Exhibit 10.1
Textron Logo [textronlogo.jpg]
 

Lewis B. Campbell
Chairman, President and Chief Executive Officer
Textron Inc.
 
40 Westminster St.
Providence, RI 02903
Tel: (401) 457-2322
Fax: (401) 457-3682
lcampbell@textron.com

 

 
June 26, 2008

Scott C. Donnelly
6450 Given Road
Cincinnati, Ohio 45243

Dear Scott:

I am pleased to offer you the position of Executive Vice President and Chief
Operating Officer of Textron Inc., reporting directly to me.  The Board and I
believe you have the personal and professional qualifications to make
significant contributions to the continued success of Textron and that you will
be an excellent leader of the organization as we address the challenges and
opportunities facing us.

As Executive Vice President and Chief Operating Officer, you 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 Textron’s By-laws and its organizational structure.

The main features of your compensation package, as approved by the Organization
and Compensation Committee of the Board, are summarized below:
 
·  
Base salary of $850,000 per year.

 
·  
An annual incentive award for 2008 (payable in March 2009) under Textron’s
annual incentive plan, in an amount determined by the Organization and
Compensation Committee by applying the 2008 performance goals and award levels
for executive officers to your base salary on a non-prorated basis; but in no
event shall your annual incentive award for 2008 be less than $1,320,000.

 
·  
Target awards under Textron’s annual incentive plan for 2009 and subsequent
years having a “target” value of at least 90% of base salary, payable upon the
attainment of any performance goals established for the year by the Organization
and Compensation Committee.  Actual payouts may vary from zero to 200% of your
target award each year based on the Organization and Compensation Committee’s
determination that Textron has attained these performance goals.  Payouts are
made within the first 2½ months after the end of the performance period.

 
·  
A long-term incentive award for 2009 with a value of $3,500,000, and long-term
incentive awards for subsequent years as determined by the Organization and
Compensation Committee as part of its review of senior management
compensation.  Long-term incentive awards will consist of performance shares or
performance share units, restricted stock or restricted stock units, stock
options, or other equity awards in proportions and subject to vesting
requirements and other terms and conditions determined by the Organization and
Compensation Committee.  Each component of your 2009 award will be in the same
proportions as awarded to me.  At present, awards of restricted stock and
restricted stock units include dividend equivalents paid currently in cash.

 

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Scott C. Donnelly
June 26, 2008
Page 2
 
·  
Effective on the later of July 1, 2008, and three business days after your first
day of employment with Textron, three pro-rata awards of performance share units
for the award cycles ending in 2008, 2009, and 2010, based on the time remaining
within each performance cycle, with a combined value of $2,100,000.  The
performance share units will be payable upon the achievement of any performance
goals established for the award cycle by the Organization and Compensation
Committee.  The award for 2008 also will be subject to a requirement that you
not voluntarily terminate your employment with Textron before the first
anniversary of the grant date, and will be payable after you satisfy this
minimum vesting requirement.  This minimum vesting requirement is mandated by
Textron’s 2007 Long-Term Incentive Plan (LTIP), as approved by shareholders.

 
·  
Effective on the later of July 1, 2008, and three business days after your first
day of employment with Textron, an initial award of nonqualified stock options
with a value of $2,510,000 (determined using standard Towers Perrin
methodology), having a 10-year term and an exercise price equal to the fair
market value of Textron stock on the grant date, and to become exercisable 20%
on first business day of the month on or after the anniversary of the grant date
in each year from 2010 through 2014, provided that you are still employed by
Textron on each vesting date.  Because the 2007 LTIP limits annual individual
grants to 200,000 stock options in any year, your stock option grant will be for
a maximum of 200,000 shares.  Any additional amount necessary to reach the
$2,510,000 target value will be paid in cash within 30 days after your first day
of employment with Textron.

