EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is entered into as of this 23rd
day of July, 1998 by and between Textron Inc. (the "Company"), a
Delaware corporation having its principal office at 00
Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000 and Xxxxx X.
Xxxxxxxx residing at 00 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx
00000 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is presently employed by the Company;
WHEREAS, the Company desires to continue to employ the
Executive and the Executive is willing to continue to be employed
by the Company; and
WHEREAS, the Company and the Executive desire to set forth
the terms and conditions of such continued employment.
NOW THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements of the parties set forth in this
Agreement, and of other good and valuable consideration, the
adequacy and receipt of which is acknowledged, the parties hereto
agree as follows:
1. Term of Employment
The Company hereby agrees to continue to employ the
Executive and the Executive hereby accepts continued employment,
in accordance with the terms and conditions set forth herein, for
a term (the "Employment Term") commencing on the date hereof (the
"Effective Date") and terminating, unless otherwise terminated
earlier in accordance with Section 5 hereof, on the third
anniversary of the Effective Date (the "Original Employment
Term"), provided that the Employment Term shall be automatically
extended, subject to earlier termination as provided in Section 5
hereof, for successive additional one (1) year periods (the
"Additional Terms"), unless, at least ninety (90) days prior to
the end of the Original Employment Term or the then Additional
Term, the Company or the Executive has notified the other in
writing that the Employment Term shall terminate at the end of
the then current term.
2. Position and Responsibilities
During the Employment Term, the Executive shall serve
as the Chief Executive Officer of the Company or in such higher
capacity as agreed by the Company and the Executive. The
Executive shall report exclusively to the Board of Directors of
the Company (the "Board"). The Executive shall, to the extent
appointed or elected, serve on the Board as a director and as a
member of any committee of the Board, in each case, without
additional compensation. The Executive shall, to the extent
appointed or elected, serve as a director or as a member of any
committee of the board (or the equivalent bodies in a non-
corporate subsidiary or affiliate) of any of the Company's
subsidiaries or affiliates and as an officer or employee (in a
capacity commensurate with his position with the Company) of any
such subsidiaries or affiliates, in all cases, without additional
compensation or benefits and any compensation paid to the
Executive, or benefits provided to the Executive, in such
capacities shall be a credit with regard to the amounts due
hereunder from the Company. The Executive shall have duties,
authorities and responsibilities generally commensurate with the
duties, authorities and responsibilities of persons in similar
capacities in similarly sized companies subject to the By-laws of
the Company. The Executive shall devote substantially all of his
business time, attention and energies to the performance of his
duties hereunder, provided the foregoing will not prevent the
Executive from participating in charitable, community or industry
affairs, from managing his and his family's personal passive
investments, and (with the consent of the Organization and
Compensation Committee (or its successor) of the Board (the "O&C
Committee"), which consent will not be unreasonably withheld,
conditioned or delayed) serving on the board of directors of
other companies, provided that these activities do not materially
interfere with the performance of his duties hereunder or create
a potential business conflict or the appearance thereof. The
Company has consented to the Executive's services on the boards
of directors, if any, on which the Executive currently serves,
which boards the Executive has disclosed in writing to the O&C
Committee. The Executive may retain any compensation or benefits
received as a result of consented to service as a director of
entities not related to the Company.
3. Compensation and Benefits
During the Employment Term, the Company shall pay and
provide the Executive the following:
3.1 Base Salary. The Company shall pay the Executive
a base salary (the "Base Salary") in an amount which shall be
established from time to time by the O&C Committee (or as
otherwise designated by the Board), provided, however, that such
base salary rate shall not be less than his current rate of base
salary. Base Salary shall be paid to the Executive in accordance
with the Company's normal payroll practices for executives. Base
Salary shall be reviewed at least annually to ascertain whether,
in the judgment of the reviewing committee, such Base Salary
should be increased. If so increased, Base Salary shall not be
thereafter decreased and shall thereafter, as increased, be the
Base Salary hereunder.
3.2 Annual Bonus. The Company shall provide the
Executive with the opportunity to earn an annual cash bonus under
the Company's current annual incentive compensation plan for
executives or a replacement plan therefor at a level commensurate
with his position, provided that the minimum annual target award
payable upon the achievement of reasonably attainable objective
performance goals shall be at least seventy percent (70%) of Base
Salary.
3.3 Long-Term Incentives. The Company shall provide
the Executive the opportunity to earn long-term incentive awards
under the current equity and cash based plans and programs or
replacements therefor at a level commensurate with the current
aggregate opportunity being provided to the Executive.
3.4 Employee Benefits. The Executive shall, to the
extent eligible, be entitled to participate at a level
commensurate with his position in all employee benefit welfare
and retirement plans and programs, as well as equity plans,
generally provided by the Company to its senior executives in
accordance with the terms thereof as in effect from time to time.
Such plans and programs currently include, without limitation,
the Amended and Restated Supplemental Retirement Plan for Textron
Inc. Key Executives (the "SERP"), the 1994 Long-Term Incentive
Plan, the Key Executive Program (including the Deferred Income
Plan, the Supplemental Benefits Plan (the "SBP") and the Survivor
Benefit Plan), group term life insurance plan, comprehensive
health, major medical, vision and dental insurance plans and
short-term and long-term disability plans.
3.5 Vacation. The Executive shall be entitled to paid
vacation in accordance with the standard written policies of the
Company with regard to vacations of executives, but in no event
less than four (4) weeks per calendar year.
3.6 Perquisites. The Company shall provide to the
Executive, at the Company's cost, all perquisites to which other
senior executives of the Company are generally entitled to
receive and such other perquisites which are suitable to the
character of the Executive's position with the Company and
adequate for the performance of his duties hereunder but not less
than the level being provided on the date hereof except as
otherwise required because of changes in law. To the extent
legally permissible, the Company shall not treat such amounts as
income to the Executive.
3.7 Right to Change Plans. The Company shall not be
obligated by reason of this Section 3 to institute, maintain, or
refrain from changing, amending, or discontinuing any benefit
plan, program, or perquisite, so long as such changes are
similarly applicable to executive employees generally and
provided that the benefits or additional credit specifically as
set forth in Section 3.8 below shall not be diminished.
3.8 Existing Awards. The Company acknowledges that
the Executive currently is entitled to, among other things, the
special grants set forth in Exhibit A hereto, as modified on
Exhibit A.
