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Exhibit
10.40
Lockheed Martin
Corporation
Severance Benefit Plan For
Certain Management Employees
January 1,
2008
This document sets forth the terms of
the Lockheed Martin Corporation Severance Benefit Plan for Certain
Management Employees (the “Plan”). The Plan provides
benefits to Eligible Employees who leave the employment of the
Corporation as a result of an Executive Layoff Event and otherwise
satisfy the eligibility requirements of the Plan. The Plan is
intended to constitute an employee welfare benefit plan under the
Employee Retirement Income Security Act of 1974
(“ERISA”) that provides severance benefits to a select
group of management or highly compensated employees.
| 1. |
Definitions. The following terms when capitalized have
the following meaning: |
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(a) |
Affiliate - Any person, any corporation, association,
partnership, joint venture or other business entity of which 50% or
more of the voting stock or other equity interests (in the case of
entities other than corporations), is owned or controlled (directly
or indirectly) by the Company or by one or more of its Affiliates,
or by a combination thereof. |
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(b) |
Annual Base Pay - An amount equal to fifty-two
(52) weeks of Base Pay. |
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(c) |
Base Pay - The Employee’s weekly salary at the
time of the Employee’s termination of employment. Base Pay
shall not include management incentive compensation, overtime or
any other additions to salary. |
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(d) |
Basic Severance Benefit - The benefit payable under
Section 5(a) of the Plan. |
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(e) |
Cause
- Any of the following: (i) Commission of a crime that the
Company determines could harm the Company’s reputation or
financial prospects or could subject the Company to penalties or
sanctions; (ii) A violation of any of the Company’s
corporate policy statements that involve compliance with
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law which violation the
Company determines could harm the Company’s reputation or
financial prospects; (iii) A violation of the Company’s
Code of Ethics and Business Conduct that the Company determines
could harm the Company’s reputation or financial prospects;
(iv) Refusal to cooperate with the Company in a Company
investigation; or (v) Any similar conduct with respect to
which the Company determines in its sole discretion that the
payment of a benefit under the Plan would not be in the
Company’s best interest.
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(f) |
Claims Administrator – The Committee, in the case
of an Officer, and the Senior Vice President, Human Resources, or
his or her delegate, in the case of any other Employee. |
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(g) |
Committee – The Management Development and
Compensation Committee of the Company’s Board of
Directors. |
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(h) |
Company – Lockheed Martin Corporation. For the
purposes of the Plan, the term “Company” shall include
any successor entity (by merger or otherwise). |
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(i) |
Eligible Employee – An Employee who satisfies the
requirements for eligibility for coverage under Section 3 and
who is not covered by any of the exceptions described in
Section 4. |
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(j) |
Employee – An individual who is employed by the
Company and is treated on the Company’s payroll records as a
salaried employee of the Company. The term “Employee”
includes an Officer but does not include anyone who is not a
citizen or resident of the United States and whose duties are
primarily performed outside the United States. |
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(k) |
Executive Layoff Event – Termination of employment
of an Eligible Employee that is (i) initiated by the Company
for reasons other than for Cause; and (ii) designated by the
Board of Directors in the case of an Officer, or the Senior Vice
President, Human Resources in the case of any Employee other than
an Officer, as an Executive Layoff Event. An Executive Layoff Event
does not include a termination that is described in
Section 4. |
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(l) |
Follow-on Benefits – A payment equal to the cost
to the Eligible Employee of continuing for one year his or her
coverage under the Company’s medical, dental and vision plans
under the plans and with the same level of coverage as elected by
the Eligible Employee during open enrollment for the Plan Year in
which the Executive Layoff Event occurs (but excluding flexible
spending account plans). The amount will be equal to the cost
charged Employees for coverage provided by the Company pursuant to
the Consolidated Omnibus Budget Reconciliation Act of 1987 (COBRA
coverage). |
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(m) |
Full Bonus Equivalent - An amount equal to an Eligible
Employee’s Annual Base Pay multiplied by the target level
assigned to the Eligible Employee under Paragraph B of Exhibit A to
the Lockheed Martin Corporation 2006 Management Incentive
Compensation Plan (Performance-Based) or any successor
plan. |
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(n) |
Long Term Incentive Performance Award – A cash
award under the Lockheed Martin Corporation Amended and Restated
2003 Incentive Performance Award Plan or any successor plan that
measures performance over a three year cycle. |
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(o) |
Officer – An Employee who is elected as an officer
of the Company by the Board of Directors. |
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(p) |
Plan Administrator - Lockheed Martin
Corporation. |
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(q) |
Plan Year – The 12-month period beginning on
January 1 each year and ending on the following
December 31. |
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(r) |
Prorated Bonus Equivalent - An amount equal to
(i) an Eligible Employee’s Base Pay multiplied by the
target percentage assigned to the Eligible Employee under Paragraph
