SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MARTIN MARIETTA MATERIALS, INC.
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(Name of Registrant as Specified in Its Charter)
MARTIN MARIETTA MATERIALS, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| 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
form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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NOTICE OF 2002
ANNUAL MEETING OF
SHAREHOLDERS AND
PROXY STATEMENT
(MARTIN MARIETTA MATERIALS LOGO)
(MARTIN MARIETTA MATERIALS LOGO)
2710 WYCLIFF ROAD
RALEIGH, NORTH CAROLINA 27607
April 5, 2002
Dear Fellow Shareholder:
The Directors and Officers of Martin Marietta Materials, Inc. join me in
inviting you to attend the Corporation's Annual Meeting of Shareholders. The
formal notice of this meeting and the Proxy Statement accompany this letter.
By attending the meeting, you will have an opportunity to hear the plans for the
Corporation's future, to meet the Directors and Officers and to participate in
the business of the meeting. If it is not possible for you to attend, please
return the enclosed proxy immediately to ensure that your shares will be voted.
We look forward to seeing you in the Carlisle Ballroom at the Grandover Resort &
Conference Center, One Thousand Club Road, Greensboro, North Carolina at 10:30
a.m. on May 23, 2002.
Sincerely,
/s/ STEPHEN P. ZELNAK, JR.
Stephen P. Zelnak, Jr.
Chairman of the Board,
President and Chief Executive Officer
MARTIN MARIETTA MATERIALS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 2002
To the Holders of the Common Stock of Martin Marietta Materials, Inc.:
The Annual Meeting of Shareholders of Martin Marietta Materials, Inc.
(the "Corporation") will be held on Thursday, May 23, 2002, at 10:30 a.m. in the
Carlisle Ballroom at the Grandover Resort & Conference Center, One Thousand Club
Road, Greensboro, North Carolina. Attendance at the Annual Meeting of
Shareholders of the Corporation will be limited to shareholders of record at the
close of business on March 22, 2002 or their proxies, beneficial owners
presenting satisfactory evidence of ownership on that date, and invited guests
of the Corporation.
The purposes of the meeting are:
(1) to elect four (4) Directors, each to serve for a term of three (3)
years until the Annual Meeting of Shareholders in 2005 and until
their successors are duly elected and qualified;
(2) to ratify the appointment of independent auditors; and
(3) to transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 22, 2002
as the record date for determination of shareholders entitled to notice of and
to vote at the Annual Meeting or any adjournment thereof.
Whether or not you expect to attend the meeting, we hope you will date
and sign the enclosed Proxy Card and mail it promptly in the enclosed stamped
envelope.
By Order of the Board of Directors,
/s/ ROSELYN R. BAR
Roselyn R. Bar
Vice President, General Counsel
and Secretary
Raleigh, North Carolina
April 5, 2002
PROXY STATEMENT
GENERAL INFORMATION
The Annual Meeting of Shareholders of Martin Marietta Materials, Inc., a
North Carolina corporation (the "Corporation"), will be held on Thursday, May
23, 2002, at the Grandover Resort & Conference Center, One Thousand Club Road,
Greensboro, North Carolina, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders ("Annual Meeting" or "Meeting"). This
statement is furnished in connection with the solicitation by the Board of
Directors of the Corporation of proxies to be used at such meeting and at any
and all adjournments of such meeting.
The Corporation's Annual Report for the fiscal year ended December 31,
2001, including audited financial statements, is being mailed to shareholders
with this Proxy Statement.
Whether or not you plan to attend the meeting, we urge you to date, sign
and return your proxy in the enclosed envelope. You may revoke your proxy at any
time prior to its exercise at the Annual Meeting (i) by filing with the
Corporation's Secretary an instrument revoking the proxy prior to the Meeting,
(ii) by timely delivery to the Corporation's Secretary, or at the Meeting, of a
subsequently dated and executed proxy, or (iii) if you attend the Meeting, by
voting your shares in person. Attendance at the Meeting will not in and of
itself constitute a revocation of a proxy.
The principal office of the Corporation is at 2710 Wycliff Road, Raleigh,
North Carolina 27607. This Proxy Statement, the Proxy Card, and the Notice of
Meeting will be sent commencing approximately April 5, 2002 to shareholders of
record on March 22, 2002.
VOTING SECURITIES AND RECORD DATE
Only shareholders of record at the close of business on March 22, 2002
are entitled to notice of and to vote at the Annual Meeting. On March 22, 2002,
there were 48,559,741 shares outstanding of the Corporation's Common Stock, $.01
par value per share ("Common Stock" or "Stock"). Each share is entitled to one
vote.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by an independent inspector of election appointed by the Corporation's Board of
Directors for the Meeting from First Union National Bank, the Corporation's
transfer agent. The inspector of election will determine whether a quorum is
present. For purposes of determining the presence of a quorum, abstentions will
be counted as shares that are present and entitled to vote. If a broker
indicates on the proxy that it does not have discretionary authority to vote on
a particular matter and specific instructions are not received from the
shareholder regarding that matter, those shares represented by the proxy will
not be considered as present and entitled to vote with respect to that matter.
The election of Directors requires a plurality of the votes cast with a
quorum present. Any other proposal presented at the meeting will be approved if
more votes are cast by proxy or in person in favor of the proposal than are cast
against it. Brokers holding shares for beneficial
1
owners must vote those shares according to the specific instructions they
receive from the beneficial owners. If specific instructions are not received,
brokers may generally vote these shares in their discretion. However, the New
York Stock Exchange rules preclude brokers from exercising their voting
discretion on certain proposals. In such cases, absent specific instructions
from the beneficial owner, the broker may not vote on those proposals. This
results in what is known as a "broker non-vote." Because the Corporation's
Bylaws require the affirmative vote of either a plurality or majority of the
votes cast for or against the proposal at the Meeting to authorize action on any
matter (as described above), abstentions and broker non-votes, which will not be
counted "for" or "against" proposals, have no effect on the vote for the
election of Directors or approval of any of the other proposals.
Each participant in the Corporation's Performance Sharing Plan, Savings
and Investment Plan and Southwest Division 401(k) Plan may direct the trustee as
to the manner in which shares of Common Stock allocated to the plan
participant's account are to be voted. If the plan participant does not return a
voting instruction card to the trustee in a timely manner or returns a card
without indicating any voting instructions, the trustee will vote the shares in
the same proportion as shares for which the trustee receives voting instructions
for that plan.
ELECTION OF DIRECTORS
The Corporation's Restated Articles of Incorporation, as amended, provide
for a classified board of directors such that the Board of Directors is divided
into three classes, each of which serves for three years. The Board of Directors
has nominated four persons for election as Directors to serve three-year terms
expiring in 2005. Unless otherwise directed, proxies will be voted in favor of
these four nominees. Each nominee has agreed to serve if elected. Each of the
nominees is currently serving as a Director. Should any nominee become unable to
serve as a Director, the persons named in the enclosed form of proxy will,
unless otherwise directed, vote for the election of such other person for such
position as the present Board of Directors may recommend in place of such
nominee.
The following sets forth certain biographical information, current
occupation and business experience for the past five years for each of the
nominees for election and for each of the other members of the Board of
Directors.
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NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
TERMS EXPIRING IN 2005
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SUE W. COLE (51)
Director (since 2002), member of the Audit and Ethics, Environmental, Safety and
Health Committees.
Ms. Cole has served as Chief Executive Officer of U.S. Trust Company of North
Carolina and its predecessor, North Carolina Trust Company, since 2001 and as
President since 1997. She is a Director of U.S. Trust Company of North Carolina
and UNIFI, Inc.
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JAMES M. REED (69)
Director (since 1994), Chairman of the Finance Committee, member of the Audit,
Compensation and Executive Committees.
Mr. Reed served as Chief Financial Officer of Union Camp Corporation from 1977
and as Vice Chairman of the Board of Union Camp Corporation from 1993 until his
retirement on November 30, 1997.
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WILLIAM B. SANSOM (60)
Director (since 1994), member of the Audit and Ethics, Environment, Safety and
Health Committees.
Mr. Sansom has served as the Chairman and Chief Executive Officer of The H.T.
