SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
RAYTHEON COMPANY
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(Name of Registrant as Specified in Its Charter)
N/A
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(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:
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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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
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[ ] 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:
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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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RAYTHEON
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held April 25, 2001
The annual meeting of stockholders of Raytheon Company will be held
at Raytheon's Executive Offices, 141 Spring Street, Lexington, Massachusetts,
02421 at 10:00 a.m. Eastern Time on Wednesday, April 25, 2001 for the following
purposes:
1. To elect six Directors whose terms are described in the proxy statement;
2. To consider and act on a proposal to amend the Company's Restated
Certificate of Incorporation to effect a reverse stock split followed by a
forward stock split of the Company's Class A and Class B common stock;
3. To consider and act on a proposal to amend the Company's Restated
Certificate of Incorporation to reclassify the Company's Class A and Class
B common stock into a single new class of common stock;
4. To approve the Raytheon Company 2001 Stock Plan; and
5. To consider and act upon such other business, including stockholder
proposals if presented by their proponents, as may properly come before
the meeting or any adjournment thereof.
Stockholders of record at the close of business on March 8, 2001 are
entitled to notice of and to vote at the meeting.
YOUR VOTE IS IMPORTANT. You can vote your shares by completing and
returning the proxy card sent to you. Most stockholders can also vote their
shares over the Internet or by telephone. Please check your proxy card or the
information forwarded by your bank, broker or other holder of record to see
which options are available to you. You can revoke a proxy at any time prior to
its exercise by following the instructions in the proxy statement.
By order of the Board of Directors,
/s/ John W. Kapples
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John W. Kapples
Secretary
Lexington, Massachusetts
[Month][Date], 2001
RAYTHEON COMPANY
141 Spring Street, Lexington, Massachusetts 02421
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
We are providing these proxy materials in connection with the
solicitation by the Board of Directors of Raytheon Company of proxies to be
voted at the 2001 annual meeting of stockholders of the company and at any
meeting following adjournment thereof.
You are cordially invited to attend Raytheon's annual meeting on
April 25, 2001 beginning at 10:00 a.m. Eastern Time. Stockholders will be
admitted beginning at 9:30 a.m. The meeting will be held at Raytheon's Executive
Offices, 141 Spring Street, Lexington, Massachusetts 02421.
We are first mailing this proxy statement and accompanying forms of
proxy and voting instructions on or about [ ] [ ], 2001 to holders of Raytheon's
Class A common shares and Class B common shares as of March 8, 2001, the record
date for the meeting.
You will need an admission ticket to enter the meeting. If you are a
stockholder of record, you will find an admission ticket attached to the proxy
card sent to you. If you plan to attend the meeting in person, please detach the
admission ticket from the proxy card and bring it with you to the meeting.
Directions to the meeting are printed on the admission ticket.
If your shares are held in the name of a bank, broker or other
holder of record and you plan to attend the meeting in person, you may obtain an
admission ticket in advance by sending a written request, along with proof of
ownership, such as a bank or brokerage account statement, to the company's
transfer agent, EquiServe L.P., 150 Royall Street, Canton, Massachusetts 02021.
If you arrive at the meeting without an admission ticket, we will admit you if
we are able to verify that you are a Raytheon stockholder.
PROXIES AND VOTING PROCEDURES
Your vote is important. Because many stockholders cannot personally
attend the meeting, it is necessary that a large number be represented by proxy.
Most stockholders have a choice of voting over the Internet, by using a
toll-free telephone number or by completing a proxy card and mailing it in the
postage-paid envelope provided. Please check your proxy card or the information
forwarded by your bank, broker or other holder of record to see which options
are available to you. Please be aware that if you vote over the Internet, you
may incur costs such as telecommunication and Internet access charges for which
you will be responsible. The Internet and telephone voting facilities for
stockholders of record will close at 11:00 p.m. Eastern Time on April 24, 2001.
The Internet and telephone voting procedures have been designed to authenticate
stockholders by use of a control number and to allow you to vote your shares and
to confirm that your instructions have been properly recorded.
There will be two proxy cards for this year's meeting: one card to
vote Class A shares and a separate card to vote Class B shares. If you own both
Class A shares and Class B shares, you will receive two proxy cards. If you
receive a proxy card for Class A shares and a proxy card for Class B shares, you
must vote both proxies by using the Internet or the toll-free
telephone number, or by completing both proxy cards and mailing them in the
postage-paid envelope provided, in order for all of your shares to be voted at
the meeting.
You can revoke your proxy at any time before it is exercised by
timely delivery of a properly executed, later-dated proxy (including an Internet
or telephone vote) or by voting by ballot at the meeting. By providing your
voting instructions promptly, you may save the company the expense of a second
mailing.
The method by which you vote will not limit your right to vote at
the meeting if you later decide to attend in person. If your shares are held in
the name of a bank, broker or other holder of record, you must obtain a proxy,
executed in your favor, from the holder of record to be able to vote at the
meeting.
All shares entitled to vote and represented by properly executed
proxies received prior to the meeting and not revoked will be voted at the
meeting in accordance with your instructions. If you do not indicate how your
shares should be voted on a matter, the shares represented by your proxy will be
voted as the Board of Directors recommends.
If any other matters are properly presented at the meeting for
consideration, including, among other things, consideration of a motion to
adjourn the meeting to another time or place, the persons named in the enclosed
form of proxy and acting thereunder will have discretion to vote on those
matters according to their best judgment to the same extent as the person
signing the proxy would be entitled to vote. At the date this proxy statement
went to press, we did not anticipate that any other matters would be raised at
the meeting.
STOCKHOLDERS ENTITLED TO VOTE
Stockholders at the close of business on the record date are
entitled to notice of and to vote at the meeting. On March 8, 2001, there were [
] common shares outstanding, consisting of [ ] Class A shares and [ ] Class B
shares.
If you are a participant in Raytheon's Dividend Reinvestment and
Stock Purchase Plan, common shares held in your account are included on, and may
be voted using, the proxy card(s) sent to you. The plan's administrator is the
stockholder of record of your dividend reinvestment plan shares and will not
vote those shares unless you provide instructions, which you can do over the
Internet, by telephone or by using the proxy card(s) sent to you.
If you are a participant in the Raytheon Savings and Investment
Plan, the proxy card(s) sent to you will serve as the voting instruction card(s)
for the trustee of the plan for all shares you own through the plan. If you own
shares through this plan and do not provide voting instructions to the trustee,
the trustee will not vote those shares at the meeting.
If you hold Raytheon stock through a stock purchase or savings plan
sponsored by General Motors Corporation, or an affiliate of General Motors,
Hughes Electronics, Delphi Automotive Systems or Saturn, you will receive one
proxy card for all shares that you own. That proxy card will serve as a voting
instruction card for the trustees of those plans for which all accounts are
registered in the same name. If you own shares through those plans and do not
sign
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and return your proxy card, the plan trustees will vote your shares as described
in the plan documents.
QUORUM AND REQUIRED VOTE - ELECTION OF DIRECTORS ONLY
The presence, in person or by proxy, of the holders of a majority of
the shares entitled to vote generally for the election of Directors is necessary
to constitute a quorum. Abstentions and broker "non-votes" are counted as
present and entitled to vote for purposes of determining a quorum. A broker
"non-vote" occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power with respect to that item and has not received instructions from
the beneficial owner.
A plurality of the votes duly cast is required for the election of
Directors (i.e., the nominees receiving the greatest number of votes will be
elected). Abstentions and broker "non-votes" are not counted for purposes of the
election of Directors.
In accordance with the company's Certificate of Incorporation, for
the election of Directors only:
* each Class A share is entitled to [_.___] votes per share, and
the total votes of all Class A shares will represent 80.1% of the
total votes of all of the company's common shares entitled to
vote for Directors; and
* each Class B share is entitled to one vote per share, and the
total votes of all Class B shares will represent 19.9% of the
total votes of all of the company's common shares entitled to
vote for Directors.
QUORUM AND REQUIRED VOTE - REVERSE/FORWARD SPLIT AND RECLASSIFICATION OF SHARES
The presence, in person or by proxy, of the holders of a majority of
each of the Class A shares and the Class B shares is necessary to constitute a
quorum with respect to the proposal to effect the reverse split of the Class A
and Class B shares followed by the forward split of the Class A and Class B
shares (which we refer to as the "Reverse/Forward Split") and the proposal to
reclassify the company's shares. Abstentions and broker "non-votes" are counted
as present and entitled to vote for purposes of determining a quorum. A broker
"non-vote" occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power with respect to that item and has not received instructions from
the beneficial owner.
With respect to the Reverse/Forward Split and the reclassification
of shares each Class A share and each Class B share has one vote per share. The
affirmative vote of the holders of a majority of the outstanding Class A shares
and a majority of the outstanding Class B shares, with each Class voting
separately, is required to approve the Reverse/Forward split and the
reclassification of shares. Both an abstention and a broker "non-vote" are
counted as votes against the Reverse/Forward split and the reclassification of
shares.
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QUORUM AND REQUIRED VOTE - 2001 STOCK PLAN; SHAREHOLDER PROPOSALS; ALL OTHER
MATTERS
The presence, in person or by proxy, of the holders of a majority of
the shares entitled to vote generally for the election of Directors is necessary
to constitute a quorum with respect to the 2001 Stock Plan, all shareholder
proposals and any other matters to come before the meeting. Abstentions and
broker "non-votes" are counted as present and entitled to vote for purposes of
determining a quorum. A broker "non-vote" occurs when a nominee holding shares
for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner.
With respect to the 2001 Stock Plan, the shareholder proposals and
all other matters (other than the election of Directors, the Reverse/Forward
Split and the reclassification of shares) on which holders of the company's
common shares are entitled to vote, the affirmative vote of the holders of a
majority of the Class A shares and a majority of the Class B shares, with each
Class voting separately, present in person or represented by proxy and entitled
to vote, is required.
An abstention is counted as a vote against, and a broker "non-vote"
is not counted for purposes of approving all matters on which holders of the
company's common shares are entitled to vote at the meeting other than the
election of Directors, the Reverse/Forward Split, and the reclassification of
shares.
TABULATION OF VOTES
All votes, whether by proxy or ballot, will be tabulated by an
independent business entity, which will not disclose your vote except as is (i)
required by law, (ii) necessary in connection with a judicial or regulatory
action or proceeding, (iii) necessary in connection with a contested proxy or
consent solicitation, or (iv) requested by you. Any comment written on a proxy
card will be provided to Raytheon's Corporate Secretary without disclosing your
vote, unless necessary to an understanding of the comment.
MULTIPLE COPIES OF ANNUAL REPORT TO STOCKHOLDERS
A copy of our 2000 annual report is enclosed. If you received more
than one copy of the annual report and you wish to reduce the number of reports
you receive and save the company the cost of producing and mailing these
reports, we will discontinue the mailing of reports on the accounts you select
if you mark the designated box on your proxy card, or follow the instructions
provided when you vote over the Internet or by telephone.
At least one account must continue to receive annual reports, unless
you elect to view future annual reports and proxy statements over the Internet.
Mailing of dividends, dividend reinvestment statements, proxy materials and
special notices will not be affected by your election to discontinue duplicate
mailings of the annual report. To discontinue or resume the mailing of an annual
report to an account, call the Raytheon Shareholder Services toll-free number at
1-800-360-4519.
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If you own Raytheon stock through a bank, broker or other nominee
and receive more than one Raytheon annual report, contact the holder of record
to eliminate duplicate mailings.
ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORT
This proxy statement and the 2000 annual report are also available
on Raytheon's Internet site at http://www.raytheon.com. Most stockholders can
elect to view future proxy statements and annual reports over the Internet
instead of receiving paper copies in the mail, saving the company the cost of
producing and mailing these documents.
If you are a stockholder of record, you can elect this option by
following the instructions provided when you vote your proxy over the Internet.
You can also register for this option by following the instructions provided on
the following Internet site: http://www.econsent.com/rtn.
By choosing to view future proxy statements and annual reports over
the Internet, you will receive a proxy card in the mail next year with
instructions containing the Internet address of those materials. Your choice
will remain in effect until you call the Raytheon Shareholder Services toll-free
number and tell us otherwise. You do not have to elect Internet access each
year.
If you hold your Raytheon stock through a bank, broker or other
holder of record, please refer to the information provided by that entity for
instructions on how to elect to view future proxy statements and annual reports
over the Internet.
Stockholders who hold their Raytheon stock through a bank, broker or
other holder of record and who elect electronic access will receive information
next year containing the Internet address for use in accessing Raytheon's proxy
statement and annual report.
COST OF PROXY SOLICITATION
The cost of soliciting proxies will be borne by the company.
Proxies may be solicited on behalf of the company by Directors, officers or
employees of the company in person or by telephone, facsimile or other
electronic means. We have retained Morrow & Co. to assist in the distribution
and solicitation of proxies. We have agreed to pay Morrow & Co. a fee of
$25,000 plus expenses for these services.
In accordance with the regulations of the Securities and Exchange
Commission and the New York Stock Exchange, we will also reimburse brokerage
firms and other custodians, nominees and fiduciaries for their expenses incurred
in sending proxies and proxy materials to beneficial owners of Raytheon stock.
STOCKHOLDER ACCOUNT MAINTENANCE
Our transfer agent is EquiServe L.P. All communications concerning
accounts of stockholders of record, including address changes, name changes,
inquiries as to requirements to transfer Raytheon stock and similar issues, can
be handled by calling the Raytheon Shareholder
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Services toll-free number at 1-800-360-4519. For other company information, you
can visit Raytheon's Internet site at http://www.raytheon.com.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
Directors and executive officers to file reports of holdings and transactions in
Raytheon stock with the Securities and Exchange Commission and the New York
Stock Exchange. Based on our records and other information, we believe that all
Securities and Exchange Commission filing requirements applicable to our
Directors and executive officers with respect to the fiscal year ending December
31, 2000 were met.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors
has reappointed PricewaterhouseCoopers LLP as the independent public accounting
firm to audit the company's financial statements for the fiscal year beginning
January 1, 2001.
Representatives of PricewaterhouseCoopers are expected to be present
at the meeting. They will be given the opportunity to make a statement if they
desire to do so, and they will be available to respond to appropriate questions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2000, the company retained the law firm of Paul, Weiss,
Rifkind, Wharton & Garrison for various legal services. Warren B. Rudman, a
Director of the company, is a member of this firm.
THE BOARD OF DIRECTORS AND BOARD COMMITTEES
Raytheon's business, property and affairs are managed under the
direction of the Board of Directors. Members of the Board are kept informed of
the company's business through discussions with the Chairman and officers, by
reviewing materials provided to them and by participating in meetings of the
Board and its committees.
During 2000, the Board held seven meetings, and the committees held
a total of 25 meetings. During 2000, L. Dennis Kozlowski attended 62% of the
combined Board meetings and meetings of the committees on which he served. Also
during 2000, Henrique de Campos Meirelles attended 70% of the combined Board
meetings and meetings of the committees on which he served. No other Director
attended less than 88% of the combined Board meetings and meetings of the
committees on which he or she served, and the average attendance at the Board
and committee meetings was 94%.
The Board of Directors currently has four committees: the Audit
Committee, the Management Development and Compensation Committee, the
Executive Committee and the Governance Committee; and two subcommittees: the
Options Subcommittee of the Management and Development and Compensation
Committee and the Nominating Subcommittee of the Governance Committee.
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AUDIT COMMITTEE
L. Dennis Kozlowski, Chairman, Frederic M. Poses and William R.
Spivey are the current members of the Audit Committee. The Audit Committee meets
with management to consider the adequacy of the company's internal controls and
the objectivity of financial reporting. The Audit Committee also meets with the
independent auditors and with appropriate financial personnel and internal
auditors of the company regarding these matters. The Audit Committee recommends
to the Board the appointment of the independent auditors. The Audit Committee
met three times in 2000.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
Barbara M. Barrett, Ferdinand Colloredo-Mansfeld, John R. Galvin,
Warren B. Rudman, Chairman, Michael C. Ruettgers and Alfred M. Zeien are the
current members of the Management Development and Compensation Committee. The
functions of the Management Development and Compensation Committee include
administering management incentive compensation plans and making recommendations
to the Board with respect to the compensation of Directors and officers of the
company. The Management Development and Compensation Committee met eight times
in 2000.
For the time being, the Board has determined that Senator
Rudman should remain on the Management Development and Compensation Committee.
Senator Rudman is currently serving his last term as a Director (directors may
not stand for re-election once they reach age 70) and has for a number of years
been deeply involved in structuring and implementing the company's compensation
plans. The Board determined that it was not in the best interests of the company
or our stockholders to remove Senator Rudman from the committee at this time
even though he does not, due to his association with the law firm of Paul,
Weiss, Rifkind, Wharton & Garrison, completely satisfy the new "independent
director" criteria included in the Corporate Governance Guidelines adopted by
the Board. The Governance Guidelines are summarized at page eight of this proxy
statement. Upon Senator Rudman's retirement, the committee will consist solely
of independent directors in accordance with the Governance Guidelines.
The Board of Directors has also established the Options Subcommittee
of the Management Development and Compensation Committee. The Options
Subcommittee administers and makes awards under the company's stock option
plans. Barbara M. Barrett, Ferdinand Colloredo-Mansfeld, John R. Galvin,
Chairman, Michael C. Ruettgers and Alfred M. Zeien are the current members of
the Options Subcommittee. The Options Subcommittee met eight times during 2000.
EXECUTIVE COMMITTEE
Daniel P. Burnham, Chairman, L. Dennis Kozlowski, Warren B. Rudman
and Alfred M. Zeien are the current members of the Executive Committee. The
Executive Committee is empowered to act for the full Board during intervals
between Board meetings, with the exception of certain matters that by law may
not be delegated. The Executive Committee met three times during 2000.
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GOVERNANCE COMMITTEE
Barbara M. Barrett, John M. Deutch, Thomas E. Everhart, Henrique de
Campos Meirelles, Dennis J. Picard, Warren B. Rudman and Alfred M. Zeien,
Chairman, are the current members of the Governance Committee. The Governance
Committee reviews and reports to the Board on a periodic basis with regard to
matters of corporate governance. The Committee reviews and assesses the
effectiveness of the Board's Guidelines on Corporate Governance and recommends
proposed revisions to the Board. The Committee also reviews proposals by
stockholders in connection with the annual meeting of stockholders and makes
recommendations to the Board for action on such proposals. The Governance
Committee met three times during 2000.
NOMINATING SUBCOMMITTEE
Barbara M. Barrett, Thomas E. Everhart and Alfred M. Zeien,
Chairman, are the current members of the Nominating Subcommittee. The Committee,
established in January 2001, makes recommendations to the Board regarding the
size and composition of the Board. The Committee also establishes procedures for
the nomination process and recommends candidates for election to the Board. The
Nominating Subcommittee will consider nominees proposed by stockholders. During
2000, the duties of the Nominating Subcommittee were performed by the Governance
Committee.
Under Raytheon's By-Laws, nominations for Director may be made only
by the Board or a Board committee, or by a stockholder entitled to vote who
delivered notice to the Corporate Secretary not later than the close of business
on the 90th calendar day nor earlier than the close of business on the 120th
calendar day prior to the first anniversary of the preceding year's annual
meeting. For the company's annual meeting in the year 2002, the company must
receive this notice after the close of business on December 26, 2001 and before
the close of business on January 25, 2002. You can obtain a copy of Raytheon's
by-laws by writing to the Corporate Secretary, Raytheon Company, Executive
Offices, 141 Spring Street, Lexington, MA 02421.
CORPORATE GOVERNANCE GUIDELINES AND POLICIES
The Board of Directors has adopted Guidelines on Corporate
Governance. The guidelines are published on Raytheon's Internet site at
http://www.raytheon.com, under Investor Information. Among other matters, the
guidelines include the following:
1. A substantial majority of the Board of Directors should be
independent directors. An independent director is someone who:
* has not been employed by the company as an executive officer
within the past five years;
* is not a paid advisor or consultant to the company and
derives no financial benefit from any entity as a result of
advice or consulting services provided to the company by such
entity;
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* is not an executive officer, director or significant
stockholder of a significant customer or supplier of the
company;
* has no personal services contract with the company;
* is not an executive officer or director of a tax-exempt
entity receiving more than 5% of its annual contributions
from the company; and
* is not the spouse, parent, child or sibling of an executive
officer of the company.
2. The Audit Committee, the Management Development and
Compensation Committee, the Nominating Subcommittee and the
Options Subcommittee consist entirely of independent directors.
3. A Director may not stand for election after attaining age 70.
4. The Nominating Subcommittee determines the appropriate skills and
characteristics required of Board members and considers diversity,
age, skills, experience and other relevant factors in performing
its assessment.
5. A Director should offer his or her resignation upon any change in
position, including retirement, from the position he or she held
when elected to the Board. When the Chief Executive Officer
resigns or retires, he or she is expected to resign from the Board
at that time.
6. The Governance Committee provides an annual assessment of the
Board's performance and of its contribution as a whole.
7. The Board annually reviews the company's long-term strategic and
business plans.
8. The independent directors meet annually to review the performance
of the Chief Executive Officer.
9. The Chief Executive Officer provides an annual report on
succession planning and management development to the Management
Development and Compensation Committee.
10. Board members have complete access to Raytheon management, and the
Board encourages the Chief Executive Officer to bring members of
management to Board meetings from time to time to provide
management insight into matters being discussed by the Board which
involve the manager.
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COMPENSATION OF DIRECTORS
Each non-employee Director receives an annual retainer of $40,000.
The Chairman of each Board committee receives an additional annual retainer of
$5,000. Non-employee Directors also receive a fee of $1,000 for attendance at
each meeting of the Board and each committee meeting, other than telephonic
meetings and committee meetings of less than two hours' duration held on the day
of full Board meetings, for which the fee is $500. Pursuant to the company's
Deferral Plan for Directors, Directors may defer receipt of their quarterly
retainer and/or meeting fees until retirement from the Board.
Non-employee Directors also receive an annual grant of Raytheon
shares equal in value to the annual retainer. Grants are made under the
Nonemployee Directors Restricted Stock Plan. All grants of restricted shares are
held in the custody of the company until restrictions lapse on the date of the
annual meeting three years after the award. The Directors receive dividends on
these shares and are entitled to vote these shares.
In 1996, the company terminated its Directors' Pension Plan. Prior
to termination, Directors of the company who were not eligible for benefits
under any company-sponsored pension plan were entitled to receive a monthly cash
benefit for up to fifteen years after their retirement from the Board. The Board
voted to terminate this plan and to convert the then-present value of each
Director's cash benefit into shares of common stock. These shares, and all
accrued dividends, are held in trust for the benefit of the individual Director
with delivery deferred until retirement or other completion of service as a
Director.
The company also maintains a general insurance policy which provides
nonemployee Directors with travel accident insurance when on company business.
During 2000, Warren B. Rudman was paid $72,000 for performing
certain additional services for the company beyond the scope of his service on
the Board of Directors pursuant to a consulting agreement between Senator Rudman
and the company. The consulting agreement between the company and Senator Rudman
expired in August 2000 and was not renewed.
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY
STATEMENT INTO ANY OTHER FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
REPORT OF THE AUDIT COMMITTEE
The functions of the Audit Committee are focused on three areas:
* the adequacy of the company's internal controls and financial
reporting process and the reliability of the company's financial
statements.
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* the independence and performance of the company's internal
auditors and independent auditors.
* the company's compliance with regulatory requirements.
We meet with management periodically to consider the adequacy of the
company's internal controls and the objectivity of its financial reporting. We
discuss these matters with the company's independent auditors and with
appropriate company financial personnel and internal auditors.
As needed, we meet privately with both the independent auditors and the
internal auditors, each of whom has unrestricted access to the committee. We
also recommend to the Board the appointment of the independent auditors and
review periodically their performance and independence from management.
The Directors who serve on the committee are all "Independent" for
purposes of the New York Stock Exchange listing standards. That is, the Board of
Directors has determined that none of us has a relationship to Raytheon that may
interfere with our independence from Raytheon and its management.
The Board has adopted a written charter setting out the functions the
committee is to perform. You can find a copy of that charter attached to this
proxy statement as Appendix A.
Management has primary responsibility for the company's financial
statements and the overall reporting process, including the company's system of
internal controls.
The independent auditors audit the annual financial statements prepared by
management, express an opinion as to whether those financial statements fairly
present the financial position, results of operations and cash flows of the
company in conformity with generally accepted accounting principles and discuss
with us any issues they believe should be raised with us.
This year, we reviewed the company's audited financial statements and met
with both management and PricewaterhouseCoopers, the company's independent
auditors, to discuss those financial statements. Management has represented to
us that the financial statements were prepared in accordance with generally
accepted accounting principles.
We have received from and discussed with PricewaterhouseCoopers the
written disclosure as required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees). These items relate to that
firm's independence from the company. We also discussed with
PricewaterhouseCoopers any matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees).
Based on these reviews and discussions, we recommended to the Board that
the company's audited financial statements be included in the company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000.
- 11 -
Management has advised us that for the year ended December 31, 2000, the
company paid fees to PricewaterhouseCoopers for services in the following
categories:
Audit Fees $3 million
Financial Information Systems $23 million
Design and Implementation Fees(1)
All Other Fees(2) $25 million
- ------
(1) The company selected PricewaterhouseCoopers Consulting in 1999 to assist
the company in its implementation of SAP.
(2) All Other Fees includes fees for the following routine audit and tax
services:
Foreign statutory audits $6 million
and carve-out audits in
support of divestitures
Tax advice and tax return assistance $7 million
Internal audit services $3 million
We have considered and determined that the provision of the non-audit
services noted in the foregoing table is compatible with maintaining
PricewaterhouseCoopers' independence.
MEMBERS OF THE AUDIT COMMITTEE
L. Dennis Kozlowski, Chairman, Frederic M. Poses, William R. Spivey
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes whose terms
expire at successive annual meetings.
We have nominated John M. Deutch, Henrique de Campos Meirelles,
Dennis J. Picard and William R. Spivey, the Directors in the class of Directors
whose terms expire at the annual meeting, for three-year terms that will expire
at the annual meeting in the year 2004.
We have also nominated Michael C. Ruettgers for a three year term
that will expire at the annual meeting in the year 2004 and Frederic M. Poses
for a two year term that will expire at the annual meeting in the year 2003. The
Board of Directors elected Mr. Ruettgers and Mr. Poses to the Board last year in
order to fill vacancies on the Board. In accordance with Raytheon's Certificate
of Incorporation, new Directors elected by the Board must stand for elec-
- 12 -
tion at the next year's annual meeting. After the 2000 annual meeting two of the
three classes of Directors will have five members and the remaining class will
have four members.
We have included below the principal occupation and other
information about the nominees and the Directors whose terms of office will
continue after the annual meeting.
The persons named in the proxy card intend to vote for the election
of each of the nominees unless you indicate that your vote should be withheld.
If elected, the nominees will continue in office until their successors have
been duly elected and qualified, or until the earlier of their death,
resignation or retirement. We expect each of the nominees to be able to serve if
elected. If, on account of death or unforeseen contingencies, any of these
persons is unavailable for election, the proxies will be voted for a substitute
nominee designated by the Board of Directors.
NOMINEES FOR THE CLASS OF DIRECTORS WHOSE TERMS EXPIRE IN 2004
JOHN M. DEUTCH
Director of the company since 1998. Institute Professor at the
Massachusetts Institute of Technology since 1990. Mr. Deutch previously served
as Director of the United States Central Intelligence Agency (1995-1996); Deputy
Secretary of Defense (1994-1995); Undersecretary of Defense, Acquisition and
Technology, (1993-1994); and Provost (1985-1990) and Chairman of the Department
of Chemistry (1982-1985) of the Massachusetts Institute of Technology. Mr.
Deutch has also served as Director of Energy Research and Undersecretary of the
U.S. Department of Energy. Director: ARIAD Pharmaceuticals, Inc.; Citigroup
Inc.; CMS Energy Corporation; Cummins Engine Company, Inc.; Schlumberger Ltd.
Affiliations: French American Foundation; Council on Foreign Relations;
Resources for the Future; Urban Institute. Age 62.
HENRIQUE DE CAMPOS MEIRELLES
Director of the company since 1998. President of Corporate and
Global Banking, FleetBoston Financial Corporation since October 1999. Prior
thereto, Mr. Meirelles served as President and Chief Operating Officer of
BankBoston Corporation and BankBoston N.A. from 1996; Regional Manager of Brazil
for both BankBoston Corporation and BankBoston N.A. from 1994; and General
Manager of Brazil for the Bank from 1984 to 1994. Director: FleetBoston
Financial Corporation; Accion International; Public Broadcasting System of Sao
Paolo, Brazil. Age 55.
DENNIS J. PICARD
Director of the company or a predecessor company since 1989.
Chairman Emeritus and Retired Chairman of the Board and Chief Executive Officer
of the company. Prior to his retirement, Mr. Picard served as Chairman of the
Board of the company from December 1998 through July 1999; Chairman of the Board
and Chief Executive Officer of the company from March 1991 to December 1998;
President from 1989; and Senior Vice President, General Manager of the Missile
Systems Division from 1983. Director: State Street Corporation. Age 68.
