UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Exhibit 10.1
December 21, 1998
X. Xxxxx Xxxxx
000 Xxxxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxxx, XX 00000
Re: Special Incentive Arrangement
Dear Xxxxx:
As you know, over the next several months, we will be exploring the potential
sale of UTA, either in its entirety or in segments. Your support will be
critical to the success of this divestiture initiative. In addition, marketing
UTA without disruption to the ongoing, successful operation of the business
presents special challenges for you. In recognition of the additional
responsibilities you will assume in connection with UTC's efforts to divest UTA,
UTC is prepared to offer you certain special financial incentives in
consideration of certain commitments from you. The incentives consist of a
special award of restricted stock and a special cash payment, to be described in
full detail below. Your commitments to UTC pertain to: (i) your efforts and
conduct in support of the marketing of the business; (ii) your ability to
maintain UTA's successful financial and operational performance throughout the
entire marketing phase, regardless of ultimate outcome; and (iii) in the event
of a divestiture, achieving a transaction that provides UTC with sufficient
value for the sale of UTA.
Incentives
If you agree to the terms and conditions set forth in this letter, UTC will
award you 10,000 shares of restricted stock. These shares will be subject to a
vesting period of three years. If, however, the business is sold prior to that
date, the vesting will be accelerated to the date that is six months following
the closing date, if the transaction is deemed to be "successful" from UTC's
perspective. The criteria for a successful transaction are described below. In
the event that the business is sold in segments, your vesting will occur six
months following the completion of the sale of the last business segment. If
the purchaser of the business terminates your employment prior to the expiration
of the six month period, vesting will be accelerated to the termination date.
Otherwise, you are required to remain with the business for the six month period
following the closing. Prior to vesting, you will receive dividends and all
other rights of share ownership, except that you will not be able to sell,
pledge, or assign any interest in the shares. If your employment with UTA is
terminated for any reason (other than death or disability) prior to the complete
divestiture of UTA or the end of the three-year vesting period, the shares will
be forfeited without value.
In addition to the restricted stock award, UTC will make a special incentive
payment to you in an amount up to $2,000,000, subject to certain conditions,
payable six months after the closing date of the sale of UTA (or the last
segment thereof) (the "Special Incentive Payment"). The actual amount of such
payment will be based upon the degree to which the divestiture constitutes a
"successful" sale, as determined by UTC in its sole discretion, and the degree
to which certain other performance criteria have been met. The criteria for a
successful divestiture and the other performance criteria are described below.
Outstanding overall performance will result in full payment.
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
Terms and Conditions
For purposes of this Agreement, a "successful" sale will be determined on the
basis of several financial and subjective factors. Exact dollar thresholds,
formulas or percentage weightings for different factors will not be utilized.
However, as UTC evaluates the sale of UTA with its outside advisors, you will be
kept informed of targets, objectives and ranges of acceptable outcomes as they
are developed. The factors that will determine a successful divestiture from
UTC's perspective include, without limitation, the ultimate purchase price net
of any retained liabilities, the structure of the transaction (and its tax
impacts), the allocation of tax, environmental and other liabilities and
contingencies between buyer and seller, the timing to completion, post closing
risks retained by UTC, and such other factors as may be determined during the
sale process. All of these factors are relevant to determining if the
transaction, on a net basis, provides adequate value to UTC relative to the long
term value of UTA. UTC will evaluate these factors in its sole discretion to
determine to what extent the overall transaction may be deemed to be
"successful".
In addition to achieving a successful divestiture, accelerated vesting of
your restricted shares and eligibility for the Special Incentive Payment are
both also subject to you (i) maintaining certain individual performance
standards during the marketing phase of the business; and, (ii) maintaining
UTA's performance during this period of time to avoid deterioration of financial
and operating performance.
During the marketing phase, you will be expected to represent and further the
best interests of UTC at all times. You will be expected to represent the
business in its best light in a consistent manner to all prospective purchasers,
regardless of your opinion as to the quality or desirability of any prospective
purchaser. In addition, it will be imperative that you not engage in any
independent efforts relative to marketing UTA. All potential purchasers and any
other related inquiries or contacts and other information relevant to the
marketing effort must be directed to the office of UTC's Vice President for
Strategic Planning. During this period of time, you will also be expected to
maintain absolute confidentiality with respect to UTC's efforts and the status
of the divestiture efforts. You must refrain from any conduct that in any way
conflicts with the best interests of UTC in this transaction. Failure to
observe completely the provisions of this paragraph may result in forfeiture of
your shares and your rights to the special incentive payment.
Maintaining the successful operation of UTA amid the distraction of a
potential sale of the business presents special challenges. Nonetheless, it is
critical to UTC that UTA's achievements and momentum in several key areas not be
sacrificed as a result of UTC's decision to market the company for potential
divestiture. We expect that all financial and operating plans and objectives
will be met during this period. Manufacturing quality, productivity, customer
relationships, employee retention, engineering and marketing initiatives and
other key facets of the business must also not be compromised in any way.
It is critical that overall business performance and the value of the
business be maintained, regardless of the outcome of divestiture efforts. If
UTC, in its sole discretion, determines that the quality of the business, either
financially or operationally, materially deteriorates during the divestiture
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UNITED TECHNOLOGIES CORPORATION
AND SUBSIDIARIES
process, the restricted share awards and your rights to the Special Incentive
Payment will be forfeited.
The restricted share award and the Special Incentive Payment are subject to
approval by the Compensation and Executive Development Committee of UTC's Board.
The benefits provided under this Agreement are separate and independent from
your eligibility for the Executive Leadership Group (the "ELG") separation
benefit which will be payable to you subject to the terms of the ELG program,
without reduction or offset for amounts provided herein.
Notwithstanding your participation in this arrangement, UTC reserves the
right to terminate your employment for cause, in which case your rights to the
restricted stock and the Special Incentive Payment will be forfeited. Examples
of a termination "for cause" include failure to perform your responsibilities,
ethical or legal violations or breach of this Agreement.
In consideration of the benefits provided under this Agreement, you also
agree that you will not voluntarily terminate your employment for any reason
(other than death or permanent disability) during the period of this Agreement
(i.e. the earlier of 6 months following complete divestiture or December 31,
2001). In the event of death or permanent long term disability (as defined in
UTA's Long Term Disability Plan), vesting in the restricted stock award will be
accelerated and the Special Incentive Payment will be cancelled. Resignation or
termination for any other reason will result in forfeiture of the restricted
shares and the Special Incentive Payment.
We believe that with your efforts, we can achieve a successful divestiture of
UTA while maintaining the financial value and operational integrity of the
business. Please acknowledge your acceptance by signing and returning one
original copy of this letter to my office. If you have any questions, please
feel to call me at 000-000-0000.
Very truly yours,
/s/Xxxxxxx X. Xxxxxxxx, Xx.
Xxxxxxx X. Xxxxxxxx, Xx.
Acknowledged and Accepted:
/s/ X. Xxxxx Xxxxx April 1,1999
X. Xxxxx Xxxxx Date
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