct that any benefit payment due him, to the extent not payable from a grantor trust, be paid on his behalf to his spouse, a child, a parent or other blood relative, or to a person with whom he resides,

16

and any such payment so made shall be a complete discharge of the liabilities of the Corporation and the Plan therefore.

3.07 Withholding Taxes

The Company and an Associated Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes.

3.08 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 the person entitled to such benefits.

3.09 Forfeiture for Cause

In the event that a Participant shall at any time be convicted of a crime involving dishonesty or fraud on the part of such Participant in his relationship with the Company or an Associated Company, all benefits that would otherwise be payable to him or to a Beneficiary under the Plan shall be forfeited.

3.10 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 subsidiary) or its employees are no longer eligible to participate hereunder, 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, at the discretion and direction of the Corporation (and approval by the new employer), be transferred to a similar plan of such new employer and become a liability thereunder. Upon such transfer (and acceptance thereof by such new employer) the liabilities for such transferred benefits shall become the obligation of the new employer and the liability under this Plan for such benefits shall then 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 shall become the obligation of the Corporation.

3.11 Acceleration of or Delay in Payments

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The 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. § 1.409A-3(j)(4). The Committee may also, in its sole and absolute discretion, delay the time for payment of a benefit owed to the Participant hereunder, to the extent permitted under Treas. Reg. § 1.409A-2(b)(7).

3.12 Indemnification

The members of the Committee, and the officers, employees and agents of the Company shall, unless prohibited by any applicable law, be indemnified against any and all liabilities arising by reason of any act or failure to act in relation to the Plan including, without limitation, expenses reasonably incurred in the defense of any claim relating to the Plan, amounts paid in any compromise or settlement relating to the Plan and any civil penalty or excise tax imposed by any applicable statute, if

(a) the act or failure to act shall have occurred

(i) in the course of the person’s service as an officer, employee or agent of the Company or as a member of the Committee, or as the Plan Administrator; or

(ii) in connection with a service provided with or without charge to the Plan; or to the Participants or Beneficiaries of the Plan, if such service was requested by the Committee or the Plan Administrator; and

(b) the act or failure to act is in good faith and in, or not opposed to, the best interests of the Corporation.

This determination shall be made by the Corporation and, if such determination is made in good faith and not arbitrarily or capriciously, shall be conclusive.

The foregoing indemnification shall be from the assets of the Corporation. However, the Corporation’s obligation hereunder shall be offset to the extent of any otherwise applicable insurance coverage under a policy maintained by the Corporation or any other person, or other source of indemnification.

3.13 Claims Procedure

(a) Submission of Claims

Claims for benefits under the Plan shall be submitted in writing to the Committee or to an individual designated by the Committee for this purpose.

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(b) Denial of Claim

If any claim for benefits is wholly or partially denied, the claimant shall be given written notice within 90 days following the date on which the claim is filed, which notice shall set forth:

(i) the specific reason or reasons for the denial;

(ii) specific reference to pertinent Plan provisions on which the denial is based;

(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; and

(iv) an explanation of the Plan’s claim review procedure, including information as to the steps to be taken if the claimant wishes to submit the claim for review and the time limits for requesting a review.

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 90 days following the date on which the claim is filed. Such an extension may not exceed a period of 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 is not furnished within 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 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 Committee, and may review pertinent documents and submit issues and comments in writing within such 60-day period.

Not later than 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 the extension. Such decision by an 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.

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(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.

3.14 Construction

(a) The Plan is intended to constitute both an excess benefit arrangement and an unfunded deferred compensation arrangement maintained for a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA, and all rights under this Plan shall be governed by ERISA. Subject to the preceding sentence, the Plan shall be construed, regulated and administered under the laws of the State of New York, to the extent such laws are not superseded by applicable federal law.

(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.

(d) The headings and subheadings in the Plan have been inserted for convenience of reference only, and are to be ignored in any construction of the provisions thereof.

(e) 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.

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ARTICLE IV.PLAN ADMINISTRATION

4.01 Responsibility for Benefit Determination

The benefit of a Participant or Beneficiary under this Plan shall be determined either by the Committee or the Appeals Committee, as provided in Section 4.02 below, or such other party as is authorized under the terms of any grantor trust.

4.02 Duties of Committee

The Committee shall cause to be calculated, in accordance with Article II, the benefit of each Participant or Beneficiary under the Plan. To the extent a Participant’s, spouse’s or Beneficiary’s benefit are payable from the Plan, the Committee and as authorized in Section 3.13(c), the Appeals Committee, shall have full discretionary authority to resolve any question which shall arise under the Plan as to any person’s eligibility for benefits, the calculation of benefits, the form, commencement date, frequency, duration of payment, or the identity of the Beneficiary. Such question shall be resolved by the Committee and the Appeals Committee under rules uniformly applicable to all person(s) or employee(s) similarly situated. It is the intent of the Corporation that the provisions of the Plan comply with the provisions of Section 409A of the Code, any regulations and other guidance promulgated with respect thereto and the provisions of the Plan shall be interpreted to be consistent therewith.

4.03 Procedure for Payment of Benefits Under the Plan

With respect to any benefit to which a Participant or Beneficiary is entitled under this Plan which is not payable under any applicable grantor trust established by the Corporation to pay benefits under the Plan, the Committee (i) shall direct the commencement of benefit payments hereunder in accordance with the applicable procedures established by the Corporation, the Company and/or the Committee regarding the disbursement of amounts from the general funds of the Corporation and (ii) shall arrange, in conjunction with any other applicable excess benefit plan, for the payment of benefits under this Plan and/or any other applicable excess benefit plan.

With respect to any benefit to which a Participant or Beneficiary is entitled under this Plan which is payable under any applicable grantor trust established by the Corporation to pay benefits under the Plan, the Committee, acting for the Corporation and in accordance with the terms of any applicable grantor trust established by the Corporation to pay benefits under the Plan, shall forward the calculation of the Participant’s or Beneficiary’s benefit under Article II of the Plan to the Participant or Beneficiary for concurrence. Upon obtaining concurrence, the Committee, acting for the Corporation, shall forward such calculation and concurrence to the trustee of the grantor trust established by the Corporation to pay benefits under the Plan for the purpose of commencing payment of benefits in accordance with any applicable grantor trust. Any question that shall arise with regard to the benefits payable to

21

a Participant or Beneficiary under any applicable grantor trust shall be resolved in accordance with the provisions of said trust.

4.04 Compliance

With respect to benefits hereunder subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code and the provisions hereof shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code and the regulations thereunder, and the Plan shall be operated accordingly. If any provision of the Plan would otherwise frustrate or conflict with this intent, the provision will be interpreted and deemed amended so as to avoid this conflict. The Plan has been administered in good faith compliance with Section 409A of the Code and the guidance issued thereunder beginning on January 1, 2005.

22

APPENDIX A

Provisions Applicable to a Participant’s Grandfathered Pre-2005 Supplemental Benefit

This Appendix A constitutes an integral part of the Plan and is applicable with respect to the Grandfathered Pre-2005 Benefit of those individuals who were Participants in the Exess Pension Plan II on December 31, 2004. The portion of a Participant’s Benefit, if any, determined under the provisions of Section 2.02 and Section 2.04(d) of the foregoing provisions of the Plan equal to his Grandfathered Pre-2005 Benefit is subject to the provisions of the Plan as in effect on October 3, 2004, modified as set forth in this Appendix A and without regard to any Plan amendments after October 3, 2004, which would constitute a material modification for Code Section 409A purposes. Section references in this Appendix A correspond to appropriate Sections of the said Plan as in effect on October 3, 2004, as set forth in Appendix B.

Article II    Participation Amount and Payment of Benefits

For purposes of Article II, the terms/phrases “termination of employment,” “terminates employment,” “retirement”, “employment is terminated” or other similar language shall mean, with respect to a Participant, the complete cessation of providing services to the Company and all Associated Companies as an employee.

Section 2.04    Payment of Benefits

(b) Retirement or Termination of Employment Effective on or After January 1, 1996

(i) Following a Participant’s retirement or termination of employment with the Company and all Associated Companies other than by reason of death, a Participant shall receive his Grandfathered Pre-2005 Benefit in the same form and at the same time as the Participant receives his corresponding retirement allowance or vested benefit under the Retirement Plan, except as otherwise provided below.

(ii) Notwithstanding the foregoing provisions of clause (i) above, the portion of his Grandfathered Pre-2005 Benefit attributable to the PEP formula shall be payable in the form of a lump-sum payment and effective as of January 1, 2008, the Participant’s right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

(iii) Notwithstanding any provisions the of Plan to the contrary, the provisions of clause (iii) of Section 2.04(b) shall only apply if the Participant completed and filed a lump-sum election pursuant to either the forgoing provisions of this Plan or Section 2.04(b)(iii) of the Exelis Excess Pension Plan IA, whichever is applicable, with the Committee on or prior to December 31, 2008, in accordance with procedures established by the Committee of the

23

Plan. In the event a Participant has made a valid lump-sum election under the provisions of this clause (iii), his Grandfathered Pre-2005 Benefit attributable to the TPP formula shall be paid in accordance with the provisions of this clause (iii).

If a Participant becomes Disabled prior to his Termination of Employment, the portion of his Disability Supplemental Benefit equal to his Grandfathered Pre-2005 Benefit shall be paid at the same time and in the same form as the Retirement Plan benefit is paid.

(c) Death Prior to a Participant’s Annuity Starting Date

(i) The portion of the death benefit determined under Section 2.04(c)(i) of the foregoing provisions of this Plan attributable to a Participant’s Grandfathered Pre-2005 Benefit payable to a Participant’s spouse (or Registered Domestic Partner) shall be paid in the same form and at the same time said spouse (or Registered Domestic Partner) receives payment under the Automatic Vested Spouse Benefit of the Retirement Plan.

Notwithstanding the foregoing, effective on and after January 1, 2008, the portion of any benefit payable under this clause (i) attributable to the PEP formula based on his Grandfathered Pre-2005 Benefit shall be payable in a single lump-sum payment and effective as of January 1, 2008, the spouse’s (or Registered Domestic Partner’s) right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

(ii) Except as therein provided in clause (iii) of this Section 2.04(c), the portion of the death benefit determined under Section 2.04(c)(ii) of the foregoing provisions of the Plan attributable to a Participant’s Grandfathered Pre-2005 Benefit shall be payable to the Participant’s Beneficiary at the same time said Beneficiary would have received a Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan, provided, however, the portion of such survivor benefit attributable to the PEP formula shall be paid in a single lump-sum payment and effective as of January 1, 2008, the Beneficiary’s right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

Notwithstanding any provisions of the Plan to the contrary, the provisions of clause (iii) of Section 2.04(c) shall only apply if the Participant completed and filed a lump-sum election under the provisions of the Plan or Section 2.04(c)(iii) of the Exelis Excess Pension Plan IA, whichever is applicable, with the Committee on or prior to December 31, 2008, in accordance with procedures established by the Committee of the Plan. In the event a Participant has made a valid lump-sum election under the provisions of said

24

clause (iii), his Grandfathered Pre-2005 Benefit attributable to the TPP formula shall be paid in accordance with the provisions of said clause (iii).

Section 2.05 Payment Upon the Occurrence of an Acceleration Event

In the event an Acceleration Event occurs, regardless of whether or not such event satisfies the definition of a Change in Control event as defined in the foregoing provisions of this Plan, the provisions of this Section 2.05, which appears in Appendix B below, shall apply to the Participant’s Grandfathered Pre-2005 Benefit.

25

APPENDIX B

Provisions of the Plan as in effect on October 3, 2004

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

26

EX-10.20

EXHIBIT 10.20

EXELIS EXCESS PENSION PLAN IIA

Effective as of January 1, 1988As Amended and Restated as of October 31, 2011

EXELIS EXCESS PENSION PLAN IIA

The ITT Excess Benefit Plan II (the “Plan”) was effective as of January 1, 1988. The purpose of the Plan was to provide those employees participating in the Retirement Plan for Salaried Employees of ITT Corporation or any successor thereto (the “Retirement Plan”) benefits which would have been payable under the Retirement Plan but for the limitations imposed on qualified plans by Section 415 of the Internal Revenue Code of 1986, as amended (the “Code”).

Effective as of January 1, 1988, the ITT Select Management Plan II was authorized by the Board of Directors of ITT Corporation (the “Corporation”) to pay supplemental benefits to certain select management or highly compensated employees who have qualified for benefits under the Retirement Plan. As of December 19, 1995, the ITT Select Management Plan II was merged into the ITT Excess Benefit Plan II, the surviving Plan was amended to accept the liabilities under ITT Industries Excess Pension Plan I attributable to all participants thereunder other than former or current Presidents, Chairmen, Chief Executive Officers, Chief Operating Officers or Executive Vice Presidents of ITT Industries, Inc. and was renamed the ITT Industries Excess Pension Plan II.

The Plan was amended, effective as of January 1, 2000, to reflect the changes in the Retirement Plan formula.

Effective as of July 13, 2004, the Plan was amended and restated to make certain administrative changes and to unify the definition of Acceleration Event (as defined herein) with other employee benefit plans of ITT Corporation (formerly known as ITT Industries, Inc.).

As of January 1, 2008, the Plan was amended to provide solely to individuals who are designated Eligible Employees (as defined herein) under the Plan on and after January 1, 2008, benefits which would have been payable on their behalf under the Retirement Plan but for the limitations on benefits imposed by Sections 415 and 401(a)(17) of the Code, to transfer all liabilities not attributable to such excess benefits into the ITT Excess Pension Plan IIB (which was authorized to be effective as of January 1, 2008) and to rename the Plan, as amended, the ITT Excess Pension Plan IIA.

With respect to a Participant (as defined herein) who (i) terminated employment with the Corporation and all its Associated Companies (as defined herein) by December 31, 2008, or (ii) was employed by ITT Corporation or one of its Associated Companies on October 1, 2008, and signed and submitted his signed acknowledgement of termination to the ITT HQ Compensation Department on or before December 31, 2008, formalizing his date of Termination of Employment (as defined herein) in 2009, the portion of his benefit, if any, payable under the provisions of this Plan equal to his Grandfathered Pre-2005 Benefit (as defined herein) was and shall continue to be subject to the provisions of the ITT Excess Pension Plan II as in effect on October 3, 2004, (attached hereto as Appendix C and made part hereof) without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code, unless otherwise provided in Appendix A.

Effective as of October 31, 2011, ITT Corporation restructured into three separate, publicly-traded companies named ITT Corporation, Exelis Inc., and Xylem Inc. In connection with the restructuring, the Plan is being amended, effective as of October 31, 2011, to reflect the restructuring and transfer

i

of the Plan sponsorship to Exelis Inc. When used hereinafter, the term Corporation shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation.

Effective as of October 31, 2011, the Plan is being renamed the Exelis Excess Pension Plan IIA. When used hereinafter, the term Plan shall collectively include the Exelis Excess Pension Plan IIA and, for the period prior to October 31, 2011, the ITT Excess Benefit Plan II and prior versions thereof. Effective December 31, 2016, the Plan is amended to cease all future accruals.

All benefits payable under this Plan, which is intended to constitute both an unfunded excess benefit plan under Section 3(36) of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and 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 Corporation. The Corporation may establish a trust in order to aid it in providing benefits due under the Plan.

ii

EXELIS EXCESS PENSION PLAN IIA

TABLE OF CONTENTS

		Page
ARTICLE I.	DEFINITIONS	1
1.01	Acceleration Event	1
1.02	Annuity Starting Date	1
1.03	Associated Company	1
1.04	Beneficiary	1
1.05	Board of Directors	1
1.06	Change in Control	1
1.07	Code	2
1.08	Committee	2
1.09	Company	2
1.10	Company Pension Plan	2
1.11	Corporation	2
1.12	Disability or Disabled	2
1.13	Eligible Employee	2
1.14	ERISA	2
1.15	Excess Benefit Portion	2
1.16	Grandfathered Pre-2005 Benefit	3
1.17	Participant	3
1.18	Plan	3
1.19	Plan Administrator	3
1.20	Retirement Plan	3
1.21	Select Management Portion	3
1.22	Specified Employee	3
1.23	Supplemental Benefit	4
1.24	409A Supplemental Benefit	4
1.25	Termination of Employment	4
ARTICLE II.	PARTICIPATION: AMOUNT AND PAYMENT OF BENEFITS	6
2.01	Participation	6
2.02	Amount of Supplemental Benefits	6
2.03	Vesting	8
2.04	Payment of Benefits	8
2.05	Payment Upon the Occurrence of a Change in Control	13
2.06	Reemployment of Former Participant or Retired Participant	14
ARTICLE III.	GENERAL PROVISIONS	15
3.01	Funding	15
3.02	Duration of Benefits	15
3.03	Discontinuance and Amendment	15

iii

3.04	Termination of Plan	16
3.05	Plan Not a Contract of Employment	16
3.06	Facility of Payment	16
3.07	Withholding Taxes	17
3.08	Nonalienation	17
3.09	Forfeiture for Cause	17
3.10	Transfers	17
3.11	Acceleration of or Delay in Payments	17
3.12	Indemnification	18
3.13	Claims Procedure	18
3.14	Construction	20
ARTICLE IV.	PLAN ADMINISTRATION	21
4.01	Responsibility for Benefit Determination	21
4.02	Duties of Committee	21
4.03	Procedure for Payment of Benefits Under the Plan	21
4.04	Compliance	22
APPENDIX A		23
APPENDIX B		25
APPENDIX C		26

iv

EXELIS EXCESS PENSION PLAN IIA

ARTICLE I.DEFINITIONS

The following terms when capitalized herein shall have the meanings assigned below.

1.01 Acceleration Event shall mean “Acceleration Event” as that term is defined under the provisions of the Plan as in effect on October 3, 2004.

1.02 Annuity Starting Date shall mean, unless the Plan expressly provides otherwise, the first day of the first period for which an amount is due as an annuity or any other form. However, if a Change in Control occurs, the Annuity Starting Date of a Participant with regard to his 409A Supplemental Benefit shall be the date such Change in Control occurs.

1.03 Associated Company shall mean any division, subsidiary or affiliated company of the Corporation not participating in the Plan which is an Associated Company, as defined in the Retirement Plan.

1.04 Beneficiary shall mean the person designated pursuant to the provisions of the Retirement Plan to receive benefits under said Retirement Plan after a Participant’s death. In the absence of a beneficiary designation under the provisions of the Retirement Plan, the Participant’s Beneficiary shall be his spouse (or Registered Domestic Partner (as defined in the Retirement Plan)), if any, otherwise his estate. Notwithstanding the foregoing, with respect to any survivor benefit payable pursuant to the provision of Section 2.04(c)(ii) based on the Participant’s 409A Supplemental Benefit attributable to the Traditional Pension Plan (“TPP”) formula (as defined in Section 4.01(b) of the Retirement Plan), in the absence of a beneficiary designation under the provisions of the Retirement Plan, the Participant’s Beneficiary shall be his spouse (or Registered Domestic Partner), if any, otherwise the person or persons named as his beneficiary (or beneficiaries) under the Exelis Salaried Investment and Savings Plan, if any, or if none, then the person or persons named as his beneficiary (or beneficiaries) under the Company’s life insurance program.

1.05 Board of Directors shall mean the Board of Directors of Exelis Inc. or any successor thereto.

1.06 Change in Control shall mean an event which shall occur if there is: (i) a change in the ownership of the Corporation; (ii) a change in the effective control of the Corporation; or (iii) a change in the ownership of a substantial portion of the assets of the Corporation.

For purposes of this Section, a change in the ownership occurs on the date on which any one person, or more than one person acting as a group (as defined in Treas. Reg. § 1.409A-3(i)(5)(v)(B)), acquires ownership of stock that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Corporation.

A change in the effective control occurs on the date on which either (i) a person, or more than one person acting as a group (as defined in Treas. Reg. § 1.409A-3(i)(5)(v)(B)), acquires

ownership of stock possessing 30% or more of the total voting power of the stock of the Corporation, taking into account all such stock acquired during the 12-month period ending on the date of the most recent acquisition, or (ii) a majority of the members of the Board of Directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of such Board of Directors prior to the date of the appointment or election, but only if no other corporation is a majority shareholder.

A change in the ownership of a substantial portion of assets occurs on the date on which any one person, or more than one person acting as a group (as defined in Treas. Reg. § 1.409A-3(i)(5)(v)(B)), other than a person or group of persons that is related to the Corporation, acquires assets that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Corporation immediately prior to such acquisition or acquisitions, taking into account all such assets acquired during the 12-month period ending on the date of the most recent acquisition.

The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Section 409A of the Code and the regulations promulgated thereunder.

1.07 Code shall mean the Internal Revenue Code of 1986, as amended from time to time.

1.08 Committee shall mean the Benefits Administration Committee under the Retirement Plan.

1.09 Company shall mean, effective October 31, 2011, Exelis Inc. or any successor by merger or purchase or otherwise and any Participating Unit (as that term is defined in the Retirement Plan) authorized by the Corporation to participate in the Plan with respect to its employees. When used herein, the term Company shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation, and any Participating Unit.

1.10 Company Pension Plan shall mean any tax qualified defined benefit plan other than the Retirement Plan maintained by the Company or an Associated Company.

1.11 Corporation shall mean, effective October 31, 2011, Exelis Inc., an Indiana corporation, or any successor by merger, purchase or otherwise. When used herein, the term Corporation shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation.

