<PAGE>
<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission file number 1-5358
Sundstrand Corporation
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 36-1840610
_______________________________ __________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4949 Harrison Avenue, P.O. Box 7003, Rockford, IL 61125-7003
_____________________________________________________________
(Address of principal executive offices and zip code)
(815) 226-6000
____________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
_____ _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 26, 1996
_______________________________________ ____________________________
Common Stock, par value $.50 per share 60,757,603<PAGE>
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SUNDSTRAND CORPORATION
FORM 10-Q
For the Quarter Ended June 30, 1996
INDEX
Page
Part I. Financial Information ____
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2<PAGE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
Sundstrand Corporation and Subsidiaries
Condensed Consolidated Statement of Earnings (Unaudited)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
(Amounts in millions except ------------------ -----------------
per share data) 1996 1995 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 371 $ 377 $ 739 $ 723
Costs, expenses, and other income:
Costs of products sold 243 247 484 473
Marketing and administration 77 77 156 152
Restructuring charge (8) 3 (8) 61
Interest expense 8 8 15 17
Interest income (2) (1) (3) (2)
Other, net - (1) - -
------ ------ ------ ------
318 333 644 701
------ ------ ------ ------
Earnings before income taxes 53 44 95 22
Less income taxes 19 17 35 13
------ ------ ------ ------
Net earnings $ 34 $ 27 $ 60 $ 9
====== ====== ====== ======
Weighted-average number of common
shares outstanding 61.4 63.3 61.4 63.3
Earnings per share $ .56 $ .44 $ .98 $ .15
====== ====== ====== ======
Cash dividends per common share $ .17 $ .15 $ .34 $ .30
====== ====== ====== ======
</TABLE>
3<PAGE>
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<TABLE>
Sundstrand Corporation and Subsidiaries
Condensed Consolidated Statement of Cash Flows (Unaudited)
<CAPTION>
Six Months Ended
June 30,
-------------------
(Amounts in millions) 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Cash flow from operating activities:
Net earnings $ 60 $ 9
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 36 40
Deferred income taxes 3 (22)
Change in operating assets and liabilities excluding
the effects of acquisitions and divestitures:
Accounts receivable 2 12
Inventory (19) (37)
Other assets (2) 5
Accounts payable (8) 3
Accrued expenses (11) 79
Other (1) (5)
------ ------
Total adjustments - 75
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 60 84
------ ------
Cash flow from investing activities:
Cash paid for property, plant, and equipment (30) (23)
Proceeds from sale of assets 1 7
Investment in IRB trust 3 (5)
Investment in equity companies - (1)
------ ------
NET CASH USED FOR INVESTING ACTIVITIES (26) (22)
------ ------
Cash flow from financing activities:
Net payments on borrowings supported by lines of credit (10) (32)
Principal payments on long-term debt (1) (4)
Issuance of long-term debt - 8
Purchase of treasury stock (30) (13)
Proceeds from stock options exercised 1 2
Dividends paid (21) (19)
------ ------
NET CASH USED FOR FINANCING ACTIVITIES (61) (58)
------ ------
Effect of exchange rate changes on cash 2 (5)
------ ------
Decrease in cash and cash equivalents (25) (1)
Cash and cash equivalents at January 1 75 66
------ ------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 50 $ 65
====== ======
Supplemental cash flow information:
Interest paid $ 15 $ 17
Income taxes paid $ 35 $ 30
</TABLE>
4<PAGE>
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<TABLE>
Sundstrand Corporation and Subsidiaries
Condensed Consolidated Balance Sheet (Unaudited)
<CAPTION>
June 30, December 31,
(Amounts in millions) 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 50 $ 75
Accounts receivable, net 278 281
Inventories, net of progress payment 348 330
Deferred income taxes 55 55
Other current assets 20 20
------- -------
Total current assets 751 761
Property, Plant, and Equipment, net 444 449
Intangible Assets, net 263 266
Deferred Income Taxes 73 75
Other Assets 42 42
------- -------
$ 1,573 $ 1,593
======= =======
Liabilities and Shareholders' Equity
Current Liabilities
Notes payable $ 157 $ 168
Long-term debt due within one year 8 7
Accounts payable 94 102
Accrued salaries, wages, and commissions 26 24
Accrued postretirement benefits other than pensions 17 17
Restructuring liability 25 27
Other accrued liabilities 88 93
------- -------
Total current liabilities 415 438
Long-Term Debt 220 221
Accrued Postretirement Benefits Other Than Pensions 365 363
Other Liabilities 83 90
Shareholders' Equity
Common stock, at par value 38 38
Other shareholders' equity 452 443
------- -------
490 481
------- -------
$ 1,573 $ 1,593
======= =======
</TABLE>
5<PAGE>
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The financial information contained herein is unaudited but, in the opinion
of the management of the Registrant, includes all adjustments (all of which
are normal recurring adjustments) necessary for a fair presentation of the
results of operations for the periods indicated.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
ACCOUNTING POLICIES
The financial statements are condensed and should be read in conjunction
with the Annual Report on Form 10-K for the year ended December 31, 1995.
PRINCIPLES OF CONSOLIDATION provide for the inclusion of the accounts of
Sundstrand Corporation and all subsidiaries. All intercompany transactions
are eliminated in consolidation.
CASH EQUIVALENTS are considered by the Registrant to be all highly liquid
debt instruments purchased with original maturities of three months or less.
<TABLE>
INVENTORIES
The components of inventories at June 30, 1996, and December 31, 1995, were
as follows:
<CAPTION>
June 30, December 31,
(Amounts in millions) 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 48 $ 51
Work in process 128 118
Finished goods and parts 190 179
----- -----
366 348
Less progress payments 18 18
----- -----
$ 348 $ 330
===== =====
Prior to the application of progress payments, the inventories shown above
included costs related to long-term contracts of $37 million and $52 million, at
June 30, 1996, and December 31, 1995, respectively.
</TABLE>
STOCK SPLIT
On February 20, 1996, the Registrant's Board of Directors authorized a
two-for-one stock split payable as a 100 percent stock dividend which was
distributed on March 19, 1996, to shareholders of record on March 5, 1996.
Shareholders' equity has been restated to give retroactive recognition to
the stock split in prior periods by reclassifying from retained earnings
to common stock the par value of the additional shares arising from the
split. In addition, all references to the number of shares and per share
amounts of the Registrant's common stock have been restated to reflect the
split.
6<PAGE>
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RESTRUCTURING
During 1995, the Registrant's Board of Directors approved a restructuring
plan which resulted in a pretax charge of $58 million. The charge was
taken to reduce excess manufacturing capacity caused by reductions in
manufacturing volume and increases in manufacturing productivity, and to
write down the assets of the Industrial segment's Spectronic Instruments
business (Spectronic) and the Aerospace segment's Advanced Power Technology,
Inc. (APT) in anticipation of their divestiture. The charge included $24
million in termination benefits for approximately 350 employees, primarily
consisting of workers at the Registrant's Lima, Ohio, facility. Also
included in the charge was $29 million for the write-down of the assets
of the Lima facility, Spectronic, and APT, as well as $5 million for
disposition of the Lima facility. The shutdown of the Lima facility was
substantially completed in June 1996. The disposition of the Lima facility
is expected to be completed by mid-1997 and the sales of Spectronic and a
majority interest in APT were completed in the third quarter of 1995.
Since the restructuring charge was recorded, approximately $4 million has
been paid and charged against the restructuring liability, including costs
to terminate 346 employees. In the second quarter of 1996, as a result of
the Lima plant shutdown, future pension and other postretirement benefits
for the terminated Lima employees were fixed causing recognition of an $8
million curtailment gain. Additionally, in the first six months of 1996
approximately $10 million was charged directly to earnings related primarily
to the movement of equipment from the Lima facility to other manufacturing
sites.
7<PAGE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The financial information for the quarter ended June 30, 1996, as compared
to the financial information for the quarter ended June 30, 1995, and the
balance sheet at December 31, 1995, is discussed below, and should be read
in conjunction with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995, and the financial data as presented in Item 1 above.
RESULTS OF OPERATIONS
Second quarter 1996 sales decreased by $6 million to $371 million from $377
million in second quarter 1995. This decrease was due primarily to the 1995
divestitures of the Spectronic Instruments business (Spectronic) and Advanced
Power Technology, Inc. (APT), partially offset by higher Aerospace segment
sales. As a result of higher commercial aftermarket sales, Aerospace segment
sales for the second quarter of 1996 increased to $183 million compared with
$176 million in the same period of 1995. Industrial sales fell to $188
million in the second quarter of 1996 compared with $201 million in second
quarter 1995, primarily as a result of the Spectronic divestiture and lower
domestic sales of industrial compressors.
Second quarter net earnings were $34 million, or $.56 per share compared
with $27 million, or $.44 per share in 1995. The increase included a $5
million after tax gain for the curtailment of pension and other
postretirement benefits related to the shutdown of the Lima, Ohio, plant
and approximately $3 million after taxes of restructuring-related period
expenses which were recognized as incurred in the second quarter of 1996.
Excluding restructuring related items, second quarter 1996 net earnings
increased to $32 million, or $.53 per share compared with $30 million or
$.47 per share in second quarter 1995, primarily as a result of stronger
commercial Aerospace sales.
Sales for the first half of 1996 were $739 million compared with $723 million
in the first half of 1995. As a result of higher commercial aftermarket
sales, Aerospace segment sales increased to $360 million in the first half
of 1996 compared with $333 million in the first half of 1995. Industrial
segment sales were $379 million and $390 million in the first half of 1996
and 1995, respectively. The decrease was due to the Spectronic divestiture
partially offset by higher sales at Falk.
