SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
RAYTHEON COMPANY
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(Name of Registrant as Specified in Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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Raytheon
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 28, 1999
The Annual Meeting of Stockholders of Raytheon Company will be held at
Raytheon Systems Company, 1151 E. Hermans Road, Tucson, Arizona, at 2:00 p.m.
Mountain Time on Wednesday, April 28, 1999 for the following purposes:
1. To elect three Directors for a term of three years.
2. To consider and act upon such other business, including stockholder
proposals if presented by their proponents, as may properly come before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on March 11, 1999 are
entitled to notice of and to vote at the meeting.
Please sign your proxy card and return it in the enclosed, postage-paid
envelope as promptly as possible. Most stockholders may also vote via the
Internet or telephonically by using a toll-free number. Check your proxy card or
the information forwarded by your bank, broker or other holder of record to see
which options are available to you. Submitting your proxy with the proxy card or
via the Internet or by telephone will not affect your right to vote in person
should you decide to attend the meeting.
By order of the Board of Directors,
/s/ Thomas D. Hyde
Thomas D. Hyde
Secretary
Lexington, Massachusetts
March 30, 1999
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RAYTHEON COMPANY
141 Spring Street, Lexington, Massachusetts 02421
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
These proxy materials are being mailed beginning on or about March 30, 1999
in connection with the solicitation by the Board of Directors of Raytheon
Company, a Delaware corporation ("Raytheon" or the "Company"), of proxies to be
voted at the 1999 Annual Meeting of Stockholders of the Company (the "Annual
Meeting" or "Meeting") and at any meeting following adjournment thereof.
You are cordially invited to attend Raytheon's Annual Meeting of
Stockholders on April 28, 1999 beginning at 2:00 p.m. Mountain Time.
Stockholders will be admitted at 1:00 p.m. The Meeting will be held at Raytheon
Systems Company, 1151 E. Hermans Road, Tucson, Arizona.
This Proxy Statement and accompanying forms of proxy and voting
instructions are being mailed to holders of the Company's Class A Common Stock
(the "Class A Shares") and Class B Common Stock (the "Class B Shares") as of the
record date, which is March 11, 1999 (the "Record Date"). The Class A Shares and
the Class B Shares are collectively referred to as the "Common Shares" or the
"Shares."
A non-transferable admission ticket, which will be required for entry into
the Annual Meeting, is attached to the proxy card accompanying this Proxy
Statement. If you plan to attend the Annual Meeting in person, please detach the
admission ticket from the proxy card and bring it with you to the Annual
Meeting. A map and directions to the Meeting can be found on the admission
ticket.
If your Shares are held in the name of a bank, broker or other holder of
record and you plan to attend the Meeting in person, you may obtain an admission
ticket in advance by sending a written request, along with proof of ownership,
such as a bank or brokerage account statement, to the Company's Transfer Agent,
Boston EquiServe (State Street Bank and Trust Company) 150 Royall Street,
Canton, Massachusetts 02021. Stockholders without admission tickets will be
admitted to the Meeting upon verification of ownership at the door.
Proxies
Your vote is important. Because many Stockholders cannot personally attend
the Meeting, it is necessary that a large number be represented by proxy. Most
Stockholders have a choice of voting over the Internet, by using a toll-free
telephone number or by completing a proxy card and mailing it in the
postage-paid envelope provided. Check your proxy card or the information
forwarded by your bank, broker or other holder of record to see which options
are available to you. Please be aware that if you vote over the Internet, you
may incur costs such as telecommunication and Internet access charges for which
you will be responsible. The Internet and telephone voting procedures are
designed to authenticate Stockholders' identities by use of a Control Number and
to confirm that their instructions have been properly recorded. The Internet and
telephone voting facilities for Stockholders of record will close at 3:00 p.m.
Eastern Time on Tuesday, April 27, 1999.
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There will be two proxy cards for this year's Meeting; one card to vote
Class A Shares and a separate card to vote Class B Shares. Accordingly, if you
own both Class A Shares and Class B Shares, you will receive two proxy cards. If
you receive a proxy card for Class A Shares and a proxy card for Class B Shares,
you must vote both proxies by using the Internet, the toll-free telephone number
or by completing both proxy cards and mailing them in the postage-paid envelope
provided in order for all of your Shares to be voted at the Meeting.
Proxies may be revoked at any time before they are exercised by written
notice to the Corporate Secretary, by timely delivery of a properly executed,
later-dated proxy (including an Internet or telephone vote) or by voting by
ballot at the Meeting. By providing your voting instructions promptly, you may
save the Company the expense of a second mailing.
The method by which you vote will not limit your right to vote at the Annual
Meeting if you later decide to attend in person. If your Shares are held in the
name of a bank, broker or other holder of record, you must obtain a proxy,
executed in your favor, from the holder of record to be able to vote at the
Meeting.
All Shares entitled to vote and represented by properly executed proxies
received prior to the Annual Meeting and not revoked will be voted at the Annual
Meeting in accordance with the instructions indicated on those proxies. If no
instructions are indicated on a properly executed proxy card, the Shares
represented by that proxy will be voted as recommended by the Board of
Directors.
If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Annual Meeting to another time or place, the persons named in the
enclosed form of proxy and acting thereunder will have discretion to vote on
those matters according to their best judgment to the same extent as the person
signing the proxy would be entitled to vote. At the date this proxy statement
went to press, the Company did not anticipate that any other matters would be
raised at the Annual Meeting.
Stockholders Entitled to Vote
Holders of record of Common Shares at the close of business on the Record
Date are entitled to notice of and to vote at the Annual Meeting. On March 11,
1999, there were 335,911,809 Common Shares outstanding, consisting of
101,124,367 Class A Shares and 234,787,442 Class B Shares.
Pursuant to the Company's Restated Certificate of Incorporation, with
respect to the election of Directors only, (i) the Class A Shares shall be
entitled to 9.345 votes per share, and the total votes of all Class A Shares
shall represent in the aggregate 80.1% of the total voting power of all holders
of Common Shares entitled to vote thereon, and (ii) the Class B Shares shall be
entitled to one vote per share, and the total votes of all Class B Shares shall
represent in the aggregate 19.9% of the total voting power of all holders of
Common Shares entitled to vote thereon. With respect to all matters on which
holders of Common Shares shall be entitled to vote at the Annual Meeting other
than the election of Directors, each Class A Share and each Class B Share shall
be entitled to one vote per share.
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If you are a participant in the Company's Automatic Dividend Reinvestment
and Stock Purchase Plan, Common Shares held in your account are included on the
proxy card accompanying this mailing and may be voted via the Internet, by using
the toll-free telephone number or by completing and returning the proxy card
provided. The plan's administrator, as the stockholder of record, may only vote
the Plan Shares for which it has received directions to vote from plan
participants.
For Raytheon Employees: If you are a participant in the Raytheon Stock
Ownership Plan, Raytheon Savings and Investment Plan, Raytheon Stock Ownership
Plan for Specified Hourly Employees, and/or Raytheon Employee Savings and
Investment Plan, you will receive one proxy card for all Shares you own. That
proxy card will serve as a voting instruction card for the trustees of those
plans where all accounts are registered in the same name. If you own Shares
through these plans and do not sign and return your proxy card, the respective
plan trustees will not vote those Shares.
If you hold Raytheon Shares through any other company's stock purchase or
savings plan, you will receive one proxy card for all Shares that you own. That
proxy card will serve as a voting instruction card for the trustees of those
plans for which all accounts are registered in the same name. If you own Shares
through these plans and do not sign and return your proxy card, the respective
plan trustees will vote those Shares at their discretion.
Required Vote
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast by the Stockholders entitled to vote generally at the
Annual Meeting is necessary to constitute a quorum. Abstentions and broker
"non-votes" are counted as present and entitled to vote for purposes of
determining a quorum. A broker "non-vote" occurs when a nominee holding Shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner.
A plurality of the votes duly cast is required for the election of Directors
(i.e., the nominees receiving the greatest number of votes will be elected).
Abstentions and broker "non-votes" are not counted for purposes of the election
of Directors.
The affirmative vote by the holders of the majority of the Common Shares
present in person or represented by proxy and entitled to vote is required to
approve the other matters to be acted upon at the Annual Meeting. The approval
of any such matter shall require the affirmative vote of the holders of Class A
Shares and Class B Shares, with each Class voting separately. An abstention is
counted as a vote against and a broker "non-vote" is not counted for purposes of
approving those matters.
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All votes, whether by proxy or ballot, will be tabulated by an independent
business entity, which will not disclose the vote of any Stockholder except as
is (i) required by law, (ii) necessary in connection with a judicial or
regulatory action or proceeding, (iii) necessary in connection with a contested
proxy solicitation, or (iv) requested by the Stockholder casting such vote. Any
comment written on a proxy card will be provided to the Corporate Secretary
without disclosing the Stockholder's vote unless necessary to an understanding
of the comment.
Multiple Copies of Annual Report to Stockholders
A copy of the Company's 1998 Annual Report to Stockholders is enclosed. If
more than one copy of the Annual Report is sent to your address and you wish to
reduce the number of reports you receive and save the Company the cost of
producing and mailing these reports, we will discontinue the mailing of reports
on the accounts you select if you mark the designated box on the appropriate
proxy card(s).
At least one account must continue to receive the Annual Report. Mailing of
dividends, dividend reinvestment statements, proxy materials and special notices
will not be affected by your election to discontinue duplicate mailings of the
Annual Report. To discontinue or resume the mailing of an Annual Report to an
account, call the Raytheon Shareholder Services toll-free number:
1-800-360-4519.
If you own Common Shares through a bank, broker or other nominee and receive
more than one Raytheon Annual Report, contact the holder of record to eliminate
duplicate mailings.
Cost of Proxy Solicitation
The cost of soliciting proxies will be borne by the Company. Proxies may be
solicited on behalf of the Company by Directors, officers or employees of the
Company in person or by telephone, facsimile transmission, telegram or
electronic transmission. The Company has retained the firm of Morrow & Co. to
assist the Company in the distribution and solicitation of proxies. The Company
has agreed to pay Morrow & Co. a fee of $12,500 plus expenses for these
services.
In accordance with the regulations of the Securities and Exchange Commission
(the "SEC") and the New York Stock Exchange (the "NYSE"), the Company will also
reimburse brokerage firms and other custodians, nominees and fiduciaries for
their expenses incurred in sending proxies and proxy materials to beneficial
owners of Common Shares.
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Advance Notice Procedures for Stockholder Proposals
Under the Company's By-Laws, nominations for Director may be made only by
the Board or a Board Committee, or by a Stockholder entitled to vote who
delivered notice to the Company between January 27, 1999 and February 26, 1999,
in the case of the 1999 meeting and, except as noted below, in the case of
future annual meetings, not later than the close of business on the 90th
calendar day nor earlier than the close of business on the 120th calendar day
prior to the first anniversary of the preceding year's annual meeting. For the
Company's annual meeting in the year 2000, the Company must receive this notice
after the close of business on December 31, 1999 and before the close of
business on January 29, 2000 unless the date of the 2000 annual meeting is
advanced by more than 30 calendar days or delayed by more than 60 calendar days
from the anniversary date of the 1999 annual meeting in which event the By-Laws
provide different notice requirements.
The By-Laws also provide that no business may be brought before an annual
meeting except as specified in the notice of the meeting, or as otherwise
brought before the meeting by or at the direction of the Board, or by a
Stockholder entitled to vote who has delivered notice to the Company (containing
certain information specified in the By-Laws), within the time limits described
above for delivering notice of a nomination for the election of a Director.
These requirements apply to any matter that a Stockholder wishes to raise at an
annual meeting other than pursuant to the procedures in SEC Rule 14a-8.
