<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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[LOCKHEED MARTIN LOGO]
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
APRIL 22, 1999
<PAGE> 3
Lockheed Martin Corporation
6801 Rockledge Drive Bethesda, MD 20817
[LOCKHEED MARTIN LOGO]
VANCE D. COFFMAN
Chairman and
Chief Executive Officer
March 19, 1999
Dear Fellow Stockholders:
I look forward to seeing you at Lockheed Martin's 1999 Annual Meeting of
Stockholders, to be held on Thursday, April 22, 1999 at The Broadmoor, Broadmoor
West Building, 1 Lake Avenue, Colorado Springs, Colorado at 10:30 a.m. You are
also invited to join the directors and management prior to the meeting at 10:00
a.m. for coffee and conversation.
At the meeting, management will report on the Corporation's 1998 and first
quarter 1999 activities. We will continue with discussion and voting on matters
set forth in the accompanying Notice of Annual Meeting and Proxy Statement.
This year, two members of our Board, Vincent N. Marafino and Allen E. Murray,
will retire following the Annual Meeting of Stockholders. We owe them a great
debt of gratitude for their service to the Corporation and its stockholders.
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 Internet or telephone.
Your vote is important. Please be sure your shares are represented at the
meeting by returning your voting instructions or placing your vote by Internet
or telephone.
Sincerely,
Vance D. Coffman
<PAGE> 4
[LOCKHEED MARTIN LOGO]
6801 Rockledge Drive
Bethesda, Maryland 20817
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Broadmoor - Broadmoor West Building
1 Lake Avenue
Colorado Springs, Colorado 80906
To the Stockholders:
Lockheed Martin Corporation's Annual Meeting of Stockholders will be held at
10:30 a.m. local time on Thursday, April 22, 1999 at The Broadmoor, Broadmoor
West Building, 1 Lake Avenue, Colorado Springs, Colorado. Attendance at the
meeting will be limited to stockholders of record at the close of business on
March 8, 1999, 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 2000;
(2) Ratification of the appointment of Ernst & Young as independent
auditors for the year 1999;
(3) Management proposal to adopt the Lockheed Martin Directors Equity
Plan;
(4) Two stockholder proposals set forth in the accompanying proxy
statement; and,
(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 electronically by accessing
http://www.eproxyvote.com/lmt on the Internet or by dialing 1-877-779-8683 on a
touch-tone telephone.
By Order of the Board of
Directors
Lillian M. Trippett
Vice President, Corporate
Secretary and Associate General
Counsel
March 19, 1999
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IMPORTANT: AN ADMISSION TICKET OR PROOF OF OWNERSHIP IS REQUIRED FOR
ADMISSION TO THE MEETING. STOCKHOLDERS OF RECORD AS OF MARCH 8, 1999
PLANNING TO ATTEND THE MEETING ARE ASKED TO CHECK THE APPROPRIATE BOX ON
THE PROXY SOLICITATION/VOTING INSTRUCTION CARD (OR INDICATE WHEN PROMPTED
IF VOTING ELECTRONICALLY). A DETACHABLE ADMISSION TICKET IS ATTACHED TO
THE PROXY SOLICITATION/VOTING INSTRUCTION CARD. STOCKHOLDERS WHO ATTEND
THE MEETING BUT DO NOT HAVE AN ADMISSION TICKET WILL BE ASKED TO SHOW PROOF
OF STOCK OWNERSHIP AT THE MEETING REGISTRATION DESKS BEFORE BEING ADMITTED
TO THE ANNUAL MEETING. 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 8, 1999).
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<PAGE> 5
<TABLE>
<CAPTION>
CONTENTS
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
Compliance with Section 16(a) of the Securities Exchange Act of 1934........ 23
Ratification of Appointment of Independent Auditors......................... 24
Proposed Lockheed Martin Directors Equity Plan.............................. 24
Stockholder Proposals....................................................... 26
Miscellaneous............................................................... 28
Directors Equity Plan (Plan Document).................................. Appendix
</TABLE>
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Upon the written request of any record holder or beneficial owner of common
stock entitled to vote at the Annual Meeting of Stockholders, the Corporation
will provide without charge a copy of its Annual Report on Form 10-K for the
year ended December 31, 1998, filed with the Securities and Exchange
Commission. Requests should be mailed to James R. Ryan, Vice President
Financial Strategies and 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
website at http://www.shareholder.com/lmt/. The Securities and Exchange
Commission also maintains a website at http://www.sec.gov that contains
reports, proxy statements and other information regarding registrants including
Lockheed Martin.
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<PAGE> 6
PROXY STATEMENT
GENERAL INFORMATION
The Annual Meeting of Stockholders ("Annual Meeting") of Lockheed Martin
Corporation, a Maryland corporation (the "Corporation" or "Lockheed Martin"),
will be held at 10:30 a.m. on Thursday, April 22, 1999, at The Broadmoor,
Broadmoor West Building, 1 Lake Avenue, Colorado Springs, Colorado 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.
This year, stockholders may vote by proxy electronically using the Internet
or a touch-tone telephone. Proxy voting through electronic means is valid under
Maryland law, and the Corporation is offering electronic services, including
access to the Corporation's annual report and proxy statement, both as a
convenience to its stockholders and as a step towards reducing printing and
mailing costs. Stockholders not wishing to utilize electronic voting methods may
continue to cast votes by mailing their signed and dated proxy
solicitation/voting instruction card to First Chicago Trust Company, a division
of EquiServe ("First Chicago Trust Company"), the Corporation's transfer agent.
Voting a proxy by Internet, telephone or mail will in no way limit a
stockholder's right to vote at the Annual Meeting. If shares are held in the
name of a broker, bank or other holder of record, voting instructions from the
holder of record will be provided.
HOW TO VOTE:
The Internet and telephone voting procedures are designed to authenticate
votes cast by use of an individual identification number. The procedures allow
stockholders to appoint a proxy (and Lockheed Martin employee benefit plan
participants who hold an interest in Lockheed Martin stock in a benefit plan
account, to instruct a plan fiduciary) to vote their shares and to confirm that
their voting instructions have been properly recorded.
- By Internet: Access the Internet voting site at
http://www.eproxyvote.com/lmt 24 hours a day. Instructional screen
prompts guide stockholders and plan participants through the voting
process and a confirmation of voting selections is required before a
vote(s) is recorded.
- By Telephone: Dial 1-877-779-8683 24 hours a day. Voice prompts guide
stockholders through the voting process and a confirmation of voting
selections is required before a vote is recorded.
- By Proxy Solicitation/Voting Instruction Card: Mark, date, and sign
the proxy solicitation/voting instruction card or, to vote in
accordance with the Board of Directors' recommendations, simply sign
and date the proxy solicitation/voting instruction card. Return it to
First Chicago Trust Company in the postage-paid envelope provided.
HOW TO REVOKE A VOTE:
Any proxy may be revoked at any time before it is voted at the Annual Meeting
by executing a later-dated proxy by Internet, telephone or mail, by voting by
ballot at the meeting or by filing an instrument of revocation with the
Secretary of the Corporation prior to the meeting at the Corporation's principal
office or at the meeting. Attendance at the meeting does not constitute a
revocation of a proxy.
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, 1999.
VOTING SECURITIES AND RECORD DATE
In October 1998, the Corporation's Board of Directors approved a two-for-one
split of its common stock in the form of a stock dividend. The new shares were
issued on December 31, 1998. Unless otherwise indicated, all references to
shares of common stock reflect the stock split.
Stockholders of record at the close of business on March 8, 1999 are entitled
to notice of and to vote at the Annual Meeting. On March 8, 1999, there were
393,907,518 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 participants in 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.
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<PAGE> 7
Shares of common stock represented by a properly executed proxy (either
signed and returned or voted through the toll-free telephone or Internet
procedures 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.
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 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 may
instruct a plan fiduciary as to the voting of shares allocated to the
participant's account. 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 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, Eugene F. Murphy, 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 2000 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 (63)
Director since March 1995. Chairman of the Executive Committee and member of the
Finance Committee.
Lecturer with the rank of Professor, Department of Mechanical and Aerospace
Engineering, School of Engineering and Applied Science, Princeton University,
since September 1997; Chairman of Lockheed Martin from January 1997 until his
retirement in April 1998, Chief Executive Officer from January 1996 until his
retirement in August 1997, Vice Chairman from April 1996 through December 1996,
President 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.
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<PAGE> 8
MARCUS C. BENNETT (63)
Director since March 1995.
Executive Vice President and Chief Financial Officer of Lockheed Martin from
July 1996 until his retirement from the Corporation in January 1999, Senior Vice
President and Chief Financial Officer from March 1995 to July 1996; Vice
President and Chief Financial Officer of Martin Marietta from 1988 to 1995;
director of Martin Marietta from 1993 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 (57)
Director since March 1995. Member of the Finance 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 Lockheed Corporation ("Lockheed") from 1994 to 1995; director
of Reader's Digest Association, Inc., American Express/IDS Mutual
Fund Group and Union Pacific Group Resources Inc.
VANCE D. COFFMAN (54)
Director since January 1996. Chairman of the Board and member of the Executive
Committee.
Chairman of the Board and Chief Executive Officer of Lockheed Martin since April
1998, Chief Executive Officer and Vice Chairman from August 1997 to April 1998,
President from June 1996 through July 1997 and Chief Operating Officer from
January 1996 through July 1997, Executive Vice President from January to June
1996, President and Chief Operating Officer of Lockheed Martin's Space &
Strategic Missiles Sector from March 1995 to December 1995; Executive Vice
President of Lockheed from 1992 to 1995, and President of Lockheed Space Systems
Division from 1988 to 1992; director of Bristol-Myers Squibb Company.
HOUSTON I. FLOURNOY (69)
Director since March 1995. Member of the Finance and Nominating Committees.
Special Assistant to the President for Governmental Affairs, University of
Southern California, Sacramento, California from August 1981 until his
retirement in 1998, 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 (67)
Director since March 1995. Member of the Audit and Ethics and Nominating
Committees.
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. (68)
Director since March 1995. Chairman of the Compensation Committee and Stock
Option Subcommittee and member of the Executive and Finance Committees.
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 Lincoln Electric
Holdings, Inc. and Gerber Scientific, Inc.; Chairman Emeritus of the Board of
Trustees of Rensselaer Polytechnic Institute; trustee of North Carolina State
University.
3
<PAGE> 9
CALEB B. HURTT (67)
Director since March 1995. Member of the Audit and Ethics, Executive and
Compensation 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 (58)
Director since March 1995. Member of the Audit and Ethics and Compensation
Committees and Stock Option Subcommittee.
Senior Vice President of Corporate and Public Affairs of 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 and Marsh and McLennan Companies.
EUGENE F. MURPHY (63)
Director since March 1995. Chairman of the Nominating Committee and member of
the Compensation and Executive Committees.
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 long as the aggregate principal
amount of loans outstanding between GE and the Corporation equals or exceeds a
specified level, GE is entitled to nominate one director to the Corporation's
Board. Mr. Murphy is that nominee.
FRANK SAVAGE (60)
Director since March 1995. Member of the Audit and Ethics and Compensation
Committees and Stock Option Subcommittee.
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, Lyondell 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 (57)
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
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.
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<PAGE> 10
CARLISLE A. H. TROST (68)
Director since March 1995. Chairman of the Audit and Ethics Committee and member
of the Executive and Nominating Committees.
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 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 (61)
Director since March 1995. Member of the Audit and Ethics and Nominating
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 (63)
Director since March 1995. Chairman of the Finance Committee and member of the
Audit and Ethics and Executive Committees.
Chairman of the Board and Chief Executive Officer of Phelps Dodge Corporation
since 1989 and President from 1991 to 1997, 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 fifteen meetings during 1998, of which eight were
regularly scheduled meetings. Non-employee directors 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 each year. Non-employee directors receive $1,500 for each
Board of Directors or committee meeting attended. The 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 and Chief Executive
Officer, 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.
The Board of Directors currently has five standing committees: Audit &
Ethics, Compensation, Nominating, Executive and Finance. The Stock Option
Subcommittee is a standing subcommittee of the Compensation Committee.
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); a non-employee Committee Chairman receives $4,000 annually, and
the Nominating Committee Chairman receives $2,000 annually.
The Board of Directors has approved a new, simplified compensation program to
take effect May 1, 1999. The old and new programs will be prorated for 1999.
Under the new program, each non-employee director will receive annual cash
compensation totaling $60,000. Non-employee committee chairmen will receive an
additional $5,000 annually. Board and Committee meeting fees and Committee
retainer fees will be eliminated after May 1, 1999. In addition, under the
Directors Equity Plan, each non-employee director will elect one of the
following to be awarded annually: 1,200 stock units; 600 stock units and options
to purchase 1,800 shares of the Corporation's stock; or options to purchase
3,600 shares of the Corporation's stock. The terms of the plan are set forth on
page 24. The Directors Equity Plan is subject to stockholder approval.
