2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 270 MARTIN MARIETTA MATERIALS ExecutiveSummary / CompensationDiscussionandAnalysis This financial performance allowed us to achieve our additional strategicobjectives,including: • Pursuing aggregates-led expansion through acquisitions thatcomplementexistingoperations(i.e.,bolt-onacquisitions) and acquisitions that provide leadership entry into new marketsorsimilarproductlines(i.e.,platformacquisitions) • Returning $209 million to our shareholders in 2017 throughsharerepurchases($100.0million)andmeaningful dividends($108.9million)thatwererecentlyincreased,and totalingover $1.2billion sinceannouncingourrepurchase authorizationinFebruary2015 Martin Marietta continues to be recognized as the best of the best in our industry. All awards are meaningful, but it is particularly satisfying when we are recognized for achievement againstacorevalue,suchassafety.Atthe2017Fallmeetingof the National Stone, Sand and Gravel Association (NSSGA), several of our facilities were recognized as NSSGA Safety ExcellenceAward winners.Theseawardsrecognizeoperations that have gonethelongestdurationwithoutareportableinjury intheirsizecategory,basedondataprovidedbytheMineSafety and Health Administration (MSHA). Our Rio Medina Quarry, located in San Antonio, Texas, earned a gold-level Safety Excellenceawardinthelargequarrycategory.Silver-levelaward winnersincludeHelotesQuarry(Texas),CedarvilleQuarry(Ohio), 3BellsSand&Gravel(Colorado),NewHarveySand(Iowa),Linn County Sand (Iowa) and Onslow Quarry (North Carolina). In addition, 20 of our operations were recognized as bronze-level awardwinners. Stewardship is another of our core values and our operations were well-represented among the NSSGA Environmental Excellence Award winners. These awards provide national recognition for operations actively contributing to the maintenanceoftheenvironmentinandaroundtheiroperations as evidenced by a commitment to the exemplary use of environmentalcontrolsandsystems.Thisawardisbased,inpart, on the extent to which an operation meets and exceeds technical environmental and regulatory requirements. In addition, in order to be eligible for the award, the operation must certify its compliance with all applicable governmental environmental regulatory requirements and does not have a pattern of violations during the time period of two full years prior to the date of application. Two of our operations, Central Rock (North Carolina) and Mill Creek Limestone (Oklahoma), were recognized as gold-level award winners. Silver-level winners included Kings Mountain Quarry (North Carolina), Maiden Quarry (North Carolina) and North Columbia Quarry (South Carolina). Eleven of our operations were recognized as bronze-levelawardwinners. In 2017, Forbes Magazine unveiled two new lists and Martin Marietta was recognized on both: We ranked #146 on the Global2000GrowthChampions listand#209onthe Global 2000 World’s Best Employers list. Sales are one of four metricsusedtorankthecompaniesontheGlobal2000Growth Championslist–theothersareprofits,assetsandmarketvalue. Ourfinancialperformanceputusonthislist.Ouremployeesput us on the Global 2000 World’s Best Employers list. Employees wereaskedtoratetheiremployerandthelikelihoodtheywould recommend the company to a friend or family member. We were one of only 9 employers from the Construction Materials sector recognized in the top 500. In addition, we were the highest ranked U.S.-based employer from the Construction Materialssectorinthetop500. Further, for the second year in a row, Martin Marietta was also recognized by Fortune Magazine as one of the World’s 100 FastestGrowingCompanies. 