Net earnings for the first six months of 1996 were $60 million, or $.98
per share, which included a $5 million after tax restructuring-related
curtailment gain. Net earnings for the first six months of 1995 were $9
million, or $.15 per share, which included restructuring charges of $42
million after taxes. Excluding restructuring related items, net income
for the first half of 1996 was $61 million, or $1.00 per share, compared
with $52 million, or $.82 per share in the same 1995 period. The increase
was due primarily to higher Aerospace operating profit stemming from the
increase in commercial aftermarket sales.
8<PAGE>
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STOCK SPLIT
On February 20, 1996, the Registrant's Board of Directors authorized a
two-for-one stock split payable as a 100 percent stock dividend which was
distributed on March 19, 1996, to shareholders of record on March 5, 1996.
Shareholders' equity has been restated to give retroactive recognition to
the stock split in prior periods by reclassifying from retained earnings
to common stock the par value of the additional shares arising from the
split. In addition, all references to the number of shares and per share
amounts of the Registrant's common stock have been restated to reflect the
split.
ORDER
Incoming orders for second quarter 1996 increased to $427 million compared
with $355 million in the second quarter of 1995, primarily as a result of
higher orders in the Aerospace markets. New orders for the six months ended
June 30, 1996, were $790 million, down from $922 million for the same period
last year. The decrease was due primarily to a $172 million long-term
contract entered into in 1995 to provide the propulsion system for the
United Kingdom's Royal Navy Spearfish heavyweight torpedo program. Total
unfilled orders at June 30, 1996, were $982 million, compared with $946
million at June 30, 1995, and $931 million at December 31, 1995.
AEROSPACE OVERVIEW FOR ONGOING BUSINESSES EXCLUDING RESTRUCTURING
Second quarter 1996 sales in the Aerospace segment were up $13 million or 8
percent compared with the second quarter of 1995, as a result of increases
in commercial OEM and aftermarket sales. Operating profit increased by
$6 million or 26 percent on the higher commercial volume, resulting in an
operating profit margin of 15.8 percent of sales, compared with 13.5
percent in the second quarter of 1995. Total Aerospace orders increased
by 58 percent in the second quarter compared with the same period in 1995.
INDUSTRIAL OVERVIEW FOR ONGOING BUSINESSES EXCLUDING RESTRUCTURING
Industrial segment sales in the second quarter of 1996 decreased by $5
million or 3 percent compared with the second quarter of 1995. Operating
profit fell by $6 million or 16 percent from the 1995 second quarter
level resulting in an operating profit margin of 16.5 percent compared
with 19.2 percent in the second quarter of 1995. Continued weakness at
Sullair, primarily in Europe, and to a lesser extent Milton Roy, contributed
to the Industrial operating profit decline. Total Industrial orders in
the second quarter were flat compared with the same period in 1995.
LIQUIDITY & CAPITAL RESOURCES
Working capital increased by $13 million to $336 million at June 30, 1996,
from $323 million at December 31, 1995. Higher inventories and lower notes
and accounts payable, partially offset by a decrease in cash and cash
equivalents were primarily responsible for the increase. Inventory
increased in response to the increased sales and order activity, primarily
in the Aerospace segment.
Net cash provided by operating activities for the first half of 1996 was $60
million compared with $84 million for the first six months of 1995. Increases
in various liability accounts, including accrued salaries, wages and
commissions and pension and other postretirement benefits liabilities, in
the first six months of 1995 were primarily responsible for the year over
year change. The effects of restructuring actions which caused significant
fluctuations in net earnings, deferred income taxes, and accrued expenses,
did not have a material effect on net operating cash flows in either period.
9<PAGE>
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In the first six months of 1996 and 1995 the Registrant used cash of $26
million and $22 million, respectively, for investing activities, primarily
for the purchase of fixed assets. In the first six months of 1996, $61
million of cash was used for financing activities, primarily common stock
repurchases, dividends payments, and reductions in commercial paper
borrowings. In the first half of 1995, $58 million of cash was used for
financing activities, which consisted primarily of cash used to reduce
commercial paper borrowings, pay dividends, and repurchase common stock,
partially offset by the issuance of an industrial revenue bond for capital
improvements at Falk's Auburn, Alabama, facility.
The Registrant repurchased 546,400 shares of its common stock during
the second quarter and an additional 9,000 shares, through July 24, 1996,
bringing the total shares repurchased in 1996 to 831,000. Through July 24,
1996, the Registrant has purchased a total of approximately 13 million
shares of the 20 million shares authorized for repurchase by the Board of
Directors.
On June 18, 1996, the Board of Directors declared a quarterly cash dividend
of $.17 per common share payable on September 17, 1996, to holders of record
on September 3, 1996.
At June 30, 1996, the Registrant's ratio of total debt to total capital
was 44.0 percent compared with 45.2 percent at December 31, 1995.
OUTLOOK
The following forward-looking statements are subject to market risks and
opportunities that could have a material impact on actual results, as set
forth in the Registrant's annual report on Form 10-K filed with the
Securities and Exchange Commission.
The Registrant continues to expect 1996 sales of its ongoing businesses to
increase by 5 percent to 10 percent, which should generate full-year earnings,
excluding restructuring costs and any additional share repurchases, of
between $2.25 and $2.40 per share. As a result of the improving commercial
aerospace cycle, the Registrant currently believes that Aerospace commercial
OEM sales for its ongoing business will increase by 20 percent to 25 percent
from 1995 levels, however it continues to expect total sales for the ongoing
Aerospace business to increase between 5 percent and 10 percent which should
generate sustained improvement in Aerospace operating profit. For the full
year, Industrial segment sales from ongoing businesses are expected to
increase about 5 percent with operating profit margins approaching the
17 percent level.
The Registrant currently expects 1996 operating cash flow after capital
expenditures to be in the $100 million to $125 million range. Additionally,
the Registrant currently expects company-funded R&D spending for the full
year to be approximately $60 million, a decrease of about $10 million from
its previous projection.
10<PAGE>
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Registrant has disclosed various legal proceedings in its Annual Report
on Form 10-K for the fiscal year ended December 31, 1995. There have been no
material changes in those proceedings or other material legal developments
since that time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of Sundstrand Corporation
was held on April 16, 1996.
(c) Stockholders voted on the election of four directors for a
term of three years and on a proposed amendment to the
Sundstrand Corporation Nonemployee Director Stock Option
Plan. Results of said votes were as follows:
i) Directors Name For Withheld
---- --- --------
Klaus H. Murmann 24,946,957 1,966,535
Robert J. Smuland* 24,914,882 1,998,609
Berger G. Wallin 24,947,758 1,965,733
Richard A. Abdoo 24,932,070 1,981,421
For Against Withheld
--- ------- --------
ii) Amendment to Sundstrand 22,812,188 3,706,100 395,203
Corporation Nonemployee
Director Stock Option Plan
* Mr. Smuland resigned from the Board of Directors effective June 10, 1996.
11<PAGE>
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(3) Articles of Incorporation and By-Laws
(a) Text of resolutions adopted by the Board of
Directors of Registrant On June 18, 1996, amending
Registrant's By-Laws effective June 18, 1996.
(b) Registrant's By-Laws, including all amendments as
effective June 18, 1996.
(10) Material Contracts
(a) Employment Agreement dated June 18, 1996, between
Registrant and Ronald F. McKenna, Registrant's
Executive Vice President and Chief Operating
Officer, Aerospace.
(11) Statement Re Computation of Per Share Earnings
(a) Computation of Fully Diluted Earnings Per
Share (Unaudited) for the quarters ended
June 30, 1996 and 1995, and for the six
months ended June 30, 1996 and 1995.
(27) Financial Data Schedule
(b) Reports on Form 8-K
On June 11, 1996, the Registrant filed a report on Form 8-K
regarding the resignation of Robert J. Smuland as a director
of the Registrant.
12<PAGE>
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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.
Sundstrand Corporation
-----------------------------
(Registrant)
Date: July 31, 1996 /s/ Richard M. Schilling
-----------------------------
Richard M. Schilling
Vice President and General
Counsel and Secretary
Date: July 31, 1996 /s/ DeWayne J. Fellows
-----------------------------
DeWayne J. Fellows
Vice President and Controller
13
<PAGE>
Exhibit (3)(a)
RESOLVED, by the Board of Directors of Sundstrand
Corporation, that the first sentence of Section 3.1 of
the By-Laws of the Corporation be, and it hereby is,
amended effective June 18, 1996, by changing the word
"twelve" to "eleven" where it appears in such sentence.
<PAGE>
Exhibit (3)(b)
BY-LAWS
OF SUNDSTRAND CORPORATION
(A Delaware Corporation)
Effective June 18, 1996
ARTICLE I
OFFICES
Section 1.1. Principal Office. The principal office of
the Corporation in the State of Delaware shall be in the City
of Wilmington, County of New Castle.
Section 1.2. Other Offices. The Corporation may also have
offices at such other places, either within or without the
State of Delaware, as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
Section 2.1. Place of Meetings. All annual and special
meetings of the stockholders shall be held at such place,
either within or without the State of Delaware, as may be fixed
by the Board and specified in the notice of the meeting.
Section 2.2. Annual Meetings. An annual meeting of
stockholders shall be held on such date and at such hour as may
be fixed by the Board and specified in the notice of the
meeting, when they shall elect by a plurality vote a Board of
Directors and transact such other business as may properly be
brought before the meeting.
