Exhibit 10.14
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Honeywell
International Inc. (formerly AlliedSignal Inc.), a
Delaware corporation (the "Company"), and Xx. Xxxxxxx X.
Xxxxxxxxxx (the "Executive"), dated and effective as of
the Effective Time (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, the Company has entered into an
Agreement and Plan of Merger (the "Merger Agreement"),
dated as of June 4, 1999, by and among the Company,
Honeywell Inc., a Delaware corporation ("Honeywell"), and
Blossom Acquisition Corp., a Delaware corporation
("Acquisition"), pursuant to which Acquisition will merge
into Honeywell (the "Merger") and Honeywell will become a
wholly-owned subsidiary of the Company; and
WHEREAS, the Company expects the Executive to
play a critical role in the integration of the business
and operations of Honeywell with those of the Company and
to make essential contributions to the future growth and
success of the Company; and;
WHEREAS, the Company wishes to provide for the
employment by the Company of the Executive, and the
Executive wishes to serve the Company, in the capacities
and on the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. TERM. The Term of this Agreement shall commence as
of the Effective Time (as defined in the Merger
Agreement) and end on December 31, 2004. During the
Term, the Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and
conditions set forth in this Agreement, for an initial
period (the "Initial Period") and a second period (the
"Subsequent Period"). The Initial Period shall begin at
the Effective Time and end on the earlier of (a) the
retirement of the current Chairman of the Company's Board
of Directors (the "Current Chairman") on April 1, 2000;
or (b) such earlier date as the Current Chairman ceases
to be Chairman for any reason. The Subsequent Period
shall begin at the end of the Initial Period and end upon
expiration of the Term. Notwithstanding the foregoing,
in the event the transactions contemplated by the Merger
Agreement are not consummated, this Agreement shall be
null and void.
2. POSITION AND DUTIES. (a) During the Initial Period
the Executive shall serve as the Chief Executive Officer
of the Company and during the Subsequent Period the
Executive shall serve as both the Chief Executive Officer
of the Company and as the Chairman of the Company's Board
of Directors; in each case with such duties and
responsibilities as are customarily assigned to such
positions, and such other duties and responsibilities not
inconsistent therewith as may from time to time be
assigned to him by the Board of Directors of the Company
(the "Board"), and which duties and responsibilities
shall be consistent with those exercised for such
position by the Current Chairman. Without limiting the
generality of the foregoing, during the Term the
Executive shall act as (i) the senior officer of the
Company, (ii) the primary spokesperson to shareholders
and the investment community, (iii) the person primarily
responsible for establishing policy and direction for the
Company and (iv) the person to whom the senior executives
of the Company report. As of the Effective Time, the
Company shall cause the Executive to be elected as a
member of the Board, to serve as a member of the class of
directors with the longest tenure as of the Effective
Time. Thereafter, during the Term, the Company shall
cause the Executive to be included in the slate of
persons nominated to serve as directors on the Board and
shall use its best efforts (including, without
limitation, the solicitation of proxies) to have the
Executive elected and reelected to the Board for the
duration of the Term. During the Term, the Executive
shall report solely to the Board. Until the second
anniversary of the Effective Time, (i) the removal of the
Executive from the position of Chief Executive Officer or
Chairman of the Board, (ii) prior to the effective date
of his election as Chairman of the Board, the reversal of
such election, or (iii) any change in the Executive's
duties and responsibilities hereunder not concurred with
by the Executive shall require the affirmative vote of at
least 75% of the members of the Board (excluding the
Executive); provided, however, that if, at any time prior
to such second anniversary, the persons (other than the
Executive) designated by Honeywell pursuant to Section
2.2(a) of the Merger Agreement ("Merger Agreement
Designees") shall represent less than 25% of the members
of the Board (excluding the Executive), then such
removal, reversal or change, as applicable, shall
require, in addition to the vote of the Board otherwise
required therefor by this Section 2(a), the affirmative
vote of at least one Merger Agreement Designee.
(b) During the Term, and excluding any periods
of vacation and sick leave to which the Executive is
entitled, the Executive shall devote his full attention
and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive
under this Agreement, use the Executive's reasonable best
efforts to carry out such responsibilities faithfully and
efficiently. It shall not be considered a violation of
the foregoing for the Executive to manage his personal
investments or serve on corporate, industry, civic or
charitable boards or committees, so long as such
activities do not significantly interfere with the
performance of the Executive's responsibilities as an
executive officer of the Company in accordance with this
Agreement.
(c) During the Term, the Executive shall be
based at the Company's principal headquarters in
Morristown, New Jersey, except for travel reasonably
required for the performance of the Executive's duties
hereunder.
3. COMPENSATION. (a) BASE SALARY. During the Term,
the Executive shall receive an annual base salary
("Annual Base Salary") of not less than $1.5 million.
