<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 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Lockheed Martin Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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
[LOCKHEED MARTIN LOGO]
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
APRIL 23, 1998
<PAGE> 3
[LOCKHEED MARTIN LOGO]
6801 Rockledge Drive
Bethesda, Maryland 20817
March 19, 1998
Dear Fellow Stockholders:
You are invited to attend Lockheed Martin's 1998 Annual Meeting of
Stockholders, to be held on Thursday, April 23, 1998 in Irving, Texas at 10:30
a.m.
At the meeting, management will report on the Corporation's 1997 and first
quarter 1998 activities. We will continue with discussion and voting on matters
set forth in the accompanying Notice of Annual Meeting and Proxy Statement.
Prior to the meeting, at 10:00 a.m., you are invited to join the directors
and management for coffee and conversation.
If you plan to attend the meeting, please note your planned attendance on the
proxy solicitation/voting instruction card, or when prompted if you cast your
vote by telephone. Prior to the meeting, you will receive an admission ticket
which you should bring with you to gain admission into the meeting.
Your vote is important. Please be sure your shares are represented at the
meeting by completing, signing and returning your voting instructions or placing
your vote by telephone.
Sincerely,
Norman R. Augustine
Chairman of the Board
<PAGE> 4
[LOCKHEED MARTIN LOGO]
6801 Rockledge Drive
Bethesda, Maryland 20817
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Omni Mandalay Hotel
221 East Las Colinas Boulevard
Irving, Texas 75039
To the Stockholders:
Lockheed Martin Corporation's Annual Meeting of Stockholders will be held at
10:30 a.m. local time on Thursday, April 23, 1998 at the Omni Mandalay Hotel,
Irving Texas. Attendance at the meeting will be limited to stockholders of
record at the close of business on March 9, 1998, or their proxies, beneficial
owners presenting satisfactory evidence of ownership on that date, and invited
guests of the Corporation.
At 10:00 a.m., you are invited to join the directors and management for
coffee and conversation. During the meeting, there will also be an opportunity
to discuss matters of interest to you as a stockholder of Lockheed Martin.
Following a management report on Lockheed Martin's business operations, the
stockholders will discuss and vote on the following matters:
(1) Election of directors to terms expiring in 1999;
(2) Ratification of the appointment of independent auditors for the year
1998;
(3) Management proposal to amend the 1995 Omnibus Performance Award
Plan;
(4) Stockholder proposals set forth in the accompanying proxy statement;
(5) Consideration of any other matters which may properly come before
the meeting.
It is important that your shares be represented at the meeting. Please sign,
date and return your proxy solicitation/voting instruction card in the enclosed
envelope or vote your shares by dialing 1-800-OK2-VOTE (1-800-652-8683).
By Order of the Board of Directors
Lillian M. Trippett
Vice President, Corporate Secretary
and Associate General Counsel
March 19, 1998
================================================================================
IMPORTANT
PLEASE NOTE THAT A TICKET IS REQUIRED FOR ADMISSION TO THE MEETING. IF YOU
PLAN TO ATTEND AND YOU ARE A STOCKHOLDER AS OF MARCH 9, 1998, PLEASE CHECK THE
APPROPRIATE BOX ON YOUR PROXY SOLICITATION/VOTING INSTRUCTION CARD (OR INDICATE
WHEN PROMPTED IF VOTING BY TELEPHONE), AND A TICKET WILL BE FORWARDED TO YOU. IF
YOUR SHARES ARE HELD IN THE NAME OF A BROKER OR OTHER NOMINEE, PLEASE BRING A
PROXY OR A LETTER FROM THAT FIRM CONFIRMING YOUR OWNERSHIP OF SHARES AS OF THE
CLOSE OF BUSINESS ON THE RECORD DATE (MARCH 9, 1998).
================================================================================
<PAGE> 5
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information..........................................................1
Voting Securities and Record Date............................................1
Election of Directors........................................................2
Board of Directors...........................................................5
Security Ownership of Certain Beneficial Owners..............................8
Securities Owned By Directors, Nominees and Named Executive Officers.........9
Compensation of Executive Officers..........................................11
Stock Price Performance Graph...............................................23
Section 16(A) Beneficial Ownership Reporting Compliance.....................23
Ratification of Appointment of Independent Auditors.........................24
Proposed Amendment to the 1995 Omnibus Performance Award Plan...............24
Stockholder Proposals.......................................................29
Miscellaneous...............................................................31
</TABLE>
<PAGE> 6
PROXY STATEMENT
GENERAL INFORMATION
The Annual Meeting of Stockholders ("Annual Meeting") of Lockheed Martin
Corporation, a Maryland corporation (the "Corporation"), will be held at 10:30
a.m. on Thursday, April 23, 1998, at the Omni Mandalay Hotel, Irving, Texas, for
the purposes set forth in the Notice of Annual Meeting of Stockholders and Proxy
Statement. This statement is furnished in connection with the solicitation by
the Board of Directors of proxies to be used at this meeting and at any and all
adjournments of the meeting.
Stockholders of record and participants in certain Lockheed Martin defined
contribution plans may cast their vote using the toll-free number listed on the
proxy solicitation/voting instruction card or they may sign, date and mail their
card in the postage paid envelope provided.
The telephone voting procedure is designed to authenticate votes cast by use
of a personal identification number. The procedure allows stockholders to
appoint a proxy and Lockheed Martin plan participants to instruct a plan
fiduciary to vote their shares and to confirm that their instructions have been
properly recorded. Specific instructions to be followed by any stockholder of
record or plan participant interested in voting by telephone are set forth on
the enclosed proxy solicitation/voting instruction card.
Any proxy given pursuant to this solicitation may be revoked at any time
before the proxy is voted by filing an instrument revoking the proxy with the
Secretary of the Corporation prior to the meeting at the Corporation's principal
office or at the Annual Meeting, by later dated vote by proxy either signed and
returned or by the toll-free telephone procedure described above, or by
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not in and of itself constitute a revocation of a proxy.
Voting your proxy by telephone or by mail will in no way limit your right to
vote at the Annual Meeting if you later decide to attend in person. If your
shares are held in the name of a broker, bank or other holder of record, you
must either direct the record holder as to how to vote your shares or obtain a
proxy from the holder of record to be able to vote at the meeting.
The principal office of the Corporation is at 6801 Rockledge Drive, Bethesda,
Maryland 20817. This proxy statement, the proxy solicitation/voting instruction
card and the notice of the Annual Meeting will be sent to the stockholders
commencing no later than March 23, 1998.
VOTING SECURITIES AND RECORD DATE
Stockholders of record at the close of business on March 9, 1998 are entitled
to notice of and to vote at the Annual Meeting. On March 9, 1998, there were
approximately 194,966,000 shares outstanding of the Corporation's common stock,
$1.00 par value per share. Each share outstanding on the record date is entitled
to one vote on each matter presented at the Annual Meeting. Participants in the
Corporation's Dividend Reinvestment and Stock Purchase Plan ("Dividend
Reinvestment Plan") and certain of the Corporation's employee benefit plans are
entitled to one vote for each share held for the participant's account under
those plans. Shares held in accounts under the Dividend Reinvestment Plan are
included in the proxy sent to the account owner.
Shares of common stock represented by a properly executed proxy (either
signed and returned or voted through the toll-free telephone procedure described
above) will be considered as represented at the Annual Meeting for purposes of
determining a quorum. Votes at the Annual Meeting will be tabulated by two
independent judges of election from First Chicago Trust Company of New York, the
Corporation's transfer agent.
The affirmative vote of a majority of shares outstanding and entitled to vote
is required for election of directors and adoption of the proposals set forth
below. Abstentions will not be counted "for" or "against" proposals, but will be
counted for the purpose of determining the existence of a quorum. Because the
Corporation's Bylaws require the affirmative vote of a majority of the votes
entitled to be cast at a meeting to authorize action on any matter, abstentions
have the effect of a vote against a proposal. Brokers holding shares for
beneficial owners must vote those shares according to the specific instructions
they receive from the owners. If specific instructions are not received, brokers
and nominees may exercise their discretion. The New York Stock Exchange rules
may preclude brokers from 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." A "broker non-vote" has the effect of a negative vote
when a majority of the shares outstanding and entitled to vote is required for
approval of a proposal. Votes "withheld" from director-nominees have the
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<PAGE> 7
effect of a negative vote since a majority of the shares outstanding and
entitled to vote is required for election of directors.
Each participant in certain Lockheed Martin defined contribution plans will
receive a proxy solicitation/voting instruction card on which the participant
may instruct a plan fiduciary as to the voting of shares allocated to the
participant's account. Participants may also instruct a plan fiduciary as to the
voting of these shares by using the vote-by-phone procedure described above. Any
allocated shares for which instructions are not received will be voted by the
applicable plan fiduciary at its discretion. In addition, participants in the
Lockheed Martin Corporation Salaried Savings Plan will be asked to indicate
whether they elect to direct a plan fiduciary as to the voting of a portion of
unallocated shares held by the plan's trust. Unallocated shares for which no
instructions are received are to be voted by a plan fiduciary in the same
proportion as unallocated shares for which instructions are received.
Participants in these plans will receive information from a plan fiduciary
concerning procedures for submitting instructions to the applicable plan
fiduciary.
ELECTION OF DIRECTORS
The charter of the Corporation ("Charter") provides that the directors of the
Corporation shall be elected to an annual term. The Board of Directors, in
accordance with the recommendation of its Nominating Committee, has nominated
Norman R. Augustine, Marcus C. Bennett, Lynne V. Cheney, Vance D. Coffman,
Houston I. Flournoy, James F. Gibbons, Edward E. Hood, Jr., Caleb B. Hurtt,
Gwendolyn S. King, Vincent N. Marafino, Eugene F. Murphy, Allen E. Murray, Frank
Savage, Peter B. Teets, Carlisle A. H. Trost, James R. Ukropina and Douglas C.
Yearley for election to serve as directors of the Corporation until the Annual
Meeting of Stockholders of the Corporation in 1999 and until their successors
have been duly elected and qualified. Each nominee is currently serving as a
director. In the event any of these nominees becomes unavailable for election to
the Board of Directors, an event which is not anticipated, the persons appointed
as proxies or their substitutes shall have full discretion and authority to vote
or refrain from voting for any other nominee in accordance with their full
judgment.
Nominees for Election --
NORMAN R. AUGUSTINE (62)
Director since March, 1995. Chairman of the Board and Executive Committee.
Chairman of Lockheed Martin since January 1997; Professor, Department of
Mechanical and Aerospace Engineering, School of Engineering and Applied Science,
Princeton University, since September 1997; Chief Executive Officer of Lockheed
Martin from January 1996 until his retirement on August 1, 1997, Vice Chairman
of Lockheed Martin from April 1996 through December 1996, President of Lockheed
Martin from March 1995 to June 1996; Chairman and Chief Executive Officer of
Martin Marietta Corporation ("Martin Marietta") from April 1988 to March 1995,
director of Martin Marietta from 1986 to 1995; director of The Black & Decker
Corporation, Phillips Petroleum Company and Procter & Gamble Co.
MARCUS C. BENNETT (62)
Director since March, 1995.
Executive Vice President and Chief Financial Officer of Lockheed Martin since
July 1996, Senior Vice President and Chief Financial Officer of Lockheed Martin
from March 1995 to July 1996; director of Martin Marietta from 1993 to 1995,
Vice President and Chief Financial Officer of Martin Marietta from 1988 to 1995;
director of Carpenter Technology, Inc., COMSAT Corporation and Martin Marietta
Materials, Inc.; member of the Financial Executives Institute, MAPI Finance
Council and The Economic Club of Washington; director of the Private Sector
Council and a member of its CFO Task Force.
LYNNE V. CHENEY (56)
Director since March, 1995. Member of the Audit and Ethics and Nominating
Committees.
Senior Fellow at the American Enterprise Institute for Public Policy Research
since 1992; Chairman of the National Endowment for the Humanities from 1986 to
1992; director of Reader's Digest Association, Inc., American Express/IDS Mutual
Fund Group and Union Pacific Group Resources, Inc.
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<PAGE> 8
VANCE D. COFFMAN (53)
Director since January, 1996. Vice Chairman of the Board and member of Executive
Committee.
Chief Executive Officer and Vice Chairman of Lockheed Martin since August 1997,
President of Lockheed Martin from June 1996 through July 1997 and Chief
Operating Officer from January 1996 through July 1997, Executive Vice President
of Lockheed Martin from January to June 1996, President and Chief Operating
Officer of Lockheed Martin Space & Strategic Missiles Sector from March 1995 to
December 1995; Executive Vice President of Lockheed Corporation ("Lockheed")
from 1992 to 1995, and President of Lockheed Space Systems Division in 1988.
HOUSTON I. FLOURNOY (68)
Director since March, 1995. Member of the Audit and Ethics and Nominating
Committees.
Special Assistant to the President for Governmental Affairs, University of
Southern California, Sacramento, California since August 1981, Professor of
Public Administration, University of Southern California, Sacramento, California
from 1981 to 1993, Vice President for Governmental Affairs, University of
Southern California, Los Angeles from 1978 to 1981; director of Lockheed from
1976 to 1995; director of Fremont General Corporation, Fremont Investment and
Loan Corporation and Tosco Corporation.
JAMES F. GIBBONS (66)
Director since March, 1995. Member of the Compensation and Nominating Committees
and Stock Option Subcommittee.
Special Counsel to the President for Industry Relations, Stanford University,
Stanford, California from 1996 to present, Dean of the School of Engineering,
Stanford University, from September 1984 to June, 1996, Reid Weaver Dennis
Professor of Electrical Engineering, Stanford University, since 1983; director
of Lockheed from 1985 to 1995; director of Raychem Corporation, Centigram
Communications Corporation, Cisco Systems Incorporated and El Paso Natural Gas
Company.
EDWARD E. HOOD, JR. (67)
Director since March, 1995. Chairman of the Audit and Ethics Committee and
Member of the Compensation and Executive Committees and Stock Option
Subcommittee.
Joined General Electric Company ("GE") in 1957 after service in the U.S. Air
Force; elected as Vice President of GE in 1968 and Vice Chairman and Executive
Officer of GE in 1979, director of GE from 1980 until his retirement in 1993;
director of Martin Marietta from 1993 to 1995; director of The Lincoln Electric
Company and Gerber Scientific, Inc.; Chairman Emeritus of the Board of Trustees
of Rensselaer Polytechnic Institute; trustee of North Carolina State University.
CALEB B. HURTT (66)
Director since March, 1995. Member of the Finance and Nominating Committees.
President and Chief Operating Officer of Martin Marietta from 1987 until his
retirement in January 1990, Executive Vice President of Martin Marietta in 1987
and Senior Vice President from 1983 to 1987, director of Martin Marietta from
1987 to 1995; Chairman of the Board of Governors of the Aerospace Industries
Association in 1989 and past Chairman of the NASA Advisory Council and of the
Federal Reserve Bank, Denver Branch; director of COMSAT Corporation; past Vice
Chairman of the Board of Trustees of Stevens Institute of Technology.
GWENDOLYN S. KING (57)
Director since March, 1995. Member of the Audit and Ethics and Finance
Committees.
Senior Vice President of Corporate and Public Affairs for PECO Energy Company
(formerly Philadelphia Electric Company) from October 1992 until her retirement
in February 1998; Commissioner of the Social Security Administration from August
1989 to September 1992; director of Martin Marietta from 1992 to 1995; director
of Monsanto Company.
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<PAGE> 9
VINCENT N. MARAFINO (67)
Director since March, 1995. Member of the Audit and Ethics, Executive and
Finance Committees.
Executive Vice President of Lockheed Martin from March 1995 until December 1995;
director of Lockheed from 1980 to 1995, Vice Chairman of the Board and Chief
Financial and Administrative Officer of Lockheed from 1988 to 1995, Executive
Vice President -- Chief Financial and Administrative Officer of Lockheed from
1983 to 1988, Executive Officer of Lockheed from 1971 to 1995.
EUGENE F. MURPHY (62)
Director since March, 1995. Chairman of the Nominating Committee and Member of
the Compensation Committee.
Vice Chairman and Executive Officer of General Electric Company since September
1997, President and Chief Executive Officer of GE Aircraft Engines from 1993 to
September 1997, President and Chief Executive Officer of GE Aerospace from 1992
to 1993, Senior Vice President of GE Communications & Services from 1986 to
1992; director of Martin Marietta from 1993 to 1995; member of President
Reagan's National Security Telecommunications Advisory Committee; former
Chairman and permanent member of the Board of Directors of the Armed Forces
Communications and Electronics Association; member of the Aerospace Industries
Association Board of Governors.
In accordance with an agreement with GE, as the result of the aggregate
principal amount of loans outstanding between GE and the Corporation, GE is
entitled to nominate one director to the Corporation's Board. Mr. Murphy is that
nominee.
ALLEN E. MURRAY (69)
Director since March, 1995. Chairman of the Compensation Committee and the Stock
Option Subcommittee and Member of the Executive and Nominating Committees.
