Honeywell
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David M. Cote Honeywell
Chairman and Chief 101 Columbia Road
Executive Officer Morristown, NJ 07962
973-455-6768
EXHIBIT 10.26
June 12, 2003
Mr. David J. Anderson
25 Mead Street
New Canaan, CT 06840
Dear Dave:
I am pleased to confirm our offer to you to join Honeywell International as
Senior Vice President and Chief Financial Officer reporting to me. In this
position, you will be elected an Executive Officer (Band 7) of the Company at
the first Board of Directors' meeting following your acceptance. Please note
that the terms and conditions of this offer are subject to approval of the
Management Development and Compensation Committee of our Board of Directors.
Dave, we have put together a terrific compensation package that ensures the
financial security for you and your family both today and for the future. The
details of the offer are outlined below:
I. COMPENSATION
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Base Salary: Your annual base salary will be $700,000 (paid biweekly). Base
salary reviews occur annually on March 31 and adjustments are based on your
performance, company performance and market conditions.
Annual Incentive Bonus: Your target bonus opportunity will be 100% of your
annual cash base salary earnings during the year. Bonuses, which can range above
or below the target, are awarded based on company and individual performance
against specific financial and non-financial objectives. Your 2003 bonus will be
guaranteed at a minimum of $700,000 as long as you are actively employed at the
time the payment is made. Bonus payments are typically made in the first
quarter.
Long Term Incentive Award: You are eligible for an annual stock option grant
that will be determined by your performance and potential. Stock option awards
are typically made in the first quarter. You will receive a 2003 Growth Plan
award under our new 2-year LTIP program of 15,000 units, granted on the latter
of your start date or the next Management Development and Compensation Committee
meeting. A plan description will be sent to you.
Mr. David J. Anderson
Page 2 of 6
Make-Whole Awards:
o A Make-whole cash payment to replace the value of your 2001 ITT LTIP
in the amount of $848,000 will be required to be paid at your
retirement. Similarly, a Make-whole payment for the 2002 ITT LTIP in
the amount of $1,129,600 that would have been paid in January 2005,
will be deferred until retirement.
o In the event that you are required to forfeit your vested ITT options
prior to exercising them, we will pay you $2,260,000 in July 2003. If
you are allowed to keep the proceeds from the exercise of your vested
ITT stock options, we will provide stock price protection at the time
of exercise up to a 10% decline in stock price as measured by the
average 30 day closing price through June 11, 2003, in the form of a
stock option grant valued at $634,200, that will vest in one-year.
Additionally, if ITT allows you to keep the proceeds, we will provide
to you a $250,000 lump sum cash bonus.
These payments are subject to applicable tax withholding and are not considered
compensation under any Honeywell Benefit Plan.
You will also be granted on the latter of your start date or the next Management
Development and Compensation Committee meeting the following Make-Whole equity
awards:
o 62,000 Stock Options, vesting 20% on the first, second, third, fourth
and fifth anniversaries of the grant date, respectively.
o 75,000 Restricted Units, which will be payable 1/3 each on the third,
fourth and fifth anniversaries of the grant date, respectively. In the
event that you are involuntarily terminated for cause, as defined in
the Stock Plan, these units would be forfeited.
Sign-On Awards:
Also to be granted on the latter of your start date or the next Board meeting
the following Sign-On equity awards:
o 100,000 Stock Options, vesting 40%, 30% and 30% on the first, second
and third anniversaries of the grant date, respectively.
o 100,000 Performance Accelerated Stock Options. These options will vest
40%, 30% and 30% on the fourth, fifth and sixth anniversaries of the
grant date, respectively, or sooner if the following performance
measures are met on the following anniversary dates:
o 40% if during any 20 consecutive day trading period after the
grant date, Honeywell stock closes 25% above the grant price;
o 30% if during any 20 consecutive day trading period after the
grant date, Honeywell stock closes 50% above the grant price;
Mr. David J. Anderson
Page 3 of 6
o 30% if during any 20 consecutive day trading period after the
grant date, Honeywell stock closes 75% above the grant price.
o 75,000 Restricted Units, that will vest 1/3 each on the fourth, fifth
and sixth anniversaries of the grant date, respectively.
