SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended October 3, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission file number 1-5480
_______________
TEXTRON INC.
(Exact name of registrant as specified in its charter)
_______________
Delaware 05-0315468
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
40 Westminster Street, Providence, RI 02903
401-421-2800
(Address and telephone number of principal executive offices)
_______________
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
Common stock outstanding at October 31, 1998 - 158,438,000 shares
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
TEXTRON INC.
Condensed Consolidated Statement of Income (unaudited)
(Dollars in millions except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
October 3, September 27, October 3, September 27,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues
Manufacturing sales $ 2,253 $ 1,950 $ 6,813 $ 6,088
Finance revenues 99 92 275 264
Total revenues 2,352 2,042 7,088 6,352
Costs and expenses
Cost of sales 1,833 1,589 5,545 4,975
Selling and administrative 249 221 742 670
Gain on sale of division - - (97) -
Special charges - - 87 -
Interest 80 72 232 218
Provision for losses on collection of
finance receivables 6 5 16 17
Total costs and expenses 2,168 1,887 6,525 5,880
Income from continuing operations
before income taxes and
distributions on preferred securities
of subsidiary trust 184 155 563 472
Income taxes (70) (58) (221) (182)
Distributions on preferred securities of
subsidiary trust, net of income taxes (6) (6) (19) (19)
Income from continuing operations 108 91 323 271
Income from discontinued operation,
net of income taxes 34 47 125 137
Net income $ 142 $ 138 $ 448 $ 408
Earning per share:
Basic:
Income from continuing operations $ .67 $ .55 $ 1.99 $ 1.64
Income from discontinued operations .20 .28 .76 0.82
Net income $ .87 $ .83 $ 2.75 $ 2.46
Diluted:
Income from continuing operations $ .65 $ .54 $ 1.94 $ 1.60
Income from discontinued operations .20 .27 .74 .80
Net income $ .85 $ .81 $ 2.68 $ 2.40
Average shares outstanding:
Basic 162,156,000 164,912,000 162,718,000 165,286,000
Diluted 166,116,000 169,675,000 166,927,000 169,909,000
Dividends per share:
$2.08 Preferred stock, Series A $ .52 $ .52 $ 1.56 $ 1.56
$1.40 Preferred stock, Series B $ .35 $ .35 $ 1.05 $ 1.05
Common stock $ .285 $ .25 $ .855 $ .75
</TABLE>
See notes to condensed consolidated financial statements.
Item 1. FINANCIAL STATEMENTS (Continued)
<TABLE>
TEXTRON INC.
Condensed Consolidated Balance Sheet (unaudited)
(Dollars in millions)
<CAPTION>
October 3, January 3,
1998 1998
<S> <C> <C>
Assets
Parent Group:
Cash $ 57 $ 30
Commercial and U.S. government receivables 1,102 920
Inventories 1,650 1,349
Investment in discontinued operation 1,193 1,214
Other current assets 300 185
Total Parent Group current assets 4,302 3,698
Property, plant, and equipment, less accumulated
depreciation of $1,829 and $1,676 1,994 1,761
Goodwill, less accumulated amortization of $371 and
$329 1,847 1,567
Other 1,265 1,126
Total Parent Group assets 9,408 8,152
Finance Group:
Cash 3 13
Finance receivables - net 3,011 2,993
Other assets 212 172
Total Finance Group assets 3,226 3,178
Total Company assets $ 12,634 $ 11,330
Liabilities and shareholders' equity
Liabilities
Parent Group:
Current portion of long-term debt and short-term debt $ 1,232 $ 476
Accounts payable 837 812
Accrued liabilities 1,070 853
Total Parent Group current liabilities 3,139 2,141
Accrued postretirement benefits other than pensions 769 766
Other liabilities 1,283 1,195
Long-term debt 876 745
Total Parent Group liabilities 6,067 4,847
Finance Group:
Other liabilities 183 88
Deferred income taxes 313 319
Debt 2,301 2,365
Total Finance Group liabilities 2,797 2,772
Total Company liabilities 8,864 7,619
Textron - obligated mandatorily redeemable
preferred securities of subsidiary trust holding
solely Textron junior subordinated debt securities 483 483
Shareholders' equity
Capital stock:
Preferred stock 13 13
Common stock 24 24
Capital surplus 888 830
Retained earnings 3,671 3,362
Accumulated other comprehensive income (89) (62)
4,507 4,167
Less cost of treasury shares 1,220 939
Total shareholders' equity 3,287 3,228
Total liabilities and shareholders' equity $ 12,634 $ 11,330
Common shares outstanding 159,769,000 162,343,000
</TABLE>
See notes to condensed consolidated financial statements.
Item 1. FINANCIAL STATEMENTS (Continued)
<TABLE>
TEXTRON INC.
Condensed Consolidated Statement of Cash Flows (Unaudited)
(In millions)
<CAPTION>
Nine Months Ended
October 3, September 27,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 323 $ 271
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities:
Depreciation 205 176
Amortization 56 47
Provision for losses on receivables 17 19
Special charges 87 -
Gain on sale of business (97) -
Dividends received from discontinued operation 140 75
Changes in assets and liabilities excluding those
related to acquisitions and divestitures:
Increase in commercial and U.S. government
receivables (131) (60)
Increase in inventories (224) (187)
Increase in other assets (143) (136)
Decrease in accounts payable (12) (21)
Increase in accrued liabilities 224 52
Other - net (15) 4
Net cash provided by operating activities 430 240
Cash flows from investing activities:
Proceeds from disposition of investments - 251
Finance receivables:
Originated or purchased (2,899) (1,928)
Repaid or sold 2,613 1,753
Proceeds from sale of securitized assets 260 373
Cash used in acquisitions (458) (355)
Cash received from dispositions 160 549
Capital expenditures (302) (227)
Other investing activities - net 17 30
Net cash provided (used) by investing activities (609) 446
Cash flows from financing activities:
Parent Group:
Increase (decrease) in short-term debt 745 (128)
Proceeds from issuance of long-term debt 7 16
Principal payments on long-term debt (100) (91)
Finance Group:
Decrease in short-term debt (112) (134)
Proceeds from issuance of long-term debt 361 50
Principal payments on long-term debt (330) (145)
Proceeds from exercise of stock options 44 32
Purchases of Textron common stock (281) (130)
Dividends paid (138) (124)
Net cash provided (used) by financing activities 196 (654)
Net increase in cash 17 32
Cash at beginning of period 43 31
Cash at end of period $ 60 $ 63
</TABLE>
See notes to condensed consolidated financial statements.
TEXTRON INC.
Notes to Condensed Consolidated Financial Statements (unaudited)
Note 1: Basis of presentation
The financial statements should be read in conjunction with the
financial statements included in Textron's Annual Report on Form 10-K
and the restated financial statements included on Form 8-K dated
October 6, 1998 for the year ended January 3, 1998. The financial
statements reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of Textron's consolidated financial
position at October 3, 1998, and its consolidated results of
operations for each of the respective three and nine month periods
ended October 3, 1998 and September 27, 1997 and consolidated cash
flows for each of the nine month periods ended October 3, 1998 and
September 27, 1997. The results of operations for the nine months
ended October 3, 1998 are not necessarily indicative of results for
the full year. Business segment data has been reclassified to reflect
the transfer of Lycoming from the Aircraft segment to the Industrial
segment.
Note 2: Discontinued Operation
On August 11, 1998, Textron announced that it had reached an agreement
to sell Avco Financial Services (AFS) to Associates First Capital
Corporation for $3.9 billion in cash. This transaction is subject to
regulatory approvals and it is expected to close by the end of 1998 or
early 1999. AFS has been presented herein as a discontinued
operation.
Summarized operating results of AFS are represented below:
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 3, September 27, October 3, September 27,
1998 1997 1998 1997
(In millions)
<S> <C> <C> <C> <C>
Revenues $ 461 $ 463 $1,391 $1,366
Cost and expenses 407 388 1,190 1,145
Income before income
taxes 54 75 201 221
Income taxes (20) (28) (76) (84)
Net income $ 34 $ 47 $ 125 $ 137
</TABLE>
Presented below is a summary of AFS' financial position at October 3,
1998 and January 3, 1998:
<TABLE>
<CAPTION>
October 3, January 3,
1998 1998
(In millions)
<S> <C> <C>
Assets:
Investments $ 933 $ 844
Finance receivables - net 7,438 7,234
Other 657 654
Total assets $9,028 $8,732
Liabilities:
Accounts payable $ 100 $ 123
Accrued liabilities, including
income taxes 388 485
Debt 7,347 6,910
Total equity 1,193 1,214
Total liabilities and equity $9,028 $8,732
</TABLE>
Note 3: Earnings per Share
In 1997, Textron adopted FAS 128 "Earnings Per Share." FAS 128
requires companies to present basic and diluted earnings per share
amounts. The dilutive effect of convertible preferred stock and stock
options was 4,209,000 and 4,623,000 shares for the nine month periods
ending October 3, 1998 and September 27, 1997, respectively. Income
available to common shareholders used to calculate basic and diluted
earnings per share approximated net income for both periods.
Note 4: Inventories
<TABLE>
<CAPTION>
October 3, January 3,
1998 1998
(In millions)
<S> <C> <C>
Finished goods $ 479 $ 454
Work in process 904 675
Raw materials 442 366
1,825 1,495
Less progress payments and customer
deposits 175 146
$1,650 $1,349
</TABLE>
Note 5: Textron-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely Textron junior subordinated debt
securities
In 1996, a trust sponsored and wholly-owned by Textron issued
preferred securities to the public (for $500 million) and shares of
its common securities to Textron (for $15.5 million), the proceeds of
which were invested by the trust in $515.5 million aggregate principal
amount of Textron's newly issued 7.92% Junior Subordinated Deferrable
Interest Debentures, due 2045. The debentures are the sole asset of
the trust. The amounts due to the trust under the debentures and the
related income statement amounts have been eliminated in Textron's
consolidated financial statements.
The preferred securities accrue and pay cash distributions quarterly
at a rate of 7.92% per annum. Textron has guaranteed, on a
subordinated basis, distributions and other payments due on the
preferred securities. The guarantee, when taken together with
Textron's obligations under the debentures and in the indenture
pursuant to which the debentures were issued and Textron's obligations
under the Amended and Restated Declaration of Trust governing the
trust, provides a full and unconditional guarantee of amounts due on
the preferred securities.
The preferred securities are mandatorily redeemable upon the maturity
of the debentures on March 31, 2045, or earlier to the extent of any
redemption by Textron of any debentures. The redemption price in
either such case will be $25 per share plus accrued and unpaid
distributions to the date fixed for redemption.
Note 6: Contingencies
Textron is subject to a number of lawsuits, investigations and claims
arising out of the conduct of its business, including those relating
to commercial transactions, government contracts, product liability,
and environmental, safety and health matters. Some seek compensatory,
treble or punitive damages in substantial amounts; fines, penalties or
restitution; or remediation of contamination. Some are or purport to
be class actions. Under federal government procurement regulations,
some could result in suspension or debarment of Textron or its
subsidiaries from U.S. government contracting for a period of time. On
the basis of information presently available, Textron believes that
any liability for these suits and proceedings would not have a
material effect on Textron's net income or financial condition.
See Part II, Item 1., LEGAL PROCEEDINGS.
Note 7: Comprehensive Income
In 1998, Textron adopted FAS 130, "Reporting Comprehensive Income."
FAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
Statement had no impact on Textron's net income or shareholders'
equity. FAS 130 requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation
adjustments, which prior to adoption were reported separately in
shareholders' equity, to be included in other comprehensive income.
Prior year financial statements have been reclassified to conform to
the requirements of FAS 130.
During the first nine months of 1998 and 1997, total comprehensive
income amounted to $421 million and $345 million, respectively. For
the three month period ending October 3, 1998 and September 27, 1997
total comprehensive income amounted to $145 million and $117 million,
respectively.
Note 8: New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued FAS 131
"Disclosures about Segments of an Enterprise and Related Information."
FAS 131 requires public companies to report financial and descriptive
information about its reportable operating segments. Operating
segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the
chief operating decision-maker in deciding how to allocate resources
and in assessing performance. This statement is effective for
financial statements of fiscal years beginning after December 15,
1997.
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires
that companies capitalize certain internal-use software once certain
criteria are met. This statement is effective for financial
statements of fiscal years beginning after December 15, 1998.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 will require all costs of start-up activities,
including organization costs, to be expensed as incurred. This
statement is effective for financial statements of fiscal years
beginning after December 15, 1998.
In June 1998, the Financial Accounting Standards Board issued FAS 133
"Accounting for Derivative Instruments and Hedging Activities."
FAS 133 requires an entity to recognize all derivatives as either
assets or liabilities and measure those instruments at fair value.
This statement is effective for fiscal years beginning after June 15,
1999.
Textron is evaluating the potential impact of these pronouncements on
future reporting.
Note 9: Financial information by borrowing group
Textron consists of two borrowing groups - the Textron Parent Company
Borrowing Group (Parent Group) and Textron's commercial finance
subsidiary (Finance Group). The Parent Group consists of all entities
of Textron (primarily manufacturing) other than its wholly-owned
commercial finance subsidiary. The Finance Group consists of Textron
Financial Corporation (TFC). Summarized financial information
(Statement of Income and Statement of Cash Flows) for the Parent Group
reflects the Finance Group on a one-line basis under the equity method
of accounting.
Item 1. FINANCIAL STATEMENTS (Continued)
Note 9: Financial information by borrowing group (continued)
<TABLE>
PARENT GROUP
(unaudited) (In millions)
<CAPTION>
Three Months Ended Nine Months Ended
October 3, September 27, October 3, September 27,
Condensed Statement of Income 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Sales $2,253 $1,950 $6,813 $6,088
Costs and expenses
Cost of sales 1,833 1,589 5,545 4,975
Selling and administrative 229 203 684 620
Gain on sale of division - - (97) -
Special charges - - 87 -
Interest 40 32 116 101
Total costs and expenses 2,102 1,824 6,335 5,696
151 126 478 392
Pretax income on Finance Group 33 29 85 80
Income from continuing operations
before income taxes and
distributions on preferred
securities of subsidiary trust 184 155 563 472
Income taxes (70) (58) (221) (182)
Distributions on preferred securities
of subsidiary trust, net of income
taxes (6) (6) (19) (19)
Income from continuing operations 108 91 323 271
Income from discontinued operation
net of income taxes 34 47 125 137
Net income $ 142 $ 138 $ 448 $ 408
</TABLE>
Item 1. FINANCIAL STATEMENTS (Continued)
Note 9: Financial information by borrowing group (continued)
<TABLE>
PARENT GROUP
(unaudited) (In millions)
<CAPTION>
Nine Months Ended
October 3, September 27,
Condensed Statement of Cash Flows 1998 1997
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 323 $ 271
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities:
Earnings of Finance Group greater than
distributions to Parent Group - 15
Depreciation 203 174
Amortization 51 41
Gain on sale of division (97) -
Special charges 87 -
Dividends received from discontinued operation 140 75
Changes in assets and liabilities excluding
those related to acquisitions and
divestitures:
Increase in receivables (131) (60)
Increase in inventories (224) (187)
Increase in other assets (172) (138)
Increase in accounts payable and accrued
liabilities 143 21
Other - net (1) 7
Net cash provided by operating activities 322 219
Cash flows from investing activities:
Capital expenditures (293) (222)
Cash used in acquisitions (443) (355)
Cash received from disposition of businesses 160 549
Proceeds from disposition of investments - 251
Other investing activities - net 27 20
Net cash provided (used) by investing activities (549) 243
Cash flows from financing activities:
Increase (decrease) in short-term debt 745 (128)
Proceeds from issuance of long-term debt 7 16
Principal payments on long-term debt (100) (91)
Proceeds from exercise of stock options 44 32
Purchases of Textron common stock (281) (130)
Dividends paid (138) (124)
Contributions paid to Finance Group (23) -
Net cash provided (used) by financing 254 (425)
activities
Net increase in cash 27 37
Cash at beginning of period 30 24
Cash at end of period $ 57 $ 61
</TABLE>
Item 1. FINANCIAL STATEMENTS (Continued)
Note 9: Financial information by borrowing group (continued)
<TABLE>
FINANCE GROUP
(unaudited) (In millions)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
Condensed Statement of Income 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues $ 99 $ 92 $ 275 $ 264
Costs and expenses
Selling and administrative 20 18 58 50
Interest 40 40 116 117
Provision for losses on collection of
finance receivables 6 5 16 17
Total costs and expenses 66 63 190 184
Income before income taxes 33 29 85 80
Income taxes (13) (10) (33) (30)
Net income $ 20 $ 19 $ 52 $ 50
</TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
TEXTRON INC.
Revenues and Income by Business Segment
(In millions)
<CAPTION>
Three Months Ended Nine Months Ended
October 3, September 27, October 3, September 27,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES
Aircraft $ 826 $ 725 $2,340 $2,159
Automotive 534 464 1,735 1,544
Industrial 893 761 2,738 2,385
Finance 99 92 275 264
Total revenues $2,352 $2,042 $7,088 $6,352
INCOME
Aircraft $ 91 $ 79 $ 243 $ 218
Automotive 29 28 128 111
Industrial 103 87 306 263
Finance 33 29 85 80
256 223 762 672
Gain on sale of division* - - 97 -
Special charges* - - (87) -
Segment income 256 223 772 672
Corporate expenses and other - net (32) (36) (93) (99)
Interest expense - net (40) (32) (116) (101)
Income from continuing
operations before income taxes
and distributions on preferred
securities of subsidiary trust $ 184 $ 155 $ 563 $ 472
</TABLE>
*Special charges include restructuring charges of $10 million for the Aircraft
segment, $25 million for the Automotive segment and $52 million for the
Industrial segment. The gain on sale of division relates to the Industrial
segment.
Liquidity and Capital Resources
The Statements of Cash Flows for Textron Inc. and the Parent Group detailing the
changes in cash balances are on pages 4 and 10, respectively. The Parent
Group's operating cash flow includes dividends received from the Finance Group
of $52 million and $65 million during the first nine months of 1998 and 1997,
respectively, and dividends received from AFS of $140 million and $75 million,
respectively.
The Parent Group's debt to total capital ratio was 36% at October 3, 1998, up
from 25% at year end. In the third quarter, the Parent Group entered into
credit agreements with six banks for an aggregate of $990 million. The
termination date is March 31, 1999. The Parent Group has credit facilities
outstanding at October 3, 1998 aggregating $2.8 billion, $1.6 billion of which
was not used or reserved as support for outstanding commercial paper or bank
borrowings. At September 30, 1998, the Finance Group had credit facilities
outstanding of approximately $1.2 billion, $319 million of which was available
at quarter end. The Parent Group had $311 million available at quarter end
under their shelf registration statement with the Securities and Exchange. In
the first nine months of 1998, the Finance Group increased its medium-term note
facility by $750 million and issued $300 million medium-term notes under this
facility. The Finance Group had $542 million available under the facility at
September 30, 1998.
During the first nine months of 1998, Textron's Parent Group acquired six
companies:
- Ransomes PLC - A UK-based manufacturer of commercial turf care machinery;
- Sukosim - a German-based fastener manufacturer;
- Peiner - a German-based fastener company;
- Ring Screw Works - a Michigan-based supplier of specialty threaded
fasteners to the automotive industry;
- Datacom Technologies - a Washington-based manufacturer of cable test
instruments, and
- Midland Industrial Plastics - a UK-based manufacturer of automotive
interior and exterior trim.
The total cost of these acquisitions was approximately $590 million, including
notes issued for approximately $150 million, plus the assumption of debt.
Early in the fourth quarter, Textron completed the acquisition of the entire
issued capital stock of David Brown Group PLC for approximately $326 million,
plus the assumption of debt. David Brown Group PLC is a UK-based designer and
manufacturer of industrial gears and mechanical and hydraulic transmission
systems.
In the first nine months of 1998, the Finance Group had $50 million of interest
rate exchange agreements expire. Also, during the first nine months, the Parent
Group terminated $275 million of fixed-pay interest rate exchange agreements.
On August 11, 1998, Textron announced that its Board of Directors had authorized
a new 25 million share repurchase program that supersedes the 8 million shares
that remained under its previous authorization. Approximately 4.2 million
shares were repurchased in the third quarter.
Management believes that the Parent Group will continue to have adequate access
to credit markets and that its credit facilities and cash flows from operations
- -- including dividends received from Textron's Finance Group -- and expected
proceeds from the sale of AFS, will continue to be more than sufficient to meet
its operating needs and to finance growth.
Year 2000 Readiness Disclosure
Introduction
Much of the world's computer hardware and software is not designed to process
date information after 1999. This is largely because computer programs have
historically used only two digits to identify the year in a date, but problems
related to processing of date information also may arise because some software
assigns special meaning to certain dates. This Year 2000 problem could, if
uncorrected, cause computers and other equipment used and manufactured by
Textron and Textron's suppliers and customers to fail to operate properly.
Year 2000 Program
In early 1997, Textron began a company-wide program (the "Program") to assess
the possible vulnerability of Textron to the Year 2000 problem and to minimize
the effect of the problem on Textron's operations. The Program is centrally
directed from the Year 2000 Program Office at Textron's corporate headquarters
and is executed at each Textron business unit. The Program addresses five
"Major Elements" at the corporate headquarters and each business unit:
- Business Systems: management information systems and personal computer
applications, including the computing environments that support them.
- Factory and Facilities Equipment: equipment that uses a computer to
control its operation either for producing an end-product or providing
services.
- End-Products: software products, delivered either alone or as a
component of another product, that are supplied to Textron customers.
- Suppliers: assurance that those who sell goods and services to Textron
will not interrupt Textron operations due to the Year 2000 problem.
- Customers: assurance that those who buy goods and services from
Textron will not interrupt Textron operations due to the Year 2000
problem.
For each of the Major Elements, the Program measures five "Readiness Levels":
<TABLE>
<S> <C>
Level I) Management has become aware of the issue. An
inventory is being taken of the Items that the Year
2000 problem may affect.
Level II) The inventory of Year 2000 items has been completed.
The priority of each Item is being assessed. Actions
are being planned to assure that each Item is ready
for the Year 2000. Resources are being committed to
do the work.
Level III) Planning has been completed. The prescribed actions
are being performed, including testing to verify that
the actions are effective. Suppliers and customers
are being surveyed and their progress is being
tracked.
Level IV) Items critical to operations have been remediated and
have been put in normal operation. Surveys of
critical suppliers and customers have been completed.
Core business systems continue to be tested. Follow-up
checking of suppliers and customers is in process.
Contingency plans are being prepared. Audits to
verify readiness are being performed. Remediation of
Items that are important to operations, but not
critical, is being performed.
Level V) Systems critical to operations have been tested.
Audits and associated corrective actions have been
completed. Contingency plans have been completed.
Follow-up checking of suppliers and customers has been
completed. In all material respects, Textron is ready
for Year 2000.
</TABLE>
Based on information currently available, Textron estimates that it will
substantially reach Readiness Level IV by December 31, 1998, and achieve full
Readiness Level IV by June 30, 1999. Textron estimates that it will
substantially reach Readiness Level V by June 30, 1999, and achieve full
Readiness Level V by September 30, 1999. Textron intends to have independent
parties complete an assessment of the implementation of the Program at the
corporate headquarters and each business unit by March 31, 1999.
The Readiness Level of the Major Elements Items that have been inventoried as of
September 1, 1998, is shown in the following table. Major Element inventories
are under continuous review, and additional Items may be identified in the
future. For the Major Elements of "Suppliers" and "Customers" the indicated
Readiness Level refers to Textron's progress in reviewing the readiness of
customers and suppliers, and not to Textron's assessment of their readiness.
Major Element Percent of Identified Major Element Items
at Readiness Level
II III IV V
Business Systems 4% 27% 33% 36%
Factory and Facilities Equipment 5% 22% 27% 46%
End-Products 1% 3% 1% 96%
Suppliers 16% 37% 23% 24%
Customers 20% 33% 19% 27%
Year 2000 Costs
The total cost of the Year 2000 Program for continuing operations is estimated
to be approximately $125 million. Approximately $70 million is for
modifications to existing Items and other program expenses and $55 million is
for replacement systems which have been or are expected to be capitalized in
accordance with Company policy. Through August 31, 1998, total expenditures were
$72 million. The estimated future cost to complete the Program is expected to
be approximately $53 million including approximately $19 million for replacement
systems. Funds for the Program are provided from special project appropriations
totaling approximately $24 million and from normal operating and capital
budgets. The Year 2000 Program has delayed certain other Textron information
management projects. Delay of these projects is not expected to have an adverse
impact on Textron.
Risks and Contingency Plans
Year 2000 issues have the potential, if not remediated, to severely disrupt
Textron's business operations and to adversely affect Textron's financial
condition. The Year 2000 Program is expected to significantly reduce Textron's
exposure to these issues, particularly with respect to Textron's Business
Systems, Factory & Facilities Equipment, and End-Products. However, it is
possible that unanticipated problems may arise in the course of Textron's
implementation of the Year 2000 Program. In addition, while monitoring of Year
2000 readiness by Textron's suppliers and customers is a major part of the Year
2000 Program, Textron has very limited ability to ensure Year 2000 readiness by
such parties. Textron could also be affected by failure of government agencies,
in the U.S. and elsewhere, to maintain governmental services that are essential
to Textron's operations. Textron is developing contingency plans to cover
situations in which Year 2000 problems arise despite Textron's efforts. Such
plans are expected to be substantially ready by June 30, 1999.
Forward-looking statements contained in this report relating to Year 2000
issues, including expectations of readiness, possible effects on Textron and
similar matters, are subject to the risks described in this section.
Results of Operations - Three months ended October 3, 1998 vs Three months ended
September 27, 1997
Diluted earnings per share from continuing operations in the third quarter 1998
were $0.65 per share, up 20% from the 1997 amount of $0.54. Income from
continuing operations in 1998 of $108 million was up 19% from $91 million in
1997. Revenues increased 15% to $2.4 billion in 1998 from $2.0 billion in 1997.
Net income was $142 million versus $138 million in 1997.
In August, 1998, Textron announced that it had reached an agreement to sell Avco
Financial Services (AFS) to Associates First Capital Corporation for $3.9
billion in cash. This transaction is subject to regulatory approvals and it is
expected to close by the end of 1998 or early 1999. Textron has restated its
financial statements as presented herein to treat AFS as a discontinued
operation. See Note 2 to the condensed consolidated financial statements for
additional information.
The Aircraft segment's revenues and income increased $101 million (14%) and $12
million (15%), respectively, due to higher results at Cessna Aircraft. Cessna's
revenues and income increased as a result of higher sales of business jets and
single engine aircraft. Bell Helicopter's revenues decreased, due primarily to
the completion in 1997 of the three-year contract for model 412 helicopters with
the Canadian Forces ($43 million) and lower commercial helicopter and spares
sales ($10 million), partially offset by higher revenues on the V-22 program and
Huey and Cobra upgrade contracts ($45 million). Bell's income decreased as a
result of the lower sales, partially offset by favorable contract adjustments in
1998 related to the V-22 program.
The Automotive segment's revenues increased $70 million (15%), while income
increased $1 million (4%). The revenue increase was due to higher volume at
Kautex associated with capacity expansion in North America, higher sales at the
Trim operations, due primarily to increased Chrysler production, and the
contribution from acquisitions. These revenue increases were partially offset
by the impact of a strike at General Motors in 1998. The increase in income
reflected the above factors, partially offset by new product development costs
and the impact of the introduction of a major replacement program with
significant additional content.
The Industrial segment's revenues increased $132 million (17%) and income
increased $16 million (18%). These increases reflected the contribution from
acquisitions, primarily Ransomes PLC., Ring Screw Works and Sukosim, and
internal growth combined with ongoing margin improvement. Internal growth was
driven primarily by continued strength in the Fluid & Power Systems business.
These benefits were partially offset by the divestitures of Speidel in the
fourth quarter 1997 and Fuel Systems in the second quarter 1998 and the impact
of a strike at General Motors on the Fastening Systems business.
The Finance segment's revenues increased $7 million (8%), while income increased
$4 million (14%). The results benefited from higher average yields on
receivables and higher other income, reflecting increases in residual income,
syndication income and portfolio servicing income. These benefits were
partially offset by a higher provision for losses and higher expenses related to
an acquisition of a receivable factoring company, growth in managed receivables,
and growth in businesses with higher operating expense ratios. Both years
included a gain of approximately $3 million on the securitization of Textron-
related receivables.
Corporate expenses and other - net decreased $4 million, due primarily to 1997
expenses related to organizational changes and higher support costs related to
international expansion.
Interest expense - net for the Parent Group increased $8 million, due to higher
average debt resulting from the incremental debt associated with acquisitions
and share repurchases.
Income taxes - the current quarter's effective income tax rate of 38.0% was
slightly higher than the corresponding prior year rate of 37.4%.
Discontinued operation - Income from discontinued operations of $34 million was
$13 million lower than 1997's income from discontinued operation of $47 million.
The decrease was due primarily to (a) a gain in 1997 on the sale of
underperforming branches in the U.S., (b) lower earnings in Hong Kong due to a
weakening economy and (c) an increase in the provision for loan losses in the
U.S., due to higher growth in consumer finance receivables.
Results of Operations - Nine months ended October 3, 1998 vs Nine months ended
September 27, 1997
Diluted earnings per share from continuing operations for the first nine months
were $1.94 per share, up 21% from the 1997 amount of $1.60. Income from
continuing operations in 1998 of $323 million was up 19% from $271 million in
1997. Revenues increased 12% to $7.1 billion in 1998 from $6.4 billion in 1997.
Net income was $448 million versus $408 million in 1997.
The Aircraft segment's revenues increased $181 million (8%) and income before
special charges increased $25 million (11%), due to higher results at Cessna
Aircraft. Cessna's revenues and income increased as a result of higher sales of
business jets, single engine aircraft and Caravans. Bell Helicopter's revenues
decreased, due primarily to the completion in 1997 of the Canadian Forces
contract ($142 million). These lower revenues were partially offset by higher
commercial helicopter and spares sales ($23 million) and higher revenues to the
U.S. Government ($21 million) as increased revenues on the V-22 program and Huey
and Cobra upgrade contracts ($99 million) more than offset lower foreign
military sales ($40 million) and lower revenues on other U.S. Government
contracts ($38 million). Bell's income decreased due to the lower sales, and a
change in product mix, primarily resulting from lower margins on U.S. Government
contracts. This unfavorable impact was partially offset by a lower level of
product development expense in 1998.
The Automotive segment's revenues increased $191 million (12%), while income
before special charges increased $17 million (15%). The revenue increase was
due to higher volume at Kautex associated with capacity expansion in North
America, higher sales at the Trim operations, due primarily to increased
Chrysler production (which was depressed in 1997 by a strike at Chrysler in the
second quarter of 1997), and the contribution from acquisitions. These revenue
increases were partially offset by the impact of a strike at General Motors in
1998. The increase in income reflected the above factors, partially offset by
new product development costs and the impact of the introduction of a major
replacement program with significant additional content.
The Industrial segment's revenues and income before special charges increased
$353 million (15%) and $43 million (16%), respectively. These increases
reflected the contribution from acquisitions, primarily Ransomes PLC., Ring
Screw Works and Sukosim, and internal growth combined with ongoing margin
improvement. Internal growth was driven by continued strength in the Fastening
Systems and Fluid & Power Systems businesses. These benefits were partially
offset by the divestitures of Speidel in the fourth quarter 1997 and Fuel
Systems in the second quarter 1998, the impact of a strike at General Motors and
a one-month strike at Textron's Jacobsen plant in 1998. Margins, although
slightly higher than last year, were adversely impacted by the lower margins of
acquisitions, the divestitures of higher margin businesses and unfavorable
contract adjustments related to marine and land systems products.
The Finance segment's revenues increased $11 million (4%), as a result of higher
average yields on receivables (10.10% in the first nine months of 1998 vs. 9.96%
in the first nine months of 1997) and higher other income, reflecting increases
in residual income, prepayment income, syndication income and portfolio
servicing income, partially offset by a lower level of average receivables
($3.173 billion in the first nine months of 1998 vs. $3.194 billion in the first
nine months of 1997). Its income increased $5 million (6%) as the benefit of
the higher revenues and a lower provision for losses were partially offset by
higher expenses related to an acquisition of a receivable factoring company,
growth in managed receivables and growth in businesses with higher operating
expense ratios. Both years included a gain of approximately $3 million on the
securitization of Textron-related receivables.
Gain on sale of division
Fuel Systems Textron was sold to Woodward Governor Company for $160 million in
cash in June 1998, at a pretax gain of $97 million ($54 million after-tax, or
$0.32 per diluted share).
Special charges:
To enhance the competitiveness and profitability of its core businesses, Textron
recorded a pretax charge of $87 million in the second quarter 1998 ($54 million
after-tax or $0.32 per diluted share). This charge was recorded to cover asset
impairments ($28 million), severance costs ($40 million), and other exit-related
costs ($9 million) associated with its decision to exit several small,
nonstrategic product lines in Automotive and the former Systems and Components
divisions which did not meet Textron's return criteria, and to realign certain
operations in the Industrial segment. The pretax charges recorded in the
Automotive and Industrial segments were $25 million and $52 million,
respectively, and also included the cost of a litigation settlement of $10
million in the Aircraft segment.
Corporate expenses and other - net decreased $6 million due primarily to first
quarter 1997 litigation expenses related to a divested operation and higher
third quarter 1997 expenses related to organizational changes and higher support
costs related to international expansion.
Interest expense - net for the Parent Group increased $15 million, due to higher
average debt resulting from the incremental debt associated with acquisitions
and share repurchases, partially offset by the payment of debt with proceeds in
1997 from the divestiture of Paul Revere.
Income taxes - the effective income tax rate of 39.3% for the nine months was
higher than the corresponding prior year rate of 38.6%, due primarily to the
nontax deductibility of goodwill related to the divestiture of Fuel Systems
Textron partially offset by the favorable resolution of certain matters with
taxing authorities.
Discontinued operation - Income from discontinued operations of $125 million was
$12 million lower than 1997's income from discontinued operation of $137
million. The decrease was due primarily to (a) weakness in the U.S. Finance
business, (b) lower earnings in Hong Kong due to a weakening economy and (c) the
unfavorable impact of foreign exchange rates primarily in Australia and Canada,
partially offset by (d) the benefits of a gain from the sale of the centralized
real estate portfolio and higher capital gains.
* * * * * *
Forward-looking Information: Certain statements in this Report, and other oral
and written statements made by Textron from time to time, are forward-looking
statements, including those that discuss strategies, goals, outlook or other
non-historical matters; or project revenues, income, returns or other
financial measures. These forward-looking statements are subject
to risks and uncertainties that may cause actual results to differ
materially from those contained in the statements, including the following:
(i) continued market demand for the types of products and services produced
and sold by Textron, (ii)changes in worldwide economic and political conditions
and associated impact on interest and foreign exchange rates, (iii) the
level of sales by original equipment manufacturers of vehicles for which
Textron supplies parts, (iv) the successful integration of companies
acquired by Textron.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See the Company's most recent Restated Financial Statements and Restated
Financial Information filed on Form 8-K (dated 10/6/98) Exhibit 99.1 pages 3
through 9. There has been no material change in this information.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On September 30, 1998, the Director of the Water Division of Region 5 of United
States Environmental Protection Agency in Chicago, Illinois, issued an
administrative Complaint alleging that Textron's CWC Castings Division violated
the Clean Water Act. The Complaint alleges that CWC exceeded wastewater
discharge limits contained in the sewer permit for its Muskegon, Michigan,
facility and that its sampling protocol did not conform to applicable federal
regulations. The Complaint proposes a penalty of $137,000. Textron has filed
an Answer to the Complaint in which it contests the allegations and the
appropriateness of the amount of the proposed penalty and requests a hearing.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Asset Purchase Agreement Among Textron Inc.,
Avco Financial Services, Inc. and Associates
First Capital Corporation dated as of August
11, 1998
10.2 Employment Agreement between Textron and John
D. Butler dated July 23, 1998
10.3 Employment Agreement between Textron and Lewis
B. Campbell dated July 23, 1998
10.4 Employment Agreement between Textron and
Herbert L. Henkel dated August 12, 1998
10.5 Employment Agreement between Textron and Mary
L. Howell dated July 23, 1998
10.6 Employment Agreement between Textron and Wayne
W. Juchatz dated July 23, 1998
10.7 Employment Agreement between Textron and
Stephen L. Key dated July 23, 1998
12.1 Computation of ratio of income to combined
fixed charges and preferred securities
dividends of the Parent Group
12.2 Computation of ratio of income to combined
fixed charges and preferred securities
dividends of Textron Inc. including all
majority-owned subsidiaries
27 Financial Data Schedule (filed electronically
only)
(b) Reports on Form 8-K
During the quarter ended October 3, 1998, Textron filed the following
reports on Form 8-K:
Current Report on Form 8-K filed with the Securities and Exchange
Commission dated August 11, 1998, reporting under Item 5 (Other
Events) and filing under Item 7 (Exhibits) a press release announcing
that Textron reached an agreement to sell its Avco Financial Services,
Inc. unit ("AFS") to Associates First Capital Corporation for $3.9
billion in cash.
Current Report on Form 8-K filed with the Securities and Exchange
Commission dated October 6, 1998, reporting under Item 5 (Other
Events) and filing under Item 7 (Exhibits) restated financial
statements to reflect AFS as a discontinued operation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEXTRON INC.
Date: November 12, 1998 s/R. L. Yates
R. L. Yates
Vice President and
Controller
(principal accounting
officer)
LIST OF EXHIBITS
The following exhibits are filed as part of this report on Form 10-Q:
<TABLE>
Name of Exhibit
<C> <S>
10.1 Asset Purchase Agreement Among Textron Inc., Avco Financial Services,
Inc. and Associates First Capital Corporation dated as of August 11, 1998
10.2 Employment Agreement between Textron and John D. Butler dated July 23, 1998
10.3 Employment Agreement between Textron and Lewis B. Campbell dated July 23, 1998
10.4 Employment Agreement between Textron and Herbert L. Henkel dated August 12, 1998
10.5 Employment Agreement between Textron and Mary L. Howell dated July 23, 1998
10.6 Employment Agreement between Textron and Wayne W. Juchatz dated July 23, 1998
10.7 Employment Agreement between Textron and Stephen L. Key dated July 23, 1998
12.1 Computation of ratio of income to combined fixed charges and preferred
securities dividends of the Parent Group
12.2 Computation of ratio of income to combined fixed charges and preferred
securities dividends of Textron Inc. including all majority-owned
subsidiaries
27 Financial Data Schedule (filed electronically only)
</TABLE>
Redacted Format
ASSET PURCHASE AGREEMENT
AMONG
TEXTRON INC.,
AVCO FINANCIAL SERVICES, INC.
and
ASSOCIATES FIRST CAPITAL CORPORATION
As of August 11, 1998
TABLE OF CONTENTS
RECITALS 1
ARTICLE I
DEFINITIONS
1.1 Definitions 2
ARTICLE II
PURCHASE AND SALE OF ASSETS AND
ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of Assets 10
2.2 Assumption of Liabilities 10
2.3 Purchase Price 11
2.4 Closing 14
2.5 Closing Obligations 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE COMPANY
3.1 Corporate Organization and Qualification 16
3.2 Stock of Subsidiaries 17
3.3 Authority Relative to This Agreement 18
3.4 Consents and Approvals; No Violations 19
3.5 SEC Reports; Financial Statements 21
3.6 Statutory Statements 22
3.7 Absence of Certain Changes or Events 22
3.8 Litigation 23
3.9 Taxes 23
3.10 Employee Benefit Plans; Labor Matters 25
3.11 Environmental Laws and Regulations 28
3.12 Compliance with Laws 28
3.13 Material Contracts 28
3.14 Insurance 29
3.15 Brokers and Finders 30
3.16 Intercompany Loans 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Corporate Organization and Qualification 30
4.2 Authority Relative to This Agreement 30
4.3 Consents and Approvals; No Violations 31
4.4 Financing 31
4.5 Brokers and Finders 32
4.6 Certain Proceedings 32
ARTICLE V
COVENANTS RELATING TO CONDUCT OF
BUSINESS AND OTHER AGREEMENTS
5.1 Conduct of Business of the Company 32
5.2 Access to Information 37
5.3 Other Actions 38
5.4 Advice of Changes 38
5.5 HSR Act Filing 39
5.6 Consents and Reasonable Efforts 39
5.7 Further Assurances 43
5.8 Publicity 43
5.9 Indemnification 44
5.10 Employees 45
5.11 Tax Allocation Agreement 48
5.12 Intercompany Transactions 48
5.13 No Negotiation 49
5.14 Non-Disclosure 49
5.15 Management of Risk Regarding Currency Translations 50
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE TRANSACTION
6.1 Conditions to Each Party's Obligations to
Complete the Transaction 50
6.2 Additional Conditions to the Obligation
of Buyer 51
6.3 Additional Conditions to the Obligation of the Company 53
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent 54
7.2 Termination by Any Party 54
7.3 Termination by Buyer 54
7.4 Termination by Parent and the Company 55
7.5 Effect of Termination 55
ARTICLE VIII
OBLIGATIONS AFTER CLOSING
8.1 Survival of Representations and Covenants;
Indemnification 56
8.2 Guarantees 62
8.3 Name Changes 62
8.4 Other Matters 62
8.5 Non-Competition 63
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Interpretation 64
9.2 Payment of Expenses and Other Payments 65
9.3 Amendment 65
9.4 Waiver and Extension 65
9.5 Counterparts 65
9.6 Governing Law 66
9.7 Notices 66
9.8 Entire Agreement; Assignment 67
9.9 Parties in Interest 68
9.10 Validity 68
9.11 Captions 68
9.12 Bulk Transfer Laws 68
9.13 Transfer, Sales and Stamp Taxes 69
EXHIBIT 1 -- Bill of Sale, Assignment and Assumption Agreement
EXHIBIT 2 -- Tax Allocation Agreement
EXHIBIT 3 -- Separation Agreement
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of August 11, 1998, (the
"Agreement") among Textron Inc., a Delaware corporation
("Parent"), Avco Financial Services, Inc. (the
"Company"), a Delaware corporation and a wholly owned
subsidiary of Textron Inc., and Associates First Capital
Corporation, a Delaware corporation ("Buyer").
RECITALS
WHEREAS, the Company desires to sell, and the
Buyer desires to purchase, substantially all of the
assets and liabilities of the Company for the
consideration and on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements set
forth herein, Parent, the Company and Buyer hereby agree
as follows:
1
ARTICLE I
7DEFINITIONS
1.1 Definitions. For purposes of this Agreement,
except as otherwise expressly provided or unless the context
clearly requires otherwise:
"Adjusted Stockholder's Equity" shall have the
meaning ascribed to it in Section 6.2(c).
"Affiliate" of any Person shall mean any other
Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such first Person.
"Agreement" shall have the meaning ascribed to it
in the Preamble.
"Assets" shall have the meaning ascribed to it in
Section 2.1.
"Buyer" shall have the meaning ascribed to it in
the Preamble.
"Claim" shall have the meaning ascribed to it in
Section 8.1(d).
"Closing" shall have the meaning ascribed to it in
Section 2.4.
"Closing Date" shall have the meaning ascribed to
it in Section 2.4.
"Code" shall mean the Internal Revenue Code of
1986, as amended.
"Company" has the meaning ascribed to it in the
Preamble.
"Company Employee" shall have the meaning ascribed
to it in Section 5.10(k).
"Company Indemnified Parties" shall have the
meaning ascribed to it in Section 5.9(a).
"Company Plan" shall mean each bonus, incentive,
deferred compensation, pension, retirement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, employment, consulting,
termination, retention, severance, change-in-control,
compensation, medical, health or other plan, agreement, policy,
program, or arrangement that covers current or former employees,
officers or directors of the Company or the Subsidiaries.
"Company's Profit Sharing Plan" shall have the
meaning ascribed to it in Section 5.10(f).
"Company Properties" shall mean all parcels and
interests of real property owned in fee or leased by the Company
or any Subsidiary excluding any real property which is owned as a
result of foreclosure, settlements in lieu of foreclosure,
troubled loans or debt restructuring or other action taken with
respect to property which was security for the repayment of a
loan or other advance of funds by the Company or any Subsidiary.
"Company SAP Statements" shall have the meaning
ascribed to it in Section 3.6.
"Company SEC Reports" shall have the meaning
ascribed to it in Section 3.5(a).
"Confidentiality Agreement" shall mean the
agreement between Parent and Buyer dated June 5, 1998.
"Consent" shall mean any consent, approval,
authorization, clearance, exemption, waiver, or similar
affirmation by, or filing with or notification to, a person
pursuant to any Contract, Law, Order or Permit.
"Contract" shall mean any written or oral
agreement, arrangement, commitment, contract, indenture,
instrument, lease or other obligation of any kind or character,
or other obligation that is binding on any Person or its capital
stock, properties or business.
"Default" shall mean (i) any breach or violation
of or default under any Contract, Order or Permit, (ii) any
occurrence of any event that with the passage of time or the
giving of notice or both would constitute a breach or violation
of or default under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right to terminate
or revoke, change the current terms of, or renegotiate, or to
accelerate, increase, or impose any liability under, or create
any Lien in connection with, any Contract, Order or Permit.
"Designated Subsidiary" shall mean Avco Financial
Services International, Inc. (Nebraska); Avco Financial Services
Management Company; Newport Management Company; Balboa Life
Insurance Company; Balboa Insurance Company; Avco Group Limited
(U.K.); Avco Trust PLC (U.K.); Avco Financial Services (Asia)
Limited (Hong Kong); Avco Australia Pty. Ltd.; Textron Financial
Corporation (Australia) Pty. Ltd.; Avco Financial Services
Limited (Australia); Avco Access Ltd. (Australia); Avco Financial
Services Canada Limited; Textron Financial Corporation (Canada);
Atlantic Reinsurance Company; Hallmark General Insurance Company
(Australia); Hallmark Life Insurance Company (Australia); and
London and Midland Insurance Company (Canada).
"Directly Owned Subsidiaries" shall have the
meaning ascribed to it in Section 3.2(a).
"Disclosure Schedule" shall mean the Disclosure
Schedule prepared by the Company and delivered to Buyer
concurrently with the execution of this Agreement.
"E&Y" shall mean Ernst & Young LLP, independent
accountants of the Company.
"Employee Welfare Benefit Plan" shall mean an
employee welfare benefit plan as defined in Section 3(1) of ERISA
and any comparable plan in locations outside the United States.
"Environmental Claim" shall mean any
investigation, notice of violation, demand, allegation, action,
suit, Order, consent decree, penalty, fine, Lien, proceeding or
claim (whether administrative, judicial or private in nature)
arising: (i) pursuant to, or in connection with, an actual or
alleged violation of any Environmental Law; (ii) in connection
with any Hazardous Material or actual or alleged activity
associated with any Hazardous Material; (iii) from any abatement,
removal, remedial, corrective or other response action in connec
tion with any Hazardous Material, Environmental Law or Order; or
(iv) from any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
"Environmental Law" shall mean any Law pertaining
to: (i) the protection of health, safety and the indoor or
outdoor environment; (ii) the conservation, management or use of
natural resources and wildlife; (iii) the protection or use of
surface water and ground water; (iv) the management, manufacture,
possession, presence, use, generation, transportation, treatment,
storage, disposal, release, threatened release, abatement,
removal, remediation or handling of, or exposure to, any
Hazardous Material; or (v) pollution (including any release to
air, land, surface water and ground water); and includes, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.
9601 et seq., and the Solid Waste Disposal Act, as amended, 42
U.S.C. 6901 et seq.
"ERISA" shall have the meaning ascribed to it in
Section 3.10(a).
"ERISA Affiliate" shall mean any corporation or
trade or business, whether or not incorporated, that together
with an entity or any subsidiary of such entity would be deemed a
"single employer" within the meaning of Section 4001 of ERISA, or
considered as being members of a controlled group of corpora
tions, under common control, or members of an affiliated service
group within the meaning of Subsections 414(b), (c), (m) or (o)
of the Code or Section 4001(a)(14) of ERISA.
"Finance Subsidiary" shall mean any Subsidiary
whose principal business is financial as identified in Schedule A
hereto.
"Financial Statements" shall have the meaning
ascribed to such term in Section 3.5(b).
"Foreign Competition Laws" shall mean foreign
statutes, rules, regulations, orders, decrees, administrative and
judicial directives, and other foreign laws, that are designed or
intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization, lessening of competition or
restraint of trade.
"GAAP" shall have the meaning ascribed to it in
Section 3.5(b).
"Guarantees" shall have the meaning ascribed to it
in Section 5.6(c).
"Governmental Entity" shall have the meaning
ascribed to it in Section 3.4(a).
"Hazardous Material" shall mean any substance,
chemical, compound, product, solid, gas, liquid, waste, by-
product, pollutant, contaminant or material which is hazardous or
toxic, and includes without limitation, asbestos or any substance
containing asbestos, polychlorinated biphenyls, petroleum
(including crude oil or any fraction thereof), and any hazardous
or toxic waste, material or substance regulated under any Environ
mental Law.
"Indemnified Party" shall have the meaning
ascribed to it in Section 8.1.(b).
"Indemnifying Party" shall have the meaning
ascribed to it in Section 8.1.(b).
"Insurance Subsidiary" shall mean any Subsidiary
whose principal business is insurance as identified in Schedule A
hereto.
"Interest Rate" shall mean six (6) percent per
year calculated on the basis of a 365 day year and charged for
the actual number of days elapsed.
"Interim Statements" shall have the meaning
ascribed to it in Section 2.3(b).
"Law" shall mean any federal, state, local or
foreign law, statute, ordinance, rule, regulation, Order,
judgment or decree, administrative or judicial decision, and any
other executive or legislative proclamation.
"Liabilities" shall have the meaning ascribed to
it in Section 2.2.
"License" shall mean any license, Permit,
certificate of authority or any other instrument issued by any
governmental authority relating to the ability to do business by
the Company and the Subsidiaries.
"Lien" shall mean any conditional sale agreement,
default of title, easement, encroachment, encumbrance,
hypothecation, infringement, lien, mortgage, option, pledge,
reservation, restriction, security interest, title retention or
other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect
to any property or property interest.
"Litigation" shall mean any suit, action, arbi
tration, cause of action, claim, complaint, criminal prosecution,
investigation, demand letter, governmental or other admin
istrative proceeding, whether at law or at equity, before or by
any federal, state or foreign court, tribunal, or agency or
before any arbitrator.
"Losses" shall mean any and all actual losses,
liabilities, costs and expenses (including reasonable attorneys'
fees and costs of investigation).
"Material Adverse Effect" shall mean any adverse
change in the business, assets, liabilities, financial condition,
or results of operations of the Company or any of the
Subsidiaries which, individually or together with any other such
adverse change, is material to the Company and the Subsidiaries
taken as a whole, other than any such effect attributable to or
resulting from (i) the public announcement of the transactions
contemplated hereby, (ii) any change in banking, insurance,
consumer finance, commercial finance, thrift, fair lending or
similar Laws of general applicability or interpretations thereof
by courts or governmental authorities, (iii) any change in
general economic conditions, in interest rates, currency exchange
rates, or in conditions affecting banking, insurance, consumer
finance, commercial finance, or thrift industries generally, (iv)
any act or omission of the Company or any Subsidiary taken with
the prior consent of the Buyer pursuant to Article V or (v)
actions taken by the Company at the specific request of Buyer.
"Material Contract" shall have the meaning
ascribed to it in Section 3.13.
"Order" shall mean any administrative decision or
award, decree, injunction, judgment, order, quasi-judicial
decision or award, ruling, or writ of any federal, state, local
or foreign or other court, arbitrator, mediator, tribunal,
administrative agency or authority.
"Permit" shall mean any federal, state, local or
foreign governmental approval, authorization, certificate,
declaration, easement, filing, franchise, license, notice,
permit, variance, clearance, exemption, closure or right to which
any person is a party or that is or may be binding upon or inure
to the benefit of any person or its securities, properties or
business.
"Person" shall mean any individual, corporation,
partnership, joint venture, trust, association, organization,
governmental authority or other entity.
"Purchase Price" shall have the meaning ascribed
to it in Section 2.3(a).
"Representatives" shall have the meaning ascribed
to it in Section 5.2(a).
"Requisite Regulatory Approvals" shall have the
meaning ascribed to it in Section 3.4(a).
