Exhibit 10.1
LOCKHEED MARTIN CORPORATION
DEFERRED MANAGEMENT INCENTIVE
COMPENSATION PLAN
(Adopted July 27, 1995)
As Amended August 1, 1998
As Amended Effective January 1, 1999
As Amended June 28, 2001
As Amended December 6, 2001
As Amended October 1, 2002
ARTICLE 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 Long Term Incentive Award payments under the Lockheed Martin
Corporation 1995 Omnibus Performance Award Plan (the "Omnibus Plan"). Providing
this opportunity to defer income under the Deferral Plan will 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 Long Term
Incentive Award payments under the Omnibus Plan 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.
ARTICLE 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
and the portions attributable to the deferral of Incentive Compensation awards
and Long Term Incentive Award payments will be accounted for separately.
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.
-2-
3. AWARD YEAR -- As to Incentive Compensation, the calendar year
with respect to which an Eligible Employee is awarded Incentive Compensation; as
to a Long Term Incentive Award payment, the first calendar year in the
Performance Period for which the Long Term Incentive Award is effective with
respect to an Eligible Employee.
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 DEFERRALS -- The amount deferred by the Company, and not
at the election of the Participant, for the two-year period following the end of
a Performance Period for a Long Term Incentive Award.
9. 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.
10. 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 or a Long Term Incentive Award
for an Award Year.
11. DEFERRAL PLAN -- The Lockheed Martin Corporation Deferred
Management Incentive Compensation Plan, adopted by the Board on July 27, 1995,
and as amended from time to time.
12. DEFERRED COMPENSATION -- The amount of Incentive Compensation
credited to a Participant's Account under the Deferral Plan and the amount of
any Long Term Incentive Award payment credited to a Participant's Account under
the Deferral Plan (other than Company Deferrals).
13. ELIGIBLE EMPLOYEE -- An employee of the Company who is a
participant in the MICP or who receives a Long Term Incentive Award under the
Omnibus Plan 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.
14. EXCHANGE ACT -- The Securities Exchange Act of 1934.
-3-
15. INCENTIVE COMPENSATION -- The MICP amount granted to an employee
for an Award Year.
16. 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.
17. LONG TERM INCENTIVE AWARD -- A long term incentive award granted
to an employee under the Omnibus Plan.
18. MICP -- The Lockheed Martin Corporation Management Incentive
Compensation Plan.
19. OMNIBUS PLAN -- The Lockheed Martin Corporation 1995 Omnibus
Performance Award Plan.
20. PARTICIPANT -- An Eligible Employee for whom Incentive
Compensation or a Long Term Incentive Award payment 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.
21. PAYMENT DATE -- As to any Participant, the January 15 or July 15
on or about on which payment to the Participant is to begin in accordance with
the Participant's election made pursuant to Section 2 or 4 of Article V.
22. PERFORMANCE PERIOD -- The period set forth in a Long Term
Incentive Award over which the Company's performance is measured by reference to
total stockholder return to determine whether any payment will be made under
such Long Term Incentive Award.
23. 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.
24. SUBSIDIARY -- As to any person, any corporation, association,
partnership, joint venture or other business entity of which 50% or more of the
voting stock or other equity interests (in the case of entities other than
corporation), is owned or controlled (directly or indirectly) by that entity, or
by one or more of the Subsidiaries of that entity, or by a combination thereof.
25. TRADING DAY -- A day upon which transactions with respect to
Company Common Stock are reported in the consolidated transaction reporting
system.
ARTICLE III
ELECTION OF DEFERRED AMOUNT
-4-
1. Timing of Deferral Elections.
(a) 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.
(b) Long Term Incentive Awards. An Eligible Employee may elect
to defer a Long Term Incentive Award payment by executing and delivering to the
Company a Deferral Agreement no 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.
(c) Irrevocability of Elections. 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 or a Long Term Incentive Award.
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 or Long Term
Incentive Award payment (adjusted to the next highest multiple
of $1,000),
(c) the excess of the Eligible Employee's Incentive
Compensation or Long Term Incentive Award payment 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 or Long Term Incentive Award payment.
An Eligible Employee's deferral election shall be effective only if the
Participant is awarded, in the case of Incentive Compensation, at least $10,000
of Incentive Compensation for that Award Year, or in the case of Long Term
Incentive Award, at least $10,000 is payable to the Participant in cash at the
conclusion of the Performance Period applicable to a Long Term Incentive Award
payment. In addition, in the case of a deferral election under paragraph (c) of
this Section 2, an Eligible Employee's deferral election shall be effective only
if the resulting excess amount is at least $5,000.
