10-12B/A

As filed with the Securities and Exchange Commission on September 8, 2014

File No. 001-36341

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 5

to

Form 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF

THE SECURITIES EXCHANGE ACT OF 1934

Vectrus, Inc.

(Exact name of registrant as specified in its charter)

Indiana	38-3924636
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
655 Space Center Drive Colorado Springs, Colorado	80915
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:

(719) 591-3600

Securities to be registered pursuant to Section 12(b) of the Act:

Title of Each Class to be so Registered	Name of Each Exchange on Which Each Class is to be Registered
Common stock, par value $0.01 per share	New York Stock Exchange

Securities to be registered pursuant to Section 12(g) of the Act:

None.

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 Securities Exchange Act of 1934, as amended. (Check one):

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

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

Item 1. Business

The information required by this item is contained under the sections “Summary,” “Risk Factors,” “Special Note About Forward-Looking Statements,” “Unaudited Pro Forma Condensed Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Management,” “Executive Compensation” and “Certain Relationships and Related Party Transactions” of the information statement filed as Exhibit 99.1 to this Form 10 (the “information statement”). Those sections are incorporated herein by reference.

Item 1A. Risk Factors

The information required by this item is contained under the section “Risk Factors” of the information statement. That section is incorporated herein by reference.

Item 2. Financial Information

The information required by this item is contained under the sections “Summary—Summary Historical and Unaudited Pro Forma Condensed Combined Financial Data,” “Capitalization,” “Selected Historical Condensed Combined Financial and Other Data,” “Unaudited Pro Forma Condensed Combined Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the information statement. Those sections are incorporated herein by reference.

Item 3. Properties

The information required by this item is contained under the section “Business—Properties” of the information statement. That section is incorporated herein by reference.

Item 4. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is contained under the section “Security Ownership of Certain Beneficial Owners and Management” of the information statement. That section is incorporated herein by reference.

Item 5. Directors and Executive Officers

The information required by this item is contained under the section “Management” of the information statement. That section is incorporated herein by reference.

Item 6. Executive Compensation

The information required by this item is contained under the sections “Management” and “Executive Compensation” of the information statement. Those sections are incorporated herein by reference.

Item 7. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is contained under the sections “Management,” “Executive Compensation” and “Certain Relationships and Related Party Transactions” of the information statement. Those sections are incorporated herein by reference.

Item 8. Legal Proceedings

The information required by this item is contained under the section “Business—Legal Proceedings” of the information statement. That section is incorporated herein by reference.

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

The information required by this item is contained under the sections “Risk Factors,” “The Spin-Off,” “Dividend Policy,” “Executive Compensation” and “Description of Capital Stock” of the information statement. Those sections are incorporated herein by reference.

Item 10. Recent Sales of Unregistered Securities

Not applicable.

Item 11. Description of Registrant’s Securities to be Registered

The information required by this item is contained under the sections “Risk Factors—Risks Relating to Our Common Stock,” “Dividend Policy” and “Description of Capital Stock” of the information statement. Those sections are incorporated herein by reference.

Item 12. Indemnification of Directors and Officers

The information required by this item is contained under the sections “Certain Relationships and Related Party Transactions—Agreements with Exelis Related to the Spin-Off—Distribution Agreement—Indemnification” of the information statement. Those sections are incorporated herein by reference.

Item 13. Financial Statements and Supplementary Data

The information required by this item is contained under the sections “Selected Historical Condensed Combined Financial and Other Data,” “Unaudited Pro Forma Condensed Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock,” and “Index to Combined Financial Statements” and the statements referenced therein of the information statement. Those sections are incorporated herein by reference.

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 15. Financial Statements and Exhibits

(a) Financial Statements

The information required by this item is contained under the section “Index to Combined Financial Statements” beginning on page F-1 of the information statement. That section is incorporated herein by reference.

(b) Exhibits

The following documents are filed as exhibits hereto:

Exhibit No.	Description
2.1	Form of Distribution Agreement between Vectrus, Inc. and Exelis Inc.*
3.1	Form of Amended and Restated Articles of Incorporation*
3.2	Form of Amended and Restated By-laws*
10.1	Form of Employee Matters Agreement between Vectrus, Inc. and Exelis Inc.*

Exhibit No.	Description
10.2	Form of Tax Matters Agreement between Vectrus, Inc. and Exelis Inc.*
10.3	Form of Transition Services Agreement between Vectrus, Inc. and Exelis Inc.*
10.4	Employment Letter Agreement with Janet L. Oliver, dated as of April 26, 2011*
10.5	Form of Transitional Trademark License Agreement between Vectrus, Inc. and Exelis Inc.*
10.6	Form of Technology License Agreement between Vectrus, Inc. and Exelis Inc.*
10.7	Form of Credit Agreement among Vectrus, Inc., Exelis Systems Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other financial institutions from time to time parties thereto
21.1	Subsidiaries of Vectrus, Inc.*
99.1	Information Statement, dated September 8, 2014.
99.2	Form of Notice of Internet Availability of Information Statement Materials*

* Previously filed

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

Vectrus, Inc.

By:	/S/ KENNETH W. HUNZEKER
	Kenneth W. Hunzeker
	Chief Executive Officer

Date: September 8, 2014

EX-10.7

Exhibit 10.7

CREDIT AGREEMENT

dated as of

September [•], 2014,

among

VECTRUS, INC.,

EXELIS SYSTEMS CORPORATION,

as the Borrower,

The Lenders and Issuing Banks Party Hereto,

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

J.P. MORGAN SECURITIES LLC,

SUNTRUST ROBINSON HUMPHREY, INC. and

U.S. BANK NATIONAL ASSOCIATION,

as Joint Lead Arrangers and Joint Bookrunners

SUNTRUST BANK and U.S. BANK NATIONAL ASSOCIATION,

as Syndication Agents

TABLE OF CONTENTS

		Page
ARTICLE I
Definitions
SECTION 1.01.	Defined Terms		1
SECTION 1.02.	Classification of Loans and Borrowings		43
SECTION 1.03.	Terms Generally		43
SECTION 1.04.	Accounting Terms; GAAP		44
SECTION 1.05.	Pro Forma Calculations		44
SECTION 1.06.	Exchange Rates; Currency Equivalents		44
SECTION 1.07.	Transactions on and prior to Spin-Off Date		45
ARTICLE II
The Credits
SECTION 2.01.	Commitments		46
SECTION 2.02.	Loans and Borrowings		46
SECTION 2.03.	Requests for Borrowings		46
SECTION 2.04.	Swingline Loans		47
SECTION 2.05.	Letters of Credit		49
SECTION 2.06.	Funding of Borrowings		55
SECTION 2.07.	Interest Elections		56
SECTION 2.08.	Termination and Reduction of Commitments		58
SECTION 2.09.	Repayment of Loans; Evidence of Debt		58
SECTION 2.10.	Amortization of Term Loans		59
SECTION 2.11.	Prepayment of Loans		60
SECTION 2.12.	Fees		63
SECTION 2.13.	Interest		64
SECTION 2.14.	Alternate Rate of Interest		65
SECTION 2.15.	Increased Costs		66
SECTION 2.16.	Break Funding Payments		67
SECTION 2.17.	Taxes		68
SECTION 2.18.	Payments Generally; Pro Rata Treatment; Sharing of Setoffs		72
SECTION 2.19.	Mitigation Obligations; Replacement of Lenders		73
SECTION 2.20.	Defaulting Lenders		74
SECTION 2.21.	Incremental Extensions of Credit		76
SECTION 2.22.	Extension of Maturity Date		79
SECTION 2.23.	Refinancing Facilities		81

i

ARTICLE III
Representations and Warranties
SECTION 3.01.	Organization; Powers	83
SECTION 3.02.	Authorization; Due Execution and Delivery; Enforceability	83
SECTION 3.03.	Governmental Approvals; No Conflicts	84
SECTION 3.04.	Financial Condition; No Material Adverse Change	84
SECTION 3.05.	Properties	85
SECTION 3.06.	Litigation and Environmental Matters	85
SECTION 3.07.	Compliance with Laws	86
SECTION 3.08.	Anti-Terrorism Laws; Anti Corruption Laws	86
SECTION 3.09.	Investment Company Status	86
SECTION 3.10.	Federal Reserve Regulations	86
SECTION 3.11.	Taxes	86
SECTION 3.12.	ERISA	86
SECTION 3.13.	Disclosure	86
SECTION 3.14.	Subsidiaries	87
SECTION 3.15.	Labor Matters	87
SECTION 3.16.	Solvency	87
SECTION 3.17.	Collateral Matters	88
SECTION 3.18.	Designation as Senior Debt	88
ARTICLE IV
Conditions
SECTION 4.01.	Effective Date	89
SECTION 4.02.	Funding Date	90
SECTION 4.03.	Each Credit Event	93
ARTICLE V
Affirmative Covenants
SECTION 5.01.	Financial Statements and Other Information	94
SECTION 5.02.	Notices of Material Events	95
SECTION 5.03.	Information Regarding Collateral	96
SECTION 5.04.	Existence; Conduct of Business	96
SECTION 5.05.	Payment of Obligations	96
SECTION 5.06.	Maintenance of Properties	97
SECTION 5.07.	Insurance	97
SECTION 5.08.	Books and Records; Inspection and Audit Rights	97
SECTION 5.09.	Compliance with Laws	97
SECTION 5.10.	Use of Proceeds; Letters of Credit	98
SECTION 5.11.	Additional Subsidiaries	98
SECTION 5.12.	Further Assurances	98
SECTION 5.13.	Post-Effective Date Matters	99
SECTION 5.14.	Designation of Subsidiaries	99
SECTION 5.15.	Spin-Off Documents	99

ii

ARTICLE VI
Negative Covenants
SECTION 6.01.	Indebtedness; Certain Equity Securities	100
SECTION 6.02.	Liens	102
SECTION 6.03.	Fundamental Changes	104
SECTION 6.04.	Investments, Loans, Advances, Guarantees and Acquisitions	105
SECTION 6.05.	Asset Sales	108
SECTION 6.06.	Sale and Leaseback Transactions	110
SECTION 6.07.	Hedging Agreements	110
SECTION 6.08.	Restricted Payments; Certain Payments of Junior Indebtedness	110
SECTION 6.09.	Transactions with Affiliates	112
SECTION 6.10.	Restrictive Agreements	113
SECTION 6.11.	Amendment of Material Documents	113
SECTION 6.12.	Interest Expense Coverage Ratio	114
SECTION 6.13.	Total Leverage Ratio	114
SECTION 6.14.	Changes in Fiscal Periods	114
ARTICLE VII
Events of Default
SECTION 7.01.	Events of Default	114
SECTION 7.02.	Exclusion of Certain Subsidiaries	117
ARTICLE VIII
The Administrative Agent
ARTICLE IX
Miscellaneous
SECTION 9.01.	Notices	122
SECTION 9.02.	Waivers; Amendments	124
SECTION 9.03.	Expenses; Indemnity; Damage Waiver	127
SECTION 9.04.	Successors and Assigns	129
SECTION 9.05.	Survival	134
SECTION 9.06.	Counterparts; Integration; Effectiveness	135
SECTION 9.07.	Severability	135
SECTION 9.08.	Right of Setoff	135
SECTION 9.09.	Governing Law; Jurisdiction; Consent to Service of Process	135
SECTION 9.10.	WAIVER OF JURY TRIAL	136
SECTION 9.11.	Headings	136
SECTION 9.12.	Confidentiality	137
SECTION 9.13.	Interest Rate Limitation	137
SECTION 9.14.	Release of Liens and Guarantees	138
SECTION 9.15.	USA PATRIOT Act Notice	138
SECTION 9.16.	No Fiduciary Relationship	138
SECTION 9.17.	Non-Public Information	139
SECTION 9.18.	Authorization to Distribute Certain Materials to Public-Siders	139

iii

SCHEDULES:

Schedule 1.01 — Existing Letters of Credit

Schedule 1.02 — Mortgaged Property

Schedule 2.01 — Commitments

Schedule 3.14 — Subsidiaries

Schedule 6.01 — Existing Indebtedness

Schedule 6.02 — Existing Liens

Schedule 6.04 — Existing Investments

Schedule 6.10 — Existing Restrictions

EXHIBITS:

Exhibit A	—	Form of Assignment and Assumption
Exhibit B	—	Form of Collateral Agreement
Exhibit C	—	Form of Perfection Certificate
Exhibit D	—	Form of Supplemental Perfection Certificate
Exhibit E	—	Form of Global Intercompany Note
Exhibit F	—	Auction Procedures
Exhibit G	—	Form of Affiliated Lender Assignment and Assumption
Exhibit H	—	Form of Maturity Date Extension Request
Exhibit I-1	—	Form of U.S. Tax Compliance Certificate for Foreign Lenders that are not Partnerships for U.S. Federal Income Tax Purposes
Exhibit I-2	—	Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are Partnerships for U.S. Federal Income Tax Purposes
Exhibit I-3	—	Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are not Partnerships for U.S. Federal Income Tax Purposes
Exhibit I-4	—	Form of U.S. Tax Compliance Certificate for Foreign Lendersthat are Partnerships for U.S. Federal Income Tax Purposes
Exhibit J	—	Form of Solvency Certificate
Exhibit K	—	Mandatory Costs Rate

iv

CREDIT AGREEMENT dated as of September [•], 2014 (this “Agreement”), among VECTRUS, INC., an Indiana corporation, EXELIS SYSTEMS CORPORATION, a Delaware corporation, the LENDERS and ISSUING BANKS party hereto and JPMORGAN CHASE BANK, N.A., as Administrative Agent.

The Borrower has requested that (a) the Tranche A Term Lenders extend credit in the form of Tranche A Term Loans on the Funding Date in an aggregate principal amount not in excess of $140,000,000 and (b) the Revolving Lenders extend credit in the form of Revolving Loans, the Swingline Lender extend credit in the form of Swingline Loans and the Issuing Banks issue Letters of Credit, in each case at any time and from time to time during the Revolving Availability Period such that the Aggregate Revolving Exposure will not exceed $75,000,000 at any time. The proceeds of the Tranche A Term Loans, together with cash on hand, will be used to (a) pay the Funding Date Distribution to Exelis (or a subsidiary thereof), (b) pay fees and expenses related to the foregoing and (c) with respect to any cash remaining on the balance sheet of the Borrower after giving effect to the Transactions, for working capital and other general corporate purposes (including acquisitions permitted by this Agreement) of Holdings, the Borrower and the Restricted Subsidiaries. The proceeds of the Revolving Loans on and after the Funding Date and of the Swingline Loans will be used for working capital and other general corporate purposes (including acquisitions permitted by this Agreement) of Holdings, the Borrower and the Restricted Subsidiaries. Letters of Credit will be used by Holdings, the Borrower and the Restricted Subsidiaries for general corporate purposes.

The Lenders are willing to extend such credit to the Borrower, and the Issuing Banks are willing to issue Letters of Credit for the account of the Borrower, on the terms and subject to the conditions set forth herein. Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement (including in the introductory paragraphs hereof), the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“Additional Lender” has the meaning assigned to such term in Section 2.21(c).

“Adjusted EURIBO Rate” means, with respect to any EURIBOR Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the sum of (a) the EURIBO Rate for such Interest Period and (b) the Mandatory Costs Rate.

“Adjusted LIBO Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period (or, solely for purposes of clause (c) of the defined term “Alternate Base Rate”, for purposes of determining the Alternate Base Rate as of any date), an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) for Borrowings denominated in dollars, (i) the LIBO Rate for dollars for such Interest Period (or such date, as applicable) multiplied by (ii) the Statutory Reserve Rate and (b) for Borrowings denominated in a Permitted Foreign Currency (other than Euro), the sum of (i) the LIBO Rate for such currency for such Interest Period and (ii) the Mandatory Costs Rate.

“Administrative Agent” means JPMCB (including its branches and affiliates), in its capacity as administrative agent hereunder and under the other Loan Documents, and its successors in such capacity as provided in Article VIII.

“Administrative Questionnaire” means an administrative questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Affiliated Lender Assignment and Assumption” means an assignment and assumption entered into by a Lender and a Purchasing Borrower Party (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit G or any other form approved by the Administrative Agent.

“Aggregate Revolving Commitment” means, at any time, the sum of the Revolving Commitments of all the Revolving Lenders at such time.

“Aggregate Revolving Exposure” means, at any time, the sum of the Revolving Exposures of all the Revolving Lenders at such time.

“Agreement” has the meaning assigned to such term in the introductory statement to this Credit Agreement.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1.00% per annum and (c) the Adjusted LIBO Rate on such day (or, if such day is not a Business Day, the immediately preceding Business Day) plus 1.00% per annum. If the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance with the terms of the definition thereof, the Alternate Base Rate shall be determined without regard to clause (b) of the preceding sentence until the circumstances giving rise to such inability no longer exist. For purposes of clause (c) above, the Adjusted LIBO Rate on any day shall be based on the LIBO Screen Rate for a deposit in dollars and an Interest Period of one month, as such rate appears at approximately 11:00 a.m., London time, on such day. If no LIBO Screen Rate shall be available for an Interest Period of one month but LIBO Screen Rates shall be available for maturities both longer and shorter than an Interest Period of one month, then the Adjusted LIBO Rate for purposes of clause (c) above shall be based on the Interpolated Screen Rate on the applicable date of determination. Notwithstanding the foregoing, if the Adjusted LIBO Rate (determined as provided above) shall be less than zero, such rate shall be deemed to be zero. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

2

“Alternative Incremental Facility Debt” means any Indebtedness incurred by the Borrower in the form of one or more series of senior secured notes or senior unsecured notes; provided that (i) if such Indebtedness is secured, such Indebtedness shall be secured by the Collateral on a junior basis with the Loan Document Obligations and shall not be secured by any property or assets of Holdings, the Borrower or any Restricted Subsidiary other than the Collateral, (ii) the stated final maturity of such Indebtedness shall not be earlier than the Latest Maturity Date (and such stated final maturity of such Indebtedness shall not be subject to any conditions that could result in such stated final maturity occurring on a date that precedes the Latest Maturity Date), and such Indebtedness shall not have a weighted average life to maturity that is shorter than the weighted average life to maturity of the then-remaining Term Loans, (iii) such Indebtedness shall have covenants no more restrictive, taken as a whole, than those applicable to the Commitments and the Loans as determined in good faith by the Borrower (it being understood that such Indebtedness may include one or more financial maintenance covenants with which Holdings and the Borrower shall be required to comply, provided that any such financial maintenance covenant shall also be for the benefit of all other Lenders in respect of all Loans and Commitments outstanding at the time that such Alternative Incremental Facility Debt is incurred), (iv) if such Indebtedness is secured, the security agreement relating to such Indebtedness shall not be materially more favorable (when taken as a whole) to the holders providing such Indebtedness than the existing Security Documents are to the Lenders, (v) if such Indebtedness is secured, a trustee or note agent acting on behalf of the holders of such Indebtedness shall have become party to customary intercreditor arrangements mutually agreed with the Administrative Agent and (vi) such Indebtedness shall not be guaranteed by any Subsidiaries other than the Loan Parties.

“Anti-Corruption Laws” means all laws, rules and regulations of any jurisdiction applicable to Holdings or its subsidiaries from time to time concerning or relating to bribery, corruption or money laundering.

“Applicable Percentage” means, at any time with respect to any Revolving Lender, the percentage of the Aggregate Revolving Commitment represented by such Lender’s Revolving Commitment at such time. If the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments of Revolving Loans, LC Exposures and Swingline Exposures that occur after such termination or expiration.

“Applicable Rate” means, for any day, with respect to (a) any Loan that is a Tranche A Term Loan, a Revolving Loan or a Swingline Loan and (b) the commitment fees payable hereunder in respect of Revolving Loans after the Funding Date, the applicable rate per annum set forth below under the applicable caption, based upon the Total Leverage Ratio as of the end of the fiscal quarter of Holdings for which consolidated financial statements have most recently been delivered to the Administrative Agent pursuant to Section 5.01(a) or 5.01(b); provided that until the delivery of such consolidated financial statements as of and for the fiscal year of Holdings ending December 31, 2014 (together with the certificate of a Financial Officer required to be delivered by the Borrower pursuant to Section 5.01(c) together therewith), the Applicable Rate shall be that set forth below in Level II:

Level	Total Leverage Ratio	Eurocurrency Loans and EURIBOR Loans	ABR Loans	Commitment Fee
I	³ 2.50 to 1.00	3.00%	2.00%	0.500%
II	³ 1.50 to 1.00 but < 2.50 to 1.00	2.75%	1.75%	0.450%
III	< 1.50 to 1.00	2.50%	1.50%	0.400%

3

For purposes of this clause (a), each change in the Applicable Rate resulting from a change in the Total Leverage Ratio shall be effective during the period commencing on and including the date of delivery to the Administrative Agent pursuant to Section 5.01(a) or 5.01(b) of the consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Total Leverage Ratio shall be deemed to be in Level I at the option of the Administrative Agent or at the request of the Required Lenders if the Borrower fails to deliver the consolidated financial statements required to be delivered by it pursuant to Section 5.01(a) or 5.01(b) or the certificate of a Financial Officer required to be delivered by it pursuant to Section 5.01(c) during the period from the expiration of the time for delivery thereof until such consolidated financial statements and such certificate are delivered.

“Approved Fund” means, with respect to any Lender or Eligible Assignee, any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in commercial loans and similar extensions of credit in the ordinary course of its activities and that is administered, advised or managed by (a) such Lender or Eligible Assignee, (b) an Affiliate of such Lender or Eligible Assignee or (c) an entity or an Affiliate of an entity that administers, advises or manages such Lender or Eligible Assignee.

“Arrangers” means, collectively, J.P. Morgan Securities LLC, SunTrust Robinson Humphrey, Inc. and U.S. Bank National Association, in their capacities as joint lead arrangers and joint bookrunners for the credit facilities provided for herein.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any Person whose consent is required by Section 9.04) and accepted by the Administrative Agent, substantially in the form of Exhibit A or any other form approved by the Administrative Agent.

“Auction” means an auction pursuant to which a Purchasing Borrower Party offers to purchase Term Loans pursuant to the Auction Procedures.

“Auction Manager” means any financial institution or advisor employed by the Borrower (whether or not an Affiliate of the Administrative Agent) to act as an arranger in connection with any Auction; provided that the Borrower shall not designate the Administrative Agent as the Auction Manager without the written consent of the Administrative Agent (it being understood and agreed that the Administrative Agent shall be under no obligation to agree to act as the Auction Manager).

“Auction Procedures” means the procedures set forth in Exhibit F.

“Auction Purchase Offer” means an offer by a Purchasing Borrower Party to purchase Term Loans of one or more Classes pursuant to an auction process conducted in accordance with the Auction Procedures and otherwise in accordance with Section 9.04(e).

4

“Available Amount” means, at any time, (a) the sum of (i) the sum of Excess Cash Flow for each fiscal year of Holdings (commencing with the fiscal year ending December 31, 2015) in respect of which financial statements have been delivered pursuant to Section 5.01(a) (to the extent such Excess Cash Flow amount exceeds $0), plus (ii) the Net Proceeds from any sale or issuance of Equity Interests (other than Disqualified Equity Interests) of Holdings to the extent such Net Proceeds are received by the Borrower, plus (iii) the aggregate amount of prepayments declined by the Term Lenders and retained by the Borrower pursuant to Section 2.11(e) (provided that any increase in the Available Amount pursuant to this clause (iii) shall not be used to make any Restricted Payment) plus (iv) the amount of any investment made using the Available Amount of the Borrower or any of its Restricted Subsidiaries in any Unrestricted Subsidiary that has been re-designated as a Restricted Subsidiary or that has been merged, amalgamated or consolidated with or into the Borrower or any of its Restricted Subsidiaries minus (b) the sum at such time of (i) all prepayments required to be made under Section 2.11(d) in respect of Excess Cash Flow for each fiscal year of Holdings in respect of which financial statements have been delivered pursuant to Section 5.01(a) (commencing with the fiscal year ending December 31, 2015), plus (ii) investments, loans and advances previously or concurrently made under Section 6.04(r) in reliance on the Available Amount, plus (iii) Restricted Payments previously or concurrently made under Section 6.08(a)(ix) in reliance on the Available Amount, plus (iv) prepayments of Indebtedness previously or concurrently made under Section 6.08(b)(v) in reliance on the Available Amount.

“Bankruptcy Event” means, with respect to any Person, that such Person has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in, any such proceeding or appointment; provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority; provided further that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States of America or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

“Board of Governors” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” means Exelis Systems Corporation, a Delaware corporation.

“Borrowing” means (a) Loans of the same Class, Type and currency, made, converted or continued on the same date and, in the case of Eurocurrency Loans and EURIBOR Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan.

“Borrowing Minimum” means (a) in the case of a Eurocurrency Borrowing denominated in dollars, $1,000,000, (b) in the case of a Eurocurrency Borrowing denominated in any Permitted Foreign Currency or a EURIBOR Borrowing, the smallest amount of such Permitted Foreign Currency that is an integral multiple of 100,000 units of such currency and that has a Dollar Equivalent in excess of $1,000,000 and (c) in the case of an ABR Borrowing, $500,000.

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“Borrowing Multiple” means (a) in the case of a Eurocurrency Borrowing denominated in dollars, $500,000, (b) in the case of a Eurocurrency Borrowing denominated in any Permitted Foreign Currency or a EURIBOR Borrowing, the smallest amount of such Permitted Foreign Currency that is an integral multiple of 100,000 units of such currency and that has a Dollar Equivalent in excess of $500,000 and (c) in the case of an ABR Borrowing, $100,000.

“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03 or 2.04, as applicable, which shall be, in the case of a written Borrowing Request, in a form approved by the Administrative Agent and otherwise consistent with the requirements of Section 2.03 or 2.04, as applicable.

“Business Day” means any day that is not a Saturday, a Sunday or any other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that (a) when used in connection with a Eurocurrency Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in the applicable currency in the London interbank market or any day on which banks in London are not open for general business and (b) when used in connection with any EURIBOR Loan, the term “Business Day” shall also exclude any day which is not a TARGET Day or any day on which banks in London are not open for general business.

“Calculation Date” means (a) the last Business Day of each calendar quarter, (b) each date (with such date to be reasonably determined by the Administrative Agent) that is on or about the date of (i) a Borrowing Request or an Interest Election Request with respect to any Revolving Loan or (ii) the issuance, amendment, renewal or extension of a Letter of Credit and (c) if an Event of Default has occurred and is continuing, any Business Day as determined by the Administrative Agent in its sole discretion.

“Capital Expenditures” means, for any period, (a) the additions to property, plant and equipment and other capital expenditures of Holdings, the Borrower and the Restricted Subsidiaries that are (or should be) set forth in a consolidated statement of cash flows of Holdings for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by Holdings, the Borrower and the Restricted Subsidiaries during such period, but excluding in each case any such expenditure (i) constituting reinvestment of the Net Proceeds of any event described in clause (a) or (b) of the definition of the term “Prepayment Event”, to the extent permitted by Section 2.11(c), (ii) made by Holdings, the Borrower or any Restricted Subsidiary as payment of the consideration for any acquisition permitted by this Agreement, (iii) made by Holdings, the Borrower or any Restricted Subsidiary to effect leasehold improvements to any property leased by Holdings, the Borrower or such Restricted Subsidiary as lessee, to the extent that such expenses have been reimbursed by the landlord, (iv) in the form of a substantially contemporaneous exchange of similar property, plant, equipment or other capital assets, except to the extent of cash or other consideration (other than the assets so exchanged), if any, paid or payable by Holdings, the Borrower or any Restricted Subsidiary and (v) made with the Net Proceeds from the issuance of Qualified Equity Interests.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. For purposes of Section 6.02, a Capital Lease Obligation shall be deemed to be secured by a Lien on the property being leased and such property shall be deemed to be owned by the lessee.

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“Cash Management Services” means the treasury management services (including controlled disbursements, zero balance arrangements, cash sweeps, corporate credit card and other card services, automated clearinghouse transactions, return items, overdrafts, temporary advances, interest and fees and interstate depository network services) provided to Holdings, the Borrower or any Restricted Subsidiary.

“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, of any Equity Interest in the Borrower by any Person other than Holdings (or prior to the consummation of the Spin-Off, Exelis or any of its subsidiaries); (b) prior to the consummation of the Spin-Off, the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person other than Exelis or any of its subsidiaries of any Equity Interest in Holdings; (c) after the consummation of the Spin-Off, the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Exchange Act and the rules of the SEC thereunder) of 35% or more on a fully diluted basis of the Voting Equity Interests in Holdings; or (d) the occupation of a majority of the seats (other than vacant seats) on the board of directors of Holdings by Persons who were not (i) directors of Holdings on the date of consummation of the Spin-Off, (ii) nominated by the board of directors of Holdings or (iii) appointed by directors who were directors of Holdings on the date of consummation of the Spin-Off or were so nominated as provided in subclause (ii) of this clause (d).

“Change in Law” means the occurrence, after the Effective Date (or with respect to any Lender, if later, the date on which such Lender becomes a Lender), of any of the following: (a) the adoption of or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that, notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives promulgated thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities, in each case pursuant to Basel III, in each case shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted, promulgated or issued.

“Charges” has the meaning assigned to such term in Section 9.13.

“Class”, when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Tranche A Term Loans, Incremental Term Loans or Swingline Loans, (b) any Commitment, refers to whether such Commitment is a Revolving Commitment, Tranche A Term Commitment or a Commitment in respect of any Incremental Term Loans and (c) any Lender, refers to whether such Lender has a Loan or Commitment with respect to a particular Class. Incremental Term Loans that have different terms and conditions (together with the Commitments in respect thereof) shall be construed to be in different Classes.

“Code” means the Internal Revenue Code of 1986.

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“Collateral” means any and all assets, whether real or personal, tangible or intangible, on which Liens are purported to be granted pursuant to the Security Documents as security for the Obligations.

“Collateral Agreement” means the Guarantee and Collateral Agreement among Holdings, the Borrower, the Subsidiary Loan Parties and the Administrative Agent, substantially in the form of Exhibit B, or any other collateral agreement reasonably requested (in accordance with the Collateral and Guarantee Requirement) by the Administrative Agent.

“Collateral and Guarantee Requirement” means, at any time, the requirement that:

(a) the Administrative Agent shall have received from Holdings, the Borrower and each Designated Subsidiary either (i) a counterpart of the Collateral Agreement duly executed and delivered on behalf of such Person or (ii) in the case of any Person that becomes a Designated Subsidiary after the Funding Date, a supplement to the Collateral Agreement, in the form specified therein, duly executed and delivered on behalf of such Person, together with opinions and documents of the type referred to in Sections 4.02(b) and (c) with respect to such Person;

(b) (i) all outstanding Equity Interests of the Borrower and each Restricted Subsidiary that is a Material Subsidiary, in each case owned by any Loan Party, shall have been pledged pursuant to the Collateral Agreement; provided that the Loan Parties shall not be required to pledge (x) more than 65% of the outstanding Voting Equity Interests of any first-tier Foreign Subsidiary or any Foreign-Subsidiary Holding Company, (y) any of the outstanding Voting Equity Interests of any Foreign Subsidiary that is not a first-tier Foreign Subsidiary or (z) any Equity Interests to the extent that a pledge of such Equity Interests is prohibited by any requirements of law or contract (so long as any contractual restriction is not incurred in contemplation of such entity becoming a subsidiary of Holdings) and (ii) the Administrative Agent shall, to the extent required by the Collateral Agreement, have received certificates or other instruments representing all such Equity Interests, together with undated stock powers or other instruments of transfer with respect thereto endorsed in blank (provided that no Loan Party shall have any obligation to deliver a certificate or other instrument representing any such Equity Interest if such Equity Interest is uncertificated);

(c) all Indebtedness of Holdings, the Borrower and each Subsidiary, and all other Indebtedness of any Person in a principal amount of $5,000,000 or more, in each case, that is owing to any Loan Party shall be evidenced by a promissory note and shall have been pledged pursuant to the Collateral Agreement, and the Administrative Agent shall have received all such promissory notes (or, if applicable, in lieu thereof, the Global Intercompany Note), together with undated instruments of transfer with respect thereto endorsed in blank;

(d) all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Documents and perfect such Liens to the extent required by, and with the priority required by, the Security Documents shall have been filed, registered or recorded or delivered to the Administrative Agent for filing, registration or recording;

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(e) the Administrative Agent shall have received (i) counterparts of a Mortgage with respect to each Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company insuring the Lien of each such Mortgage as a valid and enforceable first Lien on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.02, together with such endorsements, coinsurance and reinsurance as the Administrative Agent may reasonably request, (iii) if any Mortgaged Property is located in an area determined by the Federal Emergency Management Agency to have special flood hazards, evidence of such flood insurance as may be required under applicable law, including Regulation H of the Board of Governors, together with “life of loan” flood zone determinations, and (iv) such surveys, abstracts, appraisals, legal opinions and other documents as the Administrative Agent or the Required Lenders may reasonably request with respect to any such Mortgage or Mortgaged Property; provided that the requirements of the foregoing clauses (i), (ii) and (iv) shall be completed on or before the date that is 90 days after the Funding Date (or such longer period as the Administrative Agent may, in its sole discretion, agree to in writing) in accordance with Section 5.13;

(f) the Administrative Agent shall have received a counterpart, duly executed and delivered by the applicable Loan Party and the applicable depositary bank or securities intermediary, as applicable, of a Control Agreement with respect to (i) each deposit account maintained by any Loan Party in the United States with any depositary bank (other than (A) any deposit account the funds in which are used, in the ordinary course of business, solely for the payment of salaries and wages, workers’ compensation and similar expenses, (B) deposit accounts the daily balance in which does not at any time exceed $100,000 for any such account or $250,000 for all such accounts, (C) any deposit account that is a zero-balance disbursement account and (D) any deposit account the funds in which consist solely of (1) funds held by Holdings, the Borrower or any Subsidiary in trust for any director, officer or employee of Holdings, the Borrower or any Subsidiary or any employee benefit plan maintained by Holdings, the Borrower or any Subsidiary or (2) funds representing deferred compensation for the directors and employees of Holdings, the Borrower and the Subsidiaries) and (ii) each securities account maintained by any Loan Party in the United States with any securities intermediary (other than any securities account the securities entitlements in which consist solely of (A) securities entitlements held by Holdings, the Borrower or any Subsidiary in trust for any director, officer or employee of Holdings, the Borrower or any Subsidiary or any employee benefit plan maintained by Holdings, the Borrower or any Subsidiary or (B) securities entitlements representing deferred compensation for the directors and employees of Holdings, the Borrower and the Subsidiaries); ; provided that the requirements of the foregoing clauses (i) and (ii) shall be completed on or before the date that is 90 days after the Funding Date (or such longer period as the Administrative Agent may, in its sole discretion, agree to in writing) in accordance with Section 5.13; and

(g) each Loan Party shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting by it of the Liens thereunder.

The foregoing definition shall not require the creation or perfection of pledges of or security interests in, or the obtaining of title insurance, legal opinions or other deliverables with respect to, particular assets, rights or properties of the Loan Parties, or the provision of Guarantees by any Designated Subsidiary, if and for so long as the Administrative Agent, in consultation with the Borrower, reasonably determines that the cost of creating or perfecting such pledges or security interests in such assets, rights or properties, or obtaining such title insurance, legal opinions or other deliverables in respect of such assets, rights or properties, or providing such Guarantees (taking into account any adverse tax consequences to the Borrower and its

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Restricted Subsidiaries (including the imposition of withholding or other material Taxes on Lenders)), shall be excessive in view of the benefits to be obtained by the Lenders therefrom. The Administrative Agent may grant extensions of time for the creation or perfection of pledges of or security interests in, or the obtaining of title insurance, legal opinions or other deliverables with respect to, particular assets, rights or properties of the Loan Parties or the provision of Guarantees by any Designated Subsidiary (including extensions beyond the Funding Date or in connection with assets, rights or properties acquired, or Subsidiaries formed or acquired, after the Funding Date) where it determines that such creation or perfection of security interests, obtaining of title insurance, legal opinions or other deliverables, or provision of Guarantees cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement or the Security Documents.

“Commitment” means (a) with respect to any Lender, such Lender’s Revolving Commitment, Tranche A Term Commitment or commitment in respect of any Incremental Term Loans or any combination thereof (as the context requires) and (b) with respect to the Swingline Lender, its Swingline Commitment.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.) and any successor statute.

“Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to this Agreement or any other Loan Document or the transactions contemplated herein or therein that is distributed to the Administrative Agent, any Lender or any Issuing Bank by means of electronic communications pursuant to Section 9.01, including through the Platform.

“Consenting Lender” has the meaning assigned to such term in Section 2.22(a).

“Consolidated Cash Interest Expense” means, for any period, the excess of (a) the sum of, without duplication, (i) the interest expense (including imputed interest expense in respect of Capital Lease Obligations) of Holdings, the Borrower and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, (ii) any interest or other financing costs accrued during such period in respect of Indebtedness of Holdings, the Borrower and the Restricted Subsidiaries that are required to be capitalized rather than included in consolidated interest expense of Holdings for such period in accordance with GAAP, (iii) any cash payments made during such period in respect of obligations referred to in clause (b)(iii) below that were amortized or accrued in a previous period, and (iv) all cash dividends paid or payable during such period in respect of Disqualified Equity Interests of Holdings; provided that such dividends shall be multiplied by a fraction the numerator of which is one and the denominator of which is one minus the effective combined tax rate of Holdings (expressed as a decimal) for such period (as estimated by a Financial Officer of Holdings in good faith) minus (b) the sum of, without duplication, (i) cash interest income of Holdings, the Borrower and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, (ii) to the extent included in such consolidated interest expense for such period, non-cash amounts attributable to amortization or write-off of capitalized interest or other financing costs paid in a previous period and (iii) to the extent included in such consolidated interest expense for such period, non-cash amounts attributable to amortization of debt discounts or accrued interest payable in kind for such period. Consolidated Cash Interest Expense shall be deemed to be (a) for the four fiscal quarter period ended December 31, 2014, Consolidated Cash Interest Expense for the period from the Funding Date to and including December 31, 2014, multiplied by a fraction equal to (x) 365 divided by (y) the number of days actually elapsed from the Funding

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Date to December 31, 2014, (b) for the four fiscal quarter period ended March 31, 2015, Consolidated Cash Interest Expense for the period from the Funding Date to and including March 31, 2015, multiplied by a fraction equal to (x) 365 divided by (y) the number of days actually elapsed from the Funding Date to March 31, 2015, (c) for the four fiscal quarter period ended June 30, 2015, Consolidated Cash Interest Expense for the period from the Funding Date to and including June 30, 2015, multiplied by a fraction equal to (x) 365 divided by (y) the number of days actually elapsed from the Funding Date to June 30, 2015, and (d) for the four fiscal quarter period ended September 30, 2015, Consolidated Cash Interest Expense for the period from the Funding Date to and including September 30, 2015, multiplied by a fraction equal to (x) 365 divided by (y) the number of days actually elapsed from the Funding Date to September 30, 2015.

“Consolidated Debt” means, as of any date, the aggregate principal amount of Indebtedness of the type specified in clauses (a), (b), (e) (but only to the extent supporting Indebtedness of the types specified in clauses (a), (b) and (g) of the definition thereof), (f) (but only to the extent supporting Indebtedness of the types specified in clauses (a), (b) and (g) of the definition thereof), (g), (h) (but only to the extent issued in support of Indebtedness of others of the types specified in clauses (a), (b) and (g) of the definition thereof) and (j) of Holdings, the Borrower and the Restricted Subsidiaries outstanding as of such date determined on a consolidated basis.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income for such period, the sum of (i) interest expense for such period, (ii) consolidated income tax expense of Holdings, the Borrower and the Restricted Subsidiaries for such period, (iii) depreciation and amortization expense of Holdings, the Borrower and the Restricted Subsidiaries for such period, (iv) fees and expenses incurred during such period in connection with the Transactions, (v) fees and expenses incurred during such period in connection with any proposed or actual permitted merger, acquisition, investment, asset sale, other disposition or capital markets transaction, without regard to the consummation thereof, (vi) non-recurring charges incurred during such period in respect of restructurings, plant closings, headcount reductions or other similar actions, including severance charges in respect of employee terminations, in an aggregate amount for all such charges not to exceed 5.0% of Consolidated EBITDA for such period as determined prior to such add-back, (vii) any non-cash charges, losses or expenses of Holdings, the Borrower and the Restricted Subsidiaries for such period (but excluding any non-cash charge, loss or expense in respect of an item that was included in Consolidated Net Income in a prior period and any non-cash charge, loss or expense that relates to the write-down or write-off of inventory, other than any write-down or write-off of inventory as a result of purchase accounting adjustments in respect of any acquisition permitted by this Agreement), (viii) any losses during such period attributable to early extinguishment of Indebtedness or obligations under any Hedging Agreement, (ix) any expense during such period relating to deferred compensation and other equity-based compensation plans, defined benefits pension or post-retirement benefit plans, (x) any losses during such period resulting from the sale or disposition of any asset of Holdings, the Borrower or any Restricted Subsidiary outside the ordinary course of business and (xi) the cumulative effect of a change in accounting principles; provided that any cash payment made with respect to any non-cash items added back in computing Consolidated EBITDA for any prior period pursuant to this clause (a) (or that would have been added back had this Agreement been in effect during such period) shall be subtracted in computing Consolidated EBITDA for the period in which such cash payment is made, and minus (b) without duplication and (except for clause (iii)) to the extent included in determining such Consolidated Net Income, the sum of (i) any non-cash gains for such period (other than any such non-cash gains (A) in respect of which cash was received in a prior period or will be

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received in a future period and (B) that represent the reversal of any accrual in a prior period for, or the reversal of any cash reserves established in a prior period for, anticipated cash charges), (ii) any income during such period relating to deferred compensation and other equity-based compensation plans, defined benefits pension or post-retirement benefit plans, (iii) cash payments during such period relating to deferred compensation and other equity-based compensation plans and cash contributions to defined benefits pension or post-retirement benefit plans, (iv) all gains during such period resulting from the sale or disposition of any asset of the Borrower or any Subsidiary outside the ordinary course of business, (v) any gains during such period attributable to early extinguishment of Indebtedness or obligations under any Hedging Agreement, (vi) the cumulative effect of a change in accounting principles and (vii) solely for purposes of the calculation set forth in Section 6.12, cash interest income of Holdings, the Borrower and the Restricted Subsidiaries for such period, all determined on a consolidated basis in accordance with GAAP. In the event any Subsidiary shall be a Subsidiary that is not wholly owned by Holdings, all amounts added back in computing Consolidated EBITDA for any period pursuant to clause (a) above, and all amounts subtracted in computing Consolidated EBITDA pursuant to clause (b) above, to the extent such amounts are, in the reasonable judgment of a Financial Officer of Holdings, attributable to such Subsidiary, shall be reduced by the portion thereof that is attributable to the non-controlling interest in such Subsidiary. Consolidated EBITDA shall be $11,033,689.55 and $20,788,000.00 for the fiscal quarters ended June 30, 2014, and March 31, 2014, respectively.

“Consolidated Net Income” means, for any period, the net income or loss of Holdings, the Borrower and the Restricted Subsidiaries for such period determined in accordance with GAAP as set forth on the consolidated financial statements of Holdings, the Borrower and the Restricted Subsidiaries for such period; provided that there shall be excluded (a) the income of any Person (other than Holdings and the Borrower) that is not a Restricted Subsidiary, except to the extent of the amount of cash dividends or other cash distributions actually paid by such Person to Holdings, the Borrower or, subject to clauses (b) and (c) of this proviso, any Restricted Subsidiary during such period, (b) the income of, and any amounts referred to in clause (a) of this proviso paid to, any Restricted Subsidiary to the extent that, on the date of determination, the declaration or payment of cash dividends or other cash distributions by such Restricted Subsidiary of that income is not at the time permitted by a Requirement of Law or any agreement or instrument applicable to such Restricted Subsidiary, unless such restrictions with respect to the payment of cash dividends and other similar cash distributions have been legally and effectively waived, (c) the income or loss of, and any amounts referred to in clause (a) of this proviso paid to, any consolidated Subsidiary that is not wholly owned by Holdings to the extent such income or loss or such amounts are attributable to the noncontrolling interest in such consolidated Subsidiary and (d) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies, or the dismissal or appointment of the management, of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Control Agreement” means, with respect to any deposit account or securities account maintained by any Loan Party, a control agreement in form and substance reasonably satisfactory to the Administrative Agent, duly executed and delivered by such Loan Party and the depositary bank or the securities intermediary, as applicable, with which such account is maintained.

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“Credit Party” means the Administrative Agent, each Issuing Bank, each Swingline Lender and each other Lender.

“Declining Lender” has the meaning assigned to such term in Section 2.22(a).

“Default” means any event or condition that constitutes an Event of Default or that upon notice, lapse of time or both would, unless cured or waived, constitute an Event of Default.

“Defaulting Lender” means any Revolving Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Revolving Lender notifies the Administrative Agent in writing that such failure is the result of such Revolving Lender’s good faith determination that a condition precedent to funding (specifically identified in such writing, including, if applicable, by reference to a specific Default) has not been satisfied, (b) has notified Holdings, the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Revolving Lender’s good faith determination that a condition precedent to funding (specifically identified in such writing, including, if applicable, by reference to a specific Default) cannot be satisfied), (c) has failed, within three Business Days after request by a Credit Party, made in good faith, to provide a certification in writing from an authorized officer of such Revolving Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and participations in then outstanding Letters of Credit and Swingline Loans; provided that such Revolving Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent or (d) has, or has a direct or indirect parent company that has, become the subject of a Bankruptcy Event. Any determination by the Administrative Agent that a Revolving Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Revolving Lender shall be deemed to be a Defaulting Lender (subject to Section 2.20) upon delivery of written notice of such determination to the Borrower, each Issuing Bank, the Swingline Lender and each other Lender.

“Designated Non-Cash Consideration” means the fair market value of non-cash consideration received by the Borrower or a Restricted Subsidiary in connection with a disposition pursuant to Section 6.05 that is designated as Designated Non-Cash Consideration pursuant to a certificate of an executive officer, setting forth the basis of such valuation (which amount will be reduced by the fair market value of the portion of the non-cash consideration converted to cash within 180 days following the consummation of such disposition).

“Designated Subsidiary” means each wholly owned Restricted Subsidiary other than (a) a Restricted Subsidiary that is (i) a Foreign Subsidiary, (ii) a Foreign-Subsidiary Holding Company and (iii) a Subsidiary of a Foreign Subsidiary or a Foreign-Subsidiary Holding Company, (b) a Subsidiary that is not a Material Subsidiary, (c) a Restricted Subsidiary that is a captive insurance subsidiary, a not-for-profit subsidiary or a special purpose entity or (d) a Restricted Subsidiary that is not permitted by law, regulation or contract to provide the Guarantee required by the Collateral and Guarantee Requirement (so long as any such contractual restriction is not incurred in contemplation of such Person becoming a Subsidiary), or would require

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governmental (including regulatory) consent, approval, license or authorization to provide such Guarantee, unless such consent, approval, license or authorization has been received, or for which the provision of such Guarantee would result in a material adverse tax consequence to the Borrower and the Restricted Subsidiaries, taken as a whole (as reasonably determined in good faith by the Borrower).

“Disqualified Equity Interest” means any Equity Interest that (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests) or subject to mandatory repurchase or redemption or repurchase at the option of the holders thereof, in each case in whole or in part and whether upon the occurrence of any event, pursuant to a sinking fund obligation on a fixed date or otherwise, prior to the date that is 91 days after the Latest Maturity Date (determined as of the date of issuance thereof or, in the case of any such Equity Interests outstanding on the date hereof, as of the date hereof), other than (i) upon payment in full of the Loan Document Obligations, reduction of the LC Exposure to zero and termination of the Commitments or (ii) upon a “change in control” or asset sale or casualty or condemnation event; provided that any payment required pursuant to this clause (ii) shall be subject to the prior repayment in full of the Loans or (b) is convertible or exchangeable, automatically or at the option of any holder thereof, into (i) any Indebtedness (other than any Indebtedness described in clause (j) of the definition thereof) or (ii) any Equity Interests or other assets other than Qualified Equity Interests, in each case at any time prior to the date that is 91 days after the Latest Maturity Date (determined as of the date of issuance thereof or, in the case of any such Equity Interests outstanding on the date hereof, as of the date hereof); provided that (x) an Equity Interest in any Person that is issued to any employee or to any plan for the benefit of employees or by any such plan to such employees shall not constitute a Disqualified Equity Interest solely because it may be required to be repurchased by such Person or any of its subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability and (y) any Equity Interest that would constitute a Disqualified Equity Interest solely as a result of a redemption feature that is conditioned upon, or subject to, compliance with the Loan Documents shall not constitute a Disqualified Equity Interest.

“Distribution Agreement” means the Distribution Agreement between Exelis and Holdings, to be dated on or prior to the Spin-Off Date.

“Dollar Equivalent” means, at any time, (a) with respect to any amount denominated in dollars, such amount and (b) with respect to any amount denominated in any Permitted Foreign Currency, the equivalent amount thereof in dollars at such time as determined in accordance with Section 1.06(a) using the Exchange Rate with respect to such Permitted Foreign Currency at the time in effect under the provisions of such Section (except as otherwise expressly provided in Section 2.05(e)).

“dollars” or “$” refers to lawful money of the United States of America.

“Domestic Subsidiary” means any Subsidiary that is not a Foreign Subsidiary.

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

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“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund and (d) any other Person, other than, in each case, a natural person, a Defaulting Lender, Holdings, the Borrower, any Subsidiary or any other Affiliate of Holdings.

“Employee Matters Agreement” means the Employee Matters Agreement between Exelis and Holdings, to be dated on or prior to the Spin-Off Date.

“Environmental Law” means any treaty, law (including common law), rule, regulation, code, ordinance, order, decree, judgment, injunction, notice or binding agreement issued, promulgated or entered into by or with any Governmental Authority, relating in any way to (a) the protection of the environment, (b) the preservation or reclamation of natural resources, (c) the generation, management, Release or threatened Release of any Hazardous Material or (d) health and safety matters, to the extent relating to the environment or the management of or exposure to Hazardous Materials.

“Environmental Liability” means any liability, obligation, loss, claim, action, order or cost, contingent or otherwise (including any liability for damages, costs of medical monitoring, costs of environmental remediation or restoration, administrative oversight costs, consultants’ fees, fines, penalties and indemnities), directly or indirectly resulting from or based upon (a) any actual or alleged violation of any Environmental Law or permit, license or approval required thereunder, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any legally binding contract or agreement or other legally binding consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests (whether voting or non-voting) in, or interests in the income or profits of, a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing (other than, prior to the date of such conversion, Indebtedness that is convertible into Equity Interests).

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or 414(c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived), (b) any failure by any Plan to satisfy the minimum funding standard (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Plan, whether or not waived, (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, (d) a determination that any Plan is, or is expected to be, in “at risk” status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4)(A) of the Code), (e) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan, (f) the receipt by the Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to an intention to

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terminate any Plan or Plans or to appoint a trustee to administer any Plan, (g) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan or (h) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any of its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA, or in endangered or critical status, within the meaning of Section 305 of ERISA.

“EURIBO Rate” means, with respect to any EURIBOR Borrowing for any Interest Period, a rate per annum equal to the Euro interbank offered rate as administered by the Banking Federation of the European Union (or any other Person that takes over the administration of such rate) for a deposit in Euro (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period as displayed on the Reuters screen page that displays such rate (currently page EURIBOR 01) or, in the event such rate does not appear on a page of the Reuters screen, on the appropriate page of such other information service that publishes such rate as shall be selected by the Administrative Agent from time to time in its reasonable discretion (such applicable rate being called the “EURIBO Screen Rate”), at approximately 11:00 a.m., Brussels time, on the Quotation Day for such Interest Period. If no EURIBO Screen Rate shall be available for a particular Interest Period but EURIBO Screen Rates shall be available for maturities both longer and shorter than such Interest Period, then the EURIBO Rate for such Interest Period shall be the Interpolated Screen Rate. Notwithstanding the foregoing, if the EURIBO Rate, determined as provided above, would otherwise be less than zero, then the EURIBO Rate shall be deemed to be zero for all purposes.

“EURIBOR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted EURIBO Rate.

“EURIBO Screen Rate” has the meaning assigned to such term in the definition of the “EURIBO Rate”.

“Euro” or “€” means the single currency of the European Union as constituted by the Treaty on European Union and as referred to in the EMU Legislation.

“Eurocurrency”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Section 7.01.

“Excess Cash Flow” means, for any fiscal year of the Borrower, the sum (without duplication) of:

(a) the Consolidated Net Income (or loss) of Holdings, the Borrower and the Restricted Subsidiaries for such fiscal year, adjusted to exclude (i) net income (or loss) of any consolidated Restricted Subsidiary that is not wholly owned by Holdings to the extent such income or loss is attributable to the noncontrolling interest in such consolidated Restricted Subsidiary and (ii) any gains or losses attributable to Prepayment Events; plus

(b) depreciation, amortization and other non-cash charges or losses deducted in determining such consolidated net income (or loss) for such fiscal year; plus

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(c) the sum of (i) the amount, if any, by which Net Working Capital decreased during such fiscal year (except as a result of the reclassification of items from short-term to long-term or vice-versa), (ii) the net amount, if any, by which the consolidated deferred revenues and other consolidated accrued long-term liability accounts of the Borrower and the Restricted Subsidiaries increased during such fiscal year and (iii) the net amount, if any, by which the consolidated accrued long-term asset accounts of the Borrower and the Restricted Subsidiaries decreased during such fiscal year; minus

(d) the sum of (i) any non-cash gains included in determining such consolidated net income (or loss) for such fiscal year, (ii) the amount, if any, by which Net Working Capital increased during such fiscal year (except as a result of the reclassification of items from long-term to short-term or vice-versa), (iii) the net amount, if any, by which the consolidated deferred revenues and other consolidated accrued long-term liability accounts of the Borrower and the Restricted Subsidiaries decreased during such fiscal year and (iv) the net amount, if any, by which the consolidated accrued long-term asset accounts of the Borrower and the Restricted Subsidiaries increased during such fiscal year; minus

(e) the sum (without duplication) of (i) Capital Expenditures and, to the extent not included as Capital Expenditures, expenditures made by Holdings, the Borrower and the Restricted Subsidiaries in respect of the acquisition of intellectual property, in each case made in cash for such fiscal year (and, at the Borrower’s option (and without deducting such amounts against the subsequent fiscal year’s Excess Cash Flow calculation), after the end of such fiscal year but prior to the date on which the prepayment pursuant to Section 2.11(d) for such fiscal year is required to have been made) (except to the extent attributable to the incurrence of Capital Lease Obligations or otherwise financed from Excluded Sources) and (ii) cash consideration paid during such fiscal year to make acquisitions or other investments (other than Permitted Investments) (except to the extent financed from Excluded Sources); minus

(f) the aggregate principal amount of Long-Term Indebtedness repaid or prepaid by the Borrower and the Restricted Subsidiaries during such fiscal year (and, at the Borrower’s option (and without deducting such amounts against the subsequent fiscal year’s Excess Cash Flow calculation), after the end of such fiscal year but prior to the date on which the prepayment pursuant to Section 2.11(d) for such fiscal year is required to have been made), excluding (i) Indebtedness in respect of Revolving Loans and Letters of Credit or other revolving credit facilities (unless there is a corresponding reduction in the Aggregate Revolving Commitment or the commitments in respect of such other revolving credit facilities, as applicable), (ii) Term Loans prepaid pursuant to Section 2.11(a), (c) or (d) and Revolving Loans prepaid pursuant to Section 2.11(a) and (iii) repayments or prepayments of Long-Term Indebtedness financed from Excluded Sources; minus

(g) the aggregate amount (not to exceed $1,000,000 in any fiscal year of the Borrower) of Restricted Payments made by Holdings in cash during such fiscal year (and, at the Borrower’s option (and without deducting such amounts against the subsequent fiscal year’s Excess Cash Flow calculation), after the end of such fiscal year but prior to the date on which the prepayment pursuant to Section 2.11(d) for such fiscal year is required to have been made) pursuant to Section 6.08(a) for the purpose of repurchasing Equity Interests of Holdings held by employees or former employees of Holdings, the Borrower or any Subsidiary, except to the extent that such Restricted Payments (i) are made to fund expenditures that reduce consolidated net income (or loss) of Holdings, the Borrower and the Restricted Subsidiaries or (ii) are financed from Excluded Sources.

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In addition to the foregoing, at the option of the Borrower, Excess Cash Flow shall also be reduced by any expenditure, payment, repayment or prepayment described in the immediately-preceding clauses (e), (f) and (g) (subject to the limitations set forth in the applicable clause) to the extent that the Borrower or any Restricted Subsidiary has entered into a legally binding commitment during the applicable fiscal year of Holdings (or after the end of such fiscal year but prior to the date on which the prepayment pursuant to Section 2.11(d) for such fiscal year is made) to make such expenditure, payment, repayment or prepayment during the next succeeding fiscal year of Holdings; provided, however, that, if such expenditure, payment, repayment or prepayment is not so made in such subsequent fiscal year, then Excess Cash Flow for such fiscal year shall be increased by an amount equal to the aggregate deduction to Excess Cash Flow taken by the Borrower for the immediately preceding fiscal year in respect of such expenditure, payment, repayment or prepayment.

“Exchange Act” means the United States Securities Exchange Act of 1934.

“Exchange Rate” means, on any day, with respect to the applicable Permitted Foreign Currency, the rate at which such currency may be exchanged into dollars, as set forth at approximately 11:00 a.m., London time, on such day on the Reuters World Currency Page “FX=” for such currency. In the event that such rate does not appear on any Reuters World Currency Page, then the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 a.m., Local Time, on such date for the purchase of dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after consultation with the Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be presumed correct absent manifest error.

“Excluded Sources” means (a) proceeds of any incurrence or issuance of Long-Term Indebtedness or Capital Lease Obligations and (b) proceeds of any issuance or sale of Equity Interests in Holdings, the Borrower or any Restricted Subsidiary (other than issuances or sales of Equity Interests to Holdings, the Borrower or any Restricted Subsidiary) or any capital contributions to Holdings, the Borrower or any Restricted Subsidiary (other than any capital contributions made by Holdings, the Borrower or any Restricted Subsidiary).

“Excluded Swap Guarantor” means Holdings or any Subsidiary Loan Party all or a portion of whose Guarantee of, or grant of a security interest to secure, any Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof).

“Excluded Swap Obligations” means, with respect to Holdings or any Subsidiary Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of Holdings or such Subsidiary Loan Party of, or the grant by Holdings or such Subsidiary Loan Party of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof). If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.

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“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes and branch profits Taxes, in each case (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. Federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.19(b) or 9.02(c)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.17, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan or Commitment or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.17(f) and (d) any U.S. Federal withholding Taxes imposed under FATCA.

“Exelis” means Exelis Inc., an Indiana corporation.

“Existing Letters of Credit” means each letter of credit previously issued for the account of, or guaranteed by, the Borrower that is (a) outstanding on the Funding Date and (b) listed on Schedule 1.01.

“Existing Maturity Date” has the meaning assigned to such term in Section 2.22(a).

“Existing Revolving Borrowings” has the meaning assigned to such term in Section 2.21(d).

“Extension Effective Date” has the meaning assigned to such term in Section 2.22(a).

“FATCA” means Sections 1471 through 1474 of the Code, as of the Effective Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b) of the Code and any intergovernmental agreements entered into in connection with the implementation of such Section of the Code (or any such amended or successor version thereof).

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

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“Financial Officer” means, with respect to any Person, the chief financial officer, principal accounting officer, treasurer or controller of such Person, or any other officer of such Person performing the duties that are customarily performed by a chief financial officer, principal accounting officer, treasurer or controller.

“Foreign Lender” means (a) if the Borrower is a U.S. Person, then a Lender, with respect to such Borrower, that is not a U.S. Person and (b) if the Borrower is not a U.S. Person, then a Lender, with respect to such Borrower, that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.

“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia.

“Foreign Subsidiary Disposition” has the meaning assigned to such term in Section 2.11(g).

“Foreign-Subsidiary Holding Company” means any Restricted Subsidiary all of whose assets consist of (a) Equity Interests and/or Indebtedness of one or more Foreign Subsidiaries and (b) not more than an immaterial amount of cash.

“Form 10” means the registration statement on Form 10, originally filed by Holdings with the SEC on March 10, 2014, as amended on April 15, 2014, May 19, 2014, August 14, 2014, and August 26, 2014, and (except as such term is used in Section 4.02(j)) as further amended.

“Funding Date” means the date on or after the Effective Date on which the conditions specified in Section 4.02 are satisfied (or waived in accordance with Section 9.02), which date shall not be later than 150 days after the Effective Date.

“Funding Date Distribution” means the payment, on or after the Funding Date (but no later than the Spin-Off Date), of a cash distribution or other cash transfer in an aggregate amount not to exceed the lowest amount which would cause the Unrestricted Cash of Holdings and its subsidiaries, immediately after the making of such payment, to be less than $25,000,000, through intervening subsidiaries of Exelis, to Exelis with a portion of the Net Proceeds of the Tranche A Term Loans and other cash on hand of the Borrower and its subsidiaries (it being understood that the Funding Date Distribution may take the form of a cash contribution by the Borrower to a Subsidiary reasonably satisfactory to the Administrative Agent and a subsequent distribution by the Borrower of the Equity Interests of that Subsidiary to Exelis or to a subsidiary of Exelis).

“GAAP” means generally accepted accounting principles in the United States of America.

“Global Intercompany Note” means the global intercompany note substantially in the form of Exhibit E pursuant to which intercompany obligations and advances owed by any Loan Party are subordinated to the Obligations.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether State or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supranational bodies exercising such powers or functions, such as the European Union or the European Central Bank).

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“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or other obligation; provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The amount, as of any date of determination, of any Guarantee shall be the principal amount outstanding on such date of the Indebtedness or other obligation guaranteed thereby (or, in the case of (i) any Guarantee the terms of which limit the monetary exposure of the guarantor or (ii) any Guarantee of an obligation that does not have a principal amount, the maximum monetary exposure as of such date of the guarantor under such Guarantee (as determined, in the case of clause (i), pursuant to such terms or, in the case of clause (ii), reasonably and in good faith by a Financial Officer of the Borrower)). The term “Guarantee” used as a verb has a corresponding meaning.

“Hazardous Materials” means all explosive, radioactive, hazardous or toxic substances, materials, wastes or other pollutants, including petroleum or petroleum by-products or distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, chlorofluorocarbons and other ozone-depleting substances or mold which are regulated pursuant to any Environmental Law.

“Hedging Agreement” means any agreement with respect to any swap, forward, future or derivative transaction, or any option or similar agreement, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of the foregoing transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Holdings, the Borrower or any Subsidiary shall be a Hedging Agreement.

“Holdings” means Vectrus, Inc. (formerly known as “Exelis MSCO Inc.”), an Indiana corporation.

“Incremental Extensions of Credit” has the meaning assigned to such term in Section 2.21(a).

“Incremental Facility Amendment” has the meaning assigned to such term in Section 2.21(c).

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“Incremental Term Loans” has the meaning assigned to such term in Section 2.21(a).

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding (i) trade accounts payable and other accrued or cash management obligations, in each case incurred in the ordinary course of business and (ii) any earnout obligation until such obligation ceases to be contingent), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed by such Person, (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances and (j) all Disqualified Equity Interests in such Person, valued, as of the date of determination, at the greater of (i) the maximum aggregate amount that would be payable upon maturity, redemption, repayment or repurchase thereof (or of Disqualified Equity Interests or Indebtedness into which such Disqualified Equity Interests are convertible or exchangeable) and (ii) the maximum liquidation preference of such Disqualified Equity Interests. Notwithstanding the foregoing, the term “Indebtedness” shall not include post-closing purchase price adjustments or earnouts except to the extent that the amount payable pursuant to such purchase price adjustment or earnout ceases to be contingent. The amount of Indebtedness of any Person for purposes of clause (e) above shall (unless such Indebtedness has been assumed by such Person or such Person has otherwise become liable for the payment thereof) be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under this Agreement or any other Loan Document and (b) to the extent not otherwise described in clause (a) of this definition, Other Taxes.

“Indemnitee” has the meaning assigned to such term in Section 9.03(b).

“Information Memorandum” means the Confidential Information Memorandum dated August 2014, relating to the Transactions.

“Intellectual Property License Agreement” means, collectively, the Transitional Trademark License Agreement and the Technology License Agreement, in each case between Exelis or one of its Affiliates and Holdings, to be dated on or prior to the Spin-Off Date.

“Interest Election Request” means a request by the Borrower to convert or continue a Revolving Borrowing or Term Borrowing in accordance with Section 2.07, which shall be, in the case of a written Interest Election Request, in a form approved by the Administrative Agent and otherwise consistent with the requirements of Section 2.07.

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“Interest Payment Date” means (a) with respect to any ABR Loan (including a Swingline Loan), the last day of each March, June, September and December and (b) with respect to any Eurocurrency Loan or EURIBOR Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing or a EURIBOR Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

“Interest Period” means, with respect to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter (or twelve months thereafter if, at the time of the relevant Borrowing, all Lenders participating therein agree to make an interest period of such duration available), as the Borrower may elect; provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“Interpolated Screen Rate” means (a) with respect to any Eurocurrency Borrowing for any Interest Period (or with respect to the calculation of the Alternate Base Rate as provided in clause (c) of the definition thereof for an Interest Period of one month), a rate per annum which results from interpolating on a linear basis between (i) the applicable LIBO Screen Rate for the longest maturity for which a LIBO Screen Rate is available that is shorter than such Interest Period and (ii) the applicable LIBO Screen Rate for the shortest maturity for which a LIBO Screen Rate is available that is longer than such Interest Period, in each case at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period (or, with respect to the calculation of the Alternate Base Rate as provided in clause (c) of the definition thereof, at approximately 11:00 a.m., London time, on the date of determination thereof), and (b) with respect to any EURIBOR Borrowing for any Interest Period, a rate per annum which results from interpolating on a linear basis between (i) the applicable EURIBO Screen Rate for the longest maturity for which a EURIBO Screen Rate is available that is shorter than such Interest Period and (ii) the applicable EURIBO Screen Rate for the shortest maturity for which a EURIBO Screen Rate is available that is longer than such Interest Period, in each case at approximately 11:00 a.m., Brussels time, on the Quotation Day for such Interest Period.

“Investment Company Act” means the U.S. Investment Company Act of 1940.

“IRS” means the United States Internal Revenue Service.

“Issuing Banks” means, collectively, (a) JPMCB and (b) each other Revolving Lender that shall have become an Issuing Bank hereunder as provided in Section 2.05(j) (in each case, other than any such Person that shall have ceased to be an Issuing Bank as provided in Section 2.05(k)), each in its capacity as an issuer of Letters of Credit hereunder. Each Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“JPMCB” means JPMorgan Chase Bank, N.A.

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“Latest Maturity Date” means, at any time, the latest of the Maturity Dates in respect of the Classes of Loans and Commitments that are outstanding at such time.

“LC Disbursements” means a payment made by an Issuing Bank pursuant to a Letter of Credit.

“LC Exposure” means, at any time, the sum of (a) the Dollar Equivalent of the aggregate undrawn amount of all outstanding Letters of Credit at such time and (b) the Dollar Equivalent of the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender at any time shall be such Lender’s Applicable Percentage of the aggregate LC Exposure at such time.

“LC Sublimit” means $35,000,000.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, an Incremental Facility Amendment or a Refinancing Facility Agreement, other than any such Person that shall have ceased to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lenders.

“Letters of Credit” means any letter of credit issued pursuant to this Agreement and, upon the consummation of the Spin-Off, any Existing Letter of Credit, other than any such letter of credit that shall have ceased to be a “Letter of Credit” outstanding hereunder pursuant to Section 9.05.

“LIBO Rate” means, with respect to any Eurocurrency Borrowing in any currency for any Interest Period, a rate per annum equal to the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for the relevant currency) for a deposit in such currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period as displayed on the Reuters screen page that displays such rate (currently page LIBOR01) or, in the event such rate does not appear on a page of the Reuters screen, on the appropriate page of such other information service that publishes such rate as shall be selected by the Administrative Agent from time to time in its reasonable discretion (such applicable rate being called the “LIBO Screen Rate”), at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period. If no LIBO Screen Rate shall be available for a particular Interest Period but LIBO Screen Rates shall be available for maturities both longer and shorter than such Interest Period, then the LIBO Rate for such Interest Period shall be the Interpolated Screen Rate. Notwithstanding the foregoing, if the LIBO Rate, determined as provided above, would otherwise be less than zero, then the LIBO Rate shall be deemed to be zero for all purposes.

“LIBO Screen Rate” has the meaning assigned to such term in the definition of the “LIBO Rate”.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, charge, security interest or other encumbrance in, on or of such asset or (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.

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“Liquidity” means, at any time, the sum of (a) the aggregate principal amount of Revolving Loans (expressed in dollars) that are permitted to be borrowed hereunder at such time in respect of the unused Revolving Commitments at such time and (b) the aggregate amount of Unrestricted Cash at such time.

“Loan Document Obligations” means (a) the due and punctual payment by the Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under this Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral and (iii) all other monetary obligations of the Borrower under this Agreement and each of the other Loan Documents, including obligations to pay fees, expense reimbursement obligations (including with respect to attorneys’ fees) and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and (b) the due and punctual payment of all the obligations of each other Loan Party under or pursuant to each of the Loan Documents (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding).

“Loan Documents” means this Agreement, any Incremental Facility Amendment, any Refinancing Facility Agreement, the Collateral Agreement, the other Security Documents, the Global Intercompany Note, any agreement designating an additional Issuing Bank as contemplated by Section 2.05(j), each agreement designating an additional Swingline Lender as contemplated by the definition thereof and, except for purposes of Section 9.02, any promissory notes delivered pursuant to Section 2.09(c) (and, in each case, any amendment, restatement, waiver, supplement or other modification to any of the foregoing).

“Loan Parties” means, collectively, Holdings, the Borrower and the Subsidiary Loan Parties.

“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement, including pursuant to any Incremental Facility Amendment or any Refinancing Facility Agreement.

“Local Time” means (a) with respect to any Loan or Borrowing denominated in dollars or any Letter of Credit denominated in dollars, New York City time, and (b) with respect to any Loan or Borrowing denominated in a Permitted Foreign Currency or any Letter of Credit denominated in a Permitted Foreign Currency, London time.

“Long-Term Indebtedness” means any Indebtedness (excluding Indebtedness permitted by Section 6.01(c)) that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability.

“Majority in Interest”, when used in reference to Lenders of any Class, means, at any time, (a) in the case of the Revolving Lenders, Lenders having Revolving Exposures and unused Revolving Commitments representing more than 50% of the sum of the Aggregate Revolving Exposure and the unused Aggregate Revolving Commitment at such time and (b) in the case of the Term Lenders of any Class, Lenders holding outstanding Term Loans of such Class representing more than 50% of the aggregate principal amount of all Term Loans of such Class outstanding at such time.

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“Mandatory Costs Rate” has the meaning set forth in Exhibit K.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, liabilities, operations or financial condition of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, (b) the ability of the Loan Parties (taken as a whole) to perform their material obligations to the Lenders or the Administrative Agent under this Agreement or any other Loan Document or (c) the material rights of, or remedies available to, the Administrative Agent or the Lenders under this Agreement or any other Loan Document.

“Material Indebtedness” means Indebtedness (other than the Loans, the Letters of Credit and the Guarantees under the Loan Documents), or obligations in respect of one or more Hedging Agreements, of any one or more of Holdings, the Borrower and the Restricted Subsidiaries in an aggregate principal amount exceeding $5,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of Holdings, the Borrower or any Restricted Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings, the Borrower or such Restricted Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.

“Material Subsidiary” means each Restricted Subsidiary (a) the consolidated total assets of which equal 5.0% or more of the consolidated total assets of Holdings, the Borrower and the Restricted Subsidiaries or (b) the consolidated revenues of which equal 5.0% or more of the consolidated revenues of Holdings, the Borrower and the Restricted Subsidiaries, in each case as of the end of or for the most recent period of four consecutive fiscal quarters of Holdings for which financial statements have been delivered pursuant to Section 5.01(a) or 5.01(b) (or, prior to the first delivery of any such financial statements, as of the end of or for the period of four consecutive fiscal quarters of Holdings most recently ended prior to the date of this Agreement); provided that if, at the end of or for any such most recent period of four consecutive fiscal quarters, the combined consolidated total assets or combined consolidated revenues of all Restricted Subsidiaries that under clauses (a) and (b) above would not constitute Material Subsidiaries shall have exceeded 10.0% of the consolidated total assets of Holdings, the Borrower and the Restricted Subsidiaries or 10.0% of the consolidated revenues of Holdings, the Borrower and the Restricted Subsidiaries, respectively, then one or more of such excluded Restricted Subsidiaries shall for all purposes of this Agreement be designated by the Borrower to be Material Subsidiaries, until such excess shall have been eliminated.

“Maturity Date” means the Revolving Maturity Date, the Tranche A Term Maturity Date or the maturity date with respect to any Class of Incremental Term Loans, as the context requires.

“Maturity Date Extension Request” means a request by the Borrower, in the form of Exhibit H hereto or such other form as shall be approved by the Administrative Agent, for the extension of the applicable Maturity Date pursuant to Section 2.22.

“Maximum Rate” has the meaning assigned to such term in Section 9.13.

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“MNPI” means material information concerning Holdings, the Borrower, any Subsidiary or any Affiliate of any of the foregoing or their securities that has not been disseminated in a manner making it available to investors generally, within the meaning of Regulation FD under the Securities Act and the Exchange Act. For purposes of this definition, “material information” means information concerning Holdings, the Borrower, the Subsidiaries or any Affiliate of any of the foregoing or any of their securities that could reasonably be expected to be material for purposes of the United States Federal and State securities laws and, where applicable, foreign securities laws.

“Moody’s” means Moody’s Investors Service, Inc., and any successor to its rating agency business.

“Mortgage” means a mortgage, deed of trust or other security document granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be reasonably satisfactory in form and substance to the Administrative Agent.

“Mortgaged Property” means, initially, each parcel of real property and the improvements thereto owned by a Loan Party and identified on Schedule 1.02, and includes each other parcel of real property and the improvements thereto owned by a Loan Party with respect to which a Mortgage is granted pursuant to Section 5.11 or 5.12.

“Multiemployer Plan” means a “multiemployer plan”, as defined in Section 4001(a)(3) of ERISA.

“Net Proceeds” means, with respect to any event, (a) the cash proceeds received in respect of such event, including (i) any cash received in respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment or earnout, but excluding any interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, minus (b) the sum, without duplication, of (i) all fees and out-of-pocket expenses paid in connection with such event by Holdings, the Borrower and the Restricted Subsidiaries, (ii) in the case of a sale, transfer, lease or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments that are permitted hereunder and are made by Holdings, the Borrower and the Restricted Subsidiaries as a result of such event to repay Indebtedness (other than the Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event and (iii) the amount of all taxes paid (or reasonably estimated to be payable) by Holdings, the Borrower and the Restricted Subsidiaries, and the amount of any reserves established by Holdings, the Borrower and the Restricted Subsidiaries in accordance with GAAP to fund purchase price adjustment, indemnification and similar contingent liabilities (other than any earnout obligations) reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to the occurrence of such event (as determined reasonably and in good faith by a Financial Officer of Holdings). For purposes of this definition, in the event any contingent liability reserve established with respect to any event as described in clause (b)(iii) above shall be reduced, the amount of such reduction shall, except to the extent such reduction is made as a result of a payment having been made in respect of the contingent liabilities with respect to which such reserve has been established, be deemed to be receipt, on the date of such reduction, of cash proceeds in respect of such event.

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“Net Working Capital” means, at any date, (a) the consolidated current assets of the Borrower and the Restricted Subsidiaries as of such date (excluding cash and Permitted Investments) minus (b) the consolidated current liabilities of the Borrower and the Restricted Subsidiaries as of such date (excluding current liabilities in respect of Indebtedness). Net Working Capital at any date may be a positive or negative number. Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative.

“Non-Consenting Lender” has the meaning assigned to such term in Section 9.02(c).

“Non-Defaulting Revolving Lender” means, at any time, a Revolving Lender that is not a Defaulting Lender at such time.

“Obligations” means, collectively, (a) all the Loan Document Obligations, (b) all the Secured Cash Management Obligations and (c) all the Secured Hedging Obligations.

“OFAC” means the Office of Foreign Assets Control of the U.S. Department of the Treasury.

“Other Connection Tax” means, with respect to any Recipient, a Tax imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced this Agreement or any other Loan Document, or sold or assigned an interest in this Agreement or any other Loan Document).

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, this Agreement or any other Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19(b)).

“Participant” has the meaning assigned to such term in Section 9.04(c).

“Participant Register” has the meaning assigned to such term in Section 9.04(c).

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Perfection Certificate” means a certificate in the form of Exhibit C or any other form approved by the Administrative Agent.

“Permitted Encumbrances” means:

(a) Liens imposed by law for Taxes that are not yet due or are being contested in good faith by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

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(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlords’ and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in good faith by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;

(c) pledges and deposits made (i) in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws and (ii) in respect of letters of credit, bank guarantees or similar instruments issued for the account of Holdings or any subsidiary of Holdings in the ordinary course of business supporting obligations of the type set forth in clause (i) above;

(d) pledges and deposits made (i) to secure the performance of bids, trade contracts (other than for payment of Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business and (ii) in respect of letters of credit, bank guarantees or similar instruments issued for the account of Holdings or any subsidiary of Holdings in the ordinary course of business supporting obligations of the type set forth in clause (i) above;

(e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Section 7.01;

(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially interfere with the ordinary conduct of business of the Borrower or any Subsidiary;

(g) Liens arising from Permitted Investments described in clause (d) of the definition of the term “Permitted Investments”;

(h) banker’s liens, rights of setoff or similar rights and remedies as to deposit accounts or other funds maintained with depository institutions and securities accounts and other financial assets maintained with a securities intermediary; provided that such deposit accounts or funds and securities accounts or other financial assets are not established or deposited for the purpose of providing collateral for any Indebtedness;

(i) Liens arising by virtue of Uniform Commercial Code financing statement filings (or similar filings under applicable law) regarding operating leases entered into by Holdings, the Borrower and the Restricted Subsidiaries;

(j) Liens of a collecting bank arising in the ordinary course of business under Section 4-208 (or the applicable corresponding section) of the Uniform Commercial Code in effect in the relevant jurisdiction covering only the items being collected upon;

(k) Liens representing any interest or title of a licensor, lessor or sublicensor or sublessor, or a licensee, lessee or sublicensee or sublessee, in the property or rights subject to any lease, license or sublicense or concession agreement in the ordinary course of business to the extent that they do not materially interfere with the business of Holdings, the Borrower or any Restricted Subsidiary;

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(l) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(m) Liens that are contractual rights of set-off;

(n) Liens (i) of a collection bank arising under Section 4-208 of the New York Uniform Commercial Code (or the corresponding section of the Uniform Commercial Code in any other jurisdiction) on items in the course of collection, (ii) attaching to commodity trading accounts or other commodities brokerage accounts incurred in the ordinary course of business and (iii) in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(o) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes; and

(p) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of Holdings, the Borrower or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of Holdings, the Borrower and the Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of Holdings, the Borrower or any Restricted Subsidiary in the ordinary course of business;

provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness, other than Liens referred to in clauses (c) and (d) above securing letters of credit, bank guarantees or similar instruments.

“Permitted Foreign Currency” means, with respect to any Revolving Loan or Letter of Credit, Euros, Pounds Sterling and any other foreign currency reasonably requested by the Borrower from time to time and in which each Revolving Lender (in the case of any Revolving Loans to be denominated in such other foreign currency) and each applicable Issuing Bank (in the case of any Letters of Credit to be denominated in such other foreign currency) has reasonably agreed, in accordance with its policies and procedures in effect at such time, to lend Revolving Loans or issue Letters of Credit, as applicable.

“Permitted Investments” means:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

(b) investments in commercial paper and variable and fixed rate notes maturing within 12 months from the date of acquisition thereof and having, at such date of acquisition, a rating of at least A-2 by S&P or P-2 by Moody’s;

(c) investments in certificates of deposit, banker’s acceptances and demand or time deposits, in each case maturing within 12 months from the date of acquisition thereof, issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;

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(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above;

(e) “money market funds” that (i) comply with the criteria set forth in Rule 2a-7 of the Investment Company Act, (ii) are rated AAA- by S&P and Aaa3 by Moody’s and (iii) have portfolio assets of at least $5,000,000,000; and

(f) in the case of any Foreign Subsidiary, other short-term investments that are analogous to the foregoing, are of comparable credit quality and are customarily used by companies in the jurisdiction of such Foreign Subsidiary for cash management purposes.

“Permitted Pari Passu Refinancing Debt” shall mean any secured Indebtedness incurred by the Borrower in the form of one or more series of senior secured notes; provided that (a) such Indebtedness is secured by the Collateral on a pari passu basis to the Obligations and is not secured by any property or assets of Holdings, the Borrower or any Restricted Subsidiary other than the Collateral, (b) such Indebtedness constitutes Refinancing Term Loan Indebtedness in respect of Term Loans (including portions of Classes of Term Loans), (c) the security agreements relating to such Indebtedness are not materially more favorable (when taken as a whole) to the holders providing such Indebtedness than the existing Security Documents are to the Lenders, (d) such Indebtedness is not guaranteed by any Restricted Subsidiaries other than the Loan Parties and (e) such Indebtedness is subject to customary intercreditor arrangements reasonably satisfactory to the Administrative Agent.

“Permitted Second Priority Refinancing Debt” shall mean any secured Indebtedness incurred by the Borrower in the form of one or more series of senior secured notes or loans; provided that (a) such Indebtedness is secured by the Collateral on a second lien, subordinated basis to the Obligations and is not secured by any property or assets of Holdings, the Borrower or any Restricted Subsidiary other than the Collateral, (b) such Indebtedness constitutes Refinancing Term Loan Indebtedness in respect of Term Loans (including portions of Classes of Term Loans), (c) the security agreements relating to such Indebtedness are not materially more favorable (when taken as a whole) to the lenders or holders providing such Indebtedness than the existing Security Documents are to the Lenders, (d) such Indebtedness is not guaranteed by any Restricted Subsidiaries other than the Loan Parties and (e) such Indebtedness is subject to customary intercreditor arrangements reasonably satisfactory to the Administrative Agent.

“Permitted Unsecured Refinancing Debt” shall mean unsecured Indebtedness incurred by the Borrower in the form of one or more series of senior or subordinated unsecured notes or loans; provided that (a) such Indebtedness constitutes Refinancing Term Loan Indebtedness in respect of Term Loans (including portions of Classes of Term Loans), (b) such Indebtedness is not guaranteed by any Subsidiaries other than the Loan Parties, (c) such Indebtedness is not secured by any Lien or any property or assets of Holdings, the Borrower or any Restricted Subsidiary and (d) if such Indebtedness is contractually subordinated to the Obligations, such subordination terms shall be market terms at the time of incurrence of such Indebtedness.

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“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any “employee pension benefit plan”, as defined in Section 3(2) of ERISA (other than a Multiemployer Plan), that is subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any of its ERISA Affiliates is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Platform” has the meaning assigned to such term in Section 9.01(d).

“Pounds Sterling” or “£“means the lawful money of the United Kingdom.

“Prepayment Event” means:

(a) any non-ordinary course sale, transfer, lease or other disposition (including pursuant to a sale and leaseback transaction and by way of merger or consolidation) (for purposes of this defined term, collectively, “dispositions”) of any asset of Holdings, the Borrower or any Restricted Subsidiary, other than (i) dispositions described in clauses (a) through (i) and (k) of Section 6.05 and (ii) other dispositions resulting in aggregate Net Proceeds not exceeding (A) $1,000,000 in the case of any single disposition or series of related dispositions and (B) $2,000,000 for all such dispositions during any fiscal year of the Borrower;

(b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any asset of Holdings, the Borrower or any Restricted Subsidiary with a fair market value immediately prior to such event equal to or greater than $1,000,000; or

(c) the incurrence by Holdings, the Borrower or any Restricted Subsidiary of any Indebtedness, other than Indebtedness permitted to be incurred under Section 6.01 or permitted by the Required Lenders pursuant to Section 9.02.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMCB as its prime rate in effect at its principal office in New York City. Each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Private Side Lender Representatives” means, with respect to any Lender, representatives of such Lender that are not Public Side Lender Representatives.

“Pro Forma Basis” means, with respect to the calculation of the financial maintenance covenants contained in Sections 6.12 and 6.13 or any other calculations hereunder or otherwise for purposes of determining the Total Leverage Ratio, Consolidated Cash Interest Expense or Consolidated EBITDA as of any date, that such calculation shall give pro forma effect to all acquisitions, designations of Restricted Subsidiaries as Unrestricted Subsidiaries, all designations of Unrestricted Subsidiaries as Restricted Subsidiaries, all issuances, incurrences or assumptions or repayments and prepayments of Indebtedness in connection therewith (with any such Indebtedness being deemed to be amortized over the applicable testing period in accordance with its terms) and all sales, transfers or other dispositions of any Equity Interests in a Restricted Subsidiary or all or substantially all assets of a Restricted Subsidiary or division or line of business of a Restricted Subsidiary outside the ordinary course of business (and any related

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prepayments or repayments of Indebtedness) that have occurred during (or, if such calculation is being made for the purpose of determining whether any Incremental Extension of Credit may be made, any designation under Section 5.14 is permitted or any event subject to Article VI is permitted, since the beginning of) the four consecutive fiscal quarter period of the Borrower most recently ended on or prior to such date as if they occurred on the first day of such four consecutive fiscal quarter period (including expected cost savings (without duplication of actual cost savings) to the extent such cost savings would be permitted to be reflected in pro forma financial information complying with the requirements of Article 11 of Regulation S-X under the Securities Act as interpreted by the Staff of the SEC, and as certified by a Financial Officer of Holdings. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Hedging Agreement applicable to such Indebtedness).

“Proposed Change” has the meaning assigned to such term in Section 9.02(c).

“Public Side Lender Representatives” means, with respect to any Lender, representatives of such Lender that do not wish to receive MNPI.

“Purchasing Borrower Party” means any of Holdings, the Borrower or any Restricted Subsidiary.

“Qualified Equity Interests” means Equity Interests of Holdings other than Disqualified Equity Interests.

“Quotation Day” means, with respect to any Eurocurrency Borrowing or EURIBOR Borrowing and any Interest Period, the day on which it is market practice in the relevant interbank market for prime banks to give quotations for deposits in the currency of such Borrowing for delivery on the first day of such Interest Period. If such quotations would normally be given by prime banks on more than one day, the Quotation Day will be the last of such days.

“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, as applicable.

“Refinanced Debt” has the meaning set forth in the definition of “Refinancing Term Loan Indebtedness”.

“Refinancing Effective Date” has the meaning assigned to such term in Section 2.23(a).

“Refinancing Facility Agreement” means a Refinancing Facility Agreement, in form and substance reasonably satisfactory to the Administrative Agent, among Holdings, the Borrower, the Administrative Agent and one or more Refinancing Term Lenders or Refinancing Revolving Lenders, as the case may be, establishing commitments in respect of Refinancing Term Loans and/or Refinancing Revolving Commitments and effecting such other amendments hereto and to the other Loan Documents as are contemplated by Section 2.23.

“Refinancing Indebtedness” means, in respect of any Indebtedness (the “Original Indebtedness”), any Indebtedness that extends, renews or refinances such Original Indebtedness (or any Refinancing Indebtedness in respect thereof); provided that (a) the principal amount (or

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accreted value, if applicable) of such Refinancing Indebtedness shall not exceed the principal amount (or accreted value, if applicable) of such Original Indebtedness except by an amount no greater than accrued and unpaid interest with respect to such Original Indebtedness and any reasonable fees, premium and expenses relating to such extension, renewal or refinancing; (b) either (i) the stated final maturity of such Refinancing Indebtedness shall not be earlier than that of such Original Indebtedness or (ii) such Refinancing Indebtedness shall not be required to mature or to be repaid, prepaid, redeemed, repurchased or defeased, whether on one or more fixed dates, upon the occurrence of one or more events or at the option of any holder thereof (except, in each case, upon the occurrence of an event of default, asset sale or a change in control or as and to the extent such repayment, prepayment, redemption, repurchase or defeasance would have been required pursuant to the terms of such Original Indebtedness) prior to the date 91 days after the Latest Maturity Date in effect on the date of such extension, renewal or refinancing; provided that, notwithstanding the foregoing, scheduled amortization payments (however denominated) of such Refinancing Indebtedness shall be permitted so long as the weighted average life to maturity of such Refinancing Indebtedness shall be no shorter than the weighted average life to maturity of such Original Indebtedness remaining as of the date of such extension, renewal or refinancing (or, if shorter, 91 days after the Latest Maturity Date in effect on the date of such extension, renewal or refinancing); (c) such Refinancing Indebtedness shall not constitute an obligation (including pursuant to a Guarantee) of the Borrower or any Subsidiary, in each case that shall not have been (or, in the case of after-acquired Subsidiaries, shall not have been required to become pursuant to the terms of the Original Indebtedness) an obligor in respect of such Original Indebtedness, and shall not constitute an obligation of Holdings if Holdings shall not have been an obligor in respect of such Original Indebtedness; (d) if such Original Indebtedness shall have been subordinated to the Loan Document Obligations, such Refinancing Indebtedness shall also be subordinated to the Loan Document Obligations on terms not less favorable in any material respect to the Lenders; and (e) such Refinancing Indebtedness shall not be secured by any Lien on any asset other than the assets that secured such Original Indebtedness (or would have been required to secure such Original Indebtedness pursuant to the terms thereof) or, in the event Liens securing such Original Indebtedness shall have been contractually subordinated to any Lien securing the Loan Document Obligations, by any Lien that shall not have been contractually subordinated to at least the same extent.

“Refinancing Revolving Lender” means any Person that provides a Refinancing Revolving Commitment.

“Refinancing Revolving Commitments” means one or more Classes of revolving credit commitments obtained pursuant to a Refinancing Facility Agreement, in each case obtained in exchange for, or to extend, renew, refinance or replace, in whole or in part, existing Revolving Commitments hereunder (including any successive Refinancing Revolving Commitments) (such existing Revolving Commitments and successive Refinancing Revolving Commitments, the “Refinanced Commitments”); provided that (a) the amount of such Refinancing Revolving Commitments shall not exceed the amount of the Refinanced Commitments; (b) the stated final maturity of such Refinancing Revolving Commitments (and the Refinancing Revolving Loans of the same Class) shall not be earlier than the Latest Maturity Date of such Refinanced Commitments, and such stated final maturity of the Refinancing Revolving Commitments (and the Refinancing Revolving Loans of the same Class) shall not be subject to any conditions that could result in such stated final maturity occurring on a date that precedes the Latest Maturity Date of such Refinanced Commitments; (c) such Refinancing Revolving Commitments (and the Refinancing Revolving Loans of the same Class) shall not constitute an obligation (including pursuant to a Guarantee) of Holdings, the Borrower or any Subsidiary, in each case that shall not have been (or, in the case of after-acquired Subsidiaries, shall not have been required to become

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pursuant to the terms of the Refinanced Commitments) an obligor in respect of such Refinanced Commitments (and the Revolving Loans of the same Class), and, in each case, shall constitute an obligation of Holdings, the Borrower or such Subsidiary to the extent of its obligations in respect of such Refinanced Debt; and (d) such Refinancing Revolving Commitments (and the Refinancing Revolving Loans of the same Class) shall contain terms and conditions that are not materially more favorable (when taken as a whole) to the investors providing such Refinancing Revolving Commitments than those applicable to the existing Revolving Commitments and Revolving Loans being refinanced (other than (A) with respect to pricing, maturity, optional prepayments and redemption, (B) covenants or other provisions applicable only to periods after the Latest Maturity Date and (C) any financial maintenance covenants described in subclause (I) of Section 2.23(a)(iv)) on the date such Refinancing Revolving Commitments are incurred.

“Refinancing Revolving Loans” means revolving loans incurred by the Borrower under this Agreement in respect of Refinancing Revolving Commitments.

“Refinancing Term Lender” means any Person that provides a Refinancing Term Loan.

“Refinancing Term Loan Indebtedness” means (a) Permitted Pari Passu Refinancing Debt, (b) Permitted Second Priority Refinancing Debt, (c) Permitted Unsecured Refinancing Debt or (d) Refinancing Term Loans obtained pursuant to a Refinancing Facility Agreement, in each case, issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, refinance or replace, in whole or part, existing Term Loans hereunder (including any successive Refinancing Term Loan Indebtedness) (such existing Term Loans and successive Refinancing Term Loan Indebtedness, the “Refinanced Debt”); provided that (i) the principal amount (or accreted value, if applicable) of such Refinancing Term Loan Indebtedness shall not exceed the principal amount (or accreted value, if applicable) of such Refinanced Debt except by an amount equal to the sum of accrued and unpaid interest, accrued fees and premiums (if any) with respect to such Refinanced Debt and fees and expenses associated with the refinancing of such Refinanced Debt with such Refinancing Term Loan Indebtedness; provided, however, that, as part of the same incurrence or issuance of Indebtedness as such Refinancing Term Loan Indebtedness, the Borrower may incur or issue an additional amount of Indebtedness under Section 6.01 without violating this clause (i) (and, for purposes of clarity, (x) such additional amount of Indebtedness shall not constitute Refinancing Term Loan Indebtedness and (y) such additional amount of Indebtedness shall reduce the applicable basket under Section 6.01, if any, on a dollar-for-dollar basis); (ii) the stated final maturity of such Refinancing Term Loan Indebtedness shall not be earlier than 91 days after the Latest Maturity Date of such Refinanced Debt, and such stated final maturity of such Refinancing Term Loan Indebtedness shall not be subject to any conditions that could result in such stated final maturity occurring on a date that precedes the date that is 91 days after the Latest Maturity Date of such Refinanced Debt; (iii) such Refinancing Term Loan Indebtedness shall not be required to be repaid, prepaid, redeemed, repurchased or defeased, whether on one or more fixed dates, upon the occurrence of one or more events or at the option of any holder thereof (except, in each case, on the stated final maturity date as permitted pursuant to the preceding clause (ii) or upon the occurrence of an event of default, asset sale or a change in control or as and to the extent such repayment, prepayment, redemption, repurchase or defeasance would have been required pursuant to the terms of such Refinanced Debt) prior to the earlier of (A) the latest stated final maturity of such Refinanced Debt and (B) 91 days after the Latest Maturity Date in effect on the date of such extension, renewal or refinancing; provided that, notwithstanding the foregoing, scheduled amortization payments (however denominated) of such Refinancing Term Loan Indebtedness in the form of Refinancing Term Loans shall be permitted

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so long as the weighted average life to maturity of such Refinancing Term Loan Indebtedness in the form of Refinancing Term Loans shall be no shorter than 91 days after the weighted average life to maturity of such Refinanced Debt remaining as of the date of such extension, replacement or refinancing; (iv) such Refinancing Term Loan Indebtedness shall not constitute an obligation (including pursuant to a Guarantee) of Holdings, the Borrower or any Subsidiary, in each case that shall not have been (or, in the case of after-acquired Subsidiaries, shall not have been required to become pursuant to the terms of the Refinanced Debt) an obligor in respect of such Refinanced Debt, and, in each case, shall constitute an obligation of Holdings, the Borrower or such Subsidiary to the extent of its obligations in respect of such Refinanced Debt; and (v) in the case of Refinancing Term Loans, such Refinancing Term Loan Indebtedness shall contain terms and conditions that are not materially more favorable (when taken as a whole) to the investors providing such Refinancing Term Loan Indebtedness than those applicable to the existing Term Loans of the applicable Class being refinanced (other than (A) with respect to pricing, maturity, amortization, optional prepayments and redemption, (B) covenants or other provisions applicable only to periods after the Latest Maturity Date and (C) any financial maintenance covenants described in subclause (I) of Section 2.23(a)(iv)) on the date such Refinancing Term Loans are incurred.

“Refinancing Term Loans” shall mean one or more Classes of term loans incurred by the Borrower under this Agreement pursuant to a Refinancing Facility Agreement; provided that such Indebtedness constitutes Refinancing Term Loan Indebtedness in respect of Term Loans (including portions of Classes of Term Loans).

“Register” has the meaning assigned to such term in Section 9.04(b).

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents, trustees, managers, advisors, representatives and controlling persons of such Person and its Affiliates.

“Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within or upon any building, structure, facility or fixture.

“Reorganization” means the reorganization that Exelis will undergo that will, among other things and subject to limited exceptions, result in the allocation and transfer or assignment to Holdings and the Borrower of the assets and liabilities in respect of the activities of the military and government services business and certain other current and former businesses and activities of Exelis.

“Required Lenders” means, at any time, Lenders having Revolving Exposures, Term Loans and unused Commitments (other than Swingline Commitments) representing more than 50% of the sum of the Aggregate Revolving Exposure, outstanding Term Loans and unused Commitments (other than Swingline Commitments) at such time.

“Requirement of Law” means, with respect to any Person, (a) the charter, articles or certificate of organization or incorporation and bylaws or other organizational or governing documents of such Person and (b) any law (including common law), statute, ordinance, treaty, rule, regulation, order, decree, writ, injunction, settlement agreement or determination of any arbitrator or court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

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“Reset Date” has the meaning assigned to such term in Section 1.06(a).

“Restricted” means, when used in reference to cash or Permitted Investments of any Person, that such cash or Permitted Investments (a) appear (or would be required to appear) as “restricted” on a consolidated balance sheet of such Person prepared in conformity with GAAP (unless such classification results solely from any Lien referred to in clause (b) below) or (b) are controlled by or subject to any Lien or other preferential arrangement in favor of any creditor, other than Liens created under the Loan Documents.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) by Holdings, the Borrower or any Restricted Subsidiary with respect to its Equity Interests, or any payment or distribution (whether in cash, securities or other property) by Holdings, the Borrower or any Restricted Subsidiary, including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of its Equity Interests.

“Restricted Subsidiary” means each Subsidiary other than an Unrestricted Subsidiary.

“Resulting Revolving Borrowings” has the meaning assigned to such term in Section 2.21(d).

“Revolving Availability Period” means the period from and including the Funding Date (or, in the case of any Revolving Loan or Swingline Loan, the first Business Day after the Funding Date) to but excluding the earlier of the Revolving Maturity Date and the date of termination of all the Revolving Commitments.

“Revolving Borrowings” means Revolving Loans of the same Class, Type and currency, made, converted or continued on the same date and as to which a single Interest Period is in effect.

“Revolving Commitments” means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum possible aggregate amount of such Lender’s Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08, (b) increased from time to time pursuant to Section 2.21 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Revolving Commitment is set forth on Schedule 2.01 or in the Assignment and Assumption or Incremental Facility Amendment pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Lenders’ Revolving Commitments is $75,000,000.

“Revolving Commitment Increase” has the meaning assigned to such term in Section 2.21(a).

“Revolving Commitment Increase Lender” means, with respect to any Revolving Commitment Increase, each Additional Lender providing a portion of such Revolving Commitment Increase.

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“Revolving Exposure” means, with respect to any Lender at any time, the sum of (a) the Dollar Equivalent of the outstanding principal amount of such Lender’s Revolving Loans, (b) such Lender’s LC Exposure and (c) such Lender’s Swingline Exposure, in each case at such time.

“Revolving Lender” means a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure.

“Revolving Lender Parent” means, with respect to any Revolving Lender, any Person as to which such Revolving Lender is, directly or indirectly, a subsidiary.

“Revolving Loan” means a Loan made pursuant to clause (b) of Section 2.01.

“Revolving Maturity Date” means the date that is five years after the Effective Date, as the same may be extended pursuant to Section 2.22.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.

“Sanctioned Country” means, at any time, a country or territory which is itself the subject or target of any Sanctions (at the time of this Agreement, Cuba, Iran, North Korea, Sudan and Syria).

“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC or the U.S. Department of State or by the United Nations Security Council, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons.

“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

“SEC” means the United States Securities and Exchange Commission or any Governmental Authority succeeding to any of its principal functions.

“Secured Cash Management Obligations” means the due and punctual payment of any and all obligations of Holdings, the Borrower and each Restricted Subsidiary (whether absolute or contingent and however and whenever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor)) arising in respect of Cash Management Services that (a) are owed to the Administrative Agent or an Affiliate thereof, or to any Person that, at the time such obligations were incurred, was the Administrative Agent or an Affiliate thereof, (b) are owed on the Effective Date to a Person that is a Lender or an Affiliate of a Lender as of the Effective Date or (c) are owed to a Person that is a Lender or an Affiliate of a Lender at the time such obligations are incurred.

“Secured Hedging Obligations” means the due and punctual payment of any and all obligations of Holdings, the Borrower and each Restricted Subsidiary arising under each Hedging Agreement that (a) is with a counterparty that is the Administrative Agent or an Affiliate thereof, or any Person that, at the time such Hedging Agreement was entered into, was the

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Administrative Agent or an Affiliate thereof, (b) is in effect on the Effective Date with a counterparty that is a Lender or an Affiliate of a Lender as of the Effective Date or (c) is entered into after the Effective Date with a counterparty that is a Lender or an Affiliate of a Lender at the time such Hedging Agreement is entered into. Notwithstanding the foregoing, in the case of any Excluded Swap Guarantor, “Secured Hedging Obligations” shall not include Excluded Swap Obligations of such Excluded Swap Guarantor.

“Secured Parties” means, collectively, (a) the Lenders, (b) the Administrative Agent, (c) each Issuing Bank, (d) each provider of Cash Management Services the obligations under which constitute Secured Cash Management Obligations, (e) each counterparty to any Hedging Agreement the obligations under which constitute Secured Hedging Obligations, (f) the beneficiaries of each indemnification obligation undertaken by any Loan Party under this Agreement or any other Loan Document and (g) the successors and assigns of each of the foregoing.

“Securities Act” means the United States Securities Act of 1933.

“Security Documents” means the Collateral Agreement, the Mortgages and each other security agreement or other instrument or document executed and delivered pursuant to any of the foregoing or pursuant to Section 5.12 to secure any of the Obligations.

“Specified ECF Percentage” means, with respect to any fiscal year of Holdings, (a) if the Total Leverage Ratio as of the last day of such fiscal year is greater than 1.50 to 1.00, 50%, (b) if the Total Leverage Ratio as of the last day of such fiscal year is greater than 1.00 to 1.00 but less than or equal to 1.50 to 1.00, 25%, and (c) if the Total Leverage Ratio as of the last day of such fiscal year is less than or equal to 1.00 to 1.00, 0%.

“Spin-Off” means the spin-off of Holdings from Exelis, as more fully described in the Form 10.

“Spin-Off Date” means the date, occurring on or after the Funding Date but not later than the first calendar day after the Funding Date, on which the Spin-Off shall have been consummated.

“Spin-Off Documents” means the Distribution Agreement, the Transition Services Agreement, the Tax Matters Agreement, the Employee Matters Agreement and the Intellectual Property License Agreements, together with any other agreements, instruments or other documents entered into in connection with any of the foregoing, each on substantially the terms described in the Form 10.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board of Governors and any other banking authority (domestic or foreign) to which the Administrative Agent or any Lender (including any branch, Affiliate or fronting office making or holding a Loan) is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board of Governors). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

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“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other business entity of which a majority of the shares or securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, by such Person.

“Subsidiary” means any subsidiary of Holdings (other than the Borrower).

“Subsidiary Loan Party” means each Restricted Subsidiary that is or, after the date hereof, becomes a party to the Collateral Agreement.

“Successor Borrower” has the meaning assigned to such term in Section 6.03(a).

“Supplemental Perfection Certificate” means a certificate in the form of Exhibit D or any other form approved by the Administrative Agent.

“Swap Obligations” means, with respect to Holdings or any Subsidiary Loan Party, an obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of § 1a(47) of the Commodity Exchange Act.

“Swingline Commitment” means, with respect to each Swingline Lender, the commitment of such Swingline Lender to make Swingline Loans pursuant to Section 2.04.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Revolving Lender at any time shall be the sum of (a) such Lender’s Applicable Percentage of the aggregate principal amount of all Swingline Loans outstanding at such time (excluding, in the case of any Revolving Lender that is a Swingline Lender, Swingline Loans made by it and outstanding at such time to the extent that the other Revolving Lenders shall not have funded their participations in such Swingline Loans), adjusted to give effect to any reallocation under Section 2.20 of the Swingline Exposure of Defaulting Lenders in effect at such time, and (b) in the case of any Revolving Lender that is a Swingline Lender, the aggregate principal amount of all Swingline Loans made by such Lender and outstanding at such time to the extent that the other Revolving Lenders shall not have funded their participations in such Swingline Loans.