"Section 5.9 Indemnified Parties" shall have the
meaning ascribed to it in Section 5.9.(b).
"Separation Agreement" shall mean the Separation
Agreement of even date herewith entered into by and among Parent,
the Company and Buyer, attached hereto as Exhibit 3.
"Shares" shall have the meaning ascribed to it in
Section 2.1.
"Statement" shall have the meaning ascribed to it
in Section 2.3(b).
"Subsidiary" shall mean each corporation
identified in Schedule A to this Agreement.
"Tax" or "Taxes" shall mean all United States
federal, state, provincial, local, territorial and foreign
income, profits, franchise, license, capital, transfer, ad
valorem, wage, severance, occupation, import, custom, gross
receipts, payroll, sales, employment, use, property, real estate,
excise, value added, estimated, stamp, alternative or add-on
minimum, environmental, withholding and any other taxes, duties,
assessments or governmental tax charges of any kind whatsoever.
"Tax Authority" shall mean any domestic, foreign,
federal, national, state, provincial, county or municipal or
other local government, any subdivision, agency, commission or
authority thereof, or any quasi-governmental body exercising any
taxing authority or any other authority exercising Tax regulatory
authority.
"Tax Return" shall mean any return, report or
similar statement required to be filed with respect to any Tax
(including any attached schedules), including any information
return, claim for refund, amended return or declaration of
estimated Tax.
"Transaction" shall mean the purchase of Assets
and the assumption of Liabilities described in Sections 2.1 and
2.2.
"Tax Allocation Agreement" shall mean the Tax
Allocation Agreement of even date herewith by and among Parent,
the Company and Buyer attached hereto as Exhibit 2.
"Transferred Employee" shall have the meaning
ascribed to it in Section 5.10(a).
ARTICLE II
PURCHASE AND SALE OF ASSETS
AND ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of Assets. Subject to the
terms and conditions of this Agreement, at the Closing the
Company shall sell, transfer, convey, assign and deliver to Buyer
and Buyer shall purchase, acquire and accept from the Company:
(a) all the outstanding capital stock owned by the Company in the
Directly Owned Subsidiaries (the "Shares"); and (b) all of the
Company's other rights, properties, assets, claims, contracts and
businesses of every kind, character and description, whether
tangible or intangible, whether real, personal or mixed, whether
accrued, contingent or otherwise, and wherever located; except
for (v) the shares of Parent Series D Cumulative Preferred Stock,
(w) the Company's National Bank Charter, (x) any rights in or to
the names "Textron" and "TFC", alone or in combination with any
other words, and any trade names, trademarks or service marks
relating thereto, and (y) any documents or records which the
Company is required by law to retain in its possession. (The
Shares and the items listed in Section 2.1(b) which are being
purchased by Buyer are collectively referred to as the "Assets").
2.2 Assumption of Liabilities. Subject to the terms
and conditions of this Agreement, the Tax Allocation Agreement
and the Separation Agreement, at the Closing the Buyer shall
assume all of the liabilities and obligations of the Company
(known and unknown and whether absolute, accrued, contingent or
otherwise) existing as of the Closing Date, whether asserted
before or after such time, other than the liabilities and
obligations of the Company (i) in connection with the
transactions contemplated by this Agreement, (ii) in connection
with the deferred tax liability associated with the Parent Series
D Cumulative Preferred Stock or (iii) pursuant to, or as a result
of a breach of, this Agreement or any other Contract entered into
in connection with the Transaction. (The liabilities and
obligations being assumed hereunder are collectively referred to
as the "Liabilities".)
2.3 (a) Purchase Price. Subject to the terms and
conditions of this Agreement including the provisions of Section
6.1(b) hereof and in consideration of the sale, assignment,
transfer and delivery of the Assets, Buyer shall pay to the
Company on the Closing Date, in immediately available funds by
wire transfer to an account designated in writing at least two
business days in advance by the Company, the sum of three
billion, nine hundred million dollars ($3,900,000,000) (the
"Purchase Price").
(b) Closing Date Statements.
(1) As soon as practical, but in any event within
sixty (60) days following the Closing Date, unless otherwise
extended by the mutual agreement of the parties, the Company
shall deliver to the Buyer at Buyer's expense (i) the audited
consolidated statement of financial position of the Company and
its consolidated Subsidiaries as of the Closing Date (the
"Statement") together with the report thereon of Ernst & Young
LLP, independent accountants of the Company ("E&Y"), stating that
such Statement has been prepared in conformity with GAAP applied
on a basis consistent with the preparation of the audited
December 31, 1997 balance sheet as contained in the SEC Reports;
(ii) a schedule of the intercompany accounts receivables between
Parent or an affiliate of Parent (other than the Company and the
Subsidiaries) on the one hand and the Company or any Subsidiary
on the other hand set forth in the Statement; (iii) a schedule of
deferred tax accounts for each Directly Owned Subsidiary as set
forth in the Statement;(iv) a schedule of all intercompany
payments between Parent and its Affiliates (other than the
Company and the Subsidiaries) on the one hand and the Company and
the Subsidiaries on the other hand from the date of the Interim
Statements to the Closing Date; and (v) a schedule setting forth
the contingent tax reserves as adjusted in accordance with the
Tax Allocation Agreement. The term "Interim Statements" shall
mean the Financial Statements of the Company and its consolidated
subsidiaries as of, and for the six month period ending on,
June 30, 1998. If requested by Buyer, the Company shall request
that E&Y conduct a full audit of the Company and its
consolidated Subsidiaries at Buyer's expense and deliver a
statement of stockholders' equity and cash flows.
(2) Subject to Section 2.3(d), the Statement shall
be final, binding and conclusive on the parties hereto as they
relate to the calculation of the Purchase Price but shall not
affect Parent's or the Company's liability under any other
Section of this Agreement.
(c) Settlement of Purchase Price. Subject to the
provisions of Section 2.3(d), within forty-five (45) days after
the date of receipt by the Buyer of the Statement, in the event
that the Adjusted Stockholder's Equity (as defined in Section
6.2(c)) and delivered pursuant to this Section 2.3 is (i) more
than $1,227,400,000, then the Buyer shall pay the difference to
the Company, as an adjustment to the Purchase Price, or (ii) less
than $1,227,400,000, then the Company shall pay the difference to
the Buyer, as an adjustment to the Purchase Price prior to 11:00
a.m. local time in New York. All payments pursuant to this
Section 2.3(c) or Section 2.3(d) ("Purchase Price Adjustment
Payments") shall be made by wire transfer of immediately
available funds and shall be made together with interest thereon
at the Interest Rate, payable for the period commencing on the
Closing Date and ending on the day immediately prior to the date
of such Purchase Price Adjustment Payment.
(d) Closing Date Statement Disputes.
(i) Buyer may dispute any amounts reflected on
the Statement; provided, however, that the Buyer shall
notify the Company in writing (the "Dispute Notice") of each
disputed item, specifying the amount thereof in dispute and
setting forth, in reasonable detail, the basis for such
dispute, within forty-five (45) days of Buyer's receipt of
the Statement as so submitted; and provided, further,
however, that if an account or item is recorded or treated
in a manner consistent with past practice, then, provided
that such recording or treatment does not prevent the
Statement from being in accordance with GAAP, it must be
accepted as correct by Buyer for purposes of this Section.
Buyer shall submit only one Dispute Notice containing all
disputed items. In the event of such a dispute, the Buyer
and the Company shall attempt to reconcile their difference
and any resolution by them as to any disputed amounts shall
be final, binding and conclusive on the parties hereto. If
the Buyer and the Company are unable to reach a resolution
with such effect within thirty (30) days of the receipt by
the Company of the Buyer's written notice of dispute, the
Buyer and the Company shall submit the items remaining in
dispute for resolution to the Independent Accounting Firm
(as defined below) which shall, within thirty (30) days
after submission, determine and report to the parties upon
such remaining disputed items, and such report shall be
final, binding and conclusive on the parties hereto. All
costs and expenses of the Independent Accounting Firm
relating to the disputed items shall be allocated between
the Buyer and the Company in the same proportion that the
aggregate dollar amount of the items unsuccessfully disputed
by each party bears to the total dollar amount of the items
disputed hereunder. The term "Independent Accounting Firm"
shall mean Arthur Andersen & Co., Certified Public
Accountants or such other firm as the Buyer and the Company
shall agree.
(i) Notwithstanding any dispute pursuant to this
Section 2.3(d) of any amounts payable pursuant to Section
2.3(c), each applicable party shall at the time specified in
Section 2.3(c) pay that portion of the amounts payable by it
pursuant to Section 2.3(c) and not subject at the time of
such payment to such dispute. Subject to the preceding
sentence, any Purchase Price Adjustment Payment made
pursuant to this Section 2.3(d) shall be paid within five
(5) business days following the resolution thereof.
(e) Access to Books and Records. During the periods
in which (x) the Statement is being prepared, or (y) any dispute
may be raised as contemplated by Section 2.3(d), Parent, the
Company and the Buyer shall provide each other, including their
authorized agents and representatives, with reasonable access,
during normal business hours and without disruption to their
normal business, to their respective books, records, facilities,
employees, accountants, counsel or other representatives
pertaining to the Company and the transactions contemplated
hereby to the extent affecting the Company including any
consolidated or combined returns, schedules, consolidated or
combined work papers and other related documents and shall
promptly provide to the Company copies of all books, records,
contracts, reports and other information which the Company or E&Y
may reasonably request in connection with the preparation of the
Statement; provided, however, that with respect to consolidated,
combined, unitary or similar Tax Returns which include Parent (or
any of its Affiliates other than the Company and the
Subsidiaries) on the one hand and the Company (or any of the
Subsidiaries) on the other hand, Buyer shall only have access to
portions of such Tax Returns relevant to the Company and the
Subsidiaries.
2.4 Closing. The Company shall as promptly as
possible notify the Buyer, and the Buyer shall as promptly as
possible notify the Company when the conditions to such party's
obligations to complete the Transaction have been satisfied or
waived. The closing of the Transaction (the "Closing") shall
take place at the offices of Skadden, Arps, Slate, Meagher & Flom
LLP, One Beacon Street, Boston, Massachusetts at 10:00 a.m.
Boston time on the last day of the month in which all of the
conditions set forth in Article VI have been satisfied or waived,
provided, however, that if the day on which such conditions have
been satisfied or waived is not at least three business days
prior to the last day of such month then the Closing shall occur
on the last day of the following month, or at such other time,
date and place as the Company and Buyer may agree in writing;
provided, further, however, that if the conditions set forth in
Article VI are not satisfied or waived prior to the third
business day prior to November 30, 1998 the Closing shall, at the
election of Parent, not occur prior to the first business day of
January 1999. (The date on which the Closing occurs is hereafter
referred to as the "Closing Date".)
2.5 Closing Obligations.
(a) At the Closing, the Company shall deliver to Buyer:
(i) certificates representing the Shares duly endorsed
(or accompanied by duly executed stock powers) for transfer
to Buyer;
(ii) a duly executed Bill of Sale, Assignment and
Assumption Agreement in the form attached as Exhibit 1
hereto;
(iii) the Officer's Certificate described in
Section 6.2(e);
(iv) the resignation of any officer or director of any
Subsidiary who is an employee or director of Parent;
(v) all such other documents as may be necessary to
convey to Buyer the right, title and interest of the Company
and the Subsidiaries in and to the Assets;
(vi) a certificate executed by the Secretary or
Assistant Secretary of the Company as to the Certificate of
Incorporation and By-Laws of the Company and the resolutions
of the Board of Directors of the Company authorizing and
approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, a list
of officers of the Company and setting forth that such
Certificate of Incorporation, By-Laws, and authorizations
and approvals are in full force and effect on the Closing
Date;
(vii) a certificate executed by the Secretary or
Assistant Secretary of each Designated Subsidiary as to the
Certificate of Incorporation and By-Laws of such Subsidiary,
a list of officers of such Designated Subsidiary and setting
forth that such Certificate of Incorporation and By-Laws are
in full force and effect on the Closing Date; and
(viii) a certificate under Section 1445(b)(2) of the
Code providing that the Company is not a foreign Person, in
form and substance reasonably satisfactory to Buyer.
(b) At the Closing, the Buyer shall deliver to the Company:
(i) a duly executed Bill of Sale, Assignment and
Assumption Agreement in the form attached as Exhibit 1
hereto;
(ii) documents in a form reasonably satisfactory to the
Company and Buyer under which Buyer assumes the Company's
obligations under the agreements identified in Section
3.4(a)(vi) of the Disclosure Schedule;
(iii) the Officer's Certificate described in
Section 6.3(d); and
(iv) the Purchase Price in the manner set forth in
Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE COMPANY
Parent and the Company jointly and severally represent
and warrant to Buyer that:
3.1 Corporate Organization and Qualification.
(a) Parent, the Company and each Designated Subsidiary
is a corporation duly organized, validly existing and in good
standing under the Laws of its jurisdiction of incorporation.
Each Subsidiary other than the Designated Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation except where
the failure to be duly organized, validly existing and in good
standing is not reasonably likely to have a Material Adverse
Effect. Parent, the Company and each of its Subsidiaries is
qualified and in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or
the business conducted, by it require such qualification, except
where the failure to so qualify or be in good standing is not
reasonably likely to have a Material Adverse Effect. Parent, the
Company and each of its Subsidiaries has all requisite corporate
power and authority and all necessary governmental Consents to
own, lease and operate its properties and to carry on its
business as it is now being conducted, except where the failure
to have such power and authority is not reasonably likely to have
a Material Adverse Effect. The Company has or will have made
available to Buyer prior to Closing complete and correct copies
of the articles of organization or articles of or certificates of
incorporation, as the case may be, and by-laws or other
equivalent organizational documents of it and each Designated Sub
sidiary as in effect as of the date hereof.
(b) Each Finance Subsidiary has the necessary Licenses
or other certificates of authority to conduct its business as is
being currently conducted in each jurisdiction where such
Licenses or certificates are required except where the failure to
be so licensed or authorized is not reasonably likely to result
in a Material Adverse Effect.
(c) Each Insurance Subsidiary is (i) duly licensed or autho
rized as an insurance company in its jurisdiction of incorpora
tion as set forth in Schedule A to the Agreement and is not
deemed to be "commercially domiciled" in any other jurisdiction,
(ii) duly licensed or authorized as an insurance company in each
other jurisdiction where it is required to be so licensed or
authorized, and (iii) duly authorized in its jurisdiction of
incorporation and each other applicable jurisdiction to write
each line of business reported as being written in the Company
SAP Statements, except, in any such case, where the failure to be
so licensed or authorized is not reasonably likely to result in a
Material Adverse Effect.
3.2 Stock of Subsidiaries.
(a) Schedule A to the Agreement identifies each Subsidiary
of the Company and separately identifies each Subsidiary whose
capital stock is directly owned by the Company (the "Directly
Owned Subsidiaries"). The Company does not own, directly or
indirectly, any equity interests in any other Person.
(b) All of the shares of capital stock of the Directly
Owned Subsidiaries, except for any directors' qualifying shares,
are owned by the Company, free and clear of all Liens, and have
been duly authorized, validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive
rights. Except for (i) any director's qualifying shares and (ii)
as set forth in Section 3.2(b) of the Disclosure Schedule, all of
the shares of the other Subsidiaries are owned by the Company or
another Subsidiary or Subsidiaries free and clear of all Liens
and have been duly authorized, validly issued and are fully paid
and nonassessable and were not issued in violation of any
preemptive rights except for any such Liens or where any such
failures to be duly authorized, validly issued, and fully paid or
nonassessable would not reasonably be expected to have a Material
Adverse Effect.
(c) Except as set forth in Section 3.2(c) of the
Disclosure Schedule, there are no options, warrants, convertible
securities or other rights, agreements, arrangements or
commitments relating to the capital stock of, or other equity
interest in, the Subsidiaries obligating the Company or a
Subsidiary to issue, sell, transfer or otherwise dispose of or
sell any shares of capital stock of, or other equity interest in,
a Subsidiary.
(d) Upon consummation of the Transaction, the Buyer
will acquire valid title to the Shares free and clear of all
Liens. Except as set forth in Section 3.2(d) of the Disclosure
Schedule, there are no voting trusts, stockholder or registration
rights agreements, proxies or other agreements or understandings
in effect with respect to the voting or transfer of the shares of
capital stock of the Subsidiaries.
3.3 Authority Relative to This Agreement. Each of
Parent and the Company has the requisite corporate power and au
thority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement and the con
summation by each of Parent and the Company of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of each of Parent and the Company and the
stockholder of the Company and no other corporate proceeding on
the part of the Company or Parent is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered
by Parent and the Company and, assuming this Agreement consti
tutes the valid and binding agreement of Buyer, constitutes the
valid and binding agreement of Parent and the Company,
enforceable against Parent and the Company in accordance with its
terms, except that the enforcement hereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other
similar Laws now or hereafter in effect relating to creditors'
rights generally and (b) general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity
or at law).
3.4 Consents and Approvals; No Violations.
(a) Except for (i) the filing of applications and
notices, as applicable, with federal and state regulatory
authorities governing consumer finance, commercial finance,
mortgage lending and insurance in the states in which the Company
and its domestic Subsidiaries operate their respective businesses
and the approval of such applications or the grant of required
Licenses by such authorities, (ii) the filing of applications and
notices, as applicable, with the foreign governmental authorities
regulating consumer finance, commercial finance, mortgage lending
and insurance in the foreign jurisdictions in which the
Subsidiaries operate their businesses, and the approval of such
applications or the grant of required Licenses by such
authorities, (iii) the filing of notification and report forms
with the United States Federal Trade Commission and the United
States Department of Justice under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the expiration or termination of any applicable waiting
period thereunder, (iv) the filing of applications and notices,
as applicable, with foreign governmental authorities under the
Foreign Competition Laws, and the approval of such applications
by such authorities, if required (including, without limitation,
(x) in the instance of Australia, receipt of approval from the
Treasurer under the Foreign Acquisitions and Takeovers Act, (y)
in the instance of Canada, receipt of either an Advanced Ruling
Certificate or no-action letter from the Bureau of Competition,
in such form and to such effect as would be determined to be
reasonably satisfactory, and (z) in the instance of the United
Kingdom, receipt of a response from either the Office of Fair
Trading or the Monopolies and Mergers Commission under the Merger
Control Law, in such form and to such effect as would be
determined to be reasonably satisfactory), (v) the Consents of
third parties under the Contracts listed in Section 3.4(a)(v) of
the Disclosure Schedule, and (vi) the assumption by Buyer of the
Company's obligations under the Contracts identified in Section
3.4(a)(vi) of the Disclosure Schedule, no notices to, Consents or
approvals of, or filings or registrations with, any court,
administrative agency or commission or other governmental
authority or instrumentality (each, a "Governmental Entity") or
with any self-regulatory authority or with any third party are
necessary in connection with the execution and delivery by Parent
and the Company of this Agreement and the consummation by Parent
and the Company of the transactions contemplated hereby, except
for such notices, Consents, approvals, filings or registrations,
the failure of which to be made or obtained would not reasonably
be expected to have a Material Adverse Effect. The notices,
Consents, or approvals, filings or registrations, and expirations
or terminations of waiting periods referred in clauses 3.4(a)(i)
through 3.4(a)(iv), without giving effect for purposes of this
definition to any qualifier as to materiality or Material Adverse
Effect are hereinafter referred to as the "Requisite Regulatory
Approvals". As of the date hereof, neither Parent nor the
Company knows of any reason why the Requisite Regulatory
Approvals should not be obtained.
(b) Neither the execution and delivery of this
Agreement by Parent or the Company nor the consummation by Parent
and the Company of the transactions contemplated hereby, does nor
will (i) conflict with or result in any breach of any provisions
of the certificate of incorporation or by-laws of the Parent or
Company or the certificate of incorporation or by-laws or other
equivalent organizational documents of any of the Subsidiaries;
(ii) subject to obtaining the Consents listed in Section
3.4(a)(v) of the Disclosure Schedule and the Buyer assuming the
Company's obligations under the Contracts identified in Section
3.4(a)(vi) of the Disclosure Schedule, and except as set forth in
Section 3.4(b) of the Disclosure Schedule, conflict with, result
in a violation or breach of, or constitute a Default (or give
rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, License, Contract, agreement or other
instrument or obligation to which the Parent or Company or any of
the Subsidiaries is a party or by which any of them or any of
their respective properties or assets may be bound; (iii)
conflict with, result in a violation or breach of, or constitute
a Default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or
provisions of any License or Permit; or (iv) subject to giving
the notices, making the filings or registrations or obtaining the
Consents or approvals referred to in clauses (i) through (vi) in
paragraph (a) above, conflict with, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the
Company, any of the Subsidiaries or any of their respective
properties or assets, except, in the case of clauses (ii), (iii)
or (iv) of this paragraph (b) for violations, breaches or
Defaults which would not reasonably be expected to have a
Material Adverse Effect.
3.5 SEC Reports; Financial Statements.
(a) The Company has timely filed all reports required
to be filed by it with the Securities and Exchange Commission
(the "SEC") since January 1, 1997 pursuant to the federal securi
ties Laws and the SEC rules and regulations thereunder which com
plied in all material respects with applicable requirements of
the Securities Exchange Act of 1934, as amended (collectively,
the "Company SEC Reports"). None of the Company SEC Reports, as
of their respective dates, contained or will contain any untrue
statement of a material fact or omitted or will omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The consolidated statements of financial position and
the related consolidated statements of operations, stockholders'
equity and cash flows (including the related notes thereto) of
the Company included in the Company SEC Reports (the "Financial
Statements") complied in all material respects with applicable ac
counting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in conformity
with United States generally accepted accounting principles
("GAAP") (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a basis consistent
with prior periods (except as otherwise noted therein), and
present fairly the consolidated financial position of the Company
as of their respective dates, and the consolidated results of its
operations and its cash flows for the periods presented therein
(subject, in the case of the unaudited interim financial
statements, to normal and recurring year-end adjustments that
have not been and are not expected to be material in amount).
3.6 Statutory Statements. Each of the Insurance Sub
sidiaries has filed all annual or quarterly statements, together
with all exhibits and schedules thereto, required to be filed
with or submitted to the appropriate regulatory authorities of
the jurisdiction in which it is domiciled on forms prescribed or
permitted by such authority (collectively, the "Company SAP State
ments") since January 1, 1997. Financial statements included in
the Company SAP Statements and prepared on a statutory basis, in
cluding the notes thereto, have been prepared in all material re
spects in accordance with accounting practices prescribed or per
mitted by applicable regulatory authorities in effect as of the
date of the respective statements and such accounting practices
have been applied in all material respects on a consistent basis
throughout the periods involved, except as expressly set forth in
the notes or schedules thereto, and such financial statements
present fairly the respective statutory financial positions and
results of operation of each of the Insurance Subsidiaries as of
their respective dates and for the respective periods presented
therein.
3.7 Absence of Certain Changes or Events.
(a) Except as disclosed in the Company SEC Reports
filed prior to the date of this Agreement, or as set forth in Sec
tion 3.7(a) of the Disclosure Schedule or as a consequence of, or
as expressly contemplated by, this Agreement, since December 31,
1997, (i) the business of the Company has been carried on only in
the ordinary and usual course consistent with past practice, and
(ii) there has not occurred any event, development or change
which has resulted or is reasonably likely to result in a
Material Adverse Effect; provided, however, that if the Material
Adverse Effect results from a lawsuit identified in Section 3.8
of the Disclosure Schedule, Parent may cure the Material Adverse
Effect by contribution to the capital of the Company in an amount
sufficient to avoid a Material Adverse Effect.
(b) Except as set forth in the Company SEC Reports
filed prior to the date of this Agreement or as listed in Section
3.7(b) of the Disclosure Schedule, and except for liabilities and
obligations incurred in the ordinary course of business
consistent with past practice, since December 31, 1997, neither
the Company nor any of its Subsidiaries has any liabilities or
obligations (i) of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be recognized or
disclosed on a consolidated balance sheet of the Company and its
consolidated subsidiaries or in the notes thereto except for
liabilities or obligations which have not resulted in or are not
reasonably likely to have a Material Adverse Effect or (ii) of
any other nature (whether accrued, absolute, contingent or
otherwise) which exceed in the aggregate three hundred and twenty-
five million dollars ($325,000,000), before giving effect to any
related reduction in Taxes. The reference to a threshold of $325
million in this Section 3.7(b)(ii) shall not be deemed in any way
to define the terms "material" or "Material Adverse Effect" and
shall not be construed to limit or qualify in any way the right
of Buyer to claim that any other representation or warranty set
forth in this Agreement has been inaccurate or has been breached;
provided, however, that if the Material Adverse Effect results
from a lawsuit identified in Section 3.8 of the Disclosure
Schedule, Parent may cure the Material Adverse Effect by a cash
contribution to the capital of the Company in an amount
sufficient to avoid a Material Adverse Effect.
3.8 Litigation. Except as set forth in Section 3.8
of the Disclosure Schedule, there is no Litigation pending, or to
the knowledge of the members of the Executive Committee of the
Board of Directors of the Company (which includes the General
Counsel of the Company), threatened, the outcome of which is rea
sonably likely to have a Material Adverse Effect.
3.9 Taxes.
(a) Tax Returns Filed and Taxes Paid. Each of the
Company and the Subsidiaries has timely filed all material Tax
Returns that it was required to file and all such Tax Returns
were correct and complete in all material respects. Each of the
Company and the Subsidiaries has timely paid in full all Taxes
that are due or owing.
(b) Tax Payments and Withholdings. Each of the
Company and the Subsidiaries has withheld and paid all Taxes
required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(c) No Liens. There are no Liens or other
encumbrances on any of the material assets or properties of the
Company and the Subsidiaries that arose in connection with any
failure (or alleged failure) to pay Tax.
(d) Tax Positions. No position has been asserted in
writing by any Tax Authority with respect to Taxes of the Company
and the Subsidiaries which, if asserted by such Tax Authority in
a Tax period ending after the Closing Date would reasonably be
expected to have a Material Adverse Effect on the Company and the
Subsidiaries.
(e) No Pending Ruling, Closing Agreements, or Changes
in Accounting Method. There are no outstanding requests for
rulings with any Tax Authority that would have a Material Adverse
Effect on the operations of the Company or the Subsidiaries for
periods after the Closing Date. None of the Company and the
Subsidiaries has (i) executed, become subject to, or entered into
any closing agreement pursuant to Code Section 7121 or any
similar or predecessor provisions thereof under the Code or other
Tax Law, or (ii) received approval to make or agreed to a change
in accounting method, which closing agreement or change in
accounting method would have a Material Adverse Effect on the
Company or any of the Subsidiaries for any Tax period ending
after the Closing Date. None of the Company and the Subsidiaries
has any application pending with any Tax Authority requesting
permission for any change in accounting method that would have a
Material Adverse Effect on the Company or the Subsidiaries for
any Tax period ending after the Closing Date.
(f) No Affiliated Group Liability. No liability has
been asserted against the Company or the Subsidiaries with
respect to Taxes of any affiliated group within the meaning of
Section 1504(a) of the Code of which the Company or the
Subsidiaries have been a member and of which Parent was not the
common parent corporation.
(g) No Tax Indemnities. No liability has been
asserted against the Company or the Subsidiaries with respect to
Taxes of any other Person pursuant to any Tax allocation or
sharing agreement with any such Person, or any agreement to
indemnify any such Person with respect to Taxes.
3.10 Employee Benefit Plans; Labor Matters.
(a) A copy of each (i) employee benefit plan covered
by the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")(and comparable foreign plans) (ii) each stock
option plan and (iii) each employment agreement with any officer
of the Company or a Subsidiary will be made available to Buyer
prior to Closing.
(b) Each Company Plan has been operated in accordance
with its terms and the requirements of ERISA, the Code, and all
other applicable Laws, except where the failure to have been so
operated is not reasonably likely to result in a Material Adverse
Effect. All reports and disclosures relating to the Company
Plans required to be filed or furnished to any governmental
entity, participants or beneficiaries prior to the Closing Date
have been or will be filed or furnished in a timely manner and in
accordance in all respects with applicable Law, except where the
failure to be so filed or furnished is not reasonably likely to
have a Material Adverse Effect.
(c) (i) Neither the Company, any Subsidiary, any
Company Plan, any trust created thereunder nor any trustee or
administrator thereof has engaged in any transaction with the
Company or any ERISA Affiliate, any Company Plan, any such trust,
or any trustee or administrator thereof, or any party dealing
with any Company Plan or any such trust, which could result in a
liability assessed pursuant to Section 409 or 502(i) of ERISA or
a tax imposed pursuant to Section 4975 of the Code; and (ii) the
Company, the Subsidiaries, and all fiduciaries (as defined in
Section 3(21) of ERISA) with respect to the Company Plans, have
complied in all material respects with Section 404 of ERISA.
(d) Determination Letters. (i) Each Company Plan
currently in effect which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service with respect to the
Code, or an application has been filed for such determination
letter on a timely basis and is currently pending, and
(ii) nothing has occurred that could reasonably be expected to
adversely affect the qualified status of such Company Plan.
(e) Except as is not reasonably likely to result in a
Material Adverse Effect, no event or condition has occurred, or
failed to occur, in connection with which the Company or any
ERISA Affiliate or any of the Subsidiaries is or may reasonably
be expected to be, directly or indirectly through any Affiliate,
subject to any liability, lien or encumbrance with respect to any
plan under ERISA or other applicable Law or under any agreement,
instrument or understanding pursuant to or under which the
Company or the Subsidiaries are required to indemnify any person
against such liability, lien or encumbrance. No liability under
Subtitle C, D or E of Title IV of ERISA has been or is expected
to be incurred by the Company or any Subsidiary with respect to
any ongoing frozen or terminated "single-employer plan", within
the meaning of Section 4001(a)(15) of ERISA, or "multi-employer
plan" within the meaning of Section 4001(a)(3) of ERISA,
currently or formerly maintained by any of them, or the single-
employer plan of any ERISA Affiliate. The Company and the
Subsidiaries have not sponsored, maintained, contributed, or been
obligated to contribute, to a multi-employer plan under Subtitle
E of Title IV of ERISA. No notice of a "reportable event"
within the meaning of Section 4043 of ERISA, for which the 30-day
reporting requirement has not been waived, has been required to
be filed for any Company Plan or by any ERISA Affiliate within
the 12-month period ending on the date hereof or will be required
to be filed in connection with the transactions contemplated by
this Agreement.
(f) All contributions required to be made under the
terms of any Company Plan as of the Closing Date have been or
will be timely made on or prior to the Closing Date. No single-
employer plan of the Company has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section
412 of the Code or Section 302 of ERISA. Neither the Company nor
any Subsidiary has provided, or is required to provide, security
to any plan pursuant to Section 401(a)(29) of the Code.
(g) The consummation of the transactions contemplated
in this Agreement will not, except as set forth in Schedule
3.10(g) (which may be amended any time prior to September 15,
1998), (A) entitle any employees of the Company or the
Subsidiaries to severance pay, (B) accelerate the time of payment
or vesting or trigger any payment of compensation or benefits
under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Company Plans or (C) result in
any breach or violation of, or a default under, any of the
Company Plans.
(h) Except as is not reasonably likely to result in a
Material Adverse Effect, the Company and the Subsidiaries have
complied with all applicable provisions of Section 6.01 et seq.
of ERISA and Section 4980B of the Code and with all applicable
provisions of the Health Insurance Portability and Accountability
Act of 1996.
(i) Since January 1, 1997, except as is not reasonably
likely to result in a Material Adverse Effect, neither the
Company nor any of the Subsidiaries has in the past or is now
engaged in any unfair labor practice, nor is any complaint
against the Company or any of the Subsidiaries pending or
threatened before the National Labor Relations Board; (i) there
is no labor strike, dispute, slowdown or stoppage actually
pending or threatened with respect to any employees of the
Company or any of the Subsidiaries; (ii) no attempt to organize
any group or all of the employees of the Company or the
Subsidiaries has been made, or to the best of the Company's
knowledge, proposed; and (iii) no grievance which might have an
adverse effect on the Company or the Subsidiaries or the conduct
of their business is pending in accordance with the Company's and
the Subsidiaries' established procedures for handling grievances
and no claim therefor has been asserted. Except as is not
reasonably likely to have a Material Adverse Effect, (i) no
agreement restricts the Company or any of the Subsidiaries from
relocating, closing or terminating any of their operations or
facilities; and (ii) in the past three years there has not been
any work stoppage at the Company or any Subsidiary. Neither the
Company nor any of the Subsidiaries is now, and the consummation
of the transactions contemplated by this Agreement will not cause
the Company or the Subsidiaries to become bound by, obligated
under or responsible for any labor contract, collective
bargaining agreement, consent decree or conciliation agreement
relating to employment (other than plans or arrangements of a
type described in Section 3.10(a)).
(j) The Company and the Subsidiaries are in compliance
with their obligations pursuant to the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN" Act). The Company
and the Subsidiaries have not effectuated a "mass layoff" (as
defined under the WARN Act) affecting in whole or in part any
site of employment, facility, operating unit or employees of the
Company or any Subsidiary.
3.11 Environmental Laws and Regulations. Except as
disclosed in Section 3.11 of the Disclosure Schedule, or except
as is not reasonably likely to result in a Material Adverse
Effect: (a) the Company and the Subsidiaries and each of the
Company Properties are and have been in compliance with all
applicable Environmental Laws with respect to the Company
Properties; (b) the Company and the Subsidiaries have obtained
all Permits required for the operation of the Company Properties
by any applicable Environmental Law; (c) neither the Company nor
any Subsidiary has, and the Company has no knowledge of any other
person who has caused any release, threatened release or disposal
of any Hazardous Material at any of the Company Properties; (d)
the Company has no knowledge that any of the Company Properties
are adversely affected by any release, threatened release or
disposal of a Hazardous Material originating or emanating from
any other property; (e) neither the Company nor any Subsidiary
has manufactured, used, generated, stored, treated, transported,
disposed of, arranged for the disposal of, released, or otherwise
managed any Hazardous Material at the Company Properties or at
any other Property; (f) neither the Company nor any Subsidiary
(i) has any liability for response or corrective action, natural
resources damage, or any other harm pursuant to any Environmental
Law involving any of the Company Properties, (ii) is subject to,
has notice or knowledge of, or is required to give any notice of
any Environmental Claim involving any of the Company Properties
or (iii) has knowledge of any condition or occurrence at any of
the Company Properties which could form the basis of an Environ
mental Claim against the Company, any Subsidiary or any of the
Company Properties; (g) the Company Properties are not subject to
any, and the Company has no knowledge of any imminent, re
striction on the ownership, occupancy, use or transferability of
the Company Properties with respect to any (i) Environmental Law
or (ii) release, threatened release or disposal of any Hazardous
Material; and (h) there are no conditions or circumstances at any
of the Company Properties that pose a risk to the environment or
the health or safety of any person; provided, however, that for
purposes of clauses (c),(d), (e),(f) and (h) of this Section 3.11
Company Properties shall be deemed to include any Property
previously owned or leased by the Company or any Subsidiary that
would qualify as a Company Property were such Property owned by
the Company or a Subsidiary as of the date hereof.
3.12 Compliance with Laws. The Company and each
Subsidiary are in compliance with all applicable Laws, Orders,
Permits and Licenses except for instances of non-compliance which
are not reasonably likely to have a Material Adverse Effect.
Except as set forth in Section 3.12 of the Disclosure Schedule,
since January 1, 1996, neither the Company nor any Subsidiary has
received any written notification or written communication from
any agency or department of foreign, federal, state, or local
government (a) asserting that the Company or any Subsidiary is
not in compliance with any of the Laws, Orders, Licenses or
Permits of any governmental agency or authority or that any such
agency or authority enforces, except such instances of non-com
pliance that are not reasonably likely to have a Material Adverse
Effect, or (b) requiring the Company or any Subsidiary to enter
into or consent to the issuance of a cease and desist order,
formal agreement, directive or commitment which restricts
materially the conduct of the Company's business or its assets,
liabilities, financial condition, results of operations, capital,
credit or reserve policies, its management, or the payment of
dividends.
3.13 Material Contracts. Each Material Contract is in
full force and effect, and is a legal, valid and binding
obligation of the Company or a Subsidiary and, to the knowledge
of the Company, each of the other parties thereto, enforceable in
accordance with its terms, except that the enforcement thereof
may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect relat
ing to creditors' rights generally and (b) general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and except as would not
reasonably be likely to have a Material Adverse Effect. No
condition exists or event has occurred which (whether with or
without notice or lapse of time or both, or the happening or
occurrence of any other event) would constitute a default by the
Company or a Subsidiary or, to the knowledge of the Company, any
other party thereto under, or result in a right in termination
of, any Material Contract, except as would not reasonably be
likely to have a Material Adverse Effect. The term "Material
Contract" shall mean any Contract which is material to the
Company and the Subsidiaries taken as a whole.
3.14 Insurance. Parent or the Company and the
Subsidiaries self-insure or maintain with third parties policies
of fire and casualty, liability and other forms of insurance in
such amounts, with such deductibles and retained amounts, and
against such risks and losses, as are reasonable for the conduct
of the business as conducted on the date hereof and for the
assets of the Company and the Subsidiaries. Parent and the
Company shall, or shall cause the Subsidiaries to, maintain in
full force and effect all such self-insurance or insurance, as
the case may be, during the period from the date of this
Agreement through the Closing Date.
3.15 Brokers and Finders. Other than Goldman, Sachs &
Co. and J.P. Morgan and Co. (the fees and expenses of which shall
be borne solely by Parent), neither Parent nor the Company have
employed any investment banker, broker, finder, consultant or
intermediary in connection with the transactions contemplated by
this Agreement which would be entitled to any investment banking,
brokerage, finder's, financial advisory or similar fee or
commission in connection with this Agreement or the transactions
contemplated hereby.
3.16 Intercompany Loans. Neither the Company nor any
Subsidiary (i) have outstanding loans to Parent or any Affiliate
of Parent (other than the Company or any Subsidiary) whose
aggregate balance exceeds five million dollars ($5,000,000), (ii)
have loans outstanding to customers of Parent or any Affiliate of
Parent which in the aggregate exceeds twelve million dollars
($12,000,000), or (iii) have any other significant commercial
relationships with Parent or any Affiliate of Parent (other than
the Company or any Subsidiary).
1.13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Company that:
4.1 Corporate Organization and Qualification. The
Buyer is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware.
4.2 Authority Relative to This Agreement. The Buyer
has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contem
plated hereby. This Agreement and the consummation by Buyer of
the transactions contemplated hereby have been duly and validly
authorized by its Board of Directors and no other corporate pro
ceedings on the part of Buyer are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered
by Buyer and, assuming this Agreement constitutes the valid and
binding agreement of Parent and the Company, constitutes the
valid and binding agreement of Parent and Buyer, enforceable
against it in accordance with its terms, except that the enforce
ment hereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter
in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is con
sidered in a proceeding at law or in equity).
4.3 Consents and Approvals; No Violations. Neither
the execution, delivery or performance of this Agreement by Buyer
nor the consummation by Buyer of the transactions contemplated
hereby nor compliance by Buyer with any of the provisions hereof
will (a) conflict with or result in any breach of any provision
of its certificate of incorporation, or articles of organization,
as the case may be, or respective by-laws or other equivalent
organizational documents, of Buyer or any of its subsidiaries;
(b) require any Consent of any governmental or regulatory authori
ty except for the Requisite Regulatory Approvals and Consents
which are not reasonably likely to have an adverse material
effect on Buyer or its ability to consummate the transactions
hereunder; (c) result in a Default under any of the terms,
conditions or provisions of any Contract to which Buyer or any of
the Buyer's subsidiaries or any of their respective assets may be
bound, except for such Defaults as to which requisite waivers or
Consents have been obtained or which are not reasonably likely to
have a Material Adverse Effect on Buyer or its ability to
consummate the transactions hereunder; or (d) assuming the Con
sents referred to in this Section 4.3 are duly and timely ob
tained or made, violate any Order or Law applicable to Buyer or
any of its subsidiaries or to any of their respective assets,
except for violations which are not reasonably likely to have a
Material Adverse Effect on Buyer or its ability to consummate the
transactions hereunder. As of the date hereof, Buyer knows of no
reason why the Requisite Regulatory Approvals should not be
obtained.
4.4 Financing. Buyer has or will have on the Closing
Date sufficient funds available to pay the Purchase Price for all
of the Assets being purchased under this Agreement.
4.5 Brokers and Finders. Except as set forth in
Schedule 4.5 to this Agreement, Buyer has not employed any in
vestment banker, broker, finder, or intermediary in connection
with the transactions contemplated by this Agreement which would
be entitled to any investment banking, brokerage, finder's,
financial advisory or similar fee or commission in connection
with this Agreement or the transactions contemplated hereby.
4.6 Certain Proceedings. There is no pending
proceeding that has been commenced against Buyer that challenges,
or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, Buyer's performance of the
Agreement or the consummation by Buyer of the transaction
contemplated hereby. To Buyer's knowledge, no such proceeding
has been threatened.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF
BUSINESS AND OTHER AGREEMENTS
5.1 Conduct of Business of the Company. Except as set
forth in Section 5.1 of the Disclosure Schedule, during the
period from the date of this Agreement to the Closing Date (un
less Buyer shall otherwise agree in writing and except as other
wise expressly contemplated by this Agreement), the Company will
conduct and will cause the Subsidiaries to conduct their opera
tions in the ordinary course of business consistent with past
practice and shall use all reasonable efforts to preserve intact
their Assets and current business organizations, keep available
the services of their current officers and employees, maintain
their Licenses and Contracts and preserve their relationships
with customers, suppliers, creditors, reinsurers, brokers, agents
and others having business dealings with them. Without limiting
the generality of the foregoing, and except as otherwise
expressly contemplated by this Agreement, or as set forth in
Section 5.1 of the Disclosure Schedule, or as agreed to in
writing by the Buyer, the Company agrees as to itself and its
Subsidiaries that:
(a) Issuance of Securities. The Company and its
Subsidiaries shall not issue, sell, grant, dispose of, pledge or
otherwise encumber or transfer, or cause, authorize or propose
the issuance, sale, grant, disposition or pledge or other encum
brance or transfer of (i) any additional shares of capital stock
of any class, or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for any
shares of capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase
or acquire any shares of capital stock or any securities or
rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of capital stock or (ii) any
other securities in respect of, in lieu of, or in substitution
for, shares outstanding on the date hereof.
(b) Dividends. The Company shall not, nor shall it
permit any Subsidiary to (i) split, combine, subdivide or reclas
sify any shares of its capital stock or (ii) declare, set aside
for payment or pay any dividend, or make any other actual, con
structive or deemed distribution in respect of, or redeem or
repurchase, any of its capital stock or otherwise make any pay
ments to Parent in its capacity as a stockholder, the effect of
which, in the case of this clause (ii), shall be to cause the
closing condition contained in Section 6.2(c) to be incapable of
being satisfied.
(c) Restructuring. The Company and its Subsidiaries
shall not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitaliza
tion or other reorganization of the Company or any Subsidiary.
(d) Governing Documents. The Company and its
Subsidiaries shall not adopt any amendments to their articles of
organization or to the articles or certificates of incorporation,
as the case may be, or their by-laws or other equivalent
organizational documents, or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the cor
porate structure or ownership of the Company or any Subsidiary.
(e) Indebtedness. The Company and the Subsidiaries
shall not incur any indebtedness for money borrowed other than in
the ordinary course of business consistent with past practice or
guarantee any such indebtedness of another Person (other than the
Company or any other Subsidiary), enter into any "keep well" or
other agreement to maintain any financial condition of another
Person (other than the Company or any other Subsidiary) or enter
into any arrangement having the economic effect of any of the
foregoing.
(f) No Acquisitions. Except in connection with
foreclosure, settlements in lieu of foreclosure or troubled loan
or debt restructurings and the acquisition from time to time of
receivables within the limits set forth in Section 5.1(f) of the
Disclosure Schedule, the Company and the Subsidiaries shall not
acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation, limited
liability company, partnership, joint venture, association or
other business organization or division thereof or (ii) any
assets that, individually or in the aggregate, are material to
the Company and the Subsidiaries.
(g) No Dispositions. Except in the ordinary course of
business consistent with past practice including the sale of
receivables within the limits set forth in Section 5.1(g) of the
Disclosure Schedule, the Company and the Subsidiaries shall not
sell, lease, license or otherwise encumber or subject to any Lien
or otherwise dispose of any of the properties or assets of the
Company or any Subsidiary.
(h) Capital Expenditures. The Company and the
Subsidiaries shall not make or agree to make any capital
expenditures relating to a single project in excess of two
hundred and fifty thousand dollars ($250,000) or in the aggregate
in excess of one million dollars ($1,000,000).
(i) Contracts. Except in the ordinary course of
business consistent with past practice, the Company and the
Subsidiaries shall not (y) enter into any Material Contract, or
(z) modify, amend or transfer in any material respect or
terminate any Material Contract to which the Company or any
Subsidiary is a party or waive, release or assign any material
rights or claims thereunder.
(j) Employee Matters. Except as required by Law or in
the ordinary course of business consistent with past practice or
in accordance with this Agreement, the Company and the
Subsidiaries shall not (i) increase the compensation or fringe
benefits of any of their respective employees, (ii) enter into
any Contract with any of their respective employees, officers or
directors regarding his or her employment, compensation or
benefits, or (iii) adopt any plan, arrangement or policy which
would become a Company Plan or amend any Company Plan to the
extent such adoption or amendment would create or increase any
liability or obligation on the part of the Company or the
Subsidiaries.
(k) Approvals. The Company and its subsidiaries shall
not take any action or enter into any agreement that could
reasonably be expected to jeopardize or delay in any material
respect the receipt of any Requisite Regulatory Approval.
(l) Accounting Policies and Procedures. The Company
and its Subsidiaries shall not make any change to their
accounting methods, principles or practices, except as may be
required by GAAP, Regulation S-X promulgated by the SEC, or
applicable statutory accounting principles.
(m) Liens. The Company shall not, and shall not
permit any of its Subsidiaries to, create, incur, suffer to exist
or assume any material Lien on any of their material assets.
(n) Claims. The Company and its Subsidiaries shall
not settle any material claim, action or proceeding or waive,
assign or release any material rights or claims except in either
case (i) in the ordinary course of business consistent with past
practice and (ii) to settle any Litigation which settlement would
not (A) impose either material restrictions on the conduct of the
business of the Company or any Subsidiary or (B) for any
individual Litigation item settled for money, exceed $250,000 in
cost to the Company or any Subsidiary. The Company and the
Subsidiaries shall not pay, discharge or satisfy any Liabilities
or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), except in the ordinary course of
business consistent with past practice or in accordance with
their terms as in effect of the date hereof.
(o) Interest Rate and Foreign Exchange. Except in the
ordinary course of business consistent with past practice, the
Company and its Subsidiaries shall not materially restructure or
materially change its gap position, through purchases, sales,
hedges, swaps, caps or collars or otherwise or the manner in
which any current hedges are classified or reported.
(p) Representations and Warranties. The Company and
the Subsidiaries shall not (i) take, or agree or commit to take
any action that would make any representation and warranty of the
Company hereunder that is qualified as to materiality from being
untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified from being untrue or inaccurate
in any material respect on the Closing Date (except for
representations and warranties which speak as of a particular
date or period of time, which need be accurate only as of such
date or period of time), or (ii) omit, or agree to omit, to take
any action necessary to prevent any such representation or war
ranty that is qualified as to materiality from being untrue or
inaccurate in any respect or any such representation or warranty
that is not so qualified from being untrue or inaccurate in any
material respect on the Closing Date; provided, however, that the
Company and any Subsidiary shall be permitted to take or omit to
take such action which can be cured, and in fact is cured, at or
prior to the Closing Date.
(q) Taxes. The Company and the Subsidiaries shall not
make any Tax election or settle or compromise any material Tax
liability, except in respect of ongoing matters or in the
ordinary course of business consistent with past practice;
provided, however, that the foregoing restrictions shall not
apply to any Tax matter involving a Tax Return filed by the
Company as part of any Parent consolidated group.
(r) No Agreements. The Company and the Subsidiaries
shall not authorize, recommend, propose or announce an intention
to do any of the foregoing, or agree or enter into any Contract
to do any of the foregoing.
5.2 Access to Information.
(a) Upon reasonable notice, the Company shall (and
shall cause each of the Subsidiaries to) afford to officers, em
ployees, counsel, accountants, financing sources and other autho
rized representatives of the Buyer ("Representatives"), in order
to evaluate the transactions contemplated by this Agreement,
reasonable access, during normal business hours throughout the
period prior to the Closing Date, to its officers, directors,
employees, accountants and other advisors and agents, properties,
books, records and Contracts and, during such period, it shall
(and shall cause each of the Subsidiaries to) furnish promptly to
such Representatives all financial, operating and other data and
other information concerning its business, properties and
personnel as may reasonably be requested.
(b) Buyer agrees that it will, and will cause its
Representatives to, use any information obtained pursuant to this
Section only in connection with the consummation of the transac
tions contemplated by this Agreement.
(c) The Confidentiality Agreement shall apply with re
spect to Information, as defined therein, furnished to the
Representatives pursuant to this Section.
(d) As reasonably requested by Buyer, Parent shall
cause Company to provide Buyer with (i) a list of all affiliated
groups within the meaning of Section 1504(a) of the Code of which
the Company or the Subsidiaries have been a member and of which
Parent was not the common parent corporation, (ii) a list of all
Tax allocation or Tax sharing agreements to which the Company and
the Subsidiaries is a party with any Person and any agreements
that provide for the Company and the Subsidiaries to indemnify
any Person with respect to Taxes, (iii) a list of the federal,
state and foreign income Tax Returns and other Tax Returns which
are material and that were filed by the Company and each of the
Subsidiaries during the three year period ending on the date of
the latest balance sheet included with the Financial Statements
indicating periods for which such Tax Returns were filed that are
closed under applicable statutes of limitation, and (iv) copies
of all United States federal pro forma consolidated income Tax
Return information of the Company and the Subsidiaries and all
material, state, local, and foreign income or franchise Tax
Returns of the Company and the Subsidiaries (including only the
relevant portions of Parent's Tax Returns that relate solely to
the Company and the Subsidiaries) for all Tax periods ending on
or after the date which is three years prior to the Closing Date.
(e) Prior to September 1, 1998, the Company shall
provide to Buyer a list of all material services provided to the
Company or any Subsidiary by Parent or any Affiliate of Parent
(other than the Company or any Subsidiary) or pursuant to
Contracts between Parent or any Affiliate of Parent (other than
the Company or any Subsidiary) and third parties. If requested
by Buyer, Parent shall enter into an amendment to the Separation
Agreement to provide, to the extent feasible and not otherwise
prohibited by Law, for the continuation for a reasonable period
subsequent to the Closing of any services included on such list,
any such services to be provided on commercially reasonable
terms.
5.3 Other Actions. Parent, the Company, the Buyer
and their respective subsidiaries shall not take any action that
would, or could reasonably be expected to, result in any of the
conditions to the consummation of the Transaction set forth in
Article VI not being satisfied.
5.4 Advice of Changes. Parent, the Company and
Buyer shall promptly advise the other party orally and in writing
of (a) any representation or warranty made by it contained in
this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate
in any material respect, (b) the failure by it to comply with or
satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this
Agreement or (c) any change or event (i) having, or which,
insofar as can reasonably be foreseen, would have, in the case of
Buyer, a material adverse effect on Buyer, and, in the case of
the Company, a Material Adverse Effect, or (ii) which has
resulted, or which, insofar as can reasonably be foreseen, would
result, in any of the conditions set forth in Article VI not
being satisfied; provided, however, that no such notification
shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.5 HSR Act Filing. Each party hereto shall, as
promptly as practicable, file, or cause to be filed, any required
notification and report forms under the HSR Act with the Federal
Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice (the "Antitrust Division") in
connection with the transactions contemplated by this Agreement,
and will use their respective commercially reasonable efforts to
respond as promptly as practicable to all inquiries received from
the FTC or the Antitrust Division for additional information or
documentation and to cause the waiting periods under the HSR Act
to terminate or expire at the earliest possible date. Each party
hereto will each furnish to the other such necessary information
and reasonable assistance as the other may reasonably request in
connection with its preparation of necessary filings or
submissions to any governmental or regulatory agency, including,
without limitation, any filings necessary under the provisions of
the HSR Act.