A copy of the full text of the By-Law provisions discussed above may be
obtained by writing to Raytheon Company, Executive Offices, 141 Spring Street,
Lexington, MA 02421 Attention: Corporate Secretary. In addition, the Company's
By-Laws have been filed with the SEC.
Stockholder Account Maintenance
The Company's Transfer Agent is Boston EquiServe (State Street Bank and
Trust Company). All communications concerning accounts of Stockholders of
record, including address changes, name changes, inquiries as to requirements to
transfer Common Shares and similar issues can be handled by calling the Raytheon
Shareholder Services toll-free number: 1-800-360-4519.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers to file reports of holdings and transactions in
Shares with the SEC and NYSE. Based on Company records and other information,
the Company believes that all SEC filing requirements applicable to its
Directors and executive officers with respect to the Company's fiscal year
ending December 31, 1998 were met.
Relationship with Independent Public Accountants
Upon recommendation of the Audit Committee of the Board of Directors, the
Board has reappointed PricewaterhouseCoopers L.L.P. ("PWC") as the independent
public accounting firm to audit the Company's financial statements for the
fiscal year beginning January 1, 1999 and ending December 31, 1999.
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Representatives of PWC are expected to be present at the Annual Meeting.
They will be given the opportunity to make a statement if they desire to do so,
and they will be available to respond to appropriate questions.
Certain Relationships and Related Transactions
During 1998, the Company retained the law firm of Paul, Weiss, Rifkind,
Wharton and Garrison for various legal services. Warren B. Rudman, a Director of
the Company, is a member of such firm.
Henrique de Campos Meirelles, a Director of the Company, is President and
Chief Operating Officer and a Director of BankBoston Corporation and BankBoston
N.A. BankBoston N.A. is a participant in the Company's Senior Credit Facilities.
In addition, BankBoston N.A. performs banking services for the Company in the
ordinary course of business. Daniel P. Burnham, President and Chief Executive
Officer and a Director of the Company, is a nominee for election to the Board of
Directors of BankBoston Corporation.
THE BOARD OF DIRECTORS AND CERTAIN OF ITS COMMITTEES
Pursuant to the Delaware General Corporation Law, as implemented by the
Company's Certificate of Incorporation and By-Laws, the business, property and
affairs of the Company are managed under the direction of the Board of
Directors. Members of the Board are kept informed of the Company's business
through discussions with the Chairman and officers, by reviewing materials
provided to them and by participating in meetings of the Board and its
committees.
During 1998, the Board held 12 meetings and the committees held 18 meetings.
The average attendance in the aggregate of the total number of Board and
committee meetings was approximately 92%. During 1998, L. Dennis Kozlowski, a
Director of the Company and a member of the Audit and Executive Committees,
attended twelve out of the seventeen meetings of the Board and committees on
which he served, or approximately 71% of such meetings.
The Board of Directors of the Company currently has four committees: an
Audit Committee, a Compensation Committee, an Executive Committee and a
Nominating Committee.
Audit Committee
Directors Steven D. Dorfman, Richard D. Hill, L. Dennis Kozlowski,
Chairman, and James N. Land, Jr. are the current members of the Audit Committee
of the Board of Directors. The Audit Committee meets with management to consider
the adequacy of the internal controls and the objectivity of financial
reporting. The Audit Committee also meets with the independent auditors and with
appropriate financial personnel and internal auditors of the Company regarding
these matters. The Audit Committee recommends to the Board the appointment of
the independent auditors. The Audit Committee met three times in 1998.
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Management Development and Compensation Committee
Directors Ferdinand Colloredo-Mansfeld, Barbara B. Hauptfuhrer, Richard D.
Hill, Chairman, Warren B. Rudman and Alfred M. Zeien are the current members of
the Management Development and Compensation Committee of the Board of Directors.
The functions of the Committee include administering management incentive
compensation plans and making recommendations to the Board with respect to the
compensation of Directors and officers of the Company. The Committee met 11
times in 1998.
The Board of Directors has also established the Options Subcommittee of the
Management Development and Compensation Committee. The Options Subcommittee
administers and makes awards under the Company's stock option plans.
Directors Barbara B. Hauptfuhrer, Richard D. Hill, Chairman, and Alfred M.
Zeien are the current members of the Options Subcommittee.
Executive Committee
Directors Daniel P. Burnham, Ferdinand Colloredo-Mansfeld, John R. Galvin,
L. Dennis Kozlowski, Thomas L. Phillips and Dennis J. Picard, Chairman, are the
current members of the Executive Committee of the Board of Directors. The
Committee is empowered to act for the full Board during intervals between Board
meetings, with the exception of certain matters that by law may not be
delegated. The Executive Committee met twice during 1998.
Nominating Committee
Directors Thomas E. Everhart, John R. Galvin, James N. Land, Jr., Thomas L.
Phillips, Chairman, and Warren B. Rudman are the current members of the
Nominating Committee of the Board of Directors. The Committee's duties are to
propose to the Board of Directors candidates for election to the Board and to
make other recommendations relating to Board membership. The Nominating
Committee will consider nominees recommended by Stockholders. No formal
procedures are required to be followed by Stockholders in submitting such
recommendations. The Nominating Committee met once during 1998.
Compensation of Directors
During 1998, each member of the Board, other than Directors who are also
employees of the Company, was paid a quarterly retainer of $6,500 and, in
addition, a fee of $1,000 for attendance at each meeting of the Board and each
committee meeting, other than telephonic meetings and committee meetings of less
than two hours' duration held on the day of full Board meetings, for which the
fee is $500. Pursuant to the Company's Deferral Plan for Directors (the
"Deferral Plan"), Directors may defer receipt of their quarterly retainer and/or
meeting fees until retirement from the Board. Deferred payments accrue interest
(payable by the Company) at the same prescribed government rate applicable to
compensation deferred by employees under the Company's Voluntary Compensation
Deferment Plan.
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On November 26, 1996, the existing Directors' Pension Plan was terminated.
Prior to that date, Directors of the Company who were not eligible for benefits
under any Company-sponsored pension plan, were entitled to receive a monthly
cash benefit for up to fifteen years after their qualified retirement from the
Board. The Board voted to terminate this plan and to convert the then-present
value of each Director's cash benefit into shares of common stock. These shares,
and all accrued dividends, are held in trust for the benefit of the individual
Director with delivery deferred until retirement or other completion of service
as a Director.
In lieu of an increase to the quarterly retainer, the Board adopted the 1997
Nonemployee Directors Restricted Stock Plan. During 1998, each current member of
the Board, other than Messrs. Burnham, Phillips and Picard, received a grant of
160 Class B Shares. All grants of restricted shares under the Plan are held in
the custody of the Company until restrictions lapse on the date of the Annual
Meeting three years after the award. The Directors are entitled to vote and
receive dividends on the shares.
The Company also maintains a general insurance policy which provides
nonemployee Directors with travel accident insurance when on Company business.
During 1998, John M. Deutch was paid $62,218 by the Company for performing
certain additional services for the Company beyond the scope of his service on
the Board of Directors pursuant to a consulting agreement between Mr. Deutch and
the Company.
During 1998, Warren B. Rudman was paid $48,000 for performing certain
additional services for the Company beyond the scope of his service on the Board
of Directors pursuant to a consulting agreement between Sen. Rudman and the
Company.
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the Board
of Directors shall be divided into three classes, with each class being as
nearly equal in number as possible, whose terms expire at successive annual
meetings. Accordingly, Directors elected at the Annual Meeting will serve
three-year terms expiring at the Company's annual meeting in the year 2002.
Directors will be elected by a plurality of the votes cast. Unless otherwise
directed, proxies received pursuant to this solicitation will be voted for the
election of the nominees listed below who have been designated by the Board of
Directors. If, on account of death or unforeseen contingencies, any of these
persons is unavailable for election, the proxies will be voted for a substitute
nominee designated by the Board of Directors.
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Nominees for the Class of Directors Whose Terms Expire in 2002
DANIEL P. BURNHAM
Director of the Company since 1998. President and Chief Executive Officer
of the Company since December 1, 1998. From July 1, 1998 until December 1, 1998
Mr. Burnham served as President and Chief Operating Officer of the Company.
Prior to joining the Company, Mr. Burnham was Vice Chairman of AlliedSignal,
Inc. from October 1997 and President of AlliedSignal Aerospace and an Executive
Vice President of AlliedSignal, Inc. from 1992 until becoming Vice Chairman in
1997. Age 52.
JOHN R. GALVIN
Director of the Company or a predecessor company since 1996. Dean of the
Fletcher School of Law and Diplomacy, Tufts University. General Galvin retired
from the U.S. Army in 1992 after a 38-year career which included positions as
NATO Supreme Allied Commander Europe and Commander-in-Chief, U.S. European
Command. From 1992 to 1994, Gen. Galvin served as the Olin Distinguished
Professor of National Security at the U.S. Military Academy at West Point. In
1994-1995, he was a visiting professor at the Mershon Center, The Ohio State
University. Director or Trustee: the Seligman Group of Investment Companies.
Trustee: Institute for Defense Analyses. Governor: Center for Creative
Leadership. Age 69.
ALFRED M. ZEIEN
Director of the Company or a predecessor company since 1992. Chairman of
the Board and Chief Executive Officer of The Gillette Company since 1991. Prior
thereto, Mr. Zeien served as President of Gillette from 1991 and as Vice
Chairman, Gillette International/Diversified Operations from 1988. Director:
BankBoston Corporation; The Gillette Company; Polaroid Corporation;
Massachusetts Mutual Life Insurance Company. Age 69.
Directors Whose Terms of Office Continue
FERDINAND COLLOREDO-MANSFELD
Director of the Company or a predecessor company since 1987. Term expires
2000. Chairman and Chief Executive Officer of Cabot Industrial Trust since
January 1998. Prior thereto, Mr. Colloredo-Mansfeld served as Chairman and Chief
Executive Officer of Cabot Partners L.P. (predecessor of Cabot Industrial Trust)
since October 1990 and as Chairman and Chief Executive Officer of Cabot, Cabot
and Forbes Co. from 1986 to 1990. Director: Data General Corporation; Chairman,
Massachusetts General Hospital. Age 59.
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JOHN M. DEUTCH
Director of the Company since 1998. Term expires 2001. Institute Professor
at the Massachusetts Institute of Technology. Mr. Deutch previously served as
Director of the United States Central Intelligence Agency; Deputy Secretary of
Defense; Undersecretary of Defense (Acquisition and Technology); Provost, Dean
of the School of Science and Chairman of the Department of Chemistry of the
Massachusetts Institute of Technology. Mr. Deutch has also served as Director of
Energy Research and Undersecretary of the U.S. Department of Energy. Director:
ARIAD Pharmaceuticals, Inc.; Citigroup Inc.; CMS Energy Corporation; Cummins
Engine Company, Inc.; Sandia Laboratories; Schlumberger Ltd. Trustee: The French
Library; The Jerusalem Foundation; Resources for the Future; Urban Institute.
Age 60.
THOMAS E. EVERHART
Director of the Company since 1997. Term expires 2000. Pro-Vice-Chancellor,
University of Cambridge, England from February 16, 1998 to June 30, 1998.
President Emeritus and Professor of Electrical Engineering and Applied Physics,
California Institute of Technology. Prior thereto, Chancellor of University of
Illinois, Urbana-Champaign. Director: General Motors Corporation;
Hewlett-Packard Company; Hughes Electronics Corporation; Electric Power Research
Institute; Saint-Gobain Corporation; Reveo, Inc.; Corporation for National
Research Initiatives. Age 67.
L. DENNIS KOZLOWSKI
Director of the Company or a predecessor company since 1995. Term expires
2000. Chairman of the Board and Chief Executive Officer of Tyco International
Ltd. since 1992. Prior thereto, Mr. Kozlowski served as President of Tyco from
1989. Director: Tyco International Ltd.; Applied Power, Inc.; U.S. Office
Products. Age 52.