Non-employee directors may defer up to 100 percent of the cash portion of
their fees under the Lockheed Martin Directors Deferred Compensation Plan
("Directors Deferred Compensation Plan"). A participating director's deferred
fees generally will be distributed (in a lump sum or in up to ten installments)
in January following the year in which the director terminates service. Deferred
amounts earn interest at a rate that tracks the performance of (i) the prime
rate, (ii) the published index for the
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<PAGE> 11
Standard & Poor's 500 (with dividends reinvested) or (iii) the Corporation's
common stock, at the director's election. Stock units deferred under the
Directors Deferred Stock Plan, which the Board has frozen effective May 1, 1999,
are payable in whole shares or in cash, in a lump sum or in up to five
installments, upon termination of service.
Through April 1999, all non-employee directors are provided a $100,000 death
benefit (except that the benefit is reduced by the amount of life insurance
coverage previously provided to a director of Lockheed or Martin Marietta). The
benefit would be increased to include the applicable estimated annual amount of
taxes associated with the benefit. Effective May 1, 1999, the death benefit will
be terminated and its actuarial value, for each non-employee director, will be
credited to the director's account under the Directors Deferred Compensation
Plan and be subject to the same investment and distribution choices described
previously for other deferred cash compensation. In addition, each non-employee
director is provided travel accident insurance up to $1 million 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. This program will be terminated for directors on May 1, 1999.
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 became vested as a result of the combination of the businesses of
Lockheed and Martin Marietta (the "Combination").
Effective May 1, 1999, consistent with the Board of Directors' action to
install a new compensation plan, the Board has terminated the Directors
Retirement Plan. Pursuant to that plan, 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. Upon termination of the
Lockheed Martin Directors Retirement Plan on May 1, 1999, the present value of
the benefits attributable to each current employee or non-employee director
prior to that date will be credited to the director's account under the Deferred
Compensation Plan. The benefit transferred will become payable to the director
in accordance with the terms of that plan. Each director will be given an
opportunity to elect by May 1, 1999 to receive a lump sum payment of the
transferred amount on or about May 1, 2000.
During 1998, Mr. Marafino performed consulting services to the Corporation in
connection with the sale or merger of certain properties and served on the
boards of directors of various joint venture companies and/or subsidiaries of
the Corporation. Mr. Marafino performed these services pursuant to a consulting
agreement. The consulting agreement provides for an annual fee of $250,000 and
does not cover his services as a director.
The Audit and Ethics Committee consists of Mrs. King and Messrs. Trost,
Gibbons, Hurtt, Marafino, Savage, Ukropina and Yearley. During 1998, 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 the Corporation's independent auditors. It reviews
the scope and timing of the independent auditors' work, reviews with the
Corporation's management and independent auditors the financial accounting and
reporting principles used by the Corporation, and 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 related policies
and procedures); 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.
6
<PAGE> 12
The Compensation Committee consists of Mrs. King and Messrs. Hood, Hurtt,
Murphy, Murray and Savage. During 1998, the committee met six times. The
committee recommends the compensation policy and standards of compensation for
the Corporation. The committee recommends 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. It does not approve performance-based
executive compensation plans.
The Stock Option Subcommittee consists of Mrs. King and Messrs. Hood,
Murray and Savage. During 1998, the subcommittee met six times. The
subcommittee oversees all of the Corporation's performance-based plans,
including stock options and long-term incentive performance awards.
The Nominating Committee consists of Mrs. Cheney and Messrs. Murphy,
Flournoy, Gibbons, Trost and Ukropina. During 1998, the committee met five
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
at an annual meeting of stockholders.
The Finance Committee consists of Mrs. Cheney and Messrs. Yearley, Augustine,
Flournoy, Hood, Marafino and Murray. During 1998, the committee met three 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 consists of Messrs. Augustine, Coffman, Hood,
Hurtt, Murphy, Trost and Yearley. During 1998, the committee did not meet.
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.
During 1998, all incumbent directors attended at least 75 percent of
regularly scheduled Board of Directors and committee meetings. Average
attendance at all Board of Directors and committee meetings was 91 percent.
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. 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 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 90 days nor more than 120 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.
7
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table shows information regarding each person known to the
Corporation to be the "beneficial owners" of more than 5 percent of the
Corporation's stock. For purposes of this table, 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 in the securities. All
information in the table is based on information reported on Schedule 13G on the
dates indicated.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name and Address of Beneficial Owner Class of Stock Ownership of Class
- ----------------------------------------------------------- -------------- --------------- --------
<S> <C> <C> <C>
U.S. Trust Co., National Association, as trustee of the: Common 37,813,150(1) 9.6%
- - Lockheed Martin Hourly Employee Savings Plan Plus and
- - Lockheed Martin Corporation Hourly Employees
Savings and Investment Plan - Fort Worth and Abilene
Divisions
515 Flower Street, #2800
Los Angeles, California 90071
UBS AG Common 31,129,434(2) 7.9%
Bahnhofstrasse 45
8021, Zurich, Switzerland
State Street Bank and Trust Company, as trustee of the: Common 29,560,636(3) 7.5%
- - Lockheed Martin Corporation Capital Accumulation Plan,
- - Lockheed Martin Corporation Operation Support
Savings Plan,
- - Lockheed Martin Corporation Performance Sharing Plan
for Bargaining Employees,
- - Lockheed Martin Corporation Performance Sharing Plan
for Puerto Rico Employees,
- - Lockheed Martin Corporation Retirement Savings Plan
for Salaried Employees,
- - Lockheed Martin Corporation Salaried Savings Plan,
- - Lockheed Martin Corporation Savings and Investment
Plan for Hourly Employees, and
- - Lockheed Martin Energy Systems Savings Program
225 Franklin Street
Boston, Massachusetts 02110
Oppenheimer Capital Common 21,117,736(4) 5.4%
Oppenheimer Tower, World Financial Center
New York, New York 10281
</TABLE>
(1) As reported in Schedule 13G filed on February 16, 1999 by U.S. Trust Co.,
National Association ("U.S. Trust"). U.S. Trust held these shares as
trustee for the noted Lockheed Martin benefit plans. U.S. Trust has shared
voting and dispositive power with respect to these shares. U.S. Trust has
expressly disclaimed beneficial ownership of these shares.
(2) As reported in Schedule 13G filed jointly on January 27, 1999 by UBS AG and
its indirect wholly owned subsidiary, Brinson Partners, Inc. ("BPI"). The
Schedule 13G states that BPI held 21,928,792 shares of common stock
(approximately 5.6%), which UBS AG reported having indirect beneficial
ownership by reason of its indirect ownership of BPI.
(3) As reported in the Amended Schedule 13G filed on March 5, 1999 by State
Street Bank and Trust Company ("State Street"). State Street held
26,650,077 shares of common stock (approximately 6.8%) as trustee for the
noted Lockheed Martin benefit plans. State Street has shared voting and
dispositive power with respect to these shares. State Street has expressly
disclaimed beneficial ownership of these shares. In addition, State Street
reported beneficial ownership of 2,910,559 shares of common stock
(approximately 0.7%) as trustee for various trust and employee benefit
plans not associated with the Corporation.
(4) As reported in Schedule 13G filed on February 9, 1999 by Oppenheimer
Capital.
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 February 1, 1999 by the directors and nominees, the Chief Executive
Officer and the four next most highly compen-sated executive officers (during
1998) 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 0.91 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.................................. 941,390(1)(2)(3)(4)
Marcus C. Bennett.................................... 197,953(2)(3)(5)
James A. Blackwell, Jr............................... 276,296(2)(3)(6)(7)
Lynne V. Cheney...................................... 2,483(4)(8)(9)
Vance D. Coffman..................................... 539,322(2)(3)(7)(10)
Thomas A. Corcoran................................... 250,920(2)((3)(7)(11)
Houston I. Flournoy.................................. 4,275(4)(8)(9)
James F. Gibbons..................................... 8,932(4)(9)
Edward E. Hood, Jr................................... 5,013(4)
Caleb B. Hurtt....................................... 6,685(4)
Gwendolyn S. King.................................... 1,507(4)(8)
Vincent N. Marafino.................................. 507,683(4)(8)(12)(13)
Eugene F. Murphy..................................... 2,613(4)(14)
Allen E. Murray...................................... 7,013(4)
Frank Savage......................................... 5,692(4)(9)
Peter B. Teets....................................... 323,606(2)(3)(7)(15)
Carlisle A. H. Trost................................. 3,452(4)(9)
James R. Ukropina.................................... 4,769(4)(9)
Douglas C. Yearley................................... 4,769(4)(9)
All executive officers and directors as a group
(26 individuals including those named above) 3,621,231(2)(3)(7)(16)
</TABLE>
(1) Includes 920,000 shares not currently owned but which could be acquired
within 60 days following February 1, 1999 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
Salaried Savings Plan ("Salaried Savings Plan") as of February 1, 1999.
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) Where appropriate, the shares shown include an approximation of the number
of stock units in the participant's account in the Lockheed Martin
Corporation Supplemental Savings Plan ("Supplemental Plan") as of December
31, 1998, the latest date for which such information is available. Because
of Internal Revenue Code limitations on contributions to the Salaried
Savings Plan, certain employees are not allowed to make the maximum
contributions permitted under the Salaried Savings Plan and may not receive
the maximum Corporation matching contribution. Certain of these employees
are permitted to participate in the nonqualified Supplemental Plan. Earnings
are credited in a manner that mirrors the participant's investment elections
under the Salaried Savings Plan. Under the Supplemental Plan, the
Corporation's matching contributions are credited to a bookkeeping account
maintained on behalf of the participant as stock units or phantom shares.
Participants' accounts are credited with additional stock units to the
extent of any dividend paid on the Corporation's common stock. Amounts
credited to a participant's account in the Supplemental Plan are distributed
from the participant's account in the form of cash following the
participant's termination of employment.
(4) Includes stock units under the Lockheed Martin Corporation Directors'
Deferred Stock Plan. As of January 31, 1999, each of Mses. Cheney and King
and Messrs. Flournoy, Gibbons, Hood, Hurtt, Murphy, Murray, Savage, Trost,
Ukropina and Yearley have been credited with 1,013 shares and Messrs.
Augustine and Marafino have been credited with 180 shares and 651 shares,
respectively. The directors do not have or share voting or investment power
for their respective plan shares.
(5) Includes 140,000 shares not currently owned but which could be acquired
within 60 days following February 1, 1999 by Mr. Bennett through the
exercise of stock options.
9
<PAGE> 15
(6) Includes 243,169 shares not currently owned but which could be acquired
within 60 days following February 1, 1999 by Mr. Blackwell through the
exercise of stock options.
(7) In April 1996, the Corporation's stockholders approved the Lockheed Martin
Corporation Deferred Management Incentive Compensation Plan (the "DMICP")
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
("MICP"). The DMICP 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 27, 1999, the latest
date for which such information is available.
(8) Shared voting and investment power.
(9) 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, 1998, Mrs. Cheney and Messrs.
Flournoy, Gibbons, Savage, Trost, Ukropina and Yearley have been credited
with 492; 496; 4,659; 2,504; 2,438; 496; and 496 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.
(10) Includes 460,000 shares not currently owned but which could be acquired
within 60 days following February 1, 1999 by Dr. Coffman through the
exercise of stock options.
(11) Includes 210,000 shares not currently owned but which could be acquired
within 60 days following February 1, 1999 by Mr. Corcoran through the
exercise of stock options.
(12) Includes 36,000 shares representing the December 31, 1998 stock dividend
that were paid on shares gifted by Mr. Marafino on December 29, 1998. These
shares were reissued to the recipients of the gift after February 1, 1999.
(13) Includes 407,493 shares not currently owned but which could be acquired
within 60 days following February 1, 1999 by Mr. Marafino through the
exercise of stock options.
(14) Mr. Murphy specifically disclaims beneficial ownership of shares of
Lockheed Martin held by GE.
(15) Includes 230,000 shares not currently owned but which could be acquired
within 60 days following February 1, 1999 by Mr. Teets through the exercise
of stock options.
(16) Includes 3,053,288 shares of common stock not currently owned by members of
the group but which could be acquired within 60 days following February 1,
1999 through the exercise of stock options.
