PENSION PLAN FOR GRANDFATHERED EMPLOYEES

Links to Specific Topics:

• Eligibility and Enrollment
• Vesting
• When You Can Retire
• Determining Your Pension Benefit
• Calculating Your Average Straight-Time Monthly Earnings
• Normal Forms of Payment
• Optional Forms of Payment
• Social Security
• Participation While You Are Disabled
• If You Die While Employed
• If You Leave Before Retirement
• Applying for Benefits
• Other Important Information
• Pension Reduction Tables

Highlights

The Bechtel Jacobs Company LLC Pension Plan for Grandfathered Employees (Pension Plan for Grandfathered Employees) is designed to help build financial security and provide you with a dependable source of income throughout your retirement years, based on your earnings and length of service credited under the Restated Retirement Program Plan for Employees of Martin Marietta Energy Systems, Inc., with Lockheed Martin (including LMES, LMUS and LMER) and your earnings and service with Bechtel Jacobs Company.

For Employees Who Retire from Active Service, the Pension Plan for Grandfathered Employees...

...Helps Provide You With Flexibility in Planning Your Retirement

You can retire with a full pension benefit at age 65 or over. You can also receive a full pension benefit when you retire at age 62 if you have at least 10 years of Company Service Credit, or when your age and years of Company Service Credit equal 85 or more. You can receive a reduced early retirement benefit as early as age 50 if you have at least 10 years of Company Service Credit.

...Lets You Choose from a Variety of Payment Forms

There are several payment forms to choose from, including life annuity and survivor benefit options. If you are married, you will be paid in a 50% joint and survivor benefit, unless you have your spouse’s written consent to elect another payment form.

...Offers Financial Help to Your Family in Case of Your Death

If you should die before you begin to receive a pension benefit and you have at least five years of Credited Service, the Pension Plan for Grandfathered Employees will pay a survivor benefit.

Eligibility and Enrollment

Eligibility

You are eligible for the Pension Plan for Grandfathered Employees if you satisfy the definition of a “Grandfathered Employee.” Grandfathered Employees are individuals who were employees of:

• Lockheed Martin Energy Systems
• Lockheed Martin Utility Services and/or
• Lockheed Martin Energy Research

on March 31, 1998, or

• Bargaining Unit employees represented by Oil, Chemical and Atomic Workers (OCAW)
• United Plant Guard Workers of America (UPGWA) and
• Atomic, Trades and Labor Council (ATLC)

on the recall list on March 31, 1998, who are subsequently employed by Bechtel Jacobs Company LLC and its first-tier or second-tier subcontractors for work under DOE Contract No. DE-AC05-98OR22700 prior to April 1, 2000

unless you are:

• an employee whose employment is governed by the terms of a collective bargaining agreement, unless the collective bargaining agreement entered into with the Company provides for participation in the Pension Plan for Grandfathered Employees and until the Company specifies such persons as being within the coverage of the Pension Plan for Grandfathered Employees,
• a nonresident alien receiving no income from sources within the United States
• a leased employee
• an independent contractor as characterized in the books and records of the Company
• an employee included in a classification set up by the Company which classification does not discriminate in favor of employees who are officers, shareholders or highly compensated or
• an individual working for Davis-Bacon covered construction services

A Grandfathered Employee who incurs a break in service of any length will continue to be a Grandfathered Employee upon reemployment by the Company.

Enrollment

If you meet the eligibility requirements for the Pension Plan for Grandfathered Employees, you are automatically enrolled from your first day of work at the Company. You do not need to fill out any forms or contribute any money.

Vesting

"Vesting" means that you have earned the right to a benefit under the Pension Plan for Grandfathered Employees. You are entitled to a vested benefit after you have completed five years of Credited Service. When you reach your 65^th birthday, you are entitled to a non-forfeitable benefit regardless of your Credited Service. Credited Service is defined in the Glossary and generally means the total time you work at the Company and the time that you worked as an employee of Lockheed Martin (including LMES, LMUS and LMER plus your Credited Service under the Restated Retirement Program Plan for Employees of Martin Marietta Energy Systems, Inc.