Hackney Co. since May 1983. During 1979 to 1983, he served in Tennessee State
Government, first as Commissioner of Transportation and then as Commissioner of
Finance and Administration. He has also previously served on the Board of
Directors of the National Crushed Stone Association. Mr. Sansom is a Director of
First Tennessee National Corporation and Astec Industries, Inc.
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STEPHEN P. ZELNAK, JR. (57)
Chairman of the Board (since 1997) and Director (since 1993), Chairman of the
Executive Committee and a member of the Finance Committee.
Mr. Zelnak has served as President and Chief Executive Officer of Martin
Marietta Materials, Inc. since 1993, and previously served as the President of
Martin Marietta Corporation's Materials Group from 1992 until the formation of
the Corporation, and of Martin Marietta Corporation's Aggregates Division since
1982. Mr. Zelnak also served as a Vice President of Martin Marietta Corporation
from 1989 until 1994, when he resigned as an officer of Martin Marietta
Corporation effective upon the completion of the initial public offering of a
portion of the Corporation's Common Stock. Mr. Zelnak joined Martin Marietta
Corporation in 1981.
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THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR"
ALL NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.
3
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2003
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WILLIAM E. MCDONALD (59)
Director (since 1996), Chairman of the Compensation Committee and member of the
Executive Committee.
Mr. McDonald served as Senior Vice President, Customer Service Operations,
Sprint Corporation until his retirement on October 13, 2000. He was previously
President and Chief Executive Officer of Sprint Mid-Atlantic Operations from
1993 through 1997 and President and Chief Executive Officer for Sprint/United
Telephone-Eastern from 1988 to 1993.
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FRANK H. MENAKER, JR. (61)
Director (since 1993), member of the Audit and Ethics, Environment, Safety and
Health Committees.
Mr. Menaker has served as Senior Vice President and General Counsel of Lockheed
Martin Corporation since July 1996. He served as Vice President and General
Counsel of Lockheed Martin Corporation from March 1995 to July 1996 and as Vice
President of Martin Marietta Corporation from 1982 until 1995, and as General
Counsel of Martin Marietta Corporation from 1981 until 1995.
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RICHARD A. VINROOT (60)
Director (since 1996), member of the Ethics, Environment, Safety and Health and
Finance Committees.
Mr. Vinroot has been a member of the law firm of Robinson, Bradshaw & Hinson,
P.A. in Charlotte, North Carolina since 1969. From 1991 to 1995, Mr. Vinroot
served as Mayor of Charlotte, North Carolina.
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TERMS EXPIRING IN 2004
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RICHARD G. ADAMSON (69)
Director (since 1994), Chairman of the Ethics, Environment, Safety and Health
Committee and a member of the Compensation Committee.
Mr. Adamson served as Vice President, Strategic Development for Martin Marietta
Corporation from April 1993 until his retirement in January 1995. From 1984
until April 1993, he served as Vice President, Business Development of Martin
Marietta Corporation.
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MARCUS C. BENNETT (66)
Director (since 1993), Chairman of the Audit Committee, member of the Executive
and Finance Committees.
Mr. Bennett served as Executive Vice President and Chief Financial Officer of
Lockheed Martin Corporation from July 1996 until his retirement on January 31,
1999. He continues to be a Director of Lockheed Martin Corporation, a position
he has held since March 1995. From March 1995 until July 1996 he served as
Senior Vice President and Chief Financial Officer of Lockheed Martin Corporation
and from 1988 until 1995 he served as Vice President and Chief Financial Officer
of Martin Marietta Corporation. He also served as a Director of Martin Marietta
Corporation from 1993 to 1995. Mr. Bennett joined Martin Marietta Corporation in
1959. Mr. Bennett is also a Director of Carpenter Technology Corporation.
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BOBBY F. LEONARD (69)
Director (since 1994), member of the Compensation and Finance Committees.
Mr. Leonard served as Vice President, Human Resources of Martin Marietta
Corporation from 1981 until his retirement in March 1995. He is currently in
private law practice in Maryland.
5
BOARD OF DIRECTORS
The Corporation's Board of Directors held 5 meetings during 2001, all of
which were regularly scheduled meetings. There was also a total of 18 committee
meetings. In addition, management confers frequently with its Directors on an
informal basis to discuss Corporation affairs. Other than Directors who are also
officers of the Corporation, commencing in May 2001, Directors serving in 2001
received an annual retainer of $45,000 and were each granted 2,000 non-qualified
stock option awards in accordance with the Martin Marietta Materials, Inc.
Amended and Restated Stock-Based Award Plan. Directors also received
reimbursement for travel and other expenses related to attendance at Board and
committee meetings. Each committee chairman (other than the chairman of the
Executive Committee) also receives an annual fee of $2,000.
Pursuant to the Amended and Restated Martin Marietta Materials, Inc.
Common Stock Purchase Plan for Directors, Directors may currently receive their
compensation in cash or Common Stock and may defer the payment commencement date
for all or a portion of their fees (in the form of cash or Common Stock) until
the date the person ceases to be a Director or the date that is one month and
one year following the date the person ceases to be a Director. Directors may
elect to receive payment of the deferred amount in a single lump sum or in equal
annual installments for a period of up to ten years. The Board of Directors
unanimously agreed that a minimum of 50% of each Director's annual retainer
would be paid in Common Stock at a 20% discount to fair market value and
deferred under the plan.
The Corporation's Board of Directors has five standing committees: an
Audit Committee, a Compensation Committee, an Ethics, Environment, Safety and
Health Committee, an Executive Committee and a Finance Committee.
The Audit Committee, which is composed of Directors who are not officers
or employees of the Corporation, held 4 meetings during 2001. The Audit
Committee possesses and may exercise the powers of the Board of Directors,
except when such powers are by statute or the Articles of Incorporation or
Bylaws reserved to the full Board, relating to all accounting and auditing
matters of the Corporation. The Audit Committee recommends to the Board of
Directors the selection of the independent auditors. The Committee also monitors
the independence of the independent auditors. The Committee reviews the scope
and timing of work to be performed by the independent auditors; compensation to
be paid to the independent auditors; financial accounting and reporting
principles used by the Corporation; policies and procedures concerning audits,
accounting and financial controls; recommendations to improve existing
practices; and results of the audit and the report of the independent auditors.
The Committee also reviews the qualifications and the plan and scope of work of
the corporate internal audit function. The Committee's members during 2001 were
Directors Bennett (Chairman), Menaker, Reed and Sansom. Director Cole was
elected in March 2002 to serve on the Audit Committee.
The Compensation Committee is composed of Directors who are not officers
or employees of the Corporation and who are also "non-employee" and "outside"
Directors as those terms are defined by Rule 16b-3 promulgated under the
Securities and Exchange Act of 1934 and Section 162(m) of the Internal Revenue
Code of 1986. It held 5 meetings during 2001.
6
The Committee has the power to fix the compensation and benefits to be paid for
all elected officers and employees. The Committee also approves and administers
the grants of stock options and any other equity-based awards that may be
granted by the Corporation. The Committee has the power to administer any other
compensation plan in connection with which the Corporation or any of its
employees may realize a benefit from administration by disinterested Directors.
The Committee's current members are Directors McDonald (Chairman), Adamson,
Leonard and Reed.
The Ethics, Environment, Safety and Health Committee held 4 meetings
during 2001. It monitors compliance with the Martin Marietta Materials, Inc.
Code of Ethics and Standards of Conduct and reviews all matters presented to it
by the Corporate Ethics Officer concerning the ethical practices of the
Corporation and its employees, including conflicts or potential conflicts of
interest between the Corporation and any of its employees. The Committee also
reviews and monitors the adequacy of the Corporation's policies and procedures
and organizational structure for ensuring compliance with environmental laws and
regulations, and matters relating to health and safety. The Committee's members
in 2001 were Directors Adamson (Chairman), Menaker, Sansom and Vinroot. Director
Cole was elected in March 2002 to serve on the Ethics, Environment, Safety and
Health Committee.
The Executive Committee held 1 meeting during 2001. It has the authority
to act during the intervals between the meetings of the Board of Directors and
may exercise the powers of the Board in the management of the business and
affairs of the Corporation as may be authorized by the Board of Directors. The
Committee's current members are Directors Zelnak (Chairman), Bennett, McDonald
and Reed.
