<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Martin Marietta Materials, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Martin Marietta Materials, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
(MARTIN MARIETTA MATERIALS LOGO)
NOTICE OF 1998
ANNUAL MEETING OF
SHAREHOLDERS AND
PROXY STATEMENT
<PAGE> 3
(MARTIN MARIETTA MATERIALS LOGO)
2710 WYCLIFF ROAD
RALEIGH, NORTH CAROLINA 27607
March 31, 1998
Dear Fellow Shareholder:
The Directors and Officers of Martin Marietta Materials, Inc. join me in
inviting you to attend the Corporation's Annual Meeting of Shareholders. The
formal notice of this meeting and the Proxy Statement accompany this letter.
By attending the meeting, you will have an opportunity to hear the plans
for the Corporation's future, to meet the Directors and Officers and to
participate in the business of the meeting. If it is not possible for you to
attend, please return the enclosed proxy immediately to ensure that your shares
will be voted.
We look forward to seeing you in the Capital Ballroom at the North Raleigh
Hilton in Raleigh, North Carolina at 10:30 a.m. on May 8, 1998.
Sincerely,
/s/ STEPHEN P. ZELNAK, JR.
Stephen P. Zelnak, Jr.
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 4
MARTIN MARIETTA MATERIALS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 1998
To the Holders of the Common Stock of Martin Marietta Materials, Inc.:
The Annual Meeting of Shareholders of Martin Marietta Materials, Inc. (the
"Corporation") will be held on Friday, May 8, 1998, at 10:30 a.m. at the North
Raleigh Hilton, 3415 Wake Forest Road, Raleigh, North Carolina. Attendance at
the Annual Meeting of Shareholders of the Corporation will be limited to
shareholders of record at the close of business on March 13, 1998 or their
proxies, beneficial owners presenting satisfactory evidence of ownership on that
date, and invited guests of the Corporation.
The purposes of the meeting are:
(1) to elect three (3) Directors, each to serve for a term of three (3)
years until the Annual Meeting of Shareholders in 2001 and until
their successors are duly elected and qualified;
(2) to approve the Stock-Based Award Plan;
(3) to ratify the appointment of independent auditors; and
(4) to transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 13, 1998 as
the record date for determination of shareholders entitled to notice of and to
vote at the Annual Meeting or any adjournment thereof.
Whether or not you expect to attend the meeting, we hope you will date and
sign the enclosed Proxy Card and mail it promptly in the enclosed stamped
envelope.
By Order of the Board of Directors
Roselyn R. Bar
Corporate Secretary and
Assistant General Counsel
Raleigh, North Carolina
March 31, 1998
<PAGE> 5
PROXY STATEMENT
GENERAL INFORMATION
The Annual Meeting of Shareholders of Martin Marietta Materials, Inc., a
North Carolina corporation (the "Corporation"), will be held on Friday, May 8,
1998, at the North Raleigh Hilton, 3415 Wake Forest Road, Raleigh, North
Carolina, for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders ("Annual Meeting" or "Meeting"). This statement is
furnished in connection with the solicitation by the Board of Directors of the
Corporation of proxies to be used at such meeting and at any and all
adjournments of such meeting.
The Corporation's Annual Report for the fiscal year ended December 31,
1997, including audited financial statements, is being mailed to shareholders
with this Proxy Statement.
Whether or not you plan to attend the meeting, we urge you to date, sign
and return your proxy in the enclosed envelope. You may revoke your proxy at any
time prior to its exercise at the Annual Meeting (i) by filing with the
Corporation's Secretary an instrument revoking the proxy prior to the Meeting,
(ii) by timely delivery to the Corporation's Secretary, or at the Meeting, of a
subsequently dated and executed proxy, or (iii) if you attend the Meeting, by
voting your shares in person. Attendance at the Meeting will not in and of
itself constitute a revocation of a proxy.
The principal office of the Corporation is at 2710 Wycliff Road, Raleigh,
North Carolina 27607. This Proxy Statement, the Proxy Card, and the Notice of
Meeting will be sent to shareholders of record commencing approximately March
31, 1998.
VOTING SECURITIES AND RECORD DATE
Only shareholders of record at the close of business on March 13, 1998 are
entitled to notice of and to vote at the Annual Meeting. On March 13, 1998,
there were 46,217,779 shares outstanding of the Corporation's Common Stock, $.01
par value per share ("Common Stock" or "Stock"). Each share is entitled to one
vote.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
an independent inspector of election appointed by the Corporation's Board of
Directors for the Meeting from First Union National Bank, the Corporation's
transfer agent. The inspector of election will determine whether a quorum is
present. For purposes of determining the presence of a quorum, abstentions will
be counted as shares that are present and entitled to vote. If a broker
indicates on the proxy that it does not have discretionary authority to vote on
a particular matter and specific instructions are not received from the
shareholder regarding that matter, those shares represented by the proxy will
not be considered as present and entitled to vote with respect to that matter.
The election of Directors requires a plurality of the votes cast with a
quorum present. Approval of any other proposals presented at the meeting
requires the affirmative vote of a majority of the votes cast by proxy or in
person. Brokers holding shares for beneficial owners must vote those shares
according to the specific instructions they receive from the beneficial owners.
If specific instructions are not received, brokers may generally vote these
shares in their discretion. However, the New York Stock Exchange rules preclude
brokers from
1
<PAGE> 6
exercising their voting discretion on certain proposals. In such cases, absent
specific instructions from the beneficial owner, the broker may not vote on
those proposals. This results in what is known as a "broker non-vote." Because
the Corporation's Bylaws require the affirmative vote of either a plurality or
majority of the votes cast at the Meeting to authorize action on any matter (as
described above), abstentions and broker non-votes, which will not be counted
"for" or "against" proposals, have no effect on the vote for the election of
Directors or approval of any of the other proposals.
Each participant in the Corporation's Performance Sharing Plan and Savings
and Investment Plan may direct the trustee as to the manner in which shares of
Common Stock allocated to the plan participant's account are to be voted. If the
plan participant does not return a voting instruction card to the trustee in a
timely manner or returns a card without indicating any voting instructions, the
trustee will vote the shares in the same proportion as shares for which the
trustee receives voting instructions for that plan.
In October 1996, the Corporation's Common Stock that was held by Lockheed
Martin Corporation became available to the public market when Lockheed Martin
disposed of its 81% ownership interest (the "Split-Off"). Before the effective
date of the Split-Off, Lockheed Martin Corporation and Martin Marietta
Investments Inc. held voting power over shares of Common Stock that represented
approximately 72.2% and 8.8%, respectively, of the shares entitled to be cast
for the election of the Board of Directors and approval of other proposals.
Martin Marietta Investments Inc. is a wholly-owned subsidiary of Lockheed Martin
Corporation, which is a Maryland corporation that was formed as the parent
corporation of Martin Marietta Corporation and Lockheed Corporation as a result
of the business combination of those two companies in March 1995. Martin
Marietta Corporation and Lockheed Corporation were subsequently merged into
Lockheed Martin Corporation in January 1996. Lockheed Martin Corporation is the
successor to Martin Marietta Technologies, Inc., which formerly held
approximately 72.2% of the Corporation's Common Stock. Unless otherwise
indicated, "Lockheed Martin Corporation" is used herein to refer to Martin
Marietta Corporation and its subsidiaries (other than the Corporation) prior to
its merger into Lockheed Martin Corporation in January 1996 and to Lockheed
Martin Corporation.
ELECTION OF DIRECTORS
The Corporation's Restated Articles of Incorporation, as amended, provide
for a classified board of directors such that the Board of Directors is divided
into three classes, each of which serves for three years. The Board of Directors
has nominated three persons for election as Directors to serve three-year terms
expiring in 2001. Unless otherwise directed, proxies will be voted in favor of
these three nominees. Each nominee has agreed to serve if elected. Each of the
nominees is currently serving as a Director. Should any nominee become unable to
serve as a Director, the persons named in the enclosed form of proxy will,
unless otherwise directed, vote for the election of such other person for such
position as the present Board of Directors may recommend in place of such
nominee.
2
<PAGE> 7
The following sets forth certain biographical information, current
occupation and business experience for the past five years for each of the
nominees for election and for each of the other members of the Board of
Directors.
- --------------------------------------------------------------------------------
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
TERMS EXPIRING IN 2001
- --------------------------------------------------------------------------------
RICHARD G. ADAMSON (65)
Director (since 1994), member of the Ethics, Environment, Safety
and Health and Audit Committees.
Mr. Adamson served as Vice President, Strategic Development for
Martin Marietta Corporation from April 1993 until his retirement
in January 1995. From 1984 until April 1993, he served as Vice
President, Business Development of Martin Marietta Corporation.
- --------------------------------------------------------------------------------
MARCUS C. BENNETT (62)
Director (since 1993), Chairman of the Executive and Finance
Committees, member of the Compensation Committee. Prior to May
1997, Mr. Bennett was Chairman of the Board.
Mr. Bennett has served as Executive Vice President and Chief
Financial Officer of Lockheed Martin Corporation since July 1996.
He has been a Director of Lockheed Martin Corporation since March
1995. From March 1995 until July 1996 he served as Senior Vice
President and Chief Financial Officer of Lockheed Martin
Corporation and from 1988 until 1995 he served as Vice President
and Chief Financial Officer of Martin Marietta Corporation. He
also served as a Director of Martin Marietta Corporation from 1993
to 1995. Mr. Bennett joined Martin Marietta Corporation in 1959.
Mr. Bennett is also a Director of Carpenter Technologies, Inc. and
Comsat Corporation.
- --------------------------------------------------------------------------------
BOBBY F. LEONARD (65)
Director (since 1994), Chairman of the Compensation Committee and
member of the Finance Committee.
Mr. Leonard served as Vice President, Human Resources of Martin
Marietta Corporation from 1981 until his retirement in March 1995.
He is currently in private law practice in Maryland.
- --------------------------------------------------------------------------------
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" ALL NOMINEES FOR ELECTION TO THE
BOARD OF DIRECTORS.
3
<PAGE> 8
- --------------------------------------------------------------------------------
DIRECTORS CONTINUING IN OFFICE
- --------------------------------------------------------------------------------
TERMS EXPIRING IN 1999
- --------------------------------------------------------------------------------
JAMES M. REED (65)
Director (since 1994), Chairman of the Audit Committee, member of
the Executive and Finance Committees.
Mr. Reed served as Chief Financial Officer of Union Camp
Corporation from 1977 and as Vice Chairman of the Board of Union
Camp Corporation from 1993 until his retirement on November 30,
1997. Mr. Reed is a Director of Bush Boake Allen Inc.
- --------------------------------------------------------------------------------
WILLIAM B. SANSOM (56)
Director (since 1994), Chairman of the Ethics, Environment, Safety
and Health Committee and a member of the Compensation Committee.
Mr. Sansom has served as the Chairman and Chief Executive Officer
of The H.T. Hackney Co. since May 1983. During 1979 to 1983, he
served in Tennessee State Government, first as Commissioner of
Transportation and then as Commissioner of Finance and
Administration. He has also previously served on the Board of
Directors of the National Crushed Stone Association. Mr. Sansom is
a Director of First Tennessee National Corporation and Astec
Industries, Inc.
- --------------------------------------------------------------------------------
STEPHEN P. ZELNAK, JR. (53)
Chairman of the Board (since 1997) and Director (since 1993),
member of the Executive and Finance Committees. Prior to May 1997,
Mr. Zelnak was Vice Chairman of the Board.
Mr. Zelnak has served as President and Chief Executive Officer of
Martin Marietta Materials, Inc. since 1993, and previously served
as the President of Martin Marietta Corporation's Materials Group
from 1992 until the formation of the Corporation, and of Martin
Marietta Corporation's Aggregates Division since 1982. Mr. Zelnak
also served as a Vice President of Martin Marietta Corporation
from 1989 until 1994, when he resigned as an officer of Martin
Marietta Corporation effective upon the completion of the initial
public offering of a portion of the Corporation's Common Stock.
Mr. Zelnak joined Martin Marietta Corporation in 1981.
- --------------------------------------------------------------------------------
4
<PAGE> 9
- --------------------------------------------------------------------------------
TERMS EXPIRING IN 2000
- --------------------------------------------------------------------------------
WILLIAM E. MCDONALD (55)
Director (since 1996), member of the Audit and Compensation
Committees.
Mr. McDonald has served as Senior Vice President, Customer Service
Operations, Sprint Corporation since January 1, 1998. He was
previously President and Chief Executive Officer of Sprint
Mid-Atlantic Operations from 1993 through 1997 and President and
Chief Executive Officer for Sprint/United Telephone-Eastern from
1988 to 1993.