Section 2.3. List of Stockholders. The Secretary
shallprepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and
showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours,
for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting,
or, if not so specified, at the place where the meeting is to
be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may
be inspected by any stockholder who is present. The original
or duplicate stock ledger shall be the only evidence as to who
are the stockholders entitled to examine such list or stock
ledger or transfer book or to vote in person or by proxy at any
meeting of stockholders.
Section 2.4. Special Meetings of Stockholders. Special
meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the
Chairman of the Board and shall be called by the Chairman of
the Board or Secretary at the request in writing of a majority
of the Board of Directors, or at the request in writing of
stockholders owning eighty percent or more in amount of the
entire capital stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 2.5. Notice of Meetings. Except as otherwise
expressly provided by law or by the Certificate of
Incorporation or these By-Laws, written or printed notice of
each annual or special meeting of stockholders shall be given
by mail at least ten but not more than sixty days before the
meeting to the stockholders of record entitled to vote thereat.
Every such notice shall be directed to a stockholder at his
address as it shall appear on the transfer books of the
Corporation; shall state the date, time and place of the
meeting; and, in the case of a special meeting, shall state
briefly the purposes thereof. Business transacted at all
special meetings shall be confined to the purposes stated in
the notice thereof.
Section 2.6. Quorum and Adjournments. The holders of a
majority of the stock issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall
be necessary and sufficient to constitute a quorum at all
meetings of the stockholders for the transaction of business,
except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws. If, however, such quorum
shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting, at which a
quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as
originally notified. The absence from any meeting of the number
required by law or by the Certificate of Incorporation or these
By-Laws for action upon any given matter shall not prevent
action at such meeting upon any other matter or matters which
may properly come before the meeting if the number required in
respect of such other matter or matters shall be present. Once
a quorum is present at a meeting, it shall be deemed to be
acting thereafter throughout the meeting, irrespective of any
withdrawals. Nothing in these ByLaws shall affect the right to
adjourn where a quorum is present.
Section 2.7. Voting by Stockholders. When a quorum is
present at any meeting, the vote of the holders of a majority
of the stock having voting power present in person or
represented by proxy shall decide any question brought before
such meeting, unless the question is one upon which by express
provision of the statutes or of the Certificate of
Incorporation or of these ByLaws a different vote is required,
in which case such express provision shall govern and control
the decision of such question.
At any meeting of the stockholders every stockholder
having the right to vote shall be entitled to vote in person,
or by proxy appointed by an instrument in writing, subscribed
by such stockholder or by his attorney or agent thereunto
authorized in writing, and bearing a date not more than three
years prior to said meeting, unless said instrument provides
for a longer period. Except as otherwise provided by the
Certificate of Incorporation, each stockholder present in
person or by proxy at any meeting shall have, on each matter on
which stockholders are entitled to vote, one vote for each
share of stock having voting power, registered in his name on
the books of the Corporation.
Section 2.8. New Business Proposals at Annual Meetings.
Only such new business shall be conducted, and only such
proposals shall be acted upon at an annual meeting of
stockholders, as shall have been properly brought before such
annual meeting (a) by, or at the direction of, the Board of
Directors, or (b) by any stockholder of the Corporation who
complies with the notice procedures set forth in this Section
2.8. A stockholder who wishes to bring a proposal before an
annual meeting shall give timely notice thereof in writing to
the Secretary of the Corporation. Such notice, to be timely,
shall be delivered to, or mailed and received by the Secretary
at the principal executive offices of the Corporation at least
sixty days but not more than ninety days prior to the scheduled
annual meeting, regardless of any postponements, deferrals or
adjournments of that meeting to a later date; provided,
however, that if less than seventy days' notice or prior public
disclosure of the date of the scheduled annual meeting is given
or made, such notice by a stockholder to be timely shall be so
delivered or received not later than the close of business on
the tenth day following the earlier of the day on which notice
of the scheduled annual meeting was mailed or the day on which
public disclosure thereof was made.
Each such stockholder notice shall set forth as to each
proposal to be brought before the annual meeting (a) a brief
description of the proposal and the reasons for conducting such
business at the annual meeting, (b) the name and address, as
they appear on the transfer books of the Corporation, of the
stockholder proposing such business and any other stockholders
known by such stockholder to be supporting the proposal, (c)
the class and number of shares of the Corporation's stock which
are beneficially owned by the stockholder on the date of such
stockholder notice and by any other stockholders known by such
stockholder to be supporting such proposal, and (d) any
financial interest of the stockholder in such proposal.
The Board of Directors may reject any stockholder proposal
not timely made in accordance with the terms of this Section
2.8. If the Board of Directors, or a designated committee
thereof, determines that the information provided in a
stockholder's notice does not satisfy the informational
requirements of this Section 2.8 in any material respect, the
Secretary shall promptly notify such stockholder of the
deficiency in the notice. The stockholder shall have an
opportunity to cure the deficiency by providing additional
information to the Secretary within five days from the date
such notice of deficiency is given to the stockholder, as the
Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period,
or if the Board of Directors or such committee determines that
the additional information provided by the stockholder,
together with the information previously provided, does not
satisfy the requirements of this Section 2.8 in any material
respect, then the Board of Directors may reject such proposal.
The Secretary shall notify the stockholder in writing whether
his proposal has been made in accordance with the time and
informational requirements of this Section 2.8. Notwithstanding
the procedure set forth in this Section 2.8, if neither the
Board of Directors nor such committee makes a determination as
to the validity of any stockholder proposal, the presiding
officer of the annual meeting shall determine and declare at
the annual meeting whether the stockholder proposal was made in
accordance with the terms of this Section 2.8. If the presiding
officer determines that the stockholder's proposal was not made
in accordance with the terms of this Section 2.8, he shall so
declare at the annual meeting and any such proposal shall not
be acted upon at the annual meeting.
This Section 2.8 shall not prevent the consideration and
approval or disapproval at an annual meeting of reports of
officers, directors and committees of the Board of Directors,
but, in connection with such reports, no new business shall be
acted upon at such annual meeting unless stated, filed and
received as herein provided.
ARTICLE III
DIRECTORS
Section 3.1. Number, Election and Terms of Office of
Directors. The number of directors which shall constitute the
whole Board shall be eleven in number. Directors need not be
stockholders in the Corporation. Except as provided in Section
3.3, the directors shall be elected at the annual meeting of
the stockholders, and each director elected shall hold office
until his successor is elected and qualified or until his
earlier resignation. The directors shall be divided into three
classes: Class I, Class II and Class III. Such classes shall
be as nearly equal in number as possible. The term of office
of the initial Class I directors shall expire at the annual
meeting of stockholders in 1971, the term of office of the
initial Class II directors shall expire at the annual meeting
of stockholders in 1972, and the term of office of the initial
Class III directors shall expire at the annual meeting of
stockholders in 1973, or thereafter in each case when their
respective successors are elected and qualified. At each
annual election held after classification and the initial
election of directors according to classes, the directors
chosen to succeed those whose terms then expire shall be
identified as being of the same class as the directors they
succeed and shall be elected for a term expiring at the third
succeeding annual meeting or thereafter when their respective
successors in each case are elected and qualified.
Section 3.2. Corporate Records. The directors may keep
the books of the Corporation, except such as are required by
law to be kept within the State of Delaware, outside of
Delaware at such place or places as they may from time to time
determine.
Section 3.3. Vacancies. Vacancies occurring in the Board
of Directors and newly created directorships resulting from any
increase in the authorized number of directors may be filled by
a majority of the directors then in office, although less than
a quorum, and any director so chosen shall hold office until
his successor is elected and qualified. A director elected to
fill a vacancy shall be elected for the unexpired portion of
the term of his predecessor in office. A director elected to
fill a newly created directorship shall serve for the term
provided herein for the class of directors for which such
director was elected.
Section 3.4. General Powers. The business and affairs of
the Corporation shall be managed by its Board of Directors
which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these By-Laws directed or
required to be exercised or done by the stockholders.
Section 3.5. Place of Meetings. The Board of Directors of
the Corporation may hold meetings, both regular and special,
either within or without the State of Delaware.
Section 3.6. Annual Meetings. The first meeting of each
newly elected Board shall constitute the annual meeting of said
Board and shall be convened as soon as is conveniently possible
but in no event more than two weeks after the date of the
annual meeting of stockholders in each year at such time and
place as shall be fixed by the Chairman of the Board.
Section 3.7. Regular Meetings. Regular meetings of the
Board shall be held upon notice, or without notice, at least
quarterly, at such time and place as shall from time to time be
determined by the Board.
Section 3.8. Special Meetings. Special meetings of the
Board may be called by the Chairman of the Board or any four
directors. Notice of each special meeting of the Board may be
given by mail, telegraph or cable, personal delivery or
telephone. Notice by mail shall be given at least three days
before the meeting; notice by any other means shall be given a
reasonable period of time before the time of such meeting but
in no event shall such notice be given less than one hour
before such meeting. If notice is by telephone, such notice
shall be promptly confirmed by telegraph or cable to each
director.
Section 3.9. Quorum. At all meetings of the Board, the
presence of a majority of the full number of directors shall be
necessary and sufficient to constitute a quorum for the
transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the
Certificate of Incorporation or by these By-Laws. If a quorum
shall not be present at any meeting of the Board of Directors,
the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting,
until a quorum shall be present.
Section 3.10. Action by Board Without Meeting.
Notwithstanding anything contained in these By-Laws, any action
required or permitted to be taken at any meeting of the Board
of Directors or of any Committee thereof may be taken without a
meeting, if a written consent thereto is signed by all members
of the Board or of such Committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the
Board of Directors or the Committee.