4. Expenses
Upon submission of appropriate documentation, in
accordance with its policies in effect from time to time, the
Company shall pay, or reimburse, the Executive for all ordinary
and necessary expenses, in a reasonable amount, which the
Executive incurs in performing his duties under this Agreement
including, but not limited to, travel, entertainment,
professional dues and subscriptions, and all dues, fees, and
expenses associated with membership in various professional,
business, and civic associations and societies in which the
Executive participates in accordance with the Company's policies
in effect from time to time.
5. Termination of Employment
The Executive's employment with the Company (including but
not limited to any subsidiary or affiliate or the Company) and
the Employment Term shall terminate upon the occurrence of the
first of the following events:
(a) Automatically on the date of the Executive's death.
(b) Upon thirty (30) days written notice by the Company to
the Executive of a termination due to Disability,
provided such notice is delivered during the period of
Disability. The term "Disability" shall mean, for
purposes of this Agreement, the inability of the
Executive, due to injury, illness, disease or bodily or
mental infirmity, to engage in the performance of his
material duties of employment with the Company as
contemplated by Section 2 herein for a period of more
than one hundred eighty (180) consecutive days or for a
period that is reasonably expected to exist for a
period of more than one hundred eighty (180)
consecutive days, provided that interim returns to work
of less than ten (10) consecutive business days in
duration shall not be deemed to interfere with a
determination of consecutive absent days if the reason
for absence before and after the interim return are the
same. The existence or non-existence of a Disability
shall be determined by a physician agreed upon in good
faith by the Executive (or his representatives) and the
Company. It is expressly understood that the
Disability of the Executive for a period of one hundred
eighty (180) consecutive days or less shall not
constitute a failure by him to perform his duties
hereunder and shall not be deemed a breach or default
and the Executive shall receive full compensation for
any such period of Disability or for any other
temporary illness or incapacity during the term of this
Agreement.
(c) Immediately upon written notice by the Company to the
Executive of a termination due to his retirement at or
after the Executive's attainment of age sixty-five
(65).
(d) Immediately upon written notice by the Company to the
Executive of a termination for Cause, provided such
notice is given within ninety (90) days after the
discovery by the Board of the Cause event and has been
approved by at least two-thirds of the Board at a
meeting at which the Executive and his counsel had the
right to appear and address such meeting after
receiving at least five (5) business days written
notice of the meeting and reasonable detail of the
facts and circumstances claimed to provide a basis for
such termination. The term "Cause" shall mean, for
purposes of this Agreement: (i) an act or acts of
willful misrepresentation, fraud or willful dishonesty
(other than good faith expense account disputes) by the
Executive which in any case is intended to result in
his or another person or entity's substantial personal
enrichment at the expense of the Company; (ii) any
willful misconduct by the Executive with regard to the
Company, its business, assets or employees that has, or
was intended to have, a material adverse impact
(economic or otherwise) on the Company; (iii) any
material, willful and knowing violation by the
Executive of (x) the Company's Business Conduct
Guidelines, or (y) any of his fiduciary duties to the
Company which in either case has, or was intended to
have, a material adverse impact (economic or otherwise)
on the Company; (iv) the willful or reckless behavior
of the Executive with regard to a matter of a material
nature which has a material adverse impact (economic or
otherwise) on the Company; (v) the Executive's willful
failure to attempt to perform his duties under Section
2 hereof or his willful failure to attempt to follow
the legal written direction of the Board, which in
either case is not remedied within ten (10) days after
receipt by the Executive of a written notice from the
Company specifying the details thereof; (vi) the
Executive's conviction of, or pleading nolo contendere
or guilty to, a felony (other than (x) a traffic
infraction or (y) vicarious liability solely as a
result of his position provided the Executive did not
have actual knowledge of the actions or inactions
creating the violation of the law or the Executive
relied in good faith on the advice of counsel with
regard to the legality of such action or inaction (or
the advice of other specifically qualified
professionals as to the appropriate or proper action or
inaction to take with regard to matters which are not
matters of legal interpretation)); or (vii) any other
material breach by the Executive of this Agreement that
is not cured by the Executive within twenty (20) days
after receipt by the Executive of a written notice from
the Company of such breach specifying the details
thereof. No action or inaction should be deemed
willful if not demonstrably willful and if taken or not
taken by the Executive in good faith as not being
adverse to the best interests of the Company.
Reference in this paragraph (d) to the Company shall
also include direct and indirect subsidiaries of the
Company, and materiality and material adverse impact
shall be measured based on the action or inaction and
the impact upon, and not the size of, the Company taken
as a whole, provided that after a Change in Control,
the size of the Company, taken as a whole, shall be a
relevant factor in determining materiality and material
adverse impact.
(e) Upon written notice by the Company to the Executive of
an involuntary termination without Cause. A notice by
the Company of non-renewal of the Employment Term
pursuant to Section 1 above shall be deemed an
involuntary termination of the Executive by the Company
without Cause as of the end of the Employment Term, but
the Executive may terminate at any time after the
receipt of such notice and shall be treated as if he
was terminated without Cause as of such date.
(f) Upon twenty (20) days written notice by the Executive
to the Company of a termination for Good Reason (which
notice sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such
termination) unless the Good Reason event is cured
within such twenty (20) day period. The term "Good
Reason" shall mean, for purposes of this Agreement,
without the Executive's express written consent, the
occurrence of any one or more of the following: (i) the
assignment to the Executive of duties materially
inconsistent with the Executive's then authorities,
duties, responsibilities, and status (including
offices, titles, and reporting requirements), or any
reduction in the Executive's then title, position,
reporting lines or a material reduction (other than
temporarily while Disabled or otherwise incapacitated)
in his then status, authorities, duties, or
responsibilities including but not limited to holding
his then position in the Company while the Company is a
subsidiary of another entity (holding stock in the
Company entitled to at least fifty percent (50%) of the
vote for the election of directors) and not holding the
same or equivalent position in the ultimate parent
entity or, if then a director of the Company, failure
to be nominated or reelected as a director of the
Company or removal as such; (ii) relocation of the
Executive from the principal office of the Company
(excluding reasonable travel on the Company's business
to an extent substantially consistent with the
Executive's business obligations) or relocation of the
principal office of the Company to a location which is
at least fifty (50) miles from the Company's current
headquarters, provided, however, if the Executive at
the time of the relocation is not located at the
principal office, such relocation provision shall apply
based on his then location; (iii) a reduction by the
Company in the Executive's Base Salary; (iv) a
reduction in the Executive's aggregate level of
participation in any of the Company's short and/or
long-term incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or
arrangements in which the Executive participated as of
the Effective Date, or, after a Change in Control,
participated immediately prior to the Change in
Control; (v) the failure of the Company to obtain and
deliver to the Executive a satisfactory written
agreement from any successor to the Company to assume
and agree to perform this Agreement; or (vi) any other
material breach by the Company of this Agreement.
