EX-10.15A 4 b38194txex10-15a.txt EMPLOYMENT AGREEMENT WITH THEODORE R. FRENCH 1 EXHIBIT 10.15A EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, is entered into as of the 21st day of December, 2000 by and between Textron Inc. (the "Company"), a Delaware corporation having its principal office at 40 Westminster Street, Providence, Rhode Island 02903 and Theodore R. French residing at 611 East Woodland Road, Lake Forest, Illinois, 60045 (the "Executive"). W I T N E S S E T H: WHEREAS, the Company desires to employ the Executive and the Executive is willing to be employed by the Company; and WHEREAS, the Company and the Executive desire to set forth the terms and conditions of such employment. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration, the adequacy and receipt of which is acknowledged, the parties hereto agree as follows: 1. TERM OF EMPLOYMENT The Company hereby agrees to employ the Executive and the Executive hereby accepts employment, in accordance with the terms and conditions set forth herein, for a term (the "Employment Term") commencing on the date hereof (the "Effective Date") and terminating, unless otherwise terminated earlier in accordance with Section 5 hereof, on the third anniversary of the Effective Date (the "Original Employment Term"), provided that the Employment Term shall be automatically extended, subject to earlier termination as provided in Section 5 hereof, for successive additional one (1) year periods (the "Additional Terms"), unless, at least ninety (90) days prior to the end of the Original Employment Term or the then Additional Term, the Company or the Executive has notified the other in writing that the Employment Term shall terminate at the end of the then current term. 2. POSITION AND RESPONSIBILITIES During the Employment Term, the Executive shall serve as the Executive Vice President and Chief Financial Officer of the Company or in such higher capacity as agreed by the Company and the Executive, and shall be a member of the Management Committee and the Executive Leadership Team or any successor body thereto ("ELT"). The Executive shall report exclusively to the Chief Executive Officer and the Board of Directors of the Company (the "Board"). The Executive shall, to the extent appointed or elected, serve on the Board as a director and as a member of any committee of the Board, in each case, without additional compensation. The Executive shall, to the extent appointed or elected, serve as a director or as a member of any committee of the board (or the equivalent bodies in a non-corporate subsidiary or affiliate) of any of the Company's subsidiaries or affiliates and as an officer or employee (in a 2 capacity commensurate with his position with the Company) of any such subsidiaries or affiliates, in all cases, without additional compensation or benefits, and any compensation paid to the Executive, or benefits provided to the Executive, in such capacities shall be a credit with regard to the amounts due hereunder from the Company. The Executive shall have duties, authorities and responsibilities generally commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized companies, subject to the By-laws and organizational structure of the Company. The Executive shall devote substantially all of his business time, attention and energies to the performance of his duties hereunder, provided the foregoing will not prevent the Executive from participating in charitable, community or industry affairs, from managing his and his family's personal passive investments, and (with the consent of the Chief Executive Officer or the Organization and Compensation Committee (or its successor) of the Board (the "O&C Committee"), which consent will not be unreasonably withheld, conditioned or delayed) serving on the board of directors of other companies, provided that these activities do not materially interfere with the performance of his duties hereunder or create a potential business conflict or the appearance thereof. The Executive may retain any compensation or benefits received as a result of consented to service as a director of entities not related to the Company. The Executive may perform his duties hereunder, when practical, at his office in Illinois or at such other location where Executive may reside in the future, provided the performance of his duties at a location other than the Company's headquarters does not materially interfere with Executive's performance of duties hereunder, as determined in good faith by the Chief Executive Officer. 3. COMPENSATION AND BENEFITS During the Employment Term, the Company shall pay and provide the Executive the following: 3.1 BASE SALARY. The Company shall pay the Executive an initial base salary (the "Base Salary") at a rate of $550,000. Base Salary shall be paid to the Executive in accordance with the Company's normal payroll practices for executives. Base Salary shall be reviewed at least annually by the O&C Committee (or as otherwise designated by the Board) to ascertain whether, in the judgment of the reviewing committee, such Base Salary should be increased. If so increased, Base Salary shall not be thereafter decreased and shall thereafter, as increased, be the Base Salary hereunder. 3.2 ANNUAL BONUS. The Company shall provide the Executive with the opportunity to earn an annual cash bonus under the Company's current annual incentive compensation plan for executives or a replacement plan therefor at a level commensurate with his position, provided, however, that the minimum annual target award payable upon the achievement of reasonably attainable objective performance goals shall be at least sixty percent (60%) of Base Salary, with a maximum payment of two hundred percent (200%) of Executive's target. Executive shall receive a guaranteed minimum 2001 annual bonus of $330,000, payable in 2002 in accordance with the provisions of the Company's annual incentive compensation plan. For (a) 2001 and (b) each year thereafter, if members of the Management Committee are eligible therefor, the Executive will have the opportunity to earn an additional cash bonus under the 2 3 Textron Quality Management ("TQM") bonus program of up to fifty percent (50%) of his annual target incentive. 3.3 HIRING BONUS. The Company shall pay the Executive a hiring bonus of $100,000 within five (5) days after the Effective Date. 3.4 LONG-TERM INCENTIVES. The Company shall provide the Executive the opportunity to earn long-term incentive awards under the current equity and cash based plans and programs or replacements therefore including the following awards: (a) OPTIONS. On the Effective Date the Company shall grant the Executive stock options under the Textron Long-Term Incentive Plan (the "Long-Term Incentive Plan") to purchase seventy thousand (70,000) shares of the Company's common stock at an exercise price equal to fair market value at the time of grant (the "Stock Options"). Fifty percent (50%) of the Stock Options shall vest on the one year anniversary of the Effective Date and the remainder shall vest on the second anniversary of the Effective Date, provided in each case the Executive is then employed by the Company. The Stock Options shall terminate on the tenth anniversary of the date of grant. The Stock Options will be granted pursuant to Non-Qualified Stock Option Award Agreements or Incentive Stock Option Award Agreements, as applicable and in each case shall be in all respects subject to the provisions of such agreements and the Company's Long-Term Incentive Plan except as otherwise expressly provided for herein. (b) PERFORMANCE SHARE UNITS. The Company shall grant the Executive performance share units ("PSUs") under the Company's Long-Term Incentive Plan as follows: six thousand (6,000) PSUs for a one (1) year award period ending December, 2001; seven thousand (7,000) PSUs for a two (2) year award period ending December, 2002; and fifteen thousand (15,000) PSUs for a three (3) year award period ending December, 2003. Commencing with award periods ending in 2002, Executive shall also have the opportunity to earn up to an additional one hundred percent (100%) of the value of the PSUs upon achieving outstanding performance under a special long-term incentive program (the "Special PSU Program"). (c) RESTRICTED STOCK. On the Effective Date the Company shall grant the Executive one hundred thousand (100,000) shares of the Company's common stock (which shall be dividend bearing), subject to the following vesting schedule: twenty thousand (20,000) shares shall vest annually commencing January 1, 2002 and each anniversary thereafter provided Executive is then employed by the Company (the "Restricted Stock"). 