10
<PAGE> 16
COMPENSATION OF EXECUTIVE OFFICERS
For the fiscal year ended December 31, 1998, the following tables show annual
and long-term compensation awarded, earned or paid for services in all
capacities to the Chief Executive Officer and the next four most highly
compensated executive officers. 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, 1998. 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. The table
captioned "Long-Term Incentive Plans--Awards in Last Fiscal Year" relates to the
award in 1998 of certain performance based compensation beginning in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
---------------------------------------- ---------------------------------
Securities
Name and Other Annual Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation(1) Options/SARs Payouts Compensation(4)
- ------------------ ---- ------ ----- ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
VANCE D. COFFMAN 1998 $1,093,750 $1,250,000 $ 99,248 220,000 --- $41,865
Chairman & 1997 899,744 1,100,000 163,547 200,000 $336,619(3) 32,759
Chief Executive Officer 1996 695,961 890,000 135,145 90,000 189,617(3) 33,406
PETER B. TEETS 1998 706,250 725,000 21,894 140,000 --- 27,019
President & 1997 580,231 700,000 147,039 70,000 --- 21,132
Chief Operating 1996 488,750 416,500 15,006 60,000 --- 5,250
Officer
MARCUS C. BENNETT 1998 649,000 495,100 23,492 100,000 --- 24,911
Executive Vice 1997 596,750 614,100 29,612 90,000 --- 21,667
President & Chief 1996 525,942 556,700 135,284 66,000 --- 5,250
Financial Officer
THOMAS A. CORCORAN(5) 1998 534,750 570,600 35,677 60,000 --- 20,513
Vice President, Sector 1997 490,750 523,400 34,040 120,000(2) --- 18,194
President - Space & 1996 457,500 443,500 24,969 60,000 --- 5,250
Strategic Missiles
JAMES A. BLACKWELL JR. 1998 517,750 363,000 175,262 60,000 --- 19,864
Vice President, Sector 1997 474,510 470,500 33,387 60,000 169,219(3) 17,659
President - Aeronautics 1996 430,000 394,700 204,870 60,000 92,754(3) 20,640
</TABLE>
(1) 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 1998,
the cost of the perquisites furnished to each executive officer, with the
exception of Dr. Coffman and Mr. Blackwell, 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. Amounts reported in 1998 for Dr.
Coffman and Mr. Blackwell include corporate aircraft charges of $28,628 and
$40,242, respectively, for their spouses during business travel. Also
included in the amount reported for Mr. Blackwell are one-time membership
fees of $30,767.
(2) In April 1997, Mr. Corcoran received an award of 60,000 options that vest
and become exercisable on the fourth anniversary date following the grant.
The terms of Mr. Corcoran's April 1997 award are otherwise the same as the
award he received in January 1997.
(3) Amounts reported represent payouts of awards earned under the Long-Term
Performance Plan of Lockheed 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 1998 contributions under the Lockheed
Martin Salaried Savings Plan for Messrs. Coffman, Teets, Bennett, Corcoran,
and Blackwell of $5,000; $3,077; $3,077; $3,077 and $3,077, respectively,
and the Corporation's 1998 contributions under the Lockheed Martin
Supplemental Savings Plan for Messrs. Coffman, Teets, Bennett, Corcoran, and
Blackwell of $36,865; $23,942; $21,834; $17,436; and $16,787, respectively.
(5) Mr. Corcoran served as President and Chief Operating Officer of the
Electronics Sector from March 1995 until assuming his current position on
September 30, 1998.
11
<PAGE> 17
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
This table shows stock options to purchase common stock granted during 1998
pursuant to the Lockheed Martin 1995 Omnibus Performance Award Plan
("Omnibus Plan")(2) to the named executives.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation For
Individual Grants Option Term(3)
- ------------------------------------------ ----------------------------------------------------- --------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees Base Price Expiration
Name Granted in 1998 Per Share Date 5% 10%
- ----------------------- ---------------- ------------- ------------- ------------- --- ---
<S> <C> <C> <C> <C> <C> <C>
VANCE D. COFFMAN 220,000 4.3% $52.000 1/21/08 $7,194,555 $18,232,414
PETER B. TEETS 140,000 2.8% 52.000 1/21/08 4,578,353 11,602,445
MARCUS C. BENNETT 100,000 2.0% 52.000 1/21/08 3,270,252 8,287,461
THOMAS A. CORCORAN 60,000 1.2% 52.000 1/21/08 1,962,151 4,972,476
JAMES A. BLACKWELL, JR. 60,000 1.2% 52.000 1/21/08 1,962,151 4,972,476
</TABLE>
(1) No SARs were granted in 1998.
(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.
Under the January 1998 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
that are vested as of the effective date of the divestiture will terminate
one year from the effective date or on the option's normal expiration date,
whichever occurs first; options that 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 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, as required by the
Securities and Exchange Commission, and are not intended to forecast
possible future appreciation, if any, of the Corporation's common stock
price.
12
<PAGE> 18
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
This table shows 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 Value of Unexercised In-the-Money
Shares Options/SARs at Fiscal Year End Options/SARs at Fiscal Year End
Acquired Value ------------------------------- -------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
VANCE D. COFFMAN 0 $ 0 250,000 320,000 $1,239,375 $ 0
PETER B. TEETS 0 0 145,000 175,000 1,098,125 0
MARCUS C. BENNETT 66,000 952,875 45,000 145,000 0 0
THOMAS A. CORCORAN 60,000 1,758,750 150,000 150,000 1,080,000 7,500
JAMES A. BLACKWELL, JR. 9,942 384,789 183,168 90,000 2,019,883 0
</TABLE>
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
This table shows grants of Long-Term Incentive Performance Awards awarded
during 1998 pursuant to the Omnibus Plan(1) to the named executives. Estimated
Future Payouts
<TABLE>
<CAPTION>
Estimated Future Payouts
Under Non-Stock Price-Based Plans
---------------------------------
Performance or
Number of Other Period Until
Shares, Units Maturation or
Name or Other Rights Payout Threshold(3) Target(4) Maximum(5)
- ---- --------------- --------------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
VANCE D. COFFMAN --- 1/1/99-12/31/00 $ 675,000 $2,700,000 $5,400,000
1/1/99-12/31/01 675,000 2,700,000 5,400,000
PETER B. TEETS --- 1/1/99-12/31/00 350,000 1,400,000 2,800,000
1/1/99-12/31/01 350,000 1,400,000 2,800,000
MARCUS C. BENNETT(2) --- --- --- --- ---
--- --- --- --- ---
THOMAS A. CORCORAN --- 1/1/99-12/31/00 187,500 750,000 1,500,000
1/1/99-12/31/01 187,500 750,000 1,500,000
JAMES A. BLACKWELL, JR. --- 1/1/99-12/31/00 187,500 750,000 1,500,000
1/1/99-12/31/01 187,500 750,000 1,500,000
</TABLE>
(1) 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 applicable
Performance Goals and the terms and conditions applicable to the award as
determined by the Stock Option Subcommittee. Under the January 1999 award
agreements, each award recipient is assigned a dollar target. The amount
earned at the end of the performance period may be greater or lesser than
the target, depending upon the Corporation's Total Stockholder Return
("TSR") relative to the TSR of each of the other corporations in the
Standard & Poor's 500 Index. At the end of the performance period, 50% of
the amount earned is payable; the remaining 50 percent of the award is
deferred for two years and treated during that period as if it were
invested in the Corporation's common stock. Amounts deferred in phantom
stock units become payable on the second anniversary date of the end of the
performance period. Awards are forfeited following termination of employment
prior to the end of the performance period (or second anniversary of the
end of the performance period in the case of the deferred portion), except
in instances following death,
13
<PAGE> 19
divestiture, disability, retirement or layoff, in which case the award
shall be prorated accordingly. In the event of a change of control during
the performance period, the performance period shall terminate and a
pro-rated portion of an award shall be paid to the participant. If a change
of control occurs after the end of the performance period but before the
second anniversary of the end of the performance period, the remaining 50
percent of the award will be payable. Amounts payable generally can be
deferred under the Lockheed Martin Deferred Management Incentive
Compensation Plan.
(2) Mr. Bennett retired from the Corporation effective January 31, 1999 and
therefore did not receive an LTIP award.
(3) The minimum amount payable under the plan is 25 percent of the target,
payable if the Corporation's TSR relative to the TSR performance of other
corporations in the Standard & Poor's 500 Index is equal to or exceeds the
40th percentile ranking. If the Corporation's TSR performance is below the
40th percentile ranking, the amount payable is zero.
(4) The target award is payable under the plan if the Corporation's TSR relative
to the TSR performance of other corporations in the Standard & Poor's 500
Index is equal to or exceeds the 60th percentile ranking.
(5) The maximum award of 200 percent of target is payable under the plan if the
Corporation's TSR relative to the TSR performance of other corporations in
the Standard & Poor's 500 Index is equal to or exceeds the 85th percentile
ranking.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview
PHILOSOPHY. The primary objectives of the executive compensation program are
to assure that the Corporation is able to attract, motivate and retain talented
executives and to create an alignment of interests between the Corporation's
executives and its stockholders. Consistent with these objectives, the
Corporation's program is structured to ensure that an executive's compensation
is driven by the performance of that executive and the Corporation. The program
also provides that each executive officer receives total compensation in a range
competitive with that offered executives with similar responsibilities at other
companies of comparable size, complexity and quality. The program places
emphasis on enhancing stockholder return. It places a substantial portion of an
executive's total compensation "at risk" by being tied to the Corporation's
performance. The Committee believes that this structure aligns the interests of
the Corporation's executives with those of its stockholders; yet the structure
provides executives with additional incentives to achieve and sustain top
performance while making prudent use of the Corporation's resources.
COMPOSITION AND ROLE OF THE COMPENSATION COMMITTEE. An independent
Compensation Committee ("Committee") consisting entirely of Board members who
are neither officers nor employees of the Corporation is responsible for
overseeing the Corporation's executive compensation program. The Committee
reviews the Corporation's executive compensation policies and programs and
recommends the form and amount of compensation to be paid to the executive
officers. The Board ratified the recommendations of the Compensation Committee
in 1998.
ROLE OF THE STOCK OPTION SUBCOMMITTEE. Certain performance-based
compensation such as employee stock options are eligible for exceptions to
limitations on the deductibility of compensation under the Internal Revenue
Code ("IRC"). The Stock Option Subcommittee of the Compensation Committee is
responsible for ensuring that performance-based compensation is awarded in
compliance with the IRS guidelines. This report is submitted by both the
Compensation Committee and the Stock Option Subcommittee and references to the
term "Committee" include both.
COMPENSATION STRUCTURE. The Corporation's executive compensation structure
consists of annual compensation and long-term compensation. Base salary and
annual incentive compensation constitute an executive's annual compensation.
Stock options and, beginning in 1999, long-term incentive performance awards,
constitute long-term compensation. As more fully described below, three of the
four components (annual incentive compensation, stock options and long-term
incentive performance awards) are at risk as their value is dependent upon
individual and corporate performance.
METHODS. The Committee establishes levels of compensation through the use of
survey data gathered by nationally recognized consulting firms specializing in
executive compensation as well as by other nationally recognized survey sources.
The Committee examines this compensation information gathered for a group of 27
publicly-held industrial companies (referred to as the "Comparator Group") of a
size, complexity and quality similar to that of the Corporation. The Boeing
Company and Raytheon Corporation are two companies that are included in both the
Comparator Group and the Peer Issuers Index set forth on page 23. Although the
objective of the Committee is to use the survey data to establish a competitive
level of total compensation, the process is subjective and within the discretion
of the Committee.
Compensation in 1998
ANNUAL COMPENSATION - BASE SALARY. The Committee annually reviews base
salaries through a process which targets base salary levels at the 50th
percentile of the Comparator Group. Base salaries may be higher or lower than
the target to reflect the executive's responsibilities, level of experience,
14
<PAGE> 20
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.
Dr. Coffman, the Chief Executive Officer of the Corporation since August
1997, received in 1998 a base salary increase of 16.7%. This increase
represented the Committee's recognition of Dr. Coffman's strong performance and
steady leadership in a complex business environment. In comparison to the chief
executive officers of the Comparator Group, Dr. Coffman's current base salary is
approximately 2.5 percent below the 50th percentile. In 1998, the base salary
levels for the named executives, excluding Dr. Coffman, were approximately 12
percent above the 50th percentile.
ANNUAL COMPENSATION - INCENTIVE. The Corporation maintains an incentive plan
known as the Lockheed Martin Management Incentive Compensation Plan ("MICP").
All of the executive officers of the Corporation participate in the MICP. The
MICP provides executives with an opportunity to earn additional cash
compensation based on an appraisal by the Committee of an executive's individual
contribution to certain pre-established performance goals of the Corporation or
a specified business unit.
Each participant in the MICP is assigned a targeted percentage of base salary
determined by the level of importance and responsibility of the participant's
position in the Corporation. The target percentages are in a range that is
comparable to incentive targets for similar positions in the Corporation's
Comparator Group. Consistent with the Committee's objective of focusing
management attention on corporate performance, the amount of incentive
compensation generated by the target percentage is adjusted after assessment of
business unit performance, or in the case of corporate staff overall corporate
performance, as well as a participant's individual contribution to such
performance. The resulting adjustments may increase or decrease the incentive
award for a participant. For example, if the maximum positive and negative
adjustments for individual and corporate performance are made, the amount of
incentive compensation that the Chief Executive Officer is eligible to receive
can range from 137 to 0 percent of base salary.
