Exhibit 10.18
SEVERANCE PROTECTION
AGREEMENT
SEVERANCE PROTECTION AGREEMENT dated
December , 2008, by and between
General Dynamics Corporation, a Delaware corporation (the “
Company ”),
and (the “ Executive ”).
The Board of Directors of the
Company (the “ Board ”) recognizes that the
possibility of a Change in Control (as hereinafter defined) of the
Company exists and that the threat or occurrence of a Change in
Control may result in the distraction of its key management
personnel because of the uncertainties inherent in such a
situation.
The Board has determined that it is
essential and in the best interests of the Company and its
stockholders to retain the services of the Executive in the event
of the threat or occurrence of a Change in Control and to ensure
the Executive’s continued dedication and efforts in such
event without undue concern for the Executive’s personal
financial and employment security.
In order to induce the Executive to
remain in the employ of the Company, particularly in the event of
the threat or occurrence of a Change in Control, the Company
desires to enter into this Agreement to provide the Executive with
certain benefits in the event the Executive’s employment is
terminated as a result of, or in connection with, a Change in
Control.
NOW, THEREFORE, in consideration of
the respective agreements of the parties contained herein, it is
agreed as follows:
Section 1.
Definitions . For purposes of
this Agreement, the following terms have the meanings set forth
below:
“ Accounting Firm
” has the meaning set forth in Section 5.2.
“ Accrued Compensation
” means an amount which includes all amounts earned or
accrued by the Executive through and including the Termination Date
but not paid to the Executive on or prior to such date, including
(a) all base salary, (b) reimbursement for all reasonable
and necessary expenses incurred by the Executive on behalf of the
Company during the period ending on the Termination Date,
(c) all vacation pay and (d) all bonuses and incentive
compensation (other than the Pro Rata Bonus).
“ Base Amount ”
means the greater of the Executive’s annual base salary
(a) at the rate in effect on the Termination Date and
(b) at the highest rate in effect at any time during the
180-day period prior to a Change in Control, and will include all
amounts of the Executive’s base salary that are deferred
under any qualified or non-qualified employee benefit plan of the
Company or any other agreement or arrangement.
“ Beneficial Owner
” has the meaning as used in Rule 13d-3 promulgated under the
Securities Exchange Act. The terms “Beneficially Owned”
and “Beneficial Ownership” each have a correlative
meaning.
“ Board ” means
the Board of Directors of the Company.
“ Bonus Amount ”
means the greater of (a) the annual bonus paid or payable to
the Executive pursuant to any annual bonus or incentive plan
maintained by the Company in respect of the fiscal year ending
immediately prior to the fiscal year in which the Termination Date
occurs or (b) the average of the annual bonus paid or payable
to the Executive pursuant to any annual bonus or incentive plan
maintained by the Company in respect of each of the three fiscal
years ending immediately prior to the fiscal year in which the
Termination Date occurs (or, if higher, ending in respect of each
of the three fiscal years ending immediately prior to the year in
which the Change in Control occurs).
“ Cause ” for the
termination of the Executive’s employment with the Company
will be deemed to exist if the Executive has been convicted of a
felony or if the Board determines by a resolution adopted in good
faith by at least two-thirds of the Board that the Executive has
(a) intentionally and continually failed to perform in all
material respects the Executive’s reasonably assigned duties
with the Company (other than a failure resulting from the
Executive’s incapacity due to physical or mental disability
or illness or from the Executive’s assignment of duties that
would constitute Good Reason for the Executive’s termination
of employment with the Company) which failure has continued for a
period of at least 30 days after a written notice of demand for
performance has been delivered to the Executive specifying the
manner in which the Executive has failed in all material respects
to so perform or (b) intentionally engaged in conduct which is
demonstrably and materially injurious to the Company; provided that
no termination of the Executive’s employment will be for
Cause as set forth in clause (b) hereof unless (i) there
has been delivered to the Executive a written notice specifying in
reasonable detail the conduct of the Executive of the type
described in clause (b) and (ii) the Executive has been
provided an opportunity to be heard in person by the Board (with
the assistance of the Executive’s counsel if the Executive so
desires). No act, nor failure to act, on the Executive’s part
will be considered intentional unless the Executive has acted, or
failed to act, with a lack of good faith and with a lack of
reasonable belief that the Executive’s action or failure to
act was in or not opposed to the best interests of the
Company.
