Employment Agreement - Raytheon Co. and Keith J. Peden
Keith J. Peden Raytheon Company
Vice President and Deputy Executive Offices
Director Human Resources 141 Spring Street
781 860 2380 Lexington, Massachusetts
781 860 2912 fax 02421 USA
March 13, 2000
Mr. Shay D. Assad
7 School Street
Hopkinton, MA 01748
Re: Retention Bonus
Raytheon Company is exploring various alternatives with respect to
Raytheon Engineers and Constructors, Inc. (hereinafter 'RE&C'), including its
sale to a third party. This letter sets forth the special incentive arrangement
and conditions for which you will be eligible in connection with your continued
employment and cooperation in the potential sale of RE&C.
Raytheon will decide in its sole discretion if and when it will proceed
with the sale of RE&C, or any portion of the assets of RE&C and the terms and
conditions upon which any sale or sales shall be effected. Nothing contained
herein shall obligate the sale of RE&C, any portion thereof or assets of RE&C at
this or any other time.
1. You agree to assist and fully cooperate with RE&C in all matters
related to its efforts to sell, and to do and perform all tasks reasonably
requested of you to support and bring about such sale. Furthermore, in
recognition of RE&C's desire that you make yourself available for employment
with the eventual buyer should the buyer desire to retain your services, you
agree to review and consider in good faith employment offers, if any, made by
2. Change In Control. The Company agrees that the successful change in
control of RE&C shall constitute a qualifying event for purposes of your
Raytheon Company Change in Control Severance Agreement ('CIC Agreement') dated
November 22, 1995, as amended. Consequently, you shall be entitled to the
Severance Benefit provided in Section 1.9 and the Excise Tax Payments, if
applicable, as set forth in Section 5. The amount due under the CIC Agreement
shall be paid to you within twenty (20) days of the Closing Date.
3. 1999 Results Based Incentive ('RBI') Bonus. You shall be
eligible for an RBI Bonus consistent with the terms of the performance measures
of the 1999 RBI Bonus Plan.
4. Retention Bonus. If you continue as an employee until the
Closing Date of the sale of RE&C, you will be eligible to participate in the
following Retention Bonus arrangement.
(A) The Retention Bonus shall be two times the annual base salary
rate you are paid as of the Closing Date and two times your
targeted 1999 RBI Bonus. The Retention Bonus is divided into
three parts and is subject to the terms and conditions set
(i) Part 1: Part 1 of the Retention Bonus is twenty-five
percent (25%) of one year's base salary and bonus.
You will be paid Part 1 if you continue to be an
active employee as of the Closing Date. Part 1 will
be paid within twenty (20) days of the Closing Date.
(ii) Part 2: Part 2 of the Retention Bonus is seventy-five
percent (75%) of one year's base salary and bonus.
You will be entitled to Part 2 if you are employed by
the Buyer on the first anniversary of the Closing
Date. Part 2 will be paid within twenty (20) days of
(iii) Part 3: Part 3 of the Retention Bonus is one year's
base salary and bonus. You shall receive Part 3 if
you are employed by the Buyer on the second
anniversary of the Closing Date. Part 3 will be paid
within twenty (20) days of this date.
(B) You shall be entitled to the full Retention Bonus (Parts 1, 2
and 3) as of the Closing Date if:
(i) You are not offered a position with the Buyer, nor are
you offered continued employment with Raytheon Company,
an affiliate or subsidiary, or
(ii) You are offered a position with the Buyer, but the
position does not include a base salary essentially
equivalent to your base salary with RE&C at the time
of the Closing.
(C) You shall be entitled to any unpaid part of the Retention
Bonus if you accept a position with the Buyer and, during the
first twenty-four (24) months of such employment, you are:
(i) Involuntarily separated from employment without cause, as
defined below; or
(ii) Subjected to a substantial reduction in the base
salary paid by the Buyer at the inception of your
employment with the Buyer.
(D) For purposes of this Retention Bonus arrangement, 'cause' shall be
(i) Failure to perform any of the material duties of the
position with the Buyer, including special projects
and assignments, after notice and a reasonable
opportunity to correct performance; or
(ii) Breach of any material provision of the Buyer's Standards
of Business Behavior and Ethics; or
(iii) Conviction of, or plea of nolo contendere to, any
felony or misdemeanor which has a material impact on
your ability to perform the duties of your position.
(E) If you are entitled to Part 2 or 3 of the Retention Bonus due
to the occurrence of the conditions set forth in paragraphs
4(B)-(C), you shall receive this payment within twenty (20)
days of written demand from you establishing to Raytheon's
satisfaction the occurrence of such condition(s).
5. Termination Prior to Closing. Raytheon retains the right to
terminate your employment prior to the Closing for the reasons set forth below.
In the event of a termination for cause, you shall not be entitled to the
Retention Bonus. Reasons for termination which shall constitute grounds for a
denial of the Retention Bonus are:
(A) Failure to perform any of the material duties of your
position, including special projects and assignments, after
notice and a reasonable opportunity to correct performance; or
(B) Breach of any material provision of the Raytheon's Standards of
Business Behavior and Ethics; or
(C) Breach of any material provision of Raytheon Company Rules and
If you are terminated prior to Closing for a reason other than those
specified in subparagraphs (A), (B) and (C) above, you will be eligible for
Portion 1 of the Retention Bonus set forth in paragraph 4.
