<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 1-3863
HARRIS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 34-0276860
- --------------------------------------------------------------------------------------------------------------------
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
</TABLE>
1025 W. NASA Boulevard
Melbourne, Florida 32919
---------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(407) 727-9100
---------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
-----------------------------------------------
<S> <C>
Common Stock, par value $1 per share New York Stock Exchange, Inc.
7 3/4% Sinking Fund Debentures due 2001 New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO __
Indicate by check mark if disclosure of delinquent filers pursuant to
Section 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of August 30, 1996 is $2,370,000,000.
The number of shares outstanding of the registrant's class of common stock,
as of August 30, 1996 is 38,955,394.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement filed September 16, 1996
(Incorporated by Reference into Part III).
<PAGE> 2
PART I
ITEM 1. BUSINESS
THE COMPANY
Harris Corporation was incorporated in Delaware in 1926 as the successor to
three companies founded in the 1890's. The executive offices of the Company are
located at 1025 W. NASA Boulevard, Melbourne, Florida 32919, and the telephone
number is (407) 727-9100.
Harris Corporation, along with its subsidiaries (hereinafter called
"Harris" or the "Company"), is a worldwide company focused on four core
businesses: advanced electronic systems, semiconductors, communications and an
office equipment distribution network.
The Company's four core businesses were carried out during fiscal 1996
through three business sectors and a subsidiary, which correspond to its
business segments used for financial reporting purposes: Communications Sector,
Semiconductor Sector, Lanier Worldwide, Inc. and Electronic Systems Sector.
Harris structures its operations primarily around the markets it serves. Its
operating divisions, which are the basic operating units, have been organized on
the basis of technology and markets. For the most part, each operating division
has its own marketing, engineering, manufacturing and service organizations.
Reference is made to the Note Business Segments in the Notes to Financial
Statements for further information with respect to business sectors and the
subsidiary.
Total sales in fiscal 1996 increased to $3.6 billion from $3.4 billion a
year earlier. Total sales in the United States were relatively unchanged while
international sales, which amounted to 33 percent of the corporate total,
increased 19 percent. Net income increased 15 percent to $178.4 million from
$154.5 million.
The Company's three business sectors and the subsidiary and their principal
products are as follows:
Communications Sector: produces broadcast, radio-communication, and
telecommunication products and systems, including transmitters and studio
equipment for radio and television, Digital TV (formerly HDTV), HF, VHF and UHF
radio-communication equipment, microwave radios, digital telephone switches,
telephone subscriber-loop equipment, and in-building paging equipment.
Semiconductor Sector: produces advanced analog, digital and mixed-signal
integrated circuits and discrete semiconductors for power, signal processing,
data-acquisition, and logic applications for automotive systems, wireless
communications, telecommunications line cards, video and imaging systems,
industrial equipment, computer peripherals, and military and aerospace systems.
Lanier Worldwide, Inc.: sells, distributes, services, supports and provides
supplies for copying systems, facsimile systems and networks, dictation systems,
optical-based electronic-image management systems, continuous recording systems
and PC-based health care management systems.
Electronic Systems Sector: engages in advanced design and development, and
produces leading-edge information processing and communication systems and
software for defense, air traffic, aerospace, energy management, law
enforcement, and newspaper composition market applications.
The financial results shown in the tables on page 2 are presented to comply
with current financial accounting standards relating to business segment
reporting. Information concerning the identifiable assets of the Company's
business segments is contained in the Note Business Segments in the Notes to
Financial Statements. In calculating operating profit, allocations of certain
expenses among the business segments involve the exercise of business judgment.
Intersegment sales are accounted for at prices comparable to those paid by
unaffiliated customers.
1
<PAGE> 3
NET SALES AND OPERATING PROFIT BY BUSINESS SEGMENT
(DOLLARS IN MILLIONS)
NET SALES
<TABLE>
<CAPTION>
YEAR ENDED COMMUNI- SEMI- LANIER ELECTRONIC
JUNE 30 CATIONS CONDUCTOR WORLDWIDE SYSTEMS TOTAL
----------------------- ---------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1994................... $628.2 $635.3 $ 943.7 $1,128.9 $ 3,336.1
1995................... 724.8 658.7 1,024.8 1,035.8 3,444.1
1996................... 841.6 707.7 1,117.2 954.7 3,621.2
</TABLE>
OPERATING PROFIT
<TABLE>
<CAPTION>
YEAR ENDED COMMUNI- SEMI- LANIER ELECTRONIC CORPORATE INTEREST
JUNE 30 CATIONS CONDUCTOR WORLDWIDE SYSTEMS EXPENSE EXPENSE TOTAL
----------------------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1994................... $57.6 $ 70.2 $ 89.8 $101.3 $(67.1 )* $(58.3 ) $193.5
1995................... 68.5 83.0 105.7 95.5 (49.7 ) (65.4 ) 237.6
1996................... 82.4 101.0 120.7 76.7 (43.9 ) (62.5 ) 274.4
</TABLE>
- ---------------
*Corporate expense in 1994 includes a $17.8 million charge resulting from the
write-off of securities received from the 1990 sale of a discontinued business.
COMMUNICATIONS
The Communications Sector of the Company designs, manufactures, and sells
products characterized by three principal communication technologies:
telecommunications, including microwave products and systems, digital telephone
switches, telephone test equipment and auxiliary telecommunication products;
broadcast, including radio and television products and transmission systems; and
two-way radio, including high-frequency (HF), very high frequency (VHF) and
ultra-high frequency (UHF) products, and complete turnkey communication systems.
Sales in fiscal 1996 for this business segment increased 16 percent to
$841.6 million from $724.8 million. The sector recorded operating profit of
$82.4 million, up from $68.5 million in fiscal 1995. The sector contributed 23
percent of Company sales in fiscal 1996 and 21 percent in fiscal 1995.
The sector is a worldwide supplier of voice and data digital network
switches and private-branch exchanges (PBXs) to long-distance carriers,
utilities, corporations and government agencies.
The sector also supplies telecommunication products and systems under the
Dracon trademark, including telephone test systems and tools.
Under the Farinon trademark, the sector is the largest producer of low- and
medium-capacity analog and digital microwave systems in North America.
The sector is the leading supplier of radio and television broadcast
transmission equipment and radio-studio equipment in the United States and
provided the nation's first advanced television transmitter to broadcast digital
television. The sector's products include radio and television transmitters,
antennas, and audio, remote-control and video production systems. The sector is
also a leading supplier of mobile broadcast units.
The sector is a leading supplier of two-way HF, VHF and UHF radio equipment
and offers a comprehensive line of products and systems for long- and
short-distance communications. The sector also designs and installs turnkey
communication systems involving a variety of communication technologies,
including HF, VHF, microwave, and switching systems with command and control
centers. The products are sold to commercial and government customers worldwide.
Internationally, particularly in the emerging markets, the sector designs,
sells, installs and services communication systems involving radio and
television broadcasting equipment and long- and short-range radios on both a
product and a turnkey system basis.
2
<PAGE> 4
Principal customers for products of the Communications Sector include
foreign and domestic commercial and industrial firms, radio and TV broadcasters,
telephone companies, governmental and military agencies, utilities, construction
companies and oil producers.
In general, these products are sold and serviced domestically directly to
customers through the sales organizations of the operating divisions and through
established distribution channels. Internationally, the sector markets and sells
its products and services through established distribution channels. See
"International Business."
The backlog of unfilled orders for this segment of Harris' business was
$343 million at June 30, 1996, substantially all of which is expected to be
filled during the 1997 fiscal year, compared with $309 million a year earlier.
SEMICONDUCTOR
The Semiconductor Sector of the Company produces advanced analog, digital,
power and mixed-signal integrated circuits and discrete semiconductors for
data-acquisition, signal processing, logic and power applications that demand
the highest levels of performance in terms of speed, precision, low power
consumption and reliability, often in harsh environments.
Sales in fiscal 1996 for this business segment increased 7 percent to
$707.7 million from $658.7 million in fiscal 1995. The sector's operating profit
was $101.0 million in fiscal 1996, compared with $83.0 million in fiscal 1995.
The sector contributed 20 percent of Company sales in fiscal 1996 and 19 percent
of Company sales in fiscal 1995.
The sector produces discrete-power products, including MOS (metal oxide
semiconductors) power devices, transistors, rectifiers, power control circuits
and transient suppression products. The sector pioneered development of
"intelligent-power" technology which permits the combination of analog, logic
and power circuits on the same chip. In addition to industrial and electronic
data processing (EDP) applications for motor controllers and power supplies,
these products are widely used in automotive electronic systems, such as
automotive ignition systems, anti-lock braking and engine controls, and
instrument displays.
The sector is a major supplier of devices addressing the communications
market through the provision of complex functions, including wireless, broadband
and data conversion components. In addition, the sector is a leader in
mixed-signal telecommunication line card applications, including SLICs
(subscriber line interface circuits), CODECs (Coder/Decoder), and cross-point
switches used in private-branch-exchange (PBX) systems and of other circuits for
cellular communications, high resolution medical imaging, broadcast and
interactive cable video, and military radar systems.
The sector is a major supplier of integrated circuits and discrete devices
to the military and aerospace markets, with an emphasis on commercial and
military space applications, and radiation hardened circuits. The sector also
supplies custom and semicustom integrated circuits, known as application
specific integrated circuits (ASICs), designed for high-performance commercial
and military applications. The sector's circuits are based on CMOS
(complementary metal oxide semiconductor), bipolar analog, power analog/digital
and other process technologies.
Principal customers for the sector's products include video imaging, EDP,
communications, telephone, industrial, medical and other electronic equipment
manufacturers, automobile manufacturers, defense contractors and U.S. government
agencies. In general, these products are sold directly to customers through a
worldwide sales organization, which includes independent manufacturers'
representatives, and to distributors, who, in turn, resell to their customers.
Internationally, this sector also sells through distributors. See "International
Business."
The integrated circuit industry and technology are characterized by intense
competition and rapid advances in product performance. In addition to its own
research and development, Harris is a party to technology development and
exchange agreements with other companies to develop new and expanded
technologies.
3
<PAGE> 5
The backlog of unfilled orders for this segment of Harris' business was
$356 million at June 30, 1996, substantially all of which is expected to be
filled during the 1997 fiscal year, compared with $354 million a year earlier.
LANIER WORLDWIDE
Lanier Worldwide, Inc. is a wholly-owned subsidiary of Harris which
markets, sells, and services office equipment and business communication
products.
Sales in fiscal 1996 for this business segment increased 9 percent to
$1,117.2 million from $1,024.8 million in fiscal year 1995. Operating profit was
$120.7 million, up from $105.7 million last year. Lanier Worldwide contributed
31 percent of Company sales in fiscal 1996 and 30 percent in 1995.
Through a global network of direct sales and service centers and authorized
dealers, Lanier Worldwide provides copying, dictation, continuous recording,
facsimile products and systems and multi-functional devices. The subsidiary also
provides facilities management operations and other related services. Lanier
Worldwide leases certain of these products to customers on a short-term basis.
Due to the nature of its business, backlog of unfilled orders is not
considered significant to an understanding of this segment's business.
ELECTRONIC SYSTEMS
The Electronic Systems Sector of Harris is composed of several operating
divisions and is engaged in advanced research, design, development and
production of advanced information processing and communication systems and
sub-systems for government and commercial organizations in the United States and
overseas. Applications of the sector's state-of-the-art technologies include air
traffic control, advanced aerospace products, energy management systems, testing
of complex electronics systems, newspaper composition and information management
systems.
The Electronic Systems Sector is a major supplier of advanced-technology
and electronic systems to the United States Department of Defense, the Federal
Aviation Administration, National Aeronautics and Space Administration, Federal
Bureau of Investigation and other federal and local government agencies,
aircraft manufacturers, airports, electric utilities, newspapers and publishing
houses.
Sales in fiscal 1996 for this business segment decreased 8 percent to
$954.7 million from $1,035.8 million in fiscal 1995. Operating profit of $76.7
million decreased from $95.5 million in the previous year. This sector
contributed 26 percent of Company sales in fiscal 1996 and 30 percent in 1995.
The sector is a leading supplier of air-traffic control communication
systems. The sector is also a major supplier of custom aircraft and spaceborne
communication and information processing systems, a leading supplier of
terrestrial and satellite communication systems and a preeminent supplier of
super-high-frequency military satellite ground terminals for the Department of
Defense.
The sector is a major supplier of custom ground-based systems and software
designed to collect, store, retrieve, process, analyze, display and distribute
information for government, defense and law enforcement applications, including
meteorological data processing systems and range management information systems.
The sector also provides computer controlled electronic maintenance, logistic,
simulation and test systems for military aircraft, ships and ground vehicles.
The sector is a worldwide supplier of energy management and distribution
automation systems for electric utilities and information-processing systems for
newspapers and publishing houses.
Most of the sales of this sector are made directly or indirectly to the
United States government under contracts or subcontracts containing standard
government clauses providing for redetermination of profits, if applicable, and
for termination for the convenience of the government or for default of the
contractor. These sales consist of a variety of contracts and programs with
various governmental agencies, with no single program accounting for 10 percent
or more of total Harris sales.
4
<PAGE> 6
The backlog of unfilled orders for this segment of Harris' business was
$607 million at June 30, 1996, substantially all of which is expected to be
filled during the 1997 fiscal year, compared with $568 million a year earlier.
INTERNATIONAL BUSINESS
Sales in fiscal 1996 of products exported from the United States or
manufactured abroad were $1,206 million or 33 percent of the corporate total,
compared with $1,016 million or 30 percent of the corporate total in fiscal 1995
and $982 million (29 percent) in fiscal 1994. Exports from the United States,
principally to Europe and Asia, totalled $632 million or 52 percent of the
international sales in fiscal 1996, $525 million or 52 percent of the
international sales in fiscal 1995 and $388 million or 40 percent in fiscal 1994
of the international sales.
Foreign operations represented 16 percent of consolidated net sales and 21
percent of consolidated total assets as of June 30, 1996. Electronic products
and systems are produced principally in the United States and international
electronic revenues are derived primarily from exports. Semiconductor assembly
facilities are located in Malaysia and Ireland and electronic products assembly
facilities are located in Canada and England.
International marketing activities are conducted through subsidiaries which
operate in Canada, Europe, Central and South America, Asia and Australia.
Reference is made to Exhibit 21 "Subsidiaries of the Registrant" for further
information regarding foreign subsidiaries.
Harris utilizes indirect sales channels, including dealers, distributors
and sales representatives, in the marketing and sale of some lines of products
and equipment, both domestically and internationally. These independent
representatives may buy for resale, or, in some cases, solicit orders from
commercial or governmental customers for direct sales by Harris. Prices to the
ultimate customer in many instances may be recommended or established by the
independent representative and may be on a basis which is above or below the
Company's list prices. Such independent representative generally receives a
discount from the Company's list prices and may mark-up such prices in setting
the final sales prices paid by the customer. During the fiscal year, orders came
from a large number of foreign countries, no one of which accounted for five
percent of total orders.
Certain of Harris' exports are paid for by letters of credit, with the
balance either on an open account or installment note basis. Advance payments,
progress payments or other similar payments received prior to or upon shipment
often cover most of the related costs incurred. Performance guarantees by the
Company are generally required on significant foreign government contracts.
The particular economic, social and political conditions for business
conducted outside the United States differ from those encountered by domestic
business. Management believes that the composite business risk for the
international business as a whole is somewhat greater than that faced by its
domestic operations as a whole. International business may subject the Company
to such risks as the laws and regulations of foreign governments relating to
investments, operations, currency exchange controls, revaluations, taxes, and
fluctuations of currencies; uncertainties as to local laws and enforcement of
contract and intellectual property rights; occasional requirements for onerous
contract clauses; and, in certain areas, rapid changes in governments and
economic and political policies, the threat of international boycotts and United
States anti-boycott legislation. Nevertheless, in the opinion of management,
these risks are offset by the diversification of the international business and
the protection provided by letters of credit and advance payments.
Except for inconsequential matters involving road and utility
rights-of-way, Harris has never been subjected to threat of government
expropriation, either within the United States or abroad.
Financial information regarding the Company's domestic and international
operations is contained in the Note Business Segments in the Notes to Financial
Statements.
5
<PAGE> 7
COMPETITION; PRINCIPAL CUSTOMERS; BACKLOG
The Company operates in highly competitive businesses that are sensitive to
technological advances. While successful product and systems development is not
necessarily dependent on substantial financial resources, some of Harris'
competitors in each of the sectors of its business are larger and can maintain
higher levels of expenditures for research and development than Harris. Harris
concentrates in each of its sectors on the market opportunities which management
believes are compatible with its resources, overall technological capabilities
and objectives. Principal competitive factors in these sectors are
cost-effectiveness, product quality and reliability, service and ability to meet
delivery schedules as well as, in international areas, the effectiveness of
dealers.
Sales to the U.S. government, which is the Company's only customer
accounting for 10 percent or more of total sales, were 26 percent, 30 percent,
and 35 percent of total sales in 1996, 1995 and 1994 respectively. It is not
expected that Defense Department budget cutbacks will have a material effect on
the profitability of the Company due in part to the Company's efforts to
diversify and reduce its reliance on defense contracts.
Harris' backlog of unfilled orders was approximately $1.3 billion at June
30, 1996 and $1.2 billion at June 30, 1995. Substantially all of the backlog
orders at June 30, 1996 are expected to be filled by June 30, 1997.
RESEARCH AND ENGINEERING
Research and engineering expenditures by Harris totaled approximately $603
million in 1996, $601 million in 1995 and $624 million in 1994.
Company-sponsored research and product development costs were $160 million in
1996, $134 million in 1995 and $128 million in 1994. The balance was funded by
government and commercial customers. Company-funded research is directed to the
development of new products and to building technological capability in selected
semiconductor, communications and electronic systems areas. Government-funded
research helps strengthen and broaden the technical capabilities of Harris in
its areas of interest. Almost all of the decentralized operating divisions
maintain their own engineering and new product development departments, with
scientific assistance provided by advanced-technology departments.
Harris holds numerous patents which it considers, in the aggregate, to
constitute an important asset. However, it does not consider its business or any
sector to be materially dependent upon any single patent or any group of related
patents. The Company is engaged in a pro-active patent licensing program
especially in the Semiconductor Sector, and has entered into a number of
unilateral license and cross-license agreements, many of which generate royalty
income. Although existing license agreements have generated income in past years
and will do so in the future, there can be no assurances the Company will enter
into additional income producing agreements.
ENVIRONMENTAL AND OTHER REGULATIONS
The manufacturing facilities of Harris, in common with those of industry
generally, are subject to numerous laws and regulations designed to protect the
environment, particularly in regard to wastes and emissions. Harris has complied
with these requirements and such compliance has not had a material adverse
effect on its business or financial condition. Expenditures to protect the
environment and to comply with current environmental laws and regulations over
the next several years are not expected to have a material impact on the
Company's competitive or financial position. If future laws and regulations
contain more stringent requirements than presently anticipated, expenditures may
be higher than the Company's present estimates of potential capital expenses.
Waste treatment facilities and pollution control equipment have been
installed to satisfy legal requirements and to achieve the Company's waste
minimization and prevention goals. An estimated $.3 million was spent on
environmental capital projects in fiscal 1996. The Company currently forecasts
authorization for environmental-related capital projects totalling $2.2 million
in fiscal 1997. Such amounts may increase in future years. The Company
anticipates that capital expenditures may be required over the next several
years for compliance costs under the new Clean Air Act; however, considerable
uncertainty remains with regard to estimates of such capital expenditures
because the regulations have not yet been issued.
6
<PAGE> 8
EMPLOYEES
As of June 30, 1996, Harris had approximately 27,600 employees.
ITEM 2. PROPERTIES
Harris operates approximately 41 plants and approximately 400 offices in
the United States, Canada, Europe, Central and South America, Asia and Australia
consisting of about 7.1 million square feet of manufacturing, administrative,
engineering and office facilities that are owned and about 3.4 million square
feet of sales, office and manufacturing facilities that are leased. The leased
facilities are occupied under leases for terms ranging from one year to 30
years, a majority of which can be terminated or renewed at no longer than
five-year intervals at Harris' option. The location of the principal
manufacturing plants owned by the Company in the United States and the sectors
which utilize such plants are as follows: Electronic Systems -- Malabar,
Melbourne and Palm Bay, Florida; Semiconductor -- Palm Bay, Florida; Findlay,
Ohio; and Mountaintop, Pennsylvania; Communications -- Novato and Redwood
Shores, California; San Antonio, Texas; Quincy, Illinois; and Rochester, New
York; and Lanier Worldwide -- Atlanta, Georgia. Harris considers its facilities
to be suitable and adequate for the purposes for which they are used.
As of June 30, 1996, the following facilities were in productive use by
Harris:
<TABLE>
<CAPTION>
SQ. FT. TOTAL SQ. FT. TOTAL
SECTOR FUNCTION OWNED LEASED
------------------------- --------------------- ------------- -------------
<S> <C> <C> <C>
Electronic Systems Office/Manufacturing 2,832,000 434,000
Semiconductor Office/Manufacturing 2,067,000 44,000
Communications Office/Manufacturing 855,000 671,000
Lanier Worldwide Office/Manufacturing 144,000 556,000
OTHER
Corporate Offices 1,235,000 58,000
Sales/Service Offices 13,700 1,684,000
------------- -------------
TOTALS 7,146,700 3,447,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
From time to time, as a normal incident of the nature and kind of business
in which the Company is engaged, various claims or charges are asserted and
litigation commenced against the Company arising from or related to product
liability; patents, trademarks, or trade secrets; breach of warranty; antitrust;
distribution; or contractual relations. Claimed amounts may be substantial but
may not bear any reasonable relationship to the merits of the claim or the
extent of any real risk of court awards. In the opinion of management, final
judgments, if any, which might be rendered against the Company in such
litigation are reserved against or would not have a material adverse effect on
the financial position or the business of the Company as a whole.
Government contractors, such as the Company, engaged in supplying goods and
services to the U.S. government are dependent on congressional appropriations
and administrative allotment of funds and may be affected by changes in U.S.
government policies. U.S. government contracts typically involve long-lead times
for design and development and are subject to significant changes in contract
scheduling and may be unilaterally modified or cancelled by the government.
Often these contracts call for successful design and production of complex and
technologically advanced items. The Company may participate in supplying goods
and services to the U.S. government as either a prime contractor or a
subcontractor to a prime contractor. Disputes may arise between the prime
contractor and the government and the prime contractor and its subcontractor and
may result in litigation between the contracting parties.
From time to time, the Company, either individually or in conjunction with
other U.S. government contractors, may be the subject of U.S. government
investigations for alleged criminal or civil violations of procurement or other
federal laws. These investigations may be conducted without the Company's
knowledge. The Company is currently cooperating with certain government
representatives in potential violations of the
7
<PAGE> 9
federal procurement laws. The Company is unable to predict the outcome of such
investigations or to estimate the amounts of resulting claims or other actions
that could be instituted against it, its officers or employees. Under present
government procurement regulations, if indicted or adjudged in violation of
procurement or other federal civil laws, a government contractor could be
suspended or debarred from eligibility for awards of new government contracts
for up to three years. In addition, a government contractor's foreign export
control licenses could be suspended or revoked. Management does not believe that
the outcome of these disputes or investigations will have any material adverse
effect on the financial position or the business of the Company as a whole.
In addition, the Company is subject to numerous federal and state
environmental laws and regulatory requirements and is involved from time to time
in investigations or litigation of various potential environmental issues
concerning the ongoing conduct of its facilities or the remediation as a result
of past activities. The Company from time to time receives notices from the
United States Environmental Protection Agency and equivalent state environmental
agencies that it is a potentially responsible party ("PRP") under the
Comprehensive Environmental Response, Compensation and Liability Act (commonly
known as the "Superfund Act") and/or equivalent state legislation. Such notices
assert potential liability for cleanup costs at various sites, most of which are
non-Company owned treatment or disposal sites, allegedly containing hazardous
substances attributable to the Company from past operations. The Company has
been named as a PRP at only 10 such sites, excluding sites as to which the
Company's records disclose no involvement or as to which the Company's liability
has been finally determined; the Company expects to resolve most of such
exposures on a de minimis basis. In the opinion of management, any payments the
Company may be required to make as a result of these claims will not have a
material adverse effect on the financial condition or the business of the
Company as a whole.
In August 1991, PLS, Inc., a California software company, filed suit
against the Company in the Superior Court of California for San Diego County,
alleging fraud, breach of contract and other charges. In December 1992, the jury
returned a verdict in favor of the plaintiff. In May 1993, the court entered
judgment against the Company for $13,379,000 in compensatory damages for eight
years of lost profits, i.e. through September 1997 and $53,424,700 in punitive
damages, together with attorney fees, interest and costs of suit. On July 23,
1996, the California Court of Appeal concluded there was insufficient evidence
to support a finding of fraud and reversed the award of punitive damages. The
Court of Appeal remanded the breach of contract matter to the lower court for
retrial solely on the issue of compensatory damages with directions to limit the
period of time for which damages can be awarded from approximately October 1989
to July 15, 1991. In light of the Court of Appeal's opinion, it is management's
belief that the ultimate outcome of this litigation will not have a material
effect on the Company's financial results.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
8
<PAGE> 10
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF SEPTEMBER 1, 1996.* (SEE ALSO ITEM 10
OF PART III).
<TABLE>
<CAPTION>
EXECUTIVE BUSINESS EXPERIENCE DURING
NAME AGE OFFICE HELD PAST FIVE YEARS
- ------------------------------ ------------------------- -------------------------------------
<S> <C> <C> <C>
Phillip W. Farmer 58 Chairman, President and Chairman of the Board and Chief
Chief Executive Officer Executive Officer since July, 1995.
President since April, 1993. Chief
Operating Officer 1993-95.
Executive Vice President and Acting
President -- Semiconductor Sector,
1991 to 1993. President --
Electronic Systems Sector, 1989 to
1991. Senior Vice President --
Sector Executive, 1988 to 1989.
Vice President -- Palm Bay
Operations, 1986 to 1988. Vice
President -- General Manager,
Government Support Systems
Division, 1982 to 1986. Director
since 1993.
Wesley E. Cantrell 61 President and President and Chief Executive
Chief Executive Officer, Lanier Worldwide, Inc.
Officer, since March, 1987. Senior Vice
Lanier Worldwide, Inc. President -- Sector Executive,
Lanier Business Products Sector,
1985 to 1987. President, Lanier
Business Products, 1977 to 1987.
Executive Vice President and
National Sales Manager, Lanier
Business Products, 1972 to 1977.
Vice President, Lanier Business
Products, 1966 to 1972. Employed by
Lanier Business Products since
1955.
John C. Garrett 53 President -- President -- Semiconductor Sector
Semiconductor Sector since April, 1993. Formerly
Executive Vice President,
Industrial Business, Square D
Company 1987 to 1993, and various
general management assignments with
General Electric Company 1964 to
1987.
Guy W. Numann 64 President -- President -- Communications Sector
Communications Sector since August, 1989. Senior Vice
President -- Sector Executive, 1984
to 1989. Vice President -- Group
Executive, RF Communications Group,
1983 to 1984. Vice President --
General Manager, RF Communications
Division, 1974 to 1983. Vice
President -- Engineering, RF
Communications Division, 1970 to
1974.
</TABLE>
- ---------------
*This listing identifies the executive officers of the Company, as defined
pursuant to the Securities Exchange Act of 1934, as well as all other corporate
officers.
9
<PAGE> 11
<TABLE>
<CAPTION>
EXECUTIVE BUSINESS EXPERIENCE DURING
NAME AGE OFFICE HELD PAST FIVE YEARS
- ------------------------------ ------------------------- -------------------------------------
<S> <C> <C> <C>
Albert E. Smith 46 President -- Electronics President -- Electronics System
System Sector Sector since April, 1996. Formerly
President -- Space Systems
Division, Lockheed Martin, June
1994 to April 1996. Various
management assignments with
Lockheed Corporation, 1985 to June
1994.
Bryan R. Roub 55 Senior Vice President -- Senior Vice President -- Finance
Chief Financial Officer since July, 1984. Formerly with
Midland-Ross Corporation in the
capacities of Executive Vice
President -- Finance, 1982 to 1984;
Senior Vice President, 1981 to
1982; Vice President and
Controller, 1977 to 1981; and
Controller, 1973 to 1977.
Richard L. Ballantyne 56 Vice President -- General Vice President -- General Counsel and
Counsel and Secretary Secretary since November, 1989.
Formerly Vice President -- General
Counsel and Secretary, Prime
Computer, Inc., 1982 to 1989.
James L. Christie 44 Vice President -- Vice President -- Internal Audit
Internal Audit since August, 1992. Director --
Internal Audit, 1986 to 1992.
Formerly Director -- Internal Audit
and Division Controller at Harris
Graphics Corporation, 1985 to 1986.
Various corporate and division
financial positions at Harris, 1978
to 1985.
Robert W. Fay 49 Vice President -- Vice President -- Controller since
Controller January, 1993. Acting Vice
President -- Controller,
Semiconductor Sector, 1991 to 1993.
Vice President -- Treasurer, 1988
to 1993. Treasurer, 1985 to 1988.
Director -- Financial Operations,
Semiconductor Sector, 1984 to 1985.
Controller -- Bipolar Digital
Semiconductor Division, 1981 to
1984. Manager -- Corporate Finance
and Cash Management, 1978 to 1981.
Nick E. Heldreth 54 Vice President -- Vice President -- Human Resources
Human Resources since June, 1986. Formerly Vice
President -- Personnel and
Industrial Relations, Commercial
Products Division, Pratt & Whitney
and various related assignments
with United Technologies Corporation,
1974 to 1986.
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
EXECUTIVE BUSINESS EXPERIENCE DURING
NAME AGE OFFICE HELD PAST FIVE YEARS
- ------------------------------ ------------------------- -------------------------------------
<S> <C> <C> <C>
John G. Johnson 60 Vice President -- Vice President -- Quality and New
Quality and Processes since 1994. Formerly Vice
New Processes President and Program Manager of
Core Program. Various management
assignments with the Electronic
Systems Sector, 1962-1994.
Herbert N. McCauley 63 Vice President -- Vice President -- Information
Information Management Management since August, 1980. In
July 1996, also Vice President --
General Manager, Telecommunications
Systems Division. Director --
Management Information Systems,
1976 to 1980.
Ronald R. Spoehel 38 Vice President -- Vice President -- Corporate
Corporate Development Development since October, 1994.
Formerly, Senior Vice President,
ICF Kaiser International, Inc., in
various general management
assignments including member of the
office of the chairman, chief
financial officer, and treasurer,
1990 to 1994; and, Vice President,
Investment Banking, Lehman Brothers
(formerly Shearson Lehman Hutton
Inc.), 1985 to 1990.
David S. Wasserman 53 Vice President -- Vice President -- Treasurer since
Treasurer January, 1993. Vice President --
Taxes 1987 to 1993. Formerly Senior
Vice President, Midland-Ross
Corporation, 1979 to 1987.
</TABLE>
There is no family relationship between any of the Company's executive
officers or directors. All of the Company's executive officers are elected by
and serve at the pleasure of the Board of Directors.
11
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Harris Corporation Common Stock, par value $1 per share (the "Common
Stock"), is listed on the New York Stock Exchange, Inc. and is also traded on
the Boston, Chicago, Philadelphia and Pacific Stock Exchanges and through the
Intermarket Trading System. As of August 30, 1996, there were 9,125 holders of
record of the Common Stock.
The high and low closing prices as reported in the consolidated transaction
reporting system and the dividends paid on the Common Stock for each quarterly
period in the last two fiscal years are reported below:
<TABLE>
<CAPTION>
PER SHARE AMOUNTS (IN DOLLARS)
--------------------------------------------------------
QUARTERS ENDED
--------------------------------------------------------
9-30-95 12-31-95 3-31-96 6-30-96 TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Fiscal 1996
Dividends................... $.34 $.34 $.34 $.34 $1.36
Stock prices (high/low)..... 61 3/8-51 1/2 60 5/8-50 3/4 68 7/8-48 7/8 68-57 5/8
</TABLE>
<TABLE>
<CAPTION>
9-30-94 12-31-94 3-31-95 6-30-95 TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Fiscal 1995
Dividends................... $.31 $.31 $.31 $.31 $1.24
Stock Prices (high/low)..... 49 1/8-41 3/8 48 7/8-38 48 3/8-40 1/2 53 3/8-46 3/8
</TABLE>
In August, 1996, the directors declared a quarterly cash dividend of 38
cents per share. The Company has paid cash dividends in every year since 1941.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial information of Harris
Corporation and its subsidiaries for each year during the five year period ended
June 30, 1996. This table should be read in conjunction with other financial
information of Harris, including "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and financial statements included
elsewhere herein.
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED JUNE 30
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................... $3,621.2 $3,444.1 $3,336.1 $3,099.1 $3,004.0
Income from continuing
operations before
extraordinary item and
cumulative effect of change
in accounting principle..... 178.4 154.5 121.9 111.1 87.5
Discontinued operations....... -- -- -- -- (9.3)
Extraordinary loss from early
retirement of debt.......... -- -- -- -- (3.0)
Cumulative effect of change in
accounting principle........ -- -- (10.1) -- --
Net income.................... 178.4 154.5 111.8 111.1 75.2
Per share data:
Income from continuing
operations before
extraordinary item and
cumulative effect of
change in accounting
principle................ 4.58 3.95 3.07 2.82 2.24
Discontinued operations..... -- -- -- -- (.24)
Extraordinary loss.......... -- -- -- -- (.08)
Cumulative effect of
accounting change........ -- -- (.25) -- --
Net income.................. 4.58 3.95 2.82 2.82 1.92
Cash dividends.............. 1.36 1.24 1.12 1.04 1.04
Net working capital........... 757.8 755.4 893.6 792.5 768.9
Total assets.................. 3,206.7 2,836.0 2,677.1 2,542.0 2,483.8
Long-term debt................ 588.5 475.9 661.7 612.0 612.5
</TABLE>
12
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The information in this review, along with Business Segment data shown on
page 2, reflects the Company's continuing operations.
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED WITH 1995 -- Sales in fiscal 1996 increased 5 percent while
net income increased 15 percent.
Communications segment sales increased 16 percent and net income increased
31 percent. The segment's strong growth in sales and earnings reflected strong
demand in the segment's telecommunication and wireless businesses, particularly
microwave systems, broadcast products, and telephone test equipment.
International sales were higher than the previous year and account for 49
percent of total segment sales in fiscal 1996.
Semiconductor segment sales increased 7 percent despite an industry-wide
slowdown in new orders during the second half of the fiscal year. Strong sales
of the segment's power control products, improved margins on military products,
and increased royalty income contributed to the segment's 24 percent earnings
growth.
Sales in the Lanier Worldwide segment increased 9 percent while net income
increased 24 percent. Sales and earnings were strong in both domestic and
international markets.
Electronic Systems segment sales and net income decreased 8 and 19 percent,
respectively. Segment results were impacted by write-offs on development
programs, whose production follow-on is unlikely, and significantly lower sales
and losses in the segment's energy management business.
Cost of sales, rentals, and services as a percentage of sales decreased to
66.4 percent from 67.6 percent in the prior year. Continuing margin improvement
in the Semiconductor and Communications segments was offset in part by higher
costs in the Electronic Systems segment. Engineering, selling, and
administrative expenses as a percentage of sales increased to 25.2 percent from
24.3 percent last year. Higher marketing expenses and a 19 percent increase in
corporation-sponsored research and development expenditures contributed to
higher operating expenses.
Interest income increased in 1996 due to an increase in the balance of
notes receivable from customers. Interest expense decreased due to lower
interest rates and an increase in the amount of interest capitalized.
"Other-net" expense was $7.7 million lower in fiscal 1996 due to gains from
foreign currency transactions.
The provision for income taxes in fiscal 1996 and 1995 was 35.0 percent of
income before income taxes.
CAPITAL EXPENDITURES -- Expenditures for land, buildings, and equipment totaled
$225 million in 1996, up from $139 million in the prior year. In addition,
during fiscal 1996, $68 million was invested in equipment for rental to
customers, up from $65 million invested in the prior year. Substantially all of
this investment in rental equipment is related to Lanier Worldwide products.
FISCAL 1995 COMPARED WITH 1994 -- Sales in fiscal 1995 increased 3 percent while
income before cumulative effect of change in accounting principle increased 27
percent. Income for 1994 included a $17.8 million charge ($11.5 million after
income taxes) for the Corporation's write-off of securities received from a
prior-year sale of a discontinued business.
Semiconductor segment sales increased 4 percent despite a significant
decline in defense business. Strong sales of high-margin, commercial products
more than offset the decline in military shipments. The segment reported a 37
percent increase in net income for the year. Segment earnings benefited from
increased sales of core commercial products, continuing improvements in
operating margins, and increased patent royalty income. These increases were
partially offset by reduced gains from the ongoing sales of investment
securities.
Communications segment sales increased 15 percent and net income increased
19 percent. The increase in sales and earnings resulted from growth in the
segment's radio communications, broadcast equipment, and microwave systems
businesses. Domestic sales were up sharply for the year and international sales
were maintained despite economic disruptions in certain major markets such as
Mexico.
13
<PAGE> 15
Sales in the Lanier Worldwide segment increased 9 percent while net income
increased 27 percent. Sales were strong in both domestic and international
markets. Segment earnings benefited from the increased profitability of Lanier's
European and other international operations.
Electronic Systems sales and net income decreased 8 and 12 percent,
respectively. Prior-year results included a computer systems business which was
spun off to shareholders in the first quarter of fiscal 1995. Excluding the
computer systems business from fiscal 1994 results, sales and net income
decreased 3 and 9 percent, respectively. Segment results were adversely impacted
by lower sales to the U.S. Government and by delays in shipments of a new energy
management system.
Cost of sales, rentals, and services as a percentage of sales decreased to
67.6 percent from 68.2 percent in the prior year. Continuing margin improvement
in the Semiconductor and Communications segments was offset in part by a higher
cost ratio in the Electronic Systems segment. Engineering, selling, and
administrative expenses as a percentage of sales were 24.3 percent in fiscal
1995, compared to 24.9 percent in the prior year. Electronic Systems segment
operating expenses were sharply lower due to cost reduction efforts begun in the
second quarter of fiscal 1995. Corporation-sponsored research and development
expenditures were 5 percent more than the previous year's expenditures.
