Deferred Compensation Plan for Non-Employee Directors - AlliedSignal Inc.

 
            DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS OF
                               ALLIEDSIGNAL INC.
                 (AS AMENDED EFFECTIVE AS OF NOVEMBER 1, 1993)
 
1. ELIGIBILITY
 
     Each   member  of  the  Board  of   Directors  of  AlliedSignal  Inc.  (the
'Corporation') who  is  not  an  employee  of the  Corporation  or  any  of  its
subsidiaries  is eligible to  participate in the  Deferred Compensation Plan for
Non-Employee Directors of AlliedSignal Inc. (the 'Plan').
 
2. PARTICIPATION
 
     (a) Time of  Election. Prior to  the beginning of  any calendar year,  each
eligible  Director  who is  not  then participating  in  the Plan  may  elect to
participate in the Plan by  directing that all or  any part of the  compensation
(including  compensation  payable for  services  as a  member  or chairman  of a
committee of the Board)  which otherwise would have  been payable currently  for
services  as a Director during such  calendar year and succeeding calendar years
shall be credited to a deferred compensation account (the 'Director's  account')
either  in cash or in  shares of the Corporation's  Common Stock. Any person who
shall become a Director during any calendar year, and who was not a Director  of
the  Corporation prior to the beginning of such calendar year, may elect, before
the Director's  term  begins,  to defer  payment  of  all or  any  part  of  the
Director's  compensation  for  the  remainder  of  such  calendar  year  and for
succeeding calendar years.
 
     (b) Form and Duration of Election.  An election to participate in the  Plan
shall  be made  by written notice  executed by  the Director and  filed with the
Secretary of the Corporation. Such election  shall continue in effect until  the
Director  terminates such election by written notice filed with the Secretary of
the Corporation. Any such  termination shall become effective  as of the end  of
the  calendar  year in  which  such notice  is given  and  only with  respect to
compensation payable for services as a Director thereafter. Amounts credited  to
the  Director's account prior to the effective  date of termination shall not be
affected by such termination  and shall be distributed  only in accordance  with
the terms of the Plan.
 
     (c)  Adjustment of Amount Deferred. Prior  to the beginning of any calendar
year, a Director participating in the Plan may file another written notice  with
the  Secretary of the Corporation electing  to change the amount of compensation
to be credited to the Director's  account for services as a Director  commencing
with such calendar year. Amounts credited to the Director's account prior to the
effective  date of such change shall not be affected by such change and shall be
distributed only in accordance with the terms of the Plan.
 
     (d) Renewal. A Director who has terminated his election to participate  may
thereafter file another election to participate for the calendar year subsequent
to the filing of such election to participate and succeeding calendar years.
 
3. THE DIRECTOR'S ACCOUNT
 
     (a)  All compensation which a Director has  elected to defer under the Plan
shall be credited to the Director's account, either in cash or in shares of  the
Corporation's  Common Stock (valued for quarterly  retainer payments at the mean
between the highest and lowest sales prices of the Common Stock reported as  New
York  Stock Exchange - Composite Transactions for the first business day of the
calendar quarter and valued  for meeting fees  at such mean for  the day of  the
meeting  (or, if  there were no  sales on  such day, at  such mean  for the next
preceding day  on which  there were  sales)), as  elected by  the Director.  The
Director  shall  not  have  any  interest in  the  cash  or  Common  Stock until
distributed in accordance with the Plan.
 
     (b) Cash  amounts credited  to the  Director's account  for services  as  a
Director  during 1993 or any prior calendar year shall accrue amounts equivalent
to interest commencing on the date such amounts would otherwise have been  paid,
at  a  rate  per  annum  for  each  calendar  quarter  fixed  by  the  Treasurer
 

 

of the Corporation at the commencement  of such calendar quarter based upon  the
sum  of (i) the average quoted rate  for three-month U.S. Treasury Bills for the
last full week of the preceding calendar  quarter, and (ii) a rate per annum  of
three percent.
 