5.6 Consents and Reasonable Efforts.
(a) Prior to September 1, 1998, the Company will
provide Buyer with a list of each material License and shall
cooperate with Buyer to determine a list of all Requisite
Regulatory Approvals.
(b) Upon the terms and subject to the conditions set
forth in this Agreement, each of the parties hereto agrees to use
all commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other party or parties in doing, all
things necessary, proper or advisable to consummate and make
effective the transactions contemplated by this Agreement as
promptly as practicable (it being recognized that time is of the
essence), including, (i) obtaining all Consents, approvals and
agreements of, and giving and making all notices and filings
with, any governmental and regulatory authorities necessary to
authorize, approve or permit the consummation of the transactions
contemplated by this Agreement, including, the Requisite
Regulatory Approvals and (ii) obtain all other approvals and
Consents to the transactions contemplated by this Agreement
including (x) the Consents of third parties required to assign or
otherwise transfer to Buyer the Contracts identified in Section
3.4(a)(v) of the Disclosure Schedule, and (y) the approvals of
third parties to Buyer's assumption of the Company's obligations
under the Contracts identified in Section 3.4(a)(vi) of the
Disclosure Schedule. In connection with and in furtherance of
the foregoing, Buyer agrees to use its commercially reasonable
efforts to file all required applications with state insurance
commissioners or departments on Form A and all comparable forms
in Canada, the U.K., Australia and New Zealand, not later than
thirty (30) days from the date hereof. Each of the Company and
Buyer shall promptly inform the other of any material
communication received by such party or any of its Affiliates
from any regulatory agency regarding any of the transactions
contemplated hereby. Each of the Company and Buyer shall advise
the other promptly of any understandings, undertakings or
agreements which such party or any of its affiliates proposes to
make or enter into with any regulatory agency in connection with
the transactions contemplated hereby. The Company shall be
entitled to notice of and to participate in all hearings of any
regulatory agency held in connection with or relating to any of
the transactions contemplated hereby.
(c) The Company and Buyer shall use all commercially
reasonable efforts to terminate the guarantees by the Company of
obligations of Subsidiaries as identified in Section 5.6(c) of
the Disclosure Schedule (the "Guarantees"), and arrange for Buyer
to assume the obligations of the Company under the Guarantees.
(d) In the event and to the extent that Buyer and the
Company are unable to obtain any required approval or Consent of
any person other than a Governmental Entity to any Contract to be
assigned to Buyer hereunder, (i) the Company shall use
commercially reasonable efforts in cooperation with Buyer to (x)
provide or cause to be provided to Buyer the benefits of any such
Contract, (y) cooperate in any arrangement, reasonable and lawful
as to the Company and Buyer, designed to provide such benefits to
Buyer and (z) enforce for the account of Buyer any rights of the
Company arising from such Contract, including the right to elect
to terminate in accordance with the terms thereof on the advice
of Buyer; (ii) Buyer shall use commercially reasonable efforts to
perform the obligations of the Company arising under such
Contract, to the extent that, by reason of the transactions
consummated pursuant to this Agreement, Buyer has control over
the resources necessary to perform such obligations; and (iii)
the consummation of the transactions contemplated hereby shall
not be deemed to have resulted in the assignment of such
Contract. If and when any such approval or Consent shall be
obtained or such Contract shall otherwise become assignable, the
Company shall promptly assign all of its rights and obligations
thereunder to Buyer without the payment of further consideration
and Buyer shall, without the payment of any further consideration
therefor, assume such rights and obligation and the Company shall
be relieved of any and all obligation or liability hereunder.
(e) (i) If, on the Closing Date, there has not been
obtained any Requisite Regulatory Approval with respect to
any Subsidiary in the absence of which the conditions
precedent to the Closing set forth in Article VI would
nevertheless be satisfied, the securities (or other
ownership interests) representing all of the Company's
ownership of such Subsidiary (the "Deferred Securities")
shall not be delivered to Buyer at Closing and, if owned by
another Subsidiary, shall be transferred, by dividend or
otherwise, from such Subsidiary to the Company immediately
prior to Closing; provided that, Buyer may, at its election,
proceed to take delivery of the Deferred Securities if such
action would not (i) subject Parent or any subsidiary or
Affiliate of Parent (other than a Subsidiary), or any
officer, director or agent of any such Person, to any
liability or penalty or (ii) be in violation of any Law or
Order applicable to or binding on Parent or any subsidiary
or Affiliate or Parent (other than a Subsidiary), or any
officer, director or agent of any such Person. From and
after the Closing, the parties hereto, at their respective
expense, shall continue to use reasonable best efforts to
obtain all Requisite Regulatory Approvals relating to the
Deferred Securities or the transfer thereof.
(ii) Until such time as any Deferred Securities have
been transferred to Buyer or a third party in accordance
with this Section 5.6(e) (each a "Deferred Transfer"), the
Subsidiaries to which any Deferred Securities relate shall
be managed and operated by the Company in the manner
hereinafter provided from the Closing and until the
respective Deferred Transfer, with all gains, income, excess
cash flow, losses, expenses, Taxes or other items generated
thereby to be for the account of such Subsidiaries and not
in any respect for the account of Parent or its other
Affiliates. From the Closing Date to the date of the
Deferred Transfer, the Company shall hold the Deferred
Securities and operate the Subsidiaries to which the
Deferred Securities relate only in the ordinary course
substantially consistent with past practice and shall use
all reasonable efforts to preserve intact such Subsidiaries'
business, keep available such Subsidiaries' officers and
employees, maintain such Subsidiaries' Licenses and
Contracts and preserve such Subsidiaries' relationships with
customers, suppliers, creditors, reinsurers, brokers, agents
and others having business dealings with them.
(iii) Unless otherwise transferred upon Buyer's
instructions in accordance with this Section 5.6(e), the
certificates for the relevant Deferred Securities, duly
endorsed in blank and with all necessary transfer stamps
affixed thereto or such other assignments, deeds, share
transfer forms or other instruments or documents are
necessary in order to effectively transfer the Deferred
Securities, will be delivered to Buyer free and clear of all
Liens, without the payment of any additional consideration
by Buyer, on the date which is no more than five business
days after all Requisite Regulatory Approvals relating to
any such Deferred Securities or the transfer thereof shall
have been obtained or on such other date as the parties may
mutually agree.
(iv) The Company shall, on the Buyer's written
instructions at any time after the Closing Date (subject to
applicable Law), or may at any time after 12 months after
the Closing Date, for Buyer's benefit, sell or dispose of
the Deferred Securities or the assets of the Subsidiaries to
which such Deferred Securities relate, on such terms and
conditions as Buyer shall reasonably determine, and remit
the proceeds of such sale to Buyer; provided that the
Company shall have no liability to any transferee of such
Deferred Securities or assets other than for negligence or
wilful misconduct.
(v) The Company shall provide Buyer with a quarterly
accounting, as well as an accounting as of the date of any
Deferred Transfer, covering all transactions entered into on
behalf of Buyer from the Closing Date or, if more recent,
the date as of which any previous accounting was measured,
to the date as of which such accounting is measured. Buyer
shall have full access, subject to applicable Law, upon
reasonable notice and during normal business hours to the
properties, officers, employees, books, papers and records
of any Subsidiary to which Deferred Securities relate.
5.7 Further Assurances. On and after the Closing
Date, (a) the parties hereto shall use all reasonable efforts to
take or cause to be taken all appropriate action and do, or cause
to be done, all things necessary or appropriate to consummate and
make effective the transactions contemplated hereby, including
the execution of any additional documents, instruments or
conveyances of any kind (not containing additional
representations and warranties) which may be reasonably necessary
or appropriate to carry out any of the provisions hereof,
including putting Buyer in full possession and operating control
of the Assets and causing Buyer to have full unencumbered
ownership of all Shares, and giving effect to the assumption of
Liabilities by Buyer as contemplated by this Agreement and (b) as
requested by Buyer, Parent and the Company shall use all
reasonable best efforts to deliver to the Buyer, originals of all
Contracts, agreements, commitments, books, records, files,
certificates, Licenses, Permits and plans of the Company and the
Subsidiaries in possession of the Company or a Subsidiary and
copies of all documents and records identified in clause (y) of
Section 2.1.
5.8 Publicity. The parties will consult with each
other and will mutually agree upon any press releases pertaining
to the purchase of assets under this Agreement and shall not
issue any such press releases prior to such consultation and
agreement, except as may be required by applicable Law or by
obligations pursuant to any listing agreement with any national
securities exchange, in which case the party proposing to issue
such press release shall use its reasonable efforts to consult in
good faith with the other party before issuing any such press re
leases.
5.9 Indemnification.
(a) Buyer agrees that all rights to indemnification
and exculpation existing in favor of the directors, officers,
employees and agents of the Company and its Subsidiaries in their
capacity as such (the "Company Indemnified Parties"), with
respect to matters occurring at or prior to the Closing Date,
under the provisions existing on the date hereof of the
applicable certificate of incorporation or by-laws or other
equivalent organizational documents shall survive and continue in
full force after Closing, and that after the Closing, Buyer shall
assume any obligations of the Company and Parent in respect
thereof as to any claim or claims asserted after the Closing
Date.
(b) Buyer shall cause to be maintained in effect for
the Section 5.9 Indemnified Parties (as defined below) for not
less than six years after the Closing Date policies of directors'
and officers' liability insurance with respect to matters
occurring at or prior to the Closing Date (including, without
limitation, the transactions contemplated by this Agreement)
providing substantially the same coverage and containing terms
and conditions which are no less advantageous, in any material
respect, to those currently maintained for the benefit of the
Company's present or former directors, officers, employees or
agents covered by such insurance policies prior to the Closing
Date (the "Section 5.9 Indemnified Parties"); provided, however,
that Buyer may, in lieu of maintaining such existing insurance as
provided above, cause comparable coverage to be provided under
any policy maintained for the benefit of Buyer or any of the
Buyer's subsidiaries, so long as the material terms thereof are
no less advantageous than such existing insurance.
(c) This Section 5.9 is intended to benefit the
Company Indemnified Parties and the Section 5.9 Indemnified Par
ties and shall be binding on all successors and assigns of Buyer.
(d) The Company shall use its reasonable efforts to
provide all required or appropriate notices under such existing
insurance with respect to potential claims of which it is aware
prior to the Closing Date.
5.10 Employees.
(a) Buyer shall offer employment on terms
substantially similar in the aggregate to those currently
provided by the Company to all of the employees of the Company
whose employment with the Company has not ended as of the Closing
Date (it being understood that individuals who are on long-term
disability as of the Closing Date shall not be considered to be
employed by the Company as of the Closing Date); provided,
however, that no such continued employment shall be construed to
limit the ability of Buyer to terminate any such employee at any
time for any reason. Each employee of the Company or the
Subsidiaries who accepts continued employment and becomes an
employee of Buyer on the Closing Date or continues to be an
employee of a Subsidiary (or, in the case of any employee offered
continued employment upon returning to work from a leave of
absence, on such date as such employee becomes an employee of
Buyer) shall be hereinafter referred to as a "Transferred
Employee." Notwithstanding anything to the contrary, employment
of the Transferred Employees shall be subject to all of Buyer's
policies and practices, including the policy of employment-at-
will. Buyer agrees to provide and pay the severance benefits and
other payments as set forth in the documents identified in
Section 3.7 (a)(2) of the Disclosure Schedule.
(b) On and after the Closing Date, Buyer shall provide
the Transferred Employees with the employee benefits generally
provided to other employees of Buyer, subject to the terms and
conditions of Buyer's plans; provided, however, that Buyer may
elect to provide vacation benefits under the Company's or any
Subsidiaries' plans (and not under Buyer's vacation policies).
(At Buyers's option, welfare plan benefits may be provided in the
manner set forth in the Separation Agreement described in Section
8.4(a).) Company and the Subsidiaries shall use their best
efforts to provide Buyer prior to the Closing Date with such
information as Buyer requires to implement the provisions of this
Section 5.10.
(c) Buyer shall grant for purposes of all of Buyer's
Employee Welfare Benefit Plans and, if applicable, Buyer's
vacation policy past service credit to all Transferred Employees
for all periods of time credited to such Transferred Employees
under the Employee Welfare Benefit Plans and vacation policy
maintained for the Transferred Employees immediately prior to the
Closing Date; provided, however, that Buyer shall not be required
to grant past service credit to Transferred Employees for any
purposes under Buyer's retiree medical plan; and provided,
further, that with respect to Buyer's short-term disability plan,
past service credit shall be granted to Transferred Employees
only for purposes of determining eligibility and not for purposes
of determining the applicable schedule.
(d) With respect to any benefits provided under any
Employee Welfare Benefit Plan, Buyer shall (i) waive all
limitations as to preexisting conditions, exclusions, and waiting
periods with respect to participation and coverage requirements
applicable to the Transferred Employees so that the Transferred
Employees may be eligible to participate in such plans after the
Closing Date, other than limitations or waiting periods that are
already in effect with respect to such employees and that have
not been satisfied as of the Closing Date under any Employee
Welfare Benefit Plan maintained for the Transferred Employees
immediately prior to the Closing Date, and (ii) provide each
Transferred Employee with credit for any co-payments and
deductibles paid prior to the Closing Date in satisfying any
applicable deductible or out-of-pocket requirements under any
Employee Welfare Benefit Plans that the Transferred Employees are
eligible to participate in after the Closing Date; provided,
however, that (i) and (ii) above shall apply only to the extent
that the Company, Parent and the Subsidiaries provide Buyer with
the information Buyer requires to administer such provisions.
(e) Buyer shall assume all liability for, and any
obligations under, to the extent any such liability or
obligations pertain to Company Employees, any retiree medical,
dental and life insurance plans maintained for any of the Company
Employees immediately prior to the Closing Date.
(f) As soon as practicable after the Closing Date,
Buyer shall assume and agrees to be the plan sponsor (as the term
is defined in ERISA Section 3(16)(B)) of the Avco Financial
Services, Inc. Profit Sharing Retirement Plan (the "Company's
Profit Sharing Plan"), and accordingly, shall assume
responsibility and authority over the Company's Profit Sharing
Plan and the related trust, which is intended to qualify under
Section 401(a) and Section 501(a) of the Code. Upon such
assumption, Buyer shall assume all of the Company's rights and
obligations and shall indemnify Company from any and all
liabilities with respect to the Company's Profit Sharing Plan and
the Company shall be relieved of all such rights and obligations
including liabilities regarding such accrued benefits under the
Company's Profit Sharing Plan.
(g) Buyer shall advise the Transferred Employees, in a
written communication issued to such employees within sixty days
following the date of this Agreement, of Buyer's undertakings set
forth in this Section 5.10. Any general communication prepared
by the Company, Parent or any Subsidiary specifically referencing
any action to be taken by Buyer relating to the subjects covered
in Section 5.10 shall be approved in advance by Buyer, to the
extent of such specific references.
(h) Transferred Employees shall receive credit for
their service with the Company and the Subsidiaries for
eligibility and vesting purposes only under the Associates
Savings and Profit-Sharing Plan; provided, however, that such
past service credit shall be granted under the Associates Savings
and Profit-Sharing Plan only to the extent that such service was
recognized and credited to such Transferred Employees under the
Company's Profit Sharing Plan. Transferred Employees shall not
receive credit for their service with the Company and the
Subsidiaries for any purposes under Buyer's tax-qualified defined
benefit pension plan. Parent shall take the action necessary to
vest, to the extent necessary, Transferred Employees who
participate in the Textron Savings Plan in their accrued benefits
under such plan as of the Closing Date.
(i) For a period of two (2) years from and after the
Closing Date, neither Parent nor the Company nor any of the
Parent's subsidiaries shall, without Buyer's consent, solicit or
employ the Transferred Employees.
(j) Nothing contained in this Agreement, whether
expressed or implied, is intended to confer upon any employee of
the Company or the Subsidiaries or any Transferred Employee or
their legal representatives, any rights or remedies, including,
without limitation, any rights of employment for any period of
any nature or kind whatsoever under or by reason of this
Agreement.
(k) Except for claims or demands relating to the
Textron Savings Plan and any matter subject to indemnification
pursuant to Section 8.1(b)(iii), after Closing, Buyer shall
assume, discharge, pay and be solely liable for and shall
indemnify, defend and hold harmless the Company, Parent and any
of their present and former officers, directors, employees,
agents, assigns and representatives from and against all Losses
arising directly or indirectly from any claims or demands by any
person employed by the Company or the Subsidiaries on or prior to
the Closing Date ("Company Employee") or their family members
arising out of the employment by Company or the Subsidiaries of
the Company Employees including any claims relating to any
severance arrangements and any Employee Welfare Benefit Plans.
5.11 Tax Allocation Agreement. Parent and Buyer have
executed as of the date hereof the Tax Allocation Agreement
relating to the allocation of the purchase price, the payment of
taxes, elections under Section 338 of the Code, and related
matters.
5.12 Intercompany Transactions. Intercompany
transactions shall be treated in accordance with the Separation
Agreement. At or prior to the Closing, Parent and the Company
will obtain the release of all Liens on assets of the Company or
any Subsidiary securing, and all guarantees by the Company or any
Subsidiary of, any indebtedness of Parent or any of its
Affiliates (other than the Company and the Subsidiaries). Except
as otherwise provided in the Separation Agreement, Parent and any
Affiliate of Parent (other than the Company or a Subsidiary) will
(a) cancel any indebtedness for money borrowed by the Company or
any Subsidiary from Parent or any Affiliate of Parent (other than
the Company or any Subsidiary) and (b) repay any indebtedness for
money borrowed by Parent or any Affiliate of Parent (other than
the Company or any Subsidiary) from the Company or any
Subsidiary.
5.13 No Negotiation. Neither the Company, any
Subsidiary nor Parent will, directly or indirectly, through any
director, employee, representative, affiliate or agent of the
Company, any Subsidiary or Parent, or otherwise (i) solicit,
initiate, encourage or assist in the submission of any inquiries,
proposals or offers from any Person or group relating to any
acquisition or purchase of any assets of, or any equity interest
in, the Company or any Subsidiary or any form of recapitalization
transaction, merger, consolidation, business combination, spin-
off, liquidation or similar transaction involving, directly or
indirectly, the Company or any Subsidiary (each an "Acquisition
Proposal"), (ii) participate in any discussions or negotiations
regarding any Acquisition Proposal or furnish to any Person any
information concerning the Company, any Subsidiary or any
Acquisition Proposal or (iii) otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other Person to make or enter into an
Acquisition Proposal. If the Company, any Subsidiary or the
Parent receives any inquiry, proposal or offer to enter into any
transaction of any type referred to above, such party agrees to
inform the Buyer promptly of the terms thereof and the identity
of the party making such inquiry, proposal or offer.
5.14 Non-Disclosure. Each of Parent and the Company
agrees that, at all times from and after the date hereof, except
as required by law or by the order of any court or government
agency, it shall keep secret and retain in strictest confidence
and shall not, except with the express prior written consent of
Buyer, directly or indirectly disclose, communicate or divulge to
any Person or use for the benefit of any Person, any Proprietary
information (meaning, all information or data with respect to the
conduct or details of the businesses of the Company or any
Subsidiary as of the date hereof and the Closing Date, including,
without limitation, methods of operation, customers and customer
lists, details of contracts with customers, consultants,
suppliers or employees, products, proposed products, former
products, proposed, pending or completed acquisitions of any
company, divisions, product line or other business unit, prices
and pricing policies, fees, costs, plans, designs, technology,
inventions, trade secrets, know-how, software, marketing methods,
policies, plans, personnel, suppliers, competitors, markets or
other specialized information or proprietary matters of the
business of the Company or the Subsidiaries, as of the date
hereof and the Closing Date). The restrictions contained in the
preceding sentence shall not apply to any Proprietary Information
that (i) is or becomes a matter of public knowledge other than
through disclosure by Parent or the Company or (ii) is or becomes
known to Parent or the Company from another source which is under
no known obligation of confidentiality to Buyer.
5.15 Management of Risk Regarding Currency
Translations. At the request of Buyer, the Company or a
Subsidiary shall enter into transactions or arrangements to
manage the risk of foreign currency translations for periods
anticipated to be prior to Closing, provided that any such
transactions or arrangements are undertaken at the cost and risk
of, and for the benefit of, Buyer and Buyer shall indemnify,
defend and hold the Company and any Subsidiary harmless from any
liability associated therewith and the Company will make
available to Buyer any benefit associated therewith.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE TRANSACTION
6.1 Conditions to Each Party's Obligations to Complete
the Transaction. The respective obligations of each party to
complete the Transaction are subject to the satisfaction at or
prior to the Closing Date of the following conditions:
(a) Injunction. There shall not be in effect any Law
or Order of a court or governmental or regulatory agency of
competent jurisdiction directing that the transactions
contemplated herein not be consummated as provided herein; provid
ed, however, that, subject to the terms and provisions herein
provided, prior to invoking this condition each party shall use
all reasonable efforts to have any such Order vacated.
(b) Governmental Filings and Consents. All Requisite
Regulatory Approvals shall have been obtained and be in effect as
of the Closing Date with respect to (i) (x) Finance Subsidiaries
incorporated in Canada, the United Kingdom and Australia, (y)
Finance Subsidiaries incorporated in the United States (excluding
the territory of Puerto Rico) which, as of December 31, 1997
accounted for at least 95% of the consolidated receivables of all
Finance Subsidiaries in the United States and (z) Finance
Subsidiaries which, as of December 31, 1997 accounted for at
least 90% of the consolidated receivables of all Finance
Subsidiaries, and (ii) (x) Insurance Subsidiaries incorporated in
Canada, the United Kingdom and Australia, (y) Insurance
Subsidiaries incorporated in the United States which accounted
for at least 95% of the revenue of all Insurance Subsidiaries in
the United States for the year ending December 31, 1997, and (z)
and Insurance Subsidiaries which accounted for at least 90% of
the revenues of all Insurance Subsidiaries for the year ending
December 31, 1997, and the waiting periods under the HSR Act
shall have expired or been terminated; provided, however, that in
the event that either all conditions to Closing set forth in this
Article VI have been satisfied or waived and the Requisite
Regulatory Approvals relating to operations of the Company or its
Subsidiaries in the Commonwealth of Puerto Rico (the "Puerto
Rican Regulatory Approvals") have not been obtained or all
conditions to Closing set forth in this Article VI have been
satisfied or waived other than the Puerto Rican Regulatory
Approvals, then at the election of Parent, either the Puerto
Rican Regulatory Approvals shall be a condition to Closing under
this Article VI or the Purchase Price shall be reduced by
$150,000,000 and Buyer and Seller shall be deemed to have waived
the Puerto Rican Regulatory Approvals.
(c) Third Party Consents. Consents of third parties
under the Contracts identified in Section 3.4(a)(v) of the
Disclosure Schedule have been obtained except where the failure
to obtain the Consents either individually or in the aggregate
shall not have a material adverse effect on the ability of the
Buyer to conduct the Company's business (taken as a whole) as
conducted by the Company as of the date hereof.
6.2 Additional Conditions to the Obligation of Buyer.
The obligation of Buyer to complete the Transaction is subject to
the satisfaction at or prior to the Closing Date of the following
conditions, any and all of which may be waived in whole or in
part by Buyer to the extent permitted by applicable law:
(a) Representations and Warranties. For purposes of
this Section 6.2(a), the accuracy of the representations and
warranties of the Company set forth in Article III of this
Agreement shall be assessed as of the date of this Agreement and
as of the Closing Date with the same effect as though all such
representations and warranties had been made on and as of the
Closing Date; provided, however, that representations and
warranties which are confined to a specified date or period of
time shall speak only as of such date or period of time. All
representations and warranties set forth in Article III hereof
which are qualified by reference to materiality or a Material
Adverse Effect shall be true and correct and all other representa
tions and warranties set forth in Article III of this Agreement
shall be true and correct in all material respects.
(b) Performance. Parent and the Company shall have
performed in all material respects all of their respective
covenants and agreements under this Agreement theretofore to be
performed.
(c) Adjusted Stockholder's Equity. Adjusted
Stockholder's Equity, as defined below, shall be greater than one
billion two hundred twenty-seven million four hundred thousand
dollars ($1,227,400,000). (If Adjusted Stockholder's Equity is
less than $1,227,400,000, this condition can be satisfied by a
contribution of cash to the capital of the Company on or before
Closing equal to the difference between Adjusted Stockholder's
Equity and $1,227,400,000.) For purposes of this Section, the
term "Adjusted Stockholder's Equity" shall mean stockholder's
equity (i.e., total consolidated assets, less total consolidated
liabilities) of the Company as set forth in the Statement
computed (i) without regard to (A) any securities valuation
adjustment and any currency translation adjustment and (B) the
Parent Series D Cumulative Preferred Stock and the deferred Tax
liability attributable thereto, (ii) without including any of the
assets referred to in clauses (w), (x) and (y) of Section 2.1 to
the extent such assets were reflected on the Interim Statements
(iii) by adding an amount equal to any accruals or payments made
after June 30, 1998 and prior to the Closing Date pursuant to the
agreements and programs identified as item 2 of Section 3.7(a) of
the Disclosure Schedule; and (iv) otherwise taking into account
Sections 19(b) and 19(c)of the Tax Allocation Agreement.
(d) Separation Agreement. Each of the Parent and the
Company shall have performed its respective obligations under the
Separation Agreement to be performed by it on or before the
Closing.
(e) Officer's Certificates. Buyer shall have received
on the Closing Date certificates dated the Closing Date and
executed by the Chief Executive Officer or the Chief Financial
Officer of each of Parent and the Company certifying to the ful
fillment of the conditions specified in Sections 6.2(a),(b),(c)
and (d) hereof.
6.3 Additional Conditions to the Obligation of the
Company. The obligation of Parent and the Company to complete
the Transaction is subject to the satisfaction at or prior to the
Closing Date of the following conditions, any and all of which
may be waived in whole or in part by the Company to the extent
permitted by applicable law:
(a) Representations and Warranties. For purposes of
this Section 6.3(a), the accuracy of the representations and
warranties set forth in Article IV of this Agreement shall be
assessed as of the date of this Agreement and as of the Closing
Date with the same effect as though all such representations and
warranties had been made on and as of the Closing Date; provided,
however, that representations and warranties which are confined
to a specified date or period of time shall speak only as of such
date or period of time. All representations and warranties set
forth in Article IV of this Agreement which are qualified by
reference to materiality shall be true and correct and all other
representations and warranties set forth in Article IV of this
Agreement shall be true and correct in all material respects.
(b) Performance. Buyer shall have performed in all
material respects its respective covenants and agreements under
this Agreement theretofore to be performed.
(c) Assumed Obligations. Buyer shall have assumed the
obligations of the Company under the Contracts identified in
Section 3.4(a)(vi) of the Disclosure Schedule in a form
reasonably satisfactory to the Company, the Buyer and the other
parties to said Contracts.
(d) Officer's Certificate. The Company shall have
received on the Closing Date a certificate dated the Closing Date
and executed by the Chief Executive Officer or the Chief
Financial Officer of the Buyer certifying to the fulfillment of
the conditions specified in Sections 6.3(a), (b) and (c) hereof.
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may
be terminated and the Transaction may be abandoned at any time
prior to the Closing Date, by the mutual written consent of the
Company and the Buyer.
7.2 Termination by Any Party. This Agreement may be
terminated and the Transaction may be abandoned by the Company or
the Buyer if (i) any court of competent jurisdiction in the
United States or some other governmental body or regulatory
authority shall have issued an Order permanently restraining, en
joining or otherwise prohibiting the Transaction and such Order
shall have become final and nonappealable; provided, however,
that the party seeking to terminate this Agreement pursuant to
this clause (i) shall have used all commercially reasonable
efforts to remove such Order, or (ii) the Transaction shall not
have been consummated by May 31, 1999; provided, however, that
the right to terminate this Agreement pursuant to this Section
7.2(ii) shall not be available to any party whose failure to
fulfill any of its material obligations under this Agreement
results in the failure of the Transaction to occur on or prior to
such date.
7.3 Termination by Buyer. This Agreement may be termi
nated by Buyer and the Transaction may be abandoned prior to the
Closing Date, (i) in the event of a material breach by Parent or
by the Company of any covenant or agreement contained in this
Agreement which, by its nature, cannot be cured prior to the
Closing or which has not been cured within 30 days after the
giving of written notice to Parent or the Company of such breach,
(ii) in the event of an inaccuracy of any representation or
warranty of Parent or the Company contained in this Agreement
which, by its nature, cannot be cured prior to the Closing or
which has not been cured within 30 days after the giving of
written notice to Parent or the Company of such inaccuracy and
which inaccuracy, in either case, would cause the conditions set
forth in Section 6.2(a) not to be satisfied, or (iii) in the
event that any of the conditions precedent to the obligations of
Buyer to consummate the Transaction cannot be satisfied or
fulfilled by the date set forth in Section 7.2(ii) of this Agree
ment, provided that the failure of such conditions to be so
satisfied shall not be as a result of Buyer's failure to fulfill
its material obligations under this Agreement.
7.4 Termination by Parent and the Company. This Agree
ment may be terminated by Parent and the Company and the
Transaction may be abandoned at any time prior to the Closing
Date, (i) in the event of a material breach by Buyer of any
covenant or agreement contained in this Agreement which, by its
nature, cannot be cured prior to the Closing or which has not
been cured within 30 days after the giving of written notice to
Buyer of such breach, (ii) in the event of an inaccuracy of any
representation or warranty of Buyer contained in this Agreement
which, by its nature, cannot be cured prior to the Closing or
which has not been cured within 30 days after the giving of
written notice to the Buyer of such inaccuracy and which inac
curacy, in either case, would cause the conditions set forth in
Section 6.3(a) not to be satisfied, or (iii) in the event that
any of the conditions precedent to the obligations of Parent and
the Company to consummate the Transaction cannot be satisfied or
fulfilled by the date set forth in Section 7.2(ii) of this
Agreement, provided that the failure of such conditions to be so
satisfied shall not be as a result of Parent's or the Company's
failure to fulfill its material obligations under this Agreement.
7.5 Effect of Termination. In the event of termi
nation of this Agreement and the abandonment of the Transaction
pursuant to this Article VII, written notice thereof shall as
promptly as practicable be given to the other party to this Agree
ment and this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by
any of the parties hereto. If this Agreement is terminated as
provided herein, this Agreement shall forthwith become void and
have no effect except that (i) the obligations of the Buyer set
forth in the Confidentiality Agreement shall remain in effect,
(ii) no party shall be relieved from any liabilities or damages
arising out of a willful breach of any provision of this
Agreement, and (iii) the respective obligations of the parties
set forth in Sections 5.15 and 9.2 shall remain in effect.
ARTICLE VIII
OBLIGATIONS AFTER CLOSING
8.1 Survival of Representations and Covenants;
Indemnification.
(a) ****[This section (approximately twenty-one
lines) has been omitted pursuant to a confidential treatment
request. The omitted portion has been filed separately with
the Commission.]****
(b) Agreement to Indemnify.
****[This section (approximately sixty-two
lines) has been omitted pursuant to a confidential treatment
request. The omitted portion has been filed separately with
the Commission.]****
(c) Limitation of Liability.
****[This section (approximately thirty
lines) has been omitted pursuant to a confidential treatment
request. The omitted portion has been filed separately with
the Commission.]****
(d) Notice of Claim.
If the Indemnified Party shall become aware of any claim,
proceeding or other matter (a "Claim") which may give rise to a
Loss that will be taken into account for purposes of calculating
whether the Indemnifying Party's indemnification obligation
arises pursuant to Section 8.1(c)(i) above, the Indemnified Party
shall promptly give notice thereof to the Indemnifying Party.
Such notice shall specify whether the Claim arises as a result of
a Claim by a Person against the Indemnified Party (a "Third Party
Claim") or whether the Claim does not so arise (a "Direct
Claim"), and shall also specify with reasonable particularity (to
the extent that the information is available) the factual basis
for the Claim and the amount of the Claim, if known.
If, through the fault of the Indemnified Party, the
Indemnifying Party does not receive notice of any Claim in time
to contest effectively the determination of any Loss susceptible
of being contested, the Indemnifying Party shall be entitled to
set off against the amount claimed by the Indemnified Party (to
be applied to the Deductible set forth in Section 8.1(c) or, if
the Deductible has been satisfied to be paid to the Indemnified
Party) the amount of any Losses incurred by the Indemnifying
Party resulting from the Indemnified Party's failure to give such
notice on a timely basis.
(e) Direct Claims.
With respect to any Direct Claim, following receipt of
notice from the Indemnified Party of the Claim, the Indemnifying
Party shall have 60 days to make such investigation of the Claim
as is considered necessary or desirable. For the purpose of such
investigation, the Indemnified Party shall make available to the
Indemnifying Party the information relied upon by the Indemnified
Party to substantiate the Claim, together with all such other
information as the Indemnifying Party may reasonably request. If
both parties agree at or prior to the expiration of such 60-day
period (or any mutually agreed upon extension thereof) to the
validity and amount of such Claim, they shall agree to apply it
to the Deductible, or if the Deductible has been satisfied, the
Indemnifying Party shall immediately pay to the Indemnified Party
the full agreed upon amount of the Claim, failing which the
matter shall be referred to binding arbitration in such manner as
the parties may agree or shall be determined by a court of
competent jurisdiction in the State of New York.
(f) Third Party Claims.
(i) With respect to any Third Party Claims, the
Indemnifying Party shall have the right, at its expense and
at its election, to assume control of the negotiation,
settlement and defense of the Claim through counsel of its
choice. In such event, the Indemnifying Party shall
reimburse the Indemnified Party for all the Indemnified
Party's reasonable out-of-pocket expenses as a result of
such assumption. The election of the Indemnifying Party to
assume such control shall be made within 60 days of receipt
of notice of the Third Party Claim, failing which the
Indemnifying Party shall be deemed to have elected not to do
so. If the Indemnifying Party elects to assume such
control, the Indemnified Party shall have the right to be
informed and consulted with respect to the negotiation,
settlement or defenses of such Third Party Claim and to
retain counsel to act on its behalf, but the fees and
disbursements of such counsel shall be paid by the
Indemnified Party unless the Indemnifying Party consents to
the retention of such counsel or unless the named parties to
any action or proceeding include both the Indemnifying Party
and the Indemnified Party and a representation of both the
Indemnifying Party and the Indemnified Party by the same
counsel would be inappropriate due to the actual or
potential differing interests between them (such as the
availability of different defenses). If the Indemnifying
Party, having elected to assume such control, thereafter
fails to defend the Third Party Claim within a reasonable
time, the Indemnified Party shall be entitled to assume such
control, and the Indemnifying Party shall be bound by the
results obtained by the Indemnified Party with respect to
the Third Party Claim. If any Third Party Claim is of a
nature such that the Indemnified party is required by
applicable Law to make a payment to any Person (a "Third
Party") with respect to the Third Party Claim before the
completion of settlement negotiations or related legal
proceedings, the Indemnified Party may make such payment and
the Indemnifying Party shall, subject to Section 8.1(b) and
Section 8.1(c) above, forthwith after demand by the
Indemnified Party, reimburse the Indemnified Party for such
payment. If the amount of any liability of the Indemnified
Party under the Third Party Claim in respect of which such
payment was made, as finally determined, is less than the
amount which was paid by the Indemnifying Party to the
Indemnified Party, the Indemnified party shall, promptly
after receipt of the difference from the Third Party, pay
the amount of such difference to the Indemnifying Party.
(ii) If the Indemnifying Party fails to assume control
of the defense of any Third Party Claim, the Indemnified
Party shall have the exclusive right to consent, settle or
pay the amount claimed. Whether or not the Indemnifying
Party assumes control of the negotiation, settlement or
defenses of any Third Party Claim, the Indemnifying Party
shall not settle any Third Party Claim without the written
consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed; but then the liability of
the Indemnifying Party shall be limited to the proposed
settlement amount if any such consent is not obtained for
any reason.
(iii) The Indemnified Party and the Indemnifying
Party shall cooperate fully with each other with respect to
Third Party Claims, and, regardless of which party has
control thereof as provided for herein, shall keep each
other fully advised with respect thereto (including
supplying copies of all relevant documentation promptly as
it becomes available).
8.2 Guarantees. If any Guarantee shall be in effect
after Closing, Buyer shall pay or cause to be paid all debt
covered by the Guarantee as the same shall become due and
payable, and shall indemnify and hold the Company harmless with
respect to any payments made by Company pursuant to any Guarantee
provided that such payments have been made in good faith.
8.3 Name Changes.
(a) No later than three months after the Closing Date,
Buyer will change the names of the following corporations and
cease using the names Textron and TFC in any manner: Textron
Finance Company Limited (U.K.), Textron Finance Compagnie, S.A.
(France), Textron Finance Compagnie, SAS, TFC Location S.A.
(France), Textron Financial Corporation (Canada), Textron Finance
Corporation (Australia) Pty. Ltd., and Textron Australia Deposits
Pty. Ltd.
(b) No later than two business days after the Closing
Date the Company will change its name.
8.4 Other Matters.
(a) Parent and Buyer have executed as of the date
hereof, a Separation Agreement covering the treatment of services
provided to the Company and certain of the Subsidiaries by
Parent, and Contracts between Parent and third parties under
which goods or services are provided to the Company and certain
of the Subsidiaries, and other intercompany matters.
(b) Buyer shall indemnify, defend, and hold harmless
the Company and Parent and their present and former officers,
directors, employees, agents, assigns and representatives
following the Closing from all Losses resulting from the Assets
and Liabilities transferred to Buyer pursuant to this Agreement.
8.5 Non-Competition. Except for any Subsidiaries
retained by the Company because a Requisite Regulatory Approval
was not obtained prior to the Closing Date, Parent agrees that
for a period of two (2) years from the Closing Date hereof it
will not and it will cause its subsidiaries not to (a) engage in
consumer finance lending which has as its primary purpose direct
general consumer lending, except as otherwise contemplated by
this Agreement or (b) specifically target customers of the
Company or its Subsidiaries as of the Closing Date for financial
services or insurance products. Except for clause (b) in the
immediately preceding sentence, nothing herein shall be
interpreted, however, to restrict Parent or its subsidiaries from
engaging in consumer lending and leasing (secured or unsecured)
which is related to the purchase, financing or refinancing of (i)
timeshare intervals, whether fee simple, fractional, right to
use, membership, or any similar resort industry description; (ii)
memberships of any kind or classification in golf courses,
country clubs, boating clubs, or yacht clubs, or other clubs,
resorts or any organizations related to any of the foregoing;
(iii) aircraft, aircraft engines, avionics or flight related
equipment; (iv) products manufactured, distributed or sold by
Parent or any entity which formerly or may in the future be a
commercial finance customer of Parent or its subsidiaries,
whether or not such products are also financed by Parent or its
subsidiaries under a flooring or wholesale arrangement, (v)
residential real estate, improved or unimproved; or (vi) premiums
for any insurance products. It is expressly understood that
Parent and its subsidiaries are in the global commercial finance
and insurance business, and in the business of purchasing and/or
servicing consumer notes, invoices, accounts, mortgages, security
instruments and other paper, and nothing herein shall be
interpreted as restricting Parent's or its subsidiaries' right to
continue in those businesses. It is also expressly understood
that Parent and its subsidiaries routinely accept the pledge of
consumer notes, invoices, accounts, mortgages, security
instruments and other paper in connection with global commercial
finance transactions and nothing herein shall be interpreted as
restricting Parent's or its subsidiaries' continued right to
accept such security.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Interpretation.
(a) When a reference is made in this Agreement to a
section or article, such reference shall be to a section or
article of this Agreement unless otherwise clearly indicated to
the contrary.
(b) Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation."
(c) The words "hereof", "hereby" "herein" and
"herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and
not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this
Agreement unless otherwise specified.
(d) The plural of any defined term shall have a
meaning correlative to such defined term, and words denoting any
gender shall include all genders. Where a word or phrase is
defined herein, each of its other grammatical forms shall have a
corresponding meaning.
(e) A reference to any party to this Agreement or any
other agreement or document shall include such party's permitted
successors and permitted assigns.
(f) A reference to any legislation or to any provision
of any legislation shall include any modification or re-enactment
thereof, any legislative provision substituted therefor and all
regulations and statutory instruments issued thereunder or
pursuant thereto.
(g) The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the
parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement.
9.2 Payment of Expenses and Other Payments. Whether
or not the Transaction shall be consummated and except as
otherwise provided in this Agreement, each party hereto shall pay
its own expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the transac
tions contemplated hereby; provided, however, that if the
transaction is consummated, all expenses of the Company and the
Subsidiaries shall be paid by Parent.
9.3 Amendment. This Agreement may be amended only by
a written agreement signed by all parties to this Agreement.
9.4 Waiver and Extension. At any time prior to the
Closing Date, the parties may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto or (c) except to the extent prohibited by Law,
waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The
failure of any party at any time or times to require performance
of any provision hereof shall in no manner affect the right of
such party at a later time to enforce the same or any other provi
sion of this Agreement. No waiver of any condition or of the
breach of any term contained in this Agreement in one or more
instances shall be deemed to be or construed as a further or
continuing waiver or such condition or breach or a waiver of any
condition or of the breach of any other term of this Agreement.
9.5 Counterparts. For the convenience of the parties
hereto, this Agreement may be executed in any number of counter
parts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute
the same agreement.
9.6 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the Laws of the State of
New York without giving effect to the principles of conflicts of
law thereof.
9.7 Notices. Any notice, request, instruction or
other document to be given hereunder by any party to another
party shall be in writing and shall be deemed given when
delivered personally, upon receipt of a transmission confirmation
(with a confirming copy sent by overnight courier) if sent by
facsimile or like transmission, and on the next business day when
sent by Federal Express, United Parcel Service, Express Mail, or
other reputable overnight courier, as follows:
(a) If to the Company, to
Avco Financial Services, Inc.
c/o Textron Inc.
40 Westminster Street
Providence, Rhode Island 02903
Attention: Stephen L. Key
(401) 421-2800 (telephone)
(401) 457-2418 (facsimile)
with a copy to:
Textron Inc.
40 Westminster Street
Providence, Rhode Island 02903
Attention: Wayne W. Juchatz
(401) 421-2800 (telephone)
(401) 457-2418 (facsimile)
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, MA 02108
Attention: Margaret A. Brown,
Esq.
(617) 573-4800 (telephone)
(617) 573-4822 (facsimile)
(b) If to Parent, to
Textron Inc.
40 Westminster Street
Providence, Rhode Island 02903
Attention: Stephen L. Key
(401) 421-2800 (telephone)
(401) 457-2418 (facsimile)
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, MA 02108
Attention: Margaret A. Brown,
Esq.
(617) 573-4800 (telephone)
(617) 573-4822 (facsimile)
(c) If to Buyer, to
250 East Carpenter Freeway
Irving, Texas 75062
Attention: President
(972) 652-3333 (telephone)
(972) 652-7095 (facsimile)
with a copy to:
250 East Carpenter Freeway
Irving, Texas 75062
Attention: General Counsel
(972) 652-4449 (telephone)
(972) 652-5798 (facsimile)
or to such other persons or addresses as may be designated in
writing by the party to receive such notice. Nothing in this
section shall be deemed to constitute consent to the manner and
address for service of process in connection with any legal
proceeding (including litigation arising out of or in connection
with this Agreement), which service shall be effected as required
by applicable Law.
9.8 Entire Agreement; Assignment. This Agreement and
the Confidentiality Agreement (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect
to the subject matter hereof and (b) shall not be assigned by
operation of law or otherwise without the prior written consent
of the other party hereto; provided, however, that (i) the Buyer
may assign its rights, in whole or in part, to one or more of its
Affiliates and such Affiliate or Affiliates may assume Buyer's
obligations hereunder and (ii) the capital stock of any
Subsidiary may be purchased by any subsidiary of Buyer, provided
that in the case of each of clauses (i) and (ii) Buyer shall
remain jointly and severally liable hereunder with such
Affiliate, and provided further that no such assignment or
purchase by any subsidiary of Buyer may be made, if the effect
thereof would be to (x) result in an economic cost to Parent or
its Affiliates, (y) create any additional financial risk to the
Company or Parent under any document relating to indebtedness for
borrowed money or any Guarantee, or (z) delay or adversely affect
the satisfaction of the conditions set forth in Article VI.
9.9 Parties in Interest. This Agreement shall be bind
ing upon and inure solely to the benefit of each party hereto and
their respective successors and assigns and to the benefit of any
person or entity which is indemnified under this Agreement.
Nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this
Agreement.
9.10 Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, each of
which shall remain in full force and effect.
9.11 Captions. The article, section and paragraph
captions herein are for convenience of reference only, do not
constitute part of this Agreement and shall not be deemed to
limit or otherwise affect any of the provisions hereof.
9.12 Bulk Transfer Laws. The Buyer acknowledges that
the Company will not comply with the provisions of any bulk
transfer laws of any jurisdiction in connection with the
transactions contemplated by the Agreement.
9.13 Transfer, Sales and Stamp Taxes. All transfer,
sales and stamp taxes and similar charges, fees and assessments
incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne one-half by the Company and
one-half by Buyer. The Buyer shall prepare and file (or cause to
be filed), to the extent required by, or permissible under,
applicable Law, all necessary Tax Returns and other documentation
with respect to all such transfer, sales and stamp taxes and
similar charges, fees and assessments, and, if required by
applicable Law, the Company shall join in the execution of any
such Tax Returns and other documentation as reasonably requested
by Buyer.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized
officers as of the date first above written.
TEXTRON INC.
By: /s/ Stephen L. Key
Name: Stephen L. Key
Title: Executive Vice President and
Chief Financial Officer
AVCO FINANCIAL SERVICES, INC.
By: /s/ Stephen L. Key
Name: Stephen L. Key
Title: Vice President
ASSOCIATES FIRST CAPITAL CORPORATION
By: /s/ Roy A. Guthrie
Name: Roy A. Guthrie
Title: Senior Executive Vice President,
Chief Financial Officer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is entered into as of this 23rd
day of July, 1998 by and between Textron Inc. (the "Company"), a
Delaware corporation having its principal office at 40
Westminster Street, Providence, Rhode Island 02903 and John D.
Butler residing at 327 North Main Street, One Constitution Hill,
Providence, Rhode Island 02904 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is presently employed by the Company;
WHEREAS, the Company desires to continue to employ the
Executive and the Executive is willing to continue to be employed
by the Company; and
WHEREAS, the Company and the Executive desire to set forth
the terms and conditions of such continued employment.
NOW THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration, the
adequacy and receipt of which is acknowledged, the parties hereto
agree as follows:
1. Term of Employment
The Company hereby agrees to continue to employ the
Executive and the Executive hereby accepts continued employment,
in accordance with the terms and conditions set forth herein, for
a term (the "Employment Term") commencing on the date hereof (the
"Effective Date") and terminating, unless otherwise terminated
earlier in accordance with Section 5 hereof, on the third
anniversary of the Effective Date (the "Original Employment
Term"), provided that the Employment Term shall be automatically
extended, subject to earlier termination as provided in Section 5
hereof, for successive additional one (1) year periods (the
"Additional Terms"), unless, at least ninety (90) days prior to
the end of the Original Employment Term or the then Additional
Term, the Company or the Executive has notified the other in
writing that the Employment Term shall terminate at the end of
the then current term.
2. Position and Responsibilities
During the Employment Term, the Executive shall serve
as the Executive Vice President and Chief Human Resources Officer
of the Company or in such higher capacity as agreed by the
Company and the Executive. The Executive shall report
exclusively to the Chief Executive Officer and the Board of
Directors of the Company (the "Board"). The Executive shall, to
the extent appointed or elected, serve on the Board as a director
and as a member of any committee of the Board, in each case,
without additional compensation. The Executive shall, to the
extent appointed or elected, serve as a director or as a member
of any committee of the board (or the equivalent bodies in a non-
corporate subsidiary or affiliate) of any of the Company's
subsidiaries or affiliates and as an officer or employee (in a
capacity commensurate with his position with the Company) of any
such subsidiaries or affiliates, in all cases, without additional
compensation or benefits and any compensation paid to the
Executive, or benefits provided to the Executive, in such
capacities shall be a credit with regard to the amounts due
hereunder from the Company. The Executive shall have duties,
authorities and responsibilities generally commensurate with the
duties, authorities and responsibilities of persons in similar
capacities in similarly sized companies subject to the By-laws of
the Company and the organizational structure of the Company. The
Executive shall devote substantially all of his business time,
attention and energies to the performance of his duties
hereunder, provided the foregoing will not prevent the Executive
from participating in charitable, community or industry affairs,
from managing his and his family's personal passive investments,
and (with the consent of the Chief Executive Officer or the
Organization and Compensation Committee (or its successor) of the
Board (the "O&C Committee"), which consent will not be
unreasonably withheld, conditioned or delayed) serving on the
board of directors of other companies, provided that these
activities do not materially interfere with the performance of
his duties hereunder or create a potential business conflict or
the appearance thereof. The Company has consented to the
Executive's services on the boards of directors, if any, on which
the Executive currently serves, which boards the Executive has
disclosed in writing to the O&C Committee. The Executive may
retain any compensation or benefits received as a result of
consented to service as a director of entities not related to the
Company.
3. Compensation and Benefits
During the Employment Term, the Company shall pay and
provide the Executive the following:
3.1 Base Salary. The Company shall pay the Executive
a base salary (the "Base Salary") in an amount which shall be
established from time to time by the O&C Committee (or as
otherwise designated by the Board), provided, however, that such
base salary rate shall not be less than his current rate of base
salary. Base Salary shall be paid to the Executive in accordance
with the Company's normal payroll practices for executives. Base
Salary shall be reviewed at least annually to ascertain whether,
in the judgment of the reviewing committee, such Base Salary
should be increased. If so increased, Base Salary shall not be
thereafter decreased and shall thereafter, as increased, be the
Base Salary hereunder.
3.2 Annual Bonus. The Company shall provide the
Executive with the opportunity to earn an annual cash bonus under
the Company's current annual incentive compensation plan for
executives or a replacement plan therefor at a level commensurate
with his position, provided that the minimum annual target award
payable upon the achievement of reasonably attainable objective
performance goals shall be at least fifty percent (50%) of Base
Salary.
3.3 Long-Term Incentives. The Company shall provide
the Executive the opportunity to earn long-term incentive awards
under the current equity and cash based plans and programs or
replacements therefor at a level commensurate with the current
aggregate opportunity being provided to the Executive.
3.4 Employee Benefits. The Executive shall, to the
extent eligible, be entitled to participate at a level
commensurate with his position in all employee benefit welfare
and retirement plans and programs, as well as equity plans,
generally provided by the Company to its senior executives in
accordance with the terms thereof as in effect from time to time.
Such plans and programs currently include, without limitation,
the Amended and Restated Supplemental Retirement Plan for Textron
Inc. Key Executives (the "SERP"), the 1994 Long-Term Incentive
Plan, the Key Executive Program (including the Deferred Income
Plan, the Supplemental Benefits Plan (the "SBP") and the Survivor
Benefit Plan), group term life insurance plan, comprehensive
health, major medical, vision and dental insurance plans and
short-term and long-term disability plans.
3.5 Vacation. The Executive shall be entitled to paid
vacation in accordance with the standard written policies of the
Company with regard to vacations of executives, but in no event
less than four (4) weeks per calendar year.
3.6 Perquisites. The Company shall provide to the
Executive, at the Company's cost, all perquisites to which other
senior executives of the Company are generally entitled to
receive and such other perquisites which are suitable to the
character of the Executive's position with the Company and
adequate for the performance of his duties hereunder but not less
than the level being provided on the date hereof except as
otherwise required because of changes in law. To the extent
legally permissible, the Company shall not treat such amounts as
income to the Executive.
3.7 Right to Change Plans. The Company shall not be
obligated by reason of this Section 3 to institute, maintain, or
refrain from changing, amending, or discontinuing any benefit
plan, program, or perquisite, so long as such changes are
similarly applicable to executive employees generally and
provided that the benefits or additional credit specifically as
set forth in Section 3.8 below shall not be diminished.
3.8 Existing Awards. The Company acknowledges that
the Executive currently is entitled to, among other things, the
special grants set forth in Exhibit A hereto, as modified on
Exhibit A.
4. Expenses
Upon submission of appropriate documentation, in
accordance with its policies in effect from time to time, the
Company shall pay, or reimburse, the Executive for all ordinary
and necessary expenses, in a reasonable amount, which the
Executive incurs in performing his duties under this Agreement
including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, and civic associations and societies in which the
Executive participates in accordance with the Company's policies
in effect from time to time.
