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1997
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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, 1997 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
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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 filers 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 [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Approximately $20,230,000,000 as of January 31, 1998.
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,
194,701,640 shares outstanding as of January 31, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Lockheed Martin Corporation's 1997 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 1998 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 in Maryland on August 29, 1994 to effect the combination (the
"Combination") of the businesses of Martin Marietta Corporation and Lockheed
Corporation. The Combination was consummated on March 15, 1995. Lockheed
Martin is a highly diversified global enterprise principally engaged in the
conception, research, design, development, manufacture, integration and
operation of advanced technology products and services.
NORTHROP GRUMMAN TRANSACTION
On July 2, 1997, Lockheed Martin and Northrop Grumman Corporation ("Northrop
Grumman") entered into an Agreement and Plan of Merger which was amended on
September 29, 1997 (as so amended, the "Agreement"). The Agreement provides for
the merger (the "Merger") of a wholly-owned subsidiary of Lockheed Martin with
and into Northrop Grumman, with Northrop Grumman surviving as a wholly-owned
subsidiary of Lockheed Martin.
Pursuant to the Agreement, each share of common stock, par value $1.00 per
share, of Northrop Grumman ("Northrop Grumman Common Stock")
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outstanding immediately prior to the Effective Time (as defined in the
Agreement) of the Merger (other than shares held in Northrop Grumman's treasury)
will be converted into the right to receive 1.1923 shares of Lockheed Martin
common stock, par value $1.00 per share ("Lockheed Martin Common Stock"). No
fractional shares will be issued and cash, without interest, will be paid in
lieu thereof. As of the Effective Time, all shares of Northrop Grumman Common
Stock issued and outstanding immediately prior to the Effective Time will no
longer be outstanding and will be automatically canceled and retired and will
cease to exist. Each holder of a certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Northrop Grumman
Common Stock will cease to have any rights with respect thereto, except the
right upon surrender of such certificate to (i) receive certificate(s)
representing the number of whole shares of Lockheed Martin Common Stock into
which such shares of Northrop Grumman Common Stock have been converted and (ii)
any cash, without interest, to be paid in lieu of any fractional share of
Lockheed Martin Common Stock.
On or about January 24, 1998, Lockheed Martin and Northrop Grumman mailed to
their respective stockholders a Joint Proxy Statement/Prospectus relating to
special meetings of stockholders of each of Lockheed Martin and Northrop Grumman
which were held on
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Thursday, February 26, 1998 (the "Special Meetings"). At the Special Meetings,
the stockholders of Lockheed Martin approved the issuance of shares of Lockheed
Martin Common Stock to the stockholders of Northrop Grumman in connection with
the Merger and Northrop Grumman's stockholders approved the Merger. Lockheed
Martin's stockholders also approved an unrelated proposal increasing the number
of shares of Common Stock authorized by Lockheed Martin's Charter. On March 9,
1998, the Corporation announced that it had been informed by the Department of
Justice (DOJ) that the DOJ was fundamentally opposed to the Merger. The
Corporation also announced on that date that it had committed to the DOJ not to
close the transaction before April 24, 1998, and to develop and submit a
proposal to the DOJ by April 8, 1998 designed to address the DOJ's antitrust
concerns while preserving the expected benefits and efficiencies of the
transaction to the Corporation and its stockholders, customers, employees and
suppliers. On March 12, 1998, the DOJ informed the Corporation that it found
this commitment unacceptable and demanded that the Corporation agree, at a
minimum, to certain substantial divestitures or the DOJ will proceed to court.
The DOJ stated that the agency expected a response by March 16,
1998. On March 13, 1998, the Corporation responded to the DOJ by letter and on
the morning of March 16, 1998 representatives of the Corporation and
representatives of Northrop Grumman met with representatives of the DOJ and
Department of Defense (DOD) and discussed the results of the Corporation's
efforts to date. The discussion included a description of the magnitude of
divestitures that the Corporation is willing to make to resolve the horizontal
and organizational conflict of interest issues raised by the DOJ and DOD. In
addition, the nature of a consent order that the Corporation would be willing to
enter to address the foreclosure issues posited by the DOJ and DOD to arise from
the vertical aspects of the combination was described. At the meeting, the
Corporation made clear to the Government that the Corporation is continuing to
work on its proposal but that the Corporation has not yet found an economically
viable way to make divestitures of the scope and magnitude set forth in the
DOJ's March 12, 1998 letter as the agency's minimum demand. In the early evening
of March 16, 1998, the DOJ sent the Corporation another letter restating the
demands of its March 12 letter and demanding an immediate response. The
Corporation responded by letter on March 17, 1998 in which the Corporation
restated its commitments of March 9 as well as the information conveyed in the
meeting of March 16. Later on March 17, the Corporation was informed by a
representative of the DOJ that, as a result of the Corporation's failure to
agree to the substantial divestitures set forth in the DOJ's March 12 letter as
the agency's minimum demand, the DOJ might proceed to court later that day or on
March 18, 1998. On March 18, the Corporation was informed by a representative of
the DOJ that the agency would not file suit on that date. The representative did
not address if or when suit might be filed.
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For additional information regarding the Northrop Grumman Transaction, please
see the Joint Proxy Statement/Prospectus contained in the Registration Statement
on Form S-4 (Reg. No. 333-44671) filed with the Securities and Exchange
Commission on January 22, 1998.
BUSINESSES
The Corporation conducts its principal businesses through five major operating
sectors: Space & Strategic Missiles; Electronics; Information & Services;
Aeronautics; and Energy & Environment. See "Business - Additional Activities
and Business Segment Reporting" on page 13.
Space & Strategic Missiles Sector
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The 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, manned space systems and
their supporting ground systems and services; telecommunications systems and
services; strategic fleet ballistic missiles; and defensive missiles.
Major programs of the Space & Strategic Missiles Sector include the Titan
family of launch vehicles including the Titan IV expendable launch vehicle, the
Trident II submarine launched fleet ballistic
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missile, the MILSTAR communications satellite and the Atlas expendable launch
vehicle. In addition, a substantial amount of the Space & Strategic Missiles
Sector's activities are classified.
In 1998, the Sector anticipates that an increased amount of its sales will be
derived from international launch services using the Proton D-1-e launch
vehicle. Lockheed Martin provides the launch services through the Lockheed
Khrunichev Energia International, Inc. joint venture with two Russian aerospace
companies. Lockheed Martin was one of two companies awarded development
contracts for the U.S. Air Force's Evolved Expendable Launch Vehicle (EELV).
The Air Force envisions that the EELV will replace existing Delta, Atlas and
Titan space launch vehicles for use in launching government and commercial
payloads.
Net sales by the Sector represented 29.6% of the Corporation's total net sales
in 1997. Net sales to the United States Government, excluding Foreign Military
Sales, represented 77.9% of the Sector's net sales in 1997.
Electronics Sector
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The Electronics Sector's activities primarily relate to the design,
development, engineering and production of high performance electronic systems
for undersea, shipboard, land-, airborne- and
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space-based applications. Major business elements include: Naval Systems;
Missiles and Air Defense; Aerospace Electronics; and Platform Integration. The
Naval Systems element serves customers world-wide with major lines of business
in surface ship and submarine combat systems, missile launching systems, anti-
submarine warfare systems, and navigation systems. The Air Defense and Missiles
element produces air defense systems; tactical battlefield missiles; and
precision guided weapons and munitions. The Aerospace Electronics element
manufactures major electronics subsystems such as: aircraft controls;
electronic-warfare; electro-optic and night vision; radar; displays; and
computers for the military and commercial aerospace market. The Platform
Integration element performs systems integration of mission specific combat
suites for both fixed and rotary wing aircraft and postal automation.
The Corporation is the prime contractor for the U.S. Navy's AEGIS fleet air
defense system, including the Vertical Launch System, and for the development
and integration of the EH-101 Merlin helicopter's anti-submarine warfare system
for the United Kingdom's Ministry of Defence. In addition, the Sector is the
prime contractor for the Multiple Launch Rocket System, the U.S. Army's general
support fire power system, and the U.S. Air Force and Navy LANTIRN targeting and
navigation system. The Sector also produces the Target Acquisition
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Designation Sight / Pilot Night Vision Sensor. In 1998, the Sector anticipates
that an increased percentage of its revenues will be derived from the Army
Tactical Missile System.
The Electronics Sector also manufactures and installs bar code readers and
sorters for the U.S. Postal Service and international postal services. In 1997,
the Sector was awarded 25 domestic and international postal contracts to provide
advanced recognition, automation, material handling and information management
systems. In addition, the Electronics Sector was awarded contracts for the
production of four AEGIS weapon systems for the Spanish Navy and, through the
Lockheed Martin/Tenix joint venture, for the development and production of the
Jindalee Operational Radar Network, a wide-area surveillance system of over-the-
horizon radars in Australia.
Net sales by the Electronics Sector represented 25.2% of the Corporation's
total net sales in 1997. Net sales to the United States Government, excluding
Foreign Military Sales, represented 68.5% of the Sector's net sales in 1997.
Information & Services Sector
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The Information & Services Sector consists of four major lines of business:
systems integration and command, control, communications, computer and
intelligence (C4I) systems; federal technology services;
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state and municipal systems support services; and commercial systems and
products. The Sector's activities include the development, integration and
operation of large, complex information systems, including satellite command and
control systems, simulation and training systems, and nationally critical
intelligence systems. The Sector provides federal government, civil and military
customers with engineering, scientific, management, technical and information
technology support. Services to state and local government customers include
systems development, integration and operational support in the areas of welfare
reform, municipal services, children and family services, transportation, and
telecommunications. Commercial systems businesses include information technology
services, computer peripheral products, real-time 3-D graphics products and
enterprise data management software. The Sector also provides Lockheed Martin
companies with internal information systems support.
Through its Technology Services Group, the Information & Services Sector
provides a wide array of science and engineering, information management,
operation and maintenance, logistics, assembly and test and installation
services to governmental agencies and prime contractors. The Sector is
upgrading the U.S. National Air Traffic Control System through replacement of
display systems at 20 Federal Aviation Administration (FAA) Air Route Traffic
Control Centers. The Sector is currently completing
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the New En Route Centre for the United Kingdom. In addition, the Sector
performs a substantial amount of classified work. In November 1997, the
Corporation divested its Access Graphics business.
In 1997, the Sector was awarded a 10-year contract to provide engineering
services in support of the FAA's modernization of the nation's air traffic
control system, a contract to provide information systems development and
maintenance to the United States Patent and Trademark Office and two contracts
to support the Environmental Protection Agency's computing and
telecommunications requirements. The United Kingdom National Air Traffic
Services selected Sky Solutions Ltd. as preferred bidder for the New Scottish
Centre, a major new air traffic control facility to be built at Prestwick,
Scotland. Sky Solutions is owned by the Corporation and Bovis Ltd. The Sector is
performing contracts under which it provides information technology services and
support for commercial and federal government customers, such as the Department
of Housing and Urban Development and the Social Security Administration.
Lockheed Martin was also selected as the North American Numbering Plan
Administrator and signed four Local Number Portability Contracts to develop and
operate a system to allow telephone customers to switch local service providers
while keeping their existing telephone numbers.
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Net sales by the Information & Services Sector represented 23.0% of Lockheed
Martin's total net sales in 1997. Net sales to the United States Government,
excluding Foreign Military Sales, represented 62.6% of the Sector's net sales in
1997.
Aeronautics Sector
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The Aeronautics Sector operates in the following primary lines of business;
tactical aircraft, airlift, surveillance/command,
maintenance/modification/logistics, reconnaissance and advanced development
programs. Programs include the F-22 air-superiority fighter, Joint Strike
Fighter, F-16 multirole fighter, C-130J tanker/transport, X-33 reusable launch
vehicle technology demonstrator, DarkStar reconnaissance vehicle, Airborne Early
Warning & Control systems, Contractor Logistics Support and a variety of
maintenance and modification programs for aircraft such as U.S. Navy P-3s and
U.S. Air Force KC-10s, as well as the Big Safari modification program for
special operations forces. The Aeronautics Sector is composed of four Operating
Companies: Aeronautical Systems, Aircraft & Logistics Center, Skunk Works, and
Tactical Aircraft Systems.
The Sector's largest programs include serving as the prime contractor on the
F-16 "Fighting Falcon" fighter aircraft, leading the team responsible for the
Air Force's F-22 air-superiority fighter
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program that achieved first flight in 1997 and manufacturing the C-130 series
airlift aircraft. The Corporation also provides sustaining engineering,
modifications and upgrading for existing aircraft, including the F-117 fighter
bomber, the U-2 reconnaissance aircraft, and earlier model C130s. Through the
Skunk Works and other operating units, the Aeronautics Sector performs a
substantial amount of classified work. The Sector anticipates an increased
percentage of its revenues in 1998 will result from the joint Japan/U.S.
production of the F-2 aircraft.
In 1997, the Corporation completed a critical design review of the X-33
single-stage-to-orbit reusable launch vehicle technology demonstrator, the next
generation of space shuttle, providing go-ahead for assembly of the subscale
prototype. The Corporation also began fabrication of two concept demonstration
aircraft and entered teaming agreements with Northrop Grumman and British
Aerospace in connection with the Joint Strike Fighter (JSF) Program. JSF Program
tasks include the design, development, construction and flight test of a full-
scale demonstration aircraft. In November 1997, the Sector's thrust reverser
business was divested.
Net sales by the Aeronautics Sector represented 21.5% of the Corporation's
total net sales in 1997. Net sales to the United States
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Government, excluding Foreign Military Sales, represented 48.2% of the Sector's
net sales in 1997.
Energy & Environment Sector
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The Energy & Environment Sector's activities primarily focus on the management
of various U.S. Department of Energy (DOE) facilities, environmental management
and remediation, and enrichment services. The Corporation is the largest
management and operations contractor within the DOE's system of laboratories,
managing energy research and defense programs at, among other facilities, the
Sandia National Laboratories, the Idaho National Engineering and Environmental
Laboratory and the Oak Ridge National Laboratory. These contractual
arrangements provide for the Corporation to be reimbursed for the cost of
operations and receive a fee for performing management services. Only the
management fees are reflected within Lockheed Martin's net sales and earnings.
The Corporation is one of two competitors for the DOE's Tank Waste Remediation
System-Privatization program.
Net sales by the Sector represented less than 1% of the Corporation's total
net sales in 1997. Net sales to the United States Government represented 81.2%
of the Sector's net sales in 1997.
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Additional Activities and Business Segment Reporting
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In addition to the above activities, Lockheed Martin has real estate
subsidiaries in Florida and Maryland; runs research laboratories; owns
approximately a 20% interest in Loral Space & Communications, Ltd., a public
company; owns approximately a 34% interest in L-3 Communications Corporation, a
company formed in 1997 in connection with the repositioning of 10 of the
Corporation's business units, is a joint venturer with Boeing in United Space
Alliance and carries on other miscellaneous activities.
For business segment reporting in the Corporation's consolidated financial
statements, the Space & Strategic Missiles, Electronics, Information & Services
and Aeronautics Sectors each comprise reportable business segments. The Energy
& Environment Sector, together with the additional activities described in the
preceding paragraph, are reported as Energy and Other and represent the balance
of the Corporation's revenues.
The Corporation's principal executive offices are located at 6801 Rockledge
Drive, Bethesda, Maryland 20817. The telephone number of the Corporation is
(301) 897-6000.
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COMPETITION AND RISK
Lockheed Martin's sales to the U.S. Government, excluding Foreign Military
Sales, amounted to 65.5% of net sales for the year ended December 31, 1997.
Sales to foreign governments comprised 17.3% of net sales for fiscal year 1997
and approximately 17.2% of net sales were to commercial customers (of which
21.3% were to international customers).
Lockheed Martin encounters extensive competition in all of its lines of
business with numerous other contractors on the basis of price, as well as
technical and managerial capability. The on-going consolidation of the United
States defense industry has intensified this competition as competitors are now
generally larger and more capable. At the same time, the number of contracts
awarded has decreased. In some instances, for example, the ongoing competition
for the Joint Strike Fighter, winning the competition may be a significant
determinant of whether the competitors are able to remain in that line of
business. In addition, the decrease in the number of contracts awarded and
intensified competition for those contracts that are awarded increasingly
requires the Corporation to generate working capital and invest in fixed assets
in order to maintain and/or expand its government business.
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More generally, the aerospace and defense 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.
Substantial efforts are undertaken continually on a long-term basis in order to
maintain existing levels of business.
Of the 1997 net sales of the Corporation, 65.5% 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
rapidly changing military and political developments, and the availability of
funds. Other characteristics of the industry are complexity of designs, the
difficulty of forecasting costs and schedules when bidding on developmental and
highly sophisticated technical work, and the rapidity with which product lines
become obsolete due to technological advances and other factors characteristic
of the industry. 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 11 through
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page 24 of the Corporation's 1997 Annual Report to Shareholders (the "1997
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, 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 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, 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
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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 loss or
termination would, in the opinion of management, materially affect the
Corporation's business.
RAW MATERIALS AND SEASONALITY
While certain of the Corporation's businesses require relatively difficult to
obtain raw materials, the Corporation has not experienced significant
difficulties in its ability to obtain raw materials and other supplies needed in
its manufacturing processes, 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.
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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. The amount of the
fee recovered, if any, is related to the proportion of the work accomplished
prior to the termination for convenience and is determined by negotiation. 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 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 United States Government to terminate,
government contracts are conditioned upon the continuing
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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, 1997, was $47.1
billion compared with $50.4 billion at the end of 1996. A portion of the change
in total negotiated backlog between year-end 1996 and 1997 is the impact of
divestitures. The total negotiated backlog of the Sectors at December 31, 1997
was as follows: Space & Strategic Missiles - $16.8 billion, Electronics - $9.8
billion, Information & Services - $6.7 billion, and Aeronautics - $13.5 billion.
Unlike the other Sectors, the Energy & Environment Sector is not a reportable
business segment. The reportable business segment of which Energy & Environment
is part, Energy and Other, had total negotiated backlog at December 31, 1997 of
$0.3 billion. Of this figure, almost all was attributable to the Energy &
Environment Sector. These figures are all approximate and include both unfilled
firm orders for the Corporation's products for which funding has been
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authorized and appropriated by the customer (Congress, in the case of
United States Government agencies) and firm orders for which funding has not
been appropriated.
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 1997 year-end backlog, approximately $31.6 billion,
or 67.1%, 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,
former facilities and at certain other sites not 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) or by
a state agency. 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
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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 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.
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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, in combination with the Corporation's actual or potential liability
for environmental responses at its own facilities, 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 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
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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 32 through page 41. See
also "Note 16 -- Commitments and Contingencies" of the "Notes to Consolidated
Financial Statements" on page 41 through page 42 and "Management's Discussion
and Analysis of Financial Condition and Results of Operations, Environmental
Matters" on page 23 through page 24 of the 1997 Annual Report.
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 approximately $1.016 billion in 1997, $1.042
billion in 1996 and $778 million in 1995 using IR&D and bid and proposal funds,
a substantial portion of
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which was included in overhead allocable to United States Government contracts.
A significant portion of the increase in amounts expended in 1997 and 1996 as
compared to 1995 reflects the Corporation's acquisition of Loral Corporation.
During fiscal year 1997, 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, however, the Corporation's launch investment
strategy is requiring increasing investments by the Corporation in the
development and improvement of launch vehicles.
See "Research and development and similar costs" in "Note 1--Summary of
Significant Accounting Policies" of the "Notes to Consolidated Financial
Statements" on page 32 of the 1997 Annual Report.
EMPLOYEES
As of December 31, 1997, Lockheed Martin had approximately 173,000 employees,
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 33,000 of Lockheed Martin's employees are covered by 120 separate
collective
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bargaining agreements with various international and local unions. Management
considers employee relations generally to be good and believes that the
probability is remote that renegotiating these contracts will have a material
adverse effect on its business.
YEAR 2000
The Corporation is near completion of a thorough assessment of the effect of
Year 2000 issues on its computer systems. The Corporation is also near
completion of the development of plans to resolve those issues identified in the
assessment. Current plans provide for substantially all of the Corporation's
systems to be Year 2000 compliant by the end of 1999. Based on information
currently available from the Corporation's internal assessment, management does
not believe that the costs associated with Year 2000 activities over the next
two years will have a material adverse effect on the Corporation's consolidated
results of operations or financial position.
FORWARD LOOKING STATEMENTS - SAFE HARBOR PROVISIONS
This Annual Report on Form 10-K contains or incorporates by reference
statements which, to the extent that they are not recitations of historical
fact, constitute "forward looking
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<PAGE>
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934 (the "Exchange Act"). The words "estimate," "anticipate," "project,"
"intend," "expect," and similar expressions are intended to identify forward
looking statements. All forward looking statements involve risks and
uncertainties, including, without limitation, statements and assumptions with
respect to future revenues, program performance and cash flows, the outcome of
contingencies including litigation and environmental remediation, and
anticipated costs of capital investments and planned dispositions. Readers are
cautioned not to place undue reliance on these forward looking statements which
speak only as of the date of this Annual Report on Form 10-K. The Corporation
does not undertake any obligation to publicly release any revisions to forward
looking statements to reflect events or circumstances or changes in expectations
after the date of this Annual Report on Form 10-K or to reflect the occurrence
of unanticipated events. The forward looking statements in (or incorporated by
reference in) this document are intended to be subject to the safe harbor
protection provided by Sections 27A of the Securities Act and 21E of the
Exchange Act. For a discussion identifying some important factors that could
cause actual results to vary materially from those anticipated in the
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<PAGE>
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
14 through 17 and 18 through 19 of this Annual Report on Form 10-K,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 11 through 24 of the 1997 Annual Report, "Note 1 -
Summary of Significant Accounting Policies", "Note 2 - Transaction Agreement
with Northrop Grumman Corporation", and "Note 16 - Commitments and
Contingencies" of the Notes to Consolidated Financial Statements on pages 31
through 32, pages 32 through 33 and 41 through 42, respectively of the
Audited Financial Statements included in the 1997 Annual Report.
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<PAGE>
ITEM 2. PROPERTIES
At December 31, 1997, the Corporation operated in approximately 486 offices,
facilities, manufacturing plants, warehouses, service centers, and laboratories
throughout the United States and internationally. Of these, the Corporation
owned floor space at approximately 70 locations aggregating approximately 44.6
million square feet. The Corporation leased space at approximately 416 of its
locations aggregating approximately 25.8 million square feet. Additionally, the
Corporation manages and/or occupies various government-owned facilities at
Marshall Space Flight Center in Alabama; Livermore, Palmdale, San Diego, Santa
Cruz, Sunnyvale and Vandenberg Air Force Base in California; Cape Canaveral Air
Force Station and Kennedy Space Center in Florida; Marietta, Georgia; Kauai,
Hawaii; Idaho Falls and Scoville, Idaho; the United States Enrichment facilities
at Paducah, Kentucky and Piketon, Ohio; the NASA Michoud Assembly Facility near
New Orleans, Louisiana; Stennis Space Center in Mississippi; Las Vegas, Nevada;
Sandia National Laboratories in New Mexico; Knolls Atomic Power Laboratory at
Niskayuna, New York; the Department of Energy facility at Oak Ridge, Tennessee;
Houston and Ft. Worth, Texas, among others. The United States Government also
furnishes certain equipment and property used by the Corporation.
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<PAGE>
The Corporation owns a corporate office building located in Bethesda, Maryland
in fee simple, and leases corporate office facilities at WestLake Village,
California, Bethesda, Maryland, and Arlington (Crystal City), Virginia. In
addition, the Corporation owns and leases major office and manufacturing
facilities for various sectors at the following locations, and with
approximately the indicated square footage:
<TABLE>
<CAPTION>
SQUARE FOOTAGE
(In Millions)
--------------------------------
SECTOR LOCATION OWNED LEASED
- ----------------------------- ---------------------------------- --------------- --------------
<S> <C> <C> <C>
Space & Strategic Sunnyvale and Palo
Missiles Alto, CA 6.3 .7
Waterton and
Littleton, CO 4.0 .4
East Windsor, NJ .7
King of Prussia, PA .9
Information & Goodyear, AZ 1.0
Services San Jose, CA .5
Colorado Springs, CO .3 .2
Orlando, FL 1.0 .2
Gaithersburg, MD .5
King of Prussia, PA .5 .6
Reston/Fairfax, VA .9
Aeronautics Ontario, CA .9
Palmdale, CA 2.2
Marietta, GA 1.9
Greenville, SC .8
Ft. Worth, TX .8 .2
Electronics Camden, AK 1.5
Orlando, FL 2.2 .3
Eagan, MN .6
Nashua, NH 2.5
Moorestown, NJ .9 .2
Great Neck, NY 1.4
Johnson City, NY .6
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Owego, NY 1.5
Syracuse, NY 1.5
Akron, OH 2.6
Grand Prairie, TX .4 2.0
Manassas, VA 1.4
</TABLE>
The above information excludes facilities associated with the former Access
Graphics business unit located in Boulder, Colorado which was divested effective
as of November 17, 1997, as well as the facilities owned and leased by L-3
Communications Corporation.
Finally, the Corporation owns various large tracts of land which are available
for sale or development. The location and approximate size of these large
tracts include:
<TABLE>
<CAPTION>
LOCATION ACREAGE
------------------------------------------------- ------------------------------------
<C> <S> <C>
1. Potrero Creek, CA 9100
2. Beaumont Gateway, CA 2800
3. Orlando, FL (under option) 2000
4. Palmdale, CA 650
5. Austin, TX 600
</TABLE>
A significant portion of the Corporation's activity is related to engineering
and research and development, which is not susceptible 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.
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Management believes that all of the Corporation's major physical facilities
are in good condition and are adequate for their intended use.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Corporation is primarily engaged in providing products and services under
contracts with the United States Government and, to a lesser degree, under
direct foreign sales 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 the Corporation's operations are being conducted in
accordance with these requirements. United States Government investigations of
the Corporation, whether relating to these Government contracts or conducted for
other reasons, could result in administrative, civil or criminal liabilities,
including repayments, fines or penalties being imposed upon the Corporation, or
could lead to suspension or debarment from future Government contracting. The
Corporation 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").
As previously reported, on June 7, 1990, Boggs, et al. v. Divested Atomic
Energy Corporation, et al., was filed against various defendants including
Lockheed Martin Energy Systems ("LMES"). Plaintiffs' request for class
certification was granted
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<PAGE>
and the case is pending in the United States District Court for the Eastern
District of Ohio. Plaintiffs seek $600 million in compensatory and $600 million
in punitive damages 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 LMES and the Department of Energy ("DOE").
LMES has received a notice of violation from the Tennessee Department of
Environmental Quality relating to alleged violations of state hazardous waste
management regulations in connection with the company's operations at the DOE
complex at Oak Ridge Tennessee. Although the DOE is the principal operator of
this complex, LMES has entered into an arrangement with the DOE by which the
company takes direct regulatory responsibility for certain day-to-day activities
under the company's control at the K-25 and Y-12 facilities within the complex.
The state made an initial penalty demand of just under $500,000 in connection
with the notice of violation, and the company is in negotiation with the state
over the content of the notice as well as the amount of the penalty sought.
The District Attorney for Mendocino County, California has notified the
Corporation that it has prepared a civil complaint naming the Corporation, M4
Environmental L.P. and a third party for
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<PAGE>
alleged violations of state and county environmental laws at the Retech facility
in Ukiah, California. The Retech operations relate to efforts by Lockheed Martin
Advanced Environmental Systems to develop technologies for treating mixed
radioactive/hazardous wastes generated by DOE facilities. Although none of the
District Attorney's allegations implicate radioactive materials, the allegations
cover a broad cross-section of conventional environmental laws, including air
and water resources, hazardous materials handling, and storage tank issues, as
well as alleged violations of California's unfair business practices statute.
Negotiations are at the very earliest stages with the District Attorney's
office, and while the potential liability of the Corporation, if any, cannot be
estimated at this time it could be in excess of $100,000.
The Corporation's property in Burbank, California (a former aircraft
manufacturing facility) is the subject of a 1991 consent decree with the U.S.
Environmental Protection Agency ("EPA") which obligates the Corporation to
design and construct facilities to monitor, extract and treat groundwater. A
second consent decree is being finalized which will obligate the Corporation to
fund the continued operation and maintenance of these facilities through the
year 2018. As is common practice, at the time the 1991 consent decree was
lodged, the EPA filed a suit with the United States
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<PAGE>
District Court for the Central District of California in order to provide that
Court with jurisdiction over the Consent Decree. The Corporation filed an Answer
and Counterclaim in March, 1997, in the EPA's suit asserting
indemnity/contribution claims against the Government based upon the Government's
ownership and operation of the former aircraft manufacturing facility. The same
former facility is subject to a cleanup and abatement order from the California
Regional Water Quality Board which requires site assessment and action to abate
groundwater contamination through a combination of groundwater and soil cleanup
and treatment. (See "Note 16 -Commitments and Contingencies" of the "Notes to
Consolidated Financial Statements" on page 41 through page 42 of the 1997 Annual
Report). On August 1, 1996, the Corporation consummated a settlement with a
group of 1,350 residents living in the vicinity of the former facility. The
settlement, valued at approximately $67 million, resolved, without litigation,
claims of personal injury and property damage asserted by the residents and
alleged to be related to environmental contamination stemming from historical
operations of the former facility. The Corporation settled the matter for
business reasons after a lengthy mediation, without any admission of liability,
notwithstanding its continuing position that the former facility does not and
has not posed a risk to the community. As the result of publicity surrounding
the
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<PAGE>
settlement, the Corporation has been named in two purported federal class action
suits and a series of seventeen state actions on behalf of approximately 3,400
individual residents and former residents of Burbank alleging similar claims of
personal injury, property damage and fear of future illnesses. As with its
remediation activities relating to environmental matters, the Corporation has
tendered these matters to its insurance carriers who have provided a defense but
are contesting coverage.
Following the filing of the lawsuits against the Corporation in connection
with its former aircraft manufacturing facility (In re Burbank Environmental
Litigation), five similar "copycat" actions were filed against the Corporation
in connection with the Corporation's former operations in Redlands, California
(e.g., Carrillo v. LMC). More lawsuits are expected in the Redlands area.
The Corporation previously reported that Lockheed Martin Electro-Optical
Systems was served with two grand jury subpoenas issued by the United States
District Court for the Central District of California and two Department of
Defense Inspector General's ("DOD IG") subpoenas all relating to the accounting
treatment of contract payments received from the Government. The United States
Attorney's Office for the Central District of California has advised the
Corporation that it has closed its criminal investigation. The Government's
civil investigation continues.
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<PAGE>
The Corporation previously reported that Lockheed Martin Electronics and
Missiles was served with a DOD IG subpoena in connection with a Government
investigation of allegations that the Corporation's proposal for the Paperless
LANTIRN Automated Depot contract was defectively priced. The Government has
advised the Corporation that this investigation has been closed.
As previously reported, on July 11, 1997, the Corporation was served with a
grand jury subpoena issued by the United States District Court for the Western
District of Tennessee, seeking documents related to the operation of the Milan
Army Ammunition Plant. The Corporation has been informed that the subpoena is a
continuation of a kickback investigation initiated in January 1994 and
previously reported by the Corporation. The Department of Justice has advised
the Corporation that it is no longer pursuing a criminal investigation of the
Corporation. The Government's civil investigation of the Corporation continues.
The Milan Army Ammunition Plant was operated by the Corporation's Armament
Systems business which was sold to General Dynamics Corporation effective
January 1, 1997. Under the terms of the agreement with General Dynamics, the
Corporation retained responsibility for investigations of this type.
As previously reported, on July 7, 1995, the Corporation was served with a
subpoena issued by the United States District Court for the Eastern District of
New York seeking documents relating to
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<PAGE>
a number of programs conducted at Lockheed Martin Tactical Defense Systems -
Great Neck. The Corporation has been provided minimal information concerning the
focus of the investigation, but it appears to arise from anonymous complaints
provided to the United States Government by employees about testing and quality
control matters. The Corporation is unaware of any such issues and is
cooperating in the Government's continuing investigation of this matter.
As previously reported, 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. Subsequently, the United States Attorney's Office for the
Middle District of Florida advised the Corporation that a grand jury is
investigating allegations of fraud in connection with certain LANTIRN program
contracts. These allegations were first made in qui tam complaints filed
against the Corporation and unsealed on July 16, 1996. In connection with its
investigation, the Government has served two DOD IG subpoenas on the Corporation
and six grand jury subpoenas on employees of the Corporation. The Corporation
and its employees have responded to the subpoenas and the Government's
investigation continues.
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<PAGE>
As previously reported, on January 23, 1996, Lockheed Martin Electronics &
Missiles was served with a 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 I missile for the U.S. Army. On July 24,
1996, a second grand jury subpoena was served on the Corporation related to the
same subject matter and the Government's investigation of this matter is
continuing.
As previously reported, on June 25, 1996, Lockheed Martin Engineering &
Science Services was served with a grand jury subpoena issued by the United
States District Court for the Southern District of Texas seeking documents
related to two former employees of a predecessor company, Lockheed Engineering &
Sciences Company (LESC), and pertaining to an investigation of cost accounting
issues in connection with NASA service and support contracts. The United States
Attorney's office for the Southern District of Texas has advised the Corporation
that it has closed its criminal investigation. The Government's civil
investigation continues.
As previously reported, on November 27, 1996, Lockheed Martin Tactical Defense
Systems - Great Neck was served with a grand jury subpoena issued by the United
States District Court for the Eastern
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<PAGE>
District of New York seeking documents related to tax and financial reporting
issues and the outsourcing of quality tasks contained in various contract
proposals. The Corporation expects this investigation to continue.
As previously reported, on February 6, 1997, three former employees of the
Corporation were served with subpoenas ad testificandum (to testify) issued by a
federal grand jury in Jackson, Tennessee. The individuals were employees of the
Corporation's Armament Systems business which was sold to General Dynamics
Corporation effective January 1, 1997. Under the terms of the agreement with
General Dynamics, the Corporation retained responsibility for investigations of
this type. The Corporation has cooperated within the Government's
investigation.
As previously reported, on August 19, 1997, Lockheed Martin IMS was served
with a grand jury subpoena issued by the United States District Court for the
District of Columbia seeking documents relating to a procurement of parking
meter and other services by the District of Columbia. The Corporation has
cooperated with the Government's investigation.
The Corporation 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 in the Office of General Counsel of the Corporation
the probability is remote that
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<PAGE>
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 the Corporation's operations or its financial
position.
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 1997. At a Special Meeting of Stockholders of the Corporation held
on February 26, 1998 (the "Special Meeting"), the stockholders of the
Corporation approved a proposal (the "Merger Proposal") to issue shares of
Lockheed Martin Common Stock to stockholders of Northrop Grumman in connection
with the Merger. The vote on the Merger Proposal was as follows:
<TABLE>
<CAPTION>
For Against/Withheld Abstentions/Broker Non-votes
--- ---------------- ----------------------------
<S> <C> <C>
154,963,677 1,598,121 13,878,762
</TABLE>
At the Special Meeting, the stockholders of the Corporation also approved a
proposal (the "Charter Amendment Proposal") to amend the Charter of the
Corporation to increase the number of authorized shares of Lockheed Martin
Common Stock. The vote on the Charter Amendment Proposal was as follows:
<TABLE>
<CAPTION>
For Against/Withheld Abstentions/Broker Non-votes
--- ---------------- ----------------------------
<S> <C> <C>
157,792,462 11,623,307 1,024,791
</TABLE>
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<PAGE>
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.
<TABLE>
<CAPTION>
POSITIONS AND
OFFICES HELD WITH PRINCIPAL OCCUPATION AND
Name CORPORATION BUSINESS EXPERIENCE
(Age at 12/31/97) (Year Elected) (Past Five Years)
- --------------------- ---------------------------- -------------------------------------------------------------
<S> <C> <C>
Norman R. Augustine Chairman of the Board; Chairman of Lockheed Martin since January 1997. Chief Executive
(62) Director (1995) Officer of Lockheed Martin from January, 1996 through August 1,
1997. Vice Chairman of Lockheed Martin from April to December
1996. President of Lockheed Martin from March 1995 to June
1996. Previously served as Chairman and Chief Executive Officer
of Martin Marietta from 1988 to 1995; and director of Martin
Marietta from 1986 to 1995.
Marcus C. Bennett Executive Vice President and Executive Vice President and Chief Financial Officer of Lockheed
(61) Chief Financial Officer; Martin since July 1996; Senior Vice President and Chief
Director (1995) Financial Officer of Lockheed Martin from March 1995 to July
1996. Previously served as Vice President and Chief Financial
Officer of Martin Marietta from 1988 to 1995; and director of
Martin Marietta from 1993 to 1995.
James A. Blackwell, Sector President and Chief President and Chief Operating Officer, Aeronautics Sector since
Jr. (57) Operating Officer - March 1995; previously served in Lockheed as Vice President and
Aeronautics President from 1993 to 1995 of Lockheed Aeronautical Systems
Company; served as an executive employee of Lockheed
Aeronautical Systems Company from 1986 until 1995.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Melvin R. Brashears Sector President and Chief President and Chief Operating Officer Space & Strategic Missiles
(52) Operating Officer - Space & Sector, since January 1996; Deputy, Space & Strategic Missiles
Strategic Missiles Sector from November 1995 to December 1995; Executive Vice
President of Lockheed Missiles & Space Company, Inc. from March
1995 to 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 & Space Company, Inc., from 1992 to 1995;
Director of Advanced Space Programs, from 1991 to 1992.
Vance D. Coffman (53) Chief Executive Officer and Chief Executive Officer and Vice Chairman of Lockheed Martin
Vice Chairman; Director since August 1997; President of Lockheed Martin from June 1996
(1996) to July 1997 and Chief Operating Officer from January 1996 to
July 1997; Executive Vice President from January to June 1996;
President and Chief Operating Officer, Space & Strategic
Missiles Sector from March 1995 to December 1995; previously
served as Executive Vice President of Lockheed from 1992 to
1995; and President of Lockheed Space Systems Division in 1988.
Thomas A. Corcoran (53) Sector President and Chief President and Chief Operating Officer, Electronics Sector since
Operating Officer - March 1995; previously served in Martin Marietta Corporation as
Electronics President, Electronics Group, from 1993 to 1995; previously
served at General Electric Corporation as Vice President and
General Manager, from 1990 to 1993.
