<PAGE> 1
PROXY STATEMENT COVER SHEET, AS REQUIRED BY RULE 14a-6(m) (INSERT AT PAGE B-17):
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a Party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LOCKHEED CORPORATION
- ----------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
LOCKHEED CORPORATION
- ----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- ----------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- ----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- ----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------------------------
/ / 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:
- ----------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- ----------------------------------------------------------------------------
(3) Filing party:
- ----------------------------------------------------------------------------
(4) Date filed:
- ----------------------------------------------------------------------------
- --------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
[LOCKHEED STAR LOGO]
4500 Park Granada Boulevard
Calabasas, California 91399
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 10, 1994
------------------------
TO THE STOCKHOLDERS OF
LOCKHEED CORPORATION:
Notice is hereby given that the Annual Meeting of Stockholders of Lockheed
Corporation will be held at the Burbank Airport Hilton Convention Center, 2500
N. Hollywood Way, Burbank, California on Tuesday, May 10, 1994, at 9:30 a.m.,
local time, to consider and vote upon:
1. Election of a Board of fourteen directors. The attached Proxy
Statement, which is a part of this Notice, includes the names of the
nominees intended to be presented by the Board of Directors for
election.
2. Election of Ernst & Young as the Corporation's independent auditors for
the year 1994.
3. A Stockholder proposal, if properly presented at the Annual Meeting,
regarding the space-based nuclear defense system.
4. A Stockholder proposal, if properly presented at the Annual Meeting, to
suspend the Management Incentive Compensation Plan to impose other
restrictions on management compensation.
5. A Stockholder proposal, if properly presented at the Annual Meeting,
regarding endorsement of the Coalition for Environmentally Responsible
Economies principles.
The Board of Directors has fixed the close of business on March 21, 1994,
as the record date for determination of stockholders entitled to notice of and
to vote at the Annual Meeting.
To assure that your shares will be represented at the Annual Meeting,
please sign and promptly return the accompanying proxy in the enclosed envelope.
You may revoke your proxy at any time before it is voted.
Dated: April 7, 1994
By Order of the Board of Directors,
CAROL R. MARSHALL
Secretary
<PAGE> 3
LOCATION OF LOCKHEED ANNUAL MEETING OF STOCKHOLDERS:
Burbank Airport Hilton Convention Center
2500 N. Hollywood Way
Burbank, California
[LOCATION MAPS]
<PAGE> 4
LOCKHEED CORPORATION
PROXY STATEMENT
APRIL 7, 1994
This Proxy Statement is furnished by the Board of Directors of Lockheed
Corporation (respectively, the "Board of Directors" and the "Corporation") in
connection with the solicitation on its behalf of proxies for use at the Annual
Meeting of Stockholders to be held on May 10, 1994, and at any adjournments or
postponements thereof (the "Annual Meeting"). The Annual Meeting has been called
to consider and vote upon the election of Directors, the election of Ernst &
Young as the Corporation's independent auditors for the year 1994, and, if
properly presented at the Annual Meeting, three proposals submitted by
stockholders. This Proxy Statement and the accompanying Proxy are being sent to
stockholders on or about April 7, 1994.
VOTING BY STOCKHOLDERS
Only holders of record of the Corporation's common stock, par value $1.00
per share (the "Common Stock"), at the close of business on March 21, 1994, are
entitled to receive notice of and to vote at the Annual Meeting. As of March 21,
1994, there were 62,812,286 shares of Common Stock issued, outstanding and
entitled to vote.
Each share of Common Stock entitles the holder thereof to one vote.
Stockholders may not cumulate their voting rights so as to cast more than one
vote for an individual director candidate. The holders of a majority of the
shares voting at the meeting will be able to elect all of the Directors if they
choose to do so, and, in such event, the other stockholders will be unable to
elect any Director or Directors. The candidates, up to the number of Directors
to be elected, receiving the highest number of votes shall be elected. The
election of auditors and action with respect to stockholder proposals will
require the affirmative vote of holders of a majority of the Common Stock
entitled to vote thereon present in person or by proxy at the Annual Meeting.
All shares represented by each properly executed unrevoked proxy received
in time for the Annual Meeting will be voted in accordance with the instructions
specified therein, or, in the absence of appropriate instructions, for Items 1
and 2 and against Items 3, 4, and 5 thereof. A proxy may be revoked at any time
prior to being voted by filing a written notice of revocation with the Secretary
of the Corporation or by presentation of a subsequent proxy.
It is the Corporation's general policy to keep confidential proxy cards,
ballots, and voting tabulations that identify individual stockholders, except
where disclosure is mandated by law, such disclosure of a stockholder's vote is
expressly requested by that stockholder, or during a contested election, and
that the tabulators and inspectors of election be independent and not employees
of the Corporation.
Votes cast by proxy or in person at the Annual Meeting will be counted by
the persons appointed by the Corporation to act as election inspectors for the
meeting. The election inspectors will treat shares represented by proxies that
reflect abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum and for purposes of determining the
outcome of any matter submitted to the stockholders for a vote. Abstentions,
however, do not constitute a vote "for" or "against" any matter and thus will be
disregarded in the calculation of a plurality or of "votes cast".
The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares identified as held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to vote
that the broker or nominee does not have discretionary power to vote on a
particular matter) as shares that are present and entitled to vote for purposes
of determining the presence of a quorum. However, for purposes of determining
the outcome of any matter, such "broker non-vote" shares will be treated as not
<PAGE> 5
present and not entitled to vote (even though those shares are considered
entitled to vote for quorum purposes and may be entitled to vote on other
matters).
Any unmarked proxies, including those submitted by brokers or nominees,
will be voted as indicated in the accompanying proxy card, as summarized above.
The Board of Directors has no present intention to present to the meeting
for action any matters other than those described in this proxy statement and
matters incident to the conduct of the meeting. If any other business comes
before the meeting or any adjournment thereof (including but not limited to
matters of which the Board of Directors is currently unaware) for which specific
authority has not been solicited from the stockholders, then to the extent
permitted by law, including the rules of the Securities and Exchange Commission,
the proxy grants to the persons named therein the discretionary authority to
vote thereon in accordance with their best judgment.
ELECTION OF DIRECTORS
At the Annual Meeting, fourteen persons will be elected to serve as the
Corporation's Board of Directors until the next Annual Meeting of Stockholders
and until their successors are elected. The proxy holders intend to vote each
share represented by each proxy for the fourteen nominees named below unless
specific contrary instructions are given in the proxy. Each of the nominees has
consented to be named as a nominee in this Proxy Statement. In the event any
nominee should become unable to serve as a Director, votes represented by the
proxies will be voted by the proxy holders in their discretion for another
person nominated by the Board.
The following table sets forth the name of each director and nominee for
election to the Board of Directors, age, principal occupation and the name and
principal business of any corporation or organization in which such occupation
is carried on, the period during which the director has served, and the number
of shares of Common Stock beneficially owned, directly or indirectly, as of
February 28, 1994 unless otherwise indicated. Each of the nominees owns
beneficially less than 1% of the Corporation's outstanding Common Stock. Unless
otherwise indicated, and except as such powers may be shared with their spouses,
the nominees have sole voting and investment power with respect to the shares
indicated below.
<TABLE>
<CAPTION>
NUMBER
OF
PRINCIPAL BUSINESS EXPERIENCE SHARES
DURING PAST FIVE YEARS AND DIRECTOR HELD
NAME AGE OTHER INFORMATION SINCE BENEFICIALLY
- ------------------------- --- -------------------------------------------- -------- ------------
<S> <C> <C> <C> <C>
Lynne V. Cheney 51 W. H. Brady, Jr., Distinguished Fellow at 1994 300
the American Enterprise Institute for Public
Policy Research, an independent, nonpartisan
organization sponsoring original research on
domestic and international economic policy,
foreign and defense policy, and social and
political issues since 1992; served as
Chairman of the National Endowment for the
Humanities, an independent federal agency
supporting education, research,
preservation, and public programs in hu-
manities, 1986-1992; director of Reader's
Digest Association and IDS Mutual Fund Group
Lodwrick M. Cook 65 Chairman of the Board and Chief Executive 1991 1,294(3)
Officer of ARCO, an integrated petroleum,
coal, and chemical company, since January,
1986; served as President and Chief
Executive Officer of ARCO since October
1985; served as a director of ARCO since
1980; served as an executive officer of ARCO
since 1970; director of H. F. Ahmanson &
Company; director of Home Savings of America
and Chairman of the Board of Directors of
ARCO Chemical Company
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
NUMBER
OF
PRINCIPAL BUSINESS EXPERIENCE SHARES
DURING PAST FIVE YEARS AND DIRECTOR HELD
NAME AGE OTHER INFORMATION SINCE BENEFICIALLY
- ------------------------- --- -------------------------------------------- -------- ------------
<S> <C> <C> <C> <C>
Houston I. Flournoy 64 Special Assistant to the President for 1976 1,074(3)
Governmental Affairs, University of Southern
California, Sacramento, California, since
August 1981; Professor of Public
Administration, University of Southern Cali-
fornia, Sacramento, California, 1981 to
1993; served as Vice President for
Governmental Affairs, University of Southern
California, Los Angeles, 1978 to 1981;
director of Fremont General Corporation and
Tosco Corporation
James F. Gibbons 62 Dean of the School of Engineering, Stanford 1985 2,309(3)
University, Stanford, California, since
September 1984; Professor of Electronics,
Stanford University, since 1964; director of
Raychem Corporation
Robert G. Kirby 68 Senior Partner, The Capital Group Partners 1990 1,452(3)
L.P., since 1991; formerly Chairman of the
Board of Capital Guardian Trust Company, a
wholly-owned subsidiary of The Capital
Group, Inc., an investment manager for
pension funds and mutual funds, 1976 to
1991; director of Capital Guardian Trust
Company and Quiksilver Inc.; member of Board
of Governors of the Pacific Stock Exchange,
Incorporated
Lawrence O. Kitchen 70 Chairman of the Executive Committee of the 1975 25,611(1)(3)
Corporation since January 1, 1989; served as
Chairman of the Board and Chief Executive
Officer of the Corporation, 1986 to 1988;
served as President and Chief Operating
Officer of the Corporation, 1975 to 1985;
director of BankAmerica Corporation and Bank
of America NT&SA
Vincent N. Marafino 63 Vice Chairman of the Board and Chief 1980 218,079(1)(2)
Financial and Administrative Officer of the
Corporation since August 1, 1988; served as
Executive Vice President -- Chief Financial
and Administrative Officer of the
Corporation, 1983 to 1988; served as an
executive officer of the Corporation since
1971
J. J. Pinola 68 Served as Chairman of the Board and Chief 1983 1,074(3)(4)
Executive Officer of First Interstate
Bancorp, 1978 to 1990; director of First
Interstate Bancorp, several First Interstate
subsidiaries, SCEcorp, and Southern
California Edison Company
David S. Potter 69 Served as Chairman of the Board of John 1987 4,844(3)
Fluke Manufacturing Company, Inc., an
electronic instrument and sensor firm,
Everett, Washington, 1990-1991; retired Vice
President and Group Executive of General
Motors Corporation; served as Vice Presi-
dent of General Motors Corporation, 1976 to
1985; director of John Fluke Manufacturing
Company, Inc.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NUMBER
OF
PRINCIPAL BUSINESS EXPERIENCE SHARES
DURING PAST FIVE YEARS AND DIRECTOR HELD
NAME AGE OTHER INFORMATION SINCE BENEFICIALLY
- ------------------------- --- -------------------------------------------- -------- ------------
<S> <C> <C> <C> <C>
Frank Savage 55 Chairman of the Board of Alliance Corporate 1990 1,419(3)
Finance Group Incorporated, an investment
management company, since 1993; Senior Vice
President of The Equitable Life Assurance
Society of the United States since 1987;
former Chairman of the Board of Equitable
Capital Management Corporation, 1992- 1993;
and former Vice Chairman of the Board of
Equitable Capital Management Corporation,
1986- 1992; director of Alliance Capital
Management Corporation, ARCO Chemical
Company, and Lexmark Corporation; trustee of
Johns Hopkins University and the Council on
Foreign Relations; director of the Boys Club
of Harlem, New York Philharmonic, and
Essence Communications Inc.; and former U.S.