JAMES N. LAND, JR.
Director of the Company or a predecessor company since 1978. Term expires
2001. Corporate Financial Advisor. Director: E.W. Blanch Holdings, Inc. Age 69.
HENRIQUE DE CAMPOS MEIRELLES
Director of the Company since 1998. Term expires 2001. President and Chief
Operating Officer of BankBoston Corporation and BankBoston N.A. since 1996.
Prior thereto, Mr. Meirelles served as Regional Manager of Brazil for both
BankBoston Corporation and BankBoston N.A. from 1994, and as General Manager of
Brazil for the Bank from 1984 to 1994. Director: BankBoston Corporation and
BankBoston N.A.; Best Foods, Inc. Age 53.
THOMAS L. PHILLIPS
Director of the Company or a predecessor company since 1962. Term expires
2000. Retired Chairman of the Board and Chief Executive Officer of the Company.
Director: Knight-Ridder, Inc.; Systems Research and Applications. Age 74.
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DENNIS J. PICARD
Director of the Company or a predecessor company since 1989. Term expires
2001. Chairman of the Board of the Company since December 1, 1998. Prior to
assuming his present position, Mr. Picard served as Chairman of the Board and
Chief Executive Officer of the Company from March 1, 1991, as President from
1989 and as Senior Vice President, General Manager of the Missile Systems
Division from 1983. Director: State Street Corporation. Age 66.
WARREN B. RUDMAN
Director of the Company or a predecessor company since 1993. Term expires
2000. Partner, law firm of Paul, Weiss, Rifkind, Wharton and Garrison since
January 1992. Prior thereto, Mr. Rudman served as a United States Senator from
1980 through January 1992. Director: Allied Waste Industries, Inc.; The Chubb
Corporation; Collins & Aikman Corporation; Prime Succession, Inc.; and several
mutual funds managed by Dreyfus Corporation. Age 68.
SECURITY OWNERSHIP
The following table lists those persons or groups known to the Company to be
the beneficial owner of more than 5% of the Company's Class A Shares or Class B
Shares as of December 31, 1998:
Name and Address of Class A Percent of Class B Percent of
Beneficial Owner Shares Class Shares Class
FMR Corp.(1). 7,901,647 7.7%
Charles B. Johnson, Rupert H.
Johnson, Franklin Resources,
Inc. and Templeton Global
Advisors Limited(2) 7,072,158 6.9%
Barrow, Hanley, Mewhinney &
Strauss, Inc.(3) 11,939,000 5.1%
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(1) FMR Corp., (including Fidelity Management & Research Company and Fidelity
Management Trust Company) 82 Devonshire Street, Boston, MA 02109, has filed
a Schedule 13G with the SEC disclosing beneficial ownership of 7,901,647
Class A Shares, with sole voting power as to 29,122 Class A Shares and sole
investment power as to 7,901,647 Class A Shares.
(2) A group consisting of Charles B. Johnson, Rupert H. Johnson, Franklin
Resources, Inc., each with a business address of 777 Mariners Island
Boulevard, San Mateo, CA 94404, and Templeton Global Advisors Limited
("Templeton"), with a business address of Lyford Cay, P.O. Box N-7759,
Nassau, Bahamas, has filed has filed a Schedule 13G with the SEC disclosing
beneficial ownership of a total of 7,072,158 Class A Shares. The Schedule
13G notes that Templeton has sole voting power as to 7,017,149 Class A
Shares and sole investment power as to 7,034,264 Class A Shares.
<PAGE>
13
(3) The address of Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow, Hanley")
is One McKinney Plaza, 3232 McKinney Avenue, Dallas, TX 75204-2429. Based on
its Schedule 13G filed with the SEC, Barrow, Hanley has sole voting power
over 1,356,300 Class B Shares, shared voting power over 10,582,700 Class B
Shares and sole dispositive power over 11,939,000 Class B Shares.
Directors and Executive Officers
As of January 1, 1999, the following Directors, nominees for Director and
named executive officers, and the Directors, nominees and all executive officers
as a group were the beneficial owners of the number of Common Shares indicated
below:
Number of Class B Number of Class A
Shares and Nature of Shares and Nature of
Beneficial Beneficial
Name Ownership(1) Ownership(1)
Daniel P. Burnham 0(2) 0
Ferdinand Colloredo-Mansfeld 11,441(3) 0
Peter R. D'Angelo 117,212(4) 0
John M. Deutch 660 500
Steven D. Dorfman 160 10,332
Thomas E. Everhart 160 525
John R. Galvin 5,856(3),(5) 0
Barbara B. Hauptfuhrer 7,441(3) 37
Richard D. Hill 12,133(3) 0
L. Dennis Kozlowski 10,441(3) 0
James N. Land, Jr 11,441(3) 0
Henrique de Campos Meirelles 160 0
Thomas L. Phillips 193,250 0
Dennis J. Picard 1,294,036(6) 0
Warren B. Rudman 6,041(3),(7) 0
William H. Swanson 246,529(8) 0
Arthur E. Wegner 210,574(9) 0
Alfred M. Zeien 7,441(3) 0
All Directors, nominees for
Director and executiveo
officers as a group (28 persons) 3,057,932(10),(11) 11,394
Footnotes
(1) No individual Director or nominee for Director or named executive officer
beneficially owns 1% or more of the outstanding Class A Shares or Class B
Shares, nor do the Directors and executive officers as a group own more
than 1% of the outstanding Class A Shares. The Directors and executive
officers as a group own approximately 1.3% of the outstanding Class B
Shares.
<PAGE>
14
(2) Does not include an aggregate of 374,713 restricted units awarded to Mr.
Burnham under the Company's employee incentive compensation plans, over
which he currently has no voting or investment power. Upon vesting, the
units will be settled on a one-for-one basis in Class B Shares.
(3) Includes 5,121 shares held in trust for the benefit of the individual
director. Each director has the power to vote the shares held for his or
her account. The shares were issued pursuant to the Company's Deferral
Plan for Directors.
(4) Includes 85,000 shares as to which Mr. D'Angelo has the right to acquire
beneficial ownership within sixty days of said date pursuant to the
exercise of stock options and 657 shares held in the Raytheon Stock
Ownership/Savings and Investment Plan.
(5) Excludes shares held by various mutual funds of the Seligman Group of
Investment Companies. As a Director or Trustee, Gen. Galvin shares voting
and investment power in these shares with other Seligman Directors and
Trustees. Gen. Galvin disclaims beneficial ownership of all such shares.
(6) Includes 1,060,396 shares as to which Mr. Picard has the right to acquire
beneficial ownership within sixty days of said date pursuant to the
exercise of stock options and 325 shares held in the Raytheon Stock
Ownership/Savings and Investment Plan. Does not include 66,666 restricted
units granted to Mr. Picard over which he currently has no voting or
investment power.
(7) Excludes shares held by any of the mutual funds of Dreyfus Corporation. As
a Director of several funds managed by Dreyfus Corporation, Mr. Rudman
shares voting and investment power in the shares held by such funds with
the other Directors of those funds and with the Directors of Dreyfus
Corporation. Mr. Rudman disclaims beneficial ownership of all such shares.
(8) Includes 203,498 shares as to which Mr. Swanson has the right to acquire
beneficial ownership within sixty days of said date pursuant to the
exercise of stock options and 687 shares held in the Raytheon Stock
Ownership/Savings and Investment Plan.
(9) Includes 185,000 shares as to which Mr. Wegner has the right to acquire
beneficial ownership within sixty days of said date pursuant to the
exercise of stock options and 72 shares held in the Raytheon Stock
Ownership/Savings and Investment Plan.
(10) Share ownership includes, in the case of certain officers, a minor number
of shares held by trusts or family members as to which beneficial
ownership is disclaimed.
(11) Includes 2,359,283 shares as to which individual members of the group have
the right to acquire beneficial ownership within sixty days of said date
pursuant to the exercise of stock options and 8,214 shares held in the
Raytheon Stock Ownership/Savings and Investment Plan.
<PAGE>
15
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for the Company's chief executive officer and the four other most
highly compensated executive officers for the fiscal years ending December 31,
1998, 1997 and 1996. The compensation information for fiscal 1996 and fiscal
1997 through December 17, 1997 relates to the named executive's service as an
executive officer of a predecessor by merger to the Company.
<PAGE>
16
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation Awards
------------------------------------------ -----------------------------
Restricted
Stock/Unit All Other
Name and Principal Salary Bonus Awards(1) Options Compensation(4)
Position Year ($) ($) ($) (#) ($)
- ------------------ ------------- -------------- ------------- ----------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Dennis J. Picard........... 1998 $ 1,340,754(2) $ 3,200,000(2) $ 0 450,000 $ 18,860
Chairman of the Board 1997 1,055,754 2,500,000 8,787,500(2) 325,000 2,721,134
1996 1,015,002 1,870,000 0 270,000 716,723
Daniel P. Burnham.......... 1998 425,004(3) 1,500,000(2) 21,873,871 250,000 286,395
President and Chief 1997
Executive Officer 1996
William H. Swanson......... 1998 479,940 800,000 0 100,000 193,158
Executive Vice President 1997 427,914 400,000 546,875 45,000 574,617
and Chairman and CEO 1996 419,520 305,000 0 40,000 6,932
Raytheon Systems Company
Peter R. D'Angelo.......... 1998 413,490 500,000 0 75,000 8,779
Executive Vice President 1997 361,974 375,000 382,813 45,000 760,492
and Chief Financial Officer 1996 335,160 300,000 0 40,000 8,087
Arthur E. Wegner........... 1998 453,348 450,000 0 60,000 9,775
Executive Vice President 1997 415,572 305,000 382,813 45,000 9,628
and Chairman and CEO 1996 403,464 255,000 0 40,000 9,233
Raytheon Aircraft Company
</TABLE>
<PAGE>
17
Footnotes
(1) The amount shown is the value of the restricted stock or unit award on the
date of grant. The executive is not entitled to the cash amount shown in the
year the restricted stock or unit award is made. The award vests over time
and is subject to the executive remaining employed by the Company. Dividends
are paid on the restricted stock shown and dividend equivalents are paid on
the restricted units.
Mr. Picard's 1997 restricted unit award was in replacement of a restricted
stock award, the final portion of which vested in mid-1997, and was put in
place to induce Mr. Picard to delay his scheduled retirement and ensure his
availability to the Company. (One unit represents one Class B Share.)
Pursuant to the terms of the award, the scheduled vesting dates are as
follows: December 1, 1997 -- 66,667 units; August 28, 1998 -- 66,667 units;
the remaining 66,666 units vest on Mr. Picard's Board-approved retirement
date.
Mr. Burnham's restricted unit award consists of a total of 374,713 units.
The units vest on a one-for-one basis in Class B Shares. The vesting
schedule for the award is as follows:
Vesting Date No. of Units
July 1, 1999 49,573
July 1, 2000 48,518
July 1, 2001 48,518
July 1, 2002 45,353
July 1, 2003 45,353
July 1, 2004 45,354
July 1, 2005 92,044
------
374,713
The number and value, based on the closing price of the Class B Shares on
December 31, 1998, of the aggregate restricted stockholdings of each of the
named executives is as follows: Mr. Picard -- 66,666 units, $3,549,965; Mr.
Burnham -- 374,713 units, $19,953,467.
(2) Mr. Picard deferred the following amounts until after retirement: the amount
of his 1998 salary in excess of $1 million; his entire 1998 bonus under the
Company's results based incentive plan; and all amounts due under his 1997
restricted unit award, including amounts vesting in 1998. Mr. Burnham
deferred until retirement 50% of his 1998 bonus under the Company's results
based incentive plan.
