exhibit10-4.htm


    Exhibit
      10.4

    Textron
      Inc.

    


    PERFORMANCE
      SHARE UNIT PLAN FOR TEXTRON EMPLOYEES

    (July
      25,
      2007)

    


    The
      1999
      Long-Term Incentive Plan for Textron Employees (“1999 LTIP”), when it was
      approved by shareholders in 1999, contained provisions relating to Performance
      Share Units (“PSUs”).  In 2004, shareholders approved a proposal that
      removed PSUs from the 1999 LTIP since PSUs are cash-based rather than
      share-based compensation.  As a result of the proposal, the terms that
      had governed PSUs did not change; rather, these terms were merely separated
      from
      the terms that remained a part of the 1999 LTIP.  The Performance
      Share Unit Plan for Textron Employees (“PSU Plan” or the “Plan”) formalizes this
      separation of terms and provisions.

    


    Effective
      April 25, 2007, the PSU Plan has been replaced by the 2007 Long-Term Incentive
      Plan for Textron Employees (“2007 LTIP”).  The terms of the PSU Plan
      will continue to govern PSUs awarded under the PSU Plan.  However, any
      awards made on or after April 25, 2007, will be governed by the 2007
      LTIP.

    


    The
      Plan
      is amended and restated as follows, effective July 25, 2007, to incorporate
      those terms necessary or advisable to ensure that existing PSUs under the Plan
      are exempt from or comply with Section 409A of the Code:

    


    Article
      I – General

    


    1.1
      Purpose.  This plan authorizes the grant of Performance
      Share Units to officers and other selected employees of Textron Inc. (“Textron”)
      and its related companies to induce them to continue as Textron employees and
      to
      reward them for improvement in Textron’s long-term performance.

    


    1.2
      Administration.  (a) The Board of Directors of Textron
      (the “Board”) shall appoint from among its members a committee (the “Committee”)
      consisting of no fewer than three directors, none of whom shall be eligible,
      and
      none of whom shall have been eligible at any time within one year prior to
      or
      after exercising discretion in administering the Plan, for any award under
      the
      Plan or under any other employee benefit plan of Textron or any related company,
      and all of whom shall certify that they are “outside directors” as defined by
      the Code.  Unless otherwise specified by the Board, the Committee, for
      purpose hereof, shall mean the Organization and Compensation Committee of the
      Board.

    


    
      	
              (b)  

            	
              The
                Committee shall have the power subject to and within the limits of
                the
                Plan:

            


    

    


    (1)
      to
      determine from time to time which eligible persons shall be granted Performance
      Share Units under the Plan, to fix the number of Performance Share Units covered
      by each grant and conditions of each grant;

     

    1

    


     (2)
      to construe and interpret the Plan and to establish, amend and revoke rules
      and
      regulations for its administration.  The Committee, in exercise of
      this power, shall generally determine all questions of policy and expediency
      that may arise and may correct any defect, omission or inconsistency in the
      Plan
      or in any agreement evidencing an award hereunder in a manner and to the extent
      it shall deem necessary or expedient to make the Plan fully
      effective;

    


    (3)
      to
      prescribe the terms and provisions of any Performance Share Units granted under
      the Plan;

     

    (4)
      generally, to exercise such powers and to perform such acts in connection with
      the Plan as are deemed necessary or expedient to promote the best interests
      of
      Textron.

     

    (c)
      The
      Board at any time may designate one or more officers or committees of Textron
      to
      act in place of the Committee in making any determination or taking any action
      under the Plan.  The Employee Benefits Committee of Textron shall have
      the authority to adopt one or more sub-plans of the Plan applicable to employees
      located in countries other than the United States for the purpose of complying
      with applicable laws and regulations of such
      countries.  Notwithstanding the above, all decisions concerning the
      Plan relate to persons who are Directors or Corporate Officers of Textron shall
      be made by the Committee.

