1995
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission file number 1-11437
[LOCKHEED MARTIN LOGO]
LOCKHEED MARTIN CORPORATION
(Exact name of registrant as specified in its charter)
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Maryland 52-1893632
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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6801 Rockledge Drive, Bethesda, Maryland 20817-1877 (301/897-6000)
(Address and telephone number of principal executive offices)
_______________
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange
Title of Each Class on which registered
------------------------- ----------------------------
Common Stock, $1 par value New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if the disclosure of delinquent files pursuant to Item
405 or Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Approximately $14,953,000,000 as of January 31, 1996.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date. Common Stock, $1 par value,
198,748,774 shares outstanding as of January 31, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Lockheed Martin Corporation's 1995 Annual Report to Shareholders
are incorporated by reference in Parts I, II and IV of this Form 10-K.
Portions of Lockheed Martin Corporation's 1996 Definitive Proxy Statement are
incorporated by reference in Part III of this Form 10-K.
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________________________________________________________________________________
PART I
ITEM 1. BUSINESS
GENERAL
Lockheed Martin Corporation ("Lockheed Martin" or the "Corporation") was
incorporated on August 29, 1994 under the Maryland General Corporation Law in
order to effect the combination (the "Combination") of the businesses of
Lockheed Corporation ("Lockheed") with the businesses of Martin Marietta
Corporation ("Martin Marietta"). On August 29, 1994, Lockheed and Martin
Marietta entered into an Agreement and Plan of Reorganization, which was amended
on February 7, 1995 (as amended, the "Reorganization Agreement"). On March 15,
1995, the Combination was consummated and Martin Marietta and Lockheed became
wholly owned subsidiaries of Lockheed Martin on the terms set forth in the
Reorganization Agreement.
On January 25, 1996, Lockheed Martin entered into an Agreement and Plans of
Merger and Complete Liquidation with certain of its direct and indirect wholly
owned subsidiaries. As a result, on January 28, 1996, each of Lockheed,
Lockheed Missiles and Space Company, Inc., Lockheed Sanders, Inc., Martin
Marietta and Martin Marietta Technologies, Inc. were merged with and into
Lockheed Martin.
The business of Lockheed Martin consists of the businesses previously
conducted by Lockheed and Martin Marietta and their respective subsidiaries.
Lockheed Martin is a diversified enterprise principally engaged in the
conception, research,
development, design, manufacture and integration of advanced technology products
and services with core businesses organized into five major operating sectors:
Space & Strategic Missiles; Aeronautics; Information & Technology Services;
Electronics; and Energy & Environment.
On June 26, 1995, Lockheed Martin unveiled a corporate-wide consolidation
plan that, when fully implemented, is expected to yield annual savings of
approximately $1.8 billion. Under the consolidation plan, Lockheed Martin will
close 12 facilities and laboratories as well as 26 duplicative field offices in
the U.S. and abroad, eliminating approximately 12,000 positions and some 7.7
million square feet of excess capacity over five years. The total cost to
implement the consolidation plan, which is expected to be largely completed over
the next two years, is estimated to be approximately $1.7 billion. These costs
will be funded by cash generated from operations supplemented, as necessary, by
borrowings. The consolidation plan resulted in a pre-tax charge of $525 million
in the second quarter of 1995. In addition, in the first quarter of 1995, the
Corporation recorded a pre-tax charge of $165 million for other merger related
costs.
Space & Strategic Missiles Sector
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Space & Strategic Missiles Sector's activities include the design,
development, engineering and production of civil, commercial and military space
systems, including spacecraft, space launch vehicles and supporting ground
systems and services; satellites; strategic fleet ballistic missiles; tactical
missile systems; electronics and instrumentation; remote sensing
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technology; space- and ground-based strategic systems; and surface- and space-
based information and communications systems.
Major programs of Space & Strategic Missiles Sector include the Titan IV
expendable launch vehicle, accounting for approximately 14% of the Sector's 1995
sales, the Trident family of submarine launched, strategic deterrent, fleet
ballistic missiles, and the Atlas expendable launch vehicle. In addition, the
Sector produces various government and commercial satellites, including
environmental monitoring satellites, such as Landsat and TIROS, military and
civilian communications satellites, including the MILSTAR communications
satellite, and the Theater High Altitude Area Defense (THAAD) ground-based
theater air defense system. Through Space & Strategic Missiles Sector, Lockheed
Martin also is a principal subcontractor on the space station, has contracted to
build spacecraft for Motorola's IRIDIUM(R) global communications system, and has
established a joint venture company with two major Russian aerospace firms,
Khrunichev State Research and Production Space Center and RSC Energia, which
markets the services of the Atlas and Proton rockets to commercial customers
world-wide. The Sector also is engaged in a substantial amount of classified
activities.
Space & Strategic Missiles Sector's Astro Space Commercial unit is building
the next series of satellites for the International Telecommunications Satellite
Organization (INTELSAT), which will provide voice, data and television
transmission for use by over 125 nations. The Technical Operations unit
controls approximately 50 orbiting spacecraft, including the Hubble Space
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Telescope. The Missiles & Space unit integrated Hubble's complex systems with
its spacecraft and provides service and support functions for NASA, including
preparing and executing the in-orbit repair mission and providing operations
support at NASA's Goddard Space Flight Center. In the area of remote sensing
technology, the Sector is producing the Earth Observing System (EOS AM-1)
satellite bus, which will be utilized by NASA to measure properties of the
atmosphere, such as pollution levels, and collect data on soil and minerals.
Sales by the Sector represented approximately 33% of the Corporation's
total sales in 1995. Sales to the United States Government, excluding Foreign
Military Sales, represented approximately 80% of the Sector's sales in 1995.
Aeronautics Sector
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Aeronautics Sector is involved in the design, development, engineering and
production of fighter, bomber, special mission, airlift, antisubmarine warfare,
reconnaissance, surveillance and high performance aircraft; systems for military
operations; aircraft controls and subsystems; thrust reversers and shipboard
vertical missile launching systems; and aircraft modification and maintenance
and logistics support for military and civilian customers.
Lockheed Martin is the prime contractor for the F-16 "Fighting Falcon"
fighter aircraft, which was the Corporation's largest program in 1995,
accounting for 8% of the Corporation's 1995 revenues and approximately 28% of
the Sector's sales. Lockheed Martin, through the Aeronautics Sector, is also a
significant
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contractor for the Air Force's F-22 air superiority fighter program, designed to
produce the next generation of tactical fighter, and for production of the C-130
series of airlift aircraft, designed primarily for military transport, but also
modified to perform many other missions including humanitarian aid and disaster
relief. Aeronautics Sector received two international orders in 1995 for the
most recent aircraft in the C-130 series, the C-130J. Aeronautics Sector
delivered eight P-3 maritime patrol aircraft in 1995 and will continue to
provide spares and support activities for the P-3. In addition, Aeronautics
Sector supports the F-117 stealth fighter bomber and designs, produces and
supports missile launching systems such as the Vertical Launching System for the
U.S. Navy and international customers. Through The Skunk Works, Aeronautics
Sector performs a substantial amount of classified work.
Sales by Aeronautics Sector represented approximately 29% of the
Corporation's total sales in 1995. Sales to the United States Government,
excluding Foreign Military Sales, represented approximately 65% of the Sector's
sales in 1995.
Information & Technology Services Sector
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Information & Technology Services Sector is involved in the development and
operation of large, complex information systems; designing, manufacturing and
marketing computer graphics products; developing and manufacturing high capacity
data storage products; electronics contract manufacturing services; and
providing advanced transportation systems and services, and payload integration,
astronaut training and flight operations support. The Sector's
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customers include state and municipal governments, NASA and other federal civil
government agencies, national intelligence agencies, the Department of Defense
and commercial markets.
Information & Technology Services Sector's largest program, representing
approximately 11% of the Sector's sales in 1995, involves performance of
processing services for NASA's space shuttle program. In addition, the Sector
produces the external tank for the space shuttle and provides engineering and
test analysis services to NASA. In 1995, NASA selected United Space Alliance, a
limited liability company owned by Lockheed Martin and Rockwell International,
to be its sole source space shuttle program prime contractor in an effort to
reduce costs through streamlined operations.
Lockheed Martin's CalComp, Access Graphics and MountainGate businesses are
involved in commercial markets for computer graphics, hardware distribution and
data storage devices. Lockheed Martin Commercial Electronics Company provides
electronics contract manufacturing services for companies in the computer,
telecommunications and medical instruments industries.
Sales by the Sector represented approximately 20% of Lockheed Martin's
total sales in 1995. Sales to the United States Government, excluding Foreign
Military Sales, represented approximately 64% of Information & Technology
Services Sector's sales in 1995.
Electronics Sector
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Electronics Sector's activities primarily relate to the design,
development, engineering and production of high-performance
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electronic systems for undersea, shipboard, land-based and airborne
applications. Major product lines include advanced technology missiles, night
navigation and targeting systems for aircraft; submarine and surface ship combat
systems; airborne, ship and land-based radar; radio frequency, infrared, and
electro-optical countermeasure systems; surveillance systems; control systems;
ordnance; and aircraft component manufacturing and assembly.
Lockheed Martin is the prime contractor for the U.S. Navy's AEGIS fleet air
defense system, Electronics Sectors' largest program accounting for
approximately 19% of the Sector's sales in 1995. In 1995, the U.S. Navy
selected Electronics Sector to upgrade the AEGIS Computer System by improving
the system's phased array radar, cooperative engagement capability, near-shore
performance and anti-tactical ballistic missile capability. Electronics
Sector's production of the LANTIRN navigation and targeting system for the U.S.
Air Force concluded in 1994. Production, however, continues for international
customers and the U.S. Navy has announced plans to integrate the LANTIRN
targeting pod on the F-14 Tomcat aircraft.
The Sector is the primary contractor for the AN/BSY-2 submarine combat
system for the Seawolf attack submarine. In addition, Electronics Sector
produces the Target Acquisition Designation Sight/Pilot Night Vision Sensor
(TADS/PNVS), as well as providing fire control and guidance systems to the
Trident II Submarine Program. The Corporation expects that the production of
Hellfire II, an upgraded air-launched, anti-armor missile used in the Apache and
Supercobra helicopters, as well as the production of
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fixed-site, mobile and tactical versions of Ground-Based Radar will account for
an increasing percentage of the Sector's sales in 1996.
Sales by Electronics Sector represented approximately 14% of the
Corporation's total sales in 1995. Sales to the United States Government,
excluding Foreign Military Sales, represented approximately 73% of the Sector's
sales in 1995.
Energy & Environment Sector
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Energy & Environment Sector is responsible for Lockheed Martin's energy and
environmental businesses, including the management of various U.S. Department of
Energy (DoE) activities. Lockheed Martin is the largest management and
operations contractor within the DoE's system of laboratories and other
facilities and is responsible for managing operations with an annual budget of
approximately $4.7 billion. Lockheed Martin, through Energy & Environment
Sector, manages the Oak Ridge National Laboratory and Energy Systems, science
research facilities that play a role in (i) the development of safe, economic
and environmentally acceptable technologies for the efficient production and use
of energy, (ii) programs related to the national defense and (iii) environmental
and other technical programs for the Department of Energy and other federal
agencies. The Sector also manages the Sandia National Laboratories, a federally
funded research and development center with responsibilities for national
security programs in defense, energy and the environment, and the Idaho National
Engineering Laboratory, an engineering and testing research center focusing on
environmental remediation and energy research.
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Sales by the Sector represented less than 1% of the Corporation's total
sales in 1995. Sales to the United States Government represented approximately
88% of the Sector's sales in 1995.
Additional Activities and Business Segment Reporting
- ----------------------------------------------------
In addition to the above activities, Lockheed Martin has real estate
subsidiaries in Florida and Maryland, runs research laboratories and carries on
other miscellaneous activities. Lockheed Martin owns approximately 81% of
Martin Marietta Materials, Inc., a publicly traded corporation which is
principally engaged in the production of aggregates used for the construction of
infrastructure projects and in commercial and residential construction and in
manufacturing and producing high-purity magnesia-based products.
For business segment reporting in the Corporation's financial statements,
the Space & Strategic Missiles; Aeronautics; Information & Technology Services
and Electronics Sectors each comprise reportable business segments. The Energy
& Environment Sector, together with the additional activities described in the
preceding paragraph, is reported as Energy, Materials and Other.
Recent Developments
- -------------------
In January 1996, Lockheed Martin and its wholly owned subsidiary LAC
Acquisition Corporation entered into an Agreement and Plan of Merger with Loral
Corporation, dated as of January 7, 1996 (the "Loral Merger Agreement"),
pursuant to which Lockheed Martin agreed to initiate a tender offer for all the
issued and outstanding shares of common stock of Loral Corporation (together
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with the associated preferred stock purchase rights) (collectively, "Loral
Shares") for an aggregate consideration of $38 per share, net to the seller in
cash, without interest, (the "Tender Offer"). The Tender Offer was initiated on
January 12, 1996. The consummation of the transactions contemplated by the
Loral Merger Agreement are subject to a number of conditions, including there
being validly tendered and not withdrawn prior to the expiration of the Tender
Offer a specified percentage of Loral Shares and the receipt of certain
regulatory approvals. The Corporation expects closing of the transactions to
occur late in the first quarter or early in the second quarter of 1996.
The Corporation intends to obtain the funds needed to consummate the Tender
Offer, estimated to be approximatley $8.4 billion, from loans to be obtained
under credit agreements with a syndicate of commercial banks or, alternatively,
through the issuance of commercial paper backed by the credit agreements.
Following the closing of the Tender Offer, it is anticipated that the
Corporation will refinance all or a portion of these borrowings with funds
raised in the public or private securities markets. The Corporation has entered
into interest rate hedging agreements to offset a portion of its exposure to
rising interest rates related to the anticipated long-term financings. Such
agreements expose the Corporation to certian risks including, but not limited
to, market risks, risks arising from the possibility that the anticipated
financing needs do not materialize and the risk of nonperformance by the
counterparty to the hedging arrangements. Procedures are in place to monitor
these risks and the Corporation does not believe these risks to be material.
COMPETITION AND RISK
Lockheed Martin's sales to the U.S. Government, excluding Foreign Military
Sales, amounted to approximately 69% of net sales for the year ended December
31, 1995. Approximately 13% of net sales for fiscal year 1995 were sales to
foreign governments and approximately 18% of net sales were to commercial
customers worldwide.
Lockheed Martin encounters extensive competition in all of its lines of
business with numerous other contractors on the basis of price, technical and
managerial capability. Its business involves rapidly advancing technologies and
is subject to many uncertainties including, but not limited to, those resulting
from changes in federal budget priorities, particularly the size and scope of
the defense budget, and dependence on Congressional appropriations.
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Substantial efforts are undertaken continually on a long-term basis in order to
maintain existing levels of business.
Approximately 69% of the 1995 sales of the Corporation were made to the
United States Government, either as a prime contractor or as a subcontractor,
for which there is intense competition. Accordingly, a significant portion of
the Corporation's sales are subject to inherent risks, including uncertainty of
economic conditions, changes in government policies and requirements that may
reflect military and political developments, availability of funds, complexity
of designs and the rapidity with which product lines become obsolete due to
technological advances, technical or schedule progress, difficulty of
forecasting costs and schedules when bidding on developmental and highly
sophisticated technical work and other factors characteristic of the industry.
Due to the intense competition for available government business, the
maintenance and/or expansion of government business increasingly requires the
Corporation to invest in its working capital and fixed asset base.
Certain risks inherent in the current defense and aerospace business
environment are discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 44 through page 56 of the
Corporation's 1995 Annual Report to Shareholders (the "1995 Annual Report").
Earnings may vary materially depending upon the types of long-term
government contracts undertaken, the costs incurred in their performance, the
achievement of other performance objectives and the stage of performance at
which the right to receive fees,
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particularly under incentive and award fee contracts, is finally determined.
The Corporation's international business involves additional risks, such as
exposure to currency fluctuations, offset obligations and changes in foreign
economic and political environments. In addition, international transactions
frequently involve increased financial and legal risks arising from stringent
contractual terms and conditions and widely differing legal systems, customs and
mores in various foreign countries. The Corporation expects that international
sales as a percentage of the overall sales of the Corporation will continue to
increase in future years as a result of, among other things, the continuing
changes in the United States defense industry.
A portion of Lockheed Martin's business includes classified programs that
cannot be specifically discussed, the operating results of which are included in
the Corporation's consolidated financial statements. The nature of and business
risks associated with classified programs do not differ materially from those of
the Corporation's other government programs and products.
PATENTS
The Corporation owns numerous patents and patent applications, some of
which, together with licenses under patents owned by others, are utilized in its
operations. While such patents and licenses are, in the aggregate, important to
the operation of the Corporation's business, no existing patent, license or
other similar intellectual property right is of such importance that its
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loss or termination would, in the opinion of management, materially affect the
Corporation's business.
RAW MATERIALS AND SEASONALITY
The Corporation has not experienced significant difficulties in its ability
to obtain raw materials and other supplies needed in its manufacturing process,
nor does the Corporation expect such difficulties to arise in the future. No
material portion of the business of the Corporation is considered to be
seasonal.
GOVERNMENT CONTRACTS AND REGULATIONS
All government contracts and, in general, subcontracts thereunder are
subject to termination in whole or in part at the convenience of the United
States Government as well as for default. Long-term government contracts and
related orders are subject to cancellation if appropriations for subsequent
performance periods become unavailable. Lockheed Martin generally would be
entitled to receive payment for work completed and allowable termination or
cancellation costs if any of its government contracts were to be terminated for
convenience. Upon termination for convenience of cost-reimbursement-type
contracts, the contractor is normally entitled, to the extent of available
funding, to reimbursement of allowable costs plus a portion of the fee related
to work accomplished. Upon termination for convenience of fixed-price-type
contracts, the contractor is normally entitled, to the extent of available
funding, to receive the purchase price for delivered items, reimbursement for
allowable costs for work in process, and
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an allowance for profit thereon or adjustment for loss if completion of
performance would have resulted in a loss.
In addition to the right of the government to terminate, government
contracts are conditioned upon the continuing availability of Congressional
appropriations. Congress usually appropriates funds on a fiscal-year basis even
though contract performance may extend over many years. Consequently, at the
outset of a program, the contract is usually partially funded, and additional
funds are normally only appropriated to the contract by Congress in future
years.
BACKLOG
Lockheed Martin's total negotiated backlog at December 31, 1995, was
approximately $41.1 billion compared with approximately $42.2 billion at the end
of 1994. The approximate total negotiated backlog of the Sectors at December
31, 1995 was as follows: Space & Strategic Missiles $16.2 billion, Aeronautics
$14.8 billion, Information & Technology Services $4.7 billion and Electronics
$5.4 billion. Unlike the other Sectors, the Energy & Environment Sector is not
itself a reportable business segment. The reportable business segment of which
the Energy & Environment Sector is part, Energy, Materials and Other, had total
negotiated backlog at December 31, 1995 of approximately $8 million. These
figures include both unfilled firm orders for the Corporation's products for
which funding has been both authorized and appropriated by the customer
(Congress, in the case of U.S. Government customers) and firm orders for which
funding has not been appropriated.
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Backlog information and comparisons thereof as of different dates may not
be accurate indicators of future sales or the ratio of Lockheed Martin's future
sales to the United States Government versus its sales to other customers.
Of the Corporation's total 1995 year-end backlog, approximately $26
billion, or 63%, is not expected to be filled within one year.
ENVIRONMENTAL REGULATION
Lockheed Martin's operations are subject to and affected by a variety of
federal, state, and local environmental protection laws and regulations. The
Corporation is involved in environmental responses at certain of its facilities
and at certain waste disposal sites not currently owned by the Corporation
(third-party sites) where the Corporation has been designated a "Potentially
Responsible Party" (PRP) by the U.S. Environmental Protection Agency (EPA). At
such third-party sites, the EPA or a state agency has identified the site as
requiring removal or remedial action under the federal "Superfund" and other
related federal or state laws governing the remediation of hazardous materials.
Generally, PRPs that are ultimately determined to be "responsible parties" are
strictly liable for site clean-ups and usually agree among themselves to share,
on an allocated basis, in the costs and expenses for investigation and
remediation of the hazardous materials. Under existing environmental laws,
however, responsible parties are jointly and severally liable and, therefore,
the Corporation is potentially liable for the full cost of funding such
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remediation. In the unlikely event that the Corporation were required to fund
the entire cost of such remediation, the statutory framework provides that the
Corporation may pursue rights of contribution from the other PRPs.
At third-party sites, the Corporation continues to pursue a course of
action designed to minimize and mitigate its potential liability through
assessing the legal basis for its involvement, including an analysis of such
factors as (i) the amount and nature of materials disposed of by the
Corporation, (ii) the allocation process, if any, used to assign all costs to
all involved parties, and (iii) the scope of the response action that is or may
reasonably be required. The Corporation also continues to pursue active
participation in steering committees, consent orders and other appropriate and
available avenues. Management believes that this approach should minimize the
Corporation's proportionate share of liability at third-party sites where other
PRPs share liability.
Although the Corporation's involvement and extent of responsibility varies
at each site, management, after an assessment of each site and consultation with
environmental experts and counsel, has concluded that the probability is remote
that the Corporation's actual or potential liability as a PRP in each or all of
these sites will have a material adverse effect on the Corporation's
consolidated financial position or results of operations. While the possibility
of insurance coverage is considered in the Corporation's efforts to minimize and
mitigate its potential liability, this possibility is not taken into account in
management's assessment of whether it is likely that its actual
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or potential liability will have a material adverse effect on the Corporation's
consolidated financial position.
In addition, Lockheed Martin manages various government-owned facilities on
behalf of the government. At such facilities, environmental compliance and
remediation costs have historically been the responsibility of the government
and the Corporation relied (and continues to rely with respect to past
practices) upon government funding to pay such costs. While the government
remains responsible for capital costs associated with environmental compliance,
responsibility for fines and penalties associated with environmental
noncompliance, in certain instances, is being shifted from the government to the
contractor with such fines and penalties no longer constituting allowable costs
under the contracts pursuant to which such facilities are managed.
Management does not believe that adherence to presently applicable
environmental regulations at its own facilities or in its contract management
capacity at government-owned facilities will have a material adverse effect on
Lockheed Martin's consolidated financial position or results of operations. For
additional details, see "Legal Proceedings" on page 23 through page 27. See
also "Note 14 -- Commitments and Contingencies" of the "Notes to Consolidated
Financial Statements" on page 73 through page 74 and "Management's Discussion
and Analysis of Financial Condition and Results of Operations, Environmental
Matters" on page 55 through page 56 of the 1995 Annual Report.
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RESEARCH AND DEVELOPMENT
Lockheed Martin conducts significant research and development activities,
both under contract funding and with Independent Research and Development (IR&D)
funds. Lockheed Martin expended $778 million in 1995, $813 million in 1994 and
$851 million in 1993 using IR&D and bid and proposal funds, a substantial
portion of which was included in overhead allocable to United States Government
contracts.
During fiscal year 1995, the Corporation did not undertake the development
of a new product or line of business requiring the investment of a material
amount of the Corporation's total assets.
See "Research and Development and Similar Costs" in "Note 1--Summary of
Significant Accounting Policies" of the "Notes to Consolidated Financial
Statements" on page 63 of the 1995 Annual Report.
EMPLOYEES
As of December 31, 1995, Lockheed Martin had approximately 160,000
employees, (including the approximatley 4,000 persons employed by Martin
Marietta Materials, Inc.) the majority of whom were located in the United
States. The Corporation has a continuing need for many skilled and professional
personnel in order to meet contract schedules and obtain new and ongoing orders
for its products. Approximately 34,500 of Lockheed Martin's employees are
covered by collective bargaining agreements with various international and local
unions. Management considers employee relations generally to be good and
believes that the probability is remote that
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renegotiating these contracts will have a material adverse effect on its
business.
FORWARD LOOKING STATEMENTS - SAFE HARBOR PROVISIONS
This Annual Report on Form 10-K contains statements which, to the extent
that they are not recitations of historical fact, constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All forward looking
statements involve risks and uncertainties. The forward looking statements in
this document are intended to be subject to the safe harbor protection provided
by Sections 27A and 21E. For a discussion identifying some important factors
that could cause actual results to vary materially from those anticipated in the
forward looking statements see the Corporation's Securities and Exchange
Commission filings, including but not limited to, the discussion of "Competition
and Risk" and the discussion of "Government Contracts and Regulations" on pages
10 through 12 and 13 through 14 of this Annual Report on Form 10-K and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 44 through 56 of the 1995 Annual Report and "Note 1 -
Summary of Significant Accounting Policies" and "Note 14 - Commitments and
Contingencies" of the Notes to Consolidated Financial Statements on pages 62
through 63 and 73 through 74, respectively, of the Audited Financial Statements
included in the 1995 Annual Report.
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ITEM 2. PROPERTIES
At December 31, 1995, the Corporation, excluding Martin Marietta Materials,
Inc., operated in approximately 409 offices, facilities, manufacturing plants,
warehouses, service centers, and laboratories throughout the United States and
internationally. Of these, the Corporation owned approximately 35 locations
aggregating approximately 33.2 million square feet of floor space. The
Corporation leased space at approximately 374 of its locations aggregating
approximately 16.7 million square feet. Additionally, the Corporation manages
or occupies various government-owned facilities at Marshall Space Flight Center
in Alabama; Livermore, Palmdale, Palo Alto, Santa Cruz, Sunnyvale and Vanderberg
Air Force Base in California; Largo, Cape Canaveral Air Force Station, and
Kennedy Space Center in Florida; Marietta, Georgia; the United States Enrichment
facilities at Paducah, Kentucky and Piketon, Ohio; the NASA Michoud Assembly
Facility near New Orleans, Louisiana; Pittsfield, Massachusetts; Stennis Space
Center in Mississippi; Las Vegas, Nevada; Sandia National Laboratories in New
Mexico; Johnson City and Knolls Atomic Power Laboratory at Niskayuna, New York;
the Department of Energy facility at Oak Ridge, the Department of Energy's Idaho
National Engineering Laboratory and the Army Ordnance plant at Milan, Tennessee;
Houston and Ft. Worth, Texas; and Jericho, Vermont, among others. The United
States Government also furnishes certain equipment and property used by the
Corporation.
The Corporation owns corporate office buildings located in Bethesda,
Maryland and Calabasas, California in fee simple, and leases corporate office
facilities in Arlington (Crystal City),
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Virginia. In addition, the Corporation owns and leases office and manufacturing
facilities for various operating sectors. Following are some of the major
locations, with their approximate square footage indicated:
SQUARE FOOTAGE (M)
-------------------
SECTOR LOCATION OWNED LEASED
- ------------------------ ------------------------ ------- ---------
Aeronautics Ontario, California 1.0
Palmdale, California 2.2
Marietta, Georgia 1.7
Middle River, Maryland 2.1
Greenville, .6
South Carolina
Ft. Worth, Texas .9
Electronics Orlando, Florida 2.3
Pittsfield, .9
Massachusetts
Nashua, New Hampshire 2.5
Camden, New Jersey .6
Moorestown, New Jersey .9
Syracuse, New York 1.8
Utica, New York .5
Information & Orlando, Florida 1.0
Technology Services King of Prussia,
Pennsylvania .5 .6
Reston, Virginia .8
Space & Strategic Sunnyvale and Palo Alto, 6.5 2.4
Missiles California
Kearny Mesa, California
Waterton and Littleton, 1.2
Colorado 4.0
East Windsor, New Jersey
King of Prussia, .7
Pennsylvania .9
Finally, the Corporation owns various tracts of land which are available
for sale or development. The location and approximate size of these land
tracts include:
LOCATION ACREAGE
- ----------------------------------- -------
Potrero Creek, California 9,100
Beaumont Gateway, California 2,800
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LOCATION ACREAGE
- ----------------------------------- -------
Meridian Test Range, Texas 2,784
Orlando, Florida 2,000
Littleton, Colorado (Deer Creek) 1,000
Palmdale Trust, California 650
Austin, Texas 600
That portion of the Corporation's activity related to engineering and
research and development does not lend itself to productive capacity
analysis. In the area of manufacturing, most of the operations are of a
job-order nature, rather than an assembly line process, and productive
equipment has multiple uses for multiple products.
Management believes that all of the Corporation's major physical
facilities are in good condition and are adequate for their intended use.
-22-
ITEM 3. LEGAL PROCEEDINGS
Lockheed Martin is primarily engaged in providing products and services
under contracts with the United States Government and, to a lesser degree,
under foreign government contracts, some of which are funded by the United
States Government. All such contracts are subject to extensive legal and
regulatory requirements and, from time to time, agencies of the United
States Government investigate whether Lockheed Martin's operations are
being conducted in accordance with these requirements. Such investigations
could result in administrative, civil or criminal liabilities including
repayments, fines or penalties being imposed upon Lockheed Martin or could
lead to suspension or debarment from future government contracting by
Lockheed Martin. Lockheed Martin is also a party to or has its property
subject to various other litigation and proceedings, including matters
arising under provisions relating to the protection of the environment
(collectively "proceedings").
On June 7, 1990, Boggs, et al. v. Divested Atomic Energy Corporation, et
-------------------------------------------------------
al., was filed against various defendants including Martin Marietta Energy
----
Systems ("MMES"). Plaintiffs' request for class certification was granted
and the case is pending in the United States District Court for the Eastern
District of Ohio. Plaintiffs seek $600 million based upon allegations that
the defendants discharged hazardous substances into the environment. In
the event that any damages are awarded in these proceedings, such damages
will be allowable costs under contracts between MMES and the Department of
Energy.
-23-
On December 28, 1993, MMES received a subpoena issued by a federal grand
jury in the Eastern District of Virginia seeking documents relating to
subcontracts with two of MMES's suppliers. MMES was not identified as a
target of the investigation and was recently advised that criminal
investigation has been declined.
On December 22, 1994 the Corporation's Ordnance Systems Facility received
a subpoena issued by the Department of Defense Inspector General's Office
("DoD IG") seeking documents relating to health and safety matters at the
facility. Documents responsive to the subpoena were produced and no further
information has been requested.
By letter dated September 21, 1995, the Corporation informed the DoD IG
that the Corporation had become aware of certain potential accounting
issues which the Corporation was investigating with respect to the LANTIRN
program. On February 12, 1996, the Corporation was served with a DoD IG
subpoena seeking documents related to the price proposal submitted in
connection with a LANTIRN program contract awarded in 1992. This was among
the items disclosed in the Corporation's letter.
On November 29, 1994, the Corporation received a subpoena issued by the
DoD IG seeking documents pertaining to testing of the AN/BQG-5 Stand-Alone
Wide Aperture Array Sonar which is produced by the Corporation's Ocean,
Radar & Sensor Systems company. Documents responsive to the subpoena were
produced.
On June 27, 1994, the Corporation received a DoD IG subpoena seeking
documents related to Lockheed Martin's Compu-Scene IV image
-24-
generator product. The documents were produced and the investigation was
later closed.
On May 4, 1995 the Corporation received a subpoena issued by the DoD IG
seeking documents relating to the Advanced Concept Center and the
Information Systems and Technologies businesses which are parts of the
Lockheed Martin Management & Data Systems company. The documents were
produced and the government's investigation of this matter is continuing.
On May 9, 1995, the Corporation received a subpoena seeking the
production of documents before a federal grand jury in Boise, Idaho. The
investigation appears to relate to alleged violations of environmental laws
and regulations pertaining to handling hazardous waste at the Idaho
National Engineering Laboratory. The investigation is continuing.
The United States Environmental Protection Agency and the U.S. Army
Criminal Investigative Command are conducting a criminal investigation to
determine whether the Corporation improperly disposed of wastes from The
Skunk Works at a government site in Nevada. It does not appear that the
Corporation is the target of the investigation.
Lockheed Martin Missiles and Space Company (which on January 28, 1996 was
merged with and into the Corporation) has voluntarily produced documents to
the U.S. Air Force Office of Special Investigations concerning the extent
to which the Corporation accurately responded to the government's request
for proposal in the Integrated Computer-Aided Software Engineering (I-CASE)
procurement. The government's investigation is continuing.
-25-
On March 31, 1995, Lockheed Sanders, Inc. was served with a subpoena by
the DoD IG seeking documents relating to a contract with the U.S. Navy for
the production of computer chip kits used in the AN/ALQ-126B On-board
Defensive Electronic Countermeasures systems. After documents responsive
to the subpoena were produced, the investigation was closed.
On June 12, 1995, the Corporation received a federal grand jury subpoena
issued by the United States District Court for the Central District of
California seeking documents relating to the Corporation's business in
Korea. The Corporation is in the process of producing the documents
requested and the government's investigation is continuing.
On July 3, 1995, the Corporation received a subpoena directed to Lockheed
Martin Tactical Aircraft Systems company seeking the production of
documents before a federal grand jury sitting in the Northern District of
Texas relating to the Corporation's use of foreign consultants and
commission representatives. The Corporation has produced the documents
requested.
On September 6, 1995, Lockheed Aeromod Centers, Inc. was served with a
civil complaint filed by Pima County, Arizona. The Complaint alleges (i)
that on two dates in 1991 and three dates in 1992 the Company exceeded
certain discharge parameters set forth in the Company's wastewater
discharge permit, (ii) that the Company was late in notifying the County
with respect to two of these instances and (iii) that the Company did not
fully test its wastewater discharge on two occasions in 1992. As a result,
the County alleges that it is entitled to up to $2.5 million in civil
penalties.
-26-
On January 23, 1996, a DoD IG subpoena was served on Lockheed Martin
Electronics & Missiles seeking documents relating to the software
development portion of the Paperless LANTIRN Automated Depot ("PLAD")
contract. It is believed that the government is investigating allegations
that the Corporation's proposal for the PLAD contract was defectively
priced.
On January 23, 1996, Lockheed Martin Electronics & Missiles was served
with a federal grand jury subpoena issued by the United States District
Court for the Middle District of Florida at Jacksonville seeking documents
related to the manufacture and testing of two circuit card assemblies used
in the production of the Hellfire missile.
Lockheed Martin is involved in various other legal and environmental
proceedings arising in the ordinary course of its business, but in the
opinion of management and counsel the probability is remote that the
outcome of any such litigation or proceedings, whether specifically
described above or referred to generally in this paragraph, will have a
material adverse effect on the results of Lockheed Martin's operations or
its financial position. See also "Note 14 -- Commitments and
Contingencies" of the "Notes to Consolidated Financial Statements" on page
73 through page 74 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations, Environmental Matters" on page 55
through page 56 of the 1995 Annual Report.
-27-
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
ITEM 4(a). EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Lockheed Martin Corporation are listed below.
There were no family relationships among any of the executive officers and
directors of the Corporation. All officers serve at the pleasure of the
Board of Directors.
POSITIONS AND
OFFICES HELD WITH PRINCIPAL OCCUPATION AND
NAME CORPORATION BUSINESS EXPERIENCE
(AGE AT 12/31/95) (YEAR ELECTED) (PAST FIVE YEARS)
- ---------------------- ------------------- -----------------------------------------
Norman R. Augustine President and President of Lockheed Martin Corporation
(60) Chief Executive since March 1995 and Chief Executive
Officer; Director Officer of Lockheed Martin Corporation
(1995) since January 1, 1996. Chairman of the
Board of Martin Marietta from 1988 to
1995 and Chief Executive Officer from
1987 to 1995.
Marcus C. Bennett Senior Vice Senior Vice President and Chief
(59) President and Financial Officer of Lockheed Martin
Chief Financial Corporation since March 1995. Vice
Officer; Director President and Chief Financial Officer of
(1995) Martin Marietta since 1988.
Vance D. Coffman Executive Vice Director since 1996; Executive Vice
(51) President and President and Chief Operating Officer
Chief Operating since 1996; President and Chief
Officer; Director Operating Officer, Space and Strategic
(1996) Missiles Sector from March 1995 to
December 1995; previously served in
Lockheed Corporation as Executive Vice
President, from 1992-1995; and President
of Lockheed Space Systems Division from
1988-1992.
Minoru S. Araki President, President, Lockheed Missiles and Space
(64) Missiles & Space Company, Inc. since March 1995;
Previously served in Lockheed
Corporation as Executive Vice President,
Missiles and Space Systems Group
and
-28-
POSITIONS AND
OFFICES HELD WITH PRINCIPAL OCCUPATION AND
NAME CORPORATION BUSINESS EXPERIENCE
(AGE AT 12/31/95) (YEAR ELECTED) (PAST FIVE YEARS)
- ---------------------- ------------------- -----------------------------------------
Executive Vice President - Lockheed
Missiles & Space Company, Inc., from
October 1988 to March 1995.
James A. Blackwell, Sector President President and Chief Operating Officer,
Jr. (55) - Aeronautics Aeronautics Sector since March 1995;
previously served in Lockheed
Corporation as Vice President and
President from April 1993 to March 1995,
Lockheed Aeronautical Systems Company;
served as an executive employee of
Lockheed Aeronautical Systems Company
from 1986 until March 1995.
Melvin R. Brashears Sector President President and Chief Operating Officer
(50) - Space & Space and Strategic Missiles Sector,
Strategic January 1996; Deputy, Space and
Missiles Strategic Missiles Sector from November
1995 to December 1995; Executive Vice
President of Lockheed Missiles & Space
Company, Inc. from March 1995 - November
1995 and President of Lockheed
Commercial Space Company; previously
served in Lockheed Corporation as Vice
President and Assistant General Manager,
Space Systems Division, Lockheed
Missiles and Space Company, Inc., from
1992 - 1995; Director of Advanced Space
Programs, from 1991-1992.
Thomas A. Corcoran Sector President President and Chief Operating Officer,
(51) - Electronics Electronics Sector since March 1995;
previously served in Martin Marietta
Corporation as President, Electronics
Group, from 1993-March 1995; previously
served at General Electric Corporation
as Vice President and General Manager,
from 1990-1993.
Dain M. Hancock President, President, Tactical Aircraft Systems
(54) Tactical Aircraft since March 1995; previously served in
Systems Lockheed Corporation as Vice President
from 1993 to March 1995; and Vice
President and F-16 Program Director,
Lockheed Fort Worth Company, from 1993
to March 1995. From 1966 until 1993 he
was an employee of General Dynamics
Corporation.
John R. Kreik (51) President, President, Sanders; previously served in
Sanders Lockheed Corporation as President,
Lockheed Sanders, Inc. from 1990-1995.
-29-
POSITIONS AND
OFFICES HELD WITH PRINCIPAL OCCUPATION AND
NAME CORPORATION BUSINESS EXPERIENCE
(AGE AT 12/31/95) (YEAR ELECTED) (PAST FIVE YEARS)
- ---------------------- ------------------- -----------------------------------------
James W. McAnally, President, President, Astronautics since March
Jr. (59) Astronautics 1995; previously served in Martin
Marietta Corporation as President,
Astronautics from 1993 to March 1995.
John S. McLellan President, President, Aeronautical Systems since
(54) Aeronautical March 1995; previously served in
Systems Lockheed Corporation as Vice President
and Executive Vice President, Lockheed
Aeronautical Systems Company from March
1994 to March 1995; served as President,
Lockheed Aircraft Service Company-
Ontario from February 1992 to March
1994; served as Executive Vice President
from April 1989 to February 1992.
Frank H. Menaker, Vice President Vice President and General Counsel for
Jr. (55) and General Lockheed Martin Corporation since March
Counsel 1995, after having served in the same
capacity for Martin Marietta Corporation
since 1981.
Albert Narath (62) Sector President President and Chief Operating Officer,
- Energy & Energy and Environment Sector, Lockheed
Environment Martin Corporation from August 15, 1995
to present; President, Sandia
Corporation from April 1989 to August
14, 1995.
Robert E. Rulon Vice President Vice President and Controller since
(52) and Controller March 1995; previously served in
Lockheed Corporation as Vice President
and Controller from 1992-1995; served as
Vice President, Internal Audit from
1990-1992.
Walter E. Vice President Vice President and Treasurer since March
Skowronski (47) and Treasurer 1995; previously served in Lockheed
Corporation as Vice President and
Treasurer from 1992-1995; served as
staff Vice President, Investor Relations
from 1990-1992.
Peter B. Teets (53) Sector President President and Chief Operating Officer,
- Information & Information and Technology Services
Technology Sector since March 1995; previously
Services served in Martin Marietta Corporation as
Corporate Vice President (since 1985)
and President, Space Group, from 1993-
1995; served as President, Astronautics
Group from 1987-1993.
-30-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There were approximately 43,300 holders of record of Lockheed Martin
Corporation Common Stock, $1 par value, as of January 31, 1996. The
Corporation's Common Stock is traded on the New York Stock Exchange, Inc.
Information concerning stock prices and dividends paid during the past two
years is as follows:
Common Dividends Paid and Market Prices/*/
------------------------------------------
Market Price
Quarter Dividends Paid High/Low High/Low
- -------- ----------------- ------------ ---------
1995 1994 1995 1994
---- ---- ---- ----
First N/A N/A 54.375/50.25 N/A
Second .35 N/A 64.875/50.00 N/A
Third .35 N/A 68.125/59.50 N/A
Fourth .35 N/A 79.50/63.00 N/A
---- ------------
Year 1.05 N/A 79.50/50.00 N/A
/*/ The first day that the Corporation's Common Stock was publicly traded was
March 16, 1995
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item 6 is included under the caption
"Six-Year Summary" on page 77 of the 1995 Annual Report, and that
information is hereby incorporated by reference in this Form 10-K.
-31-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item 7 is included under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 44 through page 56 of the 1995 Annual Report, and that
information is hereby incorporated by reference in this Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item 8 is included under the captions
"Consolidated Statement of Earnings," "Consolidated Statement of Cash
Flows," "Consolidated Balance Sheet," "Consolidated Statement of
Stockholders' Equity," and "Notes to Consolidated Financial Statements" on
page 57 through page 76 of the Audited Consolidated Financial Statements
included in the 1995 Annual Report and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on page 44
through page 56 of the 1995 Annual Report. This information is hereby
incorporated by reference in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-32-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors required by this Item 10 is
included under the caption "Election of Directors" in the Corporation's
definitive Proxy Statement to be filed pursuant to Regulation 14A no later
than March 26, 1996 (the "1996 Proxy Statement"), and that information is
hereby incorporated by reference in this Form 10-K. Information concerning
executive officers required by this Item 10 is located under Part I, Item
4(a) on page 28 through page 30 of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is included in the text and
tables under the caption "Compensation of Executive Officers" in the 1996
Proxy Statement and that information, except for the information required
by Item 402(k) and 402(l) of Regulation S-K, is hereby incorporated by
reference in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is included under the heading
"Securities Owned by Management" and "Voting Securities and Record Date" in
the 1996 Proxy Statement and that information is hereby incorporated by
reference in this Form 10-K.
-33-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable.
-34-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) List of Financial Statements filed as part of the Form 10-K.
Page
----
The following financial statements of Lockheed Martin Corporation
and consolidated subsidiaries, included in the 1995 Annual
Report, are incorporated by reference into Item 8 on page 32 of
this Annual Report on Form 10-K. Page numbers refer to the 1995
Annual Report:
Consolidated Statement of Earnings--
Years ended December 31, 1995, 1994 and 1993.............. 58
Consolidated Statement of Cash Flows--
Years ended December 31, 1995, 1994 and 1993.............. 59
Consolidated Balance Sheet--
December 31, 1995 and 1994................................ 60
Consolidated Statement of Stockholders' Equity--
Years ended December 31, 1995, 1994 and 1993.............. 61
Notes to Consolidated Financial Statements--
Years ended December 31, 1995, 1994 and 1993.............. 62
(2) List of Financial Statement Schedules filed as part of this
Form 10-K.
All schedules have been omitted because they are not applicable,
not required, or the information has been otherwise supplied in
the financial statements or notes to the financial statements.
Ernst & Young LLP
The report of Lockheed Martin's independent auditors with respect
to the above-referenced financial statements appears on page 57
of
-35-
the 1995 Annual Report and that report is hereby incorporated by
reference in this Form 10-K. The consent of Lockheed Martin's
independent auditors appears on page 49.
(b) The following report on Form 8-K was filed during the last
quarter of the period covered by this report:
(1) Lockheed Martin Corporation Current Report on Form 8-K filed
with the Securities and Exchange Commission on October 2,
1995.
During the first quarter of 1996, Lockheed Martin Corporation
made the following filings on Form 8-K:
(1) Lockheed Martin Corporation Current Report on Form 8-K filed
with the Securities and Exchange Commission on January 12,
1996.
(c) Exhibits
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession.
(a) Agreement and Plans of Merger and Complete
Liquidation dated as of January 25, 1996.
(b) Agreement and Plan of Reorganization, dated as of
August 29, 1994, among the Corporation, Martin
Marietta Corporation and Lockheed Corporation, as
amended as of February 7, 1995 (incorporated by
reference to Exhibit 2.1 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
(c) Plan and Agreement of Merger, dated as of August
29, 1994, among Lockheed Corporation, Pacific Sub,
Inc. and the Corporation (incorporated by
reference to Exhibit 2.2 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
(d) Plan and Agreement of Merger, dated as of August
29, 1994, among Martin Marietta Corporation,
Atlantic Sub, Inc. and the Corporation
(incorporated by reference to Exhibit 2.3 to
Lockheed
-36-
Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission
on February 9, 1995).
(e) Agreement and Plan of Merger, dated as of January
7, 1996, by and among Loral Corporation, Lockheed
Martin Corporation and LAC Acquisition Corporation
(incorporated by reference to Exhibit (C)(2) to
the Schedule 14D-1 filed with the Commission on
January 12, 1996 by the Corporation and LAC
Acquisition Corporation).
(3)(i) Articles of Incorporation.
(a) Articles of Amendment and Restatement of Lockheed
Martin Corporation (formerly Parent Corporation)
filed with the State Department of Assessments and
Taxation of the State of Maryland on February 7,
1995 (incorporated by reference to Exhibit 3.1 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
(ii) Bylaws
(a) Copy of the Bylaws of Lockheed Martin Corporation
as amended on February 6, 1995 (incorporated by
reference to Exhibit 3.2 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
(4) (a) Indenture dated April 22, 1993, between Martin
Marietta Corporation, Technologies, and
Continental Bank, National Association as Trustee
(incorporated by reference to Exhibit 4 of the
Corporation's filing on Form 8-K on April 15,
1993).
No other instruments defining the rights of
holders of long-term debt are filed since the
total amount of securities authorized under any
such instrument does not exceed 10% of the total
assets of the Corporation on a consolidated basis.
The Corporation agrees to furnish a copy of such
instruments to the Securities and Exchange
Commission upon request.
(b) See Exhibits 3.1 and 3.2.
(10)* (a) Format of the agreements between Martin
Marietta Corporation and certain officers to
provide for continuity of management in the event
of a change in control of the Corporation
(incorporated by reference
-37-
to Exhibit 10.14 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 9, 1995).
(b) Lockheed Martin Corporation 1995 Omnibus
Performance Award Plan (incorporated by reference
to Exhibit 10.36 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 9, 1995).
(c) Lockheed Martin Corporation Directors Deferred
Stock Plan (incorporated by reference to Exhibit
10.37 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 9, 1995).
(d) Lockheed Martin Corporation Directors Deferred
Compensation Plan.
(e) Lockheed Martin Corporation Directors Retirement
Plan.
(f) Lockheed Martin Corporation Directors Charitable
Award Plan.
(g) Lockheed Martin Corporation Death Benefit and
Business Travel Accident Insurance Policy for
Directors.
(h) Lockheed Martin Corporation Financial Counseling
Program for Directors.
(i) Lockheed Martin Corporation Elected Officers Post
Retirement Death Benefit Plan.
(j) Lockheed Martin Corporation Senior Management
Financial Counseling Program.
(k) Lockheed Martin Corporation Directors Personal
Liability and Accidental Death Plan.
(l) Lockheed Martin Corporation Management Incentive
Compensation Plan.
(m) Trust Agreement, dated February 14, 1996, between
Lockheed Martin Corporation and Bankers Trust
Company.
(n) Agreement Containing Consent Order, dated December
22, 1994, among the Corporation, Lockheed
Corporation, Martin Marietta Corporation and the
Federal Trade Commission (incorporated by
reference to Exhibit 10.4 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
(o) Confidentiality and Standstill Agreement, dated
March 29, 1994, between Martin Marietta
Corporation and Lockheed Corporation (incorporated
by reference to Exhibit 10.5 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
(p) Reconfiguration Agreement, dated August 29, 1994,
among Martin Marietta Corporation, the Corporation
and General Electric Company (incorporated by
reference to Exhibit 10.2 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
(q) Amendment to the Reconfiguration Agreement, dated
November 30, 1994, among Martin Marietta
Corporation, the
-38-
Corporation and General Electric Company
(incorporated by reference to Exhibit 10.3 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
(r) Standstill Agreement, dated April 2, 1993, between
Martin Marietta Corporation and General Electric
Company (incorporated by reference to Exhibit 10.1
to Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
(s) Restructuring , Financing, and Distribution
Agreement, dated as of January 7, 1996, by and
among Loral Corporation, Loral Aerospace Holdings,
Inc., Loral Aerospace Corp., Loral General Partner
Inc., Loral Globalstar, L.P., Loral Globalstar
Limited, Loral Telecommunications Acquisition,
Inc. ("to be renamed Loral Space & Communications
Ltd.") and Lockheed Martin Corporation
(incorporated by reference to Exhibit (C)(3) to
the Schedule 14D-1 filed with the Commission on
January 12, 1996 by the Corporation and LAC
Acquisition Corporation).
(t) Form of Stockholders Agreement to be entered into
by and among Loral Corporation (which will
become "Lockheed Martin Tactical Systems, Inc.")
and Loral Space & Communications Ltd.
(incorporated by reference to Exhibit (C)(4) to
the Schedule 14D-1 filed with the Commission on
January 12, 1996 by the Corporation and LAC
Acquisition Corporation).
(u) Form of Tax Sharing Agreement to be entered into
by and among Lockheed Martin Tactical Systems,
Inc., Loral Space & Communications Ltd., Lockheed
Martin Corporation and LAC Acquisition Corporation
(incorporated by reference to Exhibit (C)(5) to
the Schedule 14D-1 filed with the Commission on
January 12, 1996 by the Corporation and LAC
Acquisition Corporation).
(v) Martin Marietta Corporation Directors Deferred
Compensation Plan, as amended (incorporated by
reference to Exhibit 10(iii)(a) to Martin Marietta
Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994).
(w) Martin Marietta Corporation Post-Retirement Income
Maintenance Plan for Directors, as amended
(incorporated by reference to Exhibit 10(iii)(b)
to Martin Marietta Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994).
(x) Martin Marietta Corporation Financial Counseling
Program for directors, officers, company
presidents, and other key employees, as amended
(incorporated by reference to Exhibit 10.6 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
(y) Martin Marietta Corporation Executive Incentive
Plan, as amended (incorporated by reference to
Exhibit 10.7 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 9, 1995).
(z) Deferred Compensation and Estate Supplement Plan,
as amended (incorporated by reference to Exhibit
10(iii)(e) to Martin Marietta
-39-
Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994).
(aa) Martin Marietta Corporation Post-Retirement Death
Benefit Plan for Senior Executives, as amended
(incorporated by reference to Exhibit 10.9 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
(bb) Martin Marietta Corporation 1979 Stock Option Plan
for Key Employees, as amended (incorporated by
reference to Exhibit 10.11 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
(cc) Martin Marietta Corporation 1984 Stock Option Plan
for Key Employees, as amended (incorporated by
reference to Exhibit 10.12 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995) (The plan amendment dated
September 28, 1995 is included as Exhibit 10(cc)
to this Annual Report on Form 10-K.)
(dd) Martin Marietta Corporation Amended Omnibus
Securities Award Plan, as amended March 25, 1993
(incorporated by reference to Exhibit 10.13 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
(ee) Martin Marietta Corporation Supplemental Excess
Retirement Plan, as amended (incorporated by
reference to Exhibit 10.15 to Lockheed Martin
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
(ff) Martin Marietta Corporation Restricted Stock Award
Plan, as amended (incorporated by reference to
Exhibit 10.16 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 9, 1995).
-40-
(gg) Martin Marietta Corporation Long Term Performance
Incentive Compensation Plan (incorporated by
reference to Exhibit 10(iii)(m) to Martin Marietta
Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994).
(hh) Amended and Restated Martin Marietta Corporation
Long-Term Performance Incentive Compensation Plan
(incorporated by reference to Exhibit 10(iii)(n)
to Martin Marietta Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31,
1994).
(ii) Martin Marietta Corporation Directors' Life
Insurance Program (incorporated by reference to
Exhibit 10.17 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 9, 1995).
(jj) Martin Marietta Corporation Executive Special
Early Retirement Option and Plant Closing
Retirement Option Plan (incorporated by reference
to Exhibit 10.18 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 9, 1995).
(kk) Martin Marietta Supplementary Pension Plan for
Employees of Transferred GE Operations
(incorporated by reference to Exhibit 10.19 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
(ll) Form of Employment Agreement between Martin
Marietta Corporation and certain officers
(incorporated by reference to Exhibit 10.20 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 9, 1995).
(mm) Martin Marietta Corporation Deferred Compensation
Plan for Selected Officers (incorporated by
reference to Exhibit 10.10 to Lockheed Martin
-41-
Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on
February 9, 1995).
(nn) Lockheed Corporation 1992 Employee Stock Option
Program (incorporated by reference to the
Registration Statement on Form S-8 (No. 33-49003)
of Lockheed Corporation filed with the Commission
on September 11, 1992).
(oo) Amendment to Lockheed Corporation 1992 Employee
Stock Option Plan (incorporated by reference to
Exhibit 10.22 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 9, 1995).
(pp) Lockheed Corporation 1986 Employee Stock Purchase
Program, as amended, (incorporated by reference to
Exhibit 10.23 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 5, 1995).
(The amendment to the plan dated September 28,
1995 is included as Exhibit 10(pp) to this Annual
Report on Form 10-K).
(qq) Lockheed Corporation 1982 Employee Stock Purchase
Program, as amended, (incorporated by reference to
Exhibit 10.24 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 5, 1995).
(The amendment to the plan dated September 28,
1995 is included as Exhibit 10(qq) to this Annual
Report on Form 10-K).
(rr) Incentive Retirement Benefit Plan for Certain
Executives of Lockheed Corporation, as amended
(incorporated by reference to Exhibit 10.6 to
Lockheed Corporation's Annual Report on Form 10-K
for the year ended December 25, 1994).
(ss) Supplemental Retirement Benefit Plan for Certain
Transferred Employees of Lockheed Corporation, as
amended (incorporated by reference to Exhibit 10.7
to Lockheed Corporation's Annual Report on
Form 10-K for the year ended December 25, 1994).
-42-
(tt) Supplemental Benefit Plan of Lockheed Corporation,
as amended.
(uu) Long-Term Performance Plan of Lockheed Corporation
and its Subsidiaries (incorporated by reference to
Exhibit 10.28 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 9, 1995).