(g) Upon written notice by the Executive to the Company of
the Executive's voluntary termination of employment
without Good Reason (which the Company may, in its sole
discretion, make effective earlier than any notice
date). A notice by the Executive of non-renewal of the
Employment Term pursuant to Section 1 above shall be
deemed a voluntary termination by the Executive without
Good Reason as of the end of the Employment Term.
6. Consequences of a Termination of Employment
6.1 Termination Due to Death or Retirement. If the
Employment Term ends on account of the Executive's termination
due to death pursuant to Section 5(a) above or retirement
pursuant to Section 5(c) above, the Executive (or the Executive's
surviving spouse, or other beneficiary as so designated by the
Executive during his lifetime, or to the Executive's estate, as
appropriate) shall be entitled, in lieu of any other payments or
benefits, to (i) payment promptly of any unpaid Base Salary,
unpaid annual incentive compensation (for the preceding fiscal
year) and any accrued vacation, (ii) reimbursement for any
unreimbursed business expenses incurred prior to the date of
termination, and (iii) any amounts, benefits or fringes due under
any equity, benefit or fringe plan, grant or program in
accordance with the terms of said plan, grant or program but
without duplication (collectively, the "Accrued Obligations").
6.2 Termination Due To Disability. If the Employment Term
ends as a result of Disability pursuant to Section 5(b) above,
the Executive shall be entitled, in lieu of any other payments or
benefits, subject to Section 7(b) hereof, to any Accrued
Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to three hundred percent (300%) of the
Executive's target annual incentive compensation award
established for the fiscal year during which the
Executive's termination occurs (the "Termination Year
Target Bonus").
(b) Continued monthly payment for two and one half (2 1/2)
years of an amount equal to the Executive's monthly
Base Salary rate reduced by any disability benefits
received by the Executive under the Company's long term
disability plan for the corresponding period.
(c) Payments and benefits as set forth in Section 6.3(c)-
(j) hereof.
(d) The Executive shall be deemed to have satisfied the
definition of "total disability" under the 1994 Long-
Term Incentive Plan or the equivalent definition under
any successor plan thereto.
(e) As provided in Exhibit A hereto.
6.3 Involuntary Termination by the Company Without Cause or
Termination by the Executive for Good Reason. If the Executive
is involuntarily terminated by the Company without Cause in
accordance with Section 5(e) above or the Executive terminates
his employment for Good Reason in accordance with Section 5(f)
above, the Executive shall be entitled, in lieu of any other
payments or benefits, subject to Section 7(b) hereof, to any
Accrued Obligations and the following:
(a) Payment, during January of the calendar year following
the date of the Executive's termination, of an amount
equal to the Executive's Termination Year Target Bonus
multiplied by a fraction, the numerator of which is the
number of days during the fiscal year of the
Executive's termination that the Executive was employed
by the Company and the denominator is three hundred
sixty-five (365), provided that in no event shall such
payment exceed fifty percent (50%) of the Termination
Year Target Bonus.
(b) Continued payment off payroll for two and one-half (2
1/2) years (in approximately equal monthly
installments) of an amount equal to two and one-half (2
1/2) times the sum of: (i) the Executive's Base
Salary, and (ii) the greater of: (x) the Termination
Year Target Bonus, or (y) the Executive's highest
annual incentive compensation award earned during the
last three (3) fiscal years ending prior to the fiscal
year of termination (whether or not deferred).
(c) To the extent eligible at such time or, if the
Executive would be eligible with credit for an
additional two and one half (2 1/2) years of age and
service credit, coverage under all applicable retiree
health and other retiree welfare plans for the
Executive and his dependents (including, if he is only
eligible because of the extra age and service credit,
an adjustment, to the extent necessary, to put the
Executive in the same after-tax position as if he had
been eligible for such coverage) and, if not eligible
for continued health coverage under the retiree health
plan, payment of the Executive's and Executive's
eligible dependents' COBRA continuation health coverage
premiums for the Company's health insurance plan that
generally applies to senior executives for the two and
one-half (2 1/2) year period following the date of
termination or, if earlier, until the Executive and
Executive's dependents cease to be eligible for such
coverage, provided that, if COBRA coverage cannot be
provided for the full period, any excess period shall
be covered under (d) below (and further provided that,
if such premiums are taxable to the Executive, an
adjustment such that the Executive has no after tax
cost for the providing of such COBRA coverage).
(d) To the extent eligible on the date of termination,
continued participation, at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans (other than medical
plans covered under (c) above), until two and one-half
(2 1/2) years after the date of termination; provided,
however, that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
benefits under such plan shall immediately cease. To
the extent such coverage cannot be provided under the
Company's welfare benefit plans without jeopardizing
the tax status of such plans, for underwriting reasons
or because of the tax impact on the Executive, the
Company shall pay the Executive an amount such that the
Executive can purchase such benefits separately at no
greater after tax cost to the Executive than the
Executive would have had if the benefits were provided
to the Executive as an employee.
(e) Two and one-half (2 1/2) additional years of service
and compensation credit (at the Executive's then
compensation level) for benefit purposes under any
defined benefit type retirement plan, including but not
limited to the SERP and the SBP if then in effect, and,
if the Executive is not eligible to receive benefits
under any such plan on the date of termination, two and
one-half (2 1/2) additional years of age for
determining eligibility to receive such benefits,
provided that benefits under any such plan will not
commence until the Executive actually attains the
required distribution age under the plan or the
Executive's spouse qualifies for death benefits under
such plan and further provided that with regard to any
plan qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") the
additional amounts may be provided on a nonqualified
plan basis.
(f) Payment promptly after termination of two and one-half
(2 1/2) times the amount of the maximum Company annual
contribution or match to any defined contribution type
plan in which the Executive participates.
