<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant / X /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
MORTON INTERNATIONAL, INC.
- ------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
- ------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ X / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction
applies:
------------------------------------------------------------
2) Aggregate number of securities to which transaction
applies:
------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated
and state how it was determined.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
[LOGO]
S. JAY STEWART
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
September 15, 1994
Dear Shareholder:
It is my pleasure to invite you to the 1994 Annual Meeting of Shareholders of
Morton International, Inc., which will be held on Thursday, October 27, 1994, at
the Grand Ballroom, 12th floor (lobby level), Ritz-Carlton Hotel, 160 East
Pearson Street, Chicago, Illinois commencing at 10:00 A.M. local time.
Information relative to the matters to be voted upon at the meeting is in the
formal notice of the meeting and proxy statement on the following pages.
It is important that your shares be represented at this meeting whether or not
you plan to attend in person. Therefore, please sign, date and return your proxy
promptly in the enclosed envelope. This will not limit your rights to vote in
person or attend the meeting.
A public news release covering voting results will be available immediately
after the meeting.
The Company's Annual Report for the fiscal year ended June 30, 1994, is being
distributed to shareholders with this proxy statement.
Sincerely,
[PASTE SIGNATURE]
<PAGE>
MORTON INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Morton International, Inc. (the "Company")
will be held on Thursday, October 27, 1994, at the Grand Ballroom, 12th floor
(lobby level), Ritz-Carlton Hotel, 160 East Pearson Street, Chicago, Illinois at
10:00 A.M. local time to consider and vote upon:
1. Election of three directors for three-year terms (see pages 1-2).
2. Adoption of the 1994 Non-Employee Directors Stock Plan (see pages 17-18
and Exhibit 1).
3. Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditing firm for the fiscal year ending June 30, 1995 (see
page 18).
4. Any other business that may properly come before the meeting.
The close of business August 29, 1994, has been fixed as the record date for the
meeting. All shareholders of record on that date are entitled to be present and
vote at the meeting.
Attendance at the annual meeting will be limited to shareholders of record,
beneficial owners of Company common stock entitled to vote at the meeting having
evidence of ownership, the authorized representative (one only) of an absent
shareholder, and invited guests of management. Any person claiming to be an
authorized representative of a shareholder must, upon request, produce written
evidence of such authorization.
The meeting will be conducted pursuant to the Company's by-laws and rules of
order prescribed by the chairman of the meeting.
By order of the Board of Directors
P. Michael Phelps
Vice President and Secretary
September 15, 1994
<PAGE>
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MORTON INTERNATIONAL, INC.
100 NORTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606-1596
- --------------------------------------------------------------------------------
PROXY STATEMENT
September 15, 1994
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by the
Company's Board of Directors (the "Board") of proxies for use at its Annual
Meeting of Shareholders, to be held on Thursday, October 27, 1994, and at any
adjournment thereof (the "1994 Annual Meeting" or the "meeting").
The shares represented by all properly executed and unrevoked proxies
received in proper form in time for the meeting will be voted. Shares will be
voted in accordance with shareholders' instructions in the accompanying proxy.
If no instructions are given, the shares will be voted in accordance with the
Board's recommendations, which are noted herein. Any proxy given may be revoked
at any time before it is voted at the meeting.
Directors will be elected by a plurality of the shares present at the
meeting in person or by proxy and entitled to vote thereon. Votes withheld as to
one or more nominees will not be counted as votes cast for such individuals. Any
other proposal brought before the meeting will be decided by a majority of votes
cast with respect thereto. Consequently, abstentions and broker non-votes (votes
withheld by brokers in the absence of instructions from street-name holders) are
not counted for purposes of determining whether a proposal has been approved,
but they are counted for purposes of establishing a quorum at the meeting.
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy material to the beneficial
owners of the Company's common stock of whom they have knowledge, and will
reimburse them for their expenses in so doing; and certain directors, officers
and other employees of the Company, not specially employed for the purpose, may
solicit proxies, without additional remuneration therefor, by personal
interview, mail, telephone or telegraph. In addition, the Company has retained
Georgeson & Co., Inc. to assist in the solicitation for a fee of $11,000 plus
expenses.