3.5 EMPLOYEE BENEFITS. (a) The Executive shall, to the extent eligible, be entitled to participate at a level commensurate with his position in all employee benefit welfare and retirement plans and programs, as well as equity plans, generally provided by the Company to its senior executives in accordance with the terms thereof as in effect from time to time. Such plans and programs currently include the Key Executive Benefits Program (including the Deferred Income Plan, the Supplemental Benefits Plan (the "SBP"), the Survivor Benefit Plan, an 3 4 executive automobile, club membership and financial planning and tax preparation), the Company's savings and pension plan and medical and life insurance. (b) The Executive shall also participate in the Supplemental Retirement Plan for Textron, Inc. Key Executives (the "SERP"). Under the SERP as currently in effect, the Executive shall be entitled to receive a single life annuity upon his retirement from the Company at or after his reaching age sixty-five (65) equal to fifty percent (50%) of his highest consecutive five (5) year average compensation. A reduced benefit is available if the Executive retires from the Company at or after age sixty (60) and prior to age 65. The cash value of the PSUs actually paid under the Long-Term Incentive Plan (but not under the Special PSU Program) shall be treated as compensation in the year paid for purposes of calculating the Executive's SERP benefit. The SERP benefit shall be reduced by any amounts payable to Executive under any other Company or prior employer defined benefit pension arrangement. 3.6 VACATION. The Executive shall be entitled to paid vacation in accordance with the standard written policies of the Company with regard to vacations of executives, but in no event less than four (4) weeks per calendar year. 3.7 PERQUISITES. The Company shall provide to the Executive, at the Company's cost, all perquisites to which other senior executives of the Company are generally entitled to receive and such other perquisites which are suitable to the character of the Executive's position with the Company and adequate for the performance of his duties hereunder. To the extent legally permissible, the Company shall not treat such amounts as income to the Executive. The Executive shall also be entitled to the following special perquisites (the "Special Perquisites"): (a) USE OF COMPANY AIRCRAFT. The Company shall make good faith efforts to provide the Executive upon his reasonable request with use of a Company aircraft for the following travel: (i) commuting to and from the Executive's primary residence and the Company's headquarters or other facilities, (ii) business travel to perform the Executive's duties hereunder and (iii) personal travel with the Executive's immediate family, provided, however, that, the Executive must accompany his family unless the Executive's absence is otherwise approved by the Chief Executive Officer. If the Company aircraft is unavailable, the Company shall pay the cost of first-class commercial airline tickets for the Executive. To the extent any expenses under (i) above result in imputed income to the Executive, the Company shall fully gross-up reimbursement to the Executive such that the Executive has no after tax cost for such aircraft travel. All other personal travel will be charged to the Executive as imputed income in accordance with the Company's standard operating procedures. The parties recognize that in light of the Executive's position the use of the Company aircraft for personal and family travel is desirable for security reasons. (b) LIVING EXPENSES. The Company shall pay the Executive's living expenses in Providence, Rhode Island, through December 31, 2001. The expenses must be approved by the Chief Executive Officer (which approval shall not be unreasonably withheld) and are limited to reasonable costs commensurate with those expenses customarily associated with a member of the ELT. To the extent the Company's payment of such living expenses result in imputed income to the 4 5 Executive, the Company shall fully gross-up the Executive such that the Executive has no after tax cost. (c) RELOCATION. The Company shall pay the Executive's one (1) time relocation costs, provided that the Company and Executive mutually agree, in good faith, that such relocation will allow the Executive to more efficiently and effectively perform his duties hereunder. The payment of such relocation expenses shall be made in accordance with the Company's relocation policy for comparable executive level expenditures and shall include a home purchase program and full gross-up for all taxes related to the relocation expenses regardless of whether any such expenses qualify for tax deductibility. 3.8 RIGHT TO CHANGE PLANS. The Company shall not be obligated by reason of this Section 3 to institute, maintain, or refrain from changing, amending, or discontinuing any benefit plan, program, or perquisite, so long as such changes are similarly applicable to senior executive employees generally, provided, however, the right to change such plans, programs or perquisites shall not in any way limit Executive's right to claim a Good Reason termination pursuant to Section 5(f)(v) as a result of any such change. Notwithstanding the foregoing, the Company shall not terminate, decrease or alter the Special Perquisites provided in Section 3.7(a) through (c) without Executive's prior written consent. 4. EXPENSES Upon submission of appropriate documentation, in accordance with its policies in effect from time to time, the Company shall pay for all ordinary and necessary expenses, in a reasonable amount, which the Executive incurs in performing his duties under this Agreement including travel, entertainment, professional dues and subscriptions, and all dues, fees, and expenses associated with membership in various professional, business, and civic associations and societies in which the Executive participates in accordance with the Company's policies in effect from time to time. 5. TERMINATION OF EMPLOYMENT The Executive's employment with the Company (including but not limited to any subsidiary or affiliate or the Company) and the Employment Term shall terminate upon the occurrence of the first of the following events: (a) Automatically on the date of the Executive's death. (b) Upon thirty (30) days written notice by the Company to the Executive of a termination due to Disability, provided such notice is delivered during the period of Disability. The term "Disability" shall mean, for purposes of this Agreement, the inability of the Executive, due to injury, illness, disease or bodily or mental infirmity, to engage in the performance of his material duties of employment with the Company as contemplated by Section 2 herein for a period of more than one hundred eighty (180) consecutive days or for a period that is reasonably expected to exist for a period of more than one hundred eighty (180) consecutive days, provided that interim returns to work of less than ten (10) consecutive business days in duration shall not be deemed to interfere with a determination of 5 6 consecutive absent days if the reason for absence before and after the interim return are the same. The existence or non-existence of a Disability shall be determined by a physician agreed upon in good faith by the Executive (or his representatives) and the Company. It is expressly understood that the Disability of the Executive for a period of one hundred eighty (180) consecutive days or less shall not constitute a failure by him to perform his duties hereunder and shall not be deemed a breach or default and the Executive shall receive full compensation for any such period of Disability or for any other temporary illness or incapacity during the term of this Agreement. (c) Immediately upon written notice by the Company to the Executive of a termination due to his retirement at or after the Executive's attainment of age sixty-five (65). (d) Immediately upon written notice by the Company to the Executive of a termination for Cause, provided such notice is given within ninety (90) days after the discovery by the Board or the Chief Executive Officer of the Cause event and has been approved by the O&C Committee at a meeting at which the Executive and his counsel had the right to appear and address such meeting after receiving at least ten (10) business days written notice of the meeting and reasonable detail of the facts and circumstances claimed to provide a basis for such termination. The term "Cause" shall mean, for purposes of this Agreement: (i) an act or acts of willful misrepresentation, fraud or willful dishonesty (other than good faith expense account disputes) by the Executive which in any case is intended to result in his or another person or entity's substantial personal enrichment at the expense of the Company; (ii) any willful misconduct by the Executive with regard to the Company, its business, assets or employees that has, or was intended to have, a material adverse impact (economic or otherwise) on the Company; (iii) any material, willful and knowing violation by the Executive of (x) the Company's Business