Adjustments for business unit and corporate performance are recommended by
the Corporation's executive office, subject to the review and approval of the
Committee. The adjustments are based upon consideration of the achievement of
targeted goals that include standard measures of financial performance such as
orders, sales, earnings, earnings per share, return on equity, cash generation,
and backlog. In addition, technical achievement, product performance and
quality, customer satisfaction, contract award fees and adherence to ethical
standards are also considered. These goals are established at the beginning of
each plan year and, during 1998, particular emphasis was placed on cash flow
performance, orders and earnings before interest and taxes. The Committee
considers subjective measures of individual performance such as adherence to and
implementation of the Corporation's policy on ethics and standards of conduct,
customer satisfaction, process improvement 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. Evaluation of the performance of the Chief Executive Officer is
performed by the Committee.
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 and actual awards may fall above or
below the Comparator Group 50th percentile. 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.
For purposes of determining awards under the MICP for 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. The Corporation and its management met
with particularly difficult challenges during 1998, which were exacerbated by
events that occurred in the fourth quarter. Anticipating analysts' projections
that were above corporate expectations, the Corporation issued an advisory press
release in December that stated that it did not expect to meet these
projections. The effect was to revise downward analysts' projections. Following
the announcement, the Corporation's stock price declined. The Committee believes
that an evaluation of senior executives' performance based solely upon the
performance of the Corporation's stock price would represent a narrow approach
to evaluating overall corporate performance and would ignore the accomplishments
described in this report as well as the breadth of operating responsibility for
each of the named Executives. Based on consideration of many diverse factors,
including the fact that 1998 was Dr. Coffman's first full year as Chief
Executive Officer and that the Corporation was highly profitable in 1998 with
excellent cash flows and technical achievement, Dr. Coffman received an annual
incentive
15
<PAGE> 21
award of $1,250,000 which represented approximately 102 percent of base salary
or approximately 51 percent of total cash compensation. Compared to the
Comparator Group, Dr. Coffman's incentive award was approximately 22 percent
below the 50th percentile, while his total cash compensation was approximately
14 percent below the 50th percentile. With respect to the remaining four named
executive officers as a group, on average, annual awards represented
approximately 83 percent of base salary or 45 percent of total cash compensation
and were approximately 19 percent above the average annual awards of the
Comparator Group, while total cash compensation for the group was approximately
15 percent above the market 50th percentile. The reference to total cash
compensation here and elsewhere in this report includes annual base salary as of
the end of 1998 and the incentive award paid in 1999 for 1998 performance.
LONG-TERM COMPENSATION - OMNIBUS PERFORMANCE AWARD PLAN. The Lockheed Martin
Omnibus Performance Award Plan ("Omnibus Plan") is designed to provide the
Corporation's executives with the opportunity for financial reward directly
correlated with increases in stockholder value. The Omnibus Plan provides for
the granting of stock-based or cash-based incentive awards based on the
performance of the Corporation under specified criteria. In previous years, only
nonqualified stock options were granted under the Omnibus Plan. During 1998, the
Committee undertook a comprehensive study, with the assistance of independent
consultants, to review the Corporation's executive compensation program. The
purpose of the study was to ensure that the Corporation's overall executive
compensation structure was competitive with compensation programs offered by
members of the Comparator Group. The findings of the study concluded that the
long-term incentive compensation element in particular was significantly below
the Comparator Group for the named executives. Therefore, the Committee
determined that the implementation of a new long-term performance-based
compensation program was appropriate and in October 1998, the Stock Option
Subcommittee granted long-term performance target awards to approximately 75 key
management employees under the Long-term Performance Incentive ("LTIP") award
program. The new LTIP program, discussed more fully below, is a multi-year
program beginning in 1999 and is designed to continue the focus of senior
management on the long-term financial performance of the Corporation.
Stock Options
Stock options were awarded under the Omnibus Plan by the Stock Option
Subcommittee to executive officers and a group of approximately 2,100 key
personnel in 1998. Stock options tie compensation directly to the future value
of the Corporation's common stock and 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. Additionally, the vesting periods
associated with stock options encourage continued employment with the
Corporation.
The number of options granted to key executives is based upon survey data
relating to the Comparator Group. Because long-term awards vest over time, the
Committee 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." The determination of the number
of options awarded is within the complete discretion of the Subcommittee, under
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 long-term
awards made by firms in the Corporation's Comparator Group.
Long-term Incentive Compensation
The LTIP program, inaugurated in 1998 with the first cycles beginning in
1999, provides an additional incentive for management to maximize and sustain
stockholder value because any payments under the program will be directly linked
to total stockholder return over a number of years. Each LTIP recipient is
assigned a dollar target amount (the "Target Award") the amount of which is
within the complete discretion of the Stock Option Subcommittee.
At the end of a specified performance period, with the first performance
period beginning in 1999, the actual cash award an LTIP participant would be
eligible to receive may be larger or smaller than such Target Award, or no award
at all, depending on the Corporation's relative ranking of total stockholder
return to the total stockholder return of the companies in the Standard & Poor's
500 Index ("S&P 500"). Total stockholder return is measured by the change in the
price of the Corporation's common stock over the performance period and the
value of dividends paid during that period. Total stockholder return for each
corporation included in the S&P 500 shall be computed from data available to the
public and the
16
<PAGE> 22
ranking shall be made using generally accepted analytical procedures. The period
for measuring performance under the new awards program begins January 1, 1999. A
more detailed description of the program, as well as the threshold, target and
maximum awards for Dr. Coffman and the four highest-paid executive officers
appears on page 13.
The value of Dr. Coffman's LTIP award, together with the grant of 220,000
options, was at approximately the 50th percentile of total long-term
compensation. The remaining named executives received on average long-term
compensation awards and option awards that were at approximately the 50th
percentile level of total long-term compensation awards granted by the companies
included in the Comparator Group.
SUMMARY. Dr. Coffman's total compensation for 1998, consisting of base
salary, annual incentive compensation and long-term compensation was
approximately 32 percent below the 50th percentile. The total compensation of
the remaining named executives for 1998 was 9 percent below the 50th percentile.
The above values do not include values related to the LTIP awards because the
performance cycles do not begin until 1999.
Relationship of Awards to Corporate Performance
Overall, 1998 was a year in which the Corporation faced a challenging and
complex business environment that resulted in performance issues for certain of
its businesses. These issues included the delay of commercial satellite launches
from 1998 to 1999, declines in other commercial space activities, delayed
deliveries of C-130J airlift aircraft from 1998 to 1999 and disappointing
performance in the Corporation's commercial information product companies. When
it became evident in December 1998 that many of these issues would become
exacerbated at year-end because of further launch vehicle and aircraft delivery
delays, the Corporation issued a press release revising its earnings estimates.
As noted previously, following the announcement, the Corporation's stock price
declined. In the Committee's opinion, even under these circumstances, the 1998
year-end share price did not fully reflect the core strengths of the
Corporation, which include strong operating cash flows, continued development of
premier technology, a diversified program base and a strong competitive
position. (The annual average return since public trading of the Corporation's
common stock began on March 16, 1995, is 16 percent. This return compares
favorably with the 13 percent return of the Peer Issuers Index.)
In addition, the Committee concluded that the year-end stock price did not
reflect accomplishments of the named executives, including Dr. Coffman. During
1998, the Corporation achieved a 97 percent Mission Success record, the
Corporation's internal "report card" on approximately 900 measurable events, and
the Corporation was successful in earning 94 percent of all possible award fees,
the customers' "report card" on the Corporation. The Corporation achieved a
greater than 60 percent win rate relative to both programs and dollars bid. The
Corporation's consolidation efforts also continued to benefit stockholders,
customers and taxpayers, and the Corporation is on track to attempt to achieve,
by 1999, projected annual savings of nearly $2.6 billion from consolidation
initiatives arising from previous merger and acquisition activities. The
Corporation's aggressive cost-reduction program, LM21 Best Practices, is
expected to fuel margin expansion and sales growth by providing estimated annual
savings of between $2.5 -- $3.0 billion. Free cash flow for 1998 was in excess
of $1.5 billion. Finally, as in prior years, portfolio shaping remained an
important part of the Corporation's long-term strategy. Despite the
disappointment of the U.S. Government's decision to oppose the proposed
combination with Northrop Grumman, the Corporation was proactive in the merger
and acquisition arena. During 1998, the Corporation announced its intention to
effect a business combination with COMSAT Corporation, a leader in the
international satellite communications services and digital networking services
and technology businesses, and the formation of a joint venture with GE American
Communications, Inc. to serve the communications needs of the Asia-Pacific
region. The Corporation also acquired several postal service companies and a
leading provider of photo enforcement technology services, and has remained
aggressive in divesting non-core businesses. The Committee believes that these
and other achievements reflect the leadership and hard work of a dedicated
management team that includes the named executives.
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 base salary. The President is expected
to have an ownership interest in the Corporation's common stock of at least four
times his or her base 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
17
<PAGE> 23
ownership interests of two times base salary. Although there is no specific
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 Federal income tax purposes, publicly held corporations are not permitted
to deduct compensation paid to any named executive in excess of $1 million
unless it is performance based. As discussed under the caption "Role of Stock
Option Subcommittee," stock option grants and long-term performance awards under
the Omnibus Plan made by the Committee are intended to meet the requirements for
deductible performance-based compensation under IRC 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 $800,000 of the compensation awarded in 1998 is not
deductible on account of the $1 million limitation.
Submitted by the Compensation Committee and Stock Option Subcommittee,
Edward E. Hood, Jr. Eugene F. Murphy
------------------------- -------------------------
Chairman - Compensation Committee Compensation Committee
Chairman - Stock Option Subcommittee
Caleb B. Hurtt Allen E. Murray
------------------------- -------------------------
Compensation Committee Compensation Committee
Stock Option Subcommittee
Gwendolyn S. King Frank Savage
------------------------- -------------------------
Compensation Committee Compensation Committee
Stock Option Subcommittee Stock Option Subcommittee
EXECUTIVE BENEFITS
The Lockheed Martin 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. During active
employment, officers of the Corporation are provided personal liability
insurance coverage of $5 million and accidental death and dismemberment coverage
of $1 million.
Under the Lockheed Martin Deferred Management Incentive Compensation Plan,
key management employees may defer receipt of all or a portion of an incentive
compensation award or long-term incentive performance award. 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 provided for the payment of
18
<PAGE> 24
certain benefits described below if, within three years after the occurrence of
certain events with respect to Lockheed, the covered officer either (a) was
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) terminated his or her employment with Lockheed for "good
reason" (as defined in the Termination Benefits Agreements).
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. The Termination Benefits
Agreements expired on March 15, 1998.
Lockheed Martin has entered into retention agreements with certain officers
of the Corporation. 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 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 1998, the
Lockheed Martin 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,
1998, 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. The Lockheed Martin Supplemental Savings
Plan ("Supplemental Plan") has been established for certain Salaried Savings
Plan participants affected by these limits. 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.
PENSION PLANS
The Corporation sponsors a number of pension plans for employees. During
1998, 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 Plan (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
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<PAGE> 25
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), 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 in effect on June 30, 1997), (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). 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 became 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.
The amounts listed on the tables that 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, 1998, 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: Dr.
Coffman-$1,556,767; Mr. Teets-$1,015,447; Mr. Bennett-$712,182 (based on Mr.
Bennett's retirement effective January 31, 1999); Mr. Corcoran-$715,913 and Mr.
Blackwell-$509,626. 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, 1998, for Messrs. Coffman, Teets, Bennett, Corcoran
and Blackwell were 31 years, 36 years, 40 years, 31 years and 29 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.
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<PAGE> 26
MAXIMUM ANNUAL BENEFIT PAYABLE UPON NORMAL RETIREMENT
LOCKHEED PLAN(1)
<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>
(1) All figures listed in the chart are benefits payable under the greater of
the Lockheed Martin Retirement Program or the Lockheed Plan. In 1999,
benefits calculated under the Lockheed Plan would always be greater.