The Finance Committee held 4 meetings during 2001. It has been delegated
general oversight powers related to the management of the financial affairs of
the Corporation, including but not limited to, establishing lines of credit or
other short-term borrowing arrangements and investing excess working capital
funds on a short-term basis. The Committee reviews and makes recommendations to
the Board of Directors concerning changes to capital structure, including the
incurrence of long-term debt, issuance of equity securities and the payment of
dividends, as well as capital expenditures and the contributions budget. The
Committee's current members are Directors Reed (Chairman), Bennett, Leonard,
Vinroot and Zelnak.
The Bylaws of the Corporation require advance notice for any proposal for
the nomination for election as a Director at an annual meeting of shareholders
that is not included in the Corporation's notice of meeting or made by or at the
direction of the Board of Directors. In general, nominations must be delivered
to the Secretary of the Corporation at its principal executive offices, 2710
Wycliff Road, Raleigh, North Carolina 27607, not less than 60 days nor more than
90 days prior to the first anniversary of the preceding year's annual meeting
and must contain specified information concerning the nominee and the
shareholder proposing the nomination. Any shareholder desiring a copy of the
Bylaws of the Corporation will be furnished a copy without charge upon written
request to the Secretary of the Corporation.
During the year ended December 31, 2001, all Directors attended at least
75% of regularly scheduled Board of Directors and committee meetings.
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INDEPENDENT AUDITORS
The Board of Directors recommends that the shareholders ratify the
appointment of Ernst & Young LLP, independent auditors, to audit the
consolidated financial statements of the Corporation for the fiscal year 2002.
The ratification of the appointment of Ernst & Young LLP is being submitted to
the shareholders because management believes this to be good corporate practice.
Should the shareholders fail to ratify this appointment, the Board of Directors
will review the matter. Representatives of Ernst & Young LLP are expected to
attend the Annual Meeting of Shareholders of the Corporation, will have the
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions from shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" RATIFICATION
OF SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Directors and officers of the
Corporation and persons who own more than 10% of the Common Stock to file with
the Securities and Exchange Commission initial reports of ownership and reports
in changes in ownership of the Common Stock. Directors, officers and more than
10% shareholders are required by Securities and Exchange Commission regulations
to furnish to the Corporation copies of all Section 16(a) reports filed.
Based solely on its review of the copies of reports furnished to the
Corporation and written representations that no other reports were required for
the year ended 2001, the Corporation is not aware of any reporting person who
failed to file on a timely basis all reports required by Section 16(a) to be
filed during 2001.
EXECUTIVE COMPENSATION
The following tables show annual and long-term compensation received from
the Corporation for services in all capacities to the Corporation of the Chief
Executive Officer and the next four most highly compensated executive officers
for the years ended December 31, 2001, 2000, and 1999. Other than compensation
paid by the Corporation as set forth below, no annual or long-term compensation
of any kind was paid to the Chief Executive Officer or other named executive
officers of the Corporation in each of the years in the three-year period ended
December 31, 2001.
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SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- -----------------------------------
AWARDS PAYOUTS
---------------------- ----------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) SARS(#)(4) PAYOUTS(5) COMPENSATION(6)
--------------------------- ---- -------- -------- --------------- ---------- ---------- ---------- ---------------
Stephen P. Zelnak, Jr...... 2001 $708,333 $317,500 $410,644 $222,206 115,000 $148,794 $5,950
Chairman, President 2000 655,000 312,500 402,868 -- 90,000 143,651 5,950
and Chief Executive Officer 1999 615,000 297,500 383,798 -- 75,000 -- 5,600
Philip J. Sipling.......... 2001 338,333 100,000 123,639 111,953 30,000 75,166 $5,950
Executive Vice President 2000 322,500 114,848 81,213 -- 30,000 69,118 5,950
1999 303,333 83,800 108,202 -- 25,000 -- 5,600
Janice K. Henry............ 2001 277,917 72,953 146,341 96,457 20,000 58,157 $5,950
Senior Vice President and 2000 262,958 70,600 90,713 -- 20,000 64,973 5,950
Chief Financial Officer 1999 246,417 62,850 81,178 -- 17,500 -- 5,600
Donald M. Moe.............. 2001 239,750 95,000 39,607 74,851 15,000 51,027 $5,950
Senior Vice President, 2000 219,500 70,000 32,953 -- 15,000 56,428 5,950
President -- Carolina Division 1999 203,503 70,000 23,047 -- 12,000 -- 5,600
Jonathan T. Stewart........ 2001 218,167 70,959 60,088 66,193 15,000 45,388 $5,950
Senior Vice President -- 2000 197,333 70,640 23,129 -- 15,000 48,899 5,950
Human Resources 1999 188,750 52,130 36,209 -- 12,500 -- 5,600
---------------
(1) Bonuses earned in 2001 were paid pursuant to the Martin Marietta Materials,
Inc. Executive Incentive Plan. A portion of the cash bonus in 2001, 2000 and
1999 to be paid to the named executive officers and certain other key
employees of the Corporation was deferred into stock-based awards pursuant
to the Martin Marietta Materials, Inc. Incentive Stock Plan. The amounts
deferred in 2001 for each of the named executive officers are as follows:
Mr. Zelnak, $317,500; Mr. Sipling, $96,235; Ms. Henry, $72,953; Mr. Moe,
$30,869; and Mr. Stewart, $47,306. The amounts deferred in 2000 for each of
the named executive officers are as follows: Mr. Zelnak, $312,500; Mr.
Sipling, $62,252; Ms. Henry, $70,600; Mr. Moe, $25,500; and Mr. Stewart,
$17,660. The amounts deferred in 1999 for each of the named executive
officers are as follows: Mr. Zelnak, $297,500; Mr. Sipling, $83,800; Ms.
Henry, $62,850; Mr. Moe, $17,500; and Mr. Stewart, $28,070. The amounts
reported under "Bonus" do not include such deferred portion which are
reported under "Other Annual Compensation."
(2) The amounts reported under "Other Annual Compensation" represent the value
of units that correspond to Common Stock credited to participants under the
Martin Marietta Materials, Inc. Incentive Stock Plan (the "Plan"). Pursuant
to the Plan, each participant at his or her election is permitted to use up
to 50% of the annual incentive bonus earned by the participant to be
credited towards units ("Units") that will subsequently be converted into
Common Stock of the Corporation pursuant to the terms of the Plan at a 20%
discount from the fair market value of the Common Stock (the closing price
of the Common Stock as reported in the Wall Street Journal) on the date the
amount of the bonus is determined. Each of the executive officers named are
required, commencing with the bonus earned for 2001, to use a minimum of 20%
of the annual incentive bonus towards the crediting of Units under the Plan,
except for Mr. Zelnak, who is required to use a minimum of 35% towards the
crediting of such Units. Any election to purchase Units under the Plan (in
addition to the mandatory purchases) must be made at least six months prior
to the date the amount of the annual incentive bonus is determined. The
Units credited under the Plan generally vest if the executive is
continuously employed on December 1 in the year that is immediately
preceding three years from the date of grant, at which time shares of Common
Stock are issued to the participant. Dividend equivalents are paid on the
Units at the same rate as dividends are paid to all shareholders. Such
payments are included in the amounts reported. The amounts reported under
"Other Annual Compensation" represent the market value on the date of grant
of the Units credited to each named executive officer. The number of Units
credited for 2001 to each of the named executives is as follows: Mr. Zelnak,
9,039; Mr. Sipling, 2,740; Ms. Henry, 2,077; Mr. Moe, 879; and Mr. Stewart
1,347. The number of Units credited for 2000 to each of the named executives
is as follows: Mr. Zelnak, 9,655; Mr. Sipling, 1,924; Ms. Henry, 2,182; Mr.
Moe, 788; and Mr. Stewart, 546. The number of Units credited for 1999 to
each of the named executives is as follows: Mr. Zelnak, 8,019; Mr. Sipling,
2,259; Ms. Henry, 1,695; Mr. Moe, 472; and Mr. Stewart, 757. The cost of
perquisites furnished to each executive officer, with the exception of Ms.