Section 3.11. Compensation of Directors. The Board of
Directors, by resolution adopted by a majority of the whole
Board, may establish reasonable compensation of all directors
for services to the Corporation as directors, officers or
otherwise. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving
compensation therefor. Members of any Committee may be allowed
like compensation for their services to the Corporation.
Section 3.12. Interested Directors. No contract or
transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in
which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or
voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the
Board or Committee which authorizes the contract or
transaction, or solely because his or their votes are counted
for such purpose, if (1) the material facts as to his
relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the
Committee, and the Board or Committee in good faith authorizes
the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (2) the
material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of
the stockholders; or (3) the contract or transaction is fair as
to the Corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, Committee, or the
stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board
or of the Committee which authorizes the contract or
transaction.
Section 3.13. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate
one or more Committees, each Committee to consist of two or
more of the directors of the Corporation. Any such Committee,
to the extent provided in the resolution not inconsistent with
the provisions of the Statutes of Delaware, shall have and may
exercise the powers and authority of the Board of Directors in
the management of the Corporation and may authorize the seal of
the Corporation to be affixed to all papers which may require
it. A majority of the members of the Committee then holding
office shall constitute a quorum at all meetings and each such
Committee shall keep regular minutes of its proceedings and
report the same to the whole Board.
Section 3.14. Nomination for Election of Directors.
Nominations for the election of Directors shall be properly
made by the Board of Directors or a nominating committee
appointed by the Board of Directors or by any stockholder
entitled to vote in the election of Directors generally;
provided, however, that any such stockholder may nominate one
or more persons for election as Directors at a meeting only if
such stockholder has given written notice of such stockholder's
intent, either by personal delivery or by United States mail,
postage prepaid, to the Secretary not later than (1) with
respect to an election to be held at an annual meeting of
stockholders, ninety days prior to the anniversary date of the
immediately preceding annual meeting, and (2) with respect to
an election to be held at a special meeting of stockholders for
the election of directors, the close of business on the tenth
day following the date on which notice of such meeting is first
given to stockholders. Each such notice shall set forth: (a)
the name and address, as they appear on the transfer books of
the Corporation, of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(d) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities
and Exchange Commission as then in effect; and (e) the consent
of each nominee to serve as a director of the Corporation if so
elected.
The presiding officer of any meeting at which a
stockholder or its representative attempts to nominate one or
more persons for election as directors may refuse to
acknowledge the nomination of any person not made in compliance
with the provisions of this Section 3.14.
ARTICLE IV
OFFICERS
Section 4.1. Designation: Number. The officers of the
Corporation shall consist of a Chairman of the Board; a
President and Chief Executive Officer; an Executive Vice
President and Chief Financial Officer; an Executive Vice
President and Chief Operating Officer, Aerospace; an Executive
Vice President and Chief Operating Officer, Industrial; a Vice
President and General Counsel; one or more other Vice
Presidents; a Secretary; a Treasurer; and a Controller, all of
whom shall be elected by the Board of Directors and shall hold
office until their successors are duly elected and qualified.
In addition, the President and Chief Executive Officer may
appoint a Tax Director, one or more Assistant Secretaries,
Assistant Treasurers and Assistant Controllers and such other
officers and agents as the President and Chief Executive
Officer may deem necessary or desirable, who shall hold their
offices for such terms and shall have such authority and
perform such duties as shall be determined by the President and
Chief Executive Officer from time to time. Any Executive Vice
President or Vice President designated by a resolution of the
Board of Directors or by delegation of the President and Chief
Executive Officer shall have authority to sign contracts and
any other documents as specifically authorized by the Board of
Directors or the President and Chief Executive Officer or which
are within the ordinary course of the business of the
Corporation.
Section 4.2. Non-Corporate Officers. The President and
Chief Executive Officer shall have authority to appoint from
time to time officers of divisions, product groups or other
segments of the Corporation's business for such terms, with
such authority and at such salary as the President and Chief
Executive Officer in his sole discretion shall determine;
provided, however, such appointed officer shall under no
circumstances have authority to bind any other division,
product group or other segment of the Corporation's business
nor to bind the Corporation, except as to the normal and usual
business affairs of the division, product group or other
segment of the Corporation's business of which he is an
officer. Such appointed officer, as such, shall not be
construed as an officer of the Corporation.
Section 4.3. Salaries. The salaries of the officers
elected pursuant to Section 4.1 above shall be determined by
the Board of Directors. The salaries of all other officers and
agents of the Corporation appointed by the President and Chief
Executive Officer shall be determined by the Board of Directors
or the President and Chief Executive Officer.
Section 4.4. Removal. Any officer elected by the Board of
Directors and any officer or agent appointed by the President
and Chief Executive Officer, as the case may be, may be removed
at any time by the Board of Directors or the President and
Chief Executive Officer, respectively, whenever in its or his
judgment the best interests of the Corporation will be served
thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Any vacancy
occurring in any elected office of the Corporation shall be
filled by the Board of Directors.
Section 4.5. Chairman of the Board. The Chairman of the
Board shall preside at all meetings of stockholders and of the
Board. He shall counsel the President and Chief Executive
Officer on plans, policies, strategies, budgets and operating
plans. The Chairman of the Board shall participate in
activities such as strategic planning, acquisitions and
divestitures, and presentations to analysts. The Chairman of
the Board, the President and Chief Executive Officer, and/or
the Executive Vice President and Chief Financial Officer shall
execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required by law
to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the
Corporation.
Section 4.6. President and Chief Executive Officer. The
President and Chief Executive Officer shall be the chief
executive officer of the Corporation. He shall see that all
orders and resolutions of the Board are carried into effect.
Subject to the control of the Board, the President and Chief
Executive Officer shall have general supervision, control and
management of the affairs and business of the Corporation. The
President and Chief Executive Officer, the Chairman of the
Board, and/or the Executive Vice President and Chief Financial
Officer shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except
where required by law to be otherwise signed and executed and
except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
Section 4.7. Executive Vice President and Chief Financial
Officer. The Executive Vice President and Chief Financial
Officer shall be the chief financial officer of the Corporation
and shall be in charge of the financial, accounting, taxation,
administration, personnel and public relations activities of
the Corporation and shall be under the direction and report to
the President and Chief Executive Officer. He and/or the
President and Chief Executive Officer shall execute bonds,
mortgages and other contracts requiring a seal, under the seal
of the Corporation, except where required by law to be
otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
Section 4.8. Executive Vice President and Chief Operating
Officer, Aerospace. The Executive Vice President and Chief
Operating Officer, Aerospace shall be the chief operating
officer of the Corporation's aerospace businesses. He shall
assist the President and Chief Executive Officer in the general
supervision, control and management of the affairs and business
of the Corporation's aerospace businesses and the Corporation's
government contracts and compliance activities.
Section 4.9. Executive Vice President and Chief Operating
Officer, Industrial. The Executive Vice President and Chief
Operating Officer, Industrial shall be the chief operating
officer of the Corporation's industrial businesses. He shall
assist the President and Chief Executive Officer in the general
supervision, control and management of the affairs and business
of the Corporation's industrial businesses.
Section 4.10. Vice President and General Counsel. The
Vice President and General Counsel shall be the chief legal
officer of the Corporation, shall be responsible for all legal
and environmental matters involving the Corporation and shall
direct the Corporation's legal and environmental affairs
staffs. He shall be under the direction of and report to the
Chief Executive Officer.
Section 4.11. Other Vice Presidents. The other Vice
Presidents shall perform such duties as may be prescribed by
the Board of Directors or the President and Chief Executive
Officer.
Section 4.12. Secretary and Assistant Secretaries.
(a) The Secretary shall attend all sessions of the Board
of Directors and all meetings of the stockholders and record
the minutes of all proceedings in a book to be kept for that
purpose, and shall perform like duties for Committees of the
Board when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and of the Board of
Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or the President and Chief
Executive Officer. He shall keep in safe custody the seal of
the Corporation, and affix the same to any instrument requiring
it, and when affixed it shall be attested by his signature or
by the signature of the Treasurer or an Assistant Secretary.
(b) The Assistant Secretaries in the order of their
seniority shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary,
and shall perform such other duties as the Chairman of the
Board and/or the President and Chief Executive Officer shall
prescribe.
Section 4.13. Treasurer and Assistant Treasurers.
(a) The Treasurer shall, subject to the direction of the
Executive Vice President and Chief Financial Officer, have the
custody of the corporate funds and securities and shall keep
full and accurate accounts of receipts and disbursements in
books belonging to the Corporation and shall deposit all money
and other valuable effects in the name and to the credit of the
Corporation, in such depositories as may be designated by the
Board of Directors.
(b) He shall disburse the funds of the Corporation when
proper to do so, taking proper vouchers for such disbursements,
and shall render to the Executive Vice President and Chief
Financial Officer, the President and Chief Executive Officer
and the Board of Directors, at the regular meetings of the
Board, or whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the
Corporation.
(c) If required by the Board of Directors, he shall give
the Corporation a bond in such sum, and with such surety or
sureties as shall be satisfactory to the Board, for the
faithful performance of the duties of his office, and for the
restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the
Corporation.
(d) The Treasurer shall be under the direction of and
report to the Executive Vice President and Chief Financial
Officer.
(e) The Assistant Treasurers in the order of their
seniority shall, in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and
shall perform such other duties as the Board of Directors or
the Executive Vice President and Chief Financial Officer shall
prescribe.
Section 4.14. Controller and Assistant Controllers.
(a) The Controller shall be the chief accounting officer
of the Corporation and shall be responsible for the
installation and supervision of all accounting records,
including the preparation and interpretation of financial
statements, the continuous audit of accounts and records, and
such other duties usually incident to the office of Controller.