- 13 -
MICHAEL C. RUETTGERS
Director of the company since 2000. Executive Chairman of EMC
Corporation since January 2001. Prior thereto, Mr. Reuttgers served as Chief
Executive Officer of EMC since January 1992 and President of EMC from October
1989 to January 2000. He also served as Executive Vice President, Operations of
EMC from July 1988 to October 1989 and Chief Operating Officer from October 1989
to January 1992. Director: EMC Corporation; PerkinElmer, Inc. Age 58.
WILLIAM R. SPIVEY
Director of the company since 1999. President and Chief Executive
Officer of Luminent, Inc. since July 2000. Prior thereto, Mr. Spivey served as
Group President, Network Products Group, Lucent Technologies Inc. from October
1997; Vice President, Systems & Components Group, AT&T Corporation from 1994;
and Group Vice President and President, Tektronix Development Company,
Tektronix, Inc. from 1991. Director: Luminent, Inc; Lyondell Chemical Co.;
Novellus Systems, Inc. Age 54.
NOMINEE FOR THE CLASS OF DIRECTORS WHOSE TERMS EXPIRE IN 2003
FREDERIC M. POSES
Director of the company since 2000. Chairman and Chief Executive
Officer of American Standard Companies, Inc. since January 2000. Prior thereto,
beginning in 1998, Mr. Poses was President and Chief Operating Officer of
AlliedSignal, Inc., where he had spent his entire 30-year career, starting as a
financial analyst and serving in various capacities including President of the
Engineered Materials business beginning in April 1988. Director: American
Standard Companies, Inc. Age 58.
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
BARBARA M. BARRETT
Director of the company since 1999. Term expires 2002. President of
Triple Creek Guest Ranch since 1993. Ms. Barrett has practiced corporate and
international law since 1979. In 1999, Ms. Barrett served as a Fellow at the
Institute of Politics at Harvard University where she now serves as a member of
the Senior Advisory Board. In 1997 and 1998, Ms. Barrett served as President
and Chief Executive Officer of the American Management Association. Ms. Barrett
served as Deputy Administrator of the Federal Aviation Administration
(1988-1989) and Vice Chairman of the Civil Aeronautics Board (1982-1985).
Trustee: Thunderbird, The American Graduate School of International Management.
Director: Exponent, Inc.; Valley Bank of Arizona. Age 50.
DANIEL P. BURNHAM
Director of the company since 1998. Term expires 2002. Chairman
and Chief Executive Officer of the company since July 31, 1999. Prior thereto,
Mr. Burnham served as President and Chief Executive Officer of the company from
December 1, 1998 to July 31, 1999
- 14 -
and as President and Chief Operating Officer from July 1, 1998 to December 1,
1998. Prior to joining the company, Mr. Burnham was Vice Chairman of
AlliedSignal, Inc. from October 1997 and President of AlliedSignal Aerospace
and an Executive Vice President of AlliedSignal, Inc. from 1992 until becoming
Vice Chairman in 1997. Director: FleetBoston Corporation. Age 54.
JOHN R. GALVIN
Director of the company or a predecessor company since 1996. Term
expires 2002. Retired Dean of the Fletcher School of Law and Diplomacy, Tufts
University. Prior to his retirement, General Galvin was Dean of the Fletcher
School from 1995 to 2000. General Galvin retired from the U.S. Army in 1992
after a 38-year career which included positions as NATO Supreme Allied Commander
Europe and Commander-in-Chief, U.S. European Command. From 1992 to 1994,
General Galvin served as the Olin Distinguished Professor of National Security
at the U.S. Military Academy at West Point. In 1994-1995, he was a visiting
professor at the Mershon Center, The Ohio State University. Director or
Trustee: the Seligman Group of Investment Companies. Trustee: Institute for
Defense Analyses. Governor: Center for Creative Leadership. Age 71.
ALFRED M. ZEIEN
Director of the company or a predecessor company since 1992. Term
expires 2002. Retired Chairman of the Board and Chief Executive Officer of The
Gillette Company. Prior to his retirement in 1999, Mr. Zeien served as Chairman
of the Board and Chief Executive Officer of Gillette since 1991. Director: EMC
Corporation; The Gillette Company; Polaroid Corporation; Massachusetts Mutual
Life Insurance Company. Age 71.
FERDINAND COLLOREDO-MANSFELD
Director of the company or a predecessor company since 1987. Term
expires 2003. Chairman and Chief Executive Officer of Cabot Industrial Trust
since January 1998. Prior thereto, Mr. Colloredo-Mansfeld served as Chairman and
Chief Executive Officer of Cabot Partners L.P. (predecessor of Cabot Industrial
Trust) since October 1990 and as Chairman and Chief Executive Officer of Cabot,
Cabot and Forbes Co. from 1986 to 1990. Trustee: Massachusetts General
Hospital. Age 61.
THOMAS E. EVERHART
Director of the company since 1997. Term expires 2003. President
Emeritus, California Institute of Technology since 1997. Prior thereto, Mr.
Everhart served as President and Professor of Electrical Engineering and Applied
Physics, California Institute of Technology since 1987. Director: Agilent
Technologies; General Motors Corporation; Hughes Electronics Corporation;
Saint-Gobain Corporation; Reveo, Inc. Trustee: California Institute of
Technology. Overseer: Harvard University. Affiliations: Electric Power Research
Institute; Corporation for National Research Initiatives. Age 69.
- 15 -
L. DENNIS KOZLOWSKI
Director of the company or a predecessor company since 1995. Term
expires 2003. Chairman of the Board and Chief Executive Officer of Tyco
International Ltd. since 1992. Prior thereto, Mr. Kozlowski served as President
of Tyco from 1989. Director: Tyco International Ltd.; Applied Power, Inc.;
U.S. Office Products. Age 54.
WARREN B. RUDMAN
Director of the company or a predecessor company since 1993. Term
expires 2003. Partner in the law firm of Paul, Weiss, Rifkind, Wharton &
Garrison since January 1992. Prior thereto, Mr. Rudman served as a United States
Senator from 1980 through January 1992. Director: Allied Waste Industries,
Inc.; American Stock Exchange, Inc.; Boston Scientific Corporation; The Chubb
Corporation; Collins & Aikman Corporation; several mutual funds managed by
Dreyfus Corporation. Age 70.
STOCK OWNERSHIP
FIVE PERCENT STOCKHOLDERS
The following table lists those persons or groups known to the
company to be the beneficial owner of more than 5% of the company's Class A
shares or Class B shares as of December 31, 2000:
PERCENT
CLASS A PERCENT OF CLASS B OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS SHARES CLASS
- ------------------------------------ --------- ---------- -------- --------
Franklin Resources, Inc., Charles 11,505,519 11.4%
B. Johnson, Rupert H. Johnson, Jr.
and Templeton Global Advisors
Limited (1)
Capital Group International, Inc. 10,958,670 10.9%
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Capital Research and 8,993,270 8.9%
Management Company
333 South Hope Street
Los Angeles, CA 90071
- ------
(1) Franklin Resources, Inc., Charles B. Johnson and Rupert H. Johnson, Jr.
each has a business address of 777 Mariners Island Boulevard, San Mateo, CA
94404. Templeton Global Advisors Limited has a business address of Lyford Cay,
P.O. Box N-7759, Nassau, Bahamas.
- 16 -
MANAGEMENT AND DIRECTORS
The following table contains information regarding the beneficial
ownership of Raytheon's Class A shares and Class B shares as of January 1, 2001
for: (a) each Director and nominee for Director, (b) the four most highly
compensated officers who are not also Directors and (c) the Directors, nominees
and all executive officers as a group.
NUMBER OF CLASS B NUMBER OF CLASS A
SHARES AND NATURE OF SHARES AND NATURE OF
BENEFICIAL OWNERSHIP(1) BENEFICIAL OWNERSHIP(1)
NAME ----------------------- ------------------------
(a)
Daniel P. Burnham.............. 1,024,329(2) 20,000
Barbara M. Barrett............. 2,000(4) 3,000
Ferdinand Colloredo-Mansfeld... 14,729(3),(4) 0
John M. Deutch................. 3,230(4) 2,500
Thomas E. Everhart............. 2,730(4) 1,525
John R. Galvin................. 8,678(3),(4),(5) 0
L. Dennis Kozlowski............ 13,263(3),(4) 0
Henrique de Campos Meirelles... 2,904(4) 0
Dennis J. Picard............... 1,603,636(4),(6) 0
Frederic M. Poses.............. 4,000 3,425
Warren B. Rudman............... 8,863(3),(4),(7) 0
Michael C. Ruettgers........... 12,000 0
William R. Spivey.............. 12,000(4) 0
Alfred M. Zeien................ 10,263(3),(4) 0
(b)
Franklyn A. Caine.............. 562,045(8) 0
Francis S. Marchilena.......... 187,487(9) 0
William H. Swanson............. 652,811(10) 0
Hansel E. Tookes, II........... 226,438(11) 1,000
(c)
All Directors, nominees for 6,049,528(12),(13) 35,310(14)
Director and executive officers
as a group (25 persons)..........
- --------------------------------------------------------------------------------
(1) No individual Director or nominee for Director or named executive officer
beneficially owns 1% or more of the outstanding Class A shares or Class B
shares, nor do the Directors and executive officers as a group own more
than 1% of the outstanding Class A shares. The Directors and executive
officers as a group own approximately 2.5% of the outstanding Class B
shares.
(2) Does not include 276,622 restricted units awarded to Mr. Burnham under the
company's employee incentive compensation plans, over which he currently
has no voting or in-
-17-
vestment power. Upon vesting, the units will be settled on a one-for-one
basis in Class B shares. Includes 669,333 shares which Mr. Burnham has
the right to acquire upon the exercise of stock options; 100,254 shares
held in trust, over which he has voting power but no investment power;
and 4,742 shares held in the Raytheon Savings and Investment Plan and in
the Raytheon Excess Savings Plan.
(3) Includes 5,373 shares held in trust for the benefit of the individual
Director. Each Director has the power to vote the shares held for his or
her account. The shares were issued pursuant to the company's Deferral
Plan for Directors.
(4) Includes restricted stock issued under the company's Nonemployee
Directors Restricted Stock Plan: Ms. Barrett and Messrs. Picard and Spivey
- 2,000 shares each; Messrs. Colloredo-Mansfeld, Galvin, Kozlowski,
Rudman and Zeien - 2,890 shares each; Messrs. Deutch, Everhart and
Meirelles - 2,730 shares each.
(5) Excludes shares held by various mutual funds of the Seligman Group of
Investment Companies. As a Director or Trustee, Gen. Galvin shares
voting and investment power in these shares with other Seligman
Directors and Trustees. Gen. Galvin disclaims beneficial ownership of
all such shares.
(6) Includes 1,485,264 shares which Mr. Picard has the right to acquire upon
the exercise of stock options; 116,189 shares held in the Dennis J. Picard
Revocable Trust; and 183 shares held in the Raytheon Savings and
Investment Plan.
(7) Excludes shares held by any of the mutual funds of Dreyfus Corporation. As
a Director of several funds managed by Dreyfus Corporation, Sen. Rudman
shares voting and investment power in the shares held by such funds with
the other Directors of those funds and with the Directors of the Dreyfus
Corporation. Sen. Rudman disclaims beneficial ownership of all such
shares.
(8) Includes 390,000 shares which Mr. Caine has the right to acquire upon the
exercise of stock options and 172,000 restricted shares over which he has
voting power but no investment power.
(9) Includes 100,336 shares which Mr. Marchilena has the right to acquire upon
the exercise of stock options; 83,500 restricted shares over which he has
voting power but no investment power; and 2,031 shares held in the
Raytheon Savings and Investment Plan and in the Raytheon Excess Savings
Plan.
(10) Includes 477,533 shares which Mr. Swanson has the right to acquire upon
the exercise of stock options; 128,250 restricted shares over which he has
voting power but no investment power; and 3,583 shares held in the
Raytheon Savings and Investment Plan and in the Raytheon Excess Savings
Plan.
(11) Includes 107,333 shares which Mr. Tookes has the right to acquire upon the
exercise of stock options; 112,500 restricted shares over which he has
voting power but no invest-
-18-
ment power; and 1,798 shares held in the
Raytheon Savings and Investment Plan and in the Raytheon Excess Savings
Plan.
(12) Share ownership includes, in the case of certain officers, a minor number
of shares held by trusts or family members as to which beneficial
ownership is disclaimed.
(13) Includes 4,498,546 shares which individual members of the group have the
right to acquire upon the exercise of stock options; 881,890 restricted
shares over which individual members of the group have voting power but no
investment power; 167,638 shares held in trust and over which the
individual has voting power; and 29,271 shares held in the Raytheon
Savings and Investment Plan and in the Raytheon Excess Savings Plan.
(14) Includes 966 shares held in the Raytheon Savings and Investment Plan and
in the Raytheon Excess Savings Plan.
-19-
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------- ---------------------
OTHER AN-
NUAL RESTRICTED
NAME AND COMPENSA- STOCK/UNIT OP- ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) TION(2)($) AWARDS(3)($) TIONS(4)(#) COMPENSATION(5)($)
- ------------------ ---- --------- ---------- ----------- ------------ ----------- -----------------
Daniel P. Burnham 2000 $973,500 $1,750,000 $76,606 $5,281,2 629,000 $78,862
Chairman and Chief 1999 901,004 900,000 82,488 0 300,000 72,360
Executive Officer 1998 425,004(1) 1,500,000 0 21,873,871 250,000 286,395
William H. Swanson 2000 576,500 875,000 0 2,112,500 273,800 171,270
Executive Vice 1999 543,286 350,000 0 778,641 125,000 226,056
President 1998 479,940 800,000 0 0 100,000 193,158
and President -
Electronic Systems
Franklyn A. Caine 2000 495,000 575,000 0 3,168,750 335,000 2,415
Senior Vice President 1999 321,235(6) 400,000 0 606,375 250,000 990
and Chief Financial 1998
Officer
Hansel E. Tookes, II 2000 460,129 400,000 0 2,234,532 131,000 68,707
Executive Vice 1999 112,502(7) 450,000 0 682,500 90,000 261,858
President and 1998
Chairman and
CEO Raytheon
Aircraft Company
Francis S. Marchilena 2000 370,000 450,000 0 1,584,375 88,000 26,175
Executive Vice Pres- 1999 321,920 185,000 0 234,281 30,000 56,933
ident and President - 1998
Command, Control,
Communication and
Information Systems
- --------
(1) Reflects salary from July 1, 1998, Mr. Burnham's date of hire, through
December 31, 1998.
(2) The amount shown for Mr. Burnham includes imputed income of $32,554 for
personal use of company aircraft and $29,052 for personal use of a
company-leased automobile. Mr. Burnham is responsible for paying taxes on
these amounts.
(3) The amount shown is the value of the restricted stock or unit award on the
date of grant. The executive is not entitled to the cash amount shown in
the year the restricted stock or unit award is made. The award vests over
time and is subject to the executive remaining employed by the company.
Dividends are paid on the restricted stock shown and dividend equivalents
are paid on the restricted units.
During 2000, the named executives were awarded the following restricted
stock grants: Mr. Burnham - 250,000 shares; Mr. Swanson - 100,000 shares;
Mr. Caine - 150,000 shares; Mr. Tookes - 100,000 shares; and Mr. Marchilena
- 75,000 shares. Each award vests on the following schedule: one-third of
the award vests on the second anniversary of the award date; one-third
vests on the fourth anniversary of the award date; and the final one-third
vests on the sixth anniversary of the award date. During 2000, Mr. Tookes
was awarded an additional
-20-
5,000 shares of restricted stock. One-half of the award vests on the first
anniversary of the award date, and the remainder of the award vests on the
second anniversary of the award date.
Restricted stock grants awarded during 1999 to Mr. Swanson (28,250 shares),
Mr. Caine (22,000 shares) and Mr. Marchilena (8,500 shares) lapse in their
entirety on the second anniversary of the award date. During 1999 Mr.
Tookes was awarded a restricted stock grant of 15,000 shares. One-half of
the award vests on the first anniversary of the award date, and the
remainder of the award vests on the second anniversary of the award date.
Mr. Burnham's 1998 restricted unit award was intended to compensate him for
forfeitures he incurred in leaving his prior employer and consisted of a
total of 374,713 units. The units vest on a one-for-one basis in Class B
shares. A total of 98,091 shares have vested to date, and Mr. Burnham has
elected to defer receipt of the 98,091 shares until after his retirement.
The vesting schedule for the remaining units is as follows:
VESTING DATE NO. OF UNITS
------------ ------------
July 1, 2001............ 48,518
July 1, 2002............ 45,353
July 1, 2003............ 45,353
July 1, 2004............ 45,354
July 1, 2005............ 92,044
-------
276,622
The number and value, based on the closing price of the Class B shares on
December 29, 2000, of the aggregate restricted holdings of Messrs. Burnham,
Swanson, Caine, Tookes and Marchilena is as follows: Mr. Burnham --526,622
shares, $16,356,879; Mr. Swanson -- 128,250 shares, $3,983,445; Mr. Caine
-- 172,000 shares, $5,342,320; Mr. Tookes - 115,000 shares, $3,571,900; and
Mr. Marchilena - 83,500 shares, $2,593,510.
In accordance with the terms of the company's stock incentive plans, all
awards of restricted stock are made in the company's Class B shares.
Management is proposing to reclassify the company's Class A shares and
Class B shares into a single new class of common stock. Please review
management's proposal to reclassify the company's shares beginning on page
48 of this proxy statement.
(4) For 2000, the total number of stock options reported for each named
executive includes the following Long-Term Achievement Plan (LTAP)
performance-based options: Mr. Burnham - 179,000; Mr. Swanson - 86,300; Mr.
Caine - 60,000; Mr. Tookes - 56,000; and Mr. Marchilena - 43,000. Please
refer to the table immediately below entitled Option Grants in Last Fiscal
Year for a description of the performance features of the LTAP options.
In accordance with the terms of the company's stock incentive plans, all
stock options are made in the company's Class B shares. Management is
proposing to reclassify the company's Class A shares and Class B shares
into a single new class of common stock. Please
-21-
review management's proposal to reclassify the company's shares beginning
on page 48 of this proxy statement.
(5) For 2000, the amounts include: (a) the value of life insurance premiums
paid by the company (Mr. Burnham -- $3,122; Mr. Swanson -- $2,397; Mr.
Caine -- $1,615; Mr. Tookes - $32,917; and Mr. Marchilena - $3,176); (b)
company contributions of $563 for Mr. Tookes and $800 for each executive
other than Mr. Tookes under the company's Stock Ownership Plan; (c) company
contributions under the company's Savings and Investment Plan (Mr. Burnham
-- $6,200; Mr. Swanson -- $6,800; Mr. Caine -- $0; Mr. Tookes -- $6,346;
and Mr. Marchilena -- $6,800); and (d) company contributions under the
company's Excess Savings Plan (Mr. Burnham -- $68,740; Mr. Swanson --
$30,260; Mr. Caine - $0; Mr. Tookes -- $28,882; and Mr. Marchilena --
$15,400). In 1999, the company provided Mr. Swanson an interest-free loan
in the original principal amount of $1,000,000 to assist him in his
relocation from Washington, D.C. to California in connection with the
reorganization of the company's defense businesses. The loan is secured by
a mortgage on Mr. Swanson's home. The amount reported for Mr. Swanson
includes $75,000, representing the difference between the market rate for
such loans and the actual interest rate. In addition, the total amount
shown for Mr. Swanson includes relocation expenses of $41,026 and $14,987
in related tax reimbursement payments.
(6) Reflects salary from Mr. Caine's date of hire through December 31, 1999.
(7) Reflects salary from Mr. Tookes' date of hire through December 31, 1999.
-22-
OPTION GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS (1) VALUE
--------------------------------------------- ---------------------------
NO. OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME GRANTED (#)(2) IN FISCAL YEAR ($/SHARE)(3) DATE VALUE ($)(4)
------------------- -------------- --------------- ------------ ---------- --------------
Daniel P. Burnham.. 10,322 0.08% $19.375 2/24/2010 $43,662
439,678 3.50% $19.375 2/25/2010 $1,859,838
179,000 1.42% $19.375 2/25/2010 $506,570
William H. Swanson.. 10,322 0.08% $19.375 2/24/2010 $43,662
177,178 1.41% $19.375 2/25/2010 $749,463
86,300 0.69% $19.375 2/25/2010 $244,229
Franklyn A. Caine.. 200,000 1.59% $19.500 1/25/2010 $846,000
10,322 0.08% $19.375 2/24/2010 $43,662
64,678 0.51% $19.375 2/25/2010 $273,588
60,000 0.48% $19.375 2/25/2010 $169,800
Hansel E. Tookes II.. 10,322 0.08% $19.375 2/24/2010 $43,662
64,678 0.51% $19.375 2/25/2010 $273,588
56,000 0.45% $19.375 2/25/2010 $158,480
Francis S. Marchilena 10,322 0.08% $19.375 2/24/2010 $43,662
34,678 0.28% $19.375 2/25/2010 $146,688
43,000 0.34% $19.375 2/25/2010 $121,690
- ------------
(1) The table contains three separate lines for each individual other than Mr.
Caine. The first line represents the grant of incentive stock options. The
second line represents the grant of nonqualified stock options. The third
line represents Long-Term Achievement Plan (LTAP) nonqualified options. In
Mr. Caine's case, the first and third lines represent the grant of
nonqualified stock options; the second line represents the grant of
incentive stock options; and the fourth line represents LTAP nonqualified
options.
(2) One-third of the total incentive and nonqualified stock options becomes
exercisable on each of the first, second, and third anniversaries of the
grant date. Mr. Caine's grant of 200,000 shares becomes fully exercisable
on the first anniversary of the grant date.
The LTAP options are performance-based options, with exercisability tied to
stock price appreciation. Specifically, the LTAP options become exercisable
in three equal installments based on appreciation in the price of the
company's Class B shares over the $19.375 price on the date of grant. The
first installment vested on August 25, 2000 after the Class B shares
achieved a price of $23.25, or a 20% appreciation in value over the grant
date price, and sustained that level for a period of 20 trading days. The
second installment vested on October 30, 2000 after the Class B shares
achieved a price of $27.90, or a further 20% appreciation in value, and
sustained that level for a period of 20 trading days. The final installment
will vest on the earlier of the date the Class B shares have achieved a
price of $33.48, or a further 20%
-23-
appreciation in value, and sustained that level for a period of 20 trading
days or the sixth anniversary of the grant date.
(3) Fair market value of underlying shares on the date of grant.
(4) The ultimate values of the options will depend on the future market price
of the Class B shares which cannot be forecast with reasonable accuracy.
The actual value, if any, an optionee will realize upon exercise of an
option will depend on the excess of the market value of the Class B shares
over the exercise price on the date the option is exercised. Management is
proposing to reclassify the company's Class A shares and Class B shares
into a single new class of common stock. Please review management's
proposal to reclassify the company's shares beginning at page 48 of this
proxy statement.
The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options reflected in the table (other than the LTAP options) include
the following: an exercise price equal to the fair market value of the
underlying stock on the date of grant ($19.375 for all grants shown other
than the 200,000 shares granted to Mr. Caine at $19.50); an option term of
10 years; an interest rate of 6.69% that represents the interest rate on a
U.S. Treasury security on the date of grant with a maturity date
corresponding to that of the option term; volatility of 30%; an assumed
dividend yield of 4.13%; and reductions of approximately 16.5% to reflect
the probability of forfeiture due to termination prior to vesting and to
the shortened exercise period on the vested options due to termination. For
LTAP options the factors are $19.375, 10 years, 6.71%, 30%, 4.13%, and 54%,
respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF IN-THE
OPTIONS AT MONEY OPTIONS
SHARES FISCAL AT FISCAL YEAR
ACQUIRED ON YEAR END (#) END ($)
EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) (1) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
- ------------------------- -------- ------------- ------------- --------------------
Daniel P. Burnham.. None $ 0 519,333/659,667 $1,394,406/5,955,459
William H. Swanson. 6,612 42,668 415,033/278,767 1,075,808/2,527,080
Franklyn A. Caine.. None 0 365,000/220,000 2,779,400/1,110,075
Hansel E. Tookes II.. None 0 82,333/138,667 436,236/1,094,499
Francis S. Marchilena.. None 0 85,366/74,334 347,077/693,318
- ---------------
(1) Based on the $31.06 closing price per share of the company's Class B shares
on December 29, 2000.
-24-
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Management Development and Compensation Committee of the Board
of Directors consists of Barbara M. Barrett, Ferdinand Colloredo-Mansfeld, John
R. Galvin, Warren B. Rudman, Michael C. Ruettgers and Alfred M. Zeien. During
2000, the company retained the law firm of Paul, Weiss, Rifkind, Wharton &
Garrison for various legal services. Warren B. Rudman is a member of this firm.
Senator Rudman also acted as consultant on behalf of the company through August
2000.
THE FOLLOWING REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION
COMMITTEE AND THE PERFORMANCE GRAPH SHALL NOT BE DEEMED INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY STATEMENT INTO ANY
OTHER FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE
ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Management Development and Compensation Committee develops the
company's executive compensation programs. We then review those programs with
the full Board of Directors. We believe that these programs align executive
compensation with the company's business strategy and management initiatives and
are intended to attract, retain, motivate and reward executive leadership of a
caliber and level of experience necessary to achieve the overall business
objectives of the company. We support an integrated, performance-oriented
compensation program that balances short- and long-term objectives to enhance
shareholder value and that places company executives in a responsible
competitive range of total compensation considering the magnitude of business
operations, strategic accomplishments, and company performance.
We make recommendations to the Board of Directors with respect to
base salary and annual incentive awards, and our Options Subcommittee grants
stock options and restricted stock/unit awards. We work closely with an
independent compensation consultant, which provides information regarding
current industry and marketplace compensation practices and provides analysis of
individual compensation compared to the external market. Raytheon's executive
compensation program is designed to increase the total portion of risk-based
cash and stock incentives at progressively higher levels of leadership.
Individual compensation awards are established based upon the
contribution the executive has made to attain the company's short-term and
strategic performance objectives, as well as the executive's anticipated future
contribution. We review performance in four areas specifically, financial,
operational, Six Sigma and people. Further, we take into consideration the
attainment of both operational short-term and enterprise wide long-term
objectives of the company that may not be reflected in the current period's
earnings and stock performance.
The company's executive compensation programs consist primarily of
the following integrated components:
-25-
BASE SALARY -- which is designed to compensate executives
competitively within the industry and competitive marketplace. When establishing
base rates of pay for executives, the Committee considers marketplace data for
comparable positions and the relative performance and contribution of each
executive to the business.
ANNUAL INCENTIVE AWARDS -- which provide a direct link between
executive compensation and the total company's performance. Annual awards take
into account the financial and operational performance of each business.
Consideration is given to strategic acquisitions, which complement and add value
to the company's core businesses and to the successful divestiture of non-core
businesses. Executive performance is also assessed against standards of ethical
business conduct, leadership competencies, Six Sigma and people-related
initiatives.
LONG-TERM INCENTIVES -- which consist of stock options and
restricted stock and restricted unit awards that link management decision-making
with the company's strategic business plan and long-term company performance.
These awards align the executive's interest with those of the stockholders.
During 2000, 13.8% of eligible exempt employees received stock option grants.
This represents a broader level of participation than among the company's
compensation peer groups.
EXECUTIVE COMPENSATION
BASE SALARY. Base salary levels for the Chief Executive Officer and
other executive officers of the company are reviewed by us and approved annually
to ensure competitiveness. Our policy has been and continues to be to maintain
base salaries at competitive levels with a peer group established for
compensation comparisons. The compensation peer group includes industry
competitors as well as other large corporations.
Each year we review a competitive analysis prepared by our
independent compensation consultant. Based on this review and the individual
performance of each executive, we recommend base salary increases, if
appropriate.
ANNUAL INCENTIVES. All executive officers, including the CEO,
participate in a Results Based Incentive Plan, which is designed to focus
management attention and effort on the attainment of pre-established performance
metrics. Specific performance metrics and weightings were established at the
corporate, business, and business unit levels early in 2000 encompassing
revenue, operating cash flow, bookings, net sales, operating profit, Six Sigma,
and people initiatives.
Individual awards under the company's Results Based Incentive Plan
reflect an executive's contribution to the company's achievement of established
performance goals, plus the successful management of human resources and the
furtherance of ethical business behavior and leadership competencies. In the
case of operating executives, the primary performance criteria are the financial
performance of the executive's business and the performance against stated
operational objectives in each unit's business plan. In the case of senior staff
executives, the primary criterion is the effective performance of the staff
function in support of strategic operating objectives as well as corporate wide
financial metrics. In every case, consideration is given
-26-
to the executive's contribution to the overall management of the company and
specific people based initiatives.
Officers listed in the Summary Compensation Table received incentive
awards based on our review of their competitive marketplace position and their
accomplishment of individual performance objectives. Based upon the analysis of
our independent compensation consultant, individual incentive target awards were
established for the CEO and each executive leader. These targets were based on a
competitive level of annual incentive compensation received by executives
holding comparable positions in the company's compensation peer group. In years
where we deem that exceptional performance has been rendered by the executive,
incentive awards above the median of the peer group may be awarded.