Interest income and interest expense were higher in fiscal 1995 due to
higher interest rates. "Other-net" expense was higher in fiscal 1995 because
1994 included a $15.6 million gain from the sale of a facility.
The provision for income taxes in fiscal 1995 was 35.0 percent of income
before income taxes compared to 37.0 percent in fiscal 1994. The lower rate in
fiscal 1995 resulted from increased tax benefits associated with foreign income.
CAPITAL EXPENDITURES -- Expenditures for land, buildings, and equipment totaled
$139 million in 1995 up from $115 million in the prior year. In addition, during
fiscal 1995, $65 million was invested in equipment for rental to customers, up
from $51 million invested in the prior year. Substantially all of this
investment in rental equipment is related to Lanier Worldwide products.
FINANCIAL CONDITION
Cash Position -- At June 30, 1996, cash and cash equivalents totaled $75
million, a decrease from $119 million at June 30, 1995. Marketable securities
were $25 million at June 30, 1996.
Receivables, Unbilled Costs, and Inventories -- Notes and accounts
receivable amounted to $919 million at June 30, 1996, compared to $824 million a
year earlier. The increase in receivables is proportionate with the increase in
fourth quarter revenues. Unbilled costs and inventories increased $72 million
over the prior year to $942 million. The increase in inventories and unbilled
costs will support planned sales growth in fiscal 1997.
Borrowing Arrangements -- The Corporation has available $500 million under
revolving credit agreements until May 1, 2000. Under these agreements $208
million was outstanding at June 30, 1996. The Corporation also has available
$238 million in open bank credit lines, of which $163 million was available at
June 30, 1996. In addition, the Corporation filed a Registration Statement
effective May 15, 1996 for $250 million of medium-term notes. No amounts are
outstanding at June 30, 1996 for these notes; however, they may be offered to
the public from time to time on terms to be determined by market conditions.
Capitalization -- At June 30, 1996, debt totaled $772 million, representing
36.0 percent of total capitalization (defined as the sum of total debt plus
shareholders' equity). A year earlier, debt of $646 million was 34.1 percent of
total capitalization. Year-end long-term debt included $250 million of
debentures, $317 million of notes payable to banks and insurance companies, and
$22 million of other long-term debt.
In 1996, the Corporation issued 319,902 shares of the Common Stock to
employees under the terms of the Corporation's stock purchase, option, and
incentive plans.
The Corporation expects to maintain operating ratios, fixed-charge
coverages, and balance-sheet ratios sufficient for retention of its present debt
ratings.
Retirement Plans -- Retirement benefits for substantially all of the
Corporation's employees are provided primarily through a retirement plan having
profit-sharing and savings elements. The Corporation also has non-
14
<PAGE> 16
contributory defined-benefit pension plans and provides limited health-care
benefits to retirees who have 10 or more years of service. All obligations under
the Corporation's retirement plans have been fully funded by the Corporation's
contributions, the provision for which totaled $78 million during the 1996
fiscal year.
Deferred Income Taxes -- The liability for non-current deferred income
taxes was $62 million at June 30, 1996, up from $56 million a year earlier.
Impact of Foreign Exchange -- Approximately 80 percent of the Corporation's
international business is transacted in local currency environments. The impact
is included as a component of Shareholders' Equity. At June 30, 1996, the
cumulative translation adjustment reduced Shareholders' Equity by $16 million
compared to a reduction of $10 million at June 30, 1995.
The Corporation utilizes exchange rate agreements with customers and
suppliers and foreign currency hedging instruments to minimize the currency
risks of international transactions. Gains and losses resulting from currency
rate fluctuations did not have a material effect on the Corporation's results in
1996, 1995, or 1994.
Impact of Inflation -- To the extent feasible, the Corporation has
consistently followed the practice of adjusting its prices to reflect the impact
of inflation on wages and salaries for employees and the cost of purchased
materials and services.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item are
set forth in the pages indicated in Item 14(a)(1) and (2) below.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
15
<PAGE> 17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item, with respect to Directors of the
Company, is incorporated herein by reference to the Company's Proxy Statement
filed September 16, 1996. See also pages 9 through 11 of Part I above.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item, with respect to compensation of
Directors and Executive Officers of the Company, is incorporated herein by
reference to the Company's Proxy Statement filed September 16, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item, with respect to security ownership
of certain beneficial owners and management, is incorporated herein by reference
to the Company's Proxy Statement filed September 16, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended June 30, 1996, there existed no relationships
and there were no transactions reportable under this Item.
16
<PAGE> 18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
PAGE
<S> <C>
(1) Financial Statements:
Consolidated Statement of Income -- Years ended June 30, 1996, 1995
and 1994........................................................... 23
Consolidated Statement of Retained Earnings --
Years ended June 30, 1996, 1995 and 1994.......................... 23
Consolidated Balance Sheet -- June 30, 1996 and 1995................ 24
Consolidated Statement of Cash Flows --
Years ended June 30, 1996, 1995 and 1994.......................... 25
Notes to Financial Statements....................................... 26
(2) Financial Statement Schedules:
For each of the three years in the period ended June 30, 1996.
Schedule II -- Valuation and Qualifying Accounts............... 33
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or the notes thereto.
(3) Exhibits
(3)(a) Restated Certificate of Incorporation of Harris Corporation
(December 1995) is incorporated by reference to Exhibit 3(i) to the
Company's Form 10-Q Quarterly Report for the quarter ended March 31,
1996.
(3)(b) By-Laws of Harris Corporation as in effect February 23, 1996
are incorporated by reference to Exhibit 3(ii) to the Company's Form
10-Q Quarterly Report for the quarter ended March 31, 1996.
(4)(a) Specimen stock certificate for the Company's Common Stock is
incorporated herein by reference to Exhibit 4(c) to the Company's
Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on September 13, 1982 (Registration Number 2-79308).
(4)(b) Rights Agreement dated as of November 24, 1986, between
Harris Corporation and Ameritrust Company National Association, as
Rights Agent, is incorporated herein by reference to Exhibit 1 to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 9, 1986.
(4)(c) Registrant by this filing agrees, upon request, to furnish
to the Securities and Exchange Commission copies of financial documents
evidencing long-term debt.
(10) Material Contracts:
*(a) Form of Senior Executive Severance Agreement.
*(b) Harris Corporation Annual Incentive Plan.
*(c) Harris Corporation Stock Incentive Plan and Form of
Performance Share Award Agreement.
*(d) Harris Corporation 1981 Stock Option Plan for Key Employees
is incorporated herein by reference to Exhibit 10(d) of the Company's
Annual Report on Form 10-K for the year ended June 30, 1991.
*(e) Lanier Worldwide, Inc. Key Contributor Bonus Plan is
incorporated herein by reference to Exhibit 10(e) of the Company's
Annual Report on Form 10-K for the year ended June 30, 1995.
17
<PAGE> 19
*(f) Lanier Worldwide, Inc. Long-Term Incentive Plan for Key
Employees is incorporated herein by reference to Exhibit 10(f) of the
Company's Annual Report on Form 10-K for the year ended June 30,
1995.
*(g) Harris Corporation Retirement Plan.
*(h) Harris Corporation Supplemental Executive Retirement Plan.
*(i) Lanier Worldwide, Inc. Pension Plan is incorporated herein
by reference to Exhibit 10(i) of the Company's Annual Report on Form
10-K for the year ended June 30, 1994.
*(j) Lanier Worldwide, Inc. Savings Incentive Plan is
incorporated herein by reference to Exhibit 99 of the Company's
Report on Form S-8, Commission file number 333-01747 filed March 15,
1996.
*(k) Lanier Worldwide, Inc. Supplemental Executive Retirement
Plan is incorporated herein by reference to Exhibit 10(k) of the
Company's Annual Report on Form 10-K for the year ended June 30,
1994.
*(l) Directors Retirement Plan.
(11) Statement regarding computation of net income per share.
(21) Subsidiaries of the Registrant.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
(1) On May 23, 1996, the Registrant filed with the Commission a
Current Report on Form 8-K containing an Item 5 report with respect to
certain litigation.
- ------------------
*Management contract or compensatory plan or arrangement.
18
<PAGE> 20
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
HARRIS CORPORATION
(Registrant)
Dated: September 16, 1996
By /s/ BRYAN R. ROUB
----------------------------
Bryan R. Roub
Senior Vice President-Chief
Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------------------------------- ----------------
<S> <C> <C>
/s/ PHILLIP W. FARMER Chairman of the Board, President September 16, 1996
- -------------------------------- and Chief Executive Officer
Phillip W. Farmer (Principal Executive Officer)
/s/ BRYAN R. ROUB Senior Vice President -- Chief
- -------------------------------- Financial Officer
Bryan R. Roub (Principal Financial Officer)
/s/ ROBERT W. FAY Vice President -- Controller
- -------------------------------- (Principal Accounting Officer)
Robert W. Fay
/s/ ROBERT CIZIK Director
- --------------------------------
Robert Cizik
/s/ LESTER E. COLEMAN Director
- --------------------------------
Lester E. Coleman
/s/ ALFRED C. DECRANE, JR. Director
- --------------------------------
Alfred C. DeCrane, Jr.
/s/ RALPH D. DENUNZIO Director
- --------------------------------
Ralph D. DeNunzio
/s/ JOSEPH L. DIONNE Director
- --------------------------------
Joseph L. Dionne
/s/ JOHN T. HARTLEY Director
- --------------------------------
John T. Hartley
/s/ KAREN KATEN Director
- --------------------------------
Karen Katen
/s/ WALTER F. RAAB Director
- --------------------------------
Walter F. Raab
/s/ ALEXANDER B. TROWBRIDGE Director
- --------------------------------
Alexander B. Trowbridge
</TABLE>
<PAGE> 21
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
YEAR ENDED JUNE 30, 1996
HARRIS CORPORATION
MELBOURNE, FLORIDA
21
<PAGE> 22
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Harris Directors and Shareholders:
We have audited the accompanying consolidated balance sheet of Harris
Corporation and subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of income, retained earnings, and cash flows for each of
the three years in the period ended June 30, 1996. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Harris
Corporation and subsidiaries at June 30, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in the Accounting Changes note to the financial statements,
effective July 1, 1993, the Corporation changed its method of accounting for
postretirement benefits other than pensions.
ERNST & YOUNG LLP
Orlando, Florida
July 23, 1996
22
<PAGE> 23
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years ended June 30
---------------------------------
In millions except per share amounts 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Revenue from product sales and rentals $ 3,189.2 $ 3,032.2 $ 2,972.0
Revenue from services 432.0 411.9 364.1
Interest 38.1 36.8 33.3
---------------------------------
3,659.3 3,480.9 3,369.4
COSTS AND EXPENSES
Cost of product sales and rentals 2,151.9 2,075.9 2,055.7
Cost of services 252.7 252.6 219.1
Engineering, selling, and administrative expenses 911.9 835.8 830.8
Interest 62.5 65.4 58.3
Write-off of securities -- -- 17.8
Other-net 5.9 13.6 (5.8)
---------------------------------
3,384.9 3,243.3 3,175.9
---------------------------------
Income before income taxes 274.4 237.6 193.5
Income taxes 96.0 83.1 71.6
---------------------------------
Income before cumulative effect of change
in accounting principle 178.4 154.5 121.9
Cumulative effect of change in accounting
principle--net of income taxes -- -- (10.1)
---------------------------------
Net income $ 178.4 $ 154.5 $ 111.8
=================================
Income per share:
Before cumulative effect of change in accounting principle $ 4.58 $ 3.95 $ 3.07
Cumulative effect of change in accounting principle -- -- (.25)
---------------------------------
Net income per share $ 4.58 $ 3.95 $ 2.82
=========
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Years ended June 30
-------------------------------
In millions except per share amounts 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 969.4 $ 943.1 $ 906.7
Net income for the year 178.4 154.5 111.8
Cash dividends ($1.36 per share in 1996,
$1.24 per share in 1995 and $1.12 per share in 1994) (52.8) (48.2) (44.2)
Non-cash dividend -- (55.2) --
Treasury stock retired (22.3) (24.8) (31.2)
-------------------------------
Balance at end of year $1,072.7 $ 969.4 $ 943.1
========
</TABLE>
See Notes to Financial Statements
Harris Corporation 23
<PAGE> 24
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30
--------------------
In millions 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 74.6 $ 119.3
Marketable securities 24.8 22.3
Receivables 727.8 657.1
Unbilled costs and accrued earnings on fixed-price contracts 397.8 374.9
Inventories 544.1 494.9
Deferred income taxes 171.8 142.2
--------------------
Total current assets 1,940.9 1,810.7
OTHER ASSETS
Plant and equipment 721.7 581.0
Notes receivable--net 190.7 166.6
Intangibles resulting from acquisitions 212.8 166.6
Other assets 140.6 111.1
--------------------
$3,206.7 $2,836.0
========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 181.3 $ 37.7
Trade accounts payable 209.0 168.7
Compensation and benefits 209.3 193.4
Other accrued items 190.8 168.4
Advance payments by customers 95.2 89.4
Unearned leasing and service income 192.6 174.6
Income taxes 102.7 90.5
Current portion of long-term debt 2.2 132.6
--------------------
Total current liabilities 1,183.1 1,055.3
OTHER LIABILITIES
Deferred income taxes 62.2 56.0
Long-term debt 588.5 475.9
SHAREHOLDERS' EQUITY
Preferred Stock, without par value:
1,000,000 shares authorized; none issued
Common Stock, $1.00 par value: 250,000,000 shares
authorized; issued and outstanding 38,871,603 shares
in 1996 and 38,877,019 shares in 1995 38.9 38.9
Other capital 266.0 240.3
Retained earnings 1,072.7 969.4
Net unrealized gain on securities available for sale 11.1 12.2
Unearned compensation .3 (1.7)
Cumulative translation adjustments (16.1) (10.3)
--------------------
Total Shareholders' Equity 1,372.9 1,248.8
--------------------
$3,206.7 $2,836.0
========
</TABLE>
See Notes to Financial Statements
24 Harris Corporation
<PAGE> 25
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended June 30
-------------------------------
In millions 1996 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income before cumulative effect
of change in accounting principle $ 178.4 $ 154.5 $ 121.9
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation 158.1 155.0 145.7
Amortization 12.6 10.3 7.7
Non-current deferred income taxes 7.4 33.3 12.1
Changes in assets and liabilities:
Receivables (88.1) (47.0) (41.5)
Unbilled costs and inventories (65.0) (52.3) (64.6)
Trade payables and accrued liabilities 63.7 (1.2) 39.5
Advance payments and unearned income 23.3 76.0 12.9
Income taxes (14.8) (35.9) (33.7)
Other (13.8) 17.4 20.8
-------------------------------
Net cash provided by operating activities 261.8 310.1 220.8
INVESTING ACTIVITIES
Cash paid for acquired businesses (69.9) (11.4) (16.6)
Capital expenditures:
Plant and equipment (225.4) (139.3) (115.2)
Rental equipment (67.5) (64.9) (50.8)
-------------------------------
Net cash used in investing activities (362.8) (215.6) (182.6)
FINANCING ACTIVITIES
Proceeds from borrowings 1,152.2 750.0 302.7
Payments of borrowings (1,025.3) (787.8) (267.1)
Cash dividends (52.8) (56.6) (44.2)
Purchase of Common Stock for treasury (26.0) (29.8) (36.7)
Proceeds from sale of Common Stock 9.2 8.6 13.5
-------------------------------
Net cash provided by (used in) financing activities 57.3 (115.6) (31.8)
-------------------------------
Effect of translation on cash and cash equivalents (1.0) 1.3 1.0
-------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (44.7) (19.8) 7.4
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 119.3 139.1 131.7
-------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 74.6 $ 119.3 $ 139.1
========
</TABLE>
See Notes to Financial Statements
Harris Corporation 25
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the
accounts of the Corporation and its subsidiaries. These statements have been
prepared in conformity with generally accepted accounting principles and require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Significant intercompany transactions and accounts have been
eliminated.
CASH EQUIVALENTS--Cash equivalents are temporary cash investments with a
maturity of three months or less when purchased. These investments include
accrued interest and are carried at the lower of cost or market.
MARKETABLE SECURITIES--Marketable securities are stated at fair value, with
unrealized gains and losses, net of tax, included as a separate component of
shareholders' equity. Realized gains and losses from marketable securities are
determined using the specific identification method. The cost basis of
marketable securities was $6.6 million at June 30, 1996, and $2.3 million at
June 30, 1995. The amount of gross realized gains included in net income in 1996
and 1995 was not material.
INVENTORIES--Inventories are priced at the lower of cost (determined by average
and first-in, first-out methods) or market.
PLANT AND EQUIPMENT--Plant and equipment are carried on the basis of cost.
Depreciation of buildings, machinery, and equipment is computed by straight-line
and accelerated methods. The estimated useful lives of buildings range between 5
and 50 years. The estimated useful lives of machinery and equipment range
between 3 and 10 years. Depreciation of rental equipment is computed by the
straight-line method using estimated useful lives between 3 and 5 years.
INTANGIBLES--Intangibles resulting from acquisitions are being amortized by the
straight-line method principally over periods between 15 and 40 years.
Recoverability of intangibles is assessed using estimated undiscounted cash
flows of related operations.
INCOME TAXES--The Corporation follows the liability method of accounting for
income taxes.
REVENUE RECOGNITION--Revenue is recognized from sales other than on long-term
contracts when a product is shipped, from rentals as they accrue, and from
services when performed. Revenue on long-term contracts is accounted for
principally by the percentage-of-completion method whereby income is recognized
based on the estimated stage of completion of individual contracts. Unearned
income on service contracts is amortized by the straight-line method over the
term of the contracts.
RETIREMENT BENEFITS--The Corporation and its subsidiaries provide retirement
benefits to substantially all employees primarily through a retirement plan
having profit-sharing and savings elements. Contributions by the Corporation to
the retirement plan are based on profits and employees' savings with no other
funding requirements. The Corporation may make additional contributions to the
fund at its discretion. The Corporation also has non-contributory defined
benefit pension plans which are fully funded.
Retirement benefits also include an unfunded limited healthcare plan for
U.S.-based retirees and employees on long-term disability. In 1994, the
Corporation began accruing the estimated cost of these medical benefits during
an employee's active service life. The Corporation previously expensed the cost
of these benefits on a pay-as-you-go basis.
FUTURES AND FORWARD CONTRACTS--Gains and losses on futures and forward contracts
that qualify as hedges are deferred and recognized as an adjustment of the
carrying amount of the hedged asset or liability or anticipated transaction.
FOREIGN CURRENCY TRANSLATION--The functional currency for most international
subsidiaries is the local currency. Assets and liabilities are translated at
current rates of exchange, and income and expense items are translated at the
weighted average exchange rate for the year. The resulting translation
adjustments are recorded as a separate component of shareholders' equity.
UNEARNED COMPENSATION--Compensation resulting from performance shares granted
under the Corporation's long-term incentive plan is amortized to expense over
the vesting period of the performance shares and is adjusted for changes in the
market value of the Common Stock.
EARNINGS PER SHARE--Income per share is based upon the weighted average number
of common shares outstanding during each year.
RECLASSIFICATIONS--Certain prior-year amounts have been reclassified to conform
with current year classifications.
26 Harris Corporation
<PAGE> 27
ACCOUNTING CHANGES
In 1996, the Corporation adopted Statement of Financial Accounting Standards No.
121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." This standard establishes the method for evaluating and
measuring possible write-downs of the carrying value of long-lived assets and
certain intangibles. The adoption of this standard had no effect on the
consolidated financial statements.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation." Under this standard, companies can elect, but are not required,
to recognize compensation expense for all stock-based awards, using a fair value
methodology. The Corporation intends to continue with its present method of
providing compensation expense for certain stock-based performance awards while
not providing compensation expense for stock options, and as required by the
standard, in 1997 the Corporation will make pro forma disclosures of net income
and earnings per share as if the new method had been applied.
In 1994, the Corporation adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." Healthcare benefits are provided on a limited cost-sharing basis to
retirees who have 10 or more years of service and to employees on long-term
disability. The cumulative effect at July 1, 1993, of adopting this standard
resulted in a one-time charge of $10.1 million net of income tax benefits of
$6.4 million.
NONRECURRING ITEMS
In 1994, the Corporation's residual holding in a company that acquired its 1989
discontinued data-communication business became impaired due to bankruptcy
proceedings. Consequently, the Corporation provided $17.8 million ($11.5 million
after income taxes or 29 cents per share) to write off its interest in equity
securities and promissory notes of this company. Also in 1994, the Corporation
sold a Semiconductor fabrication facility for $35.5 million in cash. This sale
resulted in a gain of $15.6 million ($9.9 million after income taxes or 25 cents
per share) and is included in "Other-net" expense in the Consolidated Statement
of Income.
CONTINGENCIES RESULTING FROM
DISCONTINUED OPERATION
In 1993, a jury in a California state court awarded a California software
company $13.4 million in compensatory damages and $85.0 million in punitive
damages against the Corporation. The court reduced the punitive damages to $53.4
million, and entered judgment for the compensatory and punitive damages,
together with interest and costs of suit. The suit arose from an August 11,
1989, contract between the plaintiff and a discontinued operation of the
Corporation. The Corporation appealed the award to the California Court of
Appeal and on July 23, 1996, the court rendered its opinion. The court reversed
the award of punitive damages. The breach of contract judgment was affirmed but
remanded to the trial court solely on the issue of compensatory damages with
directions to limit the period of time for which damages can be awarded. In
light of the appeals court opinion, it is unlikely that the ultimate outcome of
this litigation will have a material effect on the Corporation's financial
results.
RECEIVABLES
Receivables are summarized below:
<TABLE>
<CAPTION>
-------------------
(In millions) 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Accounts receivable $653.5 $588.3
Notes receivable due within one year--net 105.6 98.8
------
759.1 687.1
Less allowances for collection losses 31.3 30.0
------
$727.8 $657.1
======
</TABLE>
INVENTORIES AND UNBILLED COSTS
Inventories are summarized below:
<TABLE>
<CAPTION>
-------------------
(In millions) 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Finished products $160.9 $184.4
Work in process 251.8 226.8
Raw materials and supplies 131.4 83.7
------
$544.1 $494.9
======
</TABLE>
Unbilled costs and accrued earnings on fixed-price contracts are net of
progress payments of $216.6 million in 1996 and $240.2 million in 1995.
PLANT AND EQUIPMENT
Plant and equipment are summarized below:
<TABLE>
<CAPTION>
-------------------
(In millions) 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Land $ 31.5 $ 30.2
Buildings 490.5 441.9
Machinery and equipment 1,241.1 1,133.4
Rental equipment 236.7 211.7
-------
1,999.8 1,817.2
Less allowances for depreciation 1,278.1 1,236.2
-------
$ 721.7 $ 581.0
=======
</TABLE>
INTANGIBLES
Accumulated amortization of intangible assets at June 30 was $52.3 million for
1996 and $43.1 million for 1995.
CREDIT ARRANGEMENTS
The Corporation maintains revolving credit agreements which provide for
borrowing up to $500.0 million until May 2000. These agreements provide for
advances under a competitive advance facility and a committed facility at
various interest rates, as determined by a pricing matrix based upon the
Corporation's long-term debt ratings
Harris Corporation 27
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS
assigned by Standard and Poor's Ratings Group and Moody's Investors Service. A
facility fee is payable on the credit and determined in the same manner as the
interest rates. The Corporation is not required to maintain compensating
balances in connection with these agreements. Under these agreements, $208.3
million was outstanding at June 30, 1996, $100 million of which has been
classified as long-term based on the Corporation's intent to maintain borrowings
of at least that amount for the next year.
The Corporation also has lines of credit for short-term financing
aggregating $238.2 million from various U.S. and foreign banks, of which $163.0
million was available on June 30, 1996. These arrangements provide for borrowing
at various interest rates, are reviewed annually for renewal, and may be used on
such terms as the Corporation and the banks mutually agree. These lines do not
require compensating balances.
Short-term debt is summarized below:
<TABLE>
<CAPTION>
-------------------
(In millions) 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Bank notes $168.1 $33.1
Other 13.2 4.6
-------
$181.3 $37.7
=======
</TABLE>
LONG-TERM DEBT
Long-term debt includes the following:
<TABLE>
<CAPTION>
-------------------
(In millions) 1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Notes payable to bank $167.0 $150.0
10 3/8% debentures, due 2018 150.0 150.0
7% debenture, due 2028 100.0 --
Notes payable to insurance companies 150.0 150.0
Other 21.5 25.9
-------
$588.5 $475.9
======= =======
</TABLE>
The weighted average interest rate for notes payable to banks was 6.5
percent in 1996 and 6.2 percent in 1995. The weighted average interest rate for
notes payable to insurance companies was 9.7 percent in 1996 and 1995.
Indentures and note agreements contain certain financial covenants
including maintenance of at least $800.0 million of tangible net worth and total
debt not to exceed 45 percent of total capital.
Maturities on long-term debt for the five years following 1996 are: $2.2
million in 1997, $6.2 million in 1998, $57.4 million in 1999, $170.0 million in
2000, and $65.5 million in 2001.
SHAREHOLDERS' EQUITY
Changes in shareholders' equity accounts other than retained earnings are
summarized as follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Common Net Unrealized Cumulative
Stock Other Gain on Unearned Translation
(In millions) Amount Capital Securities Compensation Adjustments
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1993 $ 39.6 $216.3 -- $ (8.3) $(13.0)
Shares issued under Stock Option Plan
(315,747 shares) .3 11.1 -- -- --
Shares granted under Stock Incentive Plans
(257,909 shares) .3 9.6 -- (9.8) --
Compensation expense -- -- -- 10.7 --
Termination of shares granted under Stock
Incentive Plans (126,638 shares) (.1) (4.1) -- 4.2 --
Shares sold under Employee Stock Purchase
Plans (47,904 shares) -- 2.1 -- -- --
Foreign currency translation adjustments -- -- -- -- (8.5)
Purchase and retirement of Common Stock for
treasury (801,300 shares) (.8) (4.7) -- -- --
---------------------------------------------------------------
BALANCE AT JUNE 30, 1994 39.3 230.3 -- (3.2) (21.5)
Adjustment to beginning balance for change
in accounting method, net of income taxes of $7.1 -- -- 11.1 -- --
Shares issued under Stock Option Plan
(136,058 shares) .1 4.0 -- -- --
Shares granted under Stock Incentive Plans
(249,950 shares) .3 10.6 -- (10.9) --
Compensation expense -- -- -- 11.8 --
Termination and award of shares granted
under Stock Incentive Plans (202,536 shares) (.2) (4.7) -- .6 --
Shares sold under Employee Stock Purchase
Plans (98,929 shares) .1 4.4 -- -- --
Change in unrealized gain on securities, net
of income taxes of $.7 -- -- 1.1 -- --
Foreign currency translation adjustments -- -- -- -- 11.2
Purchase and retirement of Common Stock for
treasury (703,500 shares) (.7) (4.3) -- -- --
---------------------------------------------------------------
BALANCE AT JUNE 30, 1995 38.9 240.3 12.2 (1.7) (10.3)
Shares issued under Stock Option Plan
(110,945 shares) .1 3.6 -- -- --
Shares granted under Stock Incentive
Plans (122,750 shares) .1 6.2 -- (6.3) --
Compensation expense -- -- -- 10.0 --
Termination and award of shares granted
under Stock Incentive Plans (131,692 shares) (.1) (2.1) -- (1.7) --
Shares sold under Employee Stock Purchase
Plans (86,207 shares) .1 5.0 -- -- --
Change in unrealized gain on securities,
net of income taxes of $(.8) -- -- (1.1) -- --
Foreign currency translation adjustments -- -- -- -- (5.8)
Purchase and retirement of Common Stock for
treasury (481,000 shares) (.5) (3.2) -- -- --
Shares issued for acquisition of purchased
company (287,374 shares) .3 16.2 -- -- --
---------------------------------------------------------------
BALANCE AT JUNE 30, 1996 $ 38.9 $266.0 $ 11.1 $ .3 $(16.1)
===============================================================
</TABLE>
28 Harris Corporation
<PAGE> 29
PREFERRED STOCK PURCHASE RIGHTS
Each outstanding share of Common Stock includes one preferred share purchase
right that entitles the holder to purchase one two-hundredth share of a new
series of participating preferred stock at an exercise price of $125. The rights
will not be exercisable, or transferable apart from the Common Stock, until 10
days following an announcement that a person or affiliated group has acquired,
or obtained the right to acquire, beneficial ownership of 20 percent or more of
the Common Stock or until 10 days following an announcement of a tender or
exchange offer for 30 percent or more of the Common Stock. The rights, which do
not have voting rights, will be exercisable by all holders except for a holder
or affiliated group beneficially owning 20 percent or more of the Common Stock.
All rights will expire on November 23, 1996, and may be redeemed by the
Corporation at a price of $.01 per right at any time prior to either their
expiration or such time that the rights become exercisable.
In the event that the Corporation is acquired in a merger or other business
combination or certain other events occur, provision shall be made so that each
holder of a right shall have the right to receive, upon exercise thereof at the
then-current exercise price, that number of shares of common stock of the
surviving company which at the time of such transaction would have a market
value of two times the exercise price of the right.
NON-CASH DIVIDEND
In 1995, the Corporation spun off as a tax-free dividend its computer systems
business by distributing one share of Harris Computer Systems Corporation common
stock for every twenty shares of the Corporation's Common Stock. Cash dividends
shown in the Consolidated Statement of Cash Flows includes the $8.4 million cash
balance of the Harris Computer System Corporation at the time of the spin-off;
the remainder of the dividend was a non-cash transaction.
STOCK OPTIONS AND AWARDS
The following information relates to stock option and incentive stock awards.
Option prices are 100 percent of market value on the date the options are
granted. Option grants are for a maximum of ten years after dates of grant and
may be exercised in installments.
<TABLE>
<CAPTION>
--------------------------------
Number of Option Prices
Shares Per Share
- -----------------------------------------------------------------
<S> <C> <C>
Exercised during the year:
1994 504,203 $14.38 to $38.63
1995 283,604 $23.75 to $50.50
1996 224,807 $14.38 to $57.75
Granted during 1996 353,251 $50.75 to $67.13
Expired during 1996 -
Terminations during 1996 46,717 $24.88 to $61.25
Outstanding at June 30, 1995 605,492 $21.88 to $52.88
Outstanding at June 30, 1996 687,219 $14.38 to $67.13
Exercisable at June 30, 1995 508,251 $21.88 to $51.00
Exercisable at June 30, 1996 354,243 $14.38 to $61.25
================================
</TABLE>
The Corporation has a stock incentive plan for directors and key employees.
Awards under this plan may include the grant of performance shares, restricted
stock, stock options, stock appreciation rights, or other stock-based awards.
The aggregate number of shares of Common Stock which may be awarded under the
plan in each fiscal year is one percent of the total outstanding shares of
Common Stock plus shares available from prior years. Performance shares
outstanding were 502,611 at June 30, 1996; 625,551 at June 30, 1995; and 735,966
at June 30, 1994. Shares of Common Stock reserved for future awards under the
plan were 1,148,818 at June 30, 1996; 1,046,717 at June 30, 1995; and 864,970 at
June 30, 1994.
Under the Corporation's domestic retirement plan, employees may purchase a
limited amount of the Corporation's Common Stock at 70 percent of current market
value. Shares of Common Stock reserved for future purchases by the retirement
plan were 1,275,361 at June 30, 1996.
RETIREMENT PLANS
Retirement and defined-benefit plans expense amounted to $77.6 million in 1996,
$71.2 million in 1995, and $70.2 million in 1994.
RESEARCH AND DEVELOPMENT
Corporation-sponsored research and product development costs were $159.8 million
in 1996, $133.9 million in 1995, and $127.7 million in 1994.
INTEREST EXPENSE
Total interest was $64.0 million in 1996, $65.4 million in 1995, and $58.6
million in 1994, of which $1.5 million was capitalized in 1996, and $.3 million
was capitalized in 1994. Interest paid was $64.2 million in 1996, $64.8 million
in 1995, and $59.0 million in 1994.
LEASE COMMITMENTS
Total rental expense amounted to $49.8 million in 1996, $52.7 million in 1995,
and $52.9 million in 1994. Future minimum rental commitments under leases,
primarily for land and buildings, amounted to approximately $156.0 million at
June 30, 1996. These commitments for the years following 1996 are: 1997--$42.3
million, 1998--$26.4 million, 1999--$19.6 million, 2000--$14.5 million,
2001--$9.9 million, and $43.3 million thereafter.
Harris Corporation 29
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
The provisions for income taxes are summarized as follows:
<TABLE>
<CAPTION>
---------------------------------
(In millions) 1996 1995 1994
- -------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States $ 82.3 $ 89.0 $50.0
International 19.3 19.9 11.3
State and local 17.3 11.7 4.9
------
118.9 120.6 66.2
------
Deferred:
United States (19.3) (32.5) (2.8)
International - (4.7) 5.6
State and local (3.6) (.3) 2.6
------
(22.9) (37.5) 5.4
------
$ 96.0 $ 83.1 $71.6
======
</TABLE>
The components of deferred income tax assets (liabilities) at June 30 are as
follows:
<TABLE>
<CAPTION>
----------------------------------------------
1996 1995
----------------------------------------------
Current Non-Current Current Non-Current
(In millions) Deferred Deferred Deferred Deferred
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Completed contracts $ 18.7 $ -- $ 7.1 $ --
Inventory valuations 16.8 -- 13.5 --
Accruals 133.4 8.6 117.6 7.3
Depreciation -- (61.6) -- (54.3)
Leases (.8) (20.5) (.5) (19.8)
International tax loss
carryforwards -- 6.5 -- 9.7
All other-net 3.7 11.3 4.5 16.8
------------------
171.8 (55.7) 142.2 (40.3)
Valuation allowance -- (6.5) -- (15.7)
------------------
$171.8 $(62.2) $142.2 $(56.0)
==================
</TABLE>
A reconciliation of the statutory United States income tax rate to the
effective income tax rate follows:
<TABLE>
<CAPTION>
-------------------------------
(In millions) 1996 1995 1994
- -------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. income
tax rate 35.0% 35.0% 35.0%
State taxes 3.2 3.1 2.6
International income (3.2) (4.0) 1.2
Tax benefits related
to export sales (2.1) (1.4) (3.1)
Nondeductible amortization .7 .8 .9
Other items 1.4 1.5 .4
----
Effective income tax rate 35.0% 35.0% 37.0%
====
</TABLE>
United States income taxes have not been provided on $479.1 million of
undistributed earnings of international subsidiaries because of the
Corporation's intention to reinvest these earnings. The determination of
unrecognized deferred U.S. tax liability for the undistributed earnings of
international subsidiaries is not practicable.
Pretax income of international subsidiaries was $74.2 million in 1996, $63.2
million in 1995, and $55.9 million in 1994.
Income taxes paid were $95.6 million in 1996, $79.2 million in 1995, and
$80.2 million in 1994.
BUSINESS SEGMENTS
The Corporation is structured primarily around the markets it serves and
operates in four business segments: Communications, Semiconductor, Lanier
Worldwide, and Electronic Systems. The Communications segment produces
broadcast, radio communications and telecommunications products and systems. The
Semiconductor segment produces advanced analog, digital and mixed signal
integrated circuits and discrete semiconductors for power, signal processing,
data-acquisition, and logic applications. Lanier Worldwide sells and services
copying and facsimile products, and PC-based healthcare management systems. The
Electronic Systems segment engages in advanced research and develops, designs
and produces advanced information processing and communication systems.
Communication and electronic products and systems are produced principally in
the United States with international revenues derived primarily from exports.
Copying and facsimile products are produced principally in Asia with
international revenues derived from the Corporation's international
subsidiaries.
Net sales and operating profit by segment are on page 34. That information
is an integral part of these financial statements.
Sales made to the U.S. Government by all segments (primarily Electronic
Systems segment) were 25.7 percent of total sales in 1996, 30.4 percent of total
sales in 1995, and 34.8 percent of total sales in 1994. Intersegment sales,
which are insignificant, are accounted for at prices comparable to unaffiliated
customers.
30 Harris Corporation
<PAGE> 31
Selected information by business segment and geographical area is summarized
below:
<TABLE>
<CAPTION>
------------------------------
(In millions) 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Communications $ 691.5 $ 442.5 $ 406.2
Semiconductor 746.6 639.2 609.3
Lanier Worldwide 867.1 831.6 738.6
Electronic Systems 658.1 672.3 730.8
Corporate 243.4 250.4 192.2
--------
$3,206.7 $2,836.0 $2,677.1
========
CAPITAL EXPENDITURES
Communications $ 33.8 $ 22.6 $ 17.5
Semiconductor 146.8 80.4 43.6
Lanier Worldwide 11.7 12.3 12.9
Electronic Systems 28.1 18.6 26.3
Corporate 5.0 5.4 14.9
--------
$ 225.4 $ 139.3 $ 115.2
========
DEPRECIATION
Communications $ 17.9 $ 14.8 $ 13.9
Semiconductor 47.6 44.5 47.5
Lanier Worldwide 10.3 10.0 7.0
Electronic Systems 24.2 25.7 29.0
Corporate 8.9 10.2 6.5
--------
$ 108.9 $ 105.2 $ 103.9
========
GEOGRAPHICAL INFORMATION
U.S. operations:
Net sales $3,046.4 $2,952.4 $2,741.8
Operating profit 200.2 174.4 137.6
Identifiable assets 2,544.4 2,191.9 2,041.2
International operations:
Net sales $ 574.8 $ 491.7 $ 594.3
Operating profit 74.2 63.2 55.9
Identifiable assets 662.3 644.1 635.9
========
</TABLE>
Capital expenditures and depreciation do not include equipment for rental to
customers. Corporate assets consist primarily of cash, marketable securities,
deferred income taxes, and plant and equipment.
Export sales approximated $631.6 million in 1996, $524.6 million in 1995, and
$387.6 million in 1994. Export sales and net sales of international operations
were principally to Europe and Asia.
FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, marketable securities, accounts
receivable, notes receivable, accounts payable, and short-term debt approximates
fair value. The fair value of long-term debt was $618.6 million at June 30,
1996.
The Corporation uses foreign exchange contracts and options to hedge
intercompany accounts and off-balance-sheet foreign currency commitments.