Presidential appointee to the Board of
Directors of U.S. Synthetic Fuels
Corporation
Daniel M. Tellep 62 Chairman of the Board and Chief Executive 1987 241,909(1)(2)(5)
Officer of the Corporation since January 1,
1989; served as President of the
Corporation, August 1988 to December 1988;
served as Group President -- Missiles and
Space Systems of the Corporation, 1986 to
1988, and President, Lockheed Missiles &
Space Company, Inc., a wholly-owned
subsidiary of the Corporation, 1984 to 1988;
served as an executive officer of the
Corporation since March 1983; director of
First Interstate Bancorp, Southern
California Edison Company, and SCEcorp.
Carlisle A. H. Trost 63 Retired Admiral, U.S. Navy, 1990; Chief of 1990 650(3)
Naval Operations, United States Navy,
1986-1990; also served as Commander in
Chief, U.S. Atlantic Fleet, Commander U.S.
Seventh Fleet, and Deputy Commander in Chief
of the U.S. Pacific Fleet; director of
Louisiana Land and Exploration Company,
General Public Utilities Corp., and General
Public Utilities -- Nuclear Corp., Burdeshaw
Associates Ltd., Precision Components
Corporation, and Bird-Johnson Company; and
Trustee of the U.S. Navy Academy Foundation
James R. Ukropina 56 Partner, O'Melveny & Myers, a law firm, Los 1988 1,074(3)
Angeles, California, since 1992; former
Chairman of the Board and Chief Executive
Officer of Pacific Enterprises, a
diversified holding company, 1989 to 1991;
served as President of Pacific Enterprises,
1986 to 1989; served as Executive Vice
President and General Counsel of Pacific
Lighting Corporation, 1984 to 1986; director
of Pacific Mutual Life Insurance Company and
member of the Board of Trustees of Stanford
University
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NUMBER
OF
PRINCIPAL BUSINESS EXPERIENCE SHARES
DURING PAST FIVE YEARS AND DIRECTOR HELD
NAME AGE OTHER INFORMATION SINCE BENEFICIALLY
- ------------------------- --- -------------------------------------------- -------- ------------
<S> <C> <C> <C> <C>
Douglas C. Yearley 58 Chairman of the Board, President and Chief 1990 1,074(3)
Executive Officer of Phelps Dodge
Corporation, a producer of copper and copper
products, carbon blacks, and wheels and rims
for medium and heavy trucks, Phoenix,
Arizona, serving as Chairman and Chief
Executive Officer since 1989 and President
since 1991; served as Executive Vice
President of Phelps Dodge Corporation from
1987 to 1989; served as President of Phelps
Dodge Industries, a division of Phelps Dodge
Corporation, from 1988 to 1990; served as
Senior Vice President of Phelps Dodge
Corporation from 1982 to 1986; director of
Phelps Dodge Corporation, J.P. Morgan & Co.
Incorporated, Morgan Guaranty Trust Company
of New York and USX Corporation
</TABLE>
- ------------
(1) Shares held beneficially by Messrs. Kitchen, Marafino and Tellep include
21,000 shares, 175,998 shares, and 231,433 shares, respectively, which are
subject to presently exercisable options or options which are exercisable
within sixty days after February 28, 1994.
(2) Includes shares held under the Lockheed Salaried Employees Savings Plan Plus
(the "Savings Plan") as of December 31, 1993.
(3) Includes shares held in trust under the Directors' deferred compensation
plan described below. As of February 28, 1994, Messrs. Cook, Flournoy,
Gibbons, Kirby, Kitchen, Pinola, Potter, Savage, Trost, Ukropina and
Yearley have been credited with 1,294; 74; 1,309; 1,452; 74; 74; 4,744;
669; 650; 74 and 74 shares, respectively, pursuant to such plan. The
Directors do not have or share voting or investment power for their
respective shares held in the trust, except in the event of a tender offer.
(4) Includes 1,000 shares held in a trust of which Mr. Pinola and his wife are
trustees and with respect to which he has shared voting and investment
power.
(5) Includes 9,635 shares held in a trust of which Mr. Tellep and his wife are
trustees and with respect to which he has shared voting and investment
power.
During the Corporation's last fiscal year, ten regularly scheduled and
special meetings of the Board of Directors were held. In addition an aggregate
of fifteen meetings of committees of the Board of Directors were held during
that period. Attendance at Board of Directors meetings and committee meetings
averaged 87% among all Directors during 1993. With the exception of Messrs.
Cook, Gibbons and Savage, each Director attended 75% or more of the aggregate
number of meetings of the Board of Directors and committees on which he served.
It should be noted that the Corporation's Directors discharge their
responsibilities throughout the year not only at such Board of Directors and
committee meetings, but through personal meetings and other communications,
including considerable telephone contact, with the Chairman and others regarding
matters of interest and concern to the Corporation.
The Corporation's standard arrangement with respect to remuneration of
non-employee Directors includes an annual cash payment of $25,000 and payment of
$1,000 for each meeting of the Board of Directors or a committee of the Board of
Directors attended by a Director. Under a deferred compensation plan, all or a
portion of such remuneration may be deferred to periods following the time a
participant ceases to be a Director. In addition, $5,000 is paid annually on
behalf of each non-employee Director to a trust maintained under the deferred
compensation plan for the purpose of purchasing Common Stock on the open market
for the benefit of such non-employee Directors. Prior to 1993, Directors could
also direct a portion of the annual cash payment and meeting fees to the trust
for the purchase of Common Stock. Stock held by the trust is distributable after
a participant ceases to be a Director. In the event a participant's status as a
Director is
5
<PAGE> 9
involuntarily terminated other than by death, all deferred cash remuneration and
all Common Stock in the Director's trust account will be distributed within
fifteen days of such termination.
Non-employee Directors who have ceased to be Directors and who have reached
age 65 with five or more years of service on the Board of Directors are entitled
to receive an annual retirement benefit equal to the amount of the annual fee,
including the portion contributed to the trust for the purchase of Common Stock,
in effect on the date the Director ceases to be a Director. These amounts will
be paid monthly to the retired Director, or upon death to the surviving spouse,
for a period equal to the number of years, up to twenty, that the Director
served on the Board of Directors. Alternatively, the Directors may elect a lump
sum payment in lieu of monthly payments. The trust established by the
Corporation for the purpose of securing the payment of benefits provided under
certain executive benefit plans in the event of a change in control of the
Corporation also covers this Director retirement benefit.
During the Corporation's last fiscal year, the Corporation paid Mr. Kitchen
$50,000 in consideration for consultant services rendered to the Corporation in
1993.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Management Development and
Compensation, and Nominating committees.
The Audit Committee is presently composed of Messrs. Flournoy, Kirby,
Pinola, Potter, and Ukropina. During the Corporation's last fiscal year the
Audit Committee held six meetings. The functions performed by the Audit
Committee include recommending to the Board of Directors the independent
auditors to be nominated by the Board of Directors for election by the
stockholders; monitoring the performance of the independent auditors as elected
by the stockholders; reviewing the scope of the audit to be conducted by the
independent auditors and the results of the audit; reviewing the non-audit
services provided by the independent auditors; reviewing the independence of the
independent auditors and the range of audit and non-audit fees of the
independent auditors; reviewing the organization and performance of the
Corporation's internal systems of audit and financial controls; reviewing the
Corporation's environmental, safety, and health policies and procedures; and
reviewing the Corporation's business practices programs and compliance by
employees of the Corporation with significant policies of the Corporation.
The Management Development and Compensation Committee (the "Compensation
Committee") is presently composed of Messrs. Cook, Gibbons, Pinola, Potter, and
Yearley. During the Corporation's last fiscal year the Compensation Committee
held four meetings. The functions performed by the Compensation Committee
include the administration of the Corporation's Management Incentive
Compensation Plan, Long Term Performance Plan, and employee stock option plans;
the review of compensation of senior management employees; the consideration of
proposed candidates for senior officer positions; the appraisal of performance
of management; and the review of plans and programs for succession to senior
management positions of the Corporation.
The Nominating Committee is presently composed of Messrs. Cook, Gibbons,
Kirby, Pinola, Savage, and Trost. During the Corporation's last fiscal year, the
Nominating Committee held two meetings. The functions performed by the
Nominating Committee include the recommendation to the Board of Directors of
nominees to be proposed for election to the Board of Directors at annual
meetings of stockholders and at other appropriate times. The Nominating
Committee will consider candidates for election as Directors of the Corporation
recommended by stockholders of the Corporation. Any such recommendation by a
stockholder must be submitted in writing to the Chairman of the Nominating
Committee, Lockheed Corporation, care of the Secretary, Lockheed Corporation,
4500 Park Granada Boulevard, Calabasas, California 91399. Nominations of
Directors other than those made by the Board of Directors may be made only
pursuant to notice in writing to the Secretary delivered to and received by the
Corporation not less than sixty days or more than ninety days prior to the
meeting, unless less than seventy days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, in which case the notice
must be received prior to the tenth day following the day on which the notice of
the date of the annual meeting was mailed or such public disclosure was made,
whichever first occurs. The notice must include the information specified in
Section 3.03 of the
6
<PAGE> 10
Bylaws of the Corporation, a copy of which may be obtained upon written request
to the Secretary of the Corporation at the address appearing on the cover of
this Proxy Statement.
Other committees of the Board of Directors consist of the Executive
Committee presently composed of Messrs. Kirby, Kitchen, Pinola, Potter, Tellep,
and Ukropina and the Finance Committee presently composed of Messrs. Flournoy,
Kitchen, Marafino, Pinola, Savage, Trost, Ukropina, and Yearley.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Ukropina served as a member of the Compensation Committee until
December 1993. The firm of O'Melveny & Myers, of which Mr. Ukropina is a
partner, renders legal services to the Corporation and its subsidiaries.