LONG-TERM INCENTIVES. Stock option grants are the company's
principal vehicle for long-term compensation. The company issues options at fair
market value at the date of grant, and the executive only receives compensation
from the grant if the stock appreciates in value. Similar to the process used in
making annual base salary recommendations and results based incentive awards,
option awards are based upon current industry and marketplace compensation data
as presented by our independent compensation consultant. Award recommendations
are made on the basis of an executive's level of responsibility, value to the
organization, contribution to the overall management of the company and, as
appropriate, the organization's performance or effective performance of the
staff function. The size of each executive's award is determined by considering
norms for comparable positions in the industry and marketplace. Equitable
distribution within the company is also considered. The awards granted to the
executives listed in the Summary Compensation Table are consistent with awards
granted for comparable positions in the company's compensation peer group.
We believe that granting stock options encourages executive officers
to manage the company from the perspective of a stockholder with an equity stake
in the business. As the value of the company increases over time, the value of
the shares of stock underlying the options granted to each of the executive
officers increases, providing a strong incentive for executive officers to
enhance stockholder value over time. Participation in the option program is not
limited to executive officers, but extends to a broad range of key employees of
the company.
Restricted stock awards are made for the purpose of attracting
outstanding candidates in the marketplace and for the long-term retention of key
executives. Awards are subject to restrictions for an extended period of time
after the award is made, and thus the executive cannot sell the stock until the
restriction expires. We believe that the award of restricted stock further
encourages executive officers to manage the company from the perspective of an
owner with an equity stake in the business. In addition, restricted stock awards
serve as a strong device for retaining leaders, since a leader who leaves the
company forfeits the restricted portion of the award.
The Long-Term Achievement Plan was established in 1999 to focus
senior leadership on the attainment of growth in the appreciation of the value
of Raytheon stock. The current plan awards performance in this area through the
use of performance based options. Specifically, when the price of Raytheon's
Class B shares reaches the predefined growth level (20% compounded) and is
sustained for a period of 20 trading days, one third of the options vest.
-27-
The second third would become exercisable upon attaining an additional twenty
percent growth with the final third becoming exercisable after the attainment of
an additional twenty percent growth in the price of Raytheon's Class B shares.
All options automatically vest at the end of six years and option awards
terminate after ten years, if not exercised.
CEO COMPENSATION
The compensation of Raytheon's CEO and other senior executives has
historically been based on two factors -- performance and comparability.
BASE SALARY. The current base salary of Daniel P. Burnham was
established after reviewing his performance and a competitive analysis
provided by our independent compensation consultant. The salary Mr. Burnham
receives falls below the 50th percentile of the compensation peer group.
ANNUAL INCENTIVE AWARD. In reviewing the CEO's total compensation
package, we gave consideration to a number of key factors, including the
company's financial and operational performance, Raytheon Six Sigma initiatives
and people metrics for the year as well as competitive marketplace data.
We noted that cash targets were exceeded, earnings per share targets
were met, backlog for Raytheon products and services was at a record high and
operating profit was on target. Additionally, targets involving people and Six
Sigma initiatives were met or exceeded. Further, focus has been paid to our core
businesses while the company continues to divest itself of non-core operations.
We took these factors into account and awarded Mr. Burnham a higher incentive
award for 2000.
Mr. Burnham's annual results based incentive compensation, when
combined with his base salary, provides for total cash compensation below the
average of the compensation peer group.
LONG-TERM INCENTIVES
STOCK OPTIONS. We reviewed industry and marketplace analyses,
developed and presented by our independent consultant, of stock option awards
for comparable positions. Based on those comparisons, we chose to award the CEO
an annual option grant and a restricted stock award that has restrictions that
lapse over a six year period. In addition, as described above, we awarded the
CEO performance based stock options under the Long-Term Achievement Plan.
OTHER COMPENSATION. The company's compensation programs also include
certain other items, which may include (i) life insurance coverage, (ii) an
allocation of company stock under the Raytheon Stock Ownership Plan, (iii)
matching contributions in company stock under the Raytheon Savings and
Investment Plan and Excess Savings Plan, and (iv) other miscellaneous
compensation.
Raytheon's executive compensation plans have been designed to
attract and retain outstanding management talent, by providing a broad program
of competitive, equitable, and
-28-
performance-based compensation, and to align executive rewards with the
long-term interest of shareholders. To the extent consistent with these
objectives, we award executive compensation that is fully deductible by the
company under the Internal Revenue Code.
MEMBERS OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
Barbara M. Barrett, Ferdinand Colloredo-Mansfeld, John R. Galvin,
Warren B. Rudman, Chairman, Michael C. Ruettgers, Alfred M. Zeien
PERFORMANCE GRAPH
The following graph provides an indicator of total stockholder
returns for Raytheon as compared with the S&P 500 Stock Index and the S&P
Aerospace/Defense Index, weighted by market value at each measurement point.
The graph covers the period December 18, 1997, the date that
Raytheon's Class A and Class B shares first began trading on the New York Stock
Exchange following the merger of Raytheon Company and the defense electronics
business of Hughes Electronics Corporation, through December 31, 2000.
12/18/97 12/31/97 12/31/98 12/31/99 12/31/00
-------- -------- -------- -------- --------
Class B Shares $100.00 $ 90.54 $ 96.84 $ 49.19 $ 59.50
Class A Shares $100.00 $ 90.55 $ 96.19 $ 47.05 $ 56.92
S&P Aerospace/Defense $100.00 $100.00 $ 76.66 $ 74.68 $117.74
S&P 500 $100.00 $100.00 $128.58 $155.64 $141.46
Assumes $100 invested on December 18, 1997 in Raytheon's Class A and
Class B shares, the S&P 500 and the S&P Aerospace/Defense Index. Assumes the
reinvestment of dividends.
PENSION PLANS
The company has a non-contributory pension plan which covers all of
its executive officers and all of its salaried employees, other than those at
certain subsidiaries and former Texas Instruments, E-Systems and Hughes Aircraft
employees who are covered by separate plans. Pension benefits under the plan are
based on final average compensation. The plan is company-funded and since 1981
does not require or permit employee contributions. Benefits are computed based
on the following formula and are reduced by the employee's estimated primary
social security benefit:
1.8% of final average compensation for each of the first 20 years of
benefit service; and
1.2% of final average compensation for each year of benefit service
thereafter.
-29-
Final average compensation is based on the 60 highest consecutive
months of compensation in the final 120 months of employment and includes base
salary and annual bonus awards. Federal laws place limitations on compensation
amounts that may be included under the plan. In 2000, up to $170,000 in eligible
base salary and annual bonus could be included in the calculation of pensions
under the plan. The normal retirement age under the plan is 65; however,
employees who are at least 55 with at least 10 years of service can retire with
reduced benefits. There is no reduction for employees who retire at age 60 or
older with at least 10 years of service.
The standard form of benefit for married participants is a 50% joint
and survivor annuity. The standard form of benefit for single participants is a
single life annuity. Both married and single participants can elect other
optional forms of payment, including a 10-year certain and continuous benefit
and joint and survivor annuities of 50%, 66-2/3%, 75% and 100%.
The following table shows the estimated annual retirement benefits
in straight life annuity amounts payable to salaried employees on normal
retirement at age 65 under the plan and the company's excess benefit plan, a
separate, unfunded plan. The excess benefit plan provides benefits that would
otherwise be denied participants due to certain Internal Revenue Code
limitations on qualified benefit plans.
Annual Estimated Benefits Under The Pension Plan
And Excess Benefit Plan
Years of Credited Service at Age 65
---------------------------------------------------------------
Final Average
Compensation 15 Years 20 Years 30 Years 40 Years
- ------------ -------- -------- -------- --------
$ 200,000 $ 54,000 $ 72,000 $ 96,000 $ 120,000
400,000 108,000 144,000 192,000 240,000
600,000 162,000 216,000 288,000 360,000
800,000 216,000 288,000 384,000 480,000
1,000,000 270,000 360,000 480,000 600,000
1,200,000 324,000 432,000 576,000 720,000
1,400,000 378,000 504,000 672,000 840,000
1,600,000 432,000 576,000 768,000 960,000
1,800,000 486,000 648,000 864,000 1,080,000
2,000,000 540,000 720,000 960,000 1,200,000
2,200,000 594,000 792,000 1,056,000 1,320,000
2,400,000 648,000 864,000 1,152,000 1,440,000
2,600,000 702,000 936,000 1,248,000 1,560,000
2,800,000 756,000 1,008,000 1,344,000 1,680,000
3,000,000 810,000 1,080,000 1,440,000 1,800,000
The years of credited service as of December 31, 2000 for each of
the named executive officers were as follows: Daniel P. Burnham -- 1.5 years;
Franklyn A. Caine -- 26.8
-30-
years; Francis S. Marchilena -- 32.5 years; Hansel E. Tookes, II -- 22.3 years;
and William H. Swanson -- 27.3 years. Final average compensation for the named
executive officers is the same as their salary and bonus shown in the Summary
Compensation Table on page 20.
The years of credited service shown above for Mr. Caine and Mr.
Tookes include additional years of service granted to each of them as
inducements for them to join the company. Mr. Caine was granted an additional 26
years, and Mr. Tookes was granted an additional 22 years. As a further
inducement, Mr. Tookes was granted eligibility to receive reduced benefits upon
early retirement after 5 years of credited service with the company. Upon
retirement, the total pensions for Mr. Caine and Mr. Tookes will be calculated
based on their respective combined service with the company and with their
respective previous employers, offset by any retirement benefits they may
receive from their previous employers and from Social Security.
Mr. Burnham's total pension is fixed at 50% of his average covered
compensation for the five consecutive years of employment with the company
yielding the highest average, subject to offsets for his estimated primary
social security benefit as well as pension benefits received from any previous
employer. If Mr. Burnham continues in his current position at his current
compensation level, and he retires at the normal retirement age of 65, the
estimated annual pension benefits payable to him under the plan and the excess
benefit plan would be $1,362,000. This amount does not reflect any offset for
pension benefits payable by prior employers.
EXECUTIVE EMPLOYMENT AGREEMENTS
MR. BURNHAM. The company hired Daniel P. Burnham in July 1998 as
President and Chief Operating Officer. In order to encourage Mr. Burnham to
leave his position as Vice Chairman of AlliedSignal, Inc., the company entered
into an employment agreement with Mr. Burnham. The agreement provides that the
company will pay Mr. Burnham a base salary of at least $850,000 per year and an
annual incentive bonus, based on performance, targeted at 200% of his base
salary. In order to replicate the value and vesting schedule of the compensation
that Mr. Burnham would forego by joining Raytheon, the company awarded Mr.
Burnham 374,713 restricted stock units that settle on a one-for-one basis in
Class B shares on specified vesting dates. To date, 98,091 shares have vested
and Mr. Burnham has elected to defer receipt of the shares until after his
retirement. The company also granted Mr. Burnham an option to purchase 250,000
Class B shares. The option is fully vested.
The company also entered into a severance agreement with Mr.
Burnham. If the company terminates Mr. Burnham's employment or demotes him for
any reason other than "cause" or "disability" (as those terms are defined in the
agreement) or his death, the company is obligated to pay Mr. Burnham the sum of
three times his base salary for the preceding calendar year plus three times his
annual incentive bonus for the preceding calendar year.
MR. SWANSON. In 1995, the company entered into a change in control
severance agreement with Mr. Swanson. The agreement provides severance pay and
continuation of certain benefits upon the occurrence of a change in control of
the company. Generally, a "change in control" means any of the following
circumstances: (i) the acquisition of 25% or more of the outstanding voting
stock of the company by any person, entity or group; (ii) the persons serving as
Directors of the company as of the date of the agreement, and replacements or
additions sub-
-31-
sequently approved by a majority vote of the Board, cease to make up at least a
majority of the Board; (iii) a merger, consolidation or reorganization in which
the stockholders of the company prior to the merger wind up owning less than 50%
of the voting power of the surviving corporation; (iv) the liquidation or
dissolution of the company or disposition of all or substantially all of the
assets of the company.
In order to receive benefits under the agreement, Mr. Swanson must
be terminated from his current position within three years following a change in
control of the company. Benefits under the agreement include (i) a cash payment
of three times Mr. Swanson's current compensation (including base salary plus
targeted bonus); (ii) special supplemental retirement benefits determined as if
Mr. Swanson had three years additional credited service under the company's
pension plans as of the date of termination; and (iii) continuation of fringe
benefits pursuant to all welfare, benefit and retirement plans under which Mr.
Swanson and his family are eligible to receive benefits for a period of up to
three years. In addition, the agreement provides for a gross-up payment if Mr.
Swanson is subject to excise taxes on payments made under his agreement.
MR. CAINE. The company hired Franklyn A. Caine in April 1999 as
Senior Vice President and Chief Financial Officer. In order to encourage Mr.
Caine to leave his previous employer, the company entered into a change in
control severance agreement with Mr. Caine. The terms of that agreement are
substantially similar to the change in control severance agreement with Mr.
Swanson described above, except that Mr. Caine will be entitled to benefits
under his agreement if he is terminated from his position within two years,
rather than three years, following a change in control of the company. On
joining the company, Mr. Caine was also granted an option to purchase 200,000
Class B shares. One half of the option vested in 2000. The remainder is
scheduled to vest in 2001. The company and Mr. Caine entered into a separate
agreement which obligates the company to pay Mr. Caine two times his base salary
plus two times his annual incentive bonus if the company terminates Mr. Caine's
employment without cause. Mr. Caine is entitled to a gross-up payment if he is
subject to excise taxes on payments made under this agreement.
MR. TOOKES. The company hired Hansel E. Tookes, II in September 1999
as President and Chief Operating Officer of Raytheon Aircraft Company. In order
to encourage Mr. Tookes to leave his previous employer, the company entered into
a change in control severance agreement with Mr. Tookes. The agreement provides
for severance pay and continuation of certain benefits upon either Mr. Tookes'
termination of employment or retirement, or the occurrence of a change in
control of the company or Raytheon Aircraft Company. Under the agreement,
Raytheon agreed to provide Mr. Tookes with a severance or retirement transition
payment of two and one half times his annual base salary if the company
voluntarily separated him from employment without cause; if Mr. Tookes retired
on an agreed upon date before his normal retirement date; or if Mr. Tookes
retired at his normal retirement date or beyond. This agreement replicated the
benefits Mr. Tookes was eligible for at his previous employer. Also under the
agreement, Mr. Tookes is also entitled to receive a payment of three times his
annual base salary and bonus in lieu of the severance or retirement transition
payments referenced above, following a change in control of the company or of
Raytheon Aircraft Company. Mr. Tookes is entitled to a gross-up payment if he is
subject to excise taxes on payments made under this agreement.
-32-
In August 2000, in connection with Mr. Tookes becoming Chairman and
Chief Executive Officer of Raytheon Aircraft Company, the company and Mr. Tookes
entered into a retention agreement. The retention agreement operates as an
amendment to Mr. Tookes' existing change in control severance agreement by
providing for the payment of three times the sum of his annual base salary and
targeted results based incentive bonus following a change in control of Raytheon
Aircraft Company. The retention agreement also amends the existing change in
control severance agreement by providing for the payment to Mr. Tookes of a
retention award, based on the value received by the company, resulting from a
change in control of Raytheon Aircraft Company.
MR. MARCHILENA. The company has entered into a change in control
severance agreement with Mr. Marchilena. The terms of that agreement are
substantially similar to the change in control severance agreement with Mr.
Swanson described above, except that Mr. Marchilena will be entitled to receive
benefits under his agreement if he is terminated from his position within two
years, rather than three years, following a change in control of the company.
Unless otherwise covered under the change in control severance
agreements and the retention agreement referenced above, the company's executive
severance policy provides that Messrs. Swanson, Caine, Tookes and Marchilena are
entitled to receive cash payments equal to two times their current compensation
as severance benefits and continuation for two years of fringe benefits pursuant
to all welfare, benefit and retirement plans if their employment with the
company is terminated other than for cause.
PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A REVERSE STOCK SPLIT FOLLOWED BY A FORWARD STOCK SPLIT OF THE COMPANY'S
CLASS A AND CLASS B COMMON STOCK
(Item No. 2 on Proxy Card)
SUMMARY
The Board of Directors has authorized, and recommends for your
approval, a reverse 1-for-20 stock split followed immediately by a forward
20-for-1 stock split of each of the company's Class A and Class B common stock.
As permitted under Delaware state law, stockholders whose shares of stock are
converted into less than 1 share in the reverse split will be converted into the
right to receive cash payments equal to the fair value of those fractional
interests. We refer to the reverse and forward stock splits, together with the
related cash payments to stockholders with small holdings, as the
"Reverse/Forward Split." The company believes the Reverse/Forward Split will
result in significantly reduced shareholder record keeping and mailing expenses,
and provide holders of less than 20 shares with a cost-effective way to cash out
their investments efficiently.
If approved, the Reverse/Forward Split will take place on [Month]
[Date], 2001. The proposed amendments to Raytheon's Certificate of Incorporation
are attached to this proxy statement as Appendix B. The highlights of the
Reverse/Forward Split are as follows.
-33-
EFFECT ON STOCKHOLDERS:
If approved at the annual meeting, the Reverse/Forward Split will
affect Raytheon Class A and Class B stockholders as follows after completion:
Class A or Class B Stockholder before Net Effect After
completion of the Reverse/Forward Split Completion of the Reverse/Forward split
- --------------------------------------------------------------------------------
Registered stockholders holding 20 or None.
more Class A shares or Class B shares
- --------------------------------------------------------------------------------
Registered stockholders holding fewer Shares will be converted into the right
Class A shares or Class B shares to receive cash at a price based on the
trading value of the shares at
that time (see "Determination of
Trading Value" at page 41). You will
not have to pay any commissions or
other fees on this cash-out. Holders of
these shares will not have any
continuing equity interest in Raytheon.
- --------------------------------------------------------------------------------
Stockholders holding Class A shares or Raytheon intends for the Reverse/
Class B shares in street name through a Forward Split to treat stockholders
nominee (such as a bank or broker) holding Raytheon Class A shares or
Class B shares in street name through a
nominee (such as a bank or broker)
identically as stockholders
whose shares are registered in their
names. However, nominees may have
different procedures and Raytheon
stockholders holding shares in street
name should contact their nominees to
determine whether they will be affected
by the Reverse/Forward Split.
REASONS FOR THE REVERSE/FORWARD SPLIT:
The Board recommends that the stockholders approve the
Reverse/Forward Split for the following reasons. These, and other reasons, are
described in detail under "Background and Purpose of the Reverse/Forward Split"
below.
-34-
Issue Solution
- --------------------------------------------------------------------------------
Raytheon has almost 177,000 The Reverse/Forward Split will reduce the
stockholders with fewer than 20 number of stockholders with small
Class A shares in their records accounts and result in significant cost
accounts, and almost 4,000 savings for Raytheon.
stockholders fewer than 20 Class B
shares in their record accounts.
Continuing to maintain accounts for
these stockholders, including costs
associated with required stockholder
mailings, will cost Raytheon over
$2.1 million per year.
In addition, based on our best
estimates, continuing to distribute
required mailings to stockholders
with fewer than 20 shares of Class A
or Class B common stock held in street
name through a nominee (i.e. a bank or
broker) will cost Raytheon an
additional $725,000 per year.
- --------------------------------------------------------------------------------
In many cases it is prohibitively The Reverse/Forward Split cashes out
exnpensive for stockholders with stockholders with small accounts without
fewer than 20 shares to sell their transaction costs such as brokerage fees.
shares on the open market. However, if these stockholders do not
want to cash out their holdings of
Class A or Class B stock, they
may purchase additional shares on
the open market to increase
their account to at least 20 shares,
or, if applicable, consolidate/transfer
their accounts into an account with at
least 20 shares.
STRUCTURE OF THE REVERSE/FORWARD SPLIT
The Reverse/Forward Split includes both a reverse stock split and a
forward stock split of both Raytheon Class A and Class B shares. If the
Reverse/Forward Split is approved and occurs, the reverse split will occur at
[Time] on [Month] [Date], 2001. All Class A stockholders on [Month][Date], 2001
will receive 1 share of Raytheon Class A common stock for every 20 shares of
Class A stock held in their accounts at that time; all Class B stockholders on
[Month][Date], 2001 will receive 1 share of Raytheon Class B common stock for
every 20 shares of Class B stock held in their accounts at that time. If a
registered holder has 20 or more Class A shares or Class B shares, any
fractional share in such account will not be cashed out after the reverse split
and the total number of shares held will not change as a result of the
Reverse/Forward Split. Any registered stockholder who holds fewer than 20 shares
of Class A or Class B stock, as the case may be, at [Time] on [Month] [Date],
2001 (also referred to as a "Cashed-Out Stockholder"), will receive a cash
payment instead of fractional shares. This cash payment will be based on the
trading value of the cashed-out shares at that time. (See "Determination of
Trading Value" at page 41 for a description of how the trading value will be
determined upon completion of the Reverse/Forward Split.) Immediately following
the reverse split, at [Time] on [Month] [Date], 2001, all Class A or Class B
stockholders who are not Cashed-Out Stockholders will receive 20 shares of Class
A or Class B common stock for every 1 share of Class A or Class B
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stock they received after the reverse stock split. We intend for the
Reverse/Forward Split to treat stockholders holding Raytheon Class A shares or
Class B shares in street name through a nominee (such as a bank or broker)
identically as stockholders whose shares are registered in their names.
Accordingly, we also refer to those street name holders who receive a cash
payment instead of fractional shares as "Cashed-Out Stockholders." However,
nominees may have different procedures and Raytheon stockholders holding shares
in street name should contact their nominees to determine whether they will be
affected by the Reverse/Forward Split.
In general, the Reverse/Forward Split can be illustrated by the following
examples:
Hypothetical Scenario Result
- --------------------------------------------------------------------------------
Mr. Brown is a registered stockholder Instead of receiving a fractional
who holds 19 Class A shares in his share (19/20 of a share) of Raytheon
account immediately prior to the Class A stock after the reverse split,
Reverse/Forward Split. At that time, Mr. Brown's 19 shares will be converted
assume the trading value of 1 share into the right to receive cash. Using
of Ratheon Class A stock is $30 (see the hypothetical trading value of $30
"Determination of Trading Value" per share, Mr. Brown will receive
at page 41). $570.00 ($30 x 19 shares).
Note: If Mr. Brown wants to continue
his investment in Raytheon, he can buy
at least 1 more share of Raytheon
Class A stock and hold it in his
account. Mr. Brown would have to act
far enough in advance of the
Reverse/Forward Split so that the
purchase is complete by the close of
business on the date of the split.
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- --------------------------------------------------------------------------------
Mrs. Green has 2 separate record Mrs. Green will receive cash payments
accounts. As of the date of the equal to the trading value of her
Reverse/Forward Split, she holds 7 Class B shares in each record account
Class B shares in one account and 15 instead of receiving fractional shares
Class B shares in the other. All of (7/20 share and 3/4 share). Assuming
her shares are registered in her name a hypothetical trading value of Class
only. B shares at $30 per share, Mrs. Green
would receive two checks totaling $660
(7 x $30 = $210; 15 x $30 = $450; $210
+ $450 = $660).
Note: If Mrs. Green wants to continue
her investment in Raytheon, she can
consolidate/transfer her two record
accounts prior to the date of the
Reverse/Forward Split. Alternatively,
Mrs. Green could buy at least 13 more
shares of Raytheon Class B stock for
her first account and at least 5 or
more shares for her second account. In
either case, her holdings will not be
cashed out in connection with the
Reverse/Forward Split because she will
hold at least 20 shares in record
accounts. She would have to act far
enough in advance so that the
consolidation or the purchase is
complete by the close of business on
the date of the split.
- --------------------------------------------------------------------------------
Mr. Blue holds 25 Class A shares in his After the Reverse/Forward Split, Mr.
record account as of the date of the Blue will continue to hold all 25
Reverse/Forward Split. shares of Raytheon Class A stock.
- --------------------------------------------------------------------------------
Mrs. White has 2 accounts. As of the Mrs. White will receive cash payments
date of the Reverse/Forward Split, she equal to the trading value of her
holds 22 Class A shares in one account Class B shares instead of receiving
and 3 Class B shares in the other. All fractional shares (3/20 share).
of her shares are registered in her Assuming a hypothetical trading value
name only. of Class B shares at $30 per share,
Mrs. White would receive a check
totaling $90 (3 x $30 = $90). Mrs.
White will continue to hold all 22
Class A shares.
Note: If Mrs. White wants to continue
her investment in Raytheon Class B
shares, she can buy at least 17 more
shares of Raytheon Class B stock and
hold it in the same account as her
existing Class B shares. Mrs. White
would have to act far enough in
advance of the Reverse/Forward Split
so that the purchase is complete by
the close of business on the date of
the split.
- --------------------------------------------------------------------------------
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Mr. Orange holds 6 Class A shares in a Raytheon intends for the
brokerage account as of the date of the Reverse/Forward Split to treat
Reverse/Forward Split. stockholders holding Raytheon Class A
stock in street name through a nominee
(such as a bank or broker) identically
as stockholders whose shares are
registered in their names. However,
nominees may have different procedures
and Raytheon Class A stockholders
holding Raytheon Class A stock in
street name should contact their
nominees to determine whether they will
be affected by the Reverse/Forward
Split.
BACKGROUND AND PURPOSE OF THE REVERSE/FORWARD SPLIT
Raytheon has a stockholder base of approximately 1,000,000
stockholders, including almost 270,000 registered stockholders. This large base
is principally the result of the December 1997 merger (the "Hughes Merger"),
pursuant to which Raytheon acquired the defense electronics business of Hughes
Electronics Corporation from General Motors Corporation, a widely held public
company. As a result of the Hughes Merger and related transactions, holders of
General Motors Corporation common stock, and holders of General Motors
Corporation Class H common stock became holders of Raytheon Class A shares.
As of [Month] [Date], 2001, approximately _00,000 registered holders
of Raytheon Class A common stock owned fewer than 20 shares of stock. At that
time, these stockholders represented approximately __% of the total number of
registered holders of Raytheon Class A stock, but they owned less than ___% of
the total number of outstanding shares of Class A stock. In addition, as of
[Month] [Date], 2001, approximately _00,000 registered holders of Raytheon Class
B common stock owned fewer than 20 shares of stock. At that time, these
stockholders represented approximately __% of the total number of registered
holders of Raytheon Class B stock, but they owned less than ___% of the total
number of outstanding shares of Class B stock.
The Reverse/Forward Split will provide Class A and Class B
stockholders with fewer than 20 shares with a cost-effective way to cash out
their investments, because Raytheon will pay all transaction costs such as
brokerage or service fees in connection with the Reverse/Forward Split. In most
other cases, small stockholders would likely incur brokerage fees
disproportionately high relative to the market value of their shares if they
wanted to sell their stock. In addition, some small stockholders might even have
difficulty finding a broker willing to handle such small transactions. The
Reverse/Forward Split, however, eliminates these problems for most small
stockholders.
Moreover, Raytheon will benefit from substantial cost savings as a
result of the Reverse/Forward Split. The costs of administering each registered
stockholder's account is the same regardless of the number of shares held in
each account. Therefore, Raytheon's costs to maintain thousands of small
accounts are disproportionately high when compared to the total number of shares
involved. In 2001, we expect that each registered stockholder will cost the
company in excess of $7.00 for transfer agent fees and the printing and postage
costs to mail the
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proxy materials and annual report. We also incur costs associated with required
mailings to stockholders holding shares in street name through a nominee (i.e. a
bank or broker). We expect that these costs will only increase over time.
In light of these disproportionate costs, the Board believes that it
is in the best interests of the company and its stockholders as a whole to
eliminate the administrative burden and costs associated with approximately
177,000 record accounts with fewer than 20 Class A shares and approximately
4,000 record accounts with fewer than 20 Class B shares. We expect that we will
reduce the total cost of administering stockholder accounts by at least $2.1
million per year if we complete the Reverse/Forward Split. Although we do not
have an accurate estimate of the number of street name stockholders with fewer
than 20 Class A shares or 20 Class B shares, we believe that it is reasonable to
assume that the number of street name stockholders with fewer than 20 Class A
shares or 20 Class B shares is roughly equivalent to the number of registered
stockholders with fewer than 20 Class A shares or 20 Class B shares. If our
assumption is correct, continuing to distribute required mailings to street name
stockholders with fewer than 20 Class A shares or 20 Class B shares will cost
Raytheon an additional $725,000 per year.
Raytheon may in the future pursue alternative methods of reducing
its stockholder base, whether or not the Reverse/Forward Split is approved,
including odd-lot tender offers and programs to facilitate sales by stockholders
of odd-lot holdings. However, there can be no assurance that Raytheon will
decide to engage in any such transaction.
EFFECT OF THE REVERSE/FORWARD SPLIT ON RAYTHEON STOCKHOLDERS
Class A or Class B Stockholders with a Record Account of Fewer than 20 Shares:
-----------------------------------------------------------------------------
If we complete the Reverse/Forward Split and you are a Cashed-Out
Stockholder (i.e., a stockholder holding either fewer than 20 shares of Raytheon
Class A common stock or fewer than 20 shares of Raytheon Class B common stock
immediately prior to the reverse stock split):
* You will not receive fractional shares of stock as a result of
the reverse split in respect of your shares being cashed out.
* Instead of receiving fractional shares, you will receive a check in
an amount equal to the trading value of your affected shares.
See "Determination of Trading Value" at page 41.