Specifically, these foreign exchange contracts offset foreign currency
denominated inventory and purchase commitments from suppliers, accounts
receivable from--and future committed sales to--customers, and firm committed
operating expenses. Management believes the use of foreign currency financial
instruments should reduce the risks which arise from doing business in
international markets. Contracts are for periods consistent with the terms of
the underlying transaction, generally one year or less. At June 30, 1996, open
foreign exchange contracts were $232.7 million (as described below), of which
$194.6 million were to hedge off-balance-sheet commitments. Additionally, for
the year ended June 30, 1996, the Corporation purchased and sold $809.7 million
of foreign exchange forward and option contracts.
Deferred gains and losses are included on a net basis in the Consolidated
Balance Sheet as other assets and are recorded in income as part of the
underlying transaction when it is recognized.
At June 30, 1996, the Corporation had $11.8 million in open option contracts.
Total open foreign exchange contracts at June 30, 1996, are described in the
table below.
COMMITMENTS TO BUY FOREIGN CURRENCIES
<TABLE>
<CAPTION>
Contract Amount
---------------
Foreign Deferred Gains Maturities
(In millions) Currency U.S. and (Losses) (In months)
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
Malaysian Ringgit 238.6 $92.0 $3.5 1-12
Irish Punt 13.2 20.8 .1 1-10
Swiss Franc 8.0 6.4 (.1) 1-5
German Mark 6.6 4.3 - 1-3
Japanese Yen 460.0 4.3 (.1) 1-4
Australian Dollar 3.2 2.4 .1 1-9
British Pound .9 1.3 - 1-6
=======================================
</TABLE>
COMMITMENTS TO SELL FOREIGN CURRENCIES
<TABLE>
<CAPTION>
Contract Amount
---------------
Foreign Deferred Gains Maturities
(In millions) Currency U.S. and (Losses) (In months)
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
British Pound 26.8 $40.9 $(.4) 1-23
German Mark 38.4 26.8 1.8 1-11
French Franc 61.1 12.3 .5 1-11
Italian Lira 13,265.0 8.3 (.4) 1-4
Japanese Yen 654.4 6.3 .3 1-6
Canadian Dollar 5.7 4.2 - 1
Australian Dollar 1.8 1.4 - 1-10
Malaysian Ringgit 1.2 .5 - 1
European Currency Units .3 .3 - 1-3
Norwegian Krone 1.5 .2 - 1
=======================================
</TABLE>
Harris Corporation 31
<PAGE> 32
QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data is summarized below.
<TABLE>
<CAPTION>
Quarters Ended
---------------------------------------------------------------------
Dollars in millions except per share amounts 9-30-95 12-31-95 3-31-96 6-30-96 Total Year
- --------------------------------------------------------------------------------------------------------------------
Fiscal 1996
<S> <C> <C> <C> <C> <C>
Net sales $ 816.7 $ 916.6 $ 875.9 $ 1,012.0 $ 3,621.2
Gross profit 271.6 301.1 298.2 345.7 1,216.6
Income before income taxes 51.6 62.1 68.0 92.7 274.4
Net income 33.5 40.4 44.2 60.3 178.4
Per share:
Net income .86 1.03 1.14 1.55 4.58
Cash dividends .34 .34 .34 .34 1.36
Stock prices (high/low) 61 3/8-51 1/2 60 5/8-50 3/4 68 7/8-48 7/8 68-57 5/8
=========================================================================
<CAPTION>
Quarters Ended
---------------------------------------------------------------------
Dollars in millions except per share amounts 9-30-94 12-31-94 3-31-95 6-30-95 Total Year
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal 1995
Net sales $ 807.3 $ 863.1 $ 850.4 $ 923.3 $ 3,444.1
Gross profit 245.8 272.9 271.8 325.1 1,115.6
Income before income taxes 44.3 53.5 58.5 81.3 237.6
Net income 28.8 34.8 38.0 52.9 154.5
Per share:
Net income .73 .88 .98 1.36 3.95
Cash dividends .31 .31 .31 .31 1.24
Stock prices (high/low) 49 1/8-41 3/8 48 7/8-38 48 3/8-40 1/2 53 3/8-46 3/8
=======================================================================
</TABLE>
Harris Corporation 32
<PAGE> 33
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
HARRIS CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A
COL. B COL. C COL. D COL. E
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ADDITIONS
-------------------------
(1) (2)
BALANCE CHARGED CHARGED
AT TO COSTS TO OTHER BALANCE
BEGINNING AND ACCOUNTS DEDUCTIONS-- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1996:
Amounts Deducted From $ 40(A)
Respective Asset Accounts 132(C)
-----------
Allowances for collection
losses........................... $29,976 $ 8,407 $ 172 $ 7,175(B) $31,380
========= ========= =========== ============ ========
YEAR ENDED JUNE 30, 1995:
Amounts Deducted From
Respective Asset Accounts $ 7,746(B)
257(C)
------------
Allowances for collection
losses........................... $29,492 $ 7,897 $ 590(A) $ 8,003 $29,976
========= ========= =========== ============ ========
YEAR ENDED JUNE 30, 1994:
Amounts Deducted From
Respective Asset Accounts $ 891(A)
6,754(B)
------------
Allowances for collection
losses........................... $28,245 $ 8,790 $ 102(C) $ 7,645 $29,492
========= ========= =========== ============ ========
</TABLE>
Note A -- Foreign currency translation gains and losses.
Note B -- Uncollectible accounts charged off, less recoveries on accounts
previously charged off.
Note C -- Amounts reclassified to other accounts in the Consolidated Balance
Sheet.
33
<PAGE> 1
Exhibit 10(a)
FORM OF
EXECUTIVE SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of July, 1996
by and between Harris Corporation, a Delaware corporation (the "Company"), and
______________ ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders; and
WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may arise and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, Executive currently serves as an officer of the
Company; and
WHEREAS, the Board (as defined in Section 1) has determined
that it is in the best interests of the Company and its stockholders to secure
Executive's continued services and to ensure Executive's continued and undivided
dedication to his duties in the event of any threat or occurrence of, or
negotiation or other action that could lead to, or create the possibility of, a
Change in Control (as defined in Section 1) of the Company, without being
influenced by the Executive's uncertainty of the Executive's own situation; and
WHEREAS, the Board has authorized the Company to enter into
this Agreement.
-1-
<PAGE> 2
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a material breach by Executive of the
duties and responsibilities of Executive (other than as a result of incapacity
due to physical or mental illness) which is (x) demonstrably willful, continued
and deliberate on Executive's part, (y) committed in bad faith or without
reasonable belief that such breach is in the best interests of the Company and
(z) not remedied within fifteen (15) days after receipt of written notice from
the Company which specifically identifies the manner in which such breach has
occurred or (2) the Executive's conviction of, or plea of NOLO CONTENDERE to, a
felony involving willful misconduct which is materially and demonstrably
injurious to the Company. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by Executive in good faith and in the best interests of the Company.
Cause shall not exist unless and until the Company has delivered to Executive a
copy of a resolution duly adopted by three-quarters (3/4) of the entire Board at
a meeting of the Board called and held for such purpose (after thirty (30) days
notice to Executive and an opportunity for Executive, together with counsel, to
be heard before the Board), finding that in the good faith opinion of the Board
an event set forth in clauses (1) or (2) has occurred and specifying the
particulars thereof in detail. The Company must notify Executive of any event
constituting Cause within ninety (90) days following the Company's knowledge of
its existence or such event shall not constitute Cause under this Agreement.
-2-
<PAGE> 3
(c) "Change in Control" means the occurrence of any one of
the following events:
(i) any "person" (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange
Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange
Act) is or becomes a "beneficial owner" (as defined in Rule 13(d)(3)
under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); PROVIDED, HOWEVER, that
the event described in this paragraph (i) shall not be deemed to be a
Change in Control by virtue of any of the following acquisitions: (A)
by the Company or any Subsidiary, (B) by any employee benefit plan
sponsored or maintained by the Company or any Subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an offering of
such securities, (D) pursuant to a Non-Control Transaction (as defined
in paragraph (iii)), or (E) pursuant to any acquisition by Executive or
any group of persons including Executive;
(ii) individuals who, on July 1, 1996, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a
director subsequent to July 1, 1996, whose election or nomination for
election was approved by a vote of at least two-thirds of the Incumbent
Directors who remain on the Board (either by a specific vote or by
approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination)
shall also be deemed to be an Incumbent Director; PROVIDED, HOWEVER,
that no individual initially elected or nominated as a director of the
Company as a result of an actual or threatened election contest with
respect to directors or any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board
of Directors shall be deemed to be an Incumbent Director;
-3-
<PAGE> 4
(iii) the consummation of a merger, consolidation,
share exchange or similar form of corporate reorganization of the
Company or any such type of transaction involving the Company or any of
its Subsidiaries that requires the approval of the Company's
stockholders (whether for such transaction or the issuance of
securities in the transaction or otherwise) (a "Business Combination"),
unless immediately following such Business Combination: (A) more than
80% of the total voting power of the Company resulting from such
Business Combination (including, without limitation, any company which
directly or indirectly has beneficial ownership of 100% of the Company
Voting Securities) eligible to elect directors of such company is
represented by shares that were Company Voting Securities immediately
prior to such Business Combination (either by remaining outstanding or
being converted), and such voting power is in substantially the same
proportion as the voting power of such Company Voting Securities
immediately prior to the Business Combination, (B) no person (other
than any publicly traded holding company resulting from such Business
Combination, any employee benefit plan sponsored or maintained by the
Company (or the corporation resulting from such Business Combination))
becomes the beneficial owner, directly or indirectly, of 20% or more of
the total voting power of the outstanding voting securities eligible to
elect directors of the company resulting from such Business
Combination, and (C) at least a majority of the members of the board of
directors of the company resulting from such Business Combination were
Incumbent Directors at the time of the Board's approval of the
execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies the foregoing
conditions specified in (A), (B) and (C) shall be deemed to be a
"Non-Control Transaction"); or
(iv) the stockholders of the Company approve a plan
of complete liquidation or dissolution of the Company or the direct or
indirect sale or other disposition of all or substantially all of the
assets of the Company and its Subsidiaries.
-4-
<PAGE> 5
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 20% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; PROVIDED, THAT if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.
Notwithstanding anything in this Agreement to the contrary, if
Executive's employment is terminated prior to a Change in Control, and Executive
reasonably demonstrates that such termination was at the request or suggestion
of a third party who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control (a "Third Party") and a Change in
Control involving such Third Party occurs, then for all purposes of this
Agreement, the date of a Change in Control shall mean the date immediately prior
to the date of such termination of employment.
(d) "Date of Termination" means (1) the effective
date on which Executive's employment by the Company terminates as specified in a
prior written notice by the Company or Executive, as the case may be, to the
other, delivered pursuant to Section 11, or (2) if Executive's employment by the
Company terminates by reason of death, the date of death of Executive.
(e) "Good Reason" means, without Executive's express
written consent, the occurrence of any of the following events after a Change in
Control:
(1) (i) the assignment to Executive of any
duties or responsibilities inconsistent in any material adverse respect
with Executive's position(s), duties, responsibilities or status with
the Company immediately prior to such Change in Control (including any
diminution of such duties or
-5-
<PAGE> 6
responsibilities) or (ii) a material adverse change in Executive's
reporting responsibilities, titles or offices with the Company as in
effect immediately prior to such Change in Control;
(2) a reduction by the Company in Executive's
rate of annual base salary or annual target bonus opportunity
(including any adverse change in the formula for such annual bonus
target) as in effect immediately prior to such Change in Control or as
the same may be increased from time to time thereafter;
(3) any requirement of the Company that
Executive (i) be based anywhere more than fifty (50) miles from the
facility where Executive is located at the time of the Change in
Control or (ii) travel on Company business to an extent substantially
greater than the travel obligations of Executive immediately prior to
such Change in Control;
(4) the failure of the Company to (i)
continue in effect any employee benefit plan or compensation plan in
which Executive is participating immediately prior to such Change in
Control, unless Executive is permitted to participate in other plans
providing Executive with substantially comparable benefits, or the
taking of any action by the Company which would adversely affect
Executive's participation in or reduce Executive's benefits under any
such plan, (ii) provide Executive and Executive's dependents with
welfare benefits in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated
companies in effect for Executive and Executive's dependents
immediately prior to such Change in Control or provide substantially
comparable benefits at a substantially comparable cost to Executive,
(iii) provide fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Company and its
affiliated companies in effect for Executive immediately prior to such
Change in Control, or provide substantially comparable fringe benefits,
or (iv) provide Executive
-6-
<PAGE> 7
with paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies as in effect for Executive immediately prior to such Change
in Control; or
(5) the failure of the Company to obtain the
assumption agreement from any successor as contemplated in Section
10(b); or
(6) any purported termination by the Company
of the Executive's employment otherwise than as expressly permitted
hereby.
Any event or condition described in this Section 1(e)(1)
through (6) which occurs prior to a Change in Control, but was at the request or
suggestion of a Third Party who effectuates a Change in Control, shall
constitute Good Reason following a Change in Control for purposes of this
Agreement notwithstanding that it occurred prior to the Change in Control. An
isolated, insubstantial and inadvertent action taken in good faith and which is
remedied by the Company within fifteen (15) days after receipt of notice thereof
given by Executive shall not constitute Good Reason. Executive must provide
notice of termination of employment within ninety (90) days of Executive's
knowledge of an event constituting Good Reason or such event shall not
constitute Good Reason under this Agreement.
(f) "Nonqualifying Termination" means a termination
of Executive's employment (1) by the Company for Cause, (2) by Executive for any
reason other than Good Reason, (3) as a result of Executive's death, (4) by the
Company due to Executive's absence from Executive's duties with the Company on a
full-time basis for at least one hundred eighty (180) consecutive days as a
result of Executive's incapacity due to physical or mental illness or (5) as a
result of Executive's mandatory retirement (not including any mandatory early
retirement) in accordance with the Company's retirement policy generally
applicable to its salaried employees, as in effect immediately prior to the
Change in Control, or in
-7-
<PAGE> 8
accordance with any retirement arrangement established with respect to Executive
with Executive's written consent.
(g) "Subsidiary" means any corporation or
other entity in which the Company has a direct or indirect ownership interest of
more than 50% of the total combined voting power of the then outstanding
securities of such corporation or other entity entitled to vote generally in the
election of directors or in which the Company has the right to receive more than
50% of the distribution of profits or of the assets on liquidation or
dissolution.
(h) "Termination Period" means the period of
time beginning with a Change in Control and ending two (2) years following such
Change in Control.
2. OBLIGATIONS OF EXECUTIVE.
(a) Executive agrees that if a Change in Control
shall occur, Executive shall not voluntarily leave the employ of the Company
without Good Reason for a period of six (6) months following the Change in
Control.
(b) Executive agrees to hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its Subsidiaries or
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its Subsidiaries or affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 2(b) constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
-8-
<PAGE> 9
3. PAYMENTS UPON TERMINATION OF EMPLOYMENT.
(a) If during the Termination Period the employment of
Executive shall terminate, other than by reason of a Nonqualifying Termination,
then the Company shall pay to Executive (or Executive's beneficiary or estate)
within thirty (30) days following the Date of Termination, as compensation for
services rendered to the Company:
(1) a lump-sum cash amount equal to
the sum of (i) Executive's base salary through the Date of Termination,
to the extent not theretofore paid, (ii) a pro rata portion of
Executive's annual bonus in an amount at least equal to: (A) the
greatest of (x) not less than Executive's target bonus for the fiscal
year in which the Change in Control occurs; (y) not less than
Executive's target bonus for the fiscal year in which Executive's Date
of Termination occurs; and (z) Executive's actual bonus payout for the
fiscal year in which Executive's Date of Termination occurs, multiplied
by (B) a fraction, the numerator of which is the number of days in the
fiscal year in which the Date of Termination occurs through the Date of
Termination and the denominator of which is three hundred sixty-five
(365), and (iii) any compensation previously deferred by Executive
other than pursuant to a tax-qualified plan (together with any interest
and earnings thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid; plus
(2) a lump-sum cash amount equal to
(i) _____ times Executive's highest annual rate of base salary during
the 12-month period prior to the Date of Termination, plus (ii) _____
times the greatest of: (A) the highest bonus earned by Executive in
respect of the three (3) fiscal years of the Company immediately
preceding the fiscal year in which the Change in Control occurs; (B)
not less than Executive's target bonus for the fiscal year in which the
Change in Control occurs; or (C) not less than Executive's target bonus
for the fiscal year in which Executive's Date of Termination occurs.
Any amount paid pursuant to this Section 3(a)(2) shall be in lieu of
any other
-9-
<PAGE> 10
amount of severance relating to salary or bonus continuation to be
received by Executive upon termination of employment of Executive under
any severance plan or policy of the Company.
(b) If during the Termination Period the employment of
Executive shall terminate, other than by reason of a Nonqualifying Termination,
the Company shall continue to provide, for a period of two (2) years following
the Date of Termination but in no event after Executive's attainment of age 65,
Executive (and Executive's dependents if applicable) with the same level of
medical, dental, accident, disability, life insurance and any other similar
benefits in place as of the Date of Termination upon substantially the same
terms and conditions (including contributions required by the Executive for such
benefits) as existed immediately prior to Executive's Date of Termination (or,
if more favorable to Executive, as such benefits and terms and conditions
existed immediately prior to the Change in Control); PROVIDED, THAT, if
Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes employed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive's eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided hereunder.
Should the terminated Executive move his residence in order to
pursue other business opportunities within two (2) years of the Date of
Termination, the Company agrees to reimburse such Executive for any reasonable
expenses incurred in that relocation (including taxes payable on the
reimbursement) which are not reimbursed by another employer. Reimbursement shall
include assistance in selling the Executive's home which was customarily
provided by the Company to transferred executives prior to the Change in
Control. The Executive shall be promptly reimbursed by the Company for up to
$4,000 of fees and expenses charged to him by any executive recruiting,
counseling or placement firms incurred in
-10-
<PAGE> 11
seeking new employment following the termination of employment as provided in
this Agreement. The Company shall also pay to the Executive on demand in cash an
"additional amount" such that the federal, state and local taxes on the
aggregate of such reimbursements and the "additional amount" equal said
"additional amount." The Company will also pay to the Executive on demand in
cash up to $5,000 per year to provide the Executive with professional financial
and tax planning assistance. If immediately prior to the Date of Termination the
Company provided the Executive with any club memberships, the Executive will be
entitled to continue such memberships at his sole expense.
(c) If during the Termination Period the employment of
Executive shall terminate by reason of a Nonqualifying Termination, then the
Company shall pay to Executive within thirty (30) days following the Date of
Termination, a cash amount equal to the sum of (1) Executive's base salary
through the Date of Termination, to the extent not theretofore paid, (2) any
benefits or awards which have been earned or become payable pursuant to the
terms of any compensation plan but which have not yet been paid to the
Executive, and (3) any compensation previously deferred by Executive other than
pursuant to a tax-qualified plan (together with any interest and earnings
thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid. The Company may make such additional payments, and provide
such additional benefits, to Executive as the Company and Executive may agree in
writing.
4. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution by the Company or its affiliated companies to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 4) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code, or any
interest or penalties are incurred by Executive with respect to such excise tax
(such
-11-
<PAGE> 12
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then Executive shall be entitled
to receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes) including, without limitation, any income
and employment taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax, imposed upon the Gross-Up Payment but before deduction
for any federal, state or local income tax upon the Payments, Executive retains
an amount (before deductions for any federal, state or local income or
employment taxes on the Payments) equal to the sum of (x) the Payments and (y)
an amount equal to the product of any deductions disallowed because of the
inclusion of the Gross-up Payment in Executive's adjusted gross income and the
highest applicable marginal rate of federal income taxation for the calendar
year in which the Gross-up Payment is to be made. Notwithstanding the foregoing,
if it shall be determined that the Executive is entitled to a Gross-Up Payment,
but that the Executive, after taking into account the Payments and the Gross-Up
Payment, would not receive net after-tax proceeds of at least $50,000 (taking
into account income and employment taxes and any Excise Tax) in excess of the
net after-tax proceeds to the Executive resulting from an elimination of the
Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount
(the "Reduced Amount") such that the receipt of Payments would not give rise to
any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the
Payments, in the aggregate, shall be reduced in the manner elected by the
Executive to the Reduced Amount. For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes
at the highest marginal rates of federal income taxation for the calendar year
in which the Gross-up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes and (iii) have otherwise allowable deductions
-12-
<PAGE> 13
for federal income tax purposes at least equal to those disallowed because of
the increase of the Gross-up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 4(a), all
determinations required to be made under this Section 4, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the "Determination"). In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company and the Company shall enter into any agreement requested
by the Accounting Firm in connection with the performance of the services
hereunder. The Gross-up Payment under this Section 4 with respect to any
Payments shall be made no later than thirty (30) days following such Payments.
If the Accounting Firm determines that no Excise Tax is payable by Executive, it
shall furnish Executive with a written opinion to such effect, and to the effect
that failure to report the Excise Tax, if any, on Executive's applicable federal
income tax return will not result in the imposition of a negligence or similar
penalty. The Determination by the Accounting Firm shall be binding upon the
Company and Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the Determination, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment") or Gross-up Payments are made by the Company which should
not have been made ("Overpayment"), consistent with the calculations required to
be made hereunder. In the event that the Executive thereafter is required to
make payment of any
-13-
<PAGE> 14
additional Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly
paid by the Company to or for the benefit of Executive. In the event the amount
of the Gross-up Payment exceeds the amount necessary to reimburse the Executive
for his Excise Tax, the Accounting Firm shall determine the amount of the
Overpayment that has been made and any such Overpayment (together with interest
at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid
by Executive to or for the benefit of the Company. Executive shall cooperate, to
the extent his expenses are reimbursed by the Company, with any reasonable
requests by the Company in connection with any contests or disputes with the
Internal Revenue Service in connection with the Excise Tax.
5. WITHHOLDING TAXES. The Company may withhold from
all payments due to Executive (or his beneficiary or estate) hereunder all taxes
which, by applicable federal, state, local or other law, the Company is required
to withhold therefrom.
6. INDEMNIFICATION AND REIMBURSEMENT OF EXPENSES. The
Company agrees to indemnify the Executive for litigation or arbitration
proceedings brought to contest, or dispute of any provision of this Agreement.
If any such contest or dispute shall arise under this Agreement involving
termination of Executive's employment with the Company or involving the failure
or refusal of the Company to perform fully in accordance with the terms hereof,
the Company shall reimburse Executive for all legal fees and expenses, if any,
incurred by Executive in connection with such contest or dispute (regardless of
the result thereof), within thirty (30) days of receipt of evidence thereof,
together with interest in an amount equal to the prime rate published in THE
WALL STREET JOURNAL from time to time in effect, but in no event higher than the
maximum legal rate permissible under applicable law, such interest to accrue
from the date the Company receives Executive's statement for such fees and
expenses through the date of payment thereof, regardless of whether or not
Executive's claim is upheld by a court of competent jurisdiction; provided,
-14-
<PAGE> 15
however, Executive shall be required to repay any such amounts to the Company to
the extent that a court issues a final and non-appealable order setting forth
the determination that the position taken by Executive was frivolous or advanced
by Executive in bad faith.
7. TERM OF AGREEMENT. This Agreement shall be effective on the
date hereof and shall continue in effect until the Company shall have given
three year written notice of cancellation; provided, that, notwithstanding the
delivery of any such notice, this Agreement shall continue in effect for a
period of twenty-four (24) months after a Change in Control, if such Change in
Control shall have occurred during the term of this Agreement. Notwithstanding
anything in this Section 7 to the contrary, this Agreement shall terminate if
Executive or the Company terminates Executive's employment prior to a Change in
Control except as provided in the last paragraph of Section 1(c).
8. TERMINATION OF AGREEMENT. This Agreement shall be effective
on the date hereof and shall continue until the first to occur of (i)
termination of Executive's employment with the Company prior to a Change in
Control (except as otherwise provided hereunder), (ii) a Nonqualifying
Termination, (iii) the end of the Termination Period or (iv) cancellation in
accordance with Section 7.
9. SCOPE OF AGREEMENT. Nothing in this Agreement shall be
deemed to entitle Executive to continued employment with the Company or its
Subsidiaries, and if Executive's employment with the Company shall terminate
prior to a Change in Control, Executive shall have no further rights under this
Agreement (except as otherwise provided hereunder); PROVIDED, HOWEVER, that any
termination of Executive's employment during the Termination Period shall be
subject to all of the provisions of this Agreement.
10. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any
Business Combination. In the event of any Business Combination, the provisions
of this
-15-
<PAGE> 16
Agreement shall be binding upon the surviving or resulting corporation or the
person or entity to which such assets are transferred.
(b) The Company agrees that concurrently with any
Business Combination that does not constitute a Non-Control Transaction, it
will cause any successor or transferee unconditionally to assume, by written
instrument delivered to Executive (or his beneficiary or estate), all of the
obligations of the Company hereunder. Failure of the Company to obtain such
assumption prior to the effectiveness of any such Business Combination,
shall be a breach of this Agreement and shall constitute Good Reason hereunder
and shall entitle Executive to compensation and other benefits from the Company
in the same amount and on the same terms as Executive would be entitled
hereunder if Executive's employment were terminated following a Change in
Control other than by reason of a Nonqualifying Termination. For purposes of
implementing the foregoing, the date on which any such Business Combination
becomes effective shall be deemed the date Good Reason occurs, and shall be the
Date of Termination if requested by Executive.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive's estate.
-16-
<PAGE> 17
11. NOTICE. (a) For purposes of this Agreement, all notices
and other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
If to the Company: Harris Corporation
1025 W. NASA Boulevard
Melbourne, Florida 32919
Attn: Corporate Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination
by the Company or Executive, as the case may be, to the other, shall (i)
indicate the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated and (iii) specify the termination
date (which date shall be not less than fifteen (15) nor more than sixty (60)
days after the giving of such notice). The failure by Executive or the Company
to set forth in such notice any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of Executive or the
Company hereunder or preclude Executive or the Company from asserting such fact
or circumstance in enforcing Executive's or the Company's rights hereunder.
12. FULL SETTLEMENT; RESOLUTION OF DISPUTES. The Company's
obligation to make payments provided for in this Agreement and otherwise to
perform its
-17-
<PAGE> 18
obligations hereunder shall be in lieu and in full settlement of all other
payments to Executive under any previous severance or employment agreement
between the Executive and the Company. The Company's obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Executive or others.
In no event shall Executive be obligated to seek other employment or take other
action by way of mitigation of the amounts payable to Executive under any of the
provisions of this Agreement and, except as provided in Section 3(b), such
amounts shall not be reduced whether or not Executive obtains other employment.
Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Orlando, Florida by three
arbitrators in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The Company shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section 12.
13. EMPLOYMENT WITH SUBSIDIARIES. Employment with the
Company for purposes of this Agreement shall include employment with any
Subsidiary.
14. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS. THE INVALIDITY OR UNENFORCEABILITY
OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR
ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS
SHALL REMAIN IN FULL FORCE AND EFFECT.
-18-
<PAGE> 19
15. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
16. MISCELLANEOUS. No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by Executive and by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by Executive or the Company to insist upon strict compliance with
any provision of this Agreement or to assert any right Executive or the Company
may have hereunder, including without limitation, the right of Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement. Except as
otherwise specifically provided herein, the rights of, and benefits payable to,
Executive, his estate or his beneficiaries pursuant to this Agreement are in
addition to any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company and Executive has
executed this Agreement as of the day and year first above written.
HARRIS CORPORATION
By:
-----------------------------
Title:
--------------------------
--------------------------------
[Executive]
-19-
<PAGE> 1
Exhibit 10b
HARRIS CORPORATION
ANNUAL INCENTIVE PLAN
AMENDED AS OF JUNE 28, 1996
1. PURPOSE. The purpose of the Harris Corporation Annual Incentive Plan
(the "Plan") is to promote the growth and performance of Harris Corporation (the
"Corporation") by linking a portion of the total compensation for certain key
employees to attainment of such corporate, sector and division financial
objectives as shall be approved by the Board of Directors, a Committee of the
Board of Directors or the Chief Executive Officer, as appropriate, for each
fiscal year.
2. DEFINITIONS. The following definitions are applicable to the Plan:
"Board" means the Board of Directors of the Corporation.
"Committee" means a committee of the Board to which the Board has
delegated authority and responsibility under the Plan and which shall be
appointed by, and serve at the pleasure of, the Board, and shall consist of
members of the Board who are not employees of the Corporation or any affiliate
thereof and who qualify as "outside directors" under Section 162(m) of the
Internal Revenue Code, as amended from time to time, and the regulations
promulgated thereunder.
"Executive Officer" means a Participant the Board has designated as an
executive officer of the Corporation for purposes of reporting under the
Securities Exchange Act of 1934, as amended from time to time, or any successor
thereto.
"Participant" means any salaried employee of the Corporation and its
subsidiaries and affiliates designated by the Board, the Committee or the Chief
Executive Officer of the Corporation to participate in the Plan.
3. ADMINISTRATION OF PLAN. With respect to participation in the Plan by
the Chairman and President, the Plan shall be administered by the "outside
directors" of the Board. With respect to participation in the Plan by the other
Executive Officers, the Plan shall be administered by the Committee. With
respect to participation in the Plan by Participants who are not Executive
Officers, the Plan shall be administered by the Board, the Committee, or the
Chief Executive Officer, in accordance with the Corporation's compensation
practices, and all references herein to the "Committee" shall be deemed to mean
the "outside directors" of the Board, the Committee, or the Chief Executive
Officer, as the case may be.
4. DESIGNATION OF PARTICIPANTS. Participants in the Plan shall be
selected by the Committee on an annual basis from among the salaried employees
of the Corporation and its subsidiaries and affiliates.
<PAGE> 2
5. ANNUAL INCENTIVE AWARDS.
(a) Each Participant in the Plan shall be eligible to receive
such annual incentive award, if any, for each Plan Year as may be payable
pursuant to the performance criteria described below. Except as provided in
Section 13 below, the Committee shall, on an annual basis, establish a "target
annual incentive award" for each Participant, and the maximum amount of a target
annual incentive award that may be awarded to a Participant for a Plan Year
shall be 200% thereof.
(b) Participants shall have their annual incentive awards, if
any, determined on the basis of the degree of achievement of performance goals
which shall be established by the Committee in writing and which goals shall be
stated in terms of the attainment of specified levels of or percentage changes
(as compared to a prior measurement period) in any one or more of the following
measurements: the Corporation's revenue, earnings per share of Common Stock, net
income, return on equity, return on capital, return on assets, total stockholder
return or cash flow, or any combination thereof. The Committee shall, for each
Plan Year, establish the performance goal or goals from among the foregoing to
apply to each Participant and a formula or matrix prescribing the extent to
which such Participant's annual incentive award shall be earned based upon the
degree of achievement of such performance goal or goals. The Committee may
determine that the annual incentive award payable to any Participant shall be
based upon the attainment of performance goals comparable to those specified
above but in whole or in part applied to the results of a subsidiary, division
or sector of the Corporation for which such Participant has substantial
management responsibility.
(c) A Participant's target annual incentive award or
performance goals may be changed by the Committee during the Plan Year to
reflect a change in responsibilities provided that any such change shall be made
in a manner consistent with Section 162(m) of the Internal Revenue Code as
amended from time to time, and the regulations promulgated thereunder.
(d) Except as provided in Section 6 below, the Committee may,
in its sole discretion, (i) award or increase the amount of an annual incentive
award payable to a Participant even though not earned in accordance with the
performance goals established pursuant to this Section 5, or (ii) decrease the
amount of an annual incentive award otherwise payable to a Participant even
though earned in accordance with the performance goals established pursuant to
this Section 5.
6. PARTICIPATION BY EXECUTIVE OFFICERS. Notwithstanding any other
provisions of the Plan to the contrary, the following provisions shall be
applicable to participation in the Plan by Executive Officers:
2
<PAGE> 3
(a) Each such Participant's annual incentive award under this
Plan for such Plan Year shall be based solely on achievement of one or more of
the performance goals as established by the Committee pursuant to Section 5
above and the Committee shall not have the discretion provided in Section 5(d)
to increase the amount of the award.
(b) With respect to each such Participant, no annual incentive
award shall be payable hereunder except upon written certification by the
Committee that the performance goals have been satisfied to a particular extent
and that any other material terms and conditions precedent to payment of an
annual incentive award pursuant to the Plan have been satisfied.
(c) The maximum annual incentive award payable to any such
Participant for any Plan Year shall be $2,000,000.
7. PAYMENT OF ANNUAL INCENTIVE AWARD. Payment of any amount to be paid
to a Participant based upon the degree of attainment of the applicable
performance goals shall be made at such time(s) as the Committee may in its
discretion determine.
8. PARTICIPANT'S INTERESTS. A Participant's interest in any annual
incentive awards hereunder shall at all times be reflected on the Corporation's
books as a general unsecured and unfunded obligation of the Corporation subject
to the terms and conditions of the Plan. The Plan shall not give any person any
right or security interest in any asset of the Corporation or any fund in which
any deferred payment is deemed invested. Neither the Corporation, the Board, nor
the Committee shall be responsible for the adequacy of the general assets of the
Corporation to discharge the payment of its obligations hereunder nor shall the
Corporation be required to reserve or set aside funds therefor.
9. NON-ALIENATION OF BENEFITS; BENEFICIARY DESIGNATION. All rights and
benefits under the Plan are personal to the Participant and neither the Plan nor
any right or interest of a Participant or any other person arising under the
Plan is subject to voluntary or involuntary alienation, sale, transfer, or
assignment without the Corporation's consent. Subject to the foregoing, the
Corporation shall establish such procedures as it deems necessary for a
Participant to designate one or more beneficiaries to whom any payment the
Committee determines to make would be payable in the event of the Participant's
death.
10. WITHHOLDING FOR TAXES. Notwithstanding any other provisions of this
Plan, the Corporation may withhold from any payment made by it under the Plan
such amount or amounts as may be required for purposes of complying with any
federal, state and local tax or withholding requirements.
11. RIGHTS OF EMPLOYEES. Nothing in the Plan shall interfere with or
limit in any way the right of the Corporation or any of its subsidiaries or
affiliates to terminate a Participant's employment at any time, or confer upon
any Participant any right to continued employment with the Corporation or any of
its subsidiaries or affiliates.
3
<PAGE> 4
12. DETERMINATIONS FINAL. Each determination provided for in the Plan
shall be made by the Committee under such procedures as may from time to time be
prescribed by the Committee and shall be made in the sole discretion of the
Committee. Any such determination shall be conclusive.
13. CHANGE IN CONTROL.
(a) Notwithstanding anything to the contrary provided
elsewhere herein, in the event of a "change in control" of the Corporation, as
defined in paragraph 13(b) below, then the Corporation shall as promptly as
practicable pay any annual incentive awards payable to Participants. The payment
to each Participant shall be an amount not less than the target annual incentive
award as originally approved for the fiscal year, notwithstanding actual results
or any changes or modifications occurring after any such change in control.
(b) "Change in control" means the occurrence of any one of the
following events:
(i) any "person" (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities eligible
to vote for the election of the Board (the "Corporation Voting Securities");
PROVIDED, HOWEVER, that the event described in this paragraph (i) shall not be
deemed to be a Change in Control by virtue of any of the following acquisitions:
(a) by the Corporation or any subsidiary, (b) by any employee benefit plan
sponsored or maintained by the Corporation or any subsidiary, (c) by any
underwriter temporarily holding securities pursuant to an offering of such
securities, (d) pursuant to a Non-Control Transaction (as defined in paragraph
(iii)), or (e) pursuant to any acquisition by a corporate officer of the
Corporation or any group of persons including a corporate officer;
(ii) individuals who, on July 1, 1996, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a Director subsequent
to July 1, 1996, whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors who remain on the Board
(either by a specific vote or by approval of the proxy statement of the
Corporation in which such person is named as a nominee for Director, without
objection to such nomination) shall also be deemed to be an Incumbent Director;
PROVIDED, HOWEVER, that no individual initially elected or nominated as a
Director of the Corporation as a result of an actual or threatened election
contest with respect to Directors or any other actual or threatened solicitation
of proxies or consents by or on
4
<PAGE> 5
behalf of any person other than the Board of Directors shall be deemed to be an
Incumbent Director;
(iii) the consummation of a merger, consolidation,
share exchange or similar form of corporate reorganization of the Corporation or
any such type of transaction involving the Corporation or any of its
subsidiaries that requires the approval of the Corporation's stockholders
(whether for such transaction or the issuance of securities in the transaction
or otherwise) (a "Business Combination"), unless immediately following such
Business Combination: (a) more than 80% of the total voting power of the
publicly traded corporation resulting from such Business Combination (including,
without limitation, any corporation which directly or indirectly has beneficial
ownership of 100% of the Corporation Voting Securities) eligible to elect
Directors of such corporation is represented by shares that were Corporation
Voting Securities immediately prior to such Business Combination (either by
remaining outstanding or being converted), and such voting power is in
substantially the same proportion as the voting power of such Corporation Voting
Securities immediately prior to the Business Combination, (b) no person (other
than any publicly traded holding corporation resulting from such Business
Combination, any employee benefit plan sponsored or maintained by the
Corporation (or the corporation resulting from such Business Combination))
becomes the beneficial owner, directly or indirectly, of 20% or more of the
total voting power of the outstanding voting securities eligible to elect
Directors of the corporation resulting from such Business Combination, and (c)
at least a majority of the members of the Board of Directors of the corporation
resulting from such Business Combination were Incumbent Directors at the time of
the Board's approval of the execution of the initial agreement providing for
such Business Combination (any Business Combination which satisfies the
foregoing conditions specified in (a), (b) and (c) shall be deemed to be a
"Non-Control Transaction"); or
(iv) the stockholders of the Corporation approve a
plan of complete liquidation or dissolution of the Corporation or the direct or
indirect sale or other disposition of all or substantially all of the assets of
the Corporation and its subsidiaries.
Notwithstanding the foregoing, a "change in control" of the Corporation shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 20% of the Corporation Voting Securities as a result of the
acquisition of Corporation Voting Securities by the Corporation which reduces
the number of Corporation Voting Securities outstanding; PROVIDED, THAT if after
such acquisition by the Corporation such person becomes the beneficial owner of
additional Corporation Voting Securities that increases the percentage of
outstanding Corporation Voting Securities beneficially owned by such person, a
"change in control" of the Corporation shall then occur.