     (c)  Cash  amounts credited  to the  Director's account  for services  as a
Director during  1994  or any  subsequent  calendar year  shall  accrue  amounts
equivalent  to interest commencing on the date such amounts would otherwise have
been paid, at the same rates per annum as those fixed for deferrals with respect
to  the  relevant   calendar  years  under   the  AlliedSignal  Inc.   Incentive
Compensation Plan for Executive Employees, as amended from time to time.
 
     (d)  Cash amounts  credited to  the Director's account  as a  result of the
conversion of shares  to cash pursuant  to paragraph 5(a)  shall accrue  amounts
equivalent  to interest commencing on the date of such conversion, at the higher
of the  two rates  provided under  paragraphs 3(b)  and (c),  regardless of  the
calendar  year or years to which the  underlying deferral of shares relates. The
determination of which rate is higher shall be made quarterly and, for  purposes
of  such determination, the rate provided  under paragraph 3(c) for cash amounts
deferred with respect to the then current calendar year shall be compared to the
rate provided under paragraph 3(b) for the then current calendar quarter.
 
     (e) Amounts determined pursuant to this paragraph 3 shall be compounded  at
the end of each calendar quarter and credited to the Director's account. Amounts
credited  to the Director's account shall  continue to accrue amounts equivalent
to interest until distributed in accordance with the Plan.
 
     (f)  Shares  credited  to  the  Director's  account  shall  accrue  amounts
equivalent  to  cash  or  stock dividends.  Such  amounts  shall  accrue amounts
equivalent to interest or  dividends in the same  manner as other amounts  which
may be credited to a Director's account.
 
4. DISTRIBUTION FROM ACCOUNTS
 
     (a) Form of Election. At the time a Director makes a participation election
pursuant to paragraphs 2(a), 2(c) or 2(d), the Director shall also file with the
Secretary of the Corporation a written election with respect to the distribution
of  the aggregate amount of  cash and shares credited  to the Director's account
pursuant to such participation  election. A Director may  elect to receive  such
amount   in  one  lump-sum  payment  or  in  a  number  of  approximately  equal
installments (provided the payout period does not exceed 10 years). The lump-sum
payment or the first installment shall be paid on the first business day of such
calendar year as  the Director may  elect or,  absent such an  election, on  the
first  business day of the calendar year immediately following the year in which
the Director ceases to be a Director of the Corporation. Subsequent installments
shall be paid on  the first business day  of each succeeding installment  period
until the entire amount credited to the Director's account shall have been paid.
If  shares have been  credited to a  Director's account, a  cash payment will be
made with the lump-sum payment  or the final installment  for any fraction of  a
share credited to the Director's account.
 
     (b)  Adjustment of  Method of Distribution.  Whether or not  a Director has
filed a  notice pursuant  to paragraph  2(c) electing  to change  the amount  of
compensation  to be credited to the Director's account, a Director participating
in the Plan  may, prior  to the  beginning of  any calendar  year, file  another
written  notice with  the Secretary  of the  Corporation electing  to change the
method of distribution of  the aggregate amount of  cash and shares credited  to
the  Director's account for services as a Director commencing with such calendar
year. Amounts credited to the Director's account prior to the effective date  of
such  change shall not be affected by  such change and shall be distributed only
in accordance with the election in effect at the time such amounts were credited
to the Director's account.
 
5. CHANGE IN CONTROL
 
     (a) Conversion of Shares. Notwithstanding  anything to the contrary in  the
Plan,  shares credited to  a Director's account  shall be converted  to cash, as
soon as practicable following a Change in Control but in no event later than  90
days  after the  Change in Control,  in an amount  equal to the  total number of
shares, and fractional  interests thereof, credited  to the Director's  account,
multiplied  by the Multiplication Factor. 'Multiplication Factor' shall mean (A)
in the case of  an acquisition of Common  Stock described in paragraph  5(d)(i),
the  Acquisition Price per Share, (B) in the event of the occurrence of an Offer
as defined in paragraph 5(d)(ii), the Offer Price per Share, (C) in the case  of
an event
 

