Severance Agreement

Retirement Agreement - Johnson

 

EX-10.23 2 dex1023.htm EXHIBIT 10.23

Exhibit 10.23

SEVERANCE PROTECTION AGREEMENT

SEVERANCE PROTECTION AGREEMENT dated                     , 20     , 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:

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 13G (or any successor Schedule) (a “13G Filer”) (provided that, if any 13G Filer subsequently becomes required to or does report its Beneficial

 

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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 voting securities of the Company) is the Beneficial Owner of 40% or more of the combined voting

 

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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).

(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

 

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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).

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.

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

 

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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;

(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;

 

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(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.

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 year through and including the Termination Date and the denominator of which is 365.

Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

Subsidiary” means any corporation with respect to which another specified corporation has the power under ordinary circumstances to vote or direct the voting of sufficient securities to elect a majority of the directors.

Successor” means a corporation or other entity acquiring all or substantially all the assets and business of the Company, whether by operation of law, by assignment or otherwise.

Supplemental Retirement Benefit” will mean the lump sum actuarial equivalent of the aggregate retirement benefit the Executive would have been entitled to receive under the Company’s supplemental and other retirement plans, including the General Dynamics Corporation Retirement Plan for Salaried Employees (the “Pension Plan”), and if applicable, an individual retirement benefit agreement with the Company or any of its Subsidiaries. For purposes of the foregoing, the “actuarial equivalent” will be determined in accordance with the actuarial assumptions used for the calculation of benefits under the Pension Plan as applied immediately prior to the Termination Date in accordance with past practices.

 

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Termination Date” means (a) in the case of the Executive’s death, the Executive’s date of death, (b) in the case of the termination of the Executive’s employment with the Company by the Executive for Good Reason, five days after the date the Notice of Termination is received by the Company, and (c) in all other cases, the date specified in the Notice of Termination; provided that if the Executive’s employment is terminated by the Company for Cause or due to Disability, the date specified in the Notice of Termination will be at least 30 days after the date the Notice of Termination is given to the Executive.

Window Period” has the meaning set forth in Section 3.1(a).

Section 2. Term of Agreement. The term of this Agreement (the “Term”) will commence on the date hereof and will continue in effect until December 312009; provided that on December 31, 2009 and each anniversary of such date thereafter, the Term shall automatically be extended for one additional year unless, not later than October 1 of such year, the Company or the Executive shall have given notice not to extend the Term; and further provided that in the event a Change in Control occurs during the Term, the Term will be extended to the date 24 months after the date of the occurrence of such Change in Control.

Section 3. Termination of Employment.

3.1 If, during the Term, the Executive’s employment with the Company is terminated within 24 months following a Change in Control, the Executive will be entitled to the following compensation and benefits:

(a) If the Executive’s employment with the Company is terminated (i) by the Company for Cause or Disability, (ii) by reason of the Executive’s death or (iii) by the Executive other than for Good Reason and other than during the 60-day period commencing on the first anniversary of the date of the occurrence of a Change in Control (the “Window Period”), the Company will pay to the Executive the Accrued Compensation and, if such termination is other than by the Company for Cause, a Pro Rata Bonus.

(b) If the Executive’s employment with the Company is terminated for any reason other than as specified in Section 3.1(a) or during the Window Period, the Executive will be entitled to the following:

(i) the Company will pay the Executive all Accrued Compensation and a Pro Rata Bonus;

(ii) the Company will pay the Executive as severance pay, and in lieu of any further compensation for periods subsequent to the Termination Date, in a single payment an amount in cash equal to [1.5 – 2.99] times the sum of (A) the Base Amount and (B) the Bonus Amount;

 

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(iii) for a period of [18 – 36] months (the “Continuation Period”), the Company will at its expense continue on behalf of the Executive and the Executive’s dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (A) to the Executive at any time during the 180-day period prior to the Change in Control or at any time thereafter or (B) to other similarly situated executives who continue in the employ of the Company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section 3.1(b)(iii) during the Continuation Period will be no less favorable to the Executive and the Executive’s dependents and beneficiaries than the most favorable of such coverage and benefits during any of the periods referred to in clauses (A) and (B) above. The Company’s obligation hereunder with respect to the foregoing benefits will be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Executive hereunder as long as the coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This Section 3.1(b) will not be interpreted so as to limit any benefits to which the Executive or the Executive’s dependents or beneficiaries may be entitled under any of the Company’s employee benefit plans, programs or practices following the Executive’s termination of employment, including retiree medical and life insurance benefits;

(iv) the Company will pay in a single payment an amount in cash equal to the excess of (A) the Supplemental Retirement Benefit determined as if (1) the Executive had an additional [18 – 36] months of age and service credit, (2) the Executive’s annual compensation during such period had been equal to the Executive’s Base Salary and the Bonus Amount, (3) the Company had made employer contributions to each defined contribution plan in which the Executive was a participant at the Termination Date in an amount equal to the amount of such contribution for the plan year immediately preceding the Termination Date and (4) the Executive had been fully vested in the Executive’s benefit under each retirement plan in which the Executive was a participant, over (B) the lump sum actuarial equivalent of the aggregate retirement benefit the

 

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Executive is actually entitled to receive under such retirement plans;

(v) the Company shall credit the Executive with [18 – 36] months of additional age and service credit for purposes of qualifying for any post-retirement health or welfare benefits provided by the Company as in effect immediately prior to the Termination Date or, if more favorable to the Executive, as in effect at the time of the Change in Control or at any time thereafter prior to the Termination Date;

(vi) the Company shall provide the Executive with outplacement services suitable to the Executive’s position for a period of 12 months or, if earlier, until the first acceptance by the Executive of an offer of employment; and

(vii) The Company shall reimburse the Executive for financial counseling and tax planning service costs incurred within [12 – 36] months following the Termination Date; provided that the aggregate cost of such financial counseling and tax planning services shall not exceed $10,000 in any calendar year.