14. ADJUSTMENT OF AWARDS. The Committee shall be authorized to make
adjustments in the method of calculating attainment of performance goals in
recognition of unusual or nonrecurring events affecting the Corporation or its
financial statements or changes in applicable laws, regulations or accounting
principles; provided, however,
5
<PAGE> 6
that no such adjustment shall impair the rights of any Participant without his
consent and that any such adjustments shall be made in a manner consistent with
Section 162(m) of the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or any
annual incentive award in the manner and to the extent it shall deem desirable
to carry it into effect. In the event the Corporation shall assume outstanding
employee benefit awards or the right or obligation to make future such awards in
connection with the acquisition of another corporation or business entity, the
Committee may, in its discretion, make such adjustments in the terms of annual
incentive awards under the Plan as it shall deem appropriate.
15. DEFERRAL. Notwithstanding anything contained herein to the
contrary, in the event that an annual incentive award shall be ineligible for
treatment as "other performance based compensation" under Section 162(m) of the
Internal Revenue Code of 1986, as amended, the Committee, in its sole
discretion, shall have the right, with respect to any Executive Officer who is a
"covered employee" under Section 162(m) of the Internal Revenue Code of 1986, as
amended from time to time, to defer, in whole or in part, such Executive
Officer's receipt of his annual incentive award until the Executive Officer is
no longer a "covered employee" or until such time as shall be determined by the
Committee, provided that the Committee may effect such a deferral only in a
situation where the Corporation would be prohibited a deduction under Section
162(m) and such deferral shall be limited to the portion of the award that is
not deductible.
16. AMENDMENT OR TERMINATION. Until such time as a "change in control"
shall have occurred, the Board or the Committee may, in its sole discretion,
amend, suspend or terminate the Plan from time to time. No such termination or
amendment shall alter a Participant's right to receive a distribution as
previously earned, as to which this Plan shall remain in effect following its
termination until all such amounts have been paid, except as the Corporation may
otherwise determine.
Approved by the Board of Directors this 28th day of June, 1996.
ATTESTED:
/s/ R.L. Ballantyne
----------------------------
Secretary
6
<PAGE> 1
Exhibit 10(c)
HARRIS CORPORATION
STOCK INCENTIVE PLAN
AMENDED AS OF JUNE 28, 1996
1. PURPOSE.
The purpose of the Harris Corporation Stock Incentive Plan (the "Plan")
is to promote the long-term growth and performance of Harris Corporation (the
"Corporation") and its affiliates and to attract and retain outstanding
individuals by awarding directors and salaried employees performance-based stock
awards, restricted stock, stock options, stock appreciation rights and/or other
stock-based awards.
2. DEFINITIONS
The following definitions are applicable to the Plan:
"Award" means the grant of performance shares, restricted stock, stock
options, stock appreciation rights or other share-based award under the Plan.
"Board" means the Board of Directors of the Corporation.
"Board Committee" means a committee of the Board consisting of Outside
Directors.
"Commission" means the Securities and Exchange Commission.
"Committee" means a committee of the Board to which the Board has
delegated authority and responsibility under the Plan and which shall be
appointed by, and serve at the pleasure of, the Board, and shall be constituted
so as to satisfy any applicable legal requirements, including the requirements
of Rule 16b-3 promulgated by the Commission under the Securities Exchange Act of
1934, as amended from time to time, or under any successor rule adopted by the
Commission and Section 162(m) of the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated thereunder.
"Common Stock" means the common stock of the Corporation, $1.00 par
value per share.
"Executive Officer" means any Participant the Board has designated as
an executive officer of the Corporation for purposes of reporting under the
Securities Exchange Act of 1934, as amended from time to time, or any successor
thereto.
"Grant Date" means the date on which the grant of an Option under
Section 7.1 hereof or a SAR under Section 8.1 hereof becomes effective pursuant
to the terms of the Stock Option Agreement or Stock Appreciation Rights
Agreement, as the case may be, relating thereto.
<PAGE> 2
"Non-employee Director" means a member of the Board who is not an
employee of the Corporation or any affiliate thereof.
"Option" means the option to purchase shares of Common Stock granted
under Sections 7.1 and 10.1 hereof.
"Option Price" means the purchase price of each share of Common Stock
under an Option.
"Outside Director" means a member of the Board who is not an employee
of the Corporation or any affiliate thereof and who qualifies as an "outside
director" under Section 162(m) of the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated thereunder.
"Participant" means any salaried employee of the Corporation and its
affiliates designated by the Board Committee to receive an Award under the Plan.
"Performance Goal" means any of the following measurements: the
Corporation's revenue, earnings per share of Common Stock, net income, return on
equity, return on capital, return on assets, total shareholder return or cash
flow, or any combination thereof.
"Performance Period" means the period of time established by the Board
Committee for achievement of certain objectives under Section 5.1 hereof.
"Shares" means shares of Common Stock, subject to adjustments made
under Section 3.2 or operation of law.
"Restriction Period" means the period of time established by the Board
Committee during which certain restrictions as to vesting and on the sale or
other disposition of Shares awarded under the Plan remain in effect under
Section 6.1 hereof.
"Stock Appreciation Rights" or "SARs" means the right to receive a cash
payment from the Corporation equal to the excess of the fair market value of a
stated number of shares of Common Stock at the exercise date over a fixed price
for such shares.
"Units" means units under a share-based award that is payable solely in
cash or is actually paid in cash, determined by reference to the number of
shares by which the share-based award is measured.
3. SHARES AND UNITS SUBJECT TO PLAN
3.1 SHARES RESERVED UNDER THE PLAN. (a) The aggregate number of Shares
which may be awarded under the Plan in each fiscal year of the Corporation,
subject to adjustment as provided in Section 3.2 hereof, shall be one percent
(1%) of the total outstanding Shares as of the first day of such year for which
the Plan is in effect; provided that no more than two
2
<PAGE> 3
million (2,000,000) Shares shall be cumulatively available for the grant of
incentive stock options under the Plan. In addition, any Common Stock issued by
the Corporation through the assumption or substitution of outstanding grants
from an acquired corporation or entity shall not reduce the shares available for
grants under the Plan. Shares to be issued pursuant to the Plan may be
authorized and unissued Shares, treasury Shares, or any combination thereof.
(b) AGGREGATE UNIT LIMIT. The aggregate number of Units which may be
awarded under the Plan in each fiscal year of the Corporation, subject to
adjustment as provided in Section 3.2 hereof, shall be one percent (1%) of the
total outstanding Shares as of the first day of such year for which the Plan is
in effect.
(c) REISSUE OF SHARES AND UNITS. The number of Shares and Units shall
be increased in any year by the number of Shares or Units available for grant
hereunder in previous years but not subject of Awards granted hereunder in such
year. Subject to Section 8.2 hereof, if any Shares or Units subject to an Award
hereunder are forfeited or any such Award otherwise terminates without the
issuance of such Shares or Units to a Participant, or if any Shares are
surrendered by a Participant in full or partial payment of the Option Price of
an Option, such Shares or Units, to the extent of any such forfeiture,
termination or surrender, shall again be available for grant under the Plan
3.2 ADJUSTMENTS. Subject to Section 12 hereof, the aggregate number of
Shares which may be awarded under the Plan and outstanding Awards shall be
adjusted by the Board Committee to reflect a change in the capitalization of the
Corporation, including but not limited to, a stock dividend or split,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, spin-off, spin-out or other distribution of assets to shareholders;
provided that the number and price of shares subject to outstanding Options
granted to Non-employee Directors pursuant to Section 10 hereof and the number
of shares subject to future Options to be granted pursuant to Section 10 shall
be subject to adjustment only as set forth in Section 10 hereof.
4. ADMINISTRATION OF PLAN
4.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by the
Board Committee; PROVIDED, HOWEVER, the Board Committee may delegate some or all
of its authority and responsibility under the Plan to the Committee; PROVIDED,
FURTHER, that the Board Committee may not delegate to the Committee any
authority to make Awards hereunder to any Executive Officer who is also a member
of the Board. The Board Committee shall have authority to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the Plan, to
prescribe the form of any agreement or instrument executed in connection
herewith, and to make all other determinations necessary or advisable for the
administration of the Plan. All such interpretations, rules, regulations and
determinations shall be conclusive and binding on all persons and for all
purposes. In addition, the Board Committee shall have authority, without
amending the Plan, to grant Awards hereunder to Participants who are foreign
nationals or employed outside the United States or both, on terms and conditions
different from those specified herein as may, in the sole judgment and
3
<PAGE> 4
discretion of the Board Committee, be necessary or desirable to further the
purpose of the Plan or to comply with foreign legal or regulatory requirements.
Notwithstanding the foregoing, neither the Board, the Board Committee nor the
Committee shall have any discretion with respect to Options granted to
Non-employee Directors pursuant to Section 10 hereof.
4.2 DESIGNATION OF PARTICIPANTS. Participants shall be selected, from
time to time, by the Board Committee, from those salaried employees of the
Corporation and its affiliates who, in the opinion of the Board Committee, have
the capacity to contribute materially to the continued growth and successful
performance of the Corporation.
5. PERFORMANCE SHARE AWARDS
5.1 AWARDS. Awards of Shares may be made, from time to time, to such
salaried employees of the Corporation and its affiliates as may be selected by
the Board Committee. The release of such Shares to the Participant subject to
such Awards shall be contingent upon (i) the degree of attainment of the
applicable Performance Goals during the Performance Period relative to such
objectives as shall be established by the Board Committee and (ii) the
expiration of the Performance Period. Except as provided in Section 11 hereof
and the Performance Share Award Agreement between the Participant and the
Corporation, Shares subject to such Awards under this Section 5.1 shall be
released to the Participant only after the expiration of the relevant
Performance Period. Each Award under this Section 5.1 shall be evidenced by a
Performance Share Award Agreement between the Participant and the Corporation
which shall specify the applicable Performance Goals, the Performance Period,
any forfeiture conditions and such other terms and conditions as the Board
Committee shall determine.
5.2 STOCK CERTIFICATES. Upon expiration of the Performance Period, the
Corporation shall issue a certificate registered in the name of the Participant
or his designee evidencing the Shares to which the Participant is entitled and
release such Shares to the custody of the Participant.
5.3 RIGHTS AS SHAREHOLDERS. Subject to the provisions of the
Performance Share Award Agreement between the Participant and the Corporation,
during the Performance Period, Participants may exercise full voting rights with
respect to all Shares awarded thereto under Section 5.1 hereof and shall be
entitled to receive dividends and other distributions paid with respect to those
Shares.
5.4 TRANSFERABILITY OF SHARES. Certificates evidencing the Shares under
the Plan shall not be sold, exchanged, assigned, transferred, pledged,
hypothecated or otherwise disposed of until the expiration of the Performance
Period.
5.5 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
employee of either the Corporation or of one of its affiliates, the number of
Shares subject of the Award, if any, to which the Participant shall be entitled
shall be determined in accordance with the Performance Share Award Agreement
between the Participant and the Corporation.
4
<PAGE> 5
5.6 TRANSFER OF EMPLOYMENT. If a Participant transfers employment from
one business unit of the Corporation or any of its affiliates to another
business unit during a Performance Period, such Participant shall be eligible to
receive such number of Shares as the Board Committee may determine based upon
such factors as the Board Committee in its sole discretion may deem appropriate.
5.7 INDIVIDUAL SHARE LIMITATION. The number of Shares for which a
Performance Share Award may be granted to any Participant who is an Executive
Officer shall not exceed 100,000 Shares in any fiscal year.
6. RESTRICTED STOCK AWARDS
6.1 AWARDS. Awards of Shares subject to such restrictions as to vesting
and otherwise as the Board Committee shall determine, may be made, from time to
time, to salaried employees of the Corporation and its affiliates as may be
selected by the Board Committee. The Board Committee may in its sole discretion
at the time of the Award or at any time thereafter provide for the early vesting
of such Award prior to the expiration of the Restriction Period. Each Award
under this Section 6.1 shall be evidenced by a Restricted Stock Award Agreement
between the Participant and the Corporation which shall specify the vesting
schedule, any rights of acceleration, any forfeiture conditions, and such other
terms and conditions as the Board Committee shall determine.
6.2 STOCK CERTIFICATES. Upon expiration of the Restriction Period, the
Corporation shall issue a certificate registered in the name of the Participant
or his designee evidencing the Shares to which the Participant is entitled and
release such Shares to the custody of the Participant.
6.3 RIGHTS AS SHAREHOLDERS. During the Restriction Period, Participants
may exercise full voting rights with respect to all Shares awarded thereto under
Section 6.1 hereof and shall be entitled to receive dividends and other
distributions paid with respect to those Shares.
6.4 TRANSFERABILITY OF SHARES. Certificates evidencing the Shares
awarded under the Plan shall not be sold, exchanged, assigned, transferred,
pledged, hypothecated or otherwise disposed of until the expiration of the
Restriction Period.
6.5 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
employee of either the Corporation or of any of its affiliates, the number of
Shares subject of the Award, if any, to which the Participant shall be entitled
shall be determined in accordance with the Restricted Stock Award Agreement
between the Participant and the Corporation. All remaining shares as to which
restrictions apply at the date of termination of employment shall be forfeited
subject to such exceptions, if any, authorized by the Board Committee.
5
<PAGE> 6
7. STOCK OPTIONS
7.1 GRANTS. Options may be granted, from time to time, to such salaried
employees of the Corporation and its affiliates as may be selected by the Board
Committee. The Option Price shall be determined by the Board Committee effective
on the Grant Date; PROVIDED HOWEVER, that such price shall not be less than one
hundred percent (100%) of the fair market value of a Share on the Grant Date.
The number of Shares subject to each option granted to each Participant, the
terms of each option, and any other terms and conditions of an Option granted
hereunder shall be determined by the Board Committee, in its sole discretion,
effective on the Grant Date; PROVIDED, HOWEVER, that no Option shall be
exercisable any later than ten (10) years from the Grant Date. Each Option shall
be evidenced by a Stock Option Agreement between the Participant and the
Corporation which shall specify the type of Option granted, the Option Price,
the term of the Option, the number of Shares to which the Option pertains, the
conditions upon which the Option becomes exercisable and such other terms and
conditions as the Board Committee shall determine.
7.2 PAYMENT OF OPTION PRICE. No Shares shall be issued upon exercise of
an Option until full payment of the Option Price therefor by the Participant.
Upon exercise, the Option Price may be paid in cash, in Shares having a fair
market value equal to the Option Price, or in any combination thereof.
7.3 RIGHTS AS SHAREHOLDERS. Participants shall not have any of the
rights of a shareholder with respect to any shares subject to an Option until
such Shares have been issued upon the proper exercise of such Option.
7.4 TRANSFERABILITY OF OPTIONS. Options granted under the Plan may not
be sold, transferred, pledged, assigned, hypothecated or otherwise disposed of
except to family members or trusts, by will or by the laws of descent and
distribution, provided that the Options may not be transferred to family members
or trusts except as permitted by applicable law or regulations. All Options
granted to a Participant under the Plan shall be exercisable during the lifetime
of such Participant only by such Participant, his agent, guardian or
attorney-in-fact.
7.5 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
employee of either the Corporation or of any of its affiliates, the Options
granted hereunder shall be exercisable in accordance with the Stock Option
Agreement between the Participant and the Corporation.
7.6 INDIVIDUAL SHARE LIMITATION. The number of Shares for which Options
may be granted to any Participant who is an Executive Officer shall not exceed
500,000 Shares over any continuous five-year period. In addition, the number of
Shares for which Options may be granted to any Participant who is an Executive
Officer upon exercise by such Participant of an Option for which the Option
Price is paid in whole or in part in Shares shall not exceed 500,000 Shares over
any continuous five-year period.
6
<PAGE> 7
8. STOCK APPRECIATION RIGHTS
8.1 GRANTS. Stock Appreciation Rights may be granted, from time to
time, to such salaried employees of the Corporation and its affiliates as may be
selected by the Board Committee. SARs may be granted at the discretion of the
Board Committee either (i) in connection with an Option or (ii) independent of
an Option. The price from which appreciation shall be computed shall be
established by the Board Committee at the Grant Date; PROVIDED, HOWEVER, that
such price shall not be less than one-hundred percent (100%) of the fair market
value of the number of Shares subject of the grant on the Grant Date. In the
event the SAR is granted in connection with an Option, the fixed price from
which appreciation shall be computed shall be the Option Price. Each grant of a
SAR shall be evidenced by a Stock Appreciation Rights Agreement between the
Participant and the Corporation which shall specify the type of SAR granted, the
number of SARs, the conditions upon which the SARs vest and such other terms and
conditions as the Board Committee shall determine.
8.2 EXERCISE OF SARS. SARs may be exercised upon such terms and
conditions as the Board Committee shall determine; PROVIDED, HOWEVER, that SARs
granted in connection with Options may be exercised only to the extent the
related Options are then exercisable. Notwithstanding Section 3.1 hereof, upon
exercise of a SAR granted in connection with an Option as to all or some of the
Shares subject of such Award, the related Option shall be automatically canceled
to the extent of the number of Shares subject of the exercise, and such Shares
shall no longer be available for grant hereunder. Conversely, if the related
Option is exercised as to some or all of the Shares subject of such Award, the
related SAR shall automatically be canceled to the extent of the number of
Shares of the exercise, and such shares shall no longer be available for grant
hereunder.
8.3 PAYMENT UPON EXERCISE. Upon exercise of a SAR, the holder shall be
paid in cash and/or Shares the excess of the fair market value of the number of
Shares subject of the exercise over the fixed price, which in the case of a SAR
granted in connection with an Option shall be the Option Price for such Shares.
8.4 RIGHTS OF SHAREHOLDERS. Participants shall not have any of the
rights of a shareholder with respect to any Options granted in connection with a
SAR until Shares have been issued upon the proper exercise of an Option.
8.5 TRANSFERABILITY OF SARS. SARs granted under the Plan may not be
sold, transferred, pledged, assigned, hypothecated or otherwise disposed of
except to family members or trust, by will or by the laws of descent and
distribution, provided that the SARs may not be transferred to family members or
trusts except as permitted by applicable law or regulations. All SARs granted to
a Participant under the Plan shall be exercisable during the lifetime of such
Participant only by such Participant, his agent, guardian, or attorney-in-fact.
7
<PAGE> 8
8.6 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
employee of either the Corporation or of any of its affiliates, SARs granted
hereunder shall be exercisable in accordance with the Stock Appreciation Rights
Agreement between the Participant and the Corporation.
8.7 INDIVIDUAL SHARE LIMITATION. The number of Shares for which SARs
may be granted to any Participant who is an Executive Officer shall not exceed
500,000 Shares over any continuous five-year period.
9. OTHER SHARE-BASED AWARDS
Awards of Shares and other awards that are valued in whole or in part
by reference to, or are otherwise based on, Shares (including, but not limited
to, phantom stock or Units, performance units, bonus stock or similar securities
or rights), may be made, from time to time, to salaried employees of the
Corporation and its affiliates as may be selected by the Board Committee. Such
Awards may be made alone or in addition to or in connection with any other Award
hereunder. The Board Committee may in its sole discretion determine the terms
and conditions of any such Award. Each such Award shall be evidenced by an
agreement between the Participant and the Corporation which shall specify the
number of Shares subject of the Award, any consideration therefor, any vesting
or performance requirements and such other terms and conditions as the Board
Committee shall determine. The number of shares or Units subject of any Awards
under this Section 9 which may be granted to a Participant who is an Executive
Officer shall not exceed 100,000 Shares or Units, as the case may be, in any
fiscal year.
10. NON-EMPLOYEE DIRECTORS' OPTIONS
10.1 GRANTS. Effective the date of the 1990 Annual Meeting of
Shareholders and on the date of each Annual Meeting thereafter, each
Non-employee Director shall automatically be granted an Option to purchase 1,000
Shares. All such Options shall be nonstatutory stock options. The Option Price
shall be one hundred percent (100%) of the fair market value of the Shares on
the date of grant.
10.2 EXERCISE OF OPTIONS. Except as set forth in this Section 10, fifty
percent (50%) of the total number of Shares subject of an Option granted to a
Non-employee Director shall become exercisable on the first anniversary of the
date of grant of the year in which the option is granted and twenty-five percent
(25%) on the anniversary date of each of the next two succeeding years. The
right to purchase Shares with respect to Shares which have become exercisable
shall be cumulative during the term of the Option. Any Option granted to
Non-employee Directors that has been outstanding for more than one (1) year
shall immediately become exercisable in the event of a Change of Control, as
hereinafter defined. The Option may be exercised by the Non-employee Director
during the period that the Non-employee Director remains a member of the Board
and for a period of three (3) years following retirement, provided that only
those Options exercisable at the date of the Non-employee Director's retirement
may be exercised during the period following retirement and, provided
8
<PAGE> 9
further, that in no event shall the Option be exercisable more than ten (10)
years after the date of grant.
In the event of the death of a Non-employee Director, the Option shall
be exercisable only within the twelve (12) months next succeeding the date of
death, and then only (i) by the executor or administrator of the Non-employee
Director's estate or by the person or persons to whom the Non-employee
Director's rights under the Option shall pass by the Non-employee Director's
will or the laws of descent and distribution, and (ii) if and to the extent that
the Non-employee Director was entitled to exercise the Option at the date of the
Non-employee Director's death, provided that in no event shall the Option be
exercisable more than ten (10) years after the date of grant.
10.3 PAYMENT OF OPTION PRICE. No Shares shall be issued upon exercise
of an Option until full payment of the Option Price therefor by the Non-employee
Director. Payment for the Shares may be paid in cash, in Shares having a fair
market value equal to the Option Price, or any combination thereof.
10.4 ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that the Shares are changed into or become exchangeable for a
larger or smaller number of shares, thereafter the number of Shares subject to
outstanding Options granted to Non-employee Directors and the number of Shares
subject to Options to be granted to Non-employee Directors pursuant to the
provisions of this Section 10 shall be increased or decreased, as the case may
be, in direct proportion to the increase or decrease in the number of Shares by
reason of such change in corporate structure, provided that the number of shares
shall always be a whole number, and the purchase price per Share of any
outstanding Options shall, in the case of an increase in the number of Shares,
be proportionately reduced, and in the case of a decrease in the number of
Shares, shall be proportionately increased.
11. CHANGE OF CONTROL
11.1 DEFINITION OF CHANGE OF CONTROL. For purposes hereof, a "change of
control" shall be deemed to have occurred if:
(i) any "person" (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and
as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities eligible
to vote for the election of the Board (the "Corporation Voting Securities");
PROVIDED, HOWEVER, that the event described in this paragraph (i) shall not be
deemed to be a Change of Control by virtue of any of the following acquisitions:
(a) by the Corporation or any subsidiary, (b) by any employee benefit plan
sponsored or maintained by the Corporation or any subsidiary, (c) by any
underwriter temporarily holding securities pursuant to an offering of such
securities, (d) pursuant to a Non-Control Transaction (as defined in paragraph
(iii)),
9
<PAGE> 10
(e) pursuant to any acquisition by a corporate officer of the Corporation or any
group of persons including a corporate officer;
(ii) individuals who, on July 1, 1996, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to July 1, 1996, whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors who remain on the Board
(either by a specific vote or by approval of the proxy statement of the
Corporation in which such person is named as a nominee for director, without
objection to such nomination) shall also be deemed to be an Incumbent Director;
PROVIDED, HOWEVER, that no individual initially elected or nominated as a
director of the Corporation as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the Board of
Directors shall be deemed to be an Incumbent Director;
(iii) the consummation of a merger, consolidation,
share exchange or similar form of corporate reorganization of the Corporation or
any such type of transaction involving the Corporation or any of its
Subsidiaries that requires the approval of the Corporation's stockholders
(whether for such transaction or the issuance of securities in the transaction
or otherwise) (a "Business Combination"), unless immediately following such
Business Combination: (a) more than 80% of the total voting power of the
corporation resulting from such Business Combination (including, without
limitation, any corporation which directly or indirectly has beneficial
ownership of 100% of the Corporation Voting Securities) eligible to elect
directors of such corporation is represented by shares that were Corporation
Voting Securities immediately prior to such Business Combination (either by
remaining outstanding or being converted), and such voting power is in
substantially the same proportion as the voting power of such Corporation Voting
Securities immediately prior to the Business Combination, (b) no person (other
than any publicly traded holding Corporation resulting from such Business
Combination, any employee benefit plan sponsored or maintained by the
Corporation (or the corporation resulting from such Business Combination))
becomes the beneficial owner, directly or indirectly, of 20% or more of the
total voting power of the outstanding voting securities eligible to elect
directors of the corporation resulting from such Business Combination, and (c)
at least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were Incumbent Directors at the time of
the Board's approval of the execution of the initial agreement providing for
such Business Combination (any Business Combination which satisfies the
conditions specified in (a), (b) and (c) shall be deemed to be a "Non-Control
Transaction"); or
(iv) the stockholders of the Corporation approve a
plan of complete liquidation or dissolution of the Corporation or the direct or
indirect sale or other disposition of all or substantially all of the assets of
the Corporation and its subsidiaries.
Notwithstanding the foregoing, a "change of control" of the
Corporation shall not be deemed to occur solely because any person acquires
beneficial ownership of more than
10
<PAGE> 11
20% of the Corporation Voting Securities as a result of the acquisition of
Corporation Voting Securities by the Corporation which reduces the number of
Corporation Voting Securities outstanding; PROVIDED, THAT if after such
acquisition by the Corporation such person becomes the beneficial owner of
additional Corporation Voting Securities that increases the percentage of
outstanding Corporation Voting Securities beneficially owned by such person, a
"change of control" of the Corporation shall then occur.
11.2 ACCELERATION OF BENEFITS. In the event of a "change of control" of
the Corporation, all outstanding Awards shall be paid in such manner and in such
amounts as determined by the Board Committee in its sole discretion at the time
such Awards are made.
12. AMENDMENT OR TERMINATION OF PLAN
Until such time as a "change of control" shall have occurred, the Board
or the Board Committee may amend, suspend or terminate the Plan or any part
thereof from time to time, provided that no change may be made which would
impair the rights of a Participant to whom Shares have theretofore been awarded
without the consent of said Participant; and provided, further, that neither the
Board nor the Board Committee may make any alteration or amendment to the Plan
which would materially increase the benefits accruing to Participants under the
Plan, increase the aggregate number of Shares which may be issued under the Plan
(other than an increase reflecting a change in capitalization of the
Corporation), change the class of employees eligible to participate in the Plan,
or amend, modify or delete Section 10 hereof, without the approval of the
shareholders of the Corporation so long as such approval is required by
applicable law or regulation. Further, Section 10 hereof may not be amended more
frequently than once every six months, except to comply with changes to the
Internal Revenue Code, the Employee Retirement Income Security Act, or the rules
promulgated thereunder. After a "change of control," the Board or the Board
Committee shall no longer have the power to amend, suspend or terminate the Plan
or any part thereof.
13. MISCELLANEOUS
13.1 RIGHTS OF EMPLOYEES. Nothing in the Plan shall interfere with or
limit in any way the right of the Corporation or any of its subsidiaries or
affiliates to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continued employment with the Corporation or
any of its subsidiaries or affiliates.
13.2 WITHHOLDING FOR TAXES. The Corporation shall have the authority to
withhold, or to require a Participant to remit to the Corporation, prior to
issuance or delivery of any Shares or cash hereunder, an amount sufficient to
satisfy federal, state and local tax or withholding requirements associated with
any Award. In addition, the Corporation may, in its sole discretion, permit a
Participant to satisfy any tax withholding requirements, in whole or in part, by
(i) delivering to the Corporation Shares held by such Participant having a fair
market value equal to the amount of the tax or (ii) directing the Corporation to
retain Shares otherwise issuable to the Participant under the Plan.
11
<PAGE> 12
13.3 STATUS OF AWARDS. Awards hereunder shall not be deemed
compensation for purposes of computing benefits under any retirement plan of the
Corporation or affiliate and shall not affect any benefits under any other
benefit plan now or hereafter in effect under which the availability or amount
of benefits is related to the level of compensation.
13.4 WAIVER OF RESTRICTIONS. The Board Committee may, in its sole
discretion, based on such factors as the Board Committee may deem appropriate,
waive in whole or in part, any remaining restrictions or vesting requirements in
connection with any Award hereunder.
13.5 DELEGATION TO MANAGEMENT. The Board Committee may delegate to one
or more officers of the Corporation or a committee of officers the right to
grant Awards hereunder to employees who are not officers or directors of the
Corporation and to cancel or suspend Awards to employees who are not officers or
directors of the Corporation.
13.6 ADJUSTMENT OF AWARDS. Subject to Section 12, the Board Committee
shall be authorized to make adjustments in the method of calculating attainment
of Performance Goals or in the terms and conditions of other Awards (except
Options granted pursuant to Section 10 hereof) in recognition of unusual or
nonrecurring events affecting the Corporation or its financial statements or
changes in applicable laws, regulations or accounting principles; provided,
however, that no such adjustment shall impair the rights of any Participant
without his consent and that any such adjustments shall be made in a manner
consistent with Section 162(m) of the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated thereunder. The Board
Committee may also make Awards hereunder in replacement of, or as alternatives
to, Awards previously granted to Participants, including without limitation,
previously granted Options having higher Option Prices and grants or rights
under any other plan of the Corporation or of any acquired entity. The Board
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry it into effect. In the event the Corporation shall
assume outstanding employee benefit awards or the right or obligation to make
future such awards in connection with the acquisition of another corporation or
business entity, the Board Committee may, in its discretion, make such
adjustments in the terms of Awards under the Plan as it shall deem appropriate.
Notwithstanding the above, neither the Board, the Board Committee nor any
Committee shall have the right to make any adjustments in the terms or
conditions of Options granted pursuant to Section 10.
13.7 CONSIDERATION FOR AWARDS. Except as otherwise required in any
applicable agreement or by the terms of the Plan, Participants under the Plan
shall not be required to make any payment or provide consideration for an Award
other than the rendering of services.
13.8 DEFERRAL. Notwithstanding anything contained herein to the
contrary, in the event that any Award shall be ineligible for treatment as
"other performance based compensation" under Section 162(m) of the Internal
Revenue Code of 1986, as amended, the Board Committee, in its sole discretion,
shall have the right with respect to any Executive Officer who is in the year
any Award hereunder becomes deductible by the Corporation, a
12
<PAGE> 13
"covered employee" under Section 162(m) of the Internal Revenue Code of 1986, as
amended, to defer, in whole or in part, such Executive Officer's receipt of such
Award until the Executive Officer is no longer a "covered employee" or until
such time as shall be determined by the Board Committee, provided that the Board
Committee may effect such a deferral only in a situation where the Corporation
would be prohibited a deduction under Section 162(m) and such deferral shall be
limited to the portion of the Award that is not deductible.
13.9 EFFECTIVE DATE AND TERM OF PLAN. The Plan shall be effective as of
July 1, 1996. Unless terminated under the provisions of Section 12 hereof, the
Plan shall continue in effect until terminated by the Board.
Approved by the Board of Directors this 28th day of June, 1996.
Attested:
/s/ R. L. Ballantyne
---------------------
Secretary
13
<PAGE> 14
FORM OF
PERFORMANCE SHARE AWARD AGREEMENT
FY'97-99 PERFORMANCE CYCLE
This AGREEMENT made as of July 1, 1996, by and between Harris
Corporation, a Delaware corporation (the "Corporation"), and _____________ an
Executive Officer or Corporate Officer of the Corporation or of one of its
subsidiaries or affiliates (the "Executive").
1. DEFINITIONS. "Executive Officer" is any person so designated by
the Board of Directors of Harris Corporation. "Corporate Officers" are all
officers of the Corporation who have not been designated Executive Officers.
2. GRANT OF AWARD. Under and subject to the provisions of the
Corporation's Stock Incentive Plan, as in effect from time to time (the "Plan"),
the Corporation hereby grants to the Executive a Performance Share Award (the
"Award") of ___________ shares of Common Stock, $1.00 par value, of the
Corporation (the "Stock") subject to the terms and conditions hereinafter set
forth:
(a) For purposes of this Agreement, the "Performance Period"
shall be the three (3) year period commencing July 1, 1996 and
terminating June 30, 1999.
(b) Upon the expiration of the Performance Period and
satisfaction of the withholding obligations set forth in Section 6
hereof, the Corporation shall cause to be issued in the name of the
Executive or his designee a stock certificate for such shares as to
which the Executive is entitled pursuant to Section 2(c) hereof, and
the certificate shall be released to the custody of the Executive.
(c) (i) For Executive Officers, the Award shall be contingent
upon the attainment during the Performance Period of the goals
specified in the approved 1997 Strategic Plan covering the years
FY'97-99 as set forth in Exhibit A hereto. The percentage attainment of
the shares subject of the Award shall be determined upon the expiration
of the Performance Period in accordance with the schedule specified in
Exhibit A, which identifies the applicable definitions, targets and
payout schedule. The final payout determination will be authorized by
the Harris Board of Directors, or its designee.
(ii) For Corporate Officers, the Award shall be
contingent upon the attainment during the Performance Period of the
goals specified in the approved 1997 Strategic Plan covering the years
FY'97-99. The percentage attainment of the shares subject of the
Award shall be determined upon the expiration of the Performance
Period based on an assessment of performance in light of the relevant
market, competitive, economic and other factors during the
Performance Period. The final payout determination will be
authorized by the Harris Board of Directors, or its designee.
(d) Subject to Section 9 hereof, during the Performance
Period, the Executive may exercise full voting rights with respect to
all shares of Stock subject of the Award and shall be entitled to
receive dividends and other distributions paid with respect to such
shares. Upon the expiration of the Performance Period, the Executive
may exercise voting rights and shall be entitled to receive dividends
and other distributions with respect to the number of shares to which
the Executive is entitled pursuant to Section 2(c) hereof.
<PAGE> 15
(e) The number of shares subject of the Award is based upon
the assumption that the Executive shall continue to perform
substantially the same duties throughout the Performance Period, and
such number of shares may be reduced or increased without formal
amendment of this Agreement to reflect a change in duties during the
Performance Period.
3. TERMINATION OF EMPLOYMENT. Other than in the event of a "change in
control" covered in paragraph 7 herein, if the Executive ceases to be an
employee of the Corporation or of one of its affiliates prior to the expiration
of the Performance Period: (i) for any reason other than death, disability or
retirement pursuant to an established retirement plan or policy of the
Corporation or of its applicable affiliate, all shares of Stock awarded to the
Executive hereunder shall be forfeited; or (ii) due to death, disability or
retirement pursuant to an established retirement plan or policy of the
Corporation or of its applicable affiliate, the Executive shall be eligible to
receive a pro-rata proportion of the shares of Stock which would have been
issued to the Executive under any outstanding Awards at the end of the
Performance Period, such pro-rata proportion to be measured by a fraction of
which the numerator is the number of months of the Performance Period during
which the Executive's employment continued, and the denominator is the full
number of months of the Performance Period. For purposes, hereof, employment for
any period of a month shall be deemed employment for a full month. Any Stock to
be issued to the Executive shall be issued thereto within a reasonable period
following expiration of the Performance Period.
4. TRANSFER OF EMPLOYMENT. If the Executive transfers employment from
one business unit of the Corporation or an affiliate to another business unit or
affiliate during a Performance Period, such Executive shall be eligible to
receive the number of shares of Stock determined by the Board of Directors or
the Committee of the Board of Directors administering the Plan based upon such
factors as the Board of Directors or the Committee, as the case may be, in its
sole discretion may deem appropriate.
5. PROHIBITION AGAINST TRANSFER. The Award and the shares of Stock
subject of the Award are nontransferable except by will or by the laws of
descent and distribution. Without limiting the generality of the foregoing, the
Award and such shares may not be sold, exchanged, assigned, transferred,
pledged, hypothecated or otherwise disposed of until the expiration of the
Performance Period, shall not be assignable by operation of law, and shall not
be subject to execution, attachment or similar process. Any attempt to effect
any of the foregoing shall be null and void and without effect.
6. TAX WITHHOLDING. Prior to the expiration of the Performance Period,
the Executive shall make arrangements with the Corporation to pay or otherwise
satisfy any federal, state and local tax withholding requirements on the Award.
7. CHANGE IN CONTROL. (a) Upon a "change in control" of the
Corporation, the performance objectives applicable to the Award shall be
conclusively deemed to have been attained. The Award shall be vested immediately
prior to the occurrence of a "change in control." The Award shall be paid to the
Executive at the end of the Performance Period, provided however: (i) in the
event of death, disability, retirement, or involuntary termination other than
for cause, the Award shall be paid IN STOCK as soon as practicable; (ii) in the
event of resignation or termination for cause, the Award shall be forfeited; and
(iii) in the event of a "change in the Corporation's capital structure," at the
election of the Executive, the Award shall be paid IN STOCK or converted and
paid IN CASH. The amount of the cash payment will be an amount equal to the
number of shares in Paragraph 2 multiplied by the highest price per share paid
in any transaction reported on the New York Stock Exchange Composite Index: (x)
during the sixty (60) day period preceding and including the date of a "change
in the Corporation's capital structure;" or (y) during the sixty (60) day period
preceding and including the date of "change in control," whichever is higher. An
Award in Stock or cash shall be paid as soon as practicable.
2
<PAGE> 16
(b) For purposes hereof, a "change in the Corporation's
capital structure" shall be deemed to have occurred if:
(i) the Stock is no longer the only class of the
Corporation's common stock;
(ii) the Stock ceases to be, or is not readily,
tradable on an established securities market (in the United States) within the
meaning of Section 409(l)(1) of the Internal Revenue Code of 1986, as amended;
(iii) the Corporation issues warrants, convertible debt,
or any other security that is exercisable or convertible into common stock,
except for rights granted under the Corporation's Stock Incentive Plan; or
(iv) the ratio of total debt to total capitalization
exceeds 45 percent. Total debt is the total debt for borrowed money. Total
capitalization is consolidated total assets of the Corporation less consolidated
total liabilities of the Corporation.