“Swingline Lenders” means JPMCB, in its capacity as a lender of Swingline Loans hereunder, and any other Revolving Lender designated as a Swingline Lender pursuant to a joinder agreement executed by the Borrower and such Revolving Lender and reasonably satisfactory to the Administrative Agent, in each case in its capacity as a lender of Swingline Loans hereunder.

“Swingline Loan” means a Loan made pursuant to Section 2.04.

“Syndication Agents” means, collectively, SunTrust Bank and U.S. Bank National Association.

“TARGET Day” means any day on which TARGET2 is open for business.

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“TARGET2” means the Trans-European Automated Real Time Gross Settlement Express Transfer payment system which utilizes a single shared platform and which was launched on November 19, 2007.

“Tax Matters Agreement” means the Tax Matters Agreement between Exelis and Holdings, to be dated on or prior to the Spin-Off Date.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term Commitments” means, collectively, the Tranche A Term Commitments and any commitments to make Incremental Term Loans.

“Term Lenders” means, collectively, the Tranche A Term Lenders and any Lenders with an outstanding Incremental Term Loan or a Commitment to make an Incremental Term Loan.

“Term Loans” means, collectively, the Tranche A Term Loans and any Incremental Term Loans.

“Total Leverage Ratio” means, as of the last day of any fiscal quarter, the ratio of (a) Consolidated Debt on such date to (b) Consolidated EBITDA for the four consecutive fiscal quarters of Holdings ended on such date.

“Tranche A Term Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make a Tranche A Term Loan hereunder on the Funding Date, expressed as an amount representing the maximum principal amount of the Tranche A Term Loan to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Tranche A Term Commitment is set forth on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Tranche A Term Commitment, as applicable. The initial aggregate amount of the Lenders’ Tranche A Term Commitments is $140,000,000.

“Tranche A Term Lender” means a Lender with a Tranche A Term Commitment or an outstanding Tranche A Term Loan.

“Tranche A Term Loan” means a Loan made pursuant to clause (a) of Section 2.01.

“Tranche A Term Maturity Date” means the date that is five years after the Effective Date, as the same may be extended pursuant to Section 2.22.

“Transaction Costs” means all fees, costs and expenses incurred or payable by Holdings, the Borrower or any Subsidiary in connection with the Transactions.

“Transactions” means, collectively, (a) the execution, delivery and performance by each Loan Party of the Loan Documents (including this Agreement) to which it is to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of

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Credit hereunder, (b) the payment of the Funding Date Distribution, (c) the payment of the Transaction Costs and (d) the Spin-Off, together with the Reorganization and all other transactions pursuant to, and the performance of all other obligations under, the Spin-Off Documents.

“Transition Services Agreement” means the Transition Services Agreement between Exelis and Holdings and/or one or more of its subsidiaries, to be dated on or prior to the Spin-Off Date.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate, the Adjusted EURIBO Rate or the Alternate Base Rate.

“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.17(f)(ii)(B)(3).

“Unrestricted Cash” means, at any time, the aggregate amount of cash and Permitted Investments owned at such time by Holdings, the Borrower and the Restricted Subsidiaries; provided that such cash and Permitted Investments are not Restricted.

“Unrestricted Subsidiaries” means (a) any Subsidiary that is formed or acquired after the Funding Date and is designated as an Unrestricted Subsidiary by the Borrower pursuant to Section 5.14 subsequent to the Funding Date and (b) any Subsidiary of an Unrestricted Subsidiary. As of the Funding Date, there shall be no Unrestricted Subsidiaries.

“Unrestricted Subsidiary Reconciliation Statement” means, with respect to any consolidated balance sheet or statement of income and comprehensive income, cash flows or stockholders’ equity of Holdings and its consolidated subsidiaries, such financial statement (in substantially the same form) prepared on the basis of consolidating the accounts of Holdings, the Borrower and the Restricted Subsidiaries and treating Unrestricted Subsidiaries as if they were not consolidated with Holdings and otherwise eliminating all accounts of Unrestricted Subsidiaries, together with an explanation of reconciliation adjustments in reasonable detail.

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.

“Voting Equity Interests” of any Person means the Equity Interests of such Person ordinarily having the power to vote for the election of the directors of such Person.

“Weighted Average Yield” means, with respect to any Loan or Commitment, the weighted average yield to stated maturity of such Loan or Commitment based on the interest rate or rates or unused commitment or similar fees applicable thereto and giving effect to all upfront or similar fees or original issue discount payable to the Lenders advancing such Loan or Commitment with respect thereto, but excluding any arrangement, commitment, structuring and underwriting fees paid or payable to the arrangers (or similar titles) or their affiliates, in each case in their capacities as such, in connection with such Loans and that are not shared with all Lenders providing the applicable Incremental Extension of Credit; provided that for purposes of calculating the Weighted Average Yield for any Incremental Term Loan or Revolving

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Commitments (and the Revolving Loans to be made thereunder) in respect of any Revolving Commitment Increase, original issue discount and upfront fees shall be equated to interest based on an assumed four-year life to maturity (or, if shorter in respect of such Incremental Extension of Credit, the actual life to maturity of such Incremental Extension of Credit). For purposes of determining the Weighted Average Yield of any floating rate Indebtedness at any time, the rate of interest applicable to such Indebtedness at such time shall be assumed to be the rate applicable to such Indebtedness at all times prior to maturity; provided that appropriate adjustments shall be made for any changes in rates of interest provided for in the documents governing such Indebtedness (other than those resulting from fluctuations in interbank offered rates, prime rates, Federal funds rates or other external indices not influenced by the financial performance or creditworthiness of Holdings, the Borrower or any Subsidiary).

“wholly owned Subsidiary” means, with respect to any Person at any date, a subsidiary of such Person of which securities or other ownership interests representing 100% of the Equity Interests (other than directors’ qualifying shares) are, as of such date, owned, controlled or held by such Person or one or more wholly owned Subsidiaries of such Person or by such Person and one or more wholly owned Subsidiaries of such Person.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Agent” means any Loan Party, the Administrative Agent and any other applicable withholding agent.

“Working Capital Adjustment” has the meaning assigned to such term in Section 6.08(a)(vi).

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurocurrency Loan”) or by Class and Type (e.g., a “Eurocurrency Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurocurrency Borrowing”) or by Class and Type (e.g., a “Eurocurrency Revolving Borrowing”).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise or except as expressly provided herein, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, amended and restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in the Loan Documents), (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), unless otherwise expressly stated to the contrary, (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references

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herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that (i) if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision (including any definition) hereof to eliminate the effect of any change occurring after the Effective Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith, (ii) notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159, The Fair Value Option for Financial Assets and Financial Liabilities, or any successor thereto (including pursuant to Accounting Standard Codifications), to value any Indebtedness of Holdings, the Borrower or any Subsidiary at “fair value”, as defined therein and (iii) notwithstanding any change in GAAP after the Effective Date which would have the effect of treating any lease properly accounted for as an operating lease prior to such accounting change as a capital lease after giving effect to any such accounting change, for all purposes of calculating Indebtedness for any purpose under this Agreement, the Loan Parties shall continue to make such determinations and calculations with respect to all leases (whether then in existence or thereafter entered into) in accordance with GAAP (as it relates to such issue) as in effect prior to such change and consistent with their past practices.

SECTION 1.05. Pro Forma Calculations. With respect to any period during which any acquisition permitted by this Agreement or any sale, transfer or other disposition of any Equity Interests in a Subsidiary or all or substantially all the assets of a Subsidiary or division or line of business of a Subsidiary outside the ordinary course of business occurs, for purposes of determining compliance with the covenants contained in Sections 6.04(b), 6.12 and 6.13 or otherwise for purposes of determining the Total Leverage Ratio, Consolidated Cash Interest Expense and Consolidated EBITDA, calculations with respect to such period shall be made on a Pro Forma Basis.

SECTION 1.06. Exchange Rates; Currency Equivalents. (a) Not later than 1:00 p.m., New York City time, on each Calculation Date, the Administrative Agent shall (x) determine the Exchange Rate as of such Calculation Date with respect to the applicable Permitted Foreign Currency and (y) give notice thereof to the applicable Issuing Lender and the Borrower. The Exchange Rates so determined shall become effective (i) in the case of the initial Calculation Date, on the Funding Date and (ii) in the case of each subsequent Calculation Date, on the first Business Day immediately following such Calculation Date (a “Reset Date”), shall remain effective until the next succeeding Reset Date and shall for all purposes of this Agreement (other than any provision expressly requiring the use of a current exchange rate) be the Exchange Rates employed in converting any amounts between dollars and any Permitted Foreign Currency.

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(b) Solely for purposes of Article II and related definitional provisions to the extent used therein, the applicable amount of any currency (other than dollars) for purposes of the Loan Documents shall be such Dollar Equivalent amount as determined by the Administrative Agent and notified to the applicable Issuing Lender and the Borrower in accordance with Section 1.06(a). If any basket is exceeded solely as a result of fluctuations in the applicable Exchange Rate after the last time such basket was utilized, such basket will not be deemed to have been exceeded solely as a result of such fluctuations in the applicable Exchange Rate. Amounts denominated in a Permitted Foreign Currency will be converted to dollars for the purposes of (A) testing the financial maintenance covenants under Sections 6.12 and 6.13, at the Exchange Rate as of the last day of the fiscal quarter for which such measurement is being made, and (B) calculating the Consolidated Cash Interest Expense and the Total Leverage Ratio (other than for purposes of determining compliance with Sections 6.12 and 6.13), at the Exchange Rate as of the date of calculation, and will, in the case of Indebtedness, reflect the currency translation effects, determined in accordance with GAAP, of Hedging Agreements permitted hereunder for currency exchange risks with respect to the applicable currency in effect on the date of determination of the Dollar Equivalent of such Indebtedness.

(c) For purposes of Section 6.01, the amount of any Indebtedness denominated in any currency other than dollars shall be calculated based on the applicable Exchange Rate, in the case of such Indebtedness incurred or committed, on the date that such Indebtedness was incurred or committed, as applicable; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a currency other than dollars, and such refinancing would cause the applicable dollar-denominated restriction to be exceeded if calculated at the applicable Exchange Rate on the date of such refinancing, such dollar-denominated restrictions shall be deemed not to have been exceeded so long as the principal amount of such Refinancing Indebtedness does not exceed the sum of (i) the outstanding or committed principal amount, as applicable, of such Indebtedness being refinanced plus (ii) the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing.

(d) For purposes of Sections 6.02, 6.04, 6.05 and 6.08, the amount of any Liens, investments, asset sales and Restricted Payments, as applicable, denominated in any currency other than dollars shall be calculated based on the applicable Exchange Rate.

SECTION 1.07. Transactions on and prior to Spin-Off Date. Notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document, no provision of this Agreement or any other Loan Document shall prevent or restrict the consummation of any of the Transactions, nor shall the Transactions give rise to any Default, or constitute the utilization of any basket (other than Section 6.08(a)(i)), under this Agreement (including Article VI hereof) or any other Loan Document. The Borrower may, after the Effective Date and prior to the Spin-Off Date, deliver to the Administrative Agent revisions to Schedules 1.01, 1.02 and 3.14 and upon such delivery such schedules shall be deemed amended without the consent of any other party hereto, except that any revisions to any such Schedule shall be reasonably acceptable to the Administrative Agent.

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ARTICLE II

The Credits

SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees (a) to make a Tranche A Term Loan denominated in dollars to the Borrower on the Funding Date in a principal amount not exceeding its Tranche A Term Commitment and (b) to make Revolving Loans denominated in dollars or in any Permitted Foreign Currency to the Borrower from time to time, in each case during the Revolving Availability Period, in an aggregate principal amount that will not result in such Lender’s Revolving Exposure exceeding such Lender’s Revolving Commitment or the Aggregate Revolving Exposure exceeding the Aggregate Revolving Commitment; provided that the Borrower shall not request, and the Revolving Lenders shall not be required to fund, a Revolving Loan that is denominated in a Permitted Foreign Currency if, immediately after the making of such Revolving Loan, the Dollar Equivalent of the aggregate principal amount of all Revolving Loans then outstanding that are denominated in any Permitted Foreign Currency (including such requested Revolving Loan) would exceed $25,000,000. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. Amounts repaid or prepaid in respect of Term Loans may not be reborrowed.

SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

(b) Subject to Section 2.14, (i) each Borrowing denominated in dollars shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith, (ii) each Borrowing denominated in Euro shall be comprised entirely of EURIBOR Loans and (iii) each Borrowing denominated in any Permitted Foreign Currency (other than Euro) shall be comprised entirely of Eurocurrency Loans. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurocurrency Loan or EURIBOR Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

(c) At the commencement of each Interest Period for any Eurocurrency Borrowing or EURIBOR Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that a Eurocurrency Borrowing or EURIBOR Borrowing that results from a continuation of an outstanding Eurocurrency Borrowing or EURIBOR Borrowing may be in an aggregate amount that is equal to such outstanding Borrowing. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $500,000. Each Swingline Loan shall be in an amount that is an integral multiple of $100,000 and not less than $500,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not be more than a total of five Eurocurrency Borrowings and EURIBOR Borrowings in the aggregate at any time outstanding. Notwithstanding anything to the contrary herein, an ABR Revolving Borrowing or a Swingline Loan may be in an aggregate amount that is equal to the entire unused balance of the Aggregate Revolving Commitment or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e).

SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing or Term Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (other than a request for any Borrowing denominated in a Permitted Foreign Currency, which request shall be made in writing) (a) in the case of a Eurocurrency Borrowing denominated

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in dollars or EURIBOR Borrowing, not later than 11:00 a.m., Local Time, three Business Days before the date of the proposed Borrowing, (b) in the case of a Eurocurrency Borrowing denominated in a Permitted Foreign Currency, not later than 11:00 a.m., London time, four Business Days before the date of the proposed Borrowing or (c) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement denominated in dollars as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery, facsimile or other electronic imaging to the Administrative Agent of a written Borrowing Request signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information (to the extent applicable, in compliance with Sections 2.01 and 2.02):

(i) whether the requested Borrowing is to be a Revolving Borrowing, a Tranche A Term Borrowing or a Borrowing of any Incremental Term Loan;

(ii) the currency and the aggregate amount of such Borrowing;

(iii) the requested date of such Borrowing, which shall be a Business Day;

(iv) whether such Borrowing is to be an ABR Borrowing, a Eurocurrency Borrowing or a EURIBOR Borrowing;

(v) in the case of a Eurocurrency Borrowing or a EURIBOR Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”;

(vi) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06(a), or, if the Borrowing is being requested to finance the reimbursement of an LC Disbursement denominated in dollars in accordance with Section 2.05(e), the identity of the Issuing Bank that made such LC Disbursement; and

(vii) that as of such date Sections 4.03(a) and 4.03(b) are satisfied.

If no election as to the Type of Borrowing is specified, other than with respect to Borrowings denominated in a Permitted Foreign Currency, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Borrowing or EURIBOR Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. If no currency is specified with respect to any requested Revolving Loan, the Borrower shall be deemed to have selected dollars. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the applicable Class of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04. Swingline Loans. (a) Subject to the terms and conditions set forth herein, from time to time during the Revolving Availability Period, each Swingline Lender severally agrees to make Swingline Loans, denominated in dollars, to the Borrower in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of the outstanding Swingline Loans exceeding $10,000,000, (ii) the aggregate

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principal amount of the outstanding Swingline Loans made by such Swingline Lender exceeding the Revolving Commitment of such Swingline Lender (in its capacity as a Revolving Lender), (iii) such Swingline Lender’s Revolving Exposure exceeding such Revolving Lender’s Revolving Commitment or (iv) the Aggregate Revolving Exposure exceeding the Aggregate Revolving Commitment; provided that (A) the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan and (B) each Swingline Loan shall be made as part of a Borrowing consisting of Swingline Loans made by the Swingline Lenders ratably in accordance with the respective Revolving Commitments of the Swingline Lenders (in their capacities as Revolving Lenders). Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans. The failure of any Swingline Lender to make its ratable portion of a Swingline Loan shall not relieve any other Swingline Lender of its obligations hereunder to make its ratable portion of such Swingline Loan, but no Swingline Lender shall be responsible for the failure of any other Swingline Lender to make the ratable portion of a Swingline Loan to be made by such other Swingline Lender on the date of any Swingline Loan.

(b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone, not later than 12:00 noon, New York City time, on the day of such proposed Swingline Loan. Each such notice shall be irrevocable and shall be confirmed promptly by hand delivery, facsimile or other electronic imaging to the Administrative Agent of a written Borrowing Request signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lenders of any such notice received from the Borrower. Each Swingline Lender shall make its ratable portion of the requested Swingline Loan available to the Borrower by means of a credit to an account of the Borrower maintained with the Administrative Agent for such purpose (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the applicable Issuing Bank or, to the extent that the Revolving Lenders have made payments pursuant to Section 2.05(e) to reimburse such Issuing Bank, to such Revolving Lenders and such Issuing Bank as their interests may appear) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.

(c) Any Swingline Lender may by written notice given to the Administrative Agent not later than 12:00 noon, New York City time, on any Business Day require the Revolving Lenders to acquire participations on such Business Day in all or a portion of its Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which the Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Swingline Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lenders, such Lender’s Applicable Percentage of such Swingline Loan or Swingline Loans. Each Revolving Lender acknowledges and agrees that, in making any Swingline Loan, each Swingline Lender shall be entitled to rely, and shall not incur any liability for relying, upon the representation and warranty of Holdings and the Borrower deemed made pursuant to Section 4.03 unless, at least one Business Day prior to the time such Swingline Loan was made, the Majority in Interest of the Revolving Lenders shall have notified such Swingline Lender (with a copy to the Administrative Agent) in writing that, as a result of one or more events or circumstances described in such notice, one or more of the conditions precedent set forth in Section 4.03(a) or 4.03(b) would not be satisfied if such

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Swingline Loan were then made (it being understood and agreed that, in the event such Swingline Lender shall have received any such notice, it shall have no obligation to make any Swingline Loan until and unless it shall be satisfied that the events and circumstances described in such notice shall have been cured or otherwise shall have ceased to exist). Each Revolving Lender further acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or any reduction or termination of the Revolving Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders under this paragraph), and the Administrative Agent shall promptly remit to the applicable Swingline Lenders the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to such Swingline Lenders. Any amounts received by a Swingline Lender from the Borrower (or other Person on behalf of the Borrower) in respect of a Swingline Loan after receipt by such Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted by such Swingline Lender to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph and to the applicable Swingline Lenders, as their interests may appear; provided that any such payment so remitted shall be repaid to the applicable Swingline Lenders or to the Administrative Agent, as applicable, and thereafter to the Borrower, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not constitute a Loan and shall not relieve the Borrower of its obligation to repay such Swingline Loan.

SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own account (or for the account of any Subsidiary so long as the Borrower is a joint and several co-applicant in respect of such Letter of Credit), denominated in dollars or in a Permitted Foreign Currency and in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Bank, at any time and from time to time during the Revolving Availability Period. Upon satisfaction of the conditions specified in Sections 4.02 and 4.03 on the Funding Date and the consummation of the Spin-Off, each Existing Letter of Credit will, automatically and without any action on the part of any Person, be deemed to be a Letter of Credit issued hereunder for all purposes of this Agreement and the other Loan Documents. Notwithstanding anything contained in any letter of credit application or other agreement (other than this Agreement or any Security Document) submitted by the Borrower to, or entered into by the Borrower with, any Issuing Bank relating to any Letter of Credit, (i) all provisions of such letter of credit application or other agreement purporting to grant Liens in favor of such Issuing Bank to secure obligations in respect of such Letter of Credit shall be disregarded, it being agreed that such obligations shall be secured to the extent provided in this Agreement and in the Security Documents, and (ii) in the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of such letter of credit application or such other agreement, as applicable, the terms and conditions of this Agreement shall control.

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(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit or the amendment, renewal or extension of an outstanding Letter of Credit (other than any automatic renewal permitted pursuant to paragraph (c) of this Section), the Borrower shall hand deliver or fax (or transmit by electronic communication, if arrangements for doing so have been approved by such Issuing Bank) to the applicable Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the requested date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the currency and amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be requested by the applicable Issuing Bank as necessary to enable the such Issuing Bank to prepare, amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Bank, the Borrower also shall submit a letter of credit application on such Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of any Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, (i) the LC Exposure shall not exceed the LC Sublimit, (ii) the Revolving Exposure of each Revolving Lender shall not exceed such Revolving Lender’s Revolving Commitment, (iii) the Aggregate Revolving Exposure shall not exceed the Aggregate Revolving Commitment and (iv) following the effectiveness of any Maturity Date Extension Request with respect to the Revolving Commitments, the LC Exposure in respect of all Letters of Credit having an expiration date after the second Business Day prior to the applicable Existing Maturity Date shall not exceed the aggregate Revolving Commitments of the Consenting Lenders extended pursuant to Section 2.22. Each Issuing Bank agrees that it shall not permit any issuance, amendment, renewal or extension of a Letter of Credit to occur unless it shall given to the Administrative Agent written notice thereof as required under paragraph (l) of this Section.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date that is one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Maturity Date; provided, however, that any Letter of Credit may, upon the request of the Borrower, include a provision whereby such Letter of Credit shall be renewed automatically for additional consecutive periods of one year or less (but not beyond the date that is five Business Days prior to the Revolving Maturity Date) unless the applicable Issuing Bank notifies the beneficiary thereof at least 30 days prior to the then-applicable expiration date that such Letter of Credit will not be renewed. For the avoidance of doubt, if the Revolving Maturity Date shall be extended pursuant to Section 2.22, “Revolving Maturity Date” as referenced in this paragraph shall refer to the Revolving Maturity Date as extended pursuant to Section 2.22; provided that, notwithstanding anything in this Agreement (including Section 2.22 hereof) or any other Loan Document to the contrary, the Revolving Maturity Date, as such term is used in reference to any Issuing Bank or any Letter of Credit issued thereby, may not be extended with respect to any Issuing Bank without the prior written consent of such Issuing Bank.

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(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Lenders, the Issuing Bank that is the issuer of such Letter of Credit hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Revolving Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the applicable Issuing Bank, such Revolving Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or any reduction or termination of the Revolving Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Lender further acknowledges and agrees that, in issuing, amending, renewing or extending any Letter of Credit, the applicable Issuing Bank shall be entitled to rely, and shall not incur any liability for relying, upon the representation and warranty of Holdings and the Borrower deemed made pursuant to Section 4.03 unless, at least one Business Day prior to the time such Letter of Credit is issued, amended, renewed or extended (or, in the case of an automatic renewal permitted pursuant to paragraph (c) of this Section, at least one Business Day prior to the time by which the election not to extend must be made by the applicable Issuing Bank), the Majority in Interest of the Revolving Lenders shall have notified the applicable Issuing Bank (with a copy to the Administrative Agent) in writing that, as a result of one or more events or circumstances described in such notice, one or more of the conditions precedent set forth in Section 4.03(a) or 4.03(b) would not be satisfied if such Letter of Credit were then issued, amended, renewed or extended (it being understood and agreed that, in the event any Issuing Bank shall have received any such notice, no Issuing Bank shall have any obligation to issue, amend, renew or extend any Letter of Credit until and unless it shall be satisfied that the events and circumstances described in such notice shall have been cured or otherwise shall have ceased to exist).

(e) Reimbursement. If an Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, then the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than (i) if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on any Business Day, then 12:00 noon, New York City time, on such Business Day, or (ii) otherwise, 12:00 noon, New York City time, on the Business Day immediately following the day that the Borrower receives such notice; provided that, in the case of an LC Disbursement denominated in dollars in an amount equal to or in excess of $500,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABR Revolving Borrowing or a Swingline Loan in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails to reimburse any LC Disbursement by the time specified above in this paragraph, then (A) if the applicable LC Disbursement relates to a Letter of Credit denominated in a currency other than dollars, Euros or Pounds Sterling, automatically and with no further action, the obligation to reimburse such LC Disbursement shall be permanently converted into an obligation to reimburse the Dollar Equivalent, determined using the Exchange Rate

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calculated as of the date when such payment was due, of such LC Disbursement and (B) the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement (and the Dollar Equivalent thereof if the immediately preceding clause (A) is applicable), the currency and amount of the payment then due from the Borrower in respect thereof and such Revolving Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each applicable Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the amount then due from the Borrower in the currency of the applicable LC Disbursement (unless such LC Disbursement relates to a Letter of Credit denominated in a currency other than dollars, Euros or Pounds Sterling, in which case such payment shall be made in dollars), in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders under this paragraph), and the Administrative Agent shall promptly remit to the applicable Issuing Bank the amounts so received by it from the applicable Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this paragraph to reimburse such Issuing Bank, then to such Revolving Lenders and such Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse an Issuing Bank for any LC Disbursement (other than the funding of an ABR Revolving Borrowing or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision thereof or hereof, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. None of the Administrative Agent, the Lenders, the Issuing Banks or any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit, any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the applicable Issuing Bank; provided that the foregoing shall not be construed to excuse any Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to special, indirect, consequential or punitive damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or wilful misconduct on the part of an Issuing Bank (as finally determined by a court of competent jurisdiction in a final and nonappealable

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judgment), such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, an Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit, and any such acceptance or refusal shall be deemed not to constitute gross negligence or wilful misconduct.

(g) Disbursement Procedures. Each Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Each Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by facsimile or other electronic imaging) of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the applicable Revolving Lenders with respect to any such LC Disbursement in accordance with paragraph (e) of this Section.

(h) Interim Interest. If an Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof (or, in the case of clause (iii)(B) below, the Dollar Equivalent of such amount, determined in accordance with paragraph (e) of this Section) shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement in full, at (i) in the case of any LC Disbursement denominated in dollars, the rate per annum then applicable to ABR Revolving Loans (and payable in dollars), (ii) in the case of an LC Disbursement denominated in Euros or Pounds Sterling, a rate per annum determined by the applicable Issuing Bank (which determination will be conclusive absent manifest error) to represent its cost of funds plus the Applicable Rate used to determine interest applicable to Eurocurrency Revolving Loans or EURIBOR Revolving Loans (and payable in such currency) and (iii) in the case of an LC Disbursement denominated in any Permitted Foreign Currency other than Euros and Pounds Sterling, (A) in the case of any LC Disbursement that is reimbursed on or before the date such LC Disbursement is required to be reimbursed under paragraph (e) of this Section, a rate per annum determined by the applicable Issuing Bank (which determination will be conclusive absent manifest error) to represent its cost of funds plus the Applicable Rate used to determine interest applicable to Eurocurrency Revolving Loans or EURIBOR Revolving Loans (and payable in such currency) and (B) in the case of any LC Disbursement that is reimbursed after the date such LC Disbursement is required to be reimbursed under paragraph (e) of this Section, the rate per annum then applicable to ABR Revolving Loans (and payable in dollars); provided that, if the Borrower fails to reimburse such LC Disbursement in full when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be paid to the Administrative Agent, for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section to reimburse such Issuing Bank shall be for the account of such Lender to the extent of such payment, and shall be payable on demand or, if no demand has been made, on the date on which the Borrower reimburses the applicable LC Disbursement in full.

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(i) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day on which the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, a Majority in Interest of the Revolving Lenders) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash and in the currency of each applicable Letter of Credit equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Section 7.01. The Borrower also shall deposit cash collateral in accordance with this paragraph as and to the extent required by Section 2.11(b), 2.20(c) or 2.22(c). Each such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Notwithstanding the terms of any Security Document, moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Banks for LC Disbursements for which they have not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to (i) the consent of a Majority in Interest of the Revolving Lenders and (ii) in the case of any such application at a time when any Revolving Lender is a Defaulting Lender (but only if, after giving effect thereto, the remaining cash collateral shall be less than the aggregate LC Exposure of all the Defaulting Lenders), the consent of each Issuing Bank), be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.11(b), such amount (to the extent not applied as aforesaid) shall be returned to the Borrower to the extent that, after giving effect to such return, the Aggregate Revolving Exposure would not exceed the Aggregate Revolving Commitment and no Default shall have occurred and be continuing. If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.20(c), such amount (to the extent not applied as aforesaid) shall be returned to the Borrower to the extent that, after giving effect to such return, no Issuing Bank shall have any exposure in respect of any outstanding Letter of Credit that is not fully covered by the Revolving Commitments of the Non-Defaulting Revolving Lenders and/or the remaining cash collateral and no Default shall have occurred and be continuing.

(j) Designation of Additional Issuing Banks. The Borrower may, at any time and from time to time, with the consent of the Administrative Agent (which consent shall not be unreasonably withheld), designate as additional Issuing Banks one or more Revolving Lenders that agree to serve in such capacity as provided below. The acceptance by a Revolving Lender of an appointment as an Issuing Bank hereunder shall be evidenced by an agreement, which shall be in form and substance reasonably satisfactory to the Administrative Agent, executed by the Borrower, the Administrative Agent and such

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designated Revolving Lender and, from and after the effective date of such agreement, (i) such Revolving Lender shall have all the rights and obligations of an Issuing Bank under this Agreement and (ii) references herein to the term “Issuing Bank” shall be deemed to include such Revolving Lender in its capacity as an issuer of Letters of Credit hereunder.

(k) Termination of an Issuing Bank. The Borrower may terminate the appointment of any Issuing Bank as an “Issuing Bank” hereunder by providing a written notice thereof to such Issuing Bank, with a copy to the Administrative Agent. Any such termination shall become effective upon the earlier of (i) such Issuing Bank acknowledging receipt of such notice and (ii) the tenth Business Day following the date of the delivery thereof; provided that no such termination shall become effective until and unless the LC Exposure attributable to Letters of Credit issued by such Issuing Bank (or its Affiliates) shall have been reduced to zero. At the time any such termination pursuant to this clause (k) shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the terminated Issuing Bank pursuant to Section 2.12(b). Notwithstanding the effectiveness of any such termination pursuant to this clause (k), the terminated Issuing Bank shall remain a party hereto and shall continue to have all the rights of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such termination, but shall not issue any additional Letters of Credit.

(l) Issuing Bank Reports to the Administrative Agent. Unless otherwise agreed by the Administrative Agent, each Issuing Bank shall, in addition to its notification obligations set forth elsewhere in this Section, report in writing to the Administrative Agent (i) periodic activity (for such period or recurrent periods as shall be requested by the Administrative Agent) in respect of Letters of Credit issued by such Issuing Bank, including all issuances, extensions, amendments and renewals, all expirations and cancelations and all disbursements and reimbursements, (ii) reasonably prior to the time that such Issuing Bank issues, amends, renews or extends any Letter of Credit, the date of such issuance, amendment, renewal or extension, and the stated amount of the Letters of Credit issued, amended, renewed or extended by it and outstanding after giving effect to such issuance, amendment, renewal or extension (and whether the amounts thereof shall have changed), (iii) on each Business Day on which such Issuing Bank makes any LC Disbursement, the date and amount of such LC Disbursement, (iv) on any Business Day on which the Borrower fails to reimburse an LC Disbursement required to be reimbursed to such Issuing Bank on such day, the date of such failure and the currency and amount of such LC Disbursement and (v) on any other Business Day, such other information as the Administrative Agent shall reasonably request as to the Letters of Credit issued by such Issuing Bank.

(m) LC Exposure Determination. For all purposes of this Agreement, the amount of a Letter of Credit that, by its terms or the terms of any document related thereto, provides for one or more automatic increases in the stated amount thereof shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at the time of determination.

SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, Local Time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to

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an account of the Borrower and designated by the Borrower in the applicable Borrowing Request; provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement denominated in dollars as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the applicable Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to Section 2.05(e) to reimburse such Issuing Bank, then to such Revolving Lenders and such Issuing Bank as their interests may appear.

(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption and in its sole discretion, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, (A) in the case of Loans denominated in dollars, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (B) in the case of Loans denominated in a Permitted Foreign Currency, the rate determined by the Administrative Agent to be the cost to it of funding such amount (which determination will be conclusive absent manifest error) or (ii) in the case of the Borrower, the interest rate applicable to (A) in the case of Loans denominated in dollars, ABR Loans of the applicable Class and (B) in the case of Loans denominated in a Permitted Foreign Currency, the interest rate applicable to the subject Loan pursuant to Section 2.13. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request or designated by Section 2.03 and, in the case of a Eurocurrency Borrowing or a EURIBOR Borrowing, shall have an initial Interest Period as specified in such Borrowing Request or designated by Section 2.03. Thereafter, the Borrower may elect to convert such Borrowing to a Borrowing of a different Type (provided that Eurocurrency Borrowings denominated in a Permitted Foreign Currency may not be converted into ABR Borrowings) or to continue such Borrowing and, in the case of a Eurocurrency Borrowing or a EURIBOR Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.

(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone (other than a request pursuant to this Section with respect to a Borrowing denominated in a Permitted Foreign Currency, which request shall be made in writing) by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to

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be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery, facsimile or other electronic imaging to the Administrative Agent of a written Interest Election Request signed by the Borrower.

(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing, a Eurocurrency Borrowing or a EURIBOR Borrowing; and

(iv) if the resulting Borrowing is to be a Eurocurrency Borrowing or a EURIBOR Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurocurrency Borrowing or a EURIBOR Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the applicable Class of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing or a EURIBOR Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period (i) in the case of a Eurocurrency Borrowing denominated in dollars, such Borrowing shall be converted to an ABR Borrowing and (ii) in the case of a Eurocurrency Borrowing denominated in a Permitted Foreign Currency or a EURIBOR Borrowing, such Borrowing shall be continued as a Borrowing of the applicable Type for an Interest Period of one month. Notwithstanding any contrary provision hereof, if an Event of Default under clause (h) or (i) of Section 7.01 has occurred and is continuing with respect to Holdings or the Borrower, or if any other Event of Default has occurred and is continuing and the Administrative Agent, at the request of a Majority in Interest of the Lenders of any Class, has notified the Borrower of the election to give effect to this sentence on account of such other Event of Default, then, in each such case, so long as such Event of Default is continuing, (i) no outstanding Borrowing (or Borrowing of the applicable Class, as applicable) denominated in dollars may be converted to or continued as a Eurocurrency Borrowing, (ii) unless repaid, each Eurocurrency Borrowing (or Eurocurrency Borrowing of the applicable Class, as applicable) denominated in dollars shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto and (iii) unless repaid, each Eurocurrency Borrowing denominated in a Permitted Foreign Currency or EURIBOR Borrowing shall be continued as a Eurocurrency Borrowing or a EURIBOR Borrowing, as applicable, with an Interest Period of one month’s duration.

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SECTION 2.08. Termination and Reduction of Commitments. (a) Unless previously terminated, (i) the Tranche A Term Commitments shall automatically terminate at 5:00 p.m., New York City time, on the Funding Date, and (ii) the Revolving Commitments shall automatically terminate on the Revolving Maturity Date (or, if the Borrower has not delivered a Borrowing Request for a Borrowing under the Tranche A Term Commitments on the Funding Date, at 5:00 p.m., New York City time, on the Funding Date); provided that, unless the Funding Date has occurred, all Commitments shall terminate on the date that is 150 days after the Effective Date.

(b) The Borrower may at any time terminate, or from time to time permanently reduce, the Commitments of any Class; provided that (i) each partial reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans or the Swingline Loans in accordance with Section 2.11, the Aggregate Revolving Exposure would exceed the Aggregate Revolving Commitment.

(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the applicable Class of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination or reduction of the Revolving Commitments delivered under this paragraph may state that such notice is conditioned upon the occurrence of one or more events specified therein, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.

SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Term Loan of such Lender as provided in Section 2.10 and (iii) to the Swingline Lenders the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Maturity Date and the fifth Business Day after such Swingline Loan is made; provided that on each date that a Revolving Borrowing is made, the Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested and the proceeds of any such Borrowing shall be applied by the Administrative Agent to repay any Swingline Loans then outstanding.

(b) The records maintained by the Administrative Agent and the Lenders shall be prima facie evidence of the existence and amounts of the obligations of the Borrower in respect of Loans, LC Disbursements, interest and fees due or accrued hereunder; provided that the failure of the Administrative Agent or any Lender to maintain such records or any error therein shall not in any manner affect the obligation of the Borrower to pay any amounts due hereunder in accordance with the terms of this Agreement.

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(c) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the payee named therein (or to such payee and its registered assigns).

SECTION 2.10. Amortization of Term Loans. (a) Subject to adjustment pursuant to paragraph (c) of this Section, the Borrower shall repay Tranche A Term Borrowings on each date set forth below, beginning with the date that is the last day of the first full fiscal quarter of Holdings after the Funding Date (it being understood that the Borrower shall not be required to make payments under this Section 2.10 on any date that is prior to the Funding Date) in the aggregate principal amount set forth opposite such date:

Date	Amount
December 31, 2014	$	2,625,000
March 31, 2015	$	2,625,000
June 30, 2015	$	2,625,000
September 30, 2015	$	2,625,000
December 31, 2015	$	3,500,000
March 31, 2016	$	3,500,000
June 30, 2016	$	3,500,000
September 30, 2016	$	3,500,000
December 31, 2016	$	3,500,000
March 31, 2017	$	3,500,000
June 30, 2017	$	3,500,000
September 30, 2017	$	3,500,000
December 31, 2017	$	5,250,000
March 31, 2018	$	5,250,000
June 30, 2018	$	5,250,000
September 30, 2018	$	5,250,000
December 31, 2018	$	20,125,000
March 31, 2019	$	20,125,000
June 30, 2019	$	20,125,000
Tranche A Maturity Date	$	20,125,000

Subject to adjustment pursuant to paragraph (c) of this Section, the Borrower shall repay Incremental Term Loans of any Class as provided in the applicable Incremental Facility Amendment.

(b) To the extent not previously paid, (i) all Tranche A Term Loans shall be due and payable on the Tranche A Term Maturity Date and (ii) all Incremental Term Loans of any Class shall be due and payable on the maturity date set forth in the applicable Incremental Facility Amendment.

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(c) Any prepayment of a Term Borrowing of any Class shall be applied to reduce the subsequent scheduled repayments of the Term Borrowings of such Class to be made pursuant to this Section as directed in writing by the Borrower (or, if the Borrower fails to so direct the application of any such prepayment, such prepayment shall be applied to reduce the subsequent scheduled repayments of the Term Borrowings of the applicable Class to be made pursuant to this Section in direct order of maturity); provided that (A) any prepayment of any Class of Incremental Term Borrowings shall be applied to subsequent scheduled repayments as provided in the applicable Incremental Facility Amendment, (B) any prepayment of Term Borrowings of any Class contemplated by Section 2.23 shall be applied to subsequent scheduled repayments as provided in such Section and (C) if any Lender elects to decline a mandatory prepayment of a Term Borrowing in accordance with Section 2.11(e), then the portion of such prepayment not so declined shall be applied to reduce the subsequent repayments of such Term Borrowing to be made pursuant to this Section ratably based on the amount of such scheduled repayments. Furthermore, in the event that the Term Loans of any Class are cancelled in accordance with Section 9.04(e)(v), the aggregate principal amount of Term Loans of such Class so cancelled shall be applied to reduce the subsequent scheduled repayments of the Term Borrowings of such Class to be made pursuant to this Section ratably based on the amount of such scheduled repayments.

(d) Prior to any repayment of any Term Borrowings of any Class under this Section, the Borrower shall select the Borrowing or Borrowings of the applicable Class to be repaid and shall notify the Administrative Agent by telephone (confirmed by hand delivery, facsimile or other electronic imaging) of such selection not later than 11:00 a.m., New York City time, three Business Days before the scheduled date of such repayment. Each repayment of a Term Borrowing shall be applied ratably to the Loans included in the repaid Term Borrowing. Repayments of Term Borrowings shall be accompanied by accrued interest on the amount repaid.

SECTION 2.11. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty, subject to Section 2.16.

(b) In the event and on each occasion that (i) the Aggregate Revolving Exposure exceeds the Aggregate Revolving Commitment (other than as a result of any revaluation of the Dollar Equivalent of Revolving Loans or the LC Exposure on any Calculation Date in accordance with Section 1.06) or (ii) the Aggregate Revolving Exposure exceeds 105% of the Aggregate Revolving Commitments solely as a result of any revaluation of the Dollar Equivalent of Revolving Loans or the LC Exposure on any Calculation Date in accordance with Section 1.06, the Borrower shall prepay Revolving Borrowings (or, if no such Borrowings are outstanding, deposit cash collateral in an account with the Administrative Agent in accordance with Section 2.05(i)) in an aggregate amount equal to such excess.

(c) In the event and on each occasion that any Net Proceeds are received by or on behalf of Holdings, the Borrower or any Restricted Subsidiary in respect of any Prepayment Event (including by the Administrative Agent as loss payee in respect of any Prepayment Event described in clause (b) of the definition of the term “Prepayment Event”), the Borrower shall, on the day such Net Proceeds are received (or, in the case of a Prepayment Event described in clause (a) or (b) of the definition of the term “Prepayment Event”, within three Business Days after such Net Proceeds are received), prepay Term Borrowings in an aggregate amount equal to 100% of the amount of such Net Proceeds (or, if the Borrower or any of its Restricted Subsidiaries has incurred Indebtedness that is permitted under Section 6.01 that is secured, on an equal and ratable basis with the Term Loans, by a Lien on the Collateral permitted under Section 6.02, and such Indebtedness is required to be prepaid or redeemed with the net proceeds of any event described in clause (a) or (b) of the definition of the term “Prepayment Event”, then by such lesser

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percentage of such Net Proceeds such that such Indebtedness receives no greater than a ratable percentage of such Net Proceeds based upon the aggregate principal amount of the Term Loans and such Indebtedness then outstanding); provided that, in the case of any event described in clause (a) or (b) of the definition of the term “Prepayment Event”, if the Borrower shall, prior to the date of the required prepayment, deliver to the Administrative Agent a certificate of a Financial Officer to the effect that the Borrower intends to cause the Net Proceeds from such event (or a portion thereof specified in such certificate) to be applied within 360 days after receipt of such Net Proceeds to acquire real property, equipment or other assets to be used in the business of Holdings, the Borrower or their Restricted Subsidiaries or to enter into an acquisition permitted by this Agreement and certifying that no Default has occurred and is continuing, then no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds in respect of such event (or the portion of such Net Proceeds specified in such certificate, if applicable) except to the extent of any such Net Proceeds that have not been so applied by the end of such 360-day period (or within a period of 180 days thereafter if by the end of such initial 360-day period the Borrower or one or more Restricted Subsidiaries shall have entered into a binding agreement with a third party to acquire such real property, equipment or other assets or to make an acquisition permitted by this Agreement), at which time a prepayment shall be required in an amount equal to such Net Proceeds that have not been so applied.

(d) Following the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2015, the Borrower shall prepay Term Borrowings in an aggregate amount equal to the Specified ECF Percentage of Excess Cash Flow for such fiscal year; provided that such amount shall be reduced by the aggregate amount of prepayments of Term Borrowings and Revolving Borrowings (but only to the extent accompanied by a permanent reduction of the corresponding Commitment) made pursuant to paragraph (a) of this Section during such fiscal year (and, at the Borrower’s option (and without deducting such amounts against the subsequent fiscal year’s prepayment computation pursuant to this paragraph (d)), after the end of such fiscal year but prior to the date on which the prepayment pursuant to this Section 2.11(d) for such fiscal year is required to have been made); provided further that, in the case of any Term Loan prepaid in connection with the purchase thereof by a Purchasing Borrower Party pursuant to Section 9.04(e) at a discount to par, the prepayment required pursuant to this Section 2.11(d) shall be reduced, with respect to the prepayment of such Term Loan, only by the actual amount of cash paid to the applicable Lender or Lenders in connection with such purchase. Each prepayment pursuant to this paragraph shall be made no later than five days after the date on which financial statements are delivered pursuant to Section 5.01(a) with respect to the fiscal year for which Excess Cash Flow is being calculated (and in any event not later than five days after the last day on which such financial statements may be delivered in compliance with such Section).

(e) Prior to any optional or mandatory prepayment of Borrowings under this Section, the Borrower shall, subject to the next sentence, select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment delivered pursuant to paragraph (f) of this Section. In the event of any mandatory prepayment of Term Borrowings made at a time when Term Borrowings of more than one Class remain outstanding, the Borrower shall select Term Borrowings to be prepaid so that the aggregate amount of such prepayment is allocated between Tranche A Term Borrowings and, to the extent provided in the Incremental Facility Amendment for any Class of Incremental Term Loans, the Borrowings of such Class pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class; provided that any Term Lender (and, to the extent provided in the Incremental Facility Amendment for any Class of Incremental Term Loans, any Lender that holds Incremental Term Loans of such Class) may elect, by notice to the Administrative Agent by telephone (confirmed by hand delivery, facsimile or other electronic imaging) at least one Business Day prior to the

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required prepayment date, to decline all or any portion of any prepayment of its Loans pursuant to this Section (other than (x) an optional prepayment pursuant to paragraph (a) of this Section or (y) a mandatory prepayment triggered by an event described in clause (a) of the definition of the term “Prepayment Event”, neither of which may be declined), in which case the aggregate amount of the prepayment that would have been applied to prepay such Loans may be retained by the Borrower.

(f) The Borrower shall notify the Administrative Agent (and, in the case of prepayment of Swingline Loans, the Swingline Lenders) by telephone (confirmed by hand delivery, facsimile or other electronic imaging) of any optional prepayment and, to the extent practicable, any mandatory prepayment hereunder (i) in the case of prepayment of a Eurocurrency Borrowing or EURIBOR Borrowing, not later than 11:00 a.m., Local Time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that (A) if a notice of optional prepayment is given in connection with a conditional notice of termination of the Revolving Commitments as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08 and (B) a notice of prepayment of Term Borrowings pursuant to paragraph (a) of this Section may state that such notice is conditioned upon the occurrence of one or more events specified therein, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified date of prepayment) if such condition is not satisfied. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the applicable Class of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13.

(g) Notwithstanding any other provisions of this Section 2.11, to the extent any or all of the Net Proceeds of any event described in clause (a) or (b) of the definition of the term “Prepayment Event” by a Foreign Subsidiary (“Foreign Subsidiary Disposition”) or Excess Cash Flow attributable to Foreign Subsidiaries, in either case are prohibited or delayed by any applicable local law (including financial assistance, corporate benefit restrictions on upstreaming of cash intra group and the fiduciary and statutory duties of the directors of such Foreign Subsidiary) from being repatriated or passed on to or used for the benefit of the Borrower or any applicable Domestic Subsidiary or if the Borrower has determined in good faith that repatriation of any such amount to the Borrower or any applicable Domestic Subsidiary would have material adverse tax consequences to the Borrower and its Subsidiaries (taken as a whole) with respect to such amount, the portion of such Net Proceeds or Excess Cash Flow so affected will not be required to be applied to prepay the Term Loans at the times provided in this Section 2.11 but may be retained by the applicable Foreign Subsidiary so long, but only so long, as the applicable local law will not permit repatriation or the passing on to or otherwise using for the benefit of the Borrower or the applicable Domestic Subsidiary, or the Borrower believes in good faith that such material adverse tax consequence would result, and once such repatriation of any of such affected Net Proceeds or Excess Cash Flow is permitted under the applicable local law or the Borrower

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determines in good faith such repatriation would no longer would have such material adverse tax consequences, such repatriation will be promptly effected and such repatriated Net Proceeds or Excess Cash Flow will be promptly (and in any event not later than five Business Days after such repatriation) applied (net of additional taxes payable or reasonably estimated to be payable as a result thereof) to the prepayment of the Term Loans pursuant to this Section 2.11 (provided that no such prepayment of the Term Loans pursuant to this Section 2.11 shall be required in the case of any such Net Proceeds or Excess Cash Flow the repatriation of which the Borrower believes in good faith would result in material adverse tax consequences, if on or before the date on which such Net Proceeds so retained would otherwise have been required to be applied to reinvestments or prepayments pursuant to a Reinvestment Notice (or such Excess Cash Flow would have been so required if it were Net Proceeds), (x) the Borrower applies an amount equal to the amount of such Net Proceeds or Excess Cash Flow to such reinvestments or prepayments as if such Net Proceeds or Excess Cash Flow had been received by the Borrower rather than such Foreign Subsidiary, less the amount of additional taxes that would have been payable or reserved against if such Net Proceeds or Excess Cash Flow had been repatriated (or, if less, the Net Proceeds or Excess Cash Flow that would be calculated if received by such Foreign Subsidiary) or (y) such Net Proceeds or Excess Cash Flow are applied to the repayment of Indebtedness of a Foreign Subsidiary).

(h) In the event the Spin-Off has not been consummated on or prior to the first calendar day following the Funding Date, (i) the Borrower shall prepay in full the aggregate principal amount of Loans outstanding within one Business Day thereafter without premium or penalty, together with accrued but unpaid interest to, but not including, the date of such repayment, (ii) the Commitments shall automatically terminate and (iii) any Letters of Credit shall be cash collateralized in accordance with Section 2.05(i).

SECTION 2.12. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender for the period from and including the Funding Date to but excluding the date on which the Revolving Commitments terminate (or are otherwise reduced to zero), a commitment fee which shall accrue at the Applicable Rate on the average daily unused amount of the aggregate Revolving Commitment of such Revolving Lender. Such accrued commitment fees shall be payable in arrears on the last Business Day of March, June, September and December of each year and on the date on which all the Revolving Commitments terminate, commencing on the first such date to occur after the Funding Date. For purposes of computing commitment fees, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose).

(b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate then used to determine the interest rate applicable to Eurocurrency Revolving Loans on the average daily amount of such Lender’s aggregate LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Funding Date to but excluding the later of the date on which all of such Lender’s Revolving Commitments terminate and the date on which such Lender ceases to have any LC Exposure and (ii) to each Issuing Bank a fronting fee, which shall accrue at a rate per annum equal to 0.125% on the average daily amount of the LC Exposure attributable to Letters of Credit issued by such Issuing Bank (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Funding Date to but excluding the later of the date of termination of all the Revolving Commitments and the date on which there ceases to be any such LC Exposure, as well as such Issuing Bank’s standard fees with

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respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Funding Date; provided that all such fees shall be payable on the date on which all the Revolving Commitments terminate and any such fees accruing after the date on which all the Revolving Commitments terminate shall be payable on demand. Any other fees payable to an Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand.

(c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

(d) The Borrower agrees to pay to the Administrative Agent, for the account of each Lender, an upfront fee equal to a percentage to be mutually agreed by the Borrower and the Administrative Agent. The upfront fees payable pursuant to this Section 2.12(d) shall be payable on the Funding Date and shall be subject to the occurrence of the Funding Date.

(e) If the Funding Date has not occurred prior to the date that is 60 days after the Effective Date (the “Ticking Fee Commencement Date”), then the Borrower agrees to pay to the Administrative Agent for the account of each Lender for the period from and including the Ticking Fee Commencement Date to but excluding the earlier of (i) the Funding Date and (ii) the date on which the Commitments terminate (or are otherwise reduced to zero) (such earlier date, the “Ticking Fee Payment Date”), a ticking fee which shall accrue at a rate per annum equal to 0.45% on the aggregate amount of the Commitments of such Lender. Such accrued ticking fees shall be payable in arrears on the Ticking Fee Payment Date.

(f) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the applicable Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Revolving Lenders entitled thereto. Fees paid hereunder shall not be refundable under any circumstances.

(g) All commitment fees, participation fees, fronting fees and ticking fees payable pursuant to this Section 2.12 shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.

(b) The Loans comprising (i) each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate and (ii) each EURIBOR Borrowing shall bear interest at the Adjusted EURIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any

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Loan, 2.00% per annum plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other overdue amount, 2.00% per annum plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this Section. Payment or acceptance of the increased rates of interest provided for in this paragraph (c) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of the Administrative Agent, any Issuing Bank or any Lender.

(d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of a Revolving Loan, upon termination of the Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of a Eurocurrency Loan or EURIBOR Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that (i) interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate and (ii) interest computed with respect to any Borrowing denominated in Pounds Sterling, in each case shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day; provided that, if a Loan, or a portion thereof, is repaid on the same day on which such Loan is made, one day’s interest shall accrue on the portion of such Loan so prepaid). The applicable Alternate Base Rate, Adjusted LIBO Rate or Adjusted EURIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing or EURIBOR Borrowing of any Class:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or Adjusted EURIBO Rate, as the case may be, for such Interest Period; or

(b) the Administrative Agent is advised by a Majority in Interest of the Lenders of such Class that the Adjusted LIBO Rate or Adjusted EURIBO Rate, as the case may be, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders of such Class by telephone, facsimile or other electronic imaging as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders of such Class that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing of such Class to, or continuation of any Borrowing of such Class as, a Eurocurrency Borrowing or EURIBOR Borrowing, as the case may be, shall be ineffective, (ii) any affected Eurodollar Borrowing or EURIBOR Borrowing that is requested to be continued shall (A) if denominated in dollars, be continued as an ABR Borrowing or (B) otherwise, be repaid on the last day of the then current Interest Period applicable thereto and (iii)

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any Borrowing Request for an affected Eurodollar Borrowing or EURIBOR Borrowing shall (A) in the case of a Borrowing denominated in dollars, be deemed a request for an ABR Borrowing or (B) in all other cases, be ineffective (and no Lender shall be obligated to make a Loan on account thereof).

SECTION 2.15. Increased Costs. (a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate or the Adjusted EURIBO Rate) or any Issuing Bank;

(ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or any Letter of Credit or participation therein; or

(iii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes and (B) Excluded Taxes) on its loans, loan principal, letters of credit, commitments or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender, such Issuing Bank or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit) or to reduce the amount of any sum received or receivable by such Lender, such Issuing Bank or such other Recipient hereunder (whether of principal, interest or otherwise), then, from time to time upon request of such Lender, such Issuing Bank or such other Recipient, the Borrower will pay to such Lender, such Issuing Bank or such other Recipient, as applicable, such additional amount or amounts as will compensate such Lender, such Issuing Bank or such other Recipient, as applicable, for such additional costs or expenses incurred or reduction suffered.

(b) If any Lender or any Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has had or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy or liquidity requirements), then, from time to time upon the request of such Lender or such Issuing Bank, the Borrower will pay to such Lender or such Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or an Issuing Bank setting forth in reasonable detail the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section and the calculation thereof shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or such Issuing Bank, as applicable, the amount shown as due on any such certificate within 30 days after receipt thereof.

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(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to this Section for any increased costs or expenses incurred or reductions suffered more than 180 days prior to the date that such Lender or such Issuing Bank, as applicable, notifies the Borrower of the Change in Law giving rise to such increased costs or expenses or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or expenses or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

(e) Notwithstanding any other provision of this Section, no Lender shall demand compensation for any increased cost or reduction pursuant to this Section in respect of any Change in Law described in the proviso to the definition of the term “Change in Law” unless such Lender has certified in writing to the Borrower that it is the general policy or practice of such Lender to demand such compensation in similar circumstances from similarly-situated borrowers.

(f) If any Lender reasonably determines that any Change in Law has made it unlawful, or that any Governmental Authority has asserted after the Effective Date that it is unlawful, for any Lender or its applicable lending office to make or maintain any Eurocurrency Loan or EURIBOR Loan, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligations of such Lender to make or continue Eurocurrency Loans or EURIBOR Loans or to convert ABR Borrowings into Eurocurrency Borrowings, as the case may be, shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist (and each Lender agrees to give such notify promptly after such circumstance no longer exist). Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), (i) with respect to Eurocurrency Loans of such Lender denominated in dollars, convert all such Eurocurrency Loans of such Lender to ABR Loans, on the last of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans and (ii) with respect to Eurocurrency Loans of such Lender denominated in a Permitted Foreign Currency and EURIBOR Loans of such Lender, prepay all such Eurocurrency Loans and/or EURIBOR Loans of such Lender, on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, the Borrower shall also pay to the applicable Lender accrued interest on the amount of the applicable Loans so prepaid or converted.

SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan or EURIBOR Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan or EURIBOR Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurocurrency Loan or EURIBOR Loan on the date specified in any notice delivered pursuant hereto (whether or not such notice may be revoked in accordance with the terms hereof) or (d) the assignment of any Eurocurrency Loan or EURIBOR Loan other than on the last day of the Interest Period applicable

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thereto as a result of a request by the Borrower pursuant to Section 2.19(b) or 9.02(c), then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan or EURIBOR Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate or Adjusted EURIBO Rate, as the case may be, that would have been applicable to such Loan (but not including the Applicable Rate applicable thereto), for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the London interbank market. A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to receive pursuant to this Section, and showing the calculation thereof, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 30 days after receipt thereof.

SECTION 2.17. Taxes. (a) Payment Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party under this Agreement or any other Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding of such Indemnified Tax has been made (including such deductions and withholdings of Indemnified Taxes applicable to additional sums payable under this Section 2.17) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(b) Payment of Other Taxes by the Loan Parties. The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for, any Other Taxes.

(c) Evidence of Payment. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 2.17, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(d) Indemnification by the Loan Parties. The Loan Parties shall jointly and severally indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

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(e) Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.04(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case that are payable or paid by the Administrative Agent in connection with this Agreement or any other Loan Document and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document or otherwise payable by the Administrative Agent to such Lender from any other source against any amount due to the Administrative Agent under this paragraph.

(f) Status of Lenders. (i) Any Lender that is entitled to an exemption from, or reduction of, withholding Tax with respect to payments made under this Agreement or any other Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.17(f)(ii)(A), 2.17(f)(ii)(B) or 2.17(f)(ii)(D)) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing:

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. Federal backup withholding Tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

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(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States of America is a party (x) with respect to payments of interest under this Agreement or any other Loan Document, executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E (or any applicable successor thereto) establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under this Agreement or any other Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E (or any applicable successor thereto) establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2) executed originals of IRS Form W-8ECI;

(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit I-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10-percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E (or any applicable successor thereto); or

(4) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E (or any applicable successor thereto), a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-2 or Exhibit I-3, IRS Form W-9 and/or another certification document from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-4 on behalf of each such direct or indirect partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from, or a reduction in, U.S. Federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

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(D) if a payment made to a Lender under this Agreement or any other Loan Document would be subject to U.S. Federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the Effective Date.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(g) Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.17 (including by the payment of additional amounts paid pursuant to this Section 2.17), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.17 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph, in no event will any indemnified party be required to pay any amount to any indemnifying party pursuant to this paragraph the payment of which would place such indemnified party in a less favorable net after-Tax position than such indemnified party would have been in if Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(h) Each party’s obligations under this Section 2.17 shall survive the resignation or replacement of the Administrative Agent or any assignment or designation of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

(i) For purposes of this Section 2.17, the term “Lender” includes any Issuing Bank and the term “applicable law” includes FATCA.

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SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Setoffs. (a) The Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 1:00 p.m., New York City time), on the date when due, in immediately available funds, without any defense, setoff, recoupment or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to such account or accounts as may be specified by the Administrative Agent, except that payments required to be made directly to any Issuing Bank or the Swingline Lender shall be so made, payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payment received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under this Agreement or any other Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder of principal or interest in respect of any Loan or LC Disbursement shall, except as otherwise expressly provided herein, be made in the currency of such Loan or LC Disbursement; all other payments hereunder and under each other Loan Document shall be made in dollars.

(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

(c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans, Term Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall notify the Administrative Agent of such fact and shall purchase (for cash at face value) participations in the Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the aggregate amount of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any Eligible Assignee, to the Borrower or any Subsidiary or other Affiliate thereof in a transaction that complies with the terms of Section 9.04(e). The Borrower consents to the foregoing and agrees,

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to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Banks hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption and in its sole discretion, distribute to the Lenders or the Issuing Banks, as applicable, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Banks, as applicable, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(a) or (b), 2.17(e), 2.18(d) or 9.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), (i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations in respect of such payment until all such unsatisfied obligations have been discharged and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Lender under any such Section, in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative Agent in its discretion.

(f) In the event that any financial statements delivered under Section 5.01(a) or 5.01(b), or any compliance certificate delivered under Section 5.01(c), shall prove to have been materially inaccurate, and such inaccuracy shall have resulted in the payment of any interest or fees at rates lower than those that were in fact applicable for any period (based on the actual Total Leverage Ratio), then the Borrower shall pay to the Administrative Agent, for distribution to the Lenders and the Issuing Banks (or former Lenders and Issuing Banks) as their interests may appear, the accrued interest or fees that should have been paid but were not paid as a result of such misstatement.

SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15, or if any Loan Party is required to pay any Indemnified Taxes or additional amounts to any Lender or to any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall (at the request of the Borrower) use commercially reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign and delegate its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Lender, such designation or assignment and delegation (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as applicable, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not be inconsistent with its internal policies or otherwise be disadvantageous to such Lender in any material respect. The Borrower hereby agrees to pay all reasonable and documented costs and expenses incurred by any Lender in connection with any such designation or assignment and delegation.

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(b) If (i) any Lender has requested compensation under Section 2.15, (ii) the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, (iii) any Lender has become a Defaulting Lender or (iv) any Lender has become a Declining Lender under Section 2.22, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights (other than its existing rights to payments pursuant to Section 2.15 or 2.17) and obligations under this Agreement and the other Loan Documents (or, in the case of any such assignment and delegation resulting from a Lender having become a Declining Lender, all its interests, rights and obligations under this Agreement and the other Loan Documents as a Lender of the applicable Class with respect to which such Lender is a Declining Lender) to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment and delegation); provided that (A) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, each Issuing Bank and the Swingline Lender), which consent shall not unreasonably be withheld or delayed, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder (if applicable, in each case only to the extent such amounts relate to its interest as a Lender of a particular Class) from the assignee (in the case of such principal and accrued interest and fees) or the Borrower (in the case of all other amounts), (C) the Borrower or such assignee shall have paid to the Administrative Agent the processing and recordation fee specified in Section 9.04(b), (D) in the case of any such assignment and delegation resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a material reduction in such compensation or payments and (E) such assignment does not conflict with applicable law. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver or consent by such Lender or otherwise (including as a result of any action taken by such Lender under paragraph (a) above), the circumstances entitling the Borrower to require such assignment and delegation have ceased to apply.

SECTION 2.20. Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Revolving Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Revolving Lender is a Defaulting Lender:

(a) commitment fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.12(a);

(b) the Revolving Commitment and Revolving Exposure of such Defaulting Lender shall not be included in determining whether the Required Lenders or any other requisite Lenders have taken or may take any action hereunder or under any other Loan Document (including any consent to any amendment, waiver or other modification pursuant to Section 9.02); provided that any amendment, waiver or other modification requiring the consent of all Lenders or all Lenders affected thereby shall, except as otherwise provided in Section 9.02, require the consent of such Defaulting Lender in accordance with the terms hereof;

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(c) if any LC Exposure exists at the time such Revolving Lender becomes a Defaulting Lender, then:

(i) all or any part of the Swingline Exposure (other than (x) any portion thereof with respect to which such Defaulting Lender shall have funded its participation as contemplated by Section 2.04(c) and (y) the portion of the Swingline Exposure referred to in clause (b) of the definition thereof) and LC Exposure (other than any portion thereof attributable to unreimbursed LC Disbursements with respect to which such Defaulting Lender shall have funded its participation as contemplated by Sections 2.05(e) and 2.05(f)) of such Defaulting Lender shall be reallocated among the Non-Defaulting Revolving Lenders in accordance with their respective Applicable Percentages but only to the extent that the sum of all Non-Defaulting Revolving Lenders’ Revolving Exposures plus such Defaulting Lender’s Swingline Exposure and LC Exposure does not exceed the sum of all Non-Defaulting Revolving Lenders’ Revolving Commitments; provided that no reallocation under this clause (i) shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Revolving Lender as a result of such Non-Defaulting Revolving Lender’s increased exposure following such reallocation;

(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one Business Day following notice by the Administrative Agent (A) first, prepay the portion of such Defaulting Lender’s Swingline Exposure that has not been reallocated and (B) second, cash collateralize for the benefit of the Dollar Issuing Banks the portion of such Defaulting Lender’s Dollar LC Exposure that has not been reallocated in accordance with the procedures set forth in Section 2.05(i) for so long as such LC Exposure is outstanding;

(iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above, the Borrower shall not be required to pay participation fees to such Defaulting Lender pursuant to Section 2.12(b) with respect to such portion of such Defaulting Lender’s LC Exposure for so long as such Defaulting Lender’s LC Exposure is cash collateralized;

(iv) if any portion of the LC Exposure of such Defaulting Lender is reallocated pursuant to clause (i) above, then the fees payable to the Lenders pursuant to Sections 2.12(a) and 2.12(b) shall be adjusted to give effect to such reallocation; and

(v) if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor cash collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of any Issuing Bank or any other Lender hereunder, all participation fees payable under Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Banks (and allocated among them ratably based on the amount of such Defaulting Lender’s LC Exposure attributable to Letters of Credit issued by each Issuing Bank) until and to the extent that such LC Exposure is reallocated and/or cash collateralized; and

(d) so long as such Revolving Lender is a Defaulting Lender, the Swingline Lenders shall not be required to fund any Swingline Loan and no Issuing Bank shall be required to issue, amend, renew or extend any Letter of Credit, unless, in each case, it is satisfied that the related exposure and the Defaulting Lender’s then outstanding Swingline Exposure (other than the portion of such Swingline Exposure referred to in clause (b) of the definition of such term) or LC Exposure, as applicable, will be fully covered by the Revolving Commitments of the Non-Defaulting Revolving Lenders and/or cash collateral provided by the Borrower in accordance with Section 2.20(c), and participating interests in any such funded Swingline Loan or in any such issued, amended, renewed or extended Letter of Credit will be allocated among the Non-Defaulting Revolving Lenders in a manner consistent with Section 2.20(c)(i) (and such Defaulting Lender shall not participate therein).

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In the event that the Administrative Agent, Holdings, the Borrower, each Swingline Lender and each applicable Issuing Bank each agrees that a Defaulting Lender has adequately remedied all matters that caused the applicable Revolving Lender to be a Defaulting Lender, then the Swingline Exposure and LC Exposure, as applicable, of the Revolving Lenders shall be readjusted to reflect the inclusion of such Revolving Lender’s Revolving Commitment and on such date such Revolving Lender shall purchase at par such of the Revolving Loans of the other Revolving Lenders as the Administrative Agent shall determine may be necessary in order for such Revolving Lender to hold such Revolving Loans in accordance with its Applicable Percentage; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Revolving Lender was a Defaulting Lender; provided further that, except as otherwise expressly agreed by the affected parties, no change hereunder from a Defaulting Lender to a Non-Defaulting Revolving Lender will constitute a waiver or release of any claim of any party hereunder arising from such Revolving Lender’s having been a Defaulting Lender.

SECTION 2.21. Incremental Extensions of Credit. (a) At any time and from time to time, commencing on the Funding Date and ending on the Latest Maturity Date (or, in the case of any Revolving Commitment Increase (as defined below), on the Revolving Maturity Date), subject to the terms and conditions set forth herein, the Borrower may, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request (i) to add one or more additional tranches of term loans (the “Incremental Term Loans”), (ii) solely during the Revolving Availability Period, one or more increases in the aggregate amount of the Revolving Commitments (each such increase, a “Revolving Commitment Increase” and, together with the Incremental Term Loans and any Alternative Incremental Facility Debt, the “Incremental Extensions of Credit”) or (iii) to incur Alternative Incremental Facility Debt, in an aggregate principal amount (for all Incremental Extensions of Credit made on and after the Funding Date) of up to $40,000,000; provided that, at the time of each such request and upon the effectiveness of each Incremental Facility Amendment or the incurrence of such Alternative Incremental Facility Debt, (A) no Default or Event of Default has occurred and is continuing or shall result therefrom (provided that in the event the proceeds of any Incremental Extension of Credit are used to finance any investment permitted hereunder, such condition precedent set forth in this clause (A) may be waived or limited as agreed between the Borrower and the Lenders providing such Incremental Extension of Credit, without the consent of any other Lenders), (B) the representations and warranties of Holdings, the Borrower and each other Loan Party, as applicable, set forth in the Loan Documents would be true and correct in all material respects (or, in the case of representations and warranties qualified as to materiality, in all respects) on and as of the date of, and immediately after giving effect to, the incurrence of such Incremental Extension of Credit (provided that in the event the proceeds of any Incremental Extension of Credit are used to finance any investment permitted hereunder, such condition precedent set forth in this clause (B) may be waived or limited as agreed between the Borrower and the Lenders providing such Incremental Extension of Credit, without the consent of any other Lenders), (C) after giving effect to such Incremental Extension of Credit and the application of the proceeds therefrom (and assuming that the full amount of such Incremental Extension of Credit shall have been funded on such date), Holdings shall be in compliance on a Pro Forma Basis with the covenants set forth in Sections 6.12 and 6.13 recomputed as of the last day of the most recently ended fiscal quarter of the Borrower (provided that in the event the proceeds of any Incremental Extension of Credit are used to finance any investment permitted

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hereunder, such condition precedent set forth in this clause (C) shall be required to be satisfied as of the date on which the binding agreement for such investment is entered into rather than the date of effectiveness of the applicable Incremental Extension of Credit) and (D) the Borrower shall have delivered a certificate of a Financial Officer to the effect set forth in the clauses (A), (B) and (C) above, together with reasonably detailed calculations demonstrating compliance with clause (C) above (which calculations shall, if made as of the last day of any fiscal quarter of the Borrower for which the Borrower has not delivered to the Administrative Agent the financial statements and certificate of a Financial Officer required to be delivered by Section 5.01(a) or 5.01(b) and Section 5.01(c), respectively, be accompanied by a reasonably detailed calculation of Consolidated EBITDA for the relevant period). Each Class of Incremental Term Loans and each Revolving Commitment Increase shall be in an integral multiple of $1,000,000 and be in an aggregate principal amount that is not less than $10,000,000; provided that such amount may be less than $10,000,000 if such amount represents all the remaining availability under the aggregate principal amount of Incremental Extensions of Credit set forth above.

(b) The Incremental Term Loans (i) shall rank pari passu or junior in right of payment in respect of the Collateral and with the Obligations in respect of the Revolving Commitments and the Tranche A Term Loans, (ii) for purposes of prepayments, shall be treated substantially the same as (and in any event no more favorably than) the Tranche A Term Loans and (iii) other than amortization, pricing and maturity date, shall be on terms that are identical to the terms with respect to the Tranche A Term Loans and shall be made on conditions determined by the Borrower and the Lenders providing such Incremental Term Loans; provided that (A) if the Weighted Average Yield relating to any Incremental Term Loans exceeds the Weighted Average Yield relating to the Tranche A Term Loans (after giving effect to any amendments to the applicable margin on the Tranche A Term Loans prior to the time that such Incremental Term Loans are made) immediately prior to the effectiveness of the applicable Incremental Facility Amendment, then the Applicable Rate relating to the Tranche A Term Loans shall be adjusted so that the Weighted Average Yield relating to such Incremental Term Loans shall not exceed the Weighted Average Yield relating to the Tranche A Term Loans; provided that (x) the requirements of this clause (A) shall not apply to any Incremental Term Loan the maturity date of which is at least two years after the Tranche A Term Maturity Date and (y) if the Adjusted LIBO Rate or the Adjusted EURIBO Rate in respect of the Tranche A Term Loans or such Incremental Term Loans includes an interest rate “floor”, then such interest rate “floor”, to the extent greater than the Adjusted LIBO Rate or the Adjusted EURIBO Rate (in each case, assuming a three-month Interest Period and without giving effect to any interest rate “floor” set forth in the definition thereof) immediately prior to the effectiveness of the applicable Incremental Facility Amendment, shall be equated to interest margin (calculated by the Administrative Agent in accordance with its customary practice) for purposes of determining whether an increase to the Applicable Rate relating to the Tranche A Term Loans shall be required, (B) any Incremental Term Loan shall not have (1) a final maturity date earlier than the Tranche A Term Maturity Date or (2) a weighted average life to maturity that is shorter than the remaining weighted average life to maturity of the then-remaining Tranche A Term Loans and (C) one or more additional financial maintenance covenants may be added to this Agreement for the benefit of any Incremental Term Loans so long as such financial maintenance covenants are for the benefit of all other Lenders in respect of all Loans and Commitments outstanding at the time that the applicable Incremental Facility Amendment becomes effective.

(c) Each notice from the Borrower pursuant to this Section shall set forth the requested amount and proposed terms of the relevant Incremental Extension of Credit. Any additional bank, financial institution, existing Lender or other Person that elects to extend commitments in respect of any Incremental Term Loans or Revolving Commitment Increase shall

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be reasonably satisfactory to the Borrower and the Administrative Agent (and, in the case of any Revolving Commitment Increase, each Issuing Bank and each Swingline Lender) (any such bank, financial institution, existing Lender or other Person being called an “Additional Lender”) and, if not already a Lender, shall become a Lender under this Agreement pursuant to an amendment (an “Incremental Facility Amendment”) to this Agreement and, as appropriate, the other Loan Documents, executed by Holdings, the Borrower, such Additional Lender and the Administrative Agent. No Lender shall be obligated to provide any Incremental Extension of Credit unless it so agrees. Commitments in respect of any Incremental Term Loans or Revolving Commitment Increase shall become Commitments (or in the case of any Revolving Commitment Increase to be provided by an existing Revolving Lender, an increase in such Lender’s Revolving Commitment) under this Agreement upon the effectiveness of the applicable Incremental Facility Amendment. An Incremental Facility Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement or to any other Loan Document as may be necessary or appropriate, in the opinion of the Administrative Agent, to effect the provisions of this Section (including to provide for voting provisions applicable to the Additional Lenders comparable to the provisions of clause (B) of the second proviso of Section 9.02(b)).

(d) On the date of effectiveness of any Revolving Commitment Increase, (i) the aggregate principal amount of the Revolving Loans outstanding (the “Existing Revolving Borrowings”) immediately prior to the effectiveness of such Revolving Commitment Increase shall be deemed to be repaid, (ii) each Revolving Commitment Increase Lender that shall have had a Revolving Commitment prior to the effectiveness of such Revolving Commitment Increase shall pay to the Administrative Agent in same day funds an amount equal to the amount, if any, by which (A) (1) such Revolving Commitment Increase Lender’s Applicable Percentage (calculated after giving effect to the effectiveness of such Revolving Commitment Increase) multiplied by (2) the aggregate principal amount of the Resulting Revolving Borrowings (as hereinafter defined) exceeds (B) (1) such Revolving Commitment Increase Lender’s Applicable Percentage (calculated without giving effect to the effectiveness of such Revolving Commitment Increase) multiplied by (2) the aggregate principal amount of the Existing Revolving Borrowings, (iii) each Revolving Commitment Increase Lender that shall not have had a Revolving Commitment prior to the effectiveness of such Revolving Commitment Increase shall pay to Administrative Agent in same day funds an amount equal to (1) such Revolving Commitment Increase Lender’s Applicable Percentage (calculated after giving effect to the effectiveness of such Revolving Commitment Increase) multiplied by (2) the aggregate principal amount of the Resulting Revolving Borrowings, (iv) after the Administrative Agent receives the funds specified in clauses (ii) and (iii) above, the Administrative Agent shall pay to each Revolving Lender the portion of such funds that is equal to the amount, if any, by which (A) (1) such Revolving Lender’s Applicable Percentage (calculated without giving effect to the effectiveness of such Revolving Commitment Increase) multiplied by (2) the aggregate principal amount of the Existing Revolving Borrowings, exceeds (B) (1) such Revolving Lender’s Applicable Percentage (calculated after giving effect to the effectiveness of such Revolving Commitment Increase) multiplied by (2) the aggregate principal amount of the Resulting Revolving Borrowings, (v) after the effectiveness of such Revolving Commitment Increase, the Borrower shall be deemed to have made new Revolving Borrowings (the “Resulting Revolving Borrowings”) in an aggregate principal amount equal to the aggregate principal amount of the Existing Revolving Borrowings and of the Types and for the Interest Periods specified in a Borrowing Request delivered to the Administrative Agent in accordance with Section 2.03 (and the Borrower shall deliver such Borrowing Request), (vi) each Revolving Lender shall be deemed to hold its Applicable Percentage of each Resulting Revolving Borrowing (calculated after giving effect to the effectiveness of such Revolving Commitment Increase) and (vii) the Borrower shall pay each Revolving Lender any and all accrued but unpaid interest on its Loans comprising the Existing

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Revolving Borrowings. The deemed payments of the Existing Revolving Borrowings made pursuant to clause (i) above shall be subject to compensation by the Borrower pursuant to the provisions of Section 2.16 if the date of the effectiveness of such Revolving Commitment Increase occurs other than on the last day of the Interest Period relating thereto. Upon each Revolving Commitment Increase pursuant to this Section, each Revolving Lender immediately prior to such increase will automatically and without further act be deemed to have assigned to each Revolving Commitment Increase Lender, and each such Revolving Commitment Increase Lender will automatically and without further act be deemed to have assumed, a portion of such Revolving Lender’s participations hereunder in outstanding Letters of Credit and Swingline Loans such that, after giving effect to such Revolving Commitment Increase and each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding participations hereunder in Letters of Credit and participations hereunder in Swingline Loans, in each case held by each Revolving Lender (including each such Revolving Commitment Increase Lender) will equal such Revolving Lender’s Applicable Percentage. Each Revolving Commitment Increase shall be on the same terms as are applicable to the Revolving Loans; provided that (A) the Borrower may increase the Applicable Rate applicable to the Revolving Loans and the Revolving Commitments in connection with any Revolving Commitment Increase if, after the effectiveness of the applicable Incremental Facility Amendment, such increased Applicable Rate applies to all Revolving Loans and Revolving Commitments, (B) if the Weighted Average Yield relating to the Revolving Commitments (and the Revolving Loans made thereunder) in respect of any Revolving Commitment Increase exceeds the Weighted Average Yield relating to the Revolving Loans and Revolving Commitments (after giving effect to any amendments to the applicable margin on the Revolving Loans and the Revolving Commitments prior to the time that such Revolving Commitment Increase becomes effective) immediately prior to the effectiveness of the applicable Incremental Facility Amendment, then the Borrower shall pay to the Revolving Lenders existing immediately prior to the effectiveness of such Incremental Facility Amendment an additional amount so that the Weighted Average Yield relating to the Revolving Commitments (and the Revolving Loans to be made thereunder) in respect of such Revolving Commitment Increase shall not exceed the Weighted Average Yield relating to the Revolving Loans and the Revolving Commitments outstanding immediately prior to the effectiveness of such Incremental Facility Amendment and (C) one or more additional financial maintenance covenants may be added to this Agreement for the benefit of any Revolving Commitment Increase so long as such financial maintenance covenants are for the benefit of all other Lenders in respect of all Loans and Commitments outstanding at the time that the applicable Incremental Facility Amendment becomes effective.

SECTION 2.22. Extension of Maturity Date. (a) The Borrower may, by delivery of a Maturity Date Extension Request to the Administrative Agent (which shall promptly deliver a copy thereof to each of the Lenders) not less than 30 days prior to the then-existing Maturity Date for the applicable Class of Commitments and/or Loans hereunder to be extended (the “Existing Maturity Date”), request that the Lenders extend the Existing Maturity Date in accordance with this Section. Each Maturity Date Extension Request shall (i) specify the applicable Class of Commitments and/or Loans hereunder to be extended, (ii) specify the date to which the applicable Maturity Date is sought to be extended, (iii) specify the changes, if any, to the Applicable Rate to be applied in determining the interest payable on the Loans of, and fees payable hereunder to, Consenting Lenders (as defined below) in respect of that portion of their Commitments and/or Loans extended to such new Maturity Date and the time as of which such changes will become effective (which may be prior to the Existing Maturity Date) and (iv) specify any other amendments or modifications to this Agreement to be effected in connection with such Maturity Date Extension Request; provided that no such changes or modifications requiring approvals pursuant to the provisos to Section 9.02(b) shall become effective prior to the

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Existing Maturity Date unless such other approvals have been obtained. In the event a Maturity Date Extension Request shall have been delivered by the Borrower, each Lender shall have the right to agree to the extension of the Existing Maturity Date and other matters contemplated thereby on the terms and subject to the conditions set forth therein (each Lender agreeing to the Maturity Date Extension Request being referred to herein as a “Consenting Lender” and each Lender not agreeing thereto being referred to herein as a “Declining Lender”), which right may be exercised by written notice thereof, specifying the maximum amount of the Commitment and/or Loans of such Lender with respect to which such Lender agrees to the extension of the Maturity Date, delivered to the Borrower (with a copy to the Administrative Agent) not later than a day to be agreed upon by the Borrower and the Administrative Agent following the date on which the Maturity Date Extension Request shall have been delivered by the Borrower (it being understood and agreed that any Lender that shall have failed to exercise such right as set forth above shall be deemed to be a Declining Lender). If a Lender elects to extend only a portion of its then existing Commitment and/or Loans, it will be deemed for purposes hereof to be a Consenting Lender in respect of such extended portion and a Declining Lender in respect of the remaining portion of its Commitment and/or Loans, and the aggregate principal amount of each Type and currency of Loans of the applicable Class of such Lender shall be allocated ratably among the extended and non-extended portions of the Loans of such Lender based on the aggregate principal amount of such Loans so extended and not extended. If Consenting Lenders shall have agreed to such Maturity Date Extension Request in respect of Commitments and/or Loans held by them, then, subject to paragraph (d) of this Section, on the date specified in the Maturity Date Extension Request as the effective date thereof (the “Extension Effective Date”), (i) the Existing Maturity Date of the applicable Commitments and/or Loans shall, as to the Consenting Lenders, be extended to such date as shall be specified therein, (ii) the terms and conditions of the applicable Commitments and/or Loans of the Consenting Lenders (including interest and fees (including Letter of Credit fees) payable in respect thereof) shall be modified as set forth in the Maturity Date Extension Request and (iii) such other modifications and amendments hereto specified in the Maturity Date Extension Request shall (subject to any required approvals (including those of the Required Lenders) having been obtained) become effective.

(b) Notwithstanding the foregoing, the Borrower shall have the right, in accordance with the provisions of Sections 2.19(b) and 9.04, at any time prior to the Existing Maturity Date, to replace a Declining Lender (for the avoidance of doubt, only in respect of that portion of such Lender’s Commitment and/or Loans subject to a Maturity Date Extension Request that it has not agreed to extend) with a Lender or other financial institution that will agree to such Maturity Date Extension Request, and any such replacement Lender shall for all purposes constitute a Consenting Lender in respect of the Commitment and/or Loans assigned to and assumed by it on and after the effective time of such replacement.

(c) If a Maturity Date Extension Request has become effective hereunder:

(i) solely in respect of a Maturity Date Extension Request that has become effective in respect of the Revolving Commitments, not later than the fifth Business Day prior to the Existing Maturity Date, the Borrower shall make prepayments of Revolving Loans and shall provide cash collateral in respect of Letters of Credit in the manner set forth in Section 2.05(i), such that, after giving effect to such prepayments and such provision of cash collateral, the Aggregate Revolving Exposure as of such date will not exceed the aggregate Revolving Commitments of the Consenting Lenders extended pursuant to this Section (and the Borrower shall not be permitted thereafter to request any Revolving Loan or any issuance, amendment, renewal or extension of a Letter of Credit if, after giving effect thereto, the Aggregate Revolving Exposure would exceed the aggregate amount of the Revolving Commitments so extended);

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(ii) solely in respect of a Maturity Date Extension Request that has become effective in respect of the Revolving Commitments, on the Existing Maturity Date, the Revolving Commitment of each Declining Lender shall, to the extent not assumed, assigned or transferred as provided in paragraph (b) of this Section, terminate, and the Borrower shall repay all the Revolving Loans of each Declining Lender, to the extent such Loans shall not have been so purchased, assigned and transferred, in each case together with accrued and unpaid interest and all fees and other amounts owing to such Declining Lender hereunder, it being understood and agreed that, subject to satisfaction of the conditions set forth in Section 4.03, such repayments may be funded with the proceeds of new Revolving Borrowings made simultaneously with such repayments by the Consenting Lenders, which such Revolving Borrowings shall be made ratably by the Consenting Lenders in accordance with their extended Revolving Commitments; and

(iii) solely in respect of a Maturity Date Extension Request that has become effective in respect of a Class of Term Loans, on the Existing Maturity Date, the Borrower shall repay all the Loans of such Class of each Declining Lender, to the extent such Loans shall not have been so purchased, assigned and transferred, in each case together with accrued and unpaid interest and all fees and other amounts owing to such Declining Lender hereunder, it being understood and agreed that, subject to satisfaction of the conditions set forth in Section 4.03, such repayments may be funded with the proceeds of new Revolving Borrowings made simultaneously with such repayments by the Revolving Lenders.

(d) Notwithstanding the foregoing, no Maturity Date Extension Request shall become effective hereunder unless, on the Extension Effective Date, the conditions set forth in clauses (a) and (b) of Section 4.03 shall be satisfied (with all references in such Section to a Borrowing being deemed to be references to such Maturity Date Extension Request) and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a Financial Officer of the Borrower.

(e) Notwithstanding any provision of this Agreement to the contrary, it is hereby agreed that no extension of an Existing Maturity Date in accordance with the express terms of this Section, or any amendment or modification of the terms and conditions of the Commitments and the Loans of the Consenting Lenders effected pursuant thereto, shall be deemed to (i) violate the last sentence of Section 2.08(c) or Section 2.18(b) or 2.18(c) or any other provision of this Agreement requiring the ratable reduction of Commitments or the ratable sharing of payments or (ii) require the consent of all Lenders or all affected Lenders under Section 9.02(b).

(f) The Borrower, the Administrative Agent and the Consenting Lenders may enter into an amendment to this Agreement to effect such modifications as may be necessary to reflect the terms of any Maturity Date Extension Request that has become effective in accordance with the provisions of this Section.

SECTION 2.23. Refinancing Facilities. (a) The Borrower may, on one or more occasions, by written notice to the Administrative Agent, obtain Refinancing Term Loan Indebtedness or Refinancing Revolving Commitments. Each such notice shall specify the date (each, a “Refinancing Effective Date”) on which the Borrower proposes that such Refinancing Term Loan Indebtedness shall be made or on which such Refinancing Revolving Commitments shall become effective, which shall be a date not less than five Business Days after the date on which such notice is delivered to the Administrative Agent; provided that:

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(i) no Event of Default of the type set forth in Section 7.01(a), (b), (h) or (i) shall have occurred and be continuing;

(ii) substantially concurrently with the incurrence of any Refinancing Term Loan Indebtedness, the Borrower shall repay or prepay then outstanding Term Borrowings of the applicable Class (together with any accrued but unpaid interest thereon and any prepayment premium with respect thereto) in an aggregate principal amount equal to the Net Proceeds of such Refinancing Term Loan Indebtedness, and any such prepayment of Term Borrowings of such Class shall be applied to reduce the subsequent scheduled repayments of Term Borrowings of such Class to be made pursuant to Section 2.09(a) ratably;

(iii) substantially concurrently with the effectiveness of any Refinancing Revolving Commitments, the Borrower shall reduce then outstanding Revolving Commitments in an aggregate amount equal to the aggregate amount of such Refinancing Revolving Commitments and shall make any prepayments of the outstanding Revolving Loans required pursuant to Section 2.08 in connection with such reduction, and any such reduction of the Revolving Commitments shall be made ratably among the Lenders in accordance with their respective Revolving Commitments; and

(iv) such notice shall set forth, with respect to any Refinancing Term Loan Indebtedness established thereby in the form of Refinancing Term Loans or with respect to any Refinancing Revolving Commitments (and the Refinancing Revolving Loans of the same Class), to the extent applicable, the following terms thereof: (A) the designation of such Refinancing Term Loans or Refinancing Revolving Commitments and Refinancing Revolving Loans, as applicable, as a new “Class” for all purposes hereof, (B) the stated termination and maturity dates applicable to the Refinancing Term Loans or Refinancing Revolving Commitments and Refinancing Revolving Loans, as applicable, of such Class, (C) in the case of Refinancing Term Loans, amortization applicable thereto and the effect thereon of any prepayment of such Refinancing Term Loans, (D) the interest rate or rates applicable to the Refinancing Term Loans or Refinancing Revolving Loans, as applicable, of such Class, (E) the fees applicable to the Refinancing Term Loans or Refinancing Revolving Commitments and Refinancing Revolving Loans, as applicable, of such Class, (F) in the case of Refinancing Term Loans, any original issue discount applicable thereto, (G) the initial Interest Period or Interest Periods applicable to Refinancing Term Loans or Refinancing Revolving Loans, as applicable, of such Class, (H) any voluntary or mandatory commitment reduction or prepayment requirements applicable to Refinancing Term Loans or Refinancing Revolving Commitments and Refinancing Revolving Loans, as applicable, of such Class (which prepayment requirements, in the case of any Refinancing Term Loans, may provide that such Refinancing Term Loans may participate in any mandatory prepayment on a pro rata basis with any Class of existing Term Loans, but may not provide for prepayment requirements that are materially more favorable to the Lenders holding such Refinancing Term Loans than to the Lenders holding such Class of Term Loans) and any restrictions on the voluntary or mandatory reductions or prepayments of Refinancing Term Loans or Refinancing Revolving Commitments and Refinancing Revolving Loans, as applicable, of such Class and (I) any financial maintenance covenant with which Holdings and the Borrower shall be required to comply (provided that any such financial maintenance covenant for the benefit of any Class of Refinancing Lenders shall also be for the benefit of all other Lenders in respect of all Loans and Commitments outstanding at the time that the applicable Refinancing Facility Agreement becomes effective).

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(b) Any Lender or any other Eligible Assignee approached by the Borrower to provide all or a portion of the Refinancing Term Loan Indebtedness or the Refinancing Revolving Commitments may elect or decline, in its sole discretion, to provide any Refinancing Term Loan Indebtedness or Refinancing Revolving Commitments, as the case may be.

(c) Any Refinancing Term Loans and any Refinancing Revolving Commitments shall be established pursuant to a Refinancing Facility Agreement executed and delivered by Holdings, the Borrower, each Refinancing Term Lender providing such Refinancing Term Loans or each Refinancing Revolving Lender providing such Refinancing Revolving Commitments, as the case may be, and the Administrative Agent, which shall be consistent with the provisions set forth in clause (a) above (but which shall not require the consent of any other Lender). Each Refinancing Facility Agreement shall be binding on the Lenders, the Loan Parties and the other parties hereto and may effect amendments to the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect provisions of this Section 2.23, including any amendments necessary to treat such Refinancing Term Loans or Refinancing Revolving Commitments (and the Refinancing Revolving Loans of the same Class) as a new “Class” of commitments or loans hereunder. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Refinancing Facility Agreement.

ARTICLE III

Representations and Warranties

Each of Holdings and the Borrower (with respect to itself and, where applicable, its respective Subsidiaries) represents and warrants to the Administrative Agent, each of the Issuing Banks and each of the Lenders that:

SECTION 3.01. Organization; Powers. Each of Holdings, the Borrower and each Restricted Subsidiary (a) is duly organized, validly existing and, to the extent that such concept is applicable in the relevant jurisdiction, in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority, and the legal right, to carry on its business as now conducted and as proposed to be conducted, to execute, deliver and perform its obligations under this Agreement and each other Loan Document and each other agreement or instrument contemplated thereby to which it is a party and to effect the Transactions and (c) except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and, to the extent that such concept is applicable in the relevant jurisdiction, is in good standing in, every jurisdiction where such qualification is required.

SECTION 3.02. Authorization; Due Execution and Delivery; Enforceability. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party have been duly authorized by all necessary corporate or other organizational action and, if required, action by the holders of such Loan Party’s Equity Interests. This Agreement has been duly executed and delivered by each of Holdings and the Borrower and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of Holdings, the Borrower or such Loan Party, as applicable, enforceable against such Person in

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accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law and an implied covenant of good faith and fair dealing.

SECTION 3.03. Governmental Approvals; No Conflicts. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party (a) as of the date such Loan Document is executed, will not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except (i) filings necessary to perfect Liens created under the Loan Documents, (ii) consents, approvals, registrations or filings which have been obtained or made and are in full force and effect or (iii) where failure to obtain such consent or approval, or make such registration or filing, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (b) will not violate any Requirement of Law applicable to Holdings, the Borrower or any Restricted Subsidiary, (c) will not violate or result (alone or with notice or lapse of time or both) in a default under any indenture, agreement or other instrument binding upon Holdings, the Borrower or any Restricted Subsidiary or their respective assets, or give rise to a right thereunder to require any payment, repurchase or redemption to be made by Holdings, the Borrower or any Restricted Subsidiary or give rise to a right of, or result in, termination, cancelation or acceleration of any obligation thereunder, except with respect to any violation, default, payment, repurchase, redemption, termination, cancellation or acceleration that would not reasonably be expected to have a Material Adverse Effect and (d) will not result in the creation or imposition of any Lien on any asset now owned or hereafter acquired by Holdings, the Borrower or any Restricted Subsidiary, except Liens created under the Loan Documents.

SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Administrative Agent Holdings’ consolidated balance sheets and the related consolidated statements of operations, shareholders’ equity and cash flows (i) as of and for the fiscal years ended December 31, 2013, December 31, 2012 and December 31, 2011, audited and reported on by Deloitte & Touche LLP, independent public accountants (without a “going concern” or like qualification, exception or statement and without any qualification or exception as to the scope of such audit) and (ii) as of and for the fiscal quarters and portions of the fiscal year ended March 31, 2014, and June 30, 2014 (and comparable periods for the prior fiscal year) certified by a Financial Officer of Holdings. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of Holdings, the Borrower and the Subsidiaries on a consolidated basis as of such dates and for such periods in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of certain footnotes in the case of the statements referred to in clause (ii) above.

(b) The Borrower has heretofore furnished to the Administrative Agent (i) Holdings’ pro forma condensed combined balance sheet as of June 30, 2014, and (ii) Holdings’ related pro forma condensed combined statements of operations for the 12-month period ending on June 30, 2014, each prepared giving effect to the Transactions and the other transactions contemplated hereby as if the Transactions and such other transactions had occurred, in the case of such balance sheet, on such date and, in the case of such statements of operations, on the first day of the twelve-month period ending on such date. Such pro forma financial statements have been prepared by the Borrower in good faith based on assumptions believed by Holdings and the Borrower on the date hereof to be reasonable.

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(c) No event, change or condition has occurred that has had, or would reasonably be expected to have, a Material Adverse Effect since December 31, 2013.

SECTION 3.05. Properties. (a) Each of Holdings, the Borrower and each Restricted Subsidiary has good title to, or valid leasehold interests in, all its property necessary for the conduct of its business (including the Mortgaged Properties), except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or as proposed to be conducted or to utilize such properties for their intended purposes. All such property is free and clear of Liens, other than Liens expressly permitted by Section 6.02.

(b) Each of Holdings, the Borrower and each Restricted Subsidiary owns, or has secured the rights to use, all trademarks, trade names, copyrights, patents and other intellectual property material to its business as currently conducted or as currently proposed to be conducted, and the use thereof by Holdings, the Borrower and each Restricted Subsidiary does not infringe upon the rights of any other Person, except, in each case, for any such failures to own or have rights to use, or any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No claim or litigation regarding any trademarks, trade names, copyrights, patents or other intellectual property owned or used by Holdings, the Borrower or any Restricted Subsidiary is pending or, to the knowledge of Holdings, the Borrower or any Restricted Subsidiary, threatened against Holdings, the Borrower or any Restricted Subsidiary that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

(c) As of the Effective Date, none of Holdings, the Borrower or any Restricted Subsidiary has received notice of, or has knowledge of, any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation. Neither any Mortgaged Property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein.

SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits, investigations or proceedings at law or in equity or by or before any arbitrator or Governmental Authority pending against or, to the knowledge of Holdings, the Borrower or any Restricted Subsidiary and solely for purposes of the representations and warranties to be given on the Funding Date, threatened against or affecting Holdings, the Borrower or any Restricted Subsidiary or any business, property or rights (other than intellectual property rights, which are addressed in Section 3.05(b)) of any such Person (i) that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve any of the Loan Documents.

(b) Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, none of Holdings, the Borrower or any Restricted Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability, (iv) has any present or, to the knowledge of Holdings, the Borrower or any Restricted Subsidiary, past operations or properties subject to any federal, state or local investigation to determine whether any remedial action is needed to address any environmental pollution, Hazardous Material impacts or environmental clean-up, (v) has any contingent liability with respect to any Release, environmental pollution or Hazardous Material impacts on any real property now or previously owned, leased or operated by it or (vi) knows of any basis for any Environmental Liability.

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SECTION 3.07. Compliance with Laws. Each of Holdings, the Borrower and each Restricted Subsidiary is in compliance with all Requirements of Law, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.08. Anti-Terrorism Laws; Anti Corruption Laws. Holdings and the Borrower have implemented and maintain in effect policies and procedures designed to ensure compliance by Holdings, the Borrower, the Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Holdings, the Borrower, the Subsidiaries and their respective officers and employees, and, to the knowledge of Holdings and the Borrower, their respective directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) Holdings, the Borrower, any Subsidiary or, to the knowledge of Holdings, the Borrower or such Subsidiary, any of their respective directors, officers or employees or (b) to the knowledge of Holdings or the Borrower, any agent of Holdings, the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. The Transactions will not violate Anti-Corruption Laws or applicable Sanctions.

SECTION 3.09. Investment Company Status. None of Holdings, the Borrower or any Restricted Subsidiary is an “investment company” as defined in, or subject to regulation under, the Investment Company Act.

SECTION 3.10. Federal Reserve Regulations. None of Holdings, the Borrower or any Restricted Subsidiary is engaged or will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors) or extending credit for the purpose of purchasing or carrying margin stock. No part of the proceeds of the Loans will be used, directly or indirectly, for any purpose that entails a violation (including on the part of any Lender) of any of the regulations of the Board of Governors, including Regulations U and X.

SECTION 3.11. Taxes. Except to the extent that failure to do so would not reasonably be expected to result in a Material Adverse Effect, each of Holdings, the Borrower and each Restricted Subsidiary (a) has timely filed or caused to be filed all Tax returns and reports required to have been filed by it and (b) has paid or caused to be paid all Taxes required to have been paid by it, except where the validity or amount thereof is being contested in good faith by appropriate proceedings and where Holdings, the Borrower or such Restricted Subsidiary, as applicable, has set aside on its books adequate reserves therefor in conformity with GAAP.

SECTION 3.12. ERISA. Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, (a) no ERISA Event has occurred or is reasonably expected to occur and (b) the present value of all accumulated benefits obligations under each Plan (based on the assumptions used for purposes of Accounting Standards Codification Topic 715) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan.

SECTION 3.13. Disclosure. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other written information furnished by or on behalf of Holdings, the Borrower or any Restricted Subsidiary to the Arrangers, the

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Administrative Agent, any Issuing Bank or any Lender on or before the Funding Date in connection with the negotiation of this Agreement or any other Loan Document, included herein or therein or furnished hereunder or thereunder (as modified or supplemented by other information so furnished and taken as a whole) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected financial information, each of Holdings and the Borrower represents only that such information was prepared in good faith based upon assumptions believed by it to be reasonable at the time so furnished and, if such projected financial information was furnished prior to the Funding Date, as of the Funding Date (it being understood and agreed that any such projected financial information may vary from actual results and that such variations may be material).

SECTION 3.14. Subsidiaries. As of the Spin-Off Date, Holdings does not have any subsidiaries other than the Borrower and the Subsidiaries. As of the Spin-Off Date, Schedule 3.14 sets forth the name of, and the ownership interest of Holdings, the Borrower and each Subsidiary in, each Subsidiary and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Spin-Off Date. As of the Spin-Off Date, the Equity Interests in the Borrower and each Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable, and such Equity Interests are owned by Holdings or the Borrower, directly or indirectly, free and clear of all Liens (other than Liens created under the Loan Documents and any Liens permitted by Section 6.02). Except as set forth in Schedule 3.14, as of the Spin-Off Date, there is no existing option, warrant, call, right, commitment or other agreement to which Holdings, the Borrower or any Subsidiary is a party requiring, and there are no Equity Interests in any Subsidiary outstanding that upon exercise, conversion or exchange would require, the issuance by the Borrower or any Subsidiary of any additional Equity Interests or other securities exercisable for, convertible into, exchangeable for or evidencing the right to subscribed for or purchase any Equity Interests in the Borrower or any Subsidiary.

SECTION 3.15. Labor Matters. As of the Funding Date, except as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (i) there are no strikes, lockouts or slowdowns or any other material labor disputes against Holdings, the Borrower or any Restricted Subsidiary pending or, to the knowledge of Holdings, the Borrower or any Restricted Subsidiary, threatened and (ii) there are no unfair labor practice complaints pending against Holdings, the Borrower or any Restricted Subsidiary or, to the knowledge of Holdings, the Borrower or any Subsidiary, threatened against any of them before the National Labor Relations Board or other Governmental Authority.

SECTION 3.16. Solvency. As of the Spin-Off Date, immediately after the consummation of the Transactions to occur on the Spin-Off Date, and giving effect to the rights of indemnification, subrogation and contribution under the Collateral Agreement, (a) the fair value of the assets of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the property of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, will be greater than the amount that will be required to pay the probable liability of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured and (d) Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, will not have unreasonably small capital with which to conduct the business in which they are engaged as such

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business is now conducted and is proposed to be conducted following the Spin-Off Date. For purposes of this Section, the amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

SECTION 3.17. Collateral Matters. (a) The Collateral Agreement, upon execution and delivery thereof by the parties thereto, will create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined therein) and (i) when such Collateral constituting certificated securities (as defined in the Uniform Commercial Code) is delivered to the Administrative Agent, together with instruments of transfer duly endorsed in blank, the security interest created under the Collateral Agreement will constitute a fully perfected security interest in all right, title and interest of the pledgors thereunder in such Collateral, prior and superior in right to any other Person, and (ii) when financing statements in appropriate form are filed in the applicable filing offices, the security interest created under the Collateral Agreement will constitute a fully perfected security interest in all right, title and interest of the Loan Parties in the remaining Collateral (as defined therein) (subject to subsections (b) and (c) of this Section 3.17) to the extent perfection can be obtained by filing Uniform Commercial Code financing statements, prior and superior to the rights of any other Person, except for rights secured by Liens permitted under Section 6.02.

(b) Each Mortgage, upon execution and delivery thereof by the parties thereto, will create in favor of the Administrative Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in all the applicable mortgagor’s right, title and interest in and to the Mortgaged Properties subject thereto and the proceeds thereof, and when the Mortgages have been filed in the jurisdictions specified therein, the Mortgages will constitute a fully perfected security interest in all right, title and interest of the mortgagors in the Mortgaged Properties and the proceeds thereof, prior and superior in right to any other Person, but subject to Liens permitted under Section 6.02.

(c) Upon the recordation of the Collateral Agreement (or a short-form security agreement in form and substance reasonably satisfactory to the Borrower and the Administrative Agent) with the United States Patent and Trademark Office or the United States Copyright Office, as applicable, and the filing of the financing statements referred to in paragraph (a) of this Section, the security interest created under the Collateral Agreement will constitute a fully perfected security interest in all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Collateral Agreement) in which a security interest may be perfected by filing in the United States of America, in each case prior and superior in right to any other Person, but subject to Liens permitted under Section 6.02 (it being understood and agreed that subsequent recordings in the United States Patent and Trademark Office or the United States Copyright Office may be necessary to perfect a security interest in such Intellectual Property acquired by the Loan Parties after the Funding Date).

SECTION 3.18. Designation as Senior Debt. All Obligations shall be designated as “Senior Indebtedness” and “Designated Senior Indebtedness” or a similar term or designation for purposes of and as defined in, any documentation with respect to any subordinated Indebtedness.

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ARTICLE IV

Conditions

SECTION 4.01. Effective Date. This Agreement and the Commitments hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):

(a) The Administrative Agent shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence reasonably satisfactory to the Administrative Agent (which may include facsimile transmission or other electronic imaging of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.

(b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders) of Simpson Thacher & Bartlett LLP, counsel for Holdings, the Borrower and the Restricted Subsidiaries, and Barnes & Thornburg LLP, Indiana counsel for Holdings, the Borrower and the Restricted Subsidiaries, (i) dated as of the Effective Date and (ii) covering such matters relating to Holdings and the Borrower or this Agreement as the Administrative Agent shall reasonably request. Each of Holdings and the Borrower hereby requests such counsel to deliver such opinion.

(c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of Holdings and the Borrower, the authorization of the Transactions and any other legal matters relating to Holdings and the Borrower or this Agreement, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel.

(d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Financial Officer or the President or a Vice President of the Borrower, confirming that, after giving effect to this Agreement, no Default or Event of Default shall have occurred and be continuing.

(e) The Administrative Agent shall have received, to the extent invoiced at least two Business Days prior to the Effective Date, reimbursement or payment of all reasonable out-of-pocket expenses (including fees, charges and disbursements of counsel) required to be reimbursed or paid by Holdings or the Borrower on the Effective Date under any agreement entered into by any of the Arrangers, the Administrative Agent and the Lenders, on the one hand, and Holdings or the Borrower, on the other hand.