(vv) Amended and Restated Supplemental Savings Plan of
Lockheed Corporation.
(ww) Deferred Compensation Plan for Directors of
Lockheed Corporation, as amended.
(xx) Lockheed Corporation Retirement Plan for
Directors, as amended.
(yy) Form of Lockheed Corporation Termination Benefits
Agreement effective January 1, 1991 (included in
Form 8, Amendment No. 1 to Exhibit 28 of Form 8-K
dated November 5, 1990 of Lockheed Corporation and
incorporated herein by reference).
(zz) Trust Agreement, as amended February 3, 1995,
between Lockheed Corporation and First Interstate
Bank of California (incorporated by reference to
Exhibit 10.33 to Lockheed Martin Corporation's
Registration Statement on
-43-
Form S-4 (No. 33-57645) filed with the Commission
on February 9, 1995).
(ab) Lockheed Corporation Directors' Deferred
Compensation Plan Trust Agreement, as amended
(incorporated by reference to Exhibit 10.34 to
Lockheed Martin Corporation's Registration
Statement on Form S-4 (No. 33-57645) filed with
the Commission on February 5, 1995). (The
amendment to the trust agreement dated September
30, 1995 is included as Exhibit 10(ab) to this
Annual Report on Form 10-K).
(ac) Trust Agreement, dated December 22, 1994, between
Lockheed Corporation and J.P. Morgan California
with respect to certain employee benefit plans of
Lockheed Corporation (incorporated by reference to
Exhibit 10.35 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645)
filed with the Commission on February 5, 1995).
(The amendment to the trust agreement dated
September 30, 1995 is included as Exhibit 10(ac)
to this Annual Report on Form 10-K).
(ad) Lockheed Corporation Deferred Management Incentive
Compensation Plan, as amended.
(ae) Lockheed Corporation 1992 Employee Stock Option
Program, as amended (incorporated by reference to
Lockheed Corporation's Registration Statement (No.
33-49003) and Exhibit 10.22 to Lockheed Martin
Corporation's Registration Statement of Form S-4
(No. 33-57645) filed with the Commission on
February 5, 1995). (The amendment to the plan
dated September 28, 1995 is included as Exhibit
(ae) to this Annual Report on Form 10-K).
(af) Lockheed Martin Corporation Deferred Management
Incentive Compensation Plan.
* Exhibits (10)(a) through 10(m) and 10(v) through (10)(af)
constitute management contracts or compensatory plans or
arrangements required to be filed as an Exhibit to this Form
pursuant to Item 14(c) of this Report.
(11) Computation of net earnings per common share for
the years ended December 31, 1995, 1994 and 1993.
(12) Computation of ratio of earnings to fixed charges
for the year ended December 31, 1995.
(13) 1995 Annual Report to Security Holders (including
an appendix describing graphic and image
material). Those portions of the 1995 Annual
Report to Security Holders which are not
incorporated by reference in this Annual Report on
Form 10-K shall not be deemed to be "filed" as
part of this Report.
(21) List of Subsidiaries of Lockheed Martin
Corporation.
(23) Consent of Ernst & Young LLP, Independent Auditors
for Lockheed Martin Corporation (included in this
Form 10-K at page 49).
-44-
(24) Powers of Attorney.
(27) Financial Data Schedule.
Other material incorporated by reference:
None.
-45-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LOCKHEED MARTIN CORPORATION
Date: March 13, 1996 By: /s/ FRANK H. MENAKER, JR.
-----------------------------------------
Frank H. Menaker, Jr.
Vice President and
General Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- -------------------------------- ------------------------- ------------------
/s/Norman R. Augustine* President, Chief March 4, 1996
- -------------------------------- Executive Officer and
NORMAN R. AUGUSTINE Director
/s/Marcus C. Bennett* Senior Vice President, February 22, 1996
- -------------------------------- Chief Financial Officer
MARCUS C. BENNETT and Director
/s/Robert E. Rulon* Chief Accounting Officer February 22, 1996
- --------------------------------
ROBERT E. RULON
/s/Lynne V. Cheney* Director February 22, 1996
- --------------------------------
LYNNE V. CHENEY
/s/A. James Clark* Director February 22, 1996
- --------------------------------
A. JAMES CLARK
/s/Vance D. Coffman* Director February 22, 1996
- --------------------------------
VANCE D. COFFMAN
-46-
SIGNATURES TITLE DATE
- -------------------------------- ------------------------- ------------------
/s/Edwin I. Colodny* Director February 22, 1996
- --------------------------------
EDWIN I. COLODNY
/s/Lodwrick M. Cook* Director February 22, 1996
- --------------------------------
LODWRICK M. COOK
/s/James L. Everett, III* Director February 22, 1996
- --------------------------------
JAMES L. EVERETT, III
/s/Houston K. Flournoy* Director February 22, 1996
- --------------------------------
HOUSTON K. FLOURNOY
/s/James F. Gibbons* Director February 22, 1996
- --------------------------------
JAMES F. GIBBONS
/s/Edward L. Hennessy, Jr.* Director February 22, 1996
- --------------------------------
EDWARD L. HENNESSY, JR.
/s/Edward E. Hood, Jr.* Director February 22, 1996
- --------------------------------
EDWARD E. HOOD, JR.
/s/Caleb B. Hurtt* Director February 22, 1996
- --------------------------------
CALEB B. HURTT
/s/Gwendolyn S. King* Director February 22, 1996
- --------------------------------
GWENDOLYN S. KING
/s/Lawrence O. Kitchen* Director February 22, 1996
- --------------------------------
LAWRENCE O. KITCHEN
/s/Gordon S. Macklin* Director February 22, 1996
- --------------------------------
GORDON S. MACKLIN
/s/Vincent N. Marafino* Director February 22, 1996
- --------------------------------
VINCENT N. MARAFINO
/s/Eugene F. Murphy* Director February 22, 1996
- --------------------------------
EUGENE F. MURPHY
/s/David S. Potter* Director February 22, 1996
- --------------------------------
DAVID S. POTTER
/s/Frank Savage* Director February 22, 1996
- --------------------------------
FRANK SAVAGE
/s/Daniel M. Tellep* Director February 22, 1996
- --------------------------------
DANIEL M. TELLEP
/s/Carlisle A.H. Trost* Director February 22, 1996
- --------------------------------
CARLISLE A.H. TROST
-47-
SIGNATURES TITLE DATE
- -------------------------------- ------------------------- ------------------
/s/James R. Ukropina* Director February 22, 1996
- --------------------------------
JAMES R. UKROPINA
/s/Douglas C. Yearley* Director February 22, 1996
- --------------------------------
DOUGLAS C. YEARLEY
*By: /s/ STEPHEN M. PIPER March 13, 1996
------------------------------
(Stephen M. Piper, Attorney-in-fact**)
_____________________
** By authority of Powers of Attorney filed with this Annual Report on
Form 10-K.
-48-
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Lockheed Martin Corporation of our report dated January 23, 1996,
included in the 1995 Annual Report to Shareholders of Lockheed Martin
Corporation.
We also consent to the incorporation by reference in the following
Registration Statements:
(1) Registration Statement Number 33-58067 of Lockheed Martin Corporation
on Form S-3, dated March 14, 1995;
(2) Registration Statement Numbers: 33-58073, 33-58075, 33-58077, 33-
58079, 33-58081, 33-58083, 33-58085, 33-58089 and 33-58097 of Lockheed
Martin Corporation on Forms S-8, each dated March 15, 1995;
(3) Post-Effective Amendment No. 1, dated March 15, 1995 to Registration
Statement Number 33-57645 of Lockheed Martin Corporation on Form S-8;
and
(4) Registration Statement Number 33-63155 of Lockheed Martin Corporation
on Form S-8, dated October 3, 1995;
of our report dated January 23, 1996, with respect to the consolidated
financial statements incorporated herein by reference.
ERNST & YOUNG LLP
Washington, D.C.
March 11, 1996
-49-
Exhibit 2(a)
AGREEMENT AND PLANS OF MERGER
AND COMPLETE LIQUIDATION
dated as of January 25, 1996
among
LOCKHEED MARTIN CORPORATION,
LOCKHEED CORPORATION,
LOCKHEED MISSILES AND SPACE COMPANY, INC.,
LOCKHEED SANDERS, INC.
MARTIN MARIETTA CORPORATION,
and
MARTIN MARIETTA TECHNOLOGIES, INC.
AGREEMENT AND PLANS OF MERGER
AND COMPLETE LIQUIDATION
This AGREEMENT AND PLANS OF MERGER AND COMPLETE LIQUIDATION (this
"Agreement") dated as of January 25, 1996, is among Lockheed Martin Corporation,
a Maryland corporation ("LMC"), Lockheed Corporation, a Delaware corporation
("Lockheed"), Lockheed Missiles and Space Company, Inc., a California
corporation ("LM&SC"), Lockheed Sanders, Inc., a Delaware corporation
("Sanders"), Martin Marietta Corporation, a Maryland corporation ("Martin
Marietta"), and Martin Marietta Technologies, Inc., a Maryland corporation
("MMTI").
RECITALS
WHEREAS, the Board of Directors of each of LMC, Lockheed, LM&SC and
Sanders deems it advisable and in the best interests of their respective
stockholders that LM&SC merge with and into Lockheed (the "LM&SC-Lockheed
Merger") and that Sanders merge with and into Lockheed (the "Sanders-Lockheed
Merger");
WHEREAS, the Board of Directors of each of LMC, Martin Marietta and
MMTI deems it advisable and in the best interests of their respective
stockholders that MMTI merge with and into Martin Marietta (the "MMTI-MMC
Merger");
WHEREAS, the Board of Directors of each of LMC, Lockheed and Martin
Marietta deems it advisable and in the best interests of their respective
stockholders that, following the consummation of the last to occur of the LM&SC-
Lockheed Merger, the Sanders-Lockheed Merger and the MMTI-Martin Marietta
Merger, Martin Marietta merge with and into LMC (the "MMC-LMC Merger") and that,
following the MMC-LMC Merger, Lockheed merge with and into LMC (the "Lockheed-
LMC Merger"); and
WHEREAS, each of the LM&SC-Lockheed Merger, the Sanders-Lockheed
Merger, the MMTI-MMC Merger, the Lockheed-LMC Merger and the MMC-LMC Merger
(collectively referred to herein as the "Mergers"), respectively, is intended to
qualify as a complete liquidation under Section 332 of the Internal Revenue Code
of 1986, as amended;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
2
The Mergers
Section 1.1. The Lockheed Heritage Mergers.
-----------------------------
(a) LM&SC and Lockheed shall execute and cause to be filed a
certificate of merger in the form attached to this Agreement as Exhibit A (the
"LM&SC-Lockheed Certificate) with the Secretary of State of the State of
Delaware and the Secretary of State of the State of California. The LM&SC-
Lockheed Certificate shall provide that the LM&SC-Lockheed Merger shall be
effective at 11:57 p.m. Eastern Standard Time on the Merger Date as hereinafter
defined. LM&SC and Lockheed shall take all actions necessary or appropriate to
consummate the LM&SC-Lockheed Merger in accordance with the provisions of the
LM&SC-Lockheed Certificate.
(b) Sanders and Lockheed shall execute and cause to be filed a
certificate of merger in the form attached to this Agreement as Exhibit B (the
"Sanders-Lockheed Certificate) with the Secretary of State of the State of
Delaware. The Sanders-Lockheed Certificate shall provide that the Sanders-
Lockheed Merger shall be effective at 11:57 p.m. Eastern Standard Time on the
Merger Date as hereinafter defined. Sanders and Lockheed shall take all actions
necessary or appropriate to consummate the Sanders-Lockheed Merger in accordance
with the provisions of the Sanders-Lockheed Certificate.
(c) Lockheed and LMC shall execute and cause to be filed (i) a
certificate of merger in the form attached to this Agreement as Exhibit C (the
"Lockheed-LMC Certificate) with the Secretary of State of the State of Delaware
and (ii) articles of merger in the form attached hereto as Exhibit D (the
"Lockheed-LMC Articles") with the State Department of Assessments and Taxation
of the State of Maryland. The Lockheed-LMC Certificate and the Lockheed-LMC
Articles shall provide that the Lockheed-LMC Merger shall be effective at 11:59
p.m. Eastern Standard Time on the Merger Date as hereinafter defined. Lockheed
and LMC shall take all actions necessary or appropriate to consummate the
Lockheed-LMC Merger in accordance with the provisions of the Lockheed-LMC
Certificate and the Lockheed-LMC Articles.
Section 1.2. The Martin Marietta Heritage Mergers.
------------------------------------
(a) Martin Marietta and MMTI will cause articles of merger in the
form attached to this Agreement as Exhibit E (the "MMTI-MMC Articles") to be
filed with the State Department of Assessments and Taxation of the State of
Maryland. The MMTI-MMC Articles shall provide that the MMTI-MMC Merger shall be
effective at 11:57 p.m. Eastern Standard Time on the Merger Date as hereinafter
defined. MMTI and MMC shall take all actions necessary or appropriate to
consummate the MMTI-MMC Merger in accordance with the provisions of the MMTI-MMC
Articles.
(b) LMC and Martin Marietta will cause articles of merger in the form
attached to this Agreement as Exhibit F (the "MMC-LMC Articles") to be filed
with the State
3
Department of Assessments and Taxation of the State of Maryland. The MMC-LMC
Articles shall provide that the MMC-LMC Merger shall be effective at 11:58 p.m.
Eastern Standard Time on the Merger Date as hereinafter defined. Martin Marietta
and LMC shall take all actions necessary or appropriate to consummate the MMC-
LMC Merger in accordance with the provisions of the MMC-LMC Articles.
ARTICLE II
Approvals
Section 2.01. Each of the parties to this Agreement covenants and
agrees for the benefit of each of the other parties to this Agreement to take
any and all action necessary or appropriate (including approval by their
respective boards of directors and shareholders, if necessary) to consummate the
Mergers in accordance with all applicable laws, including the Maryland General
Corporation Law, the General Corporation Law of the State of Delaware and the
California General Corporation Law.
4
ARTICLE III
Effect of Mergers
Section 3.01. LM&SC-Lockheed Merger. Upon consummation of the LM&SC-
---------------------
Lockheed Merger, LM&SC shall immediately cease to exist and Lockheed shall
succeed to all rights and obligations of LM&SC. Each share of capital stock of
Lockheed which shall be outstanding at the effective time of this merger shall,
by virtue of the merger and without any action on the part of the holder
thereof, remain an outstanding share of capital stock of the corporation
surviving the merger provided for herein. Each share of capital stock of LM&SC
which shall be outstanding at the effective time of the merger shall, by virtue
of the merger and without any action on the part of the holder thereof, be
canceled and no consideration shall be paid in respect thereof. The Certificate
of Incorporation and Bylaws of Lockheed shall be the Certificate of
Incorporation and Bylaws of the surviving corporation and shall thereafter
continue to be its Certificate of Incorporation and Bylaws until changed as
provided therein and by law.
Section 3.02. Sanders-Lockheed Merger. Upon consummation of the
-----------------------
Sanders-Lockheed Merger, Sanders shall cease to exist and Lockheed shall succeed
to all rights and obligations of Sanders. Each share of capital stock of
Lockheed which shall be outstanding at the effective time of this merger shall,
by virtue of the merger and without any action on the part of the holder
thereof, remain an outstanding share of capital stock of the corporation
surviving the merger provided for herein. Each share of capital stock of
Sanders which shall be outstanding at the effective time of the merger shall, by
virtue of the merger and without any action on the part of the holder thereof,
be canceled and no consideration shall be paid in respect thereof. The
Certificate of Incorporation and Bylaws of Lockheed shall be the Certificate of
Incorporation and Bylaws of the surviving corporation and shall thereafter
continue to be its Certificate of Incorporation and Bylaws until changed as
provided therein and by law.
Section 3.03. MMTI-MMC Merger. Upon consummation of the MMTI-MMC
---------------
Merger, MMTI shall cease to exist and Martin Marietta shall succeed to all
rights and obligations of MMTI. Each share of capital stock of Martin Marietta
which shall be outstanding at the effective time of this merger shall, by virtue
of the merger and without any action on the part of the holder thereof, remain
an outstanding share of capital stock of the corporation surviving the merger
provided for herein. Each share of capital stock of MMTI which shall be
outstanding at the effective time of the merger shall, by virtue of the merger
and without any action on the part of the holder thereof, be canceled and no
consideration shall be paid in respect thereof. The Charter and Bylaws of
Martin Marietta shall be the Charter and Bylaws of the surviving corporation and
shall thereafter continue to be its Charter and Bylaws until changed as provided
therein and by law.
Section 3.04. Lockheed-LMC Merger. Upon consummation of the
-------------------
Lockheed-LMC Merger, Lockheed shall cease to exist and LMC shall succeed to all
rights and obligations of Lockheed (including all rights and obligations to
which
5
Lockheed succeeded pursuant to the LM&SC-Lockheed Merger and the Sanders-
Lockheed Merger, respectively). Each share of capital stock of LMC which shall
be outstanding at the effective time of this merger shall, by virtue of the
merger and without any action on the part of the holder thereof, remain an
outstanding share of capital stock of the corporation surviving the merger
provided for herein. Each share of capital stock of Lockheed which shall be
outstanding at the effective time of the merger shall, by virtue of the merger
and without any action on the part of the holder thereof, be canceled and no
consideration shall be paid in respect thereof. The Charter and Bylaws of LMC
shall be the Charter and Bylaws of the surviving corporation and shall
thereafter continue to be its Charter and Bylaws until changed as provided
therein and by law.
Section 3.05. MMC-LMC Merger. Upon consummation of the MMC-LMC
--------------
Merger, Martin Marietta shall cease to exist and LMC shall succeed to all rights
and obligations of Martin Marietta (including all rights and obligations to
which Martin Marietta succeeded pursuant to the MMTI-MMC Merger). Each share of
capital stock of LMC which shall be outstanding at the effective time of this
merger shall, by virtue of the merger and without any action on the part of the
holder thereof, remain an outstanding share of capital stock of the corporation
surviving the merger provided for herein. Each share of capital stock of Martin
Marietta which shall be outstanding at the effective time of the merger shall,
by virtue of the merger and without any action on the part of the holder
thereof, be canceled and no consideration shall be paid in respect thereof. The
Charter and Bylaws of LMC shall be the Charter and Bylaws of the surviving
corporation and shall thereafter continue to be its Charter and Bylaws until
changed as provided therein and by law.
Section 3.06. Complete Liquidation. Each of the Mergers is
--------------------
intended to qualify as a complete liquidation under Section 332 of the Internal
Revenue Code of 1986, as amended, of the entity merging out of existence.
ARTICLE IV
Miscellaneous
Section 4.01. Counterparts. The Agreement and any amendment thereof
------------
may be executed in two or more counterparts, all of which shall be considered
the same agreement.
Section 4.02. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Maryland, without regard
to the principles of conflicts of laws thereof.
Section 4.03. Exhibits. All Exhibits to this Agreement referred to
--------
herein are intended to be and hereby are specifically made a part of this
Agreement.
6
Section 4.04. Headings. All section headings contained in this
--------
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not effect in any way the meaning or interpretation of this
Agreement.
Section 4.05. No Third Party Beneficiaries. The terms and conditions
----------------------------
of this Agreement are for the sole benefit of the parties to this Agreement and
their successors and assigns only, and shall not be relied upon by, nor
construed as conferring any rights upon, any other persons.
Section 4.06. Condition Precedent and Merger Date. Notwithstanding
-----------------------------------
anything to the contrary contained herein, this Agreement shall become null and
void, the obligations of the parties to proceed with the Mergers contemplated
herein shall terminate and the Plans of Merger and Complete Liquidation
contained herein shall be rescinded unless, on or prior to the Merger Date as
hereinafter defined, one of the Chairman of the Board, the President and Chief
Executive Officer or the Vice President and General Counsel of LMC executes a
certificate to the effect that satisfactory agreements have been reached with
the United States Government concerning the transfer of contracts from each such
party to LMC and later lodges such certificate with the Corporate Secretary of
each party to this Agreement for inclusion with the minutes of that partyOs
Board of Directors. The Merger Date shall be January 28, 1996, provided,
however, that either the Chairman of the Board or the President of LMC may
extend this date to a date through and including May 1, 1996.
Section 4.07 Amendment. No amendment of any provision of this
---------
Agreement shall be valid unless the same shall be in writing and signed by all
the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first written above.
ATTEST: LOCKHEED MARTIN
CORPORATION
_________________________ By:________________________
ATTEST: LOCKHEED CORPORATION
_________________________ By:________________________
ATTEST: MARTIN MARIETTA
CORPORATION
7
_________________________ By:________________________
ATTEST: LOCKHEED MISSILES AND
SPACE COMPANY, INC.
_________________________ By:________________________
ATTEST: LOCKHEED SANDERS, INC.
_________________________ By:________________________
ATTEST: MARTIN MARIETTA
TECHNOLOGIES, INC.
_________________________ By:________________________
8
Exhibit 10(d)
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
------------------------------------
March 15, 1995
As Amended December 7, 1995
ARTICLE I
PURPOSE
The purpose of this Plan is to give each non-employee Director of
Lockheed Martin Corporation the opportunity to be compensated for his or her
service as a Director on a deferred basis. The Plan is also intended to
establish a method of paying Director's compensation which will aid the
Corporation in attracting and retaining as members of the Board persons whose
abilities, experience and judgment can contribute to the success of the
Corporation.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below, unless the context clearly indicates to the
contrary:
Account means the bookkeeping account maintained by the Corporation on
behalf of a participating Director which is credited with the Director's
Deferred Compensation, including investment earnings credited under Section 4.2.
Beneficiary shall have the meaning specified in Section 7.2(b).
Board of Directors or Board means the Board of Directors of the
Corporation.
Committee means the Committee appointed to administer this Plan, as
provided in Section 6.1 hereof.
Corporation means Lockheed Martin Corporation, a Maryland corporation
and its successors.
Deferred Compensation means Director's Fees deferred pursuant to this
Plan and investment earnings credited thereto under Section 4.2.
Election Form means the form by which a Director elects to participate
in this Plan.
Director means a member of the Board of Directors of the Corporation
who is eligible to receive compensation in the form of Director's Fees and who
is not an officer or employee of the Corporation or any of its subsidiaries.
- 2 -
Director's Fees means the fees payable to a Director for services as a
Director and for services on any Committee of the Board, including the amount of
any retainer paid to a non-employee for services as Chairman of the Board, but
excluding any amounts credited or stock distributed to a Director under the
Lockheed Martin Corporation Directors Deferred Stock Plan.
Effective Date means the effective date referred to in Section 7.8.
Plan means the Lockheed Martin Corporation Directors Deferred
Compensation Plan.
ARTICLE III
PARTICIPATION
3.1 Timing of Deferral Elections. In order to defer Director's fees
earned in any calendar year, a Director must make a deferral election by
executing and filing an Election Form before the commencement of that calendar
year or, in the case of a new Director, before the commencement of the
Director's term of office in that calendar year. Individuals who are Directors
on the Effective Date of the Plan must make their deferral election before the
Effective Date in order to defer Director's Fees to be earned in the calendar
year that includes the Effective Date.
3.2 Terms of Deferral Elections. A Director's deferral election for
a calendar year shall specify the percentage (which may equal 100%) of the
Director's Fees to be earned by the Director for that year which are to be
deferred under this Plan. A Director's deferral election shall remain in effect
for each subsequent calendar year, unless the Director duly files a revised
Election Form or written revocation of the election before the beginning of the
subsequent calendar year. A Director's deferral election shall be irrevocable
during any calendar year in which it is in effect.
ARTICLE IV
CREDITING OF ACCOUNTS
4.1 Crediting of Director's Fees. Director's Fees that a Director
has elected to defer shall be credited to the Director's Account as of the first
day of the month in which the Director's Fees would have been payable to the
Director if no deferral election had been made under this Plan. The elected
deferral percentage shall apply to all Director's Fees earned by the Director
during a calendar year.
4.2 Crediting of Investment Earnings. As of the last day of each
month, a Director's Account shall be credited to reflect investment earnings (or
loss) for the month, based on the Director's investment selections under this
Section 4.2. A Director may elect to have his or her Account credited with
investment earnings for each month as if the Director's Account balance had been
invested and earned
- 3 -
(a) interest at a rate equal to one twelfth (1/12) of the annual
prime rate as set by Citibank, N.A., New York, New York, on the last
day of the preceding month,
(b) a return equal to that of the published index for the Standard &
Poors 500 (with dividends) for the month, or
(c) a combination of (a) and (b).
A Director's initial investment selections must be made by the date that the
Director's initial deferral election takes effect. A Director may change his or
her investment selections with respect to all amounts credited to the Director's
Account, including amounts deferred in prior periods. A change of investment
selections must be made by filing a revised Election Form in advance of the
month in which the change is to take effect.
4.3 Account Balance as Measure of Deferred Compensation. The
Deferred Compensation payable to a Director (or the Director's Beneficiary)
shall be measured by, and shall in no event exceed, the sum of the amounts
credited to the Director's Account.
ARTICLE V
PAYMENT OF DEFERRED COMPENSATION
5.1 Manner of Distribution.
(a) Lump sum payments. A Director's Deferred Compensation shall be
paid as a lump sum cash payment equal to the balance credited to the Director's
Account on the December 31 that is coincident with or next follows the date of
the termination of the Director's status as a Director, unless the Director has
elected to receive installment payments in accordance with Section 5.1(b).
(b) Installment payments. A Director may elect to have the Director's
Deferred Compensation distributed in annual installments over a maximum period
of ten (10) years. The amount of each annual installment shall be determined by
dividing the Director's Account balance (or the portion of the Account balance
to which the installment election applies) on the December 31 preceding the
payment date by the number of years remaining in the elected installment period.
A Director's election to receive installment payments with respect to Director's
fees deferred in any calendar year must be made on an Election Form duly filed
no later than the latest date on which a deferral election may be made for that
calendar year under Section 4.1. A Director's installment election shall remain
in effect with respect to Director's fees deferred in each subsequent calendar
year, unless the Director duly files a revised Election Form before the
beginning of the subsequent calendar year. An installment election shall be
irrevocable with respect to Director's fees deferred (and allocable investment
earnings) in any calendar year for which the installment election is in effect.
- 4 -
(c) Deferral For Directors Fees Earned in 1996. A Director may elect
to have the Director's Deferred Compensation earned during the 1996 calendar
year credited and paid as a lump sum under (a) or annual installments under (b)
except that payment (or installments, as the case may be) will be made (or
commence) on January 1, 1998, or as soon as practicable thereafter regardless of
whether the Director has terminated service as a Director.
5.2 Commencement of Payments. Except as provided in Sections 5.1(c)
and 5.4, the payment of Deferred Compensation to a Director shall be made or
commence in January of the first calendar year following the year in which the
Director ceases to be a Director, whether due to resignation, retirement,
disability, death, or otherwise. Installment payments shall continue to be made
in January of each succeeding year until all installments have been paid.
5.3 Death Benefits. In the event that a Director dies before payment
of the Director's Deferred Compensation has commenced or been completed, the
balance of the Director's Account shall be distributed to the Director's
Beneficiary commencing in the January following the date of the Director's death
in accordance with the manner of distribution (lump sum or annual installments)
elected by the Director for payments during the Director's lifetime. However,
upon good cause shown by a Beneficiary or personal representative of the
Director, the Committee, in its sole discretion, may reject a Director's
installment election and instead cause the Director's death benefits to be paid
in a lump sum.
5.4 Emergency Withdrawals. In the event of an unforeseeable
emergency prior to the commencement of distributions or after the commencement
of installment payments, the Committee may approve a distribution to a Director
(or Beneficiary after the death of a Director) of the part of the Director's
Account balance that is reasonably needed to satisfy the emergency need. An
Emergency withdrawal will be approved only in a circumstance of severe financial
hardship to the Director (or Beneficiary after the death of the Director)
resulting from a sudden and unexpected illness or accident of the Director (or
Beneficiary, as applicable) or of a dependent of the Director (or Beneficiary,
as applicable), loss of property due to casualty, or other similar extraordinary
or unforeseeable circumstance arising from events beyond the control of the
Director (or Beneficiary, as applicable). The investment earnings credited to
the Director's Account shall be determined as if the withdrawal had been debited
from the Director's Account on the first day of the month in which the
withdrawal occurs.
5.5 Corporation's Right to Withhold. There shall be deducted from
all payments under this Plan the amount of taxes, if any, required to be
withheld under applicable federal or state tax laws. The Directors and their
Beneficiaries will be liable for payment of any and all income or other taxes
imposed on Deferred Compensation payable under this Plan.
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ARTICLE VI
ADMINISTRATION, AMENDMENT AND TERMINATION
6.1 Administration by Committee. This Plan shall be administered by
a Committee of three consisting of the (i) Chief Financial Officer of the
Corporation, (ii) Secretary of the Corporation, and (iii) Treasurer of the
Corporation. The Committee shall act by vote or by written consent of a
majority of its members. The Committee's resolution of any question regarding
the interpretation of this Plan shall be subject to review by the Board, and the
Board's determination shall be final and binding on all parties.
6.2 Amendment and Termination. This Plan may be amended, modified,
or terminated by the Board at any time, except that no such action shall
(without the consent of affected Directors or, if appropriate, their
Beneficiaries or personal representatives) adversely affect the rights of
Directors or Beneficiaries with respect to compensation earned and deferred
under this Plan prior to the date of such amendment, modification, or
termination.
ARTICLE VII
MISCELLANEOUS
7.1 Limitation on Directors' Rights. Participation in this Plan
shall not give any Director the right to continue to serve as a member of the
Board or any rights or interests other than as herein provided. No Director
shall have any right to any payment or benefit hereunder except to the extent
provided in this Plan. This Plan shall create only a contractual obligation on
the part of the Corporation as to such amounts and shall not be construed as
creating a trust. The Plan, in and of itself, has no assets. Directors shall
have only the rights of general unsecured creditors of the Corporation with
respect to amounts credited to or payable from their Accounts.
7.2 Beneficiaries.
(a) Beneficiary Designation. Subject to applicable laws (including
any applicable community property and probate laws), each Director may designate
in writing the Beneficiary that the Director chooses to receive any payments
that become payable after the Director's death, as provided in Section 5.3. A
Director's Beneficiary designation shall be made on forms provided and in
accordance with procedures established by the Corporation and may be changed by
the Director at any time before the Director's death.
(b) Definition of Beneficiary. A Director's "Beneficiary" or
"Beneficiaries" shall be the person or persons, including a trust or trusts,
validly designated by the Director or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution to receive the amounts
otherwise payable to the Director under this Plan in the event of the Director's
death.
- 6 -
7.3 Rights Not Assignable; Obligations Binding Upon Successors. A
Director's rights under this Plan shall not be assignable or transferable and
any purported transfer, assignment, pledge or other encumbrance or attachment of
any payments or benefits under this Plan, or any interest thereon, other than
pursuant to Section 7.2, shall not be permitted or recognized. Obligations of
the Corporation under this Plan shall be binding upon successors of the
Corporation.
7.4 Governing Law; Severability. The validity of this Plan or any of
its provisions shall be construed, administered, and governed in all respects
under and by the laws of the State of Maryland. If any provisions of this
instrument shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
7.5 Annual Statements. The Corporation shall prepare and send a
statement to the Director (or to the Director's Beneficiary after the Director's
death) showing the balance credited to the Director's Account as of December 31
of each year for which an Account is maintained with respect to the Director.
7.6 Headings Not Part of Plan. Headings and subheadings in this Plan
are inserted for reference only and are not to be considered in the construction
of this Plan.
7.7 Consent to Plan Terms. By electing to participate in this Plan,
a Director shall be deemed conclusively to have accepted and consented to all of
the terms of this Plan and to all actions and decisions of the Corporation,
Board, or Committee with regard to the Plan. Such terms and consent shall also
apply to and be binding upon each Director's Beneficiary or Beneficiaries,
personal representatives, and other successors in interest.
7.8 Effective Date. This Plan shall become effective on the date
that the proposed plan of combination between Lockheed Corporation and Martin
Marietta Corporation has been approved by the stockholders of both corporations
and becomes effective. This Plan shall apply only to Director's Fees earned by
Directors after that date.
EXHIBIT 10(e)
LOCKHEED MARTIN CORPORATION
DIRECTORS RETIREMENT PLAN
-------------------------
May 25, 1995
ARTICLE I
PURPOSE
The purpose of this Plan is to provide retirement income to persons
who have performed substantial services as non-employee Directors of Lockheed
Martin Corporation and thereby to aid the Corporation in attracting and
retaining as members of the Board persons whose abilities, experience and
judgment can contribute to the success of the Corporation.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have
the meaning specified below, unless the context clearly indicates to the
contrary:
Beneficiary shall have the meaning specified in Section 6.2(b).
Board of Directors or Board means the Board of Directors of the
Corporation.
Committee means the Committee appointed to administer this Plan, as
provided in Section 5.1 hereof.
Corporation means Lockheed Martin Corporation, a Maryland corporation
and its successors.
Director means a member of the Board of Directors of the Corporation
who is eligible to receive compensation in the form of Retainer Fees and who is
not an officer or employee of the Corporation or any of its subsidiaries; where
indicated by the context, the term Director shall include a retired or former
Director.
Effective Date means March 15, 1995.
Plan means the Lockheed Martin Corporation Directors Retirement Plan.
Retainer Fee means the annual fee payable to a Director for service as
a Board member, including the value of the amount annually credited to each
Director under the Lockheed Martin Corporation Directors Deferred Stock Plan,
but not including any fees for services as a member of a committee of the Board.
Retirement Age means the age for mandatory retirement of Directors
from Board membership, as specified in the Corporation's by-laws on the date a
Director retires, resigns, or otherwise ceases to be a member of the Board.
-2-
ARTICLE III
ELIGIBILITY FOR BENEFITS
3.1 Five-year Service Requirement. Except as provided in Section
4.1, a Director shall be eligible to receive benefits under this Plan only if
the Director has served as a member of the Board for five (5) or more years, and
the Director retires, resigns, or otherwise ceases to be a member of the Board
after the Effective Date.
3.2 Credited Service. For purposes of Section 3.1 and Article IV, a
Director's years of service as a Board member shall be deemed to include all
periods in which he or she served as a director of the Corporation, Lockheed
Corporation, or Martin Marietta Corporation, including all periods in which he
or she served as a director while an employee of one or more of those
corporations. A Director shall be credited with a year of service for each
twelve (12) month period of Board service; fractional years of service shall not
be taken into account under this Plan.
ARTICLE IV
BENEFITS
4.1 Retirement at Retirement Age. If a Director retires from the
Board on or after attainment of Retirement Age, the Corporation shall make
annual payments to the Director in the amount of the Retainer Fee for life.
Such payments shall commence in the January following the year in which the
Director retires and shall be made in each successive January ending with the
January payment for the calendar year of the Director's death. Upon the
approval of the Nominating Committee of the Board, a Director who retires from
the Board on or after attainment of Retirement Age, but with less than five (5)
years of service on the Board, may be treated as having satisfied the
eligibility requirement of Section 3.1. Notwithstanding the foregoing, an
initial payment prorated to reflect the number of months remaining in the year
shall be made to the Director as soon as practicable following his retirement.
4.2 Resignation before Retirement Age. If a Director retires,
resigns, or otherwise ceases to be a member of the Board before attaining
Retirement Age, the Corporation shall make annual payments to the Director in
the amount of the Retainer Fee for a number of years equal to the number of full
years the Director had served on the Board. Such payments shall commence in the
January following the year in which the Director ceases to be a member of the
Board and shall be made in each successive January until the payments have been
completed.
4.3 Death Benefits. Upon the death of an active Director, whether or
not such Director has served as a Director for five (5) years, or a retired or
former Director entitled to benefits under Section 4.1 or 4.2, the Corporation
shall make annual payments to the Director's Beneficiary in the amount of the
Retainer Fee for a number of years equal to (i) the number of full years the
Director had served on the Board, less (ii) the number of years, if any, for
which payments were made to the Director under Section 4.1 or 4.2, provided that
the number of annual payments to a Director's Beneficiary shall in no event
exceed twenty (20). Such payments shall commence in the January following the
year of the Director's death and shall be made in each successive January until
the payments have been completed.
-3-
4.4 Retainer Fee used to Determine Benefits. All benefits payable to
or with respect to a Director shall be based upon the amount of the Retainer Fee
in effect on the Date the Director retires, resigns, or otherwise ceases to be a
member of the Board.
4.5 Coordination with Predecessor Plans. The payments to a Director
or Beneficiary under Section 4.1, 4.2, or 4.3 shall be adjusted to reflect
payments made or to be made under the Post-Retirement Income Maintenance Plan
for Directors of Martin Marietta Corporation (the "Martin Marietta Plan") and
the Lockheed Corporation Retirement Plan for Directors (the "Lockheed Plan") in
the following manner:
(a) With respect to any Director who received a lump sum payment under
the Martin Marietta Plan, each annual benefit payment under this Plan
(commencing with the earliest year in which a benefit is otherwise payable)
shall be reduced by an amount equal to the annual retainer fee that was taken
into account in determining the amount of the lump sum payment to the Director
under the Martin Plan; that reduction shall be made for a number of years equal
to the number of years of accrued benefits for which the Director received the
lump sum payment under the Martin Plan; thereafter, any benefits payable to the
Director or the Director's Beneficiary under this Plan shall be unaffected by
this Section 4.5.
(b) With respect to any Director who has accrued the right to receive
benefits under the Lockheed Plan and who has not waived that right in favor of
the benefits payable under this Plan:
(i) the amount of any annual benefit payment that would be made
to the Director or the Director's Beneficiary under this Plan in
January of a year shall be reduced by the sum of the monthly benefit
payments, if any, made to the Director or the Director's surviving
spouse under the Lockheed Plan in the preceding calendar year;
(ii) if a lump sum payment has been made to the Director or the
Director's surviving spouse under the Lockheed Plan, each annual
benefit payment under this Plan (commencing with the earliest year in
which a benefit is otherwise payable) shall be reduced by an amount
equal to the annual retainer fee that was taken into account in
determining the amount of the lump sum payment under the Lockheed
Plan; that reduction shall be made for the number of years equal to
the number of years of accrued benefits for which the lump sum payment
was made under the Lockheed Plan; thereafter, any benefits payable to
the Director or the Director's Beneficiary under this Plan shall be
unaffected by this Section 4.5; and
(iii) if the benefit payments to the Director or the Director's
surviving spouse under the Lockheed Plan will commence later than the
date on which benefit payments would otherwise commence to be made to
the Director or the Director's Beneficiary under this Plan, payments
under this Plan shall commence no earlier than January of the calendar
year following the year in which benefit payments will commence under
the Lockheed Plan, advanced by one year for each full year that the
Director has served on the Board of the Corporation (excluding years
of service as a director of Lockheed Corporation).
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ARTICLE V
ADMINISTRATION, AMENDMENT AND TERMINATION
5.1 Administration by Committee. This Plan shall be administered by
a Committee of three consisting of the (i) Chief Financial Officer of the
Corporation, (ii) Secretary of the Corporation, and (iii) Treasurer of the
Corporation. The Committee shall act by vote or by written consent of a
majority of its members. The Committee's resolution of any question regarding
the interpretation of this Plan shall be subject to review by the Board, and the
Board's determination shall be final and binding on all parties.
5.2 Amendment and Termination. This Plan may be amended, modified,
or terminated by the Board at any time, except that no such action shall
(without the consent of affected Directors or, if appropriate, their
Beneficiaries or personal representatives) adversely affect the rights of
Directors or Beneficiaries with respect to benefit rights accrued under this
Plan prior to the date of such amendment, modification, or termination.
ARTICLE VI
MISCELLANEOUS
6.1 Limitation on Directors' Rights. Participation in this Plan
shall not give any Director the right to continue to serve as a member of the
Board or any rights or interests other than as herein provided. No Director
shall have any right to any payment or benefit hereunder except to the extent
provided in this Plan. This Plan shall create only a contractual obligation on
the part of the Corporation and shall not be construed as creating a trust. The
Plan, in and of itself, has no assets. Directors shall have only the rights of
general unsecured creditors of the Corporation with respect to benefits payable
under this Plan.
6.2 Beneficiaries.
(a) Beneficiary Designation. Subject to applicable laws (including
any applicable community property and probate laws), each Director may designate
in writing the Beneficiary that the Director chooses to receive any payments
that become payable after the Director's death, as provided in Section 4.3. A
Director's Beneficiary designation shall be made on forms provided and in
accordance with procedures established by the Corporation and may be changed by
the Director at any time before the Director's death.
(b) Definition of Beneficiary. A Director's "Beneficiary" or
"Beneficiaries" shall be the person or persons, including a trust or trusts,
validly designated by the Director or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution to receive the amounts
otherwise payable to the Director under this Plan in the event of the Director's
death.
6.3 Rights Not Assignable; Obligations Binding Upon Successors. A
Director's rights under this Plan shall not be assignable or transferable and
any purported transfer, assignment, pledge or other encumbrance or
-5-
attachment of any payments or benefits under this Plan, or any interest thereon,
other than pursuant to Section 6.2, shall not be permitted or recognized.
Obligations of the Corporation under this Plan shall be binding upon successors
of the Corporation.
6.4 Governing Law; Severability. The validity of this Plan or any of
its provisions shall be construed, administered, and governed in all respects
under and by the laws of the State of Maryland. If any provisions of this
instrument shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
6.5 Corporation's Right to Withhold. There shall be deducted from
all payments under this Plan the amount of taxes, if any, required to be
withheld under applicable federal or state tax laws. The Directors and their
Beneficiaries will be liable for payment of any and all income or other taxes
imposed on benefits payable under this Plan.
6.6 Headings Not Part of Plan. Headings and subheadings in this Plan
are inserted for reference only and are not to be considered in the construction
of this Plan.
Exhibit 10(f)
Lockheed Martin Corporation
Directors Charitable Award Plan
Plan Document Amended and Restated
Effective June 1, 1995
The Lockheed Martin Corporation Directors Charitable Award Plan ("Plan") was
originally adopted effective July 1, 1994 as the Martin Marietta Corporation
Directors Charitable Award Plan ("Prior Plan"). Effective March 15, 1995,
Lockheed Martin Corporation (the "Corporation") assumed the rights and
obligations of Martin Marietta Corporation under the Prior Plan. Effective June
1, 1995, the Corporation adopted the Prior Plan and amended and restated the
Prior Plan to make it applicable to members of the Board of Directors of the
Corporation.
1. PURPOSE OF THE PLAN
The Plan allows each eligible Director of the Corporation to recommend that
the Corporation make a donation of up to $1,000,000 to the eligible tax-
exempt organization(s) (the "Donee(s)") selected by the Director, with the
donation to be made, in the Director's name, in ten equal annual
installments, with the first installment to be made as soon as is
practicable after the Director's death. The purpose of the Plan is to
recognize the interest of the Corporation and its Directors in supporting
worthy educational institutions and/or charitable organizations.
2. ELIGIBILITY
All persons serving as Directors of the Corporation as of June 1, 1995,
shall be eligible to participate in the Plan. Any Director who joins the
Corporation's Board of Directors after that date shall be immediately
eligible to participate in the Plan upon election to the Board.
Individuals who were Directors of Martin Marietta Corporation on March 15,
1995 are also eligible for benefits under the Plan.
3. AMOUNT AND TIMING OF DONATION
Each eligible Director may choose one organization to receive a Corporation
donation of $1,000,000, or up to five organizations to receive donations
aggregating $1,000,000. Each recommended organization must be designated
to receive a donation of at least $100,000. The donation will be made by
the Corporation in ten equal annual installments, with the first
installment to be made as soon as is practicable
after the Director's death, and each later installment to be made at
approximately the same time in the following years. If a Director
recommends more than one organization to receive a donation, each will
receive a prorated portion of each annual installment as follows: Each
annual installment payment will be divided among the recommended
organizations in the same proportions as the total donation amount has been
allocated among the organizations by the Director.
4. DONEES
In order to be eligible to receive a donation, a recommended organization
must be a tax-exempt charitable organization or educational institution and
must initially, and at the time a donation is to be made, be able to
demonstrate receipt of an IRS notice of qualification to receive tax
deductible contributions, if requested by the Corporation, and be reviewed
and approved by the Directors Charitable Award Plan Committee (the
"Committee"). The Committee may disapprove a donation if it determines
that a donation to the organization would be detrimental to the best
interests of the Corporation. A Director's private foundation is not
eligible to receive donations under the Plan. If an organization
recommended by a Director ceases to qualify as a Donee, and if the Director
does not submit a form to change the recommendation before his or her
death, the amount recommended to be donated to the organization will
instead be donated to the Director's remaining qualified Donee(s) on a
prorata basis. If all of a Director's recommended organizations cease to
qualify, the amount will be donated to organizations selected by the
Corporation. A Director may not receive any property or economic benefit
from an organization as a result of recommending it as a Donee under the
Plan; a violation of this requirement will render the Director's
recommendation of the Donee void.
5. RECOMMENDATION OF DONATION
When a Director becomes eligible to participate in the Plan, he or she
shall make a written recommendation to the Corporation, on a form approved
by the Corporation for this purpose, designating the Donee(s) which he or
she intends to be the recipient(s) of the Corporation donation to be made
on his or her behalf. A Director may revise or revoke any such
recommendation prior to his or her death by signing a new recommendation
form and submitting it to the Corporation.
A Director may choose to place restrictions on the use of funds he or she
recommends to be donated to an organization. The Corporation will advise
the Donee of the restrictions, but the Corporation will not be responsible
for monitoring the use of the funds by the organization to ensure
compliance with the restrictions. However, the Committee may, in its
discretion, suspend any remaining donation installments for the
organization if it becomes aware that the funds are not being used in a
manner which is consistent with the restrictions.
6. VESTING
A Director will become vested in the Plan upon the completion of sixty full
months of service as a Director, or if he or she dies, retires or becomes
disabled while serving as a Director. Service as a member of the Board of
Directors of Lockheed Corporation prior to June 1, 1995 will be counted as
vesting service. If a Director terminates Board service before becoming
vested (other than on account of death, retirement or disability), no
donation will be made on his or her behalf. A Director will be considered
to have retired if he or she has attained mandatory retirement age for
Directors as set forth in the Corporation's By-laws.
7. FUNDING AND PLAN ASSETS
The Corporation may fund the Plan or it may choose not to fund the Plan.
If the Corporation elects to fund the Plan in any manner, neither the
Directors (or their heirs or assigns) nor their recommended Donee(s) shall
have any rights or interests in any assets of the Corporation identified
for such purpose. Nothing contained in the Plan shall create, or be deemed
to create, a trust, actual or constructive, for the benefit of a Director
or any Donee recommended by a Director to receive a donation, or shall
give, or be deemed to give, any Director or recommended Donee any interest
in any assets of the Plan or the Corporation. If the Corporation elects to
fund the Plan through life insurance policies, a participating Director
agrees to cooperate and fulfill the enrollment requirements necessary to
obtain insurance on his or her life.
8. AMENDMENT OR TERMINATION
The Board of Directors of the Corporation may, at any time, by a majority
vote and without the consent of the Directors participating in the Plan,
amend, modify, or waive any term of the Plan or suspend, or terminate the
Plan for any reason, including, but not limited to, changes in applicable
tax laws; provided however, that, subject to Section 4, no such amendment
or termination shall, without the consent of the relevant Director or
relevant Donee (if the Director has died) eliminate, reduce, or modify the
obligation of the Corporation to make contributions on behalf of a Director
who prior to the date of the amendment is adopted dies, retires, becomes
disabled or has completed sixty full months of service as a Director.
9. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall be
responsible for executing and delivering documents necessary and
appropriate to the administration of the Plan and for making determinations
as to the eligibility of Donees. The Board of Directors shall have the
authority to interpret the Plan and make determinations as to eligibility
of Directors. The determinations of the Committee (or the Board of
Directors, as the case may be) on the foregoing matters shall be conclusive
and binding on all interested parties.
10. DIRECTORS CHARITABLE AWARD PLAN COMMITTEE
The Directors Charitable Award Plan Committee shall be a committee of four
members consisting of the persons who from time to time may be the
Corporation's Chief Financial Officer, Treasurer, Secretary, and Vice
President, Corporate Communications. The Chief Financial Officer shall
act as the Chairperson of the Committee.
11. GOVERNING LAW
The Plan shall be construed and enforced according to the laws of Maryland,
and all provisions thereof shall be administered according to the laws of
said state.
12. MISCELLANEOUS PROVISIONS
A Director's rights and interest under the Plan may not be assigned or
transferred. The expenses of the Plan will be borne by the Corporation.
13. CHANGE OF CONTROL
(a) If there is a Change of Control of the Corporation, all Directors
participating in the Plan shall immediately become vested. For the purpose
of the Plan, the term "Change of Control" shall have the same meaning as is
defined for the term in Section 10(b) of the Martin Marietta Corporation
Amended Omnibus Securities Award Plan. In the event of a Change of Control
other than as a result of the transactions contemplated by the Agreement
and Plan of Reorganization among Parent Corporation, Martin Marietta
Corporation and Lockheed Corporation dated as of August 29, 1994, the
Corporation shall immediately create an irrevocable trust to make the
anticipated Plan donations, and shall immediately transfer to the trust
sufficient assets (which may include insurance policies) to make all the
Plan donations in respect to the individuals who were Directors immediately
before the Change of Control. In addition, once a Change of Control
occurs, Section 3 and 13 of this Plan may not be amended.
(b) Notwithstanding the foregoing, effective June 1, 1995, the term
"Change of Control" shall have the same meaning as is defined for the term
in Section 7(b) of the Lockheed Martin Corporation 1995 Omnibus Performance
Award Plan.
14. CONSENT
By electing to participate in the Plan, a Director shall be deemed
conclusively to have accepted and consented to all the terms of this Plan
and all actions or decisions made by the Corporation, the Board, or the
Committee with regard to the Plan. Such terms and consent shall also apply
to and be binding upon the beneficiaries, distributees, and personal
representatives and other successors in interest of each participant.
15. EFFECTIVE DATE
The Plan as amended and restated is effective June 1, 1995. The
recommendations of a Director will be effective when he or she completes
all of the Plan enrollment requirements (including, if the Plan is funded
with insurance, satisfaction of any requirements to qualify for the
insurance).
16. RIGHTS UNDER PRIOR PLAN
The rights of any individual who was a member of the Board of Directors of
Martin Marietta Corporation on March 15, 1995 (an "MMC Director") shall be
determined solely under this Plan as amended and restated effective June 1,
1995, except that each MMC Director is fully vested as of march 15, 1995 in
the Plan's benefits. Any MMC Director shall be entitled to a single
benefit attributable to service both as a member of the Board of Directors
of Martin Marietta Corporation and of the Corporation. After March 15,
1995, Directors of Martin Marietta Corporation (other than individuals who
were Directors on that date) shall not be eligible to participate in the
Plan.
Exhibit 10(g)
Resolution No. 61
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Lockheed Martin Corporation
Board of Directors
May 25, 1995
$100,000 Death Benefit and $1 million Business Travel Accident Insurance Policy
For Directors
RESOLVED, That the Senior Vice President and Chief Financial Officer
be authorized, with the authority to delegate such authorization, to adopt
a plan providing that upon the death of any former or active non-employee
member of the Board of Directors, the Corporation shall pay to the
director's designated beneficiary (or if no beneficiary has been
designated, his or her estate), a death benefit in the amount of $100,000,
reduced by the amount of life insurance coverage provided to the director
by Lockheed Corporation or Martin Marietta Corporation, and increased to
include the estimated amount of taxes on a grossed up basis.
RESOLVED FURTHER, That the Senior Vice President and Chief Financial
Officer be authorized, with the authority to delegate such authorization,
to obtain for each non-employee member of the Board of Directors travel
accident insurance coverage paying a benefit of up to $1,000,000 in the
event that the director is involved in an accident while travelling on
business related to the Corporation.
RESOLVED FURTHER, That the officers of the Corporation be and each
hereby is authorized, with the power to delegate such authorization, to
execute and deliver such instruments and documents, to do all such other
acts and things, and to take all such further steps as are deemed necessary
or advisable or convenient or proper in order to fully carry out the intent
of the foregoing resolutions.
Resolution No. 58 Exhibit 10(h)
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Lockheed Martin Corporation
Board of Directors
May 25, 1995
Financial Counseling Program
For Directors
RESOLVED, That the Senior Vice President and Chief Financial Officer
be authorized, with the authority to delegate such authorization, to
provide reimbursement to each member of the Board of Directors of up to
$6,000 annually for expenses incurred by the director in obtaining
financial counseling services while the director is serving as a member of
the Board of Directors and for one year following retirement;
RESOLVED FURTHER, That the officers of the Corporation be and each
hereby is authorized, with the power to delegate such authorization, to
execute and deliver such instruments and documents, to do all such other
acts and things, and to take all such further steps as are deemed necessary
or advisable or convenient or proper in order to fully carry out the intent
of the foregoing resolution.
Exhibit 10(i)
10(j)
Resolution No. 57 10(k)
- --------------------------------------------------------------------------------
Lockheed Martin Corporation
Board of Directors
May 25, 1995
Benefits for Elected Officers (Post-Retirement Death Benefit Plan, Financial
Counseling, Personal Liability Insurance, Accidental Death and Dismemberment
Coverage and Other Incidental Benefits)
RESOLVED, That the Chairman and Chief Executive Officer and the
President be and each is hereby authorized, with authority to delegate such
authorization, to adopt for the benefit of elected officers of the
Corporation a post-retirement death benefit plan paying benefits in the
amount of one and one-half times base salary at retirement, except that
officers who do not waive their rights to post retirement death benefits
under the Martin Marietta Corporation Post Retirement Death Benefit Plan
for Senior Executives or the Lockheed Corporation Post Retirement Death
Benefit Plan, as appropriate, will not be eligible for the plan.
RESOLVED, That the Chairman and Chief Executive Officer and the
President be and each is hereby authorized, with authority to delegate such
authorization, to adopt a financial counseling program which provides
reimbursement to elected officers of the Corporation for financial
counseling up to 3-1/2% of base salary as of the first pay period of the
year in which the expense is incurred or $10,000, whichever is less, and
reimbursement to non-elected vice presidents of $2,000 annually; provided
however, that during 1995, officers and vice presidents who continue to
receive reimbursement for similar expenses under existing Martin Marietta
Corporation and Lockheed Corporation programs shall not be eligible to
receive reimbursements.
RESOLVED FURTHER, That the Chairman and Chief Executive Officer and
the President be and each is hereby authorized, with authority to delegate
such authorization, to adopt for the benefit of elected officers (i)
personal liability insurance coverage while employed as an officer of
$5,000,000; and (ii) accidental death and dismemberment coverage while
employed as an officer of $1,000,000; and to adopt for elected officers and
senior management employees such other incidental benefits and non-cash
compensation as is consistent with the presentation made to the Committee
on such matters and for which no significant long term liabilities for the
Corporation are created.
