Exhibit 10.2
LOCKHEED MARTIN
CORPORATION
DIRECTORS DEFERRED COMPENSATION
PLAN
March 15, 1995
As Amended December 7,
1995
As Amended April 24,
1996
As Amended February 27,
1997
As Amended December 3,
1998
As Amended February 24,
1999
As Amended October 24,
2002
As Amended October 24,
2003
As Amended and Restated Effective
January 1, 2005
As Amended October 27,
2006
As Amended October 24,
2008
As Amended and Restated Effective
January 1, 2009
ARTICLE I
PURPOSE
The purpose of this Plan is to give
each non-employee Director of Lockheed Martin Corporation the
opportunity to be compensated for his or her service as a Director
on a deferred basis. The Plan is also intended to establish a
method of paying Director’s compensation which will aid the
Corporation in attracting and retaining as members of the Board
persons whose abilities, experience and judgment can contribute to
the success of the Corporation. In addition, by providing Directors
with the option of accruing earnings based on the performance of
Lockheed Martin Common Stock, the Plan is intended to more closely
align the economic interests of Directors with the interests of
stockholders generally.
The Plan was amended and restated,
effective January 1, 2005, in order to comply with the
requirements of Internal Revenue Code section 409A. This amendment
and restatement of the Plan applies only to the portion of a
Participant’s Account Balance that is earned or becomes
vested on or after January 1, 2005 (and any earnings
attributable to that portion). The portion of a Participant’s
Account Balance that was earned and vested prior to January 1,
2005 (and any earnings attributable to that portion) shall be
governed by the terms of the Plan in effect on December 31,
2004, which is attached hereto as Appendix A.
The Plan and Appendix A were amended
and restated, effective as soon as administratively practicable on
or after February 1, 2009, to change the interest option for
calculating earnings and to provide for new investment options in
which Participants may invest their Account Balances, whether
earned and vested before or after January 1, 2005. The
addition of the new investment options in Appendix A is not
intended to constitute a material modification within the meaning
of Code section 409A.
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The Plan is hereby amended and
restated to prospectively eliminate an investment option and make
other clarifying changes.
ARTICLE II
DEFINITIONS
Whenever the following terms are
used in this Plan, they shall have the meaning specified below,
unless the context clearly indicates to the contrary:
Account means the bookkeeping account maintained by the
Corporation on behalf of a participating Director which is credited
with the Director’s Deferred Compensation, including
investment earnings credited under Section 4.2.
Beneficiary
shall have the meaning specified in
Section 7.2(b).
Board of Directors
or Board means the Board of
Directors of the Corporation.
Committee means the Committee appointed to administer this
Plan, as provided in Section 6.1 hereof.
Corporation
means Lockheed Martin Corporation, a
Maryland corporation and its successors.
Deferred Compensation
means Director’s Fees deferred
pursuant to this Plan and investment earnings credited thereto
under Section 4.2.
Director means a member of the Board of Directors of the
Corporation who is eligible to receive compensation in the form of
Director’s Fees and who is not an officer or employee of the
Corporation or any of its subsidiaries.
Director’s Fees
means the cash fees payable to a
Director for services as a Director and for services on any
Committee of the Board, including the amount of any retainer paid
to a non-employee for services as Chairman of the Board.
Effective Date
means the effective date referred to
in Section 7.8.
Election Form
means the form by which a Director
elects to participate in this Plan.
Plan means the Lockheed Martin Corporation Directors
Deferred Compensation Plan.
Qualified Savings Plan
means the Lockheed Martin
Corporation Salaried Savings Plan.
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ARTICLE III
PARTICIPATION
3.1 Timing of Deferral
Elections . In order to defer Director’s fees earned in
any calendar year, a Director must make a deferral election by
executing and filing an Election Form by December 31 of the
year prior to the year in which the fees will be earned. In the
case of a new Director, an election to defer Director’s fees
must be filed within 30 days after the commencement of the
Director’s term of office and shall apply only to fees for
services after the date of such election. The deferral election
shall specify the manner in which earnings (or losses) on the
deferred amount shall accrue in accordance with Section 4.2
below. To the extent that a Director elects that any portion of a
deferred amount shall accrue earnings (or losses) based on the
Lockheed Martin Common Stock Investment Option, such an election
shall be given effect only if (i) the election is irrevocably
made at least six (6) months prior to the effective date of
the allocation or (ii) the crediting of the deferred amount to
the Lockheed Martin Common Stock Investment Option has been
approved by the Board of Directors (or a committee thereof that is
comprised of persons specified in Section 6.1). To the extent
that a Director makes an election to have Deferred Compensation
credited to the Lockheed Martin Common Stock Investment Option
which is not in compliance with (i) or (ii) above, the
amount elected to be deferred into the Lockheed Martin Common Stock
Investment Option shall initially be allocated to the Interest
Option until such time as the allocation to the Lockheed Martin
Common Stock Investment Option would be in compliance with
(i) or (ii) above, at which time the deferred amount
shall automatically be reallocated.