(g) Immediate full vesting of any outstanding stock options
that would vest within two and one half (2 1/2) years
after such termination of employment as if the
Executive had continued employment for such two and one
half (2 1/2) year period, to the extent permitted under
the plan or grant, or if such vesting is not permitted,
a cash payment equal to the difference between the fair
market value of the shares covered by the unvested
options and the exercise price of such unvested options
(the "Spread") on the date of termination, and, in both
cases, to the extent such options are exercisable for
less than two and three quarters (2-3/4) years after
termination (or, if less, the remainder of the
respective terms), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
termination) future value of such options for the
lesser of two and three quarters (2-3/4) years or the
remainder of such terms (any such payments shall be
made promptly after such termination). The terms of
the Executive's outstanding options are deemed to be
modified to the extent required by this Section 6.3
(g).
(h) Payment when it would otherwise be paid in accordance
with the 1994 Long-Term Incentive Plan of any amount
due with regard to performance share units outstanding
on the date of termination to the extent permitted
under such plan, plus, outside of such plan, when it
would otherwise have been paid, an amount equal to the
amount the Executive would have received with regard to
any performance share units outstanding at the time of
termination that could not be so paid. For purposes of
calculating the foregoing amounts, all discretionary
performance targets relating to the Executive's
individual performance will be deemed to be fully
achieved and the actual level of achievement of all
financial performance targets will be determined as if
the Executive continued to be employed through the end
of the applicable measuring period.
(i) Immediate full vesting of the Executive's accounts
under the Deferred Income Plan, and to the extent not
permitted under such plan, a cash payment outside of
the plan equal to the value of the amount that would
have vested under the plan.
(j) Continuation of participation for two and one-half (2
1/2) additional years in the Company's programs with
regard to tax preparation assistance and financial
planning assistance, club dues and automobile (but
based on the automobile then being used and no new
one), in accordance with the Company's programs in
effect at the time of the termination.
(k) As provided in Exhibit A hereto.
6.4 Termination by the Company for Cause or Termination by
the Executive without Good Reason. If the Executive is
terminated by the Company for Cause or the Executive terminates
his employment without Good Reason, the Executive shall be
entitled to receive all Accrued Obligations.
7. No Mitigation/No Offset/Release
(a) In the event of any termination of employment
hereunder, the Executive shall be under no obligation
to seek other employment and there shall be no offset
against any amounts due the Executive under this
Agreement on account of any remuneration attributable
to any subsequent employment that the Executive may
obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or
other right which the Company may have against the
Executive or others, except as specifically set forth
in Section 9 hereof or upon obtaining by the Company of
a final unappealable judgement against the Executive.
(b) Any amounts payable and benefits or additional rights
provided pursuant to Section 6.2 (other than Section
6.2(e)), Section 6.3 (other than Section 6.3(k)) and
Section 8.1 (other than Section 8.1(m)) beyond Accrued
Obligations and amounts or rights due under law, and,
in the case of Section 6.3 and Section 8.1, beyond the
sum of any amounts due (without execution of a release)
under the Company severance program then in effect, or,
if greater, three (3) months Base Salary as severance,
shall only be payable if the Executive delivers to the
Company a release of all claims of the Executive (other
than those specifically payable or providable hereunder
on or upon the applicable type of termination and any
rights of indemnification under the Company's
organizational documents) with regard to the Company,
its subsidiaries and related entities and their
respective past or present officers, directors and
employees in such form as reasonably requested by the
Company.
(c) Upon any termination of employment, upon the request of
the Company, the Executive shall deliver to the Company
a resignation from all offices and directorships and
fiduciary positions of the Executive in which the
Executive is serving with, or at the request of, the
Company or its subsidiaries, affiliates or benefit
plans.
(d) The amounts and benefits provided under Sections 6 and
8 hereof are intended to be inclusive and not
duplicative of the amounts and benefits due under the
Company's employee benefit plans and programs to the
extent they are duplicative.
8. Change in Control
8.1 Employment Termination in Connection with a Change in
Control. In the event of a Qualifying Termination (as defined
below) during the period commencing one-hundred eighty (180) days
prior to the effective date of a Change in Control and
terminating on the second anniversary of the effective date of a
Change in Control (the "Change in Control Protection Period"),
then in lieu of the benefits provided to the Executive under
Section 6.3 of this Agreement, the Company shall pay the
Executive the following amounts within (except as otherwise
provided) thirty (30) business days of the Qualifying Termination
(or, if later, the effective date of the Change in Control; in
which case any amounts or benefits previously paid pursuant to
Section 6 shall be setoff against those under this Section 8) and
provide the following benefits:
(a) Any Accrued Obligations.
(b) A lump-sum cash payment equal to three (3) times the
highest rate of the Executive's Base Salary rate in
effect at any time up to and including the date of the
Executive's termination.
(c) A lump-sum cash payment equal to the Prorated Portion
(as determined in the next sentence) of the greater of:
(i) the Executive's Termination Year Target Bonus or
(ii) the Executive's earned annual incentive award for
the fiscal year prior to the fiscal year in which the
earlier of the Change in Control or the Qualifying
Termination occurs (whether or not deferred). The
"Prorated Portion" of the foregoing amount shall be
determined by multiplying such amount by a fraction,
the numerator of which is the number of days during the
fiscal year of termination that the Executive is
employed by the Company, and the denominator of which
is, three hundred sixty-five (365).
(d) A lump-sum cash payment equal to three (3) times the
greater of: (i) the Executive's highest annual
incentive compensation earned over the three (3) fiscal
years ending prior to the earlier of the Change in
Control or the Qualifying Termination (whether or not
deferred); or (ii) the Executive's target incentive
compensation established for the fiscal year in which
the Executive's date of termination occurs.
(e) To the extent the Executive is eligible, was eligible
prior or after the Change in Control (or, if earlier,
the Qualifying Termination) or if the Executive would
be eligible with credit for an additional three (3)
years of age and service credit, coverage under all
applicable retiree health and other retiree welfare
plans for the Executive and the Executive's eligible
dependents (including an adjustment to the extent
necessary to put the Executive on the same after tax
basis as if the Executive had been eligible for such
coverage).
(f) To the extent eligible prior or after the Change in
Control (or, if earlier the Qualifying Termination),
continued participation, (coordinated with (e) above to
the extent duplicative), at no additional after tax
cost to the Executive than the Executive would have as
an employee, in all welfare plans, until three (3)
years after the date of termination, provided, however,
that in the event the Executive obtains other
employment that offers substantially similar or
improved benefits, as to any particular welfare plan,
such continuation of coverage by the Company for such
similar or improved benefit under such plan shall
immediately cease. To the extent such coverage cannot
be provided under the Company's welfare benefit plans
without jeopardizing the tax status of such plans, for
underwriting reasons or because of the tax impact on
the Executive, the Company shall pay the Executive an
amount such that the Executive can purchase such
benefits separately at no greater after tax cost to him
than he would have had if the benefits were provided to
him as an employee.