 
·  
A nonqualified pension benefit determined using the benefit formula under the
Textron Master Retirement Plan (but without regard to the limits on compensation
and benefits imposed by the Internal Revenue Code), taking into account your
service with both General Electric and Textron, and using the definition of
pensionable compensation and final average compensation in the Textron Spillover
Pension Plan.  This nonqualified pension benefit will become 100% vested upon
the earlier of your completion of ten years of service with Textron and your
attainment of age 62 while employed by Textron, and will be reduced by the
combined value of any benefit you are eligible to receive under (1) a
tax-qualified defined benefit plan maintained by General Electric, (2) a
tax-qualified defined benefit plan maintained by Textron (before any reduction
in your tax-qualified defined benefit to reflect an offset for your account
under the Textron Retirement Account Plan), and (3) the Textron Spillover
Pension Plan (or any successor nonqualified defined benefit plan maintained by
Textron).  The forms of payment and other terms of your nonqualified pension
benefit will be as determined by the Board and reflected in a separate document
or an appendix to the Textron Spillover Pension Plan.

 
·  
Eligibility to participate in the Deferred Income Plan for Textron Executives,
or any successor elective deferred compensation plan offered to Textron’s senior
executives.  You would participate in the Deferred Income Plan as a “Schedule A”
participant, which is the participation level that applies to Textron’s other
senior executives.  The Deferred Income Plan currently provides a matching
contribution equal to 10% of any elective deferred income (not including
deferrals of base salary) that a Schedule A participant allocates to the Textron
stock unit account in the plan.  You would be eligible to receive this matching
contribution to the same extent as other Schedule A participants.

 
·  
Eligibility to participate in Textron’s health, disability, life insurance,
annual physical, and other welfare benefit programs at the same level as
Textron’s other senior executives.

 
·  
Eligibility for four weeks of paid vacation, and for relocation benefits
consistent with (and subject to the same tax treatment as) the benefits under
Textron’s relocation policy for senior executives.

 
In recognition of the substantial long-term incentive awards you will forfeit
when you leave your current position with General Electric, the Organization and
Compensation Committee has approved the following in addition to the
compensation described above:
 
·  
A cash payment of $4,100,000, payable in two installments.  The first
installment of $2,100,000 is to be paid no later than September 30, 2008.  The
remaining balance of

 
 

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Scott C. Donnelly
June 26, 2008
Page 3 
 
 
$2,000,000 is to be paid no later than February 28, 2009, provided that you are
still employed by Textron on December 31, 2008.

 
·  
Effective on the later of July 1, 2008, and three business days after your first
day of employment with Textron, an award of restricted stock units with a value
of $7,500,000, with 75% of the units vesting ratably on the first business day
of the month on or after the anniversary of the grant date in each of 2009,
2010, and 2011, and with the remaining 25% of the units vesting ratably on the
first business day of the month on or after the anniversary of the grant date in
each of 2012, 2013, and 2016; provided that you are, in each case, still
employed by Textron on the vesting date.  The award will be paid to you in
shares of Textron stock within 2½ months after the restricted stock units
vest.  You will be eligible to receive dividend equivalents paid currently in
cash on the entire award.

 
All equity awards described in this letter will be made under the Textron Inc.
2007 Long-Term Incentive Plan (or under a successor plan), and will be subject
to the terms and conditions of the plan and award agreement under which they are
granted.  Where the letter specifies a value for an award, the number of shares
(or equivalent cash) necessary to provide the specified value will be determined
by Towers Perrin, the independent compensation consultant to the Organization
and Compensation Committee (or any successor independent compensation consultant
to the Committee), using its standard methodology for valuing equity awards.

I am confident that you will have a long and successful career with
Textron.  However, in the event that Textron should terminate your employment
involuntarily (without Cause), or in the event that you should terminate for
Good Reason, you would be entitled to the separation benefits described in
Appendix A, which are the same as the separation benefits provided under my
employment agreement on the date of this letter.

For purposes of this letter, including determining your entitlement to
separation benefits, the terms “Cause,” “Good Reason,” and “Change in Control”
have the meanings set forth in Appendix B.  All separation benefits (other than
those required by law or vested before your separation) will be subject to your
signing a release of claims reasonably acceptable to Textron, an agreement to
cooperate in any proceedings relating to matters in which you were involved
before your separation, and an agreement to abide by the same covenants
(non-competition, non-solicitation, maintaining confidentiality, etc.) that
appear in my employment agreement on the date of this letter.

