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EXHIBIT 10.1
LOCKHEED MARTIN CORPORATION
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MANAGEMENT INCENTIVE COMPENSATION PLAN
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Approved July 27, 1995
Amended September 24, 1998
Amended September 28, 2000
ARTICLE I
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PURPOSE OF THE PLAN
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This Plan is established to provide a further incentive to selected employees to
promote the success of Lockheed Martin Corporation by providing an opportunity
to receive additional compensation for above average performance measured
against individual and business unit goals. The Plan is intended to achieve the
following:
1. Improved cost effectiveness.
2. Stimulate employees to work individually and as teams to meet
objectives and goals consistent with enhancing shareholder values.
3. Facilitate the Company's ability to retain qualified employees and to
attract top executive talent.
ARTICLE II
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STANDARD OF CONDUCT AND PERFORMANCE EXPECTATION
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1. It is expected that the business and individual goals and objectives
established for this Plan will be accomplished in accordance with the
Company's policy on ethical conduct in business with the Government
and all other customers. It is a prerequisite before any award can be
considered that a participant will have acted in accordance with the
Lockheed Martin Corporation Code of Ethics and Business Conduct and
fostered an atmosphere to encourage all employees acting under the
Participants' supervision to perform their duties in accordance with
the highest ethical standards. Ethical behavior is imperative. Thus,
in achieving one's goals, their individual commitment and adherence to
the Company's ethical standards will be considered paramount in
determining awards under this Plan.
2. Plan participants whose individual performance is determined to be
less than acceptable are not eligible to receive incentive awards.
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ARTICLE III
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DEFINITIONS
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1. PLAN -- This Lockheed Martin Corporation Management Incentive
Compensation Plan (MICP).
2. BOARD OF DIRECTORS -- The Board of Directors of the Company.
3. COMMITTEE -- The Management Development & Compensation Committee of
the Board of Directors as from time to time appointed or constituted
by the Board of Directors.
4. COMPANY -- Lockheed Martin Corporation and those subsidiaries of
which it owns directly or indirectly 50% or more of the voting stock
or other equity interests.
5. EMPLOYEE -- Any person who is employed by the Company and who is paid
a salary as distinguished from an hourly wage. The term shall be
deemed to include any person who was employed by the Company during
all or any part of the year with respect to which an appropriation is
made to the Plan by the Board of Directors but shall not include any
employee who, during any part of such year, was represented by a
collective bargaining agent or whose salary is paid by a third party.
6. PARTICIPANT -- Any Employee selected to participate in the Plan in
accordance with its terms.
7. PLAN YEAR -- A calendar year.
8. ANNUAL SALARY -- The regular base salary of a Participant during a
fiscal year of the Company, determined by multiplying by 52 the
Participant's weekly base salary rate effective during the first full
pay period in December preceding the year of payment, but excluding
any incentive compensation, commissions, over-time payments, payments
under work-week plan, indirect payments, retroactive payments not
affecting the base salary or applicable to the current year, and any
other payments of compensation of any kind.
ARTICLE IV
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ELIGIBILITY FOR PARTICIPATION
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Those Employees who through their efforts are able to contribute significantly
to the success of the Company in any given calendar year will be considered
eligible for selection for participation in the Plan with respect to that year.
Participants are selected each Plan Year based on recommendations by the
Business Area Executive Vice Presidents or corporate function heads and have
received the endorsement of the Executive Office. Those eligible shall include
all Employees considered by the Committee to be key Employees of the Company.
No member of the Committee shall be eligible for participation in the Plan.
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ARTICLE V
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INCENTIVE COMPENSATION PAYMENTS
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1. CALCULATION OF PAYMENTS -- Incentive compensation payments to
Participants shall be calculated in accordance with the formula and
procedures set forth in Exhibit A hereto. All such payments shall be
in cash.
2. INDIVIDUAL PERFORMANCE FACTORS -- The Individual Performance Factors
of Participants, as provided in Exhibit A shall be determined by the
Business Area Executive Vice President or corporate function head and
approved by the Executive Office. The performance factors of the
Chairman of the Board and the President of Lockheed Martin Corporation
shall be determined by the Committee and the Committee shall review
the Individual Performance Factors of other Participants who are
elected officers of the Company. The Committee may at the request of
any member of the Committee review the Individual Performance Factors
of any other Participant or groups of Participants. The Committee may
make adjustments in any such performance factors as it considers
appropriate.