(3) Reflects salary from Mr. Burnham's date of hire through December 31, 1998.
<PAGE>
18
(4) For 1998, the amounts shown include: (a) the value of life insurance
premiums paid by the Company (Mr. Picard -- $13,261; Mr. Burnham -- $1,381;
Mr. Swanson -- $1,740; Mr. D'Angelo -- $3,179; and Mr. Wegner -- $4,175);
(b) Company contributions of $800 for each executive other than Mr. Burnham
under the Company's Stock Ownership Plan; and (c) Company contributions of
$4,800 for each executive other than Mr. Burnham under the Company's Savings
and Investment Plan. The total amount for Mr. Burnham includes relocation
expenses of $234,271 and $50,743 in related tax reimbursement payments. The
total amount for Mr. Swanson includes relocation expenses of $127,605 and
$19,463 in related tax reimbursement payments. Also in 1998, the Company
provided to Mr. Swanson an interest-free loan in the original principal
amount of $1,000,000 to assist him in his relocation from Massachusetts to
Washington, DC. As of February 15, 1999, the outstanding balance on this
loan was $950,000. The loan is secured by a mortgage on Mr. Swanson's home.
Accordingly, the amount reported for Mr. Swanson includes $38,750,
representing the difference between the market rate for such loans and the
actual interest rate.
<PAGE>
19
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Grant Date
Individual Grants(1) Value
---------------------------------------------------------- -----------
No. of
Securities % of Total
Underlying Options Exercise or Grant Date
Options Granted to Base Price Expiration Present
Name Granted(#)(2) Employees ($/Share)(3) Date Value(4)
<S> <C> <C> <C> <C> <C>
Dennis J. Picard 1,788 0.03% $ 55.9063 06/23/08 $ 19,918
448,212 6.44% 55.9063 06/24/08 4,993,082
Daniel P. Burnham 1,713 0.02% 58.3750 06/30/08 19,083
248,287 3.57% 58.3750 07/01/08 2,765,917
William H. Swanson 3,576 0.05% 55.9063 06/23/08 39,837
96,424 1.39% 55.9063 06/24/08 1,074,163
Peter R. D'Angelo 3,576 0.05% 55.9063 06/23/08 39,837
71,424 1.03% 55.9063 06/24/08 795,663
Arthur E. Wegner 3,576 0.05% 55.9063 06/23/08 39,837
56,424 0.81% 55.9063 06/24/08 628,563
</TABLE>
<PAGE>
20
Footnotes
(1) The table contains two separate lines for each individual. The first line
represents the grant of incentive stock options and the second represents
the grant of nonqualified stock options.
(2) In the case of Messrs. Picard and Burnham, the options become exercisable in
full on the first anniversary of the grant date. In the case of Messrs.
Swanson, D'Angelo and Wegner, one-half of the options become exercisable on
the first anniversary of the grant date and the remainder become exercisable
on the second anniversary of the grant date.
(3) Fair market value of underlying shares on the date of grant.
(4) As of December 31, 1998, the options set forth in this table had no value
because at that date the market value of the underlying shares was below the
option price. Furthermore, the ultimate values of the options will depend on
the future market price of the Class B Shares, which cannot be forecast with
reasonable accuracy. The actual value, if any, an optionee will realize upon
exercise of an option will depend on the excess of the market value of the
Class B Shares over exercise price on the date the option is exercised.
The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model.
As required pursuant to SEC regulations, the material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options reflected in the above table include the following: an
exercise price of $55.9063 for Messrs. Picard, Swanson, D'Angelo and Wegner,
representing the fair market value of the underlying stock on the date of
grant (for Mr. Burnham the exercise price is $58.375); an option term of 10
years; an interest rate of 5.5% that represents the interest rate on a U.S.
Treasury security on the date of grant with a maturity date corresponding to
that of the option term; volatility of 15.0%, calculated using daily stock
prices for an average of three years prior to the grant date; assumed
dividend growth of 6.0%; and reductions of approximately 5.0% to reflect the
probability of forfeiture due to termination prior to vesting.
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year End Option Values
Securities
Underlying
Unexercised Value of In-the
Shares Options at Fiscal Money Options at
Acquired on Year End(#) Fiscal Year End($)
Exercise Value Exercisable/ Exercisable/
Name #)(1) Realized($) Unexercisable Unexercisable(1)
- ------------
Dennis J. Picard(2) 33,724 $ 1,298,162 1,060,396/450,000 $9,521,061/$0
Daniel P. Burnham None 0 None/250,000 0/$0
William H. Swanson None 0 203,498/100,000 2,968,590/$0
Peter R. D'Angelo 40,000 634,838 85,000/75,000 97,813/$0
Arthur E. Wegner None 0 185,000/60,000 1,922,183/$0
<PAGE>
21
Footnotes
(1) Based on the $53.25 closing price per share of the Company's Class B Shares
at December 31, 1998.
(2) In connection with the exercise of employee stock options, Mr. Picard
transferred a total of 11,387 shares, with a value of $652,100, to the
Company. The transfers to the Company were approved in advance by the
Compensation Committee of the Board of Directors in accordance with SEC Rule
16b-3. Mr. Picard used the proceeds to satisfy various tax withholding
liabilities incident to Company compensation.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Management Development and Compensation Committee of the Board of
Directors consists of Ferdinand Colloredo-Mansfeld, Barbara B. Hauptfuhrer,
Richard D. Hill, Warren B. Rudman and Alfred M. Zeien. During 1998, the Company
retained the law firm of Paul, Weiss, Rifkind, Wharton and Garrison for various
legal services. Warren B. Rudman is a member of such firm. Sen. Rudman also acts
as consultant on behalf of the Company.
The following report of the Management Development and Compensation
Committee and the Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement into any
other filing under the Securities Act of 1933 or under the Securities Exchange
Act of 1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation programs are developed and reviewed by
the Management Development and Compensation Committee, consisting solely of
directors who are not employees of the Company, and are approved by the Board of
Directors. These programs align executive compensation with the Company's
business strategy and management initiatives, and are intended to attract,
retain, motivate and reward executive managers of a caliber and level of
experience necessary to achieve the overall business objectives of the Company.
The Board of Directors supports an integrated, performance-oriented compensation
program that balances short- and long-term objectives to enhance shareholder
value, and that places Company executives in a responsible competitive range of
total compensation considering the magnitude of business operations, strategic
accomplishments, and Company performance.
<PAGE>
22
The Committee makes recommendations to the Board of Directors with respect
to base salary and annual incentive awards, and the Options Subcommittee of the
Committee grants stock options and restricted stock awards. The Committee works
closely with an independent compensation consultant which provides information
regarding current industry and marketplace compensation practices, and provides
analysis of individual compensation compared to the external market. Raytheon's
executive compensation program is designed to increase the total portion of
risk-based cash and stock incentives at progressively higher levels of
management.
Individual compensation awards are established based upon the contribution
the executive has made to attain the Company's short-term and strategic
performance objectives, as well as the executive's anticipated future
contribution. While the financial performance of the Company and its business
units is of paramount significance in compensation awards, the Committee
recognizes the need to reward and encourage executives to develop and lead a
diverse, global workforce toward the Company's strategic objective of remaining
one of the leaders -- "top-tier" -- in defense electronics; growing the
application of defense technologies in commercial markets, while maintaining a
strong commercial base. Further, the Committee takes into consideration the
attainment of global and long-term objectives of the Company that may not be
reflected in the current period's earnings and stock performance.
The Company's executive compensation programs consist primarily of the
following integrated components:
Base Salary -- which is designed to compensate executives competitively
within the industry and competitive marketplace. When establishing base rates of
pay for executives, the Committee considers marketplace data for comparable
positions, and the relative performance and contribution of each executive to
the business.
Annual Incentive Awards -- which provide a direct link between executive
compensation and the total Company's performance. Annual awards take into
account the growth of each business segment. Consideration is given to strategic
acquisitions which complement and add value to the Company's core businesses,
and to the successful divestiture of non-core businesses. Executive performance
is also assessed against standards of ethical business conduct and management
diversity initiatives.
Long-Term Incentives -- which consist of stock options and restricted stock
and restricted unit awards that link management decision-making with the
Company's strategic business plan and long-term Company performance. These
awards align the executive's interest with those of the stockholders. During
1998, 12% of eligible exempt employees received stock option grants. This
represents a broader level of participation than among the Company's
compensation peer groups.
Executive Compensation
Base Salary. Base salary levels for the Chief Executive Officer ("CEO") and
other executive officers of the Company are reviewed by the Committee and
approved annually to ensure competitiveness. The Committee's policy has been and
continues to be to maintain base salaries at competitive levels with peer groups
established for compensation comparisons. These include most of the companies
listed on the performance graph immediately following this report, as well as
other $20 billion corporations.
<PAGE>
23
Each year the Committee reviews a competitive analysis prepared by its
independent compensation consultant. Based on this review and the individual
performance of each executive, the Committee recommends base salary increases,
if appropriate.
Annual Incentive. All executive officers, including the CEO, participate in
a Results Based Incentive Plan, which is designed to focus management attention
and effort on the attainment of pre-established performance goals. Specific
performance measures and weightings were established at the Corporate, Business
Segment, and Business Unit levels early in 1998 encompassing revenue growth,
cash flow, synergies, operating profit, and diversity initiatives.
Individual awards under the Company's Results Based Incentive Plan reflect
an executive's contribution to the Company's achievement of established
performance goals, plus the successful management of human resources and the
furtherance of ethical business behavior and quality standards. In the case of
operating executives, the primary performance criteria are the financial
performance of the executive's business unit compared to the prior period, and
the performance against stated operational objectives in each unit's business
plan. In the case of senior staff executives, the primary criterion is the
effective performance of the staff function in support of strategic operating
objectives. In every case, consideration is given to the executive's
contribution to the overall management of the Company.
Other officers listed in the Summary Compensation Table received incentive
awards based on the Committee's review of their competitive marketplace position
and their accomplishment of individual performance objectives. Based upon the
analysis of the Committee's independent compensation consultant, individual
incentive target awards were established for the CEO and executive vice
presidents. These targets were based on a competitive level of annual incentive
compensation received by executives holding comparable positions in the
Company's compensation peer group. In years where the Committee deems that
exceptional performance has been rendered by an executive, incentive awards
above the median of their peer group may be awarded.
Long-Term Incentives. Stock option grants are the Company's principal
vehicle for long-term compensation. The Company issues options at fair market
value at the date of grant, and an executive only receives compensation from the
grant if the stock appreciates in value. Similar to the process used in making
annual base salary recommendations and results based incentive awards, option
awards are based upon current industry and marketplace compensation data as
presented by the Committee's independent compensation consultant. Award
recommendations are made on the basis of an executive's level of responsibility,
value to the organization, contribution to the overall management of the Company
and, as appropriate, the organization's earnings and sales performance, or
effective performance of the staff function. The size of each executive's award
is determined by considering comparable positions in the industry and
marketplace. Equitable distribution within the Company is also considered. The
awards granted to the executives listed in the Summary Compensation Table are
consistent with awards granted for comparable positions in the Company's
compensation peer groups.
<PAGE>
24
The Board of Directors believes that granting stock options encourages
executive officers to manage the Company from the perspective of a stockholder
with an equity stake in the business. As the value of the Company increases over
time, the value of the shares of stock underlying the options granted to each of
the executive officers increases, providing a strong incentive for executive
officers to enhance stockholder value over time. Participation in the option
program is not limited to executive officers, but extends to a broad range of
key employees of the Company.