He shall be under the direction of the Executive Vice President
and Chief Financial Officer and shall, in addition to the
foregoing duties, perform such other duties as may be assigned
to him by the Board of Directors or the Executive Vice
President and Chief Financial Officer.
(b) The Assistant Controllers in the order of their
seniority shall, in the absence or disability of the
Controller, perform the duties and exercise the powers of the
Controller and shall perform such other duties as the Board of
Directors or the Executive Vice President and Chief Financial
Officer shall prescribe.
Section 4.15. Tax Director. The Tax Director shall be
responsible for the preparation and signing of all federal and
state tax returns, consents, elections, closing agreements and
all other documents related to the determination of any federal
or state tax liability of the Corporation, and as such shall be
under the direction of and report to the Treasurer.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 5.1. Certificates of Stock. Certificates for
shares of stock of the Corporation shall be in such form as
shall be approved by the Board, and during the period while
more than one class of stock or more than one series of any
class of the Corporation is authorized, the powers,
designations, preferences and relative, participating, optional
or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of
such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificates which the
Corporation shall issue to represent such class or series of
stock, or else there shall appear on the certificates a
statement that the Corporation shall furnish such information
to a stockholder without charge if it be requested. They shall
exhibit the holder's name and number of shares, and, with
respect to each class of stock of the Corporation, or series
thereof, if there be more than one class or series thereof,
shall bear a distinguishing letter, and each class or series
thereof, if any, shall be numbered serially and be issued in
consecutive order. They shall bear the Corporate seal or a
facsimile thereof and shall be signed by the President and
Chief Executive Officer, an Executive Vice President, or a Vice
President, and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation. If
such certificate is countersigned (1) by a transfer agent other
than the Corporation or its employee, or, (2) by a registrar
other than the Corporation or its employee, any other signature
on the certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with
same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Section 5.2. Transfer of Stock. Upon surrender to the
Corporation or its transfer agent of a certificate representing
shares, duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, a new
certificate shall be issued to the person entitled thereto, and
the old certificate canceled, and the transaction recorded upon
the books of the Corporation.
Section 5.3. Lost, Stolen or Destroyed Certificates. Any
person, claiming a certificate for shares of the Corporation to
be lost, stolen or destroyed, shall make affidavit of the fact
and lodge the same with the Secretary of the Corporation
accompanied by a signed application for a new certificate.
Such person shall also give the Corporation a bond of indemnity
with one or more sureties satisfactory to the Board of
Directors, and in an amount which in their judgment shall be
sufficient to save the Corporation from loss, or shall qualify
under such blanket bond as may from time to time be approved by
the Board of Directors, and thereupon the proper officers may
cause to be issued a new certificate of like tenor with the one
alleged to be lost, stolen or destroyed.
Section 5.4. Record Date. In order that the Corporation
may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, or
to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior
to any other action.
Section 5.5. Registered Stockholders. The Corporation
shall be entitled to treat the holder of record of any share or
shares of stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
Section 5.6. Transfer Agents and Registrars. The Board of
Directors may from time to time appoint a transfer agent and
registrar in one or more cities; may require all certificates
evidencing shares of stock of the Corporation to bear the
signatures of a transfer agent and registrar; and may provide
that such certificates shall be transferable in more than one
city.
ARTICLE VI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Corporation shall, to the fullest extent to which it
is empowered to do so by the General Corporation Law of
Delaware, or any other applicable laws, as from time to time in
effect, indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he
is or was a director or officer of the Corporation or a
division thereof, or is or was serving at the request of the
Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, against
all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding.
The provisions of this Article shall be deemed to be a
contract between the Corporation and each director or officer
who serves in any such capacity at any time while this Article
and the relevant provisions of the General Corporation Law of
Delaware or other applicable law, if any, are in effect, and
any repeal or modification of any such law or of this Article
shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or
any action, suit or proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any such
state of facts.
The Corporation shall, to the fullest extent to which it
is empowered to do so by the General Corporation Law of
Delaware, and with respect to the Employee Retirement Income
Security Act of 1974, or any other applicable laws, as from
time to time in effect, indemnify any officer, director or
employee of the Corporation or an affiliated corporation, who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was serving at the request of
the Corporation as an individual Trustee, Committee member,
administrator or fiduciary of a pension or other benefit plan
for employees of the Corporation, or of an affiliated
corporation or other enterprise.
Persons who are not covered by the foregoing provisions of
this Article and who are or were employees or agents of the
Corporation or a division thereof, or are or were serving at
the request of the Corporation as employees or agents of
another corporation, partnership, joint venture, trust or other
enterprise, may be indemnified to the extent authorized at any
time or from time to time by the Board of Directors of the
Corporation.
The indemnification provided or permitted by this Article
shall not be deemed exclusive of any other rights to which
those indemnified may be entitled by law or otherwise, and
shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such
liability under the provisions of this Article.
The Corporation shall, to the fullest extent to which it
is empowered to do so by the General Corporation Law of
Delaware, or any other applicable laws, as from time to time in
effect, pay expenses, including attorneys' fees, incurred in
defending any action, suit or proceeding, in advance of the
final disposition of such action, suit or proceeding, to any
person who is or was a party or is threatened to be made a
party to any such threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was
a director or officer of the Corporation, upon receipt of an
undertaking by or on behalf of such person to repay such amount
if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation as authorized by
applicable laws.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. Checks, Drafts and Other Instruments;
Security Voting and Proxies. All checks, drafts or other
orders for the payment of money, notes or other evidences of
indebtedness, issued in the name of the Corporation shall be
signed by such officer or officers, or such other person or
persons, as the Board of Directors may from time to time
designate. In the absence of specific action by the Board of
Directors, the President and Chief Executive Officer or any
Executive Vice President or Vice President shall have the
authority to grant proxies to vote, or vote, on behalf of the
Corporation the securities of other corporations, both domestic
and foreign, held by the Corporation.
Section 7.2. Seal. The corporate seal of the Corporation
shall be in such form as the Board of Directors may determine
and shall include the name of the Corporation and the words
"Corporate Seal, Delaware." The seal may be used by causing it,
or a facsimile thereof, to be impressed or affixed or in any
manner reproduced.
Section 7.3. Fiscal Year. The fiscal year of the
Corporation shall commence on the first day of January in each
year and end on the following 31st day of December.
Section 7.4. Notices. Notice by mail shall be deemed to
have been given at the time the same shall be mailed. Notice
by telegraph shall be deemed to have been given when the same
shall have been delivered for prepaid transmission into the
custody of a company ordinarily engaged in the transmission of
such messages.
Section 7.5. Waiver of Notice. Whenever any notice
whatever is required to be given under the provisions of the
laws of the State of Delaware or under the provisions of the
Certificate of Incorporation or these By-Laws, a waiver thereof
in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. Except as may be otherwise
specifically provided by law, any waiver by mail, telegraph,
cable or wireless bearing the name of the person entitled to
notice shall be deemed a waiver in writing duly signed. The
presence of any person at any meeting either in person or by
proxy shall be deemed the equivalent of a waiver in writing
duly signed, except where the person attends for the express
purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened.
Section 7.6. Dividends. Dividends upon the capital stock
of the Corporation, subject to the provisions of the
Certificate of Incorporation, if any, may be declared by the
Board at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of law and of the
Certificate of Incorporation.
Section 7.7. Creation of Reserves. Before payment of any
dividend or making any distribution of profits, there may be
set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board from time to time, in
its absolute discretion, may think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation,
or for such other purpose as the Board shall think conducive to
the interest of the Corporation, and the Board may at any time
modify or abolish any such reserve in the manner in which it
was created.
Section 7.8. Amendments. These By-Laws may be altered or
repealed by the affirmative vote of the majority of the entire
number of directors specified from time to time in the restated
Certificate of Incorporation at any regular meeting of the
Board or at any special meeting of the Board, if notice of the
proposed alteration or repeal be contained in the notice of
such special meeting; provided, however, that any provisions of
these By-Laws resulting from such alteration or repeal shall at
all times be in conformance with the Restated Certificate of
Incorporation and the laws of the State of Delaware.
<PAGE>
Exhibit (10)(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of the 18th day of June,
1996, by and between Sundstrand Corporation (the "Company"), and
Ronald F. McKenna, an individual (the "Executive") (hereinafter
collectively referred to as "the parties").
WHEREAS, the Board of Directors of the Company (the
"Board") recognizes that the possibility of a Change in Control
(as hereinafter defined in Section 8(e)) exists and that the
threat of or the occurrence of a Change in Control can result in
significant distractions of its key management personnel because
of the uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and
in the best interest of the Company and its stockholders to
retain the services of the Executive in the event of a threat or
occurrence of a Change in Control and to ensure his continued
dedication and efforts in such event without undue concern for
his personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the
employ of the Company, particularly in the event of a threat of
or the occurrence of a Change in Control, the Company desires to
enter into this Agreement with the Executive.
NOW, THEREFORE, in consideration of the respective
agreements of the parties contained herein, it is agreed as
follows:
l. Employment Term.
(a) The "Employment Term" shall commence on the first
date during the Protected Period (as defined in Section l(c)
below) on which a Change in Control occurs (the "Effective Date")
and shall expire on the third anniversary of the Effective Date;
provided, however, that on each anniversary of the Effective
Date, the Employment Term shall automatically be extended for one
(l) year unless either the Company or the Executive shall have
given written notice to the other at least ninety (90) days prior
thereto that the Employment Term shall not be so extended; and
provided, further, that the Employment Term shall in no event
extend beyond the first day of the month following the month in
which the Executive attains age sixty-five (65).