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
-5-
shall be made proportionately out of amounts otherwise allocable to the Interest
Option and the Company Stock Investment Option.
4. Multiple Awards. In the case of an Eligible Employee who
receives more than one Long Term Incentive Award with respect to the same
Performance Period, the elections made by the Eligible Employee under this
Article III as well as under Articles V and VI for the first Long Term Incentive
Award granted to the Eligible Employee with respect to a Performance Period
shall be deemed to be the elections made by that Eligible Employee for any other
Long Term Incentive Awards granted to that Eligible Employee with respect to
that same Performance Period.
5. Company Deferrals. Pursuant to the terms of the Long Term
Incentive Awards, 50% of the amount payable at the end of the Performance Period
will be automatically deferred until the second anniversary of the last day of
the Performance Period with respect to a particular award. The Company may
establish an account for Company Deferrals under the Company Stock Investment
Option of this Deferral Plan. However, the terms governing the Company Deferrals
will be governed for the two year period of deferral by the terms of the award
agreement entered into under the Omnibus Plan with respect to the Long Term
Incentive Award and not by this Deferral Plan. Notwithstanding the foregoing, if
the Participant elects to defer the Company Deferrals beyond the second
anniversary of the end of the Performance Period, the deferrals will be treated
as made under this Deferral Plan for the period following the second anniversary
of the end of the Performance Period.
ARTICLE IV
CREDITING OF ACCOUNTS
1. Crediting of Deferred Compensation. Incentive Compensation
or a Long Term Incentive Award payment 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 or the Long Term Incentive Award payment would
have made to the Participant if no Deferral Agreement had been made. Company
Deferrals shall be credited as of the last day of the Performance Period.
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 to be made pursuant to
the Participant's election as set forth in Article V. Company Deferrals shall be
credited with earnings through the second anniversary of the end of the
applicable Performance Period unless deferred further pursuant to a Deferral
Agreement. 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.
-6-
(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.
(c) Interest Crediting For Late Payments: Notwithstanding
the investment option to which a Participant's Account has been
allocated, in the event payment does not commence by the last
day of the month in which the Payment Date occurs, earnings
shall be credited on the Participant's entire Account from the
last day of the month preceding the Payment Date to the last day
of the month preceding the actual commencement of payment at the
rate set forth under Section 2(a) of this Article IV. Interest
credited under this Section 2(c) of this Article IV shall be
paid on the date payment under the Plan first commences.
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 a particular type of award for
an Award Year and shall be irrevocable with respect to amounts deferred for that
type of award 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 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).
-7-
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, the Participant or Beneficiary, as
applicable, may elect irrevocably at any time after the Participant's
termination of employment and before the completion of benefit payments to have
the portion of the Participant's Account that is allocated to the Company Stock
Investment Option reallocated to the Interest Option. A reallocation under this
Section 6 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.
ARTICLE 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 (including but not limited to Section 5 of
Article III with respect to Company Deferrals), 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:
-8-
(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.
(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 a particular type of award 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 a particular type of award 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.
(a) Payment Election Changes. Notwithstanding anything
to the contrary in Sections 1 through 4 of this Article V, a
Participant may make an election with respect to the
commencement of payment (from among the options set forth in
Section 2(A), (B), or (C) above) and form of payment (from among
the options set forth in Section 3(A) or (B) above) of his or
her entire Account Balance, or with respect to specific Award
Years, by executing and delivering to the Company an election
form on or after October 1, 2002 in such form as prescribed by
the Company. If a Participant has different payment options in
effect with respect to his or her Account Balance, the Company
shall maintain sub-
-9-
accounts for the Participant to determine the amounts subject to
each payment election; however, no election or modification of
an election will be accepted if it would require the Company to
maintain more than five sub-accounts within the Participant's
Account in order to make payments in accordance with the
Participant's elections.
In the event a Participant does not make a valid election with
respect to the commencement of payment and form of benefit for
an Award Year commencing on or after October 1, 2002, the
Participant will be deemed to have elected that payment of
benefits with respect to that Award Year be made in a lump sum
on or about the January 15th or July 15th next following the
date of the Participant's termination of employment.
A Participant's election with respect to an Award Year
(including a "deemed election" in accordance with the preceding
paragraph) shall remain in effect unless and until such election
is modified by a subsequent election in accordance with the
second preceding paragraph above.
To constitute a valid election, an election made after October
1, 2002 must be executed and delivered to the Company (i) at
least six months before the date the first payment would be due
under the Participant's previous election and (ii) in a
different calendar year than the date the first payment would be
due under the Participant's previous election. In the event an
election fails to satisfy the provisions set forth in this
paragraph, such election shall be void.