- --------------------------------------------------------------------------------
FRANK H. MENAKER, JR. (57)
Director (since 1993), member of the Ethics, Environment, Safety
and Health and Audit Committees.
Mr. Menaker has served as Senior Vice President and General
Counsel of Lockheed Martin Corporation since July 1996. He served
as Vice President and General Counsel of Lockheed Martin
Corporation from March 1995 to July 1996 and as Vice President of
Martin Marietta Corporation from 1982 until 1995, and as General
Counsel of Martin Marietta Corporation from 1981 until 1995.
- --------------------------------------------------------------------------------
RICHARD A. VINROOT (56)
Director (since 1996), member of the Ethics, Environment, Safety
and Health Committee.
Mr. Vinroot has been a member of the law firm of Robinson,
Bradshaw & Hinson, P.A. in Charlotte, North Carolina since 1969.
From 1991 to 1995, Mr. Vinroot served as Mayor of Charlotte, North
Carolina.
- --------------------------------------------------------------------------------
5
<PAGE> 10
BOARD OF DIRECTORS
The Corporation's Board of Directors held six meetings during 1997, of
which five were regularly scheduled meetings. In addition, management confers
frequently with its Directors on an informal basis to discuss Corporation
affairs. Other than Directors who are also officers of the Corporation,
Directors serving in 1997 received an annual retainer of $25,000. Directors also
received $1,000 for each regular or special meeting of the Board and $500 for
each Board committee meeting attended, in addition to reimbursement for travel
and other expenses related to attendance at Board and committee meetings. Each
committee chairman (other than the chairman of the Executive Committee) also
receives an annual fee of $1,000.
Pursuant to the Amended and Restated Martin Marietta Materials, Inc. Common
Stock Purchase Plan for Directors, Directors may currently receive their
compensation in cash and may defer all or a portion of their fees (in the form
of cash or Common Stock) until the date the person ceases to be a Director or
the date that is one month and one year following the date the person ceases to
be a Director. The Board of Directors unanimously agreed that a minimum of 30%
of each Director's annual retainer would be paid in Common Stock and deferred
under the plan.
The Corporation's Board of Directors has five standing committees: an Audit
Committee, a Compensation Committee, an Ethics, Environment, Safety and Health
Committee, an Executive Committee and a Finance Committee.
The Audit Committee, which is composed of Directors who are not officers or
employees of the Corporation, held four meetings during 1997. The Audit
Committee possesses and may exercise the powers of the Board of Directors,
except when such powers are by statute or the Articles of Incorporation or
Bylaws reserved to the full Board, relating to all accounting and auditing
matters of the Corporation. The Audit Committee recommends to the Board of
Directors the selection of the independent auditors. The Committee also monitors
the independence of the independent auditors. The Committee reviews the scope
and timing of work to be performed by the independent auditors; compensation to
be paid to the independent auditors; financial accounting and reporting
principles used by the Corporation; policies and procedures concerning audits,
accounting and financial controls; recommendations to improve existing
practices; and results of the audit and the report of the independent auditors.
The Committee also reviews the qualifications and the plan and scope of work of
the corporate internal audit function. The Committee's current members are
Directors Reed (Chairman), Adamson, McDonald and Menaker.
The Compensation Committee is composed of Directors who are not officers or
employees of the Corporation and who are also "disinterested" and "outside"
Directors as those terms are defined by the Securities and Exchange Act of 1934
and the Internal Revenue Code of 1986. It held five meetings during 1997. The
Committee has the power to fix the compensation and benefits to be paid for all
elected officers and employees. The Committee also approves and administers the
grants of stock options and any other awards that may be granted under the
Martin Marietta Materials, Inc. Amended Omnibus Securities Award Plan. The
Committee also has the power to administer any other compensation plan in
connection with which the Corporation or any of its employees may realize a
benefit from administration by disinterested Directors. The Committee's current
members are Directors Leonard (Chairman), Bennett, McDonald and Sansom.
6
<PAGE> 11
The Ethics, Environment, Safety and Health Committee held four meetings
during 1997. It monitors compliance with the Martin Marietta Materials, Inc.
Code of Ethics and Standards of Conduct and reviews all matters presented to it
by the Corporate Ethics Officer concerning the ethical practices of the
Corporation and its employees, including conflicts or potential conflicts of
interest between the Corporation and any of its employees. The Committee also
reviews and monitors the adequacy of the Corporation's policies and procedures
and organizational structure for ensuring compliance with environmental laws and
regulations, and matters relating to health and safety. The Committee's current
members are Directors Sansom (Chairman), Adamson, Menaker and Vinroot.
The Executive Committee held no meetings during 1997. It has the authority
to act during the intervals between the meetings of the Board of Directors and
may exercise the powers of the Board in the management of the business and
affairs of the Corporation as may be authorized by the Board of Directors. The
Committee's current members are Directors Bennett (Chairman), Reed and Zelnak.
The Finance Committee held four meetings during 1997. It has been delegated
general oversight powers related to the management of the financial affairs of
the Corporation, including but not limited to, establishing lines of credit or
other short-term borrowing arrangements and investing excess working capital
funds on a short-term basis. The Committee reviews and makes recommendations to
the Board of Directors concerning changes to capital structure, including the
incurrence of long-term debt and issuance of equity securities, capital
expenditures and the contributions budget and the payment of dividends. The
Committee's current members are Directors Bennett (Chairman), Leonard, Reed and
Zelnak.
The Bylaws of the Corporation require advance notice for any proposal for
the nomination for election as a Director at an annual meeting of shareholders
that is not included in the Corporation's notice of meeting or made by or at the
direction of the Board of Directors. In general, nominations must be delivered
to the Secretary of the Corporation at its principal executive offices, 2710
Wycliff Road, Raleigh, North Carolina 27607, not less than 60 days nor more than
90 days prior to the first anniversary of the preceding year's annual meeting
and must contain specified information concerning the nominee and the
shareholder proposing the nomination. Any shareholder desiring a copy of the
Bylaws of the Corporation will be furnished a copy without charge upon written
request to the Secretary of the Corporation.
During the year ended December 31, 1997, no Director attended fewer than
75% of the aggregate of (1) the total number of meetings of the Board of
Directors (held during the period for which he has been a director) and (2) the
total number of meetings held by all committees of the Board on which he served
(during the periods that he served).
7
<PAGE> 12
BENEFICIAL OWNERSHIP OF SHARES
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows as of March 13, 1998 the number of shares of
Common Stock beneficially owned by the Directors and nominees, the Chief
Executive Officer, and the four most highly compensated executive officers,
individually, and by all Directors and executive officers of the Corporation as
a group. The number of shares shown for each Director and each of the named
executive officers represented less than 1 percent of the shares of Common Stock
outstanding. The number of shares shown for all Directors and executive officers
as a group represented less than 1 percent of the shares of Common Stock
outstanding.
<TABLE>
<CAPTION>
AMOUNT OF
NAME OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED(1)
---------------- ---------------------
<S> <C>
Richard G. Adamson............................... 1,801(2)
Marcus C. Bennett................................ 5,415(2)
Bruce A. Deerson................................. 16,001(3)(4)
Janice K. Henry.................................. 21,408(3)(4)
Bobby F. Leonard................................. 5,283(2)
William E. McDonald.............................. 851(2)
Frank H. Menaker, Jr............................. 3,887(2)
James M. Reed.................................... 2,863(2)
William B. Sansom................................ 2,479(2)
Philip J. Sipling................................ 27,978(3)(4)
Richard A. Vinroot............................... 1,305(2)
Robert R. Winchester............................. 26,965(3)(4)
Stephen P. Zelnak, Jr............................ 84,332(3)(4)
All Directors and executive officers as a group
(15 individuals including those named
above)........................................ 222,078
</TABLE>
- ------------------------
(1) Shares reported are less than 1% of the shares of Common Stock outstanding.
As to the shares reported, (i) beneficial ownership is direct, and (ii) the
person indicated has sole voting and investment power.
(2) Amounts reported include compensation paid on a quarterly basis that
Directors have received in Common Stock units that is deferred pursuant to
the Amended and Restated Martin Marietta Materials, Inc. Common Stock
Purchase Plan for Directors. The Directors do not have voting or investment
power for their respective share units. The number of Common Stock units
credited to each of the Directors as of March 13, 1998 is as follows: Mr.
Adamson, 401; Mr. Bennett, 1,415; Mr. Leonard, 533; Mr. McDonald, 851; Mr.
Menaker, 1,337; Mr. Reed, 863; Mr. Sansom, 1,429; and Mr. Vinroot, 1,305.
(3) The number of shares owned for each of Messrs. Deerson, Sipling, Winchester,
Zelnak and Ms. Henry and all Directors and executive officers as a group
assumes that options held by each of them covering shares of Common Stock in
the amounts indicated, which are currently exercisable within 60 days of
March 13, 1998, have been exercised: Mr. Deerson, 13,666; Ms. Henry, 17,000;
Mr. Sipling, 22,000; Mr. Winchester, 22,000; Mr. Zelnak, 74,332; and all
Directors and executive officers as a group, 166,997.
(4) Includes an approximation of the number of shares in the participant's
account in the Martin Marietta Materials, Inc. Performance Sharing Plan.
8
<PAGE> 13
FIVE PERCENT SHAREHOLDERS
The following table sets forth information with respect to the shares of
Common Stock which are held by persons known to the Corporation to be the
beneficial owners of more than 5% of such stock as of March 13, 1998. To the
best of the Corporation's knowledge, no person (other than as disclosed below)
owned more than 5 percent of any class of the Corporation's outstanding voting
securities at the close of business on March 13, 1998.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS COMMON STOCK PERCENT
OF SHAREHOLDER BENEFICIALLY OWNED(1) OF CLASS
- ---------------- ---------------------- --------
<S> <C> <C>
American Express Financial 4,043,822 8.8%
Corporation(2)
IDS Tower 10
Minneapolis, MN 55440
Davis Selected Advisers, 3,367,300 7.2%
L.P.(3)
124 East Marcy Street
Santa Fe, NM 87501
Perry Corp.(4) 2,691,208 5.8%
599 Lexington Avenue
New York, NY 10022
</TABLE>
- ------------------------
(1) As to the shares reported, (i) beneficial ownership is direct, and (ii) the
person indicated has sole voting and investment power.
(2) As reported in Schedule 13G dated December 31, 1997 filed with the
Securities and Exchange Commission. The total includes 30,300 shares over
which the shareholder has shared voting power with its parent holding
company, American Express Company, and 4,043,822 shares over which the
shareholder has shared dispositive power with its parent holding company,
American Express Company. American Express Company disclaims beneficial
ownership of the shares referred to in the Schedule 13G.
(3) As reported in Schedule 13G dated March 3, 1998 filed with the Securities
and Exchange Commission.
(4) As reported in Schedule 13G dated February 18, 1998 filed with the
Securities and Exchange Commission. Richard C. Perry, as sole stockholder of
Perry Corp., has the power to vote and dispose of the shares reported. Perry
Corp. and Richard C. Perry disclaim beneficial ownership of the shares other
than the portion which relates to their respective individual economic
interests in such shares.
9
<PAGE> 14
EXECUTIVE COMPENSATION
The following tables show annual and long-term compensation received from
the Corporation and Lockheed Martin Corporation for services in all capacities
to the Corporation (and prior to its incorporation, to Martin Marietta
Corporation), of the Chief Executive Officer and the next four most highly
compensated executive officers for the years ended December 31, 1997, 1996 and
1995. Other than compensation paid by the Corporation or Lockheed Martin
Corporation as set forth below, no annual or long-term compensation of any kind
was paid to the Chief Executive Officer or other named executive officers of the
Corporation in each of the years in the three-year period ended December 31,
1997. The information set forth in the table captioned "Option Grants in Last
Fiscal Year" relates to stock options with respect to the Common Stock of the
Corporation. The information set forth in the table captioned "Aggregated
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values"
relates to stock options and stock appreciation rights ("SARs") under plans
sponsored by the Corporation or by Lockheed Martin Corporation. Each stock
option and SAR outstanding under Martin Marietta Corporation stock option plans
at the time of the business combination between Martin Marietta Corporation and
Lockheed Corporation (effective as of March 1995), were fully vested (pursuant
to the change-in-control provisions in the plans) and converted into an option
and SAR with respect to the common stock of Lockheed Martin Corporation
(pursuant to an agreement entered into in connection with the combination).
Accordingly, securities granted under these plans were options exercisable for
the common stock of Lockheed Martin Corporation and in connection with the
Split-Off, terminated if not exercised before October 1997.