The Annual Base Salary shall be payable in accordance
with the Company's regular payroll practice for its
senior executives, as in effect from time to time.
During the Term, the Annual Base Salary shall be reviewed
by the Management Development and Compensation Committee
of the Board (the "Compensation Committee") for possible
increase at least annually. Any increase in the Annual
Base Salary shall not limit or reduce any other
obligation of the Company under this Agreement. The
Annual Base Salary shall not be reduced below any such
increased amount, and the term "Annual Base Salary" shall
thereafter refer to the Annual Base Salary as so
increased.
(b) INCENTIVE COMPENSATION. The Executive
shall receive an annual cash bonus from the Company with
respect to 1999 which is equal to the excess if any of
(x) $1 million over (y) the cash bonus paid or payable to
the Executive in respect of 1999 (or any portion thereof)
under Honeywell's annual incentive plans (including any
such amounts payable by reason of shareholder approval of
or consummation of the Merger). Such cash bonus amount
shall be paid in accordance with the Company's normal
practice. Commencing on January 1, 2000, the Executive
shall have a minimum target bonus of not less than 100
percent of his Annual Base Salary (the "Minimum Target
Bonus").
(c) OTHER BENEFITS. During the Term: (1) the
Executive shall be entitled to participate in all savings
and retirement plans (including non-qualified
supplemental executive retirement plans, subject,
however, to the provisions of this Agreement), and shall
be entitled to participate in all fringe benefit and
perquisite practices, policies and programs of the
Company made available to the senior officers of the
Company and (2) the Executive and/or the Executive's
eligible dependents, as the case may be, shall be
eligible for participation in, and shall receive all
benefits under, all welfare benefit plans, practices,
policies and programs provided by the Company, including,
without limitation, medical, prescription, dental,
disability, salary continuance, employee life insurance,
group life insurance, accidental death and travel
accident insurance plans and programs to the same extent,
and subject to the same terms, conditions, cost-sharing
requirements and the like, as are made available to the
senior officers of the Company. Executive shall receive
credit, for purposes of the Company benefit plans
referenced in this paragraph (c) in which Executive is or
becomes a participant, for his service with Honeywell and
the Company, except as described in Section 6.6(c)(i) of
the Merger Agreement. In addition to perquisites made
available to senior officers of the Company, the Company
shall provide Executive with an annual financial planning
allowance of up to $50,000, a car and driver, use of
Company-owned aircraft for personal travel in accordance
with the Company's security requirements, and a gross-up
of any imputed income tax payable by reason of travel by
the Executive's spouse on Company-owned aircraft when
accompanying the Executive on his business travel. The
Company shall reimburse the Executive for relocation
expenses in accordance with the Company's Executive
Relocation Policy, a copy of which has been made avail
able to the Executive.
(d) EQUITY AWARDS. (i) As of the Effective
Time, the Compensation Committee shall grant to the
Executive a non-qualified option (the "Option") to
purchase 1.0 million shares of the Company's common stock
("Company Stock") pursuant to the Company's 1993 Stock
Plan for Employees of AlliedSignal Inc. and its
Affiliates (the "Stock Plan"). The Option shall (x) have
a ten year term, (y) have a per share exercise price
equal to the fair market value (as defined in the Stock
Plan) of the Company Stock on the day on which the
Effective Time occurs and (z) subject to the provisions
hereof, vest and become exercisable with respect to 40%
of the shares of Company Stock subject thereto on
December 31, 2000 and with respect to an additional 30%
of the shares subject thereto on each of December 31,
2001 and December 31, 2002 so long as the Executive is
employed by the Company on each such date. In the event
of the termination of the Executive's employment with the
Company for any reason (other than a termination by the
Company for Cause or a voluntary resignation by the
Executive without Good Reason (as each term is defined
herein)) (a "Qualifying Termination"), the Option will
become fully vested and exercisable. To the extent that
the Option has become vested and exercisable, it will
remain so vested and exercisable for the remainder of its
term.
(ii) As of the Effective Time, the Compensation
Committee shall grant to the Executive a non-qualified
option to purchase 500,000 shares of Company Stock
pursuant to the Stock Plan (the "Performance Option").