Chairman of the Board and Chief Executive Officer of Mobil Corporation from 1986
until 1994; director of Martin Marietta from 1991 to 1995; director of
Metropolitan Life Insurance Company, Minnesota Mining and Manufacturing Company,
Morgan Stanley, Dean Witter, Discover & Co. and St. Francis Hospital Foundation;
member of the Board of Trustees of New York University; honorary director of the
American Petroleum Institute; member of The Business Council and The Council on
Foreign Relations.
FRANK SAVAGE (59)
Director since March, 1995. Member of the Finance and Nominating Committees.
Chairman of Alliance Capital Management International, an investment management
company, since 1994; Chairman of the Board of Alliance Corporate Finance Group,
Inc. since 1993; Senior Vice President of The Equitable Life Assurance Society
of the United States from 1987 to 1996; Chairman of the Board of Equitable
Capital Management Corporation from 1992 to 1993, Vice Chairman of the Board of
Equitable Capital Management Corporation from 1986 to 1992; director of Alliance
Capital Management Corporation, ARCO Chemical Company, Qualcomm Inc. and Essence
Communications, Inc.; trustee of Johns Hopkins University and Chairman of the
Board of Trustees of Howard University; director of Lockheed from 1990 to 1995;
director of the Council on Foreign Relations and the New York Philharmonic;
former U.S. Presidential appointee to the Board of Directors of U.S. Synthetic
Fuels Corporation.
PETER B. TEETS (56)
Director since July 1997.
President and Chief Operating Officer of Lockheed Martin since August 1997,
President and Chief Operating Officer of Lockheed Martin's Information &
Services Sector from March 1995 to July 1997; Vice President of Martin Marietta
Corporation from 1985 to 1995, President of Martin Marietta's Space Group from
1993 to 1995 and President of its Astronautics Group from 1987 to 1993.
CARLISLE A. H. TROST (67)
Director since March, 1995. Member of the Audit and Ethics and Compensation
Committees and Stock Option Subcommittee.
Retired Admiral, U.S. Navy, 1990; Chief of Naval Operations, United States Navy
from 1986 to 1990; Commander in Chief, U.S. Atlantic Fleet, Commander U.S.
Seventh Fleet, and Deputy Commander in
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Chief of the U.S. Pacific Fleet; director of Lockheed from 1990 to 1995;
director of GPU Inc., GPU Nuclear Corp., General Dynamics Corporation, Precision
Components Corporation and Bird-Johnson Company; Trustee of the U. S. Naval
Academy Foundation and Olmsted Foundation.
JAMES R. UKROPINA (60)
Director since March, 1995. Chairman of the Finance Committee and Member of the
Audit and Ethics and Executive Committees.
Partner of O'Melveny & Myers since 1992; Chairman of the Board and Chief
Executive Officer of Pacific Enterprises from 1989 to 1991; director of Lockheed
from 1988 to 1995; director of Pacific Life Insurance Company; Vice Chairman
and member of the Board of Trustees of Stanford University.
DOUGLAS C. YEARLEY (62)
Director since March, 1995. Member of the Compensation, Executive and Finance
Committees and Stock Option Subcommittee.
Chairman of the Board and Chief Executive Officer of Phelps Dodge Corporation
since 1989 and President since 1991, Executive Vice President of Phelps Dodge
Corporation from 1987 to 1989, President of Phelps Dodge Industries, a division
of Phelps Dodge Corporation, from 1988 to 1990, Senior Vice President of Phelps
Dodge Corporation from 1982 to 1986; director of Lockheed from 1990 to 1995;
director of J.P. Morgan & Co. Incorporated, Morgan Guaranty Trust Company of New
York, Southern Peru Copper Corporation, and USX Corporation; member of The
Business Roundtable, The Business Council and The Conference Board.
BOARD OF DIRECTORS
The Board of Directors held ten meetings during 1997, of which eight were
regularly scheduled meetings. Non-employee directors of the Corporation receive
$35,000 annually for service on the Board of which $25,000 is paid in cash and
$10,000 is paid in the form of the award of units equivalent to shares of common
stock under the Directors Deferred Stock Plan, based on the value of the
Corporation's common stock on June 1 of the year for which the award is made.
Non-employee directors receive $1,500 for each meeting of the Board of Directors
or a committee thereof attended. A non-employee Chairman of the Board receives
an additional fee of $40,000 per month. The Corporation's directors discharge
their responsibilities throughout the year not only at Board of Directors and
committee meetings, but also through personal meetings and other communications,
including considerable telephone contact, with the Chairman, the Chief Executive
Officer and Vice Chairman, the President and Chief Operating Officer and others
regarding matters of interest and concern to the Corporation. Directors are also
reimbursed for expenses in connection with attendance at meetings.
Non-employee directors may defer up to 100 percent of the cash portion of the
fees (including committee fees) otherwise payable to the director. Subject to
certain limitations, a participating director's deferred fees will be
distributed (or distribution will commence) in January following the year in
which he or she ceases to be a director. Fees earned in 1996 could be deferred
until 1998 regardless of the director's continuing service on the Board of
Directors. Deferral elections are irrevocable during any calendar year and must
be made before the beginning of the calendar year in which fees are earned.
Earnings are accrued on deferred amounts. Depending on a director's investment
election, deferred amounts earn interest at a rate that tracks the performance
of the prime rate, the published index for the Standard & Poor's 500 (with
dividends reinvested) or the performance of the Corporation's common stock. In
addition, pursuant to the Directors Deferred Stock Plan, $10,000 of the annual
retainer is deferred in the form of units equivalent to shares of common stock
on June 1 of each year. Upon retirement, termination of service, death or
disability, the plan provides that a director's account be distributed, at the
election of the director, in whole shares or in cash except that fractional
shares will not be issued but will be payable in cash. At the election of each
director, distributions may be made in a lump sum or in installments.
The Board of Directors currently has five standing committees: Audit and
Ethics, Compensation, Nominating, Executive and Finance. There is one standing
subcommittee, the Stock Option Subcommittee. Non-employee directors receive
$5,000 annually for each committee on which they serve (there are no additional
fees for service on the Stock Option Subcommittee). In addition, a non-employee
director who serves as Chairman of a Committee receives $4,000 annually, except
for the Nominating Committee Chairman who receives $2,000.
All non-employee directors are provided a $100,000 death benefit, which
remains available following retirement, except that the benefit is reduced by
the amount of life insurance coverage previously
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provided to a director of Lockheed or Martin Marietta. The benefit will be
increased to include the applicable estimated annual amount of taxes associated
with the benefit. In addition, each non-employee director is provided travel
accident insurance up to $1,000,000 in the event that the director is involved
in an accident while traveling on business related to the Corporation.
A financial counseling program which provides reimbursement for tax and
financial planning and tax preparation services is available to directors and
officers. The Corporation pays a maximum of $6,000 per director and $10,000 per
officer.
The Directors Charitable Award Plan provides that upon the death of a
director, Lockheed Martin will make donations to tax-exempt organizations
previously recommended by the director up to an aggregate of $1 million.
Directors are vested under this plan if (a) they have served for at least five
years on the Lockheed Martin Board of Directors, including service on the former
Lockheed or Martin Marietta Boards of Directors, or (b) their service on the
Lockheed Martin Board of Directors is terminated due to death, disability or
retirement. Under the terms of the plan, if there is a change in control of the
Corporation, all participating directors in the plan shall immediately become
vested. Those directors who previously served on Martin Marietta's Board of
Directors are all vested in the plan as a result of the combination of the
businesses of Lockheed and Martin Marietta (the "Combination").
Non-employee directors who leave the Board after serving five or more years
on the Board of Directors are entitled to receive an annual retirement benefit
equal to the amount of the annual retainer fee, including the portion
contributed to the Directors Deferred Stock Plan, in effect on the date of the
director's retirement. These amounts will be paid annually to the retired
director for a period equal to the number of years that the director served on
the Board of Directors. If a director who has completed at least five years of
service on the Board of Directors (or with the approval of the Nominating
Committee, less than five years) retires at the mandatory retirement age under
the Corporation's Bylaws, the payment will be made on an annual basis for the
director's life. Upon the death of an active director (whether or not he or she
served as a director for at least five years) or a retired director receiving
benefits, annual payments will be paid to the director's beneficiary for a
maximum period of twenty years (less the number of years for which benefits may
have already been paid to a retired director). In determining eligibility for
benefits and the number of years for which a benefit is payable, service on the
Board of Directors includes service as an employee director as well as service
on the Lockheed or Martin Marietta Boards of Directors prior to the Combination.
However, the amount of any benefit payable under the Lockheed Martin Directors
Retirement Plan will be reduced on a dollar-for-dollar basis by the amount of
any benefit paid or payable under those companies' retirement plans for
directors.
During 1997, Mr. Marafino performed consulting services to the Corporation
with respect to providing representation in connection with the sale or merger
of certain properties, serving on the boards of directors of various joint
venture companies and/or subsidiaries of the Corporation, providing
administrative and other services as requested, and providing advice and counsel
to senior management of the Corporation. Mr. Marafino performed these services
pursuant to a consulting agreement. The consulting agreement provides for an
annual retainer of $250,000 and does not cover his services as a director of the
Corporation.
The Audit and Ethics Committee is presently composed of Mses. Cheney and King
and Messrs. Hood, Flournoy, Marafino, Tellep, Trost and Ukropina. During 1997,
the Audit and Ethics Committee met five times. The committee has general powers
relating to accounting and auditing matters. The committee recommends the
selection and monitors the independence of independent auditors for the
Corporation, reviews the scope and timing of their work, reviews with the
Corporation's management and independent auditors the financial accounting and
reporting principles used by the Corporation, the policies and procedures
concerning audits, accounting, financial controls, as well as any
recommendations to improve existing practices. The committee reviews the results
of the independent audit as well as the activities of the corporate internal
audit staff. The committee monitors compliance with the Corporation's Code of
Ethics and Business Conduct, reviews and resolves all matters presented to it
for resolution by the Corporate Ethics Office, and reviews and monitors the
adequacy of the Corporation's policies and procedures, as well as the
organizational structure for ensuring general compliance with laws and
regulations including environmental laws and regulations and the policies and
procedures relating thereto; it reviews with the Corporation's management
significant litigation and regulatory proceedings in which the Corporation is or
may become involved and reviews accounting and financial reporting issues,
including the adequacy of disclosure of environmental matters. At least four
times annually the committee meets separately and independently with the vice
president of internal audit and the Corporation's independent auditors.
The Compensation Committee is presently composed of Messrs. Murray, Gibbons,
Hood, Murphy, Trost and Yearley. During 1997, the committee met three times. The
committee recommends the compensation policy and standards of compensation for
the Corporation. The committee recommends
6
<PAGE> 12
compensation to be paid to officers reporting to the Executive Office and
approves the compensation for all other elected officers. The committee has the
power to approve employee benefits provided by all bonus, supplemental and
special compensation plans, including pension, insurance and health plans, but
excluding performance-based executive compensation plans.
The Stock Option Subcommittee is presently composed of Messrs. Murray,
Gibbons, Hood, Trost and Yearley. During 1997, the subcommittee met four times.
The subcommittee administers all of the Corporation's stock option plans,
including its 1995 Omnibus Performance Award Plan and approves awards granted
thereunder.
The Nominating Committee is presently composed of Mrs. Cheney and Messrs.
Murphy, Flournoy, Gibbons, Hurtt, Murray and Savage. During 1997, the committee
met two times. The committee makes recommendations to the Board of Directors
concerning the composition and compensation of the Board of Directors, including
its size and qualifications for membership. It also recommends nominees to fill
vacancies or new positions on the Board of Directors and the Board's nominees
for election by the stockholders at an annual meeting of stockholders.
The Finance Committee is presently composed of Mrs. King and Messrs.
Ukropina, Hurtt, Marafino, Savage, Tellep and Yearley. During 1997, the
committee met four times. The committee has general powers relating to the
management of the financial affairs of the Corporation, including
responsibilities related to borrowing arrangements and the investment of the
Corporation's available cash resources. It reviews the financial condition of
the Corporation, the financial impact of all proposed changes in the capital
structure of the Corporation and reviews and makes recommendations regarding the
proposed capital expenditure and contributions budgets of the Corporation. The
committee also monitors the financial impact and implementation of all trusteed
benefit plans sponsored by the Corporation and reviews the performance of the
assets and administration of the Corporation's trusteed benefit plans.
The Executive Committee is presently composed of Messrs. Augustine, Coffman,
Hood, Marafino, Murray, Tellep, Ukropina and Yearley. During 1997, the committee
met one time. The committee may exercise such powers in the management of the
business of the Corporation as may be authorized by the Board of Directors,
subject to applicable law.
Written suggestions submitted by stockholders concerning proposed nominees
for election to the Board of Directors will be presented to the Nominating
Committee for its consideration. Suggestions should include a brief description
of the proposed nominee's qualifications and all other relevant biographical
data as well as the written consent of the proposed nominee to act as a director
if nominated and elected. In accordance with the Corporation's Bylaws,
suggestions should be mailed to the Secretary of the Corporation.
In addition, the Bylaws of the Corporation require advance notice of any
proposal for the nomination for election as a director at an annual meeting of
stockholders 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
office, 6801 Rockledge Drive, Bethesda, Maryland 20817, 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 specific information concerning the nominee and
the stockholder proposing the nomination. Any stockholder 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 1997, all incumbent directors attended at least 75 percent of Board of
Directors and committee meetings. Average attendance at all Board of Directors
and committee meetings was 96 percent.
7
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to the shares of the
Corporation's common stock which are held by persons known to the Corporation to
be the "beneficial owners" of more than 5 percent of such stock. For purposes of
this Proxy Statement, beneficial ownership of securities is defined in
accordance with the rules of the Securities and Exchange Commission and
generally means the power to vote or dispose of securities regardless of any
economic interest therein. Except as otherwise noted, all information set forth
in the following table is as of December 31, 1997.
<TABLE>
<CAPTION>
Number Percent
Name and Address of Stockholder Class of Stock of Shares of Class
------------------------------- -------------- --------- --------
<S> <C> <C> <C>
State Street Bank and Trust Company as trustee of the Common 26,471,969(1) 13.6%
Lockheed Martin Corporation Capital Accumulation Plan, the Lockheed Martin
Corporation Operation Support Savings Plan, the Lockheed Martin Corporation
Performance Sharing Plan for Bargaining Employees, the Lockheed Martin
Corporation Performance Sharing Plan for Puerto Rico Employees, the Lockheed
Martin Corporation Retirement Savings Plan for Salaried Employees, the Lockheed
Martin Corporation Salaried Savings Plan, the Lockheed Martin Savings and
Investment Plan for Hourly Employees, the Lockheed Martin Energy Systems Inc.
401K Savings Plan for Hourly Employees, The Lockheed Martin Energy Systems
Savings Plan for Salaried and Hourly Employees, the Lockheed Martin Energy
Systems Savings Program and as trustee for various trust and employee benefit
plans not associated with the Corporation 225 Franklin Street Boston,
Massachusetts 02110
FMR Corp. Common 12,995,416(2) 6.7%
82 Devonshire Street
Boston, Massachusetts 02109
Oppenheimer Capital Common 12,858,314(3) 6.6%
Oppenheimer Tower, World Financial Center
New York, New York 10281
</TABLE>
(1)As reported in Schedule 13G, as amended, filed on March 6, 1998 by State
Street Bank and Trust Company ("State Street"). State Street held 23,438,041
shares of common stock (approximately 12.1%) as trustee for the Lockheed
Martin Corporation benefit plans indicated above; the stockholder has shared
voting and dispositive power with respect to these shares. State Street has
expressly disclaimed beneficial ownership of said shares. In addition, State
Street reported beneficial ownership of 3,033,928 shares of common stock
(approximately 1.5%) as trustee for various trust and employee benefit plans
not associated with the Corporation.
(2)As reported in Schedule 13G filed on February 10, 1998 by FMR Corp. Although
not disclosed in its Schedule 13G, it is the Corporation's belief that
Fidelity Management Trust Company, a wholly owned subsidiary of FMR Corp.,
also holds 1,899,644 shares of the Corporation's common stock as trustee for
the Lockheed Martin Aerospace Savings Plan, Lockheed Martin Tactical Defense
Systems Savings Plan, Lockheed Martin Tactical Systems Master Savings Plan,
Lockheed Martin Fairchild Corporation Savings Plan, Lockheed Martin IR
Imaging Systems, Inc. Savings Plan, Lockheed Martin Vought Systems
Corporation Capital Accumulation Plan, Lockheed Martin Librascope Retirement
Savings Plan, Sandia Corporation Savings and Income Plan, and Sandia
Corporation Savings and Security Plan.
(3)As reported in Schedule 13G filed on March 10, 1998 by Oppenheimer Capital.
To the best of the Corporation's knowledge, no other person owned more than 5
percent of any class of the Corporation's outstanding voting securities at the
close of business on March 9, 1998.