When You Can Retire

To offer you flexibility in planning for retirement, the Pension Plan for Grandfathered Employees provides a choice of retirement dates. You can retire with a full pension:

• at age 65 or over

• at age 62 with 10 years and months of Company Service Credit or

• when your age and years and months of Company Service Credit total 85 or more

You can also retire as early as age 50 and receive a reduced early retirement benefit if you have at least 10 years of Company Service Credit.

“Company Service Credit” is defined in the Glossary and generally means the total time you work at the Company and the time that you worked as an employee of Lockheed Martin (including LMES, LMUS and LMER) plus your Company Service Credit under the Restated Retirement Program Plan for Employees of Martin Marietta Energy Systems, Inc.

If you choose to retire after age 65, you will continue to earn credit for your service and pay for plan benefit purposes until you actually retire. Generally, if you are still in active service at age

70 ½, you will have a one-time opportunity to elect to:

• start receiving your benefits while actively employed or
• defer benefits until you stop working for the Company and all of its affiliates

If you are stop working for the Company and all of its affiliates terminated before age 70 ½, your benefits will commence automatically on April 1 of the calendar year following the year in which you turn 70 ½.

There is one important exception to these retirement dates. If you stop working for the Company and all of its affiliates due to action of the Company (other than for cause), you will be considered to have met the age and service requirements for:

• a full pension benefit if you are age 60 or over and have at least eight years and months of Company Service Credit, or if you are age 48 or over and your years and months of Company Service Credit and age total 83 or more

or

• a reduced pension benefit if you are between ages 48 and 60 with at least eight years and months of Company Service Credit.

Determining Your Pension Benefit

The Pension Plan for Grandfathered Employees provides three different formulas — regular, alternate and minimum formulas — for calculating your pension. Each formula is based on your years and months of service and your average monthly earnings. The formula that produces the highest benefit for you, within plan limits, will be used.

All of the formulas are based in part on:

• your average straight-time monthly earnings — the average of your highest earnings for the three calendar years during the last 10 years just before you retire or, if greater, the final 36 full calendar months just before you retire (click link for a discussion of how these earnings are calculated).

• your Company Service Credit — including all your years and completed months of service as described in the definition of Company Service Credit — with each completed month counting as 1/12 of a year

Under this formula, no more than 50% of your Primary Social Security Benefit will be used to offset your earnings. If you provide the Company with complete Social Security Administration records of your covered earnings within six months of your retirement date, the Company will use a Social Security benefit based on these earnings rather than an estimated earnings history if it provides a higher benefit. Otherwise, the Company will use your estimated earnings history.

When you retire, your Primary Social Security Benefit for purposes of this formula is the benefit you would be eligible to receive at your retirement age or age 62, if later. This benefit is based on your estimated earnings before retirement and on the Social Security laws in effect on the date you retire.

Reduced Retirement Benefits

If you leave Covered Service at or after age 50 with at least 10 years of Company Service Credit and you request your retirement benefit, your monthly benefit is reduced. Covered Service is defined in the Glossary and generally means your service with Bechtel Jacobs Company including its designated subcontractors under DOE Contract DE-AC05-98OR22700. The amount of reduction is based on your age and service. For example, if you are age 55 and have 27 years of service, you will receive 85% of your full benefit. For a table of reduction factors, see Table I. See also the “Payment of Benefits” section .

The three formulas used to calculate full pensions are also used to calculate reduced pensions. The one which produces the largest benefit will be the one used. In the regular and minimum formulas, the reduction factor is applied after calculating the total benefit. In the alternate formula, the reduction factor is applied before subtracting the Primary Social Security Benefit.

If you retire before you are eligible for a full pension, you may postpone starting your pension and thus lessen or eliminate the reduction. In the example above, if you retire at age 55 with 27 years of service but postpone starting your pension until age 58, you will receive a full pension because your 27 years of service and your age will then total 85.