1.12 Disability or Disabled shall mean “Disability” as defined under Treas. Reg. § 1.409A-3(i)(4)(i) and (ii) and any subsequent guidance thereto.

1.13 Eligible Employee shall mean a member of the Retirement Plan who is not eligible to participate in the Exelis Excess Pension Plan IA or IB.

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

1.15 Excess Benefit Portion shall mean the portion of the Plan which is intended to constitute an unfunded excess benefit plan under Sections 3(36) and 4(b)(5) of Title I of ERISA which

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provides benefits not otherwise payable under the Retirement Plan due to restrictions imposed by Section 415 of the Code.

1.16 Grandfathered Pre-2005 Benefit shall mean, with respect to a Participant who (i) terminated employment on or prior to December 31, 2008, or (ii) was employed by the Company or an Associated Company on October 1, 2008, and signs and submits his acknowledgement of termination to the ITT HQ Compensation Department on or before December 31, 2008, formalizing his date of Termination of Employment in 2009, the portion of such Participant’s Supplemental Benefit, if any, which was accrued and vested before January 1, 2005, determined under the provisions of the Plan without regard to any amendments after October 3, 2004, which would cause a material modification for purposes of Section 409A of the Code, adjusted for the passage of time based on actuarial equivalent assumptions and procedures established by the Committee in accordance with the provisions of Treas. Reg. § 1.409A-6(a)(3)(iv).

1.17 Participant shall mean an Eligible Employee who is participating in the Plan pursuant to Section 2.01 hereof.

1.18 Plan shall mean the Exelis Excess Pension Plan IIA, as set forth herein or as amended from time to time.

1.19 Plan Administrator shall mean the Benefits Administration Committee (as defined in the Retirement Plan) or in the case of an appeal under Section 3.13(c), the Appeals Committee (as defined in the Retirement Plan).

1.20 Retirement Plan shall mean the Exelis Salaried Retirement Plan, which was formerly known prior to October 31, 2011, as the ITT Salaried Retirement Plan and prior to that the ITT Industries Salaried Retirement Plan, as amended from time to time.

1.21 Select Management Portion shall mean the portion of the Plan, other than the Excess Benefit Portion, which is intended to constitute an unfunded deferred compensation plan for a select group of management or highly compensated employees under Title I of ERISA.

1.22 Specified Employee shall mean a “specified employee” as such term is defined in the Treasury Regulation promulgated pursuant to Section 409A of the Code, as modified by the rules set forth below:

(a) For purposes of determining whether a Participant is a Specified Employee, the compensation of the Participant shall be determined in accordance with the definition of compensation provided under Treas. Reg. § 1.415(c)-2(d)(3) (wages within the meaning of Section 3401(a) of the Code for purposes of income tax withholding at the source, plus amounts excludible from gross income under Sections 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b) of the Code, without regard to rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed).

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(b) The “Specified Employee Identification Date” means December 31, unless the Compensation and Personnel Committee of the Board has elected a different date through action that is legally binding with respect to all nonqualified deferred compensation plans maintained by the Company or any Associated Company.

(c) The “Specified Employee Effective Date” means the first day of the fourth month following the Specified Employee Identification Date or such earlier date as is selected by the Compensation and Personnel Committee of the Board.

1.23 Supplemental Benefit shall mean the monthly benefit payable to a Participant as determined under Section 2.02, which shall include a Participant’s Excess Benefit Portion and Select Management Portion as determined pursuant to Section 2.02 of this Plan.

1.24 409A Supplemental Benefit shall mean the portion of a Participant’s Supplemental Benefit, if any, in excess of his Grandfathered Pre-2005 Benefit.

1.25 Termination of Employment shall mean a “Separation from Service” as such term is defined in the Treasury Regulation promulgated pursuant to Section 409A of the Code, as modified by the rules described below:

(a) A Participant who is absent from work due to military leave, sick leave, or other bona fide leave of absence pursuant to Company policies shall incur a Termination of Employment on the first date immediately following the later of (i) the six-month anniversary of the commencement of the leave (18-month anniversary for a disability leave of absence) or (ii) the expiration of the Employee’s right, if any, to reemployment under statute or contract or pursuant to Company policies. For this purpose, a “disability leave of absence” is an absence due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 6 months, where such impairment causes the Participant to be unable to perform the duties of his job or a substantially similar job.

(b) For purposes of determining whether another organization is an Associated Company of the Corporation, common ownership of at least 50% shall be determinative.

(c) The Corporation specifically reserves the right to determine whether a sale or other disposition of substantial assets to an unrelated party constitutes a Termination of Employment with respect to the Participant providing services to the seller immediately prior to the transaction and providing services to the buyer after the transaction. Such determination shall be made in accordance with the requirements of Section 409A of the Code.

(d) A Participant who on October 31, 2011, continued in employment with ITT Corporation or commenced employment with Xylem Inc. shall be treated as though he has not experienced a Termination of Employment until he has incurred a

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Termination of Employment with ITT Corporation or Xylem Inc., as the case may be.

Whether a Termination of Employment has occurred shall be determined by the Committee in accordance with Section 409A of the Code, the regulation promulgated thereunder, and other applicable guidance, as modified by rules described above. The terms or phrases “terminates employment,” “termination of employment,” “employment is terminated,” or any other similar terminology shall have the same meaning as a “Termination of Employment.”

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ARTICLE II.

PARTICIPATION; AMOUNT AND PAYMENT OF BENEFITS

2.01 Participation

(a) Each Eligible Employee who is a Participant in the Plan as of October 31, 2011, shall continue to be a Participant in the Plan, subject to the provisions of paragraph (d) below. An Eligible Employee whose retirement allowance or vested benefit under the Retirement Plan exceeds the limitations imposed by Sections 415(b) or 401(a)(17) of the Code shall become a Participant in the Plan.

(b) Each Eligible Employee’s annual retirement allowance or vested benefit which at the time of payment under the Retirement Plan exceeds the limitations imposed by Section 415(b) of the Code (or prior to January 1, 2000, Section 415(e) of the Code) shall be payable from the Excess Benefit Portion of the Plan.

(c) Each Eligible Employee’s annual retirement allowance or vested benefit which at the time of payment under the Retirement Plan is limited by reason of the limitation on Compensation (as that term is defined in the Retirement Plan) under Section 401(a)(17) of the Code shall be payable from the Select Management Portion of the Plan.

(d) A Participant’s participation in the Plan shall terminate upon the Participant’s death or other Termination of Employment with the Company and all Associated Companies, unless a benefit is payable under the Plan with respect to the Participant or his Beneficiary under the provisions of this Article II.

2.02 Amount of Supplemental Benefits

(a) A Participant’s Supplemental Benefit under this Article II shall be equal to the excess, if any, of (i) over (ii) as determined below:

(i) the monthly retirement allowance or vested benefit determined as of such Participant’s Termination of Employment which would have been payable to the Participant under Section 4.02, 4.03, 4.04, 4.05 or 4.06 of the Retirement Plan, whichever is applicable, assuming such benefit commences on the date set forth in Section 2.04(a)(i), (ii) or (iv) of this Plan, whichever is applicable, and

(1) prior to the application of any offset required pursuant to Section 4.10 or to an applicable Appendix of the Retirement Plan with regard to benefits payable under any other Company Pension Plan;

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(2) without regard to the provisions contained in Section 415 of the Code relating to the maximum limitation on benefits, as incorporated into the Retirement Plan; and

(3) without regard to the annual limitation on Compensation contained in Section 401(a)(17) of the Code, as incorporated into the Retirement Plan;

over

(ii) the monthly retirement allowance or vested benefit which would have been payable for the Participant’s lifetime under Section 4.02, 4.03, 4.04, 4.05 or 4.06 of the Retirement Plan, whichever is applicable, assuming such benefit commences on the date set forth in Section 2.04(a)(i), (ii) or (iv), whichever is applicable, and determined

(1) prior to the application of any offset required pursuant to Section 4.10 or an applicable Appendix of the Retirement Plan with regard to benefits payable under any other Company Pension Plan;

(2) with regard to the provisions contained in Section 415 of the Code relating to maximum limitation benefits as incorporated into the Retirement Plan; and

(3) with regard to the annual limitation on Compensation contained in Section 401(a)(17) of the Code, as incorporated into the Retirement Plan.

(b) Except as otherwise provided below, if, after a Participant’s Annuity Starting Date, changes to the Code or ERISA permit the Retirement Plan to provide for payment of a Participant’s monthly retirement allowance or vested benefit in an amount greater than that permissible at that particular Annuity Starting Date, the Participant’s monthly benefit under this Plan shall be reduced by the portion of his retirement allowance or vested benefit actually paid from the Retirement Plan. This provision shall not be applicable to any portion of a Participant’s Supplemental Benefit received in the form of a lump-sum payment.

(c) Notwithstanding anything to the contrary in Section 2.01 or Section 2.02(a), a Participant who on October 31, 2011, continued in employment with ITT Corporation or commenced employment with Xylem Inc. shall be treated for purposes of determining his Supplemental Benefit as though he earns Eligibility Service (as defined in the Retirement Plan) for Plan purposes until the earlier of October 31, 2016, the date such Participant terminates employment with ITT Corporation or Xylem Inc., the date on which the benefits under the Retirement Plan attributable to the TPP Formula commence, the date of his death or a Change in Control of ITT Corporation or Xylem Inc., as the case may be.

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(d) Notwithstanding anything to the contrary in Section 2.01 or 2.01(a), effective as of October 31, 2011, with respect to a Participant who on October 31, 2011, continued in employment with ITT Corporation or commenced employment with Xylem Inc., the interest rate credited per annum on the Pension Equity Plan (“PEP”) (as defined in Section 4.01(c) of the Retirement Plan) lump-sum value of the portion of a Participant’s Supplemental Benefit payable under Section 2.02 attributable to the PEP formula during the period beginning on October 31, 2011, and ending on the Participant’s Annuity Starting Date shall be the greater of the 10-year Treasury rate as in effect on December 31 of the prior calendar year or 3.25 percent.

(e) Notwithstanding anything to the contrary in Section 2.01 or this Section 2.02, effective December 31, 2016, Benefit Service (as defined under the Retirement Plan) and Compensation used to determine a Participant’s Supplemental Benefits under this Plan shall be frozen.

2.03 Vesting

(a) Each Participant shall be vested in, and have a nonforfeitable right to, the benefit payable under this Article II to the same extent as the Participant is vested in his Accrued Benefit (as that term is defined in the Retirement Plan) under the provisions of the Retirement Plan.

(b) Notwithstanding any provision of this Plan to the contrary, in the event of an Acceleration Event, all Participants and their Beneficiaries shall become fully vested in the benefits provided under this Plan.

(c) Notwithstanding any provision of this Plan to the contrary, a Participant who on October 31, 2011, was credited for purposes of the Retirement Plan with at least one year of Eligibility Service and continued in employment with ITT Corporation or commenced employment with Xylem Inc. shall become 100 percent vested in and have a nonforfeitable right to benefits under this Plan as of October 31, 2011.

2.04 Payment of Benefits

(a) Timing of Payment

(i) Subject to the provisions of clause (iii) below, the portion of any Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the TPP formula, to the extent vested pursuant to Section 2.03, shall commence as of the first day of the month following (1) the Participant’s Termination of Employment or (2) if the Participant is not at least age 50 on such date of Termination of Employment and his age and Eligibility Service as of such date does not equal 80 or more, the Participant’s attainment of age 55, if later. Notwithstanding the foregoing and subject to the provisions of Treas. Reg. § 1.409A-2(b), with respect to a Participant who is first employed by the Company or an Associated Company on or after January 1, 2000, the

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portion of such Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the TPP formula, if any, to the extent vested pursuant to Section 2.03, shall commence on the later of the first day of the month following the Participant’s attainment of age 55 or the Participant’s Termination of Employment.

(ii) Notwithstanding the foregoing provisions of clause (i) above and subject to the provisions of clause (iii) below, the portion of any Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the PEP formula, to the extent vested pursuant to Section 2.03, shall commence as of the first day of the month following the Participant’s Termination of Employment.

(iii) Notwithstanding the foregoing, if a Participant is classified as a “Specified Employee” on his date of Termination of Employment, the actual payment of a 409A Supplemental Benefit payable under Section 2.02 due to the Participant’s Termination of Employment for reasons other than death or Disability shall not commence prior to the first day of the seventh month following the Participant’s Termination of Employment. Any payment due the Participant which he would have otherwise received under Section 2.02 during the six-month period immediately following such Participant’s Termination of Employment shall be accumulated, with interest, at the IRS Interest Rate (as defined in the Retirement Plan) in accordance with procedures established by the Committee. For the avoidance of doubt, the provisions of this clause (iii) shall not apply to a 409A Supplemental Benefit payable under (1) Section 2.04(c) due to the death of the Participant or (2) Section 2.04(d) due to the Participant’s Disability.

(iv) Notwithstanding the foregoing, in the event a Participant who incurred a Termination of Employment prior to January 1, 2009, has not commenced payment of his 409A Supplemental Benefit as of January 1, 2009, such Participant’s 409A Supplemental Benefit shall commence as of April 1, 2009, (January 1, 2009, with respect to a Participant listed on Appendix B) or, if later, the date specified in clause (i), (ii) or (iii) above, whichever is applicable.

(v) A Participant’s Grandfathered Pre-2005 Benefit shall commence in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(b) Form of Benefit

(i) Unless a Participant has a valid election under clause (ii) below in effect, the portion of the Participant’s 409A Supplemental Benefit determined

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under Section 2.02 attributable to the TPP formula shall be paid in the form of a single life annuity for the life of the Participant if the Participant is not married on his Annuity Starting Date, or in the form of a 50% joint & survivor annuity, if the Participant is married (or has a Registered Domestic Partner) on his Annuity Starting Date.

(ii) Subject to the provisions of clause (iii) below, a Participant may elect to convert his 409A Supplemental Benefit payable under Section 2.02 attributable to the TPP formula into an optional annuity of equivalent actuarial value available to that Participant under the provisions of Section 4.07(b) of the Retirement Plan as of his Annuity Starting Date, provided said optional annuity satisfies the definition of “life annuity” as provided in Treas. Reg. § 1.409A-(2)(b)(2)(ii) and any further guidance thereto. Such equivalent actuarial value shall be based on the applicable factors set forth in Appendix A of the Retirement Plan.

(iii) Notwithstanding the foregoing and subject to the provisions of Section 409A of the Code, a Participant’s election to receive his 409A Supplemental Benefit attributable to the TPP formula in an optional annuity form of payment as described in clause (ii) above shall be effective as of the Participant’s Annuity Starting Date applicable to that portion of his 409A Supplemental Benefit, provided the Participant makes and submits to the Committee in the manner prescribed by the Committee, his election of such optional annuity form prior to such applicable Annuity Starting Date. A Participant who fails to elect an optional annuity form of benefit applicable to the TPP formula portion of his 409A Supplemental Benefit in a timely manner shall receive such benefit in accordance with the provisions of clause (i) above.

(iv) Notwithstanding the foregoing provisions of this Section 2.04(b), the portion of a Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the PEP formula shall be payable in the form of a single lump-sum payment. Such lump-sum payment shall be calculated on the same basis as provided in Section 4.07(b)(v) of the Retirement Plan except as otherwise provided in Section 2.02(d).

(v) The portion of the Participant’s Grandfathered Pre-2005 Benefit payable under Section 2.02 attributable to the TPP formula shall commence and the form of payment of such benefit shall be determined in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any Plan amendments after that date which would constitute a material modification for purposes of Section 409A of the Code. The portion of the Participant’s Grandfathered Pre-2005 Benefit payable under Section 2.02 attributable to the PEP formula shall be payable in accordance with the provisions of the Plan as in effect on October

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3, 2004, modified as set forth in Appendix A and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(c) Death Prior to a Participant’s Annuity Starting Date

(i) If a Participant entitled to a vested benefit under the Retirement Plan dies (1) before meeting the eligibility requirements for an Automatic Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan and while in active service with the Company or any Associated Company or while Disabled but before his Annuity Starting Date, or (2) after Termination of Employment with entitlement to a vested benefit hereunder but prior to his Annuity Starting Date, the Participant’s spouse (or Registered Domestic Partner) shall receive a monthly payment for life equal to the monthly income which would have been payable to such spouse (or Registered Domestic Partner) under Section 4.08(a) of the Retirement Plan based on the hypothetical benefit attributable to his Supplemental Benefit as calculated under Section 2.02 hereof assuming payments commence as of the first day of the month following the Participant’s date of death, or attainment of age 55, if later. The portion of such survivor benefit attributable to the Participant’s 409A Supplemental Benefit shall commence as of the first day of the month following the later of the Participant’s date of death, or the Participant’s attainment of age 55 (or in the event clause (iii) is applicable, the date specified in clause (iii)). Notwithstanding the foregoing, the portion of any benefit payable under this clause (i) attributable to the PEP formula portion of the benefit which would have been payable to the spouse (or Registered Domestic Partner) based on the hypothetical 409A Supplemental Benefit as calculated under Section 2.02 shall be determined assuming that portion of the survivor benefit commences as of the first day of the month following the Participant’s date of death (or the date specified in clause (iii), if later) and such benefit shall be payable in the form of a single lump-sum payment as of the first day of the month following the Participant’s date of death. This lump-sum payment shall be calculated on the same basis as provided in Section 4.08(a)(iii) of the Retirement Plan using the IRS Mortality Table (as defined in the Retirement Plan) and IRS Interest Rate. Notwithstanding any Plan provision to the contrary, the portion of any survivor benefit payable under this clause (i) attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be payable in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any Plan amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(ii) Except as otherwise provided below, in the event a Participant who has satisfied the eligibility requirements for the Automatic Pre-Retirement

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Survivor’s Benefit under Section 4.08(b) of the Retirement Plan, dies (1) while in active service with the Company or any Associated Company or (2) after his Termination of Employment or the date he becomes Disabled, if earlier, but prior to his Annuity Starting Date, the Participant’s Beneficiary, if any, shall receive a monthly payment for the life of the Beneficiary equal to the monthly income which would have been payable to such Beneficiary under Section 4.08(b) of the Retirement Plan based on the hypothetical retirement benefit attributable to his Supplemental Benefit as calculated under Section 2.02 hereof assuming payments commence on the first day of the month following the Participant’s death (or the date specified in clause (iii), if later). Notwithstanding the foregoing, the portion of any benefit payable under this clause (ii) attributable to the PEP formula portion of the benefit which would have been payable to the Beneficiary based on the hypothetical 409A Supplemental Benefit as calculated under Section 2.02 hereof shall be payable in the form of a single lump-sum payment. This lump-sum payment shall be calculated on the same basis as provided in Section 4.08(b)(iii) of the Retirement Plan except as otherwise provided in Section 2.02(d). The portion of any benefit payable under this clause (ii) attributable to a Participant’s 409A Supplemental Benefit as calculated under Section 2.02 hereof shall commence on the first day of the month following the Participant’s death.

The portion of such survivor benefit payable under this clause (ii) of paragraph (c) attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any Plan amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(iii) Notwithstanding the foregoing, in the event the survivor benefit payable under this Section 2.04(c) to the spouse or Beneficiary of a Participant who died prior to January 1, 2009, has not commenced as of January 1, 2009, such survivor benefit shall commence as of April 1, 2009, or, if later, the date specified in clauses (i) or (ii) above, whichever is applicable.

(d) Disability prior to Termination of Employment

(i) Notwithstanding any Plan provision to the contrary, in the event a Participant becomes Disabled prior to his Termination of Employment, the Participant shall be entitled to a Disability Supplemental Benefit equal to the amount determined under the provisions of Section 2.02(a) based on his years of Benefit Service, accrued under the Retirement Plan to the date he became Disabled plus the years of Benefit Service, if any, such Participant accrues under the terms of the Retirement Plan after the date he becomes Disabled and prior to the earlier of his attainment of age 65 or December 31, 2016.

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(ii) The portion of the Disability Supplemental Benefit determined under the provisions of clause (i) in excess of the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of paragraph (b) above and payments shall commence on the first day of the month following the month in which the Participant attains age 65.