8
<PAGE> 14
SECURITIES OWNED BY DIRECTORS, NOMINEES AND NAMED EXECUTIVE OFFICERS
The following table shows the number of shares of common stock beneficially
owned on January 31, 1998 by the directors and nominees, the Chairman, the Chief
Executive Officer and Vice Chairman, and the four next most highly compensated
executive officers (during 1997) and by all directors and executive officers 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 executive officers and directors
as a group represented .96 percent of the common stock outstanding. Individuals
have sole voting and investment power over the stock unless otherwise indicated
in the footnotes.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR AMOUNT AND NATURE OF
IDENTITY OF GROUP BENEFICIAL OWNERSHIP
----------------- --------------------
<S> <C>
Norman R. Augustine.................................. 498,111(1)(2)
Marcus C. Bennett.................................... 83,541(2)(3)
James A. Blackwell, Jr............................... 112,220(2)(4)(8)
Lynne V. Cheney...................................... 1,145(5)(6)(7)
Vance D. Coffman..................................... 149,512(2)(8)(9)
Thomas A. Corcoran................................... 120,673(2)(8)(10)
Houston I. Flournoy.................................. 2,037(5)(6)(7)
James F. Gibbons..................................... 4,369(6)(7)
Edward E. Hood, Jr................................... 2,410(7)
Caleb B. Hurtt....................................... 3,246(7)
Gwendolyn S. King.................................... 653(5)(7)
Vincent N. Marafino.................................. 374,437(5)(7)(11)
Eugene F. Murphy..................................... 610(7)(12)
Allen E. Murray...................................... 3,410(7)
Frank Savage......................................... 2,884(6)(7)
Peter B. Teets....................................... 103,322(2)(8)(13)
Daniel M. Tellep..................................... 157,682(5)(7)(14)
Carlisle A. H. Trost................................. 1,629(6)(7)
James R. Ukropina.................................... 2,288(6)(7)
Douglas C. Yearley................................... 2,288(6)(7)
All executive officers and directors as a group
(28 individuals including those named above) 1,875,431(2)(6)(7)(8)(15)
</TABLE>
(1) Includes 390,000 shares not currently owned but which could be acquired
within 60 days following January 31, 1998 by Mr. Augustine through the
exercise of stock options.
(2) Where appropriate, the shares shown include an approximation of the number
of shares attributable to the participant's account in the Lockheed Martin
Corporation Salaried Savings Plan as of January 31, 1998. Executive officers
do not have investment power over shares contributed by the Corporation as
matching contributions to that plan but do have investment power over shares
purchased with their own contributions or contributed by the Corporation
prior to January 1, 1997 as matching contributions to the Lockheed Martin
Corporation Performance Sharing Plan.
(3) Includes 55,500 shares not currently owned but which could be acquired
within 60 days following January 31, 1998 by Mr. Bennett through the
exercise of stock options.
(4) Includes 96,555 shares not currently owned but which could be acquired
within 60 days following January 31, 1998 by Mr. Blackwell through the
exercise of stock options.
(5) Shared voting and investment power.
(6) Includes shares held in trust under the former Lockheed Directors' Deferred
Compensation Plan, pursuant to which $5,000 was paid annually on behalf of
each non-employee director to a trust maintained for the purpose of
purchasing Lockheed common stock on the open market for the benefit of
non-employee directors. Prior to 1993, directors could also direct a portion
of the annual cash payment and meeting fees to the trust for the purchase of
common stock. All shares in the trust were exchanged for common stock of the
Corporation after the Combination. Other cash amounts voluntarily deferred
by directors are credited with interest at the current rate of interest
specified and published by the Secretary of the Treasury pursuant to Public
Law 92-41, 85 Stat. 97. Deferred amounts are distributable after a
participant ceases to be a director. In the event a participant's status as
a director is involuntarily terminated other than by death, all deferred
cash remuneration (plus interest) and all common stock in the director's
trust account will be distributed within fifteen days of termination. As of
December 31, 1997, Mrs. Cheney and Messrs. Flournoy, Gibbons, Savage, Trost,
Ukropina and Yearley have been
9
<PAGE> 15
credited with 246; 247; 2,329; 1,251; 1,219; 247; and 247 shares,
respectively, pursuant to the plan. The directors do not have or share
voting or investment power for their respective shares held in the trust
except in the event of a tender offer.
(7) Includes stock units under the Lockheed Martin Corporation Directors'
Deferred Stock Plan. As of January 31, 1998, each of Mses. Cheney and King
and Messrs. Flournoy, Gibbons, Hood, Hurtt, Murphy, Murray, Savage, Trost,
Ukropina and Yearley have been credited with 409 shares and Messrs. Marafino
and Tellep have been credited with 231 shares. The directors do not have or
share voting or investment power for their respective plan shares.
(8) In April 1996, the Corporation's stockholders approved the Lockheed Martin
Corporation Deferred Management Incentive Compensation Plan (the "Plan")
which provides certain key management employees of the Corporation and its
subsidiaries the opportunity to elect annually to defer receipt until
termination of service or beyond all or a portion of incentive compensation
awards under the Lockheed Martin Management Incentive Compensation Plan. The
Plan provides that a participant may choose annually between two accounts
(the "Interest Investment Option" or the "Stock Investment Option") pursuant
to which earnings on deferred amounts will accrue. Under the Stock
Investment Option, earnings on deferred amounts will accrue at a rate that
tracks the performance of the Corporation's common stock (including
reinvestment of dividends). Under the Interest Investment Option, earnings
on deferred amounts will accrue at a rate equivalent to the then published
rate for computing the present value of future benefits under Cost
Accounting Statement 415, Deferred Compensation. Where appropriate, the
shares shown include an approximation of the number of stock units in the
participant's account as of January 22, 1998, the latest date for which such
information is available.
(9) Includes 125,000 shares not currently owned but which could be acquired
within 60 days following January 31, 1998 by Dr. Coffman through the
exercise of stock options.
(10)Includes 105,000 shares not currently owned but which could be acquired
within 60 days following January 31, 1998 by Mr. Corcoran through the
exercise of stock options.
(11)Includes 307,436 shares not currently owned but which could be acquired
within 60 days following January 31, 1998 by Mr. Marafino through the
exercise of stock options.
(12)Mr. Murphy, GE's nominee to the Corporation's Board of Directors,
specifically disclaims beneficial ownership of shares of Lockheed Martin
held by GE.
(13)Includes 72,500 shares not currently owned but which could be acquired
within 60 days following January 31, 1998 by Mr. Teets through the exercise
of stock options.
(14)Includes 125,000 shares not currently owned but which could be acquired
within 60 days following January 31, 1998 by Mr. Tellep through the exercise
of stock options.
(15)Includes 1,179,368 shares of common stock not currently owned by members of
the group but which could be acquired within 60 days following January 31,
1998 through the exercise of stock options.
10
<PAGE> 16
COMPENSATION OF EXECUTIVE OFFICERS
The following tables show annual and long-term compensation awarded, earned
or paid for services in all capacities to the Corporation of the Chief Executive
Officer and the next four most highly compensated executive officers for the
fiscal year ended December 31, 1997. Mr. Augustine served as Chief Executive
Officer until his retirement on August 1, 1997, when Dr. Coffman assumed that
office. Other than 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 by the Corporation for the year ended December 31, 1997. In addition,
the information set forth in the tables captioned "Option/SAR Grants in Last
Fiscal Year" and "Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values," relate to stock options and stock appreciation
rights (SARs) with respect to the Corporation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation(2)
- ------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
NORMAN R. AUGUSTINE 1997 $ 919,099(1) $1,000,000(1) $ 59,673
Chairman 1996 1,137,500 1,600,000 43,575
1995 983,846 1,300,000 29,815
VANCE D. COFFMAN 1997 899,744 1,100,000 163,547
Chief Executive Officer 1996 695,961 890,000 135,145
& Vice Chairman 1995 459,904 448,200 487,707
PETER B. TEETS 1997 580,231 700,000 147,039
President & 1996 488,750 416,500 15,006
Chief Operating 1995 458,846 425,000 15,560
Officer
MARCUS C. BENNETT 1997 596,750 614,100 29,612
Executive Vice 1996 525,942 556,700 135,284
President & Chief 1995 464,615 443,500 34,977
Financial Officer
THOMAS A. CORCORAN 1997 490,750 523,400 34,040
Vice President, Sector 1996 457,500 443,500 24,969
President - Electronics 1995 424,705 370,000 30,106
JAMES A. BLACKWELL,JR. 1997 474,510 470,500 33,387
Vice President, Sector 1996 430,000 394,700 204,870
President - Aeronautics 1995 371,154 345,300 188,960
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
Awards
-------------------------------------
Securities
Name and Underlying LTIP All Other
Principal Position Year Options/SARs Payouts Compensation(4)
- ------------------ ---- ------------ ------- ------------
<S> <C> <C> <C> <C>
NORMAN R. AUGUSTINE 1997 140,000 --- $ 29,615
Chairman 1996 120,000 --- 5,249
1995 100,000 $2,746,950 5,504,499
VANCE D. COFFMAN 1997 100,000 336,619(3) 32,759
Chief Executive Officer 1996 45,000 189,617(3) 33,406
& Vice Chairman 1995 30,000 299,162(3) 244,229
PETER B. TEETS 1997 35,000 --- 21,132
President & 1996 30,000 --- 5,250
Chief Operating 1995 30,000 662,910 1,534,845
Officer
MARCUS C. BENNETT 1997 45,000 --- 21,667
Executive Vice 1996 33,000 --- 5,250
President & Chief 1995 30,000 606,150 1,611,529
Financial Officer
THOMAS A. CORCORAN 1997 60,000 --- 18,194
Vice President, Sector 1996 30,000 --- 5,250
President - Electronics 1995 30,000 --- 1,633,650
JAMES A. BLACKWELL,JR. 1997 30,000 169,219(3) 17,659
Vice President, Sector 1996 30,000 92,754(3) 20,640
President - Aeronautics 1995 25,000 67,084(3) 93,743
</TABLE>
(1) Amounts reported for salary (including accrued vacation) and bonus were
based on Mr. Augustine's annualized salary of $1,250,000 and bonus of
$1,714,286, and prorated to August 1, 1997, the date he retired as Chief
Executive Officer of the Corporation.
(2) Amounts reported under the column generally represent amounts reimbursed for
the payment of taxes and financial counseling fees. Some executives of the
Corporation received certain perquisites from the Corporation. During 1997,
the cost of the perquisites furnished to each executive officer with the
exceptions of Dr. Coffman and Mr. Teets did not exceed the lesser of $50,000
or 10 percent of the total annual salary and bonus of that executive officer
as reported in the table above. On occasion, the Corporation determines that
it is in its best interest to pay membership fees, dues and other expenses
related to employee participation in professional and social organizations.
Determinations are made on a case-by-case basis rather than pursuant to a
formal program or plan. The amount reported in 1997 for Dr. Coffman includes
a one-time membership fee of $51,410; the amount reported for Mr. Teets in
1997 includes a one-time membership fee of $52,115. The amounts reported for
Mr. Blackwell in 1996 and 1995 include payments of $161,603 and $72,576 for
relocation expenses, consistent with the Corporation's policies and
procedures.
(3) Amounts reported represent payouts of awards earned under the Long Term
Performance Plan of Lockheed Corporation and its Subsidiaries. Upon
consummation of the combination of Lockheed and Martin Marietta, this plan
was terminated as an active plan and no further awards will be made.
(4) Amounts include the Corporation's 1997 contributions under the Lockheed
Martin Corporation Salaried Savings Plan for Messrs. Augustine, Coffman,
Teets, Bennett, Corcoran, and Blackwell of $2,923; $4,750; $2,923; $2,821;
$3,150; and $3,143, respectively, and the Corporation's 1997 contributions
under the Lockheed Martin Corporation Supplemental Savings Plan for Messrs.
Augustine, Coffman, Teets, Bennett, Corcoran, and Blackwell of $26,692;
$28,009; $18,209; $18,846; $15,044; and $14,516, respectively.
11
<PAGE> 17
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
Shown below is information on grants of stock options exercisable for common
stock awarded during 1997 pursuant to the Lockheed Martin 1995 Omnibus
Performance Award Plan ("Omnibus Plan")(2) to the named executives.
<TABLE>
<CAPTION>
Individual Grants
- ------------------------------------------------------- ---------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees Base Price Expiration
Name Granted in 1997 Per Share Date
- -------------------------------- ---------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
NORMAN R. AUGUSTINE 140,000 4.8% $91.125 1/22/07
VANCE D. COFFMAN 100,000 3.5% 91.125 1/22/07
PETER B. TEETS 35,000 1.2% 91.125 1/22/07
MARCUS C. BENNETT 45,000 1.6% 91.125 1/22/07
THOMAS A. CORCORAN 30,000 1.0% 91.125 1/22/07
30,000(4) 1.0% 84.500 4/17/07
JAMES A. BLACKWELL, JR. 30,000 1.0% 91.125 1/22/07
</TABLE>
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation For
Option Term(3)
- ------------------------------------- ---------------------------------
Name 5% 10%
- -------------------------------- -- ---
<S> <C> <C>
NORMAN R. AUGUSTINE $8,023,123 $20,332,169
VANCE D. COFFMAN 5,730,802 14,522,978
PETER B. TEETS 2,005,781 5,083,042
MARCUS C. BENNETT 2,578,861 6,535,340
THOMAS A. CORCORAN 1,719,241 4,356,893
1,594,248 4,040,137
JAMES A. BLACKWELL, JR. 1,719,241 4,356,893
</TABLE>
(1) No SARs were granted in 1997.
(2) Awards are granted at the discretion of the Stock Option Subcommittee, a
disinterested subcommittee of the Board of Directors made up of non-employee
directors, upon the recommendation of management. The Omnibus Plan requires
that awards be evidenced by an award agreement setting forth the number and
type of stock-based awards and the terms and conditions applicable to the
award as determined by the Stock Option Subcommittee. In 1997, the only type
of instrument awarded under the Omnibus Plan was nonqualified stock options.
Under the January 1997 award agreements, options vest and become exercisable
in two equal installments on the first and second anniversary dates
following the grant. Options expire 186 days following termination of
employment, except in instances following death, disability, divestiture,
layoff or retirement. In the event of death, all outstanding options vest
immediately and will expire three years following the date of death, but in
no event more than ten years after the date of grant. In instances of
disability, all outstanding options vest immediately and expire on the
normal expiration date, ten years following the date of grant. In cases of
layoff the award agreement states that the terms of all outstanding options
will be unaffected. In cases of divestiture, outstanding options which are
vested as of the effective date of the divestiture will terminate one year
from the effective date or the option's normal expiration date, whichever
occurs first; options which are not vested as of the effective date of the
divestiture will be treated in accordance with the provisions of the award
pertaining to termination of employment. In cases of retirement on or after
the first vesting date, the award agreement states that the terms of all
outstanding options will be unaffected by such retirement. Generally
retirement before the first vesting date is treated as a termination. In the
event of a change of control, the options would vest to the extent not
already vested.
(3) The dollar amounts set forth in these columns are the result of calculations
assuming 5% and 10% annual return rates set by the Securities and Exchange
Commission and are not intended to forecast possible future appreciation, if
any, of the Corporation's common stock price.
(4) Under the April 1997 award agreement, options vest and become excercisable
on the fourth anniversary date following the grant. The terms of the April
1997 award are otherwise the same as the January 1997 awards.
12
<PAGE> 18
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Shown below is information relating to the exercise of stock options and
stock appreciation rights (SARs) during the last completed fiscal year and the
fiscal year-end value of unexercised options of common stock and SARs for the
named executives.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised
Shares Options/SARs at Fiscal Year End
Acquired Value -------------------------------
Name on Exercise Realized Exercisable Unexercisable
- ---- ----------- -------- ----------- -------------
<S> <C> <C> <C> <C>
NORMAN R. AUGUSTINE 0 $0 260,000 200,000
VANCE D. COFFMAN 0 0 52,500 122,500
PETER B. TEETS 0 0 40,000 50,000
MARCUS C. BENNETT 24,400 1,247,500 16,500 61,500
THOMAS A. CORCORAN 0 0 75,000 75,000
JAMES A. BLACKWELL, JR. 3,830 229,225 66,555 45,000
</TABLE>
<TABLE>
<CAPTION>
Value of Unexercised In-the-Money
Options/SARs at Fiscal Year End
-------------------------------
Name Exercisable Unexercisable
- ---- ----------- -------------
<S> <C> <C>
NORMAN R. AUGUSTINE $10,737,500 $2,495,000
VANCE D. COFFMAN 1,722,188 1,285,938
PETER B. TEETS 1,488,750 623,750
MARCUS C. BENNETT 402,188 734,063
THOMAS A. CORCORAN 3,148,125 1,006,875
JAMES A. BLACKWELL, JR. 3,070,913 586,875
</TABLE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview
GOAL. The Corporation's goal is to be recognized as the world's premier
systems engineering and technology enterprise, meeting the needs of its
customers with high-quality products and services. In so doing, the Corporation
believes that it can produce superior returns for its stockholders. To achieve
this goal, the Corporation must attract and retain the services of dedicated and
talented individuals. This requires a compensation program that is competitive
with that of other companies with whom the Corporation competes for talent,
provides incentives to meet or exceed the Corporation's objectives and makes
prudent use of the Corporation's resources.