(g) A lump-sum cash payment of the actuarial present value
equivalent (as determined in accordance with the most
favorable (to the Executive) overall actuarial
assumptions and subsidies in any of the Company's tax-
qualified or nonqualified type defined benefit pension
plans in which the Executive then participates) of the
accrued benefits accrued by the Executive as of the
date of termination under the terms of any nonqualified
defined benefit type retirement plan, including but not
limited to, the SERP and the SBP and assuming the
benefit was fully vested without regard to any minimum
age or service requirements. For this purpose, such
benefits shall be calculated under the assumption that
the Executive's employment continued following the date
of termination for three (3) full years (i.e., three
(3) additional years of age (including, but not limited
to, for purposes of determining the actuarial present
value), compensation and service credits shall be
added).
(h) Three (3) times the amount of the maximum Company
contribution or match to any defined contribution type
plan in which the Executive participates.
(i) A lump-sum cash payment of the product of (i) the
Interest Factor (as determined in the next sentence)
multiplied by (ii) the Executive's entire account
balance under the Deferred Income Plan (or any
replacement therefor), plus an additional amount equal
to three (3) times the match which the Company made for
the Executive to such plan for the fiscal year ending
immediately prior to the earlier of the Change in
Control or the Qualifying Termination. The "Interest
Factor" shall be equal to one (1) plus three (3) times
the rate of earnings of the Executive's account under
such plan for the fiscal year ending immediately prior
to his termination.
(j) Immediate full vesting of any outstanding stock
options, performance share units and other equity
awards (and lapse of any forfeiture provisions) to the
extent permitted under the plan or grant, or if full
vesting is not permitted with regard to stock options,
a cash payment equal to the Spread on such unvested
options on the date of termination (or, if later, the
date of the Change in Control) plus, in both cases, if
options are exercisable for less than three (3) years
after termination (or, if less, the remainder of the
respective terms, including any termination of
exercisability of all Company stock options in
connection with the Change in Control or a merger
related thereto), a cash payment equal to the Black-
Scholes (based on the same methodology used for the
Company's then latest distributed proxy statement or,
if not so used, for internal valuation of the last
stock option grants made by the Company prior to the
earlier of the Qualifying Termination or the Change in
Control) future value of such outstanding options for
the lesser of three (3) years or the remainder of such
terms.
(k) Outplacement services at a level commensurate with the
Executive's position, including use of an executive
office and secretary, for a period of one (1) year
commencing on the date of termination but in no event
extending beyond the date on which the Executive
commences other full time employment.
(l) Continuation of participation for three (3) additional
years in the Company's programs with regard to tax
preparation assistance and financial planning
assistance, club dues and automobile (but based on the
automobile then being used and no new one), in
accordance with the Company's programs in effect at the
time of the Change in Control.
(m) As provided in Exhibit A hereto.
For purposes of this Section 8, a Qualifying Termination
shall mean any termination of the Executive's employment (i) by
the Company without Cause, or (ii) by the Executive for Good
Reason.
8.2 Definition of "Change in Control." A Change in Control
of the Company shall be deemed to have occurred as of the first
day any one or more of the following conditions shall have been
satisfied:
(a) Any "person" or "group" (within the meaning of Section
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) other than the
Company, any trustee or other fiduciary holding Company
common stock under an employee benefit plan of the
Company or a related company, or any corporation which
is owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as
their ownership of the Company's common stock, is or
becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of more than thirty percent
(30%) of the then outstanding voting stock;
(b) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board and any new director whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in office
who either were directors at the beginning of the two
year period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority of the Board;
(c) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger
or consolidation which would result in the voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or being converted into voting securities
of the surviving entity) more than fifty percent (50%)
of the combined voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation; or
(d) The approval of the stockholders of the Company of a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all of its assets.
8.3 Excise Tax Equalization Payment. In the event that the
Executive becomes entitled to payments and/or benefits which
would constitute "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, the provisions of Exhibit B will
apply.
9. Noncompetition, Confidentiality and Nondisparagement
9.1 Agreement Not to Compete.
(a) The Executive agrees that for a period of two (2) years
after the termination of the Executive's employment,
the Executive will not engage in Competition with the
Company with the Listed Companies, provided that after
the Executive's termination of employment the Listed
Companies shall be limited to those effectively listed
at the time of his termination and still on such list
at the time of any alleged activity of the Executive,
including, but not limited to, (i) soliciting
customers, business or orders for, or selling any
products and services in, Competition with the Company
for such Listed Companies or (ii) diverting, enticing,
or otherwise taking away customers, business or orders
of the Company, or attempting to do so, in either case
in Competition with the Company for such Listed
Companies.
(b) The Executive agrees that if, while he is receiving
severance pay from the Company pursuant to Section
6.2(b) or Section 6.3(b), the Executive: (i) violates
(a) above, or (ii) otherwise engages in Competition in
the Restricted Territory, whether or not with the
Listed Companies, Section 9.6(b) hereof shall apply.
(c) The Executive agrees that the restrictions contained in
this Section 9 are necessary for the protection of the
business and goodwill of the Company because of the
trade secrets within the Executive's knowledge and are
considered by the Executive to be reasonable for such
purpose.
9.2 Definitions.
(a) "Competition" shall mean engaging in, as an employee,
director, partner, principal, shareholder, consultant,
advisor, independent contractor or similar capacity,
with (a) the Listed Companies or (b) in any business,
activity or conduct which directly competes with the
business of the Company, provided that, with regard to
the period after termination of the Executive's
employment, Section 9.1(b)(ii) shall only apply to
business lines in which the Company is engaged both at
the time of termination of employment and at the time
of the determination and which during the last fiscal
year ending prior to the date of such termination repre
sented at least five percent (5%) of the Company's
revenues (the "Prohibited Lines"). Notwithstanding
anything else in this Section 9, Competition shall not
include: (A) (i) holding five percent (5%) or less of
an interest in the equity or debt of any publicly
traded company, (ii) engaging in any activity with the
prior written approval of the O&C Committee, (iii) the
practice of law in a law firm that represents entities
in Competition with the Company, provided that the
Executive does not personally represent such entities,
or (iv) the employment by, or provision of services to,
an investment banking firm or consulting firm that
provides services to entities that are in Competition
with the Company provided that the Executive does not
personally represent or provide services to such
entities that are Listed Companies or otherwise with
regard to businesses in Competition with the Prohibited
Lines, or (B) with regard to Section 9.1(b)(ii), (i)
being employed by, or consulting for, a non-Competitive
division or business unit of an entity which is in
Competition with the Company (and participating in such
entity's employee equity plans), (ii) being employed
by, or consulting for, an entity which had annual
revenues in the last fiscal year prior to the Executive
being employed by, or consulting for, the entity
generated through business lines in Competition with
the Prohibited Lines of the Company that do not exceed
five percent (5%) of such entity's total annual
revenues, provided that revenues within the Executive's
area of responsibility or authority are not more than
ten percent (10%) composed of the revenues from the
businesses in Competition with the Prohibited Lines, or
(iii) any activities conducted after a Change in
Control of the Company.