Conduct Guidelines, or (y) any of his fiduciary duties to the Company which in either case has, or was intended to have, a material adverse impact (economic or otherwise) on the Company; (iv) the willful or reckless behavior of the Executive with regard to a matter of a material nature which has a material adverse impact (economic or otherwise) on the Company; (v) the Executive's willful failure to attempt to perform his duties under Section 2 hereof or his willful failure to attempt to follow the legal written direction of the Board, which in either case is not remedied within ten (10) days after receipt by the Executive of a written notice from the Company specifying the details thereof; (vi) the Executive's conviction of, or pleading nolo contendere or guilty to, a felony (other than (x) a traffic infraction or (y) vicarious liability solely as a result of his position provided the Executive did not have actual knowledge of the actions or inactions creating the violation of the law or the Executive relied in good faith on the advice of counsel with regard to the legality of such action or inaction (or the advice of other specifically qualified professionals as to the appropriate or proper action or inaction to take with regard to matters which are not matters of legal interpretation)); or (vii) any other material breach by the Executive of this Agreement that is not cured by the Executive within twenty (20) days after receipt by the Executive of a written notice from the Company of such breach specifying 6 7 the details thereof. No action or inaction should be deemed willful if not demonstrably willful and if taken or not taken by the Executive in good faith as not being adverse to the best interests of the Company. Reference in this paragraph (d) to the Company shall also include direct and indirect subsidiaries of the Company, and materiality and material adverse impact shall be measured based on the action or inaction and the impact upon, and not the size of, the Company taken as a whole, provided that after a Change in Control, the size of the Company taken as a whole, shall be a relevant factor in determining materiality and material adverse impact. (e) Upon written notice by the Company to the Executive of an involuntary termination without Cause. A notice by the Company of non-renewal of the Employment Term pursuant to Section 1 above shall be deemed an involuntary termination of the Executive by the Company without Cause as of the end of the Employment Term, but the Executive may terminate at any time after the receipt of such notice and shall be treated as if he was terminated without Cause as of such date. (f) Upon twenty (20) days written notice by the Executive to the Company of a termination for Good Reason (which notice sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination) unless the Good Reason event is cured within such twenty (20) day period. The term "Good Reason" shall mean, for purposes of this Agreement, without the Executive's express written consent, the occurrence of any one or more of the following: (i) the assignment to the Executive (other than temporarily while Disabled or otherwise incapacitated) of duties materially inconsistent with the Executive's then position, authorities, duties, responsibilities, and status (including offices, titles, and reporting requirements); (ii) any material reduction in the Executive's then title, position, reporting lines or a material reduction (other than temporarily while Disabled or otherwise incapacitated) in his then status, authority, duties or responsibilities (it being acknowledged by the parties that a material reduction will occur in the event of a transaction in which the Company is acquired directly or indirectly by another entity in such manner that the Company is no longer a "reporting company" under the Securities Exchange Act of 1934 based on its common stock being publicly traded, unless Executive becomes Chief Financial Officer of the ultimate parent entity) or, if then a director of the Company, failure to be nominated or reelected as a director of the Company or removal as such, provided, however, that it is not intended hereby that any incidental reallocation or reassignment of personnel or minor changes in the areas reporting to the Executive (so long as such changes are not core functions of Executive's responsibilities) shall constitute Good Reason for the Executive's resignation unless the cumulative result of such actions is to so modify the Executive's role so as to make it materially different from such role immediately prior to such actions; (iii) relocation (A) of the Executive from the principal office of the Company (excluding reasonable travel on the Company's business to an extent substantially consistent with the Executive's business obligations) or (B) of the principal office of the Company to a location which is at least fifty (50) miles from the Company's current headquarters, provided, however, in the case of clause (B), if 7 8 the Executive at the time of such relocation is not located at the principal office of the Company, such relocation provision shall apply based on his then location but shall not cover a relocation to the principal office prior to a Change in Control; (iv) a reduction by the Company in the Executive's Base Salary; (v) a reduction in the Executive's aggregate level of participation in any of the Company's short and/or long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or arrangements in which the Executive participated as of the Effective Date, or, after a Change in Control, participated immediately prior to the Change in Control that in either case has a disproportionate adverse aggregate impact on the Executive as compared to other similarly situated executives; (vi) Executive's voluntary termination of employment for any reason during the thirty (30) day period following the one (1) year anniversary of a Change in Control; (vii) the failure of the Company to obtain and deliver to the Executive a satisfactory written agreement from any successor to the Company to assume and agree to perform this Agreement; or (viii) any other material breach by the Company of this Agreement. (g) Upon written notice by the Executive to the Company of the Executive's voluntary termination of employment without Good Reason (which the Company may, in its sole discretion, make effective earlier than any termination date indicated in the Executive's notice). A notice by the Executive of non-renewal of the Employment Term pursuant to Section 1 above shall be deemed a voluntary termination by the Executive without Good Reason as of the end of the Employment Term. 6. CONSEQUENCES OF A TERMINATION OF EMPLOYMENT 6.1 TERMINATION DUE TO DEATH OR RETIREMENT. If the Employment Term ends on account of the Executive's termination due to death pursuant to Section 5(a) above or retirement pursuant to Section 5(c) above, the Executive (or the Executive's surviving spouse, or other beneficiary as so designated by the Executive during his lifetime, or to the Executive's estate, as appropriate) shall be entitled, in lieu of any other payments or benefits, to (i) payment promptly of any unpaid Base Salary, unpaid annual incentive compensation (for the preceding fiscal year) and any accrued vacation, (ii) reimbursement for any unreimbursed business expenses incurred prior to the date of termination, (iii) any amounts, benefits or fringes due under any equity, benefit or fringe plan, grant or program in accordance with the terms of said plan, grant or program but without duplication (collectively, the "Accrued Obligations") and (iv) a pro-rata portion of the annual incentive compensation for the year of Executive's termination calculated as follows: the product of (x) the Executive's prior year bonus (or, if a termination occurs prior to the determination of the 2001 year bonus, the target bonus for 2001), multiplied by (y) a fraction, the numerator of which is the number of days of the current fiscal year during which Executive was employed by the Company, and the denominator of which is 365, provided, however, Executive shall only receive such pro-rata bonus if other senior executives remaining employed by the Company through the end of such year receive an annual bonus with respect to such year (a "Pro Rata Bonus"). In addition, Executive shall be fully vested in the Stock Options and the Restricted Stock (the "Special Vesting") and the Company shall pay the COBRA premiums for eighteen (18) months (or if earlier, until termination of COBRA coverage for Executive's dependents ("COBRA Coverage"). 8 9 6.2 TERMINATION DUE TO DISABILITY. If the Employment Term ends as a result of Disability pursuant to Section 5(b) above, the Executive shall be entitled, in lieu of any other payments or benefits, to any Accrued Obligations and the following: (a) The Pro Rata Bonus. (b) The Special Vesting. (c) COBRA Coverage for Executive and his dependents. (d) The Executive shall be deemed to have satisfied the definition of "total disability" under the 1994 Long-Term Incentive Plan or the equivalent definition under any successor plan thereto. 