“ Change in Control
” means any following events:
(a) An acquisition (other than
directly from the Company) of any voting securities of the Company
by any Person who immediately after such acquisition is the
Beneficial Owner of 40% or more of the combined voting power of the
Company’s then outstanding voting securities; provided that
in determining whether a Change in Control has occurred, voting
securities which are acquired by (i) an employee benefit plan
(or a trust forming a part thereof) maintained by the Company or
any Subsidiary of the Company, (ii) the Company or any
Subsidiary of the Company, (iii) any Person that, pursuant to
Rule 13d-1 promulgated under the Securities Exchange Act, is
permitted to, and actually does, report its beneficial ownership of
voting securities of the Company on Schedule
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13G (or any successor Schedule) (a
“ 13G Filer ”) (provided that, if any 13G Filer
subsequently becomes required to or does report its Beneficial
Ownership of voting securities of the Company on Schedule 13D (or
any successor Schedule) then such Person shall be deemed to have
first acquired, on the first date on which such Person becomes
required to or does so file, Beneficial Ownership of all voting
securities of the Company Beneficially Owned by it on such date,
(iv) any Person in connection with a Non-Control Transaction
(as hereinafter defined) or (v) any acquisition by an
underwriter temporarily holding Company securities pursuant to an
offering of such securities, will not constitute an acquisition
which results in a Change in Control;
(b) Consummation of:
(i) a merger, consolidation or
reorganization involving the Company, or any direct or indirect
Subsidiary of the Company, unless:
(A) the stockholders of the Company
immediately before such merger, consolidation or reorganization
will own, directly or indirectly, immediately following such
merger, consolidation or reorganization, at least 50% of the
combined voting power of the outstanding voting securities of the
corporation resulting from such merger, consolidation or
reorganization (the “ Surviving Corporation ”)
or any parent thereof in substantially the same proportion as their
ownership of the voting securities of the Company immediately
before such merger, consolidation or reorganization;
(B) the individuals who were members
of the Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute a majority of the members of the board of directors of
the Surviving Corporation (or parent thereof); and
(C) no Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan
(or any trust forming a part thereof) maintained by the Company,
any Schedule 13G Filer, the Surviving Corporation, any Subsidiary
or parent of the Surviving Corporation, or any Person who,
immediately prior to such merger, consolidation or reorganization,
was the Beneficial Owner of 40% or more of the then
outstanding
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voting securities of the Company) is
the Beneficial Owner of 40% or more of the combined voting power of
the Surviving Corporation’s then outstanding voting
securities.
(D) a transaction described in
clauses (A) through (C) above is referred to herein as a
“Non-Control Transaction”; or
(ii) the complete liquidation or
dissolution of the company.
(iii) a sale or other disposition of
all or substantially all of the assets of the Company to an entity
(other than to an entity (A) of which at least 50% of the
combined voting power of the outstanding voting securities are
owned, directly or indirectly, by stockholders of the Company in
substantially the same proportion as their ownership of the voting
securities of the Company, (B) a majority if the board of
directors of which is comprised of the individuals who were members
of the Board immediately prior to the execution of the agreement
providing for such sale or disposition and (C) of which no
Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Company or any of its Subsidiaries, any Schedule
13G Filer, the Surviving Corporation, any Subsidiary or parent of
the Surviving Corporation, or any Person who, immediately prior to
such merger, consolidation or reorganization, was the Beneficial
Owner of 40% or more of the then outstanding voting securities of
the Company) has Beneficial Ownership of 40% or more of the
combined voting power of the entity’s outstanding voting
securities.
(c) Individuals who, as of the date
hereof, constitute the Board (the “ Incumbent Board
”), cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a
director subsequent to the date first written above whose election,
or nomination for election by Company stockholders, was approved by
a vote of two-thirds of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member
of the Incumbent Board, unless any such individual’s initial
assumption of office occurs as a result of either an actual or
threatened election contest (including, but not limited to, a
consent solicitation).
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(d) Notwithstanding the foregoing, a
Change in Control will not be deemed to occur solely because any
Person (a “ Subject Person ”) acquires
Beneficial Ownership of more than the permitted amount of the
outstanding voting securities of the Company as a result of the
acquisition of voting securities by the Company which, by reducing
the number of voting securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Person, provided that if a Change in Control would occur (but for
the operation of this sentence) as a result of the acquisition of
voting securities by the Company, and after such share acquisition
by the Company, the Subject Person becomes the Beneficial Owner of
any additional voting securities which increases the percentage of
the then outstanding voting securities Beneficially Owned by the
Subject Person, then a Change in Control will be deemed to have
occurred.
(e) Notwithstanding anything
contained in this Agreement to the contrary, if the
Executive’s employment with the Company is terminated prior
to a Change in Control and the Executive reasonably demonstrates
that such termination (i) was at the request of a Person who
has indicated an intention or taken steps reasonably calculated to
effect a Change in Control or (ii) otherwise occurred in
connection with, or in anticipation of, a Change in Control, then
for all purposes of this Agreement, the date of such Change in
Control with respect to the Executive will mean the date
immediately prior to the date of such termination of the
Executive’s employment.