Philip J. Duke (52) Vice President - Finance Vice President Finance since July 1996; Chief Financial Officer,
Space & Strategic Missiles Sector from March 1995 to July 1996;
previously served as Vice President Finance, Martin Marietta
from 1994 to 1995; Chief Financial Officer, Electronics Sector
of Martin Marietta from 1993 to 1994; and Vice President
Business Management of Martin Marietta from 1987 to 1993.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Arthur E. Johnson (51) Sector President and Chief President and Chief Operating Officer Information & Services
Operating Officer - Sector, since August 1997; President, Systems Integration Group
Information & Services from January to August, 1997; President, Lockheed Martin Federal
Systems from January 1996 to January 1997; previously served as
Vice President, Loral Federal Systems Group of Loral Corporation
from 1994 to 1996 and President and Chief Operating Officer of
IBM Federal Systems Division from 1992 to 1994.
Todd J. Kallman (41) Vice President and Controller Vice President and Controller since August 1997; Vice President
Finance, Aeronautics Sector from July 1995 to August 1997; Vice President
Business Management, Lockheed Martin Aeronautical Systems Company from
March 1995 to July 1995; previously served as Vice President Business
Management, Lockheed Aeronautical Systems Company from 1994 to 1995;
Vice President Finance, Lockheed Aeronautical Systems Company from 1992 to
1994.
Frank H. Menaker, Jr. Senior Vice President and Senior Vice President since July 1996; Vice President and
(57) General Counsel General Counsel for Lockheed Martin Corporation March 1995 to
July 1996, after having served in the same capacity for Martin
Marietta Corporation since 1981.
Walter E. Skowronski Vice President and Treasurer Vice President and Treasurer since March 1995; previously served
(49) in Lockheed Corporation as Vice President and Treasurer from
1992 to 1995; served as staff Vice President, Investor Relations
from 1990 to 1992.
Robert J. Stevens (46) Sector President and Chief President and Chief Operating Officer, Energy and Environment
Operating Officer - Energy & Sector, since January 1998; President, Air Traffic Management
Environment Division from June 1996 through January 1998; Executive Vice
President and Senior Vice President and Chief Financial Officer
of Air Traffic Management from December 1993; previously served
as an executive employee of Loral Corporation from August 1987.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Peter B. Teets (55) President and Chief President and Chief Operating Officer of Lockheed Martin since
Operating Officer; Director August 1997; President and Chief Operating Officer, Lockheed
(1997) Martin Information & Services Sector from March 1995 to July
1997; previously served as Corporate Vice President of Martin Marietta
from 1985 to 1995, President of Martin Marietta Space Group from
1993 to 1995, and President of Martin Marietta Astronautics
Group from 1987 to 1993.
</TABLE>
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There were approximately 42,433 holders of record of Lockheed Martin
Corporation Common Stock, $1 par value, as of December 31, 1997. 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:
<TABLE>
<CAPTION>
Common Dividends Paid and Market Prices
---------------------------------------
Market Price
Quarter ---------------- High/Low High/Low
- ------- Dividends Paid Sales Prices Sales Prices
---------------- ------------ ------------
1997 1996 1997 1996
------- ------- ----- ------
<S> <C> <C> <C> <C>
First $ .40 $ .40 $ 92.875/82 $80.875/73.125
Second .40 .40 105.25/78.25 86.75/73
Third .40 .40 113.438/98.375 91.75/76.25
Fourth .40 .40 108.438/88.125 96.625/85.25
----- ----- --------------- --------------
Year 1.60 1.60 113.438/78.25 96.625/73
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item 6 is included under the caption
"Consolidated Financial Data - Eight-Year Summary" on page 45 of the
1997 Annual Report, and that information is hereby incorporated by
reference in this Form 10-K.
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<PAGE>
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 11 through page 24 of the 1997 Annual Report, and that
information is hereby incorporated by reference in this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation does not hold or issue derivative financial instruments for
trading purposes. The Corporation uses derivative financial instruments to
manage its exposure to fluctuations in interest rates and foreign exchange
rates. The aggregate value of derivative financial instruments held or issued by
the Corporation is not material to the Corporation nor is the market risk posed.
For additional discussion of the Corporation's use of such instruments see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations, Other Matters" on page 24 of the 1997 Annual Report and "Note 1 -
Summary of Significant Accounting Policies, Derivative financial instruments" of
the Notes to Consolidated Financial Statements on page 32 of the Audited
Financial Statements included in
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<PAGE>
the 1997 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 27 through page 44 of
the Audited Consolidated Financial Statements included in the 1997 Annual Report
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 11 through page 24 of the 1997 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.
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<PAGE>
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 23, 1998
(the "1998 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 42 through page 45 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 1998 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.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is included under the headings
"Security Ownership of Certain Beneficial Owners," "Securities Owned by
Directors, Nominees and Named Executive Officers" and "Voting Securities and
Record Date" in the 1998 Proxy Statement and that information is hereby
incorporated by reference in this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
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<PAGE>
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 1997 Annual Report, are
incorporated by reference into Item 8 on page 48 of this Annual Report
on Form 10-K. Page numbers refer to the 1996 Annual Report:
Consolidated Statement of Earnings--
Years ended December 31, 1997, 1996 and 1995 .................. 27
Consolidated Statement of Cash Flows--
Years ended December 31, 1997, 1996 and 1995 .................. 28
Consolidated Balance Sheet--
December 31, 1997 and 1996 .................................... 29
Consolidated Statement of Stockholders' Equity--
Years ended December 31, 1997, 1996 and 1995 .................. 30
Notes to Consolidated Financial Statements--
Years ended December 31, 1997, 1996 and 1995 .................. 31
(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.
- 51 -
<PAGE>
Ernst & Young LLP
The report of Lockheed Martin's independent auditors with respect to the
above-referenced financial statements appears on page 26 of the 1997
Annual Report and that report is hereby incorporated by reference in this
Form 10-K. The consent of Lockheed Martin's independent auditors appears
as Exhibit 23 to this Annual Report on Form 10-K.
(b) The following reports on Form 8-K were 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 November 21, 1997.
During the first quarter of 1998, Lockheed Martin Corporation made the
following filing on Form 8-K:
(1) Lockheed Martin Corporation Current Report on Form 8-K filed with
the Securities and Exchange Commission on January 21, 1998.
(c) Exhibits
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
(a) Agreement and Plan of Merger, dated as of July 2, 1997
(as amended as of September 27, 1997), by and among the
Corporation, Hurricane Sub, Inc. and Northrop Grumman
Corporation (incorporated by reference to the
Registration Statement on Form S-4 (Reg. No. 333-
44671) filed by the Corporation on January 22, 1998).
- 52 -
<PAGE>
(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 through January 22, 1998.
(4) (a) Indenture dated May 16, 1996, between the Corporation,
Lockheed Martin Tactical Systems, Inc., and First Trust
of Illinois, National Association as Trustee
(incorporated by reference to Exhibit 4 of the
Corporation's filing on Form 8-K on May 16, 1996).
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(i) and 3(ii).
- 53 -
<PAGE>
(10)* (a) Format of the agreements between the Corporation
and certain officers to provide for continuity of
management in the event of a change in control of the
Corporation (incorporated by reference to Exhibit 10.14
to Lockheed Martin Corporation's Registration Statement
on Form S-4 (No. 33-57645) filed with 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, as amended February 27, 1997.
(d) 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).
(e) Lockheed Martin Corporation Directors Deferred
Compensation Plan, as amended February 27, 1997.
(f) 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).
- 54 -
<PAGE>
(g) Resolutions dated June 27, 1997 relating to Lockheed
Martin Corporation Financial Counseling Program for
directors, officers, company presidents, and other key
employees, as amended.
(h) 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 Commission on
February 9, 1995).
(i) Deferred Compensation and Estate Supplement Plan, as
amended (incorporated by reference to Exhibit
10(iii)(e) to Martin Marietta Corporation's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994).
(j) 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 Commission on February 9,
1995).
(k) 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 Commission on February 9, 1995).
(l) 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
- 55 -
<PAGE>
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(m) 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).
(n) 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).
(o) 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).
- 56 -
<PAGE>
(p) 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).
(q) 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).
(r) 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).
(s) 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).
(t) 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).
- 57 -
<PAGE>
(u) Form of Retention Agreement, including Addendum.
(v) Martin Marietta Corporation Deferred Compensation Plan
for Selected Officers, as amended June 27, 1997.
(w) 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).
(x) 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).
(y) 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 9, 1995).
(z) 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 9, 1995).
- 58 -
<PAGE>
(aa) Incentive Retirement Benefit Plan for Certain
Executives of Lockheed Corporation, as amended
(incorporated by reference to Exhibit 10.25 to Lockheed
Martin Corporation's Registration Statement on Form S-4
(No. 33-57645) filed with the Commission on February 9,
1995).
(bb) Supplemental Retirement Benefit Plan for Certain
Transferred Employees of Lockheed Corporation, as
amended (incorporated by reference to Exhibit 10.26 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(cc) Supplemental Benefit Plan of Lockheed Corporation, as
amended (incorporated by reference to Exhibit 10.27 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(dd) 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).
(ee) Lockheed Martin Corporation Supplemental Savings Plan,
as amended and restated effective January 1, 1997.
- 59 -
<PAGE>
(ff) Deferred Compensation Plan for Directors of Lockheed
Corporation, as amended (incorporated by reference to
Exhibit 10.30 to Lockheed Martin Corporation's
Registration Statement on Form S-4 (No. 33-57645) filed
with the Commission on February 9, 1995).
(gg) Lockheed Corporation Retirement Plan for Directors, as
amended (incorporated by reference to Exhibit 10.31 to
Lockheed Martin Corporation's Registration Statement on
Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(hh) 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).
(ii) 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 Form S-4 (No. 33-57645) filed with the Commission on
February 9, 1995).
(jj) 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 9,
1995).
(kk) Trust Agreement, dated December 22, 1994, between
Lockheed Corporation and J.P. Morgan California with
respect to certain employee benefit plans of
- 60 -
<PAGE>
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 9, 1995).
(ll) Lockheed Martin Corporation Directors Charitable Award
Plan (incorporated by reference to Exhibit 10(oo) to
Lockheed Martin Corporation's Annual Report on Form 10-
K for the year ended December 31, 1996).
(mm) 1983 Stock Option Plan (incorporated by reference from
Loral Corporation's 1983 Proxy Statement).
(nn) Amendment to the 1983 Stock Option Plan (incorporated
by reference from Loral Corporation's Form 10-K for the
fiscal year ended March 31, 1986, Exhibit 10.11).
(oo) Amended 1986 Stock Option Plan (incorporated by
reference from Loral Corporation's Form 10-Q for the
quarter ended June 30, 1988, Exhibit 10.1).
(pp) Amendment to the 1983 and 1986 Stock Option Plans
(incorporated by reference from Loral Corporation's
Form 10-K for the fiscal year ended March 31, 1990,
Exhibit 10.8).
(qq) 1991 Amendment to the 1986 Stock Option Plan
(incorporated by reference from Loral Corporation's
Form 10-K for the fiscal year ended March 31, 1991,
Exhibit 10.9).
(rr) Loral Corporation Incentive Compensation Plan for
Senior Executives (incorporated
- 61 -
<PAGE>
by reference from Loral Corporation's 1994 Proxy
Statement).
(ss) 1994 Stock Option and Incentive Stock Purchase Plan
(incorporated by reference from Loral Corporation's
1994 Proxy Statement).
(tt) Loral Corporation Restricted Stock Purchase Plan
(incorporated by reference from Loral Corporation's
Form 8-K dated May 13, 1987, Exhibit 10.28).
(uu) Amendment to the Loral Corporation Restricted Stock
Purchase Plan (incorporated by reference from Loral
Corporation's Form 10-Q for the quarter ended June 30,
1987, Exhibit 10.2).
(vv) Restated Employment Agreement between Loral Corporation
and Bernard L. Schwartz, dated as of April 1, 1990
(incorporated by reference from Loral Corporation's
Form 10-K for the fiscal year ended March 31, 1990,
Exhibit 10.11).
(ww) Extension and Modification Agreement between Loral
Corporation and Bernard L. Schwartz dated as of June
14, 1994 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1995, Exhibit 10.11).
(xx) Split-dollar life insurance agreement with Bernard L.
Schwartz, dated as of March 15, 1990 (incorporated by
reference from Loral Corporation's Form 10-K for the
fiscal year ended March 31, 1991, Exhibit 10.13).
(yy) Split-dollar life insurance agreement with Bernard L.
Schwartz, dated as of
- 62 -
<PAGE>
December 10, 1990 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1991, Exhibit 10.14).
(zz) Employment Contract between Loral Corporation and Frank
C. Lanza, dated as of April 1, 1987 (incorporated by
reference from Loral Corporation's Form 10-Q for the
quarter ended June 30, 1987, Exhibit 10.1 and Form 10-K
for the fiscal year ended March 31, 1982, Exhibit
10.11).
(aaa)Amendment to Employment Contract between Loral
Corporation and Frank C. Lanza, dated as of March 31,
1988 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1988, Exhibit 10.19).
(bbb)Amendment to Employment Contract between Loral
Corporation and Frank C. Lanza, dated as of March 21,
1990 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1990, Exhibit 10.16).
(ccc)Amendment to Employment Contract between Loral
Corporation and Frank C. Lanza, dated as of April 1,
1992 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1992, Exhibit 10.17).
(ddd)Modification Agreement between Loral Corporation and
Frank C. Lanza dated as of June 14, 1994 (incorporated
by reference from Loral Corporation's Form 10-K for the
fiscal year ended March 31, 1995, Exhibit 10.18).
(eee)Split-dollar life insurance agreement with Frank C.
Lanza, dated as of August
- 63 -
<PAGE>
5, 1985 (incorporated by reference from Loral
Corporation's Form 10-K for the fiscal year ended March
31, 1991, Exhibit 10.18).
(fff)Loral Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 99.2 of the
Schedule 14D-9 filed by Loral Corporation with the
Commission on January 16, 1996).
(ggg)Loral Corporation Supplemental Bonus Plan (incorporated
by reference to Exhibit 99.3 of the Schedule 14D-9
filed by Loral Corporation with the Commission on
January 16, 1996).
(hhh)Loral Corporation Supplemental Severance Program
(incorporated by reference to Exhibit 99.4 of the
Schedule 14D-9 filed by Loral Corporation with the
Commission on January 16, 1996).
(iii)Form of Employment Protection Agreement between Loral
Corporation and Executives of Loral (incorporated by
reference to Exhibit 99.5 of the Schedule 14D-9 filed
by Loral Corporation with the Commission on January 16,
1996).
(jjj)Loral Corporation Employment Protection Plan
(incorporated by reference to Exhibit 99.6 of the
Schedule 14D-9 filed by Loral Corporation with the
Commission on January 16, 1996).
(kkk)Amendment to Lockheed Martin Corporation Supplemental
Excess Retirement Plan (incorporated by reference to
Exhibit 10(nnn) of the Corporation's Annual Report in
Form 10-K for the year ended December 31, 1996).
(lll)Amendment to Terms of Outstanding Stock Option Relating
to Exercise Period for Employees of Divested Business
(incorporated by reference to Exhibit 10(ooo) of the
Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996).
- 64 -
<PAGE>
(mmm)Lockheed Martin Corporation Post-Retirement Death
Benefit Plan for Elected Officers, as amended
(incorporated by reference to Exhibit 10(ppp) to the
Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996).
(nnn)Lockheed Martin Corporation Directors Retirement Plan,
as amended (incorporated by reference to Exhibit
10(qqq) to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1996).
(ooo)Deferred Performance Payment Plan of Lockheed Martin
Corporation Space & Strategic Missiles Sector.
(ppp)Resolutions of Board of Directors of Lockheed Martin
Corporation dated June 27, 1997 amending Lockheed
Martin Non-Qualified Pension Plans.
* Exhibits (10)(a) through (10)(c) and 10(e) through 10 (ppp)
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.
(12) Computation of ratio of earnings to fixed charges for
the year ended December 31, 1997.
(13) 1997 Annual Report to Security Holders (including an
appendix describing graphic and image material). Those
portions of the 1997 Annual Report to Security Holders
which are not incorporated by reference in this Annual
Report on Form 10-K shall not be deemed "filed" as part
of this Report.
- 65 -
<PAGE>
(21) List of Subsidiaries of Lockheed Martin Corporation.
(23) Consent of Ernst & Young LLP.
(24) Powers of Attorney.
(27) Financial Data Schedule
Other material incorporated by reference:
None.
- 66 -
<PAGE>
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 18, 1998 By: /s/ FRANK H. MENAKER, JR.
---------------------
Frank H. Menaker, Jr.
Senior 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.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- -------------------------- ------------------------- --------------
<S> <C> <C>
/s/Vance D. Coffman* Chief Executive March 18, 1998
- --------------------------
VANCE D. COFFMAN Officer, Vice Chairman
and Director
/s/Marcus C. Bennett* Executive Vice President, March 18, 1998
- --------------------------
MARCUS C. BENNETT Chief Financial Officer
and Director
/s/Todd J. Kallman* Chief Accounting Officer March 18, 1998
- --------------------------
TODD J. KALLMAN
/s/Norman R. Augustine* Director March 18, 1998
- --------------------------
NORMAN R. AUGUSTINE
</TABLE>
- 67 -
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/Lynne V. Cheney* Director March 18, 1998
- ------------------
LYNNE V. CHENEY
/s/Houston K. Flournoy* Director March 18, 1998
- ----------------------
HOUSTON K. FLOURNOY
/s/James F. Gibbons* Director March 18, 1998
- --------------------------
JAMES F. GIBBONS
/s/Edward E. Hood, Jr.* Director March 18, 1998
- --------------------------
EDWARD E. HOOD, JR.
/s/Caleb B. Hurtt* Director March 18, 1998
- --------------------------
CALEB B. HURTT
/s/Gwendolyn S. King* Director March 18, 1998
- --------------------------
GWENDOLYN S. KING
/s/Vincent N. Marafino* Director March 18, 1998
- --------------------------
VINCENT N. MARAFINO
/s/Eugene F. Murphy* Director March 18, 1998
- --------------------------
EUGENE F. MURPHY
/s/Allen E. Murray* Director March 18, 1998
- --------------------------
Allen E. Murray
/s/Frank Savage* Director March 18, 1998
- --------------------------
FRANK SAVAGE
/s/Peter B. Teets Director March 18, 1998
- --------------------------
PETER B. TEETS
</TABLE>
- 68 -
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/Daniel M. Tellep* Director March 18, 1998
- --------------------------
DANIEL M. TELLEP
/s/Carlisle A.H. Trost* Director March 18, 1998
- --------------------------
CARLISLE A.H. TROST
/s/James R. Ukropina* Director March 18, 1998
- --------------------------
JAMES R. UKROPINA
/s/Douglas C. Yearley* Director March 18, 1998
- --------------------------
DOUGLAS C. YEARLEY
*By: /s/ STEPHEN M. PIPER March 18, 1998
------------------
(Stephen M. Piper, Attorney-in-fact**)
</TABLE>
_____________________
**By authority of Powers of Attorney filed with this Annual
Report on Form 10-K.
- 69 -
<PAGE>
Exhibit 3(ii)
-------------
L O C K H E E D M A R T I N C O R P O R A T I O N
B Y- L A W S
ADOPTED AUGUST 26, 1994
(AMENDED FEBRUARY 6, 1995)
(AMENDED APRIL 27, 1995)
(AMENDED SEPTEMBER 28, 1995)
(AMENDED JANUARY 1, 1996)
(AMENDED JANUARY 7, 1996)
(AMENDED APRIL 25, 1996)
(AMENDED JANUARY 23, 1997)
(AMENDED SEPTEMBER 25, 1997)
(AMENDED OCTOBER 23, 1997)
(AMENDED JANUARY 22, 1998)
<PAGE>
TABLE OF CONTENTS
BYLAWS
OF
LOCKHEED MARTIN CORPORATION
<TABLE>
<CAPTION>
ARTICLE I
STOCKHOLDERS
<S> <C> <C>
Section 1.01. Annual Meetings................................ 1
Section 1.02. Special Meetings............................... 1
Section 1.03. Place of Meetings.............................. 1
Section 1.04. Notice of Meetings............................. 1
Section 1.05. Conduct of Meetings............................ 2
Section 1.06. Quorum......................................... 2
Section 1.07. Votes Required................................. 2
Section 1.08. Proxies........................................ 2
Section 1.09. List of Stockholders........................... 2
Section 1.10. Inspectors of Election......................... 2
Section 1.11. Director Nominations and Stockholder Business.. 3
<CAPTION>
ARTICLE II
BOARD OF DIRECTORS
<S> <C> <C>
Section 2.01. Powers......................................... 5
Section 2.02. Number of Directors............................ 5
Section 2.03. Election of Directors.......................... 5
Section 2.04. Chairman of the Board.......................... 5
Section 2.05. Vice Chairmen.................................. 5
Section 2.06. Removal........................................ 6
Section 2.07. Vacancies...................................... 6
Section 2.08. Regular Meetings............................... 6
Section 2.09. Special Meetings............................... 6
Section 2.10. Notice of Meetings............................. 6
Section 2.11. Presence at Meeting............................ 7
Section 2.12. Presiding Officer and Secretary at Meetings.... 7
Section 2.13. Quorum......................................... 7
Section 2.14. Compensation................................... 7
Section 2.15. Voting of Shares by Certain Holders............ 7
</TABLE>
i
<PAGE>
ARTICLE III
COMMITTEES
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.01. Executive Committee................................ 7
Section 3.02. Finance Committee.................................. 8
Section 3.03. Audit & Ethics Committee........................... 8
Section 3.04(a) Compensation Committee............................. 9
Section 3.04(b) Stock Option Subcommittee.......................... 10
Section 3.05. Nominating Committee............................... 10
Section 3.06. Other Committees................................... 10
Section 3.07. Meetings of Committees............................. 10
<CAPTION>
ARTICLE IV
OFFICERS
<S> <C> <C>
Section 4.01. Executive Officers -- Election and Term of Office.. 11
Section 4.02 Chief Executive Officer............................ 11
Section 4.03. President.......................................... 11
Section 4.04. Vice Presidents.................................... 11
Section 4.05. Secretary.......................................... 12
Section 4.06. Treasurer.......................................... 12
Section 4.07. Subordinate Officers............................... 12
Section 4.08. Other Officers and Agents.......................... 12
Section 4.09. When Duties of an Officer May Be Delegated......... 12
Section 4.10. Officers Holding Two or More Offices............... 12
Section 4.11. Compensation....................................... 12
Section 4.12. Resignations....................................... 13
Section 4.13. Removal............................................ 13
<CAPTION>
ARTICLE V
STOCK
<S> <C> <C>
Section 5.01. Certificates....................................... 13
Section 5.02. Transfer of Shares................................. 13
Section 5.03. Transfer Agents and Registrars..................... 13
Section 5.04. Stock Ledgers...................................... 13
Section 5.05. Record Dates....................................... 14
Section 5.06. New Certificates................................... 14
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE VI
INDEMNIFICATION
<S> <C> <C>
Section 6.01. Indemnification of Directors, Officers, and Employees... 14
Section 6.02. Standard................................................ 14
Section 6.03. Advance Payment of Expenses............................. 15
Section 6.04. General................................................. 15
<CAPTION>
ARTICLE VII
SUNDRY PROVISIONS
<S> <C> <C>
Section 7.01. Seal.................................................... 15
Section 7.02. Voting of Stock in other Corporations................... 15
Section 7.03. Amendments.............................................. 16
</TABLE>
iii
<PAGE>
BYLAWS
OF
LOCKHEED MARTIN CORPORATION
(Incorporated under the laws of Maryland, August 26, 1994, and herein referred
to as the "Corporation")
ARTICLE I
STOCKHOLDERS
SECTION 1.01. ANNUAL MEETINGS. The Corporation shall hold an annual
meeting of stockholders for the election of directors and the transaction of any
business within the powers of the Corporation at such date during the month of
April in each year as shall be determined by the Board of Directors. Subject to
Article I, Section 1.11 of these Bylaws, any business of the Corporation may be
transacted at such annual meeting. Failure to hold an annual meeting at the
designated time shall not, however, invalidate the corporate existence or affect
otherwise valid corporate acts.
SECTION 1.02. SPECIAL MEETINGS. At any time in the interval between
annual meetings, special meetings of the stockholders may be called by the
Chairman of the Board, Chief Executive Officer, or by the Board of Directors or
by the Executive Committee by vote at a meeting or in writing with or without a
meeting. Special meetings of stockholders shall also be called by the Secretary
of the Corporation on the written request of stockholders entitled to cast at
least a majority of all the votes entitled to be cast at the meeting.
SECTION 1.03. PLACE OF MEETINGS. All meetings of stockholders shall be
held at such place within the United States as may be designated in the notice
of meeting.
SECTION 1.04. NOTICE OF MEETINGS. Not less than thirty (30) days nor more
than ninety (90) days before the date of every stockholders' meeting, the
Secretary shall give to each stockholder entitled to vote at such meeting and
each other stockholder entitled to notice of the meeting, written or printed
notice stating the time and place of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, either by mail
or by presenting it to him or her personally or by leaving it at his or her
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail addressed to the stockholder
at his or her post office address as it appears on the records of the
Corporation, with postage thereon prepaid. Notwithstanding the foregoing
provision for notice, a waiver of notice in writing, signed by the person or
persons entitled to such notice and filed with the records of the meeting,
whether before or after the holding thereof, or actual attendance at the meeting
in person or by proxy, shall be deemed equivalent to the giving of such notice
<PAGE>
to such persons. Any meeting of stockholders, annual or special, may adjourn
from time to time without further notice to a date not more than one hundred
twenty (120) days after the original record date at the same or some other
place.
SECTION 1.05. CONDUCT OF MEETINGS. Each meeting of stockholders shall be
conducted in accordance with such rules and procedures as the Board of Directors
may determine subject to the requirements of applicable law and the Charter. The
Chairman of the Board, or in his or her absence the Chief Executive Officer, or
in their absence the person designated in writing by the Chairman of the Board,
or if no person is so designated, then a person designated by the Board of
Directors, shall preside as chairman of the meeting; if no person is so
designated, then the meeting shall choose a chairman by a majority of all votes
cast at a meeting at which a quorum is present. The Secretary or in the absence
of the Secretary a person designated by the chairman of the meeting shall act as
secretary of the meeting.
SECTION 1.06. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of the votes
thereat shall constitute a quorum; but this section shall not affect any
requirement under statute or under the Charter of the Corporation for the vote
necessary for the adoption of any measure. In the absence of a quorum, the
stockholders present in person or by proxy, by majority vote and without further
notice, may adjourn the meeting from time to time to a date not more than 120
days after the original record date until a quorum shall attend. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
SECTION 1.07. VOTES REQUIRED. Unless applicable law or the Charter of the
Corporation provides otherwise, at a meeting of stockholders, the vote of a
majority of the votes entitled to be cast at a meeting, duly called and at which
a quorum is present, shall be required to take or authorize action upon any
matter which may properly come before the meeting. Unless the Charter provides
for a greater or lesser number of votes per share or limits or denies voting
rights, each outstanding share of stock, regardless of class, shall be entitled
to one vote on each matter submitted to a vote at a meeting of stockholders; but
no share shall be entitled to any vote if any installment payable thereon is
overdue and unpaid.
SECTION 1.08. PROXIES. A stockholder may vote shares of the Corporation's
capital stock that are entitled to be voted and are owned of record by such
stockholder either in person or by proxy in any manner permitted by Section 2-
507 of the Maryland General Corporation Law, as in effect from time to time. No
proxy shall be valid more than eleven (11) months after its date, unless
otherwise provided in the proxy.
SECTION 1.09. LIST OF STOCKHOLDERS. At each meeting of stockholders, a
true and complete list of all stockholders entitled to vote at such meeting,
stating the number and class of shares held by each, shall be furnished by the
Secretary.
SECTION 1.10. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint Inspectors of Election to act
at such meeting or at
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any adjournment or adjournments thereof. If such Inspectors are not so appointed
or fail or refuse to act, the chairman of any such meeting, upon the demand of
stockholders present in person or by proxy entitled to cast 25% of all the votes
entitled to be cast at the meeting, shall make such appointments.
If there are three (3) or more Inspectors of Election, the decision, act or
certificate of a majority shall be effective in all respects as the decision,
act or certificate of all. The Inspectors of Election shall determine the number
of shares outstanding, the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies; shall receive votes, ballots, assents or consents, hear and determine
all challenges and questions in any way arising in connection with the vote,
count and tabulate all votes, assents and consents, and determine the result;
and do such acts as may be proper to conduct the election and the vote with
fairness to all stockholders. On request, the Inspectors shall make a report in
writing of any challenge, question or matter determined by them, and shall make
and execute a certificate of any fact found by them.
No such Inspector need be a stockholder of the Corporation.
SECTION 1.11. DIRECTOR NOMINATIONS AND STOCKHOLDER BUSINESS.
(a) Nominations and Stockholder Business at Annual Meetings of
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Stockholders. Nominations of persons for election to the Board of Directors of
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the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this Section 1.11(a),
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section 1.11(a).
For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of paragraph (a) of this
Section 1.11, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than thirty (30) days or delayed by more than sixty (60) days from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such annual meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made. Such stockholder's notice shall set forth (i) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director, (A) the name, age, business address and residence address of such
person, (B) the class and number of shares of capital stock of the Corporation
that are beneficially owned by such person, and (C) all other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A (or any successor provision) under the Securities
Exchange Act of 1934, as
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amended (the "Exchange Act") (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); (ii) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made, the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and the
class and number of shares of stock of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
Notwithstanding anything in this paragraph (a) of this Section 1.11 to the
contrary, in the event that Section 2.02 of these Bylaws is amended, altered or
repealed so as to increase or decrease the maximum or minimum number of
directors and there is no public announcement of such action at least seventy
(70) days prior to the first anniversary of the preceding year's annual meeting,
a stockholder's notice required by this Section 1.11(a) shall also be considered
timely, but only with respect to nominees for director, if it shall be delivered
to the Secretary at the principal executive offices of the Corporation not later
than the close of business on the 10th day following the day on which such
public announcement is first made by the Corporation.
(b) Director Nominations and Stockholder Business at Special Meetings of
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Stockholders. Only such business shall be conducted at a special meeting of
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stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (i)
by or at the direction of the Board of Directors or (ii) provided that the Board
of Directors has determined that directors shall be elected at such special
meeting, by any stockholder of the Corporation who is a stockholder of record at
the time of giving of notice provided for in this Section 1.11, who is entitled
to vote at the meeting and who complied with the notice procedures set forth in
this Section 1.11. In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board, any
such stockholder may nominate a person or persons (as the case may be) for
election to such position(s) as specified in the Corporation's notice of
meeting, if the stockholder's notice required by paragraph (a) of this Section
1.11 shall be delivered to the Secretary at the principal executive offices of
the Corporation not earlier than the 90th day prior to such special meeting and
not later than the close of business on the later of the 60th day prior to such
special meeting or the 10th day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting.
(c) General. Only such persons who are nominated in accordance with the
-------
procedures set forth in this Section 1.11 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.11. The presiding officer of the meeting shall have
the power and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this Section 1.11 and, if
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any proposed nomination or business is not in compliance with this Section 1.11,
to declare that such defective nomination or proposal be disregarded.
For purposes of this Section 1.11, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones New Service, Associated
Press or comparable news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Sections 13,
14 or 15(d) of the Exchange Act.
Notwithstanding the foregoing provisions of this Section 1.11, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 1.11. Nothing in this Section 1.11 shall be
deemed to affect any rights of stockholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 (or any successor
provision) under the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. POWERS. The business and affairs of the Corporation shall
be managed under the direction of its Board of Directors. The Board of Directors
may exercise all the powers of the Corporation, except such as are by statute or
the Charter or the Bylaws conferred upon or reserved to the stockholders.
SECTION 2.02. NUMBER OF DIRECTORS. The number of directors of the
Corporation shall be not less than four (4) nor more than twenty-five (25). By
vote of a majority of the Board of Directors, the number of directors may be
increased or decreased, from time to time, within the limits above specified;
provided, however, that except as set forth in the Charter of the Corporation,
the tenure of office of a director shall not be affected by any decrease in the
number of directors so made by the Board.
SECTION 2.03. ELECTION OF DIRECTORS. Except as set forth in the Charter
of the Corporation, the members of the Board of Directors shall be elected each
year at the annual meeting of stockholders, and each director shall hold office
until the next annual meeting of stockholders held after his or her election and
until his or her successor will have been elected and qualified. No person,
other than a person granted an exemption from this provision by the Board of
Directors, shall be eligible to be elected as a director for a term which
expires after the first annual meeting of stockholders after he or she reaches
the age of 70 years.
SECTION 2.04. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate from its membership a Chairman of the Board, who shall preside at all
meetings of the stockholders and of the Board of Directors. He may sign with the
Secretary or an Assistant Secretary certificates of stock of the Corporation,
and he shall perform such other duties as may be prescribed by the Board of
Directors.
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SECTION 2.05. VICE CHAIRMEN. The Board of Directors shall designate from
its membership no more than two Vice Chairmen of the Board, who shall perform
such functions and duties as requested by the Chairman of the Board.
SECTION 2.06. REMOVAL. Any director or the Board of Directors may be
removed from office as a director at any time, but only for cause, by the
affirmative vote at a duly called meeting of stockholders of at least 80% of the
votes which all holders of the then outstanding shares of capital stock of the
Corporation would be entitled to cast at an annual election of directors, voting
together as a single class.
SECTION 2.07. VACANCIES. Vacancies in the Board of Directors, except for
vacancies resulting from an increase in the number of directors, shall be filled
only by a majority vote of the remaining directors then in office, though less
than a quorum, except that vacancies resulting from removal from office by a
vote of the stockholders may be filled by the stockholders at the same meeting
at which such removal occurs. Vacancies resulting from an increase in the number
of directors shall be filled only by a majority vote of the Board of Directors.
Any director elected to fill a vacancy shall hold office until the next annual
meeting of stockholders and until his or her successor will have been elected
and qualified.
SECTION 2.08. REGULAR MEETINGS. After each meeting of stockholders at
which a Board of Directors, or any class thereof, shall have been elected, the
Board of Directors shall meet as soon as practicable for the purpose of
organization and the transaction of other business, at such time and place
within or without the State of Maryland as may be designated by the Board of
Directors. Other regular meetings of the Board of Directors shall be held on
such dates and at such places within or without the State of Maryland as may be
designated from time to time by the Board of Directors.
SECTION 2.09. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time, at any place, and for any purpose by the
Chairman of the Board, the Chief Executive Officer, the Chairman of the
Executive Committee, any three (3) directors, or by any officer of the
Corporation upon the request of a majority of the Board.
SECTION 2.10. NOTICE OF MEETINGS. Notice of the place, day, and hour of
every regular and special meeting of the Board of Directors shall be given to
each director twenty-four (24) hours (or more) before the meeting, by
telephoning the notice to such director, or by delivering the notice to him or
her personally, or by sending the notice to him or her by telegraph, or by
facsimile, or by leaving the notice at his or her residence or usual place of
business, or, in the alternative, by mailing such notice three (3) days (or
more) before the meeting, postage prepaid, and addressed to him or her at his or
her last known post office address, according to the records of the Corporation.
If mailed, such notice shall be deemed to be given when deposited in the United
States mail, properly addressed, with postage thereon prepaid. If notice be
given by telegram or by facsimile, such notice shall be deemed to be given when
the telegram is delivered to the telegraph company or when the facsimile is
transmitted. If the notice be given by telephone or by personal delivery, such
notice shall be deemed to be given at the time of the communication or delivery.
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Unless required by these Bylaws or by resolution of the Board of Directors, no
notice of any meeting of the Board of Directors need state the business to be
transacted thereat. No notice of any meeting of the Board of Directors need be
given to any director who attends or to any director who, in a writing executed
and filed with the records of the meeting either before or after the holding
thereof, waives such notice. Any meeting of the Board of Directors, regular or
special, may adjourn from time to time to reconvene at the same or some other
place, and no further notice need be given of any such adjourned meeting.
SECTION 2.11. PRESENCE AT MEETING. Members of the Board, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other at the same time. Participation in this
manner shall constitute presence in person at the meeting.
SECTION 2.12. PRESIDING OFFICER AND SECRETARY AT MEETINGS. Each meeting
of the Board of Directors shall be presided over by the Chairman of the Board of
Directors or in his or her absence by the Chief Executive Officer or if neither
is present by such member of the Board of Directors as shall be chosen by the
meeting. The Secretary, or in his or her absence an Assistant Secretary, shall
act as secretary of the meeting, or if no such officer is present, a secretary
of the meeting shall be designated by the person presiding over the meeting.
SECTION 2.13. QUORUM. At all meetings of the Board of Directors, a
majority of the Board of Directors shall constitute a quorum for the transaction
of business. Except in cases in which it is by statute, by the Charter, or by
the Bylaws otherwise provided, the vote of a majority of such quorum at a duly
constituted meeting shall be sufficient to pass any measure. In the absence of a
quorum, the directors present by majority vote and without notice other than by
announcement may adjourn the meeting from time to time until a quorum shall be
present. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 2.14. COMPENSATION. Directors shall not receive any stated salary
for their services as Directors but, by resolution of the Board of Directors,
annual retainers, fees and expenses of attendance, if any, may be provided to
Directors for attendance at each annual, regular or special meeting of the Board
of Directors or of any committee thereof; but nothing contained herein shall be
construed to preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
SECTION 2.15. VOTING OF SHARES BY CERTAIN HOLDERS. Notwithstanding any
other provision of the Charter of the Corporation or these Bylaws, Title 3,
Subtitle 7 of the Corporations and Associations Article of the Annotated Code of
Maryland (or any successor statute) shall not apply to any acquisition by
General Electric Company of shares of stock of the Corporation.
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ARTICLE III
COMMITTEES
SECTION 3.01. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the Board of Directors, may provide for an Executive
Committee of two (2) or more directors. If provision be made for an Executive
Committee, the members thereof shall be elected by the Board of Directors to
serve at the pleasure of the Board of Directors. Unless a Chairman of the Board
shall have been selected by the Board of Directors, the Chief Executive Officer
shall act as chairman thereof. During the intervals between the meetings of the
Board of Directors, the Executive Committee shall possess and may exercise such
powers in the management of the business and affairs of the Corporation as may
be authorized by the Board of Directors, subject to applicable law. All action
by the Executive Committee shall be reported to the Board of Directors at its
meeting next succeeding such action, and shall be subject to revision and
alteration by the Board of Directors. Vacancies in the Executive Committee shall
be filled by the Board of Directors.