6.3 INVOLUNTARY TERMINATION BY THE COMPANY WITHOUT CAUSE OR TERMINATION BY THE EXECUTIVE FOR GOOD REASON. If the Executive is involuntarily terminated by the Company without Cause in accordance with Section 5(e) above or the Executive terminates his employment for Good Reason in accordance with Section 5(f) above, the Executive shall be entitled, in lieu of any other payments or benefits, subject to Section 7(b) hereof, to any Accrued Obligations and the following: (a) A Pro Rata Bonus. (b) Continued payment off payroll for two (2) years (in approximately equal monthly installments) of an amount equal to two (2) times the sum of (i) the Executive's Base Salary and (ii) the higher of (x) the Executive's target incentive compensation established for the fiscal year in which the Executive's termination occurs or (y) a multiple thereof equal to the product of such target amount and the multiple of target earned by the Executive for the prior fiscal year (whether or not deferred). (c) To the extent eligible at such time or, if the Executive would be eligible with credit for an additional two (2) years of age and service credit, coverage under all applicable retiree health and other retiree welfare plans for the Executive and his dependents (including, if he is only eligible because of the extra age and service credit, an adjustment, to the extent necessary, to put the Executive in the same after-tax position as if he had been eligible for such coverage) and, if not eligible for continued health coverage under the retiree health plan, payment of the Executive's and Executive's eligible dependents' COBRA continuation health coverage premiums for the Company's health insurance plan that generally applies to senior executives for the two (2) year period following the date of termination or, if earlier, until the Executive and Executive's dependents cease to be eligible for such coverage, provided that, if COBRA coverage cannot be provided for the full period, any excess period shall be covered under (d) below (and further provided that, if such premiums are taxable to the Executive, an adjustment such that the Executive has no after tax cost for the providing of such COBRA coverage). 9 10 (d) To the extent eligible on the date of termination, continued participation, at no additional after tax cost to the Executive than the Executive would have as an employee, in all welfare plans (other than medical plans covered under (c) above), until two (2) years after the date of termination; provided, however, that in the event the Executive obtains other employment that offers substantially similar or improved benefits, as to any particular welfare plan, such continuation of coverage by the Company for such benefits under such plan shall immediately cease. To the extent such coverage cannot be provided under the Company's welfare benefit plans without jeopardizing the tax status of such plans, for underwriting reasons or because of the tax impact on the Executive, the Company shall pay the Executive an amount such that the Executive can purchase such benefits separately at no greater after tax cost to the Executive than the Executive would have had if the benefits were provided to the Executive as an employee. (e) Immediate full vesting of the Stock Options, the Restricted Stock and any outstanding stock options or other equity award that would vest within two (2) years after such termination of employment as if the Executive had continued employment for such two (2) year period, to the extent permitted under the plan or grant, or if such vesting is not permitted, a cash payment equal to the difference between the fair market value of the shares covered by the unvested options and the exercise price of such unvested options (the "Spread") on the date of termination, or, in the case of Restricted Stock and other non-option equity grants that would have vested if permitted, the fair market value of such Restricted Stock or other non-option equity as of the date of termination. In addition, to the extent the Stock Options or any other options are exercisable for less than two and three- quarters (2-3/4) years after the Executive's termination, the Executive also shall receive promptly following his termination a cash payment equal to the estimated cash value of such options for the lesser of two and three-quarters (2-3/4) years or the remainder of the respective terms of such options (calculated in accordance with the same Black-Scholes methodology used for the Company's then latest distributed proxy statement or, if not so used, for internal valuation of the last stock option grants made by the Company prior to the termination). The terms of the Executive's outstanding options are deemed to be modified to the extent required by this Section 6.3 (g). (f) Payment when it would otherwise be paid in accordance with the 1994 Long-Term Incentive Plan of any amount due with regard to performance share units outstanding on the date of termination to the extent permitted under such plan, plus, outside of such plan, when it would otherwise have been paid, an amount equal to the amount the Executive would have received with regard to any performance share units outstanding at the time of termination that could not be so paid. For purposes of calculating the foregoing amounts, all discretionary performance targets relating to the Executive's individual performance will be deemed to be fully achieved and the actual level of achievement of all financial performance targets will be determined as if the Executive continued to be employed through the end of the applicable measuring period. 10 11 (g) Immediate full vesting of the Executive's accounts under the Deferred Income Plan, and to the extent not permitted under such plan, a cash payment outside of the plan equal to the value of the amount that would have vested under the plan. (h) Continuation of participation for two (2) years in the Company's programs with regard to tax preparation assistance and financial planning assistance, club dues and automobile (but based on the automobile then being used and no new one), in accordance with the Company's programs in effect at the time of the termination. (i) To the extent that with regard to any particular item, the Executive would receive better treatment under the applicable Company plan or program, such better treatment shall apply. 6.4 TERMINATION BY THE COMPANY FOR CAUSE OR TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON. If the Executive is terminated by the Company for Cause or the Executive terminates his employment without Good Reason, the Executive shall be entitled to receive all Accrued Obligations. 7. NO MITIGATION/NO OFFSET/RELEASE (a) In the event of any termination of employment hereunder, the Executive shall be under no obligation to seek other employment and there shall be no offset against any amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that the Executive may obtain. The amounts payable hereunder shall not be subject to setoff, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others, except as specifically set forth in Section 9 hereof or upon obtaining by the Company of a final unappealable judgement against the Executive. (b) Any amounts payable and benefits or additional rights provided pursuant to Section 6.2, 6.3 or Section 8.1 beyond Accrued Obligations and amounts or rights due under law, and, in the case of Section 6.3 and Section 8.1 beyond the sum of any amounts due (without execution of a release) under the Company severance program then in effect, or, if greater, three (3) months Base Salary as severance, shall only be payable if the Executive delivers to the Company a release of all claims of the Executive (other than those specifically payable or providable hereunder on or upon the applicable type of termination and any rights of indemnification under the Company's organizational documents) with regard to the Company, its subsidiaries and related entities and their respective past or present officers, directors and employees in such form as reasonably requested by the Company (for clarification, the parties intend that (i) any such release not go beyond a release and the provisions necessary to make it effective but (ii) this parenthetical clause not be construed as substantively modifying the text of this subsection). (c) Upon any termination of employment, upon the request of the Company, the Executive shall deliver to the Company a resignation from all offices and directorships and fiduciary positions of the Executive in which the Executive is serving with, or at the request of, the Company or its subsidiaries, affiliates or benefit plans. 