exhibit10-2.htm


    Exhibit
      10.2

    


    TEXTRON
      INC. SHORT-TERM INCENTIVE PLAN

     

    (As
      amended and restated effective July 25, 2007)

     

    


    SECTION
      1. ESTABLISHMENT AND PURPOSE

    


    1.1   Establishment
      of the Plan.   Textron Inc., a Delaware company (the “Company”),
      hereby establishes a short-term incentive compensation plan to be known as
      the
      Textron Inc. Short-Term Incentive Plan (the “Plan”). The Plan permits the
      awarding of cash bonuses to Employees (as defined below), based on the
      achievement of performance goals that are pre-established by the Board of
      Directors of the Company (the “Board”) or by the Committee (as defined
      below).

    


    The
      Plan,
      as adopted by the Board and approved by the shareholders of the Company at
      the
      2007 annual general meeting of shareholders, is effective as of January 1,
      2007
      and shall continue until December 31, 2016, unless terminated earlier as set
      forth in Section 10.  The Plan is amended and restated as follows,
      effective July 25, 2007, to incorporate those terms necessary or advisable
      to
      ensure that awards under the Plan are exempt from or comply with Section 409A
      of
      the Internal Revenue Code.

    


    1.2   Purpose.   The
      purposes of the Plan are to (i) provide greater motivation for certain employees
      of the Company and its Subsidiaries (as defined below) to attain and maintain
      the highest standards of performance, (ii) attract and retain employees of
      outstanding competence, and (iii) direct the energies of employees towards
      the
      achievement of specific business goals established for the Company and its
      Subsidiaries.

    


    The
      purposes of the Plan shall be carried out by the payment to Participants (as
      defined below) of short-term incentive cash awards, subject to the terms and
      conditions of the Plan. All compensation payable under this Plan to Participants
      who are Executive Officers (as defined below) is intended to be deductible
      by
      the Company under Section 162(m) of the Code (as defined below).

    


    SECTION
      2. DEFINITIONS

    


    As
      used
      in the Plan, the following terms shall have the meanings set forth below (unless
      otherwise expressly provided).

    


    “Award
      Opportunity” means the various levels of incentive awards which a Participant
      may earn under the Plan, as established by the Committee pursuant to Section
      5.1.  For an individual, the Award Opportunity is typically expressed
      as a minimum and maximum
      percentage of the individual’s Target Incentive Award (as defined below) that
      define a range within which the actual incentive award will fall.

    


     

    “Base
      Salary” shall mean the regular annualized base salary (determined as of January
      1 of each Plan Year with respect to Executive Officers) earned by a Participant
      during a Plan Year prior to any salary reduction contributions made to any
      deferred compensation plans sponsored or maintained by the Company or by any
      Subsidiary; provided, however, that Base Salary shall not include awards under
      this Plan, any bonuses, equity awards, the matching contribution under any
      plan
      of the Company or any of its Subsidiaries (as applicable) providing such,
      overtime, relocation allowances, severance payments or any other special awards
      as determined by the Committee.

    


    “Beneficial
      Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General
      Rules and Regulations under the Exchange Act.

    


    “Board”
      has the meaning set forth in Section 1.1.

    


    “Code”
      means the Internal Revenue Code of 1986, as amended, and the regulations
      promulgated thereunder.

    


    “Committee”
      means the Organization and Compensation Committee of the Board, provided that
      the Committee shall consist of three or more individuals, appointed by the
      Board
      to administer the Plan, pursuant to Section 3, who are “outside directors” to
      the extent required by and within the meaning of Section 162(m) of the Code,
      as
      amended from time to time.

    


    “Company”
      has the meaning set forth in Section 1.1.

    


    “Effective
      Date” means the date the Plan becomes effective, as set forth in Section 1.1
      herein.

    


    “Employee”
      means an employee of the Company or a Subsidiary.

    


    “Exchange
      Act” means the Securities Exchange Act of 1934, as amended from time to
      time.

    


    “Executive
      Officer” means a “covered employee” within the meaning of Section 162(m)(3) of
      the Code or any other executive designated by the Committee for purposes of
      exempting compensation payable under the Plan from the deduction limitations
      of
      Section 162(m) of the Code.