     

    (d)
      The
      Board at any time may revest administration of the Plan, including all powers
      and duties of the Committee, in the Board, provided that in any matter relating
      to administration of the Plan, a majority of the Board and a majority of the
      directors acting on such matter shall not be eligible, and shall not have been
      eligible at any time within one year prior thereto, for a grant under the Plan
      or under any other employee benefit plan of Textron or any related
      company.  In such all references herein to the Committee shall be
      deemed to refer to the Board.

     

    (e)
      All
      actions of the Board, the Committee or any designate under Section 1.2 in
      con-nection with the plan shall be final, conclusive and binding.  No
      member of the Board, the Committee or any designated committee, nor any
      designated officer, shall be liable for any action taken or decision made in
      good faith relating to the Plan or any grant or award hereunder.

     

    1.3
      Eligibility.  The Committee may grant Performance Share
      Units under the Plan to any full-time employee of Textron or any related company
      (determined at the date of grant) who is a corporate, division, segment or
      subsidiary officer, administrative or professional employee, or other selected
      employee capable of making a substantial contribution to the success of
      Textron.  Performance Share Units may be granted to full-time
      employees who are also members of the Board.  In making grants and
      determining their form and amount, the Committee shall consider functions and
      responsibilities of the employee, the employee’s potential contributions to
      profitability and sound growth of Textron and such other factors, as the
      Committee deems relevant.

     

    2

     

    1.4
      Grants.  Grants under the Plan may be comprised of
      Performance Share Units as described in Article II.

     

    1.5
      Additional Definitions.  For purposes of this Plan, the
      following terms shall have the meaning specified in this Section
      1.5:

     

    
      	
              (a)  

            	
              “Award
                Period” shall mean the period during which Performance Targets or
                Performance Measures are to be
                accomplished.

            


    

     

    
      	
              (b)  

            	
              “Cause”
                shall mean a degree of less than acceptable performance as is determined
                by the Committee.

            


    

     

    
      	
              (c)  

            	
              “Code”
                shall mean the Internal Revenue Code of 1986, as amended from time
                to
                time.

            


    

     

    
      	
              (d)  

            	
              “Common
                Stock” shall mean shares of Textron common
                stock.

            


    

     

    
      	
              (e)  

            	
              “Current
                Value” of a share of Common Stock on any date shall mean the average of
                the composite closing prices for Textron common stock, as reported
                in
                The Wall Street Journal, for ten trading days next following that
                date.

            


    

     

    
      	
              (f)  

            	
              “Corporate
                Officer” shall mean corporate officers of Textron who are not assistant
                corporate officers.

            


    

     

    
      	
              (g)  

            	
              “Director”
                shall mean a member of the Board of Directors of
                Textron.

            


    

     

    
      	
              (h)  

            	
              “Early
                Retirement” shall mean the attainment of any of the following
                requirements: age 55 with 10 years of Vesting Service, age 60, or
                20 years
                of Vesting Service.  For the purposes of this Plan, “Vesting
                Service” shall have the meaning ascribed to it in Addendum A of the
                Textron Master Retirement Plan (January 1, 1998
                Restatement).

            


    

     

    
      	
              (i)  

            	
              “Performance-Based
                Exception” shall mean the performance-based exception from the tax
                deductibility limitations of Code section
                162(m).

            


    

     

    
      	
              (j)  

            	
              “Performance
                Measures” shall mean the performance standards described in Section 2.4 of
                this Plan.

            


    

     

    
      	
              (k)  

            	
              “Performance
                Share Units” shall mean fictional shares of Common Stock accumulated and
                accounted for under this Plan for the sole purpose of determining
                the cash
                amount of any distribution on account of awards earned pursuant to
                Article
                III of this Plan.

            


    

     

    
      	
              (l)  

            	
              “Performance
                Targets” shall mean the performance standards described in Article III of
                this Plan

            


    

     

    
      3

    

     

    
      	
              (m)  

            	
              “Plan”
                shall mean the Performance Share Unit Plan for Textron
                Employees.