5. Termination of Employment
The Executive's employment with the Company (including but
not limited to any subsidiary or affiliate or the Company) and
the Employment Term shall terminate upon the occurrence of the
first of the following events:
(a) Automatically on the date of the Executive's death.
(b) Upon thirty (30) days written notice by the Company to
the Executive of a termination due to Disability,
provided such notice is delivered during the period of
Disability. The term "Disability" shall mean, for
purposes of this Agreement, the inability of the
Executive, due to injury, illness, disease or bodily or
mental infirmity, to engage in the performance of his
material duties of employment with the Company as
contemplated by Section 2 herein for a period of more
than one hundred eighty (180) consecutive days or for a
period that is reasonably expected to exist for a
period of more than one hundred eighty (180)
consecutive days, provided that interim returns to work
of less than ten (10) consecutive business days in
duration shall not be deemed to interfere with a
determination of consecutive absent days if the reason
for absence before and after the interim return are the
same. The existence or non-existence of a Disability
shall be determined by a physician agreed upon in good
faith by the Executive (or his representatives) and the
Company. It is expressly understood that the
Disability of the Executive for a period of one hundred
eighty (180) consecutive days or less shall not
constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default
and the Executive shall receive full compensation for
any such period of Disability or for any other
temporary illness or incapacity during the term of this
Agreement.
(c) Immediately upon written notice by the Company to the
Executive of a termination due to his retirement at or
after the Executive's attainment of age sixty-five
(65).
(d) Immediately upon written notice by the Company to the
Executive of a termination for Cause, provided such
notice is given within ninety (90) days after the
discovery by the Board or the Chief Executive Officer
of the Cause event and has been approved by the O&C
Committee at a meeting at which the Executive and his
counsel had the right to appear and address such
meeting after receiving at least five (5) business days
written notice of the meeting and reasonable detail of
the facts and circumstances claimed to provide a basis
for such termination. The term "Cause" shall mean, for
purposes of this Agreement: (i) an act or acts of
willful misrepresentation, fraud or willful dishonesty
(other than good faith expense account disputes) by the
Executive which in any case is intended to result in
his or another person or entity's substantial personal
enrichment at the expense of the Company; (ii) any
willful misconduct by the Executive with regard to the
Company, its business, assets or employees that has, or
was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iii) any
material, willful and knowing violation by the
Executive of (x) the Company's Business Conduct
Guidelines, or (y) any of his fiduciary duties to the
Company which in either case has, or was intended to
have, a material adverse impact (economic or otherwise)
on the Company; (iv) the willful or reckless behavior
of the Executive with regard to a matter of a material
nature which has a material adverse impact (economic or
otherwise) on the Company; (v) the Executive's willful
failure to attempt to perform his duties under Section
2 hereof or his willful failure to attempt to follow
the legal written direction of the Board, which in
either case is not remedied within ten (10) days after
receipt by the Executive of a written notice from the
Company specifying the details thereof; (vi) the
Executive's conviction of, or pleading nolo contendere
or guilty to, a felony (other than (x) a traffic
infraction or (y) vicarious liability solely as a
result of his position provided the Executive did not
have actual knowledge of the actions or inactions
creating the violation of the law or the Executive
relied in good faith on the advice of counsel with
regard to the legality of such action or inaction (or
the advice of other specifically qualified
professionals as to the appropriate or proper action or
inaction to take with regard to matters which are not
matters of legal interpretation)); or (vii) any other
material breach by the Executive of this Agreement that
is not cured by the Executive within twenty (20) days
after receipt by the Executive of a written notice from
the Company of such breach specifying the details
thereof. No action or inaction should be deemed
willful if not demonstrably willful and if taken or not
taken by the Executive in good faith as not being
adverse to the best interests of the Company.
Reference in this paragraph (d) to the Company shall
also include direct and indirect subsidiaries of the
Company, and materiality and material adverse impact
shall be measured based on the action or inaction and
the impact upon, and not the size of, the Company taken
as a whole, provided that after a Change in Control,
the size of the Company, taken as a whole, shall be a
relevant factor in determining materiality and material
adverse impact.
(e) Upon written notice by the Company to the Executive of
an involuntary termination without Cause. A notice by
the Company of non-renewal of the Employment Term
pursuant to Section 1 above shall be deemed an
involuntary termination of the Executive by the Company
without Cause as of the end of the Employment Term, but
the Executive may terminate at any time after the
receipt of such notice and shall be treated as if he
was terminated without Cause as of such date.
(f) Upon twenty (20) days written notice by the Executive
to the Company of a termination for Good Reason (which
notice sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such
termination) unless the Good Reason event is cured
within such twenty (20) day period. The term "Good
Reason" shall mean, for purposes of this Agreement,
without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the
assignment to the Executive of duties materially
inconsistent with the Executive's then authorities,
duties, responsibilities, and status (including
offices, titles, and reporting requirements), or any
reduction in the Executive's then title, position,
reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated)
in his then status, authorities, duties, or
responsibilities or, if then a director of the Company,
failure to be nominated or reelected as a director of
the Company or removal as such; (ii) relocation of the
Executive from the principal office of the Company
(excluding reasonable travel on the Company's business
to an extent substantially consistent with the
Executive's business obligations) or relocation of the
principal office of the Company to a location which is
at least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at
the time of the relocation is not located at the
principal office, such relocation provision shall apply
based on his then location; (iii) a reduction by the
Company in the Executive's Base Salary; (iv) a
reduction in the Executive's aggregate level of
participation in any of the Company's short and/or
long-term incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or
arrangements in which the Executive participated as of
the Effective Date, or, after a Change in Control,
participated immediately prior to the Change in
Control; (v) the failure of the Company to obtain and
deliver to the Executive a satisfactory written
agreement from any successor to the Company to assume
and agree to perform this Agreement; or (vi) any other
material breach by the Company of this Agreement.
(g) Upon written notice by the Executive to the Company of
the Executive's voluntary termination of employment
without Good Reason (which the Company may, in its sole
discretion, make effective earlier than any notice
date). A notice by the Executive of non-renewal of the
Employment Term pursuant to Section 1 above shall be
deemed a voluntary termination by the Executive without
Good Reason as of the end of the Employment Term.
6. Consequences of a Termination of Employment
6.1 Termination Due to Death or Retirement. If the
Employment Term ends on account of the Executive's termination
due to death pursuant to Section 5(a) above or retirement
pursuant to Section 5(c) above, the Executive (or the Executive's
surviving spouse, or other beneficiary as so designated by the
Executive during his lifetime, or to the Executive's estate, as
appropriate) shall be entitled, in lieu of any other payments or
benefits, to (i) payment promptly of any unpaid Base Salary,
unpaid annual incentive compensation (for the preceding fiscal
year) and any accrued vacation, (ii) reimbursement for any
unreimbursed business expenses incurred prior to the date of
termination, and (iii) any amounts, benefits or fringes due under
any equity, benefit or fringe plan, grant or program in
accordance with the terms of said plan, grant or program but
without duplication (collectively, the "Accrued Obligations").
6.2 Termination Due To Disability. If the Employment Term
ends as a result of Disability pursuant to Section 5(b) above,
the Executive shall be entitled, in lieu of any other payments or
benefits, subject to Section 7(b) hereof, to any Accrued
Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to three hundred percent (300%) of the
Executive's target annual incentive compensation award
established for the fiscal year during which the
Executive's termination occurs (the "Termination Year
Target Bonus").
(b) Continued monthly payment for two and one half (2 1/2)
years of an amount equal to the Executive's monthly
Base Salary rate reduced by any disability benefits
received by the Executive under the Company's long term
disability plan for the corresponding period.
(c) Payments and benefits as set forth in Section 6.3(c)-
(j) hereof.
(d) The Executive shall be deemed to have satisfied the
definition of "total disability" under the 1994 Long-
Term Incentive Plan or the equivalent definition under
any successor plan thereto.
(e) As provided in Exhibit A hereto.
6.3 Involuntary Termination by the Company Without Cause or
Termination by the Executive for Good Reason. If the Executive
is involuntarily terminated by the Company without Cause in
accordance with Section 5(e) above or the Executive terminates
his employment for Good Reason in accordance with Section 5(f)
above, the Executive shall be entitled, in lieu of any other
payments or benefits, subject to Section 7(b) hereof, to any
Accrued Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to the Executive's Termination Year Target Bonus
multiplied by a fraction, the numerator of which is the
number of days during the fiscal year of the
Executive's termination that the Executive was employed
by the Company and the denominator is three hundred
sixty-five (365), provided that in no event shall such
payment exceed fifty percent (50%) of the Termination
Year Target Bonus.
(b) Continued payment off payroll for two and one-half (2
1/2) years (in approximately equal monthly
installments) of an amount equal to two and one-half (2
1/2) times the sum of: (i) the Executive's Base
Salary, and (ii) the greater of: (x) the Termination
Year Target Bonus, or (y) the Executive's highest
annual incentive compensation award earned during the
last three (3) fiscal years ending prior to the fiscal
year of termination (whether or not deferred).
(c) To the extent eligible at such time or, if the
Executive would be eligible with credit for an
additional two and one half (2 1/2) years of age and
service credit, coverage under all applicable retiree
health and other retiree welfare plans for the
Executive and his dependents (including, if he is only
eligible because of the extra age and service credit,
an adjustment, to the extent necessary, to put the
Executive in the same after-tax position as if he had
been eligible for such coverage) and, if not eligible
for continued health coverage under the retiree health
plan, payment of the Executive's and Executive's
eligible dependents' COBRA continuation health coverage
premiums for the Company's health insurance plan that
generally applies to senior executives for the two and
one-half (2 1/2) year period following the date of
termination or, if earlier, until the Executive and
Executive's dependents cease to be eligible for such
coverage, provided that, if COBRA coverage cannot be
provided for the full period, any excess period shall
be covered under (d) below (and further provided that,
if such premiums are taxable to the Executive, an
adjustment such that the Executive has no after tax
cost for the providing of such COBRA coverage).
(d) To the extent eligible on the date of termination,
continued participation, at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans (other than medical
plans covered under (c) above), until two and one-half
(2 1/2) years after the date of termination; provided,
however, that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
benefits under such plan shall immediately cease. To
the extent such coverage cannot be provided under the
Company's welfare benefit plans without jeopardizing
the tax status of such plans, for underwriting reasons
or because of the tax impact on the Executive, the
Company shall pay the Executive an amount such that the
Executive can purchase such benefits separately at no
greater after tax cost to the Executive than the
Executive would have had if the benefits were provided
to the Executive as an employee.
(e) Two and one-half (2 1/2) additional years of service
and compensation credit (at the Executive's then
compensation level) for benefit purposes under any
defined benefit type retirement plan, including but not
limited to the SERP and the SBP if then in effect, and,
if the Executive is not eligible to receive benefits
under any such plan on the date of termination, two and
one-half (2 1/2) additional years of age for
determining eligibility to receive such benefits,
provided that benefits under any such plan will not
commence until the Executive actually attains the
required distribution age under the plan or the
Executive's spouse qualifies for death benefits under
such plan and further provided that with regard to any
plan qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") the
additional amounts may be provided on a nonqualified
plan basis.
(f) Payment promptly after termination of two and one-half
(2 1/2) times the amount of the maximum Company annual
contribution or match to any defined contribution type
plan in which the Executive participates.
(g) Immediate full vesting of any outstanding stock options
that would vest within two and one half (2 1/2) years
after such termination of employment as if the
Executive had continued employment for such two and one
half (2 1/2) year period, to the extent permitted under
the plan or grant, or if such vesting is not permitted,
a cash payment equal to the difference between the fair
market value of the shares covered by the unvested
options and the exercise price of such unvested options
(the "Spread") on the date of termination, and, in both
cases, to the extent such options are exercisable for
less than two and three quarters (2-3/4) years after
termination (or, if less, the remainder of the
respective terms), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
termination) future value of such options for the
lesser of two and three quarters (2-3/4) years or the
remainder of such terms (any such payments shall be
made promptly after such termination). The terms of
the Executive's outstanding options are deemed to be
modified to the extent required by this Section 6.3
(g).
(h) Payment when it would otherwise be paid in accordance
with the 1994 Long-Term Incentive Plan of any amount
due with regard to performance share units outstanding
on the date of termination to the extent permitted
under such plan, plus, outside of such plan, when it
would otherwise have been paid, an amount equal to the
amount the Executive would have received with regard to
any performance share units outstanding at the time of
termination that could not be so paid. For purposes of
calculating the foregoing amounts, all discretionary
performance targets relating to the Executive's
individual performance will be deemed to be fully
achieved and the actual level of achievement of all
financial performance targets will be determined as if
the Executive continued to be employed through the end
of the applicable measuring period.
(i) Immediate full vesting of the Executive's accounts
under the Deferred Income Plan, and to the extent not
permitted under such plan, a cash payment outside of
the plan equal to the value of the amount that would
have vested under the plan.
(j) Continuation of participation for two and one-half (2
1/2) additional years in the Company's programs with
regard to tax preparation assistance and financial
planning assistance, club dues and automobile (but
based on the automobile then being used and no new
one), in accordance with the Company's programs in
effect at the time of the termination.
(k) As provided in Exhibit A hereto.
6.4 Termination by the Company for Cause or Termination by
the Executive without Good Reason. If the Executive is
terminated by the Company for Cause or the Executive terminates
his employment without Good Reason, the Executive shall be
entitled to receive all Accrued Obligations.
7. No Mitigation/No Offset/Release
(a) In the event of any termination of employment
hereunder, the Executive shall be under no obligation
to seek other employment and there shall be no offset
against any amounts due the Executive under this
Agreement on account of any remuneration attributable
to any subsequent employment that the Executive may
obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or
other right which the Company may have against the
Executive or others, except as specifically set forth
in Section 9 hereof or upon obtaining by the Company of
a final unappealable judgement against the Executive.
(b) Any amounts payable and benefits or additional rights
provided pursuant to Section 6.2 (other than Section
6.2(e)), Section 6.3 (other than Section 6.3(k)) and
Section 8.1 (other than Section 8.1(m)) beyond Accrued
Obligations and amounts or rights due under law, and,
in the case of Section 6.3 and Section 8.1, beyond the
sum of any amounts due (without execution of a release)
under the Company severance program then in effect, or,
if greater, three (3) months Base Salary as severance,
shall only be payable if the Executive delivers to the
Company a release of all claims of the Executive (other
than those specifically payable or providable hereunder
on or upon the applicable type of termination and any
rights of indemnification under the Company's
organizational documents) with regard to the Company,
its subsidiaries and related entities and their
respective past or present officers, directors and
employees in such form as reasonably requested by the
Company.
(c) Upon any termination of employment, upon the request of
the Company, the Executive shall deliver to the Company
a resignation from all offices and directorships and
fiduciary positions of the Executive in which the
Executive is serving with, or at the request of, the
Company or its subsidiaries, affiliates or benefit
plans.
(d) The amounts and benefits provided under Sections 6 and
8 hereof are intended to be inclusive and not
duplicative of the amounts and benefits due under the
Company's employee benefit plans and programs to the
extent they are duplicative.
8. Change in Control
8.1 Employment Termination in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) during the period commencing one-hundred eighty (180) days
prior to the effective date of a Change in Control and
terminating on the second anniversary of the effective date of a
Change in Control (the "Change in Control Protection Period"),
then in lieu of the benefits provided to the Executive under
Section 6.3 of this Agreement, the Company shall pay the
Executive the following amounts within (except as otherwise
provided) thirty (30) business days of the Qualifying Termination
(or, if later, the effective date of the Change in Control; in
which case any amounts or benefits previously paid pursuant to
Section 6 shall be setoff against those under this Section 8) and
provide the following benefits:
(a) Any Accrued Obligations.
(b) A lump-sum cash payment equal to three (3) times the
highest rate of the Executive's Base Salary rate in
effect at any time up to and including the date of the
Executive's termination.
(c) A lump-sum cash payment equal to the Prorated Portion
(as determined in the next sentence) of the greater of:
(i) the Executive's Termination Year Target Bonus or
(ii) the Executive's earned annual incentive award for
the fiscal year prior to the fiscal year in which the
earlier of the Change in Control or the Qualifying
Termination occurs (whether or not deferred). The
"Prorated Portion" of the foregoing amount shall be
determined by multiplying such amount by a fraction,
the numerator of which is the number of days during the
fiscal year of termination that the Executive is
employed by the Company, and the denominator of which
is, three hundred sixty-five (365).
(d) A lump-sum cash payment equal to three (3) times the
greater of: (i) the Executive's highest annual
incentive compensation earned over the three (3) fiscal
years ending prior to the earlier of the Change in
Control or the Qualifying Termination (whether or not
deferred); or (ii) the Executive's target incentive
compensation established for the fiscal year in which
the Executive's date of termination occurs.
(e) To the extent the Executive is eligible, was eligible
prior or after the Change in Control (or, if earlier,
the Qualifying Termination) or if the Executive would
be eligible with credit for an additional three (3)
years of age and service credit, coverage under all
applicable retiree health and other retiree welfare
plans for the Executive and the Executive's eligible
dependents (including an adjustment to the extent
necessary to put the Executive on the same after tax
basis as if the Executive had been eligible for such
coverage).
(f) To the extent eligible prior or after the Change in
Control (or, if earlier, the Qualifying Termination),
continued participation, (coordinated with (e) above to
the extent duplicative), at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans, until three (3)
years after the date of termination, provided, however,
that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
similar or improved benefit under such plan shall
immediately cease. To the extent such coverage cannot
be provided under the Company's welfare benefit plans
without jeopardizing the tax status of such plans, for
underwriting reasons or because of the tax impact on
the Executive, the Company shall pay the Executive an
amount such that the Executive can purchase such
benefits separately at no greater after tax cost to him
than he would have had if the benefits were provided to
him as an employee.
(g) A lump-sum cash payment of the actuarial present value
equivalent (as determined in accordance with the most
favorable (to the Executive) overall actuarial
assumptions and subsidies in any of the Company's tax-
qualified or nonqualified type defined benefit pension
plans in which the Executive then participates) of the
accrued benefits accrued by the Executive as of the
date of termination under the terms of any nonqualified
defined benefit type retirement plan, including but not
limited to, the SERP and the SBP and assuming the
benefit was fully vested without regard to any minimum
age or service requirements. For this purpose, such
benefits shall be calculated under the assumption that
the Executive's employment continued following the date
of termination for three (3) full years (i.e., three
(3) additional years of age (including, but not limited
to, for purposes of determining the actuarial present
value), compensation and service credits shall be
added).
(h) Three (3) times the amount of the maximum Company
contribution or match to any defined contribution type
plan in which the Executive participates.
(i) A lump-sum cash payment of the product of (i) the
Interest Factor (as determined in the next sentence)
multiplied by (ii) the Executive's entire account
balance under the Deferred Income Plan (or any
replacement therefor), plus an additional amount equal
to three (3) times the match which the Company made for
the Executive to such plan for the fiscal year ending
immediately prior to the earlier of the Change in
Control or the Qualifying Termination. The "Interest
Factor" shall be equal to one (1) plus three (3) times
the rate of earnings of the Executive's account under
such plan for the fiscal year ending immediately prior
to his termination.
(j) Immediate full vesting of any outstanding stock
options, performance share units and other equity
awards (and lapse of any forfeiture provisions) to the
extent permitted under the plan or grant, or if full
vesting is not permitted with regard to stock options,
a cash payment equal to the Spread on such unvested
options on the date of termination (or, if later, the
date of the Change in Control) plus, in both cases, if
options are exercisable for less than three (3) years
after termination (or, if less, the remainder of the
respective terms, including any termination of
exercisability of all Company stock options in
connection with the Change in Control or a merger
related thereto), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
earlier of the Qualifying Termination or the Change in
Control) future value of such outstanding options for
the lesser of three (3) years or the remainder of such
terms.
(k) Outplacement services at a level commensurate with the
Executive's position, including use of an executive
office and secretary, for a period of one (1) year
commencing on the date of termination but in no event
extending beyond the date on which the Executive
commences other full time employment.
(l) Continuation of participation for three (3) additional
years in the Company's programs with regard to tax
preparation assistance and financial planning
assistance, club dues and automobile (but based on the
automobile then being used and no new one), in
accordance with the Company's programs in effect at the
time of the Change in Control.
(m) As provided in Exhibit A hereto.
For purposes of this Section 8, a Qualifying Termination
shall mean any termination of the Executive's employment (i) by
the Company without Cause, or (ii) by the Executive for Good
Reason.
8.2 Definition of "Change in Control." A Change in Control
of the Company shall be deemed to have occurred as of the first
day any one or more of the following conditions shall have been
satisfied:
(a) Any "person" or "group" (within the meaning of Section
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than the
Company, any trustee or other fiduciary holding Company
common stock under an employee benefit plan of the
Company or a related company, or any corporation which
is owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as
their ownership of the Company's common stock, is or
becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than thirty percent
(30%) of the then outstanding voting stock;
(b) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board and any new director whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in office
who either were directors at the beginning of the two
year period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority of the Board;
(c) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger
or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or being converted into voting securities
of the surviving entity) more than fifty percent (50%)
of the combined voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation; or
(d) The approval of the stockholders of the Company of a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all of its assets.
8.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to payments and/or benefits which
would constitute "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, the provisions of Exhibit B will
apply.
9. Noncompetition, Confidentiality and Nondisparagement
9.1 Agreement Not to Compete.
(a) The Executive agrees that for a period of two (2) years
after the termination of the Executive's employment,
the Executive will not engage in Competition with the
Company with the Listed Companies, provided that after
the Executive's termination of employment the Listed
Companies shall be limited to those effectively listed
at the time of his termination and still on such list
at the time of any alleged activity of the Executive,
including, but not limited to, (i) soliciting
customers, business or orders for, or selling any
products and services in, Competition with the Company
for such Listed Companies or (ii) diverting, enticing,
or otherwise taking away customers, business or orders
of the Company, or attempting to do so, in either case
in Competition with the Company for such Listed
Companies.
(b) The Executive agrees that if, while he is receiving
severance pay from the Company pursuant to Section
6.2(b) or Section 6.3(b), the Executive: (i) violates
(a) above, or (ii) otherwise engages in Competition in
the Restricted Territory, whether or not with the
Listed Companies, Section 9.6(b) hereof shall apply.
(c) The Executive agrees that the restrictions contained in
this Section 9 are necessary for the protection of the
business and goodwill of the Company because of the
trade secrets within the Executive's knowledge and are
considered by the Executive to be reasonable for such
purpose.
9.2 Definitions.
(a) "Competition" shall mean engaging in, as an employee,
director, partner, principal, shareholder, consultant,
advisor, independent contractor or similar capacity,
with (a) the Listed Companies or (b) in any business,
activity or conduct which directly competes with the
business of the Company, provided that, with regard to
the period after termination of the Executive's
employment, Section 9.1(b)(ii) shall only apply to
business lines in which the Company is engaged both at
the time of termination of employment and at the time
of the determination and which during the last fiscal
year ending prior to the date of such termination repre
sented at least five percent (5%) of the Company's
revenues (the "Prohibited Lines"). Notwithstanding
anything else in this Section 9, Competition shall not
include: (A) (i) holding five percent (5%) or less of
an interest in the equity or debt of any publicly
traded company, (ii) engaging in any activity with the
prior written approval of the Chief Executive Officer
or the O&C Committee, (iii) the practice of law in a
law firm that represents entities in Competition with
the Company, provided that the Executive does not
personally represent such entities, or (iv) the
employment by, or provision of services to, an
investment banking firm or consulting firm that
provides services to entities that are in Competition
with the Company provided that the Executive does not
personally represent or provide services to such
entities that are Listed Companies or otherwise with
regard to businesses in Competition with the Prohibited
Lines, or (B) with regard to Section 9.1(b)(ii), (i)
being employed by, or consulting for, a non-Competitive
division or business unit of an entity which is in
Competition with the Company (and participating in such
entity's employee equity plans), (ii) being employed
by, or consulting for, an entity which had annual
revenues in the last fiscal year prior to the Executive
being employed by, or consulting for, the entity
generated through business lines in Competition with
the Prohibited Lines of the Company that do not exceed
five percent (5%) of such entity's total annual
revenues, provided that revenues within the Executive's
area of responsibility or authority are not more than
ten percent (10%) composed of the revenues from the
businesses in Competition with the Prohibited Lines, or
(iii) any activities conducted after a Change in
Control of the Company.
(b) The Restricted Territory shall mean any geographic area
in which the Company with regard to the Prohibited
Lines did more than nominal business.
(c) Listed Companies shall mean those entities which are
within the "peer group" established by the Company for
the performance graphs in its proxy statement pursuant
to Item 402(l) of Regulation S-K under the Exchange Act
and which are in a list of no more than five (5)
entities established by the Company from time to time
and available from the Chief Human Resources Officer,
provided that the addition of any entity to the list
shall not be effective until sixty (60) days after it
is so listed.
(d) For purposes of this Section 9, "Company" shall mean
the Company and its subsidiaries and affiliates.
9.3 Agreement Not to Engage in Certain Solicitation.
The Executive agrees that the Executive will not, during the
Executive's employment with the Company or during the two (2)
year period thereafter, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any non-clerical
employee(s), sales representative(s), agent(s), or consultant(s)
of the Company to terminate such person's employment,
representation or other association with the Company for the
purpose of affiliating with any entity with which the Executive
is associated ("Solicitation").
9.4 Confidential Information.
(a) The Executive specifically acknowledges that any trade
secrets or confidential business and technical
information of the Company or its vendors, suppliers or
customers, whether reduced to writing, maintained on
any form of electronic media, or maintained in mind or
memory and whether compiled by the Executive or the
Company (collectively, "Confidential Information"),
derives independent economic value from not being
readily known to or ascertainable by proper means by
others; that reasonable efforts have been made by the
Company to maintain the secrecy of such information;
that such information is the sole property of the
Company or its vendors, suppliers, or customers and
that any retention, use or disclosure of such
information by the Executive during the Employment Term
(except in the course of performing duties and
obligations of employment with the Company) or any time
after termination thereof, shall constitute
misappropriation of the trade secrets of the Company or
its vendors, suppliers, or customers, provided that
Confidential Information shall not include: (i)
information that is at the time of disclosure public
knowledge or generally known within the industry, (ii)
information deemed in good faith by the Executive,
while employed by the Company, desirable to disclose in
the course of performing the Executive's duties, (iii)
information the disclosure of which the Executive in
good faith deems necessary in defense of the
Executive's rights provided such disclosure by the
Executive is limited to only disclose as necessary for
such purpose, or (iv) information disclosed by the
Executive to comply with a court, or other lawful
compulsory, order compelling him to do so, provided the
Executive gives the Company prompt notice of the
receipt of such order and the disclosure by the
Executive is limited to only disclosure necessary for
such purpose.
(b) The Executive acknowledges that the Company from time
to time may have agreements with other persons or with
the United States Government, or agencies thereof, that
impose obligations or restrictions on the Company
regarding inventions made during the course of work
under such agreements or regarding the confidential
nature of such work. If the Executive's duties
hereunder will require disclosures to be made to him
subject to such obligations and restrictions, the
Executive agrees to be bound by them.
9.5 Scope of Restrictions. If, at the time of
enforcement of this Section 9, a court holds that the
restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and
that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area
permitted by law.
9.6 Remedies.
(a) In the event of a material breach or threatened
material breach of Section 9.1(a), Section 9.3, Section
9.4 or Section 9.10, the Company, in addition to its
other remedies at law or in equity, shall be entitled
to injunctive or other equitable relief in order to
enforce or prevent any violations of the provisions of
this Section 9. Except as specifically provided with
regard to Listed Companies, the Company agrees that it
will not assert to enjoin or otherwise limit the
Executive's activities based on an argument of
inevitable disclosure of confidential information.
(b) In the event Section 9.1(b) applies, the Company may
immediately cease payment to the Executive of all
future amounts due under Sections 6.2(a) or (b) or
Sections 6.3(a) or (b), as well as otherwise
specifically provided in any other plan, grant or
program.
(c) Upon written request of the Executive, the Company
shall within thirty (30) days notify the Executive in
writing whether or not in good faith it believes any
proposed activities would be in Competition and, if it
so determines or does not reply within thirty (30)
days, it shall be deemed to waive any right to treat
such activities as Competition unless the facts are
otherwise than as presented by the Executive or there
is a change thereafter in such activities. The
Executive shall promptly provide the Company with such
information as it may reasonably request to evaluate
whether or not such activities are in Competition.
9.7 Uniformity. In no event shall any definitions of
Competition or Solicitation (or a similar provision) as it
applies to the Executive with regard to any plan of program or
grant of the Company be interpreted to be any broader than as set
forth in this Section 9.
9.8 Delivery of Documents. Upon termination of this
Agreement or at any other time upon request by the Company, the
Executive shall promptly deliver to the Company all records,
files, memoranda, notes, designs, data, reports, price lists,
customer lists, drawings, plans, computer programs, software,
software documentation, sketches, laboratory and research
notebooks and other documents (and all copies or reproductions of
such materials in his possession or control) belonging to the
Company. Notwithstanding the foregoing, the Executive may retain
his rolodex and similar phone directories (collectively, the
"Rolodex") to the extent the Rolodex does not contain information
other than name, address, telephone number and similar
information, provided that, at the request of the Company, the
Executive shall provide the Company with a copy of the Rolodex.
9.9 Nondisparagement.
(a) During the Employment Term and thereafter, the
Executive shall not with willful intent to damage
economically or as to reputation or vindictively
disparage the Company, its subsidiaries or their
respective past or present officers, directors or
employees (the "Protected Group"), provided that the
foregoing shall not apply to (i) actions or statements
taken or made by the Executive while employed by the
Company in good faith as fulfilling the Executive's
duties with the Company or otherwise at the request of
the Company, (ii) truthful statements made in
compliance with legal process or governmental inquiry,
(iii) as the Executive in good faith deems necessary to
rebut any untrue or misleading public statements made
about him or any other member of the Protected Group,
(iv) statements made in good faith by the Executive to
rebut untrue or misleading statements made about him or
any other member of the Protected Group by any member
of the Protected Group, and (v) normal commercial
puffery in a competitive business situation. No member
of the Protected Group shall be a third party
beneficiary of this Section 9.9(a).
(b) During the Employment Term and thereafter, neither the
Company officially nor any then member of the Executive
Leadership Team (or the equivalent) of the Company, as
such term is currently used within the Company, shall
with willful intent to damage the Executive
economically or as to reputation or otherwise
vindictively disparage the Executive, provided the
foregoing shall not apply to (i) actions or statements
taken or made in good faith within the Company in
fulfilling duties with the Company, (ii) truthful
statements made in compliance with legal process,
governmental inquiry or as required by legal filing or
disclosure requirements, (iii) as in good faith deemed
necessary to rebut any untrue or misleading statements
by the Executive as to any member of the Protected
Group or (iv) normal commercial puffery in a
competitive business situation.
(c) In the event of a material breach or threatened
material breach of clauses (a) or (b) above, the
Company or the Executive, as the case may be, in
addition to its or the Executive's other remedies at
law or in equity, shall be entitled to injunctive or
other equitable relief in order to enforce or prevent
any violations of this Section 9.9.
9.10 Pooling of Interests. If the Company is involved
in any proposed business combination that is contemplated to be
accounted for as a pooling of interests, the Executive agrees to
cooperate with the reasonable requests of the Company with regard
to the exercise of stock options, the sale of Company stock or
other matters that could affect the ability of the combination to
be accounted for as a pooling of interests.
10 Liability Insurance
The Company shall cover the Executive under directors
and officers liability insurance both during and, while potential
liability exists, after the Employment Term in the same amount
and to the same extent, if any, as the Company covers its other
officers and directors.
11 Assignment
11.1 Assignment by the Company. This Agreement may and
shall be assigned or transferred to, and shall be binding upon
and shall inure to the benefit of, any successor of the Company,
and any such successor shall be deemed substituted for all
purposes of the "Company" under the terms of this Agreement. As
used in this Agreement, the term "successor" shall mean any
person, firm, corporation or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or
substantially all of the assets of the Company. Notwithstanding
such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
11.2 Assignment by the Executive. This Agreement is
not assignable by the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
12 Legal Remedies
12.1 Payment of Legal Fees. The Company shall pay the
Executive's reasonable legal fees and costs associated with
entering into this Agreement. To the fullest extent permitted by
law, the Company shall promptly pay upon submission of statements
all legal and other professional fees, costs of litigation,
prejudgment interest, and other expenses incurred in connection
with any dispute arising hereunder; provided, however, the
Company shall be reimbursed by the Executive for (i) the fees and
expenses advanced in the event the Executive's claim is in a
material manner in bad faith or frivolous and the arbitrator or
court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate, or (ii) to the extent that the
arbitrator or court, as appropriate, determines that such legal
and other professional fees are clearly and demonstrably
unreasonable.
12.2 Arbitration. All disputes and controversies
arising under or in connection with this Agreement, other than
the seeking of injunctive or other equitable relief pursuant to
Section 9 hereof, shall be settled by arbitration conducted
before a panel of three (3) arbitrators sitting in New York City,
New York, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of commercial
disputes of the American Arbitration Association then in effect.
The determination of the majority of the arbitrators shall be
final and binding on the parties. Judgment may be entered on the
award of the arbitrator in any court having proper jurisdiction.
All expenses of such arbitration, including the fees and expenses
of the counsel of the Executive, shall be borne by the Company
and the Executive shall be entitled to reimbursement of his
expenses as provided in Section 12.1 hereof.
12.3 Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if delivered personally, sent by telecopier,
sent by an overnight service or sent by registered or certified
mail. Notice to the Executive not delivered personally (or by
telecopy where the Executive is known to be) shall be sent to the
last address on the books of the Company, and notice to the
Company not delivered personally (or by telecopy to the known
personal telecopy of the person it is being sent to) shall be
sent to it at its principal office. All notices to the Company
shall be delivered to the Chief Executive Officer with a copy to
the senior legal officer. Delivery shall be deemed to occur on
the earlier of actual receipt or tender and rejection by the
intended recipient.
12.4 Continued Payments. In the event after a Change
in Control either party files for arbitration to resolve any
dispute as to whether a termination is for Cause or Good Reason,
until such dispute is determined by the arbitrators, the
Executive shall continue to be treated economically and benefit
wise in the manner asserted by him in the arbitration effective
as of the date of the filing of the arbitration, subject to the
Executive promptly refunding any amounts paid to him, paying the
cost of any benefits provided to him and paying to the Company
the profits in any stock option or other equity awards exercised
or otherwise realized by him during the pendency of the
arbitration which he is ultimately held not to be entitled to;
provided the arbitrators may terminate such payments and benefits
in the event that they determine at any point that the Executive
is intentionally delaying conclusion of the arbitration.
13 Miscellaneous
13.1 Entire Agreement. This Agreement, except to the
extent specifically provided otherwise herein, supersedes any
prior agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect to the subject matter
hereof. To the extent any severance plan or program of the
Company that would apply to the Executive is more generous to the
Executive than the provisions hereof, the Executive shall be
entitled to any additional payments or benefits which are not
duplicative, but shall otherwise not be eligible for such plan or
program.
13.2 Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended, nor
any provision hereof waived, except by mutual agreement of the
parties in a written instrument executed by the parties hereto or
their legal representatives.
13.3 Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.4 Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed to be
an original, but all of which together will constitute one and
the same Agreement.
13.5 Tax Withholding. The Company may withhold from
any benefits payable under this Agreement all federal, state,
city, or other taxes as may be required pursuant to any law or
governmental regulation or ruling.
13.6 Beneficiaries. The Executive may designate one or
more persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
13.7 Representation. The Executive represents that the
Executive's employment by the Company and the performance by the
Executive of his obligations under this Agreement do not, and
shall not, breach any agreement that obligates him to keep in
confidence any trade secrets or confidential or proprietary
information of his or of any other party, to write or consult to
any other party or to refrain from competing, directly or
indirectly, with the business of any other party. The Executive
shall not disclose to the Company, and the Company shall not
request that the Executive disclose, any trade secrets or
confidential or proprietary information of any other party.
14 Governing Law
The provisions of this Agreement shall be construed and
enforced in accordance with the laws of the state of Delaware,
without regard to any otherwise applicable principles of
conflicts of laws.
IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement, as of the day and year first above
written.
/s/John D. Butler
John D. Butler
TEXTRON INC.
By:/s/Lewis B. Campbell
Name: Lewis B. Campbell
Title: Chief Executive
Officer
Exhibit A
Special Grants
As provided in Section 11 of the Executive's employment
letter of June 10, 1998, the Company will pay the costs of the
Executive's family remaining in Zurich until September 1, 1998.
Exhibit B
Parachute Gross Up
(a) In the event that the Executive shall become
entitled to payments and/or benefits provided by this Agreement
or any other amounts in the "nature of compensation" (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person) as a result of such
change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code
(and any similar tax that may hereafter be imposed by any taxing
authority) the Company shall pay to the Executive at the time
specified in subsection (d) below an additional amount (the
"Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and for local income or
payroll tax upon the Gross-up Payment provided for by this
paragraph (a), but before deduction for any U.S. federal, state,
and local income or payroll tax on the Company Payments, shall be
equal to the Company Payments.
(b) For purposes of determining whether any of the
Company Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except
to the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax
counsel selected by such accountants (the "Accountants") such
Total Payments (in whole or in part) either do not constitute
"parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, the Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-
up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of
the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment
thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided
for in subsection (c) above shall be paid not later than the
thirtieth (30th) day following an event occurring which subjects
the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good
faith by the Accountant, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code), subject to further payments pursuant to subsection (c)
hereof, as soon as the amount thereof can reasonably be deter
mined, but in no event later than the ninetieth day after the
occurrence of the event subjecting the Executive to the Excise
Tax. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
(e) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) with regard to the
Excise Tax, the Executive shall permit the Company to control
issues related to the Excise Tax (at its expense), provided that
such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In
the event the issues are interrelated, the Executive and the
Company shall in good faith cooperate so as not to jeopardize
resolution of either issue, but if the parties cannot agree the
Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive
shall permit the representative of the Company to accompany the
Executive, and the Executive and the Executive's representative
shall cooperate with the Company and its representative.
(f) The Company shall be responsible for all charges
of the Accountant.
(g) The Company and the Executive shall promptly
deliver to each other copies of any written communications, and
summaries of any verbal communications, with any taxing authority
regarding the Excise Tax covered by this Exhibit B.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is entered into as of this 23rd
day of July, 1998 by and between Textron Inc. (the "Company"), a
Delaware corporation having its principal office at 40
Westminster Street, Providence, Rhode Island 02903 and Lewis B.
Campbell residing at 50 Channing Avenue, Providence, Rhode Island
02906 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is presently employed by the Company;
WHEREAS, the Company desires to continue to employ the
Executive and the Executive is willing to continue to be employed
by the Company; and
WHEREAS, the Company and the Executive desire to set forth
the terms and conditions of such continued employment.
NOW THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration, the
adequacy and receipt of which is acknowledged, the parties hereto
agree as follows:
1. Term of Employment
The Company hereby agrees to continue to employ the
Executive and the Executive hereby accepts continued employment,
in accordance with the terms and conditions set forth herein, for
a term (the "Employment Term") commencing on the date hereof (the
"Effective Date") and terminating, unless otherwise terminated
earlier in accordance with Section 5 hereof, on the third
anniversary of the Effective Date (the "Original Employment
Term"), provided that the Employment Term shall be automatically
extended, subject to earlier termination as provided in Section 5
hereof, for successive additional one (1) year periods (the
"Additional Terms"), unless, at least ninety (90) days prior to
the end of the Original Employment Term or the then Additional
Term, the Company or the Executive has notified the other in
writing that the Employment Term shall terminate at the end of
the then current term.
2. Position and Responsibilities
During the Employment Term, the Executive shall serve
as the Chief Executive Officer of the Company or in such higher
capacity as agreed by the Company and the Executive. The
Executive shall report exclusively to the Board of Directors of
the Company (the "Board"). The Executive shall, to the extent
appointed or elected, serve on the Board as a director and as a
member of any committee of the Board, in each case, without
additional compensation. The Executive shall, to the extent
appointed or elected, serve as a director or as a member of any
committee of the board (or the equivalent bodies in a non-
corporate subsidiary or affiliate) of any of the Company's
subsidiaries or affiliates and as an officer or employee (in a
capacity commensurate with his position with the Company) of any
such subsidiaries or affiliates, in all cases, without additional
compensation or benefits and any compensation paid to the
Executive, or benefits provided to the Executive, in such
capacities shall be a credit with regard to the amounts due
hereunder from the Company. The Executive shall have duties,
authorities and responsibilities generally commensurate with the
duties, authorities and responsibilities of persons in similar
capacities in similarly sized companies subject to the By-laws of
the Company. The Executive shall devote substantially all of his
business time, attention and energies to the performance of his
duties hereunder, provided the foregoing will not prevent the
Executive from participating in charitable, community or industry
affairs, from managing his and his family's personal passive
investments, and (with the consent of the Organization and
Compensation Committee (or its successor) of the Board (the "O&C
Committee"), which consent will not be unreasonably withheld,
conditioned or delayed) serving on the board of directors of
other companies, provided that these activities do not materially
interfere with the performance of his duties hereunder or create
a potential business conflict or the appearance thereof. The
Company has consented to the Executive's services on the boards
of directors, if any, on which the Executive currently serves,
which boards the Executive has disclosed in writing to the O&C
Committee. The Executive may retain any compensation or benefits
received as a result of consented to service as a director of
entities not related to the Company.
3. Compensation and Benefits
During the Employment Term, the Company shall pay and
provide the Executive the following:
3.1 Base Salary. The Company shall pay the Executive
a base salary (the "Base Salary") in an amount which shall be
established from time to time by the O&C Committee (or as
otherwise designated by the Board), provided, however, that such
base salary rate shall not be less than his current rate of base
salary. Base Salary shall be paid to the Executive in accordance
with the Company's normal payroll practices for executives. Base
Salary shall be reviewed at least annually to ascertain whether,
in the judgment of the reviewing committee, such Base Salary
should be increased. If so increased, Base Salary shall not be
thereafter decreased and shall thereafter, as increased, be the
Base Salary hereunder.
3.2 Annual Bonus. The Company shall provide the
Executive with the opportunity to earn an annual cash bonus under
the Company's current annual incentive compensation plan for
executives or a replacement plan therefor at a level commensurate
with his position, provided that the minimum annual target award
payable upon the achievement of reasonably attainable objective
performance goals shall be at least seventy percent (70%) of Base
Salary.
3.3 Long-Term Incentives. The Company shall provide
the Executive the opportunity to earn long-term incentive awards
under the current equity and cash based plans and programs or
replacements therefor at a level commensurate with the current
aggregate opportunity being provided to the Executive.
3.4 Employee Benefits. The Executive shall, to the
extent eligible, be entitled to participate at a level
commensurate with his position in all employee benefit welfare
and retirement plans and programs, as well as equity plans,
generally provided by the Company to its senior executives in
accordance with the terms thereof as in effect from time to time.
Such plans and programs currently include, without limitation,
the Amended and Restated Supplemental Retirement Plan for Textron
Inc. Key Executives (the "SERP"), the 1994 Long-Term Incentive
Plan, the Key Executive Program (including the Deferred Income
Plan, the Supplemental Benefits Plan (the "SBP") and the Survivor
Benefit Plan), group term life insurance plan, comprehensive
health, major medical, vision and dental insurance plans and
short-term and long-term disability plans.
3.5 Vacation. The Executive shall be entitled to paid
vacation in accordance with the standard written policies of the
Company with regard to vacations of executives, but in no event
less than four (4) weeks per calendar year.
3.6 Perquisites. The Company shall provide to the
Executive, at the Company's cost, all perquisites to which other
senior executives of the Company are generally entitled to
receive and such other perquisites which are suitable to the
character of the Executive's position with the Company and
adequate for the performance of his duties hereunder but not less
than the level being provided on the date hereof except as
otherwise required because of changes in law. To the extent
legally permissible, the Company shall not treat such amounts as
income to the Executive.
3.7 Right to Change Plans. The Company shall not be
obligated by reason of this Section 3 to institute, maintain, or
refrain from changing, amending, or discontinuing any benefit
plan, program, or perquisite, so long as such changes are
similarly applicable to executive employees generally and
provided that the benefits or additional credit specifically as
set forth in Section 3.8 below shall not be diminished.
3.8 Existing Awards. The Company acknowledges that
the Executive currently is entitled to, among other things, the
special grants set forth in Exhibit A hereto, as modified on
Exhibit A.
4. Expenses
Upon submission of appropriate documentation, in
accordance with its policies in effect from time to time, the
Company shall pay, or reimburse, the Executive for all ordinary
and necessary expenses, in a reasonable amount, which the
Executive incurs in performing his duties under this Agreement
including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, and civic associations and societies in which the
Executive participates in accordance with the Company's policies
in effect from time to time.
5. Termination of Employment
The Executive's employment with the Company (including but
not limited to any subsidiary or affiliate or the Company) and
the Employment Term shall terminate upon the occurrence of the
first of the following events:
(a) Automatically on the date of the Executive's death.
(b) Upon thirty (30) days written notice by the Company to
the Executive of a termination due to Disability,
provided such notice is delivered during the period of
Disability. The term "Disability" shall mean, for
purposes of this Agreement, the inability of the
Executive, due to injury, illness, disease or bodily or
mental infirmity, to engage in the performance of his
material duties of employment with the Company as
contemplated by Section 2 herein for a period of more
than one hundred eighty (180) consecutive days or for a
period that is reasonably expected to exist for a
period of more than one hundred eighty (180)
consecutive days, provided that interim returns to work
of less than ten (10) consecutive business days in
duration shall not be deemed to interfere with a
determination of consecutive absent days if the reason
for absence before and after the interim return are the
same. The existence or non-existence of a Disability
shall be determined by a physician agreed upon in good
faith by the Executive (or his representatives) and the
Company. It is expressly understood that the
Disability of the Executive for a period of one hundred
eighty (180) consecutive days or less shall not
constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default
and the Executive shall receive full compensation for
any such period of Disability or for any other
temporary illness or incapacity during the term of this
Agreement.
(c) Immediately upon written notice by the Company to the
Executive of a termination due to his retirement at or
after the Executive's attainment of age sixty-five
(65).
(d) Immediately upon written notice by the Company to the
Executive of a termination for Cause, provided such
notice is given within ninety (90) days after the
discovery by the Board of the Cause event and has been
approved by at least two-thirds of the Board at a
meeting at which the Executive and his counsel had the
right to appear and address such meeting after
receiving at least five (5) business days written
notice of the meeting and reasonable detail of the
facts and circumstances claimed to provide a basis for
such termination. The term "Cause" shall mean, for
purposes of this Agreement: (i) an act or acts of
willful misrepresentation, fraud or willful dishonesty
(other than good faith expense account disputes) by the
Executive which in any case is intended to result in
his or another person or entity's substantial personal
enrichment at the expense of the Company; (ii) any
willful misconduct by the Executive with regard to the
Company, its business, assets or employees that has, or
was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iii) any
material, willful and knowing violation by the
Executive of (x) the Company's Business Conduct
Guidelines, or (y) any of his fiduciary duties to the
Company which in either case has, or was intended to
have, a material adverse impact (economic or otherwise)
on the Company; (iv) the willful or reckless behavior
of the Executive with regard to a matter of a material
nature which has a material adverse impact (economic or
otherwise) on the Company; (v) the Executive's willful
failure to attempt to perform his duties under Section
2 hereof or his willful failure to attempt to follow
the legal written direction of the Board, which in
either case is not remedied within ten (10) days after
receipt by the Executive of a written notice from the
Company specifying the details thereof; (vi) the
Executive's conviction of, or pleading nolo contendere
or guilty to, a felony (other than (x) a traffic
infraction or (y) vicarious liability solely as a
result of his position provided the Executive did not
have actual knowledge of the actions or inactions
creating the violation of the law or the Executive
relied in good faith on the advice of counsel with
regard to the legality of such action or inaction (or
the advice of other specifically qualified
professionals as to the appropriate or proper action or
inaction to take with regard to matters which are not
matters of legal interpretation)); or (vii) any other
material breach by the Executive of this Agreement that
is not cured by the Executive within twenty (20) days
after receipt by the Executive of a written notice from
the Company of such breach specifying the details
thereof. No action or inaction should be deemed
willful if not demonstrably willful and if taken or not
taken by the Executive in good faith as not being
adverse to the best interests of the Company.
Reference in this paragraph (d) to the Company shall
also include direct and indirect subsidiaries of the
Company, and materiality and material adverse impact
shall be measured based on the action or inaction and
the impact upon, and not the size of, the Company taken
as a whole, provided that after a Change in Control,
the size of the Company, taken as a whole, shall be a
relevant factor in determining materiality and material
adverse impact.
(e) Upon written notice by the Company to the Executive of
an involuntary termination without Cause. A notice by
the Company of non-renewal of the Employment Term
pursuant to Section 1 above shall be deemed an
involuntary termination of the Executive by the Company
without Cause as of the end of the Employment Term, but
the Executive may terminate at any time after the
receipt of such notice and shall be treated as if he
was terminated without Cause as of such date.
(f) Upon twenty (20) days written notice by the Executive
to the Company of a termination for Good Reason (which
notice sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such
termination) unless the Good Reason event is cured
within such twenty (20) day period. The term "Good
Reason" shall mean, for purposes of this Agreement,
without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the
assignment to the Executive of duties materially
inconsistent with the Executive's then authorities,
duties, responsibilities, and status (including
offices, titles, and reporting requirements), or any
reduction in the Executive's then title, position,
reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated)
in his then status, authorities, duties, or
responsibilities including but not limited to holding
his then position in the Company while the Company is a
subsidiary of another entity (holding stock in the
Company entitled to at least fifty percent (50%) of the
vote for the election of directors) and not holding the
same or equivalent position in the ultimate parent
entity or, if then a director of the Company, failure
to be nominated or reelected as a director of the
Company or removal as such; (ii) relocation of the
Executive from the principal office of the Company
(excluding reasonable travel on the Company's business
to an extent substantially consistent with the
Executive's business obligations) or relocation of the
principal office of the Company to a location which is
at least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at
the time of the relocation is not located at the
principal office, such relocation provision shall apply
based on his then location; (iii) a reduction by the
Company in the Executive's Base Salary; (iv) a
reduction in the Executive's aggregate level of
participation in any of the Company's short and/or
long-term incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or
arrangements in which the Executive participated as of
the Effective Date, or, after a Change in Control,
participated immediately prior to the Change in
Control; (v) the failure of the Company to obtain and
deliver to the Executive a satisfactory written
agreement from any successor to the Company to assume
and agree to perform this Agreement; or (vi) any other
material breach by the Company of this Agreement.
(g) Upon written notice by the Executive to the Company of
the Executive's voluntary termination of employment
without Good Reason (which the Company may, in its sole
discretion, make effective earlier than any notice
date). A notice by the Executive of non-renewal of the
Employment Term pursuant to Section 1 above shall be
deemed a voluntary termination by the Executive without
Good Reason as of the end of the Employment Term.
6. Consequences of a Termination of Employment
6.1 Termination Due to Death or Retirement. If the
Employment Term ends on account of the Executive's termination
due to death pursuant to Section 5(a) above or retirement
pursuant to Section 5(c) above, the Executive (or the Executive's
surviving spouse, or other beneficiary as so designated by the
Executive during his lifetime, or to the Executive's estate, as
appropriate) shall be entitled, in lieu of any other payments or
benefits, to (i) payment promptly of any unpaid Base Salary,
unpaid annual incentive compensation (for the preceding fiscal
year) and any accrued vacation, (ii) reimbursement for any
unreimbursed business expenses incurred prior to the date of
termination, and (iii) any amounts, benefits or fringes due under
any equity, benefit or fringe plan, grant or program in
accordance with the terms of said plan, grant or program but
without duplication (collectively, the "Accrued Obligations").
6.2 Termination Due To Disability. If the Employment Term
ends as a result of Disability pursuant to Section 5(b) above,
the Executive shall be entitled, in lieu of any other payments or
benefits, subject to Section 7(b) hereof, to any Accrued
Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to three hundred percent (300%) of the
Executive's target annual incentive compensation award
established for the fiscal year during which the
Executive's termination occurs (the "Termination Year
Target Bonus").