10
<PAGE> 15
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------------- -------------------------------
AWARDS PAYOUTS
------------------ ----------
SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS/SARS(#)(3) PAYOUTS(4) COMPENSATION(5)
- --------------------------- ---- -------- -------- --------------- ------------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen P. Zelnak, Jr. ....... 1997 $490,000 $225,000 $288,745 54,000 $ -- $ 5,600
Chairman, President 1996 396,667 170,000 215,862 47,000 -- 5,250
and Chief Executive Officer 1995 333,334 122,500 153,132 43,000 166,600 915,806
Philip J. Sipling............. 1997 223,625 64,400 82,350 18,000 -- 5,536
Executive Vice President 1996 194,917 54,100 68,198 15,000 -- 5,250
1995 176,667 80,000 25,011 12,000 41,650 136,920
Robert R. Winchester.......... 1997 207,667 104,850 15,478 15,000 -- 5,600
Senior Vice President 1996 191,417 79,650 33,481 15,000 -- 5,250
1995 176,667 89,190 12,390 12,000 73,420 129,605
Janice K. Henry............... 1997 195,000 46,800 59,978 13,000 -- 5,600
Vice President, Chief 1996 180,000 43,900 55,312 12,000 -- 5,317
Financial Officer and 1995 167,667 61,760 19,320 9,000 58,310 151,550
Treasurer
Bruce A. Deerson.............. 1997 178,583 77,130 12,272 10,000 -- 4,676
Vice President and 1996 162,167 50,000 37,212 9,000 -- 5,565
General Counsel 1995 152,333 40,000 37,632 7,000 24,990 78,400
</TABLE>
- ---------------
(1) Bonuses were paid pursuant to the Martin Marietta Materials, Inc. Executive
Incentive Plan. A portion of the cash bonus in 1997, 1996 and 1995 to be
paid to the named executive officers and certain other key employees of the
Corporation was deferred into stock-based awards pursuant to the Martin
Marietta Materials, Inc. Incentive Stock Plan. The amounts deferred in 1997
for each of the named executive officers are as follows: Mr. Zelnak,
$225,000; Mr. Sipling, $64,400; Mr. Winchester, $11,650; Ms. Henry, $46,800;
and Mr. Deerson, $8,570. The amounts deferred in 1996 for each of the named
executive officers are as follows: Mr. Zelnak, $170,000; Mr. Sipling,
$54,100; Mr. Winchester, $26,550; Ms. Henry, $43,900; and Mr. Deerson,
$29,100. The amounts deferred in 1995 for each of the named executive
officers are as follows: Mr. Zelnak, $122,500; Mr. Sipling, $20,000; Mr.
Winchester, $9,910; Ms. Henry, $15,440; and Mr. Deerson, $30,100. The
amounts reported under "Bonus" do not include such deferred portion which
are reported under "Other Annual Compensation."
(2) The amounts reported under "Other Annual Compensation" represent the value
of units that correspond to Common Stock credited to participants under the
Martin Marietta Materials, Inc. Incentive Stock Plan (the "Plan"). Pursuant
to the Plan, each participant at his or her election is permitted to use up
to 50% of the annual incentive bonus earned by the participant to be
credited towards units ("Units") that will subsequently be converted into
Common Stock of the Corporation pursuant to the terms of the Plan at a 20%
discount from the fair market value of the Common Stock (the closing price
of the Common Stock as reported in the Wall Street Journal) on the date the
amount of the bonus is determined. Each of the executive officers named are
required to use a minimum of 10% of the annual incentive bonus towards the
crediting of Units under the Plan, except for Mr. Zelnak, who is required to
use a minimum of 25% towards the crediting of such Units. Any election to
purchase Units under the Plan (in addition to the mandatory purchases) must
be made at least six months prior to the date the amount of the annual
incentive bonus is determined. The Units credited under the Plan generally
vest on December 1 in the year that is immediately preceding three years
from the date of grant, at which time shares of Common Stock are issued to
the participant. Dividend equivalents are paid on the Units at the same rate
as dividends are paid to all shareholders. Such payments are included in the
amounts reported. The amounts reported under "Other Annual Compensation"
represent the market value on the date of grant of the Units credited to
each named executive officer. The number of Units credited in 1997 to each
of the named executives is as follows: Mr. Zelnak, 7,759; Mr. Sipling,
2,221; Mr. Winchester, 402; Ms. Henry, 1,614; and Mr. Deerson, 296. The
number of Units credited in 1996 to each of the named executives is as
follows: Mr. Zelnak, 8,293; Mr. Sipling, 2,640; Mr. Winchester, 1,296; Ms.
Henry, 2,142; and Mr. Deerson, 1,420. The number of Units credited in 1995
to each of the named executives is as follows: Mr. Zelnak, 7,292; Mr.
Sipling, 1,191; Mr. Winchester, 590; Ms. Henry, 920; and Mr. Deerson 1,792.
The cost of perquisites furnished to each executive officer did not exceed
the lesser of $50,000 or 10% of such officer's salary and bonus.
(3) Options granted are for Common Stock of the Corporation.
(4) Amounts reported under this column represent payouts of awards under the
Amended and Restated Martin Marietta Corporation Long Term Performance
Incentive Compensation Plan. Upon consummation of the business combination
of Martin Marietta Corporation and Lockheed Corporation, the plan was
terminated as an active plan and no further awards will be made.
(5) Amounts reported under "All Other Compensation" represent matching
contributions to the Corporation's Performance Sharing Plan and, for periods
prior to the Split-Off, the Lockheed Martin Corporation Performance Sharing
Plan, and in 1995, for Mr. Zelnak, amounts paid under the Martin Marietta
Corporation Deferred Compensation and Estate Supplement Plan. Amounts
reported in 1995 also represent awards granted in 1993 under the Amended and
Restated Martin Marietta Corporation Long Term Performance Incentive
Compensation Plan, payment of which was accelerated upon the business
combination of Martin Marietta Corporation and Lockheed Corporation.
Accelerated payments were in the amounts that follow: Mr. Zelnak, $512,050;
Mr. Sipling, $131,670; Mr. Winchester, $124,355; Ms. Henry, $146,300; and
Mr. Deerson, $73,150.
11
<PAGE> 16
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants of options for the Corporation's
Common Stock awarded pursuant to the Martin Marietta Materials, Inc. Amended
Omnibus Securities Award Plan (the "Omnibus Plan") to the named executives in
the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------------------------------------- POTENTIAL REALIZABLE
VALUE AT
NO. OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED FISCAL YEAR 1997 PER SHARE DATE 5% 10%
- ---- ---------- ---------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Zelnak, Jr.................. 54,000 18.88% $35.50 8/14/07 $1,205,591 $3,055,204
Philip J. Sipling...................... 18,000 6.29 35.50 8/14/07 401,864 1,018,401
Robert R. Winchester................... 15,000 5.24 35.50 8/14/07 334,886 848,668
Janice K. Henry........................ 13,000 4.55 35.50 8/14/07 290,235 735,512
Bruce A. Deerson....................... 10,000 3.50 35.50 8/14/07 223,258 565,779
</TABLE>
- ------------------------
(1) Awards are granted at the discretion of a disinterested committee (the
"Committee") of the Board of Directors of the Corporation upon the
recommendation of management of the Corporation, except for Mr. Zelnak, for
whom the Committee formulates its own decision, and may be awarded based on
past performance or as incentive for future efforts. A maximum of 2,000,000
shares of the Corporation's stock are authorized for grants to key
employees. Each award under the Omnibus Plan is evidenced by an award
agreement setting forth the number and type of stock-based incentives
subject to the award and such other terms and conditions applicable to the
award as determined by the Committee. Under the award agreement, options
vest and become exercisable in three approximately equal increments on the
first, second and third anniversary dates of the grant and expire 10 years
from the date of grant. No individual may receive annual grants for more
than 10 percent of the shares available under the Omnibus Plan. Options
awarded in 1997 expire ninety days following termination of employment,
except in instances following death, disability or retirement. In the event
of death, all outstanding options vest immediately and will expire one year
following the date of death. In instances of disability or normal
retirement, the award agreement states that the terms of all outstanding
options will be unaffected by such retirement or disability. In the event of
early retirement, options that are not vested will terminate on the second
business day after such retirement and options that are vested will
terminate 90 days thereafter unless the Chief Executive Officer or, in the
case of persons subject to Section 16 of the Securities Exchange Act of
1934, the Committee determines that all outstanding options will be
unaffected by such retirement. The exercise price of the shares of Common
Stock subject to options is set by the Committee and must be at least 100%
of the fair market value of the shares on the date the option is granted.
The award agreement provides that shares to be issued upon exercise of
options may be purchased by the Company in the open market.
(2) The dollar amounts set forth in these columns are the result of calculations
at the 5 percent and 10 percent rates set by the Securities and Exchange
Commission, and therefore are not intended to forecast possible future
appreciation, if any, of the price of the Common Stock.
12
<PAGE> 17
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTIONS/SAR VALUES
Shown below is information relating to (1) the exercise of options for the
purchase of Lockheed Martin Corporation common stock and stock appreciation
rights ("SARs") during the last completed fiscal year and (2) the fiscal
year-end value of unexercised options for the Corporation's Common Stock under
the Omnibus Plan for the named executives. No options for the Corporation's
Common Stock have been exercised by the named executives. There are no
unexercised options or SARs for Lockheed Martin Corporation Common Stock held by
executive officers of the Corporation.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-THE-MONEY
NO. OF UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES AT FISCAL YEAR-END(2) AT FISCAL YEAR-END(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(1) REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen P. Zelnak, Jr. ............. -- -- 74,332 99,668 $1,104,543 $680,582
Philip J. Sipling................... 6,600 $360,825 22,000 32,000 325,125 208,500
Robert R. Winchester................ 13,400 767,956 22,000 29,000 325,125 205,313
Janice K. Henry..................... 11,000 870,250 17,000 24,000 250,563 162,000
Bruce A. Deerson.................... -- -- 13,666 18,334 201,593 123,157
</TABLE>
- ------------------------
(1) Includes shares acquired and value realized from exercise of options of the
common stock and SARs of Lockheed Martin Corporation for which related
expenses were paid by and incurred by Lockheed Martin Corporation. No
options have been exercised by the named executives for the Corporation's
Common Stock.
(2) Options granted by the Corporation in 1997 as shown in "Option Grants in
Last Fiscal Year" on page 12, all of which were unexercisable at year-end,
are included in this table. Options granted by the Corporation in 1996,
one-third of which vested in 1997, in 1995, two-thirds of which vested in
1997, and in 1994, all of which vested in 1997, are also included in this
table.
(3) The value presented represents the difference between the closing price of
the stock at year-end and the exercise price of the options.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
NO. OF OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
SHARES, PERIOD UNTIL NON-STOCK PRICE-BASED PLANS(2)
UNITS OR MATURATION -------------------------------------
NAME OTHER RIGHTS OR PAYOUT(1) THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ---- ------------ ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Stephen P. Zelnak, Jr. ......................... N/A 3 years 903 1,806 2,709
Philip J. Sipling............................... N/A 3 years 434 869 1,303
Robert R. Winchester............................ N/A 3 years 421 843 1,264
Janice K. Henry................................. N/A 3 years 408 817 1,225
Bruce A. Deerson................................ N/A 3 years 350 701 1,051
</TABLE>
- ------------------------
(1) The performance period for awards granted in 1997 under the Martin Marietta
Materials, Inc. Shareholder Value Achievement Plan (the "Achievement Plan")
is the three fiscal years beginning January 1, 1997 and ending December 31,
1999.
(2) Awards are denominated in units that relate to a number of shares of the
Corporation's Common Stock where threshold, target and maximum numbers
represent the degree to which the performance goals are achieved at the end
of the three-year performance period. Awards under the Achievement Plan are
based upon a combination of factors, including a total return to
shareholders formula which compares the Corporation's total return to
shareholders to that of the Standard & Poor's 500 Index and to a peer group
of companies. If the Corporation fails to meet the threshold performance
objectives, no award is made under the Achievement Plan.
13
<PAGE> 18
PENSION PLANS
The named executives participated in the Martin Marietta Materials, Inc.