EXECUTIVE COMPENSATION
The Compensation Committee's report on executive compensation is set forth
below.
The following report of the Compensation Committee shall not be deemed to
be incorporated by reference as a result of any general incorporation by
reference of this Proxy Statement or any part thereof.
REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
The Management Development and Compensation Committee (the "Compensation
Committee" or "Committee") is presently composed of non-employee directors
including Messrs. Cook, Gibbons, Pinola, Potter, and Yearley. Mr. Ukropina was
also a member of the Compensation Committee in 1993 but resigned as a member of
the Committee on December 7, 1993. No member of the Compensation Committee is a
former or current officer or employee of the Corporation or any of its
subsidiaries. The functions performed by the Compensation Committee include the
review of the compensation of senior management employees; the consideration of
proposed candidates for senior officer positions; the appraisal of the
performance of management; the review of plans and programs of succession to
senior management positions of the Corporation; and the administration of the
Corporation's Management Incentive Compensation Plan (the "MICP"), Long Term
Performance Plan (the "LTPP"), and the 1992 Employee Stock Option Program.
Hewitt Associates ("Hewitt"), an independent, nationally recognized,
compensation and benefit consulting firm periodically provides information to
the Compensation Committee with respect to the competitiveness of compensation
paid to senior officers of the Corporation. In doing so, Hewitt takes into
account how compensation paid to the Corporation's senior executives compares to
compensation paid to similarly situated executives at other aerospace companies,
including those companies in the peer group set forth in the Stock Price
Performance Graph. Members of the Compensation Committee also review
compensation survey information prepared by other recognized consulting firms.
It has also been the practice of the Compensation Committee to meet with Hewitt
from time to time.
COMPENSATION PLAN ELEMENTS
The Corporation's executive compensation program includes four basic
elements: base salary; the Management Incentive Compensation Plan award based on
annual individual and corporate performance; the Long Term Performance Plan
award based on three-year cycles; and the stock option program. Incentive
compensation awards provide each executive with opportunities to improve total
compensation and can be a significant portion of the executive's total cash
compensation.
COMPENSATION PHILOSOPHY
At the direction of the Board of Directors and pursuant to the charter of
the Committee, the Committee endeavors to ensure that the compensation programs
for executives of the Corporation and its subsidiaries are effective in
attracting and retaining key executives responsible for the success of the
Corporation and are administered in an appropriate fashion in the long-term
interests of the Corporation and its stockholders. The
7
<PAGE> 11
Committee, through the various incentive awards described herein, also seeks to
align total compensation for senior management with corporate performance.
Committee actions related to the compensation of the Chief Executive Officer of
the Corporation are submitted to the full board for ratification.
The Corporation's compensation philosophy for senior executives provides
that a significant portion of total compensation be incentive-oriented and also
provides for recognition of contributions to the attainment of the Corporation's
financial and business objectives (described in more detail below). Within this
philosophy and as discussed more fully below, base salaries are set at levels
somewhat less than industry averages for base salaries, and executives, under
the incentives provided in the MICP and LTPP elements of the overall
compensation plan, have the opportunity to achieve industry level total
compensation based on performance against both short and long term objectives.
For the executive officers named in the Summary Compensation Table, on
average incentive awards comprised approximately 51 percent of the total 1993
salary and incentive compensation.
COMMENTS ON 1993 PERFORMANCE
During 1993 the Corporation experienced, generally, excellent performance,
and return to stockholders in the form of share price appreciation and dividends
was 25 percent. As reported on the Stock Price Performance Graph, this return
was below the average of the peer companies, but above the Standard & Poor's 500
Index. The year was also noteworthy for the successful integration of the Fort
Worth fighter business which was acquired in February 1993, a 19 percent
increase in earnings per share, and generation of positive cash flow which
enabled the Corporation to significantly reduce net debt. These are specific
factors that the Committee considered with respect to its decisions regarding
Mr. Tellep's base salary and awards under the Corporation's 1992 Employee Stock
Option Program.
1993 BASE SALARIES
As discussed above, the Committee has been advised that base salaries
for the Corporation's executive officers are generally somewhat below the
averages for executive officers at comparable companies in the industry.
The group of comparable companies (the "Index Group") includes the peer
companies set forth in the Stock Price Performance Graph (with the
exception of Loral, which is not a participant in the compensation studies
conducted by Hewitt), and also Allied Signal, Boeing, FMC, GenCorp,
Sunstrand, TRW and United Technologies. This broader base of companies is
used for comparison of base salaries since, in the Committee's view, the
competition for hiring executives extends beyond the direct competitor peer
group. The Committee also believes that this provides a more balanced and
complete reference with respect to the level of base salaries. Base
salaries reflect time in position and a subjective evaluation of individual
duties, scope of responsibility, and individual performance. The Committee
focuses primarily on total annual compensation, including incentive awards,
rather than base salary alone, as the appropriate measure of executive
officer performance and contribution. The Committee does not target a
specific percentile range or rank within the Index Group in determining
base salaries for executive officers.
The Committee determined, based upon the specific factors outlined
above and on its subjective evaluation of his performance, leadership, and
contributions to increase long term stockholder value, and also taking into
consideration that at his request he was not granted a salary increase last
year, Mr. Tellep merited a salary increase of 6.7 percent for the period of
September 1993 to September 1994. As to the remaining top four officers as
a group, the average salary increase granted in September 1993 was 6
percent.
MANAGEMENT INCENTIVE COMPENSATION PLAN AWARDS (MICP)
The primary purpose of the MICP is to reward executives for annual
attainment of financial and operational objectives. The MICP provides an
opportunity for annual cash bonuses based on the Committee's subjective
evaluation of the performance of the Corporation or operating subsidiary
against certain pre-established objectives and a subjective appraisal of
each executive's contribution to such
8
<PAGE> 12
performance. Bonuses are determined by a formula which takes into account
these evaluations and which can result in a bonus ranging from zero to 94
percent of base salary. The actual percentage is determined based upon the
Committee's subjective evaluation of each individual officer's performance.
Awards under the MICP are generally made in February of each year for
performance in the previous year.
With respect to the year ended December 26, 1993, and for purposes of
determining awards under the MICP for Mr. Tellep and the other four named
executive officers, the Committee measured the Corporation's and operating
subsidiaries' performance against various financial objectives (e.g.,
increase in earnings per share and program profit margins), business
development objectives (e.g., obtaining certain program wins), operations
objectives (e.g., satisfactory achievement of program milestones and
quality standards), and other significant objectives such as the completion
of the acquisition of the Fort Worth Division of General Dynamics. The
Committee believes that the specific criteria used in determining the
awards under the MICP constitute proprietary and confidential information,
the disclosure of which would adversely affect the Corporation. In the case
of Mr. Tellep, his annual bonus represented approximately 85 percent of
base salary or approximately 40 percent of his total cash compensation. As
to the remaining four named executive officers as a group, on the average
the annual bonus represents 83 percent of base salary or approximately 41
percent of total cash compensation.
LONG TERM PERFORMANCE PLAN AWARDS (LTPP)
The primary purpose of the LTPP is to provide an incentive for
positive longer term performance of the Corporation and the executive. The
LTPP provides an opportunity for a bonus which is determined by a formula
(as described below) based on management performance measured against
certain specific criteria and improvement in total stockholder value during
a three-year performance cycle, which are the internal and external
measurement factors of the plan. The long-term bonus opportunity for the
1990-92 three-year cycle paid in 1993 was determined based on achievement
of a combination of the factors, which achievements were audited by the
Corporation's independent auditors, Ernst & Young. For the three-year
cycle, the external factors consisted of total stockholder return compared
with the Standard & Poor's 400 Industrials and performance of a group of
aerospace companies consisting of Grumman, McDonnell Douglas, Martin
Marietta, Northrop, General Dynamics, Rockwell, TRW, and Raytheon. The
internal measures consisted of predetermined targets of cash flow return on
assets and the achievement of signing funded contracts. The specific
criteria and target levels have not been disclosed because the Committee
believes they are proprietary in nature and the disclosure would be
detrimental to the Corporation. The LTPP Award for the 1990-92 cycle paid
to Mr. Tellep was approximately 13 percent of his total cash compensation.
As to the remaining four named executive officers as a group, on the
average, the LTPP award for the 1990-92 cycle was approximately 10 percent
of total cash compensation.
STOCK OPTION PROGRAM
The 1992 Employee Stock Option Program authorizes the Committee to
make grants and awards of stock options and stock appreciation rights to
senior executives. The purpose of the option program is to provide
additional incentives to employees to strive to maximize stockholder value.
The option program utilizes vesting periods to encourage key employees to
continue in the employ of the Corporation. Executives who were awarded
stock options received a fixed number of options based on a number of
factors. In determining the amounts of the grants of stock options, the
Compensation Committee recommended individual awards for each of the
executive officers based upon the Committee's subjective evaluation of the
scope of the optionee's responsibilities, contributions to the performance
of the Corporation, and individual performance expectations. The number of
shares held by an executive officer is not a factor in determining the size
of current option grants. The number of options previously awarded to
executive officers is reviewed but is not an important factor in
determining the size of current option grants.
9
<PAGE> 13
Based upon Mr. Tellep's leadership in concluding the Fort Worth
transaction and the Committee's evaluation of Mr. Tellep's contribution as
Chief Executive Officer to the overall level of performance of the
Corporation, the Committee approved a grant to Mr. Tellep of options to
purchase 60,000 shares.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Compensation Committee considers the
anticipated tax treatment to the Corporation and to the executives of various
payments and benefits. Some types of compensation payments and their
deductibility (e.g., the spread on exercise of non-qualified options) depend
upon the timing of an executive's vesting or exercise of previously granted
rights. Further, interpretations of and changes in the tax laws and other
factors beyond the Committee's control also affect the deductibility of
compensation. The Committee will consider various alternatives to preserve the
deductibility of compensation payments and benefits to the extent reasonably
practicable and to the extent consistent with its other compensation objectives.
The Committee also approved the compensation of the Corporation's other
executive officers for 1993, following the principles and procedures outlined in
this report.
MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE
Douglas C. Yearley, Chairman
Lodwrick M. Cook
James F. Gibbons
J. J. Pinola
David S. Potter
10
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth the compensation for
services in all capacities earned by each of the Corporation's Chairman and
Chief Executive Officer and the other four most highly compensated executive
officers of the Corporation and its subsidiaries (the "named executive
officers") during the three fiscal years ended December 26, 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS
------------------------------------------- ----------- PAYOUTS
OTHER SECURITIES --------
ANNUAL UNDERLYING LTIP ALL OTHER
NAME OF AND SALARY BONUS COMPENSATION OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($)(A) ($)(B) ($)(C) (#)(D) ($)(E) ($)(F)
------------------ ---- ------- ------- ------------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
D. M. Tellep 1993 762,500 650,000 -- 60,000 203,318 36,746
Chairman of the Board and 1992 750,000 600,000 -- 40,000 95,196 36,692
Chief Executive Officer 1991 675,000 550,000 -- 44,624 89,775 --
V. N. Marafino 1993 612,500 525,000 -- 30,000 161,539 29,428
Vice Chairman of the Board and Chief 1992 638,346 475,000 -- 30,000 77,574 28,491
Financial and Administrative Officer 1991 537,500 400,000 -- 34,998 84,644 --
V. D. Coffman 1993 382,500 300,000 -- 15,000 47,533 66,051
Executive Vice President 1992 350,719 200,000 -- 8,100 15,960 10,964
1991 185,769 105,000 -- 8,409 13,928 --
K. W. Cannestra 1993 330,769 285,000 -- 13,000 62,762 15,305
Group President -- 1992 312,115 189,000 -- 15,000 29,904 14,345
Aeronautical Systems 1991 263,558 224,000 -- 15,832 31,044 --
V. P. Peline 1993 293,750 235,000 -- 13,000 62,046 14,114
Group President -- 1992 278,750 233,000 -- 15,000 30,363 13,634
Electronic Systems 1991 256,250 202,000 -- 15,995 -- --
</TABLE>
- ---------------
(a) Base salary increases are generally effective in September of each year.
Amounts therefore can reflect a base salary earned for 75% of the year and
an increased base salary earned for 25% of the year. Mr. Cannestra received
a salary increase in March 1993 in connection with his assumption of
expanded responsibilities. Salary amounts may include payment for vacation
in lieu of time off.
(b) Reported amounts include awards for 1993 performance that were paid in
early 1994 to Messrs. Coffman, Cannestra, and Peline under the
Corporation's Management Incentive Compensation Plan ("MICP"). Payment of
MICP awards for 1993 made to Messrs. Tellep and Marafino has been deferred
and may be made in accordance with the provisions of the Corporation's
Deferred Management Incentive Compensation Plan, which provides for
interest on deferred amounts and payment in either a single sum or
installments, as elected by the participant.
(c) Other Annual Compensation in the form of the value of certain perquisites
did not, in the aggregate, exceed the lower of $50,000 or 10% of the
aggregate 1993 salary and bonus compensation of any of the named
executives.
(d) 1991 stock option grants include options granted in connection with SAR
cancellation.
(e) Amounts reported include Long-Term Performance Plan awards for the period
1990-1992 which were paid in 1993. Mr. Peline elected to defer any award
payable in 1991 until after his retirement.
(f) 1993 amounts include the Corporation's contributions to the qualified
savings plan for Messrs. Tellep, Marafino, Coffman, Cannestra, and Peline
of $5,236; $11,250; $5,236; $11,045; and $11,250, respectively; and the
Corporation's contributions to the non-qualified supplemental plan of
$31,510; $18,178; $13,151; $4,260; and $2,864, respectively. Of the $66,051
shown for Mr. Coffman, $46,164 represents taxable relocation reimbursement
and $1,500 represents non-taxable relocation reimbursement. Information for
1991 is excluded in reliance upon applicable SEC transition rules.
11
<PAGE> 15
The table below shows information regarding grants of stock options made to
the named executive officers under the Corporation's 1992 Employee Stock Option
Program during the fiscal year ended December 26, 1993. The Corporation did not
grant any stock appreciation rights during the 1993 fiscal year. The amounts
shown for each of the named executive officers as potential realizable values
are based on arbitrarily assumed annualized rates of stock price appreciation of
zero percent, five percent and ten percent over the full ten-year term of the
options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL POTENTIAL REALIZABLE VALUE AT ASSUMED
UNDERLYING OPTIONS ANNUAL RATES OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------------------
NAME (#)(A,B,C) FISCAL YEAR ($/SH) DATE 0% ($) 5% ($)(D) 10% ($)(D)
---- ---------- ------------ ----------- ---------- ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
D. M. Tellep................. 60,000 9.5 58.81 2/2/2003 0 2,219,400 5,623,800
V. N. Marafino............... 30,000 4.7 58.81 2/2/2003 0 1,109,700 2,811,900
V. D. Coffman................ 15,000 2.4 58.81 2/2/2003 0 554,850 1,405,950
K. W. Cannestra.............. 13,000 2.0 58.81 2/2/2003 0 480,870 1,218,490
V. P. Peline................. 13,000 2.0 58.81 2/2/2003 0 480,870 1,218,490
All Lockheed Stockholders(e). -- -- -- -- 0 2,262,489,872 5,732,986,639
</TABLE>
- ---------------
(a) Options granted pursuant to the Corporation's 1992 Employee Stock Option
Program. The options are exercisable starting 12 months after the grant
date with 50% of the shares covered thereby becoming exercisable at that
time and with an additional 50% of the option shares becoming exercisable
on the second anniversary date. Acceleration of the exercisability of the
options may occur under certain circumstances, including mandatory
retirement or a change in control. The options were granted with an
exercise price of 100% of fair market value on the date of grant and for a
term of 10 years (subject to earlier termination at or 12 months after a
termination of employment other than by reason of death, disability or
retirement). A description of certain additional features of this Option
Program is provided under the section herein entitled "Employee Stock
Option Programs."
(b) Under the terms of this Option Program, the Compensation Committee retains
discretion, subject to plan limits, to modify the terms of outstanding
options and to reprice the options.
(c) The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions.
(d) The potential realizable values shown are on a pre-tax basis.
(e) The stockholder amounts shown above do not include dividends, and are based
on the market price and outstanding shares of Common Stock held by all
stockholders (other than the Corporation) on the grant date.
THESE POTENTIAL REALIZABLE VALUES ARE BASED SOLELY ON ARBITRARILY ASSUMED
RATES OF APPRECIATION REQUIRED BY APPLICABLE SEC REGULATIONS AND ARE NOT
INTENDED TO FORECAST FUTURE APPRECIATION, IF ANY, OF THE COMMON STOCK. ACTUAL
GAINS, IF ANY, ON OPTION EXERCISES AND COMMON STOCK HOLDINGS ARE DEPENDENT ON
THE FUTURE PERFORMANCE OF THE COMMON STOCK, OVERALL STOCK MARKET CONDITIONS, AND
OTHER FACTORS. THERE CAN BE NO ASSURANCE THAT THE POTENTIAL REALIZABLE VALUES
SHOWN IN THIS TABLE WILL BE ACHIEVED.
12
<PAGE> 16
The following table sets forth information concerning the exercise of stock
options during the 1993 fiscal year by each of the named executive officers and
the fiscal year-end spread on unexercised "in-the-money" options. No stock
appreciation rights were exercised in 1993 by the named executive officers or
held by them at fiscal year-end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END AT FY-END
(#) ($)(A)
VALUE ------------ --------------------
SHARES ACQUIRED REALIZED(A) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ----------- ------------ --------------------
<S> <C> <C> <C> <C>
D. M. Tellep........................... 0 0 181,433/ 4,970,141/
80,000 1,151,400
V. N. Marafino......................... 30,800 640,925 145,998/ 4,044,910/
45,000 707,887
V. D. Coffman.......................... 7,100 161,484 26,859/ 736,291/
19,050 262,733
K. W. Cannestra........................ 51,950 1,299,911 23,332/ 661,729/
20,500 333,188
V. P. Peline........................... 891 28,793 80,395/ 2,189,335/
20,500 333,188
</TABLE>
- ---------------
(a) Market value of underlying securities at exercise date or year-end, as the
case may be, minus the exercise or base price of "in-the-money" options.
"Value Realized" and "Value of Unexercised In-the-Money Options" are on a
pre-tax basis.
13
<PAGE> 17
The following table sets forth information concerning potential
individual awards for the Long Term Performance Plan (the "LTPP") cycle
beginning in the 1993 fiscal year for the 1993-1995 LTPP Cycle for each of the
named executive officers.
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER NON-STOCK PRICE BASED PLANS (A, B)
OTHER PERIOD ----------------------------------------
UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME OR PAYOUT(B) ($) ($) ($)
---- ---------------- --------- ------- -------
<S> <C> <C> <C> <C>
D. M. Tellep............................. 3 years 0 484,946 969,892
V. N. Marafino........................... 3 years 0 386,388 772,776
V. D. Coffman............................ 3 years 0 196,037 392,074
K. W. Cannestra.......................... 3 years 0 166,868 333,736
V. P. Peline............................. 3 years 0 148,536 297,072
</TABLE>
- ---------------
(a) Awards under the LTPP are based upon a combination of factors including (i)
the Corporation's absolute percentage gain in total stockholder value as
compared to an absolute target approved by the Compensation Committee, and
(ii) the Corporation's investment value relative to a peer group investment
value. The peer group is described below and is approved by the Compensation
Committee.
(b) Under the terms of the Corporation's Long Term Performance Plan, the
Compensation Committee retains discretion, subject to plan limits, to (i)
adjust awards to take into account any exceptional factors influencing the
award amounts generated by the award factor schedules, (ii) adjust the award
of any individual participant, and (iii) defer payment of any individual
participant's award.
The industry peer group shown on the stock price performance graph (the
"Peer Group") will be used as the standard for measuring the gain in stockholder
value achieved by the Corporation during the 1993-1995 LTPP cycle. The relevant
group for the 1990-1992 LTPP cycle, on which long-term compensation paid and
reported in fiscal 1993 was based, included seven of the eight companies in the
Peer Group. Loral was substituted for TRW in the Peer Group because of changes
in their respective businesses from 1989 to 1992, which rendered Loral a more
similar company.
INCENTIVE COMPENSATION PLAN
The Corporation's Management Incentive Compensation Plan provides for
incentive compensation payments to certain management employees selected by the
Compensation Committee, which administers the plan. Approximately 874 employees
are eligible to participate in this plan. The award of incentive compensation,
if any, is made on an annual basis, generally during the first quarter of the
year following the year during which the services on which the award is based
were performed, although the Compensation Committee may defer payment of any
individual participant's award. The aggregate amount of awards, if any, made
under this plan is at the discretion of the Board of Directors following the
recommendation of the Compensation Committee. Individual awards are typically
determined by a formula which takes into consideration the performance of the
employee and the operating company or organization to which the employee is
assigned during the year in respect of which the award is earned. Companies are
measured against specific financial objectives such as pre-tax earnings, cash
flow management, and funded sign-ups. Also measured are other significant
operational objectives. Subject to certain conditions, an employee may defer the
payment of all or a portion of an award. All amounts accumulated and unpaid
under this plan must be paid by the Corporation in a lump sum within fifteen
calendar days following a change in control, as defined.
LONG TERM PERFORMANCE PLAN
The Corporation's Long Term Performance Plan is intended to provide
additional cash compensation to certain executive officers of the Corporation
selected by the Compensation Committee. Approximately 40
14
<PAGE> 18
employees are eligible to participate in this plan. Awards under the Long Term
Performance Plan are based on the Corporation's financial performance over
3-year performance cycles, beginning in successive years. For plan cycles
beginning prior to 1992, the performance measurements which will determine the
awards are based on a combination of external and internal factors. The external
factors consist of total stockholder return compared to the performance of
selected aerospace companies and the Standard and Poor's 400 Industrials, and
the internal measures consist of the extent to which predetermined targets of
cash flow return on assets and achievement of funded sign-up goals are realized.