(c) The amounts provided for in Section 3.1(a) and Sections 3.1(b)(i), (ii) and (iv) will be paid in a single lump sum cash payment by the Company to the Executive within five days after the Termination Date. Notwithstanding anything to the contrary in this Agreement, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following the Executive’s termination of employment shall instead be paid on the first business day after the date that is six months following the Executive’s “separation from service” within the meaning of Section 409A of the Code. Any amount the payment of which is delayed in accordance with the preceding sentence shall be paid with interest at an annual rate equal to the prime rate (as determined by the Northern Trust Company of Chicago from time to time) from the date on which such amount would otherwise have been paid until the actual date of payment.

(d) The Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, and no such payment will be offset or reduced by the amount of any compensation or benefits provided to the Executive

 

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in any subsequent employment except as specifically provided in Section 3.1(b)(iii) and 3.1(b)(vi).

(e) Notwithstanding anything in this Agreement to the contrary, the Executive shall not be entitled to the payments or benefits provided in this Section 3.1 until the Executive has incurred a “separation from service” under Section 409A of the Code.

3.2 The compensation to be paid to the Executive pursuant to Sections 3.1(a), 3.1(b)(i) and 3.1(b)(ii) of this Agreement will be in lieu of any similar severance or termination compensation to which the Executive may be entitled under any other Company severance or termination agreement, plan, program, policy, practice or arrangement. With respect to any other compensation and benefit to be paid or provided to the Executive pursuant to this Section 3The Executive’s entitlement to any compensation or benefits of a type not provided in this Agreement will be determined in accordance with the Company’s employee benefit plans and other applicable programs, policies and practices as in effect from time to time.

Section 4. Notice of Termination. Following a Change in Control, any purported termination of the Executive’s employment by the Company will be communicated by a Notice of Termination to the Executive. For purposes of this Agreement, no such purported termination will be effective without such Notice of Termination.

Section 5. Successors; Binding Agreement. This Agreement will be binding upon and will inure to the benefit of the Company and its Successors, and the Company will require any Successors to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. Neither this Agreement nor any right or interest hereunder will be assignable or transferable by the Executive or by the Executive’s beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement will inure to the benefit of and be enforceable by the Executive’s legal representatives.

Section 6. Fees and Expenses. The Company will pay as they become due all legal fees and related expenses (including the costs of experts) incurred by the Executive as a result of (a) the Executive’s termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment) and (b) the Executive seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits. Such payments shall be made no later than the last day of the Executive’s taxable year following the taxable year in which the fee or expense was incurred.

Section 7. Retirement Benefit Agreement. Upon the occurrence of a Change in Control, any benefits under an individual retirement benefit agreement between the Company and the Executive to which the Executive would be entitled to

 

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upon an involuntary termination of the Executive’s employment by the Company other than for cause shall become fully vested and shall, notwithstanding anything in such agreement to the contrary, be nonforfeitable under any circumstances.

Section 8. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the Notice of Termination) will be in writing and will be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other, provided that all notices to the Company will be directed to the attention of the Board with a copy to the Secretary of the Company. All notices and communications will be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address will be effective only upon receipt.

Section 9. Nonexclusivity of Rights. Nothing in this Agreement will prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company for which the Executive may qualify, nor will anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company (except for any severance or termination agreement). Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company will be payable in accordance with such plan or program, except as specifically modified by this Agreement.

Section 10. No Set-Off. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder will not be affected by any circumstances, including any right of set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive or others.

Section 11. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

Section 12. Governing Law. This Agreement will be governed by and construed and enforced in accordance with the laws of the State of Delaware without giving effect to the conflict of laws principles thereof. Any action brought by any party to this Agreement will be brought and maintained in a court of competent jurisdiction in New Castle County in the State of Delaware.

 

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Section 13. Severability. The provisions of this Agreement will be deemed severable and the invalidity or unenforceability of any provision will not affect the validity or enforceability of the other provisions hereof.

Section 14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to severance protection in connection with a Change in Control.

Section 16. Section 409A. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in compliance therewith. Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement until the Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. To the extent required to avoid an accelerated or additional tax under Section 409A of the Code, amounts reimbursable to Executive under this Agreement shall be paid to the Executive on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind benefits provided to the Executive) during any one year may not effect amounts reimbursable or provided in any subsequent year.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.

 

GENERAL DYNAMICS CORPORATION

 


Name:

Title:

 


[Executive’s Name]

 

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EX-10.1 2 d363812dex101.htm EXHIBIT 10.1

Exhibit 10.1

RETIREMENT AGREEMENT

This Retirement Agreement (the “Agreement”) is made as of June 6, 2012, by and between Jay L. Johnson (the “Executive”) and General Dynamics Corporation (the “Company”) (together, the “Parties”).