2017markedthe31steditionof Fortune’s Fastest Growing Companies list which reveals the top three-year performers in revenues, profits and stock returns. MartinMariettawasranked#57in2016and#72in2017.None ofourindustryorsectorpeersmadethe Fortune ranking. Martin Marietta was also identified as North Carolina’s best-run public company for 2017 by the American City BusinessJournals .Sevenperformancefactorswereconsideredin theranking:returnonequity,profitmargin,debt-to-equityratio, revenue growth, liquidity, shareholder return and employee growth. We bested Bank of America, BB&T, Duke Energy, Lowes, Nucor, Hanes Brands, VF Corporation, Red Hat, and IQVIA (formerly Quintiles), among others, due to our impressive financialperformance. We were also well-represented on the Institutional Investor All-America Executive Team for 2018 , where, among other recognitions, the Martin Marietta Analyst Day was ranked secondoverall. Finally, our Information Services team was honored at OpenWorldinSanFranciscofor DigitalInnovation. Theaward recognizedtheteam’spioneeringeffortsininstallingJDEdwards on Oracle’s SuperCluster technology platform. This project significantlyimprovedapplicationperformance,createdarobust businesscontinuityanddisasterrecoveryplatform,andprovides afoundationforgrowththatwillservetheCompanyforyears. 2018PROXYSTATEMENT 33 Total of 04 pages in section CompensationDiscussionandAnalysis / ExecutiveSummary Ourperformanceearnedusrecognition,includingbeing ranked#72inFortune’s100fastestgrowingcompaniesintheworld in 2017. OurTSRforthe3-yearand5-yearperiodsrepresentedapremium relativetotheperformanceoftheS&P500TSRandthe S&P500MaterialsIndexTSR. MartinMarietta Common Stocks S&P 500 Index S&P500 Materials Index 1Yr. 0.6% 21.8% 23.8% 3Yr. 105.9% 38.3% 32.4% 5Yr. 148.0% 108.1% 77.8% 10Yr. 93.7% 126.0% 82.0% TOTALRETURN (INCLUSIVEOFDIVIDENDS) (as ofDecember31,2017) In 2017, we continued to focus on strategically positioning ourselves in high-growth areas. Consistent with our strategic plan and our assessment of the attractiveness of markets, we entered into an agreement to acquire Bluegrass Materials, the largest privately-held, pure-playaggregatesbusinessintheUnitedStateswithlocationsinMaryland,Georgia,Kentucky,TennesseeandSouthCarolina. MARKETATTRACTIVENESSDRIVER Populationgrowth Market economicdiversity Superior statefinancialposition Populationdensity Highbarriers to entry ADVANTAGE Increased per capita aggregates consumption Large infrastructure network leads to increased repair&maintenance expenditures Market stability Supports infrastructure growth Protects location advantage Despitesignificantprecipitationinmanyofourkeymarketsandshipmentvolumedecreases,weachievedrecordfinancialperformance in 2017 that led to increased profits versus the prior year. Effective management provided us the ability to prudently reinvest in our business,pursuestrategicopportunities,andreturncashtoourshareholders.Basedonourstrategy,wehaveachievedthenumber1or 2positionin85%oftheregionsinwhichweoperate,givingusafoundationfordurablegrowth. Insummary,MartinMariettacontinuedtoexecuteitsstrategicplanwhiledeliveringstrongperformancein2017ascomparedto2016: • Record earnings per diluted share of $11.25 compared with $6.63; 2017 includes $4.07 per share benefit for the impactoftheTaxCutsandJobsActof2017(2017TaxAct) • RecordnetearningsattributabletoMartinMariettaof $713.3 million, an increase of 68%, including a $258.1million income tax benefitfromtheremeasurement of deferred tax assets and liabilities following enactment of the2017TaxAct • Record consolidated EBITDA of over $1.00 billion comparedwith$971.6million • Record consolidated total revenues of $3.97 billion comparedwith$3.82billion,anincreaseof3.8% • Aggregates product line pricing increase of 4.5% despite aggregatesproductlinevolumedeclineof0.6% • Cement product line total reven es of $384.1 million and grossprofitof$117.3million • Returnonshareholders’equityof16.2% • RecordMagnesiaSpecialties’totalrevenuesof$270.0million and earningsfromoperationsof$79.4million • Effective management of controllable production costs, as evidenced by a 60-basis-point improvement in consolidated grossmargin • Selling, general and administrative (SG&A) expenses representing6.6%oftotalrevenues • Operatingcashflowof$657.9million 32 2018PROXYSTATEMENT Compensation Discussion and Analysis Introduction This Compensation Discussion and Analysis, or CD&A, describes our 2017 executive compensation program and the attendant oversight provided by the Management Development and Compensation Committee of the Board of Directors (the Committee). It also summarizes our executive compensation structure and discusses the compensation earned by Martin Marietta’s NEOs (the CEO, the CFO, and the three other most highly compensated executive officers in 2017) as presented below in the tables under “ Executive Compensation ” following this CD&A, which contain detailed compensation information quantifyingandfurtherexplainingourNEOs’compensation. For2017,ourNEOswere: NEO Title C.HowardNye ChairmanoftheBoard,PresidentandChiefExecutiveOfficer JamesA.J.Nickolas SeniorVicePresidentandChiefFinancialOfficer RoselynR.Bar ExecutiveVicePresident,GeneralCounselandCorporateSecretary DanielL.Grant SeniorVicePresident–StrategyandDevelopment DonaldA.McCunniff SeniorVicePresident–HumanResources * Also included in the Executive Compensation information starting on page 51 is Anne H. Lloyd, former Executive VicePresidentandChiefFinancialOfficer,whoretiredfromtheCompanyasofDecember31,2017.Thetermsof herseparationfromtheCompanyaredescribedonpages60and62ofthisproxystatement. Executive Summary Byalmostanymeaningfulmeasure,2017wasaremarkableyear for Martin Marietta. We had record financial performance, delivering net earnings of $713.4 million and over $1 billion dollars in EBITDA.* We continue to focus not only on the operations of the Company, but on the best practices needed to make Martin Marietta not just the best aggregates company, but rather one of the world’s best companies. Our Company performance, coupled with the achievement of key strategic goals, delivered excellent results in 2017, and established an enhanced solid foundation for continued performanceanddeliveryofshareholdervalue. AnotherRecordYear:PerformanceThroughTransformation / Recordtotalrevenuesof$4.0billion / Recordgrossprofitof$971.9million / Record net earnings of $713.4 million, despite 1 million tons lower of aggregates shipments than2016 / RecordEBITDA*of$1.004billion / Recordearningsperdilutedshareof$11.25 *SeeAppendixBforareconciliationofnetearningsattributabletoEBITDA. 2018PROXYSTATEMENT 31 PAYCOM SOFTWARE, INC. 2018PROXYSTATEMENT CompensationDiscussionandAnalysis (continued) • ouroutlookandoperatingplanfortheupcomingyear; • thecompensationanalysisprovidedbyCompensia; • theNEO’srole,responsibilities,andskills; • theNEO’scompensationforthepreviousyear; • relevanttermsoftheNEO’semploymentagreement,ifany; • anevaluationoftheNEO’sindividualperformance(see“—RoleofExecutiveOfficers”); • theproposedcompensationpackagesfortheotherNEOs(internalpayequity); • thesizeoftheaggregateequitypoolavailableforawardsfortheyearandtherelativeallocationofsuchpoolamongthe NEOsandtheotherparticipants; • overallequitydilutionandburnratesaswellasequityoverhanglevels; • the value of, and expense associated with, proposed and previously awarded equity grants, including the continuing retentivevalueofpastawards;and • compensationtrendsandcompetitivefactorsinthemarketfortalentinwhichwecompete. RoleofCompensationCommittee Our compensation committee reviews and approves, or recommends that our Board of Directors approve, the compensation of our NEOs. Among other matters, the compensation committee reviews and approves corporate goals andobjectivesrelevanttothecompensationofourChiefExecutiveOfficerandotherNEOs,evaluatestheperformanceof theseofficersinlightofthosegoalsandobjectives,andapproves,orrecommendsthatourBoardofDirectorsapprove,all equityawardstoourNEOs. RoleofCompensationConsultant The compensation committee has engaged Compensia to provide input, analysis, and advice about our compensation programs for executives and non-employee directors, including compensation