(c) For purposes hereof, a "change in control" shall be
deemed to have occurred if:
(i) any "person" (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities eligible
to vote for the election of the Board (the "Corporation Voting Securities");
PROVIDED, HOWEVER, that the event described in this paragraph (i) shall not be
deemed to be a Change in Control by virtue of any of the following acquisitions:
(a) by the Corporation or any subsidiary, (b) by any employee benefit plan
sponsored or maintained by the Corporation or any subsidiary, (c) by any
underwriter temporarily holding securities pursuant to an offering of such
securities, (d) pursuant to a Non-Control Transaction (as defined in paragraph
(iii)), (e) pursuant to any acquisition by an Executive of the Corporation or
any group of persons including an Executive;
(ii) individuals who, on July 1, 1996, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to July 1, 1996, whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors who remain on the Board
(either by a specific vote or by approval of the proxy statement of the
Corporation in which such person is named as a nominee for director, without
objection to such nomination) shall also be deemed to be an Incumbent Director;
PROVIDED, HOWEVER, that no individual initially elected or nominated as a
director of the Corporation as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the Board of
Directors shall be deemed to be an Incumbent Director;
(iii) the consummation of a merger, consolidation,
share exchange or similar form of corporate reorganization of the Corporation or
any such type of transaction involving the Corporation or any of its
Subsidiaries that requires the approval of the Corporation's stockholders
(whether for such transaction or the issuance of securities in the transaction
or otherwise) (a "Business Combination"), unless immediately following such
Business Combination: (a) more than 80% of the total voting power of the
corporation resulting from such Business Combination (including, without
limitation, any corporation which directly or indirectly has beneficial
ownership of 100% of the Corporation Voting Securities) eligible to elect
directors of such corporation is represented by shares that were Corporation
Voting Securities immediately prior to such Business Combination (either by
remaining outstanding or being converted), and
3
<PAGE> 17
such voting power is in substantially the same proportion as the voting power of
such Corporation Voting Securities immediately prior to the Business
Combination, (b) no person (other than any publicly traded holding Corporation
resulting from such Business Combination, any employee benefit plan sponsored or
maintained by the Corporation (or the corporation resulting from such Business
Combination)) becomes the beneficial owner, directly or indirectly, of 20% or
more of the total voting power of the outstanding voting securities eligible to
elect directors of the corporation resulting from such Business Combination, and
(c) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were Incumbent Directors at
the time of the Board's approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination which
satisfies the conditions specified in (a), (b) and (c) shall be deemed to be a
"Non-Control Transaction"); or
(iv) the stockholders of the Corporation approve a
plan of complete liquidation or dissolution of the Corporation or the direct or
indirect sale or other disposition of all or substantially all of the assets of
the Corporation and its subsidiaries.
Notwithstanding the foregoing, a "change in control" of the
Corporation shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 20% of the Corporation Voting Securities as a
result of the acquisition of Corporation Voting Securities by the Corporation
which reduces the number of Corporation Voting Securities outstanding; PROVIDED,
THAT if after such acquisition by the Corporation such person becomes the
beneficial owner of additional Corporation Voting Securities that increases the
percentage of outstanding Corporation Voting Securities beneficially owned by
such person, a "change in control" of the Corporation shall then occur.
(d) "Cause" shall mean (1) a material breach by the Executive
of the duties and responsibilities of the Executive (other than as a result of
incapacity due to physical or mental illness) which is (x) demonstrably willful,
continued and deliberate on the employee's part, (y) committed in bad faith or
without reasonable belief that such breach is in the best interests of the
Corporation and (z) not remedied within fifteen (15) days after receipt of
written notice from the Corporation which specifically identifies the manner in
which such breach has occurred or (2) the Executive's conviction of, or plea of
NOLO CONTENDERE to, a felony involving willful misconduct which is materially
and demonstrably injurious to the Corporation. Any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the Board or based
upon the advice of counsel for the Corporation shall be conclusively presumed to
be done, or omitted to be done, by the Executive in good faith and in the best
interests of the Corporation. Cause shall not exist unless and until the Company
has delivered to Executive a copy of a resolution duly adopted by three-quarters
(3/4) of the entire Board at a meeting of the Board called and held for such
purpose (after thirty (30) days notice to Executive and an opportunity for
Executive, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board an event set forth in clauses (1) or (2) has
occurred and specifying the particulars thereof in detail. The Company must
notify Executive of any event constituting Cause within ninety (90) days
following the Company's knowledge of its existence or such event shall not
constitute Cause under this Agreement.
8. MISCELLANEOUS. This Agreement (a) shall be binding upon and inure to
the benefit of any successor of the Corporation, (b) shall be governed by the
laws of the State of Florida and any applicable laws of the United States, and
(c) except as permitted under Sections 4.1 and 13.6 of the Plan, may not be
amended without the written consent of both the Corporation and the Executive.
No contract or right of employment shall be implied by this Agreement. If this
Award is assumed or a new award is substituted therefor in any corporate
reorganization (including, but not limited to, any transaction of the type
referred to in Section 424(a) of the Internal Revenue Code of 1986, as amended),
employment by such assuming or substituting corporation or by a parent
corporation or subsidiary thereof shall be considered for all purposes of this
Award to be employment by the Corporation.
4
<PAGE> 18
9. SECURITIES LAW REQUIREMENTS. The Corporation shall not be required
to issue shares pursuant to the Award unless and until (a) such shares have been
duly listed upon each stock exchange on which the Corporation's Stock is then
registered; and (b) a registration statement under the Securities Act of 1933
with respect to such shares is then effective.
10. COMMITTEE. The Committee of the Board of Directors administering
the Plan shall have authority, subject to the express provisions of the Plan as
in effect from time to time, to construe this Agreement and the Plan, to
establish, amend and rescind rules and regulations relating to the Plan, and to
make all other determinations in the judgment of the Committee necessary or
desirable for the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in this Agreement
in the manner and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of such expediency.
11. DEFERRAL. Notwithstanding anything contained herein to the
contrary, in the event that the Award shall be ineligible for treatment as
"other performance based compensation" under Section 162(m) of the Internal
Revenue Code of 1986, as amended, the Committee, in its sole discretion, shall
have the right, with respect to any Executive Officer who is in the year any
Award hereunder becomes deductible by the Corporation, a "covered employee"
under Section 162(m) of the Internal Revenue Code of 1986, as amended, to defer,
in whole or in part, such Executive Officer's receipt of such Award until the
Executive Officer is no longer a "covered employee" or until such time as shall
be determined by the Committee, provided that the Committee may effect such a
deferral only in a situation where the Corporation would be prohibited a
deduction under Section 162(m) and such deferral shall be limited to the portion
of the Award that is not deductible.
12. ADJUSTMENTS. Non-recurring losses or charges which are separately
identified and quantified in the Corporation's audited financial statements and
notes thereto including, but not limited to, extraordinary items, changes in tax
laws, changes in generally accepted accounting principles, impact of
discontinued operations, restructuring charges, restatement of prior period
financial results, shall be excluded from the calculation of performance results
for purposes of the Plan. However, the Committee can choose to include any or
all such non-recurring items as long as inclusion of each such item causes the
Award to be reduced.
13. INCORPORATION OF PLAN PROVISIONS. This Agreement is made pursuant
to the Plan and is subject to all of the terms and provisions of the Plan as if
the same were fully set forth herein. Capitalized terms not otherwise defined
herein shall have the meanings set forth for such terms in the Plan. In the
event of a conflict between the terms of this Agreement and the Plan, the terms
of the Plan shall govern.
HARRIS CORPORATION
BY: _______________________________
5
<PAGE> 1
EXHIBIT 10(g)
July 1, 1996
Harris Corporation Retirement Plan
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C>
1.1 Accounts................................................................................. - 2 -
1.2 After-Tax Account........................................................................ - 2 -
1.3 After-Tax Contributions.................................................................. - 2 -
1.4 Basic Account............................................................................ - 2 -
1.5 Balanced Fund............................................................................ - 2 -
1.6 Beneficiary.............................................................................. - 2 -
1.7 Break-in-Service......................................................................... - 3 -
1.8 Code..................................................................................... - 3 -
1.9 Compensation............................................................................. - 3 -
1.10 Consolidated Subsidiaries................................................................ - 5 -
1.11 Corporation.............................................................................. - 6 -
1.12 Corporation Committee.................................................................... - 6 -
1.13 Disability............................................................................... - 6 -
1.14 Early Retirement Age .................................................................... - 6 -
1.15 Employment Unit.......................................................................... - 6 -
1.16 Employee................................................................................. - 6 -
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
1.17 ERISA -.................................................................................. - 7 -
1.18 Excess Compensation...................................................................... - 7 -
1.19 Fiscal Year.............................................................................. - 7 -
1.20 Full-time Employee....................................................................... - 7 -
1.21 Harris Stock Fund ....................................................................... - 8 -
1.22 Harris Stock After-Tax Account........................................................... - 8 -
1.23 Harris Stock Matching Account ........................................................... - 8 -
1.24 Harris Stock Pre-Tax Account............................................................. - 8 -
1.25 Highly Compensated Employee.............................................................. - 8 -
1.26 Hour of Service.......................................................................... - 8 -
1.27 Investment Funds ........................................................................ - 9 -
1.28 Layoff .................................................................................. - 9 -
1.29 Leave of Absence ........................................................................ - 9 -
1.30 Matching After-Tax Account.............................................................. - 10 -
1.31 Matching After-Tax Contributions ....................................................... - 10 -
1.32 Matching Contributions ................................................................. - 10 -
1.33 Matching Pre-Tax Account ............................................................... - 10 -
1.34 Matching Pre-Tax Contributions.......................................................... - 10 -
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
1.35 Military Leave.......................................................................... - 10 -
1.36 Normal Retirement Age................................................................... - 11 -
1.37 Participant............................................................................. 11 -
1.38 Participating Company................................................................... - 11 -
1.39 Period of Service ...................................................................... - 11 -
1.40 Period of Severance .................................................................... - 11 -
1.41 Plan.................................................................................... - 12 -
1.42 Plan Year............................................................................... - 12 -
1.43 Predecessor Company..................................................................... - 12 -
1.44 Pre-Tax Account ........................................................................ - 12 -
1.45 Pre-Tax Contributions................................................................... - 13 -
1.46 Profit-Sharing Account ................................................................. - 13 -
1.47 Profit-Sharing Contributions ........................................................... - 13 -
1.48 Related Company......................................................................... - 13 -
1.49 Rollover Account........................................................................ - 13 -
1.50 Savings Account......................................................................... - 14 -
1.51 SERP.................................................................................... - 14 -
1.52 Severance from Service Date ............................................................ - 14 -
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
1.53 Supplemental Account ................................................................... - 14 -
1.54 Taxable Wage Base ...................................................................... - 14 -
1.55 Trust Agreement ........................................................................ - 15 -
1.56 Trust Fund.............................................................................. - 15 -
1.57 Trustee ................................................................................ - 15 -
1.58 Valuation Date.......................................................................... - 15 -
ARTICLE II
PARTICIPATION
2.1 In General.............................................................................. - 16 -
2.2 Renewal of Participation on Reemployment................................................ - 16 -
2.3 Periods of Service on Reemployment...................................................... - 16 -
2.4 Service with Predecessor Company........................................................ - 17 -
2.5 Participation for Purposes of Rollover Contributions.................................... - 18 -
ARTICLE III
CONTRIBUTIONS AND ALLOCATIONS
3.1 Profit-Sharing Contributions............................................................ - 19 -
3.2 Allocation of Profit-Sharing Contributions to Participants.............................. - 22 -
3.3 Pre-Tax Contributions................................................................... - 23 -
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C>
3.4 Matching Pre-Tax Contributions.......................................................... - 24 -
3.5 After-Tax Contributions................................................................. - 25 -
3.6 Matching After-Tax Contributions........................................................ - 26 -
3.7 Elections to Make Pre-Tax and After-Tax Contributions................................... - 26 -
3.8 Rollover Contributions.................................................................. - 28 -
3.9 Participating Company's Obligation to Make Contributions................................ - 28 -
3.10 Treatment of Forfeited Amounts.......................................................... - 29 -
3.11 Finality of Allocations................................................................. - 29 -
ARTICLE IV
LIMITATIONS ON CONTRIBUTIONS
4.1 In General.............................................................................. - 31 -
4.2 Pre-Tax Contributions................................................................... - 31 -
4.3 Percentage Limitation on Pre-Tax Contributions.......................................... - 32 -
4.4 Percentage Limitation on After-Tax and Matching Contributions........................... - 32 -
4.5 Multiple Use of Alternative Limitations................................................. - 34 -
4.6 Limitations on Annual Additions......................................................... - 34 -
</TABLE>
ARTICLE V
VESTING AND FORFEITURES
-v-
<PAGE> 7
<TABLE>
<S> <C>
5.1 In General..................................................................................... - 37 -
5.2 Vesting on Retirement, Death or Disability..................................................... - 37 -
5.3 Vesting on Other Termination of Employment..................................................... - 37 -
5.4 Effect of In-Service Withdrawals on a Participant's Vested Percentage.......................... - 39 -
5.5 Forfeitures.................................................................................... - 39 -
ARTICLE VI
ACCOUNTS AND INVESTMENTS
6.1 Establishment of Accounts...................................................................... - 41 -
6.2 Investment of Profit-Sharing Account........................................................... - 42 -
6.3 Investment of Accounts Other than Profit-Sharing Account....................................... - 43 -
6.4 Allocation of Earnings and Losses.............................................................. - 45 -
6.5 Special Rules Concerning Harris Stock Fund..................................................... - 46 -
ARTICLE VII
DISTRIBUTIONS
7.1 In General..................................................................................... - 49 -
7.2 Small Benefit Cash-out......................................................................... - 49 -
7.3 Form of Payment................................................................................ - 50 -
7.4 Time of Payment................................................................................ - 51 -
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<S> <C>
7.5 Direct Rollover................................................................................ - 51 -
7.6 Payments on Death.............................................................................. - 52 -
7.7 Benefit Amount and Withholding................................................................. - 53 -
7.8 Order of Distributions......................................................................... - 54 -
7.9 Statutory Requirements......................................................................... - 54 -
7.10 Designating Beneficiaries...................................................................... - 57 -
7.11 Payment of Group Insurance Premiums............................................................ - 58 -
7.12 Inability to Locate Participant................................................................ - 59 -
ARTICLE VIII
LOANS
8.1 In General..................................................................................... - 60 -
8.2 Loan Administration............................................................................ - 60 -
8.3 Terms and Conditions of Loans.................................................................. - 61 -
8.4 Interest Rate.................................................................................. - 63 -
8.5 Repayment and Default.......................................................................... - 63 -
8.6 Mechanics...................................................................................... - 65 -
8.7 Special Powers................................................................................. - 65 -
</TABLE>
ARTICLE IX
-vii-
<PAGE> 9
IN-SERVICE WITHDRAWALS
<TABLE>
<S> <C>
9.1 At-Will Withdrawals from Savings Account and After-Tax Account................................. - 67 -
9.2 Hardship Withdrawals from Pre-Tax Account...................................................... - 67 -
9.3 Emergency Withdrawals.......................................................................... - 69 -
9.4 Reduction of Investment Fund Balances.......................................................... - 70 -
ARTICLE X
TOP-HEAVY PROVISIONS
10.1 In General..................................................................................... - 71 -
10.2 Minimum Allocation............................................................................. - 71 -
10.3 Minimum Vesting................................................................................ - 72 -
10.4 Definitions.................................................................................... - 73 -
ARTICLE XI
ADMINISTRATION
11.1 Named Fiduciaries.............................................................................. - 79 -
11.2 Corporation Committee.......................................................................... - 79 -
11.3 Powers and Duties of Committee................................................................. - 79 -
11.4 Actions of Committee........................................................................... - 79 -
11.5 Finality of Decisions.......................................................................... - 80 -
</TABLE>
-viii-
<PAGE> 10
<TABLE>
<S> <C>
11.6 Immunities of Committee........................................................................ - 80 -
11.7 Advisers and Agents............................................................................ - 80 -
11.8 Committee Member who is Participant............................................................ - 81 -
11.9 Information Provided by Participating Companies................................................ - 81 -
11.10 Expenses....................................................................................... - 81 -
11.11 Trust Fund Available to Pay All Plan Benefits.................................................. - 82 -
ARTICLE XII
AMENDMENT AND TERMINATION AND CHANGE OF CONTROL
12.1 Amendment...................................................................................... - 83 -
12.2 Termination of Plan............................................................................ - 84 -
12.3 Discontinuance of Contributions................................................................ - 84 -
12.4 Vesting on Termination or Discontinuance of Contributions...................................... - 84 -
12.5 Distribution on Termination.................................................................... - 85 -
12.6 Change of Control.............................................................................. - 85 -
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Restrictions on Alienation; Qualified Domestic Relations Orders................................ - 92 -
13.2 Exclusive Benefit Requirement.................................................................. - 93 -
</TABLE>
-ix-
<PAGE> 11
<TABLE>
<S> <C>
13.3 Return of Contributions........................................................................ - 94 -
13.4 No Contract of Employment...................................................................... - 94 -
13.5 Payment of Benefits on Incapacity.............................................................. - 94 -
13.6 Merger......................................................................................... - 95 -
13.7 Construction................................................................................... - 96 -
13.8 Governing Law.................................................................................. - 95 -
13.9 Mistaken Payments.............................................................................. - 96 -
ARTICLE XIV
SPECIAL PROVISIONS FOR
EMPLOYEES OF
HARRIS TECHNICAL SERVICES DIVISION OF
HARRIS TECHNICAL SERVICES CORPORATION
14.1 Participation.................................................................................. - 97 -
14.2 Profit-Sharing Contributions................................................................... - 97 -
14.3 Pre-Tax Contributions.......................................................................... - 98 -
14.4 No Matching Pre-Tax Contributions.............................................................. - 98 -
14.5 No Investment in the Harris Stock Fund......................................................... - 98 -
14.6 Vesting........................................................................................ - 98 -
</TABLE>
-x-
<PAGE> 12
APPENDIX A
Investment Funds................................................ - 101-
APPENDIX B
Special Provisions For Transferred Participants................. - 104-
APPENDIX A
Participating Companies......................................... - 106-
- xi-
<PAGE> 13
INTRODUCTION
The Harris Corporation Retirement Plan (the "Plan") is hereby
amended and restated effective July 1, 1996. Those Participants in the Plan who
are Employees on July 1, 1996 shall continue to participate in the Plan, as
restated. Those Participants in the Plan who are not Employees on July 1, 1996
shall not be participants in the Plan, as restated, and their benefits shall be
determined under the terms of the Plan that were in effect when they ceased to
be Employees unless they are reemployed as Employees on or after July 1, 1996 by
a Participating Company.
The Plan and the related trust are intended to be a tax-exempt
plan and trust under sections 401(a) and 501(a) of the Code, respectively. The
Plan also is intended to be a profit-sharing plan that contains a qualified cash
or deferred arrangement under section 401(k) of the Code.
- 1 -
<PAGE> 14
ARTICLE I
DEFINITIONS
1.1 Accounts -- means all of the accounts described in section
6.1, and such other accounts that may be established on behalf of each
Participant, to be credited with contributions made on behalf of a Participant,
adjusted for earnings and losses as provided in the Plan and debited by Plan
expenses allocable to the Accounts, distributions, withdrawals and loans to the
Participant.
1.2 After-Tax Account -- means the account established to record
After-Tax Contributions made on the Participant's behalf other than those
invested in the Harris Stock Fund.
1.3 After-Tax Contributions -- means the contributions described
in section 3.5.
1.4 Basic Account -- means the account established to record the
portion of the Profit-Sharing Contributions allocable to a Participant's
Compensation.
-2- Harris Retirement Plan
<PAGE> 15
Definitions
1.5 Balanced Fund -- means the Balanced Fund described in
Appendix A.
1.6 Beneficiary -- means the person or persons entitled to
receive any benefits payable under the Plan on account of a Participant's death.
1.7 Break-in-Service -- means a Period of Severance, as defined
below.
1.8 Code -- means the Internal Revenue Code of 1986, as amended
from time to time.
1.9 Compensation -- means the following items of remuneration
which an Employee earns for work or personal services performed for a
Participating Company:
(a) salary or wage;
(b) commission paid pursuant to a sales incentive plan;
(c) overtime premium, shift differential or, additional
compensation in lieu of overtime premium;
(d) compensation in lieu of vacation;
-3- Harris Retirement Plan
<PAGE> 16
Definitions
(e) any annual bonus or incentive compensation payable in
the form of cash pursuant to the Annual Incentive Plan
or any successor thereto or other similar plan adopted
by the Corporation from time to time or any stock award
made in lieu of an annual cash bonus or incentive
compensation;
(f) any cash bonus or incentive compensation payable in the
form of cash or any stock awards made pursuant to an
established plan of the Corporation or Employee's
Employment Unit, including but not limited to, bonus
awards, spot awards, lump sum, profit sharing, team
awards and gain sharing awards;
(g) any compensation of a type described in items (a)
through (f) above which is paid as an employee
contribution to the Plan;
(h) any salary reduction contributions to aSection 125 plan
maintained by a Participating Company;
but excluding:
(i) any extraordinary compensation of a recurring or
non-recurring nature not included under items (a) to
(f) above;
-4- Harris Retirement Plan
<PAGE> 17
Definitions
(ii) any extraordinary compensation in the nature of bonus,
commission or incentive compensation which is not paid
pursuant to an established plan of the Employee's
Employment Unit or pursuant to an established sales
incentive plan;
(iii) any award made or amount paid pursuant to the Stock
Incentive Plan or any successor thereto, including,
but not limited to, performance shares, stock options,
restricted stock, SARs, or other stock-based awards or
dividend equivalents;
(iv) severance pay or special retirement pay;
(v) retention bonuses or completion bonuses unless
authorized by the appropriate officer of the
Corporation in a uniform and nondiscriminatory manner;
(vi) reimbursement or allowances with respect to expenses
incurred in connection with employment, such as tax
equalization, reimbursement for moving expenses,
mileage or expense allowance or education refund.
In no event does the term "Compensation" include indirect compensation such as
employer paid group insurance premiums, or contributions under this or other
-5- Harris Retirement Plan
<PAGE> 18
Definitions
qualified employee benefit plan, other than as a contribution described in item
(g) above.
Only Compensation not in excess of the amount allowed under Code
section 401(a)(17), which is $150,000 for 1996, shall be taken into account. In
addition, in the year in which an Employee becomes a Participant, only
Compensation received after he becomes a Participant shall be taken into
account. For purposes of any test imposed under any section of the Code, the
Plan authorizes the use of any definition of Compensation that satisfies the
requirements of such section.
1.10 Consolidated Subsidiaries -- means those subsidiaries of the
Corporation which are included in the consolidated annual financial statement
for the Corporation.
1.11 Corporation -- means Harris Corporation.
1.12 Corporation Committee -- means the committee established
under section 11.2.
-6- Harris Retirement Plan
<PAGE> 19
Definitions
1.13 Disability -- means a disability that qualifies a
Participant for disability benefits under title II or title XVI of the Federal
Social Security Act, and occurs on the effective date determined by the Social
Security Administration.
1.14 -- Early Retirement Age -- means age 55.
1.15 Employment Unit -- means any division or other readily
identifiable segment of the operations of a Participating Company, for example,
as identified in the annual report or such other segments as may be established
for purposes of the Plan by the Corporation, in its discretion.
1.16 Employee -- means an individual who is employed by a
Participating Company, or division or operation thereof, designated in Appendix
C; provided that the individual is not covered by a retirement plan which is
maintained by the Participating Company pursuant to a collective bargaining
agreement and which was in effect on or after July 1, 1990. With respect to a
Participating Company not all of whose employees are eligible to be participants
(a "Limited Participating Company"), the term "Employee" shall include those
employees of the Participating Company who were Participants
-7- Harris Retirement Plan
<PAGE> 20
Definitions
prior to their employment by the Limited Participating Company. Solely for Plan
qualification testing, the term "Employee" includes a "leased employee" only to
the extent required in section 414(n) of the Code.
1.17 ERISA -- means the Employee Retirement Income Security Act
of 1974, as amended from time to time.
1.18 Excess Compensation -- means the portion of a Participant's
Compensation that exceeds the Taxable Wage Base for the year in which the
Compensation is received.
1.19 Fiscal Year -- means the fiscal year of the Corporation
commencing on July 1 and ending on June 30.
1.20 Full-time Employee -- means an Employee who is hired by a
Participating Company to work 30 or more hours per week.
-8- Harris Retirement Plan
<PAGE> 21
Definitions
1.21 Harris Stock Fund -- means the Fund described in Appendix A
that is designed to be invested in qualifying employer securities within the
meaning of section 407 of ERISA, as it applies to an eligible individual account
plan.
1.22 Harris Stock After-Tax Account -- means the portion of the
After-Tax Contributions made on the Participant's behalf invested in the Harris
Stock Fund.
1.23 Harris Stock Matching Account -- means the portion of the
Matching Contributions made on the Participant's behalf invested in the Harris
Stock Fund.
1.24 Harris Stock Pre-Tax Account -- means the portion of the
Pre-Tax Contributions made on the Participant's behalf invested in the Harris
Stock Fund.
1.25 Highly Compensated Employee -- means a "highly compensated
employee" for a Plan Year as defined in section 414(q) of the Code, including
the family aggregation rules contained therein.
-9- Harris Retirement Plan
<PAGE> 22
Definitions
1.26 Hour of Service -- means each hour for which an Employee is
paid or entitled to payment for the performance of duties for a Participating
Company or Related Company.
1.27 Investment Funds -- means the funds described in Appendix A
to the Plan.
1.28 Layoff -- means a temporary suspension of the active
employment of an Employee with the understanding that the Employee will be
recalled to active employment if and when his services are again required. A
period of Layoff terminates, and a Participant who is not recalled is deemed to
terminate employment, on the earliest of the following dates:
(a) the expiration date specified in a notice of recall
delivered to the Employee;
(b) the first anniversary of the date the Layoff began, or
(c) the election of an Employee to terminate the Layoff by
written notice delivered to the Corporation.
-10- Harris Retirement Plan
<PAGE> 23
Definitions
1.29 Leave of Absence -- means a period of interruption of the
active employment of an Employee granted by the Participating Company or
Predecessor Company with the understanding that the Employee will return to
active employment at the expiration of the period of time. A Leave of Absence is
of definite duration, but may be extended by the Participating Company or
Predecessor Company for additional periods. The term Leave of Absence does not
include a Military Leave.
1.30 Matching After-Tax Account -- means the account established
to record Matching After-Tax Contributions made on the Participant's behalf
other than those invested in the Harris Stock Fund.
1.31 Matching After-Tax Contributions -- means the contributions
made on behalf of a Participant under section 3.6.
1.32 Matching Contributions -- means the aggregate of the
Matching After-Tax Contributions and the Matching Pre-Tax Contributions.
-11- Harris Retirement Plan
<PAGE> 24
Definitions
1.33 Matching Pre-Tax Account -- means the account established to
record the Matching Pre-Tax Contributions made on the Participant's behalf other
than those invested in the Harris Stock Fund.
1.34 Matching Pre-Tax Contributions -- means the contributions
made on behalf of a Participant under section 3.4.
1.35 Military Leave -- means an interruption of active employment
of an Employee with a Participating Company or Predecessor Company to enter the
Armed Forces of the United States under such circumstances that the Employee
thereby becomes entitled to reemployment rights under Federal law. Military
Leave terminates on the expiration of such reemployment rights.
1.36 Normal Retirement Age -- means age 65.
1.37 Participant -- means an Employee who satisfies the
requirements of Section 2.1.
-12- Harris Retirement Plan
<PAGE> 25
Definitions
1.38 Participating Company -- means the Corporation and any
Related Company or division or operation thereof so designated by the
Corporation, including a foreign subsidiary. Appendix C, as it may be amended
from time to time, lists each Participating Company, or division thereof, whose
Employees may become Participants.
1.39 Period of Service -- means the period of time that begins on
the Employee's employment or reemployment date, whichever is applicable, and
ends on his Severance from Service Date. The Employee's employment or
reemployment date is the date on which the Employee first performs an Hour of
Service.
1.40 Period of Severance -- means the period of time commencing
on the Severance from Service Date and ending on the date on which the Employee
again performs an Hour of Service.
1.41 Plan -- means the Harris Corporation Retirement Plan.
1.42 Plan Year -- means the Fiscal Year.
-13- Harris Retirement Plan
<PAGE> 26
Definitions
1.43 Predecessor Company -- means any corporation (a) of which a
Related Company is a successor by reason of having acquired all or substantially
all of its business and assets by purchase, merger, consolidation or
liquidation, or (b) from which a Related Company acquired a business formerly
conducted by such corporation; provided, however, that in the case of any such
corporation that continued to conduct a trade or business subsequent to the
acquisition by a Related Company referred in (a) or (b) above, the status of
such corporation as a Predecessor Company relates only to the period of time
prior to the date of such acquisition.
1.44 Pre-Tax Account -- means the account established to record
the Pre-Tax Contributions made on the Participant's behalf other than those
invested in the Harris Stock Fund.
1.45 Pre-Tax Contributions -- means the contributions made on
behalf of a Participant under section 3.3.
-14- Harris Retirement Plan
<PAGE> 27
Definitions
1.46 Profit-Sharing Account -- means the account established to
record the Profit-Sharing Contributions made on a Participant's behalf, and
includes the Basic Account and the Supplemental Account.
1.47 Profit-Sharing Contributions -- means the contributions
described in section 3.1.
1.48 Related Company -- means the Corporation and any corporation
that is a member of a controlled group of corporations (as defined in section
414(b) of the Code) with the Corporation; any trade or business (whether or not
incorporated) which is under common control (as defined in section 414(c) of the
Code) with the Corporation; any organization (whether or not incorporated) which
is a member of an affiliated service group (as defined in section 414(m) of the
Code) which includes the Corporation, and any other entity required to be
aggregated with the Corporation under section 414(o) of the Code.
1.49 Rollover Account -- means the account established to record
the Rollover Contributions made by a Participant from another tax-qualified
plan.
-15- Harris Retirement Plan
<PAGE> 28
Definitions
1.50 Savings Account -- means the account established under
section 6.1(f).
1.51 SERP -- means the Harris Corporation Supplemental Executive
Retirement Plan.
1.52 Severance from Service Date -- means, with respect to a
Related Company, the earlier of (a) the date on which the Employee quits,
retires, is discharged or dies, or (b) the first anniversary of the first date
of a period in which an Employee remains absent from service (with or without
pay) for any reason other than quitting, retirement, discharge or death;
provided that "second anniversary" shall be substituted for "first anniversary"
if the absence is due to maternity or paternity reasons as defined in section
410(a)(5)(E) of the Code. The period between the first and the second
anniversary shall not be a Period of Service or a Period of Severance.
1.53 Supplemental Account -- means the account established to
record the portion of the Profit-Sharing Contribution allocable to a
Participant's Excess Compensation.
-16- Harris Retirement Plan
<PAGE> 29
Definitions
1.54 Taxable Wage Base -- means the maximum amount of earnings
that may be considered wages under section 3121(a)(1) of the Code, except for
purposes of Medicare taxes, as in effect on the first day of the Plan Year. In
the case of an Employee who was a Participant for only a portion of a particular
Plan Year, the Taxable Wage Base shall be multiplied by the ratio of the number
of calendar months (including a fraction of a month as a full month) in the Plan
Year during which he was a Participant to 12 months.
1.55 Trust Agreement -- means the Trust Agreement relating to the
Harris Corporation Retirement Plan, entered into between the Corporation and the
Trustee, as it may be amended from time to time.
1.56 Trust Fund -- means the assets held by the Trustee in
accordance with the Trust Agreement.
1.57 Trustee -- means Boston Safe Deposit & Trust Company, or
such successor (or successors) thereto designated by the Corporation to act as
trustee under the provisions of the Trust Agreement, who shall agree to act as
such by executing the Trust Agreement.
-17- Harris Retirement Plan
<PAGE> 30
Definitions
1.58 Valuation Date -- means the last day of each calendar month.
-18- Harris Retirement Plan
<PAGE> 31
ARTICLE II
PARTICIPATION
2.1 In General. An Employee shall become a Participant in the
Plan on the date he completes a one-year Period of Service, provided that he is
employed by a Participating Company on that date. Notwithstanding the above, and
solely for purposes of making Pre-Tax Contributions, After-Tax Contributions and
Rollover Contributions, a Full-time Employee shall become a Participant in the
Plan on the date he first performs an Hour of Service.
2.2 Renewal of Participation on Reemployment. An Employee who
terminates employment after he completes a one-year Period of Service and is
reemployed by a Participating Company shall become a Participant immediately on
reemployment. An Employee who terminates employment before he completes a
one-year Period of Service shall become a Participant as provided in section
2.1, provided that his Period of Service prior to reemployment shall be used to
satisfy the one-year Period of Service requirement of section 2.1 to the extent
provided under section 2.3.
-19- Harris Retirement Plan
<PAGE> 32
Participation
2.3 Periods of Service on Reemployment. The following rules shall
apply to an Employee who terminates employment before he completes a one-year
Period of Service and is reemployed by a Related Company:
(a) Credit for Prior Period of Service. If the Employee is
reemployed by a Related Company before his Period of Severance equals or exceeds
the greater of his Period of Service before he terminated employment or five
years, his Period of Service before he terminated employment shall be counted as
service.
(b) Credit for Period of Severance. If the Employee
terminates employment due to quitting, discharge, or retirement and is
reemployed by a Related Company within 12 months of his termination date, his
Period of Severance shall be counted as service. If the Employee terminates
employment for any reason other than quitting, discharge, or retirement, and
subsequently quits, is discharged, or retires, his Period of Severance shall be
counted as service only if he is reemployed by a Related Company within 12
months of when he first terminated employment.
-20- Harris Retirement Plan
<PAGE> 33
Participation
2.4 Service with Predecessor Company. In the case of a
corporation (other than a Related Company) which becomes a Predecessor Company
by reason of the acquisition of all or substantially all of the assets and
business of such corporation by a Related Company, an Employee's Period of
Service shall include employment with such Predecessor Company, as provided in
the corporate documents effecting the acquisition.
2.5 Participation for Purposes of Rollover Contributions.
Full-time Employees of a Participating Company who do not satisfy the
requirements of section 2.1 may, nevertheless, be Participants solely for
purposes of making Rollover Contributions under section 3.8.
-21- Harris Retirement Plan
<PAGE> 34
ARTICLE III
CONTRIBUTIONS AND ALLOCATIONS
3.1 Profit-Sharing Contributions.
(a) Basic. The amount of Profit-Sharing Contributions made
on behalf of Participating Companies for a Fiscal Year with respect to
Participants in this Plan and the Harris Corporation Union Retirement Plan shall
equal 11-1/2 percent of the adjusted consolidated net income of the Corporation
and its Consolidated Subsidiaries before net income taxes for such Fiscal Year
as determined in subsection (d), reduced by the portion of such amount with
respect to Participants' Compensation that would have been allocable under
section 3.2 of this Plan or section 3.2 of the Harris Corporation Union
Retirement Plan, if Compensation were determined without regard to statutory
limits under section 401(a)(17) or 415 of the Code.
(b) Special. The Corporation, in its discretion, may provide
for an additional Profit-Sharing Contribution in a specified dollar amount or
pursuant to a formula with respect to any Fiscal Year.
(c) Apportionment Between the Plan and the Harris Union
Retirement Plan. Profit-Sharing Contributions for a Plan Year shall be
apportioned for accounting and payment purposes between the Plan and the Harris
Corporation Union Retirement Plan (the "Union Plan") based on the ratio of
-22- Harris Retirement Plan
<PAGE> 35
Contributions and Allocations
the total Compensation plus Excess Compensation for the Plan Year of
participants in each plan to the total Compensation plus Excess Compensation of
all participants in the Plan and the Union Plan for the Plan Year.
(d) Adjusted Consolidated Net Income. The adjusted
consolidated net income of the Corporation and its Consolidated Subsidiaries
before net income taxes shall be determined on the basis of the annual audit
report prepared by the Corporation's independent public accountants by adjusting
the consolidated net income shown in the report to eliminate the effect, if any,
of the following items:
(1) any provision for taxes on or measured by income
for such years required by the laws of the United
States or of any state or political subdivision
thereof (including the Ohio Franchise Income Tax,
whether or not in fact measured by income), or any
provision for similar taxes required by the laws
of any other country;
(2) all items consisting of credits or deficiencies
relating to taxes described in clause (1) above on
or measured by income for prior Fiscal Years:
-23- Harris Retirement Plan
<PAGE> 36
Contributions and Allocations
(3) any provision for contributions for such Fiscal
Year under this Plan or under any profit-sharing
retirement plan of a Consolidated Subsidiary of
the Corporation;
(4) all dividends received during such Fiscal Year
with respect to stock of a Related Company which
is not included among the Consolidated
Subsidiaries;
(5) gains or losses from the sale, exchange or other
disposition of capital or depreciable property, as
defined in the Code;
(6) any income from the use of the "lifo" inventory
method resulting from either a reduction in
inventory or a decrease in the cost index;
(7) all items of income and expense which relate
directly to the conduct by a Related Company of a
business (i) which was formerly conducted by a
corporation which was not then a Related Company,
and (ii) the net income (or loss) of which was
included for the first time in determining the
consolidated net income of the
-24- Harris Retirement Plan
<PAGE> 37
Contributions and Allocations
Corporation and its Consolidated Subsidiaries for
the Fiscal Year in question;
(8) all exchange adjustments resulting from
translating to United States currency those
year-end balance sheet items of subsidiaries which
are denominated in a foreign currency;
(9) any item of income or expense relating to the
right of any employee to receive cash upon
cancellation of an unexercised stock option, and
(10) the net of all items of income and expense, other
than tax items described in subsection (1) and (2)
above, relating to Lanier Business Products, Inc.
and any subsidiary thereof which is a Related
Company.
3.2 Allocation of Profit-Sharing Contributions to Participants.
(a) In General. The Profit-Sharing Contributions for a Plan
Year with respect to an Employment Unit shall be allocated among eligible
Participants described in subsection (c) who are employed by the Employment Unit
during some part or all of the Plan Year based on the ratio of each eligible
-25- Harris Retirement Plan
<PAGE> 38
Contributions and Allocations
Participant's Compensation plus Excess Compensation for the Plan Year to the
Compensation plus Excess Compensation of all eligible Participants for the Plan
Year.
(b) Limitation On Amount. Notwithstanding subsection (a),
the amount allocated to an eligible Participant with respect to Excess
Compensation shall not exceed the "base contribution percentage" by more than
the lesser of (i) the base contribution percentage or (ii) 5.7% (or if greater,
the percentage equal to the Old Age portion of the tax under section 3111(a) of
the Code, as in effect on the first day of the Plan Year). The term "base
contribution percentage" means the percentage of Compensation contributed by the
Participating Company with respect to each Participant's Compensation not in
excess of the Participant's Taxable Wage Base.
(c) Limitation On Eligibility. A Participant shall be
eligible to receive an allocation of Profit-Sharing Contributions for a Plan
Year if (1) the Participant is employed on the last day of the Plan Year or (2)
the Participant terminates employment during the Plan Year on or after Early
Retirement Age or Normal Retirement Age, or due to Disability, death, Lay-off,
Leave of Absence or Military Leave, or is transferred by the Corporation as a
Release Employee to an entity that is not a Participating Company.