21
<PAGE> 27
MAXIMUM ANNUAL BENEFIT PAYABLE UPON NORMAL RETIREMENT
MARTIN PLAN(1)
<TABLE>
<CAPTION>
===============================================================================
FIVE-YEAR 15 YEARS 20 YEARS 30 YEARS 40 YEARS
AVERAGE OF OF 25 YEARS OF OF
COMPENSATION Service(2) Service(2) OF SERVICE(3) Service(3) Service(3)
===============================================================================
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 21,333 $ 28,444 $ 46,418 $ 51,576 $ 57,204
- -------------------------------------------------------------------------------
150,000 32,583 43,444 71,168 79,076 87,454
- -------------------------------------------------------------------------------
200,000 43,833 58,444 95,918 106,576 117,704
- -------------------------------------------------------------------------------
300,000 66,333 88,444 145,418 161,576 178,204
- -------------------------------------------------------------------------------
400,000 88,833 118,444 194,918 216,576 238,704
- -------------------------------------------------------------------------------
500,000 111,333 148,444 244,418 271,576 299,204
- -------------------------------------------------------------------------------
600,000 133,833 178,444 293,918 326,576 359,704
- -------------------------------------------------------------------------------
700,000 156,333 208,444 343,418 381,576 420,204
- -------------------------------------------------------------------------------
800,000 178,833 238,444 392,918 436,576 480,704
- -------------------------------------------------------------------------------
900,000 201,333 268,444 442,418 491,576 541,204
- -------------------------------------------------------------------------------
1,000,000 223,833 298,444 491,918 546,576 601,704
- -------------------------------------------------------------------------------
1,200,000 268,833 358,444 590,918 656,576 722,704
- -------------------------------------------------------------------------------
1,400,000 313,833 418,444 689,918 766,576 843,704
- -------------------------------------------------------------------------------
1,600,000 358,833 478,444 788,918 876,576 964,704
- -------------------------------------------------------------------------------
1,800,000 403,833 538,444 887,918 986,576 1,085,704
- -------------------------------------------------------------------------------
2,000,000 448,833 598,444 986,918 1,096,576 1,206,704
- -------------------------------------------------------------------------------
2,500,000 561,333 748,444 1,234,418 1,371,576 1,509,204
- -------------------------------------------------------------------------------
2,700,000 606,333 808,444 1,333,418 1,481,576 1,630,204
===============================================================================
</TABLE>
(1) All figures listed in the chart above are benefits payable under the greater
of the Lockheed Martin Retirement Program or the Martin Plan.
(2) 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 participating in the Plan prior to October 1, 1975 ("Pre-ERISA
Formula"). Employees who became participants on or 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. As a result
of the amendment, if an employee would receive 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.
(3) Calculated under the Pre-ERISA Formula.
22
<PAGE> 28
STOCK PRICE PERFORMANCE GRAPH
<TABLE>
<CAPTION>
Lockheed Martin S&P 500 Peer Issuers Index
<S> <C> <C> <C>
16-Mar-95 100 100 100
Mar-95 102 101 105
Jun-95 123 111 119
Sept-95 131 119 131
Dec-95 155 127 149
Mar-96 150 133 157
Jun-96 167 139 163
Sep-96 180 144 178
Dec-96 183 156 186
Mar-97 169 160 172
Jun-97 209 188 196
Sept-97 216 202 212
Dec-97 201 207 194
Mar-98 230 236 210
Jun-98 217 244 195
Sep-98 208 220 168
Dec-98 176 267 161
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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 1998 or in
1999 on a Form 5 for the year ended December 31, 1998, all filing requirements
were complied with on a timely basis, except that the timely filing on behalf of
one executive officer, Mr. Robert J. Stevens, of one report covering one
purchase transaction was not made and was subsequently filed. In addition, the
filings on behalf of all executive officers covering the accumulation of
benefits in phantom stock accounts under the Corporation's Supplemental Salaried
Savings Plan were not timely made on Form 5 and were subsequently filed.
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 in 1999. 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. If
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 IN 1999.
PROPOSED LOCKHEED MARTIN DIRECTORS EQUITY PLAN
The Board of Directors has adopted the Lockheed Martin Directors Equity Plan
(the "Equity Plan"), subject to the approval by the Corporation's stockholders.
The purpose of the Equity Plan is to attract, motivate and retain experienced
and knowledgeable directors of the Corporation and to further align their
economic interests with the interests of stockholders generally. The Equity Plan
is one component of a new, simplified compensation program for directors, as
described under the section entitled "Board of Directors." Adoption of the new
program follows an extensive Board review of outside director compensation based
on an independent analysis of market data. If approved, compensation awarded
under the Equity Plan will constitute approximately 50% of each eligible
director's compensation per year, a change the Board believes is appropriate to
align director compensation more closely with stockholder value. The remaining
portion is payable in cash and may be deferred at the director's election into a
deferred account earning 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. The Board of
Directors recommends that the stockholders approve the Equity Plan. If the
stockholders fail to ratify the proposed Plan, the Board of Directors will
review the matter.
The following description of the Equity Plan's principal features is
qualified in its entirety by reference to the complete text of the Equity Plan,
a copy of which is set forth in the Appendix to this Proxy Statement.
Under the Equity Plan, each eligible director will elect to receive, on May 1
of each year (following election at the Annual Meeting), one of the following
awards: (1) 1,200 stock units; (2) 600 stock units and options to purchase 1,800
shares of the Corporation's common stock; or (3) options to purchase 3,600
shares of the Corporation's common stock. Eligible directors include all
directors who are not officers or employees of the Corporation or its
subsidiaries. Thirteen of the Corporation's proposed directors will be eligible
on May 1, 1999 to participate in the Equity Plan. Upon approval of the Equity
Plan by the stockholders, the Corporation intends to register under the
Securities Act of 1933 one million shares of the Corporation's common stock.
Stock Units. A stock unit is a bookkeeping entry that represents the value of
a share of the Corporation's common stock. All stock units will be fully vested
on the first anniversary of the grant date. Upon a director's termination of
service from the Corporation's Board of Directors, the Equity Plan provides that
a director's accrued stock units will be distributed, at the election of the
director, in whole shares of the Corporation's common stock or an amount in cash
based on the fair market value of the Corporation's common stock. A director may
irrevocably elect to receive his or her accrued stock units in a lump sum or in
equal annual installments over a period of up to ten years after termination of
service. In the case of a director's termination of service as a result of death
or disability, however, the stock units will be paid in a lump sum. During the
period a director's interest is represented by stock units, a director will have
no voting, dividend or other rights with respect to the shares, but will receive
additional stock units representing dividend equivalents based on cash
distributions on the underlying shares (converted to stock units based on the
closing market price of the Corporation's common stock on the applicable
dividend payment dates).
Options. Under the Equity Plan, options are rights to purchase a specified
number of shares of the Corporation's common stock at an exercise price equal to
100% of the fair market value of the stock on the grant date. The options
granted pursuant to the Equity Plan are non-qualified stock options and have a
term of ten years. Except in certain circumstances, options vest on the first
anniversary of grant. If a director's service ceases by reason of normal
retirement (i.e., retirement at the end of a director's term),
24
<PAGE> 30
death or disability, a director (or his estate, as the case may be) will have
the right to exercise his or her options. A director will have no voting,
dividend or other stockholder rights for the shares of common stock covered by
an option until the director becomes the holder of record of those shares.
Administration; Change in Control. The Equity Plan will be administered by
the Board of Directors' Nominating Committee and may be amended by the
Nominating Committee in its sole discretion, without stockholder approval. No
guidelines have been established relating to the nature of any amendments that
may be made without stockholder approval; however, such approval may be required
to preserve the qualifying status of the Equity Plan under Rule 16b-3 under the
Exchange Act. Any amendments made without stockholder approval could increase
the costs of the Equity Plan. A director's consent would be required to revoke
or alter an outstanding award in a manner unfavorable to such director. The term
of the Equity Plan is ten years, subject to earlier termination by the
Nominating Committee.
The aggregate number of shares of common stock that may be issued under the
Equity Plan may not exceed one million shares. This number of shares is subject
to adjustment in event of a stock split, recapitalization or other
reorganization.
Upon a "Change in Control" of the Corporation (as defined in the Equity
Plan), a director's stock units and outstanding options become fully vested, and
directors will have the right to exercise their options immediately. A Change in
Control under the Equity Plan is defined generally to include a change in
ownership involving 25% or more of the outstanding voting securities of the
Corporation (or a combined entity), a transfer of substantially all of the
Corporation's assets or a change in majority of the members of the Corporation's
Board of Directors as a result of any such change or reorganization or contested
election.
Federal Tax Consequences. In general, under current federal income tax laws,
stock units under the Equity Plan will be includible in a director's taxable
income and deductible to the Corporation based on the fair market value of the
common stock at the time stock units are paid in cash or shares following
termination of service.
A director will not recognize income upon the grant of an option to purchase
shares of common stock. Upon exercise of the option, a director will recognize
ordinary income equal to the excess of the fair market value of the common stock
on the date the option is exercised over the option price for such stock. The
tax basis of the option stock will equal the option price for the stock plus the
amount of ordinary income that the director recognizes upon exercise of the
option, and the holding period for the stock will commence on the day the option
is exercised. A director who sells option stock will recognize a 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 one year after exercise. The Corporation will be entitled to
a deduction equal to the amount of ordinary compensation income recognized by
the director. The deduction will be allowed at the same time that the director
recognizes the income.
Depending upon the award selected by a director, the benefits to be awarded
to the non-employee directors as a group are as follows:
<TABLE>
<CAPTION>
DIRECTORS EQUITY PLAN
POSITION DOLLAR VALUE(1) NUMBER OF UNITS(2)
-------- --------------- ------------------
<S> <C> <C>
Non-Employee Directors as a
Group (13) $577,200 15,600
</TABLE>
(1) Based on a price of $37.00 per share, the closing price for the
Corporation's common stock on February 1, 1999.
(2) The table shows the aggregate value of one year's award for all 13
non-employee directors, assuming that they all elected to receive their
awards entirely in stock units. Each director can elect to receive 1,200
stock units with a value of $44,400. No value is shown for a director
electing to receive an award entirely in stock options. A director electing
to receive 600 stock units and 1,800 stock options would receive a value
equal to the 600 stock units of $22,200.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED DIRECTORS EQUITY
PLAN.
25
<PAGE> 31
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 448 shares of common stock of the
Corporation has notified Lockheed Martin that she intends to present the
following proposal at this year's 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 9,828,380 shares, representing approximately 6.4% 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:
The Board has reviewed the proponent's proposal to impose term limits, and
believes that the reasons for opposing the resolution in 1998, at which time it
was rejected by more than 93% of shares voting, are equally valid today.
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 views 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 limits on who may serve. 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.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE
PROPOSAL.
------------------------
STOCKHOLDER PROPOSAL 2
The Domestic and Foreign Missionary Society of the Protestant Episcopal
Church, 815 Second Avenue, New York, New York 10017-4594, the owner of 400
shares of common stock of the Corporation; The Sisters of St. Francis of
Philadelphia, 609 South Convent Road, Aston, PA 19014-1207, the owner of 200
shares of common stock of the Corporation; the School Sisters of Notre Dame
Cooperative Investment Fund, 336 East Ripa Ave., St. Louis, MO 63125, the owner
of 108 shares of common stock of the Corporation; the Retirement Plans for
Employees of the Sisters of Mercy Regional Community of Detroit, 34605 Twelve
Mile Road, Farmington Hills, Michigan 48331, the owner of 90,704 shares of
common stock of the Corporation; the Medical Mission Sisters Office for
Responsible Investment, 338 West Street, Hyde Park, Massachusetts 02136-1320,
the owner of 200 shares of common
26
<PAGE> 32
stock of the Corporation; the Mercy Consolidated Asset Management Program, 20
Washington Square North, New York, NY 10011, the owner of 100 shares of common
stock of the Corporation; the Congregation of the Sisters of Charity of the
Incarnate Word, P. O. Box 230969, 6510 Lawndale, Houston, Texas 77223-0969, the
owner of 2,000 shares of common stock of the Corporation; the Sisters of Mercy
of the Regional Community of Detroit, 29000 Eleven Mile Road, Farmington Hills,
MI 48336-1405, the owner of 4,000 shares of common stock of the Corporation; and
the Dominican Province of St. Albert the Great, 1909 South Ashland Avenue,
Chicago, Illinois 60608-2994, the owner of 340 shares of common stock of the
Corporation, have notified Lockheed Martin Corporation that they intend to
present the following proposal at this year's Annual Meeting:
"WHEREAS the proponents of this resolution believe that the Board of LOCKHEED
MARTIN should establish criteria to guide management in their defense
contract bidding and implementation activities;
"WHEREAS we believe that economic decision-making has both an ethical and
a financial component;
"WHEREAS we believe our company's ethical responsibilities include analyzing
the effects of its decisions with respect to employees, communities, and
nations;
"WHEREAS we believe decisions to develop and to produce weapons can have
grave consequences to the lives and/or freedom of people worldwide, if the
company has not considered its ethical responsibilities ahead of time;
therefore be it
"RESOLVED that the shareholders request the Board of Directors to establish
a committee to research this issue and to develop criteria for the bidding,
acceptance and implementation of military contracts, and to report the
results of its study to shareholders at its 2000 annual meeting.
Proprietary information may be omitted and the cost limited to a reasonable
amount."