WHEREAS, the Executive is currently employed by the Company and serves as its Chairman and Chief Executive Officer;

WHEREAS, the Executive would like to retire from his position effective as of December 31, 2012;

WHEREAS, the Company desires to facilitate an orderly transition of the Executive’s responsibilities, and to retain the benefit of the Executive’s knowledge, judgment, and expertise until the end of the current calendar year and for a fixed consulting period immediately following his retirement;

WHEREAS, the Executive and the Company wish to confirm the terms under which the Executive will transition into retirement, and the employment relationship between the Parties will end;

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration, receipt of which is hereby acknowledged, the Executive and the Company hereby agree as follows:

1. Retirement. Effective as of December 31, 2012 (the “Retirement Date”), the Executive hereby resigns his position as Chairman and Chief Executive Officer of the Company and all other positions, titles, duties, authorities, and responsibilities with, arising out of, or relating to the Executive’s employment with the Company and its affiliates. The Executive further agrees to execute all additional documents and take such further steps as may be required to effectuate such resignation. By mutual agreement, the employment relationship between the Executive and the Company and its affiliates shall terminate effective as of the Retirement Date.

2. Payments and Benefits.

(a) Base Salary. From the date of this Agreement through and including the Retirement Date, the Executive will continue to receive an annual base salary of $1,650,000, to be paid in regular installments in accordance with the Company’s general payroll practices as in effect from time to time.

(b) Annual Bonus. The Executive will receive a cash bonus in the amount of $3,600,000, in respect of his services during the calendar year 2012 (the “Annual Bonus”). The Annual Bonus will be administered in a manner consistent with past practice and, provided that the Executive does not voluntarily terminate his employment prior to the Retirement Date, shall be paid in cash at the same time and in the same manner as annual bonuses are paid to other executives of the Company and in no event later than March 15, 2013.

(c) Accrued Obligations. On the first regular payroll date following the Retirement


Date, the Company shall pay the Executive all base salary earned but unpaid as of the Retirement Date and all vacation earned but not used prior to the Retirement Date.

(d) Benefits Participation and Continued Insurance Coverage. As of the Retirement Date, the Executive shall cease to be an active participant in the benefit plans and programs offered by the Company to its employees and executives, with the sole exception that the Executive may continue to receive the benefits, insurance, and perquisites set forth in this Agreement.

(i) Medical, Dental and Vision Insurance. During the period beginning on January 1, 2013 and ending on December 31, 2013, the Executive and his eligible dependents may continue to participate in the Company’s medical, dental, and vision insurances in which they participate immediately before the Retirement Date at the active employee rate for such coverage as in effect from time to time. Such coverage shall cease on December 31, 2013, at which time the Executive may elect to continue medical, dental and vision insurance coverage for himself and his eligible dependents, at the Executive’s cost, to the extent provided in, and subject to the applicable terms and conditions of, Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”) and Section 601 of the Employee Retirement Income Security Act of 1974, as amended (which provisions are commonly known as “COBRA”). All coverage will be subject to any plan amendments or changes that are made in plan design, coverage, offerings, premiums, deductibles, co-pays or plan administration during the relevant time period.

(ii) Life Insurance. Subject to the Executive providing the consulting services required by the Consulting Agreement attached hereto as Schedule C through the end of the Consulting Period (as defined in Schedule C), the Company will continue to provide the executive with taxable life insurance benefits at the level elected by the Executive under the Company’s policies, not to exceed two times the Executive’s final annual base salary. Commencing on July 1, 2013, the Company will provide the Executive with taxable life insurance benefits for life at the level elected by the Executive under the Company’s policies, not to exceed two times the Executive’s final annual base salary. The taxable life insurance benefits provided to the Executive pursuant to this Section 2(d)(ii) are subject to a reduction factor in accordance with the Company’s policies in effect from time to time until the Executive reaches age seventy (70), at which time the amount of the benefits will be fixed at twenty-five percent (25%) of the original amount elected by the Executive. The insurance will be provided at no cost to the Executive, except for taxation for imputed income.

(iii) Liability Insurance. The Executive may continue his personal liability insurance coverage in effect as of the date of this Agreement for life at the rate in effect from time to time for then-current executives of the Company.

(iv) D&O Insurance. After the Retirement Date, the Executive will continue to receive directors’ and officers’ insurance coverage for his service as an officer or director of the Company under the Company’s directors’ & officers’ insurance policies in amounts of coverage and terms and conditions at least as favorable as the amounts of coverage and terms and conditions applicable to the Company’s then current directors and officers.

(e) Outstanding Equity Awards. The Executive has been granted shares of restricted

 

2


stock (the “Restricted Stock”), performance restricted stock units (the “Performance RSUs”) and stock options (the “Stock Options”) pursuant to the General Dynamics Corporation 2009 Equity Compensation Plan. The Restricted Stock, Performance RSUs and Stock Options that are outstanding as of the date of this Agreement are listed on Schedule A to this Agreement; such awards will be treated as follows, notwithstanding anything in the applicable award agreements to the contrary.