11 12 (d) The amounts and benefits provided under Sections 6 and 8 hereof are intended to be inclusive and not duplicative of the amounts and benefits due under the Company's employee benefit plans and programs to the extent they are duplicative. 8. CHANGE IN CONTROL 8.1 EMPLOYMENT TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL. In the event of a Qualifying Termination (as defined below) during the period commencing one-hundred eighty (180) days prior to the effective date of a Change in Control and terminating on the second anniversary of the effective date of a Change in Control (the "Change in Control Protection Period"), then in lieu of the benefits provided to the Executive under Section 6.3 of this Agreement, the Company shall pay the Executive the following amounts within (except as otherwise provided) thirty (30) business days following the Qualifying Termination (or, if later, the effective date of the Change in Control; in which case any amounts or benefits previously paid, pursuant to Section 6 shall be setoff against those under this Section 8) and provide the following benefits: (a) Any Accrued Obligations. (b) A lump-sum cash payment equal to three (3) times the highest rate of the Executive's Base Salary rate in effect at any time up to and including the date of the Executive's termination. (c) A lump-sum cash payment equal to the Prorated Portion of the greater of: (i) the Executive's target annual incentive compensation award established for the fiscal year during which the Executive's award termination occurs, or (ii) the Executive's earned annual incentive award for the fiscal year prior to the fiscal year in which the earlier of the Change in Control or the Qualifying Termination occurs (whether or not deferred). The "Prorated Portion" of the foregoing amount shall be determined by multiplying such amount by a fraction, the numerator of which is the number of days during the fiscal year of termination that the Executive is employed by the Company, and the denominator of which is, three hundred sixty-five (365). (d) A lump-sum cash payment equal to three (3) times the greater of: (i) the Executive's highest annual incentive compensation earned over the three (3) fiscal years ending prior to the earlier of the Change in Control or the Qualifying Termination (whether or not deferred); or (ii) the Executive's target incentive compensation established for the fiscal year in which the Executive's date of termination occurs. (e) To the extent the Executive is eligible, was eligible prior or after the Change in Control (or, if earlier, the Qualifying Termination) or if the Executive would be eligible with credit for an additional three (3) years of age and service credit, coverage under all applicable retiree health and other retiree welfare plans for the Executive and the Executive's eligible dependents (including an adjustment to the 12 13 extent necessary to put the Executive on the same after tax basis as if the Executive had been eligible for such coverage). (f) To the extent eligible prior or after the Change in Control (or, if earlier, the Qualifying Termination), continued participation, (coordinated with (e) above to the extent duplicative), at no additional after tax cost to the Executive than the Executive would have as an employee, in all welfare plans, until three (3) years after the date of termination, provided, however, that in the event the Executive obtains other employment that offers substantially similar or improved benefits, as to any particular welfare plan, such continuation of coverage by the Company for such similar or improved benefit under such plan shall immediately cease. To the extent such coverage cannot be provided under the Company's welfare benefit plans without jeopardizing the tax status of such plans, for underwriting reasons or because of the tax impact on the Executive, the Company shall pay the Executive an amount such that the Executive can purchase such benefits separately at no greater after tax cost to him than he would have had if the benefits were provided to him as an employee. (g) A lump-sum cash payment of the actuarial present value equivalent (as determined in accordance with the most favorable (to the Executive) overall actuarial assumptions and subsidies in any of the Company's tax-qualified or nonqualified type defined benefit pension plans in which the Executive then participates) of the accrued benefits accrued by the Executive as of the date of termination under the terms of any nonqualified defined benefit type retirement plan, including but not limited to, the Amended and Restated Supplemental Executive Retirement Plan for Textron Inc. Key Executives and the Supplemental Benefits Plan and assuming the benefit was fully vested without regard to any minimum age or service requirements. For this purpose, such benefits shall be calculated under the assumption that the Executive's employment continued following the date of termination for three (3) full years (i.e., three (3) additional years of age (including, but not limited to, for purposes of determining the actuarial present value), compensation and service credits shall be added). (h) Three (3) times the amount of the maximum Company contribution or match to any defined contribution type plan in which the Executive participates. (i) A lump-sum cash payment of the product of (i) the Interest Factor (as determined in the next sentence) multiplied by (ii) the Executive's entire account balance under the Deferred Income Plan (or any replacement therefor), plus an additional amount equal to three (3) times the match which the Company made for the Executive to such plan for the fiscal year ending immediately prior to the earlier of the Change in Control or the Qualifying Termination. The "Interest Factor" shall be equal to one (1) plus three (3) times the rate of earnings of the Executive's account under such plan for the fiscal year ending immediately prior to his termination. (j) Immediate full vesting of any outstanding stock options, performance share units and other equity awards (and lapse of any forfeiture provisions) to the extent 13 14 permitted under the plan or grant, or if full vesting is not permitted with regard to stock options, a cash payment equal to the difference between the fair market value of the shares covered by the unvested options and the exercise price of such unvested options on such unvested options on the date of termination (or, if later, the date of the Change in Control) or, in the case of Restricted Stock and other non-option equity grants that would have vested if permitted, the fair market value of such Restricted Stock or other non-option equity as of the date of termination. In addition, to the extent any stock options are exercisable for less than three (3) years after the Executive's termination (or, if less, the remainder of the respective terms of such options, including any termination of exercisability of all Company stock options in connection with the Change in Control or a merger related thereto), the Executive also shall receive, promptly following his termination, a cash payment equal to the estimated future value of such options for the lesser of three (3) years or the remainder of the respective terms of such options (calculated in accordance with the same Black-Scholes methodology used for the Company's then latest distributed proxy statement or, if not so used, for internal valuation of the last stock option grants made by the Company prior to the earlier of the Qualifying Termination or the Change in Control). (k) Outplacement services at a level commensurate with the Executive's position, including use of an executive office and secretary, for a period of one (1) year commencing on the date of termination but in no event extending beyond the date on which the Executive commences other full time employment. (l) Continuation of participation for three (3) additional years in the Company's programs with regard to tax preparation assistance and financial planning assistance, club dues and automobile (but based on the automobile then being used and no new one), in accordance with the Company's programs in effect at the time of the Change in Control. (m) To the extent that with regard to any particular item, the Executive would receive better treatment under the applicable Company plan or program, such better treatment shall apply. For purposes of this Section 8, a Qualifying Termination shall mean any termination of the Executive's employment (i) by the Company without Cause, or (ii) by the Executive for Good Reason. 