(iii) Notwithstanding the foregoing, the portion of the Disability Supplemental Benefit attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of the Plan as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

2.05 Payment Upon the Occurrence of a Change in Control

Upon the occurrence of a Change in Control, (i) all retired Participants then receiving or then entitled to receive a 409A Supplemental Benefit under the Plan, (ii) all former Participants then receiving or then entitled to receive a 409A Supplemental Benefit hereunder, and (iii) all Participants who are then still in active service shall automatically receive, in a single lump-sum payment, the 409A Supplemental Benefit remaining due as of the Change in Control to any such retired or former Participant or the benefit, if any, accrued by such active Participant up to the Change in Control event and as determined under Section 2.02 hereof. The amount of such lump-sum payment attributable to the PEP formula portion of the Participant’s 409A Supplemental Benefit payable under this Plan not in payment status as of the occurrence of a Change in Control event shall be calculated on the same basis as provided in Section 4.07(b)(v) of the Retirement Plan using the IRS Mortality Table and IRS Interest Rate determined as if the date the Change in Control event occurs is the Participant’s Annuity Starting Date. The amount of the lump-sum payment attributable to the TPP formula portion of the Participant’s 409A Supplemental Benefit payable under this Plan shall be calculated on an actuarial equivalent basis using (i) the interest rate assumption used by the PBGC for valuing benefits for single employer plans as published by the PBGC for the month in which such Change in Control event occurs and (ii) the mortality table utilized as of the day immediately preceding the date the Change in Control event occurs under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. The interest rate for immediate annuities will be used, if the Participant has met the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance as of the Change in Control or is then in receipt of monthly payments under this Plan. Otherwise the Plan shall use the interest rate assumption for deferred annuities to the earliest date the Participant could have commenced payment of such benefit or, if it results in a larger lump sum, his Normal Retirement Date (as defined under the Retirement Plan). If the Participant is not in receipt of his monthly 409A Supplemental Benefit payments under this Plan as of the Change in Control, the calculation of a lump-sum payment hereunder of the portion of the Participant’s accrued benefit payable under this Plan attributable to the TPP formula portion shall be based on the Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to such

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TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on the Participant’s Annuity Starting Date; provided, however, if the Participant has not met the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance, the calculation of such lump-sum payment shall be based on the Participant’s accrued 409A Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on the earliest date he could have commenced payment of such benefit. In no event, however, shall the lump-sum payment determined under the preceding sentence be less than the lump-sum payment based on the Participant’s accrued 409 Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on his Normal Retirement Date. The calculation of a lump-sum payment hereunder shall be made on the basis of the Participant’s age (and Beneficiary’s age, if applicable) at the Change in Control and without regard to the possibility of any future changes after the Change in Control in the amount of benefits payable hereunder because of future changes in the limitations referred to in Section 2.02. The lump-sum payment shall be made within 90 days following the date the Change in Control event occurs. In the event the Participant dies after such Change in Control event occurs but before receiving such payment, the lump-sum payment shall be made to his Beneficiary. This lump-sum payment represents a complete settlement of all benefits on the Participant’s behalf under the Plan.

For avoidance of doubt, upon the occurrence of an Acceleration Event, either prior to, after or simultaneously with, the occurrence of a Change in Control, the provisions of Section 2.05 of the Plan as in effect on October 3, 2004, without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code shall be applicable to a Participant’s Grandfathered Pre-2005 Benefit.

2.06 Reemployment of Former Participant or Retired Participant

If a Participant who retired or otherwise terminated employment with the Company and all Associated Companies is reemployed as an employee by the Company or an Associated Company, such reemployment shall have no impact on the payment or timing of payment of any 409A Supplement Benefits earned prior to reemployment.

14

ARTICLE III.

GENERAL PROVISIONS

3.01 Funding

(f) 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, to the extent not paid from the assets of any trust established pursuant to paragraph (b) below.

(g) The Corporation may, for administrative reasons, establish a grantor trust for the benefit of Participants in the Plan. The assets placed in said trust shall be held separate and apart from other Corporation funds and shall be used exclusively for the purposes set forth in the Plan and the applicable trust agreement, subject to the following conditions:

(i) the creation of said trust shall not cause the Plan to be other than “unfunded” for purposes of Title I of ERISA;

(ii) the Corporation shall be treated as “grantor” of said trust for purposes of Section 677 of the Code; and

(iii) the agreement of said trust shall provide that its assets may be used upon the insolvency or bankruptcy of the Corporation to satisfy claims of the Company’s general creditors and that the rights of such general creditors are enforceable by them under federal and state law.

(h) To the extent that any person acquires a right to receive payments under the Plan, such right shall be no greater than the right of any unsecured creditor of the Corporation.

3.02 Duration of Benefits

Subject to Section 2.02(e), benefits shall accrue under the Plan on behalf of a Participant only for so long as the provisions of Sections 415 or 401(a)(17) of the Code limit the benefits that are payable under the Retirement Plan.

3.03 Discontinuance and Amendment

The Board of Directors reserves the right to modify, amend, or discontinue in whole or in part benefit accruals under the Plan at any time. However, no modification, amendment, or discontinuance shall adversely affect the right of any Participant to receive the benefits accrued as of the date of such modification, amendment or discontinuance and after the

15

occurrence of an Acceleration Event, no modification or amendment shall be made to Sections 2.03 or 2.05. Notwithstanding the foregoing, following any amendment and except as provided in Article II with respect to lump-sum payments hereunder, benefits may be adjusted as required to take into account the amount of benefits payable under the Retirement Plan after the application of the limitations referred to in Section 2.02.

3.04 Termination of Plan

The Board of Directors reserves the right to terminate the Plan at any time, provided, however, that no termination shall be effective retroactively. As of the effective date of termination of the Plan,

(a) the benefits of any Participant or Beneficiary whose benefit payments have commenced shall continue to be paid, but only to the extent such benefits are not otherwise payable under the Retirement Plan because of the limitations referred to in Section 2.02; and

(b) no further benefits shall accrue on behalf of any Participant whose benefits have not commenced, and such Participant and his Beneficiary shall retain the right to benefits hereunder; provided that, on or after the effective date of termination,

(iv) the Participant is vested under the Retirement Plan; and

(v) such benefits are not at any time otherwise payable under the Retirement Plan because of the limitations imposed by Sections 415 or 401(a)(17) of the Code.

All other provisions of this Plan shall remain in effect.

3.05 Plan Not a Contract of Employment

This 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 this 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 Corporation 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 agreements entered into pursuant thereto.

3.06 Facility of Payment

In the event that the Committee shall find that a Participant is unable to care for his affairs because of illness or accident or is a minor or has died, the Committee may, unless claim shall have been made therefore by a duly appointed legal representative, direct that any benefit payment due him, to the extent not payable from a grantor trust, be paid on his behalf to his spouse, a child, a parent or other blood relative, or to a person with whom he resides,

16

and any such payment so made shall be a complete discharge of the liabilities of the Corporation and the Plan therefore.

3.07 Withholding Taxes

The Company and an Associated Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes.

3.08 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 the person entitled to such benefits.

3.09 Forfeiture for Cause

In the event that a Participant shall at any time be convicted of a crime involving dishonesty or fraud on the part of such Participant in his relationship with the Company or an Associated Company, all benefits that would otherwise be payable to him or to a Beneficiary under the Plan shall be forfeited.

3.10 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 subsidiary) or its employees are no longer eligible to participate hereunder, 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, at the discretion and direction of the Corporation (and approval by the new employer), be transferred to a similar plan of such new employer and become a liability thereunder. Upon such transfer (and acceptance thereof by such new employer) the liabilities for such transferred benefits shall become the obligation of the new employer and the liability under this Plan for such benefits shall then 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 shall become the obligation of the Corporation.

3.11 Acceleration of or Delay in Payments

17

The 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. § 1.409A-3(j)(4). The Committee may also, in its sole and absolute discretion, delay the time for payment of a benefit owed to the Participant hereunder, to the extent permitted under Treas. Reg. § 1.409A-2(b)(7).

3.12 Indemnification

The members of the Committee, and the officers, employees and agents of the Company shall, unless prohibited by any applicable law, be indemnified against any and all liabilities arising by reason of any act or failure to act in relation to the Plan including, without limitation, expenses reasonably incurred in the defense of any claim relating to the Plan, amounts paid in any compromise or settlement relating to the Plan and any civil penalty or excise tax imposed by any applicable statute, if

(a) the act or failure to act shall have occurred

(i) in the course of the person’s service as an officer, employee or agent of the Company or as a member of the Committee, or as the Plan Administrator; or

(ii) in connection with a service provided with or without charge to the Plan or to the Participants or Beneficiaries of the Plan, if such service was requested by the Committee or the Plan Administrator; and

(b) the act or failure to act is in good faith and in, or not opposed to, the best interests of the Corporation.

This determination shall be made by the Corporation and, if such determination is made in good faith and not arbitrarily or capriciously, shall be conclusive.

The foregoing indemnification shall be from the assets of the Corporation. However, the Corporation’s obligation hereunder shall be offset to the extent of any otherwise applicable insurance coverage under a policy maintained by the Corporation or any other person, or other source of indemnification.

3.13 Claims Procedure

(a) Submission of Claims

Claims for benefits under the Plan shall be submitted in writing to the Committee or to an individual designated by the Committee for this purpose.

18

(b) Denial of Claim

If any claim for benefits is wholly or partially denied, the claimant shall be given written notice within 90 days following the date on which the claim is filed, which notice shall set forth:

(i) the specific reason or reasons for the denial;

(ii) specific reference to pertinent Plan provisions on which the denial is based;

(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; and

(iv) an explanation of the Plan’s claim review procedure, including information as to the steps to be taken if the claimant wishes to submit the claim for review and the time limits for requesting a review.

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 90 days following the date on which the claim is filed. Such an extension may not exceed a period of 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 is not furnished within 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 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 Committee, and may review pertinent documents and submit issues and comments in writing within such 60-day period.

Not later than 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 the extension. Such decision by an 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.

19

(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.

3.14 Construction

(a) The Plan is intended to constitute both an excess benefit arrangement and an unfunded deferred compensation arrangement maintained for a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA, and all rights under this Plan shall be governed by ERISA. Subject to the preceding sentence, the Plan shall be construed, regulated and administered under the laws of the State of New York, to the extent such laws are not superseded by applicable federal law.

(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.

(d) The headings and subheadings in the Plan have been inserted for convenience of reference only, and are to be ignored in any construction of the provisions thereof.

(e) 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.

20

ARTICLE IV.

PLAN ADMINISTRATION

4.01 Responsibility for Benefit Determination

The benefit of a Participant or Beneficiary under this Plan shall be determined either by the Committee or the Appeals Committee, as provided in Section 4.02 below, or such other party as is authorized under the terms of any grantor trust.

4.02 Duties of Committee

The Committee shall cause to be calculated, in accordance with Article II, the benefit of each Participant or Beneficiary under the Plan. To the extent a Participant’s, spouse’s or Beneficiary’s benefit are payable from the Plan, the Committee and as authorized in Section 3.13(c), the Appeals Committee, shall have full discretionary authority to resolve any question which shall arise under the Plan as to any person’s eligibility for benefits, the calculation of benefits, the form, commencement date, frequency, duration of payment, or the identity of the Beneficiary. Such question shall be resolved by the Committee and the Appeals Committee under rules uniformly applicable to all person(s) or employee(s) similarly situated. It is the intent of the Corporation that the provisions of the Plan comply with the provisions of Section 409A of the Code, any regulations and other guidance promulgated with respect thereto and the provisions of the Plan shall be interpreted to be consistent therewith.

4.03 Procedure for Payment of Benefits Under the Plan

With respect to any benefit to which a Participant or Beneficiary is entitled under this Plan which is not payable under any applicable grantor trust established by the Corporation to pay benefits under the Plan, the Committee (i) shall direct the commencement of benefit payments hereunder in accordance with the applicable procedures established by the Corporation, the Company and/or the Committee regarding the disbursement of amounts from the general funds of the Corporation and (ii) shall arrange, in conjunction with any other applicable excess benefit plan, for the payment of benefits under this Plan and/or any other applicable excess benefit plan.

With respect to any benefit to which a Participant or Beneficiary is entitled under this Plan which is payable under any applicable grantor trust established by the Corporation to pay benefits under the Plan, the Committee, acting for the Corporation and in accordance with the terms of any applicable grantor trust established by the Corporation to pay benefits under the Plan, shall forward the calculation of the Participant’s or Beneficiary’s benefit under Article II of the Plan to the Participant or Beneficiary for concurrence. Upon obtaining concurrence, the Committee, acting for the Corporation, shall forward such calculation and concurrence to the trustee of the grantor trust established by the Corporation to pay benefits under the Plan for the purpose of commencing payment of benefits in accordance with any

21

applicable grantor trust. Any question that shall arise with regard to the benefits payable to a Participant or Beneficiary under any applicable grantor trust shall be resolved in accordance with the provisions of said trust.

4.04 Compliance

With respect to benefits hereunder subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code and the provisions hereof shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code and the regulations thereunder, and the Plan shall be operated accordingly. If any provision of the Plan would otherwise frustrate or conflict with this intent, the provision will be interpreted and deemed amended so as to avoid this conflict. The Plan has been administered in good faith compliance with Section 409A of the Code and the guidance issued thereunder beginning on January 1, 2005.

22

APPENDIX A

Provisions Applicable to a Participant’s Grandfathered Pre-2005 Supplemental Benefit

This Appendix A constitutes an integral part of the Plan and is applicable with respect to the Grandfathered Pre-2005 Benefit of those individuals who were Participants in the Plan on December 31, 2004. The portion of a Participant’s Benefit, if any, determined under the provisions of Section 2.02 and Section 2.04(d) of the foregoing provisions of the Plan equal to his Grandfathered Pre-2005 Benefit is subject to the provisions of the Plan as in effect on October 3, 2004, modified as set forth in this Appendix A and without regard to any Plan amendments after October 3, 2004, which would constitute a material modification for Code Section 409A purposes. Section references in this Appendix A correspond to appropriate Sections of the said Plan as in effect on October 3, 2004, as set forth in Appendix C.

Article II — Participation Amount and Payment of Benefits

For purposes of Article II, the terms/phrases “termination of employment,” “terminates employment,” “retirement”, “employment is terminated” or other similar language shall mean, with respect to a Participant, the complete cessation of providing services to the Company and all Associated Companies as an employee.

Section 2.04 Payment of Benefits

(a) Retirement or Termination of Employment Effective on and After December 31, 1995

(i) Following a Participant’s retirement or termination of employment with the Company and all Associated Companies other than by reason of death, a Participant shall receive his Grandfathered Pre-2005 Benefit in the same form and at the same time as the Participant receives his corresponding retirement allowance or vested benefit under the Retirement Plan, except as otherwise provided below.

If a Participant becomes Disabled prior to his Termination of Employment, the portion of his Disability Supplemental Benefit equal to his Grandfathered Pre-2005 Benefit shall be paid at the same time and in the same form as his Retirement Plan benefit is paid.

(ii) Notwithstanding the foregoing provisions of clause (i) above, the portion of his Grandfathered Pre-2005 Benefit attributable to the PEP formula shall be payable in the form of a lump-sum payment and effective as of January 1, 2008, the Participant’s right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

23

(b) Death Prior to a Participant’s Annuity Starting Date

(i) The portion of the death benefit determined under Section 2.04(b)(i) of the foregoing provisions of this Plan attributable to a Participant’s Grandfathered Pre-2005 Benefit payable to a Participant’s spouse (or Registered Domestic Partner) shall be paid in the same form and at the same time said spouse (or Registered Domestic Partner) receives payment under the Automatic Vested Spouse Benefit of the Retirement Plan. Notwithstanding the foregoing, effective on and after January 1, 2008, the portion of any benefit payable under this clause (i) attributable to the PEP formula based on his Grandfathered Pre-2005 Benefit shall be payable in a single lump-sum payment and effective as of January 1, 2008, the spouse’s (or Registered Domestic Partner’s) right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

(ii) The portion of the death benefit determined under Section 2.04(b)(ii) of the foregoing provisions of the Plan attributable to a Participant’s Grandfathered Pre-2005 Benefit shall be payable to the Participant’s Beneficiary at the same time said Beneficiary would have received a Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan, provided, however, the portion of such survivor benefit attributable to the PEP formula shall be paid in a single lump-sum payment and effective as of January 1, 2008, the Beneficiary’s right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

Section 2.05 Payment Upon the Occurrence of an Acceleration Event

In the event an Acceleration Event occurs, regardless of whether or not such event satisfies the definition of a Change in Control event as defined in the foregoing provisions of this Plan, the provisions of this Section 2.05, which appears in Appendix C below, shall apply to the Participant’s Grandfathered Pre-2005 Benefit.

24

APPENDIX B

Name

James Crumley, Jr.

James Faughnan

John Krochmal

Ralph Meoni

Louis Dollive

Sean Osborne

Calvin Gorrel

Randolph Lopez

Melvin Hershey

Frank Koester

25

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 Plan provisions as in effect on October 3, 2004.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

26

EX-10.21

EXHIBIT 10.21

EXELIS EXCESS PENSION PLAN IIB

Effective as of January 1, 2008As Amended and Restated as of October 31, 2011

EXELIS EXCESS PENSION PLAN IIB

The ITT Excess Pension Plan IIB (the “Plan”) was authorized and adopted by the Board of Directors of ITT Corporation (the “Corporation”) to be effective as of January 1, 2008. The purpose of the Plan is to provide certain supplemental benefits to certain select management or highly compensated employees who qualify for benefits under the ITT Salaried Retirement Plan (the “Retirement Plan”).

Effective as of January 1, 2008, the ITT Excess Pension Plan II was amended (i) to provide solely to individuals who are eligible employees thereunder on and after January 1, 2008, the excess benefits which would have been payable under the Retirement Plan but for the limitations imposed by Sections 415 and 401(a)(17) of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) to transfer into the ITT Excess Pension Plan IIB (as the successor plan) all liabilities not attributable to such excess benefits. The Plan provisions effective as January 1, 2008, are substantially identical, except with respect to Plan participation, to the provisions of the ITT Excess Pension II as in effect on December 31, 2007, unless other indicated in Appendix A attached hereto.

Effective as of December 21, 2008, the Plan was amended and restated to comply with the provisions of Section 409A of the Code and the regulations promulgated thereunder.

The benefits accrued and vested under the provisions of the Plan by a Participant (as defined herein) who terminated employment with the Corporation and all its Associated Companies (as defined herein) prior to January 1, 2005, shall be subject to the provisions of the ITT Excess Pension Plan II as in effect on October 3, 2004, (attached hereto as Appendix C and made part hereof). In addition, with respect to a Participant (i) who terminated employment with the Corporation or one of its Associated Companies on or prior to December 31, 2008, or (ii) who was employed by the Company or an Associated Company on October 1, 2008, and signs and submits his acknowledge of termination to the ITT HQ Compensation Department on or before December 31, 2008, formalizing his date of Termination of Employment in 2009, the portion of his benefit payable under the provisions of this Plan equal to his Grandfathered Pre-2005 Benefit (as defined herein) shall be subject to the provisions of the ITT Excess Pension Plan II as in effect on October 3, 2004, without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code, unless otherwise provided in Appendix A.

Effective as of October 31, 2011, ITT Corporation restructured into three separate, publicly-traded companies named ITT Corporation, Exelis Inc., and Xylem Inc. In connection with the restructuring, the Plan is being amended, effective as of October 31, 2011, to reflect the restructuring and transfer of the Plan sponsorship to Exelis Inc. When used hereinafter, the term Corporation shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation.

Effective as of October 31, 2011, the Plan is being renamed the Exelis Excess Pension Plan IIB. When used hereinafter, the term Plan shall collectively include the Exelis Excess Pension Plan IIB and, for the period prior to October 31, 2011, the ITT Excess Benefit Plan IIB and prior versions thereof. Effective December 31, 2016, the Plan is amended to cease all future accruals.

All benefits payable under this Plan, which is intended to constitute a nonqualified, unfunded deferred compensation plan for a select group of management or highly compensated employees

i

under Title I of the Employee Retirement Income Security Act of 1974, as amended, shall be paid out of the general assets of the Corporation. The Corporation may establish a trust in order to aid it in providing benefits due under the Plan.

ii

EXELIS EXCESS PENSION PLAN IIB

TABLE OF CONTENTS

		Page
ARTICLE I.	DEFINITIONS	1
1.01	Acceleration Event	1
1.02	Annuity Starting Date	1
1.03	Associated Company	1
1.04	Beneficiary	1
1.05	Board of Directors	1
1.06	Change in Control	1
1.07	Code	1
1.08	Committee	1
1.09	Company	1
1.10	Company Pension Plan	2
1.11	Corporation	2
1.12	Deferred Compensation Program	2
1.13	Disability or Disabled	2
1.14	Eligible Employee	2
1.15	ERISA	2
1.16	Excess Plan II	2
1.17	Grandfathered Pre-2005 Benefit	2
1.18	Participant	2
1.19	Plan	2
1.20	Plan Administrator	2
1.21	Retirement Plan	2
1.22	Specified Employee	3
1.23	Supplemental Benefit	3
1.24	409A Supplemental Benefit	3
1.25	Termination of Employment	3
ARTICLE II.	PARTICIPATION: AMOUNT AND PAYMENT OF BENEFITS	4
2.01	Participation	4
2.02	Amount of Supplemental Benefits	4
2.03	Vesting	6
2.04	Payment of Benefits	6
2.05	Payment Upon the Occurrence of a Change in Control	11
2.06	Reemployment of Former Participant or Retired Participant	12
ARTICLE III.	GENERAL PROVISIONS	13
3.01	Funding	13
3.02	Duration of Benefits	13
3.03	Discontinuance and Amendment	13
3.04	Termination of Plan	14

iii

3.05	Plan Not a Contract of Employment	14
3.06	Facility of Payment	14
3.07	Withholding Taxes	15
3.08	Nonalienation	15
3.09	Forfeiture for Cause	15
3.10	Transfers	15
3.11	Acceleration of or Delay in Payments	15
3.12	Indemnification	16
3.13	Claims Procedure	16
3.14	Construction	18
ARTICLE IV.	PLAN ADMINISTRATION	19
4.01	Responsibility for Benefit Determination	19
4.02	Duties of Committee	19
4.03	Procedure for Payment of Benefits Under the Plan	19
4.04	Compliance	20
APPENDIX A		21
APPENDIX B		23
APPENDIX C		24

iv

EXELIS EXCESS PENSION PLAN IIB

ARTICLE I.DEFINITIONS

The following terms when capitalized herein shall have the meanings assigned below.

1.01 Acceleration Event shall mean “Acceleration Event” as that term is defined under the provisions of the Excess Plan II as in effect on October 3, 2004.