Beginning with the plan cycle starting in 1992, the performance measurements
under the plan will be based on the Corporation's absolute percentage gain in
total stockholder value as compared to an absolute target and the Corporation's
investment value relative to a peer group investment value. The performance
measurement calculations under the plan are subject to review by the
Corporation's independent auditors. The Compensation Committee retains
discretion, subject to plan limits, to (i) adjust awards to take into account
any exceptional factors influencing the award amounts generated by the award
factor schedules, (ii) adjust the award of any individual participant, and (iii)
defer payment of any individual award. Subject to certain conditions, an
employee may defer all or a portion of the award. All amounts accumulated and
unpaid under this plan must be paid by the Corporation in a lump sum within
fifteen calendar days following a change in control, as defined.
SALARIED EMPLOYEE SAVINGS PLAN
The Corporation's Savings Plan is available to substantially all salaried
employees of the Corporation and its subsidiaries. Approximately 50,000
employees, including officers and key employees, participate in the Plan. The
Savings Plan is intended to qualify under Sections 401(k) and 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). Under the Savings Plan,
participants may elect to defer receipt of 2% to 12% of their regular
compensation and have it contributed to the Savings Plan or make such
contributions on an after-tax basis (the "Participant's Contribution"). The
Corporation presently matches 60% of the first 8% of compensation contributed on
behalf of the employee (the "Matching Contribution"). Under the Code, a maximum
of $9,240 (subject to annual indexing adjustments) can be deferred under the
Savings Plan in 1994. All amounts contributed to the Savings Plan by
participants in excess of such maximum limitation are not treated as deferred
compensation.
All contributions are paid to a trustee and invested for the benefit of the
participant. Participant Contributions are invested either entirely in a Bond
Fund, a Securities Fund or a Short Term Investment Fund, or in a combination
thereof, as specified by the individual participant. Alternatively, a
participant may specify that 25% of such contributions be invested in Common
Stock. 50% of the Corporation's Matching Contributions is invested in Common
Stock and the remaining 50% is invested in the same funds as the Participant's
Contribution.
Effective March 27, 1989, the Corporation amended the Savings Plan to
create the Lockheed (ESOP Feature) Trust (the "ESOP Trust") to fund a portion of
the Corporation's Matching Contributions. On April 4, 1989, the Corporation sold
to the ESOP Trust 10,613,458 shares of the Common Stock for an aggregate
purchase price of $500 million. The purchase price was borrowed by the ESOP
Trust and will be repaid over fifteen years, with release of shares from a
suspense account to participants in the plan over that period as the loan is
repaid. The Common Stock portion of the Corporation's Matching Contributions is
fulfilled, in part, with the stock allocated from the suspense account
(approximately 710,000 shares per year). The balance of the stock portion of the
Corporation's Matching Contributions is fulfilled through purchases of Common
Stock on the open market or from participants who terminate their employment by
retirement or otherwise. 77,000 shares of Common Stock were purchased on the
open market by the ESOP Trust in 1993. Participants' accounts become
distributable to participants upon termination of employment, except that all or
portions of the Corporation's Matching Contributions are forfeited under certain
circumstances. In 1993 the ESOP Trust also sold on the open market 110,000
shares purchased from participants who terminated their employment by retirement
or otherwise.
The Savings Plan provides that the participants may instruct the ESOP Trust
trustee to vote the shares allocated to their accounts and may separately
instruct the ESOP Trust trustee to vote a proportionate amount of the
unallocated shares held by the ESOP Trust. With respect to any allocated shares
held by the ESOP
15
<PAGE> 19
Trust for which instructions are not received, the ESOP Trust trustee may vote
such shares in its discretion. All unallocated shares held by the ESOP Trust are
to be voted by the ESOP Trust trustee on the same basis as unallocated shares
for which instructions are received.
Because of the limitations on annual contributions to the Savings Plan
contained in the Code, certain employees are not allowed to elect to contribute
the maximum 12% of compensation otherwise permitted by the Savings Plan. In
order to afford to such employees approximately equivalent benefits of such full
participation, the Board of Directors has authorized a supplemental plan in
which these employees may participate. This plan is unfunded and provides for
the payment from the general assets of the Corporation upon termination of
employment, subject to restrictions similar to those contained in the Savings
Plan, of amounts deferred by the employee in excess of the Code's deferral
limit, the Corporation's Matching Contributions and the income on both. All
amounts accumulated and unpaid under this supplemental plan must be paid by the
Corporation in a lump sum within fifteen calendar days following a change in
control, as defined.
RETIREMENT PLAN
The Corporation's salaried employees retirement plan, which covers certain
executive officers and most salaried employees, is noncontributory and provides
that those employees meeting certain age and service requirements shall be
entitled to certain benefits in the event of normal, early, disability, or
deferred retirement. The plan also allows payment of benefits to a deceased
employee's surviving spouse, provided that certain conditions are met. The
amount of retirement benefits received by a retiree is subject to adjustment if
one of several available optional payment arrangements is selected. The plan
also provides for certain death benefits payable to designated beneficiaries of
eligible retirees. The calculation of retirement benefits for the named
executives is by a formula which includes years of credited service and average
pay (salary plus bonus as set forth in the Summary Compensation Table) for the
highest five consecutive years of the last ten years of employment with the
Corporation preceding retirement.
The plan protects the benefits of participants and retirees thereunder in
the event of a non-Board approved change in control of the Corporation, as
defined. The plan generally provides that (i) the plan may not be terminated and
the benefits payable thereunder may not be adversely modified for a period of
two years following such change in control; (ii) the plan may not be merged or
consolidated with an underfunded plan during the five-year period following such
change in control; and (iii) if the plan is terminated within the five-year
period following such change in control, any surplus assets remaining after
satisfaction of all plan liabilities, taxes and other rightful claims of the
U.S. government shall be transferred to a trust and applied solely to the
payment of certain employee benefits otherwise payable to employees and retirees
(e.g., retiree medical benefits), which trust shall remain in existence at least
until the expiration of such five-year term. In addition, during the five-year
period following such change in control, the plan may not invest in securities
issued by the Corporation or any entity in which 10% or more of the equity
interests are held in the aggregate by officers, directors, or 5% stockholders
of the Corporation or any of their affiliates.
The maximum benefits under the plan are subject to the limitations from
time to time in effect under the Code. In order to provide certain employees
with a retirement benefit equal to that which they would have received in the
absence of such limitations, the Board of Directors has authorized a
supplemental retirement plan for the employees who are subject to such
limitations. This supplemental plan provides for the payment of the difference
between the actual benefits payable under the salaried employees retirement plan
and the benefits that would have been payable under that plan except for such
limitations. The Board of Directors has also authorized a supplemental
retirement plan under which employees who are participants in the Management
Incentive Compensation Plan will receive an additional retirement benefit in the
amount of the difference between their benefit under the salaried employees
retirement plan and what their benefit would be if the portion of their awards
under the Management Incentive Compensation Plan not taken into account in
determining such benefit due to certain Code limitations were taken into account
and without regard to certain other limitations imposed by the Code. The
additional benefit payable under each of these supplemental plans is calculated
and payable in the same manner as the employee's benefit under the salaried
employees retirement plan; except that each supplemental retirement plan
provides that participants may elect a lump
16
<PAGE> 20
sum payment in lieu of annuity payments and that any participant receiving
annuity payment benefits under such plans at the time of a change in control of
the Corporation, as defined, will receive, in lieu of the continuation of such
annuity payments, the actuarial equivalent of such benefits in a lump sum
payable by the Corporation within thirty calendar days following the change in
control. Each such plan is unfunded and provides for payments from the general
assets of the Corporation.
The following table sets forth estimated annual pension benefits under the
salaried employees retirement plan and the supplemental plans on a single life
annuity basis for representative years of credited service as defined in the
salaried employees retirement plan.
ESTIMATED RETIREMENT PLAN BENEFITS AT SELECTED
COMPENSATION AND SERVICE CATEGORIES
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION FOR
FIVE-YEAR REPRESENTATIVE YEARS OF CREDITED SERVICE
AVERAGE ---------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35 40
- ------------ -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 300,000 $ 66,910 $ 89,213 $111,516 $133,819 $156,122 $ 178,620
400,000 89,408 119,210 149,013 178,816 208,618 238,616
500,000 111,906 149,208 186,510 223,812 261,114 298,611
600,000 134,406 179,208 224,010 268,812 313,614 358,606
700,000 156,902 209,203 261,504 313,805 366,106 418,601
800,000 179,041 239,201 299,001 358,801 418,601 478,597
900,000 201,899 269,198 336,498 403,798 471,097 538,592
1,000,000 224,397 299,196 373,995 448,794 523,593 598,587
1,100,000 246,895 329,194 411,492 493,790 576,089 658,582
1,200,000 269,393 359,191 448,989 538,787 628,585 718,582
1,300,000 291,893 389,191 486,489 583,787 681,085 778,577
1,400,000 314,392 419,189 523,986 628,783 733,580 838,573
1,500,000 336,890 449,186 561,483 673,780 786,076 898,568
1,600,000 359,388 479,184 598,980 718,776 838,572 958,563
1,700,000 381,886 509,182 636,477 736,772 891,068 1,018,558
</TABLE>
Such benefits are not subject to any deduction for Social Security benefits
or other offset amounts. Messrs. Tellep, Marafino, Coffman, Cannestra, and
Peline have approximately 38, 34, 26, 31, and 35 years of credited service under
the plan, respectively.
TERMINATION BENEFITS AGREEMENTS
The Corporation has entered into severance agreements (the "Termination
Benefits Agreements") with 40 Board-elected executive officers, including
Messrs. Tellep, Marafino, Coffman, Cannestra, and Peline. The Termination
Benefits Agreements provide for the payment of certain benefits described below
if within three years after the occurrence of a change in control of the
Corporation, the covered executive officer either (a) is terminated by the
Corporation (other than on account of death, disability or retirement of the
officer or for "cause," defined in the Agreement to include, among other things,
willful and continued failure to substantially perform his or her duties, or
willful misfeasance or gross negligence related to his or her employment), or
(b) terminates his or her employment with the Corporation for "good reason" (as
defined in the Agreement to include, among other things, a reduction in base
salary, bonus or certain other benefits, certain changes in status, duties or
position with the Corporation, or geographic relocation).