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1. ELECTION OF DIRECTORS
The Company's by-laws provide that the size of the Board shall be fixed from
time to time by Board resolution. The Board presently consists of nine members,
divided into three classes. Directors in each class are elected, on a rotating
basis at the annual shareholders' meeting at which the term for such class
expires, for terms expiring (except as noted herein) at the third subsequent
annual meeting of shareholders.
Listed on the following pages as nominees for election at the 1994 Annual
Meeting for three-year terms are the three directors whose present terms will
expire at that time. All nominees are presently serving as directors, and the
Company has not been advised by any nominee that he will not serve if elected.
The Board recommends a vote FOR the nominees for director.
1
<PAGE>
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BOARD MEETING ATTENDANCE AND COMPENSATION OF DIRECTORS
The Board met six times during the fiscal year ended June 30, 1994 ("fiscal
1994"). Except for Mr. Stone, all of the incumbent directors were present for
75% or more of the total meetings of the Board and Board committees of which
they were members.
Directors who are not employees of the Company or any subsidiary thereof
receive for their services a retainer of $28,000 per year, plus a fee of $1,000
for each Board meeting attended. Directors who are employees of the Company or
any subsidiary thereof do not receive any compensation for service on the Board.
In addition, if the Company's 1994 Non-Employee Directors Stock Plan is
approved at the Annual Meeting, non-employee directors will each receive annual
grants of 500 shares of Company common stock. This plan is summarized on pages
17-18 of this proxy statement, and the complete text is set forth in Exhibit 1.
NOTE: As indicated in the following biographies, several Company directors have
served as such since 1989, which is the year the Company became a publicly
owned corporation.
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NOMINEES FOR DIRECTOR -- TERMS EXPIRING AT THE 1997 ANNUAL MEETING
RALPH M. BARFORD, age 65, is President of Valleydene Corp.
Ltd., an investment company. He is also Chairman of GSW, Inc.,
a manufacturer of consumer products, Chairman of Camco Inc.,
an appliance manufacturer, and a director of Algoma Steel
Corporation, Ltd., Bank of Montreal, BCE Inc., Hollinger,
Inc., Molson Companies, Northern Telecom Inc. and SpaceLabs
Medical, Inc. Mr. Barford has been a director of the Company
since 1989. He holds a Bachelor of Commerce degree from the
University of Toronto and an M.B.A. degree from Harvard
Business School.
[PHOTO]
WILLIAM T. CRESON, age 65, retired in 1986 from Crown
Zellerbach Corporation, a forest products and paper
manufacturer, where he had served as President, Chief
Executive Officer, and Chairman of the Board. Mr. Creson has
been a director of the Company since 1989. He holds a Bachelor
of Science degree in Mechanical Engineering from Purdue
University and an M.B.A. degree from the University of
Pennsylvania Wharton School of Finance.
[PHOTO]
S. JAY STEWART, age 55, became Chairman and Chief
Executive Officer of the Company in April 1994. Also, he has
been a director of the Company since 1989, and was its
President and Chief Operating Officer from 1989 through March
1994. Mr. Stewart holds a Bachelor of Science degree in
Chemical Engineering from the University of Cincinnati and a
Master of Business Administration degree from West Virginia
University.
[PHOTO]
2
<PAGE>
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INCUMBENT DIRECTORS -- TERMS EXPIRING IN 1995 *
FRANK W. LUERSSEN, age 67, retired on August 31, 1992, as
Chairman and Chief Executive Officer (since 1986) of Inland
Steel Industries, Inc. He has been a director of the Company
since 1989. Mr. Luerssen holds the following degrees: Bachelor
of Science, Physics (Pennsylvania State University); Master of
Science, Metallurgical Engineering (Lehigh University);
Honorary Doctor of Laws (Calumet College), and Honorary Doctor
of Public Service (St. Xavier University).
[PHOTO]
ROGER W. STONE, age 59, is Chairman of the Board (since
1983), President (since 1975), and Chief Executive Officer
(since 1979) of Stone Container Corporation, a paper and
paperboard manufacturer. He has been a director of the Company
since 1989. Mr. Stone is also a director of First Chicago
Corporation and its subsidiary, The First National Bank of
Chicago, McDonald's Corporation, and Option Care, Inc. He is a
graduate of the University of Pennsylvania Wharton School of
Finance.