philosophy and design, peer group data, competitivepositioningandequitycompensationpractices.ThecompensationcommitteeselectedCompensiatoprovide these services based on, among other things Compensia’s reputation and substantial insight and experience with executivecompensationprogramsinourindustry.Compensiareportsdirectlytothecompensationcommitteeanddidnot perform work for Paycom in 2017 except under its engagement by the compensation committee. After reviewing and consideringthefactorssetoutbytheapplicablerulesandregulationsoftheSECandNYSEregardingtheindependenceof compensationadvisors,thecompensationcommitteedeterminedthatCompensiaisindependentanditsworkin2017did notraiseanyconflictsofinterest. RoleofExecutiveOfficers On an annual basis, we evaluate each NEO’s performance for the prior year. Our Chief Executive Officer, Mr. Richison, prepares an evaluation of each NEO other than himself, with input from others within the Company. The evaluation focuses on the achievement of stated corporate and individual goals and performance criteria and the amount of contributions made to Paycom. This process leads to a recommendation from the Chief Executive Officer to the compensationcommitteewithrespecttothecashcompensationofeachNEO(otherthanhimself)aswellaswhetheror not equity incentive awards should be granted. The compensation committee determines the Chief Executive Officer’s cashcompensation(withouthisinput),aswellaswhetherornotequityincentiveawardsshouldbegrantedtohim. CompensationMix The charts below provide the compensation mix for our NEOs in 2017. As shown in these charts, we emphasize performance-based,at-riskcompensation.In2017,approximately62%ofourChiefExecutiveOfficer’stotalcompensation wastiedtoperformance,includingapproximately51%thatwasdeliveredintheformofrestrictedstockthatwasdesigned tovestuponour“totalenterprisevalue”reachingcertainpredeterminedthresholds,whichwerefertoas“market-based” 26 Total of 03 pages in section 2018PROXYSTATEMENT CompensationDiscussionandAnalysis (continued) ObjectivesandComponentsofCompensation Our compensation committee has determined what it believes to be the appropriate level and mix of the various compensationcomponentsforourNEOs.Thespecificobjectivesofourexecutivecompensationprogramareto: • rewardtheachievementofourstrategicobjectives,includingfinancialgrowth; • drivethecontinueddevelopmentofoursuccessfulandprofitablebusiness; • motivate,rewardandretainhighlyqualifiedexecutiveswhoareimportanttooursuccess; • recognize strong performers by offering cash performance-based incentive compensation and equity awards that rewardcontributionstoouroverallsuccess;and • aligntheinterestsofourNEOswiththoseofourstockholdersand,indoingso,createvalueforourstockholders. The table below summarizes how the various components of our executive compensation program are designed to achievetheseobjectives. CompensationComponent Objectives Basesalary To compensate NEOs for services rendered during the fiscal year and to recognize their experience, skills,knowledgeandresponsibilities Performance-basedcashbonuses To emphasize pay-for-performance and to reward NEOs for the achievement of specified performance criteria Equityincentiveawards To incentivize and reward NEOs for long-term retention and corporate performance based on our enterprise value and, consequently, to align their interestswiththoseofourstockholders Retirementbenefits To compensate NEOs for services rendered during the fiscal year and to recognize their experience, skills,knowledgeandresponsibilities Perquisitesandpersonalbenefits To compensate NEOs for services rendered during the fiscal year and to recognize their experience, skills,knowledgeandresponsibilities Compensation Philosophy As we pursueour strategic objectives,we must continuouslydevelopand refine our solutionto stay aheadof urcli nts’ needsandchallenges,whichrequiresatalentedandexperiencedmanagementteam.Ourcompensationcommittee,with input from