SECTION 3.02. FINANCE COMMITTEE. The Board of Directors by resolution
adopted by a majority of the Board of Directors may provide for a Finance
Committee of three (3) or more directors. If provision is made for a Finance
Committee, the members of the Finance Committee shall be elected by the Board of
Directors to serve at the pleasure of the Board of Directors. The Board of
Directors shall designate from among the membership of the Finance Committee a
chairman. During the intervals between the meetings of the Board of Directors,
the Finance Committee shall, except when such powers are by statute or the
Charter or the Bylaws either reserved to the full Board of Directors or
delegated to another committee of the Board of Directors, possess and may
exercise all of the powers of the Board of Directors in the management of the
financial affairs of the Corporation, including but not limited to establishing
bank lines of credit or other short-term borrowing arrangements and investing
excess working capital funds on a short-term basis. The Finance Committee will
review the financial condition of the Corporation, the financial impact of all
benefit plans and all proposed changes to the capital structure of the
Corporation, including the incurrence of long-term indebtedness and the issuance
of additional equity securities, and will make suitable recommendations to the
Board of Directors. It will likewise review on an annual basis the proposed
capital expenditure and contributions budgets of the Corporation and make
recommendations to the Board of Directors for their adoption. It will monitor
the financial impact of all trusteed benefit plans sponsored by the Corporation
and of any amendments or modifications thereto and will monitor the performance
of the assets and administration of the Corporation's trusteed benefit plans.
All action by the Finance Committee shall be reported to the Board of Directors
at its meeting next succeeding such action and shall be subject to revision and
alteration by the Board of Directors. Vacancies in the Finance Committee shall
be filled by the Board of Directors.
SECTION 3.03. AUDIT AND ETHICS COMMITTEE. The Board of Directors by
resolution adopted by a majority of the Board of Directors shall provide for an
Audit and Ethics Committee of three or more directors who are not officers or
employees of the Corporation, and who otherwise independent of management and
free from any relationship that, in the opinion of the Board of Directors, would
interfere with the exercise of the independent judgment of each member as a
Committee member. The members of the Audit and Ethics Committee shall be
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elected by the Board of Directors to serve at the pleasure of the Board of
Directors. The Board of Directors shall designate from among the membership of
the Audit and Ethics Committee a chairman. The Audit and Ethics Committee shall,
except when such powers are by statute or the Charter or the Bylaws either
reserved to the full Board of Directors or delegated to another committee of the
Board of Directors, possess and may exercise the powers of the Board of
Directors relating to all accounting and auditing matters of this Corporation.
The Audit and Ethics Committee shall recommend to the Board of Directors the
selection of and monitor the independence of the independent public accountants
for this Corporation and prior to the end of the Corporation's fiscal year shall
review the scope and timing of the work to be performed and the compensation to
be paid to the accountants selected by the Board; review with the Corporation's
management and the independent public accountants the financial accounting and
reporting principles appropriate for the Corporation, the policies and
procedures concerning audits, accounting and financial controls, and any
recommendations to improve existing practices, and the qualifications and work
of the Corporation's internal auditing staff; review with the Corporation's
independent public accountants the results of their audit and their report
including any changes in accounting principles and any significant amendments;
and shall meet with the Corporation's internal audit department representative
to review the plan and scope of work of the internal auditing staff. The
Committee shall hold quarterly meetings, and shall separately meet in executive
session, with the Corporation's independent public accountants and internal
audit department representative to review and resolve all matters of concern
presented to the Committee. The Committee shall monitor compliance with the Code
of Ethics and Standards of Conduct and shall review and resolve all matters of
concern presented to it by the Corporate Ethics Committee or the Corporate
Ethics Office. The Committee shall review and monitor the adequacy of the
Corporation's policies and procedures, as well as the organizational structure,
for ensuring compliance with environmental, health and safety laws and
regulations; review, at least annually, the Corporation's record of compliance
with any environmental, health and safety laws and regulations and the policies
and procedures relating thereto; review with the Corporation's management
significant environmental, health and safety litigation and regulatory
proceedings in which the Corporation is or may become involved; and review the
accounting and financial reporting issues, including the adequacy of disclosure,
for all environmental matters. The Committee shall have the power to investigate
any matter falling within its jurisdiction, and it shall also perform such other
functions and exercise such other powers as may be delegated to it from time to
time by the Board of Directors. All action by the Audit and Ethics Committee
shall be reported to the Board of Directors at its meeting next succeeding such
action and shall be subject to revision and alteration by the Board of
Directors. Vacancies in the Audit and Ethics Committee shall be filled by the
Board of Directors.
SECTION 3.04(A). COMPENSATION COMMITTEE. The Board of Directors by
resolution adopted by a majority of the Board of Directors may provide for a
Compensation Committee of three (3) or more directors who are not officers or
employees of the Corporation. If provision is made for a Compensation Committee,
the members of the Compensation Committee shall be elected by the Board of
Directors to serve at the pleasure of the Board of Directors. The Board of
Directors shall designate from among the membership of the Compensation
Committee a chairman. The Compensation Committee shall recommend to the Board of
Directors the compensation to be paid for services of senior elected officers of
the Corporation as established by
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resolution of the Board of Directors from time to time. The Compensation
Committee shall have the power to fix the compensation of all other elected
officers and to approve the benefits provided by any bonus, supplemental, and
special compensation plans, including pension, insurance, and health plans, but
excluding performance-based executive compensation plans, and such powers as are
by statute or the Charter or the Bylaws reserved to the full Board of Directors.
The Compensation Committee shall also perform such other functions and exercise
such other powers as may be delegated to it from time to time by the Board of
Directors. All action by the Compensation Committee shall be reported to the
Board of Directors at its meeting next succeeding such action and shall be
subject to revision and alteration by the Board of Directors. Vacancies in the
Compensation Committee shall be filled by the Board of Directors.
SECTION 3.04(B). STOCK OPTION SUBCOMMITTEE. The Board of Directors by
resolution adopted by a majority of the Board of Directors may provide for a
Stock Option Subcommittee of three (3) or more directors of the Compensation
Committee who meet the qualifications of an independent director under Section
162(m) of the Internal Revenue Code. If provision is made for a Stock Option
Subcommittee, the members of the Stock Option Subcommittee shall be elected by
the Board of Directors to serve at the pleasure of the Board of Directors. The
Board of Directors shall designate from among the membership of the Stock Option
Subcommittee a chairman. The Stock Option Subcommittee shall serve as the Stock
Option Subcommittee of the Board and shall administer any performance-based
executive compensation plan and approve awards granted thereunder. The Stock
Option Subcommittee shall also perform such other functions and exercise such
other powers as may be delegated to it from time to time by the Board of
Directors. All action by the Stock Option Subcommittee shall be reported to the
Board of Directors at its meeting next succeeding such action and shall be
subject to revision and alteration by the Board of Directors. Vacancies in the
Stock Option Subcommittee shall be filled by the Board of Directors.
SECTION 3.05. NOMINATING COMMITTEE. The Board of Directors by resolution
adopted by a majority of the Board of Directors may provide for a Nominating
Committee of three (3) or more Directors who are not officers or employees of
the Corporation. If provision is made for a Nominating Committee, the members of
the Nominating Committee shall be elected by the Board of Directors to serve at
the pleasure of the Board of Directors. The Board of Directors shall designate
from among the membership of the Nominating Committee a committee chairman. The
Nominating Committee shall make recommendations to the Board of Directors
concerning the fees and compensation for directors, the composition of the Board
including its size and the qualifications for membership, and the Nominating
Committee shall recommend to the Board of Directors nominees for election to
fill any vacancy occurring in the Board and to fill new positions created by an
increase in the authorized number of directors of the Corporation. Annually the
Nominating Committee shall recommend to the Board of Directors a slate of
directors to serve as management's nominees for election by the stockholders at
the annual meeting. Vacancies in the Nominating Committee shall be filled by the
Board of Directors.
SECTION 3.06. OTHER COMMITTEES. The Board of Directors may by resolution
provide for such other standing or special committees, composed of two (2) or
more directors, and
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discontinue the same at its pleasure. Each such committee shall have such powers
and perform such duties, not inconsistent with law, as may be assigned to it by
the Board of Directors.
SECTION 3.07. MEETINGS OF COMMITTEES. Each committee of the Board of
Directors shall fix its own rules of procedure, consistent with the provisions
of any rules or resolutions of the Board of Directors governing such committee,
and shall meet as provided by such rules or by resolution of the Board of
Directors, and it shall also meet at the call of its chairman or any two (2)
members of such committee. Unless otherwise provided by such rules or by such
resolution, the provisions of the article of these Bylaws entitled the "Board of
Directors" relating to the place of holding and notice required of meetings of
the Board of Directors shall govern committees of the Board of Directors. A
majority of each committee shall constitute a quorum thereof; provided, however,
that in the absence of any member of such committee, the members thereof present
at any meeting, whether or not they constitute a quorum, may appoint a member of
the Board of Directors to act in the place of such absent member. Except in
cases in which it is otherwise provided by the rules of such committee or by
resolution of the Board of Directors, the vote of a majority of such quorum at a
duly constituted meeting shall be sufficient to pass any measure.
ARTICLE IV
OFFICERS
SECTION 4.01. EXECUTIVE OFFICERS -- ELECTION AND TERM OF OFFICE. The
Executive Officers of the Corporation shall be a Chief Executive Officer, a
President, such number of Vice Presidents as the Board of Directors may
determine, a Secretary and a Treasurer. The Chief Executive Officer and the
President shall be chosen from among the Directors. The Executive Officers shall
be elected annually by the Board of Directors at its first meeting following
each annual meeting of stockholders and each such officer shall hold office
until the corresponding meeting of the Board of Directors in the next year and
until his or her successor shall have been duly chosen and qualified or until
his or her death or until he or she shall have resigned, or shall have been
removed from office in the manner provided in this Article IV. Any vacancy in
any of the above offices may be filled for the unexpired portion of the term by
the Board of Directors at any regular or special meeting.
SECTION 4.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
serve as a member of the Executive Committee and, in the absence of the Chairman
of the Board, preside at all meetings of the stockholders and of the Board of
Directors. Subject to the authority of the Board of Directors, he shall have
general charge and supervision of the business and affairs of the Corporation.
He shall have the authority to sign and execute in the name of the Corporation
all deeds, mortgages, bonds, contracts or other instruments. He shall have the
authority to vote stock in other corporations, and he shall perform such other
duties of management as may be prescribed by resolution or as otherwise may be
assigned to him by the Board of Directors. He shall have the authority to
delegate such authorization and power as vested in him by these Bylaws to some
other officer or employee or agent of the Corporation as he shall deem
appropriate.
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<PAGE>
SECTION 4.03. PRESIDENT. The President shall be the Chief Operating
Officer of the Corporation. He or she shall have general charge and supervision
of the operations of the Corporation and shall have such other powers and duties
of management as from time to time may be assigned to him or her by the Board of
Directors or the Chief Executive Officer.
SECTION 4.04. VICE PRESIDENTS. The Corporation shall have one (1) or more
Vice Presidents, including Executive and Senior Vice Presidents as appropriate,
as elected from time to time by the Board of Directors. The Vice Presidents
shall perform such duties as from time to time may be assigned to them by the
President.
SECTION 4.05. SECRETARY. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and record all votes and minutes or
proceedings, in books provided for that purpose; shall see that all notices of
such meetings are duly given in accordance with the provisions of the Bylaws of
the Corporation, or as required by law; may sign certificates of stock of the
Corporation with the Chairman of the Board; shall be custodian of the corporate
seal; shall see that the corporate seal is affixed to all documents, the
execution of which, on behalf of the Corporation, under its seal, is duly
authorized, and when so affixed may attest the same; and in general, shall
perform all duties incident to the office of a secretary of a corporation, and
such other duties as from time to time may be assigned to the Secretary by the
Chairman of the Board.
SECTION 4.06. TREASURER. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all monies or other valuable effects in such banks, trust
companies, or other depositories as shall, from time to time, be selected by the
Board of Directors; and in general, shall render such reports and perform such
other duties incident to the office of a treasurer of a corporation, and such
other duties as from time to time may be assigned to him or her by the
President.
SECTION 4.07. SUBORDINATE OFFICERS. The subordinate officers shall
consist of such assistant officers and agents as may be deemed desirable and as
may be appointed by the Chief Executive Officer or the President. Each such
subordinate officer shall hold office for such period, have such authority and
perform such duties as the Chief Executive Officer or the President may
prescribe.
SECTION 4.08. OTHER OFFICERS AND AGENTS. The Board of Directors may
create such other offices and appoint or provide for the appointment of such
other officers and agents, attorneys-in-fact and employees as it shall deem
necessary, who shall bear such titles, have such authority, receive such
compensation, and provide such security for faithful service and hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 4.09. WHEN DUTIES OF AN OFFICER MAY BE DELEGATED. In the case of
the absence or disability of an officer of the Corporation or for any other
reason that may
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seem sufficient to the Board of Directors, the Board of Directors, or any
officer designated by it, may, for the time being, delegate such officer's
duties and powers to any other person.
SECTION 4.10. OFFICERS HOLDING TWO OR MORE OFFICES. Any two (2) of the
above mentioned offices, except those of a Vice President, may be held by the
same person, but no officer shall execute, acknowledge or verify any instrument
in more than one capacity, if such instrument be required by law, by the Charter
or by these Bylaws, to be executed, acknowledged or verified by any two (2) or
more officers.
SECTION 4.11. COMPENSATION. The Board of Directors shall have power to
fix the compensation of all officers and employees of the Corporation.
SECTION 4.12. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors or to the Chief Executive
Officer or the Secretary of the Corporation. Any such resignation shall take
effect simultaneously with or at any time subsequent to its delivery as shall be
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 4.13. REMOVAL. Any officer of the Corporation may be removed,
with or without cause, by the Board of Directors, if such removal is determined
in the judgment of the Board of Directors to be in the best interests of the
Corporation, and any officer of the Corporation duly appointed by another
officer may be removed, with or without cause, by such officer.
ARTICLE V
STOCK
SECTION 5.01. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number and
kind of shares of stock owned by him or her in the Corporation. Such
certificates shall be signed by the Chairman of the Board and countersigned by
the Secretary or an Assistant Secretary, and sealed with the seal of the
Corporation or a facsimile of such seal. Stock certificates shall be in such
form, not inconsistent with law or with the Charter, as shall be approved by the
Board of Directors. When certificates for stock of any class are countersigned
by a transfer agent, other than the Corporation or its employee, or by a
registrar, other than the Corporation or its employee, any other signature on
such certificates may be a facsimile. In case any officer of the Corporation who
has signed any certificate ceases to be an officer of the Corporation, whether
because of death, resignation or otherwise, before such certificate is issued,
the certificate may nevertheless be issued and delivered by the Corporation as
if the officer had not ceased to be such officer as of the date of its issue.
SECTION 5.02. TRANSFER OF SHARES. Shares of stock shall be transferable
only on the books of the Corporation only by the holder thereof, in person or by
duly authorized attorney, upon the surrender of the certificate representing the
shares to be transferred, properly endorsed.
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The Board of Directors shall have power and authority to make such other rules
and regulations concerning the issue, transfer and registration of certificates
of stock as it may deem expedient.
SECTION 5.03. TRANSFER AGENTS AND REGISTRARS. The Corporation may have
one (1) or more transfer agents and one (1) or more registrars of its stock,
whose respective duties the Board of Directors may, from time to time, define.
No certificate of stock shall be valid until countersigned by a transfer agent,
if the Corporation has a transfer agent, or until registered by a registrar, if
the Corporation has a registrar. The duties of transfer agent and registrar may
be combined.
SECTION 5.04. STOCK LEDGERS. Original or duplicate stock ledgers,
containing the names and addresses of the stockholders of the Corporation and
the number of shares of each class held by them respectively, shall be kept at
an office or agency of the Corporation in such city or town as may be designated
by the Board of Directors. If no other place is so designated such original or
duplicate stock ledgers shall be kept at an office or agency of the Corporation
in New York, New York or Bethesda, Maryland.
SECTION 5.05. RECORD DATES. The Board of Directors is hereby empowered to
fix, in advance, a date as the record date for the purpose of determining
stockholders entitled to notice of, or to vote at, any meeting of stockholders,
or stockholders entitled to receive payment of any dividend or the allotment of
any rights, or in order to make a determination of stockholders for any other
proper purpose. Such date in any case shall be not more than ninety (90) days
and, in case of a meeting of stockholders, not less than thirty (30) days, prior
to the date on which the particular action, requiring such determination of
stockholders, is to be taken. If a record date is not set and the transfer books
are not closed, the record date for the purpose of making any proper
determination with respect to stockholders shall be fixed in accordance with
applicable law.
SECTION 5.06. NEW CERTIFICATES. In case any certificate of stock is lost,
stolen, mutilated or destroyed, the Board of Directors may authorize the issue
of a new certificate in place thereof upon such terms and conditions as it may
deem advisable; or the Board of Directors may delegate such power to any officer
or officers or agents of the Corporation; but the Board of Directors or such
officer or officers, in their discretion, may refuse to issue such new
certificate save upon the order of some court having jurisdiction in the
premises.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. INDEMNIFICATION OF DIRECTORS, OFFICERS, AND EMPLOYEES. The
Corporation shall indemnify and hold harmless to the fullest extent permitted
by, and under, applicable law as it presently exists and as is further set forth
in Section 6.02 below or as may hereafter be amended any person who is or was a
director, officer or employee of the Corporation or who is or was serving at the
request of the Corporation as a director, officer or employee of another
corporation or entity (including service with employee benefit plans), who by
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reason of this status or service in that capacity was, is, or is threatened to
be made a party or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative, or investigative. Such indemnification
shall be against all liability and loss suffered and expenses (including, but
not limited to, attorneys' fees, judgments, fines, penalties, and amounts paid
in settlement) actually and reasonably incurred by the individual in connection
with such proceeding; provided, however, that the Corporation shall not be
required to indemnify a person in connection with an action, suit or proceeding
initiated by such person unless the action, suit or proceeding was authorized by
the Board of Directors of the Corporation.
SECTION 6.02. STANDARD. Maryland General Corporation Law Section 2-418,
on August 29, 1994, provided generally that a corporation may indemnify any
individual made a party to a proceeding by reason of service on behalf of the
corporation unless it is established that:
(i) The act or omission of the individual was material to the matter
giving rise to the proceeding; and
(1) Was committed in bad faith; or
(2) Was the result of active and deliberate dishonesty; or
(ii) The individual actually received an improper personal benefit in
money, property, or services; or
(iii) In the case of any criminal proceeding, the individual had
reasonable cause to believe that the act or omission was unlawful.
SECTION 6.03. ADVANCE PAYMENT OF EXPENSES. The Corporation shall pay or
reimburse reasonable expenses in advance of a final disposition of the
proceeding and without requiring a preliminary determination of the ultimate
entitlement to indemnification provided that the individual first provides the
Corporation with: (a) a written affirmation of the individual's good faith
belief that the individual meets the standard of conduct necessary for
indemnification under the laws of the State of Maryland; and (b) a written
undertaking by or on behalf of the individual to repay the amount advanced if it
shall ultimately be determined that the applicable standard of conduct has not
been met.
SECTION 6.04. GENERAL. The Board of Directors, by resolution, may
authorize the management of the Corporation to act for and on behalf of the
Corporation in all matters relating to indemnification within any such limits as
may be specified from time to time by the Board of Directors, all consistent
with applicable law.
The rights conferred on any person by this Article VI shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter of the Corporation, these Bylaws,
agreement, vote of the stockholders or disinterested directors or otherwise.
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<PAGE>
Repeal or modification of this Article VI or the relevant law shall not
affect adversely any rights or obligations then existing with respect to any
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought or threatened based in whole or in part upon any such
facts.
ARTICLE VII
SUNDRY PROVISIONS
SECTION 7.01. SEAL. The corporate seal of the Corporation shall bear the
name of the Corporation and the words "Incorporated 1994 Maryland" and
"Corporate Seal."
SECTION 7.02. VOTING OF STOCK IN OTHER CORPORATIONS. Any shares of stock
in other corporations or associations, which may from time to time be held by
the Corporation, may be represented and voted at any of the stockholders'
meetings thereof by the Chairman or President of the Corporation or by proxy or
proxies appointed by the Chairman or President of the Corporation. The Board of
Directors or Chairman, however, may by resolution or delegation appoint some
other person or persons to vote such shares, in which case such person or
persons shall be entitled to vote such shares upon the production of a certified
copy of such resolution or delegation.
SECTION 7.03. AMENDMENTS. The Board of Directors shall have the exclusive
power, at any regular or special meeting thereof, to make and adopt new Bylaws,
or to amend, alter, or repeal any Bylaws of the Corporation, provided such
revisions are not inconsistent with the Charter or statute.
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C E R T I F I C A T E A S T O B Y L A W S
I, ____________________________, ____________ Vice President and Secretary
of LOCKHEED MARTIN CORPORATION hereby certify that the foregoing is a true,
correct and complete copy of the Bylaws of LOCKHEED MARTIN CORPORATION and that
such Bylaws are in full force and effect as of the date of this certificate.
WITNESS my hand and the seal of LOCKHEED MARTIN CORPORATION, this ____ day
of ____________, 19__.
---------------------------------
Vice President and Secretary
CORPORATE SEAL
<PAGE>
EXHIBIT 10(c)
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED STOCK PLAN
<PAGE>
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED STOCK PLAN
TABLE OF CONTENTS
ARTICLE I TITLE, PURPOSE AND AUTHORIZED SHARES
ARTICLE II DEFINITIONS
ARTICLE III PARTICIPATION
ARTICLE IV DEFERRAL ACCOUNTS
4.1. Stock Unit Account
4.2. Dividend Equivalents; Dividend Equivalent Stock Account
4.3. Vesting of Stock Unit Account and Dividend Equivalent Stock
Account
4.4. Distribution of Benefits
4.5. Adjustments in Case of Changes in Common Stock
4.6. Corporation's Right to Withhold
4.7. Limitations on Rights Associated with Units
4.8. Restrictions on Resale
ARTICLE V ADMINISTRATION
5.1. Formula Plan
. 5.2. Decisions Final; Delegation; Reliance; and Limitation
on Liability
ARTICLE VI PLAN CHANGES AND TERMINATION
6.1. Amendments
6.2. Term
6.3. Distribution of Shares
ARTICLE VII MISCELLANEOUS
7.1. Limitation on Directors' Rights
7.2. Beneficiaries
7.3. Benefits Not Assignable; Obligations Binding Upon Successors
7.4. Governing Law; Severability
7.5. Compliance With Laws
7.6. Plan Construction
7.7. Headings Not Part of Plan
7.8. Stockholder Approval; Effective Date
<PAGE>
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED STOCK PLAN
MARCH 15, 1995
AS AMENDED FEBRUARY 27, 1997
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
This Plan shall be known as "Lockheed Martin Corporation Directors Deferred
Stock Plan" and shall become effective on March 15, 1995. The purpose of this
Plan is to attract, motivate and retain experienced and knowledgeable directors
of the Corporation and to further align their economic interest with the
interests of stockholders generally. The total number of shares of Common Stock
that may be delivered pursuant to awards under this Plan is 50,000, subject to
adjustments contemplated by Section 4.6.
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:
Accounts means a Director's Stock Unit Account and Dividend Equivalent Stock
Account.
Average Fair Market Value means the average of the Fair Market Values of a
share of Common Stock of the Corporation during the last 10 trading days
preceding the applicable date of determination.
Award means the crediting of a Unit or Units under this Plan. Each Award shall
be approved by the Board of Directors or a committee appointed by the Board of
Directors in accordance with Section 5.1.
Award Date means June 1 of each year, commencing in 1995.
<PAGE>
Beneficiary shall have the meaning specified in Section 7.2(b).
Board of Directors or Board means the Board of Directors of the Corporation.
Code means the Internal Revenue Code of 1986, as amended.
Common Stock means shares of Common Stock of the Corporation, par value $1.00
per share, subject to adjustments made under Section 4.5 or by operation of law.
Corporation means Lockheed Martin Corporation, a Maryland corporation, and its
successors and assigns.
Director means a member of the Board of Directors of the Corporation who is
eligible to receive compensation in the form of retainer fees for services in
such capacity and who is not an officer or employee of the Corporation or any
of its subsidiaries.
<PAGE>
Disability means a "permanent and total disability" within the meaning of
Section 22(e)(3) of the Code.
Dividend Equivalent means the amount of cash dividends or other cash
distributions paid by the Corporation on that number of shares of Common Stock
equivalent to the number of Stock Units then credited to a Director's Stock
Unit Account and Dividend Equivalent Stock Account, which amount shall be
allocated as additional Stock Units to the Director's Dividend Equivalent
Stock Account.
Dividend Equivalent Stock Account means the bookkeeping account maintained by
the Corporation on behalf of a Director which is credited with Dividend
Equivalents in the form of Stock Units in accordance with Section 4.2.
Effective Date means March 15, 1995.
Exchange Act means the Securities Exchange Act of 1934, as amended from time
to time.
Fair Market Value means the closing price of the Stock as reported on the
composite tape of New York Stock Exchange issues (or, if the Stock is not so
listed or if the principal market on which it is traded is not the New York
Stock Exchange, such other reporting system as shall be selected by the Board)
on the relevant date, or, if no sale of the Stock is reported for that date, the
next preceding day for which there is a reported sale.
Merger means the business combination described in Article I.
Plan means the Lockheed Martin Corporation Directors Deferred Stock Plan.
Stock means Common Stock.
Stock Unit or Unit means a non-voting unit of measurement that is deemed for
bookkeeping purposes to be equivalent to an outstanding share of Common Stock of
the Corporation and includes fractional units.
<PAGE>
Stock Unit Account means the bookkeeping account maintained by the Corporation
on behalf of each Director which is credited with Stock Units in accordance with
Section 4.1.
ARTICLE III
PARTICIPATION
Each Director shall become a participant in the Plan upon the approval of an
Award to the Director.
ARTICLE IV
DEFERRAL ACCOUNTS
4.1. Stock Unit Account.
The Stock Unit Account of each Director shall be credited on each Award Date
with a number of Units determined by dividing $10,000 by the Average Fair Market
Value of the Common Stock on the Award Date, provided that the Board of
Directors previously approved the Award. A Director who is not serving as a
director on an Award Date is not eligible for any portion of the Award for the
applicable year.
4.2. Dividend Equivalents; Dividend Equivalent Stock Account.
(a) Allocation of Dividend Equivalents. Each Director shall be entitled to
receive Dividend Equivalents on the Units credited to his or her Stock Unit
Account and Dividend Equivalent Account, whether before or after a termination
of service, which Dividend Equivalents shall be credited to the Director's
Dividend Equivalent Stock Account in accordance with Section 4.2(b) below.
(b) Dividend Equivalent Stock Account. The Director's Dividend Equivalent
Stock Account shall be credited with an additional number of Units determined by
dividing the amount of Dividend Equivalents by the Fair Market Value of a share
of Common Stock as of each dividend payment date. The Units credited to a
Director's Dividend Equivalent Stock Account shall be allocated (for purposes of
distribution) in accordance with Section 4.4(b) and shall be subject to
adjustment in accordance with Section 4.5.
<PAGE>
4.3. Vesting of Stock Unit Account and Dividend Equivalent Stock Account.
The rights of each Director in respect of his or her Stock Unit Account and
related Dividend Equivalent Stock Account shall vest immediately on crediting.
4.4. Distribution of Benefits.
(a) Commencement of Benefits Distribution. Subject to the terms of this
Section 4.4, each Director shall be entitled to receive a distribution of his or
her Accounts upon a termination of service (including but not limited to a
retirement or resignation) as a Director of the Corporation. Benefits shall be
distributed at the time or times set forth in Section 4.4.
(b) Manner of Distribution. The benefits payable under this Plan shall be
distributed to the Director (or, in the event of his or her death, the
Director's Beneficiary) in a lump sum, unless the Director elects in writing (on
forms provided by the Corporation) by the time specified in Section 4.4(f), to
receive a distribution of his or her benefits in respect of such Units in
approximately equal annual installments (before giving effect to post-
termination crediting of additional Dividend Equivalents before the applicable
payment date) for up to five years thereafter. Elections with respect to any
Units in the Stock Unit Account shall apply to all Dividend Equivalent Units
attributable to those Stock Units, and to all Dividend Equivalent Units
attributable to those Dividend Equivalent Units. Subject to Section 4.4(f),
installment payments shall commence as of the date benefits become distributable
under Section 4.4(a). Notwithstanding the foregoing, if the vested balance
remaining in a Director's Stock Unit Account and Dividend Equivalent Stock
Account is less than 50 shares, then the remaining balance shall be distributed
in shares in a lump sum.
(c) Effect of Death or Disability. Notwithstanding Sections 4.4(a) and (b),
if a Director's service as a director terminates by reason of Disability, or a
Director or former Director dies, the distribution of a Director's Accounts
(including remaining Account balances of a former Director) shall be made
immediately in a lump sum.
<PAGE>
(d) Form of Distribution. Stock Units credited to a Director's Stock Unit
Account and Dividend Equivalent Stock Account shall be paid and distributed by
means of a distribution of an equivalent whole number of shares of the Common
Stock. Fractions shall be accumulated and converted to Units, but any fractional
interest in a Unit shall be paid in cash on final distribution. In the event of
a termination of service or retirement, a Director may elect, in accordance with
the provisions of Section 4.4(f), to have Stock Units credited to the Director's
Stock Unit Account and Dividend Share Equivalent Account paid and distributed in
the form of cash or a combination of whole shares of Common Stock and cash. Any
such election shall be made at times and in the manner specified in Section
4.4(f).
(e) Sub-Accounts. The Administrator shall retain sub-accounts of a Director's
Accounts as may be necessary to determine which Units are subject to any
distribution elections under Section 4.4(b).
(f) Timing of Elections. A Director may elect an installment distribution as
provided in Section 4.4(b) only with respect to Units credited on a June 1 which
is at least 12 months following his or her election. Notwithstanding the
preceding sentence, a Director's election to receive an installment distribution
may be made with respect to Units credited during the Director's first year of
service on the Board, within 30 days after the Director commenced service as a
Director (but in any event prior to the date on which the Units are credited).
In addition, in the event of a termination of service or retirement, at least
six months prior to receipt by a Director of any distribution of benefits under
the Plan, the Director shall make a written election (on forms to be provided by
the Corporation) as to the percentage the Director elects to receive in the form
of cash and the percentage the Director elects to receive in the form of whole
shares of Common Stock.
4.5. Adjustments in Case of Changes in Common Stock. If there shall occur
any recapitalization, stock split (including a stock split in the form of a
stock dividend), reverse stock split, merger, combination, consolidation, or
other reorganization or any extraordinary non-cash dividend or other
extraordinary distribution in respect of the Stock (whether in the form of
Stock, other securities, or other property), or any
<PAGE>
split-up, spin-off, extraordinary redemption, or exchange of outstanding Stock,
or there shall occur any other similar corporate transaction or event in respect
of the Stock, or a sale of substantially all the assets of the Corporation as an
entirety, proportionate and equitable adjustments consistent with the effect of
such event on stockholders generally (but without duplication of benefits if
Dividend Equivalents are credited) shall be made in the number and type of
shares of Common Stock (or other cash, property or securities in respect
thereof) reserved, and of Units, under this Plan.
4.6. Corporation's Right to Withhold. The Corporation shall satisfy state or
federal income tax withholding obligations, if any, arising upon distribution of
a Director's accounts by reducing the number of shares of Common Stock otherwise
deliverable to the Director by the appropriate number of shares (based on the
Average Fair Market Value) required to satisfy such tax withholding obligation.
If the Corporation, for any reason, cannot satisfy the withholding obligation in
accordance with the preceding sentence, the Director shall pay or provide for
payment in cash of the amount of any taxes which the Corporation may be required
to withhold with respect to the benefits hereunder.
4.7. Limitations on Rights Associated with Units. A Director's Accounts
shall be memorandum accounts on the books of the Corporation. The Units credited
to a Director's Accounts shall be used solely as a device for the determination
of the number of shares of Common Stock to be eventually distributed to such
Director in accordance with this Plan. The Units shall not be treated as
property or as a trust fund of any kind, although the Corporation shall reserve
shares of Common Stock to satisfy its obligations under this Plan. All shares of
Common Stock or other amounts attributed to the Units shall be and remain the
sole property of the Corporation, and each Director's rights in the Units is
limited to the right to receive shares of Common Stock in the future as herein
provided. No Director shall be entitled to any voting or other stockholder
rights with respect to Units granted under this Plan. The number of Units
credited
<PAGE>
under this Section shall be subject to adjustment in accordance with Section
4.5.
4.8. Restrictions on Resale. Stock distributed in respect of those Stock
Units that were first credited under Section 4.1 within six months of the
distribution (and Dividend Equivalent Account Units credited under Section 4.2
solely in respect thereof) may be legended or otherwise restricted so as to
prevent a sale of the Stock within six months of the initial crediting of those
Stock Units. Installments shall be deemed payable and paid in the order (i.e.,
last-in, last-out) of the accrual of the underlying Units.
ARTICLE V
ADMINISTRATION
5.1. Administration. This Plan shall be construed, interpreted and, to the
extent required, administered by the Board or a committee appointed by the Board
to act on its behalf under this Plan. To the extent that the Plan is
administered by a committee of the Board of Directors, the committee shall
consist exclusively of "non-employee directors" as that term is defined in Rule
16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act. Notwithstanding the foregoing, but subject to
Section 6.1 hereof, the Board shall have no discretionary authority with respect
to the amount or price of any Award granted under this Plan and no director
shall participate in any decision relating solely to his or her benefits (other
than approval of the Award). Subject to the foregoing, the Board may resolve any
questions and make all other determinations and adjustments required by this
Plan, maintain all the necessary records for the administration of this Plan,
and provide forms and procedures to facilitate the implementation of this Plan.
5.2. Decisions Final; Delegation; Reliance; and Limitation on Liability. Any
determination of the Board or committee made in good faith shall be conclusive.
In performing its duties, the Board or the committee shall be entitled to rely
on public records and on information, opinions, reports or statements prepared
or presented by officers or employees of the Corporation or other experts
believed to be reliable and competent. The Board or the committee may delegate
ministerial, bookkeeping and other
<PAGE>
non-discretionary functions to individuals who are officers or employees of the
Corporation.
Neither the Corporation nor any member of the Board, nor any other person
participating in any determination of any question under this Plan, or in the
interpretation, administration or application of this Plan, shall have any
liability to any party for any action taken or not taken in good faith under
this Plan or for the failure of an Award (or action or payment in respect of an
Award) to satisfy Code requirements for realization of intended tax
consequences, to qualify for exemption or relief under Rule 16b-3, or to comply
with any other law, compliance with which is not required on the part of the
Corporation.
ARTICLE VI
PLAN CHANGES AND TERMINATION
6.1. Amendments. The Board of Directors shall have the right to amend this
Plan in whole or in part from time to time or may at any time suspend or
terminate this Plan; provided, however, that no amendment or termination shall
cancel or otherwise adversely affect in any way, without his or her written
consent, any Director's rights with respect to Stock Units and Dividend
Equivalents credited to his or her Stock Unit Account or Dividend Equivalent
Stock Account.
6.2. Term. This Plan shall continue for a period of 10 years from the
Effective Date, but continuance of this Plan is not assumed as a contractual
obligation of the Corporation. In the event that the Board of Directors decides
to terminate this Plan, it shall notify the Directors of its action in an
instrument in writing, and this Plan shall be terminated at the time therein set
forth, and all Directors shall be bound thereby.
6.3. Distribution of Shares. If this Plan terminates pursuant to Section
6.2, the distribution of the Accounts of a Director shall be made at the time
provided in Section 4.4(a) and in a manner consistent with the elections made
pursuant to Sections 4.4(b) and (f), if any.
<PAGE>
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.
This 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 or vested and benefits payable, if any, on their Accounts.
7.2. Beneficiaries.
(a) Beneficiary Designation. Upon forms provided and in accordance with
procedures established by the Corporation, each Director may designate in
writing (and change a designation of) the Beneficiary or Beneficiaries (as
defined in Section 7.3(b)) that the Director chooses to receive the Common Stock
payable under this Plan after his or her death, subject to applicable laws
(including any applicable community property and probate laws).
(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 Director's benefits under
this Plan in the event of the Director's death.
7.3. Benefits Not Assignable; Obligations Binding Upon Successors. Benefits
of a Director 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 therein, 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
<PAGE>
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. Compliance With Laws. This Plan and the offer, issuance and delivery of
shares of Common Stock and/or the payment and deferral of compensation under
this Plan are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal reporting,
registration, insider trading and other securities laws) and to such approvals
by any listing agency or any regulatory or governmental authority as may, in the
opinion of counsel for the Corporation, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring the securities shall, if requested by the
Corporation, provide such assurances and representations to the Corporation as
the Corporation may deem necessary or desirable to assure compliance with all
applicable legal requirements.
7.6. Plan Construction. It is the intent of the Corporation that this Plan
satisfy and be interpreted in a manner that satisfies the applicable
requirements of Rule 16b-3 so that Directors will be entitled to the benefits of
Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and
will not be subjected to avoidable liability thereunder. Any contrary
interpretation shall be avoided.
7.7. 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.
<PAGE>
EXHIBIT 10(e)
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
<PAGE>
LOCKHEED MARTIN CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
MARCH 15, 1995
AS AMENDED DECEMBER 7, 1995
AS AMENDED APRIL 24, 1996
AS AMENDED FEBRUARY 27, 1997
ARTICLE I
PURPOSE
The purpose of this Plan is to give each non-employee Director of Lockheed
Martin Corporation the opportunity to be compensated for his or her service as a
Director on a deferred basis. The Plan is also intended to establish a method
of paying Director's compensation which will aid the Corporation in attracting
and retaining as members of the Board persons whose abilities, experience and
judgment can contribute to the success of the Corporation. In addition, by
providing Directors with the option of accruing earnings based on the
performance of Lockheed Martin Common Stock, the Plan is intended to more
closely align the economic interests of Directors with the interests of
stockholders generally.
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.
<PAGE>
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.
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. The deferral election shall
<PAGE>
specify the manner in which earnings (or losses) on the deferred amount shall
accrue in accordance with Section 4.2 below. To the extent that a Director
elects that any portion of a deferred amount shall accrue earnings based on the
Lockheed Martin Common Stock Investment Option, such an election shall be given
effect only if (i) the election is irrevocably made at least six (6) months
prior to the effective date of the allocation or (ii) the crediting of the
deferred amount to the Lockheed Martin Common Stock Investment Option has been
approved by the Board of Directors (or a committee thereof that is comprised of
persons specified in Section 6.1). To the extent that a Director makes an
election to have Deferred Compensation credited to the Lockheed Martin Common
Stock Investment Option which is not in compliance with (i) or (ii) above, the
amount elected to be deferred into the Lockheed Martin Common Stock Investment
Option shall initially be allocated to the Interest Option until such time as
the allocation to the Lockheed Martin Common Stock Investment Option would be in
compliance with (i) or (ii) above, at which time the deferred amount shall
automatically be reallocated.
