Exhibit (10)(a)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered
into as of the 19th day of September, 1995 between SUNDSTRAND
CORPORATION, a Delaware corporation (the "Company"), and Xxxxxx
X. Xxxxxxx ("Executive").
WHEREAS, the Board of Directors of the Company on
September 19, 1995 elected Executive as President and Chief
Executive Officer of the Company effective October 1, 1995; and
WHEREAS, the Company desires to enter into this Agreement
to assure the benefits of Executive's future services to the
Company, and Executive is willing to commit to render such
services, upon the terms and conditions set forth below.
It is therefore mutually agreed as follows:
1. EMPLOYMENT. The Company agrees to employ Executive
as President and Chief Executive Officer and Executive agrees to
serve the Company, upon the terms and conditions and for the
period of employment hereinafter set forth. Throughout the
Employment Period (as hereinafter defined), unless otherwise
agreed in writing by Executive and the Company, the Company shall
neither demote Executive nor assign to Executive any duties or
responsibilities that are inconsistent with his position, duties,
responsibilities and status as President and Chief Executive
Officer.
2. EMPLOYMENT PERIOD. The term of Executive's
employment under this Agreement shall commence on October 1,
1995, and shall expire, subject to earlier termination of
employment as hereinafter provided, on September 30, 1998 (the
"Employment Period"), provided however that on September 30, 1996
and each anniversary of such date, the Employment Period shall
automatically be extended for an additional year unless prior
thereto either party has given written notice to the other that
such party does not wish to extend the term of this Agreement.
3. COMPENSATION. Throughout the Employment Period, the
Company shall pay or provide Executive with the following, and
Executive shall accept the same, as compensation for the
performance of his undertakings and the services to be rendered
by him under this Agreement.
(a) A salary payable not less often than bi-weekly, at a
rate not less than the highest salary rate he has
attained on an annualized basis, but in no event less
than $650,000 per annum (the "Base Salary").
(b) Participation in all executive benefit or incentive
compensation plans now maintained or hereafter
established by the Company for the purpose of
providing compensation and/or benefits to executives
of the Company including, but not limited to, the
Company's 1989 Restricted Stock Plan, the Sundstrand
Corporation Stock Incentive Plan, the Officer
Incentive Plan, and any supplemental retirement,
salary continuation, stock option, deferred
compensation, supplemental medical or life insurance
or other bonus or incentive compensation plans.
Unless otherwise provided herein, Executive's
participation in such plans shall be on the same
basis and terms as other executive officers of the
Company. 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 Executive's entitlements hereunder.
(c) Participation in all employee benefit plans,
practices and programs maintained by the Company and
made available to employees generally including,
without limitation, all pension, retirement, savings,
medical, hospitalization, disability, dental, life or
travel accident insurance benefit plans (collectively
the "Benefit Plans"). Executive's participation in
such Benefit Plans shall be on the same basis and
terms as are applicable to employees of the Company
generally. In the event Executive at any time during
the Employment Period is not eligible to participate
in any Benefit Plan for which Executive was
previously eligible or the Company terminates or
materially amends any Benefit Plan, the Company shall
provide to Executive benefits comparable with those
benefits that would have been received by Executive
if Executive continued to participate in such Plans.
(d) Paid vacations in accordance with the Company's
vacation policy as in effect from time to time, and
all paid holidays given by the Company to its
executive officers.
(e) All fringe benefits and perquisites (e.g. physical
examinations, financial planning and tax preparation
services) made available by the Company to its
executive officers.
