Exhibit 10.3
FORM OF EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between Honeywell International Inc., a
Delaware corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (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
(previously named "AlliedSignal Inc."), 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 Executives duties
and responsibilities hereunder not concurred in 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 secondary
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. 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 available 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 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
paragraphs (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 H. 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 of the Company in which Executive participates as of the date on
which Executive's employment terminates (which plan shall recognize salary and
bonus in computing benefits thereunder and shall permit 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 H) and (y) the Executive's "Final Average Earnings" (as defined in the H
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. 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 DISABILITY. 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 not
be effective unless it is accomplished in accordance with the following
procedures. 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 include 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 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 nonprofessional 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:
__________________
__________________
__________________
If to the Company:
Honeywell International Inc.
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▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
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 provisions 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 as of [ ] 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, encumber 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.
HONEYWELL INTERNATIONAL INC.
By: ___________________________
Title:
_______________________________
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APPENDIX A
Consolidated Earnings Per Share Growth
Calendar Year Growth in Consolidated EPS
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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
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2000 15%
2001 16%
2002 17%