B of Exhibit A to the Lockheed Martin Corporation 2006 Management
Incentive Compensation Plan (2006) (or any successor plan),
and (ii) then multiplying the product obtained under
(i) by the number of full weeks for which the Eligible
Employee was employed by the Company in the Plan Year in which the
Executive Layoff Event occurs. |
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(s) |
Salaried Employee Plan - The Severance Benefit Plan for
Employees of Lockheed Martin Corporation or any successor plan that
provides benefits in the case of a layoff or reduction in force to
salaried employees of the Company or its Affiliates. |
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(m) |
Severance Benefit - Benefits payable under the Plan
which could be a Basic Severance Benefit or a Supplemental
Severance Benefit. |
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(n) |
Supplemental Severance Benefit – The benefit
payable under Section 5(b) of the Plan. |
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(o) |
Years of Service - The number of consecutive calendar
months from (and including) the month of the Eligible
Employee’s date of hire through and including the month in
which the applicable Employee’s Executive Layoff Event
occurs, divided by 12, subject to the following: |
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(i) |
Service Limited to Whole Years . Fractional Years of
Service will be disregarded, so that only full Years of Service
will be recognized. The only exception relating to fractional years
of service pertains to Eligible Employees who have more than six
months of service, but less than a full year of service, in which
case the Years of Service will be calculated as one
year. |
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(ii) |
Certain Periods of Leave . Time periods of leave during
the Employee’s employment that do not or would not qualify
for credited service under the pension plan applicable to the
Eligible Employee will be deducted from the total period of
employment to calculate the Eligible Employee’s Years of
Service; |
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(iii) |
An Eligible Employee’s Years of Service under the
foregoing rules shall never exceed the actual number of full years
worked by the Employee for the Company. |
| 2. |
Effective Date . The Plan shall be effective with
respect to Executive Layoff Events that occur and are announced on
or after January 1, 2008. |
| 3. |
Eligibility for Coverage. An Employee shall be eligible
for coverage under the Plan if the Employee satisfies all of the
following: |
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(a) |
At the time of the Executive Layoff Event, the Employee is
either |
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(ii) |
an Employee who has been granted a Long Term Incentive
Performance Award for which a performance cycle is still ongoing;
or |
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(iii) |
an Employee who is designated in writing by the Senior Vice
President, Human Resources to participate in the Plan. |
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(b) |
The Employee has not waived coverage under the
Plan; |
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(c) |
The Employee is not receiving a benefit under the Salaried
Employee Plan and is not a party to another plan, agreement or
arrangement providing severance or similar benefits on account of
termination of employment; |
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(d) |
The Employee is not disqualified for a Severance Benefit
because the Employee’s termination of employment is on
account of one of the exceptions set forth in Section 4;
and |
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(e) |
The Senior Vice President, Human Resources determines in his or
her sole discretion that the Employee’s employment has or
will terminate on account of Executive Layoff Event. In the case of
an Officer, this determination will be made by the Committee in its
sole discretion. |
| 4. |
Exceptions To Coverage As An Executive Layoff
Event. |
Notwithstanding
Section 3 or anything else to the contrary, an
Employee’s termination of employment will not be considered
to have occurred on account of an Executive Layoff Event and the
Employee will not be entitled to a Severance Benefit if:
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(a) |
the Employee is transferred to or assumes another position
within the Company or with any Affiliate; |
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(b) |
the Employee
is transferred to, assumes, or is offered a job or position with
(A) a purchaser of stock of the Company, or of assets of the
Company, or of a business unit(s) of the Company, or of stock or
other equity interests or assets of an Affiliate(s) or of a
business unit(s) of an Affiliate; (B) the surviving entity
following a merger or consolidation of the Company or an
Affiliate(s) with another entity; (C) an entity serving as a
contractor or a succeeding contractor (including a subcontractor or
outsourcer) for business or functions performed by the Company;
(D) an entity including but not limited to a joint venture,
limited liability
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company or partnership to
whom control of a business unit, organization or function within
the Company or a business unit of the Company or of an Affiliate,
or contract is transferred, whether by a stock or asset sale or
other means; or (E) an affiliate of any such purchaser,
contractor, succeeding contractor, subcontractor, outsourcer or
entity;
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(c) |
the Employee is terminated for Cause; or |
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(d) |
the Employee terminates employment on his or her own initiative
including retirement, resignation, failure to return from leave of
absence or disability, or dies. If an Employee elects to retire
concurrent with an Executive Layoff Event, then the Employee will
not fall within this exception to coverage. |
| 5. |
Calculation of Severance Benefit. |
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(a) |
Basic Severance Benefit Applicable to all Eligible
Employees. The Basic Severance Benefit payable to an Eligible