(f) Notwithstanding anything contained in this Agreement
to the contrary, in the event that any payment
(within the meaning of Section 28OG(b)(2) of the
Internal Revenue Code of 1986, as amended (the
"Code")), or distribution to or for the benefit of
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 Executive with respect
to such excise tax (such excise tax, collectively
referred to as the "Excise Tax"), then Executive
shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after
payment by Executive of all taxes (including any
interest or penalties imposed with respect to such
taxes), including any Excise Tax, imposed upon the
Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
An initial determination shall be made as to whether
a Gross-Up Payment is required pursuant to this
Section 3(f) and the amount of such Gross-Up Payment
shall be made by a national independent accounting
firm selected by 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
Executive, both to the Company and Executive within
fifteen (15) business days of the Termination Date,
if applicable, or such other time as requested by the
Company or by Executive (provided 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 3(f)
shall be paid by the Company to Executive within five
(5) business days of the receipt of the Accounting
Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Executive
with respect to a Payment or Payments, it shall
furnish Executive with an unqualified opinion that no
Excise Tax will be imposed with respect to any such
Payment or Payments. Any such initial determination
by the Accounting Firm of the Gross-Up Payment shall
be binding upon the Company and Executive subject to
the application of the paragraph set forth
immediately below.
As a result of the uncertainty in the application of
Section 4999 and 28OG of the Code, it is possible
that a Gross-Up Payment (or a portion thereof) will
be paid which should not have been paid (an
"Overpayment") or a Gross-Up Payment (or a portion
thereof) which should have been paid will not have
been paid (an "Underpayment"). An Underpayment shall
be deemed to have occurred upon notice (formal or
informal) to Executive from any governmental taxing
authority that the tax liability of Executive
(whether in respect of the then current taxable year
of Executive or in respect of any prior taxable year
of Executive) may be increased by reason of the
imposition of the Excise Tax on a Payment or Payments
with respect to which the Company has failed to make
a sufficient Gross-Up Payment. An Overpayment shall
be deemed to have occurred upon a "Final
Determination" (as hereinafter defined) that the
Excise Tax shall not be imposed upon a Payment or
Payments with respect to which Executive had
previously received a Gross-Up Payment. A Final
Determination shall be deemed to have occurred when
Executive has received from the applicable
governmental taxing authority a refund of taxes or
other reduction in his tax liability by reason of the
Overpayment and upon either (i) the date a
determination is made by, or an agreement is entered
into with, the applicable governmental taxing
authority which finally and conclusively binds
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 Executive's
applicable tax return has expired. If an
Underpayment occurs, Executive shall promptly notify
the Company and the Company shall pay to Executive at
least five (5) business days prior to the date on
which the applicable governmental taxing authority
has requested payment, an additional Gross-Up Payment
equal to the amount of the Underpayment plus any
interest and penalties imposed on the Underpayment.
If an Overpayment occurs, the amount of the
Overpayment shall be treated as a loan by the Company
to Executive and Executive shall, within ten (10)
business days of the occurrence of such Overpayment,
pay the Company the amount of the Overpayment plus
interest at an annual rate equal to the rate provided
for in Section 1274(b)(2)(B) of the Code from the
date the Gross-Up Payment (to which the Overpayment
relates) was paid to Executive.
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.
4. EXPENSES. During the Employment Period, the Company
shall promptly pay or reimburse Executive for all reasonable
expenses incurred by Executive in the performance of duties
hereunder.
5. CONDITIONS OF EMPLOYMENT. Throughout the Employment
Period, (a) the Company shall not require or assign duties to
Executive which would require him to move the location of his
principal business office or his principal place of residence
outside the area of Rockford, Illinois (the "Rockford Area"), (b)
the Company shall not require or assign duties to Executive which
would require him to spend more than forty-five (45) normal
working days away from the Rockford Area during any consecutive
twelve-month period, (c) the Company shall provide an office to
Executive, the location and furnishings of which shall be
equivalent to the offices provided to other members of the
executive office of the Company on the date of this Agreement,
and (d) the Company shall provide secretarial services and other
administrative services to Executive which shall be equivalent to
the secretarial services and other administrative services
provided to other members of the executive office of the Company
on the date of this Agreement.