(b) Continued monthly payment for two and one half (2 1/2)
years of an amount equal to the Executive's monthly
Base Salary rate reduced by any disability benefits
received by the Executive under the Company's long term
disability plan for the corresponding period.
(c) Payments and benefits as set forth in Section 6.3(c)-
(j) hereof.
(d) The Executive shall be deemed to have satisfied the
definition of "total disability" under the 1994 Long-
Term Incentive Plan or the equivalent definition under
any successor plan thereto.
(e) As provided in Exhibit A hereto.
6.3 Involuntary Termination by the Company Without Cause or
Termination by the Executive for Good Reason. If the Executive
is involuntarily terminated by the Company without Cause in
accordance with Section 5(e) above or the Executive terminates
his employment for Good Reason in accordance with Section 5(f)
above, the Executive shall be entitled, in lieu of any other
payments or benefits, subject to Section 7(b) hereof, to any
Accrued Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to the Executive's Termination Year Target Bonus
multiplied by a fraction, the numerator of which is the
number of days during the fiscal year of the
Executive's termination that the Executive was employed
by the Company and the denominator is three hundred
sixty-five (365), provided that in no event shall such
payment exceed fifty percent (50%) of the Termination
Year Target Bonus.
(b) Continued payment off payroll for two and one-half (2
1/2) years (in approximately equal monthly
installments) of an amount equal to two and one-half (2
1/2) times the sum of: (i) the Executive's Base
Salary, and (ii) the greater of: (x) the Termination
Year Target Bonus, or (y) the Executive's highest
annual incentive compensation award earned during the
last three (3) fiscal years ending prior to the fiscal
year of termination (whether or not deferred).
(c) To the extent eligible at such time or, if the
Executive would be eligible with credit for an
additional two and one half (2 1/2) years of age and
service credit, coverage under all applicable retiree
health and other retiree welfare plans for the
Executive and his dependents (including, if he is only
eligible because of the extra age and service credit,
an adjustment, to the extent necessary, to put the
Executive in the same after-tax position as if he had
been eligible for such coverage) and, if not eligible
for continued health coverage under the retiree health
plan, payment of the Executive's and Executive's
eligible dependents' COBRA continuation health coverage
premiums for the Company's health insurance plan that
generally applies to senior executives for the two and
one-half (2 1/2) year period following the date of
termination or, if earlier, until the Executive and
Executive's dependents cease to be eligible for such
coverage, provided that, if COBRA coverage cannot be
provided for the full period, any excess period shall
be covered under (d) below (and further provided that,
if such premiums are taxable to the Executive, an
adjustment such that the Executive has no after tax
cost for the providing of such COBRA coverage).
(d) To the extent eligible on the date of termination,
continued participation, at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans (other than medical
plans covered under (c) above), until two and one-half
(2 1/2) years after the date of termination; provided,
however, that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
benefits under such plan shall immediately cease. To
the extent such coverage cannot be provided under the
Company's welfare benefit plans without jeopardizing
the tax status of such plans, for underwriting reasons
or because of the tax impact on the Executive, the
Company shall pay the Executive an amount such that the
Executive can purchase such benefits separately at no
greater after tax cost to the Executive than the
Executive would have had if the benefits were provided
to the Executive as an employee.
(e) Two and one-half (2 1/2) additional years of service
and compensation credit (at the Executive's then
compensation level) for benefit purposes under any
defined benefit type retirement plan, including but not
limited to the SERP and the SBP if then in effect, and,
if the Executive is not eligible to receive benefits
under any such plan on the date of termination, two and
one-half (2 1/2) additional years of age for
determining eligibility to receive such benefits,
provided that benefits under any such plan will not
commence until the Executive actually attains the
required distribution age under the plan or the
Executive's spouse qualifies for death benefits under
such plan and further provided that with regard to any
plan qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") the
additional amounts may be provided on a nonqualified
plan basis.
(f) Payment promptly after termination of two and one-half
(2 1/2) times the amount of the maximum Company annual
contribution or match to any defined contribution type
plan in which the Executive participates.
(g) Immediate full vesting of any outstanding stock options
that would vest within two and one half (2 1/2) years
after such termination of employment as if the
Executive had continued employment for such two and one
half (2 1/2) year period, to the extent permitted under
the plan or grant, or if such vesting is not permitted,
a cash payment equal to the difference between the fair
market value of the shares covered by the unvested
options and the exercise price of such unvested options
(the "Spread") on the date of termination, and, in both
cases, to the extent such options are exercisable for
less than two and three quarters (2-3/4) years after
termination (or, if less, the remainder of the
respective terms), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
termination) future value of such options for the
lesser of two and three quarters (2-3/4) years or the
remainder of such terms (any such payments shall be
made promptly after such termination). The terms of
the Executive's outstanding options are deemed to be
modified to the extent required by this Section 6.3
(g).
(h) Payment when it would otherwise be paid in accordance
with the 1994 Long-Term Incentive Plan of any amount
due with regard to performance share units outstanding
on the date of termination to the extent permitted
under such plan, plus, outside of such plan, when it
would otherwise have been paid, an amount equal to the
amount the Executive would have received with regard to
any performance share units outstanding at the time of
termination that could not be so paid. For purposes of
calculating the foregoing amounts, all discretionary
performance targets relating to the Executive's
individual performance will be deemed to be fully
achieved and the actual level of achievement of all
financial performance targets will be determined as if
the Executive continued to be employed through the end
of the applicable measuring period.
(i) Immediate full vesting of the Executive's accounts
under the Deferred Income Plan, and to the extent not
permitted under such plan, a cash payment outside of
the plan equal to the value of the amount that would
have vested under the plan.
(j) Continuation of participation for two and one-half (2
1/2) additional years in the Company's programs with
regard to tax preparation assistance and financial
planning assistance, club dues and automobile (but
based on the automobile then being used and no new
one), in accordance with the Company's programs in
effect at the time of the termination.
(k) As provided in Exhibit A hereto.
6.4 Termination by the Company for Cause or Termination by
the Executive without Good Reason. If the Executive is
terminated by the Company for Cause or the Executive terminates
his employment without Good Reason, the Executive shall be
entitled to receive all Accrued Obligations.
7. No Mitigation/No Offset/Release
(a) In the event of any termination of employment
hereunder, the Executive shall be under no obligation
to seek other employment and there shall be no offset
against any amounts due the Executive under this
Agreement on account of any remuneration attributable
to any subsequent employment that the Executive may
obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or
other right which the Company may have against the
Executive or others, except as specifically set forth
in Section 9 hereof or upon obtaining by the Company of
a final unappealable judgement against the Executive.
(b) Any amounts payable and benefits or additional rights
provided pursuant to Section 6.2 (other than Section
6.2(e)), Section 6.3 (other than Section 6.3(k)) and
Section 8.1 (other than Section 8.1(m)) beyond Accrued
Obligations and amounts or rights due under law, and,
in the case of Section 6.3 and Section 8.1, beyond the
sum of any amounts due (without execution of a release)
under the Company severance program then in effect, or,
if greater, three (3) months Base Salary as severance,
shall only be payable if the Executive delivers to the
Company a release of all claims of the Executive (other
than those specifically payable or providable hereunder
on or upon the applicable type of termination and any
rights of indemnification under the Company's
organizational documents) with regard to the Company,
its subsidiaries and related entities and their
respective past or present officers, directors and
employees in such form as reasonably requested by the
Company.
(c) Upon any termination of employment, upon the request of
the Company, the Executive shall deliver to the Company
a resignation from all offices and directorships and
fiduciary positions of the Executive in which the
Executive is serving with, or at the request of, the
Company or its subsidiaries, affiliates or benefit
plans.
(d) The amounts and benefits provided under Sections 6 and
8 hereof are intended to be inclusive and not
duplicative of the amounts and benefits due under the
Company's employee benefit plans and programs to the
extent they are duplicative.
8. Change in Control
8.1 Employment Termination in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) during the period commencing one-hundred eighty (180) days
prior to the effective date of a Change in Control and
terminating on the second anniversary of the effective date of a
Change in Control (the "Change in Control Protection Period"),
then in lieu of the benefits provided to the Executive under
Section 6.3 of this Agreement, the Company shall pay the
Executive the following amounts within (except as otherwise
provided) thirty (30) business days of the Qualifying Termination
(or, if later, the effective date of the Change in Control; in
which case any amounts or benefits previously paid pursuant to
Section 6 shall be setoff against those under this Section 8) and
provide the following benefits:
(a) Any Accrued Obligations.
(b) A lump-sum cash payment equal to three (3) times the
highest rate of the Executive's Base Salary rate in
effect at any time up to and including the date of the
Executive's termination.
(c) A lump-sum cash payment equal to the Prorated Portion
(as determined in the next sentence) of the greater of:
(i) the Executive's Termination Year Target Bonus or
(ii) the Executive's earned annual incentive award for
the fiscal year prior to the fiscal year in which the
earlier of the Change in Control or the Qualifying
Termination occurs (whether or not deferred). The
"Prorated Portion" of the foregoing amount shall be
determined by multiplying such amount by a fraction,
the numerator of which is the number of days during the
fiscal year of termination that the Executive is
employed by the Company, and the denominator of which
is, three hundred sixty-five (365).
(d) A lump-sum cash payment equal to three (3) times the
greater of: (i) the Executive's highest annual
incentive compensation earned over the three (3) fiscal
years ending prior to the earlier of the Change in
Control or the Qualifying Termination (whether or not
deferred); or (ii) the Executive's target incentive
compensation established for the fiscal year in which
the Executive's date of termination occurs.
(e) To the extent the Executive is eligible, was eligible
prior or after the Change in Control (or, if earlier,
the Qualifying Termination) or if the Executive would
be eligible with credit for an additional three (3)
years of age and service credit, coverage under all
applicable retiree health and other retiree welfare
plans for the Executive and the Executive's eligible
dependents (including an adjustment to the extent
necessary to put the Executive on the same after tax
basis as if the Executive had been eligible for such
coverage).
(f) To the extent eligible prior or after the Change in
Control (or, if earlier the Qualifying Termination),
continued participation, (coordinated with (e) above to
the extent duplicative), at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans, until three (3)
years after the date of termination, provided, however,
that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
similar or improved benefit under such plan shall
immediately cease. To the extent such coverage cannot
be provided under the Company's welfare benefit plans
without jeopardizing the tax status of such plans, for
underwriting reasons or because of the tax impact on
the Executive, the Company shall pay the Executive an
amount such that the Executive can purchase such
benefits separately at no greater after tax cost to him
than he would have had if the benefits were provided to
him as an employee.
(g) A lump-sum cash payment of the actuarial present value
equivalent (as determined in accordance with the most
favorable (to the Executive) overall actuarial
assumptions and subsidies in any of the Company's tax-
qualified or nonqualified type defined benefit pension
plans in which the Executive then participates) of the
accrued benefits accrued by the Executive as of the
date of termination under the terms of any nonqualified
defined benefit type retirement plan, including but not
limited to, the SERP and the SBP and assuming the
benefit was fully vested without regard to any minimum
age or service requirements. For this purpose, such
benefits shall be calculated under the assumption that
the Executive's employment continued following the date
of termination for three (3) full years (i.e., three
(3) additional years of age (including, but not limited
to, for purposes of determining the actuarial present
value), compensation and service credits shall be
added).
(h) Three (3) times the amount of the maximum Company
contribution or match to any defined contribution type
plan in which the Executive participates.
(i) A lump-sum cash payment of the product of (i) the
Interest Factor (as determined in the next sentence)
multiplied by (ii) the Executive's entire account
balance under the Deferred Income Plan (or any
replacement therefor), plus an additional amount equal
to three (3) times the match which the Company made for
the Executive to such plan for the fiscal year ending
immediately prior to the earlier of the Change in
Control or the Qualifying Termination. The "Interest
Factor" shall be equal to one (1) plus three (3) times
the rate of earnings of the Executive's account under
such plan for the fiscal year ending immediately prior
to his termination.
(j) Immediate full vesting of any outstanding stock
options, performance share units and other equity
awards (and lapse of any forfeiture provisions) to the
extent permitted under the plan or grant, or if full
vesting is not permitted with regard to stock options,
a cash payment equal to the Spread on such unvested
options on the date of termination (or, if later, the
date of the Change in Control) plus, in both cases, if
options are exercisable for less than three (3) years
after termination (or, if less, the remainder of the
respective terms, including any termination of
exercisability of all Company stock options in
connection with the Change in Control or a merger
related thereto), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
earlier of the Qualifying Termination or the Change in
Control) future value of such outstanding options for
the lesser of three (3) years or the remainder of such
terms.
(k) Outplacement services at a level commensurate with the
Executive's position, including use of an executive
office and secretary, for a period of one (1) year
commencing on the date of termination but in no event
extending beyond the date on which the Executive
commences other full time employment.
(l) Continuation of participation for three (3) additional
years in the Company's programs with regard to tax
preparation assistance and financial planning
assistance, club dues and automobile (but based on the
automobile then being used and no new one), in
accordance with the Company's programs in effect at the
time of the Change in Control.
(m) As provided in Exhibit A hereto.
For purposes of this Section 8, a Qualifying Termination
shall mean any termination of the Executive's employment (i) by
the Company without Cause, or (ii) by the Executive for Good
Reason.
8.2 Definition of "Change in Control." A Change in Control
of the Company shall be deemed to have occurred as of the first
day any one or more of the following conditions shall have been
satisfied:
(a) Any "person" or "group" (within the meaning of Section
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than the
Company, any trustee or other fiduciary holding Company
common stock under an employee benefit plan of the
Company or a related company, or any corporation which
is owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as
their ownership of the Company's common stock, is or
becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than thirty percent
(30%) of the then outstanding voting stock;
(b) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board and any new director whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in office
who either were directors at the beginning of the two
year period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority of the Board;
(c) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger
or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or being converted into voting securities
of the surviving entity) more than fifty percent (50%)
of the combined voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation; or
(d) The approval of the stockholders of the Company of a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all of its assets.
8.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to payments and/or benefits which
would constitute "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, the provisions of Exhibit B will
apply.
9. Noncompetition, Confidentiality and Nondisparagement
9.1 Agreement Not to Compete.
(a) The Executive agrees that for a period of two (2) years
after the termination of the Executive's employment,
the Executive will not engage in Competition with the
Company with the Listed Companies, provided that after
the Executive's termination of employment the Listed
Companies shall be limited to those effectively listed
at the time of his termination and still on such list
at the time of any alleged activity of the Executive,
including, but not limited to, (i) soliciting
customers, business or orders for, or selling any
products and services in, Competition with the Company
for such Listed Companies or (ii) diverting, enticing,
or otherwise taking away customers, business or orders
of the Company, or attempting to do so, in either case
in Competition with the Company for such Listed
Companies.
(b) The Executive agrees that if, while he is receiving
severance pay from the Company pursuant to Section
6.2(b) or Section 6.3(b), the Executive: (i) violates
(a) above, or (ii) otherwise engages in Competition in
the Restricted Territory, whether or not with the
Listed Companies, Section 9.6(b) hereof shall apply.
(c) The Executive agrees that the restrictions contained in
this Section 9 are necessary for the protection of the
business and goodwill of the Company because of the
trade secrets within the Executive's knowledge and are
considered by the Executive to be reasonable for such
purpose.
9.2 Definitions.
(a) "Competition" shall mean engaging in, as an employee,
director, partner, principal, shareholder, consultant,
advisor, independent contractor or similar capacity,
with (a) the Listed Companies or (b) in any business,
activity or conduct which directly competes with the
business of the Company, provided that, with regard to
the period after termination of the Executive's
employment, Section 9.1(b)(ii) shall only apply to
business lines in which the Company is engaged both at
the time of termination of employment and at the time
of the determination and which during the last fiscal
year ending prior to the date of such termination repre
sented at least five percent (5%) of the Company's
revenues (the "Prohibited Lines"). Notwithstanding
anything else in this Section 9, Competition shall not
include: (A) (i) holding five percent (5%) or less of
an interest in the equity or debt of any publicly
traded company, (ii) engaging in any activity with the
prior written approval of the O&C Committee, (iii) the
practice of law in a law firm that represents entities
in Competition with the Company, provided that the
Executive does not personally represent such entities,
or (iv) the employment by, or provision of services to,
an investment banking firm or consulting firm that
provides services to entities that are in Competition
with the Company provided that the Executive does not
personally represent or provide services to such
entities that are Listed Companies or otherwise with
regard to businesses in Competition with the Prohibited
Lines, or (B) with regard to Section 9.1(b)(ii), (i)
being employed by, or consulting for, a non-Competitive
division or business unit of an entity which is in
Competition with the Company (and participating in such
entity's employee equity plans), (ii) being employed
by, or consulting for, an entity which had annual
revenues in the last fiscal year prior to the Executive
being employed by, or consulting for, the entity
generated through business lines in Competition with
the Prohibited Lines of the Company that do not exceed
five percent (5%) of such entity's total annual
revenues, provided that revenues within the Executive's
area of responsibility or authority are not more than
ten percent (10%) composed of the revenues from the
businesses in Competition with the Prohibited Lines, or
(iii) any activities conducted after a Change in
Control of the Company.
(b) The Restricted Territory shall mean any geographic area
in which the Company with regard to the Prohibited
Lines did more than nominal business.
(c) Listed Companies shall mean those entities which are
within the "peer group" established by the Company for
the performance graphs in its proxy statement pursuant
to Item 402(l) of Regulation S-K under the Exchange Act
and which are in a list of no more than five (5)
entities established by the Company from time to time
and available from the Chief Human Resources Officer,
provided that the addition of any entity to the list
shall not be effective until sixty (60) days after it
is so listed.
(d) For purposes of this Section 9, "Company" shall mean
the Company and its subsidiaries and affiliates.
9.3 Agreement Not to Engage in Certain Solicitation.
The Executive agrees that the Executive will not, during the
Executive's employment with the Company or during the two (2)
year period thereafter, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any non-clerical
employee(s), sales representative(s), agent(s), or consultant(s)
of the Company to terminate such person's employment,
representation or other association with the Company for the
purpose of affiliating with any entity with which the Executive
is associated ("Solicitation").
9.4 Confidential Information.
(a) The Executive specifically acknowledges that any trade
secrets or confidential business and technical
information of the Company or its vendors, suppliers or
customers, whether reduced to writing, maintained on
any form of electronic media, or maintained in mind or
memory and whether compiled by the Executive or the
Company (collectively, "Confidential Information"),
derives independent economic value from not being
readily known to or ascertainable by proper means by
others; that reasonable efforts have been made by the
Company to maintain the secrecy of such information;
that such information is the sole property of the
Company or its vendors, suppliers, or customers and
that any retention, use or disclosure of such
information by the Executive during the Employment Term
(except in the course of performing duties and
obligations of employment with the Company) or any time
after termination thereof, shall constitute
misappropriation of the trade secrets of the Company or
its vendors, suppliers, or customers, provided that
Confidential Information shall not include: (i)
information that is at the time of disclosure public
knowledge or generally known within the industry, (ii)
information deemed in good faith by the Executive,
while employed by the Company, desirable to disclose in
the course of performing the Executive's duties, (iii)
information the disclosure of which the Executive in
good faith deems necessary in defense of the
Executive's rights provided such disclosure by the
Executive is limited to only disclose as necessary for
such purpose, or (iv) information disclosed by the
Executive to comply with a court, or other lawful
compulsory, order compelling him to do so, provided the
Executive gives the Company prompt notice of the
receipt of such order and the disclosure by the
Executive is limited to only disclosure necessary for
such purpose.
(b) The Executive acknowledges that the Company from time
to time may have agreements with other persons or with
the United States Government, or agencies thereof, that
impose obligations or restrictions on the Company
regarding inventions made during the course of work
under such agreements or regarding the confidential
nature of such work. If the Executive's duties
hereunder will require disclosures to be made to him
subject to such obligations and restrictions, the
Executive agrees to be bound by them.
9.5 Scope of Restrictions. If, at the time of
enforcement of this Section 9, a court holds that the
restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and
that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area
permitted by law.
9.6 Remedies.
(a) In the event of a material breach or threatened
material breach of Section 9.1(a), Section 9.3, Section
9.4 or Section 9.10, the Company, in addition to its
other remedies at law or in equity, shall be entitled
to injunctive or other equitable relief in order to
enforce or prevent any violations of the provisions of
this Section 9. Except as specifically provided with
regard to Listed Companies, the Company agrees that it
will not assert to enjoin or otherwise limit the
Executive's activities based on an argument of
inevitable disclosure of confidential information.
(b) In the event Section 9.1(b) applies, the Company may
immediately cease payment to the Executive of all
future amounts due under Sections 6.2(a) or (b) or
Sections 6.3(a) or (b), as well as otherwise
specifically provided in any other plan, grant or
program.
(c) Upon written request of the Executive, the Company
shall within thirty (30) days notify the Executive in
writing whether or not in good faith it believes any
proposed activities would be in Competition and, if it
so determines or does not reply within thirty (30)
days, it shall be deemed to waive any right to treat
such activities as Competition unless the facts are
otherwise than as presented by the Executive or there
is a change thereafter in such activities. The
Executive shall promptly provide the Company with such
information as it may reasonably request to evaluate
whether or not such activities are in Competition.
9.7 Uniformity. In no event shall any definitions of
Competition or Solicitation (or a similar provision) as it
applies to the Executive with regard to any plan of program or
grant of the Company be interpreted to be any broader than as set
forth in this Section 9.
9.8 Delivery of Documents. Upon termination of this
Agreement or at any other time upon request by the Company, the
Executive shall promptly deliver to the Company all records,
files, memoranda, notes, designs, data, reports, price lists,
customer lists, drawings, plans, computer programs, software,
software documentation, sketches, laboratory and research
notebooks and other documents (and all copies or reproductions of
such materials in his possession or control) belonging to the
Company. Notwithstanding the foregoing, the Executive may retain
his rolodex and similar phone directories (collectively, the
"Rolodex") to the extent the Rolodex does not contain information
other than name, address, telephone number and similar
information, provided that, at the request of the Company, the
Executive shall provide the Company with a copy of the Rolodex.
9.9 Nondisparagement.
(a) During the Employment Term and thereafter, the
Executive shall not with willful intent to damage
economically or as to reputation or vindictively
disparage the Company, its subsidiaries or their
respective past or present officers, directors or
employees (the "Protected Group"), provided that the
foregoing shall not apply to (i) actions or statements
taken or made by the Executive while employed by the
Company in good faith as fulfilling the Executive's
duties with the Company or otherwise at the request of
the Company, (ii) truthful statements made in
compliance with legal process or governmental inquiry,
(iii) as the Executive in good faith deems necessary to
rebut any untrue or misleading public statements made
about him or any other member of the Protected Group,
(iv) statements made in good faith by the Executive to
rebut untrue or misleading statements made about him or
any other member of the Protected Group by any member
of the Protected Group, and (v) normal commercial
puffery in a competitive business situation. No member
of the Protected Group shall be a third party
beneficiary of this Section 9.9(a).
(b) During the Employment Term and thereafter, neither the
Company officially nor any then member of the Executive
Leadership Team (or the equivalent) of the Company, as
such term is currently used within the Company, shall
with willful intent to damage the Executive
economically or as to reputation or otherwise
vindictively disparage the Executive, provided the
foregoing shall not apply to (i) actions or statements
taken or made in good faith within the Company in
fulfilling duties with the Company, (ii) truthful
statements made in compliance with legal process,
governmental inquiry or as required by legal filing or
disclosure requirements, (iii) as in good faith deemed
necessary to rebut any untrue or misleading statements
by the Executive as to any member of the Protected
Group or (iv) normal commercial puffery in a
competitive business situation.
(c) In the event of a material breach or threatened
material breach of clauses (a) or (b) above, the
Company or the Executive, as the case may be, in
addition to its or the Executive's other remedies at
law or in equity, shall be entitled to injunctive or
other equitable relief in order to enforce or prevent
any violations of this Section 9.9.
9.10 Pooling of Interests. If the Company is involved
in any proposed business combination that is contemplated to be
accounted for as a pooling of interests, the Executive agrees to
cooperate with the reasonable requests of the Company with regard
to the exercise of stock options, the sale of Company stock or
other matters that could affect the ability of the combination to
be accounted for as a pooling of interests.
10 Liability Insurance
The Company shall cover the Executive under directors
and officers liability insurance both during and, while potential
liability exists, after the Employment Term in the same amount
and to the same extent, if any, as the Company covers its other
officers and directors.
11 Assignment
11.1 Assignment by the Company. This Agreement may and
shall be assigned or transferred to, and shall be binding upon
and shall inure to the benefit of, any successor of the Company,
and any such successor shall be deemed substituted for all
purposes of the "Company" under the terms of this Agreement. As
used in this Agreement, the term "successor" shall mean any
person, firm, corporation or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or
substantially all of the assets of the Company. Notwithstanding
such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
11.2 Assignment by the Executive. This Agreement is
not assignable by the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
12 Legal Remedies
12.1 Payment of Legal Fees. The Company shall pay the
Executive's reasonable legal fees and costs associated with
entering into this Agreement. To the fullest extent permitted by
law, the Company shall promptly pay upon submission of statements
all legal and other professional fees, costs of litigation,
prejudgment interest, and other expenses incurred in connection
with any dispute arising hereunder; provided, however, the
Company shall be reimbursed by the Executive for (i) the fees and
expenses advanced in the event the Executive's claim is in a
material manner in bad faith or frivolous and the arbitrator or
court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate, or (ii) to the extent that the
arbitrator or court, as appropriate, determines that such legal
and other professional fees are clearly and demonstrably
unreasonable.
12.2 Arbitration. All disputes and controversies
arising under or in connection with this Agreement, other than
the seeking of injunctive or other equitable relief pursuant to
Section 9 hereof, shall be settled by arbitration conducted
before a panel of three (3) arbitrators sitting in New York City,
New York, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of commercial
disputes of the American Arbitration Association then in effect.
The determination of the majority of the arbitrators shall be
final and binding on the parties. Judgment may be entered on the
award of the arbitrator in any court having proper jurisdiction.
All expenses of such arbitration, including the fees and expenses
of the counsel of the Executive, shall be borne by the Company
and the Executive shall be entitled to reimbursement of his
expenses as provided in Section 12.1 hereof.
12.3 Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if delivered personally, sent by telecopier,
sent by an overnight service or sent by registered or certified
mail. Notice to the Executive not delivered personally (or by
telecopy where the Executive is known to be) shall be sent to the
last address on the books of the Company, and notice to the
Company not delivered personally (or by telecopy to the known
personal telecopy of the person it is being sent to) shall be
sent to it at its principal office. All notices to the Company
shall be delivered to the Chairman of the O&C Committee with a
copy to the senior legal officer. Delivery shall be deemed to
occur on the earlier of actual receipt or tender and rejection by
the intended recipient.
12.4 Continued Payments. In the event after a Change
in Control either party files for arbitration to resolve any
dispute as to whether a termination is for Cause or Good Reason,
until such dispute is determined by the arbitrators, the
Executive shall continue to be treated economically and benefit
wise in the manner asserted by him in the arbitration effective
as of the date of the filing of the arbitration, subject to the
Executive promptly refunding any amounts paid to him, paying the
cost of any benefits provided to him and paying to the Company
the profits in any stock option or other equity awards exercised
or otherwise realized by him during the pendency of the
arbitration which he is ultimately held not to be entitled to;
provided the arbitrators may terminate such payments and benefits
in the event that they determine at any point that the Executive
is intentionally delaying conclusion of the arbitration.
13 Miscellaneous
13.1 Entire Agreement. This Agreement, except to the
extent specifically provided otherwise herein, supersedes any
prior agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect to the subject matter
hereof. To the extent any severance plan or program of the
Company that would apply to the Executive is more generous to the
Executive than the provisions hereof, the Executive shall be
entitled to any additional payments or benefits which are not
duplicative, but shall otherwise not be eligible for such plan or
program.
13.2 Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended, nor
any provision hereof waived, except by mutual agreement of the
parties in a written instrument executed by the parties hereto or
their legal representatives.
13.3 Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.4 Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed to be
an original, but all of which together will constitute one and
the same Agreement.
13.5 Tax Withholding. The Company may withhold from
any benefits payable under this Agreement all federal, state,
city, or other taxes as may be required pursuant to any law or
governmental regulation or ruling.
13.6 Beneficiaries. The Executive may designate one or
more persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
13.7 Representation. The Executive represents that the
Executive's employment by the Company and the performance by the
Executive of his obligations under this Agreement do not, and
shall not, breach any agreement that obligates him to keep in
confidence any trade secrets or confidential or proprietary
information of his or of any other party, to write or consult to
any other party or to refrain from competing, directly or
indirectly, with the business of any other party. The Executive
shall not disclose to the Company, and the Company shall not
request that the Executive disclose, any trade secrets or
confidential or proprietary information of any other party.
14 Governing Law
The provisions of this Agreement shall be construed and
enforced in accordance with the laws of the state of Delaware,
without regard to any otherwise applicable principles of
conflicts of laws.
IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement, as of the day and year first above
written.
/s/Lewis B. Campbell
Lewis B. Campbell
TEXTRON INC.
By:/s/John D. Butler
Name: John D. Butler
Title: Executive Vice
President
Exhibit A
Special Grants
By Retention Award Letter (the "Letter") dated December 19,
1995, the Executive was awarded the cash equivalent of 25,000
shares of Company stock (50,000 shares post split) subject to
certain conditions. The Letter shall continue to apply, except
as set forth below.
1. In the event of the Executive's termination of
employment as a result of death (pursuant to Section
5(a) hereof), Disability (pursuant to Section 5(b)
hereof), by the Company without Cause (pursuant to
Section 5(e) hereof) or by the Executive for Good
Reason (pursuant to Section 5(f) hereof), the Executive
shall immediately become fully vested in the cash
payment under the Letter (which shall be calculated
using the same method as set forth in the Letter, but
substituting the date of termination for January 1,
2001) and the award shall immediately be paid out after
the date of termination in a lump sum. Furthermore, in
the event of a Change in Control before January 1,
2001, but not a termination until thereafter, the value
of the cash payment on January 1, 2001 will be the
greater of the method in the second and fourth bullets
of the Letter. The payment shall immediately vest upon
a Change in Control, but not be paid out until the
earlier of January 1, 2001 or a termination of
employment. The foregoing award shall not be subject
in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment,
garnishment, execution or levy of any kind and any
attempt to do so shall not be recognized.
Exhibit B
Parachute Gross Up
(a) In the event that the Executive shall become
entitled to payments and/or benefits provided by this Agreement
or any other amounts in the "nature of compensation" (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person) as a result of such
change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code
(and any similar tax that may hereafter be imposed by any taxing
authority) the Company shall pay to the Executive at the time
specified in subsection (d) below an additional amount (the
"Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and for local income or
payroll tax upon the Gross-up Payment provided for by this
paragraph (a), but before deduction for any U.S. federal, state,
and local income or payroll tax on the Company Payments, shall be
equal to the Company Payments.
(b) For purposes of determining whether any of the
Company Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except
to the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax
counsel selected by such accountants (the "Accountants") such
Total Payments (in whole or in part) either do not constitute
"parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, the Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-
up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of
the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment
thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided
for in subsection (c) above shall be paid not later than the
thirtieth (30th) day following an event occurring which subjects
the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good
faith by the Accountant, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code), subject to further payments pursuant to subsection (c)
hereof, as soon as the amount thereof can reasonably be deter
mined, but in no event later than the ninetieth day after the
occurrence of the event subjecting the Executive to the Excise
Tax. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
(e) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) with regard to the
Excise Tax, the Executive shall permit the Company to control
issues related to the Excise Tax (at its expense), provided that
such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In
the event the issues are interrelated, the Executive and the
Company shall in good faith cooperate so as not to jeopardize
resolution of either issue, but if the parties cannot agree the
Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive
shall permit the representative of the Company to accompany the
Executive, and the Executive and the Executive's representative
shall cooperate with the Company and its representative.
(f) The Company shall be responsible for all charges
of the Accountant.
(g) The Company and the Executive shall promptly
deliver to each other copies of any written communications, and
summaries of any verbal communications, with any taxing authority
regarding the Excise Tax covered by this Exhibit B.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is entered into as of this 12th
day of August, 1998 by and between Textron Inc. (the "Company"),
a Delaware corporation having its principal office at 40
Westminster Street, Providence, Rhode Island 02903 and Herbert L.
Henkel residing at 4 Spinney Lane, North Kingstown, Rhode Island
02852 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive and the
Executive is willing to be employed by the Company; and
WHEREAS, the Company and the Executive desire to set forth
the terms and conditions of such employment.
NOW THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration, the
adequacy and receipt of which is acknowledged, the parties hereto
agree as follows:
1. Term of Employment
The Company hereby agrees to employ the Executive and
the Executive hereby accepts employment, in accordance with the
terms and conditions set forth herein, for a term (the
"Employment Term") commencing on the date hereof (the "Effective
Date") and terminating, unless otherwise terminated earlier in
accordance with Section 5 hereof, on the third anniversary of the
Effective Date (the "Original Employment Term"), provided that
the Employment Term shall be automatically extended, subject to
earlier termination as provided in Section 5 hereof, for
successive additional one (1) year periods (the "Additional
Terms"), unless, at least ninety (90) days prior to the end of
the Original Employment Term or the then Additional Term, the
Company or the Executive has notified the other in writing that
the Employment Term shall terminate at the end of the then
current term.
2. Position and Responsibilities
During the Employment Term, the Executive shall serve
as the Executive Vice President and Chief Operating Officer of
the Company or in such higher capacity as agreed by the Company
and the Executive. The Executive shall report exclusively to the
Chief Executive Officer and the Board of Directors of the Company
(the "Board"). The Executive shall, to the extent appointed or
elected, serve on the Board as a director and as a member of any
committee of the Board, in each case, without additional
compensation. The Executive shall, to the extent appointed or
elected, serve as a director or as a member of any committee of
the board (or the equivalent bodies in a non-corporate subsidiary
or affiliate) of any of the Company's subsidiaries or affiliates
and as an officer or employee (in a capacity commensurate with
his position with the Company) of any such subsidiaries or
affiliates, in all cases, without additional compensation or
benefits and any compensation paid to the Executive, or benefits
provided to the Executive, in such capacities shall be a credit
with regard to the amounts due hereunder from the Company. The
Executive shall have duties, authorities and responsibilities
generally commensurate with the duties, authorities and
responsibilities of persons in similar capacities in similarly
sized companies, subject to the By-laws of the Company the
organizational structure of the Company. The Executive shall
devote substantially all of his business time, attention and
energies to the performance of his duties hereunder, provided the
foregoing will not prevent the Executive from participating in
charitable, community or industry affairs, from managing his and
his family's personal passive investments, and (with the consent
of the Chief Executive Officer or the Organization and
Compensation Committee (or its successor) of the Board (the "O&C
Committee"), which consent will not be unreasonably withheld,
conditioned or delayed) serving on the board of directors of
other companies, provided that these activities do not materially
interfere with the performance of his duties hereunder or create
a potential business conflict or the appearance thereof.
3. Compensation and Benefits
During the Employment Term, the Company shall pay and
provide the Executive the following:
3.1 Base Salary. The Company shall pay the Executive
an initial base salary (the "Base Salary") at a rate of $500,000.
Base Salary shall be paid to the Executive in accordance with the
Company's normal payroll practices for executives. Base Salary
shall be reviewed at least annually by the O&C Committee (or as
otherwise designated by the Board) to ascertain whether, in the
judgment of the reviewing committee, such Base Salary should be
increased. If so increased, Base Salary shall not be thereafter
decreased and shall thereafter, as increased, be the Base Salary
hereunder.
3.2 Annual Bonus. The Company shall provide the
Executive with the opportunity to earn an annual cash bonus under
the Company's current annual incentive compensation plan for
executives or a replacement plan therefor at a level commensurate
with his position, provided that the minimum annual target award
payable upon the achievement of reasonably attainable objective
performance goals shall be at least sixty percent (60%) of Base
Salary.
3.3 Long-Term Incentives. The Company shall provide
the Executive the opportunity to earn long-term incentive awards
under the current equity and cash based plans and programs or
replacements therefor.
3.4 Employee Benefits. The Executive shall, to the
extent eligible, be entitled to participate at a level
commensurate with his position in all employee benefit welfare
and retirement plans and programs, as well as equity plans,
generally provided by the Company to its senior executives in
accordance with the terms thereof as in effect from time to time.
3.5 Vacation. The Executive shall be entitled to paid
vacation in accordance with the standard written policies of the
Company with regard to vacations of executives, but in no event
less than four (4) weeks per calendar year.
3.6 Perquisites. The Company shall provide to the
Executive, at the Company's cost, all perquisites to which other
senior executives of the Company are generally entitled to
receive and such other perquisites which are suitable to the
character of the Executive's position with the Company and
adequate for the performance of his duties hereunder. To the
extent legally permissible, the Company shall not treat such
amounts as income to the Executive.
3.7 Right to Change Plans. The Company shall not be
obligated by reason of this Section 3 to institute, maintain, or
refrain from changing, amending, or discontinuing any benefit
plan, program, or perquisite, so long as such changes are
similarly applicable to executive employees generally.
4. Expenses
Upon submission of appropriate documentation, in
accordance with its policies in effect from time to time, the
Company shall pay, or reimburse, the Executive for all ordinary
and necessary expenses, in a reasonable amount, which the
Executive incurs in performing his duties under this Agreement
including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, and civic associations and societies in which the
Executive participates in accordance with the Company's policies
in effect from time to time.
5. Termination of Employment
The Executive's employment with the Company (including but
not limited to any subsidiary or affiliate or the Company) and
the Employment Term shall terminate upon the occurrence of the
first of the following events:
(a) Automatically on the date of the Executive's death.
(b) Upon thirty (30) days written notice by the Company to
the Executive of a termination due to Disability,
provided such notice is delivered during the period of
Disability. The term "Disability" shall mean, for
purposes of this Agreement, the inability of the
Executive, due to injury, illness, disease or bodily or
mental infirmity, to engage in the performance of his
material duties of employment with the Company as
contemplated by Section 2 herein for a period of more
than one hundred eighty (180) consecutive days or for a
period that is reasonably expected to exist for a
period of more than one hundred eighty (180)
consecutive days, provided that interim returns to work
of less than ten (10) consecutive business days in
duration shall not be deemed to interfere with a
determination of consecutive absent days if the reason
for absence before and after the interim return are the
same. The existence or non-existence of a Disability
shall be determined by a physician agreed upon in good
faith by the Executive (or his representatives) and the
Company. It is expressly understood that the
Disability of the Executive for a period of one hundred
eighty (180) consecutive days or less shall not
constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default
and the Executive shall receive full compensation for
any such period of Disability or for any other
temporary illness or incapacity during the term of this
Agreement.
(c) Immediately upon written notice by the Company to the
Executive of a termination due to his retirement at or
after the Executive's attainment of age sixty-five
(65).
(d) Immediately upon written notice by the Company to the
Executive of a termination for Cause, provided such
notice is given within ninety (90) days after the
discovery by the Board or the Chief Executive Officer
of the Cause event and has been approved by the O&C
Committee at a meeting at which the Executive and his
counsel had the right to appear and address such
meeting after receiving at least five (5) business days
written notice of the meeting and reasonable detail of
the facts and circumstances claimed to provide a basis
for such termination. The term "Cause" shall mean, for
purposes of this Agreement: (i) an act or acts of
willful misrepresentation, fraud or willful dishonesty
(other than good faith expense account disputes) by the
Executive which in any case is intended to result in
his or another person or entity's substantial personal
enrichment at the expense of the Company; (ii) any
willful misconduct by the Executive with regard to the
Company, its business, assets or employees that has, or
was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iii) any
material, willful and knowing violation by the
Executive of (x) the Company's Business Conduct
Guidelines, or (y) any of his fiduciary duties to the
Company which in either case has, or was intended to
have, a material adverse impact (economic or otherwise)
on the Company; (iv) the willful or reckless behavior
of the Executive with regard to a matter of a material
nature which has a material adverse impact (economic or
otherwise) on the Company; (v) the Executive's willful
failure to attempt to perform his duties under Section
2 hereof or his willful failure to attempt to follow
the legal written direction of the Board, which in
either case is not remedied within ten (10) days after
receipt by the Executive of a written notice from the
Company specifying the details thereof; (vi) the
Executive's conviction of, or pleading nolo contendere
or guilty to, a felony (other than (x) a traffic
infraction or (y) vicarious liability solely as a
result of his position provided the Executive did not
have actual knowledge of the actions or inactions
creating the violation of the law or the Executive
relied in good faith on the advice of counsel with
regard to the legality of such action or inaction (or
the advice of other specifically qualified
professionals as to the appropriate or proper action or
inaction to take with regard to matters which are not
matters of legal interpretation)); or (vii) any other
material breach by the Executive of this Agreement that
is not cured by the Executive within twenty (20) days
after receipt by the Executive of a written notice from
the Company of such breach specifying the details
thereof. No action or inaction should be deemed
willful if not demonstrably willful and if taken or not
taken by the Executive in good faith as not being
adverse to the best interests of the Company.
Reference in this paragraph (d) to the Company shall
also include direct and indirect subsidiaries of the
Company, and materiality and material adverse impact
shall be measured based on the action or inaction and
the impact upon, and not the size of, the Company taken
as a whole, provided that after a Change in Control,
the size of the Company, taken as a whole, shall be a
relevant factor in determining materiality and material
adverse impact.
(e) Upon written notice by the Company to the Executive of
an involuntary termination without Cause. A notice by
the Company of non-renewal of the Employment Term
pursuant to Section 1 above shall be deemed an
involuntary termination of the Executive by the Company
without Cause as of the end of the Employment Term, but
the Executive may terminate at any time after the
receipt of such notice and shall be treated as if he
was terminated without Cause as of such date.
(f) Upon twenty (20) days written notice by the Executive
to the Company of a termination for Good Reason (which
notice sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such
termination) unless the Good Reason event is cured
within such twenty (20) day period. The term "Good
Reason" shall mean, for purposes of this Agreement,
without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the
assignment to the Executive of duties materially
inconsistent with the Executive's then authorities,
duties, responsibilities, and status (including
offices, titles, and reporting requirements), or any
reduction in the Executive's then title, position,
reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated)
in his then status, authorities, duties, or
responsibilities or, if then a director of the Company,
failure to be nominated or reelected as a director of
the Company or removal as such; (ii) relocation of the
Executive from the principal office of the Company
(excluding reasonable travel on the Company's business
to an extent substantially consistent with the
Executive's business obligations) or relocation of the
principal office of the Company to a location which is
at least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at
the time of the relocation is not located at the
principal office, such relocation provision shall apply
based on his then location but shall not cover a
relocation to the principal office prior to a Change in
Control; (iii) a reduction by the Company in the
Executive's Base Salary; (iv) a reduction in the
Executive's aggregate level of participation in any of
the Company's short and/or long-term incentive
compensation plans, or employee benefit or retirement
plans, policies, practices, or arrangements in which
the Executive participated as of the Effective Date,
or, after a Change in Control, participated immediately
prior to the Change in Control; (v) the failure of the
Company to obtain and deliver to the Executive a
satisfactory written agreement from any successor to
the Company to assume and agree to perform this
Agreement; or (vi) any other material breach by the
Company of this Agreement.
(g) Upon written notice by the Executive to the Company of
the Executive's voluntary termination of employment
without Good Reason (which the Company may, in its sole
discretion, make effective earlier than any notice
date). A notice by the Executive of non-renewal of the
Employment Term pursuant to Section 1 above shall be
deemed a voluntary termination by the Executive without
Good Reason as of the end of the Employment Term.
6. Consequences of a Termination of Employment
6.1 Termination Due to Death or Retirement. If the
Employment Term ends on account of the Executive's termination
due to death pursuant to Section 5(a) above or retirement
pursuant to Section 5(c) above, the Executive (or the Executive's
surviving spouse, or other beneficiary as so designated by the
Executive during his lifetime, or to the Executive's estate, as
appropriate) shall be entitled, in lieu of any other payments or
benefits, to (i) payment promptly of any unpaid Base Salary,
unpaid annual incentive compensation (for the preceding fiscal
year) and any accrued vacation, (ii) reimbursement for any
unreimbursed business expenses incurred prior to the date of
termination, and (iii) any amounts, benefits or fringes due under
any equity, benefit or fringe plan, grant or program in
accordance with the terms of said plan, grant or program but
without duplication (collectively, the "Accrued Obligations").
6.2 Termination Due To Disability. If the Employment Term
ends as a result of Disability pursuant to Section 5(b) above,
the Executive shall be entitled, in lieu of any other payments or
benefits, to any Accrued Obligations.
6.3 Involuntary Termination by the Company Without Cause or
Termination by the Executive for Good Reason. If the Executive
is involuntarily terminated by the Company without Cause in
accordance with Section 5(e) above or the Executive terminates
his employment for Good Reason in accordance with Section 5(f)
above, the Executive shall be entitled, in lieu of any other
payments or benefits, subject to Section 7(b) hereof, to any
Accrued Obligations and the following:
(a) Payment of the Prorated Portion (as determined in the
next sentence) of the earned annual incentive
compensation award for the fiscal year in which the
Executive's termination occurs, payable promptly after
the end of such fiscal year. "Prorated Portion" shall
be determined by multiplying such amount by a fraction,
the numerator of which is the number of days during the
fiscal year of termination that the Executive is
employed by the Company, and the denominator of which
is, 365.
(b) Continued payment off payroll for two years (in
approximately equal monthly installments) of an amount
equal to two times the sum of (i) the Executive's Base
Salary and (ii) the higher of (x) the Executive's
target incentive compensation established for the
fiscal year in which the Executive's termination occurs
or (y) a multiple thereof equal to the product of such
target amount and the multiple of target earned by the
Executive for the prior fiscal year (whether or not
deferred).
(c) Payment of the premium for COBRA continuation health
coverage for the Executive and the Executive's
dependents until the earliest of (i) eighteen (18)
months after such termination, (ii) until no longer
eligible for COBRA continuation benefit coverage or
(iii) the Executive commences other substantially full-
time employment.
6.4 Termination by the Company for Cause or Termination by
the Executive without Good Reason. If the Executive is
terminated by the Company for Cause or the Executive terminates
his employment without Good Reason, the Executive shall be
entitled to receive all Accrued Obligations.
7. No Mitigation/No Offset/Release
(a) In the event of any termination of employment
hereunder, the Executive shall be under no obligation
to seek other employment and there shall be no offset
against any amounts due the Executive under this
Agreement on account of any remuneration attributable
to any subsequent employment that the Executive may
obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or
other right which the Company may have against the
Executive or others, except as specifically set forth
in Section 9 hereof or upon obtaining by the Company of
a final unappealable judgement against the Executive.
(b) Any amounts payable and benefits or additional rights
provided pursuant to Section 6.3 or Section 8.1 beyond
and Accrued Obligations and beyond the sum of any
amounts due (without execution of a release) under the
Company severance program then in effect, or, if
greater, three (3) months Base Salary as severance,
shall only be payable if the Executive delivers to the
Company a release of all claims of the Executive (other
than those specifically payable or providable hereunder
on or upon the applicable type of termination and any
rights of indemnification under the Company's
organizational documents) with regard to the Company,
its subsidiaries and related entities and their
respective past or present officers, directors and
employees in such form as reasonably requested by the
Company.
(c) Upon any termination of employment, upon the request of
the Company, the Executive shall deliver to the Company
a resignation from all offices and directorships and
fiduciary positions of the Executive in which the
Executive is serving with, or at the request of, the
Company or its subsidiaries, affiliates or benefit
plans.
(d) The amounts and benefits provided under Sections 6 and
8 hereof are intended to be inclusive and not
duplicative of the amounts and benefits due under the
Company's employee benefit plans and programs to the
extent they are duplicative.
8. Change in Control
8.1 Employment Termination in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) during the period commencing one-hundred eighty (180) days
prior to the effective date of a Change in Control and
terminating on the second anniversary of the effective date of a
Change in Control (the "Change in Control Protection Period"),
then in lieu of the benefits provided to the Executive under
Section 6.3 of this Agreement, the Company shall pay the
Executive the following amounts within (except as otherwise
provided) thirty (30) business days of the Qualifying Termination
(or, if later, the effective date of the Change in Control; in
which case any amounts or benefits previously paid, pursuant to
Section 6 shall be setoff against those under this Section 8) and
provide the following benefits:
(a) Any Accrued Obligations.
(b) A lump-sum cash payment equal to three (3) times the
highest rate of the Executive's Base Salary rate in
effect at any time up to and including the date of the
Executive's termination.
(c) A lump-sum cash payment equal to the Prorated Portion
of the greater of: (i) the Executive's target annual
incentive compensation award established for the fiscal
year during which the Executive's award termination
occurs, or (ii) the Executive's earned annual
incentive award for the fiscal year prior to the fiscal
year in which the earlier of the Change in Control or
the Qualifying Termination occurs (whether or not
deferred).
(d) A lump-sum cash payment equal to three (3) times the
greater of: (i) the Executive's highest annual
incentive compensation earned over the three (3) fiscal
years ending prior to the earlier of the Change in
Control or the Qualifying Termination (whether or not
deferred); or (ii) the Executive's target incentive
compensation established for the fiscal year in which
the Executive's date of termination occurs.
(e) To the extent the Executive is eligible, was eligible
prior or after the Change in Control (or, if earlier,
the Qualifying Termination) or if the Executive would
be eligible with credit for an additional three (3)
years of age and service credit, coverage under all
applicable retiree health and other retiree welfare
plans for the Executive and the Executive's eligible
dependents (including an adjustment to the extent
necessary to put the Executive on the same after tax
basis as if the Executive had been eligible for such
coverage).
(f) To the extent eligible prior or after the Change in
Control (or, if earlier, the Qualifying Termination),
continued participation, (coordinated with (e) above to
the extent duplicative), at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans, until three (3)
years after the date of termination, provided, however,
that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
similar or improved benefit under such plan shall
immediately cease. To the extent such coverage cannot
be provided under the Company's welfare benefit plans
without jeopardizing the tax status of such plans, for
underwriting reasons or because of the tax impact on
the Executive, the Company shall pay the Executive an
amount such that the Executive can purchase such
benefits separately at no greater after tax cost to him
than he would have had if the benefits were provided to
him as an employee.
(g) A lump-sum cash payment of the actuarial present value
equivalent (as determined in accordance with the most
favorable (to the Executive) overall actuarial
assumptions and subsidies in any of the Company's tax-
qualified or nonqualified type defined benefit pension
plans in which the Executive then participates) of the
accrued benefits accrued by the Executive as of the
date of termination under the terms of any nonqualified
defined benefit type retirement plan, including but not
limited to, the Amended and Restated Supplemental
Executive Retirement Plan for Textron Inc. Key
Executives and the Supplemental Benefits Plan and
assuming the benefit was fully vested without regard to
any minimum age or service requirements. For this
purpose, such benefits shall be calculated under the
assumption that the Executive's employment continued
following the date of termination for three (3) full
years (i.e., three (3) additional years of age
(including, but not limited to, for purposes of
determining the actuarial present value), compensation
and service credits shall be added).
(h) Three (3) times the amount of the maximum Company
contribution or match to any defined contribution type
plan in which the Executive participates.
(i) A lump-sum cash payment of the product of (i) the
Interest Factor (as determined in the next sentence)
multiplied by (ii) the Executive's entire account
balance under the Deferred Income Plan (or any
replacement therefor), plus an additional amount equal
to three (3) times the match which the Company made for
the Executive to such plan for the fiscal year ending
immediately prior to the earlier of the Change in
Control or the Qualifying Termination. The "Interest
Factor" shall be equal to one (1) plus three (3) times
the rate of earnings of the Executive's account under
such plan for the fiscal year ending immediately prior
to his termination.
(j) Immediate full vesting of any outstanding stock
options, performance share units and other equity
awards (and lapse of any forfeiture provisions) to the
extent permitted under the plan or grant, or if full
vesting is not permitted with regard to stock options,
a cash payment equal to the difference between the fair
market value of the shares covered by the unvested
options and the exercise price of such unvested options
on such unvested options on the date of termination
(or, if later, the date of the Change in Control).
(k) Outplacement services at a level commensurate with the
Executive's position, including use of an executive
office and secretary, for a period of one (1) year
commencing on the date of termination but in no event
extending beyond the date on which the Executive
commences other full time employment.