3.2 Terms of Deferral Elections. A Director's deferral election for a
calendar year shall specify the percentage (which may equal 100%) of the
Director's Fees to be earned by the Director for that year which are to be
deferred under this Plan. 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.
<PAGE>
4.2 Crediting of Investment Earnings. Subject to the provisions of Section
3.1 above, 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 (or losses) for
each month as if the Director's Account balance had been invested in the
following:
(a) Interest Option. 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) S&P 500 Option. A return (or loss) equal to that of the published index
for the Standard & Poors 500 (with dividends) for the month will accrue.
(c) Lockheed Martin Common Stock Investment Option. Earnings (or losses)
shall be credited as if such amount had been invested in Lockheed Martin Common
Stock at the published closing price of the Corporation's Common Stock on the
New York Stock Exchange on the last trading day preceding the day as to which
such amount is deferred (or reallocated) into the Lockheed Martin Common Stock
Investment Option; this portion of a Director's Account shall reflect any
subsequent appreciation or depreciation in the market value of Lockheed Martin
Common Stock based on the published closing price of the stock on the New York
Stock Exchange on the last trading day of each month and shall reflect dividends
on the stock as if such dividends were reinvested in shares of Lockheed Martin
Common Stock.
(d) A combination of (a), (b) and (c).
A Director's initial investment selections must be made by the date that the
Director's initial deferral election takes effect. A Director may change his or
her investment selections with respect to all amounts credited to the Director's
Account, including amounts deferred in prior periods, provided that any such
change that would result in an increase or decrease in the portion of the
Director's Account allocated to the Lockheed Martin Common Stock Investment
Option shall only be effective if it is made pursuant to an irrevocable written
election made at
<PAGE>
least six months following the date of the Director's most recent "opposite way"
election with respect to either the Plan or any other plan maintained by
Lockheed Martin that provides for Discretionary Transactions (as defined in Rule
16b-3). Subject to the foregoing, a change of investment selections must be made
by 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. Subject to the provisions of Section 5.6, 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
<PAGE>
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.
(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. Subject to the provisions of Section 5.6 and
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. Subject to the provisions of Section 5.6, 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
<PAGE>
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 Status of Certain Directors. For purposes of Section 5.2, a retired
Director who continues to advise the Board of Directors under an Advisory
Services Agreement shall be treated as an active Director for the period that he
or she continues to serve under such agreement, if the Director so elects on or
before April 25, 1996. An election under this Section 5.5 shall not otherwise
alter the Director's rights under this plan. Once made, an election under this
Section 5.5 shall be irrevocable.
5.6 Corporation's Right to Withhold. There shall be deducted from all
payments under this Plan the amount of taxes, if any, required to be withheld
under applicable federal or state tax laws. The Directors and their
Beneficiaries will be liable for payment of any and all income or other taxes
imposed on Deferred Compensation payable under this Plan.
5.7 Section 16 Limitations on Distributions. Notwithstanding anything
contained herein to the contrary, no distribution of any portion of a Director's
Account credited to the Lockheed Martin Common Stock Investment Option shall be
made unless (I) the Board of Directors or Committee has approved the
distribution or (ii) at least six months have passed from the date the
Director's service on the Board has terminated.
ARTICLE VI
ADMINISTRATION, AMENDMENT AND TERMINATION
6.1 Administration by Committee. This Plan shall be administered by a
Committee consisting of exclusively "non-employee directors" as that term is
defined in Rule 16b-3
<PAGE>
("Rule 16b-3") promulgated by the Securities and Exchange Commission under
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act"). The
Committee shall act by vote of a majority or by unanimous written consent of its
members. The Committee's resolution of any question regarding the interpretation
of this Plan shall be subject to review by the Board, and the Board's
determination shall be final and binding on all parties.
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
<PAGE>
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.
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
<PAGE>
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 became effective on March 15, 1995.
7.9 Plan Construction. It is the intent of the Corporation that this Plan
satisfy and be interpreted in a manner that satisfies the applicable
requirements of Rule 16b-3 so that Directors will be entitled to the benefits of
Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and
will not be subjected to avoidable liability thereunder. Any contrary
interpretation shall be avoided.
<PAGE>
EXHIBIT 10(g)
Resolution No. 57
- --------------------------------------------------------------------------------
Lockheed Martin Corporation
Board of Directors
May 25, 1995: Amended June 27, 1997
Re: 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 and Presidents of Operating Companies 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 appointed 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
<PAGE>
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.
AMENDED JUNE 27,1997:
RESOLVED, That effective this date, the Financial Counseling Program
for Elected Officers shall be further modified to extend the program for
elected officers to allow for participation one year following the year in
which the officer's retirement occurs.
<PAGE>
Exhibit 10(u)
RETENTION AGREEMENT
-------------------
AGREEMENT entered into effective as of November 1, 1997 between Lockheed
Martin Corporation (the "Corporation") and [ ] (the "Executive").
Whereas the Corporation wishes to assure that it retains the continued services
of the Executive for the strategically important [ ] competition, the
Corporation and Executive agree as follows:
1. RETENTION PERIOD
This Agreement shall become effective as of November 1, 1997, and shall end
on December 31, 2001. The period during which this Agreement is effective
shall be known as the "Retention Period."
2. NATURE OF EMPLOYMENT
During the Retention Period the Executive agrees to continue to perform and
discharge faithfully his duties as the []. The Executive agrees to devote
his full attention to the business of the Corporation and shall not engage
in any other business activity whether or not that business activity is
pursued for gain, profit or other pecuniary advantage.
3. RETENTION BONUS
In addition to the compensation and benefits otherwise payable to the
Executive, the Executive is eligible to receive a Retention Bonus in
accordance with the following terms and conditions:
a. Completion of Retention period and [ ] Win.
-------------------------------------------
Subject to Section 3(d), if the Executive remains employed through the
completion of the Retention Period and the Company wins the [ ]
competition, the Executive will receive a lump-sum retention bonus
equal to two times Base Salary and Average Bonus. The retention bonus
shall be paid as soon as practicable following completion of the
Retention Period.
<PAGE>
b. Completion of Retention Period and [ ] Loss.
--------------------------------------------
If the Executive remains employed through the completion of the
Retention Period and the Corporation does not win the [ ] competition,
he will receive a lump-sum retention bonus equal to the amount
calculated in Section 3(a), reduced by one-third (1/3). The retention
bonus shall be paid as soon as practicable following completion of the
Retention Period.
c. Termination for Reasons other than Good Cause or Substantial and
----------------------------------------------------------------
Serious Cause. If the Executive dies, becomes disabled or resigns for
--------------
reasons other than Good Cause prior to completion of the Retention
Period, he (or his estate, if applicable) will receive a lump-sum
retention bonus equal to the amount calculated under Section 3(a),
reduced by one-third (1/3) and further reduced on a pro-rata basis for
each day by which the Executive's death disability or resignation date
precedes December 31, 2001. The retention bonus shall be paid as soon
as practicable following the Executive's death, disability or
resignation.
d. Delay in [ ] Award. If the [ ] award decision is delayed beyond
---------------------
December 31, 2001, a retention bonus calculated under Section 3(b)
shall be paid to the Executive as soon as practicable following
completion of the Retention Period. If the Company wins the [ ]
competition, an additional amount equal to the difference between the
amount paid pursuant to the preceding sentence and the amount payable
under Section 3(a) shall be paid as soon as practicable following the
award decision. Notwithstanding the foregoing, the Compensation
Committee of the Company's Board of Directors may, in its sole
discretion, elect to pay such additional amount prior to the receipt
of the award decision. Any such payment will be final and not subject
to repayment to the Company by the Executive if the Company does not
win the [ ] competition.
<PAGE>
e. Termination By Corporation For Substantial and Serious Cause. If,
------------------------------------------------------------
prior to the completion of the Retention Period, the Executive's
employment is terminated by the Corporation for Substantial and
Serious Cause, no retention bonus will be payable and no further
obligation under this Agreement shall exist on the part of the
Corporation (or its Affiliates) to the Executive.
f. Termination By Corporation For Other than Substantial and Serious
-----------------------------------------------------------------
Cause or Resignation by Executive For Good Cause. If, prior to the
------------------------------------------------
completion of the Retention Period, the Executive's employment is
terminated by the Corporation for any reason other than Substantial
and Serious Cause or the Executive resigns for Good Cause, the
Corporation shall pay to the Executive a retention bonus equal to the
retention bonus payable under Section 3a as soon as practicable
following the Executive's termination of employment. Additionally,
the Corporation may unilaterally terminate this Agreement at any time,
in which case the Corporation shall pay to the Executive a retention
bonus equal to the retention bonus payable under Section 3a as soon as
practicable following the termination of the Agreement.
g. Definitions.
------------
For the purpose of this Section 3,
AVERAGE BONUS shall mean the greater of (i) the average of the
Executive's annual bonuses awarded (regardless of when paid) during
the three year period ending on December 31, 2001(or the December 31
preceding or coinciding with his date of termination of employment
prior to December 31, 2001) under the Lockheed Martin Corporation
Management Incentive Compensation Plan ("MICP"), or (ii) the average
of the Executive's annual MICP bonuses awarded (regardless of when
paid) during the three year period ending on December 31, 1997.
BASE SALARY shall be the greater of (i) Executive's
<PAGE>
Base Salary on December 31, 2001 (or the day immediately preceding his
termination of employment prior to such date) or (ii) his Base Salary
on December 31, 1997.
GOOD CAUSE shall mean any of the following, if undertaken without the
consent of the Executive:
Assignment of duties inconsistent with the position, duties,
responsibilities and status of an executive of the Corporation;
Reduction of reporting responsibilities, or titles from those
previously held with the Corporation;
Reduction in the amount of the Executive's salary from the salary
previously paid to the Executive by the Corporation, or reduction in
the Executive's bonus target from the bonus previously targeted for
the Executive by the Corporation;
Notwithstanding the foregoing, Good Cause shall not include
termination by the Corporation for Substantial and Serious Cause or
any act taken by the Corporation in furtherance of its obligations
under the Administrative Agreement between the Corporation and the
United States Air Force, entered into in June 1995.
SUBSTANTIAL AND SERIOUS CAUSE shall mean the Executive's final
conviction of a felony or Federal offense involving fraud, corruption,
or moral turpitude; the Executive's engaging in willful fraud or
defalcation involving material funds or other assets of the
Corporation; or the debarment of the Executive or the Executive
engaging in any other offense described in Administrative Agreement
between the Corporation and the United States Air Force, entered into
in June 1995.
A WIN of the [ ] competition shall mean an award to the Corporation of
any portion of the [ ] program.
<PAGE>
4. DISCLOSURE OF INFORMATION AND INTELLECTUAL PROPERTY
a. The Executive recognizes and acknowledges that the Corporation's
proprietary developments, trade secrets, confidential technical and
business data, and sensitive management, financial, business,
planning, marketing information, and the like ("Proprietary
Information"), are valuable, special and unique assets of the
Corporation's business, access to and knowledge of which are essential
to the performance of the Executive's duties under this Agreement.
The Executive shall not, during or after the Retention Period, in
whole or in part, disclose such Proprietary Information to any person,
firm, corporation, association or other entity for any reason or
purpose whatsoever; nor shall the Executive make use of any such
property for his own purposes or for the benefit of any person, firm,
corporation or other entity except the Corporation under any
circumstance; provided that after the Executive's employment
terminates, the restrictions shall not apply to such Proprietary
Information which are in the public domain so long as the Executive
was not responsible, directly or indirectly, for such Proprietary
Information entering the public domain without the Corporation's
consent.
b. The Executive shall disclose promptly and fully to the Corporation all
innovations, inventions, works of authorship prepared by him within
the scope of his employment, and any other items of intellectual
property ("Intellectual Property"), whether or not patentable,
copyrightable or registrable, that have been conceived, made or
authored by him solely or jointly with others during the period of his
employment with the Corporation: (i) which relate to the business or
investigations of the Corporation or its affiliates; (ii) which result
from any work that the Executive may do for or on behalf of the
Corporation; (iii) which result from any Proprietary Information that
may have been made available to the Executive; or (iv) that are
otherwise made through the use of the Corporation's time, facilities
or materials. All such Intellectual Property shall be the sole and
exclusive property of
<PAGE>
the Corporation. The Executive hereby assigns all of his right, title
and interest to such Intellectual Property to the Corporation.
5. COVENANT NOT TO COMPETE
For a period ending twelve months from and after the termination of the
Executive's employment during the Retention Period, the Executive shall not
engage in any business (whether as an officer, director owner, employee,
partner or other direct or indirect participant) competing with that of the
Corporation in any area in which the Corporation is conducting any business
on the date of such termination of employment. For such period, the
Executive shall also not interfere with, disrupt, or attempt to disrupt the
relationship, contractual of otherwise, between the Corporation and any
customer, supplier or employee of the Corporation.
It is the desire and intent of the parties that the provisions of this
shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular portion of this Section 5 shall be
adjudicated to be invalid or unenforceable, this Section shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of
this Section in the particular jurisdiction in which such adjudication is
made.
6. NON-WAIVER OF OTHER RIGHTS OR REMEDIES
No actions taken by the Corporation under the terms and conditions of this
Agreement shall be deemed to be a waiver of any of its other rights or
remedies available at law, in equity or otherwise.
7. ASSUMPTION AND ASSIGNABILITY OF AGREEMENT
The Executive may not delegate, subcontract or otherwise transfer or assign
his rights or obligations under this Agreement. The rights and obligations
of the Corporation
<PAGE>
under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Corporation.
8. AMENDMENT
This Agreement may not be modified, changed or altered except in writing
signed by both the Executive and the Corporation.
9. MEDIATION
The parties shall attempt in good faith to resolve any dispute (other than
a dispute under 4 or 5) arising out of or relating to this Agreement
promptly by negotiation. Any party may give the other party written notice
of any dispute not resolved in the normal course of business. Within 15
days after delivery of the notice, the receiving party shall submit to the
other a written response. The notice and the response shall include (i) a
statement of each party's position and a summary of arguments supporting
that position, and (ii) the name and title of the individual who will
represent that party. Within thirty (30) days after delivery of the
disputing party's notice, the representatives of both parties shall meet at
a mutually acceptable time and place, and thereafter as often as they
reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for information made by one party to the other will be
honored. If the dispute has not been resolved by negotiation within sixty
(60) days of the disputing party's notice, or if the parties fail to meet
within thirty (30) days, the parties shall endeavor to settle the dispute
by mediation under CPR Model Mediation Procedure for Business Disputes in
effect on the date of this Agreement. The time periods contained in this
paragraph may be extended by mutual consent.
10. INJUNCTION
If there is a breach or threatened breach of the provisions of Section 4 or
5, the Corporation shall be entitled to an injunction restraining the
Executive from such breach. Nothing herein shall be construed as
prohibiting the
<PAGE>
Corporation from pursuing any other remedies for such breach or threatened
breach. However, nothing herein should be construed as requiring the
Corporation to mediate its claims under Section 9 above prior to seeking
the injunction.
12. GOVERNING LAW
This Agreement shall be governed in all respects by and in accordance with
the laws of the State of Maryland.
13. SEPARABILITY
The invalidity or unenforceability of any portion of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
November 1, 1997.
LOCKHEED MARTIN CORPORATION
By:
------------------------------ ----------------------------------
Robert B. Corlett
Vice President
Human Resources
<PAGE>
ADDENDUM TO RETENTION AGREEMENT
-------------------------------
This Addendum is entered into effective as of November 1, 1997, by and
between Lockheed Martin Corporation (the "Corporation") and [ ]. (the
"Executive").
Whereas the Corporation and the Executive are parties to a Retention
Agreement dated as of November 1, 1997 (the "Agreement"); and
Whereas the Corporation and the Executive wish to clarify the term of the
Covenant Not to Compete set forth in Section 5 of the Agreement.
NOW THEREFORE, the Corporation and the Executive agree that the first
sentence of Section 5 of the Agreement is revised to read as follows:
For a period ending upon the earlier of (i) the [ ] award decision or (ii)
twelve months from and after the termination of the Executive's employment
during the Retention Period, the Executive shall not engage in any business
(whether as an officer, director owner, employee, partner or other direct
or indirect participant) competing with that of the Corporation in any area
in which the Corporation is conducting any business on the date of such
termination of employment.
IN WITNESS WHEREOF, the parties have executed this Addendum effective as of
November 1, 1997.
LOCKHEED MARTIN CORPORATION
By:
----------------------------- ---------------------------------
Robert B. Corlett
Vice President
Human Resources
Date: December ___, 1997 Date: December ___, 1997
<PAGE>
EXHIBIT 10(v)
MARTIN MARIETTA CORPORATION
Deferred Compensation Plan for Selected Officers
------------------------------------------------
Adopted October 27, 1994
AMENDED JUNE 27, 1997
The name of this plan is the Martin Marietta Corporation Deferred Compensation
Plan for Selected Officers (the "Plan"). The Plan provides for the deferred
payment to selected officers ("Officers") of compensatory obligations that
Martin Marietta Corporation (the "Corporation") is expected to accrue by reason
of the Corporation's proposed combination with Lockheed Corporation (the
"Combination"). This Plan shall take effect only if the Combination is
consummated.
A. Background and Purpose. In connection with the Combination, the Board
----------------------
of Directors of the Corporation (the "Board") has amended certain of its
executive compensation plans, including the Amended and Restated Long Term
Performance Incentive Compensation Plan and the Deferred Compensation and Estate
Supplement Plan. The purpose of the amendments was to modify (and in some cases
reduce) the payment obligations that otherwise would have accrued under the
terms of those plans by reason of the Combination. Pursuant to the amendments,
most of the participants in the plans will receive single sum payments shortly
following the date of the Combination, if it is consummated. However, the Board
has decided to implement the plan amendments by deferring payment to a
participant if immediate payment would (or reasonably might) prevent the
Corporation from deducting that payment for Federal income tax purposes. The
Board has determined that the deductibility of payments to certain Officers
would be jeopardized if made on an immediate basis, and thus that the plan
amendments should be implemented by making deferred payments to those Officers.
None of the Officers has been given or may hereafter exercise any elective right
with respect to the timing of the payments. This Plan sets forth the
contractual terms under which the deferred compensation shall be accumulated and
paid.
<PAGE>
B. Participating Officers and Amounts Deferred. The Officers for whom
-------------------------------------------
deferred compensation will be credited and paid under this Plan shall be those
Officers designated by the Board, as evidenced in the records of Board meetings
and by written notices to such Officers. The amount of deferred compensation
with respect to each Officer shall equal the Corporation's accrued obligations
to that Officer under all plans for which the Board has determined that payment
on a deferred basis is warranted. The Corporation's accrued obligation to an
Officer under each plan shall equal the single sum amount that would have been
payable to the Officer under the plan at the time of the Combination if it had
not been determined that payment to the Officer under that plan was to be
deferred. Any payroll taxes required to be withheld with respect to an
Officer's deferred compensation shall be withheld out of other wages payable to
that Officer and shall not reduce the amount of that Officer's deferred
compensation.
C. Crediting of Accounts. Each participating Officer's deferred
---------------------
compensation shall be credited to a bookkeeping account (the "Account")
maintained in that Officer's name. The Officer's Account shall be credited as
of the day on which the deferred amount would have been payable to the Officer
if the Officer's payment under the plan had not been deferred. In addition,
each Officer's Account shall be credited with interest at a daily rate
equivalent to the Federal long-term rate, as determined under section 1274(d) of
the Internal Revenue Code of 1986, as amended, applicable to the month in which
the deferred compensation is first credited to the Officer's Account. Interest
shall be credited for the period commencing with the first day as of which any
deferred compensation is credited to the Officer's Account and ending on the day
on which actual payment of the deferred compensation is made. Each
participating Officer shall at all times have a fully vested and nonforfeitable
interest in the deferred compensation and interest credited to his or her
Account.
D. Payment of Deferred Compensation. Each participating Officer's Account
--------------------------------
balance shall be paid to him or her in a single sum as soon as practicable
following the last day of the calendar year in which the Officer ceases to be an
officer of the Corporation (and ceases to be an officer of any parent or
affiliate of the Corporation) ("Original Payment Date") or at
<PAGE>
such later date as is elected by the Officer in accordance with Paragraph G
below.
E. Death Benefits. In the event that an Officer dies before his or her
--------------
Account balance has been paid, the Account balance shall be paid to the
Officer's beneficiary in a single sum as soon as practicable thereafter, unless
the Committee determines that payment at that time would jeopardize the
deductibility of the payment, in which case payment shall be made no later than
February 1 of the year following the year of the Officer's death. For purposes
of this paragraph, an Officer's surviving spouse shall be deemed to be the
Officer's beneficiary, unless the Officer has notified the Committee in writing
prior to his or her death that a different individual, individuals, or other
person (including the Officer's estate) is to be treated as the Officer's
beneficiary under this Plan. If the Officer is not survived by a spouse or
other designated beneficiary, payment shall be made to the Officer's estate.
F. Additional Payments. The payment of deferred compensation under this
-------------------
Plan is intended to protect the Corporation's right to claim Federal income tax
deductions, not to impair the economic position of the Officers for whom the
Committee has determined that deferred payments are warranted. Accordingly, if
the deferred payments to be made under this Plan cause the economic position of
any Officer to be impaired, the Committee shall direct that an additional
payment be made to that Officer (or the Officer's beneficiary) which, after
taking account of any taxes imposed on that additional payment, shall be
sufficient to eliminate that economic impairment. For purposes of this
paragraph, the economic position of an Officer shall be deemed to have been
impaired by deferral under this Plan if and to the extent that (i) the deferred
payment made to that Officer, less any income taxes or other assessments imposed
by reason of the inclusion in the Officer's gross income for any year of the
amounts paid or deferred hereunder, is less than (ii) the amount the Officer
would have accumulated if the amount deferred hereunder had been paid to the
Officer at the time of the Combination, and the amount of that payment (less
income taxes thereon) had immediately been invested (and remained invested for
the Officer's deferral period) in an investment that provided a currently
taxable rate of return equal to the crediting rate described in paragraph C.
For purposes of clause (ii), it shall
<PAGE>
be assumed that the Officer would have been subject to income tax at the highest
applicable combined Federal and state rates for all years during the deferral
period. Notwithstanding the foregoing, the Corporation's obligation to make
additional payments under this Paragraph F shall apply only to the extent the
economic position of the Officer is impaired by the decision of the Compensation
Committee to defer amounts and shall not apply to the extent of any impairment
of the economic position of the Officer as a result of the decision of the
Officer to defer payments under Paragraph G below.
G. Deferral of Payments By Officer. An Officer may elect to defer payment
-------------------------------
of his Account by executing and delivering to the Corporation a Deferral
Agreement no later than the later of (i) July 27, 1997; or (ii) one year prior
to the year in which an Officer retires or otherwise terminates employment with
the Corporation (or of any parent or affiliate of the Corporation). The
Deferral Agreement shall provide for payment to begin on or about (i) the July
15th next following the Original Payment Date; or (ii) the January 15th or July
15th next following the Original Payment Date and attainment of the age
designated by the Officer in the Deferral Agreement. The Deferral Agreement
shall also provide for election of a form of payment for the Officer's Account
from among the following options:
(A) A lump sum; or
(B) Annual payments for a period of years designated by the
Officer which shall not exceed fifteen (15). The amount of each
annual payment shall be determined by dividing the Officer'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 Officer during the designated installment period
would be too small to justify the maintenance of the Officer's
Account and the processing of payments. If an Officer dies while
actively employed or otherwise before the payment of his or her
account has
<PAGE>
commenced, payments to the Officer's Beneficiary shall commence
on the date payments to the Officer would have commenced, taking
account of the Officer's termination of employment (by death or
before) and, if applicable, by postponing commencement until
after the date the Officer would have attained the commencement
age specified by the Officer. Whether the Officer dies before or
after the commencement of distributions, payments to the
Beneficiary shall be made for the period or remaining period
elected by the Officer. Notwithstanding anything herein, the
Committee may direct payment of all or a portion of the Officer's
Account at a date earlier than the date elected by the Officer
for the receipt of payment if the Committee determines in good
faith, based on consultation with counsel, that (i) the Officer
is suffering from a serious financial emergency caused by
circumstances beyond the Officer's control which would cause a
hardship to the Officer unless all or a portion of his or her
Account was paid; or (ii) a change in, interpretation of, or
determination under, the Internal Revenue Code or other
applicable law with respect to the Plan will have an adverse
effect on the Plan or any Officer.
H. Change in Control. In the event of a change in control of Lockheed
-----------------
Martin Corporation (the "Combined Company"), each Officer's Account balance
shall be paid to the Officer in a lump sum immediately following the change in
control, unless prior to the change in control, the Board of Directors of the
Combined Company directs otherwise by a vote of three-quarters of the incumbent
members of that board. In the event the Board of Directors of the Combined
Company directs that the Officers' Account balances not be paid upon the change
in control, (i) all deferred compensation under the Plan will be payable under
paragraph D of the Plan, and (ii) the Corporation shall immediately establish a
trust under terms equivalent to those described in IRS Revenue Procedure 92-64,
1992-2 C.B. 422, and contribute to the trust an amount equal to the sum of all
the Account balances then existing under this Plan plus $500,000. Subject to
the rights of the Corporation's creditors, as
<PAGE>
described in IRS Revenue Procedure 92-64, all assets of the trust shall be used
exclusively to pay benefits under this Plan, except that the additional $500,000
shall be available to pay legal fees and costs incurred by the Officers if legal
or other action is necessary for the Officers to receive payment under this Plan
in accordance with paragraph D; any trust assets remaining after payment of all
benefits under this Plan shall revert to the Corporation. For the purposes of
this Plan, a change in control shall be deemed to occur in the circumstances
that would constitute a change in control under the terms of the Lockheed Martin
Corporation Omnibus Performance Award Plan, to be implemented by the Combined
Company.
I. Nature of Officers' Rights. An Officer's right to payment under this
--------------------------
Plan is not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, or encumbrance. Amounts payable hereunder shall be paid
exclusively from the general assets of the Corporation, and each Officer's
rights shall be those of a general, unsecured creditor of the Corporation. The
liability of the Corporation hereunder is a mere contractual promise to make
benefit payments in the future. Any assets that may be acquired or held by the
Corporation in connection with this Plan shall be the sole property of the
Corporation, and no Officer shall have any claim against, or beneficial interest
in, any specific assets of the Corporation. It is the Corporation'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.
J. Amendment. The Board may amend or modify this Plan at any time,
---------
provided, however, that no amendment shall have the effect of reducing an
Officer's Account balance or of impairing an Officer's nonforfeitable right to
receive payment of the deferred compensation credited to the Officer's Account.
Further, no amendment may alter the formula or method for crediting interest to
an Officer's Account, unless the amended formula is not less favorable to the
Officer than that previously in effect, or unless the Officer has consented to
the amended formula or to an alternative method for crediting investment
increments to his or her Account. Further, no amendment may be made to limit
the effect of Paragraph G after a change in control, within the meaning of that
paragraph, occurs.
<PAGE>
K. Administration. This Plan shall be administered by the Committee (or
--------------
such other committee or board of the Combined Company as may hereafter be
delegated authority to oversee the compensation of the Officers participating
hereunder), which shall have full authority to interpret the Plan;
interpretations by the Committee shall be final and binding on all parties.
L. Binding Effect. This Plan is intended to represent a binding contract
--------------
between the Corporation and each participating Officer, and its terms shall be
binding upon the Corporation, its successors, transferees, and assigns, and
shall inure to the benefit of the Officers and their heirs, executors,
administrators, and legal representatives.
M. Applicable Law. Except as otherwise required by law, this Plan and all
--------------
matters arising hereunder shall be governed by the laws of the State of
Maryland.
<PAGE>
Exhibit 10(ee)
LOCKHEED MARTIN CORPORATION
---------------------------
SUPPLEMENTAL SAVINGS PLAN
-------------------------
(Amended and Restated as of January 1, 1997)
ARTICLE I
---------
PURPOSES OF THE PLAN
--------------------
The purposes of the Lockheed Martin Corporation Supplemental Savings Plan (the
"Supplemental Savings Plan") are to provide certain key management employees of
Lockheed Martin Corporation and its subsidiaries (the "Company") the opportunity
to defer compensation that cannot be contributed under the Lockheed Martin
Salaried Savings Program (the "Qualified Savings Plan") because of the
limitations of Code section 401(a)(17), 402(g), or 415(c)(1)(A), and to provide
those employees with matching credits equal to the matching contributions that
would have been made by the Company on their behalf under the Qualified Savings
Plan if the amounts deferred had been contributed to the Qualified Savings Plan.
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,
Matching Credits, and earnings (or losses) attributable to the Investment
Options selected by the Participant, and which is debited to reflect
distributions. The portions of a Participant's Account allocated to different
Investment Options will be accounted for separately.
<PAGE>
2. ACCOUNT BALANCE -- The total amount credited to a Participant's Account at
any time, including the portions of the Account allocated to each Investment
Option.
3. BENEFICIARY -- The person or persons designated by the Participant as his
or her beneficiary under the Qualified Savings Plan.
4. BOARD -- The Board of Directors of Lockheed Martin Corporation.
5. CODE -- The Internal Revenue Code of 1986, as amended.
6. COMMITTEE -- The committee described in Section 1 of Article IX.
7. COMPANY -- Lockheed Martin Corporation and its subsidiaries.
8. COMPANY STOCK INVESTMENT OPTION -- The Investment Option under which the
Participant's Account is credited as if invested under the investment option in
the Qualified Savings Plan for the common stock of the Company.
9. COMPENSATION -- An employee's base salary from the Company, as defined in
the Qualified Savings Plan.
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 Compensation for a Year.
11. DEFERRED COMPENSATION -- The amount of Compensation deferred and credited
to a Participant's Account under the Supplemental Savings Plan for a Year.
12. ELIGIBLE EMPLOYEE -- A salaried employee who is eligible to participate
in the Qualified Savings Plan as of the thirtieth (30th) day preceding the last
day on which a Deferral Agreement may be made for a Year, and whose annual rate
of Compensation equals or exceeds $150,000 as of November 1 of the Year
preceding the Year for which a Deferral Agreement is to take effect, and who
satisfies such additional requirements for
<PAGE>
participation in this Supplemental Savings 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. INVESTMENT OPTION -- A measure of investment return pursuant to which
Deferred Compensation credited to a Participant's Account shall be further
credited with earnings (or losses). The Investment Options available under this
Supplemental Savings Plan shall correspond to the investment options available
under the Qualified Savings Plan.
15. MATCHING CREDIT -- Any amount credited to a Participant's Account under
Article IV.
16. PARTICIPANT -- An Eligible Employee for whom Compensation has been
deferred under this Supplemental Savings Plan; the term shall include a former
employee whose Account Balance has not been fully distributed.
17. QUALIFIED SAVINGS PLAN -- The Lockheed Martin Salaried Savings Plan or
any successor plan.
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 Exchange
Act.
19. SUPPLEMENTAL SAVINGS PLAN -- The Lockheed Martin Corporation Supplemental
Savings Plan, which was originally adopted by the Board of Directors of Lockheed
Corporation, effective January 1, 1984, as the Lockheed Corporation Supplemental
Savings Plan, and which has been amended and restated (and re-named) pursuant to
action of the Board on July 25, 1996.
20. YEAR -- The calendar year.
<PAGE>
ARTICLE III
-----------
ELECTION OF DEFERRED AMOUNT
---------------------------
1. Timing of Deferral Elections. An Eligible Employee may elect to defer
----------------------------
Compensation for a Year by executing and delivering to the Company a Deferral
Agreement no later than November 30 of the preceding Year. An Eligible
Employee's Deferral Agreement shall be irrevocable when delivered to the Company
and shall remain irrevocably in effect for all succeeding Years, except that the
Deferral Agreement may be modified or revoked with respect to any succeeding
year by the Eligible Employee's execution and delivery to the Company of a new
or modified Deferral Agreement on or before November 30 of such succeeding Year.
Notwithstanding the foregoing, deferral elections for the 1997 Year may be made
as late as February 28, 1997, in recognition of the fact that the right to enter
into Deferral Agreements for the 1997 Year has generally been suspended pending
the distribution of prospectuses for the Plan, as amended and restated;
provided, however, no Deferral Agreement for the 1997 Year shall take effect, or
apply to Compensation earned, before the date that the Eligible Employee's
Deferral Agreement is executed and delivered to the Company.
2. Amount of Deferred Compensation. Unless an Eligible Employee elects to
-------------------------------
make no deferral for a Year, the Eligible Employee's Deferred Compensation for a
Year shall equal (i) his or her Compensation from the time when his or her
Deferral Agreement takes effect during the Year (as elected under Section 3 of
this Article III) until the last day of the Year, multiplied by (ii) the
percentage of Compensation that the Eligible Employee has elected to contribute
to the Qualified Savings Plan (whether in the form of pre-tax salary reduction
contributions, after-tax contributions, or a combination thereof) for that Year.
An Eligible Employee who has elected to make a deferral for a Year under this
Supplemental Savings Plan shall be precluded from modifying his or her rate of
contributions to the Qualified Savings Plan for that Year after the date on
which his or her Deferral Agreement for that Year (including any continuing
Deferral Agreement) has become irrevocable under Section 1 of this Article III.
3. Time when Deferral Agreement Takes Effect. The
-----------------------------------------
<PAGE>
Eligible Employee may elect to have his or her Deferral Agreement take effect
after the occurrence of either of the following triggering events:
(a) the Eligible Employee's pre-tax salary reduction contributions under
the Qualified Savings Plan for the Year equal the applicable limit under Code
section 402(g), or
(b) the Compensation paid to the Eligible Employee for the Year equals
the applicable compensation limit under Code section 401(a)(17), or, if
earlier, the annual additions (within the meaning of Code section 415(c)(2))
of the Eligible Employee for the Year under the Qualified Savings Plan and any
other plan maintained by the Company equal the applicable limit under Code
section 415(c)(1)(A).
An Eligible Employee's Deferral Agreement shall first take effect and apply to
that portion of Compensation earned by the Eligible Employee for a particular
payroll period that exceeds the amount at which, or with respect to which, the
triggering event occurs.
ARTICLE IV
----------
MATCHING CREDITS
----------------
The Company shall credit to the Account of a Participant as Matching Credits
the same percentage of the Participant's Deferred Compensation as it would have
contributed as matching contributions to the Qualified Savings Plan if the
amount of the Participant's Deferred Compensation had been contributed as pre-
tax salary reduction or after-tax contributions to the Qualified Savings Plan.
<PAGE>
ARTICLE V
---------
CREDITING OF ACCOUNTS
---------------------
1. Crediting of Deferred Compensation. Deferred Compensation shall be
----------------------------------
credited to a Participant's Account as of the day on which such amount would
have been credited to the Participant's account under the Qualified Savings Plan
if the Participant's Deferred Compensation had been contributed as pre-tax
salary reduction or after-tax contributions to the Qualified Savings Plan.
2. Crediting of Matching Credits. Matching Credits shall be credited to a
-----------------------------
Participant's Account as of the day on which the Deferred Compensation to which
they relate are credited under Section 1.
3. Crediting of Earnings. Earnings shall be credited to a Participant's
---------------------
Account based on the Investment Option or Options to which his or her Account
has been allocated, beginning with the day as of which any amounts (or any
reallocation of amounts) are credited to the Participant's Account. Any amount
distributed from a Participant's Account shall be credited with earnings through
the day on which the distribution is processed. The manner in which earnings
are credited under each of the Investment Options shall be determined in the
same manner as under the Qualified Savings Plan.
4. Selection of Investment Options. The amounts credited to a Participant's
-------------------------------
Account under this Supplemental Savings Plan shall be allocated among the
Investment Options in the same percentages as the Participant's account under
the Qualified Savings Plan is allocated among those Investment Options. In the
event that an Account is maintained for a Participant under this Supplemental
Savings Plan at a time when an account is no longer maintained for the
Participant under the Qualified Savings Plan, the Participant may allocate and
reallocate his or her Account Balance among the Investment Options in accordance
with the procedures and limitations on allocations and reallocations under the
Qualified Savings Plan.
<PAGE>
ARTICLE VI
----------
PAYMENT OF BENEFITS
-------------------
1. General. The Company's liability to pay benefits to a Participant or
-------
Beneficiary under this Supplemental Savings Plan shall be measured by and shall
in no event exceed the Participant's Account Balance, which shall be fully
vested and nonforfeitable at all times. All benefit payments shall be made in
cash and, except as otherwise provided, shall reduce allocations to the
Investment Options in the same proportions that the Participant's Account
Balance is allocated among those Investment Options.
2. Commencement of Payment. The payment of benefits to a Participant shall
-----------------------
commence as soon as administratively feasible following the Participant's
termination of employment with the Company and his or her entitlement to
commence receiving benefits under the Qualified Savings Plan.
3. Form of Payment. At the time an Eligible Employee first completes a
---------------
Deferral Agreement, he or she shall irrevocably 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 5, 10, 15, or 20 years, as
designated by the Participant. The amount of each annual payment
shall be determined by dividing the Participant's Account Balance on
the date such payment is processed 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 Election. The Committee
--------------------------------------
<PAGE>
may, in its discretion, permit a Participant to modify his or her payment
election under Section 3 of this Article VI at the time the Participant enters
into a Deferral Agreement for a Year; if accepted, any such modification shall
apply to all amounts credited to the Participant's Account under this
Supplemental Savings Plan. No such modification will be effective if made within
one year of the date of the Participant's termination of employment.
5. 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 an immediate lump sum.
6. Acceleration upon Change in Control.
-----------------------------------
(a) Notwithstanding any other provision of this Supplemental Savings
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 Supplemental Savings 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
<PAGE>
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 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 6(a), if a distribution in
accordance with the provisions of Section 6(a) would result in a nonexempt
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
<PAGE>
transaction or would otherwise not result in liability under Section 16(b) of
the Exchange Act.
(d) This Section 6 shall apply only to a Change in Control of Lockheed
Martin Corporation and shall not cause immediate payout of an Account Balance
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 6 at any time prior
to a Change in Control. In the event of a Change in Control, this Section 6
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
6 shall not, for purposes of Section 6, be subject to cancellation or
modification during the five year period.
7. Deductibility of Payments. In the event that the payment of benefits in
-------------------------
accordance with the Participant's election under Section 3 of this Article VI
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 election, 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.