6. Benefit Assurance. The company intends to seek agreement with the
Buyer to provide employee benefits reasonably comparable in the aggregate to the
current company benefits. If the company is unable to reach such agreement, you
will receive a one-time lump sum payment as a one-year benefit differential.
(a) Vested Stock Options at Closing Date: For those stock
options which are vested as of the Closing Date, you
shall have three (3) years from the last day worked
for Raytheon to exercise these options. The procedure
for the exercise of the options will vary depending
upon whether you exercise the options during or after
the first anniversary of your separation from
(i) First Year Exercise: Exercise of these
options during the first year following your
last day worked for Raytheon shall be
pursuant to the procedure set forth in 'A
Guide to Your Raytheon Company Stock Option
Plan' (see page 8 of attached copy).
(ii) Exercise Years 2 and 3: The following terms
and procedures shall govern the exercise of
your options after the first anniversary and
ending on the third anniversary of your last
day worked for Raytheon:
(A) Basis for Separation from Employment:
(1) Involuntarily Without Cause: If you are
involuntarily terminated without cause, as
defined in paragraph 3(D), you may exercise
these options through the third anniversary of
the Closing Date.
(2) Involuntarily With Cause: If you are
terminated for cause, as defined in paragraph
3(D), by the Buyer, you will immediately lose
the right to exercise these options as of the
date terminated by the Buyer.
(3) Voluntary Termination: If you voluntarily
terminate your employment during this period,
you shall have thirty (30) calendar days
following your last day actually worked to
exercise these options.
(i) On any business day you may elect to obtain the
value of all or a portion of these options by
contacting the Stock Administration Group,
Corporate Human Resources, Lexington, MA at
781-860-2903 and making a verbal request
identifying the number of shares you want to
'exercise.' This request should be confirmed
by facsimile letter to the Stock Administrator,
Fax No. 781-860-3688 as soon as possible after
the verbal request.
(ii) Raytheon will then calculate the amount due to
you by multiplying the number of shares you
want to exercise by the difference between the
option price and the highest reported trading
price on the date of your request following the
time of your request to the Stock
(iii) Payment of the amount calculated pursuant to
subsection (b) above, subject to applicable
statutory withholdings, will be sent to you by
check, within seven (7) days of your 'exercise'
(b) Non-Vested Stock Options at Closing Date. With respect to
your options which have not vested as of the Closing Date, the
company intends to reach an agreement with the Buyer whereby
the unvested options are converted to an equivalent value of
Buyer's common stock. Under the intended agreement, structured
to comply with the applicable provisions of the Internal
Revenue Code (ss. 422 and 424), your current unvested options
in Raytheon stock would be adjusted to constitute a Buyer
option to acquire the number of shares of Buyer's stock equal
to the number of shares of Raytheon stock subject to option
times a fraction, the numerator of which is the average of the
daily average of the high and low trading prices of Raytheon
stock for the three business days prior to the Closing Date,
and the denominator of which is the average of the daily
average of the high and low trading prices of each share of
Buyer common stock for the three business days prior to the
(c) Restricted Stock. The restrictions on your restricted stock
award will be waived as of the Closing Date, and you will
receive the cash value of these shares at the highest traded
price on that day, payable within twenty (20) days, subject to
normal applicable tax withholdings.
8. Long Term Achievement Program ('LTAP'). You shall continue as an
active participant in the LTAP transition plans for 1999 and 2000; and, the
1999-2001 plan in accordance with LTAP terms. The payout, if any, for the
performance cycles shall be made after the performance cycles in accordance with
each plan's performance measures.
9. Pension. As of the Closing Date, you will be vested in the accrued
benefit as provided pursuant to the terms of the Raytheon Company Pension Plan
for Salaried Employees.
10. Financial and Estate Planning Program. The financial and estate
planning services provided in accordance with the Raytheon Executive Perquisite
Program shall continue through June 30, 2000.
11. Prior to any public announcement concerning the sale of RE&C, you
agree that without the prior consent of Raytheon you will not have any contact
with nor disclose to any person or entity (other than those individuals
identified to you in writing as being active participants in the sale process),
either the fact that discussions or negotiations are taking place or have taken
place regarding the possible sale of RE&C or any of the terms, conditions or
other facts relating to the possible sale, including the status thereof. During
the course of the negotiation of the possible sale of RE&C, you recognize your
continuing duty of loyalty and obligation to act in the best interests of the
12. Confidentiality. You agree to keep confidential this agreement and
not to disclose either the fact of the agreement or the terms thereof, except
where necessary to members of your immediate family, tax or legal advisors, and
as required in response to a valid subpoena or court order.
13. Arbitration of Claims. The parties agree that any disputes arising
during the term of your employment with Raytheon and/or RE&C, including but not
limited to any claims arising under the terms of this agreement, shall be
subject to final and binding arbitration as the sole and exclusive forum for
dispute resolution. Arbitration under this section shall be conducted pursuant
to the rules of the American Arbitration Association applicable to employment
Please acknowledge your acceptance of the terms and conditions of this
Retention Bonus agreement by signing below.
Very truly yours,
Keith J. Peden
Vice President and Deputy Director
AGREED AND ACCEPTED:
cc: D. M. Donovan
G. F. Gasperini