(l) Continuation of participation for three (3) additional
years in the Company's programs with regard to tax
preparation assistance and financial planning
assistance, club dues and automobile (but based on the
automobile then being used and no new one), in
accordance with the Company's programs in effect at the
time of the Change in Control.
For purposes of this Section 8, a Qualifying Termination
shall mean any termination of the Executive's employment (i) by
the Company without Cause, or (ii) by the Executive for Good
Reason.
8.2 Definition of "Change in Control." A Change in Control
of the Company shall be deemed to have occurred as of the first
day any one or more of the following conditions shall have been
satisfied:
(a) Any "person" or "group" (within the meaning of Section
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than the
Company, any trustee or other fiduciary holding Company
common stock under an employee benefit plan of the
Company or a related company, or any corporation which
is owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as
their ownership of the Company's common stock, is or
becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than thirty percent
(30%) of the then outstanding voting stock;
(b) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board and any new director whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in office
who either were directors at the beginning of the two
year period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority of the Board;
(c) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger
or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or being converted into voting securities
of the surviving entity) more than fifty percent (50%)
of the combined voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation; or
(d) The approval of the stockholders of the Company of a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all of its assets.
8.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to payments and/or benefits which
would constitute "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, the provisions of Exhibit A will
apply.
9. Noncompetition, Confidentiality and Nondisparagement
9.1 Agreement Not to Compete.
(a) The Executive agrees that for a period of two (2) years
after the termination of the Executive's employment,
the Executive will not engage in Competition with the
Company with the Listed Companies, provided that after
the Executive's termination of employment the Listed
Companies shall be limited to those effectively listed
at the time of his termination and still on such list
at the time of any alleged activity of the Executive,
including, but not limited to, (i) soliciting
customers, business or orders for, or selling any
products and services in, Competition with the Company
for such Listed Companies or (ii) diverting, enticing,
or otherwise taking away customers, business or orders
of the Company, or attempting to do so, in either case
in Competition with the Company for such Listed
Companies.
(b) The Executive agrees that if, while he is receiving
severance pay from the Company pursuant to Section
6.3(b), the Executive: (i) violates (a) above, or (ii)
otherwise engages in Competition in the Restricted
Territory, whether or not with the Listed Companies,
Section 9.6(b) hereof shall apply.
(c) The Executive agrees that the restrictions contained in
this Section 9 are necessary for the protection of the
business and goodwill of the Company because of the
trade secrets within the Executive's knowledge and are
considered by the Executive to be reasonable for such
purpose.
9.2 Definitions.
(a) "Competition" shall mean engaging in, as an employee,
director, partner, principal, shareholder, consultant,
advisor, independent contractor or similar capacity,
with (a) the Listed Companies or (b) in any business,
activity or conduct which directly competes with the
business of the Company, provided that, with regard to
the period after termination of the Executive's
employment, Section 9.1(b)(ii) shall only apply to
business lines in which the Company is engaged both at
the time of termination of employment and at the time
of the determination and which during the last fiscal
year ending prior to the date of such termination repre
sented at least five percent (5%) of the Company's
revenues (the "Prohibited Lines"). Notwithstanding
anything else in this Section 9, Competition shall not
include: (A) (i) holding five percent (5%) or less of
an interest in the equity or debt of any publicly
traded company, (ii) engaging in any activity with the
prior written approval of the Chief Executive Officer
or the O&C Committee, (iii) the practice of law in a
law firm that represents entities in Competition with
the Company, provided that the Executive does not
personally represent such entities, or (iv) the
employment by, or provision of services to, an
investment banking firm or consulting firm that
provides services to entities that are in Competition
with the Company provided that the Executive does not
personally represent or provide services to such
entities that are Listed Companies or otherwise with
regard to businesses in Competition with the Prohibited
Lines, or (B) with regard to Section 9.1(b)(ii), (i)
being employed by, or consulting for, a non-Competitive
division or business unit of an entity which is in
Competition with the Company (and participating in such
entity's employee equity plans), (ii) being employed
by, or consulting for, an entity which had annual
revenues in the last fiscal year prior to the Executive
being employed by, or consulting for, the entity
generated through business lines in Competition with
the Prohibited Lines of the Company that do not exceed
five percent (5%) of such entity's total annual
revenues, provided that revenues within the Executive's
area of responsibility or authority are not more than
ten percent (10%) composed of the revenues from the
businesses in Competition with the Prohibited Lines, or
(iii) any activities conducted after a Change in
Control of the Company.
(b) The Restricted Territory shall mean any geographic area
in which the Company with regard to the Prohibited
Lines did more than nominal business.
(c) Listed Companies shall mean those entities which are
within the "peer group" established by the Company for
the performance graphs in its proxy statement pursuant
to Item 402(l) of Regulation S-K under the Exchange Act
and which are in a list of no more than five (5)
entities established by the Company from time to time
and available from the Chief Human Resources Officer,
provided that the addition of any entity to the list
shall not be effective until sixty (60) days after it
is so listed.
(d) For purposes of this Section 9, "Company" shall mean
the Company and its subsidiaries and affiliates.
9.3 Agreement Not to Engage in Certain Solicitation. The
Executive agrees that the Executive will not, during the
Executive's employment with the Company or during the two (2)
year period thereafter, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any non-clerical
employee(s), sales representative(s), agent(s), or consultant(s)
of the Company to terminate such person's employment,
representation or other association with the Company for the
purpose of affiliating with any entity with which the Executive
is associated ("Solicitation").
9.4 Confidential Information.
(a) The Executive specifically acknowledges that any trade
secrets or confidential business and technical
information of the Company or its vendors, suppliers or
customers, whether reduced to writing, maintained on
any form of electronic media, or maintained in mind or
memory and whether compiled by the Executive or the
Company (collectively, "Confidential Information"),
derives independent economic value from not being
readily known to or ascertainable by proper means by
others; that reasonable efforts have been made by the
Company to maintain the secrecy of such information;
that such information is the sole property of the
Company or its vendors, suppliers, or customers and
that any retention, use or disclosure of such
information by the Executive during the Employment Term
(except in the course of performing duties and
obligations of employment with the Company) or any time
after termination thereof, shall constitute
misappropriation of the trade secrets of the Company or
its vendors, suppliers, or customers, provided that
Confidential Information shall not include: (i)
information that is at the time of disclosure public
knowledge or generally known within the industry, (ii)
information deemed in good faith by the Executive,
while employed by the Company, desirable to disclose in
the course of performing the Executive's duties, (iii)
information the disclosure of which the Executive in
good faith deems necessary in defense of the
Executive's rights provided such disclosure by the
Executive is limited to only disclose as necessary for
such purpose, or (iv) information disclosed by the
Executive to comply with a court, or other lawful
compulsory, order compelling him to do so, provided the
Executive gives the Company prompt notice of the
receipt of such order and the disclosure by the
Executive is limited to only disclosure necessary for
such purpose.
(b) The Executive acknowledges that the Company from time
to time may have agreements with other persons or with
the United States Government, or agencies thereof, that
impose obligations or restrictions on the Company
regarding inventions made during the course of work
under such agreements or regarding the confidential
nature of such work. If the Executive's duties
hereunder will require disclosures to be made to him
subject to such obligations and restrictions, the
Executive agrees to be bound by them.
9.5 Scope of Restrictions. If, at the time of enforcement
of this Section 9, a court holds that the restrictions stated
herein are unreasonable under circumstances then existing, the
parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area and that the
court shall be allowed to revise the restrictions contained
herein to cover the maximum period, scope and area permitted by
law.
9.6 Remedies.
(a) In the event of a material breach or threatened
material breach of Section 9.1(a), Section 9.3, Section
9.4 or Section 9.10, the Company, in addition to its
other remedies at law or in equity, shall be entitled
to injunctive or other equitable relief in order to
enforce or prevent any violations of the provisions of
this Section 9. Except as specifically provided with
regard to Listed Companies, the Company agrees that it
will not assert to enjoin or otherwise limit the
Executive's activities based on an argument of
inevitable disclosure of confidential information.
(b) In the event Section 9.1(b) applies, the Company may
immediately cease payment to the Executive of all
future amounts due under Sections 6.3(a) or (b) as well
as otherwise specifically provided in any other plan,
grant or program.
(c) Upon written request of the Executive, the Company
shall within thirty (30) days notify the Executive in
writing whether or not in good faith it believes any
proposed activities would be in Competition and, if it
so determines or does not reply within thirty (30)
days, it shall be deemed to waive any right to treat
such activities as Competition unless the facts are
otherwise than as presented by the Executive or there
is a change thereafter in such activities. The
Executive shall promptly provide the Company with such
information as it may reasonably request to evaluate
whether or not such activities are in Competition.
9.7 Uniformity. In no event shall any definitions of
Competition or Solicitation (or a similar provision) as it
applies to the Executive with regard to any plan of program or
grant of the Company be interpreted to be any broader than as set
forth in this Section 9.
9.8 Delivery of Documents. Upon termination of this
Agreement or at any other time upon request by the Company, the
Executive shall promptly deliver to the Company all records,
files, memoranda, notes, designs, data, reports, price lists,
customer lists, drawings, plans, computer programs, software,
software documentation, sketches, laboratory and research
notebooks and other documents (and all copies or reproductions of
such materials in his possession or control) belonging to the
Company. Notwithstanding the foregoing, the Executive may retain
his rolodex and similar phone directories (collectively, the
"Rolodex") to the extent the Rolodex does not contain information
other than name, address, telephone number and similar
information, provided that, at the request of the Company, the
Executive shall provide the Company with a copy of the Rolodex.
9.9 Nondisparagement.
(a) During the Employment Term and thereafter, the
Executive shall not with willful intent to damage
economically or as to reputation or vindictively
disparage the Company, its subsidiaries or their
respective past or present officers, directors or
employees (the "Protected Group"), provided that the
foregoing shall not apply to (i) actions or statements
taken or made by the Executive while employed by the
Company in good faith as fulfilling the Executive's
duties with the Company or otherwise at the request of
the Company, (ii) truthful statements made in
compliance with legal process or governmental inquiry,
(iii) as the Executive in good faith deems necessary to
rebut any untrue or misleading public statements made
about him or any other member of the Protected Group,
(iv) statements made in good faith by the Executive to
rebut untrue or misleading statements made about him or
any other member of the Protected Group by any member
of the Protected Group, and (v) normal commercial
puffery in a competitive business situation. No member
of the Protected Group shall be a third party
beneficiary of this Section 9.9(a).
(b) During the Employment Term and thereafter, neither the
Company officially nor any then member of the Executive
Leadership Team (or the equivalent) of the Company, as
such term is currently used within the Company, shall
with willful intent to damage the Executive
economically or as to reputation or otherwise
vindictively disparage the Executive, provided the
foregoing shall not apply to (i) actions or statements
taken or made in good faith within the Company in
fulfilling duties with the Company, (ii) truthful
statements made in compliance with legal process,
governmental inquiry or as required by legal filing or
disclosure requirements, (iii) as in good faith deemed
necessary to rebut any untrue or misleading statements
by the Executive as to any member of the Protected
Group, or (iv) normal commercial puffery in a
competitive business situation.
(c) In the event of a material breach or threatened
material breach of clauses (a) or (b) above, the
Company or the Executive, as the case may be, in
addition to its or the Executive's other remedies at
law or in equity, shall be entitled to injunctive or
other equitable relief in order to enforce or prevent
any violations of this Section 9.9.
9.10 Pooling of Interests. If the Company is involved in
any proposed business combination that is contemplated to be
accounted for as a pooling of interests, the Executive agrees to
cooperate with the reasonable requests of the Company with regard
to the exercise of stock options, the sale of Company stock or
other matters that could affect the ability of the combination to
be accounted for as a pooling of interests.
10 Liability Insurance
The Company shall cover the Executive under directors and
officers liability insurance both during and, while potential
liability exists, after the Employment Term in the same amount
and to the same extent, if any, as the Company covers its other
officers and directors.
11 Assignment
11.1 Assignment by the Company. This Agreement may and
shall be assigned or transferred to, and shall be binding upon
and shall inure to the benefit of, any successor of the Company,
and any such successor shall be deemed substituted for all
purposes of the "Company" under the terms of this Agreement. As
used in this Agreement, the term "successor" shall mean any
person, firm, corporation or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or
substantially all of the assets of the Company. Notwithstanding
such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
11.2 Assignment by the Executive. This Agreement is not
assignable by the Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
12 Legal Remedies
12.1 Payment of Legal Fees. The Company shall pay the
Executive's reasonable legal fees and costs associated with
entering into this Agreement. To the fullest extent permitted by
law, the Company shall promptly pay upon submission of statements
all legal and other professional fees, costs of litigation,
prejudgment interest, and other expenses incurred in connection
with any dispute arising hereunder; provided, however, the
Company shall be reimbursed by the Executive for (i) the fees and
expenses advanced in the event the Executive's claim is in a
material manner in bad faith or frivolous and the arbitrator or
court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate, or (ii) to the extent that the
arbitrator or court, as appropriate, determines that such legal
and other professional fees are clearly and demonstrably
unreasonable.
12.2 Arbitration. All disputes and controversies arising
under or in connection with this Agreement, other than the
seeking of injunctive or other equitable relief pursuant to
Section 9 hereof, shall be settled by arbitration conducted
before a panel of three (3) arbitrators sitting in New York City,
New York, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of commercial
disputes of the American Arbitration Association then in effect.
The determination of the majority of the arbitrators shall be
final and binding on the parties. Judgment may be entered on the
award of the arbitrator in any court having proper jurisdiction.
All expenses of such arbitration, including the fees and expenses
of the counsel of the Executive, shall be borne by the Company
and the Executive shall be entitled to reimbursement of his
expenses as provided in Section 12.1 hereof.
12.3 Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if delivered personally, sent by telecopier,
sent by an overnight service or sent by registered or certified
mail. Notice to the Executive not delivered personally (or by
telecopy where the Executive is known to be) shall be sent to the
last address on the books of the Company, and notice to the
Company not delivered personally (or by telecopy to the known
personal telecopy of the person it is being sent to) shall be
sent to it at its principal office. All notices to the Company
shall be delivered to the Chief Executive Officer with a copy to
the [senior legal officer]. Delivery shall be deemed to occur on
the earlier of actual receipt or tender and rejection by the
intended recipient.
[12.4 Continued Payments. In the event after a Change
in Control either party files for arbitration to resolve any
dispute as to whether a termination is for Cause or Good Reason,
until such dispute is determined by the arbitrators, the
Executive shall continue to be treated economically and benefit
wise in the manner asserted by him in the arbitration effective
as of the date of the filing of the arbitration, subject to the
Executive promptly refunding any amounts paid to him, paying the
cost of any benefits provided to him and paying to the Company
the profits in any stock option or other equity awards exercised
or otherwise realized by him during the pendency of the
arbitration which he is ultimately held not to be entitled to;
provided the arbitrators may terminate such payments and benefits
in the event that they determine at any point that the Executive
is intentionally delaying conclusion of the arbitration.]
13 Miscellaneous
13.1 Entire Agreement. This Agreement, except to the extent
specifically provided otherwise herein, supersedes any prior
agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect to the subject matter
hereof. To the extent any severance plan or program of the
Company that would apply to the Executive is more generous to the
Executive than the provisions hereof, the Executive shall be
entitled to any additional payments or benefits which are not
duplicative, but shall otherwise not be eligible for such plan or
program.
13.2 Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended, nor
any provision hereof waived, except by mutual agreement of the
parties in a written instrument executed by the parties hereto or
their legal representatives.
13.3 Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.4 Counterparts. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed to be an
original, but all of which together will constitute one and the
same Agreement.
13.5 Tax Withholding. The Company may withhold from any
benefits payable under this Agreement all federal, state, city,
or other taxes as may be required pursuant to any law or
governmental regulation or ruling.
13.6 Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
13.7 Representation. The Executive represents that the
Executive's employment by the Company and the performance by the
Executive of his obligations under this Agreement do not, and
shall not, breach any agreement that obligates him to keep in
confidence any trade secrets or confidential or proprietary
information of his or of any other party, to write or consult to
any other party or to refrain from competing, directly or
indirectly, with the business of any other party. The Executive
shall not disclose to the Company, and the Company shall not
request that the Executive disclose, any trade secrets or
confidential or proprietary information of any other party.
14 Governing Law
The provisions of this Agreement shall be construed and
enforced in accordance with the laws of the state of Delaware,
without regard to any otherwise applicable principles of
conflicts of laws.
IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement, as of the day and year first above
written.
/s/Herbert L. Henkel
Herbert L. Henkel
TEXTRON INC.
By:/s/John D. Butler
Name: John D. Butler
Title: Executive Vice President
Exhibit A
Parachute Gross Up
(a) In the event that the Executive shall become
entitled to payments and/or benefits provided by this Agreement
or any other amounts in the "nature of compensation" (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person) as a result of such
change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code
(and any similar tax that may hereafter be imposed by any taxing
authority) the Company shall pay to the Executive at the time
specified in subsection (d) below an additional amount (the
"Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and for local income or
payroll tax upon the Gross-up Payment provided for by this
paragraph (a), but before deduction for any U.S. federal, state,
and local income or payroll tax on the Company Payments, shall be
equal to the Company Payments.
(b) For purposes of determining whether any of the
Company Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except
to the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax
counsel selected by such accountants (the "Accountants") such
Total Payments (in whole or in part) either do not constitute
"parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, the Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-
up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of
the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment
thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided
for in subsection (c) above shall be paid not later than the
thirtieth (30th) day following an event occurring which subjects
the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good
faith by the Accountant, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code), subject to further payments pursuant to subsection (c)
hereof, as soon as the amount thereof can reasonably be deter
mined, but in no event later than the ninetieth day after the
occurrence of the event subjecting the Executive to the Excise
Tax. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
(e) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) with regard to the
Excise Tax, the Executive shall permit the Company to control
issues related to the Excise Tax (at its expense), provided that
such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In
the event the issues are interrelated, the Executive and the
Company shall in good faith cooperate so as not to jeopardize
resolution of either issue, but if the parties cannot agree the
Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive
shall permit the representative of the Company to accompany the
Executive, and the Executive and the Executive's representative
shall cooperate with the Company and its representative.
(f) The Company shall be responsible for all charges
of the Accountant.
(g) The Company and the Executive shall promptly
deliver to each other copies of any written communications, and
summaries of any verbal communications, with any taxing authority
regarding the Excise Tax covered by this Exhibit A.
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is entered into as of this 23rd
day of July, 1998 by and between Textron Inc. (the "Company"), a
Delaware corporation having its principal office at 40
Westminster Street, Providence, Rhode Island 02903 and Mary L.
Howell residing at 4605 Rock Spring Road, Arlington, Virginia
22207 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is presently employed by the Company;
WHEREAS, the Company desires to continue to employ the
Executive and the Executive is willing to continue to be employed
by the Company; and
WHEREAS, the Company and the Executive desire to set forth
the terms and conditions of such continued employment.
NOW THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration, the
adequacy and receipt of which is acknowledged, the parties hereto
agree as follows:
1. Term of Employment
The Company hereby agrees to continue to employ the
Executive and the Executive hereby accepts continued employment,
in accordance with the terms and conditions set forth herein, for
a term (the "Employment Term") commencing on the date hereof (the
"Effective Date") and terminating, unless otherwise terminated
earlier in accordance with Section 5 hereof, on the third
anniversary of the Effective Date (the "Original Employment
Term"), provided that the Employment Term shall be automatically
extended, subject to earlier termination as provided in Section 5
hereof, for successive additional one (1) year periods (the
"Additional Terms"), unless, at least ninety (90) days prior to
the end of the Original Employment Term or the then Additional
Term, the Company or the Executive has notified the other in
writing that the Employment Term shall terminate at the end of
the then current term.
2. Position and Responsibilities
During the Employment Term, the Executive shall serve
as the Executive Vice President - Government and International of
the Company or in such higher capacity as agreed by the Company
and the Executive. The Executive shall report exclusively to the
Chief Executive Officer and the Board of Directors of the Company
(the "Board"). The Executive shall, to the extent appointed or
elected, serve on the Board as a director and as a member of any
committee of the Board, in each case, without additional
compensation. The Executive shall, to the extent appointed or
elected, serve as a director or as a member of any committee of
the board (or the equivalent bodies in a non-corporate subsidiary
or affiliate) of any of the Company's subsidiaries or affiliates
and as an officer or employee (in a capacity commensurate with
her position with the Company) of any such subsidiaries or
affiliates, in all cases, without additional compensation or
benefits and any compensation paid to the Executive, or benefits
provided to the Executive, in such capacities shall be a credit
with regard to the amounts due hereunder from the Company. The
Executive shall have duties, authorities and responsibilities
generally commensurate with the duties, authorities and
responsibilities of persons in similar capacities in similarly
sized companies subject to the By-laws of the Company and the
organizational structure of the Company. The Executive shall
devote substantially all of her business time, attention and
energies to the performance of her duties hereunder, provided the
foregoing will not prevent the Executive from participating in
charitable, community or industry affairs, from managing her and
her family's personal passive investments, and (with the consent
of the Chief Executive Officer or the Organization and
Compensation Committee (or its successor) of the Board (the "O&C
Committee"), which consent will not be unreasonably withheld,
conditioned or delayed) serving on the board of directors of
other companies, provided that these activities do not materially
interfere with the performance of her duties hereunder or create
a potential business conflict or the appearance thereof. The
Company has consented to the Executive's services on the boards
of directors, if any, on which the Executive currently serves,
which boards the Executive has disclosed in writing to the O&C
Committee. The Executive may retain any compensation or benefits
received as a result of consented to service as a director of
entities not related to the Company.
3. Compensation and Benefits
During the Employment Term, the Company shall pay and
provide the Executive the following:
3.1 Base Salary. The Company shall pay the Executive
a base salary (the "Base Salary") in an amount which shall be
established from time to time by the O&C Committee (or as
otherwise designated by the Board), provided, however, that such
base salary rate shall not be less than her current rate of base
salary. Base Salary shall be paid to the Executive in accordance
with the Company's normal payroll practices for executives. Base
Salary shall be reviewed at least annually to ascertain whether,
in the judgment of the reviewing committee, such Base Salary
should be increased. If so increased, Base Salary shall not be
thereafter decreased and shall thereafter, as increased, be the
Base Salary hereunder.
3.2 Annual Bonus. The Company shall provide the
Executive with the opportunity to earn an annual cash bonus under
the Company's current annual incentive compensation plan for
executives or a replacement plan therefor at a level commensurate
with her position, provided that the minimum annual target award
payable upon the achievement of reasonably attainable objective
performance goals shall be at least fifty percent (50%) of Base
Salary.
3.3 Long-Term Incentives. The Company shall provide
the Executive the opportunity to earn long-term incentive awards
under the current equity and cash based plans and programs or
replacements therefor at a level commensurate with the current
aggregate opportunity being provided to the Executive.
3.4 Employee Benefits. The Executive shall, to the
extent eligible, be entitled to participate at a level
commensurate with her position in all employee benefit welfare
and retirement plans and programs, as well as equity plans,
generally provided by the Company to its senior executives in
accordance with the terms thereof as in effect from time to time.
Such plans and programs currently include, without limitation,
the Amended and Restated Supplemental Retirement Plan for Textron
Inc. Key Executives (the "SERP"), the 1994 Long-Term Incentive
Plan, the Key Executive Program (including the Deferred Income
Plan, the Supplemental Benefits Plan (the "SBP") and the Survivor
Benefit Plan), group term life insurance plan, comprehensive
health, major medical, vision and dental insurance plans and
short-term and long-term disability plans.
3.5 Vacation. The Executive shall be entitled to paid
vacation in accordance with the standard written policies of the
Company with regard to vacations of executives, but in no event
less than four (4) weeks per calendar year.
3.6 Perquisites. The Company shall provide to the
Executive, at the Company's cost, all perquisites to which other
senior executives of the Company are generally entitled to
receive and such other perquisites which are suitable to the
character of the Executive's position with the Company and
adequate for the performance of her duties hereunder but not less
than the level being provided on the date hereof except as
otherwise required because of changes in law. To the extent
legally permissible, the Company shall not treat such amounts as
income to the Executive.
3.7 Right to Change Plans. The Company shall not be
obligated by reason of this Section 3 to institute, maintain, or
refrain from changing, amending, or discontinuing any benefit
plan, program, or perquisite, so long as such changes are
similarly applicable to executive employees generally and
provided that the benefits or additional credit specifically as
set forth in Section 3.8 below shall not be diminished.
3.8 Existing Awards. The Company acknowledges that
the Executive currently is entitled to, among other things, the
special grants set forth in Exhibit A hereto, as modified on
Exhibit A.
4. Expenses
Upon submission of appropriate documentation, in
accordance with its policies in effect from time to time, the
Company shall pay, or reimburse, the Executive for all ordinary
and necessary expenses, in a reasonable amount, which the
Executive incurs in performing her duties under this Agreement
including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, and civic associations and societies in which the
Executive participates in accordance with the Company's policies
in effect from time to time.
5. Termination of Employment
The Executive's employment with the Company (including but
not limited to any subsidiary or affiliate or the Company) and
the Employment Term shall terminate upon the occurrence of the
first of the following events:
(a) Automatically on the date of the Executive's death.
(b) Upon thirty (30) days written notice by the Company to
the Executive of a termination due to Disability,
provided such notice is delivered during the period of
Disability. The term "Disability" shall mean, for
purposes of this Agreement, the inability of the
Executive, due to injury, illness, disease or bodily or
mental infirmity, to engage in the performance of her
material duties of employment with the Company as
contemplated by Section 2 herein for a period of more
than one hundred eighty (180) consecutive days or for a
period that is reasonably expected to exist for a
period of more than one hundred eighty (180)
consecutive days, provided that interim returns to work
of less than ten (10) consecutive business days in
duration shall not be deemed to interfere with a
determination of consecutive absent days if the reason
for absence before and after the interim return are the
same. The existence or non-existence of a Disability
shall be determined by a physician agreed upon in good
faith by the Executive (or her representatives) and the
Company. It is expressly understood that the
Disability of the Executive for a period of one hundred
eighty (180) consecutive days or less shall not
constitute a failure by her to perform her duties
hereunder and shall not be deemed a breach or default
and the Executive shall receive full compensation for
any such period of Disability or for any other
temporary illness or incapacity during the term of this
Agreement.
(c) Immediately upon written notice by the Company to the
Executive of a termination due to her retirement at or
after the Executive's attainment of age sixty-five
(65).
(d) Immediately upon written notice by the Company to the
Executive of a termination for Cause, provided such
notice is given within ninety (90) days after the
discovery by the Board or the Chief Executive Officer
of the Cause event and has been approved by the O&C
Committee at a meeting at which the Executive and her
counsel had the right to appear and address such
meeting after receiving at least five (5) business days
written notice of the meeting and reasonable detail of
the facts and circumstances claimed to provide a basis
for such termination. The term "Cause" shall mean, for
purposes of this Agreement: (i) an act or acts of
willful misrepresentation, fraud or willful dishonesty
(other than good faith expense account disputes) by the
Executive which in any case is intended to result in
her or another person or entity's substantial personal
enrichment at the expense of the Company; (ii) any
willful misconduct by the Executive with regard to the
Company, its business, assets or employees that has, or
was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iii) any
material, willful and knowing violation by the
Executive of (x) the Company's Business Conduct
Guidelines, or (y) any of her fiduciary duties to the
Company which in either case has, or was intended to
have, a material adverse impact (economic or otherwise)
on the Company; (iv) the willful or reckless behavior
of the Executive with regard to a matter of a material
nature which has a material adverse impact (economic or
otherwise) on the Company; (v) the Executive's willful
failure to attempt to perform her duties under Section
2 hereof or her willful failure to attempt to follow
the legal written direction of the Board, which in
either case is not remedied within ten (10) days after
receipt by the Executive of a written notice from the
Company specifying the details thereof; (vi) the
Executive's conviction of, or pleading nolo contendere
or guilty to, a felony (other than (x) a traffic
infraction or (y) vicarious liability solely as a
result of her position provided the Executive did not
have actual knowledge of the actions or inactions
creating the violation of the law or the Executive
relied in good faith on the advice of counsel with
regard to the legality of such action or inaction (or
the advice of other specifically qualified
professionals as to the appropriate or proper action or
inaction to take with regard to matters which are not
matters of legal interpretation)); or (vii) any other
material breach by the Executive of this Agreement that
is not cured by the Executive within twenty (20) days
after receipt by the Executive of a written notice from
the Company of such breach specifying the details
thereof. No action or inaction should be deemed
willful if not demonstrably willful and if taken or not
taken by the Executive in good faith as not being
adverse to the best interests of the Company.
Reference in this paragraph (d) to the Company shall
also include direct and indirect subsidiaries of the
Company, and materiality and material adverse impact
shall be measured based on the action or inaction and
the impact upon, and not the size of, the Company taken
as a whole, provided that after a Change in Control,
the size of the Company, taken as a whole, shall be a
relevant factor in determining materiality and material
adverse impact.
(e) Upon written notice by the Company to the Executive of
an involuntary termination without Cause. A notice by
the Company of non-renewal of the Employment Term
pursuant to Section 1 above shall be deemed an
involuntary termination of the Executive by the Company
without Cause as of the end of the Employment Term, but
the Executive may terminate at any time after the
receipt of such notice and shall be treated as if she
was terminated without Cause as of such date.
(f) Upon twenty (20) days written notice by the Executive
to the Company of a termination for Good Reason (which
notice sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such
termination) unless the Good Reason event is cured
within such twenty (20) day period. The term "Good
Reason" shall mean, for purposes of this Agreement,
without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the
assignment to the Executive of duties materially
inconsistent with the Executive's then authorities,
duties, responsibilities, and status (including
offices, titles, and reporting requirements), or any
reduction in the Executive's then title, position,
reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated)
in her then status, authorities, duties, or
responsibilities or, if then a director of the Company,
failure to be nominated or reelected as a director of
the Company or removal as such; (ii) relocation of the
Executive from the principal office of the Company
(excluding reasonable travel on the Company's business
to an extent substantially consistent with the
Executive's business obligations) or relocation of the
principal office of the Company to a location which is
at least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at
the time of the relocation is not located at the
principal office, such relocation provision shall apply
based on her then location; (iii) a reduction by the
Company in the Executive's Base Salary; (iv) a
reduction in the Executive's aggregate level of
participation in any of the Company's short and/or
long-term incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or
arrangements in which the Executive participated as of
the Effective Date, or, after a Change in Control,
participated immediately prior to the Change in
Control; (v) the failure of the Company to obtain and
deliver to the Executive a satisfactory written
agreement from any successor to the Company to assume
and agree to perform this Agreement; or (vi) any other
material breach by the Company of this Agreement.
(g) Upon written notice by the Executive to the Company of
the Executive's voluntary termination of employment
without Good Reason (which the Company may, in its sole
discretion, make effective earlier than any notice
date). A notice by the Executive of non-renewal of the
Employment Term pursuant to Section 1 above shall be
deemed a voluntary termination by the Executive without
Good Reason as of the end of the Employment Term.
6. Consequences of a Termination of Employment
6.1 Termination Due to Death or Retirement. If the
Employment Term ends on account of the Executive's termination
due to death pursuant to Section 5(a) above or retirement
pursuant to Section 5(c) above, the Executive (or the Executive's
surviving spouse, or other beneficiary as so designated by the
Executive during her lifetime, or to the Executive's estate, as
appropriate) shall be entitled, in lieu of any other payments or
benefits, to (i) payment promptly of any unpaid Base Salary,
unpaid annual incentive compensation (for the preceding fiscal
year) and any accrued vacation, (ii) reimbursement for any
unreimbursed business expenses incurred prior to the date of
termination, and (iii) any amounts, benefits or fringes due under
any equity, benefit or fringe plan, grant or program in
accordance with the terms of said plan, grant or program but
without duplication (collectively, the "Accrued Obligations").
6.2 Termination Due To Disability. If the Employment Term
ends as a result of Disability pursuant to Section 5(b) above,
the Executive shall be entitled, in lieu of any other payments or
benefits, subject to Section 7(b) hereof, to any Accrued
Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to three hundred percent (300%) of the
Executive's target annual incentive compensation award
established for the fiscal year during which the
Executive's termination occurs (the "Termination Year
Target Bonus").
(b) Continued monthly payment for two and one half (2 1/2)
years of an amount equal to the Executive's monthly
Base Salary rate reduced by any disability benefits
received by the Executive under the Company's long term
disability plan for the corresponding period.
(c) Payments and benefits as set forth in Section 6.3(c)-
(j) hereof.
(d) The Executive shall be deemed to have satisfied the
definition of "total disability" under the 1994 Long-
Term Incentive Plan or the equivalent definition under
any successor plan thereto.
(e) As provided in Exhibit A hereto.
6.3 Involuntary Termination by the Company Without Cause or
Termination by the Executive for Good Reason. If the Executive
is involuntarily terminated by the Company without Cause in
accordance with Section 5(e) above or the Executive terminates
her employment for Good Reason in accordance with Section 5(f)
above, the Executive shall be entitled, in lieu of any other
payments or benefits, subject to Section 7(b) hereof, to any
Accrued Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to the Executive's Termination Year Target Bonus
multiplied by a fraction, the numerator of which is the
number of days during the fiscal year of the
Executive's termination that the Executive was employed
by the Company and the denominator is three hundred
sixty-five (365), provided that in no event shall such
payment exceed fifty percent (50%) of the Termination
Year Target Bonus.
(b) Continued payment off payroll for two and one-half (2
1/2) years (in approximately equal monthly
installments) of an amount equal to two and one-half (2
1/2) times the sum of: (i) the Executive's Base
Salary, and (ii) the greater of: (x) the Termination
Year Target Bonus, or (y) the Executive's highest
annual incentive compensation award earned during the
last three (3) fiscal years ending prior to the fiscal
year of termination (whether or not deferred).
(c) To the extent eligible at such time or, if the
Executive would be eligible with credit for an
additional two and one half (2 1/2) years of age and
service credit, coverage under all applicable retiree
health and other retiree welfare plans for the
Executive and her dependents (including, if she is only
eligible because of the extra age and service credit,
an adjustment, to the extent necessary, to put the
Executive in the same after-tax position as if she had
been eligible for such coverage) and, if not eligible
for continued health coverage under the retiree health
plan, payment of the Executive's and Executive's
eligible dependents' COBRA continuation health coverage
premiums for the Company's health insurance plan that
generally applies to senior executives for the two and
one-half (2 1/2) year period following the date of
termination or, if earlier, until the Executive and
Executive's dependents cease to be eligible for such
coverage, provided that, if COBRA coverage cannot be
provided for the full period, any excess period shall
be covered under (d) below (and further provided that,
if such premiums are taxable to the Executive, an
adjustment such that the Executive has no after tax
cost for the providing of such COBRA coverage).
(d) To the extent eligible on the date of termination,
continued participation, at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans (other than medical
plans covered under (c) above), until two and one-half
(2 1/2) years after the date of termination; provided,
however, that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
benefits under such plan shall immediately cease. To
the extent such coverage cannot be provided under the
Company's welfare benefit plans without jeopardizing
the tax status of such plans, for underwriting reasons
or because of the tax impact on the Executive, the
Company shall pay the Executive an amount such that the
Executive can purchase such benefits separately at no
greater after tax cost to the Executive than the
Executive would have had if the benefits were provided
to the Executive as an employee.
(e) Two and one-half (2 1/2) additional years of service
and compensation credit (at the Executive's then
compensation level) for benefit purposes under any
defined benefit type retirement plan, including but not
limited to the SERP and the SBP if then in effect, and,
if the Executive is not eligible to receive benefits
under any such plan on the date of termination, two and
one-half (2 1/2) additional years of age for
determining eligibility to receive such benefits,
provided that benefits under any such plan will not
commence until the Executive actually attains the
required distribution age under the plan or the
Executive's spouse qualifies for death benefits under
such plan and further provided that with regard to any
plan qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") the
additional amounts may be provided on a nonqualified
plan basis.
(f) Payment promptly after termination of two and one-half
(2 1/2) times the amount of the maximum Company annual
contribution or match to any defined contribution type
plan in which the Executive participates.
(g) Immediate full vesting of any outstanding stock options
that would vest within two and one half (2 1/2) years
after such termination of employment as if the
Executive had continued employment for such two and one
half (2 1/2) year period, to the extent permitted under
the plan or grant, or if such vesting is not permitted,
a cash payment equal to the difference between the fair
market value of the shares covered by the unvested
options and the exercise price of such unvested options
(the "Spread") on the date of termination, and, in both
cases, to the extent such options are exercisable for
less than two and three quarters (2-3/4) years after
termination (or, if less, the remainder of the
respective terms), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
termination) future value of such options for the
lesser of two and three quarters (2-3/4) years or the
remainder of such terms (any such payments shall be
made promptly after such termination). The terms of
the Executive's outstanding options are deemed to be
modified to the extent required by this Section 6.3
(g).
(h) Payment when it would otherwise be paid in accordance
with the 1994 Long-Term Incentive Plan of any amount
due with regard to performance share units outstanding
on the date of termination to the extent permitted
under such plan, plus, outside of such plan, when it
would otherwise have been paid, an amount equal to the
amount the Executive would have received with regard to
any performance share units outstanding at the time of
termination that could not be so paid. For purposes of
calculating the foregoing amounts, all discretionary
performance targets relating to the Executive's
individual performance will be deemed to be fully
achieved and the actual level of achievement of all
financial performance targets will be determined as if
the Executive continued to be employed through the end
of the applicable measuring period.
(i) Immediate full vesting of the Executive's accounts
under the Deferred Income Plan, and to the extent not
permitted under such plan, a cash payment outside of
the plan equal to the value of the amount that would
have vested under the plan.
(j) Continuation of participation for two and one-half (2
1/2) additional years in the Company's programs with
regard to tax preparation assistance and financial
planning assistance, club dues and automobile (but
based on the automobile then being used and no new
one), in accordance with the Company's programs in
effect at the time of the termination.
(k) As provided in Exhibit A hereto.
6.4 Termination by the Company for Cause or Termination by
the Executive without Good Reason. If the Executive is
terminated by the Company for Cause or the Executive terminates
her employment without Good Reason, the Executive shall be
entitled to receive all Accrued Obligations.
7. No Mitigation/No Offset/Release
(a) In the event of any termination of employment
hereunder, the Executive shall be under no obligation
to seek other employment and there shall be no offset
against any amounts due the Executive under this
Agreement on account of any remuneration attributable
to any subsequent employment that the Executive may
obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or
other right which the Company may have against the
Executive or others, except as specifically set forth
in Section 9 hereof or upon obtaining by the Company of
a final unappealable judgement against the Executive.
(b) Any amounts payable and benefits or additional rights
provided pursuant to Section 6.2 (other than Section
6.2(e)), Section 6.3 (other than Section 6.3(k)) and
Section 8.1 (other than Section 8.1(m)) beyond Accrued
Obligations and amounts or rights due under law, and,
in the case of Section 6.3 and Section 8.1, beyond the
sum of any amounts due (without execution of a release)
under the Company severance program then in effect, or,
if greater, three (3) months Base Salary as severance,
shall only be payable if the Executive delivers to the
Company a release of all claims of the Executive (other
than those specifically payable or providable hereunder
on or upon the applicable type of termination and any
rights of indemnification under the Company's
organizational documents) with regard to the Company,
its subsidiaries and related entities and their
respective past or present officers, directors and
employees in such form as reasonably requested by the
Company.
(c) Upon any termination of employment, upon the request of
the Company, the Executive shall deliver to the Company
a resignation from all offices and directorships and
fiduciary positions of the Executive in which the
Executive is serving with, or at the request of, the
Company or its subsidiaries, affiliates or benefit
plans.
(d) The amounts and benefits provided under Sections 6 and
8 hereof are intended to be inclusive and not
duplicative of the amounts and benefits due under the
Company's employee benefit plans and programs to the
extent they are duplicative.
8. Change in Control
8.1 Employment Termination in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) during the period commencing one-hundred eighty (180) days
prior to the effective date of a Change in Control and
terminating on the second anniversary of the effective date of a
Change in Control (the "Change in Control Protection Period"),
then in lieu of the benefits provided to the Executive under
Section 6.3 of this Agreement, the Company shall pay the
Executive the following amounts within (except as otherwise
provided) thirty (30) business days of the Qualifying Termination
(or, if later, the effective date of the Change in Control; in
which case any amounts or benefits previously paid pursuant to
Section 6 shall be setoff against those under this Section 8) and
provide the following benefits:
(a) Any Accrued Obligations.
(b) A lump-sum cash payment equal to three (3) times the
highest rate of the Executive's Base Salary rate in
effect at any time up to and including the date of the
Executive's termination.
(c) A lump-sum cash payment equal to the Prorated Portion
(as determined in the next sentence) of the greater of:
(i) the Executive's Termination Year Target Bonus or
(ii) the Executive's earned annual incentive award for
the fiscal year prior to the fiscal year in which the
earlier of the Change in Control or the Qualifying
Termination occurs (whether or not deferred). The
"Prorated Portion" of the foregoing amount shall be
determined by multiplying such amount by a fraction,
the numerator of which is the number of days during the
fiscal year of termination that the Executive is
employed by the Company, and the denominator of which
is, three hundred sixty-five (365).
(d) A lump-sum cash payment equal to three (3) times the
greater of: (i) the Executive's highest annual
incentive compensation earned over the three (3) fiscal
years ending prior to the earlier of the Change in
Control or the Qualifying Termination (whether or not
deferred); or (ii) the Executive's target incentive
compensation established for the fiscal year in which
the Executive's date of termination occurs.
(e) To the extent the Executive is eligible, was eligible
prior or after the Change in Control (or, if earlier,
the Qualifying Termination) or if the Executive would
be eligible with credit for an additional three (3)
years of age and service credit, coverage under all
applicable retiree health and other retiree welfare
plans for the Executive and the Executive's eligible
dependents (including an adjustment to the extent
necessary to put the Executive on the same after tax
basis as if the Executive had been eligible for such
coverage).
(f) To the extent eligible prior or after the Change in
Control (or, if earlier, the Qualifying Termination),
continued participation, (coordinated with (e) above to
the extent duplicative), at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans, until three (3)
years after the date of termination, provided, however,
that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
similar or improved benefit under such plan shall
immediately cease. To the extent such coverage cannot
be provided under the Company's welfare benefit plans
without jeopardizing the tax status of such plans, for
underwriting reasons or because of the tax impact on
the Executive, the Company shall pay the Executive an
amount such that the Executive can purchase such
benefits separately at no greater after tax cost to her
than she would have had if the benefits were provided
to her as an employee.
(g) A lump-sum cash payment of the actuarial present value
equivalent (as determined in accordance with the most
favorable (to the Executive) overall actuarial
assumptions and subsidies in any of the Company's tax-
qualified or nonqualified type defined benefit pension
plans in which the Executive then participates) of the
accrued benefits accrued by the Executive as of the
date of termination under the terms of any nonqualified
defined benefit type retirement plan, including but not
limited to, the SERP and the SBP and assuming the
benefit was fully vested without regard to any minimum
age or service requirements. For this purpose, such
benefits shall be calculated under the assumption that
the Executive's employment continued following the date
of termination for three (3) full years (i.e., three
(3) additional years of age (including, but not limited
to, for purposes of determining the actuarial present
value), compensation and service credits shall be
added).
(h) Three (3) times the amount of the maximum Company
contribution or match to any defined contribution type
plan in which the Executive participates.
(i) A lump-sum cash payment of the product of (i) the
Interest Factor (as determined in the next sentence)
multiplied by (ii) the Executive's entire account
balance under the Deferred Income Plan (or any
replacement therefor), plus an additional amount equal
to three (3) times the match which the Company made for
the Executive to such plan for the fiscal year ending
immediately prior to the earlier of the Change in
Control or the Qualifying Termination. The "Interest
Factor" shall be equal to one (1) plus three (3) times
the rate of earnings of the Executive's account under
such plan for the fiscal year ending immediately prior
to her termination.
(j) Immediate full vesting of any outstanding stock
options, performance share units and other equity
awards (and lapse of any forfeiture provisions) to the
extent permitted under the plan or grant, or if full
vesting is not permitted with regard to stock options,
a cash payment equal to the Spread on such unvested
options on the date of termination (or, if later, the
date of the Change in Control) plus, in both cases, if
options are exercisable for less than three (3) years
after termination (or, if less, the remainder of the
respective terms, including any termination of
exercisability of all Company stock options in
connection with the Change in Control or a merger
related thereto), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
earlier of the Qualifying Termination or the Change in
Control) future value of such outstanding options for
the lesser of three (3) years or the remainder of such
terms.
(k) Outplacement services at a level commensurate with the
Executive's position, including use of an executive
office and secretary, for a period of one (1) year
commencing on the date of termination but in no event
extending beyond the date on which the Executive
commences other full time employment.
(l) Continuation of participation for three (3) additional
years in the Company's programs with regard to tax
preparation assistance and financial planning
assistance, club dues and automobile (but based on the
automobile then being used and no new one), in
accordance with the Company's programs in effect at the
time of the Change in Control.
(m) As provided in Exhibit A hereto.
For purposes of this Section 8, a Qualifying Termination
shall mean any termination of the Executive's employment (i) by
the Company without Cause, or (ii) by the Executive for Good
Reason.
8.2 Definition of "Change in Control." A Change in Control
of the Company shall be deemed to have occurred as of the first
day any one or more of the following conditions shall have been
satisfied:
(a) Any "person" or "group" (within the meaning of Section
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than the
Company, any trustee or other fiduciary holding Company
common stock under an employee benefit plan of the
Company or a related company, or any corporation which
is owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as
their ownership of the Company's common stock, is or
becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than thirty percent
(30%) of the then outstanding voting stock;
(b) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board and any new director whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in office
who either were directors at the beginning of the two
year period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority of the Board;
(c) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger
or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or being converted into voting securities
of the surviving entity) more than fifty percent (50%)
of the combined voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation; or
(d) The approval of the stockholders of the Company of a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all of its assets.
8.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to payments and/or benefits which
would constitute "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, the provisions of Exhibit B will
apply.
9. Noncompetition, Confidentiality and Nondisparagement
9.1 Agreement Not to Compete.
(a) The Executive agrees that for a period of two (2) years
after the termination of the Executive's employment,
the Executive will not engage in Competition with the
Company with the Listed Companies, provided that after
the Executive's termination of employment the Listed
Companies shall be limited to those effectively listed
at the time of her termination and still on such list
at the time of any alleged activity of the Executive,
including, but not limited to, (i) soliciting
customers, business or orders for, or selling any
products and services in, Competition with the Company
for such Listed Companies or (ii) diverting, enticing,
or otherwise taking away customers, business or orders
of the Company, or attempting to do so, in either case
in Competition with the Company for such Listed
Companies.
(b) The Executive agrees that if, while she is receiving
severance pay from the Company pursuant to Section
6.2(b) or Section 6.3(b), the Executive: (i) violates
(a) above, or (ii) otherwise engages in Competition in
the Restricted Territory, whether or not with the
Listed Companies, Section 9.6(b) hereof shall apply.
(c) The Executive agrees that the restrictions contained in
this Section 9 are necessary for the protection of the
business and goodwill of the Company because of the
trade secrets within the Executive's knowledge and are
considered by the Executive to be reasonable for such
purpose.
9.2 Definitions.
(a) "Competition" shall mean engaging in, as an employee,
director, partner, principal, shareholder, consultant,
advisor, independent contractor or similar capacity,
with (a) the Listed Companies or (b) in any business,
activity or conduct which directly competes with the
business of the Company, provided that, with regard to
the period after termination of the Executive's
employment, Section 9.1(b)(ii) shall only apply to
business lines in which the Company is engaged both at
the time of termination of employment and at the time
of the determination and which during the last fiscal
year ending prior to the date of such termination repre
sented at least five percent (5%) of the Company's
revenues (the "Prohibited Lines"). Notwithstanding
anything else in this Section 9, Competition shall not
include: (A) (i) holding five percent (5%) or less of
an interest in the equity or debt of any publicly
traded company, (ii) engaging in any activity with the
prior written approval of the Chief Executive Officer
or the O&C Committee, (iii) the practice of law in a
law firm that represents entities in Competition with
the Company, provided that the Executive does not
personally represent such entities, or (iv) the
employment by, or provision of services to, an
investment banking firm or consulting firm that
provides services to entities that are in Competition
with the Company provided that the Executive does not
personally represent or provide services to such
entities that are Listed Companies or otherwise with
regard to businesses in Competition with the Prohibited
Lines, or (B) with regard to Section 9.1(b)(ii), (i)
being employed by, or consulting for, a non-Competitive
division or business unit of an entity which is in
Competition with the Company (and participating in such
entity's employee equity plans), (ii) being employed
by, or consulting for, an entity which had annual
revenues in the last fiscal year prior to the Executive
being employed by, or consulting for, the entity
generated through business lines in Competition with
the Prohibited Lines of the Company that do not exceed
five percent (5%) of such entity's total annual
revenues, provided that revenues within the Executive's
area of responsibility or authority are not more than
ten percent (10%) composed of the revenues from the
businesses in Competition with the Prohibited Lines, or
(iii) any activities conducted after a Change in
Control of the Company.
(b) The Restricted Territory shall mean any geographic area
in which the Company with regard to the Prohibited
Lines did more than nominal business.
(c) Listed Companies shall mean those entities which are
within the "peer group" established by the Company for
the performance graphs in its proxy statement pursuant
to Item 402(l) of Regulation S-K under the Exchange Act
and which are in a list of no more than five (5)
entities established by the Company from time to time
and available from the Chief Human Resources Officer,
provided that the addition of any entity to the list
shall not be effective until sixty (60) days after it
is so listed.
(d) For purposes of this Section 9, "Company" shall mean
the Company and its subsidiaries and affiliates.
9.3 Agreement Not to Engage in Certain Solicitation.
The Executive agrees that the Executive will not, during the
Executive's employment with the Company or during the two (2)
year period thereafter, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any non-clerical
employee(s), sales representative(s), agent(s), or consultant(s)
of the Company to terminate such person's employment,
representation or other association with the Company for the
purpose of affiliating with any entity with which the Executive
is associated ("Solicitation").
9.4 Confidential Information.
(a) The Executive specifically acknowledges that any trade
secrets or confidential business and technical
information of the Company or its vendors, suppliers or
customers, whether reduced to writing, maintained on
any form of electronic media, or maintained in mind or
memory and whether compiled by the Executive or the
Company (collectively, "Confidential Information"),
derives independent economic value from not being
readily known to or ascertainable by proper means by
others; that reasonable efforts have been made by the
Company to maintain the secrecy of such information;
that such information is the sole property of the
Company or its vendors, suppliers, or customers and
that any retention, use or disclosure of such
information by the Executive during the Employment Term
(except in the course of performing duties and
obligations of employment with the Company) or any time
after termination thereof, shall constitute
misappropriation of the trade secrets of the Company or
its vendors, suppliers, or customers, provided that
Confidential Information shall not include: (i)
information that is at the time of disclosure public
knowledge or generally known within the industry, (ii)
information deemed in good faith by the Executive,
while employed by the Company, desirable to disclose in
the course of performing the Executive's duties, (iii)
information the disclosure of which the Executive in
good faith deems necessary in defense of the
Executive's rights provided such disclosure by the
Executive is limited to only disclose as necessary for
such purpose, or (iv) information disclosed by the
Executive to comply with a court, or other lawful
compulsory, order compelling her to do so, provided the
Executive gives the Company prompt notice of the
receipt of such order and the disclosure by the
Executive is limited to only disclosure necessary for
such purpose.
(b) The Executive acknowledges that the Company from time
to time may have agreements with other persons or with
the United States Government, or agencies thereof, that
impose obligations or restrictions on the Company
regarding inventions made during the course of work
under such agreements or regarding the confidential
nature of such work. If the Executive's duties
hereunder will require disclosures to be made to her
subject to such obligations and restrictions, the
Executive agrees to be bound by them.
9.5 Scope of Restrictions. If, at the time of
enforcement of this Section 9, a court holds that the
restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and
that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area
permitted by law.
9.6 Remedies.
(a) In the event of a material breach or threatened
material breach of Section 9.1(a), Section 9.3, Section
9.4 or Section 9.10, the Company, in addition to its
other remedies at law or in equity, shall be entitled
to injunctive or other equitable relief in order to
enforce or prevent any violations of the provisions of
this Section 9. Except as specifically provided with
regard to Listed Companies, the Company agrees that it
will not assert to enjoin or otherwise limit the
Executive's activities based on an argument of
inevitable disclosure of confidential information.