Henry, did not exceed the lesser of $50,000 or 10% of such officer's salary
and bonus. Included in the amount reported for Ms. Henry in 2001 is a
country club membership initiation fee and dues in the amount of $52,000.
(3) Amounts reported under "Restricted Stock Awards" represent the value of
units that correspond to Common Stock awarded to participants under the
Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan
based on the closing market price on the date of grant. The awards are based
on the Corporation's performance as measured by its specific return on
capital goals that are equally weighted and determined by a total return to
shareholders ranking that must be at least in the 40th percentile as
compared to the Standard and Poor's index of 400 Midcap companies and to the
Standard and Poor's Basic Materials Industrial Group for the three year
performance period ending on January 1 in the year the awards are granted.
The stock-based awards generally vest if the executive is continuously
employed on December 1 in the year that is immediately preceding three or
five years from the date of grant, at which time shares of Common Stock are
9
issued to the participant. These grants under the Amended and Restated
Stock-Based Award Plan replace the granting of awards previously made under
the Martin Marietta Materials, Inc. Shareholder Value Achievement Awards.
The number of units credited for 2001 to each of the named executives is as
follows: Mr. Zelnak, 5,492; Mr. Sipling, 2,767; Ms. Henry, 2,384; Mr. Moe,
1,850; and Mr. Stewart, 1,636.
(4) Options granted are for Common Stock of the Corporation. There are no awards
of SARs for the Corporation's Common Stock.
(5) Amounts reported under "LTIP Payouts" represent payouts of awards earned
under the Martin Marietta Materials, Inc. Shareholder Value Achievement Plan
which are based upon a combination of factors, including a total return to
shareholders formula which compares the Corporation's total return to
shareholders to that of the Standard and Poor's MidCap 400 Index and the
Standard and Poor's Basic Materials Industrial Group, at the end of a
three-year performance period. The payouts were made in shares of Common
Stock. The amounts reported reflect the dollar value of the Common Stock
based on the closing price at year-end.
(6) Amounts reported under "All Other Compensation" represent matching
contributions to the Corporation's Performance Sharing Plan.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants of options for the Corporation's
Common Stock awarded pursuant to the Martin Marietta Materials, Inc. Amended and
Restated Stock-Based Award Plan (the "Stock-Based Award Plan") to the named
executives in the fiscal year ended December 31, 2001.
INDIVIDUAL GRANTS (1)
-------------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NO. OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED STOCK PRICE APPRECIATION FOR
UNDERLYING TO EMPLOYEES EXERCISE OR OPTION TERM(2)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ------------------------------
NAME GRANTED YEAR 2001 PER SHARE DATE 5% 10%
---- ---------- ------------ ----------- ---------- ------------- -------------
Stephen P. Zelnak, Jr.... 115,000 22.46% $43.58 8/16/11 $3,151,831 $7,987,359
Philip J. Sipling........ 30,000 5.86% 43.58 8/16/11 822,217 2,083,659
Janice K. Henry.......... 20,000 3.91% 43.58 8/16/11 548,145 1,389,106
Donald M. Moe............ 15,000 2.93% 43.58 8/16/11 411,108 1,041,829
Jonathan T. Stewart...... 15,000 2.93% 43.58 8/16/11 411,108 1,041,829
---------------
(1) Awards under the Stock-Based Award Plan are granted at the discretion of the
Compensation Committee of the Board of Directors of the Corporation, which
is comprised of disinterested directors (the "Committee") upon the
recommendation of management of the Corporation, except for Mr. Zelnak, for
whom the Committee formulates its own decision, and may be awarded based on
past performance or as incentive for future efforts. A maximum of 5,000,000
shares of the Corporation's stock are authorized under the Stock-Based Award
Plan for grants to key employees. Each award under the Stock-Based Award
Plan is evidenced by an award agreement setting forth the number and type of
stock-based incentives subject to the award and such other terms and
conditions applicable to the award as determined by the Committee. Under the
award agreements, the 2001 options will vest and become exercisable in three
approximately equal increments on August 16, 2002, 2003 and 2004 and expire
10 years from the date of grant. No individual may receive annual grants for
more than 10 percent of the shares available under the Stock-Based Award
Plan. Options awarded in 2001 expire ninety days following termination of
employment, except in instances following death, disability or retirement.
In the event of death, all outstanding options vest immediately and will
expire one year following the date of death. In instances of disability or
normal retirement, the award agreement states that the terms of all
outstanding options will be unaffected by such retirement or disability. In
the event of early retirement, options that are not vested will terminate on
the second business day after such retirement and options that are vested
will terminate 90 days thereafter unless the Chief Executive Officer or, in
the case of persons subject to Section 16 of the Securities Exchange Act of
1934, the Committee determines that all outstanding options will be
unaffected by such retirement. In the event of a change in control (as
defined in the Stock-Based Award Plan), the vesting date of all outstanding
options are accelerated so as to cause all outstanding options to become
exercisable. The exercise price of the shares of Common Stock subject to
options is set by the Committee and must be at least 100% of the fair market
value of the shares on the date the option is granted. The award agreement
provides that shares to be issued upon exercise of options may be purchased
by the Corporation in the open market.
(2) The dollar amounts set forth in these columns are the result of calculations
at the 5 percent and 10 percent rates set by the Securities and Exchange
Commission, and therefore are not intended to forecast possible future
appreciation, if any, of the price of the Common Stock.
10
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTIONS VALUES
Shown below is information relating to (1) the exercise of options for
the purchase of the Corporation's Common Stock during the last completed fiscal
year and (2) the fiscal year-end value of unexercised options for the
Corporation's Common Stock under the Martin Marietta Materials, Inc. Amended
Omnibus Securities Award Plan and the Amended and Restated Stock-Based Award
Plan for the named executives. There are no awards of stock appreciation rights
("SARs") for the Corporation's Common Stock.
NUMBER OF SECURITIES
UNDERLYING VALUE OF
UNEXERCISED OPTIONS AT UNEXERCISED IN-THE-MONEY
SHARES FISCAL YEAR-END(1) OPTIONS AT FISCAL YEAR-END(2)
ACQUIRED VALUE ---------------------------- ------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ------------ --------------
Stephen P. Zelnak, Jr.. 15,667 $323,994 194,000 200,000 $ 619,200 386,900
Philip J. Sipling...... -- -- 100,666 58,334 1,082,250 103,800
Janice K. Henry........ -- -- 73,332 39,168 828,500 69,200
Donald M. Moe.......... -- -- 53,000 29,000 638,150 51,900
Jonathan T. Stewart.... -- -- 26,666 29,167 40,296 51,900
---------------
(1) Options granted by the Corporation in 2001 as shown in "Option Grants in
Last Fiscal Year" on page 10, all of which were unexercisable at year-end,
are included in this table. Options granted by the Corporation in 2000,
one-third of which vested in 2001; in 1999, two-thirds of which were vested
in 2001; and in 1998 and in prior years, all of which were vested in 2001,
are also included in this table.
(2) The value presented represents the difference between the closing price of
the stock at year-end and the exercise price of the options. Options that
were not in-the-money at year-end are not included in this table.
PENSION PLANS
The named executives participated in the Martin Marietta Materials, Inc.
Pension Plan (the "Pension Plan"), which was sponsored by the Corporation and
covered all of the Corporation's executive officers and substantially all of the
salaried employees of the Corporation on a non-contributing basis. Set forth
below is a pension plan table which shows the estimated annual benefits payable
under the Pension Plan and the Martin Marietta Materials, Inc. Supplemental
Excess Retirement Plan ("SERP") upon retirement for specified earnings and years
of service under the pension plans.