    


    “Final
      Award” means the actual award earned during a Plan Year by a Participant, as
      determined by the Committee at the end of such Plan Year.

     

    “Participant”
      means an Employee who is participating in the Plan pursuant to Section
      4.

     

    “Plan”
      means this Textron Inc. Short-Term Incentive Plan.

     

    
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“Plan
      Year” means the calendar year, commencing on January 1st and ending on December
      31st, or any other period that the Committee designates as the performance
      period for a particular performance goal pursuant to Section 5.1.

    


    “Subsidiary”
      means any company or corporation in which the Company beneficially owns,
      directly or indirectly, 50% or more of the securities entitled to vote in the
      election of the directors of the corporation.

    


    “Target
      Incentive Award” means the target award to be paid to a Participant when
      performance measures are achieved, as established by the Committee. For an
      individual, the Target Incentive Award is typically expressed as a percentage
      of
      the individual’s Base Salary (as defined above).

    


    SECTION
      3. ADMINISTRATION

    


    The
      Plan
      shall be administered by the Committee. Subject to the limitations set forth
      in
      the Plan, the Committee shall: (i) select from the Employees of the Company
      and
      its Subsidiaries, those who shall participate in the Plan, (ii) establish Award
      Opportunities in such forms and amounts as it shall determine, (iii) impose
      such
      limitations, restrictions, and conditions upon such Award Opportunities as
      it
      shall deem appropriate, (iv) interpret the Plan and adopt, amend, and rescind
      administrative guidelines and other rules and regulations relating to the Plan,
      (v) make any and all factual and legal determinations in connection with the
      administration and interpretation of the Plan, (vi) correct any defect or
      omission or reconcile any inconsistency in this Plan or in any Award Opportunity
      granted hereunder, and (vii) make all other necessary determinations and take
      all other actions necessary or advisable for the implementation and
      administration of the Plan. The Committee's determinations on matters within
      its
      authority shall be conclusive and binding upon all parties.

    


    Except
      with respect to the matters that under Section 162(m) of the Code and Treasury
      Regulation Section 1.162-27(e) are required to be determined or established
      by
      the Committee to qualify awards to Executive Officers under the Plan as
      qualified performance-based compensation, the Committee shall have the power
      to
      delegate to any officer or employee of the Company the authority to administer
      and interpret the procedural aspects of the Plan, subject to the Plan's terms,
      including adopting and enforcing rules to decide procedural and administrative
      issues. To the extent of any such delegation, references to the “Committee”
herein shall be deemed to refer to the relevant delegate.

    
Subject
      to applicable laws, rules and regulations:  (i) no member of the
      Committee (or its delegates) shall be liable for any good faith action or
      determination made in connection with the operation, administration or
      interpretation of the Plan and (ii) the members of the Committee (and its
      delegates) shall be entitled to indemnification and reimbursement 

     

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    in
      the
      manner provided in the Company’s Certificate of Incorporation as it may be
      amended from time to time. In the performance of its responsibilities with
      respect to the Plan, the Committee shall be entitled to rely upon information
      and/or advice
      furnished by the Company’s officers or employees, the Company’s accountants, the
      Company’s counsel and any other party the Committee deems necessary, and no
      member of the Committee shall be liable for any action taken or not taken in
      reliance upon any such information and/or advice.

    


    SECTION
      4. ELIGIBILITY AND PARTICIPATION

    


    4.1   Eligibility.   Each
      Employee who is included in the Plan by the Committee, shall be eligible to
      participate in the Plan for such Plan Year and all subsequent Plan Years,
      subject to the limitations of Section 7 herein.

    


    4.2   Participation.   Participation
      in the Plan shall be determined annually by the Committee based upon the
      criteria set forth in the Plan. Participation in the Plan during the applicable
      Plan Year shall be limited to those Employees (“Participants”) who are selected
      by the Committee. Employees who are eligible to participate in the Plan shall
      be
      notified of the performance goals and related Award Opportunities for the
      relevant Plan Year.