Any reduction for early retirement is in addition to the reduction that may be made to your plan benefit if you are eligible to elect and you do elect a form of benefit that provides continuing plan benefits to your spouse, dependent children or dependent parents after your death, as discussed in the section, If You Die While Employed . See Table III, Table IV and Table V for survivor reduction factors.

Calculating Your Average Straight-Time Monthly Earnings

Average straight-time monthly earnings are computed using your straight-time rate of pay (including certain executive incentive compensation, shift differential and hourly COLA) and your regularly scheduled hours during:

• the three full calendar years in which these earnings were highest during the 10 full calendar years just before you retire

or, if greater

• the final 36 full calendar months (three years) just before you retire

The average straight-time monthly earnings during the final three years are calculated by using:

• scheduled straight-time monthly earnings in the months of the calendar year in which you retire

• scheduled straight-time earnings in the two preceding calendar years

• for any months in the third preceding calendar year, the average of the scheduled straight-time monthly earnings for that year times the number of months used in that year

This calculation does not use the actual scheduled earnings for the specific months of the third year. The earnings rate used will be the monthly average for the entire year.

Note: Section 415 provides for limits on your annual pension benefit at retirement. For 1998, the maximum annual pension is $130,000. This amount is adjusted depending on your age at retirement, and the form of benefit you select. Your pension benefit may be further limited to the extent that combined 415 limits apply. Beginning in 2000, the combined plan limit will no longer apply. The Company will notify you if your pension benefit might be subject to these limits.

The amount of pay that can be used to calculate your benefit in the Pension Plan for Grandfathered Employees is also limited by federal tax law. For 1998, this amount is $160,000. This limit is subject to periodic cost-of-living adjustments.

Normal Forms of Payment

You will receive your plan benefits under the plan’s normal form of payment based on your marital status when you begin to receive benefits, unless you elect an optional form of payment.

For Married Employees

If you are married when you begin to receive benefits, the normal form of payment is a 50% joint and survivor benefit. Under this form of payment, your pension is reduced and, after your death, 50% of that benefit is continued to your surviving spouse for the rest of his or her life. This reduction is based on the ages of you and your spouse and reflects the fact that benefits are payable during both of your lifetimes. If your spouse dies before you, this form of payment will automatically be canceled and you will receive your future plan benefit as paid for single employees, discussed below. For a table of reduction factors, see Table III .

If you die before you begin to receive plan benefits, your spouse will receive 50% of the benefit you would have received had it begun on the date of your death.

If you have been married for less than one year, special rules apply.

For Single Employees

The plan’s normal form of payment for a single employee is a life annuity. Under this form of payment, you receive the full benefit earned at retirement for your lifetime. After your death, no benefits are paid to anyone else.

Optional Forms of Payment

The following optional forms of payment are available to retirees under the Pension Plan for Grandfathered Employees.

If you are married, you will need your spouse’s written consent, witnessed by a notary public or a representative of the Plan Administrator, in order to elect a form of payment other than the 50% joint and survivor benefit. You may revoke or change your election at any time before benefits begin, subject to your spouse’s written and witnessed consent.

Life Annuity Option for Married Employees

This option for married employees is the same as the normal form of payment for single employees. Under this form of payment, you receive your full pension benefits for your lifetime only. No benefits are paid to anyone after your death.

Survivor Benefit Option

You can elect a reduced pension in order to provide continuing income to a dependent child under age 23 or a dependent parent.

The amount of reduction in your pension depends on your age and the age of your named survivor. Examples of survivor factors are shown in Table IV and Table V. The terms "dependent child" and "dependent parent" are defined in the Glossary .

After your death, 50% of your reduced benefit will continue to your dependent child until age 23 (or as long as the child remains totally and permanently disabled) or your dependent parent for the rest of his or her life.

If you die before your pension benefits start, your named survivor will receive 50% of the reduced pension you would have received had it begun on the date of your death. Your election of a survivor benefit cannot be changed after your pension begins. If your named survivor should die before you, this payment form is automatically canceled and you will receive your future plan benefit as paid for single employees.