YEARS OF SERVICE
----------------------------------------------------------
REMUNERATION 15 20 25 30 40
------------ -------- -------- -------- -------- ----------
$100,000............................... $ 20,630 $ 27,507 $ 34,383 $ 41,260 $ 55,637
$150,000(1)............................ 31,880 42,507 53,133 63,760 85,637
$200,000(1)............................ 43,130 57,507 71,883 86,260 115,637
$300,000(1)............................ 65,630 87,507 109,383 131,260 175,637
$400,000(1)............................ 88,130 117,507 146,883 176,260 235,637
$500,000(1)............................ 110,630 147,507 184,383 221,260 295,637
$750,000(1)............................ 166,880 222,507 278,133 333,760 445,637
$1,000,000(1).......................... 223,130 297,507 371,883 446,260 595,637
$1,250,000(1).......................... 279,380 372,507 465,633 558,760 745,637
$1,500,000(1).......................... 335,630 447,507 559,383 671,260 895,637
$1,750,000(1).......................... 391,880 522,507 653,133 783,760 1,045,637
---------------
(1) The benefits payable under the Pension Plan may be limited by sections
401(a)(17) and 415(b) of the Internal Revenue Code. The maximum earnings
amount in 2001 which may be considered to compute a benefit in accordance
with Section 401(a)(17) of the Code is $170,000. The maximum annual amount
payable under the Plan as of December 31, 2000 in accordance with Section
415(b) of the Code is $140,000.
11
Compensation covered by the pension plans generally includes, but is not
limited to, base salary, executive incentive compensation awards, lump sum
payments in lieu of a salary increase, and overtime. The normal retirement age
under the pension plans is 65, but unreduced early retirement benefits are
available at age 62 and reduced benefits are available as early as age 55. The
calculation of benefits under the pension plans is generally based on an annual
accrual rate, average compensation for the highest consecutive five years of the
ten years preceding retirement and the participant's number of years of credited
service. Benefits payable under the Pension Plan are subject to current Internal
Revenue Code limitations. The SERP generally provides for the payment of
benefits in excess of the Internal Revenue Code limits, which benefits vest in
the same manner that benefits vest under the Pension Plan. The SERP provides for
a lump sum payment of the vested benefits provided by the SERP unless the
participant chooses to receive the benefits in the same manner that benefits are
paid under the Pension Plan. The amounts listed in the foregoing table are not
subject to any deduction for Social Security benefits or other offsets amounts.
As of December 31, 2001, the estimated total annual benefits payable upon
retirement at age 65 for the individuals named in the compensation table, based
on continued employment at current compensation, are as follows: Mr. Zelnak,
$569,480; Mr. Sipling, $208,259; Ms. Henry, $254,099; Mr. Moe, $178,927; and Mr.
Stewart, $138,935. These amounts include benefits that are payable under the
SERP. The years of credited service upon assumed retirement at age 65 for Mr.
Zelnak, Mr. Sipling, Ms. Henry, Mr. Moe, and Mr. Stewart are 28.75 years, 27.67
years, 41.67 years, 36.92 years, and 31.67 years, respectively.
EMPLOYMENT PROTECTION AGREEMENTS
The Corporation has entered into Employment Protection Agreements, as
amended from time to time, (the "Agreements") with each of the named executive
officers. The purpose of these Agreements is to provide the Corporation's key
executives with payments and benefits upon certain types of terminations within
two years and 30 days following a "Change of Control." For purposes of the
Agreements, a Change of Control is generally defined as (i) the acquisition by
any person, or related group of persons, of 40% or more of either the
outstanding Common Stock of the Corporation or the combined voting power of the
Corporation's outstanding securities, (ii) consummation of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the Corporation's assets following which the Corporation's shareholders
before such event fail to own more than 50% of the resulting entity, (iii) a
change in the majority membership of the Board, (iv) a liquidation or
dissolution of the Corporation, or (v) a sale of all or substantially all of the
Corporation's assets.
The Agreements provide that if, within the two-year period following a
Change of Control, an executive is terminated without "Cause" (as defined in the
Agreements) or terminates his employment with "Good Reason" (as defined in the
Agreements), or if the executive voluntarily terminates his employment for any
reason during the thirty-day period following the second anniversary of the
Change of Control, the Corporation is obligated to pay the executive, in a lump
sum, an amount equal to twice the sum of the executive's "Base Salary" and
"Annual Bonus." For purposes of the Agreements, Base Salary means the highest
annual rate of base salary that the executive received within the twelve-month
period ending on the date
12
of the Change of Control and Annual Bonus means the executive's highest annual
bonus paid during the period beginning five years prior to the Change of Control
and ending on the date of the executive's termination of employment. In
addition, for two years following termination of employment, the Corporation
must provide the executive with welfare benefits that are generally as favorable
as those the executive enjoyed prior to the Change of Control. Furthermore, the
Agreements provide for "gross up" payments to compensate the executives for any
golden parachute excise taxes imposed under the Internal Revenue Code on account
of the severance amounts.
The term of the Agreements is three years following their effective
dates. On each anniversary date of the effective date, the Agreements are
renewed for one additional year, unless either party gives notice of its intent
to cancel the automatic extension.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
FIVE PERCENT SHAREHOLDERS
The following table sets forth information with respect to the shares of
Common Stock which are held by persons known to the Corporation to be the
beneficial owners of more than 5% of such stock as of March 22, 2002. To the
best of the Corporation's knowledge, based solely on filings on Schedule 13G
with the Securities and Exchange Commission, no person (other than as disclosed
below) owned more than 5 percent of any class of the Corporation's outstanding
voting securities at the close of business on March 22, 2002.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
Davis Selected Advisers, L.P.(1)............................ 6,615,200 13.6%
2949 East Elvira Road
Suite 101
Tucson, AZ 85706
American Century Investment Management, Inc.(2)............. 3,847,000 7.9%
4500 Main Street
PO Box 418210
Kansas City, MO 64141-9210
Attn: Charles C. S. Park
FMR Corp.(3)................................................ 3,649,384 7.5%
82 Devonshire Street
Boston, MA 02109
American Express Financial Corporation(4)................... 2,909,572 6.0%
200 AXP Financial Center
Minneapolis, MN 55474
---------------
(1) As reported in Schedule 13G dated January 10, 2002 filed with the Securities
and Exchange Commission.
(2) As reported in Schedule 13G dated February 8, 2002 filed with the Securities
and Exchange Commission.
(3) As reported in Schedule 13G/A dated February 14, 2002 filed with the
Securities and Exchange Commission. The total includes stock held by certain
affiliated entities and individuals over which FMR Corp. has the sole power
to vote or to direct the vote of 552,320 shares and the sole power to
dispose or direct the disposition of 3,649,384 shares as a result of acting
as investment adviser or subadviser to certain investment companies.
(4) As reported in Schedule 13G dated December 31, 2001 filed with the
Securities and Exchange Commission. The total includes 103,782 shares over
which the shareholder has shared voting power with its parent holding
company, American Express Company, and 2,909,572 shares over which the
shareholder has shared dispositive power with its parent holding company,
American Express Company.
13
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of March 22, 2002 with
respect to the shares of Common Stock that are held by the Directors and
nominees, the Chief Executive Officer, and the four most highly compensated
executive officers, individually, and by all Directors and executive officers of
the Corporation as a group.
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)
---------------- ------------------------
Richard G. Adamson.......................................... 10,780(2)
Marcus C. Bennett........................................... 15,296(2)
Sue W. Cole................................................. 2,500(3)
Janice K. Henry............................................. 91,572(4)(5)
Bobby F. Leonard............................................ 13,682(2)
William E. McDonald......................................... 9,830(2)
Frank H. Menaker, Jr........................................ 12,604(2)
Donald M. Moe............................................... 61,410(4)
James M. Reed............................................... 13,241(2)
William B. Sansom........................................... 12,363(2)
Philip J. Sipling........................................... 123,268(4)(5)
Jonathan T. Stewart......................................... 35,767(4)(5)
Richard A. Vinroot.......................................... 10,938(2)
Stephen P. Zelnak, Jr....................................... 243,635(4)(6)
All Directors and executive officers as a group (17
individuals including those named above).................. 724,345(2)(3)(4)(5)
---------------
(1) As to the shares reported, unless indicated otherwise, (i) beneficial
ownership is direct, and (ii) the person indicated has sole voting and
investment power. None of the Directors or named executive officers
individually own in excess of one percent of the shares of Common Stock
outstanding. All Directors and executive officers as a group own 1.49% of
the shares of Common Stock outstanding as of March 22, 2002.