RESOLVED FURTHER, That the officers of the Corporation be and each
hereby is authorized, with the power to delegate such authorization, to
execute and deliver such instruments and documents, to do all such other
acts
and things, and to take all such further steps as are deemed necessary
or advisable or convenient or proper in order to fully carry out the intent
of the foregoing resolutions.
Exhibit 10(l)
LOCKHEED MARTIN CORPORATION
---------------------------
MANAGEMENT INCENTIVE COMPENSATION PLAN
--------------------------------------
Approved July 27, 1995
ARTICLE I
---------
PURPOSE OF THE PLAN
-------------------
This plan is established to provide a further incentive to selected employees to
promote the success of Lockheed Martin Corporation by providing an opportunity
to receive additional compensation for above average performance measured
against individual and business unit goals. The Plan is intended to achieve the
following:
1. Improved cost effectiveness.
2. Stimulate employees to work individually and as teams to meet
objectives and goals consistent with enhancing shareholder values.
3. Facilitate the Company's ability to retain qualified employees and to
attract top executive talent.
ARTICLE II
----------
STANDARD OF CONDUCT AND PERFORMANCE EXPECTATION
-----------------------------------------------
1. It is expected that the business and individual goals and objectives
established for this Plan will be accomplished in accordance with the
Corporation's policy on ethical conduct in business with the
Government and all other customers. It is a prerequisite before any
award can be considered that a participant will have acted in
accordance with the Lockheed Martin Corporation Code of Ethics and
Business Conduct and fostered an atmosphere to encourage all employees
acting under the participants' supervision to perform their duties in
accordance with the highest ethical standards. Ethical behavior is
imperative. Thus, in achieving one's goals, their individual
commitment and adherence to the Corporation's ethical standards will
be considered paramount in determining awards under this Plan.
1
2. Plan participants whose individual performance is determined to be
less than acceptable are not eligible to receive incentive awards.
2
ARTICLE III
-----------
DEFINITIONS
-----------
1. PLAN -- This Lockheed Martin Corporation Management Incentive
Compensation Plan (MICP).
2. BOARD OF DIRECTORS -- The Board of Directors of the Company.
3. COMMITTEE -- The Compensation Committee of the Board of Directors as
from time to time appointed or constituted by the Board of Directors.
4. COMPANY -- Lockheed Martin Corporation and its Subsidiaries.
5. EMPLOYEE -- Any person who is employed by the Company and who is paid
a salary as distinguished from an hourly wage. The term shall be
deemed to include any person who was employed by the Company during
all or any part of the year with respect to which an appropriation is
made to the Plan by the Board of Directors but shall not include any
employee who, during any part of such year, was represented by a
collective bargaining agent.
6. PARTICIPANT -- Any Employee selected to participate in the Plan in
accordance with its terms.
7. ANNUAL SALARY -- The regular base salary of a Participant during a
fiscal year of the Company, determined by multiplying by 52 the
Participant's weekly base salary rate effective during the first full
pay period in December preceding the year of payment, but excluding
any incentive compensation, commissions, over-time payments, payments
under work-week plan, indirect payments, retroactive payments not
affecting the base salary or applicable to the current year, and any
other payments of compensation of any kind.
ARTICLE IV
----------
ELIGIBILITY FOR PARTICIPATION
-----------------------------
Those Employees who through their efforts are able to contribute significantly
to the success of the Company in any given calendar year will be considered
eligible for selection for participation in the Plan with respect to that year.
Participants are selected each plan year based on recommendations by the sector
presidents or corporate function heads and have received the endorsement of the
executive office. Those eligible shall include all Employees considered by
3
the Committee to be key Employees of the Company. No member of the Committee
shall be eligible for participation in the plan.
4
ARTICLE V
---------
INCENTIVE COMPENSATION PAYMENTS
-------------------------------
1. CALCULATION OF PAYMENTS - Incentive compensation payments to
Participants shall be calculated in accordance with the formula and
procedures set forth in Exhibit A hereto. All such payments shall be
in cash.
2. INDIVIDUAL PERFORMANCE FACTORS - The Individual Performance Factors of
Participants, as provided in Exhibit A shall be determined by the
sector president or corporate function head and approved by the
executive office. The performance factors of the Chairman of the
Board and the President of Lockheed Martin Corporation shall be
determined by the Committee and the Committee shall review the
Individual Performance Ratings of other Participants who are elected
officers of the Company. The Committee may at the request of any
member of the Committee review the performance ratings of any other
Participant or groups of Participants. The Committee may make
adjustments in any such performance factors as it considers
appropriate.
3. COMPANY AND CORPORATE FACTORS - The company factors and corporate
factors, as provided for in Exhibit A, shall be determined by the
executive office and shall thereafter be reviewed with and be subject
to the approval of the Committee. The Committee may make adjustments
in any such factor as it considers appropriate. The executive office
shall, as soon as feasible in each year, review with the Committee the
company and corporate objectives which may relate to the determination
of such company and corporate factors.
4. RECOMMENDATION BY THE COMMITTEE.
A. As early as feasible after the end of each year in respect of
which incentive compensation payments are to be made, the
Committee shall establish an incentive fund which shall be equal
to a percentage, to be determined by the Committee at that time,
to the Company's pretax earnings for the year in which incentive
compensation payments are to be made. For purposes of the Plan,
pretax earnings shall (i) consist of pretax earnings from
operations; (ii) shall not include any earnings attributable to
extraordinary items as determined by generally accepted
accounting principles; and (iii) shall be computed prior to the
deduction of incentive compensation payments to be paid under the
Plan.
5
B. To the extent that the aggregate of all proposed payments of
incentive compensation to all Participants as determined by the
application of the formula set forth in Exhibit A (subject to any
adjustments made by the Committee under Paragraph 2 or 3 above)
exceeds the amount of the incentive fund as determined under
Paragraph 4.A. above, all proposed payments of incentive
compensation to Participants shall be reduced on a prorata basis.
C. If the Company's pretax earnings, as defined in Paragraph 4A, are
less than the aggregate of all proposed payments of incentive
compensation (as determined by the application of the formula set
forth in Exhibit A subject to 2 or 3 above), the Committee may,
in its discretion, establish an incentive fund without regard to
the pretax earnings guideline of Paragraph 4A. If the Committee
does so, Paragraph 4B shall not apply and the Committee's
recommendation to the Board of Directors shall both state that
the pretax earnings guideline would be exceeded and set forth the
reasons the Committee believes that the proposed incentive
compensation payments should nevertheless be made.
D. The Committee will recommend to the Board of Directors the
authorization of an appropriation to the Plan by the Company for
distribution to Participants in an amount equal to the incentive
fund as computed pursuant to the provisions of this Paragraph 4.
5. APPROPRIATIONS TO THE PLAN - The Board of Directors may,
notwithstanding any provision of the Plan, make adjustments in any
proposed incentive compensation payment under the Plan, and subject to
any such adjustments, the Board of Directors will appropriate to the
Plan the amount as recommended by the Committee for distribution to
the Participants; provided that, the Board of Directors may
appropriate an amount which is less than the amount recommended by the
Committee in which event all proposed payments of incentive
compensation to Participants shall be reduced on a prorata basis.
6. METHOD OF PAYMENT - The amount so determined for each Participant
with respect to each calendar year shall be paid to such Participant
in full or on a deferred basis as determined by the Committee. Such
determination as to deferred payments shall be governed by the
Committee's judgement as to the time of payment best serving the
interests of the Company. Deferred payments shall be made pursuant to
such terms and conditions, as may be determined or provided for the by
the Committee, only to Participants who continue in the employ of the
Company or are retired under a retirement plan approved by the Board
of
6
Directors, or to the estates of, or beneficiaries designated by,
Participants who shall have died while in such employ or after such
retirement.
In the event of termination of employment by a Participant for any
reason other than such retirement or death, then such participant or
his estate or his beneficiary or beneficiaries, shall after such
termination receive a distribution or distributions of any amounts
deferred by the Committee, if any, the amount (not in excess of the
unpaid deferred payments) and time of which shall be determined or
provided for by the Committee. Participants may also elect to defer
payments to the extend provided in the Lockheed Martin Corporation
Deferred Management Incentive Plan.
7. RIGHTS OF PARTICIPANTS - All payments are subject to the discretion of
the Board of Directors. No Participant shall have any right to require
the Board of Directors to make any appropriation to the Plan for any
calendar year, nor shall any Participant have any vested interest or
property right in any share in any amounts which may be appropriated
to the Plan. Payments made under the Plan and distributed to
Participants shall not be recoverable from the Participant by the
Company.
ARTICLE VI
----------
ADMINISTRATION
--------------
The Plan shall be administered under the direction of the Committee. The
Committee shall have the right to construe the Plan, to interpret any provision
thereof, to make rules and regulations relating to the Plan, and to determine
any factual question arising in connection with the Plan's operation after such
investigation or hearing as the Committee may deem appropriate. Any decision
made by the Committee under the provisions of this Article shall be conclusive
and binding on all parties concerned. The Committee may delegate to the officers
or employees of the Company the authority to execute and deliver those
instruments and documents, to do all acts and things, and to take all other
steps deemed necessary, advisable or convenient for the effective administration
of this MICP Plan in accordance with its terms and purpose.
ARTICLE VII
-----------
AMENDMENT OR TERMINATION OF PLAN
--------------------------------
The Board of Directors shall have the right to terminate or amend this Plan at
any time and to discontinue further appropriations thereto.
7
ARTICLE VIII
------------
EFFECTIVE DATE
--------------
The Plan shall be effective with respect to the operations of the Company for
the year 1995 and the years subsequent thereto. A participant who receives an
award from this Plan is no longer eligible for any incentive compensation
payment from any similar plan which may have been administered by the Lockheed
Corporation or the Martin Marietta Corporation.
8
EXHIBIT A
CALCULATION OF MANAGEMENT INCENTIVE COMPENSATION PAYMENTS
A. AWARD FORMULA
-------------
1. Incentive compensation payments will be calculated by multiplying the
Participant's Annual Salary by the applicable "target" of the
Participant's position (as defined in B), and that result will then be
multiplied by the Individual Performance Factor (as defined in C).
The resulting award will be increased or decreased proportionately
based on the appropriate Organizational Factor (as defined in D).
2. The aggregate of all Participant's Incentive Awards determined under
items C and D below will be recommended to the Committee for its
consideration.
3. Any calculation of incentive awards under this exhibit shall be
subject to the provisions of the Plan and in the event of any conflict
between the terms or application of this Exhibit A and the Plan, the
Plan shall prevail.
B. TARGET LEVELS
-------------
Target levels are based on the level of importance and responsibility of
the position in the organization as determined by the sector president
and/or major corporate function head subject to approval by the executive
office.
Position Target
-------- ------
Chief Executive Officer 75%
President 65%
Exec. VP. Sector Pres. & CFO 55%
Other Elected Officers 45%
Other Eligible Positions 40%
30%
20%
15%
9
C. INDIVIDUAL PERFORMANCE FACTORS
------------------------------
Individual performance factors are normally in increments of 0.10 and will
have the following definitions:
Factor Definition
------ ----------
1.30 - 1.40 Performance vastly superior to expectations and peers
within the organization.
1.10 - 1.20 Consistently exceeds expected performance.
1.00 Consistently meets all requirements and expectations.
0.80 - 0.90 Performance meets most, but not all job requirements and
expectations.
0.60 - 0.70 Performance meets some objectives, but overall
performance below expected levels.
0.00 Performance fails to meet job requirements.
D. ORGANIZATIONAL PERFORMANCE FACTORS
----------------------------------
1. Specific objectives will be established by the executive office and
the rating will depend on the assessment of the quality of performance
by each operating unit, or the corporate staff in accomplishing the
objectives based on the following schedule:
1.30 On balance, far exceeded high performance expectations.
1.00 Achieved all objectives or on balance met high performance
expectations.
0.75 Met most objectives. Overall performance was good, but not as
high as possible or expected.
0.50 Met few objectives, but overall performance not as good as
possible or expected.
0.00 Did not achieve sufficient overall performance level.
10
2. Intermediate organizational ratings, as deemed appropriate by the
executive office for results achieved, may be assigned in increments
of 0.05.
11
Exhibit 10(m)
TRUST AGREEMENT
TRUST AGREEMENT made this 14th day of February, 1996, by and between Lockheed
Martin Corporation, a corporation organized and existing under the laws of the
State of Maryland ("Company") and Bankers Trust Company, a New York banking
corporation ("Trustee");
WHEREAS, Company has adopted the nonqualified deferred compensation plans and
other contractual arrangements as listed in Appendix A (hereinafter called the
"Plans");
WHEREAS, Company has incurred or expects to incur liability under the terms
of such Plans with respect to the individuals participating in such Plans;
WHEREAS, Company wishes to establish a trust (hereinafter called the "Trust")
and to contribute to the Trust assets that shall be held therein, subject to the
claims of Company's creditors in the event of Company's Insolvency, as herein
defined, until paid to Plan participants and their beneficiaries in such manner
and at such times as specified in the Plans;
WHEREAS, it is the intention of the parties that this Trust shall constitute
an unfunded arrangement and, to the extent applicable, shall not affect the
status of the Plans as unfunded plans maintained for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees for purposes of Title I of the Employee Retirement Income Security Act
of 1974 (hereinafter called "ERISA");
WHEREAS, it is the intention of Company to make contributions to the Trust to
provide itself with a source of funds to assist it in the meeting of its
liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that the
Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
----------------------
(a) Company hereby deposits with Trustee in trust the cash and/or property
shown on Appendix B, which shall become the principal of the Trust to be held,
administered and disposed of by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
1
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of Plan participants and their beneficiaries and Company's
general creditors as herein set forth. Plan participants and their
beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. Any rights created under the Plans and
this Trust Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against Company. Any assets held by the
Trust will be subject to the claims of Company's general creditors under federal
and state law in the event of Insolvency, as defined in Section 3(a) herein.
(e) Company shall make additional irrevocable contributions to the Trust of
cash or other property acceptable to Trustee pursuant to any applicable terms of
the Plans. In addition, Company, in its sole discretion, may at any time, or
from time to time, make additional irrevocable contributions of cash or other
property acceptable to the Trustee. Such additional contribution shall augment
the principal to be held, administered and disposed of by Trustee as provided in
this Trust Agreement. The Trustee shall have no responsibility or authority in
connection with the determination of the amounts to be transferred to it from
time to time as contributions of the Company, nor shall it have any authority on
behalf of the Trust or any participant to bring any action or proceeding to
enforce the collection of any such amount.
(f) Upon a Change of Control of Company as to anywith respect to a
Plan (as Change of Control is defined by suchthe applicable Plan), (1)
Company shall, as soon as possible, but in no event later than two business days
preceding the date payment of benefits is due under such Plan due to the Change
of Control, make an irrevocable contribution to the Trust of cash or other
property acceptable to Trustee that is sufficient, when added to the then
principal of the Trust and after consideration of benefits to be paid pursuant
to the other Plans, to pay each Plan participant or beneficiary the benefits to
which Plan participants or their beneficiaries are entitled pursuant to the
terms of the Plan as of the date on which the Change of Control occurred, and
(2) Company or Recordkeeper (as defined in Section 2(a) below) shall deliver to
Trustee a Payment Schedule (as defined in Section 2(a) below) for the Plan
indicating the benefits which have accrued as of the Change in Control or become
payable due to the Change in Control.
Section 2. Payments to Plan Participants and Their Beneficiaries.
-----------------------------------------------------
(a) The Company may designate another party (a "Recordkeeper"), which may be
the Trustee, to perform recordkeeping and other ministerial duties for each
Plan (including but not limited to calculating the amount of benefits payable
under a Plan to a participant), as indicated on Appendix A. From time to
time Company or the Recordkeeper shall deliver to Trustee a schedule or
schedules (each, a "Payment Schedule") that indicates the amounts payable and
applicable withholding taxes in respect of each Plan participant (and his or her
beneficiaries), or that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in which such amount is
to be paid (as provided for or available under the Plans),
2
and the time of commencement for payment of such amounts. Except as otherwise
provided herein, Trustee shall make payments to the Plan participants and their
beneficiaries in accordance with such Payment Schedule. Trustee shall deduct
from any such payments any withholding taxes indicated on the Payment Schedule
and shall be responsible for payment and reporting of such withholding taxes to
the appropriate taxing authorities.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under a Plan shall be determined by Company or such party as it shall
designate as Recordkeeper under the Plan, and any claim for such benefits
shall be considered and reviewed under the procedures set out in the Plan.
The Trustee shall have no duty to determine any person's payment rights
or other entitlements under a Plan unless the Trustee has been designated
the Recordkeeper for that Plan and as such has agreed to undertake
such determinations.
(c) Company may make payment of some or all benefits directly to
Plan participants or their beneficiaries as they become due under the terms of
the Plans. Company shall be responsible for the payment and reporting of any
applicable withholding taxes to the appropriate taxing authorities in connection
with such payments. Company shall notify Trustee of its decision to make
payment of benefits directly prior to the time amounts are payable to
participants or their beneficiaries. If any payments under a Plan are made
directly by Company to the Participants, the Trustee shall, at the written
request of Company, use the assets of the Trust, to the extent they are
sufficient, to reimburse Company for such payments and for any tax withholding
payments made by Company with respect thereto. The Trustee may rely upon
and shall be fully protected in acting upon such directions.
(d) In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits in accordance
with the terms of the Plans, as reflected on a Payment Schedule, Company shall
make the balance of each such payment as it falls due. Trustee shall notify
Company where principal and earnings of the Trust are not sufficient to make any
such payments.
(e) Notwithstanding anything contained in this Section 2
to the contrary, Company may designate another party (a "Paying Agent"), which
may be a Recordkeeper other than the Trustee, for each Plan, as indicated in
Appendix A, to pay benefits to participants and beneficiaries under that Plan.
Accordingly, from time to time, Company or a Recordkeeper shall may
deliver to Trustee a Payment Schedule with instructions to pay the amounts
described therein to the appropriate Paying Agent(s). Except as otherwise
provided herein, Trustee shall make payments to the Paying Agent(s) in
accordance with such Payment Schedule and such instructions, which Payment
Schedule and instructions shall provide whether (1) Trustee shall pay to the
Paying Agent the gross amount payable to Plan participants and beneficiaries,
with the Paying Agent responsible for withholding any applicable withholding
taxes and reporting and remitting such withholding taxes to the appropriate
taxing authorities or (2) Trustee shall pay to the Paying Agent the amount of
benefits net of withholding taxes (as set forth in the Payment Schedule), with
Trustee responsible for reporting and remitting the applicable withholding taxes
to the appropriate taxing authorities. The provisions of
3
Section 2(a) shall apply to benefits payable under a Plan at any time that there
is no designated Paying Agent for such Plan.
(f) If a Participant elects pursuant to the terms of a Plan to
release the Company in whole or in part from its liability to provide benefits
to the Participant under that Plan (the "First Plan") in exchange for the
Company's agreement to provide benefits to the Participant under a plan that is
not listed in Appendix A (the "Second Plan"), the Company may direct the Trustee
to pay an amount equal to the value of the reduction in the Participant's
benefits under the First Plan to an irrevocable trust established by the
Company in connection with the Second Plan. Similarly, if a Participant elects
pursuant to the terms of a Plan to have the Company's liability to the
Participant under that Plan discharged through an assumption of that liability
by another person, the Company may direct the Trustee to pay an amount equal to
the value of the Participant's benefits under the Plan to such other person (or
that person's designee) in connection with such assumption of liability. The
Trustee shall be under no duty or obligation to question or to verify any such
direction of the Company and shall be fully protected in acting in accordance
with such direction.
Section 3. Trustee Responsibility Regarding Payments to Trust
--------------------------------------------------
Beneficiary When Company Is Insolvent.
- -------------------------------------
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries or the Paying Agent(s) if the Company is Insolvent. Company shall
be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is
unable to pay its debts as they become due, or (ii) Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in Section
1(d) hereof, the principal and income of the Trust shall be subject to claims of
general creditors of Company under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive Officer of Company shall
have the duty to inform Trustee in writing of Company's Insolvency. If a person
claiming to be a creditor of Company alleges in writing to Trustee that Company
has become Insolvent, Trustee shall determine whether Company is Insolvent and,
pending such determination, Trustee shall discontinue payment of benefits to
Plan participants or their beneficiaries or the Paying Agent(s).
(2) Unless Trustee has actual knowledge of Company's Insolvency, or has
received notice from Company or a person claiming to be a creditor alleging that
Company is Insolvent, Trustee shall have no duty to inquire whether Company is
Insolvent. Trustee may in all events rely on such evidence concerning Company's
solvency as may be furnished to Trustee and that provides Trustee with a
reasonable basis for making a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is Insolvent, Trustee
shall discontinue payments to Plan participants or their beneficiaries or the
Paying Agent(s) and shall hold the assets of the Trust for the benefit of
Company's general
4
creditors. Nothing in this Trust Agreement shall in any way diminish any rights
of Plan participants or their beneficiaries to pursue their rights as general
creditors of Company with respect to benefits due under the Plans or otherwise.
(4) Trustee shall resume the payment of benefits to Plan participants or
their beneficiaries or the Paying Agent(s) in accordance with Section 2 of this
Trust Agreement only after Trustee has determined that Company is not Insolvent
(or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3 (b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plans, or the Paying
Agent(s) pursuant to the Payment Schedule, for the period of such
discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries or the Paying Agent(s) by Company in lieu of
the payments provided for hereunder during any such period of discontinuance.
Section 4. Payments to Company.
-------------------
Except as provided in Section 2 or Section 3 hereof, Company shall have no
right or power to direct Trustee to return to Company or to divert to others any
of the Trust assets before all payment of benefits have been made to Plan
participants and their beneficiaries pursuant to the terms of the Plans.
Section 5. Investment Authority.
--------------------
(a) Trustee shall have full investment authority with respect to the Trust
assets, subject to the right of Company to (i) designate in writing investment
policy guidelines ("Investment Policy") with respect to Trust assets which
Investment Policy may be amended from time to time in Company's sole discretion,
and (ii) to designate in accordance with paragraph (e) below an Investment
Manager with authority to direct Trustee in the investment of all or part of the
assets of the Trust. Notwithstanding anything in this Agreement to the contrary,
the Trustee shall have no responsibility with respect to the formulation of any
funding, investment, or diversification policy embodied in the Investment
Policy. Subject to any such Investment Policy or Investment Manager directions,
Trustee may invest and reinvest in and acquire by purchase, exchange or
otherwise property of any character whatsoever, foreign or domestic, or
interests or participations therein. If such investments are otherwise permitted
by the Investment Policy, Trustee shall have the power to invest in (1) common
or collective trust funds advised or managed by Trustee or an affiliate of
Trustee, and and (2) shares of or interests in any mutual fund or any investment
company for which Trustee or an affiliate of Trustee performs investment
advisory, custody, distribution, management or other services. Company
recognizes that allocation by Trustee of Trust assets among such funds or
companies may affect the compensation of Trustee or such affiliate with respect
to such funds or companies. Trustee's compensation as provided for in Section 9
hereof shall not be reduced by the compensation, if any, with respect to such
funds or
5
companies received by Trustee or such affiliate. Company specifically waives any
rule of undivided loyalty or any other conflict of interest with respect to such
investment.
(b) Subject to the Investment Policy, to the extent assets of the Trust are
invested in common stock of the Company ("Company Stock"), the Trustee shall
have no obligation to diversify the investments in the Trust and shall not be
subject to any rule of applicable law which might otherwise make necessary,
require or in any way deem appropriate diversification of investments in the
Trust, all such rules being hereby expressly waived.
(c) Subject to the Investment Policy, Trustee is authorized to exercise from
time to time in its sole discretion the following powers in respect of any
property of the Trust, it being intended that these powers be construed in the
broadest possible manner:
(1) Power to sell at public or private sale for cash and upon such terms and
conditions as it shall deem proper. No purchaser shall be bound to see to or be
liable for the application of the proceeds of any such sale.
(2) Power to exchange any securities or property held by it for other
securities or property, or partly for such securities or property and partly for
cash, and to exercise conversion, subscription, option and similar rights with
respect to any securities held by it, and to make payments in connection
therewith.
(3) Power to vote in person or by proxy at corporate or other meetings and to
participate in or consent to any voting trust, reorganization, dissolution,
merger or other action affecting any securities in its possession or the issuers
thereof, and to make payments in connection therewith.
(4) Power to compromise and adjust all debts or claims due to or made against
it.
(5) In the acquisition, disposition and management of investments for or
under the trust, power to acquire and hold any securities or other property even
though Trustee in its individual or any other capacity, shall have invested or
may thereafter invest its or their own or other funds in the same securities or
related property or related securities or other property the interest, principal
or other avails of which may be payable at different rates or different times or
may have a different rank or priority; and to acquire and hold any securities or
other property even though in connection therewith Trustee, in its individual or
any other capacity, may receive compensation reasonably and customarily due in
the course of its or their regular activities.
(6) Power to acquire, hold or dispose of property in its name without
designation of fiduciary capacity, or in the name of its nominee, to deposit any
property with any custodian, or in a depository, clearing corporation or any
central system for handling of investments, or any nominee thereof.
(7) Power to employ from time to time counsel and suitable agents, including
custodians, accountants, brokers and appraisers, including any affiliate of
Trustee.
6
(8) Power to do all acts which it may deem necessary or proper and to
exercise any and all powers of Trustee under this Trust Agreement under such
terms and conditions as it may deem to be for the best interest of the Trust.
(9) Trustee may invest in securities (including stock or rights to acquire
stock) or obligations issued by Company. All securities of Company held by the
Trust shall be voted by Trustee in its sole discretion and all other rights
associated with assets of the Trust shall be exercised by Trustee or the person
designated by Trustee, and shall in no event be exercisable by or rest with Plan
participants.
(d) Notwithstanding anything contained herein to the contrary, Company shall
have the right, at any time, and from time to time in its sole discretion, to
substitute assets of equal fair market value for any asset held by the Trust.
This right is exercisable by Company in a non-fiduciary capacity without the
approval or consent of any person acting in a fiduciary capacity.
(e) (1) Notwithstanding anything contained herein to the contrary, at any
time, Company may, by a writing delivered to Trustee, delegate investment
authority, management and control of Trust assets (including securities
issued by Company) to one or more Investment Managers (as defined in section
5(e)(4) below) appointed by Company. Where Company has specifically delegated
investment authority, management and control of Trust assets, Trustee shall
continue to be the sole custodian of the Trust assets but shall not be the
fiduciary with respect to the investment, management and control of the Trust
assets and shall exercise the investment, management and control of such assets
subject to the direction by any Investment Manager appointed by Company, and in
such case such Investment Manager shall be the fiduciary with respect to the
investment, management and control of such assets. The appointment, selection
and retention of any Investment Manager shall be solely the responsibility of
Company. Trustee is authorized and entitled to rely upon the fact that said
Investment Manager is authorized to direct the investment and management of the
assets of the Trust until such time as Company shall notify Trustee in writing
that another Investment Manager has been appointed in the place and stead of the
Investment Manager named or, in the alternative, that the Investment Manager
named has been removed and the responsibility for the investment and management
of the Trust assets has been transferred back to Trustee, as the case may be.
(2) Trustee shall not be liable nor responsible for losses or unfavorable
results arising from Trustee's compliance with any directions of an Investment
Manager appointed by Company which are made in accordance with the terms of the
Trust. Trustee shall be under no duty to question any directions of the
Investment Manager nor to review any securities or other property of the Trust
constituting assets thereof with respect to which an Investment Manager has
investment responsibility, nor to make any suggestions to such Investment
Manager in connection therewith. Trustee shall, as promptly as possible, comply
with any written directions given by an Investment Manager. Notwithstanding any
other provisions of this Trust, however, Trustee, in its sole discretion, may
refuse to comply with any directions which Trustee deems to be improper or
contrary to the provisions of the Trust and any applicable federal or state
statutes. Trustee shall not be liable for the making or retention of any
investment
7
pursuant to such investment directions or for its failure to invest
any or all of the Trust funds in the absence of such written directions.
(3) All directions concerning investments made by the Investment Manager
shall be signed by such person or persons, acting on behalf of the Investment
Manager as may be duly authorized in writing pursuant to this Trust; provided,
however that the transmission to Trustee of such directions by photostatic
teletransmission with duplicate or facsimile signature or signatures shall be
considered a delivery in writing of the aforesaid directions until Trustee is
notified in writing by Company that the use of such devices with duplicate or
facsimile signatures is no longer authorized. Trustee shall be authorized to
accept telephonic directions provided that such directions are promptly
confirmed to Trustee in writing.
(4) For purposes of this Trust Agreement, "Investment Manager" shall mean a
fiduciary (i) who (A) is registered as an investment adviser under the
Investment Advisers Act of 1940, (B) is a bank, as defined in the Investment
Advisers Act of 1940 or (C) is an insurance company qualified to perform
investment advisory services under the laws of more than one state, and (ii) who
has agreed to abide by written investment policy guidelines established by
Company with respect to the Trust assets to be managed by such Investment
Manager.
Section 6. Disposition of Income.
---------------------
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested and added to principal.
Section 7. Accounting by Trustee.
---------------------
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within 90 days following the close of each calendar
quarter and within 90 days after the removal or resignation of Trustee, Trustee
shall deliver to Company a written account of its administration of the Trust
during such quarter or during the period from the close of the last preceding
quarter to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such quarter or as of the date of
such removal or resignation, as the case may be.
The Company may approve such account by an instrument in writing delivered to
Trustee. In the absence of Company's filing with Trustee objections to any such
account within one hundred eighty (180) days after its receipt, Company shall be
deemed to have so approved such account. In such case, or upon the written
approval by Company of any such account, Trustee shall, to the extent permitted
by applicable law, be discharged from all liability to Company for its acts or
failures to act described by such account, and Company shall thereafter
reimburse, indemnify (as provided in
8
Section 8(b) hereof) and hold harmless Trustee, individually and as Trustee, of,
from and against any and all expenses, losses, damages, liabilities, demands,
charges and claims of any kind or nature whatsoever in respect of its acts,
omissions, transactions, duties, obligations or responsibilities as Trustee
during the period covered by such account. The foregoing, however, shall not
preclude the Trustee from having its account settled by a court of competent
jurisdiction. Company shall not be liable to any person for approving,
disapproving or failing to approve any statement of account rendered by Trustee.
Section 8. Responsibility of Trustee.
-------------------------
(a) Trustee shall act with the care, skill, prudence, and diligence under the
circumstances then prevailing that prudent persons acting in a like fiduciary
capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims to accomplish the purposes of
the Trust as determined from the Trust instrument; provided that nothing in this
Section shall be construed to impose responsibility upon the Trustee with
respect to (i) Company Stock, other than to invest and retain such Company Stock
in accordance with the terms of this Agreement and the Investment Policy or (ii)
transactions effected, or assets managed, by an Investment Manager other than as
provided in this Agreement.
Similarly, when investing, reinvesting, purchasing, acquiring, exchanging,
selling, and managing Trust property, the Trustee shall act in accordance with
the Investment Policy and with the care, skill, prudence, and diligence under
the circumstances then prevailing, including, but not limited to, the general
economic conditions and the anticipated needs of the Trust and its
beneficiaries, that prudent persons acting in a like fiduciary capacity and
familiar with such matters would use in the conduct of an enterprise of like
character and with like aims to accomplish the purposes of the Trust as
determined from the Investment Policy and Trust instrument. In the course of
administering the Trust pursuant to this standard, individual investments shall
be considered as part of an overall investment strategy.
(b) Unless the Trustee has been appointed Recordkeeper for a Plan, Trustee
shall have no duty to make an independent investigation as to any matters
relating to any Plan, and shall be entitled to rely on the determinations of the
Company and the applicable Recordkeeper as to all such matters. Company shall
notify Trustee in writing of the occurrence of a Change in Control as to any
Plan. Trustee may rely on such written notice and Company's determination shall
be binding upon Trustee and the Plan participants and their beneficiaries.
Trustee shall incur no liability to any person for any action taken pursuant
to a direction, request or approval given by Company, an Investment Manager,
Paying Agent, or Recordkeeper (other than the Trustee) which is contemplated by,
and in conformity with, the terms of the Plans or this Trust Agreement. Except
as otherwise provided in this Trust Agreement, the Trustee may act upon any
instruction, whether written, oral, telephonic, cable or telex, which purports
to have come from Company, an Investment Manager, Paying Agent, or Recordkeeper
(other than the Trustee) or its designees, without responsibility for errors in
delivery, transmission or receipt provided
9
that the Trustee in good faith has determined that there is no reason to believe
that such instruction, on its face, is invalid.
Trustee is authorized, but not required, to take any action it
believes appropriate if it is unable in due time to obtain instructions from
Company or if such action is determined by it to be required by law.
In the event of a dispute between Company and any party, Trustee may apply to
a court of competent jurisdiction to resolve the dispute.
(c) Company hereby indemnifies Trustee against losses, liabilities, claims,
costs and expenses in connection with the administration of the Trust, unless
resulting from the negligence or willful misconduct of Trustee. If Trustee
defends any litigation arising in connection with this Trust, or, at the
direction of Company, undertakes litigation, Company agrees to indemnify Trustee
against Trustee's costs, expenses and liabilities (including, without
limitation, reasonable attorneys' fees and expenses) relating thereto and to be
primarily liable for such payments.
(d) Without limiting the authorities granted under Section 5, Trustee may
employ and consult with legal counsel (who may also be counsel for Company
generally) with respect to any of its duties or obligations hereunder and may
employ agents, including accountants and other professionals, to assist it in
performing any of its duties or obligations hereunder and Company shall pay the
reasonable costs of any counsel or agent so employed (excluding any
employees of Trustee).
(e) Trustee shall have, without exclusion, all powers conferred on Trustees
by applicable law, unless expressly provided otherwise herein, provided,
however, that if an insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the Trust, to
assign the policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to any person the proceeds
of any borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant to this Trust
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
Section 9. Compensation and Expenses of Trustee.
------------------------------------
The Trustee's compensation shall be as agreed in writing from time to time
by Company and Trustee. Company shall pay all administrative and Trustee's fees
and expenses. If Company does not pay any fees, expenses, liabilities
or costs payable by Company under the terms of this Trust Agreement in a
reasonably timely manner, after 15 days advance written notice to Company
and verbal discussions with Company, Trustee may obtain payment from the
Trust if such amount still is unpaid at that time.
Section 10. Resignation and Removal of Trustee.
----------------------------------
10
(a) Trustee may resign at any time by written notice to Company, which shall
be effective 60 days after receipt of such notice unless Company and Trustee
agree otherwise.
(b) Trustee may be removed by Company on 60 days' written notice or upon
shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets of the Trust shall subsequently be transferred to the
successor Trustee. Such transfer shall be completed within 60 days after
receipt of written notice of such resignation, removal or transfer, unless
Company extends the time limit; provided that Trustee shall not be required to
effect such transfer until it has been released as provided in Section 7 hereof.
(d) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraph (a) or (b) of this section. If no such appointment has
been timely made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
Section 11. Appointment of Successor.
------------------------
If Trustee resigns or is removed in accordance with Section 10(a) or
(b) hereof, Company may appoint any third party, such as a bank trust department
or other party that may be granted corporate trustee powers under state law, as
a successor to replace Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee, who shall have
all of the rights and powers of the former Trustee, including ownership rights
in the Trust assets. Subject to the provisions of Section 10(c), the former
Trustee shall execute any instrument necessary or reasonably requested by
Company or the successor Trustee to evidence the transfer.
Section 12. Amendment or Termination.
------------------------
(a) This Trust Agreement may be amended by a written instrument executed by
Trustee and Company. Notwithstanding the foregoing, no such amendment shall (1)
conflict with the terms of the Plans, (2) give Plan participants any greater
rights in Trust assets than rights as general creditors, (3) allow Company to
borrow funds from the Trust, (4) make the Trust revocable, or (5) amend this
Section 12(a).
(b) The Trust shall not terminate until the date on which Plan participants
and their beneficiaries are no longer entitled to benefits pursuant to the terms
of the Plans. Notwithstanding the foregoing, the Trust shall terminate upon the
earlier of (1) the exhaustion of the assets of the Trust or (2) the exhaustion
of all appeals of (or the earlier expiration of the time to appeal) a final
determination of a court of competent jurisdiction that the Trust is not or has
ceased to be a grantor trust as described in
11
Section 1(c) hereof. Upon termination of the Trust any assets remaining in the
Trust shall be returned to Company.
(c) Upon receipt by Company of written approval by all participants or
beneficiaries with accrued benefits, whether or not vested, under the Plans,
Company may terminate this Trust in its entirety prior to the time all benefit
payments under the Plans have been made upon written notice to Trustee. All
assets in the Trust at termination shall be returned to Company unless Company
otherwise directs the Trustee.
(d) Upon receipt by Company of written approval by all participants or
beneficiaries with accrued benefits, whether or not vested, under any Plan,
Company may terminate this Trust as to that Plan. Upon such a partial
termination of the Trust, all assets of the Trust shall remain in the Trust and
be available for payment of benefits under the remaining Plans.
(e) Section 1(f) of the Trust Agreement may not be amended by Company as
to any Plan for five years following a Change in Control as to such Plan
as defined herein.
Section 13. Miscellaneous.
-------------
(a) Any provision of this Trust Agreement prohibited by law or which would
cause the Trust to any extent to fail or cease to be a grantor trust as
described in Section 1(c) hereof shall be ineffective to the extent of any such
prohibition, without invalidating the remaining provisions hereof.
(b) The Plans shall be administered by Company and the Recordkeepers.
Unless the Trustee has been appointed the Recordkeeper for a Plan, the Trustee
shall be under no duty whatsoever in respect of the administration of the Plans.
If the Trustee has been appointed Recordkeeper, it shall be responsible solely
for those administrative functions it has expressly undertaken in writing.
(c) Benefits payable to Plan participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(d) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
(e) This Trust Agreement shall inure to the benefits of, and be
binding upon, the parties hereto and their successors and assigns.
(f) This Trust Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterpart shall constitute
but one and the same instrument, which may be sufficiently evidenced by any one
counterpart.
12
Section 14. Effective Date.
--------------
The effective date of this Trust Agreement shall be February 14, 1996.
IN WITNESS WHEREOF the Company and the Trustee have executed this instrument
this 14th day of February, 1996.
LOCKHEED MARTIN CORPORATION
By __________________________
Title:
Address for notice:
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Vice President & Treasurer
BANKERS TRUST COMPANY
By ___________________________
Title:
By ____________________________
Title:
280 Park Avenue
33 West
New York, New York 10017
Attention: Global Retirement Securities
and Services
13
APPENDIX A
----------
As of February 14th, 1996
Paying Investment
Plan or Arrangement Recordkeeper Agent Manager
- ------------------- ------------ ----- -------
Lockheed Martin Corporation Bankers Trust none none
Deferred Management Incentive Company
Compensation Plan
14
APPENDIX B
----------
$24.5 Million Cash
15
APPENDIX C
----------
As of February 14, 1996
INVESTMENT POLICY GUIDELINES
I. General
-------
A. Total return should be sufficient to provide that assets of the Trust
will be adequate to meet all obligations as they come due, in accordance
with provisions of the underlying benefit plans.
B. Prudent risk parameters will be maintained, including diversification of
investments, consistent with the terms of the Plans that participate in
the Trust. Assets of the Trust will be invested in two portfolios as
described in Section II below and underlying benefit plans will
participate in these two portfolios on an equitable share accounting or
plan accounting basis.
C. Investments will be for the exclusive benefit of the trust participants
and beneficiaries.
D. Turnover will be monitored.
II. Portfolios and Asset Allocation
-------------------------------
A. Lockheed Martin Stock Portfolio
1. Trust assets in the Lockheed Martin Stock Portfolio shall be invested
in Lockheed Martin common stock (with a STIF account to be used only
as described in 4. below). Dividends on stock in the Lockheed Martin
Stock Portfolio are to be reinvested.
2. In purchasing any securities of Lockheed Martin Corporation on a
national securities exchange, the Trustee shall give due regard to the
trading volume, if any, of common stock at the time of each purchase
and accordingly shall regulate the amount and timing of such purchases
so as to minimize the effect on market price fluctuations which may be
caused by such purchases.
3. The Lockheed Martin Stock Portfolio shall not have a designated
liquidity reserve. All liquidity needs of the participating plans
shall be met through Trust assets that are designated as the Liquidity
Portion of the Balanced Portfolio.
4. The STIF component in the Lockheed Martin Stock Portfolio will be used
only to collect contributions, to hold funds pending distribution to
participants, and to collect dividends on Lockheed Martin stock before
16
reinvestment. The STIF investments of the Lockheed Martin Stock
Portfolio shall reflect the guidelines for the Liquidity Portion of
the Balanced Portfolio, described in Section B.3., below.
B. Balanced Portfolio
1. Trust assets not included in the Liquidity Portion (see below) of the
Balanced Portfolio shall be deemed to constitute the General Portion
of the Balanced Portfolio and shall be invested in accordance with a
"balanced" mandate, as follows:
a) Asset allocation target shall generally be 35% US equity
securities and 65% fixed income securities, and
b) Investment Manager (or Trustee, if an Investment Manager has
not been appointed) may, at its discretion, invest 25%-45% of
assets in US equity securities and 55%-75% of assets in fixed
income securities
2. Investment in fixed income securities with maturities greater than one
year shall reflect at all times an average credit rating of "A" or
better by Standard & Poor's Corporation ("S&P") or A2 or better by
Moody's Investors Service, Inc. ("Moody's"). There shall be a maximum
20% investment in securities rated between BBB+ and BB- as rated by
S&P, or between Baa1 and Ba3 as rated by Moody's. In no event will
securities rated below BB- by S&P or Ba3 by Moody's be used. The
short term investments of the Balanced Portfolio shall reflect the
guidelines for the Liquidity Portion of the Balanced Portfolio,
described in Section B.3 below.
3. The Liquidity Portion shall consist of high quality, short term,
readily marketable securities such as certificates of deposit, U.S.
Treasury bills, commercial paper, bankers acceptances, or other
instruments rated either A1 or higher by S&P or P-1 or higher by
Moody's, and maturing less than 12 months from date of purchase.
The Liquidity Portion shall be the primary source of funds for ongoing
payments made to participating plan beneficiaries, and shall at all
times be maintained in an amount at least equal to the lesser of:
----------
a) 10% of total Trust market value, or
b) $5 million
4. Appropriate collective, commingled, or mutual funds may be used if
authorized for use in writing by Lockheed Martin Corporation, prior to
such use.
III. Investment Performance
----------------------
A. Primary measurement will be time-weighted rate of return on market value,
measured from beginning market value of a unit of assets held
continuously for the entire time period measured. This rate provides a
standard for
17
comparing the performance of different funds in which the size and timing
of contributions and payouts could vary considerably. Consequently, the
time-weighted rate of return is a mathematical measure that eliminates
the effects of fund cash flows. (The "time-weighted" rate of return on
market value would be the same as the "internal" rate of return on market
value if there were no payouts or contributions during the period
measured).
B. Secondary measurement will be internal or dollar-weighted rate of return
on market value. The internal rate of return on market value, measured
from a beginning market value, is a total rate of return that gives full
weight to the size and timing of cash flows over the period measured.
(The internal rate of return on market value is the true rate of return
of an asset pool).
C. Performance will be calculated on both a time-weighted and dollar-
weighted basis, on the five following portions of the Trust assets:
1. Lockheed Martin Stock Portfolio
2. Liquidity Portion of Balanced Portfolio
3. General Portion of Balanced Portfolio
4. Total Balanced Portfolio
5. Total Trust Account
D. Funds will be monitored over various time periods. Most significant will
be performance over complete market cycles.
E. Performance will be measured against similar funds as well as against
various market indices.
F. Due to the uncertainty of the timing and magnitude of initial cash flows
to the Trust, measurement of performance against benchmarks will not
commence until January 1, 1997.
IV. Restrictions
------------
A. Except as provided in the Trust, prospectus, or similar offering document
of any collective, commingled or mutual fund approved by Lockheed Martin
in advance as required by Section II.B.4, or unless otherwise approved by
Lockheed Martin Corporation in advance in writing, there will be no
investment in:
1. Commodities or commodity-linked derivatives.
2. Short Sales.
18
3. Real Estate, except Real Estate Investment Trusts listed on the New
York Stock Exchange.
4. Letter or restricted stock.
5. Futures, options, forwards, or other derivative instruments such as
swaps, swaptions, and debt instruments embedding any of the foregoing,
but excluding US Treasury strips and GNMA, FNMA, and FHLMC
passthroughs.
6. Mortgage, pledge, loan or encumbrance of any asset, including
securities lending.
7. Equity or fixed income private placements, including Section 144(a)
securities.
8. Non-dollar fixed income securities, except for Yankee bonds and other
sovereign fixed income securities denominated in U.S. dollars.
B. Unless approved by Lockheed Martin Corporation in advance in writing,
there will be no investment:
1. Of more than 6% of the book value of the Balanced Portfolio in any one
issuer (this excludes U.S. Treasury or U.S. agency securities).
C. Unless approved by Lockheed Martin Corporation in advance in writing,
there will be no purchases or sales or carrying securities on margin or
any other leverage.
V. Benchmarks
----------
A. Performance Benchmark -- Lockheed Martin Stock Portfolio
1. Trust assets in the Lockheed Martin Stock Portfolio shall be assigned
a benchmark equal to the return on Lockheed Martin common stock with
dividends reinvested. There will be no separate benchmark for the
cash component of this Portfolio.
B. Balanced Portfolio
1. Trust assets in the General Portion of the Balanced Portfolio shall be
assigned a benchmark equal to the return of an asset pool invested 35%
in the S&P 500 index, and 65% in the Lehman Brothers Aggregate index.
This benchmark will be rebalanced annually at the beginning of each
calendar year.
19
2. Trust assets in the Liquidity Portion of the Balanced Portfolio shall
be assigned a benchmark equal to the return of an asset pool invested
in the US Treasury Bill index.
VI. Communications
--------------
A. Changes to this investment policy statement may be made at the discretion
of Lockheed Martin Corporation. Any such changes shall be promptly
transmitted to the Trustee and the Investment Manager.
B. Meetings between the Trustee, the Investment Manager, and Lockheed Martin
Corporation shall be held at least annually unless otherwise determined
by Lockheed Martin. Other formal and/or informal meetings may be
arranged when desirable or convenient.
20
Exhibit 10(cc)
10(pp)
10(qq)
Resolution No. 71 10(ae)
- --------------------------------------------------------------------------------
Lockheed Martin Corporation
Board of Directors
September 28, 1995
Amendment of Former Lockheed and Martin Marietta Stock Option Plans
Lockheed Corporation 1992 Employee Stock Option Program
Lockheed Corporation 1982 Employee Stock Purchase Program
Lockheed Corporation 1986 Employee Stock Purchase Program
Martin Marietta Corporation 1984 Stock Option Plan for Key Employees
RESOLVED, That Section 11 of each of the Lockheed Corporation 1982
Employee Stock Purchase Program and the Lockheed Corporation 1986 Employee
Stock Purchase Program be amended substantially in the form noted below:
RESOLVED FURTHER, That a new Section 6 (e) be added to the Martin
Marietta Corporation 1984 Stock Option Plan for Key Employees substantially
in the form noted below;
Tax Withholding. Any withholding obligation under applicable tax
laws shall be paid in cash, or subject to the Committee's express
authorization and the restrictions, conditions and procedures as the
Committee may impose, any one or combination of (i) cash, (ii) the
delivery of shares of Lockheed Martin Corporation common stock, (iii)
a reduction in the amount of shares of Lockheed Martin Corporation
common stock or other amounts otherwise issuable or payable pursuant
to the exercise of options, or (iv) the delivery of a promissory note,
or other obligation for the further payment in money, the terms and
conditions of which shall be determined by the Committee. In the case
of a payment by the means described in clause (ii) or (iii) above, the
shares to be so delivered or offset shall be determined by reference
to the closing price as reported on the composite tape of the New York
Stock Exchange of the shares on the date as of which the payment or
offset is made. Notwithstanding anything in this section to the
contrary, no person shall be permitted to use the methods described in
clause (iii) or (iv) if use of such method would fail to satisfy the
applicable requirements of Rule 16b-3 under Section 16 of the
Securities Exchange Act of 1934, including but not limited to the
shareholder approval requirements of such rule.
RESOLVED FURTHER, That participants exercising options under the
Lockheed Corporation 1992 Employee Stock Option Program, Lockheed
Corporation 1982 Employee Stock Purchase Program and the Lockheed
Corporation 1986 Employee Stock Purchase Program and the Martin Marietta
Corporation 1984 Stock Option Plan for Key Employees may, in accordance
with procedures adopted by the Corporation, apply shares issued upon the
exercise of options or previously acquired shares to satisfy tax
withholding requirements;
RESOLVED FURTHER, That the proper officers of the Corporation be and
each hereby is authorized to execute and deliver such documents , and to
take all such further actions, as such officers shall determine in their
sole discretion to be necessary or advisable to effect the intent of the
foregoing resolution.
Exhibit 10 (tt)
SUPPLEMENTAL BENEFIT PLAN
OF
LOCKHEED CORPORATION
(As Amended and Restated June 22, 1995)
SUPPLEMENTAL BENEFIT PLAN
OF
LOCKHEED CORPORATION
(As Amended and Restated March 15, 1995)
ARTICLE I
---------
PURPOSE OF THE PLAN
-------------------
This Plan is established to supplement the benefits of certain
employees under the Lockheed Retirement Plan for Certain Salaried Employees to
the extent that such benefits are reduced by the limitations on benefits imposed
by Section 415 of the Internal Revenue Code. It is intended that this Plan
shall be an Excess Benefit Plan as defined in Section 3(36) of the Employee
Retirement Income Security Act of 1974.
ARTICLE II
----------
DEFINITIONS
-----------
1. PLAN -- This Supplemental Benefit Plan.
2. BOARD OF DIRECTORS -- The Board of Directors of Lockheed
Corporation.
3. CODE -- The Internal Revenue Code of 1986, as amended.
4. COMMITTEE -- The Management Development and Compensation
Committee of the Board of Directors as from time to time appointed or
constituted by the Board of Directors.
5. COMPANY -- Lockheed Corporation and it Subsidiaries.
6. PARTICIPANT -- Any employee participating in the Plan in
accordance with its terms.
7. RETIREMENT PLAN -- The Lockheed Retirement Plan for Certain
Salaried Employees.
8. SUPPLEMENTAL BENEFIT -- The monthly benefit payable in
accordance with the Plan.
9. ACTUARIAL EQUIVALENT -- A benefit which has the equivalent
value computed using the interest rate which would be used by the Pension
Benefit Guaranty Corporation to determine the present value of an immediate lump
sum distribution on termination of a pension plan, as in effect on January 1 of
the year in which the Participant's termination of employment occurs, and the
1983 Group Annuity Mortality Table.
ARTICLE III
-----------
ELIGIBILITY FOR PARTICIPATION
-----------------------------
Those employees of the Company who are members of the Retirement Plan
and whose benefits thereunder are affected by the limitation on benefits imposed
by Section 415 of the Code or who, prior to August 29, 1994, entered into a
Termination Benefits Agreement with Lockheed Corporation, shall be eligible to
participate in the Plan. No member of the Committee shall be eligible for
participation in the Plan.
ARTICLE IV
----------
PLAN BENEFITS
-------------
A. The Supplemental Benefit which each Participant shall be entitled
to receive under this Plan shall be the difference between the actual benefits
of such Participant under the Retirement Plan and the benefits that would have
been payable under that Plan except for the limitations on benefits imposed by
Code Section 415, as provided in Section 10.01 of the Retirement Plan plus,
unless otherwise paid to the Participant prior to commencement of benefits under
this Plan, any additional benefits to which a Participant becomes entitled
pursuant to Section 6(a) of his or her Termination Benefits Agreement on account
of the merger of Lockheed Corporation contemplated by the Agreement and Plan of
Reorganization, dated as of August 29, 1994, by and among Lockheed Martin
Corporation, Martin Marietta Corporation, and Lockheed Corporation.
B. Except as provided in Paragraphs C and D below, the benefits
payable under this Plan shall be payable to the Participant or to any other
person who is receiving or entitled to receive benefits with respect to the
Participant under the Retirement Plan, and shall be paid in the same form, at
the same times and for the same period as benefits are paid with respect to the
Participant under the Retirement Plan.
C. In lieu of receipt of the annuity payments under Paragraph B
above, a Participant may elect to receive in a single lump sum payment an amount
equal to the Actuarial Equivalent of
his Supplemental Benefit. Effective October 1, 1993, a Participant also has the
option to receive a partial annuity payment, in the same form as elected under
the Lockheed Retirement Plan with the balance of the benefit amount paid to him
in a lump sum payment. Any election must be made within the sixty (60) day
period preceding retirement by following the procedure established by the
administrator. Payment will be made to the Participant six (6) months following
his retirement.
D. (1) A Person receiving an annuity benefit from this Plan at the
time of a Change in Control shall be paid in a single lump sum within
thirty (30) calendar days following such Change in Control, an amount equal
to the Actuarial Equivalent of such annuity benefit. Within thirty (30)
calendar days following a Change in Control a Participant who has not yet
retired shall be paid in a single lump sum an amount equal to the Actuarial
Equivalent of his or her Supplemental Benefit, calculated as if the
Participant had retired on the date of the Change in Control.
(2) For purposes of this Plan, a Change in Control shall be
deemed to have occurred if (i) any "person", as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than a trustee or other fiduciary holding
securities under an employee benefit plan of Lockheed Martin Corporation
("Lockheed Martin") or any of its subsidiaries, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Lockheed Martin representing 30% or more of
the combined voting power of Lockheed Martin's then outstanding securities;
or (ii) during any period of two consecutive years (not including any
period prior to the adoption of this Paragraph D), individuals who at the
beginning of such period constitute the Board of Directors of Lockheed
Martin, and any new director (other than a director designated by a person
who has entered into an agreement with Lockheed Martin to effect a
transaction described in clause (i) or (iii) of this Paragraph) whose
election by the Board of Directors of Lockheed Martin or nomination for
election by Lockheed Martin's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof; or (iii) the shareholders of
Lockheed Martin approve a merger or consolidation of Lockheed Martin with
any other corporation, other than a merger or consolidation which would
result in the voting securities of Lockheed Martin outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or
by being converted into voting
securities of the surviving entity) at least 80% of the combined voting
power of the voting securities of Lockheed Martin or such surviving entity
outstanding immediately after such merger or consolidation or (iv) the
shareholders of Lockheed Martin approve a plan of complete liquidation of
Lockheed Martin or an agreement for the sale or disposition by Lockheed
Martin of all or substantially all of Lockheed Martin's assets.