6. CONTINUATION OF BENEFITS. If the Company shall fail
to observe or perform any covenant or agreement contained in this
Agreement to be observed or performed by the Company, then
Executive shall, until such time as Executive's Employment Period
hereunder would otherwise terminate pursuant to the provisions of
Section 2 or Section 7, continue to receive all benefits which
the Company has hereinabove in Section 3 agreed to pay to and
provide for Executive, in each case in the amounts and at the
times provided for in Section 3. The parties agree that, in such
event, such payments and benefits shall be deemed to constitute
liquidated damages for the Company's breach of this Agreement.
7. TERMINATION. This Agreement shall terminate upon the
following circumstances:
(a) The date of death of Executive during the Employment
Period; provided, however, that Executive's estate,
heirs and beneficiaries shall be entitled to receive
the full amount of his salary for the month in which
death occurs and all other benefits available to them
under the Company's Benefit Plans as in effect on the
date of death of Executive;
(b) Following conviction of Executive of a felony, the
date as of which Executive's right to file an appeal
after conviction has expired, or if Executive files
an appeal after conviction, the date as of which the
appellate court fails to reverse the conviction, and
the Company shall pay Executive his full salary
through such date of termination and the Company
shall have no further obligations to Executive under
this Agreement except with respect to any rights
Executive might otherwise have under the Company's
Benefit plans as in effect on the date of termination
of Executive; or
(c) The date as of which the Company elects to terminate
this Agreement in accordance with Section l0.
8. COVENANT NOT TO COMPETE. Without the consent of the
Company, Executive shall not at any time during the Employment
Period undertake employment as an owner, director, officer
employee or consultant with any business entity directly engaged
in the manufacture and/or sale of products competitive with any
material product or product line of the Company; provided,
however, that Executive shall not be deemed to have breached this
undertaking if his sole relation with such entity consists of his
holding, directly or indirectly, an equity interest in such
entity not greater than two percent (2%) of such entity's
outstanding equity interest. For purposes hereof the term
"material product or product line of the Company" shall mean any
product or product line of the Company, the gross sales of which
during any calendar year during the five (5) year period
preceding Executive's undertaking such employment were at least
$50 million.
9. UNAUTHORIZED DISCLOSURE. Executive shall not make
any Unauthorized Disclosure. For purposes of this Agreement,
"Unauthorized Disclosure" shall mean disclosure by 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 Executive of his duties as an executive of the
Company or as may be legally required, of any confidential
information obtained by 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 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 9) or any
information not otherwise considered confidential by a reasonable
person engaged in the same business as that conducted by the
Company.
10. BREACH OF SECTION 8 OR SECTION 9. In the event of a
breach by Executive of the provisions of Section 8 or Section 9
of this Agreement, the Company may terminate this Agreement under
Section 7(c), but only if the Company complies with the following
provisions:
(a) The Company shall provide Executive with written
notice of its belief that a breach of Section 8 or
Section 9 of this Agreement has occurred and shall
afford Executive sixty (60) days or such longer
period as the Company may determine to cure the
alleged breach.
(b) In the event Executive does not cure the breach, the
Company shall be required to institute a judicial
proceeding to determine whether a breach of Section 8
or Section 9 of this Agreement has occurred and
Executive has not cured such breach.
(c) This Agreement may then be terminated only upon a
judicial determination that Executive has breached
the provisions of Section 8 or Section 9 and has
failed to cure such breach; provided, however, that
this Agreement may not be terminated until either all
appellate proceedings have been exhausted or the time
within which Executive may appeal an adverse ruling
has expired.
11. LITIGATION EXPENSES. The Company shall pay to
Executive all out-of-pocket expenses, including attorneys' fees,
incurred by Executive in connection with any claim or legal
action or proceeding brought under or involving this Agreement,
whether brought by Executive or by or on behalf of the Company or
by another party; provided, however, the Company shall not be
obligated to pay to Executive out-of-pocket expenses, including
attorneys' fees, incurred by Executive in any claim or legal
action or proceeding involving Section 8 or Section 9 of this
Agreement if Company prevails in such litigation.