* After the reverse split, you will have no further interest in
Raytheon with respect to your cashed-out shares. These shares will
no longer entitle you to the right to vote as a stockholder or share
in the company's assets, earnings, or profits or in any dividends
paid after the reverse split. In other words, you will no longer
hold your cashed-out shares, you will just have the right to receive
cash for these shares. In addition, you will not be entitled to
receive interest with respect to the period of time between the
date of the reverse split and the date you receive your check for the
cashed out shares.
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* You will not have to pay any service charges or brokerage
commissions in connection with the Reverse/Forward Split.
* As soon as practicable after [Month] [Date], 2001, you will
receive a check for the cashed out shares you held immediately
prior to the reverse split in accordance with the procedures
described below.
If you hold Book-Entry Shares:
-----------------------------
* Most of Raytheon's registered Class A and Class B stockholders hold
their shares of Raytheon Class A and Class B common stock in
book-entry form under the Direct Registration System for securities.
These stockholders do not have stock certificates evidencing their
ownership of Raytheon's Class A or Class B common stock. They are,
however, provided with a statement reflecting the number of shares
registered in their accounts.
* If you are a Cashed-Out Stockholder who holds registered shares in a
book-entry account, you do not need to take any action to receive your
cash payment. We will mail a check to you at your registered address
as soon as practicable after [Month] [Date], 2001. By signing and
cashing this check, you will warrant that you owned the shares for
which you received a cash payment.
If you hold Certificated Shares:
-------------------------------
* If you are a Cashed-Out Stockholder with a stock certificate
representing your cashed-out shares, you will receive a transmittal
letter from Raytheon as soon as practicable after [Month] [Date],
2001. The letter of transmittal will contain instructions on how to
surrender your certificate(s) to the company's transfer agent,
EquiServe, for your cash payment. You will not receive your cash
payment until you surrender your outstanding certificate(s) to
EquiServe, together with a completed and executed copy of the letter
of transmittal. Please do not send your certificates until you receive
your letter of transmittal. For further information, see "Stock
Certificates" below.
* All amounts owed to you will be subject to applicable federal
income tax and state abandoned property laws.
* You will not receive any interest on cash payments owed to
you as a result of the Reverse/Forward Split.
NOTE: If you want to continue to hold Raytheon Class A or Class B stock after
the Reverse/Forward Split, you may do so by taking either of the
following actions far enough in advance so that it is complete by
[Month] [Date], 2001:
(1) purchase a sufficient number of shares of Raytheon Class A or Class B
common stock, as the case may be, on the open market so that you hold at
least 20 shares of Class A or Class B common stock, as the case may be, in
your account prior to the reverse split; or
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(2) if applicable, consolidate your accounts so that you hold at least 20
shares of Raytheon Class A or Class B common stock, as the case may be, in
one account prior to the reverse split.
Registered Stockholders With 20 or More Shares of Class A or
Class B Common Stock:
------------------------------------------------------------------------
If you are a stockholder with 20 or more shares of either Class A or
Class B common stock as of [Time] on [Month] [Date], 2001, we will first convert
your shares into one twentieth (1/20) of the number of shares you held
immediately prior to the reverse split. One minute after the reverse split, at
[Time], we will reconvert your shares in the forward stock split into 20 times
the number of shares you held after the reverse split, which is the same number
of shares you held before the reverse split. For example, if you were an owner
of 25 shares of either Raytheon Class A or Class B common stock immediately
prior to the reverse split, your shares would be converted to 1.25 shares in the
reverse split and back to 25 shares in the forward split. As a result, the
Reverse/Forward Split will not affect the number of shares that you hold if you
hold 20 or more shares of either Raytheon Class A or Class B stock account
immediately prior to the reverse split.
Street Name Holders of Raytheon Class A or Class B Common Stock:
------------------------------------------------------------------
Raytheon intends for the Reverse/Forward Split to treat stockholders
holding Raytheon Class A or Class B common stock in street name through a
nominee (such as a bank or broker) identically as stockholders whose shares are
registered in their names. However, nominees may have different procedures and
stockholders holding Raytheon Class A or Class B common stock in street name
should contact their nominees to determine whether they will be affected by the
Reverse/Forward Split.
Current and Former Raytheon Employees and Directors:
---------------------------------------------------
If you are an employee or director of Raytheon (or a former employee
or director), you may own Raytheon restricted stock and/or hold options to
purchase Raytheon stock through the company's stock plans. In addition, you may
have invested in Raytheon stock under the Raytheon Savings and Investment Plan.
If you have invested in Raytheon stock under the Raytheon Savings
and Investment Plan, the Reverse/Forward Split will not affect your investment.
In addition, the Reverse/Forward Split will not affect the number of options you
hold to acquire Raytheon stock under the company's stock plans. If you hold
fewer than 20 restricted shares of Raytheon stock in a registered account, those
shares would be converted into the right to receive cash under the
Reverse/Forward Split. However, the company does not believe that there are any
such accounts.
DETERMINATION OF TRADING VALUE
In order to avoid the expense and inconvenience of issuing
fractional shares to stockholders who hold less than 1 share after the reverse
split, under Delaware state law, Raytheon may either arrange for the sale of
these fractional shares or pay cash for their fair value. If stockholders
approve this proposal at the annual meeting and the Reverse/Forward Split is
completed, the Board of Directors will elect either to arrange for Raytheon's
transfer agent to sell
-41-
these fractional shares of Class A and Class B common stock on the open market,
or to have Raytheon pay cash for the fractional shares based on the trading
value of the Raytheon Class A and Class B common stock that is cashed out. The
Board will make this decision, in its sole discretion, as soon as practicable
after the annual meeting and will publicly announce its decision in a press
release and post it on our website at http://www.raytheon.com. The details of
each of the Board's options and the manner of determining trading value under
each option are summarized in the following chart:
OPTION DETERMINATION OF TRADING VALUE
- --------------------------------------------------------------------------------
ARRANGE FOR THE SALE As soon as practicable after [Month] [Date],
OF FRACTIONAL SHARES 2001, the exchange agent will sell the aggregated
ON THE OPEN MARKET: of the Cashed-Out Stockholders fractional shares of
The fractional shares at the prevailing prices on the open market. The
of Raytheon Class A sale will be executed on the New York Stock
and Class B common Exchange in round lots to the extent practicable.
stock of the Cashed- Raytheon expects that the exchange agent will conduct
Out Stockholders will the sale in an orderly fashion at a reasonable pace.
be aggregated and sold Based on the average daily trading volume for
by the company's Raytheon's Class A stock on the New York Stock
transfer agent, Exchange as of [Month][Date], 2001, we expect that
EquiServe, acting as it will take at least 10 business days to sell all of
an exchange agent on the aggregated fractional shares of Class A and Class
behalf of the Cashed- B stock. If the exchange agent attempts to sell these
Out Stockholders. shares too quickly, it could hurt the sales price for
the shares. There can be no assurance as to the sales
price that the exchange agent will receive for the
aggregated fractional shares.
After completing the sale of all the aggregated
fractional shares, the exchange agent will make a
cash payment (without interest) equal to each
Cashed-Out Stockholder's proportionate interest in
the net proceeds from the sale of the aggregated
fractional shares. Raytheon will pay all of the
commissions and other out-of-pocket transaction costs
in connection with the sale. Until the proceeds of
the sale have been distributed, the transfer agent
will hold the proceeds in trust for the Cashed-Out
Stockholders. As soon as practicable after the
determination of the amount of cash to be paid in
place of fractional shares, the transfer agent will
pay the cash to the Cashed-Out Stockholders as
described above in "Effect of the Reverse/Forward
Split on Raytheon Stockholders."
-42-
PURCHASE OF FRACTIONAL The Cashed-Out Stockholders will receive cash equal
SHARES: Raytheon will to the trading value of the shares they held
purchase the fractional immediately prior to the reverse split in accounts
shares of Class A and with fewer than 20 shares of Class A and Class B
Class B common stock common stock. The trading value of each outstanding
from the Cashed-Out share of Class A and Class B common stock at that
Stockholders. time will be based on the average daily closing price
per share of Class A and Class B common stock, as the
case may be, on the New York Stock Exchange for the
ten trading days immediately before and including
[Month] [Date], 2001, without interest.
- --------------------------------------------------------------------------------
EFFECT OF THE REVERSE/FORWARD SPLIT ON RAYTHEON
The Reverse/Forward Split will not affect the public registration of
Raytheon's Class A or Class B common stock with the SEC under the Securities
Exchange Act of 1934, as amended. Similarly, we do not expect that the
Reverse/Forward Split will affect the company's application for continued
listing of Raytheon Class A or Class B common stock on the New York Stock
Exchange.
The number of shares of authorized common stock will not change as a
result of the Reverse/Forward Split. On [Month] [Date], 2001, there were [ ]
shares of Raytheon Class A common stock issued and outstanding and [ ] shares of
Raytheon Class B common stock issued and outstanding. If the Board elects to
arrange for the sale of the Cashed-Out Stockholders' fractional shares on the
open market, there will be no effect on the number of issued and outstanding
shares of Raytheon Class A or Class B common stock. On the other hand, if the
Board elects to purchase the fractional shares of the Cashed-Out Stockholders,
the total number of outstanding shares of Raytheon Class A or Class B common
stock will be reduced by the number of shares held by the Cashed-Out
Stockholders immediately prior to the reverse split.
If the Board of Directors opts to purchase the fractional shares of
Class A and Class B common stock from the Cashed-Out Stockholders, the total
number of shares that will be purchased and the total cash to be paid by the
company are unknown. Also, we do not know what the average daily closing price
per share of Raytheon Class A or Class B common stock on the New York Stock
Exchange for the ten trading days prior to and including [Month] [Date], 2001
will be or, if applicable, what the net proceeds of the sale of the aggregate
fractional shares by the exchange agent will be. However, if the Reverse/Forward
Split had been completed as of [Month] [Date], 2001, when the average daily
closing price per share of Raytheon Class A common stock on the New York Stock
Exchange for the ten trading days immediately preceding and including such date
was [$ ], then the cash payments that would have been issued to Cashed-Out
Stockholders instead of fractional shares would have been approximately [$ ],
with approximately [ ] shares of Class A common stock purchased by the company.
Similarly, as of [Month] [Date], 2001, when the average daily closing price per
share of Raytheon Class B common stock on the New York Stock Exchange for the
-43-
ten trading days immediately preceding and including such date was [$ ], the
cash payments that would have been issued to Cashed-Out Stockholders instead of
fractional shares would have been approximately [$ ], with approximately [ ]
shares of Class B common stock purchased by the company. The actual amounts will
depend on the number of Cashed-Out Stockholders on [Month] [Date], 2001, which
will vary from the number of such stockholders on [Month] [Date], 2001. The par
value of Raytheon's Class A and Class B common stock will remain at $.01 per
share after the Reverse/Forward Split under either option available to the Board
under Delaware law.
STOCK CERTIFICATES
In connection with the Reverse/Forward Split, Raytheon's Class A and
Class B common stock will each be identified by a new CUSIP number. These new
CUSIP numbers will appear on any stock certificates representing shares of
Raytheon Class A of Class B common stock after [Month] [Date], 2001. The
Reverse/Forward Split will not affect any certificates representing shares of
common stock or the book-entry account records held by registered stockholders
owning 20 or more shares immediately prior to the reverse split. Old
certificates held by any of these stockholders will continue to evidence
ownership of the same number of shares as is set forth on the face of the
certificate. Any Class A or Class B stockholder with 20 or more shares
immediately prior to the reverse split who wants to receive a certificate
bearing the new CUSIP number can do so at any time by contacting Raytheon's
transfer agent at 1-800-360-4519 for instructions on how to surrender old
certificates. After [Month] [Date], 2001, an old certificate presented to an
exchange agent in settlement of a trade will be exchanged for a new certificate
bearing the new CUSIP number. In addition, if the company completes the
reclassification of its Class A and Class B shares, as described beginning on
page 48, shareholders will receive instructions for surrendering their shares.
See "Effective Time; Exchange of Certificates; Fractional Shares," at page 55.
As described above, any Cashed-Out Stockholder with share
certificates will receive a letter of transmittal after the Reverse/Forward
Split is completed. These stockholders must complete and sign the letter of
transmittal and return it with their stock certificate(s) to Raytheon's transfer
agent before they can receive cash payment for those shares.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
We have summarized below certain federal income tax consequences to
the company and stockholders resulting from the Reverse/Forward Split. This
summary is based on existing U.S. federal income tax law, which may change, even
retroactively. This summary does not discuss all aspects of federal income
taxation which may be important to you in light of your individual
circumstances. Many stockholders (such as financial institutions, insurance
companies, broker-dealers, tax-exempt organizations, and foreign persons) may
be subject to special tax rules. Other stockholders may also be subject to
special tax rules, including but not limited to: stockholders who received
Raytheon stock as compensation for services or pursuant to the exercise of an
employee stock option, or stockholders who have held, or will hold, stock as
part of a straddle, hedging, or conversion transaction for federal income tax
purposes. In addition, this summary does not discuss any state, local, foreign,
or other tax considerations. This summary assumes that you are a U.S. citizen
and have held, and will hold, yourshares as capital assets for investment
purposes under the Internal Revenue Code of 1986, as amended (the "Code").
-44-
You should consult your tax advisor as to the particular federal, state, local,
foreign, and other tax consequences, in light of your specific circumstances.
We believe that the Reverse/Forward Split will be treated as a
tax-free "recapitalization" for federal income tax purposes. This will result in
no material federal income tax consequences to the company.
The federal income tax consequences to Class A and Class B
stockholders will depend in part on whether the Board chooses to arrange for the
sale of the Cashed-Out Stockholders' fractional shares on the open market, or to
purchase these fractional shares directly. See "Determination of Trading Value"
above. The tax consequences of these alternatives are discussed below.
FEDERAL INCOME TAX CONSEQUENCES TO CLASS A AND CLASS B STOCKHOLDERS
WHO ARE NOT CASHED OUT BY THE REVERSE/FORWARD SPLIT:
If you (1) continue to hold Raytheon Class A or Class B common stock
immediately after the Reverse/Forward Split, and (2) you receive no cash as a
result of the Reverse/Forward Split, you will not recognize any gain or loss in
the Reverse/Forward Split and you will have the same adjusted tax basis and
holding period in your Raytheon Class A or Class B common stock, as the case may
be, as you had in such stock immediately prior to the Reverse/Forward Split.
FEDERAL INCOME TAX CONSEQUENCES TO CASHED-OUT STOCKHOLDERS:
Alternative 1. Raytheon's Board Chooses to Arrange for Sale of the
Fractional Shares on the Open Market.
If you receive cash as a result of the Reverse/Forward Split, you
will recognize capital gain or loss in an amount equal to the difference between
the cash you received in the Reverse/Forward Split and your aggregate adjusted
tax basis in the shares of Raytheon Class A or Class B common stock cashed out.
Alternative 2. Raytheon's Board Chooses to Purchase the Fractional
Shares Directly.
If you receive cash as a result of the Reverse/Forward Split, your
tax consequences will depend on whether, in addition to receiving cash, you or a
person or entity related to you continues to hold Raytheon Class A or Class B
common stock immediately after the Reverse/Forward Split, as explained below.
a. Class A or Class B Stockholders Who Exchange All of Their Raytheon
Class A or Class B common stock for Cash as a Result of the
Reverse/Forward Split.
If you (1) receive cash in exchange for a fractional share as a
result of the Reverse/Forward Split, (2) you do not continue to hold any
Raytheon Class A or Class B stock immediately after the Reverse/Forward Split,
and (3) you are not related to any person or entity which holds Raytheon Class A
or Class B common stock immediately after the Reverse/Forward Split, you will
recognize capital gain or immediately after the Reverse/Forward Split, you will
recognize capital gain or between the cash you receive for your cashed-out stock
and your aggregate adjusted tax basis in such stock.
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If you are related to a person or entity who continues to hold
Raytheon Class A or Class B common stock immediately after the Reverse/Forward
Split, you will recognize gain in the same manner as set forth in the previous
paragraph, provided that your receipt of cash either (1) is "not essentially
equivalent to a dividend," or (2) is a "substantially disproportionate
redemption of stock," as described below.
* "Not Essentially Equivalent to a Dividend." You will satisfy the
"not essentially equivalent to a dividend" test if the reduction
in your proportionate interest in the company resulting from the
Reverse/Forward Split is considered a "meaningful reduction" given
your particular facts and circumstances. The Internal Revenue
Service has ruled that a small reduction by a minority stockholder
whose relative stock interest is minimal and who exercises no
control over the affairs of the corporation will meet this test.
* "Substantially Disproportionate Redemption of Stock." The receipt
of cash in the Reverse/Forward Split will be a "substantially
disproportionate redemption of stock" for you if the percentage of
the outstanding shares of Raytheon Class A or Class B common stock
owned by you immediately after the Reverse/Forward Split is less
than 80% of the percentage of shares of Raytheon Class A or Class
B common stock owned by you immediately before the Reverse/Forward
Split.
In applying these tests, you will be treated as owning shares
actually or constructively owned by certain individuals and entities related to
you. If the taxable amount is not treated as capital gain under any of the
tests, it will be treated first as ordinary dividend income to the extent of
your ratable share of Raytheon's undistributed earnings and profits, then as a
tax-free return of capital to the extent of your aggregate adjusted tax basis
in your shares, and any remaining gain will be treated as capital gain. See
"Maximum Tax Rates Applicable to Capital Gain" below.
b. Stockholders Who Both Receive Cash and Continue to Hold Raytheon
Class A or Class B Common Stock Immediately After the
Reverse/Forward Split.
If you both receive cash as a result of the Reverse/Forward Split
and continue to hold Raytheon Class A or Class B common stock immediately after
the Reverse/Forward Split, you generally will recognize gain, but not loss, in
an amount equal to the lesser of (1) the excess of the sum of aggregate fair
market value of your shares of Raytheon Class A or Class B common stock plus the
cash received over your adjusted tax basis in the shares, or (2) the amount of
cash received in the Reverse/Forward Split. In determining whether you continue
to hold Raytheon Class A or Class B common stock immediately after the
Reverse/Forward Split, you will be treated as owning shares actually or
constructively owned by certain individuals and entities
-46-
related to you. Your aggregate adjusted tax basis in your shares of Raytheon
Class A or Class B common stock held immediately after the Reverse/Forward Split
will be equal to your aggregate adjusted tax basis in your shares of Raytheon
Class A common stock held immediately prior to the Reverse/Forward Split,
increased by any gain recognized in the Reverse/Forward Split, and decreased by
the amount of cash received in the Reverse/Forward Split.
Any gain recognized in the Reverse/Forward Split will be treated,
for federal income tax purposes, as capital gain, provided that your receipt of
cash either (1) is "not essentially equivalent to a dividend" with respect to
you, or (2) is a "substantially disproportionate redemption of stock" with
respect to you. (Each of the terms in quotation marks in the previous sentence
is discussed above under the heading "Stockholders Who Exchange All of Their
Raytheon Class A or Class B common stock for Cash as a Result of the
Reverse/Forward Split.") In applying these tests, you may possibly take into
account sales of shares of Raytheon Class A or Class B common stock that occur
substantially contemporaneously with the Reverse/Forward Split. If your gain is
not treated as capital gain under any of these tests, the gain will be treated
as ordinary dividend income to you to the extent of your ratable share of
Raytheon's undistributed earnings and profits, then as a tax-free return of
capital to the extent of your aggregate adjusted tax basis in your shares, and
any remaining gain will be treated as a capital gain.
YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR FEDERAL,
STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF THE REVERSE/FORWARD SPLIT,
IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.
APPRAISAL RIGHTS
Dissenting stockholders do not have appraisal rights under Delaware
state law or under the company's Certificate of Incorporation or By-laws in
connection with the Reverse/Forward Split.
RESERVATION OF RIGHTS
The Board of Directors reserves the right to abandon the
Reverse/Forward Split without further action by the stockholders at any time
before the filing of the amendments to the Restated Certificate of Incorporation
with the Delaware Secretary of State, even if the Reverse/Forward Split has been
authorized by the stockholders at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL,
UNLESS YOU SPECIFY OTHERWISE IN YOUR PROXY.
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PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
TO RECLASSIFY THE COMPANY'S TWO CLASSES OF STOCK INTO A
SINGLE NEW CLASS OF COMMON STOCK
(Item No. 3 on Proxy Card)
The Board of Directors has unanimously approved the proposal to
amend the Certificate of Incorporation (which we refer to as the "Amendment")
which, if approved, would eliminate the company's two classes of common stock
and reclassify the Class A common stock and the Class B common stock into a
single new class of common stock, $.01 par value, of the company (which we refer
to as the "New Common Stock"). The reclassification will eliminate the trading
disparities between the Class A shares and the Class B shares and eliminate any
confusion from having two publicly traded classes of common stock. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE AMENDMENT.
BACKGROUND OF AMENDMENT
The company's dual class structure is the result of the Hughes
Merger. Pursuant to the Hughes Merger, shareholders of the former Raytheon
Company received Class B stock and stockholders of General Motors Corporation
common stock, and holders of General Motors Corporation Class H common stock
became holders of Raytheon Class A shares.
At the time of the Hughes Merger, the Class A common stock
represented approximately 30% of the outstanding equity value of Raytheon and
the Class B common stock represented the remaining approximately 70% of the
outstanding equity value. With respect to the election and removal of directors
of Raytheon, the Class A common stockholders currently possess 80.1% of the
voting power and the Class B common stockholders currently possess the remaining
19.9% of the voting power. Each class votes separately on all other matters.
Except as to voting rights, the Class A common stock and Class B common stock
are identical.
This dual class capital structure was necessary in order for General
Motors to obtain an IRS letter ruling to the effect that the Hughes Merger was
tax-free to General Motors and its common stockholders for U.S. federal income
tax purposes.
In considering the Hughes Merger, the Board of Directors of former
Raytheon had concern over the use of a dual class structure, especially since
its shareholders were to receive low-vote stock. However, after careful
consideration and consultation with investment bankers, the Board of Directors
concluded that a dual class structure was advisable. The Board of Directors
believed that, as both Class A and Class B common stock would be widely held and
neither class had a dividend preference, the two classes of stock would trade
roughly at parity and that a dual class structure would not create serious
trading or financial constraints.
Since the Hughes Merger, the two classes of stock have not traded at
parity. With the exception of a very brief period, the Class B common stock has
traded at a premium to the
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Class A common stock, with an average premium of Class B common stock over Class
A common stock since inception of approximately 2.3% and at times as high as
10%. In addition, certain other issues with respect to the dual class structure
have arisen since the Hughes Merger. Among these issues are higher volatility in
the Class A and Class B shares, the confusion from having two publicly traded
classes of common stock and the difficulties in effecting potential acquisitions
or other business combinations. In the Fall of 2000, while not deciding to
reclassify the two classes of common stock, management decided to request advice
from the Internal Revenue Service, as to whether a reclassification plan could
be effected without a negative impact on the prior IRS letter ruling.
In December 2000, in anticipation of receiving advice from the IRS,
the company began speaking with Morgan Stanley & Co. Incorporated to study the
effects of a possible reclassification of its shares and its effects on the
company's shareholders. On January 24, 2001 the Board of Directors formally
considered a proposal to reclassify the Class A common stock and the Class B
common stock into a single class of new common stock. The Board reviewed the
history of the dual class structure. Outside counsel addressed the potential tax
consequences of combining the two classes. Morgan Stanley made a presentation to
the Board, and rendered its opinion that as of January 23, 2001 and subject to
and based on the considerations described in its opinion that the exchange ratio
pursuant to the amendment was fair to the holders of Class A common stock and
the holders of Class B common stock from a financial point of view. The full
text of the written opinion, which sets forth the assumptions made, the
procedures followed, the matters considered and the limitations on the review
undertaken by Morgan Stanley is attached as Appendix C to this proxy statement
and is incorporated herein by reference. We urge you to read Morgan Stanley's
opinion carefully and in its entirety.
After consideration of the issues, the Board of Directors resolved
to seek shareholder approval to reclassify the Class A and Class B common stock
into a single class of new common stock, contingent upon receiving a ruling from
the Internal Revenue Service that the Hughes Merger would remain tax-free to
General Motors Corporation.
On January 31, 2001, the IRS issued to the company a supplementary
ruling to the effect that consummation of the proposed reclassification, as well
as the Reverse/Forward Split, will not adversely affect the IRS ruling received
in connection with the Hughes Merger.
PRIMARY EFFECTS AND CONSEQUENCES OF THE AMENDMENT ON THE COMPANY'S
CAPITALIZATION
If the Amendment is approved, it will have the following effects,
among others, on the company's capitalization and holders of both classes of
common stock:
- EFFECTS ON NUMBER OF ISSUED SHARES OF COMMON STOCK. Each issued
share of Class A common stock outstanding after the
Reverse/Forward Split (if the Reverse/Forward Split is approved),
including each treasury share, will be reclassified into 1 share
of New Common Stock. Each issued share of Class B common stock
outstanding after the Reverse/Forward Split (assuming the
Reverse/Forward Split is approved), including each treasury
share, will be reclassified into 1 share of New Common Stock,
rounded to the nearest whole share. As of [Month] [Date], 2001,
[ ] shares of common stock
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were outstanding, with holders of the Class A common stock owning
[ ] or __._%, of all the shares of both classes of common stock
combined and holders of the Class B common stock owning [ ] or
__._%, of all the shares of both classes of common stock
combined. After giving effect to the Amendment, as of [Month]
[Date], 2001, there would be [ ] shares of New Common Stock
outstanding, with holders of the Class A common stock owning [ ],
or __._%, of all the shares of New Common Stock and holders of
the Class B common stock owning [ ], or __._%, of all the shares
of the New Common Stock outstanding.
- EFFECTS ON THE VOTING RIGHTS OF OUTSTANDING SHARES OF COMMON
STOCK. The holders of the Class A common stock are currently
entitled to cast 80.1% of all the votes entitled to be cast with
respect to the election and removal of directors, and holders of
shares of the Class B common stock are entitled to cast the
remaining 19.9% of the votes with respect to the election and
removal of directors. On all other matters on which holders of
the company's common shares are entitled to vote, each Class A
share and each Class B share has one vote per share and a
majority of each of the Class A and Class B shares, with each
voting as a separate class, is required to approve such other
matters. After giving effect to the Amendment, as of [Month]
[Date], 2001, the holders of the New Common Stock would be
entitled to cast approximately [ ] votes on all matters as a
single class, including the election of all of the directors,
with holders of the Class A common stock entitled to cast
approximately [ ] votes, or __._% of all the votes entitled to be
cast, of the New Common Stock and with the holders of Class B
common stock entitled to cast approximately [ ] votes, or __._%
of all the votes entitled to be cast, of the New Common Stock.
BASED ON THE AMENDMENT, AS OF [Month] [Date], 2001, THE VOTING
POWER OF THE HOLDERS OF THE CLASS A COMMON STOCK WITH RESPECT TO
THE ELECTION OF DIRECTORS WOULD BE DECREASED FROM 80.1% TO __._%.
- EFFECTS ON OPTIONS. The company will cause each option to
purchase shares of Class B common stock to become an option to
purchase the same number of shares of New Common Stock at the
same exercise price. As of [Month] [Date], 2001, there were [ ]
options to purchase shares of Class B common stock outstanding at
a weighted average exercise price of $__.__. After giving effect
to the Amendment, as of [Month] [Date], 2001, there would be [ ]
options to purchase shares of New Common Stock at a weighted
average exercise price of $__.__.
- EFFECTS ON RIGHTS AGREEMENT. The company will amend the Rights
Agreement, dated December 15, 1997, between the company and State
Street Bank and Trust Company, (the "Rights Agreement") so that
holders of shares of Class A or Class B common stock that
currently hold one right to purchase 1/100(th) of a share of
Series A Junior Participating Preferred Stock, par value $.01 per
share (the "Series A Preferred Stock") at $250 per 1/100(th) of a
share of Series A Preferred Stock for each share of Class A or
Class B com-
-50-
mon stock they hold, will hold one right to purchase 1/100(th) of
a share of Series A Preferred Stock at $250 per 1/100(th) of a
share of Series A Preferred Stock for each share of New Common
Stock they will hold.
REASONS FOR, ADVANTAGES OF AND POSSIBLE DISADVANTAGES OF, THE AMENDMENT
In determining whether to recommend and adopt the Amendment, the
Board of Directors considered a number of factors, including the following:
- The capital structure of the company would be simplified and
potential investor confusion and additional administrative
expenses caused by the dual class structure would be eliminated.
- Any negative impact on the market price of the common stock that
results from having a dual class structure would be eliminated.
- Liquidity, trading efficiencies and the investor base would
potentially increase.
- Voting rights of holders of Class A shares and Class B shares
would be better aligned with their economic risk of ownership.
- Flexibility to structure acquisitions and equity financings would
likely increase.
- The reclassification is not expected to cause the shareholders to
receive taxable income at the time of the reclassification.
The Board of Directors also considered the following factors
relating to the reclassification in connection with the recommendation and
adoption of the Amendment:
- The opinion of Morgan Stanley that as of January 23, 2001 and,
subject to and based on the considerations described in such
opinion, the exchange ratio pursuant to the amendment was fair to
the holders of Class A shares and to the holders of Class B
shares from a financial point of view. The full text of the
opinion, which sets forth the assumptions made, the procedures
followed, the matters considered and the limitations on the
review undertaken by Morgan Stanley is attached as Appendix C to
this proxy statement and is incorporated herein by reference. We
urge you to read Morgan Stanley's opinion carefully and in its
entirety.