Restricted stock awards are made under the 1991 Stock Plan for the purpose
of attracting candidates in the marketplace and for the long-term retention of
key executives. Such awards are subject to restrictions for an extended period
of time after the award is made, and the executive cannot sell the stock until
the restriction expires. The Board of Directors believes that the award of
restricted stock further encourages executive officers to manage the Company
from the perspective of an owner with an equity stake in the business. In
addition, restricted stock awards serve as a device for retaining managers,
since a manager who leaves the Company forfeits the unvested portion of the
award.
CEO Compensation.
The compensation of Raytheon's CEO and other senior executives has
historically been based on two factors -- performance and comparability.
Base Salary. The current base salary of Dennis J. Picard was established in
July 1998, after reviewing a competitive analysis provided by the Committee's
independent compensation consultant. The salary of Mr. Burnham who was elected
Chief Executive Officer effective December 1, 1998, was established at the time
of his employment.
Annual Incentive Award. In reviewing the CEO's total compensation package,
the Committee gave special consideration to several key factors, including the
Company's performance during 1998, the strategic accomplishments against plan
for the year, and competitive marketplace data.
The Committee noted the strong operating performance during 1998 at Raytheon
Systems Company, the Company's largest business unit, and Raytheon Aircraft
Company, the Company's next largest business unit. The Committee also noted the
significant achievements in generating cash flow from operations, divestitures,
and asset sales during the year, including excellent cash flow at Raytheon
Engineers & Constructors. The Committee took into account the disappointing
earnings performance of Raytheon Engineers & Constructors, and supported the
management changes effected to address this situation. The Committee also
considered the disappointing performance of the Microelectronics segment of the
Company's Commercial Electronics business.
The Company met its total divestiture goal early in the year and
successfully targeted additional non-core divestitures. Raytheon Systems Company
accelerated an already aggressive cost reduction program, which contributed
substantially to the solid after-tax performance of that business unit. Raytheon
Aircraft Company improved profit and margins across all business lines,
resulting in another year of record sales and profit, and the business is well
positioned for future growth, with backlog up 25 percent over a year ago.
<PAGE>
25
The Committee considered the reorganization and consolidation initiatives at
Raytheon Systems Company, the selection of a new President and Chief Operating
Officer during the year, and the successful leadership transition accomplished
during the second half of the year. The Committee considered it appropriate to
award an increased incentive over 1997, targeting the Chairman's annual results
based incentive compensation when combined with base salary at the 75th
percentile of peer CEO's. Mr. Burnham's results based incentive award for 1998
was established in connection with his employment agreement.
Long-Term Incentives.
Stock Options. The Committee reviewed industry and marketplace analyses,
developed and presented by an independent consultant, of stock option awards for
comparable positions. Noting in particular the value of the Chairman to the
corporation both in the current year and over his more than 40-year career with
the Company, the Committee awarded an increased option grant. As part of Mr.
Burnham's employment agreement, Raytheon awarded stock options and restricted
stock units both to compensate him for awards forfeited upon his termination of
employment with a prior employer and to position his long-term incentive
compensation with that of executives at a comparable level within Raytheon's
peer group companies.
Other Compensation. The Company's compensation programs also include certain
other items, which may include (i) life insurance coverage, (ii) an allocation
of Company stock under the Raytheon Stock Ownership Plan, (iii) matching
contributions under the Raytheon Savings and Investment Plan, and (iv) other
miscellaneous compensation.
The Company's executive compensation plans have been designed to attract and
retain outstanding management talent by providing a broad program of
competitive, equitable, and performance-based compensation, that aligns
executive rewards with the long-terms interests of shareholders. The Company
takes prudent steps to secure Federal tax deductions for its compensation
expenditures under Section 162(m) of the Internal Revenue Code, while also
providing the Committee with the flexibility to respond to changes in the
marketplace and the discretion to exercise subjective judgment in assessing
executive performance.
Members of the Management Development and Compensation Committee
Ferdinand Colloredo-Mansfeld, Barbara B. Hauptfuhrer, Richard D. Hill, Chairman,
Warren B. Rudman and Alfred M. Zeien
<PAGE>
26
PERFORMANCE GRAPH
SEC regulations require that the Company include in its Proxy Statement a
line-graph presentation comparing cumulative stockholder returns for the
Company's Class A Shares and Class B Shares with a broad-based market index and
either a nationally recognized industry standard or an index of peer companies
selected by the Company. In past years, the Company has compared its performance
with the S&P 500 Stock Index ("S&P 500") and a Company-selected peer group
reflecting its various business segments and consisting of the following
companies: defense/aerospace -- Litton Industries, Inc., Lockheed Martin
Corporation and Northrop Grumman Corporation; general aviation -- Textron Inc.
(Cessna); engineering and construction -- Fluor Corporation, Foster Wheeler
Corporation and Halliburton Corporation; and multi-industry companies --
Rockwell International Corporation, TRW, Inc. and United Technologies
Corporation (the "Former Peer Group"). As a result of the Company's acquisition
of the defense business of Texas Instruments and its merger with the defense
business of Hughes Electronics Corporation ("Hughes Defense"), coupled with the
divestiture of various non-core commercial businesses, the Company is now more
accurately categorized as a defense/aerospace corporation than a multi-industry
company. Accordingly, the Company believes that the S&P Aerospace/Defense Index
provides a better benchmark of peer companies than the Former Peer Group.
In accordance with SEC regulations, both the Former Peer Group and the S&P
Aerospace/Defense Index are presented in the following graph. The graph covers
the period December 18, 1997, the date the Company's Class A and Class B shares
first began trading on the NYSE following the merger of Raytheon Company and
Hughes Defense, through December 31, 1998.
[CHART OF COMPARISON OF TOTAL STOCKHOLDER RETURN
DECEMBER 18, 1997 THROUGH DECEMBER 31, 1998]
12/18/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
Class B Shares $100.00 $ 90.54 $105.02 $106.72 $ 97.72 $ 96.84
Class A Shares $100.00 $ 90.55 $104.67 $106.42 $ 96.05 $ 96.19
Former Peer Group $100.00 $102.47 $115.31 $108.86 $ 89.70 $102.85
S&P Aerospace/Defense $100.00 $100.00 $106.96 $ 96.52 $ 81.04 $ 76.66
S&P 500 $100.00 $100.00 $113.95 $117.71 $106.00 $128.58
Assumes $100 invested on December 18, 1997 in shares of each of the
Company's Class A and Class B Common Stock, the S&P 500, the S&P
Aerospace/Defense Index and each of the companies in the Former Peer Group.
Assumes the reinvestment of dividends.
The following graph, provided for information purposes, is an indicator of
cumulative total stockholder returns for the Company's Class A Shares and Class
B Shares as compared with the S&P 500, the Former Peer Group and the S&P
Aerospace/Defense Index weighted by market value at each measurement point. The
graph covers the one year period from December 31, 1997 through December 31,
1998, and attempts to mitigate some of the impact of the share price volatility
resulting from the unnatural selling activity that occurred during the two week
period immediately following the merger with Hughes Defense.
<PAGE>
27
[CHART OF COMPARISON OF TOTAL STOCKHOLDER RETURN
DECEMBER 31, 1997 THROUGH DECEMBER 31, 1998]
12/31/97 3/31/98 6/30/98 9/30/98 12/30/98
Class B Shares $100.00 $115.99 $117.88 $107.93 $106.96
Class A Shares $100.00 $115.99 $117.53 $106.08 $106.23
Former Peer Group $100.00 $112.53 $106.23 $ 87.54 $100.38
S&P Aerospace/Defense $100.00 $106.96 $ 96.52 $ 81.04 $ 76.66
S&P 500 $100.00 $113.95 $117.71 $106.00 $128.58
Assumes $100 invested in the Company's Class A Shares, Class B Shares, the
S&P 500, the S&P Aerospace/Defense Index and each of the companies in the Former
Peer Group. Assumes the reinvestment of dividends.
RETIREMENT BENEFITS
The Company's salaried pension plan (the "Salaried Pension Plan") covers all
salaried employees, excluding those at certain subsidiaries, who have completed
one year of service and attained age 21. The Salaried Pension Plan is
Company-funded and does not require or permit employee contributions. Benefits
are computed by a formula which takes into account an employee's years of
service and plan membership, final average compensation and an estimated primary
Social Security benefit.
The following table shows the estimated annual retirement benefits payable
to salaried employees on normal retirement at age 65 under the Salaried Pension
Plan and the Company's excess benefit plan, a separate, funded plan. The excess
benefit plan provides benefits that would otherwise be denied participants due
to certain Internal Revenue Code limitations on qualified benefit plans.
Annual Estimated Benefits Under The Raytheon Company Pension Plan
For Salaried Employees And Excess Benefit Plan
Final Average Years of Pension Credit at Age 65
Compensation 15 Years 20 Years 30 Years 40 Years
- -------------- ----------- ----------- ----------- ----------
$ 200,000 $ 54,000 $ 72,000 $ 96,000 $ 120,000
400,000 108,000 144,000 192,000 240,000
600,000 162,000 216,000 288,000 360,000
800,000 216,000 288,000 384,000 480,000
1,000,000 270,000 360,000 480,000 600,000
1,200,000 324,000 432,000 576,000 720,000
1,400,000 378,000 504,000 672,000 840,000
1,600,000 432,000 576,000 768,000 960,000
1,800,000 486,000 648,000 864,000 1,080,000
2,000,000 540,000 720,000 960,000 1,200,000
<PAGE>
28
Pension benefits shown in the above table are straight life annuity amounts
and assume retirement at age 65 (normal retirement age). Under the plan formula,
the amounts in the table will be reduced by a percentage of the employee's
estimated primary Social Security benefit. Pension benefits are based on the
average compensation (salary and bonus) paid during the sixty highest
consecutive months of employment. For 1998, covered compensation for Messrs.
Swanson, D'Angelo and Wegner is the same as their salary and bonus shown in the
Summary Compensation Table. As of December 31, 1998, those executive officers
had the following years of credited service: Mr. Swanson -- 25 years; Mr.
D'Angelo -- 33 years; and Mr. Wegner -- 10 years. The years of credited service
for Mr. Wegner include additional years of service granted to Mr. Wegner as an
inducement for him to join the Company.
The Company has also adopted a supplemental executive retirement plan (the
"Supplemental Plan"). The Supplemental Plan provides selected Company executives
with retirement income as a supplement to compensation and employee benefits
that are provided under the Salaried Pension Plan and the excess benefit plan,
and is similar in operation to plans currently in place at companies within the
Company's peer group. Mr. Picard's total pension benefit has been fixed at 65%
of the average of his covered compensation (consisting of base salary and bonus
as disclosed in the Summary Compensation Table) for the three consecutive years
during the last ten years prior to retirement for which such covered
compensation was the highest. The estimated annual pension benefit for Mr.
Picard, based on his current compensation level, is $2,026,161. As of December
31, 1998, Mr. Picard had 43 years of credited service with the Company.
Mr. Burnham's total pension has been fixed at 50% of his average covered
compensation for the five consecutive years of his employment at the Company
yielding the highest such average, subject to offsets by 50% of his estimated
primary Social Security benefit and by pension benefits received from any
previous employer. The estimated annual pension benefit for Mr. Burnham at age
65, based on his current compensation level and the current Social Security
laws, is $1,165,208 (payable for his lifetime only). This amount does not
reflect any offset for pension benefits payable by prior employers.
EXECUTIVE EMPLOYMENT AGREEMENTS
AND OTHER ARRANGEMENTS
The Company has entered into Change-in-Control Severance Agreements (the
"Severance Agreements") with Messrs. Picard, Swanson, D'Angelo and Wegner. The
Severance Agreements provide severance pay and continuation of certain benefits
upon the occurrence of a Change in Control. Entry into the Severance Agreements
was unanimously approved by the Board of Directors. The agreements became
effective as of November 22, 1995.