Level Income Option

If you retire before age 62 and choose to have your pension benefits begin before you are eligible to receive Social Security benefits, you may elect the level income option in addition to any other form of payment. Under this option, your plan income is increased until age 62 and is decreased after that time so that your combined income from the plan and Social Security is approximately level throughout your retirement. The Social Security amount used in the level income calculation is not your actual Social Security amount but is an estimate based on your average straight-time monthly earnings for the calendar year immediately preceding your retirement date.

If you elect the level income option, the survivor’s benefit will be based on the pension amount before adjustment for this option.

Social Security

Social Security provides retirement benefits to you and your eligible spouse based on earnings covered under the law. If you were born before 1938, full Social Security retirement benefits can start at age 65. Your spouse is eligible for an additional 50% of your benefit — or a benefit based on his or her own covered earnings, if greater — when he or she reaches age 65. Disability benefits may also be provided for you and eligible family members, as well as survivor’s benefits.

For employees born after 1937, the age for unreduced Social Security benefits will gradually increase from age 65 to age 67. Ultimately, for employees born after 1959, full Social Security benefits will not become payable until age 67. Reduced benefits are available as early as age 62.

Please remember that, although you and the Company each pay taxes toward the cost of your Social Security benefits, these benefits are not paid automatically. You must apply for them in all cases. To get more information about the law and your personal status under it, contact your local Social Security office.

Participation While You Are Disabled

Continuation of Plan Participation

If you become totally disabled and qualify for benefits under the Company’s Long-Term Disability Plan, you will continue to earn Company Service Credit just as if you had continued working. While you continue to be totally disabled, your earnings will be assumed to remain the same as at the time you became disabled. For purposes of determining your benefit, your average straight-time monthly earnings will be based on:

• the three calendar years in which your earnings were highest during the 10 full calendar years just prior to your last day worked just prior to your last day worked or

• the final 36 full calendar months (three years) worked(three years) just prior to your last day worked.

Click link for information on how your average straight-time monthly earnings during the final three years are calculated .

Effect of Disability on Your Pension Benefit

If you continue to be totally disabled, you may request a distribution of your specially calculated benefit under the same conditions as any other participant who terminates active employment at age 65. If your disability ends before age 65, you will receive Company Service Credit for the period of your disability — provided you return to work or transfer from disability status to retirement status. If you do not return to work after your disability ends, you will be considered to have terminated employment on the date your disability began.

If You Die While Employed

If you die while you are still employed and you have completed at least five years of Credited Service, the plan will pay a survivor benefit unless another form of payment has been selected. The timing and amount of this benefit will depend on your years of Credited Service when you die.

If you die after completing 10 years of Company Service Credit, the survivor benefit is payable immediately. (The age-50 requirement for early retirement does not apply in determining eligibility for the survivor benefit.) The benefit is a monthly income equal to 50% of the pension you would have received if you had retired on the day of your death. If your survivor is a younger spouse, the benefit will be reduced ½% for each full year more than five years that your spouse is younger than you. However, in no event will the survivor benefit be reduced to less than 25% of your full pension, calculated using your average earnings and service at your death.

If you die before completing 10 years of Company Service Credit (but after five years), the survivor benefit is payable the first day of the month following the day you would have reached age 65. The benefit is a monthly income equal to 50% of the benefit you would have received had you terminated employment on the day of your death and elected to receive your benefit at age 65 in the 50% joint and survivor form of payment. Your survivor can elect to receive reduced benefits as early as the date you would have reached age 50. The reduction will be 6 2/3% for each year before age 65, for up to three years (to age 62), plus 5% for each year before age 62 that benefits begin.

The benefit will be paid to your spouse for the rest of his or her life. If you are employed and not married when you die, the benefit will be paid in equal shares to your dependent children until age 23 (or as long as a child remains totally and permanently disabled). If you have no dependent children, then the benefit will be paid in equal shares to your dependent parents for life. The terms "dependent child" and "dependent parent" are defined in the Glossary .