    


    4.3   Right
      to Reduce or End Eligibility.   The Committee may elect to reduce
      the Award Opportunity (as described in Section 5.2 herein) or end it altogether
      for any single Participant or group of Participants at any time.

    


    SECTION
      5. AWARD DETERMINATION

    


    5.1   Performance
      Goals.   Prior to the beginning of each Plan Year, or as soon as
      practicable thereafter, the Committee shall approve or establish in writing
      the
      performance goals for that Plan Year. Performance goals may include financial
      and/or non-financial goals.

    


    Performance
      goals and their relative weight may vary by job. After the performance goals
      are
      established, the Committee will align the achievement of the performance goals
      with the Award Opportunities (as described in Section 5.2 herein), such that
      the
      level of achievement at the end of the Plan Year as compared to the
      pre-established performance goals set at the beginning of the Plan Year will
      determine the amount of the Final Award. The Committee also shall have the
      authority to exercise subjective discretion in the determination of Final Awards
      to reduce or increase a calculated award based on the Committee's qualitative
      assessment of performance.

     

    The
      performance period with respect to which awards may be payable under the Plan
      shall generally be the Plan Year; provided, however, that the Committee shall
      have the authority and discretion to designate different performance periods
      under the Plan, in

     

    
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     which
      case references to Plan Year shall be deemed to refer to such other performance
      period.

    


    5.2   Award
      Opportunities.   Prior to the beginning of each Plan Year, or as
      soon as practicable thereafter, the Committee shall establish an Award
      Opportunity for each Participant. In the event a Participant changes job levels
      during a Plan Year, the Participant's Award Opportunity may be adjusted to
      reflect the amount of time at each job level during the Plan Year. In addition,
      if a Participant changes jobs during the year, the Participant’s goals may
      change as of the effective date of the job change to reflect the different
      performance goals. Each job’s performance goals will continue to be assessed on
      a full-year basis to determine payouts, with the proportion of time in each
      job
      applied to determine the final payout amount.  In the case of an Award
      Opportunity that the Committee has designated as “performance-based
      compensation” for purposes of Section 162(m) or Section 409A of the Code, the
      Committee shall have the right to adjust the Award Opportunity as described
      in
      this Section 5.2 only to the extent that the adjustment would not cause the
      Award Opportunity to fail to qualify as “performance-based compensation” for
      purposes of Section 162(m) or Section 409A, as applicable.

    


    5.3   Adjustment
      of Performance Goals.   The Committee shall have the right to
      adjust the performance goals and the Award Opportunities (either up or down)
      during a Plan Year if it determines that the occurrence of external changes
      or
      other unanticipated business conditions have materially affected the fairness
      of
      the goals and have unduly influenced the Company's ability to meet them,
      including without limitation, events such as material acquisitions, changes
      in
      the capital structure of the Company, and extraordinary accounting changes.
      In
      addition, performance goals and Award Opportunities will be calculated without
      regard to any changes in accounting standards that may be required by the
      Financial Accounting Standards Board after such performance goals or Award
      Opportunities are established. Further, in the event of a Plan Year of less
      than
      twelve months, the Committee shall have the right to adjust the performance
      goals and the Award Opportunities accordingly, at its sole
      discretion.  In the case of an Award Opportunity that the Committee
      has designated as “performance-based compensation” for purposes of Section
      162(m) or Section 409A of the Code, the Committee shall have the right to adjust
      the performance goals or Award Opportunity as described in this Section 5.3
      only
      to the extent that the adjustment would not cause the Award Opportunity to
      fail
      to qualify as “performance-based compensation” for purposes of Section 162(m) or
      Section 409A, as applicable.

    


    5.4   Final
      Award Determinations.   At the end of each Plan Year, Final
      Awards shall be computed for each Participant as determined by the Committee.
      Each Final Award shall be based upon the (i) Participant’s Target Incentive
      Award percentage, multiplied by his Base
      Salary and (ii) percent satisfaction of performance goals (as set by the
      Committee). Final Award amounts may vary above or below the Target Incentive
      Award, based on the level of achievement of the pre-established performance
      goals.

    


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    5.5   Limitations.   The
      amount payable to a Participant for any Plan Year shall not exceed U.S.
      $4,000,000.