A Change in Control shall not, however, include any transaction
which has been approved by individuals who at the beginning of any period
of at least two consecutive years (not including any period prior to the
adoption of this Paragraph D) constitute the Board of Directors of Lockheed
Martin and any new director (other than a director designated by a person
who has entered into an agreement with Lockheed Martin to effect a
transaction described in clause (i) or (iii) of this Paragraph) whose
election by the Board of Directors of Lockheed Martin or nomination for
election by Lockheed Martin's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved.
(3) This Paragraph D shall apply only to a Change in Control of
Lockheed Martin and shall not cause lump sum payment of annuity benefits in
any transaction involving Lockheed Martin's sale, liquidation, merger, or
other disposition of any subsidiary.
(4) This Paragraph D may be canceled or modified at any time
prior to a Change in Control. In the event of a Change in Control, this
Paragraph D shall remain in force and effect, and shall not be subject to
cancellation or modification for a period of five (5) years, and any
provision defining a capitalized term used in Paragraph D shall, for
purposes of Paragraph D, be subject to cancellation or modification during
the five (5) year period.
ARTICLE V
---------
TRUST
-----
Although the Plan is an unfunded plan, the Company has established a
trust (the "Trust") pursuant to a trust agreement dated December 22, 1994 by and
between the Company and J. P. Morgan California to hold assets, subject to the
claims of the Company's creditors in the event of its insolvency, to pay
benefits under this Plan. The Company shall no later than nine
months following the close of its fiscal year make contributions to the Trust in
an amount sufficient, when added to the then principal of the Trust and after
consideration of benefits to be paid pursuant to other plans covered by the
Trust, to equal the present value of benefits which have accrued under the Plan
during the preceding fiscal year, as such amount is determined by an independent
actuary.
ARTICLE VI
----------
ADMINISTRATION
--------------
The Plan shall be administered under the direction of the Committee.
The Committee shall have the right and discretion to construe the Plan, to
interpret any provision thereof, to make rules and regulations relating to the
Plan, and to determine any factual question arising in connection with the
Plan's operation after such investigation or hearing as the Committee may deem
appropriate. Any decision made by the Committee under the provisions of this
Article shall be conclusive and binding on all parties concerned.
ARTICLE VII
-----------
AMENDMENT OR TERMINATION OF PLAN
--------------------------------
Except as provided in Paragraph D(4) of Article IV, the Board of
Directors shall have the right to amend or terminate the Plan at any time. In
the event of Plan amendment or termination, a Participant's benefits under the
Plan shall not be less than the Plan benefits to which the Participant would
have been entitled if the Participant had retired immediately prior to such
amendment or termination of the Plan.
ARTICLE VIII
------------
EMPLOYMENT RIGHTS
-----------------
Nothing in the Plan shall be deemed to give any person any right to
remain in the employ of the Company or affect any right of the Company to
terminate a person's employment.
ARTICLE IX
----------
EFFECTIVE DATE
--------------
The Plan shall be effective with respect to the plan years of the
Retirement Plan commencing on and after December 25, 1982.
Exhibit 10(vv)
SUPPLEMENTAL SAVINGS PLAN
OF
LOCKHEED CORPORATION
(As Amended and Restated December 6, 1995)
ARTICLE I
---------
PURPOSE OF THE PLAN
-------------------
This Plan is established to supplement the benefits of certain
employees under the Lockheed Salaried Employees Savings Plan Plus ("Savings
Plan") whose benefits are reduced by (1) the limitation on Annual Additions
under Code Section 415 and (2) the compensation limit under Code Section
401(a)(17). It is intended that this Plan shall be an Excess Benefit Plan as
defined in Section 3 (36) of the Employee Retirement Income Security Act of
1974.
The terms and definitions used in the Savings Plan are incorporated by
reference in this Plan unless superseded by this Plan's terms.
ARTICLE II
----------
DEFINITIONS
-----------
1. PLAN -- Supplemental Savings Plan of Lockheed Corporation
2. ANNUAL ADDITION -- The term defined in Section 5.02(c)(1) of the
Savings Plan.
3. BOARD OF DIRECTORS -- The Board of Directors of Lockheed
Corporation.
4. CODE -- The Internal Revenue Code of 1986, as amended from time
to time.
5. COMMITTEE -- The Management Development and Compensation
Committee of the Board of Directors appointed by the Board of Directors.
1
6. CORPORATION -- Lockheed Corporation and its Subsidiaries.
7. PARTICIPANT -- Any employee who meets the Article III
eligibility requirements.
8. SAVINGS PLAN -- The Lockheed Salaried Employees Savings Plan Plus.
9. EXCESS SAVINGS AMOUNT -- The amount a Participant specifies to be
credited to the Participant's Account in lieu of paying such amount to the
Participant in cash, in accordance with the Participant's election to defer
such payment.
ARTICLE III
-----------
ELIGIBILITY FOR PARTICIPATION
-----------------------------
Employees of the Corporation who are Participants in the Savings Plan
and (1) whose benefits in that Plan are affected by (a) the Annual Additions
limitation of Code Section 415 or (b) the Code Section 401(a) (17) compensation
limit, or (2) who, prior to August 29, 1994, entered into a Termination Benefits
Agreement with Lockheed Corporation, may participate in the Plan. No member of
the Committee shall be eligible to participate in the Plan.
ARTICLE IV
----------
PLAN BENEFITS
-------------
Each Participant shall be entitled to receive a benefit under this
Plan which is the difference between the Participant's benefit under the Savings
Plan and the approximate benefits that would have been payable under that Plan
except for (1) the limitations on Annual Additions to a Participant's Account
under Code Section 415, as provided in Section 5.02 of the Savings Plan, and/or
(2) the Elective Deferral limitation of Code Section 402(g), and/or the
compensation limit under Code Section
2
401(a)(17). In addition, if a Participant becomes entitled to the benefits
described in Section 6(c) of his or her Termination Benefits Agreement on
account of the merger of Lockheed Corporation contemplated by the Agreement and
Plan of Reorganization, dated as of August 29, 1994, by and among Lockheed
Martin Corporation, Martin Marietta Corporation, and Lockheed Corporation, and
such benefits have not otherwise been paid to the Participant prior to
commencement of benefits under this Plan, such benefits shall be paid at the
same time and in the same manner as the other benefits payable under this Plan.
ARTICLE V
---------
EXCESS SAVINGS AMOUNT
----------------------
1. An eligible employee may become a Participant by Filing With the
Committee documents specifying the Excess Savings Amount to be deducted from his
wages and credited to his Participant's Account. The Excess Savings Amount
deducted and credited shall be equal to the difference between the percentage
requested by the Participant on the election form in accordance with Section 3
of the Savings Plan and
(a) the Participant's actual Elective Deferral Percentage under the
Savings Plan as limited by the Annual Additions limit, or
(b) the Participant's actual Elective Deferral Percentage under the
Savings Plan as limited by the Code Section 402(g) Elective Deferral
limit, or
(c) the Code Section 401(a)(17) compensation limit.
2. Such amount shall be effective coincident with the effective date of
the Participant's Elective Deferral under the Savings Plan, and shall be
irrevocable for that Plan Year.
ARTICLE VI
----------
PARTICIPANT'S ACCOUNT
---------------------
A separate Participant's Account shall be maintained for each
Participant which shall show in dollars (1) the Excess Savings Amount specified
by the Participant and (2) the
3
corresponding Corporation Matching Contributions, and in terms of Units, (3) the
portion of the Participant's Account in the Bond Fund, the Securities Fund,
and/or the short term investment fund ("STIF Fund") (the "Funds"). The Units
shall be valued in accordance with the procedures followed in the Savings Plan.
ARTICLE VII
-----------
CORPORATION MATCHING CONTRIBUTION
---------------------------------
When the Participant's Excess Savings Amounts are credited to his
Participant's Account, the Corporation will contribute for credit to the account
an amount equal to sixty percent (60%) of such Excess Savings Amounts. The
Corporation Matching Contribution, when added to the Corporation Matching
Contribution made under the Savings Plan, shall not exceed four and eight tenths
percent (4.8%) of the Participant's Weekly Rate of Compensation.
ARTICLE VIII
------------
ALLOCATION SPECIFICATIONS
-------------------------
1. Upon becoming a Participant, the Participant shall elect to have the
value of the amount equal to the sum of (1) the Participant's Excess Savings
Amount and (2) the Corporation Matching Contributions credited to his
Participant's Account allocated to the Funds by Filing With The Committee. The
election shall specify the percent of the total allocation in twenty five
percent (25%) increments following the procedures established under the Savings
Plan. A Participant may change the investment specifications and have the value
of all Units credited to his Participant's Account reallocated in accordance
with the procedures established under the Savings Plan.
ARTICLE IX
----------
PAYMENT OF BENEFITS
-------------------
4
1. A Participant shall receive a cash payment in an amount equal to
the dollar value of the Units in his Participant's Account coincident with or
immediately following the date of Termination of Employment for any of the
reasons set forth in Section 8.01 of the Savings Plan. Upon termination of
employment for any other reason, a Participant shall receive a cash payment in
an amount equal to the sum of the following:
(a) Amount of Payment
-----------------
(1) The dollar value of the Units in his Participant's Account
credited to the Weekly Excess Savings Amounts; and
(2) The vested portion of the dollar value of the Units in his
Participant's Account which were credited to Corporation Matching Contributions.
The vested portion of Corporation Matching Contributions shall be determined in
accordance with the following:
Years of Service Vested Percent
---------------- --------------
Less than 2 years 0%
2 years 25%
3 years 50%
4 years 75%
5 years or more 100%
(3) When a Participant Terminates Employment for reasons other than
those set forth in Section 8.01 of the Savings Plan, the Participant shall
forfeit all Units credited to the Participant's Account to which he is not
entitled as a benefit under the provisions of this Article IX, and the
Participant shall have no further rights in those Units.
(b) Payment Options
---------------
(1) When an eligible employee becomes a Participant, he shall File
with the Committee an election for the method of payment of benefits, as
provided in paragraph (b)(2) of this Article IX. The election shall be
irrevocable, and is applicable to the entire amount of the Participant's
Account. However, a Participant may petition the Committee at any time prior to
one year before his retirement to request a change in the method of payment
described in paragraph (b)(2) of this Article IX, which the Committee, at its
sole discretion, may grant.
(2) A Participant may elect, in lieu of a cash payment, that the total
number of Units in his Account be paid to
5
him in five (5), ten (10), fifteen (15), or twenty (20) equal annual
installments beginning on the last day of the month following the month in which
the Participant's employment has been terminated. The dollar amount of each
payment shall be equal to the dollar value of the Units to be paid in the
installment, determined on the Valuation Date immediately preceding the date
payment is due. When a Participant dies before payments begin, the Participant's
method of payment election shall cease and his beneficiary shall receive a lump
sum payment. When a Participant dies on or after payments begin but before
payment of the entire amount due him, the dollar value of the remaining balance
of the Units in the Participant's Account shall be paid in a lump sum to the
Participant's beneficiary. The dollar value of the lump sum payment shall be
determined on the Valuation Date immediately following the Participant's date of
death. Election of the method of payment must be made in writing by Filing With
the Committee when the Participant begins participation in the Plan. The
election shall be irrevocable, as provided in Article V.
(c) Notwithstanding anything in paragraph (a) or (b) of this Article IX (1)
to the contrary, if immediately prior to retirement, the Participant was either
(i) the Chairman and Chief Executive Officer of Lockheed Martin Corporation and
immediately following his retirement as an employee, was the Chairman of the
Board of Lockheed Martin Corporation; or (ii) the Executive Vice President of
Lockheed Martin Corporation and immediately following his retirement as an
employee, was a member of the Board of Directors of Lockheed Martin Corporation,
the payment will be made to that Participant on January 1, 1998 or as soon as
practicable thereafter.
(d) Immediate Payout Upon Change in Control
---------------------------------------
(1) Notwithstanding any other provision of the Plan, all amounts
accumulated and unpaid in each Participant's Account, as determined in paragraph
(a) of this Article IX, shall be paid in a single lump sum within fifteen (15)
calendar days following a Change in Control. Paragraph (b) of this Article IX
regarding Payment Options shall not apply to payments under this paragraph (c)
and any elections made thereunder shall be void.
(2) For purposes of this Plan, a Change in Control of shall be deemed
to have occurred if (i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of Lockheed Martin Corporation ("Lockheed Martin") or any of its
subsidiaries, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or
6
indirectly, of securities of Lockheed Martin representing thirty percent (30%)
or more of the combined voting power of Lockheed Martin's then outstanding
securities; or (ii) during any period of two (2) consecutive years (not
including any period prior to the adoption of this paragraph (c)), individuals
who at the beginning of such period constitute the Board of Directors of
Lockheed Martin, and any new director (other than a director designated by a
person who has entered into an agreement with Lockheed Martin to effect a
transaction described in clause (i) or (iii) of this paragraph) whose election
by the Board of Directors of Lockheed Martin or nomination for election by
Lockheed Martin's shareholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof; or (iii) the shareholders of Lockheed Martin approve a merger or
consolidation of Lockheed Martin with any other corporation, other than a merger
or consolidation which would result in the voting securities of Lockheed Martin
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least eighty percent (80%) of the combined voting power of
the voting securities of Lockheed Martin or such surviving entity outstanding
immediately after such merger or consolidation or (iv) the shareholders of
Lockheed Martin approve a plan of complete liquidation of Lockheed Martin or an
agreement for the sale or disposition by Lockheed Martin of all or substantially
all of Lockheed Martin's assets.
(3) A Change in Control shall not, however, include any transaction
which has been approved by individuals who at the beginning of any period of at
least two (2) consecutive years (not including any period prior to the adoption
of this paragraph (c)) constitute the Board of Directors of Lockheed Martin,
and any new director (other than a director designated by a person who has
entered into an agreement with Lockheed Martin to effect a transaction described
in clause (i) or (iii)) whose election by the Board of Directors of Lockheed
Martin or nomination for election by Lockheed Martin's shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved.
(4) This paragraph (c) shall apply only to a Change in Control of
Lockheed Martin and shall not cause immediate payout of any Participant's
Account in any transaction involving Lockheed Martin's sale, liquidation,
merger, or other disposition of any subsidiary.
7
(5) The Board of Directors may cancel or modify this paragraph (c) at
any time prior to a Change in Control. In the event of a Change in Control,
this paragraph (c) shall remain in force and effect, and shall not be subject to
cancellation or modification for a period of five (5) years, and any other
provision defining a capitalized term used in this paragraph (c) shall not, for
purposes of this paragraph (c), be subject to cancellation or modification
during the five year period.
ARTICLE X
---------
TRUST
-----
Although the Plan is an unfunded plan, the Corporation has established
a trust (the "Trust") pursuant to a trust agreement dated December 22, 1994 by
and between the Corporation and J. P. Morgan California to hold assets, subject
to the claims of the Corporation's creditors in the event of its insolvency, to
pay benefits under this Plan. The Corporation shall no later than nine months
following the close of its fiscal year make contributions to the Trust in an
amount sufficient, when added to the then principal of the Trust and after
consideration of benefits to be paid pursuant to other plans covered by the
Trust, to equal the present value of benefits which have accrued under the Plan
during the preceding fiscal year.
ARTICLE XI
----------
ADMINISTRATION
--------------
The Plan shall be administered by the Committee or in cases where
amendments are necessary to implement changes not affecting the overall
functioning of the Plan; and such changes will not, in the judgment of the
Lockheed Corporate Salary Board, substantially alter the nature or expense of
the affected plan, then the power to amend shall also be designated to the
Corporate Salary Board under guidance from counsel. The Committee shall have
the right to construe the Plan, to interpret any provision thereof, to make
rules and regulations relating to the Plan, and to determine any factual
question arising in connection with the Plan's operation after such
investigation or hearing as the Committee may deem appropriate. Any decision
made by the Committee under the provisions of this Article shall be conclusive
and binding on all parties concerned.
8
ARTICLE XII
-----------
AMENDMENT OR TERMINATION OF THE PLAN
------------------------------------
The Board of Directors and/or the Corporate Salary Board shall have
the right to amend or terminate the Plan at any time. When Plan is amended or
terminated, a Participant's plan benefits shall not be less than the Plan
benefits to which the Participant would have been entitled if the Participant
had retired immediately prior to the amendment or termination.
ARTICLE XIII
------------
EMPLOYMENT RIGHTS
-----------------
Nothing in the Plan shall be deemed to give any person any right to
remain an employee of the Corporation or affect any right of the Corporation to
terminate a person's employment.
ARTICLE XIV
-----------
EFFECTIVE DATE
--------------
The effective date of the Plan is January 1, 1984.
9
EXHIBIT 10(ww)
DEFERRED COMPENSATION PLAN
--------------------------
FOR DIRECTORS
-------------
OF
--
LOCKHEED CORPORATION
--------------------
(As Amended effective September 30, 1996)
ARTICLE I
---------
PURPOSE OF THE PLAN
-------------------
The purpose of the Deferred Compensation Plan for Directors (the "Plan") is to
provide additional benefits for Directors of Lockheed Corporation following
termination of service as a Director. All deferrals under this Plan shall cease
upon the combination of Lockheed Corporation and Martin Marietta Corporation
contemplated by the Agreement and Plan of Reorganization, dated as of August 29,
1994 and as amended from time to time, by and among Lockheed Corporation, Martin
Marietta Corporation and Lockheed Martin Corporation.
ARTICLE II
----------
DEFINITIONS
-----------
Unless the context clearly indicates otherwise, the following words and phrases
shall have the meanings hereinafter indicated:
1. ACCOUNT -- A Participant's Stock Retainer Account, Cash Account and/or
Elective Stock Account. Accounts are unfunded obligations of the Company.
2. ANNUAL CASH RETAINER -- The annual retainer fee to which a Director is
entitled for service on the Board of Directors and which is payable in
cash.
3. ANNUAL STOCK RETAINER -- The annual fee of $5,000 to which an outside
Director is entitled for service on the Board of
1
Directors and which is credited to the Participant's Stock Retainer Account
on October 1 of each year ending in an odd number and on November 15 in
each year ending in an even number. The Annual Stock Retainer for a new
Director shall be credited to his or her Stock Retainer Account on the
first day of the month following the date such Director is first elected or
otherwise begins service on the Board of Directors.
4. BOARD OF DIRECTORS -- The Board of Directors of Lockheed Corporation.
5. CASH ACCOUNT -- The bookkeeping account maintained for each Participant
that is credited with (1) Deferred Cash Compensation and (2) interest
imputed pursuant to Section 3(b) of Article VII.
6. COMMITTEE -- The Management Development and Compensation Committee of the
Board of Directors as is, from time to time, appointed or constituted by
the Board of Directors, or such other committee that the Board of Directors
may from time to time appoint to administer this Plan.
7. COMPANY -- Lockheed Corporation and its successors.
8. CASH COMPENSATION -- The Annual Cash Retainer and the Meeting Fees to which
an outside Director is entitled for service on the Board of Directors.
9. CREDITING DATE -- The first day in any month.
10. DEFERRED COMPENSATION -- The portion of Cash Compensation which a
Participant elects to defer and the Participant's Annual Stock Retainer.
11. DISTRIBUTION SUBACCOUNTS -- Subaccounts of a Participant's Accounts which
shall be established to separately account for Deferred Compensation, and
interest or earnings thereon, which are subject to different payout period
elections.
12. DIRECTOR -- A member of the Board of Directors.
2
13. ELECTIVE STOCK ACCOUNT -- The bookkeeping account maintained for each
Participant that is credited with (1) the Cash Compensation which a
Participant elected prior to the 1994 Plan Year to defer and invest in
Stock and (2) earnings credited thereto pursuant to Section 4 of Article
VII.
14. LOCKHEED MARTIN BOARD -- The Board of Directors of Lockheed Martin
Corporation.
15. MEETING FEES -- The monetary amounts to which a Director is entitled for
attending meetings of the Board of Directors, or a committee thereof.
16. PARTICIPANT -- Each Director who is credited with an Annual Stock Retainer
and any Director who elects to defer Cash Compensation in accordance with
the Plan.
17. PAYMENT ELIGIBILITY DATE -- With respect to Elective Stock Accounts and
Cash Accounts, the date on which a Participant attains the age of 65 years,
or ceases to be a Director, whichever is later. With respect to Stock
Retainer Accounts, the date on which a Participant ceases to be a Director.
For purposes of the definition of Payment Eligibility Date under this Plan,
the date on which a Participant ceases to be a Director shall, for any
Participant who may serve on the Lockheed Martin Board, be the date the
Participant ceases to be a member of the Lockheed Martin Board.
18. PLAN -- This Deferred Compensation Plan for Directors, as amended from time
to time.
19. PLAN YEAR -- The twelve (12) month period beginning on January 1 and ending
on the next succeeding December 31.
20. SECRETARY -- The Secretary of the Company or his or her designee.
21. STOCK -- Common stock of the Company until exchanged for common stock of
Lockheed Martin Corporation and, thereafter, common stock of Lockheed
Martin Corporation.
3
22. STOCK ACQUISITION PERIOD -- In Plan Years ending in an even number, the
Stock Acquisition Period shall be the period beginning December 1 and
ending December 15, inclusive. In Plan Years ending in an odd number, the
Stock Acquisition Period shall be the period beginning October 16 and
ending October 31, inclusive.
23. STOCK RETAINER ACCOUNT -- The bookkeeping account maintained for each
Participant that is credited with (1) the Participant's Annual Stock
Retainer and (2) earnings credited thereto pursuant to Section 4 of Article
VII.
24. TRUST -- The irrevocable grantor trust which is established to acquire and
hold the shares of Stock allocated to each Participant's Elective Stock
Account and/or Stock Retainer Account and under which the assets are
subject to the claims of the Company's creditors.
25. TRUSTEE -- The Trustee or Trustees, whether original or successor,
appointed under the Trust.
ARTICLE III
-----------
PARTICIPATION
-------------
A Director shall become a Participant in the Plan (i) automatically when the
Director's Annual Stock Retainer is credited to his or her Stock Retainer
Account pursuant to Article IV or (ii) by electing to defer all or a portion of
Cash Compensation. An election under clause (ii) shall be made by filing with
the Secretary a "Director's Deferral Election Form" which complies with the
requirements of Articles V and VI.
ARTICLE IV
----------
AUTOMATIC DEFERRAL OF ANNUAL STOCK RETAINER
-------------------------------------------
Any Annual Stock Retainer to which a Director is entitled during the Plan Year
shall not be immediately payable to such Director but shall be deferred
automatically, without any action on the part of the Director, and credited to
the Participant's Stock Retainer Account.
4
ARTICLE V
---------
ELECTION TO DEFER CASH COMPENSATION
-----------------------------------
1. Election. On or before December 15 of each year, a Director may elect to
--------
defer Cash Compensation for the ensuing Plan Year. Such election shall specify
a. The percentage of each payment of Annual Cash Retainer to be deferred,
and/or
b. The percentage of each payment of Meeting Fees to be deferred.
2. Election by New Directors. A Director who is first elected during a Plan
-------------------------
Year may elect to defer Cash Compensation for the remainder of that Plan Year by
filing such election within 30 days of becoming a Director. Such election shall
be effective for all Cash Compensation for that Plan Year which is earned after
the election is filed with the Secretary.
3. Effect of Annual Election. The annual election made by a Participant in
-------------------------
regard to Cash Compensation for any Plan Year shall be irrevocable with respect
to such year. However, such election shall not be binding with respect to Cash
Compensation attributable to any succeeding Plan Year. A separate election must
be filed for each Plan Year.
ARTICLE VI
----------
PAYOUT PERIOD ELECTIONS
-----------------------
1. Methods of Payout. Payments under the Plan shall be made in accordance with
-----------------
the options elected by the Participant. The following options are available:
a. A single lump sum payment of the amounts credited through the first
Crediting Date following the Participant's Payment Eligibility Date,
payable as of such Crediting Date.
5
b. Approximately equal annual installments over a period of either, 5,
10, 15 or 20 years of the amounts credited to a Participant's Account,
commencing with the first Crediting Date following the Participant's
Payment Eligibility Date.
2. Payout Period Election. Coincident with an election under Article V, a
----------------------
Participant in the Plan shall irrevocably elect one of the above methods of
payment with respect to all Deferred Compensation for the ensuing Plan Year. A
Participant who does not elect to defer any Cash Compensation for the ensuing
Plan Year shall nevertheless, on or before December 15 of each year, make an
irrevocable election of one of the above methods of payment with respect to the
Annual Stock Retainer for the ensuing Plan Year. A Director who is first
elected during a Plan Year and who does not elect to defer any Cash Compensation
for the remainder of that Plan Year shall nevertheless, within 30 days of
becoming a Director, make an irrevocable election of one of the above methods of
payment with respect to the Annual Stock Retainer for that Plan Year. If a
Participant fails to elect a payment method with regard to the Annual Stock
Retainer for any Plan Year, the Participant shall be deemed to have elected the
single sum payment option for that Plan Year.
The payout period election made by a Participant for one Plan Year shall not be
binding with respect to Deferred Compensation for any succeeding Plan Year.
Thus, for example, a Participant may irrevocably elect a lump sum payment for
Deferred Compensation for one Plan Year and a ten-year installment payment
method for Deferred Compensation the succeeding Plan Year.
ARTICLE VII
-----------
PARTICIPANT ACCOUNTS
--------------------
1. General. A Stock Retainer Account, Cash Account and Elective Stock Account
-------
shall be maintained for each Participant. Each such Account shall consist of
such Distribution Subaccounts as necessary to account for the amounts payable
under the various distribution options elected by the Participant.
6
2. Stock Balance and Cash Balance Under the Elective Stock Account and Stock
-------------------------------------------------------------------------
Retainer Account. Each Participant's Elective Stock Account and Stock Retainer
- ----------------
Account shall consist of a Stock Balance and a Cash Balance. The Cash Balance
in each such Account shall reflect the amount of the Participant's Deferred
Compensation which has been allocated to the Account, but which has not yet been
exchanged for an allocation of shares of Stock. The Stock Balance in the
Elective Stock Account and in the Stock Retainer Account shall reflect the
number of shares of Stock which have been allocated to the Account pursuant to
the provisions of this Plan.
3. Allocations to Cash Account. There shall be credited to each Participant's
---------------------------
Cash Account as of each Crediting Date, the following amounts:
a. The portion of Cash Compensation which the Participant has elected to
defer and be allocated to the Participant's Cash Account and which has
not previously been credited to either the Participant's Cash Account
or Elective Stock Account.
b. Imputed interest for the period since the previous Crediting Date,
calculated on such previous Cash Account balance at the current rate
of interest specified and published by the Secretary of the Treasury
pursuant to Public Law 92-41, 85 Stat. 97.
4. Allocations to Elective Stock Account and Stock Retainer Account.
----------------------------------------------------------------
a. Initial Allocation to Cash Balance in Elective Stock Account. There
------------------------------------------------------------
shall be credited to the Cash Balance in each Participant's Elective
Stock Account as of each Crediting Date, the following amounts:
1) The amount of any dividend paid since the preceding Crediting
Date with respect to one share of Stock multiplied by the number
of shares of Stock which were allocated to the Participant's
7
Elective Stock Account on the date such dividend was paid; and
2) Any interest or other earnings on cash invested by the Trustee
pursuant to paragraph (c) below and which has not previously been
credited to the Participant's Elective Stock Account.
b. Initial Allocation to Cash Balance in Stock Retainer Account. There
------------------------------------------------------------
shall be credited to the Cash Balance in each Participant's Stock
Retainer Account as of each Crediting Date, the following amounts:
1) Any Annual Stock Retainer to which the Participant is entitled
and which has not previously been credited to the Participant's
Stock Retainer Account; and
2) The amount of any dividend paid since the preceding Crediting
Date with respect to one share of Stock multiplied by the number
of shares of Stock which were allocated to the Participant's
Stock Retainer Account on the date such dividend was paid.
3) Any interest or other earnings on cash invested by the Trustee
pursuant to paragraph (c) below and which has not previously been
credited to the Participant's Stock Retainer Account.
c. Acquisition of Stock. Within ten business days following each
--------------------
Crediting Date, the Company shall deliver to the Trustee cash equal to
the Deferred Compensation credited to the Participant's Cash Balances
under paragraph (b)(1) above. The Trustee shall invest such cash,
along with any cash dividends received by the Trustee and credited to
the Participant's Cash Balances under paragraphs (a)(1) and (b)(2)
above, as provided in the Trust agreement. During the next Stock
Acquisition Period the Trustee shall purchase, on the open market, the
maximum number of whole shares of Stock that can be purchased with the
8
amount allocated to the Participant's Cash Balances. Commissions and
other expenses of purchasing Stock shall be deemed to be part of the
purchase price for such Stock.
d. Allocation of Stock. Upon the Trustee's purchase of Stock described
-------------------
in paragraph (c) above, the Stock Balance in the Participant's
Elective Stock Account and/or Stock Retainer Account, as appropriate,
shall be credited with the number of shares of Stock so acquired by
the Trustee, and the Participant's Cash Balance in the appropriate
Account shall be debited by an amount equal to the purchase price paid
by the Trustee for such shares of Stock. Notwithstanding the
foregoing, the Trustee shall not purchase any stock for the Elective
Stock Account or the Stock Retainer Account of any Participant after
September 30, 1995. After September 30, 1995 cash dividends and other
earnings on participant's cash balances shall be in other than stock,
as provided in the Trust Agreement.
e. Stock Dividends and Stock Splits. Whenever the Stock is subject to a
--------------------------------
split, stock dividend, reverse stock split, recapitalization, or like
change, the number of shares of Stock allocated to each Participant's
Elective Stock Account and/or Stock Retainer Account shall be adjusted
accordingly.
5. Termination of the Trust. In the event the Trust is terminated at a time
------------------------
when any amounts are allocated to a Participant's Elective Stock Account or
Stock Retainer Account, then, notwithstanding any payment option elected by
the Participant, (i) the Cash Balances in the Participant's Stock Accounts
and (ii) the number of whole shares of Stock allocated to the Participant's
Stock Accounts shall be distributed to the Participant as soon as
practicable following the Termination Date. Fractional shares of Stock
shall be paid in cash.
9
6. Voting; Tender Offers.
---------------------
a. Voting. The Trustee shall independently vote the shares held under
-------
the Trust.
b. Tender Offers. In the event of any transaction which is evidenced by
-------------
the filing of a Statement on Schedule 14D-1 with the Securities and
Exchange Commission or in the event of any other similar transaction
(a "Tender Offer"), then the Trustee shall seek confidential written
instructions from each Participant as to whether the Stock credited to
the Participant's Accounts should be tendered. If a Participant does
not submit instructions, the Participant shall be deemed to have
elected not to have such shares tendered. The Trustee shall tender or
not tender the Stock in accordance with the Participant's elections.
If a Participant directs that any shares allocated to his or her
Elective Stock Account or Stock Retainer Account be tendered, then
the Participant's Elective Stock Account or Stock Retainer Account, as
appropriate, shall be debited by the number of shares tendered and an
amount equal to the proceeds received in exchange for those shares
shall be credited to the Participant's Cash Account.
ARTICLE VIII
------------
DISTRIBUTIONS
-------------
1. Time and Amount of Distribution. Each Participant shall be entitled to
-------------------------------
receive a distribution of benefits under this Plan as soon as practicable
following the Participant's Payment Eligibility Date. The distribution payable
to a Participant shall be the amount of cash and the number of whole shares of
Stock allocated to the Participant's Accounts as of the Participant's Payment
Eligibility Date; provided, however, that if any portion of the distribution is
made in installments, then amounts remaining credited to the Participant's
Accounts shall continue to be credited with interest and/or dividend additions
10
until distributed. Fractional shares of Stock shall be paid in cash.
2. Form of Distribution. Benefits shall be distributed in accordance with the
--------------------
Participant's elections pursuant to Article VI.
3. Discretionary Exceptions.
------------------------
a. In the event that a Participant ceases to be a Director (or, if a
member of the Lockheed Martin Board, ceases to be a member of that
board) prior to age 65, the Committee may, in its sole discretion,
determine that such Participant's Elective Stock Account and Cash
Account be paid out in the manner elected by such Participant, but
commencing at a date earlier than such Participant's Payment
Eligibility Date, provided that if any such decision would subject the
-------------
Participant to liability under Section 16(b) of the Securities
Exchange Act of 1934, as amended, such decision shall be subject to
the consent of the Participant or his or her designated beneficiaries;
b. In the event that a Participant dies prior to the Participant's
Payment Eligibility Date, the Committee has the discretion to
disregard any payout period elections the Participant has made and to
aggregate and pay over to such Participant's designated beneficiary
the balance of such Participant's Accounts through the last Crediting
Date preceding such payment; and
c. In the event that a Participant dies following the commencement of
payout on an installment basis, the Committee may, in its sole
discretion, aggregate and vary the number and amount of installments
for the remaining payout, if any, to the designated beneficiary of
such Participant.
4. To Whom Payments are to be Made. Each payment under the Plan shall be made
-------------------------------
to the Participant, except that, in the event of the Participant's death,
payments will thereafter be made to the beneficiary or beneficiaries whom the
Participant has
11
designated on the "Lockheed Beneficiary Designation Form," Form 22-B, as filed
with the Secretary. If no such beneficiary has been designated, or the
designated beneficiary fails to survive the Participant, then such post-death
payments shall be made in accordance with the law of the Participant's domicile
at the date of death.
5. Special Payout Period. In the event that the Plan is amended, modified,
---------------------
suspended or terminated, the Committee may, at its option, direct a special
five-year payout of all amounts accumulated and unpaid in each Participant's
Account hereunder, provided that it deems this to be in the best interests of
the Company. In this event, all amounts accumulated and unpaid in each
Participant's Account will continue to be credited with interest and/or
dividends, as specified in Article VII, throughout the special payout period.
If no such special payout is directed, each Participant's Account shall continue
to be credited with interest and/or dividend additions until paid out in full
under the provisions of the Plan.
6. Involuntary Termination of Director Status. Notwithstanding any other
------------------------------------------
provision of this Plan, in the event a Participant's status as a Director or as
a member of the Lockheed Martin Board is involuntarily terminated other than by
death, within 15 calendar days following such involuntary change in status all
amounts accumulated and unpaid in such Participant's Cash Account shall be paid
in a single lump sum and all shares of Stock in such Participant's Stock
Accounts shall be distributed. Section 5 of this Article VIII regarding a
special five year Payout Period shall not apply to payments under this Section
6.
7. Accelerated Payout. Notwithstanding any other provision of this Plan, a
------------------
Participant may at any time elect that all or any portion of the accumulated and
unpaid amounts credited to his or her Cash Account be paid in a lump sum as soon
as practicable following the filing of such election with the Secretary;
provided, however, that only 90% of the amount otherwise payable to the
Participant upon such accelerated payout shall be paid to the Participant. The
remaining 10% of the amount otherwise payable shall be permanently forfeited and
shall not be paid to, or in respect of, the Participant.
12
ARTICLE IX
----------
ADMINISTRATION
--------------
1. Appointment and Removal of Committee. The Plan shall be administered by the
------------------------------------
Committee. The Board of Directors shall have the power to remove any member of
the Committee at any time, with or without cause, and fill any vacancy in its
membership.
2. Powers and Duties of Committee. The Committee shall have such powers and
------------------------------
duties as are conferred on it by the Plan and the Board of Directors. The
Committee shall have the authority to take any and all actions that it deems
necessary or appropriate in the administration of the Plan. The Committee may
adopt such rules and procedures for the administration of the Plan as it deems
advisable to implement such rules and procedures. The Committee shall act at
meetings by affirmative vote of a majority of the members of the Committee. Any
action permitted to be taken at a meeting may be taken without a meeting if,
prior to such action, a written consent to the action is signed by all members
of the Committee and such written consent is filed with the minutes of the
proceedings of the Committee.
3. Construction and Interpretation. The Committee shall have the full
-------------------------------
discretion to construe and interpret the terms and provisions of the Plan and
all determinations made by the Committee shall be final. It is the intent of
the Company that the Plan satisfy and be interpreted and administered in a
manner that in the case of Participants who administer other stock-based
incentive plans of the Company satisfies the applicable requirements for
disinterested administration of such other plans under applicable provisions of
SEC Rule 16b-3.
4. Reliance Upon Information. The Committee and the Board of Directors may
-------------------------
rely upon any information supplied to them by any officer of the Company, the
Company's legal counsel or by the Company's independent public accountants in
connection with the administration of the Plan, and shall not be liable for any
decision or action in reliance thereon.
5. Expenses. All expenses of the administration of the Plan shall be borne by
--------
the Company, except to the extent commissions
13
and other expenses related to Stock acquisitions and dispositions are charged
against Participant Accounts in accordance with other provisions of the Plan.
6. Annual Statement. Under procedures to be established by the Committee, a
----------------
Participant shall receive an annual statement with respect to such Participant's
Accounts.
ARTICLE X
---------
MISCELLANEOUS
-------------
1. Rights and Interests. No rights or interests under this Plan shall be
--------------------
assignable, transferable or subject to encumbrance, pledge or charge of any
nature, except that a Participant may designate a beneficiary to receive any
benefits arising hereunder upon such Participant's death.
No Participant shall have any right or interest in the Plan or any
benefits hereunder unless and until all of the terms, conditions and provisions
of the Plan that affect the Participant shall have been complied with as herein
specified. Additionally, the Participant shall complete such forms and furnish
such information as the Committee may require in the administration of the Plan.
2. Withholding. There shall be deducted from each payment made under the Plan
-----------
all taxes which are required to be withheld by the Company or Trustee in respect
to such payment. The Company and Trustee shall have the right to reduce any
payment by the amount sufficient to provide the amount of said taxes.
3. Trust Related to Cash Accounts. Although the Plan is an unfunded plan, the
------------------------------
Company has established a trust (the "Cash Accounts Trust") pursuant to a trust
agreement dated December 22, 1994 by and between the Company and J. P. Morgan
California to hold assets, subject to the claims of the Company's creditors in
the event of its insolvency, to pay benefits under the Cash Accounts under this
Plan. The Company shall no later than nine months following the close of its
fiscal year make contributions to the Cash Accounts Trust in an amount
sufficient, when added to
14
the then principal of the Cash Accounts Trust and after consideration of
benefits to be paid pursuant to other plans covered by the Cash Accounts Trust,
to equal the present value of benefits which have accrued under the Cash
Accounts during the preceding fiscal year.
4. Amendment, Modification, Suspension or Termination. The Committee may
--------------------------------------------------
amend, modify, suspend or terminate the Plan in whole or in part, except that no
amendment, modification, suspension or termination shall reduce any amounts
allocated previously to a Participant's Accounts, or to be credited in the
future based on amounts previously credited to a Participant, subject to Section
7 of Article VIII, provided that any amendment to or change in the Plan adopted
by the Committee, which will either significantly increase any benefits under
the Plan or will substantially alter the general principles of the Plan, shall
not become effective unless ratified by the Board of Directors.
5. Governing Law. The place of administration of the Plan shall be
-------------
conclusively deemed to be within the State of California; and the validity,
construction, interpretation and effect of the Plan and all rights of any and
all persons having or claiming any interest in such Plan shall be governed by
the laws of the State of California.
ARTICLE XI
----------
EFFECTIVE DATE
--------------
The Plan shall be applicable to and shall be effective as to Compensation for
Plan Years commencing on and after January 1, 1989.
The first Annual Stock Retainer will be credited to Participant Accounts on
October 1, 1993. Each Participant shall make a payout period election with
respect to this Annual Stock Retainer on or before December 15, 1993; which
payout event shall in no event be earlier than six months after the election.
15
Exhibit 10(xx)
LOCKHEED CORPORATION
RETIREMENT PLAN FOR DIRECTORS
EFFECTIVE JANUARY 1, 1987
AS AMENDED AS OF AUGUST 23, 1995
I. Purpose
-- -------
The purpose of this plan shall be to provide recognition and
retirement compensation to eligible members of the Board of Directors ("Board")
of Lockheed Corporation ("Company") to facilitate the Company's ability to
attract, retain, and reward members of its Board.
II. Eligibility
--- -----------
Eligibility in this plan shall be limited to members of the Board who
are not employees of the Company who have at least five years of total service
on the Board as a director, and who resign or retire from the Board, or if such
director has also served on the Board of Lockheed Martin Corporation (the
"Lockheed Martin Board"), from the Lockheed Martin Board, in good standing.
Notwithstanding the foregoing, members of the Board on March 14, 1995 with less
than five years of service shall be eligible to receive benefits under this
plan.
III. Amount of Benefit
---- -----------------
Each eligible director shall be entitled to an annual retirement
benefit which shall be equal to the annual retainer fee for directors as in
effect at the time of the eligible director's resignation, retirement or other
cessation of service as a member of the Board. For purposes of this calculation
the annual retainer fee shall include any annual amount automatically deposited
in a trust for the purpose of purchasing the Corporation's stock in accordance
with the Deferred Compensation Plan for Directors of Lockheed Corporation. This
benefit shall be paid as provided in Article IV. No additional amount shall be
paid under this Plan for service on any of the committees of the
Board or for service on the Lockheed Martin Board, nor shall interest be paid on
these amounts.
IV. Commencement and Duration of Benefits
--- -------------------------------------
A. Monthly Payments.
-----------------
Unless a lump sum payment is elected pursuant to paragraph B, benefit
payments will begin in the January following the date on which an eligible
director leaves the Board or the date on which an eligible director leaves the
Lockheed Martin Board (for purposes of this Plan, the later of such dates shall
be the date the eligible director "Retires" or the date of the eligible
director's "Retirement"). Benefits will be paid each succeeding year, in
January, and will be paid for a period equal to the number of years that the
eligible director served as an outside director of the Company, provided such
director, or spouse thereof, survives for such period. Fractional years of
service will be rounded up to the next higher whole year. In no event shall the
payment period exceed twenty (20) years. Upon the death of the eligible
director, any remaining retirement benefits under this plan will be paid to his
or her spouse according to the same payment schedule as set forth above. If
there is no spouse living at the time of death of the eligible director, no
further payments will be made.
B. Lump Sum Payment Option.
------------------------
In lieu of receipt of annual payments under paragraph A above, an
eligible director may irrevocably elect to receive in a single lump sum payment
an amount which is the actuarial equivalent of the annual benefits described in
paragraph A. The actuarial equivalent shall be computed using the interest rate
which is one percent (1%) above the rate which would be used by the Pension
Benefit Guaranty Corporation to determine the present value of an immediate lump
sum distribution on termination of a pension plan, as in effect on January 1 of
the year in which monthly payments would otherwise begin under this Plan, and
the Lockheed Mortality Tables. The election must be made within the sixty (60)
day period preceding the director's Retirement by filing a written election with
the Company's Secretary. Payment will be made to the eligible director six (6)
months following
-2-
the date annual payments would otherwise begin pursuant to paragraph A.
If a director who elects a lump sum payment should die after
Retirement but before the lump sum payment date, the lump sum benefit will be
paid on the lump sum payment date to the director's spouse. If the spouse is
not living on the lump sum payment date, no payment will be made.
C. Death While a Board Member.
---------------------------
If the eligible director should die while still a member of the Board
or the Lockheed Martin Board, the spouse will receive 100% of the benefit to
which the director would have been entitled had the director resigned on the
date he or she died. Annual payments will commence to the spouse as of the date
on which the eligible director would have become entitled to receive payments.
In lieu of receiving annual payments, the surviving spouse may irrevocably elect
within sixty (60) days of the director's death to receive an actuarially
equivalent lump sum payment, calculated in accordance with paragraph B, payable
six (6) months after the date annual payments to the spouse would otherwise
begin. If the spouse is not living at the time benefits become payable, no
payment will be made.
D. Involuntary Termination of Director Status.
-------------------------------------------
If an eligible director's status as a Member of the Board or the
Lockheed Martin Board is involuntarily terminated other than by death within
thirty (30) calendar days following such involuntary change in status there
shall be paid to such director an actuarially equivalent lump sum payment,
calculated in accordance with paragraph B, of the Director's retirement benefit.
E. Directors Retired Prior to August 23, 1995.
------------------------------------------
Directors who have retired prior to August 23, 1995 and who are
currently receiving monthly benefits will continue to receive monthly benefits
through December, 1995. Annual payments to such former directors will begin in
January, 1996.
-3-
Directors who have retired prior to August 23, 1995 and who are in the
six month waiting period described in paragraph B above will receive their
previously elected lump sum benefit as scheduled.
Directors who have retired prior to August 23, 1995 but are not yet
receiving benefits because they have not attained age 65 may, within the last 60
days of 1995, make an election under paragraph B to receive a lump sum payment
in July, 1996. In the absence of such an election, annual payments to such
former directors will begin in January 1996.
V. Administration
-- --------------
The Salary Board of the Company, or the Vice President of Human
Resources, if authorized to act on its behalf, shall have full and final
authority to interpret this plan to make determinations which they believe
advisable for the administration of the plan, to approve ministerial changes or
amendments to the plan, to interpret plan provisions, and to approve changes as
may from time to time be required by law or regulation. All decisions and
determinations by the Salary Board shall be final and binding upon all parties.
If any person entitled to payments under this plan is, in the opinion
of the Salary Board or its designee, incapacitated and unable to use such
payments in his or her own best interest, the Salary Board or its designee may
direct that payments (or any portion) be made to that person's legal guardian or
conservator, or that person's spouse, as an alternative to the payment to the
person unable to use the payments. The Salary Board or its designee shall have
no obligation to supervise the use of such payments, and court-appointed
guardianship or conservatorship may be required.
This Plan shall be governed by the laws of the State of Delaware.
VI. TRUST
--- -----
Although the Plan is an unfunded plan, the Company has established a
trust (the "Trust") pursuant to a trust agreement
-4-
dated December 22, 1994 by and between the Company and J. P. Morgan California
to hold assets, subject to the claims of the Company's creditors in the event of
its insolvency, to pay benefits under this Plan. The Company shall no later than
nine months following the close of its fiscal year make contributions to the
Trust in an amount sufficient, when added to the then principal of the Trust and
after consideration of benefits to be paid pursuant to other plans covered by
the Trust, to equal the present value of benefits which have accrued under the
Plan during the preceding fiscal year, as such amount is determined by an
independent actuary.
VII. AMENDMENT OR TERMINATION OF PLAN
---- --------------------------------
The Board shall have the right to amend or terminate this Plan at any
time. In the event of Plan amendment or termination, the Plan benefit payable
on account of a retired or deceased director shall not be impaired, and the Plan
benefit of other directors shall not be less than the benefit to which each such
director would have been entitled if he or she had retired immediately prior to
such amendment or termination of the Plan.
-5-
Exhibit 10(ab)
THIRD AMENDMENT TO THE
LOCKHEED CORPORATION DIRECTORS'
DEFERRED COMPENSATION PLAN TRUST AGREEMENT
SEPTEMBER 30, 1995
Lockheed Corporation, a Delaware corporation, and First Interstate Bank of
California, successor to First Interstate Bank, Ltd. (the "Trustee"), adopt the
following amendment to the Lockheed Corporation Directors' Deferred Compensation
Plan Trust Agreement effective September 30, 1995:
Section 5.1 is amended by adding the following new paragraph at the end
thereof:
"Notwithstanding anything herein to the contrary, the Trustee shall not
purchase any Stock on or after September 30, 1995. On and after September
30, 1995 all earnings on Trust assets, including cash dividends on Stock,
shall be invested by the Trustee in units or shares of mutual funds
invested only in direct obligations of the United States of America or
obligations unconditionally and fully guaranteed as to principal and
interest by the United States of America. The Committee may from time to
time authorize the Trustee to invest Trust assets in other types of
investments, but it may not at any time authorize the Trustee to purchase
Stock."
Exhibit 10(ac)
AMENDMENT NO. 1
TO
TRUST AGREEMENT DATED DECEMBER 22, 1994
BETWEEN
LOCKHEED CORPORATION
AND
J.P. MORGAN CALIFORNIA, AS TRUSTEE
SEPTEMBER 30, 1995
WHEREAS, Lockheed Corporation ("Company") and J.P. Morgan California
("Trustee") have entered into a Trust Agreement dated December 22, 1994 ("Trust
Agreement") and now desire to change certain terms and conditions of the Trust
Agreement; and
WHEREAS, Section 12 of the Trust Agreement provides that the Trust
Agreement may be amended by written action of the Company and the Trustee;
NOW, THEREFORE, effective as of September 30, 1995, Section 2 of the Trust
Agreement is hereby amended by adding the following at the end thereof:
"(e) If a Participant elects pursuant to the terms of a Plan to release
the Company in whole or in part from its liability to provide benefits to
the Participant under that Plan (the "First Plan") in exchange for the
Company's agreement to provide benefits to the Participant under a plan
that is not listed in Appendix A (the "Second Plan"), the Company may
direct the Trustee to pay an amount equal to the value of the reduction in
the Participant's benefits under the First Plan to an irrevocable trust
established by the Company in connection with the Second Plan. Similarly,
if a Participant elects pursuant to the terms of a Plan to have the
Company's liability to the Participant under that Plan discharged through
an assumption of that liability by another person, the Company may direct
the Trustee to pay an amount equal to the value of the Participant's
benefits under the Plan to such other person (or that person's designee) in
connection with such assumption of liability."
Exhibit 10 (ad)
DEFERRED MANAGEMENT INCENTIVE
-----------------------------
COMPENSATION PLAN
-----------------
OF
--
LOCKHEED CORPORATION
--------------------
AND ITS SUBSIDIARIES
--------------------
(Adopted September 30, 1979)
(As Amended and Restated March 15, 1995)
ARTICLE I
---------
PURPOSE OF THE PLAN
-------------------
The purpose of the Deferred Management Incentive Compensation Plan
(the "Deferral Plan") is to provide certain key management employees with
additional benefits upon retirement under a Lockheed Corporation Retirement
Plan. The Deferral Plan amends Section 7 of Article IV of the Lockheed
Management Incentive Compensation Plan (the "MICP") to permit employee
Participants of the MICP an annual election to defer receipt of Incentive
Compensation granted under the MICP. Except as expressly provided
hereinafter, the provisions of the MICP shall be construed entirely
independent of the Deferral Plan.
The Deferral Plan applies solely to MICP awards and expressly does not
apply to any special awards which may be made under any other Lockheed
incentive plans except and to the extent specifically provided under the
terms of such other incentive plans.
ARTICLE II
----------
DEFINITIONS
-----------
Unless the context clearly indicates otherwise, the following words
and phrases shall have the meanings hereinafter indicated:
-1-
1. DEFERRAL PLAN -- This Deferred Management Incentive Compensation
Plan, adopted by the Board of Directors of Lockheed Corporation on
September 30, 1979, as amended from time to time.
2. MICP -- The Management Incentive Compensation Plan of Lockheed
Corporation and its subsidiaries, as amended on February 5, 1979, and from
time to time thereafter.
3. COMPANY -- Lockheed Corporation and its subsidiaries.
4. BOARD OF DIRECTORS -- The Board of Directors of Lockheed
Corporation.
5. COMMITTEE -- The Management Development and Compensation
Committee of the Board of Directors as is, from time to time, appointed or
constituted by the Board of Directors.
6. EMPLOYEE -- Any person who is employed by the Company and is
paid a salary, as distinguished from an hourly wage. The term shall be
deemed to include any person who was employed by the Company during all or
any portion of the year, with respect to which an appropriation is made to
the MICP by the Board of Directors, but shall not include any employee who,
during any portion of such year, was represented by a collective bargaining
unit.
7. PARTICIPANT -- Any employee who is selected to participate in
the MICP and who satisfies the conditions for eligibility contained in
Article III of the Deferral Plan. The term shall be deemed to include
former employees who have retired under a Company Retirement Plan.
8. INCENTIVE COMPENSATION -- The MICP amount granted to an employee
in a Grant Year.
9. DEFERRED COMPENSATION -- The amount of Incentive Compensation
which a Participant in the Deferral Plan defers for an Award Year.
10. AWARD YEAR -- The Company fiscal year with respect to which the
Participant is awarded Incentive Compensation.
-2-
11. GRANT YEAR -- The Company fiscal year, subsequent to an Award
Year, during which the Participant is actually granted Incentive
Compensation.
12. FISCAL YEAR -- The fiscal year of the Company.
13. CREDITING DATES -- The dates on which interest is credited under
the Deferral Plan on the accumulated amount or amounts in each
Participant's "account." The crediting dates are January 15th and July 15th
of each calendar year.
14. ACCOUNT -- An "account" is merely a bookkeeping record of the
principal sums of the Participant's Incentive Compensation, which have been
deferred and credited, and the interest accretions thereon. An "account" is
an unfunded liability of the Company.
15. DISABILITY -- A Participant shall be deemed to be permanently
disabled when, on the basis of medical evidence satisfactory to the
Committee, the Committee finds that he is wholly and continuously disabled
for a consecutive period of six or more months.
ARTICLE III
-----------
PARTICIPATION
-------------
1. Eligibility. An employee who is selected to
-----------
participate in the MICP may elect to defer all or a portion of his
Incentive Compensation whenever it equals or exceeds the sum of $5,000, or
such other amount as may be determined, from time to time, by the
Committee. Except as provided immediately below, such employee shall become
a Participant in the Deferral Plan with respect to Incentive Compensation
for an Award Year by electing to defer all or a portion of such
compensation in accordance with the deferral election requirements on Form
23-B (the "Lockheed Deferral Election Form").
2. An employee who makes a deferral election but does not
effectively defer Incentive Compensation of at least $5,000 for
-3-
an Award Year shall not be eligible to participate in the Deferral Plan.
3. In no event shall a member of the Committee be eligible to
participate in the Deferral Plan.
ARTICLE IV
----------
ELECTION OF DEFERRED AMOUNT
---------------------------
1. Election. On or before November 15th of the Award Year, an
--------
employee who is selected to participate in the MICP may elect to defer
Incentive Compensation for such Year in accordance with the following
alternatives:
(a) A specific dollar amount of Incentive Compensation not less
than $5,000;
(b) A percentage of Incentive Compensation or $5,000 whichever
is larger; or
(c) The excess of Incentive Compensation over a stated dollar
amount.
In each instance, if the $5,000 minimum deferral requirement is not
satisfied, no amount will be deferred.
2. Effect of Annual Election. The annual election made by a
-------------------------
Participant for an Award Year shall be irrevocable with respect to such
Year. However, such election shall not be binding on him/her with respect
to deferral elections to be made for any succeeding Award Year. Thus, for
example, the Participant may irrevocably elect a specific dollar amount to
be deferred in one Award Year and a percentage or $5,000, whichever is
larger, in the succeeding Award Year.
3. Period of Deferral. Deferred Compensation shall not become
------------------
payable to a Participant prior to his or her retirement under a Company
Retirement Plan or termination of employment except as provided in Section
4 or Section 5 of Article V."
-4-
ARTICLE V
---------
PAYOUT PERIOD ELECTIONS, EXCEPTIONS AND RULES
---------------------------------------------
1. Methods of Payout. Payments under the Deferral Plan shall be
-----------------
made in accordance with the following options:
OPTION A. A SINGLE lump sum payment of the amounts credited
--------
through the first Crediting Date following the Participant's
retirement or termination of employment with the Company, payable as
of such Crediting Date.