[PHOTO]
RAYMOND C. TOWER, age 69, retired on March 1, 1990, as
President (since 1977) and Chief Operating Officer (since
1980) of FMC Corporation, a manufacturer of chemicals and
machinery for industry, agriculture and government. He has
been a director of the Company since 1989. Mr. Tower is also a
director of Household International, Inc., Inland Steel
Industries, Inc. and its subsidiary, Inland Steel Company, and
Wellman, Inc. He is a graduate of Yale University.
[PHOTO]
- --------
*Mr. Tower's term will expire in February 1995, when he will reach age 70. The
terms of the other two directors named in this class will expire at the October
1995 Annual Meeting.
3
<PAGE>
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INCUMBENT DIRECTORS -- TERMS EXPIRING AT THE OCTOBER 1996 ANNUAL MEETING
DENNIS C. FILL, age 65, is (since June 1992) Chairman and
Chief Executive Officer of Advanced Technology Laboratories,
Inc., formerly named Westmark International Incorporated, a
medical electronics systems manufacturer, where he held
corresponding offices since 1986. Mr. Fill has been a director
of the Company since 1989. He is also a director of Beckman
Instruments, Inc., Cytran, Inc. and Spacelabs Medical, Inc.
Mr. Fill attended Ealing College, the Institute of Export and
the Borough Polytechnic branch of London University. He also
served in the Royal Air Force.
[PHOTO]
CHARLES A. SANDERS, M.D., age 62, is (since 1989) Chairman
and former Chief Executive Officer (1989 - March 1994) of
Glaxo Inc. and (since 1990) a director of its British parent,
Glaxo Holdings p.l.c. Both companies are pharmaceuticals
manufacturers. Dr. Sanders has been a director of the Company
since 1990, and is also a director of Merrill Lynch & Co. and
Reynolds Metals Company. His M.D. degree is from Southwestern
Medical College of the University of Texas, and he also holds
two honorary Doctor of Science degrees.
[PHOTO]
GEORGE A. SCHAEFER, age 66, is a director (since 1983) of
Caterpillar Inc., a manufacturer of construction, earthmoving
and material handling equipment and engines. He retired in
1990 as Chairman and Chief Executive Officer of Caterpillar,
positions he had held since 1985. Mr. Schaefer has been a
director of the Company since 1990. He is also a director of
Aon Corporation, Helmerich & Payne, Inc. and McDonnell Douglas
Corporation. Mr. Schaefer is a graduate of St. Louis
University.
[PHOTO]
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COMMITTEES OF THE BOARD
There are four standing committees of the Board: Audit Committee,
Compensation Committee, Executive Committee, and Nominating and Organization
Committee.
The Audit Committee recommends to the Board the independent auditors to be
selected to audit the Company's annual financial statements, and reviews the
fees charged for such audits and for any special assignments given such
auditors. The committee also reviews the annual audit and its scope, including
the independent auditors' letter of comments and management's responses thereto;
possible violations of the Company's business ethics and conflicts of interest
policies; any major accounting changes made or contemplated; and the
effectiveness and efficiency of the Company's internal audit staff. In addition,
the committee confirms that no restrictions have been imposed by Company
personnel on the scope of independent auditors' examinations. Members of this
committee are Messrs. Luerssen (Chairman), Creson, Schaefer and Tower. The
committee met twice in fiscal 1994.
The Compensation Committee annually reviews and reports to the Board on
pension plan investment performance, and makes recommendations to the Board with
respect to the creation and amendment of pension and welfare plans of the
Company and its subsidiaries. The committee also approves senior officers'
salaries and administers the Company's employee cash and stock incentive
compensation plan. Members of this committee are Messrs. Fill (Chairman),
Barford, Sanders and Stone. The committee met four times in fiscal 1994.