3.2 Terms of Deferral
Elections . A Director’s deferral election for a calendar
year shall specify the percentage (which may equal 100%) of the
Director’s Fees to be earned by the Director for that year
which are to be deferred under this Plan and, with respect to fees
deferred pursuant to that election, the method for crediting
earnings (or losses) selected by the Director in accordance with
Article IV and the manner of distribution in accordance with
Section 5.1(a). A Director’s deferral election shall be
irrevocable during any calendar year in which it is in effect. A
Director’s election shall remain in effect and shall be
deemed to have been made for a subsequent calendar year unless the
Director files a revised election form by December 31 of the
year preceding the year in which the applicable Director’s
Fees will be earned. If a Director files a change of election in
accordance with Section 5.1(c), the manner of distribution
elected under that Section will apply only to the Deferred
Compensation for the calendar years listed on the Election
Form.
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ARTICLE IV
CREDITING OF
ACCOUNTS
4.1 Crediting of Director’s
Fees . Director’s Fees that a Director has elected to
defer shall be credited to the Director’s Account as of the
first day of the month in which the Director’s Fees would
have been payable to the Director if no deferral election had been
made under this Plan. The elected deferral percentage shall apply
to all Director’s Fees earned by the Director during a
calendar year.
4.2 Crediting of Investment
Earnings . Subject to the provisions of Section 3.1 above,
as of each trading day (each day on which the New York Stock
Exchange is open), a Director’s Account shall be credited to
reflect investment earnings (or losses) for each trading day, based
on the Director’s investment selections under this
Section 4.2. A Director may elect to have his or her Account
credited with investment earnings (or losses) for each trading day
as if the Director’s Account balance had been invested in the
following:
(a) Interest Option. Interest
at a rate equivalent to (i) the then published rate for
computing the present value of future benefits at the time cost is
assignable under Cost Accounting Standard 415, Deferred
Compensation, as determined by the Secretary of the Treasury on a
semi-annual basis pursuant to Pub. L. 92-41, 85 Stat. 97,
(ii) such other interest rate as is available to participants
in the Lockheed Martin Corporation Deferred Management Compensation
Plan as an interest option if the interest option under (i) is
not an option under that plan, or (iii) if there is no rate
under (i) or (ii) such other interest rate as is approved
by the Board. Notwithstanding anything in the Plan to the contrary,
Deferred Compensation credited to a Director’s Account on or
after July 1, 2009 may not be invested in the Interest Option.
Deferred Compensation credited to the Interest Option prior to
July 1, 2009 may remain credited to the Interest Option, until
such amounts are transferred to the Lockheed Martin Common Stock
Investment Option or the Investment Fund Option on or after
July 1, 2009. No Deferred Compensation may be credited or
reallocated to the Interest Option on or after July 1,
2009.
(b) Investment Fund Option.
Earnings shall be credited to a Director’s Account based on
the market value and investment return of the investment options
(including the Target Date Funds and core mutual funds (and
successor funds), and excluding the Company Stock Fund, ESOP Fund,
and Self-Managed Account) that are available to participants
pursuant to the terms of the Qualified Savings Plan, provided that
the Committee retains the discretion to add certain funds to, or to
exclude certain funds from, the Investment Fund Option. Earnings
(or losses) shall be credited to a Director’s Account based
on the investment option or options within the Investment Fund
Option to which his or her Account has been allocated. The manner
in which earnings (or losses) are credited under each of the
investment options shall be determined in the same manner as under
the Qualified Savings Plan.