(i) Restricted Stock. All vesting restrictions applicable to shares of Restricted Stock will lapse as of the Retirement Date and such shares will become fully vested and will no longer be subject to forfeiture. Such shares will be delivered to the Executive on the scheduled delivery dates described in the applicable award agreements and set forth on Schedule A hereto.

(ii) Performance RSUs. With respect to the Performance RSUs granted to the Executive on March 7, 2012, the Executive will vest in the Earned Performance RSUs and the Earned Dividend Equivalent RSUs (each as defined in the award agreement) as of the Retirement Date and such Earned Performance RSUs and Earned Dividend Equivalent RSUs, along with the additional Dividend Equivalent RSUs (as defined in the award agreement) credited thereon prior to the scheduled settlement date, will be settled in shares of the Company’s common stock on the scheduled settlement date described in the award agreement and set forth on Schedule A hereto.

(iii) Stock Options. All previously granted Stock Options, whether vested or unvested as of the date hereof, will become and remain exercisable until the earlier to occur of (x) the original expiration date of the Stock Options (as described in the applicable award agreements and set forth on Schedule A hereto) or (y) four (4) years from the Retirement Date.

(iv) Award Agreements. Except to the extent modified by the foregoing provisions of this Section 2(e), the provisions of the applicable award agreements shall continue to apply to the Restricted Stock, Performance RSUs, and Stock Options, including without limitation any provision regarding adjustment of an award following a Performance Period, concerning the consequences upon termination of employment prior to the Retirement Date, or providing for forfeiture of an applicable award by the Executive in the event that the Executive causes “Harm” to the Company. Notwithstanding the foregoing, for purposes of all applicable award agreements, the term “Harm” shall not have the meaning set forth in each such applicable award agreement, but rather solely shall mean a material breach by the Executive of Section 3 below, which is not cured following written notice of such breach by the Company and a reasonable opportunity to cure the breach.

(f) Automobile. On or before the Retirement Date, the Executive will be allowed to purchase the automobile being provided by the Company to the Executive by paying the lease option purchase amount.

(g) Supplemental Savings and Stock Investment Plan. The Executive’s account under the General Dynamics Corporation Supplemental Savings and Stock Investment Plan (the “Supplemental SSIP”) shall continue to be subject in all respects to the terms and conditions of the Supplemental SSIP, including, without limitation, the terms and conditions of the Supplemental SSIP applicable to the time and form of payment of the balance of the Executive’s

 

3


account.

(h) Tax Planning and Preparation. Promptly following the Executive’s presentation of reasonable supporting documentation therefor, the Company will reimburse the Executive for income tax planning and tax return preparation expenses in an amount of up to $5,000 per year for expenses accrued in calendar year 2013 and up to $5,000 for expenses accrued in calendar year 2014.

(i) Withholding. The Company may withhold from any amounts payable to the Executive hereunder all federal, state, city or other taxes that the Company may reasonably determine are required to be withheld pursuant to any applicable law or regulation (it being understood that the Executive shall be responsible for payment of all taxes in respect of the payments and benefits provided herein).

3. Restrictive Covenants.

In consideration of the favorable treatment on equity awards and the other benefits set forth in Section 2 above, the Executive agrees to undertake and comply with the following covenants:

(a) Non-Competition. From the present until the end of the Consulting Period, the Executive shall not manage, control, operate, advise or assist, provide services to, be employed by, or be connected in any manner with the ownership, management, operation, or control of, any of the entities identified on Schedule B hereto (each, a “Competitor”), or any subsidiary or affiliate of those entities, whether directly or indirectly, as an individual on his own account, or as a partner, member, joint venturer, officer, director, investor, shareholder, or otherwise; provided that the Executive may own, directly or indirectly, solely as a passive investment, securities of any Competitor (i) that are traded on any national securities exchange if the Executive is not a controlling person of, or a member of a group which controls, such entity and does not, directly or indirectly, own one percent (1%) or more of any class of securities of such Competitor or (ii) that are owned by a mutual fund, hedge fund or similar investment vehicle.

(b) Non-Solicitation. From the present until the end of the Consulting Period, the Executive shall not, directly or indirectly, whether for compensation or not, (i) solicit, hire or assist any other person or entity in soliciting or hiring any employee of the Company or its affiliates to perform services for any entity (other than the Company or any of its affiliates), or attempt to induce any such employee to leave the employ of the Company or any of its affiliates (provided, that nothing in this Section 3(b)(i) shall be deemed to prohibit general solicitations for employment through advertisements or other means that may be seen by employees of the Company or its affiliates); or (ii) solicit or assist any other person or entity in soliciting or attempting to solicit any client, customer, supplier or distributor, or prospective client, customer, supplier or distributor, of the Company or its affiliates to reduce, terminate or otherwise modify, interfere with or diminish its relationship with the Company or any of its affiliates.