Pension Plan for Salaried Employees (the "Pension Plan"), which was sponsored by
the Corporation and covered all of the Corporation's executive officers and
substantially all of the salaried employees of the Corporation on a
non-contributing basis. Set forth below is a pension plan table which shows the
estimated annual benefits payable upon retirement for specified earnings and
years of service under the Pension Plan.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 40
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000.................................. $ 21,027 $ 28,037 $ 35,046 $ 42,055 $ 56,564
$150,000.................................. 32,277 43,037 53,796 64,555 86,564
$200,000(1)............................... 43,527 58,037 72,546 87,055 116,564
$300,000(1)............................... 66,027 88,037 110,046 132,055 176,564
$400,000(1)............................... 88,527 118,037 147,546 177,055 236,564
$500,000(1)............................... 111,027 148,037 185,046 222,055 296,564
</TABLE>
- ------------------------
(1) The benefits payable under the Pension Plan may be limited by sections
401(a)(17) and 415 of the Internal Revenue Code. The maximum earnings amount
which may be considered to compute a benefit in accordance with Section
401(a)(17) of the Code is $160,000. The maximum annual amount payable under
the Plan as of December 31, 1997 in accordance with Section 415(b) of the
Code is $125,000.
Compensation covered by the Pension Plan generally includes, but is not
limited to, base salary, executive incentive compensation awards including the
deferred portion thereof, lump sum payments in lieu of a salary increase, and
overtime. The normal retirement age under the Pension Plan is 65, but unreduced
early retirement benefits are available at age 62 and reduced benefits are
available as early as age 55. The calculation of benefits under the Pension Plan
is generally based on an annual accrual rate, average compensation for the
highest consecutive five years of the ten years preceding retirement and the
participant's number of years of credited service. Maximum benefits payable
under the Pension Plan are subject to current Internal Revenue Code limitations.
The amounts listed in the foregoing table are not subject to any deduction for
Social Security benefits or other offsets amounts.
As of December 31, 1997, the estimated total annual benefits payable upon
retirement at age 65 for the individuals named in the compensation table, based
on continued employment at current compensation, are as follows: Mr. Zelnak,
$403,592; Mr. Sipling, $141,943; Mr. Winchester, $147,622; Ms. Henry, $174,368;
and Mr. Deerson, $139,610. These amounts include benefits that would have been
payable under Lockheed Martin Corporation's Supplemental Excess Retirement Plan.
The years of credited service upon assumed retirement at age 65 for Mr. Zelnak,
Mr. Sipling, Mr. Winchester, Ms. Henry, and Mr. Deerson are 28.75 years, 27.67
years, 31.08 years, 41.67 years, and 36.75 years, respectively.
Sections 401(a)(17) and 415 of the Internal Revenue Code limit the annual
benefits payable under the Pension Plan. As permitted by ERISA, Lockheed Martin
Corporation maintained the Supplemental Excess Retirement Plan, which provides
for the payment of benefits in excess of those limits and payment of amounts
equalizing the differences in the accrual method for those certain employees who
were not participants in the Pension Plan prior to October 1, 1975 and the
payment of a supplemental death benefit to participants who die while employed.
14
<PAGE> 19
EMPLOYMENT PROTECTION AGREEMENTS
The Corporation has entered into Employment Protection Agreements (the
"Agreements") with each of the named executive officers. The purpose of these
Agreements is to provide the Corporation's key executives with payments and
benefits upon certain types of terminations within two years and 30 days
following a "Change of Control." For purposes of the Agreements, a Change of
Control is generally defined as (i) the acquisition by any person, or related
group of persons, of 40% or more of either the outstanding Common Stock of the
Corporation or the combined voting power of the Corporation's outstanding
securities, (ii) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the Corporation's
assets following which the Corporation's shareholders before such event fail to
own more than 50% of the resulting entity, (iii) a change in the majority
membership of the Board, (iv) a liquidation or dissolution of the Corporation,
or (v) a sale of all or substantially all of the Corporation's assets.
The Agreements provide that if, within the two-year period following a
Change of Control, an executive is terminated without "Cause" (as defined in the
Agreements) or terminates his employment with "Good Reason" (as defined in the
Agreements), or if the executive voluntarily terminates his employment for any
reason during the thirty-day period following the second anniversary of the
Change of Control, the Corporation is obligated to pay the executive, in a lump
sum, an amount equal to twice the sum of the executive's "Base Salary" and
"Annual Bonus." For purposes of the Agreements, Base Salary means the highest
annual rate of base salary that the executive received within the twelve-month
period ending on the date of the Change of Control and Annual Bonus means the
executive's highest annual bonus paid during the period beginning five years
prior to the Change of Control and ending on the date of the executive's
termination of employment. In addition, for two years following termination of
employment, the Corporation must provide the executive with welfare benefits
that are generally as favorable as those the executive enjoyed prior to the
Change of Control. Furthermore, the Agreements provide for "gross up" payments
to compensate the executives for any golden parachute excise taxes imposed under
the Internal Revenue Code on account of the severance amounts.
The term of the Agreements is three years following their effective dates.
On each anniversary date of the effective date, the Agreements are renewed for
one additional year, unless either party gives notice of its intent to cancel
the automatic extension.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Corporation's executive compensation program is administered by the
Compensation Committee (the "Committee") of the Board of Directors, which
consists entirely of Board members who are neither officers nor employees of the
Corporation. The role of the Compensation Committee is, among other things, to
approve salaries and other compensation of the executive officers of the
Corporation and to review, approve and administer grants of stock options and
equity-related awards to all employees, including the principal officers of the
Corporation, and to administer any other compensation plan in connection with
which the Corporation or any of its employees may realize a benefit from
administration by disinterested Directors.
15
<PAGE> 20
GENERAL COMPENSATION PHILOSOPHY
The Committee supports the Corporation's belief that executive compensation
should further the Corporation's strategic goals. To accomplish this, the
Committee's philosophy with respect to executive compensation holds that the
Corporation's employees are its most important resource and should be
compensated fairly in order to achieve optimum operating performance for the
Corporation. The Committee focuses on operating performance rather than
short-term changes in stock price based on its view that the long-term operating
performance of the Corporation will be reflected by stock price performance over
the long-term. Competitive compensation levels serve to attract and retain
individuals of outstanding ability and motivate such individuals to sustain high
levels of personal performance. The type and amount of compensation granted is
based upon the subjective judgment of the Committee; nevertheless, in the
exercise of its discretion, the Committee considers a number of objective
criteria which are discussed below in the context of the components of
compensation to which they apply.
COMPENSATION STRUCTURE AND AWARDS FOR 1997
The key elements of the Corporation's compensation structure are base
salary, annual incentives and long-term incentives, each of which is intended to
accomplish the overall compensation philosophy.
Annual Compensation -- Base Salary. In setting base salaries for 1997,
the Committee reviewed information drawn from various sources, including proxy
statements and surveys conducted by an outside compensation consulting firm of a
selected peer group of companies in the aggregates, cement and specialty
chemical industries, including those in the Performance Graph peer group on page
20, and of a selected group of general industry companies with comparable
revenues to those of the Corporation. The group of companies reflected in the
compensation surveys was broader than the group of peer companies set forth in
the Performance Graph on page 20 because of the Committee's belief that the
larger group better represents the market within which it competes for executive
talent. The Committee also considered the advice of independent compensation
advisors. The targeted value of an executive's base salary is generally set at
median competitive levels.
Salaries for executives are reviewed by the Compensation Committee on an
annual basis and may be increased at that time based on: (1) the Committee's
agreement on the individual's contribution to the Corporation, and (2) increases
in median competitive pay levels. The total cash compensation (base salary and
bonus described below) for each of the named executive officers was at or below
the median compensation of executives having similar responsibilities in the
compensation surveys, including those in the Performance Graph peer group.
The base salary for the Chairman, President and Chief Executive Officer of
the Corporation was increased during 1997 to $525,000. This represents an
approximate 25 percent increase from 1996. The rate of increase in 1997
reflected the Committee's unanimous agreement on Mr. Zelnak's continued superior
leadership ability as reflected by the successful integration of the American
Aggregates Corporation acquisition from CSR America, Inc. and other acquisitions
completed in 1997 and as demonstrated by the Corporation's continued excellent
financial performance as to record sales and earnings.
16
<PAGE> 21
Under Mr. Zelnak's guidance, the Corporation achieved strong earnings growth and
remained an industry leader in performance as measured by return on sales and
return on investment. In addition, the Committee also reviewed base salary data
for chief executive officers in the compensation studies and in the Performance
Graph peer group.
Annual Compensation -- Bonus. To encourage achievement of the performance
objectives of the Corporation, a significant portion of annual compensation
takes the form of an incentive compensation bonus. In 1997, under the
Corporation's Executive Incentive Plan, the maximum amount that an executive
could receive was based upon a percentage of that executive's base salary. All
of the executive officers participate in the plan, except for Mr. Zelnak, for
whom bonus consideration is made outside the plan.
Following review of the achievements of the Corporation as compared to the
targeted goals set at the end of the previous year, a comparative review of each
of the individual contributions of all participants towards achieving these
goals is conducted. The Compensation Committee also considers qualitative
measures of performance such as adherence to and implementation of the
Corporation's policy on ethics and standards of conduct, customer satisfaction
and product quality.
The amount actually awarded to each participant in the plan is based upon
the Compensation Committee's assessment of each individual's achievement of
targeted objectives, including standard measures of financial performance such
as sales, earnings, return on capital investments and cash generation. These
objectives are established at the beginning of each plan year and are based upon
the Corporation's Long Range Operating Plan. For executives in corporate staff
positions, 50 percent of the determination is made with respect to the
Corporation's performance and 50 percent is based on the individual's
performance. The Committee considers the recommendations of the Corporation's
Chief Executive Officer but retains complete discretion in performing these
reviews.
Mr. Zelnak was awarded an annual incentive bonus of $450,000 for 1997 based
on his outstanding performance and leadership in connection with the
Corporation's financial achievements and successful acquisitions. The
Corporation's Incentive Stock Plan (discussed more generally below) requires Mr.
Zelnak to use 25% of his 1997 annual incentive bonus towards credits of Common
Stock units at a 20% discount to market value. These units generally vest in
three years. In addition, Mr. Zelnak made an irrevocable choice six months prior
to the bonus determination to use 25% more, for a total of 50% of his annual
incentive bonus, towards Common Stock units. Although there was no special
attempt to set Mr. Zelnak's 1997 bonus in any particular relationship to the
compensation data, Mr. Zelnak's bonus was above the median level of bonus
compensation of CEO's in the compensation surveys, including those in the
Performance Graph peer group. His total cash compensation (base salary and
bonus) was below the median compensation of those CEOs. The Compensation
Committee retains complete discretion in determining the amount of incentive
compensation to be awarded to Mr. Zelnak. Consequently, no particular weighting
of criteria is required or performed.
Long Term Compensation -- Stock Options. Stock options awarded under the
Corporation's Amended Omnibus Securities Award Plan link the compensation
provided to a group of 97 executive officers and key personnel with gains
realized by the shareholders. The vesting periods associated with stock options
encourage continued employment with
17
<PAGE> 22
the Corporation while also serving to confer on recipients an ownership interest
in the Corporation.
The number of options granted to an individual is based upon survey data
provided by compensation consultants. The data shows the value of option awards
as a multiple of base pay for comparable executive positions in other
corporations. In making 1997 stock option award decisions, the Committee elected
to provide option awards, as a multiple of base salary, near the average for
awards made by firms in a national compensation group comprised of the same
companies surveyed in the Compensation Committee's review of base salaries. The
determination of the number of options awarded is within the complete discretion
of the Committee, which considers the recommendations of the Chief Executive
Officer with respect to participants other than the Chief Executive Officer, and
which formulates its own decision with respect to the Chief Executive Officer.
The Committee awarded Mr. Zelnak 54,000 options in 1997 to align Mr. Zelnak's
compensation directly with the Corporation's performance. In exercising its
discretion, the Committee generally follows the same procedures as are followed
in determining the amount of incentive compensation awards discussed above.
Since long-term awards vest over time, the Committee grants new awards to
provide continuing incentives for future performance without regard to the
number of options currently held by the recipient. Options awarded are not
transferable and have an exercise price equal to the closing price of the
Corporation's Common Stock on the date of grant, and therefore, have no value to
the recipient unless the price of the Common Stock increases.
Long Term Compensation -- Incentive Stock Awards. In 1997, a group of 42
executive officers and key personnel was granted awards under the Martin
Marietta Materials, Inc. Incentive Stock Plan. The plan is intended to give key
employees who participate in the Executive Incentive Plan the opportunity to
invest up to 50% of their annual incentive awards to purchase units that are
subsequently converted into shares of Common Stock pursuant to the terms of the
plan at a 20% discount from the market price of the Corporation's Common Stock
on the date of the award. The units become fully vested and are distributed in
the form of unrestricted Common Stock after three years of continued additional
employment with the Corporation. Participation in the plan is elective, except
that executive officers of the Corporation are required to invest a minimum
percentage of their annual incentive awards in units that are subsequently
converted into the Corporation's Common Stock in accordance with the terms of
the Incentive Stock Plan. The plan is intended to assist the Corporation in
attracting and retaining key employees, to link directly executive officer and
management compensation to shareholder returns, and to foster stock ownership in
the Corporation among its key employees.