Generally, a "Change in Control" will be deemed to have occurred in any of
the following circumstances: (i) the acquisition of 25% or more of the
outstanding voting stock of the Company by any person, entity or group; (ii) the
persons serving as Directors of the Company as of November 22, 1995, and
replacements or additions subsequently approved by a majority vote of the Board,
cease to make up at least a majority of the Board; (iii) a merger, consolidation
or reorganization in which the stockholders of the Company prior to the merger
wind up owning less than 50% of the voting power of the surviving corporation;
(iv) a complete liquidation or dissolution of the Company or disposition of all
or substantially all of the assets of the Company.
<PAGE>
29
The Severance Agreements contain a dual trigger which requires, in addition
to a Change in Control, a qualifying termination of the executive's employment
within two years following a Change in Control for the executive to receive
benefits under the Severance Agreement, which include (i) a cash payment of
three times his current compensation (including base salary plus targeted
bonus); (ii) special supplemental retirement benefits determined as if the
executive had three years additional credit service under the Company's pension
plans as of the date of termination; and (iii) continuation of fringe benefits
pursuant to all welfare, benefit and retirement plans under which the executive
and his family are eligible to receive benefits for a period of up to three
years. In addition, the Severance Agreements provide for a supplemental cash
payment to the executive to the extent necessary to preserve the level of
benefits provided in the event of the imposition on the executive of excise
taxes payable in respect of "excess parachute payments" under the Internal
Revenue Code.
In July of 1998, the Company hired Daniel P. Burnham as President and Chief
Operating Officer and on December 1, 1998, in accordance with the Company's
announced succession plan, Mr. Burnham succeeded Dennis J. Picard as Chief
Executive Officer of the Company. In order to induce Mr. Burnham to leave his
position as Vice Chairman of AlliedSignal, Inc., the Company entered into an
employment agreement with Mr. Burnham.
The agreement provides that the Company will pay Mr. Burnham a base salary
of $850,000 per year and a target annual incentive bonus in an amount equal to
200% of his base salary. For 1998, Mr. Burnham received an annual incentive
award in the amount of $1,500,000. In order to compensate Mr. Burnham for
certain forfeitures he would incur in joining Raytheon, the Company awarded Mr.
Burnham 374,317 restricted stock units that settle on a one-for-one basis in
Class B Shares on certain scheduled vesting dates. The Company also granted Mr.
Burnham an option to purchase 250,000 Class B Shares. The option vests in full
on July 1, 1999.
The Company has also entered into a severance agreement with Mr. Burnham.
The agreement provides that if, prior to the completion of a full calendar year
of employment with the Company, the Company terminates Mr. Burnham's employment
or demotes him for any reason other than "cause" or "disability" (as those terms
are defined in the agreement) or his death, the Company will pay Mr. Burnham an
amount equal to the sum of three times his initial annual base salary plus three
times his target annual incentive bonus. If the Company thereafter terminates
Mr. Burnham's employment or demotes him for any reason other than "cause" or
"disability" (as those terms are defined in the agreement) or his death, the
Company will pay Mr. Burnham an amount equal to the sum of three times his base
salary for the immediately preceding full calendar year plus three times the
annual incentive bonus received by Mr. Burnham for the immediately preceding
full calendar year.
STOCKHOLDER PROPOSALS
Stockholders who intend to present proposals at the 2000 Annual Meeting, and
who wish to have such proposals included in the Company's Proxy Statement for
the 2000 Annual Meeting, must be certain that such proposals are received by the
Corporate Secretary, Raytheon Company, Executive Offices, 141 Spring Street,
Lexington, MA 02421, not later than December 1, 1999. Such proposals must meet
the requirements of the SEC in order to be eligible for inclusion in the Proxy
Statement for that meeting.
<PAGE>
30
STOCKHOLDER PROPOSAL NUMBER 1
Management has been advised that a group of stockholders whose names,
addresses and number of shares owned will be furnished by the Company promptly
upon receipt of any request therefor, intends to present the following proposal
at the Meeting:
ENDORSEMENT OF THE CERES PRINCIPLES
FOR PUBLIC ENVIRONMENTAL ACCOUNTABILITY
WHEREAS:
All leaders of industry in the United States now acknowledge their
obligation to pursue superior environmental performance and to disclose
information about that performance to their investors and other stakeholders.
The integrity, utility, and comparability of environmental disclosure
depends on the creation of environmental reports that employ a common format,
use credible metrics, and follow a set of a generally accepted environmental
disclosure standards.
The Coalition for Environmentally Responsible Economies (CERES), a ten year
old partnership among some of the largest investors, environmental groups, and
corporations in the country, has established what we believe is the most
thorough and well-respected environmental disclosure form in the United States.
CERES has also gathered leading international organizations, including the
United Nations Environment Programme, into a collaborative Global Reporting
Initiative to guide and accelerate the worldwide trend toward standardized
environmental reporting.
The CERES Principles and the CERES Report have already been adopted by
leading firms in highly diverse industries such as Bank America, Baxter
International, Bethlehem Steel, Coca-Cola, General Motors, Interface, ITT
Industries, Pennsylvania Power and Light, Polaroid, and Sun Company.
We believe endorsing the CERES Principles commits a company to the prudent
oversight of its financial and physical resources through: 1) protection of the
biosphere; 2) sustainable use of natural resources; 3) waste reduction; 4)
energy conservation; 5) risk reduction; 6) safe products/services; 7)
environmental restoration; 8) informing the public; 9) management commitment;
10) audits and reports. (The full text of the CERES Principles and accompanying
CERES Report form are obtainable from CERES, 11 Arlington Street, Boston,
Massachusetts 02116, (617) 247-0700 or at www.ceres.org).
RESOLVED: Shareholders request that the company endorse the CERES Principles
as a reasonable and beneficial component of their corporate commitment to be
publicly accountable for environmental performance.
<PAGE>
31
SUPPORTING STATEMENT
Recent studies show that the integration of environmental commitment into
business operations provide competitive advantage and improve long-term
financial performance for companies. In addition, the depth of a firm's
environmental commitment and the quality with which it manages its environmental
performance provide us with indicators of the foresight of its management.
Given investors' needs for credible information about a firm's environmental
performance, and given the large number of companies that have already endorsed
the CERES Principles and adopted its report format, endorsement of the CERES
Principles is a reasonable, widely accepted step for any company wishing to
demonstrate its seriousness about superior environmental performance.
The goal of the CERES Principles is continuous improvement in corporate
environmental performance, coupled with public accountability. One cannot
measure improvement without having data over time. Standardizing that data
enables investors to assess environmental progress within and across industries.
By endorsing the CERES Principles, a company agrees to a single consistent
standard for environmental reporting. An endorsing company works with CERES and
other endorsing companies in setting that reporting standard.
Your vote FOR this resolution serves the best interests of our Company and
its shareholders.
Your Directors recommend a vote AGAINST this proposal. The Company is
committed at all levels of management to operating its business in an
environmentally responsible manner, and has a pro-active approach of efficiently
and economically integrating its environmental principles into the operations of
the Company. The Company shares the proponent's concern for a healthy planet and
is working toward the environmental goals the proponent espouses.
Over the years, the Company has visibly demonstrated its commitment to
achieving high standards of environmental quality and to providing a safe and
healthful workplace for employees, contractors and communities. Our commitment
to environmental, health & safety quality ("EH&S") is reflected at all levels of
the corporation. Our EH&S principles are an integral part of our business
agenda, making them fundamental to our operations and our way of doing business.
The Company's management continually encourages all stakeholders to measure the
Company by its results. For example, the Company reduced its 1987 level of
reportable releases to the environment by over 90%, and the Company's solid
waste recycling program results in several million dollars of cost savings each
year. To encourage evaluation of its performance, the Company publishes its EH&S
results on the Internet which assures visibility and allows opportunity for
input.
<PAGE>
32
The precepts behind the CERES principles are embodied in our operational
policies and procedures. The Company has demonstrated this commitment with
aggressive programs to prevent pollution, reduce waste, promote recycling, and
conduct environmental, health and safety audits of all operating locations,
ensuring a pro-active approach which goes beyond merely complying with
applicable laws and regulations. These programs have received favorable
recognition from government, industry, and environmentalists. Recent examples of
such recognition include the EPA National Performance Review Hammer Award for
exemplary achievement under the 33/50 Program; New England Water Works
Association for protection of drinking water sources; Massachusetts Association
of Conservation Commission's Award for advancing the progress of collaborative
watershed management; and the National Security Industrial Association's
Environmental Award.
The Massachusetts Watershed Coalition presented the Company with its 1997
Watershed Leader Award "in appreciation for corporate leadership in establishing
the Massachusetts Watershed Initiative and strengthening community stewardship
of watershed ecosystems." The Company continues to commit financial and human
resources to this national model. The Company has established a new relationship
with River Network to raise public awareness of the link between safe drinking
water and watershed protection.
The Company supports the International Leadership Council of the Nature
Conservancy and assists several state Conservancy chapters. At its corporate
headquarters, the Company is working with the Wildlife Habitat Council to engage
employees as volunteers to develop a nature trail in honor of its former
Chairmen, Charles F. Adams and Thomas L. Phillips. Other Company facilities will
be working with the Council to preserve wildlife habitat on our properties.
In the Forth Worth, Texas area, the Company is active in promoting
environmental awareness and education within the local school system and was
presented with the "Environmental Vision" award by the Fort Worth Clean City
organization for demonstrating its commitment to advancing environmental
awareness among school children.
In 1998, the Department of Defense ("DoD") awarded the Company the DoD's
prestigious "Single Process Initiative Recognition Program Award" for successful
elimination of chromium and solvents in 6 different applications. The award is
part of the DoD's "Acquisition Pollution Prevention Initiative", a program for
promoting acquisition streamlining through contractual block change
modifications. With the stroke of the pen, hundreds or thousands of contracts
can be changed simultaneously, significantly reducing the time and cost to
implement changes. Beyond the pollution prevention benefits and improved
employee work conditions, this change generates significant cost savings.
The Company's Ontario, Canada facility was honored by the Ontario Industry
Association for exemplary safety performance -- working over 1,000,000 hours
without a lost time accident.
These are just a few examples of the Company's many EH&S efforts. More
information can be found in the Company's most recent EHS Stewardship Report
which is available directly from the Company or on its Internet site at
www.raytheon.com
<PAGE>
33
The Company recognizes the value of communicating its environmental programs
and achievements, and since 1996, has periodically distributed an EH&S
Stewardship Report to stockholders and other interested parties. After comparing
the scope of our report and the CERES recommendations, the Company feels that
reiterating similar information in a different format is not a value-added
activity. Like most large corporations, the Company is under constant pressure
to streamline its operations and reduce costs, and management feels that our
shareholders and the public are better served if the Company devotes its
resources towards the integration of our EH&S principles into our processes,
products and services.
The Company is fully committed to sound environmental performance and agrees
that responsible implementation increases long-term shareholder value. Many
organizations, including government agencies, trade associations, and privately
and publicly funded groups advance the same ultimate goal, but each with its own
focus or set of priorities to which they would ask us to adhere. Your Directors
believe the Company will best benefit society by staying focused on its
demonstrated course of environmental performance improvement, rather than trying
to keep up with and accommodate the ever-changing agendas of these various
groups. In the highly competitive environment in which the Company operates, it
prefers to focus its resources on substantive performance rather than generating
additional reports. Accordingly, your Directors do not think it is in the
Company's interest to conform to the particular set of principles and reporting
format advocated by the proponents.
The Board of Directors recommends that Stockholders vote AGAINST the
adoption of this proposal. Proxies solicited by the Board of Directors will be
so voted unless Stockholders otherwise specify in their proxies.