The Corporation's Termination Benefits Agreements provide for lump sum cash
payments of up to two times the officer's base annual salary at the time of the
change in control or termination, two times an amount determined by multiplying
the officer's base salary by the average percentage of awards under the
Management Incentive Compensation Plan to base salary paid during the last two
years; two times the Corporation's annual Matching Contributions on behalf of
the officer to the Savings Plan; the cash value of the officer's target
established under the Long Term Performance Plan performance cycles as in effect
on the
17
<PAGE> 21
date of termination; and the equivalent cash value of providing certain health
and dental insurance plans and other fringe benefits as in effect prior to the
change in control for a two-year period following termination. The termination
of employment must be an actual or constructive termination (other than because
of death, disability, retirement under the salaried retirement plan or for
cause). If the officer obtains other employment, the payments received on
termination shall be reduced to the extent that compensation received between
thirteen and twenty-four months after termination from the new employer exceeds
fifty percent of the annualized benefits provided by the Termination Benefits
Agreement, provided that in no event will the benefits be reduced to below one
year's annual compensation. Additional benefits provided by the agreements
include the vesting of all retirement benefits and the addition of two years of
credited service under the salaried retirement plans. Benefits under the
Termination Benefits Agreements may be subject to an excise tax payable by the
officer, and may not be deductible by the Corporation, to the extent they exceed
certain statutory limitations. Each of the agreements continues in effect
through the end of the calendar year and is automatically extended on each
January 1 thereafter for an additional year unless the Corporation gives the
officer advance notice to the contrary. The Corporation has established a trust
for the purpose of securing the payment of the benefits provided under the
Termination Benefits Agreements and certain other executive benefit plans in the
event of a change in control of the Corporation.
EMPLOYEE STOCK OPTION PROGRAMS
The Corporation's 1982 Employee Stock Purchase Program (the "1982 Program")
and 1986 Employee Stock Purchase Program (the "1986 Program") and 1992 Employee
Stock Option Program (the "1992 Program") initially authorized grants of options
and stock appreciation rights to acquire up to 1,250,000 shares, 2,750,000
shares and 3,000,000 shares, respectively, of the Corporation's authorized but
unissued Common Stock. Such grants are limited to officers and other key
employees of the Corporation and its subsidiaries. Non-employee directors and
members of the Compensation Committee are not eligible to participate in the
1982 Program, the 1986 Program or the 1992 Program. The number of shares subject
to outstanding options theretofore granted under the 1982 Program and the number
of shares authorized for grants under the 1982 Program were adjusted in
accordance with their respective terms to reflect the three-for-one split of the
Corporation's Common Stock which became effective on August 22, 1983.
The 1982 Program, the 1986 Program and the 1992 Program are each composed
of two separate stock option plans. The first plan provides for the grant of
options intended to qualify as incentive stock options under Section 422A of the
Code. Options granted under this incentive stock option plan cannot be
accompanied by stock appreciation rights. The second plan provides for the grant
of stock options that are not incentive stock options and that may, at the
discretion of the Board of Directors, include the grant (at the time the option
is granted or at any time during the option's term) of stock appreciation rights
relating to options. A stock appreciation right, which cannot be exercised
within the first six months of grant, relates to a particular option and extends
to a specified number of shares that can be no more than 50% of the number of
shares subject to the related option. The holder of an option with a companion
stock appreciation right, accordingly, is able to purchase half the shares then
exercisable under the stock option and receive payment, in cash or Common Stock,
as determined by the Compensation Committee, on the remaining half equal to the
appreciation in value of such shares since the date of such option grant.
Grants under the 1982 Program and the 1986 Program were made by the Board
of Directors after consideration of the recommendations of the Compensation
Committee. Under the terms of the 1992 Program, grants are made by the
Compensation Committee, which consists of non-employee directors who are not
eligible to participate in the 1982 Program, the 1986 Program, or the 1992
Program. The 1982 Program, the 1986 Program and the 1992 Program provide that
the option price may not be less than the fair market value of the Common Stock
on the date of grant and that, except as otherwise determined by the
Compensation Committee with respect to the 1986 Program and the 1992 Program,
options may not be exercised prior to one year after the date of grant. The 1986
Program and the 1992 Program further provide that, if the Board of Directors
determines that a change in control, as defined, has occurred or is about to
occur, outstanding options and any companion stock appreciation rights, to the
extent not exercisable, will
18
<PAGE> 22
become fully exercisable. No additional grants may be made under the 1982
Program which terminated on February 28, 1992.
At March 1, 1994, 256,077, 1,411,162 and 1,719,173 shares of the
Corporation's Common Stock were reserved for issuance on exercise of options
under the 1982 Program, the 1986 Program and 1992 Program, respectively.
CHANGE IN CONTROL PROVISIONS
A "change in control," for purposes of the plans and benefits described in
this Proxy Statement, is generally deemed to have occurred if (a) any person
(other than a fiduciary holding securities under an employee benefit plan of the
Corporation) becomes the beneficial owner, directly or indirectly, of securities
of the Corporation representing 30% or more of the combined voting power of the
Corporation's then outstanding securities; or (b) during any period of two
consecutive years, there occur certain changes in the composition of a majority
of the Board of Directors; or (c) the stockholders of the Corporation approve a
merger or consolidation of the Corporation with any other entity that results in
the voting securities of the Corporation outstanding immediately prior to such
event continuing to represent (following any conversion or similar change) less
than 80% of the combined voting securities of the surviving entity outstanding
immediately after such event; or (d) the stockholders of the Corporation approve
a plan of complete liquidation of the Corporation or an agreement for the sale
or disposition by the Corporation of all or substantially all of the
Corporation's assets.
COMPLIANCE WITH SECTION 16(A) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
ten percent of a registered class of the Corporation's equity securities, to
file with the Securities and Exchange Commission and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Corporation. Based solely on the
Corporation's review of the copies of such forms it has received and written
representations from certain reporting persons that they were not required to
file Forms 5 for specified fiscal years, the Corporation believes that all its
officers, directors, and greater than ten percent beneficial owners complied
with all filing requirements applicable to them with respect to transactions
during fiscal 1993.
SECURITY HOLDINGS OF EXECUTIVE OFFICERS
The following table sets forth the aggregate number of shares of Common
Stock owned beneficially by each of the named executive officers as of February
28, 1994 except as otherwise indicated, including shares held indirectly under
the Savings Plan (the "ESOP Shares"), and shares subject to options granted
under the Corporation's stock option plans that are presently exercisable or
exercisable within 60 days of February 28, 1994 ("Option Shares"). None of such
persons owned over 1% of the outstanding shares of common stock; certain of such
persons share with their spouses voting and dispositive powers with respect to
the reported shares.
<TABLE>
<CAPTION>
AGGREGATE SHARES ESOP OPTION
NAME BENEFICIALLY OWNED SHARES(A) SHARES
---- ------------------ --------- -------
<S> <C> <C> <C>
D.M. Tellep................................................ 241,909 841 231,433
V.N. Marafino.............................................. 218,079 955 175,998
V.D. Coffman............................................... 40,326 717 38,409
K.W. Cannestra............................................. 38,069 737 37,332
V.P. Peline................................................ 97,792 967 94,395
</TABLE>
- ---------------
(a) Information as to ESOP shares is as of December 31, 1993.
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<PAGE> 23
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the shares of
the Corporation's Common Stock which are held by persons known to the
Corporation to be the beneficial owners of more than 5% of such stock, and by
all executive officers and directors as a group. For purposes of this Proxy
Statement, beneficial ownership of securities is defined in accordance with the
rules of the Securities and Exchange Commission and generally means the power to
vote or dispose of securities regardless of any economic interest therein and
includes the right to acquire securities on or within 60 days of the applicable
date. Unless otherwise indicated, the stockholders have sole voting and
investment power with respect to the shares indicated. All information set forth
in the following table is as of December 31, 1993, except as otherwise
indicated.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-----------------------
NUMBER PERCENT
NAME AND ADDRESS OF STOCKHOLDER CLASS OF STOCK OF SHARES OF CLASS
------------------------------- -------------- ---------- --------
<S> <C> <C> <C>
US Trust Company of California, N.A., New York, N.Y., as trustee Common 16,057,125(a) 25.6%
of the Lockheed (ESOP Feature) Trust established under the
Lockheed Salaried Employee Savings Plan Plus, and the trustee
of the Lockheed (Hourly ESOP) Trust established under the
Lockheed Hourly Employee Savings Plan Plus and the Lockheed
Space Operations Company Hourly Investment Plan Plus
555 South Flower Street
Los Angeles, California 90071
INVESCO PLC Common 5,301,085(b) 8.5%
11 Devonshire Square
London EC2M 4YR
England
Sanford C. Bernstein & Co., Inc. Common 4,964,960(c) 8.0%
One State Street Plaza
New York, New York 10004-1545
All executive officers and directors of the Corporation
as a group (53 persons) Common 1,263,610(d) 2.0%
</TABLE>
- ------------
(a) As reported in Schedule 13G dated February 11, 1994. Stockholder has sole
dispositive power and shared voting power with respect to the number of
shares stated.
(b) As reported in Schedule 13G dated February 10, 1994. Stockholder has sole
voting power with respect to none of the shares, shared voting power with
respect to 5,301,085 of the shares, sole dispositive power with respect to
none of the shares and shared dispositive power with respect to 5,301,085 of
the shares.
(c) As reported in Schedule 13G dated February 14, 1994. Stockholder has sole
voting power with respect to 2,719,366 of the shares and sole dispositive
power with respect to 4,964,960 of the shares.
(d) Includes 1,156,397 shares which are subject to presently exercisable options
or options which are exercisable within sixty days after December 31, 1993;
24,783 shares held as of December 31, 1993, by the Savings Plan for the
beneficial interest of officers; 10,488 shares held for the benefit of
non-employee Directors as of February 28, 1994, by the trustee of the
Directors' Deferred Compensation Plan and as to which such non-employee
Directors have no voting or investment power, other than as to a tender
offer; and certain shares with respect to which the officers and Directors
disclaim beneficial ownership or do not have sole investment and voting
power.
20
<PAGE> 24
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Corporation's cumulative stockholder
return on its Common Stock, including the reinvestment of dividends, with the
return on the Standard & Poor's 500 Stock Index and the peer group identified
below. The graph shall not be deemed incorporated by reference in any general
incorporation by reference of this proxy statement or any part thereof.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE PERIOD ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
STANDARD &
MEASUREMENT PERIOD POOR'S 500 PEER GROUP
(FISCAL YEAR COVERED) LOCKHEED INDEX INDEX
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 98.20 131.69 100.25
1990 89.63 127.60 101.88
1991 125.61 166.47 131.23
1992 164.96 179.15 159.63
1993 206.04 197.21 228.27
</TABLE>
Industry peer group: General Dynamics Corp., Grumman Corp., Loral
Corp.,
Martin Marietta Corp., McDonnell Douglas Corp., Northrop Corp.,
Raytheon Co.,
and Rockwell Intl. Corp.
Source of data: Standard & Poor's Compustat Services, Inc.
ELECTION OF AUDITORS
The Board of Directors, after consideration of the recommendation of the
Audit Committee, has nominated the independent public accounting firm of Ernst &
Young as the Corporation's independent auditors for the year 1994. Stockholders
will be asked to elect Ernst & Young at the Annual Meeting. Election will
require the favorable vote of the holders of a majority of the Common Stock
represented and voting at the meeting. Although election of the auditors by
stockholders is not legally required, the Corporation's Board of Directors
believes such election to be in the best interest of the Corporation. Ernst &
Young also served as the Corporation's auditors for the fiscal year ended
December 26, 1993. Representatives of Ernst & Young are expected to be present
at the Annual Meeting with the opportunity to make a statement if they desire to
do so and be available at that time to respond to appropriate questions.