Long Term Compensation -- Shareholder Value Achievement Plan Awards. In
1997, a group of 11 executive officers and key personnel was granted awards
under the Martin Marietta Materials, Inc. Shareholder Value Achievement Plan
(the "Achievement Plan"). The primary purpose of the Achievement Plan is to
foster and promote the long-term growth and performance of the Corporation by
enhancing the Corporation's ability to attract and retain qualified key
employees and motivate key employees through performance-based incentives.
18
<PAGE> 23
The 1997 awards granted under the Achievement Plan allow long term
incentives to be earned by the Chief Executive Officer and the other
participants when the Corporation attains specific return on capital goals that
are equally weighted and are determined by a total return to shareholders
ranking that must be at least in the 40th percentile as compared to the Standard
and Poor's 500 Index and at least at the median percentile as compared to a peer
group. The peer group differs and is larger than the peer group used in the
Performance Graph because the Corporation has historically compared its
financial performance against this larger competitor group for compensation
purposes. Awards earned under this plan are made in Common Stock that vests at
the end of a three-year period if the performance goals are attained. The
objective of this plan is to focus senior management's attention on certain
critical factors affecting the Corporation's long term performance and reward
them for making successful long term decisions. The value of these awards may
vary considerably based on the Corporation's stock price performance.
Stock-Based Awards -- Generally. The value, if any, of stock-based awards
is dependent upon the performance of the Corporation's Common Stock. Further, as
noted above, in exercising its discretion in determining the type and amount of
award made, the Committee considers many factors related to the Corporation's
performance and the performance of the individual being considered for an award.
While objective criteria are carefully considered, the Committee has the
discretion to make awards as it deems appropriate. Therefore, there is no
formula that results in a direct or quantifiable correlation between performance
and stock-related awards.
POLICY WITH RESPECT TO DEDUCTIBILITY OF COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code which makes certain "non-performance based" compensation
to the named executives in excess of $1 million non-deductible to the
Corporation. None of the named executive officers has received annual
compensation exceeding $1 million in 1997.
The Committee has taken steps to qualify certain compensation to ensure
deductibility. The Committee has determined that, in reviewing the design and
administration of the executive compensation program, its compensation
objectives discussed above will be met if, in connection with other
compensation, it retains the flexibility to exercise subjective judgment in
assessing an executive's performance. The Committee believes that the
achievement of the Corporation's general compensation policies and objectives
that are currently in place best serves shareholder interests.
March 27, 1998
COMPENSATION COMMITTEE
Bobby F. Leonard, Chairman
Marcus C. Bennett
William E. McDonald
William B. Sansom
19
<PAGE> 24
COMPARISON CUMULATIVE TOTAL RETURN(1)
MARTIN MARIETTA MATERIALS, INC., S&P 500
AND PEER GROUP INDICES
The following graph compares the performance of the Corporation's Common
Stock to that of the Standard & Poor's 500 Stock Index ("S&P 500") and a market
capitalization weighted index containing a group of peer companies in the
aggregates and cement industries selected by the Corporation. The peer group
consists of the following companies: CalMat Co., Florida Rock Industries, Inc.,
Lafarge Corporation, Martin Marietta Materials, Inc. and Vulcan Materials
Company.
GRAPH
MLM Peer Index S&P 500
Feb-94 $ 100.00 $ 100.00 $ 100.00
May-94 $84.24 $90.84 $99.07
Aug-94 $85.26 $94.15 $103.90
Nov-94 $79.18 $85.72 $99.87
Feb-95 $82.42 $91.08 $108.03
May-95 $94.52 $97.05 $119.07
Aug-95 $85.00 $95.87 $126.19
Nov-95 $91.64 $97.50 $136.80
Feb-96 $101.70 $97.55 $145.51
May-96 $109.54 $107.76 $152.93
Aug-96 $100.43 $101.39 $149.82
Nov-96 $107.83 $107.73 $174.91
Feb-97 $121.57 $119.20 $183.59
May-97 $133.07 $130.72 $197.91
Aug-97 $162.27 $162.88 $210.72
Nov-97 $161.37 $171.82 $224.79
2/27/98 $177.96 $181.93 $247.46
- ---------------
(1) Assumes that the investment in the Corporation's Common Stock and each index
was $100, with quarterly reinvestment of dividends.
20
<PAGE> 25
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS
There are no executive officer-director interlocks where an executive of
the Corporation serves on the compensation committee of another corporation that
has an executive officer serving on the Corporation's Board of Directors.
Messrs. Bennett, Leonard, McDonald and Sansom served on the Corporation's
Compensation Committee during 1997. Mr. Bennett is Executive Vice President,
Chief Financial Officer and a Director of Lockheed Martin Corporation which,
until the Split-Off, owned approximately 81% of the Corporation's Common Stock.
He is not, and was not, an officer or employee of the Corporation or any of its
subsidiaries. Information with respect to transactions between the Corporation
and Lockheed Martin Corporation can be found in "Certain Related Transactions"
below.
CERTAIN RELATED TRANSACTIONS
The following transactions involve amounts exceeding $60,000 in which
certain shareholders or Directors of the Corporation may have a material
interest.
TRANSACTIONS WITH LOCKHEED MARTIN CORPORATION
Before the Split-Off, Lockheed Martin Corporation (which was formed as a
result of the business combination of Martin Marietta Corporation and Lockheed
Corporation) owned directly and through its wholly owned subsidiary Martin
Marietta Investments Inc. approximately 81% of the Corporation's outstanding
Common Stock. The Corporation's relationship with Lockheed Martin Corporation
was governed by agreements, as amended from time to time, entered into in
connection with the incorporation of the Corporation in November 1993 and the
initial public offering of a portion of the Corporation's Common Stock in
February 1994 (the "Offering"), including a credit agreement, a cash management
agreement, a services agreement, and certain other agreements. Because of
Lockheed Martin Corporation's control of the Corporation, and its Board of
Directors, none of the agreements resulted from an arm's-length negotiation.
Credit Agreement
Pursuant to an Amended and Restated Credit Agreement dated as of January 2,
1995, as amended from time to time (the "Credit Agreement") between the
Corporation and Lockheed Martin Corporation, Lockheed Martin Corporation agreed
to provide (i) term loans of up to $75 million and (ii) a revolving credit loan
of up to $25 million, each for general corporate purposes. In March 1996, the
Credit Agreement was amended to increase the revolving credit loan to provide
for up to $55 million. Under the term loan portion of the Credit Agreement,
Lockheed Martin Corporation's commitment to extend credit expired on June 30,
1995.
There was no required prepayment or scheduled reduction of availability of
credit under the revolving credit loan. The Corporation and Lockheed Martin had
the right, upon 90 or 120 days notice, respectively, to reduce the unused
portion of the revolving credit loan. Depending on type and duration of
borrowing, interest payments were due monthly, quarterly or upon maturity of the
revolving credit loan.
21
<PAGE> 26
Subject to certain conditions, revolving credit loans outstanding under the
Credit Agreement in 1996 bore interest either at (i) the rate announced from
time to time by Morgan Guaranty Trust Company of New York as its prime rate, or
(ii) LIBOR plus a margin. The Credit Agreement provided that, as of March 1996,
loans borrowed at LIBOR carried a margin of .25 to .40 percent depending upon
the rating received by the Corporation from nationally recognized rating
agencies on the Corporation's unsecured senior long-term debt. Prior to March
1996, loans borrowed at LIBOR carried a margin of .375%.
The Corporation was required to pay Lockheed Martin Corporation a
commitment fee equal to .125 percent per annum on the amount of the available
but unused borrowing commitment under the Credit Agreement.
The revolving credit loan portion of the Credit Agreement terminated on
January 31, 1997.
Cash Management Agreement
The Corporation and Lockheed Martin Corporation entered into a cash
management agreement dated February 17, 1994 (the "Cash Management Agreement")
pursuant to which Lockheed Martin Corporation provided daily liquidity and
investment capability for the Corporation. The Cash Management Agreement had an
initial term of three years from the completion of the Offering, but was
terminable by either party after one year on 90 days' written notice. In
accordance with the terms of the Cash Management Agreement, excess cash balances
of the Corporation were advanced to Lockheed Martin Corporation on an overnight
basis, and earned interest at a rate per annum equal to the federal funds rate
as in effect from time to time. Cash shortfalls, up to $2 million, were funded
by Lockheed Martin Corporation on an overnight basis, and bore interest at a
rate per annum equal to the federal funds rate as in effect from time to time.
The cost to the Corporation for the services provided pursuant to the Cash
Management Agreement were included in the Services Agreement, discussed below.
No additional compensation was paid to Lockheed Martin Corporation for such
services. The Cash Management Agreement was terminated on January 31, 1997.
Services Agreement
Pursuant to an intercompany services agreement dated February 17, 1994 (the
"Services Agreement"), up until the time of the Split-Off, Lockheed Martin
Corporation furnished to the Corporation a package of services in exchange for a
service fee, which was determined by Lockheed Martin Corporation on a basis
consistent with past practices, recognizing, to the extent practicable, Lockheed
Martin Corporation's reduced ownership of the Corporation after the Offering,
the Corporation's requirements for certain services for which it was previously
charged by Lockheed Martin Corporation and the Corporation's costs of obtaining
services previously provided by Lockheed Martin Corporation. In addition to the
service fee, the Corporation agreed to reimburse Lockheed Martin Corporation for
certain identified costs procured on behalf of the Corporation.
The Services Agreement was terminated at the time of the Split-Off. A
Transition Agreement dated as of October 18, 1996 was entered into by the
Corporation and Lockheed Martin Corporation that provides, among other things,
for certain services to be continued to be provided by Lockheed Martin
Corporation and for the transfer in 1997 from Lockheed
22
<PAGE> 27
Martin Corporation to the Corporation of certain assets related to the
Corporation's business, including those in connection with the Corporation's
defined benefit, defined contribution and certain other benefit plans. The cost
to the Corporation reflecting the service fee in 1997 was approximately $27,000.
The Tax Sharing, Supplemental Tax
Sharing and Tax Assurance Agreements
The Corporation was included in Lockheed Martin Corporation's consolidated
tax group until and including the effective day of the Split-Off, and therefore
the taxable income (or loss) of the Corporation and its subsidiaries (the
"Materials Consolidated Group") was included in the Lockheed Martin Corporation
consolidated federal income tax return until such date. The Corporation and
Lockheed Martin Corporation, as successor to Martin Marietta Corporation, are
parties to a Tax Sharing Agreement, dated February 18, 1994, that allocates
responsibility between the Corporation and Lockheed Martin Corporation for their
respective shares of the consolidated federal income tax liability of Lockheed
Martin Corporation and certain other liabilities. Pursuant to the Tax Sharing
Agreement, the Corporation and Lockheed Martin Corporation make payments between
them such that, with respect to any period, the amount of taxes paid by the
Corporation or any refund payable to the Corporation is determined as though the
Corporation filed separate federal, state and local income tax returns
(including any amounts determined to be due as a result of a redetermination of
the tax liability of Lockheed Martin Corporation arising from an audit or
otherwise) as the common parent of an affiliated group of corporations filing a
consolidated return rather than a consolidated subsidiary of Lockheed Martin
Corporation.
In anticipation of the Split-Off, the Corporation and Lockheed Martin
Corporation entered into a Supplemental Tax Sharing Agreement and a Tax
Assurance Agreement. The Supplemental Tax Sharing Agreement allocates
responsibility between the Corporation and Lockheed Martin Corporation for
certain tax liabilities (including any related liability of the Corporation or
Lockheed Martin Corporation to stockholders of Lockheed Martin Corporation) that
may result from the failure of the Split-Off to qualify as a fully tax-free
distribution. Pursuant to this agreement, any such liability generally will be
allocated 81% to Lockheed Martin Corporation and 19% to the Corporation, subject
to a maximum allocation of $25 million to the Corporation. However, if either
Lockheed Martin Corporation or the Corporation (but not both) knowingly or
willfully breaches a covenant contained in the Tax Assurance Agreement, which
contains covenants relating to the parties' post-Split-Off conduct which could
jeopardize the qualification of the Split-Off as fully tax-free (if, among other
things, there is a change of law or in the ruling policy of the IRS), and the
failure of the Split-Off to qualify as a fully tax-free distribution would not
have occurred but for such breach, the resulting liability will be allocated
solely to the breaching party. The Corporation would not be solely liable for
the resulting liability if it first obtained an opinion of counsel (satisfactory
to Lockheed Martin Corporation) to the effect that any action underlying a
breach would not cause the Split-Off to fail to qualify as a fully tax-free
distribution. Furthermore, if either Lockheed Martin Corporation or the
Corporation is acquired in a manner that causes the failure of the Split-Off to
qualify as a fully tax-free distribution under Section 355 of the Internal
Revenue Code (including the recognition of gain to Lockheed Martin Corporation
on the distribution of the Corporation's Common Stock pursuant to Section 355(d)
of the Internal Revenue Code) and the gain did not
23
<PAGE> 28
result from a breach of the Tax Assurance Agreement, the resulting liability
will be allocated solely to the corporation so acquired.