(b) In the event Section 9.1(b) applies, the Company may
immediately cease payment to the Executive of all
future amounts due under Sections 6.2(a) or (b) or
Sections 6.3(a) or (b), as well as otherwise
specifically provided in any other plan, grant or
program.
(c) Upon written request of the Executive, the Company
shall within thirty (30) days notify the Executive in
writing whether or not in good faith it believes any
proposed activities would be in Competition and, if it
so determines or does not reply within thirty (30)
days, it shall be deemed to waive any right to treat
such activities as Competition unless the facts are
otherwise than as presented by the Executive or there
is a change thereafter in such activities. The
Executive shall promptly provide the Company with such
information as it may reasonably request to evaluate
whether or not such activities are in Competition.
9.7 Uniformity. In no event shall any definitions of
Competition or Solicitation (or a similar provision) as it
applies to the Executive with regard to any plan of program or
grant of the Company be interpreted to be any broader than as set
forth in this Section 9.
9.8 Delivery of Documents. Upon termination of this
Agreement or at any other time upon request by the Company, the
Executive shall promptly deliver to the Company all records,
files, memoranda, notes, designs, data, reports, price lists,
customer lists, drawings, plans, computer programs, software,
software documentation, sketches, laboratory and research
notebooks and other documents (and all copies or reproductions of
such materials in her possession or control) belonging to the
Company. Notwithstanding the foregoing, the Executive may retain
her rolodex and similar phone directories (collectively, the
"Rolodex") to the extent the Rolodex does not contain information
other than name, address, telephone number and similar
information, provided that, at the request of the Company, the
Executive shall provide the Company with a copy of the Rolodex.
9.9 Nondisparagement.
(a) During the Employment Term and thereafter, the
Executive shall not with willful intent to damage
economically or as to reputation or vindictively
disparage the Company, its subsidiaries or their
respective past or present officers, directors or
employees (the "Protected Group"), provided that the
foregoing shall not apply to (i) actions or statements
taken or made by the Executive while employed by the
Company in good faith as fulfilling the Executive's
duties with the Company or otherwise at the request of
the Company, (ii) truthful statements made in
compliance with legal process or governmental inquiry,
(iii) as the Executive in good faith deems necessary to
rebut any untrue or misleading public statements made
about her or any other member of the Protected Group,
(iv) statements made in good faith by the Executive to
rebut untrue or misleading statements made about her or
any other member of the Protected Group by any member
of the Protected Group, and (v) normal commercial
puffery in a competitive business situation. No member
of the Protected Group shall be a third party
beneficiary of this Section 9.9(a).
(b) During the Employment Term and thereafter, neither the
Company officially nor any then member of the Executive
Leadership Team (or the equivalent) of the Company, as
such term is currently used within the Company, shall
with willful intent to damage the Executive
economically or as to reputation or otherwise
vindictively disparage the Executive, provided the
foregoing shall not apply to (i) actions or statements
taken or made in good faith within the Company in
fulfilling duties with the Company, (ii) truthful
statements made in compliance with legal process,
governmental inquiry or as required by legal filing or
disclosure requirements, (iii) as in good faith deemed
necessary to rebut any untrue or misleading statements
by the Executive as to any member of the Protected
Group or (iv) normal commercial puffery in a
competitive business situation.
(c) In the event of a material breach or threatened
material breach of clauses (a) or (b) above, the
Company or the Executive, as the case may be, in
addition to its or the Executive's other remedies at
law or in equity, shall be entitled to injunctive or
other equitable relief in order to enforce or prevent
any violations of this Section 9.9.
9.10 Pooling of Interests. If the Company is involved
in any proposed business combination that is contemplated to be
accounted for as a pooling of interests, the Executive agrees to
cooperate with the reasonable requests of the Company with regard
to the exercise of stock options, the sale of Company stock or
other matters that could affect the ability of the combination to
be accounted for as a pooling of interests.
10 Liability Insurance
The Company shall cover the Executive under directors
and officers liability insurance both during and, while potential
liability exists, after the Employment Term in the same amount
and to the same extent, if any, as the Company covers its other
officers and directors.
11 Assignment
11.1 Assignment by the Company. This Agreement may and
shall be assigned or transferred to, and shall be binding upon
and shall inure to the benefit of, any successor of the Company,
and any such successor shall be deemed substituted for all
purposes of the "Company" under the terms of this Agreement. As
used in this Agreement, the term "successor" shall mean any
person, firm, corporation or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or
substantially all of the assets of the Company. Notwithstanding
such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
11.2 Assignment by the Executive. This Agreement is
not assignable by the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
12 Legal Remedies
12.1 Payment of Legal Fees. The Company shall pay the
Executive's reasonable legal fees and costs associated with
entering into this Agreement. To the fullest extent permitted by
law, the Company shall promptly pay upon submission of statements
all legal and other professional fees, costs of litigation,
prejudgment interest, and other expenses incurred in connection
with any dispute arising hereunder; provided, however, the
Company shall be reimbursed by the Executive for (i) the fees and
expenses advanced in the event the Executive's claim is in a
material manner in bad faith or frivolous and the arbitrator or
court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate, or (ii) to the extent that the
arbitrator or court, as appropriate, determines that such legal
and other professional fees are clearly and demonstrably
unreasonable.
12.2 Arbitration. All disputes and controversies
arising under or in connection with this Agreement, other than
the seeking of injunctive or other equitable relief pursuant to
Section 9 hereof, shall be settled by arbitration conducted
before a panel of three (3) arbitrators sitting in New York City,
New York, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of commercial
disputes of the American Arbitration Association then in effect.
The determination of the majority of the arbitrators shall be
final and binding on the parties. Judgment may be entered on the
award of the arbitrator in any court having proper jurisdiction.
All expenses of such arbitration, including the fees and expenses
of the counsel of the Executive, shall be borne by the Company
and the Executive shall be entitled to reimbursement of her
expenses as provided in Section 12.1 hereof.
12.3 Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if delivered personally, sent by telecopier,
sent by an overnight service or sent by registered or certified
mail. Notice to the Executive not delivered personally (or by
telecopy where the Executive is known to be) shall be sent to the
last address on the books of the Company, and notice to the
Company not delivered personally (or by telecopy to the known
personal telecopy of the person it is being sent to) shall be
sent to it at its principal office. All notices to the Company
shall be delivered to the Chief Executive Officer with a copy to
the senior legal officer. Delivery shall be deemed to occur on
the earlier of actual receipt or tender and rejection by the
intended recipient.
12.4 Continued Payments. In the event after a Change
in Control either party files for arbitration to resolve any
dispute as to whether a termination is for Cause or Good Reason,
until such dispute is determined by the arbitrators, the
Executive shall continue to be treated economically and benefit
wise in the manner asserted by her in the arbitration effective
as of the date of the filing of the arbitration, subject to the
Executive promptly refunding any amounts paid to her, paying the
cost of any benefits provided to her and paying to the Company
the profits in any stock option or other equity awards exercised
or otherwise realized by her during the pendency of the
arbitration which she is ultimately held not to be entitled to;
provided the arbitrators may terminate such payments and benefits
in the event that they determine at any point that the Executive
is intentionally delaying conclusion of the arbitration.
13 Miscellaneous
13.1 Entire Agreement. This Agreement, except to the
extent specifically provided otherwise herein, supersedes any
prior agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect to the subject matter
hereof. To the extent any severance plan or program of the
Company that would apply to the Executive is more generous to the
Executive than the provisions hereof, the Executive shall be
entitled to any additional payments or benefits which are not
duplicative, but shall otherwise not be eligible for such plan or
program.
13.2 Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended, nor
any provision hereof waived, except by mutual agreement of the
parties in a written instrument executed by the parties hereto or
their legal representatives.
13.3 Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.4 Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed to be
an original, but all of which together will constitute one and
the same Agreement.
13.5 Tax Withholding. The Company may withhold from
any benefits payable under this Agreement all federal, state,
city, or other taxes as may be required pursuant to any law or
governmental regulation or ruling.
13.6 Beneficiaries. The Executive may designate one or
more persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
13.7 Representation. The Executive represents that the
Executive's employment by the Company and the performance by the
Executive of her obligations under this Agreement do not, and
shall not, breach any agreement that obligates her to keep in
confidence any trade secrets or confidential or proprietary
information of her or of any other party, to write or consult to
any other party or to refrain from competing, directly or
indirectly, with the business of any other party. The Executive
shall not disclose to the Company, and the Company shall not
request that the Executive disclose, any trade secrets or
confidential or proprietary information of any other party.
14 Governing Law
The provisions of this Agreement shall be construed and
enforced in accordance with the laws of the state of Delaware,
without regard to any otherwise applicable principles of
conflicts of laws.
IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement, as of the day and year first above
written.
/s/Mary L. Howell
Mary L. Howell
TEXTRON INC.
By:/s/John D. Butler
Name: John D. Butler
Title: Executive Vice President
Exhibit A
Special Grants
None.
Exhibit B
Parachute Gross Up
(a) In the event that the Executive shall become
entitled to payments and/or benefits provided by this Agreement
or any other amounts in the "nature of compensation" (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person) as a result of such
change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code
(and any similar tax that may hereafter be imposed by any taxing
authority) the Company shall pay to the Executive at the time
specified in subsection (d) below an additional amount (the
"Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and for local income or
payroll tax upon the Gross-up Payment provided for by this
paragraph (a), but before deduction for any U.S. federal, state,
and local income or payroll tax on the Company Payments, shall be
equal to the Company Payments.
(b) For purposes of determining whether any of the
Company Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except
to the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax
counsel selected by such accountants (the "Accountants") such
Total Payments (in whole or in part) either do not constitute
"parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, the Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-
up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of
the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment
thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided
for in subsection (c) above shall be paid not later than the
thirtieth (30th) day following an event occurring which subjects
the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good
faith by the Accountant, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code), subject to further payments pursuant to subsection (c)
hereof, as soon as the amount thereof can reasonably be deter
mined, but in no event later than the ninetieth day after the
occurrence of the event subjecting the Executive to the Excise
Tax. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
(e) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) with regard to the
Excise Tax, the Executive shall permit the Company to control
issues related to the Excise Tax (at its expense), provided that
such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In
the event the issues are interrelated, the Executive and the
Company shall in good faith cooperate so as not to jeopardize
resolution of either issue, but if the parties cannot agree the
Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive
shall permit the representative of the Company to accompany the
Executive, and the Executive and the Executive's representative
shall cooperate with the Company and its representative.
(f) The Company shall be responsible for all charges
of the Accountant.
(g) The Company and the Executive shall promptly
deliver to each other copies of any written communications, and
summaries of any verbal communications, with any taxing authority
regarding the Excise Tax covered by this Exhibit B.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is entered into as of this 23rd
day of July, 1998 by and between Textron Inc. (the "Company"), a
Delaware corporation having its principal office at 40
Westminster Street, Providence, Rhode Island 02903 and Wayne W.
Juchatz residing at 15 Courageous Circle, Bristol, Rhode Island
02809 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is presently employed by the Company;
WHEREAS, the Company desires to continue to employ the
Executive and the Executive is willing to continue to be employed
by the Company; and
WHEREAS, the Company and the Executive desire to set forth
the terms and conditions of such continued employment.
NOW THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration, the
adequacy and receipt of which is acknowledged, the parties hereto
agree as follows:
1. Term of Employment
The Company hereby agrees to continue to employ the
Executive and the Executive hereby accepts continued employment,
in accordance with the terms and conditions set forth herein, for
a term (the "Employment Term") commencing on the date hereof (the
"Effective Date") and terminating, unless otherwise terminated
earlier in accordance with Section 5 hereof, on the third
anniversary of the Effective Date (the "Original Employment
Term"), provided that the Employment Term shall be automatically
extended, subject to earlier termination as provided in Section 5
hereof, for successive additional one (1) year periods (the
"Additional Terms"), unless, at least ninety (90) days prior to
the end of the Original Employment Term or the then Additional
Term, the Company or the Executive has notified the other in
writing that the Employment Term shall terminate at the end of
the then current term.
2. Position and Responsibilities
During the Employment Term, the Executive shall serve
as the Executive Vice President and General Counsel of the
Company or in such higher capacity as agreed by the Company and
the Executive. The Executive shall report exclusively to the
Chief Executive Officer and the Board of Directors of the Company
(the "Board"). The Executive shall, to the extent appointed or
elected, serve on the Board as a director and as a member of any
committee of the Board, in each case, without additional
compensation. The Executive shall, to the extent appointed or
elected, serve as a director or as a member of any committee of
the board (or the equivalent bodies in a non-corporate subsidiary
or affiliate) of any of the Company's subsidiaries or affiliates
and as an officer or employee (in a capacity commensurate with
his position with the Company) of any such subsidiaries or
affiliates, in all cases, without additional compensation or
benefits and any compensation paid to the Executive, or benefits
provided to the Executive, in such capacities shall be a credit
with regard to the amounts due hereunder from the Company. The
Executive shall have duties, authorities and responsibilities
generally commensurate with the duties, authorities and
responsibilities of persons in similar capacities in similarly
sized companies subject to the By-laws of the Company and the
organizational structure of the Company. The Executive shall
devote substantially all of his business time, attention and
energies to the performance of his duties hereunder, provided the
foregoing will not prevent the Executive from participating in
charitable, community or industry affairs, from managing his and
his family's personal passive investments, and (with the consent
of the Chief Executive Officer or the Organization and
Compensation Committee (or its successor) of the Board (the "O&C
Committee"), which consent will not be unreasonably withheld,
conditioned or delayed) serving on the board of directors of
other companies, provided that these activities do not materially
interfere with the performance of his duties hereunder or create
a potential business conflict or the appearance thereof. The
Company has consented to the Executive's services on the boards
of directors, if any, on which the Executive currently serves,
which boards the Executive has disclosed in writing to the O&C
Committee. The Executive may retain any compensation or benefits
received as a result of consented to service as a director of
entities not related to the Company.
3. Compensation and Benefits
During the Employment Term, the Company shall pay and
provide the Executive the following:
3.1 Base Salary. The Company shall pay the Executive
a base salary (the "Base Salary") in an amount which shall be
established from time to time by the O&C Committee (or as
otherwise designated by the Board), provided, however, that such
base salary rate shall not be less than his current rate of base
salary. Base Salary shall be paid to the Executive in accordance
with the Company's normal payroll practices for executives. Base
Salary shall be reviewed at least annually to ascertain whether,
in the judgment of the reviewing committee, such Base Salary
should be increased. If so increased, Base Salary shall not be
thereafter decreased and shall thereafter, as increased, be the
Base Salary hereunder.
3.2 Annual Bonus. The Company shall provide the
Executive with the opportunity to earn an annual cash bonus under
the Company's current annual incentive compensation plan for
executives or a replacement plan therefor at a level commensurate
with his position, provided that the minimum annual target award
payable upon the achievement of reasonably attainable objective
performance goals shall be at least fifty percent (50%) of Base
Salary.
3.3 Long-Term Incentives. The Company shall provide
the Executive the opportunity to earn long-term incentive awards
under the current equity and cash based plans and programs or
replacements therefor at a level commensurate with the current
aggregate opportunity being provided to the Executive.
3.4 Employee Benefits. The Executive shall, to the
extent eligible, be entitled to participate at a level
commensurate with his position in all employee benefit welfare
and retirement plans and programs, as well as equity plans,
generally provided by the Company to its senior executives in
accordance with the terms thereof as in effect from time to time.
Such plans and programs currently include, without limitation,
the Amended and Restated Supplemental Retirement Plan for Textron
Inc. Key Executives (the "SERP"), the 1994 Long-Term Incentive
Plan, the Key Executive Program (including the Deferred Income
Plan, the Supplemental Benefits Plan (the "SBP") and the Survivor
Benefit Plan), group term life insurance plan, comprehensive
health, major medical, vision and dental insurance plans and
short-term and long-term disability plans.
3.5 Vacation. The Executive shall be entitled to paid
vacation in accordance with the standard written policies of the
Company with regard to vacations of executives, but in no event
less than four (4) weeks per calendar year.
3.6 Perquisites. The Company shall provide to the
Executive, at the Company's cost, all perquisites to which other
senior executives of the Company are generally entitled to
receive and such other perquisites which are suitable to the
character of the Executive's position with the Company and
adequate for the performance of his duties hereunder but not less
than the level being provided on the date hereof except as
otherwise required because of changes in law. To the extent
legally permissible, the Company shall not treat such amounts as
income to the Executive.
3.7 Right to Change Plans. The Company shall not be
obligated by reason of this Section 3 to institute, maintain, or
refrain from changing, amending, or discontinuing any benefit
plan, program, or perquisite, so long as such changes are
similarly applicable to executive employees generally and
provided that the benefits or additional credit specifically as
set forth in Section 3.8 below shall not be diminished.
3.8 Existing Awards. The Company acknowledges that
the Executive currently is entitled to, among other things, the
special grants set forth in Exhibit A hereto, as modified on
Exhibit A.
4. Expenses
Upon submission of appropriate documentation, in
accordance with its policies in effect from time to time, the
Company shall pay, or reimburse, the Executive for all ordinary
and necessary expenses, in a reasonable amount, which the
Executive incurs in performing his duties under this Agreement
including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, and civic associations and societies in which the
Executive participates in accordance with the Company's policies
in effect from time to time.
5. Termination of Employment
The Executive's employment with the Company (including but
not limited to any subsidiary or affiliate or the Company) and
the Employment Term shall terminate upon the occurrence of the
first of the following events:
(a) Automatically on the date of the Executive's death.
(b) Upon thirty (30) days written notice by the Company to
the Executive of a termination due to Disability,
provided such notice is delivered during the period of
Disability. The term "Disability" shall mean, for
purposes of this Agreement, the inability of the
Executive, due to injury, illness, disease or bodily or
mental infirmity, to engage in the performance of his
material duties of employment with the Company as
contemplated by Section 2 herein for a period of more
than one hundred eighty (180) consecutive days or for a
period that is reasonably expected to exist for a
period of more than one hundred eighty (180)
consecutive days, provided that interim returns to work
of less than ten (10) consecutive business days in
duration shall not be deemed to interfere with a
determination of consecutive absent days if the reason
for absence before and after the interim return are the
same. The existence or non-existence of a Disability
shall be determined by a physician agreed upon in good
faith by the Executive (or his representatives) and the
Company. It is expressly understood that the
Disability of the Executive for a period of one hundred
eighty (180) consecutive days or less shall not
constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default
and the Executive shall receive full compensation for
any such period of Disability or for any other
temporary illness or incapacity during the term of this
Agreement.
(c) Immediately upon written notice by the Company to the
Executive of a termination due to his retirement at or
after the Executive's attainment of age sixty-five
(65).
(d) Immediately upon written notice by the Company to the
Executive of a termination for Cause, provided such
notice is given within ninety (90) days after the
discovery by the Board or the Chief Executive Officer
of the Cause event and has been approved by the O&C
Committee at a meeting at which the Executive and his
counsel had the right to appear and address such
meeting after receiving at least five (5) business days
written notice of the meeting and reasonable detail of
the facts and circumstances claimed to provide a basis
for such termination. The term "Cause" shall mean, for
purposes of this Agreement: (i) an act or acts of
willful misrepresentation, fraud or willful dishonesty
(other than good faith expense account disputes) by the
Executive which in any case is intended to result in
his or another person or entity's substantial personal
enrichment at the expense of the Company; (ii) any
willful misconduct by the Executive with regard to the
Company, its business, assets or employees that has, or
was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iii) any
material, willful and knowing violation by the
Executive of (x) the Company's Business Conduct
Guidelines, or (y) any of his fiduciary duties to the
Company which in either case has, or was intended to
have, a material adverse impact (economic or otherwise)
on the Company; (iv) the willful or reckless behavior
of the Executive with regard to a matter of a material
nature which has a material adverse impact (economic or
otherwise) on the Company; (v) the Executive's willful
failure to attempt to perform his duties under Section
2 hereof or his willful failure to attempt to follow
the legal written direction of the Board, which in
either case is not remedied within ten (10) days after
receipt by the Executive of a written notice from the
Company specifying the details thereof; (vi) the
Executive's conviction of, or pleading nolo contendere
or guilty to, a felony (other than (x) a traffic
infraction or (y) vicarious liability solely as a
result of his position provided the Executive did not
have actual knowledge of the actions or inactions
creating the violation of the law or the Executive
relied in good faith on the advice of counsel with
regard to the legality of such action or inaction (or
the advice of other specifically qualified
professionals as to the appropriate or proper action or
inaction to take with regard to matters which are not
matters of legal interpretation)); or (vii) any other
material breach by the Executive of this Agreement that
is not cured by the Executive within twenty (20) days
after receipt by the Executive of a written notice from
the Company of such breach specifying the details
thereof. No action or inaction should be deemed
willful if not demonstrably willful and if taken or not
taken by the Executive in good faith as not being
adverse to the best interests of the Company.
Reference in this paragraph (d) to the Company shall
also include direct and indirect subsidiaries of the
Company, and materiality and material adverse impact
shall be measured based on the action or inaction and
the impact upon, and not the size of, the Company taken
as a whole, provided that after a Change in Control,
the size of the Company, taken as a whole, shall be a
relevant factor in determining materiality and material
adverse impact.
(e) Upon written notice by the Company to the Executive of
an involuntary termination without Cause. A notice by
the Company of non-renewal of the Employment Term
pursuant to Section 1 above shall be deemed an
involuntary termination of the Executive by the Company
without Cause as of the end of the Employment Term, but
the Executive may terminate at any time after the
receipt of such notice and shall be treated as if he
was terminated without Cause as of such date.
(f) Upon twenty (20) days written notice by the Executive
to the Company of a termination for Good Reason (which
notice sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such
termination) unless the Good Reason event is cured
within such twenty (20) day period. The term "Good
Reason" shall mean, for purposes of this Agreement,
without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the
assignment to the Executive of duties materially
inconsistent with the Executive's then authorities,
duties, responsibilities, and status (including
offices, titles, and reporting requirements), or any
reduction in the Executive's then title, position,
reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated)
in his then status, authorities, duties, or
responsibilities or, if then a director of the Company,
failure to be nominated or reelected as a director of
the Company or removal as such; (ii) relocation of the
Executive from the principal office of the Company
(excluding reasonable travel on the Company's business
to an extent substantially consistent with the
Executive's business obligations) or relocation of the
principal office of the Company to a location which is
at least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at
the time of the relocation is not located at the
principal office, such relocation provision shall apply
based on his then location; (iii) a reduction by the
Company in the Executive's Base Salary; (iv) a
reduction in the Executive's aggregate level of
participation in any of the Company's short and/or
long-term incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or
arrangements in which the Executive participated as of
the Effective Date, or, after a Change in Control,
participated immediately prior to the Change in
Control; (v) the failure of the Company to obtain and
deliver to the Executive a satisfactory written
agreement from any successor to the Company to assume
and agree to perform this Agreement; or (vi) any other
material breach by the Company of this Agreement.
(g) Upon written notice by the Executive to the Company of
the Executive's voluntary termination of employment
without Good Reason (which the Company may, in its sole
discretion, make effective earlier than any notice
date). A notice by the Executive of non-renewal of the
Employment Term pursuant to Section 1 above shall be
deemed a voluntary termination by the Executive without
Good Reason as of the end of the Employment Term.
6. Consequences of a Termination of Employment
6.1 Termination Due to Death or Retirement. If the
Employment Term ends on account of the Executive's termination
due to death pursuant to Section 5(a) above or retirement
pursuant to Section 5(c) above, the Executive (or the Executive's
surviving spouse, or other beneficiary as so designated by the
Executive during his lifetime, or to the Executive's estate, as
appropriate) shall be entitled, in lieu of any other payments or
benefits, to (i) payment promptly of any unpaid Base Salary,
unpaid annual incentive compensation (for the preceding fiscal
year) and any accrued vacation, (ii) reimbursement for any
unreimbursed business expenses incurred prior to the date of
termination, and (iii) any amounts, benefits or fringes due under
any equity, benefit or fringe plan, grant or program in
accordance with the terms of said plan, grant or program but
without duplication (collectively, the "Accrued Obligations").
6.2 Termination Due To Disability. If the Employment Term
ends as a result of Disability pursuant to Section 5(b) above,
the Executive shall be entitled, in lieu of any other payments or
benefits, subject to Section 7(b) hereof, to any Accrued
Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to three hundred percent (300%) of the
Executive's target annual incentive compensation award
established for the fiscal year during which the
Executive's termination occurs (the "Termination Year
Target Bonus").
(b) Continued monthly payment for two and one half (2 1/2)
years of an amount equal to the Executive's monthly
Base Salary rate reduced by any disability benefits
received by the Executive under the Company's long term
disability plan for the corresponding period.
(c) Payments and benefits as set forth in Section 6.3(c)-
(j) hereof.
(d) The Executive shall be deemed to have satisfied the
definition of "total disability" under the 1994 Long-
Term Incentive Plan or the equivalent definition under
any successor plan thereto.
(e) As provided in Exhibit A hereto.
6.3 Involuntary Termination by the Company Without Cause or
Termination by the Executive for Good Reason. If the Executive
is involuntarily terminated by the Company without Cause in
accordance with Section 5(e) above or the Executive terminates
his employment for Good Reason in accordance with Section 5(f)
above, the Executive shall be entitled, in lieu of any other
payments or benefits, subject to Section 7(b) hereof, to any
Accrued Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to the Executive's Termination Year Target Bonus
multiplied by a fraction, the numerator of which is the
number of days during the fiscal year of the
Executive's termination that the Executive was employed
by the Company and the denominator is three hundred
sixty-five (365), provided that in no event shall such
payment exceed fifty percent (50%) of the Termination
Year Target Bonus.
(b) Continued payment off payroll for two and one-half (2
1/2) years (in approximately equal monthly
installments) of an amount equal to two and one-half (2
1/2) times the sum of: (i) the Executive's Base
Salary, and (ii) the greater of: (x) the Termination
Year Target Bonus, or (y) the Executive's highest
annual incentive compensation award earned during the
last three (3) fiscal years ending prior to the fiscal
year of termination (whether or not deferred).
(c) To the extent eligible at such time or, if the
Executive would be eligible with credit for an
additional two and one half (2 1/2) years of age and
service credit, coverage under all applicable retiree
health and other retiree welfare plans for the
Executive and his dependents (including, if he is only
eligible because of the extra age and service credit,
an adjustment, to the extent necessary, to put the
Executive in the same after-tax position as if he had
been eligible for such coverage) and, if not eligible
for continued health coverage under the retiree health
plan, payment of the Executive's and Executive's
eligible dependents' COBRA continuation health coverage
premiums for the Company's health insurance plan that
generally applies to senior executives for the two and
one-half (2 1/2) year period following the date of
termination or, if earlier, until the Executive and
Executive's dependents cease to be eligible for such
coverage, provided that, if COBRA coverage cannot be
provided for the full period, any excess period shall
be covered under (d) below (and further provided that,
if such premiums are taxable to the Executive, an
adjustment such that the Executive has no after tax
cost for the providing of such COBRA coverage).
(d) To the extent eligible on the date of termination,
continued participation, at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans (other than medical
plans covered under (c) above), until two and one-half
(2 1/2) years after the date of termination; provided,
however, that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
benefits under such plan shall immediately cease. To
the extent such coverage cannot be provided under the
Company's welfare benefit plans without jeopardizing
the tax status of such plans, for underwriting reasons
or because of the tax impact on the Executive, the
Company shall pay the Executive an amount such that the
Executive can purchase such benefits separately at no
greater after tax cost to the Executive than the
Executive would have had if the benefits were provided
to the Executive as an employee.
(e) Two and one-half (2 1/2) additional years of service
and compensation credit (at the Executive's then
compensation level) for benefit purposes under any
defined benefit type retirement plan, including but not
limited to the SERP and the SBP if then in effect, and,
if the Executive is not eligible to receive benefits
under any such plan on the date of termination, two and
one-half (2 1/2) additional years of age for
determining eligibility to receive such benefits,
provided that benefits under any such plan will not
commence until the Executive actually attains the
required distribution age under the plan or the
Executive's spouse qualifies for death benefits under
such plan and further provided that with regard to any
plan qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") the
additional amounts may be provided on a nonqualified
plan basis.
(f) Payment promptly after termination of two and one-half
(2 1/2) times the amount of the maximum Company annual
contribution or match to any defined contribution type
plan in which the Executive participates.
(g) Immediate full vesting of any outstanding stock options
that would vest within two and one half (2 1/2) years
after such termination of employment as if the
Executive had continued employment for such two and one
half (2 1/2) year period, to the extent permitted under
the plan or grant, or if such vesting is not permitted,
a cash payment equal to the difference between the fair
market value of the shares covered by the unvested
options and the exercise price of such unvested options
(the "Spread") on the date of termination, and, in both
cases, to the extent such options are exercisable for
less than two and three quarters (2-3/4) years after
termination (or, if less, the remainder of the
respective terms), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
termination) future value of such options for the
lesser of two and three quarters (2-3/4) years or the
remainder of such terms (any such payments shall be
made promptly after such termination). The terms of
the Executive's outstanding options are deemed to be
modified to the extent required by this Section 6.3
(g).
(h) Payment when it would otherwise be paid in accordance
with the 1994 Long-Term Incentive Plan of any amount
due with regard to performance share units outstanding
on the date of termination to the extent permitted
under such plan, plus, outside of such plan, when it
would otherwise have been paid, an amount equal to the
amount the Executive would have received with regard to
any performance share units outstanding at the time of
termination that could not be so paid. For purposes of
calculating the foregoing amounts, all discretionary
performance targets relating to the Executive's
individual performance will be deemed to be fully
achieved and the actual level of achievement of all
financial performance targets will be determined as if
the Executive continued to be employed through the end
of the applicable measuring period.
(i) Immediate full vesting of the Executive's accounts
under the Deferred Income Plan, and to the extent not
permitted under such plan, a cash payment outside of
the plan equal to the value of the amount that would
have vested under the plan.
(j) Continuation of participation for two and one-half (2
1/2) additional years in the Company's programs with
regard to tax preparation assistance and financial
planning assistance, club dues and automobile (but
based on the automobile then being used and no new
one), in accordance with the Company's programs in
effect at the time of the termination.
(k) As provided in Exhibit A hereto.
6.4 Termination by the Company for Cause or Termination by
the Executive without Good Reason. If the Executive is
terminated by the Company for Cause or the Executive terminates
his employment without Good Reason, the Executive shall be
entitled to receive all Accrued Obligations.
7. No Mitigation/No Offset/Release
(a) In the event of any termination of employment
hereunder, the Executive shall be under no obligation
to seek other employment and there shall be no offset
against any amounts due the Executive under this
Agreement on account of any remuneration attributable
to any subsequent employment that the Executive may
obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or
other right which the Company may have against the
Executive or others, except as specifically set forth
in Section 9 hereof or upon obtaining by the Company of
a final unappealable judgement against the Executive.
(b) Any amounts payable and benefits or additional rights
provided pursuant to Section 6.2 (other than Section
6.2(e)), Section 6.3 (other than Section 6.3(k)) and
Section 8.1 (other than Section 8.1(m)) beyond Accrued
Obligations and amounts or rights due under law, and,
in the case of Section 6.3 and Section 8.1, beyond the
sum of any amounts due (without execution of a release)
under the Company severance program then in effect, or,
if greater, three (3) months Base Salary as severance,
shall only be payable if the Executive delivers to the
Company a release of all claims of the Executive (other
than those specifically payable or providable hereunder
on or upon the applicable type of termination and any
rights of indemnification under the Company's
organizational documents) with regard to the Company,
its subsidiaries and related entities and their
respective past or present officers, directors and
employees in such form as reasonably requested by the
Company.
(c) Upon any termination of employment, upon the request of
the Company, the Executive shall deliver to the Company
a resignation from all offices and directorships and
fiduciary positions of the Executive in which the
Executive is serving with, or at the request of, the
Company or its subsidiaries, affiliates or benefit
plans.
(d) The amounts and benefits provided under Sections 6 and
8 hereof are intended to be inclusive and not
duplicative of the amounts and benefits due under the
Company's employee benefit plans and programs to the
extent they are duplicative.
8. Change in Control
8.1 Employment Termination in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) during the period commencing one-hundred eighty (180) days
prior to the effective date of a Change in Control and
terminating on the second anniversary of the effective date of a
Change in Control (the "Change in Control Protection Period"),
then in lieu of the benefits provided to the Executive under
Section 6.3 of this Agreement, the Company shall pay the
Executive the following amounts within (except as otherwise
provided) thirty (30) business days of the Qualifying Termination
(or, if later, the effective date of the Change in Control; in
which case any amounts or benefits previously paid pursuant to
Section 6 shall be setoff against those under this Section 8) and
provide the following benefits:
(a) Any Accrued Obligations.
(b) A lump-sum cash payment equal to three (3) times the
highest rate of the Executive's Base Salary rate in
effect at any time up to and including the date of the
Executive's termination.
(c) A lump-sum cash payment equal to the Prorated Portion
(as determined in the next sentence) of the greater of:
(i) the Executive's Termination Year Target Bonus or
(ii) the Executive's earned annual incentive award for
the fiscal year prior to the fiscal year in which the
earlier of the Change in Control or the Qualifying
Termination occurs (whether or not deferred). The
"Prorated Portion" of the foregoing amount shall be
determined by multiplying such amount by a fraction,
the numerator of which is the number of days during the
fiscal year of termination that the Executive is
employed by the Company, and the denominator of which
is, three hundred sixty-five (365).
(d) A lump-sum cash payment equal to three (3) times the
greater of: (i) the Executive's highest annual
incentive compensation earned over the three (3) fiscal
years ending prior to the earlier of the Change in
Control or the Qualifying Termination (whether or not
deferred); or (ii) the Executive's target incentive
compensation established for the fiscal year in which
the Executive's date of termination occurs.
(e) To the extent the Executive is eligible, was eligible
prior or after the Change in Control (or, if earlier,
the Qualifying Termination) or if the Executive would
be eligible with credit for an additional three (3)
years of age and service credit, coverage under all
applicable retiree health and other retiree welfare
plans for the Executive and the Executive's eligible
dependents (including an adjustment to the extent
necessary to put the Executive on the same after tax
basis as if the Executive had been eligible for such
coverage).
(f) To the extent eligible prior or after the Change in
Control (or, if earlier, the Qualifying Termination),
continued participation, (coordinated with (e) above to
the extent duplicative), at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans, until three (3)
years after the date of termination, provided, however,
that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
similar or improved benefit under such plan shall
immediately cease. To the extent such coverage cannot
be provided under the Company's welfare benefit plans
without jeopardizing the tax status of such plans, for
underwriting reasons or because of the tax impact on
the Executive, the Company shall pay the Executive an
amount such that the Executive can purchase such
benefits separately at no greater after tax cost to him
than he would have had if the benefits were provided to
him as an employee.
(g) A lump-sum cash payment of the actuarial present value
equivalent (as determined in accordance with the most
favorable (to the Executive) overall actuarial
assumptions and subsidies in any of the Company's tax-
qualified or nonqualified type defined benefit pension
plans in which the Executive then participates) of the
accrued benefits accrued by the Executive as of the
date of termination under the terms of any nonqualified
defined benefit type retirement plan, including but not
limited to, the SERP and the SBP and assuming the
benefit was fully vested without regard to any minimum
age or service requirements. For this purpose, such
benefits shall be calculated under the assumption that
the Executive's employment continued following the date
of termination for three (3) full years (i.e., three
(3) additional years of age (including, but not limited
to, for purposes of determining the actuarial present
value), compensation and service credits shall be
added).
(h) Three (3) times the amount of the maximum Company
contribution or match to any defined contribution type
plan in which the Executive participates.
(i) A lump-sum cash payment of the product of (i) the
Interest Factor (as determined in the next sentence)
multiplied by (ii) the Executive's entire account
balance under the Deferred Income Plan (or any
replacement therefor), plus an additional amount equal
to three (3) times the match which the Company made for
the Executive to such plan for the fiscal year ending
immediately prior to the earlier of the Change in
Control or the Qualifying Termination. The "Interest
Factor" shall be equal to one (1) plus three (3) times
the rate of earnings of the Executive's account under
such plan for the fiscal year ending immediately prior
to his termination.
(j) Immediate full vesting of any outstanding stock
options, performance share units and other equity
awards (and lapse of any forfeiture provisions) to the
extent permitted under the plan or grant, or if full
vesting is not permitted with regard to stock options,
a cash payment equal to the Spread on such unvested
options on the date of termination (or, if later, the
date of the Change in Control) plus, in both cases, if
options are exercisable for less than three (3) years
after termination (or, if less, the remainder of the
respective terms, including any termination of
exercisability of all Company stock options in
connection with the Change in Control or a merger
related thereto), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
earlier of the Qualifying Termination or the Change in
Control) future value of such outstanding options for
the lesser of three (3) years or the remainder of such
terms.
(k) Outplacement services at a level commensurate with the
Executive's position, including use of an executive
office and secretary, for a period of one (1) year
commencing on the date of termination but in no event
extending beyond the date on which the Executive
commences other full time employment.
(l) Continuation of participation for three (3) additional
years in the Company's programs with regard to tax
preparation assistance and financial planning
assistance, club dues and automobile (but based on the
automobile then being used and no new one), in
accordance with the Company's programs in effect at the
time of the Change in Control.
(m) As provided in Exhibit A hereto.
For purposes of this Section 8, a Qualifying Termination
shall mean any termination of the Executive's employment (i) by
the Company without Cause, or (ii) by the Executive for Good
Reason.
8.2 Definition of "Change in Control." A Change in Control
of the Company shall be deemed to have occurred as of the first
day any one or more of the following conditions shall have been
satisfied:
(a) Any "person" or "group" (within the meaning of Section
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than the
Company, any trustee or other fiduciary holding Company
common stock under an employee benefit plan of the
Company or a related company, or any corporation which
is owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as
their ownership of the Company's common stock, is or
becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than thirty percent
(30%) of the then outstanding voting stock;
(b) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board and any new director whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in office
who either were directors at the beginning of the two
year period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority of the Board;
(c) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger
or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or being converted into voting securities
of the surviving entity) more than fifty percent (50%)
of the combined voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation; or
(d) The approval of the stockholders of the Company of a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all of its assets.
8.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to payments and/or benefits which
would constitute "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, the provisions of Exhibit B will
apply.
9. Noncompetition, Confidentiality and Nondisparagement
9.1 Agreement Not to Compete.
(a) The Executive agrees that for a period of two (2) years
after the termination of the Executive's employment,
the Executive will not engage in Competition with the
Company with the Listed Companies, provided that after
the Executive's termination of employment the Listed
Companies shall be limited to those effectively listed
at the time of his termination and still on such list
at the time of any alleged activity of the Executive,
including, but not limited to, (i) soliciting
customers, business or orders for, or selling any
products and services in, Competition with the Company
for such Listed Companies or (ii) diverting, enticing,
or otherwise taking away customers, business or orders
of the Company, or attempting to do so, in either case
in Competition with the Company for such Listed
Companies.
(b) The Executive agrees that if, while he is receiving
severance pay from the Company pursuant to Section
6.2(b) or Section 6.3(b), the Executive: (i) violates
(a) above, or (ii) otherwise engages in Competition in
the Restricted Territory, whether or not with the
Listed Companies, Section 9.6(b) hereof shall apply.
(c) The Executive agrees that the restrictions contained in
this Section 9 are necessary for the protection of the
business and goodwill of the Company because of the
trade secrets within the Executive's knowledge and are
considered by the Executive to be reasonable for such
purpose.
9.2 Definitions.
(a) "Competition" shall mean engaging in, as an employee,
director, partner, principal, shareholder, consultant,
advisor, independent contractor or similar capacity,
with (a) the Listed Companies or (b) in any business,
activity or conduct which directly competes with the
business of the Company, provided that, with regard to
the period after termination of the Executive's
employment, Section 9.1(b)(ii) shall only apply to
business lines in which the Company is engaged both at
the time of termination of employment and at the time
of the determination and which during the last fiscal
year ending prior to the date of such termination repre
sented at least five percent (5%) of the Company's
revenues (the "Prohibited Lines"). Notwithstanding
anything else in this Section 9, Competition shall not
include: (A) (i) holding five percent (5%) or less of
an interest in the equity or debt of any publicly
traded company, (ii) engaging in any activity with the
prior written approval of the Chief Executive Officer
or the O&C Committee, (iii) the practice of law in a
law firm that represents entities in Competition with
the Company, provided that the Executive does not
personally represent such entities, or (iv) the
employment by, or provision of services to, an
investment banking firm or consulting firm that
provides services to entities that are in Competition
with the Company provided that the Executive does not
personally represent or provide services to such
entities that are Listed Companies or otherwise with
regard to businesses in Competition with the Prohibited
Lines, or (B) with regard to Section 9.1(b)(ii), (i)
being employed by, or consulting for, a non-Competitive
division or business unit of an entity which is in
Competition with the Company (and participating in such
entity's employee equity plans), (ii) being employed
by, or consulting for, an entity which had annual
revenues in the last fiscal year prior to the Executive
being employed by, or consulting for, the entity
generated through business lines in Competition with
the Prohibited Lines of the Company that do not exceed
five percent (5%) of such entity's total annual
revenues, provided that revenues within the Executive's
area of responsibility or authority are not more than
ten percent (10%) composed of the revenues from the
businesses in Competition with the Prohibited Lines, or
(iii) any activities conducted after a Change in
Control of the Company.
(b) The Restricted Territory shall mean any geographic area
in which the Company with regard to the Prohibited
Lines did more than nominal business.
(c) Listed Companies shall mean those entities which are
within the "peer group" established by the Company for
the performance graphs in its proxy statement pursuant
to Item 402(l) of Regulation S-K under the Exchange Act
and which are in a list of no more than five (5)
entities established by the Company from time to time
and available from the Chief Human Resources Officer,
provided that the addition of any entity to the list
shall not be effective until sixty (60) days after it
is so listed.
(d) For purposes of this Section 9, "Company" shall mean
the Company and its subsidiaries and affiliates.
9.3 Agreement Not to Engage in Certain Solicitation.
The Executive agrees that the Executive will not, during the
Executive's employment with the Company or during the two (2)
year period thereafter, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any non-clerical
employee(s), sales representative(s), agent(s), or consultant(s)
of the Company to terminate such person's employment,
representation or other association with the Company for the
purpose of affiliating with any entity with which the Executive
is associated ("Solicitation").
9.4 Confidential Information.
(a) The Executive specifically acknowledges that any trade
secrets or confidential business and technical
information of the Company or its vendors, suppliers or
customers, whether reduced to writing, maintained on
any form of electronic media, or maintained in mind or
memory and whether compiled by the Executive or the
Company (collectively, "Confidential Information"),
derives independent economic value from not being
readily known to or ascertainable by proper means by
others; that reasonable efforts have been made by the
Company to maintain the secrecy of such information;
that such information is the sole property of the
Company or its vendors, suppliers, or customers and
that any retention, use or disclosure of such
information by the Executive during the Employment Term
(except in the course of performing duties and
obligations of employment with the Company) or any time
after termination thereof, shall constitute
misappropriation of the trade secrets of the Company or
its vendors, suppliers, or customers, provided that
Confidential Information shall not include: (i)
information that is at the time of disclosure public
knowledge or generally known within the industry, (ii)
information deemed in good faith by the Executive,
while employed by the Company, desirable to disclose in
the course of performing the Executive's duties, (iii)
information the disclosure of which the Executive in
good faith deems necessary in defense of the
Executive's rights provided such disclosure by the
Executive is limited to only disclose as necessary for
such purpose, or (iv) information disclosed by the
Executive to comply with a court, or other lawful
compulsory, order compelling him to do so, provided the
Executive gives the Company prompt notice of the
receipt of such order and the disclosure by the
Executive is limited to only disclosure necessary for
such purpose.
(b) The Executive acknowledges that the Company from time
to time may have agreements with other persons or with
the United States Government, or agencies thereof, that
impose obligations or restrictions on the Company
regarding inventions made during the course of work
under such agreements or regarding the confidential
nature of such work. If the Executive's duties
hereunder will require disclosures to be made to him
subject to such obligations and restrictions, the
Executive agrees to be bound by them.
9.5 Scope of Restrictions. If, at the time of
enforcement of this Section 9, a court holds that the
restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and
that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area
permitted by law.
9.6 Remedies.
(a) In the event of a material breach or threatened
material breach of Section 9.1(a), Section 9.3, Section
9.4 or Section 9.10, the Company, in addition to its
other remedies at law or in equity, shall be entitled
to injunctive or other equitable relief in order to
enforce or prevent any violations of the provisions of
this Section 9. Except as specifically provided with
regard to Listed Companies, the Company agrees that it
will not assert to enjoin or otherwise limit the
Executive's activities based on an argument of
inevitable disclosure of confidential information.
(b) In the event Section 9.1(b) applies, the Company may
immediately cease payment to the Executive of all
future amounts due under Sections 6.2(a) or (b) or
Sections 6.3(a) or (b), as well as otherwise
specifically provided in any other plan, grant or
program.
(c) Upon written request of the Executive, the Company
shall within thirty (30) days notify the Executive in
writing whether or not in good faith it believes any
proposed activities would be in Competition and, if it
so determines or does not reply within thirty (30)
days, it shall be deemed to waive any right to treat
such activities as Competition unless the facts are
otherwise than as presented by the Executive or there
is a change thereafter in such activities. The
Executive shall promptly provide the Company with such
information as it may reasonably request to evaluate
whether or not such activities are in Competition.
9.7 Uniformity. In no event shall any definitions of
Competition or Solicitation (or a similar provision) as it
applies to the Executive with regard to any plan of program or
grant of the Company be interpreted to be any broader than as set
forth in this Section 9.
9.8 Delivery of Documents. Upon termination of this
Agreement or at any other time upon request by the Company, the
Executive shall promptly deliver to the Company all records,
files, memoranda, notes, designs, data, reports, price lists,
customer lists, drawings, plans, computer programs, software,
software documentation, sketches, laboratory and research
notebooks and other documents (and all copies or reproductions of
such materials in his possession or control) belonging to the
Company. Notwithstanding the foregoing, the Executive may retain
his rolodex and similar phone directories (collectively, the
"Rolodex") to the extent the Rolodex does not contain information
other than name, address, telephone number and similar
information, provided that, at the request of the Company, the
Executive shall provide the Company with a copy of the Rolodex.
9.9 Nondisparagement.
(a) During the Employment Term and thereafter, the
Executive shall not with willful intent to damage
economically or as to reputation or vindictively
disparage the Company, its subsidiaries or their
respective past or present officers, directors or
employees (the "Protected Group"), provided that the
foregoing shall not apply to (i) actions or statements
taken or made by the Executive while employed by the
Company in good faith as fulfilling the Executive's
duties with the Company or otherwise at the request of
the Company, (ii) truthful statements made in
compliance with legal process or governmental inquiry,
(iii) as the Executive in good faith deems necessary to
rebut any untrue or misleading public statements made
about him or any other member of the Protected Group,
(iv) statements made in good faith by the Executive to
rebut untrue or misleading statements made about him or
any other member of the Protected Group by any member
of the Protected Group, and (v) normal commercial
puffery in a competitive business situation. No member
of the Protected Group shall be a third party
beneficiary of this Section 9.9(a).
(b) During the Employment Term and thereafter, neither the
Company officially nor any then member of the Executive
Leadership Team (or the equivalent) of the Company, as
such term is currently used within the Company, shall
with willful intent to damage the Executive
economically or as to reputation or otherwise
vindictively disparage the Executive, provided the
foregoing shall not apply to (i) actions or statements
taken or made in good faith within the Company in
fulfilling duties with the Company, (ii) truthful
statements made in compliance with legal process,
governmental inquiry or as required by legal filing or
disclosure requirements, (iii) as in good faith deemed
necessary to rebut any untrue or misleading statements
by the Executive as to any member of the Protected
Group or (iv) normal commercial puffery in a
competitive business situation.
(c) In the event of a material breach or threatened
material breach of clauses (a) or (b) above, the
Company or the Executive, as the case may be, in
addition to its or the Executive's other remedies at
law or in equity, shall be entitled to injunctive or
other equitable relief in order to enforce or prevent
any violations of this Section 9.9.
9.10 Pooling of Interests. If the Company is involved
in any proposed business combination that is contemplated to be
accounted for as a pooling of interests, the Executive agrees to
cooperate with the reasonable requests of the Company with regard
to the exercise of stock options, the sale of Company stock or
other matters that could affect the ability of the combination to
be accounted for as a pooling of interests.
10 Liability Insurance
The Company shall cover the Executive under directors
and officers liability insurance both during and, while potential
liability exists, after the Employment Term in the same amount
and to the same extent, if any, as the Company covers its other
officers and directors.
11 Assignment
11.1 Assignment by the Company. This Agreement may and
shall be assigned or transferred to, and shall be binding upon
and shall inure to the benefit of, any successor of the Company,
and any such successor shall be deemed substituted for all
purposes of the "Company" under the terms of this Agreement. As
used in this Agreement, the term "successor" shall mean any
person, firm, corporation or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or
substantially all of the assets of the Company. Notwithstanding
such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
11.2 Assignment by the Executive. This Agreement is
not assignable by the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
12 Legal Remedies
12.1 Payment of Legal Fees. The Company shall pay the
Executive's reasonable legal fees and costs associated with
entering into this Agreement. To the fullest extent permitted by
law, the Company shall promptly pay upon submission of statements
all legal and other professional fees, costs of litigation,
prejudgment interest, and other expenses incurred in connection
with any dispute arising hereunder; provided, however, the
Company shall be reimbursed by the Executive for (i) the fees and
expenses advanced in the event the Executive's claim is in a
material manner in bad faith or frivolous and the arbitrator or
court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate, or (ii) to the extent that the
arbitrator or court, as appropriate, determines that such legal
and other professional fees are clearly and demonstrably
unreasonable.
12.2 Arbitration. All disputes and controversies
arising under or in connection with this Agreement, other than
the seeking of injunctive or other equitable relief pursuant to
Section 9 hereof, shall be settled by arbitration conducted
before a panel of three (3) arbitrators sitting in New York City,
New York, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of commercial
disputes of the American Arbitration Association then in effect.
The determination of the majority of the arbitrators shall be
final and binding on the parties. Judgment may be entered on the
award of the arbitrator in any court having proper jurisdiction.
All expenses of such arbitration, including the fees and expenses
of the counsel of the Executive, shall be borne by the Company
and the Executive shall be entitled to reimbursement of his
expenses as provided in Section 12.1 hereof.
12.3 Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if delivered personally, sent by telecopier,
sent by an overnight service or sent by registered or certified
mail. Notice to the Executive not delivered personally (or by
telecopy where the Executive is known to be) shall be sent to the
last address on the books of the Company, and notice to the
Company not delivered personally (or by telecopy to the known
personal telecopy of the person it is being sent to) shall be
sent to it at its principal office. All notices to the Company
shall be delivered to the Chief Executive Officer with a copy to
the senior human resources officer. Delivery shall be deemed to
occur on the earlier of actual receipt or tender and rejection by
the intended recipient.
12.4 Continued Payments. In the event after a Change
in Control either party files for arbitration to resolve any
dispute as to whether a termination is for Cause or Good Reason,
until such dispute is determined by the arbitrators, the
Executive shall continue to be treated economically and benefit
wise in the manner asserted by him in the arbitration effective
as of the date of the filing of the arbitration, subject to the
Executive promptly refunding any amounts paid to him, paying the
cost of any benefits provided to him and paying to the Company
the profits in any stock option or other equity awards exercised
or otherwise realized by him during the pendency of the
arbitration which he is ultimately held not to be entitled to;
provided the arbitrators may terminate such payments and benefits
in the event that they determine at any point that the Executive
is intentionally delaying conclusion of the arbitration.
13 Miscellaneous
13.1 Entire Agreement. This Agreement, except to the
extent specifically provided otherwise herein, supersedes any
prior agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect to the subject matter
hereof. To the extent any severance plan or program of the
Company that would apply to the Executive is more generous to the
Executive than the provisions hereof, the Executive shall be
entitled to any additional payments or benefits which are not
duplicative, but shall otherwise not be eligible for such plan or
program.