 

described in paragraph 5(d)(iii), the Merger Price per Share, or (D) in the case
of  a change in the composition of the Board as described in paragraph 5(d)(iv),
the highest Fair Market Value per Share  of the Common Stock for any day  during
(i)  the ninety-day period ending on or within 89 days following the date of the
Change in Control which the Nominating and Board Affairs Committee of the  Board
(the  'Committee'), in its sole discretion, shall  select prior to the Change in
Control, or (ii) if  the Committee shall not  have selected a ninety-day  period
pursuant  to clause  (i) of this  sentence prior  to the Change  in Control, the
ninety-day period ending on  the 45th day  following the date  of the Change  in
Control. 'Acquisition Price per Share' shall mean the greater of (A) the highest
price per share stated on the Schedule 13D or any amendment thereto filed by the
holder  of 30% or more of the Corporation's voting power which gives rise to the
Change in Control, and  (B) the highest  Fair Market Value  per Share of  Common
Stock  during the  ninety-day period  ending on the  date the  Change in Control
occurs. 'Offer Price per Share' shall mean the greater of (A) the highest  price
per  share of Common  Stock paid in any  Offer, which Offer is  in effect at any
time during the  ninety-day period ending  on the  date on which  the Change  in
Control  occurs, or (B) the highest Fair  Market Value per Share of Common Stock
during such ninety-day period. Any securities or property which are part or  all
of  the consideration  paid for  shares of  Common Stock  in the  Offer shall be
valued in  determining the  Offer  Price per  Share at  the  higher of  (A)  the
valuation  placed on such  securities or property by  the corporation, person or
other entity making such Offer or (B) the valuation placed on such securities or
property by the Committee.  'Merger Price per Share'  shall mean the greater  of
(A)  the fixed or  formula price for  the acquisition of  shares of Common Stock
occurring pursuant to such event described in paragraph 5(d)(iii) if such  fixed
or  formula price  is determinable on  the date  on which the  Change in Control
occurs, and (B) the highest Fair Market  Value per Share of Common Stock  during
the  ninety-day period ending on the date on which the Change in Control occurs.
Any securities or property which are part  or all of the consideration paid  for
shares of Common Stock pursuant to such event shall be valued in determining the
Merger  Price  per Share  at  the higher  of (A)  the  valuation placed  on such
securities or property  by the corporation,  person or other  entity which is  a
party  with the Corporation to an event described in paragraph 5(d)(iii), or (B)
the valuation  placed on  such  securities or  property  by the  Committee.  For
purposes of this paragraph (5)(a), 'Fair Market Value per Share of Common Stock'
for  any day shall  be the mean between  the highest and  lowest sales prices of
Common Stock as reported on the New York Stock Exchange Composite Tape for  such
day.
 
     (b)  Interest Equivalents. Notwithstanding anything  to the contrary in the
Plan, in the event of a Change in Control, the Plan may not be amended to reduce
the formulas contained in paragraph 3 which determine the rate at which  amounts
equivalent  to  interest  accrue with  respect  to  cash amounts  credited  to a
Director's account, including  cash amounts  attributable to  the conversion  of
shares  in  a  Director's  account  pursuant to  paragraph  5(a),  and  the Plan
Administrator referred to in paragraph 8(c)  shall fix rates under the  formulas
contained in paragraph 3 in lieu of the Treasurer of the Corporation.
 
     (c)(i)  Initial Lump-Sum Payment Election. Notwithstanding any notice filed
pursuant to paragraph 4,  a Director may,  prior to the earlier  of a Change  in
Control  or September 30, 1990, file a  written notice with the Secretary of the
Corporation electing to  have the  aggregate amount credited  to the  Director's
account for services performed as a Director both before and after the filing of
the written notice paid in one lump-sum payment as soon as practicable following
a  Change in Control  but in no  event later than  90 days after  such Change in
Control. Notwithstanding any notice  filed pursuant to  paragraph 4, any  person
who  becomes a Director of the Corporation  after September 30, 1990, may file a
written notice with the Secretary of the Corporation before the Director's  term
begins, electing to have the aggregate amount credited to the Director's account
for  services performed as  a Director paid  in one lump-sum  payment as soon as
practicable following a Change  in Control but  in no event  later than 90  days
after such Change in Control.
 