OTHER TRANSACTIONS
Mr. Vinroot is a partner with the law firm of Robinson, Bradshaw & Hinson,
P.A., which has provided certain legal services for the Corporation in an amount
less than 5% of such firm's gross revenues for the firm's last fiscal year.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Directors and officers of the
Corporation and persons who own more than 10% of the Common Stock to file with
the Securities and Exchange Commission initial reports of ownership and reports
in changes in ownership of the Common Stock. Directors, officers and more than
10% shareholders are required by Securities and Exchange Commission regulations
to furnish to the Corporation copies of all Section 16(a) reports filed.
Based solely on its review of the copies of reports furnished to the
Corporation and written representations that no other reports were required for
the year ended 1997, the Corporation is not aware of any reporting person who
failed to file on a timely basis all reports required by Section 16(a) to be
filed during 1997.
APPROVAL OF THE STOCK-BASED AWARD PLAN
Effective March 27, 1998, the Corporation adopted the Martin Marietta
Materials, Inc. Stock-Based Award Plan (the "Plan"), subject to approval by the
Corporation's shareholders. The Plan is being submitted to shareholders in view
of the Corporation's desire that awards (as defined below) qualify as
"performance based compensation" for purposes of Section 162(m) of the Code and
to satisfy the shareholder approval requirements of Section 422 of the Code and
the New York Stock Exchange. If the proposed Plan is not approved by the
shareholders, the Martin Marietta Materials, Inc. Amended Omnibus Securities
Award Plan (the "Omnibus Plan") as currently in effect will remain in full force
and effect. If the Plan is approved by the shareholders, no further awards will
be made under the Omnibus Plan but awards granted prior to the effective date of
the Plan will remain outstanding subject to the terms and conditions of the
Omnibus Plan as it currently exists.
The following summary of the Plan is qualified in its entirety by reference
to the text of the Plan, a copy of which has been filed with the Securities and
Exchange Commission.
SUMMARY OF THE PLAN
PURPOSE AND ELIGIBILITY
The primary purpose of the Plan is to enable officers and other key exempt
salaried employees of the Corporation or any subsidiary to share in the growth
and prosperity of the Corporation by encouraging stock ownership by such persons
and to attract and retain skilled personnel. The Plan contemplates the issuance
of incentive stock options within the
24
<PAGE> 29
meaning of Section 422 of the Code ("Incentive Options"), as well as
non-qualified stock options ("Non-Qualified Options") (collectively, "Options"),
restricted stock, and other stock-based incentive awards (collectively,
"Awards"). All officers and other key exempt salaried employees of the
Corporation and any of its subsidiaries are eligible for discretionary Awards
under the Plan. However, no individual who beneficially owns Common Stock
possessing five percent (5%) or more of the combined voting power of all classes
of stock of the Corporation is eligible to participate in the Plan. The number
of persons currently participating in the Omnibus Plan is 97. The approximate
number of persons eligible to participate in the Plan is 100, comprised of
officers and certain key employees. The Plan is substantially the same as the
Omnibus Plan, as more fully described below.
The aggregate number of shares with respect to which Non-Qualified Options,
Incentive Options or other Awards payable in securities may be granted under the
Plan is 5,000,000. The aggregate number of shares with respect to which
Non-Qualified Options or Incentive Options may be granted to any Participant is
500,000 in any one year. The aggregate number of shares with respect to which
restricted stock may be granted under the Plan is 1,000,000. As of the date of
this Proxy Statement, approximately 1,007,000 shares were subject to outstanding
Awards under the Omnibus Plan. Accordingly, approximately 976,000 additional
shares would be available for issuance under the Omnibus Plan if the Plan is not
approved by shareholders.
ADMINISTRATION
The Plan will be administered by a committee composed of members of the
Board of Directors who are neither employees nor officers of the Corporation
(the "Committee"). The members of the Committee must be both "non-employee
directors" for purposes of Rule 16b-3 under the Securities Exchange act of 1934
(the "Exchange Act") and "outside directors" for purposes of Section 162(m) of
the Code. The Committee in its sole discretion, has the authority, among other
things: to determine the terms of all Awards granted under the Plan, including
any purchase or exercise price for an Award; to determine the persons to whom
Awards will be granted ("Participants") and the time or times at which grants
will be made and become exercisable and forfeitable; to determine the number of
shares covered by an Award; to interpret the Plan; and to make all other
determinations deemed advisable for the administration of the Plan.
AWARD AGREEMENTS
Each Award under the Plan will be evidenced by an agreement between the
Corporation and the Participant (an "Award Agreement") which will set forth the
number of shares of Common Stock or units subject to the Award and such other
terms and conditions as the Committee determines to be applicable to the Award.
Under the terms of the Plan, each Award Agreement must provide for the
following:
(i) Termination of Employment: A provision describing the treatment of
an Award in the event of the retirement, disability, death or other
termination of a Participant's employment with the Corporation or its
subsidiary;
(ii) Rights as a Shareholder: A provision stating that a Participant
will have no rights as a shareholder with respect to any securities covered
by an Award until the date the Participant becomes a holder of record of
such shares;
25
<PAGE> 30
(iii) Withholding: A provision requiring the withholding of any taxes
required by law to be withheld from all amounts paid in satisfaction of an
Award. In the case of Awards paid in shares of Common Stock, a Participant
may satisfy the withholding obligation by paying the amount of any taxes in
cash, or, with the approval of the Committee, with shares of Common Stock,
having a "Fair Market Value" (as defined in the Plan) equal to the
withholding amount due on the date the Award is exercised;
(iv) Execution: A provision stating that no Award is enforceable until
the Award Agreement or a receipt has been signed by the Participant and
either the Chairman of the Board or the Chief Executive Officer (or his
delegate) of the Corporation; and
(v) Exercise and Payment: A provision describing the permitted methods
of exercising and paying the exercise price with respect to the Award.
OPTIONS
The Committee may from time to time grant Options to any Participant. The
terms of Options granted under the Plan will be set out in Award Agreements
which will contain such provisions as the Committee from time to time deems
appropriate, including the exercise price and expiration date of such Options.
Award Agreements will specify whether or not an Option is an Incentive Option.
In no event will the exercise price of an Incentive Option be less than
100% of the Fair Market Value of the shares subject to the Option on the date of
grant. The term of Incentive Options cannot exceed ten years from the date of
grant. To the extent that the aggregate Fair Market Value, determined as of the
time the Incentive Option is granted, of the Common Stock which may become
exercisable for the first time by any employee during any calendar year exceeds
$100,000, such excess amount will be treated as Non-Qualified Options.
RESTRICTED STOCK
The Committee from time to time may grant restricted stock ("Restricted
Stock") to any Participant. Restricted Stock is Common Stock that is issued to a
Participant and is subject to restrictions on transfer and/or such other
restrictions or incidents of ownership as the Committee may determine. Each
Participant who is awarded Restricted Stock will be required to enter into an
Award Agreement, in a form specified by the Committee, agreeing to the terms and
conditions of the grant and such other matters consistent with the Plan as the
Committee determines appropriate.
OTHER AWARDS
The Committee may grant any other stock or stock-related awards to a
Participant that the Committee deems appropriate.
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
If any change is made to the shares of Common Stock by reason of any
recapitalization, merger, consolidation, spin-off, reorganization, combination
or exchange of shares, or other corporate change, or any distributions are made
to shareholders other than cash dividends, appropriate adjustments will be made
by the Committee to the kind and
26
<PAGE> 31
maximum number of shares subject to the Plan and the kind and number of shares
and price per share of stock subject to each outstanding Award.
TERMINATION OR AMENDMENT
The Board of Directors may terminate, suspend or discontinue the Plan at
any time, provided that no such action shall deprive Participants of their
rights under outstanding Awards. The Committee may amend or alter the Plan from
time to time as it deems desirable, to the extent permitted by law. However, no
such action may, without approval of the shareholders of the Corporation, be
effective if shareholder approval would be required to keep the Plan and the
Awards made thereunder in compliance with Sections 162(m) and 422 of the Code.
CHANGE IN CONTROL
The Plan provides that, upon the occurrence of a Change in Control (as
defined in the Plan) all time periods for purposes of vesting in, or realizing
gain from, any outstanding Award will automatically accelerate.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief discussion of the Federal income tax consequences
of transactions under the Plan based on the Code, as in effect as of the date
hereof. The Plan is not qualified under Section 401(a) of the Code. This
discussion is not intended to be exhaustive and does not describe any state or
local tax consequences.
Incentive Options. No ordinary taxable income is realized by the optionee
upon the grant or exercise of an Incentive Option. If Common Stock is issued to
an optionee pursuant to the exercise of an Incentive Option, and if no
disqualifying disposition of such shares is made by such optionee within two
years after the date of grant or within one year after the transfer of such
shares to such optionee, then (1) upon sale of such shares, any amount realized
in excess of the exercise price will be taxed to such optionee as a long-term or
mid-term capital gain (depending on the holding period after exercise) and any
loss sustained will be a long-term or mid-term capital loss, and (2) no
deduction will be allowed to the optionee's employer for Federal income tax
purposes.
If the Common Stock acquired upon the exercise of an Incentive Option is
disposed of prior to the expiration of either holding period described above,
generally (1) the optionee will realize ordinary income in the year of
disposition in an amount equal to the excess (if any) of the fair market value
of such shares at exercise (or, if less, the amount realized on the disposition
of such shares) over the exercise price paid for such shares, and (2) the
optionee's employer will be entitled to deduct such amount for Federal income
tax purposes if the amount represents an ordinary and necessary business
expense. Any further gain (or loss) realized by the optionee will be taxed as
short-term, mid-term or long-term capital gain (or loss), as the case may be,
and will not result in any deduction by the employer.
Non-Qualified Options. Except as noted below, with respect to
Non-Qualified Options, (1) no income is realized by the optionee at the time the
Option is granted; (2) generally, at exercise, ordinary income is realized by
the optionee in an amount equal to the difference between the exercise price
paid for the shares and the fair market value of the shares, if unrestricted, on
the date of exercise, and the optionee's employer is generally
27
<PAGE> 32
entitled to a tax deduction in the same amount subject to applicable tax
withholding requirements; and (3) at sale, appreciation (or depreciation) after
the date as of which amounts are includable in income is treated as either
short-term, mid-term or long-term capital gain (or loss) depending on how long
the shares have been held.
NEW PLAN BENEFITS
Inasmuch as Awards to all Participants under the Plan will be granted at
the sole discretion of the Committee, such benefits under the Plan are not
presently determinable.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE PLAN.
INDEPENDENT AUDITORS
The Board of Directors recommends that the shareholders ratify the
appointment of Ernst & Young LLP, independent auditors, to audit the
consolidated financial statements of the Corporation for the fiscal year 1998.
The ratification of the appointment of Ernst & Young LLP is being submitted to
the shareholders because management believes this to be good corporate practice.
Should the shareholders fail to ratify this appointment, the Board of Directors
will review the matter. Representatives of Ernst & Young LLP are expected to
attend the Annual Meeting of Shareholders of the Corporation, will have the
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions from shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION OF SELECTION OF ERNST
& YOUNG LLP AS INDEPENDENT AUDITORS.