(f) The Administrative Agent shall have received the financial statements, opinions and certificates referred to in (i) Section 3.04(a) and (ii) Section 3.04(b).

(g) The Administrative Agent shall have received a detailed business plan of Holdings, the Borrower and its Restricted Subsidiaries for the fiscal years 2014 through 2018 (including but not limited to quarterly projections for each of the fiscal years of Holdings ending December 31, 2014, and December 31, 2015).

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(h) The Administrative Agent shall have received, at least five Business Days prior to the Effective Date, all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the USA PATRIOT Act, that has been requested at least ten Business Days prior to the Effective Date.

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.

SECTION 4.02. Funding Date. The obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):

(a) The Administrative Agent shall have received from each party thereto either (i) a counterpart of each Loan Document (excluding the Mortgages, which shall be delivered in accordance with Section 5.13) signed on behalf of such party or (ii) written evidence reasonably satisfactory to the Administrative Agent (which may include facsimile transmission or other electronic imaging of a signed signature page of each Loan Document) that such party has signed a counterpart of each Loan Document (excluding the Mortgages, which shall be delivered in accordance with Section 5.13).

(b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders) of Simpson Thacher & Bartlett LLP, counsel for Holdings, the Borrower and the Restricted Subsidiaries, and Barnes & Thornburg LLP, Indiana counsel for Holdings, the Borrower and the Restricted Subsidiaries, (i) dated as of the Funding Date and (ii) covering such matters relating to the Loan Parties or the Loan Documents as the Administrative Agent shall reasonably request. Each of Holdings and the Borrower hereby requests such counsel to deliver such opinion.

(c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties or the Loan Documents, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel.

(d) The Administrative Agent shall have received a certificate, dated the Funding Date and signed by a Financial Officer or the President or a Vice President of the Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.03 (for purposes of the conditions set forth in paragraphs (a) and (b) of Section 4.03, after giving effect to the consummation of the Spin-Off).

(e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Funding Date, including, to the extent invoiced at least two Business Days prior to the Funding Date, reimbursement or payment of all reasonable out-of-pocket expenses (including fees, charges and disbursements of counsel) incurred between the Effective Date and the Funding Date required to be reimbursed or paid by any Loan Party hereunder, under any other Loan Document or under any other agreement entered into by any of the Arrangers, the Administrative Agent and the Lenders, on the one hand, and any of the Loan Parties, on the other hand; provided that such amounts may be offset against the proceeds of the Tranche A Term Loans.

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(f) The Collateral and Guarantee Requirement shall have been satisfied to the extent applicable and the Administrative Agent, on behalf of the Secured Parties, shall have a security interest in the Collateral of the type and priority described in each Security Document, except as otherwise set forth in the Collateral and Guarantee Requirement or Section 5.13. The Administrative Agent shall have received a completed Perfection Certificate dated the Funding Date and signed by a Financial Officer or legal officer of each of Holdings and the Borrower, together with all attachments contemplated thereby, including (i) the results of a bring-down search of the Uniform Commercial Code (or equivalent) filings and Federal and State tax filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate, in each case that are reasonably requested by the Administrative Agent, (ii) copies of the financing statements (or similar documents) disclosed by such search and (iii) evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.02 or have been or will contemporaneously with the initial funding of the Loans on the Funding Date be released or terminated.

(g) The Administrative Agent shall have received evidence that the flood insurance required by Section 5.07 is in effect.

(h) The Lenders shall have received a certificate from a Financial Officer of Holdings, substantially in the form of Exhibit J, certifying as to the solvency of Holdings and its Restricted Subsidiaries as of the Spin-Off Date on a consolidated basis after giving effect to the Transactions and the other transactions contemplated hereby.

(i) The Transactions shall have been consummated, or shall be consummated substantially concurrently with the initial Borrowing, in accordance with applicable law in all material respects and, in all material respects, consistent with the information set forth in the Form 10 (it being understood that the Spin-Off shall be deemed to have been consummated substantially concurrently with the initial Borrowing to the extent that the Spin-Off occurs promptly after 12:00 a.m., New York City time, on the first calendar day following the date on which the initial Borrowing occurs).

(j) The Lenders shall have received a copy of the most recently available version of each material Spin-Off Document and each other Spin-Off Document requested by the Administrative Agent, each certified by a Financial Officer of Holdings as being complete and correct. The terms of the Distribution Agreement shall not contain any modifications from the information set forth in the Form 10, as filed with and declared effective by the SEC and as the same may be amended, supplemented or modified on or prior to the date that is three Business Days prior to the Effective Date, that are material and adverse to the rights or interests of the Lenders without the prior written approval of the Administrative Agent (it being understood that the inclusion of information in the Distribution Agreement for which there is a placeholder in the Form 10, such as the distribution ratio and the distribution and record, dates, shall not be deemed to be material and adverse to the rights or interests of the Lenders), and no term or condition of the Distribution Agreement or any related agreement shall have been waived, amended or otherwise modified in a manner material and adverse to the rights or interests of the Lenders without the prior written approval of the Administrative Agent.

(k) All conditions to the Spin-Off set forth in the Form 10 and in the Distribution Agreement (other than the funding of the Loans) shall have been satisfied or shall be satisfied substantially concurrently with the initial Borrowing (or shall have been waived, amended or otherwise modified in a manner not material and adverse to the rights or interests of the Lenders

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without the prior written approval of the Administrative Agent), it being understood that such conditions shall be deemed to have been satisfied substantially concurrently with the initial Borrowing to the extent that such conditions are satisfied promptly after 12:00 a.m., New York City time, on the first calendar day following the date on which the initial Borrowing occurs. There shall be no material payments or distributions by Holdings or any of its subsidiaries to Exelis or any of its subsidiaries (other than Holdings and its subsidiaries) in connection with the Spin-Off, other than the payment of the Funding Date Distribution and, if applicable, the Working Capital Adjustment.

(l) The Lenders that have executed a non-reliance letter in form and substance satisfactory to the applicable solvency opinion provider shall have received a copy of the solvency opinion delivered to the Board of Directors of Exelis (or, if applicable, of Holdings or the Borrower) in connection with the Spin-Off (provided that the Administrative Agent and the Lenders shall not be required to be addressees or beneficiaries of such opinion).

(m) Immediately after giving effect to the Transactions and the other transactions contemplated hereby, none of Holdings, the Borrower or any Restricted Subsidiary shall have outstanding any Indebtedness, other than (i) Indebtedness incurred under the Loan Documents and (ii) other Indebtedness permitted under Section 6.01.

(n) The Borrower shall have delivered to the Administrative Agent the notice required by Section 2.03.

(o) On the Funding Date, immediately after giving effect to the Transactions (other than the Spin-Off), Holdings, the Borrower and the Subsidiaries (determined after giving pro forma effect to the Spin-Off) will have cash on hand of not less than $25,000,000.

(p) The Borrower shall have received written notice from the Defense Contract Management Agency, either through the Divisional Administrative Contracting Officer (DACO) or her delegate, that its accounting system is approved (i.e., is an “acceptable accounting system” as defined in the Department of Defense Federal Acquisition Regulation Supplement (“DFARS”) § 252.242-7006) and that the withholds applied on April 30, 2014, under DFARS § 252.242-7005 have been discontinued.

(q) No action or event shall have occurred during the period from and including the Effective Date to and including the Funding Date which would have constituted a non-compliance by Holdings or the Borrower with each of the covenants set forth in Articles V (other than Sections 5.01, 5.03, the second sentence of 5.07, 5.10, 5.11, 5.12, 5.13 and 5.15) and VI (other than Sections 6.12 and 6.13 and provided that, solely for purposes of this clause (q), transactions with Exelis or any of its subsidiaries under or in connection with the Transactions or conducted consistent with prior practice shall not be deemed to constitute non-compliance by Holdings or the Borrower with the covenant set forth in Section 6.09) of this Agreement as if such covenants had been effective from and including the Effective Date (it being understood, for the avoidance of doubt, that the covenants in Articles V and VI of this Agreement shall not be effective prior to the Funding Date); provided that if any such action or event shall have occurred with respect to any such covenant, the condition precedent in this paragraph (q) shall nonetheless be satisfied if such action or event has been cured with respect to such covenant if, as of the Funding Date, Holdings and the Borrower are in compliance with such covenant.

(r) The Borrower shall have delivered an executed promissory note to each Lender that has requested a promissory note pursuant to Section 2.09(c) prior to the Funding Date.

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The Administrative Agent shall notify the Borrower and the Lenders of the Funding Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 5:00 p.m., New York City time, on the date that is 150 days after the Effective Date.

SECTION 4.03. Each Credit Event. The obligations of the Lenders to make Loans on the occasion of any Borrowing, and of the Issuing Banks to issue, amend, renew or extend any Letter of Credit, is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the following conditions:

(a) The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects (or, in the case of representations and warranties qualified as to materiality, in all respects) on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except in the case of any such representation and warranty that expressly relates to a prior date, in which case such representation and warranty shall be true and correct in all material respects (or in all respects, as applicable) as of such earlier date.

(b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall have occurred and be continuing.

(c) The Borrower shall have delivered to the Administrative Agent the notice required by Section 2.03.

Each Borrowing (provided that a conversion or a continuation of a Borrowing shall not constitute a “Borrowing” for purposes of this Section 4.03) and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by Holdings and the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section 4.03.

ARTICLE V

Affirmative Covenants

From and including the Funding Date and until the Commitments shall have expired or been terminated and the principal of and interest on each Loan and all fees, expenses and other amounts (other than contingent amounts not yet due) payable under this Agreement or any other Loan Document shall have been paid in full and all Letters of Credit (other than those collateralized or back-stopped on terms reasonably satisfactory to the applicable Issuing Bank) shall have expired or been terminated and all LC Disbursements shall have been reimbursed, each of Holdings and the Borrower covenants and agrees with the Lenders that:

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SECTION 5.01. Financial Statements and Other Information. In the case of Holdings, Holdings will furnish to the Administrative Agent, which shall furnish to each Lender, the following:

(a) within 90 days after the end of each fiscal year of Holdings (or such later date as Form 10-K of Holdings is required to be filed with the SEC taking into account any extension granted by the SEC, provided that Holdings gives the Administrative Agent notice of any such extension), its audited consolidated balance sheet and audited consolidated statements of operations, shareholders’ equity and cash flows as of the end of and for such fiscal year, and related notes thereto, setting forth in each case in comparative form the figures for the previous fiscal year, prepared in accordance with generally accepted auditing standards and reported on by Deloitte & Touche LLP or other independent public accountants of recognized national standing (without a “going concern” or like qualification, exception or statement and without any qualification or exception as to the scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition, results of operations and cash flow of Holdings and its subsidiaries on a consolidated basis as of the end of and for such fiscal year in accordance with GAAP consistently applied and accompanied by a narrative report describing the financial position, results of operations and cash flow of Holdings and its consolidated subsidiaries, which requirement to deliver a narrative report shall be satisfied by the filing by Holdings with the SEC of the requisite Form 10-K for such fiscal year;

(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of Holdings (or such later date as Form 10-Q of Holdings is required to be filed with the SEC taking into account any extension granted by the SEC, provided that Holdings gives the Administrative Agent notice of any such extension), beginning with the first full fiscal quarter of Holdings after the Spin-Off Date, its unaudited consolidated balance sheet and unaudited consolidated statements of operations and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a Financial Officer of Holdings as presenting fairly in all material respects the financial condition, results of operations and cash flows of Holdings and its Subsidiaries on a consolidated basis as of the end of and for such fiscal quarter and such portion of the fiscal year in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes, and accompanied by a narrative report describing the financial position, results of operations and cash flow of Holdings and its consolidated Subsidiaries, which requirement to deliver a narrative report shall be satisfied by the filing by Holdings with the SEC of the requisite Form 10-Q for such fiscal year;

(c) concurrently with each delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of Holdings (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations (A) demonstrating compliance with the covenants contained in Sections 6.12 and 6.13 and (B) in the case of financial statements delivered under clause (a) above, beginning with the financial statements for the fiscal year of Holdings ending December 31, 2015, of Excess Cash Flow, (iii) stating whether any change in GAAP or in the application thereof has occurred since the later of the date of Holdings’

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audited financial statements referred to in Section 3.04 and the date of the prior certificate delivered pursuant to this clause (c) indicating such a change and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate and (iv) at any time when there is any Unrestricted Subsidiary, including as an attachment with respect to each such financial statement, an Unrestricted Subsidiary Reconciliation Statement (except to the extent that the information required thereby is separately provided with the public filing of such financial statement);

(d) concurrently with any delivery of financial statements under clause (a) above, a detailed consolidated budget for the then current fiscal year (including a projected consolidated balance sheet and consolidated statements of projected operations and cash flows as of the end of and for such fiscal year (and as of the end of and for each fiscal quarter in such fiscal year) and setting forth the assumptions used for purposes of preparing such budget) and, promptly when available, any significant revisions of such budget;

(e) promptly after the request by any Lender, all documentation and other information that such Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act;

(f) promptly after the same becomes publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Holdings, the Borrower or any Restricted Subsidiary with the SEC or with any national securities exchange, or distributed by Holdings to the holders of its Equity Interests generally, as applicable; and

(g) promptly following any request therefor, but subject to the limitations set forth in the proviso to the last sentence of Section 5.08 and Section 9.12, such other information regarding the operations, business affairs, assets, liabilities (including contingent liabilities) and financial condition of Holdings, the Borrower or any Restricted Subsidiary, or compliance with the terms of this Agreement or any other Loan Document, as the Administrative Agent, any Issuing Bank or any Lender may reasonably request.

Information required to be furnished pursuant to clause (a), (b) or (f) of this Section shall be deemed to have been furnished if such information, or one or more annual or quarterly reports containing such information, shall have been posted by the Administrative Agent on the Platform or shall be available on the website of the SEC at http://www.sec.gov. Information required to be furnished pursuant to this Section may also be furnished by electronic communications pursuant to procedures approved by the Administrative Agent.

SECTION 5.02. Notices of Material Events. Holdings and the Borrower will furnish to the Administrative Agent, which shall furnish to each Issuing Bank and each Lender, prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of a Financial Officer or another executive officer of Holdings, the Borrower or any Restricted Subsidiary, affecting Holdings, the Borrower or any Restricted Subsidiary, or any adverse development in any such pending action, suit or proceeding not previously disclosed in

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writing by Holdings or the Borrower to the Administrative Agent, that in each case could reasonably be expected to result in a Material Adverse Effect or that in any manner questions the validity of this Agreement or any other Loan Document; and

(c) any other development (including notice of any matter or event that could give rise to an Environmental Liability or ERISA Event) that has resulted, or could reasonably be expected to result, in a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a written statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03. Information Regarding Collateral. (a) Holdings will furnish to the Administrative Agent prompt written notice of any change (i) in any Loan Party’s legal name, as set forth in such Loan Party’s organizational documents, (ii) in the jurisdiction of incorporation or organization of any Loan Party, (iii) in the form of organization of any Loan Party or (iv) in any Loan Party’s organizational identification number, if any, or, with respect to a Loan Party organized under the laws of a jurisdiction that requires such information to be set forth on the face of a Uniform Commercial Code financing statement, the Federal Taxpayer Identification Number of such Loan Party.

(b) At the time of delivery of financial statements pursuant to Section 5.01(a), Holdings shall deliver to the Administrative Agent a completed Supplemental Perfection Certificate (i) setting forth the information required pursuant to the Supplemental Perfection Certificate and indicating, in a manner reasonably satisfactory to the Administrative Agent, any changes in such information from the most recent Supplemental Perfection Certificate delivered pursuant to this Section (or, prior to the first delivery of a Supplemental Perfection Certificate, from the Perfection Certificate delivered on the Funding Date) or (ii) certifying that there has been no change in such information from the most recent Supplemental Perfection Certificate delivered pursuant to this Section (or, prior to the first delivery of a Supplemental Perfection Certificate, from the Perfection Certificate delivered on the Funding Date).

SECTION 5.04. Existence; Conduct of Business. Each of Holdings and the Borrower will, and will cause each of its Restricted Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names necessary for the conduct of its business; provided that the foregoing shall not prohibit (i) any merger, consolidation, liquidation or dissolution permitted under Section 6.03 or (ii) Holdings, the Borrower and each of its Restricted Subsidiaries from allowing its respective patents, copyrights, trademarks and trade names to lapse, expire or become abandoned in the ordinary course of business or its reasonable business judgment, as applicable.

SECTION 5.05. Payment of Obligations. Each of Holdings and the Borrower will, and will cause each of its Restricted Subsidiaries to, pay its material obligations (other than Indebtedness and any obligations in respect of any Hedging Agreements), including Tax liabilities, before the same shall become delinquent or in default, except where (a) (i) the validity or amount thereof is being contested in good faith by appropriate proceedings and (ii) Holdings, the Borrower or such Restricted Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP or (b) the failure to make payment would not reasonably be expected to result in a Material Adverse Effect.

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SECTION 5.06. Maintenance of Properties. Except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect, each of Holdings and the Borrower will, and will cause each of its Restricted Subsidiaries to, keep and maintain all property necessary for the conduct of its business in good working order and condition, ordinary wear and tear excepted.

SECTION 5.07. Insurance. Each of Holdings and the Borrower will, and will cause each of its Restricted Subsidiaries to, maintain, with financially sound and reputable insurance companies, insurance in such amounts (with no greater risk retention) and against such risks as is customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations. Each such policy of liability or casualty insurance maintained by or on behalf of Loan Parties will (a) in the case of each liability insurance policy (other than workers’ compensation, director and officer liability or other policies in which such endorsements are not customary), name the Administrative Agent, on behalf of the Secured Parties, as an additional insured thereunder, (b) in the case of each casualty insurance policy, contain a loss payable clause or endorsement that names the Administrative Agent, on behalf of the Secured Parties, as the loss payee thereunder and (c) provide for at least 30 days’ (or such shorter number of days as may be agreed to by the Administrative Agent) prior written notice to the Administrative Agent of any cancellation of such policy. With respect to each Mortgaged Property that is located in an area determined by the Federal Emergency Management Agency to have special flood hazards, the applicable Loan Party has obtained, and will maintain, with financially sound and reputable insurance companies, such flood insurance as is required under applicable law, including Regulation H of the Board of Governors, together with “life of loan” flood zone determinations. Holdings will furnish to the Lenders, upon reasonable request of the Administrative Agent, information in reasonable detail as to the insurance so maintained.

SECTION 5.08. Books and Records; Inspection and Audit Rights. Each of Holdings and the Borrower will, and will cause each of its Restricted Subsidiaries to, keep proper books of record and accounts in which full, true and correct entries in conformity with GAAP and all Requirements of Law are made of all dealings and transactions in relation to its business and activities. Each of Holdings and the Borrower will, and will cause each of its Restricted Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested; provided that, excluding any such visits and inspections during the continuation of an Event of Default, the Administrative Agent shall not exercise the rights under this Section 5.08 more often than two times during any calendar year; provided further that none of Holdings, the Borrower or any Restricted Subsidiary will be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter (i) that constitutes non-financial trade secrets or non-financial proprietary information, (ii) in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is prohibited by Requirement of Law or any binding agreement or (iii) that is subject to attorney-client or similar privilege or constitutes attorney work product.

SECTION 5.09. Compliance with Laws. Each of Holdings and the Borrower will, and will take reasonable action to cause each of its Restricted Subsidiaries to, comply with all Requirements of Law (including Environmental Laws) with respect to it or its operations or

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property, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. Holdings and the Borrower will maintain in effect and enforce policies and procedures designed to ensure compliance by Holdings, the Borrower, their Subsidiaries and the respective directors, officers, employees and agents of the foregoing with Anti-Corruption Laws and applicable Sanctions.

SECTION 5.10. Use of Proceeds; Letters of Credit. (a) The proceeds of the Tranche A Term Loans, together with cash on hand, will be used (i) for the payment of fees and expenses payable in connection with the Transactions, (ii) for the payment of the Funding Date Distribution and (iii) with respect to any cash remaining on the balance sheet of the Borrower after giving effect to the Transactions, for working capital and other general corporate purposes (including acquisitions permitted by this Agreement). The proceeds of the Revolving Loans and the Swingline Loans, as well as the proceeds of any Incremental Extension of Credit (unless otherwise provided in the applicable Incremental Facility Amendment), will be used for working capital and other general corporate purposes (including acquisitions permitted by this Agreement) of Holdings, the Borrower and the Restricted Subsidiaries. The proceeds of the Revolving Loans and the Swingline Loans may also be used for other transactions not prohibited by this Agreement. No part of the proceeds of any Loan will be used in violation of the representation set forth in Section 3.10. Letters of Credit will be used by Holdings, the Borrower and the Restricted Subsidiaries for general corporate purposes.

(b) The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that its Subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or any Letter of Credit (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) in any manner that would result in the violation of any Sanctions applicable to any party hereto, for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (iii) otherwise in any manner that would result in the violation of any Sanctions applicable to any party hereto.

SECTION 5.11. Additional Subsidiaries. If any additional Subsidiary is formed or acquired (or otherwise becomes a Designated Subsidiary) after the Funding Date, then Holdings will, as promptly as practicable and, in any event, within 60 days (or such longer period as the Administrative Agent, acting reasonably, may agree to in writing (including electronic mail)) after such Subsidiary is formed or acquired (or otherwise becomes a Designated Subsidiary), notify the Administrative Agent thereof and, to the extent applicable, cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary (if it is a Designated Subsidiary) and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party.

SECTION 5.12. Further Assurances. (a) Each of Holdings and the Borrower will, and will cause each of its Subsidiaries that is a Subsidiary Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), that may be required under any applicable law, or that the Administrative Agent or the Required Lenders may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Loan Parties. Each of Holdings and the Borrower also agrees to, and shall cause each of its Subsidiaries that is a Subsidiary Loan Party to, provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

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(b) If any material assets (including any real property or improvements thereto or any interest therein with a fair market value in excess of $5,000,000) are acquired by Holdings, the Borrower or any Subsidiary Loan Party after the Funding Date (other than assets constituting Collateral under the Collateral Agreement that become subject to the Lien created by the Collateral Agreement upon acquisition thereof), Holdings will notify the Administrative Agent and the Lenders thereof, and, if requested by the Administrative Agent or the Required Lenders, Holdings will cause such assets to be subjected to a Lien securing the Obligations and will take, and cause the Subsidiary Loan Parties to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section, all at the expense of the Loan Parties.

SECTION 5.13. Post-Effective Date Matters. (a) Within one calendar day after the Funding Date, (i) the Borrower shall cause the Funding Date Distribution to be paid and (ii) the Spin-Off shall be consummated.

(b) As promptly as practicable, and in any event within 90 days (or such longer period as the Administrative Agent, acting reasonably, may agree to in writing), after the Funding Date, Holdings and the Borrower shall, and shall cause each of its Subsidiaries that is a Loan Party to, deliver all Mortgages and Control Agreements that are required to be delivered pursuant to the Collateral and Guarantee Requirement, except to the extent otherwise agreed by the Administrative Agent pursuant to its authority as set forth in the definition of the term “Collateral and Guarantee Requirement”.

SECTION 5.14. Designation of Subsidiaries. Holdings may at any time designate any Restricted Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (a) immediately before and after such designation, no Event of Default shall have occurred and be continuing or would result from such designation, (b) immediately after giving effect to such designation, Holdings shall be in compliance on a Pro Forma Basis with the covenants set forth in Sections 6.12 and 6.13 recomputed as of the last day of the most recently ended fiscal quarter of Holdings, and the Borrower shall have delivered to the Administrative Agent a certificate of a Financial Officer setting forth reasonably detailed calculations demonstrating compliance with this clause (b), and (c) no Subsidiary may be designated as an Unrestricted Subsidiary if it is a “restricted subsidiary” or a “guarantor” (or any similar designation) for any Material Indebtedness. The designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an investment by the parent company of such Subsidiary therein under Section 6.04(r) at the date of designation in an amount equal to the net book value of such parent company’s investment therein. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness or Liens of such Subsidiary, and the making of an investment by such Subsidiary in any investments of such Subsidiary, in each case existing at such time.

SECTION 5.15. Spin-Off Documents. No term or condition set forth in the most recently available version of any Spin-Off Document shall be waived, amended or otherwise modified in a manner material and adverse to the rights or interests of the Lenders without the prior written approval of the Administrative Agent. Holdings shall deliver a copy of an executed version of each Spin-Off Document previously delivered in draft form under Section 4.02(j) promptly after execution.

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ARTICLE VI

Negative Covenants

From and including the Funding Date and until the Commitments shall have expired or been terminated and the principal of and interest on each Loan and all fees, expenses and other amounts (other than contingent amounts not yet due) payable under this Agreement or any other Loan Document have been paid in full, and all Letters of Credit (other than those collateralized or back-stopped on terms reasonably satisfactory to the applicable Issuing Bank) have expired or been terminated and all LC Disbursements shall have been reimbursed, each of Holdings and the Borrower covenants and agrees (provided that notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document, no provision of this Agreement or any other Loan Document shall prevent or restrict the consummation of any of the Transactions, nor shall the Transactions give rise to any Default, or constitute the utilization of any basket, under this Agreement (including this Article VI) or any other Loan Document) with the Lenders that:

SECTION 6.01. Indebtedness; Certain Equity Securities. Neither Holdings nor the Borrower will, nor will Holdings or the Borrower permit any of their respective Restricted Subsidiaries to, create, incur, assume or permit to exist any Indebtedness, except:

(a) Indebtedness created hereunder and under the other Loan Documents;

(b) Indebtedness existing on the Effective Date or the Spin-Off Date and, in each case, set forth in Schedule 6.01(b) (for purposes of clarity, as of the Effective Date), any Refinancing Indebtedness in respect thereof and any intercompany Indebtedness existing on the Effective Date or the Spin-Off Date arising out of, or in connection with, the Transactions; provided that, for so long as any letter of credit set forth on Schedule 6.01(b) is outstanding, the face amount of such letter of credit shall reduce, on a dollar-for-dollar basis, the LC Sublimit;

(c) Indebtedness of the Borrower to any Restricted Subsidiary and of any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary; provided that (A) Indebtedness of any Subsidiary that is not a Loan Party to the Borrower or any Subsidiary Loan Party shall be subject to Section 6.04 and (B) Indebtedness of the Borrower or any Subsidiary Loan Party to any Restricted Subsidiary that is not a Subsidiary Loan Party shall, on and after the Funding Date, be subordinated to the Obligations on the terms set forth in the Global Intercompany Note;

(d) Guarantees by the Borrower of Indebtedness of any Restricted Subsidiary and by any Restricted Subsidiary of Indebtedness of the Borrower or any other Restricted Subsidiary; provided that (i) the Indebtedness so Guaranteed is permitted by this Section (other than clause (b) or (f)), (ii) Guarantees by the Borrower or any Subsidiary Loan Party of Indebtedness of any Subsidiary that is not a Loan Party shall be subject to Section 6.04 and (iii) Guarantees permitted under this clause (d) shall be subordinated to the Obligations of the applicable Loan Party to the same extent and on the same terms as the Indebtedness so Guaranteed is subordinated to the Obligations;

(e) (i) Indebtedness of the Borrower or any Restricted Subsidiary incurred to finance the acquisition, construction, repair, replacement or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed by the

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Borrower or any Restricted Subsidiary in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof; provided that such Indebtedness is incurred prior to or within 270 days after such acquisition or the completion of such construction, repair, replacement or improvement, and (ii) Refinancing Indebtedness in respect of Indebtedness incurred or assumed pursuant to clause (i) above; provided that the aggregate principal amount of Indebtedness permitted by this clause (e), together with any sale and leaseback transaction incurred pursuant to Section 6.06, shall not exceed $10,000,000 at any time outstanding;

(f) (i) Indebtedness of any Person that becomes a Restricted Subsidiary (or of any Person not previously a Restricted Subsidiary that is merged or consolidated with or into a Restricted Subsidiary in a transaction permitted hereunder) after the Funding Date, or Indebtedness of any Person that is assumed by any Restricted Subsidiary in connection with an acquisition of assets by such Restricted Subsidiary in an acquisition permitted by Section 6.04; provided that such Indebtedness exists at the time such Person becomes a Restricted Subsidiary (or is so merged or consolidated) or such assets are acquired and is not created in contemplation of or in connection with such Person becoming a Restricted Subsidiary (or such merger or consolidation) or such assets being acquired and (ii) Refinancing Indebtedness in respect of Indebtedness incurred or assumed, as applicable, pursuant to clause (i) above;

(g) other Indebtedness in an aggregate principal amount not exceeding $5,000,000 at any time outstanding;

(h) Indebtedness owed to any Person (including obligations in respect of letters of credit for the benefit of such Person) providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance, pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business;

(i) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds, performance and completion guarantees and similar obligations (other than in respect of other Indebtedness), in each case provided in the ordinary course of business;

(j) Indebtedness in respect of Hedging Agreements permitted by Section 6.07;

(k) Indebtedness owed in respect of any overdrafts and related liabilities arising from treasury, depositary and cash management services or in connection with any automated clearinghouse transfers of funds; provided that such Indebtedness shall be repaid in full within five Business Days of the incurrence thereof;

(l) Indebtedness in the form of purchase price adjustments, earnouts, non-competition agreements or other arrangements representing acquisition consideration or deferred payments of a similar nature incurred in connection with any acquisition or other investment permitted under Section 6.04;

(m) Refinancing Term Loan Indebtedness incurred pursuant to Section 2.23; provided that the Net Proceeds thereof are used to make the prepayments required under clause (a)(ii) of Section 2.23;

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(n) Alternative Incremental Facility Debt; provided that the aggregate principal amount of such Alternative Incremental Facility Debt shall not exceed the amount permitted under Section 2.21;

(o) Indebtedness representing deferred compensation to directors, officers, consultants or employees of the Borrower and its Restricted Subsidiaries incurred in the ordinary course of business;

(p) Indebtedness consisting of promissory notes issued by any Loan Party to current or former officers, directors, consultants and employees or their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of Holdings permitted by Section 6.08;

(q) Indebtedness of the Borrower or any other Loan Party that is unsecured or secured by the Collateral on a second-lien, subordinated basis to the Obligations (and is not secured by any property or assets of Holdings, the Borrower or any Restricted Subsidiary other than the Collateral) if, after giving effect to the incurrence thereof and the application of the proceeds thereof, (i) no Event of Default has occurred and is continuing or would result therefrom and (ii) Holdings is in compliance with Sections 6.12 and 6.13;

(r) Indebtedness consisting of indemnification obligations under the Spin-Off Documents with respect to letters of credit outstanding as of the Spin-Off Date and listed on Schedule 6.01(r); provided that the Borrower shall use commercially reasonable efforts to cause such letters of credit to be returned or replaced as soon as practicable after the Spin-Off Date;

(s) obligations in respect of the Working Capital Adjustment to the extent constituting Indebtedness; and

(t) Indebtedness consisting of obligations to pay insurance premiums arising in the ordinary course of business and not in connection with the borrowing of money.

SECTION 6.02. Liens. Neither Holdings nor the Borrower will, nor will Holdings or the Borrower permit any of their respective Restricted Subsidiaries to, create, incur, assume or permit to exist any Lien on any asset now owned or hereafter acquired by it, except:

(a) Liens created under the Loan Documents;

(b) Permitted Encumbrances;

(c) any Lien on any asset of the Borrower or any Restricted Subsidiary existing on the Effective Date or the Spin-Off Date and, in each case, set forth in Schedule 6.02 (for purposes of clarity, as of the Effective Date); provided that (i) such Lien shall not apply to any other asset of the Borrower or any Restricted Subsidiary (other than assets financed by the same financing source in the ordinary course of business) and (ii) such Lien shall secure only those obligations that it secures on the Effective Date or the Spin-Off Date, as applicable, and extensions, renewals, replacements and refinancings thereof so long as the principal amount of such extensions, renewals, replacements and refinancings does not exceed the principal amount of the obligations being extended, renewed, replaced or refinanced or, in the case of any such obligations constituting Indebtedness, that are permitted under Section 6.01(b) as Refinancing Indebtedness in respect thereof;

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(d) any Lien existing on any asset prior to the acquisition thereof by the Borrower or any Restricted Subsidiary or existing on any asset of any Person that becomes a Restricted Subsidiary (or of any Person not previously a Restricted Subsidiary that is merged or consolidated with or into a Restricted Subsidiary in a transaction permitted hereunder) after the Funding Date prior to the time such Person becomes a Restricted Subsidiary (or is so merged or consolidated); provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Restricted Subsidiary (or such merger or consolidation), (ii) such Lien shall not apply to any other asset of Holdings, the Borrower or any Restricted Subsidiary (other than (x) assets financed by the same financing source in the ordinary course of business and (y) in the case of any such merger or consolidation, the assets of any special purpose merger Subsidiary that is a party thereto) and (iii) such Lien shall secure only those obligations that it secures on the date of such acquisition or the date such Person becomes a Restricted Subsidiary (or is so merged or consolidated) and extensions, renewals, replacements and refinancings thereof so long as the principal amount of such extensions, renewals and replacements does not exceed the principal amount of the obligations being extended, renewed or replaced or, in the case of any such obligations constituting Indebtedness, that are permitted under Section 6.01(f) as Refinancing Indebtedness in respect thereof;

(e) Liens on fixed or capital assets acquired, constructed, repaired, replaced or improved (including any such assets made the subject of a Capital Lease Obligation incurred) by the Borrower or any Restricted Subsidiary; provided that (i) such Liens secure Indebtedness incurred to finance such acquisition, construction, repair, replacement or improvement and permitted by clause (e)(i) of Section 6.01 or any Refinancing Indebtedness in respect thereof permitted by clause (e)(ii) of Section 6.01, (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within 270 days after such acquisition or the completion of such construction, repair, replacement or improvement (provided that this clause (ii) shall not apply to any Refinancing Indebtedness permitted by clause (e)(ii) of Section 6.01 or any Lien securing such Refinancing Indebtedness), (iii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing, repairing, replacing or improving such fixed or capital asset and in any event, the aggregate principal amount of such Indebtedness does not exceed the amount permitted under the second proviso of Section 6.01(e) at any time outstanding and (iv) such Liens shall not apply to any other property or assets of the Borrower or any Restricted Subsidiary (except assets financed by the same financing source in the ordinary course of business);

(f) in connection with the sale or transfer of any Equity Interests or other assets in a transaction permitted under Section 6.05, customary rights and restrictions contained in agreements relating to such sale or transfer pending the completion thereof;

(g) in the case of (i) any Restricted Subsidiary that is not a wholly owned Subsidiary or (ii) the Equity Interests in any Person that is not a Restricted Subsidiary, any encumbrance or restriction, including any put and call arrangements, related to Equity Interests in such Restricted Subsidiary or such other Person set forth in the organizational documents of such Restricted Subsidiary or such other Person or any related joint venture, shareholders’ or similar agreement;

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(h) Liens solely on any cash earnest money deposits, escrow arrangements or similar arrangements made by the Borrower or any Restricted Subsidiary in connection with any letter of intent or purchase agreement for an acquisition or other transaction permitted hereunder;

(i) Liens on Collateral securing (i) any Permitted Pari Passu Refinancing Debt, Permitted Second Priority Refinancing Debt or Alternative Incremental Facility Debt or (ii) any secured Indebtedness permitted to be incurred under Section 6.01(q); provided that, in the case of each of clauses (i) and (ii), such Liens are subject to customary intercreditor arrangements reasonably satisfactory to the Administrative Agent;

(j) Liens granted by a Subsidiary that is not a Loan Party in respect of Indebtedness permitted to be incurred by such Subsidiary under Section 6.01; and

(k) Liens not otherwise permitted by this Section to the extent that the aggregate outstanding principal amount of the obligations at any time outstanding that are secured thereby does not exceed $5,000,000.

SECTION 6.03. Fundamental Changes. (a) Neither Holdings nor the Borrower will, nor will they permit any of their Restricted Subsidiaries to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, (i) any Person may merge into or consolidate with the Borrower in a transaction in which the Borrower is the surviving entity or the surviving entity (the “Successor Borrower”) (A) is organized under the laws of the United States of America, (B) expressly assumes the Borrower’s obligations under this Agreement and the other Loan Documents to which the Borrower is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent, (C) each Subsidiary Loan Party, unless it is the other party to such merger or consolidation, shall have by a supplement to the Collateral Agreement (and, if reasonably requested by the Administrative Agent, each other applicable Security Document) confirmed that its obligations thereunder shall apply to the Successor Borrower’s obligations under this Agreement and (D) each mortgagor of a Mortgaged Property, unless it is the other party to such merger or consolidation, shall have by an amendment to or restatement of the applicable Mortgage confirmed that its obligations thereunder shall apply to the Successor Borrower’s obligations under this Agreement; provided that if the foregoing are satisfied, the Successor Borrower will succeed to, and be substituted for, the Borrower under this Agreement, (ii) any Person (other than Holdings and the Borrower) may merge into or consolidate with any Restricted Subsidiary in a transaction in which the surviving entity is a Restricted Subsidiary and, if any party to such merger or consolidation is a Subsidiary Loan Party, is a Subsidiary Loan Party, (iii) any Restricted Subsidiary other than the Borrower may merge into or consolidate with any Person in a transaction permitted under Section 6.05 in which, after giving effect to such transaction, the surviving entity is not a Restricted Subsidiary, (iv) any Restricted Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; provided that any such merger or consolidation involving a Person that is not a wholly owned Restricted Subsidiary immediately prior to such merger or consolidation shall not be permitted unless it is also permitted by Section 6.04, and (v) the Borrower or any Restricted Subsidiary may engage in a merger, consolidation, dissolution or liquidation, the purpose of which is to effect a disposition permitted pursuant to Section 6.05.

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(b) The Borrower will not, and Holdings and the Borrower will not permit any Restricted Subsidiary to, engage to any material extent in any business other than businesses of the type to be conducted by the Borrower and the Restricted Subsidiaries as described in the Form 10 and businesses reasonably related, incidental or ancillary thereto.

(c) Notwithstanding anything in this Agreement or any other Loan Document to the contrary, Holdings will not (i) engage in any business or activity other than the ownership of all the outstanding Equity Interests of the Borrower and activities incidental thereto and compliance with its obligations under the Loan Documents, (ii) own or acquire any assets (other than Equity Interests of the Borrower, cash and Permitted Investments), (iii) incur any liabilities (other than liabilities under the Loan Documents, liabilities imposed by law, including tax liabilities, and other liabilities incidental to its existence and permitted business and activities) or (iv) incur or permit to exist any Liens on any of its assets (other than the Liens created by the Loan Documents and Liens imposed by law).

SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, purchase, hold or acquire (including pursuant to any merger or consolidation with any Person that was not a wholly owned Restricted Subsidiary prior to such merger or consolidation) any Equity Interests in or evidences of Indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:

(a) cash and Permitted Investments;

(b) investments constituting the purchase or other acquisition (in one transaction or a series of related transactions) of all or substantially all of the property and assets or business of any Person or of assets constituting a business unit, a line of business or division of such Person, or the majority of the Equity Interests in a Person that, upon the consummation thereof, will be a Restricted Subsidiary if, at the time the binding agreement for such investment is entered into, after giving effect to such investment, (x) Holdings would be in compliance with Sections 6.12 recomputed on a Pro Forma Basis as of the last day of the most recently ended fiscal quarter of the Borrower prior to such date and (y) the Total Leverage Ratio recomputed on a Pro Forma Basis as of the last day of the most recently ended fiscal quarter of the Borrower prior to such date shall not be greater than 2.75 to 1.00; provided that (i) such investment was not preceded by, or consummated pursuant to, a hostile offer (including a proxy contest), (ii) no Event of Default has occurred and is continuing at the time the binding agreement for such investment is entered into, (iii) all actions required to be taken with respect to such acquired Restricted Subsidiary or such acquired assets under Sections 5.11 and 5.12 shall have been taken (or arrangements for the taking of such actions reasonably satisfactory to the Administrative Agent shall have been made) and (iv) the aggregate amount of cash consideration paid in respect of such investments (including in the form of loans or advances made to Restricted Subsidiaries that are not Loan Parties) by Loan Parties involving the acquisition of Restricted Subsidiaries that do not become Loan Parties shall not exceed, at the time such investment is made and after giving effect thereto, $5,000,000;

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(c) (i) investments (including intercompany loans and advances) existing on the Funding Date or the Spin-Off Date in the Borrower and the Restricted Subsidiaries arising out of, or in connection with, the Transactions and (ii) other investments existing on the Effective Date or the Spin-Off and, in each case, set forth on Schedule 6.04 (for purposes of clarity, as of the Effective Date);

(d) investments by Holdings in the Borrower and by the Borrower and the Restricted Subsidiaries in Equity Interests of their respective subsidiaries; provided that (i) any such Equity Interests held by a Loan Party shall be pledged to the extent required by the definition of the term “Collateral and Guarantee Requirement” and (ii) the aggregate outstanding amount of such investments made by Loan Parties in Restricted Subsidiaries that are not Loan Parties (together with outstanding intercompany loans permitted under subclause (ii) of the proviso to clause (e) of this Section and outstanding Guarantees permitted under the proviso to clause (f) of this Section) shall not exceed $10,000,000 (in each case determined without regard to any write-downs or write-offs); provided that if any such investment under this subclause (ii) is made for the purpose of making an investment, loan or advance permitted under clause (r) of this Section, the amount available under this clause (d) shall not be reduced by the amount of any such investment loan or advance which reduces the basket under clause (r) of this Section);

(e) loans or advances made by Holdings or the Borrower to any Restricted Subsidiary and made by any Restricted Subsidiary to the Borrower or any other Restricted Subsidiary; provided that (i) any such loans and advances made by a Loan Party shall be evidenced, on and after the Funding Date, by a promissory note pledged pursuant to the Collateral Agreement and (ii) the outstanding amount of such loans and advances made by Loan Parties to Restricted Subsidiaries that are not Loan Parties (together with investments permitted under subclause (ii) of the proviso to clause (d) of this Section and outstanding Guarantees permitted under the proviso to clause (f) of this Section) shall not exceed $10,000,000 (in each case determined without regard to any write-downs or write-offs); provided that if any such loan or advance under this subclause (ii) is made for the purpose of making an investment, loan or advance permitted under clause (r) of this Section, the amount available under this clause (e) shall not be reduced by the amount of any such investment loan or advance which reduces the basket under clause (r) of this Section);

(f) Guarantees of Indebtedness that is permitted under Section 6.01 and other obligations, in each case of Holdings, the Borrower or any Restricted Subsidiary; provided that the total of the aggregate outstanding principal amount of Indebtedness and the aggregate amount of other obligations, in each case of Restricted Subsidiaries that are not Loan Parties that is Guaranteed by any Loan Party (together with investments permitted under subclause (ii) of the proviso to clause (d) of this Section and intercompany loans permitted under subclause (ii) to the proviso to clause (e) of this Section) shall not exceed $10,000,000 (in each case determined without regard to any write-downs or write-offs);

(g) loans or advances to directors, officers, consultants or employees of Holdings, the Borrower or any Restricted Subsidiary made in the ordinary course of business of Holdings, the Borrower or such Restricted Subsidiary, as applicable, not exceeding $1,000,000 in the aggregate outstanding at any time (determined without regard to any write-downs or write-offs of such loans or advances);

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(h) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses of Holdings, the Borrower or any Restricted Subsidiary for accounting purposes and that are made in the ordinary course of business;

(i) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

(j) investments in the form of Hedging Agreements permitted by Section 6.07;

(k) investments of any Person existing at the time such Person becomes a Restricted Subsidiary or consolidates or merges with the Borrower or any Restricted Subsidiary so long as such investments were not made in contemplation of such Person becoming a Restricted Subsidiary or of such consolidation or merger;

(l) investments resulting from pledges or deposits described in clause (c) or (d) of the definition of the term “Permitted Encumbrance”;

(m) investments made as a result of the receipt of noncash consideration from a sale, transfer, lease or other disposition of any asset in compliance with Section 6.05;

(n) investments that result solely from the receipt by Holdings, the Borrower or any Restricted Subsidiary from any of its subsidiaries of a dividend or other Restricted Payment in the form of Equity Interests, evidences of Indebtedness or other securities (but not any additions thereto made after the date of the receipt thereof);

(o) receivables or other trade payables owing to the Borrower or a Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided that such trade terms may include such concessionary trade terms as the Borrower or any Restricted Subsidiary deems reasonable under the circumstances;

(p) mergers and consolidations permitted under Section 6.03 that do not involve any Person other than Holdings, the Borrower and Restricted Subsidiaries that are wholly owned Restricted Subsidiaries;

(q) Guarantees by the Borrower or any Restricted Subsidiary of leases (other than Capitalized Leases) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business; and

(r) so long as no Event of Default has occurred and is continuing or would result therefrom, other investments, loans and advances by the Borrower or any Restricted Subsidiary in an aggregate amount, as valued at cost at the time each such investment, loan or advance is made and including all related commitments for future investments, loans or advances (and the principal amount of any Indebtedness that is assumed or otherwise incurred in connection with such investment, loan or advance), in an aggregate amount not exceeding, at the time such investments, loans or advances are made and after giving effect thereto, the sum of (i) $10,000,000 plus (ii) the Available Amount at such time in the aggregate for all such investments made or committed to be made from and after the Effective Date plus an amount equal to any returns of capital or sale proceeds actually received in cash in respect of any such investments (which amount shall not exceed the amount of such investment valued at cost at the time such investment was made).

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The amount, as of any date of determination, of (i) any investment in the form of a loan or an advance shall be the principal amount thereof outstanding on such date, minus any cash payments actually received by such investor representing a payment or prepayment of in respect of principal of such Investment, but without any adjustment for write-downs or write-offs (including as a result of forgiveness of any portion thereof) with respect to such loan or advance after the date thereof, (ii) any investment in the form of a Guarantee shall be equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof, as determined in good faith by the Borrower, (iii) any investment in an Equity Interests by the investor to the investee, including any capital contribution, shall be the fair market value (as determined in good faith by the Borrower) of such Equity Interests or capital contribution, minus any payments actually received by such investor representing a return of capital of such investment, but without any other adjustment for increases or decreases in value of, or write-ups, write-downs or write-offs with respect to, such investment after the date of such Investment, and (iv) any other investment (other than any investment referred to in clause (i), (ii) or (iii) above) by the specified Person shall be the original cost of such investment (including any Indebtedness assumed in connection therewith), minus the amount of any portion of such investment that has been repaid to the investor in cash as a repayment of principal or a return of capital, but without any other adjustment for increases or decreases in value of, or write-ups, write-downs or write-offs with respect to, such investment after the date of such Investment. For purposes of this Section 6.04, if an investment involves the acquisition of more than one Person, the amount of such investment shall be allocated among the acquired Persons in accordance with GAAP; provided that pending the final determination of the amounts to be so allocated in accordance with GAAP, such allocation shall be as reasonably determined by the Borrower.

SECTION 6.05. Asset Sales. Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by it, nor will Holdings or the Borrower permit any Restricted Subsidiary to issue any additional Equity Interest in such Restricted Subsidiary (other than issuing directors’ qualifying shares and other than issuing Equity Interests to the Borrower or another Restricted Subsidiary), except:

(a) sales, transfers, leases and other dispositions of (i) inventory, (ii) used, obsolete or surplus equipment, (iii) property no longer used or useful in the conduct of the business of the Borrower and the Restricted Subsidiaries (including intellectual property), (iv) immaterial assets and (v) cash and Permitted Investments, in each case in the ordinary course of business;

(b) sales, transfers, leases and other dispositions to the Borrower or a Restricted Subsidiary; provided that any such sales, transfers, leases or other dispositions involving a Restricted Subsidiary that is not a Loan Party shall, to the extent applicable, be made in compliance with Sections 6.04 and 6.09;

(c) sales, transfers and other dispositions of accounts receivable in connection with the compromise, settlement or collection thereof not as part of any accounts receivables financing transaction;

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(d) (i) sales, transfers, leases and other dispositions of assets to the extent that such assets constitute an investment permitted by clause (i), (k) or (m) of Section 6.04 or another asset received as consideration for the disposition of any asset permitted by this Section (in each case, other than Equity Interests in a Restricted Subsidiary, unless all Equity Interests in such Restricted Subsidiary (other than directors’ qualifying shares) are sold) and (ii) sales, transfers, and other dispositions of the Equity Interests of a Restricted Subsidiary by the Borrower or a Restricted Subsidiary to the extent such sale, transfer or other disposition would be permissible as an investment in a Restricted Subsidiary permitted by Section 6.04(d) or (r);

(e) leases or subleases entered into in the ordinary course of business, to the extent that they do not materially interfere with the business of Holdings, the Borrower or any Restricted Subsidiary;

(f) licenses or sublicenses of intellectual property in the ordinary course of business, to the extent that they do not materially interfere with the business of Holdings, the Borrower or any Restricted Subsidiary;

(g) dispositions resulting from any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any asset of any of Holdings, the Borrower or any Restricted Subsidiary;

(h) dispositions of assets to the extent that (i) such assets are exchanged for credit against the purchase price of similar replacement assets or (ii) the proceeds of such disposition are promptly applied to the purchase price of such replacement assets;

(i) dispositions permitted by Section 6.08;

(j) sales, transfers, leases and other dispositions of assets that are not permitted by any other clause of this Section; provided that (i) the aggregate fair value of all assets sold, transferred, leased or otherwise disposed of in reliance upon this clause (j) shall not exceed (A) in any fiscal year, $2,000,000 and (B) during the term of this Agreement, $5,000,000 and (ii) no Event of Default has occurred and is continuing or would result therefrom; and

(k) sales, transfers or other dispositions of accounts receivable in connection with the factoring on a non-recourse basis of such accounts receivable;

provided that all sales, transfers, leases and other dispositions permitted hereby (other than those permitted by clause (b)) shall be made for fair value (as determined in good faith by the Borrower), and at least 75% of the consideration from all sales, transfers, leases and other dispositions permitted hereby (other than those permitted by clause (b), (d), (g) or (h)) since the Effective Date, on a cumulative basis, is in the form of cash or cash equivalents; provided further that (i) any consideration in the form of Permitted Investments that are disposed of for cash consideration within 30 Business Days after such sale, transfer or other disposition shall be deemed to be cash consideration in an amount equal to the amount of such cash consideration for purposes of this proviso, (ii) any liabilities (as shown on the Borrower’s or such Restricted Subsidiary’s most recent balance sheet provided hereunder or in the footnotes thereto) of the Borrower or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the payment in cash of the Obligations, that are assumed by the transferee with respect to the applicable sale, transfer, lease or other disposition and for which the Borrower and all the Restricted Subsidiaries shall have been validly released by all applicable creditors in writing shall

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be deemed to be cash consideration in an amount equal to the liabilities so assumed and (iii) any Designated Non-Cash Consideration received by the Borrower or such Subsidiary in respect of such sale, transfer, lease or other disposition having an aggregate fair market value, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (iii) that is at that time outstanding, not in excess of $1,000,000 at the time of the receipt of such Designated Non-Cash Consideration, with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value, shall be deemed to be cash consideration.

SECTION 6.06. Sale and Leaseback Transactions. Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, except for any such sale of any fixed or capital assets by the Borrower or any Restricted Subsidiary that is made for cash consideration in an amount not less than the fair value of such fixed or capital asset and is consummated within 270 days after the Borrower or such Restricted Subsidiary acquires or completes the construction of such fixed or capital asset; provided that, if such sale and leaseback results in a Capital Lease Obligation, such Capital Lease Obligation is permitted by Section 6.01(e) and any Lien made the subject of such Capital Lease Obligation is permitted by Section 6.02(e).

SECTION 6.07. Hedging Agreements. Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, enter into any Hedging Agreement, except (a) Hedging Agreements entered into to hedge or mitigate risks to which Holdings, the Borrower or any Restricted Subsidiary has actual exposure (other than those in respect of the Equity Interests of Holdings, the Borrower or any Restricted Subsidiary) and (b) Hedging Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from floating to fixed rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of Holdings, the Borrower or any Restricted Subsidiary.

SECTION 6.08. Restricted Payments; Certain Payments of Junior Indebtedness. (a) Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that:

(i) Holdings may declare and pay the Funding Date Distribution;

(ii) on and after the Spin-Off Date, the Borrower and any Restricted Subsidiary may declare and pay dividends or make other distributions with respect to its Equity Interests, or make other Restricted Payments in respect of its Equity Interests, in each case ratably to the holders of such Equity Interests;

(iii) Holdings may declare and pay dividends with respect to its Equity Interests payable solely in shares of Qualified Equity Interests or Disqualified Equity Interests permitted hereunder;

(iv) Holdings may make Restricted Payments to Exelis or any of its subsidiaries (A) substantially concurrently with or after the consummation of the Transactions on account of working capital or similar adjustments arising from the Transactions (the “Working Capital Adjustment”) or (B) prior to the Funding Date, pursuant to intercompany sweeps;

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(v) Holdings may make cash payments in lieu of the issuance of fractional shares representing insignificant interests in Holdings in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Equity Interests in Holdings;

(vi) Holdings may make repurchases of Equity Interests or withhold Equity Interests, in each case if such Equity Interests are tendered by a holder of stock options upon the exercise of such stock options and such Equity Interests represent a portion of the exercise price of such stock options (and related redemption or cancellation of shares for payment of taxes or other amounts relating to the exercise under such stock option or other benefit plans); provided that the foregoing repurchases are not effected by the making of any payment in cash by Holdings, the Borrower or any of its Restricted Subsidiaries, but are instead are effected by either (x) Holdings withholding Equity Interests that would otherwise be issued upon the exercise of stock options or (y) Holdings accepting Equity Interests tendered by a holder of stock options upon the exercise of stock options by such holder;

(vii) concurrently with any issuance of Qualified Equity Interests, Holdings may redeem, purchase or retire any Equity Interests of Holdings using the proceeds of, or convert or exchange any Equity Interests of Holdings for, such Qualified Equity Interests;

(viii) Holdings may make Restricted Payments not otherwise permitted by this Section 6.08(a) in an aggregate amount not to exceed $5,000,000 less the sum of (x) the aggregate amount of Restricted Payments previously made in reliance on this clause (viii) and (y) the aggregate amount of payments of Indebtedness previously made in reliance on clause (iv) of Section 6.08(b); provided that, with respect to any Restricted Payment made in reliance on this clause (viii), (x) no Default has occurred or is continuing at the time such Restricted Payment is made or would result therefrom, (y) after giving effect to any Restricted Payment, Holdings shall be in compliance on a Pro Forma Basis with the covenants set forth in Sections 6.12 and 6.13 recomputed as of the last day of the most recently ended fiscal quarter of the Borrower and (z) immediately after giving effect to such Restricted Payment, Liquidity is at least $25,000,000;

(ix) Holdings may make Restricted Payments not otherwise permitted by this Section 6.08(a) in an aggregate amount not to exceed, at any time, the Available Amount at such time; provided that, with respect to any Restricted Payment made in reliance on this clause (ix), (x) no Default has occurred or is continuing at the time such Restricted Payment is made or would result therefrom, (y) after giving effect to any Restricted Payment, Holdings shall be in compliance on a Pro Forma Basis with the covenants set forth in Sections 6.12 and 6.13 recomputed as of the last day of the most recently ended fiscal quarter of the Borrower and (z) immediately after giving effect to such Restricted Payment, Liquidity is at least $25,000,000; and

(x) Restricted Payments may be made in the form of the payment of withholding or similar taxes payable or expected to be payable in connection with the exercise of stock options and the vesting of restricted stock, or the withholding, repurchase, redemption or retirement of any equity interests granted to current or former employees, officers or directors of the Borrower, Holdings or any Subsidiary pursuant to the equity incentive plans of Holdings.

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(b) Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, prepay, redeem, purchase or otherwise satisfy any Indebtedness that is subordinated in right of payment to the Obligations, except for:

(i) (A) payments of Indebtedness created under this Agreement or any other Loan Document and (B) payments of intercompany Indebtedness not prohibited by the subordination terms of the Global Intercompany Note;

(ii) regularly scheduled interest and principal payments as and when due in respect of any such Indebtedness, other than payments in respect of such Indebtedness prohibited by the subordination provisions thereof;

(iii) refinancings of Indebtedness with the proceeds of other Indebtedness permitted under Section 6.01;

(iv) payments of or in respect of Indebtedness in an amount not to exceed $5,000,000 less the sum of (x) the aggregate amount of payments previously made in reliance on this clause (iv) and (y) the aggregate amount of Restricted Payments previously made in reliance on clause (viii) of Section 6.08(a); provided that, with respect to any payment made in reliance on this clause (iv), (x) no Default has occurred or is continuing at the time such payment is made or would result therefrom, (y) after giving effect to such payment, Holdings shall be in compliance on a Pro Forma Basis with the covenants set forth in Sections 6.12 and 6.13 recomputed as of the last day of the most recently ended fiscal quarter of the Borrower and (z) immediately after giving effect to such payment, Liquidity is at least $25,000,000; and

(v) payments of or in respect of Indebtedness in an amount not to exceed, at any time, the Available Amount at such time; provided that, with respect to any payment made in reliance on this clause (v), (x) no Default has occurred or is continuing at the time such payment is made or would result therefrom, (y) after giving effect to such payment, Holdings shall be in compliance on a Pro Forma Basis with the covenants set forth in Sections 6.12 and 6.13 recomputed as of the last day of the most recently ended fiscal quarter of the Borrower and (z) immediately after giving effect to such payment, Liquidity is at least $25,000,000.

SECTION 6.09. Transactions with Affiliates. Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, sell, lease or otherwise transfer any assets to, or purchase, lease or otherwise acquire any assets from, or otherwise engage in any other transactions involving aggregate consideration in excess of $500,000 with, any of its Affiliates, except (i) transactions that are at prices and on terms and conditions not less favorable to the Borrower or such Restricted Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (ii) transactions between or among the Loan Parties not involving any other Affiliate, (iii) advances, equity issuances, repurchases, retirements or other acquisitions or retirements of Equity Interests and other Restricted Payments permitted under Section 6.08 and investments, loans and advances to Restricted Subsidiaries permitted under Section 6.04 and any other transaction involving the Borrower and the Restricted Subsidiaries permitted under Section 6.03 to the extent such transaction is between the Borrower and one or more Restricted Subsidiaries or between two or more Restricted Subsidiaries and Section 6.05 (to the extent such transaction is not required to be for fair value thereunder), (iv) the payment of reasonable fees to

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directors of Holdings, the Borrower or any Restricted Subsidiary who are not employees of Holdings, the Borrower or any Restricted Subsidiary, and compensation and employee benefit arrangements paid to, and indemnities provided for the benefit of, directors, officers, consultants or employees of Holdings, the Borrower or the Restricted Subsidiaries in the ordinary course of business, (v) any issuances of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans approved by the Borrower’s board of directors and (vi) employment and severance arrangements entered into in the ordinary course of business between Holdings, the Borrower or any Restricted Subsidiary and any employee thereof and approved by the Borrower’s board of directors.

SECTION 6.10. Restrictive Agreements. Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of Holdings, the Borrower or any Restricted Subsidiary to create, incur or permit to exist any Lien upon any of its assets to secure the Obligations or (b) the ability of any Restricted Subsidiary to pay dividends or other distributions with respect to any of its Equity Interests, to make or repay loans or advances to the Borrower or any Restricted Subsidiary, to Guarantee Indebtedness of the Borrower or any Restricted Subsidiary, to transfer any of its properties or assets to the Borrower or any Restricted Subsidiary or to grant Liens on its assets (including Equity Interests) to the Administrative Agent; provided that (i) the foregoing shall not apply to (A) restrictions and conditions imposed by law or by this Agreement, any other Loan Document, any Incremental Facility Amendment, any Refinancing Facility Agreement or any document governing any Refinancing Term Loan Indebtedness, Refinancing Revolving Commitments or Refinancing Indebtedness of any of the foregoing, (B) in the case of any Restricted Subsidiary that is not a wholly owned Restricted Subsidiary, restrictions and conditions imposed by its organizational documents or any related joint venture or similar agreements; provided that such restrictions and conditions apply only to such Restricted Subsidiary and to the Equity Interests of such Restricted Subsidiary, (C) customary restrictions and conditions contained in agreements relating to the sale of a Restricted Subsidiary or any assets of Holdings, the Borrower or any Restricted Subsidiary, in each case pending such sale; provided that such restrictions and conditions apply only to such Restricted Subsidiary or the assets that are to be sold and, in each case, such sale is permitted hereunder, (D) restrictions and conditions existing on the Effective Date or the Spin-Off Date and, in each case, identified on Schedule 6.10 (for purposes of clarity, as of the Effective Date) (and any extension or renewal of, or any amendment, modification or replacement of the documents set forth on such schedule that do not expand the scope of, any such restriction or condition in any material respect) and (E) restrictions and conditions imposed by any agreement relating to Indebtedness of any Restricted Subsidiary in existence at the time such Restricted Subsidiary became a Restricted Subsidiary and otherwise permitted by clause (f) of Section 6.01 or to any restrictions in any Indebtedness of a non-Loan Party Restricted Subsidiary permitted by clause (g) of Section 6.01, in each case if such restrictions and conditions apply only to such Restricted Subsidiary and its subsidiaries; and (ii) clause (a) of the foregoing shall not apply to (A) restrictions and conditions imposed by any agreement relating to secured Indebtedness permitted by clause (e) of Section 6.01 if such restrictions and conditions apply only to the assets securing such Indebtedness and (B) customary provisions in leases and other agreements restricting the assignment thereof.

SECTION 6.11. Amendment of Material Documents. Neither Holdings nor the Borrower will, nor will they permit any of their respective Restricted Subsidiaries to, amend, modify or waive, (a) its certificate of incorporation, bylaws or other organizational documents, (b) any of the Spin-Off Documents or (c) any agreement or instrument governing or evidencing any Material Indebtedness that is subordinated in right of payment to the Obligations, in each case if the effect of such amendment, modification or waiver would be materially adverse to the Lenders.

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SECTION 6.12. Interest Expense Coverage Ratio. Holdings will not permit, as of the last day of any fiscal quarter of Holdings, the ratio of (a) Consolidated EBITDA to (b) Consolidated Cash Interest Expense, in each case for the period of four consecutive fiscal quarters of Holdings ending on such day (commencing with the four consecutive fiscal quarters of Holdings ending December 31, 2014) to be less than 4.50 to 1.00.

SECTION 6.13. Total Leverage Ratio. Holdings will not permit the Total Leverage Ratio for the period of four consecutive fiscal quarters of Holdings (commencing with the four consecutive fiscal quarters of Holdings ending December 31, 2014) ending on the last day of any fiscal quarter of Holdings during any period set forth below, to exceed the ratio set forth below opposite such period:

Period	Total Leverage Ratio
December 31, 2014 through June 30, 2015		3.50 to 1.00
July 1, 2015 through December 31, 2015		3.00 to 1.00
January 1, 2016 and thereafter		2.75 to 1.00

SECTION 6.14. Changes in Fiscal Periods. Holdings will neither (a) permit its fiscal year or the fiscal year of the Borrower or any Restricted Subsidiary to end on a day other than December 31 (or, if different, on dates consistent with practice in effect on the Spin-Off Date), nor (b) change its method of determining fiscal quarters.

ARTICLE VII

Events of Default

SECTION 7.01. Events of Default. If any of the following events (each such event, an “Event of Default”) shall occur:

(a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Section) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days;

(c) any representation or warranty made or deemed made by or on behalf of Holdings, the Borrower or any Restricted Subsidiary in this Agreement or any other Loan Document, or in any report, certificate, financial statement or other information furnished pursuant to or in connection with this Agreement or any other Loan Document, shall prove to have been incorrect in any material respect when made or deemed made;

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(d) on and after the Funding Date, Holdings or the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(a), 5.04 (with respect to the existence of Holdings or the Borrower) or in Article VI;

(e) on and after the Funding Date, any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in this Agreement or any other Loan Document (other than those specified in clause (a), (b) or (d) of this Section), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent or any Lender to the Borrower;

(f) Holdings, the Borrower or any Restricted Subsidiary shall fail to make any payment (whether of principal, interest, premium or otherwise and regardless of amount) in respect of any Material Indebtedness when and as the same shall become due and payable (after giving effect to any applicable grace period in respect of such failure under the documentation representing such Material Indebtedness);

(g) any event or condition occurs that results in any Material Indebtedness becoming due or being terminated or required to be prepaid, repurchased, redeemed or defeased prior to its scheduled maturity or that enables or permits (with all applicable grace periods in respect of such event or condition under the documentation representing such Material Indebtedness having expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf, or, in the case of any Hedging Agreement, the applicable counterparty, to cause any Material Indebtedness to become due, or to terminate or require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to (i) any secured Indebtedness that becomes due as a result of the voluntary sale, transfer or other disposition of the assets securing such Indebtedness (to the extent such sale, transfer or other disposition is not prohibited under this Agreement) or (ii) any Indebtedness that becomes due as a result of a voluntary refinancing thereof permitted under Section 6.01;

(h) except as otherwise provided in Section 7.02, an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of Holdings, the Borrower or any Restricted Subsidiary or its debts, or of a substantial part of its assets, under any Federal, State or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Restricted Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) except as otherwise provided in Section 7.02, Holdings, the Borrower or any Restricted Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation (other than any liquidation permitted under Section 6.03(a)(iv)), reorganization or other relief under any Federal, State or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Section, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Restricted Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding or

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(v) make a general assignment for the benefit of creditors, or the board of directors (or similar governing body) of Holdings, the Borrower or any Restricted Subsidiary (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to above in this clause (i) or in clause (h) of this Section;

(j) Holdings, the Borrower or any Restricted Subsidiary shall admit in writing its inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in excess of $5,000,000 (other than any such judgment covered by insurance (other than under a self-insurance program) to the extent a claim therefor has been made in writing and liability therefor has not been denied by the insurer) shall be rendered against Holdings, the Borrower, any Restricted Subsidiary or any combination thereof and the same shall remain undischarged for a period of 60 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of Holdings, the Borrower or any Restricted Subsidiary to enforce any such judgment;

(l) an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(m) on and after the Funding Date, any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any material Collateral, with the priority required by the applicable Security Document, except as a result of (i) the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents, (ii) the release thereof as provided in Section 9.14 or (iii) the Administrative Agent’s failure to (A) maintain possession of any stock certificate, promissory note or other instrument delivered to it under the Collateral Agreement or (B) file Uniform Commercial Code continuation statements;

(n) on and after the Funding Date, any material Security Document shall cease to be, or shall be asserted by any Loan Party not to be, in full force and effect, except as a result of the release thereof as provided in the applicable Loan Document or Section 9.14;

(o) on and after the Funding Date, any Guarantee purported to be created under any Loan Document shall cease to be, or shall be asserted by any Loan Party not to be, in full force and effect, except as a result of the release thereof as provided in the applicable Loan Document or Section 9.14; or

(p) a Change in Control shall occur;

then, and in every such event (other than an event with respect to Holdings or the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, (ii) declare the Loans then outstanding to be due and payable in whole (or in part (but ratably as among the Classes of Loans and the Loans of each Class at such time outstanding), in which case

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any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower hereunder, shall become due and payable immediately and (iii) require the deposit of cash collateral in respect of LC Exposure as provided in Section 2.05(i), in each case, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Holdings and the Borrower; and in the case of any event with respect to Holdings or the Borrower described in clause (h) or (i) of this Section, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower hereunder, shall immediately and automatically become due and payable and the deposit of such cash collateral in respect of LC Exposure shall immediately and automatically become due, in each case, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Holdings and the Borrower.

SECTION 7.02. Exclusion of Certain Subsidiaries. Solely for the purposes of determining whether a Default has occurred under clause (h) or (i) of Section 7.01, any reference in any such paragraph to any Restricted Subsidiary shall be deemed not to include any Restricted Subsidiary affected by any event or circumstance referred to in such paragraph that (a) did not, as of the last day of the fiscal quarter of the Borrower most recently ended, have consolidated total assets that equal 5.0% or more of the consolidated total assets of Holdings and (b) did not have revenues during the four fiscal quarter period of the Borrower most recently ended equal to or greater than 5.0% of the consolidated revenues of Holdings; provided that if it is necessary to exclude more than one Restricted Subsidiary from clause (h) or (i) of Section 7.01 pursuant to this paragraph in order to avoid a Default, the aggregate consolidated assets of all such excluded Restricted Subsidiaries as of such last day may not exceed 5.0% of the consolidated total assets of Holdings and the aggregate consolidated revenues of all such excluded Restricted Subsidiaries for such four fiscal quarter period may not exceed 5.0% of the consolidated revenues of Holdings.

ARTICLE VIII

The Administrative Agent

Each of the Lenders and the Issuing Banks hereby irrevocably appoints the entity named as Administrative Agent in the heading of this Agreement and its successors to serve as administrative agent and collateral agent under the Loan Documents and authorizes the Administrative Agent to take such actions and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than the United States of America, each of the Lenders and the Issuing Banks hereby grants to the Administrative Agent any required powers of attorney to execute any Security Document governed by the laws of such jurisdiction on such Lender’s or such Issuing Bank’s behalf. It is understood and agreed that the use of the term “agent” (or any similar term) herein or in any other Loan Document with reference to the Administrative Agent is not intended to connote any fiduciary duty or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used as a matter of market custom and is intended to create or reflect only an administrative relationship between contracting parties.

The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender or an Issuing Bank as any other Lender or Issuing Bank and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial

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advisor or in any other advisory capacity for and generally engage in any kind of business with Holdings, the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders or the Issuing Banks.

The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or to exercise any discretionary power, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith to be necessary, under the circumstances as provided in the Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion, could expose the Administrative Agent to liability or be contrary to this Agreement or any other Loan Document or applicable law, and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Holdings, the Borrower, any Subsidiary or any other Affiliate of any of the foregoing that is communicated to or obtained by the Person serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith to be necessary, under the circumstances as provided in the Loan Documents) or in the absence of its own gross negligence or wilful misconduct (such absence to be presumed unless otherwise determined by a court of competent jurisdiction by a final and nonappealable judgment). The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof (stating that it is a “notice of default”) is given to the Administrative Agent by Holdings, the Borrower, a Lender or an Issuing Bank, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in this Agreement or any other Loan Document or the occurrence of any Default, (iv) the sufficiency, validity, enforceability, effectiveness or genuineness of this Agreement or any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere in this Agreement or any other Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent or satisfaction of any condition that expressly refers to the matters described therein being acceptable or satisfactory to the Administrative Agent. Notwithstanding anything herein to the contrary, the Administrative Agent shall not be liable for, or be responsible for any loss, cost or expense suffered by the Borrower or any Lender as a result of, any determination of the Revolving Exposure or the component amounts thereof or of the Weighted Average Yield.

The Administrative Agent shall be entitled to rely, and shall not incur any liability for relying, upon any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed or sent or otherwise authenticated by the proper Person (whether or not such Person in fact meets the requirements set

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forth in the Loan Documents for being the signatory, sender or authenticator thereof). The Administrative Agent also shall be entitled to rely, and shall not incur any liability for relying, upon any statement made to it orally or by telephone and believed by it to be made by the proper Person (whether or not such Person in fact meets the requirements set forth in the Loan Documents for being the signatory, sender or authenticator thereof), and may act upon any such statement prior to receipt of written confirmation thereof. In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, the Administrative Agent may presume that such condition is satisfactory to such Lender or such Issuing Bank unless the Administrative Agent shall have received notice to the contrary from such Lender or such Issuing Bank prior to the making of such Loan or the issuance of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any of and all its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any of and all their duties and exercise their rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with gross negligence or wilful misconduct in the selection of such sub-agents.

Subject to the terms of this paragraph, the Administrative Agent may resign at any time from its capacity as such. In connection with such resignation, the Administrative Agent shall give notice of its intent to resign to the Lenders, the Issuing Banks and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower (which shall not be unreasonably withheld or delayed), to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its intent to resign, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Banks, appoint a successor Administrative Agent, which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. The fees payable by Holdings and the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed by Holdings, the Borrower and such successor. Notwithstanding the foregoing, in the event no successor Administrative Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its intent to resign, the retiring Administrative Agent may give notice of the effectiveness of its resignation to the Lenders, the Issuing Banks and the Borrower, whereupon, on the date of effectiveness of such resignation stated in such notice, (a) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents;

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provided that, solely for purposes of maintaining any security interest granted to the Administrative Agent under any Security Document for the benefit of the Secured Parties, the retiring Administrative Agent shall continue to be vested with such security interest as collateral agent for the benefit of the Secured Parties and, in the case of any Collateral in the possession of the Administrative Agent, shall continue to hold such Collateral, in each case until such time as a successor Administrative Agent is appointed and accepts such appointment in accordance with this paragraph (it being understood and agreed that the retiring Administrative Agent shall have no duty or obligation to take any further action under any Security Document, including any action required to maintain the perfection of any such security interest), and (b) the Required Lenders shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent; provided that (i) all payments required to be made hereunder or under any other Loan Document to the Administrative Agent for the account of any Person other than the Administrative Agent shall be made directly to such Person and (ii) all notices and other communications required or contemplated to be given or made to the Administrative Agent shall also directly be given or made to each Lender and each Issuing Bank. Following the effectiveness of the Administrative Agent’s resignation from its capacity as such, the provisions of this Article and Section 9.03, as well as any exculpatory, reimbursement and indemnification provisions set forth in any other Loan Document, shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent and in respect of the matters referred to in the proviso under clause (a) above.

Each Lender and each Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent, the Arrangers or any other Lender or Issuing Bank, or any of the Related Parties of any of the foregoing, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and each Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent, the Arrangers or any other Lender or Issuing Bank, or any of the Related Parties of any of the foregoing, and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

Each Lender, by delivering its signature page to this Agreement on the Effective Date and funding its Loans on the Funding Date, or delivering its signature page to an Assignment and Assumption or any other Loan Document pursuant to which it shall become a Lender hereunder, shall be deemed to have acknowledged receipt of, and consented to and approved, this Agreement and each other Loan Document and each other document required to be delivered to, or be approved by or satisfactory to, the Administrative Agent or the Lenders on the Effective Date or the Funding Date.

Except with respect to the exercise of setoff rights of any Lender in accordance with Section 9.08 or with respect to a Lender’s right to file a proof of claim in an insolvency proceeding, no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce any Guarantee of the Obligations, it being understood and agreed that all powers, rights and remedies under the Loan Documents may be exercised solely by the Administrative Agent on behalf of the Secured Parties in accordance with the terms thereof. In the event of a foreclosure by the Administrative Agent on any of the Collateral pursuant to a public or private sale or other disposition, the Administrative Agent or any Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition, and the Administrative Agent, as agent for and representative of the Secured Parties (but not any Lender

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or Lenders in its or their respective individual capacities unless the Required Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Loan Document Obligations as a credit on account of the purchase price for any collateral payable by the Administrative Agent on behalf of the Secured Parties at such sale or other disposition.

In furtherance of the foregoing and not in limitation thereof, no Hedging Agreement the obligations under which constitute Secured Hedging Obligations will create (or be deemed to create) in favor of any Secured Party that is a party thereto any rights in connection with the management or release of any Collateral or of the obligations of any Loan Party under this Agreement or any other Loan Document except as expressly provided in the Collateral Agreement. By accepting the benefits of the Collateral, each Secured Party that is a party to any such Hedging Agreement shall be deemed to have appointed the Administrative Agent to serve as administrative agent and collateral agent under the Loan Documents and agreed to be bound by the Loan Documents as a Secured Party thereunder, subject to the limitations set forth in this paragraph.

The Secured Parties irrevocably authorize the Administrative Agent, at its option and in its discretion, to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 6.02(e). The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.

In case of the pendency of any proceeding with respect to any Loan Party under any Federal, State or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, the Administrative Agent (irrespective of whether the principal of any Loan or any LC Disbursement shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, LC Exposure and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Banks and the Administrative Agent (including any claim under Sections 2.12, 2.13, 2.15, 2.16, 2.17 and 9.03) allowed in such judicial proceeding; and

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such proceeding is hereby authorized by each Lender, each Issuing Bank and each other Secured Party to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, the Issuing Banks or the other Secured Parties, to pay to the Administrative Agent any amount due to it, in its capacity as the Administrative Agent, under the Loan Documents (including under Section 9.03).

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Notwithstanding anything herein to the contrary, neither the Arrangers nor any Person named on the cover page of this Agreement as a Syndication Agent shall have any duties or obligations under this Agreement or any other Loan Document (except in its capacity, as applicable, as a Lender or an Issuing Bank), but all such Persons shall have the benefit of the indemnities provided for hereunder.

The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Banks, and, except solely to the extent of the Borrower’s rights to consent pursuant to and subject to the conditions set forth in this Article, none of Holdings, the Borrower or any Subsidiary shall have any rights as a third party beneficiary of any such provisions. Each Secured Party, whether or not a party hereto, will be deemed, by its acceptance of the benefits of the Collateral and the Guarantees of the Obligations provided under the Loan Documents, to have agreed to the provisions of this Article.

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. (a) General. Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) of this Section), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax, as follows:

(i) if to Holdings or the Borrower, to it at Exelis Systems Corporation, 655 Space Center Drive, Colorado Springs, Colorado 80915, Attention of Matt Klein, Chief Financial Officer (Fax No.: (719) 637-4150; email: matt.klein@exelisinc.com), with a copy to Exelis Systems Corporation, 655 Space Center Drive, Colorado Springs, Colorado 80915, Attention of Michele Tyler, Vice President and General Counsel (Fax No.: (719) 637-5986; email: michele.tyler@exelisinc.com);

(ii) if to the Administrative Agent in respect of Borrowings denominated in dollars and all other matters, to it at JPMorgan Chase Bank, N.A., Loan and Agency Services Group, 10 South Dearborn Street, L2, Chicago, Illinois 60603, Attention of Leonida Mischke (Fax No.: (888) 292-9533; email: Jpm.agency.servicing.4@jpmchase.com), with a copy to JPMorgan Chase Bank, N.A., 2200 Ross Avenue, Floor 3, Dallas, Texas 75201, Attention of Brandon Watkins (Fax No.: (214) 965-2044);

(iii) if to the Administrative Agent in respect of Borrowings denominated in any Permitted Foreign Currency, to it at J.P. Morgan Europe Limited, Loans Agency 6th Floor, 25 Bank Street, Canary Wharf, London E145JP, United Kingdom, Attention of Loans Agency (Fax No: 44 207 777 2360; Email: loan_and_agency_london@jpmorgan.com);

(iv) if to any Issuing Bank, to it at its address (or fax number) most recently specified by it in a notice delivered to the Administrative Agent, Holdings and the Borrower (or, in the absence of any such notice, to the address (or fax number) set forth in the Administrative Questionnaire of the Lender that is serving as such Issuing Bank or is an Affiliate thereof);

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(v) if to the Swingline Lender, to it at (A) in the case of JPMorgan Chase Bank, N.A., JPMorgan Chase Bank, N.A., Loan and Agency Services Group, 10 South Dearborn Street, L2, Chicago, Illinois 60603, Attention of Leonida Mischke (Fax No.: (888) 292-9533; email: Jpm.agency.servicing.4@jpmchase.com), with a copy to JPMorgan Chase Bank, N.A., 2200 Ross Avenue, Floor 3, Dallas, Texas 75201, Attention of Brandon Watkins (Fax No.: (214) 965-2044); and (B) in the case of any other Swingline Lender, to it at its address (or fax number) set forth in the applicable joinder agreement contemplated by the definition of “Swingline Lenders”; and

(vi) if to any other Lender, to it at its address (or fax number) set forth in its Administrative Questionnaire.

Notices and communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by fax shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications, to the extent provided in paragraph (b) of this Section, shall be effective as provided in such paragraph.

(b) Electronic Communications. Notices and other communications to the Lenders and the Issuing Banks hereunder may be delivered or furnished by electronic communication (including e-mail and Internet and intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices under Article II to any Lender or any Issuing Bank if such Lender or such Issuing Bank, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent, Holdings or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications or may be rescinded by any such Person by notice to each other such Person.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment) and (ii) notices and other communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefore; provided that, for both clauses (i) and (ii) above, if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient.

(c) Change of Address, etc. Any party hereto may change its address or fax number for notices and other communications hereunder by notice to the other parties hereto.

(d) Platform. Holdings and the Borrower agree that the Administrative Agent may, but shall not be obligated to, make any Communications by posting such Communication on Debt Domain, IntraLinks, SyndTrak or a substantially similar electronic

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transmission system (the “Platform”). The Platform is provided “as is” and “as available”. Neither the Administrative Agent nor any of its Related Parties warrants, or shall be deemed to warrant, as to the adequacy of the Platform and each such Person expressly disclaims any liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made, or shall be deemed to be made, by the Administrative Agent or any of its Related Parties in connection with the Communications or the Platform.

SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Without limiting the generality of the foregoing, the execution and delivery of this Agreement, the making of a Loan or the issuance, amendment, renewal or extension of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time. No notice or demand on Holdings or the Borrower in any case shall entitle Holdings or the Borrower to any other or further notice or demand in similar or other circumstances.

(b) Except as provided in Sections 2.21, 2.22, 2.23 and 9.02(c), none of this Agreement, any other Loan Document or any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings, the Borrower, the Administrative Agent and the Required Lenders and, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, in each case without the written consent of each Lender affected thereby, (iii) postpone the scheduled maturity date of any Loan, or the date of any scheduled payment of the principal amount of any Term Loan under Section 2.10 or the applicable Incremental Facility Amendment or the required date of reimbursement of any LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change any of the provisions of this Section or the percentage set forth in the definition of the term “Required Lenders” or any other provision of this Agreement or any other Loan Document specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or otherwise modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as applicable); provided that, with the consent of the Required Lenders, the provisions of this Section and the

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definition of the term “Required Lenders” may be amended to include references to any new class of loans created under this Agreement (or to lenders extending such loans) on substantially the same basis as the corresponding references relating to the existing Classes of Loans or Lenders, (v) release the Guarantee provided by Holdings under the Collateral Agreement or release all or substantially all of the value of the Guarantees provided by the Subsidiary Loan Parties under the Collateral Agreement, in each case without the written consent of each Lender (except as expressly provided in Section 9.14 or the Collateral Agreement (including any such release by the Administrative Agent in connection with any sale or other disposition of any Subsidiary upon the exercise of remedies under the Security Documents), it being understood and agreed that an amendment or other modification of the type of obligations guaranteed under the Collateral Agreement shall not be deemed to be a release of any Guarantee), (vi) release all or substantially all the Collateral from the Liens of the Security Documents without the written consent of each Lender (except as expressly provided in Section 9.14 or the applicable Security Document (including any such release by the Administrative Agent in connection with any sale or other disposition of the Collateral upon the exercise of remedies under the Security Documents), it being understood and agreed that an amendment or other modification of the type of obligations secured by the Security Documents shall not be deemed to be a release of the Collateral from the Liens of the Security Documents), (vii) change any provisions of this Agreement or any other Loan Document in a manner that by its terms adversely affects the rights in respect of Collateral securing the obligations owed to, or payments due to, Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders representing a Majority in Interest of each affected Class or (viii) change the rights of the Tranche A Term Lenders to decline mandatory prepayments as provided in Section 2.11 or the rights of any Additional Lenders of any Class to decline mandatory prepayments of Term Loans of such Class as provided in the applicable Incremental Facility Amendment, without the written consent of Tranche A Term Lenders or Additional Lenders of such Class, as applicable, holding a majority of the outstanding Tranche A Term Loans or Incremental Term Loans of such Class, as applicable; provided further that (A) no such agreement shall amend, modify, extend or otherwise affect the rights or obligations of the Administrative Agent, any Issuing Bank or any Swingline Lender without the prior written consent of the Administrative Agent, such Issuing Bank or such Swingline Lender, as applicable, (B) any waiver, amendment or other modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Lenders of one or more Classes (but not the Lenders of any other Class) may be effected by an agreement or agreements in writing entered into by Holdings, the Borrower and the requisite number or percentage in interest of each affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time and (C) if the terms of any waiver, amendment or other modification of this Agreement or any other Loan Document provide that any Class of Loans (together with all accrued interest thereon and all accrued fees payable with respect to the Commitments of such Class) will be repaid or paid in full, and the Commitments of such Class (if any) terminated, as a condition to the effectiveness of such waiver, amendment or other modification, then so long as the Loans of such Class (together with such accrued interest and fees) are in fact repaid or paid in full and such Commitments are in fact terminated, in each case prior to or substantially simultaneously with the effectiveness of such amendment, then such Loans and Commitments shall not be included in the determination of the Required Lenders with respect to such amendment. Notwithstanding any of the foregoing, (1) no consent with respect to any waiver, amendment or other modification of this Agreement or any other Loan Document shall be required of any Defaulting Lender, except with respect to any waiver, amendment or other modification referred to in clause (i), (ii) or (iii) of the first proviso of this paragraph

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and then only in the event such Defaulting Lender shall be affected by such waiver, amendment or other modification, (2) any provision of this Agreement or any other Loan Document may be amended by an agreement in writing entered into by the Borrower and the Administrative Agent to cure any ambiguity, omission, mistake, defect or inconsistency so long as, in each case, the Lenders shall have received at least five Business Days prior written notice thereof and the Administrative Agent shall not have received, within five Business Days of the date of such notice to the Lenders, a written notice from (x) the Required Lenders stating that the Required Lenders object to such amendment or (y) if affected by such amendment, any Swingline Lender or any Issuing Bank stating that it objects to such amendment, (3) this Agreement may be amended to provide for Incremental Extensions of Credit in the manner contemplated by Section 2.21, the extension of the Maturity Date as provided in Section 2.22 and the incurrence of Refinancing Revolving Commitments and Refinancing Term Loans as provided in Section 2.23, in each case without any additional consents and (4) no agreement referred to in the immediately preceding sentence shall waive any condition set forth in Section 4.03 without the written consent of the Majority in Interest of the Revolving Lenders (it being understood and agreed that any amendment or waiver of, or any consent with respect to, any provision of this Agreement (other than any waiver expressly relating to Section 4.03) or any other Loan Document, including any amendment of an affirmative or negative covenant set forth herein or in any other Loan Document or any waiver of a Default or an Event of Default, shall not be deemed to be a waiver of any condition set forth in Section 4.03).

(c) In connection with any proposed amendment, modification, waiver or termination (a “Proposed Change”) requiring the consent of all Lenders or all affected Lenders, if the consent of the Required Lenders (and, to the extent any Proposed Change requires the consent of Lenders holding Loans of any Class pursuant to clause (iv) of paragraph (b) of this Section, the consent of a majority in interest of the outstanding Loans and unused Commitments of such Class) to such Proposed Change is obtained, but the consent to such Proposed Change of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in paragraph (b) of this Section being referred to as a “Non-Consenting Lender” for purposes of this clause (c)), then the Borrower may, at its sole expense and effort, upon notice to such Non-Consenting Lender and the Administrative Agent, require such Non-Consenting Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) if the Administrative Agent is not such Non-Consenting Lender, the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, each Issuing Bank and each Swingline Lender), which consent shall not unreasonably be withheld or delayed, (ii) such Non-Consenting Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder from the assignee (in the case of such principal and accrued interest and fees) or the Borrower (in the case of all other amounts, (iii) the Borrower or such assignee shall have paid to the Administrative Agent the processing and recordation fee specified in Section 9.04(b), (iv) such assignment does not conflict with applicable law and (v) the assignee shall have given its consent to such Proposed Change and, as a result of such assignment and delegation and any contemporaneous assignments and delegations and consents, such Proposed Change can be effected. Any assignment required pursuant to this Section 9.02(c) may be effected pursuant to an Assignment and Assumption executed by the Borrower, the Administrative Agent and the assignee, and the Lender required to make such assignment shall not be required to be a party to such Assignment and Assumption.

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(d) Notwithstanding anything herein to the contrary, the Administrative Agent may, without the consent of any Secured Party, consent to a departure by any Loan Party from any covenant of such Loan Party set forth in this Agreement, the Collateral Agreement or any other Security Document to the extent such departure is consistent with the authority of the Administrative Agent set forth in Section 5.11, the definition of the term “Collateral and Guarantee Requirement” or as otherwise expressly provided in the Loan Documents.

(e) The Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute waivers, amendments or other modifications on behalf of such Lender. Any waiver, amendment or other modification effected in accordance with this Section, shall be binding upon each Person that is at the time thereof a Lender and each Person that subsequently becomes a Lender.

SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) Holdings and the Borrower shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, the Arrangers, the Syndication Agents and their respective Affiliates, including the reasonable and documented fees, charges and disbursements of one firm of counsel for the foregoing (and, if reasonably necessary, one firm of local counsel in each relevant jurisdiction (which may include a single firm of special counsel acting in multiple jurisdictions) for the foregoing), in connection with the structuring, arrangement and syndication of the credit facilities provided for herein and any credit or similar facility refinancing or replacing, in whole or in part, any of the credit facilities provided for herein, as well as the preparation, negotiation, execution, delivery and administration of this Agreement, the other Loan Documents or any waiver, amendment or modification of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable and documented out-of-pocket expenses incurred by any Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, any Issuing Bank or any Lender, including the reasonable and documented fees, charges and disbursements of one firm of counsel for the foregoing, taken as a whole (and, if reasonably necessary, one firm of local counsel in each relevant jurisdiction (which may include a single firm of special counsel acting in multiple jurisdictions) for the foregoing) and, in the case of an actual or perceived conflict of interest where any such Person affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of another firm of counsel for such affected Person (and, if reasonably necessary, one firm of local counsel in each relevant jurisdiction (which may include a single firm of special counsel acting in multiple jurisdictions) for such affected Person), in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) Holdings and the Borrower shall indemnify the Administrative Agent, the Arrangers, the Syndication Agents, the Lenders, the Issuing Banks and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”), against, and hold each Indemnitee harmless from, any and all losses, claims, damages, penalties, liabilities and related expenses (including the reasonable and

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documented fees, charges and disbursements of one firm of counsel for all such Indemnitees, taken as a whole, and, if reasonably necessary, of one firm of local counsel in each relevant jurisdiction (which may include a single firm of special counsel acting in multiple jurisdictions) for all such Indemnitees, taken as a whole (and, in the case of an actual or perceived conflict of interest where the Indemnitee affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of another firm of counsel for such affected Indemnitee and, if reasonably necessary, of a single firm of local counsel in each appropriate jurisdiction (which may include a single firm of special counsel acting in multiple jurisdictions) for such affected Indemnitee)), incurred by or asserted against such Indemnitees arising out of, in connection with or as a result of any actual or prospective claim, litigation, investigation or proceeding relating to (i) the structuring, arrangement and syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement, the other Loan Documents or any other agreement or instrument contemplated hereby or thereby, the performance by the parties to this Agreement or the other Loan Documents of their respective obligations hereunder or thereunder or the consummation of the Transactions or any other transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by any Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit) or (iii) any actual or alleged presence or Release of Hazardous Materials on, at, to or from any Mortgaged Property or any other property currently or formerly owned or operated by Holdings, the Borrower or any Subsidiary, or any other Environmental Liability related in any way to Holdings, the Borrower or any Subsidiary, in each case, whether based on contract, tort or any other theory and whether initiated against or by any party to this Agreement or any other Loan Document, any Affiliate of any of the foregoing or any third party (and regardless of whether any Indemnitee is a party thereto); provided that the foregoing indemnity shall not, as to any Indemnitee, apply to any losses, claims, damages, liabilities or related expenses to the extent they are found in a final and non-appealable judgment of a court of competent jurisdiction to have resulted from (A) the bad faith, wilful misconduct or gross negligence of such Indemnitee or any such Indemnitee’s Related Parties, (B) a claim brought by Holdings, the Borrower or any Subsidiary against such Indemnitee for material breach of such Indemnitee’s obligations under this Agreement or any other Loan Document or (C) a proceeding that does not involve an act or omission by Holdings, the Borrower or any of their respective Affiliates and that is brought by an Indemnitee against any other Indemnitee (other than a proceeding that is brought against the Administrative Agent or any other agent or any Arranger in its capacity or in fulfilling its roles as an agent or arranger hereunder or any similar role with respect to the Indebtedness incurred or to be incurred hereunder). This paragraph shall not apply with respect to Taxes other than any Taxes that represent losses, claims or damages arising from any non-Tax claim.

(c) To the extent that Holdings and the Borrower fail to indefeasibly pay any amount required to be paid by them under paragraph (a) or (b) of this Section to the Administrative Agent, any Issuing Bank, any Swingline Lender or any Related Party of any of the foregoing (and without limiting their obligation to do so), each Lender severally agrees to pay to the Administrative Agent, such Issuing Bank, such Swingline Lender or such Related Party, as applicable, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount (it being understood and agreed that the Borrower’s failure to pay any such amount shall not relieve the Borrower of any default in the payment thereof); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as applicable, was

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incurred by or asserted against the Administrative Agent, such Issuing Bank or such Swingline Lender in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent, any Issuing Bank or any Swingline Lender in connection with such capacity; provided further that, with respect to such unpaid amounts owed to any Issuing Bank or any Swingline Lender in its capacity as such, or to any Related Party of any of the foregoing acting for any Issuing Bank or any Swingline Lender in connection with such capacity, only the Revolving Lenders shall be required to pay such unpaid amounts. For purposes of this Section, a Lender’s “pro rata share” shall be determined by its share of the sum of the total Revolving Exposure, unused Revolving Commitments and, except for purposes of the second proviso of the immediately preceding sentence, the outstanding Term Loans and unused Term Commitments, in each case at that time. The obligations of the Lenders under this paragraph are subject to the last sentence of Section 2.02(a) (which shall apply mutatis mutandis to the Lenders’ obligations under this paragraph).

(d) To the fullest extent permitted by applicable law, (i) neither Holdings nor the Borrower shall assert, or permit any of their respective Affiliates or Related Parties to assert, and each hereby waives, any claim against any Indemnitee for any damages arising from the use by others of information or other materials obtained through telecommunications, electronic or other information transmission systems (including the Internet), except to the extent such damages are found in a final and non-appealable judgment of a court of competent jurisdiction to have resulted from the bad faith, wilful misconduct or gross negligence of any Indemnitee or Related Party of any Indemnitee or (ii) neither any Indemnitee nor any other party to this Agreement or any other Loan Document shall be liable for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof; provided that nothing in this clause (ii) shall limit the expense reimbursement and indemnification obligations of Holdings and the Borrower set forth in paragraphs (a) and (b) of this Section 9.03.

(e) All amounts due under this Section shall be payable promptly after written demand therefor.

SECTION 9.04. Successors and Assigns. (a) General. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), except that (i) neither Holdings nor the Borrower may assign, delegate or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender (and any attempted assignment, delegation or transfer by Holdings or the Borrower without such consent shall be null and void) and (ii) no Lender may assign, delegate or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section), the Arrangers, the Syndication Agents and, to the extent expressly contemplated hereby, the Related Parties of any of the Administrative Agent, any Arranger, any Syndication Agent, any Issuing Bank and any Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.

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(b) Assignments by Lenders. (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign and delegate to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of (A) the Borrower; provided that no consent of the Borrower shall be required (1) (x) with respect to Term Commitments or Term Loans, for an assignment and delegation to a Lender, an Affiliate of a Lender or an Approved Fund and (y) with respect to Revolving Commitments or Revolving Loans, for an assignment and delegation to a Revolving Lender, an Affiliate of a Revolving Lender or an Approved Fund in respect of a Revolving Lender and (2) if an Event of Default has occurred and is continuing, for any other assignment and delegation; provided further that the Borrower shall be deemed to have consented to any such assignment and delegation unless it shall object thereto by written notice to the Administrative Agent within five Business Days after having received notice thereof, (B) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment and delegation of all or any portion of a Term Commitment or Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund, (C) each Issuing Bank, in the case of any assignment and delegation of all or a portion of a Revolving Commitment or any Lender’s obligations in respect of its LC Exposure and (D) each Swingline Lender, in the case of any assignment and delegation of all or a portion of a Revolving Commitment or any Lender’s obligations in respect of its Swingline Exposure.

(ii) Assignments and delegations shall be subject to the following additional conditions: (A) except in the case of an assignment and delegation to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment and delegation of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment and delegation (determined as of the trade date specified in the Assignment and Assumption with respect to such assignment and delegation or, if no trade date is so specified, as of the date the Assignment and Assumption with respect to such assignment and delegation is delivered to the Administrative Agent) shall not be less than $5,000,000 or, in the case of Term Loans, $1,000,000 (treating contemporaneous assignments by or to two or more Approved Funds as a single assignment for purposes of such minimum transfer amount), unless each of the Borrower and the Administrative Agent otherwise consents (such consent not to be unreasonably withheld or delayed); provided that no such consent of the Borrower shall be required if an Event of Default of the type set forth in Section 7.01(a), (b), (h) or (i) has occurred and is continuing, (B) each partial assignment and delegation shall be made as an assignment and delegation of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement; provided that this clause (B) shall not be construed to prohibit the assignment and delegation of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans, (C) the parties to each assignment and delegation shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; provided that (1) only one such processing and recordation fee shall be payable in the event of simultaneous assignments and delegations by or to two or more Approved Funds, (2) the Administrative Agent may waive or reduce such fee in its sole discretion and (3) with respect to any assignment and delegation pursuant to Section 2.19(b) or 9.02(c), the parties hereto agree that such assignment and delegation may be effected pursuant to an Assignment and Assumption executed by the Borrower, the Administrative Agent and the assignee and that the Lender required to make such assignment and delegation need not

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be a party thereto, and (D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent any tax forms required by Section 2.17(f) and an Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-level information (which may contain MNPI) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable law, including Federal, State and foreign securities laws.

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(v) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned and delegated by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned and delegated by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of (and subject to the obligations and limitations of) Sections 2.15, 2.16, 2.17 and 9.03 and to any fees payable hereunder that have accrued for such Lender’s account but have not yet been paid). Any assignment, delegation or other transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 9.04(c).

(iv) The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount (and stated interest) of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and Holdings, the Borrower, the Administrative Agent, the Issuing Banks and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and, as to entries pertaining to it, any Issuing Bank or any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(v) Upon receipt by the Administrative Agent of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire and any tax forms required by Section 2.17(f) (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment and delegation required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register; provided that the Administrative Agent shall not be required to accept such Assignment and Assumption or so record the information contained therein if the Administrative Agent reasonably believes that such Assignment and Assumption lacks any written consent required by this Section or is otherwise not in proper form, it being acknowledged that the Administrative Agent shall have no duty or obligation (and shall incur no liability) with respect to obtaining (or confirming the receipt) of any such written consent or with respect to the form of (or any defect in) such Assignment and Assumption, any such duty and obligation being solely with the

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assigning Lender and the assignee. No assignment or delegation shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph and, following such recording, unless otherwise determined by the Administrative Agent (such determination to be made in the sole discretion of the Administrative Agent, which determination may be conditioned on the consent of the assigning Lender and the assignee), shall be effective notwithstanding any defect in the Assignment and Assumption relating thereto. Each assigning Lender and the assignee, by its execution and delivery of an Assignment and Assumption, shall be deemed to have represented to the Administrative Agent that all written consents required by this Section with respect thereto (other than the consent of the Administrative Agent) have been obtained and that such Assignment and Assumption is otherwise duly completed and in proper form, and each assignee, by its execution and delivery of an Assignment and Assumption, shall be deemed to have represented to the assigning Lender and the Administrative Agent that such assignee is an Eligible Assignee.

(vi) The words “execution”, “signed”, “signature” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as applicable, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act or any other similar State laws based on the Uniform Electronic Transactions Act.

(c) Participations. Any Lender may, without the consent of the Borrower, the Administrative Agent, any Issuing Bank or any Swingline Lender, sell participations to one or more Eligible Assignees (each, a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitments and Loans of any Class); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) Holdings, the Borrower, the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant or requires the approval of all the Lenders. Holdings and the Borrower agree that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 (subject to the requirements and limitations therein, including the requirements under Section 2.17(f) (it being understood and agreed that the documentation required under Section 2.17(f) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment and delegation pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Sections 2.18 and 2.19 as if it were an assignee under paragraph (b) of this Section and (B) shall not be entitled to receive any greater payment under Section 2.15 or 2.17, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a

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participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement or any other Loan Document (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under this Agreement or any other Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(d) Certain Pledges. Any Lender may, without the consent of the Borrower, the Administrative Agent, any Issuing Bank or any Swingline Lender, at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any other central bank having jurisdiction over such Lender, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(e) Purchasing Borrower Parties. Notwithstanding anything else to the contrary contained in this Agreement (including the definition of “Eligible Assignee”), any Lender may assign and delegate all or a portion of its Term Loans to any Purchasing Borrower Party (x) through open market purchases made by such Purchasing Borrower Party on a non-pro rata basis (subject to clause (v) below) or (y) otherwise pursuant to an Auction Purchase Offer in accordance with clauses (i) through (vii) below (which assignment and delegation, in the case of the foregoing clauses (x) and (y), will not constitute a prepayment of Loans for any purposes of this Agreement and the other Loan Documents); provided that, in the case of assignments and delegations made pursuant to the foregoing clause (y):

(i) no Default or Event of Default has occurred and is continuing or would result therefrom;

(ii) each Auction Purchase Offer shall be conducted in accordance with the procedures, terms and conditions set forth in this paragraph and the Auction Procedures;

(iii) the assigning Lender and Purchasing Borrower Party purchasing such Lender’s Term Loans, as applicable, shall execute and deliver to the Administrative Agent an Affiliated Lender Assignment and Assumption in lieu of an Assignment and Assumption;

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(iv) for the avoidance of doubt, the Lenders shall not be permitted to assign or delegate Revolving Commitments or Revolving Exposure to a Purchasing Borrower Party;

(v) to the extent permitted by applicable law and not giving rise to any adverse tax consequence, any Term Loans assigned and delegated to any Purchasing Borrower Party shall be automatically and permanently cancelled upon the effectiveness of such assignment and delegation and will thereafter no longer be outstanding for any purpose hereunder (it being understood and agreed that (A) except as expressly set forth in any such definition, any gains or losses by any Purchasing Borrower Party upon purchase or acquisition and cancellation of such Term Loans shall not be taken into account in the calculation of Excess Cash Flow, Consolidated Net Income and Consolidated EBITDA and (B) any purchase of Term Loans pursuant to this paragraph (e) shall not constitute a voluntary prepayment of Term Loans for purposes of this Agreement);

(vi) the Purchasing Borrower Party shall either (A) not have any MNPI that has not been disclosed to the assigning Lender (other than any such Lender that does not wish to receive MNPI) on or prior to the date of any initiation of an Auction by such Purchasing Borrower Party or (B) advise the assigning Lender that it cannot make the statement in the foregoing clause (A), except to the extent that such Lender has entered into a customary “big boy” letter with Holdings or the Borrower; and

(vii) no Purchasing Borrower Party may use the proceeds from Revolving Loans to purchase any Term Loans.

SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in this Agreement and the other Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the other Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Arrangers, any Syndication Agent, any Issuing Bank, any Lender or any Affiliate of any of the foregoing may have had notice or knowledge of any Default or incorrect representation or warranty at the time this Agreement or any other Loan Document is executed and delivered or any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any LC Exposure is outstanding and so long as the Commitments have not expired or terminated. Notwithstanding the foregoing or anything else to the contrary set forth in this Agreement or any other Loan Document, in the event that, in connection with the refinancing or repayment in full of the credit facilities provided for herein, an Issuing Bank shall have provided to the Administrative Agent a written consent to the release of the Revolving Lenders from their obligations hereunder with respect to any Letter of Credit issued by such Issuing Bank (whether as a result of the obligations of the Borrower (and any other account party) in respect of such Letter of Credit having been collateralized in full by a deposit of cash with such Issuing Bank, or being supported by a letter of credit that names such Issuing Bank as the beneficiary thereunder, or otherwise), then from and after such time such Letter of Credit shall cease to be a “Letter of Credit” outstanding hereunder for all purposes of this Agreement and the other Loan Documents, and the Revolving Lenders shall be deemed to have no participations in such Letter of Credit, and no obligations with respect thereto, under Section 2.05(d) or 2.05(e). The provisions of Sections

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2.15, 2.16, 2.17, 2.18(e), 2.18(f) and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment or prepayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent or the syndication of the Loans and Commitments constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission or other electronic imaging shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each Issuing Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) or other amounts at any time held and other obligations (in whatever currency) at any time owing by such Lender or such Issuing Bank to or for the credit or the account of Holdings or the Borrower against any of and all the obligations then due of Holdings or the Borrower now or hereafter existing under this Agreement held by such Lender or such Issuing Bank, irrespective of whether or not such Lender or such Issuing Bank shall have made any demand under this Agreement and although such obligations of Holdings or the Borrower are owed to a branch or office of such Lender or such Issuing Bank different from the branch or office holding such deposit or obligated on such Indebtedness. Each Lender and each Issuing Bank agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give or any delay in giving such notice shall not affect the validity of any such setoff and application under this Section. The rights of each Lender and each Issuing Bank under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or such Issuing Bank may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transactions contemplated hereby shall be governed by, and construed in accordance with, the law of the State of New York.