(b) The Restricted Territory shall mean any geographic area
in which the Company with regard to the Prohibited
Lines did more than nominal business.
(c) Listed Companies shall mean those entities which are
within the "peer group" established by the Company for
the performance graphs in its proxy statement pursuant
to Item 402(l) of Regulation S-K under the Exchange Act
and which are in a list of no more than five (5)
entities established by the Company from time to time
and available from the Chief Human Resources Officer,
provided that the addition of any entity to the list
shall not be effective until sixty (60) days after it
is so listed.
(d) For purposes of this Section 9, "Company" shall mean
the Company and its subsidiaries and affiliates.
9.3 Agreement Not to Engage in Certain Solicitation.
The Executive agrees that the Executive will not, during the
Executive's employment with the Company or during the two (2)
year period thereafter, directly or indirectly, solicit or
induce, or attempt to solicit or induce, any non-clerical
employee(s), sales representative(s), agent(s), or consultant(s)
of the Company to terminate such person's employment,
representation or other association with the Company for the
purpose of affiliating with any entity with which the Executive
is associated ("Solicitation").
9.4 Confidential Information.
(a) The Executive specifically acknowledges that any trade
secrets or confidential business and technical
information of the Company or its vendors, suppliers or
customers, whether reduced to writing, maintained on
any form of electronic media, or maintained in mind or
memory and whether compiled by the Executive or the
Company (collectively, "Confidential Information"),
derives independent economic value from not being
readily known to or ascertainable by proper means by
others; that reasonable efforts have been made by the
Company to maintain the secrecy of such information;
that such information is the sole property of the
Company or its vendors, suppliers, or customers and
that any retention, use or disclosure of such
information by the Executive during the Employment Term
(except in the course of performing duties and
obligations of employment with the Company) or any time
after termination thereof, shall constitute
misappropriation of the trade secrets of the Company or
its vendors, suppliers, or customers, provided that
Confidential Information shall not include: (i)
information that is at the time of disclosure public
knowledge or generally known within the industry, (ii)
information deemed in good faith by the Executive,
while employed by the Company, desirable to disclose in
the course of performing the Executive's duties, (iii)
information the disclosure of which the Executive in
good xxxxx xxxxx necessary in defense of the
Executive's rights provided such disclosure by the
Executive is limited to only disclose as necessary for
such purpose, or (iv) information disclosed by the
Executive to comply with a court, or other lawful
compulsory, order compelling him to do so, provided the
Executive gives the Company prompt notice of the
receipt of such order and the disclosure by the
Executive is limited to only disclosure necessary for
such purpose.
(b) The Executive acknowledges that the Company from time
to time may have agreements with other persons or with
the United States Government, or agencies thereof, that
impose obligations or restrictions on the Company
regarding inventions made during the course of work
under such agreements or regarding the confidential
nature of such work. If the Executive's duties
hereunder will require disclosures to be made to him
subject to such obligations and restrictions, the
Executive agrees to be bound by them.
9.5 Scope of Restrictions. If, at the time of
enforcement of this Section 9, a court holds that the
restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and
that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area
permitted by law.
9.6 Remedies.
(a) In the event of a material breach or threatened
material breach of Section 9.1(a), Section 9.3, Section
9.4 or Section 9.10, the Company, in addition to its
other remedies at law or in equity, shall be entitled
to injunctive or other equitable relief in order to
enforce or prevent any violations of the provisions of
this Section 9. Except as specifically provided with
regard to Listed Companies, the Company agrees that it
will not assert to enjoin or otherwise limit the
Executive's activities based on an argument of
inevitable disclosure of confidential information.
(b) In the event Section 9.1(b) applies, the Company may
immediately cease payment to the Executive of all
future amounts due under Sections 6.2(a) or (b) or
Sections 6.3(a) or (b), as well as otherwise
specifically provided in any other plan, grant or
program.
(c) Upon written request of the Executive, the Company
shall within thirty (30) days notify the Executive in
writing whether or not in good faith it believes any
proposed activities would be in Competition and, if it
so determines or does not reply within thirty (30)
days, it shall be deemed to waive any right to treat
such activities as Competition unless the facts are
otherwise than as presented by the Executive or there
is a change thereafter in such activities. The
Executive shall promptly provide the Company with such
information as it may reasonably request to evaluate
whether or not such activities are in Competition.
9.7 Uniformity. In no event shall any definitions of
Competition or Solicitation (or a similar provision) as it
applies to the Executive with regard to any plan of program or
grant of the Company be interpreted to be any broader than as set
forth in this Section 9.
9.8 Delivery of Documents. Upon termination of this
Agreement or at any other time upon request by the Company, the
Executive shall promptly deliver to the Company all records,
files, memoranda, notes, designs, data, reports, price lists,
customer lists, drawings, plans, computer programs, software,
software documentation, sketches, laboratory and research
notebooks and other documents (and all copies or reproductions of
such materials in his possession or control) belonging to the
Company. Notwithstanding the foregoing, the Executive may retain
his rolodex and similar phone directories (collectively, the
"Rolodex") to the extent the Rolodex does not contain information
other than name, address, telephone number and similar
information, provided that, at the request of the Company, the
Executive shall provide the Company with a copy of the Rolodex.