- The historical trading price of the Class A shares compared to
the historical trading price of the Class B shares.
- The price trading differentials between two classes of stock of
other similarly situated companies.
-51-
The foregoing discussion of information and factors considered by
the Board of Directors is not intended to be exhaustive but includes all
material factors considered by the Board of Directors in making their decision.
In view of the wide variety of factors considered by the Board of Directors in
connection with their evaluation of the reclassification and the complexity of
those matters, the Board of Directors did not consider it practicable to, nor
did they attempt to, quantify, rank or otherwise assign relative weights to the
specific factors they considered in reaching their decision to approve the
Amendment. In considering the factors described above, individual members of the
Board of Directors may have given different weight to different factors.
INTERESTS IN CERTAIN PERSONS
As of [Month] [Date], 2001, the members of the Board of Directors,
beneficially owned and had voting control over a total of [ ] shares, or __%, of
the Class A common stock, and beneficially owned and had voting control over [ ]
shares, or __%, of the Class B common stock. The directors are not required to
vote "FOR" the Amendment, but have indicated that it is their intention to do
so. The directors may have different interests from you in voting on the
Amendment.
Morgan Stanley is a full service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking, financing, and financial advisory services. In the ordinary course of
our trading, brokerage and financing activities, Morgan Stanley or its
affiliates may at any time hold long or short positions, and may trade or
otherwise effect transactions, for its own account, Raytheon's account or the
accounts of customers, in debt or equity securities or senior loans of Raytheon.
In addition, from time to time, Morgan Stanley has provided and may in the
future provide financial advisory and financing services to Raytheon and has
received fees and may receive in the future in connection with such services.
Pursuant to an engagement letter dated January 23, 2001, Raytheon
formally engaged Morgan Stanley as its financial advisor to assist Raytheon in
its consideration of the reclassification and to render a fairness opinion in
connection with such transaction. Morgan Stanley will receive a customary fee in
connection with its services. Raytheon has also agreed to reimburse Morgan
Stanley for its reasonable expenses and to indemnify Morgan Stanley against
certain liabilities, including liabilities under the U.S. federal securities
laws.
APPRAISAL RIGHTS
Under Delaware state law and the Certificate of Incorporation,
holders of the Class A shares and Class B shares have no appraisal rights in
connection with the proposal to amend the Certificate of Incorporation.
COMPARISON OF CAPITAL STOCK BEFORE AND AFTER AMENDMENT
The existing rights, powers and limitations of Class A shares and
Class B shares are set forth in Article Four of the Certificate of
Incorporation. The rights, powers and limitations of the New Common Stock that
will be issued pursuant to the Amendment will be set forth in the amended and
restated Article Four of the Certificate of Incorporation. The following
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summary should be read in conjunction with, and is qualified in its entirety by
reference to, the form of Amendment to the Certificate of Incorporation set
forth in Appendix D hereto:
COMPARISON OF CLASS A COMMON STOCK, CLASS B COMMON STOCK AND NEW COMMON STOCK
RIGHT, POWER CLASS A CLASS B NEW
OR LIMITATION COMMON STOCK COMMON STOCK COMMON STOCK
- --------------- ---------------- ------------------ -----------------
Election or - Holders - Holders - Holders
Removal of entitled to entitled to entitled to
Directors: 80.1% of the 19.9% of the elect or
total voting total voting remove all
power with power with the directors.
respect to the respect to the
election or election or
removal of removal of
directors. directors.
Class Voting: - On all matters - On all matters - Holders vote
(other than (other than as a single
the election the election class on all
or removal or removal matters.
of directors) of directors)
the approval the approval
of holders of of holders of
each Class, each Class,
voting separately, voting separately,
is required. is required.
Dividends and - Dividends - Dividends - Except as
Stock Splits payable or payable or prohibited
and stock divisions stock divisions under Delaware
Combinations: or combinations or combinations law, no
with respect with respect prohibition on
to shares of to shares of the payment of
Class A common Class B common dividends or
stock must be stock must be stock
made pro rata made pro rata divisions or
with shares of with shares of combinations.
Class B common Class A common
stock. stock.
Liquidation, - Participate - Participate - Participate
Dissolution, pro rata with pro rata with pro rata with
Mergers, the holders of the holders of other holders
Consolidations, Class B common Class A common of New Common
or other stock. stock. Stock.
reorganizations:
-53-
RIGHT, POWER CLASS A CLASS B NEW
OR LIMITATION COMMON STOCK COMMON STOCK COMMON STOCK
- --------------- ---------------- ------------------ -----------------
Stock - company - company - Except as
Repurchases: repurchases of repurchases of prohibited
Class A stock Class B stock under
must be must be applicable law,
effected effected no prohibitions
ratably, and ratably, and on stock
in a in a repurchases.
non-prejudicial non-prejudicial
way, with way, with
purchases of purchases of
Class B common Class A common
stock stock
IMPACT OF AMENDMENT ON LISTING AND THE NEW YORK STOCK EXCHANGE AND ON OPERATIONS
The shares of Class A common stock and Class B common stock are both
listed on the New York Stock Exchange. After filing the Amendment with the State
of Delaware, the shares of New Common Stock will be listed on the New York Stock
Exchange. The company expects that the Amendment will have no impact on
operations of the company. In addition, the Amendment involves no increase in
the total number of shares of common stock authorized in the Certificate of
Incorporation.
FINANCIAL INFORMATION
The company believes that its shareholders can exercise prudent
judgment with respect to the decision whether to vote for adoption of the
Amendment without reference to financial statements of the company. The fiscal
2000 audited consolidated financial statements of the company are contained in
our 2000 annual report, which is enclosed. In addition, the company will provide
without charge to any shareholder, on the request of such shareholder, an
additional copy of our 2000 annual report. Written or oral requests for such
copies should be directed to the Raytheon Company, 141 Spring Street, Lexington,
Massachusetts, 02421, Attention: Shareholder Services, telephone number (800)
360-4519. In addition, copies can be accessed on the company's Internet site at
http://www.raytheon.com.
FEDERAL TAX CONSEQUENCES
The following discussion is intended only as a brief summary of the
federal income tax consequences of the Amendment. This summary is not tax
advice, is not exhaustive and does not describe state, local and foreign or
certain other tax consequences of the proposed Amendment. You should consult
your own tax advisor with respect to the tax consequences of the proposed
Amendment, including tax reporting requirements and tax consequences under
state, local or foreign law.
The company believes that the reclassification of shares of Class A
common stock and Class B common stock into shares of the New Common Stock
pursuant to the Amendment will be treated as a tax-free recapitalization under
Section 368(a)(1)(E) of the Code and, there-
-54-
fore, (a) will not result in the recognition of any gain or loss by the holders
of Class A common stock or Class B common stock, (b) the basis of the New Common
Stock will be the same as the shareholder's basis in the Class A common stock or
the Class B common stock, as the case may be, surrendered therefor, and (c) the
holding period of the New Common Stock received by a shareholder will include
such shareholder's holding period for the Class A common stock or the Class B
common stock, as the case may be, surrendered therefor, provided that each share
of the Class A common stock or the Class B common stock, as the case may be,
held on the date of the reclassification is a capital asset as defined in
Section 1221 of the Code.
EFFECTIVE TIME; EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The Amendment will become effective when it is filed with the
Secretary of State of the State of Delaware. If approved, the Amendment will be
filed as soon as practicable after the annual meeting. However, if stockholders
approve the Reverse/Forward Split, the Amendment will be filed as soon as
practicable after the completion of the Reverse/Forward Split. At the effective
time, shares of Class A common stock and Class B common stock will become shares
of New Common Stock, without any action on your part.
Promptly after the effective time, EquiServe, our transfer agent,
will mail each record holder of Class A common stock and Class B common stock
holding shares in certificated form, instructions and transmittal materials for
effecting the surrender of stock certificates for Class A common stock and Class
B common stock in exchange for replacement certificates representing the number
of whole shares of New Common Stock into which such shares of Class A common
stock and Class B common stock have been reclassified. EquiServe will mail each
record holder of Class A common stock and Class B common stock who holds shares
in a book-entry account a statement reflecting the number of shares of New
Common Stock registered in their accounts.
No fractional shares will be issued in connection with the Amendment
to the Certificate of Incorporation, other than to participants in Raytheon's
Dividend Reinvestment and Stock Purchase Plan.
YOU ARE ASKED NOT TO SEND ANY CERTIFICATES WITH THE ENCLOSED PROXY
AND NOT TO SURRENDER ANY CERTIFICATE FOR EXCHANGE UNTIL YOU HAVE RECEIVED SUCH
TRANSMITTAL MATERIALS FROM THE TRANSFER AGENT.
RESERVATION OF RIGHTS
The Board of Directors reserves the right to abandon the
reclassification of the company's two classes of common stock without further
action by the stockholders at any time before the filing of the amendment to the
Restated Certificate of Incorporation with the Delaware Secretary of State, even
if the reclassification has been authorized by the stockholders at the annual
meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS PROPOSAL,
UNLESS YOU SPECIFY OTHERWISE IN YOUR PROXY.
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PROPOSAL TO APPROVE THE 2001 STOCK PLAN
(Item No. 4 on Proxy Card)
On February 1, 2001, the Board of Directors adopted the Raytheon 2001
Stock Plan (which we refer to as the "2001 Plan") subject to stockholder
approval. The Board of Directors believes that the 2001 Plan will be of
substantial value in attracting and retaining key employees and in stimulating
their efforts toward the continued success of the company and its subsidiaries.
In that regard, the 2001 Plan will (a) align the long-term interests of key
employees and stockholders by creating a direct link between key employee
compensation and stockholder return, (b) enable key employees to develop and
maintain a substantial stock ownership in the company and (c) provide incentives
to such key employees to continue contributing to the success of the company.
The proposed Plan is set forth in Appendix E. A summary of the key
provisions is set forth below:
ADMINISTRATION. The 2001 Plan will be administered by the Options
Subcommittee of the Management Development and Compensation Committee, which is
comprised solely of independent directors (the "Committee"). The Committee
selects participants and, in a manner consistent with the terms of the 2001
Plan, determines the number, type and duration of the awards to be granted and
the terms and conditions of the award agreements. The Committee may delegate to
the CEO certain authority under the 2001 Plan, including the authority to grant
awards to eligible employees who are not officers subject to Section 16 of the
Securities Exchange Act of 1934.
ELIGIBILITY. Participants under the 2001 Plan shall consist of employees,
officers, directors and consultants of the company or its affiliates who, in the
opinion of the Committee, are responsible for the continued growth and
development and future financial success of the business.
GRANTS UNDER THE PLAN.
SHARES AVAILABLE. Twenty eight million shares of common stock will be
available for awards under the 2001 Plan. The available shares constitute
approximately 8% of the outstanding shares of the company as of January 31, 2001
and approximately 10% if combined with the 7.4 million shares currently
available for grant under the 1995 Stock Option Plan.
STOCK OPTIONS. Options granted under the 2001 Plan may be incentive stock
options, which qualify for favorable tax treatment for the option holder as
described below, or non-statutory stock options. However, options on no more
than 14,000,000 shares may be granted as incentive stock options. The option
price for both incentive stock options and non-statutory stock options may not
be less than the fair market value of the company's common stock on the date the
option is granted. The option price is payable in cash or in common stock of the
company having a fair market value equal to the option exercise price. The
proceeds received by the company from the sale of stock under the 2001 Plan are
added to the general funds of the company.
-56-
All unexercised options terminate after a certain number of years, as
determined by the Committee, but may not be longer than ten years in the case of
incentive stock options. Unexercised options may terminate earlier as a result
of the optionee's termination of employment or retirement. Shares under options
that have terminated or lapsed unexercised, will be available again for issuance
under the 2001 Plan.
Options are exercisable for Class B shares. However, if the shareholders
approve and the company completes the reclassification of the Class A and Class
B shares into a single new class of common stock, options will be exercisable
for that new class of common stock. In the event of a change in the number or
kind of outstanding shares of the company's common stock, stock split,
recapitalization, merger or other change in the capital structure of the
company, an appropriate adjustment may be made with respect to existing and
future options.
Options may be granted under the 2001 Plan until February 1, 2011. Options
outstanding at that date will continue in effect in accordance with the terms of
the 2001 Plan.
STOCK APPRECIATION RIGHTS. The Committee may grant stock appreciation
rights (which we refer to as "SARs"), either alone or in combination with an
underlying stock option, under the 2001 Plan. The term of each SAR will be fixed
by the Committee. SARs entitle the grantee to receipt of the same economic value
that would have been derived from the exercise of an option. Payment may be made
in cash, in shares or a combination of both at the discretion of the Committee.
If a SAR is granted in tandem with an underlying stock option, exercise of the
SAR will result in cancellation of the related option.
RESTRICTED STOCK AND STOCK UNIT AWARDS. The Committee may also award
shares under a restricted stock award or stock unit award. A restricted stock
award is an award of shares of company stock, while a stock unit award entitles
the recipient to a payment equal to the value of company stock. Restricted unit
awards may be settled in shares, cash or a combination thereof. Restricted stock
grants and stock unit grants are generally awarded subject to vesting
restrictions and conditions, such as remaining with the company for a
predetermined period of time and/or the achievement of pre-established
performance goals. If the recipient fails to achieve the designated goals or
terminates his or her service prior to the expiration of the vesting period, the
award is generally forfeited.
TREATMENT OF AWARDS ON A CHANGE IN CONTROL. The 2001 Plan provides that
upon a Change in Control each outstanding option or SAR becomes fully
exercisable and the restrictions and deferral limitations applicable to any
restricted stock award and stock unit award will lapse. A "Change in Control"
generally includes the acquisition by a third party of twenty percent or more of
the company's common stock, the replacement of the majority of the incumbent
directors by individuals not approved by a majority of the incumbent Board,
certain mergers, the sale of substantially all the assets or a liquidation of
the company.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief description of
the company's understanding of the federal income tax consequences applicable to
incentive stock options and non-statutory stock options granted under the 2001
Plan. This summary is not intended to constitute tax advice and specifically
does not address any state, local or foreign tax consequences.
-57-
INCENTIVE STOCK OPTIONS. The optionee pays no federal income tax upon the
grant or exercise of incentive stock options. If the optionee disposes of the
shares within two years after the date of the grant or one year after the date
of exercise, the excess of the stock's fair market value on the date of exercise
(or, if less, the amount realized on its sale) over the option price paid at
exercise will generally be taxable ordinary income to the optionee. In such a
case, the company will generally receive a deduction equal to the amount of
taxable ordinary income to the optionee. If the stock is held beyond such
period, any gain or loss realized upon the sale of such stock is treated as
long-term capital gain or loss to the optionee and the company will not receive
a tax deduction. In addition, subject to certain exceptions for death or
disability, if an incentive stock option is exercised more than three months
after termination of employment, the exercise of the option will generally be
treated as the exercise of a non-statutory stock option.
The exercise of an incentive stock option will give rise to an item of tax
preference that may result in alternative minimum tax liability for the optionee
unless the optionee disposes of the stock received upon exercise of the option
within the same calendar year of exercise.
NON-STATUTORY STOCK OPTIONS. A non-statutory stock option results in no
taxable income to the optionee or deduction to the company at the time it is
granted. An optionee exercising such an option will, at that time, realize
taxable compensation in the amount of the difference between the option price
and the then market value of the shares. A deduction for federal income tax
purposes will generally be allowable to the company in the year of exercise in
an amount equal to the taxable compensation realized by the optionee. The
optionee's tax basis in the option shares is equal to the option price paid for
such shares plus the amount includable in income upon exercise. At sale,
appreciation (or depreciation) after the date of exercise is treated as either
short-term or long-term capital gain (or loss) depending upon how long the
shares have been held.
STOCK APPRECIATION RIGHTS. The grant of a SAR does not result in income
for the grantee or in a deduction for the company. Upon the exercise of a SAR,
the grantee recognizes ordinary income and the company is generally entitled to
a deduction measured by the fair market value of the shares plus any cash
received.
RESTRICTED STOCK. Except as provided in the following sentence, a
participant will not recognize any taxable income, and the company will not be
allowed a tax deduction, upon the grant of restricted stock; rather, on the date
when the restrictions lapse, the grantee will recognize ordinary income equal to
the fair market value of the shares on that date. Alternatively, the participant
may elect, within 30 days after the grant of restricted stock, to recognize
ordinary income at the time of the grant, in which event the amount of such
ordinary income will be equal to the fair market value of the shares on the date
of grant. In either event, at the time the participant recognizes income with
respect to the restricted stock, the company is generally entitled to a
deduction in an equal amount.
STOCK UNIT AWARDS. A participant will not recognize any taxable
income, and the company will not be allowed a tax deduction, upon the grant of
stock units. Rather, on the date when cash, shares or a combination thereof are
delivered to the grantee, the grantee will recognize ordinary income equal to
the amount of any such cash plus the fair market value on that date of any such
shares, and the company will generally be entitled to a deduction in an equal
amount.
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LIMITATIONS ON COMPANY'S DEDUCTIONS; CONSEQUENCES OF CHANGE OF
CONTROL. Section 162(m) of the Internal Revenue Code limits the amount that the
company may deduct for compensation of its chief executive officer and its four
other highest-paid executive officers to $1 million per executive per year.
However, compensation paid under a shareholder-approved arrangement based upon
the achievement of objective performance goals is exempt from this limitation.
If the company's stockholders approve the 2001 plan, the compensation
attributable to stock options and SARs will be exempt from this limitation, and
the company will be entitled to deductions with respect to stock options and
SARs as described above. However, the compensation attributable to restricted
stock and stock unit awards will not be exempt from this limitation. Therefore,
the deduction that the company might otherwise receive with respect to such
awards to its top five executive officers may be disallowed. In addition, if a
Change of Control causes awards under the 2001 plan to vest as described above,
the participants could in some cases be considered to have received "excess
parachute payments," which could subject to participants to a 20% excise tax on
the excess parachute payments and could result in a disallowance of the
company's deductions.
MARKET VALUE. On January 31, 2001 the closing price of the company's Class
B shares on the New York Stock Exchange Composite Transactions was $35.19 per
share as reported in THE WALL STREET JOURNAL.
Individuals who will participate in the 2001 Plan in the future and the
amounts of their allotments are to be determined by the Committee subject to any
restrictions outlined above. Since no such determinations have yet been made, it
is not possible to state the terms of any individual options which may be issued
under the 2001 Plan or the names or positions of, or respective amounts of the
allotments to, any individuals who may participate.
THE BOARD OF DIRECTORS BELIEVES THAT THE 2001 PLAN IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR THE
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS
PROPOSAL, UNLESS YOU SPECIFY OTHERWISE IN YOUR PROXY.
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the 2002 annual
meeting must deliver the proposal to the Corporate Secretary at Raytheon
Company, Executive Offices, 141 Spring Street, Lexington, MA 02421, not later
than:
* November 25, 2001, if the proposal is submitted for inclusion in
Raytheon's proxy materials for the 2002 meeting pursuant to Rule
14a-8 under the Securities Exchange Act of 1934; or
* After the close of business on December 26, 2001 and before the
close of business on January 25, 2002, if the proposal is
submitted in accordance with Raytheon's by-laws, in which case
the company is not required to include the proposal in our proxy
materials.
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STOCKHOLDER PROPOSAL NUMBER 1
(Item No. 5 on the proxy card)
John A. Duggan, 803 Kittering Way, Worcester, MA 01609, beneficial
owner of 200 Class A shares, has proposed the adoption of the following
resolution and has furnished the following statement in support of his proposal:
EXECUTIVE COMPENSATION REVIEW
"WHEREAS, despite record profitability in the 1990s, U.S. corporations,
including Raytheon, have also laid off record number of workers, arguing that
cost-cutting is one key to long-term competitiveness and increased
profitability;
"WHEREAS, only 44% of firms that downsized employees saw a rise in operating
profits, according to a 1992 study by the American Management Association. The
same study found that only 31% of corporate downsizers experienced productivity
gains following the layoffs, while 77% experienced deterioration in employee
morale;
"WHEREAS, a 1992 study by the Haas School of Business at the University of
California at Berkeley found that firms with the widest pay gaps experienced
lower quality products and services. A study published in the JOURNAL OF
ORGANIZATIONAL BEHAVIOR found that high levels of executive compensation
generated cynicism among white-collar employees;
"WHEREAS, firms with large pay gaps between CEOs and other executives experience
executive turnover at twice the rate of firms with a more equal distribution of
pay among executives according to a 2000 study by Notre Dame University (Source:
WALL STREET JOURNAL, April 6, 2000);
"WHEREAS, Raytheon has announced the layoffs of more than 18,000 employees
between 1998 and 2000;
"WHEREAS, Raytheon experienced a bitter four week strike by 3,000 unionized
workers in 2000;
"WHEREAS, professional employees of Raytheon expressed concern and frustration
at last year's Raytheon annual meeting after learning that CEO Daniel Burnham
received a $900,000 bonus in 1999 after informing employees that there would be
no bonuses available for them due to the poor performance of the company;
"WHEREAS, we believe that asking employees to sacrifice, while at the same time
rewarding executives sends a mixed message to employees, suppliers and
shareholders. We believe that business success over the long term is enhanced
when business is viewed as a shared enterprise in which both the rewards and
sacrifices are equitably shared among all employees;
"WHEREAS, we believe that Raytheon's workforce is one of the company's most
prized assets and that it is management's responsibility to implement policies
and practices that keep the workforce satisfied and productive;
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"RESOLVED, shareholders request that the Board conduct a special executive
compensation review. The review shall look for ways to link a portion of
executive compensation to measures of employee satisfaction, including
consideration of employee surveys and employee turnover data. The results of
this review will be summarized in the Compensation Committee's report to
shareholders.
SUPPORTING STATEMENT
Several leading companies, including IBM, Bristol-Myers Squibb and
Procter & Gamble consider measures of employee satisfaction in setting executive
pay. As shareholders, we are concerned about the long-term effects of continuing
layoffs, contentious strikes, and executive pay practices which reward
executives with bonuses while at the same time denying bonuses to other
employees. In the current tight labor market it is vitally important that
Raytheon be a highly desirable place to work. This resolution creates a direct
and positive incentive for management to establish Raytheon as a great place to
work. PLEASE VOTE YES!
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
The company agrees that executive compensation should be reviewed
and in fact does annually review executive compensation. The company also
conducts annual external benchmarking using normative data to ensure that
executive compensation is competitive with the marketplace. The company
therefore believes that conducting an additional special review as proposed by
the shareholder would be unnecessary and needlessly costly and time consuming.
The company's current review involves an evaluation of a number of
measures of employee satisfaction, including "turnover data" or the executives
progress in improvement in recruiting and retention efforts. In addition, in the
company deployed a 360-degree feedback tool which provides leader and team
evaluation information from peers, subordinates and managers. This 360-degree
feedback is an evaluative instrument that the company employs to link a portion
of executive compensation to measures of employee satisfaction.
The company also measures employee satisfaction within the context
of determining People Metrics through the use of employee surveys. This survey
process began in 1999, and was designed to systematically measure employee
opinions and progress toward organizational effectiveness goals. Survey results
are one of the quantitative measures Raytheon uses to track improvement and one
of the factors contributing to results-based executive compensation decisions.
The survey process is based on a two-year cycle. In year one of the
cycle, a survey is distributed to every employee ("census survey"). In year two
of the cycle, scientifically drawn samples of employees are surveyed. The first
census survey was conducted in 1999. The total response rate on the 1999
employee census survey was 57%. In 2000, two samples were surveyed, one in July
and one in December. A total of 20% of the workforce was sampled in 2000 and the
7% improvement target was exceeded by 3%. In 2001, the second census survey will
be conducted. In 2002, quarterly samples (5% per quarter) will be surveyed.
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The objectives of the 1999 census survey were to establish the
baseline against which future progress in the area of employee morale would be
measured; provide all employees with the opportunity to contribute their
opinions systematically and in a way that ensures those opinions become part of
the company's formal assessment process; and provide the basis for "fact-based"
discussions between leaders and employees about ways to improve the company's
business and Raytheon as an employer. The objectives of the sample survey are to
monitor the work environment for effective performance, measure progress toward
the improvement goal set by the CEO and provide interim measures to businesses
to help them assure their local improvement actions are having the desired
effect.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST
THE ADOPTION OF THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL
BE SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.
STOCKHOLDER PROPOSAL NUMBER 2
(Item No. 6 on the proxy card)
The Sisters of St. Joseph, Nazareth, MI 49074, beneficial owners of
49 Class A shares, have proposed the adoption of the following resolution and
have furnished the following statement in support of the proposal. We understand
that the proposal is being co-sponsored by the following groups: Mercy
Consolidated Asset Management, the Sisters of Mercy of the Americas, the Sisters
of the Order of St. Dominic, Mercy Health Services, the School Sisters of Notre
Dame and the Benedictine Sisters.
OFFSETS
RESOLVED: Shareholders request the Company to disclose all significant promises
(including technology transfers), made to foreign governments or foreign firms
in connection with foreign military sales, intended to offset their U.S. dollar
cost of weapons purchased by foreign nations.
What Are Offsets?
Offsets are agreements by U.S. weapons manufacturers and the U.S.
government to direct some benefits -- usually jobs or technology -- back to the
purchasing country as a condition of sale. The value of offsets sometimes
exceeds the weapons' cost.
DIRECT OFFSETS transfer purchasing dollar and/or military technology
(often through licensing or joint production) to the recipient country to
produce a U.S. weapon system, its components, or sub-components.
INDIRECT OFFSETS may involve investments in the purchasing country,
counter-trade agreements to market foreign goods, or transfers of commercial
technology.
U.S. taxpayers finance offsets by (1) paying for the research and
development of weapons and (2) providing grants, loans and loan guarantees for
the sale. Offsets also lead to the loss of U.S. jobs.
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Are Offset Agreements Proprietary?
The U.S. arms industry guards information on offsets closely,
claiming "proprietary privilege." However, purchasing countries often disclose
such information for their own political purposes, e.g., to convince their
citizens that they are gaining some tangible benefits from the millions or
billions of dollars spent on arms.
The proponents believe that insofar as U.S. arms manufacturers (1)
engage in foreign policy by negotiating private offset agreements with foreign
governments, and (2) export domestic jobs while claiming that foreign military
sales create jobs, they forfeit their proprietary claims to this information.
Sound public policy demands transparency and public debate on these matters.
Offset Examples
In 1999, two U.S. companies offered lucrative production-sharing
contracts with Israeli military manufacturers, in connection with the company's
bidding on a contract with Israel.
Between 1993 and 1997 U.S. defense companies entered into new offset
agreements valued at $19 billion in support of $35 billion worth of defense
contracts. For every dollar a U.S. company received from an arms sale associated
with offsets, it returned 54 cents worth of offset obligations to the purchasing
country ("Offsets in Defense Trade 1999," Commerce Department).
1997 data shows that 13 U.S. prime military contractors reported 58
new offset agreements valued at $3.85 billion in support of $5.84 billion in
export contracts.
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
Raytheon is a global company conducting business in the international
marketplace. A portion of the company's international business consists of the
sale of military equipment. The company's international sales provide the means
for Raytheon to create new jobs and maintain its current labor force.
International sales of military equipment and services are made only in strict
compliance with U.S. government regulations that control where products may be
sold overseas and what products may be exported. The Department of Defense
and the Department of State identify countries whose policies are determined to
be hostile to American values and prohibits military sales in those countries.
Government regulations also impose strict licensing controls on the export of
equipment and technology to protect the long-term economic and national security
interests of the United States. Raytheon complies with all these U.S. government
restrictions and regulations.
Contractual agreements for offset transactions, such as technology
licensing, production sharing or co-marketing, are commonplace in international
sales for both commercial and military products. To the extent the company
engages in such transactions, it does so only in compliance with U.S. government
regulations and as negotiated with the customer. Failure to enter into such
arrangements could result in the loss of customers, and could translate into
lost jobs
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and diminished shareholder value. The company believes that robust and bilateral
trading leads to job creation at both ends of international transactions and is
beneficial to international economic stability and growth. Raytheon's offset
arrangements provide the company with a competitive advantage in the
international defense market. Competition for defense contracts with foreign
governments has grown in recent years due to decreased defense spending and
increased reliance on local and regional contractors to fulfill military needs.
These factors confirm the company's belief that offset arrangements influence a
foreign government's decision to select a defense contractor.
Under U.S. government regulations, the company is required to report
extensive information regarding the export of military products to the
Department of State, including specific information with respect to offset
transactions. This government regulation is evidenced by the Defense Offsets
Disclosure Act of 1999, which requires a description of any offset agreements
with respect to foreign military sales or direct commercial sales and
establishes a National Commission of government and private sector individuals
to review the use of offsets in the defense trade. Information regarding the
company's military exports is already adequately disclosed in various reports
from the company, the U.S. Defense Department, and the U.S. State Department. In
addition, in order to ensure that they are in accordance with, and in
furtherance of, our government's foreign policy and our national security, the
company's military exports are typically negotiated with extensive participation
of the U.S. Defense Department and are reviewed and approved by the U.S. State
Department.
The company understands that some shareholders may wish to know details of
the company's military sales contracts with respect to offset transactions.