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(b) Each of Holdings and the Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Administrative Agent, any Lender, any Issuing Bank or any Related Party of any of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of such courts and agrees that all claims in respect of any action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such Federal court. Each party hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, any Lender or any Issuing Bank may otherwise have to bring any action, litigation or proceeding relating to this Agreement or any other Loan Document against any Loan Party or any of its properties in the courts of any jurisdiction.

(c) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action, litigation or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

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SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Lenders and the Issuing Banks agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Related Parties, including accountants, legal counsel and other agents and advisors, it being understood and agreed that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential, (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such Person or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies under this Agreement or any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing confidentiality undertakings substantially similar to those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its Related Parties) to any Hedging Agreement relating to Holdings, the Borrower or any Subsidiary and its obligations hereunder or under any other Loan Document, (g) on a confidential basis to (i) any rating agency in connection with rating the Borrower or its Subsidiaries or the credit facilities provided for herein or (ii) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of CUSIP numbers with respect to the credit facilities provided for herein, (h) with the consent of the Borrower, (i) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, any Lender or any Issuing Bank or any Affiliate of any of the foregoing on a nonconfidential basis from a source other than Holdings or the Borrower or (j) to any credit insurance provider relating to the Borrower or its Obligations. For purposes of this Section, “Information” means all information received from Holdings or the Borrower relating to Holdings, the Borrower or any Subsidiary or their businesses, other than any such information that is available to the Administrative Agent, any Lender or any Issuing Bank on a nonconfidential basis prior to disclosure by Holdings or the Borrower. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan or participation in any LC Disbursement, together with all fees, charges and other amounts that are treated as interest on such Loan or LC Disbursement or participation therein under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or LC Disbursement or participation therein in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan or LC Disbursement or participation therein but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or LC Disbursements or participation therein or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

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SECTION 9.14. Release of Liens and Guarantees. Subject to the reinstatement provisions set forth in the Collateral Agreement, a Subsidiary Loan Party shall automatically be released from its obligations under the Loan Documents, and all security interests created by the Security Documents in Collateral owned by such Subsidiary Loan Party shall be automatically released, upon the consummation of any transaction permitted by this Agreement as a result of which such Subsidiary Loan Party ceases to be a Designated Subsidiary; provided that, if so required by this Agreement, the Required Lenders shall have consented to such transaction and the terms of such consent shall not have provided otherwise. Upon any sale or other transfer by any Loan Party (other than to Holdings, the Borrower or any other Loan Party) of any Collateral in a transaction permitted under this Agreement, or upon the effectiveness of any written consent to the release of the security interest created under any Security Document in any Collateral pursuant to Section 9.02, the security interests in such Collateral created by the Security Documents shall be automatically released. In connection with any termination or release pursuant to this Section, the Administrative Agent shall execute and deliver to any Loan Party, at such Loan Party’s expense, all documents that such Loan Party shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section shall be without recourse to or warranty by the Administrative Agent. Each of the Secured Parties irrevocably authorizes the Administrative Agent, at its option and in its discretion, to effect the releases set forth in this Section.

SECTION 9.15. USA PATRIOT Act Notice. Each Lender, each Issuing Bank and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Loan Party that, pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender, such Issuing Bank or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the USA PATRIOT Act, and each Loan Party agrees to provide such information from time to time to such Lender, such Issuing Bank and the Administrative Agent, as applicable. This notice is given in accordance with the requirements of the USA PATRIOT Act and is effective for the Administrative Agent and each Lender.

SECTION 9.16. No Fiduciary Relationship. Each of Holdings and the Borrower, on behalf of itself and its subsidiaries, agrees that in connection with all aspects of the transactions contemplated hereby and any communications in connection therewith, Holdings, the Borrower, the Subsidiaries and their respective Affiliates, on the one hand, and the Administrative Agent, the Arrangers, the Syndication Agents, the Lenders, the Issuing Banks and their respective Affiliates, on the other hand, will have a business relationship that does not create, by implication or otherwise, any fiduciary duty on the part of the Administrative Agent, the Arrangers, the Syndication Agents, the Lenders, the Issuing Banks or their respective Affiliates, and no such duty will be deemed to have arisen in connection with any such transactions or communications. The Administrative Agent, the Arrangers, the Syndication Agents, the Lenders, the Issuing Banks and their respective Affiliates may be engaged, for their own accounts or the accounts of customers, in a broad range of transactions that involve interests that differ from those of Holdings, the Borrower, the Subsidiaries and their respective Affiliates, and none of the Administrative Agent, the Arrangers, the Syndication Agents, the Lenders, the Issuing Banks or any of their respective Affiliates has any obligation to disclose any of such interests to Holdings, the Borrower, the Subsidiaries or any of their respective Affiliates. To the fullest extent permitted by law, each of Holdings and the Borrower hereby waives and releases any claims that it or any of its Affiliates may have against the Administrative Agent, the Arrangers, the Syndication Agents, the Lenders, the Issuing Banks or any of their respective Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

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SECTION 9.17. Non-Public Information. (a) Each Lender acknowledges that all information, including requests for waivers and amendments, furnished by Holdings, the Borrower or the Administrative Agent pursuant to or in connection with, or in the course of administering, this Agreement will be syndicate-level information, which may contain MNPI. Each Lender represents to Holdings, the Borrower and the Administrative Agent that (i) it has developed compliance procedures regarding the use of MNPI and that it will handle MNPI in accordance with such procedures and applicable law, including Federal, State and foreign securities laws, and (ii) it has identified in its Administrative Questionnaire a credit contact who may receive information that may contain MNPI in accordance with its compliance procedures and applicable law, including Federal, State and foreign securities laws.

(b) Holdings, the Borrower and each Lender acknowledge that, if information furnished by Holdings or the Borrower pursuant to or in connection with this Agreement is being distributed by the Administrative Agent through the Platform, (i) the Administrative Agent may post any information that Holdings or the Borrower has indicated as containing MNPI solely on that portion of the Platform as is designated for Private Side Lender Representatives and (ii) if Holdings or the Borrower has not indicated whether any information furnished by it pursuant to or in connection with this Agreement contains MNPI, the Administrative Agent reserves the right to post such information solely on that portion of the Platform as is designated for Private Side Lender Representatives. Each of Holdings and the Borrower agrees to clearly designate all information provided to the Administrative Agent by or on behalf of Holdings or the Borrower that is suitable to be made available to Public Side Lender Representatives, and the Administrative Agent shall be entitled to rely on any such designation by Holdings and the Borrower without liability or responsibility for the independent verification thereof.

SECTION 9.18. Authorization to Distribute Certain Materials to Public-Siders; Security Clearances. (a) If the Borrower does not file this Agreement with the SEC, then the Borrower hereby authorizes the Administrative Agent to distribute the execution version of this Agreement and the Loan Documents to all Lenders, including their Public Side Lender Representatives. The Borrower acknowledges its understanding that Lenders, including their Public Side Lender Representatives, may be trading in securities of the Borrower and its Affiliates while in possession of the Loan Documents.

(b) To the extent that any of the executed Loan Documents constitutes at any time material non-public information within the meaning of the Federal and state securities laws after the date hereof, the Borrower agrees that it will promptly make such information publicly available by press release or public filing with the SEC.

(c) Notwithstanding anything in this Agreement or any Loan Document to the contrary, no Loan Party or Restricted Subsidiary shall be required to provide or deliver any information, give any notice or permit the Administrative Agent or any Lender or any of their respective representatives to visit and inspect its properties or to examine and make extracts from its books and records, if the Borrower reasonably determines that providing or delivering such information, giving such notice or granting such permission could reasonably be expected to (x) result in the withdrawal, revocation, suspension or other compromise of any security clearance of Holdings or subsidiary of Holdings or any individual employed by or otherwise working for Holdings or any subsidiary of Holdings or (y) result in a violation of any Requirement of Law.

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[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

VECTRUS, INC.,
	by
		Name: Title:
EXELIS SYSTEMS CORPORATION,
	by
		Name: Title:
JPMORGAN CHASE BANK, N.A., individually as a Lender and as Administrative Agent, an Issuing Bank and a Swingline Lender,
	by
		Name: Title:

141

SIGNATURE PAGE TO

THE CREDIT AGREEMENT OF

EXELIS SYSTEMS CORPORATION

Name of Institution:
	by
		Name: Title:
For any Lender requiring a second signature block:
	by
		Name: Title:

Schedule 1.01

Existing Letters of Credit

Bank Security #	Issuer	Applicant	Beneficiary	Face Amount
TFTS-807030	JPMorgan Chase Bank, N.A.	ITT Corporation	National Bank of Kuwait	KWD $250,000
P-226181	JPMorgan Chase Bank, N.A.	ITT Federal Services International	National Bank of Kuwait	KWD $175,000

Schedule 1.02

Mortgaged Property

None.

Schedule 2.01

Commitments¹

Revolving Commitments

Lender	Amount
JPMorgan Chase Bank, N.A.	$	14,000,000.00
SunTrust Bank		13,935,000.00
U.S. Bank National Association		13,935,000.00
Citibank, N.A.		7,000,000.00
Bank of the West		5,230,000.00
Northern Trust		5,230,000.00
Synovus Bank		5,230,000.00
Barclays Bank PLC		3,480,000.00
American Savings Bank		3,480,000.00
Banco Sabadell		3,480,000.00
TOTAL	$	75,000,000.00

Tranche A Term Commitments

Lender	Amount
JPMorgan Chase Bank, N.A.	$	24,500,000.00
SunTrust Bank		24,315,000.00
U.S. Bank National Association		24,315,000.00
Citibank, N.A.		13,000,000.00
Bank of the West		9,770,000.00
Northern Trust		9,770,000.00
Synovus Bank		9,770,000.00
Barclays Bank PLC		6,520,000.00
American Savings Bank		6,520,000.00
Banco Sabadell		6,520,000.00
United Bank		5,000,000.00
TOTAL	$	140,000,000.00

¹  Exact legal names of each committing bank to be confirmed by the Lenders.

Schedule 3.14

Subsidiaries²

Subsidiary	Owner		Ownership
Exelis Federal Services International, Ltd.		Exelis Systems Corporation		100	%
Exelis Federal Services GmbH		Exelis Systems Corporation		100	%
ITT Federal Services Arabia, Ltd.		Exelis Systems Corporation		60	%
Exelis Services GmbH		Exelis Systems Corporation		100	%
Exelis Mission Systems Ltd.		Exelis Systems Corporation		100	%
Exelis Services A/S		Exelis Systems Corporation		100	%

²  None of the subsidiaries is a Loan Party.-

Schedule 6.01(b)

Existing Indebtedness

Existing Letters of Credit

Bank Security #	Issuer	Applicant	Beneficiary	Face Amount
NAAA1US13S176635	Royal Bank of Scotland	Exelis Systems Corporation	Zurich American Insurance Company	USD $1,500,0003

Capital Leases

Lessor	Lessee	Details	Ending Balance	End Date
CISCO	Exelis Systems Corporation	Network Equipment	429,094.28	November 2016
Net App, Inc.	Exelis Systems Corporation	Data Storage System	321,064.19	November 2016
Ricoh	Exelis Systems Corporation	Copiers	66,485.12	June 2016
Kemmier	Exelis Systems Corporation	Copiers	59,172.39	June 2014
Autohaus Scherer GmbH & Co. KG	Exelis Federal Services GmbH	Vehicles	316,054.04	August 2016

³  Amount of liability attributable to Holdings and its Restricted Subsidiaries currently estimated at $1,418,961.

Schedule 6.01(r)

Existing Indebtedness (Indemnification Obligations with Respect to Letters of Credit Outstanding as of the Spin-Off Date)

No.	Bank Security #	Issuer	Applicant	Beneficiary	Face Amount
1.	NAAA1US13S176968	Royal Bank of Scotland	Exelis Systems Corporation	National Bank of Kuwait	KWD $175,000
2.	NAAA1US13S176958	Royal Bank of Scotland	Exelis Systems Corporation	National Bank of Kuwait S.A.K.	KWD $500,000
3.	NAAA1US13S176576	Royal Bank of Scotland	Exelis Systems Corporation	Ministry of Social Affairs & Labour	KWD $875,000
4.	NAAA1US12S176409	Royal Bank of Scotland	Exelis Systems Corporation	Ministry of Social Affairs & Labour	KWD $312,500
5.	NAAA1US14S177855	Royal Bank of Scotland	Exelis Systems Corporation	National Bank of Kuwait	KWD $625,000
6.	5309314	Mizuho Corporate Bank	Exelis Inc.	Ace American Insurance Company, Pacific Employers Insurance CO., Insurance Company of North America, Indemnity Insurance Co. of North America and Ace Property and Casualty Insurance Co.	USD $18,916,3904
7.	9099679	Zurich	Exelis Inc.	Ace American Insurance Company	USD $3,163,0465
8.	105820263	Travelers	Exelis Inc.	Ace American Insurance Company	USD $3,163,0466

⁴  Amount of total liability attributable to Holdings and its Restricted Subsidiaries attributable to the letters of credit and/or surety bonds listed in 6, 7 and 8 is currently estimated at approximately $10,995,000. Holdings and its Restricted Subsidiaries will use commercially reasonable efforts to replace these letters of credit and/or surety bonds in the amount of its liability and have the total amount of such letters of credit and/or surety bonds reduced by such amount.

⁵  See Fn. 4 above.

⁶  See Fn. 4 above.

Schedule 6.02

Existing Liens

1. Liens on the leased equipment under the capital leases described in Schedule 6.01(b).

Schedule 6.04

Existing Investments

1. Investment constituting 40% of the equity interests in High Desert Support Services LLC.

Schedule 6.10

Existing Restrictions

None.

EXHIBIT A

[FORM OF] ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between the Assignor (as defined below) and the Assignee (as defined below). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex I attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions referred to below and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, (a) all the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any Guarantees, Letters of Credit and Swingline Loans included in such facilities) and (b) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (a) above (the rights and obligations sold and assigned pursuant to clauses (a) and (b) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1. Assignor:                                                                                                                                                             

2. Assignee:                                                                                                                                                             

[and is [a Lender] [an Affiliate/Approved Fund of [Identify Lender]]]¹

3. Borrower: Exelis Systems Corporation, a Delaware corporation

4. Administrative Agent: JPMorgan Chase Bank, N.A., as the Administrative Agent under the Credit Agreement

¹  Select as applicable.

5. Credit Agreement: The Credit Agreement dated as of [•], 2014, among Vectrus, Inc., an Indiana corporation, Exelis Systems Corporation, a Delaware corporatino, the Lenders and Issuing Banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

6. Assigned Interest:²

Facility Assigned	Aggregate Amount of Commitments/Loans of the applicable Class of all Lenders	Amount of the Commitments/Loans of the applicable Class Assigned	Percentage Assigned of Aggregate Amount of Commitments/Loans of the applicable Class of all Lenders3
Revolving Commitments/Loans	$	$		%
Tranche A Term Commitments/Loans	$	$		%
[            ]4	$	$		%

Effective Date:                 , 20     [TO BE INSERTED BY THE ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR]

The Assignee, if not already a Lender, agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more credit contacts to whom all syndicate-level information (which may contain MNPI) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and State securities laws.

²  Must comply with the minimum assignment amounts set forth in Section 9.04(b)(ii)(A) of the Credit Agreement, to the extent such minimum assignment amounts are applicable.

³  Set forth, to at least 9 decimals, as a percentage of the Commitments/Loans of all Lenders of any Class, as applicable.

⁴  In the event Incremental Term Loans of any Class are established under Section 2.21 of the Credit Agreement or any new Class of Loans or Commitments is established pursuant to Section 2.22 or 2.23 of the Credit Agreement, refer to the Class of such Loans assigned.

The terms set forth above are hereby agreed to:                     , as Assignor,		[Consented to and]6 Accepted: JPMORGAN CHASE BANK, N.A., as Administrative Agent,
by		by
	Name:		Name:
	Title:		Title:
, as Assignor,5		Consented to: [EXELIS SYSTEMS CORPORATION,
by		by
	Name:		Name:
	Title:		Title:]7

⁵  The Assignee must deliver to the Borrower all applicable Tax forms required to be delivered by it under Section 2.17(f) of the Credit Agreement.

⁶  No consent of the Administrative Agent is required for an assignment of any Term Commitment or Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund.

⁷  No consent of the Borrower is required (x) with respect to Term Commitments or Term Loans, for an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, (y) with respect to Revolving Commitments or Revolving Loans, for an assignment to a Revolving Lender, an Affiliate of a Revolving Lender or an Approved Fund in respect of a Revolving Lender or (z) if an Event of Default of the type set forth in Section 7.01(a), (b), (h) or (i) has occurred and is continuing, for any other assignment.

ANNEX 1 TO

ASSIGNMENT AND ASSUMPTION

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1. Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, other than statements made by it herein, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of Holdings, the Borrower, any Subsidiary or any other Affiliate of Holdings or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by Holdings, the Borrower, any Subsidiary or any other Affiliate of Holdings or any other Person of any of their respective obligations under any Loan Document.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption, to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof (or, prior to the first such delivery, the financial statements referred to in Section 3.04 thereof), and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent, the Assignor or any other Lender, (v) if it is a Lender that is a U.S. Person, attached hereto is an executed original of IRS Form W-9 certifying that such Lender is exempt from U.S. Federal backup withholding tax and (vi) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement (including Section 2.17(f) thereof), duly completed and executed by the Assignee, and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time,

continue to make its own credit decisions in taking or not taking action under the Loan Documents and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to or on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.

3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile or other electronic imaging shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by and construed in accordance with the laws of the State of New York.

EXHIBIT B

[FORM OF] COLLATERAL AGREEMENT

[See attached]

EXHIBIT C

[FORM OF] PERFECTION CERTIFICATE

[•], 2014

Reference is made to the Credit Agreement dated as of [•], 2014 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Exelis Systems Corporation (the “Borrower”), Vectrus, Inc. (“Holdings”), the lenders from time to time party thereto (the “Lenders”) and JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders (in such capacity, the “Administrative Agent”). Capitalized terms used but not defined herein have the meanings assigned in the Credit Agreement or the Collateral Agreement referred to therein, as applicable.

The undersigned, a Financial Officer or a Legal Officer of Holdings and the Borrower, respectively, hereby certify (solely in their capacity as officers of Holdings and the Borrower and not in their individual capacity) to the Administrative Agent and each other Secured Party as follows:

1. Names. (a) The exact legal name of each Grantor, as such name appears in its respective certificate of formation or organization, is set forth on Schedule 1(a).

(b) Set forth on Schedule 1(b) is (i) each other legal name each Grantor has had in the past five years, together with the date of the relevant change and (ii) each other name (including trade names or similar appellations) used by each Grantor or any of its divisions or other business units in connection with the conduct of its business or the ownership of its properties at any time during the past five years.

(c) Except as set forth on Schedule 1(c), no Grantor has changed its identity or corporate structure in any way within the past five years. Changes in identity or corporate structure would include mergers, consolidations and acquisitions (including acquisitions of all or substantially all of the assets of another person), as well as any change in the form, nature or jurisdiction of organization. If any such change has occurred, include in Schedule 1(c) the information required by Sections 1 and 2 of this certificate as to each acquiree or constituent party to a merger or consolidation.

(d) Set forth on Schedule 1(d) is (i) the Organizational Identification Number, if any, issued by the jurisdiction of formation of each Grantor that is a registered organization and (ii) the Federal Taxpayer Identification Number of each Grantor, in each case where such information is required to be included in financing statements by the Uniform Commercial Code filing office in the jurisdiction in which such Grantor is located.

2. Current Locations. (a) The jurisdiction of formation or organization of each Grantor that is a registered organization is set forth in Schedule 2(a) opposite its name.

(b) The chief executive office of each Grantor is located at the address set forth on Schedule 2(b) opposite its name.

(c) Set forth on Schedule 2(c) opposite the name of each Grantor are all locations in the United States where such Grantor maintains any books or records relating to any Accounts Receivable with a value exceeding $1,000,000 (with each location at which chattel paper, if any, is kept being indicated by an “*”).

(d) Set forth on Schedule 2(d) opposite the name of each Grantor are all locations in the United States where such Grantor maintains any Inventory with a value exceeding $1,000,000.

(e) Set forth on Schedule 2(e) opposite the name of each Grantor are all the locations in the United States, not otherwise identified in Schedules 2(b), (c) or (d), where such Grantor maintains any Equipment or other Collateral with a value exceeding $1,000,000.

(f) Set forth on Schedule 2(f) is a list of all real property owned by each Grantor with a fair market value in excess of $5,000,000, the name of the Grantor that owns such real property and the fair market value of such real property, to the extent an appraisal exists with respect to such real property or, in the absence of any such appraisal, the book value of such real property.

3. Unusual Transactions. All Accounts have been originated by the Grantors and all Inventory has been either acquired by the Grantors in the ordinary course of business or manufactured by the Grantors.

4. File Search Reports. File search reports have been obtained from each Uniform Commercial Code filing office identified with respect to such Grantor in Section 2 hereof, and such search reports reflect no liens against any of the Collateral other than those permitted under the Credit Agreement or those which have been or will contemporaneously with the initial funding of Loans on the Funding Date be released or terminated.

5. UCC Filings. Financing statements in substantially the form of Schedule 5 hereto have been prepared by counsel to the Lenders for filing in the proper Uniform Commercial Code filing office in the jurisdiction in which each Grantor is located and, to the extent any of the collateral is comprised of fixtures, timber to be cut or as extracted collateral from the wellhead or minehead, in the proper local jurisdiction, in each case as set forth with respect to such Grantor in Section 2 hereof.

6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule setting forth, with respect to the filings described in Section 5 above, each filing and the filing office in which such filing is to be made.

7. Stock Ownership and other Equity Interests. Attached hereto as Schedule 7 is a true and correct list of (a) all the issued and outstanding stock, partnership interests, limited liability company membership interests or other Equity Interests held directly by each Grantor and the record and beneficial owners of such stock, partnership interests, membership interests or other Equity Interests and (b) each equity investment held directly by each Grantor that represents 50% or more of the Equity Interests of the Person in which such investment was made, in each case specifying the issuer and certificate number of, and the number and percentage of ownership represented by, such Equity Interests and if such Equity Interests are not required to be pledged under any of the Loan Documents, the reason therefor.

8. Debt Instruments. Attached hereto as Schedule 8 is a true and correct list of all promissory notes and other evidence of Indebtedness (other than checks to be deposited in the ordinary course of business) held by each Grantor that are required to be pledged under the Collateral Agreement.

9. [Reserved.]

10. Mortgage Filings. Attached hereto as Schedule 10 is a schedule setting forth, with respect to each Mortgaged Property, (a) the exact name of the Person that owns such property as such name appears in its certificate of incorporation or other organizational document, (b) if different from the name identified pursuant to clause (a), the exact name of the current record owner of such property reflected in the records of the filing office for such property identified pursuant to the following clause and (c) the filing office in which a Mortgage with respect to such property must be filed or recorded in order for the Administrative Agent to obtain a perfected security interest therein.

11. Intellectual Property. Attached hereto as Schedule 11(A) in proper form for filing with the United States Patent and Trademark Office is a schedule setting forth all of each Grantor’s U.S. Patents and Patent Applications, including the name of the registered owner, type, registration or application number and the expiration date (if already registered) of each U.S. Patent and Patent Application owned by any Grantor.

Attached hereto as Schedule 11(B) in proper form for filing with the United States Patent and Trademark Office is a schedule setting forth all of each Grantor’s U.S. registered Trademarks and Trademark Applications, including the name of the registered owner, the registration or application number and the expiration date (if already registered) of each Trademark and Trademark application owned by any Grantor.

Attached hereto as Schedule 11(C) in proper form for filing with the United States Copyright Office is a schedule setting forth all of each Grantor’s U.S. registered Copyrights (including the name of the registered owner, the title and the registration number) and Copyright Applications (including the name of the registered owner and the title) of each Copyright or Copyright Application owned by any Grantor. Also set forth on Schedule 11(C) in proper form for filing with the United States Copyright Office is a schedule setting forth all exclusive Copyright Licenses granted to any Grantor for which the licensed work is registered in the United States Copyright Office.

12. Commercial Tort Claims. Attached hereto as Schedule 12 is a true and correct list of commercial tort claims in excess of $500,000 held by any Grantor, including a brief description thereof.

13. Deposit Accounts. Attached hereto as Schedule 13 is a true and correct list of deposit accounts maintained by each Grantor in the United States, other than all Excluded Accounts, including the name and address of the depositary institution, the type of account and the account number.

14. Securities Accounts and Commodities Accounts. Attached hereto as Schedule 14 is a true and correct list of securities accounts and commodities accounts maintained by each Grantor in the United States, other than all Excluded Accounts, including the name and address of the intermediary institution, the type of account and the account number.

15. Assignment of Claims Act. Attached hereto as Schedule 15 is a true and correct list of all Material Government Contracts, setting forth the contract number, name and address of contracting officer (or other party to whom a notice of assignment under the Assignment of Claims Act should be sent), contract start date, agency with which the contract was entered into, and a description of the contract type.

16. Chattel Paper. Attached hereto as Schedule 16 is a true and complete list, for each Grantor, of all chattel paper (whether tangible or electronic) in excess of $1,000,000, specifying the Grantor and obligor thereunder, the type, the due date and outstanding principal amount thereof.

IN WITNESS WHEREOF, the undersigned have duly executed this certificate on this [•] day of [•].

EXELIS SYSTEMS CORPORATION, as the Borrower,
by
	Name:
	Title:
VECTRUS, INC., as Holdings, by
by
	Name:
	Title:

EXHIBIT D

[FORM OF] SUPPLEMENTAL PERFECTION CERTIFICATE

Reference is made to the Credit Agreement dated as of [•], 2014 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Vectrus, Inc., an Indiana corporation (“Holdings”), Exelis Systems Corporation, a Delaware corporation (the “Borrower”), the Lenders and Issuing Banks from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”). Capitalized terms used but not defined herein have the meanings assigned in the Credit Agreement or the Collateral Agreement referred to therein, as applicable.

This Certificate is dated as of [ ], 20[ ] and is delivered pursuant to Section 5.03(b) of the Credit Agreement (this Certificate and each other Certificate heretofore delivered pursuant to Section 5.03(b) of the Credit Agreement being referred to as a “Supplemental Perfection Certificate”), and supplements the information set forth in the Perfection Certificate delivered on the Effective Date (as supplemented from time to time by the Supplemental Perfection Certificates delivered after the Effective Date and prior to the date hereof, the “Prior Perfection Certificate”).

The undersigned, a Financial Officer or legal officer of each of Holdings and the Borrower, hereby certifies (solely in his/her capacity as an officer of Holdings and the Borrower and not in his/her individual capacity) to the Administrative Agent and each other Secured Party as follows:

1. Names. (a) Except as set forth in Schedule 1(a) hereto, Schedule 1(a) of the Prior Perfection Certificate sets forth the exact legal name of each Grantor, as such name appears in its respective certificate of formation or organization.

(b) Except as set forth in Schedule 1(b) hereto, Schedule 1(b) of the Prior Perfection Certificate sets forth (i) each other legal name each Grantor has had in the past five years, together with the date of the relevant change and (ii) each other name (including trade names or similar appellations) used by each Grantor or any of its divisions or other business units in connection with the conduct of its business or the ownership of its properties at any time during the past five years.

(c) Except as set forth in Schedule 1(c) hereto or as set forth on Schedule 1(c) of the Prior Perfection Certificate, no Grantor has changed its identity or corporate structure in any way within the past five years. Changes in identity or corporate structure would include mergers, consolidations and acquisitions (including acquisitions of all or substantially all of the assets of another person), as well as any change in the form, nature or jurisdiction of organization. If any such change has occurred, include in Schedule 1(c) hereto (to the extent not already included in Schedule 1(c) of the Prior Perfection Certificate) the information required by Sections 1 and 2 of this certificate as to each acquiree or constituent party to a merger or consolidation.

(d) Except as set forth in Schedule 1(d) hereto, Schedule 1(d) of the Prior Perfection Certificate sets forth (i) the Organizational Identification Number, if any, issued by the jurisdiction of formation of each Grantor that is a registered organization and (ii) the Federal Taxpayer Identification Number of each Grantor, in each case where such information is required to be included in financing statements by the Uniform Commercial Code filing office in the jurisdiction in which such Grantor is located.

2. Current Locations. (a) Except as set forth in Schedule 2(a) hereto, the jurisdiction of formation or organization of each Grantor that is a registered organization is set forth in Schedule 2(a) of the Prior Perfection Certificate opposite its name.

(b) Except as set forth in Schedule 2(b) hereto, the chief executive office of each Grantor is located at the address set forth in Schedule 2(b) of the Prior Perfection Certificate opposite its name.

(c) Except as set forth in Schedule 2(c) hereto, set forth in Schedule 2(c) of the Prior Perfection Certificate opposite the name of each Grantor are all locations in the United States where such Grantor maintains any books or records relating to any Accounts Receivable with a value exceeding $1,000,000 (with each location at which chattel paper, if any, is kept being indicated by an “*”).

(d) Except as set forth in Schedule 2(d) hereto, set forth in Schedule 2(d) of the Prior Perfection Certificate opposite the name of each Grantor are all locations in the United States where such Grantor maintains any Inventory with a value exceeding $1,000,000.

(e) Except as set forth in Schedule 2(e) hereto, set forth in Schedule 2(e) of the Prior Perfection Certificate opposite the name of each Grantor are all locations in the United States where such Grantor maintains any Equipment or other Collateral with a value exceeding $1,000,000 not otherwise identified in Schedules 2(b), (c) or (d) of this Supplemental Perfection Certificate or the Prior Perfection Certificate.

(f) Except as set forth in Schedule 2(f) hereto, Schedule 2(f) of the Prior Perfection Certificate sets forth a list of all real property owned by each Grantor with a fair market value in excess of $5,000,000, the name of the Grantor that owns such real property and the fair market value of such real property, to the extent an appraisal exists with respect to such real property or, in the absence of any such appraisal, the book value of such real property.

3. Unusual Transactions. All Accounts have been originated by the Grantors and all Inventory has been either acquired by the Grantors in the ordinary course of business or manufactured by the Grantors.

4. File Search Reports. To the extent that this Supplemental Perfection Certificate contains an update to Schedule 2(a) or Schedule 2(b) hereto, file search reports have been obtained from each Uniform Commercial Code filing office identified with respect to such Grantor in Section 2 of this Supplemental Perfection Certificate, and such search reports reflect no liens against any of the Collateral other than those permitted under the Credit Agreement.

5. UCC Filings. To the extent that this Supplemental Perfection Certificate contains an update to Schedule 2(a) or Schedule 2(b) hereto, financing statements in substantially the form of Schedule 5 hereto have been prepared by counsel to the Lenders for filing in the proper Uniform Commercial Code filing office in the jurisdiction in which each Grantor is located as set forth with respect to such Grantor in Section 2 hereof and, to the extent any of the collateral is comprised of fixtures, timber to be cut or as extracted collateral from the wellhead or minehead, in the proper local jurisdiction, in each case as set forth with respect to such Grantor in Section 2 hereof.

6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule setting forth, with respect to the filings described in Section 5 above, each filing and the filing office in which such filing is to be made.

7. Stock Ownership and other Equity Interests. Except as set forth in Schedule 7 hereto, Schedule 7 of the Prior Perfection Certificate sets forth a true and correct list of (a) all the issued and outstanding stock, partnership interests, limited liability company membership interests or other Equity Interests held directly by each Grantor and the record and beneficial owners of such stock, partnership interests, membership interests or other Equity Interests and (b) each equity investment held directly by each Grantor that represents 50% or more of the Equity Interests of the Person in which such investment was made, in each case specifying the issuer and certificate number of, and the number and percentage of ownership represented by, such Equity Interests and if such Equity Interests are not required to be pledged under any of the Loan Documents, the reason therefor.

8. Debt Instruments. Except as set forth in Schedule 8 hereto, Schedule 8 of the Prior Perfection Certificate sets forth a true and correct list of all promissory notes and other evidence of Indebtedness (other than checks to be deposited in the ordinary course of business) held by each Grantor that are required to be pledged under the Collateral Agreement.

9. [Reserved.]

10. Mortgage Filings. Except as set forth in Schedule 10 hereto, Schedule 10 of the Prior Perfection Certificate sets forth, with respect to each Mortgaged Property, (a) the exact name of the Person that owns such property as such name appears in its certificate of incorporation or other organizational document, (b) if different from the name identified pursuant to clause (a), the exact name of the current record owner of such property reflected in the records of the filing office for such property identified pursuant to the following clause and (c) the filing office in which a Mortgage with respect to such property must be filed or recorded in order for the Administrative Agent to obtain a perfected security interest therein.

11. Intellectual Property. Except as set forth in Schedule 11(A) hereto, Schedule 11(A) of the Prior Perfection Certificate sets forth, in proper form for filing with the United States Patent and Trademark Office, a list of each Grantor’s U.S. Patents and Patent Applications, including the name of the registered owner, type, registration or application number and the expiration date (if already registered) of each U.S. Patent and Patent Applications owned by any Grantor.

Except as set forth in Schedule 11(B) hereto, Schedule 11(B) of the Prior Perfection Certificate sets forth, in proper form for filing with the United States Patent and Trademark Office, a list of each Grantor’s U.S. registered Trademarks and Trademark Applications, including the name of the registered owner, the registration or application number and the expiration date (if already registered) of each of same owned by any Grantor.

Except as set forth in Schedule 11(C) hereto, Schedule 11(C) of the Prior Perfection Certificate sets forth, in proper form for filing with the United States Copyright Office, a list of each Grantor’s U.S. registered Copyrights (including the name of the registered owner, the title and the registration number) and Copyright Applications (including the name of the registered owner and the title) of each Copyright or Copyright Application owned by any Grantor. Also set forth on Schedule 11(C) in proper form for filing with the United States Copyright Office is a schedule setting forth all exclusive Copyright Licenses granted to any Grantor for which the licensed work is registered in the United States Copyright Office.

12. Commercial Tort Claims. Except as set forth in Schedule 12 hereto, Schedule 12 of the Prior Perfection Certificate sets forth a true and correct list of commercial tort claims in excess of $1,000,000 held by any Grantor, including a brief description thereof.

13. Deposit Accounts. Except as set forth in Schedule 13 hereto, Schedule 13 of the Prior Perfection Certificate sets forth a true and correct list of deposit accounts maintained by each Grantor in the United States, other than all Excluded Accounts, including the name and address of the depositary institution, the type of account and the account number.

14. Securities Accounts and Commodities Accounts. Except as set forth in Schedule 14 hereto, Schedule 14 of the Prior Perfection Certificate sets forth a true and correct list of securities accounts and commodities accounts maintained by each Grantor in the United States, other than all Excluded Accounts, including the name and address of the intermediary institution, the type of account and the account number.

15. Assignment of Claims Act. Except as set forth in Schedule 15 hereto, Schedule 15 of the Prior Perfection Certificate sets forth a true and correct list of all Material Government Contracts, setting forth the contract number, name and address of contracting officer (or other party to whom a notice of assignment under the Assignment of Claims Act should be sent), contract start date, agency with which the contract was entered into, and a description of the contract type.

16. Chattel Paper. Except as set forth in Schedule 16 hereto, Schedule 16 of the Prior Perfection Certificate sets forth a true and complete list, for each Grantor, of all chattel paper (whether tangible or electronic) in excess of $1,000,000, specifying the Grantor and obligor thereunder, the type, the due date and outstanding principal amount thereof.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned have duly executed this certificate on the date first written above.

VECTRUS, INC.

By:

Name:

Title:

EXELIS SYSTEMS CORPORATION

By:

Name:

Title:

EXHIBIT E

[FORM OF] GLOBAL INTERCOMPANY NOTE

[•], 2014

FOR VALUE RECEIVED, each of the undersigned, to the extent a borrower from time to time from any other entity listed on a signature page hereto (each, in such capacity, a “Payor”), hereby promises to pay on demand to the order of such other entity (each, in such capacity, a “Payee”), in lawful money of the United States of America, or in such other currency as agreed to by such Payor and such Payee, in immediately available funds, at such location as a Payee shall from time to time designate, the unpaid principal amount of all loans and advances constituting Indebtedness made by such Payee to such Payor. Each Payor promises also to pay interest, if any, on the unpaid principal amount of all such loans and advances in like money at said location from the date of such loans and advances until paid at such rate per annum as shall be agreed upon from time to time by such Payor and such Payee.

Reference is made to the Credit Agreement dated as of [•], 2014 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Vectrus, Inc., an Indiana corporation (“Holdings”), Exelis Systems Corporation, a Delaware corporation (the “Borrower”), the Lenders and Issuing Banks from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders (in such capacity, the “Administrative Agent”). Capitalized terms used but not defined herein have the meanings assigned in the Credit Agreement or the Collateral Agreement referred to therein, as applicable. This Note is the Global Intercompany Note referred to in the Credit Agreement.

This Note shall be pledged by each Payee that is a Loan Party to the Administrative Agent pursuant to the Collateral Agreement as collateral security for the full and prompt payment when due of, and the performance of, the Obligations. Each Payee hereby acknowledges and agrees that after the occurrence of and during the continuance of an Event of Default under and as defined in the Credit Agreement, the Administrative Agent may, in addition to the other rights and remedies provided pursuant to the Credit Agreement and the other Loan Documents and otherwise available to it (subject to any applicable notice requirements thereunder), exercise all rights of the Payees that are Loan Parties with respect to this Note.

Upon the commencement of any insolvency or bankruptcy proceeding, or any receivership, liquidation, reorganization or other similar proceeding in connection therewith, relating to any Payor owing any amounts evidenced by this Note to any Loan Party, or to any property of any such Payor, or upon the commencement of any proceeding for voluntary liquidation, dissolution or other winding up of any such Payor, all amounts evidenced by this Note owing by such Payor to any and all Loan Parties shall become immediately due and payable, without presentment, demand, protest or notice of any kind.

Anything in this Note to the contrary notwithstanding, the Indebtedness evidenced by this Note of Holdings, the Borrower or any Subsidiary Loan Party (each, an “Subordination Payor”) to any Restricted Subsidiary that is not a Subsidiary Loan Party (each such Payee, an “Affected Payee”) shall be subordinate and junior in right of payment, to the extent and in the manner hereinafter set forth, to all Obligations of such Subordination Payor; provided that each Subordination Payor may make payments to the applicable Payee so long as no Event of Default under and as defined in the Credit Agreement shall have occurred and be continuing (such Obligations and, in each case, other indebtedness and obligations in connection with any renewal, refunding, restructuring or refinancing thereof, including interest thereon accruing after the commencement of any proceedings referred to in clause (i) below, whether or not such interest is an allowed claim in such proceeding, being hereinafter collectively referred to as “Senior Indebtedness”):

(i) In the event of any insolvency or bankruptcy proceedings, and any receivership, liquidation, reorganization or other similar proceedings in connection therewith, relative to any Subordination Payor or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of such Subordination Payor (except as expressly permitted by the Loan Documents), whether or not involving insolvency or bankruptcy, if an Event of Default (as defined in the Credit Agreement) has occurred and is continuing (x) the holders of Senior Indebtedness shall be paid in full in cash in respect of all amounts constituting Senior Indebtedness (other than (A) contingent indemnification obligations as to which no claim has been asserted, (B) Secured Cash Management Obligations and (C) Secured Hedging Obligations) and no Letter of Credit shall remain outstanding (unless the LC Exposure related thereto has been cash collateralized or back-stopped by a letter of credit reasonably satisfactory to the applicable Issuing Bank or such Letter of Credit has been deemed reissued under another agreement acceptable to the applicable Issuing Bank) before any Affected Payee is entitled to receive (whether directly or indirectly), or make any demands for, any payment on account of this Note and (y) until the holders of Senior Indebtedness are paid in full in cash in respect of all amounts constituting Senior Indebtedness (other than (A) contingent indemnification obligations as to which no claim has been asserted, (B) Secured Cash Management Obligations and (C) Secured Hedging Obligations) and no Letter of Credit shall remain outstanding (unless the LC Exposure related thereto has been cash collateralized or back-stopped by a letter of credit reasonably satisfactory to the applicable Issuing Bank or such Letter of Credit has been deemed reissued under another agreement acceptable to the applicable Issuing Bank), any payment or distribution to which such Affected Payee would otherwise be entitled (other than equity or debt securities of such Subordination Payor that are subordinated, to at least the same extent as this Note, to the payment of all Senior Indebtedness then outstanding (such securities being hereinafter referred to as “Restructured Securities”)) shall be made to the holders of Senior Indebtedness;

(ii) (x) if any Event of Default under the Credit Agreement occurs and is continuing and the Administrative Agent delivers notice to the Borrower instructing the Borrower that the Administrative Agent is thereby exercising its rights pursuant to this clause (ii) (provided that no such notice shall be required to be given in the case of any Event of Default arising under Section 7.01(h) or Section 7.01(i) of the Credit Agreement), then, unless otherwise agreed in writing by the Administrative Agent, no payment or distribution of any kind or character shall be made by or on behalf of any Subordination Payor or any other Person on its behalf, and no payment or distribution of any kind or character shall be received by or on behalf of any Affected Payee or any other Person on its behalf, with respect to this Note until (x) the applicable Senior Indebtedness shall have been paid in full in cash (other than (A) contingent indemnification obligations as to which no claim has been asserted, (B) Secured Cash Management Obligations, (C) Secured Hedging Obligations and (D) obligations with respect to Letters of Credit if the LC Exposure related thereto has been cash collateralized or back-stopped by a letter of credit reasonably satisfactory to the applicable Issuing Bank or such Letter of Credit has been deemed reissued under another agreement acceptable to the applicable Issuing Bank) or (y) such Event of Default shall have been cured or waived;

(iii) if any payment or distribution of any character, whether in cash, securities or other property (other than Restructured Securities), in respect of this Note shall (despite these subordination provisions) be received by any Affected Payee in violation of the foregoing clause (i) or (ii), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered in accordance with the relevant Security Documents to, the Administrative Agent; and

(iv) each Subordination Payor agrees to file all claims against each relevant Affected Payee in any bankruptcy or other proceeding in which the filing of claims is required by law in respect of any Senior Indebtedness and the Administrative Agent shall be entitled to all of such Subordination Payor’s rights thereunder. If for any reason a Subordination Payor fails to file such claim at least ten (10) days prior to the last date on which such claim should be filed, such Subordination Payor hereby irrevocably appoints the Administrative Agent as its true and lawful attorney-in-fact and the Administrative Agent is hereby authorized to act as attorney-in-fact in such Subordination Payor’s name to file such claim or, in the Administrative Agent’s discretion, to assign such claim to and cause proof of claim to be filed in the name of the Administrative Agent or its nominee. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to the Administrative Agent the full amount payable on the claim in the proceeding, and, to the full extent necessary for that purpose, each Subordination Payor hereby assigns to the Administrative Agent all of such Subordination Payor’s rights to any payments or distributions to which such Subordination Payor otherwise would be entitled. If the amount so paid is greater than such Subordination Payor’s liability hereunder, the Administrative Agent shall pay the excess amount to the party entitled thereto under applicable law. In addition, upon the occurrence and during the continuance of an Event of Default, each Subordination Payor hereby irrevocably appoints the Administrative Agent as its attorney-in-fact to exercise all of such Subordination Payor’s voting rights in connection with any bankruptcy proceeding or any plan for the reorganization of each relevant Affected Payee.

Except as otherwise set forth in clauses (i) and (ii) of the immediately preceding paragraph, any Payor is permitted to pay, and any Payee is entitled to receive, any payment or prepayment of principal and interest on the Indebtedness evidenced by this Note.

To the fullest extent permitted by applicable law, no present or future holder of Senior Indebtedness shall be prejudiced in its right to enforce the subordination of this Note by any act or failure to act on the part of any Subordination Payor or Affected Payee or by any act or failure to act on the part of such holder or any trustee or agent for such holder. Each Affected Payee and each Subordination Payor hereby agrees that the subordination of this Note is for the benefit of the Administrative Agent, each Issuing Bank and the other Secured Parties. The Administrative Agent and the other Secured Parties are obligees under this Note to the same extent as if their names were written herein as such and the Administrative Agent (or other applicable representative) may, on behalf of itself, and the Secured Parties, proceed to enforce the subordination provisions herein.

The Indebtedness evidenced by this Note owed by any Payor other than Holdings, the Borrower or any Subsidiary Loan Party shall not be subject to the subordination provisions set forth above.

Nothing contained in the subordination provisions set forth above is intended to or will impair, as between each Payor and each Payee, the obligations of such Payor, which are absolute and unconditional, to pay to such Payee the principal of and interest on this Note as and when due and payable in accordance with its terms, or is intended to or will affect the relative rights of such Payee and other creditors of such Payor other than the holders of Senior Indebtedness.

Each Payee is hereby authorized (but not required) to record all loans and advances made by it to any Payor (all of which shall be evidenced by this Note), and all repayments or prepayments thereof, in its books and records, such books and records constituting prima facie evidence of the accuracy of the information contained therein. For the avoidance of doubt, this Note shall not in any way replace, or affect the principal amount of, any intercompany loan outstanding between any Payor and any Payee prior to the execution hereof, and to the extent permitted by applicable law, from and after the date hereof, each such intercompany loan shall be deemed to incorporate the terms set forth in this Note to the extent applicable and shall be deemed to be evidenced by this Note together with any documents and instruments executed prior to the date hereof in connection with such intercompany Indebtedness.

Each Payor hereby waives presentment, demand, protest or notice of any kind in connection with this Note. Except to the extent of any taxes required by law to be withheld, all payments under this Note shall be made without offset, counterclaim or deduction of any kind.

It is understood that this Note shall evidence only Indebtedness and not amounts owing in respect of accounts payable incurred in connection with goods sold or services rendered in the ordinary course of business and not in connection with the borrowing of money.

This Note shall be binding upon each Payor and its successors and assigns, and the terms and provisions of this Note shall inure to the benefit of each Payee and their respective successors and assigns, including subsequent holders hereof.

From time to time after the date hereof, additional Subsidiaries of the Borrower may become parties hereto (as Payor and/or Payee, as the case may be) by executing a counterpart signature page hereto, which shall be automatically incorporated into this Note (each additional Subsidiary, an “Additional Party”). Upon delivery of such counterpart signature page to the Payees, notice of which is hereby waived by the other Payors, each Additional Party shall be a Payor and/or a Payee, as the case may be, and shall be as fully a party hereto as if such Additional Party were an original signatory hereof. Each Payor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Payor or Payee hereunder. This Note shall be fully effective as to any Payor or Payee that is or becomes a party hereto regardless of whether any other person becomes or fails to become or ceases to be a Payor or Payee hereunder.

Indebtedness governed by this Note shall be maintained in “registered form” within the meaning of Section 163(f) of the Internal Revenue Code of 1986, as amended. The Payor or its designee (which shall, at the Administrative Agent’s request, be the Administrative Agent, acting solely for these purposes as agent of the Payor) shall record the transfer of the right to payments of principal and interest on the Indebtedness governed by this Note to holders of the Senior Indebtedness in a register (the “Register”), and no such transfer shall be effective until entered in the Register.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

[Signature Pages Follow]

[Holdings, Borrower and Restricted Subsidiaries]
By:
	Name:
	Title:

EXHIBIT F

AUCTION PROCEDURES

This Exhibit F is intended to summarize certain basic terms of the reverse Dutch auction procedures pursuant to and in accordance with the terms and conditions of Section 9.04(e) of the Credit Agreement, of which this Exhibit F is a part. It is not intended to be a definitive statement of all of the terms and conditions of a reverse Dutch auction, the definitive terms and conditions for which shall be set forth in the applicable Auction Notice. None of the Administrative Agent, the Auction Manager, any of their respective Affiliates, any Purchasing Borrower Party or any of its Affiliates makes any recommendation pursuant to the applicable Auction Notice as to whether or not any Lender should sell its Term Loans to a Purchasing Borrower Party pursuant to the applicable Auction Notice, nor shall the decision by the Administrative Agent or the Auction Manager (or any of their respective Affiliates) in its capacity as a Lender to sell its Term Loans to a Purchasing Borrower Party be deemed to constitute such a recommendation. Each Lender should make its own decision as to whether to sell any of its Term Loans and as to the price to be sought for such Term Loans. In addition, each Lender should consult its own attorney, business advisor or tax advisor as to legal, business, tax and related matters concerning each Auction Purchase Offer and the applicable Auction Notice. Capitalized terms not otherwise defined in this Exhibit F have the meanings assigned to them in the Credit Agreement.

Notice Procedures. In connection with each Auction Purchase Offer, a Purchasing Borrower Party will provide notification to the Auction Manager (for distribution to the Lenders) of the Term Loans (as determined by such Purchasing Borrower Party in its sole discretion) that will be the subject of such Auction Purchase Offer (each, an “Auction Notice”). Each Auction Notice shall contain (i) the maximum principal amount (calculated on the face amount thereof) of Term Loans of the applicable Class that the applicable Purchasing Borrower Party offers to purchase in such Auction Purchase Offer (the “Auction Amount”), which shall be no less than $20,000,000; (ii) the range of discounts to par (the “Discount Range”), expressed as a range of prices (in increments of $25) per $1,000, at which such Purchasing Borrower Party would be willing to purchase Term Loans of such Class in such Auction Purchase Offer; and (iii) the date on which such Auction Purchase Offer will conclude (which date shall not be less than three Business Days following the distribution of the Auction Notice to the Lenders), on which date Return Bids (as defined below) will be due by 1:00 p.m., New York City time (as such date and time may be extended by the Auction Manager, the “Expiration Time”). Such Expiration Time may be extended for a period not exceeding three Business Days upon notice by the applicable Purchasing Borrower Party to the Auction Manager received not less than 24 hours before the original Expiration Time; provided that only one extension per Auction Purchase Offer shall be permitted. An Auction Purchase Offer shall be regarded as a “failed Auction Purchase Offer” in the event that either (x) the applicable Purchasing Borrower Party withdraws such Auction Purchase Offer in accordance with the terms hereof or (y) the Expiration Time occurs with no Qualifying Bids (as defined below) having been received. In the event of a failed Auction Purchase Offer, no Purchasing Borrower Party shall be permitted to deliver a new Auction Notice prior to the date occurring three Business Days after such withdrawal or Expiration Time, as the case may be. Notwithstanding anything to the contrary contained herein, the

applicable Purchasing Borrower Party shall not initiate any Auction Purchase Offer by delivering an Auction Notice to the Auction Manager until after the conclusion (whether successful or failed) of the previous Auction Purchase Offer (if any), whether such conclusion occurs by withdrawal of such previous Auction Purchase Offer or the occurrence of the Expiration Time of such previous Auction Purchase Offer.

Reply Procedures. In connection with any Auction Purchase Offer, each Lender of Term Loans of the applicable Class wishing to participate in such Auction Purchase Offer shall, prior to the Expiration Time, provide the Auction Manager with a notice of participation, in the form included in the applicable offering document (each, a “Return Bid”), which shall specify (i) a discount to par that must be expressed as a price (in increments of $25) per $1,000 in principal amount of Term Loans of the applicable Class (the “Reply Price”) within the Discount Range and (ii) the principal amount of Term Loans of the applicable Class, in an amount not less than $1,000,000 or an integral multiple of $1,000 in excess thereof, that such Lender offers for sale at its Reply Price (the “Reply Amount”). A Lender may submit a Reply Amount that is less than the minimum amount and incremental amount requirements described above only if the Reply Amount comprises the entire amount of the Term Loans of the applicable Class held by such Lender. Lenders may only submit one Return Bid per Auction Purchase Offer, but each Return Bid may contain up to three component bids, each of which may result in a separate Qualifying Bid (as defined below) and each of which will not be contingent on any other component bid submitted by such Lender resulting in a Qualifying Bid. In addition to the Return Bid, the participating Lender must execute and deliver, to be held in escrow by the Auction Manager, an Affiliated Lender Assignment and Assumption. No Purchasing Borrower Party will purchase any Term Loans at a price that is outside of the applicable Discount Range, nor will any Return Bids (including any component bids specified therein) submitted at a price that is outside such applicable Discount Range be considered in any calculation of the Applicable Threshold Price (as defined below).

Acceptance Procedures. Based on the Reply Prices and Reply Amounts received by the Auction Manager, the Auction Manager, in consultation with the applicable Purchasing Borrower Party, will determine the applicable discounted price (the “Applicable Discounted Price”) for the Auction, which will be (i) the lowest Reply Price for which such Purchasing Borrower Party can complete the Auction Purchase Offer at the Auction Amount or (ii) in the event that the aggregate amount of the Reply Amounts relating to such Auction Notice is insufficient to allow such Purchasing Borrower Party to purchase the entire Auction Amount, the highest Reply Price that is within the Discounted Range so that such Purchasing Borrower Party can complete the purchase at such aggregate amount of Reply Amounts. Subject to the conditions contained in the Auction Notice, the applicable Purchasing Borrower Party shall purchase the Term Loans of the applicable Class (or the respective portions thereof) from each Lender with a Reply Price that is equal to or less than the Applicable Discounted Price (“Qualifying Bids”) at the Applicable Discounted Price; provided that if the aggregate amount required to pay the Qualifying Bids would exceed the Auction Amount for such Auction Purchase Offer, such Purchasing Borrower Party shall pay such Qualifying Bids at the Applicable Discounted Price ratably based on the respective principal amounts of such Qualifying Bids (subject to rounding requirements specified by the Auction Manager) in an aggregate amount not to exceed the Auction Amount. Each participating Lender shall be given notice as to whether its bid is a Qualifying Bid as soon as reasonably practicable but in no case later than five Business Days from the date the Return Bid was due.

Notification Procedures. The Auction Manager will calculate the Applicable Discounted Price and will cause the Administrative Agent to post the Applicable Discounted Price and proration factor onto an internet or intranet site (including an IntraLinks, SyndTrak or other electronic workspace) in accordance with the Auction Manager’s standard dissemination practices by 4:00 p.m., New York City time, on the Business Day during which the Expiration Time occurs. The Auction Manager will insert the principal amount of Term Loans of the applicable Class to be assigned and the applicable settlement date into each applicable Affiliated Lender Assignment and Assumption received in connection with a Qualifying Bid. Upon the request of the submitting Lender, the Auction Manager will promptly return any Affiliated Lender Assignment and Assumption received in connection with a Return Bid that is not a Qualifying Bid.

Additional Procedures. Once initiated by an Auction Notice, the applicable Purchasing Borrower Party may withdraw an Auction Purchase Offer only if no Qualifying Bid has been received by the Auction Manager at the time of withdrawal. Any Return Bid (including any component bid thereof) delivered to the Auction Manager may not be withdrawn, modified, revoked, terminated or cancelled by a Lender. However, an Auction Purchase Offer may become void if the conditions to the purchase set forth in Section 9.04(e) of the Credit Agreement are not met. The purchase price in respect of each Qualifying Bid for which purchase by the applicable Purchasing Borrower Party is required in accordance with the foregoing provisions shall be paid directly by such Purchasing Borrower Party to the respective assigning Lender on a settlement date as determined jointly by such Purchasing Borrower Party and the Auction Manager (which shall be not later than ten Business Days after the date Return Bids are due). The applicable Purchasing Borrower Party shall execute each applicable Affiliated Lender Assignment and Assumption received in connection with a Qualifying Bid. All questions as to the form of documents and eligibility of Term Loans that are the subject of an Auction Purchase Offer will be determined by the Auction Manager, in consultation with the applicable Purchasing Borrower Party, and their determination will be final and binding so long as such determination is not inconsistent with the terms of Section 9.04(e) of the Credit Agreement or this Exhibit F. The Auction Manager’s interpretation of the terms and conditions of the Auction Notice, in consultation with the applicable Purchasing Borrower Party, will be final and binding so long as such interpretation is not inconsistent with the terms of Section 9.04(e) of the Credit Agreement or this Exhibit F. None of the Administrative Agent, the Auction Manager or any of their respective Affiliates assumes any responsibility for the accuracy or completeness of the information concerning the applicable Purchasing Borrower Party, the Loan Parties or any of their respective Affiliates (whether contained in an offering document or otherwise) or for any failure to disclose events that may have occurred and may affect the significance or accuracy of such information. Notwithstanding anything to the contrary contained herein or in any other Loan Document, this Exhibit F shall not require any Purchasing Borrower Party to initiate any Auction Purchase Offer.

EXHIBIT G

[FORM OF] AFFILIATED LENDER ASSIGNMENT AND ASSUMPTION

This Affiliated Lender Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between the Assignor (as defined below) and the Assignee (as defined below). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex I attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions referred to below and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below, (a) all the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any Guarantees included in such facilities) and (b) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (a) above (the rights and obligations sold and assigned pursuant to clauses (a) and (b) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1. Assignor:                                                                                                                                                             

2. Assignee:                                                                                                                                                             

[and is [a Lender] [an Affiliate/Approved Fund of [Identify Lender]]]¹

3. Borrower: Exelis Systems Corporation, a Delaware corporation

4. Administrative Agent: JPMorgan Chase Bank. N.A., as the Administrative Agent under the Credit Agreement

¹  Select as applicable.

5. Credit Agreement: The Credit Agreement dated as of [•], 2014, among Vectrus, Inc., an Indiana corporation, Exelis Systems Corporation, a Delaware corporation, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

6. Assigned Interest:²

Facility Assigned	Aggregate Amount of Commitments/Loans of the applicable Class of all Lenders	Amount of the Commitments/ Loans of the applicable Class Assigned	Percentage Assigned of Aggregate Amount of Commitments/Loans of the applicable Class of all Lenders3
Tranche A Term Loans	$	$		%
[            ]4	$	$		%

Effective Date:                 , 20            [TO BE INSERTED BY THE ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR]

The Assignee, if not already a Lender, agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more credit contacts to whom all syndicate-level information (which may contain MNPI) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and State securities laws.

²  Must comply with the minimum assignment amounts set forth in Section 9.04(b)(ii)(A) of the Credit Agreement, to the extent such minimum assignment amounts are applicable.

³  Set forth, to at least 9 decimals, as a percentage of the Commitments/Loans of all Lenders of any Class, as applicable.

⁴  In the event Incremental Term Loans of any Class are established under Section 2.21 of the Credit Agreement or any new Class of Loans or Commitments is established pursuant to Section 2.23 of the Credit Agreement, refer to the Class of such Loans assigned.

The terms set forth above are hereby agreed to:                     , as Assignor,		[Consented to and]6 Accepted: JPMORGAN CHASE BANK, N.A., as Administrative Agent,
by		by
	Name:		Name:
	Title:		Title:
, as Assignor,5		Consented to: [EXELIS SYSTEMS CORPORATION,
by		by
	Name:		Name:
	Title:		Title:]7

⁵  The Assignee must deliver to the Borrower all applicable Tax forms required to be delivered by it under Section 2.17(f) of the Credit Agreement.

⁶  No consent of the Administrative Agent is required for an assignment of any Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund.

⁷  No consent of the Borrower is required for an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or, if a payment or bankruptcy Event of Default has occurred and is continuing, for any other assignment.

ANNEX 1 TO

AFFILIATED LENDER

ASSIGNMENT AND ASSUMPTION

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1. Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, other than statements made by it herein, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of Holdings, the Borrower, any Subsidiary or any other Affiliate of Holdings or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by Holdings, the Borrower, any Subsidiary or any other Affiliate of Holdings or any other Person of any of their respective obligations under any Loan Document and (c) acknowledges that the Assignee is a Purchasing Borrower Party.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption, to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) it is a Purchasing Borrower Party (as defined in the Credit Agreement), (iv) as of the date hereof the Assignee either (A) does not have any MNPI (as defined in the Credit Agreement) that has not been disclosed to the Assignor (other than because the Assignor does not wish to receive MNPI) on or prior to the date of the initiation of the Auction in connection with which this assignment is being effectuated or (B) has advised the Assignor that the Assignee cannot make the statement in the foregoing clause (A) (except to the extent that the Assignor has separately entered into a customary “big boy” letter with Holdings or the Borrower; provided that no Lender shall be required to enter into any such “big boy” letter), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof (or, prior to the first such delivery, the financial statements referred to in Section 3.04 thereof), and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into

this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent, the Assignor or any other Lender, (v) if it is a Lender that is a U.S. Person, attached hereto is an executed original of IRS Form W-9 certifying that such Lender is exempt from U.S. Federal backup withholding tax and (vi) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement (including Section 2.17(f) thereof), duly completed and executed by the Assignee, and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to or on or after the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.

3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile or other electronic imaging shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by and construed in accordance with the laws of the State of New York.

EXHIBIT H

[FORM OF] MATURITY DATE EXTENSION REQUEST

[Insert Date]

JPMorgan Chase Bank, N.A.,

    as Administrative Agent

383 Madison Avenue

New York, New York 10179

Attention: [•]

Fax: [•]

Ladies and Gentlemen:

Reference is made to the Credit Agreement dated as of [•], 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Vectrus, Inc., an Indiana corporation, Exelis Systems Corporation, a Delaware corporation (the “Borrower”), the Lenders and Issuing Banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.

In accordance with Section 2.22 of the Credit Agreement, the undersigned hereby requests [(a)] an extension of the [insert applicable Class] Maturity Date from [•] to [•][, (b) the Applicable Rate to be applied in determining the interest payable on [insert applicable Class] Loans of[, and fees payable under the Credit Agreement to,] Consenting Lenders in respect of that portion of their [[insert applicable Class] Loans] extended to the new Maturity Date to be [•]%, which changes shall be effective as of [•] and (c) the amendments to the terms of the Credit Agreement set forth below, which amendments will become effective on [•]:]

[Insert amendments to Credit Agreement, if any]

[Signature Pages Follow]

Very truly yours, EXELIS SYSTEMS CORPORATION
By:
	Name:
	Title:

EXHIBIT I-1

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of [•], 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Vectrus, Inc., an Indiana corporation, Exelis Systems Corporation, a Delaware corporation (the “Borrower”), the Lenders and Issuing Banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any promissory note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “10-percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF LENDER]
By:
	Name:
	Title:

Date:                  , 20[    ]

EXHIBIT I-2

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of [•], 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Vectrus, Inc., an Indiana corporation, Exelis Systems Corporation, a Delaware corporation (the “Borrower”), the Lenders and Issuing Banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect to such participation, neither the undersigned nor any of its direct or indirect partners/members is a “bank” extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a “10-percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF PARTICIPANT]
By:
	Name:
	Title:

Date:                  , 20[    ]

EXHIBIT I-3

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of [•], 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Vectrus, Inc., an Indiana corporation, Exelis Systems Corporation, a Delaware corporation (the “Borrower”), the Lenders and Issuing Banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “10-percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF PARTICIPANT]
By:
	Name:
	Title:

Date:                  , 20[    ]

EXHIBIT I-4

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of [•], 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Vectrus, Inc., an Indiana corporation, Exelis Systems Corporation, a Delaware corporation (the “Borrower”), the Lenders and Issuing Banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any promissory note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any promissory note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a “bank” extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a “10-percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

[NAME OF LENDER]
By:
	Name:
	Title:

Date:                  , 20[    ]

EXHIBIT J

[FORM OF] SOLVENCY CERTIFICATE

[•], 2014

Pursuant to Section [4.02(h)] of the Credit Agreement dated as of [•], 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Vectrus, Inc., an Indiana corporation (“Holdings”), Exelis Systems Corporation, a Delaware corporation (the “Borrower”), the Lenders and Issuing Banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, the undersigned hereby certifies, solely in such undersigned’s capacity as [chief financial officer] [chief accounting officer] [specify other officer with equivalent duties] of Holdings, and not individually, as follows:

I am generally familiar with the businesses and assets of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, and am duly authorized to execute this Solvency Certificate on behalf of Holdings pursuant to the Credit Agreement.

As of the date hereof, after giving effect to the consummation of the Transactions, including the making of the Loans under the Credit Agreement, and after giving effect to the application of the proceeds of such indebtedness:

a. The fair value of the assets of Holdings, the Borrower and the Restricted Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, subordinated, contingent or otherwise;

b. The present fair saleable value of the property of Holdings, the Borrower and the Restricted Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured;

c. Holdings, the Borrower and the Restricted Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured; and

d. Holdings, the Borrower and the Restricted Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital.

For purposes of this Solvency Certificate, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.

[Signature page follows]

IN WITNESS WHEREOF, the undersigned has executed this Solvency Certificate in such undersigned’s capacity as [chief financial officer] [chief accounting officer] [specify other officer with equivalent duties] of Holdings, on behalf of Holdings, and not individually, as of the date first stated above.

VECTRUS, INC.,
By:
	Name:
	Title:

EXHIBIT K

MANDATORY COSTS RATE¹⁵

1. The Mandatory Costs Rate is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England, the Financial Conduct Authority and/or the Prudential Regulation Authority (or, in any case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2. On the first day of each Interest Period (or as soon as possible thereafter) the Administrative Agent shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Costs Rate will be calculated by the Administrative Agent as a weighted average of the Lenders’ Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Borrowings) and will be expressed as a percentage rate per annum.

3. The Additional Cost Rate for any Lender lending from a lending office in a member state of the European Community that adopts or has adopted the Euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union will be the percentage notified by such Lender to the Administrative Agent. This percentage will be certified by such Lender in its notice to the Administrative Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in the relevant Borrowing made from such lending office) of complying with the minimum reserve requirements of the European Central Bank in respect of Loans made from such lending office.

4. The Additional Cost Rate for any Lender lending from a lending office in the United Kingdom will be calculated by the Administrative Agent as follows:

(a) in relation to a Loan denominated in Pounds Sterling:

% per annum

(b) in relation to a Loan denominated in any currency other than Pounds Sterling:

% per annum.

Where:

A is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which such Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

¹⁵  Capitalized terms used but not otherwise defined herein shall have the meanings specified in the Credit Agreement to which this Exhibit M is attached.

B is the percentage rate of interest (excluding the Applicable Rate and the Mandatory Costs Rate and any additional rate of interest specified in Section 2.13(c) of the Credit Agreement payable for the relevant Interest Period on the Loan.

C is the percentage (if any) of Eligible Liabilities which such Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

D is the percentage rate per annum payable by the Bank of England to the Administrative Agent on interest bearing Special Deposits.

E is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Administrative Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Administrative Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.

5. For the purposes of this Schedule:

(a) “Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b) “Fees Rules” means the rules on periodic fees contained in the Financial Conduct Authority Fees Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(c) “Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);

(d) “Reference Banks” means, in relation to EURIBOR, LIBO Rate and Mandatory Cost, the principal London office of JPMorgan Chase Bank, N.A. or such other banks as may be appointed by the Administrative Agent; and

(e) “Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

6. In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e., 5% will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

7. If requested by the Administrative Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Conduct Authority, supply to the Administrative Agent, the rate of charge payable by such Reference Bank to the Financial Conduct Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Conduct Authority (calculated for this purpose by such Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of such Reference Bank.

8. Each Lender shall supply any information required by the Administrative Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(a) the jurisdiction of its applicable lending office; and

(b) any other information that the Administrative Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Administrative Agent of any change to the information provided by it pursuant to this paragraph.

9. The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by the Administrative Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Administrative Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a lending office in the same jurisdiction as such Lender’s applicable lending office.

10. The Administrative Agent shall have no liability to any Person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or any Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11. The Administrative Agent shall distribute the additional amounts received as a result of the Mandatory Costs Rate to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.

12. Any determination by the Administrative Agent pursuant to this Schedule in relation to a formula, the Mandatory Costs Rate, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all parties to this Agreement.

13. The Administrative Agent may from time to time, after consultation with the Company and the Lenders, determine and notify to all parties to this Agreement any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Conduct Authority, the Prudential Regulation Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all parties to this Agreement.

EX-99.1

Exhibit 99.1

                , 2014

Dear Exelis Inc. Shareholder:

I am pleased to inform you that on December 11, 2013, the Board of Directors of Exelis Inc. (“Exelis”) approved a plan to separate the company’s military and government services business into an independent, publicly traded company, Vectrus, Inc. (“Vectrus”). Following completion of the transaction, the new company will be a leading provider of infrastructure asset management, logistics and supply chain management, and information technology and network communication services to the U.S. government worldwide.

Exelis will continue to trade on the New York Stock Exchange as a leader in Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) related products, networks and systems. Exelis will retain a portfolio of mission critical, affordable and platform agnostic products and services for managing global threats, conflicts and complexities and focus its future investments on strengthening four strategic growth platforms: Critical Networks; ISR & Analytics; Electronic Warfare; and Aerostructures. Immediately following the completion of the spin-off, Exelis shareholders will own all of the outstanding shares of common stock of Vectrus.

We believe the spin-off is in the best interests of our company, its shareholders and other stakeholders, as it will enable both Exelis and Vectrus to become more agile, better aligned and able to more effectively meet the needs of their respective customers, both domestically and internationally.

The spin-off will be completed by way of a pro rata distribution of Vectrus common stock to our shareholders of record as of 5:00 p.m., New York time, on September 18, 2014, the spin-off record date. Each Exelis shareholder will receive one share of Vectrus common stock for every 18 shares of Exelis common stock held by such shareholder on the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued. Following the spin-off, shareholders may request that their shares of Vectrus common stock be transferred to a brokerage or other account at any time.

The spin-off is subject to certain customary conditions. Shareholder approval of the distribution is not required, nor are you required to take any action to receive your shares of Vectrus common stock.

Immediately following the spin-off, you will own common stock in Exelis and Vectrus. The common stock of Exelis will continue to trade on the New York Stock Exchange under the symbol “XLS”. Vectrus intends to have its common stock listed on the New York Stock Exchange under the symbol “VEC”.

We expect the spin-off to be tax-free to the shareholders of Exelis, except to the extent of cash received in lieu of fractional shares. The spin-off is conditioned on, among other things, the receipt of an opinion of counsel confirming that the spin-off will qualify as a tax-free distribution under Section 355 of the Internal Revenue Code of 1986, as amended.

We have prepared an information statement, which describes the spin-off in great detail and contains important information about Vectrus, including historical combined financial statements. We are mailing to all Exelis shareholders a notice with instructions informing holders how to access the information statement online. We urge you to read the information statement carefully.

I want to thank you for your continued support of Exelis, and we all look forward to your support of both companies in the future.

Yours sincerely,

David F. Melcher

Chief Executive Officer and President

Exelis Inc.

                , 2014

Dear Vectrus, Inc. Shareholder:

It is our pleasure to welcome you as a shareholder of our company, Vectrus, Inc. (“Vectrus”), a leading provider of infrastructure asset management, logistics and supply chain management, and information technology and network communication services to the U.S. government worldwide. We have more than 50 years of experience serving customers with complex requirements in difficult locations. Our reputation is one of responsiveness, high ethical standards, and affordability.

Our infrastructure asset management, logistics and supply chain management, and information technology and network communication competencies are well positioned for core and adjacent opportunities. We have the experienced management team to realize our vision and we look forward to the prospects that await us as a new company.

As an independent and publicly traded company, we believe we can more effectively focus on our market opportunities and manage capital allocation to bring increasing value to our shareholders.

We expect to have Vectrus common stock listed on the New York Stock Exchange under the symbol “VEC” in connection with the distribution of Vectrus common stock by Exelis Inc.

We invite you to learn more about Vectrus by reviewing the enclosed information statement, and to join in our excitement in this new phase of our corporate life.

Very truly yours,

Kenneth W. Hunzeker

Chief Executive Officer

Vectrus, Inc.

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 2014

INFORMATION STATEMENT

VECTRUS, INC.

Common Stock

(par value $0.01 per share)

This information statement is being sent to you in connection with the separation of Vectrus, Inc. (“Vectrus”) from Exelis Inc. (“Exelis”), following which Vectrus will be an independent, publicly traded company. As part of the separation, Exelis will undergo an internal reorganization, after which it will complete the separation by distributing all of the outstanding shares of Vectrus common stock on a pro rata basis to the holders of Exelis common stock. We refer to this pro rata distribution as the “distribution” and we refer to the separation, including the internal reorganization and distribution, as the “spin-off.” We expect that the spin-off will be tax-free to Exelis shareholders for U.S. Federal income tax purposes, except to the extent of cash received in lieu of fractional shares. Each Exelis shareholder will receive one share of Vectrus common stock for every 18 shares of Exelis common stock held by such shareholder on September 18, 2014, the record date. The distribution of shares will be made in book-entry form. Exelis will not distribute any fractional shares of Vectrus common stock. Instead, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate net cash proceeds from the sales pro rata to each holder who would otherwise have been entitled to receive a fractional share in the spin-off. The distribution will be effective as of 12:01 a.m., New York time, on September 27, 2014. Immediately after the distribution becomes effective, we will be an independent, publicly traded company.

No vote or other action of Exelis shareholders is required in connection with the spin-off. We are not asking you for a proxy and you should not send us a proxy. Exelis shareholders will not be required to pay any consideration for the shares of Vectrus common stock they receive in the spin-off, and they will not be required to surrender or exchange shares of their Exelis common stock or take any other action in connection with the spin-off.

All of the outstanding shares of Vectrus common stock are currently owned by Exelis. Accordingly, there is no current trading market for Vectrus common stock. We expect, however, that a limited trading market for Vectrus common stock, commonly known as a “when-issued” trading market, will develop at least two trading days prior to the record date for the distribution, and we expect “regular-way” trading of Vectrus common stock will begin the first trading day after the distribution date. We intend to list Vectrus common stock on the New York Stock Exchange under the ticker symbol “VEC”.

In reviewing this information statement, you should carefully consider the matters described in “Risk Factors” beginning on page 17 of this information statement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement is not an offer to sell, or a solicitation of an offer to buy, any securities.

The date of this information statement is                 , 2014.

A Notice of Internet Availability of Information Statement Materials containing instructions describing how to access this Information Statement was first mailed to Exelis shareholders on or about                     , 2014.

TABLE OF CONTENTS

	Page
Summary		1
Risk Factors		17
Special Note About Forward-Looking Statements		37
The Spin-Off		38
Trading Market		47
Dividend Policy		49
Capitalization		50
Selected Historical Condensed Combined Financial and Other Data		51
Unaudited Pro Forma Condensed Combined Financial Statements		52
Management’s Discussion and Analysis of Financial Condition and Results of Operations		59
Business		75
Management		86
Executive Compensation		94
Certain Relationships and Related Party Transactions		141
Description of Material Indebtedness		147
Security Ownership of Certain Beneficial Owners and Management		150
Description of Capital Stock		153
Where You Can Find More Information		159
Index to Combined Financial Statements		F-1

SUMMARY

This summary highlights information contained in this information statement and provides an overview of our company, our separation from Exelis and the distribution of Vectrus common stock by Exelis to its shareholders. For a more complete understanding of our business and the spin-off, you should read this entire information statement carefully, particularly the discussion set forth under “Risk Factors” and our audited historical combined financial statements, our unaudited pro forma condensed combined financial statements and the respective notes to those statements included in this information statement.

Except as otherwise indicated or unless the context otherwise requires, “Vectrus,” “the Company,” “our company,” “we,” “us” and “our” refer to Vectrus, Inc. and its subsidiaries after giving effect to the internal reorganization preceding the distribution described in this information statement. Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement assumes the completion of the internal reorganization preceding the distribution.

Our Company

We are a leading provider of infrastructure asset management, logistics and supply chain management, and information technology and network communication services to the U.S. government worldwide. Our services include operations, maintenance, management, engineering and sustainment for physical assets including a wide variety of facilities, information technology, network and communication systems, vehicles and equipment. We have a proven history of deploying resources rapidly and with precision to support the mission success of our customers. Leveraging a history of more than 50 years, we provide global service solutions in 18 countries across four continents in both stable and unstable environments. For the six months ended June 30, 2014 and year ended December 31, 2013, we had revenue of $617 million and $1.5 billion, respectively, all of which was derived from U.S. government customers.

We operate in a single segment and offer services in three major capability areas: infrastructure asset management, logistics and supply chain management, and information technology and network communication services. Our infrastructure asset management services support the U.S. Army, Air Force, and Navy, and include infrastructure services, security, warehouse management and distribution, ammunition management, military base maintenance and operations, communications, emergency services, transportation, and life support activities at a number of critical global military installations. Our logistics and supply chain management services support and maintain the vehicle and equipment stocks of the U.S. Army and Marine Corps. Our information technology and network communication capabilities consist of operation and maintenance of communications systems, network security, systems installation, and full life cycle management of information technology systems for the U.S. Army, Air Force and Navy.

Our primary customer is the Department of Defense (DoD) with a high concentration in the U.S. Army. For the year ended December 31, 2013, we generated approximately 92% of our total revenue from the U.S. Army. We added our first U.S. Marine Corps contract in 2013. We attribute the strength of our customer relationships to our focus on operational performance, global responsiveness and cost efficiencies, as well as our core values of integrity, respect and responsibility.

We employ approximately 6,800 people and engage more than 7,250 subcontractor personnel around the world. This includes an experienced management team with an average of 28 years of experience in the military, industry, and a wide range of U.S. government entities. Our management team has a proven track record of winning new contracts, driving premier operating efficiency, and managing all aspects of the demanding compliance culture required to do business with the U.S. government in the United States and abroad. We are also a leading employer of veterans with more than 30% of our employees reporting a military background, and we have been recognized a number of times in recent years by veteran-focused organizations as a military-friendly employer.

1

Our Strengths

With a deep understanding of our customers’ needs and missions, we create value through operational excellence, delivering superior program performance and by providing compelling and differentiated value added services. Our core strengths include:

• Proven Strong Performance and Enduring Relationships. We have long, enduring relationships with strategically essential government customers, including some that have lasted for more than 30 years, and a sustained track record of repeat awards for our key contracts and winning new contracts. We believe our success and the continuity of demand for our services are due to our deep understanding of our customers’ needs as well as their trust and confidence in our ability to respond quickly and deliver specific expertise on a cost efficient basis. Independent reports from customers typically rate our company at the highest levels for technical expertise, responsiveness, quality control, cost control, and management capability. We were the prime contractor on 85% of our revenue for the year ended December 31, 2013. Our strong customer relationships and close proximity enable us to develop deep customer knowledge and translate our mission understanding into successful program execution and continued demand for our services.

• Rapid and Agile Global Operating Capabilities. For more than 50 years, we have consistently demonstrated our ability to quickly and efficiently respond to customer requirements anywhere in the world serving critical and enduring national security needs. We excel at providing services for our customers in any location from the United States to Europe to remote locations in the Middle East and Afghanistan. Our contracts require quick start-up in complex locations for customer missions that cannot be disrupted. We respond effectively and rapidly with qualified personnel and effective management systems, as well as the necessary tools, equipment, and supplies for full service functionality. This expeditionary posture demonstrates our aptitude at interpreting and complying with varied, complex, changing and often unpredictable requirements of foreign laws and business environments. We leverage our network of in-house and local counsel to monitor and control compliance risk, which we believe gives us a competitive advantage in our market segment.

• Attractive Business Dynamics. We have a highly variable cost structure, allowing our company significant flexibility to adapt to changing market conditions and contract structures. We are able to manage and perform both cost-reimbursable and firm-fixed-price contracts, as well contracts that include elements of both these contract types, which are increasingly common. Several contracts have been won under low price-technically acceptable terms, and are profitable, demonstrating our insightful bid strategy as well as outstanding operational capability. Over the past three years, our capital expenditures and working capital as a percentage of total revenue has averaged 0.16% and 5.2%, respectively. Combined with our low fixed cost structure, this provides us with a substantial degree of operating and financial flexibility.

• Integrated Service Offerings. We provide a full spectrum of support and an efficient single point of responsibility for our customers, and we regularly combine the components across our main service offerings, or within each offering, to create a customer value proposition. The integration of these capabilities facilitates our ability to act as the prime contractor more often, makes us more cost competitive, creates more value for our stakeholders, and allows us to more effectively support our customers’ missions.

• Experienced Team with Deep Industry and Market Knowledge. Crucial to our success is the quality, training, commitment and experience of our workforce, which possesses a comprehensive understanding of the operating environment of our customers. Our hiring practices are honed to select the most qualified and best suited candidates for each assignment. Our workforce has deep technical expertise, including more than 3,000 technical certifications in the information technology (IT) area. Additionally, more than 35% of our workforce holds an active security clearance, which is required on

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many of our existing and future program opportunities. Members of our senior management team, which is led by Kenneth Hunzeker who will serve as our Chief Executive Officer and President, have held a variety of senior leadership roles with a record of delivering customer solutions and, collectively, have an average of 28 years of relevant industry, military and government experience.

• Culture of Compliance and Certified Processes. At the time of our spin-off from Exelis, we expect that our business systems will have been approved by the U.S. government entities that audit contractors. We are disciplined in our approach to monitor and control compliance with U.S. government regulations reducing legal and reputational risk, which we believe gives us a competitive advantage in our market segment. We have stringent and proven processes for management, engineering, business development, technical support and services, and we strive to bring demonstrated and successful processes to every endeavor. We are certified to a number of recognized international benchmarks that require rigorous discipline to maintain the high standards of conformity. We hold certifications in areas including quality management system (ISO 9001), occupational health and safety management system (OHSAS 18001) and IT service management system (ISO 20000). In addition, we maintain a Capability Maturity Model Integration (CMMI) maturity level 3 appraisal for our network communication services.

Our Business Strategy

By delivering value to our customers through exceptional performance and cost efficiencies, we are positioned to continue to drive earnings and cash flow, and create value for our shareholders. Key components of our business strategy include:

• Expand Our Geographic Footprint. The drawdown of U.S. Forces from Afghanistan will result in the contraction of certain of our programs. We have realigned our resources to invest in new business opportunities in the United States, Middle East and North Africa (MENA) and the Pacific. We believe the ability to ramp up quickly, and then sustain a qualified workforce on large, complex programs will continue to be a differentiator for our company. This capability enables us to win contracts from existing and new customers, and we expect will enhance our market leadership position.

• Broaden Our Customer Base. We intend to leverage our leadership position in the Middle East with the U.S. Army to provide our full range of offerings to other U.S. government military and civil agencies in the United States and worldwide. We believe our core strengths of program performance and operational excellence, and our focus on the needs and missions of our customers, have allowed us to thrive with current customers and will translate to further growth with closely related new U.S. government customers.

• Capitalize on Essential Infrastructure Asset Management and Sustainment Services. We intend to continue to provide services to the U.S. government in light of its reliance on civilian contractors and its significant expenditures on the types of services we provide. The requirements we fill are essential to the basic operation of the mission of our customers. We will pursue opportunities that provide mission critical and enduring services, such as information technology support, rather than only optional upgrades or replacements.

• Extend, Deepen and Enhance Our Technical Capabilities. We expect to internally invest in our own capabilities as well as evaluate and pursue acquisitions on a strategic basis, with a view to adding capabilities that allow us to deliver an even higher value added and differentiated service.

Other Information

Vectrus was incorporated in the State of Indiana on February 4, 2014. Our headquarters are located in Colorado Springs, Colorado, at 655 Space Center Drive. Our telephone number is (719) 591-3600.

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The Spin-Off

Overview

On December 11, 2013, the Board of Directors of Exelis approved a plan to spin-off Vectrus from Exelis, following which Vectrus will be an independent, publicly traded company.

Before our spin-off from Exelis, we will enter into a Distribution Agreement and several other agreements with Exelis related to the spin-off. These agreements will govern the relationship between us and Exelis after completion of the spin-off and provide for the allocation between us and Exelis of various assets, liabilities, rights and obligations (including employee benefits, insurance and tax-related assets and liabilities). These agreements will also include arrangements with respect to transitional services to be provided by Exelis to Vectrus. See “Certain Relationships and Related Party Transactions—Agreements with Exelis Related to the Spin-Off.”

The distribution of Vectrus common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. In addition, Exelis has the right not to complete the spin-off if, at any time prior to the distribution, the Board of Directors of Exelis determines, in its sole discretion, that the spin-off is not in the best interests of Exelis or its shareholders or other constituents, that a sale or other alternative is in the best interests of Exelis or its shareholders or other constituents, or that market conditions or other circumstances are such that it is not advisable at that time to separate Vectrus from Exelis. See “The Spin-Off—Conditions to the Spin-Off.” Additionally, prior to the completion of the spin-off, we will raise indebtedness in an amount estimated at $140 million under a senior secured term facility and enter into a senior secured revolving facility permitting borrowings of up to $75 million. See “Description of Material Indebtedness.” The proceeds from the senior secured term facility will be used to fund a cash distribution to Exelis that is expected to be approximately $119 million.

Questions and Answers About the Spin-Off

The following provides only a summary of the terms of the spin-off. For a more detailed description of the matters described below, see “The Spin-Off.”

Q: What is the spin-off?

A: The spin-off is the series of transactions by which Vectrus will separate from Exelis. To complete the spin-off, Exelis will distribute to its shareholders all of the outstanding shares of Vectrus common stock. We refer to this as the distribution. Following the spin-off, Vectrus will be a separate company from Exelis, and Exelis will not retain any ownership interest in Vectrus.

Q: What will I receive in the spin-off?

A: As a holder of Exelis common stock, you will retain your Exelis shares of common stock and will receive one share of Vectrus common stock for every 18 shares of Exelis common stock you own as of the record date. The number of shares of Exelis common stock you own and your proportionate interest in Exelis will not change as a result of the spin-off. See “The Spin-Off.”

Q: What is Vectrus?

A: Vectrus is a leading provider of infrastructure asset management, logistics and supply chain management, and information technology and network communication services to the U.S. government worldwide. Vectrus is currently a subsidiary of Exelis whose shares will be distributed to Exelis shareholders when the spin-off is completed. After the spin-off is completed, Vectrus will be an independent, publicly traded company.

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Q: Why is the separation of Vectrus structured as a spin-off?

A: On December 11, 2013, the Board of Directors of Exelis approved a plan to spin-off the military and government services business of Exelis into a new company. Exelis determined, and continues to believe, that a spin-off is the most efficient way to accomplish a separation of our business from Exelis for various reasons, including: (i) a spin-off would be a tax-free distribution of Vectrus common stock to Exelis shareholders; (ii) a spin-off offers a higher degree of certainty of completion in a timely manner, lessening disruption to current business operations; and (iii) a spin-off provides greater assurance that decisions regarding Vectrus’s capital structure support future financial stability. After consideration of strategic alternatives, including a sale, Exelis believes that a tax-free spin-off will enhance the long-term value of both Exelis and Vectrus. See “The Spin-Off—Reasons for the Spin-Off.”

Q: Can Exelis decide to cancel the distribution of the Vectrus common shares even if all the conditions have been met?

A: Yes. The distribution of Vectrus common stock is subject to the satisfaction or waiver of certain conditions. See “The Spin-Off—Conditions to the Spin-Off.” Exelis has the right not to complete the spin-off if, at any time prior to the distribution, the Board of Directors of Exelis determines, in its sole discretion, that the spin-off is not in the best interests of Exelis or its shareholders or other constituents, that a sale or other alternative is in the best interests of Exelis or its shareholders or other constituents, or that market conditions or other circumstances are such that it is not advisable at that time to separate Vectrus from Exelis. In the event the Board of Directors of Exelis determines to waive a material condition to the distribution, to modify a material term of the distribution or not to proceed with the spin-off, Exelis intends to promptly issue a press release or other public announcement and file a Current Report on Form 8-K to report such event. The Company is not aware of any circumstances under which the distribution would be abandoned.

Q: What is being distributed in the spin-off?

A: Approximately 10 million shares of Vectrus common stock will be distributed in the spin-off, based on the number of shares of Exelis common stock expected to be outstanding as of September 18, 2014, the record date, and assuming a distribution ratio of one-to-eighteen. The exact number of shares of Vectrus common stock to be distributed will be calculated on the record date. The shares of Vectrus common stock to be distributed by Exelis will constitute all of the issued and outstanding shares of Vectrus common stock immediately prior to the distribution. See “Description of Capital Stock—Common Stock.”

Q: When is the record date for the distribution?

A: The record date is September 18, 2014.

Q: When will the distribution occur?

A: The distribution date of the spin-off is September 27, 2014. We expect that it will take the distribution agent, acting on behalf of Exelis, up to two weeks after the distribution date to fully distribute the shares of Vectrus common stock to Exelis shareholders.

Q: What do I have to do to participate in the spin-off?

A: Nothing. You are not required to take any action, although you are urged to read this entire document carefully. No shareholder approval of the distribution is required or sought. You are not being asked for a proxy. No action is required on your part to receive your shares of Vectrus common stock. You will neither be required to pay anything for the new shares nor be required to surrender any shares of Exelis common stock to participate in the spin-off.

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Q: How will fractional shares be treated in the spin-off?

A: Fractional shares of Vectrus common stock will not be distributed. Fractional shares of Vectrus common stock to which Exelis shareholders of record would otherwise be entitled will be aggregated and sold in the public market by the distribution agent at prevailing market prices. The aggregate net cash proceeds of the sales will be distributed ratably to those shareholders who would otherwise have received fractional shares of Vectrus common stock. See “The Spin-Off—Treatment of Fractional Shares” for a more detailed explanation. Receipt of the proceeds from these sales will generally result in a taxable gain or loss to those shareholders. Each shareholder entitled to receive cash proceeds from these shares should consult his, her or its own tax advisor as to such shareholder’s particular circumstances. The tax consequences of the distribution are described in more detail under “The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off.”

Q: Why has Exelis determined to undertake the spin-off?

A: The Exelis Board of Directors has determined that the spin-off is in the best interests of Exelis, its shareholders and other stakeholders because the spin-off will provide the following key benefits:

• Greater Strategic Focus of Management’s Efforts and Resources. The military and government services business of Exelis (the Mission Systems business) has historically exhibited different financial and operating characteristics than the other businesses of Exelis, especially the Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) related businesses, which are a key component of the future growth strategy of Exelis. Management of Exelis and we believe that the Mission Systems business and the other businesses of Exelis have limited similarities, benefit from limited synergies and require different capital expenditure and management strategies in order to maximize their respective long-term value. Consequently, the management resources of each of Exelis and us would be more efficiently utilized if concentrated on our respective businesses.

• Enhanced Focus on Customers. Both Exelis and we believe that, as a unified, independently managed, stand-alone company, our management will be able to more closely align internal resources, including senior management time, with the unique priorities and realities of customers of our business.

• Direct and Differentiated Access to Capital Resources. After the spin-off, we will no longer need to compete with the other businesses of Exelis for capital resources. Both Exelis and we believe that direct and differentiated access to capital resources will allow each of us to better optimize the amounts and terms of the capital needed for each of the respective businesses, aligning financial and operational characteristics with market expectations.

• Enhanced Choices for Investors by Offering Investment Opportunities in Separate Entities. After the spin-off, investors should be able to better evaluate our financial performance, as well as our strategy within the context of our markets, thereby enhancing the likelihood that we will achieve an appropriate market valuation. As a result of the spin-off, our management should be able to implement goals and evaluate strategic opportunities in light of investor expectations within our specialties without undue attention to investor expectations in other specialties.

• Improved Management Incentive Tools. Similar to Exelis, we expect to use our equity to compensate current and future employees. In multi-business companies such as Exelis, it is difficult to structure incentives that reward managers in a manner directly related to the performance of their respective business units. By granting stock based compensation tied directly to the Mission Systems business, equity compensation will be in line with the financial results of the managers’ direct work product. As a result, the incentives offered by our compensation plan will be less diluted and more effective.

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• Ability to Utilize Stock as an Acquisition Currency. Although we are not currently planning any acquisitions involving the use of our stock, the spin-off will enable us to use our stock as currency to pursue certain financial and strategic objectives, including tax-free merger transactions. In addition, future strategic transactions with similar businesses will be more easily facilitated through the use of our stock as consideration.

Q: What are the U.S. Federal income tax consequences of the spin-off?

A: The spin-off is conditioned on the receipt by Exelis of an opinion of tax counsel to the effect that the spin-off will qualify as a tax-free distribution to Exelis and its shareholders under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”). Exelis expects to receive such opinion at or prior to the time of the consummation of the spin-off. Although Exelis has no current intention to do so, such condition is solely for the benefit of Exelis and its shareholders and may be waived by Exelis in its sole discretion. The tax consequences of the distribution are described in more detail under “The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off.”

Q: Will the Vectrus common stock be listed on a stock exchange?

A: Yes. Although there is not currently a public market for Vectrus common stock, before completion of the spin-off, Vectrus will apply to list its common stock on the New York Stock Exchange (the “NYSE”) under the symbol “VEC”. It is anticipated that trading of Vectrus common stock will commence on a “when-issued” basis at least two trading days prior to the record date. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. “When-issued” trades generally settle within four trading days after the distribution date. On the first trading day following the distribution date, any “when-issued” trading with respect to Vectrus common stock will end and “regular-way” trading will begin. “Regular-way” trading refers to trading after a security has been issued and typically involves a transaction that settles on the third full trading day following the date of the transaction. See “Trading Market.”

Q: Will my shares of Exelis common stock continue to trade?

A: Yes. Exelis common stock will continue to be listed and trade on the NYSE under the symbol “XLS”.

Q: If I sell, on or before the distribution date, shares of Exelis common stock that I held on the record date, am I still entitled to receive shares of Vectrus common stock distributable with respect to the shares of Exelis common stock I sold?

A: Beginning on or shortly before the record date and continuing through the distribution date for the spin-off, Exelis common stock will begin to trade in two markets on the New York Stock Exchange: a “regular-way” market and an “ex-distribution” market. If you hold shares of Exelis common stock as of the record date for the distribution and choose to sell those shares in the “regular-way” market after the record date for the distribution and on or before the distribution date, you also will be selling the right to receive the shares of Vectrus common stock in connection with the spin-off. However, if you hold shares of Exelis common stock as of the record date for the distribution and choose to sell those shares in the “ex-distribution” market after the record date for the distribution and on or before the distribution date, you will still receive the shares of Vectrus common stock in the spin-off.

Q: Will the spin-off affect the trading price of my Exelis stock?

A: Yes, the trading price of shares of Exelis common stock immediately following the distribution is expected to be lower than immediately prior to the distribution because its trading price will no longer reflect the

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value of the Vectrus business. However, we cannot predict the price at which the Exelis shares will trade following the spin-off.

Q: What indebtedness will Vectrus have following the spin-off?

A: It is anticipated that, prior to the completion of the spin-off, we will raise indebtedness in an amount estimated at $140 million under a senior secured term facility and enter into a senior secured revolving facility permitting borrowings of up to $75 million. See “Description of Material Indebtedness.” The proceeds from the senior secured term facility will be used to fund a cash distribution to Exelis that is expected to be approximately $119 million.

Q: Who will comprise the senior management team and Board of Directors of Vectrus after the spin-off?

A: Following the spin-off, our senior management team will be led by Kenneth Hunzeker, who will serve as our Chief Executive Officer and President. Our executive officers have held a variety of senior leadership roles at Vectrus and, collectively, have an average of 28 years of relevant industry, military and government experience. Mr. Hunzeker will also serve on the Board of Directors. The non-executive chairman of the Board of Directors will be Louis Giuliano, a previous chairman, president and chief executive officer of ITT Corporation. See “Management” for information on our executive officers and Board of Directors.

Q: What will be the relationship between Exelis and Vectrus after the spin-off?

A: Following the spin-off, Vectrus will be an independent, publicly traded company and Exelis will have no continuing stock ownership interest in Vectrus. Vectrus will have entered into a Distribution Agreement with Exelis and will enter into several other agreements for the purpose of allocating between Vectrus and Exelis various assets, liabilities, rights and obligations (including employee benefits, insurance and tax-related assets and liabilities). These agreements will also govern Vectrus’s relationship with Exelis following the spin-off and will provide arrangements for employee matters, tax matters, intellectual property matters, insurance matters and other specified liabilities, rights and obligations attributable to periods before and, in some cases, after the spin-off. These agreements will also include arrangements with respect to transitional services to be provided by Exelis to Vectrus. The Distribution Agreement will provide, in general, that Vectrus will indemnify Exelis against any and all liabilities arising out of Vectrus’s business as constituted in connection with the spin-off and any other liabilities and obligations assumed by Vectrus, and that Exelis will indemnify Vectrus against any and all liabilities arising out of the businesses of Exelis as constituted in connection with the spin-off and any other liabilities and obligations assumed by Exelis.

Q: What will Vectrus’s dividend policy be after the spin-off?

A: We do not currently plan to pay a regular dividend on our common stock following the spin-off. The declaration of any future cash dividends and, if declared, the amount of any such dividends, will be subject to our financial condition, earnings, capital requirements, financial covenants and other contractual restrictions and to the discretion of our Board of Directors. Our Board of Directors may take into account such matters as general business conditions, industry practice, our financial condition and performance, our future prospects, our cash needs and capital investment plans, income tax consequences, applicable law and such other factors as our Board of Directors may deem relevant. See “Dividend Policy.”

Q: What are the anti-takeover effects of the spin-off?

A: Some provisions of the amended and restated articles of incorporation of Vectrus and the amended and restated by-laws of Vectrus, Indiana law and possibly the agreements governing Vectrus’s new debt, as

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each will be in effect immediately following the spin-off, may have the effect of making more difficult an acquisition of control of Vectrus in a transaction not approved by Vectrus’s Board of Directors. See “Description of Capital Stock— Provisions of Our Amended and Restated Articles of Incorporation and Amended and Restated By-Laws That Could Delay or Prevent a Change in Control.” In addition, under the Tax Matters Agreement, Vectrus will agree not to enter into any transaction for a period of two years following the distribution involving an acquisition (including issuance) of Vectrus common stock or any other transaction that could cause the distribution to be taxable to Exelis. The parties will also agree to indemnify each other for any tax resulting from any such transaction to the extent a party’s actions caused such tax liability, whether or not the indemnified party consented to such transaction or the indemnifying party was otherwise permitted to enter into such transaction under the Tax Matters Agreement, and for all or a portion of any tax liabilities resulting from the distribution under certain other circumstances. Generally, Exelis will recognize a taxable gain on the distribution if there are one or more acquisitions (including issuances) of Vectrus capital stock representing 50% or more of Vectrus’s then-outstanding stock, measured by vote or value, and the acquisitions are deemed to be part of a plan or series of related transactions that include the distribution. Any such acquisition of Vectrus common stock within two years before or after the distribution (with exceptions, including public trading by less-than-5% shareholders and certain compensatory stock issuances) generally will be presumed to be part of such a plan unless that presumption is rebutted. As a result, Vectrus’s obligations may discourage, delay or prevent a change of control of Vectrus.

Q: What are the risks associated with the spin-off?

A: There are a number of risks associated with the spin-off and ownership of Vectrus common stock. These risks are discussed under “Risk Factors.”

Q: How will the spin-off affect Vectrus’s relationship with its customers?

A: We believe we have well-established relationships with our principal customers. We believe the spin-off will enable us to better focus on those customers and to align our resources with their priorities. As we seek to enter into new contracts with our customers, we expect to continue to provide information to enable them to have ongoing confidence in our management, our workforce and our ability to perform, including our financial stability.

Q: Where can I get more information?

A. If you have any questions relating to the mechanics of the distribution, you should contact the distribution agent at:

Computershare Trust Company, N.A.

Address: 211 Quality Circle, Suite 210

                         College Station, TX 77845

Toll Free Number: 888-847-8927

Before the spin-off, if you have any questions relating to the spin-off, you should contact Exelis at:

Exelis Inc.

Investor Relations

Phone: 703-245-4292

Email: exelisinvestorrelations@exelisinc.com

www.exelisinc.com

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After the spin-off, if you have any questions relating to Vectrus, you should contact Vectrus at:

Vectrus, Inc.

Investor Relations

Phone: 719-591-3600

www.vectrus.com

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Summary of the Spin-Off

Distributing Company Exelis Inc., an Indiana corporation. After the distribution, Exelis will not own any shares of Vectrus common stock.

Distributed Company Vectrus, Inc., an Indiana corporation and a wholly owned subsidiary of Exelis. After the spin-off, Vectrus will be an independent, publicly traded company.

Distributed Securities All of the outstanding shares of Vectrus common stock owned by Exelis, which will be 100% of Vectrus common stock issued and outstanding immediately prior to the distribution.

Record Date The record date for the distribution is September 18, 2014.

Distribution Date The distribution date is September 27, 2014.

Internal Reorganization As part of the spin-off, Exelis will undergo an internal reorganization, which we refer to as the “internal reorganization,” that will, among other things and subject to limited exceptions: (i) allocate and transfer to a newly formed indirect subsidiary of Exelis those assets, and allocate and assign responsibility for those liabilities, in respect of the activities of the Tethered Aerostat Business of Exelis (the “TARS business”), which will be retained by Exelis, and (ii) transfer to us the ownership interests of Exelis Systems Corporation and other indirect subsidiaries of Exelis that form a part of the Mission Systems business.

After completion of the spin-off, Vectrus will be an independent, publicly traded company. Immediately following the spin-off, Vectrus expects to have approximately 15,500 record holders of shares of common stock and approximately 10 million shares of common stock outstanding, based on the number of shareholders and outstanding shares of Exelis common stock on and the distribution ratio. The figures exclude shares of Exelis common stock held directly or indirectly by Exelis, if any. The actual number of shares to be distributed will be determined on the record date and will reflect any repurchases of shares of Exelis common stock and issuances of shares of Exelis common stock in respect of employer or employee contributions under Exelis benefit plans between the date the Exelis Board of Directors declares the dividend for the distribution and the record date for the distribution.

See “The Spin-Off—Manner of Effecting the Spin-Off—Internal Reorganization.”

Distribution Ratio Each holder of Exelis common stock will receive one share of Vectrus common stock for every 18 shares of Exelis common stock held at 5:00 p.m., New York time, on September 18, 2014.

The Distribution On the distribution date, Exelis will release the shares of Vectrus common stock to the distribution agent to distribute to Exelis

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shareholders. The distribution of shares will be made in book-entry form, which means that no physical share certificates will be issued. It is expected that it will take the distribution agent up to two weeks to issue shares of Vectrus common stock to you or to your bank or brokerage firm electronically on your behalf by way of direct registration in book-entry form. Trading of our shares will not be affected during that time. Following the spin-off, shareholders whose shares are held in book-entry form may request that their shares of Vectrus common stock be transferred to a brokerage or other account at any time. You will not be required to make any payment, surrender or exchange your shares of Exelis common stock or take any other action to receive your shares of Vectrus common stock.

Fractional Shares The distribution agent will not distribute any fractional shares of Vectrus common stock to Exelis shareholders. Fractional shares of Vectrus common stock to which Exelis shareholders of record would otherwise be entitled will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of the sales will be distributed ratably to those shareholders who would otherwise have received fractional shares of Vectrus common stock. Receipt of the proceeds from these sales will generally result in a taxable gain or loss to those shareholders. Each shareholder entitled to receive cash proceeds from these shares should consult his, her or its own tax advisor as to such shareholder’s particular circumstances. The tax consequences of the distribution are described in more detail under “The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off.”

Conditions to the Spin-Off Completion of the spin-off is subject to the satisfaction or waiver by Exelis of the following conditions:

• our Registration Statement on Form 10, of which this information statement forms a part, shall have been declared effective by the Securities and Exchange Commission (the “SEC”), no stop order suspending the effectiveness thereof shall be in effect, no proceedings for such purpose shall be pending before or threatened by the SEC, and this information statement, or a notice of internet availability thereof, shall have been mailed to the Exelis shareholders;

• Vectrus common stock shall have been approved for listing on the New York Stock Exchange, subject to official notice of distribution;

• Exelis shall have obtained an opinion from its tax counsel, in form and substance satisfactory to Exelis, to the effect that the spin-off will qualify as a tax-free distribution under Section 355 of the Code.