The Executive Committee has and may exercise all the powers and authority of
the Board in the management of its business and affairs, except that the
committee does not have the power to amend
4
<PAGE>
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the Company's by-laws or articles of incorporation (except to fix the
designations, preferences and other terms of any of its preferred stock),
authorize the issuance of stock, authorize distributions (other than pursuant to
a formula set by the Board), adopt an agreement of merger or consolidation,
approve a plan of merger that does not require a vote of shareholders under
Indiana law, fill vacancies in the Board or Executive Committee or recommend to
shareholders action that Indiana law requires be approved by shareholders.
Members of this committee are Messrs. Luerssen, Stewart, Stone and Tower. The
committee had no meetings in fiscal 1994.
The Nominating and Organization Committee identifies and evaluates
individuals for potential directorships and makes recommendations accordingly to
the Board to fill vacancies or new positions on the Board, as well as
recommending to the Board the management slate of nominees for election as
directors at annual shareholders' meetings. The committee also makes
recommendations to the Board regarding the size and composition of the Board,
Board committees and management succession; and reviews the development of the
management organization structure. Members of this committee are Messrs. Stone
(Chairman), Barford, Fill and Stewart. The committee met once in fiscal 1994.
Written nominations by shareholders for directors will be considered by the
Nominating and Organization Committee provided they are received by the
Corporate Secretary of the Company at its principal executive offices pursuant
to timely advance written notice in accordance with its by-laws* and contain all
information specified in such by-laws. No such nominations were received for the
1994 Annual Meeting. For the Company's 1995 Annual Meeting, any such nominations
must be received by the Company between July 22 and August 20, 1995.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
NOTE: All amounts and prices of Company common stock reported in this proxy
statement (including shares represented by stock options granted,
outstanding and exercised) have been adjusted to reflect a 3-for-1 stock
split paid on August 17, 1994, in the form of a 200% stock dividend.
On August 29, 1994, the record date for the 1994 Annual Meeting, there were
147,793,677 shares of common stock outstanding, each entitled to one vote. Only
shareholders of record on that date will be entitled to vote at the meeting. The
Company has no other class of equity securities outstanding. As of the date of
this proxy statement, there was no known beneficial ownership of more than 5% of
the Company's common stock.
- --------
*A copy of the Company's by-laws may be obtained by written request to its
Corporate Secretary.
5
<PAGE>
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The following table shows the Company's common stock beneficially owned as
of August 29, 1994, by each present director and each executive officer named in
the Summary Compensation Table on page 11; and by all present directors and
executive officers of the Company as a group. Each named person has sole voting
and investment power with respect to the shares shown (except for the shares
identified in footnote (2) below).
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1)
------------
<S> <C>
Ralph M. Barford............................................................................... 75,000
William T. Creson.............................................................................. 3,000
Dennis C. Fill................................................................................. 11,900
Stephen A. Gerow............................................................................... 91,272
Kenneth D. Holmgren............................................................................ 158,289
William E. Johnston............................................................................ 294,213
Charles S. Locke............................................................................... 933,540
Frank W. Luerssen.............................................................................. 3,000
Charles A. Sanders............................................................................. 6,000
George A. Schaefer............................................................................. 6,000
James R. Stanley............................................................................... 205,584 (2)
S. Jay Stewart................................................................................. 620,988
Roger W. Stone................................................................................. 3,000
Raymond C. Tower............................................................................... 1,500
All directors, nominees and executive officers as a group (25 persons including those named)... 2,158,208
NOTE: The largest individual beneficial holding shown above represents 6/10 of 1% of the outstanding shares;
the holdings of the group represent 1.5% of the outstanding shares.
<FN>
- --------
(1) Shares in this column include shares which the individuals have only the
right to acquire through the exercise of stock options which are
exercisable presently or within 60 days: Mr. Stewart (471,414 shares), Mr.
Johnston (240,618 shares), Mr. Gerow (90,000 shares), Mr. Holmgren (130,548
shares), Mr. Stanley (165,618 shares), Mr. Locke (255,750 shares) and all
directors and executive officers as a group (1,906,425 shares).
(2) 15,000 of these shares are owned by Mr. Stanley's wife.
</TABLE>
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COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation Committee is comprised exclusively of directors who are not
and have never been Company employees. No Company executive officer serves on
the Compensation Committee or as a director of another company for which any
member of the Compensation Committee serves as a director or executive officer.