You will be covered by the indemnification provisions of Textron’s By-Laws to
the same extent as Textron’s other senior officers.  Textron will cover you
under directors and officers liability insurance for bona fide claims based on
your actions or failure to act in your capacity as a Textron officer in the same
amount and to the same extent as Textron covers its other officers and
directors.

If you accept this offer of employment with Textron, Textron agrees to pay your
reasonable legal fees and costs (before tax) associated with your reviewing the
terms of this offer.

All of the payments and benefits described in this letter are subject to
applicable tax withholding, to the terms and conditions of the Textron plans
under which they are provided (as amended from time to time), and to the
requirements of applicable law.  The dollar amounts and values described in this
letter are gross amounts, before any applicable tax or tax withholding.

This offer of at-will employment is subject to Textron’s normal pre-employment
requirements, which include verification of employment and a mandatory drug
test.  The terms of the offer will be governed by the laws of Delaware.  This
offer remains in effect until August 1, 2008. We anticipate that you will start
work on or before August 1, 2008.
 

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Scott C. Donnelly
June 26, 2008
Page 4

I am pleased to offer you this opportunity to join the Textron team and look
forward to hearing from you soon.  I assure you of a very warm welcome to
Textron.

Sincerely,

/s/ Lewis B. Campbell  
Date:
  June 30, 2008
Lewis B. Campbell
     

I have read the foregoing offer of at-will employment.  I understand that this
offer is the complete agreement between me and Textron concerning the terms of
my employment, and that it replaces any prior agreements or understandings
between me and Textron or offers or promises made by Textron.  I agree with, and
accept, this offer of employment subject to the terms and conditions detailed in
this letter and the attachments.

Signed:
/s/ Scott C. Donnelly  
Date:
  June 26, 2008  
Scott C. Donnelly
     

 
 

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Textron Logo [textronlogo.jpg]

 
APPENDIX A
 
SEPARATION BENEFITS

The separation benefits referred to in your offer letter are listed in this
appendix.  “Regular Separation Benefits” are available if your involuntary
termination (not for Cause) or termination for Good Reason occurs at any time
other than the Change in Control period described in the following
sentence.  “Change in Control Separation Benefits” are available if your
involuntary termination (not for Cause) or termination for Good Reason occurs
during the period beginning within 180 days before a Change in Control and
ending on the second anniversary of the Change in Control.  In all cases, your
“separation” means your separation from service within the meaning of section
409A of the Internal Revenue Code.

All of your separation benefits shall be paid at the time and in the form
specified for the corresponding benefit in the employment agreement between
Textron Inc. and Lewis B. Campbell dated February 26, 2008, which is the version
of my employment agreement in effect on the date of this letter.

You are not entitled to receive the separation benefits described in this
appendix upon your death while employed by Textron, your total disability, or
your voluntary or mandatory retirement at or after reaching age 65.  If your
termination occurs for any of these reasons, Textron will pay you (or your
designated beneficiary in the event of your death) any compensation you have
earned but have not yet received at the time of your death, disability, or
retirement, in accordance with Textron’s normal payroll practices and the terms
of any benefit plan or program in which you participate.

In addition to the separation benefits summarized below, in the event that you
become entitled to payments or benefits that would constitute “parachute
payments” within the meaning of section 280G(b)(2) of the Internal Revenue Code,
and the value of the parachute payments exceeds 110% of an amount equal to 2.99
times your “base amount” (within the meaning of section 280G(b)(3) of the
Internal Revenue Code), you will be entitled to a gross up of any excise tax
imposed by section 4999 of the Internal Revenue Code on your parachute payments
(and any excise, income, or payroll tax imposed on the initial gross-up
payment), calculated and paid as provided in Exhibit A of my employment
agreement as in effect on the date of this letter.  If the value of your
parachute payments does not exceed 110% of an amount equal to 2.99 times your
“base amount,” your parachute payments will be reduced so that they are equal to
2.99 times your “base amount,” as provided in Exhibit A of my employment
agreement as in effect on the date of this letter.