Notwithstanding any provision of the Stock Plan to the
contrary, the Performance Option shall (x) have a ten
year term, (y) have a per share exercise price equal to
the fair market value (as defined in the Stock Plan) of
the Company Stock on the day on which the Effective Time
occurs and (z) vest and become exercisable in accordance
with (A) or (B) below, as follows:
(A) With respect to 40% of the shares of
Company Stock subject thereto, on April 1,
2001, if and only if the growth in Consolidated
Earnings Per Share (as defined below) for
calendar year 2000 over calendar year 1999 is
at least equal to the targeted growth for such
year set by the Compensation Committee, as set
forth on Appendix A hereto; with respect to an
additional 30% of the shares subject thereto,
on April 1, 2002, if and only if the growth in
Consolidated Earnings Per Share for calendar
year 2001 over calendar year 2000 is at least
equal to the targeted growth for such year set
by the Compensation Committee, as set forth on
Appendix A hereto; and with respect to an
additional 30% of the shares subject thereto,
on April 1, 2003, if and only if the growth in
Consolidated Earnings Per Share for calendar
year 2002 over calendar year 2001 is at least
equal to the targeted growth for such year set
by the Compensation Committee, as set forth on
Appendix A hereto; or
(B) With respect to 100% of the shares of
Company Stock subject thereto, on April 1,
2003, if and only if the cumulative growth in
Consolidated Earnings Per Share for the three-
year calendar period commencing January 1, 2000
and ending December 31, 2002 over calendar year
1999 is at least equal to the cumulative
Consolidated Earnings Per Share target set by
the Compensation Committee for such three-year
period, as set forth on Appendix A hereto.
In the event of a Qualifying Termination prior to April
1, 2003 or a voluntary resignation by the Executive after
December 31, 2002, and prior to April 1, 2003, any
portion of the Performance Option which has not become
vested and exercisable as of the date of such termination
shall remain outstanding and shall be treated for all
purposes as if the Executive remained employed by the
Company through April 1, 2003. To the extent that any
portion of the Performance Option (AA) has not become
vested and exercisable pursuant to paragraph (A) or (B)
above by April 1, 2003, the portion of the Performance
Option which is unvested and not exercisable on such date
shall terminate and be of no further force and effect,
and (BB) has become vested and exercisable, the portion
of the Performance Option which has become vested and
exercisable shall remain vested and exercisable for the
remainder of its term. For purposes of the Performance
Option, "Consolidated Earnings Per Share" for a calendar
year shall mean consolidated net income for that year as
shown on the consolidated statement of income for the
Company, adjusted to omit the effects of extraordinary
items, gain or loss on the disposal of a business segment
(other than provisions for operating losses or income
during the phase-out period), unusual or infrequently
occurring events or transactions and the cumulative
effects of changes in accounting principles, all as
determined in accordance with generally accepted
accounting principles; divided by the weighted average
number of outstanding shares of Company Stock for the
calendar year.
(iii) As of the Effective Time, the
Compensation Committee shall also grant 375,000
restricted stock units to the Executive (such units, the
"Restricted Units") pursuant to the Stock Plan.
Notwithstanding any provision of the Stock Plan to the
contrary, and subject to the provisions hereof, the
restrictions on the Restricted Units shall lapse solely
upon the attainment of the performance criteria set forth
below:
As to one-third of the Restricted Units, on
April 1, 2001, if and only if the Company's
Operating Margin (as defined below) for
calendar year 2000 is at least equal to the
target for such year set by the Compensation
Committee, as set forth on Appendix B hereto;
as to an additional one-third of the Restricted
Units, on April 1, 2002, if and only if the
Company's Operating Margin for calendar year
2001 is at least equal to the target for such
year set by the Compensation Committee, as set
forth on Appendix B hereto; and as to an
additional one-third of the Restricted Units on
April 1, 2003, if and only if the Company's
Operating Margin for calendar year 2002 is at
least equal to the target for such year set by
the Compensation Committee, as set forth on
Appendix B hereto.
Dividend equivalents will be awarded pursuant to the
Stock Plan with respect to such Restricted Units. In the
event of a Qualifying Termination prior to April 1, 2003
or a voluntary resignation by the Executive after
December 31, 2002 and prior to April 1, 2003, all
Restricted Units as to which the restrictions have not
lapsed as of the date of such termination shall remain
outstanding and shall be treated for all purposes as if
the Executive remained employed by the Company through
April 1, 2003. All Restricted Units as to which the
restrictions have not lapsed as of April 1, 2003 shall
expire. The Executive shall have no right to receive any
payment in respect of any Restricted Units that expire
pursuant to the preceding sentence. For purposes of the
Restricted Units, "Operating Margin" for a calendar year
shall mean net sales less operating expenses, including
cost of goods sold and sales, general and administration
expenses and other recurring operating expenses,
determined in accordance with generally accepted
accounting principles, but adjusted to omit the effects
of unusual or infrequently occurring events or
transactions, including, without limitation,
restructuring charges and gain or loss on any business
disposition, including without limitation of any
strategic business unit or strategic business enterprise.
(iv) During the Term, the Executive shall be
entitled to be granted additional options to acquire
Company Stock, restricted stock units and other equity
awards at the discretion of the Compensation Committee.