1.02 Annuity Starting Date shall mean, unless the Plan expressly provides otherwise, the first day of the first period for which an amount is due as an annuity or any other form. However, if a Change in Control occurs, the Annuity Starting Date of a Participant with regard to his 409A Supplemental Benefit shall be the date such Change in Control occurs.

1.03 Associated Company shall mean any division, subsidiary or affiliated company of the Corporation not participating in the Plan which is an Associated Company, as defined in the Retirement Plan.

1.04 Beneficiary shall mean the person designated pursuant to the provisions of the Retirement Plan to receive benefits under said Retirement Plan after a Participant’s death. In the absence of a beneficiary designation under the provisions of the Retirement Plan, the Participant’s Beneficiary shall be his spouse (or Registered Domestic Partner (as defined in the Retirement Plan)), if any, otherwise his estate. Notwithstanding the foregoing, with respect to any survivor benefit payable pursuant to the provision of Section 2.04(c)(ii) based on the Participant’s 409A Supplemental Benefit attributable to the Traditional Pension Plan (“TPP”) formula (as defined in Section 4.01(b) of the Retirement Plan), in the absence of a beneficiary designation under the provisions of the Retirement Plan, the Participant’s Beneficiary shall be his spouse (or Registered Domestic Partner), if any, otherwise the person or persons named as his beneficiary (or beneficiaries) under the Exelis Salaried Investment and Savings Plan, if any, or if none, then the person or persons named as his beneficiary (or beneficiaries) under the Company’s life insurance program.

1.05 Board of Directors shall mean the Board of Directors of Exelis Inc. or any successor thereto.

1.06 Change in Control shall mean “Change in Control” as such term is defined under the terms of the Exelis Excess Pension Plan IIA, as amended from time to time.

1.07 Code shall mean the Internal Revenue Code of 1986, as amended from time to time.

1.08 Committee shall mean the Benefits Administration Committee under the Retirement Plan.

1.09 Company shall mean, effective October 31, 2011, Exelis Inc. or any successor by merger or purchase or otherwise, and any Participating Unit (as that term is defined in the Retirement Plan) authorized by the Corporation to participate in the Plan with respect to its employees. When used herein, the term Company shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation and any Participating Unit.

1.10 Company Pension Plan shall mean any tax qualified defined benefit plan other than the Retirement Plan maintained by the Company or an Associated Company.

1.11 Corporation shall mean, effective October 31, 2011, Exelis Inc., an Indiana corporation, or any successor by merger, purchase or otherwise. When used herein, the term Corporation shall collectively include Exelis Inc. and, for the period prior to October 31, 2011, ITT Corporation.

1.12 Deferred Compensation Program shall mean any nonqualified deferred compensation plan maintained by the Company or an Associated Company.

1.13 Disability or Disabled shall mean “Disability” or “Disabled” as such terms are defined under the terms of the Exelis Excess Pension Plan IIA, as amended from time to time.

1.14 Eligible Employee shall mean a member of the Retirement Plan who is not eligible to participate in the Exelis Excess Pension Plan IA or IB.

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

1.16 Excess Plan II shall mean the ITT Excess Pension Plan II (formerly known as the ITT Industries Excess Pension Plan II).

1.17 Grandfathered Pre-2005 Benefit shall mean, with respect to a Participant who (i) terminated employment on or prior to December 31, 2008, or (ii) was employed by the Company or an Associated Company on October 1, 2008, and signs and submits his acknowledgement of termination to the ITT HQ Compensation Department on or before December 31, 2008, formalizing his date of Termination of Employment in 2009 the portion of such Participant’s Supplemental Benefit, if any, that was accrued and vested before January 1, 2005, determined under the provisions of Excess Plan II without regard to any amendments after October 3, 2004, which would cause a material modification for purposes of Section 409A of the Code, adjusted for the passage of time based on actuarial equivalent assumptions and procedures established by the Committee in accordance with the provisions of Treas. Reg. § 1.409A-6(a)(3)(iv).

1.18 Participant shall mean an Eligible Employee who is participating in the Plan pursuant to Section 2.01 hereof.

1.19 Plan shall mean the Exelis Excess Pension Plan IIB, as set forth herein or as amended from time to time.

1.20 Plan Administrator shall mean the Benefits Administration Committee (as defined in the Retirement Plan) or in the case of an appeal under Section 3.13(c), the Appeals Committee (as defined in the Retirement Plan).

1.21 Retirement Plan shall mean the Exelis Salaried Retirement Plan, which was formerly known prior to October 31, 2011, as the ITT Salaried Retirement Plan and prior to that the ITT Industries Salaried Retirement Plan, as amended from time to time.

2

1.22 Specified Employee shall mean a “specified employee” as such term is defined in the Exelis Excess Pension Plan IIA.

1.23 Supplemental Benefit shall mean the monthly benefit payable to a Participant as determined under Section 2.02.

1.24 409A Supplemental Benefit shall mean the portion of a Participant’s Supplemental Benefit, if any, in excess of his Grandfathered Pre-2005 Benefit.

1.25 Termination of Employment shall mean a “Separation from Service” as such term is defined in the Exelis Excess Pension Plan IIA.

3

ARTICLE II.PARTICIPATION; AMOUNT AND PAYMENT OF BENEFITS

2.01 Participation

(a) Each individual who is an Eligible Employee on October 31, 2011, whose annual retirement allowance or vested benefit under the Retirement Plan is reduced as a result of:

(i) deferrals of compensation under a Deferred Compensation Program; or

(ii) such other restrictions imposed by the Board of Directors with respect to the determination of a Participant’s retirement allowance or vested benefit under the Retirement Plan

shall, subject to the provisions of paragraph (c) below, remain as a Participant of this Plan on October 31, 2011.

(b) Effective on and after October 31, 2011, each other Eligible Employee whose annual retirement allowance or vested benefit under the Retirement Plan is reduced as a result of:

(i) deferrals of compensation under a Deferred Compensation Program; or

(ii) such other restrictions imposed by the Board of Directors with respect to the determination of a Participant’s retirement allowance or vested benefit under the Retirement Plan,

shall become a Participant in this Plan.

(c) A Participant’s participation in the Plan shall terminate upon the Participant’s death or other Termination of Employment with the Company and all Associated Companies, unless a benefit is payable under the Plan with respect to the Participant or his Beneficiary under the provisions of this Article II.

2.02 Amount of Supplemental Benefits

(a) A Participant’s Supplemental Benefit under this Article II shall be equal to the excess, if any, of (i) over (ii) as determined below:

(iii) the monthly retirement allowance or vested benefit determined as of such Participant’s Termination of Employment which would have been payable to the Participant under Section 4.02, 4.03, 4.04, 4.05 or 4.06 of the Retirement Plan, whichever is applicable, assuming such benefit commences on the date set forth in Section 2.04(a)(i), (ii) or (iv), of this Plan, whichever is applicable, and

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(1) prior to the application of any offset required pursuant to Section 4.10 or to an applicable Appendix of the Retirement Plan with regard to benefits payable under any other Company Pension Plan;

(2) without regard to the provisions contained in Section 415 of the Code relating to the maximum limitation on benefits, as incorporated into the Retirement Plan;

(3) without regard to the annual limitation on Compensation (as defined in the Retirement Plan) contained in Section 401(a)(17) of the Code, as incorporated into the Retirement Plan; and

(4) without regard to deferrals of compensation made pursuant to the Deferred Compensation Program.

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(iv) the monthly retirement allowance or vested benefit which would have been payable for the Participant’s lifetime under Section 4.02, 4.03, 4.04, 4.05 or 4.06 of the Retirement Plan, whichever is applicable, assuming such benefit commences on the date set forth in Section 2.04(a)(i), (ii) or (iv), whichever is applicable, and determined

(1) prior to the application of any offset required pursuant to Section 4.10 or an applicable Appendix of the Retirement Plan with regard to benefits payable under any other Company Pension Plan;

(2) without regard to the provisions contained in Section 415 of the Code relating to maximum limitation benefits, as incorporated into the Retirement Plan; and

(3) without regard to the annual limitation on Compensation contained in Section 401(a)(17) of the Code, as incorporated into the Retirement Plan.

(b) Notwithstanding anything to the contrary in Section 2.01 or Section 2.02(a), a Participant who on October 31, 2011, continued in employment with ITT Corporation or commenced employment with Xylem Inc. shall be treated for purposes of determining his Supplemental Benefit as though he earns Eligibility Service (as defined in the Retirement Plan) for Plan purposes until the earlier of October 31, 2016, the date such Participant terminates employment with ITT Corporation or Xylem Inc., the date on which the benefits under the Retirement Plan attributable to the TPP Formula commence, the date of his death or a Change in Control of ITT Corporation or Xylem Inc., as the case may be.

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(c) Notwithstanding anything to the contrary in Section 2.01 or 2.01(a), effective as of October 31, 2011, with respect to a Participant who on October 31, 2011, continued in employment with ITT Corporation or commenced employment with Xylem Inc., the interest rate credited per annum on the Pension Equity Plan (“PEP”) formula (as defined in Section 4.01(c) of the Retirement Plan) lump-sum value of the portion of a Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the PEP formula during the period beginning on October 31, 2011, and ending on the Participant’s Annuity Starting Date shall be the greater of the 10-year Treasury rate as in effect on December 31 of the prior calendar year or 3.25 percent.

(d) Notwithstanding anything to the contrary in Section 2.01 or this Section 2.02, effective December 31, 2016, Benefit Service and Compensation used to determine a Participant’s Supplemental Benefits under this Plan shall be frozen.

2.03 Vesting

(a) Each Participant shall be vested in, and have a nonforfeitable right to, the benefit payable under this Article II to the same extent as the Participant is vested in his Accrued Benefit (as that term is defined in the Retirement Plan) under the provisions of the Retirement Plan.

(b) Notwithstanding any provision of this Plan to the contrary, in the event of an Acceleration Event, all Participants and their Beneficiaries shall become fully vested in the benefits provided under this Plan.

(c) Notwithstanding any provision of this Plan to the contrary, a Participant who on October 31, 2011, was credited for purposes of the Retirement Plan with at least one year of Eligibility Service and continued in employment with ITT Corporation or Xylem Inc. shall become 100 percent vested in and have a nonforfeitable right to benefits under this Plan as of October 31, 2011.

2.04 Payment of Benefits

(a) Timing of Payment

(i) Subject to the provisions of clause (iii) below, the portion of any Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the TPP formula, to the extent vested pursuant to Section 2.03, shall commence as of the first day of the month following (1) the Participant’s Termination of Employment or (2) if the Participant is not at least age 50 on such date of Termination of Employment and his age and Eligibility Service as of such date does not equal 80 or more, the Participant’s attainment of age 55, if later. Notwithstanding the foregoing and subject to the provisions of Treas. Reg. § 1.409A-2(b), with respect to a Participant who is first employed by the Company or an Associated Company on or after January 1, 2000, the portion of such Participant’s 409A Supplemental Benefit payable under

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Section 2.02 attributable to the TPP formula, if any, to the extent vested pursuant to Section 2.03, shall commence on the later of the first day of the month following the Participant’s attainment of age 55 or the Participant’s Termination of Employment

(ii) Notwithstanding the foregoing provisions of clause (i) above and subject to the provisions of clause (iii) below, the portion of any Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the PEP formula, to the extent vested pursuant to Section 2.03, shall commence as of the first day of the month following the Participant’s Termination of Employment.

(iii) Notwithstanding the foregoing, if a Participant is classified as a “Specified Employee” on his date of Termination of Employment, the actual payment of a 409A Supplemental Benefit payable under Section 2.02 due to the Participant’s Termination of Employment for reasons other than death or Disability shall not commence prior to the first day of the seventh month following the Participant’s Termination of Employment. Any payment due the Participant which he would have otherwise received under Section 2.02 during the six-month period immediately following such Participant’s Termination of Employment shall be accumulated, with interest, at the IRS Interest Rate (as defined in the Retirement Plan) in accordance with procedures established by the Committee. For the avoidance of doubt, the provisions of this clause (iii) shall not apply to a 409A Supplemental Benefit payable under (1) Section 2.04(c) due to the death of the Participant or (2) Section 2.04(d) due to the Participant’s Disability.

(iv) Notwithstanding the foregoing, in the event a Participant who incurred a Termination of Employment prior to January 1, 2009, has not commenced payment of his 409A Supplemental Benefit as of April 1, 2009, (January 1, 2009, with respect to Participants listed in Appendix B), such Participant’s 409A Supplemental Benefit shall commence as of January 1, 2009, or, if later, the date specified in clause (i), (ii) or (iii) above, whichever is applicable.

(v) A Participant’s Grandfathered Pre-2005 Benefit shall commence in accordance with the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(b) Form of Benefit

(i) Notwithstanding any provisions of the Plan to the contrary, the portion of the Participant’s 409A Supplemental Benefit determined under Section 2.02 attributable to the TPP formula shall be paid in the same form as the

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Participant’s supplemental benefit determined under the provisions of the Exelis Excess Pension Plan IIA attributable to the TPP formula, if any, is paid. However, if the Participant is not entitled to a supplemental benefit under the provisions of the Exelis Excess Pension Plan IIA attributable to the TPP formula, then unless the Participant has a valid election under clause (ii) below in effect, the portion of the Participant’s 409A Supplemental Benefit determined under Section 2.02 attributable to the TPP formula shall be paid in the form of a single life annuity for the life of the Participant, if the Participant is not married on his Annuity Starting Date, or in the form of a 50% joint & survivor annuity, if the Participant is married (or has a Registered Domestic Partner) on his Annuity Starting Date.

(ii) Subject to the provisions of clause (iii) below, a Participant who is not entitled to a supplement benefit under the provisions of the Exelis Excess Pension Plan IIA attributable to the TPP formula may elect to convert his 409A Supplemental Benefit payable under Section 2.02 attributable to the TPP formula into an optional annuity of equivalent actuarial value available to that Participant under the provisions of Section 4.07(b) of the Retirement Plan as of his Annuity Starting Date, provided said optional annuity satisfies the definition of “life annuity” as provided in Treas. Reg. § 1.409A-(2)(b)(2)(ii) and any further guidance thereto. Such equivalent actuarial value shall be based on the applicable factors set forth in Appendix A of the Retirement Plan.

(iii) Notwithstanding the foregoing and subject to the provisions of Section 409A of the Code, a Participant’s election to receive his 409A Supplemental Benefit attributable to the TPP formula in an optional annuity form of payment as described in clause (ii) above shall be effective as of the Participant’s Annuity Starting Date applicable to that portion of his 409A Supplemental Benefit, provided the Participant makes and submits to the Committee in the manner prescribed by the Committee, his election of such optional annuity form prior to such applicable Annuity Starting Date. A Participant who fails to elect an optional annuity form of benefit applicable to the TPP formula portion of his 409A Supplemental Benefit in a timely manner shall receive such benefit in accordance with the provisions of clause (i) above.

(iv) Notwithstanding the foregoing provisions of this Section 2.04(b), the portion of a Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to the PEP formula shall be payable in the form of a single lump-sum payment. Such lump-sum payment shall be calculated on the same basis as provided in Section 4.07(b)(v) of the Retirement Plan except as otherwise provided in Section 2.02(c).

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(v) The portion of the Participant’s Grandfathered Pre-2005 Benefit payable under Section 2.02 attributable to the TPP formula shall commence and the form of payment of such benefit shall be determined in accordance with the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any Plan amendments after that date which would constitute a material modification for purposes of Section 409A of the Code. The portion of the Participant’s Grandfathered Pre-2005 Benefit payable under Section 2.02 attributable to the PEP formula shall be payable in accordance with the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in Appendix A and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(c) Death Prior to a Participant’s Annuity Starting Date

(i) If a Participant entitled to a vested benefit under the Retirement Plan dies (1) before meeting the eligibility requirements for an Automatic Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan and while in active service with the Company or any Associated Company or while Disabled but before his Annuity Starting Date, or (2) after Termination of Employment with entitlement to a vested benefit hereunder but prior to his Annuity Starting Date, the Participant’s spouse (or Registered Domestic Partner) shall receive a monthly payment for life equal to the monthly income which would have been payable to such spouse (or Registered Domestic Partner) under Section 4.08(a) of the Retirement Plan based on the hypothetical benefit attributable to his Supplemental Benefit as calculated under Section 2.02 hereof assuming payments commence as of the first day of the month following the Participant’s date of death or attainment of age 55, if later. The portion of such survivor benefit attributable to the Participant’s 409A Supplemental Benefit shall commence as of the first day of the month following the later of the Participant’s date of death or the Participant’s attainment of age 55 (or in the event clause (iii) is applicable, the date specified in clause (iii)). Notwithstanding the foregoing, the portion of any benefit payable under this clause (i) attributable to the PEP formula portion of the benefit which would have been payable to the spouse (or Registered Domestic Partner) based on the hypothetical 409A Supplemental Benefit as calculated under Section 2.02 shall be determined assuming that portion of the survivor benefit commences as of the first day of the month following the Participant’s date of death (or the date specified in clause (iii), if later) and such benefit shall be payable in the form of a single lump-sum payment as of the first day of the month following the Participant’s date of death. This lump-sum payment shall be calculated on the same basis as provided in Section 4.08(a)(iii) of the Retirement Plan using the IRS Mortality Table and IRS Interest Rate. Notwithstanding any Plan provision to the contrary, the portion of any survivor benefit payable

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under this clause (i) attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be payable in accordance with the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(ii) In the event a Participant who has satisfied the eligibility requirements for the Automatic Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan, dies (1) while in active service with the Company or any Associated Company or (2) after his Termination of Employment or the date he becomes Disabled, if earlier, but prior to his Annuity Starting Date, the Participant’s Beneficiary, if any, shall receive a monthly payment for the life of the Beneficiary equal to the monthly income which would have been payable to such Beneficiary under Section 4.08(b) of the Retirement Plan based on the hypothetical retirement benefit attributable to his Supplemental Benefit as calculated under Section 2.02 hereof assuming payments commence on the first day of the month following the Participant’s death (or the date specified in clause (iii), if later). Notwithstanding the foregoing, the portion of any benefit payable under this clause (ii) attributable to the PEP formula portion of the benefit which would have been payable to the Beneficiary based on the hypothetical 409A Supplemental Benefit as calculated under Section 2.02 hereof shall be payable in the form of a single lump-sum payment. This lump-sum payment shall be calculated on the same basis as provided in Section 4.08(b)(iii) of the Retirement except as otherwise required by Section 2.02(c). The portion of any benefit payable under this clause (ii) attributable to a Participant’s 409A Supplemental Benefit as calculated under Section 2.02 hereof shall commence on the first day of the month following the Participant’s death.

The portion of such survivor benefit payable under this clause (ii) of paragraph (c) attributable to the Participant’s Grandfathered Pre-2005 Benefit shall commence in accordance with the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

(iii) Notwithstanding the foregoing, in the event the survivor benefit payable under this Section 2.04(c) to the spouse or Beneficiary of a Participant who died prior to January 1, 2009, has not commenced as of January 1, 2009, such survivor benefit shall commence as of January 1, 2009, or, if later, the date specified in clauses (i) or (ii) above, whichever is applicable.

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(d) Disability prior to Termination of Employment

(i) Notwithstanding any Plan provision to the contrary, in the event a Participant becomes Disabled prior to his Termination of Employment, the Participant shall be entitled to a Disability Supplemental Benefit equal to the amount determined under the provisions of Section 2.02(a) based on his years of Benefit Service, accrued under the Retirement Plan to the date he became Disabled plus the years of Benefit Service, if any, such Participant accrues under the terms of the Retirement Plan after the date he becomes Disabled and prior to the earlier of his attainment of age 65 or December 31, 2016.

(ii) The portion of the Disability Supplemental Benefit determined under the provisions of clause (i) in excess of the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of paragraph (b) above and payments shall commence on the first day of the month following the month in which the Participant attains age 65.

(iii) Notwithstanding the foregoing, the portion of the Disability Supplemental Benefit attributable to the Participant’s Grandfathered Pre-2005 Benefit shall be paid in accordance with the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in Appendix A, and without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code.