<PAGE>
8. 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 this Supplemental Savings 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.
9. Tax Withholding. To the extent required by law, the Company shall
---------------
withhold from benefit payments hereunder, or with respect to any amounts
credited to a Participant's Account 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. However, the amount of Deferred
Compensation or Matching Credits to be credited to a Participant's Account will
not be reduced or adjusted by the amount of any tax that the Company is required
to withhold with respect thereto.
<PAGE>
ARTICLE VII
-----------
EXTENT OF PARTICIPANTS' RIGHTS
------------------------------
1. Unfunded Status of Plan. This Supplemental Savings 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
Supplemental Savings Plan. Notwithstanding the foregoing, to assist the Company
in meeting its obligations under this Supplemental Savings Plan, the Company may
set aside assets in a trust or trusts described in Revenue Procedure 92-64,
1992-2 C.B. 422 (generally known as a "rabbi trust"), and the Company may direct
that its obligations under this Supplemental Savings Plan be satisfied by
payments out of such trust or trusts. It is the Company's intention that this
Supplemental Savings 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 to benefit payments
---------------------------
under this Supplemental Savings Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Participant or the Participant's
Beneficiary.
ARTICLE VIII
------------
AMENDMENT OR TERMINATION
------------------------
1. Amendment. The Board may amend, modify, suspend or discontinue this
---------
Supplemental Savings 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 or her
Account Balance.
2. Termination. The Board reserves the right to terminate this Supplemental
-----------
Savings Plan at any time and to pay all
<PAGE>
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 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 transaction or would otherwise not result
in liability under Section 16(b) of the Exchange Act.
ARTICLE IX
----------
ADMINISTRATION
--------------
1. The Committee. This Supplemental Savings 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 Supplemental
Savings Plan to comply with the 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
Supplemental Savings Plan in accordance with its terms and purpose, except that
the Committee may not delegate any authority the delegation of which would cause
this Supplemental Savings 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 Supplemental Savings 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
<PAGE>
individual rights or benefits under the Supplemental Savings 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 Supplemental Savings 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
Supplemental Savings Plan or for the failure of the Supplemental Savings Plan or
any Participant's rights under the Supplemental Savings 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.
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
<PAGE>
(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) 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.
<PAGE>
ARTICLE X
---------
GENERAL AND MISCELLANEOUS PROVISIONS
------------------------------------
1. Neither this Supplemental Savings 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 Supplemental Savings 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 limit the right of the Company to change
an Eligible Employee's compensation or other benefits.
2. Any amount credited to a Participant's Account under this Supplemental
Savings 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.
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 Supplemental Savings Plan.
5. By electing to become a Participant hereunder,
<PAGE>
each Eligible Employee shall be deemed conclusively to have accepted and
consented to all the terms of this Supplemental Savings Plan and all actions or
decisions made by the Company, the Board, or Committee with regard to the
Supplemental Savings Plan.
6. The provisions of this Supplemental Savings 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 Supplemental Savings 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 Supplemental Savings 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 Supplemental Savings 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. This Supplemental Savings Plan is intended to constitute an "excess
benefit plan" within the meaning of Rule 16b-3(b)(2) under the Securities
Exchange Act of 1934, and it shall be construed and applied accordingly. It is
the intent of the Company that this Supplemental Savings 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
<PAGE>
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 Supplemental Savings
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 Supplemental Savings 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 Supplemental Savings Plan, the provisions of this Supplemental Savings Plan
may at any time be bifurcated by the Board or the Committee in any manner so
that certain provisions of this Supplemental Savings Plan are applicable solely
to Section 16 Persons. Notwithstanding any other provision of this Supplemental
Savings 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 Supplemental Savings 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.
ARTICLE XI
----------
EFFECTIVE DATE
--------------
This amendment and restatement of the Supplemental Savings Plan shall
generally become effective on January 1, 1997.
<PAGE>
Exhibit 10(ooo)
DEFERRED PERFORMANCE PAYMENT PLAN
OF
LOCKHEED MARTIN CORPORATION
SPACE & STRATEGIC MISSILES SECTOR
(Adopted September 26, 1997)
ARTICLE I
PURPOSE OF THE PLAN
-------------------
The purposes of the Deferred Performance Payment Plan of Lockheed Martin
Corporation Space & Strategic Missiles Sector (the "Deferral Plan") are to
provide certain key management employees of Lockheed Martin Corporation (the
"Company") the opportunity to defer receipt of Performance Plan Payments under
the Lockheed Martin Corporation Space and Strategic Missiles Sector Performance
Plan for Employees in Key Assignments Essential/Critical to the Success of
Sector Consolidation (the "Performance Plan"). Except as expressly provided
hereinafter, the provisions of the Performance Plan shall be construed entirely
independent of the Deferral Plan.
The Deferral Plan applies solely to Performance Plan Payments and expressly
does not apply to any special awards which may be made under any other Lockheed
Martin incentive plans.
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 Performance
Payment and Interest, and which is debited to reflect distributions and
forfeitures.
2. ACCOUNT BALANCE -- The total amount credited to a Participant's Account at
any point in time.
<PAGE>
3. BENEFICIARY -- The person or persons 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. If the Participant has
not designated a Beneficiary, or if the designated Beneficiary has predeceased
the Participant, the executor or administrator of the Participant's estate shall
be the Beneficiary; a Participant may amend the Beneficiary designation at any
time before the Participant's death.
4. BOARD -- The Board of Directors of Lockheed Martin Corporation.
5. COMMITTEE -- The Compensation Committee of the Board.
6. COMPANY -- Lockheed Martin Corporation.
7. 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 a portion or all of his or her Performance Plan Award.
8. DEFERRAL PLAN -- This Deferred Performance Payment Plan of Lockheed Martin
Corporation Space & Strategic Missiles Sector, adopted by the Board on September
26, 1997.
9. DEFERRED PERFORMANCE PAYMENT -- The amount of the Performance Plan Payment
credited to a Participant's Account under the Deferral Plan pursuant to the
Participant's Deferral Agreement.
10. ELIGIBLE EMPLOYEE -- An employee of the Company (i) who is a participant
in the Deferral Plan and the Lockheed Martin Management Incentive Compensation
Plan; (ii) who is also a participant in the Performance Plan; (iii) whose base
annual salary rate on November 1, 1997 is at least $80,000; and (iv) who is
employed by the Company on January 1, 1999.
11. INTEREST -- The interest to be credited to a Participant's Account and
which shall be at a rate equivalent to the then published rate for computing
present value of future benefits at the time cost is assignable under Cost
Accounting Standard 415, Deferred Compensation, as determined by the
<PAGE>
Secretary of Treasury on a semi-annual basis pursuant to Pub. L. 92-41, 85 Stat.
97.
12. PARTICIPANT -- An Eligible Employee for whom a Performance Plan Payment
has been deferred under this Deferral Plan; the term shall include a former
employee whose Deferred Compensation has not been fully distributed.
13. PERFORMANCE PLAN -- The Lockheed Martin Corporation Space and Strategic
Missiles Sector Performance Plan for Employees in Key Assignments
Essential/Critical to the Success of Sector Consolidation.
14. PERFORMANCE PLAN PAYMENT -- The amount that would be payable to the
Participant under the Performance Plan.
15. SECTOR -- The Company's Space & Strategic Missiles Sector.
ARTICLE III
ELECTION OF DEFERRED AMOUNT
---------------------------
1. Timing of Deferral Elections. An Eligible Employee may elect to make a
----------------------------
deferral of a portion or all of his or her Performance Plan Payment by executing
a Deferral Agreement no later than December 31, 1997. An Eligible Employee's
Deferral Agreement shall be irrevocable after the latest date on which it could
be made.
2. Amount of Deferral Elections. An Eligible Employee's deferral election
----------------------------
may be stated as (i) a dollar amount which is an even multiple of $5,000, (ii) a
percentage of the Eligible Employee's Performance Plan Payment which is an even
multiple of five percent (5%), or (iii) such a dollar amount or percentage based
on the portion of the Eligible Employee's Performance Plan Payment in excess of
a specified dollar amount. However, unless a minimum amount of $5,000 would be
deferred under the terms of the Eligible Employee's deferral election, no amount
will be deferred. Notwithstanding the foregoing, in no event shall a
Participant's Deferred Performance Payment exceed one hundred percent (100%) of
the Participant's Performance Plan Payment less the maximum amount that was
available to the Participant before
<PAGE>
January 1, 1999 as an advance against the Performance Plan Payment for
relocation expenses or other reasons, whether or not such an advance was made to
the Participant. A Deferral Agreement shall be effective only if the Participant
is awarded a Performance Plan Payment of at least $10,000 and the Participant is
employed by the Company on January 1, 1999.
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 Performance Payment.
ARTICLE IV
CREDITING OF ACCOUNTS
---------------------
1. Crediting of Deferred Compensation. The Deferred Performance Payment
----------------------------------
shall be credited to the Participant's Account within 60 days of January 1,
1999.
2. Crediting of Interest. Interest shall be credited to a Participant's
---------------------
Account on a monthly basis until the Participant's entire Account Balance has
been distributed. For purposes of determining the Interest creditable to a
Participant's Account, any distribution made during a month shall be treated as
made on the first day of that month.
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
Article V, a Participant's Account Balance shall be paid to him in accordance
with the Participant's elections under Sections 2 and 3 and such elections shall
be continuing and irrevocable. All benefit payments shall be made in cash.
2. Election for Commencement of Payment. As a part of the Participant's
------------------------------------
Deferral Agreement, he or she shall elect from among the following options
governing the date on which the payment of benefits shall commence:
<PAGE>
(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. As a part of the Participant's Deferral
----------------------------
Agreement, he or she shall elect the form of payment of his 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. 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
before the Participant is eligible to commence receiving retirement benefits
under a pension plan maintained by the Company, 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.
<PAGE>
5. 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.
6. Withdrawal with Forfeiture. There is one exception to the irrevocability
--------------------------
of payment elections which may be availed of by a Participant or Beneficiary. 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.
7. 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,
<PAGE>
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 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) This Section 7 shall apply only to a Change in Control of Lockheed
Martin Corporation and shall not cause immediate payout of Deferred Compensation
in any transaction
<PAGE>
involving the Company's sale, liquidation, merger, or other disposition of any
subsidiary.
(d) The Committee may cancel or modify this Section 7 at any time prior
to a Change in Control. In the event of a Change in Control, this Section 7
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 7 shall not, for purposes of Section 7, be subject
to cancellation or modification during the five year period.
8. 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.
9. 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.
<PAGE>
10. Tax Withholding. To the extent required by law, the Company shall
---------------
withhold from benefit payments hereunder, or with respect to any Performance
Plan 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 benefit 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 benefit obligations under this Deferral Plan be satisfied by
payments out of such trust. 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 Deferred Plan, or any interest therein, other than the
designation of a Beneficiary, shall not be permitted or recognized.
ARTICLE VII
AMENDMENT OR TERMINATION
------------------------
1. Amendment. The Board may amend or modify this Deferral Plan at any time,
---------
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
<PAGE>
distribution of his Account Balance. Further, no amendment may alter the formula
for crediting Interest to Participants' Accounts, unless the amended formula in
not less favorable to Participants than that previously in effect, or unless
affected Participants consent 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.
ARTICLE VIII
ADMINISTRATION
--------------
1. This Deferral Plan shall be administered by the Committee, which shall
have full authority to interpret the Plan, and interpretations of the Plan by
the Committee shall be final and binding on all parties. The Committee may
delegate to the Chairman of the Committee, the Chief Executive Officer of the
Company, or other officers or employees of the Company the authority to execute
and deliver such instruments and documents, to do all such acts and things and
to take all such other steps deemed necessary, advisable or convenient for the
effective administration of the Plan in accordance with its purpose.
2. 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. Neither the Company nor any member of the Board, 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 or to comply
with any other law, compliance with which is not required on the part of the
Company.
4. If a minor, person declared incompetent, or person incapable of handling
the disposition of his property is entitled to receive a benefit, make an
application, or make an election
<PAGE>
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. 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. 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.
<PAGE>
(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 Plan.
ARTICLE IX
GENERAL 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 a Performance Plan Payment to any Eligible
Employee.
2. A Performance Plan Payment 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 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 Plan, the Company or the Committee may
perform such other act as
<PAGE>
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 provision 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. 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.
ARTICLE X
EFFECTIVE DATE
--------------
The Deferral Plan shall be applicable to and effective as to Performance Plan
Payments payable under the Performance Plan after December 31, 1998.
<PAGE>
Exhibit 10(ppp)
RESOLUTION NO. 150
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lockheed Martin Corporation
Board of Directors
June 27, 1997
Amendment of Lockheed Martin
Nonqualified Pension Plans
RESOLVED, that the Vice President, Human Resources be and is hereby
authorized to amend, effective July 1, 1997, (i) the Lockheed Martin
Corporation Supplemental Excess Retirement Plan and the Lockheed
Martin Corporation Supplemental Retirement Income Plan to provide a
lump sum payment option; and (iii) the Lockheed Martin Corporation
Supplemental Excess Retirement Plan, the Lockheed Martin Corporation
Supplemental Retirement Income Plan, the Lockheed Martin Corporation
Supplementary Pension Plan for Employees of Transferred GE Operations,
the Lockheed Martin Corporation Incentive Retirement Benefit Plan for
Certain Executives of Lockheed Corporation, Supplemental Retirement
Benefit Plan for Certain Transferred Employees of Lockheed Martin
Corporation, the Supplemental Benefit Plan of Lockheed Martin
Corporation, and the Sanders Supplemental Executive Retirement Plan to
reflect the common pension formula contained in the tax-qualified
plans effective July 1, 1997 and to otherwise make such nonqualified
plans consistent in form and operation with each other.
RESOLVED FURTHER, that the 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.
<PAGE>
EXHIBIT 12
LOCKHEED MARTIN CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN MILLIONS OF DOLLARS, EXCEPT RATIO)
<TABLE>
<CAPTION>
1997
------
<S> <C>
EARNINGS:
Net earnings $1,300
Taxes on income 637
Interest expense 842
Amortization of debt premium and discount, net (3)
Portion of rents representative of an interest factor 86
------
Adjusted earnings before taxes and fixed charges $2,862
======
FIXED CHARGES:
Interest expense $ 842
Amortization of debt premium and discount, net (3)
Portion of rents representative of an interest factor 86
Capitalized interest 5
------
Total fixed charges $ 930
======
RATIO OF EARNINGS TO FIXED CHARGES 3.1
======
</TABLE>
<PAGE>
Exhibit 13
[LOGO OF LOCKHEED MARTIN APPEARS HERE]
Annual Report 1997
[GRAPHIC PRESENTATION OF OCEAN, LAND, SKY AND SPACE PRESENTED HERE.]
<PAGE>
Financial Highlights
(In millions, except per share data) 1997/(a)/ 1996/(a)/
================================================================================
Net sales $28,069 $26,875
- --------------------------------------------------------------------------------
Net earnings 1,300/(c)/ 1,347/(d)/
- --------------------------------------------------------------------------------
Diluted earnings per share before
deemed preferred stock dividend/(b)/ 6.09/(c)/ 6.09/(d)/
- --------------------------------------------------------------------------------
Cash dividends per common share 1.60 1.60
- --------------------------------------------------------------------------------
Total assets 28,361 29,540
- --------------------------------------------------------------------------------
Short-term borrowings 494 1,110
- --------------------------------------------------------------------------------
Current maturities of long-term debt 876 180
- --------------------------------------------------------------------------------
Long-term debt 10,528 10,188
- --------------------------------------------------------------------------------
Shareholders' equity/(b)/ 5,176 6,856
- --------------------------------------------------------------------------------
Negotiated backlog 47,059 50,406
- --------------------------------------------------------------------------------
(a) Includes the effects of the business combination with Loral Corporation
since April 1996.
(b) Earnings per share for 1997 excludes the effects of a deemed preferred stock
dividend resulting from a transaction with General Electric Company (GE).
The excess of the fair value of the consideration transferred to GE
(approximately $2.8 billion) over the carrying value of the Series A
preferred stock ($1.0 billion) was treated as a deemed preferred stock
dividend and deducted from 1997 net earnings in determining net earnings
applicable to common stock used in the computation of earnings per share.
The effect of this deemed dividend was to decrease basic earnings per share
by $9.85, and was antidilutive in the calculation of diluted earnings per
share.
(c) Earnings for 1997 include the effects of a tax-free gain of $311 million, or
$1.46 per diluted share, related to the transaction with GE to redeem the
Corporation's Series A preferred stock, and nonrecurring and unusual charges
related to the Corporation's decision to exit certain lines of business in
the areas of children and family services systems development and
environmental remediation, and related to impairments in the values of
various non-core investments and certain other assets in keeping with the
Corporation's continued focus on core operations. These charges decreased
net earnings by $303 million, or $1.42 per diluted share.
(d) Earnings for 1996 include the effects of a nonrecurring gain resulting from
divestitures which increased net earnings by $351 million, or $1.59 per
diluted share. The gain was substantially offset by nonrecurring charges
related to the Corporation's environmental remediation business, and related
to impairments in the values of non-core investments and certain other
assets, and costs for facility closings and transfers of programs. These
charges decreased net earnings by $209 million, or $.94 per diluted share.
<TABLE>
<S> <C>
Contents
--------
1 To Our Shareholders
--------
8 1997 Achievements
--------
On the Cover: 10 Financial Section
From the depths of the oceans to the far reaches of space, Lockheed Martin will
continue to write new chapters in the chronicle of technological advances. We --------
will enjoy success in the highly competitive global marketplace. Success will 46 Corporate Directory
depend on the intensity with which we pursue our work and excellence in
everything we do. We are proud of our heritage, confident of our present, and --------
excited about our future. 48 General Information
</TABLE>
<PAGE>
"1997 was the third consecutive year of significant achievements..."
- -------------------------------------------------------------------
[PHOTO OF VANCE D. COFFMAN, NORMAN R. AUGUSTINE, AND PETER B. TEETS APPEARS
HERE]
Vance D. Coffman
Chief Executive Officer
and Vice Chairman
Norman R. Augustine
Chairman
Peter B. Teets
President and
Chief Operating Officer
Dear Fellow Shareholders
Upon the completion of the merger forming Lockheed Martin Corporation, we set
forth five goals for the new corporation:
- - Enhance our position as one of the leaders in the aerospace/defense industry
- - Achieve significant cost reductions to increase margins and improve
competitiveness
- - Generate substantial cash flow and deploy cash to enhance shareholder value
- - Produce double-digit earnings per share growth
- - Achieve superior shareholder returns.
1997 was the third consecutive year of significant achievements in meeting
each of these goals and fulfilling the promise of Lockheed Martin.
- ----------
1
<PAGE>
"Mission Success is the 'litmus test' for our systems."
- -------------------------------------------------------
Enhance Aerospace/Defense Leadership --
Lockheed Martin has led the consolidation of the industry, growing net sales to
a record $28 billion in 1997. In an industry as technologically demanding as
ours and where the adverse consequences of product failures are substantial,
leadership comes not from size, but from performance. Mission Success is the
"litmus test" for our systems. Our Mission Success record in 1997 was just short
of perfection -- 96 percent of over 600 measurable events (comprising such items
as satellite deployments, test flights and missile launches, including
development efforts) were successful. For many of our programs, the customers
score our performance with award fees. Our award fees in 1997 were
representative of leadership performance -- a median of approximately 95 percent
of all available award fees were awarded by our customers, and nearly one-third
of those award fee ratings were at 100 percent.
On July 3, 1997, the Corporation announced the execution of an $11.6 billion
merger agreement with the Northrop Grumman Corporation. On February 26, 1998,
stockholders of Northrop Grumman approved the merger and stockholders of
Lockheed Martin approved the issuance of common stock necessary to complete the
merger, and closing was targeted for March 17, 1998. On March 9, 1998, the
Corporation announced that it had been informed by the Department of Justice
(DOJ) that the DOJ was fundamentally opposed to the merger. The Corporation has
committed that it will not close on its combination with Northrop Grumman prior
to April 24, 1998 and will in the interim attempt to develop and submit a
proposal responding to the DOJ's antitrust concerns while preserving the
benefits of the merger. As we went to press, the DOJ had informed the
Corporation that it did not find this commitment satisfactory and the matter
remained unresolved.
EchoStar III direct-to-home communications satellite gets a successful lift from
an Atlas IIAS
[PHOTO OF ECHOSTAR III AND ATLAS IIAS APPEARS HERE]
- ----------
2
<PAGE>
"The Corporation won more than two-thirds of its competitive bids in 1997."
- ---------------------------------------------------------------------------
Longbow Apache is a true around-the-clock, all-weather anti-armor platform
[PHOTO OF LONGBOW APACHE APPEARS HERE]
Achieve significant cost reductions to increase margins and improve
competitiveness --
The Corporation achieved significant progress in 1997, and remains ahead of
schedule in its consolidation program to reduce annual costs by $2.6 billion.
This progress was manifested in 1997 through the achievement of record operating
margins and record win rates on competitive programs. Excluding the effects of
nonrecurring and unusual items, our operating margin, based on Earnings Before
Interest and Taxes (EBIT), of 10.4 percent was above the 10 percent margin
recorded in 1996. Equally important for the future, and a key metric of our
improved competitiveness, the Corporation won more than two-thirds of its
competitive bids in 1997. This win rate was up from the exemplary 63 percent win
rate achieved in 1996.
If consummated, the Northrop Grumman combination will provide further
opportunity for cost savings and increased competitiveness. Preliminary analyses
have identified an additional $1 billion in annual steady-state savings expected
to be achieved from cost reduction opportunities related to this transaction.
The majority of these savings accrue to the government.
Generate substantial cash flow and deploy it to enhance shareholder value --
In 1997, the Corporation generated over $1.6 billion in cash, consisting of $900
million in free cash flow from operations and $750 million in after-tax proceeds
from divestitures. While our stated priority entering
- ----------
3
<PAGE>
The New En Route Center -- modern air traffic management for the United Kingdom
[PHOTO OF THE NEW EN ROUTE CENTER APPEARS HERE]
the year was to use available cash to reduce debt resulting from the Loral
transaction, the Corporation was presented a unique opportunity to enhance
shareholder value. In November, the Corporation exchanged a subsidiary composed
of the Access Graphics and thrust reversers businesses, its investment in
Globalstar, and approximately $1.6 billion in cash for all of the Corporation's
convertible preferred stock held by the General Electric Company. This
transaction resulted in approximately 29 million equivalent common shares being
reacquired. Combined with the Martin Marietta Materials exchange transaction
consummated in October 1996, the Corporation retired in excess of 16 percent of
its diluted shares outstanding in 1996 and 1997.
Produce double-digit earnings per share growth --
Lockheed Martin's diluted earnings per share over the past three years have been
impacted by numerous nonrecurring and unusual items arising out of the
Corporation's consolidation and shareholder value initiatives (most notably the
negative impact of the deemed preferred stock dividend of $8.55 per diluted
share in 1997) which are described in detail in management's financial
discussion and analysis section of this report. Excluding those nonrecurring and
unusual items, 1997 diluted earnings per share would have been $6.05 per share,
an 11 percent increase over similarly-adjusted 1996 earnings per share of $5.44.
This earnings per share growth exceeded growth in net sales, which reached a
record $28.1
- ----------
4
<PAGE>
"With the fulfillment of major goals we set for ourselves at the time of the
- ----------------------------------------------------------------------------
1995 merger... a firm foundation for the future has been established."
- --------------------------------------------------------------------
billion in 1997 compared with $26.9 billion in 1996. Earnings per share growth
was also achieved despite an 11 percent increase in goodwill and intangible
amortization, which rose to $446 million in 1997 from $402 million in 1996. This
amortization represents an ongoing non-cash expense reflected in the
Corporation's results of operations.
Generate superior shareholder returns --
Despite share price performance in 1997 being below overall market averages, we
have realized an excellent shareholder return record (based on stock price
appreciation plus dividends) since the formation of Lockheed Martin three years
ago. Over that period, Lockheed Martin generated a 28 percent compound annual
shareholder return, which compares favorably to the 25 percent annual return
achieved by our aerospace/defense peer group.
Goals for 1998 and Beyond
- -------------------------
With the fulfillment of major goals we set for ourselves at the time of the 1995
merger of Lockheed and Martin Marietta, a firm foundation for the future has
been established.
Generating robust cash flows will continue to be an important goal of
Lockheed Martin. In fact, we have recently raised the weighting of the cash
generation element of the management incentive compensation formula. We
recognize cash flow as a key valuation driver and a key to enhancing long-term
earnings.
Our goals for 1998 and beyond include our continuing commitment to being a
"merchant supplier" and a "merchant buyer" in the world marketplace. This means
that our businesses will provide products and services to other companies within
Lockheed Martin as well as to other prime contractors and other customers around
the world. At the same time, all Lockheed Martin businesses will purchase the
products and services they need from the most capable, cost effective suppliers
in the world, whether these suppliers are found inside or outside Lockheed
Martin.
The Corporation faces an intensely competitive environment in our key
businesses, a new set of competitors and global market dynamics in our
closely-related target areas of information services and commercial space, along
with overall higher standards of shareholder returns.
F-22 Raptor air superiority fighter makes its first flight
[PHOTO OF F-22 RAPTOR APPEARS HERE]
- ----------
5
<PAGE>
To enhance our position as a world-class company, and in order to meet our
goal of superior shareholder returns, we must continually evaluate our processes
and implement changes to improve the way we do business, over and above
activities designed to achieve consolidation savings. Lockheed Martin is
committed to growing shareholder value by improving productivity and
efficiencies, and generating additional cash flows through the sharing and
implementation of "Best Practices" throughout the Corporation.
We have identified five initiatives, to be launched in 1998, to focus our
management processes on the fundamentals of cash flow generation, increased
competitiveness, and continual operating margin enhancement. These initiatives
can be summarized as follows:
Procurement Leverage --
As a premier high-technology systems provider, the Corporation has historically
procured goods and services totaling about 50 percent of net annual sales. The
financial and operational benefits from forging stronger relationships with
strategic partners, embracing electronic commerce, and working more closely with
our suppliers can provide improved returns to our customers and shareholders.
Receivables Reduction --
Lockheed Martin had $5 billion in receivables at year end 1997, representing
opportunities to improve billing and cash collection cycles. It is estimated
that a reduction of three days sales outstanding could generate over $200
million in cash flow to redeploy toward growing shareholder value.
Inventory Management --
Lockheed Martin had over $3 billion in inventories at year end 1997.
It is estimated that a five percent improvement in our inventory turnover rate
could generate more than $150 million in cash flow.
Manufacturing Excellence --
We are installing a "lean thinking" mentality throughout our Corporation to
reduce cycle times, improve quality, promote "just in time" manufacturing, and
eliminate non-productive assets. At the
Sandia-developed air bags give Mars Pathfinder a soft landing
[PHOTO OF MARS PATHFINDER APPEARS HERE]
- ----------
6
<PAGE>
"We are confident of our present and excited about our future as we look to the
- -------------------------------------------------------------------------------
new challenges ahead."
- ----------------------
same time, we are maintaining and enhancing our standards of quality to ensure
relentless focus on future Mission Success.
Employee Development --
In order to drive our productivity gains, we must continue to empower our
employees with the proper tools and incentives. Productivity improvements should
result in meaningful margin improvements. While each productivity step is
important, so also is the strong commitment to develop new technologies and the
systems that bring them to everyday use. Employee development and capability
enhancement make this possible. We continue to invest about $1 billion annually
in research and development efforts and bid and proposal activities to build
advanced technology capabilities and win new business.
Our employees have done a superlative job in working together as a team
during a period of unprecedented consolidation in our industry. Our unrelenting
drive to become more efficient and productive, and accelerate our growth
outlook, provides a brighter future for our employees, attractive pricing for
our customers, and higher returns for our shareholders.
Before closing, we would like to express our admiration, gratitude and
thanks to Daniel M. Tellep, the first Chairman and Chief Executive Officer of
Lockheed Martin, for his dedicated and exemplary service to the Corporation and
its Board of Directors. Dan has decided not to seek re-election to the Board in
order to spend more time with his family in California.
While we take pride in our history, we have challenged ourselves to improve
upon the past. And while that has been our attitude since we formed Lockheed
Martin on March 15, 1995, we are confident of our present and excited about our
future as we look to the new challenges ahead.
March 12, 1998
/s/ Norman R. Augustine
Norman R. Augustine
Chairman
/s/ Vance D. Coffman
Vance D. Coffman
Chief Executive Officer and Vice Chairman
/s/ Peter B. Teets
Peter B. Teets
President and Chief Operating Officer
- ----------
7
<PAGE>
- -----------------
1997 Achievements
- -----------------
- ---------------------------------
Space & Strategic Missiles Sector
================================================================================
[PHOTO OF MEL BRASHEARS APPEARS HERE]
Mel Brashears President and Chief Operating Officer
- ---------------------------------------------------------------
- - 100 percent Mission Success on five Titan, eight Atlas, one Athena and three
Russian Proton vehicle launches.
- - U.S. Air Force awards Lockheed Martin a development contract for the Evolved
Expendable Launch Vehicle family of launchers.
- - Lockheed Martin builds the External Tanks for eight successful Space Shuttle
launches.
- - Lockheed Martin completes demonstration tank proof testing for the X-33 in
support of the VentureStar(TM) Reusable Launch Vehicle.
- ------------------
Electronics Sector
================================================================================
[PHOTO OF THOMAS A. CORCORAN APPEARS HERE]
Thomas A. Corcoran President and Chief Operating Officer
- ---------------------------------------------------------------
- - U.S. Air Force awards contract to develop and integrate modifications for the
A/OA-10 aircraft fleet.
- - The Raytheon TI Systems Inc./Lockheed Martin Javelin joint venture receives a
contract for full-rate production.
- - Lockheed Martin signs a contract to provide a vessel traffic management system
to China.
- - Lockheed Martin to build "smart" guidance kits for the Wind Corrected
Munitions Dispenser.
- -----------------------------
Information & Services Sector
================================================================================
[PHOTO OF ARTHUR E. JOHNSON APPEARS HERE]
Arthur E. Johnson President and Chief Operating Officer
- ---------------------------------------------------------------
- - 100 percent Mission Success on eight Space Shuttle missions launched by United
Space Alliance.
- - FAA selects Lockheed Martin to modernize the nation's air traffic control
system, including assistance to the FAA's upgrade of computer and control
systems.
- - The U.K. National Air Traffic Services selects Sky Solutions Ltd. as preferred
bidder for the New Scottish Centre, a new air traffic control facility. Sky
Solutions is owned by Lockheed Martin and Bovis Ltd.
- - The U.S. Patent and Trademark Office awards Lockheed Martin contract for
information systems development and maintenance.
- ------------------
Aeronautics Sector
================================================================================
[PHOTO OF JAMES A. BLACKWELL, JR. APPEARS HERE]
James A. Blackwell, Jr. President and Chief Operating Officer
- ---------------------------------------------------------------
- - F-22 aircraft rollout April 9 and first flight September 7.
- - U.S. and international customers order 42 C-130J Hercules aircraft in 1997,
bringing total orders and options to 145 aircraft.
- - Singapore makes follow-on order for 12 F-16 aircraft; Lockheed Martin
co-produces and delivers total of 117 Fighting Falcons in 1997.
- - Joint Strike Fighter: Teaming agreements with Northrop Grumman and British
Aerospace; start component production for two X-35 concept demonstrators;
- ---------------------------
Energy & Environment Sector
================================================================================
[PHOTO OF ROBERT J. STEVENS APPEARS HERE]
Robert J. Stevens President and Chief Operating Officer
- ---------------------------------------------------------------
- - Industry Week magazine names the Paducah Gaseous Diffusion Plant as a Top 10
Best Plant in America.
- - Sandia receives Department of Energy award for delivering a 500 percent return
on investment and saving $106.3 million by turning Tritium Research Laboratory
into a chemical/radiation detection research facility.
- - Lockheed Martin employees at Idaho National Engineering and Environmental
Laboratory, Oak Ridge Energy Systems and
8
<PAGE>
[Space & Strategic Missiles Sector, continued]
================================================================================
- - 100 percent Mission Success on 54 commercial, four civil and four military
satellites, all manufactured by Lockheed Martin, including the first A2100 bus
completed at the Corporation's new Commercial Satellite Center.
- - Lockheed Martin and Russia's Intersputnik International Organization of Space
Communications form a joint venture called Lockheed Martin Intersputnik to
provide international telecommunications services.
- - Lockheed Martin supports NASA's Mars Pathfinder, Mars Global Surveyor and
Cassini planetary missions.
- - Lockheed Martin assists with the successful second Hubble Space Telescope
servicing mission.
- - Lockheed Martin conducts 15 successful land- and sea-launched strategic and
tactical missile flights.
- - United Missile Defense Company is formed to strengthen National Missile
Defense bid.
[Electronics Sector, continued]
================================================================================
- - Lockheed Martin wins 25 domestic and international postal contracts to provide
advanced recognition, automation, material handling and information management
systems.
- - The Lockheed Martin-Tenix joint venture to manage to completion the Jindalee
Operational Radar Network in Australia.
- - Spanish Ministry of Defense selects the AEGIS combat system for its F-100
frigates.
- - Lockheed Martin Federal Systems-Owego attains highest rating of a company's
software development capability from the Carnegie Mellon Software Engineering
Institute, joining only two other companies worldwide rated at Level 5.
- - A Lockheed Martin-Northrop Grumman joint venture is formed to produce Longbow
Apache anti-armor missiles and missile launchers for U.S. Army.
- - Ballistic Missile Defense Organization and U.S. Army conduct two successful
test flights of the Patriot Advanced Capability (PAC-3) Missile.
[Information & Services Sector, continued]
================================================================================
- - The Census Bureau selects Lockheed Martin to develop and install document
imaging system to capture information from forms used for the Year 2000
Census.
- - U.S. Air Force Space Command's 50th Space Wing selects Lockheed Martin for
satellite operations, operations support, plus maintenance and training.
- - The Environmental Protection Agency awards Lockheed Martin contracts to
support the agency's computing and telecommunications requirements.
- - The New York State Metropolitan Transportation Authority selects Lockheed
Martin to outsource its information technology initiatives.
- - Lockheed Martin becomes the North American Numbering Plan Administrator; signs
Local Number Portability contracts serving phone carriers in 24 states. Local
number portability allows customers to keep existing telephone numbers if they
switch local service providers.
- - Lockheed Martin wins Phase I of Consolidated Space Operations Contract.
[Aeronautics Sector, continued]
================================================================================
successful Interim Program Review confirming we're on schedule, within budget,
with robust design.
- - Successful X-33 Critical Design Review, providing go-ahead to complete
fabrication and assembly of subscale prototype. Linear Aerospike SR-71
Experiment validates propulsion configurations.
- - Lockheed Martin and Alenia Aerospazio announce launch of C-27J medium
airlifter.
- - Lockheed Martin-Northrop Grumman team joins Australia's Transfield Defence
(now Tenix) to compete for Wedgetail airborne early warning and control
program.
- - Deliver first operational Block 30 EC-130H Compass Call electronic warfare
aircraft.
- - Successful transition of Big Safari maintenance and modification work from
Ontario plant to Palmdale; close Ontario plant as part of facilities
consolidations.
- - Receive U.S. Air Force contract to develop technologies/concepts for a
military spaceplane.
- - Aircraft & Logistics Centers begin operating January 1 following consolidation
of four units into a single operating company; capture contracts totaling over
$1.25 billion in 1997.
[Energy & Environment Sector, continued]
================================================================================
Hanford are honored with Vice President Gore's "Hammer Award".
- - NASA thanks Sandia for its role in the Pathfinder mission to Mars, including
design and test of airbags that protected equipment during landing.
- - The Joint Program Office for Unmanned Ground Vehicles selects Lockheed Martin
to provide robotic systems for bomb detection.
- - Sandia and eight universities will pilot the FAA's new Center of Excellence
for air worthiness assurance.
- - Oak Ridge Energy Systems delivers "hospital-in-a-box" prototype to the Army
and Air Force.
- - The U.S. Environmental Protection Agency accepts Sandia's application to open
the Waste Isolation Pilot Project to store transuranic wastes.
- - Department of Energy selects Lockheed Martin to eliminate solid propellant,
rocket motor cases and missile canisters from former Soviet ICBMs.
- ----------
9
<PAGE>
Financial Section
- -----------------------------------------
Management's Discussion and 11
Analysis of Financial Condition
and Results of Operations
- -----------------------------------------
The Corporation's Responsibility 25
for Financial Reporting
- -----------------------------------------
Report of Ernst & Young LLP, 26
Independent Auditors
- -----------------------------------------
Consolidated Statement 27
of Earnings
- -----------------------------------------
Consolidated Statement 28
of Cash Flows
- -----------------------------------------
Consolidated Balance Sheet 29
- -----------------------------------------
Consolidated Statement 30
of Stockholders' Equity
- -----------------------------------------
Notes to Consolidated
Financial Statements 31
- -----------------------------------------
Consolidated Financial Data - 45
Eight Year Summary
- ----------
10
<PAGE>
Lockheed Martin Corporation
================================================================================
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Lockheed Martin Corporation (Lockheed Martin or the Corporation) is a
highly diversified global enterprise principally engaged in the conception,
research, design, development, manufacture and integration of advanced-
technology products and services. The following discussion should be read in
conjunction with the audited consolidated financial statements included herein.
================================================================================
Transaction Agreement with
Northrop Grumman Corporation
On July 3, 1997, the Corporation and Northrop Grumman Corporation (Northrop
Grumman) announced that they had entered into an Agreement and Plan of Merger
(the Merger Agreement) to combine the companies in a transaction with a total
estimated value at the announcement date of approximately $11.6 billion,
including Northrop Grumman debt to be assumed by the Corporation of
approximately $3.1 billion (the Merger). Under the terms of the Merger
Agreement, which was approved by the respective Boards of Directors of the
Corporation and Northrop Grumman, Northrop Grumman stockholders will receive
1.1923 shares of Lockheed Martin common stock for each share of Northrop Grumman
common stock. On February 26, 1998, the stockholders of the Corporation approved
the issuance of shares of Lockheed Martin common stock in connection with the
Merger. In addition, the Corporation's stockholders approved an amendment to
Lockheed Martin's charter to increase the number of authorized shares of
Lockheed Martin common stock from 750 million to 1.5 billion. Also on February
26, 1998, the stockholders of Northrop Grumman approved the Merger Agreement
pursuant to which Northrop Grumman is to become a wholly-owned subsidiary of
Lockheed Martin.