OPTION B. FIVE approximately equal annual installments of the
--------
amounts credited to a Participant through the first Crediting Date
following his/her retirement or termination of employment with the
Company, commencing as of such Crediting Date.
OPTION C. TEN approximately equal annual installments of the
--------
amounts credited to a Participant through the first Crediting Date
following his/her retirement or termination of employment with the
Company, commencing as of such Crediting Date.
OPTION D. FIFTEEN approximately equal annual installments of the
--------
amounts credited to a Participant through the first Crediting Date
following his/her retirement or termination of employment with the
Company, commencing as of such Crediting Date.
OPTION E. TWENTY approximately equal annual installments of the
--------
amounts credited to a Participant through the first Crediting Date
following his/her retirement or termination of employment with the
Company, commencing as of such Crediting Date.
2. Payout Period Election. On or before November 15th of the Award
----------------------
Year, an employee who is selected to participate in the MICP and who is a
Participant in the Deferral Plan shall irrevocably elect one of the five
methods of payment with respect
-5-
to all Deferred Compensation for such Award Year. However, the payout period
election made by a Participant in one Award Year shall not be binding on him/her
with respect to Incentive Compensation for any succeeding Award Year. Thus, for
example, a Participant may irrevocably elect a lump sum payment for Deferred
Compensation in one Award Year and a ten-year installment payment method for
his/her Deferred Compensation the succeeding Award Year.
3. Special Circumstance Exceptions. There are several exceptions to
-------------------------------
the payout option rules which may be availed of upon written request by a
Participant retired under a Company Retirement Plan or, if not then living,
his/her beneficiary:
(a) Death While an Active Employee. In the event that a
------------------------------
Participant dies while an active employee, the Committee has the
discretion to disregard any payout period elections the Participant
has made and to aggregate and pay over to his/her designated
beneficiary either in the year of death or in the first year following
death, the total amount deferred for all Award Years plus accumulated
interest credited through the first Crediting Date following death.
(b) Death, Disability or Financial Hardship During Retirement.
---------------------------------------------------------
In the event that a Participant, retired under a Company Retirement
Plan, is permanently disabled or dies, or upon proof of his/her
financial hardship, the Committee may, in its sole discretion,
aggregate and vary the number of installments in which any such
Deferred Compensation will be paid to such Participant or his/her
designated beneficiary, as well as the amount to be paid in all or any
such installments, provided such modification is made solely as
necessary to meet such hardship.
4. Immediate Payout Upon Change in Control.
---------------------------------------
(a) Notwithstanding any other provision of the Deferral Plan,
all amounts accumulated and unpaid in each Participant's "account"
shall be paid in a single lump sum within 15 calendar days following a
Change in Control. Section 7(a) of Article VI regarding a Special
Payout Period
-6-
of up to five years shall not apply to payments under this Section 4.
(b) For purposes of this Deferral Plan, a Change in Control
shall be deemed to have occurred if (i) any "person," as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than a trustee or other
fiduciary holding securities under an employee benefit plan of
Lockheed Martin Corporation ("Lockheed Martin") or any of its
subsidiaries, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
Lockheed Martin representing 30% or more of the combined voting power
of Lockheed Martin's then outstanding securities; or (ii) during any
period of two consecutive years (not including any period prior to the
adoption of this Section 4), individuals who at the beginning of such
period constitute the Board of Directors of Lockheed Martin, and any
new director (other than a director designated by a person who has
entered into an agreement with Lockheed Martin to effect a transaction
described in clause (i) or (iii) of this Section) whose election by
the Board of Directors of Lockheed Martin or nomination for election
by Lockheed Martin's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof; or (iii) the
shareholders of Lockheed Martin approve a merger or consolidation of
Lockheed Martin with any other corporation, other than a merger or
consolidation which would result in the voting securities of Lockheed
Martin outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined
voting power of the voting securities of Lockheed Martin or such
surviving entity outstanding immediately after such merger or
consolidation or (iv) the shareholders of Lockheed Martin approve a
plan of complete liquidation of Lockheed Martin or an agreement for
the sale or disposition
-7-
by Lockheed Martin of all or substantially all of Lockheed Martin's
assets.
A Change in Control shall not, however, include any transaction
which has been approved by individuals who at the beginning of any
period of at least two consecutive years (not including any period
prior to the adoption of this Section 4) constitute the Board of
Directors of Lockheed Martin and any new director (other than a
director designated by a person who has entered into an agreement with
Lockheed Martin to effect a transaction described in clause (i) or
(iii) of this Section) whose election by the Board of Directors of
Lockheed Martin or nomination for election by Lockheed Martin's
shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved.
(c) This Section 4 shall apply only to a Change in Control of
Lockheed Martin and shall not cause immediate payout of Deferred
Compensation in any transaction involving Lockheed Martin's sale,
liquidation, merger, or other disposition of any subsidiary.
(d) The Committee may cancel or modify this Section 4 at any
time prior to a Change in Control. In the event of a Change in
Control, this Section 4 shall remain in force and effect, and shall
not be subject to cancellation or modification for a period of five
years, and any other provision defining a capital term used in Section
4 shall not, for purposes of Section 4, be subject to cancellation or
modification during the five year period.
5. Accelerated Payout. Notwithstanding any other provision of the
------------------
Deferral Plan, a Participant may at any time make a written election that
all or any portion of the accumulated and unpaid amounts credited to his or
her "account" under the Deferral Plan be paid in a lump sum as soon as
practicable following the filing of such election; provided, however, that
only 90% of the amount otherwise payable to the Participant upon such
accelerated payout shall be paid to the Participant. The remaining 10% of
the
-8-
amount otherwise payable shall be permanently forfeited and shall not be
paid to, or in respect of, the Participant.
ARTICLE VI
----------
CREDITS AND FORFEITURES
-----------------------
1. Credits. There are two basic credits or additions which will be
-------
added to a Participant's "account": First, the amount of Incentive
Compensation which the Participant has elected to defer for each Award
Year; and Second, the amount of any interest accretions or additions which
have accrued on such Deferred Compensation. Accordingly, all Deferred
Compensation credited and unpaid prior to such Crediting Date, shall be
credited and added to each Participant's "account" balance as of January
15th and July 15th of each calendar year in accordance with the following
formula:
Each Participant shall have credited and added to his/her Deferred
Compensation "account" an amount which shall be calculated by
multiplying such balance by one-half of the interest rate determined
as is set forth in Cost Accounting Standard 415 Deferred Compensation,
as the discount rate for computing the present value of the future
benefits at the time the cost is assignable. Such rate is currently
specified as that rate determined by the Secretary of the Treasury
(semi-annually) pursuant to PL 92-41, 85 Stat. 97. The published
interest rate applicable to the period January 1 through June 30 will
be used in determining the interest to be accrued on the employee
account balance at January 15, and the published interest rate
applicable to the period July 1 through December 31 will be applied to
the employee account balance at July 15. Compounding of interest will
be on an annual basis.
2. Forfeiture. There shall be no forfeiture of any rights, interests
----------
or benefits accrued under the Deferral Plan except as hereinafter provided
or as provided in Article V, Section 5. In the event that a Participant
either (i) terminates his/her employment with the Company to engage in
other employment prior to retirement, or (ii) has taken or permitted some
action
-9-
or omission resulting in damage or competitive injury to the Company, then,
unless such action or omission shall have been taken or permitted in good
faith without reasonable cause to believe that it was improper or illegal
or harmful, then a majority of the Committee may, in its discretion,
terminate all future crediting of interest on any principal amount of
amounts which the Participant has accumulated in his "account" either from
the date of termination of his/her employment with the Company prior to
retirement or from the date on which the Committee determines that his/her
action or omission resulted in damage or competitive injury to the Company.
3. Safe-Haven Forfeiture Rule. In no event, however, shall any
--------------------------
cessation of future interest accretions be permitted, for any reason, after
the date of the Participant's retirement under a Company retirement plan.
This provision is subject to Sections 6 and 7 of Article VII and Section 4
of Article V.
4. Governmental Appointments. In the discretion of the Committee,
-------------------------
and provided that it does not contravene any applicable federal or state
law, the Participant may suspend or terminate his/her employment with the
Company to accept an appointment to a governmental post, for a period not
to exceed four years from the date of his/her suspension or termination,
without forfeiture of any future interest accretions under this Plan.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
1. Plan Shall not Constitute Employment Contract. Neither the
---------------------------------------------
adoption of the Deferral Plan nor its operation shall affect in any way the
right of the Company to dismiss or discharge a Participant at any time, nor
shall it give an employee a right to participate in the Company's MICP.
2. Rights and Interests. No rights or interests under this Deferral
--------------------
Plan shall be assignable, transferable or subject to encumbrance, pledge or
charge of any nature, except that a
-10-
Participant may designate a beneficiary to receive any benefits arising
hereunder upon his/her death.
No Participant, or any person claiming through him/her, shall have any
right or interest in the Deferral Plan or any benefits hereunder unless and
until all of the terms, conditions and provisions of the Deferral Plan that
affect the Participant or such other person claiming through him/her shall
have been complied with as herein specified. Additionally, the Participant
shall complete such forms and furnish such information as the Committee may
require in the administration of the Deferral Plan.
3. To Whom Payments are to be Made. Each payment under the Plan shall be
-------------------------------
made to the Participant, provided he/she is living on the date of payment.
In the event of the Participant's death, payments will thereafter be made
to the beneficiary or beneficiaries whom the Participant has designated on
his/her Lockheed Form 22-B (the "Lockheed Beneficiary Designation Form") to
receive his/her Company basic group life insurance benefits, and in the
same proportions. If no such beneficiary has been designated, or the
designated beneficiary fails to survive the Participant, then such post-
death payments shall be made in accordance with the law of the
Participant's domicile at the date of his/her death.
This provision does not affect the number of payments or the amount of
each payment, but only affects the determination of whom such payments are
to be made to.
4. Withholding. There shall be deducted from each cash payment
-----------
actually made under the Deferral Plan all taxes which are required to be
withheld by the Company in respect to such payment. The Company shall have
the right to reduce any cash payment by the amount of cash sufficient to
provide the amount of said taxes.
5. Trust. Although the Plan is an unfunded plan, the Company has
-----
established a trust (the "Trust") pursuant to a trust agreement dated
December 22, 1994 by and between the Company and J. P. Morgan California to
hold assets, subject to the claims of the Company's creditors in the event
of its insolvency, to pay benefits under this Plan. The Company shall no
later than nine
-11-
months following the close of its fiscal year make contributions to the
Trust in an amount sufficient, when added to the then principal of the
Trust and after consideration of benefits to be paid pursuant to other
plans covered by the Trust, to equal the present value of benefits which
have accrued under the Plan during the preceding fiscal year.
6. Amendment, Modification, Suspension or Termination. The
--------------------------------------------------
Committee may amend, modify, suspend or terminate the Deferral Plan in
whole or in part, except that no amendment, modification, suspension or
termination shall reduce any Deferred Compensation, pension benefits and
interest previously credited to a Participant prior to the date of such
amendment, modification, suspension or termination, or to be credited in
the future, subject to Section 7 of this Article VII and Sections 4 and 5
of Article V, based on amounts previously credited to a Participant,
provided that any amendment to or change in the Deferral Plan adopted by
the Committee, which will either significantly increase any benefits under
the Deferral Plan or will substantially alter the general principles of the
Deferral Plan, shall not become effective unless ratified by a majority
vote of the full Committee.
7. Special Payouts.
---------------
(a) In the event that the Deferral Plan is amended, modified,
suspended or terminated, the Committee may, at its option, direct an
immediate special lump sum payout or an immediate special payout over
any period of time not in excess of five years, ("Special Payout
Period") provided that it deems this to be in the best interests of
the Company.
(b) In the event of a lump sum payout, each Participant's
"account" shall be credited with interest additions from the most
recent Crediting Date to the first day of the month in which the
payment occurs. In the event a Special Payout Period is used, all
amounts accumulated and unpaid in each Participant's "account" will
continue to draw interest, as specified in Section 1 of Article VI,
throughout the Special Payout Period.
-12-
(c) If no special payout is directed, each Participant's
"account" shall continue to be credited with interest additions until
paid out in full under the provisions of the Deferral Plan.
8. Governing Law. The place of administration of the Deferral Plan
-------------
shall be conclusively deemed to be within the State of California; and the
validity, construction, interpretation and effect of the Deferral Plan and
all rights of any and all persons having or claiming any interest in such
Deferral Plan shall be governed by the laws of the State of California.
ARTICLE VIII
------------
ADMINISTRATION
--------------
1. Appointment and Removal of Committee. The Deferral Plan shall be
------------------------------------
administered by the Committee. The Committee shall consist of three or more
Directors, none of whom shall be Participants in the Deferral Plan. The
Board of Directors shall have the power to remove any member of the
Committee at any time, with or without cause, and fill any vacancy in its
membership.
2. Powers and Duties of Committee. The Committee shall have such
------------------------------
powers and duties as are conferred on it by the Deferral Plan and the Board
of Directors. The Committee shall have the authority to take any and all
actions that it deems necessary or appropriate in the administration of the
Deferral Plan. The Committee may adopt such rules and procedures for the
administration of the Deferral Plan as it deems advisable to implement such
rules and procedures. The Committee shall act at meetings by affirmative
vote of a majority of the members of the Committee. Any action permitted to
be taken at a meeting may be taken without a meeting if, prior to such
action, a written consent to the action is signed by all members of the
Committee and such written consent is filed with the minutes of the
proceedings of the Committee.
-13-
3. Construction and Interpretation. The Committee shall have the
-------------------------------
sole responsibility for the construction and interpretation of the terms
and provisions of the Deferral Plan and all determinations made by the
Committee shall be final.
4. Reliance Upon Information. The Committee and the Board of
-------------------------
Directors may rely upon any information supplied to them by any officer of
the Company, the Company's legal counsel or by the Company's independent
public accountants in connection with the administration of the Deferral
Plan, and shall not be liable for any decision or action in reliance
thereon.
5. Expenses. All expenses of the administration of the Deferral
--------
Plan shall be borne by the Company.
6. Annual Statement. Under procedures to be established by the
----------------
Committee, a Participant shall receive an annual statement with respect to
his/her Deferred Compensation.
ARTICLE IX
----------
EFFECTIVE DATE
--------------
The Deferral Plan shall be applicable to and shall be effective as to
awards of Incentive Compensation made for the Company Fiscal Year ending
December 30, 1979, and subsequent Fiscal Years unless specifically provided
otherwise herein. This Deferral Plan shall be submitted for ratification
and approval at the next Board of Directors' meeting to be held on
September 30, 1979, and shall not become effective unless affirmatively
approved by a majority of the Committee.
-14-
ADDENDUM 1 TO
DEFERRED MANAGEMENT INCENTIVE COMPENSATION PLAN
OF LOCKHEED CORPORATION AND ITS SUBSIDIARIES
Amendments to the Deferral Plan, as set forth in this Addendum 1, are
applicable only to those Participants identified below:
Executive-Level Employees Attaining Age 65 During 1988.
1. Section 3 of Article IV is amended by adding at the end thereof: ",
except as set forth in Section 4 of Article V with respect to the
Participants who meet the definition of "Executive-Level Employees" as
defined in Lockheed Corporation Human Resources Policy Statement
Number 20 and who attain age 65 during calendar year 1988."
2. Section 4 of Article V is added to read as follows:
4. Special Payout. Notwithstanding the payout period elections made
--------------
by Participants who are Executive-Level Employees and who attain age
65 during 1988, the payment which would otherwise be made to such
Participants on the first Crediting Date following retirement or
termination of employment with the Company shall be made to such
Participants prior to January 1, 1989; provided, however, that
interest shall only be credited on the accumulated amounts in each of
such Participant's account to the date of payment.
-15-
ADDENDUM 2 TO
DEFERRED MANAGEMENT INCENTIVE COMPENSATION PLAN
OF LOCKHEED CORPORATION AND ITS SUBSIDIARIES
Amendments to the Deferral Plan, as set forth in this Addendum 2, are
applicable only to those Participants identified below:
Executive-Level Employees Attaining Age 65 During 1990.
1. Section 3 of Article IV is amended by adding at the end thereof: ",
except as set forth in Section 4 of Article V with respect to
Participants who meet the definition of "Executive-Level Employees" as
defined in Lockheed Corporation Human Resources Policy Statement
Number 20 and who attain age 65 during calendar year 1990."
2. Section 4 of Article V is added to read as follows:
4. Special Payout. Notwithstanding the payout period elections made by
--------------
Participants who are Executive-Level Employees and who attain age 65
during 1990, the payment which would otherwise be made to such
Participants on the first Crediting Date following retirement or
termination of employment with the Company shall be made to such
Participants prior to January 1, 1991; provided, however, that
interest shall only be credited on the accumulated amounts in each of
such Participant's account to the date of payment.
-16-
Exhibit 10(af)
LOCKHEED MARTIN CORPORATION
---------------------------
DEFERRED MANAGEMENT INCENTIVE
-----------------------------
COMPENSATION PLAN
-----------------
(Adopted July 27, 1995)
I
-
PURPOSES OF THE PLAN
--------------------
The purposes of the Lockheed Martin Corporation Deferred Management
Incentive Compensation Plan (the "Deferral Plan") are to provide certain key
management employees of Lockheed Martin Corporation and its subsidiaries (the
"Company") the opportunity to defer receipt of Incentive Compensation awards
under the Lockheed Martin Corporation Management Incentive Compensation Plan
(the "MICP") and to encourage key employees to maintain a financial interest in
the Company's performance. Except as expressly provided hereinafter, the
provisions of this Deferral Plan and the MICP shall be construed and applied
independently of each other.
The Deferral Plan applies solely to MICP awards and expressly does not
apply to any special awards which may be made under any of the Company's other
incentive plans, except and to the extent specifically provided under the terms
of such other incentive plans and the relevant awards.
II
--
DEFINITIONS
-----------
Unless the context indicates otherwise, the following words and
phrases shall have the meanings hereinafter indicated:
1. ACCOUNT -- The bookkeeping account maintained by the Company for
each Participant which is credited with the Participant's Deferred Compensation
and earnings (or losses) attributable to the investment options selected by the
Participant, and which is debited to reflect distributions and forfeitures; the
portions of a Participant's Account allocated to different investment options
will be accounted for separately.
-1-
2. ACCOUNT BALANCE -- The total amount credited to a Participant's
Account at any point in time, including the portions of the Account allocated to
each investment option.
3. AWARD YEAR -- The calendar year with respect to which an Eligible
Employee is awarded Incentive Compensation.
4. BENEFICIARY -- The person or persons (including a trust or trusts)
validly designated by a Participant, on the form provided by the Company, to
receive distributions of the Participant's Account Balance, if any, upon the
Participant's death. In the absence of a valid designation, or if the
designated Beneficiary has predeceased the Participant, the Beneficiary shall be
the person or persons entitled by will or the laws of descent and distribution
to receive the amounts otherwise payable to the Participant under this Deferral
Plan; a Participant may amend his or her Beneficiary designation at any time
before the Participant's death.
5. BOARD -- The Board of Directors of Lockheed Martin Corporation.
6. COMMITTEE -- The committee described in Section 1 of Article VIII.
7. COMPANY -- Lockheed Martin Corporation and its subsidiaries.
8. COMPANY STOCK INVESTMENT OPTION -- The investment option under
which the amount credited to a Participant's Account will be based on the market
value and investment return of the Company's Common Stock.
9. DEFERRAL AGREEMENT -- The written agreement executed by an
Eligible Employee on the form provided by the Company under which the Eligible
Employee elects to defer Incentive Compensation for an Award Year.
10. DEFERRAL PLAN -- The Lockheed Martin Corporation Deferred
Management Incentive Compensation Plan, adopted by the Board on July 27, 1995.
11. DEFERRED COMPENSATION -- The amount of Incentive Compensation
credited to a Participant's Account under the Deferral Plan for an Award Year.
-2-
12. ELIGIBLE EMPLOYEE -- An employee of the Company who is a
participant in the MICP and who has satisfied such additional requirements for
participation in this Deferral Plan as the Committee may from time to time
establish. In the exercise of its authority under this provision, the Committee
shall limit participation in the Plan to employees whom the Committee believes
to be a select group of management or highly compensated employees within the
meaning of Title I of the Employee Retirement Income Security Act of 1974, as
amended.
13. EXCHANGE ACT -- The Securities Exchange Act of 1934.
14. INCENTIVE COMPENSATION -- The MICP amount granted to an employee
for an Award Year.
15. INTEREST OPTION -- The investment option under which earnings
will be credited to a Participant's Account based on the interest rate
applicable under Cost Accounting Standard 415, Deferred Compensation.
16. MICP -- The Lockheed Martin Corporation Management Incentive
Compensation Plan.
17. PARTICIPANT -- An Eligible Employee for whom Incentive
Compensation has been deferred for one or more years under this Deferral Plan;
the term shall include a former employee whose Deferred Compensation has not
been fully distributed.
18. SECTION 16 PERSON -- A Participant who at the relevant time is
subject to the reporting and short-swing liability provisions of Section 16 of
the Securities Exchange Act of 1934.
19. TRADING DAY -- A day upon which transactions with respect to
Company Common Stock are reported in the consolidated transaction reporting
system.
III
---
ELECTION OF DEFERRED AMOUNT
---------------------------
-3-
1. Timing of Deferral Elections. An Eligible Employee may elect to
----------------------------
defer Incentive Compensation for an Award Year by executing and delivering to
the Company a Deferral Agreement no later than October 15 of the Award Year or
such other date established by the Committee for an Award Year that is not later
than October 31 of that Award Year, provided that any election by a Section 16
Person shall be subject to the provisions of Section 4 of Article IV. An
employee who first qualifies as an Eligible Employee after September 15 of an
Award Year may elect to defer Incentive Compensation for that Award Year by
entering into a Deferral Agreement up to thirty (30) days after the date on
which such employee first becomes a participant in the MICP. An Eligible
Employee's Deferral Agreement shall be irrevocable when delivered to the
Company. Each Deferral Agreement shall apply only to amounts deferred in that
Award Year and a separate Deferral Agreement must be completed for each Award
Year for which an Eligible Employee defers Incentive Compensation.
2. Amount of Deferral Elections. An Eligible Employee's deferral
----------------------------
election may be stated as:
(a) a dollar amount which is at least $5,000 and is an even
multiple of $1,000,
(b) the greater of $5,000 or a designated percentage of the
Eligible Employee's Incentive Compensation (adjusted to the next
highest multiple of $1,000),
(c) the excess of the Eligible Employee's Incentive Compensation
over a dollar amount specified by the Eligible Employee (which must be
an even multiple of $1,000), or
(d) all of the Eligible Employee's Incentive Compensation.
An Eligible Employee's deferral election shall be effective only if the
Participant is awarded at least $10,000 of Incentive Compensation for that Award
Year, and, in the case of a deferral election under paragraph (c) of this
Section 2, only if the resulting excess amount is at least $5,000.
-4-
3. Effect of Taxes on Deferred Compensation. The amount that would
----------------------------------------
otherwise be deferred and credited to an Eligible Employee's Account will be
reduced by the amount of any tax that the Company is required to withhold with
respect to the Deferred Compensation. The reduction for taxes shall be made
proportionately out of amounts otherwise allocable to the Interest Option and
the Company Stock Investment Option.
IV
--
CREDITING OF ACCOUNTS
---------------------
1. Crediting of Deferred Compensation. Incentive Compensation that
----------------------------------
has been deferred hereunder shall be credited to a Participant's Account as of
the day on which the Incentive Compensation would have been paid to the
Participant if no Deferral Agreement had been made.
2. Crediting of Earnings. Earnings shall be credited to a
---------------------
Participant's Account based on the investment option or options to which the
Account has been allocated, beginning with the day as of which Deferred
Compensation (or any reallocation under Section 4, 5, or 6 of Article IV) is
credited to the Participant's Account. Any amount distributed from a
Participant's Account shall be credited with earnings through the last day of
the month preceding the month in which a distribution is made. The earnings
credited under each of the investment options shall be determined as follows:
(a) Interest Option: The portion of a Participant's Account
---------------
allocated to the Interest Option shall be credited with interest,
compounded monthly, at a rate equivalent to the then published rate
for computing the present value of future benefits at the time cost is
assignable under Cost Accounting Standard 415, Deferred Compensation,
as determined by the Secretary of the Treasury on a semi-annual basis
pursuant to Pub. L. 92-41, 85 Stat. 97.
-5-
(b) Company Stock Investment Option: The portion of a
-------------------------------
Participant's Account allocated to the Company Stock Investment Option
shall be credited as if such amount had been invested in the Company's
Common Stock at the published closing price of the Company's Common
Stock on the last Trading Day preceding the day as of which Deferred
Compensation (or any reallocation under Section 4, 5, or 6 of Article
IV) is credited to the Participant's Account; this portion of the
Participant's Account Balance shall reflect any subsequent
appreciation or depreciation in the market value of the Company's
Common Stock based on the closing price of the stock on the New York
Stock Exchange on the last Trading Day of each month and shall reflect
dividends on the Company's Common Stock as if such dividends had been
reinvested in the Company's Common Stock.
3. Selection of Investment Options. Except as otherwise provided in
-------------------------------
this Deferral Plan, a Participant's investment selections shall be made as part
of his or her Deferral Agreement for an Award Year and shall be irrevocable with
respect to amounts deferred for that Award Year, and no subsequent reallocations
shall be made. At the time of entering into a Deferral Agreement for any
subsequent Award Year, a Participant shall select the investment options for the
Deferred Compensation to be credited to the Participant's Account for that Award
Year. A Participant's allocations between investment options shall be subject
to such minimum allocations as the Committee may establish.
4. Special Rules for Section 16 Persons. Notwithstanding the
------------------------------------
foregoing, an election by a Section 16 Person to have Deferred Compensation
allocated to the Company Stock Investment Option shall be given effect only if
irrevocably made at least six months prior to the effective date of the
allocation. If a Section 16 Person's Deferral Agreement for an Award Year is
entered into less than six months prior to the date that Deferred Compensation
is credited for that Award Year, and if he or she has elected to have any
portion of the Deferred Compensation for that Award Year allocated to the
Company Stock Investment Option, that portion shall initially be allocated to
the Interest Option and shall be reallocated and credited to the Company Stock
Investment Option as of the first day of the seventh month following the month
in which the Deferral Agreement
-6-
was made. An Eligible Employee who first becomes a Section 16 Person after his
or her Deferral Agreement has been entered into for an Award Year shall be
subject to the requirements of this Section 4, except that such an Eligible
Employee shall be permitted, within ten business days after becoming a Section
16 Person, to make irrevocable modified investment elections for that Award
Year; any allocations to the Company Stock Investment Option on behalf of such a
Section 16 Person shall be deferred until the first day of the seventh month
following the month in which the Eligible Employee's modified election is made
(or, if later, the first day of the seventh month following the month in which
the election period expires without a modified election having been made).
5. Reallocations to Company Stock Investment Option. Each Eligible
------------------------------------------------
Employee for whom an account is maintained under the Deferred Management
Incentive Compensation Plan of Lockheed Corporation and its Subsidiaries (the
"Lockheed Plan") will be given a one-time opportunity during calendar year 1996
to make an irrevocable election to have all or a portion of that account balance
credited to the Eligible Employee's Account under this Deferral Plan and
reallocated to the Company Stock Investment Option. That reallocation shall be
credited to the Participant's Account under this Deferral Plan as of the first
day of the month following the last month in which such elections are permitted,
but in the case of a Section 16 Person not earlier than the first day of the
seventh month after the month in which the election is delivered to the Company.
If such a reallocation is made, the Eligible Employee's right to receive
benefits under the Lockheed Plan will be reduced accordingly, and the Company
will be released from liability under the Lockheed Plan for the amount
reallocated. Although the terms of this Deferral Plan shall generally apply to
any amount so reallocated, the Eligible Employee's irrevocable payment elections
under the Lockheed Plan will continue to apply to the reallocated amount.
6. Reallocations to Interest Option. If benefit payments to a
--------------------------------
Participant or Beneficiary are to be paid or commenced to be paid over a period
that extends more than six months after the date of the Participant's
termination of employment with the Company or death, the Participant or
Beneficiary, as applicable, may elect irrevocably at any time after the
Participant's termination of employment or death and before the commencement of
benefit payments to have the portion of the Participant's Account that is
allocated to the Company
-7-
Stock Investment Option reallocated to the Interest Option. A reallocation
under this Section 5 shall take effect as of the first day of the month
following the month in which an executed reallocation election is delivered to
the Company, but in the case of a Section 16 Person not earlier than the first
day of the seventh month following the month in which the reallocation election
is delivered to the Company.
V
-
PAYMENT OF BENEFITS
-------------------
1. General. The Company's liability to pay benefits to a Participant
-------
or Beneficiary under this Deferral Plan shall be measured by and shall in no
event exceed the Participant's Account Balance. Except as otherwise provided in
this Deferral Plan, a Participant's Account Balance shall be paid to him in
accordance with the Participant's elections under Sections 2 and 3 of this
Article, and such elections shall be continuing and irrevocable. All benefit
payments shall be made in cash and, except as otherwise provided, shall reduce
allocations to the Interest Option and the Company Stock Investment Option in
the same proportions that the Participant's Account Balance is allocated between
those investment options at the end of the month preceding the date of
distribution. Notwithstanding the foregoing, no amount shall be distributed to
a Section 16 Person under this Deferral Plan unless the amount was allocated to
the Participant's Account at least six months prior to the date of distribution
or no portion of the amount was allocated to the Company Stock Investment
Option.
2. Election for Commencement of Payment. At the time a Participant
------------------------------------
first completes a Deferral Agreement, he or she shall elect from among the
following options governing the date on which the payment of benefits shall
commence:
(A) Payment to begin on or about the January 15th or July 15th
next following the date of the Participant's termination of
employment with the Company for any reason.
(B) Payment to begin on or about January 15th of the year next
following the year in which the Participant terminates
employment with the Company for any reason.
-8-
(C) Payment to begin on or about the January 15th or July 15th
next following the date on which the Participant has both
terminated employment with the Company for any reason and
attained the age designated by the Participant in the
Deferral Agreement.
3. Election for Form of Payment. At the time a Participant first
----------------------------
completes a Deferral Agreement, he or she shall elect the form of payment of his
or her Account Balance from among the following options:
(A) A lump sum.
(B) Annual payments for a period of years designated by the
Participant which shall not exceed fifteen (15). The amount
of each annual payment shall be determined by dividing the
Participant's Account Balance at the end of the month prior
to such payment by the number of years remaining in the
designated installment period. The installment period may
be shortened, in the sole discretion of the Committee, if
the Committee at any time determines that the amount of the
annual payments that would be made to the Participant during
the designated installment period would be too small to
justify the maintenance of the Participant's Account and the
processing of payments.
4. Prospective Change of Payment Elections. At the time of entering
---------------------------------------
into a Deferral Agreement for an Award Year, a Participant may modify his
payment elections under Sections 2 and 3 with respect to the portion of his or
her Account allocable to the amounts to be deferred for that Award Year and
subsequent Award Years. If a Participant has different payment elections in
effect, the Company shall maintain sub-accounts for the Participant to determine
the amounts subject to each payment election; no modification of payment
elections will be accepted if it would require the Company to maintain more than
five (5) sub-accounts within the Participant's Account in order to make payments
in accordance with the Participant's elections.
-9-
5. Acceleration upon Early Termination. Notwithstanding a
-----------------------------------
Participant's payment elections under Sections 2 and 3, if the Participant
terminates employment with the Company other than by reason of layoff, death or
disability and before the Participant is eligible to commence receiving
retirement benefits under a pension plan maintained by the Company (or before
the Participant has attained age 55 if the Participant does not participate in
such a pension plan), the Participant's Account Balance shall be distributed to
him or her in a lump sum on or about the January 15th or July 15th next
following the date of the Participant's termination of employment with the
Company.
6. Death Benefits. Upon the death of a Participant before a complete
--------------
distribution of his or her Account Balance, the Account Balance will be paid to
the Participant's Beneficiary in accordance with the payment elections
applicable to the Participant. If a Participant dies while actively employed or
otherwise before the payment of benefits has commenced, payments to the
Beneficiary shall commence on the date payments to the Participant would have
commenced, taking account of the Participant's termination of employment (by
death or before) and, if applicable, by postponing commencement until after the
date the Participant would have attained the commencement age specified by the
Participant. Whether the Participant dies before or after the commencement of
distributions, payments to the Beneficiary shall be made for the period or
remaining period elected by the Participant.
7. Early Distributions in Special Circumstances. Notwithstanding a
--------------------------------------------
Participant's payment elections under Sections 2 and 3 of this Article V, a
Participant or Beneficiary may request an earlier distribution in the following
limited circumstances:
(a) Hardship Distributions. Subject to the last sentence of this
----------------------
Section 7(a) with respect to Section 16 Persons, the Committee shall
have the power and discretion at any time to approve a payment to a
Participant if the Committee determines that the Participant is
suffering from a serious financial emergency caused by circumstances
beyond the Participant's control which would cause a hardship to the
Participant unless such payment were made. Any such hardship payment
will be in a lump sum and will
-10-
not exceed the lesser of (i) the amount necessary to satisfy the
financial emergency (taking account of the income tax liability
associated with the distribution), or (ii) the Participant's Account
Balance. In the event that a Section 16 Person seeks a hardship
withdrawal under this Section 7(a), the distribution will be made
first out of the portion of the Participant's Account, if any,
allocated to the Interest Option; if the hardship distribution cannot
be satisfied in full out of amounts allocated to the Interest Option,
no distribution will be made from the portion of the Participant's
Account allocated to the Company Stock Investment Option until the
seventh month following the month in which the Participant's
application under this Section 7(a) was made, which application shall
be irrevocable when made.
(b) Withdrawal with Forfeiture. A Participant may elect at any
--------------------------
time to withdraw ninety percent (90%) of the amount credited to the
Participant's Account. If such a withdrawal is made, the remaining
ten percent (10%) of the Participant's Account shall be permanently
forfeited, and the Participant will be prohibited from deferring any
amount under the Deferral Plan for the Award Year in which the
withdrawal is received (or the first Award Year in which any portion
of the withdrawal is received). In the event that a Section 16 Person
seeks a withdrawal under this Section 7(b), any portion of the Section
16 Person's Account allocated to the Company Stock Investment Option
will not be subject to distribution or forfeiture until the seventh
month following the month in which the Participant's election under
this Section 7(b) was made, which election shall be irrevocable when
made; any portion of the Section 16 Person's Account allocated to the
Interest Option will be subject to immediate distribution and
forfeiture; the ten percent forfeiture shall be separately applied to
each such portion of the Section 16 Person's Account at the time of
distribution.
(c) Death or Disability. In the event that a Participant dies or
-------------------
becomes permanently disabled before the Participant's entire Account
Balance has been distributed, the Committee, in its sole discretion,
may modify the timing of distributions from the
-11-
Participant's Account, including the commencement date and number of
distributions, if it concludes that such modification is necessary to
relieve the financial burdens of the Participant or Beneficiary.
8. Acceleration upon Change in Control.
-----------------------------------
(a) Notwithstanding any other provision of the Deferral Plan, the
Account Balance of each Participant shall be distributed in a single
lump sum within fifteen (15) calendar days following a "Change in
Control."
(b) For purposes of this Deferral Plan, a Change in Control shall
include and be deemed to occur upon the following events:
(1) A tender offer or exchange offer is consummated for the
ownership of securities of the Company representing 25% or more
of the combined voting power of the Company's then outstanding
voting securities entitled to vote in the election of directors
of the Company.
(2) The Company is merged, combined, consolidated,
recapitalized or otherwise reorganized with one or more other
entities that are not Subsidiaries and, as a result of the
merger, combination, consolidation, recapitalization or other
reorganization, less than 75% of the outstanding voting
securities of the surviving or resulting corporation shall
immediately after the event be owned in the aggregate by the
stockholders of the Company (directly or indirectly), determined
on the basis of record ownership as of the date of determination
of holders entitled to vote on the action (or in the absence of a
vote, the day immediately prior to the event).
(3) Any person (as this term is used in Sections 3(a)(9) and
13(d)(3) of the Exchange Act, but excluding any person described
in and satisfying the conditions of Rule 13d-1(b)(1) thereunder),
becomes the beneficial owner (as
-12-
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more
of the combined voting power of the Company's then outstanding
securities entitled to vote in the election of directors of the
Company.
(4) At any time within any period of two years after a
tender offer, merger, combination, consolidation,
recapitalization, or other reorganization or a contested
election, or any combination of these events, the "Incumbent
Directors" shall cease to constitute at least a majority of the
authorized number of members of the Board. For purposes hereof,
"Incumbent Directors" shall mean the persons who were members of
the Board immediately before the first of these events and the
persons who were elected or nominated as their successors or
pursuant to increases in the size of the Board by a vote of at
least three-fourths of the Board members who were then Board
members (or successors or additional members so elected or
nominated).
(5) The stockholders of the Company approve a plan of
liquidation and dissolution or the sale or transfer of
substantially all of the Company's business and/or assets as an
entirety to an entity that is not a Subsidiary.
(c) Notwithstanding the provisions of Section 8(a), if a
distribution in accordance with the provisions of Section 8(a) would
result in a nonexempt short-swing transaction under Section 16(b) of
the Exchange Act with respect to any Section 16 Person, then the date
of distribution to such Section 16 Person shall be delayed until the
earliest date upon which the distribution either would not result in a
nonexempt short-swing transaction or would otherwise not result in
liability under Section 16(b) of the Exchange Act.
(d) This Section 8 shall apply only to a Change in Control of
Lockheed Martin Corporation and shall not cause immediate payout of
Deferred Compensation in any
-13-
transaction involving the Company's sale, liquidation, merger, or
other disposition of any subsidiary.
(e) The Committee may cancel or modify this Section 8 at any time
prior to a Change in Control. In the event of a Change in Control,
this Section 8 shall remain in force and effect, and shall not be
subject to cancellation or modification for a period of five years,
and any defined term used in Section 8 shall not, for purposes of
Section 8, be subject to cancellation or modification during the five
year period.
9. Deductibility of Payments. In the event that the payment of
-------------------------
benefits in accordance with the Participant's elections under Sections 2 and 3
would prevent the Company from claiming an income tax deduction with respect to
any portion of the benefits paid, the Committee shall have the right to modify
the timing of distributions from the Participant's Account as necessary to
maximize the Company's tax deductions. In the exercise of its discretion to
adopt a modified distribution schedule, the Committee shall undertake to have
distributions made at such times and in such amounts as most closely approximate
the Participant's elections, consistent with the objective of maximum
deductibility for the Company. The Committee shall have no authority to reduce
a Participant's Account Balance or to pay aggregate benefits less than the
Participant's Account Balance in the event that all or a portion thereof would
not be deductible by the Company.
10. Change of Law. Notwithstanding anything to the contrary herein,
-------------
if the Committee determines in good faith, based on consultation with counsel,
that the federal income tax treatment or legal status of the Plan has or may be
adversely affected by a change in the Internal Revenue Code, Title I of the
Employee Retirement Income Security Act of 1974, or other applicable law or by
an administrative or judicial construction thereof, the Committee may direct
that the Accounts of affected Participants or of all Participants be distributed
as soon as practicable after such determination is made, to the extent deemed
necessary or advisable by the Committee to cure or mitigate the consequences, or
possible consequences of, such change in law or interpretation thereof.
-14-
11. Tax Withholding. To the extent required by law, the Company
---------------
shall withhold from benefit payments hereunder, or with respect to any Incentive
Compensation deferred hereunder, any Federal, state, or local income or payroll
taxes required to be withheld and shall furnish the recipient and the applicable
government agency or agencies with such reports, statements, or information as
may be legally required.
VI
--
EXTENT OF PARTICIPANTS' RIGHTS
------------------------------
1. Unfunded Status of Plan. This Deferral Plan constitutes a mere
-----------------------
contractual promise by the Company to make payments in the future, and each
Participant's rights shall be those of a general, unsecured creditor of the
Company. No Participant shall have any beneficial interest in any specific
assets that the Company may hold or set aside in connection with this Deferral
Plan. Notwithstanding the foregoing, to assist the Company in meeting its
obligations under this Deferral Plan, the Company may set aside assets in a
trust described in Revenue Procedure 92-64, 1964-2 C.B. 44, and the Company may
direct that its obligations under this Deferral Plan be satisfied by payments
out of such trust. The assets of any such trust will remain subject to the
claims of the general creditors of the Company. It is the Company's intention
that the Plan be unfunded for Federal income tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974.
2. Nonalienability of Benefits. A Participant's rights under this
---------------------------
Deferral Plan shall not be assignable or transferable and any purported
transfer, assignment, pledge or other encumbrance or attachment of any payments
or benefits under this Deferral Plan, or any interest therein shall not be
permitted or recognized, other than the designation of, or passage of payment
rights to, a Beneficiary.
-15-
VII
---
AMENDMENT OR TERMINATION
------------------------
1. Amendment. The Board may amend, modify, suspend or discontinue
---------
this Deferral Plan at any time subject to any shareholder approval that may be
required under applicable law, provided, however, that no such amendment shall
have the effect of reducing a Participant's Account Balance or postponing the
time when a Participant is entitled to receive a distribution of his Account
Balance. Further, no amendment may alter the formula for crediting interest to
Participants' Accounts with respect to amounts for which deferral elections have
previously been made, unless the amended formula is not less favorable to
Participants than that previously in effect, or unless each affected Participant
consents to such change.
2. Termination. The Board reserves the right to terminate this Plan
-----------
at any time and to pay all Participants their Account Balances in a lump sum
immediately following such termination or at such time thereafter as the Board
may determine; provided, however, that if a distribution in accordance with the
provisions of this Section 2 would otherwise result in a nonexempt short-swing
transaction under Section 16(b) of the Exchange Act, the date of distribution
with respect to any Section 16 Person shall be delayed until the earliest date
upon which the distribution either would not result in a nonexempt short-swing
transaction or would otherwise not result in liability under Section 16(b) of
the Exchange Act.
VIII
----
ADMINISTRATION
--------------
1. The Committee. This Deferral Plan shall be administered by the
-------------
Compensation Committee of the Board or such other committee of the Board as may
be designated by the Board and constituted so as to permit this Deferral Plan to
comply with the disinterested administration requirements of Rule 16b-3 of the
Exchange Act. The members of the Committee shall be designated by the Board. A
majority of the members of the Committee (but not fewer than two) shall
constitute a quorum. The vote of a majority of a quorum or the unanimous
written consent of the Committee shall constitute action by the Committee. The
Committee shall have full authority to interpret
-16-
the Plan, and interpretations of the Plan by the Committee shall be final and
binding on all parties.
2. Delegation and Reliance. The Committee may delegate to the
-----------------------
officers or employees of the Company the authority to execute and deliver those
instruments and documents, to do all acts and things, and to take all other
steps deemed necessary, advisable or convenient for the effective administration
of this Deferral Plan in accordance with its terms and purpose, except that the
Committee may not delegate any authority the delegation of which would cause
this Deferral Plan to fail to satisfy the applicable requirements of Rule 16b-3.
In making any determination or in taking or not taking any action under this
Deferral Plan, the Committee may obtain and rely upon the advice of experts,
including professional advisors to the Company. No member of the Committee or
officer of the Company who is a Participant hereunder may participate in any
decision specifically relating to his or her individual rights or benefits under
the Deferral Plan.
3. Exculpation and Indemnity. Neither the Company nor any member of
-------------------------
the Board or of the Committee, nor any other person participating in any
determination of any question under this Deferral Plan, or in the
interpretation, administration or application thereof, shall have any liability
to any party for any action taken or not taken in good faith under this Deferral
Plan or for the failure of the Deferral Plan or any Participant's rights under
the Deferral Plan to achieve intended tax consequences, to qualify for exemption
or relief under Section 16 of the Exchange Act and the rules thereunder, or to
comply with any other law, compliance with which is not required on the part of
the Company.
4. Facility of Payment. If a minor, person declared incompetent, or
-------------------
person incapable of handling the disposition of his or her property is entitled
to receive a benefit, make an application, or make an election hereunder, the
Committee may direct that such benefits be paid to, or such application or
election be made by, the guardian, legal representative, or person having the
care and custody of such minor, incompetent, or incapable person. Any payment
made, application allowed, or election implemented in accordance with this
Section shall completely discharge the Company and the Committee from all
liability with respect thereto.
-17-
5. Proof of Claims. The Committee may require proof of the death,
---------------
disability, incompetency, minority, or incapacity of any Participant or
Beneficiary and of the right of a person to receive any benefit or make any
application or election.
6. Claim Procedures. The procedures when a claim under this Plan is
----------------
denied by the Committee are as follows:
(A) The Committee shall:
(i) notify the claimant within a reasonable time of such
denial, setting forth the specific reasons therefor;
and
(ii) afford the claimant a reasonable opportunity for a
review of the decision.
(B) The notice of such denial shall set forth, in addition to
the specific reasons for the denial, the following:
(i) identification of pertinent provisions of this Plan;
(ii) such additional information as may be relevant to the
denial of the claim; and
(iii) an explanation of the claims review procedure and
advice that the claimant may request an opportunity to
submit a statement of issues and comments.
(C) Within sixty days following advice of denial of a claim,
upon request made by the claimant, the Committee shall take
appropriate steps to review its decision in light of any
further information or comments submitted by the claimant.
The Committee may hold a hearing at which the claimant may
present the basis of any claim for review.
(D) The Committee shall render a decision within a reasonable
time (not to exceed 120 days)
-18-
after the claimant's request for review and shall advise the
claimant in writing of its decision, specifying the reasons
and identifying the appropriate provisions of the Plan.
IX
--
GENERAL AND MISCELLANEOUS PROVISIONS
------------------------------------
1. Neither this Deferral Plan nor a Participant's Deferral Agreement,
either singly or collectively, shall in any way obligate the Company to continue
the employment of a Participant with the Company, nor does either this Deferral
Plan or a Deferral Agreement limit the right of the Company at any time and for
any reason to terminate the Participant's employment. In no event shall this
Plan or a Deferral Agreement, either singly or collectively, by their terms or
implications constitute an employment contract of any nature whatsoever between
the Company and a Participant. In no event shall this Plan or a Plan Agreement,
either singly or collectively, by their terms or implications in any way
obligate the Company to award Incentive Compensation to any Eligible Employee
for any Award Year, whether or not the Eligible Employee is a Participant in the
Deferral Plan for that Award Year, nor in any other way limit the right of the
Company to change an Eligible Employee's compensation or other benefits.
2. Incentive Compensation deferred under this Deferral Plan shall not
be treated as compensation for purposes of calculating the amount of a
Participant's benefits or contributions under any pension, retirement, or other
plan maintained by the Company, except as provided in such other plan.
3. Any written notice to the Company referred to herein shall be made
by mailing or delivering such notice to the Company at 6801 Rockledge Drive,
Bethesda, Maryland 20817, to the attention of the Vice President, Human
Resources. Any written notice to a Participant shall be made by delivery to the
Participant in person, through electronic transmission, or by mailing such
notice to the Participant at his or her place of residence or business address.
-19-
4. In the event it should become impossible for the Company or the
Committee to perform any act required by this Plan, the Company or the Committee
may perform such other act as it in good faith determines will most nearly carry
out the intent and the purpose of this Deferral Plan.
5. By electing to become a Participant hereunder, each Eligible
Employee shall be deemed conclusively to have accepted and consented to all of
the terms of this Deferral Plan and all actions or decisions made by the
Company, the Board, or Committee with regard to the Deferral Plan.
6. The provisions of this Deferral Plan and the Deferral Agreements
hereunder shall be binding upon and inure to the benefit of the Company, its
successors, and its assigns, and to the Participants and their heirs, executors,
administrators, and legal representatives.
7. A copy of this Deferral Plan shall be available for inspection by
Participants or other persons entitled to benefits under the Plan at reasonable
times at the offices of the Company.
8. The validity of this Deferral Plan or any of its provisions shall
be construed, administered, and governed in all respects under and by the laws
of the State of Maryland, except as to matters of Federal law. If any
provisions of this instrument shall be held by a court of competent jurisdiction
to be invalid or unenforceable, the remaining provisions hereof shall continue
to be fully effective.
9. This Deferral Plan and its operation, including but not limited
to, the mechanics of deferral elections, the issuance of securities, if any, or
the payment of cash hereunder is subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal insider trading, registration, reporting and other securities
laws) and such other approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith.
10. It is the intent of the Company that this Deferral Plan satisfy
and be interpreted in a manner, that, in the case of Participants who are or may
be Section 16 Persons, satisfies any
-20-
applicable requirements of Rule 16b-3 of the Exchange Act or other exemptive
rules under Section 16 of the Exchange Act and will not subject Section 16
Persons to short-swing profit liability thereunder. If any provision of this
Deferral Plan would otherwise frustrate or conflict with the intent expressed in
this Section 10, that provision to the extent possible shall be interpreted and
deemed amended so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with this intent, the provision shall be deemed
disregarded. Similarly, any action or election by a Section 16 Person with
respect to the Deferral Plan to the extent possible shall be interpreted and
deemed amended so as to avoid liability under Section 16 or, if this is not
possible, to the extent necessary to avoid liability under Section 16, shall be
deemed ineffective. Notwithstanding anything to the contrary in this Deferral
Plan, the provisions of this Deferral Plan may at any time be bifurcated by the
Board or the Committee in any manner so that certain provisions of this Deferral
Plan are applicable solely to Section 16 Persons. Notwithstanding any other
provision of this Deferral Plan to the contrary, if a distribution which would
otherwise occur is prohibited or proposed to be delayed because of the
provisions of Section 16 of the Exchange Act or the provisions of the Deferral
Plan designed to ensure compliance with Section 16, the Section 16 Person
involved may affirmatively elect in writing to have the distribution occur in
any event; provided that the Section 16 Person shall concurrently enter into
arrangements satisfactory to the Committee in its sole discretion for the
satisfaction of any and all liabilities, costs and expenses arising from this
election.
11. Notwithstanding any other provision of this Deferral Plan, each
Eligible Employee who is a Section 16 Person and has entered into a Deferral
Agreement prior to the initial distribution of a prospectus relating to this
Deferral Plan shall be entitled, during a ten-business-day period following the
initial distribution of that prospectus, to make an irrevocable election to (i)
receive a distribution of all or any portion of his or her Account Balance
attributable to Deferred Compensation for the 1995 Award Year during the seventh
month following the month of the election, or (ii) reallocate all or any part of
his or her Account Balance attributable to Deferred Compensation for the 1995
Award Year to a different investment option as of the end of the sixth month
following the month of the election.
-21-
12. At no time shall the aggregate Account Balances of all
Participants to the extent allocated to the Company Stock Investment Option
exceed an amount equal to the then fair market value of 5,000,000 shares of the
Company's Common Stock, nor shall the cumulative amount of Incentive
Compensation deferred under this Deferral Plan by all Eligible Employees for all
Award Years exceed $250,000,000.
X
-
EFFECTIVE DATE AND SHAREHOLDER APPROVAL
---------------------------------------
This Deferral Plan was adopted by the Board on July 27, 1995 and
became effective upon adoption to awards of Incentive Compensation for the
Company's fiscal year ending December 31, 1995 and subsequent fiscal years;
provided, however, that with respect to Section 16 Persons, the availability of
the Company Stock Investment Option is conditioned upon the approval of this
Deferral Plan by the stockholders of Lockheed Martin Corporation. In the event
that this Deferral Plan is not approved by the stockholders, then Section 16
Persons shall not be entitled to have Deferred Compensation allocated to the
Company Stock Investment Option; any prior elections by Section 16 Persons to
have allocations made to the Company Stock Investment Option shall retroactively
be deemed ineffective, and the Account Balances of those Section 16 Persons
shall be restated as if all of their Deferred Compensation had been allocated to
the Interest Option at all times.
-22-
EXHIBIT 11
LOCKHEED MARTIN CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
Year ended December 31,
1995 1994 1993
-------- ------- --------
(In millions, except per share data)
ASSUMING NO DILUTION:
Average number of common shares outstanding 189.3 187.0 196.6
====== ====== ======
Earnings before cumulative effect of
change in accounting $ 682 $1,055 $ 829
Less: Preferred stock dividends (60) (60) (45)
------ ------ ------
Earnings before cumulative effect of change
in accounting applicable to common stock 622 995 784
Cumulative effect of change in accounting - (37) -
------ ------ ------
Net earnings applicable to common stock $ 622 $ 958 $ 784
====== ====== ======
Earnings per common share:
Before cumulative effect of change in accounting $ 3.28 $ 5.32 $ 3.99
Cumulative effect of change in accounting - (.20) -
------ ------ ------
$ 3.28 $ 5.12 $ 3.99
====== ====== ======
EXHIBIT 11 - CONTINUED
LOCKHEED MARTIN CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
Year ended December 31,
1995 1994 1993
-------- ------- --------
(In millions, except per share data)
ASSUMING FULL DILUTION:
Average number of common shares outstanding 189.3 187.0 196.6
Dilutive stock options-based on the treasury stock
method using the year-end market prices,
if higher than average market price 5.0 2.4 2.8
Assumed conversion of the Convertible Series A
Preferred Stock 28.9 28.9 21.7
------ ------ ------
223.2 218.3 221.1
====== ====== ======
Earnings before cumulative effect of change
in accounting $ 682 $1,055 $ 829
Cumulative effect of change in accounting - (37) -
------ ------ ------
Net earnings $ 682 $1,018 $ 829
====== ====== ======
Earnings per common share:
Before cumulative effect of change in accounting $ 3.05 $ 4.83 $ 3.75
Cumulative effect of change in accounting - (.17) -
------ ------ ------
$ 3.05 $ 4.66 $ 3.75
====== ====== ======
EXHIBIT 12
LOCKHEED MARTIN CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS OF DOLLARS, EXCEPT RATIO)
EARNINGS:
Net earnings $ 682
Taxes on income 407
Interest expense 288
Amortization of debt premium and discount, net (1)
Portion of rents representative of an interest factor 53
Earnings of less than 50% owned associated companies (4)
------
Adjusted earnings before taxes and fixed charges $1,425
======
FIXED CHARGES:
Interest expense $ 288
Amortization of debt premium and discount, net (1)
Portion of rents representative of an interest factor 53
Capitalized interest 3
------
Total fixed charges $ 343
======
RATIO OF EARNINGS TO FIXED CHARGES 4.2
======
The above ratio computation reflects the impact of merger related and
consolidation expenses recorded during 1995.