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(c) Lockheed Martin Common Stock
Investment Option. Earnings (or losses) shall be credited as if
such amount had been invested in Lockheed Martin Common Stock at
the published closing price of the Corporation’s Common Stock
on the New York Stock Exchange on the last trading day preceding
the day as to which such amount is deferred (or reallocated) into
the Lockheed Martin Common Stock Investment Option; this portion of
a Director’s Account shall reflect any subsequent
appreciation or depreciation in the market value of Lockheed Martin
Common Stock based on the published closing price of the stock on
the New York Stock Exchange on each trading day of each month and
shall reflect dividends on the stock as if such dividends were
reinvested in shares of Lockheed Martin Common Stock.
(d) A combination of (a),
(b) and (c).
A Director’s initial
investment selections must be made by the date that the
Director’s initial deferral election takes effect. A Director
may change his or her investment selections for all amounts
credited to the Plan or separately with respect to amounts to be
deferred in future periods to the Director’s Account and
amounts deferred in prior periods to the Director’s Account,
provided that any such change to the investment of amounts deferred
in prior periods to the Director’s Account that would result
in an increase or decrease in the portion of the Director’s
Account allocated to the Lockheed Martin Common Stock Investment
Option shall only be effective if it is made pursuant to an
irrevocable written election made at least six months following the
date of the Director’s most recent “opposite way”
election with respect to either the Plan or any other plan
maintained by Lockheed Martin that provides for Discretionary
Transactions (as defined in Rule 16b-3). Subject to the foregoing,
a change of investment selections must be made by accessing the
Qualified Savings Plan Web tool. Except as set forth above, the
procedures (including restrictions) for directing the allocation
and reallocation among the investment options shall be the same as
the procedures (and restrictions) for making allocations and
reallocations under the Qualified Savings Plan. Deferred
Compensation credited to a Director’s Account prior to
July 1, 2009 may be credited or reallocated to the Interest
Option prior to July 1, 2009. No Deferred Compensation may be
credited or reallocated to the Interest Option on or after
July 1, 2009.
4.3 Account Balance as Measure of
Deferred Compensation . The Deferred Compensation payable to a
Director (or the Director’s Beneficiary) shall be measured
by, and shall in no event exceed, the sum of the amounts credited
to the Director’s Account.
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ARTICLE V
PAYMENT OF DEFERRED
COMPENSATION
5.1 Manner of Distribution
.
(a) Rules for Initial Elections
and subsequent changes in Elections.
(i) Election for Commencement of
Payment . At the time a Director completes an Election Form or
files a change of election form, he or she shall elect from among
the following options governing the date on which the payment of
benefits shall commence:
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(A)
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Payment to
begin on the January 15th or July 15th next following the
date of the termination of a Director’s status as a Director
for any reason.
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(B)
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Payment to
begin on January 15th of the year next following the year in
which the Director’s status as a Director terminates for any
reason.
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(C)
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Payment to
begin on the January 15th next following the date on which the
Director has both terminated Director status for any reason and
attained the age designated by the Director in the Election
Form.
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(ii) Election for Form of
Payment . At the time a Director completes an Election Form or
files a change of election form, he or she shall elect the form of
payment of his or her Deferred Compensation from among the
following options:
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(B)
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Annual payments
for a period of years designated by the Director which shall not
exceed fifteen (15). The amount of each annual payment shall be
determined by dividing the Director’s Account at the end of
the month prior to such payment by the number of years remaining in
the elected installment period.
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(b) Cash-out of
Small Benefits . Notwithstanding the above, if the Account
Balance of a Director who is entitled to begin payment equals
$10,000 or less, the Director’s Account Balance shall be paid
in a single lump sum payment in full discharge of all liabilities
with respect to such benefits. In no event shall a distribution in
accordance with the previous sentence be made after
March 15 th of the calendar year following
the year in which the termination of the Director’s status as
a Director occurs.
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(c) Subsequent Change of
Elections . A Director may change any election as to the manner
of distribution and file a new election choosing a lump sum or
installment payments with respect to the payment of the
Director’s entire Account, or with respect to fees deferred
for specific calendar years, by executing an election (on a form
prescribed by the Company) within the time periods described in
this Section 5.1(c). Any election under this
Section 5.1(c) shall specify a time on which commencement of
distribution will begin and the number of installments to be paid
if any, under the options specified in Section 5.1(c). An
election must be made prior to the Director’s termination of
service as a director. To constitute a valid election by a Director
making a prospective change to a previous election, (i) the
prospective election must be executed and delivered to the Company
at least twelve (12) months before the date the first payment
would be due under the Director’s previous election, and
(ii) the first payment must be delayed by at least sixty
(60) months from the date the first payment would be due under
the Director’s previous election. In the event an election
fails to satisfy the terms of this Section 5.1(c), such
election shall be void and payment shall commence under the
Director’s previous valid election or, if none exists, shall
be paid in a lump sum.