4. Indemnification

(a) Rights of Indemnification. The Company hereby agrees and acknowledges that the Executive is, and shall continue to be, entitled to indemnification and reimbursement in

 

4


accordance with Article Twelfth of its Restated Certificate of Incorporation, which was adopted on October 6, 2004 (the “Current Certificate”). The Company further agrees that in the event that the Executive is, by reason of the fact that the Executive is or was an officer or director of the Company (including, without limitation, in connection with his performance of services pursuant to the Consulting Agreement), made a party, or is required or at the request of the Company becomes a witness or other non-party participant, in any Claim, Action, Suit or Proceeding (within the meaning of the Current Certificate), the Executive shall be entitled to the fullest rights to indemnification and advancement of expenses permitted by applicable law as in effect from time to time. In furtherance, and not in limitation of the preceding sentence, if there is an amendment to the Company’s bylaws or certificate of incorporation that provides any greater right to indemnification or advancement than the rights to indemnification and advancement that the Executive possesses under the Current Certificate, as modified by this Section 4(a), or if the Company enters into any contract or other agreement with any individual that provides any greater right to indemnification or advancement than the rights to indemnification and advancement that the Executive possesses under the Current Certificate, as modified by this Section 4(a), in any such event, the Executive shall be deemed to have such greater right and this Agreement shall be deemed to have been amended to provide for such greater right.

(b) Attorneys Fees and Costs. In the event that any action is instituted by the Executive to enforce or interpret any of the Executive’s rights to indemnification or advancement, and the Executive is the prevailing party in such action, the Executive shall be entitled to be paid all costs and expenses, including without limitation attorneys fees, incurred by the Executive with respect to such action.

5. Confidentiality and Intellectual Property.

(a) Confidential Information. After the Retirement Date, the Executive agrees that he will not use, disclose, divulge, furnish or make available to any person any confidential or proprietary information concerning the Company or its affiliates, including without limitation any confidential or proprietary information concerning the operations, plans or methods of doing business of Company or its affiliates (the “Confidential Information”); providedthat the term “Confidential Information” shall not include such information which is or becomes generally available to the public other than as a result of unauthorized or improper disclosure by the Executive. Notwithstanding the foregoing, the Executive may disclose Confidential Information to the extent he is compelled to do so by lawful service of process, subpoena, court order, or as he is otherwise compelled to do by law or the rules or regulations of any regulatory body or governmental agency or instrumentality to which he is subject, including full and complete disclosure in response thereto, in which event he agrees (unless prohibited by law) to provide the Company with a copy of the documents seeking disclosure of such information promptly upon receipt of such documents and prior to their disclosure of any such information, so that the Company may, upon notice to the Executive, take such action as the Company deems appropriate in relation to such subpoena or request and the Executive (unless otherwise compelled to do so by lawful service of process, subpoena, court order, or by law or the rules or regulations of any regulatory body or governmental agency or instrumentality) may not disclose any such information until the Company has had the opportunity to take such action. The Executive agrees that he will return to the Company not later than the Retirement Date all

 

5


Confidential Information in whatever form (including computer files and other electronic data) in his possession and will cease using such information as of such date, except to the extent such information is retained or used, respectively, in the good faith performance of services for the Company pursuant to the Consulting Agreement.

(b) Intellectual Property. After the Retirement Date, the Executive agrees that all writing or other works subject to copyright and, whether patentable or not, every invention, discovery, improvement, device, design, apparatus, practice, process, method or product (each of which is hereinafter called an “invention”), created, written, made, developed, perfected, devised, conceived or first reduced to practice by the Executive, either solely or in collaboration with others during the period of his employment by the Company and its affiliates, whether or not during regular working hours, relating in any way to the business, products, developments or activities of the Company and its affiliates, are the sole and exclusive property of the Company and its affiliates. To the extent that the Company and its affiliates or the Executive was, is or will be involved in agreements or arrangements with the United States Government or agencies or instrumentalities thereof, the Executive agrees that he was, is and will be bound by all obligations, restrictions, and limitations imposed by contract, law or regulation, applicable to any invention conceived or developed, or to any writing or other work acquired, written or produced by the Executive during the period of his employment with the Company and its affiliates, and shall take all action which may be required to discharge such obligations and to comply with such restrictions and limitations.

(c) Termination of Prior Agreements. From the date of this Agreement to and including the Retirement Date, any and all agreements to which the Executive is subject regarding confidentiality, trade secrets, or intellectual property, including without limitation that certain Invention, Copyright and Secrecy Agreement and that certain Private and Proprietary Information Agreement executed by the Executive on September 2, 2008 (collectively, the “Prior Agreements”), shall continue in full force and effect. As of the day after the Retirement Date the Prior Agreements shall be terminated and shall be of no further force or effect.

6. General Provisions

(a) Disputes. Any dispute, controversy, or claim arising out of or in connection with the employment relationship between the Parties or the termination of that relationship or arising out of or in connection with this Agreement, including any question regarding the existence, validity or termination of this Agreement, other than a dispute, controversy or claim with respect to the Executive’s indemnification or advancement rights, shall be finally resolved by arbitration under the rules of the American Arbitration Association in force as of the date of this Agreement, which rules are deemed to be incorporated by reference into this clause. The place of arbitration shall be Fairfax County, Virginia. Any determination by the Company that the Executive is not entitled to indemnification or advancement (including, without limitation, any determination pursuant to Section 2 of Article Twelfth of the Current Certificate) may be challenged by the Executive in the Federal or state courts of Delaware. In the event that the Company shall breach its obligation to advance expenses in accordance with Section 4(a), above, the parties hereto agree that the Executive’s remedies available at law would not be adequate and that the Executive shall be entitled to the remedies of specific performance and injunctive relief to enforce such obligation of the Company.