1) All exercises of equity awards will be governed by Honeywell's Stock
Ownership guidelines.
2) All grants of Stock Options, Restricted Units and Growth Plan Units are
subject to the terms and conditions of the 2003 Stock Plan.
3) You will have the opportunity to elect to receive or defer the quarterly
dividends associated with the Restricted Units.
II. BENEFITS
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Relocation: You are eligible for our Executive Relocation Policy for your move
from Birmingham which includes two months base salary ($116,667 grossed-up) as
your miscellaneous allowance. For information or to initiate your relocation
benefit, please contact Lee Vogt at 973-455-2666.
Pension: You will be eligible for an enhanced retirement benefit through a
combination of Honeywell's qualified retirement plan and a special non-qualified
pension enhancement that will provide:
If you retire on or after age 56, a monthly benefit commencing at
retirement equal to the benefit provided under the Honeywell
International Inc. Supplemental Executive Retirement Plan for
Executives in Career Band 6 and Above. Honeywell will credit your
years of service with both ITT and Honeywell as Service under the plan
for all plan purposes.
No enhancement will be available in the event of retirement or termination prior
to age 56.
Plus,
If you retire on or after age 60, a benefit for your lifetime in the
amount of $125,000 annually. In the event that you are terminated by
the company, other than for cause, after completing at least two years
of service with Honeywell, payment will commence as of January 1,
2010. In the event of change of control, payment will commence as of
January 1, 2010, regardless of the number of years of service
completed by you as of the date of the change in control. If you
retire on or after age 62, this lifetime benefit will be in the amount
of $175,000 annually.
Savings Plan: Upon employment, you are eligible to participate in Honeywell's
Savings Plan without a Company matching contribution. After one year, the
Company matches fifty cents ($.50) on any dollar of your savings, up to 8% of
your base salary. The
Mr. David J. Anderson
Page 4 of 6
Company's match increases to one dollar ($1.00) for each one dollar ($1.00) of
your savings after five (5) years of matching participation in the Honeywell's
Savings Plan.
The Company's contribution is fully vested after three (3) years of service at
Honeywell.
The Savings Plan provides several attractive investment opportunities and has a
401(k) feature. Your current savings in a qualified 401(k) plan can be rolled
over to our plan. Employees are permitted to borrow from their savings account.
In addition, we have a Non-Qualified Supplemental Savings Plan ("SSP") that is
designed to assist highly paid employees whose contributions or compensation
taken into account under our tax qualified savings plan is limited by federal
tax law. The current interest rate for amounts you contribute to the plan is
10%. Your contributions are matched by notional shares of Honeywell stock.
Please note that the SSP is unfunded and is subject to the claims of Honeywell's
general creditors.
Salary and Incentive Compensation Deferrals: You may defer up to 50% of your
base salary and 100% of your bonus. The interest rate for amounts deferred in
2003 is 10%, if you remain with Honeywell for 3 years from the end of the
calendar year in which the deferral was made, or 7% if your employment
terminates sooner.
Medical and Dental Plans: Medical and Dental Plans provide competitive and
comprehensive coverage on a subsidized basis. Coverage begins on the first day
of employment.
Short Term Disability (STD): A benefit of up to 26 weeks base salary will be
provided.
Long Term Disability (LTD): The plan provides 60% of your base salary and
incentive compensation target up to a maximum of $30,000 per month. This plan is
contributory.
Vacation: You will be eligible for four (4) weeks' vacation.