    


    5.6   Award
      Opportunities under Section 409A.  The Committee may, in its
      discretion, establish Award Opportunities that will qualify as
“performance-based compensation” under Section 409A of the Code.  An
      Award Opportunity intended to qualify as “performance-based compensation” under
      Section 409A of the Code shall meet the following requirements:

    


    
      	
              (a)  

            	
              For
                any Participant who is eligible to participate in the Plan on the
                first
                day of the performance period, the performance period shall include
                at
                least 12 consecutive months;

            


    

     

    
      	
              (b)  

            	
              Performance
                goals shall be established no later than 90 days after the beginning
                of
                the performance period, and at a time when it is not substantially
                certain
                that the performance goals will be met.  Performance goals may
                not be adjusted after the first 90 days of the performance period,
                except
                that the Committee may, consistent with Section 409A, make adjustments
                it
                deems necessary to reflect corporate events, such as recapitalizations
                or
                mergers, that would otherwise affect the performance goals;
                and

            


    

     

    
      	
              (c)  

            	
              No
                Final Award shall be paid unless the pre-established performance
                goals are
                satisfied.

            


    

     

    SECTION
      6. PAYMENT OF FINAL AWARDS

    


    6.1   Form
      and Timing of Payment.   As soon as practicable after the end of
      each Plan Year, the Committee shall determine the extent to which the Company
      and each Participant has achieved the performance goals for such Plan Year,
      including the specific target objective(s) and the satisfaction of any other
      material terms of the awards, and the Committee shall approve the amount of
      each
      Participant's Final Award for the relevant period. Final Award payments shall
      be
      payable to the Participant, or to his estate in the case of death, in a single
      lump-sum cash payment, as soon as practicable after the end of each Plan Year,
      after the Committee, in its sole discretion, has certified in writing the extent
      to which the specified performance goals were achieved, but in no event later
      than March 15th of the year following the calendar year in which the applicable
      performance period ends.

     

    6.2   Payment
      of Partial Awards.   In the event a Participant no longer meets
      the eligibility criteria as set forth in the Plan during the course of a
      particular Plan Year, the Committee may, in its sole discretion, compute and
      pay
      a partial award in a lump sum on the scheduled date in Section 6.1 for the
      portion of the Plan Year that an Employee was a Participant. Unless such payment
      is specifically approved by the Committee, no such 

     

    
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    payments
      will be made, and continued service through the end of the Plan Year shall
      be
      required to earn an award. Unless the Committee determines otherwise, a
      Participant who has earned a Final Award with respect to a completed Plan Year
      who subsequently terminates employment or otherwise ceases eligibility before
      the date that the Final Award is to be paid shall be paid such Final Award
      on
      the scheduled date.

    


    6.3   Unsecured
      Interest.   No Participant or any other party claiming an
      interest in amounts earned under the Plan shall have any interest whatsoever
      in
      any specific asset of the Company or of any Subsidiary. To the extent that
      any
      party acquires a right to receive payments under the Plan, such right shall
      be
      equivalent to that of an unsecured general creditor of the Company.

    


    SECTION
      7. TERMINATION OF ELIGIBILITY OR EMPLOYMENT

    


    7.1   Termination
      of Eligibility.   In the event a Participant ceases to be
      eligible to participate in the Plan during a Plan Year but remains employed
      by
      the Company or a Subsidiary through the end of such Plan Year, the Final Award
      determined in accordance with Section 5.4 herein shall be reduced to reflect
      participation prior to such cessation of eligibility only. The reduced award
      shall be based upon the proportionate amount of Base Salary earned during the
      Plan Year prior to cessation of eligibility.

    The
      Final
      Award thus determined shall be payable in a lump sum as soon as practicable
      following certification of the relevant performance goals by the Committee
      for
      the Plan Year in which such termination occurs, or sooner (except with respect
      to Executive Officers), as determined by the Committee in its sole
      discretion.  A participant’s Final Award shall be paid no later than
      March 15 of the year following the calendar year in which the applicable
      performance period ends.