(e) ADDITIONAL RETIREMENT BENEFIT. (i)
Subject to the terms and conditions set forth herein, the
Executive shall be entitled to payment by the Company of
an annual supplemental retirement benefit (the "SERP
Benefit"), expressed as a life annuity commencing on the
Executive's sixty-fifth birthday, equal to (1) the
product of (A) 60% times (B) the Executive's Final
Average Compensation (as defined below), minus (2) the
aggregate annual vested benefit (expressed as a life
annuity commencing on the Executive's sixty-fifth
birthday) payable to the Executive under the terms of any
"defined benefit plan" (as defined in Section 3(35) of
the Employee Retirement Income Security Act of 1974, as
amended) or plans, including excess benefit or
supplemental retirement plans or agreements, maintained
by the Company or Honeywell. As of the Effective Time,
the Executive shall be fully vested in the SERP Benefit.
The SERP Benefit shall be reduced by 3% for each year (or
pro rata for any portion thereof) during which the
Executive collects his SERP Benefit prior to January 1,
2003. Following the Executive's death (whether or not
the payment of the SERP Benefit has commenced), an annual
survivor benefit equal to 50% of the SERP Benefit shall
be payable to the Executive's surviving spouse (if any)
for her life.
(ii) The SERP Benefit shall be payable at such
time and in such manner and shall in all other respects
be subject to such terms and conditions as are applicable
to retirement benefits payable under the supplemental
retirement plan of the Company in which the Executive
participates as of the date on which the Executive's
employment terminates (which plan shall recognize salary
and bonus in computing benefits thereunder and shall
permit the Executive to elect to receive benefits in a
lump sum); provided, however, that if the Executive is
entitled to severance pay under the "Severance Plan" (as
defined below) upon termination of his employment,
payment of the SERP Benefit shall not commence until
expiration of the "Severance Period" (as defined below);
and provided, further, however, that for purposes of
computing SERP Benefit payable prior to January 1, 2003,
it shall be assumed that benefits under the plans
referred to in Section 3(e)(i)(2) above commenced at the
same time as such SERP Benefit. For purposes of this
Section 3(e), Final Average Compensation shall mean the
greater of (x) the average of the Executive's base salary
and bonus with respect to the three calendar years
coincident with or immediately preceding the end of the
Executive's employment with the Company (including for
this purpose, if applicable, base salary and bonus paid
or payable to the Executive by Honeywell) and (y) the
Executive's "Final Average Earnings" (as defined in the
Honeywell Retirement Benefit Plan as in effect on June 4,
1999, but without regard to (A) the benefit limitation
under Section 415 of the Code (as hereinafter defined),
(B) the compensation limitation under Section 401(a)(17)
of the Code and (C) the exclusion from the definition of
earnings under such plan of any amounts of deferred
compensation), determined as of December 31, 1999 (such
"Final Average Earnings" are reflected on a preliminary
basis on Appendix C hereto). For purposes of this
Section 3(e), (aa) Final Average Compensation shall take
into account severance payments made under Section 5(a)
hereof which payments shall be treated as having been
made over the Severance Period (as defined in the
Severance Plan referred to in Section 5(a)) and (bb) the
Executive will be treated as having remained employed by
the Company during the Severance Period.
(iii) The Company agrees to provide the
Executive for the period beginning at the end of the Term
(or in the event of a voluntary resignation on or after
January 1, 2003, from and after the Date of Termination
in connection therewith) and for the remainder of his
life thereafter the facilities, services and other
arrangements that were provided to him during the Term
(including office and clerical support, executive
transportation and other security services, financial and
tax planning services, continued access to certain other
general facilities and services and reimbursements for
properly documented expenses, if any, incurred on behalf
of the Company and at the request of his successor, but
excluding the use of Company-owned aircraft for personal
travel).
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DIS
ABILITY. The Executive's employment shall terminate
automatically upon the Executive's death during the Term.
The Company shall be entitled to terminate the
Executive's employment because of the Executive's
Disability during the Term. "Disability" means that the
Executive is disabled within the meaning of the Company's
long-term disability policy or, if there is no such
policy in effect, that (i) the Executive has been
substantially unable, for 120 business days within a
period of 180 consecutive business days, to perform the
Executive's duties under this Agreement, as a result of
physical or mental illness or injury, and (ii) a
physician selected by the Company or its insurers, and
acceptable to the Executive or the Executive's legal
representative, has determined that the Executive is
disabled. A termination of the Executive's employment by
the Company for Disability shall be communicated to the
Executive by written notice, and shall be effective on
the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), unless the
Executive returns to full-time performance of the
Executive's duties before the Disability Effective Date.