Life Insurance:
o Group Life will be provided on a non-contributory basis in an amount
equal to one and one-half times your base salary. Additionally, Group
Universal Life is available; equal to eight (8) times base salary (up
to a maximum of $5.0 million) and is contributory at an attractive
group basis. Group Universal Life amounts over $250,000 are subject to
evidence of good health.
o Accidental Death and Dismemberment insurance is provided by the
company at 1.5x base salary and on a contributory basis a benefit up
to the maximum of eight (8) times your base salary (up to a maximum if
$2.0M).
o Business Travel Accident insurance is provided on a non-contributory
basis, and provides a death benefit in the case of a business-related
accident, of up to five (5) times your annual base salary.
Mr. David J. Anderson
Page 5 of 6
Other Executive Benefits:
o Flexible Perquisite Allowance: You will be eligible for a quarterly
payment of $12,500 (an annual benefit of $50,000), which is designed
to pay for, but is not limited to, expenses such as a car, and
financial and estate planning assistance. This allowance is not
considered eligible compensation for Honeywell's Benefit Plans and is
treated as taxable income subsequent to tax withholding. This plan is
currently under review and subject to change. In the event that the
plan changes, you will be eligible for the same benefits available to
other Executive Officers of the company.
o Executive Travel - As an Executive Officer of the Company, you are
eligible to fly first-class or on corporate aircraft.
o Excess Liability Insurance: You will receive Excess Liability
Insurance of $10,000,000 per occurrence.
o Senior Executive Severance: The Company will provide 36 months of
continued base salary, annual incentive bonus at the target bonus
opportunity then in effect, and certain benefits, in the event of your
involuntary termination for other than gross cause.
o Golf Membership: You will be eligible to use Honeywell's corporate
golf membership at Fiddler's Elbow Country Club. Details of the
membership and the terms of use will be provided in the near future.
As required for all new employees, this offer is subject to certification of
suitability for your proposed employment which will include screening for
illegal substance abuse, satisfactory reference checks and background
investigation, verification of documentation required in compliance with the
Immigration Reform and Control Act of 1986, and your signing the Company's
Agreement Relating to Intellectual Property and Confidential Information.
PRIOR TO YOUR STARTING DATE
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Upon your acceptance, please schedule your pre-employment drug-screening test.
To determine a location nearest you, refer to the website "questdiagnostic.com"
(click Patient Service Center and then click Drug Screen Collection) or you can
call Quest Diagnostic at 1-800-877-7484. (Bring with you the attached "Forensic
Drug Testing Custody and Control Form"). This testing should be done at least
three working days prior to your starting date to allow sufficient time to
obtain the results.
Once you have formally accepted your offer of employment with the company, login
to Honeywell's Pre-Employment Tool Kit Portal at
http://www.honeywell.com/newhire. Enter Username: candidate and Password:
nh35honey (Username and Password are case sensitive) and then click on FORMS to
complete your paperwork.
Mr. David J. Anderson
Page 6 of 6
Forms submission works best when using the Internet Explorer browser version 5.0
or above. Enter the email address where indicated on the screen, HR/STAFFING:
lucy.fitze@honeywell.com and be sure to enter your return email address to
receive a copy of your forms for your records.
Other sections you should review before your first day are About Honeywell, Our
Businesses, Orientation, and Benefits. The Checklist will help you keep track of
your new employee "to do" list, and Frequently Asked Questions are provided for
your reference. Once you begin work at Honeywell, please complete the Feedback
Survey to tell us how to make the new employee experience even more valuable for
future employees.
Dave, I very much look forward to working with you. Your experience and
background will be a major asset to our Company, and we look forward to having
you join the Leadership team. We have a lot to do as we position Honeywell for
growth and we intend to work hard and have lots of fun doing it. We want you as
part of this team.
Personal regards,
/s/ David M. Cote
Read and Accepted: /s/ David J. Anderson
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Signature
Date: June 12, 2003
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cc: T. Weidenkopf
B. Marcotte
A. Versfeld