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Exhibit (10)(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into as of the 1st day of June, 1998 and
between Sundstrand Corporation (the "Company"), and ______________, 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(f)) 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, unless otherwise terminated in
accordance with the provisions of Section 8 hereof, 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.
(c) For purposes of this Agreement, the "Protected Period"
shall be the two (2) year period commencing on the date hereof, provided,
however, that the Protected Period shall be automatically extended for one (l)
year on the first anniversary of the date hereof and on each anniversary of the
date hereof 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.
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During the Employment Term, the Executive shall be employed as Executive Vice
President and Chief Financial Officer 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 a base salary at the rate of
$___________ 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,
medical, hospitalization, disability, dental and life, travel accident and
umbrella liability insurance and 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, but in no event on a basis
less favorable in terms of benefit levels applicable to the Executive as in
effect immediately prior to the Effective Date.
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 and life insurance and other bonus and
incentive compensation plans. Unless otherwise provided herein, the Executive's
participation in such plans, or any successor 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 immediately prior to 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, but in no event on a
basis less favorable in terms of benefit and perquisites levels applicable to
the Executive as in effect immediately prior to the Effective Date.
(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 awards (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:
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(a) The Executive shall be entitled to annual vacation in
accordance with the policies as periodically 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. The Employment Term may be terminated under the
following circumstances:
(a) Death. The Employment Term shall immediately terminate upon
the Executive's death.
(b) Disability. The Company may terminate the Employment Term
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 Employment Term 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.
(c) Cause. The Company may terminate the Employment Term 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 Employment Term 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 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.
(d) (l) Good Reason. The Executive may terminate the Employment
Term for Good Reason. For purposes of this Agreement, "Good Reason" shall mean
the occurrence after a Change in Control (as hereinafter defined in Section
8(f)) 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 a termination of the
Employment Term for Disability, Cause, as a result of 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;
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(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 or a comparable equity-based 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 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 Section
8(d)(1)(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 and,
under the circumstances described in 2(i) and 2(ii), the Effective Date shall
mean the date immediately prior to the date of the occurrence of Good Reason.
(3) The Executive's right to terminate the Employment
Term pursuant to this Section (8)(d) shall not be affected by his incapacity due
to physical or mental illness.
(e) Voluntary Termination. The Executive may voluntarily
terminate the Employment Term at any time. If the Executive voluntarily
terminates the Employment Term for any reason or without reason effective no
earlier than one (1) year following the Effective Date, after having given
notice of the same during the period which commences on the Effective Date and
ends on the date which is eight (8) months following the Effective Date, it
shall be referred to as a "Limited Period Termination".
(f) 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 0000 Xxx) of twenty-five
percent (25%) 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) (i) A merger or consolidation involving the
Company (or any direct or indirect subsidiary of the Company) or (ii) the
issuance of shares of capital stock of the Company in connection with a merger
or consolidation involving the Company (or any direct or indirect subsidiary of
the Company) if, in the case of clause (i) or clause (ii), the stockholders of
the Company immediately before such merger or consolidation, do not, as a result
of such merger or consolidation, own, directly or indirectly, immediately
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following such merger or consolidation, more than sixty-seven percent (67%) of
the combined voting power of the then outstanding voting securities of the
person issuing securities in the 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; provided, however, that for purposes of clause (i) and clause
(ii), voting securities of the Company issued in connection with the merger or
consolidation, including securities to cover stock options or cure "tainted"
shares (whether issued in the merger or consolidation or pursuant to a public or
private offering related thereto), shall be treated as having been issued in
such merger or consolidation and not as having been outstanding immediately
prior to such merger or consolidation or (iii) a complete liquidation or
dissolution of the Company or consummation of 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(f)(l), solely because twenty-five percent (25%) or more of
the combined voting power of the Company's then outstanding voting 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.
(g) 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
Employment Term under the provision so indicated. For purposes of this
Agreement, no such purported termination of the Employment Term shall be
effective without such Notice of Termination.
(h) 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 Employment Term 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 Employment Term is terminated (i) by the
Executive for Good Reason, 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 or (ii) due to a Limited Period Termination, the date
specified in the Notice of Termination shall be the first anniversary of the
Effective Date, unless otherwise agreed to by the Company.