However, much of the information requested is competitively sensitive. In
addition, many offset arrangements are subject to confidentiality agreements
with the customer. United States law recognizes this fact and affords
confidential treatment to information that is reported to the government
regarding offset transactions. Publication of such information would put
Raytheon at a competitive disadvantage in its business, may breach contractual
arrangements and would not be in the best interest of the company or the
majority of its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE
ADOPTION OF THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.
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STOCKHOLDER PROPOSAL NUMBER 3
(Item No. 7 on the proxy card)
John W. Wilson, 407 Otto Avenue, Salina, KS 67401, beneficial owner
of at least $2,000 of Class A shares, has proposed the adoption of the following
resolution and has furnished the following statement in support of his proposal:
RAYTHEON CORPORATE SHAREHOLDER PROPOSAL
BENCHMARKING EXECUTIVE COMPENSATION
"RESOLVED, that the stockholders of Raytheon (the "Company") request
that the Compensation and Compensation Administration Committees of the Board of
Directors, in establishing and administering standards for use in awarding
performance-based executive compensation, incorporate measures of human capital
such as contributions to employee training, morale and safety, in addition to
traditional measures of the Company's financial performance, such as stock
price."
SUPPORTING STATEMENT OF THE PROPONENT
At present the process for compensating the Company's senior
executive officers does not take into account any performance measures relating
to our most important resource - human capital. The loyalty and productivity of
the Company's workforce has demonstrably improved the Company's long-term
financial success. Recent downsizing and layoffs not related to loss of sales
threaten to destroy that loyalty and productivity.
A growing body of evidence links "high-performance workplace"
practices, which emphasize employee training, participation and feedback, with
better overall management, higher productivity and, ultimately, greater value
for shareholders. In light of that evidence, companies have begun to implement
compensation programs that incorporate measures of employee satisfaction and
development in the formula for determining executive pay. For example, UAL,
Eastman Kodak and Sears, Roebuck & Co. base certain executive compensation on,
among other factors, objective measures of employee satisfaction.
I believe that Raytheon's ability to attract, develop and retain
good employees is critical to its success, and that senior executives'
compensation should be based, in part, on the Company's progress toward
attaining that goal. To that end, I request that the Compensation and
Compensation Administration Committees of the Company's Board of Directors
formulate employment practice performance criteria to be used in determining
compensation for its senior executive officers and in bonus, stock option and
long-term incentive plans in which those executives participate. These measures
should constitute a significant component in determining the overall amount of
performance-based compensation.
Further, the employee satisfaction component of executive
compensation should include both affirmative and negative components. On the
affirmative side, an increase in measures of employee satisfaction should
result, all other factors remaining the same, in a higher overall performance
rating for the executive and thus a larger amount of performance-based
compensation. Employee satisfaction should be measured using objective surveys
and interviews conducted on at least an annual basis. On the negative side, an
executive's performance
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rating would decline upon the occurrence of certain events having a significant
adverse effect on the Company's employees or with respect to officers who do not
contribute positively to employment security, training, morale and safety.
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
The company believes that executive compensation should be based on
a variety of factors including some of those mentioned in the shareholder
proposal. However the company believes that its current methods of determining
performance based executive compensation are superior to that suggested by the
shareholder.
The company has implemented a Results-Based Incentive plan which
annually awards performance based executive compensations. One of the components
of the company's plan is People Metrics. People Metrics are measured using a
variety of tools, including employee survey data and a 360-degree feedback tool
which provides leader and team evaluation information from peers, subordinates
and managers. Employee training, morale and safety are each included in People
Metrics and as a result are used in the determination of performance based
executive compensation.
Employee training is included in People Metrics through the
measurement of an executive's progress in the career development of his or her
employees. This includes measurement of the executives development of people
processes, team leadership and identification of high potential employees and
moving them into leadership rolls. Employee development and training are also
the driving factors behind the creation of the Raytheon Learning Institute
comprised of the Leadership Institute, Raytheon Six Sigma Institute, Engineering
Institute and Enterprise Excellence Institute.
With respect to employee morale, the company makes extensive use of
employee surveys, the results of which are a component of People Metrics and as
a result are used in the determination of performance based executive
compensation. Specifically, the surveys measure an executive's progress towards
reaching a targeted level of improvement in the employee satisfaction index and
attaining a targeted employee satisfaction level over time.
Employee safety is also a component of People Metrics and used to
determine performance based executive compensation. In addition, one time awards
have been given for improvements in employee safety. Over the past twenty-four
months, the lost workday injury rate at the company has decreased by fifty
percent and a significant reduction in OSHA recordable injuries has been
documented.
In addition, the company uses other components of human capital in
determining People Metrics, including a measurement of the executives progress
towards building an inclusive and diverse culture. This includes measuring an
executive's ability to communicate broadly to engage people as part of the
solution, their participating in a diversity conference and their ability to
facilitate employee networking and mentoring.
Based on the foregoing, the company believes that its current
compensation methods are a more effective method of achieving the goals sought
by the shareholder. Further,
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executives are held accountable for the implementation and maintenance of the
new performance development process, which focuses on the continued development
of employees and alignment with corporate values and goals.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE
ADOPTION OF THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.
STOCKHOLDER PROPOSAL NUMBER 4
(Item No. 8 on the proxy card)
The Massachusetts Carpenters Combined Pension Fund, 350 Fordham
Road, Wilmington, MA 01887, beneficial owner of 4,900 Raytheon shares, has
proposed the adoption of the following resolution and has furnished the
following statement in support of its proposal:
"RESOLVED, that the shareholders of Raytheon Company (the "Company") request
that the Board of Directors adopt an executive compensation policy that all
future stock option grants to senior executives shall be performance-based. For
the purposes of this resolution, a stock-option is performance-based if its
exercise price is linked to an industry performance index associated with the
peer group companies used for stock price comparisons in the Company's proxy
statement."
SUPPORTING STATEMENT
As long-term shareholders of the company, we support executive
compensation policies and practices that provide challenging performance
objectives and serve to motivate executives to achieve long-term corporate value
maximization goals. While salaries and bonuses compensate management for
short-term results, the grant of stock and stock options has become the primary
vehicle for focusing management on achieving long-term results. Unfortunately,
these option grants can and do often provide levels of compensation well beyond
those merited. It has become abundantly clear that stock option grants without
specific performance-based targets often reward executives for stock price
increases due solely to a general stock market rise, rather than improved or
superior company performance.
Indexed stock options are options whose exercise price moves with an
appropriate market index composed of a company's primary competitors. The
resolution requests that the company's Board ensure that future company stock
option plans link the option exercise price to an industry performance index
associated with the peer group of companies used for stock price comparisons in
the company's proxy statement.
Implementing an indexed stock option plan would mean that our
company's participating executives would receive payouts only if the company's
stock price performance was better than that of the peer group average. By tying
the exercise price to a market index, indexed options reward participating
executives for outperforming the competition. Indexed options would have value
when our company's stock price rises in excess of its peer group average or
declines less than its peer group average stock price decline. By downwardly
adjusting the exer-
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cise price of the option during a downturn in the industry, indexed options
remove pressure to reprice stock options. In short, superior performance would
be rewarded.
At present, the company's stock option plan is not indexed to peer
group performance standards. Further, our company's stock performance has been
significantly below that of its peer group and the S&P 500 since the company's
merger with Hughes Electronics Corporation in 1997. An investment of $100 in the
company's Class A or B shares in December 1997 was worth only $47.05 or $49.19,
respectively, in December 1999.
As long-term owners, we feel strongly that our company would benefit
from the implementation of a stock option program that rewarded superior
long-term corporate performance. In response to strong negative public and
shareholder reactions to the excessive financial rewards provided executives by
non-performance based option plans, a growing number of shareholder
organizations, executive compensation experts, and companies are supporting the
implementation of indexed stock option plans. We urge your support for this
important governance reform.
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
Stock Options are an important retention tool at Raytheon. Stock
options are considered a form of long-term variable pay. Exempt employees, who
have demonstrated extremely high performance or greater long-term potential, are
eligible to participate in the Stock Option Program.
While the Stock Option Program is not an indexed option program,
Raytheon's Long-term Achievement Plan (LTAP) awarded to senior leadership of the
corporation is based on stock appreciation. The current plan awards performance
that results in the attainment of growth in the appreciation of the value of
Raytheon stock using performance based options. Specifically, when the stock
price reaches the predefined growth level (20% compounded) and is sustained for
a period of 20 trading days, one third of the options vest. Similarly, the
second third would become exercisable upon attaining an additional twenty
percent growth with the final third becoming exercisable after the attainment of
an additional twenty percent growth in the price of Raytheon's Class B shares.
This program is designed to ensure that executives are not rewarded for stock
price increases due solely to a general stock market rise, rather that they are
rewarded for improved company performance that is sustained over time.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE
ADOPTION OF THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.
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STOCKHOLDER PROPOSAL NUMBER 5
(Item No. 9 on the proxy card)
John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA,
90278, beneficial owner of 50 Class A shares and 3 Class B shares, has proposed
the adoption of the following resolution and has furnished the following
statement in support of the proposal:
ADOPT RESOLUTION THAT WON 60% OF SHAREHOLDER VOTE:
ELECT THE ENTIRE BOARD OF DIRECTORS EACH YEAR
John Chevedden, Calif., Raytheon shareholder, submits this proposal
for shareholder approval.
"RESOLVED: Adopt resolution that won 60% of shareholder vote: Elect the entire
Board of Directors each year with a majority of independent directors."
Raytheon shareholders request the Board of Directors take all
necessary steps to enact this resolution. This includes that less frequent than
annual election of the entire board be voted as a separate resolution.
(Unexpired terms of directors not affected.)
Why Elect The Entire Board Of Directors Each Year?
To make Raytheon more competitive at the highest corporate level -
Where it will have the greatest impact to improve Raytheon's dismal performance:
Raytheon ranks below average (4) in timeliness.
VALUE LINE June 23, 2000
Raytheon has the dubious distinction of posting some of the lowest scores
in key performance measures in AVIATION WEEK'S Competitive Index.
AVIATION WEEK May 31, 1999
Raytheon suffers from:
* $638 million write-off
* $600 million shortfall in revenue
* Lower growth estimates
The stock price fall was a massacre - 40%.
AVIATION WEEK Oct. 18, 1999
40% Drop Is A Shareholder Loss Of Over $4 Billion.
Raytheon stock is trading at 33% of its former peak. We estimate a slow
recovery.
VALUELINE June 30, 2000
Raytheon CEO Daniel Burnham gets $20 million in stock. If fired he gets
3-times his annual pay and 3-times his bonus.
WALL STREET JOURNAL March 31, 1999
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* Edward Jones analyst Bill Fiala said "It doesn't get much uglier."
Raytheon's disclosures concern "areas that are the bread and butter of
Raytheon."
* JSA analyst Paul Nisbet said, "The credibility has gone to
near-zero, and its going to be a long time before its back."
BOSTON GLOBE Oct. 13, 1999
Retired Chairman Dennis Picard will remain on Raytheon's board.
WALL STREET JOURNAL April 29, 1999
* For most of the this decade, Raytheon was dominated by Mr. Picard.
* The aggressive culture that Picard left behind - in which managers had
difficulty facing up to and reporting bad news on a timely basis -
exacerbated the difficulties.
* The company must spend millions of dollars on legal fees to defend
against shareholder lawsuits.
The combination of Raytheon's classified board and poison pill
entrenches management and lessens management's incentive to improve company
performance. This combination is a formidable defense against takeover
overtures. In order to repeal the company's poison pill and complete an
acquisition, a shareholder group must win all board seats up for election at 2
consecutive annual meetings.
As a sign that management is not interested in the preference of its
shareholders, management hired a $269-million law firm to prevent shareholders
from voting on this resolution in 1999. This proposal won the challenge of
management's $269-million law firm and won increased shareholder support in
achieving 60% shareholder approval at the 2000 annual meeting.
Annual election of directors will encourage an independent and
competitive Raytheon board for effective oversight of management.
The best boards continue to raise the bar, said BUSINESS WEEK -
ADOPT RESOLUTION THAT WON 60% OF SHAREHOLDER VOTE:
ELECT THE ENTIRE BOARD OF DIRECTORS EACH YEAR
YES ON 9
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
The company's current system of electing directors by classes was
originally approved by Raytheon shareholders in 1985. Under this method, as
provided in the company's Restated Certificate of Incorporation and By-laws,
approximately one-third of the directors are elected annually by the
shareholders.
The same proponent has presented a proposal to eliminate the classified
Board in each of the last three years. The Proponent's Supporting Statement
references many matters that the Board does not believe relate to a classified
Board, such as executive compensation and management styles of former
executives. Furthermore, the Board disagrees with the proponent's contention
that our Board is not currently independent. In fact, eleven of the fourteen
directors
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on our current Board are independent and the Board has taken steps to maintain
such independence by adopting a set of Corporate Governance guidelines,
described on page 8 of this proxy statement, which state that a substantial
majority of the Board should be comprised of independent directors.
The Board of Directors has again, reviewed the issues raised in the
proposal and, for the reasons indicated below, continues to believe that the
classified Board best serves the company and its shareholders.
With the classified Board, the likelihood of continuity and stability in
the Board's business strategies and policies is enhanced since generally two
thirds of the directors at all times will have had prior experience and
familiarity with the business and affairs of the company. This enables the
directors to build on past experience and plan for a reasonable period into the
future.
The Board believes that directors elected to a classified Board are no
less accountable to shareowners than they would be if all directors were elected
annually. Since one-third of the directors must stand for election each year,
the shareowners have the opportunity annually to vote against management. The
Board addresses many important issues during the year and it disagrees with any
suggestion that its attention to these issues is in any way affected by the
timing of elections.
In addition, our classified Board structure provides the additional
benefit of reducing the likelihood of a sudden, unsolicited and possibly
disadvantageous takeover of the company without prior discussions with the
Board. If a hostile acquiror cannot circumvent negotiations with the Board, the
Board has the ability to evaluate potential takeover offers, seek alternatives
to unacceptable proposals and negotiate to achieve the best possible outcome for
shareholders. While the classified Board does not preclude a successful takeover
offer, the Board of Directors believes that it enhances the Board's ability to
negotiate favorable terms and thereby provide shareholders with the best value
in the event the shareholders decide that such a takeover is beneficial.
Finally, adoption of this proposal would not automatically result in the
elimination of the classified Board. Further action by shareholders is required
to amend the Certificate of Incorporation and By-laws. In order to amend these
documents, a majority vote of the outstanding Class A shares and the Class B
shares would be required. Furthermore, under Delaware law, the Certificate of
Incorporation can only be amended following a recommendation of the Board of
Directors prior to submission to shareholders. While the Board, consistent with
its fiduciary duties, would consider such an amendment, for the foregoing
reasons the Board does not currently believe that such an amendment would be in
the best interest of the company or its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE
ADOPTION OF THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.
-71-
STOCKHOLDER PROPOSAL NUMBER 6
(Item No. 10 on the proxy card)
John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, CA,
90278, on behalf of Ray T. Chevedden and Veronica G. Chevedden, beneficial
owners of 127 Class A shares, has proposed the adoption of the following
resolution and has furnished the following statement in support of the proposal:
ADOPT THE PROPOSAL THAT WON 60% SHAREHOLDER APPROVAL IN 2000:
SHAREHOLDER OPPORTUNITY TO VOTE ON POISON PILLS
"RESOLVED: SHAREHOLDER OPPORTUNITY TO VOTE ON POISON PILLS
Recommend the company not adopt or maintain any poison pill designed to
block the acquisition of stock in excess of a specified amount: UNLESS
such plan or agreement has been previously approved by a majority
shareholder vote. This includes, but is not limited to the poison pill
that was adopted by the Company WITHOUT SHAREHOLDER APPROVAL in 1997.
After adoption this proposal is not to be amended, modified or repealed,
except as a separate proposal by a shareholder vote."
SUPPORTING STATEMENT:
Raytheon adopted a 10-year poison-pill without shareholder vote -
despite a commitment to shareholders not to do so.
Investor Responsibility Research Center; Washington, DC, Feb. 13,
1998
Why submit the Raytheon poison pill to a shareholder vote?
* The poison pill is an anti-takeover device, which injure shareholders
by reducing management accountability and adversely affecting
shareholder value.
* Pills give directors absolute veto power over any proposed business
combination, no matter how beneficial it might be for the shareholders.
Nell Minow and Robert Monks in their book, POWER AND ACCOUNTABILITY
* Shareholder right to vote on poison pill resolutions achieved 60%
APPROVAL from shareholders in 1999. Investor Responsibility Research
Center's Corporate Governance Bulletin, April-June 1999
* The Council of Institutional Investors (http://www.cii.org/ &
http://www.cii.org/ ciicentral/policies.htm) recommends shareholder
approval of all poison pills in its Shareholder Bill of Rights.
* The Council of Institutional Investors Shareholder Bill of Rights also
recommends that companies adopt proposals that win a majority
shareholder vote as this proposal did (60%).
-73-
The adoption of proposals winning majority vote is of greater
significance to Raytheon. Reason: The company has additional management
practices that are not competitive - according to many large shareholders:
* No cumulative voting.
* No annual election of all directors.
* Unequal voting rights on the election and removal of directors.
* Dual class common stock.
* Outside directors have an ax to grind with added financial links to the
company.
* Directors are over-committed to non-Raytheon interests in a time of
Raytheon shareholder crisis:
Mr. Deutch 5 outside boards
Mr. Everhart 7 outside boards
* Mr. Picard, retired Raytheon CEO, sits on the nominating committee.
* Mr. Rudman, whose employer collects legal fees from Raytheon, sits on
both the nominating and compensation committees.
* Mr. Deutch collects consulting fees from Raytheon and sits on the
nominating committee.
What issues highlight concern about improving Raytheon's performance at the
highest corporate level:
Raytheon's $668 million write-off including layoff expenses for 2,380
employees. WALL STREET JOURNAL Oct. 13, 1999
Raytheon's merger difficulties may be not be solved until 2003-2005.
VALUE LINE March 31, 2000
Raytheon tells Delaware court that it paid too much for its $9 billion
acquisition of Hughes Defense.
WALL STREET JOURNAL May 21, 1999
In its response to this resolution, Raytheon management is asked to
name the steps it has taken in the last year to improve corporate governance at
the highest level of the company. Improvement at the highest corporate level can
have the greatest impact and can be a cost-free alternative to $668 million
write-offs.
To increase shareholder value vote yes:
ADOPT THE PROPOSAL THAT WON 60% SHAREHOLDER APPROVAL IN 2000:
SHAREHOLDER OPPORTUNITY TO VOTE ON POISON PILLS
YES ON 10
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
The same proponent has presented a proposal to change the company's
shareholder rights plan in each of the last two years. The Proponent's
Supporting Statement references many matters that the Board does not believe
relate to the company's current shareholder rights plan, such
-73-
as the tenure of directors, directors' positions on other boards, the
constitution of Board committees, the current dual class capital structure and
cost reduction efforts undertaken by the company in the ordinary course. The
Board of Directors has again, reviewed the issues raised in the proposal and,
for the reasons indicated below, continues to believe that the current
shareholder rights plan best serves the company and its shareholders.
The company's shareholder rights plan is designed to protect shareholders
in the event of certain unsolicited attempts to acquire control of the company,
including a partial or two-tier tender offer that fails to treat all
shareholders equally, a "creeping acquisition" of the company by the purchase of
stock on the open market and other acquisition tactics that the Board believes
are unfair to the company's shareholders and are not in their best interests.
Plans similar to the company's plan have been adopted by a majority of the
companies included in the S&P 500 Stock Index.
A major function of the rights plan is to give the Board a greater period
of time within which it can properly evaluate an acquisition offer. A second
major function of the plan is to induce a bidder for the company to negotiate
with the Board and thus strengthen the Board's bargaining position vis-a-vis the
bidder. The plan thus enables the Board, as elected representatives of the
shareholders, to better protect and further the interests of shareholders in the
event of an acquisition proposal. The Board gains the opportunity and additional
time to determine if an offer reflects the full value of the company and is fair
to all shareholders, and if not, to reject the offer or to seek an alternative
that meets these criteria.
The Board's fiduciary duty to shareholders dictates that it evaluate the
merits of each and every acquisition presented to the Board and seek to insure
that any proposed business combination or acquisition delivers full value to the
shareholders. Redeeming the rights would remove an important tool that the Board
should have for the protection of shareholders. The Board therefore believes
that any decision to redeem the rights should be made in the context of a
specific acquisition proposal.
Although some would contend that shareholder rights plans inhibit
realization of shareholder value, research indicates that having a rights plan
accomplishes the stated goal of maximizing shareholder value, while not having a
rights plan may in fact undercut this goal. A 1994 study by two University of
Rochester economists concluded that rights plans are reliably associated with
higher premiums for selling shareholders and that antitakeover measures increase
the bargaining position of target firms.
A 1997 study published by Georgeson & Company determined that companies
with shareholder rights plans received $13 billion dollars in additional
takeover premiums during the period from 1992 to 1996. The Georgeson study also
concluded that (1) premiums paid to acquire target companies with shareholder
rights plans were on average eight percentage points higher than premiums paid
for target companies that did not have such plans, (2) the presence of a rights
plan did not increase the likelihood of the defeat of a hostile takeover bid or
the withdrawal of a friendly bid and (3) rights plans did not reduce the
likelihood that a company would become a takeover target. Thus, evidence
suggests that rights plans serve their principal objectives: protection against
inadequate offers and abusive tactics and increased bargaining power
-74-
resulting in higher value for shareholders.
The Board believes that the company's rights plan is not intended to, and
does not, preclude unsolicited, non-abusive offers to acquire the company at a
fair price. Instead, the plan strengthens the Board's ability, in the exercise
of its fiduciary duties, to protect and maximize the value of shareholders'
investment in the company in the event of an attempt to acquire control of the
company. As such, the plan would not affect any takeover proposal the Board
believes to be in the best interests of shareholders. The overriding objective
of the Board remains the preservation and the maximization of the company's
value for all shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THE
ADOPTION OF THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS STOCKHOLDERS OTHERWISE SPECIFY IN THEIR PROXIES.
OTHER MATTERS
Whether or not you plan to attend the meeting, please vote over the
Internet or by telephone or complete, sign and return the proxy card(s) sent to
you in the envelope provided. No postage is required for mailing in the United
States.
The company's 2000 annual report, which is not a part of this proxy
statement and is not proxy soliciting material, is enclosed.
By Order of the Board of Directors,
/s/ John W. Kapples
---------------------------------
John W. Kapples
Secretary
Lexington, Massachusetts
[Month] [Date], 2001
-75-
APPENDIX A
------------
RAYTHEON COMPANY
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company, (2) the
compliance by the Company with legal and regulatory requirements and (3) the
independence and performance of the Company's internal and external auditors.
The members of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange. The members
of the Audit Committee shall be appointed by the Board on the
recommendation of the Governance Committee.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee may
request any officer or employee of the Company or the Company's outside counsel
or independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval.
2. Review the annual audited financial statements with management, including
major issues regarding accounting and auditing principles and practices as
well as the adequacy of internal controls that could significantly affect
the Company's financial statements.
3. Review an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements.
4. Meet periodically with management to review the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures.
5. Review with management and the independent auditor the Company's quarterly
financial results prior to the filing of the Company's Form 10-Q.
6. Review major changes to the Company's auditing and accounting principles
and practices as suggested by the independent auditor, internal auditors or
management.
7. Recommend to the Board the appointment of the independent auditor, which
firm is ultimately accountable to the Audit Committee and the Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the Board take
appropriate action to satisfy itself of the independence of the auditor.
10. Evaluate together with the Board the performance of the independent auditor
and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.
11. Review the appointment and replacement of the senior internal auditing
executive.
12. Review the significant reports to management prepared by the internal
auditing department and management's responses.
13. Meet with the independent auditor prior to the audit to review the planning
and staffing of the audit.
14. Obtain from the independent auditor assurance that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been implicated.
15. Obtain reports from management, the Company's senior internal auditing
executive and the independent auditor that the Company's subsidiary/foreign
affiliated entities are in conformity with applicable legal requirements
and the Company's Code of Conduct.
16. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61 relating to the conduct of the
audit.
17. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access
to required information.
(b) Any changes required in the planned scope of the internal audit.
(c) The internal audit department responsibilities, budget and
staffing.
18. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
19. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Conduct.
-2-
20. Review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies.
21. Meet at least annually with the chief financial officer, the senior
internal auditing executive and the independent auditor in separate
executive sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations and the Company's Code of Conduct.
-3-
APPENDIX B
------------
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION OF
RAYTHEON COMPANY
Raytheon Company, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a regular meeting of the members of the board of
directors of the Corporation, resolutions were duly adopted setting forth
proposed amendments to the Certificate of Incorporation of the Corporation and
declaring said amendments to be advisable. The resolutions setting forth the
proposed amendments are as follows:
RESOLVED, that, upon approval of the stockholders of the
Corporation, Section 1 of Article IV of the Corporation's Certificate of
Incorporation be amended to read in its entirety as follows:
Each twenty (20) shares of Class A Common Stock (as defined below),
either issued and outstanding or held by the Corporation as treasury
stock, immediately prior to the time this amendment becomes
effective shall be and are automatically reclassified and changed
(without any further act) into one (1) fully-paid and nonassessable
share of Class A Common Stock, provided, that no fractional shares
shall be issued.
Each twenty (20) shares of Class B Common Stock (as defined below),
either issued and outstanding or held by the Corporation as treasury
stock, immediately prior to the time this amendment becomes
effective shall be and are automatically reclassified and changed
(without any further act) into one (1) fully-paid and nonassessable
share of Class B Common Stock, provided, that no fractional shares
shall be issued.
The Corporation is authorized to issue 272,500,000 shares of capital
stock of which (a) 72,500,000 shares shall be shares of Common Stock
$.01 par value per share ("Common Stock"), and which shares of
Common Stock shall be divided into two classes, 22,500,000 shares of
Common Stock shall be shares of Class A Common Stock ("Class A
Common Stock") and 50,00,000 shares of Common Stock shall be shares
of Class B Common Stock ("Class B Common Stock"), and (b)
200,000,000 shares shall be shares of Preferred Stock $.01 par value
per share ("Preferred Stock").
SECOND: That at the annual meeting of stockholders, said amendments
were duly adopted in accordance with the applicable provisions of Sections 242
of the General Corporation Law of the State of Delaware.
-1-
IN WITNESS WHEREOF, said the Raytheon Company has caused this
certificate to be signed by its Vice President this __ day of [ ], 2001.
By:
------------------------
Name:
Title:
-2-
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION OF
RAYTHEON COMPANY
Raytheon Company, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a regular meeting of the members of the board of
directors of the Corporation, resolutions were duly adopted setting forth
proposed amendments to the Certificate of Incorporation of the Corporation and
declaring said amendments to be advisable. The resolutions setting forth the
proposed amendments are as follows:
RESOLVED, that, upon approval of the stockholders of the Corporation,
Section 1 of Article IV of the Corporation's Certificate of Incorporation
be amended to read in its entirety as follows:
Each share of Class A Common Stock (as defined below), either issued
and outstanding or held by the Corporation as treasury stock,
immediately prior to the time this amendment becomes effective shall
be and is automatically reclassified and changed (without any
further act) into twenty (20) fully-paid and nonassessable shares of
Class A Common Stock, provided, that no fractional shares shall be
issued.
Each share of Class B Common Stock (as defined below), either issued
and outstanding or held by the Corporation as treasury stock,
immediately prior to the time this amendment becomes effective shall
be and is automatically reclassified and changed (without any
further act) into twenty (20) fully-paid and nonassessable shares of
Class B Common Stock, provided, that no fractional shares shall be
issued.
The Corporation is authorized to issue 1,650,000,000 shares of
capital stock of which (a) 1,450,000,000 shares shall be shares of
Common Stock $.01 par value per share ("Common Stock"), and which
shares of Common Stock shall be divided into two classes,
450,000,000 shares of Common Stock shall be shares of Class A Common
Stock ("Class A Common Stock") and 1,000,000,000 shares of Common
Stock shall be shares of Class B Common Stock ("Class B Common
Stock"), and (b) 200,000,000 shares shall be shares of Preferred
Stock $.01 par value per share ("Preferred Stock").
SECOND: That at the annual meeting of stockholders, said amendments
were duly adopted in accordance with the applicable provisions of Sections 242
of the General Corporation Law of the State of Delaware.
-1-
IN WITNESS WHEREOF, said the Raytheon Company has caused this
certificate to be signed by its Vice President this __ day of [ ], 2001.
By:
-------------------------------
Name:
Title:
-2-
APPENDIX C
------------
MORGAN STANLEY DEAN WITTER
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
January 23, 2001
Board of Directors
Raytheon Corporation
141 Spring Street
Lexington, MA 02421-9107
To the Board of Directors:
We understand that Raytheon Company ("Raytheon" or the "Company") proposes to
amend its Restated Certificate of Incorporation, dated February 11, 1998 (the
"Certificate of Incorporation"), pursuant to amendments, substantially in the
form of the draft dated January 23, 2001 (the "Amendment"). Pursuant to the
Amendment, Raytheon proposes to undertake a reclassification of its Class A
Common Stock, par value $0.01 per share (the "Class A Stock"), and Class B
Common Stock, par value $0.01 per share (the "Class B Stock"), into a single
class of Raytheon Common Stock, par value $0.01 per share (the "New Common
Stock"), whereby each outstanding share of Class A Stock and Class B Stock will
be exchanged for one share (the "Exchange Ratio") of New Common Stock (the
"Reclassification").