            


    

     

    
      	
              (n)  

            	
              “Total
                Disability” shall mean a permanent mental or physical disability as
                determined by the Committee.

            


    

     

    Article
      II – Performance Share Units

     

    2.1
      Award of Performance Share Units. (a) The
      Committee may, from time to time, subject to the provisions of the Plan and
      such
      other terms and conditions as the Committee may prescribe, grant to eligible
      employees one or more Performance Share Units.  Such grants shall be
      evidenced in writing.

     

    (b)
      The
      existence of the Performance Share Units is for record keeping purposes only
      and
      does not require any segregation of assets.

     

    2.2
      Conditions of Grant. When a grant of
      Performance Share Units is made, the Committee shall determine: (1) the number
      of Performance Share Units included in this grant; (2) the Performance Targets
      or Performance Measures as described further in Section 2.4; and (3) the Award
      Period during which the Performance Targets or Performance Measurements are
      to
      be accomplished.

     

    2.3
      Payment for Performance Share Units.  Payment
      in respect of earned Performance Share Units shall be due not more than 90
      days
      after the Award Period for such Performance Share Units has
      ended.  Such payment shall be in the amount determined under Section
      2.6, or in a greater amount pursuant to the last two sentences of Section 2.4,
      and shall be made in a lump sum subject to such terms and conditions as the
      Committee shall specify.  Payments for Performance Share Units shall
      be made in cash no later than March 15 of the year following the year in which
      the Award Period ends.

     

    2.4
      Performance Measures and Performance
      Targets.  Upon making a grant of Performance
      Share Units, the Committee shall establish the applicable Performance Measures
      or Performance Targets to be attained for the Award Period as a Condition of
      the
      related Performance Shares being earned in whole or part.  Performance
      Targets shall be established only in terms of the standards set forth in Article
      V of this Plan.  Attainment of a primary Performance Target in an
      Award Period shall result in the earning of all of the Performance Share Units
      related to that Performance Target.  For Corporate Officers only,
      Awards may not exceed 100% of the value of Performance Share Units related
      to
      the applicable Performance Targets.  Failure to attain a minimum
      Performance Target in an Award Period shall result in the failure to earn any
      of
      the Performance Share Units related to that Performance
      Target.  Attainment between a primary and minimum Performance target
      in an Award Period shall result in the earning of a portion of the Performance
      Share Units related to those Performance Targets, determined by a
      pre-established mathematical formula which shall be determined by the
      Committee.  The Committee may determine an award less than that
      determined by the formula, but may not, however, determine an award more than
      that derived by the formula.  Performance Measures may be expressed in
      terms of any standard, financial or 

     

    4

     

    otherwise,
      as the Committee may determine.  Performance Share Units related to
      one or more Performance Measures shall be earned only as determined by the
      Committee and may not exceed 100% of the value of such Performance Share
      Units.

     

    In
      addition to the above targets, stretch targets related to return on invested
      capital will be established.  Such targets will provide the
      participants with the opportunity to earn up to an additional 30% of the value
      of the performance share units.  Performance share units related to
      one or more performance measures shall be earned only as determined by the
      committee and may not exceed more than 130% of the value of such
      units.

     

    2.5
      Termination of Employment. (a) If a
      grantee’s employment with Textron or related company shall terminate for Cause,
      as determined by the Committee, all of the grantee’s outstanding Performance
      Share Units will be cancelled immediately.

     

    (b)
      If
      the employment with Textron and its related companies of the grantee who is
      not
      described in Section 2.5(a) shall end during an Award Period but more than
      one
      year after its beginning:

     

    (1)
      due to death or Total Disability,
      or after the guarantee has become eligible for Early Retirement, the grantee
      or
      the grantee’s successor in interest shall be entitled to payment on account of
      the Performance Share Units earned during that Award Period, if any, on a pro
      rata basis, or

     

    (2)
      otherwise than as described in
      Section 2.5(b)(1), the grantee or the grantee’s successor in interest shall be
      entitled to payment on account of the Performance Share Units earned during
      that
      Award Period on a pro rata basis only as determined by the
      Committee.