No election will be considered valid to the extent the election would
(i) result in a payment being made within six months of the date of
the election or (ii) result in a payment in the same calendar year as
the date of the election. In the event an election fails to satisfy
the provisions set forth in this paragraph, the first payment under
the election will be delayed until the first January 15 or July 15
that is both (i) at least six months after the date of the election
and (ii) in a calendar year after the date of the election.
A Participant may not make or modify an election with respect to
commencement of payment or form of payment after the date a
Participant terminates employment.
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), except as provided in Section 5 of Article III with
respect to Company Deferrals, 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. Acceleration Upon Conflict of Interest. Notwithstanding a
Participant's payment elections under Sections 2 and 3, if following a
Participant's termination of employment with the Company, the Participant takes
a position (or accepts a position) with a governmental entity, agency, or
instrumentality and that employer has determined or indicated that the
Participant's continued participation in the Plan may constitute a conflict of
interest precluding the Participant from continuing in his position (or from
accepting an offered position) with that employer or subjecting the Participant
to penalty, sanction, or otherwise limiting the Participant's responsibilities
for that employer, except as
-10-
provided in Section 5 of Article III with respect to Company Deferrals, then the
Participant's Account Balance shall be distributed to him or her in a lump sum
as soon as practical following the later of (i) the date on which the
Participant commences employment with the government employer; or (ii) the date
on which it is determined that the conflict of interest may exist.
7. 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.
8. 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 (except as provided in Section 5 of Article
III with respect to Company Deferrals):
(a) Hardship Distributions. Subject to the last sentence
of this Section 8(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 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
8(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 8(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 8(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 8(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
-11-
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 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.
9. Acceleration upon Change in Control.
(a) Notwithstanding any other provision of the Deferral
Plan, except as provided in Section 5 of Article III with
respect to Company Deferrals, 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 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
-12-
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 9(a), if a
distribution in accordance with the provisions of Section 9(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 9 shall apply only to a Change in
Control of Lockheed Martin Corporation and shall not cause
immediate payout of Deferred Compensation in any transaction
involving the Company's sale, liquidation, merger, or other
disposition of any subsidiary.
(e) The Committee may cancel or modify this Section 9 at
any time prior to a Change in Control. In the event of a Change
in Control, this Section 9 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 9
shall not, for purposes of Section 9, be subject to cancellation
or modification during the five year period.
10. 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.
11. 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.
12. Tax Withholding. To the extent required by law, the
Company shall withhold from benefit payments hereunder, or with respect to any
Incentive Compensation or Long Term Incentive
-13-
Award payment 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.
ARTICLE 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, 1992-2 C.B. 422, 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 Deferral 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.
ARTICLE 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.
-14-
3. Transfer of Liability. The Board reserves the right to
transfer to another entity all of the obligations of Company with respect to a
Participant under this Plan if such entity agrees pursuant to a binding written
agreement to assume all of the obligations of the Company under this Plan with
respect to such Participant.
ARTICLE 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 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.
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.
-15-
6. Claim Procedures. The procedures when a claim under this
Deferral 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 therefore; 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
Deferral 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) 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 Deferral Plan.
-16-
ARTICLE IX
GENERAL AND MISCELLANEOUS PROVISIONS
1. Neither this Deferral Plan, a Company Deferral 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, a Company Deferral 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 Deferral Plan, a
Company Deferral 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
Deferral Plan, a Company Deferral or a Plan Agreement, either singly or
collectively, by their terms or implications in any way obligate the Company to
award Incentive Compensation, grant any award under the Omnibus Plan or make any
Long Term Incentive Award payment 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. Neither Incentive Compensation nor Long Term Incentive
Award payments deferred under this Deferral Plan shall 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 last-known place of residence or
business address.
4. In the event it should become impossible for the Company
or the Committee to perform any act required by this Deferral 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
Deferral Plan at reasonable times at the offices of the Company.
-17-
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 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.
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 and Long Term Incentive Award payments deferred under this Deferral
Plan by all Eligible Employees for all Award Years exceed $250,000,000.
-18-
ARTICLE 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. Subsequent amendments to the Deferral Plan are
effective as of the date stated in the amendment or the adopting resolution.
-19-
This Deferral Plan has been amended and restated effective as of the
dates stated on the first page hereof.
LOCKHEED MARTIN CORPORATION
Terry F. Powell
Senior Vice President, Human Resources
WITNESS:
_______________________