COMPOSITION OF THE COMPENSATION COMMITTEE. The Board of Directors relies upon
an independent Compensation Committee consisting entirely of Board members who
are neither officers nor employees of the Corporation to oversee the
Corporation's compensation program. Among the duties of the Committee is that of
reviewing the Corporation's executive compensation policies and programs and
recommending the form and amount of compensation to be paid to the Corporation's
executive officers. The Board ratified the recommendations of the Compensation
Committee in 1997.
ROLE OF THE STOCK OPTION SUBCOMMITTEE. The Corporation has acted to minimize
the amount of compensation paid by the Corporation that may not be deducted for
federal income tax purposes. To allow employee stock options to fit within
certain exceptions to limitations on the deductibility of compensation, options
are awarded by the Stock Option Subcommittee, in compliance with these
exceptions. This report is submitted by both the Compensation Committee and the
Stock Option Subcommittee and references to the term "Committee" include both.
PHILOSOPHY. The overall philosophy of the executive compensation program is
that each executive officer should have the opportunity to receive compensation
in a range competitive with that offered executives with similar
responsibilities at other companies of comparable size, complexity and quality.
Only in this way can the Corporation effectively compete with such companies for
the services of these individuals. An executive's compensation package is
structured so that the total compensation received by the executive is dependent
on the performance of that executive and the performance of the Corporation. The
Committee believes that this structure aligns the interests of the Corporation's
executives with those of its stockholders and provides executives additional
incentives to achieve and sustain superior performance. Further, in setting an
executive's total compensation, the Committee must balance the need to offer an
attractive compensation package with its obligation to make prudent use of the
Corporation's resources.
COMPENSATION STRUCTURE. The Corporation's executive compensation structure
includes three elements. These are base salary and annual incentive
compensation, which constitute an executive's
13
<PAGE> 19
annual compensation, and stock options which constitute long-term compensation.
As more fully described below, two of the three elements (annual incentive
compensation and stock options) are at risk as their value is entirely dependent
upon individual and company performance.
METHODS. The process of determining executive compensation is subjective and
is entirely within the discretion of the Committee. In determining levels of
compensation, the Committee relies upon survey data gathered by nationally
recognized consulting firms specializing in executive compensation as well as
upon other nationally recognized survey sources. Information is gathered both as
to companies included within the Peer Issuers Index (included on page 23 of this
Proxy) and as to a broader group of 27 publicly held industrial companies of a
size, complexity and quality similar to that of the Corporation. The Boeing
Company is the only company included in both the larger survey comparator group
and the Peer Issuers Index.
Compensation in 1997
ANNUAL COMPENSATION - BASE SALARY. In accordance with the Committee's
philosophy, the Committee seeks to set base salary levels at the 50th percentile
of the surveyed companies with flexibility to pay within a range around the 50th
percentile, consistent with the executive's responsibilities, level of
experience, performance in past years and competence. Therefore, over time, and
as the result of sustained superior performance, individual executive base
salaries may exceed the market 50th percentile. Throughout this report,
comparisons to the 50th percentile refer to figures that have been weighted to
reflect the size of the business unit, as measured by a regression analysis of
sales, in comparison to the broader group of 27 publicly held industrial
companies.
Mr. Augustine served as Chief Executive Officer of Lockheed Martin during
1997 until his retirement on August 1, 1997. He received no adjustment in base
salary during this period.
Dr. Coffman was elected Vice Chairman and Chief Executive Officer of
Lockheed Martin, succeeding Mr. Augustine as Chief Executive Officer, effective
August 1, 1997. He received a 33 percent base salary increase at the time he was
elected Chief Executive Officer. Dr. Coffman's resulting base salary is
approximately 11 percent below the 50th percentile when compared to other Chief
Executive Officers.
While the Committee seeks to set executive salaries at or about the 50th
percentile, management succession during 1997 and the need for an orderly
transition from an executive's previous salary level to that appropriate for the
new position were strong contributing factors in determining the level of
compensation for Dr. Coffman. In 1997, the base salary levels for the named
executives, excluding Mr. Augustine and Dr. Coffman, were approximately 3
percent above the 50th percentile.
ANNUAL COMPENSATION - INCENTIVE. The Corporation maintains an incentive plan
known as the Lockheed Martin Corporation Management Incentive Compensation Plan
(MICP). The primary purpose of the MICP is to provide executives an opportunity
to earn additional compensation based on performance. The MICP provides an
opportunity for annual cash incentives based upon an evaluation of the
performance of the Corporation or a specified operating subsidiary or business
unit against certain pre-established goals. This requires an appraisal of each
executive's contribution to this performance. These reviews are subjective and
within the discretion of the Committee. All of the executive officers of the
Corporation participate in the plan. Each participant in the MICP is assigned a
targeted percentage of base salary. MICP target levels are in a range that is
comparable to incentive targets for similar level positions in the Corporation's
comparator group of 27 publicly held industrial companies. The amount of
incentive compensation generated by the target is further adjusted in
consideration of individual and business unit performance or overall corporate
performance in the case of corporate staff, and actual awards may fall above or
below the market 50th percentile. Adjustments for performance are based upon
consideration of the achievement of targeted goals which include standard
measures of financial performance such as orders, sales, earnings, earnings per
share, return on equity, cash generation, and backlog as well as technical
achievement, product performance and quality, customer satisfaction, and
adherence to ethical standards. These goals are established at the beginning of
each plan year and are based in part upon the Corporation's Long Range Plan.
Adjustments for the individual performance of the Chief Executive Officer are
determined by the Committee. Adjustments for business unit and corporate
performance are determined by the Corporation's executive office, subject to the
review and approval of the Committee. Under the MICP, if the maximum adjustments
for individual and business unit performance are made, the maximum amount that
the Chief Executive Officer would receive is approximately 137 percent of base
salary. The total amount of MICP awards may be further affected by the amount of
funds allocated for awards. If the amount allocated by the Board of Directors is
less than the aggregate of all proposed payments, payments will be reduced on a
pro rata basis.
14
<PAGE> 20
The Committee retains complete discretion in performing these reviews and in
determining the amount of actual awards, if any. Consequently, no particular
analytical weighting of criteria is required or performed. Following review of
the achievements of the Corporation and its operating units as compared to
target goals established at the beginning of the plan year, a comparative review
of the individual contributions of each participant towards achieving these
goals is conducted. The 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.
In performing these evaluations, except as to any award to be made to the Chief
Executive Officer, the Committee also considers the recommendations of the Chief
Executive Officer.
For purposes of determining awards under the MICP for Mr. Augustine and Dr.
Coffman and the other four named executive officers, the Committee measured the
Corporation's or business unit's performance against the various financial,
business development and operations goals discussed above. In addition, the
Committee considered other significant accomplishments such as the continued
successful execution of the Corporation's consolidation plans and the agreement
reached with Northrop Grumman to acquire Northrop Grumman. Awards were made in
January 1998 with respect to performance in the year ended December 31, 1997.
Mr. Augustine's actual award, $1,000,000 as specified by the Board, represented
an amount which was prorated to his date of retirement. Annualized ($1,714,286)
this award represents approximately 137 percent of base salary or approximately
76 percent of total cash compensation. Dr. Coffman's annual incentive of
$1,100,000 represented approximately 105 percent of base salary or approximately
51 percent of total cash compensation. The reference to total cash compensation
here and elsewhere in this report relates to annual base salary, as of year end
1997, or in the case of Mr. Augustine, prior to retirement, and the incentive
award paid in 1998 for 1997 performance. Compared to the survey group, Mr.
Augustine's award was approximately 45 percent above the 50th percentile, while
his total cash compensation was approximately 25 percent above the 50th
percentile. Compared to the survey group, Dr. Coffman's award was approximately
7 percent below the 50th percentile (Chief Executive Officer position), while
his total cash compensation was approximately 9 percent below the 50th
percentile (Chief Executive Officer position). With respect to the remaining
four named executive officers as a group, on average, annual awards represented
approximately 99 percent of base salary or 50 percent of total cash compensation
and were approximately 39 percent above the average annual awards of the
comparison group, while total cash compensation for the group was approximately
18 percent above the market 50th percentile. These award levels reflect the
superior performance of the named individuals and of the Corporation and are
consistent with the Committee's philosophy on executive compensation.
LONG-TERM COMPENSATION - OMNIBUS PERFORMANCE AWARD PLAN. The Lockheed Martin
Corporation Omnibus Performance Award Plan ("Omnibus Plan") was approved by the
stockholders in 1995. The Omnibus Plan provides for the granting of
performance-related awards in various forms including stock options, stock
appreciation rights, restricted stock and other share-based awards or cash-based
incentive awards such as performance units. Since its adoption, the only type of
award made under the Omnibus Plan has been nonqualified stock options. Stock
options awarded under the Omnibus Plan directly link the compensation provided
to executive officers and a group of approximately 2,200 key personnel in 1997
with gains realized by the Corporation's stockholders. The purpose of the option
program is to provide additional incentives to employees to strive to maximize
stockholder value. The vesting periods associated with stock options encourage
continued employment with the Corporation while also serving to confer upon
recipients an ownership interest in the Corporation. All options awarded have an
exercise price equal to the closing market 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 Corporation's common stock increases.
The number of options granted to key executives is based upon survey data
relating to the same corporations surveyed in conjunction with setting base
salaries and annual incentives. Since long-term awards vest over time, the
Corporation grants new awards to key executives to provide continuing incentives
for future performance without regard to the number of options currently held by
the recipient. The Committee believes that stock ownership by executives is
extremely important and discusses the Corporation's stock ownership guidelines
under the caption "Stock Ownership Guidelines." As previously noted, grants of
options under the Omnibus Plan are made by the Stock Option Subcommittee. The
determination of the number of options awarded is within the complete discretion
of the Subcommittee. In exercising its discretion, the Subcommittee generally
follows the same procedures as are followed by the Compensation Committee in
determining the amount of incentive compensation awards.
Consistent with the Corporation's compensation philosophy, the Subcommittee
strives to provide option awards to key executives, as a multiple of base
salary, near the average of awards made by firms in the Corporation's 27-firm
comparator group. Mr. Augustine received a grant of 140,000 stock options in
January 1997, the value of which was approximately 2 percent below the 50th
percentile. In consideration
15
<PAGE> 21
of Mr. Augustine's recognized role in the leadership of Lockheed Martin, the
Committee elected to authorize Mr. Augustine's stock option grant to vest in the
normal course and be exercisable for the duration of the original grant. Dr.
Coffman received a grant of 100,000 options, the value of which was
approximately 30 percent below the 50th percentile (Chief Executive Officer
position). The remaining named executives received on average awards that were
approximately 13 percent below the 50th percentile level of awards granted by
the companies comprising the comparison group.
SUMMARY. Mr. Augustine's total annualized compensation for 1997, consisting
of base salary, annual incentive compensation, and long term compensation, was
approximately 8 percent above the 50th percentile. Dr. Coffman's total
compensation for 1997, consisting of base salary, annual incentive compensation
and long term compensation was approximately 22 percent below the 50th
percentile (Chief Executive Officer position). The total compensation of the
remaining named executives for 1997 fell at the 50th percentile.
Relationship of Awards to Corporate Performance
The Corporation had an outstanding year in 1997 and
compensation awarded to the Corporation's executive officers (including the
named executives) reflects this. Lockheed Martin's stock price appreciation,
plus reinvested dividends, produced a 9.5 percent return in the year 1997 and an
annual average return of 28 percent since public trading of the Corporation's
common stock began on March 16, 1995. This return compares favorably with the 25
percent return of the Peer Issuers Index and the 30 percent total return
recorded by the Standard & Poor's 500 Index over this same period. The
Corporation made concrete its stated goal of delivering high quality products
and services to its customers by achieving a 96 percent success rate on 640
measurable events, garnering average award fees of over 90 percent. The
Corporation exceeded both the earnings and cash generation estimates contained
in the Corporation's Long Range Plan. At the same time, the Corporation laid a
strong foundation for the future achieving an enviable win rate on programs and
winning a number of major competitions including Wind Corrected Munitions
Dispersion, New Scottish Air Traffic Control Centre, Spanish Frigates, Postal
Tray Management System, Italian C-130J Aircraft, Apache Prime Vendor Support,
F-117 Total Systems Support, Titan Satellite/Launcher Integration, New Jersey
Toll Collection, and Joint SIGINT Architecture Family. The Corporation achieved
a greater than two-thirds win rate, both of programs and dollars bid. The
Corporation's consolidation efforts also continued to benefit stockholders,
customers and taxpayers. The Corporation is on track to achieve, by 1999,
projected steady-state annual savings of nearly $2.6 billion from consolidation
initiatives arising from previous merger and acquisition activities, including
the Lockheed-Martin Marietta and Lockheed Martin-Loral combinations. The
Northrop Grumman combination provides the potential for an additional
approximately $1 billion in steady-state annual savings.
As in the prior year, portfolio shaping remains an important part of the
Corporation's long-term strategy to manage cash flow and enhance stockholder
value. During 1997, the Corporation repositioned ten non-core former business
units as a new independent company, L-3 Communications Holdings, Inc. The
Corporation and GE announced an agreement for GE Medical Systems to purchase the
assets of Lockheed Martin Medical Imaging Systems, a unit that manufactures and
sells medical imaging equipment. In addition, the Corporation and GE announced a
definitive agreement to exchange a subsidiary comprising two non-core commercial
business units, the Corporation's investment in a telecommunications partnership
and cash for all outstanding shares of Lockheed Martin Series A preferred stock
held by GE. The preferred stock was convertible into 29 million equivalent
shares of Lockheed Martin common stock.
The Committee believes that these and other achievements of the Corporation
reflect the hard work and dedication of each of the Corporation's employees and
the leadership of the Corporation's executive officers including the named
executives and the two individuals who served as Chief Executive Officer during
1997. In setting the compensation awarded to these individuals, the Committee
specifically considered the tangible results of this leadership which have been
instrumental in enhancing stockholder value.
Stock Ownership Guidelines
The Board of Directors believes that a close alignment of the interests of
the Corporation's executives and its stockholders is imperative. Reflecting this
belief, in 1995, the Board adopted stock ownership guidelines that apply to
employees of the Corporation who participate in the MICP and who have an annual
base salary of $100,000 or more. Under the guidelines, the Chief Executive
Officer is expected to have an ownership interest in the Corporation's common
stock of at least five times his or her salary. The President is expected to
have an ownership interest in the Corporation's common stock of at least four
times his or her salary. Executive Vice Presidents, Sector Presidents and Senior
Vice Presidents, a grouping that includes the remaining named executives, are
expected to have ownership interests of three times base salary. Other employees
subject to the guidelines are expected to have ownership interests of
16
<PAGE> 22
two times base salary. Although there is no specific time period in which an
employee subject to the guidelines must meet these targets, continuous progress
is expected and employees must certify annually that they are making such
progress. Ownership represented by unexercised stock options is not considered
for the purpose of meeting the guidelines. The Corporation has recommended that
employees who have not reached their targets use specified percentages of any
incentive compensation award they receive to do so.
Executive Compensation - Tax Deductibility
For income tax purposes, publicly held corporations are not permitted to
deduct compensation paid to any named executive in excess of $1 million. As
discussed under the caption "Role of Stock Option Subcommittee," stock option
grants under the Omnibus Plan made by the Committee meet the requirements for
deductible compensation under Internal Revenue Code Section 162(m). The
Committee believes that the decrease in tax liability that would result from
further action to reduce exposure to the $1 million limitation is of
insufficient magnitude to warrant alteration to the present compensation system
which is achieving the compensation objectives of the Committee discussed above
and which retains the flexibility of the Committee to exercise subjective
judgment in assessing an executive's performance. The Committee has concluded
that approximately $600,000 of the compensation awarded in 1997 is not
deductible on account of the $1 million limitation.
Submitted by the Compensation Committee and Stock Option Subcommittee,
<TABLE>
<S> <C>
/s/Allen E. Murray
--------------------------------------
Chairman - Compensation Committee
Chairman - Stock Option Subcommittee
/s/James F. Gibbons /s/Carlisle A. H. Trost
-------------------------------------- ------------------------------
James F. Gibbons Carlisle A. H. Trost
Compensation Committee Compensation Committee
Stock Option Subcommittee Stock Option Subcommittee
/s/Edward E. Hood, Jr. /s/Douglas C. Yearley
-------------------------------------- ------------------------------
Edward E. Hood, Jr. Douglas C. Yearley
Compensation Committee Compensation Committee
Stock Option Subcommittee Stock Option Subcommittee
/s/Eugene F. Murphy
--------------------------------------
Eugene F. Murphy
Compensation Committee
</TABLE>
17
<PAGE> 23
EXECUTIVE BENEFITS
The Lockheed Martin Corporation Post-Retirement Death Benefit Plan for
Elected Officers provides a death benefit for retired elected officers of the
Corporation at a level of 1.5 times the officer's base salary at the time of
retirement. The amount payable under the plan is reduced to the extent an
officer has not waived his or her benefits (if any) under the Martin Marietta
Post-Retirement Death Benefit Plan or the Lockheed Post Retirement Death Benefit
Plan. Officers of the Corporation are also provided personal liability insurance
coverage while employed as an officer of $5,000,000 and accidental death and
dismemberment coverage while employed as an officer of $1,000,000.