Exhibit 13
Mission Success
Our Commitment to achieve superior performance and total customer satisfaction
in every goal we set and every task we undertake
[Photo Appears Here]
- --------------------
Financial Highlights
- --------------------
- --------------------------------------------------------------------------------
In millions, except per share data 1995 1994
- --------------------------------------------------------------------------------
Net sales $22,853 $22,906
Earnings before cumulative 682(a) 1,055(b)
effect of change in accounting
- --------------------------------------------------------------------------------
Net earnings 682(a) 1,018(b)(c)
- --------------------------------------------------------------------------------
Earnings per common share, 3.05(a) 4.66(b)(c)
assuming full dilution
- --------------------------------------------------------------------------------
Cash dividends per 1.34 1.14
common share
- --------------------------------------------------------------------------------
Total assets 17,648 18,049
- --------------------------------------------------------------------------------
Debt:
Current maturities 722 285
Long-term 3,010 3,594
- --------------------------------------------------------------------------------
Shareholders' equity 6,433 6,086
- --------------------------------------------------------------------------------
Negotiated backlog 41,125 42,232
- --------------------------------------------------------------------------------
See notes 1,2,4, and 10 to the Consolidated Financial Statements.
(a) Earnings for 1995 include the effects of pretax charges totaling $690
million for merger related and consolidation expenses. These charges
reduced net earnings by $436 million, or $1.96 per common share.
(b) Earnings for 1994 include the favorable effects of two significant
nonrecurring transactions: a $118 million pretax gain from an initial
public offering of a portion of the common stock of a subsidiary and the
receipt of a $50 million acquisition termination fee. These nonrecurring
transactions increased net earnings by $70 million, or $.32 per common
share, and $30 million, or $.14 per common share, respectively.
(c) Effective January 1, 1994, the Corporation changed the method of accounting
for its ESOP. This change resulted in a cumulative effect adjustment which
reduced net earnings for 1994 by $37 million, or $.17 per common share.
Contents
To Our Shareholders 2
Vision Statement 7
Operating Companies 8
Operating Highlights
Aeronautics Sector 14
Electronics Sector 20
Energy & Environment 26
Sector
Information & 31
Technology Services
Sector
Space & Strategic 37
Missiles Sector
Financial Information 43
Corporate Directory 78
General Information 80
Dear Fellow Shareholders
A key measure of Lockheed Martin's mission success during 1995 was our record
for meeting major program milestones and commitments.
[PHOTO APPEARS HERE]
By any measure, 1995 was an extraordinarily successful year. The ambitious
merger of Lockheed and Martin Marietta, which we embarked upon just one year
ago, has surpassed expectations on almost every front: We met or exceeded all
financial targets, achieved nearly 100 percent mission success, captured vital
new business and made tangible progress toward realizing significant cost
savings. In addition, we have expanded our opportunities by recently entering
into a strategic agreement to acquire Loral's defense electronics and systems
integration businesses. This outstanding record is attributable to Lockheed
Martin's 160,000 men and women whose commitment, performance and willingness to
lead and to change have set a new standard.
Financial Results
In 1995, Lockheed Martin's financial strength further improved; both cash flow
and income were better than expectations. Net earnings were $1.12 billion
(excluding $436 million in merger related and consolidation charges), an
increase of 17 percent over 1994 earnings (adjusted for non-operating items). On
the same basis, 1995 fully diluted earnings per share were $5.01, or 14.6
percent better than the previous year.
Significantly, Lockheed Martin's ongoing emphasis on strong cash management
paid off with $882 million in free cash flow during 1995, which we applied in
several ways to enhance shareholder value, including paying dividends, reducing
debt, internal growth, acquisitions and repurchasing 2.3 million shares of
common stock.
In our first year of operation, sales were steady at $22.85 billion versus
$22.90 billion for 1994. We ended the year with a healthy backlog of $41
billion.
This strong overall financial performance was clearly reflected in the
investment community's confidence in Lockheed Martin stock, which increased in
value by more than 78 percent during 1995. The total shareholder return for
1995, including dividend reinvestment, topped 81 percent, well above market
averages.
2
Mission Success
"Mission Success" expresses Lockheed Martin's commitment to achieve superior
performance and total customer satisfaction in every goal we set and every task
we undertake. A key measure of Lockheed Martin's mission success during 1995 was
our record for meeting major program milestones and commitments. Just in terms
of strategic and tactical missile firings, space vehicle launches, satellites
delivered on orbit, aircraft first flights, and Space Shuttle missions -- which
totaled 215 during the year -- the men and women of Lockheed Martin achieved an
extraordinary 96 percent success rate. This outstanding performance was
reflected in excellent customer award fee ratings.
In our first year of operation, we also dealt with a few disappointments.
The first test flight of our new small launch vehicle was unsuccessful, and we
lost some competitions. We gained valuable insights for the future from these
experiences and redoubled our commitment to achieve 100 percent mission success
as we go forward.
Competitive Performance
In 1995, Lockheed Martin turned in an impressive record of new business awards.
Our win rate was over 60 percent of the number of major competitive bids pursued
and just under 60 percent of the dollar value bid. This is a record which far
surpasses industry averages. Capturing vital new business across the spectrum of
our products and services, for both government and commercial customers
worldwide, demonstrates Lockheed Martin's broad technological capabilities and
competitive strengths. Significantly, several major new business awards resulted
from synergies and system solutions realized from our merger.
The Operating Highlights portion of our report details Lockheed Martin's
numerous specific business achievements throughout the year. From a broad
strategic viewpoint, we:
.. Positioned our launch vehicle, satellite and space vehicle ground operations
businesses to provide customers with total system solutions, unmatched by
our competitors.
.. Reinforced our position in U.S. military aircraft and continued to expand
internationally.
.. Substantially strengthened our position in growing information systems
businesses, both government and commercial, with advanced technology
products and services.
.. Improved our competitive position in defense electronics businesses and
created market demand for next generation systems.
.. Maintained our role as the Department of Energy's single largest services
provider, while gaining greater presence in the environmental remediation
area.
.. Enhanced our international business base, which accounts for more than 15
percent of total sales, through synergies, strong in-country presence and
relationships with international partners.
Consolidation
On June 26, just three months after our merger and on our original schedule, we
announced a corporate-wide consolidation plan, which carries out Lockheed
Martin's commitment to maximize efficiencies, improve global competitiveness,
expand long-term employment prospects and enhance shareholder value. By year
end, we had met all key decision dates; all consolidation
3
[PHOTO APPEARS HERE]
Daniel M. Tellep
Chairman
Norman R. Augustine
President and
Chief Executive Officer
activities are on or ahead of schedule; and we had made substantive progress
toward realizing the significant cost savings anticipated. In the first five
years of the plan, we expect to realize net savings of about $5 billion; when
fully implemented, by 1999, we expect to achieve annual savings of $1.8 billion.
By increasing economies of scale, capitalizing on corporate-wide synergies and
leveraging our added financial strength, consolidation will benefit
shareholders, customers and employees.
Management Succession
Toward the end of Lockheed Martin's first year of operation, we also implemented
the succession plan we set in place in the August 1994 agreement to merge. As
part of this transition, Dan Tellep retired as chief executive officer effective
January 1, 1996 and will continue throughout 1996 as chairman of the board. Norm
Augustine, previously president, is now president and chief executive officer
and will also serve as vice chairman of the board of directors. Vance Coffman
was elected to the new position of executive vice president and chief operating
officer, effective January 1, 1996. Vance was formerly president of the
Corporation's Space & Strategic Missiles Sector and is succeeded in that
position by Mel Brashears, previously executive vice president of Lockheed
Martin Missiles & Space. This orderly transition helps to ensure the continued
smooth evolution of our merger and strong management continuity in pursuing our
strategic goals.
Other key management changes during 1995 were the retirements of Lockheed
Martin executive vice presidents, A. Thomas Young and Vincent N. Marafino,
following long and distinguished careers during which they made valuable
contributions to our heritage Martin Marietta and Lockheed companies,
respectively. Vince will continue as a member of the Lockheed Martin board of
directors.
Strategic Combination with Loral
In January 1996, Lockheed Martin and Loral announced a strategic combination to
solidify our industry leadership position for the 21st century. When the
transaction is complete, Lockheed Martin's annual sales will approach $30
billion with a total backlog in excess of $50 billion, and we expect to generate
between $1.5 billion and $2.0 billion in free cash annually. The Loral
transaction is the "set piece" for our business portfolio, effectively balancing
Lockheed Martin's prodigious strengths in major platform systems with additional
capabilities in electronics, information systems and systems integration.
Under key terms of the agreement, Loral's defense electronics and systems
integration businesses are integrated with those of Lockheed Martin, which also
holds a 20 percent equity position in the newly formed Loral Space &
Communications, expected to become one of the two or three leaders in the fast-
growing space communications industry. A major benefit in the agreement is
continued participation of Loral's senior management in our new enterprise.
Loral chairman and chief executive officer, Bernard Schwartz, will serve as a
vice chairman of the Lockheed Martin board of directors, along with Norm
Augustine. Loral president and chief
5
operating officer, Frank Lanza, will join Lockheed Martin's board of directors
and serve as an executive vice president and co-chief operating officer with
Vance Coffman. Frank also will serve as acting president of the new Tactical
Systems Sector, initially comprising the Loral businesses. This strong executive
team will help to ensure a smooth transition and should further enhance our
ability to deliver shareholder value in 1996 and beyond.
Looking Ahead
Lockheed Martin's plan for maximizing shareholder value includes ongoing cost
reductions, continuing margin expansion, strong positive cash flow and
opportunistic portfolio shaping. Major focus will be placed on debt reduction.
In 1995, we also announced broadly based executive stock ownership guidelines,
under which senior managers are expected over time to invest various multiples
of their compensation in Lockheed Martin stock. We believe this plan will
further incentivize management to continue pursuing shareholder value growth.
In carrying out the Lockheed Martin merger, we successfully integrated
several different cultures and today are operating as one fully integrated
company. A notable accomplishment is that, in less than a year, we have blended
two strong ethics programs into one which is among the strongest in any
industry. We also launched a comprehensive compliance program tailored to the
various operating environments of all our businesses. Lockheed Martin's success,
as always, will depend on our continued adherence to the highest standards of
ethical conduct at every level, which is our uncompromising pledge to our
colleagues, customers, shareholders, suppliers and the public.
Lockheed Martin is opening a new chapter in the future of our industry.
Success in our extremely competitive, diverse global business depends on the
intelligence, intensity and integrity with which we pursue our goals. We take on
this enormous challenge with enthusiasm and a sense of stewardship for the
future of our many heritage companies and the men and women who are committed
daily to mission success.
We also thank all of our shareholders for your continued support.
February 9, 1996
/s/ Daniel M. Tellep
Daniel M. Tellep
Chairman
/s/ Norman R. Augustine
Norman R. Augustine
President and Chief Executive Officer
6
[PHOTO APPEARS HERE]
Vision Statement
Our vision is for Lockheed Martin
to be recognized as the world's premier
systems engineering and technology
enterprise. Our mission is to build on
our aerospace heritage to meet the needs
of our customers with high-quality
products and services. And, in so doing,
produce superior returns for our
shareholders and foster growth and
achievement for our employees.
Sector Operating Companies
- ------------------------------------------------------------------------------------------------------------------------
Aeronautics . Lockheed Martin . Lockheed Martin
Skunk Works Aeronautics International
[PHOTO APPEARS HERE] Palmdale, California Ontario, California
James A. Blackwell, Jr. . Lockheed Martin . Lockheed Martin
President and Chief Operating Officer Aircraft Center Logistics Management
Greenville, South Carolina Arlington, Texas
-----------------------------------------------------------------------
Electronics . Lockheed Martin . Lockheed Martin
Armament Systems Control Systems
[PHOTO APPEARS HERE] Burlington, Vermont; Binghamton, New York;
Milan, Tennessee Fort Wayne, Indiana
Thomas A. Corcoran
President and Chief Operating Officer . Lockheed Martin . Lockheed Martin
Communications Systems Defense Systems
Camden, New Jersey Pittsfield, Massachusetts
-----------------------------------------------------------------------
Energy . Lockheed Martin . Lockheed Martin
& Environment Energy Systems Idaho Technologies
Oak Ridge, Tennessee Idaho Falls, Idaho
[PHOTO APPEARS HERE]
. Lockheed Martin . Sandia Corporation
Albert Narath Energy Research Corp. A Lockheed Martin Company
President and Chief Operating Officer Oak Ridge, Tennessee Albuquerque, New Mexico
. Innovative Ventures Corp.
Oak Ridge, Tennessee
-----------------------------------------------------------------------
Information . Lockheed Martin IMS . Lockheed Martin
& Technology Teaneck, New Jersey Space Operations
Services Titusville, Florida
. Lockheed Martin
[PHOTO APPEARS HERE] Management & Data Systems . Lockheed Martin
Valley Forge, Pennsylvania; Enterprise Information
Peter B. Teets Reston, Virginia Systems
President and Chief Operating Officer Orlando, Florida
. Lockheed Martin
Manned Space Systems . Lockheed Martin
Michoud, Louisiana Information Systems
Orlando, Florida
-----------------------------------------------------------------------
Space . Lockheed Martin . Lockheed Martin
& Strategic Missiles & Space Astronautics
Missiles Sunnyvale, California Denver, Colorado
[PHOTO APPEARS HERE]
Vance D. Coffman*
*As of January 1, 1996, Vance Coffman assumed the new post of executive vice
president and chief operating officer. Melvin Brashears succeeded Mr. Coffman as
president and chief operating officer of the Space & Strategic Missiles Sector.
8
- --------------------------------------------------------
.. Lockheed Martin . Lockheed Martin
Aeronautical Systems Aero & Naval Systems
Marietta, Georgia Baltimore, Maryland
.. Lockheed Martin
Tactical Aircraft Systems
Fort Worth, Texas
- --------------------------------------------------------------------------------------------
.. Lockheed Martin . Lockheed Martin . Lockheed Martin
Electronics & Missiles Ocean, Radar & Advanced Technology
Orlando and Ocala, Florida; Sensor Systems Laboratories
Troy, Alabama Syracuse and Utica, Camden, New Jersey
New York
.. Lockheed Martin . Lockheed Martin Canada
Government Electronic . Sanders Kanata, Ontario, Canada
Systems Nashua, New Hampshire
Moorestown, New Jersey . AV Technology, LLC
Chesterfield, Michigan
- -----------------------------------------------------------------------------------------
.. Lockheed Martin . Lockheed Martin . Lockheed Martin
Environmental Systems & Utility Services Specialty Components
Technologies Bethesda, Maryland Largo, Florida
Houston, Texas
. Technology Ventures Corp.
.. Lockheed Martin Albuquerque, New Mexico
Nevada Technologies, Inc.
Las Vegas, Nevada
- -----------------------------------------------------------------------------------------------------------------------------------
Lockheed Martin Lockheed Martin . Formtek . Lockheed Martin
Services Group Commercial Systems Group A Lockheed Martin Company Integrated Business Solutions
Pittsburgh, Pennsylvania; Orlando, Florida
.. KAPL . Access Graphics Palo Alto, California
A Lockheed Martin Company A Lockheed Martin Company . Real 3D
Niskayuna and West Milton, Boulder, Colorado . Lockheed Martin Orlando, Florida
New York; Commercial Electronics
Windsor, Connecticut . CalComp Hudson, New Hampshire
A Lockheed Martin Company
.. Lockheed Martin Anaheim, California . MountainGate
Services A Lockheed Martin Company
Cherry Hill, New Jersey; Reno, Nevada
Houston, Texas
- ---------------------------------------------------------
.. Lockheed Martin . Lockheed Martin
Astro Space Commercial Technical Operations
Sunnyvale, California Sunnyvale, California
Subsidiaries and Other Investments
.. Martin Marietta Materials, Inc.
.. Airport Group International, Inc.
.. Space Imaging, Inc.
.. Lockheed Martin Finance Corp.
.. M4 Environmental, L.P.
.. Oak Ridge, Tennessee
9
[PHOTO APPEARS HERE]
From the depths of the Earth's oceans to the far reaches of space Lockheed
Martin products and services set the standard for industry leadership in
aircraft, energy and environmental remediation, missiles, electronics,
information systems, spacecraft and launch vehicles. Every day, our talented and
dedicated employees utilize innovative technologies and redefine what is
possible.
[PHOTO APPEARS HERE]
[PHOTO APPEARS HERE]
[PHOTO APPEARS HERE]
- ------------------
Aeronautics Sector
- ------------------
The F-22 is designed to dominate the air combat arena by integrating
stealth, supercruise and advanced avionics.
[PHOTO APPEARS HERE]
In 1995, Lockheed Martin Aeronautics Sector successfully pursued a strategy that
sets the stage for continued profitability and enhanced competitiveness.
Aeronautics enters 1996 as a major force ready to grow its core lines of
military aircraft business as well as expand into related domestic and
international markets.
In an environment of declining defense budgets worldwide, the Aeronautics
Sector retains a leading competitive position in the military aircraft market
due to the breadth of its businesses, the capabilities of its products and the
success of its lean manufacturing initiatives. In addition, the Aeronautics
Sector has a strong international sales base with effective in-country presence
in key areas.
The U.S. Air Force F-22 is a high priority tactical aircraft program. It
completed a highly successful Critical Design Review in 1995. The F-22 team
began fabrication and assembly, and the first flight of the Engineering and
Manufacturing Development aircraft is expected in mid-1997. The F-22 is slated
to replace the aging F-15 in the air superiority role in the 21st century and
bring precision ground attack capability to the battlefield.
The F-22 is designed to dominate the air combat arena by integrating
stealth, supercruise and advanced avionics. It will operate freely in the
increasingly lethal surface-to-air and air-to-air missile environment, even when
outnumbered. The F-22 is the key to theater air defense strategy; it allows
allied forces to attack enemy ballistic and cruise missiles on the launcher or
during boost phase. The aircraft's impressive ground attack capabilities are
designed to provide a new level of versatility to future Joint Force Commanders.
Production of 442 aircraft is expected to begin in 1998.
Lockheed Martin is pursuing a range of tactical aircraft program
opportunities that include additional F-16 sales to international customers as
well as the U.S. Air Force, a series of F-16 derivatives, and development of
concepts for the future Joint Advanced Strike Technology (JAST) aircraft.
International sales of the F-16 fighter are a major factor in the
Aeronautics Sector's financial strength. At year end, Tactical Aircraft Systems
delivered the 3,500th F-16 and had a firm backlog of 414 F-16 orders worth about
$6 billion, including aircraft to be produced for Taiwan, Turkey, South Korea,
Greece and Singapore. Japan's FS-X, an F-16 derivative, successfully completed
its
14
[PHOTO APPEARS HERE]
The F-22 is the next generation air superiority fighter. The F-22 cockpit
mockup, here, illustrates the sophistication of this 21st century aircraft.
[PHOTO APPEARS HERE]
Making its debut on October 18, 1995, the C-130J is attracting the attention of
U.S. and international military transport customers. The United Kingdom and
Australia have selected the J as their next generation airlifter.
[PHOTO APPEARS HERE]
first flight in October. Tactical Aircraft Systems is assisting the prime
contractor, Mitsubishi Heavy Industries, in development and production of the
FS-X aircraft. The Japanese government is expected to announce full production
of the FS-X in 1996.
Today's F-16 aircraft is the product of seven major upgrades, and the U.S.
Air Force is planning additional F-16 capability improvements as part of its
Fighter Configuration Plan. Congress took the first step toward meeting the
force sustainment need by including funds for six F-16s in the 1996 defense
budget. Lockheed Martin also proposed the F-16 program as a pilot plant project
for acquisition reform during 1995, estimating an additional 15 percent cost
savings for future F-16s by applying commercial practices to contracting and
production. Implementation could begin in 1996, pending government direction.
Lockheed Martin is competing to develop concepts for the next major fighter
program, JAST, a common, affordable joint strike fighter for the U.S. Air Force,
Navy, Marines and British Royal Navy. Lockheed Martin Tactical Aircraft Systems
is coordinating the Corporation's overall JAST effort, which applies technical
expertise from companies throughout the Aeronautics Sector.
In 1995, the Aeronautics Sector conducted propulsion and wind tunnel tests
with a large-scale model representing the short-takeoff and vertical-landing
version of its JAST aircraft concept. Lockheed Martin Skunk Works built the
model, accomplishing this phase of the competition on schedule and within
budget. In 1996, the government is scheduled to select two contractors to build
JAST demonstrator aircraft, with first flights expected before 1999.
In the military transport market, interest in the C-130J Hercules program is
increasing among international and U.S. government customers. The United Kingdom
and Australia have selected the C-130J as their next generation airlifter, and
numerous international air forces have requested pricing data on airlift, tanker
and airborne early warning variants of this versatile aircraft. To date,
Lockheed Martin has delivered more than 2,100 C-130s, and 64 countries fly the
C-130 Hercules aircraft for troop and equipment transport, humanitarian aid
missions and disaster relief.
The advanced C-130J utilizes fully integrated digital avionics and dual
mission computers; head-up displays for both pilots; a new, highly efficient
propulsion system; and all-composite, six-bladed propellers. The U.S. Air Force
executed a commercial-type contract for its initial buy of C-130Js. In concert
with Defense Department acquisition reform goals, the C-130J program was
designated a commercial off-the-shelf item and is a regulatory pilot program.
In 1995, we delivered eight P-3 aircraft to the Republic of Korea Navy, the
14th nation to select the P-3 for its maritime patrol requirements. We submitted
a P-3 Orion-2000 proposal to the United Kingdom's Replacement Maritime Patrol
program. The United Kingdom anticipates replacing its aging fleet of Nimrod
aircraft with up to 25 new maritime patrol airplanes. Lockheed Martin is
offering a modernized version of the P-3, incorporating new engines, a glass
cockpit and an advanced mission avionics system. In an example of the new
Corporation's synergy, the Aeronautics and Electronics Sectors are jointly
studying development of an advanced, low-cost airborne early warning and control
suite that could be used on either the C-130 or the P-3 as an adjunct to AWACS
for the international market.
18
Lockheed Martin Skunk Works, a national asset since its inception during
World War II, is a world leader in advanced aircraft design and low-observable
technology. In 1995, the Skunk Works refurbished two SR-71A Blackbird
reconnaissance aircraft for the U.S. Air Force and unveiled DarkStar, a low-
observable, unpiloted air vehicle developed jointly with Boeing. DarkStar is
designed to provide near real-time, continuous, all-weather, wide-area
surveillance in support of tactical battlefield commanders.
The Skunk Works' technology leadership also extends to space. NASA selected
Lockheed Martin as one of three competitors for Phase I of the X-33 program, a
subscale version of a single-stage-to-orbit reusable launch vehicle. NASA is
expected to make a downselect this year and launch the first prototype in 1999.
As part of our corporate-wide consolidation plan, we restructured Lockheed
Martin Aircraft Services as a division within the Skunk Works. In 1995, Aircraft
Services delivered 18 heavily-modified special mission C-130s to the Air Force
and other customers. Modification work began on A-4M Skyhawk fighters for
Argentina, and Lockheed Argentina began operating the former government
modification facility at Cordoba. Lockheed Martin Aircraft Center, in
Greenville, South Carolina, will continue to pursue modification, maintenance
and contractor logistics support programs. The newly created Aeronautics
International is developing a strategy to market and manage offshore
modification and maintenance companies, as well as selected joint ventures.
In 1995, Lockheed Martin was at the forefront of the depot privatization
initiative. Led by Lockheed Martin Logistics Management, a 34-member team was
formed to examine the business potential of privatization. Initial efforts have
focused on the Air Logistics Centers at Kelly Air Force Base in San Antonio and
McClellan Air Force Base in Sacramento. Lockheed Martin's efforts are expected
to position the Corporation to win new business opportunities as the Air Force
institutes pilot programs for these depots.
Aeronautics Sector's Aero & Naval Systems production of General Electric CF6
thrust reversers remained strong in 1995 with production deliveries exceeding
plans. The CF6 overhaul and repair business doubled in 1995 and is expected to
grow in 1996 due to nacelle work for U.S. Air Force KC-10 aircraft and four new
airline customers. The improved quality and efficiency of composite thrust
reversers produced for Pratt & Whitney 4168 engines has resulted in an excellent
flight service record.
Aero & Naval's MK-41 Vertical Launching System continues to exceed
production schedules and meet mission success goals, including 13 combat firings
in support of NATO peacekeeping. The Turkish Navy has become the first customer
to buy the new shortened tactical version of the MK-41, opening a new market for
smaller classes of ships around the world.
The Aeronautics Sector is implementing a thorough, long-range strategy to
remain the leader in its lines of business, as well as to grow in a declining
industry. Continued emphasis on technological innovation, international sales
and a lean, effective organization is expected to yield continued success in the
marketplace and contribute to shareholder value well into the next century.
19
- ------------------
Electronics Sector
- ------------------
The Electronics Sector's growth strategy focuses on preserving its traditional
business base, while expanding its global defense electronics and related
commercial businesses.
[PHOTO APPEARS HERE]
Lockheed Martin Electronics Sector moved aggressively in 1995 to capture several
new contracts amid intensifying competition in the global defense electronics
marketplace. A strong win rate and outstanding program performance reflected
Electronics' dedication to be a growing market-driven, global business. The
organization made strides toward its vision of an enterprise in which "the whole
is greater than the sum of its parts" by leveraging across its business units
its strengths in terms of market position, ability to reduce costs, employee
skills and best practices.
Indicative of effective Lockheed Martin synergy is the U.S. Army's selection
of Lockheed Martin for the project definition/validation phase of the multi-
billion dollar Corps SAM/MEADS air defense program. The Lockheed Martin team,
led by Electronics & Missiles, includes six Lockheed Martin companies and
laboratory operations. An international program to provide ground forces with an
effective defense against tactical ballistic and cruise missiles and other
threats, the Corps SAM/MEADS team also includes three European partners.
Another example of synergy benefits is the contract award to Lockheed Martin
Control Systems for the avionics systems' central computer on the C-17
Globemaster III aircraft. Sanders is a major subcontractor to Control Systems,
providing the central processing unit.
Other major competitive wins in 1995 added to Electronics' portfolio of
business. Electronics & Missiles, on a team led by Westland Helicopter of
Yeovil, England, is to provide fire control, missile, night vision and targeting
systems for 67 Apache helicopters for the British Army. The potential business
from this program is estimated at more than $1 billion. Thirty Apaches ordered
by the Netherlands will be equipped with Target Acquisition Designation
Sight/Pilot Night Vision Sensor (TADS/PNVS) systems which allow pilots to fly at
low altitudes in total darkness or under poor weather conditions. The Royal
Netherlands Air Force also placed orders for Hellfire II antiarmor missiles,
produced jointly by Lockheed Martin and Rockwell International.
The Netherlands TADS/PNVS units will be the first configured for possible
integration with the Longbow millimeter wave radar fire control and missile
systems. The Sector's commitment to mission success was aptly demonstrated by
successful test flights of both Hellfire and its upgraded derivative, Longbow.
Low-rate initial production of Longbow antiarmor missiles is expected to start
in 1996.
20
Sanders solidified its position among industry leaders in electronics
countermeasures systems with several key wins, including its selection to
produce the Advanced Threat Infrared Countermeasures system, the next-generation
laser-based system to protect aircraft from heat-seeking missiles and provide a
common missile warning system for U.S. Army, Navy and Air Force aircraft. The
long-term potential of these programs is more than $1 billion.
Additionally, Sanders was selected to produce the Integrated Defensive
Electronic Countermeasures (IDECM) radio frequency subsystem that is to provide
increased survivability against advanced missile threats for U.S. Navy and Air
Force aircraft. The production program for IDECM could total more than $1
billion.
Lockheed Martin Government Electronic Systems is a leader in developing
multifunction, phased-array radars for the U.S. Navy, the Electronics Sector's
single largest customer. In 1995, the Navy selected Government Electronic
Systems to continue upgrades to the capabilities and performance of its AEGIS
combat system. These efforts, which include modification to the phased-array
radar, are part of a contract valued at $577 million through the end of the
decade, and may lead to similar improvements to AEGIS equipped ships of the
Japanese Maritime Self Defense Force. In addition, Government Electronic Systems
received contracts in 1995 worth more than $400 million for AEGIS equipment,
production and life cycle support.
In another important Navy program, Lockheed Martin Ocean, Radar & Sensor
Systems produced on cost and delivered on schedule in 1995 the first BSY-2
combat system for the Seawolf submarine. The Navy has characterized initial
performance of the system as outstanding.
The Electronics Sector continued to demonstrate its competitiveness in
international defense and commercial electronics business segments with other
significant achievements. The Taiwan Air Force selected Sanders to build
computer-based mission planning systems for that country's F-16 fighters. Ocean,
Radar & Sensor Systems will provide long-range radar systems to the Romanian
government for that nation's airspace management system and, in a major advance
into an adjacent market, was selected to provide a marine traffic management
system for Ras Tanura, a large Saudi Arabian port on the Arabian Gulf. Other
traffic management wins included strategically significant contracts for the
Straits of Gibraltar and in Singapore.
In other major developments, Lockheed Martin Ordnance Systems won a contract
to produce the HYDRA-70 rocket system for the U.S. Army. The most widely used
helicopter weapon in the world today, the HYDRA-70 is a multi-purpose rocket
system used by all branches of the U.S. military. Also, the U.S. Marine Corps
executed a contract with Lockheed Martin Armament Systems to produce 17 Light
Armored Vehicle - Air Defense (LAV-AD) systems. The LAV-AD system, which
protects Marine forces against air attack, utilizes a Blazer air defense turret
on a light armored vehicle chassis. The Blazer turret is equipped with a 25mm
Gatling gun and a pair of Stinger missile launchers.
The U.S. Air Force selected Electronics & Missiles to develop and
demonstrate the Wind-Corrected Munitions Dispenser, positioning Lockheed Martin
to compete for a contract potentially worth several billion dollars. The Wind-
Corrected Munitions Dispenser is designed to provide all-weather autonomous
guidance for air-to-ground tactical munitions
21
[PHOTO APPEARS HERE]
Integrated Defenses Electronic Countermeasures (IDECM) system consists of a
variety of components that together improve the survivability of aircraft. The
Fiber Optic Towed Decoy, here, is used to confuse enemy missiles.
dispensers for fighter and bomber aircraft. The U.S. Navy chose the Low Altitude
Navigation & Targeting Infrared for Night system (LANTIRN) for the F-14 Tomcat
as part of the service's Precision Strike Program. Electronics & Missiles also
won its third contract under the Joint Advanced Strike Technology (JAST)
program, a U.S. Navy/Air Force initiative to develop advanced technologies for a
family of fighter aircraft in the next century.
Lockheed Martin Defense Systems won a contract to perform transmission
design work for the Crusader program, the U.S. Army's advanced field artillery
system. Lockheed Martin Communications Systems won new business in the
electronic key management systems area and was chosen to develop the next-
generation digital secure terminal equipment (STE), which is designed to provide
secure digital communications capability to military and civil government
agencies into the next century. Lockheed Martin Canada leads a team that won the
Canadian Army Electronic Warfare Control & Analysis Centre, the first in the
Army's series of tactical information management programs.
Electronics invested in three new operations to strengthen and expand
business opportunities. Lockheed Martin acquired from GE Aircraft Engines its
engine controls manufacturing and service business in Fort Wayne, Indiana.
Combining the Fort Wayne operation with Lockheed Martin Control Systems in
Binghamton, New York, creates a world-class organization specializing in design,
development, production and service of advanced electronic engine controls, as
well as a wide range of controls for other aircraft and industrial applications.
Defense Systems formed AV Technology, LLC, which will supply turret systems and
light armored combat vehicles to the global defense marketplace. Lockheed Martin
has taken an 80 percent interest in the new company. Ocean, Radar & Sensor
Systems continued to diversify beyond traditional product offerings with the
purchase of ERAAM, a French firm specializing in the design and development of
state-of-the-art safety and traffic management systems.
In 1995, Electronics also initiated consolidation plans to reduce costs and
strengthen competitiveness. Those actions, which will eliminate 2.1 million
square feet of excess capacity and reduce employment by roughly nine percent,
are expected to be completed in 1996. Electronics also is leading a corporate-
wide effort to leverage the combined volume of procurement requirements of
heritage Lockheed and Martin Marietta, an initiative that is expected to
generate more than $50 million in annual savings on the purchase of direct
commodities. These plans fulfill the Electronics Sector's commitment to
customers to aggressively leverage the strengths of the new Lockheed Martin to
lower costs and improve efficiency.
23
[PHOTO APPEARS HERE]
The AEGIS shipboard combat system is capable of simultaneously engaging threats
from the air, the surface and under the sea. Developed for the U.S. Navy, AEGIS
also is deployed by the Japanese Maritime Self Defense Force.
[PHOTO APPEARS HERE]
- ---------------------------
Energy & Environment Sector
- ---------------------------
An important achievement in 1995 was winning the performance-based contract to
provide support services for the Department of Energy's Nevada Test Site.
[PHOTO APPEARS HERE]
One of Lockheed Martin's early decisions in 1995 was to establish a fifth sector
- -- Energy & Environment -- to strengthen its role in managing and operating
Department of Energy facilities. Establishment of the new sector also signals
the Corporation's intent, directly and through ventures with other corporations,
to gain a large presence in the domestic and international environmental
remediation business.
The Energy & Environment Sector's overall strategy is to apply its
technology skills to manage Department of Energy facilities and leverage that
experience to create new business opportunities. For example, the Energy &
Environment Sector is positioned to pursue Department of Energy privatization
initiatives that, in turn, lead to other privatization and military base
environmental remediation opportunities in the United States and abroad.
An important achievement in 1995 was winning the performance-based contract
to provide support services for the Department of Energy's Nevada Test Site.
Lockheed Martin, as an integrated subcontractor to Bechtel National, Inc., will
manage the testing, counterproliferation and technology base of the Nevada Test
Site, beginning in 1996. We established a new operating unit in the Energy &
Environment Sector, Lockheed Martin Nevada Technologies, Inc., for the effort.
Lockheed Martin Energy Systems signed a two-year extension to manage and
operate the Department of Energy's Oak Ridge facilities and the environmental
management programs at the Portsmouth, Ohio, and Paducah, Kentucky, facilities.
This extension continues our management of these facilities through March 31,
1998, with an estimated Department of Energy budget of $3.5 billion. In
December, the Department of Energy and Lockheed Martin agreed to operate the Oak
Ridge National Laboratory, a major national science center, under a separate
contract, which will be performed by a new operating unit in the Energy &
Environment Sector, Lockheed Martin Energy Research Corporation.
26
[PHOTO APPEARS HERE]
Sandia National Laboratories, managed by Lockheed Martin for the Department of
Energy, is at the forefront of robotic vehicle design. Robots, like the Ratler,
may explore the moon and planets.
[PHOTO APPEARS HERE]
In 1995, the Department of Energy approved the resumption of nuclear
materials receipt, storage and shipment operations at Oak Ridge's Y-12 plant.
This was the culmination of a comprehensive review and revamping of operations
and procedures by the government and Lockheed Martin over the past year. The
assessment involved critical surveys of every aspect of operations in the
program as the nation's nuclear materials stewardship transitions from the Cold
War.
Lockheed Martin's Energy & Environment Sector also manages the Idaho
National Engineering Laboratory and Sandia National Laboratories, both of which
are in the forefront of military and civil research, as well as technology
development for possible transfer to the private sector.
In 1995, Sandia offered a revolutionary automobile airbag design -- the
result of a business-government partnership that permits Department of Energy
laboratories to commercialize certain technologies. Currently, the Idaho
National Engineering Laboratory is working on a neutron cancer treatment
program. Lockheed Martin Specialty Components is the management and operating
contractor for the Department of Energy's Pinellas Plant. For more than 40
years, the plant's Energy Department mission was to manufacture components for
nuclear weapons. The defense production mission was successfully completed, and
the mission now is environmental management and restoration of the facility.
Concurrently, Specialty Components is using the facility, technology,
equipment and personnel, once used solely for defense activities, to develop a
commercial business.
Specialty Components' service centers, developed around core technologies,
offer extensive laboratory and technical consulting to local businesses.
Technology transfer funding and other grant programs provided by the Department
of Energy have enabled many local, small businesses to take advantage of the
plant's resources for product design and/or manufacturing.
As the single largest provider of services to the Department of Energy,
Lockheed Martin is focused on maintaining high quality operations, providing
rapid response when corrective actions are needed and carrying out the
laboratories' challenging missions.
This year, the Energy & Environment Sector is expected to implement the
"system of laboratories'' concept among the three national laboratories operated
by Lockheed Martin. The concept is designed to enhance the interchange of
information and skills among sites and across
The Rimfire high voltage switch, shown left, controls more than 5 million volts
for the Particle Beam Fusion Accelerator (PBFA) II at Sandia National
Laboratories. PBFA is made up of 36 modules, each producing a powerful pulse of
energy. Rimfire switches synchronize those pulses to within 10 billionths of a
second.
29
programs. Our strategy is to implement the best management practices across all
Lockheed Martin-managed facilities to reduce operating costs and improve their
efficiency. We are examining ways to improve such functions as procurement,
finance, training and construction, and will submit recommendations to the
Secretary of Energy this year. We also are confident that this approach will
yield significant new business opportunities in the public and private sectors.
Last year, Lockheed Martin Utility Services was awarded a three-year
extension, through September 30, 1998, with an option for an additional two
years under its existing contract, to maintain the Portsmouth and Paducah
uranium enrichment facilities for the U.S. Enrichment Corporation. Under the
extension, Lockheed Martin and the U.S. Enrichment Corporation will manage an
operating budget in excess of $1 billion.
Lockheed Martin and Molten Metal Technology, Inc. have entered into
agreements intended to strengthen their environmental services business. Under
these agreements, which are subject to certain conditions, including regulatory
approvals, Lockheed Martin Environmental Systems & Technologies will sell its
Retech environmental division to M4 Environmental L.P., a limited partnership
jointly-owned by Lockheed Martin and Molten Metal Technology. Retech designs and
manufactures plasma furnaces for the metallurgical and remediation markets. M4
Environmental was created in 1994 to supply Molten Metal Technology's waste
recycling technology to Department of Defense and Department of Energy
customers.
This year, the Energy & Environment Sector is expected to implement the "system
of laboratories" concept among the three national laboratories operated by
Lockheed Martin.
30
- ----------------------------------------
Information & Technology Services Sector
- ----------------------------------------
Lockheed Martin is penetrating the federal civil market, supporting a number of
government agencies as they update their information systems.
[PHOTO APPEARS HERE]
Lockheed Martin Information & Technology Services Sector provides systems
design, development, integration and operations for federal, state and municipal
governments, as well as information systems and products to commercial
customers. In 1995, the Information & Technology Services Sector continued an
outstanding competitive win rate by providing cost-effective flexible, full-
service solutions for complex customer problems.
The Lockheed Martin IMS experience in providing solutions to state and
municipal government agencies served the Corporation well in 1995. Lockheed
Martin, supporting Citibank, won contracts in eleven states in the emerging
Electronic Benefit Transfer business. Under these contracts, state and federal
benefits, including food stamps, Aid to Families with Dependent Children and
other assistance programs will be converted from traditional paper based systems
to a debit card system, enhancing benefit distribution and reducing fraud.
IMS is implementing Child Support Enforcement Systems in several states,
including California, Pennsylvania and Massachusetts. These systems facilitate
implementation of court orders, greatly increasing collection of child support
payments. In 1995, IMS won additional programs in Florida and Hawaii.
An industry leader in transportation systems and services, IMS is positioned
to capture new business as the majority of U.S. toll roads convert to electronic
toll collection by the year 2000. In addition, in 1995 IMS began providing a
weigh station bypass service in California called PrePass. Through PrePass,
truck operators save time and money by having their credentials verified and
weight checked electronically, without having to stop at weigh stations.
Lockheed Martin Services Group is penetrating the federal civil market,
supporting a number of government agencies as they update their information
systems. The Services Group is currently under contract to modernize the
information systems of the Social Security Administration (SSA). Development of
a paperless processing pilot at the SSA Great Lakes Processing Center was deemed
so exemplary that the President's National Performance Review Committee selected
the SSA/Lockheed Martin team to receive a Hammer Award for leadership in
reinventing government.
31
[PHOTO APPEARS HERE]
Lockheed Martin Information Systems is developing an Automated Fingerprint
Identification Segment (AFIS) for the FBI that will provide 24-hour turn-around
on requests that now take months to process.
[PHOTO APPEARS HERE]
Motorists using the Verrazano-Narrows Bridge in New York City can save time and
avoid lines by using the E-ZPass electronic toll collection service provided by
Lockheed Martin IMS.
The Services Group also operates information systems for the Environmental
Protection Agency, including the National Environmental Supercomputing Center,
where advanced scientific visualization techniques are used to model the
movement of pollutants through the air and water and to assess the effectiveness
of possible control mechanisms. Services Group during 1995 enjoyed competitive
wins with the U.S. Department of Treasury, the General Services Administration
and the U.S. Patent and Trademark Office. During 1995, Lockheed Martin
Information Systems was under contract with the FBI to demonstrate key elements
of the future Automated Fingerprint Identification Segment (AFIS). When
operational, AFIS will be able to match, within minutes, a high priority set of
ten fingerprints against a data base of 400 million fingerprints -- a
significant improvement over today's search process.
Lockheed Martin Information Systems enhanced its position in the simulation
and training business during 1995 by winning the U.S. Army's Advanced
Distributed Simulation Technology II program and a simulation and training
support contract for the U.S. Air Force 58th Special Operations Wing. These
simulation products are designed to assist our armed forces in improving weapons
systems, analyzing resource allocations, and training and evaluating personnel
in realistic simulated combat environments.
Building on its heritage in military simulation systems, Information Systems
launched a commercial product line of three dimensional computer graphics. This
state-of-the-art Real 3D(TM) product line includes arcade graphics boards
developed for Sega Enterprises, graphics engines for commercial training and
chip sets for the personal computer market, and real time software applications.
The Information & Technology Services Sector is on the cutting edge of
rapidly evolving distributed client-server computing. Numerous customers have
contracted with the Sector to help re-engineer their business processes and
introduce this advanced technology. Lockheed Martin Management & Data Systems
(M&DS) has developed a system that entails nearly three million lines of code
and a 300 gigabyte operational database to support 80 worldwide user sites.
Enterprise Information Systems employs client-server technology to develop
Lockheed Martin internal information systems, providing efficiencies to the
operating companies and honing the skills of our development cadres for external
applications. MountainGate designs, develops and sells commercially a wide
variety of modern, cost-effective information storage subsystems that can be
integral components of such information systems. Formtek develops and sells
commercially enterprise software that permits integration of existing
applications and databases into modern enterprise systems. Access Graphics sells
and supports UNIX-based computing solutions from corporations such as Sun
Microsystems and Silicon Graphics.
Highlighting a successful year in providing commercial information
technology products and services, Lockheed Martin Integrated Business Solutions
solidified its role as the technology partner of choice for outsourcing by
signing a contract with Melville Corporation, a leading retail conglomerate
including such well-known chains as Thom McAn, Foot Action and Kay Bee Toys.
Integrated Business Solutions will consolidate and modernize Melville's existing
information systems operations to provide better service at lower costs.
Photo Right:
NASA has selected United Space Alliance, a joint venture between Lockheed Martin
and Rockwell International, to negotiate a sole-source contract that will
consolidate the Space Shuttle Program under a single prime contractor.
34
[PHOTO APPEARS HERE]
CalComp, a Lockheed Martin company, had a successful year in 1995 focusing
on Graphics Arts applications, including color inkjet printing and a 4 x 5-inch
input tablet, and restructured its global distribution channels. Lockheed Martin
Commercial Electronics continued its outstanding record of high quality
electronic manufacturing services for its diverse set of customers in the
computer and telecommunications industries.
Underlying the Sector's growth businesses is a solid core of NASA programs.
The Corporation's effort to achieve 100 percent mission success has been a key
to sustaining our role with this important customer. In 1995, that commitment to
mission success was demonstrated by seven successful Space Shuttle launches,
including two historic linkups with the Russian Mir space station. Lockheed
Martin Space Operations performs all ground processing operations from Shuttle
landing through launch, as well as solid rocket booster retrieval and launch
facility maintenance.
NASA has announced its intention to negotiate on a sole-source basis a
contract for its Space Flight Operations with the United Space Alliance (USA), a
joint venture between Lockheed Martin and Rockwell International. USA was formed
to provide NASA and its Space Shuttle program reduced costs through streamlined
operations while maintaining dedication to safety and mission success.
Lockheed Martin Manned Space Systems continues to develop the Super Light
Weight Tank (SLWT) for the Space Shuttle's scheduled December 1997 launch.
Employing a new Lockheed Martin-developed aluminum-lithium alloy, which is both
lighter and significantly stronger than the aluminum currently in use, SLWT will
increase the Shuttle's payload capacity by 34 percent for the orbit needed to
support the International Space Station program.
In addition, Services Group provides a wide range of support to NASA,
including development, integration and operation of life sciences experiments at
Johnson Space Center and Ames Research Center, satellite control at Goddard
Space Flight Center and research and technology support at Langley Research
Center.
Products and services provided to the Department of Defense are broad and
diverse. In 1995, the Sector also won the U.S. Army Global Command and Control
System contract to integrate three existing systems and link the Army with the
Joint Staff; won the U.S. Air Force Network Support Program for tracking
military satellites; contracted for continued production of the U.S. Navy's
Consolidated Automated Support System for avionics test equipment; and signed an
extension to our contract supporting the U.S. Navy nuclear-powered fleet at the
Knolls Atomic Power Laboratory.
These important awards augment a substantial business portfolio providing
for design, development, training, operation and maintenance of complex
information systems for the Defense Department. As modernization and
privatization continue, Defense Department sales are expected to be stable.
36
- ---------------------------------
Space & Strategic Missiles Sector
- ---------------------------------
Our commitment to mission success was demonstrated in 1995 with the successful
launches of four national security payloads aboard Titan IV vehicles, 12 Atlas
launches and seven Lockheed Martin-built satellites placed into orbit.
[PHOTO APPEARS HERE]
The Space & Strategic Missiles Sector took actions last year that should
position Lockheed Martin to remain the world's space systems leader well into
the 21st century. To this end, in 1995, Lockheed Martin announced a strategic
investment in its family of launch vehicles, expanded its presence in the
telecommunications services market, and consolidated its commercial satellite
production.
A key element of the Corporation's $300 million Launch Vehicle Leadership
strategy is to develop a re-engined single-stage Atlas booster with a single-
engine cryogenic Centaur upper stage. The new Atlas IIAR is designed for greater
reliability and cost effectiveness due principally to simplifying and reducing
the number of propulsion systems. The first Atlas IIAR should be launched in
late 1998.
The Atlas IIAR is the building block of Lockheed Martin's plan for common
hardware. The use of common boosters, Centaur upper stages, common adapters,
avionics and engines simplifies manufacturing and reduces launch costs. The
Atlas IIAR also effectively positions Lockheed Martin to compete for the U.S.
Air Force's Evolved Expendable Launch Vehicle (EELV). In 1995, Lockheed Martin
Astronautics was one of four companies selected to develop EELV designs. Another
element of our launch vehicle strategy is an improved Titan IV/B with a Solid
Rocket Motor Upgrade that is expected to increase the Titan's lift capability
significantly.
As part of Lockheed Martin's strategy to serve the broadest range of launch
vehicle customers, we formed ILS International Launch Services in 1995 -- a
joint venture with Russia's Khrunichev State Research and Production Space
Center and RSC Energia -- to market the Atlas and Proton rockets to commercial
customers worldwide. The combined capabilities of Titan, Atlas, Proton and
Lockheed Martin Launch Vehicle will offer customers services across the orbit
and payload spectrum, making Lockheed Martin a powerful competitor in the global
launch services business. In 1995, the Corporation progressed on its strategy
to realize near-term cost savings by consolidating launch vehicle production and
operations in Denver.
Lockheed Martin's continued commitment to mission success was well
demonstrated in 1995 with the successful launches of four national security
payloads aboard Titan IV vehicles, 12 successful Atlas launches and seven
Lockheed Martin-built satellites successfully placed into orbit.
37
[PHOTO APPEARS HERE]
[PHOTO APPEARS HERE]
Lockheed Martin is a premier designer and producer of environmental monitoring
satellites such as TIROS, here. Today, TIROS weather satellites meet the data
requirements of 140 nations.
The Space & Strategic Missiles Sector in 1995 laid the groundwork for a
global telecommunications business with plans to build, launch and operate a
satellite system, called Astrolink.(TM) This project reflects the Corporation's
commitment to the commercial space business and should expand our role in the
growing telecommunications services industry. Lockheed Martin expects to proceed
with the project after obtaining regulatory approval, strategic alliance
commitments and external investment.
Lockheed Martin's Astro Space Commercial will build on a rich heritage of
commercial satellite design and production. A new world-class facility in
Sunnyvale, California, should accelerate production cycle times and reduce
costs. Our initial commercial goals call for making the new factory operational
in early 1997 and capable of meeting an 18-month delivery cycle, with capacity
for producing eight satellites annually. We expect productivity improvements
eventually will increase the annual throughput to 16 spacecraft.
Indicative of Lockheed Martin's commitment to provide customers with total
system solutions is the Asia Cellular Satellite System (ACeS). With this key win
in 1995, Lockheed Martin will provide a full turnkey operation -- the first
regional wireless mobile system of its kind -- with two A2100 spacecraft, the
Corporation's most advanced global communications satellite. In addition, under
the $650 million contract, Lockheed Martin is to provide full ground
architecture, as well as overall systems engineering and integration, and launch
services.
When complete in 1998, ACeS will offer voice, facsimile and pager services
to hand-held mobile and fixed telephone users in Southeast Asia. ACeS is an
important international win for Lockheed Martin in a burgeoning communications
industry. The ACeS consortium includes PT. Pasifik Satelit Nusantara of
Indonesia, Philippine Long Distance Telephone Company and Jasmine International
PLC of Thailand.
Another major international win in 1995 was the ChinaStar-1 satellite
program for China Orient Telecomm Satellite Co. Ltd. of Beijing. ChinaStar-1
will be an A2100 spacecraft to provide service in Ku and C frequency bands for
voice, data and television services to the People's Republic of China.
In 1995, the U.S. Air Force selected Lockheed Martin Missiles & Space to
build the fifth and sixth Milstar satellites, an award valued at $1.3 billion.
Milstar, a cornerstone of America's defense preparedness, provides rapid,
secure, multi-service military communications to tactical and strategic users
anywhere in the world. Milstar, which functions as a secure switchboard in
space, provides U.S. military forces with capabilities not available through
current satellites, including immunity to jamming and interception.
In addition, Lockheed Martin is now producing second generation satellites
for the Global Positioning System (GPS), which provides highly accurate position
location to military and civilian users worldwide. The first of 21 satellites
for the GPS IIR program is scheduled for delivery in 1996.
40
NASA last year chose Lockheed Martin Astronautics to provide the lander and
orbiting spacecraft for the Mars Surveyor Program, which will study the martian
atmosphere and soil as well as search for water on the red planet. Late in the
year, NASA also selected Astronautics to build the Stardust spacecraft for its
Discovery Program. Stardust will collect interstellar material and dust from a
comet and return them to Earth for laboratory studies. In addition, we remain a
principal subcontractor on the International Space Station with work valued at
$1.3 billion.
Lockheed Martin Technical Operations continued its record of mission success
in engineering and technical services for the Department of Defense, NASA and
other government and private sector customers, and has consistently received
award fees in the "excellent" category. Among the 50 orbiting satellites
controlled from Lockheed Martin Technical Operations is Hubble Space Telescope,
which is providing some of the most startling images of the universe, including
stellar formation. Missiles & Space also provides NASA with a wide range of
Hubble-related service and support functions, including preparation and
execution of servicing missions, as well as telescope operations support at
Goddard Space Flight Center.
Another dynamic element of Space & Strategic Missiles Sector's business is
ballistic missile development and production. In 1995, 14 Trident fleet
ballistic missiles were successfully launched as part of the Navy's 1995
operational test flight program. Missiles & Space has produced six generations
of submarine-launched strategic missiles for the U.S. Navy's Fleet Ballistic
Missile program.
The Sector also completed four demonstration/validation flights of the
Theater High Altitude Area Defense (THAAD), the first weapon system designed
specifically to defend against theater ballistic missiles. As prime contractor
for THAAD, Lockheed Martin is working under a four-year, $745 million contract
awarded in 1992 by the U.S. Army.
The complementary capabilities inherent in the Lockheed Martin merger are
evident in the products and services of the Space & Strategic Missiles Sector,
which is solidifying its position as a leader in satellite construction and
launch services. As demands for high-speed global communications and remote
sensing rise, Lockheed Martin is well poised to grow its commercial and
international space business.
The complementary capabilities inherent in the Lockheed Martin merger are
evident in the products and services of the Space & Strategic Missiles Sector.
41
[PHOTO APPEARS HERE]
The second Titan IV launch of a Department of Defense Milstar satellite on
November 7 demonstrates the unique synergy of capabilities inherent in Lockheed
Martin, which built the launch vehicle, its Centaur upper stage and the
satellite, and integrated the stack before launch.
Financial Information
- --------------------------------------------------------------------------------
44 Management's Discussion and
Analysis of Financial Condition
and Results of Operations
57 The Corporation's Responsibility
for Financial Reporting
57 Report of Ernst & Young LLP,
Independent Auditors
58 Consolidated Statement
of Earnings
59 Consolidated Statement
of Cash Flows
60 Consolidated Balance Sheet
61 Consolidated Statement
of Stockholders' Equity
62 Notes to Consolidated
Financial Statements
77 Six Year Summary
43
Management's Discussion and Analysis of Financial
Condition and Results of Operations
- --------------------------------------------------------------------------------
On March 15, 1995, following the approval of the stockholders of each
corporation, Lockheed Corporation (Lockheed) and Martin Marietta Corporation
(Martin Marietta) consummated a transaction (the Business Combination) pursuant
to which Lockheed and Martin Marietta became wholly-owned subsidiaries of a
newly created holding corporation, Lockheed Martin Corporation (Lockheed Martin
or the Corporation). The Business Combination qualified for the pooling of
interests method of accounting (see Note 2). Subsequent to the Business
Combination, Lockheed, Martin Marietta and certain other subsidiaries were
merged with and into the Corporation. The discussion which follows reflects the
combined financial condition and results of operations of Lockheed Martin, and
should be read in conjunction with the audited consolidated financial statements
included herein.
Recent Developments
On January 7, 1996, the Corporation entered into an Agreement and Plan of Merger
(the Merger Agreement) with Loral Corporation (Loral) for a series of
interrelated transactions with a total estimated value of approximately $9.4
billion. Loral is a leading supplier of advanced electronic systems, components
and services to U.S. and foreign governments for defense and non-defense
purposes. Under the terms of the Merger Agreement, the Corporation intends to
acquire the defense electronics and systems integration businesses and certain
other businesses of Loral for approximately $9.1 billion, including $2.1 billion
of assumed debt. Of the total, approximately $7 billion will be paid directly to
Loral shareholders by the Corporation through a tender offer for all outstanding
shares of Loral common stock for $38.00 per share in cash. Following the
consummation of the tender offer, Loral will distribute, for each share of Loral
common stock previously held, one share of common stock of a newly-formed
company, Loral Space & Communications, Ltd. (Loral Space), which will own
substantially all of the space and satellite telecommunications interests of
Loral. Finally, the Corporation will invest $344 million in Loral Space for the
acquisition of shares of preferred stock that are convertible into 20 percent of
Loral Space's common stock on a fully diluted basis. The Corporation's offer is
contingent, among other things, on the tendering of two-thirds of Loral's
outstanding shares and on regulatory approvals, and is expected to close in the
first half of 1996. If the business combination with Loral is consummated,
the purchase method of accounting will be used to record the transactions,
resulting in a combined entity with anticipated annual net sales of
approximately $30 billion. As more fully described in the Capital Structure and
Resources section below, management intends to arrange through a syndicate of
banks two credit facilities totalling $10 billion which would be available to
finance the transactions. If the business combination with Loral is consummated,
these credit facilities would replace the $1.5 billion revolving credit facility
in effect at December 31, 1995.