STOCKHOLDER'S SUPPORTING STATEMENT
"The proponents of this resolution believe that all human beings are called
to seek justice and peace. An ethic of stewardship of the earth must include
respect for humanity and for creation. Because we believe that corporate
social responsibility in a successful free enterprise system demands ethical
reflection and action upon activities that are socially useful as well as
economically profitable, we recommend that the Board study include the
following subjects:
"- Arms sales to governments that repress their citizens
"- The connection between arms sales and geographical or
political instability
"- Lobbying and marketing activities, both in the United States
and abroad, including costs
"- Sales of weapons, parts, technology, and components
convertible to military use (dual-use) to foreign governments
"- Transfers of technology, including co-production agreements
"A YES vote recommends that the Board consider the above-listed criteria in
a study of our company's military sales and production activities."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS
PROPOSAL FOR THE FOLLOWING REASONS:
Lockheed Martin is a global company conducting business in the international
marketplace. A portion of the Corporation's international business consists of
the sale of military equipment. Of these sales, some are Foreign Military Sales,
where the U.S. government provides the equipment directly to the foreign
government, and some are sold directly by Lockheed Martin to the foreign
customer. In either instance, these sales are reviewed and approved by the U.S.
Government. The U.S. Government administers a rigorous regime of approval and
licensing for the sale of military hardware and permits only those sales that
are consistent with United States interests and policy objectives. Lockheed
Martin's international sales are strictly compliant with all provisions of U.S.
law and policy.
27
<PAGE> 33
Since the end of the Cold War, the United States defense procurement budget
has declined by 55% in real terms. Defense budgets worldwide have declined by
nearly one third since 1988, and the volume of global exports of military
equipment in 1997 was roughly half the volume in 1988. International sales help
to offset this decline and to enable the Corporation to maintain its industrial
capabilities and provide jobs for its employees.
The present proposal supposes that the Corporation is involved in arms
transfers that negatively impact the interests of the United States and threaten
world peace. The Corporation's sales of defense systems to allied governments
enhance the security of our country and allies. These sales have been supported
by the American people's elected representatives in the Congress and by the
President of the United States. The Board believes that the development of
criteria for the bidding, acceptance and implementation of military contracts is
properly within the purview of government policymakers and regulators. Thus, the
Board believes that a special report to the stockholders as called for in the
proposal would be of little value to the stockholders. Business decisions
regarding the bidding and sale of the Corporation's products receive rigorous
analysis by management and conform to Government policy and objectives.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE
PROPOSAL.
MISCELLANEOUS
Financial and other reports will be made available for inspection by
stockholders present at the Annual Meeting, but it is not intended that any
action will be taken regarding them.
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. The Corporation has retained Morrow & Co., Inc. to
aid in the solicitation of proxies and to verify records related to the
solicitation at a fee of $35,000 plus expenses. To the extent necessary to
ensure sufficient representation at the meeting, the Corporation may request the
return of proxies by telephone or otherwise. The extent to which additional
requests will be necessary depends upon how promptly proxies are returned.
Stockholders are urged to return their proxies without delay.
The Board of Directors is not aware that any matters not referred to will 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
in accordance with the judgment of the persons voting them. It is also intended
that discretionary authority will be exercised to vote on any matters incidental
to the conduct of the meeting.
PROPOSALS BY STOCKHOLDERS INTENDED TO BE PRESENTED AT THE 2000 ANNUAL MEETING
OF STOCKHOLDERS OF LOCKHEED MARTIN MUST BE RECEIVED BY THE SECRETARY OF THE
CORPORATION NO LATER THAN NOVEMBER 19, 1999 TO BE INCLUDED IN THE PROXY
STATEMENT AND ON THE PROXY SOLICITATION/VOTING INSTRUCTION CARD THAT WILL BE
SOLICITED BY THE BOARD OF DIRECTORS. 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 90 days nor more than 120 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 relating to a particular stockholder proposal
shall not constitute a waiver of any other stockholder proposal nor shall it
obligate the Corporation to waive these requirements regarding future
submissions of that 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, Corporate Secretary
and Associate General Counsel
March 19, 1999
28
<PAGE> 34
APPENDIX
[LOCKHEED MARTIN LOGO]
DIRECTORS EQUITY PLAN
<PAGE> 35
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
ARTICLE II
DEFINITIONS
ARTICLE III
PARTICIPATION
<S> <C>
3.1. Award...............................................................A-3
3.2. Election............................................................A-3
ARTICLE IV
STOCK UNITS
4.1. Stock Unit Account..................................................A-3
4.2. Dividend Equivalents; Dividend Equivalent Stock Account.............A-3
4.3. Vesting of Stock Unit Account and Dividend Equivalent Stock Account.A-3
4.4. Distribution of Benefits............................................A-4
4.5. Limitations on Rights Associated with Units.........................A-4
ARTICLE V
STOCK OPTIONS
5.1. Exercise Price......................................................A-5
5.2. Non-transferability of Options......................................A-5
5.3. Vesting; Term of Options............................................A-5
5.4. Payment of Exercise Price...........................................A-5
5.5. Rights as Stockholder...............................................A-5
ARTICLE VI
ADMINISTRATION
6.1. Administration......................................................A-5
6.2. Decisions Final; Delegation; Reliance; and Limitation on Liability..A-5
</TABLE>
i
<PAGE> 36
<TABLE>
<CAPTION>
ARTICLE VII
PLAN CHANGES AND TERMINATION
<S> <C>
7.1. Adjustments upon Changes in Common Stock............................A-6
7.2. Amendments..........................................................A-6
7.3. Term................................................................A-6
7.4. Distribution of Shares..............................................A-6
ARTICLE VIII
MISCELLANEOUS
8.1. Limitation on Directors' Rights.....................................A-6
8.2. Beneficiaries.......................................................A-6
8.3. Corporation's Right to Withhold.....................................A-6
8.4. Benefits Not Assignable; Obligations Binding upon Successors........A-7
8.5. Governing Law; Severability.........................................A-7
8.6. Compliance with Laws................................................A-7
8.7. Plan Construction...................................................A-7
8.8. Headings Not Part of Plan...........................................A-7
</TABLE>
ii
<PAGE> 37
LOCKHEED MARTIN CORPORATION
DIRECTORS EQUITY PLAN
MAY 1, 1999
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
This Plan shall be known as "Lockheed Martin Corporation Directors Equity
Plan" and shall become effective on May 1, 1999. The purpose of this Plan is to
attract, motivate and retain experienced and knowledgeable directors for the
Corporation and to further align their economic interests with the interests of
stockholders generally. The total number of shares of Common Stock that may be
delivered pursuant to awards under this Plan is 1,000,000, subject to
adjustments contemplated by Section 7.1. Shares of Common Stock subject to an
Option terminating or expiring for any reason prior to its exercise, and Units
and Dividend Equivalents that are forfeited pursuant to the Plan, shall be
available for Awards to be granted during the term of the Plan.
ARTICLE II
DEFINITIONS
The following terms shall have the meaning specified below unless the
context clearly indicates otherwise:
Accounts means a Director's Stock Unit Account and Dividend
Equivalent Stock Account.
Award means an award granted pursuant to Section 3.1.
Award Date means May 1 of each year, commencing in 1999 (or if May 1
falls on a weekend or holiday, the next following business day).
Beneficiary shall have the meaning specified in Section 8.2(b).
Board of Directors or Board means the Board of Directors of the
Corporation.
Change in Control means:
1) A tender offer or exchange offer is consummated for the
ownership of securities of the Corporation representing 25% or more
of the combined voting power of the Corporation's then outstanding
voting securities entitled to vote in the election of directors of
the Corporation.
2) The Corporation is merged, combined, consolidated,
recapitalized or otherwise reorganized with one or more other
entities that are not Subsidiaries and, as a result of the merger,
combination, consolidation, recapitalization or other
reorganization, less than 75% of the outstanding voting securities
of the surviving or resulting corporation shall immediately after
the event be owned in the aggregate by the stockholders of the
Corporation (directly or indirectly), determined on the basis of
record ownership as of the date of determination of holders entitled
to vote on the action (or in the absence of a vote, the day
immediately prior to the event).
3) Any person (as this term is used in Sections 3(a)(9) and
13(d)(3) of the Exchange Act, but excluding any person described in
and satisfying the conditions of Rule 13d-1(b) (1) thereunder),
becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting power of
the Corporation's then outstanding securities entitled to vote in
the election of directors of the Corporation.
A-1
<PAGE> 38
4) At any time within any period of two years after a tender
offer, merger, combination, consolidation, recapitalization, or
other reorganization or a contested election, or any combination of
these events, the "Incumbent Directors" shall cease to constitute at
least a majority of the authorized number of members of the Board.
For purposes hereof, "Incumbent Directors" shall mean the persons
who were members of the Board immediately before the first of these
events and the persons who were elected or nominated as their
successors or pursuant to increases in the size of the Board by a
vote of at least three-fourths of the Board members who were then
Board members (or successors or additional members so elected or
nominated).
5) The stockholders of the Corporation approve a plan of
liquidation and dissolution or the sale or transfer of substantially
all of the Corporation's business and/or assets as an entirety to an
entity that is not a Subsidiary.
Code means the Internal Revenue Code of 1986, as amended.
Common Stock or Stock means shares of Common Stock of the
Corporation, par value $1.00 per share, subject to adjustments made under
Section 7.1 or by operation of law.
Corporation means Lockheed Martin Corporation, a Maryland
corporation, and its successors and assigns.
Director means a member of the Board of Directors of the Corporation
who is not an officer or employee of the Corporation or any of its
subsidiaries.
Disability means a "permanent and total disability" within the
meaning of Section 22(e)(3) of the Code.
Dividend Equivalent means the amount of cash dividends or other cash
distributions that would have been paid by the Corporation on Stock Units
then credited to a Director's Stock Unit Account had those Stock Units
been shares of common stock.
Dividend Equivalent Stock Account means the bookkeeping account
maintained by the Corporation on behalf of a Director which is credited
with Dividend Equivalents in the form of Stock Units in accordance with
Section 4.2.
Effective Date means May 1, 1999.
Exchange Act means the Securities Exchange Act of 1934, as amended
from time to time.
Fair Market Value means the closing price of the Stock as reported
on the composite tape of New York Stock Exchange issues on the relevant
date, or, if no sale of Stock is reported for that date, the next
preceding day for which there is a reported sale.
Option means a Nonqualified Stock Option to purchase shares of
Common Stock with the terms and conditions as described in Article V.
Plan means the Lockheed Martin Corporation Directors Equity
Plan.
Retirement means retirement from the Corporation at the expiration
of a Director's term.
Stock Unit or Unit means a non-voting unit of measurement that is
deemed for bookkeeping purposes to be equivalent to an outstanding share
of Common Stock of the Corporation.
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Stock Unit Account means the bookkeeping account maintained by the
Corporation on behalf of each Director which is credited with Stock Units
in accordance with Section 4.1.
Subsidiary means, as to any person, any corporation, association,
partnership, joint venture or other business entity of which 50% or more
of the voting stock or other equity interests (in the case of entities
other than corporations), is owned or controlled (directly or indirectly)
by that entity, or by one or more of the Subsidiaries of that entity, or
by a combination thereof.
ARTICLE III
PARTICIPATION
3.1. Award. Commencing on May 1, 1999, and on each Award Date thereafter
during the term of this Plan, each Director shall be granted, in the form
elected by the Director pursuant to Section 3.2, one of the following Awards:
(a) 1,200 Units credited to the Director's Stock Unit Account;
(b) 600 Units credited to the Director's Stock Unit Account and
Options to purchase 1,800 shares of Stock; or
(c) Options to purchase 3,600 shares of Stock.
3.2. Election. Prior to the Corporation's Annual Meeting of Stockholders
or, in the case of a new Director, before the commencement of the Director's
term of office, a Director must file an election form, as provided by the
Corporation, with the Secretary of the Corporation specifying the form of the
Award the Director elects to receive pursuant to Section 3.1. A Director's
election shall remain in effect for Awards made in each subsequent calendar
year, unless the Director files a revised election form or written revocation of
the election with the Secretary of the Corporation before the subsequent Annual
Meeting of Stockholders. A Director's election shall be irrevocable after the
Award for a particular year is made.
ARTICLE IV
STOCK UNITS
4.1. Stock Unit Account. If a Director elects the Award described in
either Section 3.1(a) or 3.1(b), the Stock Unit Account of such Director shall
be credited on the Award Date with either (i) 1,200 Units pursuant to Section
3.1(a) or (ii) 600 Units pursuant to Section 3.1(b).
4.2. Dividend Equivalents; Dividend Equivalent Stock Account.
(a) Allocation of Dividend Equivalents. Each Director shall be
entitled to receive Dividend Equivalents on the Units credited to his or her
Stock Unit Account and Dividend Equivalent Stock Account, both before and after
a termination of service. The Dividend Equivalents shall be credited to the
Director's Dividend Equivalent Stock Account in accordance with Section 4.2(b)
below.
(b) Dividend Equivalent Stock Account. The Director's Dividend
Equivalent Stock Account shall be credited with an additional number of Units
determined by dividing the amount of Dividend Equivalents by the Fair Market
Value of a share of Common Stock as of the date on which the dividend is paid.