-26- Harris Retirement Plan
<PAGE> 39
Contributions and Allocations
3.3 Pre-Tax Contributions.
(a) Maximum Election. A Participant may elect to reduce his
Compensation by an amount equal to any whole percentage not to exceed 12 percent
and have that amount contributed to the Plan as a Pre-Tax Contribution. A
Participant's Pre-Tax Contribution to the Plan and any other plan of the
Participating Company or Related Company for any calendar year shall not exceed
$7,000 (as adjusted in accordance with Code section 402(g)(5) for increases in
the cost of living) including the full fair market value of any Common Stock
contributed as a Pre-Tax Contribution. For Pre-Tax Contributions invested in the
Harris Stock Fund, the normal form of contribution shall be cash; provided,
however, that the Corporation, in its discretion, may make the contribution in
common stock of the Corporation, which may be contributed at a discount from
fair market value.
(b) Contributions in Excess of the Maximum. If the Pre-Tax
Contributions on behalf of a Participant for a calendar year reach the limit
described in subsection (a), any additional contributions to be made during the
calendar year pursuant to the Participant's election shall be made as After-Tax
Contributions and any Matching Pre-Tax Contributions with respect to that
-27- Harris Retirement Plan
<PAGE> 40
Contributions and Allocations
amount shall be made as Matching After-Tax Contributions. Notwithstanding the
above, if the Pre-Tax Contributions for a calendar year on behalf of a
Participant who is eligible to participate in the SERP reach the limit described
in subsection (a), such Participant may elect (i) that any additional
contributions be made as After-Tax Contributions and any Matching Pre-Tax
Contributions with respect to that amount be made as Matching After-Tax
Contributions or (ii) that such amounts (including the amount of the Matching
Contributions) be credited to the Participant's account under the SERP. Such
election shall be made in accordance with procedures established by the
Corporation Committee.
3.4 Matching Pre-Tax Contributions. The Participating Company
shall make a Matching Pre-Tax Contribution on behalf of each Participant who is
employed by it and has completed a one-year Period of Service in the amount of
100 percent of the first six percent of the Pre-Tax Contributions made on behalf
of the Participant during the Plan Year. The normal form of matching
contribution for Pre-Tax Contributions invested in the Harris Stock Fund shall
be in cash; provided, however, that the Corporation in its discretion, may make
the contribution in common stock of the Corporation, which may be contributed at
-28- Harris Retirement Plan
<PAGE> 41
Contributions and Allocations
a discount from fair market value. The Trustee is authorized to purchase common
stock of the Corporation in the open market, and to give effect to the discount,
if any, that has been established from time to time by allocating shares to
Participants' Accounts in addition to the number of shares purchased on the open
market by means of a given contribution.
3.5 After-Tax Contributions. A Participant may elect to reduce
his Compensation by an amount equal to any whole percentage not to exceed 12
percent and have that amount contributed to the Plan as an After-Tax
Contribution, provided that a Participant with less than a one-year Period of
Service may make After-Tax Contributions only to the extent necessary pursuant
to sections 3.3(b) or 4.2. A Participant who makes Pre-Tax Contributions for a
Plan Year may not make After-Tax Contributions for that Plan Year other than
pursuant to sections 3.3(b) or 4.2.
3.6 Matching After-Tax Contributions. The Participating Company
shall make a Matching After-Tax Contribution on behalf of each Participant who
is employed by one of its constituent Employment Units (and effective prior to
April 1, 1995 has completed a one-year Period of Service) in the amount of 100
-29- Harris Retirement Plan
<PAGE> 42
Contributions and Allocations
percent of the first six percent of the After-Tax Contributions on behalf of the
Participant, reduced by the amount of the Matching Pre-Tax Contribution made on
behalf of the Participant during the Plan Year. The normal form of matching
contribution for After-Tax Contributions invested in the Harris Stock Fund shall
be in cash; provided, however, that the Corporation in its discretion, may make
the contribution in common stock of the Corporation, which may be contributed at
a discount from fair market value. The Trustee is authorized to purchase common
stock of the Corporation in the open market, and to give effect to the discount,
if any, that has been established from time to time by allocating shares to
Participants' Accounts in addition to the number of shares purchased on the open
market by means of a given contribution.
3.7 Elections to Make Pre-Tax and After-Tax Contributions.
(a) Written Elections. A Participant's initial election to
reduce his Compensation and have Pre-Tax Contributions and/or After-Tax
Contributions made on his behalf shall be made in writing by filing the
appropriate form, which shall specify the effective date of the election. The
initial election shall take effect as of the first payroll period commencing
immediately after the effective date of the election.
-30- Harris Retirement Plan
<PAGE> 43
Contributions and Allocations
(b) Changing Elections. A Participant may change the
percentage (in increments of one percent) of future Pre-Tax Contributions and/or
After-Tax Contributions made on his behalf by filing the appropriate form or by
following the appropriate telephone procedures for changing elections as
established by the Corporation Committee. A change may be made not more than
once each month. A change of election shall become effective as of the first
payroll period commencing immediately after the effective date of the election.
(c) Terminating Elections. A Participant may terminate his
election to have Pre-Tax Contributions and/or After-Tax Contributions made on
his behalf by filing the appropriate form. The termination election shall become
effective as of the first payroll period commencing immediately after the
effective date of the election.
(d) Corporation's Discretion to Limit Elections. The
Corporation Committee may direct that Participant elections with respect to
Pre-Tax Contributions and/or After-Tax Contributions be changed in any manner
the Corporation Committee, in its discretion, shall determine appropriate to
preserve the qualification of the Plan under section 401(a) of the Code and as a
cash or deferred arrangement under section 401(k) of the Code.
-31- Harris Retirement Plan
<PAGE> 44
Contributions and Allocations
3.8 Rollover Contributions. A Participant, with the consent of
the Corporation Committee or its delegate, may at any time make a rollover
contribution to the Plan. Rollover contributions shall include only (a) cash
funds transferred directly from a tax-qualified plan within the meaning of
section 401 of the Code, and (b) cash funds distributed from a tax-qualified
plan or a conduit individual retirement account that are eligible for rollover
treatment and are transferred to the Plan within 60 days of the Participant's
receipt thereof. A Participant may be required to establish that the transfer of
amounts into a Rollover Account will not require any changes to the terms of the
Plan or risk adverse consequences for the Plan or Trust.
3.9 Participating Company's Obligation to Make Contributions.
(a) Contributions. Each Participating Company agrees to pay
to the Trustee the contributions that are required with respect to Participants
who are employed by one of its constituent Employment Units. Profit-Sharing
Contributions with respect to a Fiscal Year shall be paid to the Trustee no
later Contributions and Allocations than the time for filing the Participating
Company's federal income tax return for such Fiscal Year, including extensions.
Pre-Tax Contributions and After-Tax Contributions shall be withheld and paid by
the Employment Unit, and Matching
-32- Harris Retirement Plan
<PAGE> 45
Contributions and Allocations
Contributions shall be paid by the Participating Company to the Trustee no later
than 20 days following the last day of the calendar month in which the amounts
were withheld from the Participants' Compensation, or sooner as required by
Federal law.
(b) Limitation. Contributions under this Article III shall
not be required to the extent they exceed the limitations of section 404 of the
Code, in which case they shall be reduced to the extent allowable and necessary
in the following order: (1) Profit-Sharing Contributions; (2) Matching
Contributions, and (3) Pre-Tax Contributions.
3.10 Treatment of Forfeited Amounts.
(a) Reduction of Contributions. Forfeitures shall be
allocated to Employment Units as provided in subsection (b) and used to reduce
Profit-Sharing Contributions and Matching Contributions of the Participating
Companies in which the Employment Units are included.
(b) Allocation of Forfeitures to Employment Units.
Forfeitures of Profit-Sharing Contributions and Matching Contributions shall be
credited to the
-33- Harris Retirement Plan
<PAGE> 46
Contributions and Allocations
Employment Unit with which the Participant was last employed before the
forfeiture occurred.
3.11 Finality of Allocations. The Corporation Committee shall
give a written benefit statement to each Participant at least annually setting
forth the amount of the contributions allocated to his Accounts; provided,
however, that if any such Participant is deceased, such statement shall be given
to his Beneficiary. Any Participant or Beneficiary claiming that an error has
been made in a benefit statement shall notify the Corporation Committee in
writing within 90 days following the delivery or mailing of such statement. The
Corporation Committee shall review the claim and advise the Participant or
Beneficiary of its decision in writing. If no such notice of error is filed, the
benefit statement shall be presumed to be correct.
-34- Harris Retirement Plan
<PAGE> 47
ARTICLE IV
LIMITATIONS ON CONTRIBUTIONS
4.1 In General. Notwithstanding any provisions of Article III to
the contrary, the contributions provided for in Article III shall be limited to
the extent necessary to meet the requirements of this Article IV.
4.2 Pre-Tax Contributions.
(a) Treatment of Certain Contributions as After-Tax. If the
Corporation Committee determines that a Participant's Pre-Tax Contributions for
a calendar year have reached the dollar limit of section 402(g) of the Code, any
additional contributions for that calendar year pursuant to the Participant's
Pre-Tax Contribution election shall be treated in the manner provided under
Section 3.3.
(b) Return of Excess Deferrals. In the event that a
Participant's Pre-Tax Contributions already made to the Plan for a calendar year
exceed the limits of section 402(g) of the Code, the excess amount, as adjusted
for income and loss, may, in the discretion of the Corporation Committee, be
distributed to the Participant no later than April 15 of the following year in
accordance with the requirements of section 402(g) of the Code and Treasury
Regulation section
-35- Harris Retirement Plan
<PAGE> 48
Limitations on Contributions
1.402(g)-1 (including return by transfer to the SERP in accordance with a timely
election filed by the Participant).
4.3 Percentage Limitation on Pre-Tax Contributions.
(a) Satisfying the Actual Deferral Percentage Test. The
Pre-Tax Contributions made on behalf of Participants with respect to a Plan Year
shall satisfy the "actual deferral percentage test" of section 401(k)(3) of the
Code and Treasury regulation section 1.401(k)-1(b)(2), the provisions of which
are incorporated herein by reference.
(b) Treatment of Excess Contributions as After-Tax. In the
event it is necessary to reduce or limit the amount of any Participant's Pre-Tax
Contributions, the amount of Pre-Tax Contributions made on behalf of Highly
Compensated Employees shall be deemed to be After-Tax Contributions and any
Matching Pre-Tax Contributions made with respect to those Contributions shall be
deemed to be Matching After-Tax Contributions. The Highly Compensated Employees
to whom this recharacterization is applicable shall be determined in accordance
with Treasury regulation section 1.401(k)-1(f)(2), the provisions of which are
incorporated herein by reference.
-36- Harris Retirement Plan
<PAGE> 49
Limitations on Contributions
4.4 Percentage Limitation on After-Tax and Matching
Contributions.
(a) Satisfying the Actual Contribution Percentage Test. The
After-Tax Contributions and Matching Contributions made on behalf of
Participants with respect to a Plan Year shall satisfy the "actual contribution
percentage test" of section 401(m)(3) of the Code and Treasury regulation
section 1.401(m)-1(b), the provisions of which are incorporated herein by
reference.
(b) Reduction and Forfeiture of After-Tax Contributions and
Matching Contributions. In the event it is necessary to reduce or limit a
Participant's After-Tax Contributions and Matching Contributions to satisfy the
actual contribution percentage test, the amount of such contributions, as
adjusted for income and losses, on behalf of Highly Compensated Employees shall
be reduced in accordance with Treasury regulation section 1.401(m)-1(e)(2), the
provisions of which are incorporated herein by reference. The amount of the
After-Tax Contributions and Matching Contribution shall be returned to the
Highly Compensated Employees (including return by transfer to the SERP in
accordance with a timely election filed by the Participant) or forfeited as
follows:
-37- Harris Retirement Plan
<PAGE> 50
Limitations on Contributions
(1) After-Tax Contributions in excess of six percent
of Compensation shall be returned, and
(2) Remaining After-Tax Contributions and Matching
After-Tax Contributions attributable thereto.
After-Tax Contributions shall be returned.
Matching After-Tax Contributions to the extent
vested shall be returned and to the extent not
vested shall be forfeited and used to reduce
contributions in accordance with section 3.10.
4.5 Multiple Use of Alternative Limitations. Multiple use of the
alternative limitations of sections 401(k)(3)(A)(iii)(II) and 401(m)(A)(ii) of
the Code shall be restricted in accordance with Treasury Regulation 1.401(m)-2,
the provisions of which are incorporated herein by reference.
4.6 Limitations on Annual Additions.
(a) The Defined Contribution Limit. The "annual addition,"
as defined herein, for any Plan Year, to a Participant's Accounts in all defined
contribution plans maintained by the Participating Company or Related
-38- Harris Retirement Plan
<PAGE> 51
Limitations on Contributions
Company shall not exceed the lesser of (1) 25 percent of the Participant's
Compensation for the Plan Year, or (2) $30,000 (as adjusted in accordance with
section 415(d) of the Code). The term "annual additions" means the sum of all
contributions and forfeitures allocated to a Participant's Accounts (other than
his Rollover Account).
(b) The Combined Limit. If the Participant also has
participated in a defined benefit plan maintained by a Related Company, the
limitations of section 415(e) of the Code shall apply. If the limitations of
section 415(e) are exceeded, the benefits under any defined benefit plan
maintained by the Participating Company or Related Company shall be reduced
before the annual additions to the Plan are reduced.
(c) Reduction of Contributions. If the Corporation Committee
determines at any time that the annual addition to any Participant's Accounts
exceeds such limitation for any Plan Year, the contributions on behalf of the
Participant shall be reduced, to the extent necessary, in the following order:
(1) Pre-Tax Contributions in excess of six percent;
(2) Remaining Pre-Tax Contributions and Matching
Pre-Tax Contributions attributable thereto shall
be reduced proportionately;
-39- Harris Retirement Plan
<PAGE> 52
Limitations on Contributions
(3) Profit-Sharing Contributions;
(4) After-Tax Contributions in excess of six percent;
(5) Remaining After-Tax Contributions and Matching
After-Tax Contributions attributable thereto shall
be reduced proportionately.
After-Tax Contributions and Pre-Tax Contributions, as adjusted
for gains, shall be returned to the Participant (including return by transfer to
the SERP in accordance with a timely election filed by the Participant).
Profit-Sharing Contributions and Matching Contributions, as adjusted for gains,
to the extent allowable shall be held in a suspense account and allocated to the
Accounts of such Participant in the next Plan Year; provided that if the
Participant is not covered by the Plan in the next Plan Year, the amount shall
be allocated to the remaining Participants in the Plan who are employed by the
Employment Unit that employed the Participant.
(d) Limits on Limits. The limits stated on this Article IV
shall apply only to the extent required under the Code. Except as otherwise
specifically provided in this section 4.6, all of the requirements of section
415 of the Code, and limitations thereon, including the transitional rules and
grandfather rules, are incorporated herein by reference.
-40- Harris Retirement Plan
<PAGE> 53
ARTICLE V
VESTING AND FORFEITURES
5.1 In General. A Participant shall have a fully vested interest
at all times in his Pre-Tax Account, After-Tax Account, Harris Stock Pre-Tax
Account, Harris Stock After-Tax Account and Savings Account (other than the
portion attributable to matching contributions made after October 1, 1984) and
Rollover Account.
5.2 Vesting on Retirement, Death or Disability. A Participant
shall have a fully vested interest in his Profit Sharing Account, Matching
Pre-Tax Account, Matching After-Tax Account, Harris Stock Matching Account, and
portion of his Savings Account attributable to matching contributions made after
October 1, 1984, on termination of employment by any Related Company in the
event of:
(a) retirement on or after Normal Retirement Age;
(b) retirement on or after Early Retirement Age;
(c) retirement on or after the effective date of a
Participant's Disability determination by the Social Security Administration;
(d) death.
5.3 Vesting on Other Termination of Employment.
-41- Harris Retirement Plan
<PAGE> 54
Vesting and Forfeitures
(a) Vesting Schedule. A Participant who terminates
employment other than on the occurrence of one of the events described in
section 5.2 shall have a vested interest in his Profit-Sharing Account, Matching
Pre-Tax Account, Matching After-Tax Account, Harris Stock Matching Account and
the portion of his Savings Account attributable to matching contributions made
after October 1, 1984 in accordance with the following schedule:
Period of Service Vested Percentage
Less than 3 years 0%
3 years but less than 4 years 30%
4 years but less than 5 years 40%
5 years but less than 6 years 60%
6 years but less than 7 years 80%
7 years or more 100%
(b) Computing a Participant's Period of Service. All Periods
of Service shall be taken into account for purposes of subsection (a). In
addition, any Period of Severance shall be treated as service as provided in
Section 2.3(b).
-42- Harris Retirement Plan
<PAGE> 55
Vesting and Forfeitures
(c) Vesting on Sale of Business. In the event of the sale or
disposition of a business or a sale of substantially all of the assets of a
trade or business, the Corporation may, in its discretion, provide for
accelerated vesting with respect to those Participants affected by the sale.
5.4 Effect of In-Service Withdrawals on a Participant's Vested
Percentage. If a Participant receives a withdrawal under Article IX or a
distribution under Article VII from his Profit-Sharing Account at a time when
the Participant has less than a fully vested interest in that account, the
dollar amount of his vested interest in his Profit-Sharing Account (X) shall be
determined at any time by the following formula:
X = P(AB + D) - D
For the purpose of applying the formula, P is the
Participant's vested interest in his Profit-Sharing Account at the time the
determination is made, AB is the balance credited to the Profit-Sharing Account
at the time the determination is made, and D is the amount of the withdrawal.
5.5 Forfeitures.
-43- Harris Retirement Plan
<PAGE> 56
Vesting and Forfeitures
(a) Timing of Forfeiture. A Participant who terminates
employment with less than a fully vested interest in his Accounts shall forfeit
the nonvested interest on the earlier of the date on which the Participant:
(1) receives a lump sum distribution of all or a
portion of the vested interest in such Accounts,
provided that such distribution is made no later
than the close of the second Plan Year following
the year in which the Participant terminates
employment;
(2) incurs five consecutive one-year Periods of
Severance; or
(3) at any earlier date allowable under the Code.
(b) Effect of Partial Distribution on a Participant's Vested
Percentage. If the Participant elects to receive a lump sum distribution of less
than the full amount of his vested interest, the part of his nonvested interest
that shall be forfeited under subsection (a)(1) is the total nonvested interest
multiplied by a fraction, the numerator of which is the amount of the
distribution and the denominator of which is the total value of his vested
interest in his Accounts other than his After-Tax Account, Harris Stock
After-Tax Account and Rollover Account.
-44- Harris Retirement Plan
<PAGE> 57
Vesting and Forfeitures
(c) Effect of Repayment of Distribution. If a Participant
incurs a forfeiture under subsection (a)(1), then returns to employment with a
Participating Company and becomes a Participant in the Plan before incurring
five consecutive one-year Periods of Severance, the forfeited amount shall be
restored by the Employment Unit of the Participating Company with which the
Participant is reemployed.
-45- Harris Retirement Plan
<PAGE> 58
ARTICLE VI
ACCOUNTS AND INVESTMENTS
6.1 Establishment of Accounts. The Committee shall establish
and maintain for each Participant the following Accounts showing the
Participant's interest under the Plan:
(a) Profit-Sharing Account, which shall consist of
(1) a Basic Account to reflect the portion of
Profit-Sharing Contributions allocable to the
Participant's Compensation, and
(2) a Supplemental Account to reflect the portion of
Profit-Sharing Contributions allocable to the
Participant's Excess Compensation;
(b) Pre-Tax Account to reflect Pre-Tax Contributions made on
the Participant's behalf other than those invested in the Harris Stock Fund;
(c) After-Tax Account to reflect After-Tax Contributions
made on the Participant's behalf other than those invested in the Harris Stock
Fund;
(d) Matching Pre-Tax Account to reflect Matching Pre-Tax
Contributions made on the Participant's behalf other than those invested in the
Harris Stock Fund;
-46- Harris Retirement Plan
<PAGE> 59
Accounts and Investments
(e) Matching After-Tax Account to reflect Matching After-Tax
Contributions made on the Participant's behalf other than those invested in the
Harris Stock Fund;
(f) Savings Account to reflect the Savings Contributions
under the Plan as in effect prior to July 1, 1990, and the aggregate of the
Participant's voluntary and required contributions to the Harris Video Systems
Savings/Incentive Plan less withdrawals, as of June 30, 1990;
(g) Harris Stock Pre-Tax Account to reflect the portion of
the Pre-Tax Contributions made on the Participant's behalf invested in the
Harris Stock Fund;
(h) Harris Stock After-Tax Account to reflect the portion of
the After-Tax Contributions made on the Participant's behalf invested in the
Harris Stock Fund;
(i) Harris Stock Matching Account to reflect the portion of
the Matching Pre-Tax Contributions and Matching After-Tax Contributions made on
the Participant's behalf and invested in the Harris Stock Fund, and
(j) Rollover Account to reflect the Participant's Rollover
Contributions.
-47- Harris Retirement Plan
<PAGE> 60
Accounts and Investments
6.2 Investment of Profit-Sharing Account.
(a) In General. Except as provided in subsection (b), the
amounts allocated to a Participant's Profit-Sharing Account shall be invested in
the Balanced Fund.
(b) Participant-Directed Investments at Age 55. On attaining
age 55, a Participant shall be entitled to direct the investment of his
Profit-Sharing Account in accordance with the procedures set out in section 6.3.
The Profit-Sharing Account shall remain invested in the Balanced Fund until the
Participant files an election with respect thereto in accordance with procedures
set out in section 6.3.
6.3 Investment of Accounts Other than Profit-Sharing Account.
Except as provided in section 6.2, effective October 1, 1993, each Participant
shall have the right to direct the investment of his Accounts and future
contributions to his Accounts among the Investment Funds in accordance with the
following procedures and such other procedures provided in the documents
pertaining to each Investment Fund:
(a) Written or Telephonic Direction. Each election shall be
completed by filing the appropriate election form or by following the
-48- Harris Retirement Plan
<PAGE> 61
Accounts and Investments
appropriate telephone procedures for direct transfer as established by the
Corporation Committee.
(b) Elections in 10% Increments for Current Balances. An
election with respect to current account balances, including the Participant's
initial election with respect to the balance arising from a Rollover
Contribution, shall be made in increments of ten percent of the account balance;
(c) Elections in 10% Increments for Future Contributions. An
election with respect to future contributions shall be made in increments of ten
percent of the contribution (after the contribution is reduced by the dollar
amount directed into the Harris Stock Fund), provided that the combined Pre-Tax
Contributions and After-Tax Contributions invested in the Harris Stock Fund
shall equal no more than one percent of Compensation. To the extent Pre-Tax
Contributions and After-Tax Contributions are invested in the Harris Stock Fund,
the Matching Contributions attributable thereto also shall be invested in the
Harris Stock Fund;
(d) Changing Elections. A change of election may be made at
any time; provided that an election change shall become effective only on the
first day of the month. To be effective on the first day of any month, a written
election must be made on or before the 20th day of the preceding
-49- Harris Retirement Plan
<PAGE> 62
Accounts and Investments
month, and a telephonic election must be made on or before the 25th day of the
preceding month. If more than one election change is made on or before the
applicable deadline, the most recent election change shall be given effect.
(e) Elections Apply to All Accounts. Each of the
Participant's Accounts (including his Profit-Sharing Account after the
Participant has filed an initial election under section 6.2(b)) shall be
invested among the Investment Funds in the same manner, such that each election
by a Participant with respect to the Investment Funds shall apply to all of his
Accounts in the same proportion.
(f) Investment in Balanced Fund Absent Election. A
Participant's Accounts and contributions made on behalf of the Participant shall
be invested in the Balanced Fund until the Participant makes a valid investment
election pursuant to this section 6.3 and any other procedures established by
the Corporation Committee.
6.4 Allocation of Earnings and Losses. Earnings and losses
shall be allocated at least annually. In determining a Participant's share of
the earnings or losses of each of the Investment Funds as of any Valuation Date,
the total
-50-
<PAGE> 63
Accounts and Investments
earnings or losses of the particular Investment Fund, net of expenses allocable
to that fund, shall be allocated among the Participants' Accounts invested in
that Investment Fund based on the ratio of each Participant's Accounts to the
aggregate of the Accounts of all Participants, before taking into account any
contributions that are required to be but are not yet made as of the Valuation
Date and before taking into account any distributions, withdrawals or loans to
Participants for the period coinciding with the Valuation Date. Contributions to
Accounts are not credited with earnings in the month in which they are credited
to any Account.
6.5 Special Rules Concerning Harris Stock Fund. Notwithstanding
any other provision of sections 6.2 and 6.3 to the contrary, the following rules
shall apply to investments in the Harris Stock Fund:
(a) Availability. Only Pre-Tax Contributions, After-Tax
Contributions and Matching Contributions made with respect to Compensation
earned on or after October 1, 1993 may be invested in this fund. For any Plan
Year, the combined Pre-Tax Contributions and After-Tax Contributions invested in
this fund on behalf of a Participant in each Plan Year shall equal no more than
one percent of the Participant's Compensation for such Plan Year. An
-51- Harris Retirement Plan
<PAGE> 64
Accounts and Investments
election to invest in the Harris Stock Fund shall take effect as soon as
administratively feasible after the election is received.
(b) Restrictions on Transfers. A Participant may not
transfer amounts from other Investment Funds to the Harris Stock Fund. Any
contributions invested in this Fund must remain in this fund for a minimum of 36
months, provided that amounts invested in this fund may be distributed to the
Participant before the expiration of the 36-month period, if the Participant is
otherwise entitled to a distribution under the Plan.
(c) Dividends. A Participant's allocable share of cash
dividends (and other cash earnings) credited to the Harris Stock Fund, will be
reinvested in the Harris Stock Fund unless the Participant elects with respect
to the dividends credited to his Account for a quarter to invest such cash
dividends (and other cash earnings) among the Investment Funds other than the
Harris Stock Fund in increments of ten percent of the amount of the dividends
(and other earnings). Only cash dividends (and earnings) that have been credited
to the Participant's Accounts for at least one month are subject to the
Participant's investment election under this subsection (c). Each election shall
be completed by filing the appropriate form or by following the appropriate
telephone procedures as established by the Corporation Committee, pursuant to
section
-52- Harris Retirement Plan
<PAGE> 65
Accounts and Investments
6.3(d). Dividends paid in the form of stock shall be retained in a Participant's
Account until liquidated, in the sole discretion of the Trustee. Such liquidated
dividends shall be cash earnings subject to investment elections in accordance
with this subsection of the Plan.
(d) Contributions. The normal form of contributions for
amounts invested in the Harris Stock Fund shall be in cash; provided, however,
that the Corporation, in its discretion, may make the contribution in common
stock of the Corporation, which may be contributed at a discount from fair
market value. The Trustee is authorized to purchase common stock of the
Corporation on the open market, and to give effect to the discount, if any, that
has been established from time to time by allocating shares to Participants'
Accounts in addition to the number of shares purchased on the open market by
means of a given contribution.
(e) Distributions. Distributions from the Harris Stock Fund
shall be in the form of cash or shares of Harris Stock at the election of the
Participant. Fractional shares and distributions of a de minimis amount as
determined by the Corporation Committee shall be paid in cash.
-53- Harris Retirement Plan
<PAGE> 66
Accounts and Investments
(f) Voting. Participants may submit non-binding proxies to
the Trustee, which will vote the shares in the Harris Stock Fund in the exercise
of its sole discretion.
-54- Harris Retirement Plan
<PAGE> 67
ARTICLE VII
DISTRIBUTIONS
7.1 In General. A Participant shall be entitled to receive a
distribution of the vested interest in his Accounts on the earlier of
termination of employment or attainment of age 59 1/2, except that his Pre-Tax
Contributions and Matching Pre-Tax Contributions are distributable only as
allowed under section 401(k) of the Code. Distributions shall be made upon the
sale or disposition of the stock in a subsidiary, or the sale or disposition of
substantially all the assets of a trade or business, as provided, under the
corporate documents effecting the sale or disposition and in accordance with
section 401(k)(10) of the Code. A termination of employment shall not be deemed
to occur for purposes of this section 7.1 and section 7.2 until the Participant
is no longer employed by a Related Company. A Participant may elect to receive
any amount invested in the Harris Stock Fund in the form of stock; provided that
fractional shares and distributions of a de minimis amount as determined by the
Corporation Committee shall be paid in cash.
7.2 Small Benefit Cash-out. Except as provided in section 7.5,
in any case in which a Participant's vested interest in his Accounts does not
(and did not at the time of any prior distributions) exceed $3,500 (or such
larger amount
-55- Harris Retirement Plan
<PAGE> 68
Distributions
as may be permitted by law), the vested interest shall be paid to the
Participant in a lump sum as soon as reasonably practicable upon termination of
employment.
7.3 Form of Payment.
(a) Options. In any case in which a Participant's vested
interest in his Accounts exceeds the amount provided in section 7.2, the
Participant (or in the event of death, his Beneficiary) may elect at any time to
receive payment in:
(1) a lump sum of any portion or all of the balance of
the Participant's Accounts;
(2) substantially equal periodic installment payments
over a period of time to be elected by the
Participant;
(3) a combination of (a) and (b), or
(4) with respect to the Participant or the
Participant's spouse, a direct rollover.
(b) Changes Allowed. A Participant (or, in the event of
death, his Beneficiary) may change his election with respect to the form of
payment at
-56- Harris Retirement Plan
<PAGE> 69
Distributions
any time before or after distribution of benefits commences, subject to the
provisions of section 7.9.
(c) Effect of Failure to Specify an Option. If a Participant
fails to file an election under this section 7.3, his benefits shall be paid in
accordance with section 7.4.
7.4 Time of Payment. On termination of employment, a
Participant, other than one described in section 7.2, may elect that payment of
benefits begin immediately or at any other time. If a Participant fails to file
an election under this section 7.4 and payment of benefits has not already
commenced, payment of his benefits shall commence on April 1 of the calendar
year following the year in which the Participant attains 70 1/2 and shall be
paid in accordance with the minimum distributions requirements of section
401(a)(9) of the Code.
7.5 Direct Rollover.
(a) A Participant or "distributee" may elect at any time to
have any portion of an "eligible rollover distribution" paid in a direct
rollover to the trustee or custodian of an "eligible retirement plan" specified
by the Participant
-57- Harris Retirement Plan
<PAGE> 70
Distributions
or distributee, whichever is applicable. Payment of a direct rollover in the
form of a check payable to the trustee or custodian of an eligible retirement
plan, for the benefit of the Participant or distributee, may be mailed to the
Participant or distributee.
(b) For purposes of this section 7.5, the following terms
shall have the following meanings:
(1) "Distributee" means a surviving spouse or a spouse
or former spouse who is an alternate payee under a
Qualified Domestic Relations Order defined in
section 414(p) of the Code.
(2) "Eligible retirement plan" means an individual
retirement account described in section 408(a) of
the Code, an individual retirement annuity
described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the
Code, or a qualified trust described in section
401(a) of the Code that accepts an eligible
rollover distribution.
(3) "Eligible rollover distribution" means any
distribution of all or a portion of the
Participant's Accounts,
-58- Harris Retirement Plan
<PAGE> 71
Distributions
other than the portion of his After-Tax Account
and Harris Stock After-Tax Account attributable to
After-Tax Contributions, but does not include a
distribution (i) in installments over a period of
ten years or more or over a period described in
section 7.9(c), or (ii) to the extent the
distribution is required under section 401(a)(9)
of the Code.
7.6 Payments on Death. If a Participant dies before he has
received the full amount of the vested interest in his Accounts, the unpaid
amount shall be paid to his Beneficiary. If the unpaid amount does not exceed
$3,500, it shall be paid to the Beneficiary as soon as reasonably practicable
upon the Participant's death. If the unpaid amount exceeds $3,500, it shall be
paid to the Beneficiary as provided in sections 7.3, 7.4 and, if the Beneficiary
is the spouse, section 7.5; provided that, if the Beneficiary fails to file an
election, the unpaid amount shall be paid in a lump sum as soon as reasonably
practicable after the fifth anniversary of the Participant's death.
7.7 Benefit Amount and Withholding.
-59- Harris Retirement Plan
<PAGE> 72
Distributions
(a) Vested Amount and Adjustments. For purposes of this
Article VII, a Participant's vested interest in his Accounts shall be determined
as of the Valuation Date coinciding with or immediately following the date of
the event giving rise to the distribution, plus any Profit-Sharing Contribution
to which the Participant may be entitled under section 3.2 that has not yet been
credited to the Participant's Profit-Sharing Account. Any unpaid amount in the
Participant's Accounts shall continue to be adjusted for earnings and losses as
provided in section 6.4 until it is distributed.
(b) Withholding. The amount of any distribution shall be
reduced to the extent necessary to comply with Federal, state and local income
tax withholding requirements.
7.8 Order of Distributions. Any distribution under this Plan
shall be charged against the Participant's Accounts pursuant to administrative
procedures designed to maximize the tax benefits to the Participant by
distributing to him first his After-Tax Contributions to the extent permitted by
law.
-60- Harris Retirement Plan
<PAGE> 73
Distributions
7.9 Statutory Requirements. Notwithstanding any other provisions
of the Plan to the contrary, the following rules shall apply to all payments
under the Plan:
(a) Latest Commencement Date. Unless the Participant files a
written election to defer payment of benefits, benefits payments with respect to
any Participant shall commence no later than the 60th day after the close of the
Plan Year in which the latest of the following occurs:
(1) the date on which the Participant attains Normal
Retirement Age;
(2) the 10th anniversary of the date on which the
Participant commenced participation in the Plan,
or
(3) the date on which the Participant terminated
employment.
Failure to file an election under section 7.4 for payment of benefits to
commence shall be deemed to be a written election to defer payment of benefits
under this subsection (a).
(b) Required Beginning Date. Notwithstanding subsection (a)
above, payment of benefits to a Participant shall commence no later than April
-61- Harris Retirement Plan
<PAGE> 74
Distributions
1 of the calendar year following the calendar year in which the Participant
attains age 70 1/2.
(c) Maximum Duration of Distributions. Payment of a
Participant's benefit shall be made over a period not to exceed one of the
following periods:
(1) the life of the Participant;
(2) the life of the Participant and the Participant's
Beneficiary;
(3) a period certain not extending beyond the life
expectancy of the Participant, or
(4) a period certain not extending beyond the joint
and last survivor expectancy of the Participant
and his Beneficiary.
The amount to be distributed each year must be at least equal to
the quotient obtained by dividing the Participant's benefit by the life
expectancy of the Participant or the joint and last survivor expectancy of the
Participant and his Beneficiary. Life expectancy and joint and last survivor
expectancy shall be computed by the use of the return multiples contained in
Treasury regulation section 1.72-9. For purposes of this computation, a
Participant's and a spouse's
-62- Harris Retirement Plan
<PAGE> 75
Distributions
life expectancy may be recalculated annually; however, the life expectancy of a
Beneficiary, other than the Participant's spouse, may not be recalculated. If
the Participant's spouse is not the Beneficiary, the method of distribution
selected must ensure that at least 50 percent of the present value of the amount
available for distribution is paid within the life expectancy of the
Participant.
(d) Distribution after the Participant's Death. In the event
a Participant who is receiving benefits dies, the remaining balance of his
benefits shall be distributed at least as rapidly as under the method of
distribution elected by the Participant. If a Participant dies before
distribution of benefits commences, the Participant's entire interest will be
distributed no later than five years after the Participant's death, except to
the extent that an election is made to receive distributions in accordance with
(1) or (2) below:
(1) if any portion of the Participant's benefit is
payable to a Beneficiary, installment
distributions may be made over the life or life
expectancy of the Beneficiary, provided that the
installments
-63- Harris Retirement Plan
<PAGE> 76
Distributions
commence no later than one year after the
Participant's death, and
(2) if the Beneficiary is the Participant's spouse,
the commencement of distributions may be delayed
until the date on which the Participant would have
attained age 70 1/2. If the spouse dies before
payments begin, subsequent distribution shall be
made as if the spouse had been the Participant.
For purposes of the foregoing, payments may be calculated by
use of the return multiples specified in Treasury regulation section 1.72-9.
Life expectancy of a spouse may be recalculated annually. However, in the case
of any other Beneficiary, such life expectancy shall be calculated at the time
payment first commences without further recalculation. Any amount paid to a
child of the Participant shall be treated as if it had been paid to the
surviving spouse if the amount becomes payable to the spouse when the child
reaches the age of majority.
(e) Limit on Limits. All distributions under this section
7.9 shall be determined and made in accordance with section 401(a)(9) of the
Code, including the minimum distribution incidental benefit requirement
-64- Harris Retirement Plan
<PAGE> 77
Distributions
of Treasury regulation section 1.401(a)(9)-2, the provisions of which are
incorporated herein by reference.
7.10 Designating Beneficiaries.
(a) Written Designation. Each Participant may, by filing a
written notice with the Corporation Committee, designate a Beneficiary or
Beneficiaries to receive any benefits payable as a result of the death of the
Participant. This designation may be changed by the Participant at any time by
giving written notice to the Corporation Committee. Any designation of a
Beneficiary other than the Participant's spouse must be consented to by the
spouse in writing and witnessed by a notary public (or a representative of the
Plan prior to October 1, 1993). Any consent required under this section 7.10
shall be valid only with respect to the spouse who signed it. Spousal consent
shall not be required if the Participant establishes to the satisfaction of a
Plan representative that such consent may not be obtained because (a) there is
no spouse; (b) the spouse cannot be located, or (c) there exists such other
circumstances as the Secretary of the Treasury may prescribe as excusing the
requirement for such consent. A Participant may revoke any prior election
without obtaining the consent of the spouse to such revocation. In the absence
-65- Harris Retirement Plan
<PAGE> 78
Distributions
of a new election that meets the requirements of this section 7.10, the spouse
shall be the Beneficiary.
(b) Death Prior to Designating Beneficiary. In the event the
Participant dies with no beneficiary designation on file, the Participant's
Beneficiary shall be the Participant's surviving spouse, if any, and if there is
no surviving spouse, the Participant's estate.