• prior to the distribution date, the Exelis Board of Directors shall have obtained opinions from a nationally recognized valuation firm, in form and substance satisfactory to Exelis, with respect to

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the capital adequacy and solvency of each of Exelis and Vectrus after giving effect to the spin-off;

• all material governmental approvals and other consents necessary to consummate the spin-off shall have been received;

• no order, injunction or decree issued by any governmental entity of competent jurisdiction or other legal restraint or prohibition preventing the consummation of all or any portion of the spin-off shall be pending, threatened, issued or in effect, and no other event outside the control of Exelis shall have occurred or failed to occur that prevents the consummation of all or any portion of the spin-off;

• no other events or developments shall have occurred or failed to occur that, in the judgment of the Board of Directors of Exelis, would result in the distribution having a material adverse effect on Exelis or its shareholders;

• the financing transactions described in “Description of Material Indebtedness” and elsewhere in this information statement as having occurred prior to the distribution shall have been consummated concurrently with or prior to the distribution (including any funding thereunder contemplated to take place and any cash contributions or distributions of the proceeds thereof anticipated to take place on or prior to the distribution);

• the internal reorganization shall have been completed, except for such steps as Exelis in its sole discretion shall have determined may be completed after the distribution date;

• Exelis shall have taken all necessary action, in the judgment of the Board of Directors of Exelis, to cause the Board of Directors of Vectrus to consist of the individuals identified in this information statement as directors of Vectrus;

• Exelis shall have taken all necessary action, in the judgment of the Board of Directors of Exelis, to cause the officers of Vectrus to be the individuals identified as such in this information statement;

• all necessary actions shall have been taken to adopt the form of amended and restated articles of incorporation and amended and restated by-laws filed by Vectrus with the SEC as exhibits to the Registration Statement on Form 10, of which this information statement forms a part;

• the Board of Directors of Exelis shall have approved the distribution, which approval may be given or withheld at its absolute and sole discretion;

• in the event that the distribution is for any reasons postponed more than 120 days after after the date on which the Exelis Board of Directors approves the distribution, the Board of Directors of Exelis shall have redetermined, as of such

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postponed distribution date, that the distribution satisfies the requirements of Indiana Business Corporation Law governing distributions; and

• each of the Distribution Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Transition Services Agreement and the other ancillary agreements shall have been executed by each party.

The fulfillment of the foregoing conditions will not create any obligation on the part of Exelis to effect the spin-off. We are not aware of any material Federal, foreign or state regulatory requirements that must be complied with or any material approvals that must be obtained, other than compliance with SEC rules and regulations, approval for listing on the New York Stock Exchange and the declaration of effectiveness of the Registration Statement on Form 10, of which this information statement forms a part, by the SEC, in connection with the distribution. Exelis has the right not to complete the spin-off if, at any time prior to the distribution, the Board of Directors of Exelis determines, in its sole discretion, that the spin-off is not then in the best interests of Exelis or its shareholders or other constituents, that a sale or other alternative is in the best interests of Exelis or its shareholders or other constituents or that it is not advisable for Vectrus to separate from Exelis at that time. For more information, see “The Spin-Off—Conditions to the Spin-Off.”

Trading Market and Symbol We intend to list Vectrus common stock on the New York Stock Exchange under the ticker symbol “VEC”. We anticipate that, at least two trading days prior to the record date, trading of shares of Vectrus common stock will begin on a “when-issued” basis and will continue up to and including the distribution date, and we expect “regular-way” trading of Vectrus common stock will begin the first trading day after the distribution date. We also anticipate that, at least two trading days prior to the record date, there will be two markets in Exelis common stock: a “regular-way” market on which shares of Exelis common stock will trade with an entitlement for the purchaser of Exelis common stock to shares of Vectrus common stock to be distributed pursuant to the distribution, and an “ex-distribution” market on which shares of Exelis common stock will trade without an entitlement for the purchaser of Exelis common stock to shares of Vectrus common stock. For more information, see “Trading Market.”

Tax Consequences The spin-off is conditioned on the receipt of an opinion of tax counsel, in form and substance satisfactory to Exelis, to the effect that the spin-off will qualify as a tax-free distribution under Section 355 of the Code. See “The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off.”

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Each shareholder is urged to consult his, her or its tax advisor as to the specific tax consequences of the spin-off to such shareholder, including the effect of any state, local or non-U.S. tax laws and of changes in applicable tax laws.

Relationship with Exelis after the Spin-Off We will enter into a Distribution Agreement and other agreements with Exelis related to the spin-off. These agreements will govern the relationship between us and Exelis after completion of the spin-off and provide for the allocation between us and Exelis of various assets, liabilities, rights and obligations (including employee benefits, insurance and tax-related assets and liabilities). We intend to enter into one or more Transition Services Agreements with Exelis pursuant to which certain services will be provided on an interim basis following the distribution. We also intend to enter into an Employee Matters Agreement that will set forth the agreements between us and Exelis concerning certain employee compensation and benefit matters. Further, we intend to enter into a Tax Matters Agreement with Exelis regarding the sharing of taxes incurred before and after completion of the spin-off, certain indemnification rights with respect to tax matters and certain restrictions on our conduct following the distribution intended to preserve the tax-free status of the spin-off. We describe these arrangements in greater detail under “Certain Relationships and Related Party Transactions—Agreements with Exelis Related to the Spin-Off,” and describe some of the risks of these arrangements under “Risk Factors—Risks Relating to the Spin-Off.”

Dividend Policy We do not currently plan to pay a regular dividend on our common stock following the spin-off. The declaration of any future cash dividends and, if declared, the amount of any such dividends, will be subject to our financial condition, earnings, capital requirements, financial covenants and other contractual restrictions and to the discretion of our Board of Directors. Our Board of Directors may take into account such matters as general business conditions, industry practice, our financial condition and performance, our future prospects, our cash needs and capital investment plans, income tax consequences, applicable law and such other factors as our Board of Directors may deem relevant. See “Dividend Policy.”

Transfer Agent Computershare Trust Company, N.A.

Risk Factors We face both general and specific risks and uncertainties relating to our business, our relationship with Exelis and our being an independent, publicly traded company. We also are subject to risks relating to the spin-off. You should carefully read the risk factors set forth in the section entitled “Risk Factors” in this information statement.

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Summary Historical and Unaudited Pro Forma Condensed Combined Financial Data

The following table presents the summary historical condensed combined financial data for Vectrus. The condensed combined statement of income data for each of the years in the three-year period ended December 31, 2013 and the condensed combined balance sheet data as of December 31, 2013 and 2012 set forth below are derived from Vectrus’s audited combined financial statements included in this information statement. The condensed combined statement of income data for the six months ended June 30, 2014 and June 30, 2013 and the condensed combined balance sheet data as of June 30, 2014 are derived from the unaudited condensed combined financial statements for Vectrus included elsewhere in this information statement. The condensed combined balance sheet data as of December 31, 2011 are derived from Vectrus’s audited combined financial statements that are not included in this information statement. The unaudited condensed combined financial statements have been prepared on the same basis as the audited combined financial statements and, in the opinion of our management, include all adjustments necessary for a fair presentation of the information set forth herein.

The summary unaudited pro forma condensed combined financial data as of and for the six months ended June 30, 2014 and the year ended December 31, 2013 have been prepared to reflect the spin-off, including: (i) the distribution of approximately 10 million shares of Vectrus common stock by Exelis to its shareholders; (ii) the incurrence of indebtedness of $140 million; (iii) a $119 million distribution to Exelis; and (iv) the transactions contemplated by the Distribution Agreement and related separation agreements. The unaudited pro forma condensed combined statement of operations presented for the six months ended June 30, 2014 and the year ended December 31, 2013 assumes the spin-off and related transactions occurred on January 1, 2013. The unaudited pro forma condensed combined balance sheet data assume the spin-off occurred on June 30, 2014. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information and we believe such assumptions are reasonable under the circumstances.

The unaudited pro forma condensed combined financial statements are not necessarily indicative of our results of operations or financial condition had the distribution and our anticipated post-spin-off capital structure been completed on the dates assumed. Also, they may not reflect the results of operations or financial condition that would have resulted had we been operating as an independent, publicly traded company during such periods. In addition, they are not necessarily indicative of our future results of operations or financial condition.

You should read this summary financial data together with “Unaudited Pro Forma Condensed Combined Financial Statements,” “Capitalization,” “Selected Historical Condensed Combined Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes included in this information statement.

	As of and for the six months ended June 30,									Year ended December 31
	Pro Forma			Historical						Pro Forma			Historical
	2014			2014			2013			2013			2013			2012			2011
(In millions)
Results of Operations
Revenue	$	598		$	617		$	835		$	1,475		$	1,512		$	1,828		$	1,806
Operating income	$	32		$	27		$	77		$	129		$	131		$	110		$	87
Operating Margin		5.4	%		4.4	%		9.2	%		8.7	%		8.7	%		6.0	%		4.8	%
Net income	$	18		$	17		$	50		$	79		$	84		$	75		$	54
Financial Position
Total assets	$	512		$	499		$	595		$	509		$	489		$	591		$	615
Total debt	$	140		$	—		$	—		$	140		$	—		$	—		$	—

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RISK FACTORS

You should carefully consider each of the following risks, which we believe are the principal risks that we face and of which we are currently aware, and all of the other information in this information statement. Some of the risks described below relate to our business, while others relate to the spin-off. Other risks relate principally to the securities markets and ownership of our common stock.

Should any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially and adversely affected, the trading price of our common stock could decline, and you could lose all or part of your investment.

Risks Relating to Our Business

We face the following risks in connection with the general conditions and trends of the industry in which we operate:

We are dependent on the U.S. government’s presence and operations in Afghanistan for a material portion of our revenue and operating income, and the announced withdrawal of military personnel and suspension or removal of funding for security and training activities in the region by the U.S. government will have an adverse effect on our revenue and operating income prospects.

We derived approximately $513 million, $625 million and $480 million of our revenue and $91 million, $75 million and $46 million of our operating income for the years ended December 31, 2013, 2012 and 2011, respectively, from services ultimately sold to the U.S. government for contracts based in Afghanistan. This reflected a decrease of 18% in revenue and an increase of 21% in operating income for the 2013 period as compared to 2012, and an increase of 29% in revenue and 63% in operating income for the 2012 period as compared to 2011. These amounts represented 34%, 34% and 27% of our overall revenue, respectively, for these periods. Our company has four large contracts with operations in Afghanistan, with work in each of our major capability areas (infrastructure asset management, logistics and supply chain management, and information technology and network communication services). Afghanistan contracts have experienced lower program activity in 2013 due to reduced service level requirements. U.S. funding for programs in Afghanistan has decreased in recent periods, and will likely continue to decrease as the U.S. government plans to reduce the U.S. presence in Afghanistan. In May 2014, the Administration announced its plan to steadily withdraw U.S. forces in Afghanistan by 2016, with only a normal embassy presence remaining. It is expected that the U.S. military will maintain a limited presence after the subsequent transition to the Afghan government. This withdrawal of military personnel and suspension or removal of funding for security and training activities in Afghanistan by the U.S. government will have an adverse effect on our revenue and operating income prospects.

We are dependent on the U.S. government and if our reputation or relationship with the U.S. government was harmed, our revenue and growth prospects would be adversely affected.

All of our 2013 revenue and 2012 revenue was derived from services ultimately sold to the U.S. government, primarily the Department of Defense (DoD), either as a prime contractor or as a subcontractor to other contractors engaged in work for the U.S. government. For the year ended December 31, 2013, we generated approximately 92% of our total revenue from the U.S. Army. We expect to continue to derive most of our revenue from work performed under U.S. government contracts. Our reputation and relationship with the U.S. government, and in particular with the branches and agencies of the DoD, are key factors in maintaining and growing this revenue. Negative press reports or publicity, which could pertain to employee or subcontractor misconduct, conflicts of interest, termination of a contract or task order, poor contract performance, deficiencies in services, reports or other deliverables, information security breaches or other aspects of our business, regardless of accuracy, could harm our reputation, particularly with these branches and agencies. If our

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reputation is negatively affected, or if we are suspended or debarred from contracting with government agencies or any branch of the DoD for any reason, the amount of our business with government and other customers would decrease and our future revenue and growth prospects would be adversely affected.

A significant portion of our revenue is derived from a few large contracts, and the loss or material reduction of any of these contracts would have a material adverse effect on our results of operations and cash flows.

Aggregate revenue from our four largest contracts amounted to approximately $1.0 billion, or 69%, of our revenue for the year ended December 31, 2013. These four contracts, the Kuwait Base Operations and Security Support Services (K-BOSSS) contract for Camp Arifjan, Kuwait, the Operations, Maintenance and Defense of Army Communications in Southwest Asia and Central Asia (OMDAC-SWACA) contract, the Logistics Civilian Augmentation Program (LOGCAP) contract and the Kuwait based Army Prepositioned Stocks-5 (APS-5 Kuwait) contract each accounted for more than 10% of our revenue for the year ended December 31, 2013. Accordingly, our results of operations and cash flows are highly dependent on these contracts. The loss or material reduction of any of these contracts would have a material adverse effect on our results of operations and cash flows.

A decline in the U.S. government defense budget, changes in spending or budgetary priorities or delays in contract awards may significantly and adversely affect our future revenue and limit our growth prospects.

Our contracts and revenue are correlated primarily with and dependent upon the U.S. defense budget which is subject to the congressional budget authorization and appropriations process. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract periods of performance may extend over many years. Consequently, at the beginning of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress in future fiscal years. DoD budgets are a function of several factors beyond our control, including, but not limited to, changes in U.S. procurement policies, budget considerations, current and future economic conditions, presidential administration priorities, changing national security and defense requirements, geo-political developments and actual fiscal year congressional appropriations for defense budgets. Any of these factors could result in a significant redirection of current and future DoD budgets and impact our future operations and cash flows. Such factors may have direct bearing on new business opportunities as well as on whether the U.S. government will exercise its options for services under existing contracts, thus affecting the timing and volume of our business.

The Budget Control Act of 2011 (Budget Control Act) provided for a reduction in planned defense budgets and mandated substantial additional spending reductions through a process known as “sequestration.” The sequestration spending reductions required for defense were approximately $43 billion for fiscal year 2013, increasing to approximately $55 billion for fiscal year 2014 and beyond. The combined effect of the Bipartisan Budget Act of 2013 and the Consolidated Appropriations Act of 2014 is a substantial alteration of sequestration in the near term. Though combined sequestration cuts of $55 billion were triggered in fiscal year 2013, the Congressional Budget Office (CBO) has reported there will be no additional cuts, across the board cuts or sequestration in fiscal year 2014. Congress has enacted a fiscal year 2014 appropriations bill implementing these new defense and non-defense caps. A similar result could occur in fiscal year 2015 if Congress appropriates no more than the $1.014 trillion in discretionary spending and adheres to the revised defense and non-defense caps. By incorporating these alterations to the original Budget Control Act, the CBO still anticipates achievement of $539 billion in discretionary spending reductions from fiscal year 2016 to 2021.

The U.S. Government also conducts periodic reviews of U.S. defense strategies and priorities, which may shift DoD budgetary priorities, reduce overall U.S. Government spending or delay contract or task order awards for defense related programs, potentially affecting future Vectrus revenue and earnings. In addition, changes to the DoD acquisition system and contracting models could affect whether and how we pursue certain opportunities and the terms under which we are able to do so. Overall, we expect that top-line defense spending will decline over the next several years. Such funding cuts will likely have an impact across the DoD budget. Such reductions in U.S. Government spending and policy could have a material impact on our business.

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Competition within our markets and an increase in bid protests may reduce our revenue and market share.

Our business is highly competitive and we compete with larger companies that have greater name recognition, greater financial resources and larger technical staffs. We also compete with smaller, more specialized companies that are able to concentrate their resources on particular areas. Additionally, we compete with the U.S. government’s own capabilities.

The markets in which we operate are characterized by the changing needs of our customers. Accordingly, our success depends on our ability to provide services that address these changing needs. To remain competitive, we must consistently provide superior service and performance on a cost-effective basis to our customers. Our competitors may be able to provide our customers with different or greater capabilities or better contract terms than we can provide, including past contract experience, geographic presence, price and the availability of qualified professional personnel. Moreover, even if we are qualified to work on a government contract, we may not be awarded the contract because of existing government policies designed to protect small businesses and under-represented minority contractors. In addition, our competitors may consolidate or establish teaming or other relationships among themselves or with third parties to increase their ability to address customers’ needs. Accordingly, we anticipate that larger or new competitors or alliances among competitors may emerge which may adversely affect our ability to compete.

If we are unable to continue to compete successfully against our current or future competitors, we may experience declines in revenue and market share which could negatively impact our financial position, results of operations, or cash flows.

The competitive environment is also affected by bid protests from unsuccessful bidders on new program awards. Bid protests could result in the award decision being overturned, requiring a renewed competition of the contract. Even where a bid protest does not result in a renewed competition, the resolution typically extends the time until the contract activity can begin, which may reduce our earnings in the period in which the contract would otherwise have commenced.

Because we depend on U.S. government contracts, a delay in the completion of the U.S. government’s budget process could delay procurement of the services and solutions we provide and have an adverse effect on our future revenue.

The funding of U.S. government programs is subject to an annual congressional budget authorization and appropriation process. In years when the U.S. government does not complete its budget process before the end of its fiscal year on September 30, government operations are typically funded pursuant to a “continuing resolution,” which allows Federal government agencies to operate at spending levels approved in the previous budget cycle, but does not authorize new spending initiatives. When the U.S. government operates under a continuing resolution, delays can occur in the procurement of the services and solutions that we provide and may result in new initiatives being cancelled. In addition, when supplemental appropriations are required to operate the U.S. government or fund specific programs and the passage of legislation needed to approve any supplemental appropriation bill is delayed, the overall funding environment for our business could be adversely affected.

The termination of government contracts may adversely affect our business.

The government services marketplace is characterized by contracts of shorter duration as compared to large production and systems integration programs. Services contracts generally are of a duration of five years and may range between three and ten years. Our financial performance is dependent on our performance under our U.S. government contracts. The U.S. government may terminate any of our government contracts at any time at its convenience. Additionally, should we fail to meet our obligations under a contract, the customer may terminate our contract for default. If any of our contracts were to be terminated for convenience, we generally

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would be entitled to receive payment for work completed and allowable termination or cancellation costs. If any of our government contracts were to be terminated for default, generally the customer would pay only for the work that has been accepted; moreover, the customer can require us to pay the difference between the original contract price and the cost to re-procure the contract items, net of the work accepted from the original contract. In addition, the U.S. government can also hold us liable for damages resulting from the default. The termination of any of our government contracts, whether for convenience or default, may adversely affect our current programs and may reduce our revenue, earnings or cash flows. A termination for default may also negatively affect our reputation, past performance ratings and our ability to win new contracts, particularly for contracts covering the same or similar types of services.

As a U.S. government contractor, we are subject to a number of procurement regulations and could be adversely affected by changes in regulations or any failure to comply with these regulations.

We operate in a highly regulated environment and must comply with many significant procurement regulations and other requirements. These regulations and requirements, although customary in government contracts, increase our performance and compliance costs. If any such regulations or procurement requirements change, our costs of complying with them could increase and therefore reduce our margins. Some significant statutes and regulations that affect us include:

• the Federal Acquisition Regulation (FAR) and department or agency-specific regulations that implement or supplement FAR, such as the DoD’s Defense Federal Acquisition Regulation Supplement, which regulate the formation, administration and performance of U.S. government contracts;

• the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations;

• the Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information, and our ability to provide compensation to certain former government officials;

• the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; and

• the U.S. government Cost Accounting Standards, which impose accounting requirements that govern our right to reimbursement under certain cost-based U.S. government contracts.

If we are convicted or otherwise found to have violated these or other laws or regulations, or are found not to have acted responsibly as defined by them, we may be subject to reductions of the value of contracts, contract modifications or termination and the assessment of penalties and fines, compensatory damages or treble damages, which could have a material adverse effect on our financial position, results of operations, or cash flows. Such findings or convictions could also result in suspension or debarment from government contracting. Given our dependence on government contracting, suspension or debarment would have a material adverse effect on our financial position, results of operations, or cash flows.

Our business is subject to reviews, investigations, audits and cost adjustments by the U.S. government, which, if resolved unfavorably to us, could adversely affect our profitability, cash position or growth prospects.

U.S. government agencies, including the Defense Contract Audit Agency (DCAA), the Defense Contract Management Agency (DCMA) 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. They also review the adequacy of the contractor’s compliance with government standards for its business systems, including its accounting system, earned value management system, estimating system, materials management and accounting system, purchasing system and property management system (program specific).

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Both contractors and the U.S. government agencies conducting these audits and reviews have come under increased scrutiny. As a result, audits and reviews have become more rigorous and the standards to which we are held are being more strictly interpreted and applied, increasing the likelihood of an audit or review resulting in an adverse outcome.

A finding of significant control deficiencies in our system audits or other reviews can result in decremented billing rates to our U.S. government customers until the control deficiencies are corrected and our corrections are accepted by DCMA. Government audits and reviews may conclude that our practices are not consistent with applicable laws and regulations and result in adjustments to contract costs and mandatory customer refunds. Such adjustments can be applied retroactively, which could result in significant customer refunds. Our receipt of adverse audit findings or the failure to obtain an “approved” determination of our various accounting and management internal control systems from the responsible U.S. government agency could significantly and adversely affect our business, including our ability to bid on new contracts and our competitive position in the bidding process. A determination of non-compliance with applicable contracting and procurement laws, regulations and standards could also result in the U.S. government imposing penalties and sanctions against us, including withholding of payments, suspension of payments and increased government scrutiny that could delay or adversely affect our ability to invoice and receive timely payment on contracts, perform contracts or compete for contracts with the U.S. government. In addition, the U.S. government, from time to time, may require its contractors to reduce certain contract prices, or may disallow costs allocated to certain contracts. These adjustments can involve substantial amounts. In the past, as a result of such audits and other investigations and inquiries, we have on occasion made adjustments to our contract prices and the costs allocated to our government contracts.

We are routinely subject to governmental investigations relating to our contracts and operations. If a review or investigation identifies improper or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, including the termination of contracts, forfeiture of profits, the triggering of price reduction clauses, suspension of payments, fines and suspension or debarment from doing business with governmental agencies. We may suffer harm to our reputation if allegations of impropriety are made against us, which would impair our ability to win new contract awards or receive contract renewals. Civil penalties and sanctions are not uncommon in our industry. If we incur a material penalty or administrative sanction or otherwise suffer harm to our reputation, our profitability, cash position and future prospects could be adversely affected.

The Department of Defense continues to evolve its business practices, which could have a material effect on its overall procurement processes and adversely impact our current programs and potential new awards.

The DoD continues to pursue various initiatives designed to gain efficiencies and to focus and enhance business practices. These initiatives and resulting changes, such as increased usage of fixed price contracts, multiple award contracts and small business set-aside contracts, are having an impact on the contracting environment in which we do business. Any of these changes could impact our ability to obtain new contracts or renew our existing contracts when those contracts are re-competed. These initiatives are evolving, and the full impact to our business remains uncertain and subject to the manner in which the DoD implements them. Any new contracting requirements or procurement methods could be costly or administratively difficult for us to implement and could adversely affect our future revenue, profitability and prospects.

We are subject to risks associated with operating internationally.

Our U.S. government contracts operating internationally represented approximately 88% of total revenue for the year ended December 31, 2013. We are subject to a variety of U.S. and foreign laws and regulations, including, without limitation foreign labor laws and anti-corruption laws, including the Foreign Corrupt Practices Act. Failure by us or our subcontractors or vendors to comply with these laws and regulations could result in administrative, civil, or criminal liabilities and could, in the extreme case, result in suspension or debarment from government contracts or suspension of our export privileges, which could have a material adverse effect on us.

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Our business operations are also subject to a variety of risks associated with conducting business internationally, including, without limitation:

• Changes in or interpretations of foreign laws or policies that may adversely affect the performance of our services;

• Political instability in foreign countries;

• Imposition of inconsistent laws or regulations;

• Conducting business in places where laws, business practices and customs are unfamiliar or unknown; and

• Imposition of limitations on or increase of withholding and other taxes on payments by foreign subsidiaries or joint ventures.

The services we provide internationally, including through the use of subcontractors, are sometimes in countries with unstable governments, in areas of military conflict or at military installations. This increases the risk of an incident resulting in damage or destruction to our work or living sites or resulting in injury or loss of life to our employees, subcontractors or other third parties. We maintain insurance to mitigate risk and potential liabilities related to our international operations, but our insurance coverage may not be adequate to cover these claims and liabilities and we may be forced to bear substantial costs arising from those claims. In addition, any accidents or incidents that occur in connection with our international operations could result in negative publicity for our company, which may adversely affect our reputation and make it more difficult for us to compete for future contracts or result in the loss of existing and future contracts. The impact of these factors is difficult to predict, but any one or more of them could adversely affect our financial position, results of operations, or cash flows.

We may not be successful in expanding our geographic footprint or broadening our customer base, which could adversely affect our business, results of operations and financial condition.

Our business strategy is based, in part, on realigning our resources to invest in new business opportunities in the United States, Middle East and North Africa, and the Pacific, and to leverage our leadership position in the Middle East with the U.S. Army to provide our full range of offerings to other U.S. government military and civil agencies. This business strategy involves a number of risks, including the risk that the expected results will not be achieved or that we are unable to effectively execute this business strategy resulting in harm to our existing reputation or relationship with the U.S. government. These activities may also impose additional compliance burdens on us and could also subject us to enhanced regulatory scrutiny and greater risks associated with operating internationally. We may also incur additional expenditures in connection with our investments in new business opportunities and these investments may also result in losses and costs.

The success of our business strategy will depend on, among other things:

• the availability of suitable opportunities;

• the level of competition from other companies that may have greater financial resources;

• our ability to obtain requisite approvals and licenses from the relevant governmental authorities and to comply with applicable laws and regulations without incurring undue costs and delays; and

• our ability to successfully negotiate and enter into beneficial arrangements with our customers.

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Our project sites are inherently dangerous workplaces. Failure to maintain safe work sites and equipment could result in environmental disasters, employee deaths or injuries, reduced profitability, the loss of projects or customers and possible exposure to litigation.

Our project sites often put our employees and others in close proximity with mechanized equipment, moving vehicles, and highly regulated materials. In addition, some of our project sites are in hostile and unstable environments, including war zones. If we fail to implement safety procedures or if the procedures we implement are ineffective, we may suffer the loss of or injury to our employees, as well as expose ourselves to possible litigation. As a result, our failure to maintain adequate safety standards and equipment, as well as the nature of the environment in which we conduct business, could result in reduced profitability or the loss of projects or customers, and could have a material adverse impact on our business, financial condition, and results of operations.

Misconduct of our employees, subcontractors, agents or business partners could cause us to lose customers and could have a significant adverse impact on our business and reputation, adversely affecting our ability to obtain new contracts.

Misconduct, fraud or other improper activities by our employees, subcontractors, agents or business partners could have a significant adverse impact on our business and reputation. Such misconduct could include the failure to comply with Federal, state, local or foreign government procurement regulations, regulations regarding the protection of classified information, legislation regarding the pricing of labor and other costs in government contracts, laws and regulations relating to environmental matters, bribery of foreign government officials, import-export control, lobbying or similar activities, and any other applicable laws or regulations. Misconduct involving data security lapses resulting in the compromise of personal information or the improper use of our customer’s sensitive or classified information could result in remediation costs, regulatory sanctions against us and serious harm to our reputation. Other examples of potential misconduct include falsifying time or other records and violations of the Anti-Kickback Act. Although we have implemented policies, procedures and controls to prevent and detect these activities, these precautions may not prevent all misconduct and as a result, we could face unknown risks or losses. Our failure to comply with applicable laws or regulations or misconduct by any of our employees, subcontractors, agents or business partners could subject us to fines and penalties, loss of security clearance, loss of current and future customer contracts and suspension or debarment from contracting with Federal, state or local government agencies, any of which would adversely affect our business, our reputation and our future financial results.

We use estimates in accounting for many of our programs and changes in our estimates could adversely affect our future financial results.

Revenue from our contracts are recognized primarily using the percentage-of-completion method or on the basis of partial performance towards completion. These methodologies require estimates of total costs at completion, fees earned on the contract, or both. This estimation process, particularly due to the nature of the services being performed and the long-term nature of certain contracts, is complex and involves significant judgment. Adjustments to original estimates are often required as work progresses, experience is gained and additional information becomes known, even though the scope of the work required under the contract may not change. Any adjustment as a result of a change in estimates is recognized as events become known. Changes in the underlying assumptions, circumstances or estimates could result in adjustments that may adversely affect our future financial results.

We may not realize as revenue the full amounts reflected in our backlog, which could adversely affect our expected future revenue and growth prospects.

As of December 31, 2013, our total backlog was $2.9 billion, which included $0.6 billion in funded backlog. Due to the U.S. government’s ability to not exercise or award contract options or to terminate, modify or curtail

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our programs or contracts, we may realize less than expected or in some cases never realize revenue from some of the contracts that are included in our backlog. Our unfunded backlog, in particular, contains management’s estimate of amounts expected to be realized on unfunded contract work that may never be realized as revenue. If we fail to realize as revenue amounts included in our backlog, our expected future revenue, growth prospects and profitability could be adversely affected.

Our earnings and margins may vary based on the mix of our contracts and programs, our performance, and our ability to control costs.

We generate revenue under various types of contracts, which include cost plus, cost reimbursement (including non-fee-bearing costs), time and materials (T&M), firm fixed price level of effort (FFP-LOE) and firm fixed price (FFP). Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenue derived from each type of contract, the nature of services provided, as well as the achievement of performance objectives and the stage of performance at which the right to receive fees, particularly under incentive and award fee contracts, is finally determined. Cost reimbursement and T&M contracts generally have lower profitability than FFP contracts.

Our profitability is adversely affected when we incur contract costs that we cannot bill to our customers. To varying degrees, each of our contract types involves some risk that we could underestimate the costs and resources necessary to fulfill the contract. While FFP contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. Revenue derived from FFP contracts represented approximately 28% of our total revenue for fiscal 2013. When making proposals on these types of contracts, we rely heavily on our estimates of costs and timing for completing the associated projects, as well as assumptions regarding technical issues. In each case, our failure to accurately estimate costs or the resources needed to perform our contracts or to effectively manage and control our costs during the performance of our work could result, and in some instances has resulted, in reduced profits or in losses. More generally, any increased or unexpected costs or unanticipated delays in connection with the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control, such as performance failures of our subcontractors, natural disasters or other force majeure events, could make our contracts less profitable than expected or unprofitable.

The failure to perform to customer expectations or contract requirements may result in reduced fees or claims made against us by our customers and may affect our financial performance in that period. Under each type of contract, if we are unable to control costs, our operating results could be adversely affected, particularly if we are unable to justify an increase in contract value to our customers. Cost overruns or the failure to perform on existing programs also may adversely affect our ability to retain existing programs and win future contract awards.

Our earnings and margins depend, in part, on our ability to perform under contracts.

When agreeing to contractual terms, our management makes assumptions and projections about future conditions and events, many of which extend over long periods. These projections assess the productivity and availability of labor, the complexity of the work to be performed, the cost and availability of materials and the impact of delayed performance. If there is a significant change in one or more of these circumstances or estimates, or if we face unanticipated contract costs, the profitability of one or more of these contracts may be adversely affected.

Our earnings and margins depend, in part, on subcontractor performance.

We rely on other companies to perform some of the services that we provide to our customers. Disruptions or performance problems caused by our subcontractors and vendors could have an adverse effect on our ability to meet our commitments to customers. Our ability to perform our obligations as a prime contractor could be adversely affected if one or more of the vendors or subcontractors are unable to provide the agreed-upon services in a timely and cost-effective manner.

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Goodwill represents a significant portion of our assets and any impairment of these assets could negatively impact our results of operations.

At December 31, 2013, our goodwill was approximately $222 million, which represented approximately 45% of our total assets. Goodwill is tested for impairment on an annual basis, or whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We also review the carrying value of finite-lived intangible assets for impairment when impairment indicators arise. We estimate the fair value of the reporting unit used in the goodwill impairment test using an income approach, and as a result the fair value measurements depend on revenue growth rates, future operating margin assumptions, risk-adjusted discount rates, future economic and market conditions, and identification of appropriate market comparable data. Because of the significance of our goodwill and other intangible assets, any future impairment of these assets could have a material adverse effect on our results of operations and financial condition.

We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could seriously harm our business.

Due to the specialized nature of our business, our future performance is highly dependent upon the continued services of our personnel and executive officers, the development of additional management personnel and the hiring of new qualified technical, marketing, sales and management personnel for our operations. Competition for qualified personnel is intense, and we may not be successful in attracting or retaining qualified personnel. In addition, certain personnel may be required to receive security clearance and substantial training in order to work on certain programs or perform certain tasks. We also employ international personnel and engage with foreign subcontractors and labor brokers, which requires compliance with numerous local laws and regulations related to labor, benefits, taxes, insurance and reporting requirements, among others. The loss of key employees, our inability to attract new qualified employees or adequately train employees, or the delay in hiring key personnel could have an adverse effect our business, results of operations and financial condition.

Some of our workforce is represented by labor unions so our business could be harmed in the event of a prolonged work stoppage.

Approximately 1,060 of our employees are unionized, which represents approximately 15.6% of our employee-base at December 31, 2013. As a result, we may experience work stoppages, which could adversely affect our business. We cannot predict how stable our union relationships will be or whether we will be able to successfully negotiate successor agreements without impacting our financial condition. In addition, the presence of unions may limit our flexibility in dealing with our workforce. Work stoppages could negatively impact our ability to provide services to our customers on a timely basis, which could negatively impact our results of operations and financial condition.

Our profitability could suffer if we are not able to maintain adequate staffing for our contracts.

The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability. The rate at which we utilize our workforce is affected by a number of factors, including:

• our ability to transition employees from completed projects to new assignments and to hire and assimilate new employees;

• our ability to hire personnel in foreign countries;

• our ability to manage attrition;

• our need to devote time and resources to training, business development, professional development and other non-chargeable activities; and

• our ability to manage a subcontractor workforce.

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We rely on our information systems in our operations. Security breaches and other disruptions could adversely affect our business and results of operations.

As a U.S. defense contractor, we face certain security threats, including cyber-security threats to our information technology infrastructure, attempts to gain access to proprietary or classified information, and threats to physical security. Cyber-security threats are evolving and include, among others, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in mission critical systems and international connectivity, unauthorized release of confidential or otherwise protected information and corruption of data. The unavailability of our information systems, the failure of these systems to perform as anticipated for any reason or any significant breach of security could disrupt our operations, lead to financial losses from remedial actions, require significant management attention and resources, and could negatively impact our reputation among our customers and the public, which could have a negative impact on our financial condition, results of operations and liquidity.

Legal disputes could require us to pay potentially large damage awards and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation.

We are subject to a number of lawsuits and claims as described under “Business—Legal Proceedings.” We are also subject to, and may become a party to, a variety of other litigation or claims and suits that arise from time to time in the ordinary course of our business. Adverse judgments or settlements in some or all of these legal disputes may result in significant monetary damages or injunctive relief against us. Any claims or litigation could be costly to defend, and even if we are successful or if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or obtain adequate insurance in the future. Litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.

Unanticipated changes in our tax provisions or exposure to additional U.S. and foreign income tax liabilities could affect our profitability.

We are subject to income taxes in the United States and many foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Furthermore, changes in domestic or foreign income tax laws and regulations, or their interpretation and enforcement, could result in higher or lower income tax rates assessed or changes in the taxability of certain sales or the deductibility of certain expenses, thereby affecting our income tax expense and profitability. In addition, we regularly are under audit by tax authorities. The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. Additionally, changes in the geographic mix of our sales could also impact our tax liabilities and affect our income tax expense and profitability.

Our insurance may be insufficient to protect us from claims or losses.

We maintain insurance coverage with third-party insurers as part of our overall risk management strategy and because some of our contracts require us to maintain specific insurance coverage limits. However, not every risk or liability is or can be protected by insurance, and, for those risks we insure, the limits of coverage we purchase or that are reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities incurred. If any of our third-party insurers fail, cancel our coverage or otherwise are unable to provide us with adequate insurance coverage, then our overall risk exposure and our operational expenses would increase and the management of our business operations would be disrupted. Our insurance may be insufficient to protect us from significant warranty and other liability claims or losses. Moreover, there is a risk that commercially available liability insurance will not continue to be available to us at a reasonable cost, if at all. If liability claims or losses exceed our current or available insurance coverage, our business and prospects may be harmed. We are also subject to the requirements of the Defense Base Act (DBA), which provides insurance coverage to persons

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employed at U.S. military bases outside of the United States. Failure to obtain DBA insurance may result in fines or other sanctions, including the loss of a particular contract. Regardless of the adequacy of our liability insurance coverage, any significant claim may have an adverse effect on our industry and market reputation, leading to a substantial decrease in demand for our services and reduced revenue.

Business disruptions caused by natural disasters and other crises could adversely affect our profitability and our overall financial position.

We have significant operations located in regions of the United States and internationally that may be exposed to damaging storms and other natural disasters, such as hurricanes, tornadoes, blizzards, flooding, wildfires or earthquakes. Our business could also be disrupted by pandemics and other national or international crises. Although preventative measures may help mitigate the damage from such occurrences, the damage and disruption to our business resulting from any of these events may be significant. If our insurance and other risk mitigation mechanisms are not sufficient to recover all costs, including loss of revenue from sales to customers, we could experience a material adverse effect on our financial position and results of operations.

We depend on our teaming arrangements and relationships with other contractors and subcontractors. If we are not able to maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenue, profitability and growth prospects could be adversely affected.

We rely on our teaming relationships with other prime contractors and subcontractors in order to submit bids for large procurements or other opportunities where we believe the combination of services provided by us and the other companies will help us to win and perform the contract. We expect to continue our use of teaming relationships following the spin-off. Our future revenue and growth prospects could be adversely affected if other contractors eliminate or reduce their contract relationships with us, or if the U.S. government terminates or reduces these other contractors’ programs, does not award them new contracts or refuses to pay under a contract. Companies that do not already have access to U.S. government contracts may perform services as our subcontractor and that exposure could enhance such companies’ prospect of securing a future position as a prime U.S. government contractor which could increase competition for future contracts and impair our ability to perform on contracts.

We may have disputes with our subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, the hiring of each other’s personnel, adjustments to the scope of the subcontractor’s work, or the subcontractor’s failure to comply with applicable law. Current uncertain economic conditions heighten the risk of financial stress of our subcontractors, which could adversely impact their ability to meet their contractual requirements to us. If any of our subcontractors fail to timely meet their contractual obligations or have regulatory compliance or other problems, our ability to fulfill our obligations as a prime contractor or higher tier subcontractor may be jeopardized. Significant losses could arise in future periods and subcontractor performance deficiencies could result in our termination for default. A termination for default could eliminate a revenue source, expose us to liability and have an adverse effect on our ability to compete for future contracts and task orders.

New government withholding regulations could adversely affect our operating performance.

In February 2012, the DoD issued the final DFARS rule which allows withholding of a percentage of payments when a contractor’s business system has one or more significant deficiencies. The DFARS rule applies to Cost Accounting Standards (CAS) covered contracts that have the DFARS clause in the contract terms and conditions. The final rule represents a significant change in the contracting environment for companies performing work for the DoD. Contracting officers may withhold 5% of contract payments for one or more significant deficiencies in any single contractor business system or up to 10% of contract payments for significant deficiencies in multiple contractor business systems. A significant deficiency is defined as a

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“shortcoming in the system that materially affects the ability of officials of the DoD to rely upon information produced by the system that is needed for management purposes.” The final rule is applicable to new DoD contracts awarded after February 2012.

Internal system or service failures could disrupt our business and impair our ability to effectively provide our services to our customers, which could damage our reputation and adversely affect our revenue and profitability.

Any system or service disruptions, including those caused by ongoing projects to improve our information technology systems and the delivery of services, whether through our shared services organization or outsourced services, if not anticipated and appropriately mitigated, could have a material adverse effect on our business including, among other things, an adverse effect on our ability to bill our customers for work performed on our contracts, collect the amounts that have been billed and produce accurate financial statements in a timely manner. We are also subject to systems failures, including network, software or hardware failures, whether caused by us, third-party service providers, cybersecurity threats, natural disasters, power shortages, terrorist attacks or other events, which could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, subject us to claims and damage our reputation. In addition, the failure or disruption of our communications or utilities could cause us to interrupt or suspend our operations or otherwise adversely affect our business. Our property and business interruption insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption and, as a result, our future results could be adversely affected.

The effects of changes in worldwide economic and capital markets conditions may significantly affect our ability to maintain liquidity or procure capital.

Our business may be adversely affected by factors in the United States and other countries that are beyond our control, such as disruptions in financial markets or downturns in economic activity in specific countries or regions, or in the various industries in which our company operates; social, political or labor conditions in specific countries or regions; or adverse changes in the availability and cost of capital, interest rates, foreign currency exchange rates, tax rates, or regulations in the jurisdictions in which our company operates. If, for any reason, we lose access to our currently available lines of credit, or if we are required to raise additional capital, we may be unable to do so in the current credit and stock market environment, or we may be able to do so only on unfavorable terms.

Adverse changes to financial conditions could jeopardize certain counterparty obligations, including those of our insurers and financial institutions and other third parties.

We may make or enter into acquisitions, investments, joint ventures and divestitures that involve numerous risks and uncertainties.

We may selectively pursue strategic acquisitions, investments and joint ventures. These transactions require significant investment of time and resources and may disrupt our business and distract our management from other responsibilities. Even if successful, these transactions could reduce earnings for a number of reasons, including the amortization of intangible assets, impairment charges, acquired operations that are not yet profitable or the payment of additional consideration under earn-out arrangements if an acquisition performs better than expected. Acquisitions, investments and joint ventures pose many other risks that could adversely affect our reputation, operations or financial results, including:

• we may not be able to identify, compete effectively for or complete suitable acquisitions and investments at prices we consider attractive;

• we may not be able to accurately estimate the financial effect of acquisitions and investments on our business and we may not realize anticipated synergies or acquisitions may not result in improved operating performance;

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• we may encounter performance problems with acquired technologies, capabilities and products, particularly with respect to those that are still in development when acquired;

• we may have trouble retaining key employees and customers of an acquired business or otherwise integrating such businesses, such as incompatible accounting, information management, or other control systems, which could result in unforeseen difficulties;

• we may assume material liabilities that were not identified as part of our due diligence or for which we are unable to receive a purchase price adjustment or reimbursement through indemnification;

• we may assume legal or regulatory risks, particularly with respect to smaller businesses that have immature business processes and compliance programs;

• acquired entities or joint ventures may not operate profitably, which could adversely affect our operating income or operating margins and we may be unable to recover investments in any such acquisitions;

• acquisitions, investments and joint ventures may require us to spend a significant amount of cash or to issue capital stock, resulting in dilution of ownership; and

• we may not be able to effectively influence the operations of our joint ventures or we may be exposed to certain liabilities if our joint venture partners do not fulfill their obligations.

If our acquisitions, investments or joint ventures fail, perform poorly or their value is otherwise impaired for any reason, including contractions in credit markets and global economic conditions, our business and financial results could be adversely affected.

Risks Relating to the Spin-Off

We face the following risks in connection with the spin-off:

We may be responsible for U.S. Federal income tax liabilities that relate to the distribution.

The spin-off is conditioned on the receipt of an opinion of tax counsel to the effect that the spin-off will qualify as a tax-free distribution under Section 355 of the Code. Receipt of the opinion of tax counsel will satisfy a condition to completion of the spin-off. An opinion of tax counsel is not binding on the Internal Revenue Service (the “IRS”). Accordingly, the IRS may reach conclusions with respect to the spin-off that are different from the conclusions reached in the opinion. The opinion will be based on certain factual statements and representations, which, if incomplete or untrue in any material respect, could alter tax counsel’s conclusions.

Exelis is not aware of any facts or circumstances that would cause any such factual statements or representations in the opinion of tax counsel to be incomplete or untrue or cause the facts on which the opinion will be based to be materially different from the facts at the time of the spin-off. If, notwithstanding the receipt of the opinion of tax counsel, the IRS were to determine the spin-off to be taxable, Exelis would recognize a substantial tax liability.

Even if the spin-off otherwise qualifies as a tax-free transaction for U.S. Federal income tax purposes, the distribution will be taxable to Exelis (but not to Exelis shareholders) pursuant to Section 355(e) of the Code if there are one or more acquisitions (including issuances) of the stock of either us or Exelis, representing 50% or more, measured by vote or value, of the then-outstanding stock of either corporation and the acquisition or acquisitions are deemed to be part of a plan or series of related transactions that include the distribution. Any acquisition of our common stock within two years before or after the distribution (with exceptions, including public trading by less-than-5% shareholders and certain compensatory stock issuances) generally will be presumed to be part of such a plan unless that presumption is rebutted. The resulting tax liability may have a material adverse effect on the business, financial condition, results of operations or cash flows of us or Exelis.

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We will agree not to enter into any transaction that could cause any portion of the spin-off to be taxable to Exelis, including under Section 355(e). Pursuant to the Tax Matters Agreement, Exelis and we will also agree to indemnify each other for any tax liabilities resulting from such transactions to the extent a party’s actions caused such tax liability, whether or not the indemnified party consented to such transaction or the indemnifying party was otherwise permitted to enter into such transaction under the Tax Matters Agreement. In addition, under U.S. Treasury regulations, each member of the Exelis consolidated group at the time of the spin-off (including us and our subsidiaries) would be jointly and severally liable for the resulting U.S. Federal income tax liability if all or a portion of the spin does not qualify as a tax-free transaction, and we will make certain payments to Exelis in respect of certain tax benefits that would be realized by us in connection with the spin-off under the Tax Matters Agreement if the spin-off were to be taxable. These obligations may discourage, delay or prevent a change of control of our company. See “The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off.”

Our accounting and other management systems and resources may not be adequately prepared to meet the financial reporting and other requirements to which we will be subject following the distribution.

Our financial results previously were included within the consolidated results of Exelis, and we believe that our financial reporting and internal controls were appropriate for a subsidiary of a public company. However, we were not directly subject to the reporting and other requirements of the Exchange Act. As a result of the distribution, we will be directly subject to reporting and other obligations under the Exchange Act. Beginning with our Annual Report on Form 10-K for the year ending December 31, 2015, we will be required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) which will require annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm as to whether we maintained, in all material respects, effective internal controls over financial reporting as of the last day of the year. These reporting and other obligations may place significant demands on our management, administrative and operational resources, including accounting systems and resources.

The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. Under the Sarbanes-Oxley Act, we are required to maintain effective disclosure controls and procedures and internal controls over financial reporting. To comply with these requirements, we may need to upgrade our systems; implement additional financial and management controls, reporting systems and procedures; and hire additional accounting and finance staff. We expect to incur additional annual expenses for the purpose of addressing these requirements, and those expenses may be significant. If we are unable to upgrade our financial and management controls, reporting systems, information technology systems and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired. Any failure to achieve and maintain effective internal controls could have a material adverse effect on our financial condition, results of operations or cash flows.

We do not have a recent operating history as an independent company and our historical financial information may not be a reliable indicator of our future results.

The historical financial information we have included in this information statement has been derived from the consolidated financial statements of Exelis and does not necessarily reflect what our financial position, results of operations and cash flows would have been as a separate, stand-alone entity during the periods presented. Exelis did not account for us, and we were not operated, as a single stand-alone entity for the periods presented even if we represented an important business in the historical consolidated financial statements of Exelis. In addition, the historical information is not necessarily indicative of what our results of operations, financial position and cash flows will be in the future. For example, following the spin-off, changes will occur in our cost structure, funding and operations, including changes in our tax structure, increased costs associated with reduced economies of scale and increased costs associated with becoming a public, stand-alone company. While we have been profitable as part of Exelis, we cannot assure you that as a stand-alone company our profits will continue at a similar level.

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We may be unable to achieve some or all of the benefits that we expect to achieve from the spin-off.

As an independent, publicly traded company, we believe that our business will benefit from, among other things, (i) greater strategic focus of management’s efforts and resources, (ii) enhanced focus on customers, (iii) direct and differentiated access to capital resources, (iv) enhanced choices for investors by offering investment opportunities in a separate entity from Exelis, (v) improved management incentive tools, and (vi) ability to utilize stock as an acquisition currency. However, by separating from Exelis, we may be more susceptible to market fluctuations and other adverse events than we would have been were we still a part of Exelis. In addition, we may not be able to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all.

Our customers, prospective customers and suppliers will need assurances that our financial stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them.

Some of our customers, prospective customers and suppliers will need assurances that our financial stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them. If our customers, prospective customers or suppliers are not satisfied with our financial stability, it could have a material adverse effect on our ability to bid for and obtain or retain projects, as well as on our business, financial condition, results of operations and cash flows.

We expect to incur new indebtedness at or prior to consummation of the spin-off, and the degree to which we will be leveraged following completion of the spin-off may have a material adverse effect on our business, financial condition or results of operations.

We have historically relied upon Exelis for working capital requirements on a short-term basis and for other financial support functions. After the spin-off, we will not be able to rely on the earnings, assets or cash flow of Exelis, and we will be responsible for servicing our own debt, and obtaining and maintaining sufficient working capital. In connection with the spin-off, we expect to incur borrowings of $140 million under a senior secured term facility and enter into a senior secured revolving facility permitting borrowings of up to $75 million. See “Description of Material Indebtedness.” The proceeds from the senior secured term facility will be used to fund a cash distribution to Exelis that is expected to be approximately $119 million. We expect to incur higher debt servicing costs on the new indebtedness than we would have incurred otherwise as a subsidiary of Exelis and/or not have access to other less expensive sources of capital from short-term debt markets.

Our ability to make payments on and to refinance our indebtedness, including the debt incurred pursuant to the spin-off, as well as any future debt that we may incur, will depend on our ability to generate cash in the future from operations, financings or asset sales. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we are not able to repay or refinance our debt as it becomes due, we may be forced to sell assets or take other disadvantageous actions, including (i) reducing financing in the future for working capital, capital expenditures and general corporate purposes or (ii) dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness. In addition, our ability to withstand competitive pressures and to react to changes in our industry could be impaired. The lenders who hold such debt could also accelerate amounts due, which could potentially trigger a default or acceleration of any of our other debt.

In addition, we may increase our debt or raise additional capital following the spin-off, subject to restrictions in our credit agreement. If our cash flow from operations is less than we anticipate, or if our cash requirements are more than we expect, we may require more financing. However, debt or equity financing may not be available to us on terms acceptable to us, if at all. If we incur additional debt or raise equity through the issuance of preferred stock, the terms of the debt or preferred stock issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation. The terms of the debt may also impose additional and more stringent restrictions on our operations than we currently have. If we raise funds through the issuance of additional equity, your percentage ownership in us would decline. If we are unable to raise additional capital when needed, it could affect our financial health,

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which could negatively affect your investment in us. Also, regardless of the terms of our debt or equity financing, the amount of our stock that we can issue may be limited because the issuance of our stock may cause the distribution to be a taxable event for Exelis under Section 355(e) of the Code, and under the Tax Matters Agreement, we could be required to indemnify Exelis for that tax. See “The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off.”

The credit agreement that will be entered into in connection with the spin-off could impair our ability to finance our future operations and could cause our expected debt to be accelerated.

We expect that our credit agreement will contain a number of significant covenants that, among other things, will restrict our ability to:

• create liens and encumbrances;

• incur additional indebtedness;

• merge, dissolve, liquidate or consolidate;

• make acquisitions, investments, advances or loans;

• dispose of or transfer assets;

• pay dividends or make other payments in respect of our capital stock;

• amend certain material governance or debt documents;

• redeem or repurchase capital stock or prepay, redeem or repurchase certain debt;

• engage in certain transactions with affiliates;

• enter into certain speculative hedging arrangements; and

• enter into certain restrictive agreements.

These restrictions could impair our ability to finance our future operations or capital needs or engage in other business activities that may be in our interests. In addition, the credit agreement also requires us to maintain compliance with certain financial ratios, including those relating to earnings before interest, taxes, depreciation and amortization and consolidated indebtedness. Our ability to comply with these ratios and covenants may be affected by events beyond our control. A breach of the credit agreement or our inability to comply with the required financial ratios or covenants included therein could result in a default under the credit agreement. In the event of any such default, the lenders under the credit agreement could elect to:

• declare all outstanding debt, accrued interest and fees to be due and immediately payable;

• take enforcement actions with respect to the collateral securing our debt; and

• require us to apply all of our available cash to repay our outstanding senior debt.

Our variable rate indebtedness may expose us to interest rate risk, which could cause our debt costs to increase significantly.

Our borrowings will be term loans or revolving facility borrowings with variable rates of interest, which expose us to interest rate risks and we will be exposed to the risk of rising interest rates. We expect that as of the date of the spin-off, we will have approximately $140 million of aggregate debt outstanding, which will consist of floating-rate term loans. We will also have the ability to incur up to $75 million of additional floating-rate debt under our revolving facility. If the LIBOR or other applicable base rates under our senior secured credit facilities increase in the future, then the interest expense on the floating-rate debt could increase materially.

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The spin-off may expose us to potential liabilities arising out of state and Federal fraudulent conveyance laws and legal distribution requirements.

The spin-off could be challenged under various state and Federal fraudulent conveyance laws. An unpaid creditor or an entity vested with the power of such creditor (such as a trustee or debtor-in-possession in a bankruptcy) could claim that Exelis did not receive fair consideration or reasonably equivalent value in the spin-off, and that the spin-off left Exelis insolvent or with unreasonably small capital or that Exelis intended or believed it would incur debts beyond its ability to pay such debts as they mature. If a court were to agree with such a plaintiff, then such court could void the spin-off as a fraudulent transfer and could impose a number of different remedies, including without limitation, returning our assets or your shares in our company to Exelis or providing Exelis with a claim for money damages against us in an amount equal to the difference between the consideration received by Exelis and the fair market value of our company at the time of the spin-off.

The measure of insolvency for purposes of the fraudulent conveyance laws may vary depending on which jurisdiction’s law is applied. Generally, however, an entity would be considered insolvent if the fair saleable value of its assets is less than the amount of its liabilities (including the probable amount of contingent liabilities), and such entity would be considered to have unreasonably small capital if it lacked adequate capital to conduct its business in the ordinary course and pay its liabilities as they become due. No assurance can be given as to what standard a court would apply to determine insolvency or that a court would determine that Exelis was solvent at the time of or after giving effect to the spin-off, including the distribution of our common stock.

The distribution by Exelis of the Vectrus common stock in the spin-off could also be challenged under state corporate distribution statutes. Under the Indiana Business Corporation Law, a corporation may not make distributions to its shareholders if, after giving effect to the distribution, (i) the corporation would not be able to pay its debts as they become due in the usual course of business; or (ii) the corporation’s total assets would be less than the sum of its total liabilities. No assurance can be given that a court will not later determine that the distribution by Exelis of Vectrus common stock in the spin-off was unlawful.

Under the Distribution Agreement, from and after the spin-off, we will be responsible for the debts, liabilities and other obligations related to the business or businesses which we own and operate following the consummation of the spin-off. Although we do not expect to be liable for any obligations not expressly assumed by us pursuant to the Distribution Agreement, it is possible that we could be required to assume responsibility for certain obligations retained by Exelis should Exelis fail to pay or perform its retained obligations. See “Certain Relationships and Related Party Transactions—Agreements with Exelis Related to the Spin-Off—Distribution Agreement.”

We may have been able to receive better terms from unaffiliated third parties than the terms we receive in our agreements related to the spin-off.

We expect that the agreements related to the spin-off, including the Distribution Agreement, Employee Matters Agreement, Tax Matters Agreement, Transition Services Agreements and any other agreements, will be negotiated in the context of our separation from Exelis while we are still part of Exelis. Accordingly, these agreements may not reflect terms that would have resulted from arm’s-length negotiations among unaffiliated third parties. The terms of the agreements being negotiated in the context of our separation are related to, among other things, allocations of assets and liabilities, rights and indemnification and other obligations between Exelis and us. To the extent that certain terms of those agreements provide for rights and obligations that could have been procured from third parties, we may have received better terms from third parties because third parties may have competed with each other to win our business. See “Certain Relationships and Related Party Transactions—Agreements with Exelis Related to the Spin-Off.”

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We may incur greater costs as an independent company than we did when we were part of Exelis.

As part of Exelis, we can take advantage of its size and purchasing power in procuring certain goods and services such as insurance and health care benefits, and technology such as computer software licenses. We also rely on Exelis to provide various corporate functions. After the spin-off, as a separate, independent entity, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable to us as those we obtained prior to the distribution. We may also incur costs for functions previously performed by Exelis that are higher than the amounts reflected in our historical financial statements, which could cause our profitability to decrease.

Following the spin-off, we will be dependent on Exelis to provide certain services pursuant to the Transition Services Agreement.

Currently, we rely on Exelis to provide certain corporate and administrative services such as certain information technology, financial and human resource services. We expect to develop the capability to provide all such services internally at Vectrus. However, to the extent that we are unable to develop such capabilities prior to the separation, we will rely on Exelis to continue to provide certain services for a period of time pursuant to a Transition Services Agreement that we intend to enter in connection with the spin-off. If Exelis is unable or unwilling to provide such services pursuant to the Transition Services Agreement, or if the agreement is terminated prior to the end of its term, we may be unable to provide such services ourselves or we may have to incur additional expenditures to obtain such services from another provider.

Risks Relating to Our Common Stock

You face the following risks in connection with ownership of our common stock:

There is no existing market for our common stock and we cannot be certain that an active trading market will develop or be sustained after the spin-off, and following the spin-off, our stock price may fluctuate significantly.

There currently is no public market for our common stock. We intend to list our common stock on the New York Stock Exchange. See “Trading Market.” It is anticipated that before the distribution date for the spin-off, trading of shares of our common stock will begin on a “when-issued” basis and such trading will continue up to and including the distribution date. However, there can be no assurance that an active trading market for our common stock will develop as a result of the spin-off or be sustained in the future. The lack of an active market may make it more difficult for you to sell our common stock and could lead to the price of our common stock being depressed or more volatile. We cannot predict the prices at which our common stock may trade after the spin-off. The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including:

• the sale of our shares by some Exelis shareholders after the distribution because our business profile and market capitalization may not fit their investment objectives;

• our dependence on the defense industry and the business risks peculiar to that industry, including changing priorities or reductions in the U.S. government or international defense budgets;

• government regulations and compliance therewith, including changes to the Department of Defense procurement process;

• competition and industry capacity;

• misconduct of our employees, subcontractors, agents and business partners;

• changes in interest rates and other factors that affect earnings and cash flows;

• the mix of our contracts and programs, our performance, and our ability to control costs;

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• governmental investigations;

• our level of indebtedness and our ability to make payments on or service our indebtedness;

• subcontractor performance;

• our ability to retain and recruit qualified personnel;

• security breaches and other disruptions to our information technology and operations;

• unanticipated changes in our tax provisions or exposure to additional income tax liabilities;

• actual or anticipated fluctuations in our operating results due to factors related to our business;

• wins and losses on contract re-competitions and new business pursuits;

• success or failure of our business strategy;

• our quarterly or annual earnings, or those of other companies in our industry;

• our ability to obtain financing as needed;

• announcements by us or our competitors of significant acquisitions or dispositions;

• changes in accounting standards, policies, guidance, interpretations or principles;

• the failure of securities analysts to cover our common stock after the spin-off;

• changes in earnings estimates by securities analysts or our ability to meet those estimates;

• the operating and stock price performance of other comparable companies;

• investor perception of our company and the defense industry, including changing priorities or reductions in the U.S. government defense budget;

• the availability of government funding and changes in customer requirements for our services;

• natural or environmental disasters that investors believe may affect us;

• overall market fluctuations;

• results from any material litigation or government investigation;

• changes in laws and regulations affecting our business; and

• general economic conditions and other external factors.

Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could adversely affect the trading price of our common stock.

Substantial sales of our common stock may occur in connection with the spin-off, which could cause the price of our common stock to decline.

The shares of our common stock that Exelis distributes to its shareholders generally may be sold immediately in the public market. It is possible that some Exelis shareholders, which could include some of our larger shareholders, will sell our common stock received in the distribution if, for reasons such as our business profile or market capitalization as an independent company, we do not fit their investment objectives, or—in the case of index funds—we are not a participant in the index in which they are investing. The sales of significant amounts of our common stock or the perception in the market that this will occur may reduce the market price of our common stock.

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We do not currently plan to pay a regular dividend on our common stock following the spin-off, and our indebtedness could limit our ability to pay dividends on our common stock in the future.

We do not currently plan to pay a regular dividend on our common stock following the spin-off. The declaration of any future cash dividends and, if declared, the amount of any such dividends, will be subject to our financial condition, earnings, capital requirements, financial covenants and other contractual restrictions and to the discretion of our Board of Directors. Our Board of Directors may take into account such matters as general business conditions, industry practice, our financial condition and performance, our future prospects, our cash needs and capital investment plans, income tax consequences, applicable law and such other factors as our Board of Directors may deem relevant. See “Dividend Policy.” There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence the payment of dividends. There can also be no assurance that the combined annual dividends on Exelis common stock and our common stock after the spin-off, if any, will be equal to the annual dividends on Exelis common stock prior to the spin-off.

Additionally, indebtedness that we expect to incur in connection with the spin-off could have important consequences for holders of our common stock. If we cannot generate sufficient cash flow from operations to meet our debt-payment obligations, then our ability to pay dividends, if so determined by the Board of Directors, will be impaired and we may be required to attempt to restructure or refinance our debt, raise additional capital or take other actions such as selling assets, reducing or delaying capital expenditures or reducing our dividend. There can be no assurance, however, that any such actions could be effected on satisfactory terms, if at all, or would be permitted by the terms of our new debt or our other credit and contractual arrangements. In addition, the terms of the agreements governing new debt that we expect to incur at or prior to the spin-off or that we may incur in the future may limit the payment of dividends.

Anti-takeover provisions in our organizational documents and Indiana law could delay or prevent a change in control.

Prior to completion of the spin-off, we will adopt the amended and restated articles of incorporation and the amended and restated by-laws. Certain provisions of the amended and restated articles of incorporation and the amended and restated by-laws may delay or prevent a merger or acquisition that a shareholder may consider favorable. For example, the amended and restated articles of incorporation and the amended and restated by-laws, among other things, will provide for a classified board and will not permit shareholders to convene special meetings or to remove our directors other than for cause. In addition, the amended and restated articles of incorporation will authorize our Board of Directors to issue one or more series of preferred stock. These provisions may also discourage acquisition proposals or delay or prevent a change in control, which could harm our stock price. Indiana law also imposes some restrictions on mergers and other business combinations between any holder of 10% or more of our outstanding common stock and us as well as certain restrictions on the voting rights of “control shares” of an “issuing public corporation.” See “Description of Capital Stock.”

Under the Tax Matters Agreement, we will agree not to enter into any transaction involving an acquisition (including issuance) of Vectrus common stock or any other transaction that could cause the distribution to be taxable to Exelis. Exelis and we will also agree to indemnify each other for any tax liabilities resulting from such transactions to the extent a party’s actions caused such tax liability, whether or not the indemnified party consented to such transaction or the indemnifying party was otherwise permitted to enter into such transaction under the Tax Matters Agreement. Generally, Exelis will recognize taxable gain on the distribution if there are one or more acquisitions (including issuances) of our capital stock, directly or indirectly, representing 50% or more, measured by vote or value, of our then-outstanding capital stock, and the acquisitions or issuances are deemed to be part of a plan or series of related transactions that include the distribution. Any such shares of our common stock acquired, directly or indirectly, within two years before or after the distribution (with exceptions, including public trading by less-than-5% shareholders and certain compensatory stock issuances) will generally be presumed to be part of such a plan unless that presumption is rebutted. As a result, our obligations may discourage, delay or prevent a change of control of our company.

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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this information statement, including in the sections entitled “Summary,” “Risk Factors,” “Questions and Answers About the Spin-Off,” “The Spin-Off,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, benefits resulting from our separation from Exelis, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” “might,” “should,” “could” or the negative of these terms or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements in this information statement. We do not have any intention or obligation to update forward-looking statements after we distribute this information statement.

The risk factors discussed in “Risk Factors” could cause our results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business. Any such risks could cause our results to differ materially from those expressed in forward-looking statements.

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THE SPIN-OFF

Background

On December 11, 2013, the Board of Directors of Exelis approved a plan to spin-off Vectrus from Exelis, following which Vectrus will be an independent, publicly traded company. As part of the spin-off, Exelis will effect an internal reorganization in order to properly align the appropriate businesses within Vectrus, which we refer to as the “internal reorganization.”

To complete the spin-off, Exelis will, following the internal reorganization, distribute to its shareholders all of the outstanding shares of our common stock. The distribution will occur on the distribution date, which is expected to be September 27, 2014. Each holder of Exelis common stock will receive one share of our common stock for every 18 shares of Exelis common stock held at 5:00 p.m., New York time, on September 18, 2014, the record date. After completion of the spin-off:

• we will be an independent, publicly traded company (NYSE: VEC), and will own and operate the military and government services business that is currently part of the Information and Technical Services segment of Exelis; and

• Exelis will continue to be an independent, publicly traded company (NYSE: XLS) and continue to own and operate its Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) related products, networks and systems.

Each holder of Exelis common stock will continue to hold his, her or its shares in Exelis. No vote of Exelis shareholders is required or is being sought in connection with the spin-off, including the internal reorganization, and Exelis shareholders will not have any appraisal rights in connection with the spin-off.

The distribution of our common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. In addition, Exelis has the right not to complete the spin-off if, at any time prior to the distribution, the Board of Directors of Exelis determines, in its sole discretion, that the spin-off is not then in the best interests of Exelis or its shareholders or other constituents, that a sale or other alternative is in the best interests of Exelis or its shareholders or other constituents or that it is not advisable for us to separate from Exelis at that time. See “—Conditions to the Spin-Off.”

Reasons for the Spin-Off

The Exelis Board of Directors has determined that the spin-off is in the best interests of Exelis, its shareholders and other stakeholders because the spin-off will provide the following key benefits: (i) greater strategic focus of management’s efforts and resources, (ii) enhanced focus on customers, (iii) direct and differentiated access to capital resources, (iv) enhanced choices for investors by offering investment opportunities in separate entities, (v) improved management incentive tools, and (vi) ability to utilize stock as an acquisition currency.

• Greater Strategic Focus of Management’s Efforts and Resources. The military and government services business of Exelis (the Mission Systems business) has historically exhibited different financial and operating characteristics than the other businesses of Exelis, especially the Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) related businesses, which are a key component of the future growth strategy of Exelis. Management of Exelis and we believe that the Mission Systems business and the other businesses of Exelis have limited similarities, benefit from limited synergies and require different capital expenditure and management strategies in order to maximize their respective long-term value. Consequently, the management resources of each of Exelis and us would be more efficiently utilized if concentrated on our respective businesses.

Both Exelis and we expect to have better use of management and financial resources following the spin-off as a result of having board and executive management teams that will devote their time

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exclusively to their respective businesses, where their time and skills are best applied. The spin-off will allow us to better align management’s attention, compensation and resources to pursue opportunities in the infrastructure asset management, logistics and supply chain management, and information technology and network communication services markets and to manage our cost structure more actively. Exelis will similarly benefit from its management’s ability to focus on the management and operation of the remaining businesses and strategic growth platforms.

• Enhanced Focus on Customers. Both Exelis and we believe that, as a unified, independently managed, stand-alone company, our management will be able to more closely align internal resources, including senior management time, with the unique priorities and realities of customers of our business.

• Direct and Differentiated Access to Capital Resources. After the spin-off, we will no longer need to compete with the other businesses of Exelis for capital resources. Both Exelis and we believe that direct and differentiated access to capital resources will allow each of us to better optimize the amounts and terms of the capital needed for each of the respective businesses, aligning financial and operational characteristics with market expectations. The management of Exelis also believes that, as a separate entity, we will have ready access to capital, because we will attract investors who are interested in the characteristics of the Mission Systems business.

• Enhanced Choices for Investors by Offering Investment Opportunities in Separate Entities. After the spin-off, investors should be able to better evaluate our financial performance, as well as our strategy within the context of our markets, thereby enhancing the likelihood that we will achieve an appropriate market valuation. Exelis management and financial advisors believe that the investment characteristics of the Mission Systems business may appeal to different types of investors than those that are currently invested in Exelis. As a result of the spin-off, our management should be able to implement goals and evaluate strategic opportunities in light of investor expectations within our specialties without undue attention to investor expectations in other specialties. In addition, we should be able to focus our public relations efforts on cultivating our own separate identity.

• Improved Management Incentive Tools. Similar to Exelis, we expect to use our equity to compensate current and future employees. In multi-business companies such as Exelis, it is difficult to structure incentives that reward managers in a manner directly related to the performance of their respective business units. By granting stock based compensation tied directly to the Mission Systems business, equity compensation will be in line with the financial results of the managers’ direct work product. As a result, the incentives offered by our compensation plan will be less diluted and more effective.

• Ability to Utilize Stock as an Acquisition Currency. Although we are not currently planning any acquisitions involving the use of our stock, the spin-off will enable us to use our stock as currency to pursue certain financial and strategic objectives, including tax-free merger transactions. In addition, future strategic transactions with similar businesses will be more easily facilitated through the use of our stock as consideration.

Manner of Effecting the Spin-Off

The general terms and conditions relating to the spin-off will be set forth in a Distribution Agreement between us and Exelis.

Internal Reorganization

As part of the spin-off, Exelis will undergo an internal reorganization that will, among other things and subject to limited exceptions: (i) allocate and transfer to a newly formed indirect subsidiary of Exelis those assets, and allocate and assign responsibility for those liabilities, in respect of the activities of the Tethered Aerostat Business of Exelis, which will be retained by Exelis, and (ii) transfer to us the ownership interests of Exelis Systems Corporation and other indirect subsidiaries of Exelis that form a part of the Mission Systems business.

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Distribution of Shares of Our Common Stock

The general terms and conditions relating to the distribution will be set forth in the Distribution Agreement between us and Exelis. Under the Distribution Agreement, the distribution will be effective as of 12:01 a.m., New York time, on September 27, 2014, the distribution date. As a result of the spin-off, on the distribution date, each holder of Exelis common stock will receive one share of our common stock for every 18 shares of Exelis common stock that he, she or it owns as of 5:00 p.m. New York time, on September 18, 2014, the record date. The actual number of shares to be distributed will be determined based on the number of shares of Exelis common stock expected to be outstanding as of the record date and will be reduced to the extent that cash payments are to be made in lieu of the issuance of fractional shares of Vectrus. The exact number of shares of Vectrus common stock to be distributed will be calculated on the record date. The shares of Vectrus common stock to be distributed by Exelis will constitute all of the issued and outstanding shares of Vectrus common stock immediately prior to the distribution.

On the distribution date, Exelis will release the shares of our common stock to our distribution agent to distribute to Exelis shareholders. For most Exelis shareholders, our distribution agent will credit their shares of our common stock to book-entry accounts established to hold their shares of our common stock. Our distribution agent will send these shareholders, including any Exelis shareholder that holds physical share certificates of Exelis common stock and is the registered holder of such shares of Exelis common stock represented by those certificates on the record date, a statement reflecting their ownership of our common stock. Book-entry refers to a method of recording stock ownership in our records in which no physical certificates are issued. For shareholders who own Exelis common stock through a broker or other nominee, their shares of our common stock will be credited to these shareholders’ accounts by the broker or other nominee. It may take the distribution agent up to two weeks to issue shares of our common stock to Exelis shareholders or to their bank or brokerage firm electronically by way of direct registration in book-entry form. Trading of our stock will not be affected by this delay in issuance by the distribution agent. As further discussed below, we will not issue fractional shares of our common stock in the distribution. Following the spin-off, shareholders whose shares are held in book-entry form may request that their shares of our common stock be transferred to a brokerage or other account at any time.

Exelis shareholders will not be required to make any payment or surrender or exchange their shares of Exelis common stock or take any other action to receive their shares of our common stock. No vote of Exelis shareholders is required or sought in connection with the spin-off, including the internal reorganization, and Exelis shareholders have no appraisal rights in connection with the spin-off.

Treatment of Fractional Shares

The distribution agent will not distribute any fractional shares of our common stock to Exelis shareholders. Instead, as soon as practicable on or after the distribution date, the distribution agent will aggregate fractional shares of our common stock to which Exelis shareholders of record would otherwise be entitled into whole shares, sell them in the open market at the prevailing market prices and then distribute the aggregate sale proceeds ratably to Exelis shareholders who would otherwise have been entitled to receive fractional shares of our common stock. The distribution agent, in its sole discretion, without any influence by Exelis or Vectrus, will determine when, how, and through which broker-dealer and at what price to sell the whole shares. Any broker-dealer used by the distribution agent will not be an affiliate of either Exelis or Vectrus. The distribution agent is not an affiliate of either Exelis or Vectrus. The amount of this payment will depend on the prices at which the distribution agent sells the aggregated fractional shares of our common stock in the open market shortly after the distribution date. We will be responsible for any payment of brokerage fees in connection with these sales. The amount of these brokerage fees is not expected to be material to us. The receipt of cash in lieu of fractional shares of our common stock will generally result in a taxable gain or loss to the recipient shareholder. Each shareholder entitled to receive cash proceeds from these shares should consult his, her or its own tax advisor as to the shareholder’s particular circumstances. The tax consequences of the distribution are described in more detail under “—U.S. Federal Income Tax Consequences of the Spin-Off.”

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U.S. Federal Income Tax Consequences of the Spin-Off

The following is a summary of certain U.S. Federal income tax consequences of the spin-off. This summary is based on the Code, the U.S. Treasury regulations promulgated thereunder, and interpretations of the Code and the U.S. Treasury regulations by the courts and the IRS, in effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. Any such change could affect the tax consequences described below.

This summary is limited to holders of Exelis common stock that are U.S. holders, as defined immediately below. A U.S. holder is a beneficial owner of Exelis common stock that is, for U.S. Federal income tax purposes:

• an individual who is a citizen or a resident of the United States;

• a corporation created or organized under the laws of the United States, any state thereof or the District of Columbia;

• an estate, the income of which is subject to U.S. Federal income taxation regardless of its source; or

• a trust, if (i) a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions or (ii) in the case of a trust that was treated as a domestic trust under the law in effect before 1997, a valid election is in place under applicable U.S. Treasury regulations.

This summary does not address the consequences to Exelis shareholders subject to special treatment under the U.S. Federal income tax laws (including, for example, non-U.S. persons, insurance companies, dealers, brokers or traders in securities or currencies, tax-exempt organizations, financial institutions, pass-through entities and investors in such entities, holders who have a functional currency other than the U.S. dollar, holders who hold their shares as a hedge or as part of a hedging, straddle, conversion, synthetic security, integrated investment or other risk-reduction transaction or who are subject to alternative minimum tax or holders who acquired their shares upon the exercise of employee stock options or otherwise as compensation).

This summary only addresses the U.S. Federal income tax consequences to U.S. holders who hold Exelis common stock as a capital asset (generally, property held for investment). Moreover, this summary does not address any state, local or non-U.S. tax consequences of any estate, gift or other non-income tax consequences.

If a partnership (or other entity treated as a partnership for U.S. Federal income tax purposes) holds Exelis common stock, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. Such partner or partnership should consult its own tax advisor as to its tax consequences.

EXELIS SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE SPIN-OFF TO THEM, INCLUDING THE EFFECT OF ANY FEDERAL, STATE, LOCAL OR NON-U.S. TAX LAWS OR U.S. TAX LAWS OTHER THAN THOSE RELATING TO INCOME TAXES AND OF CHANGES IN APPLICABLE TAX LAWS.

The spin-off is conditioned on the receipt of an opinion of tax counsel, in form and substance satisfactory to Exelis, to the effect that the spin-off will qualify as a tax-free distribution under Section 355 of the Code. Assuming the distribution qualifies under Section 355 of the Code as tax-free:

• no gain or loss will be recognized by, and no amount will be included in the income of, holders of Exelis common stock upon their receipt of shares of our common stock in the distribution;

• the basis of Exelis common stock immediately before the distribution will be allocated between the Exelis common stock and our common stock received in the distribution (including any fractional share interest deemed received), in proportion with relative fair market values at the time of the distribution;

• the holding period of our common stock received distribution (including any fractional share interest deemed received) by each Exelis shareholder will include the period during which the shareholder held

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the Exelis common stock on which the distribution is made, provided that the Exelis common stock is held as a capital asset on the distribution date;

• any cash received in lieu of fractional share interests in our common stock will give rise to taxable gain or loss equal to the difference between the amount of cash received and the tax basis allocable to the fractional share interests, determined as described above, and such gain will be capital gain or loss (the deductibility of which is subject to limitation) if the Exelis common stock on which the distribution is made is held as a capital asset on the distribution date and will be long-term capital gain or loss if the U.S. holder’s holding period for such fractional share interest, determined as described above, is greater than one year; and

• no gain or loss will be recognized by Exelis upon the distribution of our common stock.

U.S. holders that have acquired different blocks of Exelis common stock at different times or at different prices should consult their tax advisors regarding the allocation of their aggregate adjusted basis among, and their holding period of, the Vectrus common stock distributed with respect to such blocks of Exelis common stock.

U.S. Treasury regulations require certain shareholders that receive stock in a spin-off to attach to their respective U.S. Federal income tax returns, for the year in which the spin-off occurs, a detailed statement setting forth certain information relating to the spin-off. Exelis will provide shareholders who receive our common stock in the distribution with the information necessary to comply with that requirement, as well as information to help shareholders allocate their stock basis between their Exelis common stock and the Vectrus common stock.

The opinion of tax counsel will be, conditioned on the truthfulness and completeness of certain factual statements and representations provided by Exelis and us. If those factual statements and representations are incomplete or untrue in any material respect, tax counsel’s conclusions may be altered. Exelis and we have reviewed the statements of fact and representations on which the opinion of tax counsel will be based, and neither Exelis nor we are aware of any facts or circumstances that would cause any of the statements of fact or representations to be incomplete or untrue. We have agreed to some restrictions on our future actions to provide further assurance that the spin-off will qualify as a tax-free distribution under Section 355 of the Code.

As discussed above, certain requirements for tax-free treatment will be addressed in the opinion of tax counsel. An opinion of tax counsel is not binding on the IRS. Accordingly, upon audit the IRS may reach conclusions with respect to the spin-off that are different from the conclusions reached in the opinion.

If the distribution does not qualify under Section 355 of the Code, each holder of Exelis common stock receiving our common stock in the distribution would be treated as receiving a taxable distribution in an amount equal to the fair market value of our common stock received, which would result in:

• a taxable dividend to the extent of the shareholder’s pro rata share of the current and accumulated earnings and profits of Exelis;

• a reduction in the shareholder’s basis in Exelis common stock to the extent the amount received exceeds such shareholder’s share of earnings and profits;

• taxable gain from the exchange of Exelis common stock to the extent the amount received exceeds both the shareholder’s share of earnings and profits and the shareholder’s basis in Exelis common stock; and

• basis in our stock equal to its fair market value on the date of the distribution.

Under certain circumstances Exelis would recognize taxable gain on the distribution. These circumstances would include the following:

• the distribution does not qualify as tax-free under Section 355 of the Code; and

• there are one or more acquisitions (including issuances) of either our stock or the stock of Exelis, representing 50% or more, measured by vote or value, of the then-outstanding stock of that

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corporation, and the acquisition or acquisitions are deemed to be part of a plan or series of related transactions that include the distribution. Any such acquisition of our stock or the stock of Exelis within two years before or after the distribution (with exceptions, including public trading by less-than- 5% shareholders and certain compensatory stock issuances) generally will be presumed to be part of such a plan unless that presumption is rebutted.

The amount of such gain would result in a significant Federal income tax liability to Exelis.

Under the Tax Matters Agreement, Vectrus will agree not to enter into any transaction for a period of two years following the distribution involving an acquisition (including issuance) of Vectrus common stock or any other transaction that could cause the distribution to be taxable to Exelis. The parties will also agree to indemnify each other for any tax resulting from any such transaction to the extent a party’s actions caused such tax liability, whether or not the indemnified party consented to such transaction or the indemnifying party was otherwise permitted to enter into such transaction under the Tax Matters Agreement, and make certain payments in respect of tax benefits resulting from the distribution under certain circumstances resulting from the distribution under certain other circumstances. Our obligation to indemnify Exelis may discourage, delay or prevent a change of control of our company. In addition, under U.S. Treasury regulations, each member of the Exelis consolidated tax return group at the time of the spin-off (including us and our subsidiaries) would be jointly and severally liable to the IRS for such tax liability. The resulting tax liability may have a material adverse effect on the business, financial condition, results of operations or cash flows of us or Exelis.

The preceding summary of certain anticipated U.S. Federal income tax consequences of the spin-off is for general informational purposes only. Exelis shareholders should consult their own tax advisors as to the specific tax consequences of the spin-off to them, including the application and effect of U.S. Federal, state, local or non-U.S. tax laws and of changes in applicable tax laws.

Results of the Spin-Off

After the spin-off, we will be an independent, publicly traded company. Immediately following the spin-off, we expect to have approximately 15,500 record holders of shares of our common stock and approximately 10 million shares of our common stock outstanding, based on the number of shareholders and outstanding shares of Exelis common stock on August 25, 2014 and the distribution ratio. The figures exclude shares of Exelis common stock held directly or indirectly by Exelis, if any. The actual number of shares to be distributed will be determined on the record date and will reflect any repurchases of shares of Exelis common stock and issuances of shares of Exelis common stock in respect of employer or employee contributions under Exelis benefit plans between the date the Exelis Board of Directors declares the dividend for the distribution and the record date for the distribution.

For information regarding options to purchase shares of our common stock that will be outstanding after the distribution, see “Capitalization,” “Certain Relationships and Related Party Transactions—Agreements with Exelis Related to the Spin-Off—Employee Matters Agreement” and “Management.”

Before the spin-off, we will enter into several agreements with Exelis to effect the spin-off and provide a framework for our relationship with Exelis after the spin-off. These agreements will govern the relationship between us and Exelis after completion of the spin-off and provide for the allocation between us and Exelis of the assets, liabilities, rights and obligations of Exelis. See “Certain Relationships and Related Party Transactions—Agreements with Exelis Related to the Spin-Off.”

Trading Prior to the Distribution Date

It is anticipated that, at least two trading days prior to the record date and continuing up to and including the distribution date, there will be a “when-issued” market in our common stock. When-issued trading refers to a sale

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or purchase made conditionally because the security has been authorized but not yet issued. The when-issued trading market will be a market for shares of our common stock that will be distributed to Exelis shareholders on the distribution date. Any Exelis shareholder who owns shares of Exelis common stock at 5:00 p.m., New York time, on the record date will be entitled to shares of our common stock distributed in the spin-off. Exelis shareholders may trade this entitlement to shares of our common stock, without the shares of Exelis common stock they own, on the when-issued market. On the first trading day following the distribution date, we expect when-issued trading with respect to our common stock will end and “regular-way” trading will begin. See “Trading Market.”

Following the distribution date, we expect shares of our common stock to be listed on the New York Stock Exchange under the ticker symbol “VEC”. We will announce the when-issued ticker symbol when and if it becomes available.

It is also anticipated that, at least two trading days prior to the record date and continuing up to and including the distribution date, there will be two markets in Exelis common stock: a “regular-way” market and an “ex-distribution” market. Shares of Exelis common stock that trade on the regular-way market will trade with an entitlement to shares of our common stock distributed pursuant to the distribution. Shares that trade on the ex-distribution market will trade without an entitlement to shares of our common stock distributed pursuant to the distribution. Therefore, if shares of Exelis common stock are sold in the regular-way market up to and including the distribution date, the selling shareholder’s right to receive shares of our common stock in the distribution will be sold as well. However, if Exelis shareholders own shares of Exelis common stock as of 5:00 p.m., New York time, on the record date and sell those shares on the ex-distribution market up to and including the distribution date, the selling shareholders will still receive the shares of our common stock that they would otherwise receive pursuant to the distribution. See “Trading Market.”

Incurrence of Debt

It is anticipated that, prior to the completion of the spin-off, we will incur indebtedness in an amount estimated at $140 million under a senior secured term facility and enter into a senior secured revolving facility permitting borrowings of up to $75 million. See “Description of Material Indebtedness.” The proceeds from the senior secured term facility will be used to fund a cash distribution to Exelis that is expected to be approximately $119 million.

Conditions to the Spin-Off

We expect that the spin-off will be effective as of 12:01 a.m., New York time, on September 27, 2014, the distribution date, provided that the following conditions shall have been satisfied or waived by Exelis:

• our Registration Statement on Form 10, of which this information statement forms a part, shall have been declared effective by the SEC, no stop order suspending the effectiveness thereof shall be in effect, no proceedings for such purpose shall be pending before or threatened by the SEC, and this information statement, or a notice of internet availability thereof, shall have been mailed to the Exelis shareholders;

• Vectrus common stock shall have been approved for listing on the New York Stock Exchange, subject to official notice of distribution;

• Exelis shall have obtained an opinion from its tax counsel, in form and substance satisfactory to Exelis, to the effect that the spin-off will qualify as a tax-free distribution under Section 355 of the Code;

• prior to the distribution date, the Exelis Board of Directors shall have obtained opinions from a nationally recognized valuation firm, in form and substance satisfactory to Exelis, with respect to the capital adequacy and solvency of each of Exelis and Vectrus after giving effect to the spin-off;

• all material governmental approvals and other consents necessary to consummate the spin-off shall have been received;

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• no order, injunction or decree issued by any governmental entity of competent jurisdiction or other legal restraint or prohibition preventing the consummation of all or any portion of the spin-off shall be pending, threatened, issued or in effect, and no other event outside the control of Exelis shall have occurred or failed to occur that prevents the consummation of all or any portion of the spin-off;

• no other events or developments shall have occurred or failed to occur that, in the judgment of the Board of Directors of Exelis, would result in the distribution having a material adverse effect on Exelis or its shareholders;

• the financing transactions described in this information statement as having occurred prior to the distribution shall have been consummated on or prior to the distribution (including any funding thereunder contemplated to take place and any cash contributions or distributions of the proceeds thereof anticipated to take place on or prior to the distribution);

• the internal reorganization shall have been completed, except for such steps as Exelis in its sole discretion shall have determined may be completed after the distribution date;

• Exelis shall have taken all necessary action, in the judgment of the Board of Directors of Exelis, to cause the Board of Directors of Vectrus to consist of the individuals identified in this information statement as directors of Vectrus;

• Exelis shall have taken all necessary action, in the judgment of the Board of Directors of Exelis, to cause the officers of Vectrus to be the individuals identified as such in this information statement;

• all necessary actions shall have been taken to adopt the form of amended and restated articles of incorporation and amended and restated by-laws filed by Vectrus with the SEC as exhibits to the Registration Statement on Form 10, of which this information statement forms a part;

• the Board of Directors of Exelis shall have approved the distribution, which approval may be given or withheld at its absolute and sole discretion;

• in the event that the distribution is for any reasons postponed more than 120 days after the date on which the Exelis Board of Directors approves the distribution, the Board of Directors of Exelis shall have redetermined, as of such postponed distribution date, that the distribution satisfies the requirements of Indiana Business Corporation Law governing distributions; and

• each of the Distribution Agreement, the Tax Matters Agreement, the Employee Matters Agreement, the Transition Services Agreement and the other ancillary agreements shall have been executed by each party.

The fulfillment of the foregoing conditions will not create any obligation on the part of Exelis to effect the spin-off. We are not aware of any material Federal, foreign or state regulatory requirements that must be complied with or any material approvals that must be obtained, other than compliance with SEC rules and regulations, approval for listing on the New York Stock Exchange and the declaration of effectiveness of the Registration Statement on Form 10 by the SEC, in connection with the distribution. Exelis has the right not to complete the spin-off if, at any time prior to the distribution, the Board of Directors of Exelis determines, in its sole discretion, that the spin-off is not then in the best interests of Exelis or its shareholders or other constituents, that a sale or other alternative is in the best interests of Exelis or its shareholders or other constituents or that it is not advisable for Vectrus to separate from Exelis at that time. In the event the Board of Directors of Exelis determines to waive a material condition to the distribution, modify a material term of the distribution or not to proceed with the spin-off, Exelis intends to promptly issue a press release or other public announcement and file a Current Report on Form 8-K to report such event. The Company is not aware of any circumstances under which the distribution would be abandoned.

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Reasons for Furnishing this Information Statement

This information statement is being furnished solely to provide information to Exelis shareholders that are entitled to receive shares of our common stock in the spin-off. This information statement is not, and is not to be construed as, an inducement or encouragement to buy, hold or sell any of our securities. We believe that the information in this information statement is accurate as of the date set forth on the cover. Changes may occur after that date and neither Exelis nor we undertake any obligation to update the information except in the normal course of our respective public disclosure obligations.

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TRADING MARKET

Market for Our Common Stock

There has been no public market for our common stock. An active trading market may not develop or may not be sustained. We anticipate that trading of our common stock will commence on a “when-issued” basis at least two trading days prior to the record date and continue through the distribution date. When-issued trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. When-issued trades generally settle within four trading days after the distribution date. If you own shares of Exelis common stock as of 5:00 p.m., New York time on the record date, you will be entitled to shares of our common stock distributed pursuant to the spin-off. You may trade this entitlement to shares of our common stock, without the shares of Exelis common stock you own, on the when-issued market. On the first trading day following the distribution date, any when-issued trading with respect to our common stock will end and “regular-way” trading will begin. We intend to list our common stock on the New York Stock Exchange under the ticker symbol “VEC”. We will announce our when-issued trading symbol when and if it becomes available.

It is also anticipated that, at least two trading days prior to the record date and continuing up to and including the distribution date, there will be two markets in Exelis common stock: a “regular-way” market and an “ex-distribution” market. Shares of Exelis common stock that trade on the regular-way market will trade with an entitlement to shares of our common stock distributed pursuant to the distribution. Shares that trade on the ex-distribution market will trade without an entitlement to shares of our common stock distributed pursuant to the distribution. Therefore, if you sell shares of Exelis common stock in the regular-way market up to and including the distribution date, you will be selling your right to receive shares of our common stock in the distribution. However, if you own shares of Exelis common stock as of 5:00 p.m., New York time, on the record date and sell those shares on the ex-distribution market up to and including the distribution date, you will still receive the shares of our common stock that you would otherwise receive pursuant to the distribution.

We cannot predict the prices at which our common stock may trade before the spin-off on a “when-issued” basis or after the spin-off. Those prices will be determined by the marketplace. Prices at which trading in our common stock occurs may fluctuate significantly. Those prices may be influenced by many factors, including anticipated or actual fluctuations in our operating results or those of other companies in our industry, investor perception of our company and the military and government services industry, market fluctuations and general economic conditions. In addition, the stock market in general has experienced extreme price and volume fluctuations that have affected the performance of many stocks and that have often been unrelated or disproportionate to the operating performance of these companies. These are just some factors that may adversely affect the market price of our common stock. See “Risk Factors—Risks Relating to Our Common Stock.”

Transferability of Shares of Our Common Stock

On August 25, 2014, Exelis had approximately 188 million shares of its common stock issued and outstanding. Based on this number, we expect that upon completion of the spin-off, we will have approximately 10 million shares of common stock issued and outstanding. The shares of our common stock that you will receive in the distribution will be freely transferable, unless you are considered an “affiliate” of ours under Rule 144 under the Securities Act. Persons who can be considered our affiliates after the spin-off generally include individuals or entities that directly, or indirectly through one or more intermediaries, control, are controlled by, or are under common control with, us, and may include certain of our officers and directors. As of the distribution date, we estimate that our directors and officers will beneficially own in the aggregate less than one percent of our shares. In addition, individuals who are affiliates of Exelis on the distribution date may be deemed to be affiliates of ours. Our affiliates may sell shares of our common stock received in the distribution only:

• under a registration statement that the SEC has declared effective under the Securities Act; or

• under an exemption from registration under the Securities Act, such as the exemption afforded by Rule 144.

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In general, under Rule 144 as currently in effect, an affiliate will be entitled to sell, within any three-month period commencing 90 days after the date that the registration statement of which this information statement is a part is declared effective, a number of shares of our common stock that does not exceed the greater of:

• 1.0% of our common stock then outstanding; or

• the average weekly trading volume of our common stock on the New York Stock Exchange during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Sales under Rule 144 are also subject to restrictions relating to manner of sale and the availability of current public information about us.

In the future, we may adopt new stock option and other equity-based compensation plans and issue options to purchase shares of our common stock and other stock-based awards. We currently expect to file a registration statement under the Securities Act to register shares to be issued under these stock plans. Shares issued pursuant to awards after the effective date of that registration statement, other than shares issued to affiliates, generally will be freely tradable without further registration under the Securities Act.

Except for our common stock distributed in the distribution and employee-based equity awards, none of our equity securities will be outstanding immediately after the spin-off and there are no registration rights agreements existing with respect to our common stock.

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DIVIDEND POLICY

We do not currently plan to pay a regular dividend on our common stock following the spin-off. The declaration of any future cash dividends and, if declared, the amount of any such dividends, will be subject to our financial condition, earnings, capital requirements, financial covenants and other contractual restrictions and to the discretion of our Board of Directors. Our Board of Directors may take into account such matters as general business conditions, industry practice, our financial condition and performance, our future prospects, our cash needs and capital investment plans, income tax consequences applicable law and such other factors as our Board of Directors may deem relevant. In addition, the terms of the agreements governing our new debt or debt that we may incur in the future may limit the payments of dividends. There can be no assurance that we will pay any dividend in the future or continue to pay any dividend if we do commence the payment of dividends. There can also be no assurance that the combined annual dividends on Exelis common stock and our common stock after the spin-off, if any, will be equal to the annual dividends on Exelis common stock prior to the spin-off.

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CAPITALIZATION

The following table presents Vectrus’s historical capitalization at June 30, 2014 and our pro forma capitalization at that date reflecting the spin-off and the related transactions and events described in the notes to our unaudited pro forma combined condensed balance sheet as if the spin-off and the related transactions and events, including our financing transaction, had occurred on June 30, 2014. The capitalization table below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Vectrus’s historical combined financial statements, our unaudited pro forma condensed combined financial statements and the notes to those financial statements included in this information statement.

We are providing the unaudited capitalization table below for informational purposes only. It should not be construed to be indicative of our capitalization or financial condition had the spin-off and the related transactions and events been completed on the date assumed. The capitalization table below may not reflect the capitalization or financial condition that would have resulted had we been operating as a separate, independent entity at that date and is not necessarily indicative of our future capitalization or financial condition.

	As of June 30, 2014
	Historical			Pro Forma
(In millions)
Cash and Cash Equivalents(1)	$	9		$	25
Capitalization:
Liabilities
Debt	$	—		$	140
Equity
Common stock ($0.01 par value)		—			—	(2)
Additional paid in capital		—			83
Parent company investment(1)		208			—
Accumulated other comprehensive income		(2	)		(2	)
Total capitalization	$	206		$	221

(1) Historically, cash received by us has generally been transferred to Exelis, and Exelis has funded our disbursement accounts on an as-needed basis. The net effect of transfers of cash to and from the Exelis cash management accounts is reflected in parent company investment in the combined balance sheets.

(2) We have assumed the number of outstanding shares of common stock based on the number of Exelis common shares outstanding at June 30, 2014, which would result in approximately 10 million shares at a par value of $0.01 per share being distributed to holders of Exelis common shares, at an assumed distribution ratio of one share of Vectrus common stock for every 18 shares of Exelis common stock.

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SELECTED HISTORICAL CONDENSED COMBINED FINANCIAL AND OTHER DATA

The following table presents selected historical combined financial data for Vectrus. The condensed combined statement of income data for each of the three years ended December 31, 2013 and the condensed combined balance sheet data as of December 31, 2013 and 2012 set forth below are derived from Vectrus’s audited combined financial statements included in this information statement. The condensed combined statement of income data for the six months ended June 30, 2014 and June 30, 2013 and the condensed combined balance sheet data as of June 30, 2014 are derived from the unaudited condensed combined financial statements for Vectrus included elsewhere in this information statement. The condensed combined statement of income data for each of the two years ended December 31, 2010 and 2009 and the condensed combined balance sheet data as of December 31, 2011, 2010 and 2009 are derived from Vectrus’s unaudited combined financial statements that are not included in this information statement. The unaudited condensed combined financial statements have been prepared on the same basis as the audited combined financial statements and, in the opinion of our management, include all adjustments necessary for a fair presentation of the information set forth herein.

The selected historical combined financial and other data presented below should be read in conjunction with Vectrus’s combined financial statements and accompanying notes and “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this information statement. Vectrus’s condensed combined financial data may not be indicative of our future performance and do not necessarily reflect what our financial position and results of operations would have been had we been operating as an independent, publicly traded company during the periods presented, including changes that will occur in our operations and capitalization as a result of the spin-off from Exelis. See “Unaudited Pro Forma Condensed Combined Financial Statements” for a further description of the anticipated changes.

	As of and for the six months ended June 30						Year ended December 31,
	2014			2013			2013			2012			2011			2010			2009
(In millions)
Results of Operations
Revenue	$	617		$	835		$	1,512		$	1,828		$	1,806		$	1,132		$	1,078
Operating income	$	27		$	77		$	131		$	110		$	87		$	35		$	62
Operating Margin		4.4	%		9.2	%		8.7	%		6.0	%		4.8	%		3.1	%		5.8	%
Net income	$	17		$	50		$	84		$	75		$	54		$	22		$	39
Financial Position
Total assets	$	499		$	595		$	489		$	591		$	615		$	474		$	414
Total debt	$	—		$	—		$	—		$	—		$	—		$	—		$	—

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined financial statements of Vectrus consist of unaudited pro forma condensed combined statements of income for the six months ended June 30, 2014 and for the fiscal year ended December 31, 2013, and an unaudited pro forma condensed combined balance sheet as of June 30, 2014. The unaudited pro forma condensed combined financial statements should be read in conjunction with our historical combined financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this information statement.

The unaudited pro forma condensed combined financial statements have been derived from our historical combined financial statements included in this information statement and are not intended to be a complete presentation of our financial position or results of operations had the transactions contemplated by the Distribution Agreement and related agreements occurred as of and for the periods indicated. In addition, they are provided for illustrative and informational purposes only and are not necessarily indicative of our future results of operations or financial condition as an independent, publicly-traded company. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable, that reflect the expected impacts of events directly attributable to the spin-off and related transaction agreements, and that are factually supportable and, for purposes of the statements of income, are expected to have a continuing impact on us. However, such adjustments are subject to change based on the finalization of the terms of the spin-off and related transaction agreements.

The unaudited pro forma condensed combined statements of income for the six months ended June 30, 2014 and for the fiscal year ended December 31, 2013 reflect our results as if the spin-off and related transactions described below had occurred as of January 1, 2013. The unaudited pro forma condensed combined balance sheet as of June 30, 2014 reflects our results as if the spin-off and related transactions described below had occurred as of such date.

The unaudited pro forma condensed combined financial statements give effect to the following, among other things:

• the contribution, pursuant to the Distribution Agreement, by Exelis to us of all the assets and liabilities that comprise our business, including the entities holding all of the assets and liabilities that comprise our business;

• the expected transfer, upon the distribution, by Exelis to us of other assets and liabilities that were not reflected in our historical combined financial statements;

• the internal reorganization as described in “The Spin-Off—Manner of Effecting the Spin-Off—Internal Reorganization;”

• our anticipated post-spin-off capital structure, including (i) the distribution of up to approximately 10 million shares of our common stock to holders of Exelis common shares (this number of shares is based upon the number of Exelis common shares outstanding on June 30, 2014 and a distribution ratio of one share of Vectrus common stock for every 18 shares Exelis common stock); and (ii) the incurrence of indebtedness in an amount estimated at $140 million and the making of a $119 million distribution to Exelis;

• the impact of, and transactions contemplated by, a Tax Matters Agreement between us and Exelis and the provisions contained therein; and

• settlement of intercompany account balances between us and Exelis.

The operating expenses reported in our historical combined statements of income include allocations of certain Exelis costs. These costs include all Exelis corporate costs, shared services, and other SG&A and non-SG&A related costs that benefit us. Some of these costs have historically been charged directly to the operating units and have been included in our historical results. As a stand-alone public company, we do not expect our recurring costs to be materially higher than the expenses historically allocated to us from Exelis.

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We currently estimate that the costs we will incur during our transition to being a stand-alone public company will range from approximately $4 million to $7 million. We have not adjusted the accompanying unaudited pro forma condensed combined statements of income for these estimated transition costs as they are not expected to have an ongoing impact on our operating results. We anticipate that substantially all of these costs will be incurred within 12 months of the distribution. These transition costs relate to the following:

• accounting, tax and other professional costs pertaining to the spin-off and establishing us as a stand-alone public company;

• compensation, such as modifications to certain bonus awards, upon completion of the spin-off;

• recruiting and relocation costs associated with hiring key senior management personnel new to our company;

• costs related to establishing our new brand in the marketplace;

• costs to separate our information systems from Exelis; and

• other separation costs.

Due to the scope and complexity of these activities, the amount of these costs could increase or decrease materially and the timing of incurrence could change.

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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

SIX MONTHS ENDED JUNE 30, 2014

(In millions, except per share amounts)	Historical (a)		Financing Adjustments			Transfer of TARS Business (m)			Separation and Other Adjustments			Pro Forma for the Financing, TARS, and the Separation
Revenue	$	617	$	—		$	(19	)	$	—		$	598
Cost of revenue		552		—			(18	)		—			534
Selling, general and administrative expenses		38		—			—			(6	)(b)		32
Operating income		27		—			(1	)		6			32
Interest expense		—		3	(c)		—			—			3
Income from continuing operations before income tax expense		27		(3	)		(1	)		6			29
Income tax expense		10		(1	)(d)		—			2	(d)		11
Net income	$	17	$	(2	)	$	(1	)	$	4		$	18
Basic earnings per share:												$	1.71	(k)
Diluted earnings per share:												$	1.68	(l)
Weighted average number of shares outstanding:
Basic													10.5	(k)
Diluted													10.7	(l)

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PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31, 2013

(In millions, except per share amounts)	Historical (a)		Financing Adjustments			Transfer of TARS Business (m)			Separation and Other Adjustments			Pro Forma for the Financing, TARS, and the Separation
Revenue	$	1,512	$	—		$	(37	)	$	—		$	1,475
Cost of revenue		1,297		—			(34	)		—			1,263
Selling, general and administrative expenses		84		—			—			(1	)(b)		83
Operating income		131		—			(3	)		1			129
Interest expense		—		6	(c)		—			—			6
Income from continuing operations before income tax expense		131		(6	)		(3	)		1			123
Income tax expense		47		(2	)(d)		(1	)		—			44
Net income	$	84	$	(4	)	$	(2	)	$	1		$	79
Basic earnings per share:												$	7.52	(k)
Diluted earnings per share:												$	7.38	(l)
Weighted average number of shares outstanding:
Basic													10.5	(k)
Diluted													10.7	(l)

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PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 30, 2014

(In millions)	Historical (a)			Financing Adjustments			Transfer of TARS Business (m)			Separation and Other Adjustments			Pro Forma for the Financing, TARS, and the Separation
Assets
Current assets
Cash and cash equivalents	$	9		$	135	(e)	$	—		$	(119	)(f)	$	25
Receivables		242			—			(5	)		—			237
Other current assets		14			—			(2	)		2	(i)		14
Total current assets		265			135			(7	)		(117	)		276
Plant, property and equipment, net		9			—			—			—			9
Goodwill		222			—			(6	)		—			216
Other non-current assets		3			5	(e)		—			3	(g)		11
Total non-current assets		234			5			(6	)		3			236
Total assets	$	499		$	140		$	(13	)	$	(114	)	$	512
Liabilities and Equity
Current liabilities
Accounts payable	$	117		$	—		$	(2	)	$	—		$	115
Advance payments and billings in excess of costs		8			—			(1	)		—			7
Compensation and other employee benefits		46			—			(2	)		—			44
Deferred tax liability		17			—			(1	)		(4	)(g)		12
Short-term debt		—			11	(e)		—			—			11
Other accrued liabilities		9			—						11	(i)		20
Total current liabilities		197			11			(6	)		7			209
Long term debt		—			129	(e)		—			—			129
Deferred tax liability		81			—			—			1	(g)		82
Other non-current liabilities		15			—			—			(4	)(h)		11
Total non-current liabilities		96			129			—			(3	)		222
Total liabilities		293			140			(6	)		4			431
Equity
Common stock		—			—			—			—	(j)		—
Additional paid in capital		—			—			—			83	(j)		83
Parent company investment		208			—			(7	)		(201	)(j)		—
Accumulated other comprehensive loss		(2	)		—			—			—			(2	)
Total equity		206			—			(7	)		(118	)		81
Total liabilities and equity	$	499		$	140		$	(13	)	$	(114	)	$	512

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NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(a) Our historical combined financial statements reflect the historical financial position and results of operations of the Mission Systems business of Exelis Inc., and do not reflect the impact of assets and liabilities that will be contributed to us by Exelis in the spin-off and that are discussed separately in footnote (g).

(b) Reflects the removal of separation costs directly related to the spin-off transaction that were incurred during the historical period. These costs were primarily for professional fees directly related to the separation.