    


    7.2   Termination
      of Employment.   In the event a Participant's employment is
      terminated for any reason, all of the Participant's rights to a Final Award
      for
      the Plan Year then in progress shall be forfeited. However, the Committee,
      in
      its sole discretion, may pay a partial award for the portion of that Plan Year
      that the Participant was employed by the Company, computed as determined by
      the
      Committee and paid in a lump sum no later than March 15 of the year following
      the calendar year in which the applicable performance period ends.

     

    SECTION
      8. RIGHTS OF PARTICIPANTS

    


    8.1   Employment.   Nothing
      in the Plan shall interfere with or limit in any way the right of the Company
      to
      terminate any Participant's employment at any time, nor confer upon any
      Participant any right to continue in the employ of the Company.

    


    8.2   Nontransferability.   No
      right or interest of any Participant in the Plan shall be assignable or
      transferable, or subject to any lien, directly, by operation of law, or


     

    
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    otherwise,
      including, but not limited to, execution, levy, garnishment, attachment, pledge,
      and bankruptcy.

    


    SECTION
      9. EXECUTIVE OFFICERS

    


    9.1   Applicability.   The
      provisions of this Section 9 shall apply only to Executive Officers and are
      intended to apply additional terms, conditions and limitations required for
      amounts payable hereunder to Executive Officers to qualify as performance-based
      compensation exempt from Section 162(m) of the Code. In the event of any
      inconsistencies between this Section 9 and the other Plan provisions, the
      provisions of this Section 9 shall control with respect to Executive
      Officers.

    


    9.2   Performance
      Goals and Award Opportunities.   With respect to Executive
      Officers, objective written performance goals and Award Opportunities for a
      Plan
      Year shall be established by the Committee (and the Committee only, with no
      delegation) (i) while the attainment of the performance goals for the Plan
      Year
      is substantially uncertain and (ii) no more than 90 days after the commencement
      of the Plan Year (or a number of days equal to 25% of the Plan Year, if less).
      The performance goals applicable to the Executive Officers shall be limited
      to
      the performance goals listed below. The Committee may select one or more of
      the
      performance goals specified for each Plan Year which need not be the same for
      each Executive Officer in a given year. Performance goals will consist of
      specified levels of one or more of the following performance criteria as the
      Committee deems appropriate: operating cash flows from continuing operations,
      operating working capital, free cash flow, revenues, segment profit, corporate
      expenses, special charges, gain (loss) on sale of business, income from
      continuing operations, net income, EBITDA—earnings before interest, taxes,
      depreciation and amortization, EBIT—earnings before interest and taxes,
      EPS—earnings per share, as adjusted EPS, ROA—return on assets, ROS—return on
      sales, ROE—return on equity, ROIC—return on invested capital, WACC—weighted
      average cost of capital, total shareholder return, stock price appreciation,
      growth in managed assets, organic growth, cost performance, net cost reductions,
      inventory turns, selling and administrative expense as a percentage of sales,
      days sales outstanding, ratio of income to fixed charges, segment profit
      margins, total profit margin, EVA—economic value added, intrinsic value and
      effective income tax rate. In each case, performance goals shall be determined
      in accordance with generally accepted accounting principles (subject to
      modifications approved by the Committee) and shall be consistently applied
      on a
business
      unit, divisional, subsidiary or consolidated basis or any combination thereof.
      Performance goals may be described in terms of objectives that are related
      to
      the individual Participant or objectives that are Company-wide or related to
      a
      Subsidiary, division, department, region, function or business unit and may
      be
      measured on an absolute or cumulative basis or on the basis of percentage of
      improvement over time, and may be measured in terms of Company performance
      (or
      performance of the applicable Subsidiary, division, department, region, function
      or business unit) or measured relative to selected peer companies or a market
      index. In addition, for awards 

     

    
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    not
      intended to qualify as “performance-based compensation” under Section 162(m) of
      the Code, the Committee may establish performance goals based on other criteria
      as it deems appropriate. Notwithstanding the above, for any award or portion
      of
      an award designated to be “performance-based compensation” under Section 162(m)
      of the Code, the Committee does not retain any right to increase any amount
      otherwise determined under the provisions of the Plan.

