Lockheed Martin (NYSE: LMT) announced today the commencement of an exchange offer for the separation of its Information Systems & Global Solutions (IS&GS) business segment. This represents the next step in the proposed tax-efficient Reverse Morris Trust transaction with Leidos Holdings, Inc. (NYSE: LDOS) announced on January 26. In the proposed transaction, Abacus Innovations Corporation (Abacus), a wholly-owned subsidiary of Lockheed Martin created to facilitate the transaction, will merge with a subsidiary of Leidos and become a wholly-owned subsidiary of Leidos.

The exchange offer provides Lockheed Martin stockholders with the opportunity to exchange their shares of Lockheed Martin common stock for shares of Abacus common stock, which will convert into shares of Leidos common stock upon completion of the merger. The exchange and the merger are expected to be tax-free to participating Lockheed Martin stockholders for U.S. federal income tax purposes, except for any gain or loss attributable to the receipt of cash in lieu of fractional shares in the merger.

The exchange offer includes several key elements:

• Lockheed Martin is offering to exchange all 76,958,918 shares of common stock of Abacus for shares of Lockheed Martin that are validly tendered and not properly withdrawn. Procedures regarding how to tender and withdraw shares will be specified in the exchange offer materials distributed to stockholders.
• Lockheed Martin stockholders have the opportunity to exchange all, some or none of their shares of Lockheed Martin common stock for shares of Abacus common stock, subject to proration if the exchange offer is oversubscribed. Each share of Abacus stock will be converted into one share of Leidos common stock upon completion of the merger.
• The exchange offer is designed to permit Lockheed Martin stockholders to exchange their shares of Lockheed Martin common stock for a number of shares of Abacus common stock that corresponds to a 10 percent discount in value, calculated as set forth in the exchange offer materials, to the equivalent amount of Leidos common stock based on the merger exchange ratio described below, subject to an upper limit.
• This discount means that tendering Lockheed Martin stockholders are expected to receive approximately$111 in value of Abacus common stock for every $100 of Lockheed Martin common stock. This is subject to an upper limit of 8.2136 shares of Abacus common stock per share of Lockheed Martin common stock. If the upper limit is in effect, then the exchange ratio will be fixed at that limit and tendering stockholders will receive less than $111 in value of Abacus stock for each $100 of Lockheed Martin common stock and could receive much less.
• Lockheed Martin will determine the ratio at which shares of Lockheed Martin common stock and Abacus common stock will be exchanged based on the simple arithmetic average of the daily volume-weighted average prices of shares of Lockheed Martin common stock and Leidos common stock on the NYSE on each of three valuation dates ending on the third trading day prior to the expiration of the exchange offer, subject to the exchange ratio upper limit. In the case of Abacus common stock, the value will be reduced by $13.64 per share, which equals the per-share amount of the approximately $1.0 billion special dividend to be paid to Leidos stockholders in connection with the transaction.
• The exchange offer will be subject to proration in the event of oversubscription.
• The exchange offer is scheduled to expire at 8:00 a.m. on August 16, 2016, unless Lockheed Martin extends or terminates the exchange offer.
• Abacus common stock will not be transferred to participants in this exchange offer. Participants will instead receive shares of Leidos common stock in the merger. No trading market currently exists or will ever exist for Abacus common stock.

The final exchange ratio showing the number of shares of Abacus common stock participating Lockheed Martin stockholders will receive for each share of Lockheed Martin common stock accepted in the exchange offer will be available at www.edocumentview.com/LockheedMartinExchange. Lockheed Martin will also announce the final exchange ratio by press release no later than 9:00 a.m. on the second trading day prior to the expiration date.

If the exchange offer is completed but not fully subscribed, Lockheed Martin will distribute the remaining shares of Abacus common stock on a pro rata basis to Lockheed Martin stockholders whose shares of Lockheed Martin common stock remain outstanding after the completion of the exchange offer.

The transactions are subject to customary closing conditions, including Leidos stockholder approval and opinions of tax counsel. Leidos has scheduled a meeting of stockholders to be held on August 8, 2016.

As a result of the exchange offer, the number of Lockheed Martin's outstanding shares of common stock will be reduced. As part of the transaction, Lockheed Martin will also receive a one-time special cash payment of $1.8 billion, which it will use to repay debt, pay dividends and/or repurchase its stock.

Immediately after the completion of the transactions, approximately 50.5% of the outstanding shares of Leidos common stock are expected to be held by pre-merger Abacus (former Lockheed Martin) stockholders on a fully diluted basis. Pre-merger Leidos stockholders are expected to hold approximately 49.5% of the outstanding shares of Leidos common stock on a fully diluted basis. Lockheed Martin will not receive or hold any shares of Leidos common stock.

More information can be found on Lockheed Martin's website and atwww.edocumentview.com/LockheedMartinExchange.

About Lockheed Martin

Headquartered in Bethesda, Maryland, Lockheed Martin is a global security and aerospace company that employs approximately 125,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.