On March 9, 1998, the Corporation announced that it had been informed by
the Department of Justice (DOJ) that the DOJ was fundamentally opposed to the
Merger. The Corporation also announced on that date that it had committed to the
DOJ not to close the transaction before April 24, 1998, and to develop and
submit a proposal to the DOJ by April 8, 1998 designed to address the DOJ's
antitrust concerns while preserving the expected benefits and efficiencies of
the transaction to the Corporation and its stockholders, customers, employees
and suppliers. On March 12, 1998, the DOJ informed the Corporation that it found
this commitment unacceptable and demanded that the Corporation agree to certain
substantial divestitures or the DOJ will proceed to court. The DOJ stated that
they expected a response by March 16, 1998.
The transaction will be accounted for using the purchase method of
accounting. Concurrent with the consummation of the Merger, the Corporation will
increase the amount of its one-year revolving credit facility from $1.5 billion
to $2.5 billion. The operations of Northrop Grumman are expected to be reported
in the Electronics, Information & Services, Aeronautics, and Energy and Other
segments.
================================================================================
Transaction Agreement with
General Electric Company
On November 3, 1997, the Corporation announced a definitive agreement with
General Electric Company (GE) under which Lockheed Martin would exchange the
stock of a newly formed subsidiary, LMT Sub, for all of the Lockheed Martin
Series A preferred stock held by GE and certain subsidiaries of GE (the GE
Transaction). The Series A preferred stock, which was originally issued to GE in
connection with the acquisition of GE's aerospace businesses in 1993, was
convertible into approximately 29 million shares of Lockheed Martin common stock
with a market value of approximately $2.8 billion at the date of the
announcement of the GE Transaction.
In accordance with the agreement, on November 17, 1997, Lockheed Martin
exchanged all of the outstanding capital stock of LMT Sub for all of the
outstanding Series A preferred stock held by GE and certain subsidiaries of GE.
LMT Sub was composed of two non-core commercial business units which contributed
approximately five percent
- --------
11
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations . Continued
of the Corporation's 1997 net sales, Lockheed Martin's investment in a
telecommunications partnership, and approximately $1.6 billion in cash. The cash
included in the exchange was initially financed through the issuance of
commercial paper. On November 20, 1997, $1.4 billion was refinanced pursuant to
a note, due November 17, 2002 and bearing interest at 6.04%, from Lockheed
Martin to LMT Sub. The remainder is expected to be refinanced with a note from
Lockheed Martin to LMT Sub on substantially similar terms following final
determination of the closing net worth of the businesses exchanged.
The GE Transaction was accounted for at fair value, and resulted in the
reduction of the Corporation's stockholders' equity by $2.8 billion and the
recognition of a tax-free gain of approximately $311 million, or $1.46 per
diluted share, during the fourth quarter. For purposes of determining net
earnings applicable to common stock used in the computation of earnings per
share, the excess of the fair value of the consideration transferred to GE
(approximately $2.8 billion) over the carrying value of the Series A preferred
stock ($1.0 billion) was treated as a deemed preferred stock dividend and
deducted from 1997 net earnings in accordance with the requirements of the
Emerging Issues Task Force's Issue D-42. This deemed dividend had a significant
impact on the earnings per share calculations, but did not impact reported 1997
net earnings. The effect of this deemed dividend decreased basic earnings per
share by $9.85, and was antidilutive in the calculation of diluted earnings per
share.
================================================================================
Other Acquisitions and Divestitures
In April 1996, the Corporation purchased all of the issued and outstanding
shares of common stock of Loral Corporation (Loral) for an aggregate
consideration of $38 per share in cash. The purchase involved a series of
transactions that resulted in (i) the distribution to stockholders of Loral,
immediately prior to the consummation of the purchase, of shares of capital
stock in Loral Space & Communications, Ltd. (Loral SpaceCom), a newly-formed
company, which now owns and manages substantially all of Loral's former space
and satellite telecommunications interests, and in which the Corporation
acquired shares of preferred stock that were convertible into 20 percent of
Loral SpaceCom's common stock on a diluted basis at the date of acquisition, and
(ii) the acquisition by the Corporation of Loral's defense electronics and
systems integration businesses (collectively, the Loral Transaction). With
regard to the Loral Transaction, the total purchase price paid, including
acquisition costs, was approximately $7.6 billion. The Loral Transaction was
accounted for using the purchase method of accounting. In connection with the
Loral Transaction, Loral changed its name to Lockheed Martin Tactical Systems,
Inc. (Tactical Systems), which became a wholly-owned subsidiary of the
Corporation. The operations of Tactical Systems have been included in the
results of operations of the Corporation from April 1, 1996. Effective June 30,
1997, Tactical Systems was merged with and into the Corporation.
In March 1997, the Corporation executed a definitive agreement valued at
approximately $525 million to reposition 10 non-core business units as a new
independent company, L-3 Communications Corporation, in which the Corporation
retained a 34.9 percent ownership interest at closing. These business units,
primarily composed of high-technology, product-oriented companies, contributed
approximately two percent of the Corporation's net sales during the three month
period ended March 31, 1997. The transaction, which closed on April 30, 1997
with an effective date of March 30, 1997, did not have a material impact on the
Corporation's earnings.
During the third quarter of 1996, the Corporation announced its intention
to distribute via an exchange offer its 81 percent interest in Martin Marietta
Materials, Inc. (Materials) to its stockholders (the Exchange Offer). Under the
terms of the Exchange Offer, the Corporation's stockholders were given the
opportunity to exchange each Lockheed Martin common share held for 4.72 common
shares of Materials on a tax-free basis. The Exchange Offer
- ----------
12
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
expired by its terms on October 18, 1996 and was oversubscribed. On October 23,
1996, approximately 7.9 million shares of the Corporation's common stock were
exchanged for the 37.35 million shares of Materials common stock held by the
Corporation. Upon the closing of this transaction, the Corporation had no
remaining ownership interest in Materials and had reduced its common shares
outstanding by approximately four percent. This fourth quarter 1996 exchange was
accounted for at fair value, resulting in the reduction of the Corporation's
stockholders' equity by $750 million and the recognition of a pretax gain of
$365 million.
In November 1996, the Corporation announced the proposed divestiture of two
of its business units, Armament Systems and Defense Systems, to General Dynamics
Corporation (General Dynamics). This transaction, which concluded with the
Corporation's receipt of $450 million in cash on January 2, 1997, had no pretax
effect on the results of operations for 1996 or 1997. At December 31, 1996, $450
million, representing the net assets of the two business units, was included in
other current assets.
On a combined basis, the Materials exchange and the Armament Systems and
Defense Systems divestiture noted above increased 1996 net earnings by $351
million, or $1.59 per diluted share.
================================================================================
Results of Operations
The Corporation's operating cycle is long-term and involves various types of
production contracts with 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 1997 were a record $28.1
billion. Net sales for the year were four percent greater than 1996 net sales,
which in turn were 18 percent greater than 1995 net sales. Sales increases for
1997 in the Space & Strategic Missiles, Aeronautics and Information & Services
segments, as well as the inclusion of the operations of Tactical Systems for a
full year, more than offset the reduction of sales due to divested operations.
The 1996 increase principally resulted from the inclusion of the operations of
Tactical Systems from April 1, 1996, which more than offset sales decreases in
the Aeronautics segment. The U.S. Government remained the Corporation's largest
customer, comprising 66 percent of the Corporation's net sales for 1997 compared
to 70 percent in 1996 and 69 percent in 1995.
The Corporation's operating profit (earnings before interest and taxes) was
approximately $2.8 billion in 1997, a two percent increase from the $2.7 billion
reported in 1996. Operating profit for 1996 was significantly greater than the
$1.4 billion reported in 1995. However, the reported amounts for each of the
three years presented included the financial impacts of various nonrecurring and
unusual items, the details of which are described below. Excluding the effects
of these nonrecurring and unusual items for each year, operating profit for 1997
would have been approximately nine percent greater than the 1996 amount, which
in turn would have been approximately 29 percent greater than the 1995 amount.
For 1997 compared to 1996, increases in operating profits at the Space &
Strategic Missiles and Aeronautics segments more than offset a reduction in
operating profit at the Information & Services segment. A significant portion of
the 1996 increase resulted from the inclusion of the operations of Tactical
Systems. Additional growth in
================================================================================
- ------------------------------------------
Net Sales
In millions
[BAR GRAPH APPEARS HERE]
(a) Includes the effects of the business combination with Loral Corporation
since April 1996.
- ----------
13
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations . Continued
operating profit in 1996 resulted from increases in the Space & Strategic
Missiles and Electronics segments, slightly offset by declines in the
Aeronautics segment.
During the fourth quarter of 1997, in addition to recording the tax-free
gain resulting from the GE Transaction, the Corporation recorded nonrecurring
and unusual pretax charges, net of state income tax benefits, totaling $457
million. These charges were identified in connection with the Corporation's
review, which concluded in the fourth quarter, of non-strategic lines of
business, non-core investments and certain other assets. Approximately $200
million of the pretax charges reflected the estimated effects of exiting
non-strategic lines of business, including amounts related to the fixed price
systems development line of business in the area of children and family
services, and related to increases in estimated exposures relative to the
environmental remediation lines of business initially identified in 1996 and for
which initial estimates of exposure were provided in the fourth quarter 1996
charges. These increases in estimated exposures were based on more current
information, including deterioration in a partner's financial condition as
evidenced by the partner seeking protection under the bankruptcy laws. The
remaining charges reflected impairments in the values of various non-core
investments and certain other assets in keeping with the Corporation's continued
focus on core operations.
Operating profit in 1996 included the gain on the Materials exchange
discussed previously. In addition, during the fourth quarter of 1996, the
Corporation recorded nonrecurring pretax charges, net of state income tax
benefits, of $307 million. Approximately one-half of the charges reflected the
estimated effects of terminating a relationship formed to provide environmental
remediation services to government and commercial customers worldwide, and the
initial estimated effects related to management's decision to exit a certain
environmental remediation line of business. Charges of approximately $85 million
were identified in connection with an evaluation of the Corporation's future
strategic focus, and reflected impairments in the values of non-core investments
and certain other assets which were other than temporary in nature. The
remaining charges of approximately $75 million were related to costs for
facility closings and transfers of programs resulting from management's decision
to include the operations of Tactical Systems in the Electronics, Information &
Services, and Energy and Other segments.
During the first quarter of 1995, the Corporation recorded a pretax charge
of $165 million for merger related expenses in connection with the formation of
Lockheed Martin. During the second quarter of 1995, the Corporation recorded a
pretax charge of $525 million in conjunction with a corporate-wide consolidation
plan under which the Corporation would close certain facilities and laboratories
and eliminate duplicative field offices in the U.S. and abroad, eliminating up
to approximately 12,000 positions. This charge represented the portion of the
accrued costs and net realizable value adjustments that were not probable of
recovery.
Reported net earnings for 1997 were $1.30 billion, which was approximately
three percent lower than the net earnings reported in 1996. Reported 1996 net
earnings of
================================================================================
- ------------------------------------------
Net Earnings
In millions
[BAR GRAPH APPEARS HERE]
(a)Includes the effects of the business combination with Loral Corporation since
April 1996.
(b) Excluding the effects of the gain on the transaction with GE, and the
charges relating to certain lines of business in the areas of children and
family services systems development and environmental remediation, and
impairments in values for certain assets, 1997 net earnings would have been
$1,292 million.
(c) Excluding the effects of the Materials exchange, the divestiture of two
business units, and the charges associated with the environmental remediation
business, impairments in values for certain assets, and other costs, 1996 net
earnings would have been $1,205 million.
(d) Excluding the effects of the merger related and consolidation charges, 1995
net earnings would have been $1,118 million.
- ----------
14
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
$1.35 billion were significantly greater than the 1995 net earnings of $682
million. The 1997 reported amount includes the Corporation's tax-free gain of
$311 million, or $1.46 per diluted share, resulting from the GE Transaction, and
the after-tax effects of the nonrecurring and unusual charges described above,
which decreased net earnings by $303 million, or $1.42 per diluted share. The
1996 reported amounts include the after-tax effects of the Materials exchange
and the provision for the after-tax effect of the Corporation's divestiture of
its Armament Systems and Defense Systems business units. On a combined basis,
the Materials exchange and the divestiture noted above increased 1996 net
earnings by $351 million, or $1.59 per diluted share. The 1996 reported amounts
also include the after-tax impact of the nonrecurring charges described above,
which decreased net earnings by $209 million, or $.94 per diluted share. The
1995 reported amounts include the after-tax effects of the merger related and
consolidation charges identified above of $436 million, or $1.97 per diluted
share. Excluding the effects of these nonrecurring and unusual items, net
earnings for 1997 would have been slightly more than $1.29 billion, representing
a seven percent increase from the adjusted 1996 net earnings of approximately
$1.20 billion. The adjusted 1996 net earnings amount would have been eight
percent higher than the adjusted 1995 net earnings amount of approximately $1.12
billion.
All earnings per share amounts have been computed in accordance with
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." Prior year amounts computed under the new standard do not differ
significantly from amounts computed under previous guidance. For purposes of
determining net earnings applicable to common stock used in the computation of
earnings per share, the excess fair value of assets transferred to GE over the
carrying value of the preferred stock (approximately $1.8 billion) was treated
as a deemed preferred stock dividend and deducted from 1997 net earnings in
accordance with the requirements of the Emerging Issues Task Force's Issue D-42.
This deemed dividend had a significant impact on the earnings per share
calculations, but did not impact reported 1997 net earnings. The effect of this
deemed dividend decreased basic earnings per share by $9.85 and diluted earnings
per share by $8.55. Accordingly, the 1997 diluted loss per share is not
presented on the Consolidated Statement of Earnings as the calculated amount was
antidilutive as compared to the calculated basic loss per share of $3.12. Basic
and diluted earnings per share amounts reported were $6.80 and $6.09 for 1996,
and $3.28 and $3.09 for 1995, respectively.
The Corporation's reported 1997, 1996, and 1995 diluted earnings per share
before the deemed preferred stock dividend were $6.09, $6.09, and $3.09,
respectively. Excluding the effects of the nonrecurring and unusual items
described above, diluted earnings per share before the deemed preferred stock
dividend for 1997, 1996, and 1995 would have been $6.05, $5.44, and $5.06,
respectively.
The Corporation's debt to capitalization ratio increased from 63 percent at
December 31, 1996 to just under 70 percent at December 31, 1997. Total debt
(including short-term
================================================================================
- -------------------------------------------------
Diluted Earnings Per Share Before
Deemed Preferred Stock Dividend
In dollars
[BAR GRAPH APPEARS HERE]
(a) Includes the effects of the business combination with Loral Corporation
since April 1996.
(b) Excludes the effects of a deemed preferred stock dividend in determining net
earnings applicable to common stock in the computation of earnings per share
which resulted from the GE Transaction. The effect of this deemed dividend was
to decrease basic earnings per share by $9.85, and was antidilutive relative to
diluted earnings per share.
(c) Excluding the effects of the gain on the transaction with GE, and the
charges related to certain lines of business in the areas of children and family
services systems development and environmental remediation, and impairments in
values for certain assets, 1997 diluted earnings per share would have been
$6.05.
(d) Excluding the effects of the Materials exchange, the divestiture of two
business units, and the charges associated with the environmental remediation
business, impairments in values for certain assets, and other costs, 1996
diluted earnings per share would have been $5.44.
(e) Excluding the effects of the merger related and consolidation charges, 1995
diluted earnings per share would have been $5.06.
- ----------
15
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations . Continued
borrowings) at December 31, 1997 increased to $11.9 billion from $11.5 billion
at December 31, 1996 while stockholders' equity decreased to $5.2 billion at
December 31, 1997 from nearly $6.9 billion at December 31, 1996. These changes
principally resulted from the increase in long-term debt and the redemption of
the Series A preferred stock in connection with the GE Transaction. The
Corporation paid common dividends of $299 million in 1997, or $1.60 per common
share.
================================================================================
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 worldwide political and economic developments have
strongly affected these markets, requiring significant adaptation by market
participants.
Reductions in the Federal defense budget for research, development, test
and evaluation, and procurement over the last several years have caused
continued pressures on participants in the aerospace and defense industry to
consolidate in order to maintain critical mass and achieve production economies.
The Corporation has been at the forefront of the consolidation within the
industry, as evidenced by the acquisitions of the aerospace businesses of GE,
the Fort Worth and Space Systems divisions of General Dynamics, the defense
electronics and systems integration businesses of Loral, and the pending
acquisition of Northrop Grumman. These transactions, combined with other
strategic acquisitions and alliances, have broadened the Corporation's business
portfolio, created opportunities for increased efficiency and cost
competitiveness, improved access to new markets and reduced the impact of
exposure to specific defense budget reductions.
The pending acquisition of Northrop Grumman is the latest action taken by
the Corporation to solidify its position in the aerospace and defense industry.
Northrop Grumman operates principally in the electronics, aircraft and
information technology segments of the defense industry as a designer, systems
integrator and manufacturer of military surveillance and combat aircraft,
defense electronics and systems, airspace management systems, information
systems, marine systems, precision weapons, space systems, and commercial and
military aerostructures. Northrop Grumman itself has been an active participant
in the consolidation of the industry through its acquisitions of Vought
Corporation, the defense electronics businesses of Westinghouse Corporation, and
Logicon Corporation. The acquisition of Northrop Grumman, if consummated, will
strengthen the Corporation's business portfolio in several key areas and broaden
its product lines and range of technologies.
In addition to the acquisition actions noted above, the Corporation's
management has been active in identifying and divesting its less well-positioned
and non-core businesses. Such actions include the exchange of the remaining
ownership interest in Materials, the divestiture of the Armament Systems and
Defense Systems businesses to General Dynamics, the repositioning of non-core
businesses as L-3 Communications Corporation, and the exchange of non-core
businesses and cash for GE's preferred stock holdings in the Corporation. In
addition, the Corporation transferred its Space Shuttle processing operations to
United Space Alliance (USA), a joint venture with The Boeing Company which has
become NASA's prime Space Shuttle operations contractor. These actions have
helped the
================================================================================
- ------------------------------------------------
Dividends Per Common Share
In dollars
[BAR GRAPH APPEARS HERE]
- ----------
16
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
Corporation's management focus its attention on core competencies. The
Corporation's management and Board of Directors will continue to periodically
review the Corporation's strategic plans, which include the possibility of
further acquisitions and divestitures, joint ventures and other new business
relationships with aerospace and defense companies.
Recently, the U.S. Department of Defense delivered to Congress a proposed
budget for fiscal year 1999 that increases weapons procurement by eight percent
over last year's level, ending a 12-year period of decline. Also, the Department
of Defense proposed a five-year budget that would ultimately exceed the $60
billion target in procurement endorsed in the government's Quadrennial Defense
Review. This target is considered the minimum necessary to adequately modernize
aging ships, aircraft and other equipment. The potential end to the decline in
defense budgets, combined with a trend toward outsourcing of information
technology functions by federal, state, and local governments and an increase in
civil and commercial space activity, may result in an improved industry market
environment in future periods.
The Corporation continued to achieve an excellent mission success record
during 1997, with a 96 percent success rating out of 640 events such as test
flights, rocket firings, missile launches and satellite deployments. In the new
business competition arena, the Corporation won more than two-thirds of its
competitions based on dollars bid, which was above its 1996 performance. To
date, the Corporation's major programs generally have been well supported, 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 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 period of time. 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 the Corporation's business
or its consolidated results of operations or financial position.
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.
Progress has been made in expanding the Corporation's presence in related
commercial and non-defense markets, most notably in space and telecommunications
activities, information management and systems integration. Although these lines
of business are not dependent on defense budgets, they share many of the risks
associated with the Corporation's primary businesses, as well as others unique
to the commercial marketplace. Such risks include development of competing
products, technological feasibility, product obsolescence and the risks inherent
in conducting business internationally. The Corporation has advanced funds to a
foreign subcontractor for the manufacture of launch vehicles and related launch
services. At December 31, 1997, such advances totaled approximately $450 million
and were included in inventories.
- ----------
17
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations . Continued
================================================================================
Discussion of Business Segments
The Corporation's operations are divided into five business segments: Space &
Strategic Missiles; Electronics; Information & Services; Aeronautics; and Energy
and Other. Certain amounts for prior years have been reclassified to conform
with the 1997 presentation.
The following table displays net sales for the Lockheed Martin business
segments for each of the three years in the period ended December 31, 1997,
which correspond to the segment information presented in Note 17 to the
consolidated financial statements.
(In millions) 1997 1996 1995
================================================================================
Net Sales
Space & Strategic Missiles $ 8,303 $ 7,904 $ 7,813
Electronics 7,069 6,675 3,357
Information & Services 6,468 5,893 4,173
Aeronautics 6,045 5,596 6,617
Energy and Other 184 807 893
- --------------------------------------------------------------------------------
$28,069 $26,875 $22,853
================================================================================
Operating profit by industry segment for each of the three years in the
period ended December 31, 1997, including the effects of the nonrecurring and
unusual items discussed previously, is displayed in the table below. This
information also corresponds to the segment information presented in Note 17 to
the consolidated financial statements.
(In millions) 1997 1996 1995
================================================================================
Operating Profit
Space & Strategic Missiles $1,053 $ 973 $ 463
Electronics 594 673 224
Information & Services 163 290 267
Aeronautics 612 441 394
Energy and Other 357 356 29
- --------------------------------------------------------------------------------
$2,779 $2,733 $1,377
================================================================================
The following table displays the pretax impact of the nonrecurring and
unusual items discussed earlier as reflected in each segment's operating profit
for each of the three years presented.
(In millions) 1997 1996 1995
================================================================================
Nonrecurring and Unusual Items:
Consolidated Effects
Gain on GE Transaction $ 311 $ -- $ --
Gain on Materials exchange -- 365 --
Nonrecurring and unusual charges (457) (307) --
Merger related and
consolidation expenses -- -- (690)
- --------------------------------------------------------------------------------
$ (146) $ 58 $(690)
- --------------------------------------------------------------------------------
Segment Effects
Space & Strategic Missiles $ (87) $ (25) $(263)
Electronics (69) -- (93)
Information & Services (163) (86) (24)
Aeronautics (44) (46) (138)
Energy and Other 217 215 (172)
- --------------------------------------------------------------------------------
$ (146) $ 58 $(690)
================================================================================
In an effort to make the following discussion of significant operating
results of each business segment more understandable, the impact of these
nonrecurring and unusual items discussed earlier have been excluded.
================================================================================
Space & Strategic Missiles
Net sales of the Space & Strategic Missiles segment increased by five percent in
1997 compared to 1996 and by one percent in 1996 compared to 1995. The 1997
increase was the result of greater Proton D-1-e launch services volume as well
as an increase in revenue from commercial satellite programs. Increases in
commercial satellite systems volume and classified program activities in 1996
compared to 1995 were largely offset by the timing of Atlas II and Atlas E
launches (seven successful launches in 1996 versus 12 in 1995) and from reduced
volume on the Trident fleet ballistic missile program.
Operating profit for the segment increased by 14 percent in 1997 compared
to 1996 and by 37 percent in 1996 compared to 1995. The 1997 increase resulted
from an increase in the profitability of Atlas launches combined with
- ----------
18
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
the increase in Proton D-1-e launch activity mentioned above. The increase in
1996 was attributable to the increases in commercial satellite volume and
classified program activities discussed above, margin expansion from improved
cost performance on the Corporation's Titan and Atlas launch vehicle programs
and timing of the recognition of award and incentive fees on certain space
programs.
================================================================================
Electronics
Net sales of the Electronics segment increased by six percent in 1997 compared
to 1996 after having doubled in 1996 compared to 1995. The 1997 net sales amount
reflects the inclusion of a full year of the operations of certain Tactical
Systems companies versus nine months in 1996. However, this increase is offset
by the divestiture of the Corporation's Armament Systems and Defense Systems
businesses to General Dynamics at the beginning of 1997. Adjusting the results
of operations to reflect these companies on a comparable basis, net sales in
1997 would have decreased by two percent compared to 1996. The 1996 net sales
amount reflected the inclusion of the operations of certain Tactical Systems
companies since April 1, 1996. Excluding the operations of the Tactical Systems
companies, 1996 net sales for the segment would have increased by 12 percent
compared to 1995. This increase was principally attributable to volume increases
in a variety of government and commercial electronics programs and the inclusion
of the operations of the aircraft controls business formerly owned by GE, which
was acquired in the fourth quarter of 1995.
Operating profit for the segment in 1997 was comparable to 1996 after
having increased by 112 percent in 1996 compared to 1995. As was the case with
net sales, 1997 operating profit reflects the inclusion of a full year of
operations of certain Tactical Systems companies and does not include the
operations of the businesses divested to General Dynamics, while the 1996
operating profit reflects the inclusion of the operations of the Tactical
Systems companies since April 1, 1996. Adjusting the results of operations to
reflect the Tactical Systems companies and the businesses divested to General
Dynamics on a comparable basis, operating profit for the segment would have
decreased by seven percent in 1997 compared to 1996 and would have increased by
28 percent in 1996 compared to 1995. The net decrease in 1997 was primarily the
result of investments in new programs, while the 1996 increase was principally
the result of the production volume increases discussed above as well as the
inclusion in 1995 of contract charges related to the LANTIRN program close-out.
================================================================================
Information & Services
Net sales of the Information & Services segment increased by 10 percent in 1997
compared to 1996, and by 41 percent in 1996 compared to 1995. The 1997 net sales
increase reflected an increase in sales volume related to commercial products,
systems integration programs and information systems programs. The inclusion of
a full year of the operations of certain Tactical Systems companies in 1997
versus nine months in 1996 was offset by the effect of the absence of the L-3
operations and the Corporation's Space Shuttle processing operations. The 1996
increase is principally due to the inclusion of the operations of certain
Tactical Systems companies since April 1, 1996. Excluding the operations of
those businesses, 1996 net sales would have been comparable to 1995 levels.
Increases in commercial product distribution activities in 1996 were largely
offset by the transfer of the Corporation's contracts for Space Shuttle
processing operations to USA as mentioned previously. The operations of the
Access Graphics business unit, which was divested in the GE Transaction,
generated approximately 19 percent of the segment's net sales in 1997.
Operating profit for the segment decreased by 13 percent in 1997 compared
to 1996 after having increased by 29 percent in 1996 compared to 1995. However,
adjusting the results of operations to reflect the companies divested in the L-3
transaction and the Tactical Systems companies on a comparable basis, operating
profit in 1997 would have decreased by six percent compared to 1996 while
operating profit in 1996 would have decreased by 30 percent compared
- ----------
19
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations . Continued
to 1995. The 1997 decrease was caused primarily by unfavorable performance in
the operations of a majority-owned subsidiary and by charges recorded in the
Corporation's graphics technology line of business. The 1996 decrease from 1995
was principally the result of charges taken in 1996 related to certain
information systems contracts and accounts, and from losses experienced at two
of the Corporation's commercial subsidiaries.
================================================================================
Aeronautics
Net sales of the Aeronautics segment increased by eight percent in 1997 compared
to 1996 after decreasing by 15 percent in 1996 compared to 1995. The 1997
increase principally resulted from increased deliveries of F-16 fighter
aircraft. The net sales decrease in 1996 was principally due to fewer deliveries
of both F-16 fighter and C-130 airlift aircraft.
Operating profit increased by 35 percent in 1997 compared to 1996 after
decreasing by eight percent in 1996 compared to 1995. The increase in 1997
resulted from the greater number of F-16 aircraft deliveries previously
mentioned, completion of significant flight performance milestone events and
margin improvements on the C-130 program, and increased margins in the
manufacture of thrust reversers. The Corporation's thrust reverser business was
divested in the GE transaction during the fourth quarter of 1997. The 1996
operating profit decrease compared to 1995 was principally the result of the
volume decreases discussed previously.
================================================================================
Energy and Other
Net sales of this segment decreased significantly in 1997 compared to 1996, and
by 10 percent in 1996 compared to 1995. The net sales decreases for both periods
were principally the result of the divestiture of Materials during the fourth
quarter of 1996.
Operating profit for this segment was relatively unchanged in 1997 compared
to 1996 after having decreased by 30 percent in 1996 compared to 1995.
Improvement in the Corporation's performance on certain environmental programs
coupled with gains related to dispositions of miscellaneous Corporate
investments essentially offset the absence of the results of operations of
Materials which was divested in 1996. The net decrease in 1996 compared to 1995
principally resulted from losses on certain environmental programs.
================================================================================
Backlog
Total negotiated backlog of $47.1 billion at December 31, 1997 included both
unfilled firm orders for the Corporation's products for which funding has been
authorized and appropriated by the customer (Congress, in the case of U.S.
Government agencies) 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) 1997 1996 1995
================================================================================
Backlog
Space & Strategic Missiles $16,834 $19,463 $18,066
Electronics 9,849 10,650 5,271
Information & Services 6,674 6,718 3,005
Aeronautics 13,456 13,408 14,775
Energy and Other 246 167 8
- --------------------------------------------------------------------------------
$47,059 $50,406 $41,125
================================================================================
- -----------------------------------------------------
Negotiated Backlog
In millions
[BAR GRAPH APPEARS HERE]
(a) Includes the effects of the business combination with Loral Corporation
since April 1996.
- ----------
20
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
Total Space & Strategic Missiles backlog decreased by 14 percent in 1997
compared to 1996 after having increased by eight percent in 1996 compared to
1995. The decrease in 1997 resulted principally from a reduction in classified
backlog and a finalization of the Corporation's backlog recognition policy for
the SBIRS program. The increase in 1996 occurred principally from new orders
received for Titan, Atlas and Proton launch vehicle services and the SBIRS
program.
In the Electronics segment, total backlog decreased by eight percent in
1997 compared to 1996 after more than doubling in 1996 compared to 1995. The
1997 decrease was caused by the absence of backlog related to the businesses
that were divested to General Dynamics during 1997. The 1996 increase was due to
the addition of the backlog of the Tactical Systems companies acquired in 1996.
Excluding the acquired backlog of the Tactical Systems companies, backlog in
1996 for the segment would have decreased by three percent compared to 1995.
This decrease was principally the result of the net effect of close-outs of
completed government electronics contracts during the year.
Total Information & Services backlog decreased slightly in 1997 compared to
1996, and increased by 124 percent in 1996 compared to 1995. The decrease in
1997 resulted from the absence of backlog related to the companies that were
divested to L-3 during 1997. If the 1996 end of year backlog of L-3 is excluded,
backlog in 1997 would have increased by eight percent compared to 1996,
principally because of new orders generated in a number of the segment's
information technology businesses. The significant 1996 increase was due to the
addition of the backlog of the Tactical Systems companies acquired in 1996.
Excluding the acquired backlog of the Tactical Systems companies, backlog in
1996 for the segment would have increased by 25 percent compared to 1995. This
increase was principally the result of new information management services
contract awards.
In the Aeronautics segment, total backlog increased slightly in 1997
compared to 1996 and decreased by nine percent in 1996 compared to 1995. In
1997, the segment's C-130 airlift aircraft backlog increased due to the receipt
of new orders. These new orders offset a reduction in F-16 fighter aircraft
backlog and the divestiture of the segment's thrust reverser program backlog to
GE during 1997. In 1996, F-16 aircraft backlog decreased, primarily reflecting
deliveries of aircraft exceeding new orders. Decreases in backlog for the F-22
air-superiority fighter aircraft program, currently in the development phase,
also contributed to the 1996 decrease.
================================================================================
Liquidity and Cash Flows
Cash provided by operating activities was approximately $1.2 billion in 1997,
compared with $1.6 billion and $1.3 billion of cash provided in 1996 and 1995,
respectively. As in the 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. Cash provided by operating activities also includes the
effect of merger related and consolidation payments of $68 million in 1997, $244
million in 1996, and $208 million in 1995.
================================================================================
- ----------------------------------------------
Net Cash Provided by Operating
Activities
In millions
[BAR GRAPH APPEARS HERE]
(a) Includes the effects of the business combination with Loral Corporation
since April 1996.
- ----------
21
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations . Continued
Cash provided by investing activities was $185 million in 1997, compared
with $8.0 billion and $699 million used for investing activities in 1996 and
1995, respectively. The disposition of the Armament Systems and Defense Systems
businesses to General Dynamics and divestiture of the L-3 businesses more than
offset additions to property, plant and equipment in 1997. The Corporation used
approximately $7.3 billion of cash in 1996 to finance the Loral Transaction.
Property, plant and equipment additions in 1996 were 47 percent higher compared
to 1995, reflecting the inclusion of the capital spending activity of the
Tactical Systems business units as well as approximately $150 million related to
the Lockheed Martin integration and consolidation program. The Corporation
continually monitors its capital spending in relation to current and anticipated
business needs. Facilities are added, consolidated, modernized or disposed of as
business circumstances dictate.
Approximately $1.4 billion of cash was used for financing activities during
1997, compared with cash provided by financing activities of $5.7 billion in
1996 and cash used for financing activities of $579 million in 1995. During
1997, the Corporation decreased its short-term borrowings significantly, while
long-term debt increased primarily due to the financing of the GE Transaction,
which resulted in the redemption of the Corporation's preferred stock.
Approximately $7.6 billion of indebtedness was incurred in 1996 in connection
with the consummation of the Loral Transaction. Approximately $876 million of
long-term debt will mature in 1998.
The Corporation receives advances on certain contracts and uses them to
finance the inventories required to complete the contracted work. Approximately
$2.8 billion of advances related to work in process at December 31, 1997 have
been received from customers and were recorded as reductions of inventories in
the Corporation's consolidated balance sheet. In addition, advances of
approximately $3.6 billion at the end of 1997 have been recognized as current
liabilities, mostly related to contracts with foreign governments and commercial
customers.
================================================================================
Capital Structure and Resources
Total debt, including short-term borrowings, increased to approximately $11.9
billion at the end of 1997 from approximately $11.5 billion at the end of 1996.
The net decrease in short-term borrowings of $866 million and the repayment of
$219 million of long-term debt were more than offset by borrowings incurred to
finance the GE Transaction. Most of the Corporation's long-term debt is in the
form of publicly issued, fixed-rate Notes and Debentures. Stockholders' equity
decreased to approximately $5.2 billion at December 31, 1997 from a balance of
nearly $6.9 billion one year ago. Stockholders' equity activity for 1997
included a reduction of approximately $2.8 billion in connection with the
redemption of the preferred stock previously held by GE. Consequently, the
Corporation's total debt to capitalization ratio (including short-term
borrowings) increased from 63 percent at December 31, 1996 to nearly 70 percent
at December 31, 1997.
At the end of 1997, the Corporation had a 4-year revolving credit facility
in the amount of $3.5 billion and a one-year revolving credit facility in the
amount of $1.5 billion (collectively, the Credit Facilities). No borrowings were
outstanding under the Credit Facilities at December 31, 1997. However, the
Credit Facilities support commercial paper borrowings of approximately $1.5
billion outstanding at December 31, 1997. Of this amount, $1.0 billion has been
classified as long-term debt in the Corporation's consolidated balance sheet
based on management's ability and intention to maintain this amount of debt
outstanding for at least one year.
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, 1997, the
Corporation had contingent liabilities on outstanding letters of credit,
guarantees and other arrangements aggregating approximately $1.2 billion.
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
- ----------
22
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
operating, consolidation and debt service requirements, discretionary investment
needs and capital expenditures of the Corporation. Consistent with the
Corporation's desire to generate cash to reduce debt, management anticipates
that, subject to prevailing financial, market and economic conditions, the
Corporation may divest other non-core businesses or surplus properties.
================================================================================
Environmental Matters
As more fully described in Note 16 to the consolidated financial statements, the
Corporation entered into a consent decree with the U.S. Environmental Protection
Agency (EPA) relating to certain property in Burbank, California, which
obligated the Corporation to design and construct facilities to monitor, extract
and treat groundwater, and to operate and maintain such facilities for
approximately eight years. A second consent decree is being finalized which will
obligate the Corporation to fund the continued operation and maintenance of
these facilities through the year 2018. The Corporation has also been operating
under a cleanup and abatement order from the California Regional Water Quality
Control Board (the Regional Board) affecting its Burbank facilities. This order
requires site assessment and action to abate groundwater contamination by a
combination of groundwater and soil cleanup and treatment. Anticipated future
costs for these projects are estimated to approximate $170 million.
The Corporation is responding to three administrative orders issued by the
Regional Board in connection with the Corporation's former Lockheed Propulsion
Company facilities in Redlands, California. Under the orders, the Corporation is
investigating the impact and potential remediation of regional groundwater
contamination by perchlorates and chlorinated solvents. The Regional Board has
approved the Corporation's plan to maintain public water supplies with respect
to chlorinated solvents during this work, and the Corporation is negotiating
with local water purveyors to implement this plan, as well as to address water
supply concerns relative to perchlorate contamination. The Corporation estimates
that expenditures required to implement work currently approved will be
approximately $110 million.
The Corporation records appropriate financial statement accruals for
environmental issues in the period in which it is probable that a liability has
been incurred and the amounts can be reasonably estimated. In addition to the
matters with respect to the Burbank property and the Redlands property described
above, the Corporation has accrued approximately $260 million at December 31,
1997 for other matters in which an estimate of financial exposure could be
determined. Management believes, however, that it is unlikely that any
additional liability the Corporation may incur for known environmental issues
would have a material adverse effect on its consolidated results of operations
or financial position.
The Corporation is a party to various 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 or
by a state agency. In the event the Corporation is ultimately found to 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 clean-ups 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,
- ----------
23
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations . Continued
continually evolving governmental 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 matters. The Corporation is currently 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.
In 1994, the Corporation was awarded a $180 million fixed price contract by
the U.S. Department of Energy (DOE) for the Phase II design, construction and
limited test of remediation facilities, and the Phase III full remediation of
waste found in Pit 9, located on the Idaho National Engineering and
Environmental Laboratory reservation. The Corporation has incurred significant
unanticipated costs and scheduling issues due to complex technical and
contractual matters which threaten the viability of the overall Pit 9 program.
Management completed its investigation to identify and quantify the overall
effect of these matters, and summarized its findings in a request for equitable
adjustment (REA) which was delivered to the DOE on March 31, 1997. The
provisions of the REA include, but are not limited to, the recovery of a portion
of unanticipated costs incurred by the Corporation and the restructuring of the
contract to provide for a more equitable sharing of the risks associated with
the Pit 9 project. To better focus the Corporation's management resources on
resolving these issues, the management and reporting structure of the Pit 9
program were changed in September 1997; however, the Corporation has been
unsuccessful in reaching any agreements with the DOE on cost recovery or other
contract restructuring matters. As a result, the Corporation has reduced work
activities at the Pit 9 site, is awaiting technical direction from the DOE, and
is in the process of preparing a certifiable claim.