Certain former officers of Lockheed were eligible for awards beginning in
1993 under the Long Term Performance Plan of Lockheed and its Subsidiaries. This
plan was similar to a predecessor plan sponsored by Lockheed which was
terminated effective March 15, 1995. Awards were based on financial performance
over 3-year performance cycles, beginning in 1993 and 1994. Performance
measurements for each cycle were based on absolute percentage gain in total
stockholder value as compared to an absolute target and investment value
relative to a peer group investment value. In April 1996, all participants
received prorated awards under the plan for the 1993 cycle. In April 1997, all
participants received prorated awards under the plan for the 1994 cycle, the
last cycle for which this plan was in effect. Payments made under this plan for
the 1993 and 1994 cycles were reduced by any payment made to a participant under
corresponding cycles of the predecessor plan. Payments were made in cash unless
the participant elected to defer the payment.
Key management employees may defer receipt of all or a portion of an
incentive compensation award under the Lockheed Martin Corporation Deferred
Management Incentive Compensation Plan. The amount with accrued earnings
generally will be paid in a lump sum or in up to fifteen annual installments as
elected by the employee at the time the employee makes a deferral election. A
participant may elect to receive earnings on amounts deferred by reference to
either (i) the published rate for computing the present value of future benefits
under Cost Accounting Standard No. 415; or (ii) the performance of the
Corporation's common stock (including reinvestment of dividends). All amounts
accumulated under the plan must be paid in a lump sum within fifteen days
following a change of control.
Prior to March 15, 1995, Lockheed had entered into severance agreements (the
"Termination Benefits Agreements") with officers of that corporation. Those
agreements generally provide for the payment of certain benefits described below
if, within three years after the occurrence of certain events with respect to
Lockheed, the covered officer either (a) is terminated by Lockheed (other than
on account of death, disability or retirement of the officer or for "cause" as
defined in the Termination Benefits Agreements), or (b) terminates his or her
employment with Lockheed for "good reason" (as defined in the Termination
Benefits Agreements).
The Termination Benefits Agreements provide for a lump sum cash payment equal
to the sum of the following amounts: two times the officer's base annual salary
at the time of the triggering event or termination, two times an amount
determined by multiplying the officer's base salary by the average percentage of
awards under the Lockheed Management Incentive Compensation Plan to base salary
paid during the last two years, and the cash value of the officer's contingent
award established under the Lockheed Long Term Performance Plan for each
incomplete performance cycle as of the date of termination, calculated on the
basis that all performance goals were fully attained and such performance cycles
were completed in their entirety. The Termination Benefits Agreements also
provide for a payment equal to the value of certain health and dental insurance
plans and other fringe benefits as in effect prior to the change in control for
a two-year period following termination. Additional benefits provided by the
Termination Benefits Agreements include the vesting of all retirement benefits
and the addition of two years of credited service under Lockheed's salaried
retirement plans and the entitlement to two additional years of matching
contributions under Lockheed's savings plans. Benefits under the Termination
Benefits Agreement may be subject to an excise tax payable by the officer, and
may not be deductible by the Corporation, to the extent they exceed certain
statutory limitations
Prior to March 15, 1995, Martin Marietta had entered into employment
agreements with certain of its officers ("Executive Agreements"). Under the
Executive Agreements, following certain events, the officer may, for "good
cause" (as that term is defined in the Executive Agreements) and within two
years of that event and within six months after the date on which circumstances
constituting good cause exist, give notice that he or she elects to terminate
employment under the agreement. Upon receipt of such notice, or upon involuntary
termination by Martin Marietta, the Executive Agreements require Martin Marietta
to pay the officer an amount equal to three times his or her average annual
taxable compensation for the preceding five years, less one dollar, as well as
any other compensation or benefits due and any amount necessary to compensate
the officer for any excise tax imposed with respect to payments made under the
Executive Agreement or any other agreement between the officer and Martin
Marietta.
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<PAGE> 24
The Corporation has adopted the Termination Benefits Agreements and the
Executive Agreements and has assumed the rights and obligations of Lockheed and
Martin Marietta thereunder.
The Combination constituted events under the Termination Benefits Agreements
and the Executive Agreements which would entitle the officers to the payment of
benefits under the applicable agreement if there is a termination of employment
and the termination satisfies the requirements of the applicable agreement
within the time frame contained in the agreement. Dr. Coffman and Mr. Blackwell
held Termination Benefits Agreements. Dr. Coffman voluntarily waived his rights
under his Termination Benefits Agreement as it related to the combination of
Lockheed and Martin Marietta. Messrs. Augustine, Bennett and Teets held
Executive Agreements. Mr. Augustine voluntarily waived his rights under his
Executive Agreement as it related to the combination of Lockheed and Martin
Marietta.
The Termination Benefits Agreements expired on March 15, 1998. The Executive
Agreements expired on March 15, 1997.
Lockheed Martin has entered into retention agreements with certain officers
of the Corporation. The agreements generally provide for the payment of certain
benefits described as follows. If the Corporation wins a specified major program
competition, and the covered executive remains employed through December 31,
2001, the benefit ("retention benefit") will be equal to two times annual base
salary and bonus (bonus will be calculated as the average of the prior three
years' actual bonus payments). If the Corporation does not win the specified
program competition, the retention benefit will be reduced by one-third. If the
covered executive terminates employment with Lockheed Martin prior to December
31, 2001, a pro-rata share of the retention benefit, reduced by one-third, will
be paid. In the event the specified program award decision is delayed beyond
December 31, 2001, one-third of the retention benefit may be deferred, or paid,
at the discretion of the Compensation Committee of the Board of Directors. If
the specified major program competition results in a partial award to the
Corporation, the partial award will be considered a competition win. Mr.
Blackwell has a retention agreement.
DEFINED CONTRIBUTION PLANS
The Corporation sponsors a number of different defined contribution plans
which cover virtually all employees of the Corporation. During 1997, the
Lockheed Martin Corporation Salaried Savings Plan ("Salaried Savings Plan")
covered the named executive officers.
The Salaried Savings Plan permits eligible employees to make regular savings
contributions on a pre-tax or after-tax basis. For the year ending December 31,
1997, participants could contribute up to 17 percent of their current base
salary (maximum of 16 percent on a pre-tax basis) subject to the limitations
imposed by the Internal Revenue Code. In addition, the Corporation made a
matching contribution to the participant's account equal to 50 percent of up to
the first 8 percent of compensation contributed by the participant.
All contributions to the Salaried Savings Plan are 100 percent vested. Full
distribution under the Salaried Savings Plan is generally made upon the
termination, layoff, retirement, disability or death of the participant.
Participants in the Salaried Savings Plan may direct the investment of
employee contributions among eleven different investment options including
unitized funds invested in the Corporation's common stock. One hundred percent
of the Corporation's matching contribution is invested in the ESOP Stock Fund,
which is in part funded by an employee stock ownership feature of the plan.
Because of the limitations on annual contributions to the Salaried Savings
Plan contained in the Internal Revenue Code, certain employees are not allowed
to elect to contribute the maximum 17 percent of compensation otherwise
permitted by the Salaried Savings Plan. A supplemental savings plan
("Supplemental Plan") has been established for certain Salaried Savings Plan
participants affected by these limits. Additional matching contributions that
become payable under a Termination Benefits Agreement are also payable through
this plan. Earnings credited to a Supplemental Plan account mirror the
participant's investment elections under the Salaried Savings Plan including
investments in the Corporation's common stock, except that investments in the
Supplemental Plan reflect only bookkeeping entries rather than actual purchases
of the underlying instruments. The Supplemental Plan provides for payment
following termination of employment in a lump sum or up to twenty annual
installments. All amounts accumulated and unpaid under the Supplemental Plan
must be paid in a lump sum within fifteen calendar days following a change in
control, as defined in the plan document.
The Lockheed Martin Salaried Savings Plan Plus ("Lockheed Savings Plan") and
the Lockheed Martin Corporation Performance Sharing Plan ("Martin Savings Plan")
were merged during 1997 to form the Salaried Savings Plan. Prior to January 1,
1997, Lockheed Savings Plan participants could contribute from 2 percent to 12
percent of their base compensation which was matched by the Corporation at the
rate
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<PAGE> 25
of 60 percent of up to the first 8 percent of compensation contributed. Lockheed
Savings Plan participants vested in Corporation matching contributions over a
five-year period. Prior to January 1, 1997, matching contributions to the Martin
Savings Plan were made in cash. Martin Savings Plan participants were not
eligible for the Supplemental Plan until January 1, 1997.
PENSION PLANS
The Corporation sponsors a number of pension plans for employees. During
1997, the named executive officers participated in the Lockheed Martin
Retirement Program, which is made up of a number of component pension plans,
including the Lockheed Martin Retirement Plan for Certain Salaried Employees
(the "Lockheed Plan") and the Lockheed Martin Retirement Income Plans I and II
(the "Martin Plan"). The Lockheed Plan covers employees previously employed by
Lockheed while the Martin Plan covers employees previously employed by Martin
Marietta.
The calculation of retirement benefits under the Lockheed Martin Retirement
Program is determined by a formula which takes into account the participant's
years of credited service and average compensation for the highest three
consecutive years of the last ten years of employment with the Corporation
preceding retirement. Average compensation includes the employee's normal rate
of pay (without overtime) and bonuses earned under the MICP and lump sum
payments in lieu of a salary increase. Normal retirement age is 65; however,
benefits are payable as early as age 55 at a reduced amount or without reduction
at age 60. Certain employees who retire between age 60 and 62 are eligible for
supplemental payments ending at age 62.
During a five year period ending on June 30, 2002, an employee who
participated in the Lockheed Plan or the Martin Plan prior to July 1, 1997 will
receive his or her pension calculated in accordance with the formula used in the
Lockheed Martin Retirement Program, or if the pension benefit would be greater,
in accordance with the formula under the Lockheed Plan or the Martin Plan,
whichever is applicable.
The formula for calculating pension benefits under the Lockheed Plan is
similar to that used in the Lockheed Martin Retirement Program except that
average compensation is based on the highest five consecutive years of the last
ten years of employment. In addition, if an employee's age and years of credited
service equal or exceed 85, a participant can retire as early as age 55 without
actuarial reduction.
The Lockheed Plan provides that, in the event of a change in control of
Lockheed (as defined in the plan document), (i) the Lockheed Retirement Plan may
not be terminated and the benefits payable thereunder may not be adversely
modified for a period of two years following such change in control; (ii) the
Lockheed Retirement Plan may not be merged or consolidated with an underfunded
plan during the five-year period following such change in control; and (iii) if
the Lockheed Retirement Plan is terminated within the five-year period following
such change in control any surplus assets remaining after satisfaction of all
plan liabilities, taxes and other rightful claims of the U.S. government shall
be transferred to a trust and applied solely to the payment of certain employee
benefits otherwise payable to employees and retirees (e.g., retiree medical
benefits), the trust shall remain in existence at least until the expiration of
that five-year term. In addition, during the five-year period following a change
in control, the Lockheed Retirement Plan may not invest in securities issued by
Lockheed or any affiliate of Lockheed, any entity in which 10 percent or more of
the equity interests are held in the aggregate by officers, directors or
affiliates of Lockheed, or by 5 percent stockholders of Lockheed. The
combination constituted a change in control under the Lockheed Retirement Plan.
The formula for calculating pension benefits under the Martin Plan is similar
to that used in the Lockheed Martin Retirement Program except that the formula
takes into account amounts earned during the year as base salary, MICP bonuses
awarded that year, lump sum payments in lieu of a salary increase and overtime.
Certain participants who retire as early as age 55 are also eligible for
supplements payable until age 62 based on years of credited service.
The Lockheed Martin Retirement Program was effective July 1, 1997. Prior to
that date, pension benefits were calculated only under the applicable formula in
the Martin Plan or the Lockheed Plan.
Certain salaried employees of the Corporation also participate in
nonqualified supplemental retirement plans. These supplemental plans pay
benefits in excess of Internal Revenue Code limits on qualified plan benefits or
in some instances in accordance with a grandfathered or special pension formula.
The supplemental plans generally pay benefits at the same time and in the same
form as benefits are paid under the Lockheed Martin Retirement Program although
lump sum payments are available under some supplemental plans. The plans
providing supplemental benefits to the Lockheed Plan provide that any
participant receiving annuity benefits under such plans at the time of a change
in control of Lockheed, as defined, will receive, in lieu of the continuation of
such annuity payments, the actuarial equivalent of such benefits in a lump sum
payable within thirty calendar days following the change in control.
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The amounts listed on the tables which follow are not subject to any
deduction for Social Security benefits or other offsets and are computed as
single life annuities.
As of December 31, 1997, the estimated 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. Augustine
$952,973 (based on Mr. Augustine's retirement on August 1, 1997); Dr. Coffman
$1,355,351; Mr. Teets $915,090; Mr. Bennett $793,220; Mr. Corcoran $656,445 and
Mr. Blackwell $536,383. These amounts (as do the amounts shown on the tables)
include benefits payable under the supplemental plans. The years of credited
service as of December 31, 1997, for Messrs. Augustine, Coffman, Teets, Bennett,
Corcoran and Blackwell were 21 years, 30 years, 35 years, 39 years, 30 years and
28 years, respectively.
Set forth below are pension tables which show the estimated annual benefits
payable upon retirement for specified earnings and years of service under the
Lockheed Plan and the Martin Plan.
MAXIMUM ANNUAL BENEFIT PAYABLE UPON NORMAL RETIREMENT
LOCKHEED PLAN (A)
<TABLE>
<CAPTION>
=================================================================================
Five Year
Average 15 Years Of 20 Years Of 25 Years Of 30 Years Of 40 Years Of
Compensation Service Service Service Service Service
=================================================================================
<S> <C> <C> <C> <C> <C>
$ 100,000 21,915 29,220 36,525 43,830 58,440
- ---------------------------------------------------------------------------------
150,000 33,165 44,220 55,275 66,330 88,440
- ---------------------------------------------------------------------------------
200,000 44,415 59,220 74,025 88,830 118,440
- ---------------------------------------------------------------------------------
300,000 66,915 89,220 111,525 133,830 178,440
- ---------------------------------------------------------------------------------
400,000 89,415 119,220 149,025 178,830 238,440
- ---------------------------------------------------------------------------------
500,000 111,915 149,220 186,525 223,830 298,440
- ---------------------------------------------------------------------------------
600,000 134,415 179,220 224,025 268,830 358,440
- ---------------------------------------------------------------------------------
700,000 156,915 209,220 261,525 313,830 418,440
- ---------------------------------------------------------------------------------
800,000 179,415 239,220 299,025 358,830 478,440
- ---------------------------------------------------------------------------------
900,000 201,915 269,220 336,525 403,830 538,440
- ---------------------------------------------------------------------------------
1,000,000 224,415 299,220 374,025 448,830 598,440
- ---------------------------------------------------------------------------------
1,200,000 269,415 359,220 449,025 538,830 718,440
- ---------------------------------------------------------------------------------
1,400,000 314,415 419,220 524,025 628,830 838,440
- ---------------------------------------------------------------------------------
1,600,000 359,415 479,220 599,025 718,830 958,440
- ---------------------------------------------------------------------------------
1,800,000 404,415 539,220 674,025 808,830 1,078,440
- ---------------------------------------------------------------------------------
2,000,000 449,415 599,220 749,025 898,830 1,198,440
- ---------------------------------------------------------------------------------
2,500,000 561,915 749,220 936,525 1,123,830 1,498,440
- ---------------------------------------------------------------------------------
2,700,000 606,915 809,220 1,011,525 1,213,830 1,618,440
=================================================================================
</TABLE>
(A)All figures listed in the chart above are benefits payable under the greater
of the Lockheed Martin Retirement Program or the Lockheed Plan. These
benefits may be limited by sections 401(a)(17) and 415(b) of the Internal
Revenue Code. The maximum earnings which may be considered to compute a
benefit in accordance with Section 401(a)(17) of the Code is $160,000. The
maximum amount payable under the Plans as of December 31, 1997 in accordance
with Section 415(b) of the Code is $125,000.