(2) Amounts reported include compensation paid on an annual basis that Directors
have received in Common Stock units that is deferred pursuant to the Amended
and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for
Directors. The Directors do not have voting or investment power for their
respective share units. The number of Common Stock units credited to each of
the Directors as of March 22, 2002 is as follows: Mr. Adamson, 2,880; Mr.
Bennett, 4,796; Ms. Cole, 0; Mr. Leonard, 2,432; Mr. McDonald, 3,330; Mr.
Menaker, 4,604; Mr. Reed, 3,741; Mr. Sansom, 4,813; and Mr. Vinroot, 4,438.
Amounts reported also include options for Common Stock in the amount of
6,500 for all Directors, except Ms. Cole, all of which are exercisable.
(3) Includes an approximation of the number of shares in Ms. Cole's IRA.
(4) The number of shares owned for each of Ms. Henry and Messrs. Moe, Sipling,
Stewart, Zelnak and all Directors and executive officers as a group assumes
that options held by each of them covering shares of Common Stock in the
amounts indicated, which are currently exercisable within 60 days of March
22, 2002, have been exercised: Ms. Henry, 73,332; Mr. Moe, 53,000; Mr.
Sipling, 100,666; Mr. Stewart, 26,666; Mr. Zelnak, 194,000; and all
Directors and executive officers as a group, 542,079. The amounts reported
also include Common Stock units credited to each of the named executives in
connection with (i) their deferral of a portion of their cash bonus under
the Martin Marietta Materials, Inc. Incentive Stock Plan, and (ii)
restricted stock awards granted in January 2001 under the Martin Marietta
Materials, Inc. Amended and Restated Stock-Based Award Plan that are subject
to forfeiture in accordance with the terms of the plan, each in the
following amounts: Ms. Henry, 5,954 and 2,384, respectively; Mr. Moe, 2,139
and 1,850, respectively; Mr. Sipling, 6,923 and 2,767, respectively; Mr.
Stewart, 2,650 and 1,636, respectively; Mr. Zelnak, 26,713 and 5,492,
respectively; and all Directors and executive officers as a group, 52,353
and 25,875, respectively. There are no voting rights associated with the
stock units.
(5) Includes an approximation of the number of shares in the participant's
account in the Martin Marietta Materials, Inc. Performance Sharing Plan.
(6) Includes 13,667 shares held by the Zelnak Private Foundation of which Mr.
Zelnak and his wife are trustees and share voting and investment power.
14
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Corporation's executive compensation program is administered by the
Compensation Committee (the "Committee") of the Board of Directors, which
consists entirely of Board members who are neither officers nor employees of the
Corporation. The role of the Compensation Committee is, among other things, to
approve salaries and other compensation of the executive officers of the
Corporation and to review, approve and administer grants of stock options and
equity-related awards to all employees, including the principal officers of the
Corporation, and to administer any other compensation plan in connection with
which the Corporation or any of its employees may realize a benefit from
administration by disinterested Directors.
GENERAL COMPENSATION PHILOSOPHY
The Committee supports the Corporation's belief that executive
compensation should further the Corporation's strategic goals. To accomplish
this, the Committee's philosophy with respect to executive compensation holds
that the Corporation's employees are its most important resource and should be
compensated fairly in order to achieve optimum operating performance for the
Corporation. The Committee focuses on operating performance rather than
short-term changes in stock price based on its view that the long-term operating
performance of the Corporation will be reflected by stock price performance over
the long-term. Competitive compensation levels serve to attract and retain
individuals of outstanding ability and motivate such individuals to sustain high
levels of personal performance. The type and amount of compensation granted is
based upon the subjective judgment of the Committee; nevertheless, in the
exercise of its discretion, the Committee considers a number of objective
criteria which are discussed below in the context of the components of
compensation to which they apply.
COMPENSATION STRUCTURE AND AWARDS FOR 2001
The key elements of the Corporation's compensation structure are base
salary, annual incentives and long-term incentives, each of which is intended to
accomplish the overall compensation philosophy.
Annual Compensation -- Base Salary. In setting base salaries for 2001,
the Committee reviewed information drawn from various sources, including proxy
statements of a selected peer group of companies in the aggregates, cement and
specialty chemical industries, including those in the Performance Graph peer
group on page 20, and surveys conducted by outside compensation consulting firms
of a selected group of general industry companies with comparable revenues to
those of the Corporation. The group of companies reflected in the compensation
surveys was broader than the group of peer companies set forth in the
Performance Graph on page 20 because of the Committee's belief that the larger
group better represents the market within which it competes for executive
talent. The Committee also considered the advice of independent compensation
advisors. The targeted value of an executive's base salary is generally set at
median competitive levels although an executive's base salary may be higher or
lower than the target to reflect the executive's responsibilities, level of
experience, performance in past years and other factors.
15
Salaries for executives are reviewed by the Compensation Committee on an
annual basis and may be increased at that time based on: (1) the Committee's
agreement on the individual's contribution to the Corporation, and (2) increases
in median competitive pay levels. The competitive market rate and proposed
individual salary for each executive is presented by the Chief Executive Officer
to the Committee, along with data supporting the recommendations. The Committee
retains complete discretion in awarding salaries for executives. The total cash
compensation (base salary and bonus described below) for each of the named
executive officers was approximately at or below the median compensation of
executives having similar responsibilities in the compensation surveys,
including those in the Performance Graph peer group.
The base salary for the Chairman, President and Chief Executive Officer
of the Corporation was increased during 2001 to $730,000. This represents an
approximate 9.7 percent increase from Mr. Zelnak's base salary in 2000. The
Committee reviewed base salary data for chief executive officers in the
compensation studies and in the Performance Graph peer group, and also
considered certain other factors. The rate of increase in 2001 reflected the
Committee's determination that Mr. Zelnak's continued superior stewardship of
the Corporation resulted in record sales despite being negatively affected by
certain weather related events, plant project delays, high energy costs and a
weakened economy. In addition, the Corporation completed 13 acquisitions in 2001
in strategic locations, adding over 35 million tons of capacity in key areas.
Annual Compensation -- Bonus. To encourage achievement of the
performance objectives of the Corporation, a significant portion of annual
compensation takes the form of an incentive compensation bonus. In 2001, under
the Corporation's Executive Incentive Plan, the maximum amount that an executive
could receive was based upon a percentage of that executive's base salary. All
of the executive officers participate in the plan, except for Mr. Zelnak, for
whom bonus consideration is made outside the plan.
For awards granted under the plan, following review of the achievements
of the Corporation as compared to the targeted goals set at the end of the
previous year, a comparative review of each of the individual contributions of
all participants towards achieving these goals is conducted. The Compensation
Committee also considers qualitative measures of performance such as adherence
to and implementation of the Corporation's policy on ethics and standards of
conduct, safety, customer satisfaction and product quality.
The amount actually awarded to each participant in the plan is based upon
the Compensation Committee's assessment of each individual's achievement of
targeted objectives, including standard measures of financial performance such
as sales, earnings, return on capital investments and cash generation. These
objectives are established at the beginning of each plan year and are based upon
the Corporation's Long Range Operating Plan. For executives in corporate staff
positions, 50 percent of the determination is made with respect to the
Corporation's performance and 50 percent is based on the individual's
performance.
The Committee considers the recommendations of the Corporation's Chief
Executive Officer but retains complete discretion in performing these reviews
and in determining the amount of actual awards, if any.
Mr. Zelnak was awarded an annual incentive bonus of $635,000 for 2001
based on consideration of many diverse factors. Consistent with its compensation
philosophy that focuses
16
on long-term performance, the Committee considers whether there are factors in
addition to quantitative ones that should be taken into account in establishing
the overall level of executive compensation. In this regard, the Committee
considered accomplishments that benefit shareholders in the longer term. The
Committee believes that an evaluation of Mr. Zelnak's overall performance during
2001 in achieving record sales, focusing on internal expansion including plant
modernization projects, successfully activating the first two phases of a new
informations system, completing the sale of the Magnesia Specialties
refractories business and completing a record 13 acquisitions in key areas,
including the successful integration of Meridian Aggregates Company, reflects
the preeminent leadership of Mr. Zelnak and the hard work of a dedicated
management team.