Regular Separation Benefits
Change in Control Separation Benefits
Accrued obligations
Compensation previously earned but not yet paid, such as unpaid base salary,
unpaid amount of previous year’s annual incentive compensation, and amounts
accrued and vested under other benefit plans and programs.
Accrued obligations
Compensation previously earned but not yet paid, such as unpaid base salary,
unpaid amount of previous year’s annual incentive compensation, and amounts
accrued and vested under other benefit plans and programs.
 

 
 

 
 

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Regular Separation Benefits
Change in Control Separation Benefits
Pro-rata bonus
A pro-rata portion (based on days employed in the bonus year divided by 365) of
the annual bonus for the year of separation (to the extent that applicable
corporate performance goals are achieved).
Pro-rata bonus
A pro-rata portion (based on days employed in the bonus year divided by 365) of
the greater of (1) your target annual incentive compensation for the year of
separation and (2) your actual incentive compensation award for the year ending
before the earlier of your separation and the change in control.
 
Severance pay
Severance pay equal to two times the sum of (1) your annual base salary and (2)
the greater of (a) your target annual incentive compensation for the year of
your separation and (b) the average of your actual incentive compensation awards
for the three most recent years.
Severance pay
Severance pay equal to three times the sum of (1) your highest base salary in
effect at any time before your separation, and (2) the greater of (a) your
target annual incentive compensation for the year of your separation and (b) the
average of your actual incentive compensation awards for the three years ending
before the earlier of your separation and the change in control.
 
Insurance coverage
To the extent eligible at separation, continued participation, at no greater
cost (before tax) than you paid as an employee, in Textron’s accidental death
and dismemberment coverage and dependent life insurance coverage.
 
Reimbursement for the cost (before tax) of purchasing the level of company-paid
term life insurance and long-term disability insurance coverage you received at
your separation.
 
The continued insurance coverage or reimbursement described in this section will
end two years after your separation (or, if earlier, when you become eligible
for comparable or better benefits under the plan of a successor employer).
Insurance coverage
To the extent eligible at your separation or the change in control, continued
participation, at no greater cost (before tax) than you paid as an employee, in
Textron’s accidental death and dismemberment coverage and dependent life
insurance coverage.
 
Reimbursement for the cost (before tax) of purchasing the level of company-paid
term life insurance and long-term disability insurance coverage you received at
the earlier of your separation and the change in control.
 
The continued insurance coverage or reimbursement described in this section will
end three years after your separation (or, if earlier, when you become eligible
for comparable or better benefits under the plan of a successor employer).
 
Additional pension credit
2½ additional years of age, service, and compensation credit for benefit
computation purposes, and 2½ additional years of age credit for purposes of
determining eligibility to receive benefits, under any nonqualified defined
benefit pension plan in which you participate at your separation.
 
Additional pension credit
Full vesting and 3 additional years of age, service, and compensation credit for
benefit computation purposes under any nonqualified defined benefit pension plan
in which you participate at your separation.

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 Regular Separation Benefits
 Change in Control Separation Benefits
Contribution replacement
2 times the maximum annual Textron contribution or match to any defined
contribution plan in which you participate at your separation.
 
Contribution replacement
3 times the maximum annual Textron contribution or match to any defined
contribution plan in which you participate at your separation.
Stock option vesting
Immediate full vesting of any outstanding stock options that would have vested
if you had remained employed for 2 years after your separation.
 
Equity award vesting
Immediate full vesting of any outstanding stock options, restricted stock units,
and other equity awards.
Pro-rata payment of performance share units
Subject to the provisions of the 2007 LTIP or successor plan, a pro-rata portion
(based on days employed in the performance period divided by total days in the
performance period) of any performance share units outstanding at your
separation (to the extent that applicable corporate performance goals are
achieved). In determining the pro-rata portion of your initial performance share
unit awards granted for the award cycles ending in 2008, 2009, and 2010, the
number of days constituting the performance period will be measured from the
grant date to the last day of the applicable performance period.
 
Full payment of performance share units
Full vesting and payment of outstanding performance share units, based on actual
performance through the change in control and assuming target performance after
the change in control.
Vesting of deferred compensation
Immediate full vesting of your accounts under Textron’s Deferred Income Plan.
Vesting of deferred compensation
[No provision in employment agreement. However, Textron’s Deferred Income Plan
currently provides for full vesting upon a change in control.]
 