44
Lockheed Martin Corporation
Business Acquisitions
Effective May 1, 1994, the Corporation purchased the Space Systems Division of
General Dynamics Corporation (GD Space Systems) for approximately $160 million
in cash, expanding the Corporation's presence in the intermediate-lift space
launch vehicle market with the Atlas series of launch vehicles. On April 2,
1993, the Corporation consummated a transaction with General Electric Company
(GE) valued at approximately $3 billion to combine the aerospace and certain
other businesses of GE (collectively, the GE Aerospace businesses) with the
businesses of the Corporation in the form of affiliated corporations. Effective
February 28, 1993, the Corporation acquired the tactical military aircraft
business of General Dynamics for approximately $1.5 billion in cash, plus the
assumption of certain liabilities related to the business. All of the
acquisitions discussed above were recorded under the purchase method of
accounting, with operating results from each acquisition included with those of
the Corporation beginning on the respective closing dates.
Results of Operations
The Corporation's operating cycle is long-term and involves various types of
production contracts and varying production delivery schedules. Accordingly,
results of a particular year, or year-to-year comparisons of recorded sales and
profits, may not be indicative of future operating results. The following
comparative analysis should be viewed in this context.
The Corporation's consolidated net sales for 1995 were $22.9 billion. Net sales
for the year remained relatively unchanged as compared to 1994 net sales, which
in turn were two percent over the $22.4 billion reported for 1993. Sales
increases for 1995 in the Space & Strategic Missiles segment and the Information
& Technology Services segment were largely offset by sales declines in the
Aeronautics segment and the Electronics segment. Sales for 1994 increased over
1993 levels at Aeronautics and at Information & Technology Services, while sales
at Electronics remained relatively flat and sales at Space & Strategic Missiles
decreased in that year. Although the U.S. Government remained the Corporation's
largest customer, the percentage of net sales decreased to 69 percent in 1995
from 72 percent in 1994 and 78 percent in 1993. Sales to foreign governments,
including sales made through the U.S. Government, as a percentage of net sales
were 13 percent in 1995, 15 percent in 1994 and 12 percent in 1993, while
commercial sales in those same periods were 18 percent, 13 percent and 10
percent, respectively.
The Corporation's operating profit (earnings before interest and taxes)
decreased in 1995 to $1.4 billion from $2.0 billion in 1994. On June 26, 1995,
the Corporation announced a corporate-wide consolidation plan which, once fully
implemented, is expected to yield annual savings of approximately $1.8 billion.
Under the consolidation plan, the Corporation will close 12 facilities and
laboratories as well as 26 duplicative field offices in the U.S. and abroad,
eliminating up to approximately 12,000 positions and 7.7 million square feet of
unneeded capacity over the next five years. The total cost to implement the
plan, which will be largely completed over the next two years, is approximately
$1.7 billion. Operating profit in 1995 included the effects of pretax charges
totaling $690 million
- --------------------------------------------------------------------------------
Net Sales
In millions
[GRAPH APPEARS HERE]
45
Management's Discussion and Analysis of
Financial Condition and Results of Operations Continued
- ---------------------------------------------
representing the portion of the consolidation plan and merger related expenses
not expected to be recovered under future pricing of U.S. Government contracts.
Operating profit in 1994 included the effect of two significant nonrecurring
transactions: a $118 million pretax gain from the February 1994 initial public
offering (IPO) of approximately 8.8 million shares, or 19 percent, of Martin
Marietta Materials, Inc. (Materials) common stock; and the receipt of a $50
million termination fee pursuant to the agreement for the proposed acquisition
of Grumman Corporation. Excluding the effects of these nonrecurring events for
each year, operating profit for 1995 would have been approximately 14 percent
greater than the 1994 amount. Earnings growth excluding these items resulted
from improvements in the Space & Strategic Missiles, Information & Technology
Services and Aeronautics segments, more than offsetting declines at the
Electronics segment. The operating profit in 1994 of $2.0 billion was 25 percent
higher than the $1.6 billion recorded in 1993, or 14 percent higher after
excluding the effects of the 1994 nonrecurring transactions.
Net earnings for 1995 were $682 million, or $3.05 per common share assuming full
dilution. Both amounts represent decreases from the reported 1994 net earnings
of $1.0 billion and earnings per common share assuming full dilution of $4.66.
However, the 1995 reported amounts include the after-tax effects of the merger
related and consolidation charges identified above of $436 million, or $1.96 per
common share assuming full dilution. The 1994 reported net earnings include the
favorable after-tax effects of the Materials IPO ($70 million, or $.32 per
share), the Grumman termination fee ($30 million, or $.14 per share) and a
charge due to the adoption of a change in accounting for the ESOP under the
American Institute of Certified Public Accountants Statement of Position No. 93-
6 ($37 million, or $.17 per share). Excluding the effects of these nonrecurring
items, net earnings for 1995 would have been approximately $1.1 billion, or
$5.01 per common share assuming full dilution, an increase of 17 percent and 15
percent, respectively, from the adjusted 1994 net earnings of $955 million, or
$4.37 per common share assuming full dilution. The 1994 net earnings and
earnings per common share assuming full dilution, after adjusting for the non-
recurring items, were 15 percent and 17 percent greater, respectively, than the
corresponding 1993 reported amounts.
The Corporation's debt to capitalization ratio was reduced from 39 percent at
December 31, 1994 to 37 percent at December 31, 1995, with total debt decreasing
from $3.9 billion to $3.7 billion and stockholders' equity increasing from $6.1
billion to $6.4 billion. However, if the business combination with Loral is
consummated, the Corporation's debt to capitalization ratio is expected to
increase to approximately 67 percent. The Corporation paid common dividends of
$254 million in 1995, or $1.34 per common share. The Corporation's backlog of
undelivered orders was approximately $41 billion at the end of 1995.
Industry Considerations
The Corporation's primary lines of business are in high technology systems for
aerospace and defense, serving both government and commercial customers. In
recent years, domestic and
- --------------------------------------------------------------------------------
Net Earnings
In millions
[GRAPH APPEARS HERE]
(a) Excluding the effects of the Materials IPO, the acquisition termination fee,
and the change in ESOP accounting, 1994 net earnings would have been $955
million.
(b) Excluding the merger related and consolidation charges, 1995 net earnings
would have been $1,118 million.
- --------------------------------------------------------------------------------
Earnings per Common Share, Assuming Full Dilution
In dollars
[GRAPH APPEARS HERE]
(a) Excluding the effects of the Materials IPO, the acquisition termination
fee, and the change in ESOP accounting, 1994 earnings per share would have
been $4.37.
(b) Excluding the merger related and consolidation charges, 1995 earnings per
share would have been $5.01.
46
Lockheed Martin Corporation
worldwide political and economic developments have strongly affected these
markets, requiring significant adaptation by market participants.
The Federal defense budgets for research, development, test and evaluation and
procurement have been reduced dramatically (after adjusting for inflation) over
the last decade. These reductions have caused participants in the
aerospace/defense industry to consolidate in order to maintain critical mass and
production economies. The Corporation has actively participated in this
consolidation activity. The Corporation's recent acquisitions described above
are examples of actions that have been taken to blend successful operations and
broaden the business portfolio, create opportunities for increased efficiency
and cost competitiveness, improve access to new markets and reduce exposure
to further defense budget program reductions. In prior years, the Corporation
acquired both the tactical military aircraft and space systems businesses of
General Dynamics, as well as the GE Aerospace businesses. Additionally, the
Corporation has undertaken major cost reduction efforts throughout its operating
units, continuously monitoring and adjusting employment levels consistent with
changing business requirements.
In light of the anticipated continuation of the recent consolidations in the
aerospace/defense industry, executive management and the Board of Directors
periodically review the Corporation's strategic plans related to joint ventures
and business combinations with companies engaged in similar or related
businesses, as well as potential internal investments. During 1995, these
efforts resulted in, among other actions, the establishment of a joint venture
with Rockwell International to negotiate a contract with NASA for space shuttle
operations, and the purchase of the aircraft controls business of GE. As noted
previously, in early 1996, the Corporation announced it had entered into a
merger agreement with Loral for a business combination which, if consummated,
will create synergy by bringing together the technologies and resources of two
successful defense electronics companies.
In December 1995, President Clinton signed the fiscal year 1996 defense
appropriations bill. This legislation is significant in that it marked the first
increase in defense budget appropriations in several years. Many analysts and
political observers expect that the fiscal 1996 budget represents the beginning
of a period of flat to modestly growing defense spending. Management believes
that its strategic actions will place the Corporation in an advantageous
position in the industry once the defense budget climate starts to improve.
To date, the Corporation's major programs generally have been well supported
during the budget decline, but uncertainty exists over the size and scope of
future defense and space budgets and their impact on specific programs. Some of
the Corporation's programs have been delayed, curtailed or terminated, and
future spending reductions and funding limitations could further impact these
programs or have similar effects on other existing or emerging programs.
As a U.S. Government contractor, the Corporation's government contracts and
operations are subject to government oversight. The government may investigate
and make inquiries of the Corporation's business practices and conduct audits of
contract performance and cost accounting. These investigations may lead to
claims against the Corporation. Under U.S. Government
47
Management's Discussion and Analysis of
Financial Condition and Results of Operations Continued
- ---------------------------------------------
procurement regulations and practices, an indictment of a government contractor
could result in that contractor being fined and/or suspended for a period of
time from eligibility for bidding on, or for award of, new government contracts;
a conviction could result in debarment for a specified term from government
contracts. Although the outcome of such investigations and inquiries cannot be
predicted, in the opinion of management there are no claims, audits or
investigations pending against the Corporation that are likely to have a
material adverse effect on either the Corporation's business or its consolidated
financial position or results of operations.
The Corporation remains exposed to other inherent risks associated with U.S.
Government contracting. These risks include technological uncertainties and
obsolescence, changes in government policies and dependence on annual
Congressional appropriation and allotment of funds. Certain of the Corporation's
contracts contain mission success incentive provisions that could significantly
impact the future profitability of these programs. The provisions enable the
Corporation to earn fees for successful performance, but also significantly
reduce fee availability in the event of unsuccessful missions. The Corporation's
commercial launch vehicle business contains market, pricing and other associated
risks.
Progress has been made in expanding the Corporation's presence in related
commercial and nondefense markets, most notably in space related activities,
energy and environmental services, information management and integration, and
communications. The Corporation also participates in the construction aggregates
and specialty chemical businesses through its 81% ownership in Materials. These
lines of business share many of the risks associated with the Corporation's
primary businesses, as well as others unique to the commercial marketplace,
although they are not dependent on defense budgets.
Discussion of Business Segments
The Corporation's operations are divided into five reportable business segments:
Space & Strategic Missiles; Aeronautics; Information & Technology Services;
Electronics; and Energy, Materials and Other. The following table displays net
sales for the Lockheed Martin business segments for each of the three years in
the period ended December 31, 1995 and directly corresponds to the segment
information presented in Note 15 to the consolidated financial statements.
(In millions) 1995 1994 1993
- ----------------------------------------------------------------
Net Sales
Space & Strategic Missiles $ 7,521 $ 6,719 $ 7,293
Aeronautics 6,617 7,091 6,601
Information & Technology Services 4,528 4,271 3,712
Electronics 3,294 4,055 4,092
Energy, Materials and Other 893 770 699
- ----------------------------------------------------------------
$22,853 $22,906 $22,397
================================================================
48
Lockheed Martin Corporation
Operating profit by industry segment for each of the three years in the period
ended December 31, 1995 is also presented in Note 15 to the consolidated
financial statements. The following table displays the pretax impact of the
nonrecurring items as reflected in operating profit for both 1995 and 1994 as
identified to each segment.
(In millions) 1995 1994
- ----------------------------------------------------
Nonrecurring Items
Space & Strategic Missiles $(263) $ --
Aeronautics (138) --
Information & Technology Services (24) --
Electronics (93) --
Energy, Materials and Other (172) 168
- ----------------------------------------------------
$(690) $ 168
====================================================
The 1995 total in the above table reflects the merger related and consolidation
expenses discussed previously, while the 1994 total consists of the $118 million
Materials IPO gain and the receipt of the $50 million acquisition termination
fee from the proposed Grumman acquisition discussed previously.
The following table depicts operating profit excluding nonrecurring items for
each of the three years in the period ended December 31, 1995. The subsequent
discussion of significant operating results of each business segment excludes
the impact of the nonrecurring items. This discussion should also be read in
conjunction with the industry segment information contained in Note 15 to the
consolidated financial statements.
(In millions) 1995 1994 1993
- -------------------------------------------------------------
Operating Profit, Excluding
Nonrecurring Items
Space & Strategic Missiles $ 694 $ 476 $ 507
Aeronautics 532 511 479
Information & Technology Services 293 228 145
Electronics 354 456 331
Energy, Materials and Other 194 140 122
- -------------------------------------------------------------
$2,067 $1,811 $1,584
=============================================================
Space & Strategic Missiles
Net sales of the Space & Strategic Missiles segment increased by 12 percent in
1995 compared to 1994 after decreasing by eight percent in 1994 compared to
1993. The increase in 1995 can be attributed primarily to the inclusion for the
full year of the former GD Space Systems, which the Corporation acquired on May
1, 1994. The operations of this acquired unit consist primarily of the Atlas
launch services program, which recorded twelve successful Atlas II and Atlas E
launches in
49
Management's Discussion and Analysis of
Financial Condition and Results of Operations Continued
- ---------------------------------------------
1995 versus four launches in the eight months of 1994 when the program results
were included in the Corporation's results of operations. The 1995 net sales
were also favorably impacted by an increase in activity in various classified
programs throughout the segment.
The decrease in net sales between 1994 and 1993 was principally the result of a
21 percent sales decline in the Air Force Titan IV program due to the stretch-
out of the program and the impact of certain 1993 nonrecurring launch pad and
engineering activities. This segment also experienced lower activity in 1994 on
various classified programs, lower revenues due to the terminations of the
Follow-on Early Warning System program and the Advanced Solid Rocket Motor
program, and decreased production contract requirements for the Trident II fleet
ballistic missile program. These decreases were partially offset by the
aforementioned addition of the former GD Space Systems.
Operating profit for the segment increased by 46 percent in 1995 compared to
1994 after decreasing by six percent in 1994 compared to 1993. The 1995 increase
was attributable to the inclusion of the Atlas launch services program for the
full year, the receipt of a favorable settlement resulting from the prior
termination of the Advanced Solid Rocket Motor program and the inclusion in 1994
of charges related to certain fixed-price programs, including a charge of $22
million related to the cancellation and final settlement on the Mobile Satellite
Antenna subcontract and charges totaling $43 million related to a military air
command, control and communication program for a foreign government. The
decrease in operating profit for 1994 compared to 1993 principally reflects the
sales decreases and the charges described above, offset partially by improved
performance related to the Milstar communications satellite program and fleet
ballistic missiles contracts recorded in 1994.
Aeronautics
Net sales of the Aeronautics segment decreased by seven percent in 1995 compared
to 1994 due to fewer deliveries of F-16 fighter aircraft and C-130 airlift
aircraft. These decreases were partially offset by the delivery of eight P-3
maritime patrol aircraft to the Republic of Korea in 1995, compared to no
deliveries in 1994. Net sales for 1994 increased by more than seven percent com-
pared to 1993, reflecting the inclusion of a full year's operation of the former
tactical military aircraft business of General Dynamics, which was purchased
effective February 28, 1993. In addition, the segment recorded in 1994
additional C-130 deliveries and F-22 development revenues which were partially
offset by decreases in certain contract field support programs.
Operating profit increased by four percent in 1995 compared to 1994 even though
sales decreased for that period. This increase is principally due to recognition
of earnings related to the P-3 aircraft deliveries which more than offset the
1995 increase in the C-130J development costs, and the inclusion in 1994 of
charges taken against earnings in connection with the Pratt & Whitney fan
reverser program. Operating profit in 1994 increased by nearly seven percent
compared with 1993, with the inclusion of the former tactical military aircraft
business of General Dynamics for the full year being the most significant
element of that increase. Other positive factors included the net effect
50
Lockheed Martin Corporation
of the 1994 sales variances described above, improved performance in C-130
programs and higher profit margins in special tactical aircraft systems
programs.
Information & Technology Services
Net sales of the Information & Technology Services segment increased by six
percent in 1995 compared to 1994, and by 15 percent for 1994 compared with 1993.
The increase in this segment in 1995 was caused primarily by increases in sales
for commercial product manufacturing and distribution activities. In addition,
the segment recorded increased revenues in information management and space
activities. The increase for 1994 compared to 1993 reflects increased sales of
command control systems and information processing services as well as
commercial product manufacturing activities.
Operating profit for the segment increased by 29 percent in 1995 compared to
1994 and by 57 percent in 1994 compared to 1993. The variance in 1995 reflects
increased award fee recognition, sales volume increases and continued
improvements in margin performance throughout the segment. The 1994 operating
profit increase was principally the result of improved performance in commercial
product manufacturing operations and improved margin performance throughout the
segment.
Electronics
Net sales of the Electronics segment decreased by almost 19 percent in 1995
compared to 1994 after remaining relatively flat in 1994 compared to 1993. The
decrease in 1995 was primarily the result of volume decreases in various
programs, particularly in AEGIS surface ship combat system programs and the
AN/BSY-2 submarine combat system program. In addition, the 1995 sales
performance represents an expected transition from mature production programs
into new development programs. In 1994, sales gains from AEGIS programs were
offset by sales decreases related to the LANTIRN targeting and navigation
system, other fire control systems programs and certain radar and undersea
surveillance systems.
Operating profit for the segment decreased by 22 percent in 1995 compared with
1994, reflecting the sales volume decreases described above, the negative
earnings implications of contract charges related to the LANTIRN program close-
out and from investments in new businesses, and substantial completion of
subcontract activities on the Patriot and other mature production programs. The
38 percent increase in operating profit for 1994 compared to 1993 reflected the
performance on the AEGIS program, fire control systems programs and armament
systems programs, and improved margin expansion across the segment.
Energy, Materials and Other
Net sales of this segment increased by 16 percent in 1995 compared with 1994 and
by ten percent in 1994 compared with 1993. Sales for both Energy and Materials
grew in 1995, reflecting the
51
Management's Discussion and Analysis of
Financial Condition and Results of Operations Continued
- ---------------------------------------------
commencement of activities under the Idaho National Engineering Laboratories
Management and Operations and Pit 9 contracts in the fourth quarter of 1994 and
the January 1995 Materials acquisition of the construction aggregates business
of Dravo Corporation. The primary reason for the increase in 1994 net sales was
the increase in sales of construction aggregates, reflecting improvements in
construction markets and increased production volume from acquisitions and new
activities.
Operating profit for this segment increased by 39 percent in 1995 compared to
1994 and by 15 percent in 1994 compared to 1993. The increase in 1995 was the
result of the inclusion of a full year of activities under the Idaho National
Engineering Laboratories Management and Operations contract and earnings growth
due to increased production volume at Materials. The increase in 1994 was
principally due to production volume growth in the Materials business.
Backlog
Total negotiated backlog of $41.1 billion at December 31, 1995 included both
unfilled firm orders for the Corporation's products for which funding has been
both authorized and appropriated by the customer (Congress, in the case of U.S.
Government customers) and firm orders for which funding has not been
appropriated. The following table shows total backlog by segment at the end of
each of the last three years:
(In millions) 1995 1994 1993
- ----------------------------------------------------------------
Backlog
Space & Strategic Missiles $16,261 $15,920 $14,052
Aeronautics 14,775 16,146 19,822
Information & Technology Services 4,669 4,855 5,526
Electronics 5,412 5,238 6,087
Energy, Materials and Other 8 73 23
- ----------------------------------------------------------------
$41,125 $42,232 $45,510
================================================================
Total Space & Strategic Missiles backlog increased by two percent in 1995 as
compared to 1994 and by 13 percent in 1994 as compared to 1993. The increase in
1995 occurred principally because of growth in new orders for classified
programs. The primary factor in the 1994 increase was the acquisition of backlog
related to the former GD Space Systems.
In the Aeronautics segment, total backlog decreased by eight percent in 1995
compared to 1994, having decreased by 19 percent in 1994 compared to 1993. For
both years, the fighter aircraft backlog decreased significantly, primarily
reflecting deliveries of aircraft to the U.S. Government without the addition of
new orders. In 1995, this decrease was partially offset by the receipt of orders
from the United Kingdom and Australia to provide 37 C-130J aircraft, with
options for 58 additional aircraft for those two nations and New Zealand.
- --------------------------------------------------------------------------------
Negotiated Backlog
In millions
[GRAPH APPEARS HERE]
52
Lockheed Martin Corporation
Total Information & Technology Services backlog decreased by nearly four percent
in 1995 compared to 1994 and by 12 percent in 1994 compared to 1993. The 1995
decrease was primarily the result of reduced contract volume in the segment's
space shuttle processing program and adjustments resulting from cost underruns
in manned space activities. The 1994 decrease was principally caused by the
maturation of several information and simulation systems programs.
In the Electronics segment, total backlog increased by over three percent in
1995 compared to 1994, having decreased by 14 percent in 1994 compared to 1993.
The primary reasons for the 1995 increase were key new awards for U.K. Apache
helicopter night vision/fire control systems, HYDRA-70 munitions and electronic
warfare countermeasures. These increases offset the declines in this segment's
defense electronics programs and AEGIS program volume. The 1994 decrease
reflected declines in the segment's radar and undersea surveillance systems
programs as well as a reduction in AEGIS program volume.
Liquidity and Cash Flows
The Corporation's primary source of liquidity in the past three years has been
cash generated from operating activities. Cash provided by operating activities
was approximately $1.3 billion in 1995 as compared to the $1.5 billion reported
for 1994 and 1993. The 1995 amount includes the effect of the pretax merger
related and consolidation expenditures to date of $208 million. As in prior
years, positive cash flows were derived in large part from operating profits
before deducting non-cash charges for depreciation and amortization of property
and intangible assets, offset in part by working capital increases.
Additions to property, plant and equipment, net of purchased operations, were
four percent higher in 1995 compared to 1994, and about equal to 1993. The
Corporation continually monitors its capital spending in relation to current and
anticipated business needs. Facilities are added, consolidated, disposed of or
modernized as business circumstances dictate. In 1995, approximately $294
million was expended on acquisition, investment and divestiture activities, a
$169 million increase from the prior year. In 1994, other investing activities
resulted in net positive cash flow, as the proceeds from the Materials IPO and
the Grumman termination fee more than offset the cash expended for the
acquisition of GD Space Systems.
The Corporation continued to reduce outstanding long-term debt in 1995,
consistent with 1994 and 1993. Approximately $287 million of long-term debt was
repaid in 1995 using cash generated from operations. In December 1995, Materials
issued $125 million of long-term debentures, the proceeds from which will be
used to retire $100 million of Notes maturing in 1996. Approximately $700
million of long-term debt will mature in 1996. As stated previously, the
proposed transactions with Loral, if consummated, would cause a significant
increase in long-term debt.
Cash dividends per common share were $1.34, $1.14, and $1.09 for 1995, 1994 and
1993, respectively. The initial regular quarterly common dividend rate after
consummation of the Business Combination was $0.35 per share. However, following
the receipt of court approval of a settlement reached by the parties of certain
class action lawsuits filed on behalf of the former shareholders of
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities
In millions
[GRAPH APPEARS HERE]
- --------------------------------------------------------------------------------
Dividends Per Common Share
In dollars
[GRAPH APPEARS HERE]
53
Management's Discussion and Analysis of
Financial Condition and Results of Operations Continued
- ---------------------------------------------
Lockheed and Martin Marietta, Lockheed Martin expects, in accordance with the
terms of the settlement, to pay a regular quarterly dividend of $0.40 per share
for each of the next three quarters beginning with the first quarter of 1996.
After the adoption of the 1995 Omnibus Performance Award Plan, the Corporation's
Board of Directors authorized the repurchase of up to six million common shares
under a systematic repurchase plan. Additionally, the Board authorized the
repurchase of up to nine million common shares to counter the dilutive effect of
common stock issued under the Corporation's other benefit and compensation
programs and for other purposes related to such plans. Approximately 2.3 million
common shares were repurchased by the Corporation in the second half of 1995 for
approximately $150 million.
Capital Structure and Resources
Long-term debt, including current maturities, declined to approximately $3.7
billion at the end of 1995 from approximately $3.9 billion at the end of 1994,
while stockholders' equity grew to over $6.4 billion from nearly $6.1 billion a
year ago. Total debt represented approximately 37 percent and 39 percent of
total capitalization at December 31, 1995 and 1994, respectively. Most of the
Corporation's debt is in the form of publicly issued, fixed-rate Notes Payable
and Debentures.
As stated previously, if the transactions with Loral are consummated, the
Corporation's debt to capitalization ratio will increase to approximately 67
percent. Consequently, the ratings on the Corporation's long-term debt were
downgraded to a lower investment grade.
On March 15, 1995, the Corporation entered into a revolving credit agreement
(the Credit Agreement) with a group of domestic and foreign banks. The Credit
Agreement makes available $1.5 billion for commercial paper backup and general
corporate purposes through March 14, 2000. Borrowings under the Credit Agreement
would be unsecured and bear interest, at the Corporation's option, at rates
based on the Eurodollar rate or a bank base rate (as defined). The Credit
Agreement contains a financial covenant relating to leverage, and provisions
which relate to certain changes in control. There have been no borrowings under
the Credit Agreement.
In connection with the proposed business combination with Loral, the Corporation
intends to arrange with a syndicate of banks to obtain credit facilities of $10
billion (the New Credit Facilities), comprised of a $5 billion five-year
unsecured revolving credit facility and a $5 billion 364-day unsecured revolving
credit facility. The New Credit Facilities would be available to finance the
purchase of Loral's common stock, to fund the $344 million investment in Loral
Space, to refinance a portion of Loral's existing debt, to pay related
transaction expenses, to provide for future working capital needs and for
general corporate purposes. Alternatively, the Corporation may obtain all or a
portion of the necessary financing through the issuance of commercial paper
backed by the New Credit Facilities. If the business combination with Loral is
consummated, the Credit Facility will be terminated and replaced with the New
Credit Facilities. Following the closing of the transactions, it is anticipated
that the Corporation will refinance all or a portion of the borrowings under the
New Credit Facilities with funds raised in the public or private securities
markets. The Corporation may
54
Lockheed Martin Corporation
enter into interest rate hedging agreements to offset a portion of its exposure
to rising interest rates related to the anticipated long-term financings.
The Corporation receives advances on certain contracts and uses them to finance
the inventories required to complete the contracted work. Approximately $1.8
billion of advances related to work in process have been received from customers
and were recorded as reductions of 1995 inventories in the Corporation's
consolidated financial statements. In addition, advances of approximately $1
billion at the end of 1995 have been recognized as current liabilities, mostly
related to contracts with foreign governments and commercial customers.
Cash on hand and temporarily invested, internally generated funds, and available
financing resources as detailed above are expected to be sufficient to meet the
anticipated operating, consolidation and debt service requirements,
discretionary investment needs and capital expenditures of the Corporation. If
the business combination with Loral is consummated, management will evaluate
potential near-term actions which may permit the Corporation to reduce its long-
term debt. These actions may include the disposition of non-core businesses or
surplus properties and the suspension of the share repurchase programs.
Environmental Matters
As more fully described in Note 14 to the consolidated financial statements, the
Corporation entered into a consent decree with the U.S. Environmental Protection
Agency (EPA) in 1991 relating to certain property in Burbank, California, which
obligates the Corporation to design and construct facilities to monitor, extract
and treat groundwater and operate and maintain such facilities for approximately
eight years. The Corporation has also been operating under a cleanup and
abatement order from the California Regional Water Quality Control Board
affecting its Burbank facilities. This order requires site assessment and action
to abate groundwater contamination through a combination of groundwater and soil
cleanup and treatment. Anticipated future costs for these projects are estimated
to approximate $205 million. The Corporation has also begun discussions with the
EPA to structure a second consent decree to cover the groundwater operations
related to the Burbank property for the years 2000 through 2018. Any potential
financial exposure related to this period is not expected to be material.
The Corporation records appropriate financial statement accruals for
environmental issues in the period in which liability is established and the
amounts can reasonably be estimated. In addition to the amounts described above,
the Corporation has accrued approximately $285 million at December 31, 1995 for
other matters in which an estimate of financial exposure could be determined.
Management believes, however, that it is unlikely that any additional liability
it may incur for known environmental issues would have a material adverse effect
on its consolidated financial position or results of operations.
The Corporation is a party to various other proceedings and potential
proceedings related to environmental clean-up issues, including matters at
various sites where it has been designated a Potentially Responsible Party (PRP)
by the EPA. In the event the Corporation is ultimately found to
55
Management's Discussion and Analysis of
Financial Condition and Results of Operations Continued
- ---------------------------------------------
have liability at those sites where it has been designated a PRP, the
Corporation anticipates that the actual burden for the costs of remediation will
be shared with other liable PRPs. Generally, PRPs that are ultimately determined
to be responsible parties are strictly liable for site cleanups and usually
agree among themselves to share, on an allocated basis, the costs and expenses
for investigation and remediation of hazardous materials. Under existing
environmental laws, however, responsible parties are jointly and severally
liable and, therefore, the Corporation is potentially liable for the full cost
of funding such remediation. In the unlikely event that the Corporation were
required to fund the entire cost of such remediation, the statutory framework
provides that the Corporation may pursue rights of contribution from the other
PRPs. Among the variables management must assess in evaluating costs associated
with these sites are changing cost estimates, continually evolving government
environmental standards and cost allowability issues. Therefore, the nature of
these environmental matters makes it extremely difficult to estimate the timing
and amount of any future costs that may be necessary for remedial measures. The
Corporation currently is unable to predict the outcome of these matters,
inasmuch as the actual costs of remedial actions have not been determined and
the allocation of liabilities among parties that ultimately may be found liable
remains uncertain.
New Accounting Standards
In 1995, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
requires that certain long-lived assets to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Additionally, SFAS No. 121
requires that certain long-lived assets to be disposed of be reported at the
lower of carrying amount or fair value less cost to sell. The Corporation will
adopt SFAS No. 121 in 1996, as required. Management anticipates that the impact
of the adoption of this standard will not be material to the Corporation's
consolidated earnings and financial position.
Also in 1995, the FASB adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." While SFAS No. 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans using a fair value method
of accounting, it allows companies to continue to measure compensation cost for
those plans using the intrinsic value method of accounting as prescribed in
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees." Should a company choose not to change its accounting method, it
must disclose the pro forma effect on net earnings and earnings per share as if
the fair value method had been adopted. Currently, the Corporation intends to
continue its present APB Opinion No. 25 accounting treatment for stock-based
compensation, and plans to adopt the disclosure provisions of SFAS No. 123
beginning in 1996, as required.
56
Lockheed Martin Corporation
The Corporation's Responsibility
for Financial Reporting
The management of Lockheed Martin Corporation prepared and is responsible for
the consolidated financial statements and all related financial information
contained in this report. The consolidated financial statements, which include
amounts based on estimates and judgments, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis.
The Corporation maintains a system of internal accounting controls designed and
intended to provide reasonable assurance that assets are safeguarded,
transactions are properly executed and recorded in accordance with management's
authorization, and accountability for assets is maintained. An environment that
establishes an appropriate level of control consciousness is maintained and
monitored and includes examinations by an internal audit staff and by the
independent auditors in connection with their annual audit.
The Corporation's management recognizes its responsibility to foster a strong
ethical climate. Management has issued written policy statements which document
the Corporation's business code of ethics. The importance of ethical behavior is
regularly communicated to all employees through the distribution of written
codes of ethics and standards of business conduct and through ongoing education
and review programs designed to create a strong compliance environment.
The Audit and Ethics Committee of the Board of Directors is composed of eight
outside directors. This Committee meets periodically with the independent
auditors, internal auditors and management to review their activities.
The consolidated financial statements have been audited by Ernst & Young LLP,
independent auditors, whose report follows.
/s/ Marcus C. Bennett
Marcus C. Bennett
Senior Vice President and
Chief Financial Officer
/s/ Robert E. Rulon
Robert E. Rulon
Vice President and Controller
Report of Ernst & Young LLP,
Independent Auditors
Board of Directors and Stockholders
Lockheed Martin Corporation
We have audited the accompanying consolidated balance sheet of Lockheed Martin
Corporation as of December 31, 1995 and 1994, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Lockheed Martin Corporation at December 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
The Corporation changed its method of accounting for the Employee Stock
Ownership Plan effective January 1, 1994 as discussed in Note 1 to the
consolidated financial statements.
/s/ Ernst & Young LLP
Washington, D.C.
January 23, 1996
57
Lockheed Martin Corporation
Consolidated Statement of Earnings
Year Ended December 31,
(In millions, except per share data) 1995 1994 1993
=============================================================================
Net sales $22,853 $22,906 $22,397
Costs and expenses:
Cost of sales 20,881 21,127 20,857
Merger related and consolidation expenses 690 -- --
- -----------------------------------------------------------------------------
Earnings from operations 1,282 1,779 1,540
Other income and expenses, net 95 200 44
- -----------------------------------------------------------------------------
1,377 1,979 1,584
Interest expense 288 304 278
- -----------------------------------------------------------------------------
Earnings before income taxes and cumulative
effect of change in accounting 1,089 1,675 1,306
Income tax expense 407 620 477
- -----------------------------------------------------------------------------
Earnings before cumulative effect of change in
accounting 682 1,055 829
Cumulative effect of change in accounting -- (37) --
- -----------------------------------------------------------------------------
Net earnings $ 682 $ 1,018 $ 829
=============================================================================
Earnings per common share:
Assuming no dilution:
Before cumulative effect of change in
accounting $ 3.28 $ 5.32 $ 3.99
Cumulative effect of change in accounting -- (.20) --
- -----------------------------------------------------------------------------
$ 3.28 $ 5.12 $ 3.99
=============================================================================
Assuming full dilution:
Before cumulative effect of change in
accounting $ 3.05 $ 4.83 $ 3.75
Cumulative effect of change in accounting -- (.17) --
- -----------------------------------------------------------------------------
$ 3.05 $ 4.66 $ 3.75
=============================================================================
See accompanying Notes to Consolidated Financial Statements.
58
Lockheed Martin Corporation
Consolidated Statement of Cash Flows
Year Ended December 31,
(In millions) 1995 1994 1993
=======================================================================================
Operating Activities
Earnings before cumulative effect of
change in accounting $ 682 $ 1,055 $ 829
Adjustments to reconcile earnings
to net cash provided by operating
activities:
Merger related and consolidation -- expenses 690 -- --
-- payments (208) -- --
Depreciation and amortization 605 638 680
Amortization of intangible assets 316 299 256
Deferred federal income taxes (116) 73 165
Gain--Materials public offering -- (118) --
Acquisition termination fee -- (50) --
Changes in operating assets and liabilities:
Receivables (394) (169) 80
Inventories 430 (221) 63
Customer advances and amounts in excess
of costs incurred (294) 20 (209)
Other (419) (34) (405)
- ---------------------------------------------------------------------------------------
Net cash provided by operating activities 1,292 1,493 1,459
- ---------------------------------------------------------------------------------------
Investing Activities
Additions to properties, net of purchased operations (531) (509) (536)
Acquisition, investment and divestiture activities (294) (125) (2,420)
Net proceeds -- Materials public offering -- 189 --
Other 126 (57) 148
- ---------------------------------------------------------------------------------------
Net cash used for investing activities (699) (502) (2,808)
- ---------------------------------------------------------------------------------------
Financing Activities
Decreases in short-term borrowings (14) (7) (9)
Increases in long-term debt 125 43 2,281
Repayments and extinguishments of long-term debt (287) (512) (741)
Issuances of common stock 61 32 88
Purchases of common stock (150) -- --
Dividends on common stock (254) (214) (215)
Dividends on preferred stock (60) (60) (45)
- ---------------------------------------------------------------------------------------
Net cash (used for) provided by financing
activities (579) (718) 1,359
- ---------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 14 273 10
Cash and cash equivalents at beginning of year 639 366 356
- ---------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 653 $ 639 $ 366
=======================================================================================
See accompanying Notes to Consolidated Financial Statements.
59
Lockheed Martin Corporation
Consolidated Balance Sheet
December 31,
(In millions) 1995 1994
========================================================================
Assets
Current assets:
Cash and cash equivalents $ 653 $ 639
Receivables 3,876 3,473
Inventories 2,804 3,159
Deferred income taxes 580 506
Other current assets 264 366
- ------------------------------------------------------------------------
Total current assets 8,177 8,143
Property, plant and equipment 3,165 3,455
Intangible assets related to contracts and programs
acquired 1,808 1,971
Cost in excess of net assets acquired 2,817 2,831
Other assets 1,681 1,649
- ------------------------------------------------------------------------
$17,648 $18,049
========================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 787 $ 1,306
Customer advances and amounts in excess of costs
incurred 1,570 1,872
Salaries, benefits and payroll taxes 567 767
Income taxes 292 86
Current maturities of long-term debt 722 285
Other current liabilities 1,353 1,319
- ------------------------------------------------------------------------
Total current liabilities 5,291 5,635
Long-term debt 3,010 3,594
Post-retirement benefit liabilities 1,778 1,756
Other liabilities 1,136 978
Stockholders' equity:
Series A preferred stock, $50 liquidation preference
per share 1,000 1,000
Common stock, $1 par value per share 199 199
Additional paid-in capital 683 734
Retained earnings 4,838 4,470
Unearned ESOP shares (287) (317)
- ------------------------------------------------------------------------
Total stockholders' equity 6,433 6,086
- ------------------------------------------------------------------------
$17,648 $18,049
========================================================================
See accompanying Notes to Consolidated Financial Statements.
60
Lockheed Martin Corporation
Consolidated Statement of Stockholders' Equity
Additional Unearned Guarantee Total
Preferred Common Paid-in Retained ESOP of ESOP Stockholders'
(In millions) Stock Stock Capital Earnings Shares Obligations Equity
===================================================================================================================================
Balance at December 31, 1992 $ -- $ 195 $ 582 $ 3,136 $ -- $(431) $ 3,482
Net earnings -- -- -- 829 -- -- 829
Preferred stock issued 1,000 -- -- -- -- -- 1,000
Dividends declared on preferred
stock ($2.25 per share) -- -- -- (45) -- -- (45)
Dividends declared on common
stock ($1.09 per share) -- -- -- (215) -- -- (215)
Stock awards and options, and
ESOP activity -- 3 107 16 -- 24 150
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 1,000 198 689 3,721 -- (407) 5,201
Earnings before cumulative effect
of change in accounting -- -- -- 1,055 -- -- 1,055
Cumulative effect of change in
accounting -- -- -- (37) (350) 407 20
Dividends declared on preferred
stock ($3.00 per share) -- -- -- (60) -- -- (60)
Dividends declared on common
stock ($1.14 per share) -- -- -- (214) -- -- (214)
Stock awards and options, and
ESOP activity -- 1 45 5 33 -- 84
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 1,000 199 734 4,470 (317) -- 6,086
Net earnings -- -- -- 682 -- -- 682
Dividends declared on preferred
stock ($3.00 per share) -- -- -- (60) -- -- (60)
Dividends declared on common
stock ($1.34 per share) -- -- -- (254) -- -- (254)
Repurchases of common stock -- (2) (148) -- -- -- (150)
Stock awards and options, and
ESOP activity -- 2 97 -- 30 -- 129
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 $1,000 $ 199 $ 683 $ 4,838 $ (287) $ -- $6,433
===================================================================================================================================
See accompanying Notes to Consolidated Financial Statements.
61
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies
Organization - Lockheed Martin Corporation (Lockheed Martin or the Corporation)
is engaged in the design, manufacture, integration and operation of a broad
array of products and services ranging from aircraft, spacecraft and launch
vehicles to energy management, missiles, electronics, and information systems.
The Corporation serves customers in both domestic and international defense and
civilian markets, with its principal customers being agencies of the U.S.
Government.
Basis of consolidation and use of estimates - The consolidated financial
statements include the accounts of wholly-owned and majority-owned subsidiaries.
All material intercompany balances and transactions have been eliminated in
consolidation. The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions, in particular estimates of anticipated contract
costs and revenues utilized in the earnings recognition process, that affect the
reported amounts in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Classifications - Receivables and inventories are primarily attributable to
long-term contracts or programs in progress on which the related operating
cycles are longer than one year. In accordance with industry practice, these
items are included in current assets.
Certain amounts for the prior years have been reclassified to conform with the
1995 presentation.
Cash and cash equivalents - Cash and cash equivalents are net of outstanding
checks that are funded daily as presented for payment. Cash equivalents are
generally comprised of highly liquid instruments with maturities of three months
or less when purchased. Due to the short maturity of these instruments, carrying
value on the Corporation's consolidated balance sheet approximates fair value.
Inventories - Inventories are stated at the lower of cost or estimated net
realizable value. Costs on long-term contracts and programs in progress
represent recoverable costs incurred for production, allocable operating
overhead, and, where appropriate, research and development and general and
administrative expenses, less amounts attributed to cost of sales. Pursuant to
contract provisions, the U.S. Government and other customers have title to, or a
security interest in, certain inventories as a result of progress payments and
advances. General and administrative expenses related to commercial products and
services essentially under commercial terms and conditions are expensed as
incurred. Costs of other product and supply inventories are principally
determined by the first-in, first-out or average cost methods.
Property, plant and equipment - Property, plant and equipment are carried
principally at cost. Depreciation is provided on plant and equipment generally
using accelerated methods of depreciation during the first half of the estimated
useful lives of the assets; thereafter, generally straight-line depreciation is
used. Estimated useful lives generally range from 8 years to 40 years for
buildings and 2 years to 20 years for machinery and equipment.
Intangible assets - Intangible assets related to contracts and programs acquired
are amortized over the estimated periods of benefit (15 years or less) and are
displayed on the consolidated balance sheet net of accumulated amortization of
$448 million and $305 million at December 31, 1995 and 1994, respectively. Cost
in excess of net assets acquired (goodwill) is amortized ratably over
appropriate periods, primarily 40 years, and is displayed on the consolidated
balance sheet net of accumulated amortization of $438 million and $343 million
at December 31, 1995 and 1994, respectively. The carrying values of intangible
assets are reviewed if the facts and circumstances indicate potential impairment
of their carrying value, and any impairment determined is recorded in the
current period.
Environmental matters - The Corporation records a liability for environmental
matters when it is probable that a liability has been incurred and the amount
can be reasonably estimated. A substantial portion of the costs are expected to
be reflected in sales and costs of sales pursuant to U.S. Government agreement
or regulation. At the time a liability is recorded for future environmental
costs, an asset is recorded for probable future recovery through pricing U.S.
Government business. The portion of those costs expected to be allocated to
commercial business is reflected in costs and expenses at the time the liability
is established.
Sales and earnings - Sales and anticipated profits under long-term fixed-price
production contracts are recorded on a percentage of completion basis, generally
using units of delivery as the measurement basis for effort accomplished.
Estimated contract
62
Lockheed Martin Corporation
profits are taken into earnings in proportion to recorded sales. Sales under
certain long-term fixed-price contracts which, among other things, provide for
the delivery of minimal quantities or require a significant amount of
development effort in relation to total contract value are recorded using the
percentage of completion cost-to-cost method of accounting where sales and
profits are recorded based on the ratio of costs incurred to estimated total
costs at completion.
Sales under cost-reimbursement-type contracts are recorded as costs are
incurred. Applicable estimated profits are included in earnings in the
proportion that incurred costs bear to total estimated costs. Sales of products
and services essentially under commercial terms and conditions are recorded upon
shipment or completion of specified tasks.
Amounts representing contract change orders, claims or other items are included
in sales only when they can be reliably estimated and realization is probable.
Incentives or penalties and awards applicable to performance on contracts are
considered in estimating sales and profit rates and are recorded when there is
sufficient information to assess anticipated contract performance. Incentive
provisions which increase or decrease earnings based solely on a single
significant event would generally not be recognized until the event has
occurred.
When adjustments in contract value or estimated costs are determined, any
changes from prior estimates are reflected in earnings in the current period.
Any anticipated losses on contracts or programs in progress are charged to
earnings when identified.
Research and development and similar costs - Corporation-sponsored research and
development costs primarily include research and development and bid and
proposal effort related to government products and services. Except for certain
arrangements described below, these costs are generally included as part of the
general and administrative costs that are allocated among all contracts and
programs in progress under U.S. Government contractual arrangements.
Corporation-sponsored product development costs not otherwise allocable are
charged to expense when incurred. Under certain arrangements in which a customer
shares in product development costs, the Corporation's portion of such
unreimbursed costs is expensed as incurred. Customer-sponsored research and
development costs incurred pursuant to contracts are accounted for as contract
costs.
Income taxes - The Corporation accounts for income taxes as prescribed in
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Deferred income tax assets and liabilities on the consolidated
balance sheet reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
Employee Stock Ownership Plan - The Corporation elected to adopt, effective
January 1, 1994, the American Institute of Certified Public Accountants (AICPA)
Statement of Position (SOP) No. 93-6, "Employers' Accounting for Employee Stock
Ownership Plans," to account for the Employee Stock Ownership Plan (ESOP).
Adoption of this accounting method resulted in a cumulative effect adjustment
which reduced net earnings for 1994 by $37 million, or $.17 per common share
assuming full dilution. In accordance with the provisions of the SOP, the
unallocated common shares held by the ESOP trust (Unallocated ESOP Shares) have
been considered outstanding for voting and other Corporate purposes, but have
been excluded from weighted average outstanding shares in calculating earnings
per share. For 1995 and 1994, the weighted average Unallocated ESOP Shares
excluded in calculating earnings per share totalled approximately 10.3 million
and 11.5 million common shares, respectively.
Earnings per common share - Earnings per common share were based on the weighted
average number of common shares outstanding during the year. Earnings per common
share, assuming no dilution, were computed based on net earnings less the
dividend requirement for preferred stock. The weighted average number of common
shares outstanding, assuming no dilution, was approximately 189.3 million in
1995, 187.0 million in 1994 and 196.6 million in 1993.
Earnings per common share, assuming full dilution, were computed assuming that
the average number of common shares was increased by the conversion of preferred
stock. The weighted average number of common shares outstanding, assuming full
dilution, was approximately 223.2 million in 1995, 218.3 million in 1994 and
221.1 million in 1993.
63
Notes to Consolidated Financial Statements Continued
- ------------------------------------------
Note 2 - Formation of Lockheed Martin and Related Consolidation Activities
On August 29, 1994, Lockheed Martin Corporation, a newly formed corporation,
Lockheed Corporation (Lockheed) and Martin Marietta Corporation (Martin
Marietta) (collectively, the Corporations) entered into an Agreement and Plan of
Reorganization (the Reorganization Agreement) whereby the Corporations would
merge through an exchange of stock (the Business Combination). The Business
Combination was consummated after stockholders' approval on March 15, 1995.
Under the terms of the Reorganization Agreement, each outstanding share of
Lockheed common stock was exchanged for 1.63 shares of Lockheed Martin common
stock, and each outstanding share of Martin Marietta common stock and preferred
stock was exchanged for one share of Lockheed Martin common stock and preferred
stock, respectively.
The Business Combination constituted a tax-free reorganization and qualified for
the pooling of interests method of accounting. Under this accounting method, the
assets and liabilities of Lockheed and Martin Marietta were carried forward to
Lockheed Martin at their historical recorded bases. Subsequent to the Business
Combination, Lockheed, Martin Marietta and certain other subsidiaries were
merged with and into the Corporation. The accompanying consolidated financial
statements, which reflect the combined balance sheets, results of operations and
cash flows for Lockheed Martin, have been derived from the balance sheets,
results of operations and cash flows of the separate Corporations for periods
before the Business Combination, combined, reclassified and conformed, as
appropriate, to reflect amounts for the combined entity. Sales and earnings of
the individual entities were as follows:
As Previously Reported
------------------------- Lockheed
Martin Combining Martin
(In millions, except per share data) Lockheed Marietta Adjustments Combined
===================================================================================================
Year ended December 31, 1994:
Net sales $13,130 $ 9,874 $ (98) $22,906
Earnings before cumulative effect of
change in accounting 445 636 (26) 1,055
Earnings per share before cumulative
effect of change in accounting,
assuming full dilution 4.29 (a) 5.05 -- 4.83
Year ended December 31, 1993:
Net sales $13,071 $9,436 $(110) $22,397
Net earnings 422 450 (b) (43) 829
Earnings per share, assuming full
dilution 4.11 (a) 3.80 (b) -- 3.75
===================================================================================================
(a) Amounts for Lockheed have been adjusted for the 1.63 exchange ratio
related to the Business Combination.
(b) Amounts for Martin Marietta do not include the cumulative effect of changes
in accounting for post-retirement benefits other than pensions and for
postemployment benefits as the timing of the adoption of such changes was
adjusted to January 1, 1992 to conform to Lockheed's timing of adoption.
Combining adjustments were recorded to eliminate intercompany sales and cost of
sales in each year. No adjustments were made to eliminate the related
intercompany profit in ending inventories as such amounts were not material.
Adjustments were also made to conform Lockheed's method of accounting for timing
differences in cost recognition between SFAS No. 87, "Employers' Accounting for
Pensions," and applicable government contract accounting principles to be
consistent with Martin Marietta's method, and to conform Lockheed's provisions
for state income taxes to Martin Marietta's methodology. Further adjustments
were recorded to reflect the tax impact of these adjustments.
During the first quarter of 1995, the Corporation recorded a $165 million pretax
charge for merger related expenses. On June 26, 1995, the Corporation announced
a corporate-wide consolidation plan under which the Corporation would close 12
facilities and laboratories as well as 26 duplicative field offices in the U.S.
and abroad, eliminating up to approximately 12,000 positions. In conjunction
with the announcement, the Corporation recorded accruals for severance, lease
termination and certain other costs as well as approximately $220 million of
adjustments to reflect affected real estate and other property, plant and
equipment at their estimated net realizable values. Under existing
64
Lockheed Martin Corporation
U.S. Government regulations, certain costs incurred for consolidation actions
that can be demonstrated to result in savings in excess of the cost to implement
can be amortized for government contracting purposes and included in future
pricing of the Corporation's products and services. The Corporation anticipates
that a substantial portion of the total costs of the consolidation plan will be
reflected in future sales and cost of sales. The Corporation recorded a pretax
charge of $525 million for the consolidation plan which represents the portion
of the accrued costs and net realizable value adjustments that are not probable
of recovery. The after-tax effect of these charges was $436 million, or $1.96
per common share assuming full dilution. As of December 31, 1995, the total
merger related and consolidation plan expenditures were approximately $208
million which primarily relate to the Business Combination, the elimination of
positions and the closure of foreign and domestic marketing offices.
Approximately $400 million of accrued merger and consolidation costs are
included in other current liabilities at December 31, 1995.
Other costs of the consolidation plan, which include relocation of personnel and
programs, retraining, process re-engineering and certain capital expenditures,
among others, generally will be recognized when incurred. The Corporation
currently anticipates that the remaining consolidation costs will be incurred by
the end of 1997.
Note 3 - Transaction Agreement with Loral Corporation
In January 1996, the Corporation entered into an Agreement and Plan of Merger
(the Merger Agreement), dated as of January 7, 1996, with Loral Corporation
(Loral) for a series of interrelated transactions with a total estimated value
of approximately $9.4 billion. Under the terms of the Merger Agreement, the
Corporation intends to acquire the defense electronics and systems integration
businesses and certain other businesses of Loral for approximately $9.1 billion,
including $2.1 billion of assumed debt. Of the total, approximately $7 billion
will be paid directly to Loral shareholders by the Corporation through a tender
offer for all outstanding shares of Loral common stock for $38.00 per share in
cash. A Schedule 14D-1 relating to the tender offer was filed with the
Securities and Exchange Commission on January 12, 1996. Following the
consummation of the tender offer, Loral will distribute, for each share of Loral
common stock previously held, one share of common stock of a newly-formed
company, Loral Space & Communications, Ltd. (Loral Space), which will own
substantially all of the space and satellite telecommunications interests of
Loral. Finally, the Corporation will invest $344 million in Loral Space for the
acquisition of shares of preferred stock that are convertible into 20 percent of
Loral Space's common stock on a fully diluted basis. The Corporation's offer is
contingent, among other things, on the tendering of two-thirds of Loral's
outstanding shares and on regulatory approvals, and is expected to close in the
first half of 1996. If the business combination with Loral is consummated,
the purchase method of accounting will be used to record the transactions.
In connection with the transactions, the Corporation intends to arrange with a
syndicate of banks to obtain credit facilities of $10 billion (the New Credit
Facilities), comprised of a $5 billion five-year unsecured revolving credit
facility and a $5 billion 364-day unsecured revolving credit facility. The New
Credit Facilities would be available to finance the purchase of Loral's common
stock, to fund the $344 million investment in Loral Space, to refinance a
portion of Loral's existing debt, to pay related transaction expenses, to
provide for future working capital needs and for general corporate purposes.
Alternatively, the Corporation may obtain all or a portion of the necessary
financing through the issuance of commercial paper backed by the New Credit
Facilities. If the business combination with Loral is consummated, the Credit
Facility in effect at December 31, 1995 (see Note 8) will be terminated and
replaced with the New Credit Facilities. Following the closing of the
transactions, it is anticipated that the Corporation will refinance all or a
portion of the borrowings under the New Credit Facilities with funds raised in
the public or private securities markets.
Note 4 - Acquisitions
On May 1, 1994, the Corporation completed its acquisition of the Space Systems
Division of General Dynamics Corporation (the Space Systems Division) for cash.
This transaction was recorded under the purchase method of accounting.
Operations of the Space Systems Division have been included in the Corporation's
Space & Strategic Missiles segment from the closing date. Pro forma financial
data related to this transaction has not been presented, based on materiality
considerations.