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Amendment is fair from a financial point of view to the holders of shares of
Class A Stock and to the holders of Class B Stock.
For the purposes of the opinion set forth herein, we have:
(i) reviewed the reported prices and trading activity for the Class A
Stock and the Class B Stock;
(ii) discussed with management the rationale for the Reclassification and
for the original creation of a dual class structure and certain
information related thereto;
(iii) compared the financial performance of the Company and the prices and
trading activity of the Class A Stock and the Class B Stock with
that of other comparable publicly traded companies with dual classes
of stock;
(iv) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(v) reviewed the Articles of Incorporation, the draft Amendment and
certain related documents; and
(vi) conducted such other analyses and considered such other factors as
we deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. In addition, we have assumed that the Reclassification will be
consummated in accordance with the terms set forth in the draft Amendment. Our
opinion is necessarily based on financial, economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof.
We have acted as financial advisor to the Board of Directors of Raytheon in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for Raytheon and have received fees
for the rendering of these services.
It should be understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that a copy of such opinion letter may be included
in its entirety, if required, in any filing made by Raytheon in respect of the
transaction with the Securities and Exchange Commission. It should further be
understood that, although subsequent developments may affect this opinion, we do
not have any obligation to update, revise or reaffirm this opinion. Our opinion
does not constitute an opinion as to the prices at which the New Common Stock,
Class A Stock and Class B Stock of Raytheon will actually trade at any time and
our opinion does not address the relative fairness of the consideration to be
received among such classes of stock. Furthermore, our opinion does not address
the relative merits of the Amendment compared to other business strategies being
considered by, or available to, the Company's Board of Directors, nor does it
address the Board's decision to proceed with the adoption of the
Reclassification. Our opinion does not constitute a recommendation to any
shareholder as to how such shareholder should vote with respect to the
Amendment.
Based on and subject to the foregoing we are of the opinion on the date hereof
that the Exchange Ratio pursuant to the Amendment is fair from a financial point
of view to the holders of shares of Class A Stock and to the holders of Class B
Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Richard W. Swift
-----------------------------------
Richard W. Swift
Managing Director
-2-
APPENDIX D
------------
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION OF
RAYTHEON COMPANY
Raytheon Company, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a regular meeting of the members of the board of
directors of the Corporation, resolutions were duly adopted setting forth
proposed amendments to the Certificate of Incorporation of the Corporation and
declaring said amendments to be advisable. The resolutions setting forth the
proposed amendments are as follows:
RESOLVED, that, upon approval of the stockholders of the Corporation, the
following changes (the "Charter Amendments") be made to the Corporation's
Certificate of Incorporation:
Section 1 of Article IV shall be amended to read in its entirety as
follows:
Each share of Class A Common Stock, par value $.01, of the
Corporation, either issued and outstanding or held by the
Corporation as treasury stock, immediately prior to the time
this amendment becomes effective shall be and is automatically
reclassified and changed (without any further act) into 1
fully paid and nonassessable share of Common Stock (as defined
below) without increasing or decreasing the amount of stated
capital or paid-in surplus of the Corporation, provided that
no fractional shares shall be issued.
Each share of Class B Common Stock, par value $.01, of the
Corporation, either issued and outstanding or held by the
Corporation as treasury stock, immediately prior to the time
this amendment becomes effective shall be and is automatically
reclassified and changed (without any further act) into 1
fully paid and nonassessable share of Common Stock without
increasing or decreasing the amount of stated capital or
paid-in surplus of the Corporation, provided that no
fractional shares shall be issued.
The Corporation is authorized to issue 1,650,000,000 shares of
capital stock of which (a) 1,450,000,000 shares shall be
shares of Common Stock $.01 par value per share ("Common
Stock") and (b) 200,000,000 shares shall be shares of
Preferred Stock $.01 par value per share ("Preferred Stock").
Section 2 of Article IV be amended to read in its entirety as follows:
Common Stock. Except as provided herein, as otherwise provided
by law or by the resolution or resolutions adopted by the
Board designating the rights, powers and preferences of any
series of Preferred Stock, the Common Stock shall have the
exclusive right to vote for the election of directors and for
all other purposes, in each case acting by such vote as
required under applicable law (or by such greater vote than
would be required under applicable law as may be set forth
herein or in the By-laws of the Corporation). Each share of
Common Stock shall have one vote, and the Common Stock shall
vote together as a single class on all matters to be voted on
by the Corporation's stockholders.
Subject to the rights of the holders of any class or series of
outstanding Preferred Stock and subject to any other
provisions hereof and applicable law, holders of Common Stock
will be entitled to dividends and such other distributions in
cash, securities or property of the Corporation as may be
declared thereon by the Corporation's board of directors, out
of funds legally available therefor, whether payable in cash,
property or securities of the Corporation
Section 3 of Article VI be amended to read in its entirety as
follows:
Newly created directorships and vacancies. Except as otherwise
provided for or fixed by or pursuant to the provisions of
Article IV relating to the rights of the holders of any class
or series of stock having a preference over the Common Stock
as to dividends or upon liquidation to elect directors under
specified circumstances, (i) newly created directorships
resulting from any vacancies on the Board resulting from
death, resignation, disqualification, removal or other cause
shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a
quorum of the Board, and not by the stockholders and (ii)
newly created directorships resulting from any increase in the
number of directors after the adoption of a resolution by a
majority of the Whole Board in accordance with Section 1 of
this Article VI shall be filled by the affirmative vote of the
holders of Common Stock, voting in accordance with the
provisions of Section 2 of Article IV. Any director appointed
in accordance with clause (i) of the preceding sentence shall
hold office until the next annual or special meeting of
stockholders and until such director's successor shall have
been duly elected and qualified. Any director elected in
accordance with clause (ii) of the preceding sentence shall
hold office for the remainder of the full term of the class of
director in which the new directorship was created and until
such director's successor shall have been duly elected and
qualified. No decrease in the number of directors constituting
the Board shall shorten the term of any incumbent director.
-2-
Section 4 of Article VI be amended to read in its entirety as
follows:
Removal. Subject to the rights of any class or series of stock
having a preference over the Common Stock as to dividends or
upon liquidation to elect directors under specified
circumstances, any director may be removed from office only
for cause by the affirmative vote of the holders of the shares
of Common Stock, voting in accordance with the provisions of
Section 2 of Article IV.
Article VII be amended to read in its entirety as follows:
By-laws. The By-Laws may be altered or repealed and new
By-Laws may be adopted (1) at any annual or special meeting of
stockholders, by the affirmative vote of the holders of the
shares of Common Stock voting in accordance with the
provisions of Section 2 of Article IV; provided, however, that
in the case of any such stockholder action at a special
meeting of stockholders, notice of the proposed alteration,
repeal or adoption of the new By-Law or By-Laws must be
contained in the notice of such special meeting, or (2) by the
affirmative vote of a majority of the Whole Board.
SECOND: That at the annual meeting of stockholders, said
amendments were duly adopted in accordance with the applicable provisions
of Sections 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said the Raytheon Company has caused this
certificate to be signed by its Vice President this __ day of [ ], 2001.
By:
-------------------------------
Name:
Title:
-3-
APPENDIX E
------------
RAYTHEON
2001 STOCK PLAN
ARTICLE I
1. PLAN NAME. This plan shall be known as the Raytheon 2001 Stock Plan.
ARTICLE II
2. PURPOSE. This Plan is intended to encourage ownership of Stock by key
employees of Raytheon Company and its Affiliates and to provide additional
incentive for them to promote the success of the Company's business. With
respect to any Incentive Stock Options that may be granted hereunder, the Plan
is intended to be an incentive stock option plan within the meaning of Section
422 of the Code.
ARTICLE III
3. EFFECTIVE DATE; TERM. The Plan is effective as of the date on which the
Plan is adopted by the Board, subject to approval of the stockholders as
required by law. No Award shall be granted under the Plan after the close of
business on the day immediately preceding the tenth (10th) anniversary of the
effective date of the Plan. Subject to other applicable provisions of the Plan,
all Awards made under the Plan prior to such termination of the Plan shall
remain in effect until such Awards have been satisfied or terminated in
accordance with the Plan and the terms of such Awards.
ARTICLE IV
4. DEFINITIONS. As used in the Plan, the following terms have the
following meanings:
4.1 AFFILIATE means any entity, whether now or hereafter existing,
which controls, is controlled by, is under common control with, the Company
(including, but not limited to, joint ventures, limited liability companies,
partnerships) or any entity with respect to which the Committee determines that
the Company has a material business interest.
4.2 AWARD means any stock options (including ISOs and NSOs), SARs
(including free-standing and tandem SARs), Restricted Stock Awards, Stock Units,
or any combination of the foregoing granted pursuant to the Plan, except,
however, when the term is being used under the Plan with respect to a particular
category of grant in which case it shall only refer to that particular category
of grant.
4.3 BOARD means the Board of Directors of the Company.
4.4 CAUSE means, for purposes of this Plan: (i) the Participant's
intentional, persistent failure, dereliction, or refusal to perform such duties
as are reasonably assigned to him or her by the officers or directors of the
Company; (ii) the Participant's fraud, dishonesty or other deliberate injury to
the Company in the performance of his or her duties on behalf of, or for, the
Company; (iii) the willful commission by the Participant of a criminal or other
act that causes substantial economic damage to the Company or substantial injury
to the business reputation of the Company; (iv) the Participant's material
breach of his or her employment or engagement agreement, if any; or (v) the
Participant's breach of any material provision of the Participant's Grant
Agreement specifying the terms of the particular Award. For purposes of the
Plan, no act, or failure to act, on the part of any person shall be considered
"willful" unless done or omitted to be done by the person other than in good
faith and without reasonable belief that the person's action or omission was in
the best interest of the Company.
4.5 CHANGE IN CORPORATE CONTROL means:
(a) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (i) the
then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power
of the then-outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company
Voting Securities"); PROVIDED, HOWEVER, that, for purposes of this
Section, the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Affiliated Company or (D) any acquisition by any corporation pursuant
to a transaction that complies with Sections 4.5(a)(i), 4.5(c)(ii) and
4.5(c)(iii).
(b) Individuals who, as of April 1, 2000, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; PROVIDED, HOWEVER, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board.
i. Consummation of a reorganization, merger, statutory
share exchange or consolidation or similar corporate
transaction involving the Company or any of its
subsidiaries, a sale or
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other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or
stock of another entity by the Company or any of its
subsidiaries (each, a "Business Combination"), in each
case unless, following such Business Combination,
ii. all or substantially all of the individuals and
entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of
the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may
be, of the corporation resulting from such Business
Combination (including, without limitation, a
corporation that, as a result of such transaction, owns
the Company or all or substantially all of the
Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as
their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities, as the case
may be,
iii. no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan
(or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the
then-outstanding voting securities of such corporation,
except to the extent that such ownership existed prior
to the Business Combination, and
iv. at least a majority of the members of the board of
directors of the corporation resulting from such
Business Combination were members of the Incumbent
Board at the time of the execution of the initial
agreement or of the action of the Board providing for
such Business Combination; or
(c) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
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4.6 CODE means the Internal Revenue Code of 1986, as amended, and any
related rules, regulations and interpretations.
4.7 COMMITTEE means the Management Development and Compensation
Committee (MDCC) of the Company's Board of Directors, consisting exclusively of
directors who at the relevant time are "outside directors" within the meaning of
ss.162(m) of the Code and "non-employee directors" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934.
4.8 COMPANY means Raytheon Company, a Delaware corporation.
4.9 COMPANY OFFICER means the Chairman of the Board, the President, and
any Executive Vice President, Senior Vice President or Vice President (elected
or appointed) of the Company.
4.10 DIRECTOR means a member of the Board of Directors of Raytheon
Company.
4.11 FAIR MARKET VALUE means the value of a share of Stock of the
Company on any date as the Committee shall in good faith determine.
4.12 GRANT AGREEMENT means the agreement between the Company and the
Participant pursuant to which the Company authorizes an Award hereunder. Each
Grant Agreement entered into between the Company and a Participant with respect
to an Award granted under the Plan shall incorporate the terms of this Plan and
shall contain such provisions, consistent with the provisions of the Plan, as
may be established by the Committee.
4.13 GRANT DATE means the date on which the Committee formally acts to
grant an Award to a Participant or such other date as the Committee shall so
designate at the time of taking such formal action.
4.14 IMMEDIATE FAMILY means any child, stepchild, grandchild, parent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships.
4.15 INCENTIVE STOCK OPTION or "ISO" means an Option grant that is
intended to meet the requirements of Section 422 of the Code.
4.16 MEDICAL LEAVE OF ABSENCE means a leave of absence for medical
reasons approved in writing by the Company's disability management group which
will terminate as of the earlier of the date the Participant is found by the
disability management group to be no longer disabled or the date the employee is
terminated from employment in accordance with Company policy.
4.17 NON-STATUTORY STOCK OPTION or "NSO" means an Option grant that is
not intended to be an Incentive Stock Option.
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4.18 OPTION means an option to purchase shares of the Stock granted
under the Plan.
4.19 OPTIONEE means a person eligible to receive an Option, as
provided in Section 8.1, to whom an Options shall have been granted
under the Plan.
4.20 OPTION PERIOD means such period (not to exceed ten (10) years from
the granting of an ISO) from the Grant Date to the date on which the option
expires as may be determined by the Committee and set forth in the Grant
Agreement.
4.21 OPTION PRICE means the price paid by an Optionee for an Option
under this Plan.
4.22 OPTION SHARE means any share of Stock of the Company transferred
to an Optionee upon exercise of an Option pursuant to this Plan.
4.23 PARTICIPANT means a director, officer, employee or consultant who
is granted an Award under the Plan.
4.24 PERSONAL LEAVE OF ABSENCE means a leave of absence for personal
reasons for a period of no more than one year approved in writing by the Senior
Vice President, Human Resources, or his delegate.
4.25 PLAN means this Raytheon 2001 Stock Plan.
4.26 PLAN YEAR means the Calendar Year, except that the first Plan Year
shall commence on the Effective Date, as described in Section 3 and shall end on
the December 31 first following the Effective Date.
4.27 RELATED CORPORATION means a parent corporation or a subsidiary
corporation, each as defined in Section 424 of the Code.
4.28 RESTRICTED STOCK AWARD means any Award of shares of restricted
Stock granted pursuant to Article XI of the Plan.
4.29 RETIREMENT means, for purposes of this Plan, the Termination of
Service with the Company, other than for Cause, at any time after attaining age
fifty-five (55) and having completed at least ten (10) years of service, or
Termination of Service under circumstances which the Committee deems equivalent
to retirement.
4.30 SAR means a stock appreciation right, as awarded under Article X.
4.31 STOCK means the common stock, $0.01 par value, of the Company,
provided that, in the event the Company has outstanding Class A and Class B
common stock, Stock means the Class B common stock.
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4.32 STOCK UNIT means credits to a bookkeeping reserve account solely
for accounting purposes, where the amount of the credit shall equal the Fair
Market Value of a share of Stock on the date of grant (unless the Committee
provides otherwise in the Grant Agreement), and which shall be subsequently
increased or decreased to reflect the Fair Market Value of a share of Stock.
Stock Units do not require segregation of any of the Company's assets. Stock
Units are awarded under Article XI.
4.33 TERMINATION OF SERVICE means cessation of performance of services
for the Company or an Affiliate by an employee or consultant and the departure
from active status as a Director by a non-employee Director. For purposes of
maintaining a Participant's continuous status as an employee and accrual of
rights under any Award granted pursuant to the Plan, transfer of an employee
among the Company and its Affiliates shall not be considered a Termination of
Service with the Company provided that no more than 30 days elapse between
termination from the Company and commencement of employment elsewhere in the
Company or with an Affiliate.
4.34 VESTING PERIOD means that period of time during which the shares
of Stock (or a portion thereof) underlying an Award are subject to a risk of
forfeiture.
ARTICLE V
5. STOCK SUBJECT TO THE PLAN.
5.1 Shares of Stock in an amount to be determined by the Committee
but not to exceed twenty-eight million (28,000,000) shares of Stock, shall be
subject to Award under the Plan. The Company shall reserve such number of shares
of Stock for Awards under the Plan, subject to adjustments as provided in
Article XII of the Plan. If any Award, or portion of an Award, under the Plan
expires or terminates unexercised, becomes unexercisable or is forfeited or
otherwise terminated, surrendered or canceled as to any shares of Stock without
the delivery of such shares or other consideration, the shares of Stock subject
to such Award shall thereafter be available for further Awards under the Plan.
Shares issued under the Plan may be shares of Stock of original issue, shares of
treasury stock, or shares of Stock that have been reacquired by the Company.
5.2 Subject to adjustments as provided in Article XII, The maximum
number of shares of Stock subject to Awards of any combination that may be
granted during any one fiscal year of the Company to any one individual shall be
limited to seven hundred thousand (700,000) shares. The foregoing per-individual
limit shall not be adjusted to effect a restoration of shares of Stock with
respect to which the related Award is terminated, surrendered or canceled.
5.3 Subject to adjustments as provided in Article XII, the maximum
number of shares of Stock subject to Award as incentive stock options shall be
limited to fourteen million (14,000,000) shares, and the number of restricted
shares released from a substantial risk of forfeiture shall not exceed five
million six hundred thousand (5,600,000).
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ARTICLE VI
6. PROCEEDS. The proceeds received by the Company from the sale of Stock
pursuant to Awards granted under the Plan will be used for general corporate
purposes.
ARTICLE VII
7. ADMINISTRATION.
7.1 GENERAL. The Plan shall be administered by the Committee. The
Committee's determinations under the Plan (including without limitation
determinations of the persons to receive Awards, the form, amount and timing of
such Awards, the terms and provisions of such Awards and the agreements
evidencing same) need not be uniform and may be made by the Committee
selectively among persons who receive, or are eligible to receive, Awards under
the Plan, whether or not such persons are similarly situated.
7.2 PROCEDURE. The Committee shall meet at such times and places and
upon such notice as it may determine. A majority of the members of the Committee
shall constitute a quorum. Any acts by the Committee may be taken at any meeting
at which a quorum is present and shall be by majority vote of those members
entitled to vote. Additionally, any acts reduced to writing or approved in
writing by all of the members of the Committee shall be valid acts of the
Committee. Members of the Committee who are either eligible for Awards or have
been granted Awards may vote on any matters affecting the administration of the
Plan or the grant of Awards pursuant to the Plan, except that no such member
shall act upon the granting of an Award to himself or herself, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Committee during which action is taken with respect to the granting of an
Award to him or her.
7.3 DUTIES. The Committee shall have full power and authority to
administer and interpret the Plan and to adopt such rules, regulations,
agreements, guidelines and instruments for the administration of the Plan and
for the conduct of its business as the Committee deems necessary or advisable,
all within the Committee's sole and absolute discretion. The Committee shall
have full power and authority to take all other actions necessary to carry out
the purpose and intent of the Plan, including without limitation the power to
accelerate or otherwise change the time in which an Award may be exercised or
becomes payable, and to waive, in whole or in part, any restriction or condition
with respect to such Award, including but not limited to, any restriction or
condition with respect to vesting or exercisability of an Award following a
Participant's Termination of Service or death.
Notwithstanding any other provision in the Plan to the contrary,
except with respect to Awards of Incentive Stock Options (ISO's), the Committee
may, at any time prior to the exercise, lapse of restrictions or expiration of
an Award, permit a Participant to (i) defer receipt of the payment of cash or
property or other delivery of Stock that would otherwise be due by virtue of the
exercise, lapse of restrictions or expiration of an Award; or (ii) convert or
exchange an Award for another Award under the Plan or under any other plan or
arrangement. If any such
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actions are permitted, the Committee shall, in its sole discretion, establish
rules and procedures to accomplish such actions.
7.4 DELEGATION OF AUTHORITY TO GRANT AWARDS. The Committee, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to granting Awards,
provided such delegation is in writing and maintained in the Company's records.
The Committee may revoke or amend the terms of such a delegation at any time,
but such revocation shall not invalidate prior actions of the Chief Executive
Officer of the Company that were consistent with the terms of the Plan.
7.5 LIMITED LIABILITY. To the maximum extent permitted by law, no
member of the Committee shall be liable for any action taken or decision made in
good faith relating to the Plan or any Award.
7.6 INDEMNIFICATION. To the maximum extent permitted by law and by
the Company's charter and by-laws, the members of the Committee shall be
indemnified by the Company in respect of all their activities under the Plan,
provided that such indemnity shall not apply to willful acts of misconduct.
7.7 EFFECT OF COMMITTEE'S DECISION. All actions taken and decisions
and determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Company, its stockholders, any participants in the Plan
and any other employee of the Company, and their respective successors in
interest.
ARTICLE VIII
8. ELIGIBILITY AND PARTICIPATION
8.1 ELIGIBILITY. Directors, officers, employees and consultants of
the Company or its Affiliates who, in the opinion of the Committee, are
responsible for the continued growth and development and future financial
success of the business shall be eligible to participate in the Plan.
8.2 PARTICIPATION. An eligible individual shall become a Participant
in this Plan when he or she is granted an Award hereunder, as evidenced by a
Grant Agreement executed by the Company and the Participant and shall no longer
be a Participant when all Awards to a Participant have been completed,
terminated or otherwise disposed of.
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ARTICLE IX
9. STOCK OPTIONS
9.1 GENERAL. Subject to the other applicable provisions of the Plan,
the Committee may from time to time grant to eligible Participants Awards of
ISO's or NSO's. The ISO or NSO Awards granted shall be subject to the following
terms and conditions.
9.2 TIME OF GRANTING OPTIONS. The granting of an Option shall take
place at the time specified in writing by the Committee.
9.3 GRANT OF OPTION. The grant of an Option shall be evidenced by a
Grant Agreement, executed by the Company and the Participant, describing the
number of shares of Stock subject to the Option, whether the Option is an ISO or
NSO, the Exercise Price of the Option, the Vesting Period for the Option and
such other terms and conditions that the Committee deems, in it sole discretion,
to be appropriate, provided that such terms and conditions are not inconsistent
with the Plan. The Grant Date shall be specified in the Grant Agreement.
9.4 PRICE. The price per share of Stock payable upon the exercise of
each Option (the "Exercise Price") shall be set forth in the Grant Agreement and
shall not be less than 100% of the Fair Market Value of the shares of Stock on
the date the Option is granted.
9.5 TERMS OF OPTIONS. The term during which each Option may be
exercised shall be determined by the Committee; provided, however, that in no
event shall an ISO be exercisable more than ten (10) years from the date it is
granted. Prior to the exercise of the Option and delivery of the share
certificates represented thereby, the Participant shall have none of the rights
of a stockholder with respect to any shares represented by an outstanding
Option.
9.6 RESTRICTIONS ON INCENTIVE STOCK OPTIONS. ISO Awards granted
under the Plan shall comply in all respects with Code section 422 and, as such,
shall meet the following additional requirements:
(a) GRANT DATE. An ISO must be granted within ten (10) years of
the earlier of the Plan's adoption by the Board of Directors or approval by the
Company's shareholders.
(b) EXERCISE PRICE AND TERM. The Exercise Price of an ISO shall
not be less than 100% of the Fair Market Value of the shares on the date the
Option is granted and the term of the Option shall not exceed ten (10) years.
Notwithstanding the immediately preceding sentence, the Exercise Price of any
ISO granted to a Participant who owns, within the meaning of Code section
422(b)(6), after application of the attribution rules in Code section 424(d),
more than ten percent (10%) of the total combined voting power of all classes of
shares of Stock of the Company shall be not less than 110% of the Fair Market
Value of the Stock on the Grant Date and the term of such ISO shall not exceed
five (5) years.
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(c) MAXIMUM GRANT. The aggregate Fair Market Value (determined
as of the Grant Date) of shares of Stock with respect to which all ISO's first
become exercisable by any Participant in any calendar year under this or any
other plan of the Company and its Parent and Subsidiary corporations may not
exceed $100,000 or such other amount as may be permitted from time to time under
Code section 422. To the extent that such aggregate Fair Market Value shall
exceed $100,000, or other applicable amount, such Options shall be treated as
NSO's. In such case, the Company may designate the shares of Stock that are to
be treated as stock acquired pursuant to the exercise of an ISO by issuing a
separate certificate for such shares and identifying the certificate as ISO
shares in the stock transfer records of the Company.
(d) PARTICIPANT. ISO's shall only be issued to employees of the
Company or a Related Corporation.
(e) TANDEM OPTIONS PROHIBITED. An ISO may not be granted in
tandem with a NSO in such a manner that the exercise of one affects a
Participant's right to exercise the other.
(f) DESIGNATION. No option shall be an ISO unless so designated
by the Committee at the time of grant or in the Grant Agreement evidencing such
Option.
(g) OTHER TERMS AND CONDITIONS. Options may contain such other
provisions, not inconsistent with the provisions of the Plan, as the Committee
shall determine is appropriate from time to time.
9.7 EXERCISABILITY.
(a) Except as otherwise provided by the Committee in the
applicable Grant Award or otherwise, during the lifetime of the Participant, the
Option shall be exercisable only by the Participant or, during the period the
Participant is under a legal disability, by the Participant's guardian or legal
representative. Unless specified to the contrary herein or in the applicable
Grant Agreement, Options cannot be exercised by a Participant subsequent to his
or her Termination of Service.
(b) An Option may be exercised in whole at any time, or in part
from time to time, within the Option Period to the extent the Option is
exercisable on the date of exercise.
(c) Except as otherwise provided by the Committee in the
applicable Grant Award or otherwise, each Option shall terminate and may no
longer be exercised if the Optionee ceases to perform services for the Company
or an Affiliate in accordance with the following:
(i) If an Optionee ceases to be an active employee,
consultant or non-employee Director of the Company or any Affiliate other
than by reason of death or retirement, absent in any case a determination
by the Committee to the contrary, any Options which were exercisable by
the Optionee on the date of cessation of active em-
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ployment may be exercised no later that the earlier of (a) the expiration
date of the Option or (b) the respective periods listed below.
Notwithstanding the foregoing, in the event an Optionee fails to exercise
an Incentive Stock Option within three months after cessation of
employment with the Company or a Related Corporation, such Option will be
treated as a Non-Statutory Stock Option pursuant to Section 422 of the
Code. The respective periods following cessation of active employment in
which exercisable Options may be exercised are as follows:
PERIOD FOLLOWING LAST DAY
REASON FOR CESSATION OF ACTIVE EMPLOYMENT WITHIN
OF ACTIVE EMPLOYMENT WHICH OPTION MAY BE EXERCISED
Medical Leave of Absence During such leave
Discharge for Cause or other None
severance of employment
determined by Committee to
warrant termination of option
Layoff or other involuntary Three Years
termination without Cause
Voluntary termination (non-retirement) Three Months
(ii) If an Optionee's employment terminates because of
death, the Options shall be fully vested automatically without regard to
whether any applicable vesting requirements in the Grant Agreement have
been fulfilled, and the Options may be exercised at any time before the
expiration date, but only by the Optionee's estate or by the person(s) who
acquired the right to exercise such Option by bequest or inheritance or by
reason of the death of the Optionee.
(iii) If an Optionee's employment terminates because of
Retirement, any Options which were issued at least one year prior to the
date of termination of employment will vest in accordance with the Vesting
Period specified in the Grant Agreement and may be exercised any time
before their expiration date, provided such Options are exercisable as of
the exercise date. Notwithstanding the foregoing, in the event an Optionee
fails to exercise an Incentive Stock Option within three months after the
date of his or her retirement, such Option will be treated as a
Non-Statutory Stock Option.
(d) The Option may not be exercised for more shares (subject to
adjustment as provided in Section 12.1) after the Participant's termination of
employment or engagement, or cessation of service as a director or the
Participant's death, as the case may be, than the Participant was entitled to
purchase thereunder at the time of the Participant's termination of employment
or engagement or death.
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9.8 EXERCISE OF OPTION. An Option may be exercised only by giving
written notice, in the manner provided in Section 15.9 hereof, specifying the
number of shares as to which the Option is being exercised, accompanied (except
as otherwise provided in Section 9.9) by full payment for such shares in the
form of check or bank draft payable to the order of the Company or other shares
of the Stock with a current Fair Market Value equal to the Option Price of the
shares to be purchased. Receipt by the Company of such notice and payment shall
constitute the exercise of the Option or a part thereof. Within 20 days
thereafter, the Company shall deliver or cause to be delivered to the Optionee a
certificate or certificates (or other evidence of ownership) for the number of
shares then being purchased. Such shares shall be fully paid and nonassessable.
If such shares are not at that time effectively registered under the Securities
Act of 1933, as amended, the Optionee shall include with such notice a letter,
in form and substance satisfactory to the Company, confirming that such shares
are being purchased for the Optionee's own account for investment and not with a
view to distribution..