Any benefit being paid to a dependent child or dependent parent cannot be transferred to someone else when the child or parent no longer qualifies for it. However, if a spouse dies while receiving the survivor benefit, the spouse’s benefit will continue in equal shares to any of your dependent children under age 23 or as long as a child remains totally and permanently disabled.

If You Leave Before Retirement

If you stop working for the Company and all of its affiliates for any reason after completing at least five years of Credited Service, you are "vested." Being vested means you have a nonforfeitable right to receive plan benefits.

Credited Service is defined in the Glossary and generally means the time you work at the Company (including designated subcontractors) and all the time you work for certain affiliated companies, from your first hour of service until you sever from service.

The following sections, "Benefit Amount," "Payment of Benefits" and "Pre-Retirement Spouse’s Benefit," apply to you if you leave Covered Service before retirement.

Benefit Amount

The amount of your vested pension payable at age 65 depends on your average straight-time earnings (including certain executive incentive compensation, shift differential and hourly COLA), your Company Service Credit at the time you leave Covered Service, and your age at the time you want your pension payments to begin. Covered Service is defined in the Glossary and generally means your service with Bechtel Jacobs Company including its designated subcontractors under DOE Contract DE-AC05-98OR22700. The three formulas previously described are used to calculate your pension, but with these differences:

• The flat amount of $18 per month under the regular and minimum formulas will be multiplied by a "service fraction." This fraction is your actual years of Company Service Credit divided by the years of Company Service Credit that would be credited had you continued in Covered Service until age 65.

• If your vested benefit is calculated using the minimum formula and you have fewer than 10 years of Company Service Credit, that part of the formula using 10% of your average straight-time earnings will be reduced by 1% for each full year under 10.

• The alternate formula is revised to require the following steps:

1. 1.5% x average straight-time monthly earnings times your years and months of Company Service Credit that would be credited had your Covered Service continued to age 65

2. 1.5% x years and months of Company Service Credit (up to 33 1/3) that would be credited if your Covered Service continued to age 65 times your monthly Primary Social Security Benefit at age 65, assuming continued employment in Covered Service at current earnings rate

3. The service fraction: Years and months of actual Company Service Credit
   

   ---

   Years and months of Company Service Credit had Covered Service continued to age 65

Payment of Benefits

Vested benefits normally become payable at age 65. However, you can elect to receive a reduced benefit as early as age 50. The amount of the reduction will depend on how many years before age 65 you elect to begin benefits. The reduction is 6 2/3% for each year before age 65, for up to three years (age 62). In addition, the reduction is 5% for each year before age 62 that plan payments start. For example, if you stop working for the Company and all of its affiliates and begin receiving your pension at age 60, your benefit will be reduced 30% — 20% for the years between 65 and 62

(6 2/3% x 3) plus 10% for the years between 60 and 62 (5% x 2).

Your benefits will begin on the first of the month following receipt of your written request. If you have been married for at least one year at the time you begin receiving your benefit, it will automatically be paid as a 50% joint and survivor benefit (as discussed in section on Married Employees ), unless you elect a life annuity with your spouse’s written consent witnessed by a notary public or representative of the Plan Administrator. If your benefit is paid in the 50% joint and survivor form, it will be reduced according to Table III. If you are single, your benefit will automatically be paid as a life annuity. Your benefit will be reduced for each year that pre-retirement spouse’s coverage is in effect, as discussed in the following section.

Pre-Retirement Spouse’s Benefit

If you stop working for the Company and all of its affiliates, if you have vested benefits, and you die before plan payments begin, your spouse may be eligible to receive a pre-retirement benefit equal to 50% of the benefit you would have received under the 50% joint and survivor benefit. Your spouse will be eligible if:

• you and your spouse have been married at least one year at the time of your death and

• you did not waive this pre-retirement benefit option at the time you stopped working for the Company and all of its affiliatesterminat

To waive this optional coverage, you must have your spouse’s written and witnessed consent.