8.2 DEFINITION OF "CHANGE IN CONTROL." A Change in Control of the Company shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied: (a) Any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than the Company, any trustee or other fiduciary holding Company common stock under an employee benefit plan of the Company or a related company, or any corporation which is owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the 14 15 Company's common stock, is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than thirty percent (30%) of the then outstanding voting stock; (b) During any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board; (c) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (d) The approval of the stockholders of the Company of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of its assets. 8.3 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive becomes entitled to payments and/or benefits which would constitute "parachute payments" within the meaning of Section 280G(b)(2) of the Code, the provisions of Exhibit A will apply. 9. NONCOMPETITION, CONFIDENTIALITY AND NONDISPARAGEMENT 9.1 AGREEMENT NOT TO COMPETE. (a) The Executive agrees that for a period of two (2) years after the termination of the Executive's employment (the "Non-Compete Period"), the Executive will not engage in Competition with the Company with the Listed Companies, including, but not limited to, (i) soliciting customers, business or orders for, or selling any products and services in, Competition with the Company for such Listed Companies or (ii) diverting, enticing, or otherwise taking away customers, business or orders of the Company, or attempting to do so, in either case in Competition with the Company for such Listed Companies. The Listed Companies are United Technologies Corporation, General Dynamics Corporation, Daniher Corporation, Emerson and Tyco International Ltd. The Listed Companies may not be amended or added to without the prior written consent of both parties hereto. (b) The Executive agrees that the restrictions contained in this Section 9 are necessary for the protection of the business and goodwill of the Company because of the trade secrets within the Executive's knowledge and are considered by the Executive to be reasonable for such purpose. 15 16 9.2 DEFINITIONS. (a) "Competition" shall mean engaging in, as an employee, director, partner, principal, shareholder, consultant, advisor, independent contractor or similar capacity, with the Listed Companies. Notwithstanding anything else in this Section 9, Competition shall not include: (i) holding five percent (5%) or less of an interest in the equity or debt of any publicly traded company, (ii) engaging in any activity with the prior written approval of the Chief Executive Officer or the O&C Committee, (iii) the providing of accounting/auditing services in an accounting firm that audits or provides services to Listed Companies, provided that the Executive does not personally represent such Listed Companies, or (iv) the employment by, or provision of services to, an investment banking firm or consulting firm that provides services to Listed Companies, provided that the Executive does not personally represent or provide services to such Listed Companies. (b) For purposes of this Section 9, "Company" shall mean the Company and its subsidiaries and affiliates. 9.3 AGREEMENT NOT TO ENGAGE IN CERTAIN SOLICITATION. The Executive agrees that the Executive will not, during the Executive's employment with the Company or during the two (2) year period thereafter, directly or indirectly, solicit or induce, or attempt to solicit or induce, any non-clerical employee(s), sales representative(s), agent(s), or consultant(s) of the Company to terminate such person's employment, representation or other association with the Company for the purpose of affiliating with any entity with which the Executive is associated ("Solicitation"). 9.4 CONFIDENTIAL INFORMATION. (a) The Executive specifically acknowledges that any trade secrets or confidential business and technical information of the Company or its vendors, suppliers or customers, whether reduced to writing, maintained on any form of electronic media, or maintained in mind or memory and whether compiled by the Executive or the Company (collectively, "Confidential Information"), derives independent economic value from not being readily known to or ascertainable by proper means by others; that reasonable efforts have been made by the Company to maintain the secrecy of such information; that such information is the sole property of the Company or its vendors, suppliers, or customers and that any retention, use or disclosure of such information by the Executive during the Employment Term (except in the course of performing duties and obligations of employment with the Company) or any time after termination thereof, shall constitute misappropriation of the trade secrets of the Company or its vendors, suppliers, or customers, provided that Confidential Information shall not include: (i) information that is at the time of disclosure public knowledge or generally known within the industry, (ii) information deemed in good faith by the Executive, while employed by the Company, desirable to disclose in the course of performing the Executive's duties, (iii) information the disclosure of which the Executive in good faith deems necessary in defense of the Executive's rights provided such disclosure by the 16 17 Executive is limited to only disclose as necessary for such purpose, or (iv) information disclosed by the Executive to comply with a court, or other lawful compulsory, order compelling him to do so, provided the Executive gives the Company prompt notice of the receipt of such order and the disclosure by the Executive is limited to only disclosure necessary for such purpose. (b) The Executive acknowledges that the Company from time to time may have agreements with other persons or with the United States Government, or agencies thereof, that impose obligations or restrictions on the Company regarding inventions made during the course of work under such agreements or regarding the confidential nature of such work. If the Executive's duties hereunder will require disclosures to be made to him subject to such obligations and restrictions, the Executive agrees to be bound by them. 9.5 SCOPE OF RESTRICTIONS. If, at the time of enforcement of this Section 9, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. 9.6 REMEDIES. (a) In the event of a material breach or threatened material breach of Section 9.1(a), Section 9.3, Section 9.4 or Section 9.10, the Company, in addition to its other remedies at law or in equity, shall be entitled to injunctive or other equitable relief in order to enforce or prevent any violations of the provisions of this Section 9. Except as specifically provided with regard to Listed Companies, the Company agrees that it will not assert to enjoin or otherwise limit the Executive's activities based on an argument of inevitable disclosure of confidential information. (b) Upon written request of the Executive, the Chief Executive Officer of the Company shall consider, in good faith, and within ten (10) days after receipt of the latter of (i) such written notice and (ii) any information reasonably requested in accordance with the last sentence of this subsection, notify the Executive in writing whether or not the Company will waive the limitation prohibiting the Executive from working for a Listed Company during the Non-Compete Period, provided, however, that if the Company does not reply within ten (10) days, the Company shall be deemed to have waived such limitation. The Executive shall promptly provide the Company with such information as it may reasonably request to evaluate whether or not it should waive such limitation. (c) In the event the Executive breaches Section 9.1(a), the Company may immediately cease payment to the Executive of all future amounts due under Section 6.3(b), as well as otherwise specifically provided in any other plan, grant or program. 17 18 9.7 UNIFORMITY. In no event shall any definitions of Competition or Solicitation (or a similar provision) as it applies to the Executive with regard to any plan of program or grant of the Company be interpreted to be any broader than as set forth in this Section 9. 9.8 DELIVERY OF DOCUMENTS. Upon termination of this Agreement or at any other time upon request by the Company, the Executive shall promptly deliver to the Company all records, files, memoranda, notes, designs, data, reports, price lists, customer lists, drawings, plans, computer programs, software, software documentation, sketches, laboratory and research notebooks and other documents (and all copies or reproductions of such materials in his possession or control) belonging to the Company. Notwithstanding the foregoing, the Executive may retain his rolodex and similar phone directories. 