During fiscal 1994, the Company made purchases from and sales to Stone
Container Corporation and its subsidiaries of approximately $7.0 million and
$3.6 million, respectively; and sales to GSW, Inc. of approximately $545,000.
6
<PAGE>
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Roger W. Stone, a director and member of the Compensation Committee of the
Company, is Chairman, President and Chief Executive Officer of Stone Container
Corporation. Ralph M. Barford, a director and member of the Compensation
Committee of the Company, is Chairman of GSW, Inc.
The foregoing transactions were made in the ordinary course of business and
on terms no less favorable to the Company than those that would have prevailed
in similar transactions with any other customer or supplier.
- --------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Because of a clerical error, a form 4 report timely delivered to the Company
during fiscal 1994 by Daniel D. Feinberg, an executive officer, was filed late
with the Securities and Exchange Commission (SEC).
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
As reported on page 4, the Compensation Committee of the Board (the
"Committee") approves senior officers' salaries and administers the Company's
cash and stock incentive compensation plan. The purpose of this plan and the
objectives of the Committee are to:
-pay for performance, motivating both long-and short-term performance on
behalf of Company shareholders,
-provide competitive compensation programs so as to be able to attract,
retain and motivate top management talent,
-place greater emphasis on at risk incentive compensation than on fixed
salaries, particularly for senior executives,
-base the incentive compensation of business unit executives in large part
on the performance of their operations, while including a component which
recognizes overall Company performance as well, and
-most importantly, join shareholder and management interests.
To further these objectives, the compensation of senior executive officers
includes four components: (1) base salaries, (2) annual bonus programs, (3)
long-term incentive programs (LTIP), and (4) stock options.
Periodically the Committee arranges for studies by independent compensation
consulting firms comparing total compensation of the Company's executive
officers with compensation of executives in similarly sized companies.* The last
such study, which was performed in August 1994, confirmed that base salaries are
somewhat lower than the averages in the study group. The study also showed that
the Company continues to place emphasis on performance based compensation, so
that total compensation is well above such averages when goals are exceeded.
- --------
*These companies do not necessarily include those in the Custom Composite (peer
group) Index in the performance graph on page 10, since the Company's
competitors for executive employees are not always the same as those for
shareholders' investments.
7
<PAGE>
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BASE SALARIES
The Committee approves salary changes for executive officers in accordance
with the Company's written salary administration policy. This policy is a
long-standing one designed and periodically reviewed in consultation with
external compensation consultants. Salary ranges are established for various
positions through job evaluation and comparison with competitive salary data.
Within the ranges adjustments are recommended on the basis of position within
the range, individual performance, and a corporate merit salary percentage
factor. Consistent with the Company's overall objectives these adjustments,
combined with bonuses as outlined below, emphasize payment for performance.
ANNUAL BONUSES
Following fiscal 1994 (which ended on June 30, 1994), the Committee
considered annual bonus payments for executive officers based on performance
during that year. Under the annual bonus program applicable to senior executive
officers, award levels may range from zero to 120% of their base salaries
(except for Mr. Locke, as described on page 9), depending on salary grade,
attainment of Company and applicable business unit profit targets as approved by
the Committee, and achievement of individual performance objectives. Based on
these factors and the terms of such annual bonus program, the Committee approved
bonus awards for participating executive officers other than Messrs. Locke and
Stewart ranging from 52% to 100% of their salaries.
LTIP
Also following fiscal 1994, the Committee considered LTIP payments to
executive officers based on performance during the three-year period from fiscal
1992 through fiscal 1994. LTIP participants are selected by the Committee
annually prior to the beginning of each particular three-year performance
period. Twelve of the sixteen current executive officers participated in the
LTIP for the most recently completed performance period. Depending on the
participant's salary grade, possible award levels range from zero if less than
5% compound annual growth in Company or applicable business unit profit goals as
approved by the Committee is realized over the three year period to a maximum
200% of base salary if 20% or greater compound annual growth is realized. Based
on the terms of the LTIP for fiscal 1992 through fiscal 1994, the Committee
authorized LTIP payments to ten of the twelve participating executive officers
ranging from 50% to 137% of their annual salaries.