 

6


(b) Complete Agreement. This Agreement, Schedules A, B, and C to this Agreement, and the Severance Protection Agreement between the Company and the Executive dated December 15, 2008 (which agreement shall remain in full force and effect in accordance with its terms, such that payments pursuant to this Agreement and the Consulting Agreement would be considered in determining any obligation of the Company pursuant to Section 5 thereof) constitute the entire understanding of the Company and the Executive with respect to the subject matter hereof and together supersede all prior understandings, written or oral except to the extent of any provision expressly incorporated herein. Neither of the Parties is executing this Agreement in reliance upon any statement or representation not expressly set forth or incorporated herein.

(c) Amendment; Waiver. The terms of this Agreement may be changed, modified or discharged only by an instrument in writing signed by the parties hereto. A failure of the Company or the Executive to insist on strict compliance with any provision of this Agreement shall not be deemed a waiver of such provision or any other provision hereof.

(d) Construction of Agreement. Each party has negotiated the terms and provisions of this Agreement and has had the opportunity to contribute to its revision. The terms of this Agreement shall be construed fairly and evenly as to both parties hereto and not in favor or against either party based on the characterization of one or the other as the drafting party.

(e) Choice of Law. This Agreement shall be construed, enforced and interpreted in accordance with and governed by the laws of the Commonwealth of Virginia (except as to matters pertaining to the Executive’s rights with respect to indemnification and advancement, and the enforcement of such rights, which shall be construed, enforced and interpreted in accordance with and governed by the laws of the State of Delaware), without regard to its choice of law principles.

(f) Successors and Assigns. This Agreement is binding upon, and shall inure to the benefit of, the parties and their respective heirs, successors and assigns, it being acknowledged and agreed that the obligation of the Executive to provide personal services to the Company shall not be assignable by him.

(g) Section 409A. The intent of the Parties is that any payments and benefits under this Agreement that are subject to Section 409A of the Code comply with the requirements of Section 409A of the Code and any related regulations and other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service. Accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered in compliance therewith. All expense reimbursements paid pursuant to this Agreement that are taxable income to the Executive shall in no event be paid later than the end of the calendar year next following the calendar year in which the Executive incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by this Agreement and Section 409A of the Code, the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit and the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year. For purposes of applying the provisions of

 

7


Section 409A of the Code to this Agreement, each separately identified amount to which the Executive is entitled under this Agreement shall be treated as a separate payment. In addition, to the extent permissible under Section 409A of the Code, any series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be executed as of the dates and years indicated below.

 

GENERAL DYNAMICS CORPORATION:

By:

 

/S/ WALTER M. OLIVER

Walter M. Oliver, Senior Vice President

Human Resources & Administration

Date:

 

June 6, 2012

EXECUTIVE:

/S/ JAY L. JOHNSON

Jay L. Johnson

Date:

 

June 6, 2012

 

8


SCHEDULE A

Outstanding Equity Awards


Jay L. Johnson Executive Compensation Stock Plan Analysis

Retirement Treatment

Based on December 31, 2012 Retirement Date

As of June 6, 2012

Restricted Stock Outstanding:

 

Grant Date

  

Shares/Units

 

  

Grant Price

 

  

Release Date

  

Comments

3/4/2009

  

 

72,500

  

  

$

40.09

  

  

1/2/2013

  

Release on January 2, 2013

3/3/2010

  

 

40,800

  

  

$

73.49

  

  

1/2/2014

  

Release on January 2, 2014

3/2/2011

  

 

47,120

  

  

$

74.81

  

  

1/2/2015

  

Release on January 2, 2015

3/7/2012

  

 

43,430

  

  

$

71.01

  

  

1/4/2016

  

Release on January 4, 2016

Performance Restricted Units Outstanding:

 

Grant Date

  

Units

 

  

Grant Price

 

  

Release Date

  

Comments

  

 

3/7/2012

  

 

43,430

  

  

$

71.01

  

  

1/4/2016

  

Release on January 4, 2016

  

Subject to Performance Adjustment before lock in

Stock Options Outstanding:

Grant Date

  

Options

 

  

Option Type

  

Option Price

 

  

Vest Date

  

Original
Expiration Date

  

Comments

3/5/2008

  

 

3,300

  

  

NQ

  

$

82.78

  

  

3/5/2009

  

3/4/2013

  

3/5/2008

  

 

3,300

  

  

NQ

  

$

82.78

  

  

3/5/2010

  

3/4/2013

  

  

 

 

 

  

  

  

  

  

  

 

6,600

  

  

  

  

  

  

9/2/2008

  

 

80,427

  

  

NQ

  

$

93.13

  

  

9/2/2009

  

9/1/2013

  

9/2/2008

  

 

1,073

  

  

ISO

  

$

93.13

  

  

9/2/2009

  

9/1/2013

  

9/2/2008

  

 

80,427

  

  

NQ

  

$

93.13

  

  

9/2/2010

  

9/1/2013

  

9/2/2008

  

 

1,073

  

  

ISO

  

$

93.13

  

  

9/2/2010

  

9/1/2013

  

  

 

 

 

  

  

  

  

  

  

 

163,000

  

  

  

  

  

  

3/4/2009

  

 

0

  