2.05 Payment Upon the Occurrence of a Change in Control

Upon the occurrence of a Change in Control, (i) all retired Participants then receiving or then entitled to receive a 409A Supplemental Benefit under the Plan, (ii) all former Participants then receiving or then entitled to receive a 409A Supplemental Benefit hereunder, and (iii) all Participants who are then still in active service shall automatically receive, in a single lump-sum payment, the 409A Supplemental Benefit remaining due as of the Change in Control to any such retired or former Participant or the benefit, if any, accrued by such active Participant up to the Change in Control event and as determined under Section 2.02 hereof. The amount of such lump-sum payment attributable to the PEP formula portion of the Participant’s 409A Supplemental Benefit payable under this Plan not in payment status as of the occurrence of a Change in Control event shall be calculated on the same basis as provided in Section 4.07(b)(v) of the Retirement Plan using the IRS Mortality Table and IRS Interest Rate determined as if the date the Change in Control event occurs is the Participant’s Annuity Starting Date. The amount of the lump-sum payment attributable to the TPP formula portion of the Participant’s 409A Supplemental Benefit payable under this Plan shall be calculated on an actuarial equivalent basis using (i) the interest rate assumption used by the PBGC for valuing benefits for single employer plans as published by the PBGC for the month in which such Change in Control event occurs and (ii) the mortality table utilized as of the day immediately preceding the date the Change in Control event occurs under the provisions of the Retirement Plan to calculate the amount of a small lump-sum cashout. The interest rate for immediate annuities will be used, if the

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Participant has met the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance as of the Change in Control or is then in receipt of monthly payments under this Plan. Otherwise the Plan shall use the interest rate assumption for deferred annuities to the earliest date the Participant could have commenced payment of such benefit or, if it results in a larger lump sum, his Normal Retirement Date (as defined under the Retirement Plan). If the Participant is not in receipt of his monthly 409A Supplemental Benefit payments under this Plan as of the Change in Control, the calculation of a lump-sum payment hereunder of the portion of the Participant’s accrued benefit payable under this Plan attributable to the TPP formula portion shall be based on the Participant’s 409A Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on the Participant’s Annuity Starting Date; provided, however, if the Participant has not met the eligibility requirements to retire under the Retirement Plan with an early, normal or postponed retirement allowance, the calculation of such lump-sum payment shall be based on the Participant’s accrued 409A Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on the earliest date he could have commenced payment of such benefit. In no event, however, shall the lump-sum payment determined under the preceding sentence be less than the lump-sum payment based on the Participant’s accrued 409 Supplemental Benefit payable under Section 2.02 attributable to such TPP formula as if it were paid in the form of a single life annuity to the Participant commencing on his Normal Retirement Date. The calculation of a lump-sum payment hereunder shall be made on the basis of the Participant’s age (and Beneficiary’s age, if applicable) at the Change in Control and without regard to the possibility of any future changes after the Change in Control in the amount of benefits payable hereunder because of future changes in the limitations referred to in Section 2.02. The lump-sum payment shall be made within 90 days following the date the Change in Control event occurs. In the event the Participant dies after such Change in Control event occurs but before receiving such payment, the lump-sum payment shall be made to his Beneficiary. This lump-sum payment represents a complete settlement of all benefits on the Participant’s behalf under the Plan.

For avoidance of doubt, upon the occurrence of an Acceleration Event, either prior to, after or simultaneously with, the occurrence of a Change in Control, the provisions of Section 2.05 of the Excess Plan II as in effect on October 3, 2004, without regard to any amendments after October 3, 2004, which would constitute a material modification for purposes of Section 409A of the Code shall be applicable to a Participant’s Grandfathered Pre-2005 Benefit.

2.06 Reemployment of Former Participant or Retired Participant

If a Participant who retired or otherwise terminated employment with the Company and all Associated Companies is reemployed as an employee by the Company or an Associated Company, such reemployment shall have no impact on the payment or timing of payment of any 409A Supplement Benefits earned prior to reemployment.

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ARTICLE III.GENERAL PROVISIONS

3.01 Funding

(e) 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, to the extent not paid from the assets of any trust established pursuant to paragraph (b) below.

(f) The Corporation may, for administrative reasons, establish a grantor trust for the benefit of Participants in the Plan. The assets placed in said trust shall be held separate and apart from other Corporation funds and shall be used exclusively for the purposes set forth in the Plan and the applicable trust agreement, subject to the following conditions:

(iv) the creation of said trust shall not cause the Plan to be other than “unfunded” for purposes of Title I of ERISA;

(v) the Corporation shall be treated as “grantor” of said trust for purposes of Section 677 of the Code; and

(vi) the agreement of said trust shall provide that its assets may be used upon the insolvency or bankruptcy of the Corporation to satisfy claims of the Company’s general creditors and that the rights of such general creditors are enforceable by them under federal and state law.

(g) To the extent that any person acquires a right to receive payments under the Plan, such right shall be no greater than the right of any unsecured creditor of the Corporation.

3.02 Duration of Benefits

Subject to Section 2.02(d), benefits shall accrue under the Plan on behalf of a Participant only for so long as the deferrals of compensation under a Deferred Compensation Program or other restrictions referred to in Section 2.02 reduce the Participant’s accrual of benefits under the Retirement Plan.

3.03 Discontinuance and Amendment

The Board of Directors reserves the right to modify, amend, or discontinue in whole or in part, benefit accruals under the Plan at any time. However, no modification, amendment, or discontinuance shall adversely affect the right of any Participant to receive the benefits accrued as of the date of such modification, amendment or discontinuance and after the occurrence of an Acceleration Event, no modification or amendment shall be made to

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Sections 2.03 or 2.05. Notwithstanding the foregoing, following any amendment and except as provided in Article II with respect to lump-sum payments hereunder, benefits may be adjusted as required to take into account the amount of benefits payable under the Retirement Plan after the application of the limitations referred to in Section 2.02.

3.04 Termination of Plan

The Board of Directors reserves the right to terminate the Plan at any time, provided, however, that no termination shall be effective retroactively. As of the effective date of termination of the Plan,

(a) the benefits of any Participant or Beneficiary whose benefit payments have commenced shall continue to be paid, but only to the extent such benefits are not otherwise payable under the Retirement Plan because of the limitations referred to in Section 2.02; and

(b) no further benefits shall accrue on behalf of any Participant whose benefits have not commenced, and such Participant and his Beneficiary shall retain the right to benefits hereunder; provided that, on or after the effective date of termination:

(iv) the Participant is vested under the Retirement Plan or pursuant to Section 2.03(b) or (c) above; and

(v) such benefits are not at any time otherwise payable under the Retirement Plan because of the deferral of compensation under a Deferred Compensation Program.

All other provisions of this Plan shall remain in effect.

3.05 Plan Not a Contract of Employment

This 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 this 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 Corporation 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 agreements entered into pursuant thereto.

3.06 Facility of Payment

In the event that the Committee shall find that a Participant is unable to care for his affairs because of illness or accident or is a minor or has died, the Committee may, unless claim shall have been made therefore by a duly appointed legal representative, direct that any benefit payment due him, to the extent not payable from a grantor trust, be paid on his behalf to his spouse, a child, a parent or other blood relative, or to a person with whom he resides,

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and any such payment so made shall be a complete discharge of the liabilities of the Corporation and the Plan therefore.

3.07 Withholding Taxes

The Company and an Associated Company shall have the right to deduct from each payment to be made under the Plan any required withholding taxes.

3.08 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 the person entitled to such benefits.

3.09 Forfeiture for Cause

In the event that a Participant shall at any time be convicted of a crime involving dishonesty or fraud on the part of such Participant in his relationship with the Company or an Associated Company, all benefits that would otherwise be payable to him or to a Beneficiary under the Plan shall be forfeited.

3.10 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 subsidiary) or its employees are no longer eligible to participate hereunder, 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, at the discretion and direction of the Corporation (and approval by the new employer), be transferred to a similar plan of such new employer and become a liability thereunder. Upon such transfer (and acceptance thereof by such new employer) the liabilities for such transferred benefits shall become the obligation of the new employer and the liability under this Plan for such benefits shall then 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 shall become the obligation of the Corporation.

3.11 Acceleration of or Delay in Payments

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The 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. § 1.409A-3(j)(4). The Committee may also, in its sole and absolute discretion, delay the time for payment of a benefit owed to the Participant hereunder, to the extent permitted under Treas. Reg. § 1.409A-2(b)(7).

3.12 Indemnification

The members of the Committee, and the officers, employees and agents of the Company shall, unless prohibited by any applicable law, be indemnified against any and all liabilities arising by reason of any act or failure to act in relation to the Plan including, without limitation, expenses reasonably incurred in the defense of any claim relating to the Plan, amounts paid in any compromise or settlement relating to the Plan and any civil penalty or excise tax imposed by any applicable statute, if

(a) the act or failure to act shall have occurred

(i) in the course of the person’s service as an officer, employee or agent of the Company or as a member of the Committee, or as the Plan Administrator; or

(ii) in connection with a service provided with or without charge to the Plan or; to the Participants or Beneficiaries of the Plan, if such service was requested by the Committee or the Plan Administrator; and

(b) the act or failure to act is in good faith and in, or not opposed to, the best interests of the Corporation.

This determination shall be made by the Corporation and, if such determination is made in good faith and not arbitrarily or capriciously, shall be conclusive.

The foregoing indemnification shall be from the assets of the Corporation. However, the Corporation’s obligation hereunder shall be offset to the extent of any otherwise applicable insurance coverage under a policy maintained by the Corporation or any other person, or other source of indemnification.

3.13 Claims Procedure

(a) Submission of Claims

Claims for benefits under the Plan shall be submitted in writing to the Committee or to an individual designated by the Committee for this purpose.

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(b) Denial of Claim

If any claim for benefits is wholly or partially denied, the claimant shall be given written notice within 90 days following the date on which the claim is filed, which notice shall set forth:

(i) the specific reason or reasons for the denial;

(ii) specific reference to pertinent Plan provisions on which the denial is based;

(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; and

(iv) an explanation of the Plan’s claim review procedure, including information as to the steps to be taken if the claimant wishes to submit the claim for review and the time limits for requesting a review.

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 90 days following the date on which the claim is filed. Such an extension may not exceed a period of 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 is not furnished within 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 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 Committee, and may review pertinent documents and submit issues and comments in writing within such 60-day period.

Not later than 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 the extension. Such decision by an 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.

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(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.

3.14 Construction

(a) The Plan is intended to constitute both an excess benefit arrangement and an unfunded deferred compensation arrangement maintained for a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA, and all rights under this Plan shall be governed by ERISA. Subject to the preceding sentence, the Plan shall be construed, regulated and administered under the laws of the State of New York, to the extent such laws are not superseded by applicable federal law.

(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.

(d) The headings and subheadings in the Plan have been inserted for convenience of reference only, and are to be ignored in any construction of the provisions thereof.

(e) 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.

18

ARTICLE IV.PLAN ADMINISTRATION

4.01 Responsibility for Benefit Determination

The benefit of a Participant or Beneficiary under this Plan shall be determined either by the Committee or the Appeals Committee, as provided in Section 4.02 below, or such other party as is authorized under the terms of any grantor trust.

4.02 Duties of Committee

The Committee shall cause to be calculated, in accordance with Article II, the benefit of each Participant or Beneficiary under the Plan. To the extent a Participant’s, spouse’s or Beneficiary’s benefit are payable from the Plan, the Committee and as authorized in Section 3.13(c), the Appeals Committee, shall have full discretionary authority to resolve any question which shall arise under the Plan as to any person’s eligibility for benefits, the calculation of benefits, the form, commencement date, frequency, duration of payment, or the identity of the Beneficiary. Such question shall be resolved by the Committee and the Appeals Committee under rules uniformly applicable to all person(s) or employee(s) similarly situated. It is the intent of the Corporation that the provisions of the Plan comply with the provisions of Section 409A of the Code, any regulations and other guidance promulgated with respect thereto and the provisions of the Plan shall be interpreted to be consistent therewith.

4.03 Procedure for Payment of Benefits Under the Plan

With respect to any benefit to which a Participant or Beneficiary is entitled under this Plan which is not payable under any applicable grantor trust established by the Corporation to pay benefits under the Plan, the Committee (i) shall direct the commencement of benefit payments hereunder in accordance with the applicable procedures established by the Corporation, the Company and/or the Committee regarding the disbursement of amounts from the general funds of the Corporation and (ii) shall arrange, in conjunction with any other applicable excess benefit plan, for the payment of benefits under this Plan and/or any other applicable excess benefit plan.

With respect to any benefit to which a Participant or Beneficiary is entitled under this Plan which is payable under any applicable grantor trust established by the Corporation to pay benefits under the Plan, the Committee, acting for the Corporation and in accordance with the terms of any applicable grantor trust established by the Corporation to pay benefits under the Plan, shall forward the calculation of the Participant’s or Beneficiary’s benefit under Article II of the Plan to the Participant or Beneficiary for concurrence. Upon obtaining concurrence, the Committee, acting for the Corporation, shall forward such calculation and concurrence to the trustee of the grantor trust established by the Corporation to pay benefits under the Plan for the purpose of commencing payment of benefits in accordance with any applicable grantor trust. Any question that shall arise with regard to the benefits payable to

19

a Participant or Beneficiary under any applicable grantor trust shall be resolved in accordance with the provisions of said trust.

4.04 Compliance

With respect to benefits hereunder subject to Section 409A of the Code, the Plan is intended to comply with the requirements of Section 409A of the Code and the provisions hereof shall be interpreted in a manner that satisfies the requirements of Section 409A of the Code and the regulations thereunder, and the Plan shall be operated accordingly. If any provision of the Plan would otherwise frustrate or conflict with this intent, the provision will be interpreted and deemed amended so as to avoid this conflict. The Plan has been administered in good faith compliance with Section 409A of the Code and the guidance issued thereunder beginning on January 1, 2005.

20

APPENDIX A

Provisions Applicable to a Participant’s Grandfathered Pre-2005 Supplemental Benefit

This Appendix A constitutes an integral part of the Plan and is applicable with respect to the Grandfathered Pre-2005 Benefit of those individuals who were Participants in the Excess Plan II on December 31, 2004. The portion of a Participant’s Benefit, if any, determined under the provisions of Section 2.02 and Section 2.04(d) of the foregoing provisions of the Plan equal to his Grandfathered Pre-2005 Benefit is subject to the provisions of the Excess Plan II as in effect on October 3, 2004, modified as set forth in this Appendix A and without regard to any Plan amendments after October 3, 2004, which would constitute a material modification for Code Section 409A purposes. Section references in this Appendix A correspond to appropriate Sections of the said Plan as in effect on October 3, 2004, as set forth in Appendix C.

Article II — Participation Amount and Payment of Benefits

For purposes of Article II, the terms/phrases “termination of employment,” “terminates employment,” “retirement”, “employment is terminated” or other similar language shall mean, with respect to a Participant, the complete cessation of providing services to the Company and all Associated Companies as an employee.

Section 2.04 Payment of Benefits

(b) Retirement or Termination of Employment Effective on or After January 1, 1996

(i) Following a Participant’s retirement or termination of employment with the Company and all Associated Companies other than by reason of death, a Participant shall receive his Grandfathered Pre-2005 Benefit in the same form and at the same time as the Participant receives his corresponding retirement allowance or vested benefit under the Retirement Plan, except as otherwise provided below.

If a Participant becomes Disabled prior to his Termination of Employment, the portion of his Disability Supplemental Benefit equal to his Grandfathered Pre-2005 Benefit shall be paid at the same time and in the same form as his Retirement Plan benefit is paid.

(ii) Notwithstanding the foregoing provisions of clause (i) above, the portion of his Grandfathered Pre-2005 Benefit attributable to the PEP formula shall be payable in the form of a lump-sum payment and effective as of January 1, 2008, the Participant’s right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

21

(c) Death Prior to a Participant’s Annuity Starting Date

(i) The portion of the death benefit determined under Section 2.04(c)(i) of the foregoing provisions of this Plan attributable to a Participant’s Grandfathered Pre-2005 Benefit payable to a Participant’s spouse (or Registered Domestic Partner) shall be paid in the same form and at the same time said spouse (or Registered Domestic Partner) receives payment under the Automatic Vested Spouse Benefit of the Retirement Plan. Notwithstanding the foregoing, effective on and after January 1, 2008, the portion of any benefit payable under this clause (i) attributable to the PEP formula based on his Grandfathered Pre-2005 Benefit shall be payable in a single lump-sum payment and effective as of January 1, 2008, the spouse’s (or Registered Domestic Partner’s) right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

(ii) The portion of the death benefit determined under Section 2.04(c)(ii) of the foregoing provisions of the Plan attributable to a Participant’s Grandfathered Pre-2005 Benefit shall be payable to the Participant’s Beneficiary at the same time said Beneficiary would have received a Pre-Retirement Survivor’s Benefit under Section 4.08(b) of the Retirement Plan, provided, however, the portion of such survivor benefit attributable to the PEP formula shall be paid in a single lump-sum payment and effective as of January 1, 2008, the Beneficiary’s right to convert such PEP formula portion of his Grandfathered Pre-2005 Benefit into a form of life annuity is eliminated.

Section 2.05 Payment Upon the Occurrence of an Acceleration Event

In the event an Acceleration Event occurs, regardless of whether or not such event satisfies the definition of a Change in Control event as defined in the foregoing provisions of this Plan, the provisions of this Section 2.05, which appears in Appendix C below, shall apply to the Participant’s Grandfathered Pre-2005 Benefit.

22

APPENDIX B

Name

James Crumley, Jr.

James Faughnan

John Krochmal

Ralph Meoni

Louis Dollive

Sean Osborne

Calvin Gorrel

Randolph Lopez

Melvin Hershey

Frank Koester

23

APPENDIX C

Provisions of the ITT Industries Excess Pension Plan II as in effect on October 3, 2004

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

24

EX-12

EXHIBIT 12

EXELIS INC.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	Six months ended June 30,		Year Ended December 31,
(IN MILLIONS, EXCEPT RATIO)	2013		2012		2011		2010		2009		2008
Earnings
Income from continuing operations before income tax expense	$	184	$	521	$	537	$	696	$	700	$	657
Add Fixed Charges
Interest expense	18		38		10		—		1		2
Interest component of rental expense (a)	8		16		15		14		14		13
Total earnings available for fixed charges	$	210	$	575	$	562	$	710	$	715	$	672
Total Fixed Charges	$	26	$	54	$	25	$	14	$	15	$	15
Ratio of earnings to fixed charges	8.1		10.6		22.5		50.7		47.7		44.8

(a) Represents the portion of operating leases which management believes is a reasonable representation of an interest factor.

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF DAVID F. MELCHER PURSUANT TO SEC. 302

OF THE SARBANES-OXLEY ACT OF 2002

I, David F. Melcher, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its combined subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 2, 2013	/S/ DAVID F. MELCHER
(Date)	David F. Melcher
	Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PETER J. MILLIGAN PURSUANT TO SEC. 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Peter J. Milligan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its combined subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 2, 2013	/S/ PETER J. MILLIGAN
(Date)	Peter J. Milligan
	Senior Vice President
	and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Exelis Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David F. Melcher, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 2, 2013	/S/ DAVID F. MELCHER
(Date)	David F. Melcher
	Chief Executive Officer and President

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Exelis Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter J. Milligan, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 2, 2013	/S/ PETER J. MILLIGAN
(Date)	Peter J. Milligan
	Senior Vice President
	and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Postretirement Benefit Plans

6 Months Ended

Jun. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Postretirement Benefit Plans

POSTRETIREMENT BENEFIT PLANS

The following table provides the components of net periodic benefit cost for our defined benefit plans, including defined benefit pension plans and other postretirement defined benefit plans:

	Three Months Ended June 30,
	2013									2012
	Pension			Other Benefits			Total			Pension			Other Benefits			Total
Net periodic benefit cost
Service cost	$	19		$	—		$	19		$	19		$	1		$	20
Interest cost	60			4			64			66			5			71
Expected return on plan assets	(86		)	(5		)	(91		)	(95		)	(6		)	(101		)
Amortization of net actuarial loss	26			3			29			18			4			22
Amortization of prior service cost (credit)	1			—			1			—			—			—
Net periodic benefit cost	$	20		$	2		$	22		$	8		$	4		$	12

	Six Months Ended June 30,
	2013									2012
	Pension			Other Benefits			Total			Pension			Other Benefits			Total
Net periodic benefit cost
Service cost	$	38		$	1		$	39		$	38		$	2		$	40
Interest cost	120			9			129			132			11			143
Expected return on plan assets	(171		)	(11		)	(182		)	(191		)	(11		)	(202		)
Amortization of net actuarial loss	54			6			60			36			7			43
Amortization of prior service cost (credit)	2			—			2			1			(1		)	—
Net periodic benefit cost	$	43		$	5		$	48		$	16		$	8		$	24

We contributed $62 and $261 to our qualified defined benefit pension plans during the six months ended June 30, 2013 and 2012, respectively. We currently anticipate making additional contributions to our qualified defined benefit pension plans in the range of $80 to $90 during the remainder of 2013.

During the second quarter of 2013, the U.S. Salaried Retirement Plan (U.S. SRP) and related Excess Pension Plans were amended to freeze all future benefit accruals effective December 31, 2016. As a result, the assets and liabilities of the U.S. SRP and related plans were re-measured as of May 31, 2013, improving the funded status of the plans by approximately $190 due to a reduced projected benefit obligation primarily caused by the use of a higher discount rate and lower projected actuarial loss. The re-measurement will reduce net periodic benefit costs by approximately $14 in 2013 primarily due to lower service costs.