     

    (c)
      If a
      grantee’s employment with Textron and its related companies shall end during an
      Award Period but one year or less after its beginning, all of the grantee’s
      Performance Share Units relating to that Award Period shall be
      cancelled.

     

    2.6
      Amount of Payment for Share Units. Any
      payment with respect to earned Perform-ance Share Units shall be made in cash
      and shall be in an amount equal to the product of (1) the Current Value of
      Textron Common Stock on the date on which they are deemed earned, times (2)
      the
      number of whole and fractional Performance Share Units which have been
      earned.  For purposes of this Plan, earned Performance Share Units
      shall be deemed earned as of the last day of the applicable Award Period unless
      the Committee determines otherwise.

     

    Article
      III – Performance-Based Exception

     

    Unless
      and until the Committee
      proposes for shareholders to vote and shareholders approve a change in the
      general Performance Targets set forth in this Article III, the attainment of
      which may determine the degree of payout and/or vesting with respect to awards
      to eligible employees which are designed to qualify for the Performance-Based
      Exception of the Performance Share Units under Article II of this Plan, and,
      if
      the Performance Targets to be used for purposes of such grants shall be chosen
      from among:

     

     

    5

     

    
      	
              (a)  

            	
              Textron’s
                earnings per share;

            


    

     

    
      	
              (b)  

            	
              Net
                operating profit;

            


    

     

    
      	
              (c)  

            	
              After-tax
                profit;

            


    

     

    
      	
              (d)  

            	
              Return
                on equity;

            


    

     

    
      	
              (e)  

            	
              Return
                on invested capital;

            


    

     

    
      	
              (f)  

            	
              Economic
                profit;

            


    

     

    
      	
              (g)  

            	
              Margins;

            


    

     

    
      	
              (h)  

            	
              Cash
                flow; and

            


    

     

    
      	
              (i)  

            	
              Shareholder
                value.

            


    

     

    The
      Committee shall have the
      discretion to adjust the determinations of the degree of attainment of the
      pre-established Performance Targets; provided, however, that awards which are
      designed to qualify for the Performance-Based Exception, and which are held
      by
      eligible employees, may not be adjusted upward (the Committee shall retain
      the
      discretion to adjust such awards downward).

     

    In
      the event that applicable tax
      and/or securities laws change to permit Committee dis-cretion to alter the
      governing Performance Targets without obtaining shareholder approv-al of such
      changes, the Committee shall have sole discretion to make such changes with-out
      obtaining shareholder approval.  In addition, in the event that the
      Committee deter-mines that it is advisable to grant awards, which shall not
      qualify for the Performance-Based Exception, the Committee may make such grants
      without satisfying the requirements of Code section 162(m).

     

    Article
      IV – Beneficiaries

     

    4.1
      A Participant may designate one or more Beneficiaries to receive
      Plan benefits payable on the Participant’s account after his or her
      death.  A Beneficiary may designate one or more Beneficiaries to
      receive any unpaid Plan benefits to the extent this designation does not
      contravene any designation filed by the deceased Participant through whom the
      Beneficiary himself or herself claims under this Plan.  Beneficiaries
      shall be designated only upon forms made available by or satisfactory to the
      Employee Benefits Committee or its designee, and filed by the Participant or
      Beneficiary with that committee or designee.

     

    4.2
      At any time prior to his or her death, a Participant or Beneficiary may change
      his own designation of Beneficiary by filing a substitute designation of
      Beneficiary with the Employee Benefits Committee or its designee.