Employee shall equal two weeks of the Eligible Employee’s
Base Pay. |
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(b) |
Supplemental Severance Benefit . The following
Supplemental Severance Benefits are in addition to the Basic
Severance Benefit and are available only to Eligible Employees who
within [45] calendar days of the Eligible Employee’s
termination of employment as a result of an Executive Layoff Event
execute both (i) a valid and binding written release of the
Company and its directors, officers and Employees of claims of any
kind or nature in respect of the Employee’s employment with
the Company and any predecessor employer (and each of their
affiliates) in the form supplied by the Company; and do not revoke
any such release of claims within any revocation period provided
for in the release of claims, and (ii) Post-Employment Conduct
Agreement substantially in the form attached to the Plan as Exhibit
A and as amended to reflect specific jurisidcitional or other
requirements. |
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i. |
For the Chief Executive Officer – a lump sum payment
equal to the sum of 2.99 times Annual Base Pay plus 2.99 times Full
Bonus Equivalent plus Follow-on Benefits. |
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ii. |
For an Officer other than the Chief Executive Officer – a
lump sum payment equal to the sum of Annual Base Pay plus Full
Bonus Equivalent plus Follow-on Benefits. |
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iii. |
For an Eligible Employee who has received a Long Term Incentive
Performance Award for which the performance period has not
concluded or any other Eligible Employee and is not covered by
Section 5(b)(i) or (ii) above – a lump sum payment
equal to the sum of (a) the product of the number of full
Years of Service credited to the Eligible Employee multiplied by
the Eligible Employee’s weekly rate of Base Pay at the time
of termination of employment, plus (b) the Eligible
Employee’s Pro Rata Bonus Equivalent. |
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iv. |
In addition to the applicable amount specified in Section
(b) (i), (ii), or (iii) above, an Eligible Employee who
is receiving a Supplemental Severance Benefit also will be eligible
to receive (a) outplacement services for one year; and
(b) if the Eligible Employee relocated in order to fill the
position held by the Eligible Employee at the time of the Executive
Layoff Event, he or she will also be eligible for relocation
services in accordance with CPS 538. |
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(c) |
Timing of
Payment of Severance Benefit - The amount of the Severance
Benefit payable under Section 5(a) and Section 5 (b)(i),
(ii) or (iii) above will be paid in a lump sum, less
applicable tax withholdings as soon as practicable following the
Eligible Employee’s termination of employment (and the
expiration of any applicable revocation period thereunder without
revocation of such release of claims) in the case of payment of a
Basic Severance Benefit and execution of a release of claims
following Executive Layoff Event in the case of payment of a
Supplemental Severance Benefit, but in no event later than the
March 15 immediately following the year in which the Eligible
Employee’s Executive Layoff
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Event occurs. Outplacement
and relocation expenses paid as part of the Supplemental Severance
Benefit will be provided by a third party provider selected by the
Company. Outplacement or relocation expenses will be paid by the
Company to the third party providing the services following billing
to the Company and must be incurred no later than December 31
of the second year following the year in which the Eligible
Employee’s Executive Layoff Event occurred and paid by the
Company no later than December 31 of the third year following
the year in which the Eligible Employee’s termination of
employment occurred.
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(d) |
Maximum Benefit Payable – Notwithstanding anything
in the Plan to the contrary, if the total amount of benefits,
including Plan benefits, provided to an Eligible Employee would
result in an “excess parachute payment” within the
meaning of Section 280G of the Internal Revenue Code of 1986,
as amended, the Company, in its sole discretion, may reduce the
benefits provided under the Plan so that the total payment will not
result in an excess parachute payment to the Eligible
Employee. |
| 6. |
Further Conditions on Payment of Severance
Benefit. |
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(a)
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The Company retains the right
to condition payment of a Basic Severance Benefit or Supplemental
Severance Benefit upon the Eligible Employee maintaining fully
satisfactory work performance until the effective date of the
Eligible Employee’s Executive Layoff Event as agreed to by
the Company, including the Eligible Employee’s faithful
performance of any remaining obligations the Employee may owe to
the Company such as prompt reimbursement to the Company for cash
advances and debit balances and the return of all Company
property.
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(b) |
In the event an Eligible Employee who is entitled to a
Supplemental Severance Benefit becomes employed by the Company (or
an Affiliate) prior to the first anniversary of his or her
Executive Layoff Event, the Eligible Employee shall be obligated to
repay to the Company an amount equal to the amount of the
Employee’s Supplemental Severance Benefit multiplied by a
fraction, the numerator of which is the number of weeks (capped at
52) in the one-year period following the Employee’s
termination of employment during which the Employee is employed by
the Company and the denominator of which is (i) fifty-two
(52), in the case of an Officer; and (ii) twenty-six
(26) in the case of any other Eligible Employee. |
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(c) |
If an Eligible Employee dies after his or her termination of
employment, but before payment of a Basic Severance Benefit is
made, the Basic Severance Benefit will be paid to his or her
estate. If an Eligible Employee dies |
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