XML

Debt - Additional Information (Details) (USD $)			6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Line of Credit [Member]	Jun. 30, 2013 Line of Credit [Member] Revolving Credit Facility	Dec. 31, 2012 Line of Credit [Member] Revolving Credit Facility	Jun. 30, 2013 Line of Credit [Member] Letter of Credit [Member]	Dec. 31, 2012 Line of Credit [Member] Letter of Credit [Member]	Jun. 30, 2013 Senior Notes [Member]	Dec. 31, 2012 Senior Notes [Member]	Jun. 30, 2013 Senior Notes [Member] Senior Notes Due 2016	Dec. 31, 2012 Senior Notes [Member] Senior Notes Due 2016	Jun. 30, 2013 Senior Notes [Member] Senior Notes Due 2021	Dec. 31, 2012 Senior Notes [Member] Senior Notes Due 2021
Debt Instrument [Line Items]
Credit facility, maturity			4 years
Credit facility, expiration date			Oct. 25, 2015
Credit facility, extension period			1 year
Credit facility, current borrowing capacity				$ 600,000,000		$ 100,000,000
Credit facility, amount outstanding				0	0	0	0
Ratio of total indebtedness to combined EBITDA			3.50
Long-term debt	650,000,000	650,000,000								250,000,000	250,000,000	400,000,000	400,000,000
Interest rate										4.25%		5.55%
Accrued interest payable, included in other accrued liabilities								$ 8,000,000	$ 8,000,000

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 259	$ 292
Receivables, net	1,035	995
Inventories, net	297	283
Deferred tax asset	65	85
Other current assets	56	58
Total current assets	1,712	1,713
Plant, property and equipment, net	508	512
Goodwill	2,185	2,180
Other intangible assets, net	177	184
Deferred tax asset	470	556
Other non-current assets	65	67
Total non-current assets	3,405	3,499
Total assets	5,117	5,212
Current liabilities
Accounts payable	368	444
Advance payments and billings in excess of costs	327	322
Compensation and other employee benefits	219	246
Other accrued liabilities	249	203
Total current liabilities	1,163	1,215
Defined benefit plans	1,924	2,203
Long-term debt	649	649
Deferred tax liability	3	1
Other non-current liabilities	130	128
Total non-current liabilities	2,706	2,981
Total liabilities	3,869	4,196
Commitments and contingencies (Note 15)
Shareholders’ equity
Common stock	2	2
Additional paid-in capital	2,590	2,575
Treasury stock	(5)	0
Retained earnings	355	274
Accumulated other comprehensive loss	(1,694)	(1,835)
Total shareholders’ equity	1,248	1,016
Total liabilities and shareholders’ equity	$ 5,117	$ 5,212

XML

Shareholders' Equity

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Shareholders' Equity

SHAREHOLDERS’ EQUITY

Capital Stock

Authorized capital was comprised of 750 shares of common stock ($0.01 par value per share (in whole dollars)) and 50 shares of preferred stock (no par value) on June 30, 2013 and December 31, 2012. There were 188.5 and 188.3 shares of common stock issued at June 30, 2013 and December 31, 2012, respectively, and 188.1 and 188.3 shares of common stock outstanding at June 30, 2013 and December 31, 2012, respectively. No preferred stock was issued and outstanding at June 30, 2013 and December 31, 2012.

During the three months ended June 30, 2013, we repurchased a total of 0.4 shares of our common stock under our share repurchase program for $5, and as of June 30, 2013 the Company had remaining authorization of $95 for future share repurchases through December 31, 2015. We account for shares repurchased as treasury stock under the cost method.

Dividends

On May 8, 2013, our Board of Directors declared a cash dividend of $0.10 per share, payable on July 1, 2013 to shareholders of record on May 24, 2013. During the six months ended June 30, 2013, we declared two quarterly cash dividends totaling $39 or $0.21 per share (in whole dollars).

XML

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Reconciliation of Basic and Diluted Earnings (Loss) Per Share

The following table sets forth the reconciliation of basic and diluted weighted average shares outstanding for our earnings per share calculations:

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Weighted average common shares outstanding	188.2	186.7	188.0	186.0
Add: Weighted average restricted stock awards outstanding(a)	—	0.8	0.2	1.1
Basic weighted average common shares outstanding	188.2	187.5	188.2	187.1
Add: Dilutive impact of stock options	0.5	0.5	0.4	0.5
Add: Dilutive impact of restricted stock units	1.8	0.5	1.6	0.4
Diluted weighted average common shares outstanding	190.5	188.5	190.2	188.0

(a) Restricted stock awards containing rights to non-forfeitable dividends which participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share.

XML

Stock-Based Compensation - Schedule of Compensation Costs (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation cost for awards	$ 11	$ 8	$ 16	$ 13
Future tax benefit	4	3	5	5
Equity-based Awards [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation cost for awards	8	7	13	12
Liability-based Awards [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Compensation cost for awards	$ 3	$ 1	$ 3	$ 1

XML

Stock-Based Compensation

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

STOCK-BASED COMPENSATION

The Company maintains an equity incentive plan to govern awards granted to Exelis employees and directors, including awards of non-qualified stock options (NQOs), restricted stock units (RSUs), total shareholder return (TSR) awards, and other awards.

The following table provides the impact of these costs in our unaudited Condensed Consolidated Statements of Operations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Compensation cost for equity-based awards	$	8	$	7	$	13	$	12
Compensation cost for liability-based awards	3		1		3		1
Total compensation costs, pre-tax	$	11	$	8	$	16	$	13
Future tax benefit	$	4	$	3	$	5	$	5

At June 30, 2013, total unrecognized compensation costs related to equity-based awards and liability-based awards were $31 and $7, respectively, which are expected to be recognized ratably over a weighted-average period of 2.2 years and 2.1 years, respectively.

The following table provides a summary of the activities for NQOs and restricted stock, including RSUs and restricted stock awards, for the three months ended June 30, 2013:

	Stock Options				Restricted Stock
	Shares		Weighted  Average Exercise Price(a)		Shares		Weighted  Average Grant Date Fair value (a)
Outstanding at January 1, 2013	11.36		$	11.06	3.56		$	11.67
Granted	2.89		11.11		1.13		11.14
Exercised	(0.38	)	8.29		—		—
Vested	—		—		(0.79	)	12.00
Forfeited, canceled or expired	(0.61	)	11.96		(0.13	)	11.21
Outstanding at June 30, 2013	13.26		$	11.11	3.77		$	11.45

(a) In whole dollars.

During the six months ended June 30, 2013, we granted long-term incentive awards to employees consisting of 2.9 NQOs and 1.1 RSUs with respective weighted average grant date fair values (in whole dollars) of $1.93 and $11.14. The NQOs vest annually in three equal installments and have a ten-year expiration period. RSUs vest on the completion of a three-year service period. We also granted TSR awards with an aggregate target value of $4 that are cash settled at the end of a three-year performance period.

The fair values of NQOs are estimated on the date of grant using the Black-Scholes model. The fair values of RSUs are determined based on the closing price of Exelis common stock on the date of grant. The fair values of TSR awards are measured quarterly based on the Company’s performance relative to the performance of a concentrated group of our peer companies and the S&P 1500 Aerospace and Defense index. Depending on the Company’s performance during the three-year performance period, payment can range from 0% to 200% of the target value.

The following table details the weighted average assumptions utilized in determining the fair value of the NQOs granted during the first six months of 2013.

Dividend yield	3.72		%
Expected volatility	27.0		%
Expected life (in years)	7.0
Risk-free rates	1.40		%
Grant date fair value (in whole dollars)	$	1.93

XML

Goodwill and Other Intangible Assets, Net - Schedule of Other Intangible Assets (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 561	$ 554
Accumulated Amortization	(384)	(370)
Net Intangibles	177	184
Customer and Distributor Relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	525	524
Accumulated Amortization	(360)	(348)
Net Intangibles	165	176
Proprietary Technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	29	25
Accumulated Amortization	(20)	(18)
Net Intangibles	9	7
Trademarks, Patents and Other
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	7	5
Accumulated Amortization	(4)	(4)
Net Intangibles	$ 3	$ 1

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Stock-Based Compensation - Summary of Non-Qualified Stock Options and Restricted Stock Activity (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Stock Options
Stock Options, Outstanding [Roll Forward]
Outstanding at beginning of period	11.36
Granted	2.89
Exercised	(0.38)
Forfeited, canceled or expired	(0.61)
Outstanding at end of period	13.26
Stock Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding at beginning of period	$ 11.06	[1]
Granted	$ 11.11	[1]
Exercised	$ 8.29	[1]
Forfeited, canceled or expired	$ 11.96	[1]
Outstanding at end of period	$ 11.11	[1]
Restricted Stock (including RSUs)
Restricted Stock (including RSUs), Outstanding [Roll Forward]
Outstanding at beginning of period	3.56
Granted	1.13
Vested	(0.79)
Forfeited, canceled or expired	(0.13)
Outstanding at June 30, 2013	3.77
Restricted Stock (including RSUs), Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding at January 1, 2013	$ 11.67	[1]
Granted	$ 11.14	[1]
Vested	$ 12.00	[1]
Forfeited, canceled or expired	$ 11.21	[1]
Outstanding at end of period	$ 11.45	[1]

[1] In whole dollars.

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Restructuring Charges, Net - Additional Information (Details) (Employee Severance, USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Restructuring Cost and Reserve [Line Items]
Expected number of positions eliminated due to restructuring (in employee positions)		1,100
New Action
Restructuring Cost and Reserve [Line Items]
Net restructuring charges recorded during period	$ 13	$ 62
Prior Actions
Restructuring Cost and Reserve [Line Items]
Net restructuring charges recorded during period	0	0
Minimum
Restructuring Cost and Reserve [Line Items]
Expected aggregate restructuring costs		70
Maximum
Restructuring Cost and Reserve [Line Items]
Expected aggregate restructuring costs		$ 80

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Inventories, Net (Tables)

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Schedule of Inventories, Net

Inventories, net were comprised of the following:

	June 30, 2013			December 31, 2012
Production costs of contracts in process	$	270		$	253
Less progress payments	(17		)	(22		)
Production costs of contracts in process, net	253			231
Product inventory	44			52
Inventories, net	$	297		$	283

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Receivables, Net (Tables)

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Schedule of Receivables, Net

Receivables, net were comprised of the following:

	June 30, 2013			December 31, 2012
Billed receivables	$	501		$	429
Unbilled contract receivables	530			562
Other	8			7
Receivables, gross	1,039			998
Allowance for doubtful accounts	(4		)	(3		)
Receivables, net	$	1,035		$	995

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Receivables, Net - Additional Information (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Billed receivables due, total	$ 501	$ 429
Government
Accounts, Notes, Loans and Financing Receivable [Line Items]
Billed receivables due, total	$ 426	$ 340

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Background, Basis of Presentation and Use of Estimates - Additional Information (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Increase in operating income due to cumulative catch up adjustments	$ 39	$ 47	$ 59	$ 60
Increase in diluted earnings per share due to cumulative catch-up adjustments (in dollars per share)	$ 0.13	$ 0.16	$ 0.21	$ 0.20

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Earnings Per Share - Additional Information (Details) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded (in shares)	6.6	10.0	10.7	8.9
Restricted Stock Units (RSUs)
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded (in shares)	0	0.1	0	0.1

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Goodwill and Other Intangible Assets, Net - Estimated Amortization Expense (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Remaining 2013	$ 13
2014	23
2015	21
2016	19
2017	16
2018 and thereafter	85
Net Intangibles	$ 177	$ 184

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Compensation Costs

The following table provides the impact of these costs in our unaudited Condensed Consolidated Statements of Operations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Compensation cost for equity-based awards	$	8	$	7	$	13	$	12
Compensation cost for liability-based awards	3		1		3		1
Total compensation costs, pre-tax	$	11	$	8	$	16	$	13
Future tax benefit	$	4	$	3	$	5	$	5

Schedule of Stock Option Activity and Restricted Stock Activity

The following table provides a summary of the activities for NQOs and restricted stock, including RSUs and restricted stock awards, for the three months ended June 30, 2013:

	Stock Options				Restricted Stock
	Shares		Weighted  Average Exercise Price(a)		Shares		Weighted  Average Grant Date Fair value (a)
Outstanding at January 1, 2013	11.36		$	11.06	3.56		$	11.67
Granted	2.89		11.11		1.13		11.14
Exercised	(0.38	)	8.29		—		—
Vested	—		—		(0.79	)	12.00
Forfeited, canceled or expired	(0.61	)	11.96		(0.13	)	11.21
Outstanding at June 30, 2013	13.26		$	11.11	3.77		$	11.45

(a) In whole dollars.

Schedule of Weighted Average Assumptions

The following table details the weighted average assumptions utilized in determining the fair value of the NQOs granted during the first six months of 2013.

Dividend yield	3.72		%
Expected volatility	27.0		%
Expected life (in years)	7.0
Risk-free rates	1.40		%
Grant date fair value (in whole dollars)	$	1.93

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Segment Information - Segment Operating Margins (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total Operating Income	$ 127	$ 145	$ 201	$ 283
Total Operating Margin	10.20%	10.50%	8.30%	10.10%
C4ISR Electronics and Systems
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total Operating Income	40	86	59	177
Total Operating Margin	7.70%	13.90%	5.80%	13.90%
Information and Technical Services
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Total Operating Income	$ 87	$ 59	$ 142	$ 106
Total Operating Margin	11.90%	7.80%	10.00%	6.90%

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Segment Information - Segment Revenue (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Segment Reporting, Revenue Reconciling Item [Line Items]
Product revenue	$ 518	$ 620	$ 1,017	$ 1,273
Service revenue	733	759	1,419	1,527
Total Revenue	1,251	1,379	2,436	2,800
C4ISR Electronics and Systems
Segment Reporting, Revenue Reconciling Item [Line Items]
Product revenue	518	620	1,017	1,273
Service revenue	0	0	0	0
Total Revenue	518	620	1,017	1,273
Information and Technical Services
Segment Reporting, Revenue Reconciling Item [Line Items]
Product revenue	0	0	0	0
Service revenue	733	759	1,419	1,527
Total Revenue	$ 733	$ 759	$ 1,419	$ 1,527

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Accumulated Other Comprehensive Loss - Additional Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Equity [Abstract]
Net actuarial loss, net of tax included in unamortized defined benefit plan costs	$ 1,693		$ 1,693		$ 1,845
Unamortized defined benefit plan costs included in accumulated other comprehensive loss, tax	1,111		1,111		1,211
Changes in defined benefit plan cost included in other comprehensive income, tax	$ 88	$ 9	$ 100	$ 17

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Components of Accumulated Other Comprehensive Loss

The following table presents changes in accumulated other comprehensive loss, net of tax, by component, for the six months ended June 30, 2013:

	Net Foreign Currency Translation Adjustments			Unamortized Defined Benefit Plan Costs				Accumulated Other Comprehensive Loss
Balance at January 1, 2013	$	15		$	(1,850	)		$	(1,835	)
Other comprehensive income (loss) before reclassifications	(12		)	116				104
Amounts reclassified from accumulated other comprehensive loss	—			37			(a)	37
Net current period other comprehensive income (loss)	(12		)	153				141
Balance at June 30, 2013	$	3		$	(1,697	)		$	(1,694	)

(a) This accumulated other comprehensive loss component primarily relates to the amortization of net actuarial loss. For the three and six months ended June 30, 2013, the amortization of net actuarial loss was $18 (net of tax of $11) and $36 (net of tax of $24), respectively, which are included in the computation of net periodic benefit cost (Note 12).

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Background, Basis of Presentation and Use of Estimates

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Background, Basis of Presentation and Use of Estimates

BACKGROUND, BASIS OF PRESENTATION AND USE OF ESTIMATES

Background

Exelis Inc. (“Exelis” or the “Company”) is a leader in Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) related products and systems and information and technical services, which it supplies to military, government and commercial customers in the United States and globally. Exelis provides mission-critical systems in the areas of networked communications, sensing and surveillance, electronic warfare, navigation, air traffic solutions and information systems, with growing positions in cyber-security, composite aerostructures, logistics and technical services. The Company’s customers include the U.S. Department of Defense (DoD), including the U.S. Army, Navy, Marines and Air Force, and its prime contractors, U.S. Government intelligence agencies, National Aeronautics and Space Administration (NASA), Federal Aviation Administration (FAA), allied foreign governments and domestic and foreign commercial customers. As a prime contractor, subcontractor, or preferred supplier, Exelis participates in many high priority defense and non-defense programs in the United States. Exelis conducts most of its business with the U.S. Government, principally the DoD.

Unless the context otherwise requires, references in these notes to “Exelis”, “we,” “us,” “our,” “the Company” and “our Company” refer to Exelis Inc. and its subsidiaries.

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements included in this Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. Certain information and note disclosures normally included in financial statements prepared annually in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such SEC rules. These financial statements should be read in conjunction with the audited Consolidated and Combined Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. We believe that the disclosures included in this Form 10-Q are adequate to make the information presented not misleading.

Our quarterly financial periods end on the Saturday closest to the last day of the calendar quarter, except for the last quarterly period of the fiscal year, which ends on December 31^st. For ease of presentation, the quarterly financial statements included herein are described as ending on the last day of the calendar quarter. The results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Estimates are revised as additional information becomes available. Estimates and assumptions are used for, but not limited to, revenue recognition, income taxes, contingency accruals and valuation allowances, fair value measurements, impairment of goodwill and other intangibles, postretirement obligations and certain contingent liabilities. Actual results could differ from these estimates.

During the performance of long-term sale contracts, estimated final contract prices and costs are reviewed periodically and revisions are made as required and recorded in income in the period in which they are determined. Changes in estimated revenues, cost of revenue and the related effect to operating income are recognized using a cumulative catch-up adjustment which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a contract’s percent complete. For the three and six months ended June 30, 2013, net favorable cumulative catch-up adjustments related to prior periods increased operating income by approximately $39 and $59, respectively, and diluted earnings per share by approximately $0.13 and $0.21, respectively. For the three and six months ended June 30, 2012, net favorable cumulative catch-up adjustments related to prior periods increased operating income by approximately $47 and $60, respectively, and diluted earnings per share by approximately $0.16 and $0.20, respectively.

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Restructuring Charges, Net

6 Months Ended

Jun. 30, 2013

Restructuring and Related Activities [Abstract]

Restructuring Charges, Net

RESTRUCTURING CHARGES, NET

During the first quarter of 2013, we initiated an action to reduce the size of our workforce and consolidate our facilities footprint to align our cost structure more closely to customer and market conditions, which is expected to be completed by the end of 2013. Through voluntary and involuntary employee reductions, we are eliminating approximately 1,100 positions related to this action, which includes factory workers, administrative personnel and management employees. For the year ended December 31, 2013, we expect to incur aggregate restructuring charges in the range of $70 to $80 related to this action. During the three and six months ended June 30, 2013, charges incurred under this action primarily related to employee severance, and to a lesser extent, lease cancellation and other costs associated with the consolidation of certain facilities. During the three and six months ended June 30, 2013, we recorded net restructuring charges of $13 and $62, respectively, related to this action and none related to prior actions. We did not have any individually significant restructuring activities during the three and six months ended June 30, 2012.

The components of restructuring charges, net, are summarized in the table below.

	Three months ended June 30, 2013				Six months ended June 30, 2013
	2013		2012		2013		2012
By component
Severance charges	$	7	$	1	$	52	$	2
Other restructuring charges	6		—		10		—
Restructuring charges, net	$	13	$	1	$	62	$	2
By segment
C4ISR Electronics and Systems	$	10	$	1	$	50	$	2
Information and Technical Services	3		—		12		—
Restructuring charges, net	$	13	$	1	$	62	$	2

The following table displays a roll-forward of restructuring accruals for the six months ended June 30, 2013 and details, by type and segment, of the restructuring accruals balance at June 30, 2013, which is presented on our Condensed Consolidated Balance Sheets within other accrued liabilities.

Balance at January 1, 2013	$	9
Charges for plans initiated during the year	62
Cash payments	(23		)
Balance at June 30, 2013	$	48
By accrual type
Severance accrual	$	37
Facility carrying and other costs accrual	11
By segment
C4ISR Electronics and Systems	$	38
Information and Technical Services	10

The following table displays a roll-forward of employee position eliminations associated with all restructuring activities for the six months ended June 30, 2013.

Planned reductions at January 1, 2013	46
Additional planned reductions	1,100
Actual reductions	(933	)
Planned reductions at June 30, 2013	213

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Accumulated Other Comprehensive Loss

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents changes in accumulated other comprehensive loss, net of tax, by component, for the six months ended June 30, 2013:

	Net Foreign Currency Translation Adjustments			Unamortized Defined Benefit Plan Costs				Accumulated Other Comprehensive Loss
Balance at January 1, 2013	$	15		$	(1,850	)		$	(1,835	)
Other comprehensive income (loss) before reclassifications	(12		)	116				104
Amounts reclassified from accumulated other comprehensive loss	—			37			(a)	37
Net current period other comprehensive income (loss)	(12		)	153				141
Balance at June 30, 2013	$	3		$	(1,697	)		$	(1,694	)

(a) This accumulated other comprehensive loss component primarily relates to the amortization of net actuarial loss. For the three and six months ended June 30, 2013, the amortization of net actuarial loss was $18 (net of tax of $11) and $36 (net of tax of $24), respectively, which are included in the computation of net periodic benefit cost (Note 12).

Unamortized defined benefit plan costs consist primarily of net actuarial loss totaling $1,693 and $1,845, net of tax, as of June 30, 2013 and December 31, 2012, respectively. Net actuarial gains or losses principally arise from gains or losses on plan assets due to variations in the fair market value of the underlying assets and changes in the benefit obligation due to changes in actuarial assumptions.

Unamortized defined benefit plan costs included in accumulated other comprehensive loss in the unaudited Condensed Consolidated Balance Sheets were reduced by taxes of $1,111 and $1,211 as of June 30, 2013 and December 31, 2012, respectively. The changes in defined benefit plan costs included in other comprehensive income (loss) in the unaudited Condensed Consolidated Statements of Comprehensive Income were reduced by taxes of $88 and $100 for the three and six months ended June 30, 2013, respectively, and $9 and $17 for the three and six months ended June 30, 2012, respectively.