STOCKHOLDER PROPOSAL NUMBER 2
Management has been advised that a group of stockholders whose names,
addresses and number of shares owned will be furnished by the Company promptly
upon receipt of any request therefor, intends to present the following proposal
at the Meeting:
FOREIGN MILITARY SALES -- RAYTHEON
WHEREAS in fiscal year 1997, the United States supplied $8.4 billion worth
of weapons in actual delivery of arms sales abroad.
WHEREAS the last three times the U.S. sent troops into combat in significant
numbers (Panama, Iraq, and Somalia), they faced adversaries that received U.S.
weapons or military technology in the period leading to the conflict.
WHEREAS U.S. weapons supplied to anti-Communist rebels in Angola and
Afghanistan under the Reagan Doctrine have been used in devastating civil wars;
in the Afghan case, U.S.-supplied Stinger missiles turned up on the
international black market as prized items sought by all manner of rebel groups
and terrorist organizations ("Sales of the Century," Commonweal, William D.
Hartung, 5/20/94). "U.S. Weapons at War: United States Arms Deliveries to
Regions of Conflict" (World Policy Institute, 1995) shows that the U.S. was a
major arms supplier in one-third of the 50 ethnic and territorial conflicts
currently raging. The study says that some 45 parties involved in the conflicts
purchased over $42 billion in U.S. arms sales in the last ten years.
<PAGE>
34
WHEREAS our company ranked third among Department of Defense-leading
corporations with contracts in excess of $6.4 billion, including $1.2 billion in
foreign military sales.
RESOLVED that shareholders request the Board of Directors to provide a
comprehensive report on Raytheon's foreign military sales. The report, prepared
at reasonable cost, should be available to all shareholders by December 1999,
and may omit classified and proprietary information.
SUPPORTING STATEMENT
Global security is security of people. The cold-war notion of using arms
sales to maintain balances of power or to support allies has been discredited by
1990s experience, when alliances, governments, and boundaries in large parts of
the world are in flux.
We are disturbed by the industry's claims and lobbying efforts asserting
that the only way to keep jobs is to promote foreign military sales. We believe
such statements are inconsistent with co-production agreements and transfers of
technology to foreign companies. Offset arrangements on major sales often give
business to overseas suppliers. Such contracts with foreign
companies/governments have harsh repercussions on U.S. workers during this time
of accelerated downsizing of our workforce.
Therefore, it is reasonable for shareholders to ask:
1. Criteria used to promote foreign military sales;
2. Procedures used to negotiate sales, directly with foreign governments or
through the U.S. government. For example, what determines which weapons
are direct commercial arms sales and what must be negotiated through the
Pentagon? What percentage is commercial military sales and what is
foreign military sales?
3. Categories of military equipment exported for the past three years, with
as much statistical information as is permissible; contracts for
servicing/maintaining equipment; offset agreements; and licensing and/or
co-production with foreign governments.
4. Analysis of legislation establishing a code for U.S. arms transfers
(e.g., no sales to governments that violate human rights of their own
citizens, engage in aggression against neighbors, come to power through
undemocratic means or ignore international arms-control agreements.
Your Directors recommend a vote AGAINST this proposal. The Company has
historically been, and intends to remain, a major defense contractor. For
decades, a consistent component of the strategic vision of the Company has been
to be among the top tier of defense contractors, and a substantial portion of
the earnings of the Company is derived from the manufacture and supply of
defense products.
<PAGE>
35
As a supplier of weapons and intelligence systems to the United States
Government, the Company supports the foreign policy of the Government and the
security of its citizens. The Government has determined as a matter of foreign
policy that it is in the national interest to support friendly and allied
nations by providing for the sale of military equipment to those nations. The
Government has also determined as a matter of foreign policy that it is contrary
to the national interest to permit or encourage the sale of military equipment
to hostile or belligerent nations. The Company fully supports these policies.
In order to prevent the sale of military equipment to hostile or belligerent
nations, the United States Government has adopted and enforces a wide variety of
export restrictions that prohibit such sales. The Company fully supports and
observes all such restrictions on the sale of military equipment.
The Company serves the national interest by manufacturing and selling
weapons and intelligence systems in accordance with the policies, laws and
regulations of the United States Government. It is in the best interest of the
Company and its shareholders that the Company continue this role.
The proponents' proposal that the Company provide a report on foreign
military sales is unnecessary, as information on foreign sales is provided in
the Company's Annual Report on Form 10-K and in the Company's Annual Report to
Shareholders. Preparing an additional report to shareholders containing
information as suggested in the proponents' supporting statement would put the
Company to unwarranted expense and possibly lead to the divulgence of
proprietary and sensitive business information, disclosure of which would not be
in the best interest of the Company and its shareholders. Making sensitive
foreign marketing data available to the public would put the Company at a
distinct competitive disadvantage. This matter should be left to the regulatory
framework established by the United States Government.
The Board of Directors recommends that Stockholders vote AGAINST the
adoption of this proposal. Proxies solicited by the Board of Directors will be
so voted unless Stockholders otherwise specify in their proxies.
STOCKHOLDER PROPOSAL NUMBER 3
Management has been advised that John Chevedden, 2215 Nelson Ave., No. 205,
Redondo Beach, CA 90278, and owner of 50 Class B Shares and 3 Class A Shares,
intends to submit the following proposal at the Meeting.
ELECT THE ENTIRE BOARD OF DIRECTORS EACH YEAR
RESOLVED:
ELECT THE ENTIRE BOARD OF DIRECTORS EACH YEAR WITH A 70% MAJORITY OF INDEPENDENT
DIRECTORS.
Raytheon shareholders request the Board of Directors take all necessary
steps to enact this resolution today. This includes that less frequent than
annual election of the entire board can be enacted only by a majority of
shareholder votes, on a separate-issue basis. This resolution will not affect
the unexpired terms of directors elected to the board at or before the 1999
annual meeting.
<PAGE>
36
WHY ELECT THE ENTIRE BOARD OF DIRECTORS EACH YEAR?
To make Raytheon more competitive at the highest corporate level.
Competitiveness at the highest level will have the greatest impact to
improve Raytheon's dismal performance:
According to Raytheon, consolidation savings are supposed to rise sharply in
the 3rd and 4th quarters -- from virtually zero in the first half of 1998.
Aviation Week Oct. 5, 1998
Raytheon will not meet Wall Street expectations for 3rd quarter earnings --
expands layoffs. Raytheon spent $13 billion to buy Hughes Electronics and Texas
Instruments. Has been trying to squeeze costs from the combined operation ever
since.
New York Times Oct. 8, 1998
We've reduced our Raytheon earnings estimates for both 1998 and 1999.
Value Line Oct. 2, 1998
E-System was never really assimilated into Raytheon even though it was
bought 3 years ago.
Aviation Week June 22, 1998
Considerable skepticism surrounds Raytheon projections about how much it
will save from the integration of the Hughes and TI businesses.
Aviation Week Oct. 5, 1998
Raytheon adopts new poison pill (until 2007) without shareholder vote --
despite a commitment to shareholders not to do so.
Investor Responsibility Research Center, Feb. 13, 1998
Washington, DC
Raytheon paid CEO Mr. Picard a whopping $14-million for 1997. But much work
remains to consolidate Hughes and TI.
Boston Globe April 1998
Annual election of directors will encourage an independent and competitive
Raytheon board for effective oversight of management.
<PAGE>
37
LACK OF INDEPENDENCE AND COMPETITIVENESS --
ANALYSIS OF RAYTHEON DIRECTORS
Director Lack of Independence Issues
C. Mansfeld 12-year term(a) On 1 Key Committee(c)
Dorfman 4 board seats(b) On 1 Key Committee(c)
Deutch 11 board seats(b)
Everhart 6 board seats(b) On 1 Key Committee(c)
Hauptfuhrer 12-year term(a) 8 board seats(b) On 1 Key Committee(c)
Hill 25-year term(a) On 2 Key Committees(c)
Land 2l-year term(a) On 2 Key Committees(c)
Meirelles 5 board seats(b)
Phillips 37-year term(a) 5 board seats(b) On 1 Key Committee(c)
Rudman Legal services(d) 5 board seats(b) On 2 Key Committees(c)
(a) CalPERS has argued that board members who stay on for a decade or more
should no longer be considered independent.
Business Week Sept. 15, 1997
(b) The more boards a director sits on, the less effective he'll probably be.
Business Week Nov. 25, 1996
(c) Institutional Shareholder Services (www.cda.com/iss) said it recommends that
all the key board committees have only independent outside directors.
(d) Receives extra Raytheon paycheck for legal services.
The best boards continue to raise the bar, said Business Week:
Place the entire board up for election every year
YES ON 3
Your Directors recommend a vote AGAINST this proposal. Currently the Board
is divided into three classes, with each class standing for election each year.
We believe that our current Board consists of individuals with a broad diversity
of experience and knowledge which are invaluable in considering issues important
to the Company. Often, however, this experience must be coupled with an in-depth
understanding of our business, future plans and strategic options, which may
take time to acquire. Accordingly, the Board of Directors believes that it is in
the Company's best interest to maintain a minimum level of experience and
continuity in the Board of Directors. The Board's current structure is
specifically tailored to ensure that after any election a minimum of two-thirds
of the Board will have had at least one year of experience as directors of the
Company.
<PAGE>
38
The Board disagrees with the proponent's contention that our Board is not
currently independent. In certain cases, qualifications of a potential Board
member may allow that individual to be deemed independent under some standards
but not so under others. However, based on our review of the standards espoused
by the California Public Employees' Retirement System ("CalPERS") and Teachers
Insurance and Annuity Association-College Retirement Equities Fund
("TIAA-CREF"), 70% of the Board is considered independent, satisfying the
threshold proposed by the proponent. Nominees to our Board are chosen based on
the mix of director characteristics and skills that is most appropriate for the
Company, including diversity of knowledge, experience, gender and race. We
believe that the Board of Directors should continue to be allowed to take into
account such factors as it deems necessary to nominate directors it believes are
capable of fulfilling the duties of the office.
Through various quotations taken out of context, the proponent alleges that
the Company's recent performance justifies elimination of our classified board
structure. Following are examples of some of the real successes, not mentioned
by the proponent, which the Company has enjoyed during the last year.
* Immediately after the merger with Hughes Defense, the Company began to
consolidate its legacy defense organizations, including Raytheon
E-Systems, into one defense electronics business, Raytheon Systems
Company ("RSC"). RSC was organized into five segments along product
lines to best serve its customers and markets. This decision to
consolidate immediately and in this fashion was unique in the industry.
During 1998, RSC generated retained cost savings of approximately $440
million, meeting its ambitious cost savings goals, and achieved a win
rate of 74%. As a result of the aggressive consolidation efforts, RSC is
today one of the most competitive defense electronics companies in the
world.
* Raytheon Aircraft, the standard-setter in general aviation, had another
record year in 1998. Sales increased 8% to $2.6 billion and operating
income increased 23% to $257 million. Raytheon Aircraft continues to
move forward with two new composite fuselage business jets and the most
important new military training aircraft of the era.
* Raytheon Engineers & Constructors ("RE&C") started 1998 by significantly
consolidating its operations. During the summer, RE&C reassessed its
entire structure and operations and later announced a turnaround plan
and new strategic direction. For the fourth quarter of 1998, RE&C
surpassed its cash flow projections. RE&C has strengthened its
management team and is undertaking changes to reestablish customer focus
and implement new productivity measures.
* During 1998 the Company generated significant cash flow from operations,
divestitures and asset sales. Net debt at the end of 1998 was $8.6
billion. That is down $1.2 billion from the end of 1997. Net debt as a
percentage of total capital was 44.1% at December 31, 1998 compared to
48.4% at December 31, 1997.
* As shown on the Performance Graph appearing on page 21, the Company
significantly outperformed its peers in the S&P Aerospace/Defense Index
over the past year.