     

    6

     

    4.3
      In the absence of an effective designation of Beneficiary, or
      if
      all persons so designated shall have predeceased the Participant or shall have
      died before the complete distribution of Plan benefits, the balance of Plan
      benefits shall be paid to the Participant’s surviving spouse or, if none, to the
      Participant’s issue per stirpes or, if no issue, to the executor or
      administrator of the Participant’s or Beneficiary’s estate, or as otherwise
      determined by the Employee Benefits Committee in its sole
      discretion.

     

    4.4
      If a Participant’s Compensation or a Plan benefit is community property, any
      designation of Beneficiary shall be valid or effective only as permitted under
      applicable law.

     

    4.5
      If a Plan benefit is payable to a minor or person declared
      incompetent or to a person incapable of handling the disposition of his
      property, the Employee Benefits Committee may direct Textron to pay such Plan
      benefit to the guardian, legal representative or person having the care and
      custody of such minor, incompetent or person.  The Employee Benefits
      Committee may require proof of incompetency, minority, incapacity or
      guardianship as it deems appropriate prior to distribution of the Plan
      benefit.  Such distribution shall completely discharge the Employee
      Benefits Committee and any Textron Company from all liability with respect
      to
      such benefit.

     

    Article
      V – Miscellaneous

     

    5.1
      General Restriction.  Each grant or award under the Plan
      shall be subject to the re-quirement that, if at any time the Committee shall
      determine that any listing or registrat-ion of the shares of Common Stock or
      any
      consent or approval of any governmental body, or any other agreement or consent,
      is necessary or desirable as a condition of a grant, an award or issuance of
      Common Stock or cash in satisfaction thereof, such grant or award may not be
      consummated unless each such requirement is satisfied in a manner acceptable
      to
      the Committee.

     

    5.2
      Restrictions on Share Transferability.  The Committee
      may impose such restrictions on any shares of Common Stock acquired pursuant
      to
      this Plan as it may seem advisable, including, without limitation, restrictions
      under federal securities laws, under the require-ments of any stock exchange
      or
      market upon which such shares are then listed or traded, and under any blue
      sky
      or state securities laws applicable to such shares.

     

    5.3
      Non-Assignability.  No award under the Plan shall be
      assignable or transferable by the recipient thereof, except by will or by laws
      of descent and distribution.

     

    5.4
      Withholding Taxes.  Whenever payments by Textron are to
      be made in cash, such payments shall be net of an amount sufficient to satisfy
      any federal, state and local withholding tax requirements.

     

    5.5
      No Right to Employment.  Nothing in the Plan or in any
      agreement entered into pursuant to it shall confer upon any participant the
      right to continue in the employment of Textron or a related company or affect
      any right which Textron or a related company may have to terminate the
      employment of such participant.

     

    7

     

    5.6
      Non-Uniform Determination.  The determinations under the
      Plan of the Committee or of any designate (including without limitation its
      determinations of the persons to receive grants or awards, the form, amount,
      timing and payment of such grants or awards, the terms and provisions of such
      grants or awards, and the establishment of Performance Measures or Performance
      Targets) need not be uniform and may be made by it selectively among persons
      who
      receive, or are eligible to receive, awards under the Plan, whether or not
      such
      persons are similarly situated.

     

    5.7
      Related Company.  As used in the Plan, “related company”
means any corporation in which Textron at the time in question
      owns, directly or
      indirectly, stock possessing 50 percent or more of the total combined voting
      power of all classes of stock and any corp-oration which at the time in question
      owns, directly or indirectly, a similar interest in Textron.

     

    5.8
      Adjustments for Certain Changes.  (a) The aggregate
      number of Performance Share Units granted under this Plan shall all be
      proportionately adjusted for an increase or decrease resulting from a stock
      split.