  

NQ

  

$

40.09

  

  

3/4/2010

  

3/3/2014

  

3/4/2009

  

 

0

  

  

ISO

  

$

40.09

  

  

3/4/2011

  

3/3/2014

  

3/4/2009

  

 

0

  

  

NQ

  

$

40.09

  

  

3/4/2011

  

3/3/2014

  

  

 

 

 

  

  

  

  

  

  

 

0

  

  

  

  

  

  

3/3/2010

  

 

199,550

  

  

NQ

  

$

73.49

  

  

3/3/2011

  

3/2/2015

  

3/3/2010

  

 

1,360

  

  

ISO

  

$

73.49

  

  

3/3/2012

  

3/2/2015

  

3/3/2010

  

 

198,190

  

  

NQ

  

$

73.49

  

  

3/3/2012

  

3/2/2015

  

  

 

 

 

  

  

  

  

  

  

 

399,100

  

  

  

  

  

  

3/2/2011

  

 

225,235

  

  

NQ

  

$

74.81

  

  

3/2/2012

  

3/1/2018

  

Adjust Expiration Date to December 31, 2016

3/2/2011

  

 

225,235

  

  

NQ

  

$

74.81

  

  

3/2/2013

  

3/1/2018

  

Adjust Expiration Date to December 31, 2016

  

 

 

 

  

  

  

  

  

  

 

450,470

  

  

  

  

  

  

3/7/2012

  

 

232,110

  

  

NQ

  

$

71.01

  

  

3/7/2013

  

3/6/2019

  

Adjust Expiration Date to December 31, 2016

3/7/2012

  

 

232,110

  

  

NQ

  

$

71.01

  

  

3/7/2014

  

3/6/2019

  

Adjust Expiration Date to December 31, 2016

  

 

 

 

  

  

  

  

  

  

 

464,220

  

  

  

  

  

  

 

Note:

This document is for estimation purposes only; actual numbers may vary

 

    

All Incentive Stock Options are converted to Non-qualified status 90 days after last day worked


SCHEDULE B

Competitors*

BAE Systems

The Boeing Company

Huntington Ingalls Industries

Lockheed Martin Corporation

Northrop Grumman Corporation

Raytheon Company

SAIC, Inc.

Textron, Inc.

United Technologies Corporation

 

*

Each entity listed includes all of the subsidiaries and affiliates of that entity.


SCHEDULE C

Consulting Agreement


June 6, 2012

Mr. Jay L. Johnson

 

 

Re:

Consulting Agreement

Dear Mr. Johnson:

This letter agreement (“Agreement”) confirms the contractual arrangement between General Dynamics Corporation (the “Company,” “us,” or “we”) and Mr. Jay L. Johnson (“Consultant” or “you”) for the personal services of Consultant described in more detail below.

 

1.

Term of Agreement

The term of this Agreement shall be from January 1, 2013, until June 30, 2013 (the “Consulting Period”). Consultant’s obligations under Section 5 of this Agreement shall survive the expiration or termination of this Agreement.

 

2.

Services to be Rendered

(a) The Company retains Consultant to render, and Consultant hereby agrees to render to the Company, upon request, strategic advice and guidance regarding the aerospace and defense market and particular matters of importance to the Company’s business. These services will include conference calls, review of relevant materials, and attendance at meetings, and may include occasional travel. All such services shall be referred to herein as “the Services.”

(b) The Parties anticipate that the level of services to be provided by Consultant during the Consulting Period will be no more than twenty percent (20%) of the average level of services provided by Consultant during his tenure as Chairman and Chief Executive Officer. On a weekly basis, the parties do not expect that the Services shall entail more than an average of eight hours of work per week.

(c) As a self-employed independent contractor, Consultant retains control over the manner and means by which Consultant provides the Services, provided that we determine the objectives of the Services and timeframes for completion. Consultant is not required to work any fixed schedule and will set his own hours, subject to deadlines required by the Company. With the exception of in-person meetings that may be scheduled at times that are mutually convenient to the Company and Consultant, Consultant will not be required to work at any particular location.


3.

Payment for Services, Reimbursement, and Office Costs

(a) In consideration for the Services, the Company shall pay Consultant a fee of Eight Hundred Twenty-Five Thousand dollars ($825,000.00) (“the Retainer”). The Retainer shall be paid to Consultant in a single, lump sum on or before January 31, 2013 but in no event prior to January 1, 2013 and shall compensate Consultant for all services performed and hours worked during the Consulting Period.

(b) Reimbursement for all out-of-pocket expenses will be based on reasonable commercial practices and actual cost, provided that the Company will reimburse Consultant only for expenses for airfare, transportation, meals, and lodging that Consultant incurs in the course of out-of-town travel requested and approved in advance by the Company. Expenses must be supported by receipts and be submitted in accordance with the Company’s standard practices for expense reimbursement. Per standard policy, all invoices submitted for payment are subject to review or audit by us, and Consultant must maintain copies of receipts for six years from the date of the relevant invoice.

(c) Subject to Consultant’s continued performance of the Services in accordance with this Agreement for the period beginning on January 1, 2013 and ending on June 30, 2013, the Company will provide office space and administrative support for the Consultant in the Washington, D.C. area for this time period. Consultant shall be responsible for all costs or expenses outside this time period.