<PAGE>
39
We wish to [set] the record straight with respect to two quotes contained
in the proposal. The current shareholder rights plan was adopted in connection
with the Company's merger with Hughes Defense. The existence of the plan,
including a detailed description of the plan's terms and conditions and its
mechanics, was fully disclosed in the Consent Solicitation Statement distributed
to all shareholders as part of the process to approve the merger. Although there
was no separate approval of the plan, the plan was part and parcel of the merger
with Hughes Defense that was overwhelmingly approved by shareholders. With
respect to Mr. Picard's 1997 compensation, he did not receive the amount
referenced by the proponent in his proposal. Over 60% of the sum referenced was
for Mr. Picard's 1997 restricted unit award. The award vests over a period of
three years; one-third in December 1997; one-third in 1998; and one-third upon
his retirement. Mr. Picard was not therefore entitled to and did not receive the
entire value of the award in 1997. In fact, Mr. Picard deferred his 1997 and
1998 portions until after his retirement. The award was in replacement of a
restricted stock award, the final portion of which had vested, and was put in
place to induce Mr. Picard to delay his scheduled retirement and ensure his
availability to the Company.
Our classified Board structure provides the additional benefit of reducing
the likelihood of a sudden, unsolicited and possibly disadvantageous takeover of
the Company without prior discussions with the Board. If hostile acquiror cannot
circumvent negotiations with the Board, the Board has the ability to evaluate
potential takeover offers, seek alternatives to unacceptable proposals and
negotiate to achieve the best possible outcome for shareholders. While the
classified Board does not preclude a successful takeover offer, the Board of
Directors believes that it enhances the Board's ability to negotiate favorable
terms and thereby provide shareholders with the best value in the event that
shareholders decide such a takeover is beneficial.
In addition, adoption of this proposal would not automatically result in the
elimination of the classified Board. Further action by shareholders would be
required to amend the By-Laws and the Certificate of Incorporation. In order to
amend these documents, a majority vote of the outstanding Class A Shares and the
Class B Shares would be required. In addition, under Delaware law, the
Certificate of Incorporation can only be amended following a recommendation of
the Board of Directors prior to submission to shareholders. While the Board,
consistent with its fiduciary duties, would consider such an amendment, for the
foregoing reasons the Board does not currently believe that such an amendment
would be in the best interest of the Company or its shareholders.
Finally, in connection with the merger with Hughes Defense, the Company
agreed to be bound by certain restrictive covenants, including limitations on
its ability to amend its Certificate of Incorporation. Unless the Company
obtains the prior consent of General Motors Corporation ("GM"), any amendment to
"declassify" the Board of Directors would constitute a breach of the Company's
obligations to GM. The Company has not discussed this matter with GM and cannot
at this time speculate whether or not GM would, if requested, consent to such an
amendment.
The Board of Directors recommends that Stockholders vote AGAINST the
adoption of this proposal. Proxies solicited by the Board of Directors will be
so voted unless Stockholders otherwise specify in their proxies.
<PAGE>
40
BUSINESS TO BE TRANSACTED
At the date of this statement, management did not know of any business to be
brought before the Annual Meeting other than the matters described in this Proxy
Statement. In the event that any other matters properly shall come before the
meeting that are not specifically set forth on the proxy cards and in this
statement, it is the intention of the persons named as proxies to vote in
accordance with their judgment on such matters.
The Annual Report of the Company for the fiscal year ended December 31,
1998, which is not a part of this Proxy Statement and is not proxy soliciting
material, is enclosed.
By Order of the Board of Directors,
/s/ Thomas D. Hyde
Thomas D. Hyde
Secretary
Lexington, Massachusetts
March 30, 1999
<PAGE>
41
PROXY CARD - CLASS A
RAYTHEON Annual Meeting of Shareholders 1999 ANNUAL MEETING
Wednesday, April 28, 1999 ADMISSION TICKET
2:00 p.m. Local Time (Doors Open
at 1:00 p.m.)
c/o Proxy Services Raytheon Systems Company
P.O. Box 8040 1151 E. Hermans Road
Boston, MA 02266-8040 Tucson, Arizona
(Map on reverse)
Please present this ticket for admittance of shareholder(s) named above.
Admittance will be based upon availability of seating.
- -------------------------------------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
Your telephone or Internet vote allows you to vote your shares in the same
manner as if you marked, signed, and returned your proxy card. For telephone
or Internet voting, you will need to enter the 14-digit Control Number located
in the lower left of this form.
VOTE BY PHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE 1-877-779-8683 OR
COLLECT ON A TOUCH-TONE TELEPHONE 1-201-536-8073 ANYTIME BEFORE
3:00 P.M. EASTERN TIME ON TUESDAY APRIL 27, 1999.
Option A: To vote as the Board of Directors recommends on ALL Items,
press 1.
Option B: If you choose to vote on each item separately, press 0. You
will hear these instructions:
Item 1: To vote FOR ALL nominees, press 1. To WITHHOLD FOR ALL
nominees, press 9.
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and
listen to the Instructions.
Nominees: (01) Daniel P. Burnham, (02) John H. Galvin, and
(03) Alfred M. Zeien
Items 2, 3 & 4: To vote FOR, press 1; AGAINST, press 9;
ABSTAIN, press 0.
When asked, you must confirm your vote by pressing 1.
VOTE BY INTERNET: THE WEB ADDRESS IS http://www.eproxyvote.com/rtna
THANK YOU FOR VOTING RAYTHEON CLASS A DETACH CARD IF MAILING
- -------------------------------------------------------------------------------
<PAGE>
42
/ X / Please mark votes as in this example.
The Board of Directors recommends a vote FOR Item 1.
- ---------------------------------------------------------
Item 1 - Election of Directors.
To elect three directors of the class whose term of
office expires in 2002 to serve for a term of three FOR WITHHOLD
years. / / / /
Nominees: (01) Daniel P. Burnham, (02) John R, Galvin, and
(03) Alfred M. Zeien
- --------------
For all nominees except as written above.
- --------------
The Board of Directors recommends a vote AGAINST Items 2, 3 and 4.
FOR AGAINST ABSTAIN
Item 2 - Stockholder Proposal:
Endoresement of the CERES Principles / / / / / /
Item 3 - Stockholder Proposal:
Foreign Military Sales / / / / / /
Item 4 - Stockholder Proposal:
Annual Election of Directors / / / / / /
- --------------
Please check any of the following that apply:
I plan to attend the Annual Meeting. / /
Please discontinue duplicate Annual
Report mailings. / /
Please note my change of address on the
back of this card. / /
Signature--------------------------------- Date------------------, 1999
Signature--------------------------------- Date------------------, 1999
- -------------------------------------------------------------------------------
<PAGE>
43
CLASS A RAYTHEON COMPANY
LEXINGTON, MA 02421
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Daniel P. Burnham, Peter R. D'Angelo, and Thomas
D. Hyde, or any of them, with full power of substitution, as proxies to vote all
shares of Raytheon Company Class A stock that the undersigned is entitled to
vote at the Annual Meeting of Stockholders of Raytheon Company to be held at
Raytheon Systems Company, 1151 E. Hermans Rd., Tucson, Arizona, at 2:00 P.M.
Local Time, Wednesday, April 28, 1999. This proxy authorizes each of them to
vote at his discretion on any other matter that may properly come before the
Meeting or any adjournments thereof. This proxy also provides voting
instructions for shares held in the Dividend Reinvestment Plan and various
employee savings plans described in the Proxy Statement.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR Item 1 and AGAINST Items 2, 3 and 4.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH MUST SIGN.
Please sign this proxy card exactly as your name appears hereon. When shares are
held by joint tenants, both must sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
HAS YOUR ADDRESS CHANGED?
(If yes, please include Social Security No.)
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
<PAGE>
44
CLASS B
RAYTHEON Annual Meeting of Shareholders 1999 ANNUAL MEETING
Wednesday, April 28, 1999 ADMISSION TICKET
2:00 p.m. Local Time (Doors Open
at 1:00 p.m.)
c/o Proxy Services Raytheon Systems Company
P.O. Box 8040 1151 E. Hermans Road
Boston, MA 02266-8040 Tucson, Arizona
(Map on reverse)
Please present this ticket for admittance of shareholder(s) named above.
Admittance will be based upon availability of seating.
- -------------------------------------------------------------------------------
VOTE BY TELEPHONE OR INTERNET
Your telephone or Internet vote allows you to vote your shares in the same
manner as if you marked, signed, and returned your proxy card. For telephone
or Internet voting, you will need to enter the 14-digit Control Number located
in the lower left of this form.
VOTE BY PHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE 1-877-779-8683 OR
COLLECT ON A TOUCH-TONE TELEPHONE 1-201-536-8073 ANYTIME BEFORE
3:00 P.M. EASTERN TIME ON TUESDAY APRIL 27, 1999.
Option A: To vote as the Board of Directors recommends on ALL Items,
press 1.
Option B: If you choose to vote on each item separately, press 0. You
will hear these instructions:
Item 1: To vote FOR ALL nominees, press 1. To WITHHOLD FOR ALL
nominees, press 9.
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and
listen to the Instructions.
Nominees: (01) Daniel P. Burnham, (02) John H. Galvin, and
(03) Alfred M. Zeien
Items 2, 3 & 4: To vote FOR, press 1; AGAINST, press 9;
ABSTAIN, press 0.
When asked, you must confirm your vote by pressing 1.
VOTE BY INTERNET: THE WEB ADDRESS IS http://www.eproxyvote.com/rtna
THANK YOU FOR VOTING RAYTHEON CLASS B DETACH CARD IF MAILING
- -------------------------------------------------------------------------------
<PAGE>
45
/ X / Please mark votes as in this example.
The Board of Directors recommends a vote FOR Item 1.
- ---------------------------------------------------------
Item 1 - Election of Directors.
To elect three directors of the class whose term of
office expires in 2002 to serve for a term of three FOR WITHHOLD
years. / / / /
Nominees: (01) Daniel P. Burnham, (02) John R, Galvin, and
(03) Alfred M. Zeien
- --------------
For all nominees except as written above.
- --------------
The Board of Directors recommends a vote AGAINST Items 2, 3 and 4.
FOR AGAINST ABSTAIN
Item 2 - Stockholder Proposal:
Endoresement of the CERES Principles / / / / / /
Item 3 - Stockholder Proposal:
Foreign Military Sales / / / / / /
Item 4 - Stockholder Proposal:
Annual Election of Directors / / / / / /
- --------------
Please check any of the following that apply:
I plan to attend the Annual Meeting. / /
Please discontinue duplicate Annual
Report mailings. / /
Please note my change of address on the
back of this card. / /
Signature--------------------------------- Date------------------, 1999
Signature--------------------------------- Date------------------, 1999
- -------------------------------------------------------------------------------
<PAGE>
46
CLASS B RAYTHEON COMPANY
LEXINGTON, MA 02421
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Daniel P. Burnham, Peter R. D'Angelo, and Thomas
D. Hyde, or any of them, with full power of substitution, as proxies to vote all
shares of Raytheon Company Class B stock that the undersigned is entitled to
vote at the Annual Meeting of Stockholders of Raytheon Company to be held at
Raytheon Systems Company, 1151 E. Hermans Rd., Tucson, Arizona, at 2:00 P.M.
Local Time, Wednesday, April 28, 1999. This proxy authorizes each of them to
vote at his discretion on any other matter that may properly come before the
Meeting or any adjournments thereof. This proxy also provides voting
instructions for shares held in the Dividend Reinvestment Plan and various
employee savings plans described in the Proxy Statement.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted FOR Item 1and AGAINST Items 2, 3 and 4.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH MUST SIGN.
Please sign this proxy card exactly as your name appears hereon. When
shares are held by joint tenants, both must sign. When signing as
attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
HAS YOUR ADDRESS CHANGED?
(If yes, please include Social Security No.)
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