21
<PAGE> 27
MAXIMUM ANNUAL BENEFIT PAYABLE UPON NORMAL RETIREMENT
MARTIN PLAN (A)
<TABLE>
<CAPTION>
==================================================================================
THREE YEAR
AVERAGE 15 Years Of 20 Years Of 25 Years Of 30 Years Of 40 Years Of
COMPENSATION Service(B) Service(B) Service(C) Service(C) Service(C)
==================================================================================
<S> <C> <C> <C> <C> <C>
$ 100,000 21,401 28,535 46,599 51,777 57,397
- ----------------------------------------------------------------------------------
150,000 32,651 43,535 71,349 79,277 87,647
- ----------------------------------------------------------------------------------
200,000 43,901 58,535 96,099 106,777 117,897
- ----------------------------------------------------------------------------------
300,000 66,401 88,535 145,599 161,777 178,397
- ----------------------------------------------------------------------------------
400,000 88,901 118,535 195,099 216,777 238,897
- ----------------------------------------------------------------------------------
500,000 111,401 148,535 244,599 271,777 299,397
- ----------------------------------------------------------------------------------
600,000 133,901 178,535 294,099 326,777 359,897
- ----------------------------------------------------------------------------------
700,000 156,401 208,535 343,599 381,777 420,397
- ----------------------------------------------------------------------------------
800,000 178,901 238,535 393,099 436,777 480,897
- ----------------------------------------------------------------------------------
900,000 201,401 268,535 442,599 491,777 541,397
- ----------------------------------------------------------------------------------
1,000,000 223,901 298,535 492,099 546,777 601,897
- ----------------------------------------------------------------------------------
1,200,000 268,901 358,535 591,099 656,777 722,897
- ----------------------------------------------------------------------------------
1,400,000 313,901 418,535 690,099 766,777 843,897
- ----------------------------------------------------------------------------------
1,600,000 358,901 478,535 789,099 876,777 964,897
- ----------------------------------------------------------------------------------
1,800,000 403,901 538,535 888,099 986,777 1,085,897
- ----------------------------------------------------------------------------------
2,000,000 448,901 598,535 987,099 1,096,777 1,206,897
- ----------------------------------------------------------------------------------
2,500,000 561,401 748,535 1,234,599 1,371,777 1,509,397
- ----------------------------------------------------------------------------------
2,700,000 606,401 808,535 1,333,599 1,481,777 1,630,397
==================================================================================
</TABLE>
(A) All figures listed in the chart above are benefits payable under the
greater of the Lockheed Martin Retirement Program or the Martin Marietta
Retirement Income Plan. These benefits may be limited by sections
401(a)(17) and 415(b) of the Internal Revenue Code. The maximum amount
which may be considered to compute a benefit in accordance with Section
401(a)(17) of the Code is $160,000. The maximum amount payable under the
Plans as of December 31, 1997, in accordance with Section 415(b) of the
Code is $125,000.
(B) When the Martin Plan was amended to comply with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), a modified version of
the existing benefit accrual formula was preserved for certain employees
who were participants in the Plan prior to October 1, 1975 ("Pre-ERISA
Formula"). Employees who became participants after that date accrue
benefits under a different formula ("Post-ERISA Formula"). In January 1991,
the Martin Plan was amended to provide that future accruals for all highly
compensated employees would be based on the Post-ERISA Formula. If as a
result of the amendment, an employee receives less from the Martin Plan
than would have been otherwise received under the Pre-ERISA Formula, the
Corporation intends to make up the difference out of general corporate
assets. The amounts in this column are calculated under the Post-ERISA
formula.
(C) Calculated under the Pre-ERISA formula.
22
<PAGE> 28
STOCK PRICE PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN THROUGH 1997 [1]
LOCKHEED MARTIN, S&P 500 INDEX AND PEER ISSUERS INDEX [2,3]
<TABLE>
<CAPTION>
3/16/95 Mar-95 Jun-95 Sep-95 Dec-95 Mar-96 Jun-96
<S> <C> <C> <C> <C> <C> <C> <C>
LMT 100 102 123 131 156 150 167
S&P 500 100 101 111 119 127 133 139
Peer Issuers Index 100 105 119 131 150 157 163
</TABLE>
<TABLE>
<CAPTION>
Sep-96 Dec-96 Mar-97 Jun-97 Sep-97 Dec-97
<S> <C> <C> <C> <C> <C> <C>
LMT 180 183 169 209 216 201
S&P 500 144 156 160 188 202 207
Peer Issuers Index 179 186 172 196 212 188
</TABLE>
(1) Assumes that the investment in Lockheed Martin Common stock ("LMT") and each
index was $100 on March 16, 1995 (the first day of trading in LMT) with
reinvestment of dividends.
(2) The Peer Issuers Index is a market weighted index comprised of: The Boeing
Company, General Dynamics Corporation, Litton Industries, Inc., Lockheed
Martin Corporation, Northrop Grumman Corporation and Raytheon Corporation.
(3) The Peer Issuers Index in Lockheed Martin's 1997 Proxy Statement included
McDonnell Douglas Corporation in addition to the corporations contained in
this 1998 Index and did not include The Boeing Company (see Note 2). The
index has been restated to omit McDonnell Douglas Corporation and include
The Boeing Company as the two companies merged effective August 1, 1997, and
trading data as to McDonnell Douglas Corporation common stock is no longer
available.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Corporation's officers and directors and persons who own more than 10 percent of
a registered class of the Corporation's equity securities file reports of
ownership and changes in ownership with the Securities and Exchange Commission,
the New York Stock Exchange and the Corporation. Based solely on its review of
copies of the forms received by it, or written representations from reporting
persons that they were not required to file a Form 5, the Corporation believes
that, with respect to transactions required to have been reported in 1997 or in
1998 on a Form 5 for the year ended December 31, 1997, all filing requirements
were complied with on a timely basis. The Corporation is not aware of any known
failure to file a required report.
23
<PAGE> 29
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends that the stockholders ratify the
appointment of Ernst & Young LLP, independent auditors, to audit the
consolidated financial statements of the Corporation for year 1998. The
ratification of the appointment of Ernst & Young LLP is being submitted to the
stockholders because the Board of Directors believes this to be good corporate
governance. Should the stockholders 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, will have the opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF APPOINTMENT
OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE YEAR 1998.
PROPOSED AMENDMENT TO THE 1995 OMNIBUS PERFORMANCE AWARD PLAN
The Board of Directors recommends that the stockholders approve the following
amendment to the 1995 Omnibus Performance Award Plan:
RESOLVED, That the following amendment to the 1995 Omnibus Performance
Award Plan, which increases the number of shares authorized for issuance by
8,500,000 to 20,500,000, be, and hereby is, approved:
Section 5(a) is amended to read as follows:
"(a) Aggregate Share Limit. The maximum number of shares of Stock that
may be issued pursuant to all Share-Based Awards (including Incentive Stock
Options) is 20,500,000 subject to adjustment as provided in this Section 5
or Section 7."
Background of Proposed Amendment to the 1995 Omnibus Performance
Award Plan
The Lockheed Martin Omnibus Plan ("Plan"), as approved in 1995, authorized
grants of up to 12,000,000 shares of common stock (subject to adjustment
pursuant to Sections 5 or 7 of the Plan). As of January 31, 1998, approximately
2,266,000 shares remained available for future grants. Since the Plan's approval
by the stockholders in 1995, only nonqualified stock options have been awarded
under the Plan. Share replenishment is recommended at this time because of the
expansion of the program since 1995 and the anticipated addition of Northrop
Grumman Corporation ("Northrop Grumman") employees in 1998 following the
consummation of the Corporation's transaction with Northrop Grumman. The Board
of Directors, on February 26, 1998, recommended that the stockholders approve an
amendment to the Plan, increasing by 8,500,000 the number of shares of common
stock available under the Plan. Based upon the Corporation's public shares
outstanding following the consummation of the Northrop Grumman transaction, and
accounting for unexercised stock options, outstanding long term incentive stock
awards, and the remaining outstanding shares available for grant under the 1995
Plan, the projected dilutive effect of the proposed issuance of 8,500,000 shares
is expected to be less than 10 percent. The stockholders of Lockheed Martin
Corporation are being asked to consider and approve the adoption of this
amendment. The Board believes that the Plan has encouraged and rewarded
participating officers and employees who have contributed to the success of
Lockheed Martin.
Description of the 1995 Omnibus Performance Award Plan
In 1995, as part of the combination of the businesses of Lockheed Corporation
and Martin Marietta Corporation, the stockholders of Lockheed Martin approved
the adoption of the Plan. Awards under the Plan may be granted to officers and
other key salaried employees of Lockheed Martin and its subsidiaries. No
individual, however, who beneficially owns stock possessing 5% or more of the
combined voting power of all classes of stock of Lockheed Martin is eligible to
participate. All officers of Lockheed Martin (three of whom are also directors
of Lockheed Martin) are among those eligible to receive awards, subject to the
discretion of the Committee (as defined below) to determine the particular
individuals who, from time to time, will be selected to receive awards. Although
the Plan authorizes awards in the form of stock options, stock appreciation
rights, restricted stock and other share-based incentive awards, or cash-based
incentive awards, such as performance units, the only type of award made to date
under the Plan has been nonqualified stock options. Stock options awarded under
the Plan directly link the compensation provided to executive officers and a
group of approximately 2,200 key personnel with gains realized by the
Corporation's stockholders. This number of key personnel is expected to increase
to approximately 3,000 with the addition of heritage Northrop Grumman employees
following the acquisition of Northrop Grumman. The number of key salaried
employees of Lockheed Martin and its subsidiaries eligible to receive awards in
any given year is subject to the discretion of the Committee and
24
<PAGE> 30
has not been determined at this time. In addition, neither the individuals who
are to receive awards, the number of awards that will be granted to any
individual or group of individuals, nor the amounts to be payable with respect
to awards, have been determined at this time. The Plan will remain in existence
as to all outstanding awards until all such awards are either exercised or
terminated; however, no award can be made after September 21, 2004.
Types of Awards
Awards under the Plan may be in the form of non-qualified stock options,
incentive stock options, stock appreciation rights (SARs), restricted stock and
other share-based incentive awards, or cash-based incentive awards, such as
performance units. Awards may be granted singly or in combination with other
awards, consistent with the terms of the Plan. The only type of award made to
date under the Plan has been nonqualified stock options. Each award will be
evidenced by an award agreement entered into between Lockheed Martin and the
recipient setting forth the specific terms and conditions applicable to that
award. Awards under the Plan that are not vested or exercised generally will be
nontransferable by a holder (other than by will or the laws of descent and
distribution) and rights thereunder generally will be exercisable during the
holder's lifetime only by the holder, subject to such exceptions as (consistent
with applicable legal considerations) may be authorized from time to time by the
Committee. The maximum term of unvested or unexercised awards under the Plan is
ten years after the initial date of grant.
Stock options authorized under the Plan are rights to purchase a specified
number of shares of Lockheed Martin common stock at an exercise price of not
less than 100% of the fair market value of the stock on the date of grant (or
date of amendment of the exercise price, if any) during the period set forth in
the award agreement. Stock options that are granted as incentive stock options
will be granted with such additional terms as are necessary to satisfy the
applicable requirements of Section 422 of the Code. The fair market value of the
Lockheed Martin common stock for which incentive stock options are exercisable
for the first time by an optionee during any calendar year can not exceed
$100,000 (measured as of the date of grant) under current tax law. Other awards
are not limited in this manner.
SARs entitle the recipient to receive, upon exercise of the SAR, an amount
(payable in cash and/or stock or other property) equal to the amount of the
excess, if any, of the fair market value of a share of Lockheed Martin common
stock on the date the SAR is exercised (or some lesser ceiling amount) over the
base price of the SAR, which cannot be less than the fair market value of a
share of Lockheed Martin common stock on the date the SAR was awarded or the
exercise price of a related stock option. SARs may be granted on a free-standing
basis, in relation to a stock option or in "tandem" with a stock option, such
that the exercise of either the option or the SAR cancels the recipient's rights
under the tandem award with respect to the number of shares so exercised. To
date, no SARs have been awarded under the Plan.
Restricted stock is Lockheed Martin common stock issued to the recipient,
typically for minimal lawful consideration and subject to certain risks of
forfeiture and restrictions and limitations on transfer, the vesting of which
may depend on individual or corporate performance, continued service or other
criteria. To date, no restricted stock has been awarded under the Plan.
Other share-based incentive awards might include phantom stock or units,
performance stock or units, bonus stock or units, dividend equivalent units,
similar securities or rights and other awards payable in or with a value derived
from or a price related to the fair market value of the Lockheed Martin common
stock, payable in Lockheed Martin common stock and/or cash, all on such terms as
the Committee may approve. Such awards may be granted, become vested or be
payable based upon the continued employment of a participant, or upon the
attainment of specified corporate or individual performance goals (as in the
case of performance stock or units).
The Plan also provides for the grant of long-term incentive awards that are
not denominated nor payable in and do not have a value derived from the value of
or a price related to shares of Lockheed Martin common stock and are payable
only in cash. Under the federal tax laws ("Section 162(m)"), Lockheed Martin may
not deduct certain compensation of over $1,000,000 in any year to the Chief
Executive Officer or one of the four other most highly compensated executive
officers of Lockheed Martin unless, among other things, this compensation
qualifies as "performance-based compensation" under Section 162(m), and the
material terms of the plan for such compensation are approved by stockholders.
Cash-based awards to executive officers are intended to satisfy the requirements
for performance-based compensation under Section 162(m). With reference to the
cash-based awards, the material terms of the Plan include the eligible class of
participants, the performance goal or goals and the maximum annual amount
payable thereunder to any individual participant.
The eligible class of persons for cash-based awards under the Plan is all key
salaried employees of Lockheed Martin and its subsidiaries. Cash-based awards
granted to executive officers thereunder may be granted only in accordance with
the requirements of Section 162(m), as set forth below. Cash-based
25
<PAGE> 31
awards to other key salaried employees may or may not be limited by the
requirements of Section 162(m), but will in any event be based on the
performance goals described below.
The performance goals for cash-based awards under the Plan are any one or a
combination of earnings per share, return on equity, total stockholder return
and cash flow (each as defined in the Plan). These goals will be applied over
either consecutive or rolling cycles of more than one but not more than five
fiscal years. Specific cycles, weightings of more than one performance goal and
target levels of performance upon which actual payments will be based, as well
as the award levels payable upon achievement of specified levels of performance,
will be determined by the Committee (as defined below) not later than the
applicable deadline under Section 162(m) and in any event at a time when
achievement of such targets is substantially uncertain. These variables may
change from cycle to cycle. Appropriate adjustments to the performance goals and
targets in respect of cash-based awards may be made by the Committee based upon
objective criteria in the case of significant acquisitions or dispositions by
Lockheed Martin, extraordinary gains or losses, material changes in accounting
principles or practices, or certain other events that in any case were not
anticipated (or the effects of which were not anticipated) at the time goals
were established, in order to neutralize the effect of such events on the
cash-based awards. Lockheed Martin believes that specific performance targets
(when established) are likely to constitute confidential business information,
the disclosure of which may adversely affect Lockheed Martin or mislead the
public.
The Committee must certify the achievement of the applicable performance
goals and the actual amount payable to each participant under the cash-based
awards prior to payment. Cash-based awards generally will be paid following the
completion of each cycle. The Committee may retain discretion to reduce, but not
increase, the amount payable under a cash-based award to any participant,
notwithstanding the achievement of targeted performance goals. Cash-based awards
may be accelerated in the event of a Change in Control of Lockheed Martin, as
described below. The maximum amount payable to any participant under all
cash-based awards during any calendar year will be $3,000,000. There is no
maximum aggregate dollar amount of cash-based awards under the Plan.
In addition to cash-based awards, other types of awards under the Plan may be
granted to qualify as performance-based compensation under Section 162(m). Stock
options and SARs that are granted under the Plan at a fair market value exercise
price are intended to qualify as performance-based compensation. In addition,
other share-based awards (such as restricted stock or performance units) may be
granted under the Plan to qualify as performance-based compensation under
Section 162(m). With reference to such other share-based awards intended to so
qualify, the material terms of the Plan are similar to those described above for
cash-based awards: the eligible class of persons is all key salaried employees
of Lockheed Martin and its subsidiaries, and the performance goals are any one
or a combination of earnings per share, return on equity, total stockholder
return and cash flow. The certification and payout procedures and nature of
Committee discretion with respect to the other share-based awards are
substantially the same as for the Section 162(m) cash-based awards. The maximum
number of shares (or share units) of Lockheed Martin common stock that may be
subject to all qualifying share-based awards, including stock options and SARs,
that are granted to any participant during any calendar year will not exceed
500,000 shares (or share units), either individually or in the aggregate.
The Committee also has the authority to grant awards under the Plan in
substitution for or as the result of the assumption of stock incentive awards
held by employees of other entities who become employees of Lockheed Martin or a
subsidiary as a result of a merger or acquisition of the entity.
Awards may be granted in connection with the surrender or cancellation of
previously granted awards, or may be amended, under such terms and conditions,
including numbers of shares and exercise price, exercisability or termination,
that are the same as or different from the existing awards, all as the Committee
may approve. Any amendment of an award to reduce its exercise or purchase price
will be subject to stockholder approval, except in the event of a change in
control or upon certain reorganization or recapitalization events or certain
anti-dilutive adjustments, as described below under "Authorized Shares; Other
Provisions; Non-Exclusivity."