9.9 Nondisparagement.
(a) During the Employment Term and thereafter, the
Executive shall not with willful intent to damage
economically or as to reputation or vindictively
disparage the Company, its subsidiaries or their
respective past or present officers, directors or
employees (the "Protected Group"), provided that the
foregoing shall not apply to (i) actions or statements
taken or made by the Executive while employed by the
Company in good faith as fulfilling the Executive's
duties with the Company or otherwise at the request of
the Company, (ii) truthful statements made in
compliance with legal process or governmental inquiry,
(iii) as the Executive in good xxxxx xxxxx necessary to
rebut any untrue or misleading public statements made
about him or any other member of the Protected Group,
(iv) statements made in good faith by the Executive to
rebut untrue or misleading statements made about him or
any other member of the Protected Group by any member
of the Protected Group, and (v) normal commercial
puffery in a competitive business situation. No member
of the Protected Group shall be a third party
beneficiary of this Section 9.9(a).
(b) During the Employment Term and thereafter, neither the
Company officially nor any then member of the Executive
Leadership Team (or the equivalent) of the Company, as
such term is currently used within the Company, shall
with willful intent to damage the Executive
economically or as to reputation or otherwise
vindictively disparage the Executive, provided the
foregoing shall not apply to (i) actions or statements
taken or made in good faith within the Company in
fulfilling duties with the Company, (ii) truthful
statements made in compliance with legal process,
governmental inquiry or as required by legal filing or
disclosure requirements, (iii) as in good faith deemed
necessary to rebut any untrue or misleading statements
by the Executive as to any member of the Protected
Group or (iv) normal commercial puffery in a
competitive business situation.
(c) In the event of a material breach or threatened
material breach of clauses (a) or (b) above, the
Company or the Executive, as the case may be, in
addition to its or the Executive's other remedies at
law or in equity, shall be entitled to injunctive or
other equitable relief in order to enforce or prevent
any violations of this Section 9.9.
9.10 Pooling of Interests. If the Company is involved
in any proposed business combination that is contemplated to be
accounted for as a pooling of interests, the Executive agrees to
cooperate with the reasonable requests of the Company with regard
to the exercise of stock options, the sale of Company stock or
other matters that could affect the ability of the combination to
be accounted for as a pooling of interests.
10 Liability Insurance
The Company shall cover the Executive under directors
and officers liability insurance both during and, while potential
liability exists, after the Employment Term in the same amount
and to the same extent, if any, as the Company covers its other
officers and directors.
11 Assignment
11.1 Assignment by the Company. This Agreement may and
shall be assigned or transferred to, and shall be binding upon
and shall inure to the benefit of, any successor of the Company,
and any such successor shall be deemed substituted for all
purposes of the "Company" under the terms of this Agreement. As
used in this Agreement, the term "successor" shall mean any
person, firm, corporation or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or
substantially all of the assets of the Company. Notwithstanding
such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
11.2 Assignment by the Executive. This Agreement is
not assignable by the Executive. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
should die while any amounts payable to the Executive hereunder
remain outstanding, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's devisee, legatee, or other designee
or, in the absence of such designee, to the Executive's estate.
12 Legal Remedies
12.1 Payment of Legal Fees. The Company shall pay the
Executive's reasonable legal fees and costs associated with
entering into this Agreement. To the fullest extent permitted by
law, the Company shall promptly pay upon submission of statements
all legal and other professional fees, costs of litigation,
prejudgment interest, and other expenses incurred in connection
with any dispute arising hereunder; provided, however, the
Company shall be reimbursed by the Executive for (i) the fees and
expenses advanced in the event the Executive's claim is in a
material manner in bad faith or frivolous and the arbitrator or
court, as applicable, determines that the reimbursement of such
fees and expenses is appropriate, or (ii) to the extent that the
arbitrator or court, as appropriate, determines that such legal
and other professional fees are clearly and demonstrably
unreasonable.
12.2 Arbitration. All disputes and controversies
arising under or in connection with this Agreement, other than
the seeking of injunctive or other equitable relief pursuant to
Section 9 hereof, shall be settled by arbitration conducted
before a panel of three (3) arbitrators sitting in New York City,
New York, or such other location agreed by the parties hereto, in
accordance with the rules for expedited resolution of commercial
disputes of the American Arbitration Association then in effect.
The determination of the majority of the arbitrators shall be
final and binding on the parties. Judgment may be entered on the
award of the arbitrator in any court having proper jurisdiction.
All expenses of such arbitration, including the fees and expenses
of the counsel of the Executive, shall be borne by the Company
and the Executive shall be entitled to reimbursement of his
expenses as provided in Section 12.1 hereof.
12.3 Notice. Any notices, requests, demands, or other
communications provided for by this Agreement shall be sufficient
if in writing and if delivered personally, sent by telecopier,
sent by an overnight service or sent by registered or certified
mail. Notice to the Executive not delivered personally (or by
telecopy where the Executive is known to be) shall be sent to the
last address on the books of the Company, and notice to the
Company not delivered personally (or by telecopy to the known
personal telecopy of the person it is being sent to) shall be
sent to it at its principal office. All notices to the Company
shall be delivered to the Chairman of the O&C Committee with a
copy to the senior legal officer. Delivery shall be deemed to
occur on the earlier of actual receipt or tender and rejection by
the intended recipient.
12.4 Continued Payments. In the event after a Change
in Control either party files for arbitration to resolve any
dispute as to whether a termination is for Cause or Good Reason,
until such dispute is determined by the arbitrators, the
Executive shall continue to be treated economically and benefit
wise in the manner asserted by him in the arbitration effective
as of the date of the filing of the arbitration, subject to the
Executive promptly refunding any amounts paid to him, paying the
cost of any benefits provided to him and paying to the Company
the profits in any stock option or other equity awards exercised
or otherwise realized by him during the pendency of the
arbitration which he is ultimately held not to be entitled to;
provided the arbitrators may terminate such payments and benefits
in the event that they determine at any point that the Executive
is intentionally delaying conclusion of the arbitration.
13 Miscellaneous
13.1 Entire Agreement. This Agreement, except to the
extent specifically provided otherwise herein, supersedes any
prior agreements or understandings, oral or written, between the
parties hereto or between the Executive and the Company, with
respect to the subject matter hereof and constitutes the entire
Agreement of the parties with respect to the subject matter
hereof. To the extent any severance plan or program of the
Company that would apply to the Executive is more generous to the
Executive than the provisions hereof, the Executive shall be
entitled to any additional payments or benefits which are not
duplicative, but shall otherwise not be eligible for such plan or
program.
13.2 Modification. This Agreement shall not be varied,
altered, modified, canceled, changed, or in any way amended, nor
any provision hereof waived, except by mutual agreement of the
parties in a written instrument executed by the parties hereto or
their legal representatives.
13.3 Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect.