    


    9.3   Certification
      of Achievement of Performance Goals.   At the end of the Plan
      Year and prior to payment, the Committee shall certify in writing the extent
      to
      which the performance goals and any other material terms were satisfied. Final
      Awards shall be computed for each Executive Officer based on (i) the
      Participant's Target Incentive Award percentage, multiplied by his Base Salary
      and (ii) percent satisfaction of performance goals (as certified by the
      Committee). Final Award amounts may vary above or below the Target Incentive
      Award based on the level of achievement of the pre-established performance
      goals.

    


    9.4   Non-adjustment
      of Performance Goals.   Once established, performance goals shall
      not be changed during the Plan Year except as permitted consistent with the
      qualified performance-based compensation exception under Section 162(m) of
      the
      Code.

    


    9.5   Discretionary
      Adjustments.   The Committee retains the discretion to eliminate
      or decrease the amount of the Final Award otherwise payable to a Participant.
      For any Final Award or portion of a Final Award designated to be
“performance-based compensation” under Section 162(m) of the Code, the Committee
      shall not retain any right to increase any amount otherwise determined under
      the
      provisions of the Plan.

    
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    SECTION
      10. AMENDMENT AND MODIFICATION

    


    The
      Committee, in its sole discretion, without notice, at any time and from time
      to
      time, may modify or amend, in whole or in part, any or all of the provisions
      of
      the Plan, or suspend or terminate it entirely; provided, however, that no such
      modification, amendment, suspension, or termination may, without the consent
      of
      a Participant (or his or her beneficiary in the case of the death of the
      Participant), reduce the right of a Participant (or his or her beneficiary,
      as
      the case may be) to a payment or distribution hereunder which he or she has
      already earned and is otherwise entitled, except where such modification,
      amendment, suspension or termination is necessary to comply with applicable
      law,
      including without limitation, any modifications or amendments made pursuant
      to
      Section 409A of the Code and any regulations, rulings and other regulatory
      guidance issued thereunder. Notwithstanding the foregoing, the Committee shall
      not amend Plan provisions to the extent that such amendment would cause an
      outstanding award or portion of an award designated to be “performance-based
      compensation” under Section 162(m) or Section 409A of the Code to fail to meet
      performance-based compensation exception of Section 162(m) or Section 409A,
      as
      applicable.

    


    SECTION
      11. MISCELLANEOUS

    


    11.1   Jurisdiction,
      Venue and Governing Law.   Except as to matters of federal law,
      the Plan, and all agreements hereunder, shall be governed by and construed
      in
      accordance with the laws of Rhode Island. Any dispute, controversy or claim
      arising out of or relating to the Plan or any award under the Plan shall be
      brought only in a court of competent jurisdiction in the State of Rhode Island,
      and no other court, agency or tribunal shall have jurisdiction to resolve any
      such dispute, controversy or claim.

    


    11.2   Withholding
      Taxes.   The Company and its Subsidiaries shall have the right to
      deduct from all payments under the Plan any federal, state, local and/or foreign
      income, employment or other applicable payroll taxes required by law to be
      withheld with respect to such payments.

    


    11.3   Gender
      and Number.   Except where otherwise indicated by the context,
      any masculine term used herein also shall include the feminine, the plural
      shall
      include the singular, and the singular shall include the plural.

    


    11.4   Severability.   In
      the event any provision of the Plan shall be held illegal or invalid for any
      reason, the illegality or invalidity shall not affect the remaining parts of
      the
      Plan, and the Plan shall be construed and enforced as if the illegal or invalid
      provision had not been included.

    


    11.5   Costs
      of the Plan.   All costs of implementing and administering the
      Plan shall be borne by the Company.

     

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    11.6   Successors.   All
      obligations of the Company and its Subsidiaries under the Plan shall be binding
      upon and inure to the benefit of any successor to the Company, whether the
      existence of such successor is the result of a direct or indirect purchase,
      merger, amalgamation, consolidation, or otherwise, of all or substantially
      all
      of the business and/or assets of the Company.

    


    11.7  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).  The Company 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 the Company; any affiliate of the Company; any director, officer, or
      employee of the Company or an affiliate; 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.

     

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