7.11 Payment of Group Insurance Premiums. If a retired
Participant is eligible to be included in any contributory group insurance
program maintained or sponsored by an Employment Unit, a retired Participant who
is receiving benefits under the Plan in installments and who elects to be
covered under such contributory group insurance program may direct that a
specified portion of the installment payments be withheld and paid by the
Trustee on his behalf to the Employment Unit as his contribution under such
group insurance program. Such direction by a retired Participant shall be in
writing on a form prescribed by the Corporation Committee. Any such direction
may be revoked by the retired Participant not less than 15 days prior to the
effective date of such revocation. Any withholding and payment of insurance
costs on behalf of a retired
-66- Harris Retirement Plan
<PAGE> 79
Distributions
Participant shall be made in accordance with Treasury regulation section
1.401(a)-13.
7.12 Inability to Locate Participant. If, when any payment
becomes due, the Corporation Committee is unable to locate the Participant or
Beneficiary after exercising reasonable diligence, payment shall be stopped and
future payments to such individual discontinued. Any remaining unpaid benefits
with respect to such Participant or Beneficiary shall be deemed to be forfeited,
provided that if the Participant or Beneficiary later notifies the Corporation
Committee of his address, to the extent required by law payment of the forfeited
amount shall be reinstated by the Participating Company with which the
Participant was last employed.
-67- Harris Retirement Plan
<PAGE> 80
ARTICLE VIII
LOANS
8.1 In General. Each "party in interest," as defined in
section 3(14) of ERISA, with respect to the Plan for whom a Pre-Tax Account,
After-Tax Account and/or Rollover Account is maintained may request that a loan
be made to him from his Pre-Tax Account, After-Tax Account and/or Rollover
Account by filing an appropriate application, pursuant to procedures adopted by
the Corporation Committee. All loan requests shall be approved on a reasonably
equivalent basis (within the meaning of section 4975(d)(1)(A) of the Code and
section 408(b)(1)(A) of ERISA), subject to the conditions set forth in this
Article VIII.
8.2 Loan Administration. The Corporation Committee shall be
responsible for administering the loan program, but may delegate the operation
of the program to the Plan's record-keeper. The procedures for applying for a
loan and the basis on which loans will be approved or denied shall be described
in the summary plan description for the Plan or in other documents prepared by
or at the direction of the Corporation for this purpose and such additional
documents are hereby incorporated by reference to the extent required by the
Department of Labor.
-68- Harris Retirement Plan
<PAGE> 81
Loans
8.3 Terms and Conditions of Loans. The terms and conditions of
each loan shall be set forth in the promissory note and security agreement
evidencing the loan and shall include, but not be limited to, the following:
(a) Maximum Amount. The principal amount of a loan made
under this Plan to any individual together with the outstanding principal amount
of any other loan made to such individual under any other qualified plan under
section 401(a) of the Code maintained by a Related Company shall not exceed the
lesser of
(1) 50 percent of the individual's vested interest in
his Accounts,
(2) $50,000 reduced by the highest outstanding balance
of any previous loans from the Plan and any other
plans of a Related Company during the one-year
period ending immediately before the date on which
the current loan is made, and
(3) such amount that repayment of principal plus
interest does not exceed 25 percent of the
individual's gross pay.
-69- Harris Retirement Plan
<PAGE> 82
Loans
(b) Minimum Amount. The minimum loan amount shall be $500
and all loan amounts shall be in increments of $100.
(c) Period. No loan shall be made for a period less than 12
months or longer than four and one-half years or such other periods as may be
established from time to time under the Corporation Committee's written loan
procedures.
(d) Security. A loan shall be secured by the Participant's
Accounts up to the amount of the outstanding balance of the loan.
(e) Number of Loans. Two loans shall be available under the
Plan to a Participant at any time, but no third loan shall be made to an
individual within 30 days following the repayment in full of a prior loan, or
such other time period as may be provided from time to time under Plan
procedures.
(f) Participant Covers Loan Expenses. Any loan made under
the Plan shall be subject to such other terms and conditions as the Corporation
Committee shall deem necessary or appropriate, including the condition that he
reimburse the Plan for any state documentary stamps and other taxes, and any
other reasonable expenses specified by the Corporation Committee, which the Plan
incurs to extend, make and service the loan.
-70- Harris Retirement Plan
<PAGE> 83
Loans
(g) How to Apply. A loan may be initiated by following the
appropriate telephonic or other procedures established by the record-keeper, as
the delegate of the Corporation Committee.
8.4 Interest Rate. The interest rate for a loan made under
this Plan shall be fixed for the term of each loan, and shall be set as
determined by the Corporation Committee on a quarterly basis at a rate which it
deems reasonable at the time for a fully secured loan and which is consistent
with applicable Department of Labor regulations.
8.5 Repayment and Default.
(a) Payments. A loan made under the Plan shall require that
repayment be made in substantially level installments through payroll
withholding while the individual is an Employee and through such other means
(not less frequently than quarterly) as the Corporation Committee deems
appropriate for an individual who is not an Employee. Nevertheless, any
individual who terminates employment for any reason other than retirement,
discharge or lay-off must repay all of the outstanding principal balance of his
loan, plus interest due, within 90 days of the date of termination.
-71- Harris Retirement Plan
<PAGE> 84
Loans
(b) Prepayment. An individual may repay, at any time, all of
the outstanding principal balance of his loan, plus interest due, without
penalty.
(c) Crediting Payments. Principal and interest payments
shall be credited to the Participant's Pre-Tax Account, After-Tax Account and/or
Rollover Account and shall be invested in the same manner as Pre-Tax
Contributions, After-Tax Contributions and Rollover Contributions.
(d) Default. The events of default shall be set forth in the
promissory note and security agreement which evidence the loan. Such events
shall include, but not be limited to, the following:
(1) an individual terminates employment as an Employee
for any reason and does not make payments when
due, subject to a 90-day grace period;
(2) the Trustee concludes that the individual no
longer is a good credit risk;
(3) to the extent permissible under federal law, the
individual's obligation to repay the loan has been
discharged through bankruptcy or any other legal
-72- Harris Retirement Plan
<PAGE> 85
Loans
process of action which did not actually result in
payment in full, and
(4) the individual does not make payments when due,
subject to the applicable 90 day grace period.
(e) Effect of Default. Upon the existence or occurrence of
an event of default, the loan may become due and payable in full and, if such
loan is not actually repaid in full, shall be cancelled on the books and records
of the Plan and the amount otherwise distributable to such individual shall be
reduced, as of the date his Accounts otherwise become distributable, by the
principal amount of the loan then due plus any accrued but unpaid interest. Such
principal and interest shall be determined without regard to whether the loan
had been discharged through bankruptcy or any other legal process or action
which did not actually result in payment in full; however, interest shall
continue to accrue on such loan only to the extent permitted under applicable
law. Cancellation of the amount distributable to an individual under this
subsection (e) shall not occur until a distributable event occurs under the
Plan. In the event a default occurs before a distributable event occurs, the
Corporation Committee shall take such other steps to cure the default as it
deems appropriate under the circumstances to preserve Plan assets.
-73- Harris Retirement Plan
<PAGE> 86
Loans
8.6 Mechanics. A loan to an individual under this Plan shall
be made from his Pre-Tax Account, After-Tax Account and Rollover Account, and
the loan shall be an asset of the respective accounts. For investment purposes,
the principal amount of the loan shall be deducted from the Participant's
Investment Funds other than the Harris Stock Fund in proportion to their value
in his Accounts as of the Valuation Date immediately preceding the loan.
8.7 Special Powers. The Corporation Committee shall have the
power to take such action as it deems necessary or appropriate to stop the
benefit payments to or on behalf of an individual who fails to repay a loan
(without regard to whether the obligation to repay the loan had been discharged
through bankruptcy or other legal process or action) until his Pre-Tax Account,
After-Tax Account and/or Rollover Account has been reduced by the principal due
(without regard to such discharge) on such loan or to distribute the note which
evidences such loan in full satisfaction of any interest in the Pre-Tax Account,
After-Tax Account, and/or Rollover Account which is attributable to the unpaid
balance of such loan.
-74- Harris Retirement Plan
<PAGE> 87
ARTICLE IX
IN-SERVICE WITHDRAWALS
9.1 At-Will Withdrawals from Savings Account and After-Tax
Account.
(a) Availability. Subject to section 9.4, a Participant may
elect to withdraw at any time in a lump sum all or a portion of the balance in
his Savings Account and After-Tax Account for any purpose by filing the
appropriate election with the Local Committee.
(b) Limitations. A Participant may make a withdrawal under
this subsection (a) not more than once every three months. A Participant's
election to make After-Tax Contributions shall be suspended, and no After-Tax
Contributions or Matching After-Tax Contributions shall be credited to the
Participant's Account, for a period of three months after the date of a
Participant's withdrawal from the After-Tax Account. The Participant's election
shall automatically be reinstated at the expiration of such three-month period,
unless the Participant has filed a change of election pursuant to section 3.7.
9.2 Hardship Withdrawals from Pre-Tax Account.
(a) Availability. Subject to section 9.4, a Participant who
has taken all loans and withdrawals under section 9.1, may elect to withdraw in
a lump sum up to 100 percent of his Pre-Tax Contributions, and/or his Rollover
-75- Harris Retirement Plan
<PAGE> 88
In-Service Withdrawals
Account to satisfy an immediate and heavy financial need, by filing an election
with the Corporation Committee. Withdrawals under this section 9.3 shall be
authorized by the Corporation Committee in the event of financial need meeting
the safe harbor standards of Treasury regulation section 1.401(k)-1(d)(2), which
is incorporated herein by reference. A withdrawal shall be deemed to be made on
account of an immediate and heavy financial need under those regulations if the
withdrawal is for:
(1) expenses for medical care previously incurred by
the Participant, his spouse or any of his
dependents or necessary for these persons to
obtain medical care;
(2) purchase (excluding mortgage payments) of a
principal residence for the Participant;
(3) payment of tuition and related education fees for
the next 12 months of post-secondary education for
the Participant, his spouse, children or
dependents;
(4) payment to prevent the eviction of the Participant
from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
-76- Harris Retirement Plan
<PAGE> 89
In-Service Withdrawals
(5) any other event determined by the Commissioner of
Internal Revenue.
A withdrawal shall be deemed necessary to satisfy an immediate
and heavy financial need of the Participant if:
(i) the withdrawal is not in excess of the amount
required to meet the financial need of the
Participant, including taxes and additions to
tax applicable to such withdrawal, and
(ii) the Participant has obtained all other
distributions, withdrawals, and all
nontaxable loans currently available under
this Plan and any other plans maintained by a
Related Company.
(b) Limitations. A Participant may take a withdrawal under
this section 9.2 no more than once in a six-month period.
9.3 Emergency Withdrawals. Subject to section 9.4, a
Participant who has taken all withdrawals available under sections 9.1 and 9.2
above may elect to withdraw in a lump sum all or a portion of the balance in his
Basic
-77- Harris Retirement Plan
<PAGE> 90
In-Service Withdrawals
Account and Supplemental Account if the withdrawal otherwise satisfies the
requirements of section 9.2(a). An election to withdraw under this section 9.3
is subject to the approval of the "sector executive" which shall be granted on a
uniform and nondiscriminatory basis.
9.4 Reduction of Investment Fund Balances. The Investment
Funds in which a Participant's Accounts are invested, other than the Harris
Stock Fund, shall be reduced proportionately to reflect the amount of the
Participant's withdrawals under this Article IX, except that a Participant may
not withdraw contributions invested in the Harris Stock Fund, and no more than
80 percent of the balance determined as of the Valuation Date immediately
preceding the withdrawal shall be available to be withdrawn from equity and
fixed income fund balances; provided that the amount remaining in the equity and
fixed income funds determined as of the Valuation Date coinciding with or next
following the withdrawal may be withdrawn as part of the withdrawal request.
-78- Harris Retirement Plan
<PAGE> 91
ARTICLE X
TOP-HEAVY PROVISIONS
10.1 In General. Notwithstanding any other provisions of the
Plan to the contrary, for any Plan Year in which this Plan is "top-heavy," as
defined herein, the provisions of this Article X shall apply. If the Plan is
top-heavy and then ceases to be top-heavy, except as otherwise provided in
section 10.3, the provisions of this Article X shall cease to apply.
10.2 Minimum Allocation.
(a) Amount. For any Plan Year for which the Plan is
top-heavy, a minimum allocation shall be made for each "non-key employee" who is
employed by a Participating Company on the last day of the Plan Year in an
amount equal to the lesser of (1) three percent of Compensation or (2) the
largest percentage of Compensation allocated to any "key employee" during the
Plan Year. The minimum allocation is determined without regard to any Social
Security contribution. The minimum allocation shall not apply to any non-key
employee who receives a minimum contribution or minimum benefit under any other
plan of a Related Company.
(b) Allocation. To satisfy subsection (a), the
Profit-Sharing Contributions for such Plan Year first shall be allocated to all
Participants
-79- Harris Retirement Plan
<PAGE> 92
Top-Heavy Provisions
employed on the last day of the Plan Year in an amount that meets the minimum
allocation amount, and any remaining Profit-Sharing Contribution then shall be
allocated in accordance with section 3.2.
10.3 Minimum Vesting. For any Plan Year for which the Plan is
top-heavy, the vested interest of a Participant who is employed by a
Participating Company during any part of the Plan Year shall be determined under
the following schedule:
Period of Service Vested Percentage
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
-80- Harris Retirement Plan
<PAGE> 93
Top-Heavy Provisions
If the Plan becomes top-heavy and ceases to be top-heavy, a
Participant who have a five-year Period of Service as determined under section
5.3 may elect to have his vested interest continue to be determined under this
section 10.3, notwithstanding that the Plan is no longer top-heavy.
10.4 Definitions. For purposes of this Article X, the following
terms shall have the following meanings:
(a) "Determination date" means the last day of the preceding
Plan Year.
(b) "Determination period" means the Plan Year containing
the determination date and the four preceding Plan Years.
(c) "Key employee" means an Employee or former employee (and
their Beneficiaries) who, at any time during the determination period, is
(1) an officer of the Participating Company and has
annual compensation greater than 50 percent of the
dollar limitation in effect under section
415(b)(1)(A) of the Code for any such Plan Year,
(2) one of the ten Employees having annual
compensation in excess of the limitation in effect
-81- Harris Retirement Plan
<PAGE> 94
Top-Heavy Provisions
under section 415(c)(1)(A) of the Code and owning
(or considered as owning with the meaning of
section 318 of the Code) the largest interests in
the Participating Company,
(3) a five-percent owner (within the meaning of
section 416(i)(1)(B) of the Code) of the
Participating Company, or
(4) a one-percent owner of the Participating Company
having annual compensation from the Participating
Company of more than $150,000.
The determination of "key employee" shall be made under
section 416(i)(1) of the Code, the terms of which are incorporated herein by
reference.
(d) "Non-key employee" means any Employee who is not a key
employee.
(e) "Permissive aggregation group" means the "required
aggregation group" and any other plans of the Participating Company which, when
considered as a group with the required aggregation group, would continue to
satisfy the requirements of sections 401(a)(4) and 410 of the Code.
-82- Harris Retirement Plan
<PAGE> 95
Top-Heavy Provisions
(f) "Required aggregation group" means (1) each qualified
plan of the Participating Company in which at least one key employee
participates or participated at any time during the determination period
(regardless of whether the plan has terminated), and (2) any other qualified
plan of the Participating Company which enables a plan described in (1) to meet
the requirements of sections 401(a) and 410 of the Code.
(g) "Top-heavy" means:
(1) the top-heavy ratio for the Plan exceeds 60
percent and the Plan is not part of any required
aggregation group or permissive aggregation group;
(2) the Plan is part of a required aggregation group
but not a permissive aggregation group and the
top-heavy ratio for the required aggregation group
exceeds 60 percent;
(3) the Plan is part of a required aggregation group
and a permissive aggregation group and the
top-heavy ratio for the permissive aggregation
group exceeds 60 percent.
(h) "Top-heavy ratio" means:
-83- Harris Retirement Plan
<PAGE> 96
Top-Heavy Provisions
(1) If the Participating Company or Related Company
has not maintained any defined benefit plan which
during the five-year period ending on the
determination date had accrued benefits, the
top-heavy ratio is a fraction, the numerator of
which is the sum of the account balances of all
key employees as of the determination date
(including any part of any account balance
distributed in the five-year period ending on the
determination date), and the denominator of which
is the sum of all account balances (including any
part of any account balance distributed in the
five-year period ending on the determination
date).
(2) If a Related Company maintains or has maintained a
defined benefit plan which during the five-year
period ending on the determination date had
accrued benefits, the top-heavy ratio is a
fraction, the numerator of which is the sum of
account balances under the defined contributions
plans for
-84- Harris Retirement Plan
<PAGE> 97
Top-Heavy Provisions
all key employees (including any part of any
account balance distributed in the five-year
period ending on the determination date), and the
present value of accrued benefits under the
defined benefit plans for all key employees as of
the determination date, and the denominator of
which is the sum of the account balances under the
defined contribution plans for all participants
(including any part of any account balance
distributed in the five-year period ending on the
determination date), and the present value of
accrued benefits under the defined benefit plans
for all participants as of the determination date.
(3) For purposes of (1) and (2) above, the value of
account balances and the present value of accrued
benefits shall be determined as of the most recent
"valuation date" that falls within or ends with
the 12-month period ending on the determination
date, except as provided in section 416 of the
Code
-85- Harris Retirement Plan
<PAGE> 98
Top-Heavy Provisions
for the first and second plan years of a
defined benefit plan. In the case of a defined
benefit plan, the "present value of accrued
benefits" shall be determined under the terms of
the applicable defined benefit plan. The account
balances and accrued benefits of a Participant who
is not a key employee but who was a key employee
in a prior year, or who has not been credited with
at least an Hour of Service with any Participating
Company maintaining the plan at any time during
the five-year period ending on the determination
date shall be disregarded. When aggregating plans,
the value of account balances and accrued benefits
shall be calculated with reference to the
determination dates that fall within the same
calendar year.
(4) The calculation of the top-heavy ratio shall be
determined in accordance with section 416 of the
-86- Harris Retirement Plan
<PAGE> 99
Top-Heavy Provisions
Code, the provisions of which are incorporated
herein by reference.
(i) "Valuation date" means the last day of the Plan Year.
-87- Harris Retirement Plan
<PAGE> 100
ARTICLE XI
ADMINISTRATION
11.1 Named Fiduciaries. The Corporation shall be the "named
fiduciary" responsible for the control, management and administration of the
Plan.
11.2 Corporation Committee. The Corporation shall establish a
Corporation Committee to administer the Plan. The members of the Corporation
Committee shall be appointed, and removed at any time, by the appropriate
officers of the Corporation. A member of the Corporation Committee may resign at
any time by giving written notice to the Corporation at least 15 days prior to
the effective date of the resignation.
11.3 Powers and Duties of Committee. The Corporation Committee
shall have the powers and duties conferred on it by the terms of the Plan. The
Corporation Committee may establish such rules and regulations as it deems
necessary to enable it to administer the Plan. The Corporation Committee shall
have the discretionary authority to determine eligibility for benefits and
construe the terms of the Plan.
-88- Harris Retirement Plan
<PAGE> 101
Administration
11.4 Actions of Committee. No formal meeting and no minutes shall
be required with respect to actions taken by the Corporation Committee.
11.5 Finality of Decisions. All decisions and directions made by
the Corporation Committee, in the discretionary exercise of its powers and
duties, shall be final and binding on all parties concerned.
11.6 Immunities of Committee. Except as otherwise provided by
law, no member of the Corporation Committee shall be liable to a Participating
Company or to any Participant or Beneficiary by reason of the exercise in good
faith of any power or discretion vested in him by the terms of the Plan.
11.7 Advisers and Agents. The Corporation, or the Corporation
Committee, with the consent of the Corporation, may employ one or more persons
to render advice with respect to any responsibility that the Corporation, or the
Corporation Committee, respectively, has under the Plan. The Corporation, or the
Corporation Committee, may appoint unrelated parties to carry out trustee,
investment management and record-keeping responsibilities with respect to the
Plan. The Corporation shall indemnify any person, including
-89- Harris Retirement Plan
<PAGE> 102
Administration
an employee of the Corporation, who is acting on behalf of the Corporation or
the Corporation Committee in this capacity with respect to liability that may
arise by reason of his action or failure to act concerning the Plan, excepting
any willful or gross misconduct or criminal acts, to the extent required in the
respective contracts governing such arrangements.
11.8 Committee Member who is Participant. A member of the
Corporation Committee who also is a Participant shall have no right to vote with
respect to any action that pertains solely to him as a Participant. In the event
a majority of the remaining members are unable to agree as to the action to be
taken with respect to the Participant, the chief executive officer of the
Corporation shall appoint an impartial person to arbitrate the matter between
the remaining members and to reach a decision.
11.9 Information Provided by Participating Companies. Each
Participating Company and Employment Unit shall provide the Corporation, the
Corporation Committee and the Trustee with complete and timely information
regarding employment data for each Employee and Participant needed by the
Corporation, Corporation Committee or Trustee to administer the Plan,
-90- Harris Retirement Plan
<PAGE> 103
Administration
including, but not limited to, information concerning Compensation, date of
employment, date of termination of employment, reason for termination and any
other information required by the Corporation, Corporation Committee, or
Trustee.
11.10 Expenses. All reasonable and proper expenses of the Plan
and the Trust, including, but not limited to, investment advisory fees,
record-keeping fees, and Trustee's fees shall be paid from Participants'
Accounts in a uniform and nondiscriminatory manner, which may be ratably, unless
otherwise paid by the Corporation. The Corporation may seek reimbursement of any
expense which it pays that is properly payable by the Trust Fund.
11.11 Trust Fund Available to Pay All Plan Benefits. The Plan
is intended to be a single plan under Treasury regulation section
1.414(l)-1(b)(1). The maintenance of Accounts as required by the terms of the
Plan shall be for record-keeping purposes only. All of the Trust Fund shall be
available to pay benefits to all Participants and Beneficiaries.
-91- Harris Retirement Plan
<PAGE> 104
ARTICLE XII
AMENDMENT AND TERMINATION AND CHANGE OF CONTROL
12.1 Amendment. The Corporation reserves the right to amend
the Plan by action of its Board of Directors or the appropriate committee
thereof at any time and from time to time, subject to the following limitations:
(a) no amendment shall be made which vests in any
Participating Company any interest in any assets of the Plan other than as
specifically provided in section 12.2;
(b) no amendment shall be made which would have the effect
of decreasing a Participant's "accrued benefit" as proscribed in section
411(d)(6) of the Code; and
(c) no amendment shall have the effect of reducing a
Participant's vested interest in his Accounts. If the Plan is amended to change
the vesting schedule, each Participant with at least a three-year Period of
Service shall have the right to elect to have his vested interest computed
without regard to the amendment. Each Participant shall be permitted to make
this election during the period ending 60 days after the latest of the date (1)
the
-92- Harris Retirement Plan
<PAGE> 105
Amendment and Termination and Change of Control
amendment is adopted; (2) the amendment is effective, and (3) the Participant is
issued a written notice of the amendment by the Corporation or its delegate.
Amendments will normally be initiated by the Corporation
Committee, approved by upper management of the Corporation, then adopted by
resolution of the Retirement Plan Investment Committee of the Board of
Directors.
12.2 Termination of Plan. This Plan is intended to be
permanent, and it is the expectation of the Corporation that it will continue
indefinitely. However, the Corporation reserves the right to terminate the Plan
by resolution of its Board of Directors or the appropriate committee thereof. In
the case of a complete termination of the Plan, previously unallocated
forfeitures shall be allocated as otherwise provided in the Plan. To the extent
previously unallocated forfeitures cannot be allocated because all Participants
have reached the limitations of section 415 of the Code, the unallocated amount
shall revert back to the appropriate Participating Company, as provided in
section 3.10.
-93- Harris Retirement Plan
<PAGE> 106
Amendment and Termination and Change of Control
12.3 Discontinuance of Contributions. The Corporation reserves
the right to discontinue contributions to the Plan by amendment or by resolution
of the Board of Directors or the appropriate committee thereof.
12.4 Vesting on Termination or Discontinuance of
Contributions. As of the date of the partial or complete termination of the Plan
or upon the complete discontinuance of contributions to the Plan, each affected
Participant shall become fully vested in his Accounts and no further allocations
of contributions or forfeitures shall be made after such date on behalf of an
affected Participant.
12.5 Distribution on Termination. Upon the complete
termination of the Plan, the Trustee shall distribute to each affected
Participant the full amount standing to the credit of his Accounts; provided
that if such amount exceeds (or at the time of any prior distribution exceeded)
$3,500 and the Participant is not yet age 65, such lump sum shall not be paid
without his consent. If the Participant does not consent, an annuity contract
shall be purchased for and distributed to the Participant.
-94- Harris Retirement Plan
<PAGE> 107
Amendment and Termination and Change of Control
12.6 Change of Control.
(a) Definition. Change in Control means the occurrence of
any one of the following events:
(i) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20 percent or more of
the combined voting power of the Corporation's then outstanding securities
eligible to vote for the election of the Board of Directors (the "Board") of the
Corporation (the "Corporation Voting Securities"); provided however, that the
event described in this paragraph (i) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (A) by the Corporation
or any Subsidiary, (B) by any employee benefit plan sponsored or maintained by
the Corporation or any Subsidiary, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) pursuant to a
"Non-Control Transaction" (as defined in paragraph (iii)) or (E) pursuant to any
acquisition by a corporate officer of the Corporation or any group of persons
including the Corporate officer;
-95- Harris Retirement Plan
<PAGE> 108
Amendment and Termination and change of Control
(ii) individuals who, on July 1, 1996, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to July 1, 1996, whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors who remain on the Board
(either by a specific vote or by approval of the proxy statement of the
Corporation in which such person is named as a nominee for director, without
objection to such nomination) shall also be deemed to be an Incumbent Director;
provided, however, that no individual initially elected or nominated as a
director of the Corporation as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the Board shall
be deemed to be an Incumbent Director;
(iii) the consummation of a merger, consolidation, share
exchange or similar form of corporate reorganization of the Corporation or any
such type of transaction involving the Corporation or any of its Subsidiaries
that requires the approval of the Corporation's stockholders (whether for such
transaction or the issuance of securities in the transaction or otherwise) (a
"Business
-96- Harris Retirement Plan
<PAGE> 109
Amendment and Termination and Change of Control
Combination"), unless immediately following such Business Combination:
(A) more than 80 percent of the total voting power of the corporation resulting
from such Business Combination (including, without limitation, any corporation
which directly or indirectly has beneficial ownership of 100 percent of the
Corporation Voting Securities) eligible to elect directors of such corporation
is represented by shares that were Corporation Voting Securities immediately
prior to such Business Combination (either by remaining outstanding or being
converted), and such voting power is in substantially the same proportion as the
voting power of such Corporation Voting Securities immediately prior to the
Business Combination, (B) no person (other than any publicly traded holding
company resulting from such Business Combination, any employee benefit plan
sponsored or maintained by the Corporation (or the corporation resulting from
such Business Combination)), becomes the beneficial owner, directly or
indirectly, of 20 percent or more of the total voting power of the outstanding
voting securities eligible to elect directors of the corporation resulting from
such Business Combination, and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business Combination
were Incumbent Directors at the time of the Board's approval of the execution of
the initial agreement providing for such Business Combination (any Business
-97- Harris Retirement Plan
<PAGE> 110
Amendment and Termination and Change of Control
Combination which satisfies the conditions specified in (A), (B) and (C) shall
be deemed to be a "Non-Control Transaction"); or
(iv) the stockholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or the direct or indirect
sale or other disposition of all or substantially all of the assets of the
Corporation and its Subsidiaries.
Notwithstanding the foregoing, a Change in Control of the
Corporation shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 20 percent of the Corporation Voting
Securities as a result of the acquisition of Corporation Voting Securities by
the Corporation which reduces the number of Corporation Voting Securities
outstanding, provided that if after such acquisition by the Corporation such
person becomes the beneficial owner of additional Corporation Voting Securities
that increases the percentage of outstanding Corporation Voting Securities
beneficially owned by such person, a Change in Control of the Corporation shall
then occur.
For purposes of the definition of a "Change of Control", the
term "Subsidiary" shall mean any corporation or other entity in which the
Corporation has a direct or indirect ownership interest of 50 percent or more of
the total
-98- Harris Retirement Plan
<PAGE> 111
Amendment and Termination and Change of Control
combined voting power of the then outstanding securities of such corporation or
other entity entitled to vote generally in the election of directors or in which
the Corporation has the right to receive 50 percent or more of the distribution
of profits or 50 percent of the assets on liquidation or dissolution.
Notwithstanding any other provisions of the Plan to the
contrary, if a Change in Control occurs, then during the period commencing on
the date of acquisition of said voting power, control of the Board, or
consummation of a Business Combination, and ending at the close of business on
the next following June 30 (the "Restriction Period"), the provisions of this
section 12.6 shall apply.
(b) Effect. During the Restriction Period, the Plan may not
be terminated or amended to the extent the amendment would:
(1) reduce coverage under the Plan;
(2) reduce the amount of Profit-Sharing Contributions
required to be made for the Plan Year ending on
the last day of the Restriction Period;
(3) reduce the amount of After-Tax Contributions
eligible for a matching contribution that a
Participant is permitted to make or the amount of
-99- Harris Retirement Plan
<PAGE> 112
Amendment and Termination and Change of Control
the Matching After-Tax Contributions required
under sections 3.5 and 3.6; or
(4) reduce the amount of Pre-Tax Contributions that a
Participant is permitted to make or the amount of
Matching Pre-Tax Contributions required under
sections 3.3 and 3.4.
(c) For the purpose of computing the amount of the
Profit-Sharing Contributions for the twelve-month period ending on the last day
of a Restriction Period, the adjusted consolidated net income of the Corporation
and its Consolidated Subsidiaries before net income taxes for the Fiscal Year
ending on such date is deemed to be the forecast of the consolidated net income
of the Corporation and its Consolidated Subsidiaries for such Fiscal Year as set
forth in the annual operating plan of the Corporation for such Fiscal Year.
(d) During the Restriction Period, any person who was an
Employee on the day preceding the first day of the Restriction Period shall be
deemed to be an Employee so long as he is employed by a member of a "controlled
group of corporations" which includes, or by a trade or business that is under
common control with (as those terms are defined in sections 414(b) and
-100- Harris Retirement Plan
<PAGE> 113
Amendment and Termination and Change of Control
(c) of the Code) the Corporation, any corporation which is the survivor of any
merger or consolidation to which the Corporation was a party, or any corporation
into which the Corporation has been liquidated.
-101- Harris Retirement Plan
<PAGE> 114
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Restrictions on Alienation; Qualified Domestic Relations
Orders. Except as otherwise may be required for Federal, state or local income
tax withholding purposes, no benefit or interest under this Plan shall be
subject to assignment or alienation, either voluntarily or involuntarily. The
preceding sentence shall apply to the creation, assignment or recognition of a
right to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined to be a Qualified
Domestic Relations Order, as defined in section 414(p) of the Code. In
accordance with uniform and nondiscriminatory procedures established by the
Corporation Committee from time to time, the Corporation Committee upon the
receipt of a domestic relations order which seeks to require the distribution of
a Participant's Account in whole or in part to an "alternative payee" (as that
term is defined in Code section 414(p)(8)) shall:
(1) promptly notify the Participant and such "alternate
payee" of the receipt of such order and of the procedure which the Corporation
Committee will follow to determine whether such order constitutes a "Qualified
Domestic Relations Order" within the meaning of Code section 414(p),
-102- Harris Retirement Plan
<PAGE> 115
Miscellaneous Provisions
(2) determine whether such order constitutes a "Qualified
Domestic Relations Order" and notify the Participant and the "alternate payee"
of the results of such determination and,
(3) if the Corporation Committee determines that such order
does constitute a "Qualified Domestic Relations Order," distribute to such
"alternate payee" under the terms of such order the amount called for under the
order in a single sum within 60 days of the date such order is determined to
constitute a Qualified Domestic Relations Order, without regard to whether a
distribution would be permissible to the Participant at such time under this
Plan.
The determination and the distribution made by, or at the
direction of, the Corporation Committee under this section 13.1 shall be final
and binding on the Participant and on all other persons interested in such
order. An "alternate payee" under this section 13.1 shall not be an eligible
person for purposes of obtaining a loan pending the distribution of such
alternate payee's entire interest under this Plan.
13.2 Exclusive Benefit Requirement. Except as provided in
sections 12.2 and 13.3, no assets of the Plan shall revert to a Participating
Company or
-103- Harris Retirement Plan
<PAGE> 116
Miscellaneous Provisions
be used for or diverted to purposes other than providing benefits to
Participants and their Beneficiaries and defraying reasonable costs of
administering the Plan.
13.3 Return of Contributions.
(a) Mistake of fact. Any contribution made by a
Participating Company due to a mistake of fact shall be returned to the
Participating Company within one year of the date the contribution was made.
(b) Nondeductible Contributions. In the event the deduction
of a contribution made by a Participating Company is disallowed under section
404 of the Code, such contribution (to the extent disallowed) shall be returned
to the Participating Company within one year of the disallowance of the
deduction.
13.4 No Contract of Employment. Neither the establishment and
maintenance of the Plan nor the participation in the Plan by any Employee shall
be construed as a contract between the Employee and any Participating Company so
as to give any Employee the right to be retained by any Participating Company,
or to interfere with the rights of any Participating Company to discharge the
Employee at any time.
-104- Harris Retirement Plan
<PAGE> 117
Miscellaneous Provisions
13.5 Payment of Benefits on Incapacity. In the event the
Corporation Committee determines that any person to whom a distribution is to be
made is unable to care for his affairs by reason of illness or other disability,
any amount distributable to such person (unless prior claim thereto shall have
been made by a duly qualified guardian or other legal representative) may, in
the discretion of the Corporation Committee, be paid to such other person deemed
by the Corporation Committee to be responsible for such person. Any such payment
made under this section 13.5 shall constitute a complete discharge of any
liability under this Plan.
13.6 Merger. In the event of a merger or consolidation with,
or transfer of assets or liabilities to any other plan, each Participant shall
receive a benefit immediately after such merger, consolidation or transfer (if
the Plan then terminated) which is at least equal to the benefit the Participant
was entitled to receive immediately before such merger, consolidation or
transfer (if the Plan had then terminated).
13.7 Construction. The headings and subheadings in this Plan
have been inserted for convenience of reference only and are to be ignored in
the
-105- Harris Retirement Plan
<PAGE> 118
Miscellaneous Provisions
construction of its provisions. Wherever appropriate, the masculine shall be
read as the feminine, the plural as the singular, and the singular as the
plural. References in this Plan to a section shall be to a section in this Plan
unless otherwise indicated. References in this Plan to a section of the Code,
ERISA or any other federal law shall also refer to the regulations issued under
such section.
13.8 Governing Law. This Plan shall be construed, to the
extent to which state law is applicable, in accordance with the laws of the
State of Florida. Venue for any action arising under this Plan shall be in
Brevard County, Florida.
13.9 Mistaken Payments. If a mistake is made in favor of a
Participant or Beneficiary in the payment of benefits under this Plan, the
Corporation or the Trustee (acting at the Corporation direction and on behalf of
the Plan) shall take such action against the Participant or Beneficiary to
remedy such mistake and to make the Plan whole as the Corporation deems proper
and appropriate under the circumstances, and any mistake in favor of the Plan
shall promptly be corrected by, or at the direction of, the Corporation.
-106- Harris Retirement Plan
<PAGE> 119
ARTICLE XIV
SPECIAL PROVISIONS FOR
EMPLOYEES OF
HARRIS TECHNICAL SERVICES DIVISION OF
HARRIS TECHNICAL SERVICES CORPORATION
Notwithstanding the provisions of any other Article of this
Plan to the contrary, the following special provisions apply to Participants who
are employees of the Harris Technical Services Division of Harris Technical
Services Corporation.
14.1 Participation. Notwithstanding section 2.1, an Employee
shall become a Participant on the first day on which the Employee performs an
Hour of Service.
14.2 Profit-Sharing Contributions. (a) Notwithstanding section
3.1, a Profit-Sharing Contribution shall be made for each Plan Year on behalf of
Employees of the Employment Unit consisting of the Harris Technical Services
Division in an amount equal to 7 percent of before-tax M-2 profits. Ten (10)
percent of the estimated Profit-Sharing Contribution for each Plan Year shall be
-107- Harris Retirement Plan
<PAGE> 120
made no later than the last day of October, January, and April of each year. The
remaining Profit-Sharing Contribution for each Plan Year shall be made no later
than the last day of September. (b) Notwithstanding any provision to the
contrary in section 3.2, Profit-Sharing Contributions shall be allocated pro
rata to each Participant on the basis of the number of full months of his or her
Period of Service completed during the Plan Year, provided that fractional
months shall be aggregated. The limitation in eligibility in section 3.2(c)
shall not apply.
14.3 Pre-Tax Contributions. Section 3.3(a) shall apply,
provided, however, that a Participant may elect to reduce his Compensation by an
amount equal to any whole percentage not to exceed 15 percent and have the
amount of such reduction contributed to the Plan as a Pre-Tax Contribution.
14.4 No Matching Pre-Tax Contributions. Notwithstanding any
other provision of the Plan to the contrary, no Matching Pre-Tax Contributions
will be made on behalf of Participants.
-108- Harris Retirement Plan
<PAGE> 121
Miscellaneous Provisions
14.5 No Investment in the Harris Stock Fund. Notwithstanding
any provision of the Plan to the contrary, Participants may not direct
investments into the Harris Stock Fund.
14.6 Vesting. The Vesting Schedule in section 5.3(a) shall be
replaced by the following vesting schedule:
Period of Service Vested Percentage
Less than 1 year 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or more 100%
-109- Harris Retirement Plan
<PAGE> 122
Miscellaneous Provisions
HARRIS CORPORATION
Date: 6/28/96 By: /s/ D.S. Wasserman
----------------------------- -------------------------------
Attest: /s/ E.T. Golitko Title: Vice President - Treasurer
--------------------------- ---------------------------
-110- Harris Retirement Plan
<PAGE> 123
APPENDIX A
Investment Funds. The Investment Funds available under the plan as of
October 1, 1993 are as follows:
(a) Balanced Fund. Assets held in this fund will be invested in a variety
of stocks, bonds, mortgages, fixed-income securities such as U.S.
Treasury bills, certificates of deposit, commercial paper and real
estate.
(b) Short-Term Bond Fund. Assets in this fund will be invested in
shorter-term fixed-income securities such as government bonds, U.S.