STOCK OPTIONS
In addition, the Committee authorizes stock option grants to selected
employees, currently including all executive officers, at approximate one-year
intervals. The Company's stock option guidelines have been designed and revised
with the assistance of external compensation consultants. These guidelines,
which do not consider previous grants, provide for a specific number of options,
the value of which is derived from the midpoint of the salary range for each
specific salary grade, using a formula that assumes a substantial increase in
the stock's market value over the life of the option. All options granted to
executive officers in fiscal 1994 are for 10 year terms, with an exercise price
equal to the stock's market value on the date of grant, and (except for Mr.
Locke, as noted on page 9) become exercisable after one year of continued
employment following the grant date. Executive officers (other than Messrs.
Stewart and Locke) received grants in August 1993 (fiscal 1994) ranging from
6,480 shares to 22,140 shares.
8
<PAGE>
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CHIEF EXECUTIVE OFFICERS
The fiscal 1994 compensation of the Company's current Chairman and Chief
Executive Officer,
S. J. Stewart, was determined in accordance with the salary policy, bonus
programs and stock option guidelines previously discussed.
In August 1993 the Committee approved a salary increase of $30,000 effective
September 1, 1993, for Mr. Stewart, who was then President and Chief Operating
Officer. Mr. Locke retired as Chairman and Chief Executive Officer on March 31,
1994, and the Committee approved a promotional salary increase of $110,000 for
Mr. Stewart effective April 1, 1994, when he assumed his present position. His
resulting base salary, $600,000, is in the lower half of the salary range
established for this position. In August 1993, Mr. Stewart was granted a stock
option for 32,400 shares, and in March 1994 an additional stock option for
90,000 shares.
The Company substantially exceeded its fiscal 1994 earnings per share goals
(as established in the annual bonus program) and therefore, in August 1994, the
Committee approved pursuant to the terms of the program an annual bonus for Mr.
Stewart of $551,250. In addition, pursuant to the terms of the LTIP, the
Committee approved a payment of $567,405 to Mr. Stewart, since the Company
exceeded the goal of 10% compound growth in earnings per share for the three
year period from fiscal 1992 through fiscal 1994.
Mr. Locke served as Chairman and Chief Executive Officer for the first nine
months of fiscal 1994. In August 1993, the Committee approved an increase of
$50,000 in Mr. Locke's base salary to an annual rate of $830,000 over the last
seven months of his tenure. At the same time the Committee approved a stock
option grant to him of 60,750 shares, notwithstanding his scheduled retirement
less than one year following the grant date. These actions were in recognition
of Mr. Locke's long and extremely successful tenure with the Company and its
predecessor, Morton Thiokol, Inc.
Mr. Locke's fiscal 1994 annual bonus of $1,245,000 was based on a target of
100% of his base salary rather than 60% because of his exclusion from the fiscal
1993-95 and 1994-96 LTIPs. However, Mr. Locke participated in the fiscal 1992-94
LTIP, pursuant to which he earned a payment of $924,660. Both the LTIP payment
and the 1994 annual bonus were pro-rated to cover only the months during which
Mr. Locke served prior to his retirement.
LIMITATION ON DEDUCTIBILITY OF CERTAIN COMPENSATION
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for annual compensation over $1 million paid to
their chief executive officers and the four other most highly compensated
executive officers. The Company will become subject to this limitation beginning
in fiscal 1995. "Performance-based compensation" (as defined in the legislation)
is not subject to the deduction limit if certain requirements are met.
Traditionally the Company's various bonus programs have been primarily
performance based within the meaning of the legislation. However most, including
those in which the Company's executive officers participate, are based in minor
part on achievement of subjective goals that are strategic in nature.
Consequently, the Committee approved a restructuring of the performance-based
compensation programs in which its most highly compensated executive officers
participate during periods beginning after fiscal 1994 to eliminate the
subjective goals in order to preserve the deductibility of amounts paid
thereunder.
Dennis C. Fill, CHAIRMAN
Ralph M. Barford
Charles A. Sanders
Roger W. Stone
9
<PAGE>
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STOCK PERFORMANCE GRAPH
The following graph compares the cumulative shareholder returns on the
Company's common stock; the Standard & Poor's-R- 500 Stock Index; and a Custom
Composite Index. The Custom Composite Index is a revenue weighted composite of
the Standard & Poor's-R- Specialty Chemicals Index and a customized index
prepared from the companies in the ValueLine Auto Parts -- Original Equipment
Industry group. The Custom Composite Index is weighted at the beginning of each
fiscal year according to the Company's revenue for that year in its Specialty
Chemicals and Automotive Safety Products lines of business.