On February 27, 1998, the Corporation received a cure notice alleging that
certain actions taken by the Corporation are conditions endangering performance
of the Pit 9 contract. The notice advised that, unless these conditions are
cured within 30 days, the contract may be terminated for default. The
Corporation believes that termination for default is neither permissible under
the Pit 9 contract nor warranted under the circumstances and is preparing its
response.
================================================================================
Other Matters
The Corporation is nearing completion of its assessments of the computer
systems affected by the Year 2000 issue, and completion of the development of
plans to resolve the issues identified in the assessments. These plans provide
for systems to be Year 2000 compliant by the end of 1999. Based on information
currently available from the work performed, management does not expect that the
amounts to be expensed for Year 2000 activities over the next two years will
have a material impact on the Corporation's consolidated results of operations
or financial position.
The Corporation uses forward exchange contracts to manage its exposure to
fluctuations in foreign exchange rates. These contracts are designated as
qualifying hedges of firm commitments or specific anticipated transactions, and
related gains and losses on the contracts are recognized in income when the
hedged transaction occurs. At December 31, 1997, the amounts of forward exchange
contracts outstanding, as well as the amounts of gains and losses recorded
during the year, were not material. The Corporation does not hold or issue
derivative financial instruments for trading purposes.
- ----------
24
<PAGE>
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 /s/ Todd J. Kallman
Marcus C. Bennett Todd J. Kallman
Executive Vice President and Vice President and Controller
Chief Financial Officer
- ----------
25
<PAGE>
Lockheed Martin Corporation
================================================================================
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, 1997 and 1996, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Washington, D.C.
January 19, 1998, except for Note 2 and
the next to the last paragraph of Note 16,
as to which the date is March 12, 1998
- ----------
26
<PAGE>
Lockheed Martin Corporation
================================================================================
Consolidated Statement of Earnings
Year ended December 31,
(In millions, except per share data) 1997 1996 1995
================================================================================
Net sales $28,069 $26,875 $22,853
Costs and expenses:
Cost of sales 25,772 24,594 20,881
Merger related and consolidation expenses -- -- 690
- --------------------------------------------------------------------------------
Earnings from operations 2,297 2,281 1,282
Other income and expenses, net 482 452 95
- --------------------------------------------------------------------------------
2,779 2,733 1,377
Interest expense 842 700 288
- --------------------------------------------------------------------------------
Earnings before income taxes 1,937 2,033 1,089
Income tax expense 637 686 407
- --------------------------------------------------------------------------------
Net earnings $ 1,300 $ 1,347 $ 682
================================================================================
Basic earnings (loss) per common share:*
Before deemed preferred stock dividend $ 6.73 $ 6.80 $ 3.28
Deemed preferred stock dividend (9.85) -- --
- --------------------------------------------------------------------------------
(Loss) earnings per share $ (3.12) $ 6.80 $ 3.28
================================================================================
Diluted earnings (loss) per common share:*
Before deemed preferred stock dividend $ 6.09 $ 6.09 $ 3.09
Deemed preferred stock dividend (8.55) -- --
- --------------------------------------------------------------------------------
(Loss) earnings per share ** $ 6.09 $ 3.09
================================================================================
* As more fully described in Notes 3 and 6, in 1997 the Corporation reacquired
all of its outstanding Series A preferred stock resulting in a deemed
dividend of $1,826 million. For purposes of computing net earnings applicable
to common stock, the deemed preferred stock dividend was deducted from 1997
net earnings.
**Antidilutive.
See accompanying Notes to Consolidated Financial Statements.
- ----------
27
<PAGE>
Lockheed Martin Corporation
================================================================================
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
(In millions) 1997 1996 1995
===========================================================================================
<S> <C> <C> <C>
Operating Activities
Net earnings $ 1,300 $ 1,347 $ 682
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Merger related and consolidation--expenses -- -- 690
--payments (68) (244) (208)
Depreciation and amortization 606 732 605
Amortization of intangible assets 446 402 230
Deferred federal income taxes 155 (251) (116)
GE Transaction (311) -- --
Materials transaction -- (365) --
Changes in operating assets and liabilities:
Receivables (572) (328) (394)
Inventories (687) (125) 430
Customer advances and amounts in excess
of costs incurred 1,048 544 (294)
Salaries, benefits and payroll taxes 53 265 (132)
Income taxes (560) (158) 206
Other (202) (183) (407)
- -------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,208 1,636 1,292
- -------------------------------------------------------------------------------------------
Investing Activities
Additions to properties, net of purchased operations (750) (737) (500)
Loral Transaction -- (7,344) --
Divestiture of L-3 companies 464 -- --
Divestiture of Armament Systems and Defense Systems 450 -- --
Other acquisition, investment and divestiture activities (24) (35) (294)
Other 45 87 95
- -------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 185 (8,029) (699)
- -------------------------------------------------------------------------------------------
Financing Activities
Net (decrease) increase in short-term borrowings (866) 1,110 (14)
Increases in long-term debt 1,505 7,000 125
Repayments and extinguishments of long-term debt (219) (2,105) (287)
Issuances of common stock 110 97 61
Purchases of common stock -- -- (150)
Dividends on common stock (299) (302) (254)
Dividends on preferred stock (53) (60) (60)
Redemption of preferred stock (1,571) -- --
- -------------------------------------------------------------------------------------------
Net cash (used for) provided by financing activities (1,393) 5,740 (579)
- -------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents -- (653) 14
Cash and cash equivalents at beginning of year -- 653 639
- -------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ -- $ -- $ 653
===========================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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28
<PAGE>
Lockheed Martin Corporation
================================================================================
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31,
(In millions) 1997 1996
=====================================================================================
<S> <C> <C>
Assets
Current assets:
Receivables $ 5,009 $ 4,999
Inventories 3,144 2,953
Deferred income taxes 1,256 1,356
Other current assets 696 1,038
- -------------------------------------------------------------------------------------
Total current assets 10,105 10,346
Property, plant and equipment 3,669 3,721
Intangible assets related to contracts and programs acquired 1,566 1,767
Cost in excess of net assets acquired 9,856 10,394
Other assets 3,165 3,312
- -------------------------------------------------------------------------------------
$28,361 $29,540
=====================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,234 $ 1,294
Customer advances and amounts in excess of costs incurred 3,644 2,600
Salaries, benefits and payroll taxes 924 991
Income taxes 364 925
Short-term borrowings 494 1,110
Current maturities of long-term debt 876 180
Other current liabilities 1,653 1,572
- -------------------------------------------------------------------------------------
Total current liabilities 9,189 8,672
Long-term debt 10,528 10,188
Post-retirement benefit liabilities 1,982 2,077
Other liabilities 1,486 1,747
Stockholders' equity:
Series A preferred stock -- 1,000
Common stock, $1 par value per share 194 193
Additional paid-in capital 25 92
Retained earnings 5,173 5,823
Unearned ESOP shares (216) (252)
- -------------------------------------------------------------------------------------
Total stockholders' equity 5,176 6,856
- -------------------------------------------------------------------------------------
$28,361 $29,540
=====================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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29
<PAGE>
Lockheed Martin Corporation
================================================================================
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Unearned Total
Preferred Common Paid-in Retained ESOP Stockholders'
(In millions) Stock Stock Capital Earnings Shares Equity
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
Net earnings -- -- -- 1,347 -- 1,347
Dividends declared on preferred
stock ($3.00 per share) -- -- -- (60) -- (60)
Dividends declared on common
stock ($1.60 per share) -- -- -- (302) -- (302)
Stock awards and options, and
ESOP activity -- 2 151 -- 35 188
Stock exchanged for
Materials shares -- (8) (742) -- -- (750)
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 1,000 193 92 5,823 (252) 6,856
Net earnings -- -- -- 1,300 -- 1,300
Dividends declared on preferred
stock ($2.65 per share) -- -- -- (53) -- (53)
Dividends declared on common
stock ($1.60 per share) -- -- -- (299) -- (299)
Stock awards and options, and
ESOP activity -- 1 161 -- 36 198
Redemption of preferred stock (1,000) -- (228) (1,598) -- (2,826)
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ -- $ 194 $ 25 $ 5,173 $ (216) $ 5,176
===========================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- ----------
30
<PAGE>
Lockheed Martin Corporation
================================================================================
Notes to Consolidated Financial Statements
December 31, 1997
================================================================================
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 missiles, electronics, information systems and energy management.
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.
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 for which the related operating
cycles are longer than one year. In accordance with industry practice, these
items are included in current assets. Book overdrafts, which are immaterial, are
included in current liabilities. Certain amounts for the prior years have been
reclassified to conform with the 1997 presentation.
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. Pursuant to contract provisions, agencies of 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 provided
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, straight-line depreciation generally 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
$651 million and $505 million at December 31, 1997 and 1996, 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 $881 million and $617 million
at December 31, 1997 and 1996, 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. Impairment is measured by comparing the undiscounted cash flows
of the related business operations to the appropriate carrying values.
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 these costs are expected
to be reflected in sales and cost 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 estimated future recovery considered probable
through the pricing of products and services to agencies of the U.S. Government.
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 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
upon achievement of performance milestones or using the 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 provided 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 are generally not recognized until the event occurs.
- ----------
31
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements . Continued
When adjustments in contract value or estimated costs are determined, any
changes from prior estimates are reflected in earnings in the current period.
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 efforts 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.
Derivative financial instruments - The Corporation may use derivative financial
instruments to manage its exposure to fluctuations in interest rates and foreign
exchange rates. The Corporation designates interest rate swap agreements as
hedges of specific debt instruments and recognizes the interest differentials as
adjustments to interest expense over the terms of the related debt obligations.
There were no interest rate swap agreements outstanding at December 31, 1997.
Forward exchange contracts are also designated as qualifying hedges of firm
commitments or specific anticipated transactions. Gains and losses on these
contracts are recognized in income when the hedged transactions occur. At
December 31, 1997, the amounts of forward exchange contracts outstanding, as
well as the amounts of gains and losses recorded during the year, were not
material. The Corporation does not hold or issue financial instruments for
trading purposes.
Accounting changes - Effective December 31, 1997, the Corporation adopted
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share", which established new standards for computing and disclosing earnings
per share. The Statement requires dual presentation of "basic" and "diluted"
earnings per share, each as defined therein, which replace primary and fully
diluted earnings per share, respectively, required under previous guidance. In
accordance with SFAS No. 128, all earnings per share amounts included in this
annual report have been restated to conform to the provisions of the new
standard and required disclosures have been made (see Note 6).
Effective January 1, 1997, the Corporation adopted the American Institute
of Certified Public Accountants' Statement of Position (SOP) No. 96-1,
"Environmental Remediation Liabilities." SOP No. 96-1 provides authoritative
guidance on certain accounting issues relative to the recognition, measurement,
display and disclosure of environmental remediation liabilities. The impact of
the adoption of this SOP was not material to the Corporation's consolidated
results of operations, financial position or disclosures.
Effective January 1, 1996, the Corporation adopted 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 costs
to sell. The impact of the adoption of this standard was not material to the
Corporation's consolidated results of operations or financial position.
Also in 1996, the Corporation adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 allows companies to continue to measure
compensation cost for stock-based employee compensation plans using the
intrinsic value method of accounting as prescribed in Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. The Corporation has elected to continue its APB Opinion
No. 25 accounting treatment for stock-based compensation, and has adopted the
provisions of SFAS No. 123 requiring disclosure of the pro forma effect on net
earnings and earnings per share as if compensation cost had been recognized
based upon the estimated fair value at the date of grant for options awarded.
Recently issued accounting pronouncements - In June 1997, the Financial
Accounting Standards Board issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way in which publicly-held companies report financial and descriptive
information about their operating segments in financial statements for both
interim and annual periods, and requires additional disclosures with respect to
products and services, geographic areas of operation and major customers. The
Statement is effective for fiscal years beginning after December 15, 1997;
however, application is not required for interim periods in 1998. The adoption
of SFAS No. 131 will have no impact on the number or composition of the
Corporation's reported business segments, or on its consolidated results of
operations or financial position, but is expected to increase the level of
disclosure of segment information.
================================================================================
Note 2 - Transaction Agreement with
Northrop Grumman Corporation
On July 3, 1997, the Corporation and Northrop Grumman Corporation (Northrop
Grumman) announced that they had entered into an Agreement and Plan of Merger
(the Merger Agreement) to combine the companies in a transaction with a total
estimated value at the announcement date of approximately $11.6 billion,
including Northrop Grumman debt to be assumed by the
- ----------
32
<PAGE>
Lockheed Martin Corporation
================================================================================
Corporation of approximately $3.1 billion (the Merger). Under the terms of the
Merger Agreement, which was approved by the respective Boards of Directors of
the Corporation and Northrop Grumman, Northrop Grumman stockholders will receive
1.1923 shares of Lockheed Martin common stock for each share of Northrop Grumman
common stock. On February 26, 1998, the stockholders of the Corporation approved
the issuance of shares of Lockheed Martin common stock in connection with the
Merger. In addition, the Corporation's stockholders approved an amendment to
Lockheed Martin's charter to increase the number of authorized shares of
Lockheed Martin common stock from 750 million to 1.5 billion. Also on February
26, 1998, the stockholders of Northrop Grumman approved the Merger Agreement
pursuant to which Northrop Grumman is to become a wholly-owned subsidiary of
Lockheed Martin.
On March 9, 1998, the Corporation announced that it had been informed by
the Department of Justice (DOJ) that the DOJ was fundamentally opposed to the
Merger. The Corporation also announced on that date that it had committed to the
DOJ not to close the transaction before April 24, 1998, and to develop and
submit a proposal to the DOJ by April 8, 1998 designed to address the DOJ's
antitrust concerns while preserving the expected benefits and efficiencies of
the transaction to the Corporation and its stockholders, customers, employees
and suppliers. On March 12, 1998, the DOJ informed the Corporation that it found
this commitment unacceptable and demanded that the Corporation agree to certain
substantial divestitures or the DOJ will proceed to court. The DOJ stated that
they expected a response by March 16, 1998.
The transaction will be accounted for using the purchase method of
accounting. Concurrent with the consummation of the Merger, the Corporation will
increase the amount of its one-year revolving credit facility from $1.5 billion
to $2.5 billion.
================================================================================
Note 3 - Transaction Agreement with
General Electric Company
On November 3, 1997, the Corporation announced a definitive agreement with
General Electric Company (GE) under which Lockheed Martin would exchange the
stock of a newly formed subsidiary, LMT Sub, for all of the Lockheed Martin
Series A preferred stock held by GE and certain subsidiaries of GE (the GE
Transaction). The Series A preferred stock, which was originally issued to GE in
connection with the acquisition of GE's aerospace businesses in 1993, was
convertible into approximately 29 million shares of Lockheed Martin common stock
with a market value of approximately $2.8 billion at the date of the
announcement of the GE Transaction.
In accordance with the agreement, on November 17, 1997, Lockheed Martin
exchanged all of the outstanding capital stock of LMT Sub for all of the
outstanding Series A preferred stock held by GE and certain subsidiaries of GE.
LMT Sub was composed of two non-core commercial business units which contributed
approximately five percent of the Corporation's 1997 net sales, Lockheed
Martin's investment in a telecommunications partnership, and approximately $1.6
billion in cash (the fair value of the non-cash net assets exchanged was
approximately $1.2 billion). The cash included in the exchange was initially
financed through the issuance of commercial paper. On November 20, 1997, $1.4
billion was refinanced pursuant to a note, due November 17, 2002 and bearing
interest at 6.04%, from Lockheed Martin to LMT Sub. The remainder is expected to
be refinanced with a note from Lockheed Martin to LMT Sub on substantially
similar terms following final determination of the closing net worth of the
businesses exchanged.
The GE Transaction was accounted for at fair value, and resulted in the
reduction of the Corporation's stockholders' equity by $2.8 billion and the
recognition of a tax-free gain, in other income and expenses, of approximately
$311 million, or $1.46 per diluted share, during the fourth quarter. For
purposes of determining net earnings applicable to common stock used in the
computation of earnings per share, the excess of the fair value of the
consideration transferred to GE (approximately $2.8 billion) over the carrying
value of the Series A preferred stock ($1.0 billion) was treated as a deemed
preferred stock dividend and deducted from 1997 net earnings in accordance with
the requirements of the Emerging Issues Task Force's Issue D-42. This deemed
dividend had a significant impact on the earnings per share calculations, but
did not impact reported 1997 net earnings. The effect of this deemed dividend
decreased basic earnings per share by $9.85, and was antidilutive in the
calculation of diluted earnings per share.
================================================================================
Note 4 - Other Acquisitions and Divestitures
In April 1996, the Corporation purchased all of the issued and outstanding
shares of common stock of Loral Corporation (Loral) for an aggregate
consideration of $38 per share in cash. The purchase involved a series of
transactions that resulted in (i) the distribution to stockholders of Loral,
immediately prior to the consummation of the purchase, of shares of capital
stock in Loral Space & Communications, Ltd. (Loral SpaceCom), a newly-formed
company, which now owns and manages substantially all of Loral's former space
and satellite telecommunications interests, and in which the Corporation
acquired shares of preferred stock that were convertible into 20 percent of
Loral SpaceCom's common stock on a diluted basis at the date of acquisition, and
(ii) the acquisition by the Corporation of Loral's defense electronics and
systems integration businesses (collectively, the Loral Transaction). With
regard to the Loral Transaction, the total purchase price paid, including
acquisition costs, was approximately $7.6 billion. The Loral Transaction was
accounted for using the purchase
- ----------
33
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements . Continued
method of accounting. In connection with the Loral Transaction, Loral changed
its name to Lockheed Martin Tactical Systems, Inc. (Tactical Systems), which
became a wholly-owned subsidiary of the Corporation. The operations of Tactical
Systems have been included in the results of operations of the Corporation from
April 1, 1996. Effective June 30, 1997, Tactical Systems was merged with and
into the Corporation.
In March 1997, the Corporation executed a definitive agreement valued at
approximately $525 million to reposition 10 non-core business units as a new
independent company, L-3 Communications Corporation, in which the Corporation
retained a 34.9 percent ownership interest at closing. These business units,
primarily composed of high-technology, product-oriented companies, contributed
approximately two percent of the Corporation's net sales during the three month
period ended March 31, 1997. The transaction, which closed on April 30, 1997
with an effective date of March 30, 1997, did not have a material impact on the
Corporation's earnings.
During the third quarter of 1996, the Corporation announced its intention
to distribute via an exchange offer its 81 percent interest in Martin Marietta
Materials, Inc. (Materials) to its stockholders (the Exchange Offer). Under the
terms of the Exchange Offer, the Corporation's stockholders were given the
opportunity to exchange each Lockheed Martin common share held for 4.72 common
shares of Materials on a tax-free basis. The Exchange Offer expired by its terms
on October 18, 1996 and was oversubscribed. On October 23, 1996, approximately
7.9 million shares of the Corporation's common stock were exchanged for the
37.35 million shares of Materials common stock held by the Corporation. Upon the
closing of this transaction, the Corporation had no remaining ownership interest
in Materials and had reduced its common shares outstanding by approximately four
percent. This fourth quarter 1996 exchange was accounted for at fair value,
resulting in the reduction of the Corporation's stockholders' equity by $750
million and the recognition of a pretax gain of $365 million in other income and
expenses.
In November 1996, the Corporation announced the proposed divestiture of two
of its business units, Armament Systems and Defense Systems. This transaction,
which concluded with the Corporation's receipt of $450 million in cash on
January 2, 1997, had no pretax effect on the results of operations for 1997 or
1996. At December 31, 1996, $450 million, representing the net assets of the two
business units, was included in other current assets.
On a combined basis, the Materials exchange and the Armament Systems and
Defense Systems divestiture noted above increased 1996 net earnings by $351
million, or $1.59 per diluted share.
================================================================================
Note 5 - Restructuring and Other Charges
During the fourth quarter of 1997, the Corporation recorded nonrecurring and
unusual pretax charges, net of state income tax benefits, totaling $457 million,
which reduced net earnings by $303 million, or $1.42 per diluted share. The
charges were identified in connection with the Corporation's review, which
concluded in the fourth quarter, of non-strategic lines of business, non-core
investments and certain other assets. Approximately $200 million of the pretax
charges reflected the estimated effects of exiting non-strategic lines of
business, including amounts related to the fixed price systems development line
of business in the area of children and family services, and related to
increases in estimated exposures relative to the environmental remediation lines
of business initially identified in 1996 and for which initial estimates of
exposure were provided in the fourth quarter 1996 charges. These increases in
estimated exposures were based on more current information, including
deterioration in a partner's financial condition as evidenced by the partner
seeking protection under the bankruptcy laws. The remaining charges reflected
impairments in the values of various non-core investments and certain other
assets in keeping with the Corporation's continued focus on core operations.
During the fourth quarter of 1996, the Corporation recorded nonrecurring
pretax charges, net of state income tax benefits, of $307 million, which
decreased net earnings by $209 million, or $.94 per diluted share. Approximately
one-half of the charges reflected the estimated effects of terminating a
business relationship formed to provide environmental remediation services to
government and commercial customers worldwide, and the initial estimated effects
related to management's decision to exit a certain environmental remediation
line of business. Charges of approximately $85 million were identified in
connection with an evaluation of the Corporation's future strategic focus, and
reflected impairments in the values of non-core investments and certain other
assets which were other than temporary in nature. The remaining charges of
approximately $75 million were related to costs for facility closings and
transfers of programs resulting from management's decision to include the
operations of Tactical Systems in the Electronics, Information & Services, and
Energy and Other segments.
During the first quarter of 1995, the Corporation recorded a pretax charge
of $165 million from merger related expenses in connection with the formation of
Lockheed Martin. During the second quarter of 1995, the Corporation recorded a
pretax charge of $525 million in conjunction with a corporate-wide consolidation
plan under which the Corporation would close certain facilities and laboratories
and eliminate duplicative field offices in the U.S. and abroad, eliminating up
to approximately 12,000 positions. The charge represented the portion of the
accrued costs and net
- ----------
34
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
realizable value adjustments that were not probable of recovery. The after-tax
effect of these charges was $436 million, or $1.97 per diluted share. As of
December 31, 1997, cumulative merger related and consolidation payments were
approximately $1.0 billion, which primarily relate to the formation of the
Corporation, the elimination of positions and the closure of foreign and
domestic offices and facilities.
During 1997 and 1996, the Corporation incurred costs anticipated in the
1995 consolidation plan which had not met the requirements for accrual earlier.
These costs include relocation of personnel and programs, retraining, process
re-engineering and certain capital expenditures, among others. Management
estimates that, consistent with the original 1995 consolidation plan,
approximately $400 million of such costs will be incurred in the future, and
currently anticipates that the remaining consolidation actions will be
substantially completed by the end of 1998.
Under existing 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 deferred and amortized for government contracting
purposes and included as allowable costs in future pricing of the Corporation's
products and services. Included in other assets at December 31, 1997 is
approximately $330 million of deferred costs that will be amortized and
recognized in future sales and cost of sales.
================================================================================
Note 6 - Earnings Per Share
Basic earnings per share were computed based on net earnings, less the dividend
requirement for preferred stock to the date of redemption, and less the deemed
preferred stock dividend resulting from the GE Transaction representing the
excess of the fair value of the consideration transferred to GE (approximately
$2.8 billion) over the carrying value of the Lockheed Martin preferred stock
redeemed ($1.0 billion). The weighted average number of common shares
outstanding during the year was used in this calculation. Diluted earnings per
share were also computed based on net earnings less the deemed preferred stock
dividend resulting from the GE Transaction. For this calculation, the weighted
average number of common shares outstanding was increased by the assumed
conversion of preferred stock to the date of redemption, and by the dilutive
effect of stock options based on the treasury stock method.
The following table sets forth the computations of basic and diluted
earnings per share:
(In millions, except per share data) 1997 1996 1995
================================================================================
Net earnings applicable to
common stock
Net earnings $ 1,300 $1,347 $ 682
Dividends on preferred stock (53) (60) (60)
- --------------------------------------------------------------------------------
1,247 1,287 622
Deemed preferred stock dividend (1,826) -- --
- --------------------------------------------------------------------------------
Net (loss) earnings applicable to
common stock for basic
earnings per share (579) 1,287 622
Dividends on preferred stock 53 60 60
- --------------------------------------------------------------------------------
Net (loss) earnings applicable to
common stock for diluted
earnings per share $ (526) $1,347 $ 682
================================================================================
Average common shares outstanding
Average number of common shares
outstanding for basic earnings
per share 185.3 189.1 189.3
Assumed conversion of the Series A
preferred stock 25.3 28.9 28.9
Dilutive stock options--based on the
treasury stock method 2.9 3.3 2.8
- --------------------------------------------------------------------------------
Average number of common shares
outstanding for diluted earnings
per share 213.5 221.3 221.0
================================================================================
Basic earnings per share
Net earnings $ 7.02 $7.12 $3.60
Dividends on preferred stock (.29) (.32) (.32)
- --------------------------------------------------------------------------------
6.73 6.80 3.28
Deemed preferred stock dividend (9.85) -- --
- --------------------------------------------------------------------------------
(Loss) earnings per share $ (3.12) $6.80 $3.28
================================================================================
Diluted earnings per share
Net earnings $ 6.09 $6.09 $3.09
Deemed preferred stock dividend (8.55) -- --
- --------------------------------------------------------------------------------
(Loss) earnings per share * $6.09 $3.09
================================================================================
*Antidilutive.
================================================================================
Note 7 - Receivables
Receivables consisted of the following components:
(In millions) 1997 1996
================================================================================
U.S. Government:
Amounts billed $ 958 $1,012
Unbilled costs and accrued profits 2,233 2,197
Commercial and foreign governments:
Amounts billed 675 875
Unbilled costs and accrued profits,
primarily related to commercial contracts 1,143 915
- --------------------------------------------------------------------------------
$5,009 $4,999
================================================================================
- ----------
35
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements . Continued
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 $410 million of the December 31, 1997
unbilled costs and accrued profits are not expected to be billed within one
year.
================================================================================
Note 8 - Inventories
Inventories consisted of the following components:
(In millions) 1997 1996
================================================================================
Work in process, primarily related to
long-term contracts and programs
in progress $ 5,155 $ 4,356
Less customer advances and
progress payments (2,805) (2,446)
- --------------------------------------------------------------------------------
2,350 1,910
Other inventories 794 1,043
- --------------------------------------------------------------------------------
$ 3,144 $ 2,953
================================================================================
Customer advances and progress payments presented above were those where
the customer has title to, or a security interest in, inventories identified
with the related contracts. Other customer advances were classified as current
liabilities. Included in 1997 work in process above were advances to a foreign
subcontractor of approximately $450 million for the manufacture of launch
vehicles and related launch services. Approximately $634 million of costs
included in 1997 inventories are not expected to be recovered within one year.
An analysis of general and administrative costs, including research and
development costs, included in work in process inventories follows:
(In millions) 1997 1996 1995
================================================================================
Beginning of year $ 460 $ 431 $ 480
Incurred during the year 2,245 2,154 1,704
Charged to costs and
expenses during the year:
Research and development (788) (784) (548)
Other general and administrative (1,384) (1,341) (1,205)
- --------------------------------------------------------------------------------
End of year $ 533 $ 460 $ 431
================================================================================
In addition, included in costs and expenses in 1997, 1996 and 1995 were
general and administrative costs, including research and development costs, of
approximately $539 million, $574 million and $320 million, respectively,
incurred by commercial business units or programs.
================================================================================
Note 9 - Property, Plant and Equipment
Property, plant and equipment consisted of the following components:
(In millions) 1997 1996
================================================================================
Land $ 285 $ 313
Buildings 3,013 2,876
Machinery and equipment 5,346 5,263
- --------------------------------------------------------------------------------
8,644 8,452
Less accumulated depreciation
and amortization (4,975) (4,731)
- --------------------------------------------------------------------------------
$ 3,669 $ 3,721
================================================================================
================================================================================
Note 10 - Debt
Long-term debt consisted of the following components:
Range of
Type (Maturity Dates) Interest
(In millions) Rates 1997 1996
================================================================================
Notes (1998-2022) 5.9- 9.4% $ 6,840 $ 5,547
Debentures (2002-2036) 7.0- 9.1% 3,158 3,156
Commercial Paper 5.8- 6.4% 1,000 1,250
ESOP obligations (1998-2004) 8.3- 8.4% 292 324
Other obligations 1.0-12.7% 114 91
- --------------------------------------------------------------------------------
11,404 10,368
Less current maturities (876) (180)
- --------------------------------------------------------------------------------
$10,528 $10,188
================================================================================
During the fourth quarter of 1997, the Corporation issued a note to LMT
Sub, a wholly-owned subsidiary of GE, totaling $1.4 billion to refinance a
portion of the commercial paper issued to finance the cash requirements for the
GE Transaction. The note, which bears interest at 6.04%, is due in 2002. The
agreements relating to the GE Transaction require that, so long as the aggregate
principal amount of the note to LMT Sub exceeds $1 billion, the Corporation will
recommend to its stockholders the election of one person designated by GE to
serve as a director of the Corporation.
During the second quarter of 1996, the Corporation issued $5 billion of
long-term fixed rate debt securities, the entire amount registered under the
Corporation's shelf registration statement which became effective on May 10,
1996. These Notes and Debentures range in maturity from two years to 40 years,
with interest rates ranging from between 6.55% and 7.75%. The registered holders
of $300 million of 40 year Debentures may elect, between March 1 and April 1,
2008, to have each of their Debentures repaid by the Corporation on May 1, 2008.
- ----------
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<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
In February 1996, the Corporation entered into interest rate hedging
agreements to offset a portion of its exposure to rising interest rates related
to the anticipated long-term financings. These agreements were closed in the
second quarter of 1996 in connection with the Corporation's issuance of its
long-term debt securities. The Corporation realized a gain of approximately $150
million on the closing of these agreements, which has been deferred and is being
amortized and recognized as an adjustment to interest expense over the terms of
the related debt obligations.
Included in Debentures are $108 million of 7% obligations ($175 million at
face value) which were originally sold at approximately 54 percent of their
principal amount. These Debentures, which are redeemable in whole or in part at
the Corporation's option at 100 percent of their face value, have an effective
yield of 13.25%.
A leveraged ESOP incorporated into the Corporation's savings plan 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 are guaranteed by
the Corporation and included as debt in the Corporation's consolidated balance
sheet.
At the end of 1997, the Corporation had a 4-year revolving credit facility
in the amount of $3.5 billion and a one-year revolving credit facility in the
amount of $1.5 billion (collectively, the Credit Facilities). Borrowings under
the Credit Facilities 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).
Each bank's obligation to make loans under the Credit Facilities is subject to,
among other things, compliance by the Corporation with various representations,
warranties, covenants and agreements, including, but not limited to, covenants
limiting the ability of the Corporation and certain of its subsidiaries to
encumber their assets and a covenant not to exceed a maximum leverage ratio.
No borrowings were outstanding under the Credit Facilities at December 31,
1997. However, the Credit Facilities support commercial paper borrowings of
approximately $1.5 billion outstanding at December 31, 1997, of which
approximately $1.0 billion has been classified as long-term debt in the
Corporation's consolidated balance sheet based on management's ability and
intention to maintain this amount of debt outstanding for at least one year.
During the third quarter of 1996, the Corporation entered into interest rate
swap agreements to fix the interest rates on $875 million of its commercial
paper borrowings. These agreements matured during 1997. The effects of these
interest rate swap agreements were recorded periodically as an adjustment to
interest expense related to commercial paper borrowings.
Excluding commercial paper classified as long-term, the Corporation's
long-term debt maturities for the five years following December 31, 1997 are:
$876 million in 1998; $857 million in 1999; $57 million in 2000; $802 million in
2001; $1,496 million in 2002; and $6,316 million thereafter.
Certain of the Corporation's other financing agreements contain restrictive
covenants relating to debt, limitations on encumbrances, and 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, including assets and liabilities recognized and not recognized in
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, 1997, aggregated
approximately $12.0 billion, compared with a carrying amount of approximately
$11.4 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 similar issues, or on current rates offered to the Corporation for
debt with similar remaining maturities.
Interest payments were $815 million in 1997, $655 million in 1996 and $275
million in 1995.
================================================================================
Note 11 - Income Taxes
The provision for federal and foreign income taxes consisted of the following
components:
(In millions) 1997 1996 1995
================================================================================
Federal income taxes:
Current $448 $ 914 $ 510
Deferred 155 (251) (116)
- --------------------------------------------------------------------------------
Total federal income taxes 603 663 394
Foreign income taxes 34 23 13
- --------------------------------------------------------------------------------
Total income taxes provided $637 $ 686 $ 407
================================================================================
- ----------
37
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements . Continued
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 $62 million for 1997, $45 million for 1996 and $86
million for 1995.
The Corporation's effective income tax rate varied from the statutory
federal income tax rate because of the following tax differences:
1997 1996 1995
===============================================================================
Statutory federal tax rate 35.0% 35.0% 35.0
Increase (reduction) in tax rate from:
Nondeductible amortization 4.9 4.2 3.2
Revisions to prior years' estimated
liabilities (5.7) (1.6) (3.4)
Divestitures (2.4) (5.6) --
Other, net 1.1 1.8 2.6
- -------------------------------------------------------------------------------
32.9% 33.8% 37.4%
===============================================================================
The primary components of the Corporation's federal deferred income tax
assets and liabilities at December 31 were as follows:
(In millions) 1997 1996
================================================================================
Deferred tax assets related to:
Accumulated post-retirement benefit
obligations $ 698 $ 700
Accrued compensation and benefits 258 333
Merger related and consolidation reserves 83 217
Contract accounting methods 669 619
Other 116 180
- --------------------------------------------------------------------------------
1,824 2,049
Deferred tax liabilities related to:
Intangible assets 437 486
Prepaid pension asset 259 297
Property, plant and equipment 132 178
- --------------------------------------------------------------------------------
828 961
- --------------------------------------------------------------------------------
Net deferred tax assets $ 996 $ 1,088
================================================================================
At December 31, 1997 and 1996, other liabilities included net long-term
deferred tax liabilities of $260 million and $268 million, respectively.
Federal and foreign income tax payments, net of refunds received, were $986
million in 1997, $1.1 billion in 1996 and $223 million in 1995.
================================================================================
Note 12 - Other Income and Expenses, Net
Other income and expenses, net, consisted of the following components:
(In millions) 1997 1996 1995
===============================================================================
Royalty income $ 52 $ 47 $ 64
Interest income 40 60 33
GE Transaction 311 -- --
Materials transaction -- 365 --
Equity in earnings (losses) of affiliates 48 (28) (15)
Other 31 8 13
- --------------------------------------------------------------------------------
$482 $452 $ 95
================================================================================
================================================================================
Note 13 - Stockholders' Equity and Related Items
Capital Structure - At December 31, 1997, the authorized capital of the
Corporation was composed of 750 million shares of common stock (194.4 million
shares issued), 50 million shares of series preferred stock (no shares issued),
and 20 million shares of Series A preferred stock (no shares outstanding).
Approximately 70 million common shares have been reserved for issuance under
benefit and incentive plans.
The Series A preferred stock, which was redeemed in November, 1997 in
connection with the GE Transaction, had a par value of $1 per share (liquidation
preference of $50 per share). The Corporation issued all of the authorized
shares of Series A preferred stock to GE in 1993 in connection with the
acquisition of the GE Aerospace businesses. Dividends were cumulative and paid
at an annual rate of $3.00 per share, or 6%.
During the second quarter of 1996, the Corporation's Board of Directors
terminated the systematic common stock repurchase plan which had been
established in 1995 to counter the future dilutive effect of common stock issued
by the Corporation under its 1995 Omnibus Performance Award Plan. A separate
program authorized in 1995 for 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 remains in effect. Approximately 2.3 million common shares
were repurchased by the Corporation in 1995 under these programs; no shares were
repurchased in 1997 or 1996.
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 also be
granted cash-based incentive awards, such as performance units. These awards may
be granted either individually or in combination with other awards. The Omnibus
Plan requires that options to purchase common stock have an exercise price of
not less than 100 percent
- ----------
38
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
of the market value of the underlying stock on the date of grant. The number of
shares of Lockheed Martin common stock authorized to be issued in respect of
awards under the Omnibus Plan at December 31, 1997 was 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 10 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.
The following table summarizes the stock option activity of the
Corporation's plans during 1995, 1996 and 1997:
<TABLE>
<CAPTION>
Number of Shares
(In thousands)
--------------------------- Weighted
Available Options Average
for Grant Outstanding Exercise Price
===================================================================================
<S> <C> <C> <C>
December 31, 1994 3,652 9,244 $33.21
Additions 12,000 -- --
Granted (2,228) 2,228 59.38
Removed from
registration (3,674) -- --
Exercised -- (1,943) 30.47
Terminated 81 (109) 51.63
- ----------------------------------------------------------------
December 31, 1995 9,831 9,420 39.74
Granted (2,649) 2,649 75.04
Exercised -- (2,241) 32.65
Terminated 141 (170) 63.32
- ----------------------------------------------------------------
December 31, 1996 7,323 9,658 50.65
Granted (2,898) 2,898 91.20
Exercised -- (1,762) 41.72
Terminated 327 (358) 81.67
- ----------------------------------------------------------------
December 31, 1997 4,752 10,436 $62.36
===================================================================================
</TABLE>
Approximately 6.5 million, 5.7 million and 6.5 million outstanding options
were exercisable at December 31, 1997, 1996 and 1995, respectively.
Information regarding options outstanding at December 31, 1997 follows (number
of options in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------- -------------------------------
Weighted Weighted Average Weighted
Range of Number of Average Remaining Contractual Number of Average
Exercise Prices Options Exercise Price Life Options Exercise Price
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Less than $40.00 2,455 $30.97 4.2 years 2,455 $30.97
$40.00 - $59.99 2,942 52.24 6.9 years 2,942 52.24
$60.00 - $80.00 2,359 74.87 8.1 years 1,141 74.90
Greater than $80.00 2,680 91.21 9.0 years 10 91.83
- ------------------------------------ -----
Total 10,436 $62.36 7.1 years 6,548 $48.27
===================================================================================================================================
</TABLE>
All stock-based incentive awards granted in 1997, 1996 and 1995 under the
Omnibus Plan were stock options which have 10 year terms, and virtually all of
which vest over a two year service period. Exercise prices of options awarded in
those years were equal to the market price of the stock on the date of grant.