(d) Valuation of
Distributions . Distributions shall be valued based on the
closing price on the trading day that is four (4) business
days prior to the date of the distribution.
5.2 Commencement of Payments
. Subject to the provisions of Section 5.5 and except as
provided in Sections 5.1(b) and 5.4, the payment of Deferred
Compensation to a Director shall be made following a
Director’s termination as a Director in accordance with his
or her deferral elections regardless of, whether the
Director’s termination is due to resignation, retirement,
disability, death, or otherwise. Installment payments shall
continue to be made in January of each succeeding year until all
installments have been paid.
5.3 Death Benefits . Subject
to the provisions of Section 5.5, in the event that a Director
dies before payment of the Director’s Deferred Compensation
has commenced or been completed, the balance of the
Director’s Account shall be distributed to the
Director’s Beneficiary commencing in the January following
the date of the Director’s death in accordance with the
manner of distribution (lump sum or annual installments as well as
timing of commencement of distributions) elected by the Director
for payments during the Director’s lifetime.
5.4 Emergency Withdrawals .
In the event of an unforeseen financial emergency prior to the
commencement of distributions or after the commencement of
installment payments, the Committee may approve a distribution to a
Director (or Beneficiary after the death of a Director) of the part
of the Director’s Account Balance an amount which does not
exceed the amount necessary to satisfy such emergency plus the
amount necessary to pay taxes reasonably anticipated as a result of
the distribution. This emergency distribution amount must take into
consideration any amounts by which the hardship is or may be
relieved through reimbursement or compensation by insurance
or
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by liquidation of the Director’s (or
Beneficiary’s after the death of the Director) assets to the
extent such liquidation would not cause a severe financial
hardship. An emergency withdrawal will be approved only in a
circumstance of severe financial hardship to the Director (or
Beneficiary, as applicable) resulting from a sudden and unexpected
illness or accident of the Director (or Beneficiary, as applicable)
or of a dependant of the Director (or Beneficiary, as applicable),
loss of property due to casualty, or other similar extraordinary
and unforeseeable circumstances arising as a result of events
beyond the control of the Director (or Beneficiary, as applicable).
The investment earnings shall be determined as if the withdrawal
had been debited from the Director’s Account in the first day
of the month in which the withdrawal occurs.
5.5 Corporation’s Right to
Withhold . There shall be deducted from all payments under this
Plan the amount of taxes, if any, required to be withheld under
applicable federal or state tax laws. The Directors and their
Beneficiaries will be liable for payment of any and all income or
other taxes imposed on Deferred Compensation payable under this
Plan.
5.6 Section 16 Limitations
on Distributions . Notwithstanding anything contained herein to
the contrary, no distribution of any portion of a Director’s
Account credited to the Lockheed Martin Common Stock Investment
Option shall be made unless (i) the Board of Directors or
Committee has approved the distribution or (ii) at least six
months have passed from the date the Director’s service on
the Board has terminated.
ARTICLE VI
ADMINISTRATION, AMENDMENT AND
TERMINATION
6.1 Administration by
Committee . This Plan shall be administered by a Committee
consisting of exclusively “non-employee directors” as
that term is defined in Rule 16b-3 (“Rule 16b-3”)
promulgated by the Securities and Exchange Commission under
Section 16 of the Securities Exchange Act of 1934 (the
“Exchange Act”). The Committee shall act by vote of a
majority or by unanimous written consent of its members. The
Committee’s resolution of any question regarding the
interpretation of this Plan shall be subject to review by the
Board, and the Board’s determination shall be final and
binding on all parties. Notwithstanding anything contained in the
Plan or in any document issued under the Plan, it is intended that
the Plan will at all times comply with the requirements of Internal
Revenue Code section 409A and any regulations or other guidance
issued thereunder, and that the provisions of the Plan will be
interpreted to meet such requirements. If any provision of the Plan
or any Deferral Agreement is determined not to conform to such
requirements, the Plan and/or the Deferral Agreement, as
applicable, shall be interpreted to omit such offending
provision.
6.2 Amendment and Termination
. This Plan may be amended, modified, or terminated by the Board at
any time, except that no such action shall (without the consent of
affected Directors or, if appropriate, their Beneficiaries or
personal representatives) adversely affect the rights of
D