12. RETIREMENT PLANS. Executive shall participate in the
Sundstrand Corporation Retirement Plan-Aerospace and the
Sundstrand Corporation Supplemental Retirement Plan
(collectively, the "Retirement Plans"). For purposes of
determining the amount of Executive's accrued benefit under the
Retirement Plans, he shall be deemed to accrue "Years of Service"
and "Years of Participation" (as those terms are defined and used
in the Retirement Plans) from the date of this Agreement at the
rate of two (2) months for each month (or fraction thereof) of
actual service. If Executive's employment with the Company
terminates prior to completion of thirty (30) months of actual
service, he shall be entitled to a nonqualified benefit computed
pursuant to the Retirement Plans and the immediately preceding
sentence but without regard to any service requirement for
eligibility. Notwithstanding the foregoing, in the event of a
Change in Control (as hereinafter defined), Executive will
immediately become fully-vested in a benefit payable from the
Retirement Plans, which benefit will be calculated as though, at
the time of such Change in Control, he had twenty (20) Years of
Service and Years of Participation in the Retirement Plans,
regardless of the actual number of Years of Service and Years of
Participation at such time.
13. CHANGE IN CONTROL. For purposes of this Agreement, a
"Change in Control" shall mean any of the following events:
(a) 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 thirty-three percent (33%) or more
of the combined voting power of the Company's then
outstanding voting securities;
(b) 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's 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
(c) Approval by stockholders of the Company of (i) a
merger or consolidation involving the Company if the
stockholders of the Company, immediately before such
merger or consolidation, do not, as a result of such
merger or consolidation, own, directly or indirectly,
more than sixty-seven percent (67%) of the combined
voting power of the then outstanding voting
securities of the corporation resulting from such
merger or consolidation in substantially the same
proportion as their ownership of the combined voting
power of the voting securities of the Company
outstanding immediately before such merger or
consolidation or (ii) a complete liquidation or
dissolution of the Company or an agreement for the
sale or other disposition of all or substantially all
of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall
not be deemed to occur pursuant to Section 13(a), solely because
thirty-three percent (33%) or more of the combined voting power
of the Company's then outstanding securities is acquired by (i) a
trustee or other fiduciary holding securities under one or more
employee benefit plans maintained by the Company or any of its
subsidiaries or (ii) any corporation which, immediately prior to
such acquisition, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their
ownership of stock in the Company immediately prior to such
acquisition.
14. RETIREE HEALTH AND LIFE INSURANCE BENEFITS UPON A
CHANGE IN CONTROL. Notwithstanding anything to the contrary
contained in the Company's Benefit Plans and other applicable
programs and practices, upon a Change in Control:
(a) The eligibility requirements for the Company's
Retiree Health Insurance Plan shall be waived, and
commencing on the later of Executive's termination of
employment or attainment of age 55, he shall be
provided with the same health care coverage as
provided to other eligible retirees at that time; and
(b) The age 62 and 30-year requirements of the Executive
Life Insurance Program for retirees are waived, and
commencing on the later of Executive's termination of
employment or attainment of age 55, he shall be
provided with a life insurance benefit of one time
his annual Base Salary at the higher of the annual
rate in effect at the time of his termination of
employment or immediately prior to the Change in
Control.
15. STOCK AWARDS UPON A CHNAGE IN CONTROL. Upon a Change
in Control, all restrictions on any stock purchased by or
otherwise granted to Executive pursuant to the Company's 1989
Restricted Stock Plan, the Sundstrand Corporation Stock Incentive
Plan and any other restricted stock plan sponsored by the Company
shall immediately lapse and all such stock shall become fully
(100%) vested immediately, and shall be immediately deliverable
to Executive; all such stock shall be freely transferable by
Executive and the Company will have no right to direct or
restrict the disposition of such stock; and all stock options
shall become fully (100%) vested and shall become immediately
exercisable.
16. TERMINATION FOLLOWING A CHANGE IN CONTROL.
(a) TERMINATION DATE. For the purposes of this Section
16, "Termination Date" shall mean in the case of
Executive's death, his date of death, or in all other
cases, the date of Executive's last day of employment
with the Company.