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Earnings Per Share

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

The following table sets forth the reconciliation of basic and diluted weighted average shares outstanding for our earnings per share calculations:

	Three Months Ended June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Weighted average common shares outstanding	188.2	186.7	188.0	186.0
Add: Weighted average restricted stock awards outstanding(a)	—	0.8	0.2	1.1
Basic weighted average common shares outstanding	188.2	187.5	188.2	187.1
Add: Dilutive impact of stock options	0.5	0.5	0.4	0.5
Add: Dilutive impact of restricted stock units	1.8	0.5	1.6	0.4
Diluted weighted average common shares outstanding	190.5	188.5	190.2	188.0

(a) Restricted stock awards containing rights to non-forfeitable dividends which participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share.

For the three and six months ended June 30, 2013, we excluded from our diluted share calculation 6.6 and 10.7 shares, respectively, related to stock options and zero shares related to restricted stock units, and for the three and six months ended June 30, 2012, we excluded 10.0 and8.9shares, respectively, related to stock options and less than 0.1shares for both periods related to restricted stock units, as their effect would have been antidilutive.

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Shareholders' Equity - Additional Information (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 quarterly_dividends	Jun. 30, 2012	May 08, 2013	Dec. 31, 2012
Equity [Abstract]
Common stock, shares authorized	750,000,000		750,000,000			750,000,000
Common stock, par value (in dollars per share)	$ 0.01		$ 0.01			$ 0.01
Preferred stock, shares authorized	50,000,000		50,000,000			50,000,000
Preferred stock, par value (in dollars per share)	$ 0		$ 0			$ 0
Common stock, shares issued	188,500,000		188,500,000			188,300,000
Common stock. shares outstanding	188,100,000		188,100,000			188,300,000
Preferred stock, shares issued	0		0			0
Preferred stock, shares outstanding	0		0			0
Share repurchase program, number of shares repurchased during period	400,000
Share repurchase program, value of shares repurchased during period	$ 5
Share repurchase program, remaining authorized amount			95
Cash dividends payable (in dollars per share)					$ 0.10
Number of quarterly cash dividends declared during the period			2
Cash dividends declared during period			$ 39
Cash dividends declared per common share (in dollars per share)	$ 0.10	$ 0.10	$ 0.21	$ 0.21

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Goodwill and Other Intangible Assets, Net (Tables)

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Other Intangible Assets, Net

Information regarding our other intangible assets was as follows:

	June 30, 2013							December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Net Intangibles		Gross Carrying Amount		Accumulated Amortization			Net Intangibles
Customer and distributor relationships	$	525	$	(360	)	$	165	$	524	$	(348	)	$	176
Proprietary technology	29		(20		)	9		25		(18		)	7
Trademark, patents and other	7		(4		)	3		5		(4		)	1
Total other intangible assets	$	561	$	(384	)	$	177	$	554	$	(370	)	$	184

Estimated Amortization Expense

Estimated amortization expense for the remaining six months of 2013 and each of the five succeeding years and thereafter is as follows:

Remaining 2013	$	13
2014	23
2015	21
2016	19
2017	16
2018 and thereafter	85
Total	$	177

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Range of Estimated Loss and Number of Active Sites

The following table illustrates the range of estimated loss and number of active sites for these environmental matters:

	June 30, 2013		December 31, 2012
Low-end range	$	24	$	24
High-end range	$	45	$	47
Number of active environmental investigations and remediation sites	21		22

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Restructuring Charges, Net - Schedule of Roll-forward of Employee Position Eliminations Associated with Restructuring Activities (Details) (Employee Severance)	6 Months Ended
	Jun. 30, 2013 employee_position
Employee Severance
Restructuring and Related Cost, Positions Eliminated [Roll Forward]
Planned reductions at beginning of period	46
Additional planned reductions	1,100
Actual reductions	(933)
Planned reductions at June 30, 2013	213

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Postretirement Benefit Plans - Additional Information (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended				3 Months Ended
	Jun. 30, 2013 Pension	Jun. 30, 2012 Pension	Jun. 30, 2013 Pension Minimum	Jun. 30, 2013 Pension Maximum	Jun. 30, 2013 U.S. Salaried Retirement Plan and related Excess Pension Plans [Member] Benefit Plan Remeasurement [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined benefit plan, contributions by employer	$ 62	$ 261
Defined benefit plan, estimated future employer contributions in remaining fiscal year			80	90
Defined benefit plan, increase (decrease) in funded status related to projected benefit obligation					(190)
Defined benefit plan, estimated increase (decrease) in net periodic benefit costs for remainder of fiscal year					$ (14)

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Goodwill and Other Intangible Assets, Net - Additional Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended			3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Mar. 31, 2013 C4i Pty. Ltd. [Member]	Jun. 30, 2013 C4ISR Electronics and Systems	Dec. 31, 2012 C4ISR Electronics and Systems	Jun. 30, 2013 Information and Technical Services	Dec. 31, 2012 Information and Technical Services
Goodwill [Line Items]
Aggregate purchase price, net of cash acquired			$ 16	$ 24		$ 16
Goodwill	2,185		2,185		2,180	7	1,801	1,802	384	378
Other intangible assets						7
Amortization expense related to other intangible assets	$ 6	$ 10	$ 13	$ 19

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Receivables, Net - Schedule of Receivables, Net (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Receivables [Abstract]
Billed receivables	$ 501	$ 429
Unbilled contract receivables	530	562
Other	8	7
Receivables, gross	1,039	998
Allowance for doubtful accounts	(4)	(3)
Receivables, net	$ 1,035	$ 995

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net income	$ 78	$ 86	$ 122	$ 156
Other comprehensive income (loss), net of tax
Net foreign currency translation adjustments	(2)	(6)	(12)	(1)
Defined benefit plans
Net actuarial gain arising during the period	116	0	116	0
Amortization of actuarial loss included in net periodic benefit cost	18	13	36	26
Amortization of prior service cost included in net periodic benefit cost	0	0	1	0
Other comprehensive income (loss), net of tax	132	7	141	25
Total comprehensive income	$ 210	$ 93	$ 263	$ 181

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Inventories, Net

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Inventories, Net

INVENTORIES, NET

Inventories, net were comprised of the following:

	June 30, 2013			December 31, 2012
Production costs of contracts in process	$	270		$	253
Less progress payments	(17		)	(22		)
Production costs of contracts in process, net	253			231
Product inventory	44			52
Inventories, net	$	297		$	283

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Operating activities
Net income	$ 122	$ 156
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	56	63
Stock-based compensation	16	13
Restructuring charges, net	62	2
Payments for restructuring	(23)	(11)
Defined benefit plans expense	48	24
Defined benefit plans payments	(75)	(275)
Change in assets and liabilities
Change in receivables	(45)	(114)
Change in inventories	(13)	(1)
Change in other assets	(3)	(2)
Change in accounts payable	(76)	(21)
Change in advance payments and billings in excess of costs	6	(29)
Change in deferred taxes	7	130
Change in other liabilities	(39)	(44)
Other, net	1	(1)
Net cash provided by (used in) operating activities	44	(110)
Investing activities
Capital expenditures	(36)	(50)
Proceeds from the sale of assets	9	1
Acquisitions, net of cash acquired	(16)	(24)
Other, net	(1)	2
Net cash used in investing activities	(44)	(71)
Financing activities
Proceeds from commercial paper, net	0	257
Dividends paid	(19)	(39)
Common stock repurchased	(5)	0
Proceeds from exercise of stock options	3	14
Other, net	(3)	(2)
Net cash (used in) provided by financing activities	(24)	230
Exchange rate effects on cash and cash equivalents	(9)	1
Net change in cash and cash equivalents	(33)	50
Cash and cash equivalents – beginning of year	292	116
Cash and cash equivalents – end of period	$ 259	$ 166

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Stock-Based Compensation - Weighted Average Assumptions (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Dividend yield	3.72%
Expected volatility	27.00%
Expected life (in years)	7 years
Risk-free rates	1.40%
Grant date fair value (in whole dollars)	$ 1.93

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Product revenue	$ 518	$ 620	$ 1,017	$ 1,273
Service revenue	733	759	1,419	1,527
Total revenue	1,251	1,379	2,436	2,800
Cost of product revenue	380	433	737	894
Cost of service revenue	594	654	1,171	1,328
Selling, general and administrative expenses	122	130	237	263
Research and development expenses	15	16	28	30
Restructuring charges, net	13	1	62	2
Operating income	127	145	201	283
Interest expense, net	10	11	18	20
Other expense (income), net	(3)	(1)	(1)	7
Income from continuing operations before income tax expense	120	135	184	256
Income tax expense	42	49	62	100
Net income	$ 78	$ 86	$ 122	$ 156
Basic
Net income (in dollars per share)	$ 0.41	$ 0.46	$ 0.65	$ 0.83
Diluted
Net income (in dollars per share)	$ 0.41	$ 0.46	$ 0.64	$ 0.83
Weighted average common shares outstanding - basic (in shares)	188.2	187.5	188.2	187.1
Weighted average common shares outstanding - diluted (in shares)	190.5	188.5	190.2	188.0
Cash dividends declared per common share (in dollars per share)	$ 0.10	$ 0.10	$ 0.21	$ 0.21

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Debt - Summary of Debt (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Debt Disclosure [Abstract]
Long-term debt	$ 650	$ 650
Unamortized debt discount	(1)	(1)
Total long-term debt	$ 649	$ 649

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Debt (Tables)

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Schedule of Debt

Debt consisted of the following:

	June 30, 2013			December 31, 2012
Long-term debt	$	650		$	650
Unamortized debt discount	(1		)	(1		)
Total long-term debt	$	649		$	649

Schedule of Carrying Values and Estimated Fair Values of Long-Term Debt

The following table provides a summary of interest rates, carrying amounts and estimated fair values of outstanding long-term debt:

			June 30, 2013				December 31, 2012
	Interest rate		Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt
Senior notes (due 2016)	4.25	%	$	250	$	264	$	250	$	262
Senior notes (due 2021)	5.55	%	400		408		400		437
Total			$	650	$	672	$	650	$	699

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Restructuring Charges, Net (Tables)

6 Months Ended

Jun. 30, 2013

Restructuring and Related Activities [Abstract]

Components of All Restructurings Charges

The components of restructuring charges, net, are summarized in the table below.

	Three months ended June 30, 2013				Six months ended June 30, 2013
	2013		2012		2013		2012
By component
Severance charges	$	7	$	1	$	52	$	2
Other restructuring charges	6		—		10		—
Restructuring charges, net	$	13	$	1	$	62	$	2
By segment
C4ISR Electronics and Systems	$	10	$	1	$	50	$	2
Information and Technical Services	3		—		12		—
Restructuring charges, net	$	13	$	1	$	62	$	2

Schedule of Roll-forward of Restructuring Accruals Presented in Consolidated Balance Sheets

The following table displays a roll-forward of restructuring accruals for the six months ended June 30, 2013 and details, by type and segment, of the restructuring accruals balance at June 30, 2013, which is presented on our Condensed Consolidated Balance Sheets within other accrued liabilities.

Balance at January 1, 2013	$	9
Charges for plans initiated during the year	62
Cash payments	(23		)
Balance at June 30, 2013	$	48
By accrual type
Severance accrual	$	37
Facility carrying and other costs accrual	11
By segment
C4ISR Electronics and Systems	$	38
Information and Technical Services	10

Schedule of Roll-forward of Employee Position Eliminations Associated with Restructuring Activities

The following table displays a roll-forward of employee position eliminations associated with all restructuring activities for the six months ended June 30, 2013.

Planned reductions at January 1, 2013	46
Additional planned reductions	1,100
Actual reductions	(933	)
Planned reductions at June 30, 2013	213

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Income Taxes - Additional Information (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Income tax provision	$ 42	$ 49	$ 62	$ 100
Percentage of provision for income tax	35.00%	36.30%	33.70%	39.10%
Federal statutory income tax rate			35.00%
Unrecognized tax benefits	35		35		56
Interest accrued for tax matters	0		0		0
Penalties accrued for tax matters	$ 6		$ 6		$ 9

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Postretirement Benefit Plans - Net Periodic Benefit Cost (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 19	$ 20	$ 39	$ 40
Interest cost	64	71	129	143
Expected return on plan assets	(91)	(101)	(182)	(202)
Amortization of net actuarial loss	29	22	60	43
Amortization of prior service cost (credit)	1	0	2	0
Net periodic benefit cost	22	12	48	24
Pension
Defined Benefit Plan Disclosure [Line Items]
Service cost	19	19	38	38
Interest cost	60	66	120	132
Expected return on plan assets	(86)	(95)	(171)	(191)
Amortization of net actuarial loss	26	18	54	36
Amortization of prior service cost (credit)	1	0	2	1
Net periodic benefit cost	20	8	43	16
Other Benefits
Defined Benefit Plan Disclosure [Line Items]
Service cost	0	1	1	2
Interest cost	4	5	9	11
Expected return on plan assets	(5)	(6)	(11)	(11)
Amortization of net actuarial loss	3	4	6	7
Amortization of prior service cost (credit)	0	0	0	(1)
Net periodic benefit cost	$ 2	$ 4	$ 5	$ 8

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Segment Information - Segment Assets (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	$ 5,117	$ 5,212
Operating Segments [Member] | C4ISR Electronics and Systems
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	3,049	3,078
Operating Segments [Member] | Information and Technical Services
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	1,261	1,186
Corporate, Non-Segment [Member] | Corporate and Other
Segment Reporting, Asset Reconciling Item [Line Items]
Total assets	$ 807	$ 948

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Earnings Per Share - Reconciliation of Basic and Diluted Weighted Average Shares Outstanding for Earnings Per Share (Details) In Millions, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Weighted Average Number of Shares Outstanding Reconciliation [Line Items]
Weighted average common shares outstanding (in shares)	188.2		186.7		188.0		186.0
Add: Weighted average restricted stock awards outstanding (in shares)	0	[1]	0.8	[1]	0.2	[1]	1.1	[1]
Basic weighted average common shares outstanding (in shares)	188.2		187.5		188.2		187.1
Diluted weighted average common shares outstanding (in shares)	190.5		188.5		190.2		188.0
Stock Options
Weighted Average Number of Shares Outstanding Reconciliation [Line Items]
Add: Dilutive impact of share-based payment arrangements (in shares)	0.5		0.5		0.4		0.5
Restricted Stock Units (RSUs)
Weighted Average Number of Shares Outstanding Reconciliation [Line Items]
Add: Dilutive impact of share-based payment arrangements (in shares)	1.8		0.5		1.6		0.4

[1] Restricted stock awards containing rights to non-forfeitable dividends which participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share.

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Restructuring Charges, Net - Components of All Restrucuturing Charges, Net (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Restructuring Cost and Reserve [Line Items]
Severance charges	$ 7	$ 1	$ 52	$ 2
Other restructuring costs	6	0	10	0
Total restructuring charges	13	1	62	2
C4ISR Electronics and Systems
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	10	1	50	2
Information and Technical Services
Restructuring Cost and Reserve [Line Items]
Total restructuring charges	$ 3	$ 0	$ 12	$ 0

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Restructuring Charges, Net - Schedule of Roll-forward of Restructuring Accruals Presented in Consolidated Balance Sheets (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Restructuring Reserve [Roll Forward]
Restructuring accrual	$ 9
Charges for plans initiated during the year	62
Cash payments	(23)	(11)
Restructuring accrual	48
C4ISR Electronics and Systems
Restructuring Reserve [Roll Forward]
Restructuring accrual	38
Information and Technical Services
Restructuring Reserve [Roll Forward]
Restructuring accrual	10
Severance Accrual
Restructuring Reserve [Roll Forward]
Restructuring accrual	37
Facility Carrying and Other Costs Accrual
Restructuring Reserve [Roll Forward]
Restructuring accrual	$ 11

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Receivables, Net

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Receivables, Net

RECEIVABLES, NET

Receivables, net were comprised of the following:

	June 30, 2013			December 31, 2012
Billed receivables	$	501		$	429
Unbilled contract receivables	530			562
Other	8			7
Receivables, gross	1,039			998
Allowance for doubtful accounts	(4		)	(3		)
Receivables, net	$	1,035		$	995

Total billed receivables due from the U.S. Government, either directly or as a subcontractor with the U.S. Government, were $426 and $340 at June 30, 2013 and December 31, 2012, respectively. Because the Company’s receivables are primarily with the U.S. Government, the Company does not have a material credit risk exposure.

Unbilled contract receivables represent revenue recognized on long-term contracts in excess of amounts billed as of the balance sheet date. We expect to bill and collect substantially all of the June 30, 2013 unbilled contract receivables during the next twelve months as scheduled performance milestones are completed or units are delivered.

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Commitments and Contingencies - Additional Information (Details) (USD $) In Millions, unless otherwise specified			6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Rabbi Trust [Member] plan
Commitments and Contingencies Disclosure [Abstract]
Estimated and accrued environmental matters	$ 27	$ 27
Aggregate amount of surety bonds, guarantees, and stand-by letters of credit	$ 109
Deferred Compensation Arrangement with Individual, Excluding Share-based Payments and Postretirement Benefits [Line Items]
Deferred compensation, employer contribution requirement, percentage			110.00%
Deferred compensation, number of plans			8

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Postretirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2013

Compensation and Retirement Disclosure [Abstract]

Components of Net Periodic Benefit Cost

The following table provides the components of net periodic benefit cost for our defined benefit plans, including defined benefit pension plans and other postretirement defined benefit plans:

	Three Months Ended June 30,
	2013									2012
	Pension			Other Benefits			Total			Pension			Other Benefits			Total
Net periodic benefit cost
Service cost	$	19		$	—		$	19		$	19		$	1		$	20
Interest cost	60			4			64			66			5			71
Expected return on plan assets	(86		)	(5		)	(91		)	(95		)	(6		)	(101		)
Amortization of net actuarial loss	26			3			29			18			4			22
Amortization of prior service cost (credit)	1			—			1			—			—			—
Net periodic benefit cost	$	20		$	2		$	22		$	8		$	4		$	12

	Six Months Ended June 30,
	2013									2012
	Pension			Other Benefits			Total			Pension			Other Benefits			Total
Net periodic benefit cost
Service cost	$	38		$	1		$	39		$	38		$	2		$	40
Interest cost	120			9			129			132			11			143
Expected return on plan assets	(171		)	(11		)	(182		)	(191		)	(11		)	(202		)
Amortization of net actuarial loss	54			6			60			36			7			43
Amortization of prior service cost (credit)	2			—			2			1			(1		)	—
Net periodic benefit cost	$	43		$	5		$	48		$	16		$	8		$	24

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Accumulated Other Comprehensive Loss - Schedule of Activity in Accumulated Other Comprehensive Income (Loss) During Period (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013		Jun. 30, 2012
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period			$ (1,835)
Other comprehensive income (loss) before reclassifications			104
Amounts reclassified from accumulated other comprehensive loss			37
Other comprehensive income (loss), net of tax			141
Balance at end of period	(1,694)		(1,694)
Amortization of actuarial loss included in net periodic benefit cost, net of tax	(18)	(13)	(36)		(26)
Amortization of actuarial loss included in net periodic benefit cost, tax	(11)		(24)
Net Foreign Currency Translation Adjustments
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period			15
Other comprehensive income (loss) before reclassifications			(12)
Amounts reclassified from accumulated other comprehensive loss			0
Other comprehensive income (loss), net of tax			(12)
Balance at end of period	3		3
Unamortized Defined Benefit Plan Costs
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period			(1,850)
Other comprehensive income (loss) before reclassifications			116
Amounts reclassified from accumulated other comprehensive loss			37	[1]
Other comprehensive income (loss), net of tax			153
Balance at end of period	$ (1,697)		$ (1,697)

[1] This accumulated other comprehensive loss component primarily relates to the amortization of net actuarial loss. For the three and six months ended June 30, 2013, the amortization of net actuarial loss was $18 (net of tax of $11) and $36 (net of tax of $24), respectively, which are included in the computation of net periodic benefit cost (Note 12).

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Debt

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Debt

DEBT

Debt consisted of the following:

	June 30, 2013			December 31, 2012
Long-term debt	$	650		$	650
Unamortized debt discount	(1		)	(1		)
Total long-term debt	$	649		$	649

The following table provides a summary of interest rates, carrying amounts and estimated fair values of outstanding long-term debt:

			June 30, 2013				December 31, 2012
	Interest rate		Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt
Senior notes (due 2016)	4.25	%	$	250	$	264	$	250	$	262
Senior notes (due 2021)	5.55	%	400		408		400		437
Total			$	650	$	672	$	650	$	699

The fair value of our notes was determined using prices in secondary markets for identical and similar securities (Level 2 inputs) obtained from external pricing sources.

Commercial Paper

The Company’s commercial paper program generally enables the Company to borrow short-term funds at competitive rates. The commercial paper program is fully supported by available borrowing capacity under our Credit Facility. As of June 30, 2013 and December 31, 2012, there was no commercial paper outstanding under our commercial paper program.

Credit Facility

The Company has a competitive advance and revolving credit facility agreement (“Credit Facility”) with a consortium of lenders, which is available for working capital, capital expenditures and other general corporate purposes. The Credit Facility provides for a four year maturity, expiring October 25, 2015, with a one year extension option upon satisfaction of certain conditions, and comprises an aggregate principal amount of up to $600 of revolving loans, competitive advances and letters of credit in a face amount up to $100. Borrowings under the Credit Facility bear interest at rates based, at our option, on a Eurodollar rate or an alternate base rate, as defined in the Credit Facility. As of June 30, 2013 and December 31, 2012, there were no borrowings or letters of credit outstanding under the Credit Facility.