The Units credited to a Director's Dividend Equivalent Stock Account shall be
allocated (for purposes of distribution) in accordance with Section 4.4(b) and
shall be subject to adjustment in accordance with Section 7.1.
4.3. Vesting of Stock Unit Account and Dividend Equivalent Stock Account.
A Director's Units held in his or her Stock Unit Account shall vest on the first
anniversary of the Award Date for such Units. A Director's Units held in his or
her Dividend Equivalent Stock Account shall vest when the underlying Units in
the Stock Unit Account vest. If a Director's service as a Director terminates
for any reason, all nonvested Units and related Dividend Equivalents shall be
forfeited. Notwithstanding the provisions of this Section 4.3, all nonvested
Units and
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<PAGE> 40
related Dividend Equivalents granted to a Director shall vest upon a Change in
Control or in the event of such Director's Retirement, death or Disability.
4.4. Distribution of Benefits.
(a) Commencement of Benefits Distribution. Subject to the terms of
Section 4.3 and this Section 4.4, each Director shall be entitled to receive a
distribution of his or her Accounts upon a termination of service (including but
not limited to a retirement or resignation) as a director of the Corporation.
Benefits shall be distributed at the time or times set forth in this Section
4.4.
(b) Manner of Distribution. The benefits payable under this Section
shall be distributed to the Director in a lump sum, unless the Director elects
in writing (on forms provided by the Corporation) on or before the Award Date on
which the Units are granted to receive a distribution of benefits in
approximately equal annual installments for up to ten years. Elections with
respect to any Units in the Stock Unit Account shall apply to all Dividend
Equivalent Units attributable to those Stock Units, and to all Dividend
Equivalent Units. Installment payments shall commence as of the date the
Accounts become distributable under Section 4.4(a). The amount of each
installment shall be equal to (i) the Fair Market Value of the Units allocated
to Director's Stock Unit Account and Dividend Equivalent Account, on the day
immediately preceding the date of payment, divided by (ii) the number of
installments yet to be paid. Notwithstanding the foregoing, if the vested
balance remaining in a Director's Stock Unit Account and Dividend Equivalent
Stock Account is less than 50 Units, then the remaining balance shall be
distributed in a lump sum in the form of cash or Stock, as previously elected by
the Director. In the event of a Change in Control or a Director's termination of
services as a result of death or Disability, either prior to or after the
Director has terminated service, the benefits payable under this Section shall
be distributed in a lump sum in cash.
(c) Form of Distribution. Stock Units shall be paid and distributed
by means of a distribution of (i) an equivalent whole number of shares of Common
Stock or (ii) cash in an amount equal to the Fair Market Value of an equivalent
number of shares of Common Stock as of the business day immediately preceding
the distribution. Any fractional interest in a Unit shall be paid in cash on
final distribution. In the event of a termination of service, a Director may
elect to have Stock Units credited to the Director's Stock Unit Account and
Dividend Equivalent Stock Account paid and distributed in the form of cash or a
combination of whole shares of Common Stock and cash by making a written
election (on forms provided by the Corporation) at least six months prior to
receipt by a Director of any distribution as to the percentage the Director
elects to receive in the form of cash and the percentage the Director elects to
receive in whole shares of Common Stock.
(d) Sub-Accounts. The Administrator shall retain sub-accounts of a
Director's Accounts as may be necessary to determine which Units are subject to
any distribution elections under Section 4.4(b).
(e) Limitations of Distributions. Notwithstanding anything herein to
the contrary, no Units may be distributed prior to the six month anniversary of
the crediting of such Units to the Director's Stock Unit Account.
4.5. Limitations on Rights Associated with Units. A Director's Accounts
shall be memorandum accounts on the books of the Corporation. The Units credited
to a Director's Accounts shall be used solely as a device for the determination
of the number of shares of Common Stock to be distributed to such Director in
accordance with this Plan. The Units shall not be treated as property or as a
trust fund of any kind, and shall not create a security interest in any property
although the Corporation shall reserve shares of Common Stock to satisfy its
obligations under this Plan. All shares of Common Stock or other amounts
attributed to the Units shall be and remain the sole property of the
Corporation, and each Director's rights in the Units is limited to the right to
receive shares of Common Stock or cash in the future, in accordance with the
Plan. No Director shall be entitled to any voting or other stockholder rights
with respect to Units granted under this Plan. The number of Units credited
under this Article shall be subject to adjustment in accordance with Section
7.1.
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<PAGE> 41
ARTICLE V
STOCK OPTIONS
All Options granted pursuant to the Plan shall be subject to the following
terms and conditions:
5.1. Exercise Price. The exercise price of an Option shall be equal to
100% of the Fair Market Value of the Stock on the day of the grant of the
Option.
5.2. Non-transferability of Options. Options shall not be assignable nor
transferable by the Director otherwise than by bequest or by the laws of
descent. Options shall be exercisable during the Director's lifetime only by the
Director or by his or her guardian or legal representative. The designation of a
Beneficiary is not a prohibited transfer.
5.3. Vesting; Term of Options. Options shall become exercisable on the day
following the first anniversary of the date the Options are granted and, subject
to Section 5.3, shall expire on the tenth anniversary of the date the Options
are granted. Notwithstanding the provisions of this Section 5.3, upon a Change
in Control or in the event a Director's service as director terminates by reason
of such Director's Retirement, death or Disability, all options shall become
exercisable.
5.4. Payment of Exercise Price. The Option's exercise price shall be paid
in cash at the time of exercise, except that in lieu of all or part of the cash,
the Director may tender Stock to the Corporation having a Fair Market Value
equal to the exercise price, (less any cash paid). The Fair Market Value of
tendered Stock shall be determined as of the close of the business day
immediately preceding the day on which the Options are exercised.
5.5 Rights as Stockholder. A Director shall have no rights as a Common
Stockholder with respect to any unissued shares of Common Stock covered by an
Option until the date the Director exercises the Options and becomes the holder
of record of those shares of Common Stock. Except as provided in Section 7.1, no
adjustment or other provision shall be made for dividends or other stockholder
rights.
ARTICLE VI
ADMINISTRATION
6.1. Administration. This Plan shall be self-executing and operated as a
formula plan. To the extent necessary for the operation of the Plan, it shall be
construed, interpreted and administered by the Board or a committee appointed by
the Board to act on its behalf under this Plan. Notwithstanding the foregoing,
but subject to Section 7.2 hereof, the Board shall have no discretionary
authority with respect to the amount or price of any Award granted under this
Plan and no Director shall participate in any decision relating solely to his or
her benefits (other than approval of the Award).
6.2. Decisions Final; Delegation; Reliance; and Limitation on Liability.
Any determination of the Board or committee made in good faith shall be
conclusive. In performing its duties, the Board or the committee shall be
entitled to rely on public records and on information, opinions, reports or
statements prepared or presented by officers or employees of the Corporation or
other experts believed to be reliable and competent. The Board or the committee
may delegate ministerial, bookkeeping and other non-discretionary functions to
individuals who are officers or employees of the Corporation.
Neither the Corporation nor any member of the Board, nor any other person
participating in any determination of any question under this Plan, or in the
interpretation, administration or application of this Plan, shall have any
liability to any party for any action taken or not taken in good faith under
this Plan or for the failure of an Award (or action or payment in respect of an
Award) to satisfy Code requirements for realization of intended tax
consequences, to qualify for exemption or relief under Rule 16b-3, or to comply
with any other law, compliance with which is not required by the Corporation.
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<PAGE> 42
ARTICLE VII
PLAN CHANGES AND TERMINATION
7.1. Adjustments upon Changes in Common Stock. Upon the Corporation's
recapitalization, stock split (including a stock split in the form of a stock
dividend), reverse stock split, merger, combination, consolidation, or other
reorganization or any extraordinary dividend or other extraordinary distribution
in respect of the Stock (whether in the form of cash, Stock or other property),
or any split-up, spin-off, extraordinary redemption, or exchange of outstanding
Stock, or there shall occur any other similar corporate transaction or event in
respect of the Stock, or a sale of substantially all the assets of the
Corporation as an entirety, the Committee shall make a proportionate and
equitable adjustment consistent with the effect of any such event on
stockholders generally (but without duplication if Dividend Equivalents are
credited) in the maximum number of shares of Common Stock reserved under the
Plan, in the number of Units granted under the Plan, and in the number, kind and
exercise price of Options granted under the Plan to prevent dilution or
enlargement of the rights of Directors under the Plan and outstanding Options.
7.2. Amendments. The Board of Directors shall have the right to amend this
Plan in whole or in part or to suspend or terminate this Plan. No amendment,
suspension, or termination, however, may cancel or otherwise adversely affect in
any way, without written consent, any Director's rights with respect to (i)
Stock Units and Dividend Equivalents credited to his or her Stock Unit Account
or Dividend Equivalent Stock Account or (ii) Options awarded prior to the
effective date of the amendment, suspension or termination.
7.3. Term. This Plan shall remain in effect for a period of 10 years from
the Effective Date, but continuance of this Plan is not a contractual obligation
of the Corporation. In the event that the Board of Directors decides to
terminate this Plan, it shall notify the Directors of its action in writing, and
this Plan shall be terminated at the time set by the Board of Directors.
7.4. Distribution of Shares. If this Plan terminates pursuant to Section
7.2, the distribution of the Accounts of a Director shall be made at the time
provided in Section 4.4 and in a manner consistent with the elections made
pursuant to Section 4.4 if any.
ARTICLE VIII
MISCELLANEOUS
8.1. Limitation on Directors' Rights. Participation in this Plan shall not
give any Director the right to continue to serve as a member of the Board or any
rights or interests other than as provided in this Plan. No Director shall have
any right to any payment or benefit except to the extent provided in this Plan.
This Plan shall create only a contractual obligation of the Corporation to
provide the benefits described in the Plan and shall not be construed as
creating a trust. This Plan has no assets. Directors shall only have rights as
general unsecured creditors of the Corporation for any amounts credited or
vested and benefits payable under this Plan.
8.2. Beneficiaries.
(a) Beneficiary Designation. Upon forms provided and in accordance
with procedures established by the Corporation, each Director may designate in
writing (and change a designation of) the Beneficiary or Beneficiaries (as
defined in Section 8.2(b)) that the Director chooses to receive the Common Stock
payable under this Plan after his or her death, subject to applicable laws
(including any applicable community property and probate laws).
(b) Definition of Beneficiary. A Director's "Beneficiary" or
"Beneficiaries" shall be the person or persons, including a trust or trusts,
validly designated by the Director or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution to receive the
Director's benefits under this Plan in the event of the Director's death.
8.3. Corporation's Right to Withhold. The Corporation shall satisfy state
or federal income tax withholding obligations, if any, arising upon distribution
of a Director's Account or of shares of Stock upon the exercise of Options by
reducing the number of shares of Common Stock otherwise deliverable to the
Director by the
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<PAGE> 43
appropriate number of shares (based on the Fair Market Value on the day
immediately preceding the payment) required to satisfy such tax withholding
obligation. If the Corporation, for any reason, cannot satisfy the withholding
obligation in accordance with the preceding sentence, the Director shall pay or
provide for payment in cash of the amount of any taxes which the Corporation may
be required to withhold with respect to the benefits hereunder.
8.4. Benefits Not Assignable; Obligations Binding upon Successors.
Benefits of a Director under this Plan shall not be assignable or transferable
and any purported transfer, assignment, pledge or other encumbrance or
attachment of any payments or benefits under this Plan, or any interest therein,
other than pursuant to Section 8.2, shall not be permitted or recognized.
Obligations of the Corporation under this Plan shall be binding upon successors
of the Corporation.
8.5. Governing Law; Severability. The validity of this Plan or any of its
provisions shall be construed, administered and governed in all respects under
and by the laws of the State of Maryland. If any provisions of this instrument
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
8.6. Compliance with Laws. This Plan and the offer, issuance and delivery
of shares of Common Stock and/or the payment and deferral of compensation under
this Plan are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal reporting,
registration, insider trading and other securities laws) and to such approvals
by any listing agency or any regulatory or governmental authority as may, in the
opinion of counsel for the Corporation, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring the securities shall, if requested by the
Corporation, provide such assurances and representations to the Corporation as
the Corporation may deem necessary or desirable to assure compliance with all
applicable legal requirements.
8.7. Plan Construction. It is the intent of the Corporation that this Plan
satisfy and be interpreted in a manner that satisfies the applicable
requirements of Rule 16b-3 so that Directors will be entitled to the benefits of
Rule 16b-3 or other exemptive rules under Section 16 of the Exchange Act and
will not be subjected to liability thereunder. Any contrary interpretation shall
be avoided.
8.8. Headings Not Part of Plan. Headings and subheadings in this Plan are
inserted for reference only and are not to be considered in the construction of
this Plan.