Administration; Change in Control
The Plan provides that it shall be administered by a committee of the
Lockheed Martin Board ("Committee"), constituted so as to permit the plan to
comply with the "non-employee director" provisions of Rule 16b-3 under the
Exchange Act and the "outside director" requirements of Section 162(m). This
role is currently filled by the Stock Option Subcommittee. The Committee has the
authority within the terms and limitations of the Plan to designate recipients
of awards, determine or modify the form, amount, terms, conditions,
restrictions, and limitations of awards, including vesting provisions, terms of
exercise of an award, expiration dates and the treatment of an award in the
event of the retirement, disability, death or other termination of a
participant's employment with Lockheed Martin, and
26
<PAGE> 32
to construe and interpret the Plan. Such authority includes the discretion to
accelerate, extend and reduce (subject to the limitations noted above) the
exercise price of outstanding awards.
The Committee is authorized to include specific provisions in award
agreements relating to the treatment of awards in the event of a "Change in
Control" of Lockheed Martin (as defined in the Plan) and is authorized to take
certain other actions in such an event. Change in Control under the Plan is
defined generally to include a change in ownership involving 25% or more of the
outstanding voting securities of Lockheed Martin (or a combined entity), a
transfer of substantially all of its assets, or a change in a majority of the
members of its Board of Directors as a result of any such change or
reorganization or a contested election.
The Committee may delegate to the officers or employees of Lockheed Martin or
its subsidiaries the authority to execute and deliver such instruments and
documents and to take actions necessary, advisable or convenient for the
effective administration of the Plan. It is intended generally that the
share-based awards under the Plan and the Plan itself comply with and (as to
share-based awards) be interpreted in a manner that, in the case of participants
who are subject to Section 16 of the Exchange Act and for whom (or whose awards)
the benefits of Rule 16b-3 are intended, satisfy 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 that Section. In general, the cash-based awards
will not be subject to Section 16. The Plan provides that neither Lockheed
Martin nor any member of the Lockheed Martin Board or of the Committee shall
have any liability to any person for any action taken or not taken in good faith
under the Plan.
Amendment and Termination
The Lockheed Martin Board has the authority to amend, suspend or discontinue
the Plan at any time, provided that no such action will affect any outstanding
award in any manner adverse to the participant without the consent of the
participant. The Plan may be amended by the Lockheed Martin Board without
further stockholder approval, and no guidelines have been established relating
to the nature of the amendments that may be made to the Plan without stockholder
approval. Such approval, however, may be required (e.g., in the case of
amendments that materially increase the available number of shares under the
Plan) to satisfy tax rules applicable to performance-based compensation under
Section 162(m) or to subsequent grants of incentive stock options, or to satisfy
other applicable legal requirements. Amendments made without stockholder
approval could increase the costs to Lockheed Martin under the Plan, although
the amount thereof is not determinable. Because the Committee retains the
discretion to set and change the specific targets for each performance period
under a performance-based award intended to be exempt from Section 162(m),
stockholder ratification of the performance goals will be required, in any event
at five-year intervals in the future to exempt awards granted under the Plan
from the limitations on deductibility.
Authorized Shares; Other Provisions; Non-Exclusivity
The number of shares of Lockheed Martin common stock that may be issued in
respect of award under the Plan currently may not exceed 12,000,000 shares. An
equal number of share units representing share-based awards exercisable for or
payable in cash is also available. If the proposed amendment is adopted, the
number of shares of common stock issuable under the Plan will be increased by
8,500,000; the number of share units representing share-based awards exercisable
or payable in cash will remain 12,000,000. Shares of Lockheed Martin common
stock subject to share-based awards payable in cash or stock (whether at the
discretion of Lockheed Martin or the participant) will initially be counted
against each of the share limit and the share unit limit. When payment is
ultimately made in respect to the award in either shares or cash, a number of
shares or share units relating to the alternative form of consideration not so
paid will be recredited to the applicable limit.
The number and kind of shares available for grant and the shares subject to
outstanding awards (as well as individual share and share unit limits on awards,
performance targets and exercise prices of awards) may be adjusted to reflect
the effect of a stock dividend, split, recapitalization, merger, consolidation,
reorganization, combination or exchange of shares, extraordinary dividend or
other distribution or other similar transaction. Any unexercised or
undistributed portion of any expired, cancelled, terminated or forfeited award,
or alternative form of consideration under an award that is not paid in
connection with the settlement of any portion of an award, will again be
available for award under the Plan, whether or not the participant has received
benefits of ownership (such as dividends or dividend equivalents or voting
rights) during the period in which the participant's ownership was restricted or
otherwise not vested. Although shares subject to repriced or cancelled options
or SARs will be counted against the individual share-based award limits to the
extent required by Section 162(m), only shares actually issued or share units
actually paid will be charged against the aggregate share or share unit limits,
respectively, under the Plan. Upon approval of the amendment by the
stockholders, Lockheed Martin
27
<PAGE> 33
intends to register under the Securities Act of 1933 the additional 8,500,000
shares of Lockheed Martin common stock authorized for issuance under the Plan.
Full payment for shares purchased on exercise of any option, along with
payment of any required tax withholding, must be made at the time of such
exercise in cash or, if permitted by the Committee, in exchange for a promissory
note in favor of Lockheed Martin, in shares of stock having a fair market value
equivalent to the exercise price and withholding obligation, or any combination
thereof, or pursuant to such "cashless exercise" procedures as may be permitted
by the Committee. Any payment required in respect of other awards may be in such
amount and in any lawful form of consideration as may be authorized by the
Committee.
The Plan does not impose any minimum vesting periods on options or other
awards. However, shares of stock acquired after exercise of an option may not,
in the ordinary course, be sold before the expiration of six months from the
date of grant. The maximum term of an option or any other award is ten years.
The Plan is not exclusive and does not limit the authority of the Lockheed
Martin Board or its committees to grant awards or authorize any other
compensation, with or without reference to the Lockheed Martin common stock,
under any other plan or authority. The Plan is not expected to be the exclusive
cash incentive plan for eligible persons (including executive officers) of
Lockheed Martin and its subsidiaries; other cash incentive plans (such as
short-term or operating entity specific plans) may be retained and/or developed
to implement Lockheed Martin's broader-based compensation objectives and
policies. Approval of the proposed amendment to the Plan by the stockholders of
Lockheed Martin Corporation will not be deemed to constitute an approval of any
such other compensation, plan or authority.
Federal Income Tax Consequences
The following is a general description of Federal income tax consequences to
participants and Lockheed Martin relating to nonqualified and incentive stock
options and certain other awards that may be granted under the Plan. This
discussion does not purport to cover all tax consequences relating to stock
options and other awards.
A optionee will not recognize income upon the grant of a nonqualified stock
option to purchase shares of Lockheed Martin common stock. Upon exercise of the
option, the optionee will recognize ordinary compensation income equal to the
excess of the fair market value of the Lockheed Martin common stock on the date
the option is exercised over the option price for such stock. The tax basis of
the option stock in the hands of the optionee will equal the option price for
the stock plus the amount of ordinary compensation income the optionee
recognizes upon exercise of the option, and the holding period for the stock
will commence on the day the option is exercised. An optionee who sells option
stock will recognize capital gain or loss measured by the difference between the
tax basis of the stock and the amount realized on the sale. Such gain or loss
will be long-term if the stock is held for more than 18 months, mid-term if held
for 18 months or less but more than one year and short term if held for one year
or less after exercise. Lockheed Martin or a subsidiary will be entitled to a
deduction equal to the amount of ordinary compensation income recognized by the
optionee. The deduction will be allowed at the same time the optionee recognizes
the income.
An optionee will not recognize income upon the grant of an incentive stock
option to purchase shares of Lockheed Martin common stock, and will not
recognize income upon exercise of the option, provided such optionee was an
employee of Lockheed Martin or a subsidiary at all times from the date of grant
until three months prior to exercise (or one year prior to exercise in the event
of disability). Generally, the amount by which the fair market value of the
Lockheed Martin common stock on the date of exercise exceeds the option price
will be includable in alternative minimum taxable income for purposes of
determining alternative minimum tax and such amount will be added to the tax
basis of such stock for purposes of determining alternative minimum taxable
income in the year the stock is sold. Where an optionee who has exercised an
incentive stock option sells the shares acquired upon exercise more than two
years after the grant date and more than one year after exercise, long-term or
mid-term capital gain or loss will be recognized equal to the difference between
the sales price and the option price. An optionee who sells such shares within
two years after the grant date or within one year after exercise will recognize
ordinary compensation income in an amount equal to the lesser of the difference
between (a) the option price and the fair market value of such shares on the
date of exercise or (b) the option price and the sales proceeds. Any remaining
gain or loss will be treated as a capital gain or loss. Lockheed Martin or a
subsidiary will be entitled to a deduction equal to the amount of ordinary
compensation income recognized by the optionee in this case. The deduction will
be allowable at the same time the optionee recognizes the income.
The current federal income tax consequences of other awards authorized under
the plan generally follow certain basic patterns: SARs are taxed and deductible
in substantially the same manner as
28
<PAGE> 34
nonqualified stock options; nontransferable restricted stock subject to a
substantial risk of forfeiture results in income recognition equal to the excess
of the fair market value of the stock over the purchase price (if any) only at
the time the restrictions lapse (unless the recipient elects to accelerate
recognition as of the date of grant); performance bonuses are generally subject
to tax measured by the value of the payment received; and cash-based awards
generally are subject to tax at the time of payment; in each of the foregoing
cases, Lockheed Martin will generally have (at the time the participant
recognizes income) a corresponding deduction.
If, as a result of a change in control event, a participant's options or SARs
or other rights become immediately exercisable, or restrictions immediately
lapse on an award, or cash, shares or other benefits covered by another type of
award are immediately vested or issued, the additional economic value, if any,
attributable to the acceleration or issuance may be deemed a "parachute payment"
under Section 280G of the Code. In such case, the participant may be subject to
a 20% non-deductible excise tax as to all or a portion of such economic value,
in addition to any income tax payable. Lockheed Martin will not be entitled to a
deduction for that portion of any parachute payment that is subject to the
excise tax.
Notwithstanding any of the foregoing discussion with respect to the
deductibility of compensation under the Plan, Section 162(m) would render
non-deductible to Lockheed Martin certain compensation in excess of $1,000,000
in any year to certain executive officers of Lockheed Martin, unless such excess
compensation is "performance-based" (as defined) or is otherwise exempt from
Section 162(m). The applicable conditions of an exemption for a
performance-based compensation plan include, among others, a requirement that
the stockholders approve the material terms of the plan. Stock options, SARs and
certain (but not all) other types of awards that may be granted to executive
officers as contemplated by the Plan are intended to qualify for the exemption
for performance-based compensation under Section 162(m).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE PROPOSED
AMENDMENT TO THE LOCKHEED MARTIN 1995 OMNIBUS PERFORMANCE AWARD PLAN.
STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSAL 1
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Avenue, N.W.,
Suite 215, Washington, D.C., the owner of 224 shares of common stock of the
Corporation has notified Lockheed Martin that she intends to present the
following proposal at the Annual Meeting:
RESOLVED: "That the stockholders of Lockheed Martin recommend
that the Board take the necessary steps so that future outside
directors shall not serve for more than six years."
STOCKHOLDER'S SUPPORTING STATEMENT
"REASONS: "The President of the U.S.A. has a term limit, so do Governors of
many states.
"Newer directors may bring in fresh outlooks and different approaches with
benefits to all shareholders.
"No director should be able to feel that his or her directorship is until
retirement.
"Last year the owners of 14,301,978 shares, representing approximately 9.1%
of shares voting, voted FOR this proposal.
"If you AGREE, please mark your proxy FOR this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS
PROPOSAL FOR THE FOLLOWING REASONS:
Lockheed Martin's directors are elected annually by the Corporation's
stockholders, following formal nomination by the Board's independent Nominating
Committee. The Board of Directors view mandatory term limits as incompatible
with the rights currently accorded to the Corporation's stockholders to choose
the best qualified individuals to serve as members of their Board on an annual
basis without arbitrary
29
<PAGE> 35
limits on who may serve. Certainly, no director on this Board believes that his
or her directorship is promised until retirement as each director is subject to
reelection on an annual basis.
The Board disagrees with the notion implicit in the proposal that a director
has only a certain number of years with which to objectively serve the
Corporation. Certainly, there is a "learning curve" associated with any complex
undertaking. At a time when wisdom and experience are at a premium, mandatory
term limits for board membership is an idea contrary to the best interests of
stockholders and incompatible with the functioning of a company as large and
complex as Lockheed Martin Corporation.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE
PROPOSAL.
------------------------
STOCKHOLDER PROPOSAL 2
The SEIU Master Trust, SEIU National Industry Pension Fund, 1313 L Street,
NW, Washington, D.C., the owner of 6,300 shares of common stock of the
Corporation has notified Lockheed Martin that they intend to present the
following proposal at the Annual Meeting:
"That the board of directors of Lockheed Martin Corporation (the "Company")
consider refraining in the future from providing pensions or other retirement
benefits to non-employee directors unless such benefits are approved by the
shareholders."
STOCKHOLDER'S SUPPORTING STATEMENT
"The board of directors should play an independent role in shaping
corporate policy and strategic direction. The board should actively
monitor senior management in faithfully implementing these policies.
Directors owe their fundamental allegiance to the shareholders of the
Company -- the owners who elect them -- not to management.
"We believe, however, that certain business or financial relationships
can adversely affect directors' ability to provide independent oversight.
This is especially critical for outside or independent directors who are
not employees of the Company and who should bring an arms-length
objectivity to board deliberations. According to the 1996 proxy statement,
for non-employee directors with at least five years of service, the
Company provides a retirement benefit equal to the annual board retainer
in effect at the time of the director's retirement from the board. That
retainer is now a generous $35,000.
"While outside directors should be entitled to reasonable compensation
for their time and expertise, we believe that additional layers of
compensation in the form of retirement benefits, which are 100% of the
director's base compensation, may have the pernicious effect of
compromising their independence and impartiality.
"To receive the pension, an outside director must serve for at least
five years. We believe that such a director may be unwilling to criticize
management for fear of jeopardizing his or her tenure and thereby risk
losing the pension.
"Because Company directors are already well compensated, we believe that
the Company will continue to attract well-qualified candidates if the
pension plan is discontinued. In addition to the $35,000 retainer, the
Company already provides $1,500 for each meeting a director attends,
$5,000 for each committee assignment, a $100,000 death benefit,
reimbursement for all expenses, a $6,000 financial counseling program, and
a $1 million Directors Charitable Award Program. We believe these benefits
are sufficiently generous to attract qualified directors.
"Because of our strong concern for insuring the board of directors act
in the shareholders' interests, we feel that the interests of the Company
are not well served by director retirement plans. Directors who are
officers of other companies are usually covered by generous retirement
policies at their principal place of employment.
"Finally, we note that many companies have agreed to voluntarily
terminate non-employee director pension plans. According to the Investor
Responsibility Research Center,
30
<PAGE> 36
'Numerous firms are moving to eliminate [director] pensions...Corporate
opinion has moved rapidly to the view that director pensions are not the
best form of compensation.'
We urge you to vote FOR this resolution."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS
PROPOSAL FOR THE FOLLOWING REASONS:
The Board believes that adjustments in director compensation can be addressed
most expeditiously and in the interests of the shareholders through its
independent Nominating Committee. The Nominating Committee is chartered to
review and recommend director compensation, and the committee relies on advice
from nationally recognized consulting firms specializing in director
compensation as well as upon other nationally recognized survey sources.
It is simply incorrect for the proponents to allege that the existing
compensation structure may compromise the Board's independence and impartiality.
When Lockheed Martin began operations in 1995, the Board structured a
compensation package that was designed to attract and retain directors of the
highest caliber and qualification and to ensure the Corporation's ability to
compete for the best individuals to serve on its Board of Directors. The Board's
compensation structure is consistent with that of major industrial corporations.
The Board, through its independent Nominating Committee, annually examines the
directors' compensation program. Consistent with this, the Nominating Committee
will conduct a review of directors' compensation in 1998. This review is
expected to focus on the continuing importance of connecting director
compensation to stockholder value. It will include a review of the Directors
Retirement Plan, and may result in changes to or elimination of that plan.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE
PROPOSAL.
MISCELLANEOUS
Financial and other reports will be presented at the meeting and will be made
available for inspection by stockholders present at the meeting, but it is not
intended that any action will be taken in respect thereof.
The cost of soliciting proxies has been or will be paid by the Corporation.
In addition to solicitation by mail, arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to send proxy material to
beneficial owners; and the Corporation will, upon request, reimburse them for
their reasonable expenses in so doing. The Corporation has retained Morrow &
Co., Inc. to aid in the solicitation of proxies and to verify certain records
related to the solicitation at a fee of $35,000 plus expenses. To the extent
necessary in order to ensure sufficient representation at the meeting, the
Corporation may request by telephone or otherwise the return of proxies. The
extent to which this will be necessary depends entirely upon how promptly
proxies are returned. Stockholders are urged to return their proxies without
delay.
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 meeting. If any other matters
properly come before the meeting, it is intended that the shares represented by
proxies will be voted with respect thereto in accordance with the judgment of
the persons voting them. It is also intended that discretionary authority will
be exercised with respect to the vote on any matters incidental to the conduct
of the meeting.