(b) Notwithstanding anything contained in this
Agreement to the contrary, if the Executive's employment is
terminated prior to the Effective Date and the Executive
reasonably demonstrates that such termination (l) was at the
request of a third party who has indicated an intention or taken
steps reasonably calculated to effect a Change in Control or (2)
otherwise occurred in connection with or in anticipation of a
Change in Control, then for all purposes of this Agreement, the
Effective Date shall mean the date immediately prior to the date
of such termination of the Executive's employment.<PAGE>
-2-
(c) For purposes of this Agreement, the "Protected
Period" shall be the two (2) year period commencing on June 18,
1996, provided, however, that the Protected Period shall be
automatically extended for one (l) year on June 18, 1997 and on
each June 18 thereafter unless the Company shall have given
written notice to the Executive at least ninety (90) days prior
thereto that the Protected Period shall not be so extended; and
provided, further, that notwithstanding any such notice by the
Company not to extend, the Protected Period shall not end if
prior to the expiration thereof any third party has indicated an
intention or taken steps reasonably calculated to effect a Change
in Control, in which event the Protected Period shall end only
after such third party publicly announces that it has abandoned
all efforts to effect a Change in Control.
2. Employment.
(a) Subject to the provisions of Section 8 hereof,
the Company agrees to continue to employ the Executive and the
Executive agrees to remain in the employ of the Company during
the Employment Term. During the Employment Term, the Executive
shall be employed as Executive Vice President and Chief Operating
Officer, Aerospace, of the Company or in such other senior
executive capacity as may be mutually agreed to in writing by the
parties. The Executive shall perform the duties, undertake the
responsibilities and exercise the authority customarily
performed, undertaken and exercised by persons situated in a
similar executive capacity. He shall also promote, by
entertainment or otherwise, the business of the Company.
(b) Excluding periods of vacation and sick leave to
which the Executive is entitled, during the Employment Term the
Executive agrees to devote reasonable attention and time during
usual business hours to the business and affairs of the Company
to the extent necessary to discharge the responsibilities
assigned to the Executive hereunder. The executive may (i) serve
on corporate, civil or charitable boards or committees, (ii)
manage personal investments and (iii) deliver lectures and teach
at educational institutions, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities hereunder.
3. Base Salary. During the Employment Term, the Company
agrees to pay or cause to be paid to the Executive during the
term of this Agreement a base salary at the rate of $300,000 per
annum or such larger amount as the Company may from time to time
determine (hereinafter referred to as the "Base Salary"). Such
Base Salary shall be payable in accordance with the Company's
customary practices applicable to its executives.
4. Employee Benefits. During the Employment Term, the
Executive shall be entitled to participate in all employee
benefit plans, practices and programs maintained by the Company
and made available to employees generally including, without
limitation all pension, retirement, profit sharing, savings,<PAGE>
-3-
medical, hospitalization, disability, dental, life or travel
accident insurance benefit plans. The Executive's participation
in such plans, practices and programs shall be on the same basis
and terms as are applicable to employees of the Company
generally.
5. Executive Benefits. During the Employment Term, the
Executive shall be entitled to participate in all executive
benefit or incentive compensation plans now maintained or
hereafter established by the Company for the purpose of providing
compensation and/or benefits to executives of the Company
including, but not limited to, the Company's 1989 Restricted
Stock Plan, the Sundstrand Corporation Stock Incentive Plan, the
Officer Incentive Plan, and any supplemental retirement, salary
continuation, stock option, deferred compensation, supplemental
medical or life insurance or other bonus or incentive
compensation plans. Unless otherwise provided herein, the
Executive's participation in such plans shall be on the same
basis and terms as other similarly situated executives of the
Company, but in no event on a basis less favorable in terms of
benefit levels or reward opportunities applicable to the
Executive as in effect on the Effective Date. No additional
compensation provided under any of such plans shall be deemed to
modify or otherwise affect the terms of this Agreement or any of
the Executive's entitlements hereunder.
6. Other Benefits.
(a) Fringe Benefits and Perquisites. During the
Employment Term, the Executive shall be entitled to all fringe
benefits and perquisites (e.g. physical examinations, financial
planning and tax preparation services) made available by the
Company to similarly situated executives.
(b) Expenses. During the Employment Term, the
Executive shall be entitled to receive prompt reimbursement of
all expenses reasonably incurred by him in connection with the
performance of his duties hereunder or for promoting, pursuing or
otherwise furthering the business or interests of the Company.
(c) As of the Effective Date, all restrictions on any
outstanding award (including restricted stock awards) granted to
the Executive shall lapse and such awards shall become fully
(100%) vested immediately, and all stock options and stock
appreciation rights granted to the Executive shall become fully
(100%) vested and shall become immediately exercisable.
7. Vacation and Sick Leave. During the Employment Term,
at such reasonable times as the Board shall in its discretion
permit, the Executive shall be entitled, without loss of pay, to
absent himself voluntarily from the performance of his employment
under this Agreement, provided that:
(a) The Executive shall be entitled to annual
vacation in accordance with the policies as periodically<PAGE>
-4-
established by the Board for similarly situated executives of the
Company.
(b) The Executive shall be entitled to sick leave
(without loss of pay) in accordance with the Company's policies
as in effect from time to time.
8. Termination. During the Employment Term, the
Executive's employment hereunder may be terminated under the
following circumstances:
(a) Disability. The Company may terminate the
Executive's employment after having established the Executive's
Disability. For purposes of this Agreement, "Disability" means a
physical or mental infirmity which impairs the Executive's
ability to substantially perform his duties under this Agreement,
which continues for a period of at least one hundred eighty (180)
consecutive days and which cannot be reasonably accommodated by
the Company. The Executive shall be entitled to the compensation
and benefits provided for under this Agreement for any period
during the term of this Agreement and prior to the establishment
of the Executive's Disability during which the Executive is
unable to work due to a physical or mental infirmity.
Notwithstanding anything contained in this Agreement to the
contrary, until the Termination Date specified in a Notice of
Termination (as each term is hereinafter defined) relating to the
Executive's Disability, the Executive shall be entitled to return
to his position with the Company as set forth in this Agreement
in which event no Disability of the Executive will be deemed to
have occurred.
(b) Cause. The Company may terminate the Executive's
employment for "Cause". A Termination for Cause is a termination
evidenced by a resolution adopted in good faith by a majority of
the Board that the Executive (i) willfully and continually failed
to substantially perform his duties with the Company (other than
a failure resulting from the Executive's incapacity due to
physical or mental illness) which failure continued for a period
of at least thirty (30) days after a written notice of demand for
substantial performance has been delivered to the Executive
specifying the manner in which the Executive has failed to
substantially perform, or (ii) willfully engaged in conduct which
is demonstrably and materially injurious to the Company,
monetarily or otherwise; provided, however, that no termination
of the Executive's employment shall be for Cause as set forth in
clause (ii) above until (x) there shall have been delivered to
the Executive a copy of a written notice setting forth that the
Executive was guilty of the conduct set forth in clause (ii) and
specifying the particulars thereof in detail, and (y) the
Executive shall have been provided an opportunity to be heard by
the Board (with the assistance of the Executive's counsel if the
Executive so desires). No act, nor failure to act, on the
Executive's part, shall be considered "willful" unless he has
acted or failed to act, with an absence of good faith and without
a reasonable belief that his action or failure to act was in the<PAGE>
-5-
best interest of the Company. Notwithstanding anything contained
in this Agreement to the contrary, no failure to perform by the
Executive after Notice of Termination is given by the Executive
shall constitute Cause for purposes of this Agreement.
(c) (l) Good Reason. The Executive may terminate
his employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean the occurrence after a Change in Control
(as hereinafter defined in this Section 8(e)) of any of the
events or conditions described in Subsections (i) through (vii)
hereof:
(i) a change in the Executive's status,
title, position or responsibilities (including reporting
responsibilities) which, in the Executive's reasonable
judgment, does not represent a promotion from his status,
title, position or responsibilities as in effect
immediately prior thereto; the assignment to the Executive
of any duties or responsibilities which, in the Executive's
reasonable judgment, are inconsistent with such status,
title, position or responsibilities; or any removal of the
Executive from or failure to re-appoint or re-elect him to
any of such positions, except in connection with the
termination of his employment for Disability, Cause, as a
result of his death or by the Executive other than for Good
Reason;
(ii) a reduction in the Executive's Base
Salary or any failure to pay the Executive any compensation
or benefits to which he is entitled within five (5) days of
the date due;
(iii) the failure by the Company to (A)
continue in effect any material compensation or benefit
plan in which the Executive was participating at the time
of the Change in Control, including, but not limited to,
the Company's 1989 Restricted Stock Plan, the Sundstrand
Corporation Stock Incentive Plan, and the Officer Incentive
Compensation Plan or (B) provide the Executive with
compensation and benefits at least equal (in terms of
benefit levels and/or reward opportunities) to those
provided for under each employee benefit plan, program and
practice as in effect immediately prior to the Change in
Control (or as in effect following the Change in Control,
if greater);
(iv) the insolvency or the filing (by any
party, including the Company) of a petition for bankruptcy,
of the Company;
(v) any material breach by the Company of
any provision of this Agreement;
(vi) any purported termination of the
Executive's employment for Cause by the Company which does<PAGE>
-6-
not comply with the terms of Section 8 of this Agreement;
and
(vii) the failure of the Company to obtain an
agreement, satisfactory to the Executive, from any
successor or assign of the Company to assume and agree to
perform this Agreement, as contemplated in Section 12
hereof.