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<PAGE> 44
LOCKHEED MARTIN CORPORATION
PROXY SOLICITATION/VOTING INSTRUCTION CARD FOR
ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Edward E. Hood, Jr., Eugene F. Murphy and
Carlisle A. H. Trost, each of them proxies of the undersigned with respect to
common stock of Lockheed Martin (the "Corporation") owned by the undersigned,
with full power of substitution, 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 22, 1999, at The Broadmoor, Broadmoor West Building, 1 Lake Avenue,
Colorado Springs, Colorado, 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 Internet, access
http://www.eproxyvote.com/lmt or to vote by telephone, dial 1-877-779-8683
(toll-free).
To vote in accordance with the Board of Directors' recommendations, please sign
and date the reverse side; no boxes need to be checked.
THE BOARD OF DIRECTORS IS SOLICITING THIS PROXY SOLICITATION/VOTING
INSTRUCTION CARD.
SEE REVERSE
SIDE
/\ IF CASTING VOTES BY MAIL, DETACH HERE AND RETURN PROPERLY EXECUTED PROXY
SOLICITATION/VOTING INSTRUCTION CARD IN ENCLOSED ENVELOPE /\
[LOCKHEED MARTIN LOGO]
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, APRIL 22, 1999
THE BROADMOOR - BROADMOOR WEST BUILDING
1 LAKE AVENUE, COLORADO SPRINGS, COLORADO 80906
You may vote your shares electronically by Internet or telephone. Voting
electronically will eliminate the need to mail a voted Proxy Solicitation/Voting
Instruction Card. Please note that participants in the Lockheed Martin Salaried
Savings Plan electing not to direct the voting of unallocated shares may not
vote by telephone but may still vote using the Internet. To vote by Internet or
telephone, please follow the steps below:
- --------------------------------------------------------------------------------
INTERNET VOTING STEPS:
1) Have this card (showing your voting control number in box on reverse side of
this card) and your social security number/tax identification number
available; then,
2) Access http://www.eproxyvote.com/lmt.
- --------------------------------------------------------------------------------
TELEPHONE VOTING STEPS:
1) Have this card (showing your voting control number in box on reverse side of
this card) and your social security number/tax identification number
available; then,
2) Using a touch-tone telephone, dial
1-877-779-8683 (TOLL-FREE).
- --------------------------------------------------------------------------------
The Internet and telephone voting systems preserve the confidentiality of your
vote and will confirm your voting instructions with you before you cast your
vote. 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.
<PAGE> 45
[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.
- --------------------------------------------------------------------------------
DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES AND FOR PROPOSALS 2 AND 3.
- --------------------------------------------------------------------------------
1. Election of Directors
[ ] FOR ALL [ ] WITHHELD
(For, except vote withheld from the following nominee(s))
- ------------------------------------
01. Norman R. Augustine
02. Marcus C. Bennett
03. Lynne V. Cheney
04. Vance D. Coffman
05. Houston I. Flournoy
06. James F. Gibbons
07. Edward E. Hood, Jr.
08. Caleb B. Hurtt
09. Gwendolyn S. King
10. Eugene F. Murphy
11. Frank Savage
12. Peter B. Teets
13. Carlisle A.H. Trost
14. James R. Ukropina
15. Douglas C. Yearley
2. Appointment FOR AGAINST ABSTAIN
of Ernst & Young as Auditors [ ] [ ] [ ]
3. Approval of the
Lockheed Martin Corporation FOR AGAINST ABSTAIN
Directors Equity Plan [ ] [ ] [ ]
DIRECTORS RECOMMEND A VOTE AGAINST PROPOSALS 4 AND 5.
4. Stockholder Proposal - FOR AGAINST ABSTAIN
Directors Term Limits [ ] [ ] [ ]
5. Stockholder Proposal -
Report on Ethical Criteria FOR AGAINST ABSTAIN
in Military Contracting [ ] [ ] [ ]
The signer hereby revokes all previous proxies given by the signer
to vote at the Annual Meeting or any adjournments thereof.
I elect not to direct the voting of unallocated
shares in the Lockheed Martin Corporation Salaried
Savings Plan. [ ]
I will attend the meeting [ ]
NOTE: If casting your vote by mail, please date and sign exactly as your name
appears above and return this card in the enclosed envelope.
- -------------------------------------
- -------------------------------------
SIGNATURE (S) DATE
/\ IF CASTING VOTES BY MAIL, DETACH HERE AND RETURN PROPERLY EXECUTED PROXY
SOLICITATION/VOTING INSTRUCTION CARD IN ENCLOSED ENVELOPE /\
[LOCKHEED MARTIN LOGO]
ADMISSION TICKET
(Please bring this ticket with you if you are attending the meeting)
ANNUAL MEETING OF STOCKHOLDERS - THURSDAY, APRIL 22, 1999
ROCKY MOUNTAIN BALLROOM - 10:30 A.M.
THE BROADMOOR
BROADMOOR WEST BUILDING
1 LAKE AVENUE
COLORADO SPRINGS, COLORADO
<PAGE> 46
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 proxy materials at this Internet location 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 22, 1999.
U.S. Trust Company, National Association ("U.S. Trust") is serving as a
trustee of the shares of Lockheed Martin Corporation common stock ("Common
Stock") held in the plans listed on the attachment hereto (the "Plans"). As a
Plan participant, you may give voting instructions to U.S. Trust with respect to
shares held in the Plans and appoint 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 form shown on the voting web site. If you want to follow the Board's
recommendations on all matters, you can do so by checking the appropriately
marked box on the Internet voting form. If you do not wish to follow the Board's
recommendations on all matters, please be sure to indicate your vote for each
issue separately.
All matters to be voted upon at this meeting are extremely important and
are described in the proxy materials. You should carefully read these materials
and the following explanation of the voting pass-through rules of the Plans and
how to provide voting instructions electronically by Internet.
VOTING DEADLINE
In order to be assured that your voting instructions to U.S. Trust will be
followed, your voting instructions must be received no later than 5 p.m.
New York City time on April 19, 1999.
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.
VOTING INSTRUCTIONS
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.
<PAGE> 47
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 .78 times the
number of ESOP Match Shares shown on your electronic voting instruction form.
Your voting instructions will automatically apply to a proportionate number of
unallocated shares, UNLESS you check the box on the electronic voting
instruction form 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 electronic voting instruction form indicating that you are
not providing voting instructions for those shares.
INSTRUCTIONS
To instruct the Trustee how to vote your allocated shares and a
proportionate number of the unallocated shares in the Salaried Savings Plan,
please follow the Internet voting instructions that appear after this letter.
FAILURE TO PROVIDE INSTRUCTIONS
If you do not provide voting instructions, 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, or the
confidentiality of your vote, please contact U.S. Trust between the hours of
8:30 a.m. and 4:00 p.m. Los Angeles time at 1-800-535-3093.
U.S. TRUST COMPANY, NATIONAL ASSOCIATION
Common Stock Trustee
<PAGE> 48
ATTACHMENT
<TABLE>
<CAPTION>
PLAN# PLAN
- ------------------------------------------------------------------------------------
<S> <C>
1 SANDIA CORPORATION SAVINGS AND INCOME PLAN
- ------------------------------------------------------------------------------------
2 SANDIA CORPORATION SAVINGS AND SECURITY PLAN
- ------------------------------------------------------------------------------------
3 IDAHO NATIONAL ENGINEERING LABORATORY EMPLOYEE INVESTMENT PLAN
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN ENERGY SYSTEMS INC. 401(K) SAVINGS PLAN FOR
4 HOURLY EMPLOYEES
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN ENERGY SYSTEMS SAVINGS PLAN FOR SALARIED AND
5 HOURLY EMPLOYEES
- ------------------------------------------------------------------------------------
6 LOCKHEED MARTIN HOURLY EMPLOYEE SAVINGS PLAN PLUS
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION HOURLY EMPLOYEES SAVINGS AND
7 INVESTMENT PLAN - FORT WORTH AND ABILENE DIVISIONS
- ------------------------------------------------------------------------------------
8 LOCKHEED MARTIN CORPORATION CAPITAL ACCUMULATION PLAN
- ------------------------------------------------------------------------------------
9 LOCKHEED MARTIN CORPORATION OPERATION SUPPORT SAVINGS PLAN
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION PERFORMANCE SHARING PLAN FOR
10 BARGAINING EMPLOYEES
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION PERFORMANCE SHARING PLAN FOR PUERTO
11 RICO EMPLOYEES
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION RETIREMENT SAVINGS PLAN FOR
12 SALARIED EMPLOYEES
- ------------------------------------------------------------------------------------
13 LOCKHEED MARTIN CORPORATION SALARIED SAVINGS PLAN
14 (Match Shares--shown separately on voting instruction card)
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION SAVINGS AND INVESTMENT PLAN FOR
15 HOURLY EMPLOYEES
- ------------------------------------------------------------------------------------
16 LOCKHEED MARTIN ENERGY SYSTEMS SAVINGS PROGRAM
- ------------------------------------------------------------------------------------
17 SPACE FLIGHT OPERATIONS CONTRACT SAVINGS PLAN
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE> 49
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 1999 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 22, 1999.
U.S. Trust Company, National Association ("U.S. Trust") is serving as a
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 electronically by Internet or 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
electronically by Internet or telephone.
VOTING DEADLINE
In order to be assured that your voting instructions to U.S. Trust will
be followed, your voting instruction card, Internet or telephone instructions
must be received no later than 5 p.m. New York City time on April 19, 1999.
If you wish to provide voting instructions by returning a voting
instruction card, you must complete, sign, date and return your card in the
envelope provided in time for it to be received by the voting deadline. Please
remember to return your card in the envelope provided, rather than to Lockheed
Martin or any other party. The envelope is addressed to First Chicago Trust
Company, a division of EquiServe, acting as confidential vote tabulator for U.S.
Trust.
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.
<PAGE> 50
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 the
Internet or a touch-tone telephone. Simply access http://www.eproxyvote.com/lmt
on the Internet or dial 1-877-779-8683 on your touch-tone telephone and follow
the directions. You must have your voting instruction card and your social
security number available when you vote by Internet or telephone. If you return
a voting instruction card and also provide voting instructions by Internet
and/or 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 latest dated electronic 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 .78 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.
FAILURE TO PROVIDE INSTRUCTIONS
If you do not sign, date, and return a card or vote by Internet or
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.
<PAGE> 51
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 4:00 p.m. Los Angeles time at 1-800-535-3093.
U.S. TRUST COMPANY, National Association
Common Stock Trustee
<PAGE> 52
ATTACHMENT
<TABLE>
<CAPTION>
PLAN# PLAN
- ------------------------------------------------------------------------------------
<S> <C>
1 SANDIA CORPORATION SAVINGS AND INCOME PLAN
- ------------------------------------------------------------------------------------
2 SANDIA CORPORATION SAVINGS AND SECURITY PLAN
- ------------------------------------------------------------------------------------
3 IDAHO NATIONAL ENGINEERING LABORATORY EMPLOYEE INVESTMENT PLAN
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN ENERGY SYSTEMS INC. 401(K) SAVINGS PLAN FOR
4 HOURLY EMPLOYEES
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN ENERGY SYSTEMS SAVINGS PLAN FOR SALARIED AND
5 HOURLY EMPLOYEES
- ------------------------------------------------------------------------------------
6 LOCKHEED MARTIN HOURLY EMPLOYEE SAVINGS PLAN PLUS
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION HOURLY EMPLOYEES SAVINGS AND STOCK
7 INVESTMENT PLAN - FORT WORTH AND ABILENE DIVISIONS
- ------------------------------------------------------------------------------------
8 LOCKHEED MARTIN CORPORATION CAPITAL ACCUMULATION PLAN
- ------------------------------------------------------------------------------------
9 LOCKHEED MARTIN CORPORATION OPERATION SUPPORT SAVINGS PLAN
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION PERFORMANCE SHARING PLAN FOR
10 BARGAINING EMPLOYEES
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION PERFORMANCE SHARING PLAN FOR PUERTO
11 RICO EMPLOYEES
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION RETIREMENT SAVINGS PLAN FOR
12 SALARIED EMPLOYEES
- ------------------------------------------------------------------------------------
13 LOCKHEED MARTIN CORPORATION SALARIED SAVINGS PLAN
14 (match shares are shown separately on voting instruction card)
- ------------------------------------------------------------------------------------
LOCKHEED MARTIN CORPORATION SAVINGS AND INVESTMENT PLAN FOR
15 HOURLY EMPLOYEES
- ------------------------------------------------------------------------------------
16 LOCKHEED MARTIN ENERGY SYSTEMS SAVINGS PROGRAM
- ------------------------------------------------------------------------------------
17 SPACE FLIGHT OPERATIONS CONTRACT SAVINGS PLAN
- ------------------------------------------------------------------------------------
</TABLE>