FINANCIAL STATEMENTS
Upon the written request of any shareholder, the Corporation will provide
without charge a copy of its Annual Report on Form 10-K for the year ended
December 31, 1997, filed with the Securities and Exchange Commission. Requests
should be mailed to the Corporate Secretary, Martin Marietta Materials, Inc.,
2710 Wycliff Road, Raleigh, North Carolina 27607.
METHOD OF PROXY SOLICITATION
The entire cost of preparing, assembling, printing and mailing the Notice
of Meeting, this Proxy Statement and proxies and the cost of soliciting proxies
relating to the meeting, if any, has been or will be paid by the Corporation. In
addition to use of the mails, proxies may be solicited by officers, directors
and other regular employees of the Corporation by telephone, facsimile or
personal solicitation, and no additional compensation will be paid to such
individuals. The Corporation will use the services of Morrow & Co., Inc., a
professional soliciting organization, to assist in obtaining in person or by
proxy the largest number of shareholder vote as is possible. The Corporation
estimates its expenses for solicitation services will not exceed $10,000. The
Corporation will, if requested, reimburse banks, brokerage houses and other
custodians, nominees and certain fiduciaries for their reasonable expenses
incurred in mailing proxy materials to their principals.
28
<PAGE> 33
OTHER MATTERS
At the time this Proxy Statement was filed with the Securities and Exchange
Commission, the Board of Directors was not aware that any matters not referred
to herein would be presented for action at the Annual Meeting. If any other
matters properly come before the Meeting, it is intended that the persons named
in the enclosed proxy will vote the shares represented by proxies on such
matters in accordance with their judgment in the best interest of the
Corporation. It is also intended that discretionary authority will be exercised
with respect to the vote on any matters incident to the conduct of the meeting.
SHAREHOLDERS' PROPOSALS FOR 1999 ANNUAL MEETING
Proposals by shareholders for nominations for directors or other matters
intended to be presented at the 1999 Annual Meeting of Shareholders of the
Corporation must be received by the Secretary of the Corporation no later than
December 1, 1998 in order to be included in the Proxy Statement and on the Proxy
Card that will be solicited by the Board of Directors in connection with that
meeting. The inclusion of any proposal will be subject to applicable rules of
the Securities and Exchange Commission. In addition, the Bylaws of the
Corporation establish an advance notice requirement for any proposal of business
to be considered at an annual meeting of shareholders. In general, written
notice must be received by the Secretary of the Corporation at its principal
executive office, 2710 Wycliff Road, Raleigh, North Carolina 27607, not less
than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting and must contain specified information
concerning the matter to be brought before such meeting and concerning the
shareholder proposing such a matter. Any waiver by the Corporation of these
requirements with respect to the submission of a particular shareholder proposal
shall not constitute a waiver with respect to the submission of any other
shareholder proposal nor shall it obligate the Corporation to waive these
requirements with respect to future submissions of the shareholder proposal or
any other shareholder proposal. Any shareholder desiring a copy of the Bylaws of
the Corporation will be furnished one without charge upon written request to the
Secretary of the Corporation at its principal executive office, 2710 Wycliff
Road, Raleigh, North Carolina 27607.
MARTIN MARIETTA MATERIALS, INC.
March 31, 1998
29
LOGO
<PAGE> 34
(Martin Marietta Materials Logo)
<PAGE> 35
APPENDIX A
PROXY MARTIN MARIETTA MATERIALS, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING TO BE HELD MAY 8, 1998
The undersigned hereby appoints Stephen P. Zelnak, Jr. and Janice K. Henry,
and each or either of them, proxies, with full power of substitution, with the
powers the undersigned would possess if personally present, to vote, as
designated below, all shares of the Common Stock of the undersigned in Martin
Marietta Materials, Inc. at the Annual Meeting of Shareholders to be held on May
8, 1998, and at any adjournment thereof.
This proxy when properly executed will be voted as specified herein and,
unless otherwise directed, will be voted FOR the election of all nominees as
Directors, FOR the approval of the Stock-Based Award Plan, and FOR the
ratification of selection of Ernst & Young LLP as independent auditors. The
Board of Directors recommends voting FOR each item.
1. ELECTION OF DIRECTORS: Nominees are Richard G. Adamson, Marcus C. Bennett,
and Bobby F. Leonard
[ ] FOR all listed nominees (except do not vote for the nominee(s) whose
name(s) I have written below)
-----------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for the listed nominees
2. APPROVAL OF STOCK-BASED AWARD PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse)
(Continued from other side)
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENTS
THEREOF.
Receipt of Notice of Annual Meeting of Shareholders and accompanying Proxy
Statement is hereby acknowledged.
PLEASE DATE AND SIGN EXACTLY AS
PRINTED BELOW AND
RETURN PROMPTLY IN THE ENCLOSED
POSTAGE PAID ENVELOPE.
Dated: , 1998
----------------------
----------------------------------
Signature and Title
----------------------------------
Signature if held jointly
(WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE,
GUARDIAN, ETC., GIVE TITLE AS
SUCH. IF JOINT ACCOUNT, EACH JOINT
OWNER SHOULD SIGN. IF A
CORPORATION OR A PARTNERSHIP, SIGN
FULL CORPORATE NAME OR PARTNERSHIP
NAME, AS THE CASE MAY BE, BY AN
AUTHORIZED PERSON.)
<PAGE> 36
APPENDIX B
MARTIN MARIETTA MATERIALS, INC.
STOCK-BASED AWARD PLAN
ADOPTED: MAY 1998
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
<PAGE> 37
SECTION 1. ESTABLISHMENT AND PURPOSE
The Martin Marietta Materials, Inc. Stock-Based Award Plan (the
"Plan") is subject to the adoption of the Plan by the shareholders of the
Corporation in a manner that complies with Section 162(m).
The purpose of this Plan is to benefit the Corporation's shareholders
by encouraging high levels of performance by individuals who are key to the
success of the Corporation and to enable the Corporation to attract, motivate,
and retain talented and experienced individuals essential to its continued
success. This is to be accomplished by providing such employees an opportunity
to obtain or increase their proprietary interest in the Corporation's
performance and by providing such employees with additional incentives to remain
with the Corporation.
SECTION 2. DEFINITIONS
The following terms, as used herein, shall have the meaning specified:
"Affiliate" of a person means any entity directly or indirectly
controlling, controlled by or under direct or indirect common control
with such person.
"Award" means an award granted pursuant to Section 4 hereof.
"Award Agreement" means an agreement described in Section 6 hereof
entered into between the Corporation and a Participant, setting forth
the terms and conditions applicable to the Award granted to the
Participant.
"Board of Directors" means the Board of Directors of the Corporation as
it may be comprised from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means a committee composed of members of, and designated
by, the Board of Directors and consisting solely of persons who are
both (i) "non-employee directors" within the meaning of Rule 16b-3, and
(ii) "outside directors" within the meaning of Section 162(m), as Rule
16b-3 and Section 162(m) may be amended from time to time, which
committee shall at all times comprise at least the minimum number of
such persons necessary to comply with both Rule 16b-3 and Section 162.
"Corporation" means Martin Marietta Materials, Inc.
"Covered Employee" means a covered employee within the meaning of
Section 162(m) or the Treasury Regulations promulgated thereunder.
2
<PAGE> 38
"Employee" means officers and other key employees of the Corporation
but excludes directors who are not also officers or employees of the
Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" means the closing price of the relevant security as
reported on the composite tape of New York Stock Exchange issues (or
such other reporting system as shall be selected by the Committee) on
the relevant date, or if no sale of the security is reported for such
date, the next following day for which there is a reported sale. The
Committee shall determine the Fair Market Value of any security that is
not publicly traded, using such criteria as it shall determine, in its
sole direction, to be appropriate for such valuation.
"Insider" means any person who is subject to Section 16 of the Exchange
Act.
"Participant" means an Employee who has been granted and holds an
unexercised or unpaid Award pursuant to this Plan.
"Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16 or any successor rule or
regulation as amended from time to time.
"Section 16" means Section 16 of the Exchange Act or any successor
statute and the rules promulgated thereunder by the Securities and
Exchange Commission, as they may be amended from time to time.
"Section 162(m)" means Section 162(m) of the Code or any successor
statute and the Treasury Regulations promulgated thereunder, as they
may be amended from time to time.
"Section 422" means Section 422 of the Code or any successor
statute and the Treasury Regulations promulgated thereunder, as they
may be amended from time to time.
"Stock" means shares of Common Stock of the Corporation, par value $.01
per share.
"Subsidiary" means any entity directly or indirectly controlled by the
Corporation.
3
<PAGE> 39
SECTION 3. ELIGIBILITY
Awards may be granted only to exempt salaried Employees of the
Corporation or any Subsidiary who are designated from time to time by the
Committee.
No individual who beneficially owns Stock possessing five percent (5%)
or more of the combined voting power of all classes of stock of the Corporation
shall be eligible to participate in the Plan.
SECTION 4. AWARDS
The Committee may grant any of the following types of Awards, either
singly, in tandem or in combination with other Awards, as the Committee may in
its sole discretion determine:
(a) Non-Qualified Stock Options. A Non-Qualified Stock Option is a
right to purchase a specified number of shares of Stock during
such specified time as the Committee may determine at a price
not less than 100% of the Fair Market Value of the Stock on
the date the option is granted.
(i) The purchase price of the Stock subject to the option
may be paid in cash. At the discretion of the
Committee, the purchase price may also be paid by the
tender of Stock, or through a combination of Stock
and cash, or through such other means as the
Committee determines are consistent with the Plan's
purpose and applicable law. No fractional shares of
Stock will be issued or accepted.
(ii) Without limiting the foregoing, to the extent
permitted by law (including relevant state law), the
Committee may agree to accept, as full or partial
payment of the purchase price of Stock issued upon
exercise of options, (A) a promissory note of the
optionee evidencing the optionee's obligation to make
future cash payments to the Corporation, or (B) any
other form of payment deemed acceptable to the
Committee. Promissory notes referred to in clause (A)
above shall be payable as determined by the Committee
(but in no event later than five years after the date
thereof), shall be secured by a pledge of shares of
Stock purchased, and shall bear interest at a rate
established by the Committee.
(b) Incentive Stock Options. An Incentive Stock Option is an Award
in the form of an option to purchase Stock that complies with
the requirements of Code Section 422 or any successor section.
(i) To the extent that the aggregate Fair Market Value
(determined at the time of the grant of the Award) of
the shares subject to Incentive Stock Options which
are exercisable by one person for the first time
during a particular
4
<PAGE> 40
calendar year exceeds $100,000, such excess shall be
treated as Non-Qualified Stock Options. For purposes
of the preceding sentence, the term "Incentive Stock
Option" shall mean an option to purchase Stock that
is granted pursuant to this Section 4(b) or pursuant
to any other plan of the Corporation, which option is
intended to comply with Section 422 of the Code.
(ii) No Incentive Stock Option may be granted under this
Plan after the tenth anniversary of the date this
Plan is adopted, or the date this Plan is approved by
the shareholders, whichever is earlier, or be
exercisable more than ten years after the date the
Award is made.
(iii) The exercise price of any Incentive Stock Option
shall be no less than Fair Market Value of the Stock
subject to the option on the date the Award is made.
(iv) The Committee may provide that the option price under
an Incentive Stock Option may be paid by one or more
of the methods available for paying the option price
of a Non-Qualified Stock Option.
(c) Restricted Stock. Restricted Stock is Stock of the Corporation
that is issued to a Participant and is subject to restrictions
on transfer and/or such other restrictions or incidents of
ownership as the Committee may determine.
(d) Other Stock-Based Incentive Awards. The Committee may from
time to time grant Awards under this Plan that provide the
Participant with the right to purchase Stock of the
Corporation or provide incentive Awards that are valued by
reference to the Fair Market Value of Stock of the Corporation
(including, but not limited to phantom securities or dividend
equivalents). Such Awards shall be in a form determined by the
Committee (and may include terms contingent upon a change of
control of the Corporation), provided that such Awards shall
not be inconsistent with the terms and purposes of the Plan.
SECTION 5. SHARES OF STOCK AND OTHER STOCK-BASED AWARDS AVAILABLE UNDER PLAN
(a) Subject to the adjustment provisions of Section 9 hereof, (i)
the aggregate number of shares with respect to which Awards
payable in securities may be granted under the Plan shall be
no more than 5,000,000; (ii) the aggregate number of shares
with respect to which Awards subject to Restricted Stock under
the Plan shall be no more than 1,000,000; and (iii) the
aggregate number of shares with respect to which Non-Qualified
Stock Options or Incentive Stock Options may be granted to
any individual Participant shall be no more than 500,000 in
any one year. Awards that are canceled or repriced shall be
counted against the 500,000 share per year limit to the
extent required by Section 162(m) of the Code.
5
<PAGE> 41
(b) Any unexercised or undistributed portion of any terminated or
forfeited Award (other than an Award terminated or forfeited
by reason of the exercise of any Award granted in tandem
therewith) shall be available for further Awards in addition
to those available under Section 5(a) hereof.