     

    (b)
      The
      Committee may, in its discretion and for purposes of determining whether
      Per-formance Measures or Performance Targets have been met, equitably restate
      Textron’s earnings per share, net operating profit, return on equity or any
      other standard utilized in establishing the Performance Measures or Performance
      Targets in order to take into ac-count the effect, if any, of (1) acquisitions
      or dispositions of businesses by Textron, (2) extraordinary and non-recurring
      events, (3) a change in capitalization described in Section 5.9 (a), or (4)
      any
      change in accounting practices, tax laws or other laws or regulations that,
      in
      the opinion of the Committee, significantly affects the financial performance
      of
      Textron.

     

    5.9
      Change in Control.  (a) Not withstanding any other
      provision of this Plan, in the event of a change in control as defined in
      Section 5.9(b):

     

    (1)
      the Award Period for each
      outstanding Performance Share Unit shall end, and each such unit shall be deemed
      to have been earned, as of the end of the Award Period and shall be payable
      immediately and in full; and

     

    (b)
      For
      purposes of this Plan, a “Change in Control” shall occur if (i) any “person” or
“group” (within the meaning of Sections 13 (d) and 14 (d)(2) of the Securities
      Exchange Act of 1934, as amended (the “Act”)) other than Textron, any “person”
who on April 27, 1994 was a director or officer of Textron, any trustee or
      other
      fiduciary holding Common Stock under an employee benefit plan of Textron, or
      related company, or any corporation which is owned, directly or indirectly,
      by
      the stockholders of Textron in substantially the same proportions as their
      ownership of Common Stock, is or becomes the “beneficial owner” (as defined in
      Rule 13d-3 under the Act) of more than thirty percent (30%) of the then
      outstanding voting stock of Textron, or (ii) during any period of two
      consecutive years, individuals who at the beginning of such period constitute
      the Board (and any new director whose election by the Board or whose nomination
      for election by Textron’s stockholders was approved by a vote of at least
      two-thirds of the directors then still in 

     

    8

     

    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 a majority thereof, or (iii) the shareholders of Textron
      approve a merger or consolidation of Textron with any other corporation, other
      than a merger or consolidation which would result in the voting securities
      of
      Textron outstanding immediately prior thereto continuing to represent (either
      by
      remaining outstanding or by being converted into voting securities of the
      surviving entity) more than fifty percent (50%) of the combined voting power
      of
      the voting securities of Textron or such surviving entity outstanding
      immediately after such merger or consolidation, or (iv) the shareholders of
      Textron approve a plan of complete liquidation of Textron or an agreement for
      the sale or disposition by Textron of all or substantially all of Textron’s
      assets.

     

    5.10
      Amendment or Termination of the Plan.  The Board,
      without further approval of the shareholders, may at any time terminate the
      Plan
      or any part thereof and may from time to time amend the Plan as it may deem
      advisable.

     

    5.11
      Compliance with Code section 162(m).  At all times when
      Code section 162(m) is applicable, all awards under this Plan shall comply
      with
      the requirements of Code section 162(m); provided, however, that in the event
      the Committee determines that such compliance is not desired with respect to
      any
      award or grant under the Plan, then compliance with Code section 162(m) shall
      not be required.  In addition, in the event that changes are made to
      section 162(m) to permit greater flexibility with respect to awards or grants
      available under the plan, the Committee may, subject to this Article V, make
      adjustments it deems appropriate.

     

    5.12
      Compliance with Code section 409A.  The Plan is
      intended, and shall be interpreted, to provide compensation that is exempt
      from
      Code section 409A under the short-term deferral rule (unless a participant
      makes
      a valid deferral election under a separate plan).  Textron does not
      warrant that the Plan will comply with Code section 409A with respect to any
      participant or with respect to any payment, however.  In no event
      shall Textron; any related company; any director, officer, or employee of
      Textron or a related company; or any member of the Committee be liable for
      any
      additional tax, interest, or penalty incurred by a participant as a result
      of
      the Plan’s failure to satisfy the requirements of Code section 409A, or as a
      result of the Plan’s failure to satisfy any other requirements of applicable tax
      laws.