Although there was no special attempt to set Mr. Zelnak's 2001 bonus in
any particular relationship to the compensation data, Mr. Zelnak's bonus was at
approximately the median level of bonus compensation of CEO's in the
compensation surveys, including those in the Performance Graph peer group, but
was a lower percentage of his base salary than he received in 2000. His total
cash compensation (base salary and bonus) was at approximately the median
compensation of those CEOs. The Compensation Committee retains complete
discretion in determining the amount of incentive compensation to be awarded to
Mr. Zelnak. Consequently, no particular weighting of criteria is required or
performed.
The Corporation's Incentive Stock Plan (discussed more generally below)
requires Mr. Zelnak to use 35% of his 2001 annual incentive bonus towards
credits of Common Stock units at a 20% discount to market value. These units
generally vest in three years. In addition, Mr. Zelnak made an irrevocable
choice six months prior to the bonus determination to use 15% more, for a total
of 50% of his annual incentive bonus, towards Common Stock units.
Long Term Compensation -- Stock Options. Stock options awarded under
the Corporation's Amended and Restated Stock-Based Award Plan link the
compensation provided to a group of 173 executive officers and key personnel
with gains realized by the shareholders. The vesting periods associated with
stock options encourage continued employment with the Corporation while also
serving to confer on recipients an ownership interest in the Corporation.
The number of options granted to an individual is based upon survey data
provided by compensation consultants. The data shows the value of option awards
as a multiple of base pay for comparable executive positions in other
corporations. In making 2001 stock option award decisions, the Committee elected
to provide option awards, as a multiple of base salary, near the average for
awards made by a selected peer group of companies in the aggregates, cement and
specialty chemical industries, including those in the Performance Graph peer
group on page 20. The determination of the number of options awarded is within
the complete discretion of the Committee, which considers the recommendations of
the Chief Executive Officer with respect to participants other than the Chief
Executive Officer, and which formulates its own decision with respect to the
Chief Executive Officer. The Committee awarded Mr. Zelnak 115,000 options in
2001 to align Mr. Zelnak's compensation directly with the Corporation's
performance. In exercising its discretion, the Committee generally follows the
same procedures as are followed in determining the amount of incentive
compensation awards discussed above.
17
Since long-term awards vest over time, the Committee grants new awards to
provide continuing incentives for future performance without regard to the
number of options currently held by the recipient. Options awarded are not
transferable and have an exercise price equal to the closing price of the
Corporation's Common Stock on the date of grant, and therefore, have no value to
the recipient unless the price of the Common Stock increases.
Long Term Compensation -- Incentive Stock Awards. In 2001, a group of
54 executive officers and key personnel participated in the Martin Marietta
Materials, Inc. Incentive Stock Plan. The plan is intended to give key employees
who participate in the Executive Incentive Plan the opportunity to invest up to
50% of their annual incentive awards to purchase units that are subsequently
converted into shares of Common Stock pursuant to the terms of the plan at a 20%
discount from the market price of the Corporation's Common Stock on the date of
the award. The units generally become fully vested and are distributed in the
form of unrestricted Common Stock after approximately three years of continued
additional employment with the Corporation. Participation in the plan is
elective, except that all senior officers of the Corporation are required to
invest a minimum percentage of their annual incentive awards in units that are
subsequently converted into the Corporation's Common Stock in accordance with
the terms of the Incentive Stock Plan. The plan is intended to assist the
Corporation in attracting and retaining key employees, to link directly
executive officer and management compensation to shareholder returns, and to
foster stock ownership in the Corporation among its key employees.
Long Term Compensation - Stock-Based Awards. The Committee periodically
reviews the components of the Corporation's executive compensation program to
ensure that pay levels are competitive and that incentive opportunities are
effective in attracting and retaining talented employees. In 2001, a group of
executive officers and key personnel was granted restricted stock awards under
the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan,
which replaced the granting of awards that were previously made under the Martin
Marietta Materials, Inc. Shareholder Value Achievement Plan (the "Achievement
Plan"). The primary purpose of the awards granted in 2001 and previously under
the Achievement Plan is to foster and promote the long-term growth and
performance of the Corporation by enhancing the Corporation's ability to attract
and retain qualified key employees and motivate key employees through
performance-based incentives. These awards allow long-term incentives to be
earned by the Chief Executive Officer and the other participants.
The awards granted in 2001 were based on the Corporation's performance as
measured by its specific return on capital goals that are equally weighted and
determined by a total return to shareholders ranking that must be at least in
the 40th percentile as compared to the Standard and Poor's index of 400 Midcap
companies and to the Standard and Poor's Basic Materials Industrial Group over
the three year period ending on January 1, 2001. There is no award if the
Corporation does not meet the threshold performance objectives. The groups used
as comparisons to determine the amount, if any, of these awards differ from and
are larger than the peer group used in the Performance Graph because the
Corporation has historically compared its financial performance against a larger
competitor group for compensation purposes. In addition, the Committee believes
that investors in the Corporation compare its performance to those in these
larger competitor groups. The 2001 stock-based awards generally vest if the
executive is continuously employed on December 1 in the year that is immediately
preceding three years
18
from the date of grant, at which time the shares of Common Stock are issued to
the participant. The objective of these awards is to focus senior management's
attention on certain critical factors affecting the Corporation's long term
performance and reward them for making successful long term decisions. The value
of these awards may vary considerably based on the Corporation's stock price
performance.
Stock-Based Awards - Generally. The value, if any, of stock-based
awards is dependent upon the performance of the Corporation's Common Stock.
Further, as noted above, in exercising its discretion in determining the type
and amount of award made, the Committee considers many factors related to the
Corporation's performance and the performance of the individual being considered
for an award. While objective criteria are carefully considered, the Committee
has the discretion to make awards as it deems appropriate. Therefore, there is
no formula that results in a direct or quantifiable correlation between
performance and stock-related awards.
POLICY WITH RESPECT TO DEDUCTIBILITY OF COMPENSATION
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code which makes certain "non-performance based" compensation
to the named executives in excess of $1 million non-deductible to the
Corporation. One of the named executive officers received annual compensation
exceeding $1 million in 2001.
The Committee has taken steps to qualify certain compensation to ensure
deductibility. The Committee has determined that, in reviewing the design and
administration of the executive compensation program, its compensation
objectives discussed above will be met if, in connection with other
compensation, it retains the flexibility to exercise subjective judgment in
assessing an executive's performance. The Committee believes that the
achievement of the Corporation's general compensation policies and objectives
that are currently in place best serves shareholder interests.
March 26, 2002
COMPENSATION COMMITTEE
William E. McDonald, Chairman
Richard G. Adamson
Bobby F. Leonard
James M. Reed
19
COMPARISON CUMULATIVE TOTAL RETURN(1)
MARTIN MARIETTA MATERIALS, INC., S&P 500
AND PEER GROUP INDICES
The following graph compares the performance of the Corporation's Common
Stock to that of the Standard and Poor's 500 Stock Index ("S&P 500") and a
market capitalization weighted index containing a group of peer companies in the
aggregates and cement industries selected by the Corporation. The peer group
consists of the following companies: Florida Rock Industries, Inc., Lafarge
Corporation, Martin Marietta Materials, Inc. and Vulcan Materials Company.(2)
[Performance Graph]
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
------- ------- ------- ------- ------- -------
MLM $100.00 $159.73 $274.80 $183.17 $191.52 $213.68
S&P 500 INDEX $100.00 $133.36 $171.48 $207.56 $188.66 $166.24
PEER GROUP $100.00 $160.63 $229.25 $185.12 $203.59 $239.81
---------------
(1) Assumes that the investment in the Corporation's Common Stock and each index
was $100, with quarterly reinvestment of dividends.
(2) The peer group index includes CalMat Co. up until the time of its merger
into Vulcan Materials Company as of January 6, 1999.
20
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
There are no executive officer-director interlocks where an executive of
the Corporation serves on the compensation committee of another corporation that
has an executive officer serving on the Corporation's Board of Directors.
CERTAIN RELATED TRANSACTIONS
Mr. Vinroot is a partner with the law firm of Robinson, Bradshaw &
Hinson, P.A., which has provided certain legal services for the Corporation in
an amount less than 5% of such firm's gross revenues for the firm's last fiscal
year.