(2) Any event or condition described in this
Section 8(c)(i) through (vii) which occurs prior to the Effective
Date but which the Executive reasonably demonstrates (i) was at
the request of a third party who has indicated an intention or
taken steps reasonably calculated to effect a Change in Control
or (ii) otherwise arose in connection with or in anticipation of
a Change in Control, shall constitute Good Reason for purposes of
this Agreement notwithstanding that it occurred prior to the
Effective Date.
(3) The Executive's right to terminate his
employment pursuant to this Section (8)(c) shall not be affected
by his incapacity due to physical or mental illness.
(d) Voluntary Termination. The Executive may
voluntarily terminate his employment hereunder at any time. If
the Executive voluntarily terminates his employment for any
reason or without reason during the sixty (60) day period which
commences on the date which is six (6) months following the
Effective Date, it shall be referred to as a "Limited Period
Termination".
(e) Change in Control. For purposes of this
Agreement, a "Change in Control" shall mean any of the following
events:
(l) The acquisition (other than from the
Company) by any person (as such term is defined in Sections 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of thirty-three percent
(33%) or more of the combined voting power of the Company's then
outstanding voting securities;
(2) The individuals who, as of the date hereof,
are members of the Board (the "Incumbent Board"), cease for any
reason to constitute a majority of the Board, unless the
election, or nomination for election by the Company stockholders,
of any new director was approved by a vote of a majority of the
Incumbent Board, and such new director shall, for purposes of
this Agreement, be considered as a member of the Incumbent Board;
or
(3) Approval by stockholders of the Company of
(i) a merger or consolidation involving the Company if the
stockholders of the Company, immediately before such merger or<PAGE>
-7-
consolidation, do not, as a result of such merger or
consolidation, own, directly or indirectly, more than sixty-seven
percent (67%) of the combined voting power of the then
outstanding voting securities of the corporation resulting from
such merger or consolidation in substantially the same proportion
as their ownership of the combined voting power of the voting
securities of the Company outstanding immediately before such
merger or consolidation or (ii) a complete liquidation or
dissolution of the Company or an agreement for the sale or other
disposition of all or substantially all of the assets of the
Company.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur pursuant to Section 8(e)(l), solely because
thirty-three percent (33%) or more of the combined voting power
of the Company's then outstanding securities is acquired by (i) a
trustee or other fiduciary holding securities under one or more
employee benefit plans maintained by the Company or any of its
subsidiaries or (ii) any corporation which, immediately prior to
such acquisition, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their
ownership of stock in the Company immediately prior to such
acquisition.
(f) Notice of Termination. Any purported termination
by the Company or by the Executive shall be communicated by
written Notice of Termination to the other. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
indicates the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated. For
purposes of this Agreement, no such purported termination of
employment shall be effective without such Notice of Termination.
(g) Termination Date, Etc. "Termination Date" shall
mean in the case of the Executive's death, his date of death, or
in all other cases, the date specified in the Notice of
Termination subject to the following:
(1) If the Executive's employment is terminated
by the Company for Cause or due to Disability, the date specified
in the Notice of Termination shall be at least thirty (30) days
from the date the Notice of Termination is given to the
Executive, provided that in the case of Disability the Executive
shall not have returned to the full-time performance of his
duties during such period of at least thirty (30) days; and
(2) If the Executive's employment is terminated
for Good Reason or is a Limited Period Termination, the date
specified in the Notice of Termination shall not be more than
sixty (60) days from the date the Notice of Termination is given
to the Company.<PAGE>
-8-
9. Compensation Upon Termination. Upon termination of
the Executive's employment during the Employment Term, the
Executive shall be entitled to the following benefits:
(a) If the Executive's employment is terminated by
the Company for Cause or Disability or by the Executive (other
than for Good Reason or a Limited Period Termination), or by
reason of the Executive's death, the Company shall pay the
Executive all amounts earned or accrued hereunder through the
Termination Date but not paid as of the Termination Date,
including Base Salary, vacation pay, bonuses or incentive
compensation and any previous compensation which the Executive
has previously deferred (including any interest earned or
credited thereon) (collectively, "Accrued Compensation"). In
addition to the foregoing, if the Executive's employment is
terminated by the Company for Disability or by reason of the
Executive's death, the Company shall pay to the Executive or his
beneficiaries an amount equal to the bonus or incentive award
that the Executive would have been entitled to receive in respect
of the fiscal year in which the Executive's Termination Date
occurs had he continued in employment until the end of such
fiscal year, calculated as if the maximum bonus payable to the
Executive had been earned for such year, multiplied by a fraction
the numerator of which is the number of days in such fiscal year
through the Termination Date and the denominator of which is 365
(a "Pro Rata Bonus"). The Executive's entitlement to any other
compensation or benefits shall be determined in accordance with
the Company's employee benefit plans and other applicable
programs and practices then in effect.
(b) If the Executive's employment by the Company
shall be terminated (1) by the Company other than for Cause,
death or Disability, (2) by the Executive for Good Reason, or (3)
by the Executive as a Limited Period Termination, then the
Executive shall be entitled to the benefits provided below:
(i) the Company shall pay the Executive all
Accrued Compensation and a Pro Rata Bonus;
(ii) the Company shall pay the Executive as
severance pay and in lieu of any further salary for periods
subsequent to the Termination Date, in a single payment an
amount in cash equal to three (3) times the sum of (A) the
Executive's Base Salary at the highest rate in effect at
any time within the ninety (90) day period ending on the
date the Notice of Termination is given (or if the
Executive's employment is terminated after a Change in
Control, the Executive's Base Salary immediately prior to
the Change in Control, if greater) and (B) the "Bonus
Amount" (as defined below). Notwithstanding the foregoing,
the amount to be paid under this Subsection (ii) shall be
multiplied by a fraction (which in no event shall be
greater than one (1)) the numerator of which shall be the
number of months (for this purpose any partial month shall
be considered as a whole month) remaining until the<PAGE>
-9-
Executive's 65th birthday and the denominator of which
shall be thirty-six (36). The term "Bonus Amount" shall
mean (x) the greatest amount of any cash bonus or incentive
compensation received by the Executive during the three
fiscal years immediately preceding the Termination Date or
(y) if no such bonus was received by the Executive during
any of such three years, then an amount equal to the
Executive's maximum bonus which could be awarded for the
fiscal year in which the Termination Date occurs had he
continued in employment until the end of such fiscal year.
(iii) for a number of months equal to the lesser
of (A) thirty-six (36) or (B) the number of months
remaining until the Executive's 65th birthday, the Company
shall at its expense continue on behalf of the Executive
and his dependents and beneficiaries the life insurance,
disability, medical, dental and hospitalization benefits
which were being provided to the Executive at the time
Notice of Termination is given (or, if the Executive is
terminated following a Change in Control, the benefits
provided to the Executive at the time of the Change in
Control, if greater). The benefits provided in this
Section 9(b)(iii) shall be no less favorable to the
Executive, in terms of amounts and deductibles and costs to
him, than the coverage provided the Executive under the
plans providing such benefits at the time of Notice of
Termination is given (or, if the Executive is terminated
following a Change in Control, at the time of the Change in
Control if more favorable to the Executive). The Company's
obligation hereunder with respect to the foregoing benefits
shall be limited to the extent that the Executive obtains
any such benefits pursuant to a subsequent employer's
benefit plans, in which case the Company may reduce the
coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverage of
the combined benefit plans is no less favorable to the
Executive, in terms of amounts and deductibles and costs to
him, than the coverage required to be provided hereunder.
This Subsection (iii) shall not be interpreted so as to
limit any benefits to which the Executive or his dependents
may be entitled under any of the Company's employee benefit
plans, programs or practices following the Executive's
termination of employment, including without limitation,
retiree medical and life insurance benefits;
(iv) the Company shall pay in a single payment an
amount in cash equal to the excess of (A) the actuarial
equivalent of the aggregate retirement benefit the
Executive would have been entitled to receive under the
Company's supplemental and excess retirement plans and
under the Sundstrand Corporation Retirement Plan-Aerospace
had (x) the executive remained employed by the Company for
an additional three (3) complete years of credited service
(or until his 65th birthday if earlier), (y) his annual
compensation during such period been equal to his Base<PAGE>
-10-
Salary (at the rate used for purposes of Section 9(b)(ii))
and the Bonus Amount, and (z) he been fully (100%) vested
in his benefit under each such retirement plan, over (B)
the actuarial equivalent of the aggregate retirement
benefit the Executive is actually entitled to receive under
such retirement plans. For purposes of this Subsection
(iv), "actuarial equivalent" shall be determined in
accordance with the actuarial assumptions used for the
calculation of benefits under the Sundstrand Corporation
Retirement Plan-Aerospace as applied prior to the
Termination Date in accordance with such plan's past
practices (but shall in any event take into account the
value of any subsidized early retirement benefit);
(v) the eligibility requirements for the
Company's Retiree Health Insurance Plan shall be waived,
and commencing on the Executive's termination of
employment, he shall be provided with the same health care
coverage as provided to other eligible retirees; and
(vi) the age 62 and 30-year requirements of the
Executive Life Insurance Program for retirees are waived,
and commencing on the Executive's termination of
employment, he shall be provided with a life insurance
benefit of one time his annual base salary at the time of
his termination of employment.
(c) The amounts provided for in Sections 9(a) and
9(b)(i), (ii) and (iv) shall be paid within five (5) days after
the Executive's Termination Date.
(d) The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by
seeking other employment or otherwise and no such payment shall
be offset or reduced by the amount of any compensation or
benefits provided to the Executive in any subsequent employment.