(c) The adjustments of $3 million in the six months ended June 30, 2014 and $6 million in the fiscal year ended December 31, 2013, represent interest expense and amortization of debt incurrence costs in connection with the indebtedness we are planning to incur as described in footnote (e) below. The pro forma impact was based on the incurrence of $140 million of indebtedness issued with an interest rate of LIBOR plus an applicable margin ranging from 2.5% – 3% pursuant to a pricing grid based on our leverage ratio. See “Description of Material Indebtedness.” We expect to capitalize debt incurrence costs of approximately $5 million in connection with these debt arrangements.

A 1/8% variance in the assumed interest rate on the new indebtedness incurrence would change annual interest expense by $0.2 million.

(d) Adjusted to reflect a pro forma Vectrus effective tax rate equal to an historical Vectrus statutory effective tax rate. The provision for income taxes reflected in our historical financial statements was determined as if Vectrus filed a separate, stand-alone consolidated income tax return. The pro forma adjustments were determined using the statutory tax rate in effect in the respective tax jurisdictions during the periods presented.

(e) Reflects the incurrence of $140 million of indebtedness, debt incurrence costs of $5 million and net cash proceeds of $135 million. The debt consists of a $140 million senior secured term loan. See “Description of Material Indebtedness.” The target debt balance at the time of separation was based on a review of a number of factors including forecast liquidity and capital requirements, expected operating results, and general economic conditions. Cash on hand following the spin-off transaction is expected to be used for general corporate purposes.

(f) Reflects the distribution to Exelis of $119 million based upon the anticipated post-separation capital structure.

(g) Reflects an adjustment to deferred income taxes of $3 million and other non-current assets of $3 million. The adjustment to deferred income taxes is comprised of a decrease in the current deferred tax liability of $4 million related to insurance reserves and an increase in the non-current deferred tax liability of $1 million related to environmental liabilities that will be retained by Exelis. The impact to other non-current assets is comprised of an indemnity related to contingent tax liabilities which will be indemnified by Exelis in connection with the spin-off as set forth in the Tax Matters Agreement. At the time of separation, we will record a liability necessary to recognize the fair value of such indemnification arrangements.

(h) Reflects an adjustment to other long-term liabilities related to environmental liabilities of $4 million that will be retained by Exelis in connection with the spin-off as set forth in the Distribution Agreement that will be entered into with Exelis.

(i) Reflects an adjustment to worker’s compensation, automobile, and general liabilities of $11 million (and associated assets of $2 million) that will be assumed by Vectrus in connection with the spin-off as set forth in the Distribution Agreement that will be entered into with Exelis.

(j) Represents the reclassification of the net investment of Exelis in us, which was recorded in parent company equity, into additional paid-in-capital and the balancing entry to reflect the par value of approximately

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million outstanding shares of common stock at a par value of $0.01 per share. We have assumed the number of outstanding shares of common stock based on the number of Exelis common shares outstanding at June 30, 2014, which would result in approximately 10 million shares being distributed to holders of Exelis common shares, at an assumed distribution ratio of one share of Vectrus common stock for every 18 shares of Exelis common stock.

(k) Pro forma basic earnings per share and pro forma weighted-average basic shares outstanding are based on the number of Exelis common shares outstanding on June 30, 2014 and December 31, 2013, adjusted for an assumed distribution ratio of one share of Vectrus common stock for every 18 shares of Exelis common stock.

(l) Pro forma diluted earnings per share and pro forma weighted-average diluted shares outstanding reflect potential common shares from Exelis equity plans in which our employees participate based on the distribution ratio. While the actual impact on a go-forward basis will depend on various factors, including employees who may change employment from one company to another, we believe the estimate yields a reasonable approximation of the dilutive impact of Exelis equity plans.

(m) These adjustments reflect the transfer to Exelis of the results of operations and financial position associated with the Tethered Aerostat Business of Exelis (TARS). The TARS business had been historically managed by us, but will be transferred to Exelis as part of the internal reorganization. See “The Spin-Off—Manner of Effecting the Spin-Off—Internal Reorganization.”

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our results of operations and financial condition together with the audited historical combined financial statements and the notes thereto included in this information statement, as well as the discussion in the section of this information statement entitled “Business.” This discussion contains 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 due to a number of factors, including those discussed in the sections of this information statement entitled “Risk Factors” and “Special Note About Forward-Looking Statements.”

The combined financial statements, which are discussed below, reflect the historical financial condition, results of operations and cash flows of the Mission Systems business of Exelis. The financial information discussed below and included in this information statement, however, may not necessarily reflect what our financial condition, results of operations or cash flows would have been had we been a standalone company during the periods presented or what our financial condition, results of operations and cash flows may be in the future.

Except as otherwise indicated or unless the context otherwise requires, the information included in this management’s discussion and analysis assumes the completion of all the transactions referred to in this information statement in connection with the spin-off. Unless the context otherwise requires, references in this information statement to “Vectrus,” “we,” “us,” “our” and “our company” refer to Vectrus, Inc. and its combined subsidiaries. References in this information statement to “Exelis” or “parent” refer to Exelis Inc., an Indiana corporation, and its consolidated subsidiaries, unless the context otherwise requires.

SPIN-OFF FROM EXELIS

On December 11, 2013, Exelis announced a plan to separate its military and government services business from the remainder of its businesses through a pro rata distribution of all of the outstanding Vectrus common stock to its shareholders.

The distribution of our common stock to Exelis shareholders is conditioned on, among other things, final approval of the distribution plan by the Exelis Board of Directors; the receipt of an opinion of tax counsel to the effect that the spin-off will qualify as a tax-free distribution under Section 355 of the Code; and the U.S. Securities and Exchange Commission, or the SEC, declaring effective our Registration Statement on Form 10, of which this information statement forms a part. Immediately following the distribution, Exelis will not own any of our outstanding common stock, and we will have entered into a Distribution Agreement and will enter into several other agreements with Exelis for the purpose of allocating between us and Exelis various assets, liabilities, rights and obligations (including employee benefits, insurance and tax-related assets and liabilities). These agreements will also include arrangements with respect to transitional services to be provided by Exelis to us.

Subsequent to the distribution, we expect to incur one-time expenditures consisting primarily of employee-related costs, costs to start up certain stand-alone functions and information technology systems, and other one-time transaction related costs. Recurring stand-alone costs include establishing the internal audit, treasury, investor relations, tax and corporate secretary functions as well as the annual expenses associated with running an independent publicly traded company including listing fees, compensation of non-employee directors and related Board of Director fees, and other fees and expenses related to insurance, legal and external audit. Recurring stand-alone costs that differ from historical allocations may have an impact on profitability and operating cash flows but we believe the impact will not be significant. As a stand-alone public company, we do

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not expect our recurring stand-alone corporate costs to be materially higher than the expenses historically allocated to us from Exelis. We believe our cash flow from operations will be sufficient to fund our corporate expenses.

EXECUTIVE SUMMARY

We are a leading provider of infrastructure asset management, logistics and supply chain management, and information technology and network communication services to the U.S. government worldwide. Our services include operations, maintenance, management, engineering and sustainment for physical assets including a wide variety of facilities, information technology, network and communication systems, vehicles and equipment. We have a proven history of deploying resources rapidly and with precision to support the mission success of our customers. Leveraging a history of more than 50 years, we provide global service solutions in 18 countries across four continents in both stable and unstable environments.

We operate in a single segment and offer services in three major capability areas: infrastructure asset management, logistics and supply chain management, and information technology and network communication services. Our infrastructure asset management services support the U.S. Army, Air Force, and Navy, and include infrastructure services, security, warehouse management and distribution, ammunition management, military base maintenance and operations, communications, emergency services, transportation, and life support activities at a number of critical global military installations. Our logistics and supply chain management services support and maintain the vehicle and equipment stocks of the U.S. Army and Marine Corps. Our information technology and network communication capabilities consist of operation and maintenance of communications systems, network security, systems installation, and full life cycle management of information technology systems for the U.S. Army, Air Force and Navy.

Vectrus reported revenue of $617 million for the six months ended June 30, 2014, a decrease of approximately 26.1% from $835 million reported for the six months ended June 30, 2013. This decrease was driven primarily by lower program activity in Afghanistan as a result of U.S. troop withdrawals. Operating income for the six months ended June 30, 2014 was $27 million, reflecting a decrease of approximately $50 million or 64.9% compared to the corresponding prior year period due to lower revenue in the six months ended June 30, 2014 and a favorable contract modification that occurred in the six months ended June 30, 2013.

Vectrus reported revenue of $1.5 billion for the fiscal year ended December 31, 2013, a decrease of approximately 17.3% from $1.8 billion reported for the fiscal year ended December 31, 2012. This decrease was driven primarily by lower program activity in Iraq and Afghanistan as a result of U.S. troop withdrawals. Despite lower revenue in 2013, our operating margin was 8.7% and operating income was $131 million, which is an increase of approximately $21 million or 19.1% as compared to the operating income reported in 2012, due to operational efficiencies and favorable contract modifications on certain Middle East and Afghanistan programs.

KEY PERFORMANCE AND NON-GAAP MEASURES

Key Performance Measures

The primary financial performance measures Vectrus uses to manage its businesses and monitor results of operations are revenue trends and operating income trends. Management believes that these financial performance measures are the primary drivers for Vectrus’s earnings and net cash from operating activities. Operating income represents revenue less both cost of revenue and selling, general and administrative expenses. We define operating margin as operating income as a percentage of revenue. Cost of revenue consists of labor, subcontracting costs, materials, and an allocation of indirect costs, which includes service center transaction costs. Selling, general and administrative expenses consists of indirect labor costs (including wages and salaries

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for executives and administrative personnel), bid and proposal expenses, and other general and administrative expenses not allocated to cost of revenue.

We manage the nature and amount of costs at the contract level, which forms the basis for estimating our total costs and profitability for a specific contract. Management evaluates its contracts and business performance by focusing on revenue, operating income and operating margin, and not by type or amount of operating expense. As a result, our discussion of results of operations focuses on revenue, operating income and operating margin. This is consistent with our approach for managing our business, which begins with management’s approach for assessing the bidding opportunity for each contract and then managing contract profitability throughout the performance period.

Revenue Trends. For the five year period ending on December 31, 2013, revenue increased $434 million, or 40%, from $1,078 million for the year ended December 31, 2009. The increase relates largely to significant contract wins in 2010 and 2011 (Kuwait Base Operations and Security Support Services (K-BOSSS), Kuwait based Army Prepositioned Stocks-5 (APS-5 Kuwait), Afghanistan National Security Forces (ANSF), and Logistics Civilian Augmentation Program (LOGCAP)) in the Middle East and Afghanistan related mostly to wartime activity. For the year ended December 31, 2011, revenue increased $674 million from the year ended December 31, 2010 due primarily to these new business wins. For the year ended December 31, 2013, however, revenue declined compared to the year ended December 31, 2012 period by $316 million, driven mainly by troop withdrawals in Iraq, a reduced U.S. presence in Afghanistan and defense spending reductions. In May 2014, the Administration announced its plan to steadily withdraw U.S. forces in Afghanistan by 2016, with only a normal embassy presence remaining, as described below. We expect this reduction in U.S. force levels will result in a material reduction in our revenue for the years ended December 31, 2014, 2015 and 2016 as compared to the year ended December 31, 2013 and prior periods.

Operating Income Trends. For the five year period ending on December 31, 2013, total operating income more than doubled from $62 million in 2009 to $131 million in 2013, and operating margin improved by 2.9%. The increase is due to the increase in revenue volume related to the contract wins in 2010 and 2011 described above, operational efficiencies and favorable contract modifications on certain Middle East and Afghanistan programs. For the years ended December 31, 2014, 2015 and 2016, we expect total operating income to be significantly lower as compared to the year ended December 31, 2013 and prior periods due to the announced reduction in U.S. force levels in Afghanistan described below.

Outlook. U.S. funding for programs in Afghanistan has decreased in recent periods, and will likely continue to decrease as the U.S. government plans to reduce the U.S. presence in Afghanistan. In May 2014, the Administration announced its plan to steadily withdraw U.S. forces in Afghanistan by 2016, with only a normal embassy presence remaining. It is expected that the U.S. military will maintain a limited presence after the subsequent transition to the Afghan government. Our strategy to broaden our customer base and expand our geographic footprint is designed to help mitigate a reduction in revenue associated with decreased funding for programs in Afghanistan and decrease our dependence on the U.S. Army and Overseas Contingency Operations (OCO) funding. Additionally, we expect our strategic plans to increase the scope and value-add of our services within current services lines to drive enduring growth following the repositioning of the U.S. presence in the Middle East.

Non-GAAP Measure

In addition to the key performance measures discussed above, we consider adjusted net income to be useful to management and investors in evaluating our operating performance for the periods presented, and to provide a tool for evaluating our ongoing operations. Adjusted net income is 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. This information can assist investors in assessing our financial performance and measures our

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ability to generate capital for deployment among competing strategic alternatives and initiatives. Adjusted net income, however, is not a measure of financial performance under generally accepted accounting principles 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. A reconciliation of adjusted income from net income is provided below.

	Six Months Ended June				Years Ended December 31,
	2014		2013		2013		2012		2011
(In millions)
Net income	$	17	$	50	$	84	$	75	$	54
Separation costs, net of tax		4		—		1		—		—
Adjusted net income	$	21	$	50	$	85	$	75	$	54

KNOWN TRENDS AND UNCERTAINTIES

Economic Opportunities, Challenges, and Risks

The U.S. government’s investment in services and capabilities in response to evolving security challenges creates a complex and evolving business environment for Vectrus and other firms in this market segment. However, the DoD budget remains the largest in the world and we believe our addressable portion of the DoD budget exceeds $25 billion based on management estimates. We expect the U.S. government will continue to place a high priority on defense spending and national security, and will continue to invest in affordable solutions for its vast facilities, logistics, equipment and communication needs, which we believe aligns with our core capabilities and strengths. In addition, we believe we can address a larger portion of the U.S. government budget and expand our focus to other sectors of the U.S. government such as the Intelligence Community and other civilian agencies.

The enacted fiscal year 2014 budget provided $520.4 billion in discretionary funding for the combined defense and security categories of discretionary budget authority. The base DoD budget portion of that funding for fiscal year 2014 as set forth in the Defense Appropriations Bill was set at $486.6 billion, representing a decrease of $31.5 billion compared to the 2013 enacted level. With this budget, and projections going forward, the DoD noted that it will achieve $486.9 billion in savings by 2021. The largest share of the budget for 2014 was the operations and maintenance (O&M) category, which is the primary source of funding for our programs. The O&M portion of the budget for fiscal year 2014 was set at $193 billion with approximately $70 billion in overseas contingency operations (OCO) O&M spending. The portion of the O&M budget allocated to the Army was set at $41 billion for fiscal year 2014.

In March 2014, the DoD released its fiscal year 2015 budget proposal, with a total request of $524 billion in base funding. OCO funding for fiscal year 2015 is expected to be $60 billion out of an expected total DoD budget of $584 billion.

Although we anticipate reductions to certain programs in which we participate or for which we expect to compete, we believe spending on O&M of defense assets, as well as civilian agency infrastructure and equipment, will continue to be a U.S. government priority. We believe our portfolio of capabilities aligns well with U.S. government cost-saving initiatives that demand that users utilize existing equipment and infrastructure rather than executing new purchases and new infrastructure construction. Vectrus’s focus is on sustaining existing base and installed equipment, which we believe aligns with our customers’ intent. Many of the core functions Vectrus performs are mission-essential, such as: keeping communication networks operational; utilities operations and repair (such as electricity, gas and steam); and firefighting. While customers may reduce the level of service required, we believe elimination of these services is unlikely.

Our programs generally face declining revenue streams going forward, in particular with programs related to the support of ongoing operations in Afghanistan. Programs related specifically to the support of ongoing

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operations in Afghanistan are subject to changes in the level of U.S. commitment. In May 2014, the Administration announced its plan to steadily withdraw U.S. forces in Afghanistan by 2016, with only a normal embassy presence remaining. It is expected that the U.S. military will maintain a limited presence after the subsequent transition to the Afghan government. This expectation is reflected in our strategic business plan as well as in our efforts to win new business. We believe we are well positioned to address emerging opportunities in the United States and the Middle East and North Africa (MENA) region.

The future scope of these activities and pace of U.S. military drawdowns remain uncertain, pending disclosure of the U.S. government’s full drawdown plan. There has been particular uncertainty around the Administration’s statements and intentions regarding the future footprint in Afghanistan.

The pace and depth of U.S. government acquisition reform and cost savings initiatives, combined with increased industry competitiveness to win long-term positions on key programs, could add pressure to sales levels and profit margins going forward.

The information provided above does not represent a complete list of 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 under the caption “Risk Factors” and the matters identified under the caption “Special Note About Forward-Looking Statements” in this information statement.

DISCUSSION OF FINANCIAL RESULTS

Selected financial highlights are presented in the table below:

	Six Months Ended June 30,									Years Ended December 31,
	2014			2013			Change			2013			2012			Change
(In millions)
Revenue	$	617		$	835			(26.1	)%	$	1,512		$	1,828			(17.3	)%
Cost of revenue		552			713			(22.6	)%		1,297			1,636			(20.7	)%
% of revenue		89.5	%		85.4	%					85.8	%		89.5	%
Selling, general and administrative		38			45			(15.6	)%		84			82			2.4	%
% of revenue		6.2	%		5.4	%					5.6	%		4.5	%
Operating income		27			77			(64.9	)%		131			110			19.1	%
Operating margin		4.4	%		9.2	%					8.7	%		6.0	%
Income tax expense		10			27			(63.0	)%		47			35			34.3	%
Effective income tax rate		35.7	%		35.8	%					35.9	%		31.8	%
Net Income	$	17		$	50			(66.0	)%	$	84		$	75			12.0	%

Six months ended June 30, 2014 compared to six months ended June 30, 2013

Revenue

Revenue for the six months ended June 30, 2014 was $617 million, reflecting a decrease of $218 million or 26.1% as compared to the same prior year period. The decline in revenue was attributable mainly to lower activity in Middle East and Afghanistan based programs. Middle East based programs experienced revenue declines of $112 million as a result of base closures on K-BOSSS as the U.S. government consolidated contracting activity and reduced maintenance requirements on APS-5 Kuwait as equipment was placed in storage due to reduced equipment requirements in-theater as the U.S. Government continues to reduce troop levels in the Middle East. Programs with contract activity in Afghanistan experienced declines of approximately $105 million as maintenance responsibility was transferred to local Afghans on certain contracts and facility service levels were reduced, to align to changing U.S. government priorities in Afghanistan.

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Cost of Revenue

The decrease in cost of revenue of $161 million or 22.6% for the six months ended June 30, 2014 as compared to the same period in 2013 was primarily due to lower sales as described above. The cost of revenue as a percentage of revenue increased due to declining leverage of certain program costs as a result of lower revenue in our Middle East and Afghanistan based programs.

Selling, General & Administrative (SG&A) Expenses

For the six months ended June 30, 2014, SG&A expenses of $38 million decreased by 15.6% as compared to $45 million for the six months ended June 30, 2013. The decrease was driven by cost reductions implemented during 2013 to align costs with revenue declines. Local cost reductions include the administrative office closure in Doha, Qatar and additional indirect staff reductions based in Colorado Springs as we implemented a leaner headquarters operating model, which was partially offset by higher general corporate expenses incurred in connection with costs to start up certain stand-alone functions in connection with the spin-off.

Operating Income

Operating income for the six months ended June 30, 2014 decreased by $50 million or 64.9% as compared to the six months ended June 30, 2013. Operating income as a percentage of revenue was 4.4% for the six months ended June 30, 2014, compared to 9.2% for the six months ended June 30, 2013. The decrease in operating margin was due primarily to positive non-recurring modifications on Afghanistan based programs during the six months ended June 30, 2013. The contract modifications related primarily to final pricing and fee negotiations with the customer for contracts with open years from 2011 through 2013 which resulted in a positive adjustment to revenue in the first half of 2013.

During the performance of long-term sales 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 revenue, 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 six months ended June 30, 2014, net cumulative catch-up adjustments related to prior periods did not increase operating income, as compared to an increase of approximately $26 million for the six months ended June 30, 2013. For the six months ended June 30, 2013, four contracts accounted for 84% of the net favorable cumulative catch-up adjustment.

Income Tax Expense

We recorded income tax expense of $10 million and $27 million for the six months ended June 30, 2014 and 2013, respectively, which represented effective income tax rates of 35.7% and 35.8%, respectively. The decrease in the six months effective income tax rate was due primarily to a one time non-deductible charge from the former parent of Exelis relating to the Company’s share of tax from an IRS examination settlement.

Year ended December 31, 2013 compared to year ended December 31, 2012

Revenue

Revenue for the year ended December 31, 2013 was $1,512 million, reflecting a decrease of $316 million or 17.3% as compared to 2012. The decline in revenue was mainly attributable to lower activity in Middle East based programs, with a decrease of $136 million as a result of base closures on K-BOSSS as the U.S. government consolidated contracting activity, and reduced maintenance requirements on APS-5 Kuwait as equipment was placed in storage due to reduced equipment requirements in-theater as the U.S. Government continues to reduce troop levels in the Middle East and Afghanistan. Programs with contract activity in Afghanistan experienced declines of $112 million as maintenance responsibility was returned to local Afghans

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on certain contracts and facility service levels were reduced aligning to changing U.S. government priorities in Afghanistan. Revenue from domestic contracts declined $31 million related primarily to the completion of the Fort Bragg contract and general customer service level reductions across remaining domestic programs. Europe based programs declined $37 million driven primarily by a change to the labor structure on the Kaiserslautern contract, which reduced overall staffing levels and the contract value.

Cost of Revenue

The decrease in cost of revenue of $339 million or 20.7% was due primarily to lower sales as described above and operational efficiencies on Middle Eastern and Afghanistan based programs. Operational efficiencies related primarily to in-sourcing or reducing the overall level of effort related to subcontract labor. Additionally, on mature programs we were able to reduce the amount of administrative costs required to run and manage our long-term contracts. We expect the cost savings from the operational efficiencies to remain at 2013 levels on existing programs and to translate into lower future revenue and profit in future periods as current contracts come up for re-competition. The cost of revenue as a percent of revenue decreased due to the operational efficiencies on our Middle Eastern and Afghanistan based programs.

Selling, General & Administrative (SG&A) Expenses

For the year ended December 31, 2013, SG&A expenses of $84 million increased by 2.4% compared to $82 million for the year ended December 31, 2012. The increase was driven by an increase in general corporate expenses of $4 million which was offset by partial year savings of $2 million as a result of local cost reductions implemented during 2013 to align costs with revenue declines. Local cost reductions include the administrative office closure in Doha, Qatar and additional indirect staff reductions based in Colorado Springs as we implemented a leaner headquarters operating model.

Operating Income

Operating income in 2013 increased by $21 million or 19.1% as compared with 2012, and operating income as a percentage of revenue was 8.7%, compared to 6.0% in 2012. The increase in operating income and margin is due primarily to operational efficiencies (noted above) and positive non-recurring contract modifications on Afghanistan based programs of approximately $16 million. The contract modifications related primarily to final pricing and fee negotiations with the customer for contracts with open years from 2011 through 2013 which resulted in a positive adjustment to revenue.

Income Tax Expense

The Company recorded income tax expense of $47 million and $35 million in 2013 and 2012, respectively, which represents effective income tax rates of 35.9% and 31.8%, respectively. The year-over-year increase in the effective income tax rate was due primarily to a non-recurring benefit in 2012 from the cumulative impact of a reduction in the state effective income tax rate.

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Year Ended December 31, 2012 compared to year ended December 31, 2011

	Years Ended December 31,
	2012			2011			Change
(In millions)
Revenue	$	1,828		$	1,806			1.2	%
Cost of revenue		1,636			1,648			(0.7	)%
% of revenue		89.5	%		91.3	%
Selling, general and administrative		82			71			15.5	%
% of revenue		4.5	%		3.9	%
Operating income		110			87			26.4	%
Operating margin		6.0	%		4.8	%
Income tax expense		35			33			6.1	%
Effective income tax rate		31.8	%		37.9	%
Net Income	$	75		$	54			38.9	%

Revenue

Revenue for the year ended December 31, 2012 was $1,828 million, reflecting an increase of $22 million or 1.2% as compared to 2011. Programs with contract activity in Afghanistan experienced increases of $142 million as the U.S. government increased personnel in Afghanistan. This was partially offset by a decline of $114 million in Middle East based programs due to U.S. government priorities shifting away from Iraq.

Cost of Revenue

The decrease in cost of revenue of $12 million or 0.7% was due primarily to lower service levels on Middle East based programs offset by increased costs on Afghanistan based programs related to the revenue increase described above. The cost of revenue as a percent of revenue decreased due primarily to operational efficiencies and favorable contract modifications on certain programs based in Afghanistan. Operational efficiencies relate primarily to decreased staffing levels in 2012 and declines in subcontract costs as we in-sourced additional work. In certain circumstances, pricing for contract elements, or contract line items, is finalized during or after work commences on the specified activity. In 2012, we had a contract with open elements related to performance in 2011 and 2012. The final fee and pricing negotiations were resolved favorably in 2012.

Selling, General & Administrative (SG&A) Expenses

For the year ended December 31, 2012, SG&A expenses of $82 million increased by 15.5% compared to $71 million for the year ended December 31, 2011. The increase was driven primarily by an increase of $4.0 million in general corporate expenses and $4.3 million in additional compliance costs for legal, contracts and accounting to support increased overseas program administration and compliance requirements.

Operating Income

Operating income increased by $23 million or 26.4% for the year ended December 31, 2012 compared to 2011, and operating income as a percentage of revenue was 6.0%, compared to 4.8% in 2011. The increase in operating income and margin is due primarily to income associated with Afghanistan revenue increases of $15 million and increased operational efficiency on Afghanistan programs for $14 million. This was partially offset by income declines associated with a decrease in revenue on Middle East based programs.

Income Tax Expense

The Company recorded income tax expense of $35 million and $33 million in 2012 and 2011, respectively, which represents effective income tax rates of 31.8% and 37.9%, respectively. The year-over-year decrease in the effective income tax rate was due primarily to a non-recurring benefit in 2012 from the cumulative impact of a reduction in the state effective income tax rate.

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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. The level of order activity related to DoD 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.

We expect to recognize a substantial portion of our funded backlog as revenue within the next 12 months. However, the U.S. government may cancel any contract at any time through a termination for convenience. Most of our contracts have terms that would permit us to recover all or a portion of our incurred costs and fees for work performed in the event of a termination for convenience.

Funded orders received decreased approximately $189 million to $466 million during the six months ended June 30, 2014 as compared to the same period in 2013 primarily due to the timing of several large funded awards received in the six months ended June 30, 2013 on our Middle East and Afghanistan based programs. Total backlog decreased by $510 million in the six months ended June 30, 2014 due primarily to certain Middle East and Afghanistan programs won in 2010 and 2011 nearing the end of their five year period of performance contract life cycle. As of December 31, 2013, total backlog (funded and unfunded) was $2.9 billion compared with $3.4 billion as of December 31, 2012.

	As of June 30,		Years Ended December 31,
	2014		2013		2012
(In millions)
Funded backlog	$	507	$	647	$	425
Unfunded backlog		1,852		2,222		2,998
Total backlog	$	2,359	$	2,869	$	3,423

LIQUIDITY AND CAPITAL RESOURCES

Current liquidity

Historically, we have generated operating cash flow sufficient to fund our working capital, capital expenditure and financing requirements. Subsequent to the spin-off, while our ability to forecast future cash flows is more limited, we expect to fund our ongoing working capital, capital expenditure and financing requirements through cash flows from operations via access to cash on hand, as well as through access to credit and capital markets.

If our cash flows from operations are less than we expect, we may need to incur debt or issue equity. From time to time we may need to access the long-term or short-term capital markets to obtain financing. Although we believe that the arrangements in place at the time of the spin-off 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 financing markets, and (iii) the state of the economy at the relevant time. We cannot provide assurance that such financing will be available to us on acceptable terms or that such financing will be available at all.

The majority of our operations participate in U.S. and international cash management and funding arrangements run by Exelis where cash is swept from our bank accounts periodically and cash to meet our operating and investing needs is provided as needed from Exelis. Transfers of cash both to and from Exelis in connection with these arrangements are reflected as a component of “Parent company investment” within “Parent company equity” in the combined balance sheets. The cash presented on our balance sheet consists primarily of U.S. and international cash from subsidiaries that do not participate in these arrangements.

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Future liquidity

On a recurring basis, our primary future cash needs will be centered on operating activities, working capital, and strategic investments. Our ability to fund these needs will depend, in part, on our ability to generate or raise cash in the future, which is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control.

Following our spin-off from Exelis, our capital structure and sources of liquidity will change significantly from our historical capital structure and sources of liquidity. We will no longer participate in cash management and funding arrangements with Exelis. Instead, our ability to fund our capital needs will depend on our ongoing ability to generate cash from operations, and access to credit and capital markets. We believe that our future cash from operations together with our access to funds on hand and credit and capital markets will provide adequate resources to fund our operating and financing needs.

We expect to have approximately $140 million of indebtedness under a five-year senior secured term facility, or the term facility, at the time of the spin-off. In addition, we expect to have a five-year senior secured revolving facility, or the revolving facility, permitting borrowings of up to $75 million. We refer to the term facility and the revolving facility collectively as the senior secured credit facilities. The interest rate for borrowings under the senior secured credit facilities is expected to be based, at the option of the borrower, on LIBOR, plus a spread, or a base rate, plus a spread, subject to a leverage-based pricing grid in each case. We anticipate that the credit agreement that we will enter into in connection with the senior secured credit facilities will contain financial and/or other restrictive covenants. We expect such covenants will restrict our ability to sell assets, incur additional indebtedness, repay certain indebtedness, make certain investments or business acquisitions, engage in business mergers or consolidations and engage in certain transactions with subsidiaries and affiliates, among other things. In addition, the credit agreement will also require us to maintain compliance with certain financial ratios, including those related to earnings before interest, taxes, depreciation and amortization and consolidated indebtedness. See “Description of Material Indebtedness”.

In connection with the internal restructuring carried out by Exelis prior to the spin-off, Exelis and its subsidiaries (including us) will enter into a contribution agreement between Exelis Holdings Inc., a subsidiary of Exelis, and Exelis Systems Corporation (“ESC”), an entity that, following the restructuring and the spin-off, will be a subsidiary of ours. Pursuant to that agreement, one or more payments may be made following the spin-off by the applicable subsidiary to the other, totaling the difference between the determined actual level of working capital (including cash) of ESC and its subsidiaries prior to the spin-off as compared to a specified target working capital (including cash). Based on the financial position of ESC and its subsidiaries as of December 31, 2013 and June 30, 2014, we estimate that ESC would have been obligated to make one or more payments totaling $2 million or $17 million, respectively, if the working capital were measured as of such dates. This estimate is being provided for illustrative purposes only, and is not necessarily indicative of the financial position of Vectrus or Exelis, or the total working capital adjustment that would have occurred if the internal restructuring and spin-off had been consummated as of December 31, 2013, June 30, 2014 or as of any future date. Accordingly, the actual total working capital adjustment payment may differ materially from the estimate provided above.

Dividends

We do not currently plan to pay a regular dividend on our common stock following the spin-off. The declaration of any future cash dividends and, if declared, the amount of any such dividends, will be subject to our financial condition, earnings, capital requirements, financial covenants and other contractual restrictions and to the discretion of our Board of Directors. Our Board of Directors may take into account such matters as general business conditions, industry practice, our financial condition and performance, our future prospects, our cash needs and capital investment plans, income tax consequences, applicable law and such other factors as our Board of Directors may deem relevant.

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Sources and Uses of Liquidity

Our principal source of liquidity is our cash flow generated from operating activities, which provides us with the ability to meet the majority of our short-term funding requirements. The following table sets forth net cash provided by or used in operating activities, investing and financing activities for the six months ended June 30, 2014 and June 30, 2013, and the years ended December 31, 2013, 2012 and 2011.

Accounts receivable and unbilled receivables are the principal components of our working capital and are generally driven by our level of revenue with other short-term fluctuations related to payment practices by our customers and the timing of our billings. Our receivables reflect amounts billed to our customers, as well as the revenue that was recognized in the preceding month, which is normally billed the month following each balance sheet date.

The total amount of our accounts receivable can vary significantly over time and is sensitive to revenue levels and the timing of payments received from our customers. Our days sales outstanding (DSO), a metric used to monitor accounts receivable levels, typically range between 67 and 80 days. Our DSO was 71 and 67 days as of June 30, 2014 and December 31, 2013, respectively. The increase in DSO was primarily due to the timing of collection activities during the quarter ended June 30, 2014.

	Six Months Ended June 30,					Years Ended December 31,
	2014			2013		2013			2012			2011
(In millions)
Operating Activities	$	3		$	1	$	92		$	116		$	35
Investing Activities		(1	)		—		(2	)		(3	)		(3	)
Financing Activities		(2	)		4		(95	)		(114	)		(17	)
Foreign Exchange		(1	)		—		1			1			(2	)
Net change in cash and cash equivalents	$	(1	)	$	5	$	(4	)	$	—		$	13

Net cash provided by operating activities increased by $2 million for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 due to changes in accounts payable of $33 million, driven by the timing of payments to vendors, and compensation and other employee benefits of $8 million driven primarily by the lower costs associated with the revenue decline. Deferred taxes provided additional cash of $9 million. These favorable changes were substantially offset by lower net income of $33 million and an increase in accounts receivable of $16 million due to the favorable timing of payments in 2013 compared to 2014.

Net cash provided by operating activities decreased by $24 million in 2013 as compared to 2012 due primarily to changes in accounts payable of $62 million, changes in other liabilities of $41 million and changes in deferred taxes of $9 million, offset by increases in accounts receivable of $76 million and net income of $9 million.

Net cash provided by operating activities increased by $81 million in 2012 as compared to 2011 due primarily to changes in accounts receivable of $156 million, and net income of $21 million, offset by decreases of accounts payable of $67 million and deferred taxes of $49 million.

Net cash of $1 million was used in investing activities, primarily for capital expenditures, for the six months ended June 30, 2014. No cash was provided by or used in investing activities for the six months ended June 30, 2013.

Net cash used in investing activities was consistent in 2013, 2012 and 2011 at $2 million, $3 million and $3 million, respectively, for capital expenditures.

Changes in cash provided by and used in financing activities for the six months ended June 30, 2014 and the six months ended June 30, 2013, as well as for fiscal years 2013 to 2012 and 2012 to 2011 were due primarily to transfers to and from our parent, Exelis. The components of net transfers include: (i) cash deposits from the

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Company to Exelis, (ii) cash borrowings Exelis used to fund operations, capital expenditures or acquisitions, (iii) charges (benefits) for income taxes, and (iv) allocations of the corporate expenses of Exelis described in Note 10, “Related Party Transactions and Parent Company Equity,” in the Notes to Combined Financial Statements and in Note 8, “Related Party Transactions and Parent Company Equity,” in the Notes to the Condensed Combined Financial Statements (Unaudited).

Contractual Obligations

Our commitments to make future payments under long-term contractual obligations were as follows, as of June 30, 2014:

	Payments Due by Period
(In millions) Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating lease(1)	$	8	$	2	$	4	$	2		—
Total	$	8	$	2	$	4	$	2		—

(1) Refer to Note 8, “Leases and Rentals,” in the Notes to Combined Financial Statements, for further discussion of lease and rental agreements.

Off-Balance Sheet Arrangements

At December 31, 2013, we had no significant off-balance sheet arrangements other than operating leases. There have been no material changes to our operating leases at June 30, 2014.

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, liabilities, revenue and expenses, and the disclosure of contingent liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Significant accounting policies used in the preparation of the Combined Financial Statements are discussed in Note 1, “Description of Business and Summary of Significant Accounting Policies,” in the Notes to Combined Financial Statements. Accounting estimates and assumptions discussed in this section are those that we consider most critical to an understanding of our financial statements because they are inherently uncertain, involve significant judgments, include areas where different estimates reasonably could have been used, and changes in the estimate that are reasonably possible could materially impact the financial statements. 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.

Revenue Recognition

As a defense contractor engaging in long-term contracts, substantially all of our revenue is derived from long-term service contracts for which revenue is recognized under the percentage-of-completion method based on units of delivery or percentage of costs incurred to total costs. For units of delivery, revenue and profits are recognized based upon the ratio of actual units delivered to estimated total units to be delivered under the contract. Under the cost-to-total cost method, revenue is recognized based upon the ratio of costs incurred to estimated total costs at completion. Revenue under cost-reimbursement contracts is recorded as costs are incurred and includes estimated earned fees or profits calculated on the basis of the relationship between costs incurred and total estimated costs. Revenue and profits on time-and-material type contracts are recognized based on

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billable rates multiplied by direct labor hours incurred plus material and other reimbursable costs incurred. The completed contract method is utilized when reasonable and reliable cost estimates for a project cannot be made. Amounts invoiced to customers in excess of revenue recognized are recorded as deferred revenue, until the revenue recognition criteria are satisfied, and are recorded as advance payments and billings in excess of costs in the accompanying balance sheet. Revenue that is earned and recognized in excess of amounts invoiced is recorded as a component of receivables.

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. Additionally, the fees under certain contracts may be increased or decreased in accordance with cost or performance incentive provisions which measure actual performance against established targets or other criteria. Such incentive fee awards or penalties are included in revenue when there is sufficient information to reasonably assess anticipated contract performance. Amounts representing contract change orders, claims, requests for equitable adjustment, or limitations in funding on contracts are recorded only if it is probable the claim will result in additional contract revenue and the amounts can be reliably estimated. As of December 31, 2013, there were no material unapproved claims or unapproved change orders. Provisions for estimated losses on uncompleted long-term contracts are made in the period in which such losses are determined and are recorded as a component of cost of revenue. Contract revenue and cost estimates are reviewed and reassessed periodically. Changes in these estimates could result in recognition of cumulative catch-up adjustments to the contract’s inception to date revenue, cost of revenue and profit in the period in which such changes are made, based on a contract’s percent complete. Changes in revenue and cost estimates could also result in a forward loss or an adjustment to a forward loss. For the years ended December 31, 2013, 2012 and 2011 net favorable cumulative catch-up adjustments related to prior periods increased operating income by approximately $38 million, $11 million and $26 million, respectively. Two contracts accounted for 44%, 56% and 84% of the 2013, 2012 and 2011 net favorable cumulative catch-up adjustments.

Aggregate revenue from our four largest contracts was approximately $1.0 billion, or 69%, of our revenue for the year ended December 31, 2013. These contracts are as follows: Kuwait Base Operations and Security Support Services (K-BOSSS), performance commenced in February 2011 with a base period (eight months) and five option years with a contractual expiration date of September 2015 (to date the customer has exercised four option years); Operations, Maintenance and Defense of Army Communications in Southwest Asia and Central Asia (OMDAC-SWACA) performance commenced in July 2013 with a base year (11 months) and four option years with a contractual expiration date of May 2018 (to date the customer has exercised one option year); Logistics Civilian Augmentation Program (LOGCAP) is a subcontract basic ordering agreement with task orders awarded at the discretion of the prime contractor, and the basic ordering agreement period of performance expires in June 2018; and Kuwait based Army Prepositioned Stocks-5 (APS-5 Kuwait), performance commenced in March 2010 with a base year and four option years and a contractual expiration date of February 2015 (to date the customer has exercised four option years). Option exercises are at the sole discretion of the U.S. Government. Changes in contract revenue and cost estimates on these four contracts could result in significant cumulative catch-up adjustments to the contract’s inception to date revenue, cost of revenue and profit in the period in which such changes are made. Contract estimates are based on various assumptions to project the outcome of future events that often span several years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; and the performance of subcontractors. Due to the significance of judgment in the estimated final contract prices and costs, it is likely that materially different revenue, cost of revenue and profit amounts could be recorded if we used different assumptions, or if the underlying circumstances were to change. Changes in underlying assumptions/estimates, or other circumstances, may adversely or positively affect financial performance in future periods.

The cumulative catch-up adjustment for the year ended December 31, 2013 of $38 million relates to operational efficiencies and non-recurring contract modifications on Afghanistan and Middle East programs. Operational efficiencies relate primarily to cost savings from decreased staffing levels due to productivity improvements on maturing contracts, decreased subcontract work as we in-sourced work at reduced costs, and

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lower administrative support required to operate maturing contracts. We believe operational efficiencies achieved in 2013 will translate into lower future revenue and profit as current contracts come up for re-competition. Non-recurring contract modifications relate to one time favorable contract modifications. In certain circumstances pricing for contract elements, or contract line items, is finalized during or after work commences on the specified activity. We had two contracts with open contract elements in 2013 related to performance in 2011, 2012 and 2013. The uncertainties around final fee and pricing negotiations were resolved favorably in the second and third quarters of 2013. We no longer have open contract line item pricing on existing contracts and do not expect similar contract modifications on current contracts to occur in the future. This is consistent with our recent cumulative catch-up experience which resulted in only a de minimis favorable adjustment to the six month period ended June 30, 2014.

	Years Ended December 31,
Contract-Type	2013			2012			2011
Firm-Fixed-Price		28	%		25	%		24	%
Cost-Plus and Cost Reimbursable(a)		72	%		75	%		76	%
Total Revenue		100	%		100	%		100	%

(a) Includes time and material contracts. Revenue related to time and material contracts was not significant during the periods presented.

Income Taxes

Our income taxes as presented are calculated on a separate tax return basis, although our operations have historically been included in the U.S. Federal and state tax returns or non-U.S. jurisdictions tax returns of Exelis. The global tax model of Exelis has been developed based on its entire portfolio of businesses. Accordingly, our tax results as presented are not necessarily reflective of the tax results that we would have generated on a stand-alone basis.

We do not maintain taxes payable to or from our parent and we are deemed to settle the annual current tax balances immediately with the legal tax paying entities in the respective jurisdictions. These settlements are reflected as changes in parent company equity.

We determine the provision for income taxes using the asset and liability approach. Under this approach, deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates in effect for the year in which we expect the differences will reverse. Based on the evaluation of available evidence, we recognize future tax benefits, such as net operating loss carryforwards, to the extent that we believe it is more likely than not we will realize these benefits. We periodically assess the likelihood that we will be able to recover our deferred tax assets and reflect any changes to our estimate of the amount we are more likely than not to realize in the valuation allowance, with a corresponding adjustment to earnings or other comprehensive income (loss), as appropriate.

In assessing the need for a valuation allowance, we look to the future reversal of existing taxable temporary differences, taxable income in carryback years, the feasibility of tax planning strategies and estimated future taxable income. The valuation allowance can be affected by changes to tax laws, changes to statutory tax rates and changes to future taxable income estimates.

Our effective tax rate reflects the impact of certain undistributed foreign earnings for which we have not provided U.S. taxes because we plan to reinvest such earnings indefinitely outside the United States. We plan foreign earnings remittance amounts based on projected cash flow needs, as well as the working capital and long-term investment requirements of our foreign subsidiaries and our domestic operations. Based on these assumptions, we estimate the amount we will distribute to the United States and provide the U.S. Federal taxes due only on these amounts. Material changes in our estimates of cash, working capital and long-term investment

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requirements in the various jurisdictions in which we do business could impact our actual remittance amounts and, accordingly, our effective tax rate.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions across our global operations. We recognize potential liabilities and record tax liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. Furthermore, we recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

We adjust our liability for unrecognized tax benefits in light of changing facts and circumstances; however, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. If our estimate of tax liabilities proves to be less than the ultimate assessment, an additional tax expense would result. If a payment of these amounts ultimately proves to be less than the recorded amounts, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary to be provided.

Goodwill

We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. We review the carrying value of our finite-lived intangible assets for potential impairment when impairment indicators arise. We conduct our annual impairment test as of the first day of the fourth fiscal quarter. We perform a two-step impairment test for goodwill. In the first step, we compare the estimated fair value of the reporting unit to its carrying value. If the estimated fair value of the reporting unit exceeds the carrying value of the net assets assigned to the reporting unit, goodwill is not impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds its fair value, then we must perform the second step of the impairment test in order to measure the impairment loss to be recorded. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then we record an impairment loss equal to the difference. We estimate the fair value of our reporting unit and intangible assets with indefinite lives using an income approach. Under the income approach, we calculate fair value based on the present value of estimated future cash flows.

Determining the fair value of the reporting unit is judgmental in nature and involves the use of significant estimates and assumptions, particularly related to future operating results and cash flows. These estimates and assumptions include, but are not limited to, revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, assumed royalty rates, future economic and market conditions and identification of appropriate market comparable data. The fair value of our reporting unit is based on estimates and assumptions that are believed to be reasonable. Actual future results may differ from those estimates, and significant changes to these estimates and assumptions could adversely impact our conclusions.

Our 2013 annual goodwill impairment analysis indicated the estimated fair value of our reporting unit significantly exceeded their carrying value, and accordingly, no impairment charges were recorded. In order to evaluate the sensitivity of the fair value estimates on the goodwill impairment test, we applied a hypothetical 100 basis point increase to the discount rates utilized, a ten percent reduction in expected future cash flows, and reduced the assumed future growth rates of the reporting unit to zero. These hypothetical changes did not result in the reporting unit failing step one of the impairment test.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued final guidance on revenue recognition, which provides a single, comprehensive revenue recognition model for all contracts with customers,

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aimed at improving comparability within industries, across industries, and across capital markets. The new guidance contains principles, including a five step approach, that an entity will apply to determine the measurement and timing of revenue recognition which will require an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also requires additional disclosures intended to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and the related cash flows. The guidance is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with the cumulative effect of initial application of the guidance recognized in retained earnings (simplified transition method). Early adoption is not permitted. We are currently evaluating the potential impact of this guidance, but it could have a significant impact on the measurement and timing of revenue recognition, contract related asset and liability balances and financial statement disclosures.

The FASB recently issued final guidance aimed at reducing the frequency of disposals reported as discontinued operations by raising the threshold for a disposal to qualify as a discontinued operation, focusing on strategic shifts that have or will have a major effect on an entity’s operations and financial results. The guidance expands the disclosures for discontinued operations, but does not change the presentation requirements for discontinued operations in the income statement. The guidance is effective prospectively for annual periods beginning on or after December 15, 2014, with early adoption permitted, and would only apply to disposals completed subsequent to adoption. We will adopt this guidance on January 1, 2015.

Other new pronouncements issued but not effective until after June 30, 2014 are not expected to have a material impact on our financial position, results of operations or cash flows.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Vectrus has limited exposure to foreign currency exchange risk as the substantial majority of our business is conducted in U.S. dollars. As a business area within Exelis, Vectrus has not directly experienced exposure to the impacts of certain market risks, including those related to equity price risk and interest rate risk. In the future, we expect impacts from any changes in market conditions to be mitigated through our normal operating and financing activities.

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BUSINESS

Overview

We are a leading provider of infrastructure asset management, logistics and supply chain management, and information technology and network communication services to the U.S. government worldwide. Our services include operations, maintenance, management, engineering and sustainment for physical assets including a wide variety of facilities, information technology, network and communication systems, vehicles and equipment. We have a proven history of deploying resources rapidly and with precision to support the mission success of our customers. Leveraging a history of more than 50 years, we provide global service solutions in 18 countries across four continents in both stable and unstable environments. For the six months ended June 30, 2014 and the year ended December 31, 2013, we had revenue of $617 million and $1.5 billion, respectively, all of which was derived from U.S. government customers.

We operate in a single segment and offer services in three major capability areas: infrastructure asset management, logistics and supply chain management, and information technology and network communication services. Our infrastructure asset management services support the U.S. Army, Air Force, and Navy, and include infrastructure services, security, warehouse management and distribution, ammunition management, military base maintenance and operations, communications, emergency services, transportation, and life support activities at a number of critical global military installations. Our logistics and supply chain management services support and maintain the vehicle and equipment stocks of the U.S. Army and Marine Corps. Our information technology and network communication capabilities consist of operation and maintenance of communications systems, network security, systems installation, and full life cycle management of information technology systems for the U.S. Army, Air Force and Navy.

Our primary customer is the Department of Defense (DoD) with a high concentration in the U.S. Army. For the year ended December 31, 2013, we generated approximately 92% of our total revenue from the U.S. Army. We added our first U.S. Marine Corps contract in 2013. We attribute the strength of our customer relationships to our focus on operational performance, global responsiveness and cost efficiencies, as well as our core values of integrity, respect and responsibility.

We employ approximately 6,800 people and engage more than 7,250 subcontractor personnel around the world. This includes an experienced management team with an average of 28 years of experience in the military, industry, and a wide range of U.S. government entities. Our management team has a proven track record of winning new contracts, driving premier operating efficiency, and managing all aspects of the demanding compliance culture required to do business with the U.S. government in the United States and abroad. We are also a leading employer of veterans with more than 30% of our employees reporting a military background, and we have been recognized a number of times in recent years by veteran-focused organizations as a military-friendly employer.

Our Strengths

With a deep understanding of our customers’ needs and missions, we create value through operational excellence, delivering superior program performance and by providing compelling and differentiated value added services. Our core strengths include:

• Proven Strong Performance and Enduring Relationships. We have long, enduring relationships with strategically essential government customers, including some that have lasted for more than 30 years, and a sustained track record of repeat awards for our key contracts and winning new contracts. We believe our success and the continuity of demand for our services are due to our deep understanding of our customers’ needs as well as their trust and confidence in our ability to respond quickly and deliver specific expertise on a cost efficient basis. Independent reports from customers typically rate our company at the highest levels for technical expertise, responsiveness, quality control,

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cost control, and management capability. We were the prime contractor on 85% of our revenue for the year ended December 31, 2013. Our strong customer relationships and close proximity enable us to develop deep customer knowledge and translate our mission understanding into successful program execution and continued demand for our services.

• Rapid and Agile Global Operating Capabilities. For more than 50 years, we have consistently demonstrated our ability to quickly and efficiently respond to customer requirements anywhere in the world serving critical and enduring national security needs. We excel at providing services for our customers in any location from the United States to Europe to remote locations in the Middle East and Afghanistan. Our contracts require quick start-up in complex locations for customer missions that cannot be disrupted. We respond effectively and rapidly with qualified personnel and effective management systems, as well as the necessary tools, equipment, and supplies for full service functionality. This expeditionary posture demonstrates our aptitude at interpreting and complying with varied, complex, changing and often unpredictable requirements of foreign laws and business environments. We leverage our network of in-house and local counsel to monitor and control compliance risk, which we believe gives us a competitive advantage in our market segment.

• Attractive Business Dynamics. We have a highly variable cost structure, allowing our company significant flexibility to adapt to changing market conditions and contract structures. We are able to manage and perform both cost-reimbursable and firm-fixed-price contracts, as well contracts that include elements of both these contract types, which are increasingly common. Several contracts have been won under low price-technically acceptable terms, and are profitable, demonstrating our insightful bid strategy as well as outstanding operational capability. Over the past three years, our capital expenditures and working capital as a percentage of total revenue has averaged 0.16% and 5.2%, respectively. Combined with our low fixed cost structure, this provides us with a substantial degree of operating and financial flexibility.

• Integrated Service Offerings. We provide a full spectrum of support and an efficient single point of responsibility for our customers, and we regularly combine the components across our main service offerings, or within each offering, to create a customer value proposition. The integration of these capabilities facilitates our ability to act as the prime contractor more often, makes us more cost competitive, creates more value for our stakeholders, and allows us to more effectively support our customers’ missions.

• Experienced Team with Deep Industry and Market Knowledge. Crucial to our success is the quality, training, commitment and experience of our workforce, which possesses a comprehensive understanding of the operating environment of our customers. Our hiring practices are honed to select the most qualified and best suited candidates for each assignment. Our workforce has deep technical expertise, including more than 3,000 technical certifications in the information technology (IT) area. Additionally, more than 35% of our workforce holds an active security clearance, which is required on many of our existing and future program opportunities. Members of our senior management team, which is led by Kenneth Hunzeker who will serve as our Chief Executive Officer and President, have held a variety of senior leadership roles with a record of delivering customer solutions and, collectively, have an average of 28 years of relevant industry, military and government experience.

• Culture of Compliance and Certified Processes. At the time of our spin-off from Exelis, we expect that our business systems will have been approved by the U.S. government entities that audit contractors. We are disciplined in our approach to monitor and control compliance with U.S. government regulations reducing legal and reputational risk, which we believe gives us a competitive advantage in our market segment. We have stringent and proven processes for management, engineering, business development, technical support and services, and we strive to bring demonstrated and successful processes to every endeavor. We are certified to a number of recognized international benchmarks that require rigorous discipline to maintain the high standards of conformity. We hold certifications in areas including quality management system (ISO 9001), occupational health and safety management system (OHSAS 18001) and IT service management system (ISO 20000). In addition, we

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maintain a Capability Maturity Model Integration (CMMI) maturity level 3 appraisal for our network communication services.

Our Business Strategy

By delivering value to our customers through exceptional performance and cost efficiencies, we are positioned to continue to drive earnings and cash flow, and create value for our shareholders. Key components of our business strategy include:

• Expand Our Geographic Footprint. The drawdown of U.S. Forces from Afghanistan will result in the contraction of certain of our programs. We have realigned our resources to invest in new business opportunities in the United States, Middle East and North Africa (MENA) and the Pacific. We believe the ability to ramp up quickly, and then sustain a qualified workforce on large, complex programs will continue to be a differentiator for our company. This capability enables us to win contracts from existing and new customers, and we expect will enhance our market leadership position.

• Broaden Our Customer Base. We intend to leverage our leadership position in the Middle East with the U.S. Army to provide our full range of offerings to other U.S. government military and civil agencies in the United States and worldwide. We believe our core strengths of program performance and operational excellence, and our focus on the needs and missions of our customers, have allowed us to thrive with current customers and will translate to further growth with closely related new U.S. government customers.

• Capitalize on Essential Infrastructure Asset Management and Sustainment Services. We intend to continue to provide services to the U.S. government in light of its reliance on civilian contractors and its significant expenditures on the types of services we provide. The requirements we fill are essential to the basic operation of the mission of our customers. We will pursue opportunities that provide mission critical and enduring services, such as information technology support, rather than only optional upgrades or replacements.

• Extend, Deepen and Enhance Our Technical Capabilities. We expect to internally invest in our own capabilities as well as evaluate and pursue acquisitions on a strategic basis, with a view to adding capabilities that allow us to deliver an even higher value added and differentiated service.

Other Information

Vectrus was incorporated in the State of Indiana on February 4, 2014. Our headquarters are located in Colorado Springs, Colorado, at 655 Space Center Drive. Our telephone number is (719) 591-3600.

Our Business

We focus on three main service offerings in the technical services market segment in support of the U.S. government. Our main service offerings are infrastructure asset management, logistics and supply chain management, and information technology and network communication services. We are a global company with more than 50 years of experience operating in a wide range of conditions from modern, technologically advanced areas to austere, contingency-based locations. Our strategic agility is best demonstrated in the decades of experience and skill we acquired while achieving a global footprint. Primary geographic areas of operation include the Middle East (Kuwait, Qatar, and Bahrain), Central Asia (Afghanistan), Asia (Japan and Korea), Europe (Germany, the United Kingdom, Turkey, Italy, and Romania), the Caribbean, and the United States.

Infrastructure Asset Management

The infrastructure asset management services competency supports the U.S. Army, Air Force and Navy with enduring technical services. For the year ended December 31, 2013, contracts within the infrastructure asset management business had revenue of $956 million.

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The spectrum of services includes:

• Infrastructure Operations and Maintenance (O&M) Services: These services include technical and trades competencies in both the continental United States (CONUS) and outside continental United States (OCONUS), including contingency environments. Services also include curriculum and training program development in multiple languages to impart required skills to the local work force in accordance with western technical and OSHA standards.

• Security: Static and mobile security includes entry and exit points to U.S. and or coalition bases; installation security; residential security; personal security detachment (PSD) operations in contingency environments; and management of biometric screening, interviews, and security badging.

• Warehouse Management and Distribution: These services include warehousing operations; inventory control and supply support activity operations; container and cargo management and tracking; and material and vertical handling equipment.

• Ammunition Management: These services include inventory control, accountability and shelf-life management of all ammunition classes including ground and aviation ammunition; and ammunition supply point operations and security.

• Air Base Maintenance and Operations: These services include flight line operations and scheduling; runway maintenance and sweeping; base support facilities operations and maintenance services; and ramp and cargo operations.

• Communications: These services include classified and unclassified email, voice, voice over internet protocol services, video teleconferencing, help desk operations, data and information management and analysis, and electronic repair.

• Emergency Services: These services include U.S. and overseas military installation fire, medical, and emergency services operations and inspections.

• Transportation: These services include personnel and all classes of supply; shuttle bus services; operational movement of personnel and household goods and supplies; and movement control including passenger terminal support, aerial port and arrival/departure airfield control group.

• Life Support Activities: These services include mail and postal operations, housing management, morale, welfare, recreation services, and medical clinic operations.

Key contracts:

• Afghanistan National Security Forces. We operate two contracts with the U.S. Army Corps of Engineers that provide operations & maintenance (O&M) and training services to the Afghanistan National Police, Army and personnel country-wide. We operate and maintain critical infrastructure including power plant production, waste water treatment and potable water supply at multiple sites. Supporting tasks include procurement, stocking and warehousing of parts and materials; work order management; and training of Afghanistan public works employees in skills applicable to various trades to ultimately operate and maintain the extensive infrastructure constructed by the U.S. government.

• Kuwait Base Operations and Security Support Services. Our largest base operations support services contract is for Camp Arifjan, Kuwait, one of the largest bases in the U.S. Military, and involves more than 22 diverse functional support areas in multiple locations, ranging from medical services, postal and maintenance, to public works, transportation and emergency services.

• Maxwell Air Force Base Operations Support (Montgomery, Alabama). We operate and maintain the key facilities at the Air University, which provides the full spectrum of Air Force education, from pre-commissioning to the highest levels of professional military education such as the Air War College. We perform facility maintenance, air base and equipment maintenance, communication architecture support and minor construction.

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• Kaiserslautern Facilities Engineering (Germany). We have provided facility engineering services for the Kaiserslautern Military Community for 33 continuous years and are currently on contract through 2020. Work consists of maintenance and repair of installed building equipment, utility services, construction, and a number of ancillary support functions.

Logistics and Supply Chain Management

Vectrus’s logistics and supply chain management qualifications are deep and serve some of the U.S. Army’s most important and complex missions. We have supported the Army in both domestic and international environments, geographically ranging from the continental United States to the Middle East and Southwest Asia. The equipment stocks we maintain and repair number in the thousands, and are as diverse as fork lifts, night vision goggles, weapons, and combat vehicles. For the year ended December 31, 2013, contracts within the logistics and supply chain management business had revenue of $311 million.

Our logistics and supply chain management services offerings include:

• Equipment Maintenance, Repair and Services: These services include maintaining the Army’s vehicle and supporting equipment stocks, ranging from mine resistant armor protected vehicles to radios, generator sets and weapons. We have a record of innovation and new service development, using Lean Six Sigma capabilities to devise optimal methods to perform maintenance and repair on war-damaged vehicles.

• Care of Supplies in Storage: These services include warehousing, inspecting, servicing and maintaining large equipment sets in storage.

• Warehouse Management and Distribution: These services include maintaining, issuing and shipping military supplies for contingency and humanitarian missions.

• Supply Point Distribution: These services include the maintenance, storage and issuance of ammunition and retail fuel distribution.

• Transportation Support: These services include support for unit movements by both air and rail, containerized movement of equipment and supplies, personal property shipments and motor pool operations.

Key contracts:

• Army Pre-Positioned Stocks 5 (APS-5) Kuwait. Our company holds positions supporting the Army’s largest pre-positioned stocks stored and maintained in Kuwait. We receive, harvest from theatre, retrograde, inspect, repair, service, stock, and inventory a wide range of equipment. Additionally, we perform the task of warehousing for large and complex equipment sets. We also maintain, issue and ship military supplies to provide worldwide support to humanitarian and contingency mission efforts as required.

• Fort Rucker Logistics Support Services (Alabama). We provide multifaceted logistic services in support of the Logistics Readiness Center (LRC) for all ground equipment and soldiers on Fort Rucker and Eglin Air Force Bases. Work under this contract includes maintenance of communication and electronic equipment, vehicles and equipment, and weapons; supply functions for receipt and issue, fuel and ammunition; and transportation.

• Marine Corps Logistics Support Services. We provide support to the Marine Corps in the areas of distribution, supply chain, and storage services in support of Marine Corps and Navy operations from the Middle East, throughout the United States and the Pacific Rim. This includes logistics planning and the asset visibility system supporting the Marine Corps Logistics Command in the U.S. Central Command, U.S. Pacific Command and other DoD and non-DoD agencies.

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Information Technology and Network Communication Services

Since 1965, we have provided information technology support and services for the U.S. government worldwide communications and network systems. The operations and maintenance (O&M) category of support ranges from legacy World War II era and emerging communications systems in Europe to dynamic state-of-the-art communications systems in remote and hostile locations in Iraq and Afghanistan. We have demonstrated our capacity to effectively operate, maintain, supply, staff, sustain, and modernize a wide array of communications systems. Our information technology and network communication work is performed in Germany, Italy, Great Britain, Turkey, Kosovo, Kuwait, Afghanistan, Japan, Korea, Qatar, Oman, Bahrain, California, Colorado, Hawaii, Virginia and at sea. To support high standards and performance excellence in this area, our company is certified to the ISO 9001, ISO 20000 and CMMI standards and maintains important information assurance, network protection, project management and design credentials for operating in this business sector. For the year ended December 31, 2013, contracts within the information technology and network communication business had revenue of $245 million.

Our information technology and network communication capabilities consist of:

• Communications: These services include complete 24/7/365 communications systems O&M including systems administration, network administration, O&M of technical control facilities, secure and non-secure telephone switch operations, Voice Over Internet Protocol, multi-media networks, cabling and distribution infrastructure and video information systems. Our support also includes contingency and backup site operations.

• Management and Service Support: These services include full lifecycle management and service delivery support functions including preventative maintenance scheduling, material control (supply) functions, help desk support, training, electronic repair, logistics trend analysis, configuration control, project support agreements, technical reports, parts lists, site survey reports, systems as-built documentation, and computer-aided design and drafting.

• Network Security: These services include communications security responsible officer functions, information assurance, and data and information management and analysis.

• Systems Installation and Activation: These services include engineering and technical support to identify and define systems requirements, determine capabilities and delineate and define interfaces, protocols, required upgrades, installation/de-installation, testing, integration, modification, documentation, troubleshooting, and training pertaining to command, control, communications, computer, intelligence, information, surveillance, and reconnaissance (C4ISR) systems.

• Quality control functions for all operations.

Key contracts:

• Operations, Maintenance and Defense of Army Communications in Southwest Asia and Central Asia (OMDAC-SWACA). This contract is for the operation and maintenance of the Army’s largest communications network from locations in the Middle East. Technical support activities include satellite communications, earth station terminals, microwave link O&M, fiber and wire communications, local area network administration, wide area network administration, technical control facilities, defense messaging systems, defense red switch network, cable television, and other contingency requirements of the warfighter.

• Fleet Systems Engineering Team (FSET). We provide on-site technical and end-to-end systems engineering support for command, control, communications, computer and intelligence (C4I) systems for the U.S. Navy. FSET assures effective operations for all afloat and ashore C4I systems throughout the deployment cycle and provides systems engineering and technical support for rapid introduction of new capabilities into the fleet. Our engineers conduct on-site troubleshooting and maintenance assistance for problems that cross multiple C4I systems, provide over-the-shoulder training on C4I systems and technical processes crossing multiple C4I systems.

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• U.S. Air Forces Europe Communications Support Contract. We provide comprehensive communications O&M support to the U.S. Air Force Europe and Defense Information Systems Agency at manned and unmanned locations in Germany, the United Kingdom, Italy and Turkey. Additional support activities include wideband maintenance, inside cable plant installation and maintenance, emergency station power, network administration, materiel control, systems control, outside cable plant installation, maintenance control, local area network administration, telephone billing, information assurance and audio/video maintenance. All functions are provided on a 24/7/365 basis.

Customers

Our primary customer is the DoD. Our revenue from the U.S. government for the periods presented below was as follows:

	Years Ended December 31,
(In millions)	2013		2012		2011
Direct
DoD	$	1,512	$	1,826	$	1,610
Other U.S. Government		—	$	2	$	196
Total Revenue	$	1,512	$	1,828	$	1,806

Competition

Our competition aligns with our three core competencies: infrastructure asset management, logistics and supply chain management, and information technology and network communication services. Our principal competitors in the information technology and network communication sector include Lockheed Martin Corporation, Harris Corporation, Science Application International Corporation, and Computer Sciences Corporation. In the infrastructure asset management services sector, primary competitors are PAE Facilities Management, Delta Tucker Holdings, Inc. (Dyncorp), Fluor Corporation, KBR Inc., and URS Corporation. The logistics and supply chain management area shares some competitors with infrastructure asset management services, such as Dyncorp and URS Corporation, and also includes AECOM Technology Corporation. In recent periods the U.S. government has restricted certain work performed in the United States to small businesses, including the Alaska native companies from time to time. We team (as a subcontractor) with small businesses to participate in these opportunities.

Competitive bids for the work that Vectrus pursues are based on technical qualifications and corporate experience in performing contracts of similar size and scope, and are highly price sensitive. While not every contract is procured via selection of the lowest priced bidder, customers are sensitive to cost based on their budget allocations. Acquisition cycles are long (12 to 24 months) and contracts are enduring as they typically have a five-year performance cycle, with some extending to ten years.

The U.S. government customers have shown a strong preference for multiple award IDIQ contracts. These contracts offer awards to a large pool of contractors, followed by competition within the pool for individual programs via task orders under each IDIQ over the period of performance. Period of performance under IDIQ contracts follows the traditional 5 year performance cycle. The governing IDIQ contracts often have multi-billion dollar ceiling values.

There are typically fewer competitors in the overseas market segment of each of our core competencies. A primary strength of our company is its expeditionary nature that is grounded in the ability to recruit U.S. and international personnel with appropriate expertise, as well as navigate the logistical, legal, and other challenges of operating in multiple, challenging overseas locations. Our company holds a leading position in the overseas market providing services to the U.S. government.

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Our company’s success in gaining market share is founded in exceptional performance of current contracts, which is required as references for future work. Our company closely monitors overhead to foster highly competitive pricing and uses an in-house business development model both to manage the cost of sales and to identify informational advantages for future bids.

Employees

Integrity, respect and responsibility are our core values. We maintain rigorous compliance and other corporate responsibility programs that ensure a safe and secure work environment and compliance with government regulations, and allow employees to voice any concerns while knowing that matters raised will be appropriately addressed. Our company employs people of diverse backgrounds and we believe that our diversity enhances our creativity and enriches our work culture. We are committed to good corporate citizenship and intend to always maintain the trust and support of the communities in which our employees work and live.

As of December 31, 2013, our global workforce was comprised of approximately 6,800 employees and an additional 7,250 subcontracted workers, spanning 110 locations in 18 countries. Of the 6,800 employees, approximately 1,060 are represented under 15 collective bargaining agreements with labor unions. Nine of the 15 collective bargaining agreements are due to expire at various times throughout 2014 and 2015. After giving effect to the internal reorganization described under “The Spin-Off—Manner of Effecting the Spin-Off—Internal Reorganization,” we expect that approximately 930 of our employees will be represented under seven collective bargaining agreements with labor unions, with two of seven collective bargaining agreements due to expire prior to the end of 2015. We believe that relations with our employees are positive.

Seasonality

We do not consider any material portion of our business to be seasonal. Various factors can affect the distribution of our sales between accounting periods, including the timing of award, the availability of customer funding, product deliveries and customer acceptance.

Regulation

Companies are heavily regulated in the U.S. government markets we serve. We market our services to the DoD and equivalent foreign agencies, National Aeronautics and Space Administration (NASA), and intelligence and other civilian agencies. When working with U.S. agencies and entities, we comply with laws and regulations relating to the creation, administration and performance of contracts. Among other things, these laws and regulations:

• Require compliance with government standards for contract administration, accounting and management internal control systems;

• Define allowable and unallowable costs and otherwise govern our right to reimbursement under various flexibly priced U.S. government contracts;

• Require certification and disclosure of all cost and pricing data in connection with certain contract negotiations;

• Require us not to compete for, or to divest ourselves of work, if an organizational conflict of interest, as defined by these laws and regulations, related to such work exists and cannot be appropriately mitigated; and

• Restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

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U.S. government contracts generally are subject to the Federal Acquisition Regulation (FAR), which sets forth policies, procedures and requirements for the acquisition of goods and services by the U.S. government, agency-specific regulations that implement or supplement FAR, such as the DoD’s Defense Federal Acquisition Regulation Supplement and other applicable laws and regulations. These regulations impose a broad range of requirements, many of which are unique to government contracting, including various procurement, import and export, security, contract pricing and cost, contract termination and adjustment, and audit requirements. A contractor’s failure to comply with these regulations and requirements could result in reductions to the value of contracts, contract modifications or termination for cause, and the assessment of penalties and fines and lead to suspension or debarment from government contracting or subcontracting for a period of time. In addition, government contractors are also subject to routine audits and investigations by U.S. government agencies such as the Defense Contract Audit Agency (DCAA). These agencies review a contractor’s performance under its contracts, its cost structure and its compliance with applicable laws, regulations and standards. The DCAA also reviews the adequacy of and a contractor’s compliance with its internal control systems and policies, including the contractor’s accounting, purchasing, government property, estimating, and related business systems.

The U.S. government may revise its procurement practices or adopt new or revised contract rules and regulations at any time. In order to help ensure compliance with these complex laws and regulations, all of our employees are required to complete ethics training and other compliance training relevant to their respective positions.

We are subject to U.S. government laws, regulations and policies, including the International Traffic in Arms Regulations, the Foreign Corrupt Practices Act and the False Claims Act. When working overseas, we must comply not only with applicable U.S. laws and regulations, but also with foreign government laws, regulations and procurement policies and practices, which may differ from U.S. law, including regulations relating to import-export control, foreign tax considerations and anti-corruption.

Contracts

U.S. government programs generally are implemented by the award of individual contracts and subcontracts. Congress generally appropriates funds on a fiscal year basis even though a program may extend across several fiscal years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations. The contracts and subcontracts under a program generally are subject to termination for convenience or adjustment if appropriations for such programs are not available or if they change. The U.S. government is required to equitably adjust a contract price for additions to or reductions in scope or other changes that it directs.

Generally, the sales price elements for our contracts are firm-fixed-price, cost-plus or cost reimbursable. A firm-fixed-price type contract typically offers higher profit margin potential than a cost-plus type contract, which is commensurate with the greater levels of risk we assume on a firm-fixed-price type contract. Our company is principally a prime contractor on long-term, three-to ten-year contracts. We also have the responsiveness and depth to meet immediate customer needs through indefinite delivery, indefinite quantity (IDIQ) contracts and blanket purchase agreements.

On a firm-fixed-price type contract, we agree to perform the contractual statement of work for a predetermined sales price. Although a firm-fixed-price type contract generally permits us to retain profits if the total actual contract costs are less than the estimated contract costs, we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on the contract. Accounting for the sales on a firm-fixed-price type contract that is covered by contract accounting standards requires the preparation of estimates of (1) the total contract revenue, (2) the total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s statement of work, and (3) the measurement of progress towards completion. Adjustments to original estimates for a firm-fixed-price type contract’s revenue are often required as work progresses under a contract. Even though the overall scope of work

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required under the contract may not change, revenue can be adjusted as experience is gained and as efficiencies are realized.

On a cost-plus type contract, we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the contract’s fee arrangement up to predetermined funding levels determined by our customers. Cost-plus type contracts with award and incentive fee provisions are our primary variable contract fee arrangement. Award fees provide for a fee based on actual performance relative to contractually specified performance criteria. Incentive fees provide for a fee based on the relationship between total allowable and target cost. Most of our cost plus contracts also contain a firm-fixed fee element.

On most of our contracts there is a cost reimbursable element that captures consumable materials required for the program. Typically these costs do not bear fee. On cost-plus type contracts we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts. It is relatively common to have elements of firm-fixed-price, cost-plus and cost-reimbursable contracts on a single contract.

We believe we have a balanced mix of firm-fixed-price and cost-plus contracts, a diversified business base and an attractive customer profile with limited reliance on any single contract.

The table below presents the percentage of our total revenue generated from each contract-type for the years ended December 31, 2013, 2012 and 2011.

	Years Ended December 31,
Contract-Type	2013			2012			2011
Firm-Fixed-Price		28	%		25	%		24	%
Cost-Plus and Cost Reimbursable(a)		72	%		75	%		76	%
Total Revenue		100	%		100	%		100	%

(a) Includes time and material contracts.

Environmental

We are subject to Federal, state and local environmental protection laws and regulations, including those governing the management and disposal of hazardous substances, the cleanup of contaminated sites, and the maintenance of a safe and healthy workplace for our employees, contractors, and visitors. Environmental laws and regulations are subject to change, the nature of which is inherently unpredictable, and the timing of potential changes is uncertain. Environmental requirements are significant factors affecting all of our operations and we have established a comprehensive program to address compliance with applicable environmental requirements.

In order to assess the potential impact on our combined financial statements, we estimate the possible remediation costs that we could reasonably incur. Such estimates take into consideration the professional judgment of our environmental professionals and, in most cases, consultations with outside environmental specialists. We have provided for the estimated cost to complete remediation where we have determined that it is probable that we will incur such costs in the future to address the environmental impact at current or formerly owned operating facilities or at sites where we have been named a potentially responsible party (PRP) by the Environmental Protection Agency (EPA) or similarly designated by other environmental agencies. It is difficult to estimate the timing and ultimate amount of environmental cleanup costs to be incurred in the future due to the uncertainties regarding the extent of the required cleanup, the discovery and application of innovative remediation technologies, and the status of the law, regulations and their interpretations. At December 31, 2013, we had accrued $4 million related to environmental obligations.

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Properties

Our contract performance typically occurs on the government customer’s facility. We consider our corporate headquarters office located at 655 Space Center Drive, Colorado Springs, Colorado our only significant location. Our Colorado Springs office is leased and has 104,000 square feet. We consider the properties that we lease to be in good condition and generally suitable for the purposes for which they are used.

Legal Proceedings

We are party to or have property subject to claims and other legal proceedings, including employment related matters, matters in connection with our contracts and matters arising under provisions relating to the protection of the environment. For information regarding these matters see Note 11, “Commitments and Contingencies,” in the Notes to Combined Financial Statements. While we cannot predict the outcome of these matters with certainty, in the opinion of management, any liability arising from these matters will not have a material adverse effect on our financial position, results of operations or cash flows.

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MANAGEMENT

Our Executive Officers

The following table sets forth certain information as of August 26, 2014, concerning certain of our executive officers following the spin-off, including a five-year employment history and any directorships held in public companies. Following the spin-off, none of our executive officers will be affiliated with Exelis.

Name	Age		Position(s)
Kenneth W. Hunzeker		62	Chief Executive Officer and President
Theodore R. Wright		58	Executive Vice President and Chief Operating Officer
Matthew M. Klein		43	Senior Vice President and Chief Financial Officer
Janet L. Oliver		55	Senior Vice President, Business Development
Kelvin R. Coppock		62	Senior Vice President, Contracts
Charles A. Anderson		56	Senior Vice President, Programs
Michele L. Tyler		46	Senior Vice President, Chief Legal Officer and Corporate Secretary
Francis A. Peloso		45	Senior Vice President and Chief Human Resources Officer

Kenneth W. Hunzeker—Lieutenant General (Ret.) Kenneth W. Hunzeker will serve as our Chief Executive Officer and President. He currently serves as Executive Vice President, Exelis and President of the Mission Systems business. Mr. Hunzeker was formerly the President and General Manager of ITT Mission Systems, ITT Corporation. Mr. Hunzeker joined ITT Corporation in September 2010 as Vice President, Government Relations for ITT Defense and Information Solutions after 35 years of distinguished service in the U.S. Army, most recently serving as Deputy Commander, United States Forces—Iraq. He was appointed President of the Mission Systems business in April 2011. Mr. Hunzeker is responsible for the management and overall operation of all facilities and projects of the Mission Systems business. Mr. Hunzeker has more than 20 years of defense community experience in program management, strategy development and finance and has worked with key decision makers within the Army, Department of Defense, Office of Management and Budget, and Congress. Mr. Hunzeker holds a Bachelor’s degree from the U.S. Military Academy at West Point and two Master’s degrees. Mr. Hunzeker was selected to serve on our board of directors because of the perspective and experience he brings as Chief Executive Officer and President, his significant management and operational experience as a Lieutenant General with the U.S. Army, and his extensive background and leadership in the government services sector.

Theodore R. Wright—Mr. Wright will serve as our Executive Vice President and Chief Operating Officer. He currently serves as Executive Vice President and Chief Operating Officer of the Mission Systems business. Mr. Wright was formerly President and CEO of ACADEMI, a security, training and executive protection services provider to U.S. government and commercial clients, from June 2011 to March 2013, Mr. Wright was President of KBR North American Government and Defense, which provides logistics support, operations and maintenance, construction and design/build services to the U.S. military and civilian Federal government agencies, from September 2010 to June 2011, Mr. Wright was a member of the BAE Systems Technology Solutions and Services Division, which provides operations and maintenance, readiness and sustainment services for air, land, maritime, C4ISR and ground platforms, systems engineering and technical analysis for major weapons systems as well as stability operations support services for U.S. government and international customers, from September 2004 to September 2010 and President of BAE Systems Technology Solutions and Services Division from 2008 to 2010. Mr. Wright served as Vice President for the Systems Division of ITT Industries Inc. from 1995 to 2004. Mr. Wright had a distinguished 30 year military career serving in the U.S. Air Force and U.S. Air Force Reserve. Mr. Wright has a Bachelor’s degree from the University of Northern Colorado, and a Master’s degree from the University of Colorado, Boulder.

Matthew M. Klein—Mr. Klein will serve as our Senior Vice President and Chief Financial Officer. He is currently Vice President and Chief Financial Officer of the Mission Systems business and has served in this

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position since May 2011. Prior to being named to his current position, Mr. Klein was the Assistant Controller for ITT Electronic Systems, Communications Systems located in Fort Wayne, Indiana and was acting Assistant Controller for ITT Electronic Systems, Radar, Reconnaissance and Acoustic Systems in Van Nuys, CA. In addition, Mr. Klein served in the ITT internal audit department leading various audits for units worldwide. He joined ITT Corporation in 1996. He has a Bachelor’s degree from Indiana University in Bloomington, Indiana, and is a CPA.

Janet L. Oliver—Ms. Oliver will serve as our Senior Vice President, Business Development. She is currently Vice President and Director of Business Development of the Mission Systems business, a position she has held since she joined the Mission Systems business in 2009. She was Vice President and Director of the U.S. and Europe Programs from April 2011 to January 2012, a position that she held concurrently with her responsibilities as the Vice President and Director of Business Development. Ms. Oliver manages the full spectrum of the Mission Systems business for a wide variety of government customers including the U.S. Air Force Space Command, U.S. Army Network Enterprise Technology Command, U.S. Army Sustainment Command, U.S. Army Materiel Command, U.S. Army Corps of Engineers, NASA, U.S. Air Force Air Combat Command, and U.S. Department of State. Prior to joining the Mission Systems business in 2009, Ms. Oliver was Vice President of the Mission Support Services business line in Shaw Group’s Federal Division, serving U.S. government agencies including the Department of Defense, NASA, and the Department of Energy. Ms. Oliver served for nine years as Executive Vice President for Marketing & Business Development for a wholly owned subsidiary of Fluor Corporation (a part of Fluor Government Group). Ms. Oliver has a Bachelor’s and a Master’s degree in Russian from the University of Arizona.

Kelvin R. Coppock—Brigadier General (Ret.) Kelvin R. Coppock will serve as our Senior Vice President, Contracts. He is currently Vice President, Contracts, of the Missions Systems business. Prior to assuming his current position, Mr. Coppock was Division Operations Officer, Director and General Manager of the Communications and Information Systems Business Area of the Mission Systems business from 2005 to 2013. Mr. Coppock started with ITT Corporation in 2004 as the Director of Program Management at ITT Systems Division (now the Mission Systems business) where he was responsible for developing the Program Management Center of Excellence, standardizing management systems and functional processes, and leveraging best practices across our company. Mr. Coppock joined ITT Corporation following a 30-year career with the Air Force. Mr. Coppock holds a Bachelor of Science degree in Management from the United States Air Force Academy, a Master’s degree in Business Administration from the University of Montana, and a Master’s degree in National Security Studies from the Naval War College.

Charles A. Anderson—Major General (Ret.) Charles A. Anderson will serve as our Senior Vice President, Programs. He is currently the Businesses Area Vice President and General Manager of the Mission Systems business for all programs in and outside of the continental United States. He joined the Mission Systems business in November 2011 immediately following his retirement from the United States Army at the rank of Major General with nearly 32 years of service. Mr. Anderson served previously as the Vice President and General Manager of the Americas Programs of the Mission Systems business, which included logistics support services and base operations support services programs primarily in the United States. Mr. Anderson has a Bachelor of Science degree from the U.S. Military Academy at West Point, as well as Masters’ degrees in Strategic Studies from the U.S. Army War College, Business Administration from Long Island University, Physical Education from Indiana University, and Systems Management from the University of Southern California.

Michele L. Tyler—Ms. Tyler will serve as our Senior Vice President, Chief Legal Officer and Corporate Secretary. She is currently Vice President and General Counsel of the Mission Systems business. Ms. Tyler is responsible for all legal support for the Mission Systems business. Previously, she was Associate General Counsel, primarily responsible for labor and employment matters for the Mission Systems business. In addition to the legal function, Ms. Tyler is responsible for overseeing the Trade Compliance, Environmental, Safety & Health, Security, Facilities, and Ethics & Compliance departments of the Mission Systems business. Ms. Tyler joined ITT Mission Systems in January 2009 as Senior Counsel. Ms. Tyler was previously a Director at

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Fennemore Craig, PC, a full-service business law firm, headquartered in Phoenix, Arizona. Ms. Tyler received her law degree from the Georgetown University Law Center and a Bachelor of Science degree from Arizona State University.

Francis A. Peloso—Mr. Peloso will serve as our Senior Vice President and Chief Human Resources Officer. He is currently the Vice President and Director, Human Resources of the Mission Systems business. Appointed to this role in November 2010, Mr. Peloso is responsible for all Human Resources activities and strategies for the Mission Systems business. Mr. Peloso joined ITT Corporation in 2000 and has worked across a variety of business areas, including ITT Corporation’s World Headquarters, ITT Mission Systems, ITT Communications Systems, and ITT Electronic Systems. From April 2010 to November 2010, Mr. Peloso served as the West Coast Regional Director for the Electronic Systems Division of ITT Corporation. From June 2009 to April 2010, Mr. Peloso served as the Vice President and Director of Human Resources for the Communications Systems Division of ITT Corporation. Mr. Peloso has a Bachelor’s degree in Theology from Georgetown University and a Master’s degree in Business Administration from Fairfield University.

Our Board of Directors

The following table sets forth information with respect to those persons who are expected to serve on our Board of Directors following the spin-off. See “—Our Executive Officers” for Mr. Hunzeker’s biographical information. We are in the process of identifying additional individuals who will become directors following the spin-off.

Name	Age		Position(s)
Louis J. Giuliano		67	Non-Executive Chairman
Bradford J. Boston		60	Director
Mary L. Howell		62	Director
Kenneth W. Hunzeker		62	Director
William F. Murdy		72	Director
Melvin F. Parker		47	Director
Eric M. Pillmore		61	Director
Stephen L. Waechter		64	Director
Phillip C. Widman		60	Director

Louis J. Giuliano—Mr. Giuliano will serve as our Non-Executive Chairman. Mr. Giuliano currently serves as a senior advisor to The Carlyle Group. Mr. Giuliano retired as Chairman, CEO, and President of ITT Corporation in December 2004. Mr. Giuliano joined ITT Corporation in 1988 as vice president of Defense Operations and became president of ITT Defense and Electronics in 1991. Before joining ITT Corporation, Mr. Giuliano spent 20 years with Allied-Signal where he held numerous positions within the Aerospace Group. He is on the Board of Accudyne Industries, and is the Chairman of the Board of Meadowkirk Retreat Center. He is an active member of the CEO Forum and the Advisory Board for the Princeton University Faith and Work Initiative, and a founder of Workforce Ministries. Mr. Giuliano was named a governor of the U.S. Postal Service by President George W. Bush in November 2004. He was confirmed by the Senate in June 2005, for a term that expires in December 2014. He served as vice chairman of United States Post Office Board of Governors from February 2009 to January 2010, and as chairman of the United States Post Office Board of Governors from January 2010 until December 2011. Prior Board positions include Engelhard Corp., ServiceMaster, and JMC Steel Group. He is a graduate of Syracuse University with a Bachelor of Arts degree in chemistry and a Master’s of Business Administration. Mr. Giuliano was selected to serve on our board of directors because of his extensive background in management and finance and his experience as the former Chairman, CEO and President of ITT Corporation, a global diversified manufacturing company and former parent of Exelis.

Bradford J. Boston—Mr. Boston will serve as a Director. Mr. Boston is currently the President and Chief Executive Officer of NetNumber Inc., a provider of next-generation centralized addressing, routing and database

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solutions to the global communications industry. He was Senior Vice President of Global Government Solutions & Corporate Security Programs Office of Cisco Systems, Inc. from 2006 to 2012, where he was responsible for engineering, business development and advanced services groups in support of defense customers in the United States, NATO and elsewhere and led all Cybersecurity coordination efforts with various governments around the world. Before that, he was Chief Information Officer of Cisco Systems, Inc. from 2001 to 2006. He also held senior positions at Corio, Inc., Sabre Holdings Corporation, American Express Company and Visa International from 1993 to 2001. Mr. Boston currently serves on the Board of Directors of NetNumber Inc. and is Chairman of the Board of Directors of Aap3 Inc. He is also Chairman of the Compensation Committee and a member of the Audit Committee of Aap3 Inc. Mr. Boston received a Bachelor’s degree from the University of Illinois. Mr. Boston was selected to serve on our board of directors because he has extensive leadership and management experience in delivering technology solutions, including to defense industry customers, and has served in senior management positions at public and private companies.

Mary L. Howell—Ms. Howell will serve as a Director. Ms. Howell is currently the Chief Executive Officer of Howell Strategy Group, an international consulting firm. Previously, Ms. Howell served as Executive Vice President of Textron Inc. from 1995 until her retirement in 2009. She served as an officer of Textron Inc. for 24 years, serving on the Textron Management Committee for over 15 years. Ms. Howell currently serves on the Board of Directors of Esterline Corporation and serves on the Audit Committee and Strategy and Technology Committee. She also serves on the executive committee of the Board of the Atlantic Council as well as serving on the Board of the Philips Collection and chairing its Development Committee. In 2008, Ms. Howell received the Charles Ruch Semper Fidelis Award and in 2010 became an Honorary Marine. Ms. Howell received a Bachelor’s degree from the University of Massachusetts at Amherst. Ms. Howell was selected to serve on our board of directors because of her extensive management experience in the defense industry. Ms. Howell also has served as a Director of another public company that also serves government and defense customers.

William F. Murdy—Mr. Murdy will serve as a Director. Mr. Murdy has served as Chairman of the Thayer Hotel since April 2009 and as Chairman of the Thayer Leader Development Group since May 2010. Mr. Murdy retired as the Chairman of Comfort Systems USA, a provider of heating, ventilation, air conditioning installation and services in the commercial/industrial/institutional sector, in May 2014. From 2000 to 2011, Mr. Murdy was Chairman and Chief Executive Officer of Comfort Systems USA. Prior to that, he was President and Chief Executive Officer of Club Quarters, a membership hotel chain. From 1997 to 1999, he was Chairman, President, Chief Executive Officer and Co-Founder of LandCare USA, Inc., a leading commercial landscape and tree services company, which later merged with ServiceMaster. Mr. Murdy also held management positions in the investment sector, including as Managing General Partner of the Morgan Stanley Venture Capital Fund and President of its associated management company from 1981 to 1989. From 1974 to 1981 he served in a number of positions including Chief Operating Officer of Pacific Resources. He served in the United States Army from 1964 to 1974. Currently, Mr. Murdy serves on the Board of Directors, Audit Committee and is Chair of the Compensation Committee of UIL Holdings; the Board of Directors, Governance Committee and is Chair of the Compensation Committee of Kaiser Aluminum; the Board of Directors, the Compensation Committee and the Strategic Committee of LSB Industries, Inc., a manufacturing, marketing and engineering company; and is a civilian aide to the Secretary of the Army. He received a Bachelor’s degree from the U.S. Military Academy at West Point and a Master’s degree from Harvard Business School. Mr. Murdy was selected to serve on our board of directors because of his extensive management and leadership experience as Chairman and Chief Executive Officer of several public companies. Mr. Murdy has also served as a Director of other companies providing relevant experience.

Melvin F. Parker—Mr. Parker will serve as a Director. Mr. Parker is currently President of North America for the Brink’s Company, a major provider of armored transportation services in North America. Before joining Brink’s in 2012, Mr. Parker served as Vice President and General Manager of the North America Consumer and Small Business Division at Dell, Inc. from 2010 to 2012 and as Executive Director and General Manager of US Small Business – Small and Medium Business – Americas at Dell, Inc. from 2009 to 2010. From 1994 until 2009, he held numerous senior leadership roles at multiple Fortune 500 Companies, including PepsiCo., Corporate Express (Staples) and Newell Rubbermaid. Mr. Parker is a decorated combat veteran and graduate of

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the U.S. Army Ranger and Airborne School. He served with distinction in the 82nd Airborne Division at Fort Bragg, N.C. He currently serves as a director on the Board of the National Black MBA Association. He is also a member of the Executive Leadership Council and was named to the Savoy Top 100 Most Influential Blacks in Corporate America for 2012 and 2014. Mr. Parker received a Bachelor’s degree from the U.S. Military Academy at West Point. Mr. Parker was selected to serve on our board of directors because of his extensive management and leadership experience as a senior executive at a number of public companies.

Eric M. Pillmore—Mr. Pillmore will serve as a Director. From 2010 to July 2014, Mr. Pillmore served as senior advisor to the Center for Corporate Governance of Deloitte LLP, which provides board governance services to global clients. Mr. Pillmore was Senior Vice President of Corporate Governance of Tyco International Corporation from 2002 to 2007. Mr. Pillmore also held CFO positions at Multilink Technology Corporation, McData Corporation and General Instrument Corporation from 1996 to 2002. Before that, he spent 17 years with General Electric Company and four years as a naval officer. Mr. Pillmore is currently a Board member of Cardone Industries, Focus on the Family and the CEO Forum. He received a Bachelor’s degree from the University of New Mexico and an Executive MBA degree from Villanova University. Mr. Pillmore was selected to serve on our board of directors because of his extensive corporate governance and financial experience, which includes advising boards of private and public companies on corporate governance and serving as Chief Financial Officer of several companies.

Stephen L. Waechter—Mr. Waechter will serve as a Director. From 2008 to 2014, Mr. Waechter was Vice President of Business Operations and Chief Financial Officer of ARINC Incorporated, a provider of communications, engineering and integration solutions for commercial, defense and government customers worldwide. From 1999 to 2007, he was Executive Vice President and Chief Financial Officer of CACI International, Inc., one of the largest government information technology contractors. Before joining CACI, Mr. Waechter served as Chief Financial Officer for a number of high-technology companies including Government Technology Services, Inc., Vincam Human Resources, Inc. and Applied Bioscience International. Mr. Waechter’s early career includes 19 years at GE, where he finished as Vice President, Finance for GE Information Services. Mr. Waechter currently serves as Chair of the Audit Committee of Social & Scientific Systems, Inc., and is Chair of the Audit Committee and a member of the Executive Committee, Strategic Planning Committee and Nominating Committee of CareFirst, Inc. He is also a member of the Board of Trustees of Christian Brothers University and former Chair of the Finance Committee of Choral Arts Society of Washington, D.C. Mr. Waechter received a Bachelor’s degree from Christian Brothers College and a Master’s degree in business administration from Xavier University. Mr. Waechter was selected to serve on our board of directors because of his extensive financial and leadership experience as Chief Financial Officer of several government contractors. Mr. Waechter has also served as a Director and an audit committee member of several private companies.

Phillip C. Widman—Mr. Widman will serve as a Director. From 2002 to his retirement in 2013, Mr. Widman was Senior Vice President and Chief Financial Officer of Terex Corporation, a global manufacturer delivering customer-driven solutions for a wide range of commercial applications, including the construction, infrastructure, quarrying, mining, manufacturing, transportation, energy and utility industries. From 2001 to 2002, he was an independent consultant, and from 1998 to 2001, he served as Executive Vice President and Chief Financial Officer of Philip Services Corporation, an integrated environmental and industrial service corporation. Prior to joining Philip Services Corporation, Mr. Widman spent 11 years at Asea Brown Boveri Ltd. and 12 years at UNISYS Corporation in various financial and operational capacities. Mr. Widman currently serves as a director of Sturm, Ruger & Co., Inc, where he is the Chairman of the Audit Committee and a member of the Risk Oversight Committee, and as a director of Harsco Corporation, where he is a member of the Audit Committee. He was a director of Lubrizol Corporation from November 2008 until its acquisition by Berkshire Hathaway in September 2011, where he served as a member of the Nominating and Governance Committee and Chairman of the Audit Committee. Mr. Widman received a BBA from University of Michigan and an MBA from Eastern Michigan University. Mr. Widman was selected to serve on our board of directors because of his extensive financial and management background and his experience as a Chief Financial Officer and senior executive at

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several companies. Mr. Widman has also served as a Director of other public companies, including service as member and Chair of several audit committees.

Structure of the Board of Directors

Our Board of Directors will be divided into three classes that will be, as nearly as possible, of equal size. The initial terms of the Class I, Class II and Class III directors will expire at the annual meeting in each of 2015, 2016 and 2017, respectively, and in each case, when any successor has been duly elected and qualified. Upon the expiration of each initial term, directors will subsequently serve three-year terms if renominated and reelected. The proposed Class I directors will include Kenneth W. Hunzeker, Bradford J. Boston and Phillip C. Widman, the proposed Class II directors will include Louis J. Giuliano, Mary L. Howell and Eric M. Pillmore, and the proposed Class III directors will include William F. Murdy, Melvin F. Parker and Stephen L. Waechter.

Committees of the Board of Directors

Following the spin-off, the standing committees of our Board of Directors will include an Audit Committee, a Compensation and Personnel Committee and a Nominating and Governance Committee, each as further described below. Following our listing on the New York Stock Exchange and in accordance with the transition provisions of the rules of the New York Stock Exchange applicable to companies listing in conjunction with a spin-off transaction, each of these committees will, by the date required by the rules of the New York Stock Exchange, be composed exclusively of directors who are independent. Other committees may also be established by the Board of Directors from time to time.

Audit Committee. The members of the Audit Committee are expected to be Stephen L. Waechter (Chair), Mary L. Howell, Phillip C. Widman and William F. Murdy. The Audit Committee will have the responsibility, among other things, to meet periodically with management and with both our independent auditor and our internal auditor to review audit results and the adequacy of and compliance with our system of internal controls. In addition, the Audit Committee will appoint or discharge our independent auditor, and review and approve auditing services and permissible non-audit services to be provided by the independent auditor in order to evaluate the impact of undertaking such added services on the independence of the auditor. The responsibilities of the Audit Committee, which are anticipated to be substantially identical to the responsibilities of Exelis Audit Committee, will be more fully described in our Audit Committee charter. The Audit Committee charter will be posted on our website and will be available in print to any shareholder who requests it. Further, the Board of Directors has determined that Phillip C. Widman possesses accounting or related financial management expertise within the meaning of the New York Stock Exchange listing standards and that qualifies as an “audit committee financial expert” as defined under the applicable SEC rules.

Compensation and Personnel Committee. The members of the Compensation and Personnel Committee are expected to be Bradford J. Boston (Chair), Mary L. Howell, Phillip C. Widman and Melvin F. Parker. The Compensation and Personnel Committee will oversee all benefit programs, executive compensation and similar actions that affect our senior officers. The Compensation and Personnel Committee will also provide strategic direction for our overall compensation structure, policies and programs and will oversee and approve the succession planning process. The responsibilities of the Compensation and Personnel Committee, which are anticipated to be substantially identical to the responsibilities of the Compensation and Personnel Committee of Exelis, will be more fully described in the Compensation and Personnel Committee charter. The Compensation and Personnel Committee Charter will be posted on our website and will be available in print to any shareholder who requests it. Each member of the Compensation and Personnel Committee will be a non-employee director and there are no Compensation and Personnel Committee interlocks involving any of the projected members of the Compensation and Personnel Committee.

Nominating and Governance Committee. The members of the Nominating and Governance Committee are expected to be Eric Pillmore (Chair), William F. Murdy and Melvin F. Parker. The Nominating and Governance Committee will be responsible for developing and recommending to the Board of Directors criteria for identifying and evaluating director candidates; identifying, reviewing the qualifications of and proposing candidates for election to the Board of Directors; and assessing the contributions and independence of incumbent

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directors in determining whether to recommend them for reelection to the Board of Directors. The Nominating and Governance Committee will also review and recommend action to the Board of Directors on matters concerning transactions with related persons and matters involving corporate governance and, in general, oversee the evaluation of the Board of Directors. The responsibilities of the Nominating and Governance Committee, which are anticipated to be substantially identical to the responsibilities of the Nominating and Governance Committee of Exelis, will be more fully described in the Nominating and Governance Committee charter. The Nominating and Governance Committee charter will be posted on our website and will be available in print to any shareholder who requests it.

Director Independence. Our Board of Directors, upon recommendation of our Nominating and Governance Committee, is expected to formally determine the independence of its directors following the spin-off. The Board of Directors of Exelis has affirmatively determined that the following directors, who are anticipated to be elected to our Board of Directors, are independent: Louis J. Giuliano, Bradford J. Boston, Mary L. Howell, William F. Murdy, Melvin F. Parker, Eric M. Pillmore, Stephen L. Waechter and Phillip C. Widman. Our Board of Directors is expected to annually determine the independence of directors based on a review by the directors and the Nominating and Governance Committee. No director will be considered independent unless the Board of Directors determines that he or she has no material relationship with us, either directly or as a partner, shareholder, or officer of an organization that has a material relationship with us. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships, among others. The standards that will be relied upon by the Board of Directors in affirmatively determining whether a director is independent are composed, in part, of those objective standards set forth in the New York Stock Exchange rules, which generally provide that:

• A director who is an employee, or whose immediate family member (defined as a spouse, parent, child, sibling, father- and mother-in-law, son- and daughter-in-law, brother- and sister-in-law and anyone, other than a domestic employee, sharing the director’s home) is an executive officer, of our company, would not be independent until three years after the end of such relationship.

• A director who receives, or whose immediate family member receives, more than $120,000 per year in direct compensation from our company, other than director and committee fees and pension or other forms of deferred compensation for prior services (provided such compensation is not contingent in any way on continued service) would not be independent until three years after ceasing to receive such amount.

• A director who is a partner of or employed by, or whose immediate family member is a partner of or employed by and personally works on our company’s audit, a present or former internal or external auditor of our company would not be independent until three years after the end of the affiliation or the employment or auditing relationship.

• A director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of our company’s present executives serve on the other company’s compensation committee would not be independent until three years after the end of such service or employment relationship.

• A director who is an employee, or whose immediate family member is an executive officer, of a company that makes payments to, or receives payments from, our company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenue, would not be independent.

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Compensation of Non-Employee Directors

Following the spin-off, Director Compensation will be determined by our Board of Directors with the assistance of its Nominating and Governance Committee. It is anticipated that such compensation will consist of an annual cash retainer and equity award for all directors; an additional cash retainer and equity award for the non-executive Chairman of the Board, and an additional cash retainer for the directors serving as chair of the Audit Committee, the Compensation and Personnel Committee or the Nominating and Governance Committee. Subject to approval by the Vectrus Board of Directors, it is expected that Director Compensation will be comprised as follows:

Board Retainer	Cash Retainer ($)		Restricted Stock Units (number of RSUs awarded at a grant date fair value equal to the listed dollar amount) ($)
All Directors		75,000	75,000
Additional Compensation
Chairman of the Board		50,000	50,000
Chair of the Audit Committee		15,000
Chair of the Compensation and Personnel Committee		10,000
Chair of the Nominating and Governance Committee		10,000

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

We are currently a wholly owned subsidiary of Exelis and, following the spin-off, we will be an independent publicly traded company that will operate the Mission Systems business. Therefore, our historical compensation strategy has been determined primarily by the Compensation and Personnel Committee of the Exelis Board of Directors (the “Exelis Compensation Committee”), which approves and oversees administration of the executive compensation programs of Exelis. Since the information presented in this document relates primarily to the 2013 fiscal year, which ended on December 31, 2013, this Compensation Discussion and Analysis focuses primarily on the compensation programs and decisions of Exelis with respect to 2013, describing all elements of the executive compensation program of Exelis as determined by the Exelis Compensation Committee. This Compensation Discussion and Analysis also describes the ways in which we anticipate that our compensation philosophy will differ from that of Exelis after we become a separate public company. As explained under “The Spin-Off—Reasons for the Spin-Off,” the separation from Exelis will provide us with the flexibility to establish appropriate compensation policies to attract, motivate and retain our executives. We will form our own Compensation and Personnel Committee (the “Vectrus Compensation Committee”), which will be responsible for our executive compensation programs prospectively, which may be different from the compensation programs in place for 2013 with Exelis.

This Compensation Discussion and Analysis describes the compensation philosophy of Exelis for our Chief Executive Officer and our Chief Financial Officer plus those individuals who are our other three most highly compensated executive officers based on their fiscal 2013 compensation with Exelis. These officers are referred to herein as Named Executive Officers (“NEOs”). Our named executives officers are Kenneth W. Hunzeker, who is expected to be Chief Executive Officer and President and was an Executive Vice President of Exelis and President of the Mission Systems business; Matthew M. Klein, who is expected to be Senior Vice President, Chief Financial Officer and was the Chief Financial Officer of the Mission Systems business; Janet L. Oliver, who is expected to be Senior Vice President, Business Development and was Vice President, Business Development of the Mission Systems business; Kelvin R. Coppock, who is expected to be Senior Vice President, Contracts and was Vice President, Business Area and Contracts of the Mission Systems business; and Charles A. Anderson, who is expected to be Senior Vice President, Programs and was Businesses Area Vice President and General Manager for all programs of the Mission Systems business.

Our Executive Compensation Program

Overall compensation policies and programs

Historically. In 2013, the Exelis Compensation Committee retained Pay Governance LLC as its independent compensation consultant (“Pay Governance” or the “Compensation Consultant”). Pay Governance provides independent consulting services in support of the Exelis Compensation Committee’s charter. The Compensation Consultant also provided independent consulting services in support of the Exelis Nominating and Governance Committee’s charter, including providing competitive data on director compensation.

The Exelis Compensation Committee reviewed and considered the following factors, among others, relevant to establishing the independence of the Compensation Consultant, including but not limited to the following:

• Provision of other services to Exelis by the Compensation Consultant;

• The amount of fees received from Exelis by the Compensation Consultant as a percentage of the Compensation Consultant’s total revenue;

• The policies and procedures of the Compensation Consultant that are designed to prevent conflicts of interest;

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• Relationships of the employees of the Compensation Consultant (who provide services to us) with members of the Compensation and Personnel Committee, including business and personal relationships;

• Relationships of the Compensation Consultant or the Compensation Consultant’s employees (who provide services to us) with an executive officer of Exelis, including business and personal relationships; and

• Stock ownership of Exelis by the Compensation Consultant.

Based on this review the Exelis Compensation Committee determined the Compensation Consultant had no conflicts of interest with Exelis or its Board of Directors.

The Compensation Consultant’s engagement leader provided objective expert analyses, assessments, research and recommendations for executive compensation programs, incentives, perquisites, and compensation standards. In this capacity, the Compensation Consultant provided services that related solely to work performed for and at the direction of the Exelis Compensation Committee including analysis of material prepared by Exelis for the Exelis Compensation Committee’s review. In 2013, the human resources, finance and legal departments of Exelis supported the work of the Exelis Compensation Committee, provided information, answered questions and responded to requests. In 2013, the Compensation Consultant also acted as an advisor to the Nominating and Governance Committee in connection with Exelis and Vectrus Director compensation. The Compensation Consultant provided analyses to the Nominating and Governance Committee of Exelis and the full Board of Directors of Exelis and Vectrus Non-employee Director compensation. The Compensation Consultant provided no other services to Exelis during 2013.

In 2013, as in past years, the Exelis Compensation Committee looked to competitive market compensation data for companies comparable to Exelis to establish overall policies and programs that address executive compensation, benefits and perquisites. This review included analysis of the Exelis Compensation Peer Group and information provided by the Compensation Consultant. The Exelis Compensation Peer Group consists of select Aerospace / Defense companies with annual revenue greater than $1 billion that were available in the Towers Watson compensation survey database. Data from these companies were adjusted, using a regression analysis, to reflect the annual revenue of Exelis.