STOCKHOLDER PROPOSAL
STOCKHOLDER PROPOSAL REGARDING THE SPACE-BASED NUCLEAR DEFENSE SYSTEM
The Glenmary Home Missioners, whose mailing address is P.O. Box 465618,
Cincinnati, Ohio, 45246-5618, beneficial owner of 100 shares of Common Stock,
and the Medical Mission Sisters, located at 20 Belgrade Avenue, Room 6,
Roslindale, Massachusetts 02131, and which also owns 100 shares of Common
21
<PAGE> 25
Stock, have advised the Corporation that they intend to present the following
proposal at the annual meeting. The proposal and supporting statement, as
submitted by the proponents, are set forth below.
WHEREAS Star Wars is far from dead despite its name change from "Strategic
Defense Initiative" to "Ballistic Missile Defense (BMD)."
WHEREAS we believe, it is an ironic twist to the end of the Cold War that
the U.S. has accelerated plans to deploy strategic defenses against
intercontinental ballistic missiles. These plans undermine
international law and threaten satellite communication and
verification systems which make possible arms control agreements.
WHEREAS the U.S. and Russia, as well as other countries, are struggling for
arms control agreements. Because no country has an effective
anti-satellite weapons system (ASAT), a bilateral ban on ASAT
testing could succeed.
WHEREAS in 1992 Lockheed ranked 3 among the top 100 Department of Defense
(DOD) contractors with contracts in excess of $4.6 billion and 6
among the 15 largest "Star Wars" contractors with contracts in
excess of $97 million;
THEREFORE BE IT RESOLVED the shareholders request the Board of Directors to
provide a comprehensive report describing our Company's involvement in the
nuclear defense system, formerly the space-based Star Wars or Strategic Defense
Initiative, and now called Ballistic Missile Defense. The report should be
available to shareholders on request within six months of the 1994 annual
meeting, may omit proprietary and classified information and be prepared at
reasonable cost.
STOCKHOLDER'S SUPPORTING STATEMENT
As investors, we are concerned about company dependence upon Department of
Defense contracts and hope a written report would describe the following
aspects:
-- current value of outstanding contracts to develop components for
the Ballistic Missile Defense Organization;
-- amount of Lockheed's own money (versus DOD funding) spent on
in-house research and development (R&D) for the BMD program. Since the
current mission has a more traditional ground-based orientation, is it
likely that Lockheed will designate more of its own R&D money for the
program?
-- Lockheed's efforts to diversify into non-DOD contracts in this
segment of its aerospace and defense division;
-- how annual threats to cut federal funding for the components of the
former SDI program affect our company;
-- the moral and financial reasons for bidding on DOD contracts.
Space-based missile defense systems have been a central national security
issue since the early 1980s. The newest plan includes a space-based component
with satellite sensors and extensive research into "brilliant pebbles" or
interceptors. Some $4.9 billion already has been spent on directed energy
research and development and another $103 million was requested for FY94. While
R&D is the pillar of the congressional program, BMD now entails deployment for
the first time.
The church-related sponsors of this resolution question the intent of the
special-interest groups who lobby Congress to make weapons a higher priority
than meeting human needs. We believe further expenditures for development of
space-based nuclear defense systems are immoral and indefensible.
We urge release of information about the extent to which our company is
involved in the research, production and promotion of weapons for the Ballistic
Missile Defense Organization.
22
<PAGE> 26
BOARD OF DIRECTORS' STATEMENT RECOMMENDING A VOTE AGAINST THIS STOCKHOLDER
PROPOSAL
A virtually identical proposal was submitted to a vote of the stockholders
in 1993, and was supported by only 6.61% of the shares outstanding. The present
proposal supposes that the Corporation is involved in space-based programs that
threaten international peace. In fact, the Corporation's current space-based
programs include peaceful surveillance systems that would provide our country
and our allies warning of an imminent attack, and thus serve as a key deterrent
to aggression. These programs have been supported by Congress, and the Board
believes that the Corporation's efforts are strongly supported by a majority of
Americans.
The introductory recitals to the proposal and the proponent's supporting
statement reflect political and ideological views toward national defense
policy. While reasonable people may disagree as to the relative merits of one
strategy or policy over another, the Board of Directors believes that the
Corporation's Proxy Statement and Annual Meeting are not proper forums for this
debate. Views on these issues are better addressed to the government and elected
representatives who are ultimately responsible for determining national defense
and security policy.
Furthermore, the Board of Directors believes that the report called for in
the proposal would impose an unnecessary burden and expense on the Corporation
with little or no resulting benefit to the stockholders. The Corporation already
reports on its Missiles and Space Systems segment in its annual and quarterly
reports which are mailed to all stockholders and filed with the Securities and
Exchange Commission. In the view of the Board, the special report called for in
the proposal is unnecessary, unwarranted, and in any event would be limited by
the Corporation's need to protect proprietary and confidential business
information and by United States Government regulations restricting the
disclosure of strategic or classified information to protect national security.
For these reasons, the Board of Directors recommends that stockholders vote
AGAINST the proposal. If the proposal is properly presented at the meeting,
proxies solicited by the Board will be voted AGAINST the proposal unless the
stockholder otherwise specifies in the proxy.
STOCKHOLDER PROPOSAL
STOCKHOLDER PROPOSAL TO SUSPEND THE MANAGEMENT INCENTIVE COMPENSATION PLAN
(MICP) AND TO IMPOSE OTHER RESTRICTIONS ON MANAGEMENT COMPENSATION
Mr. Philip A. Jarrell, an employee of the Company's wholly owned
subsidiary, Lockheed Missiles and Space Company ("LMSC"), who resides at 2345 D
Street, Fremont, California 94536, and is the beneficial owner of 245 shares of
the Corporation's common stock, has advised the Corporation that he intends to
present the following proposal at the Annual Meeting. The proposal and
supporting statement, as submitted by Mr. Jarrell, are set forth below.
WHEREAS Lockheed's Management Incentive Compensation Plan should recognize
innovative approaches to business growth, and seek to reward decision-makers for
career risks assumed in pursuing commercial ventures, and
WHEREAS there has been much reluctance by management to engage in ventures
which entail risk, or to assume career risk in the pursuit of commercial
business growth, and
WHEREAS Lockheed has achieved much of its recent record profitability
through headcount reductions in the line workforce, leading many employees to
perceive continuing bonus payments to management as unwarranted, and
WHEREAS employee motivation, which is key to successful defense conversion
and growth in competitiveness, depends upon the perception of fairness on
management's part,
BE IT THEREFORE RESOLVED that the shareholders request suspension of the
MICP, effective immediately, with reinstatement on a company-by-company basis,
and contingent upon each company keeping layoff and termination activity to
below five percent of its workforce annually over any two consecutive
23
<PAGE> 27
years having commenced January 1, 1992, and will, for corporate personnel, be
contingent upon the same criteria applied to the corporation as a whole, but
excluding the Fort Worth Company from the workforce baseline, and further
RESOLVED that, until reinstatement is achieved, each remaining compensation
category for personnel currently eligible for the MICP be tied to that of
calendar year 1993, plus an annual rate of increase not to exceed the average
salary increase among all employees at their respective companies, or among all
employees of the corporation in the case of corporate personnel.
STOCKHOLDER'S SUPPORTING STATEMENT
As its skilled, intelligent workforce is Lockheed's greatest asset, future
profitability and value to shareholders depends upon employee motivation. These
are threatened by employee cynicism and mistrust of management because of
widespread feelings that the MICP rewards them far beyond their accomplishments.
The recent record growth in profitability has resulted largely from massive
headcount reductions through layoff, cuts in benefits, and incentivized
retirements, causing a large, temporary downspike in expenses. Line workers
generally do not believe that management should be rewarded for this, especially
since they only incidentally retain the competitive skills mix best qualified to
advance defense conversion efforts.
Suspending the MICP will foster worker dedication, enthusiasm and
productivity. Seeing management share the sacrifices will help reverse the view
that it is isolated, elitist, and insensitive to employee concerns over job
security and personal solvency. A further benefit will be an increase to working
capital. The millions of dollars not paid out as bonuses should be used to
retain jobs, and fund commercial ventures. This will best maximize the
Corporation's value to shareholders, among them executives who, though losing
some bonus payments, will benefit through their stock options.
For the sake of Lockheed's continued competitiveness, diversification, and
growth, please vote your proxy FOR this proposal. Thank you.
BOARD OF DIRECTOR'S STATEMENT RECOMMENDING A VOTE AGAINST THIS STOCKHOLDER
PROPOSAL
This proposal requests that the Board of Directors suspend the
Corporation's Management Incentive Compensation Plan ("MICP") and link
reinstatement of the MICP to limits on layoff activity. The proposal further
requests that the Board of Directors impose arbitrary limitations on the rate of
increase in other types of compensation paid to MICP-eligible employees. The
Board of Directors believes that these actions would adversely affect the
Corporation by limiting its flexibility to establish and design compensation
programs which will attract, motivate and retain top quality managers.
The Corporation's management compensation objectives and policies are
established and reviewed by the Management Development and Compensation
Committee of the Board of Directors (the "Committee"), which is comprised solely
of non-employee directors. The Committee reviews and approves salaries, bonuses,
and other compensation programs provided to senior executives of the Corporation
and reviews and analyzes compensation programs provided to managers, including
the MICP. With the advice of management compensation consultants, the Committee
has structured the Corporation's management compensation programs to be
competitive with other aerospace companies and to provide strong incentives to
key managers to achieve the Corporation's short and long-term goals.
The Board of Directors believes that the proposal, if implemented, could
significantly hinder the Committee's efforts to ensure that the Corporation's
key managers have proper incentives for maximizing shareholder value. Suspending
the MICP would eliminate a key component of the Corporation's incentive-based
compensation program. Furthermore, limiting other forms of compensation paid to
managers would further restrict the flexibility the Committee believes that it
needs to design competitive compensation packages and to react to business
circumstances. In the Board's view, implementation of the proposal could place
the Corporation at a disadvantage in recruiting and retaining qualified
individuals to manage the Corporation's business, and, over the long term, could
adversely affect the value of the stockholders' investment.
24
<PAGE> 28
For these reasons, the Board of Directors recommends that stockholders vote
AGAINST this proposal. If the proposal is properly presented at the meeting,
proxies solicited by the Board will be voted AGAINST the proposal unless the
stockholder otherwise specifies in the proxy.
Messrs. Tellep and Marafino and all other executive officers of the
Corporation are eligible to participate and receive awards under the MICP and
further receive other forms of compensation which are proposed to be affected by
the terms of this proposal. Because of their personal interest in the proposal,
Messrs. Tellep and Marafino have abstained from the Board of Directors'
recommendation against this proposal.