(b) TERMINATION BY THE COMPANY. (i) Subject
to Section 2(a) hereof, the Company may terminate the
Executive's employment during the Term for Cause or
without Cause. "Cause" means the conviction of the
Executive for the commission of a felony, or willful
gross misconduct by the Executive that results in
material and demonstrable damage to the business or
reputation of the Company. No act or failure to act on
the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that
the Executive's action or omission was in the best
interests of the Company. Any act or failure to act that
is based upon authority given pursuant to a resolution
duly adopted by the Board, or the advice of counsel for
the Company, shall be conclusively presumed to be done,
or omitted to be done, by the Executive in good faith and
in the best interests of the Company.
(ii) A termination of the Executive's
employment for Cause shall be not be effective unless it
is accomplished in accordance with the following proce
dures. The Company shall give the Executive written
notice ("Notice of Termination for Cause") of its
intention to terminate the Executive's employment for
Cause, setting forth in reasonable detail the specific
conduct of the Executive that it considers to constitute
Cause and the specific provision(s) of this Agreement on
which it relies, and stating the date, time and place of
the Special Board Meeting for Cause. The "Special Board
Meeting for Cause" means a meeting of the Board called
and held specifically and exclusively for the purpose of
considering the Executive's termination for Cause, that
takes place not less than five nor more than thirty
business days after the Executive receives the Notice of
Termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the
Special Board Meeting for Cause. The Executive's
termination for Cause shall be effective when and if a
resolution is duly adopted at the Special Board Meeting
for Cause by affirmative vote of three-quarters of the
entire membership of the Board (other than the Executive)
but in any event, in accordance with Section 2(a) hereof
to the extent applicable, stating that, in the good faith
opinion of the Board, the Executive is guilty of the
conduct described in the Notice of Termination for Cause
and that such conduct constitutes Cause under this
Agreement. The failure to set forth any fact or
circumstance in a Notice of Termination for Cause shall
not constitute a waiver of the right to assert, and shall
not preclude the Company from asserting, such fact or
circumstance in an attempt to enforce any right under or
provision of this Agreement.
(c) GOOD REASON. (i) The Executive may
terminate employment for Good Reason or without Good
Reason. "Good Reason" means, without the
Executive's written consent:
(A) the failure of the Executive to become the
Chairman of the Board upon the expiration of
the Initial Period or the failure of the
Executive to be retained as Chief Executive
Officer of the Company during the Term or as
Chairman of the Board during the Subsequent
Period;
(B) the assignment to the Executive of any
duties or responsibilities inconsistent in any
respect with those customarily associated with
the positions to be held by the Executive
during the applicable period pursuant to this
Agreement, or any other action by the Company
that results in a diminution in the Executive's
position, authority, duties or
responsibilities, other than an isolated,
insubstantial and inadvertent action that is
not taken in bad faith and is remedied by the
Company promptly after receipt of notice
thereof from the Executive;
(C) any failure by the Company to comply with
any provision of Section 3 of this Agreement,
other than an isolated, insubstantial and
inadvertent failure that is not taken in bad
faith and is remedied by the Company promptly
after receipt of notice thereof from the
Executive;
(D) any requirement by the Company that the
Executive's services be rendered primarily at a
location more than 50 miles from the location
provided for in paragraph (c) of Section 2 of
this Agreement (except for travel reasonably
required for the performance of the Executive's
duties hereunder);
(E) any failure by the Company to comply with
paragraph (c) of Section 10 of this Agreement;
(F) any other material breach of this Agreement
by the Company that is not remedied by the
Company promptly after receipt of notice
thereof from the Executive.
(ii) A termination of employment by the
Executive for Good Reason shall be effectuated by giving
the Company written notice ("Notice of Termination for
Good Reason") of the termination, setting forth in
reasonable detail the specific conduct of the Company
that constitutes Good Reason and the specific
provision(s) of this Agreement on which the Executive
relies. A termination of employment by the Executive for
Good Reason shall be effective on the fifth business day
following the date when the Notice of Termination for
Good Reason is given, unless the notice sets forth a
later date (which date shall in no event be later than 30
days after the notice is given).
(iii) The failure to set forth any fact or
circumstance in a Notice of Termination for Good Reason
shall not constitute a waiver of the right to assert, and
shall not preclude the Executive from asserting such fact
or circumstance in an attempt to enforce any right under
or provision of this Agreement.
(iv) A termination of the Executive's
employment by the Executive without Good Reason shall be
effected by giving the Company 30 days written notice of
the termination.