3. ORGANIZATIONAL PERFORMANCE FACTORS -- Organizational Performance
Factors, as provided for in Exhibit A, shall be determined by the
Executive Office and shall thereafter be reviewed with and be subject
to the approval of the Committee. The Committee may make adjustments
in any such factor as it considers appropriate. The Executive Office
shall, as soon as feasible in each year, review with the Committee the
company and corporate objectives which may relate to the determination
of such Organizational Performance Factors.
4. RECOMMENDATION BY THE COMMITTEE.
A. As early as feasible after the end of each Plan Year in respect
of which incentive compensation payments are to be made, the
Committee shall establish an incentive fund which shall be equal
to a percentage, to be determined by the Committee at that time,
to be the Company's pretax earnings for the year in which
incentive compensation payments are to be made. For purposes of
the Plan, pretax earnings shall (i) consist of pretax earnings
from operations; (ii) shall not include any earnings attributable
to extraordinary items as determined by generally accepted
accounting principles; and (iii) shall be computed prior to the
deduction of incentive compensation payments to be paid under the
Plan.
B. To the extent that the aggregate of all proposed payments of
incentive compensation to all Participants as determined by the
application of the formula set forth in Exhibit A (subject to any
adjustments made by the Committee under Paragraph 2 or 3 above)
exceeds the amount of the incentive fund as determined under
Paragraph 4.A. above, all proposed payments of incentive
compensation to Participants shall be reduced on a prorata basis.
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C. If the Company's pretax earnings, as defined in Paragraph 4A, are
less than the aggregate of all proposed payments of incentive
compensation (as determined by the application of the formula set
forth in Exhibit A subject to 2 or 3 above), the Committee may,
in its discretion, establish an incentive fund without regard to
the pretax earnings guideline of Paragraph 4A. If the Committee
does so, Paragraph 4B shall not apply and the Committee's
recommendation to the Board of Directors shall both state that
the pretax earnings guideline would be exceeded and set forth the
reasons the Committee believes that the proposed incentive
compensation payments should nevertheless be made.
D. The Committee will recommend to the Board of Directors the
authorization of an appropriation to the Plan by the Company for
distribution to Participants in an amount equal to the incentive
fund as computed pursuant to the provisions of this Paragraph 4.
5. APPROPRIATIONS TO THE PLAN -- The Board of Directors may,
notwithstanding any provision of the Plan, make adjustments in any
proposed incentive compensation payment under the Plan, and subject to
any such adjustments, the Board of Directors will appropriate to the
Plan the amount as recommended by the Committee for distribution to
the Participants; provided that, the Board of Directors may
appropriate an amount which is less than the amount recommended by the
Committee in which event all proposed payments of incentive
compensation to Participants shall be reduced on a prorata basis.
6. METHOD OF PAYMENT -- The amount so determined for each Participant
with respect to each calendar year shall be paid to such Participant
in full or on a deferred basis as determined by the Committee. Such
determination as to deferred payments shall be governed by the
Committee's judgement as to the time of payment best serving the
interests of the Company. Deferred payments shall be made pursuant to
such terms and conditions, as may be determined or provided for the by
the Committee, only to Participants who continue in the employ of the
Company or are retired under a retirement plan approved by the Board
of Directors, or to the estates of, or beneficiaries designated by,
Participants who shall have died while in such employ or after such
retirement. In the event of termination of employment by a Participant
for any reason other than such retirement or death, then such
Participant or his estate or his beneficiary or beneficiaries, shall
after such termination receive a distribution or distributions of any
amounts deferred by the Committee, if any, the amount (not in excess
of the unpaid deferred payments) and time of which shall be determined
or provided for by the Committee. Participants may also elect to defer
payments to the extend provided in the Lockheed Martin Corporation
Deferred Management Incentive Compensation Plan.
7. RIGHTS OF PARTICIPANTS -- All payments are subject to the discretion
of the Board of Directors. No Participant shall have any right to
require the Board of Directors to make any appropriation to the Plan
for any calendar year, nor shall any Participant have any vested
interest or property right in any share in any amounts which may be
appropriated to the Plan. Payments properly made under the Plan and
distributed to Participants shall not be recoverable from the
Participant by the Company.
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ARTICLE VI
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ADMINISTRATION
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The Plan shall be administered under the direction of the Committee. The
Committee shall have the right to construe the Plan, to interpret any provision
thereof, to make rules and regulations relating to the Plan, and to determine
any factual question arising in connection with the Plan's operation after such
investigation or hearing as the Committee may deem appropriate. Any decision
made by the Committee under the provisions of this Article shall be conclusive
and binding on all parties concerned. The Committee may delegate to the officers
or employees of the Company the authority to execute and deliver those
instruments and documents, to do all acts and things, and to take all other
steps deemed necessary, advisable or convenient for the effective administration
of this Plan in accordance with its terms and purpose. Notwithstanding the
target levels noted on Exhibit A, the Committee and the Board of Directors (as
appropriate) may adopt a different target level for any elected officer.