9. Compensation Upon Termination. Upon termination of the
Employment Term, the Executive shall be entitled to the following benefits and
treatment:
(a) If the Employment Term is terminated by the Company for
Cause, by the Executive (other than for Good Reason or due to a Limited Period
Termination), or by reason of the Executive's death or Disability (except if the
Executive had given timely notice of a Limited Period Termination pursuant to
Section 8(e)), 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 (except if the
Executive had given timely notice of a Limited Period Termination pursuant to
Section 8(e)), the Company shall pay to the Executive or his beneficiaries an
amount equal to the Bonus Amount (as defined below) 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. For purposes of this
Agreement, the term "Bonus Amount" shall mean an amount equal to the greater of
(x) the cash bonus or incentive award which would have been paid or payable to
the Executive in respect of the fiscal year in which the Executive's Termination
Date occurs had he continued in
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employment until the end of such fiscal year, calculated as if the maximum bonus
or incentive award payable to the Executive had been earned for such year and
(y) the greatest of (i) the highest percentage of Base Salary used to determine
the Executive's cash bonus or incentive award during the Three Year Period (as
defined below) multiplied by the higher of the Base Salary in effect immediately
prior to the Effective Date and immediately prior to the Termination Date, (ii)
the highest actual cash bonus or incentive award in the case of clause (i) and
clause (ii) paid or payable to the Executive in respect of any of the most
recent three (3) years prior to the fiscal year in which the Executive's
Termination Date occurs (such three (3) year period referred to as the "Three
Year Period"), and (iii) the product of (A) the highest Base Salary paid or
payable to the Executive in the year of termination or during the Three Year
Period, (B) the highest target bonus percentage applicable to the Executive in
the year of termination or during the Three Year Period and (C) the highest
Bonus to Target Ratio (as defined below) applicable to the Executive during the
Three Year Period, whichever would result in the greatest "Bonus Amount". The
"Bonus to Target Ratio" for a particular year shall mean a fraction, not less
than one, the numerator of which shall be the bonus paid or payable to the
Executive for such year and the denominator of which shall be the target bonus
applicable to the Executive for such year.
(b) If the Employment Term shall be terminated (1) by the
Company other than for Cause, (2) by the Executive for Good Reason or (3) by the
Executive due to a Limited Period Termination, then the Executive shall be
entitled to the benefits and treatment 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 (subject to
Section 23 hereof) an amount in cash equal to three (3) times the
sum of (A) the Executive's Base Salary (including, for calculation
purposes only, any portion thereof the receipt of which has been
deferred under any plan, program, policy or arrangement of the
Company providing for the deferral of income) 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 the Executive's
Base Salary immediately prior to a Change in Control, if greater)
and (B) the Bonus Amount. 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 Executive's 65th birthday and the denominator of which
shall be thirty-six (36);
(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 to provide on behalf of the Executive and his
dependents and beneficiaries the fringe benefits, perquisites, life
insurance, disability, medical, dental and hospitalization, travel
accident, pension, profit sharing, savings, retirement and any
other employee benefits (other than participation in stock or other
equity-based plans) which were being provided to the Executive at
the time Notice of Termination is given (or the benefits provided
to the Executive at the time of a 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 Notice of Termination is
given (or 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 termination of the
Employment Term, including without limitation, retiree medical and
life insurance benefits;
(iv) the Company shall pay in a single payment
(subject to Section 23 hereof) an amount in cash equal to the
excess of (A) the actuarial equivalent of the aggregate
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retirement benefit the Executive would have been entitled to
receive under the Company's Supplemental and Special retirement
plans and under the Sundstrand Corporation Retirement
Plan-Aerospace if (w) the Executive had remained employed by the
Company for an additional three (3) complete years of credited
service (or until his 65th birthday if earlier) after termination;
(x) the early retirement reduction factor had been based on the
larger of age 55, or the Executive's actual age at termination plus
the additional years of credited service; (y) his annual
compensation during such period had been equal to his Base Salary
(at the rate used for purposes of Section 9(b)(ii)) and the Bonus
Amount, and (z) he had 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 immediately 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 and any subsidized joint and survivor annuity
options). Such "actuarial equivalent" calculation described in (A)
above shall be based on a benefit commencement age as determined in
(x) above and valuation age equal to the Executive's actual age at
termination;
(v) the Company shall pay in a single payment
(subject to Section 23 hereof) an amount in cash equal to the
greater of (x) or (y) or (z), where (x) equals three (3) times the
amount of any matching contribution made and which would have been
made on behalf of the Executive to the Company's Employee Savings
Plan and Supplemental Savings Account of the Deferred Compensation
Plan for the full year in which the Executive's Termination Date
occurs, using the applicable compensation amounts as defined in
Section 9(b)(ii) of this Agreement and assuming for this purpose
that the matching contribution percentage in effect on the
Executive's Termination Date shall remain the same for such year,
the Executive had been employed for all of such year and the
Executive had continued to make contributions for the full year
based upon his election in effect on his Termination Date, (y)
equals three (3) times the amount of any matching contribution made
on behalf of the Executive to the Company's Employee Savings Plan
and Supplemental Savings Account of the Deferred Compensation Plan
for the year prior to the year in which the Effective Date occurs