(c) For the purposes of computing the aggregate number of shares
with respect to which awards payable in securities may be
granted under the Plan, the following rules shall apply:
(i) except as provided in (v) of this Section, each
option shall be deemed to be the equivalent of the
maximum number of shares that may be issued upon
exercise of the particular option;
(ii) except as provided in (v) of this Section, each other
stock-based Award shall be deemed to be equal to the
number of shares to which it relates;
(iii) except as provided in (v) of this Section, where the
number of shares available under the Award is
variable on the date it is granted, the number of
shares shall be deemed to be the maximum number of
shares that could be received under that particular
Award.
(iv) where one or more types of Awards (both of which are
payable in Stock or another security) are granted in
tandem with each other, such that the exercise of one
type of Award with respect to a number of shares
cancels an equal number of shares of the other, each
joint Award shall be deemed to be the equivalent of
the number of shares under the other; and
(v) each share awarded or deemed to be awarded under the
preceding subsections shall be treated as shares of
Stock, even if the Award is for a security other than
Stock.
Additional rules for determining the aggregate number of
shares with respect to which awards payable in securities may
be granted under the Plan may be made by the Committee, as it
deems necessary or appropriate.
(d) No Stock may be issued pursuant to an Award under the Plan
except to the extent that, prior to such issuance, the
Corporation shall have acquired shares from its shareholders
sufficient to fulfill the requirements of the Plan with
respect to such issuance.
SECTION 6. AWARD AGREEMENTS
Each Award under this Plan shall be evidenced by an Award Agreement
setting forth the number of shares of Stock, or units subject to the Award and
such other terms and conditions applicable to the Award as determined by the
Committee.
6
<PAGE> 42
(a) Award Agreements shall include the following terms:
(i) Termination of Employment: A provision describing the
treatment of an Award in the event of the retirement,
disability, death or other termination of a
Participant's employment with the Corporation or
Subsidiary, including but not limited to terms
relating to the vesting, time for exercise,
forfeiture or cancellation of an Award in such
circumstances.
(ii) Rights as Shareholder: A provision that a Participant
shall have no rights as a shareholder with respect to
any securities covered by an Award until the date the
Participant becomes the holder of record. Except as
provided in Section 9 hereof, no adjustment shall be
made for dividends or other rights, unless the Award
Agreement specifically requires such adjustment, in
which case, grants of dividend equivalents or similar
rights shall not be considered to be a grant of any
other shareholder right.
(iii) Withholding: A provision requiring the withholding of
applicable taxes required by law from all amounts
paid in satisfaction of an Award. In the case of an
Award paid in cash, the withholding obligation shall
be satisfied by withholding the applicable amount and
paying the net amount in cash to the Participant. In
the case of Awards paid in shares of Stock or other
securities of the Corporation, a Participant may
satisfy the withholding obligation by paying the
amount of any taxes in cash or, with the approval of
the Committee, shares of Stock may be deducted from
the payment to satisfy the obligation in full or in
part. The number of shares to be deducted shall be
determined by reference to the Fair Market Value of
such shares on the date the Award is exercised.
(iv) Execution: A provision stating that no Award is
enforceable until the Award Agreement or a receipt
has been signed by the Participant and the Chairman
or the Chief Executive Officer of the Corporation (or
his delegate). By executing the Award Agreement or
receipt, a Participant shall be deemed to have
accepted and consented to any action taken under the
Plan by the Committee, the Board of Directors or
their delegates.
(v) Exercise and Payment: The permitted methods of
exercising and paying the exercise price with respect
to the Award.
(b) Award Agreements may include the following terms:
(i) Replacement, Substitution and Reloading: Any
provisions (A) permitting the surrender of
outstanding Awards or securities held by the
Participant in order to exercise or realize rights
under other Awards, or in exchange for the grant of
new Awards under similar or different terms
(including the grant of
7
<PAGE> 43
reload options), or, (B) requiring holders of Awards
to surrender outstanding Awards as a condition
precedent to the grant of new Awards under the Plan.
(ii) Other Terms: Such other terms as are necessary and
appropriate to effect an Award to the Participant
including but not limited to the term of the Award,
vesting provisions, any requirements for continued
employment with the Corporation or any Subsidiary,
any other restrictions or conditions (including
performance requirements) on the Award and the method
by which restrictions or conditions lapse, the effect
on the Award of a change in control, the price and
the amount or value of Awards.
SECTION 7. AMENDMENT AND TERMINATION
The Board of Directors may at any time amend, suspend or discontinue
the Plan. The Committee may at any time alter or amend any or all Award
Agreements under the Plan to the extent permitted by law. However, no such
action may, without approval of the shareholders of the Corporation, be
effective if shareholder approval would be required to keep the Plan and the
Awards made thereunder in compliance with Sections 162(m) and 422.
SECTION 8. ADMINISTRATION
(a) The Plan and all Awards granted pursuant thereto shall be
administered by the Committee. The members of the Committee
shall be designated by the Board of Directors. A majority of
the members of the Committee shall constitute a quorum. The
vote of a majority of a quorum shall constitute action by the
Committee.
(b) The Committee shall periodically determine the Participants in
the Plan and the nature, amount, pricing, timing, and other
terms of Awards to be made to such individuals.
(c) The Committee shall have the power to interpret and administer
the Plan. All questions of interpretation with respect to the
Plan, the number of shares of Stock, or units granted, and the
terms of any Award Agreements shall be determined by the
Committee and its determination shall be final and conclusive
upon all parties in interest. In the event of any conflict
between an Award Agreement and this Plan, the terms of this
Plan shall govern.
(d) It is the intent of the Corporation that this Plan and Awards
hereunder satisfy and be interpreted in a manner, that, in the
case of Participants who are or may be Insiders, satisfies the
applicable requirements of Rule 16b-3, so that such persons
will be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 and will not be subjected to
avoidable liability thereunder. If any provision of this Plan
8
<PAGE> 44
or of any Award would otherwise frustrate or conflict with the
intent expressed in this Section 8(d), that provision to the
extent possible shall be interpreted and deemed amended so as
to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, the provision shall
be deemed void as applicable to Insiders to the extent
permitted by law and deemed advisable by the Committee.
(e) It is the intent of the Corporation that this Plan and Awards
hereunder satisfy and be interpreted in a manner, that, in the
case of Participants who are or may be Covered Employees,
satisfies the applicable requirements of Section 162(m), so
that the Corporation will be entitled, to the extent possible,
to deduct compensation paid under the Plan and otherwise to
such Covered Employees and will not be subjected to avoidable
loss of deductions thereunder. If any provision of this Plan
or of any Award would otherwise frustrate or conflict with the
intent expressed in this Section 8(e), that provision to the
extent possible shall be interpreted and deemed amended so as
to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, the provision shall
be deemed void as applicable to Covered Employees to the
extent permitted by law and deemed advisable by the Committee.
(f) The Committee may delegate to the officers or employees of the
Corporation the authority to execute and deliver such
instruments and documents, to do all such acts and things, and
to take all such other steps deemed necessary, advisable or
convenient for the effective administration of the Plan in
accordance with its terms and purpose, except that the
Committee may not delegate any discretionary authority with
respect to substantive decisions or functions regarding the
Plan or Awards thereunder as these relate to Insiders or
Covered Employees, including but not limited to decisions
regarding the timing, eligibility, pricing, amount or other
material term of such Awards.
SECTION 9. ADJUSTMENT PROVISIONS
(a) In the event of any change in the outstanding shares of Stock
by reason of a stock dividend or split, recapitalization,
merger or consolidation, reorganization, combination or
exchange of shares or other similar corporate change, the
number of shares of Stock (or other securities) then remaining
subject to this Plan, and the maximum number of shares that
may be issued to anyone pursuant to this Plan, including those
that are then covered by outstanding Awards, shall (i) in the
event of an increase in the number of outstanding shares, be
proportionately increased and the price for each share then
covered by an outstanding Award shall be proportionately
reduced, and (ii) in the event of a reduction in the number of
outstanding shares, be proportionately reduced and the price
for each share then covered by an outstanding Award, shall be
proportionately increased.
(b) The Committee shall make any further adjustments as it deems
necessary to ensure equitable treatment of any holder of an
Award as the result of any transaction
9
<PAGE> 45
affecting the securities subject to the Plan not described in
(a), or as is required or authorized under the terms of any
applicable Award Agreement.
SECTION 10. CHANGE IN CONTROL
(a) Subject to Sections 5, 7 and 9, in the event of a change in control of
the Corporation, in addition to any action required or authorized by
the terms of any Award Agreement, all time periods for purposes of
vesting in, or realizing gain from, any and all outstanding Awards made
pursuant to this Plan will automatically accelerate.
(b) For the purposes of this Section, a "Change in Control" shall mean
on or after the effective date of the Plan,
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 40% or more of
either (A) the fully diluted shares of Stock, as
reflected on the Corporation's financial statements
(the "Outstanding Corporation Common Stock"), or (B)
the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors (the
"Outstanding Corporation Voting Securities");
provided,
10
<PAGE> 46
however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a
Change of Control: (1) any acquisition by the
Corporation or any "affiliate" of the Corporation,
within the meaning of 17 C.F.R. ss. 230.405 (an
"Affiliate"), (2) any acquisition by any employee
benefit plan (or related trust) sponsored or
maintained by the Corporation or any Affiliate of the
Corporation, or (3) any acquisition by any entity
pursuant to a transaction which complies with clauses
(A), (B) and (C) of subsection (iii) of this
definition; or
(ii) Individuals who constitute the Board on the
effective date of the Plan (the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however, that any
individual becoming a director subsequent to such
effective date whose election, or nomination for
election by the Corporation's shareholders, was
approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall
be considered as though such individual were a member
of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption
of office occurs as a result of an actual or
threatened election contest with respect to the
election or removal of directors or other actual or
threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless,
following such Business Combination, (A) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities immediately prior to
such Business Combination beneficially own, directly
or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the
combined voting power of the then outstanding voting
securities entitled to vote generally in the election
of directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation, a corporation which as a result
of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their
ownership, immediately prior to such Business
Combination, of the Outstanding Corporation Common
Stock and Outstanding Corporation Voting Securities,
as the case may be, (B) no Person (excluding any
employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any Affiliate of the
Corporation, or such corporation resulting from such
Business Combination or any Affiliate of such
corporation) beneficially owns, directly or
indirectly, 40% or more of, respectively, the fully
diluted shares of common stock of the corporation
resulting from such Business Combination, as
reflected on such corporation's
11
<PAGE> 47
financial statements, or the combined voting power of
the then outstanding voting securities of such
corporation except to the extent that such ownership
existed prior to the Business Combination, and (C) at
least a majority of the members of the board of
directors of the corporation resulting from such
Business Combination were members of the Incumbent
Board at the time of the execution of the initial
agreement, or of the action of the Board, providing
for such Business Combination; or
(iv) Approval by the shareholders of the Corporation
of a complete liquidation or dissolution of the
Corporation.
SECTION 11. UNFUNDED PLAN
The Plan shall be unfunded. Neither the Corporation nor the Board of
Directors shall be required to segregate any assets that may at any time be
represented by Awards made pursuant to the Plan. Neither the Corporation, the
Committee, nor the Board of Directors shall be deemed to be a trustee of any
amounts to be paid under the Plan.
SECTION 12. LIMITS OF LIABILITY
(a) Any liability of the Corporation to any Participant with
respect to an Award shall be based solely upon contractual
obligations created by the Plan and the Award Agreement.
(b) Neither the Corporation nor any member of the Board of
Directors or of the Committee, nor any other person
participating in any determination of any question under the
Plan, or in the interpretation, administration or application
of the Plan, shall have any liability to any party for any
action taken or not taken, in good faith under the Plan.
SECTION 13. RIGHTS OF EMPLOYEES
(a) Status as an eligible Employee shall not be construed as a
commitment that any Award will be made under this Plan to such
eligible Employee or to eligible Employees generally.
(b) Nothing contained in this Plan (or in any other documents
related to this Plan or to any Award) shall confer upon any
Employee or Participant any right to continue in the employ or
other service of the Corporation or constitute any contract or
limit in any way the right of the Corporation to change such
person's compensation or other benefits or to terminate the
employment of such person with or without cause.
SECTION 14. DURATION
12
<PAGE> 48
The Plan shall remain in effect until all Awards under the Plan have
been exercised or terminated under the terms of the Plan and applicable Award
Agreement, provided that Awards under the Plan may only be granted until
December 31, 2008.
SECTION 15. GOVERNING LAW
The Plan shall be governed by the laws of the State of North Carolina.
13