13.4 Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed to be
an original, but all of which together will constitute one and
the same Agreement.
13.5 Tax Withholding. The Company may withhold from
any benefits payable under this Agreement all federal, state,
city, or other taxes as may be required pursuant to any law or
governmental regulation or ruling.
13.6 Beneficiaries. The Executive may designate one or
more persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing
acceptable to the Board or the Board's designee. The Executive
may make or change such designation at any time.
13.7 Representation. The Executive represents that the
Executive's employment by the Company and the performance by the
Executive of his obligations under this Agreement do not, and
shall not, breach any agreement that obligates him to keep in
confidence any trade secrets or confidential or proprietary
information of his or of any other party, to write or consult to
any other party or to refrain from competing, directly or
indirectly, with the business of any other party. The Executive
shall not disclose to the Company, and the Company shall not
request that the Executive disclose, any trade secrets or
confidential or proprietary information of any other party.
14 Governing Law
The provisions of this Agreement shall be construed and
enforced in accordance with the laws of the state of Delaware,
without regard to any otherwise applicable principles of
conflicts of laws.
IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement, as of the day and year first above
written.
/s/Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
TEXTRON INC.
By:/s/Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: Executive Vice
President
Exhibit A
Special Grants
By Retention Award Letter (the "Letter") dated December 19,
1995, the Executive was awarded the cash equivalent of 25,000
shares of Company stock (50,000 shares post split) subject to
certain conditions. The Letter shall continue to apply, except
as set forth below.
1. In the event of the Executive's termination of
employment as a result of death (pursuant to Section
5(a) hereof), Disability (pursuant to Section 5(b)
hereof), by the Company without Cause (pursuant to
Section 5(e) hereof) or by the Executive for Good
Reason (pursuant to Section 5(f) hereof), the Executive
shall immediately become fully vested in the cash
payment under the Letter (which shall be calculated
using the same method as set forth in the Letter, but
substituting the date of termination for January 1,
2001) and the award shall immediately be paid out after
the date of termination in a lump sum. Furthermore, in
the event of a Change in Control before January 1,
2001, but not a termination until thereafter, the value
of the cash payment on January 1, 2001 will be the
greater of the method in the second and fourth bullets
of the Letter. The payment shall immediately vest upon
a Change in Control, but not be paid out until the
earlier of January 1, 2001 or a termination of
employment. The foregoing award shall not be subject
in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment,
garnishment, execution or levy of any kind and any
attempt to do so shall not be recognized.
Exhibit B
Parachute Gross Up
(a) In the event that the Executive shall become
entitled to payments and/or benefits provided by this Agreement
or any other amounts in the "nature of compensation" (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any person
affiliated with the Company or such person) as a result of such
change in ownership or effective control (collectively the
"Company Payments"), and such Company Payments will be subject to
the tax (the "Excise Tax") imposed by Section 4999 of the Code
(and any similar tax that may hereafter be imposed by any taxing
authority) the Company shall pay to the Executive at the time
specified in subsection (d) below an additional amount (the
"Gross-up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Company
Payments and any U.S. federal, state, and for local income or
payroll tax upon the Gross-up Payment provided for by this
paragraph (a), but before deduction for any U.S. federal, state,
and local income or payroll tax on the Company Payments, shall be
equal to the Company Payments.
(b) For purposes of determining whether any of the
Company Payments and Gross-up Payments (collectively the "Total
Payments") will be subject to the Excise Tax and the amount of
such Excise Tax, (x) the Total Payments shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "parachute payments" in excess of the "base
amount" (as defined under Code Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except
to the extent that, in the opinion of the Company's independent
certified public accountants appointed prior to any change in
ownership (as defined under Code Section 280G(b)(2)) or tax
counsel selected by such accountants (the "Accountants") such
Total Payments (in whole or in part) either do not constitute
"parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount" or are
otherwise not subject to the Excise Tax, and (y) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Accountants in accordance with the principles
of Section 280G of the Code.
(c) For purposes of determining the amount of the
Gross-up Payment, the Executive shall be deemed to pay U.S.
federal income taxes at the highest marginal rate of U.S. federal
income taxation in the calendar year in which the Gross-up
Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of
the Executive's residence for the calendar year in which the
Company Payment is to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction
of such state and local taxes if paid in such year. In the event
that the Excise Tax is subsequently determined by the Accountants
to be less than the amount taken into account hereunder at the
time the Gross-up Payment is made, the Executive shall repay to
the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-
up Payment attributable to such reduction (plus the portion of
the Gross-up Payment attributable to the Excise Tax and U.S.
federal, state and local income tax imposed on the portion of the
Gross-up Payment being repaid by the Executive if such repayment
results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. Notwithstanding the foregoing, in the event any portion of
the Gross-up Payment to be refunded to the Company has been paid
to any U.S. federal, state and local tax authority, repayment
thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for
the period it held such portion. The Executive and the Company
shall mutually agree upon the course of action to be pursued (and
the method of allocating the expense thereof) if the Executive's
claim for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountant or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Gross-up
Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-
up Payment), the Company shall make an additional Gross-up
Payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount
of such excess is finally determined.
(d) The Gross-up Payment or portion thereof provided
for in subsection (c) above shall be paid not later than the
thirtieth (30th) day following an event occurring which subjects
the Executive to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be
finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good
faith by the Accountant, of the minimum amount of such payments
and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the
Code), subject to further payments pursuant to subsection (c)
hereof, as soon as the amount thereof can reasonably be deter
mined, but in no event later than the ninetieth day after the
occurrence of the event subjecting the Executive to the Excise
Tax. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
(e) In the event of any controversy with the Internal
Revenue Service (or other taxing authority) with regard to the
Excise Tax, the Executive shall permit the Company to control
issues related to the Excise Tax (at its expense), provided that
such issues do not potentially materially adversely affect the
Executive, but the Executive shall control any other issues. In
the event the issues are interrelated, the Executive and the
Company shall in good faith cooperate so as not to jeopardize
resolution of either issue, but if the parties cannot agree the
Executive shall make the final determination with regard to the
issues. In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, the Executive
shall permit the representative of the Company to accompany the
Executive, and the Executive and the Executive's representative
shall cooperate with the Company and its representative.
(f) The Company shall be responsible for all charges
of the Accountant.
(g) The Company and the Executive shall promptly
deliver to each other copies of any written communications, and
summaries of any verbal communications, with any taxing authority
regarding the Excise Tax covered by this Exhibit B.