9.9 NONDISPARAGEMENT. (a) During the Employment Term and thereafter, the Executive shall not with willful intent to damage economically or as to reputation or vindictively disparage the Company, its subsidiaries or their past or present respective officers, directors or employees (the "Protected Group"), provided that the foregoing shall not apply to (i) actions or statements taken or made by the Executive while employed by the Company in good faith as fulfilling the Executive's duties with the Company or otherwise at the request of the Company, (ii) statements the Executive believes to be truthful that are made in compliance with legal process or governmental inquiry, (iii) as the Executive in good faith deems necessary to rebut any untrue or misleading public statements made about him or any other member of the Protected Group, (iv) statements made in good faith by the Executive to rebut untrue or misleading statements made about him or any other member of the Protected Group by any member of the Protected Group, and (v) normal commercial puffery in a competitive business situation. No member of the Protected Group shall be a third party beneficiary of this Section 9.9(a). (b) During the Employment Term and thereafter, neither the Company officially nor any then member of the Executive Leadership Team (or the equivalent) of the Company, as such term is currently used within the Company, shall with willful intent to damage the Executive economically or as to reputation or otherwise vindictively disparage the Executive, provided the foregoing shall not apply to (i) actions or statements taken or made in good faith within the Company in fulfilling duties with the Company, (ii) truthful statements made in compliance with legal process, governmental inquiry or as required by legal filing or disclosure requirements, (iii) as in good faith deemed necessary to rebut any untrue or misleading statements by the Executive as to any member of the Protected Group, or (iv) normal commercial puffery in a competitive business situation. (c) In the event of a material breach or threatened material breach of clauses (a) or (b) above, the Company or the Executive, as the case may be, in addition to its or the Executive's other remedies at law or in equity, shall be entitled to injunctive or other equitable relief in order to enforce or prevent any violations of this Section 9.9. 18 19 9.10 POOLING OF INTERESTS. If the Company is involved in any proposed business combination that is contemplated to be accounted for as a pooling of interests, the Executive agrees to cooperate with the reasonable requests of the Company with regard to the exercise of stock options, the sale of Company stock or other matters that could affect the ability of the combination to be accounted for as a pooling of interests. 10. LIABILITY INSURANCE AND INDEMNIFICATION The Company shall cover the Executive under directors and officers liability insurance both during and, while potential liability exists, after the Employment Term in the same amount and to the same extent, if any, as the Company covers its other officers and directors. 11. ASSIGNMENT 11.1 ASSIGNMENT BY THE COMPANY. This Agreement may and shall be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted for all purposes of the "Company" under the terms of this Agreement. As used in this Agreement, the term "successor" shall mean any person, firm, corporation or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets of the Company. Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all its obligations hereunder. Except as herein provided, this Agreement may not otherwise be assigned by the Company. 11.2 ASSIGNMENT BY THE EXECUTIVE. This Agreement is not assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, and administrators, successors, heirs, distributees, devisees, and legatees. If the Executive should die while any amounts payable to the Executive hereunder remain outstanding, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, in the absence of such designee, to the Executive's estate. 12. LEGAL REMEDIES 12.1 PAYMENT OF LEGAL FEES. The Company shall pay the Executive's reasonable legal fees and costs associated with entering into this Agreement. To the fullest extent permitted by law, the Company shall promptly pay upon submission of statements all legal and other professional fees, costs of litigation, prejudgment interest, and other expenses incurred in connection with any dispute arising hereunder; provided, however, the Company shall be reimbursed by the Executive for (i) the fees and expenses advanced in the event the Executive's claim is in a material manner in bad faith or frivolous and the arbitrator or court, as applicable, determines that the reimbursement of such fees and expenses is appropriate, or (ii) to the extent that the arbitrator or court, as appropriate, determines that such legal and other professional fees are clearly and demonstrably unreasonable. 12.2 ARBITRATION. All disputes and controversies arising under or in connection with this Agreement, other than the seeking of injunctive or other equitable relief pursuant to Section 9 hereof, shall be settled by arbitration conducted before a panel of three (3) arbitrators sitting in New York City, New York, or such other location agreed by the parties hereto, in accordance 19 20 with the rules for expedited resolution of commercial disputes of the American Arbitration Association then in effect. The determination of the majority of the arbitrators shall be final and binding on the parties. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. All expenses of such arbitration, including the fees and expenses of the counsel of the Executive, shall be borne by the Company and the Executive shall be entitled to reimbursement of his expenses as provided in Section 12.1 hereof. 12.3 NOTICE. Any notices, requests, demands, or other communications provided for by this Agreement shall be sufficient if in writing and if delivered personally, sent by telecopier, sent by an overnight service or sent by registered or certified mail. Notice to the Executive not delivered personally (or by telecopy where the Executive is known to be) shall be sent to the last address on the books of the Company, and notice to the Company not delivered personally (or by telecopy to the known personal telecopy of the person it is being sent to) shall be sent to it at its principal office. All notices to the Company shall be delivered to the Chief Executive Officer with a copy to the senior legal officer. Delivery shall be deemed to occur on the earlier of actual receipt or tender and rejection by the intended recipient. 12.4 CONTINUED PAYMENTS. In the event after a Change in Control either party files for arbitration to resolve any dispute as to whether a termination is for Cause or Good Reason, until such dispute is determined by the arbitrators, the Executive shall continue to be treated economically and benefit wise in the manner asserted by him in the arbitration effective as of the date of the filing of the arbitration, subject to the Executive promptly refunding any amounts paid to him, paying the cost of any benefits provided to him and paying to the Company the profits in any stock option or other equity awards exercised or otherwise realized by him during the pendency of the arbitration which he is ultimately held not to be entitled to; provided the arbitrators may terminate such payments and benefits in the event that they determine at any point that the Executive is intentionally delaying conclusion of the arbitration. 13. MISCELLANEOUS 13.1 ENTIRE AGREEMENT. This Agreement, except to the extent specifically provided otherwise herein, supersedes any prior agreements or understandings, oral or written, between the parties hereto or between the Executive and the Company, with respect to the subject matter hereof and constitutes the entire Agreement of the parties with respect to the subject matter hereof. To the extent any severance plan or program of the Company that would apply to the Executive is more generous to the Executive than the provisions hereof, the Executive shall be entitled to any additional payments or benefits which are not duplicative, but shall otherwise not be eligible for such plan or program. 13.2 MODIFICATION. This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended, nor any provision hereof waived, except by mutual agreement of the parties in a written instrument executed by the parties hereto or their legal representatives. 13.3 SEVERABILITY. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 20 21 13.4 COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 13.5 TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling. 13.6 BENEFICIARIES. The Executive may designate one or more persons or entities as the primary and/or contingent beneficiaries of any amounts to be received under this Agreement. Such designation must be in the form of a signed writing acceptable to the Board or the Board's designee. The Executive may make or change such designation at any time. 13.7 REPRESENTATION. The Executive represents that the Executive's employment by the Company and the performance by the Executive of his obligations under this Agreement do not, and shall not, breach any agreement that obligates him to keep in confidence any trade secrets or confidential or proprietary information of his or of any other party, to write or consult to any other party or to refrain from competing, directly or indirectly, with the business of any other party. The Executive shall not disclose to the Company, and the Company shall not request that the Executive disclose, any trade secrets or confidential or proprietary information of any other party. 