“ Code ” means
the Internal Revenue Code of 1986, as amended.
“ Company ” means
General Dynamics Corporation, a Delaware corporation, and includes
its Successors.
“ Continuation Period
” has the meaning set forth in
Section 3.1(b)(iii).
“ Determination ”
has the meaning set forth in Section 5.2.
“ Disability ”
means a physical or mental disability or illness which
substantially impairs the Executive’s ability to perform the
Executive’s regular duties with the Company for a period of
180 consecutive days or for a period of 270 days in any 365-day
period.
“ Dispute ” has
the meaning set forth in Section 5.2.
“ Excess Payment
” has the meaning set forth in Section 5.3.
“ Excise Tax ”
has the meaning set forth in Section 5.1.
“ Final Determination
” has the meaning set forth in Section 5.3.
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“ Good Reason ”
means the occurrence after a Change in Control of any of the events
or conditions described in clauses (a) through
(h) hereof:
(a) any (i) change in the
Executive’s status, title, position or responsibilities
(including reporting responsibilities) which, in the
Executive’s reasonable judgment, represents an adverse change
from the Executive’s status, title, position or
responsibilities as in effect at any time within 180 days preceding
the date of the Change in Control or at any time thereafter,
(ii) assignment to the Executive of duties or responsibilities
which, in the Executive’s reasonable judgment, are
inconsistent with the Executive’s status, title, position or
responsibilities as in effect at any time within 180 days preceding
the date of the Change in Control or at any time thereafter,
(iii) removal of the Executive from or failure to reappoint or
reelect the Executive to any of such offices or positions, or
(iv) in the case of an Executive who is an executive officer
of the Company a significant portion of whose responsibilities
relate to the Company’s status as a public company, the
failure of such Executive to continue to serve as an executive
officer of a public company, in each case except in connection with
the termination of the Executive’s employment for Disability,
Cause, as a result of the Executive’s death or by the
Executive other than for Good Reason;
(b) a reduction in the
Executive’s base salary or any failure to pay the Executive
any compensation or benefits to which the Executive is entitled
within five days after the date when due;
(c) the imposition of a requirement
that the Executive be based (i) at any place outside a 50-mile
radius from the Executive’s principal place of employment
immediately prior to the Change in Control or (ii) at any
location other than the Company’s corporate headquarters or,
if applicable, the headquarters of the business unit by which he
was employed immediately prior to the Change in Control, except, in
each case, for reasonably required travel on Company business which
is not materially greater in frequency or duration than prior to
the Change in Control;
(d) the failure by the Company to
(i) continue in effect (without reduction in benefit level or
reward opportunities and without unreasonably establishing or
modifying any performance or other criteria used to determine
reward levels) any material compensation or employee benefit plan
in which the Executive was participating at any time within 180
days preceding the date of the Change in Control or at any time
thereafter, unless such plan is replaced with a plan that provides
substantially equivalent compensation or benefits to the Executive
or (ii) provide the Executive with compensation and benefits,
in the aggregate, at least equal (in terms of benefit levels and
reward opportunities) to those provided for under each other
employee benefit plan, program and practice in which the Executive
was participating at any time within 180 days preceding the date of
the Change in Control or at any time thereafter;
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(e) the insolvency or the filing (by
any party, including the Company) of a petition for bankruptcy with
respect to the Company, which petition is not dismissed within 60
days;
(f) any material breach by the
Company of any provision of this Agreement;
(g) any purported termination of the
Executive’s employment for Cause by the Company which does
not comply with the terms of this Agreement; or
(h) the failure of the Company to
obtain, as contemplated in Section 6, an agreement, reasonably
satisfactory to the Executive, from any Successor to assume and
agree to perform this Agreement.
Notwithstanding anything to the
contrary in this Agreement, no termination will be deemed to be for
Good Reason hereunder if it results from an isolated, insubstantial
and inadvertent action not taken by the Company in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Executive.
“ Gross-Up Payment
” has the meaning set forth in Section 5.1.
“ Notice of Termination
” means a written notice from the Company or the Executive of
the termination of the Executive’s employment which indicates
the specific termination provision in this Agreement relied upon
and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so
indicated.
“ Person ” has
the meaning as used in Section 13(d) or 14(d) of the
Securities Exchange Act, and will include any “group”
as such term is used in such sections.
“ Pro Rata Bonus
” means an amount equal to the Bonus Amount multiplied by a
fraction, the numerator of which is the number of days elapsed in
the then fiscal