(d) DATE OF TERMINATION. The "Date of
Termination" means the date of the Executive's death, the
Disability Effective Date or the date on which the
termination of the Executive's employment by the Company
for Cause or without Cause or by the Executive for Good
Reason or without Good Reason is effective.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a)
OTHER THAN FOR CAUSE, DEATH OR DISABILITY, OR FOR GOOD
REASON. In the event of the termination of Executive's
employment during the Term, except as otherwise provided
in this Agreement, the consequences of such termination
shall be determined in accordance with the Company's
Severance Plan for Senior Executives or any successor
thereto (the "Severance Plan"), which is incorporated by
reference in this Agreement, with the additions and
modifications in respect of the Executive as set forth
below. The Executive shall be treated as an "Officer
Participant" under the Severance Plan. The "Severance
Period" for purposes of the Severance Plan shall, in
Executive's case, be thirty-six months. The "Severance
Pay Factor" for purposes of the Severance Plan shall, in
Executive's case, be equal to the number of months of
Executive's Severance Period. "Covered Termination" for
purposes of the Severance Plan shall mean (i) any
termination of the Executive's employment by the Company
other than for Cause (as defined in Section 4(b) of this
Agreement) and (ii) any termination of the Executive's
employment by the Executive for Good Reason (as defined
in Section 4(c) of this Agreement). Benefit Payments
under the Severance Plan shall be made in a lump-sum,
within thirty days after the Date of Termination. There
will be no forfeiture of benefits pursuant to Section
20(c) of the Severance Plan unless the Executive's
employment has been terminated for Cause (as defined in
Section 4(b) hereof) and in no event shall the Executive
forfeit any portion of the benefits described in Section
3(e) hereof. In addition, if during the Term, the
Company terminates the Executive's employment for any
reason other than Cause, death or Disability, or the
Executive terminates his employment for Good Reason, (i)
all of the Executive's then outstanding equity awards
(other than the Option, Performance Option and Restricted
Units, which shall be treated in the manner set forth in
Section 3(d) hereof) shall be treated in accordance with
the terms of the plan and agreements evidencing such
equity awards and (ii) the Company shall promptly pay to
the Executive any portion of the Executive's Annual Base
Salary and bonus through the Date of Termination that has
not yet been paid. The Company shall also pay or provide
to the Executive, in the event of such a termination, the
benefits described in Section 3(e) hereof and all
compensation and benefits payable to the Executive under
the terms of the Company's compensation and benefit
plans, programs or arrangements as in effect immediately
prior to the Date of Termination.
(b) DEATH AND DISABILITY. If the Executive's
employment is terminated by reason of the Executive's
death or Disability during the Term, the Company shall
pay to the Executive or, in the case of the Executive's
death, to the Executive's designated beneficiaries (or,
if there is no such beneficiary, to the Executive's
estate or legal representative), in a lump sum in cash
within 30 days after the Date of Termination, the sum of
the following amounts: (1) any portion of the Executive's
Annual Base Salary and bonus through the Date of
Termination that has not yet been paid; (2) an amount
equal to the product of (A) the target bonus that the
Executive would have been eligible to earn for the period
during which such termination occurs, and (B) a fraction,
the numerator of which is the number of days in such
period through the Date of Termination, and the
denominator of which is the total number of days in the
relevant period; and (3) the benefits described in
Section 3(e) hereof and all compensation and benefits
payable to the Executive under the terms of the Company's
compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of
Termination. If the Executive's employment is terminated
by reason of the Executive's death or Disability during
the Term, all of the Executive's then outstanding equity
awards (other than the Option, Performance Option and
Restricted Units, which shall be treated in the manner
set forth in Section 3(d) hereof) shall be treated in
accordance with the terms of the plan and agreements
evidencing such equity awards.
(c) BY THE COMPANY FOR CAUSE; BY THE EXECUTIVE
OTHER THAN FOR GOOD REASON. If the Executive's
employment is terminated by the Company for Cause or the
Executive voluntarily terminates employment other than
for Good Reason during the Term, (1) the Company shall
pay to the Executive in a lump sum in cash immediately
prior to the Date of Termination, any portion of the
Executive's Annual Base Salary and bonus earned through
the Date of Termination that has not been paid; (2) all
then unvested equity awards shall, except as otherwise
provided in Section 3(d) hereof, be forfeited and all
previously vested options and other vested equity awards
granted on or after the Effective Time shall be treated
according to the provisions of the plan and agreements
under which such awards were granted; and (3) the Company
shall also pay or provide to the Executive the benefits
described in Section 3(e) hereof and all compensation and
benefits payable to the Executive under the terms of the
Company's compensation and benefit plans, programs or
arrangements as in effect immediately prior to the Date
of Termination.