If you die after age 50, payments will begin on the first of the month following your death. If you die before age 50, payments will begin on the first of the month following the date you would have reached age 50.

Your pension payments, as well as payments to your spouse, will be reduced for receipt as a 50% joint and survivor benefit (see Table III), and for each year or part of a year that the pre-retirement coverage described below is in effect after your termination.

Forfeiture of Benefits

If you stop working for the Company and all of its affiliates before you have completed five years of Credited Service, you will forfeit your right to any plan income.

Reemployment After Retirement

If you had been receiving plan income and return to work for the Company Covered Service, your benefits will be suspended during your period of reemployment until you reach 70½. At age 70½, you will be given a one-time choice to commence receiving benefits or defer payments until you stop working for the Company and all of its affiliates. If you are between 65 and 70½, your benefits will be suspended for any month in which you receive payment for work for the Company Covered Service performed on each of eight or more days (or separate work shifts). When payments begin again, they will be adjusted to reflect your additional service and earnings after returning to work.

Applying For Benefits

Benefit Plans Employee Services will provide you with the necessary information and instructions for receiving benefits and electing payment forms. If you don’t receive this information, call the Employee Helpline.

In case of your death before you have begun to receive plan benefits, Benefit Plans Employee Services will contact your spouse or beneficiary to provide information about any plan benefits that might be payable. If your beneficiary does not receive this information, he/she should call the Employee Helpline.

If the appropriate forms are not completed and submitted — or if any information requested by Benefit Plans Employee Services is not provided — benefits will be delayed.

Other Important Information

Other Retirement Income

Any benefits due you (or your survivor, if you die before you begin receiving benefits from the Pension Plan for Grandfathered Employees) will be reduced by the amount (or the actuarial equivalent, if appropriate) of any retirement benefit payable from any of the following sources, provided the benefit is related to service recognized under the Pension Plan for Grandfathered Employees:

• benefits already received from the Pension Plan for Grandfathered Employees

• any other private plan

• any other public pension for which you received Credited Service other than military or Social Security

The reduction will be made under rules that will apply uniformly to all affected employees.

Withholding Taxes

Under federal tax law, federal income taxes must be withheld from plan payments — unless you properly elect otherwise. If you would like more information about tax withholding, call the Employee Helpline.

Direct Deposit of Payments

Your pension payments will be directly deposited into the bank of your choice, unless an exception is approved by Benefit Plans Employee Services.

Change of Address

It is important that you notify the Company of any change in your address while you are a participant in the plan and after you stop working for the Company and all of its affiliates so you will receive benefit communications about the Pension Plan for Grandfathered Employees. You can request a change of address form by calling the Employee Helpline.

Pension Reduction Tables

Table I – Early Retirement Reduction Factors

These factors use your age and years of Company Service Credit to determine the percentage of your full pension that is payable.

Factors for intermediate ages and intermediate service are available.

Years of Company Service Credit

Table II – Early Retirement Reduction Factors if Terminated by Company Action

If you are terminated by Company action other than for cause, use this table instead of Table I to determine the percentage of your full pension that is payable.

Factors for intermediate ages and intermediate service are available.

Years of Company Service Credit

Table III – Surviving Spouse Reduction Factors

Use your age and the age of your spouse as of the birthday nearest the date your pension starts (age 65 if you are receiving a disability benefit) to determine the factor that will be applied to reduce your pension. If you receive a disability benefit, and die prior to age 65 or you retire and defer commencing your pension, the factor will be based on your age and your spouse’s age at the time of your death.

Factors for ages other than those shown are available.

Pensioner’s Age

Table IV – Surviving Child Reduction Factors

If you elect to provide your dependent child with a survivor pension, use this table instead of Table III.

Factors for ages other than those shown are available.

Pensioner’s Age

Table V – Surviving Dependent Parent Reduction Factors

If you elect to provide your dependent parent with a survivor pension, use this table instead of Table III.