On April 2, 1993, the Corporation consummated a transaction (the GE Transaction)
with
65
Notes to Consolidated Financial Statements Continued
- ------------------------------------------
General Electric Company (GE) to combine the aerospace and certain other
businesses of GE (collectively, the GE Aerospace businesses) with the businesses
of the Corporation in the form of affiliated corporations. The exchange
consideration of approximately $3 billion for the GE Transaction consisted of
approximately $900 million in cash, convertible preferred stock (valued at $1
billion), retention by GE of certain accounts receivable and the assumption of
payment obligations related to certain GE indebtedness ($750 million). The GE
Transaction was recorded under the purchase method of accounting. The GE
Aerospace operations have been included in the Corporation's results of
operations since the closing date. If the GE Transaction were presented on an
unaudited pro forma basis as if it had occurred as of January 1, 1993, the
Corporation's 1993 net sales would increase by approximately $1 billion and net
earnings would increase by less than 1.5%.
Effective February 28, 1993, the Corporation acquired the tactical military
aircraft business of General Dynamics Corporation (formerly, the GD Fort Worth
Division) for approximately $1.5 billion in cash, plus the assumption of certain
liabilities related to the business. The acquisition was recorded under the
purchase method of accounting. Pro forma financial data for 1993 related to this
transaction has not been presented based on materiality considerations.
Note 5 - Receivables
Receivables consisted of the following components:
(In millions) 1995 1994
======================================================
U.S. Government:
Amounts billed $ 925 $ 984
Unbilled costs and accrued profits 1,622 1,383
Commercial and foreign governments:
Amounts billed 654 662
Unbilled costs and accrued profits,
primarily related to commercial
contracts 675 444
- ------------------------------------------------------
$3,876 $3,473
======================================================
Unbilled costs and accrued profits consisted primarily of revenues on long-term
contracts that had been recognized for accounting purposes but not yet billed to
customers. Approximately $185 million of the December 31, 1995 unbilled costs
and accrued profits are not expected to be billed within one year.
Note 6 - Inventories
Inventories consisted of the following components:
(In millions) 1995 1994
===================================================
Work in process, primarily on
long-term contracts and
programs in progress $ 3,721 $ 4,291
Less customer advances and
progress payments (1,772) (1,785)
- ---------------------------------------------------
1,949 2,506
Other inventories 855 653
- ---------------------------------------------------
$2,804 $ 3,159
===================================================
Customer advances and progress payments applied above are those where the
customer has title to, or a security interest in, inventories identified with
the related contracts. Other customer advances are classified as current
liabilities. Inventories include unamortized deferred costs of approximately
$300 million at December 31, 1995 which are anticipated to be recovered through
future contracts.
An analysis of general and administrative costs, including research and
development costs, included in work in process inventories follows:
(In millions) 1995 1994 1993
=========================================================
Beginning of year $ 480 $ 499 $ 243
Incurred during the year 1,704 1,761 1,882
Charged to costs and
expenses during the year:
Research and development (548) (659) (696)
Other general and
administrative (1,205) (1,121) (930)
- ---------------------------------------------------------
End of year $ 431 $ 480 $ 499
=========================================================
In addition, included in costs and expenses in 1995, 1994 and 1993 were general
and administrative costs, including research and development costs, of
approximately $230 million, $154 million and $155 million, respectively,
incurred by commercial business units or programs.
66
Lockheed Martin Corporation
Note 7 - Property, Plant and Equipment
Property, plant and equipment consisted of the following components:
(In millions) 1995 1994
=======================================================
Land $ 362 $ 332
Buildings 2,494 2,419
Machinery and equipment 5,329 5,425
- -------------------------------------------------------
8,185 8,176
Less accumulated depreciation
and amortization (5,020) (4,721)
- -------------------------------------------------------
$3,165 $ 3,455
=======================================================
Note 8 - Debt
Long-term debt consisted of the following components:
Type Range of
(Maturity Dates) Interest
(In millions) Rates 1995 1994
==================================================================
Notes Payable:
Fixed rate (1996-2023) 4.5-9.4% $2,172 $ 2,215
Variable rate (1995) (a) -- 200
Debentures (2011-2025) 7.0-7.9% 828 703
ESOP obligations (1996-2004) 8.3-8.4% 355 382
Payment obligations assumed from
GE (1996) 5.0% 303 310
Other obligations 6.0-9.0% 74 69
- ------------------------------------------------------------------
3,732 3,879
Less current maturities (722) (285)
- ------------------------------------------------------------------
$3,010 $ 3,594
==================================================================
(a) Interest rates vary based on the Eurodollar rate.
During the second quarter of 1995, the Corporation retired $200 million of
variable rate Notes Payable and $43 million of fixed rate Notes Payable. During
the fourth quarter, Martin Marietta Materials, Inc. (Materials), a public
company owned 81% by the Corporation, issued $125 million of 7% debentures due
in 2025.
Included in Notes Payable are $300 million of 9.375% notes due in 1999 which
stipulate that, in the event of both a "designated event" and a related "rating
decline" occurring within a specified period of time, holders of the notes may
require the Corporation to redeem the notes and pay accrued interest. In
general, a "designated event" occurs when any one of certain ownership, control,
or capitalization changes takes place. A "rating decline" occurs when the
ratings assigned to the Corporation's debt are reduced below investment-grade
levels.
Included in Debentures are $150 million of 7.75% obligations which may be
redeemed by the Corporation at specified prices on or after April 15, 2003. Also
included in Debentures are $103 million of 7% obligations ($175 million at face
value) which were originally sold at approximately 54% of their principal
amount. These debentures, which are redeemable in whole or in part at the
Corporation's option at 100% of their face value, have an effective yield of
13.25%.
A leveraged ESOP incorporated into the Lockheed Salaried Savings Plan (401(k))
(see Note 12) borrowed $500 million through a private placement of notes in
1989. These notes are being repaid in quarterly installments over terms ending
in 2004. The ESOP note agreement stipulates that, in the event that the ratings
assigned to the Corporation's long-term senior unsecured debt are below
investment grade, holders of the notes may require the Corporation to purchase
the notes and pay accrued interest. These notes are obligations of the ESOP but
guaranteed by the Corporation and are reported as debt on the Corporation's
consolidated balance sheet.
The Corporation's long-term debt maturities for the five years following
December 31, 1995, are: $722 million in 1996; $166 million in 1997; $374 million
in 1998; $350 million in 1999; $44 million in 2000 and $2,076 million
thereafter.
Certain of the financing agreements of the Corporation contain certain
restrictive covenants relating to debt, requirements for limitations on
encumbrances and on sale and lease-back transactions, and provisions which
relate to certain changes in control.
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," and SFAS
No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments," require the disclosure of the fair value of financial
instruments, both assets and liabilities recognized and not recognized on the
consolidated balance sheet, for which it is practicable to estimate fair value.
Unless otherwise indicated elsewhere in the notes to the consolidated financial
statements, the carrying value of the Corporation's financial instruments
approximates fair value. The estimated fair values of the Corporation's long-
term debt instruments at December 31, 1995, aggregated approximately
67
Notes to Consolidated Financial Statements Continued
- ------------------------------------------
$4.0 billion, compared with a carrying amount of approximately $3.7 billion on
the consolidated balance sheet. The fair values were estimated based on quoted
market prices for those instruments publicly traded. For privately placed debt,
the fair values were estimated based on the quoted market prices for the same or
similar issues, or on current rates offered to the Corporation for debt of the
same remaining maturities.
On March 15, 1995, the Corporation entered into a revolving credit agreement
(the Credit Agreement) with a group of domestic and foreign banks. The Credit
Agreement makes available $1.5 billion through March 14, 2000. Borrowings under
the Credit Agreement would be unsecured and bear interest, at the Corporation's
option, at rates based on the Eurodollar rate or a bank base rate (as defined).
The Credit Agreement contains a financial covenant relating to leverage, and
provisions which relate to certain changes in control. There have been no
borrowings under the Credit Agreement.
Interest payments were $275 million in 1995, $276 million in 1994 and $262
million in 1993.
Note 9 - Income Taxes
The provision for federal and foreign income taxes consisted of the following
components:
(In millions) 1995 1994 1993
========================================================
Federal income taxes:
Current $ 510 $ 538 $ 304
Deferred (116) 73 165
- --------------------------------------------------------
Total federal income taxes 394 611 469
Foreign income taxes 13 9 8
- --------------------------------------------------------
Total income taxes
provided $ 407 $ 620 $ 477
========================================================
Net provisions for state income taxes are included in general and administrative
expenses, which are primarily allocable to government contracts. Such state
income taxes were $86 million for 1995, $50 million for 1994 and $86 million for
1993.
The Corporation's effective income tax rate varied from the statutory federal
income tax rate because of the following tax differences:
1995 1994 1993
==================================================
Statutory federal tax rate 35.0% 35.0% 35.0%
Increase (reduction) in tax
rate from:
Nondeductible amortization 3.2 2.1 2.0
Revisions to prior years'
estimated liabilities (3.4) (.9) 1.2
Other, net 2.6 .8 (1.7)
- --------------------------------------------------
37.4% 37.0% 36.5%
==================================================
The primary components of the Corporation's federal deferred income tax assets
and liabilities at December 31 were as follows:
(In millions) 1995 1994
=========================================================
Deferred tax assets related to:
Accumulated post-retirement
benefit obligations $ 674 $ 680
Accrued compensation and benefits 290 356
Merger related and
consolidation reserves 168 --
Contract accounting methods 132 76
Other 110 116
- ---------------------------------------------------------
1,374 1,228
Deferred tax liabilities related to:
Intangible assets 547 520
Property, plant and equipment 247 244
- ---------------------------------------------------------
794 764
- ---------------------------------------------------------
Net deferred tax assets $ 580 $ 464
=========================================================
Federal and foreign income tax payments, net of refunds received, were $223
million in 1995, $502 million in 1994 and $455 million in 1993.
68
Lockheed Martin Corporation
Note 10 - Other Income and Expenses
Other income and expenses, net consisted of the following components:
(In millions) 1995 1994 1993
====================================================
Royalty income $ 64 $ 59 $ 33
Interest income 33 34 22
Gain--Materials
public offering -- 118 --
Acquisition termination fee -- 50 --
Other (2) (61) (11)
- ----------------------------------------------------
$ 95 $ 200 $ 44
====================================================
In February 1994, Materials sold through an initial public offering
approximately 8.8 million shares of its common stock. The Corporation retains
approximately 81% of the outstanding stock of Materials. Minority interest of
$84 million and $71 million was included in other liabilities at December 31,
1995 and 1994, respectively. A portion of the proceeds from the offering was
used to defease in substance $125 million of 9.5% Notes. The Corporation
recognized a pretax gain, net of a loss on debt defeasance, of $118 million from
Materials' initial public offering. The net after-tax gain from these
transactions was $70 million, or $.32 per common share assuming full dilution.
During March 1994, the Corporation entered into an Agreement and Plan of Merger
with Grumman Corporation (Grumman) and made an offer to purchase for cash all
outstanding shares of common stock of Grumman. Subsequently, Grumman reached
agreement with and accepted Northrop Corporation's competing offer to purchase
its outstanding common shares. In April 1994, the Corporation received $50
million plus reimbursement of expenses from Grumman pursuant to the termination
provisions of the Agreement and Plan of Merger. The Corporation recorded an
after-tax gain of $30 million, or $.14 per common share assuming full dilution.
Note 11 - Stockholders' Equity and Related Items
Capital structure - The authorized capital structure of the Corporation is
composed of 750 million shares of common stock (199 million shares issued), 50
million shares of series preferred stock (no shares issued), and 20 million
shares of Series A preferred stock (20 million shares issued). Approximately 70
million common shares have been reserved for issuance under benefit and
incentive plans.
The Series A preferred stock has a par value of $1 per share (liquidation
preference of $50 per share). As part of the consideration for the GE
Transaction, the Corporation issued to GE all of the authorized and
outstanding shares of Series A preferred stock. Dividends are cumulative and
paid at an annual rate of $3.00 per share, or 6%. The shares held by GE are
currently convertible into approximately 13% of the shares of the Corporation's
common stock after giving effect to such conversion, have an aggregate
liquidation preference of $1 billion, and are nonvoting except in special
circumstances. Accordingly, 29 million common shares have been reserved for this
potential conversion. In March 1998 and thereafter, the Corporation will be
entitled to redeem, at its option, any or all shares of the Series A preferred
stock for either cash or common stock. The Series A preferred stock is held
under a Standstill Agreement which, among other things, imposes certain
limitations on either the increase or disposal of GE's interest in voting
securities of the Corporation, on GE's solicitation of proxies and stockholder
proposals, on GE's voting of its shares and on GE's ability to place or remove
members of the Corporation's Board of Directors. In addition, the Standstill
Agreement requires the Corporation to recommend to its shareholders the election
of two persons designated by GE to serve as directors of the Corporation.
On July 27, 1995, the Corporation's Board of Directors authorized the repurchase
of up to six million common shares under a systematic repurchase plan to counter
the future dilutive effect of common stock issued by the Corporation under its
1995 Omnibus Performance Award Plan. Additionally, the Board authorized the
repurchase of up to nine million common shares to counter the dilutive effect of
common stock issued under the Corporation's other benefit and compensation
programs and for other purposes related to such plans. Approximately 2.3 million
common shares were repurchased by the Corporation in the second half of 1995.
Stock option and award plans - On March 15, 1995, the stockholders approved the
Lockheed Martin 1995 Omnibus Performance Award Plan (Omnibus Plan). Under the
Omnibus Plan, employees of the Corporation may be granted stock-based incentive
awards, including options to purchase common stock, stock appreciation rights,
restricted stock or other stock-based incentive awards. Employees may
69
Notes to Consolidated Financial Statements Continued
- ------------------------------------------
also be granted cash-based incentive awards, such as performance units. These
awards may be granted either individually or in combination with other awards.
Options to purchase common stock will be at an exercise price of not less than
100% of the market value of the underlying stock on the date of grant. The
number of shares of Lockheed Martin common stock that may be issued in respect
of awards under the Omnibus Plan will not exceed 12 million shares. The Omnibus
Plan does not impose any minimum vesting periods on options or other awards. The
maximum term of an option or any other award is ten years. The Omnibus Plan
allows the Corporation to provide for financing of purchases, subject to certain
conditions, by interest-bearing notes payable to the Corporation.
Prior to the Business Combination, Lockheed and Martin Marietta had also
utilized share-based and cash-based incentive award plans. Under the terms of
certain of these plans, consummation of the Business Combination resulted in the
acceleration of payment of certain benefits that would otherwise have been
payable over time, early vesting of certain benefits that would otherwise not be
fully vested, and, in some cases, the use of modified formulas for calculating
the amounts of such benefits. In addition, the Reorganization Agreement provided
for each outstanding stock option, stock appreciation right and other stock-
based incentive award to be converted into a similar instrument of Lockheed
Martin upon consummation of the Business Combination. Effective with the
adoption of the Omnibus Plan, no further grants of share-based or cash-based
incentive awards will be made under any of Lockheed's and Martin Marietta's
prior plans. Accordingly, shares available for grant under these prior plans
have been removed from registration.
The following table summarizes the stock option activity under the Corporation's
plans during 1995:
Number of Shares
-----------------------
Available Options Option
(In thousands) for Grant Outstanding Price Range
======================================================================
December 31, 1994 3,652 9,244 $19.60-$44.88
Additions 12,000 -- --
Options granted (2,228) 2,228 $ 59.38
Removed from registration (3,674) -- --
Exercised -- (1,943) $19.75-$44.88
Terminated 81 (109) $19.60-$59.38
- ----------------------------------------------------------------------
December 31, 1995 9,831 9,420 $19.60-$59.38
======================================================================
At December 31, 1995, approximately 6.5 million options outstanding were
exercisable.
Note 12 - Post-Retirement Benefit Plans
The Corporation maintains separate plans for post-retirement benefits for
heritage Lockheed and Martin Marietta employees.
Defined Contribution Plans
The Corporation maintains a number of contributory 401(k) savings plans for
salaried employees (the Salaried Plans) and hourly employees (the Hourly Plans)
which cover substantially all employees.
The Lockheed Salaried Plans - The Lockheed Salaried Plan includes an ESOP which
purchased approximately 17.4 million shares of the Corporation's common stock
with the proceeds from a $500 million note issue which is guaranteed by the
Corporation (see Note 8). Shares are held in a suspense account in a salaried
ESOP awaiting release and allocation to participants as described below.
Under provisions of the Lockheed Salaried Plan, employees' eligible
contributions are matched by the Corporation at an established rate. The
Corporation's matching obligation was $98 million in 1995, $103 million in 1994
and $104 million in 1993.
Since inception of the ESOP, some portion of the Corporation's match has
consisted of the Corporation's common stock. The common stock portion of the
matching obligation is fulfilled, in
70
Lockheed Martin Corporation
part, with stock released from the suspense account at approximately 1.2 million
shares per year based upon the debt repayment schedule through the year 2004.
The balance of the stock portion of the matching obligation is fulfilled through
purchases of common stock from terminating participants or on the open market.
Effective January 1, 1994, the Corporation adopted SOP No. 93-6. Among other
things, under this method of accounting, the cost of the ESOP includes the
interest paid by the ESOP trust to service the debt (approximately $31 million
and $33 million for 1995 and 1994, respectively).
The Lockheed salaried ESOP trust held approximately 22 million and 23 million
issued shares of the Corporation's common stock at December 31, 1995 and 1994,
respectively, representing about 11 percent of the Corporation's total common
shares outstanding in each period. The 22 million shares held at December 31,
1995 consisted of approximately 12 million allocated shares and 10 million
unallocated shares. The fair value of the unallocated ESOP shares at December
31, 1995 was approximately $780 million.
The Lockheed Hourly Plans - ESOPs were created and incorporated into the
Lockheed Hourly Plans. The Corporation matches an established rate of
participating employees' eligible contributions to the Hourly Plans through
payments to the ESOP trusts. A portion of the Corporation's match consists of
Corporation common stock purchased by the ESOPs on the open market and from
terminating participants. The required match was $12 million in 1995, $12
million in 1994 and $15 million in 1993. The hourly ESOP trusts held
approximately two million issued and outstanding shares of common stock at
December 31, 1995.
Dividends on allocated shares - Dividends paid to the Lockheed salaried and
hourly ESOP trusts on the allocated shares are paid annually by the ESOP trusts
to the participants based upon the number of shares allocated to each
participant.
The Martin Marietta Plans - The Corporation sponsors a number of contributory
401(k) savings plans which cover substantially all Martin Marietta heritage
employees. Under the provisions of the plans, certain contributions of eligible
employees are matched by the Corporation at an established rate. The
Corporation's contributions for the years ended December 31, 1995, 1994 and 1993
were $70 million, $77 million and $48 million, respectively, which were
reflected as compensation expense. Plan assets at December 31, 1995, which are
held in a master trust, included approximately 10 million shares of the
Corporation's common stock.
Defined Benefit Plans
Most employees are covered by contributory or noncontributory defined benefit
pension plans. Benefits for salaried plans are generally based on average
compensation and years of service, while those for hourly plans are generally
based on negotiated benefits and years of service. Substantially all benefits
are paid from funds previously contributed to trustees. The Corporation's
funding policy is to make contributions that are consistent with U.S. Government
cost allowability and Internal Revenue Service deductibility requirements,
subject to the full-funding limits of the Employee Retirement Income Security
Act of 1974 (ERISA). When any funded plan exceeds the full-funding limits of
ERISA, no contribution is made to that plan.
The net pension cost of the Corporation's defined benefit plans includes the
following components:
(In millions) 1995 1994 1993
===========================================================
Service cost--benefits earned
during the year $ 350 $ 440 $ 386
Interest cost 896 842 807
Net amortization and other
components 1,545 (1,060) 326
Actual return on assets (2,577) 64 (1,259)
Employee contributions (3) (3) (3)
- -----------------------------------------------------------
Net pension cost $ 211 $ 283 $ 257
===========================================================
71
Notes to Consolidated Financial Statements Continued
- ------------------------------------------
The following table sets forth the defined benefit plans' funded status and
amounts recognized in the Corporation's consolidated balance sheet as of
December 31:
(In millions) 1995 1994
=======================================================
Plan assets at fair value $13,848 $11,845
=======================================================
Actuarial present value of
benefit obligations:
Vested $10,839 $ 9,423
Non-vested 121 118
- -------------------------------------------------------
Accumulated benefit obligation 10,960 9,541
Effect of projected future
salary increases 1,648 1,330
- -------------------------------------------------------
Projected benefit obligation (PBO) 12,608 10,871
- -------------------------------------------------------
Plan assets greater than PBO 1,240 974
Reconciling items:
Unrecognized net asset
existing at the date of initial
application of SFAS No. 87 (279) (369)
Unrecognized prior-service cost 536 584
Unrecognized gain (1,332) (984)
- -------------------------------------------------------
Prepaid pension asset $ 165 $ 205
=======================================================
The increase in the fair value of plan assets in 1995 from 1994 was primarily
due to favorable investment returns. The increase in the projected benefit
obligation in 1995 from 1994 was primarily due to a decrease in the assumed
discount rate.
At December 31, 1995, approximately 50 percent of the plan assets were equity
securities and the rest were primarily fixed income securities and cash
equivalents. Actuarial determinations were based on various assumptions
displayed in the following table. Net pension costs in 1995, 1994 and 1993 were
based on assumptions in effect at the end of the respective preceding year.
Benefit obligations as of each year-end were based on assumptions in effect as
of those dates.
1995 1994 1993
====================================================================
Assumptions:
Plan discount rates 7.5% 8.2-8.5% 7.0-7.5%
Rates of increase in future com-
pensation levels 6.0 5.5-6.0 6.0
Expected long-term rate of return
on assets 8.8 8.0-8.8 8.0-8.8
====================================================================
Retiree Medical and Life Insurance Plans
Certain health care and life insurance benefits are provided to eligible
retirees by the Corporation. These benefits are paid by the Corporation or
funded through several trusts.
The net periodic post-retirement benefit cost for the years ended December 31,
included the following components:
(In millions) 1995 1994 1993
=================================================
Service cost--benefits
earned during the year $ 34 $ 54 $ 47
Interest cost 177 164 153
Net amortization and
other components 44 (29) 11
Actual return on assets (82) (3) (35)
Curtailment gain -- (21) (28)
- -------------------------------------------------
Net periodic cost $ 173 $ 165 $ 148
=================================================
The Corporation has made contributions to irrevocable trusts (including
Voluntary Employees' Beneficiary Association (VEBA) trusts and 401(h) accounts)
established to pay future medical benefits to eligible retirees and dependents.
The following table sets forth the post-retirement benefit plans' obligations
and funded status as of December 31:
(In millions) 1995 1994
====================================================
Plan assets at fair value $ 590 $ 423
====================================================
Actuarial present value of
benefit obligations:
Active employees,
eligible to retire $ 344 $ 371
Active employees, not
eligible to retire 428 402
Former employees 1,504 1,480
- ----------------------------------------------------
Accumulated post-retirement
benefit obligation (APBO) 2,276 2,253
- ----------------------------------------------------
Assets less than APBO 1,686 1,830
Unrecognized prior service cost 16 (5)
Unrecognized gain 93 24
- ----------------------------------------------------
Post-retirement benefit
unfunded liability $1,795 $1,849
====================================================
72
Lockheed Martin Corporation
Actuarial determinations were based on various assumptions displayed in the
following table. Net retiree medical costs for 1995, 1994 and 1993 were based on
assumptions in effect at the end of the respective preceding years. Benefit
obligations as of the end of each year reflect assumptions in effect as of those
dates.
1995 1994 1993
======================================================================
Assumptions:
Plan discount rates 7.5% 8.2-8.5% 7.0-7.5%
Expected long-term rate of return
on assets 8.8 8.0-8.8 8.0-8.8
======================================================================
The following table presents the medical trend rates for the plans:
1995 1994 1993
==============================================================
Initial:
Lockheed early retirees (pre-65) 8.0% 11.0% 13.0%
Lockheed other retirees 8.0 6.0 9.0
Martin Marietta retirees 7.5 7.5 7.5
Ultimate Lockheed:
Early(a) 4.5 5.0 5.0
Other(b) 2.0 2.0 2.0
Ultimate Martin Marietta
(7 years and after) 4.5 4.5 4.5
==============================================================
(a) 8 years and after for 1995; 20 years and after for 1994 and 1993.
(b) 13 years and after for 1995; 16 years and after for 1994 and 1993.
An increase of one percentage point in the assumed medical trend rates would
result in an increase in the APBO of approximately 7.9% at December 31, 1995,
and a 1995 post-retirement benefit cost increase of approximately 10.3%. The
Corporation believes that the cost containment features it has previously
adopted and the funding approaches underway will allow it to effectively manage
its retiree medical expenses, but it will continue to monitor the costs of
retiree medical benefits and may further modify the plans if circumstances
warrant.
Note 13 - Leases
Total rental expense under operating leases, net of immaterial amounts of
sublease rentals and contingent rentals, were $236 million, $265 million and
$257 million for 1995, 1994 and 1993, respectively.
Future minimum lease commitments at December 31, 1995, for all operating leases
that have a remaining term of more than one year were $781 million ($178 million
in 1996, $130 million in 1997, $106 million in 1998, $90 million in 1999, $74
million in 2000, and $203 million in later years). Certain major plant
facilities and equipment are furnished by the U.S. Government under short-term
or cancelable arrangements.
Note 14 - Commitments and Contingencies
The Corporation or its subsidiaries are parties to or have property subject to
litigation and other proceedings, including matters arising under provisions
relating to the protection of the environment, that have the potential to affect
the results of the Corporation's operations or its financial position. These
matters include the following items:
Environmental matters - In 1991, the Corporation entered into a consent decree
with the U.S. Environmental Protection Agency (EPA) relating to certain property
in Burbank, California, which obligates the Corporation to design and construct
facilities to monitor, extract, and treat groundwater and operate and maintain
such facilities for approximately eight years. The Corporation estimates that
expenditures required to comply with the terms of the consent decree over the
remaining term of the project will be approximately $50 million.
The Corporation has also been operating under a cleanup and abatement order from
the California Regional Water Quality Control Board affecting its facilities in
Burbank, California. This order requires site assessment and action to abate
groundwater contamination by a combination of groundwater and soil cleanup and
treatment. Based on experience derived from initial remediation activities, the
Corporation estimates the anticipated costs of these actions in excess of the
requirements under the EPA consent decree to approximate $155 million over the
remaining term of the project; however, this estimate is likely to change as
work progresses and as additional experience is gained.
In addition, the Corporation is involved in several other proceedings and
potential proceedings relating to environmental matters, including disposal of
hazardous wastes and soil and water contamination. The extent of the
Corporation's financial exposure cannot in all cases be reasonably estimated at
this time. A liability of approximately $285 million for those cases in which an
estimate of financial exposure can be determined has been recorded.
Under an agreement with the U.S. Government, the Burbank groundwater treatment
and soil
73
Notes to Consolidated Financial Statements Continued
- ------------------------------------------
remediation expenditures referenced above are being allocated to the
Corporation's operations as general and administrative costs and, under existing
government regulations, these and other environmental expenditures related to
U.S. Government business, after deducting any recoveries from insurance or other
responsible parties, are allowable in establishing the prices of the
Corporation's products and services. As a result, a substantial portion of the
expenditures will be reflected in the Corporation's sales and cost of sales
pursuant to U.S. Government agreement or regulation. The Corporation has
recorded a liability for probable future environmental costs as discussed above,
and has recorded an asset for probable future recovery of the portion of these
costs in pricing of the Corporation's products and services for U.S. Government
business. The portion that is expected to be allocated to commercial business
has been reflected in cost of sales. The recorded amounts do not reflect the
possible recovery of portions of the environmental costs through insurance
policy coverage or from other potentially responsible parties to the
contamination, which the Corporation is pursuing as required by agreement and
U.S. Government regulation. Any such recoveries, when received, would reduce the
Corporation's liability as well as the allocated amounts to be included in the
Corporation's U.S. Government sales and cost of sales.
Legal proceedings - The Corporation or its subsidiaries are parties to or have
property subject to litigation and other proceedings, including matters arising
under provisions relating to the protection of the environment, in addition to
those described above. In the opinion of management and counsel, the probability
is remote that the outcome of litigation and proceedings will have a material
adverse effect on the results of the Corporation's operations or its financial
position.
Letters of credit and other matters - The Corporation has entered into standby
letter of credit agreements and other arrangements with financial institutions
primarily relating to the guarantee of future performance on certain contracts.
At December 31, 1995, the Corporation had contingent liabilities on outstanding
letters of credit, guarantees, and other arrangements aggregating approximately
$560 million.
At December 31, 1995, Lockheed Martin Finance Corporation (LMFC) had entered
into approximately $140 million in interest rate swap agreements to reduce the
impact of changes in interest rates on its operations. The effect of these
agreements is that the aggregate of the carrying value of LMFC's financial
instruments approximates their fair market value. LMFC is exposed to credit
loss, to the extent of future interest rate differentials, in the event of
nonperformance by the intermediaries to the interest rate swap agreements. The
Corporation does not anticipate nonperformance by the intermediaries.
Note 15 - Information on Industry Segments and Major Customers
The Corporation operates in four principal business segments: Space & Strategic
Missiles, Aeronautics, Information & Technology Services, and Electronics. All
other activities of the Corporation fall within the Energy, Materials and Other
segment.
Space & Strategic Missiles - Engaged in the design, development, engineering and
production of civil, commercial and military space systems, including
spacecraft, space launch vehicles and supporting ground systems and services;
satellites; strategic fleet ballistic missiles; tactical defense missiles;
electronics and instrumentation; remote sensing technology; space and ground-
based strategic systems; and surface and space-based information and
communications systems.
Aeronautics - Engaged in the design, development, engineering and production of
fighter, bomber, special mission, airlift, antisubmarine warfare,
reconnaissance, surveillance and high performance aircraft; aircraft controls
and subsystems; thrust reversers and shipboard vertical missile launching
systems; and aircraft modification and maintenance and logistics support for
military and civilian customers.
Information & Technology Services - Engaged in the development and operation of
large, complex information systems; designing, manufacturing and marketing
computer graphics products; developing and manufacturing high capacity data
storage products; electronics contract manufacturing services; and providing
advanced transportation systems and services, and payload integration, astronaut
training and flight operations support.
Electronics - Engaged in the design, development, engineering and production of
high-performance electronic systems for undersea, shipboard, land-based and
airborne applications. Major product lines include advanced technology missiles,
night navigation and targeting systems for aircraft; submarine and surface ship
combat systems; airborne,
74
Lockheed Martin Corporation
ship and land-based radar; radio frequency, infrared, and electro-optical
countermeasure systems; surveillance systems; control systems; ordnance; and
aircraft component manufacturing and assembly.
Energy, Materials and Other - The Corporation manages certain facilities for the
U.S. Department of Energy. The contractual arrangements provide for the
Corporation to be reimbursed for the cost of operations and receive a fee for
performing management services. The Corporation reflects only the management fee
in its sales and earnings for these government-owned facilities. In addition,
while the employees at such facilities are employees of the Corporation,
applicable employee benefit plans are separate from the Corporation's plans. The
Corporation also provides construction aggregates and specialty chemical
products to commercial and civil customers through its Materials subsidiary,
provides environmental remediation services to commercial and U.S. Government
customers, and has investments in airport development and management as well as
other businesses.
Selected Financial Data By Business Segment
(In millions) 1995 1994 1993
==============================================================
Net sales
Space & Strategic Missiles $ 7,521 $ 6,719 $ 7,293
Aeronautics 6,617 7,091 6,601
Information & Technology Services 4,528 4,271 3,712
Electronics 3,294 4,055 4,092
Energy, Materials and Other 893 770 699
- --------------------------------------------------------------
$22,853 $22,906 $22,397
==============================================================
Operating profit
Space & Strategic Missiles $ 431 $ 476 $ 507
Aeronautics 394 511 479
Information & Technology Services 269 228 145
Electronics 261 456 331
Energy, Materials and Other 22 308 122
- --------------------------------------------------------------
$ 1,377 $ 1,979 $ 1,584
==============================================================
(In millions) 1995 1994 1993
==============================================================
Depreciation and amortization
Space & Strategic Missiles $ 205 $ 217 $ 218
Aeronautics 142 126 137
Information & Technology Services 67 77 92
Electronics 125 139 161
Energy, Materials and Other 66 79 72
- --------------------------------------------------------------
$ 605 $ 638 $ 680
==============================================================
Expenditures for property, plant
and equipment
Space & Strategic Missiles $ 165 $ 175 $ 163
Aeronautics 58 96 155
Information & Technology Services 64 67 77
Electronics 99 101 77
Energy, Materials and Other 145 70 64
- --------------------------------------------------------------
$ 531 $ 509 $ 536
==============================================================
Identifiable assets
Space & Strategic Missiles $ 3,734 $ 4,195 $ 3,341
Aeronautics 4,082 4,591 5,119
Information & Technology Services 2,758 2,450 2,138
Electronics 3,806 3,338 3,485
Energy, Materials and Other 3,268 3,475 3,025
- --------------------------------------------------------------
$17,648 $18,049 $17,108
==============================================================
75
Notes to Consolidated Financial Statements Continued
- ------------------------------------------
Net Sales By Customer Category
(In millions) 1995 1994 1993
==============================================================
U.S. Government(a)
Space & Strategic Missiles $ 6,025 $ 5,594 $ 6,663
Aeronautics 4,274 4,970 4,937
Information & Technology Services 2,885 2,849 2,737
Electronics 2,418 2,999 3,042
Energy, Materials and Other 168 152 118
- --------------------------------------------------------------
$15,770 $16,564 $17,497
==============================================================
Foreign governments
Space & Strategic Missiles $ 112 $ 290 $ 282
Aeronautics 1,966 1,958 1,408
Information & Technology Services 72 155 9
Electronics 837 1,037 1,028
Energy, Materials and Other -- -- --
- --------------------------------------------------------------
$ 2,987 $ 3,440 $ 2,727
==============================================================
Commercial
Space & Strategic Missiles $ 1,384 $ 835 $ 348
Aeronautics 377 163 256
Information & Technology Services 1,571 1,267 966
Electronics 39 19 22
Energy, Materials and Other 725 618 581
- --------------------------------------------------------------
$4,096 $ 2,902 $ 2,173
==============================================================
(a) Sales made to foreign governments through the U.S. Government are
included in sales to foreign governments.
Export sales were $3.7 billion, $3.6 billion and $2.8 billion in 1995, 1994
and 1993, respectively.
Note 16 - Summary of Quarterly Information (Unaudited)
1995 Quarters
-------------------------------------
(In millions, except per share data) First(a) Second(a) Third Fourth
==============================================================================
Net sales $ 5,644 $ 5,606 $ 5,551 $6,052
Earnings (loss) from operations 290 (55) 510 537
Net earnings (loss) 137 (53) 287 311
Earnings (loss) per common share,
assuming full dilution .62 (b) 1.29 1.38
==============================================================================
1994 Quarters
---------------------------------------
(In millions, except per share data) First(c)(d) Second(e) Third Fourth
===============================================================================
Net sales $ 5,036 $ 5,562 $ 5,704 $6,604
Earnings from operations 402 453 443 481
Earnings before cumulative effect of
change in accounting 272 259 254 270
Earnings per common share before
cumulative effect of change in
accounting, assuming full dilution 1.25 1.19 1.16 1.23
===============================================================================
(a) Earnings for the first and second quarters of 1995 include merger related
and consolidation expenses (see Note 2).
(b) Loss per common share, assuming full dilution, of $.24 has not been
presented above as such amount was anti-dilutive when compared to the loss
per common share, assuming no dilution, of $.36.
(c) First quarter 1994 earnings exclude the cumulative effect of the change in
accounting for ESOP resulting from the adoption of SOP No. 93-6. The
cumulative effect reduced net earnings by $37 million, or $.17 per common
share assuming full dilution.
(d) Earnings for the first quarter of 1994 include the gain from the Materials
public offering (see Note 10).
(e) Earnings for the second quarter of 1994 include the acquisition termination
fee (see Note 10).
76
Lockheed Martin Corporation
Consolidated Financial Data
Six Year Summary
(In millions, except per share data) 1995 1994 1993 1992 1991 1990
====================================================================================================================
Operating Results
Net sales $22,853 $22,906 $22,397 $16,030 $15,871 $16,089
Costs and expenses 21,571 21,127 20,857 14,891 14,767 15,178
- --------------------------------------------------------------------------------------------------------------------
Earnings from operations 1,282 1,779 1,540 1,139 1,104 911
Other income and expenses, net 95 200 44 42 (49) 34
- --------------------------------------------------------------------------------------------------------------------
1,377 1,979 1,584 1,181 1,055 945
Interest expense 288 304 278 177 176 180
- --------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative effect
of changes in accounting 1,089 1,675 1,306 1,004 879 765
Income tax expense 407 620 477 355 261 161
- --------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of changes in
accounting 682 1,055 829 649 618 604
Cumulative effect of changes in accounting -- (37) -- (1,010) --
- --------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 682 $ 1,018 $ 829 $ (361) $ 618 $ 604
====================================================================================================================
Per Common Share
Assuming no dilution:
Before cumulative effect of changes in
accounting $ 3.28 $ 5.32 $ 3.99 $ 3.31 $ 3.05 $ 2.97
Cumulative effect of changes in accounting -- (.20) -- (5.15) --
- --------------------------------------------------------------------------------------------------------------------
$ 3.28 $ 5.12 $ 3.99 $ (1.84) $ 3.05 $ 2.97
====================================================================================================================
Assuming full dilution:
Before cumulative effect of changes in
accounting $ 3.05 $ 4.83 $ 3.75 $ 3.31 $ 3.05 $ 2.97
Cumulative effect of changes in accounting -- (.17) -- (5.15) --
- --------------------------------------------------------------------------------------------------------------------
$ 3.05 $ 4.66 $ 3.75 $ (1.84) $ 3.05 $ 2.97
====================================================================================================================
Cash Dividends $ 1.34 $ 1.14 $ 1.09 $ 1.04 $ .98 $ .90
====================================================================================================================
Condensed Balance Sheet Data
Current assets $ 8,177 $ 8,143 $ 6,961 $ 5,157 $ 5,553 $ 5,442
Property, plant and equipment 3,165 3,455 3,643 3,139 3,155 3,200
Intangible assets related to contracts
and programs acquired 1,808 1,971 2,127 42 52 59
Cost in excess of net assets acquired 2,817 2,831 2,697 841 864 882
Other assets 1,681 1,649 1,680 1,648 895 883
- --------------------------------------------------------------------------------------------------------------------
Total $17,648 $18,049 $17,108 $10,827 $10,519 $10,466
====================================================================================================================
Current liabilities--other $ 4,569 $ 5,350 $ 4,845 $ 3,176 $ 3,833 $ 4,235
Current maturities of long-term debt 722 285 346 327 298 30
Long-term debt 3,010 3,594 4,026 1,803 1,997 2,392
Post-retirement benefit liabilities 1,778 1,756 1,719 1,579 54 --
Other liabilities 1,136 978 971 460 112 38
Stockholders' equity 6,433 6,086 5,201 3,482 4,225 3,771
- --------------------------------------------------------------------------------------------------------------------
Total $17,648 $18,049 $17,108 $10,827 $10,519 $10,466
====================================================================================================================
Common Shares Outstanding at Year End 198.6 199.1 197.9 194.1 201.4 200.7
====================================================================================================================
77
Corporate Directory
- --------------------------------------------------------------------------------
Board of Directors
Norman R. Augustine
President and Chief Executive Officer,
Lockheed Martin Corporation
Marcus C. Bennett
Senior Vice President and
Chief Financial Officer,
Lockheed Martin Corporation
Lynne V. Cheney
W. H. Brady, Jr.,
Distinguished Fellow,
American Enterprise Institute
A. James Clark
Chairman and President,
Clark Enterprises, Inc.
Vance D. Coffman
Executive Vice President
and Chief Operating Officer,
Lockheed Martin Corporation
Edwin I. Colodny
Of Counsel, Paul, Hastings,
Janofsky & Walker
Lodwrick M. Cook
Chairman Emeritus, ARCO
James L. Everett, III
Retired Chairman,
Philadelphia Electric Company
Houston I. Flournoy
Special Assistant to the President, Governmental Affairs,
University of Southern California
James F. Gibbons
Dean, School of Engineering,
Stanford University
Edward L. Hennessy, Jr.
Retired Chairman,
AlliedSignal Inc.
Edward E. Hood, Jr.
Retired Vice Chairman,
General Electric Company
Caleb B. Hurtt
Retired President and
Chief Operating Officer,
Martin Marietta Corporation
Gwendolyn S. King
Senior Vice President,
Corporate and Public Affairs,
PECO Energy Company
Lawrence O. Kitchen
Retired Chairman of the Board
and Chief Executive Officer,
Lockheed Corporation
Gordon S. Macklin
Chairman, White River Corporation
Vincent N. Marafino
Retired Executive Vice President,
Lockheed Martin Corporation
Eugene F. Murphy
President and
Chief Executive Officer,
GE Aircraft Engines
Allen E. Murray
Retired Chairman and
Chief Executive Officer,
Mobil Corporation
David S. Potter
Retired Vice President
and Group Executive,
General Motors Corporation
Frank Savage
Chairman, Alliance Capital
Management International
Daniel M. Tellep
Chairman of the Board,
Lockheed Martin Corporation
Carlisle A. H. Trost
Retired Chief of Naval Operations
James R. Ukropina
Partner, O'Melveny & Myers
Douglas C. Yearley
Chairman, President
and Chief Executive Officer,
Phelps Dodge Corporation
Committees
Audit and Ethics Committee
Mr. Potter, Chairman.
Mrs. King, Messrs. Everett,
Flournoy, Hood, Kitchen,
Macklin and Ukropina.
Compensation Committee
Mr. Murray, Chairman.
Messrs. Clark, Cook, Hennessy,
Hood, Potter, Trost and Yearley.
Executive Committee
Mr. Tellep, Chairman.
Mrs. Cheney, Messrs. Augustine,
Clark, Colodny, Macklin,
Savage and Trost.
Finance Committee
Mr. Ukropina, Chairman.
Mmes. Cheney and King,
Messrs. Colodny, Everett, Hurtt,
Kitchen, Murphy, Savage
and Yearley.
Nominating Committee
Mr. Hennessy, Chairman.
Messrs. Cook, Flournoy, Gibbons,
Hurtt and Murphy.
Officers
Dean O. Allen
Vice President
Joseph D. Antinucci
Vice President
M. Sam Araki
Vice President
Norman R. Augustine
President and Chief Executive Officer
William F. Ballhaus
Vice President
Marcus C. Bennett
Senior Vice President and
Chief Financial Officer
78
Lockheed Martin Corporation
James A. Blackwell, Jr.
Vice President and President
and Chief Operating Officer,
Aeronautics Sector
Harold T. Bowling
Vice President
Peter A. Bracken
Vice President
Melvin R. Brashears
Vice President and President
and Chief Operating Officer,
Space & Strategic Missiles Sector
William B. Bullock
Vice President
Michael F. Camardo
Vice President
Joseph R. Cleveland
Vice President
Vance D. Coffman
Executive Vice President
and Chief Operating Officer
Thomas A. Corcoran
Vice President and President
and Chief Operating Officer,
Electronics Sector
Robert B. Corlett
Vice President
Peter DeMayo
Vice President
Philip J. Duke
Vice President
John F. Egan
Vice President
Ronald R. Finkbiner
Vice President
Jack S. Gordon
Vice President
John Hallal
Vice President
Dain M. Hancock
Vice President
Alfred G. Hansen
Vice President
Alexander L. Horvath
Vice President
John R. Kreick
Vice President
Gary P. Mann
Vice President
John F. Manuel
Vice President
Carol R. Marshall
Vice President
James W. McAnally
Vice President
Russell T. McFall
Vice President
Janet L. McGregor
Vice President
John S. McLellan
Vice President
Frank H. Menaker, Jr.
Vice President and General Counsel
John E. Montague
Vice President
L. David Montague
Vice President
Albert Narath
Vice President and President
and Chief Operating Officer,
Energy & Environment Sector
Gerald T. Oppliger
Vice President
David S. Osterhout
Vice President
Stephen Pavlosky
Vice President
Susan M. Pearce
Vice President
Robert J. Polutchko
Vice President
John B. Ramsey
Vice President
Joseph B. Reagan
Vice President
Robert E. Rulon
Vice President and Controller
Walter E. Skowronski
Vice President and Treasurer
Albert E. Smith
Vice President
Michael A. Smith
Vice President
William R. Sorenson
Vice President
Kenneth R. Swimm
Vice President
Peter B. Teets
Vice President and President
and Chief Operating Officer,
Information & Technology
Services Sector
Joseph T. Threston
Vice President
Robert E. Tokerud
Vice President
Lillian M. Trippett
Secretary and
Associate General Counsel
Leonard L. Victorino
Vice President
William T. Vinson
Vice President and Chief Counsel
79
Lockheed Martin Corporation
General Information
- -------------------
As of December 31, 1995, there were approximately 43,361 holders of record of
Lockheed Martin common stock and 198,601,608 shares outstanding.
Common Stock Prices (New York Stock Exchange--composite transactions)
================================================
High Low Close
1995 Quarters
1st* 54 3/8 50 1/4 52 7/8
2nd 64 7/8 50 63 1/8
3rd 68 1/8 59 3/8 67 1/8
4th 79 1/2 63 79
================================================
*March 16, 1995-March 31, 1995, reflecting the completion of the merger
March 15, 1995.
Transfer Agent & Registrar
First Chicago Trust Company of New York
P. O. Box 2536, Suite 4694
Jersey City, New Jersey 07303-2536
Telephone: 1-800-519-3111
Dividend Reinvestment Plan
Lockheed Martin's Dividend Reinvestment and Stock Purchase Plan offers
stockholders an opportunity to purchase additional shares through automatic
dividend reinvestment and/or voluntary cash investments. For more information,
contact our transfer agent, First Chicago Trust Company of New York at 1-800-
519-3111.
Independent Auditors
Ernst & Young LLP
1225 Connecticut Avenue, N.W.
Washington, D.C. 20036
Common Stock
Stock symbol: LMT
Listed: New York
Annual Report on Form 10-K
Stockholders may obtain, without charge, a copy of Lockheed Martin's Annual
Report on Form 10-K, as filed with the Securities and Exchange Commission for
the fiscal year ended December 31, 1995 by writing to:
Lockheed Martin Investor Relations
6801 Rockledge Drive
Bethesda, MD 20817
or calling Lockheed Martin Shareholder Direct at 1-800-LMT-9758.
Lockheed Martin recently introduced Shareholder Direct. Updates on earnings,
dividends and company news are available by calling 1-800-LMT-9758, 24 hours a
day, seven days a week.
80
This Annual Report contains statements which, to the extent that they are not
recitations of historical fact, constitute "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All forward looking statements involve risks
and uncertainties. The forward looking statements in this document are intended
to be subject to the safe harbor protection provided by Sections 27A and 21E.
For a discussion identifying some important factors that could cause actual
results to differ materially from those anticipated in the forward looking
statements see the Corporation's Securities and Exchange Commission filings,
including but not limited to, the discussion of "Competition and Risk" and the
discussion of "Government Contracts and Regulations" on pages 10 through 12 and
pages 13 through 14, respectively, of the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (Form 10-K); "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 44 through 56 of this Annual Report and "Note 1-Summary of Significant
Accounting Policies" and "Note 14-Commitments and Contingencies" of the Notes to
Consolidated Financial Statements on pages 62 through 63 and 73 through 74,
respectively, of the Audited Consolidated Financial Statements included in this
Annual Report and incorporated by reference into the Form 10-K.
Lockheed Martin Code of Ethics and Business Conduct
We are committed to the ethical treatment of those to whom we have an
obligation.
For our employees we are committed to honesty, just management, and fairness,
providing a safe and healthy environment, and respecting the dignity due
everyone.
For our customers we are committed to produce reliable products and services,
delivered on time, at a fair price.
For the communities in which we live and work we are committed to acting as
concerned and responsible neighbors, reflecting all aspects of good citizenship.
For our shareholders we are committed to pursuing sound growth and earnings
objectives and to exercising prudence in the use of our assets and resources.
For our suppliers we are committed to fair competition and the sense of
responsibility required of a good customer.
Principal photography by Eric Schulzinger
Designed and produced by Taylor & Ives, Inc NYC
Shareholders desiring additional information about the Corporation's ethics
program may write to the Corporation care of Carol R. Marshall, Vice President,
Ethics and Business Conduct, P.O. Box 34143, Bethesda, MD 20827-0143.
APPENDIX TO THE EDGAR VERSION OF THE 1995 ANNUAL REPORT TO
SECURITY HOLDERS FILED PURSUANT TO RULE 304 OF REGULATION S-T
This appendix is being filed pursuant to Rule 304 of Regulation S-K and
represents Lockheed Martin Corporation's good faith effort to fairly and
accurately describe certain graphic and image material that is included in the
paper version of the 1995 Annual Report to Shareholders (the "1995 Annual
Report") but has been omitted from the EDGAR version.
A description of the pictures omitted from the 1995 Annual Report in its
EDGAR format follows. Generally, the omitted pictures are described in the
associated captions and represent products produced by Lockheed Martin
Corporation which are discussed at various locations in the text of the
document. In some instances, the pictures are of officers, directors and
employees of the Corporation or of persons using the Corporation's products. The
pictures are included primarily to add visual interest to the 1995 Annual Report
and are neither individually nor in the aggregate material to an understanding
of the Report.
The 1995 Annual Report in its EDGAR format also omits certain graphic
material. This material is also described fully in the text. A description of
the omitted graphic material follows:
Page 45 - The omitted graph sets forth in columnar format net sales, in millions
of dollars, for the years 1993, 1994 and 1995 and corresponds to the textual
description of net sales.
Page 46 - The graph omitted at the top of the page sets forth in columnar format
net earnings, in millions of dollars, for the years 1993, 1994 and 1995 as well
as including a column pertaining to 1994 to which footnote (a) relates and a
column pertaining to 1995 to which footnote (b) relates. The graph corresponds
to the textual description of net earnings.
Page 46 - The graph omitted at the bottom of the page sets forth in columnar
format earnings per common share, assuming full dilution, in dollars, for the
years 1993, 1994 and 1995 and includes a column pertaining to 1994 to which
footnote (a) relates and a column pertaining to 1995 to which footnote (b)
relates. The graph corresponds to the textual description of earnings per common
share.
Page 52 - The omitted graph sets forth in columnar format negotiated backlog, in
millions of dollars, for the years 1993, 1994 and 1995 and corresponds to the
textual description of negotiated backlog.
Page 53 - The graph omitted at the top of the page sets forth in columnar format
net cash provided by operating activities, of millions in dollars, for the years
1993, 1994 and 1995 and corresponds to the textual description of net cash
provided by operating activities.
Page 53 - The graph omitted at the bottom of the page sets forth in columnar
format dividends per common share, in dollars, for the years 1993, 1994 and 1995
and corresponds to the textual description of dividends per common share.
EXHIBIT 21
LIST OF SUBSIDIARIES OF
LOCKHEED MARTIN CORPORATION
State or Percentage
Country of of Securities
Name of Subsidiary Incorporation Owned
------------------ ------------- -------------
Martin Marietta Materials, Inc. Maryland 80.9%
Lockheed Martin Corporation has a number of other subsidiaries, but all of them,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary. Accordingly, the names of the particular subsidiaries
are omitted.
EXHIBIT 24
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents,
and each of them, or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
/s/ NORMAN R. AUGUSTINE March 4, 1996
- -----------------------------
Norman R. Augustine
President, Chief Executive
Officer and Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ MARCUS C. BENNETT February 22, 1996
- ---------------------
Marcus C. Bennett
Senior Vice President,
Chief Financial Officer
and Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ ROBERT E. RULON February 22, 1996
- ---------------------
Robert E. Rulon
Chief Accounting Officer
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ LYNNE V. CHENEY February 22, 1996
- ---------------------
Lynne V. Cheney
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ A. JAMES CLARK February 22, 1996
- ---------------------
A. James Clark
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ VANCE D. COFFMAN February 22, 1996
- ---------------------
Vance D. Coffman
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ EDWIN I. COLODNY February 22, 1996
- ---------------------
Edwin I. Colodny
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue
hereof.
/s/ LODWRICK M. COOK February 22, 1996
- ---------------------
Lodwrick M. Cook
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ JAMES L. EVERETT, III February 22, 1996
- -------------------------
James L. Everett, III
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ HOUSTON K. FLOURNOY February 22, 1996
- -----------------------
Houston K. Flournoy
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ JAMES F. GIBBONS February 22, 1996
- ---------------------
James F. Gibbons
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ EDWARD L. HENNESSY, JR. February 22, 1996
- ---------------------------
Edward L. Hennessy, Jr.
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ EDWARD E. HOOD, JR. February 22, 1996
- -----------------------
Edward E. Hood, Jr.
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ CALEB B. HURTT February 22, 1996
- ------------------
Caleb B. Hurtt
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ GWENDOLYN S. KING February 22, 1996
- ---------------------
Gwendolyn S. King
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ LAWRENCE O. KITCHEN February 22, 1996
- -----------------------
Lawrence O. Kitchen
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ GORDON S. MACKLIN February 22, 1996
- ---------------------
Gordon S. Macklin
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ VINCENT N. MARAFINO February 22, 1996
- -----------------------
Vincent N. Marafino
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ EUGENE F. MURPHY February 22, 1996
- --------------------
Eugene F. Murphy
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ DAVID S. POTTER February 22, 1996
- -------------------
David S. Potter
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ FRANK SAVAGE February 22, 1996
- ----------------
Frank Savage
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ DANIEL M. TELLEP February 22, 1996
- --------------------
Daniel M. Tellep
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ CARLISLE A. H. TROST February 22, 1996
- ------------------------
Carlisle A. H. Trost
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents, and
each of them, or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
/s/ JAMES R. UKROPINA February 22, 1996
- ---------------------
James R. Ukropina
Director
POWER OF ATTORNEY
LOCKHEED MARTIN CORPORATION
The undersigned hereby constitutes Frank H. Menaker, Jr. and Stephen M.
Piper, and each of them, jointly and severally, his or her lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities,
including, but not limited to, that listed below, in connection with the
preparation, execution and filing with the Securities and Exchange Commission
(hereinafter referred to as the "Commission"), under the Securities Exchange Act
of 1934 of an Annual Report on Form 10-K of Lockheed Martin Corporation
("Lockheed Martin") for Lockheed Martin's fiscal year ended December 31, 1995
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1995, and other documents in
connection therewith (collectively, the "Form 10-K"), and all matters required
by the Commission in connection with the Form 10-K, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done as
fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorney's-in-fact and agents,
and each of them, or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
/s/ DOUGLAS C. YEARLEY February 22, 1996
- ----------------------
Douglas C. Yearley
Director
5
1,000,000
12-MOS
DEC-31-1995
DEC-31-1995
653
0
3,876
0
2,804
8,177
8,185
5,020
17,648
5,291
3,010
0
1,000
199
5,234
17,648
22,853
22,853
20,881
20,881
690
0
288
1,089
407
682
0
0
0
682
3.28
3.05
