This excerpt taken from the TXT 10-Q filed May 5, 2006.
Item 5. OTHER INFORMATION
(a) Because this Quarterly Report on Form 10-Q is being filed within four business days from the date of the reportable events, we have elected to make the following disclosures in this Quarterly Report on Form 10-Q instead of in a Current Report on Form 8-K under Item 1.01 Entry into a Material Definitive Agreement and Item 2.06 Material Impairments.
Entry into a Material Definitive Agreement
On May 4, 2006, Textron and Mary L. Howell, John D. Butler and Terrence O'Donnell entered into Amended and Restated Employment Agreements, amending the Employment Agreements dated July 23, 1998, July 23, 1998 and March 10, 2000, respectively. The intent of these Amended and Restated Employment Agreements, which was mutually agreed upon by the executives and the Board of Directors, was to eliminate the inclusion of any performance share units granted after 2005 from the calculation of the executives' benefits under the Supplemental Retirement Plan for Textron Key Executives (the "SERP").
PART II. OTHER INFORMATION (continued)
In consideration of this elimination of performance share units granted after 2005 from the calculation of SERP benefits, the Amended and Restated Employment Agreements for Ms. Howell and Mr. Butler each provide that, in the event of the executive's death, disability, termination without "cause" or resignation for "good reason," the executive will become fully vested in the maximum annual benefit payable under the SERP (i.e., 50% of highest consecutive five-year compensation reduced by benefits payable under other plans). Except in the case of death or a termination following a change of control, the SERP benefits so calculated, to the extent they exceed the benefits calculated without regard to such accelerated vesting provision, will not be payable until two and one-half years following termination.
In the case of Mr. O'Donnell, in consideration for the elimination of performance share units granted after 2005 from the calculation of SERP benefits, Textron has agreed to credit Mr. O'Donnell's account under the Deferred Income Plan for Textron Key Executives with an additional $157,465 as of January 1, 2006, and as of each anniversary of such date ending with January 1, 2009. Such amounts will be credited only if Mr. O'Donnell remains employed on the relevant dates, or if his employment is terminated without cause or he resigns for good reason, in which case the discounted present value of any installment not yet credited to Mr. O'Donnell's account will be accelerated and paid to Mr. O'Donnell in cash.
The Amended and Restated Employment Agreements also clarify certain language to reflect historic interpretations of the provisions so to avoid any future ambiguity, supply a previously absent definition of compensation for purposes of post-termination deemed years of service under Textron's pension plans and add a provision to make adjustments necessary to bring the Amended and Restated Employment Agreements in compliance with the new requirements with regard to deferred compensation under Section 409A of the Internal Revenue Code.
Also on May 4, 2006, Textron entered into a Second Amendment to the Employment Agreement with Lewis B. Campbell entered into as of July 23, 1998 (as amended by the First Amendment dated as of May 6, 2005). This Amendment implements clarifying changes substantially identical to those referred to above in the description of the Amended and Restated Employment Agreements with Ms. Howell and Messrs. Butler and O'Donnell.
Copies of the Amended and Restated Employment Agreements with Ms. Howell and Messrs. Butler and O'Donnell are attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively. A copy of the Campbell Second Amendment is attached hereto as Exhibit 10.4.
In December 2005, Textron's Board of Directors authorized the divestiture of the Textron Fastening Systems business. With this approval, Textron committed to actively market the segment and expected to complete the sale within 12 months. Beginning in the fourth quarter of 2005, the Fastening Systems segment was reported as a discontinued operation.
In the first quarter of 2006, Textron's management commenced its marketing efforts including establishing the proposed deal structure and identifying potential buyers. Formal negotiations commenced with a number of potential purchasers and specific terms and conditions have been discussed including the impact on the sales price of depreciation, currency exchange fluctuation, the assumption of liabilities, as well as the transfer of pension related obligations and assets.
On May 4, 2006, as a result of the offers received from potential purchasers of substantially all of the business of the segment, and the additional obligations that Textron now estimates will need to be settled as part of the sale, Textron determined that the net assets of discontinued operations related to the Textron Fastening Systems business may exceed the fair value less costs to sell. Consequently, Textron determined that it will incur a non-cash impairment charge in the second quarter of 2006 in the range of $75 million to $150 million.
PART II. OTHER INFORMATION (continued)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
LIST OF EXHIBITS
The following exhibits are filed as part of this report on Form 10-Q:
Name of Exhibit