     (c)(ii)  Subsequent Lump-Sum Payment Election. A  Director who did not make
an election  pursuant to  paragraph  5(c)(i) or  who  has revoked,  pursuant  to
paragraph 5(c)(iii), an election previously made under paragraph 5(c)(i) or this
paragraph  5(c)(ii) may,  prior to  the earlier  of a  Change in  Control or the
beginning of the calendar year in which  the election is to take effect, file  a
written  notice  with the  Secretary of  the Corporation,  electing to  have the
aggregate amount credited to the Director's account for services performed as  a
Director,  for  all  calendar  years commencing  with  the  first  calendar year
beginning after  the date  the written  notice is  filed, paid  in one  lump-sum
payment as soon as
 

 

practicable  following a Change  in Control but  in no event  later than 90 days
after such Change in Control. Amounts  credited to the Director's account  prior
to  the effective date  of the written  notice filed pursuant  to this paragraph
5(c)(ii) shall not be affected by  such written notice and shall be  distributed
following  a Change in Control  in accordance with any  prior election in effect
under paragraphs 5(c)(i) or 5(c)(ii).
 
     (c)(iii) Revocation of Lump-Sum Payment Election. A Director may, prior  to
the earlier of a Change in Control or the beginning of any calendar year, file a
written  notice with the Secretary of the Corporation revoking any election made
pursuant to paragraphs 5(c)(i) or 5(c)(ii), with respect to amounts credited  to
the  Director's account for services performed as a Director commencing with the
first calendar  year  beginning  after  the written  notice  is  filed.  Amounts
credited  to the Director's account  prior to the effective  date of the written
notice filed pursuant to this paragraph 5(c)(iii) shall not be affected by  such
written  notice  and  shall be  distributed  following  a Change  in  Control in
accordance with  any  prior  election  in effect  under  paragraphs  5(c)(i)  or
5(c)(ii).
 
     (d)  Definition of Change in Control. For purposes of the Plan, a Change in
Control is deemed  to occur at  the time (i)  when any entity,  person or  group
(other  than the  Corporation, any subsidiary  or any savings,  pension or other
benefit  plan  for  the  benefit  of   employees  of  the  Corporation  or   its
subsidiaries)  which theretofore beneficially owned less  than 30% of the Common
Stock then  outstanding acquires  shares of  Common Stock  in a  transaction  or
series  of transactions that results in such entity, person or group directly or
indirectly owning beneficially 30% or more of the outstanding Common Stock, (ii)
of the purchase of shares of Common Stock pursuant to a tender offer or exchange
offer (other than  an offer by  the Corporation) for  all, or any  part of,  the
Common  Stock ('Offer'),  (iii) of  a merger in  which the  Corporation will not
survive as an  independent, publicly  owned corporation, a  consolidation, or  a
sale,  exchange  or  other  disposition  of  all  or  substantially  all  of the
Corporation's assets, (iv)  of a substantial  change in the  composition of  the
Board  during any period of  two consecutive years such  that individuals who at
the beginning of such period were members  of the Board cease for any reason  to
constitute  at least a majority thereof,  unless the election, or the nomination
for election by the  stockholders of the Corporation,  of each new director  was
approved  by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period, or (v) of any transaction  or
other event which the Committee, in its discretion, determines to be a Change in
Control for purposes of the Plan.
 
6. DISTRIBUTION ON DEATH
 
     If  a Director  should die  before all  amounts credited  to the Director's
account shall have  been paid in  accordance with the  elections referred to  in
paragraphs  4 or  5, the  balance in  such account  shall be  paid on  the first
business day of the calendar year following the year of the Director's death  to
the  beneficiary  designated  in writing  by  the  Director and  filed  with the
Secretary of the Corporation. Such  balance shall be paid  to the estate of  the
Director  if  (a)  no such  designation  has  been made  or  (b)  the designated
beneficiary shall have predeceased the  Director and no further designation  has
been  made. A Director may change the  designated beneficiary at any time during
the Director's lifetime by filing a  subsequent designation in writing with  the
Secretary of the Corporation.
 