9.9 CASHLESS EXERCISE. In lieu of payment by check, bank draft or
other shares of Stock accompanying the written notice of exercise, an Optionee
may, unless prohibited by applicable law, elect to effect payment by including
with the written notice irrevocable instructions to deliver for sale to a
registered securities broker acceptable to the Company a number of the shares
subject to the Option being exercised sufficient, after brokerage commissions,
to cover the aggregate exercise price of such Option and, if the Optionee
further elects, the Optionee's withholding obligations with respect to such
exercise referred to in Section 15.8, together with irrevocable instructions to
such broker to sell such shares and to remit directly to the Company such
aggregate exercise price and, if the Optionee has so elected, the amount of such
withholding obligation. The Company shall not be required to deliver to such
securities broker any stock certificate (or other evidence of ownership) for
such shares until it has received from the broker such exercise price and, if
the Optionee has so elected, such withholding obligation amount.
9.10 TRANSFERABILITY. Except as otherwise provided herein or in the
Grant Agreement, Stock Options granted to individuals other than Company
Officers shall not be transferable, otherwise than by will or the laws of
descent and distribution, and may be exercised during the life of the holder
thereof only by him or her. Non-Statutory Options granted hereunder to a Company
Officer may be transferred to a member of such Company Officer's Immediate
Family or trusts or other entities established solely for the benefit of such
Immediate Family members, so long as the transferee is a person entitled to rely
on the Form S-8 filed by the Company with respect to the Plan. The holder of an
Option or his or her legal representatives, legatees, distributees, or permitted
transferees, as the case may be, shall have none of the rights of a stockholder
with respect to any shares subject to such Option until such shares have been
issued to him or her under this Plan.
ARTICLE X
10. STOCK APPRECIATION RIGHTS.
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10.1 AWARD OF SAR'S. Subject to the other applicable provisions of
the Plan, the Committee may at any time and from time to time grant SAR's to
eligible participants, either on a free-standing basis (without regard to or in
addition to the grant of an Option) or on a tandem basis (related to the grant
of an underlying Option), as it determines. SAR's granted in tandem with or in
addition to an Option may be granted either at the same time as the Option or at
a later time; provided, however, that a tandem SAR shall not be granted with
respect to any outstanding ISO Award without the consent of the Participant.
SAR's shall be evidenced by Grant Agreements, executed by the Company and the
Participant, stating the number of shares of Stock subject to the SAR and the
terms and conditions of such SAR, in such form as the Committee may from time to
time determine. The term during which each SAR may be exercised shall be
determined by the Committee. The Participant shall have none of the rights of a
stockholder with respect to any shares of Stock represented by a SAR.
10.2 RESTRICTIONS ON TANDEM SAR'S. ISO's may not may be surrendered
in connection with the exercise of a tandem SAR unless the Fair Market Value of
the Stock subject to the ISO is greater than the Exercise Price for such ISO.
SAR's granted in tandem with Options shall be exercisable only to the same
extent and subject to the same conditions as the related Options are
exercisable. The Committee may, in its discretion, prescribe additional
conditions to the exercise of any such tandem SAR.
10.3 AMOUNT OF PAYMENT UPON EXERCISE OF SAR'S. A SAR shall entitle
the Participant to receive, subject to the provisions of the Plan and the Grant
Agreement, a payment having an aggregate value equal to the product of (i) the
excess of (A) the Fair Market Value on the exercise date of one share of Stock
over (B) the base price per share specified in the Grant Agreement (which shall
be determined by the Committee but which shall not be less than 100% of the Fair
Market Value of one share of Stock on the date of grant of the SAR), times (ii)
the number of shares specified by the SAR, or portion thereof, which is
exercised. In the case of exercise of a tandem SAR, such payment shall be made
in exchange for the surrender of the unexercised related Option (or any portions
thereof which the Participant from time to time determines to surrender for this
purpose).
10.4 FORM OF PAYMENT UPON EXERCISE OF SAR'S. Payment by the Company
of the amount receivable upon any exercise of a SAR may be made by the delivery
of Stock or cash, or any combination of Stock and cash, as determined in the
sole discretion of the Committee from time to time. If upon settlement of the
exercise of an SAR a Participant is to receive a portion of such payment in
shares of Stock, the number of shares shall be determined by dividing such
portion by the Fair Market Value of a share of Stock on the exercise date. No
fractional shares shall be used for such payment and the Committee shall
determine whether cash shall be given in lieu of such fractional shares or
whether such fractional shares shall be eliminated.
10.5 TRANSFERABILITY. SAR's may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
in the Grant Agreement.
ARTICLE XI
-13-
11. RESTRICTED STOCK AWARDS AND STOCK UNIT AWARDS
11.1 GRANTS. Subject to the other applicable provisions of the Plan,
the Committee may at any time grant Restricted Stock Awards or Stock Units to
Participants in such amounts and for such consideration, including no
consideration or such minimum consideration as may be required by law, as it
determines. Such Awards shall be granted pursuant to a Grant Agreement.
11.2 TERMS AND CONDITIONS. A Restricted Stock Award entitles the
recipient to acquire shares of Stock and a Stock Unit Award entitles the
recipient to be paid the Fair Market Value of the Stock on the date on which
restrictions lapse. Stock Units may be settled in Stock, cash or a combination
thereof, as determined by the Committee. Restricted Stock Awards and Stock Unit
Awards are subject to Vesting Periods and other restrictions and conditions as
the Committee may include in the Grant Agreement. Such restrictions or
conditions may be based on continuing employment or engagement (or other
business relationship) and/or achievement of pre-established performance goals.
The Committee shall specify in the Grant Agreement the dates and/or the
description of how pre-established performance goals shall be deemed to have
been obtained and any other conditions upon which Restricted Stock Awards or
Stock Units shall become vested. If the Participant or the Company fails to
achieve the designated goals or the Participant incurs a Termination of Service
prior to the expiration of the Vesting Period, the Participant shall forfeit all
shares of Stock or cash subject to the Award which have not vested as of such
date. Restricted Stock Awards or Stock Units, if not sooner terminated, shall
vest upon Participant's death.
11.3 RESTRICTED STOCK AWARDS.
(a) Each Restricted Stock Award shall specify the applicable
restrictions, on such shares of Stock, the duration of such restrictions, and
the time or times at which such restrictions shall lapse with respect to all or
a specified number of shares of Stock that are part of the Award.
Notwithstanding the foregoing, the Committee may reduce or shorten the duration
of any restriction applicable to any shares of Stock awarded to any Participant
under the Plan.
(b) Share certificates with respect to restricted shares of
Stock shall be issued (or the shares shall be held in a book entry position
through the transfer agent's direct registration service) at the time of grant
of the Restricted Stock Award, subject to forfeiture if the restrictions do not
lapse, or upon lapse of the restrictions. If share certificates are issued at
the time of grant of the Restricted Stock Award, the certificates shall bear an
appropriate legend with respect to the restrictions applicable to such
Restricted Stock Award (as described in Section 11.2) or, alternatively, the
Participant may be required to deposit the certificates with the Company during
the period of any restriction thereon and to execute a blank stock power or
other instrument of transfer. If shares are in a book entry position with the
transfer agent's direct registration service, the restrictions shall be
appropriately noted.
(c) Except as otherwise provided by the Committee, during such
period of restriction following the issuance of share certificates, the
Participant shall have all of the
-14-
rights of a holder of Stock, including but not limited to the rights to receive
dividends (or amounts equivalent to dividends) and to vote with respect to the
restricted shares. Upon lapse of restrictions on a Restricted Stock Award, the
Committee may provide that, to the extent not already received, the Participant
will be entitled to receive any amounts per share pursuant to any dividend or
distribution paid by the Company on its Stock to stockholders of record after
grant of the Restricted Stock Award and prior to the issuance of the share
certificates (or holding in a book entry position through the transfer agent).
11.4 STOCK UNIT AWARDS.
(a) The grant of Stock Units shall be evidenced by a Grant
Agreement, executed by the Company and the Participant, that incorporates the
terms of the Plan and states the number of Stock Units evidenced thereby and the
terms and conditions of such Stock Units in such form as the Committee may from
time to time determine. The Grant Agreement shall provide for payment of the
Stock Unit Awards upon expiration of a term certain.
(b) Stock Unit awards shall be subject to such rules and
regulations as the Committee may prescribe and/or such determinations, orders,
or decisions as the Committee may make.
(c) Except as otherwise provided in the Grant Agreement, the
Participant shall have none of the rights of a stockholder with respect to any
shares of Stock represented by a Stock Unit as a result of the grant of a Stock
Unit to the Participant.
11.5 TRANSFERABILITY. Unvested Restricted Stock Awards or Stock
Units may not be sold, assigned, transferred, pledged or otherwise encumbered or
disposed of except as specifically provided in the Grant Agreement.
ARTICLE XII
12. CORPORATE TRANSACTIONS
12.1 ADJUSTMENT OF NUMBER AND PRICE OF SHARES. Pro rata adjustment
shall be made in the maximum number of shares of Stock subject to the Plan or
that may be awarded to any individual in any year to give effect to any stock
dividends, stock splits, stock combinations, recapitalizations and other similar
changes in the capital structure of the Company. Pro rata adjustments shall be
made in the number, kind and price of shares of Stock covered by any outstanding
Award hereunder to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and similar changes in the capital structure of
the Company, or a merger, dissolution or reorganization of the Company, after
the date the Award is granted, so that the recipient of the Award is treated in
a manner equivalent to that of holders of the underlying Stock.
12.2 CHANGE IN CORPORATE CONTROL. Upon a Change in Corporate
Control:
-15-
(a) Any Options and SAR's outstanding as of the date of such
Change in Corporate Control, and which are not then exercisable and vested,
shall become fully exercisable and vested.
(b) The restrictions and deferral limitations applicable to any
Restricted Stock and Stock Units shall lapse, such Restricted Stock shall become
free of all restrictions and become fully vested and transferable, and such
Stock Units shall be payable in full.
(c) The Committee may also make additional adjustments and/or
settlements of outstanding Awards as it deems appropriate and consistent with
the Plan's purposes, including without limitation settlement of all Options and
Stock Appreciation Rights for a cash payment equal to the excess (if any) of the
Fair Market Value of the Stock subject thereto over the aggregate exercise or
base price thereof.
12.3 SUBSTITUTION OF OPTIONS. In the event that, by reason of a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board shall authorize the issuance or
assumption of a stock option or stock options in a transaction to which Code
section 424(a) applies, then, notwithstanding any other provision of the Plan,
the Committee may grant an Option upon such terms and conditions as it may deem
appropriate for the purpose of assumption of the old option, or substitution of
a new Option for the old option, in conformity with the provisions of Code
section 424(a) and the rules and regulations thereunder, as they may be amended
from time to time.
12.4 FRACTIONAL SHARES. No adjustment or substitution provided for
in this Article shall require the Company to issue or to sell a fractional share
under any Grant Agreement and the total adjustment or substitution with respect
to each Grant Agreement shall be limited accordingly.
12.5 RESCISSION AND REVOCATION OF AWARDS. A Participant may request
in writing that the Committee rescind or revoke an Award and such request shall
specify the reasons that rescission or revocation is sought. The Committee, in
its absolute discretion, may grant, deny or otherwise rule on the request.
ARTICLE XIII
13. RESERVATION OF STOCK. The Company shall at all times during the term
of the Options reserve and keep available such number of shares of the Stock as
will be sufficient to satisfy the requirements of this Plan and shall pay all
fees and expenses necessarily incurred by the Company in connection therewith.
ARTICLE XIV
14. AMENDMENT AND TERMINATION
-16-
14.1 AMENDMENT. The Committee may amend the Plan at any time and
from time to time, provided that (i) no amendment shall deprive any person of
any rights granted under the Plan before the effective date of such amendment,
without such person's consent, (ii) no amendment can increase the maximum number
of shares of Stock subject to award under the Plan, and (iii) amendments may be
subject to shareholder approval to the extent needed to comply with applicable
law. Notwithstanding the foregoing, the Committee may amend the Plan and/or any
Award granted under the Plan at any time and from time to time, without the
consent of affected Participants and their beneficiaries, to the extent
necessary to cause the Plan or Award to comply with applicable law, stock
exchange rules or accounting rules.
14.2 TERMINATION. The Committee reserves the right to terminate the
Plan in whole or in part at any time, without the consent of any person granted
any rights under the Plan.
-17-
ARTICLE XV
15. OTHER CONDITIONS
15.1 COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Notwithstanding any
provision of the Plan or the terms of any Grant Agreement entered into pursuant
to the Plan, the Company shall not be required to issue any shares hereunder
prior to registration of the shares subject to the Plan under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, if such
registration shall be necessary, or before compliance by the Corporation or any
Participant with any other provisions of either of those acts or of regulations
or rulings of the Securities and Exchange Commission thereunder, or before
compliance with other federal and state laws and regulations and rulings
thereunder, including the rules of any applicable securities exchange or
quotation system. The Company shall use its best efforts to effect such
registrations and to comply with such laws, regulations and rulings forthwith
upon advice by its counsel that any such registration or compliance is
necessary.
15.2 COMPANY CHARTER AND BYLAWS. This Plan is subject to the charter
and by-laws of the Company, as they may be amended from time to time.
15.3 NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company and a Participant or any other
person. To the extent that any Participant or other person acquires a right to
receive payments from the Company pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company.
15.4 NO GUARANTEE OF EMPLOYMENT. Participation in this Plan shall
not be construed to confer upon any Participant the legal right to be retained
in the employ of the Company or give any person any right to any payment
whatsoever, except to the extent of the benefits provided for hereunder. Each
Participant shall remain subject to discharge to the same extent as if this Plan
had never been adopted. Nothing in this Plan shall prevent, interfere with or
limit in any way the right of the Company to terminate a Participant's
employment at any time, whether or not such termination would result in: (i) the
failure of any Award to vest; (ii) the forfeiture of any unvested or vested
portion of any Award under the Plan; and/or (iii) any other adverse effect on
the Participant's interests under the Plan.
15.5 NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained
in the Plan shall prevent the Company or its Affiliates from adopting or
continuing in effect other compensation arrangements (whether such arrangements
be generally applicable or applicable only in specific cases) as the Committee,
in its discretion determines desirable, including without limitation the
granting of stock options, stock awards, stock appreciation rights or phantom
stock units otherwise than under the Plan.
15.6 GOVERNING LAW. The provisions of this Plan shall be governed
by, construed and administered in accordance with applicable federal law;
provided, however, that to the extent not in conflict with federal law, this
Plan shall be governed by, construed and administered under the laws of the
State of Delaware, other than its laws respecting choice of law.
-18-
15.7 LIMITATION OF RIGHTS IN THE OPTION SHARES. The Optionee shall
not be deemed for any purpose to be a stockholder of the Company with respect to
any of the Option Shares except to the extent that the Option shall have been
exercised with respect thereto and, in addition, a certificate shall have been
issued therefor and delivered to the Optionee.
15.8 WITHHOLDING. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for federal income tax
purposes with respect to any Award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Company, withholding obligations may be settled with Common Stock, including
Common Stock that is part of the Award that gives rise to the withholding
requirement; provided, that not more than the legally required minimum
withholding may be settled with Common Stock. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and the
Company and its Affiliates shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment otherwise due to the participant. The
Committee may establish such procedures as it deems appropriate, including
making irrevocable elections, for the settlement of withholding obligations with
Common Stock.
15.9 NOTICES. Any communication or notice required or permitted to
be given under the Plan shall be in writing, and mailed by registered or
certified mail or delivered in hand, if to the Company, to 141 Spring Street,
Lexington, Massachusetts 02421, Attention: Senior Vice President, Human
Resources and, if to the Optionee, to the address as the Optionee shall last
have furnished to the communicating party.
-19-
ANNEX A
---------
RAYTHEON Annual Meeting of Stockholders 2001 ANNUAL MEETING
Wednesday, April 25, 2001 ADMISSION TICKET
10:00 a.m. Eastern Time
(Doors Open at 9:30 a.m.)
c/o Proxy Services Raytheon Company
P.O. Box 8040 Executive Offices
Boston, MA 02266-8040 141 Spring Street
Lexington, MA 02421
(Directions on reverse)
- -------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
Raytheon Company encourages all stockholders to vote. We provide three
convenient methods for voting listed below:
PROXY CARD: Complete, sign, date, and return the proxy card attached below in
the enclosed envelope.
OR
TELEPHONE: If you are a resident of the United States or Canada, call toll-free
on a touch-tone phone 1-877-779-8683, 7 days a week, 24 hours a day. If you
reside outside of the United States or Canada, call toll-free 1-201-536-8073.
There is no charge for this call. Your voter control number is located above
your name on this proxy card. Please vote by 11:00 p.m. Eastern Time on April
24, 2001.
OR
INTERNET: Log on to the Web site http://www.eproxyvote.com/rtn and follow the
instructions provided. Your voter control number is located above your name on
this proxy card. Please vote by 11:00 p.m. Eastern Time on April 24, 2001.
Canadian and non U.S. residents are encouraged to vote either by telephone or
Internet.
RECEIVE FUTURE PROXY MATERIALS ELECTRONICALLY. Receiving stockholder material
electronically reduces mailing and printing costs and is better for the
environment. Would you like to receive future proxy materials electronically? If
so go to http://www.econsent.com/rtn and follow the instructions provided.
IF YOU VOTE BY TELEPHONE OR INTERNET YOU DO NOT NEED TO RETURN YOUR PROXY CARD.
RAYTHEON CLASS A
- -------------------------------------------------------------------------------
/ X / Please mark votes as in this example.
The Board of Directors recommends a vote FOR Items 1, 2, 3 and 4.
- ---------------------------------------------------------------------
Item 1 - Election of Directors: To elect five directors of the class whose term
of office expires in 2004 to serve for a term of three years. Nominees:
(01) John M. Deutch, (02) Henrique de Campos Meirelles, (03) Dennis J. Picard,
(04) Michael C. Ruettgers and (05) William R. Spivey. To elect one director of
the class whose term of office expires in 2005 to serve for a term of two years.
Nominee: (06) Frederic M. Poses
FOR WITHHOLD
/ / / /
- ----------------------------------------
For all nominees except as written above.
FOR AGAINST ABSTAIN
Item 2 - To amend the Company's Certificate
of Incorporation to effect the
Reverse/Forward Stock Split / / / / / /
Item 3 - To amend the Company's Certificate
of Incorporation to reclassify the Company's
Class A and Class B common stock / / / / / /
Item 4 -To approve the Company's
2001 Stock Plan / / / / / /
The Board of Directors recommends a vote AGAINST Items 5, 6, 7, 8, 9 and 10.
Item 5 - Stockholder Proposal #2:
Offsets / / / / / /
Item 6 - Stockholder Proposal #3:
Benchmark Executive Compensation / / / / / /
Item 7 - Stockholder Proposal #4:
Performance-based Stock Options / / / / / /
Item 8 - Stockholder Proposal #5:
Annual Election of Directors / / / / / /
Item 9 - Stockholder Proposal #6:
Shareholder Rights Plan / / / / / /
- --------------
Please check any of the following that apply:
I plan to attend the Annual Meeting. / /
Please discontinue duplicate Annual
Report mailings. / /
Please note my change of address on the
back of this card. / /
Signature--------------------------------- Date------------------, 2001
Signature--------------------------------- Date------------------, 2001
Please sign this proxy as the name(s) appear above. When signing as attorney,
executor, administrator, trustee or guardian, please give full name as such.
- -------------------------------------------------------------------------------
Directions to the Raytheon Annual Meeting of Stockholders:
Raytheon's Annual Meeting of Stockholders will be held on Wednesday, April 25,
2001, at 10:00 a.m. at:
Raytheon Company
Executive Offices
141 Spring Street
Lexington, MA 02421
FOR ATTENDEES DRIVING TO THE MEETING:
-2-
In order to enter the Raytheon facility, you will need to stop at the guardhouse
and show your employee badge or admission ticket. Once approved, security guards
and signs will be available for parking directions and entrance to the facility.
Driving North on Route 95/128:
In Lexington, take Exit 29A (Route 2 East) toward Arlington/Cambridge.
Approximately one-half mile take the first exit, #53, Spring Street, and bear
right all the way to the stop sign. Turn right onto Spring Street. Cross over
Route 2. Raytheon is the first driveway on the left.
Driving South on Route 95/128:
In Lexington, take Exit 29A (Route 2) toward Arlington/Cambridge. Approximately
one-half mile take the first exit, #53, Spring Street, and bear right all the
way to the stop sign. Turn right onto Spring Street. Cross over Route 2.
Raytheon is the first driveway on the left.
Driving East on Route 2:
Go past Route 95/128. Take the very next exit, #53, Spring Street. Bear right
all the way to the stop sign. Turn right onto Spring Street, and cross over
Route 2. Raytheon is the first driveway on the left.
Driving West on Route 2:
Go past the Waltham Street/Lexington exit. Take the next exit, Waltham
Street/Waltham, #54A. Bear left at the end of the ramp and turn left onto Hayden
Avenue. Go to the top of the hill (running parallel to Route 2). Cross over
Spring Street into the Raytheon Executive Offices driveway.
Please present this ticket for admittance to the Annual Meeting.
- -------------------------------------------------------------------------------
CLASS A RAYTHEON COMPANY
LEXINGTON, MA 02421
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Daniel P. Burnham, Franklyn A. Caine, and Thomas
D. Hyde, or any of them, with full power of substitution, as proxies to vote all
shares of Raytheon Company Class A stock that the undersigned is entitled to
vote at the Annual Meeting of Stockholders of Raytheon Company to be held at the
the Company's Executive Offices, 141 Spring Street, Lexington, Massachusetts at
10:00 a.m. Eastern Time, Wednesday, April 25, 2001. This proxy authorizes each
of them to vote at his discretion on any other matter that may properly come
before the Meeting or any adjournment thereof. This proxy also provides voting
instructions for shares held in the Dividend Reinvestment Plan and various
employee savings plans described in the Proxy Statement.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR Items 1, 2, 3 and 4 and AGAINST Items 5, 6, 7, 8, 9 and 10.
IF YOU ARE NOT VOTING VIA THE INTERNET OR BY TELEPHONE, PLEASE MARK, SIGN, DATE,
AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH MUST SIGN.
Please sign this proxy card exactly as your name appears hereon. When shares are
held by joint tenants, both must sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
IF YOU VOTED YOUR PROXY CARD BY TELEPHONE OR INTERNET DO NOT RETURN YOUR PROXY
CARD.
-3-
HAS YOUR ADDRESS CHANGED?
(If yes, please include Social Security No.)
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
-4-
RAYTHEON Annual Meeting of Stockholders 2001 ANNUAL MEETING
Wednesday, April 25, 2001 ADMISSION TICKET
10:00 a.m. Eastern Time
(Doors Open at 9:30 a.m.)
c/o Proxy Services Raytheon Company
P.O. Box 8040 Executive Offices
Boston, MA 02266-8040 141 Spring Street
Lexington, MA 02421
(Directions on reverse)
- -------------------------------------------------------------------------------
PROXY VOTING INSTRUCTIONS
Raytheon Company encourages all stockholders to vote. We provide three
convenient methods for voting listed below:
PROXY CARD: Complete, sign, date, and return the proxy card attached below in
the enclosed envelope.
OR
TELEPHONE: If you are a resident of the United States or Canada, call toll-free
on a touch-tone phone 1-877-779-8683, 7 days a week, 24 hours a day. If you
reside outside of the United States or Canada, call toll-free 1-201-536-8073.
There is no charge for this call. Your voter control number is located above
your name on this proxy card. Please vote by 11:00 p.m. Eastern Time on April
24, 2001.
OR
INTERNET: Log on to the Web site http://www.eproxyvote.com/rtn and follow the
instructions provided. Your voter control number is located above your name on
this proxy card. Please vote by 11:00 p.m. Eastern Time on April 24, 2001.
Canadian and non U.S. residents are encouraged to vote either by telephone or
Internet.
RECEIVE FUTURE PROXY MATERIALS ELECTRONICALLY. Receiving stockholder material
electronically reduces mailing and printing costs and is better for the
environment. Would you like to receive future proxy materials electronically? If
so go to http://www.econsent.com/rtn and follow the instructions provided.
IF YOU VOTE BY TELEPHONE OR INTERNET YOU DO NOT NEED TO RETURN YOUR PROXY CARD.
RAYTHEON CLASS B
- -------------------------------------------------------------------------------
/ X / Please mark votes as in this example.
The Board of Directors recommends a vote FOR Items 1, 2, 3 and 4.
- ---------------------------------------------------------------------
Item 1 - Election of Directors: To elect five directors of the class whose
term of office expires in 2004 to serve for a term of three years. Nominees:
(01) John M. Deutch, (02) Henrique de Campos Meirelles, (03) Dennis J. Picard,
(04) Michael C. Ruettgers and (05) William R. Spivey. To elect one director of
the class whose term of office expires in 2005 to serve for a term of two years.
Nominee: (06) Frederic M. Poses
FOR WITHHOLD
/ / / /
- ----------------------------------------
For all nominees except as written above.
-5-
FOR AGAINST ABSTAIN
Item 2 - To amend the Company's Certificate
of Incorporation to effect the
Reverse/Forward Stock Split / / / / / /
Item 3 - To amend the Company's Certificate
of Incorporation to reclassify the Company's
Class A and Class B common stock / / / / / /
Item 4 -To approve the Company's
2001 Stock Plan / / / / / /
The Board of Directors recommends a vote AGAINST Items 5, 6, 7, 8, 9 and 10.
Item 5 - Stockholder Proposal #2:
Offsets / / / / / /
Item 6 - Stockholder Proposal #3:
Benchmark Executive Compensation / / / / / /
Item 7 - Stockholder Proposal #4:
Performance-based Stock Options / / / / / /
Item 8 - Stockholder Proposal #5:
Annual Election of Directors / / / / / /
Item 9 - Stockholder Proposal #6:
Shareholder Rights Plan / / / / / /
- --------------
Please check any of the following that apply:
I plan to attend the Annual Meeting. / /
Please discontinue duplicate Annual
Report mailings. / /
Please note my change of address on the
back of this card. / /
Signature--------------------------------- Date------------------, 2001
Signature--------------------------------- Date------------------, 2001
Please sign this proxy as the name(s) appear above. When signing as attorney,
executor, administrator, trustee or guardian, please give full name as such.
- -------------------------------------------------------------------------------
Directions to the Raytheon Annual Meeting of Stockholders:
Raytheon's Annual Meeting of Stockholders will be held on Wednesday, April 25,
2001, at 10:00 a.m. at:
Raytheon Company
Executive Offices
141 Spring Street
Lexington, MA 02421
FOR ATTENDEES DRIVING TO THE MEETING:
In order to enter the Raytheon facility, you will need to stop at the guardhouse
and show your employee badge or admission ticket. Once approved, security guards
and signs will be available for parking directions and entrance to the facility.
-6-
Driving North on Route 95/128:
In Lexington, take Exit 29A (Route 2 East) toward Arlington/Cambridge.
Approximately one-half mile take the first exit, #53, Spring Street, and bear
right all the way to the stop sign. Turn right onto Spring Street. Cross over
Route 2. Raytheon is the first driveway on the left.
Driving South on Route 95/128:
In Lexington, take Exit 29A (Route 2) toward Arlington/Cambridge. Approximately
one-half mile take the first exit, #53, Spring Street, and bear right all the
way to the stop sign. Turn right onto Spring Street. Cross over Route 2.
Raytheon is the first driveway on the left.
Driving East on Route 2:
Go past Route 95/128. Take the very next exit, #53, Spring Street. Bear right
all the way to the stop sign. Turn right onto Spring Street, and cross over
Route 2. Raytheon is the first driveway on the left.
Driving West on Route 2:
Go past the Waltham Street/Lexington exit. Take the next exit, Waltham
Street/Waltham, #54A. Bear left at the end of the ramp and turn left onto Hayden
Avenue. Go to the top of the hill (running parallel to Route 2). Cross over
Spring Street into the Raytheon Executive Offices driveway.
Please present this ticket for admittance to the Annual Meeting.
- -------------------------------------------------------------------------------
CLASS B RAYTHEON COMPANY
LEXINGTON, MA 02421
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Daniel P. Burnham, Franklyn A. Caine, and Thomas
D. Hyde, or any of them, with full power of substitution, as proxies to vote all
shares of Raytheon Company Class B stock that the undersigned is entitled to
vote at the Annual Meeting of Stockholders of Raytheon Company to be held at the
the Company's Executive Offices, 141 Spring Street, Lexington, Massachusetts at
10:00 a.m. Eastern Time, Wednesday, April 25, 2001. This proxy authorizes each
of them to vote at his discretion on any other matter that may properly come
before the Meeting or any adjournment thereof. This proxy also provides voting
instructions for shares held in the Dividend Reinvestment Plan and various
employee savings plans described in the Proxy Statement.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR Items 1, 2, 3 and 4 and AGAINST Items 5, 6, 7, 8, 9 and 10.
IF YOU ARE NOT VOTING VIA THE INTERNET OR BY TELEPHONE, PLEASE MARK, SIGN, DATE,
AND RETURN THIS PROXY CARD USING THE ENCLOSED ENVELOPE. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH MUST SIGN.
Please sign this proxy card exactly as your name appears hereon. When shares are
held by joint tenants, both must sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
IF YOU VOTED YOUR PROXY CARD BY TELEPHONE OR INTERNET DO NOT RETURN YOUR PROXY
CARD.
HAS YOUR ADDRESS CHANGED?
(If yes, please include Social Security No.)
-7-
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
-8-