 

4.

Restrictions on Services for Others

During the Consulting Period, Consultant may provide consulting, advisory or other services to other persons or entities and may serve as a director or be employed by other persons or entities, provided that Consultant shall not violate the restrictive covenants set forth in Section 3 of the June 6, 2012 Retirement Agreement between Consultant and the Company (the “Retirement Agreement”), which obligations are expressly incorporated herein. Consultant further agrees and covenants that, during the Consulting Period, all services he performs for the Company in connection with any government program or business opportunity shall be limited solely to the exclusive benefit of General Dynamics and its subsidiaries.

 

5.

Protection of Information

(a) Use and Disclosure of Confidential Information. You acknowledge and agree that any Confidential Information (as such term is defined in the Retirement Agreement) that the Company provides you (even if you previously acquired that information while employed by the Company), will not be used by you for any purpose other than for the sole and exclusive benefit of the Company. You further agree that all Confidential Information shall remain our property and that, subject to the same exceptions that permit disclosure under the Retirement Agreement, you will not disclose such information to any third party without our prior written approval, during or after the term of this Agreement. Upon our written request or the conclusion of this Agreement, whichever is earlier, you will promptly return to us all Confirmation Information in whatever form (including computer files and other electronic data) provided to you during the

 

2


Consulting Period. Nothing in this Agreement shall limit or extinguish your obligations under the Retirement Agreement to maintain confidentiality of trade secrets and other information relating to the Company’s business.

b. Intellectual Property. All documents, writings, presentations, or other copyrightable materials that you produce and deliver to us as work done in connection with the Services shall constitute “works for hire” prepared for us, and as such, General Dynamics is and shall be the sole owner of all right, title, and interest in the copyright of all such materials. You shall promptly notify us of any limitation of which you are or become aware concerning materials you deliver to us.

 

6.

Independent Contractor Relationship, Taxes, and Insurance

At all times, the relationship between us shall be that of independent contractors, and nothing herein shall be construed to create or imply any employer-employee, principal-agent, partnership, joint venture, or other relationship between us. You shall hold no authority, express or implied, to obligate us or make representations on our behalf and shall make no representation to others to the contrary.

Amounts paid to you hereunder will be reported on IRS Form 1099-Misc. You are solely responsible for payment of all taxes arising out of your activities in connection with the Services, including, without limitation, federal and state income taxes, self employment taxes, and any other taxes or business license fees as required. We shall not be responsible for paying any income or taxes on your behalf.

No amount payable hereunder shall be counted for purposes of calculating or accruing any benefit or service for purposes of any pension, retirement, health, welfare, or other benefit plan or program. Your performance of the Services will not count toward, and does not and will not make you eligible to participate in, any benefit plan or program in which employees of GD or its subsidiaries or affiliates participate.

 

7.

Compliance with Laws

Consultant will comply with all federal, state, and local laws, regulations, licensing and registration requirements, and rules that apply to Consultant’s activities in connection with the Services.

 

8.

General Provisions

(a) Disputes. Any dispute, controversy, or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be finally resolved by arbitration under the rules of the American Arbitration Association in force as of the date of this Agreement, which rules are deemed to be incorporated by reference into this clause. The place of arbitration shall be Fairfax County, Virginia.

(b) Complete Agreement. This Agreement and the Retirement Agreement constitute the entire understanding of the Company and the Consultant with respect to the subject matter

 

3


hereof and together supersede all prior understandings, written or oral.

(c) Amendment; Waiver. The terms of this Agreement may be changed, modified or discharged only by an instrument in writing signed by the parties hereto. A failure of the Company or the Consultant to insist on strict compliance with any provision of this Agreement shall not be deemed a waiver of such provision or any other provision hereof.

(d) Construction of Agreement. Each party has negotiated the terms and provisions of this Agreement and has had the opportunity to contribute to its revision. The terms of this Agreement shall be construed fairly and evenly as to both parties hereto and not in favor or against either party based on the characterization of one or the other as the drafting party.

(e) Choice of Law. This Agreement shall be construed, enforced and interpreted in accordance with and governed by the laws of the Commonwealth of Virginia, without regard to its choice of law principles.

(f) Successors and Assigns. This Agreement is binding upon, and shall inure to the benefit of, the parties and their respective heirs, successors and assigns, it being acknowledged and agreed that the obligation of the Consultant to provide personal services to the Company shall not be assignable by him.

(g) Section 409A. The intent of the Parties is that any payments and benefits under this Agreement that are subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) comply with the requirements of Section 409A of the Code and any related regulations and other guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service. Accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered in compliance therewith. All expense reimbursements paid pursuant to this Agreement that are taxable income to Consultant shall in no event be paid later than the end of the calendar year next following the calendar year in which Consultant incurs such expense. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by this Agreement and Section 409A of the Code, the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit and the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

 

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If the foregoing clearly sets forth our understanding, please sign in the space provided below.

 

Very truly yours,

General Dynamics Corporation

By:

 

/S/ WALTER M. OLIVER

Walter M. Oliver, Senior Vice President Human

Resources & Administration

 

Accepted and agreed this 6th day of June, 2012:

CONSULTANT:

By:

 

/S/ JAY L. JOHNSON

Jay L. Johnson

 

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