STOCKHOLDER PROPOSAL
STOCKHOLDER PROPOSAL TO ENDORSE THE COALITION FOR ENVIRONMENTALLY RESPONSIBLE
ECONOMIES (CERES) PRINCIPLES
The New York City Employee's Retirement System, in care of the
Comptroller's Office of the City of New York, located at 1 Centre St., New York,
New York 10007-2341, and beneficial owner of 111,700 shares of the Corporation's
common stock, has advised the Corporation that it intends to present the
following proposal at the Annual Meeting. The proposal and supporting statement,
as submitted by the New York City Employee's Retirement System, are set forth
below.
WHEREAS WE BELIEVE:
The responsible implementation of sound environmental policy increases
long-term shareholder value by increasing efficiency, decreasing clean-up costs,
reducing litigation, and enhancing public image and product attractiveness;
Adherence to public standards for environmental performance gives a company
greater public credibility than is achieved by following standards created by
industry alone. In order to maximize public credibility and usefulness, such
standards also need to reflect what investors and other stakeholders want to
know about the environmental records of their companies;
Standardized environmental reports will provide shareholders with useful
information which allows comparison of performance against uniform standards and
comparisons of progress over time. Companies can also attract new capital from
investors seeking investments that are environmentally responsible, responsive,
progressive, and which minimize the risk of environmental liability.
AND WHEREAS:
The Coalition for Environmentally Responsible Economies (CERES), which
comprises large institutional investors with $150 billion in stockholdings
(including shareholders of this Company), public interest representatives, and
environmental experts, consulted with dozens of corporations and produced
comprehensive public standards for both environmental performance and reporting.
Over 50 companies, including the Sun Company, a Fortune-500 company, have
endorsed the CERES Principles to demonstrate their commitment to public
environmental accountability.
In endorsing the CERES Principles, a company commits to work toward:
1. Protection of the biosphere
2. Sustainable use of natural resources and services
3. Waste reduction and disposal
4. Energy conservation
5. Risk reduction
6. Safe products
7. Environmental restoration
8. Informing the public
25
<PAGE> 29
9. Management commitment
10. Audits and reports
The full text of the CERES Principles and the accompanying CERES Report
Form are available from CERES, 711 Atlantic Avenue, Boston, MA 02110. Telephone:
(617) 451-0927.
Concerned investors are asking the Company to be publicly accountable for
its environmental impact, including collaboration with this corporate,
environmental, investor, and community coalition to develop;
(a) standards for environmental performance and disclosure;
(b) appropriate goals relative to these standards;
(c) evaluation methods and tools for measurement of progress toward these
goals; and
(d) a format for public reporting of this progress.
We believe this request is consistent with regulation adopted by the
European Community for companies' voluntary participation in verified and
publicly-reported eco-management and auditing.
RESOLVED: Shareholders request the Company to endorse the CERES Principles
as a commitment to be publicly accountable for its environmental impact.
SHAREHOLDER'S SUPPORTING STATEMENT
We invite the Company to endorse the CERES Principles by:
(1) stating its endorsement in a letter signed by a senior officer;
(2) commiting to implement the Principles; and
(3) annually completing the CERES Report.
Endorsing these Principles complements rather than supplants internal
corporate environmental policies and procedures.
We believe that without this public scrutiny, corporate environmental
policies and reports lack the critical component of adherence to standards set
not only by management but also by other stakeholders. Shareholders are asked to
support this resolution, to encourage our Company to demonstrate environmental
leadership and accountability for its environmental impact.
BOARD OF DIRECTORS' STATEMENT RECOMMENDING A VOTE AGAINST THIS STOCKHOLDER
PROPOSAL
The Corporation is committed to environmental protection. This commitment
has been established through internal directives and has been reflected in prior
public statements expressing the Corporation's determination to conduct its
operations in an environmentally responsible manner. Like many other companies
engaged in similar applications and lines of business, the Corporation is
involved in various proceedings and is the subject of various administrative
orders relating to environmental matters, including those described in Note 11
to the consolidated financial statements included in the Corporation's 1993
Annual Report (which "Environmental Matters" portion of such Note is hereby
incorporated by reference). However, the Corporation has taken steps to reduce
pollution, increase recycling and otherwise improve its compliance with
applicable environmental standards. For example, the Corporation is a voluntary
participant in the EPA's "33/50 Program," which targets a 50% reduction in the
use of 17 designated toxic chemicals by 1995. Similarly, the Corporation is
phasing out its use of "ozone depleting substances" in advance of the time table
mandated by the Clean Air Act Amendments of 1990.
The Corporation is subject to the comprehensive structure of environmental
laws and regulations established by federal, state, and local government
agencies. The Board of Directors does not believe that the additional
obligations imposed by the CERES proposal are necessary for environmental
activities, and the Board believes that the cost of preparing the additional
CERES reports would be unwarranted.
Finally, the Board of Directors does not believe that a private group such
as CERES should be directly involved in regulation of the Corporation's
environmental policy. Instead, it should be the Board of Directors
26
<PAGE> 30
and management of the Corporation, working together with public officials, who
are the proper arbiters of the Corporation's efforts to protect the environment.
For these reasons, the Board of Directors recommends that stockholders vote
AGAINST the proposal. If the proposal is properly presented at the meeting,
proxies solicited by the Board will be voted AGAINST the proposal unless the
stockholder otherwise specifies in the proxy.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal which a stockholder intends to present at the next Annual
Meeting of Stockholders must be received at the office of the Secretary of the
Corporation by December 8, 1994, if such proposal is to be considered for
inclusion in the Corporation's proxy statement and form of proxy relating to
that meeting.
INCORPORATION BY REFERENCE
The "Environmental Matters" portion of Note 11 to the consolidated
financial statements included in the Corporation's 1993 Annual Report is
incorporated herein by reference.
MISCELLANEOUS
EXPENSES
All the expenses of soliciting proxies from stockholders will be borne by
the Corporation. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward solicitation materials to the
beneficial owners of Common Stock, and such persons will be reimbursed for their
expenses. Proxies may be solicited by Directors, officers or employees of the
Corporation in person or by telephone or telegraph and by Georgeson & Co. Inc.,
which has been retained by the Corporation to aid in the solicitation. Georgeson
& Co., Inc. will be paid a fee of approximately $15,000, plus expenses, for its
services.
By Order of the Board of Directors,
CAROL R. MARSHALL
Secretary
Calabasas, California
April 7, 1994
27
<PAGE> 31
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<TABLE>
<S> <C> <C>
ANNUAL MEETING OF
[LOGO] PROXY STOCKHOLDERS TO BE HELD
ON MAY 10, 1994, 9:30 A.M.
CONVENTION CENTER
2500 N. HOLLYWOOD WAY
BURBANK, CA
</TABLE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.J. Pinola, David S. Potter, and Daniel M.
Tellep, and each of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
below, all the shares of Common Stock of Lockheed Corporation held of record by
the undersigned on March 21, 1994 at the Annual Meeting of Stockholders to be
held on May 10, 1994, and at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS / / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(check one box only) (except as indicated below) for all nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for any
individual nominee(s) check the "FOR" box above and
write that nominee's name on the space provided below.)
----------------------------------------------------------
Lynne V. Cheney, Lodwrick M. Cook, Houston I. Flournoy, James F. Gibbons,
Robert G. Kirby, Lawrence O. Kitchen, Vincent N. Marafino, J.J. Pinola,
David S. Potter, Frank Savage, Daniel M. Tellep, Carlisle A.H. Trost,
James R. Ukropina, and Douglas C. Yearley.
2. FOR / / AGAINST / / ABSTAIN / / election of Ernst & Young as the
Corporation's independent auditors
for the year 1994.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 3.
3. FOR / / AGAINST / / ABSTAIN / / adoption of a stockholder proposal
regarding the space-based nuclear
defense system.
(To be completed and signed on reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 4.
4. FOR / / AGAINST / / ABSTAIN / / adoption of a stockholder proposal to
suspend the Management Incentive
Compensation Plan and to impose other
restrictions on management compensation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 5.
5. FOR / / AGAINST / / ABSTAIN / / adoption of a stockholder proposal
regarding the endorsement of the
Coalition for Environmentally
Responsible Economies principles.
In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments or
postponements thereof.
The submission of this proxy if properly executed revokes all prior
proxies.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED BUT IF NO
DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2 AND AGAINST ITEMS
3, 4 AND 5.
Receipt of the Notice of Annual Meeting of Stockholders and accompanying
Proxy Statement is hereby acknowledged.
Dated:______________, 1994
--------------------------
--------------------------
(Signature of Stockholder)
Please sign exactly as
your name appears hereon
PLEASE BE CERTAIN YOU DATE THIS PROXY AT THE TIME YOU SIGN IT.
- --------------------------------------------------------------------------------
<PAGE> 32
Appendix
1. Maps preceding page 1 show location of Annual Meeting of Stockholders.
<PAGE> 33
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C>
13 "Environmental Matters" portion of Note 11 to the
consolidated financial statements included in Lockheed
Corporation's 1993 Annual Report.
</TABLE>
<PAGE> 1
EXHIBIT 13
"Environmental Matters" portion of Note 11 to the consolidated financial
statements included in Lockheed Corporations 1993 Annual Report.
NOTE 11--COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL MATTERS -- In March 1991, the company entered into a consent
decree with the U.S. Environmental Protection Agency (EPA) relating to certain
property in Burbank, California, which obligates the company to design and
construct facilities to monitor, extract, and treat groundwater and operate and
maintain such facilities for approximately eight years. The company currently
estimates that expenditues required to comply with the terms of the consent
decree over the remaining term of the project will approximate $120 million.
The company has also been operating under a cleanup and abatement order
from the California Regional Water Quality Control Board affecting its
facilities in Burbank, California. This order requires site assessment and
action to abate groundwater contamination by a combination of groundwater and
soil cleanup and treatment. Based on experience being derived from initial
remediation activities, the company currently estimates the anticipated costs
of these actions in excess of the requirements under the EPA consent decree to
approximate $175 million over the remaining term of the project; however, this
estimate will be subject to changes as work progresses and as additional
experience is gained.
The Company is also involved in several other proceedings and potential
proceedings relating to environmental matters, including disposal of hazardous
wastes and soil and water contamination. The company has not incurred any
material costs relating to these environmental matters. The extent of the
company's financial exposure cannot in all cases be reasonably estimated at
this time. A liability of approximately $55 million for those cases in which
an estimate of financial exposure can be determined has been recorded.
Under an agreement with the U.S. government, the Burbank groundwater
treatment and soil remediation expenditures are being allocated to all of the
company's operations as general and administrative costs (see Note 1), and
under existing government regulations these and other environmental
expenditures related to U.S. government business are allowable in establishing
the prices of the company's products and services. As a result, a substantial
portion of the expenditures will be reflected in the company's sales and costs
of sales pursuant to U.S. government agreement or regulation. The company has
recorded a liability for probable future environmental costs as discussed
above, and has recorded an asset for probable future recovery of these costs in
pricing of the company's products and services for U.S. government business.
The portion that is expected to be allocated to commercial business has been
reflected in cost of sales.