(b) COMPENSATION UPON TERMINATION FOLLOWING A CHANGE IN
CONTROL. Notwithstanding the provisions of Section 7
or any other section of this Agreement and in
addition to any other amounts or benefits payable to
Executive or on his behalf pursuant to the terms of
this Agreement, following a Change in Control upon
termination of Executive's employment:
(i) for any reason, during the Employment Period,
the Company shall pay Executive or his
beneficiaries on his behalf 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 Executive has previously
deferred (including any interest earned or
credited thereon) (collectively "Accrued
Compensation"); and
(ii) (A) for any reason other than pursuant to the
provisions of Section 7, during the Employment
Period, the Company shall pay Executive a
"Bonus Amount" equal to the product of (x) (a)
the greatest amount of any cash bonus or
incentive compensation received by Executive
during the three fiscal years immediately
preceding the Termination Date or (b) if no
such bonus was received by Executive during
any of such three years, then an amount equal
to Executive's maximum bonus which could be
awarded for the fiscal year in which the
Termination Date occurs had he continued in
employment until the end of such fiscal year,
assuming all performance targets and goals (if
applicable) had been fully met by the Company
and by Executive, as applicable, for such year
and (y) a fraction (which shall not be less
than one) the numerator of which shall be the
number of months (each partial month shall be
treated as a full month) remaining in the
Employment Period (if Executive were to
continue in the employ of the Company) and the
denominator of which is 12; or
(B) for any reason pursuant to the provisions
of Section 7, during the Employment Period,
the Company shall pay to Executive or his
beneficiaries an amount equal to the bonus or
incentive award that Executive would have been
entitled to receive in respect of the fiscal
year in which Executive's Termination Date
occurs had he continued in employment until
the end of such fiscal year, calculated as if
all performance targets and goals (if
applicable) had been fully met by the Company
and by Executive, as applicable, for such
year, multiplied by a fraction (which shall
not be less than 0) the numerator of which is
the number of months (each partial month shall
be treated as a full month) remaining in such
fiscal year through the Termination Date and
the denominator of which is 12 (a "Pro Rata
Bonus").
(c) The Accrued Compensation and Bonus Amount or Pro Rata
Bonus, as the case may be, provided under this
Section 16 shall be paid in cash by the Company
within five (5) days after Executive's Termination
Date.
(d) Executive's entitlement to any other compensation or
benefits shall be determined in accordance with the
terms of this Agreement and in accordance with the
Company's employee Benefit Plans and other applicable
programs, practices and arrangements then in effect,
to the extent that such plans, programs, practices
and arrangements do not conflict with the terms of
this Agreement.
17. NO MITIGATION. 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 Executive in any subsequent employment.
18. NOTICES. Notice given pursuant to this Agreement
shall be in writing and shall be deemed given when received and
if mailed shall be mailed by United States registered or
certified mail, return receipt requested, addressee only, postage
prepaid if to the Company, to the Board of Directors of
Sundstrand Corporation, Attention: Vice President and General
Counsel and Secretary of the Company, 0000 Xxxxxxxx Xxxxxx, X.X.
Xxx 0000, Xxxxxxxx, Xxxxxxxx 00000, or if to Executive, at 00000
Xxxx Xxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, or to such other
address as either party may have previously designated by notice
to the other party given in the foregoing manner.
19. SUCCESSORS AND ASSIGNS. 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 assignee 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.
Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by 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 Executive's legal
representative.
20. WAIVER, MODIFICATION AND INTERPRETATION. No
provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and an appropriate
officer of the Company empowered to sign same by the Board of
Directors of the Company. No waiver by either party at any time
of any breach by the party of, or compliance with, any condition
or provision of this Agreement to be performed by the other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same time or at any prior or subsequent time.
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Illinois. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
21. HEADINGS. The headings contained herein are for
reference purposes only and shall not in any way affect the
meaning or interpretation of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first written above.
SUNDSTRAND CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxx
---------------------------
Vice President and General
Counsel and Secretary
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Executive