13.8 CONSTRUCTION. No provision of this Agreement shall be interpreted or construed against any party because that party or its legal representative drafted that provision. The captions and headings of the Sections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. Unless the context of this Agreement clearly requires otherwise: (a) references to the plural include the singular, the singular the plural, and the part the whole, (b) references to one gender include all genders, (c) "or" has the inclusive meaning frequently identified with the phrase "and/or," (d) "including" has the inclusive meaning frequently identified with the phrase "including but not limited to" or "including without limitation," (e) references to "hereunder," "herein" or "hereof" relate to this Agreement as a whole, and (f) the terms "dollars" and "$" refer to United States dollars. Section, subsection, exhibit and schedule references are to this Agreement as originally executed unless otherwise specified. Any reference herein to any agreement, including this Agreement, shall be deemed to include such agreement as it may be modified, varied, amended or supplemented from time to time. Any reference herein to any statute, rule or regulation shall be deemed to include such statute, rule or regulation as it may be modified, varied, amended or supplemented from time to time. Any reference herein to any person shall be deemed to include the heirs, personal representatives, successors and permitted assigns of such person. 14. GOVERNING LAW The provisions of this Agreement shall be construed and enforced in accordance with the laws of the state of Delaware, without regard to any otherwise applicable principles of conflicts of laws. IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement, as of the day and year first above written. /s/ Theodore R. French ---------------------- THEODORE R. FRENCH TEXTRON INC. By: /s/ Terrence O'Donnell --------------------------------- Name: Terrence O'Donnell Title: Executive Vice President and General Counsel 21 22 EXHIBIT A PARACHUTE GROSS UP (a) In the event that the Executive shall become entitled to payments and/or benefits provided by this Agreement or any other amounts in the "nature of compensation" (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any person whose actions result in a change of ownership or effective control covered by Section 280G(b)(2) of the Code or any person affiliated with the Company or such person) as a result of such change in ownership or effective control (collectively the "Company Payments"), and such Company Payments will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (and any similar tax that may hereafter be imposed by any taxing authority) the Company shall pay to the Executive at the time specified in subsection (d) below: (i) an additional amount (the "Gross-up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Company Payments and any U.S. federal, state, and for local income or payroll tax upon the Gross-up Payment provided for by this paragraph (a), but before deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments, shall be equal to the Company Payments and (ii) an amount equal to the product of any deductions disallowed for federal, state or local income tax purposes because of the inclusion of the Gross-Up Payment in the Executive's adjusted gross income multiplied by the highest applicable marginal rate of federal, state or local income taxation, respectively, for the calendar year in which the Gross-Up Payment is to be made. (b) For purposes of determining whether any of the Company Payments and Gross-up Payments (collectively the "Total Payments") will be subject to the Excise Tax and the amount of such Excise Tax, (x) the Total Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "parachute payments" in excess of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless and except to the extent that, in the opinion of the Company's independent certified public accountants appointed prior to any change in ownership (as defined under Code Section 280G(b)(2)) or tax counsel selected by such accountants (the "Accountants") such Total Payments (in whole or in part) either do not constitute "parachute payments," represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the "base amount" or are otherwise not subject to the Excise Tax, and (y) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code. (c) For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to pay U.S. federal income taxes at the highest marginal rate of U.S. federal income taxation in the calendar year in which the Gross-up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive's residence for the calendar year in which the Company Payment is to be made, net of the maximum reduction in U.S. federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year. In the event that the Excise Tax is subsequently determined by the Accountants (or by the Internal Revenue Service or other taxing authority) to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, the Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the prior Gross-up Payment attributable to such 23 reduction (plus the portion of the Gross-up Payment attributable to the Excise Tax and U.S. federal, state and local income tax imposed on the portion of the Gross-up Payment being repaid by the Executive if such repayment results in a reduction in Excise Tax or a U.S. federal, state and local income tax deduction), plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any portion of the Gross-up Payment to be refunded to the Company has been paid to any U.S. federal, state and local tax authority, repayment thereof (and related amounts) shall not be required until actual refund or credit of such portion has been made to the Executive, and interest payable to the Company shall not exceed the interest received or credited to the Executive by such tax authority for the period it held such portion. The Executive and the Company shall mutually agree upon the course of action to be pursued (and the method of allocating the expense thereof) if the Executive's claim for refund or credit is denied. In the event that the Excise Tax is later determined by the Accountants (or the Internal Revenue Service or other taxing authority) to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of such excess (plus any interest or penalties payable with respect to such excess) at the time that the amount of such excess is finally determined. (d) The Gross-up Payment or portion thereof provided for in subsection (c) above shall be paid not later than the thirtieth (30th) day following an event occurring which subjects the Executive to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Accountants, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code), subject to further payments pursuant to subsection (c) hereof, as soon as the amount thereof can reasonably be determined, but in no event later than the ninetieth day after the occurrence of the event subjecting the Executive to the Excise Tax. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to the Executive, payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (e) In the event of any controversy with the Internal Revenue Service (or other taxing authority) with regard to the Excise Tax, the Executive shall permit the Company to control issues related to the Excise Tax (at its expense), provided that such issues do not potentially materially adversely affect the Executive, but the Executive shall control any other issues. In the event the issues are interrelated, the Executive and the Company shall in good faith cooperate so as not to jeopardize resolution of any such issues, but if the parties cannot agree the Executive shall make the final determination with regard to the issues. In the event of any conference with any taxing authority as to the Excise Tax or associated income taxes, the Executive shall permit the representative of the Company to accompany the Executive, and the Executive and the Executive's representative shall cooperate with the Company and its representative. 2 24 (f) The Company shall be responsible for all charges of the Accountants. (g) The Company and the Executive shall promptly deliver to each other copies of any written communications, and summaries of any verbal communications, with any taxing authority regarding the Excise Tax covered by this Exhibit A. 3