ARTICLE VII
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AMENDMENT OR TERMINATION OF PLAN
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The Board of Directors shall have the right to terminate or amend this Plan at
any time and to discontinue further appropriations thereto.
ARTICLE VIII
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EFFECTIVE DATE
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The Plan shall be effective with respect to the operations of the Company for
the year 1995 and the years subsequent thereto. A Participant who receives an
award from this Plan is no longer eligible for any incentive compensation
payment from any similar plan which may have been administered by the Lockheed
Corporation or the Martin Marietta Corporation.
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EXHIBIT A
CALCULATION OF MANAGEMENT INCENTIVE COMPENSATION PAYMENTS
A. AWARD FORMULA
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1. Incentive compensation payments will be calculated by multiplying the
Participant's Annual Salary by the applicable "target" of the Participant's
position (as defined in B), and that result will then be multiplied by the
Individual Performance Factor (as defined in C). The resulting award will be
increased or decreased proportionately based on the appropriate
Organizational Performance Factor (as defined in D).
2. Partial awards for Participants who terminate employment during a Plan Year
may be recommended for consideration based on the following:
Termination Method MICP Award
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Voluntary May be considered for a pro-rated award if on active
status December 1 of the Plan Year with a minimum of
six (6) full months as an active Plan Participant
during the Plan Year.
Lay Off May be pro-rated based on the conditions of the case
at the discretion of the Business Area Executive Vice
President (or major corporate function head) with a
minimum of (6) full months as an active Plan
Participant during the Plan Year.
Retirement May be considered for a pro-rated award with a minimum
of (6) full months as an active Participant during the
Plan Year if Participant goes directly into retirement
status upon termination.
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3. Pro-rated awards may be recommended for individuals who become Participants
subsequent to the beginning of a Plan Year, and have a minimum of (6) full
months as active Participants during the Plan Year.
Any deviation requires Corporate Salary Board approval.
4. Recommended awards for Participants whose MICP target levels change during
the Plan Year will be pro-rated (based on number of months at old versus new
target level), if the new target level is in effect for less than (9) months
during the Plan Year.
Any deviation requires Business Area Executive Vice President or Executive
Office review and approval as appropriate.
5. The aggregate of all Participant's incentive awards determined under items C
and D below will be recommended to the Committee for its consideration.
6. Any calculation of incentive awards under this exhibit shall be subject to
the provisions of the Plan and in the event of any conflict between the
terms or application of this Exhibit A and the Plan, the Plan shall
prevail.
B. TARGET LEVELS
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Target levels are based on the level of importance and responsibility of the
position in the organization as determined by the Business Area Executive
Vice President and/or major corporate function head subject to approval by
the Executive Office.
Position Target
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Chief Executive Officer 100%
President 75%
Exec. VP. 65%
Other Elected Officers 55%
50%
45%
Other Eligible Positions 40%
35%
30%
25%
20%
15%
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C. INDIVIDUAL PERFORMANCE FACTORS
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Individual performance factors are normally in increments of 0.05 and will
have the following definitions:
Factor Definition
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1.20 - 1.30 Performance vastly superior to expectations and peers within
the organization.
1.05 - 1.15 Consistently exceeds expected performance.
1.00 Consistently meets all requirements and expectations.
0.80 - 0.90 Performance meets most, but not all job requirements and
expectations.
0.60 - 0.70 Performance meets some objectives, but overall performance
below expected levels.
0.00 Performance fails to meet job requirements.
D. ORGANIZATIONAL PERFORMANCE FACTORS
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l. Specific objectives will be established by the Executive Office and the
rating will depend on the assessment of the quality of performance by each
operating unit, or the corporate staff in accomplishing the objectives based
on the following schedule:
1.50 Far exceeded organizational objectives in all categories.
1.30 On balance, exceeded high performance expectations in most
categories.
1.00 Achieved all objectives or on balance met high performance
expectations.
0.75 Met most objectives. Overall performance was good, but not as
high as possible or expected.
0.50 Met few objectives, but overall performance not as good as
possible or expected.
0.0 Did not achieve sufficient overall performance level.
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2. Intermediate organizational ratings, as deemed appropriate by the Executive
Office for results achieved, may be assigned normally in increments of 0.05.
3. Weighting of organizational performance may be applied, as deemed
appropriate by the Executive Office.
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