and (z) equals the amount of any matching contribution made and
which would have been made on behalf of the Executive to the
Company's Employee Savings Plan and Supplemental Savings Account of
the Deferred Compensation Plan for the full year in which the
Executive's Termination Date occurs, using the applicable
compensation amounts as defined in Section 9(b)(ii) of this
Agreement and assuming for this purpose that the matching
contribution percentage in effect on the Executive's Termination
Date shall remain the same for such year, the Executive had been
employed for all of such year and the Executive had continued to
make contributions for the full year based upon his election in
effect on his Termination Date, plus the amount of matching
contribution which would have been made on behalf of the Executive
to the Company's Employee Savings Plan and Supplemental Savings
Account of the Deferred Compensation Plan for the two full years
following the year in which the Termination Date occurs, assuming
that any prospective increases in the Company matching contribution
percentage approved prior to the Effective Date were in effect, the
Executive had been employed for the entire two-year period, the
Executive had continued to make contributions based upon his
election in effect on his Termination Date, and using the
applicable compensation amounts as defined in Section 9(b)(ii) of
this Agreement;
(vi) for purposes of the Company's Supplemental
and Special retirement plans (other than for purposes of
calculating years of service credit thereunder), the Executive
shall be treated as if he were age fifty-five (55) or his actual
age, if greater, as of the Termination Date; provided, however,
that, if applicable, the payments made pursuant to such plans shall
be discounted to take into effect the actual payments of amounts
pursuant thereto prior to the Executive attaining age fifty-five
(55), using a discount rate equal to the product of the one-year
Treasury Xxxx rate in effect on the Termination Date multiplied by
the difference between one and the Executive's then marginal
combined income tax rate;
(vii) 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
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(viii) the age 60 and 30-year requirements of
the Executive Life Insurance Program for retirees shall be waived,
and commencing on the Executive's termination of employment, he
shall be provided with a life insurance benefit of (A) five (5)
times the Base Salary in effect on the Termination Date for the
period commencing on the Termination Date and terminating on the
third anniversary of the Termination Date and (B) one times the
Base Salary thereafter.
(c) Subject to Section 23 hereof, the amounts provided for
in Sections 9(a) and 9(b)(i), (ii), (iv) and (v) shall be paid within five (5)
days after the Executive's Termination Date.
(d) The Executive's death or termination by reason of
Disability, after the Executive having given timely notice of a Limited Period
Termination pursuant to Section 8(e), shall be treated as if the Executive had
terminated his employment for Good Reason on the date of death or the first
anniversary of the Effective Date, respectively.
(e) 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
280G(b)(2) of the Internal Revenue Code of 1986, as amended, and any regulations
promulgated or proposed thereunder (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 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 Company's receipt of the Accounting Firm's
determination. The Accounting Firm shall furnish the Executive with an
unqualified opinion that no Excise Tax will be imposed with respect to any such
Payment or Payments, or that the amount of the Excise Tax due is correct. 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 280G 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 all or any portion of any Payment or
Payments with respect to which the Executive had previously received a Gross-Up
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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 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 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.
(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. Employee Covenants.
(a) 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.
(b) By and in consideration of the Company's entering into
this Agreement and the Base Salary and benefits to be provided by the Company
hereunder, and further in consideration of the Executive's exposure to the
proprietary information of the Company, the Executive agrees that the Executive
will not, from and after the date hereof until one year after expiration of the
Employment Term, directly or indirectly, own, manage, operate, join, control, be
employed by, or participate in the ownership, management, operation or control
of, or be connected in any manner, including but not limited to, holding the
position of shareholder, director, officer, consultant, independent contractor,
Executive, partner, or investor, with any Competing Enterprise. For purposes of
this paragraph, the term "Competing Enterprise" shall mean any person,
corporation, partnership or other entity engaged in a business (in the United
States) which is in competition with any of the businesses of the Company or any
of its affiliates as of the Termination Date. Following the Termination Date,
upon request, the Executive shall notify the Company of the Executive's then
current employment status. Notwithstanding anything contained in this Section
11(b) to the contrary, the Executive shall not be prohibited from acquiring or
holding up to two percent (2%) of the common stock of an entity that is traded
on a national securities exchange or a nationally recognized over-the-counter
market.
(c) The Executive agrees that any breach of the terms of
this Section 11 would result in irreparable injury and damage to the Company for
which the Company would have no adequate remedy at law; the Executive therefore
also agrees that in the event of said breach or any threat of breach, the
Company shall be entitled to an immediate injunction and restraining order to
prevent such breach and/or threatened breach and/or continued breach by the
Executive and/or any and all persons and/or entities acting for and/or with the
Executive, without having to prove damages, and to all costs and expenses,
including reasonable attorneys' fees and costs, in addition to any other
remedies to which the Company may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company from pursuing any other available
remedies for any breach or threatened breach hereof, including but not limited
to the recovery of damages from the Executive. The Executive and the Company
further agree that the provisions of the covenant not to compete are reasonable.
