Lockheed Martin 1999 Annual Report Download - page 49

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1999
for issuance under the Omnibus Plan at December 31,
1999 was 38 million shares. The Omnibus Plan does not
impose any minimum vesting periods on options or other
awards. The maximum term of an option or any other award
is 10 years. The Omnibus Plan allows the Corporation to
provide for financing of purchases of its common stock, sub-
ject to certain conditions, by interest-bearing notes payable
to the Corporation.
In December 1999, 175,000 shares of restricted
common stock were awarded under the Omnibus Plan
to certain senior executives of the Corporation. The
shares were recorded based on the market value of the
Corporation’s common stock on the date of the award.
The award requires the recipients to pay the $1 par value
of each share of stock and provides for payment to be
made in cash or in the form of a recourse note to the
Corporation. Recipients are entitled to cash dividends and
to vote their respective shares, but are prohibited from sell-
ing or transferring shares prior to vesting. One-third of the
restricted shares will vest in two years from the date of
grant, with the remainder vesting four years from the grant
date. The impact of these awards was not material to stock-
holders’ equity or compensation expense in 1999.
The following table summarizes employee stock option
and restricted stock activity related to the Corporation’s
plans during 1997, 1998 and 1999:
Number of Shares Weighted
(In thousands)
Average
Available Options Exercise
for Grant Outstanding Price
December 31, 1996 14,646 19,316 $25.33
Granted (5,796) 5,796 45.60
Exercised — (3,519) 20.86
Terminated 654 (716) 40.84
December 31, 1997 9,504 20,877 31.18
Additions 17,000 — —
Granted (5,090) 5,090 52.06
Exercised — (2,697) 24.70
Terminated 220 (223) 49.03
December 31, 1998 21,634 23,047 36.38
Granted (5,444) 5,444 37.01
Exercised — (656) 19.76
Terminated 565 (567) 42.51
16,755 27,268 36.78
Restricted stock awards (175) — —
December 31, 1999 16,580 27,268 $36.78
Approximately 19.7 million, 15.5 million and 13.0 mil-
lion outstanding options were exercisable by employees at
December 31, 1999, 1998 and 1997, respectively.
Information regarding options outstanding at December
31, 1999 follows (number of options in thousands):
Weighted
Average
Weighted Remaining
Range of Number of Average Contractual
Exercise Prices Options Exercise Price Life
Options Outstanding:
Less than $20.00 3,328 $15.82 2.7
$20.00–$29.99 4,922 26.33 4.9
$30.00–$39.99 9,220 37.19 8.3
$40.00–$50.00 4,980 45.53 7.0
Greater than $50.00 4,818 52.09 9.0
27,268 $36.78 6.9
Options Exercisable:
Less than $20.00 3,328 $15.82
$20.00–$29.99 4,922 26.33
$30.00–$39.99 4,006 37.42
$40.00–$50.00 4,975 45.53
Greater than $50.00 2,454 52.11
19,685 $34.87
All stock options granted in 1999, 1998 and 1997
under the Omnibus Plan have 10 year terms and vest
over a two year service period. Exercise prices of options
awarded in those years were equal to the market price
of the stock on the date of grant. Pro forma information
regarding net earnings and earnings per share as required
by SFAS No. 123 has been prepared as if the Corporation
had accounted for its employee stock options under the
fair value method. The fair value for these options was
estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted average
assumptions for 1999, 1998 and 1997, respectively: risk-
free interest rates of 4.64 percent, 5.39 percent and 6.36
percent; dividend yields of 2.4 percent, 1.9 percent and
1.5 percent; volatility factors related to the expected market
price of the Corporation’s common stock of .247, .174 and
.163; and a weighted average expected option life of five
years. The weighted average fair values of options granted
during 1999, 1998 and 1997 were $8.53, $10.96 and
$10.94, respectively.