PROPOSALS BY STOCKHOLDERS INTENDED TO BE PRESENTED AT THE 1999 ANNUAL MEETING OF
STOCKHOLDERS OF LOCKHEED MARTIN CORPORATION MUST BE RECEIVED BY THE SECRETARY OF
THE CORPORATION NO LATER THAN NOVEMBER 20, 1998 IN ORDER TO BE INCLUDED IN THE
PROXY STATEMENT AND ON THE PROXY SOLICITATION/VOTING INSTRUCTION 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 stockholders. Written notice must be delivered to the
Secretary of the Corporation at its principal executive office, 6801 Rockledge
Drive, Bethesda, Maryland 20817, 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 stockholder proposing such a matter. Any waiver by
the Corporation of these requirements with respect to the submission of a
particular stockholder proposal shall not constitute a waiver with respect to
the submission of any other stockholder proposal nor shall it obligate the
Corporation to waive these requirements with respect to
31
<PAGE> 37
future submissions of the stockholder proposal or any other stockholder
proposal. Any stockholder desiring a copy of the Bylaws of the Corporation will
be furnished one without charge upon written request to the Secretary of the
Corporation.
Lillian M. Trippett
Vice President, CorporateSecretary
and Associate General Counsel
March 19, 1998
Upon the written request of any record holder or beneficial owner of common
stock entitled to vote at the Annual Meeting of Stockholders of the Corporation,
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 James R. Ryan, Vice President,
Investor Relations, Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda,
Maryland 20817, by calling Lockheed Martin Shareholder Direct at 1-800-LMT-9758
or by accessing the Lockheed Martin Home Page on the Internet using the Uniform
Resource Locator: http://www.shareholder.com/lmt/. The Securities and Exchange
Commission also maintains a Website at http://www.sec.gov, which contains
reports, proxy statements and other information regarding registrants including
Lockheed Martin.
32
<PAGE> 38
U.S. TRUST
NOTICE TO PARTICIPANTS WITH LOCKHEED
MARTIN CORPORATION COMMON STOCK ALLOCATED
TO THEIR ACCOUNTS IN THE 401(K) PLANS OF:
LOCKHEED MARTIN CORPORATION
LOCKHEED MARTIN ENERGY SYSTEMS, INC.
LOCKHEED MARTIN IDAHO TECHNOLOGIES COMPANY
SANDIA CORPORATION
UNITED SPACE ALLIANCE, LLC
Dear Plan Participant:
The enclosed proxy materials have been prepared by the Board of Directors
of Lockheed Martin Corporation ("Lockheed Martin") in connection with its
solicitation of proxies for the Annual Meeting of Stockholders to be held on
April 23, 1998.
U.S. Trust Company of California, N.A. ("U.S. Trust") is serving as
Trustee of the shares of Lockheed Martin Corporation common stock ("Common
Stock") held in the plans listed on the attachment hereto (the "Plans"). The
enclosed Proxy Solicitation/Voting Instruction card is to be used for giving
voting instructions to U.S. Trust with respect to shares held in the Plans and
appointing proxies for voting shares owned outside of the Plans. This letter
provides information concerning the voting of Common Stock held in the Plans.
The recommendations of the Board of Directors with respect to matters to
be voted upon at the Annual Meeting of Stockholders are printed on the voting
instruction card. If you want to follow the Board's recommendations on all
matters, you can do so by signing, dating and returning the card in the enclosed
postage-paid envelope without checking any of the boxes on the card. You may
also provide voting instructions by telephone, as explained below.
All matters to be voted upon at this meeting are extremely important and
are described in the enclosed proxy materials. You should carefully read these
materials and the following explanation of the voting pass-through rules of the
Plans and how to complete and return the card or provide voting instructions by
telephone.
VOTING DEADLINE
In order to be assured that your voting instructions to U.S. Trust will be
followed, your voting instruction card or your telephone instructions must be
received no later than 5 p.m. New York City time on April 20, 1998.
If you wish to provide voting instructions by returning a voting
instruction card, you must complete, sign, date and return your card in the
enclosed envelope in time for it to be received by the voting deadline. Please
remember to return your card in the enclosed envelope, rather than to Lockheed
Martin or any other party. The envelope is addressed to First Chicago, acting as
confidential vote tabulator for U.S. Trust.
<PAGE> 39
U.S. TRUST'S RESPONSIBILITIES
As a trustee of the Common Stock held in the Plans, U.S. Trust's
responsibilities include providing proxy materials to participants, ensuring the
confidentiality of participants' voting instructions, voting shares in
accordance with participant instructions, and voting shares for which no
instructions are received from participants.
HOW TO GIVE VOTING INSTRUCTIONS
These instructions explain how you may give voting instructions to U.S.
Trust with respect to both allocated and unallocated shares of Common Stock.
ALLOCATED SHARES
Only U.S. Trust can vote the shares held by the Plans. However, under the
terms of the Plans, each participant is entitled to instruct U.S. Trust how to
vote all shares allocated to his or her account. You may instruct U.S. Trust to
vote for or against any particular matter or to abstain from voting on that
matter. If you sign, date and return a card but do not check any boxes on the
card, U.S. Trust will vote the shares in accordance with the Board's
recommendations on the card.
You may also provide voting instructions to U.S. Trust by using a
touch-tone telephone. Simply dial the telephone number on the voting instruction
card and follow the directions. You must have your voting instruction card and
your social security number available when you dial the number. If you return a
voting instruction card and also provide voting instructions by telephone, U.S.
Trust will follow your latest instructions. For this purpose, the date on your
voting instruction card will be the date for those instructions. If it is not
possible to determine which voting instructions are the latest, U.S. Trust will
follow your telephone voting instructions.
UNALLOCATED SHARES
The Lockheed Martin Corporation Salaried Savings Plan ("Salaried Savings
Plan") also holds shares of Common Stock which are not yet allocated to any
individual's account. If you participate in the Salaried Savings Plan, you may
choose to act as a "named fiduciary" under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and instruct U.S. Trust how to vote
a proportionate number of unallocated shares based upon the number of ESOP Match
Shares currently allocated to your account. The unallocated shares for which you
are entitled to provide voting instructions will be approximately .74 times the
number of ESOP Match Shares shown on your voting instruction card. Your voting
instructions will automatically apply to a proportionate number of unallocated
shares, unless you check the box on the card indicating that you do not want to
provide voting instructions for those shares.
Under ERISA, a person who agrees to act as a fiduciary becomes subject to
the fiduciary responsibility rules of ERISA. These fiduciary responsibility
rules require a fiduciary to act prudently, solely in the interest of all plan
participants and beneficiaries and for the exclusive purpose of providing
benefits to the plan participants and beneficiaries. A fiduciary who breaches
the fiduciary responsibility rules of ERISA may be liable to the plan for any
losses caused by the fiduciary's actions. If you accept your designation as a
named fiduciary, you should exercise your voting rights prudently and in the
interest of all participants and beneficiaries of the Salaried Savings Plan. If
you do not wish to act as a named fiduciary for the unallocated shares, you must
check the box on the voting instruction card indicating that you are not
providing voting instructions for those shares.
If you are a participant in the Salaried Savings Plan and do not wish to
provide voting instructions for the unallocated shares, you may not vote by
telephone.
<PAGE> 40
FAILURE TO PROVIDE INSTRUCTIONS
If you do not sign, date, and return a card or vote by telephone, U.S.
Trust will vote shares allocated to your account in its sole discretion. If
timely voting instructions for unallocated shares are not received from all
participants who have ESOP Match Shares allocated to their accounts, U.S. Trust
will vote the remaining unallocated shares in the same proportions as those for
which timely voting instructions have been received. Accordingly, the exact
number of unallocated shares which will be voted in accordance with your voting
instructions cannot be determined until all timely participant instructions have
been received.
CONFIDENTIALITY
Your voting instructions to U.S. Trust are confidential. U.S. Trust will
not disclose how you voted or if you voted, unless required to do so by law.
You should feel free to instruct U.S. Trust to vote in the manner you think is
best.
QUESTIONS
If you have any questions about your voting rights under the Plan, the
card, or the confidentiality of your vote, please contact U.S. Trust between the
hours of 8:30 a.m. and 5:00 p.m. Los Angeles time at 1-800-535-3093.
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
Common Stock Trustee
March 19, 1998
<PAGE> 41
<TABLE>
<CAPTION>
Attachment
PLAN
PLAN NAME ABBREVIATION
<S> <C>
IDAHO NATIONAL ENGINEERING LABORATORY EMPLOYEE
INVESTMENT PLAN INELIP
LOCKHEED MARTIN AEROSPACE SAVINGS PLAN LMASP
LOCKHEED MARTIN CAPITAL ACCUMULATION PLAN LMCAP
LOCKHEED MARTIN CORPORATION OPERATION SUPPORT
SAVINGS PLAN LMOSSP
LOCKHEED MARTIN CORPORATION PERFORMANCE SHARING
PLAN FOR BARGAINING EMPLOYEES LMPSPB
LOCKHEED MARTIN CORPORATION PERFORMANCE SHARING
PLAN FOR PUERTO RICO EMPLOYEES LMPSPPR
LOCKHEED MARTIN CORPORATION RETIREMENT SAVINGS PLAN
FOR SALARIED EMPLOYEES LMRSP
LOCKHEED MARTIN CORPORATION SALARIED SAVINGS PLAN LMSSP
(match shares are shown separately on voting instruction card) LMSSMTCH
LOCKHEED MARTIN CORPORATION SAVINGS AND INVESTMENT PLAN
FOR HOURLY EMPLOYEES LMSIPH
LOCKHEED MARTIN ENERGY SYSTEMS INC. 401(K) SAVINGS PLAN
FOR HOURLY EMPLOYEES LMES401K
LOCKHEED MARTIN ENERGY SYSTEM SAVINGS PLAN FOR
SALARIED AND HOURLY EMPLOYEES LMESPIA
LOCKHEED MARTIN ENERGY SYSTEMS SAVINGS PROGRAM LMESSP
LOCKHEED MARTIN FAIRCHILD CORPORATION SAVINGS PLAN LMFCSP
LOCKHEED MARTIN HOURLY EMPLOYEE SAVINGS PLAN PLUS LMHSPP
LOCKHEED MARTIN HOURLY EMPLOYEES SAVINGS AND STOCK
INVESTMENT PLAN-FORT WORTH AND ABILENE DIVISIONS LMHSSIP
LOCKHEED MARTIN IR IMAGING SYSTEMS, INC. SAVINGS PLAN LMIISP
LOCKHEED MARTIN LIBRASCOPE RETIREMENT SAVINGS PLAN LMLRSP
LOCKHEED MARTIN TACTICAL DEFENSE SYSTEMS SAVINGS PLAN LMTDSSP
LOCKHEED MARTIN TACTICAL SYSTEMS MASTER SAVINGS PLAN
AND TRUST LMTSMST
LOCKHEED MARTIN VOUGHT SYSTEMS CORPORATION CAPITAL
ACCUMULATION LMVSCAP
SANDIA CORPORATION SAVINGS AND INCOME PLAN SCSIP
SANDIA CORPORATION SAVINGS AND SECURITY PLAN SCSSP
SPACE FLIGHT OPERATIONS CONTRACT SAVINGS PLAN LMUSAP
</TABLE>
<PAGE> 42
LOCKHEED MARTIN CORPORATION
PROXY SOLICITATION/VOTING INSTRUCTION CARD FOR
ANNUAL MEETING OF STOCKHOLDERS
P The undersigned hereby appoints Marcus C. Bennett, Allen E.
R Murray and Frank Savage, each of them proxies of the
O undersigned with respect to common stock of the Corporation
X owned by the undersigned, with full power of substitution,
Y to vote and act for the undersigned at the Annual Meeting of
Stockholders of the Corporation to be held at 10:30 a.m. on
April 23, 1998, at the Omni Mandalay Hotel, 221 East Las
Colinas Boulevard, Irving, Texas, and at any adjournment or
postponement thereof. If the undersigned is a participant in
one or more of the Corporation's 401(k) or capital
accumulation plans and has stock allocated to his or her
account(s), the undersigned hereby instructs the Trustee of
the plan(s) to vote such shares of stock in accordance with
the instructions on the reverse side of this card at the
Annual Meeting and any adjournment thereof and in accordance
with its discretion on such other matters as may properly
come before the meeting. A proportionate number of shares of
stock not yet allocated to participants' accounts in the
Lockheed Martin Corporation Salaried Savings Plan will be
voted in accordance with the instructions of each
participant in that plan who has ESOP match shares allocated
to his or her account, unless the participant elects not to
provide instructions with respect to such shares on the
reverse side of this card. Allocated plan shares for which
no card is received will be voted by the Trustee at its
discretion. Unallocated shares for which no card is received
will be voted by the Trustee in the same proportion as
unallocated shares for which instructions are received.
Stockholders and plan participants are requested to mark,
date and sign this card on the reverse side and to return it
promptly in the enclosed envelope, or to vote by telephone,
dial 1-800-OK2-VOTE (1-800-652-8683).
To vote in accordance with the Board of Directors'
recommendations, please sign and date the reverse side; no
boxes need to be checked.
-----------
SEE REVERSE
SIDE
-----------
----------------------------------------------------------------------------
- DETACH HERE AND RETURN PROPERLY EXECUTED PROXY
SOLICITATION/VOTING INSTRUCTION CARD IN ENCLOSED ENVELOPE -
----------------------------------------------------------------------------
IMPORTANT
Please note that a ticket is required for admission to the meeting.
If you plan to attend and you are a stockholder as of the record date,
please check the appropriate box on your proxy solicitation/voting
instruction card, or indicate when prompted if voting by telephone, and a
ticket will be forwarded to you. If, however, your shares are held in the
name of a broker or other nominee, please bring a proxy or a letter from
the firm confirming your ownership of the shares as of the close of
business on the record date (March 9, 1998).
----------------------------------------------------------------------------
[LOCKHEED MARTIN LOGO]
<PAGE> 43
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THIS PROXY SOLICITATION/VOTING INSTRUCTION CARD WHEN PROPERLY EXECUTED AND
RETURNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE,
THIS CARD WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4 AND 5.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES AND FOR PROPOSALS 2 AND 3.
- -------------------------------------------------------------------------------------------
<S> <C>
FOR ALL WITHHELD 1. Norman R. Augustine 10. Vincent N. Marafino
1. Election of [ ] [ ] 2. Marcus C. Bennett 11. Eugene F. Murphy
Directors 3. Lynne V. Cheney 12. Allen E. Murray
4. Vance D. Coffman 13. Frank Savage
(For, except vote withheld from the 5. Houston I. Flournoy 14. Peter B. Teets
following nominee(s)) 6. James F. Gibbons 15. Carlisle A.H. Trost
7. Edward E. Hood, Jr. 16. James R. Ukropina
8. Caleb B. Hurtt 17. Douglas C. Yearley
------------------------------------ 9. Gwendolyn S. King
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES AND FOR PROPOSALS 2 AND 3.
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
2. Appointment [ ] [ ] [ ]
of Auditors
3. Amendment to 1995 [ ] [ ] [ ]
Omnibus Performance
Award Plan
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE AGAINST PROPOSALS 4 AND 5.
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4. Stockholder FOR AGAINST ABSTAIN
Proposal - [ ] [ ] [ ]
Directors'
Term Limits
5. Stockholder [ ] [ ] [ ]
Proposal -
Directors'
Compensation
</TABLE>
The signer hereby revokes all previous proxies given by the signer to vote at
said meeting or any adjournments thereof.
<TABLE>
<S> <C> <C> <C>
I elect not to direct [ ] I will [ ]
the voting of unallocated attend the
shares in the Lockheed Martin meeting
Corporation Salaried
Savings Plan.
</TABLE>
NOTE: Please date and sign exactly as your name appears above and return this
card in the enclosed envelope.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SIGNATURE(S) DATE
- -------------------------------------------------------------------------------
- DETACH HERE AND RETURN PROPERLY EXECUTED PROXY
SOLICITATION/VOTING INSTRUCTION CARD IN ENCLOSED ENVELOPE -
[LOCKHEED MARTIN LOGO]
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, APRIL 23, 1998, 10:30 A.M.
OMNI MANDALAY HOTEL
221 EAST LAS COLINAS BOULEVARD
IRVING, TEXAS 75039
You may vote the shares by telephone (unless you are a participant in the
Lockheed Martin Salaried Savings Plan and elect not to direct the voting of
unallocated shares in that plan). Voting by telephone will eliminate the need
to mail a voted Proxy Solicitation/Voting Instruction Card. To vote by phone
please follow the steps below:
1) HAVE THIS CARD AND YOUR SOCIAL SECURITY NUMBER AVAILABLE.
2) USING A TOUCH-TONE TELEPHONE, DIAL 1-800-OK2-VOTE (1-800-652-8683)
The telephone voting system preserves the confidentiality of your vote and will
confirm your voting instructions with you during the call. You may also change
your selections on any or all of the proposals to be voted.
YOUR VOTE IS IMPORTANT TO US. THANK YOU FOR VOTING.