The 2013 Exelis Compensation Peer Group consists of:

•   Alliant Techsystems Inc.	•   L-3 Communications Holdings, Inc.
•   BAE Systems plc	•   Lockheed Martin Corporation
•   The Boeing Company	•   Northrop Grumman Corporation
•   Curtiss-Wright Corporation	•   Rockwell Collins, Inc.
•   General Dynamics Corporation	•   Rolls-Royce
•   General Atomics	•   SAIC, Inc.
•   Hexcel Corporation	•   Space Systems / Loral, Inc.
•   Honeywell International Inc.	•   Spirit AeroSystems Holdings, Inc.
•   Huntington Ingalls Industries, Inc.	•   Textron Inc.
	•   United Technologies Corporation

The Exelis Compensation Committee believes that the Exelis Compensation Peer Group companies most closely reflect the labor market in which Exelis competes for talent.

The Exelis Compensation Committee has delegated to the Senior Vice President and Chief Human Resources Officer of Exelis responsibility for administering the executive compensation program. During the first quarter of 2013, the Chief Executive Officer and the Chief Human Resources Officer of Exelis made recommendations to the Exelis Compensation Committee regarding compensation actions and incentive awards

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for Mr. Hunzeker. The Exelis Compensation Committee reviewed each compensation element for Mr. Hunzeker and made the final determination regarding compensation for him using the processes described for Exelis in this Compensation Discussion and Analysis.

With respect to 2013 compensation for Messrs. Klein, Coppock and Anderson, and Ms. Oliver, Mr. Hunzeker, in his role as President of the Mission System business, after review by the Senior Vice President and Chief Human Resources Officer of Exelis, made recommendations to the Chief Executive Officer and President of Exelis regarding compensation actions and incentive awards for these individuals in accordance with the approved 2013 Exelis compensation program. After discussing Mr. Hunzeker’s recommendations, the final executive compensation determinations were made by Mr. Melcher. The Exelis Compensation Committee believes the compensation programs of Exelis reflect its overarching business rationale and are designed to be reasonable, fair, fully disclosed, and consistently aligned with long-term value creation. The Exelis Compensation Committee further believes this compensation philosophy encourages individual and group behaviors that balance risk and reward and assists Exelis in achieving steady, sustained growth and earnings performance.

With respect to the spin-off of the Mission Systems business, in December 2013, compensation recommendations for the executives of the Mission Systems business referenced above were reviewed and approved by the Exelis Compensation Committee in connection with the review of executive officers for Vectrus.

Going Forward. Following the spin-off, it is expected that the Vectrus Compensation Committee will retain a compensation consultant and the nature and scope of the compensation consultant’s engagement will be similar to that of the Compensation Consultant of Exelis. In addition, we expect to establish a similar executive compensation philosophy with respect to our NEOs following the spin-off. We expect that our compensation objective will be to implement compensation programs that reflect an overarching business rationale and are designed to be reasonable, fair, fully disclosed, and consistently aligned with long-term value creation. We also expect that the Vectrus Compensation Committee will delegate to the Chief Human Resources Officer responsibility for administering the Executive Compensation program.

Individual executive positions—compensation comparisons

Historically. Senior management positions of Exelis, including each of its NEO positions, were compared to positions with similar attributes and responsibilities based on the Exelis Compensation Peer Group information. This information was used to provide the market median dollar value for annual base salary, annual incentives and long-term incentives. Compensation levels that are approximately 10% above or below the market median dollar value are considered by the Compensation Consultant and the Exelis Compensation Committee to be within the market median range.

The Exelis Compensation Committee used the Exelis Compensation Peer Group information, along with other qualitative information, described below, in making its determination of target and actual compensation provided to Mr. Hunzeker in 2013. The Exelis Compensation Committee may consider deviations from the market median range depending on a position’s strategic value, objectives and strategies of Exelis, and individual experience and performance in the position. The Exelis Compensation Committee may, but is not required to, consider prior year’s compensation, including short-term or long-term incentive payouts, restricted stock vesting or option exercises in making compensation decisions for the NEOs.

For each of the remaining Vectrus NEOs, target and actual compensation was determined by approved program guidelines established for Exelis executives for the year 2013. These program guidelines were established based on competitive market data and reflect the current defense industry budget constraints.

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Individual executive positions—percentage of median

The following chart sets out Mr. Hunzeker’s 2013 target compensation for annual base salary, annual incentive and long-term incentive and each element of compensation relative to the market median dollar value:

Named Executive Officer	2013 Base Salary ($)		2013 Annual Base Salary Position as Percentage of Market Median Dollar Value			Target 2013 Annual Incentive Award (% of Base Salary)			Target 2013 Annual Incentive Position as Percentage of Market Median Dollar Value			2013 Long- Term Incentive Target Award ($)		2013 Long- Term Incentive Position as Percentage of Market Median Dollar Value			Anticipated 2013 Total Compensation Position as Percentage of Market Median Dollar Value
Kenneth W. Hunzeker		375,045		95	%		65	%		89	%		500,000		84	%		89	%

The following chart sets out 2013 base salary and target incentive compensation elements for each of the other NEOs:

Named Executive Officer	2013 Base Salary ($)		Target 2013 Annual Incentive Award (% of Base Salary)			2013 Long-Term Incentive Target Award ($)
Matthew M. Klein		225,500		35	%		130,000
Janet L. Oliver		269,100		38	%		160,000
Kelvin R. Coppock		253,800		38	%		130,000
Charles A. Anderson		216,000		32	%		70,000

Going Forward. While it is expected that the Vectrus Compensation Committee will adopt a similar approach to evaluating and determining target and actual compensation provided to each of our NEOs, the use of the Exelis Compensation Peer Group or the peers included in the market sample may change to be more reflective of our industry, size and / or business model.

Our compensation cycle

Historically. Compensation is reviewed in detail every year during the first quarter. This review includes:

• Annual performance reviews for the prior year,

• Base salary merit increases—normally established in March,

• Annual Incentive Plan (“AIP”) target awards, and

• Long-term incentive target awards (including stock options, restricted stock or restricted stock units and target total shareholder return (“TSR”) awards).

The actual date on which long-term incentive awards are made is the date on which the Exelis Compensation Committee approves these awards. In recent years, this date has been in March. (Meeting dates for the following year’s regular Exelis Board and Committee meetings are scheduled during the prior year.) Target TSR awards are currently subject to a 3-year performance period starting on January 1 of the year in which the Exelis Compensation Committee approves the TSR award. Long-term incentive award recipients receive communication of the award as soon as reasonably practical after the grant date of the award. The Exelis Compensation Committee reviewed and assessed the performance of the Exelis NEOs during 2013 and authorized salary and other personnel related actions it believed were appropriate and commensurate with relevant competitive data and the approved salary program.

Going Forward. It is expected that the Vectrus Compensation Committee will review, decide and award compensation to our NEOs following a similar annual cycle.

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Qualitative considerations

Historically. Exelis considers individual performance, including the following qualitative performance factors, in addition to the quantitative measures discussed in this Compensation Discussion and Analysis. While there is no formal weighting of qualitative factors, the following factors may be considered important in making compensation decisions:

Consideration	Objective
Portfolio Repositioning	Rationalize business around core, attractive market segments
Differentiated Organic Growth	Align strategies and resources around attractive portfolio positions
Strategic Execution	Outperform market expectations
Cultural Transformation	Optimize organization around Exelis Vision and Values

Going Forward. It is expected that the Vectrus Compensation Committee will consider similar qualitative factors in making compensation decisions. These qualitative performance factors may change to reflect our business focus and strategy.

Compensation Program Objectives

Historically.

Compensation Objectives, Principles and Approaches: The compensation program objectives, principles and approaches reflect Exelis business needs and strategy. The following sections provide more detailed information about the Exelis compensation program.

Objective	General Principle	Specific Approach
Attract and retain well-rounded, capable leaders.	Design an executive compensation program to attract and retain high performing executives.	Target total direct compensation at the competitive median of the Exelis Compensation Peer Group adjusted for revenue size.
Align at-risk compensation with business performance.	The measures of performance in our compensation programs must be aligned with measures key to the success of our businesses. If our businesses succeed, our shareholders will benefit.	Provide annual and long-term incentive opportunity based on business performance to drive shareholder value.
Align at-risk compensation with levels of executive responsibility.	As executives advance in our company, the leverage of at-risk pay relative to fixed pay increases.	Structure NEO compensation so that a substantial portion of compensation is at risk for executives with greater levels of responsibility.

Primary Compensation Components

The following table provides the ratios of the elements of compensation to the NEO’s total compensation for 2013 for their respective positions in the Mission Systems business.

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NEO	Percentage of Base Salary to Total Compensation (Compensation not at Risk) (a)			Percentage of AIP to Total Compensation (b)			Percentage of Cash Compensation to Total Compensation (a + b = c)			Percentage of Long-Term Compensation to Total Compensation (d)			Percentage of At Risk Compensation to Total Compensation (short and long-term compensation) (b + d = e)
Kenneth W. Hunzeker		33	%		22	%		55	%		45	%		67	%
Matthew M. Klein		52	%		18	%		70	%		30	%		48	%
Kelvin R. Coppock		53	%		20	%		73	%		27	%		47	%
Janet L. Oliver		51	%		19	%		70	%		30	%		49	%
Charles A. Anderson		61	%		19	%		80	%		20	%		39	%

NEO Compensation   =   Base Salary   +   Annual Incentive   +   Long-Term Incentives  

1. Salary—Base salary comprises the smallest component of total direct compensation for Mr. Hunzeker and approximately half of the total compensation for the other NEOs, reflecting the Compensation Committee’s commitment to aligning NEO compensation with Exelis performance. Salary is not a risk-based element of compensation.

2. Annual Incentive Plan Awards (AIP)—AIP payouts are discretionary, not guaranteed. AIP payouts are based on the annual performance of Exelis and the Mission Systems business against approved objective corporate financial goals and individual performance. Annual performance must meet minimum performance levels for a payout to be earned.

3. Long-Term Incentive Awards—Restricted Stock Units, Non-qualified Stock Options and TSR awards comprise the Long-Term Incentive Awards. Equity awards align NEO compensation with shareholder value. The TSR awards measures the share price performance of Exelis relative to a peer group of companies (the Exelis TSR Performance Index discussed under “—Long-Term Incentive Awards—TSR Award Component”) over a three year period. Performance below required thresholds results in zero payout.

Going Forward. It is expected that the Vectrus Compensation Committee will conduct a thorough review of the current Exelis compensation program and adopt a program with objectives, principles and approaches that appropriately reflect our business needs and strategy. It is anticipated that the ratio of cash compensation as a percent of total compensation and long-term compensation as a percent of total compensation will change over time to be more weighted towards at risk compensation in keeping with market competitive compensation design.

Base Salary

Historically. The Exelis Compensation Committee generally considered the following principles and approaches in establishing base salary for the NEOs.

General Principle	Specific Approach
A competitive salary provides a necessary element of stability.	Salary levels reflect comparable competitive market levels among a peer group of aerospace and defense companies, adjusted by revenue size, as provided by the Compensation Consultant. Data was adjusted using regression analysis to reflect the size of Exelis. Salary levels are reviewed annually.
Base salary should recognize individual performance, the market value of a position, and the incumbent’s tenure, experience, responsibilities, contribution to Exelis and growth in his or her role.	Merit increases are based on overall performance and relative competitive market position.

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Going Forward. It is expected that the Vectrus Compensation Committee consider similar principles and approaches in establishing base salaries for the NEOs that appropriately reflect our business needs and strategy.

Exelis Annual Incentive Plan (AIP)

Historically.

AIP Payment = Annual Base Salary x Target AIP Percent x Approved Performance Factor Subject to Exelis Compensation Committee Approval

Overview of the Exelis AIP

General Principle	Specific Approach
The AIP target award for NEOs recognizes contributions to the year’s results and is determined by performance against specific corporate financial metrics, as well as qualitative factors, as described in more detail in “Compensation Discussion and Analysis—Our Executive Compensation Program—Qualitative Considerations.”	The AIP incorporates metrics that are critical to achieving optimal operating performance.
AIP target awards are structured to achieve competitive compensation levels when targeted performance results are achieved. Objective formulas are used to establish potential AIP performance awards.	The Exelis AIP provides for a cash payment to participating executives established as a target percentage of base salary. AIP target awards are set with reference to the median of competitive practice based on the Exelis Compensation Peer Group. The Compensation Committee may approve negative discretionary adjustments with respect to NEOs.

Exelis AIP awards to NEOs are made under the Exelis Inc. Annual Incentive Plan for Executive Officers, which first became effective as of October 31, 2011, following the spin-off of Exelis from ITT Corporation (the “Exelis spin-off”) and which was subsequently approved by Exelis shareholders on May 8, 2013. 2013 AIP targets for Exelis NEOs were approved by the Exelis Compensation Committee in March 2013.

2013 Performance Metrics

To focus the businesses on the operating performance of the enterprise, 2013 internal performance metric attainment and payout design emphasized corporate performance.

The Exelis Compensation Committee determined that the metrics noted below would be most closely predictive of optimal operating performance in 2013.

Earnings Per Share

Earnings per share measures the return per outstanding diluted common share. This provides a way to align executive compensation with shareholder value creation.

Revenue

Revenue reflects the emphasis on growth by Exelis. Revenue is defined as reported GAAP revenue excluding the impact of foreign currency fluctuations and contributions from acquisitions and divestitures.

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Operating Cash Flow

Operating cash flow reflects the emphasis on cash flow generation by Exelis. For purposes of AIP, Operating Cash Flow is GAAP net cash flow from operating activities, less capital expenditures plus interest, cash taxes and other expense (Income), and adjusted for other non-cash special items.

Return on Invested Capital

ROIC measures the ability of Exelis to profitably invest available capital. ROIC = Operating Income ÷ Five Point Average Invested Capital. Invested Capital is defined as: Total Assets—Pension Related Deferred Tax Assets—Non-Interest Bearing Current Liabilities. The Five Point Average describes the year-end invested capital position as well as the invested capital position for each of the preceding four quarters.

2013 AIP Internal Performance Metrics and Payout Design

Exelis pays for performance that clearly demonstrates achievement of plan goals. Exelis establishes strong incentives for revenue and earnings per share performance and sets aggressive goals for operating cash flow and ROIC metrics. In order to achieve an AIP payout, each metric must meet a certain threshold for that component to be considered in the calculation. For example, revenue performance below the 90% payout threshold would result in that metric being reflected as zero in the AIP calculation. In 2013, each performance component of the AIP and the overall AIP award was capped at 200%. Results between points are interpolated.

	2013 Metric Attainment and Payout Design
	Revenue and Earnings per Share							Operating Cash Flow							ROIC
Performance Percentage of Target		90	%	100	%	108	%		80	%	100	%	116	%		85	%	100	%	116	%
Payout Percentage of Target		50	%	100	%	200	%		50	%	100	%	200	%		50	%	100	%	200	%

Mr. Hunzeker participated in the AIP at the Exelis Corporate Level. Messrs. Klein, Coppock and Anderson, and Ms. Oliver participated in the AIP at the Mission Systems business level.

2013 AIP Internal Performance Metrics—Corporate Level—Mr. Hunzeker

2013 Metrics	Percentage Weight
Earnings per Share		30	%
Revenue		30	%
Operating Cash Flow		20	%
Return on Invested Capital		20	%

2013 Internal Performance Metrics—Mission Systems Business—Messrs. Klein, Coppock and Anderson, and Ms. Oliver

2013 Metrics	Percentage Weight
Exelis Earnings Per Share		30	%
Mission Systems business		70	%
— Revenue		30	%
— Operating Cash Flow		20	%
— Return on Invested Capital		20	%

2013 AIP Performance Targets and Performance

The Exelis Compensation Committee, after considering management recommendations, established 2013 AIP performance targets for the NEOs based on the applicable performance metrics and the approved annual

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operating plan of Exelis, taking into consideration its aspirational business goals. Successful attainment of both qualitative factors and quantitative factors (described in “Compensation Discussion and Analysis—Our Executive Compensation Program—Qualitative Considerations” and “—2013 Internal Performance Metric Attainment and Payout Design”) are achievable only if the enterprise and the individual NEOs perform at levels established by the Exelis Compensation Committee. As permitted by the Exelis Inc. Annual Incentive Plan and the Exelis Inc. Annual Incentive Plan for Executive Officers, the Exelis Compensation Committee may exclude the impact of acquisitions, dispositions and other special items in computing the AIP performance payout factor.

2013 AIP Awards Paid in 2014

On February 19, 2014, the 2013 AIP award for Mr. Hunzeker was reviewed and approved by Mr. Melcher in his role as Chief Executive Officer and President of Exelis and by the Exelis Compensation Committee. Upon recommendation by Mr. Melcher, the Exelis Compensation Committee approved an award for Mr. Hunzeker at 105% of the corporate payout formula in recognition of his contributions to the Mission Systems business and to Exelis during 2013. 2013 AIP awards for all remaining NEOs were reviewed and approved by Mr. Melcher, upon the recommendation of Mr. Hunzeker. The 2013 AIP awards for Mr. Klein and Mr. Anderson were at 120% and 150%, respectively, of the approved 113.5% payout factor for the Mission Systems business in recognition of Mr. Klein’s significant contributions and performance during 2013 and Mr. Anderson’s increased scope of responsibilities and performance during 2013. The approved 2013 AIP awards for NEOs are included in the summary compensation table under “—Tabular Executive Compensation Disclosure” in the “Non-Equity Incentive Plan Compensation” column. No negative discretion was exercised by the Exelis Compensation Committee for any NEOs of the Mission Systems business. As permitted by the 2011 Exelis Omnibus Incentive Plan and the 2011 Annual Incentive Plan for Executive Officers, the Exelis Compensation Committee excluded the impact of acquisitions, dispositions and other special items in computing AIP performance relating to AIP targets, which AIP targets also excluded these items. The performance and payout percentages for each component of the AIP were as follows:

Corporate Level—Mr. Hunzeker

Metric (all $ amounts in millions Except for EPS and ROIC)	Performance Target at 100% Payment and Weighting					2013 Performance			Performance Percentage of Target			Payout Percentage of Target			Weighted Attainment
Earnings Per Share	$	1.50		30	%	$	1.55			103	%		112	%		33.6	%
Revenue	$	5,050		30	%	$	4,810			95	%		84	%		25.1	%
Operating Cash Flow	$	508		20	%	$	587			116	%		196	%		39.2	%
Return on Invested Capital		15.0	%	20	%		16.0	%		106	%		117	%		23.3	%

Mission Systems Business—Messrs. Klein, Coppock and Anderson and Ms. Oliver

Metric (all $ amounts in millions Except for EPS and ROIC)	Performance Target at 100% Payment and Weighting					2013 Performance			Performance Percentage of Target			Payout Percentage of Target			Weighted Attainment
Exelis Earnings Per Share	$	1.50		30	%	$	1.55			103	%		112	%		33.6	%
Mission Systems business				70	%
— Revenue	$	1,686		30	%	$	1,512			89.7	%		0	%		0	%
— Operating Cash Flow	$	102		20	%	$	161			158	%		200	%		40.0	%
— Return on Invested Capital		41.6	%	20	%		50.0	%		120	%		200	%		40.0	%

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The following table illustrates the calculation of the 2013 AIP awards paid in 2014 at the Exelis corporate level and reflects the positive discretion exercised for Mr. Hunzeker. (Sum of components may differ from actual award amounts due to rounding.)

Named Executive Officer	2013 Base Salary $(a)		Annual Incentive Target as a Percentage of Base Salary (b)			Earnings Per Share Percentage Achieved			Revenue Percentage Achieved			Operating Cash Flow Percentage Achieved			ROIC Percentage Achieved			Total Performance Percentage Achieved (c)(1)			Actual AIP 2013 Awards (a) *(b) *(c)
Kenneth W. Hunzeker		375,045		65	%		33.6	%		25.1	%		39.2	%		23.3	%		121.5	%	$	311,000

The following table illustrates the calculation of the 2013 AIP awards at the Mission Systems business level paid in 2014 and reflects the positive discretion exercised for Mr. Klein and Mr. Anderson as described above. (Sum of components may differ from actual award amounts due to rounding.)

Mission Systems Business Level
Named Executive Officer	Base Salary $ (a)		Annual Incentive Target as a Percentage of Base Salary (b)			Earnings Per Share Percentage Achieved			Revenue Percentage Achieved			Operating Cash Flow Percentage Achieved			ROIC Percentage Achieved			Total Performance Percentage Achieved (c)(1)			Actual AIP 2013 Awards (a) *(b) *(c)
Matthew M. Klein		225,500		35	%		33.6	%		0	%		40.0	%		40.0	%		113.5	%	$	107,500
Janet L. Oliver		269,100		38	%		33.6	%		0	%		40.0	%		40.0	%		113.5	%	$	116,100
Kelvin R. Coppock		253,800		38	%		33.6	%		0	%		40.0	%		40.0	%		113.5	%	$	109,500
Charles A. Anderson		216,000		32	%		33.6	%		0	%		40.0	%		40.0	%		113.5	%	$	117,700

(1) Total Performance Percentage Achieved doesn’t foot due to rounding.

In addition to the award referenced in this table Ms. Oliver received an additional award of $150,000 in accordance with the Janet Oliver Letter Agreements.

Going Forward. In connection with the spin-off, we expect to adopt an annual incentive plan with terms to be determined by the Vectrus Compensation Committee. We expect this program will be designed to reflect measures, targets and goals reflective of our business and industry using our competitive marketplace as a benchmark.

Long-Term Incentive Awards

Historically.

The 2013 Exelis long-term incentive award for senior executives has three components, each of which directly ties long-term compensation to long-term value creation and shareholder return. The 2013 long-term incentive program awards were allocated as follows:

The 2013 awards were granted on March 8, 2013. A valuation based on the March 8, 2013 grant date was used to determine the number of options and restricted stock units to be granted pursuant to this allocation. The

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number of options granted was based on the Black-Scholes value on the March 8, 2013 grant date. The number of restricted stock units granted was based on the closing price of Exelis stock on the grant date. TSR awards represent 30% of the total target long-term award.

The Compensation Committee selected vesting terms for restricted stock units and non-qualified stock options based on the Compensation Consultant’s review and assessment of current competitive practice, as well as the Compensation Committee’s view of the vesting terms appropriate for Exelis. The Compensation Committee determined allocations among restricted stock units and non-qualified stock options based on the view that a balanced award of restricted stock units and non-qualified stock options provides a combination of incentives for absolute share price appreciation. The Compensation Committee considers the Compensation Consultant’s review and assessment of current competitive practice, as well as individual performance, in determining the individual’s total target award.

Restrictive Covenants for Exelis Long-Term Incentive Awards: Starting with the 2012 awards, the Compensation Committee approved modifications to the restricted stock unit, non-qualified stock option and TSR award terms and conditions upon termination of employment by the participant.

• Non-solicitation: In order for the participant to receive an award the participant must accept the terms and conditions, including a restrictive covenant which provides that the participant will not, within the restricted period, influence or attempt to influence Exelis customers for the purpose of soliciting business or Exelis employees for the purposes of hiring such employees for a period of one year following termination.

• Non-competition: In order for participants who have “retired,” as defined in the applicable award agreement, to receive continued vesting of awards after reaching age 60 or older and having completed at least five years of service, the participant must accept the terms of a non-competition agreement for the term during which such award remains unvested following the participant’s retirement. If the participant does not accept the terms of the non-competition agreement, the awards will be subject to standard pro-rata vesting upon termination due to retirement.

Breach of either the non-solicitation or non-competition provisions will result in forfeiture of the award, or if the participant has disposed of all or any portion of such award prior to and breach, recovery of an amount equal to the aggregate after-tax proceeds.

Restricted Stock Unit Component

Grants of restricted stock units provide NEOs with stock ownership of unrestricted shares after the restriction lapses. NEOs received restricted stock unit awards because, in the judgment of the Exelis Compensation Committee and based on management recommendations, these individuals were in positions most likely to assist in the achievement of the long-term value creation goals of Exelis and to create shareholder value over time. The Exelis Compensation Committee reviewed and approved all proposed grants of restricted stock units for NEOs. Key elements of the 2013 restricted stock unit award program were:

• Restricted stock units provide the same economic risk or reward as restricted stock, but recipients do not have voting rights and do not receive cash dividends during the restriction period. Dividend equivalents are accrued and paid in cash upon vesting of the restricted stock units. Vested restricted stock units are generally settled in shares.

• Restricted stock units granted prior to 2014 were generally subject to a three-year restriction period. In 2014 restricted stock unit grants will vest in one-third annual installments. In certain cases, such as for new hires or to facilitate retention, selected employees may receive restricted stock units subject to different vesting terms as approved by the Exelis Compensation Committee.

• If an acceleration event occurs (as described in “—Potential Payments Upon Termination or Change in Control—Change of Control Arrangements”), restricted stock units vest in full.

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• If an employee dies or becomes disabled, restricted stock units vest in full.

• If an employee leaves Exelis prior to vesting either through resignation or termination for cause, restricted stock units are forfeited.

• If an employee retires or is terminated other than for cause, a pro-rata portion of the restricted stock unit award vests. With respect to termination other than for cause, the pro rata portion includes vesting that reflects the applicable severance period. Beginning in 2012, restricted stock unit awards continued to vest for employees who retire if certain non-solicitation and non-competition provisions are met as described above.

Non-Qualified Stock Options Component

Non-qualified stock options permit optionees to buy Exelis stock in the future at a price equal to the stock’s value on the date the option was granted, which price is the option exercise price. Non-qualified stock option terms were selected after the Exelis Compensation Committee’s review and assessment of the market and general competitive practice.

Key elements of the 2013 non-qualified stock option program were:

• The option exercise price of stock options awarded was the NYSE closing price of Exelis common stock on the date the award was approved by the Exelis Compensation Committee.

• For options granted to new executives, the option exercise price of approved stock option awards is the closing price on the grant date, generally five days following the first day of employment.

• Options cannot be exercised prior to vesting.

• Options vest in one-third annual increments, after the first, second and third anniversary of the date of grant.

• If an acceleration event occurs (as described in “—Potential Payments Upon Termination or Change in Control—Change of Control Arrangements”), the stock option award vests in full.

• Options awarded in 2013 expire ten years after the grant date.

• If an employee is terminated for cause, vested and unvested portions of the options expire on the date of termination.

• The ITT Corporation 2003 Equity Incentive Plan, the 2011 Exelis Omnibus Incentive Plan and the Amended and Restated Exelis Omnibus Incentive 2011 Plan prohibit the repricing of, or exchange of, stock options and stock appreciation rights that are priced below the prevailing market price with lower-priced stock options or stock appreciation rights without shareholder approval.

• There may be adjustments to the post-employment exercise period of an option grant if an employee’s tenure with Exelis is terminated due to death, disability, retirement or termination by Exelis other than for cause. Any post-employment exercise period, however, cannot exceed the original expiration date of the option. If employment is terminated due to an acceleration event or because the option holder believed in good faith that he or she would be unable to discharge his or her duties effectively after the acceleration event, the option would expire on the earlier of the date seven months after the acceleration event or the normal expiration date.

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The following table provides a summary of some of the main characteristics of restricted stock units and non-qualified stock options.

Restricted Stock Units	Non-Qualified Stock Options
A restricted stock unit award is a promise to deliver to the recipient, upon vesting, shares of Exelis stock.	Non-qualified stock options provide the opportunity to purchase Exelis stock at a specified price called the “exercise price” at a future date.
Holders of restricted stock units are not entitled to vote the shares and do not receive cash dividends during the restriction period. Dividend equivalents are paid in cash upon restricted stock unit vestings.	Stock option holders do not receive dividends on shares underlying the options and holders have no voting rights on non-qualified stock options.
Restricted stock and restricted stock units have intrinsic value on the day the award is received and retain some value even if the share price declines during the restriction period, so each provides strong employee retention value.	Non-qualified stock options increase focus on activities related primarily to absolute share price appreciation. If the value of Exelis stock increases and the optionee exercises his or her option to buy at the exercise price, the optionee receives a gain in value equal to the difference between the option exercise price and the price of the stock on the exercise date. If the value of Exelis stock fails to increase or declines, the stock option has no value. Stock options may provide less retention value than restricted stock units since stock options have value only if the share price appreciates over the option exercise price before the options expire.

TSR Award Component

Feature	Implementation
TSR awards reward comparative stock price appreciation relative to that of the Exelis TSR Performance Index described under “—Long-Term Incentive Awards—TSR Award Component”.	The Exelis Compensation Committee, at its discretion, determines the size and frequency of target TSR awards, performance measures and performance goals, in addition to performance periods. In determining the size of target TSR awards for executives, the Exelis Compensation Committee considers comparative data provided by the Compensation Consultant.
Three-year performance period	A three-year TSR performance period encourages behaviors and performance geared to Exelis long-term goals and, in the view of the Exelis Compensation Committee, discourages behaviors that might distract from that focus. The three-year performance period allows sufficient time for focus on long-term goals, mitigates market swings not based on performance and is also somewhat independent of short-term market cycles.

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Feature	Implementation
Performance measurement and award frequency	The performance of Exelis for purposes of the TSR awards is measured by ranking the performance of Exelis against the Exelis TSR Performance Index. Payouts, if any, are based on a non-discretionary formula and interpolated for values between the 25th and 75th percentiles of performance. The Exelis Compensation Committee felt these breakpoints were properly motivational and rewarded the desired behavior.
TSR awards are expressed as target cash awards and paid in cash	Cash awards reward relative performance while reducing share dilution.
Components of TSR	The Exelis Compensation Committee considered the components of a measurable return of value to shareholders, reviewed peer practices and received input from the Compensation Consultant. Based on that review the Compensation Committee determined that the most significant factors to measure return of value to shareholders were: •   dividend yields, •   cumulative relative change in stock price, and •   extraordinary shareholder payouts.
TSR calculation	TSR = the sum of (1) dividends paid and reinvested and any other extraordinary shareholder payouts during the three-year performance period and (2) the cumulative change in stock price from the beginning to the end of the performance period as a percentage of beginning stock price.

2013 TSR awards are weighted as follows:

Exelis 2013 TSR Performance Index

50%	Exelis concentrated peer group	General Dynamics Corporation L-3 Communications Holdings, Inc. Lockheed Martin Corporation Huntington Ingalls Industries, Inc.	Northrop Grumman Corporation Raytheon Company Exelis
50%		S&P 1500 Aerospace/Defense Index

The Exelis Compensation Committee’s rationale for this bifurcated weighting was based on considerations of the relatively small Exelis concentrated peer group of companies with high exposure to non-commercial aerospace/defense businesses and a broader aerospace/defense industry group with commercial revenue. At the recommendation of the Compensation Consultant, the Exelis Compensation Committee determined that use of the concentrated peer group alone presented volatility risks due to its small size and the larger S&P 1500 Aerospace/Defense Index alone presented too much concentration with respect to commercial businesses. The Exelis Compensation Committee determined that equal weighting of the two groups provides a more balanced comparison.

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The combination of these two groups, described in the table above, is referred to as the Exelis TSR Performance Index.

The table below describes the payout formula and payout of the target value based on the Exelis rank in a concentrated peer group, as well as the payout formula and payout of the target value based on the Exelis percentile rank with respect to the S&P 1500 Aerospace/Defense Index.

Performance Goals and Payments for the TSR Awards

Payout Formula	Exelis Rank	Payout of Target Value
Concentrated Peer Group Ranking	8th or 7th	0%
	6th	50%
	5th or 4th	100%
	3rd	150%
	2nd or 1st	200%
S&P 1500 Aerospace/Defense Index*	Below the 25th percentile	0%
	25th percentile or above	50%
	50th percentile or above	100%
	75th percentile or above	200%

* Payouts for the S&P 1500 Aerospace / Defense Index are interpolated for intermediate percentiles.

Amount of target TSR awards. Exelis target TSR awards provided to NEOs are generally based on the participant’s position, competitive market data, individual performance and anticipated contributions to Exelis long-term goals. The Exelis Compensation Committee considered individual performance and competitive market data in determining individual target TSR awards.

Key elements of 2013 TSR awards include:

• If a participant’s employment terminates before the end of the three-year performance period, the award is forfeited except in two cases: (1) if a participant dies or becomes disabled, the TSR award vests in full and payment, if any, is made according to its original terms. Vesting in full in the case of death or disability reflects the inability of the participant to control the triggering event and is consistent with benefit plan provisions related to death and disability; and (2) if a participant retires or is terminated by Exelis other than for cause, a pro-rata payout, if any, is provided based on the number of full months of employment during the measurement period divided by 36 months (the term of the three-year TSR performance period). This pro-rated payout, if any, is provided because it reflects the participant’s service during the pro-rated period. For TSR awards granted starting in 2012, awards are not forfeited if certain non-solicitation and non-competition provisions are met as described under “—Long-Term Incentive Awards”.

• Exelis performance for purposes of the TSR awards is measured by comparing the average stock price over the trading days in the month of December immediately prior to the start of the TSR three-year performance period to the average stock price over the trading days in the last month of the three-year cycle, including adjustments for dividends and extraordinary payments.

• Payment, if any, of cash awards generally is made following the end of the applicable three-year performance period and will be based on the performance of Exelis measured against the total shareholder return performance of the Exelis TSR Performance Index.

• Subject to the provisions of Section 409A of the Code, in the event of an acceleration event in a change of control (described in “—Potential Payments Upon Termination or Change in Control—Change of Control Arrangements”), a pro rata portion of outstanding awards could be paid through the date of the change of control based on actual performance and the balance of the award would be paid at target (100%). There could be up to three outstanding TSR awards at any time.

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• Performance goals for the applicable TSR performance period were established in writing no later than 90 days after the beginning of the applicable performance period.

2013 Long-Term Incentive Awards

The following table describes the 2013 long-term incentive awards for the NEOs, as determined by the Exelis Compensation Committee on March 8, 2013.

Named Executive Officer	TSR (Target Cash Award) $		Non-Qualified Stock Option Award # Options		Restricted Stock Unit Award # Units
Kenneth W. Hunzeker		150,000		103,627		13,501
Matthew M. Klein		39,000		26,943		3,510
Janet L. Oliver		48,000		33,161		4,320
Kelvin R. Coppock		39,000		26,943		3,510
Charles A. Anderson		—		—		6,301

2014 Long-Term Incentive Awards.

The Exelis Compensation and Personnel Committee approved Long-Term Incentive Awards under the approved program for 2014 to be effective March 6, 2014. Awards for the Vectrus NEOs were approved as follows:

Named Executive Officer	TSR (Target Cash Award) $		Non-Qualified Stock Option Award # Options		Restricted Stock Unit Award # Units
Kenneth W. Hunzeker		—		19,531		19,203
Matthew M. Klein		—		7,813		7,681
Janet L. Oliver		—		6,250		6,145
Kelvin R. Coppock		—		5,859		5,761
Charles A. Anderson		—		—		7,201

Awards for 2014 were granted in the form of restricted stock units and stock options only. For Messrs. Hunzeker, Klein and Coppock and for Ms. Oliver, their awards were granted 80% in RSUs and 20% in nonqualified stock options. Mr. Anderson’s award was granted wholly in the form of RSUs, according to the Exelis program guidelines approved for the 2014 program. Total Shareholder Return (TSR) awards were not made to Vectrus NEOs because the Exelis TSR index of the Aerospace and Defense 1500 was not considered an appropriate peer group for Vectrus.

The number of restricted stock units awarded was calculated based on $20.83 per share, the closing price of Exelis common shares on March 6, 2014. The number of stock options granted was calculated based on $5.12 per share, the Black-Scholes value of Exelis common shares on March 6, 2014. The option exercise price is $20.83, the closing price of Exelis common shares on March 6, 2014. Both RSUs and stock options will vest in one-third installments on the 1st, 2nd and 3rd anniversaries of the grant date and stock options will expire on March 6, 2024.

Going Forward. It is expected that the Vectrus Compensation Committee will adopt similar principles and approaches with respect to Long-Term Incentives.

We intend to adopt and rename, subject to the approval of Exelis prior to the spin-off, in its capacity as our sole stockholder, the Exelis 2011 Omnibus Incentive Plan as Amended and Restated. The Exelis 2011 Omnibus Incentive Plan as Amended and Restated is expected to permit the granting of stock options, stock appreciation rights, stock and stock unit awards, other stock-based awards and target cash awards based on attainment of

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performance goals. The reserve placed in the Exelis 2011 Omnibus Incentive Plan as Amended and Restated will be expected to be sufficient to maintain our stock-based incentive plans for at least three years. Under the Exelis 2011 Omnibus Incentive Plan as Amended and Restated, no individual may receive more than 15 million shares subject to options in any one year. The number of shares an individual may receive under the Vectrus 2011 Omnibus Incentive Plan as Amended and Restated will be adjusted based on the number of shares Vectrus will have outstanding, which is expected to be substantially less than the number of shares outstanding for Exelis. It is expected that the Exelis 2011 Omnibus Incentive Plan as Amended and Restated, as adopted and renamed by Vectrus, will not permit repricing of stock options without shareholder approval and will generally comply in all significant aspects with current best practices in corporate governance of stock-based compensation plans.

With respect to Long-Term Incentive Target Awards (or their equivalents), we will determine the appropriate structure and mix of components appropriate for our business needs. Similar to Exelis, we would expect to deliver multiple forms of long-term incentive awards; however, the vehicles provided, the blend of these vehicles and the measures used to determine our long-term performance may differ. It is expected that the Vectrus Long-Term Incentive Target Awards may be comprised of restricted stock units and non-qualified stock options.

Other Considerations and Policies

Stock Ownership Guidelines

Historically. The Exelis Board of Directors’ share ownership guidelines provide for share ownership levels at five times the annual retainer amount. Non-employee directors receive a portion of their retainer in restricted stock units, which are settled in shares when the restricted stock units vest. Non-employee directors are encouraged to hold such shares until their total share ownership meets or exceeds their ownership guidelines.

Share ownership guidelines for corporate officers, first approved by the Exelis Board of Directors during 2011, are regularly reviewed. The guidelines, set forth below, specify the desired levels of Exelis stock ownership and encourage a set of behaviors for each officer to reach the guideline levels. The approved guidelines require share ownership expressed as a multiple of base salary for all corporate officers.

Non-employee Directors	5 X Annual Cash Retainer Amount
CEO	5 X Annual Base Salary
CFO	3 X Annual Base Salary
Executive Vice Presidents	3 X Annual Base Salary
Senior Vice Presidents	2 X Annual Base Salary
Corporate Vice Presidents	1 X Annual Base Salary

To attain the ownership levels set forth in the guidelines it is expected that any restricted stock units settled in shares when the restricted stock units vest will be held, and that all shares acquired through the exercise of stock options will be held, except, in all cases, to the extent necessary to meet tax obligations. Compliance with the guidelines is monitored periodically. Non-employee directors and Exelis corporate officers are afforded five years to meet the guidelines.

Going Forward. It is expected that the Vectrus Compensation Committee will establish similar share ownership guidelines for our non-employee directors and corporate officers that are consistent with general marketplace practices in this regard. Specific guidelines have not yet been determined.

Clawback Policy

Historically. In 2011, Exelis, upon the recommendation of the Exelis Compensation Committee, adopted a policy that provides for clawback of performance-based compensation if the Board of Directors determines that a

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senior executive has engaged in fraud or willful misconduct that caused or otherwise contributed to the need for a material restatement of the financial results of Exelis. In such a situation, the Board will review all compensation awarded to or earned by that senior executive on the basis of the financial performance of Exelis during fiscal periods materially affected by the restatement. This would include annual cash incentive and bonus awards and all forms of equity-based compensation. If, in the Board’s view, the compensation related to the financial performance of Exelis would have been lower if it had been based on the restated results, the Board will, to the extent permitted by applicable law, seek recoupment from that senior executive for any portion of such compensation as it deems appropriate after a review of all relevant facts and circumstances.

Going Forward. The Vectrus Compensation Committee will consider and develop a similar policy to provide for clawback of performance-based compensation if the Board of Directors determines that a senior executive has engaged in fraud or willful misconduct. However, the policy may need to be reviewed and updated for consistency with the final rules to be issued by the SEC implementing the clawback provisions set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Equity Grant Policy—Consideration of Material Non-Public Information

Historically. Exelis typically closes the stock trading window for insiders in advance of, and for a period of time immediately following earnings releases and Board and Committee meetings, because Exelis and insiders may be in possession of material non-public information.

The Exelis Compensation Committee meeting, at which compensation decisions and awards are typically made, usually occurs during a Board meeting period. Therefore, awards may be made at a time when Exelis is in possession of material non-public information. The Exelis Compensation Committee does not consider the possible possession of material non-public information when it determines the number of non-qualified stock options granted, price of options granted or timing of non-qualified stock options granted, number of restricted stock unit awards or TSR awards. Rather, it uses competitive data, individual performance and retention considerations when it grants non-qualified stock options, restricted stock units and TSR awards under the long-term incentive program.

Non-qualified stock option awards and restricted stock unit awards granted to NEOs and restricted stock unit awards with respect to Non-employee Directors are awarded and priced on the same date as the approval date. Exelis may also award restricted stock unit and non-qualified stock options in the case of the promotion of an existing employee or hiring of a new employee. Again, these awards may be made at a time when Exelis is in possession of material non-public information related to the promotion or the hiring of a new employee or other matters. Exelis does not time its release of material non-public information for the purpose of affecting the value of executive compensation, and executive compensation decisions are not timed to the release of material non-public information.

Going Forward. It is expected that the Vectrus Compensation Committee will establish a similar policy with respect to stock trading window periods in advance of, and immediately following, earnings releases and policies for the appropriate treatment of equity grants and material non-public information.

Post-Employment Compensation

•    Exelis Salaried Investment and Savings Plan and Exelis Salaried Retirement Plan

Historically. Some of the salaried employees of Exelis who work in the United States participate in the Exelis Salaried Retirement Plan (the “SRP”), a tax-qualified retirement plan. Under the plan, participants had the option, prior to December 31, 2011 to elect to be covered by either a Traditional Pension Plan (the “TPP”) or a Pension Equity Plan (the “PEP”) formula for future pension accruals. While the TPP formula pays benefits as an annuity on a monthly basis after retirement, the PEP formula enabled participants to elect to have benefits paid as

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a single sum payment upon employment termination, regardless of the participant’s age. The TPP benefit payable to an employee depends upon the date an employee first became a participant under the SRP.

Effective January 1, 2012 (the “effective date”), the Exelis Compensation Committee adopted and implemented modifications to the Exelis Salaried Investment and Savings Plan (the “ISP”) and the SRP. On that date, all current, eligible U.S. Exelis employees, including the Exelis NEOs and Vectrus NEOs, had a one-time opportunity to choose participation in the ISP or the SRP. Employees who chose the ISP stopped accruing benefits under the SRP on the effective date. Employees who chose the SRP alternative will not receive any further employer matching or base contributions under the ISP, but they may continue to make their own contributions under the ISP. The SRP is described in more detail in the narrative related to Pension Benefits in “—Pension Benefits— Exelis Pension Benefits” and in the 2013 Pension Benefits table. Employees are vested under the SRP after completing 3 years of eligibility service. For those employees who chose the ISP, Exelis will continue to credit the employee’s ISP account each pay period throughout the year with a base contribution, regardless of whether the employee makes individual contributions. Effective January 1, 2012, the new base contribution is based on the following formula:

• 2% of eligible pay if an employee is less than 35 years of age;

• 3% of eligible pay if an employee is at least 35 years of age but less than 45 years of age; and

• 4% of eligible pay if an employee is 45 years of age or older.

In addition, an employee receives a dollar-for-dollar match (100%) on the first 1% of the eligible employee’s salary and bonus that such participant contributes into the ISP and a 50% match on the next 5% of eligible employee’s salary and bonus that such participant contributes into the ISP up to a maximum of eligible pay described above. An employee will be vested immediately in all individual and company contributions under the ISP. Effective January 1, 2012, matching contributions to the ISP were automatically increased to 6% of eligible pay if an employee was saving less than 6% as of the January 1, 2012 or not saving at all. By contributing 6% of eligible pay, an employee received the maximum employer matching contribution.

Federal law limits the amount of compensation that can be used to determine employee and employer contribution amounts ($255,000 in 2013) to the tax-qualified ISP plan. Accordingly, Exelis established and maintains a non-qualified, unfunded Exelis Excess Savings Plan that is discussed in more detail in the narrative to the “2013 Nonqualified Deferred Compensation” table.

Effective January 1, 2012 the PEP was discontinued. Any benefit amount employees have accrued under the PEP will be credited with interest under the PEP formula. The PEP interest rate will be the greater of the 10-year Treasury bond as of December 31 of the prior year or 3.25%. When an employee leaves Exelis, at any age, the employee receives the PEP amount accrued, if vested.

•    Excess Pension Plans

Historically. Exelis employees who elected to participate in the SRP may continue to accrue benefits under the Exelis Excess Pension Plans (the “Excess Pension Plans”). Because Federal law limits the amount of benefits that can be paid and the amount of compensation that can be recognized under tax-qualified retirement plans, Exelis established and maintained non-qualified, unfunded excess pension plans solely to pay retirement benefits that could not be paid from the SRP. Benefits under the Excess Pension Plans are generally paid directly by Exelis. The excess benefit earned under the TPP formula will be paid as an annuity. Since the Excess Pension Plans are an unfunded obligation of Exelis, in the event of a change of control, Excess Pension Plans benefits would be immediately payable, subject to any applicable Section 409A restrictions with respect to form and timing of payments, and would be paid in a single discounted sum. The single-sum payment provision provides executives with the earliest possible access to the funds in the event of a change of control, and avoids leaving unfunded pension payments in the hands of the acquirer. Benefits under the Excess Pension Plan were frozen, as of January 1, 2012, for Exelis employees who did not elect to continue participation in the SRP.

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•    Freezing the SRP and Excess Pension Plans

SRP

On May 29, 2013, the Exelis Compensation Committee approved amendments to the SRP, a qualified defined benefit pension plan, effective December 31, 2016, to freeze all benefit accruals for all persons entitled to benefits under the SRP by freezing the accrual of “Benefit Service” and the crediting of “Compensation,” as such terms are defined in the SRP, as of December 31, 2016. As a result, final average pay formulas will not reflect future compensation increases or benefit service after December 31, 2016.

Excess Pension Plans

On May 29, 2013, the Exelis Compensation Committee approved similar amendments to the Excess Pension Plans, each a non-qualified defined benefit pension plan. The amendments will freeze all further benefit accruals under the Excess Pension Plans as of December 31, 2016 for all persons entitled to benefits thereunder. As a result, final average pay formulas in the Excess Pension Plans will not reflect future compensation increases or benefit service after December 31, 2016.

•    Deferred Compensation Plans

Historically. Exelis NEOs are also eligible to participate in the Exelis Deferred Compensation Plan, which is described in more detail in “—Nonqualified Deferred Compensation— Exelis Deferred Compensation Plan.” This plan provides executives an opportunity to defer receipt of between 2% and 90% of any AIP payments they earn. The amount of deferred compensation ultimately received reflects the performance of benchmark investment funds made available under the Deferred Compensation Plan as selected by the executive. Participants in the Deferred Compensation Plan may elect a fund that tracks the performance of Exelis common stock.

Post-Employment Compensation

Going Forward. It is expected that the Vectrus Compensation Committee will adopt competitive post-employment compensation programs. The specific plans and terms of such plans have not yet been determined. Benefits under the SRP and Excess Pension Plans will be frozen as of the date of the spin-off for all participating Vectrus employees. It is anticipated that eligibility service will continue to accrue for all persons entitled to benefits under the SRP and Excess Pension Plans through December 31, 2016.

Severance Plan Arrangements

Historically. Exelis maintains two severance plans for its senior executives — the Senior Executive Severance Pay Plan and the Special Senior Executive Severance Pay Plan. These plans were originally established in 1984 and are regularly reviewed by the Exelis Compensation Committee. They are described in more detail in “—Potential Payments Upon Termination or Change in Control— Potential Post-Employment Compensation.” The severance plans apply to the Exelis key employees as defined by Section 409A of the Code. The Exelis severance plan arrangements are not considered in determining other elements of compensation. In addition, Exelis has adopted the Exelis Severance Policy which provides for severance based on grade level and years of service.

Mr. Hunzeker participates in both the Senior Executive Severance Pay Plan and the Special Senior Executive Severance Pay Plan. Messrs. Klein, Coppock, and Anderson and Ms. Oliver are covered by the Exelis Severance Policy.

Senior Executive Severance Pay Plan. The purpose of this plan is to provide a period of transition for senior executives. Senior executives, who are U.S. citizens or who are employed in the United States, are covered by this plan. The plan generally provides for severance payments if Exelis terminates a senior executive’s employment without cause.

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The exceptions to severance payment are:

• the executive terminates his or her own employment,

• the executive’s employment is terminated for cause,

• termination occurs after the executive’s normal retirement date under the Senior Executive Severance Pay Plan, or

• termination occurs in certain divestiture instances if the executive accepts employment or refuses comparable employment.

No severance is provided for termination for cause because Exelis believes employees terminated for cause should not receive additional compensation. No severance is provided in the case of termination after a normal retirement date because the executive will be eligible for retirement payments under the SRP. No severance is provided where an executive accepts or refuses comparable employment because the executive has the opportunity to receive employment income from another party under comparable circumstances.

Special Senior Executive Severance Pay Plan. The purpose of this plan is to provide compensation in the case of termination of employment in connection with an acceleration event (defined in “—Potential Payments Upon Termination or Change in Control—Change of Control Arrangements”) including a change of control. The plan is structured to encourage executives to act in the best interests of shareholders by providing for certain compensation and retention benefits and payments, including change of control provisions, in the case of an acceleration event. The Special Senior Executive Severance Pay Plan provides two different levels of benefits for covered executives. Based on their position within Exelis each covered executive is designated as either a “Band A” participant or a “Band B” participant. Mr. Hunzeker is the only Vectrus NEO who participates in the Special Senior Executive Severance Pay Plan. He is eligible to receive those benefits available to participants designated as “Band A” participants, which are described herein.

The purposes of the Special Senior Executive Severance Pay Plan provisions are to:

• provide for continuing cohesive operations as executives evaluate a transaction, which, without change of control protection, could be personally adverse to the executive,

• keep executives focused on preserving value for shareholders,

• retain key talent in the face of potential transactions, and

• aid in attracting talented employees in the competitive marketplace.

The Special Senior Executive Severance Pay Plan provides severance benefits for covered executives, including any Exelis NEO whose employment is terminated by Exelis other than for cause, or where the covered executive terminates his or her employment for good reason within two years after the occurrence of an acceleration event as described below (including a termination due to death or disability) or if during the two-year period following an acceleration event, the covered executive had grounds to resign with good reason or the covered executive’s employment is terminated in contemplation of an acceleration event that ultimately occurs.

With respect to severance pay, the Special Senior Executive Severance Pay Plan provides that a covered executive is entitled to receive the sum of three times (x) the current base salary rate in effect at the time of such covered executive’s termination of employment and (y) the target annual bonus at the time of such covered executive’s termination of employment. More information about the Special Senior Executive Severance Pay Plan is provided in “—Potential Payments upon Termination or Change in Control— Potential Post-Employment Compensation— Special Senior Executive Severance Pay Plan.”

Going Forward. It is expected that the Vectrus Compensation Committee will adopt and implement severance plans similar to the Senior Executive Severance Pay Plan and the Special Senior Executive Severance

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Pay Plan and that each of the NEOs will participate in these plans. The specific arrangements and terms of such severance plans or arrangements have not yet been determined.

Change of Control Arrangements

Historically. As described more fully in “—Potential Payments Upon Termination or Change in Control—Change of Control Arrangements,” many of the short-term and long-term incentive plans, severance arrangements and nonqualified deferred compensation plans of Exelis provide additional or accelerated benefits upon a change of control. Generally, these change of control provisions are intended to put the executive in the same position he or she would have been in had the change of control not occurred. Executives then can focus on preserving value for shareholders when evaluating situations that, without change of control provisions, could be personally adverse to the executive.

Going Forward. It is expected that the Vectrus Compensation Committee will provide for similar treatment of short-term and long-term incentive plans, severance arrangements and nonqualified deferred compensation plans upon a change of control. The specific terms of these plans and arrangements have not yet been determined.

Employee Benefits and Perquisites

Historically. Executives, including the NEOs, are eligible to participate in the Exelis broad-based employee benefits program. The program includes either the pension program (if selected prior to January 1, 2012) or an ISP which includes before-tax and after-tax savings features, group medical and dental coverage, group life insurance, group accidental death and dismemberment insurance and other benefit plans. These other benefit plans include short- and long-term disability insurance, long-term care insurance and a flexible spending account plan.

Certain perquisites to the NEOs.

Historically. Exelis provides only those perquisites that it considers to be reasonable and consistent with competitive practice. Perquisites (which are described more fully in “—Tabular Executive Compensation Disclosure—All Other Compensation Table” and the related narrative) available for certain Exelis executives include a car allowance up to $1,300 per month and financial and estate planning. Such perquisites are not tax-protected.

Going Forward. The Vectrus Compensation Committee will review these benefits and perquisites after the spin-off.

Consideration of Tax and Accounting Impacts

Historically. Section 162(m) of the Code places a limit of $1,000,000 on the amount of compensation that Exelis may deduct in any one year with respect to its Chief Executive Officer and the three other highest-paid NEOs, other than the Chief Financial Officer. There is an exception to the $1,000,000 limitation for performance-based compensation meeting certain requirements. Compensation attributable to awards under the Exelis AIP and long-term incentive program are generally structured to qualify as performance-based compensation under Section 162(m) of the Code.

However, the Exelis Compensation Committee realizes that evaluation of the overall performance of the senior executives cannot be reduced in all cases to a fixed formula. There may be situations in which the prudent use of discretion in determining pay levels is in the best interests of Exelis and its shareholders and, therefore, desirable. In those situations where discretion is used, awards may be structured in ways that will not permit them to qualify as performance-based compensation under Section 162(m) of the Code.

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Exelis utilizes a best-net provision in its plans in the event of a change-of-control. Under the “best net” provisions, if payments triggered by a change-of-control would be subject to an excise tax, then the payments either (1) would be reduced by the amount needed to avoid triggering the tax, or (2) would not be reduced, depending on which alternative left the executive in the best after-tax position. Exelis and the Exelis Compensation Committee do not consider other tax implications in designing the Exelis compensation plans, except that such plans are intended to comply with Section 409A of the Code, to the extent applicable.

Going Forward. It is expected that the Vectrus Compensation Committee will establish a similar policy and practice with respect to compliance with Sections 162(m) and 409A, and the best-net provisions of the Code.

Policy Against Hedging, Speculation in Exelis Stock, and Insider Trading

Historically. Exelis has a policy that prohibits employees from taking advantage of, disclosing, or using any confidential information for the purpose of personal gain, including buying, selling, or trading in any Exelis security. The Board of Directors has adopted a parallel policy. These policies include prohibitions against hedging, speculation or other investments where the share owner’s economic interest is disassociated from share ownership. Further, Directors and executives annually receive specific instructions which prohibit engaging in certain trading with respect to equity securities of Exelis including short sales and transactions involving puts, calls, and listed and unlisted options (other than exercises of company granted stock options).

Going Forward. It is expected that the management of Vectrus and the Vectrus Board of Directors will establish similar policies against hedging, speculation in Vectrus stock and insider trading.

Business Risk and Compensation

Historically. In 2013, as in past years, the Exelis Compensation Committee evaluated risk factors associated with its businesses in determining compensation structure and pay practices. The structure of the Exelis Board of Directors and Committees facilitated this evaluation and determination. During 2013, the Non-executive chair of the Board was a member of the Exelis Audit and Compensation Committees. This dual Committee membership provided insight into the business risks of Exelis and afforded the Exelis Compensation Committee access to information necessary to consider the impact of business risks on compensation structure and pay practices. Further, overall enterprise risk was considered and discussed at Board meetings, providing additional important information to the Exelis Compensation Committee. Compensation across the enterprise is structured so that unnecessary or excessive risk-taking behavior is discouraged. Total compensation for senior officers is heavily weighted toward long-term compensation consistent with the Exelis compensation philosophy. This focus on long-term compensation discourages behaviors that encourage short-term risks. The Chief Executive Officer and President attends the Exelis Compensation Committee meetings and the Senior Vice President and Chief Financial Officer attends those portions of the Exelis Compensation Committee meetings at which plan features and design configurations for the annual and long-term incentive plans are considered and approved. The Exelis Compensation Committee determined that the compensation structure did not create risks that would have a material adverse effect on our company. Compensation across the enterprise is structured so that unnecessary or excessive risk-taking behavior is discouraged. Further, total compensation for senior officers is heavily weighted toward long-term compensation consistent with the Exelis compensation philosophy, which is focused on long-term value creation. This long-term weighting discourages behaviors that encourage short-term risks.

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The following table summarizes representative Exelis compensation components or policies and relevant risk mitigation factors:

Risk Assessment Across the Enterprise

Exelis Compensation Component or Policy	Risk Mitigation Factor
Salary	Based on market rates. Provides stability and minimizes risk-taking incentives.
Annual Incentive Plan	AIP design emphasizes overall performance and collaboration across the enterprise as well as at the applicable Mission Systems business level. AIP components focus on metrics that encourage operating performance and earnings per share appreciation. AIP design is tailored to meet unique business considerations for the Corporate and Mission System business levels. Individual AIP components and total AIP awards are capped.
Long-Term Incentive Awards
•   Restricted Stock Units	Restricted stock units generally vest after three years.
•   Stock Options	Stock options vest in one-third cumulative annual installments after the first, second and third anniversary of the grant date.
•   Total Shareholder Return Awards	TSR awards are based on three-year relative share price performance and encourage behaviors focused on long-term goals, while discouraging behaviors focused on short-term risks.
Perquisites	Limited perquisites are based on competitive market data. Such perquisites are not tax-protected.
Severance and Pension benefits	Severance and pension benefits are in line with competitive market data.
Clawback Policy	Provides mechanism for senior executive compensation recapture in certain situations involving fraud or willful misconduct.
Officer Share Ownership Guidelines	Exelis officers are required to own Exelis shares or share equivalents up to 5x base salary, depending on the level of the officer (discussed in “Share Ownership Guidelines” under “—Other Considerations and Policies”). Share ownership guidelines align executive and shareholder interests.
Prohibition Against Hedging, Pledging and Speculation in Exelis Securities	Exelis policy prohibits speculative trading in and out of Exelis securities, including prohibitions on hedging, short sales and leverage transactions, such as puts, calls, and listed and unlisted options.

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Going Forward. It is expected that the Vectrus Compensation Committee will adopt a compensation philosophy similar to that of Exelis, and that it will be structured and operate similarly so as to discourage unnecessary or excessive risk-taking and promote long-term value creation.

Compensation Committee Interlocks and Insider Participation

There are no Compensation and Personnel Committee interlocks involving any of the projected members of the Compensation and Personnel Committee.

Action Taken in Anticipation of Spin-off

The following are the anticipated compensation arrangements expected in connection with the spin-off for each of the Vectrus NEOs. All of these arrangements are subject to review and approval by the Vectrus Compensation Committee. The Exelis Compensation Committee considered data from the Compensation Consultant in determining initial compensation levels for these executives. The Exelis Compensation Committee determined, in view of individual experience for each of the Vectrus NEOs, that it was appropriate to use the 25th percentile of competitive practice in determining initial compensation levels for these executives effective upon completion of the spin-off. This includes annual base salaries, Target 2015 Long-Term Incentive Awards, which will be an equity-based award, and target awards for the 2014 Annual Incentive Plan that will be paid in 2015. With respect to each of these elements, compensation levels within approximately 10% above or below the market dollar value are considered by the Compensation Consultant and the Exelis Compensation Committee to be within the competitive market range. The Exelis Compensation Committee reviewed the compensation of the executives below and determined that compensation actions that will be taken in 2014, before the spin-off, would begin to move individual compensation amounts toward the 25th percentile of market. At the time of the spin-off, total compensation levels for Mr. Hunzeker, Mr. Klein, Ms. Oliver and Mr. Anderson will be at 101%, 100%, 117%, and 97% of the 25th percentile, respectively. Mr. Coppock’s pay was set based on internal equity with the other NEOs at Vectrus. While the 25th percentile is our target for these executives at the time of the spin-off, the table below compares anticipated compensation at the time of the spin-off with the market median.

Named Executive Officer	Annual Base Salary Effective Upon Spin-Off ($)		Annual Base Salary Effective Upon Spin-Off as Percentage of Market Median Dollar Value			Target 2014 Annual Incentive Award (%) of Base Salary			Target 2014 Annual Incentive Award as Percentage of Market Median Dollar Value			2015 Long- Term Incentive Award ($)		2014 Long- Term Incentive Award as Percentage of Market Median Dollar Value			Anticipated Total Compensation as Percentage of Market Median Range
Kenneth W. Hunzeker		600,000		76	%		100	%		75	%		900,000		78	%		76	%
Matthew M. Klein		325,000		73	%		65	%		67	%		410,000		61	%		66	%
Janet L. Oliver		280,000		80	%		50	%		67	%		200,000		96	%		81	%
Kelvin R. Coppock (1)		270,000					50	%					200,000
Charles A. Anderson		280,000		83	%		50	%		72	%		200,000		63	%		73	%

(1) For Mr. Coppock, as there was no direct market benchmark for his position, his pay was set based on internal equity with the other NEOs at Vectrus.

It is also anticipated that Founders’ Grants will be awarded to each of the NEOs and to other employees in positions deemed critical to the establishment and success of Vectrus. The Founders’ Grants are a special one-time award intended to closely align the economic interests of the recipients with the Vectrus shareholders. Based upon discussions with the Compensation Consultant, the Exelis Compensation Committee decided to set the Founders’ Grant award amounts at 1.5 times each NEO’s Target 2015 Long-Term Incentive Award because the Exelis Compensation Committee determined that this amount would appropriately align the NEOs economic interests with the Vectrus shareholders while providing an appropriate retention incentive. It is anticipated that the Founders’ Grants will be comprised of the following: one-half of the Founders’ Grant award will be in restricted stock units and one-half will be in non-qualified stock options, which combined awards will have a grant date fair value equal to the dollar value of the Founders’ Grant. It is anticipated that the restricted stock units and option awards will vest ratably over three years.

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Additionally, Transaction Success Incentive Awards will be awarded to Messrs. Klein, Coppock and Anderson and Ms. Oliver. Transaction Success Incentive Awards are cash awards intended to provide an incentive to the recipient in recognition of the additional work and responsibilities required and to facilitate successful completion of the transaction. Target Transaction Success Incentive Awards are expected to be payable on a date to be determined following the spin-off and are expected to include consideration of the following factors in determining the actual payout of the award: timely completion of the spin-off and retention of key employees. Based upon discussions with the Compensation Consultant, the Exelis Compensation Committee decided to set the Transaction Success Incentive Award amounts at approximately 50% of each NEO’s March 2014 base salary because the Exelis Compensation Committee determined that this amount would appropriately reward the NEOs for the successful completion of their additional responsibilities in connection with the spin-off.

These anticipated awards were assessed independently by the Exelis Compensation Committee as one-time awards in recognition of the significant responsibilities undertaken by the NEOs to execute the spin-off transaction and in recognition of the leadership demonstrated by the NEOs throughout the transaction, which will be key to the success of the new organization. The Founders’ Grants and Transaction Success Incentive Awards were not considered in setting the other elements of compensation we expect to pay to the NEOs for their service as NEOs of the new organization as described above. The Founders’ Grants will be awarded to the NEOs and to other Vectrus key leadership employees who are critical to the establishment and success of the new company. The Founders’ Grant awards will be granted by the Vectrus Compensation Committee following the completion of the transaction. Any value realized with respect to stock options and any increased value associated with the restricted stock unit awards will depend on the performance of Vectrus in the years following the spin-off.

The Transaction Success Incentive Awards for Messrs. Klein, Coppock and Anderson and for Ms. Oliver were set at 50% of each NEOs March 2014 base salary because the Exelis Compensation Committee determined that this level of incentive would appropriately recognize the NEOs for the successful completion of their additional responsibilities in connection with the spin-off. Each of these NEOs is expected to carry on their current management roles within Exelis Systems related to their financial, operations, business development and program management responsibilities key to the continuing successful performance of the business, as well as provide the critical strategic direction and leadership in connection with the spin-off. The Exelis Compensation Committee did not award Mr. Hunzeker a Transaction Success Incentive Award in consideration of the amount of his Founders’ Grant award.

The table below provides the expected amounts of Founders’ Grants and Transaction Success Incentive Awards to be paid to each of our NEOs:

Named Executive Officer	Founders’ Grant		Transaction Success Incentive Award
Kenneth W. Hunzeker	$	1,350,000	$	—
Matthew M. Klein	$	615,000	$	137,500
Janet L. Oliver	$	300,000	$	137,500
Kelvin R. Coppock	$	300,000	$	130,000
Charles A. Anderson	$	300,000	$	117,500

See “Certain Relationships and Related Party Transactions—Agreements with Exelis Related to the Spin-Off—Employee Matters Agreement” for a description of the terms of the Employee Matters Agreement, including the treatment of outstanding Exelis equity awards.

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TABULAR EXECUTIVE COMPENSATION DISCLOSURE

SUMMARY COMPENSATION TABLE

Name and Principal Position (a)	Year (b)		Salary ($) (c)		Bonus ($) (d)		Stock Awards ($) (e)		Option Awards ($) (f)		Non- Equity Incentive Plan Compensation ($) (g)		Change in Pension Value & Nonqualified Deferred Compensation Earnings ($) (h)		All Other Compensation ($) (i)		Total ($) (j)
Kenneth W. Hunzeker, Chief Executive Officer and President		2013		370,635		—		299,996		200,000		311,000		—		143,838		1,325,469
Matthew M. Klein, Senior Vice President and Chief Financial Officer		2013		224,454		—		77,996		52,000		107,500		—		21,300		483,250
Janet L. Oliver, Senior Vice President, Business Development		2013		267,859		150,000		95,995		64,001		116,100		56,998		603		751,556
Kelvin R. Coppock, Senior Vice President, Contracts		2013		330,400		—		77,996		52,000		109,500		89,307		1,588		660,791
Charles A. Anderson, Senior Vice President, Programs		2013		215,949		—		70,004		—		117,700		—		35,001		438,654

(d) Ms. Oliver received a bonus for year 2013 under the Janet Oliver Letter Agreements described under “—Individual Compensation Arrangements”.

(e) Amounts in the Stock Awards column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for TSR awards and restricted stock unit awards for all NEOs, except that the amount for Mr. Anderson represents restricted stock unit awards only. The grant date fair value of TSR units are expressed as target cash payout for the period from January 1, 2013 through December 31, 2015 based on the performance of Exelis relative to the performance of companies comprising the S&P 1500 Aerospace/Defense Index and our concentrated group of peer companies. Based on the performance of Exelis, payment can range from 0% to 200% of the target value. The TSR plan is considered a liability plan under the provisions of FASB ASC Topic 718. The grant date fair value of restricted stock units is calculated based on Exelis stock price at the close of the grant date.

(f) Amounts in the Option Awards column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of non-qualified stock option awards in the year of grant based on a value of $1.93 per share. The fair value of $1.93 per share was calculated under the Black-Scholes model based on the following assumptions: dividend yield of 3.72% (based on the announced dividend as of the grant date annualized and divided by the grant date stock price), expected volatility of 27.0% (based on daily average volatility of our peer group companies over seven years), expected life of seven years (represents the estimated period of time until exercise and is based on the vesting period of the award and the estimated exercise patterns of employees) and risk-free rate of 1.40% (based on the United States Treasury stripped coupon rates with maturities corresponding to the expected term of seven years measured as of the grant date).

(g) Amounts in the Non-Equity Incentive Plan Compensation column represent AIP awards for year 2013, which to the extent not deferred by an executive, were paid out in February 2014.

(h) No NEO received preferential or above-market earnings on deferred compensation. The change in the present value in accrued pension benefits was determined by measuring the present value of the accrued benefit at the respective dates using a discount rate of 4.10% at December 31, 2012, and 4.70% at December 31, 2013 and based on the assumption that retirement occurs at the normal retirement date. Exelis will retain the SRP. In accordance with the SEC’s disclosure rules, no change is reflected in the table for Messrs. Hunzeker, Klein, and Anderson because the actuarial present value of their accumulated pension benefit declined by $ (26,412),$(25,506) and $(130) respectively during fiscal 2013 due to a change in the applicable discount rate. Because their pension benefits were frozen as of December 31, 2011, the effect of this change in discount rate was not offset by increases in accrued benefits as is the case for the other named executive officers. The terms of pension arrangements are summarized under “—Pension Benefits” below.

(i) Amounts in this column for 2013 represent items specified in the table below.

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All Other Compensation Table

Name	Financial Counseling ($) (a)		Auto Allowances ($) (b)		Relocation ($) (c)		Total Perquisites ($)		Excess Savings Plan Contributions ($) (d)		401(K) Match and Base ($) (e)		Other ($) (f)		Total All Other Compensation ($)
Kenneth W. Hunzeker		600		15,600		81,600		97,800		26,680		16,840		2,518		143,838
Matthew M. Klein		—		—		—		—		8,036		13,054		210		21,300
Janet L. Oliver		—		—		—		—		—		—		603		603
Kelvin R. Coppock		—		—		—		—		—		—		1,588		1,588
Charles A. Anderson		—		—		9,244		9,244		5,786		19,125		846		35,001

(a) Amounts represent financial counseling and tax service fees paid during 2013 for Mr. Hunzeker. Financial counseling and tax service fees reflect fees for invoices submitted during the calendar year.

(b) Auto allowances are provided to a range of executives including Mr. Hunzeker. The remaining NEOs did not receive an auto allowance.

(c) Messrs. Hunzeker and Anderson received relocation assistance related to each NEO’s move to the Mission Systems business headquarters in Colorado Springs, Colorado.

(d) Exelis contributions to the Exelis Excess Savings Plan are unfunded and earnings accrue at the same rate as the Stable Value Fund available to participants in the Exelis Salaried Investment and Savings Plan.

(e) Amounts represent the aggregate of the match and base contributions of Exelis to the participant’s Exelis Salaried Investment and Savings Plan account.

(f) Amounts include taxable group term-life insurance premiums attributable to each NEO.

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GRANTS OF PLAN-BASED AWARDS

The following table provides information about 2013 equity and non-equity awards for the NEOs. The table includes the grant date for equity-based awards, the estimated future payouts under non-equity incentive plan awards and estimated future payouts under 2013 equity incentive plan awards (which consist of the TSR target award granted in 2013 for the 2013-2015 performance period (each unit equals $1)). Also provided is the number of shares underlying all other stock awards, consisting of restricted stock unit and non-qualified stock option awards. The table also provides the exercise price of the non-qualified stock option awards, reflecting the closing price of Exelis stock on the grant date and the grant date fair value of each equity award computed under FASB ASC Topic 718. The compensation plans under which the grants in the following table were made are described in the Compensation Discussion and Analysis and include the AIP, TSR, restricted stock unit awards, and non-qualified stock options awards.

Grants of Plan-Based Awards

		Estimated Future Payouts Under Non- Equity Incentive Plan						Estimated Future Payouts Under Equity Incentive Plan Awards						All Other Stock Awards: Number of Shares of Stock or Units (#) (i)		All Other Option Awards: Number of Securities Underlying Options (#) (j)		Exercise or Base Price of Option Awards ($) (k)		Grant Date Fair Value of Stock and Option Awards ($) (l)
Name (a)	Grant Date (b)	Threshold ($) (c)		Target ($) (d)		Maximum ($) (e)		Threshold (#) (f)		Target (#) (g)		Maximum (#) (h)
Kenneth W. Hunzeker	—		121,875		243,750		487,500		—		—		—		—		—		—		—
	08-Mar-2013		—		—		—		75,000		150,000		300,000		—		—		—		150,000
	08-Mar-2013		—		—		—		—		—		—		13,501		—		—		150,000
	08-Mar-2013		—		—		—		—		—		—		—		103,627		11.11		200,000
Matthew M. Klein	—		39,463		78,925		157,852		—		—		—		—		—		—		—
	08-Mar-2013		—		—		—		19,500		39,000		78,000		—		—		—		39,000
	08-Mar-2013		—		—		—		—		—		—		3,510		—		—		39,000
	08-Mar-2013		—		—		—		—		—		—				26,943		11.11		52,000
Janet L. Oliver	—		51,129		102,258		204,516		—		—		—		—		—		—		—
	08-Mar-2013		—		—		—		24,000		48,000		96,000		—		—		—		48,000
	08-Mar-2013		—		—		—		—		—		—		4,320		—		—		48,000
	08-Mar-2013		—		—		—		—		—		—		—		33,161		11.11		64,000
Kelvin R. Coppock	—		48,222		96,444		192,888		—		—		—		—		—		—		—
	08-Mar-2013		—		—		—		19,500		39,000		78,000		—		—		—		39,000
	08-Mar-2013		—		—		—		—		—		—		3,510		—		—		39,000
	08-Mar-2013		—		—		—		—		—		—		—		26,943		11.11		52,000
Charles A. Anderson	—		34,560		69,120		138,240		—		—		—		—		—		—		—
	08-Mar-2013		—		—		—		—		—		—		6,301		—		—		70,000

(c)(d)(e) Amounts reflect the threshold, target and maximum payment levels, respectively, if an award payout is achieved under Exelis AIP described above in “—Compensation Discussion and Analysis—Overview of the Exelis AIP”). These potential payments are based on achievement of specific performance metrics and are completely at risk. The target award is computed based upon the applicable range of net estimated payments denominated in dollars where the target award is equal to 100% of the award potential, the threshold is equal to 50% of target and the maximum is equal to 200% of target.

(f)(g)(h) Amounts reflect the threshold, target and maximum payment levels, if an award payout is achieved, under Exelis TSR Plan for the 2013-2015 performance period described under “Compensation Discussion and Analysis—TSR Award Component”. Each unit under the TSR Plan equals $1. Payments, if any, under the TSR Plan are paid in cash following the end of the performance period. The performance period for awards under the TSR Plan of Exelis, reflected in the Estimated Future Payouts Under Equity Incentive Plan Awards column, for the 2013-2015 performance period is January 1, 2013-December 31, 2015.

(i) Amounts reflect the number of restricted stock units granted in 2013 to the NEOs. The number of shares underlying restricted stock unit awards was determined using the closing price of Exelis common stock price on the grant date of March 8, 2013. Restricted stock unit grants to NEOs generally vest in full at the end of the three-year restriction period following the grant date.

(j) Amounts reflect the number of non-qualified stock options granted in 2013 to the NEOs. The number of non-qualified stock options was determined by the Black Scholes value on the grant date of March 8, 2013.

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(k) The option exercise price for non-qualified stock options granted in 2013 was the closing price of Exelis common stock on March 8, 2013, the date the non-qualified stock options were granted.

(l) Amounts in this column represent the grant date fair value computed in accordance with FASB ASC Topic 718 for TSR target awards, restricted stock unit awards and non-qualified stock option awards granted to the NEOs in 2013.

Individual Compensation Arrangements

Janet Oliver Letter Agreements

Ms. Oliver entered into agreements with ITT Corporation on April 26, 2011 which were amended on January 31, 2012, to substitute Exelis for ITT Corporation following the Exelis spin-off and provided for certain incentives to be paid to Ms. Oliver in exchange for the execution of a Non-Competition and Non-Solicitation Agreement. These agreements are collectively referred to as the “Janet Oliver Letter Agreements” and are filed as exhibits to the Registration Statement on Form 10 of which this information statement is a part. It is expected that, going forward, Vectrus will assume and agree to perform any remaining special compensation incentives set forth in the Janet Oliver Letter Agreements.

Term: The Janet Oliver Letter Agreements provide incentives for Ms. Oliver to remain with Exelis through at least March 31, 2015.

Incentives: We agreed to make three separate incentive payments beyond the awards for which Ms. Oliver might otherwise qualify under the Annual Incentive Plan. Specifically, we agreed to increase by $150,000 any bonus awarded and paid to Ms. Oliver in each of March 2012, 2013 and 2014. In the event Ms. Oliver voluntarily terminates her employment with us or is terminated for cause (as defined in the Non-Competition and Non-Solicitation agreements which are part of the Janet Oliver Letter Agreements), Ms. Oliver forfeits any and all claims to any payments not made prior to the date of such termination.

Amendment: As described above, the Janet Oliver Letter Agreements were amended effective January 31, 2012 to substitute Exelis for ITT Corporation to reflect the Exelis spin-off. Further, Ms. Oliver is not precluded from working for businesses deemed to be in competition with the business of the Mission Systems business, if and only if a portion of the Mission Systems business is sold directly to such business. No other terms of the Janet Oliver Letter Agreements were amended.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table reflects the outstanding equity awards held by Vectrus NEOs on December 31, 2013.

	Option Awards										Stock Awards
Name (a)	Grant Date (1)		Number of Securities Underlying Unexercised Options (#) Exercisable (b)		Number of Securities Underlying Unexercised Options (#) Unexercisable (c)		Option Exercise Price ($) (e)		Option Expiration Date (f)		Number of Shares or Units of Stock That Have Not Vested (#) (g)(2)		Market Value of Shares or Units of Stock That Have Not Vested ($)(2, 3) (h)
Kenneth W. Hunzeker		—		—		—		—		—		55,703		1,061,699
		03-Mar-11		—		8,519		13.07		03-Mar-21		—		—
		18-Apr-11		—		3,404		13.11		18-Apr-21		—		—
		07-Nov-11		—		45,573		10.95		07-Nov-21		—		—
		06-Mar-12		—		47,619		11.19		06-Mar-22		—		—
		08-Mar-13		—		103,627		11.11		08-Mar-23		—		—
Matthew M. Klein		—		—		—		—		—		—		186,864
		06-Mar-12		5,443		10,884		11.19		06-Mar-22		—		—
		08-Mar-13		—		26,943		11.11		08-Mar-23		—		—
Janet L. Oliver		—		—		—		—		—		—		213,777
		05-Mar-10		—		—		12.12		05-Mar-20		—		—
		03-Mar-11		—		4,260		13.07		03-Mar-21		—		—
		06-Mar-12		—		19,047		11.19		06-Mar-22		—		—
		08-Mar-13		—		33,161		11.11		08-Mar-23		—		—
Kelvin R. Coppock		—		—		—		—		—		10,554		201,159
		06-Mar-12		—		10,884		11.19		06-Mar-22		—		—
		08-Mar-13		—		26,943		11.11		08-Mar-23		—		—
Charles A. Anderson		—		—		—		—		—		10,769		205,257

(1) The award dates presented in this column prior to October 31, 2011 represent the date the awards were granted (a) by ITT Corporation for awards prior to the Exelis Spin-Off and (b) by Exelis for all other awards. Though the awards prior to the Exelis Spin-Off were converted to Exelis equity, the vesting dates remained the same.

(2) For Mr. Hunzeker and Ms. Oliver, 6,286 shares and 4,260 shares, respectively, vested on March 3, 2014.

(3) Reflects the closing stock price of Exelis of $19.06 on December 31, 2013.

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Option Vesting Schedule

Generally, options vest in one-third installments on each of the first, second and third anniversary of the grant date.

Name	Grant Date		Vesting Schedule (#s)
			2014		2015		2016
Kenneth W. Hunzeker		03-Mar-11		8,519		—		—
		18-Apr-11		3,404		—		—
		07-Nov-11		45,573		—		—
		06-Mar-12		23,810		23,809		—
		08-Mar-13		34,543		34,542		34,542
Matthew M. Klein		06-Mar-12		5,442		5,442		—
		08-Mar-13		8,981		8,981		8,981
Janet L. Oliver		03-Mar-11		4,260		—		—
		06-Mar-12		9,524		9,523		—
		08-Mar-13		11,054		11,054		11,053
Kelvin R. Coppock		06-Mar-12		5,442		5,442		—
		08-Mar-13		8,981		8,981		8,981
Charles A. Anderson		—		—		—		—

Stock Vesting Schedule

Restricted stock units granted through 2013 cliff vest on the third anniversary of the grant date.

Name	Grant Date		Vesting Schedule (#s)
			2014		2015		2016
Kenneth W. Hunzeker		03-Mar-11		6,286		—		—
		18-Apr-11		2,560		—		—
		07-Nov-11		23,973		—		—
		06-Mar-12		—		9,383		—
		08-Mar-13		—		—		13,501
Matthew M. Klein		03-Mar-11		4,149		—		—
		06-Mar-12		—		2,145		—
		08-Mar-13		—		—		3,510
Janet L. Oliver		03-Mar-11		3,143		—		—
		06-Mar-12		—		3,753		—
		08-Mar-13		—		—		4,320
Kelvin R. Coppock		03-Mar-11		4,899		—		—
		06-Mar-12		—		2,145		—
		08-Mar-13		—		—		3,510
Charles A. Anderson		06-Mar-12		—		4,468		—
		08-Mar-13		—		—		6,301

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The following table represents the vesting schedule of outstanding 2012 and 2013 TSR awards on December 31, 2014 and 2015, respectively, with each TSR unit reflecting $1 of value.

Name	Approval Date(1)		Target Award in Units (#)(2)		Vesting Schedule
					2014		2015
Kenneth W. Hunzeker		2012		105,000		105,000		—
		2013		150,000		—		150,000
Matthew M. Klein		2012		24,000		24,000		—
		2013		39,000		—		39,000
Janet L. Oliver		2012		42,000		42,000		—
		2013		48,000		—		48,000
Kelvin R. Coppock		2012		24,000		24,000		—
		2013		39,000		—		39,000
Charles A. Anderson		—		—		—		—

(1) For purposes of the TSR, the grant date is January 1, the first day of the performance period for the year in which the award is approved.

(2) Awards are typically expressed as target cash awards and payment, if any, is in cash following the end of the performance cycle.

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OPTION EXERCISES AND STOCK VESTED

The following table shows stock options exercised and stock awards vested in 2013.

	Option Awards				Stock Awards
Name (a)	Number of Shares Acquired on Exercise (#) (b)		Value Realized on Exercise ($) (c)		Number of Shares Acquired on Vesting (#) (d)		Value Realized on Vesting(1) ($) (e)
Kenneth W. Hunzeker(2)		138,810		980,290		3,454		104,798
Matthew M. Klein		—		—		—		—
Janet L. Oliver(3)		20,449		136,513		4,666		85,167
Kelvin R. Coppock		5,443		39,755		3,707		42,113
Charles A. Anderson		—		—		—		—

(1) Reflects aggregate dollar value upon vesting of restricted stock.

(2) 5,494 shares vested on December 31, 2013 and Mr. Hunzeker acquired 3,454 shares on vesting. The vested shares were delivered in January 2014. Restricted stock units were awarded as a replacement for the 2011 ITT TSR. The vesting date is December 31, 2013, the end of the measurement period for the 2011 ITT TSR.

(3) In addition to other shares acquired on vesting during 2013, 2,750 shares vested on December 31, 2013 and Ms. Oliver acquired 1,724 shares on vesting. The shares that vested on December 31, 2013 were delivered in January 2014. Restricted stock units were awarded as a replacement for the 2011 ITT TSR. The vesting date is December 31, 2013, the end of the measurement period for the 2011 ITT TSR.

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PENSION BENEFITS

Exelis Pension Benefits

Exelis Salaried Retirement Plan: As discussed under “Other Considerations and Policies—Post-Employment Compensation”, under the Salaried Retirement Plan (“SRP”), participants had the option, through December 31, 2011, to elect to be covered under either the Traditional Pension (“TPP”) or the Pension Equity Plan (“PEP”) formula for future pension accruals. Effective January 1, 2012, the PEP was discontinued. Also, the Exelis Compensation Committee adopted and implemented modifications to the SRP effective January 1, 2012. All current U.S. Exelis employees, including the NEOs, had a one-time opportunity to choose participation in the ISP or SRP. Employees who chose the Investment Savings Plan (“ISP”) stopped accruing benefits under the SRP on January 1, 2012.

The SRP is a funded and tax-qualified retirement program. The plan is described in detail below.

All of the NEOs participate only in the TPP formula of the Exelis SRP.

Under the TPP, a participant first employed prior to January 1, 2000 would receive an annual pension that would be the total of:

• 2% of his or her “average final compensation” (as described below) for each of the first 25 years of benefit service, plus

• 1 ¹⁄₂% of his or her average final compensation for each of the next 15 years of benefit service up to a combined maximum of 40 years benefit service, reduced by

• 1 ¹⁄₄% of his or her primary Social Security benefit multiplied by the number of years of benefit service up to a maximum of 40 years.

A participant first employed on or after January 1, 2000, under the TPP would receive an annual pension that would equal:

• 1 ¹⁄₂% of his or her average final compensation (as defined below) for each year of benefit service up to 40 years, reduced by

• 1 ¹⁄₄% of his or her primary Social Security benefit multiplied by the number of years of benefit service up to a maximum of 40 years.

For a participant first employed prior to January 1, 2005, average final compensation (including salary and approved bonus or AIP payments) is the total of:

• the participant’s average annual base salary for the five calendar years of the last 120 consecutive calendar months of eligibility service that would result in the highest average annual base salary amount, plus

• the participant’s average annual pension eligible compensation, not including base salary, for the five calendar years of the participant’s last 120 consecutive calendar months of eligibility service that would result in the highest average annual compensation amount.

For a participant first employed on or after January 1, 2005, average final compensation is the average of the participant’s total pension eligible compensation (salary, bonus and annual incentive payments for NEOs and other exempt salaried employees) over the highest five consecutive calendar years of the participant’s final 120 months of eligibility service.

Under the TPP, Standard Early Retirement is available to employees at least 55 years of age with 10 years of eligibility service. For participants first employed prior to January 1, 2000, Special Early Retirement is

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available to employees at least age 55 with 15 years of eligibility service or at least age 50 whose age plus total eligibility service equals at least 80. For Standard Early Retirement, if payments begin before age 65, payments from anticipated payments at the normal retirement age of 65 (the “Normal Retirement Age”) are reduced by 1/4 of 1% for each month that payments commence prior to the Normal Retirement Age. For Special Early Retirement, if payments begin between ages 60-64, benefits will be payable at 100%. If payments begin prior to age 60, they are reduced by 5/12 of 1% for each month that payments start before age 60 but not more than 25%.

For participants first employed from January 1, 2000 through December 31, 2004, under the TPP, Standard Early Retirement is available as described above. Special Early Retirement is also available to employees who have attained at least age 55 with 15 years of eligibility service (but not earlier than age 55). For Special Early Retirement, the benefit payable at or after age 62 would be at 100%; if payments commence prior to age 62 they would be reduced by 5/12 of 1% for each of the first 48 months prior to age 62 and by an additional 4/12 of 1% for each of the next 12 months and by an additional 3/12 of 1% for each month prior to age 57.

For participants first employed on or after January 1, 2005, and who retire before age 65, benefits may commence at or after age 55 but they would be reduced by 5/9 of 1% for each of the first 60 months prior to age 65 and an additional 5/18 of 1% for each month prior to age 60.

Under the PEP, offered to all employees as of January 1, 2000, a single sum payment was available when an employee terminated employment regardless of age or the employee may elect to receive the benefit in monthly installments. Employees had an opportunity to choose the PEP formula when they were first hired or during the open enrollment period. Prior to January 1, 2012, employees could switch their pension plan formula annually; the last election on file continued absent any changes. The PEP single sum benefit was determined using the following percentages for each year the PEP formula was in effect multiplied by the employee’s final average pay: under age 30—3% for each year, between 30 and 39 years of age—4% for each year, between 40 and 49 years of age—5% for each year, and 6% for age 50 and over.

When an employee leaves Exelis, their total SRP benefit will be determined by the benefit earned under the TPP formula plus the PEP formula for the periods elected under each formula.

For employees who elected to participate in the ISP rather than the SRP, as of January 1, 2012, their benefits will be determined by the benefit earned under the TPP formula plus the PEP formula for the periods elected under each formula as of January 1, 2012. For those participants, the final average pay used under the TPP and PEP formula was frozen as of January 1, 2012 and any PEP formula will accrue interest at the 10-year Treasury rate as of the prior December 31, but rate shall not be less than 3.25%.

The accumulated benefit an employee earns over his or her career with Exelis is payable on a monthly basis starting after retirement. Pensions may be reduced if retirement starts before age 65. Possible pension reductions are described above.

Benefits under the SRP are subject to the limitations imposed under Sections 415 and 401(a) (17) of the Code in effect as of December 31, 2013. Section 415 limits the amount of annual pension payable from a qualified plan. For 2013, this limit is $205,000 per year for a single-life annuity payable at an IRS-prescribed retirement age. This ceiling may be actuarially adjusted in accordance with IRS rules for items such as employee contributions, other forms of distribution and different annuity starting dates. Section 401(a) (17) limits the amount of compensation that may be recognized in the determination of a benefit under a qualified plan. For 2013, this limit is $255,000.

Excess Pension Plans: Since Federal law limits the amount of benefits paid under and the amount of compensation recognized under tax-qualified retirement plans, Exelis maintains the unfunded Excess Pension Plans, which are not qualified for tax purposes. The purpose of the Excess Pension Plans is to restore benefits calculated under the SRP formula that cannot be paid because of the IRS limitations noted above. Exelis has not

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granted any extra years of benefit service to any employee under either the SRP or the Excess Pension Plans. In the event of a change of control, certain extra years of service may be allowed in accordance with the terms of the Special Senior Executive Severance Pay Plan which is described in “Primary Compensation Components—Special Senior Executive Severance Pay Plan.”

In the event of a change of control, any Excess Pension Plans benefits would be immediately payable, subject to any applicable Section 409A restrictions with respect to form and timing of payments, and would be paid in a single discounted sum. Amendments to the Excess Pension Plans related to Section 409A compliance, while not modifying the previously disclosed definition of change in control in the Excess Pension Plans, provide that payouts of pension amounts earned since January 1, 2005 require a change in control involving an acceleration event of 30% or more of Exelis outstanding stock.

Freezing of the SRP

On May 29, 2013, the Exelis Compensation Committee approved amendments to the SRP, a qualified defined benefit pension plan, effective December 31, 2016, to freeze all benefit accruals for all persons entitled to benefits under the Pension Plan by freezing the accrual of “Benefit Service” and the crediting of “Compensation,” as such terms are defined in the SRP, as of December 31, 2016. As a result, final average pay formulas will not reflect future compensation increases or benefit service after December 31, 2016.

Freezing of the Excess Pension Plans

On May 29, 2013, the Exelis Compensation Committee approved similar amendments to the Excess Pension Plans, which include the Exelis Excess Pension Plan IA, Exelis Excess Pension Plan IB, Exelis Excess Pension Plan IIA and Exelis Excess Pension Plan IIB, each a non-qualified defined benefit pension plan. The amendments will freeze all further benefit accruals under the Excess Plans as of December 31, 2016 for all persons entitled to benefits thereunder. As a result, final average pay formulas in the Excess Pension Plans will not reflect future compensation increases or benefit service after December 31, 2016. Messrs. Hunzeker and Coppock and Ms. Oliver participate in the Excess Pension Plans. Mr. Hunzeker’s final average pay for his Exelis Pension Plans was frozen as of December 31, 2011 as he elected to participate in the ISP.

The 2013 Pension Benefits table provides information on the pension benefits for the Vectrus NEOs. At the present time, all of the NEOs listed in the summary compensation table under “—Tabular Executive Compensation Disclosure” have elected to accrue benefits under the TPP formula. Messrs. Hunzeker and Anderson and Ms. Oliver participate in the post-2005 TPP formula. Mr. Coppock participates under the terms of the plan in effect for employees hired on or after January 1, 2000. Mr. Klein participates under the terms of the plan in effect for employees hired prior to January 1, 2000. Benefits for Messrs. Hunzeker, Klein and Anderson were frozen as of December 31, 2011 when each elected to participate in the ISP.

Going Forward. It is expected that the Vectrus Compensation Committee will adopt competitive post-employment compensation programs. The specific plans and terms of such plans have not yet been determined. Benefits under the SRP and Excess Pension Plans will be frozen as of the date of the spin-off for all participating Vectrus employees. It is anticipated that Exelis may recognize future employment with Vectrus for eligibility purposes until December 31, 2016.

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Pension Benefits

No pension benefits were paid to any of the named executive officers in the last fiscal year.

Name (a)	Plan Name (b)	Number of Years Credited Service (c) (#)		Present Value of Accumulated Benefit at Normal Retirement (d) (1) (2) ($)		Present Value of Accumulated Benefit at Earliest Date for Unreduced Benefit (d) (3) (4) ($)		Payments During Last Fiscal Year (e) ($)
Kenneth W. Hunzeker	Exelis Salaried Retirement Plan Exelis Excess Pension Plan		1.32 1.32		42,708 23,766		42,708 23,766		—   —
Matthew M. Klein	Exelis Salaried Retirement Plan		15.5		179,766		179,766		—
Janet L. Oliver	Exelis Salaried Retirement Plan Exelis Excess Pension Plan		4.13 4.13		105,376 92,976		105,376 92,976		—   —
Kelvin R. Coppock	Exelis Salaried Retirement Plan Exelis Excess Pension Plan		9.13 9.13		297,775 160,346		378,289 203,701		—   —
Charles A. Anderson	Exelis Salaried Retirement Plan		0.15		2,286		2,286		—

(1) Assumptions used to determine present value as of December 31, 2013 are as follows:

Measurement date: December 31, 2013; Discount Rate: 4.7%; Mortality (pre-commencement): None; Mortality (post-commencement): IRS 2013 Static Mortality Table; Termination of Employment: Age 65 for all participants; Present value is based on the single life annuity payable beginning on the first day of the month at normal retirement age 65 (first column (d)) or the earliest time at which a participant may retire under the plan without any benefit reduction due to age. The six-month delay under the Pension Plan for “specified employees” as required under Section 409A of the Code was disregarded for this purpose. All results shown are estimates only; actual benefits will be based on precise credited service and compensation history, which will be determined at termination of employment. The row of the column titled Change in Pension Plan Value & Nonqualified Deferred Compensation Earnings in the summary compensation table under “—Tabular Executive Compensation Disclosure” quantifies the change in the present value of the Pension Plan benefit from December 31, 2012 to December 31, 2013. To determine the present value of the plan benefit as of December 31, 2013, the same assumptions that are described above to determine present value as of December 31, 2012 were used, except a 4.7% interest rate was used to determine the present value, as compared to a 4.1% interest rate as of December 31, 2012.

(2) The accumulated benefit is based on service and earnings (base salary and bonus and/or AIP payment) considered by the plans for the period through December 31, 2013, and represents the actuarial present value under ASC Topic 715 of pension earned to date and payable at the assumed normal retirement age for the named executive officers as defined under each plan. Exelis has retained the SRP.

(3) The amounts represent the actuarial present value of the accumulated benefit at December 31, 2013, for the named executive officers under each plan based upon actuarial factors and assumptions as described in (1) above, where the retirement age is assumed to be the earliest age at which the individual can receive undiscounted early retirement benefits.

(4) This column is not required, but it is being added to supplement the understanding of the information in the table.

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NONQUALIFIED DEFERRED COMPENSATION

Exelis Deferred Compensation Plan

Exelis Deferred Compensation Plan. The Exelis Deferred Compensation Plan is a tax deferral plan. The Exelis Deferred Compensation Plan permits eligible executives with a base salary of at least $200,000 to defer between 2% and 90% of their AIP payment. The AIP amount deferred is included in the summary compensation table under “—Tabular Executive Compensation Disclosure” under the column “Non-Equity Incentive Plan Compensation.” Withdrawals under the plan are available on payment dates elected by participants at the time of the deferral election. The withdrawal election is irrevocable except in cases of demonstrated hardship due to an unforeseeable emergency as provided by the Exelis Deferred Compensation Plan. Amounts deferred will be unsecured general obligations of Exelis to pay the deferred compensation in the future and will rank with other unsecured and unsubordinated indebtedness of Exelis.

Participants can elect to have their account balances allocated into one or more of the 25 phantom investment funds (including a phantom Exelis stock fund) and can change their investment allocations on a daily basis. All plan accounts are maintained on the accounts of Exelis and investment earnings are credited to a participant’s account (and charged to corporate earnings) to mirror the investment returns achieved by the investment funds chosen by that participant.

A participant can establish up to six “accounts” into which AIP payment deferrals are credited and he or she can elect a different form of payment and a different payment commencement date for each “account.” One account may be selected based on a termination date (the “Termination Account”) and five accounts are based on employee-specified dates (each a “Special Purpose Account”). Each Special Purpose and Termination Account may have different investment and payment options. Termination Accounts will be paid in the seventh month following the last day worked. Changes to Special Purpose Account distribution elections must be made at least 12 months before any existing benefit payment date, may not take effect for at least 12 months, and must postpone the existing benefit payment date by at least five years. Additionally, Termination Account distribution elections are irrevocable.

Exelis Excess Savings Plan: Exelis adopted a supplemental retirement savings plan, the Exelis Excess Savings Plan, to provide our key employees with an opportunity to earn retirement savings benefits in excess of the retirement benefits they may contribute under our tax-qualified retirement savings plan. (Federal law limits the amount of compensation that can be used to determine employee and employer contribution amounts ($250,000 in 2013) to the tax-qualified plan.) The Exelis Excess Savings Plan is a non-qualified unfunded savings plan. All balances under this plan are maintained on the books of Exelis. For those NEOs who selected the ISP alternative in 2013, Exelis will credit the participant’s excess savings account based on 3 ¹⁄₂% of eligible pay and the age-based contributions based on eligible salary in excess of these limits under the Exelis Excess Savings. Earnings are credited to the accumulated savings under the plan based on the earnings in the Stable Value Fund in the tax-qualified plan. Benefits will be paid in a lump sum in the seventh month following the last day worked.

Deferred Compensation. All NEOs, except for Mr. Coppock, participate in the Exelis Excess Savings Plan. No NEOs participated in the Exelis Deferred Compensation Plan. The following table shows the activity within the Exelis Excess Savings Plan for the NEOs.

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Nonqualified Deferred Compensation

Name	Executive Contributions in Last FY ($)(a)		Registrant Contributions in Last FY ($)(b)(1)		Aggregate Earnings in Last FY ($)(c)		Aggregate Withdrawals/ Distributions ($)(d)		Aggregate Balance at Last FYE ($)(e)(2)
Kenneth W. Hunzeker		—		26,680		1,653		—		79,562
Matthew M. Klein		—		8,036		252		—		16,132
Janet L. Oliver		—		—		52		—		2,035
Kelvin R. Coppock		—		—		—		—		—
Charles A. Anderson		—		5,786		44		—		6,582

(1) The amounts in column (b) regarding non-qualified savings are also reflected in column (d) of the all other compensation table under “—Tabular Executive Compensation Disclosure” as Excess Saving Plan Contributions and included in the summary compensation table “—Tabular Executive Compensation Disclosure”.

(2) For all Vectrus NEOs, amounts in the table above do not include any amounts reported in previous summary compensation tables.

The table below shows the mutual funds available under the Exelis Deferred Compensation Plan, as reported by the administrator and their annual rate of return for the calendar year ended December 31, 2013.

Deferred Compensation earnings under the Exelis Deferred Compensation Plan are calculated by reference to actual earnings of mutual funds or Exelis stock as provided in the following table. The table below shows the funds available under the Exelis Deferred Compensation Plan, as reported by the administrator and their annual rate of return for the calendar year ended December 31, 2013.

Name of Fund	Rate of Return 1/1/2013-12/31/2013			Name of Fund	Rate of Return 1/1/2013 – 12/31/2013
Fixed Rate Option (1)		5.50	%	Vanguard Developed Markets Index (VDMIX)		21.84	%
PIMCO Total Return Institutional (PTTRX)		-1.92	%	Aberdeen Select International Equity A (BJBIX)		12.37.	%
PIMCO Real Return Institutional (PRRIX)		-9.05	%	American Funds EuroPacific Growth (REREX)		20.17	%
T Rowe Price High Yield (PRHYX)		9.07	%	First Eagle Overseas A (SGOVX)		11.57	%
Dodge & Cox Stock (DODGX)		40.55	%	Lazard Emerging Markets Equity Open (LZOEX)		-1.14	%
Vanguard 500 Index (VFINX)		32.18	%	Invesco Global Real Estate (AGREX)		2.38	%
American Funds Growth Fund of America R4 (RGAEX)		33.82	%	Model Portfolio*—Conservative		1.61	%
Perkins Mid Cap Value (JMCVX)		25.92	%	Model Portfolio*—Moderate Conservative		8.37	%
Artisan Mid Cap (ARTMX)		37.39	%	Model Portfolio*—Moderate		14.68	%
American Century Small Cap Value (ASVIX)		34.91	%	Model Portfolio*—Moderate Aggressive		19.51	%
Perimeter Small Cap Growth (PSCGX)		43.29	%	Model Portfolio*—Aggressive		25.14	%
Harbor International (HIINX)		16.40	%	Exelis Inc. Stock Tracking Fund (Exelis)		74.47	%
Vanguard Total Bond Market Index (VBMFX)		-2.26	%

(1) The Fixed Rate Option of 5.50% is not subsidized by our company but rather is a rate based on guaranteed contractual returns from the third-party insurance company provider.

* The returns shown in the model portfolio were not subsidized by Exelis during 2013, but represent returns for a managed portfolio based on funds available to deferred compensation participants.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

Potential Post-Employment Compensation

The potential post-employment compensation tables below reflect the amount of compensation payable to each of the NEOs in the event of employment termination under several different circumstances, including voluntary termination, termination for cause, death, disability, termination without cause or termination in connection with a change of control. Mr. Hunzeker is covered under the Exelis Senior Executive Severance Pay Plan and the Exelis Special Senior Executive Severance Pay Plan (applicable to change of control) described in “—Primary Compensation Components—Severance Plan Arrangements.” Messrs. Klein, Coppock and Anderson, and Ms. Oliver are covered under the Exelis Severance Policy. The Exelis Severance Policy provides for severance based on grade level and years of service.

The amounts shown in the potential post-employment compensation tables are estimates (or the estimated present value of the Exelis Excess Pension Plan which may be paid in continuing annuity payments), assuming that the triggering event was effective as of December 31, 2013, including amounts which would be earned through such date (or that would be earned during a period of severance), and where applicable, are based on Exelis closing stock price on December 31, 2013, the last trading day of 2013, which was $19.06.

The actual amounts to be paid out can only be determined at the time of such executive’s separation from Exelis. For purposes of calculating the estimated potential payments to our officers under the Exelis Excess Pension Plan, as reflected in the tables below, we have used the same actuarial factors and assumptions described in note (1) to the Pension Benefits table. The calculations assume a discount rate of 4.7% and take into account the IRS Static Table projected to 2013.

Payments and Benefits Provided Generally to Salaried Employees. The amounts shown in the tables below do not include payments and benefits to the extent these payments and benefits are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include:

• Accrued salary and paid time off;

• Regular pension benefits under the SRP;

• Health care benefits provided to retirees under the SRP, including retiree medical and dental insurance. Employees who terminate prior to retirement are eligible for continued benefits under COBRA; and

• Distributions of plan balances under the ISP and amounts currently vested under the Exelis Excess Savings Plan.

No perquisites are available to any NEOs in any of the post-employment compensation circumstances. With respect to the SRP, benefits under such plan may be deferred to age 65, but may become payable at age 55 or, if the participant is eligible for early retirement, the first of the month immediately following the last day worked without regard to the period of the severance payments. Benefits under the Exelis Excess Pension Plan must commence as soon as possible but generally would be payable seven months following such date, retroactive to the date the Excess Pension Plan benefit became payable.

Senior Executive Severance Pay Plan. The amount of severance pay under this plan depends on the executive’s base pay and years of service. The amount will not exceed 24 months of base pay or be greater than two times the executive’s total annual compensation during the year immediately preceding termination. Exelis considers these severance pay provisions appropriate transitional provisions given the job responsibilities and competitive market in which senior executives function. The obligation of Exelis to continue severance payments stops if the executive does not comply with the Exelis Code of Corporate Conduct. Exelis considers this cessation provision to be critical to the emphasis on ethical behavior by the senior executives of Exelis. The obligation of Exelis to continue severance payments also stops if the senior executive does not comply with non-

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competition provisions of the Exelis Severance Policy or Senior Executive Severance Pay Plan. These provisions protect the integrity of our businesses and are consistent with typical commercial arrangements. Mr. Hunzeker is covered under the Senior Executive Pay Plan. Messrs. Klein, Coppock and Anderson, and Ms. Oliver are covered under the Exelis Severance Policy, which provides compensation based on grade level and years of service.