(d) Whether or not Executive's employment is
terminated hereunder, if any payments under this
Agreement or any other payments or benefits received or
to be received by the Executive in connection with the
Merger, a change in control of the Company, termination
of the Executive's employment, or cessation of the
Executive's active service (whether pursuant to the terms
of this Agreement or any other plan, arrangement or
agreement with the Company, or any person affiliated with
the Company) (the "Severance Payments"), will be subject
to the tax (the "Excise Tax") imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the
"Code") (or any similar tax that may hereafter be
imposed), the Company shall pay at the time specified
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 Severance Payments and
any federal, state and local income tax and Excise Tax
upon the payment provided for by this Subsection 5(d),
shall be equal to the Severance Payments. For purposes
of determining whether any of the Severance Payments will
be subject to the Excise Tax and the amount of such
Excise Tax, (a) all Severance Payments shall be treated
as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the
opinion of tax counsel selected by the Company's
independent auditors and acceptable to the Executive
("tax counsel"), such Severance Payments (in whole or in
part) do not constitute parachute payments, or such
excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of Section
280G(b)(3) of the Code, or are otherwise not subject to
the Excise Tax, (b) the amount of the Severance Payments
which shall be treated as subject to the Excise Tax shall
be equal to the lesser of (1) the total amount of the
Severance Payments or (2) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) (after
applying clause (a), above), and (c) the value of any non-
cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and
(4) of the Code. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to
pay federal income taxes at Executive's highest marginal
rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and
local income taxes at Executive's highest marginal rate
of taxation in the state and locality of Executive's
residence on the Date of Termination (or, as applicable,
at the Effective Time), net of the maximum reduction in
federal income taxes which could be obtained from
deduction of such state and local taxes. In the event
that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder, 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 Gross-Up Payment
attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and
federal and state and local income tax imposed on the
Gross-Up Payment being repaid by the Executive if such
repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction) plus
interest on the amount of such repayment from the date
the Gross-Up Payment was initially made to the date of
repayment at the rate provided in Section 1274(b)(2)(B)
of the Code (the "Applicable Rate"). In the event that
the Excise Tax is determined to exceed the amount taken
into account hereunder (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 payable with
respect to such excess) at the time that the amount of
such excess is finally determined. Any payment to be
made under this paragraph shall be payable within five
(5) days of the determination of tax counsel that such a
payment is required hereunder and, if applicable, within
five (5) days of a final determination that additional
Excise Tax is payable.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this
Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its
affiliated companies for which the Executive may qualify
(but, other than as expressly provided in Section 5
hereof, excluding in each case, any severance plan or
arrangement of the Company or any of its affiliated
companies) nor shall anything in this Agreement limit or
otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any
of its affiliated companies. Vested benefits and other
amounts that the Executive is otherwise entitled to
receive under any plan, policy, practice or program of,
or any contract of agreement with, the Company or any of
its affiliated companies on or after the Date of
Termination shall be payable in accordance with the terms
of each such plan, policy, practice, program, contract or
agreement, as the case may be, except as explicitly
modified by this Agreement.
7. FULL SETTLEMENT. The Company's obligation to make
the payments provided for in, and otherwise to perform
its obligations under, this Agreement shall not be
affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action that the Company
may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the
amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not
be reduced, regardless of whether the Executive obtains
other employment.
8. CONFIDENTIAL INFORMATION; COMPETITION; SOLICITATION.
The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or
any of its affiliated companies and their respective
businesses that the Executive obtains during the
Executive's employment by the Company or any of its
affiliated companies and that is not public knowledge
(other than as a result of the Executive's violation of
this Section 8) ("Confidential Information"). The
Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the
Executive's employment with the Company, except with the
prior written consent of the Company or as otherwise
required by law or legal process. If the Executive
resigns without Good Reason or if the Executive is
terminated by the Company with Cause prior to the end of
the Term, then for two years after the Date of
Termination, the Executive will not, without the written
consent of the Board, directly or indirectly, (A)
knowingly engage or be interested in (as owner, partner,
stockholder, employee, director, officer, agent,
consultant or otherwise), with or without compensation,
any business in the United States and Canada which is in
competition with any line of business actively being
conducted on the Date of Termination by the Company or
any of its subsidiaries, and (B) hire any person who was
employed by the Company or any of its subsidiaries or
affiliates (other than persons employed in a clerical or
other non-professional position) within the six-month
period preceding the date of such hiring, or solicit,
entice, persuade or induce any person or entity doing
business with the Company and its subsidiaries and
affiliates, to terminate such relationship or to refrain
from extending or renewing the same. Nothing herein,
however, will prohibit the Executive from acquiring or
holding not more than one percent of any class of
publicly traded securities of any such business; provided
that such securities entitle the Executive to no more
than one percent of the total outstanding votes entitled
to be cast by security holders of such business in
matters on which such security holders are entitled to
vote.