AUDIT COMMITTEE REPORT OF THE BOARD OF DIRECTORS
The Board of Directors has charged the Audit Committee with a number of
responsibilities, including review of the adequacy of the Corporation's
financial reporting and accounting systems and controls. The Committee has a
direct line of communication with the Corporation's independent auditors and the
director of the internal audit function. The Committee is composed entirely of
independent directors as defined by the listing standards of the New York Stock
Exchange.
In the discharge of its responsibilities, the Audit Committee has
reviewed and discussed with management and the independent auditors the
Corporation's audited financial statements for fiscal year 2001. In addition,
the Committee has discussed with the independent auditors matters such as the
quality (in addition to acceptability), clarity, consistency and completeness of
the Corporation's financial reporting, as required by Statement on Auditing
Standards No. 61, Communication with Audit Committees as amended by Statement on
Auditing Standards No. 90, Audit Committee Communications.
The Audit Committee has received from the independent auditors written
disclosures and a letter concerning the independent auditors' independence from
the Corporation, as required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees. These disclosures have been
reviewed by the Committee and discussed with the independent auditors.
Based on these reviews and discussions, the Committee has recommended to
the Board that the audited financial statements be included in the Corporation's
2001 Annual Report on Form 10-K for filing with the Securities and Exchange
Commission.
March 26, 2002
AUDIT COMMITTEE
Marcus C. Bennett, Chairman
Sue W. Cole
Frank H. Menaker, Jr.
James M. Reed
William B. Sansom
21
FEES PAID TO INDEPENDENT AUDITORS
AUDIT FEES: The aggregate fees billed for professional services
rendered by Ernst & Young LLP to the Corporation in connection with the annual
audit and for the reviews during 2001 of the Corporation's financial statements
included in the quarterly reports on Form 10Q were $688,000.
ALL OTHER FEES: The aggregate fees billed for professional services
rendered by Ernst & Young LLP to the Corporation in connection with
audit-related services, including pension and subsidiary audits, business
acquisitions, accounting consultations, internal audit and Securities and
Exchange Commission registrations, were $649,000. The aggregate fees billed for
professional services rendered by Ernst & Young LLP to the Corporation in 2001
in connection with non-audit related activities, including tax compliance and
consulting services, were $496,000. The total aggregate non-audit fees billed
for all other fees for professional services rendered by Ernst & Young LLP to
the Corporation in 2001 were $1,145,000.
In appointing Ernst & Young LLP to serve as independent auditors for the
year ending December 31, 2001, the Audit Committee considered whether the
provision of these non-audit related services is compatible with maintaining the
independent auditors' independence.
FINANCIAL STATEMENTS
Upon the written request of any shareholder, the Corporation will provide
without charge a copy of its Annual Report on Form 10-K for the year ended
December 31, 2001, filed with the Securities and Exchange Commission. Requests
should be mailed to the Corporate Secretary, Martin Marietta Materials, Inc.,
2710 Wycliff Road, Raleigh, North Carolina 27607.
METHOD OF PROXY SOLICITATION
The entire cost of preparing, assembling, printing and mailing the Notice
of Meeting, this Proxy Statement and proxies and the cost of soliciting proxies
relating to the meeting, if any, has been or will be paid by the Corporation. In
addition to use of the mails, proxies may be solicited by officers, directors
and other regular employees of the Corporation by telephone, facsimile or
personal solicitation, and no additional compensation will be paid to such
individuals. The Corporation will use the services of Morrow & Co., Inc., a
professional soliciting organization, to assist in obtaining in person or by
proxy the largest number of shareholder vote as is possible. The Corporation
estimates its expenses for solicitation services will not exceed $15,000. The
Corporation will, if requested, reimburse banks, brokerage houses and other
custodians, nominees and certain fiduciaries for their reasonable expenses
incurred in mailing proxy materials to their principals.
OTHER MATTERS
At the time this Proxy Statement was filed with the Securities and
Exchange Commission, the Board of Directors was not aware that any matters not
referred to herein would be presented for action at the Annual Meeting. If any
other matters properly come before the Meeting, it is intended that the persons
named in the enclosed proxy will vote the shares
22
represented by proxies on such matters in accordance with their judgment in the
best interest of the Corporation. It is also intended that discretionary
authority will be exercised with respect to the vote on any matters incident to
the conduct of the meeting.
SHAREHOLDERS' PROPOSALS FOR 2003 ANNUAL MEETING
Proposals by shareholders for nominations for directors or other matters
intended to be presented at the 2003 Annual Meeting of Shareholders of the
Corporation must be received by the Secretary of the Corporation no later than
December 2, 2002 in order to be included in the Proxy Statement and on the Proxy
Card that will be solicited by the Board of Directors in connection with that
meeting. The inclusion of any proposal will be subject to applicable rules of
the Securities and Exchange Commission. In addition, the Bylaws of the
Corporation establish an advance notice requirement for any proposal of business
to be considered at an annual meeting of shareholders, including the nomination
of any person for election as director. In general, written notice must be
received by the Secretary of the Corporation at its principal executive office,
2710 Wycliff Road, Raleigh, North Carolina 27607, not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's annual
meeting and must contain specified information concerning the matter to be
brought before such meeting and concerning the shareholder proposing such a
matter. Accordingly, to be considered at the 2003 Annual Meeting of
Shareholders, proposals must be received by the Secretary of the Corporation no
earlier than February 24, 2003 and no later than March 24, 2003. Any waiver by
the Corporation of these requirements with respect to the submission of a
particular shareholder proposal shall not constitute a waiver with respect to
the submission of any other shareholder proposal nor shall it obligate the
Corporation to waive these requirements with respect to future submissions of
the shareholder proposal or any other shareholder proposal. Any shareholder
desiring a copy of the Bylaws of the Corporation will be furnished one without
charge upon written request to the Secretary of the Corporation at its principal
executive office, 2710 Wycliff Road, Raleigh, North Carolina 27607.
MARTIN MARIETTA MATERIALS, INC.
April 5, 2002
23
(MARTIN MARIETTA MATERIALS, INC. LOGO)
Martin Marietta Materials, Inc.
2710 Wycliff Road
919-781-4550
www.martinmarietta.com
NYSE Stock Symbol: MLM
APPENDIX A
- FOLD AND DETACH HERE -
MARTIN MARIETTA MATERIALS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING TO BE HELD MAY 23, 2002
The undersigned hereby appoints Stephen P. Zelnak, Jr. and Janice K. Henry, and
each or either of them, proxies, with full power of substitution, with the
powers the undersigned would possess if personally present, to vote, as
designated below, all shares of the Common Stock of the undersigned in Martin
Marietta Materials, Inc. at the Annual Meeting of Shareholders to be held on May
23, 2002, and at any adjournment thereof.
1. ELECTION OF DIRECTORS: Nominees are Sue W. Cole, James M. Reed, William B.
Sansom and Stephen P. Zelnak, Jr.
[ ] FOR all listed nominees (except do not vote for the nominee(s) whose
name(s) I have written below)
-----------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for the listed nominees
2. RATIFICATION OF SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENTS
THEREOF.
MARTIN MARIETTA MATERIALS, INC.
- FOLD AND DETACH HERE -
This proxy is solicited by the Board of Directors and when properly executed
will be voted as specified herein and, unless otherwise directed, will be voted
FOR the election of all nominees as Directors and FOR the ratification of
selection of Ernst & Young LLP as independent auditors. The Board of Directors
recommends voting FOR each item.
Receipt of Notice of Annual Meeting of Shareholders and accompanying Proxy
Statement is hereby acknowledged.
PLEASE DATE AND SIGN EXACTLY AS
PRINTED BELOW AND RETURN PROMPTLY
IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
Dated: , 2002
------------------
------------------------------
Signature and Title
------------------------------
Signature if held jointly
(WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, ETC., GIVE
TITLE AS SUCH. IF JOINT
ACCOUNT, EACH JOINT OWNER
SHOULD SIGN. IF A CORPORATION
OR A PARTNERSHIP, SIGN FULL
CORPORATE NAME OR PARTNERSHIP
NAME, AS THE CASE MAY BE, BY
AN AUTHORIZED PERSON.)