Should a court or arbitrator determine, however, that any provision of the
covenant not to compete is unreasonable, either in period
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of time, geographical area, or otherwise, the parties hereto agree that the
covenant should be interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable.
The existence of any claim or cause of action by the
Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements of this Section 11.
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 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. 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)(c)
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 (if earlier),
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 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
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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, including, but not limited to,
the Employment Agreement, dated as of July 20, 1989, between the Company and the
Executive, and any and all amendments thereto. The Executive acknowledges that
he has read this Agreement carefully and has consulted counsel about the
contents of this Agreement prior to the execution hereof.
21. Gender, Tense and Headings. Whenever any words are used
herein in the masculine gender, they shall be construed as though they were also
used in the feminine gender in all cases where they would so apply. Whenever any
words used herein are in the singular form, they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
The headings contained herein are solely for purposes of
reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
22. Rabbi Trust. Immediately prior to a change in Control, the
Company shall deposit into a "rabbi trust," solely for the benefit of the
Executive, which meets the requirements of Rev. Proc. 92-64, 1992-2 C.B. 422,
and the terms of which are reasonably acceptable to the Executive, an amount of
cash sufficient (as determined by the Company in good faith, subject to the
approval of the Executive, which approval shall not unreasonably be withheld) to
fund the anticipated payments and benefits under this Agreement, but in no event
shall such amount be less than that amount which would be required to be
deposited by assuming that the Executive will terminate his employment due to a
Limited Period Termination on the first anniversary of the Effective Date.
23. Deferral. The Company shall provide the Executive the
opportunity to defer the receipt of any amounts payable under Section 9(a),
9(b)(i), (ii), (iv), and (v) hereunder and under the Company's Supplemental and
Special retirement plans to such date or dates as are reasonably chosen by the
Executive, such deferred amounts to appreciate at an annual rate equal to one
hundred and thirty percent (130%) of the Xxxxx Average (as defined below) for
such year, pursuant to an election to so defer made by the Executive no later
than one year prior to the date such payments would otherwise be due. In the
event that the Executive shall make an election to defer receipt of any amount
due under Section 9(a), 9(b)(i), (ii), (iv), and (v) hereunder or under the
Company's Supplemental and Special retirement plans, on the Termination Date the
Company shall deposit into a "rabbi trust" which meets the requirements of Rev.
Proc. 92-64, 1992-2 C.B. 422, solely for the benefit of the Executive, and the
terms of which are reasonably acceptable to the Executive, an amount equal to
one hundred and ten percent (110%) of the amount so deferred. "Xxxxx Average"
shall mean the average rate under the Xxxxx'x Long Term Corporate Bond Yield
Averages for the 12-month period ending on the last business day in September of
the Company's fiscal year preceding the year in which such rate shall be used.
On each anniversary of the initial funding of such trust, the Company shall
deposit cash into the trust in an amount sufficient so that, as of such
anniversary, the value of the assets of the trust are not less than the
obligations of the Company to the Executive under this Agreement.
24. Indemnification. During the Employment Term and thereafter,
the Company shall indemnify the Executive to the fullest extent permitted by law
against any judgments, fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees), and advance amounts necessary to pay the foregoing
at the earliest time and to the fullest extent permitted by law, in connection
with any claim, action or proceeding (whether civil or criminal) against the
Executive as a result of the Executive serving as an officer or director of the
Company or in any capacity at the request of the Company, in or with regard to
any other entity, employee benefit plan or enterprise (other than arising out of
the Executive's acts of willful misconduct, misappropriation of funds or fraud).
This indemnification shall be in addition to, and not in lieu of, any other
indemnification the Executive shall be
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entitled to pursuant to the Company's Certificate of Incorporation or By-Laws or
otherwise. Following the Termination Date, the Company shall continue to cover
the Executive under the Company's directors and officers insurance for the
period during which the Executive may be subject to potential liability for any
claim, action or proceeding (whether civil or criminal) as a result of his
service as an officer or director of the Company or in any capacity at the
request of the Company, in or with regard to any other entity, employee benefit
plan or enterprise (other than arising out of the Executive's acts of willful
misconduct, misappropriation of funds or fraud) at the highest level then
maintained for any then or former officer or director, but in no event on a
basis less favorable in terms of benefit levels applicable to the Executive as
in effect immediately prior to the Effective Date.
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:
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Title:
ATTEST:
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Secretary
By:
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Executive