Treasury bills and notes, certificates of deposit, federal agency
obligations, mortgage securities and corporate bonds.
(c) Money Market Fund. Assets in this fund will be invested in a
diversified portfolio of high-quality, short-term fixed instruments
such as U.S. Treasury bills, federal agency obligations, commercial
paper, certificates of deposit and banker's acceptances.
-111- Harris Retirement Plan
<PAGE> 124
(d) Stable Value Fund. Assets held in this fund will be invested in a
diversified portfolio of investment contracts and short-term,
high-quality fixed income instruments that guarantee principal and a
specified rate of return for a specified period.
(e) Equity Income Fund. Assets held in this fund will be invested primarily
in dividend-paying common stocks of established companies but may also
be invested in convertible bonds and/or convertible preferred stock.
(f) Indexed Equity Fund. Assets held in this fund will be invested in a
stock portfolio that mirrors the Standard & Poor's 500 Stock Index.
(g) Growth Fund. Assets in this fund will be invested for the longer term,
primarily in common stocks of companies which are currently
experiencing an above-average rate of earnings growth. The fund's stock
selection criteria include a requirement that each company have a
five-year average performance record of sales, earnings, dividend
growth, pre-tax margins, return on equity.
(h) Harris Stock Fund. Assets in this fund will be invested in common stock
of the Corporation.
-112- Harris Retirement Plan
<PAGE> 125
The Investment Funds may be changed at any time and from time to time.
-113- Harris Retirement Plan
<PAGE> 126
APPENDIX B
SPECIAL PROVISIONS FOR TRANSFERRED PARTICIPANTS
The provisions of this Appendix B are effective as of January 1, 1990.
(a) For purposes of this Appendix B, the following terms shall
have the following meanings:
(1) "Transferred Participants" means those former Employees
whose employment with a Participating Company ceased
due to a sale of the stock or assets of a Sold
Operation.
(2) "Sold Operation" means (i) the Data Communications
Division and (ii) the Chatsworth Operation.
-114- Harris Retirement Plan
<PAGE> 127
(3) "Closing Date" means the date as of which the sale of
the relevant Sold Operation was effective.
(b) Each Transferred Participant shall be fully vested in his
Accounts as of the relevant Closing Date.
-115- Harris Retirement Plan
<PAGE> 128
APPENDIX C
PARTICIPATING COMPANIES
As of July 1, 1996, the Related Companies that are Participating
Companies are:
Harris Corporation
Harris Data Services Corporation
R.F. Communications, Inc.
Scientific Calculations, Inc.
Harris Semiconductor International, Inc.
Harris Technical Services Corporation
Harris International Sales Corporation
Harris Space Systems Corporation
Harris Video Communications Systems, Inc.
Harris Data Communications Division of Lanier Worldwide,
Inc.
Baseview Products, Inc.
-116- Harris Retirement Plan
<PAGE> 1
Exhibit 10(h)
HARRIS CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I - PURPOSE AND EFFECTIVE DATE
1.1 Purpose. The Harris Corporation Supplemental Executive Retirement Plan (the
"SERP") is intended to provide deferred compensation for a "select group of
management or highly compensated employees" as defined in section 201(2) of
ERISA. In particular, the SERP is intended to provide participants in the Harris
Corporation Retirement Plan (the "Retirement Plan") with contributions that
would have been made on their behalf, but for the limitations of sections
401(a)(17), 401(k)(3), 402(g) and 415 of the Code.
1.2 Effective Date. The SERP, as amended herein, is effective as of July 1,
1996.
ARTICLE II - DEFINITIONS
Each term used in this Plan shall have the definition given to it in the
Retirement Plan, unless otherwise specifically provided herein.
2.1 Account - means the account established under section 5.1 for each
Participant.
2.2 Code - means the Internal Revenue Code of 1986, as amended from time to
time.
2.3 Committee - means the Corporation Committee, the members of which shall be
appointed in the exercise of discretion of the Retirement Plan Investment
Committee of the Board of Directors of the Corporation.
2.4 Corporation - means Harris Corporation.
2.5 ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.6 Participant - means an individual who meets the requirements of sections 3.1
or 3.2 and, where applicable, enters into a salary deferral agreement pursuant
to Article IV.
2.7 Retirement Plan - means the Harris Corporation Retirement Plan, as amended
from time to time.
2.8 SERP - means the Harris Corporation Supplemental Executive Retirement Plan,
as amended from time to time.
-1-
<PAGE> 2
ARTICLE III - PARTICIPATION
3.1 Continued Participation. Any individual who is a participant in the Harris
Corporation Supplemental Executive Retirement Plan as of June 30, 1996 shall
continue to participate in this SERP.
3.2 General Participation. The following shall be eligible to participate: Any
employee who receives compensation for a Plan Year from the Corporation of at
least $120,000 (as indexed for inflation in a manner to be determined in the
sole discretion of the Committee) and (a) for whom contributions under the
Retirement Plan are reduced as a result of sections 401(a)(17), 401(k)(3),
402(g) or 415 of the Code, or (b) who is designated by the Committee as a
Participant.
ARTICLE IV - CONTRIBUTIONS
4.1 In General. (a) Subject to the provisions of subsection 4.2, whenever
contributions to the Retirement Plan on behalf of a Participant are reduced
pursuant to sections 401(a)(17), 401(k)(3), 402(g) or 415 of the Code, the
amount of the reduction shall be credited to the Participant's Account.
(b) For any Plan Year during which a Participant is not a participant
in the Retirement Plan and has filed a Salary Deferral Agreement under Section
4.3, contributions shall be made to the SERP in an amount equal to the
Profit-Sharing Contribution that he would have received under Section 3.2 of the
Retirement Plan had he been a participant in the Retirement Plan (without regard
to sections 401(a)(17), 401(k), 402(g) and 415 of the Code) and any other
contributions attributable to his salary deferral agreement under Section 4.3 of
this SERP, had it been made under Section 3.7 of the Retirement Plan (without
regard to sections 401(a)(17), 401(k), 402(g) and 415 of the Code).
4.2 Salary Deferral Agreement by Retirement Plan Participant. Pre-Tax
Contributions and Matching Pre-Tax Contributions under the Retirement Plan that
are reduced pursuant to sections 401(a)(17), 401(k)(3, 402(g) or 415 of the Code
shall be credited to the Participant's Account only if he or she timely enters
into a deferral election on the form and in the manner prescribed by the
Committee.
4.3 Salary Deferral Agreement by Non-Retirement Plan Participant. A Participant
who is not a participant in the Retirement Plan may enter into a salary deferral
agreement, electing to defer into the SERP a percentage of his or her
Compensation, in one percent increments up to 12 percent, without regard to any
limitation under section 401(a)(17) of the Code. The salary deferral agreement
shall be made on the form and in the manner prescribed by the Committee.
A Participant described in this Section 4.3 may increase or decrease
the deferral percentage for a subsequent Plan Year by filing a new deferral
election prior to the first day of the Plan Year to which the new deferral
election applies. Any deferral election made by the Participant will remain in
effect for subsequent Plan Years unless the Participant timely files a new
deferral election.
-2-
<PAGE> 3
4.4 Special Award Amounts. The Corporation, in its sole discretion, may make
additional special award contributions on behalf of some or all Participants.
4.5 Transferred Accounts. A Participant's Account under this SERP may include
amounts transferred directly from a prior employer's nonqualified deferred
compensation plan, subject to the sole discretion of the Committee, and shall be
held, managed and distributed under the terms of this SERP; provided, however,
that such transferred amounts shall be fully vested at all times.
4.6 Individual Arrangements. A Participant's Account under this SERP may include
additional amounts of salary deferrals pursuant to a written individual deferred
compensation agreement between the Corporation and the Participant, subject to
the sole discretion of the Committee. Such arrangements must be memorialized in
a writing signed before the Participant performs the services for which the
compensation is to be deferred. Such amounts shall be held, managed and
distributed under the terms of this SERP; provided, however, that such amounts
shall be fully vested at all times.
ARTICLE V - ACCOUNTS AND INVESTMENTS
5.1 Establishment of Accounts. The Account established for each Participant
shall be credited with contributions, then adjusted for earnings, losses,
expenses and distributions as provided herein at least annually or more
frequently as determined by the Committee.
5.2 Investments. Amounts credited to the Account of a Participant shall be
deemed to be invested pursuant to the Participant's investment election under
the Retirement Plan. If a Participant's investment election under the Retirement
Plan directs that a portion of additions to his or her account under the
Retirement Plan is invested in Harris Stock, earnings and losses for a
corresponding portion of additions to the Participant's SERP Account shall
reflect the performance of Harris Stock; however, the Participant's SERP Account
is not required to be invested in Harris Stock and the Participant shall have no
right to a distribution of his or her Account in the form of Harris Stock. If a
Participant who is also a participant in the Retirement Plan has no investment
election in effect under the Retirement Plan, such Participant's Account shall
be deemed to be invested in the Balanced Fund. If a Participant is not a
participant in the Retirement Plan, the Participant may file an investment
election under the SERP, directing the deemed investment of his Account in
conformity with the terms of the Retirement Plan, except that such Participant
may not direct the investment of his SERP Account to reflect performance of
Harris Stock.
ARTICLE VI - VESTING AND DISTRIBUTIONS
6.1 Vesting. Contributions shall have the character that they would have had if
they been made to the Retirement Plan and shall become vested in accordance with
the terms of the Retirement Plan.
-3-
<PAGE> 4
6.2 Time of Payment. A Participant shall begin to receive payment of benefits on
the attainment of age 55 or termination of employment, if later; provided,
however, that if a Participant makes an election under section 6.3(a), benefits
shall not commence earlier than 30 days after the date the election is filed
with the Committee.
6.3 Form of Payment. (a) A Participant who has attained age 60 by June 30, 1994,
or who has not participated in the Retirement Plan may elect the form in which
benefits shall be paid by filing an election with the Committee on the form and
in the manner prescribed by the Committee. A Participant who has not attained
age 60 by June 30, 1994 may elect the form in which benefits shall be paid by
filing an election with the Committee on the form and in the manner prescribed
by the Committee when he or she becomes a Participant. An election period shall
be provided for each Participant during the period commencing on the 90th day
and ending on the 30th day preceding such Participant's retirement date. During
this period, a Participant may elect the form in which benefits shall be paid or
may change a prior election. All elections shall become irrevocable on the 30th
day preceding a Participant's retirement date.
(b) Except as provided in 6.3(c), a Participant who has not filed an
election under section 6.3(a) shall receive benefits either (i) at the same time
and in the same manner that benefits are paid under the Retirement Plan; or (ii)
if such Participant has not participated in the Retirement Plan, in annual
installments over ten years. A Participant who makes an election under section
6.3(a) may elect to receive benefits in the following forms:
(1) Except as provided in section 6.3(c), payment of benefits at the
same time and in the same manner that benefits are paid under the
Retirement Plan;
(2) Payment of benefits in annual installments over a five year period;
or
(3) Payment of benefits in annual installments over a ten year period.
(c) If a Participant elects payment of benefits at the same time and in
the same manner that benefits are paid under the Retirement Plan or if benefits
will be paid in such manner because a Participant has not filed an election
under section 6.3(a), and:
(1) after separating from service, elects to have a substantial amount,
as determined in the sole discretion of the Committee, of his or her benefits
under the Retirement Plan paid as a direct distribution to the Participant, the
balance of the Participant's Account under this SERP shall be paid in a lump
sum; or
(2) after separating from service, elects to have a substantial amount,
as determined in the sole discretion of the Committee, of his or her benefit
under the Retirement Plan paid as a direct rollover under section 401(a)(31) of
the Code, the balance of the Participant's Account under this SERP shall be paid
in annual installments over a period of ten years.
(d) Notwithstanding any provision in this SERP to the contrary, if a
Participant's vested interest in his Account is a de minimis amount, as
determined by the Committee, it shall be paid to the Participant in a lump sum
as soon as reasonably practicable upon entitlement to a distribution.
6.4 Death. Any amounts credited to the Participant's Account at death shall be
paid to the Participant's beneficiary, determined under section 6.5 below, in
the same manner that they would have been paid to the Participant.
-4-
<PAGE> 5
6.5 Designation of Beneficiary. Each Participant may designate a beneficiary to
receive any benefits payable as a result of the Participant's death. The
beneficiary designation shall be effective only if it is made on the form and in
the manner prescribed by the Committee. A beneficiary designation may be revoked
or changed by the Participant at any time by filing a new form with the
Committee. Absent a valid beneficiary designation hereunder, the Participant's
beneficiary shall be determined under the terms of the Retirement Plan.
6.6 Financial Hardship. All or a portion of any amounts credited to the
Participant's Account may be immediately paid to the Participant if the
Participant incurs a financial hardship, as determined in the sole discretion of
the Committee.
6.7 Payment on Incapacity. In the event the Committee determines that any person
to whom a distribution is to be made is unable to care for his or her affairs by
reason of illness or other dis ability, any amount distributable to such person
hereunder may be paid to such other person deemed by the Committee, in its sole
discretion, to be responsible for such person (unless prior claim thereto has
been made by a duly qualified guardian or other legal representative). Any such
payment made under this section 6.7 shall constitute a complete discharge of any
liability under this Plan.
6.8 Overpayments. In the event the benefits actually paid with respect to a
Participant exceed the benefits to which he or she is entitled under the terms
of this Plan, future benefits shall be reduced in any manner which the
Committee, in its sole discretion, deems equitable.
6.9 Withholding for Taxes. The Corporation shall have the right to deduct any
Federal, state or local income, employment, or other taxes required by law to be
withheld with respect to any benefits payable under this SERP, and to withhold
such amounts from any payment otherwise due the Participant (or beneficiary).
ARTICLE VII - ADMINISTRATION
7.1 Committee. This Plan shall be administered by the Committee.
7.2 Authority of Committee. The Committee shall, in its sole and absolute
discretion, have the complete authority to interpret this SERP, to adopt rules
for carrying out the purposes of this SERP and to make all other determinations
necessary or advisable for the administration of this SERP. To the extent
practicable, the Committee shall conform the administration of this SERP to the
provisions of the Retirement Plan. Any decision or interpretation of any
provision of this SERP made by the Committee, the Corporation, or their
delegates, shall be final and conclusive, and shall be binding on all
Participants (and their beneficiaries). A Participant who is a member of the
Committee may participate in a decision of the Committee that may affect his or
her rights or obligations under this SERP only if the decision does not require
a vote of the Committee.
7.3 Delegation of Authority. The Committee may delegate any of its
administrative powers or duties with respect to this SERP to any person or
committee designated by it and may employ such attorneys, agents, and advisors
as it may deem necessary or advisable to assist it in carrying out its duties
hereunder.
-5-
<PAGE> 6
7.4 Liability of Committee. No member of the Committee and no individual to whom
the Committee has delegated authority to administer this SERP shall be liable
for any action or failure to act under this SERP, except where such action or
failure to act was due to gross negligence or fraud.
ARTICLE VIII - GENERAL PROVISIONS
8.1 Amendment and Termination. The Corporation may amend or terminate this Plan
at any time, in whole or in part. Amendments will normally be initiated by the
Committee, approved by upper management of the Corporation, then adopted by
resolution of the Retirement Plan Investment Committee of the Board of
Directors.
-6-
<PAGE> 7
8.2 Anti-Alienation. A Participant's rights and interest under this SERP may not
be assigned or transferred except by will or the laws of descent or
distribution. Any other purported transfer, assignment, pledge or other
encumbrance or attachment of any payments or benefits under this SERP shall not
be permitted or recognized.
8.3 Funding. The Corporation may, but is not required to, establish a trust to
fund the benefits under this SERP, provided that the assets in such trust are
subject to the claims of the Corporation's general creditors in the event of
insolvency. To the extent benefits are not funded by a trust, a Participant (and
beneficiary) shall have no interest in any fund or specific asset of the
Corporation, and the rights of a Participant (and beneficiary) to any benefits
under this SERP shall be solely those of an unsecured creditor of the
Corporation.
8.4 Separability. If any provision of this SERP is found unlawful by any court
having proper jurisdiction, such provision shall be construed by such court to
most nearly reflect the Corporation's original intent in adopting this SERP,
consistent with applicable law.
8.5 Not a Contract of Employment. This SERP shall not constitute a contract of
continuing employment or in any manner obligate the Corporation to continue or
discontinue the service of an employee.
8.6 Construction of SERP. This SERP shall be construed in accordance with the
laws of the State of Florida.
IN WITNESS WHEREOF, Harris Corporation does hereby adopt this SERP, as
amended, effective July 1, 1996.
Date: 6/28/96 By: /s/ D.S. Wasserman
----------------- -----------------------------------
-7-
<PAGE> 1
Exhibit 10(l)
DIRECTORS RETIREMENT PLAN
ARTICLE I
INTRODUCTION
In order to assist in the attraction and retention of the best-qualified persons
available to serve on the Board of Directors of Harris Corporation, this
Directors Retirement Plan is adopted to provide retirement benefits to members
of the Board of Directors who are not employees of Harris Corporation.
ARTICLE II
DEFINITIONS
For the purpose of this Plan, the following words and phrases shall
have the meanings indicated, unless the context clearly indicates otherwise.
Section 2.01 "Actuarial Equivalent" shall mean a benefit of equivalent
value when computed on the basis of 8% interest compounded annually and the
unadjusted 1983 group mortality tables determined separately by sex. In the
event of a Change of Control, the definitions of this Section 2.01 cannot be
changed.
Section 2.02 "Board" means the Board of Directors of Harris
Corporation.
Section 2.03 "Change of Control" means any of the following events:
(i) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act, is or becomes a "beneficial
owner" (as defined in Rule
<PAGE> 2
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities eligible to vote for the election of the Board (the
"Company Voting Securities"); provided, however, that the event described in
this paragraph (i) shall not be deemed to be a Change in Control by virtue of
any of the following acquisitions: (a) by the Company or any subsidiary, (b) by
any employee benefit plan sponsored or maintained by the Company or any
subsidiary, (c) by any underwriter temporarily holding securities pursuant to an
offering of such securities, (d) pursuant to a Non- Control Transaction (as
defined in paragraph (iii), or (e) pursuant to any acquisition by a corporate
officer of the Company or any group of persons including a corporate officer;
(ii) individuals who, on July 1, 1996, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to July 1, 1996, whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors who remain on the Board
(either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for director, without objection to
such nomination) shall also be deemed to be an Incumbent Board; provided,
however, that no individual initially elected or nominated as a director of the
Company as a result of an actual or threatened election contest with respect to
directors or any other actual or threatened solicitation of proxies or consents
by or on behalf of any person other than the Board of Directors shall be deemed
to be an Incumbent Director;
(iii) the consummation of a merger, consolidation, share
exchange or similar form of corporate reorganization of the Company or any such
type of transaction involving the Company or any of its Subsidiaries that
requires the approval of the Company's stockholders (whether for such
transaction or the issuance of securities in the transaction or otherwise), or
the consummation of the direct or indirect sale or other disposition of all or
substantially all of the assets, of the Company and its Subsidiaries (a
"Business Combination"), unless immediately following such Business Combination:
(a) more than 80% of the total voting power of the corporation resulting from
such Business Combination (including, without limitation, any corporation which
directly or indirectly has beneficial ownership of 100% of the Company Voting
Securities eligible to elect directors of such corporation is represented by
shares that were Company Voting Securities immediately prior to such Business
Combination (either by remaining outstanding or being converted), and such
voting power is in substantially the same proportion as the voting power of such
Company Voting Securities immediately prior to the Business Combination, (b) no
person (other than any publicly traded holding company resulting from such
Business Combination, any employee benefit plan sponsored or maintained by the
Company (or the corporation resulting from such Business Combination)) becomes
the beneficial owner, directly or indirectly, of 20% or more of the total voting
power of the outstanding voting securities eligible to elect directors of the
corporation resulting from such Business Combination, and (c) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Director at the
time of the Board's approval
2
<PAGE> 3
of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies the conditions specified
in (a), (b) and (c) shall be deemed to be a "non-Control Transaction"); or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or the direct or indirect
sale or other disposition of all or substantially all of the assets of the
Company and its subsidiaries.
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 20% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided, that, if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur.
Section 2.04 "Committee" means the Management Development and
Nominating Committee of the Board, or a successor committee responsible for
similar policy issues.
Section 2.05 "Company" means Harris Corporation, its successors, and
any organization into which or with which Harris Corporation may merge or
consolidate or to which all or substantially all of its assets may be
transferred.
Section 2.06 "Disability" means that a physician acceptable to the
Committee has concluded that the Outside Director is unable to engage in
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration.
Section 2.07 "Effective Date" means the date the Plan is adopted by the
Board of Directors.
Section 2.08 "Participant" means any member of the Board who becomes a
participant under the Plan pursuant to Article III.
3
<PAGE> 4
Section 2.09 "Plan" means the Harris Corporation Directors Retirement
Plan.
Section 2.10 "Retirement Date" means the first day of the month
coincident with or immediately following the date the Participant attains age
65.
Section 2.11 "Retainer" means the annual amount payable to members of
the Board as compensation for their services in that capacity as of a
Participant's Retirement Date (but excluding attendance fees and committee
retainer and attendance fees).
Section 2.12 "Service" means the period (or periods) during which a
person serves as a member of the Board, excluding any portion of the period (or
periods) during which such person was also an employee of the Company. A partial
year of service shall be deemed a full year of service.
ARTICLE III
PARTICIPATION
Section 3.01 Eligibility for Participation. In addition to the
eligibility provisions in Section 4.04(b), any member of the Board on or after
the Effective Date who (a) is not an employee of the Company, and (b) has
completed at least five years of service, shall become a Participant and
thereupon shall become eligible for an annual retirement benefit or a disability
benefit in accordance with the provisions of Section 4.01 or 4.02 as applicable.
4
<PAGE> 5
ARTICLE IV
BENEFITS
Section 4.01 Retirement Benefit.
(a) Each Participant who ceases to be a member of the Board
shall be entitled to an annual retirement benefit based on the following
percentage of his Retainer:
<TABLE>
<CAPTION>
Years of Service % of Retainer
<S> <C> <C>
less than 5 0%
5 50%
6 60%
7 70%
8 80%
9 90%
10 or more 100%
</TABLE>
(b) A Participant's retirement benefit shall be paid in equal
monthly installments for the life of the Participant, commencing on the first
day of the month immediately following the later of: (i) the date the
Participant ceases to be a member of the Board; or, (ii) the Participant's
Retirement Date, and ending in the month immediately following the date of
Participant's death.
5
<PAGE> 6
Section 4.02 Disability Benefit.
(a) In the event a Participant ceases to be a member of the
Board prior to his Retirement Date by reason of Disability, the Participant
shall be entitled to receive disability benefits as determined under Section
4.01(a).
(b) The Participant's disability benefit shall be paid in
equal monthly installments for the life of the Participant, commencing on the
first day of the month immediately following the date the Participant ceases to
be a member of the Board and ending in the month immediately following the date
of Participant's death.
Section 4.03 Joint and Survivor Form of Payment.
Notwithstanding the provisions of Sections 4.01 and 4.02, a Participant may, by
written election to the Committee at least 30 days prior to the date he ceases
to be a member of the Board, elect to receive payment of his retirement or
disability benefit in the joint and survivor form. Such form, which shall be the
Actuarial Equivalent of the normal form of payment under Section 4.01 or 4.02,
as applicable, shall provide for a reduced amount paid to the Participant in
equal monthly installments for the Participant's life, with payments continuing
to the Participant's spouse after the death of the Participant, for the life of
the spouse, in an amount equal to 50% of the monthly installments paid to the
Participant. No survivor benefits shall be payable if the Participant dies
before he ceases to be a member of the Board.
Section 4.04 Acceleration of Payment - Change of Control.
(a) In lieu of the benefits payable under Sections 4.01
through 4.03, in the event of a Change of Control, (i) each Participant or
beneficiary who is then receiving
6
<PAGE> 7
a retirement benefit or a disability benefit shall be paid immediately upon such
change of control a lump sum payment equal to the Actuarial Equivalent of such
benefit measured as of the date of the Change of Control; (ii) each other
Participant who does not continue as a member of the Board shall receive an
immediate lump sum payment equal to the Actuarial Equivalent of the retirement
benefit to which that Participant would be entitled commencing at that
Participant's Retirement Date, based on the years of Service completed by the
Participant as of the date that Participant ceases to be a member of the Board;
and (iii) each other Participant who continues as a member of the Board shall
receive a lump sum payment, at the time he ceases to be a member of the Board,
equal to the Actuarial Equivalent of the retirement benefit or disability
benefit to which that Participant would be entitled commencing at that
Participant's Retirement Date, or, in the case of Disability, the date that
Participant ceases to be a member of the Board, based on the years of Service
completed by the Participant as of the date that Participant ceases to be a
member of the Board.
(b) In the event of a Change of Control, any member of the
Board as of the date of the Change of Control who (i) is not then a Participant,
and (ii) is not an employee of the Company, shall become a Participant on the
later of: (1) the date the member has completed one year of service, or (2) the
date of the Change of Control. If such Participant ceases to be a member of the
Board prior to completing 5 years of service, the amount of the lump sum payment
equal to the Actuarial Equivalent of the
7
<PAGE> 8
Participant's retirement benefit or disability benefit under Section 4.04(a)
above shall be based on the following percentage of his Retainer:
<TABLE>
<CAPTION>
Years of Service % of Retainer
<S> <C> <C>
1 10%
2 20%
3 30%
4 40%
</TABLE>
The terms of Sections 6.01 and 6.02 hereof shall not be
applicable following a Change of Control of the Company.
The reasonable legal fees and expenses incurred by any
Participant to enforce his or her valid rights under this Section 4.04 shall be
paid for by the Company in addition to sums due hereunder.
Section 4.05 Acceleration of Payment - Participant's Election.
In lieu of the benefits payable under Section 4.01 or 4.02, a Participant who
becomes entitled to a retirement or disability benefit or, in lieu of benefits
payable under Section 4.03, the spouse of a deceased current or former
Participant who becomes entitled to a death benefit under the Plan may, at his
or her option, elect to receive a cash-out distribution of such benefit. Such
distribution shall be a lump sum payment, equal to the Actuarial Equivalent of
the retirement benefit or disability benefit to which the Participant or such
spouse would be entitled commencing at that Participant's Retirement Date, or in
the case of disability, the date the Participant ceases to be a member of the
Board based on the years of service completed by Participant as of the date that
Participant ceases to be a
8
<PAGE> 9
member of the Board. A cash-out distribution under the Plan shall, when made to
the person entitled thereto, constitute full satisfaction of the Company's
obligation to pay such benefit.
ARTICLE V
ADMINISTRATION
Section 5.01 Duties of the Committee. The Plan shall be administered by
the Committee. The Committee shall have the authority to make, amend, interpret,
and enforce all appropriate rules and regulations for the administration of this
Plan and decide or resolve any and all questions, including interpretations of
this Plan, as may arise in connection with the Plan.
Section 5.02 Binding Effect of Decisions. The decision or action of the
Committee with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final, conclusive and binding upon
all persons having any interest in the Plan, unless a written appeal is received
by the Committee within sixty days of the disputed action. The appeal will be
reviewed by the Committee and the decision of the Committee shall be final,
conclusive and binding on the Participant and all persons claiming by, through
or under the Participant.
9
<PAGE> 10
ARTICLE VI
AMENDMENT AND TERMINATION OF PLAN
Section 6.01 Amendment. The Board may at any time amend the Plan in
whole or in part; provided, however, that no amendment shall be effective to
decrease or restrict any benefits then being paid under the Plan at the time of
such amendment.
Section 6.02 Company's Right to Terminate. The Board may at any time
terminate this Plan. Upon any such termination,
(a) each Participant who is then receiving a retirement
benefit or disability benefit shall receive an immediate lump sum payment equal
to the Actuarial Equivalent of such benefit as of the date of termination, and
(b) each other Participant shall receive a lump sum payment
equal to the Actuarial Equivalent of the retirement benefit to which that
Participant would be entitled commencing at that Participant's Retirement Date,
based on years of service completed by the Participant as of such termination.
ARTICLE VII
MISCELLANEOUS
Section 7.01 Unsecured General Creditor. Participants shall have no
legal or equitable rights, interest or claims in any property or assets of the
Company, nor shall they be beneficiaries of, or have any rights, claims or
interests in any life insurance policies,
10
<PAGE> 11
annuity contracts or the proceeds therefrom owned or which may be acquired by
the Company ("Policies"). Such Policies or other assets of the Company shall not
be held under any trust for the benefit of Participants or their Beneficiaries
or held in any way as collateral security for the fulfilling of the obligations
of the Company under this Plan. Any and all of the Company's obligations under
the Plan shall be merely unfunded and unsecured promises of the Company to pay
money in the future.
Section 7.02 Nonassignability. Neither a Participant nor any other
person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are, expressly declared to be
unassignable and non-transferable. No part of the amounts payable shall, prior
to actual payment, be subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a Participant or any
other person, nor be transferable by operation of law in the event of a
Participant's or any other person's bankruptcy or insolvency.
Section 7.03 Normal Retirement Policy for Members of Board. Nothing in
this Plan shall be deemed to change or amend the Company's normal retirement
policy for non-employee members of the Board which policy currently provides
that no non-employee member shall be elected to, or reelected to, the Board
after such member attains age 72.
11
<PAGE> 12
APPROVED AND AUTHORIZED BY THE BOARD OF DIRECTORS this 28th day of
June, 1996.
/s/ Phillp W. Farmer
----------------------------------------
Phillip W. Farmer
Chairman of the Board
Harris Corporation
ATTEST:
/s/ R.L. Ballantyne
- -----------------------------
Corporate Secretary
12
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Primary:
Average shares outstanding.......................... 38,975 39,146 39,720
======== ======== ========
Income before cumulative effect of change in
accounting principle............................. $178,367 $154,466 $121,880
Cumulative effect of change in accounting
principle........................................ -- -- (10,063)
-------- -------- --------
Net Income.......................................... $178,367 $154,466 $111,817
======== ======== ========
Per share amounts:
Income before cumulative effect of change in
accounting principle........................... $4.58 $3.95 $3.07
Cumulative effect of change in accounting
principle...................................... -- -- (.25)
-------- -------- --------
Total............................................ $4.58 $3.95 $2.82
======== ======== ========
Fully diluted:
Total primary average shares outstanding............ 38,975 39,146 39,720
Dilutive stock options and employee stock purchase
plan shares -- based on treasury stock method
using the greater of year-end market price or
average market price............................. 128 132 154
-------- -------- --------
Total fully diluted average shares outstanding...... 39,103 39,278 39,874
======== ======== ========
Per share amounts:
Income before cumulative effect of change in
accounting principle........................... $4.56 $3.93 $3.05
Cumulative effect of change in accounting
principle...................................... -- -- (.25)
-------- -------- --------
Total............................................ $4.56 $3.93 $2.80
======== ======== ========
</TABLE>
34
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Each of the below listed subsidiaries is 100% directly or indirectly owned
by Harris Corporation except as otherwise indicated, and all are included in the
consolidated financial statements.
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------------------------------
<S> <C>
Harris K.K. ............................................................. Japan
Harris S.A. ............................................................. Belgium
Harris S.A. de C.V. ..................................................... Mexico
Harris Srl............................................................... Italy
Harris Advanced Technology (Malaysia) Sdn. Bhd. ......................... Malaysia
Harris Airport Systems Sdn. Bhd. ........................................ Malaysia
Harris Australia Pty. Ltd. .............................................. Australia
Harris Broadcast Systems (Nigeria) Limited (40% of voting securities
owned)................................................................. Nigeria
Harris Canada, Inc....................................................... Canada
Harris Communications Honduras, S.A. de C.V. ............................ Honduras
Harris Communications Ltd. .............................................. Hong Kong
Harris Controls Australia Limited........................................ Australia
Harris Data Services Corporation......................................... Delaware
Harris do Brasil Limitada................................................ Brazil
Harris Far East Limited.................................................. Delaware
Harris Foreign Sales Corporation, Inc. .................................. Virgin Islands
Harris International Sales Corporation................................... Delaware
Harris International Systems, Inc........................................ Delaware
Harris Investments of Delaware, Inc. .................................... Delaware
Harris Ireland Development Company Limited............................... Ireland
Harris Ireland Ltd....................................................... Ireland
Harris Italiana, Inc. ................................................... Delaware
Harris Mauritius Limited................................................. Mauritius
Harris Pension Management Limited........................................ England
Harris Publishing Systems Corporation.................................... Delaware
Harris Semiconducteurs Sarl.............................................. France
Harris Semiconductor B.V. ............................................... Netherlands
Harris Semiconductor GmbH................................................ Germany
Harris Semiconductor Limited............................................. England
Harris Semiconductor China, Ltd. ........................................ Hong Kong
Harris Semiconductor Y.H. ............................................... Korea
Harris Semiconductor, Inc. .............................................. Delaware
Harris Semiconductor (Florida), Inc. .................................... Delaware
Harris Semiconductor (Ohio), Inc. ....................................... Delaware
Harris Semiconductor Patents, Inc. ...................................... Delaware
Harris Semiconductor (Pennsylvania), Inc. ............................... Delaware
Harris Semiconductor Pte. Ltd. .......................................... Singapore
Harris Semiconductor (Taiwan) Ltd. ...................................... Taiwan
Harris Solid-State (Malaysia) Sdn. Bhd. ................................. Malaysia
Harris Southwest Properties, Inc. ....................................... Delaware
Harris Space Systems Corporation......................................... Delaware
Harris Systems Limited................................................... England
Harris Technical Services Corporation.................................... Delaware
Allied Broadcast Equipment Canada, Ltd. ................................. Canada
Harris Semiconductor (Suzhou) Co., Ltd. ................................. China
</TABLE>
35
<PAGE> 2
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------------------------------
<S> <C>
Harris Semiconductor Design & Sales Pte. Ltd. ........................... Singapore
American Coastal Insurance Ltd. ......................................... Bermuda
Anshan Harris Broadcast Equipment Company, Limited (51%)................. China
ARM Harris Communications (India) Pvt. Ltd. (51%)........................ India
Baseview Products, Inc. ................................................. Michigan
Communication & Information Processing Harris S.A........................ Argentina
ECCO Parent Limited...................................................... Ireland
Executive Conference Center, Inc. ....................................... Georgia
GE-Harris Railway Electronics, LLC (49%)................................. Delaware
Guangzhou Harris Telecommunications Company Ltd. (51%)................... China
Inversiones Harris Chile Limitada S.R.L. ................................ Chile
Lanier (Australia) Pty. Ltd. ............................................ Australia
Lanier Business Products, Inc. .......................................... Georgia
Lanier Financial Services, Inc. ......................................... Georgia
Lanier Holdings Pty. Ltd. ............................................... Australia
Lanier Holdings, Inc. ................................................... Delaware
Lanier International, Inc. .............................................. Delaware
Lanier Pacific Pty. Ltd. ................................................ Australia
Lanier Professional Services, Inc. ...................................... Delaware
Lanier Worldwide, Inc. .................................................. Delaware
Lanier Leasing, Inc. .................................................... Delaware
Lanier Europe, B.V. ..................................................... Netherlands
Lanier United Kingdom Ltd. .............................................. England
Lanier Canada, Inc. ..................................................... Canada
Lanier de Chile, S.A. ................................................... Chile
Lanier S.A. ............................................................. Colombia
Lanier de El Salvador, S.A. de C.V. ..................................... El Salvador
Lanier de Guatemala, S.A. ............................................... Guatemala
Lanier de Dominicana, S.A. .............................................. Dominican Republic
Lanier de Panama, S.A. .................................................. Panama
Lanier Puerto Rico, Inc. ................................................ Puerto Rico
Lanier de Costa Rica S.A. ............................................... Costa Rica
Lanier Espana S.A. ...................................................... Spain
Lanier Belgium S.A. ..................................................... Belgium
Lanier Danmark A/S....................................................... Denmark
Lanier Deutschland GmbH.................................................. Germany
Lanier Italia S.p.A. .................................................... Italy
Lanier Hellas AEBE....................................................... Greece
Lanier Norge A/S ........................................................ Norway
Lanier Holdings A.G. .................................................... Switzerland
Lanier Finance A.G....................................................... Switzerland
Lanier (Schweiz) A.G. ................................................... Switzerland
Lanier Singapore Pte. Ltd. .............................................. Singapore
RF Communications, Inc. ................................................. Delaware
RF Communications, Inc. ................................................. New York
Shenzhen Harris Telecom Co. Ltd. (55% of voting securities owned) ....... China
</TABLE>
36
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the following registration
statements of Harris Corporation and in each related Prospectus of our report
dated July 23, 1996, with respect to the consolidated financial statements and
schedule of Harris Corporation and subsidiaries included in this Annual Report
(Form 10-K) for the year ended June 30, 1996:
<TABLE>
<S> <C> <C> <C>
Form S-8 No. 2-74551 Harris Corporation 1981 Stock Option Plan for Key
Employees
Form S-8 No. 33-50169 Harris Corporation Retirement Plan
Form S-8 No. 33-50167 Harris Corporation Union Retirement Plan
Form S-8 Nos. 33-37969; Harris Corporation Stock Incentive Plan
33-51171; and
333-7985
Form S-3 No. 333-3111 Harris Corporation Debt Securities
Form S-8 No. 333-01747 Lanier Worldwide, Inc. Savings Incentive Plan
</TABLE>
ERNST & YOUNG LLP
Orlando, Florida
September 12, 1996
37
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 74,600
<SECURITIES> 24,800
<RECEIVABLES> 759,100
<ALLOWANCES> 31,300
<INVENTORY> 544,100
<CURRENT-ASSETS> 1,940,900
<PP&E> 1,999,800
<DEPRECIATION> 1,278,100
<TOTAL-ASSETS> 3,206,700
<CURRENT-LIABILITIES> 1,183,100
<BONDS> 588,500
<COMMON> 38,900
0
0
<OTHER-SE> 1,334,000
<TOTAL-LIABILITY-AND-EQUITY> 3,206,700
<SALES> 3,621,200
<TOTAL-REVENUES> 3,659,300
<CGS> 2,404,600
<TOTAL-COSTS> 911,900
<OTHER-EXPENSES> 5,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,500
<INCOME-PRETAX> 274,400
<INCOME-TAX> 96,000
<INCOME-CONTINUING> 178,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 178,400
<EPS-PRIMARY> 4.58
<EPS-DILUTED> 4.56
</TABLE>