 
Outplacement services
Outplacement services at a level commensurate with your position, including
office and secretary, for 1 year after your separation (or, if earlier, until
you commence a new full-time job).
 

 

 

 
 

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APPENDIX B
 
DEFINITIONS
 

TERMINATION FOR CAUSE

The executive may be terminated immediately upon written notice by Textron to
the executive of a termination for Cause, provided such notice is given within
ninety (90) days after the discovery by the Board of the Cause event and has
been approved by at least two-thirds of the Board at a meeting at which the
Executive and his counsel had the right to appear and address such meeting after
receiving at least five (5) business days written notice of the meeting and
reasonable detail of the facts and circumstances claimed to provide a basis for
such termination.  The term "Cause" shall mean, for purposes of this letter: (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 Textron; (ii) any willful misconduct by the
executive with regard to Textron, its business, assets or employees that has, or
was intended to have, a material adverse impact (economic or otherwise) on
Textron; (iii) any material, willful and knowing violation by the executive of
(x) Textron's Business Conduct Guidelines, or (y) any of his fiduciary duties to
Textron which in either case has, or was intended to have, a material adverse
impact (economic or otherwise) on Textron; (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 Textron; (v) the executive's
willful failure to attempt to perform his duties 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 Textron specifying the details thereof; or (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)).  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
Textron.  Reference in this paragraph to Textron shall also include direct and
indirect subsidiaries of Textron, and materiality and material adverse impact
shall be measured based on the action or inaction and the impact upon, and not
the size of, Textron taken as a whole, provided that after a change in control,
the size of Textron, taken as a whole, shall be a relevant factor in determining
materiality and material adverse impact.

TERMINATION FOR GOOD REASON

The executive may terminate for Good Reason upon twenty (20) days written notice
by the executive to Textron 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
letter, without the executive's express written consent, the occurrence of any
one or more of the following: (i) the assignment to the executive of duties
materially inconsistent with the executive's then authorities, duties,
responsibilities, and status (including offices, titles, and reporting
requirements), or any reduction in the executive's then title, position,
reporting lines or a material reduction (other than temporarily while disabled
or otherwise incapacitated) in his then status, authorities, duties, or
responsibilities including but not limited to holding his then position in
Textron while Textron is a subsidiary of another entity (holding stock in
Textron entitled to at least fifty percent (50%) of the vote for the election of
directors) and not holding the same or equivalent position in the ultimate
parent entity or, if then a director of Textron, failure to be nominated or
reelected as a director of Textron or removal as such; (ii) relocation of the
executive from the principal office of Textron (excluding reasonable travel on
Textron's business to an extent substantially consistent with
 

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the executive's business obligations) or relocation of the principal office of
Textron to a location which is at least fifty (50) miles from Textron's current
headquarters, provided, however, if the executive at the time of the relocation
is not located at the principal office, such relocation provision shall apply
based on his then location; (iii) a reduction by Textron in the executive's base
salary; (iv) a reduction in the executive's aggregate level of participation in
any of Textron'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 August 1, 2008, or, after a change in
control, participated immediately prior to the change in control; (v) the
failure of Textron to obtain and deliver to the executive a satisfactory written
agreement from any successor to Textron to assume and agree to perform the
obligations set forth in this letter; or (vi) any other material breach by
Textron of this letter.

CHANGE IN CONTROL
 
A Change in Control of Textron Inc. (the “Company”) shall be deemed to have
occurred as of the first day any one or more of the following conditions shall
have been satisfied:

 
(a)
Any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than the
Company, any trustee or other fiduciary holding Company common stock under an
employee benefit plan of the Company or a related company, or any corporation
which is owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of the Company's common
stock, is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of more than thirty percent (30%) of the then outstanding voting
stock;

 
(b)
During any period of two (2) consecutive years, individuals who at the beginning
of such period constitute the Board and any new director whose election by the
Board or nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the two year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board;

 
(c)
The consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or being converted into
voting securities of the surviving entity) more than fifty percent (50%) of the
combined voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or

 
(d)
The approval of the stockholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of its assets.