13.2 Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended, nor
any provision hereof waived, except by mutual agreement of the
parties in a written instrument executed by the parties hereto or
their legal representatives.
13.3 Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.4 Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed to be
an original, but all of which together will constitute one and
the same Agreement.
13.5 Tax Withholding. The Company may withhold from
any benefits payable under this Agreement all federal, state,
city, or other taxes as may be required pursuant to any law or
governmental regulation or ruling.
13.6 Beneficiaries. The Executive may designate one or
more persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
13.7 Representation. The Executive represents that the
Executive's employment by the Company and the performance by the
Executive of his obligations under this Agreement do not, and
shall not, breach any agreement that obligates him to keep in
confidence any trade secrets or confidential or proprietary
information of his or of any other party, to write or consult to
any other party or to refrain from competing, directly or
indirectly, with the business of any other party. The Executive
shall not disclose to the Company, and the Company shall not
request that the Executive disclose, any trade secrets or
confidential or proprietary information of any other party.
14 Governing Law
The provisions of this Agreement shall be construed and
enforced in accordance with the laws of the state of Delaware,
without regard to any otherwise applicable principles of
conflicts of laws.
IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement, as of the day and year first above
written.
/s/Wayne W. Juchatz
Wayne W. Juchatz
TEXTRON INC.
By:/s/John D. Butler
Name: John D. Butler
Title: Executive Vice President
Exhibit A
Special Grants
For all purposes with regard to all qualified and non-
qualified defined benefit type pension plans of the Company in
which the Executive participates, the Executive shall be entitled
to twelve (12) additional years of Company service credit,
including but not limited to under the SBP and the SERP, provided
that no additional service will be recognized under any qualified
plan but will be made up as part of the SBP or SERP or through
another nonqualified arrangement and further provided that the
Executive shall not receive such additional credit until he is
credited with five (5) years of service under the qualified
defined benefit pension plan or his earlier termination of
employment as a result of his death, for Disability (pursuant to
Section 5(b) hereof), by the Company without Cause (pursuant to
Section 5(e) hereof) or by the Executive for Good Reason
(pursuant to Section 5(f) hereof).
Exhibit B
Parachute Gross Up
(a) In the event that the Executive shall become
entitled to payments and/or benefits provided by this Agreement
or any other amounts in the "nature of compensation" (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person) as a result of such
change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code
(and any similar tax that may hereafter be imposed by any taxing
authority) the Company shall pay to the Executive at the time
specified in subsection (d) below an additional amount (the
"Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and for local income or
payroll tax upon the Gross-up Payment provided for by this
paragraph (a), but before deduction for any U.S. federal, state,
and local income or payroll tax on the Company Payments, shall be
equal to the Company Payments.
(b) For purposes of determining whether any of the
Company Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except
to the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax
counsel selected by such accountants (the "Accountants") such
Total Payments (in whole or in part) either do not constitute
"parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, the Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-
up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of
the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment
thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided
for in subsection (c) above shall be paid not later than the
thirtieth (30th) day following an event occurring which subjects
the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good
faith by the Accountant, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code), subject to further payments pursuant to subsection (c)
hereof, as soon as the amount thereof can reasonably be deter
mined, but in no event later than the ninetieth day after the
occurrence of the event subjecting the Executive to the Excise
Tax. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
(e) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) with regard to the
Excise Tax, the Executive shall permit the Company to control
issues related to the Excise Tax (at its expense), provided that
such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In
the event the issues are interrelated, the Executive and the
Company shall in good faith cooperate so as not to jeopardize
resolution of either issue, but if the parties cannot agree the
Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive
shall permit the representative of the Company to accompany the
Executive, and the Executive and the Executive's representative
shall cooperate with the Company and its representative.
(f) The Company shall be responsible for all charges
of the Accountant.
(g) The Company and the Executive shall promptly
deliver to each other copies of any written communications, and
summaries of any verbal communications, with any taxing authority
regarding the Excise Tax covered by this Exhibit B.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is entered into as of this 23rd
day of July, 1998 by and between Textron Inc. (the "Company"), a
Delaware corporation having its principal office at 40
Westminster Street, Providence, Rhode Island 02903 and Stephen L.
Key residing at 44 Stimson Avenue, Providence, Rhode Island 02906
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is presently employed by the Company;
WHEREAS, the Company desires to continue to employ the
Executive and the Executive is willing to continue to be employed
by the Company; and
WHEREAS, the Company and the Executive desire to set forth
the terms and conditions of such continued employment.
NOW THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration, the
adequacy and receipt of which is acknowledged, the parties hereto
agree as follows:
1. Term of Employment
The Company hereby agrees to continue to employ the
Executive and the Executive hereby accepts continued employment,
in accordance with the terms and conditions set forth herein, for
a term (the "Employment Term") commencing on the date hereof (the
"Effective Date") and terminating, unless otherwise terminated
earlier in accordance with Section 5 hereof, on the third
anniversary of the Effective Date (the "Original Employment
Term"), provided that the Employment Term shall be automatically
extended, subject to earlier termination as provided in Section 5
hereof, for successive additional one (1) year periods (the
"Additional Terms"), unless, at least ninety (90) days prior to
the end of the Original Employment Term or the then Additional
Term, the Company or the Executive has notified the other in
writing that the Employment Term shall terminate at the end of
the then current term.
2. Position and Responsibilities
During the Employment Term, the Executive shall serve
as the Executive Vice President and Chief Financial Officer of
the Company or in such higher capacity as agreed by the Company
and the Executive. The Executive shall report exclusively to the
Chief Executive Officer and the Board of Directors of the Company
(the "Board"). The Executive shall, to the extent appointed or
elected, serve on the Board as a director and as a member of any
committee of the Board, in each case, without additional
compensation. The Executive shall, to the extent appointed or
elected, serve as a director or as a member of any committee of
the board (or the equivalent bodies in a non-corporate subsidiary
or affiliate) of any of the Company's subsidiaries or affiliates
and as an officer or employee (in a capacity commensurate with
his position with the Company) of any such subsidiaries or
affiliates, in all cases, without additional compensation or
benefits and any compensation paid to the Executive, or benefits
provided to the Executive, in such capacities shall be a credit
with regard to the amounts due hereunder from the Company. The
Executive shall have duties, authorities and responsibilities
generally commensurate with the duties, authorities and
responsibilities of persons in similar capacities in similarly
sized companies subject to the By-laws of the Company and the
organizational structure of the Company. The Executive shall
devote substantially all of his business time, attention and
energies to the performance of his duties hereunder, provided the
foregoing will not prevent the Executive from participating in
charitable, community or industry affairs, from managing his and
his family's personal passive investments, and (with the consent
of the Chief Executive Officer or the Organization and
Compensation Committee (or its successor) of the Board (the "O&C
Committee"), which consent will not be unreasonably withheld,
conditioned or delayed) serving on the board of directors of
other companies, provided that these activities do not materially
interfere with the performance of his duties hereunder or create
a potential business conflict or the appearance thereof. The
Company has consented to the Executive's services on the boards
of directors, if any, on which the Executive currently serves,
which boards the Executive has disclosed in writing to the O&C
Committee. The Executive may retain any compensation or benefits
received as a result of consented to service as a director of
entities not related to the Company.
3. Compensation and Benefits
During the Employment Term, the Company shall pay and
provide the Executive the following:
3.1 Base Salary. The Company shall pay the Executive
a base salary (the "Base Salary") in an amount which shall be
established from time to time by the O&C Committee (or as
otherwise designated by the Board), provided, however, that such
base salary rate shall not be less than his current rate of base
salary. Base Salary shall be paid to the Executive in accordance
with the Company's normal payroll practices for executives. Base
Salary shall be reviewed at least annually to ascertain whether,
in the judgment of the reviewing committee, such Base Salary
should be increased. If so increased, Base Salary shall not be
thereafter decreased and shall thereafter, as increased, be the
Base Salary hereunder.
3.2 Annual Bonus. The Company shall provide the
Executive with the opportunity to earn an annual cash bonus under
the Company's current annual incentive compensation plan for
executives or a replacement plan therefor at a level commensurate
with his position, provided that the minimum annual target award
payable upon the achievement of reasonably attainable objective
performance goals shall be at least fifty-five percent (55%) of
Base Salary.
3.3 Long-Term Incentives. The Company shall provide
the Executive the opportunity to earn long-term incentive awards
under the current equity and cash based plans and programs or
replacements therefor at a level commensurate with the current
aggregate opportunity being provided to the Executive.
3.4 Employee Benefits. The Executive shall, to the
extent eligible, be entitled to participate at a level
commensurate with his position in all employee benefit welfare
and retirement plans and programs, as well as equity plans,
generally provided by the Company to its senior executives in
accordance with the terms thereof as in effect from time to time.
Such plans and programs currently include, without limitation,
the Amended and Restated Supplemental Retirement Plan for Textron
Inc. Key Executives (the "SERP"), the 1994 Long-Term Incentive
Plan, the Key Executive Program (including the Deferred Income
Plan, the Supplemental Benefits Plan (the "SBP") and the Survivor
Benefit Plan), group term life insurance plan, comprehensive
health, major medical, vision and dental insurance plans and
short-term and long-term disability plans.
3.5 Vacation. The Executive shall be entitled to paid
vacation in accordance with the standard written policies of the
Company with regard to vacations of executives, but in no event
less than four (4) weeks per calendar year.
3.6 Perquisites. The Company shall provide to the
Executive, at the Company's cost, all perquisites to which other
senior executives of the Company are generally entitled to
receive and such other perquisites which are suitable to the
character of the Executive's position with the Company and
adequate for the performance of his duties hereunder but not less
than the level being provided on the date hereof except as
otherwise required because of changes in law. To the extent
legally permissible, the Company shall not treat such amounts as
income to the Executive.
3.7 Right to Change Plans. The Company shall not be
obligated by reason of this Section 3 to institute, maintain, or
refrain from changing, amending, or discontinuing any benefit
plan, program, or perquisite, so long as such changes are
similarly applicable to executive employees generally and
provided that the benefits or additional credit specifically as
set forth in Section 3.8 below shall not be diminished.
3.8 Existing Awards. The Company acknowledges that
the Executive currently is entitled to, among other things, the
special grants set forth in Exhibit A hereto, as modified on
Exhibit A.
4. Expenses
Upon submission of appropriate documentation, in
accordance with its policies in effect from time to time, the
Company shall pay, or reimburse, the Executive for all ordinary
and necessary expenses, in a reasonable amount, which the
Executive incurs in performing his duties under this Agreement
including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, and civic associations and societies in which the
Executive participates in accordance with the Company's policies
in effect from time to time.
5. Termination of Employment
The Executive's employment with the Company (including but
not limited to any subsidiary or affiliate or the Company) and
the Employment Term shall terminate upon the occurrence of the
first of the following events:
(a) Automatically on the date of the Executive's death.
(b) Upon thirty (30) days written notice by the Company to
the Executive of a termination due to Disability,
provided such notice is delivered during the period of
Disability. The term "Disability" shall mean, for
purposes of this Agreement, the inability of the
Executive, due to injury, illness, disease or bodily or
mental infirmity, to engage in the performance of his
material duties of employment with the Company as
contemplated by Section 2 herein for a period of more
than one hundred eighty (180) consecutive days or for a
period that is reasonably expected to exist for a
period of more than one hundred eighty (180)
consecutive days, provided that interim returns to work
of less than ten (10) consecutive business days in
duration shall not be deemed to interfere with a
determination of consecutive absent days if the reason
for absence before and after the interim return are the
same. The existence or non-existence of a Disability
shall be determined by a physician agreed upon in good
faith by the Executive (or his representatives) and the
Company. It is expressly understood that the
Disability of the Executive for a period of one hundred
eighty (180) consecutive days or less shall not
constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default
and the Executive shall receive full compensation for
any such period of Disability or for any other
temporary illness or incapacity during the term of this
Agreement.
(c) Immediately upon written notice by the Company to the
Executive of a termination due to his retirement at or
after the Executive's attainment of age sixty-five
(65).
(d) Immediately upon written notice by the Company to the
Executive of a termination for Cause, provided such
notice is given within ninety (90) days after the
discovery by the Board or the Chief Executive Officer
of the Cause event and has been approved by the O&C
Committee at a meeting at which the Executive and his
counsel had the right to appear and address such
meeting after receiving at least five (5) business days
written notice of the meeting and reasonable detail of
the facts and circumstances claimed to provide a basis
for such termination. The term "Cause" shall mean, for
purposes of this Agreement: (i) an act or acts of
willful misrepresentation, fraud or willful dishonesty
(other than good faith expense account disputes) by the
Executive which in any case is intended to result in
his or another person or entity's substantial personal
enrichment at the expense of the Company; (ii) any
willful misconduct by the Executive with regard to the
Company, its business, assets or employees that has, or
was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iii) any
material, willful and knowing violation by the
Executive of (x) the Company's Business Conduct
Guidelines, or (y) any of his fiduciary duties to the
Company which in either case has, or was intended to
have, a material adverse impact (economic or otherwise)
on the Company; (iv) the willful or reckless behavior
of the Executive with regard to a matter of a material
nature which has a material adverse impact (economic or
otherwise) on the Company; (v) the Executive's willful
failure to attempt to perform his duties under Section
2 hereof or his willful failure to attempt to follow
the legal written direction of the Board, which in
either case is not remedied within ten (10) days after
receipt by the Executive of a written notice from the
Company specifying the details thereof; (vi) the
Executive's conviction of, or pleading nolo contendere
or guilty to, a felony (other than (x) a traffic
infraction or (y) vicarious liability solely as a
result of his position provided the Executive did not
have actual knowledge of the actions or inactions
creating the violation of the law or the Executive
relied in good faith on the advice of counsel with
regard to the legality of such action or inaction (or
the advice of other specifically qualified
professionals as to the appropriate or proper action or
inaction to take with regard to matters which are not
matters of legal interpretation)); or (vii) any other
material breach by the Executive of this Agreement that
is not cured by the Executive within twenty (20) days
after receipt by the Executive of a written notice from
the Company of such breach specifying the details
thereof. No action or inaction should be deemed
willful if not demonstrably willful and if taken or not
taken by the Executive in good faith as not being
adverse to the best interests of the Company.
Reference in this paragraph (d) to the Company shall
also include direct and indirect subsidiaries of the
Company, and materiality and material adverse impact
shall be measured based on the action or inaction and
the impact upon, and not the size of, the Company taken
as a whole, provided that after a Change in Control,
the size of the Company, taken as a whole, shall be a
relevant factor in determining materiality and material
adverse impact.
(e) Upon written notice by the Company to the Executive of
an involuntary termination without Cause. A notice by
the Company of non-renewal of the Employment Term
pursuant to Section 1 above shall be deemed an
involuntary termination of the Executive by the Company
without Cause as of the end of the Employment Term, but
the Executive may terminate at any time after the
receipt of such notice and shall be treated as if he
was terminated without Cause as of such date.
(f) Upon twenty (20) days written notice by the Executive
to the Company of a termination for Good Reason (which
notice sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such
termination) unless the Good Reason event is cured
within such twenty (20) day period. The term "Good
Reason" shall mean, for purposes of this Agreement,
without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the
assignment to the Executive of duties materially
inconsistent with the Executive's then authorities,
duties, responsibilities, and status (including
offices, titles, and reporting requirements), or any
reduction in the Executive's then title, position,
reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated)
in his then status, authorities, duties, or
responsibilities or, if then a director of the Company,
failure to be nominated or reelected as a director of
the Company or removal as such; (ii) relocation of the
Executive from the principal office of the Company
(excluding reasonable travel on the Company's business
to an extent substantially consistent with the
Executive's business obligations) or relocation of the
principal office of the Company to a location which is
at least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at
the time of the relocation is not located at the
principal office, such relocation provision shall apply
based on his then location; (iii) a reduction by the
Company in the Executive's Base Salary; (iv) a
reduction in the Executive's aggregate level of
participation in any of the Company's short and/or
long-term incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or
arrangements in which the Executive participated as of
the Effective Date, or, after a Change in Control,
participated immediately prior to the Change in
Control; (v) the failure of the Company to obtain and
deliver to the Executive a satisfactory written
agreement from any successor to the Company to assume
and agree to perform this Agreement; or (vi) any other
material breach by the Company of this Agreement.
(g) Upon written notice by the Executive to the Company of
the Executive's voluntary termination of employment
without Good Reason (which the Company may, in its sole
discretion, make effective earlier than any notice
date). A notice by the Executive of non-renewal of the
Employment Term pursuant to Section 1 above shall be
deemed a voluntary termination by the Executive without
Good Reason as of the end of the Employment Term.
6. Consequences of a Termination of Employment
6.1 Termination Due to Death or Retirement. If the
Employment Term ends on account of the Executive's termination
due to death pursuant to Section 5(a) above or retirement
pursuant to Section 5(c) above, the Executive (or the Executive's
surviving spouse, or other beneficiary as so designated by the
Executive during his lifetime, or to the Executive's estate, as
appropriate) shall be entitled, in lieu of any other payments or
benefits, to (i) payment promptly of any unpaid Base Salary,
unpaid annual incentive compensation (for the preceding fiscal
year) and any accrued vacation, (ii) reimbursement for any
unreimbursed business expenses incurred prior to the date of
termination, and (iii) any amounts, benefits or fringes due under
any equity, benefit or fringe plan, grant or program in
accordance with the terms of said plan, grant or program but
without duplication (collectively, the "Accrued Obligations").
6.2 Termination Due To Disability. If the Employment Term
ends as a result of Disability pursuant to Section 5(b) above,
the Executive shall be entitled, in lieu of any other payments or
benefits, subject to Section 7(b) hereof, to any Accrued
Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to three hundred percent (300%) of the
Executive's target annual incentive compensation award
established for the fiscal year during which the
Executive's termination occurs (the "Termination Year
Target Bonus").
(b) Continued monthly payment for two and one half (2 1/2)
years of an amount equal to the Executive's monthly
Base Salary rate reduced by any disability benefits
received by the Executive under the Company's long term
disability plan for the corresponding period.
(c) Payments and benefits as set forth in Section 6.3(c)-
(j) hereof.
(d) The Executive shall be deemed to have satisfied the
definition of "total disability" under the 1994 Long-
Term Incentive Plan or the equivalent definition under
any successor plan thereto.
(e) As provided in Exhibit A hereto.
6.3 Involuntary Termination by the Company Without Cause or
Termination by the Executive for Good Reason. If the Executive
is involuntarily terminated by the Company without Cause in
accordance with Section 5(e) above or the Executive terminates
his employment for Good Reason in accordance with Section 5(f)
above, the Executive shall be entitled, in lieu of any other
payments or benefits, subject to Section 7(b) hereof, to any
Accrued Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to the Executive's Termination Year Target Bonus
multiplied by a fraction, the numerator of which is the
number of days during the fiscal year of the
Executive's termination that the Executive was employed
by the Company and the denominator is three hundred
sixty-five (365), provided that in no event shall such
payment exceed fifty percent (50%) of the Termination
Year Target Bonus.
(b) Continued payment off payroll for two and one-half (2
1/2) years (in approximately equal monthly
installments) of an amount equal to two and one-half (2
1/2) times the sum of: (i) the Executive's Base
Salary, and (ii) the greater of: (x) the Termination
Year Target Bonus, or (y) the Executive's highest
annual incentive compensation award earned during the
last three (3) fiscal years ending prior to the fiscal
year of termination (whether or not deferred).
(c) To the extent eligible at such time or, if the
Executive would be eligible with credit for an
additional two and one half (2 1/2) years of age and
service credit, coverage under all applicable retiree
health and other retiree welfare plans for the
Executive and his dependents (including, if he is only
eligible because of the extra age and service credit,
an adjustment, to the extent necessary, to put the
Executive in the same after-tax position as if he had
been eligible for such coverage) and, if not eligible
for continued health coverage under the retiree health
plan, payment of the Executive's and Executive's
eligible dependents' COBRA continuation health coverage
premiums for the Company's health insurance plan that
generally applies to senior executives for the two and
one-half (2 1/2) year period following the date of
termination or, if earlier, until the Executive and
Executive's dependents cease to be eligible for such
coverage, provided that, if COBRA coverage cannot be
provided for the full period, any excess period shall
be covered under (d) below (and further provided that,
if such premiums are taxable to the Executive, an
adjustment such that the Executive has no after tax
cost for the providing of such COBRA coverage).
(d) To the extent eligible on the date of termination,
continued participation, at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans (other than medical
plans covered under (c) above), until two and one-half
(2 1/2) years after the date of termination; provided,
however, that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
benefits under such plan shall immediately cease. To
the extent such coverage cannot be provided under the
Company's welfare benefit plans without jeopardizing
the tax status of such plans, for underwriting reasons
or because of the tax impact on the Executive, the
Company shall pay the Executive an amount such that the
Executive can purchase such benefits separately at no
greater after tax cost to the Executive than the
Executive would have had if the benefits were provided
to the Executive as an employee.
(e) Two and one-half (2 1/2) additional years of service
and compensation credit (at the Executive's then
compensation level) for benefit purposes under any
defined benefit type retirement plan, including but not
limited to the SERP and the SBP if then in effect, and,
if the Executive is not eligible to receive benefits
under any such plan on the date of termination, two and
one-half (2 1/2) additional years of age for
determining eligibility to receive such benefits,
provided that benefits under any such plan will not
commence until the Executive actually attains the
required distribution age under the plan or the
Executive's spouse qualifies for death benefits under
such plan and further provided that with regard to any
plan qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") the
additional amounts may be provided on a nonqualified
plan basis.
(f) Payment promptly after termination of two and one-half
(2 1/2) times the amount of the maximum Company annual
contribution or match to any defined contribution type
plan in which the Executive participates.
(g) Immediate full vesting of any outstanding stock options
that would vest within two and one half (2 1/2) years
after such termination of employment as if the
Executive had continued employment for such two and one
half (2 1/2) year period, to the extent permitted under
the plan or grant, or if such vesting is not permitted,
a cash payment equal to the difference between the fair
market value of the shares covered by the unvested
options and the exercise price of such unvested options
(the "Spread") on the date of termination, and, in both
cases, to the extent such options are exercisable for
less than two and three quarters (2-3/4) years after
termination (or, if less, the remainder of the
respective terms), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
termination) future value of such options for the
lesser of two and three quarters (2-3/4) years or the
remainder of such terms (any such payments shall be
made promptly after such termination). The terms of
the Executive's outstanding options are deemed to be
modified to the extent required by this Section 6.3
(g).
(h) Payment when it would otherwise be paid in accordance
with the 1994 Long-Term Incentive Plan of any amount
due with regard to performance share units outstanding
on the date of termination to the extent permitted
under such plan, plus, outside of such plan, when it
would otherwise have been paid, an amount equal to the
amount the Executive would have received with regard to
any performance share units outstanding at the time of
termination that could not be so paid. For purposes of
calculating the foregoing amounts, all discretionary
performance targets relating to the Executive's
individual performance will be deemed to be fully
achieved and the actual level of achievement of all
financial performance targets will be determined as if
the Executive continued to be employed through the end
of the applicable measuring period.
(i) Immediate full vesting of the Executive's accounts
under the Deferred Income Plan, and to the extent not
permitted under such plan, a cash payment outside of
the plan equal to the value of the amount that would
have vested under the plan.
(j) Continuation of participation for two and one-half (2
1/2) additional years in the Company's programs with
regard to tax preparation assistance and financial
planning assistance, club dues and automobile (but
based on the automobile then being used and no new
one), in accordance with the Company's programs in
effect at the time of the termination.
(k) As provided in Exhibit A hereto.
6.4 Termination by the Company for Cause or Termination by
the Executive without Good Reason. If the Executive is
terminated by the Company for Cause or the Executive terminates
his employment without Good Reason, the Executive shall be
entitled to receive all Accrued Obligations.
7. No Mitigation/No Offset/Release
(a) In the event of any termination of employment
hereunder, the Executive shall be under no obligation
to seek other employment and there shall be no offset
against any amounts due the Executive under this
Agreement on account of any remuneration attributable
to any subsequent employment that the Executive may
obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or
other right which the Company may have against the
Executive or others, except as specifically set forth
in Section 9 hereof or upon obtaining by the Company of
a final unappealable judgement against the Executive.
(b) Any amounts payable and benefits or additional rights
provided pursuant to Section 6.2 (other than Section
6.2(e)), Section 6.3 (other than Section 6.3(k)) and
Section 8.1 (other than Section 8.1(m)) beyond Accrued
Obligations and amounts or rights due under law, and,
in the case of Section 6.3 and Section 8.1, beyond the
sum of any amounts due (without execution of a release)
under the Company severance program then in effect, or,
if greater, three (3) months Base Salary as severance,
shall only be payable if the Executive delivers to the
Company a release of all claims of the Executive (other
than those specifically payable or providable hereunder
on or upon the applicable type of termination and any
rights of indemnification under the Company's
organizational documents) with regard to the Company,
its subsidiaries and related entities and their
respective past or present officers, directors and
employees in such form as reasonably requested by the
Company.
(c) Upon any termination of employment, upon the request of
the Company, the Executive shall deliver to the Company
a resignation from all offices and directorships and
fiduciary positions of the Executive in which the
Executive is serving with, or at the request of, the
Company or its subsidiaries, affiliates or benefit
plans.
(d) The amounts and benefits provided under Sections 6 and
8 hereof are intended to be inclusive and not
duplicative of the amounts and benefits due under the
Company's employee benefit plans and programs to the
extent they are duplicative.
8. Change in Control
8.1 Employment Termination in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) during the period commencing one-hundred eighty (180) days
prior to the effective date of a Change in Control and
terminating on the second anniversary of the effective date of a
Change in Control (the "Change in Control Protection Period"),
then in lieu of the benefits provided to the Executive under
Section 6.3 of this Agreement, the Company shall pay the
Executive the following amounts within (except as otherwise
provided) thirty (30) business days of the Qualifying Termination
(or, if later, the effective date of the Change in Control; in
which case any amounts or benefits previously paid pursuant to
Section 6 shall be setoff against those under this Section 8) and
provide the following benefits:
(a) Any Accrued Obligations.
(b) A lump-sum cash payment equal to three (3) times the
highest rate of the Executive's Base Salary rate in
effect at any time up to and including the date of the
Executive's termination.
(c) A lump-sum cash payment equal to the Prorated Portion
(as determined in the next sentence) of the greater of:
(i) the Executive's Termination Year Target Bonus or
(ii) the Executive's earned annual incentive award for
the fiscal year prior to the fiscal year in which the
earlier of the Change in Control or the Qualifying
Termination occurs (whether or not deferred). The
"Prorated Portion" of the foregoing amount shall be
determined by multiplying such amount by a fraction,
the numerator of which is the number of days during the
fiscal year of termination that the Executive is
employed by the Company, and the denominator of which
is, three hundred sixty-five (365).
(d) A lump-sum cash payment equal to three (3) times the
greater of: (i) the Executive's highest annual
incentive compensation earned over the three (3) fiscal
years ending prior to the earlier of the Change in
Control or the Qualifying Termination (whether or not
deferred); or (ii) the Executive's target incentive
compensation established for the fiscal year in which
the Executive's date of termination occurs.
(e) To the extent the Executive is eligible, was eligible
prior or after the Change in Control (or, if earlier,
the Qualifying Termination) or if the Executive would
be eligible with credit for an additional three (3)
years of age and service credit, coverage under all
applicable retiree health and other retiree welfare
plans for the Executive and the Executive's eligible
dependents (including an adjustment to the extent
necessary to put the Executive on the same after tax
basis as if the Executive had been eligible for such
coverage).
(f) To the extent eligible prior or after the Change in
Control (or, if earlier, the Qualifying Termination),
continued participation, (coordinated with (e) above to
the extent duplicative), at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans, until three (3)
years after the date of termination, provided, however,
that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
similar or improved benefit under such plan shall
immediately cease. To the extent such coverage cannot
be provided under the Company's welfare benefit plans
without jeopardizing the tax status of such plans, for
underwriting reasons or because of the tax impact on
the Executive, the Company shall pay the Executive an
amount such that the Executive can purchase such
benefits separately at no greater after tax cost to him
than he would have had if the benefits were provided to
him as an employee.
(g) A lump-sum cash payment of the actuarial present value
equivalent (as determined in accordance with the most
favorable (to the Executive) overall actuarial
assumptions and subsidies in any of the Company's tax-
qualified or nonqualified type defined benefit pension
plans in which the Executive then participates) of the
accrued benefits accrued by the Executive as of the
date of termination under the terms of any nonqualified
defined benefit type retirement plan, including but not
limited to, the SERP and the SBP and assuming the
benefit was fully vested without regard to any minimum
age or service requirements. For this purpose, such
benefits shall be calculated under the assumption that
the Executive's employment continued following the date
of termination for three (3) full years (i.e., three
(3) additional years of age (including, but not limited
to, for purposes of determining the actuarial present
value), compensation and service credits shall be
added).
(h) Three (3) times the amount of the maximum Company
contribution or match to any defined contribution type
plan in which the Executive participates.
(i) A lump-sum cash payment of the product of (i) the
Interest Factor (as determined in the next sentence)
multiplied by (ii) the Executive's entire account
balance under the Deferred Income Plan (or any
replacement therefor), plus an additional amount equal
to three (3) times the match which the Company made for
the Executive to such plan for the fiscal year ending
immediately prior to the earlier of the Change in
Control or the Qualifying Termination. The "Interest
Factor" shall be equal to one (1) plus three (3) times
the rate of earnings of the Executive's account under
such plan for the fiscal year ending immediately prior
to his termination.
(j) Immediate full vesting of any outstanding stock
options, performance share units and other equity
awards (and lapse of any forfeiture provisions) to the
extent permitted under the plan or grant, or if full
vesting is not permitted with regard to stock options,
a cash payment equal to the Spread on such unvested
options on the date of termination (or, if later, the
date of the Change in Control) plus, in both cases, if
options are exercisable for less than three (3) years
after termination (or, if less, the remainder of the
respective terms, including any termination of
exercisability of all Company stock options in
connection with the Change in Control or a merger
related thereto), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
earlier of the Qualifying Termination or the Change in
Control) future value of such outstanding options for
the lesser of three (3) years or the remainder of such
terms.
(k) Outplacement services at a level commensurate with the
Executive's position, including use of an executive
office and secretary, for a period of one (1) year
commencing on the date of termination but in no event
extending beyond the date on which the Executive
commences other full time employment.
(l) Continuation of participation for three (3) additional
years in the Company's programs with regard to tax
preparation assistance and financial planning
assistance, club dues and automobile (but based on the
automobile then being used and no new one), in
accordance with the Company's programs in effect at the
time of the Change in Control.
(m) As provided in Exhibit A hereto.
For purposes of this Section 8, a Qualifying Termination
shall mean any termination of the Executive's employment (i) by
the Company without Cause, or (ii) by the Executive for Good
Reason.
8.2 Definition of "Change in Control." A Change in Control
of the Company shall be deemed to have occurred as of the first
day any one or more of the following conditions shall have been
satisfied:
(a) Any "person" or "group" (within the meaning of Section
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than the
Company, any trustee or other fiduciary holding Company
common stock under an employee benefit plan of the
Company or a related company, or any corporation which
is owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as
their ownership of the Company's common stock, is or
becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than thirty percent
(30%) of the then outstanding voting stock;
(b) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board and any new director whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in office
who either were directors at the beginning of the two
year period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority of the Board;
(c) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger
or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or being converted into voting securities
of the surviving entity) more than fifty percent (50%)
of the combined voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation; or
(d) The approval of the stockholders of the Company of a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all of its assets.
8.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to payments and/or benefits which
would constitute "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, the provisions of Exhibit B will
apply.
9. Noncompetition, Confidentiality and Nondisparagement
9.1 Agreement Not to Compete.
(a) The Executive agrees that for a period of two (2) years
after the termination of the Executive's employment,
the Executive will not engage in Competition with the
Company with the Listed Companies, provided that after
the Executive's termination of employment the Listed
Companies shall be limited to those effectively listed
at the time of his termination and still on such list
at the time of any alleged activity of the Executive,
including, but not limited to, (i) soliciting
customers, business or orders for, or selling any
products and services in, Competition with the Company
for such Listed Companies or (ii) diverting, enticing,
or otherwise taking away customers, business or orders
of the Company, or attempting to do so, in either case
in Competition with the Company for such Listed
Companies.
(b) The Executive agrees that if, while he is receiving
severance pay from the Company pursuant to Section
6.2(b) or Section 6.3(b), the Executive: (i) violates
(a) above, or (ii) otherwise engages in Competition in
the Restricted Territory, whether or not with the
Listed Companies, Section 9.6(b) hereof shall apply.
(c) The Executive agrees that the restrictions contained in
this Section 9 are necessary for the protection of the
business and goodwill of the Company because of the
trade secrets within the Executive's knowledge and are
considered by the Executive to be reasonable for such
purpose.
9.2 Definitions.
(a) "Competition" shall mean engaging in, as an employee,
director, partner, principal, shareholder, consultant,
advisor, independent contractor or similar capacity,
with (a) the Listed Companies or (b) in any business,
activity or conduct which directly competes with the
business of the Company, provided that, with regard to
the period after termination of the Executive's
employment, Section 9.1(b)(ii) shall only apply to
business lines in which the Company is engaged both at
the time of termination of employment and at the time
of the determination and which during the last fiscal
year ending prior to the date of such termination repre
sented at least five percent (5%) of the Company's
revenues (the "Prohibited Lines"). Notwithstanding
anything else in this Section 9, Competition shall not
include: (A) (i) holding five percent (5%) or less of
an interest in the equity or debt of any publicly
traded company, (ii) engaging in any activity with the
prior written approval of the Chief Executive Officer
or the O&C Committee, (iii) the practice of law in a
law firm that represents entities in Competition with
the Company, provided that the Executive does not
personally represent such entities, or (iv) the
employment by, or provision of services to, an
investment banking firm or consulting firm that
provides services to entities that are in Competition
with the Company provided that the Executive does not
personally represent or provide services to such
entities that are Listed Companies or otherwise with
regard to businesses in Competition with the Prohibited
Lines, or (B) with regard to Section 9.1(b)(ii), (i)
being employed by, or consulting for, a non-Competitive
division or business unit of an entity which is in
Competition with the Company (and participating in such
entity's employee equity plans), (ii) being employed
by, or consulting for, an entity which had annual
revenues in the last fiscal year prior to the Executive
being employed by, or consulting for, the entity
generated through business lines in Competition with
the Prohibited Lines of the Company that do not exceed
five percent (5%) of such entity's total annual
revenues, provided that revenues within the Executive's
area of responsibility or authority are not more than
ten percent (10%) composed of the revenues from the
businesses in Competition with the Prohibited Lines, or
(iii) any activities conducted after a Change in
Control of the Company.
(b) The Restricted Territory shall mean any geographic area
in which the Company with regard to the Prohibited
Lines did more than nominal business.
(c) Listed Companies shall mean those entities which are
within the "peer group" established by the Company for
the performance graphs in its proxy statement pursuant
to Item 402(l) of Regulation S-K under the Exchange Act
and which are in a list of no more than five (5)
entities established by the Company from time to time
and available from the Chief Human Resources Officer,
provided that the addition of any entity to the list
shall not be effective until sixty (60) days after it
is so listed.
(d) For purposes of this Section 9, "Company" shall mean
the Company and its subsidiaries and affiliates.
9.3 Agreement Not to Engage in Certain Solicitation.
The Executive agrees that the Executive will not, during the
Executive's employment with the Company or during the two (2)
year period thereafter, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any non-clerical
employee(s), sales representative(s), agent(s), or consultant(s)
of the Company to terminate such person's employment,
representation or other association with the Company for the
purpose of affiliating with any entity with which the Executive
is associated ("Solicitation").
9.4 Confidential Information.
(a) The Executive specifically acknowledges that any trade
secrets or confidential business and technical
information of the Company or its vendors, suppliers or
customers, whether reduced to writing, maintained on
any form of electronic media, or maintained in mind or
memory and whether compiled by the Executive or the
Company (collectively, "Confidential Information"),
derives independent economic value from not being
readily known to or ascertainable by proper means by
others; that reasonable efforts have been made by the
Company to maintain the secrecy of such information;
that such information is the sole property of the
Company or its vendors, suppliers, or customers and
that any retention, use or disclosure of such
information by the Executive during the Employment Term
(except in the course of performing duties and
obligations of employment with the Company) or any time
after termination thereof, shall constitute
misappropriation of the trade secrets of the Company or
its vendors, suppliers, or customers, provided that
Confidential Information shall not include: (i)
information that is at the time of disclosure public
knowledge or generally known within the industry, (ii)
information deemed in good faith by the Executive,
while employed by the Company, desirable to disclose in
the course of performing the Executive's duties, (iii)
information the disclosure of which the Executive in
good faith deems necessary in defense of the
Executive's rights provided such disclosure by the
Executive is limited to only disclose as necessary for
such purpose, or (iv) information disclosed by the
Executive to comply with a court, or other lawful
compulsory, order compelling him to do so, provided the
Executive gives the Company prompt notice of the
receipt of such order and the disclosure by the
Executive is limited to only disclosure necessary for
such purpose.
(b) The Executive acknowledges that the Company from time
to time may have agreements with other persons or with
the United States Government, or agencies thereof, that
impose obligations or restrictions on the Company
regarding inventions made during the course of work
under such agreements or regarding the confidential
nature of such work. If the Executive's duties
hereunder will require disclosures to be made to him
subject to such obligations and restrictions, the
Executive agrees to be bound by them.
9.5 Scope of Restrictions. If, at the time of
enforcement of this Section 9, a court holds that the
restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and
that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area
permitted by law.
9.6 Remedies.
(a) In the event of a material breach or threatened
material breach of Section 9.1(a), Section 9.3, Section
9.4 or Section 9.10, the Company, in addition to its
other remedies at law or in equity, shall be entitled
to injunctive or other equitable relief in order to
enforce or prevent any violations of the provisions of
this Section 9. Except as specifically provided with
regard to Listed Companies, the Company agrees that it
will not assert to enjoin or otherwise limit the
Executive's activities based on an argument of
inevitable disclosure of confidential information.
(b) In the event Section 9.1(b) applies, the Company may
immediately cease payment to the Executive of all
future amounts due under Sections 6.2(a) or (b) or
Sections 6.3(a) or (b), as well as otherwise
specifically provided in any other plan, grant or
program.
(c) Upon written request of the Executive, the Company
shall within thirty (30) days notify the Executive in
writing whether or not in good faith it believes any
proposed activities would be in Competition and, if it
so determines or does not reply within thirty (30)
days, it shall be deemed to waive any right to treat
such activities as Competition unless the facts are
otherwise than as presented by the Executive or there
is a change thereafter in such activities. The
Executive shall promptly provide the Company with such
information as it may reasonably request to evaluate
whether or not such activities are in Competition.
9.7 Uniformity. In no event shall any definitions of
Competition or Solicitation (or a similar provision) as it
applies to the Executive with regard to any plan of program or
grant of the Company be interpreted to be any broader than as set
forth in this Section 9.
9.8 Delivery of Documents. Upon termination of this
Agreement or at any other time upon request by the Company, the
Executive shall promptly deliver to the Company all records,
files, memoranda, notes, designs, data, reports, price lists,
customer lists, drawings, plans, computer programs, software,
software documentation, sketches, laboratory and research
notebooks and other documents (and all copies or reproductions of
such materials in his possession or control) belonging to the
Company. Notwithstanding the foregoing, the Executive may retain
his rolodex and similar phone directories (collectively, the
"Rolodex") to the extent the Rolodex does not contain information
other than name, address, telephone number and similar
information, provided that, at the request of the Company, the
Executive shall provide the Company with a copy of the Rolodex.
9.9 Nondisparagement.
(a) During the Employment Term and thereafter, the
Executive shall not with willful intent to damage
economically or as to reputation or vindictively
disparage the Company, its subsidiaries or their
respective past or present officers, directors or
employees (the "Protected Group"), provided that the
foregoing shall not apply to (i) actions or statements
taken or made by the Executive while employed by the
Company in good faith as fulfilling the Executive's
duties with the Company or otherwise at the request of
the Company, (ii) truthful statements made in
compliance with legal process or governmental inquiry,
(iii) as the Executive in good faith deems necessary to
rebut any untrue or misleading public statements made
about him or any other member of the Protected Group,
(iv) statements made in good faith by the Executive to
rebut untrue or misleading statements made about him or
any other member of the Protected Group by any member
of the Protected Group, and (v) normal commercial
puffery in a competitive business situation. No member
of the Protected Group shall be a third party
beneficiary of this Section 9.9(a).
(b) During the Employment Term and thereafter, neither the
Company officially nor any then member of the Executive
Leadership Team (or the equivalent) of the Company, as
such term is currently used within the Company, shall
with willful intent to damage the Executive
economically or as to reputation or otherwise
vindictively disparage the Executive, provided the
foregoing shall not apply to (i) actions or statements
taken or made in good faith within the Company in
fulfilling duties with the Company, (ii) truthful
statements made in compliance with legal process,
governmental inquiry or as required by legal filing or
disclosure requirements, (iii) as in good faith deemed
necessary to rebut any untrue or misleading statements
by the Executive as to any member of the Protected
Group or (iv) normal commercial puffery in a
competitive business situation.
(c) In the event of a material breach or threatened
material breach of clauses (a) or (b) above, the
Company or the Executive, as the case may be, in
addition to its or the Executive's other remedies at
law or in equity, shall be entitled to injunctive or
other equitable relief in order to enforce or prevent
any violations of this Section 9.9.
9.10 Pooling of Interests. If the Company is involved
in any proposed business combination that is contemplated to be
accounted for as a pooling of interests, the Executive agrees to
cooperate with the reasonable requests of the Company with regard
to the exercise of stock options, the sale of Company stock or
other matters that could affect the ability of the combination to
be accounted for as a pooling of interests.
10 Liability Insurance
The Company shall cover the Executive under directors
and officers liability insurance both during and, while potential
liability exists, after the Employment Term in the same amount
and to the same extent, if any, as the Company covers its other
officers and directors.
11 Assignment
11.1 Assignment by the Company. This Agreement may and
shall be assigned or transferred to, and shall be binding upon
and shall inure to the benefit of, any successor of the Company,
and any such successor shall be deemed substituted for all
purposes of the "Company" under the terms of this Agreement. As
used in this Agreement, the term "successor" shall mean any
person, firm, corporation or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or
substantially all of the assets of the Company. Notwithstanding
such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
11.2 Assignment by the Executive. This Agreement is
not assignable by the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
12 Legal Remedies
12.1 Payment of Legal Fees. The Company shall pay the
Executive's reasonable legal fees and costs associated with
entering into this Agreement. To the fullest extent permitted by
law, the Company shall promptly pay upon submission of statements
all legal and other professional fees, costs of litigation,
prejudgment interest, and other expenses incurred in connection
with any dispute arising hereunder; provided, however, the
Company shall be reimbursed by the Executive for (i) the fees and
expenses advanced in the event the Executive's claim is in a
material manner in bad faith or frivolous and the arbitrator or
court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate, or (ii) to the extent that the
arbitrator or court, as appropriate, determines that such legal
and other professional fees are clearly and demonstrably
unreasonable.
12.2 Arbitration. All disputes and controversies
arising under or in connection with this Agreement, other than
the seeking of injunctive or other equitable relief pursuant to
Section 9 hereof, shall be settled by arbitration conducted
before a panel of three (3) arbitrators sitting in New York City,
New York, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of commercial
disputes of the American Arbitration Association then in effect.
The determination of the majority of the arbitrators shall be
final and binding on the parties. Judgment may be entered on the
award of the arbitrator in any court having proper jurisdiction.
All expenses of such arbitration, including the fees and expenses
of the counsel of the Executive, shall be borne by the Company
and the Executive shall be entitled to reimbursement of his
expenses as provided in Section 12.1 hereof.
12.3 Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if delivered personally, sent by telecopier,
sent by an overnight service or sent by registered or certified
mail. Notice to the Executive not delivered personally (or by
telecopy where the Executive is known to be) shall be sent to the
last address on the books of the Company, and notice to the
Company not delivered personally (or by telecopy to the known
personal telecopy of the person it is being sent to) shall be
sent to it at its principal office. All notices to the Company
shall be delivered to the Chief Executive Officer with a copy to
the senior legal officer. Delivery shall be deemed to occur on
the earlier of actual receipt or tender and rejection by the
intended recipient.
12.4 Continued Payments. In the event after a Change
in Control either party files for arbitration to resolve any
dispute as to whether a termination is for Cause or Good Reason,
until such dispute is determined by the arbitrators, the
Executive shall continue to be treated economically and benefit
wise in the manner asserted by him in the arbitration effective
as of the date of the filing of the arbitration, subject to the
Executive promptly refunding any amounts paid to him, paying the
cost of any benefits provided to him and paying to the Company
the profits in any stock option or other equity awards exercised
or otherwise realized by him during the pendency of the
arbitration which he is ultimately held not to be entitled to;
provided the arbitrators may terminate such payments and benefits
in the event that they determine at any point that the Executive
is intentionally delaying conclusion of the arbitration.
13 Miscellaneous
13.1 Entire Agreement. This Agreement, except to the
extent specifically provided otherwise herein, supersedes any
prior agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect to the subject matter
hereof. To the extent any severance plan or program of the
Company that would apply to the Executive is more generous to the
Executive than the provisions hereof, the Executive shall be
entitled to any additional payments or benefits which are not
duplicative, but shall otherwise not be eligible for such plan or
program.
13.2 Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended, nor
any provision hereof waived, except by mutual agreement of the
parties in a written instrument executed by the parties hereto or
their legal representatives.
13.3 Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.4 Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed to be
an original, but all of which together will constitute one and
the same Agreement.
13.5 Tax Withholding. The Company may withhold from
any benefits payable under this Agreement all federal, state,
city, or other taxes as may be required pursuant to any law or
governmental regulation or ruling.
13.6 Beneficiaries. The Executive may designate one or
more persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
13.7 Representation. The Executive represents that the
Executive's employment by the Company and the performance by the
Executive of his obligations under this Agreement do not, and
shall not, breach any agreement that obligates him to keep in
confidence any trade secrets or confidential or proprietary
information of his or of any other party, to write or consult to
any other party or to refrain from competing, directly or
indirectly, with the business of any other party. The Executive
shall not disclose to the Company, and the Company shall not
request that the Executive disclose, any trade secrets or
confidential or proprietary information of any other party.
14 Governing Law
The provisions of this Agreement shall be construed and
enforced in accordance with the laws of the state of Delaware,
without regard to any otherwise applicable principles of
conflicts of laws.
IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement, as of the day and year first above
written.
/s/Stephen L. Key
Stephen L. Key
TEXTRON INC.
By:/s/John D. Butler
Name: John D. Butler
Title: Executive Vice President
Exhibit A
Special Grants
Pursuant to a letter dated March 21, 1995 (the "Letter"),
the Executive is entitled to the cash equivalent of 20,000
shares of the Company's common stock (40,000 shares post
split) following his retirement provided he retires from the
Company at or after age 65. The number of shares shall be
proportionally adjusted for any increase or decrease in the
number of issued shares of the Company's common stock
resulting from a stock split, stock dividend or any other
increase or decrease in such shares effected without receipt
of consideration by the Company. For consideration: the
cash equivalent will be based on the average of the
composite closing price (as reported on the New York Stock
Exchange consolidated tape) of the Company's common stock
for the first ten trading days following the trigger date,
provided that in the event of a Change in Control, if a
Qualified Termination occurs within the protected period
under Section 8 of the Agreement, the price, if higher,
shall be the highest closing price per share of the
Company's common stock (as reported on the New York Stock
Exchange consolidated tape) during the 30 day period ending
on the date of such Change in Control. Notwithstanding the
foregoing age 65 requirement, the payment shall vest and be
paid out in a lump sum upon the Executive's termination of
employment as a result of death (pursuant to Section 5(a)
hereof), Disability (pursuant to Section 5(b) hereof), by
the Company without Cause (pursuant to Section 5(e) hereof)
or by the Executive for Good Reason (pursuant to Section
5(f) hereof). The payment shall immediately vest upon a
Change in Control, but not be paid out until the termination
of employment thereafter. The foregoing award shall not be
subject in any manner in anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment,
garnishment, execution or levy of any kind and any attempt
to do so shall not be recognized.
Exhibit B
Parachute Gross Up
(a) In the event that the Executive shall become
entitled to payments and/or benefits provided by this Agreement
or any other amounts in the "nature of compensation" (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person) as a result of such
change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code
(and any similar tax that may hereafter be imposed by any taxing
authority) the Company shall pay to the Executive at the time
specified in subsection (d) below an additional amount (the
"Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and for local income or
payroll tax upon the Gross-up Payment provided for by this
paragraph (a), but before deduction for any U.S. federal, state,
and local income or payroll tax on the Company Payments, shall be
equal to the Company Payments.
(b) For purposes of determining whether any of the
Company Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except
to the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax
counsel selected by such accountants (the "Accountants") such
Total Payments (in whole or in part) either do not constitute
"parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, the Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-
up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of
the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment
thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided
for in subsection (c) above shall be paid not later than the
thirtieth (30th) day following an event occurring which subjects
the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good
faith by the Accountant, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code), subject to further payments pursuant to subsection (c)
hereof, as soon as the amount thereof can reasonably be deter
mined, but in no event later than the ninetieth day after the
occurrence of the event subjecting the Executive to the Excise
Tax. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
(e) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) with regard to the
Excise Tax, the Executive shall permit the Company to control
issues related to the Excise Tax (at its expense), provided that
such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In
the event the issues are interrelated, the Executive and the
Company shall in good faith cooperate so as not to jeopardize
resolution of either issue, but if the parties cannot agree the
Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive
shall permit the representative of the Company to accompany the
Executive, and the Executive and the Executive's representative
shall cooperate with the Company and its representative.
(f) The Company shall be responsible for all charges
of the Accountant.
(g) The Company and the Executive shall promptly
deliver to each other copies of any written communications, and
summaries of any verbal communications, with any taxing authority
regarding the Excise Tax covered by this Exhibit B.
EXHIBIT 12.1
<TABLE>
PARENT GROUP
COMPUTATION OF RATIO OF INCOME TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(unaudited)
(In millions except ratio)
<CAPTION>
Nine Months
Ended
October 3, 1998
<S> <C>
Fixed charges:
Interest expense $ 116
Distributions on preferred securities of
subsidiary trust, net of income taxes 19
Estimated interest portion of rents 16
Total fixed charges $ 151
Income:
Income before income taxes and distributions on
preferred securities of subsidiary trust $ 563
Eliminate equity in undistributed pretax income
of Finance Group (33)
Fixed charges * 132
Adjusted income $ 662
Ratio of income to fixed charges 4.38
* Adjusted to exclude distributions on preferred securities of subsidiary trust,
net of income taxes
</TABLE>
EXHIBIT 12.2
<TABLE>
TEXTRON INC. INCLUDING ALL MAJORITY-OWNED SUBSIDIARIES
COMPUTATION OF RATIO OF INCOME TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(unaudited)
(In millions except ratio)
Nine Months
Ended
October 3,
1998
<S> <C>
Fixed charges:
Interest expense $ 232
Distributions on preferred securities of subsidiary
trust, net of income taxes 19
Estimated interest portion of rents 16
Total fixed charges $ 267
Income:
Income before income taxes and distributions on
preferred securities of subsidiary trust $ 563
Fixed charges * 248
Adjusted income $ 811
Ratio of income to fixed charges 3.04
* Adjusted to exclude distributions on preferred securities of subsidiary trust,
net of income taxes
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> OCT-03-1998
<CASH> 60
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,650
<CURRENT-ASSETS> 4,302
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,634
<CURRENT-LIABILITIES> 3,139
<BONDS> 4,409
<COMMON> 24
0
13
<OTHER-SE> 3,250
<TOTAL-LIABILITY-AND-EQUITY> 12,634
<SALES> 6,813
<TOTAL-REVENUES> 7,088
<CGS> 5,545
<TOTAL-COSTS> 5,545
<OTHER-EXPENSES> (10)
<LOSS-PROVISION> 16
<INTEREST-EXPENSE> 232
<INCOME-PRETAX> 563
<INCOME-TAX> 221
<INCOME-CONTINUING> 323
<DISCONTINUED> 125
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 448
<EPS-PRIMARY> 2.75
<EPS-DILUTED> 2.68
</TABLE>