If a covered executive receives or is entitled to receive other compensation from another company plan or arrangement, the amount of that other compensation could be used to offset amounts otherwise payable under the Exelis Senior Executive Severance Pay Plan. During the severance payment period, the executive will have a limited right to continue to be eligible for participation in certain benefit plans. Severance pay will start within sixty days following the covered executive’s scheduled termination date.

Special Senior Executive Severance Pay Plan. The Special Senior Executive Severance Pay Plan provides two levels of benefits for covered executives. Based on their position within Exelis, each covered executive is designated as either a “Band A” or “Band B” participant. The Committee considered two levels of benefits appropriate based on the relative ability of each level of employee to influence future Exelis performance. As a Band A participant, Mr. Hunzeker receives the higher level of benefits, which are described herein. Messrs. Klein, Coppock and Anderson, and Ms. Oliver are not covered by the Special Senior Executive Severance Pay Plan. Under the Special Senior Executive Severance Pay Plan, if a covered executive is terminated within two years after an acceleration event in a change of control or in contemplation of an acceleration in a change of control event that ultimately occurs or if the covered executive terminates his or her employment for good reason within two years after an acceleration event in the event of a change of control, he or she would be entitled to:

• any accrued but unpaid base salary, bonus (AIP payment), unreimbursed expenses and employee benefits, including vacation;

• three times the annual base salary rate immediately preceding the date of termination and three times the target AIP immediately preceding the acceleration event or termination;

• continuation of health and life insurance benefits and certain perquisites at the same levels for three years;

• if the executive participates in the SRP and/or Excess Pension Plans, a lump-sum payment equal to the difference between the total lump-sum value of his or her pension benefit under SRP, Excess Pension Plans, or any successor pension plans (provided such plans are no less favorable to the executive than the Exelis pension plans), and the total lump-sum value of his or her pension benefit under the pension plans after crediting an additional three years of age and eligibility and benefit service using the highest annual base salary rate and target AIP immediately preceding the acceleration event or termination for purposes of determining final average compensation under the pension plans;

• credit for an additional three years of age and three years of eligibility service under the retiree health and retiree life insurance benefits under which the executive was covered at any time during the three year period immediately preceding the executive’s termination;

• if the executive participated in the Exelis ISP or Excess Savings Plan at any time in the three years immediately preceding termination or an acceleration event, a lump-sum payment equal to three times the highest annual base salary rate immediately preceding the acceleration or termination times the three times the highest percentage rate of the contributions to the ISP by Exelis and the Exelis Excess Savings Plan, such payment not to exceed 7.5% per year; and

• if payments triggered by a change-of-control would be subject to an excise tax, then either: (1) reduction of payments by the amount needed to avoid triggering the tax, or (2) no reduction of payments, depending on which alternative left the executive in the best after-tax position;

• one year of outplacement.

Messrs. Klein, Coppock and Anderson, and Ms. Oliver are covered under the Exelis Severance Policy, which provides severance based on grade level and years of service.

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The potential post-employment compensation tables below provide additional information.

Change of Control Arrangements

The payment or vesting of awards or benefits under each of the plans listed below would be accelerated upon the occurrence of a change of control of Exelis. The change of control provisions in these plans are intended to provide protections in the context of change of control transaction so that the executives can focus on preserving value for shareholders when evaluating situations that, without change of control provisions, could be personally adverse to the executive. For substantially all of the plans listed below there would be a change of control of Exelis if one of the following acceleration events occurred:

1. A report on Schedule 13D was filed with the SEC disclosing that any person, other than Exelis or one of its subsidiaries or any employee benefit plan that is sponsored by Exelis or a subsidiary, had become the beneficial owner of 20% or more of the outstanding stock of Exelis;

2. A person other than Exelis or one of its subsidiaries or any employee benefit plan that is sponsored by Exelis or a subsidiary purchased Exelis shares in connection with a tender or exchange offer, if after consummation of the offer the person purchasing the shares is the beneficial owner of 20% or more of the outstanding stock of Exelis;

3. The consummation of:

(a) any consolidation, business combination or merger of Exelis other than a consolidation, business combination or merger in which the shareholders of Exelis immediately prior to the merger would hold 50% or more of the combined voting power of Exelis or the surviving corporation of the merger and would have the same proportionate ownership of common stock of the surviving corporation that they held in Exelis immediately prior to the merger; or

(b) any sale, lease, exchange or other transfer of all or substantially all of the assets of Exelis;

4. A majority of the members of the Board of Directors of Exelis changed within a 12-month period, unless the election or nomination for election of each of the new Directors by Exelis’ shareholders had been approved by two-thirds of the Directors still in office who had been Directors at the beginning of the 12-month period or whose nomination for election or election was recommended or approved by a majority of Directors who were Directors at the beginning of the 12-month period; or

5. Any person other than Exelis or one of its subsidiaries or any employee benefit plan sponsored by Exelis or a subsidiary became the beneficial owner of 20% or more of Exelis outstanding stock.

At the time of an acceleration event, any unfunded plan obligations will be funded using a trust, often referred to as a “Rabbi Trust,” (which remains at Exelis), the assets of which would remain subject to the claims or our creditors in the event of our insolvency. Pre-2005 awards and benefits will be paid if the 20% threshold described above is reached. For awards or benefits earned since January 1, 2005, payment of awards or benefits would be made if a person other than Exelis, its subsidiaries or any employee benefit plan sponsored by Exelis becomes the beneficial owner of 30% or more of Exelis outstanding stock.

The following Exelis plans have change of control provisions:

• the 2011 Omnibus Incentive Plan;

• the Amended and Restated Exelis 2011 Omnibus Incentive Plan (adopted by Exelis shareholders May 9, 2012);

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• the ITT Corporation 2003 Equity Incentive Plan;

• the Exelis Inc. 2013 Annual Incentive Plan for Executive Officers;

• the Exelis Inc. Special Senior Executive Severance Pay Plan;

• the Exelis Inc. Deferred Compensation Plan;

• the Exelis Inc. Excess Savings Plan; and

• the Exelis Inc. Excess Pension Plans.

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Potential post-employment compensation arrangements are more fully described for the NEOs in the tables below.

Potential Post-Employment Compensation

Name	Resignation		Termination For Cause		Death		Disability		Termination Not For Cause		Termination Not For Cause or With Good Reason After Change of Control
Kenneth W. Hunzeker (total)	$	24,613	$	24,613	$	3,335,870	$	3,323,563	$	2,878,013	$	5,492,762
Cash Severance(1)	$	0	$	0	$	0	$	0	$	375,000	$	1,856,250
Unvested Non-Equity Awards(2)	$	0	$	0	$	255,000	$	255,000	$	205,000	$	350,400
Unvested Equity Awards(3)	$	0	$	0	$	3,068,563	$	3,068,563	$	2,272,295	$	3,068,563
Non-Qualified Retirement Benefits(4)(5)	$	24,613	$	24,613	$	12,307	$	0	$	24,613	$	139,235
Other Non-Qualified Benefits(6)	$	0	$	0	$	0	$	0	$	1,105	$	78,314
Best Net Cutback Amount(7)		NA		NA		NA		NA		NA	$	0
Matthew M. Klein (total)	$	0	$	0	$	549,723	$	549,723	$	453,403	$	706,761
Cash Severance (1)	$	0	$	0	$	0	$	0	$	134,434	$	134,434
Unvested Non-Equity Awards(2)	$	0	$	0	$	63,000	$	63,000	$	41,250	$	85,604
Unvested Equity Awards(3)	$	0	$	0	$	486,723	$	486,723	$	269,119	$	486,723
Non-Qualified Retirement Benefits(4)(5)	$	0	$	0	$	0	$	0	$	0	$	0
Other Non-Qualified Benefits(6)	$	0	$	0	$	0	$	0	$	8,600	$	0
Best Net Cutback Amount(7)		NA		NA		NA		NA		NA		NA
Janet L. Oliver (total)	$	94,627	$	94,627	$	790,153	$	742,839	$	604,646	$	877,298
Cash Severance (1)	$	0	$	0	$	0	$	0	$	98,331	$	98,331
Unvested Non-Equity Awards(2)	$	0	$	0	$	90,000	$	90,000	$	54,000	$	126,128
Unvested Equity Awards(3)	$	0	$	0	$	652,839	$	652,839	$	352,656	$	652,839
Non-Qualified Retirement Benefits(4)(5)	$	94,627	$	94,627	$	47,314	$	0	$	94,627	$	0
Other Non-Qualified Benefits(6)	$	0	$	0	$	0	$	0	$	5,032	$	0
Best Net Cutback Amount(7)		NA		NA		NA		NA		NA		NA

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Name	Resignation		Termination For Cause		Death		Disability		Termination Not For Cause		Termination Not For Cause or With Good Reason After Change of Control
	(a)		(b)		(c)		(d)		(e)		(f)
Kelvin R. Coppock (total)	$	636,704	$	166,061	$	647,048	$	564,018	$	603,644	$	703,769
Cash Severance(1)	$	0	$	0	$	0	$	0	$	117,147	$	117,147
Unvested Non-Equity Awards(2)	$	63,000	$	0	$	63,000	$	63,000	$	39,500	$	85,604
Unvested Equity Awards(3)	$	407,643	$	0	$	501,018	$	501,018	$	280,420	$	501,018
Non-Qualified Retirement Benefits(4)(5)	$	166,061	$	166,061	$	83,030	$	0	$	166,061	$	0
Other Non-Qualified Benefits(6)	$	0	$	0	$	0	$	0	$	516	$	0
Best Net Cutback Amount(7)		NA		NA		NA		NA		NA		NA
Charles A. Anderson (total)	$	0	$	0	$	205,257	$	205,257	$	159,497	$	267,568
Cash Severance(1)	$	0	$	0	$	0	$	0	$	62,311	$	62,311
Unvested Non-Equity Awards(2)	$	0	$	0	$	0	$	0	$	0	$	0
Unvested Equity Awards(3)	$	0	$	0	$	205,257	$	205,257	$	96,806	$	205,257
Non-Qualified Retirement Benefits(4)(5)	$	0	$	0	$	0	$	0	$	0	$	0
Other Non-Qualified Benefits(6)	$	0	$	0	$	0	$	0	$	380	$	0
Best Net Cutback Amount(7)		NA		NA		NA		NA		NA		NA

(1) Mr. Hunzeker is covered under the Exelis Senior Executive Severance Pay Plan. Under that plan, if his employment is terminated other than for cause prior to his normal retirement date, Mr. Hunzeker will receive a severance benefit equal to 12 months of the highest annual base salary he received during the 24-month period preceding such termination. In the event of a change of control, Mr. Hunzeker is covered under the Exelis Special Senior Executive Severance Pay Plan and under the terms of that plan would be paid a lump sum payment equal to three times current annual base salary rate ($375,045) paid plus three times the target AIP ($243,779). Messrs. Klein, Coppock and Anderson, and Ms. Oliver will receive severance benefits equal to 31, 24, 15 and 19 weeks, respectively, if terminated other than for cause unless termination occurs after the normal retirement date or following a change in control. Further information regarding post-employment compensation is provided in the pension benefits table under “—Pension Benefits—Pension Benefits” and the non-qualified deferred compensation table under “—Nonqualified Deferred Compensation—Exelis Deferred Compensation Plan”. The bonus calculation excluded the value of the completed performance period, as it does not represent incremental compensation with respect to column (e).

(2) Should Messrs. Hunzeker, Klein, and Anderson and Ms. Oliver resign or be terminated for cause, their TSR awards would be forfeited. Should Mr. Coppock resign, his TSR awards would not be forfeited as he is retirement eligible and if he has complied with the restrictive covenants described under “—Long-Term Incentive Awards”, he will be eligible to receive payment, if any, for any outstanding TSR awards, with payment and timing thereunder in accordance with Section 409A of the Code. Should Mr. Coppock be terminated for cause his TSR awards would be forfeited. In the event of his or her death or disability, each of Messrs. Hunzeker, Klein, Coppock and Anderson, and Ms. Oliver would receive payment, if any, for outstanding TSR awards. In the event of termination without cause and without acceptance of or compliance with the restrictive covenants, each would receive payment, if any, based on a pro-rata portion of the

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outstanding TSR award as of the termination date, based on the performance of Exelis during the three-year period, in accordance with Section 409A of the Code. In the event of an acceleration event in a change of control, each TSR award will be paid through the date of the change of control based on actual performance and the balance of the award will be paid at target (100%).

(3) Equity awards vest according to the terms described in “Compensation Discussion and Analysis—Long-Term Incentive Awards Program”. Unvested equity awards reflect the market value of restricted stock, RSUs, and in-the-money value of options based on the Exelis December 31, 2013 closing stock price of $19.06.

(4) Column (a) and column (b) amounts reflect present value of the annual vested benefit payable under the Exelis Excess Pension Plan as of December 31, 2013 assuming retirement at age 65. Column (c) provides the value of the benefit payable to the executive’s beneficiary upon death. Column (d) is inapplicable because disability would not affect retirement benefits. Column (e) provides the present value of the annual vested benefit payable under the Exelis Excess Pension Plan as of December 31, 2013 assuming retirement at age 65. Column (f) provides the lump sum payable by Exelis in accordance with the Exelis Special Senior Executive Severance Pay Plan in the event of a change of control.

(5) No additional Exelis Excess Savings Plan payments are made in the event of voluntary or involuntary termination or termination for cause. In the case of death or disability, the participant is 100% vested in the Exelis match. Column (f) reflects the additional cash payment representing Exelis contributions, which would be made following a change of control as described in the Special Senior Executive Severance Pay Plan in this information statement.

(6) Amounts shown in column (e): In the event of termination not for cause, Exelis will pay its portion of medical and life insurance premiums for one year for Mr. Hunzeker ($1,105). Exelis will pay its portion of medical and life insurance premiums for Mr. Klein ($8,600), Ms. Oliver ($5,032), Mr. Coppock ($516) and Mr. Anderson ($380) for 31, 24, 15 and 19 weeks, respectively. In the event of a change in control, amounts shown in column (f) include, as provided in the Exelis Special Senior Executive Severance Pay Plan, one year of outplacement services in the amount of $75,000 for Mr. Hunzeker based on a current competitive bid. In the event of a change of control, Exelis will also pay medical and life insurance premiums for three years for Mr. Hunzeker ($3,314).

(7) Amounts in column (f), Best Net Cutback Amount, assume termination occurs immediately upon a change of control based on the Exelis December 31, 2013 closing stock price of $19.06.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Agreements with Exelis Related to the Spin-Off

This section of the information statement summarizes material agreements between us and Exelis that will govern the ongoing relationships between the two companies after the spin-off and are intended to provide for an orderly transition to our status as an independent, publicly traded company. Additional or modified agreements, arrangements and transactions, which would be negotiated at arm’s length, may be entered into between us and Exelis after the spin-off. The summaries below of each of these agreements set forth the terms that we believe are material. These summaries are qualified in their entirety by reference to the full text of the applicable agreements, which are incorporated by reference into this information statement.

Following the spin-off, we and Exelis will operate independently, and neither will have any ownership interest in the other. In order to govern certain ongoing relationships between us and Exelis after the spin-off and to provide mechanisms for an orderly transition, we and Exelis intend to enter into agreements pursuant to which certain services and rights will be provided for following the spin-off, and we and Exelis will indemnify each other against certain liabilities arising from our respective businesses. The following is a summary of the terms of the material agreements we expect to enter into with Exelis.

Distribution Agreement

We intend to enter into a Distribution Agreement with Exelis prior to the distribution of our shares of common stock to Exelis shareholders. The Distribution Agreement will set forth our agreements with Exelis regarding the principal actions to be taken in connection with our spin-off from Exelis. It will also set forth other agreements that govern certain aspects of our relationship with Exelis following the spin-off.

Transfer of Assets and Assumption of Liabilities. The Distribution Agreement will provide for those transfers of assets and assumptions of liabilities that are necessary in connection with our spin-off from Exelis so that each of Exelis and Vectrus is allocated the assets necessary to operate its respective business and retains or assumes the liabilities allocated to it in accordance with the separation plan. The Distribution Agreement will also provide for the settlement or extinguishment of certain liabilities and other obligations between Exelis and Vectrus. See “Unaudited Pro Forma Condensed Combined Financial Statements.” In particular, the Distribution Agreement will provide that, subject to the terms and conditions contained in the Distribution Agreement:

• All of the assets and liabilities (including whether accrued, contingent or otherwise, and subject to certain exceptions) associated with the Mission Systems business of Exelis, other than the TARS business and certain environmental liabilities, will be retained by or transferred to us or one of our subsidiaries.

• All other assets and liabilities (including whether accrued, contingent or otherwise, and subject to certain exceptions) of Exelis, including the TARS business and certain environmental liabilities associated with the Mission Systems business, will be retained by or transferred to Exelis or one of its subsidiaries (other than us or one of our subsidiaries).

• Liabilities (including whether accrued, contingent or otherwise) related to, arising out of or resulting from businesses of Exelis that were previously terminated or divested will be allocated among us and Exelis to the extent formerly owned or managed by or associated with us or Exelis or our respective businesses.

• We will assume or retain any liabilities (including under applicable federal and state securities laws) relating to, arising out of or resulting from the Form 10 registering our common stock to be distributed by Exelis in the spin-off, subject to exceptions for certain information for which Exelis will retain liability.

• Except as otherwise provided in the Distribution Agreement or any ancillary agreement, Exelis will be responsible for the majority of the expenses related to the spin-off and incurred prior to the distribution date. We will be responsible for our expenses incurred following the distribution date, including expenses related to our documents filed with the SEC and our NYSE listing.

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Further Assurances. To the extent that any transfers of assets or assumptions of liabilities contemplated by the Distribution Agreement have not been consummated on or prior to the date of the distribution, we and Exelis will cooperate to effect such transfers or assumptions as promptly as practicable following the date of the distribution. In addition, each of us will agree to cooperate with each other and use commercially reasonable efforts to take or to cause to be taken all actions, and to do, or to cause to be done, all things reasonably necessary under applicable law or contractual obligations to consummate and make effective the transactions contemplated by the Distribution Agreement and the ancillary agreements.

Representations and Warranties. In general, neither we nor Exelis will make any representations or warranties regarding any assets or liabilities transferred or assumed, any consents or approvals that may be required in connection with such transfers or assumptions, the value or freedom from any restriction on transfer, non-infringement, encumbrance, lien or other security interest of any assets transferred, the absence of any defenses relating to any claim of either party or the legal sufficiency of any conveyance documents, or any other matters. Except as expressly set forth in the Distribution Agreement or in any ancillary agreement, all assets, including the stock of subsidiaries, will be transferred on an “as is,” “where is” basis.

The Distribution. The Distribution Agreement will govern the rights and obligations of the parties regarding the proposed distribution and certain actions that must occur prior to the proposed distribution, such as the election of officers and directors and the adoption of the amended and restated articles of incorporation and amended and restated by-laws. Prior to the distribution, we will distribute shares of our common stock to Exelis in a share dividend, so that Exelis will hold the necessary number of shares of our common stock required to be distributed in the distribution. Exelis will cause its agent to distribute to Exelis shareholders that hold shares of Exelis common stock as of the applicable record date all the issued and outstanding shares of our common stock. Exelis will have the sole and absolute discretion to determine (and change) the terms of, and whether to proceed with, the distribution and, to the extent it determines to so proceed, to determine the date of the distribution.

Conditions. The Distribution Agreement will provide that the distribution is subject to a number of conditions that must be satisfied or waived by Exelis in its sole discretion. For further information regarding these conditions, see “The Spin-Off—Conditions to the Spin-Off.” Exelis may, in its sole discretion, determine the distribution date and the terms of the distribution and may at any time prior to the completion of the distribution decide to abandon or modify the distribution.

Termination. The Distribution Agreement will provide that it may be terminated by Exelis at any time in its sole discretion prior to the date of the distribution.

Release of Claims and Indemnification. We and Exelis will agree to broad releases pursuant to which we will each release the other and certain related persons specified in the Distribution Agreement from any claims against any of them that arise out of or relate to events, circumstances or actions occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing at or alleged to exist at or prior to the time of the distribution. These releases will be subject to certain exceptions set forth in the Distribution Agreement.

The Distribution Agreement will provide for cross-indemnities that, except as otherwise provided in the Distribution Agreement, are principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of Exelis’ business with Exelis. Specifically, each party will, and will cause its subsidiaries and affiliates to, indemnify, defend and hold harmless the other party, its affiliates and subsidiaries and each of its officers, directors, employees and agents for any losses arising out of or otherwise in connection with:

• the liabilities or alleged liabilities each such party assumed or retained pursuant to the Distribution Agreement; and

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• any breach by such party of the Distribution Agreement or any ancillary agreement unless such ancillary agreement expressly provides for separate indemnification, in which case any such indemnification claims will be made thereunder.

The amount of each party’s indemnification obligations will be subject to reduction by any insurance proceeds received by the party being indemnified. The Distribution Agreement will also specify procedures with respect to claims subject to indemnification and related matters. Indemnification with respect to taxes will be governed solely by the Tax Matters Agreement.

Insurance. Following the spin-off, we will be responsible for obtaining and maintaining our own insurance coverage, although we will continue to have coverage under certain of Exelis’ pre-spin-off insurance policies for certain matters that occurred prior to the spin-off.

Non-Compete. Subject to certain limited exceptions, for a three year period following the distribution date, we will be subject to a covenant not to compete with Exelis with respect to the TARS business and similar work with the Department of Homeland Security relating to tethered aerostat airborne surveillance.

Dispute Resolution. In the event of any dispute arising out of the Distribution Agreement, the general counsels of us and Exelis and such other representatives as we each designate will negotiate to resolve any disputes between us. If we are unable to resolve the dispute in this manner within 45 days then, unless agreed otherwise, we and Exelis will submit the dispute to mediation for an additional period of 45 days. If we are unable to resolve the dispute in this manner, the dispute will be resolved through binding arbitration.

Other Matters Governed by the Distribution Agreement. Other matters governed by the Distribution Agreement will include access to financial and other information, intellectual property, confidentiality, access to and provision of records and treatment of outstanding guarantees and similar credit support.

Employee Matters Agreement

We intend to enter into an Employee Matters Agreement with Exelis that will govern the respective rights, responsibilities and obligations of the parties from and after the spin-off with respect to employee-related liabilities and, among other things, our respective retirement plans, nonqualified deferred compensation plans, health and welfare benefit plans, and equity-based compensation plans (including the treatment of outstanding awards granted thereunder). The Employee Matters Agreement will generally provide for the allocation and treatment of assets, account balances and liabilities, as applicable, arising out of incentive plans, retirement plans, nonqualified deferred compensation plans and employee health and welfare benefit programs in which our employees participated prior to the spin-off. Generally, we will assume or retain sponsorship of, and liabilities relating to, employee compensation and benefit programs relating to our current employees. However, Exelis will retain certain liabilities accrued prior to the spin-off relating to our current employees with respect to certain Exelis pension plans and retiree health and welfare plans.

Subject to the applicable transition periods with respect to certain benefit plans or programs, after the spin-off, our employees will no longer participate in Exelis plans or programs, and Exelis employees will not participate in any of our plans or programs. This summary of the Employee Matters Agreement is qualified in its entirety by reference to the full text of the agreement, which is incorporated by reference into this information statement.

Tax Matters Agreement

We intend to enter into a Tax Matters Agreement with Exelis that will govern the respective rights, responsibilities and obligations of Exelis and us after the spin-off with respect to tax liabilities and benefits, tax

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attributes, tax contests and other tax sharing regarding U.S. Federal, state, local and foreign income taxes, other tax matters and related tax returns. As a subsidiary of Exelis we and certain of our subsidiaries have (and will continue to have following the spin-off) joint and several liability with Exelis to the IRS for the consolidated U.S. Federal income taxes of the Exelis consolidated group relating to the taxable periods in which we (or our subsidiaries) were part of that group. However, the Tax Matters Agreement will specify the portion, if any, of this tax liability for which we will bear responsibility and Exelis will agree to indemnify us against any amounts for which we are not responsible. The Tax Matters Agreement will also provide special rules for allocating tax liabilities in the event that the spin-off is not tax-free. The Tax Matters Agreement will provide for certain covenants that may restrict our ability to pursue strategic or other transactions that otherwise could maximize the value of our business and may discourage or delay a change of control that you may consider favorable. For example, unless we were to receive a private letter ruling from the IRS, an unqualified opinion from a nationally recognized tax advisor or Exelis were to grant us a waiver, we would be restricted until 2 years after the spin-off is consummated from entering into transactions which would result in an ownership shift in our company of more than 35% (measured by vote or value) or divestitures of our business or entities which could impact the tax-free nature of the spin-off. Under the Tax Matters Agreement we will agree to indemnify Exelis for any tax resulting from any such transactions, whether or not Exelis consented to such transactions or we were otherwise permitted to enter into such transactions under the Tax Matters Agreement. Though valid as between the parties, the Tax Matters Agreement will not be binding on the IRS.

Transition Services Agreement

We intend to enter into a Transition Services Agreement with Exelis under which Exelis or its respective affiliates will provide us, and we or our affiliates will provide Exelis, with certain services for a limited time to help ensure an orderly transition for each of us and Exelis following the distribution. We anticipate that under the Transition Services Agreement, Exelis and Vectrus will provide each other (or cause applicable third parties to provide) certain services, including information technology, financial, human resource and other specified services, on a transitional basis. We expect these services will be provided initially at a base amount with scheduled, escalating increases to up to the base amount plus 10% subject to adjustments for inflation, and these services are generally planned to extend for a period of 4 to 24 months, subject to limited exceptions.

Intellectual Property License Agreements

We intend to enter into a Transitional Trademark License Agreement with Exelis pursuant to which we will license on a non-exclusive basis the right to use the Exelis name and trademark in the Mission Systems business for a transitional period while we phase out the use of such trademark in the operation of our business. We also intend to enter into a Technology License Agreement with Exelis pursuant to which we will license on a non-exclusive basis certain of our intellectual property (excluding trademarks) existing as of the distribution date to Exelis and its affiliates and in turn, Exelis and its affiliates will grant reciprocal licenses to us, each for use in our respective businesses.

Subcontract Pending Novation

We intend to enter into a subcontract with Exelis pending the U.S. government’s agreement to novate one government contract to Exelis under which Exelis will be obligated to fulfill the terms of such government contract. Pursuant to the terms of the subcontract, we will be obligated to immediately deposit all proceeds we receive under such government contract into a bank account controlled by Exelis. We will work diligently with the U.S. government to finalize the novation of this contract and do not expect any disruptions in our business as a result of this process.

In support of ongoing business, we expect to enter into one or more subcontracts with Exelis, the terms of which will be negotiated at arm’s length, whereby either we or Exelis will serve as a subcontractor to the other on certain government contracts in the future.

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Working Capital Adjustment

In connection with the internal restructuring carried out by Exelis prior to the distribution to separate the Vectrus business, Exelis and its subsidiaries (including us) have entered into, and will enter into, a number of conveyance agreements, including a contribution agreement between Exelis Holdings Inc., a subsidiary of Exelis, and Exelis Systems Corporation (“ESC”), an entity that, following the restructuring and the spin-off, will be a subsidiary of ours, containing a two-way adjustment mechanism relating to the working capital and cash levels of ESC and its subsidiaries immediately prior to the spin-off. Pursuant to that agreement, one or more payments may be made following the spin-off by the applicable subsidiary to the other, totaling the difference between the determined actual level of working capital (including cash) of ESC and its subsidiaries prior to the spin-off as compared to a specified target working capital (including cash). Based on the financial position of ESC and its subsidiaries as of December 31, 2013 and June 30, 2014, we estimate that ESC would have been obligated to make one or more payments totaling $2 million or $17 million, respectively, if the working capital were measured as of such dates. This estimate is being provided for illustrative purposes only, and is not necessarily indicative of the financial position of Vectrus or Exelis, or the total working capital adjustment that would have occurred if the internal restructuring and spin-off had been consummated as of December 31, 2013, June 30, 2014 or as of any future date. Accordingly, the actual total working capital adjustment payment may differ materially from the estimate provided above.

Other Agreements

Effective upon the distribution, we intend for certain intercompany work orders and/or informal intercompany commercial arrangements to be converted into third-party contracts based on the standard terms and conditions of Exelis.

Policies for Approving Related Person Transactions

In connection with the spin-off, it is expected that our company and our Board of Directors will adopt formal written policies for evaluation of potential related person transactions, as those terms are defined in the SEC’s rules for executive compensation and related person disclosure, which provide for review and pre-approval of transactions which may or are expected to exceed $120,000 involving non-employee directors, executive officers, beneficial owners of five percent or more of our company’s common stock or other securities and any immediate family of such persons. Our company’s policy is expected to generally group transactions with related persons into two categories: (1) transactions requiring the approval of the Nominating and Governance Committee and (2) certain transactions, including ordinary course transactions below established financial thresholds, that are deemed pre-approved by the Nominating and Governance Committee.

In reviewing related person transactions that are not deemed pre-approved for approval or ratification, it is expected that the Nominating and Governance Committee will consider the relevant facts and circumstances, including:

• Whether terms or conditions of the transaction are generally available to third-parties under similar terms or conditions;

• Level of interest or benefit to the related person;

• Availability of alternative suppliers or customers; and

• Benefit to our company.

The Nominating and Governance Committee is expected to deem to have pre-approved certain transactions identified in Item 404(a) of Regulation S-K that are not required to be disclosed even if the amount involved exceeds $120,000. In addition, any transaction with another company at which a related person’s only relationship is as an employee (other than an executive officer), director and/or beneficial owner of less than 10% of that company’s shares is expected to be deemed pre-approved; provided, however, that with respect to directors, if a director is a current employee, or an immediate family member is a current executive officer, of a

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company that has made payments to, or received payments from, our company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenue, such transaction is expected to be reviewed by the Nominating and Governance Committee and not considered appropriate for automatic pre-approval. Regardless of whether a transaction is deemed pre-approved, all transactions in any amount are expected to be required to be reported to the Nominating and Governance Committee.

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DESCRIPTION OF MATERIAL INDEBTEDNESS

From and after the spin-off, Vectrus and Exelis will, in general, each be responsible for the debts, liabilities, rights and obligations related to the business or businesses that it owns and operates following consummation of the spin-off. See “Certain Relationships and Related Party Transactions—Agreements with Exelis Related to the Spin-Off.”

The credit agreement described below will be filed as an exhibit to the Registration Statement on Form 10 of which this information statement is a part. You should read the more detailed provisions of the credit agreement, including the defined terms, for provisions that may be important to you.

We expect to have approximately $140 million of indebtedness under a five-year senior secured term facility, or the term facility, at the time of the spin-off. In addition, we expect to have a five-year senior secured revolving facility, or the revolving facility, permitting borrowings of up to $75 million. We refer to the term facility and the revolving facility collectively as the senior secured credit facilities.

Term Loan

The term facility will consist of a term loan, or the term loan, in an aggregate principal amount of $140 million. The full amount of the term loan will be made in a single drawing immediately prior to the consummation of the spin-off, and amounts borrowed under the term facility that are repaid or prepaid may not be reborrowed. The term facility will amortize in quarterly installments, with the first such installment due at the end of the first full quarter following the funding of the term loan, at the following rates per annum: 7.5% in year one; 10% in each of years two and three, 15% in year four and 57.5% in year five. Any unpaid amounts must be repaid on the date that is five years after the date on which the credit agreement is entered into.

Revolving Facility

The revolving facility permits borrowings of up to $75 million, up to $35 million of which will be available for the issuance of letters of credit. The revolving facility will mature on the date that is five years after the date on which the credit agreement is entered into. Amounts repaid under the revolving facility may be reborrowed.

Guarantees and Collateral

The indebtedness, obligations and liabilities under the senior secured credit facilities will be unconditionally guaranteed jointly and severally on a senior secured basis by Vectrus and certain of its current and future restricted subsidiaries, and will be secured, subject to permitted liens and other exceptions and exclusions, by a first-priority lien on substantially all tangible and intangible assets of Vectrus, ESC, which we refer to as the borrower, and each domestic guarantor (including (i) a perfected pledge of all of the capital stock of the borrower and each direct, wholly-owned material restricted subsidiary held by the borrower or any guarantor (subject to certain limitations with respect to foreign subsidiaries) and (ii) perfected security interests in, and mortgages on, accounts, inventory, equipment, general intangibles, commercial tort claims, investment property, intellectual property, material fee-owned real property, letter-of-credit rights, deposit and securities accounts, intercompany notes and proceeds of the foregoing, except for certain excluded assets).

Mandatory Prepayments

The term facility will require the following amounts to be applied to prepay the term loan, subject to certain thresholds, exceptions and reinvestment rights:

• 100% of the net cash proceeds from the incurrence of indebtedness by Vectrus and its restricted subsidiaries (other than permitted debt);

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• 100% of the net cash proceeds of all non-ordinary course asset sales or other dispositions of property by Vectrus and its restricted subsidiaries (including casualty insurance and condemnation proceeds, but with exceptions for sales of inventory and other ordinary course dispositions, obsolete or worn-out property, property no longer useful in the business and other exceptions); and

• 50% of excess cash flow with stepdowns to 25% and 0% based on certain leverage ratios.

Mandatory prepayments will be applied as directed by the borrower.

Voluntary Prepayments and Commitment Reductions

The borrower may voluntarily prepay the outstanding term loan or loans under the revolving facility in whole or in part at any time without premium or penalty, subject to the payment of customary breakage costs in the case of LIBOR rate loans. Optional prepayments of the term loan will be applied to the remaining installments thereof as directed by the borrower.

Commitments under the revolving facility may be reduced in whole or in part at any time without premium or penalty.

Covenants

The senior secured credit facilities will contain certain covenants that, among other things, limit or restrict the ability of Vectrus and its restricted subsidiaries, including the borrower, to (subject to certain qualifications and exceptions):

• create liens and encumbrances;

• incur additional indebtedness;

• merge, dissolve, liquidate or consolidate;

• make acquisitions, investments, advances or loans;

• dispose of or transfer assets;

• pay dividends or make other payments in respect of our capital stock;

• amend certain material governance or debt documents;

• redeem or repurchase capital stock or prepay, redeem or repurchase certain debt;

• engage in certain transactions with affiliates;

• enter into certain speculative hedging arrangements; and

• enter into certain restrictive agreements.

In addition, Vectrus will be required to comply with (a) a maximum ratio of total consolidated indebtedness to consolidated EBITDA of 3.50 to 1.00, with step-downs to 3.00 to 1.00 beginning with the third fiscal quarter of 2015 and 2.75 to 1.00 beginning with the first fiscal quarter of 2016, and (b) a minimum ratio of consolidated EBITDA to consolidated interest expense (net of cash interest income) of 4.50 to 1.00.

Events of Default

The senior secured credit facilities will provide for customary events of default (subject in certain cases to customary grace and cure periods), which will include nonpayment, breach of covenants, cross-default to certain other indebtedness, failure to pay certain judgments and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the lenders may declare the principal, premium, if any, interest and other monetary obligations under the senior secured credit facilities payable immediately, terminate all commitments to extend credit under the revolving facility, take enforcement actions with respect to the collateral securing the senior secured credit facilities and require us to apply all of our available cash to repay the obligations under the senior secured credit facilities.

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Interest Rates and Fees

Outstanding borrowings under the senior secured credit facilities will accrue interest, at the option of the borrower, at a per annum rate of (i) a LIBOR rate plus the applicable margin or (ii) a base rate plus the applicable margin. The applicable margin for borrowings under the senior secured credit facilities will be subject to a leverage-based pricing grid with the LIBOR rate ranging from 2.50% to 3.00%.

During an event of default, overdue principal under the senior secured credit facilities may bear interest at a rate 2.00% in excess of the otherwise applicable rate of interest. On and after the funding date, the borrower will also pay a commitment fee on the undrawn portion of the revolving facility ranging from 0.40% to 0.50% depending on the leverage ratio.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of the date of this information statement, all of the outstanding shares of our common stock are beneficially owned by Exelis. After the spin-off, Exelis will not own any shares of our common stock.

The following tables provide information with respect to the anticipated beneficial ownership of our common stock by:

• each of our shareholders who we believe (based on the assumptions described below) will beneficially own more than 5% of our outstanding common stock;

• each of our current directors and the directors following the spin-off;

• each officer named in the summary compensation table under “Executive Compensation—Tabular Executive Compensation Disclosure”; and

• all of our directors and executive officers following the spin-off as a group.

To the extent our directors and executive officers own Exelis common stock at the record date of the spin-off, they will participate in the distribution on the same terms as other holders of Exelis common stock. It is expected that, upon the consummation of the spin-off, the outstanding options and unvested restricted stock units held by Exelis employees who are becoming Vectrus employees will be converted from securities of Exelis into equivalent securities of Vectrus with the number and exercise price equitably determined to preserve the economic value of the previously held securities of Exelis.

Except as otherwise noted in the footnotes below, each person or entity identified in the tables below has sole voting and investment power with respect to the securities owned by such person or entity.

Immediately following the spin-off, we estimate that approximately 10 million shares of our common stock will be issued and outstanding, based on the number of shares of Exelis common stock expected to be outstanding as of the record date and based on the distribution ratio. The actual number of shares of our common stock outstanding following the spin-off will be determined on September 18, 2014, the record date.

Stock Ownership of Certain Beneficial Owners

We anticipate, based on information to our knowledge as of February 26, 2014, that the following entities will beneficially own more than 5% of our common stock after the spin-off.

Name and address of beneficial owner	Amount and nature of beneficial ownership of Exelis Inc. common stock		Percent of Class
BlackRock, Inc. (1)		19,756,568		10.5	%
40 East 52nd Street, New York, NY 10022
AJO, LP (2)		12,062,390		6.4	%
230 S. Broad Street, 20th Floor Philadelphia, PA 19102
Vanguard Group (3)		11,590,186		6.13	%
100 Vanguard Blvd. Malvern, PA 19355

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(1) As reported on a Schedule 13G filed on January 10, 2014, BlackRock, Inc. has sole voting power with respect to 15,564,372 shares, shared voting power with respect to 0 shares, shared dispositive power with respect to 0 shares and sole dispositive power with respect to 19,756,568 shares.

(2) As reported on a Schedule 13G filed on February 11, 2014, AJO, LP has sole voting power with respect to 7,127,790 shares, shared voting power with respect to 0 shares, shared dispositive power with respect to 0 shares and sole dispositive power with respect to 12,062,390 shares.

(3) As reported on a Schedule 13G filed on February 12, 2014, Vanguard Group has sole voting power with respect to 118,057 shares, shared voting power with respect to 0 shares, and sole dispositive power with respect to 11,484,929 shares and shared dispositive power with respect to 105,257 shares.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires that our company’s executive officers and directors, and any persons beneficially owning more than 10% of a registered class of our company’s equity securities, file reports of ownership and changes in ownership with the SEC within specified time periods. To our company’s knowledge, based upon a review of the copies of the reports furnished to our company and written representations that no other reports were required, all filing requirements were satisfied in a timely manner for the year ended December 31, 2013.

Stock Ownership of Officers and Directors

The following table shows, as of June 30, 2014, the beneficial ownership of Exelis common stock and options exercisable within 60 days by each Vectrus Non-employee Director, by each of the executive officers named in the summary compensation table set forth under “Executive Compensation—Tabular Executive Compensation Disclosure”, and by all Non-employee Directors and executive officers as a group. In addition, we have provided information about ownership of options and restricted stock units that provide economic linkage to Exelis common stock but do not represent actual beneficial ownership of shares.

The number of shares beneficially owned by each non-employee Director or executive officer has been determined under the rules of the SEC, which provide that beneficial ownership includes any shares as to which a person has the right to acquire beneficial ownership within 60 days through the exercise of any option or other right. Unless otherwise indicated, each non-employee Director or executive officer has sole dispositive and voting power or shares those powers with his or her spouse.

There were 188,325,004 shares of Exelis common stock outstanding on July 29, 2014.

Stock Ownership of Officers and Directors

Amount and Nature of Beneficial Ownership

Name of Beneficial Owner

Title of Class

Common Stock

Vested Options (1)

Unvested Restricted Stock Units

Total Shares Beneficially Owned

Percentage of Class Beneficially Owned

Non-Employee Directors

Louis J. Giuliano

Common Stock

—

—

—

—

—

Bradford J. Boston

Common Stock

—

—

—

—

—

Mary L. Howell

Common Stock

—

—

—

—

—

William F. Murdy

Common Stock

—

—

—

—

—

Melvin F. Parker

Common Stock

—

—

—

—

—

Eric M. Pillmore

Common Stock

—

—

—

—

—

Stephen L. Waechter

Common Stock

—

—

—

—

—

Phillip C. Widman

Common Stock

—

—

—

—

—

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			Amount and Nature of Beneficial Ownership
Name of Beneficial Owner	Title of Class		Common Stock		Vested Options (1)		Unvested Restricted Stock Units		Total Shares Beneficially Owned		Percentage of Class Beneficially Owned
Named Executive Officers
Kenneth W. Hunzeker(2)		Common Stock		9,090		3,404		66,060		12,494		*
Matthew M. Klein		Common Stock		16		—		13,336		16		*
Janet L. Oliver		Common Stock		—		—		14,218		—		*
Kelvin R. Coppock		Common Stock		—		—		11,416		—		*
Charles A. Anderson		Common Stock		—		—		17,970		—		*
All Directors and Executive Officers as a Group (16 persons)		Common Stock		9,106		9,622		155,732		18,728		*

* Less than 1%

(1) Reflects stock options vesting within 60 days of June 30, 2014. More detail on outstanding option awards held by Messrs. Hunzeker, Klein, Coppock and Anderson, and Ms. Oliver is provided in the “Outstanding Equity Awards At Fiscal Year End” table under “Executive Compensation”.

(2) With respect to Mr. Hunzeker, 23,973 restricted stock units and 45,573 stock options vest on November 7, 2014.

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DESCRIPTION OF CAPITAL STOCK

General

Prior to the distribution date, our Board of Directors and Exelis, as our sole shareholder, will approve and adopt the amended and restated articles of incorporation and the amended and restated by-laws. Our amended and restated articles of incorporation authorize us to issue 100 million shares of common stock, par value $0.01 per share, and 10 million shares of preferred stock. The following is a description of our capital stock. This description is not complete, and we qualify this description by referring to our amended and restated articles of incorporation and our amended and restated by-laws, which are attached as exhibits to our Registration Statement on Form 10, of which this information statement forms a part, and to the laws of the state of Indiana.

Common Stock

Dividend Rights. Under our amended and restated articles of incorporation, holders of our common stock are entitled to receive any dividends our Board of Directors may declare on the common stock, subject to the prior rights of the preferred stock. The Board of Directors may declare dividends from funds legally available for this purpose.

Voting Rights. Our common stock has one vote per share. The holders of our common stock are entitled to vote on all matters to be voted on by shareholders. Our amended and restated articles of incorporation do not provide for cumulative voting. This could prevent directors from being elected by a relatively small group of shareholders.

Liquidation Rights. After provision for payment of creditors and after payment of any liquidation preferences to holders of the outstanding preferred stock, if any, if we liquidate, dissolve or are wound up, whether voluntary or not, the holders of our common stock will be entitled to receive on a pro rata basis all assets remaining.

Other Rights. Our common stock is not liable for further calls or assessment. The holders of our common stock are not currently entitled to subscribe for or purchase additional shares of our capital stock. Our common stock is not subject to redemption and does not have any conversion or sinking fund provisions.

Preferred Stock

Our Board of Directors has the authority, without other action by shareholders, to issue preferred stock in one or more series. The holders of our preferred stock do not have the right to vote, except as our Board of Directors establishes, or as provided in our amended and restated articles of incorporation or as determined by state law.

The Board of Directors has the authority to determine the terms of each series of preferred stock, within the limits of our amended and restated articles of incorporation, our amended and restated by-laws and the laws of the state of Indiana. These terms include the number of shares in a series, the consideration, dividend rights, liquidation preferences, terms of redemption, conversion rights and voting rights, if any. Such determinations are to be accomplished by an amendment to our amended and restated articles of incorporation, which amendment may, except as otherwise provided by law, be made solely by action of our Board of Directors.

Effects on Our Common Stock if We Issue Preferred Stock

If we issue preferred stock, it may negatively affect the holders of our common stock. These possible negative effects include the following:

• diluting the voting power of shares of our common stock;

• affecting the market price of our common stock;

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• delaying or preventing a change in control of our company;

• making removal of our present management more difficult; or

• restricting dividends and other distributions on our common stock.

Provisions of Our Amended and Restated Articles of Incorporation and Amended and Restated By-Laws That Could Delay or Prevent a Change in Control

Certain provisions of our amended and restated articles of incorporation and amended and restated by-laws may delay or make more difficult unsolicited acquisitions or changes of control of our company. We believe that such provisions will enable us to develop our business in a manner that will foster our long-term growth without disruption caused by the threat of a takeover not deemed by our Board of Directors to be in the best interests of our company, our shareholders and certain other constituents. Such provisions could have the effect of discouraging third parties from making proposals involving an unsolicited acquisition or change of control of our company, although a majority of our shareholders might consider such proposals, if made, desirable. Such provisions may also have the effect of making it more difficult for third parties to cause the replacement of our current management without the concurrence of our Board of Directors. These provisions include:

• a classified Board of Directors;

• the availability of capital stock for issuance from time to time at the discretion of our Board of Directors;

• the ability of our Board of Directors to increase the size of the board and to appoint directors to fill newly-created directorships;

• prohibitions against shareholders calling a special meeting of shareholders; and

• requirements for advance notice for raising business or making nominations at shareholders’ meetings.

Classified Board of Directors

Our Board of Directors will be divided into three classes that will be, as nearly as possible, of equal size. The initial terms of the Class I, Class II and Class III directors will expire at the annual meeting in each of 2015, 2016 and 2017, respectively, and in each case, when any successor has been duly elected and qualified. Upon the expiration of each initial term, directors will subsequently serve three-year terms if renominated and reelected. The proposed Class I directors will include Kenneth W. Hunzeker, Bradford J. Boston and Phillip C. Widman, the proposed Class II directors will include Louis J. Giuliano, Mary L. Howell and Eric M. Pillmore, and the proposed Class III directors will include William F. Murdy, Melvin F. Parker and Stephen L. Waechter.

Authorized But Unissued Capital Stock

The authorized but unissued shares of our common stock and preferred stock will be available for future issuance without shareholder approval. Indiana law does not require shareholder approval for any issuance of authorized shares. However, the listing requirements of the New York Stock Exchange, which would apply to us so long as our common stock remains listed on the New York Stock Exchange, require shareholder approval of certain issuances equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of our common stock. We may issue additional shares for a variety of corporate purposes, including future public offerings to raise additional capital or to facilitate corporate acquisitions.

Our board may be able to issue shares of unissued and unreserved common or preferred stock to persons friendly to current management. This issuance may render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management. This could possibly deprive our shareholders of opportunities to sell their shares of our stock at prices higher than prevailing market prices. Our board could also use these shares to dilute the ownership of persons seeking to obtain control of our company.

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Number of Directors; Filling of Vacancies

Our amended and restated articles of incorporation provide that the Board of Directors will have at least three and at most 25 directors. The size of the board may be changed only by a majority vote of the Board of Directors. A majority of the board determines the exact number of directors at any given time. Directors may be removed only for cause and the board fills any new directorships it creates and any other vacancies. Accordingly, our board may be able to prevent any shareholder from obtaining majority representation on the board by increasing the size of the board and filling the newly-created directorships with its own nominees.

Special Meetings

Our amended and restated articles of incorporation and amended and restated by-laws provide that only the chairman of the board or a majority of our board may call a special meeting of shareholders. This provision may delay or prevent a shareholder from removing a director from the board or from gaining control of the board.

Advance Notice Provisions

Our amended and restated by-laws require that for a shareholder to nominate a director or bring other business before an annual meeting, the shareholder must give written notice, in proper form, to our Secretary not less than 90 calendar days and no more than 120 calendar days prior to the date corresponding to the date on which we first mailed our proxy materials for the prior year’s annual meeting. If no annual meeting was held in the previous year, such written notice must be received no earlier than 120 calendar days prior to the annual meeting and not later than 90 calendar days prior to the annual meeting or 10 calendar days following the date on which public announcement of the date of the meeting is first made.

Only persons who are nominated by, or at the direction of, our Board of Directors, or who are nominated by a shareholder who has given timely written notice, in proper form, to the Secretary of Vectrus prior to a meeting at which directors are to be elected, will be eligible for election as directors of Vectrus. The notice of any nomination for election as a director must set forth:

• the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated;

• a representation that the shareholder is a holder of record of our stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice;

• a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons, naming such person or persons, pursuant to which the nomination or nominations are to be made by the shareholder;

• such other information regarding each nominee proposed by such shareholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated, by our board;

• the consent of each nominee to serve as a director if so elected; and

• if the shareholder intends to solicit proxies in support of such shareholder’s nominee(s), a representation to that effect.

The notice to bring any other matter a shareholder proposes to bring before an annual meeting must also set forth:

• a brief description of the proposal and the reasons therefor;

• if the proposal involves an amendment to our amended and restated articles of incorporation or amended and restated by-laws, the language of the proposed amendment;

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• any material interest of the shareholder in the proposal; and

• if the shareholder intends to solicit proxies with respect to the proposal, a representation to that effect.

Our amended and restated by-laws limit the business that may be conducted at a special meeting to the purposes stated in the notice of the meeting.

The advance notice provisions may delay a person from bringing matters before a shareholder meeting. The provisions may provide enough time for us to begin litigation or take other steps to respond to these matters, or to prevent them from being acted upon, if we find it desirable.

Choice of Forum

Our amended and restated bylaws will provide that a Circuit or Superior Court of Marion County, Indiana or the United States District Court for the Southern District of Indiana will be the exclusive forums for (i) any action asserting a claim of breach of a fiduciary duty owed to us by our directors, officers, employees or agents, (ii) any action asserting a claim against us arising pursuant to any provision of the Indiana Business Corporation Law, the amended and restated certificate of incorporation or the amended and restated by-laws or (iii) any action asserting a claim otherwise relating to our internal affairs including, but not limited to, any derivative action brought on our behalf. It is possible that a court could rule that this provision is not applicable or is unenforceable. We may consent in writing to alternative forums. Stockholders will be deemed to have notice of and consented to this provision of our amended and restated bylaws.

Certain Provisions of the Indiana Business Corporation Law

As an Indiana corporation, we are governed by the Indiana Business Corporation Law, or the IBCL. Under specified circumstances, the following provisions of the IBCL may delay, prevent or make more difficult unsolicited acquisitions or changes of control of our company. These provisions also may have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions which shareholders may otherwise deem to be in their best interest.

Control Share Acquisitions. Under Sections 23-1-42-1 to 23-1-42-11 of the IBCL, an acquiring person or group who makes a “control share acquisition” in an “issuing public corporation” may not exercise voting rights on any “control shares” unless these voting rights are conferred by a majority vote of the disinterested shareholders of the issuing corporation at a special meeting of those shareholders held upon the request and at the expense of the acquiring person. If control shares acquired in a control share acquisition are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of all voting power, all shareholders of the issuing public corporation have dissenters’ rights to receive the fair value of their shares pursuant to Section 23-1-44 of the IBCL.

Under the IBCL, “control shares” means shares acquired by a person that, when added to all other shares of the issuing public corporation owned by that person or in respect to which that person may exercise or direct the exercise of voting power, would otherwise entitle that person to exercise voting power of the issuing public corporation in the election of directors within any of the following ranges of voting power:

• one-fifth or more but less than one-third;

• one-third or more but less than a majority; or

• a majority or more.

“Control share acquisition” means, subject to specified exceptions, the acquisition, directly or indirectly, by any person of ownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares. For the purposes of determining whether an acquisition constitutes a control share

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acquisition, shares acquired within 90 days or under a plan to make a control share acquisition are considered to have been acquired in the same acquisition. “Issuing public corporation” means a corporation which is organized in Indiana and has (i) 100 or more shareholders, (ii) its principal place of business, its principal office or assets having a fair market value of more than $1,000,000 within Indiana and either (iii) (A) more than 10% of its shareholders resident in Indiana, (B) more than 10% of its shares beneficially owned by Indiana residents or (C) 1,000 shareholders resident in Indiana.

The above provisions do not apply if, before a control share acquisition is made, the corporation’s articles of incorporation or by-laws, including a board adopted by-law, provide that they do not apply. Our amended and restated articles of incorporation and amended and restated by-laws do not currently exclude us from the restrictions imposed by the above provisions.

Certain Business Combinations. Sections 23-1-43-1 to 23-1-43-24 of the IBCL restrict the ability of a “resident domestic corporation” to engage in any combinations with an “interested shareholder” for five years after the date the interested shareholder became such, unless the combination or the purchase of shares by the interested shareholder on the interested shareholder’s date of acquiring shares is approved by the Board of Directors of the resident domestic corporation before that date. If the combination was not previously approved, the interested shareholder may effect a combination after the five-year period only if that shareholder receives approval from a majority of the disinterested shares or the offer meets specified fair price criteria. For purposes of the above provisions, “resident domestic corporation” means an Indiana corporation that has 100 or more shareholders. “Interested shareholder” means any person, other than the resident domestic corporation or its subsidiaries, who is (1) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the resident domestic corporation or (2) an affiliate or associate of the resident domestic corporation, which at any time within the five-year period immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding shares of the resident domestic corporation. The above provisions do not apply to corporations that so elect in an amendment to their articles of incorporation approved by a majority of the disinterested shares. That amendment, however, cannot become effective until 18 months after its passage and would apply only to share acquisitions occurring after its effective date. Our amended and restated articles of incorporation do not exclude us from the restrictions imposed by the above provisions.

Directors’ Duties and Liability. Under Section 23-1-35-1 of the IBCL, directors are required to discharge their duties:

• in good faith;

• with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

• in a manner the directors reasonably believe to be in the best interests of the corporation.

However, the IBCL also provides that a director is not liable for any action taken as a director, or any failure to act, unless the director has breached or failed to perform the duties of the director’s office and the action or failure to act constitutes willful misconduct or recklessness.

The exoneration from liability under the IBCL does not affect the liability of directors for violations of the Federal securities laws.

Section 23-1-35-1 of the IBCL also provides that a Board of Directors, in discharging its duties, may consider, in its discretion, both the long-term and short-term best interests of the corporation, taking into account, and weighing as the directors deem appropriate, the effects of an action on the corporation’s shareholders, employees, suppliers and customers and the communities in which offices or other facilities of the corporation are located and any other factors the directors consider pertinent. Directors are not required to consider the effects of a proposed corporate action on any particular corporate constituent group or interest as a dominant or controlling factor. If a

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determination is made with the approval of a majority of the disinterested directors of the board, that determination is conclusively presumed to be valid unless it can be demonstrated that the determination was not made in good faith after reasonable investigation. Section 23-1-35-1 specifically provides that specified judicial decisions in Delaware and other jurisdictions, which might be looked upon for guidance in interpreting Indiana law, including decisions that propose a higher or different degree of scrutiny in response to a proposed acquisition of the corporation, are inconsistent with the proper application of the business judgment rule under the IBCL.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.

Listing

Following the spin-off, we expect to have our common stock listed on the New York Stock Exchange under the ticker symbol “VEC”.

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WHERE YOU CAN FIND MORE INFORMATION

We have filed a Registration Statement on Form 10 with the SEC with respect to the shares of common stock that Exelis shareholders will receive in the distribution. This information statement does not contain all of the information contained in the Registration Statement on Form 10 and the exhibits and schedules to the Registration Statement on Form 10. Some items are omitted in accordance with the rules and regulations of the SEC. For additional information relating to us and the spin-off, reference is made to the Registration Statement on Form 10 and the exhibits to the Registration Statement on Form 10, which are on file at the offices of the SEC. Statements contained in this information statement as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if the contract or document is filed as an exhibit, reference is made to the copy of the contract or other documents filed as an exhibit to the Registration Statement on Form 10. Each statement is qualified in all respects by the relevant reference.

You may inspect and copy the Registration Statement on Form 10 and the exhibits to the Registration Statement on Form 10 that we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further information on the Public Reference Room. In addition, the SEC maintains an Internet site at www.sec.gov, from which you can electronically access the Registration Statement on Form 10, including the exhibits and schedules to the Registration Statement on Form 10.

Our Internet site and the information contained on that site, or connected to that site, are not incorporated into the information statement or the Registration Statement on Form 10.

As a result of the distribution, we will be required to comply with the full informational requirements of the Exchange Act. We will fulfill our obligations with respect to these requirements by filing periodic reports and other information with the SEC.

We plan to make available, free of charge, on our Internet site our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, reports filed pursuant to Section 16 of the Exchange Act and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the SEC.

You should rely only on the information contained in this information statement or to which we have referred you. We have not authorized any person to provide you with different information or to make any representation not contained in this information statement.

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INDEX TO COMBINED FINANCIAL STATEMENTS

MISSION SYSTEMS BUSINESS OF EXELIS INC.

	Page No.
Combined Financial Statements
Report of Independent Registered Public Accounting Firm		F-2
Combined Statements of Income for the years ended December 31, 2013, 2012 and 2011		F-3
Combined Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011		F-4
Combined Balance Sheets as of December 31, 2013 and December 31, 2012		F-5
Combined Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011		F-6
Combined Statements of Parent Company Equity for the years ended December 31, 2013, 2012 and 2011		F-7
Notes to Combined Financial Statements		F-8
Interim Condensed Combined Financial Statements (unaudited)
Condensed Combined Statements of Income for the Six Months Ended June 30, 2014 and 2013 (unaudited)		F-21
Condensed Combined Statements of Comprehensive Income (Loss) for the Six Months Ended June  30, 2014 and 2013 (unaudited)		F-22
Condensed Combined Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013 (audited)		F-23
Condensed Combined Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013 (unaudited)		F-24
Notes to Unaudited Condensed Combined Financial Statements		F-25

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Exelis Inc.

McLean, Virginia

We have audited the accompanying combined balance sheets of the Mission Systems business of Exelis Inc. (the “Company”) as of December 31, 2013 and 2012, and the related combined statements of income, parent company equity, comprehensive income and cash flows for each of the three years in the period ended December 31, 2013. These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such combined financial statements present fairly, in all material respects, the financial position of the Mission Systems business of Exelis Inc. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

As described in Note 1, the accompanying combined financial statements have been derived from the consolidated and combined financial statements and accounting records of Exelis Inc. The combined financial statements also include expense allocations for certain corporate functions historically provided by Exelis Inc. These allocations may not be reflective of the actual expense which would have been incurred had the Company operated as a separate entity apart from Exelis Inc. Included in Note 10 to the combined financial statements is a summary of transactions with related parties.

/s/ DELOITTE & TOUCHE LLP

McLean, Virginia

March 7, 2014

F-2

COMBINED STATEMENTS OF INCOME

MISSION SYSTEMS BUSINESS OF EXELIS INC.

	Years Ended December 31,
(In millions)	2013		2012		2011
Revenue	$	1,512	$	1,828	$	1,806
Cost of revenue		1,297		1,636		1,648
Selling, general and administrative expenses		84		82		71
Operating income		131		110		87
Income tax expense		47		35		33
Net income	$	84	$	75	$	54

The accompanying notes are an integral part of the Combined Financial Statements.

F-3

COMBINED STATEMENTS OF COMPREHENSIVE INCOME

MISSION SYSTEMS BUSINESS OF EXELIS INC.

	Years Ended December 31,
(In millions)	2013		2012		2011
Net income	$	84	$	75	$	54
Other comprehensive income (loss), net of tax
Net foreign currency translation adjustments		1		1		(2	)
Other comprehensive income (loss), net of tax		1		1		(2	)
Total comprehensive income	$	85	$	76	$	52

The accompanying notes are an integral part of the Combined Financial Statements.

F-4

COMBINED BALANCE SHEETS

MISSION SYSTEMS BUSINESS OF EXELIS INC.

	December 31,
(In millions)	2013			2012
Assets
Current assets
Cash and cash equivalents	$	10		$	14
Receivables		228			329
Other current assets		17			15
Total current assets		255			358
Plant, property and equipment, net		9			10
Goodwill		222			222
Other non-current assets		3			1
Total non-current assets		234			233
Total assets	$	489		$	591
Liabilities and Parent Company Equity
Current liabilities
Accounts payable	$	111		$	162
Advance payments and billings in excess of costs		12			12
Compensation and other employee benefits		50			71
Deferred tax liability		24			45
Other accrued liabilities		11			10
Total current liabilities		208			300
Deferred tax liability		75			70
Other non-current liabilities		15			20
Total non-current liabilities		90			90
Total liabilities		298			390
Commitments and contingencies (Note 11)
Parent company equity
Parent company investment		192			203
Accumulated other comprehensive loss		(1	)		(2	)
Total parent company equity		191			201
Total liabilities and parent company equity	$	489		$	591

The accompanying notes are an integral part of the Combined Financial Statements.

F-5

COMBINED STATEMENTS OF CASH FLOWS

MISSION SYSTEMS BUSINESS OF EXELIS INC.

	Years Ended December 31,
(In millions)	2013			2012			2011
Operating Activities
Net income	$	84		$	75		$	54
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		3			3			3
Changes in assets and liabilities
Change in receivables		101			25			(131	)
Change in other assets		(4	)		(1	)		3
Change in accounts payable		(51	)		11			78
Change in advance payments and billings in excess of costs		—			(6	)		3
Change in deferred taxes		(16	)		(7	)		42
Compensation and other employee benefits		(21	)		8			26
Change in other liabilities		(4	)		8			(43	)
Net cash provided by operating activities		92			116			35
Investing Activities
Capital expenditures		(2	)		(3	)		(3	)
Net cash used in investing activities		(2	)		(3	)		(3	)
Financing Activities
Transfer to Parent, net		(95	)		(114	)		(17	)
Net cash used in financing activities		(95	)		(114	)		(17	)
Exchange rate effect on cash and cash equivalents		1			1			(2	)
Net change in cash and cash equivalents		(4	)		—			13
Cash and cash equivalents—beginning of year		14			14			1
Cash and cash equivalents—end of year	$	10		$	14		$	14
Supplemental disclosures of cash flow information
Income taxes paid (net of refunds received)	$	63		$	44		$	(9	)

The accompanying notes are an integral part of the Combined Financial Statements.

F-6

COMBINED STATEMENTS OF PARENT COMPANY EQUITY

MISSION SYSTEMS BUSINESS OF EXELIS INC.

	December 31,
(In millions)	2013			2012			2011
Parent company investment
Parent company investment, beginning balance	$	203		$	242		$	205
Net income		84			75			54
Net transfer to parent		(95	)		(114	)		(17	)
Parent company investment, ending balance	$	192		$	203		$	242
Accumulated other comprehensive loss
Accumulated other comprehensive loss, beginning balance	$	(2	)	$	(3	)	$	(1	)
Net foreign currency translation adjustments		1			1			(2	)
Accumulated other comprehensive loss, ending balance	$	(1	)	$	(2	)	$	(3	)
Total parent company equity
Total parent company equity, beginning balance	$	201		$	239		$	204
Net change in parent company investment		(11	)		(39	)		37
Net change in accumulated other comprehensive loss		1			1			(2	)
Total parent company equity, ending balance	$	191		$	201		$	239

The accompanying notes are an integral part of the Combined Financial Statements.

F-7

NOTES TO COMBINED FINANCIAL STATEMENTS

(DOLLARS IN MILLIONS, UNLESS OTHERWISE STATED)

NOTE 1

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Separation from Exelis Inc.

On December 11, 2013, Exelis Inc. announced that its Board of Directors approved a plan to spin-off to Exelis shareholders its military and government services business in the form of a new independent company named Vectrus, Inc. (“Vectrus”). Unless the context otherwise requires, references in these notes to “we,” “us,” “our,” “the Company” and “our company” refer to the Mission Systems business of Exelis Inc. and its combined subsidiaries. References in these notes to “Exelis” or “parent” refer to Exelis Inc., an Indiana corporation, and its consolidated subsidiaries (other than the Company and its combined subsidiaries), unless the context otherwise requires. Vectrus was incorporated in Indiana on February 4, 2014.

The spin-off is conditioned on, among other things, final approval of the transaction by the Exelis Board of Directors and receipt of an opinion of tax counsel to the effect that the spin-off will qualify as a tax-free distribution under Section 355 of the Internal Revenue Code of 1986, as amended.

The Company expects to issue third-party debt based on the anticipated initial post-spin-off capital structure of the Company.

Our Business

The Company is a leading provider of infrastructure asset management, logistics and supply chain management, and information technology and network communication services to the U.S. government worldwide. The Company operates in 18 countries across four continents and its services include operations, maintenance, management, engineering and sustainment for physical assets including a wide variety of facilities, information technology, network and communication systems, vehicles and equipment. We operate in a single reportable segment. Our primary customer is the Department of Defense (DoD) with a high concentration in the U.S. Army, followed by the U.S. Air Force and U.S. Navy.

Principles of Combination and Basis of Presentation

The Combined Financial Statements have been prepared on a stand-alone basis and are derived from the consolidated and combined financial statements and accounting records of Exelis. The Combined Financial Statements reflect our financial position, results of operations and cash flows as we were historically managed, in conformity with accounting principles generally accepted in the United States of America (GAAP).

All intracompany transactions between our businesses have been eliminated. All intercompany transactions between us and Exelis have been included in these Combined Financial Statements and are considered to be effectively settled for cash in the Combined Financial Statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Combined Statements of Cash Flows as a financing activity, and in the Combined Balance Sheets and Combined Statements of Parent Company Equity as “parent company investment.”

Our Combined Financial Statements include expenses of Exelis allocated to us for certain functions provided by Exelis, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, ethics and compliance, shared services, employee benefits and incentives, insurance and stock-based compensation. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on the basis of revenue, headcount or other measures. Both we and Exelis consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to, or the benefit received by, us during the periods presented.

F-8

Management believes such allocations are reasonable. The allocations may not, however, reflect the expense we would have incurred as an independent, publicly-traded company for the periods presented. Actual costs that may have been incurred if we had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. Following our separation from Exelis, we will perform these functions using our own resources or purchased services. For an interim period, however, some of these functions will continue to be provided by Exelis under a transition services agreement, which will generally have a term of one year or less. In addition to the transition services agreement, we will enter into commercial arrangements with Exelis in connection with the spin-off, several of which are expected to have terms longer than one year.

Exelis uses a centralized approach to cash management and financing of its operations. The majority of our cash is transferred to Exelis daily and Exelis funds our operating and investing activities as needed. Cash transfers to and from the cash management accounts of Exelis are reflected in the Combined Statements of Cash Flows as “transfers to parent, net.”

The Combined Financial Statements also include the push down of certain assets and liabilities that have historically been held at the Exelis corporate level but are specifically identifiable or otherwise allocable to us. The cash and cash equivalents held by Exelis at the corporate level are not specifically identifiable to the Company and therefore were not allocated to us for any of the periods presented. Cash and cash equivalents in our Combined Balance Sheets represent primarily cash held locally by entities included in our Combined Financial Statements. Third-party debt and the related interest expense of Exelis were not allocated to us for any of the periods presented as we are not the legal obligor of the debt and the Exelis borrowings were not directly attributable to our business.

See Note 10, “Related Party Transactions and Parent Company Equity,” for further description of the transactions between us and Exelis.

Parent Company Investment

Parent company investment in the Combined Balance Sheets represents the historical investment of Exelis in us. See “Principles of Combination and Basis of Presentation” above and Note 10, “Related Party Transactions and Parent Company Equity,” for additional information.

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 tax contingency accruals and valuation allowances, fair value and impairment of goodwill, and valuation of assets and certain contingent liabilities. Actual results could differ from these estimates.

Revenue Recognition

As a defense contractor engaging in long-term contracts, the majority of our revenue is derived from long-term service contracts for which revenue is recognized under the percentage-of-completion method based on units of delivery or percentage of costs incurred to total costs. For units of delivery, revenue and profits are recognized based upon the ratio of actual units delivered to estimated total units to be delivered under the contract. Under the cost-to-total cost method, revenue is recognized based upon the ratio of costs incurred to estimated total costs at completion. Revenue under cost-reimbursement contracts is recorded as costs are incurred and includes estimated earned fees or profits calculated on the basis of the relationship between costs incurred

F-9

and total estimated costs. Revenue and profits on time-and-material type contracts are recognized based on billable rates multiplied by direct labor hours incurred plus material and other reimbursable costs incurred. The completed contract method is utilized when reasonable and reliable cost estimates for a project cannot be made. Amounts invoiced to customers in excess of revenue recognized are recorded as deferred revenue, until the revenue recognition criteria are satisfied, and are recorded as advance payments and billings in excess of costs in the accompanying Combined Balance Sheets. Revenue that is earned and recognized in excess of amounts invoiced is recorded as a component of receivables.

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. Additionally, the fees under certain contracts may be increased or decreased in accordance with cost or performance incentive provisions which measure actual performance against established targets or other criteria. Such incentive fee awards or penalties are included in revenue when there is sufficient information to reasonably assess anticipated contract performance. Amounts representing contract change orders, claims, requests for equitable adjustment, or limitations in funding on contracts are recorded only if it is probable the claim will result in additional contract revenue and the amounts can be reliably estimated. Provisions for estimated losses on uncompleted long-term contracts are made in the period in which such losses are determined and are recorded as a component of cost of revenue. Contract revenue and cost estimates are reviewed and reassessed periodically. Changes in these estimates could result in recognition of cumulative catch-up adjustments to the contract’s inception to date revenue, cost of revenue and profit in the period in which such changes are made, based on a contract’s percentage completion. Changes in revenue and cost estimates could also result in a forward loss or an adjustment to a forward loss. For the years ended December 31, 2013, 2012, and 2011 net favorable cumulative catch-up adjustments related to prior periods increased operating income by approximately $38 million, $11 million and $26 million, respectively. Two contracts accounted for 44%, 56% and 84% of the 2013, 2012 and 2011 net favorable cumulative catch-up adjustments.

For the year ended December 31, 2013, we generated approximately 92% of our total revenue from the U.S. Army of which our four largest contracts amounted to approximately $1.0 billion or 69% of our revenue.

Income taxes

Our income taxes as presented are calculated on a separate tax return basis, although our operations have historically been included in U.S. Federal and state tax returns or non-U.S. jurisdictions tax returns of Exelis. With the exception of certain dedicated foreign entities, we do not maintain taxes payable to or receivable from our parent and we are deemed to settle the annual current tax balances immediately with the legal tax-paying entities in the respective jurisdictions. These settlements are reflected as changes in parent company investment.

We determine the provision for income taxes using the asset and liability approach. Under this approach, deferred income taxes represent the expected future tax consequences of temporary differences between the carrying amounts and tax basis of assets and liabilities.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. In assessing the need for a valuation allowance, we look to the future reversal of existing taxable temporary differences, taxable income in carryback years, the feasibility of tax planning strategies and estimated future taxable income. The valuation allowance can be affected by changes to tax laws, changes to statutory tax rates and changes to future taxable income estimates.

We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the Combined Financial Statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

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Foreign Currency Translation

The financial statements of combined international businesses, for which the functional currency is not the U.S. dollar, are translated into U.S. dollars. Balance sheet accounts are translated at the exchange rate in effect at the end of each period; income statement accounts are translated at the average rates of exchange prevailing during the period. Gains and losses on foreign currency translations are reflected in the accumulated other comprehensive income/loss component of parent company equity. Net gains or losses from foreign currency transactions are reported in Selling, General and Administrative (SG&A) expenses and have historically been immaterial.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Receivables

Receivables include amounts billed and currently due from customers, amounts currently due but unbilled, certain estimated contract change amounts, estimates related to expected award fees, claims or requests for equitable adjustment in negotiation that are probable of recovery, and amounts retained by the customer pending contract completion.

Plant, Property and Equipment, Net

Plant, property and equipment, net are stated at cost less accumulated depreciation. Major improvements are capitalized at cost while expenditures for maintenance, repairs and minor improvements are expensed. For asset sales or retirements, the assets and related accumulated depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in income.

Depreciation is generally computed using either an accelerated or straight-line method and is based on estimated useful lives or lease term as follows:

	Years
Buildings and improvements		5 – 40
Machinery and equipment		2 – 10
Furniture, fixtures, and office equipment		3 – 7

Operating Leases

Many of our real property lease agreements contain incentives for tenant improvements, rent holidays, or rent escalation clauses. For incentives for tenant improvements, the Company records a deferred rent liability and amortizes the deferred rent over the term of the lease as a reduction to rent expense. For rent holidays and rent escalation clauses during the lease term, the Company records minimum rental expenses on a straight-line basis over the term of the lease. Leasehold improvements are amortized over the lesser of the remaining life of the lease or the estimated useful life of the improvement.

Long-Lived Asset Impairment

Long-lived assets, including other intangible assets with finite lives, are tested for impairment whenever events or changes in circumstances indicate their carrying value may not be recoverable. We assess the recoverability of long-lived assets based on the undiscounted future cash flow the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use

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of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When an impairment is identified, we reduce the carrying value of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values.

Goodwill

Goodwill represents purchase consideration paid in a business combination that exceeds the values assigned to the net assets of acquired businesses. Goodwill is not amortized, but instead is tested for impairment annually (or more frequently if impairment indicators arise, such as changes to the reporting unit structure or significant adverse changes in the business climate). We conduct our annual impairment testing on the first day of the fourth fiscal quarter. We perform this review at the reporting unit level, which is one level below our one reportable segment. The impairment test is a two-step test. In the first step, the estimated fair value of the reporting unit is compared to the carrying value of the net assets assigned to the reporting unit. If the estimated fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and the second step of the impairment test is not performed. If the carrying value of the reporting unit exceeds its estimated fair value, then the second step of the impairment test is performed in order to measure the impairment loss to be recorded. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then we record an impairment loss equal to the difference. We estimate the fair value of our reporting unit using an income approach. Under the income approach, we estimate fair value based on the present value of estimated future cash flows.

Stock-Based Compensation

We recognize stock-based compensation expense primarily within SG&A expenses based on the grant date fair values, net of estimated forfeitures, for all share-based awards granted over the requisite service periods of the awards, which is generally equivalent to the vesting terms. Stock based compensation expense related to our employees was $2 million, $1 million and $1 million in 2013, 2012 and 2011, respectively.

Segment Information

Management has concluded that the Company operates in one segment based upon the information used by the chief operating decision maker in evaluating the performance of the Company’s business and allocating resources and capital. While we perform services worldwide, all of our 2013 revenue was with the U.S. government.

Commitments and Contingencies

We record accruals for commitments and loss contingencies when they are probable of occurrence and the amounts can be reasonably estimated. In addition, legal fees are accrued for cases where a loss is probable and the related fees can be reasonably estimated. Significant judgment is required to determine both probability and the estimated amount of loss. We review these accruals quarterly and adjust the accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other updated information.

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. Our estimated liability is reduced to reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. These accruals are adjusted quarterly as assessment and remediation efforts progress or as additional technical or legal information become available. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given inherent uncertainties in evaluating environmental exposures. Accruals for environmental liabilities are included primarily in other non-current liabilities at undiscounted amounts and exclude claims for recoveries from insurance companies or other third parties. Recoveries from insurance companies or other third parties are included primarily in other non-current assets when the recovery is probable.

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NOTE 2

RECENT ACCOUNTING PRONOUNCEMENTS

New pronouncements issued but not effective until after December 31, 2013 are not expected to have a material impact on our financial position, results of operations or cash flows.

NOTE 3

COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

The following tables present financial information underlying certain balance sheet captions.

Other current assets

Other current assets were composed of the following as of December 31:

(In millions)	2013		2012
Inventory	$	6	$	5
Prepaid assets		11		7
Other		—		3
Total	$	17	$	15

Compensation and other employee benefits

Compensation and other employee benefits were composed of the following as of December 31:

(In millions)	2013		2012
Accrued salaries and wages	$	26	$	44
Accrued bonus		4		6
Accrued employee benefits		20		21
Total	$	50	$	71

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NOTE 4

INCOME TAXES

Our operating results have been included in the consolidated U.S. Federal and state income tax returns of Exelis as well as included in many of the tax filings of Exelis for non-U.S. jurisdictions. Amounts presented in these Combined Financial Statements related to income taxes have been determined on a separate return basis. Our contribution to the tax losses and tax credits of Exelis on a separate return basis has been included in these financial statements. Our separate return basis tax losses and tax credits may not reflect the tax positions taken or to be taken by Exelis. In many cases the tax losses and tax credits we generated have been available for use by Exelis and may remain with Exelis after the separation from Exelis.

The source of pre- tax income and the components of income tax expense at December 31, 2013, 2012 and 2011, respectively, are as follows:

($ In millions)	2013			2012			2011
Total income components
United States	$	131		$	110		$	87
Income tax expense components
Current income tax provision
United States—Federal	$	62		$	41		$	(11	)
United States—state and local		1			—			—
Foreign		—			1			2
Total current income tax provision	$	63		$	42		$	(9	)
Deferred income tax provision
United States—Federal	$	(16	)	$	(2	)	$	40
United States—state and local		—			(5	)		2
Total deferred income tax provision	$	(16	)	$	(7	)	$	42
Total income tax expense	$	47		$	35		$	33
Effective income tax rate		35.9	%		31.8	%		37.9	%

A reconciliation of the income tax provision at the U.S. statutory rate to the effective income tax rate as reported is as follows:

	2013			2012			2011
Tax provision at U.S. statutory rate		35.0	%		35.0	%		35.0	%
State and local income tax, net of Federal benefit		0.5			(2.9	)		2.1
Other		0.4			(0.3	)		0.8
Effective income tax rate		35.9	%		31.8	%		37.9	%

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Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates in effect for the year in which we expect the differences will reverse. Deferred tax assets and liabilities include the following:

(In millions)	2013			2012
Deferred Tax Assets:
Inventory	$	4		$	4
Compensation and benefits		2			2
Contingency reserves		2			2
Other		3			4
Total deferred tax assets	$	11		$	12
Deferred Tax Liabilities:
Goodwill	$	(74	)	$	(70	)
Property, Plant, and Equipment		(3	)		(3	)
Unbilled receivables		(33	)		(54	)
Total deferred tax liabilities	$	(110	)	$	(127	)

Deferred taxes are classified in the Combined Balance Sheets as follows:

(In millions)	2013		2012
Current liabilities	$	24	$	45
Non-current liabilities		75		70
Net deferred tax liabilities	$	99	$	115

Uncertain Tax Position

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31, 2013, 2012 and 2011 is as follows:

(In millions)	2013			2012		2011
Unrecognized tax benefits—January 1,	$	13		$	1	$	12
Additions for:
Current year tax positions		2			12		0
Reductions for:
Prior year tax positions		(6	)		—		(11	)
Unrecognized tax benefits—December 31,	$	9		$	13	$	1

As of December 31, 2013, 2012, and 2011, there were no unrecognized tax benefits that would, if recognized, affect the effective tax rate. We do not believe that the uncertain tax positions will significantly change within twelve months of the reporting date.

In many cases, unrecognized tax benefits are related to tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes the earliest open tax years by major jurisdiction:

Jurisdiction	Earliest Open Year
United States		2009

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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 Combined Statement of Income. During 2013, 2012 and 2011, we did not recognize any expense related to tax matters. As of December 31, 2013, 2012, and 2011, we had no interest accrued for tax matters.

NOTE 5

RECEIVABLES

Receivables were composed of the following at December 31:

	2013		2012
(In millions)
Billed receivables	$	69	$	82
Unbilled contract receivables		159		247
Receivables	$	228	$	329

All billed receivables are due from the U.S. government, either directly or as subcontractor with the government at December 31, 2013 and 2012, respectively. Because the Company’s billed receivables are with the U.S. government, the Company does not have 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 December 31, 2013 unbilled contract receivables during the next twelve months.

NOTE 6

PLANT, PROPERTY AND EQUIPMENT, NET

Plant, property and equipment, net consisted of the following at December 31:

	2013			2012
Buildings and improvements	$	7		$	7
Machinery and equipment		12			10
Furniture, fixtures and office equipment		1			1
Plant, property and equipment, gross		20			18
Less—accumulated depreciation		(11	)		(8	)
Plant, property and equipment, net	$	9		$	10

Depreciation expense of plant, property and equipment, net was $3 million, $3 million and $3 million in 2013, 2012 and 2011, respectively.

NOTE 7

GOODWILL

There were no acquisitions during the years ended December 31, 2013 and 2012. Based upon our annual impairment tests, we determined no impairment of goodwill existed as of the measurement date in 2013 or 2012. Accordingly, goodwill had a carrying value of $222 million for all periods presented. However, future goodwill impairment tests could result in a charge to income. We will continue to evaluate goodwill on an annual basis as of the beginning of the fourth fiscal quarter and whenever events and changes in circumstances indicate there may be a potential impairment. Additionally, there have been no historical impairments of goodwill.

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NOTE 8

LEASES AND RENTALS

The Company leases certain offices, manufacturing buildings, land, machinery, automobiles, computers and other equipment under operating leases. Such leases expire at various dates through 2018 and may include renewal and payment escalation clauses. The Company often pays maintenance, insurance and tax expense related to leased assets. Rental expenses under our operating leases were $10 million, $9 million and $10 million for 2013, 2012 and 2011, respectively. Future minimum operating lease payments under non-cancellable operating leases with an initial term in excess of one year as of December 31, 2013 are shown below.

(In millions)
2014	$	2
2015		1
2016		1
2017		2
2018		1
Total future minimum lease payments	$	7

NOTE 9

POSTRETIREMENT BENEFIT PLANS

Exelis sponsors numerous defined contribution savings plans, which allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with specified guidelines. Several of the plans require us to match a percentage of the employee contributions up to certain limits, generally 2%—6% of employee base pay. Our portion of the matching contributions charged to income amounted to $4 million, $6 million and $5 million for 2013, 2012 and 2011, respectively.

NOTE 10

RELATED PARTY TRANSACTIONS AND PARENT COMPANY EQUITY

The Combined Financial Statements have been prepared on a stand-alone basis and are derived from the consolidated and combined financial statements and accounting records of Exelis.

Allocation of General Corporate Expenses

The Combined Financial Statements include expense allocations for certain functions provided by Exelis as well as other Exelis employees not solely dedicated to the Company, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, ethics and compliance, shared services, employee benefits and incentives, and stock-based compensation. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on the basis of revenue, headcount or other measures. During 2013, 2012 and 2011, we were allocated $33 million, $36 million and $43 million, respectively, of general corporate expenses incurred by Exelis which is primarily included within SG&A expenses in the Combined Statements of Income.

The expense allocations from Exelis discussed above include costs associated with defined benefit pension and other postretirement benefit plans (the “Shared Plans”) sponsored by Exelis in which some of our employees participate. We account for such Shared Plans as multiemployer benefit plans. Accordingly, we do not record an asset or liability to recognize the funded status of the Shared Plans. Subsequent to the completion of the spin-off, the Company will not receive expense allocations for the Shared Plans and all assets and liabilities related to the Shared Plans will remain with Exelis.

F-17

The expense allocations have been determined on a basis that we consider to be a reasonable reflection of the utilization of services provided or the benefit received by us during the periods presented. The allocations may not, however, reflect the expense we would have incurred as an independent, publicly-traded company for the periods presented. Actual costs that may have been incurred if we had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, functions outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.

Parent Company Equity

Net transfers to parent are included within parent company investment on the Combined Statements of Parent Company Equity. The components of the net transfers to parent as of December 31, 2013, 2012 and 2011 are as follows:

	December 31,
	2013			2012			2011
(In millions)
Cash pooling and general financing activities	$	(182	)	$	(182	)	$	(36	)
Corporate allocations including income taxes		87			68			19
Total net transfers to parent	$	(95	)	$	(114	)	$	(17	)

Subcontract Pending Novation

We intend to enter into a subcontract with Exelis pending the U.S. government’s agreement to novate one government contract to Exelis under which Exelis will be obligated to fulfill the terms of such government contract. Pursuant to the terms of the subcontract, we will be obligated to immediately deposit all proceeds we receive under such government contract into a bank account controlled by Exelis. We will work diligently with the U.S. government to finalize the novation of this contract and do not expect any disruptions in our business as a result of this process.

In support of ongoing business, we expect to enter into one or more subcontracts with Exelis, the terms of which will be negotiated at arm’s length, whereby either we or Exelis will serve as a subcontractor to the other on certain government contracts in the future.

NOTE 11

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.

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

F-18

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 the Company, and other properties or water supplies that may be or have been impacted from the operations at those sites, 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 the 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 $4 million as of December 31, 2013 and 2012, for environmental matters. In our opinion, the total amount accrued is appropriate based on existing facts and circumstances known to us.

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

	December 31,
(In millions)	2013		2012
Low-end range	$	3	$	3
High-end range	$	6	$	6
Number of active environmental investigation and remediation sites		5		4

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 materially adversely affect 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 U.S. 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 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, 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, U.S. government 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 to us.

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CONDENSED COMBINED STATEMENTS OF INCOME (UNAUDITED)

MISSION SYSTEMS BUSINESS OF EXELIS INC.

	Six Months Ended June 30,
(In millions)	2014		2013
Revenue	$	617	$	835
Cost of revenue		552		713
Selling, general and administrative expenses		38		45
Operating income		27		77
Income tax expense		10		27
Net income	$	17	$	50

The accompanying notes are an integral part of the Condensed Combined Financial Statements.

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CONDENSED COMBINED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

MISSION SYSTEMS BUSINESS OF EXELIS INC.

	Six Months Ended June 30,
(In millions)	2014			2013
Net income	$	17		$	50
Other comprehensive income (loss), net of tax
Net foreign currency translation adjustments		(1	)		(1	)
Other comprehensive income (loss), net of tax		(1	)		(1	)
Total comprehensive income	$	16		$	49

The accompanying notes are an integral part of the Condensed Combined Financial Statements.

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CONDENSED COMBINED BALANCE SHEETS (UNAUDITED)

MISSION SYSTEMS BUSINESS OF EXELIS INC.

(In millions)	Exelis Distribution Pro Forma June 30, 2014			June 30, 2014			December 31, 2013
Assets
Current assets
Cash and cash equivalents	$	25		$	9		$	10
Receivables		237			242			228
Other current assets		14			14			17
Total current assets		276			265			255
Plant, property and equipment, net		9			9			9
Goodwill		216			222			222
Other non-current assets		11			3			3
Total non-current assets		236			234			234
Total assets	$	512		$	499		$	489
Liabilities and Parent Company Equity
Current liabilities
Accounts payable	$	115		$	117		$	111
Advance payments and billings in excess of costs		7			8			12
Compensation and other employee benefits		44			46			50
Deferred tax liability		12			17			24
Short-term debt		11			—			—
Other accrued liabilities		20			9			11
Total current liabilities		209			197			208
Long term debt		129			—			—
Deferred tax liability		82			81			75
Other non-current liabilities		11			15			15
Total non-current liabilities		222			96			90
Total liabilities		431			293			298
Commitments and contingencies (Note 9)
Parent company equity
Additional paid in capital		83			—			—
Parent company investment		—			208			192
Accumulated other comprehensive loss		(2	)		(2	)		(1	)
Total parent company equity		81			206			191
Total liabilities and parent company equity	$	512		$	499		$	489

The accompanying notes are an integral part of the Condensed Combined Financial Statements.

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CONDENSED COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)

MISSION SYSTEMS BUSINESS OF EXELIS INC.

	Six Months Ended June 30,
(In millions)	2014			2013
Operating Activities
Net income	$	17		$	50
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation expense		2			1
Changes in assets and liabilities
Change in receivables		(14	)		2
Change in other assets		3			(2	)
Change in accounts payable		6			(27	)
Change in advance payments and billings in excess of costs		(4	)		2
Change in deferred taxes		(1	)		(10	)
Compensation and other employee benefits		(4	)		(12	)
Change in other liabilities		(2	)		(3	)
Net cash provided by operating activities		3			1
Investing Activities
Capital expenditures		(1	)		—
Net cash used in investing activities		(1	)		—
Financing Activities
Transfer (to) from Parent, net		(2	)		4
Net cash (used in) provided by financing activities		(2	)		4
Exchange rate effect on cash and cash equivalents		(1	)		—
Net change in cash and cash equivalents		(1	)		5
Cash and cash equivalents—beginning of year		10			14
Cash and cash equivalents—end of period	$	9		$	19

The accompanying notes are an integral part of the Condensed Combined Financial Statements.

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NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

(DOLLARS IN MILLIONS, UNLESS OTHERWISE STATED)

NOTE 1

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Separation from Exelis Inc.

On December 11, 2013, Exelis Inc. announced that its Board of Directors approved a plan to spin-off to Exelis shareholders its military and government services business in the form of a new independent company named Vectrus, Inc. (“Vectrus”). Unless the context otherwise requires, references in these notes to “we,” “us,” “our,” “the Company” and “our company” refer to the Mission Systems business of Exelis Inc. and its combined subsidiaries. References in these notes to “Exelis” or “parent” refer to Exelis Inc., an Indiana corporation, and its consolidated subsidiaries (other than the Company and its combined subsidiaries), unless the context otherwise requires. Vectrus was incorporated in Indiana on February 4, 2014.

The spin-off is conditioned on, among other things, final approval of the transaction by the Exelis Board of Directors and receipt of an opinion of tax counsel to the effect that the spin-off will qualify as a tax-free distribution under Section 355 of the Internal Revenue Code of 1986, as amended.

The Company expects to issue third-party debt based on the anticipated initial post-spin-off capital structure of the Company.

Our Business

The Company is a leading provider of infrastructure asset management, logistics and supply chain management, and information technology and network communication services to the U.S. government worldwide. The Company operates in 18 countries across four continents and its services include operations, maintenance, management, engineering and sustainment for physical assets including a wide variety of facilities, information technology, network and communication systems, vehicles and equipment. We operate in a single reportable segment. Our primary customer is the Department of Defense (DoD) with a high concentration in the U.S. Army, followed by the U.S. Air Force and U.S. Navy.

For the six months ended June 30, 2014, we generated approximately 86% of our total revenue from the U.S. Army of which our four largest contracts amounted to approximately $409 million or 66% of our revenue.

Principles of Combination and Basis of Presentation

The unaudited Condensed Combined Financial Statements have been prepared on a stand-alone basis and are derived from the consolidated and combined financial statements and accounting records of Exelis. The Condensed Combined Financial Statements reflect our financial position, results of operations and cash flows as we were historically managed, in conformity with accounting principles generally accepted in the United States of America (GAAP).

The Condensed Combined Financial Statements 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 Company’s 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 GAAP have been condensed or omitted pursuant to such SEC rules. These financial statements should be read in conjunction with the audited Combined Financial Statements included in this information statement for the years ended December 31, 2013, 2012 and 2011. We believe that the disclosures included in these financial statements are adequate to make the information presented not misleading.

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All intracompany transactions among our businesses have been eliminated. All intercompany transactions between us and Exelis have been included in these Condensed Combined Financial Statements and are considered to be effectively settled for cash in the Condensed Combined Financial Statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the Condensed Combined Statements of Cash Flows as a financing activity, and in the Condensed Combined Balance Sheets as “Parent company investment.”

Our Condensed Combined Financial Statements include expenses of Exelis allocated to us for certain functions provided by Exelis, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, ethics and compliance, shared services, employee benefits and incentives, insurance and stock-based compensation. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on the basis of revenue, headcount or other measures. Both we and Exelis consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to, or the benefit received by, us during the periods presented. The allocations may not, however, reflect the expense we would have incurred as an independent, publicly-traded company for the periods presented. Actual costs that may have been incurred if we had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure. Following our separation from Exelis, we will perform these functions using our own resources or purchased services. For an interim period, however, some of these functions will continue to be provided by Exelis under a transition services agreement, which will generally have a term of one year or less for most services to be provided. In addition to the transition services agreement, we will enter into commercial arrangements with Exelis in connection with the spin-off, several of which are expected to have terms longer than one year.

The accompanying unaudited pro forma condensed combined balance sheet as of June 30, 2014, is presented to give effect to the following:

a. The incurrence of $140 million of indebtedness, debt incurrence costs of $5 million and net cash proceeds of $135 million.

b. The distribution to Exelis of $119 million.

c. The adjustment to deferred income taxes and other non-current assets, and the impact of, and transactions contemplated by, a Tax Matters Agreement between Vectrus and Exelis to be entered in connection with the spin-off.

d. The adjustment to other long-term liabilities related to environmental liabilities that will be retained by Exelis.

e. The adjustment to worker’s compensation, automobile, and general liabilities and associated assets that will be assumed by the Company in connection with the spin-off.

f. The reclassification of the net investment of Exelis in the Company, which was recorded in additional paid-in-capital and the balancing entry to reflect par value of common stock at par value of $0.01 per share.

g. The adjustment to reflect the transfer to Exelis of the financial position associated with the Tethered Aerostat Business of Exelis (TARS). The TARS business had been historically managed by us, but will be transferred to Exelis as part of the internal reorganization.

Exelis uses a centralized approach to cash management and financing of its operations. The majority of our cash is transferred to Exelis daily and Exelis funds our operating and investing activities as needed. Cash transfers to and from the cash management accounts of Exelis are reflected in the Condensed Combined Statements of Cash Flows as “Transfer (to) from Parent, net.”

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The Condensed Combined Financial Statements also include the push down of certain assets and liabilities that have historically been held at the Exelis corporate level but are specifically identifiable or otherwise allocable to us. The cash and cash equivalents held by Exelis at the corporate level are not specifically identifiable to the Company and therefore were not allocated to us for any of the periods presented. Cash and cash equivalents in our Condensed Combined Balance Sheets represent primarily cash held locally by entities included in our Condensed Combined Financial Statements. Third-party debt and the related interest expense of Exelis were not allocated to us for any of the periods presented as we are not the legal obligor of the debt and the Exelis borrowings were not directly attributable to our business.

Our quarterly financial periods end on the Friday closest to the last day of the calendar quarter, except for the last quarterly period of the fiscal year, which ends on December 31. 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.

See Note 8, “Related Party Transactions and Parent Company Equity,” for further description of the transactions between us and Exelis.

Parent Company Investment

Parent company investment in the Condensed Combined Balance Sheets represents the historical investment of Exelis in us. See “Principles of Combination and Basis of Presentation” above and Note 8, “Related Party Transactions and Parent Company Equity,” for additional information.

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 tax contingency accruals and valuation allowances, fair value and impairment of goodwill, and valuation of assets and certain contingent liabilities. Actual results could differ from these estimates.

During the performance of long-term sales 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. Additionally, the fees under certain contracts may be increased or decreased in accordance with cost or performance incentive provisions which measure actual performance against established targets or other criteria. Such incentive fee awards or penalties are included in revenue when there is sufficient information to reasonably assess anticipated contract performance. Amounts representing contract change orders, claims, requests for equitable adjustment, or limitations in funding on contracts are recorded only if it is probable the claim will result in additional contract revenue and the amounts can be reliably estimated. Provisions for estimated losses on uncompleted long-term contracts are made in the period in which such losses are determined and are recorded as a component of cost of revenue. Contract revenue and cost estimates are reviewed and reassessed periodically. Changes in these estimates could result in recognition of cumulative catch-up adjustments to the contract’s inception to date revenue, cost of revenue and profit in the period in which such changes are made, based on a contract’s percentage completion. Changes in revenue and cost estimates could also result in a forward loss or an adjustment to a forward loss. For the six months ended June 30, 2014, net favorable cumulative catch-up adjustments related to prior periods did not increase operating income, as compared to an increase of approximately $26 million for the six months ended June 30, 2013. For the six months ended June 30, 2013, four contracts accounted for 84% of the net favorable cumulative catch-up adjustment.

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NOTE 2

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (FASB) issued final guidance on revenue recognition, which provides a single, comprehensive revenue recognition model for all contracts with customers, aimed at improving comparability within industries, across industries, and across capital markets. The new guidance contains principles, including a five step approach, that an entity will apply to determine the measurement and timing of revenue recognition that will require an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also requires additional disclosures intended to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and the related cash flows. The guidance is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with the cumulative effect of initial application of the guidance recognized in retained earnings (simplified transition method). Early adoption is not permitted. We are currently evaluating the potential impact of this guidance, but it could have a significant impact on the measurement and timing of revenue recognition, contract related asset and liability balances and financial statement disclosures.

The FASB recently issued final guidance aimed at reducing the frequency of disposals reported as discontinued operations by raising the threshold for a disposal to qualify as a discontinued operation, focusing on strategic shifts that have or will have a major effect on an entity’s operations and financial results. The guidance expands the disclosures for discontinued operations, but does not change the presentation requirements for discontinued operations in the income statement. The guidance is effective prospectively for annual periods beginning on or after December 15, 2014, with early adoption permitted, and would only apply to disposals completed subsequent to adoption. We will adopt this guidance on January 1, 2015.

Other new pronouncements issued but not effective until after June 30, 2014 are not expected to have a material impact on our financial position, results of operations or cash flows.

NOTE 3

COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

The following tables present financial information underlying certain balance sheet captions.

Other current assets

Other current assets were composed of the following:

(In millions)	June 30, 2014		December 31, 2013
Inventory	$	4	$	6
Prepaid assets		10		11
Total	$	14	$	17

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Compensation and other employee benefits

Compensation and other employee benefits were composed of the following:

(In millions)	June 30, 2014		December 31, 2013
Accrued salaries and wages	$	23	$	26
Accrued bonus		3		4
Accrued employee benefits		20		20
Total	$	46	$	50

NOTE 4

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 six months ended June 30, 2014, the Company recorded an income tax provision of $10 million or 35.7% of income from continuing operations before income tax expense compared to $27 million or 35.8% during the same prior year period. The effective income tax rate varies from the federal statutory rate of 35% primarily due to the impact of state taxes and non-deductible expenses.

Uncertain Tax Position

As of June 30, 2014 and December 31, 2013, unrecognized tax benefits were $9 million and $9 million, respectively, and would not, if recognized, affect the tax rate. We do not believe that uncertain tax positions will significantly change within twelve months of the reporting date.

NOTE 5

RECEIVABLES

Receivables were comprised of the following:

	June 30, 2014		December 31, 2013
(In millions)
Billed receivables	$	76	$	69
Unbilled contract receivables		166		159
Receivables	$	242	$	228

All billed receivables are due from the U.S. government, either directly or as subcontractor with the government, at June 30, 2014 and December 31, 2013. Because the Company’s billed receivables are 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, 2014 unbilled contract receivables during the next twelve months.

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NOTE 6

GOODWILL

There were no acquisitions during the six months ended June 30, 2014. Goodwill at June 30, 2014 of $222 million remained unchanged from December 31, 2013.

NOTE 7

POSTRETIREMENT BENEFIT PLANS

Exelis sponsors numerous defined contribution savings plans, which allow employees to contribute a portion of their pre-tax and/or after-tax income in accordance with specified guidelines. Several of the plans require us to match a percentage of the employee contributions up to certain limits, generally 2%-6% of employee base pay. Our portion of the matching contributions charged to income amounted to $2 million and $3 million for the six months ended June 30, 2014 and 2013, respectively.

NOTE 8

RELATED PARTY TRANSACTIONS AND PARENT COMPANY EQUITY

The Condensed Combined Financial Statements have been prepared on a stand-alone basis and are derived from the consolidated and combined financial statements and accounting records of Exelis.

Allocation of General Corporate Expenses

The Condensed Combined Financial Statements include expense allocations for certain functions provided by Exelis as well as other Exelis employees not solely dedicated to the Company, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, communications, ethics and compliance, shared services, employee benefits and incentives, and stock-based compensation. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on the basis of revenue, headcount or other measures. During the six months ended June 30, 2014 and 2013, we were allocated $13 million, and $19 million, respectively, of general corporate expenses incurred by Exelis which is primarily included within selling, general and administrative expenses in the Condensed Combined Statements of Income.

The expense allocations from Exelis discussed above include costs associated with defined benefit pension and other postretirement benefit plans (the “Shared Plans”) sponsored by Exelis in which some of our employees participate. We account for such Shared Plans as multiemployer benefit plans. Accordingly, we do not record an asset or liability to recognize the funded status of the Shared Plans. Subsequent to the completion of the spin-off, the Company will not receive expense allocations for the Shared Plans and all assets and liabilities related to the Shared Plans will remain with Exelis.

The expense allocations have been determined on a basis that we consider to be a reasonable reflection of the utilization of services provided or the benefit received by us during the periods presented. The allocations may not, however, reflect the expense we would have incurred as an independent, publicly-traded company for the periods presented. Actual costs that may have been incurred if we had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, functions outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.

F-30

Parent Company Equity

Net transfers from parent are included within parent company investment on the Condensed Combined Statements of Parent Company Equity. The components of the net transfers from parent for the periods ended June 30, 2014, and 2013 are as follows:

	June 30,
	2014			2013
(In millions)
Cash pooling and general financing activities	$	(22	)	$	(47	)
Corporate allocations including income taxes		20			51
Total net transfers (to) / from parent	$	(2	)	$	4

Subcontract Pending Novation

We intend to enter into a subcontract with Exelis pending the U.S. government’s agreement to novate one government contract to Exelis under which Exelis will be obligated to fulfill the terms of such government contract. Pursuant to the terms of the subcontract, we will be obligated to immediately deposit all proceeds we receive under such government contract into a bank account controlled by Exelis. We will work diligently with the U.S. government to finalize the novation of this contract and do not expect any disruptions in our business as a result of this process.

In support of ongoing business, we expect to enter into one or more subcontracts with Exelis, the terms of which will be negotiated at arm’s length, whereby either we or Exelis will serve as a subcontractor to the other on certain government contracts in the future.

NOTE 9

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, employment and pension matters, and commercial or contractual disputes.

Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information, including our assessment of the merits of each 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 other governmental agencies, that a number of sites formerly or currently owned and/or operated by the Company, and other properties or water supplies that may be or have been impacted from the operations at those sites, 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.

F-31

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 the 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 $4 million as of June 30, 2014 and December 31, 2013, for environmental matters. In our opinion, the total amount accrued is appropriate based on existing facts and circumstances known to us.

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

(In millions)	June 30, 2014(A)		December 31, 2013
Low-end range	$	3	$	3
High-end range	$	30	$	6
Number of active environmental investigation and remediation sites		28		5

(A) In June 2014, the Company received notice from the Department of Justice, Environmental and Natural Resources Division that it may be potentially responsible for contribution to the environmental investigation and remediation of multiple locations in Alaska. Pending further information, we have increased the number of active sites and high-end range of estimated loss based on our historical costs for similar matters.

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 materially adversely affect 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 U.S. 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

F-32

accounting and management internal control systems, including: control environment and accounting system, general information technology system, budget and planning system, purchasing system, material management 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, 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, U.S. government 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 to us.

NOTE 10

SUBSEQUENT EVENTS

We evaluated potential events occurring subsequent to June 30, 2014 and through the date the financial statements were issued and concluded that no subsequent events merited disclosure as of and for the six months ended June 30, 2014.

F-33

CORRESP

SIMPSON THACHER & BARTLETT LLP

425 LEXINGTON AVENUE

NEW YORK, N.Y. 10017-3954

(212) 455-2000

FACSIMILE (212) 455-2502

September 8, 2014

VIA COURIER AND EDGAR

Re:	Vectrus, Inc.
	Amendment No. 5 to Registration
	Statement on Form 10-12B
	File No. 001-36341

Ms. Pamela A. Long

Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, D.C. 20549

Dear Ms. Long:

On behalf of Vectrus, Inc. (the “Company” or “Vectrus”), we hereby transmit via EDGAR for filing with the Securities and Exchange Commission the above-referenced amendment (the “Amendment”) to the above-referenced registration statement (the “Registration Statement”), marked to show changes from Amendment No. 4 to the Registration Statement as filed on August 26, 2014. The Registration Statement has been revised to include the record and distribution dates of the proposed spin-off described in the Registration Statement and to reflect certain other changes. In addition, in response to the comment received orally from the staff of the Securities and Exchange Commission on September 3, 2014 relating to the Registration Statement, the Company has refiled Exhibit 10.7, the form of Credit Agreement to be entered into by the Company, to include the accompanying schedules and exhibits thereto.

*    *    *    *

The Company is aware of its obligations under the Securities Exchange Act of 1934, as amended. The Company acknowledges that:

• it is responsible for the adequacy and accuracy of the disclosure in the filing;

• Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to filing; and

• it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Please do not hesitate to call Caroline Gottschalk at 212-455-3523 or Arjun Koshal at 212-455-3379, with any questions or further comments you may have regarding the filing or if you wish to discuss the above responses.

*    *    *    *

Very truly yours,

/s/ Simpson Thacher & Bartlett LLP

SIMPSON THACHER & BARTLETT LLP

cc: Securities and Exchange Commission

Terence O’Brien

Asia Timmons-Pierce

Patricia Do

Vectrus, Inc.

Kenneth W. Hunzeker

Matthew M. Klein

Michele Tyle

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