Pro forma information regarding net earnings and earnings per share as required
by SFAS No. 123 has been determined as if the Corporation had accounted for its
employee stock options under the fair value method. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1997, 1996 and 1995,
respectively: risk-free interest rates of 6.36%, 5.58% and 6.64%; dividend
yields of 1.5%, 1.7% and 1.7%; volatility factors related to the expected market
price of the Corporation's common stock of .163, .186 and .216; and a weighted
average expected option life of five years. The weighted average fair values of
options granted during 1997, 1996 and 1995 were $21.87, $17.24 and $16.09,
respectively.
For purposes of pro forma disclosures, the options' estimated fair values
are amortized to expense over the options' vesting periods. Therefore, the pro
forma results for 1995 presented below include only 50 percent of the total pro
forma expense for options awarded in that year. The Corporation's pro forma
information follows:
<TABLE>
<CAPTION>
(In millions, except per share data) 1997 1996 1995
================================================================================
<S> <C> <C> <C>
Pro forma net earnings $1,267 $1,322 $ 671
Pro forma earnings per share
before deemed preferred
stock dividend:
Basic $ 6.55 $ 6.67 $3.23
Diluted $ 5.93 $ 5.97 $3.04
================================================================================
</TABLE>
- ----------
39
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements . Continued
================================================================================
Note 14 - Post-Retirement Benefit Plans
Defined Contribution Plans
The Corporation maintains a number of defined contribution plans which cover
substantially all employees, the most significant of which are the 401(k) plans
for salaried employees and hourly employees. Under the provisions of these
401(k) plans, employees' eligible contributions are matched by the Corporation
at established rates. The Corporation's matching obligations were $212 million
in 1997, $202 million in 1996, and $180 million in 1995.
The Lockheed Martin Corporation Salaried Savings Plan includes an ESOP
which purchased 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.
The Corporation's match consisted of shares of its common stock, which was
partially fulfilled with stock released from the ESOP at approximately 1.2
million shares per year based upon the debt repayment schedule through the year
2004, with the remainder being fulfilled through purchases of common stock from
terminating participants or in the open market, or through newly issued shares
from the Corporation. Interest incurred on the ESOP debt totaled $26 million,
$29 million and $31 million in 1997, 1996 and 1995, respectively. Dividends
received by the ESOP with respect to unallocated shares held are used for debt
service. The ESOP held approximately 20.2 million issued shares of the
Corporation's common stock at December 31, 1997, of which approximately 12.7
million were allocated and 7.5 million were unallocated. Unallocated common
shares held by the ESOP are considered outstanding for voting and other
Corporate purposes, but excluded from weighted average outstanding shares in
calculating earnings per share. For 1997, 1996 and 1995, the weighted average
unallocated ESOP shares excluded in calculating earnings per share totaled
approximately 7.9 million, 9.1 million and 10.3 million common shares,
respectively. The fair value of the unallocated ESOP shares at December 31, 1997
was approximately $740 million.
Certain plans for hourly employees include non-leveraged ESOPs. The
Corporation's match to these plans were made through cash contributions to the
ESOP trusts which were used, in part, to purchase common stock from terminating
participants and in the open market for allocation to participant accounts.
These ESOP trusts held approximately 1.7 million issued and outstanding shares
of common stock at December 31, 1997.
Dividends paid to the 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.
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 related to the Corporation's defined benefit plans
included the following components:
(In millions) 1997 1996 1995
==========================================================================
Service cost--benefits earned
during the year $ 444 $ 463 $ 342
Interest cost 1,163 1,050 881
Net amortization and other
components 1,751 889 1,534
Actual return on assets (3,329) (2,243) (2,571)
- --------------------------------------------------------------------------
Net pension cost $ 29 $ 159 $ 186
==========================================================================
The following table sets forth the defined benefit plans' funded status and
amounts recognized in the Corporation's consolidated balance sheet:
(In millions) 1997 1996
============================================================================
Plan assets at fair value $ 20,642 $ 18,402
============================================================================
Actuarial present value of benefit obligations:
Vested $ 14,179 $ 13,486
Non-vested 265 236
- ----------------------------------------------------------------------------
Accumulated benefit obligation 14,444 13,722
Effect of projected future salary increases 1,882 1,694
- ----------------------------------------------------------------------------
Projected benefit obligation (PBO) 16,326 15,416
- ----------------------------------------------------------------------------
Plan assets greater than PBO 4,316 2,986
Reconciling items:
Unrecognized net asset existing at the date of
initial application of SFAS No. 87 (106) (196)
Unrecognized prior-service cost 456 461
Unrecognized gain (3,738) (2,484)
- ----------------------------------------------------------------------------
Prepaid pension asset $ 928 $ 767
============================================================================
At December 31, 1997, approximately 56 percent of the plan assets were
equity securities, with the remainder primarily being fixed income securities
and cash equivalents. Actuarial determinations were based on various assumptions
displayed in the following table. Net pension costs in 1996 and 1995 were based
on assumptions in effect at the end of the respective preceding year. Effective
- ------
40
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
October 1, 1997, the Corporation changed its expected long-term rate of return
on assets. This change in estimate decreased pension cost by approximately $70
million. Benefit obligations as of each year-end were based on assumptions in
effect as of those dates.
1997 1996 1995
==============================================================================
Assumptions:
Discount rates 7.5% 7.8% 7.5%
Rates of increase in future
compensation levels 6.0 6.0 6.0
Expected long-term
rate of return on assets 9.5 9.0 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 included the following
components:
(In millions) 1997 1996 1995
==============================================================================
Service cost--benefits
earned during the year $ 39 $ 40 $ 34
Interest cost 191 181 177
Net amortization and other
components 38 13 44
Actual return on assets (117) (73) (82)
Curtailment gain -- (15) --
- ------------------------------------------------------------------------------
Net post-retirement cost $ 151 $146 $173
==============================================================================
The Corporation has made contributions to 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) 1997 1996
=============================================================================
Plan assets at fair value $ 895 $ 736
=============================================================================
Actuarial present value of benefit obligations:
Active employees, eligible to retire $ 350 $ 334
Active employees, not eligible to retire 462 454
Former employees 1,714 1,819
- -----------------------------------------------------------------------------
Accumulated post-retirement benefit
obligation (APBO) 2,526 2,607
- -----------------------------------------------------------------------------
Assets less than APBO 1,631 1,871
Unrecognized gain 351 206
- -----------------------------------------------------------------------------
Post-retirement benefit unfunded liability $1,982 $2,077
=============================================================================
At December 31, 1997, approximately 46 percent of these plans' assets were
equity securities, with the remainder primarily being fixed income securities
and cash equivalents. Actuarial determinations were based on various assumptions
displayed in the following table. Net retiree medical costs for 1997, 1996 and
1995 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.
1997 1996 1995
================================================================================
Assumptions:
Discount rates 7.5% 7.8% 7.5%
Expected long-term
rate of return on assets 9.5 9.0 8.8
================================================================================
The medical trend rates used in measuring the APBO were 7.0% in 1997 and
7.5% in 1996, and were assumed to gradually decrease to 4.5% by the year 2004.
An increase of one percentage point in the assumed medical trend rates would
result in an increase in the APBO of approximately 6.5% at December 31, 1997,
and a 1997 post-retirement benefit cost increase of approximately 8.5%. The
medical trend rate for 1998 is 6.7%. 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 15 - Leases
Total rental expense under operating leases, net of immaterial amounts of
sublease rentals and contingent rentals, were $295 million, $320 million and
$236 million for 1997, 1996 and 1995, respectively.
Future minimum lease commitments at December 31, 1997 for all operating
leases that have a remaining term of more than one year were approximately $989
million ($237 million in 1998, $187 million in 1999, $141 million in 2000, $110
million in 2001, $81 million in 2002, and $233 million in later years). Certain
major plant facilities and equipment are furnished by the U.S. Government under
short-term or cancelable arrangements.
================================================================================
Note 16 - 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. In the opinion of management and
in-house counsel, the probability is remote that the outcome of these matters
will have a
- -----
41
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements . Continued
material adverse effect on the Corporation's consolidated results of operations
or 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 obligated the Corporation to design and construct
facilities to monitor, extract, and treat groundwater, and to operate and
maintain such facilities for approximately eight years. A second consent decree
is being finalized which will obligate the Corporation to fund the continued
operation and maintenance of these facilities through the year 2018. The
Corporation estimates that expenditures required to comply with the consent
decrees over their remaining terms will be approximately $110 million.
The Corporation has also been operating under a cleanup and abatement order
from the California Regional Water Quality Control Board (the Regional 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 decrees to
approximate $60 million over the remaining term of the project.
The Corporation is responding to three administrative orders issued by the
Regional Board in connection with the Corporation's former Lockheed Propulsion
Company facilities in Redlands, California. Under the orders, the Corporation is
investigating the impact and potential remediation of regional groundwater
contamination by perchlorates and chlorinated solvents. The Regional Board has
approved the Corporation's plan to maintain public water supplies with respect
to chlorinated solvents during this work, and the Corporation is negotiating
with local water purveyors to implement this plan, as well as to address water
supply concerns relative to perchlorate contamination. The Corporation estimates
that expenditures required to implement work currently approved will be
approximately $110 million.
In addition, the Corporation is involved in 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 $260 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 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 are being reflected in the Corporation's sales and cost of
sales pursuant to U.S.
Government agreement or regulation. The Corporation has recorded an asset for
the portion of these costs that are probable of future recovery 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
future recovery of portions of the environmental costs through insurance policy
coverage or from other potentially responsible parties, 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.
Waste remediation contract - In 1994, the Corporation was awarded a $180 million
fixed price contract by the U.S. Department of Energy (DOE) for the Phase II
design, construction and limited test of remediation facilities, and the Phase
III full remediation of waste found in Pit 9, located on the Idaho National
Engineering and Environmental Laboratory reservation. The Corporation has
incurred significant unanticipated costs and scheduling issues due to complex
technical and contractual matters which threaten the viability of the overall
Pit 9 program. Management completed its investigation to identify and quantify
the overall effect of these matters, and summarized its findings in a request
for equitable adjustment (REA) which was delivered to the DOE on March 31, 1997.
The provisions of the REA include, but are not limited to, the recovery of a
portion of unanticipated costs incurred by the Corporation and the restructuring
of the contract to provide for a more equitable sharing of the risks associated
with the Pit 9 project. To better focus the Corporation's management resources
on resolving these issues, the management and reporting structure of the Pit 9
program were changed in September 1997; however, the Corporation has been
unsuccessful in reaching any agreements with the DOE on cost recovery or other
contract restructuring matters. As a result, the Corporation has reduced work
activities at the Pit 9 site, is awaiting technical direction from the DOE, and
is in the process of preparing a certifiable claim.
On February 27, 1998, the Corporation received a cure notice alleging that
certain actions taken by the Corporation are conditions endangering performance
of the Pit 9 contract. The notice advised that, unless these conditions are
cured within 30 days, the contract may be terminated for default. The
Corporation believes that termination for default is neither permissible under
the Pit 9 contract nor warranted under the circumstances and is preparing its
response.
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, 1997, the Corporation had contingent liabilities on outstanding
letters of credit, guarantees, and other arrangements aggregating approximately
$1.2 billion.
- -----
42
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
================================================================================
Note 17 - Information on
Industry Segments and Major Customers
The Corporation operates in four principal business segments: Space & Strategic
Missiles, Electronics, Information & Services, and Aeronautics. All other
activities of the Corporation fall within the Energy 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, manned space systems and their supporting
ground systems and services; telecommunications systems and services; strategic
fleet ballistic missiles; and defensive missiles.
Electronics - Engaged in the design, development, integration and production of
high performance electronic systems for undersea, shipboard, land, airborne and
space-based applications. Major defense product lines include surface ship and
submarine combat systems; anti-submarine warfare systems; air defense systems;
tactical battlefield missiles; aircraft controls; electronic-warfare;
electro-optic and night-vision; radar; displays; and systems integration of
mission specific combat suites. Major commercial product lines include satellite
electronics and mail handling automation systems.
Information & Services - Engaged in the development, integration and operation
of large, complex information systems; engineering, technical, and management
services for federal customers; transaction processing systems and services for
state and local government agencies; commercial information technology services;
manufacture of computer peripherals, real-time 3-D graphics products and
enterprise data management software; and the provision of internal information
technology support to the Corporation.
Aeronautics - Engaged in the following primary lines of business: tactical
aircraft, airlift, surveillance/command, maintenance/modification/logistics,
reconnaissance and advanced development programs. Major programs include the
F-22 air-superiority fighter, Joint Strike Fighter, F-16 multi-role fighter,
C-130J tanker/transport, X-33 reusable launch vehicle technology demonstrator,
DarkStar reconnaissance vehicle, Airborne Early Warning & Control systems,
Contractor Logistics Support, and various maintenance and modification programs.
Energy and Other - The Corporation manages certain facilities for the DOE. 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 environmental
remediation services to commercial and U.S. Government customers, and has
investments in other businesses. Through October 1996, the Corporation provided
construction aggregates and specialty chemical products to commercial and civil
customers through its Materials subsidiary.
Selected Financial Data by Business Segment
(In millions) 1997 1996 1995
============================================================================
Net sales
Space & Strategic Missiles $ 8,303 $ 7,904 $ 7,813
Electronics 7,069 6,675 3,357
Information & Services 6,468 5,893 4,173
Aeronautics 6,045 5,596 6,617
Energy and Other 184 807 893
- ----------------------------------------------------------------------------
$28,069 $26,875 $22,853
============================================================================
Operating profit
Space & Strategic Missiles $1,053 $ 973 $ 463
Electronics 594 673 224
Information & Services 163 290 267
Aeronautics 612 441 394
Energy and Other 357 356 29
- ----------------------------------------------------------------------------
$2,779 $2,733 $1,377
============================================================================
Depreciation and amortization
Space & Strategic Missiles $177 $188 $206
Electronics 214 239 122
Information & Services 112 121 69
Aeronautics 88 126 142
Energy and Other 15 58 66
- ----------------------------------------------------------------------------
$606 $732 $605
============================================================================
Amortization of intangible assets
Space & Strategic Missiles $ 29 $ 29 $ 37
Electronics 228 199 64
Information & Services 107 92 47
Aeronautics 80 80 80
Energy and Other 2 2 2
- ----------------------------------------------------------------------------
$446 $402 $230
============================================================================
Expenditures for property,
plant and equipment
Space & Strategic Missiles $293 $264 $165
Electronics 189 213 100
Information & Services 137 104 63
Aeronautics 104 75 58
Energy and Other 27 81 114
- ----------------------------------------------------------------------------
$750 $737 $500
============================================================================
Identifiable assets
Space & Strategic Missiles $ 4,599 $ 3,758 $ 3,750
Electronics 10,619 11,363 3,869
Information & Services 5,150 6,111 2,679
Aeronautics 3,757 4,201 3,827
Energy and Other 4,236 4,107 3,433
- ----------------------------------------------------------------------------
$28,361 $29,540 $17,558
============================================================================
- -----
43
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements . Continued
Net Sales by Customer Category
(In millions) 1997 1996 1995
================================================================================
U.S. Government
Space & Strategic Missiles $ 6,472 $ 6,401 $ 6,315
Electronics 4,844 4,451 2,266
Information & Services 4,050 3,878 2,747
Aeronautics 2,912 3,830 4,274
Energy and Other 118 154 168
- --------------------------------------------------------------------------------
$18,396 $18,714 $15,770
================================================================================
Foreign governments/(a)//(b)/
Space & Strategic Missiles $ 94 $ 38 $ 112
Electronics 1,695 1,656 832
Information & Services 246 152 77
Aeronautics 2,826 1,466 1,966
Energy and Other -- -- --
- --------------------------------------------------------------------------------
$4,861 $3,312 $2,987
================================================================================
Commercial/(b)/
Space & Strategic Missiles $1,737 $1,465 $1,386
Electronics 530 568 259
Information & Services 2,172 1,863 1,349
Aeronautics 307 300 377
Energy and Other 66 653 725
- --------------------------------------------------------------------------------
$4,812 $4,849 $4,096
================================================================================
(a) Sales made to foreign governments through the U.S. Government are included
in the foreign governments category above.
(b) Export sales, included in the foreign governments and commercial categories
above, were $5.9 billion, $4.7 billion and $3.7 billion in 1997, 1996 and
1995, respectively.
================================================================================
Note 18 - Summary of
Quarterly Information (Unaudited)
1997 Quarters
-------------------------------------
(In millions,
except per share data) First Second Third Fourth/(a)/
===========================================================================
Net sales $6,674 $6,898 $6,619 $7,878
Earnings from operations 656 637 677 327
Net earnings 290 308 331 371
Diluted earnings per share
before deemed preferred
stock dividend 1.35 1.42 1.51 1.83/(b)/
===========================================================================
1996 Quarters
-------------------------------------
(In millions,
except per share data) First/(c)/ Second Third Fourth/(d)/
===========================================================================
Net sales $5,109 $7,076 $7,028 $7,662
Earnings from operations 472 693 675 441
Net earnings 272 299 311 465
Diluted earnings per share 1.23 1.34 1.40 2.14
===========================================================================
(a) Earnings for the fourth quarter of 1997 include the effects of certain
nonrecurring and unusual items, including a tax-free gain of $311 million,
or $1.53 per diluted share, and after tax charges of $303 million, or $1.49
per diluted share (see Notes 3 and 5). The Corporation also changed its
expected long-term rate of return on benefit plan assets effective October
1, 1997, which decreased pension cost (see Note 14).
(b) Earnings per share for 1997 excludes the effects of a deemed preferred
stock dividend resulting from the transaction with GE. The excess of the
fair value of the consideration transferred to GE (approximately $2.8
billion) over the carrying value of the Series A preferred stock ($1.0
billion) was treated as a deemed preferred stock dividend and deducted from
1997 net earnings in determining net earnings applicable to common stock
used in the computation of earnings per share. The effect of this deemed
dividend was to decrease basic earnings per share by $9.79, and was
antidilutive in the calculation of diluted earnings per share.
(c) Net sales and earnings for the first quarter of 1996 do not include the
operations of Tactical Systems, as its operations have been included in the
results of operations of the Corporation from April 1, 1996 (see Note 4).
(d) Earnings for the fourth quarter of 1996 include the effects of certain
nonrecurring items, including an after tax gain of $351 million, or $1.62
per diluted share, and after tax charges of $209 million, or $.97 per
diluted share (see Notes 4 and 5).
- -----
44
<PAGE>
Lockheed Martin Corporation
================================================================================
Consolidated Financial Data - Eight Year Summary
<TABLE>
<CAPTION>
(In millions, except per share data) 1997 1996 1995 1994 1993 1992 1991 1990
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Results
Net sales $ 28,069 $ 26,875 $ 22,853 $ 22,906 $ 22,397 $ 16,030 $ 15,871 $ 16,089
Costs and expenses 25,772 24,594 21,571 21,127 20,857 14,891 14,767 15,178
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings from operations 2,297 2,281 1,282 1,779 1,540 1,139 1,104 911
Other income and expenses, net 482 452 95 200 44 42 (49) 34
- ----------------------------------------------------------------------------------------------------------------------------------
2,779 2,733 1,377 1,979 1,584 1,181 1,055 945
Interest expense 842 700 288 304 278 177 176 180
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and
cumulative effect of changes in
accounting 1,937 2,033 1,089 1,675 1,306 1,004 879 765
Income tax expense 637 686 407 620 477 355 261 161
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect
of changes in accounting 1,300 1,347 682 1,055 829 649 618 604
Cumulative effect of changes
in accounting -- -- -- (37) -- (1,010) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 1,300 $ 1,347 $ 682 $ 1,018 $ 829 $ (361) $ 618 $ 604
==================================================================================================================================
Earnings (Loss) Per Common Share
Basic:
Before deemed preferred stock dividend
and cumulative effect of changes
in accounting $ 6.73 $ 6.80 $ 3.28 $ 5.32 $ 3.99 $ 3.31 $ 3.05 $ 2.97
Deemed preferred stock dividend (9.85) -- -- -- -- -- -- --
Cumulative effect of changes in
accounting -- -- -- (.20) -- (5.15) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
$ (3.12) $ 6.80 $ 3.28 $ 5.12 $ 3.99 $ (1.84) $ 3.05 $ 2.97
==================================================================================================================================
Diluted:
Before deemed preferred stock dividend
and cumulative effect of changes
in accounting $ 6.09 $ 6.09 $ 3.09 $ 4.85 $ 3.77 $ 3.30 $ 3.04 $ 2.97
Deemed preferred stock dividend (8.55) -- -- -- -- -- -- --
Cumulative effect of changes
in accounting -- -- -- (.17) -- (5.14) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
* $ 6.09 $ 3.09 $ 4.68 $ 3.77 $ (1.84) $ 3.04 $ 2.97
==================================================================================================================================
Cash dividends $ 1.60 $ 1.60 $ 1.34 $ 1.14 $ 1.09 $ 1.04 $ .98 $ .90
==================================================================================================================================
Condensed Balance Sheet Data
Current assets $ 10,105 $ 10,346 $ 8,208 $ 8,143 $ 6,961 $ 5,157 $ 5,553 $ 5,442
Property, plant and equipment 3,669 3,721 3,134 3,455 3,643 3,139 3,155 3,200
Intangible assets related to contracts
and programs acquired 1,566 1,767 1,553 1,696 1,832 42 52 59
Costs in excess of net assets acquired 9,856 10,394 2,794 2,831 2,697 841 864 882
Other assets 3,165 3,312 1,869 1,854 1,949 1,648 895 883
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 28,361 $ 29,540 $ 17,558 $ 17,979 $ 17,082 $ 10,827 $ 10,519 $ 10,466
==================================================================================================================================
Short-term borrowings $ 494 $ 1,110 $ -- $ -- $ -- $ -- $ -- $ --
Current maturities of long-term debt 876 180 722 285 346 327 298 30
Other current liabilities 7,819 7,382 4,462 5,177 4,690 3,176 3,833 4,235
Long-term debt 10,528 10,188 3,010 3,594 4,026 1,803 1,997 2,392
Post-retirement benefit liabilities 1,982 2,077 1,795 1,859 1,848 1,579 54 --
Other liabilities 1,486 1,747 1,136 978 971 460 112 38
Stockholders' equity 5,176 6,856 6,433 6,086 5,201 3,482 4,225 3,771
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 28,361 $ 29,540 $ 17,558 $ 17,979 $ 17,082 $ 10,827 $10,519 $ 10,466
==================================================================================================================================
Common Shares Outstanding
at Year End 194.4 192.7 198.6 199.1 197.9 194.1 201.4 200.7
==================================================================================================================================
</TABLE>
*Antidilutive.
- ----------
45
<PAGE>
================================================================================
Corporate Directors
(As of March 12, 1998)
Board of Directors Eugene F. Murphy
Vice Chairman and
Norman R. Augustine Executive Officer
Chairman of the Board General Electric Company
Lockheed Martin Corporation
Allen E. Murray
Marcus C. Bennett Retired Chairman and
Executive Vice President and Chief Chief Executive Officer
Financial Officer Mobil Corporation
Lockheed Martin Corporation
Frank Savage
Lynne V. Cheney Chairman
Senior Fellow for Public Policy Research Alliance Capital Management
American Enterprise Institute International
Vance D. Coffman Peter B. Teets
Chief Executive Officer and President and Chief Operating Officer
Vice Chairman Lockheed Martin Corporation
Lockheed Martin Corporation
Daniel M. Tellep
Houston I. Flournoy Retired Chairman of the Board and
Special Assistant to the President, Chief Executive Officer
Governmental Affairs Lockheed Martin Corporation
University of Southern California
Carlisle A. H. Trost
James F. Gibbons Retired Chief of Naval Operations
Reid Weaver Dennis Professor
of Electrical Engineering James R. Ukropina
Stanford University Partner
O'Melveny & Myers
Edward E. Hood, Jr.
Retired Vice Chairman Douglas C. Yearley
General Electric Company Chairman, President and Chief
Executive Officer
Caleb B. Hurtt Phelps Dodge Corporation
Retired President and
Chief Operating Officer
Martin Marietta Corporation
Gwendolyn S. King
Retired Senior Vice President,
Corporate and Public Affairs
PECO Energy Company
Vincent N. Marafino
Retired Executive Vice President
Lockheed Martin Corporation
Committees
Audit and Ethics Committee
Mr. Hood, Chairman
Mmes. Cheney and King, Messrs.
Flournoy, Marafino, Tellep, Trost
and Ukropina
Compensation Committee
Mr. Murray, Chairman
Messrs. Gibbons, Hood, Murphy,
Trost and Yearley
Executive Committee
Mr. Augustine, Chairman
Messrs. Coffman, Hood, Marafino,
Murray, Tellep, Ukropina and Yearley
Finance Committee
Mr. Ukropina, Chairman
Mrs. King and Messrs. Hurtt,
Marafino, Savage, Tellep and Yearley
Nominating Committee
Mr. Murphy, Chairman
Mrs. Cheney and Messrs. Flournoy,
Gibbons, Hurtt, Murray and Savage
Stock Option Subcommittee
Mr. Murray, Chairman
Messrs. Gibbons, Hood, Trost
and Yearley
- ----------
46
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
Officers Brian D. Dailey
Vice President
Joseph D. Antinucci
Vice President Peter DeMayo
Vice President
William F. Ballhaus, Jr.
Vice President Terrance M. Drabant
Vice President
Marcus C. Bennett
Executive Vice President and Philip J. Duke
Chief Financial Officer Vice President
James F. Berry Jack S. Gordon
Vice President Vice President
James A. Blackwell, Jr. John Hallal
Vice President and President and Vice President
Chief Operating Officer,
Aeronautics Sector Dain M. Hancock
Vice President
Melvin R. Brashears
Vice President and President and Alfred G. Hansen
Chief Operating Officer, Vice President
Space & Strategic Missiles Sector
Marcus C. Hansen
William B. Bullock Vice President
Vice President
K. Michael Henshaw
Michael F. Camardo Vice President
Vice President
Arthur E. Johnson
Joseph R. Cleveland Vice President and President and
Vice President Chief Operating Officer,
Information & Services Sector
Vance D. Coffman
Chief Executive Officer and Todd J. Kallman
Vice Chairman Vice President and Controller
Raymond S. Colladay Gary P. Mann
Vice President Vice President
Thomas A. Corcoran John F. Manuel
Vice President and President and Vice President
Chief Operating Officer,
Electronics Sector G. Thomas Marsh
Vice President
Robert B. Coutts
Vice President Carol R. Marshall
Vice President
Russell T. McFall
Vice President
Janet L. McGregor
Vice President
Frank H. Menaker, Jr.
Senior Vice President and
General Counsel
John E. Montague
Vice President
Albert Narath
Vice President
David S. Osterhout
Vice President
Daniel W. Patterson
Vice President
Susan M. Pearce
Vice President
Terry F. Powell
Vice President
John B. Ramsey
Vice President
Walter E. Skowronski
Vice President and Treasurer
Albert E. Smith
Vice President
Michael A. Smith
Vice President
John V. Sponyoe
Vice President
Robert J. Stevens
Vice President and President and
Chief Operating Officer,
Energy & Environment Sector
Peter B. Teets
President and Chief Operating Officer
Robert H. Trice, Jr.
Vice President
Lillian M. Trippett
Vice President, Corporate Secretary and
Associate General Counsel
Anthony Van Schaick
Vice President
Leonard L. Victorino
Vice President
William T. Vinson
Vice President and Chief Counsel
- ----------
47
<PAGE>
Lockheed Martin Corporation
================================================================================
General Information
As of December 31, 1997, there were approximately 41,071 holders of record of
Lockheed Martin common stock and 194,416,938 shares outstanding.
Common Stock Prices (New York Stock Exchange--composite transactions)
(In dollars) High Low Close
==========================================================================
1997 Quarters
------------------------------------------------------------------------
1st 92 7/8 82 84
------------------------------------------------------------------------
2nd 105 1/4 78 1/4 103 9/16
------------------------------------------------------------------------
3rd 113 7/16 98 3/8 106 5/8
------------------------------------------------------------------------
4th 108 7/16 88 1/8 98 1/2
==========================================================================
==========================================================================
1996 Quarters
------------------------------------------------------------------------
1st 80 7/8 73 1/8 75 7/8
------------------------------------------------------------------------
2nd 86 3/4 73 84
------------------------------------------------------------------------
3rd 91 3/4 76 1/4 90 1/8
------------------------------------------------------------------------
4th 96 5/8 85 1/4 91 1/2
==========================================================================
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 Stock Exchange
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 year ended December 31, 1997 by writing to:
Lockheed Martin Investor Relations
6801 Rockledge Drive
Bethesda, MD 20817
For accessing the Lockheed Martin homepage on the Internet use the Uniform
Resource Locator: http://www.shareholder.com/lmt.
Updates on earnings, dividends and company news are available
by calling Lockheed Martin Shareholder Direct at
1-800-LMT-9758, 24 hours a day, seven days a week.
- -----
48
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
Setting the Standard
Lockheed Martin's Code of Ethics and Business Conduct is called "Setting the
Standard." We aim to set the standard for ethical business conduct through these
six guiding ethical principles.
Honesty: to be truthful in all our endeavors; to be honest and forthright with
one another and with our customers, communities, suppliers, and shareholders.
Integrity: to say what we mean, to deliver what we promise, and to stand for
what is right.
Respect: to treat one another with dignity and fairness, appreciating the
diversity of our workforce and the uniqueness of each employee.
Trust: to build confidence through teamwork and open, candid communication.
Responsibility: to speak up--without fear of retribution--and report concerns
in the work place, including violations of laws, regulations and company
policies, and seek clarification and guidance whenever there is doubt.
Citizenship: to obey all the laws of the United States and the other countries
in which we do business and to do our part to make the communities in which we
live better.
- --------------------------------------------------------------------------------
Shareholders desiring to read "Setting the Standard, Lockheed Martin's Code of
Ethics and Business Conduct" or obtain additional information about the
Corporation's ethics program may visit the Lockheed Martin homepage on the
World Wide Web: http://www.lmco.com or write to the Corporation care of Carol R.
Marshall, Vice President, Ethics and Business Conduct, P.O. Box 34143, Bethesda,
MD 20827-0143. E-mail: [email protected]
- -----
49
<PAGE>
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
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, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the
"Exchange Act"). The words "estimate," "anticipate," "project," "intend,"
"expect," and similar expressions are intended to identify forward looking
statements. All forward looking statements involve risks and uncertainties,
including, without limitation, statements and assumptions with respect to future
revenues, program performance and cash flows, the outcome of contingencies
including litigation and environmental remediation, and anticipated costs of
capital investments and planned dispositions. Readers are cautioned not to place
undue reliance on these forward looking statements which speak only as of the
date of this Annual Report. The Corporation does not undertake any obligation to
publicly release any revisions to these forward looking statements to reflect
events, circumstances or changes in expectations after the date of this Annual
Report, or to reflect the occurrence of unanticipated events. The forward
looking statements in this document are intended to be subject to the safe
harbor protection provided by Sections 27A of the Securities Act and 21E of the
Exchange Act. 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 14 through
17 and pages 18 through 19, respectively, of the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 (Form 10-K); "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 11 through 24 of this Annual Report, and "Note 1--Summary of Significant
Accounting Policies," "Note 2--Transaction Agreement with Northrop Grumman
Corporation" and "Note 16--Commitments and Contingencies" of the Notes to
Consolidated Financial Statements on pages 31 through 32, 32 through 33 and 41
through 42, respectively, of the Audited Consolidated Financial Statements
included in this Annual Report and incorporated by reference into the Form 10-K.
- -----
50
<PAGE>
[LOGO OF LOCKHEED MARTIN APPEARS HERE]
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, MD 20817
<PAGE>
[INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX TO THE EDGAR VERSION OF THE 1997 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 1997 Annual Report to Shareholders (the "1997 Annual
Report") but has been omitted from the EDGAR version.
A description of the pictures omitted from the 1997 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 1997 Annual
Report and are neither individually nor in the aggregate material to an
understanding of the Report.
The 1997 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 13 -- The omitted graph sets forth in columnar format net sales, in
millions of dollars, for the years 1997, 1996 and 1995 and corresponds to the
textual description of net sales.
Page 14 -- The graph omitted at the top of the page sets forth in columnar
format net earnings, in millions of dollars, for the years 1997, 1996, and 1995.
The graph corresponds to the textual description of net earnings.
Page 15 -- The graph omitted at the bottom of the page sets forth in columnar
format earnings per common share, assuming full dilution, before deemed
preferred stock dividend in dollars, for the years 1997, 1996 and 1995. The
graph corresponds to the textual desciption of earnings per common share.
Page 16 -- The omitted graph sets forth in columnar format dividends per common
share for each of 1997, 1996 and 1995.
Page 20 -- The omitted graph sets forth in columnar format negotiated backlog,
in millions of dollars, for the years 1997, 1996 and 1995 and corresponds to the
textual description of negotiated backlog.
Page 21 -- The omitted graph sets forth in columnar format net cash provided by
operating activities in each of 1997, 1996 and 1995 and follows the associated
textual discussion.
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF
LOCKHEED MARTIN CORPORATION
<TABLE>
<CAPTION>
State or Percentage
Country of of Securities
Name of Subsidiary Incorporation Owned
- ------------------ ------------- -------------
<S> <C>
Lockheed Martin Federal Systems, Inc. Delaware 100%
</TABLE>
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.
<PAGE>
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 19, 1998, except for
Note 2 and the next to the last paragraph of Note 16, as to which the date is
March 12, 1998, included in the 1997 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, 33-58085, 33-58089 and 33-58097 of Lockheed Martin Corporation
on Form 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;
(4) Registration Statement Number 33-63155 of Lockheed Martin Corporation on
Form S-8, dated October 3, 1995;
(5) Registration Statement Number 33-06255 of Lockheed Martin Corporation on
Form S-8, dated June 19, 1996;
(6) Registration Statement Numbers: 33-06479, 33-06481, 33-06483, 33-06485,
33-06487, 33-06515 and 33-06517 of Lockheed Martin Corporation on Form
S-8, each dated June 21, 1996;
(7) Registration Statement Numbers: 333-20117 and 333-20139 of Lockheed
Martin Corporation on Form S-8, each dated January 22, 1997;
(8) Post-Effective Amendment No. 1, dated January 22, 1997 to Registration
Statement Number 333-58083 on Form S-8;
(9) Registration Statement Number 333-27309 of Lockheed Martin Corporation on
Form S-8, dated May 16, 1997;
(10) Registration Statement Number 333-37069 of Lockheed Martin Corporation
on Form S-8, dated October 2, 1997;
(11) Registration Statement Number 333-40997 of Lockheed Martin Corporation on
Form S-8, dated November 25, 1997; and
(12) Registration Statement Number 333-44671 of Lockheed Martin Corporation
on Form S-4, dated January 22, 1998
of our report dated January 19, 1998, except for Note 2 and the next to the last
paragraph of Note 16, as to which the date is March 12, 1998, with respect to
the consolidated financial statements incorporated herein by reference.
/s/ Ernst & Young LLP
Washington, D.C.
March 16, 1998
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- --------------------
Vance D. Coffman
Chief Executive Officer and Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- ---------------------
Marcus C. Bennett
Executive Vice President, Chief Financial Officer and Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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/TODD J. KALLMAN February 26, 1998
- ------------------
Todd J. Kallman
Chief Accounting Officer
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 February 26, 1998
- -----------------------
Norman R. Augustine
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- -------------------
Lynne V. Cheney
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 I. FLOURNOY February 26, 1998
- -----------------------
Houston I. Flournoy
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- --------------------
James F. Gibbons
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- -----------------------
Edward E. Hood, Jr.
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- ------------------
Caleb B. Hurtt
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- --------------------
Gwendolyn S. King
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- ----------------------
Vincent N. Marafino
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- -------------------
Eugene F. Murphy
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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/ALLEN E. MURRAY February 26, 1998
- ------------------
Allen E. Murray
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- ---------------
Frank Savage
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- -------------------
Daniel M. Tellep
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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/PETER B. TEETS February 26, 1998
- -----------------
Peter B. Teets
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- -----------------------
Carlisle A. H. Trost
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- --------------------
James R. Ukropina
Director
<PAGE>
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") and any
amendments thereto for Lockheed Martin's fiscal year ended December 31, 1997
with exhibits thereto, including, but not limited to, Lockheed Martin's Audited
Consolidated Financial Statements as of December 31, 1997 and 1996 and for each
of the three years in the period ended December 31, 1997 and Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Lockheed Martin's fiscal year ended December 31, 1997, 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 26, 1998
- ---------------------
Douglas C. Yearley
Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 5,009
<ALLOWANCES> 0
<INVENTORY> 3,144
<CURRENT-ASSETS> 10,105
<PP&E> 8,644
<DEPRECIATION> 4,975
<TOTAL-ASSETS> 28,361
<CURRENT-LIABILITIES> 9,189
<BONDS> 10,528
0
0
<COMMON> 194
<OTHER-SE> 4,982
<TOTAL-LIABILITY-AND-EQUITY> 28,361
<SALES> 28,069
<TOTAL-REVENUES> 28,069
<CGS> 25,772
<TOTAL-COSTS> 25,772
<OTHER-EXPENSES> 482
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 842
<INCOME-PRETAX> 1,937
<INCOME-TAX> 637
<INCOME-CONTINUING> 1,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,300
<EPS-PRIMARY> (3.12)<F1>
<EPS-DILUTED> (2.46)<F1>
<FN>
<F1>See "Note 6 -- Earnings Per Share" on page 35 of the 1997 Annual Report
incorporated by reference in Lockheed Martin's Annual Report on Form 10-K for
the year ended December 31, 1997.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
RESTATED FINANCIAL DATA SCHEDULE - CONTAINS RESTATED SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED
STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
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0
1,000
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RESTATED FINANCIAL DATA SCHEDULE - CONTAINS RESTATED SUMMARY FINANCIAL
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0
1,000
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RESTATED FINANCIAL DATA SCHEDULE - REFLECTS RESTATEMENT OF DILUTED EARNINGS PER
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0
1,000
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RESTATED FINANCIAL DATA SCHEDULE - REFLECTS RESTATEMENT OF DILUTED EARNINGS PER
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0
1,000
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RESTATED FINANCIAL DATA SCHEDULE - REFLECTS RESTATEMENT OF DILUTED EARNINGS PER
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0
1,000
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RESTATED FINANCIAL DATA SCHEDULE - REFLECTS RESTATEMENT OF DILUTED EARNINGS PER
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0
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RESTATED FINANCIAL DATA SCHEDULE - REFLECTS RESTATEMENT OF DILUTED EARNINGS PER
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0
1,000
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RESTATED FINANCIAL DATA SCHEDULE - REFLECTS RESTATEMENT OF DILUTED EARNINGS PER
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0
1,000
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