7. PAYMENT IN THE EVENT OF HARDSHIP
 
     Upon  receipt  of a  request  from a  Director  or a  Director's designated
beneficiary, delivered  in writing  to  the Secretary  of the  Corporation,  the
Committee may cause the Corporation to accelerate payment promptly of all or any
part  of the unpaid portion of deferred compensation, including accrued amounts,
then credited to the Director's account if it finds in its sole discretion  that
continued  deferral of  such deferred  compensation, including  accrued amounts,
would result in  hardship to the  Director or the  person otherwise entitled  to
receive  it.  For  this  purpose, 'hardship'  means  an  unanticipated financial
emergency that is caused by an event beyond the control of the Director or other
person entitled to  receive payment and  that would result  in severe  financial
hardship to such person if acceleration of payment were not permitted.
 

 

8. MISCELLANEOUS
 
     (a)  The  right  of  a  Director to  receive  any  amount  credited  to the
Director's account  shall not  be transferable  or assignable  by the  Director,
except  by will or by  the laws of descent and  distribution. To the extent that
any person  acquires a  right to  receive any  amount credited  to a  Director's
account  hereunder, such  right shall  be no greater  than that  of an unsecured
general creditor of the  Corporation. Except as  expressly provided herein,  any
person  having an interest in any amount  credited to a Director's account under
the Plan shall not be entitled to payment  until the date the amount is due  and
payable.  No person shall  be entitled to anticipate  any payment by assignment,
alienation, sale, pledge, encumbrance or transfer in any form or manner prior to
actual or constructive receipt thereof.
 
     (b) The Corporation shall not be required to reserve or otherwise set aside
funds or shares of  Common Stock for the  payment of its obligations  hereunder.
The Corporation shall make available as and when required a sufficient number of
shares  of  Common Stock  to meet  the needs  of  the Plan.  To the  extent that
registration of such shares under the  Securities Act of 1933 shall be  required
prior  to their resale, the Corporation undertakes to either file a registration
statement relating to such shares or include such shares in another registration
statement to be filed within a reasonable time.
 
     (c) Prior to a  Change in Control, the  Committee shall interpret the  Plan
and  make  all  determinations  deemed necessary  or  desirable  for  the Plan's
implementation. The  determination of  the Committee  shall be  conclusive.  The
Committee  may obtain  such advice  or assistance  as it  deems appropriate from
persons not  serving  on the  Committee.  The  Senior Vice  President  -  Human
Resources  or other appropriate  officer of the Corporation  shall, prior to any
Change in Control, name as Plan  Administrator any person or entity  (including,
without limitation, a bank or trust company). Following a Change in Control, the
Plan  Administrator shall interpret the Plan  and make all determinations deemed
necessary or desirable for the  Plan's implementation. The determination of  the
Plan  Administrator shall be conclusive. The  Corporation shall provide the Plan
Administrator with such records and information as are necessary for the  proper
administration  of the Plan.  The Plan Administrator shall  rely on such records
and other  information as  the Plan  Administrator shall  in its  judgment  deem
necessary  or appropriate in  determining the eligibility of  a Director and the
amount payable to a Director under the Plan.
 
     (d) The Board of Directors may at any time amend or terminate the Plan. The
Plan may also  be amended  by the  Corporation with  the approval  of its  Chief
Executive  Officer, provided that  all such amendments shall  be reported to the
Board. No amendment or  termination shall impair the  rights of a Director  with
respect to amounts then credited to the Director's account.
 
     (e)  Each Director  participating in the  Plan will receive  a statement at
least annually indicating the  amount of cash and  number of shares credited  to
the Director's account as of the end of the preceding calendar year.
 
     (f)  If adjustments  are made  to outstanding shares  of Common  Stock as a
result of stock dividends, split-ups, recapitalizations, mergers, consolidations
and the like,  an appropriate  adjustment will  also be  made in  the number  of
shares credited to the Director's account.