management and our compensation consultant, has developed an executive compensation program that we believe is designed to (i) motivate, reward and retain our leaders, (ii) support our strategic objectives, including long-term, sustainable growth and increasing stockholder value, and (iii) encourage strong financial performance on an annual and long-termbasis,ineachcasewithoutencouragingexcessiveorinappropriaterisktaking. Compensation Review and Determination Overview IndeterminingthecompensationforeachNEO,thecompensationcommitteeconsideredthefollowingfactors: • ourperformanceinthepreviousyear,basedonfinancialandnon-financialmetrics; • ourgrowthfromthepreviousyear,basedonbothfinancialandnon-financialmetrics; • retentionconsiderations; 25 2018PROXYSTATEMENT Compensation Discussion and Analysis This Compensation Discussion and Analysis provides an overview of the material components of our executive compensationprogramforthefollowingpersons: ChadRichison, PresidentandChiefExecutiveOfficer CraigE.Boelte, ChiefFinancialOfficer JeffreyD.York, ChiefSalesOfficer StaceyPezold, ChiefLearningOfficer WilliamX.KerberIII, FormerChiefInformationOfficer (1) (1) Mr.KerberresignedfromhispositionasChiefInformationOfficeroftheCompanyonOctober9,2017. In this Compensation Discussion and Analysis and the accompanying compensation tables, we refer to the executive officers listed above as our named executive officers (“NEOs”). The compensation provided to our NEOs for the years endedDecember31,2017,2016and2015issetforthindetailintheSummaryCompensationTableandoth rt blesthat follow this section, as well as the accompanying footnotes and narrative discussions relating to those tables. This Compensation Discussion and Analysis also provides an overview of the elements and philosophy of our executive compensation program as well as how and why the compensation committee and our Board of Directors make specific compensationdecisionsandpolicieswithrespecttotheNEOs. Executive Summary 2017FinancialandBusinessHighlights We are committed to achieving long-term, sustainable growth and increasing stockholder value. As evidenced by our strongfinancialresults,ourmomentumandsuccesscontinuedin2017.AsweapproachthefourthanniversaryofourIPO and reflect on all that we have accomplished in just four years, we recognize that our talented and experienced management team is critical to our ability to maintain our momentum and to continue to pursue our strategic objectives. Accordingly,webelieveitisimportanttoconsiderourexecutivecompensationdecisionsinthecontextofou financialand operationalperformanceduring2017. 2017FINANCIALHIGHLIGHTS REVENUE EARNINGS STOCKPRICE 31.6% growth year-over-year $1.13earningsper diluted share (representing52.7%growth year-over-year) 435.5% increase from thedateof our IPO (as ofDecember 31, 2017) 2017 BUSINESS HIGHLIGHTS EXPANDINGOUR FOOTPRINT EXPANDINGOUR CLIENTBASE 2,700new clients Three new salesoffices (based on taxpayer identification number) 600new clients (basedon parent company grouping) We were also encouraged by the results of the stockholder advisory vote on the compensation of our NEOs held at our 2017 annual meeting. Over 90% of the shares present in person or represented by proxy and entitled to vote on the proposalwerevotedinfavorofour“say-on-pay”resolutionatthe2017annualmeeting.Weinterpretedthisstronglevelof supportasaffirmationofthestructureofourexecutivecompensationprogramandourapproachtomakingcompensation decisions. As a result, we did not make substantive changes to the program design following the 2017 annual meeting, otherthantoaddatime-basedcomponenttoourNEOs’LTIPawards. 24 2017financialhighlightsrevenue31.6%growthyear-over-yearearnings$1.13earningsperdilutedshare(representing5z7%growthyear-to-year)stockprice435.5%increasefromthedateofourIPO(asofDecember37.2077)2017businesshighlightsexpandingourthreenewsalesofficesexpandingourclientbase2,700newclients600newclients(basedonparentcompanygrouping)