9. DISPUTE RESOLUTION; ATTORNEYS' FEES. All disputes
arising under or related to the employment of the
Executive or the provisions of this agreement shall be
settled by arbitration under the rules of the American
Arbitration Association then in effect, such arbitration
to be held in Morristown, New Jersey, as the sole and
exclusive remedy of either party and judgement on any
arbitration award may be entered in any court of
competent jurisdiction. The Company agrees to pay, as
incurred, to the fullest extent permitted by law, all
legal fees and expenses that the Executive may reasonably
incur as a result of any contest (regardless of the
outcome) by the Company, the Executive or others of the
validity or enforceability of or liability under, or
otherwise involving, any provision of this Agreement,
together with interest on any delayed payment at the
applicable federal rate provided for in Section
7872(f)(2)(A) of the Code. The Company shall also pay
all reasonable legal fees and expenses incurred by the
Executive in connection with the preparation and
negotiation of this Agreement.
10. SUCCESSORS. (a) This Agreement is personal to
the Executive and, without the prior written consent of
the Company, shall not be assignable by the Executive
otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit
of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and
assigns.
(c) The Company shall require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would have
been required to perform it if no such succession had
taken place. As used in this Agreement, the "Company"
shall mean both the Company as defined above and any such
successor that assumes and agrees to perform this
Agreement, by operation of law or otherwise.
11. MISCELLANEOUS. (a) This Agreement shall be
governed by, and construed in accordance with, the laws
of the State of New Jersey, without reference to
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be
amended or modified except by a written agreement
executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under
this Agreement shall be in writing and shall be given by
hand delivery to the other party or by registered or
certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
c/o Honeywell International Inc.
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx
If to the Company:
Honeywell International Inc.
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx
Attention: General Counsel
or to such other address as either party furnishes to the
other in writing in accordance with this paragraph (b) of
Section 11. Notices and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity
or enforceability of any other provision of this
Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining
portion of such provision, together with all other provi
sions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the
fullest extent consistent with law.
(d) Notwithstanding any other provision of
this Agreement, the Company may withhold from amounts
payable under this Agreement all federal, state, local
and foreign taxes that are required to be withheld by
applicable laws or regulations.
(e) The Executive's or the Company's failure
to insist upon strict compliance with any provisions of,
or to assert any right under, this Agreement (including,
without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to
paragraph (c) of Section 4 of this Agreement) shall not
be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge
that, as of the Effective Time, this Agreement supersedes
(i) the change in control letter agreement between the
Executive and Honeywell, dated December 19, 1994, and
(ii) any other agreement between them concerning the
subject matter hereof and that, following the Effective
Time, no such agreement shall be of any further force or
effect.
(g) The rights and benefits of the Executive
under this Agreement may not be anticipated, assigned,
alienated or subject to attachment, garnishment, levy,
execution or other legal or equitable process except as
required by law. Any attempt by the Executive to
anticipate, alienate, assign, sell, transfer, pledge,
encum-ber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive
in the event of insolvency or bankruptcy.
(h) This Agreement may be executed in several
counterparts, each of which shall be deemed an original,
and said counterparts shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, the Executive has hereunto
set the Executive's hand and, pursuant to the
authorization of its Board, the Company has caused this
Agreement to be executed in its name on its behalf, all
as of the day and year first above written.
[Seal] HONEYWELL INTERNATIONAL INC.
Attest:
/s/ Xxxxx X. Xxxxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
_______________________ __________________________
Xxxxxx X. Xxxxxxx
Director and Chairman of the
Management Development and
Compensation Committee
/s/ Xxxxxxx X. Xxxxxxxxxx
_________________________________
Xxxxxxx X. Xxxxxxxxxx
APPENDIX A
Consolidated Earnings Per Share Growth
______________________________________
Calendar Year Growth in Consolidated EPS
_____________ __________________________
2000 vs. 1999 20%
2001 vs. 2000 17%
2002 vs. 2001 16%
Cumulative Consolidated Earnings Per Share Growth
_________________________________________________
Cumulative Consolidated Earnings Per Share over the three-
year calendar period commencing January 1, 2000 and
ending December 31, 2002 must be at least 53% greater
than the Consolidated Earnings Per Share for calendar
year 1999.
APPENDIX B
Calendar Year Target Operating Margin
_____________ _______________________
2000 15%
2001 16%
2002 17%
APPENDIX C
Annual Pay
__________
1999 $2,097,552.96*
1998 2,075,121.54
1997 1,702,308.20
_____________
$5,874,982.70
/ 3
_______
Final Average Earnings* $1,958,327.57
_______________________________
__________________________________
* 1999 Pay assumes (1) a change in salary rate (to
$1.5 million), effective for the last four pay
periods of 1999 and (2) a 1999 bonus of $1 million.
Actual 1999 Pay and Final Average Earnings as of
12/31/99 will be adjusted to reflect actual 1999
salary and bonus.