10. Excise Tax Payments.
(a) Notwithstanding anything contained in this
Agreement to the contrary, in the event that any payment (within
the meaning of Section 28OG(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code")), or distribution to or for the
benefit of the Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or
otherwise in connection with, or arising out of, his employment
with the Company (a "Payment" or "Payments"), would be subject to
the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, collectively referred to as
the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, the<PAGE>
-11-
Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) An initial determination shall be made as to
whether a Gross-Up Payment is required pursuant to this Section
10 and the amount of such Gross-Up Payment shall be made by a
national independent accounting firm selected by the Executive
(the "Accounting Firm"). All fees, costs and expenses
(including, but not limited to, the cost of retaining experts) of
the Accounting Firm shall be borne by the Company and the Company
shall pay such fees, costs and expenses as they become due. The
Accounting Firm shall provide detailed supporting calculations,
acceptable to the Executive, both to the Company and the
Executive within fifteen (15) business days of the Termination
Date, if applicable, or such other time as requested by the
Company or by the Executive (provided the Executive reasonably
believes that any of the Payments may be subject to the Excise
Tax). The Gross-Up Payment, if any, as determined pursuant to
this Section 10(b) shall be paid by the Company to the Executive
within five (5) business days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive with respect to a Payment
or Payments, it shall furnish the Executive with an unqualified
opinion that no Excise Tax will be imposed with respect to any
such Payment or Payments. Any such initial determination by the
Accounting Firm of the Gross-Up Payment shall be binding upon the
Company and the Executive subject to the application of Section
10(c).
(c) As a result of the uncertainty in the application
of Section 4999 and 28OG of the Code, it is possible that a
Gross-Up Payment (or a portion thereof) will be paid which should
not have been paid (an "Overpayment") or a Gross-Up Payment (or a
portion thereof) which should have been paid will not have been
paid (an "Underpayment"). An Underpayment shall be deemed to
have occurred upon notice (formal or informal) to the Executive
from any governmental taxing authority that the tax liability of
the Executive (whether in respect of the then current taxable
year of the Executive or in respect of any prior taxable year of
the Executive) may be increased by reason of the imposition of
the Excise Tax on a Payment or Payments with respect to which the
Company has failed to make a sufficient Gross-Up Payment. An
Overpayment shall be deemed to have occurred upon a "Final
Determination" (as hereinafter defined) that the Excise Tax shall
not be imposed upon a Payment or Payments with respect to which
the Executive had previously received a Gross-Up Payment. A
Final Determination shall be deemed to have occurred when the
Executive has received from the applicable governmental taxing
authority a refund of taxes or other reduction in his tax
liability by reason of the Overpayment and upon either (i) the
date a determination is made by, or an agreement is entered into
with, the applicable governmental taxing authority which finally
and conclusively binds the Executive and such taxing authority,
or in the event that a claim is brought before a court of
competent jurisdiction, the date upon which a final determination<PAGE>
-12-
has been made by such court and either all appeals have been
taken and finally resolved or the time for all appeals has
expired or (ii) the statute of limitations with respect to the
Executive's applicable tax return has expired. If an
Underpayment occurs, the Executive shall promptly notify the
Company and the Company shall pay to the Executive at least five
(5) business days prior to the date on which the applicable
governmental taxing authority has requested payment, an
additional Gross-Up Payment equal to the amount of the
Underpayment plus any interest and penalties imposed on the
Underpayment. If an Overpayment occurs, the amount of the
Overpayment shall be treated as a loan by the Company to the
Executive and the Executive shall, within ten (10) business days
of the occurrence of such Overpayment, pay the Company the amount
of the Overpayment plus interest at an annual rate equal to the
rate provided for in Section 1274(b)(2)(B) of the Code from the
date the Gross-Up Payment (to which the Overpayment relates) was
paid to the Executive.
(d) Notwithstanding anything contained in this
Agreement to the contrary, in the event it is determined that an
Excise Tax will be imposed on any Payment or Payments, the
Company shall pay to the applicable governmental taxing
authorities as Excise Tax withholding, the amount of the Excise
Tax that the Company has actually withheld from the Payment or
Payments.
11. Unauthorized Disclosure. The Executive shall not make
any Unauthorized Disclosure. For purposes of this Agreement,
"Unauthorized Disclosure" shall mean disclosure by the Executive
without the consent of the Board to any person, other than an
employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the
performance by the Executive of his duties as an executive of the
Company or as may be legally required, of any confidential
information obtained by the Executive while in the employ of the
Company (including, but not limited to, any confidential
information with respect to any of the Company's customers or
methods of distribution) the disclosure of which he knows or has
reason to believe will be materially injurious to the Company;
provided, however, that such term shall not include the use or
disclosure by the Executive, without consent, of any information
known generally to the public (other than as a result of
disclosure by him in violation of this Section 11) or any
information not otherwise considered confidential by a reasonable
person engaged in the same business as that conducted by the
Company.
12. Successors and Assigns.
(a) This Agreement shall be binding upon and shall
inure to the benefit of the Company, its successors and assigns
and the Company shall require any successor or assign to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required<PAGE>
-13-
to perform it if no such succession or assignment had taken
place. The term "the Company" as used herein shall include such
successors and assigns. The term "successors and assigns" as
used herein shall mean a corporation or other entity acquiring
all or substantially all the assets and business of the Company
(including this Agreement) whether by operation of law or
otherwise.
(b) Neither this Agreement nor any right or interest
hereunder shall be assignable or transferable by the Executive,
his beneficiaries or legal representatives, except by will or by
the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal
representative.
13. Fees and Expenses. As of the Effective Date, the
Company shall pay all legal fees and related expenses (including
the costs of experts, evidence and counsel) reasonably incurred
by the Executive as they become due as a result of (i) the
Executive's termination of employment (including all such fees
and expenses, if any, incurred in contesting or disputing any
such termination of employment), (ii) the Executive's hearing
before the Board as contemplated in Section (8)(b) of this
Agreement, (iii) the Executive's seeking to obtain or enforce any
right or benefit provided by this Agreement or by any other plan
or arrangement maintained by the Company under which the
Executive is or may be entitled to receive benefits, or (iv) a
dispute between the Executive and the Internal Revenue Service
(or any other taxing authority) with regard to an "Underpayment"
(as defined in Section 10 of this Agreement).
14. Notice. For the purposes of this Agreement, notices
and all other communications provided for in the Agreement
(including the Notice of Termination) shall be in writing and
shall be deemed to have been duly given when personally delivered
or sent by certified mail, return receipt requested, postage
prepaid, addressed to the respective addresses last given by each
party to the other, provided that all notices to the Company
shall be directed to the attention of the Board with a copy to
the Secretary of the Company. All notices and communications
shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof,
except that notice of change of address shall be effective only
upon receipt.
15. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or
program provided by the Company or any of its subsidiaries and
for which the Executive may qualify, nor shall anything herein
limit or reduce such rights as the Executive may have under any
other agreements with the Company or any of its subsidiaries.
Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan or program of the
Company or any of its subsidiaries shall be payable in accordance<PAGE>
-14-
with such plan or program, except as explicitly modified by this
Agreement.
16. Settlement of Claims. The Company's obligation to
make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company may have against the Executive or others.
17. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by
the Executive and the Company. No waiver by either party hereto
at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are
not expressly set forth in this Agreement.
18. Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the
State of Illinois without giving effect to the conflict of law
principles thereof.
19. Severability. The provisions of this Agreement shall
be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the
other provisions hereof.
20. Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto and supersedes all
prior agreements, if any, understandings and arrangements, oral
or written, between the parties hereto with respect to the
subject matter hereof.<PAGE>
-15-
IN WITNESS WHEREOF, the Company has caused this Agreement
to be executed by its duly authorized officer and the Executive
has executed this Agreement as of the day and year first above
written.
SUNDSTRAND CORPORATION
By: /s/ Robert H. Jenkins
---------------------------
Title: President and Chief
Executive Officer
ATTEST:
/s/ Richard M. Schilling
- ------------------------
Secretary
By: /s/ Ronald F. McKenna
--------------------------
Ronald F. McKenna
<PAGE>
<TABLE>
Exhibit (11)(a)
Computation of Fully Diluted Earnings Per Share (Unaudited)
Quarter Ended Six Months
June 30, Ended June 30,
-------------- --------------
(Amounts in millions except per share date) 1996 1995 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EARNINGS
Net earnings $ 34 $ 27 $ 60 $ 9
===== ===== ===== =====
- ------------------------------------------------------------------------------
SHARES
Weighted-average number of common shares
outstanding 61.4 63.3 61.4 63.3
Additional shares assuming conversion
of stock options .5 .3 .5 .3
----- ----- ----- -----
Fully diluted shares 61.9 63.6 61.9 63.6
===== ===== ===== =====
- ------------------------------------------------------------------------------
FULLY DILUTED EARNINGS PER SHARE
Net earnings $ .55 $ .43 $ .97 $ .14
===== ===== ===== =====
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE REGISTRANT'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 50
<SECURITIES> 0
<RECEIVABLES> 278
<ALLOWANCES> 0
<INVENTORY> 348
<CURRENT-ASSETS> 751
<PP&E> 444
<DEPRECIATION> 0
<TOTAL-ASSETS> 1573
<CURRENT-LIABILITIES> 415
<BONDS> 220
0
0
<COMMON> 38
<OTHER-SE> 452
<TOTAL-LIABILITY-AND-EQUITY> 1573
<SALES> 739
<TOTAL-REVENUES> 739
<CGS> 484
<TOTAL-COSTS> 632
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15
<INCOME-PRETAX> 95
<INCOME-TAX> 35
<INCOME-CONTINUING> 60
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60
<EPS-PRIMARY> .98
<EPS-DILUTED> 0
</TABLE>