The Credit Facility contains customary affirmative and negative covenants that, among other things, limit or restrict our ability to: incur additional debt or issue guarantees of indebtedness; create liens; enter into certain sale and lease-back transactions; merge or consolidate with another person; sell, transfer, lease or otherwise dispose of assets; liquidate or dissolve; and enter into restrictive covenants. Additionally, the Credit Facility requires us not to permit the ratio of combined total indebtedness to combined EBITDA (leverage ratio) to exceed 3.50 to 1.00 at any time.

Senior Notes

The Company has outstanding long-term debt of $250 aggregate principal amount of 4.25% senior notes due October 1, 2016 and $400 aggregate principal amount of 5.55% senior notes due October 1, 2021 (together the “Notes”). As of June 30, 2013 and December 31, 2012, accrued interest payable on the Notes, included in other accrued liabilities, was $8 and $8, respectively, and is payable on April 1 and October 1 of each year.

The Notes have covenants that restrict our ability to, subject to exceptions, incur indebtedness secured by liens or engage in sale and leaseback transactions. The Notes also have customary events of default, including, but not limited to, non-payment of principal and interest, and certain events of bankruptcy, insolvency or reorganization of the Company. Under the terms of the Notes, we have the option to redeem the Notes prior to maturity, and we will be required to make an offer to purchase the Notes if a change of control triggering event (as defined in the Notes indenture) occurs.

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Effective Tax Rate

Our quarterly income tax expense is measured using an estimated annual effective income tax rate, adjusted for discrete items within the period. The comparison of effective income tax rates between periods is significantly affected by discrete items recognized during the periods, the level and mix of earnings by tax jurisdiction and permanent differences.

For the three months ended June 30, 2013, the Company recorded an income tax provision of $42 or 35.0% of income from continuing operations before income tax expense as compared to $49 or 36.3% during the same prior year period. For the six months ended June 30, 2013, the Company recorded an income tax provision of $62 or 33.7% of income from continuing operations before income tax expense as compared to $100 or 39.1% during the same prior year period. The effective income tax rate varies from the federal statutory rate of 35% primarily due to the unfavorable impact of state taxes offset by the favorable impacts from the U.S. manufacturing deduction. The effective income tax rate for the six months ended June 30, 2013 also included the favorable impact of a discrete item related to the renewal of the 2012 federal research and development tax credit. The effective income tax rate for the six months ended June 30, 2012 also included the unfavorable impact of nondeductible separation costs.

Uncertain Tax Positions

As of June 30, 2013 and December 31, 2012, unrecognized tax benefits were $35 and $56, respectively. Unrecognized tax benefits are primarily related to the timing of certain income and deductions and we anticipate that these unrecognized tax benefits will significantly decrease within twelve months of the reporting date due to the expected filing and acceptance of accounting method changes, which will not impact income tax expense.

We classify interest relating to tax matters as a component of interest expense and tax penalties as a component of income tax expense in our unaudited Condensed Consolidated Statements of Operations. As of June 30, 2013 and December 31, 2012, we had no interest accrued for tax matters and $6 and $9, respectively, accrued for tax penalties.

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2013

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Pronouncements

In February 2013, the Financial Accounting Standards Board (FASB) issued guidance intended to update the disclosure requirements for accumulated other comprehensive income (AOCI). This guidance does not change the current requirements for reporting net income or other comprehensive income in the financial statements. The updated guidance requires an entity to disclose additional information about changes in AOCI balances by component and significant amounts reclassified out of AOCI by component. This guidance is effective prospectively for reporting periods beginning after December 15, 2012. We adopted this guidance on January 1, 2013 and have provided the additional required disclosures in the notes to these financial statements.

Pronouncements Not Yet Adopted

New pronouncements issued but not effective until after June 30, 2013 are not expected to have a material impact on our financial position, results of operations or cash flows.

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Debt - Summary of Long-Term Debt (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Debt Instrument [Line Items]
Carrying Value	$ 650,000,000	$ 650,000,000
Fair Value	672,000,000	699,000,000
Senior Notes [Member] | Senior Notes Due 2016
Debt Instrument [Line Items]
Interest rate	4.25%
Carrying Value	250,000,000	250,000,000
Fair Value	264,000,000	262,000,000
Senior Notes [Member] | Senior Notes Due 2021
Debt Instrument [Line Items]
Interest rate	5.55%
Carrying Value	400,000,000	400,000,000
Fair Value	$ 408,000,000	$ 437,000,000

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Inventories, Net - Schedule of Inventories, Net (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Inventory Disclosure [Abstract]
Production costs of contracts in process	$ 270	$ 253
Less progress payments	(17)	(22)
Production costs of contracts in process, net	253	231
Product inventory	44	52
Inventories, net	$ 297	$ 283

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Summary of Segment Revenue

Segment financial results were as follows:

	Three Months Ended June 30,
	2013						2012
	Product Revenue		Service Revenue		Total Revenue		Product Revenue		Service Revenue		Total Revenue
C4ISR Electronics and Systems	$	518	$	—	$	518	$	620	$	—	$	620
Information and Technical Services	—		733		733		—		759		759
Total	$	518	$	733	$	1,251	$	620	$	759	$	1,379
	Six Months Ended June 30,
	2013						2012
	Product Revenue		Service Revenue		Total Revenue		Product Revenue		Service Revenue		Total Revenue
C4ISR Electronics and Systems	$	1,017	$	—	$	1,017	$	1,273	$	—	$	1,273
Information and Technical Services	—		1,419		1,419		—		1,527		1,527
Total	$	1,017	$	1,419	$	2,436	$	1,273	$	1,527	$	2,800

Summary of Segment Operating Income and Operating Margin

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Operating Income
C4ISR Electronics and Systems	$	40		$	86		$	59		$	177
Information and Technical Services	87			59			142			106
Total Operating Income	$	127		$	145		$	201		$	283
Operating Margin
C4ISR Electronics and Systems	7.7		%	13.9		%	5.8		%	13.9		%
Information and Technical Services	11.9		%	7.8		%	10.0		%	6.9		%
Total Operating Margin	10.2		%	10.5		%	8.3		%	10.1		%

Summary of Segment Reporting Assets

	June 30, 2013		December 31, 2012
Assets
C4ISR Electronics and Systems	$	3,049	$	3,078
Information and Technical Services	1,261		1,186
Corporate and Other	807		948
Total Assets	$	5,117	$	5,212

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Segment Information - Additional Information (Details)	6 Months Ended
	Jun. 30, 2013 Segment
Segment Reporting [Abstract]
Number of operating segments	2

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Stock-Based Compensation - Additional Information (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average grant date fair value, options (in dollars per share)	$ 1.93
Non-Qualified Stock Options (NQOs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted long-term incentives to employees, options	2.89
Weighted average grant date fair value, options (in dollars per share)	$ 1.93
Award vesting period	3 years
Award expiration period	10 years
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted long-term incentives to employees, equity instruments other than options	1.10
Weighted average grant date fair value, equity instruments other than options (in dollars per share)	$ 11.14
Award vesting period	3 years
Total Shareholder Return Awards (TSRs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period	3 years
Aggregate target value of award, settled in cash	$ 4
Total Shareholder Return Awards (TSRs) | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated cash settlement, percentage of target award	0.00%
Total Shareholder Return Awards (TSRs) | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated cash settlement, percentage of target award	200.00%
Equity-based Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation costs	31
Unrecognized compensation costs, weighted average period for recognition	2 years 2 months 12 days
Liability-based Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total unrecognized compensation costs	$ 7
Unrecognized compensation costs, weighted average period for recognition	2 years 1 month 6 days

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Related Party Transactions

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

RELATED PARTY TRANSACTIONS

Separation Agreements

On October 31, 2011, ITT Corporation ("ITT") completed the spin-off (the “Spin-off”) of Exelis and Exelis began operating as a stand-alone publicly traded corporation. Prior to the Spin-off, Exelis operated as the Defense and Information Solutions Segment of ITT.

In order to govern certain ongoing relationships between Exelis and ITT following the Spin-off and to provide mechanisms for an orderly transition, on October 25, 2011, Exelis, ITT, and Xylem Inc. executed the various agreements that govern the ongoing relationships between and among the three companies after the Spin-off and provide for the allocation of employee benefits, income taxes, and certain other liabilities and obligations attributable to periods prior to the Spin-off. The executed agreements include the Distribution Agreement, Benefits and Compensation Matters Agreement, Tax Matters Agreement, several real estate matters agreements, and Master Transition Services Agreement.

The Distribution Agreement provides for certain indemnifications and cross-indemnifications among Exelis, ITT and Xylem Inc. The indemnifications address a variety of subjects, including indemnification by ITT of Exelis in respect of certain asserted and unasserted asbestos or silica liability claims. Certain intercompany work orders and/or informal intercompany commercial arrangements were converted into third-party contracts based on ITT’s standard terms and conditions.

For the three and six months ended June 30, 2013, charges incurred for services provided to Exelis by ITT and Xylem Inc. under the separation agreements, net of costs passed through to third parties, were $0.4 and $1, respectively, and $1 and $1, for the three and six months ended June 30, 2012, respectively. For the three and six months ended June 30, 2013, charges related to these agreements for services provided by Exelis to ITT and Xylem Inc., net of costs passed through to third parties, were $0.4 and $1, respectively, and $1 and $1, for the three and six months ended June 30, 2012, respectively. At June 30, 2013 and December 31, 2012, total payables due from Exelis to ITT and Xylem Inc. were $4 and $3, respectively and total receivables due to Exelis from ITT and Xylem Inc. were $7 and $7, respectively.

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Goodwill and Other Intangible Assets, Net

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, Net

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

As of June 30, 2013 and December 31, 2012, goodwill was $2,185 and $2,180, respectively. As of June 30, 2013 and December 31, 2012, goodwill for our C4ISR Electronics and Systems segment was $1,801 and $1,802, respectively, and goodwill for our Information and Technical Services segment was $384 and $378, respectively.

During the first quarter of 2013, the Company acquired C4i Pty. Ltd. for an aggregate purchase price of approximately $16, net of cash acquired, resulting in an increase to goodwill of $7 and other intangible assets of $7. The operating results of the business are reported in the Information and Technical Services segment from the date of acquisition. The assets, liabilities and results of operations for the acquired business were not material to the Company.

Other Intangible Assets, Net

Information regarding our other intangible assets was as follows:

	June 30, 2013							December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Net Intangibles		Gross Carrying Amount		Accumulated Amortization			Net Intangibles
Customer and distributor relationships	$	525	$	(360	)	$	165	$	524	$	(348	)	$	176
Proprietary technology	29		(20		)	9		25		(18		)	7
Trademark, patents and other	7		(4		)	3		5		(4		)	1
Total other intangible assets	$	561	$	(384	)	$	177	$	554	$	(370	)	$	184

Amortization expense related to other intangible assets for the three and six months ended June 30, 2013 was $6 and $13, respectively, and $10 and $19 for the three and six months ended June 30, 2012, respectively.

Estimated amortization expense for the remaining six months of 2013 and each of the five succeeding years and thereafter is as follows:

Remaining 2013	$	13
2014	23
2015	21
2016	19
2017	16
2018 and thereafter	85
Total	$	177

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Background, Basis of Presentation and Use of Estimates (Policies)

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The unaudited Condensed Consolidated Financial Statements included in this Form 10-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. Certain information and note disclosures normally included in financial statements prepared annually in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such SEC rules. These financial statements should be read in conjunction with the audited Consolidated and Combined Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. We believe that the disclosures included in this Form 10-Q are adequate to make the information presented not misleading.

Our quarterly financial periods end on the Saturday closest to the last day of the calendar quarter, except for the last quarterly period of the fiscal year, which ends on December 31^st. For ease of presentation, the quarterly financial statements included herein are described as ending on the last day of the calendar quarter.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Estimates are revised as additional information becomes available. Estimates and assumptions are used for, but not limited to, revenue recognition, income taxes, contingency accruals and valuation allowances, fair value measurements, impairment of goodwill and other intangibles, postretirement obligations and certain contingent liabilities. Actual results could differ from these estimates.

During the performance of long-term sale contracts, estimated final contract prices and costs are reviewed periodically and revisions are made as required and recorded in income in the period in which they are determined. Changes in estimated revenues, cost of revenue and the related effect to operating income are recognized using a cumulative catch-up adjustment which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a contract’s percent complete.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

General

From time to time, we are involved in legal proceedings that are incidental to the operation of our businesses. Some of these proceedings seek remedies relating to environmental matters, personal injury claims, employment and pension matters, and commercial or contractual disputes, sometimes related to acquisitions or divestitures.

Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of the particular claim, we do not expect that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material adverse effect on our cash flow, results of operations, or financial condition.

Environmental

In the ordinary course of business, we are subject to federal, state, local, and foreign environmental laws and regulations. We are responsible, or are alleged to be responsible, for ongoing environmental investigation and remediation of multiple sites. These sites are in various stages of investigation and/or remediation and in many of these proceedings our liability is considered de minimis. We have received notification from the U.S. Environmental Protection Agency, and from similar environmental agencies, that a number of sites formerly or currently owned and/or operated by Exelis, and other properties or water supplies that may be or have been impacted from those operations, contain disposed or recycled materials or wastes and require environmental investigation and/or remediation. These sites include instances where we have been identified as a potentially responsible party under federal and state environmental laws and regulations.

Accruals for environmental matters are recorded on a site by site basis when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies available to us. Our accrued liabilities for these environmental matters represent our best estimates related to the investigation and remediation of environmental media such as water, soil, soil vapor, air and structures, as well as related legal fees. These estimates, and related accruals, are reviewed quarterly and updated for progress of investigation and remediation efforts and changes in facts and legal circumstances. Liabilities for these environmental expenditures are recorded on an undiscounted basis.

It is difficult to estimate the final costs of investigation and remediation due to various factors, including incomplete information regarding particular sites and other potentially responsible parties, uncertainty regarding the extent of investigation or remediation and our share, if any, of liability for such conditions, the selection of alternative remedial approaches, and changes in environmental standards and regulatory requirements. We have estimated and accrued $27 and $27 as of June 30, 2013 and December 31, 2012, respectively, for environmental matters. In our opinion, the total amount accrued is appropriate based on existing facts and circumstances.

The following table illustrates the range of estimated loss and number of active sites for these environmental matters:

	June 30, 2013		December 31, 2012
Low-end range	$	24	$	24
High-end range	$	45	$	47
Number of active environmental investigations and remediation sites	21		22

U.S. Government Contracts, Investigations and Claims

The Company has U.S. Government contracts that are funded incrementally on a year-to-year basis. Changes in government policies, priorities or funding levels through agency or program budget reductions by the U.S. Congress or executive agencies could have a material adverse effect on the Company’s financial condition or results of operations. Furthermore, contracts with the U.S. Government may be terminated or suspended by the U.S. Government at any time, with or without cause. Such contract suspensions or terminations could result in un-reimbursable expenses or charges or otherwise adversely affect the Company’s financial condition and/or results of operations.

Departments and agencies of the U.S. Government have the authority to investigate various transactions and operations of the Company, and the results of such investigations may lead to administrative, civil or criminal proceedings, the ultimate outcome of which could be fines, penalties, repayments or compensatory or treble damages. U.S. Government regulations provide that certain findings against a contractor may lead to suspension or debarment from future U.S. Government contracts or the loss of export privileges for a company or an operating division or subdivision. Suspension or debarment could have a material adverse effect on the Company because of its reliance on government contracts.

U.S. Government agencies, including the Defense Contract Audit Agency (DCAA) and others, routinely audit and review a contractor’s performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. Accordingly, costs billed or billable to the U.S. Government customers are subject to potential adjustment upon audit by such agencies. They also review the adequacy of the contractor’s compliance with government standards for its accounting and management internal control systems, including: control environment and accounting system, general information technology system, budget and planning system, purchasing system, material management and accounting system, compensation system, labor system, indirect and other direct costs system, billing system and estimating system. Audits currently underway include the Company’s control environment and accounting, billing, purchasing, and indirect and other direct cost systems, as well as reviews of the Company’s compliance with certain U.S. Government Cost Accounting Standards.

From time to time, customers advise the Company of claims and penalties concerning certain potential disallowed costs. When such findings are presented, Exelis and the U.S. Government representatives engage in discussions to enable Exelis to evaluate the merits of these claims as well as to assess the amounts being claimed. Where appropriate, provisions are made to reflect the expected exposure to the matters raised by the U.S. Government representatives and such provisions are reviewed on a quarterly basis for sufficiency based on the most recent information available.

Indemnifications

As part of the Spin-off, Exelis, ITT and Xylem Inc. indemnify one another with respect to such parties’ assumed or retained liabilities under the Distribution Agreement and breaches of the Distribution Agreement or related Spin-off agreements. Exelis expects ITT and Xylem Inc. to fully perform under the terms of the Distribution Agreement and therefore we have not recorded a liability for matters for which we are indemnified. In addition, we are not aware of any claims or other circumstances that would give rise to material payments to ITT or Xylem Inc. under the indemnity that we provide to them.

Letters of Credit

In the ordinary course of business, we use standby letters of credit, guarantees issued by commercial banks and surety bonds issued by insurance companies, as well as self-guarantees, principally to guarantee our performance on certain contracts and to support our self-insured workers’ compensation plans. At June 30, 2013, there was an aggregate of approximately $109 in surety bonds, guarantees and stand-by letters of credit outstanding.

Rabbi Trust

The Company maintains a grantor trust (“Rabbi Trust”) for the purpose of assisting the Company with the payment of certain nonqualified deferred compensation obligations in the event of a change in control of the Company. The Company is obligated to contribute an amount equal to 110 percent of the Company’s obligations under eight nonqualified deferred compensation plans at the time of an “Acceleration Event,” as defined in such plans and the Rabbi Trust.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 31, 2013
Entity Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	XLS
Entity Registrant Name	Exelis Inc.
Entity Central Index Key	0001524471
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		188,310,730

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Segment Information

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

The Company’s segments are reported on the same basis used internally for evaluating performance and for allocating resources. We operate in two segments: C4ISR Electronics and Systems, and Information and Technical Services. Assets of the business segments exclude general corporate assets, which principally consist of cash, deferred tax assets, certain plant, property, and equipment, and certain other assets.

C4ISR Electronics and Systems

This segment provides communications, sensing and surveillance, space and advanced engineering equipment and systems for government and commercial customers around the world.

Information and Technical Services

This segment provides a broad range of systems integration, operations, sustainment, advanced engineering, logistics, space launch and range-support solutions for a wide variety of U.S. military and government agency customers.

Segment financial results were as follows:

	Three Months Ended June 30,
	2013						2012
	Product Revenue		Service Revenue		Total Revenue		Product Revenue		Service Revenue		Total Revenue
C4ISR Electronics and Systems	$	518	$	—	$	518	$	620	$	—	$	620
Information and Technical Services	—		733		733		—		759		759
Total	$	518	$	733	$	1,251	$	620	$	759	$	1,379
	Six Months Ended June 30,
	2013						2012
	Product Revenue		Service Revenue		Total Revenue		Product Revenue		Service Revenue		Total Revenue
C4ISR Electronics and Systems	$	1,017	$	—	$	1,017	$	1,273	$	—	$	1,273
Information and Technical Services	—		1,419		1,419		—		1,527		1,527
Total	$	1,017	$	1,419	$	2,436	$	1,273	$	1,527	$	2,800

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Operating Income
C4ISR Electronics and Systems	$	40		$	86		$	59		$	177
Information and Technical Services	87			59			142			106
Total Operating Income	$	127		$	145		$	201		$	283
Operating Margin
C4ISR Electronics and Systems	7.7		%	13.9		%	5.8		%	13.9		%
Information and Technical Services	11.9		%	7.8		%	10.0		%	6.9		%
Total Operating Margin	10.2		%	10.5		%	8.3		%	10.1		%

	June 30, 2013		December 31, 2012
Assets
C4ISR Electronics and Systems	$	3,049	$	3,078
Information and Technical Services	1,261		1,186
Corporate and Other	807		948
Total Assets	$	5,117	$	5,212

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Commitments and Contingencies - Range of Estimated Loss Environmental Matters (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013 site	Dec. 31, 2012 site
Range of Estimated Loss and Number of Active Sites for Environmental Matters:
Low-end range	$ 24	$ 24
High-end range	$ 45	$ 47
Number of active environmental investigations and remediation sites (in sites)	21	22

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Related Party Transactions - Additional Information (Details) (Xylem And ITT, USD $) In Millions, unless otherwise specified			3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Charges for Services Provided to the Company [Member]	Jun. 30, 2012 Charges for Services Provided to the Company [Member]	Jun. 30, 2013 Charges for Services Provided to the Company [Member]	Jun. 30, 2012 Charges for Services Provided to the Company [Member]	Jun. 30, 2013 Charges for Servcies Provided by the Company [Member]	Jun. 30, 2012 Charges for Servcies Provided by the Company [Member]	Jun. 30, 2013 Charges for Servcies Provided by the Company [Member]	Jun. 30, 2012 Charges for Servcies Provided by the Company [Member]
Related Party Transaction [Line Items]
Charges incurred from transactions with related party			$ 0.4	$ 1.0	$ 1.0	$ 1.0	$ 0.4	$ 1.0	$ 1.0	$ 1.0
Total payables due from Exelis to related parties	4	3
Total receivables due to Exelis to related parties	$ 7	$ 7