The ValueLine component of the Custom Composite Index consists of the
following companies: Arvin Industries Inc., Dana Corp., Eaton Corp., Intermet
Corp., Modine Manufacturing Co., Simpson Industries Inc., A.O. Smith, Standard
Products Co., Superior Industries International Inc., and Walbro Corp. The
returns for each of these companies are weighted in accordance with their
respective market capitalizations on a quarterly basis at the beginning of each
quarter.
The graph covers the five year period from June 30, 1989, through June 30,
1994, the end of the Company's last fiscal year.
<TABLE>
<CAPTION>
JUN-89 JUN-90 JUN-91 JUN-92 JUN-93 JUN-94
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Morton International $100 $110 $135 $142 $205 $209
S&P 500-R- $100 $116 $125 $142 $161 $163
Custom Composite Index $100 $105 $112 $131 $160 $158
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------
PAYOUTS
ANNUAL COMPENSATION AWARDS
--------------------------------------------------- ---------------------
SECURITIES
OTHER ANNUAL UNDERLYING LTIP ALL OTHER
COMPENSATION OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) ($)(1) (#) ($)(2) ($)(3)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
S. JAY STEWART 1994 $ 512,500 $ 551,250 $ 2,277,011 122,400 $567,405 $ 15,375
Chairman and Chief 1993 455,000 434,844 -0- -0- -0- 13,650
Executive Officer(4) 1992 425,000 335,121 -0- 15,400 125,728 12,750
- -------------------------------------------------------------------------------------------------------------------------
WILLIAM E. JOHNSTON 1994 $ 302,167 $ 310,500 $ 1,014,704 22,140 $236,060 $ 9,315
Executive Vice President, 1993 258,417 260,500 -0- -0- 160,000 7,753
Administration 1992 245,834 164,052 -0- 24,750 210,600 7,375
- -------------------------------------------------------------------------------------------------------------------------
KENNETH D. HOLMGREN 1994 $ 245,000 $ 245,834 $ -0- 12,150 $336,000 $ 7,350
President, Automotive 1993 216,667 198,000 -0- -0- 300,000 6,500
Safety Products Group 1992 195,833 176,666 -0- 14,850 196,000 5,875
- -------------------------------------------------------------------------------------------------------------------------
STEPHEN A. GEROW 1994 $ 222,833 $ 202,500 $ -0- 12,150 $304,000 $ 6,685
President, Coatings 1993 210,167 150,910 -0- -0- -0- 6,305
Group 1992 199,167 141,374 -0- 14,850 -0- 5,975
- -------------------------------------------------------------------------------------------------------------------------
JAMES R. STANLEY 1994 $ 222,167 $ 201,600 $ -0- 12,150 $191,657 $ 6,665
Vice President for Legal 1993 211,167 164,743 -0- -0- -0- 6,335
Affairs and General Counsel 1992 200,000 126,987 -0- 13,200 50,291 6,000
- -------------------------------------------------------------------------------------------------------------------------
CHARLES S. LOCKE 1994 $ 614,167 $1,245,000 $ 10,182,580 60,750 $924,660 $ 46,711
Former Chairman and Chief 1993 771,667 1,340,625 -0- -0- -0- 23,150
Executive Officer 1992 720,000 620,646 -0- 75,000 227,882 21,600
- -------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Amounts in this column consist of cash payments to the indicated
individuals pursuant to stock option agreement provisions for reimbursement
of their income tax liability upon exercise of the related options (for a
detailed description of such payments, see footnote (2) to the option
exercise table on page 13).
(2) Amounts in this column consist of Long Term Incentive Program (LTIP) awards
earned during three-year performance periods ending on the last day of the
indicated fiscal years and paid out approximately two months thereafter.
(3) Except for Mr. Locke, amounts in this column consist of Company
contributions to the named individuals' accounts in the Company's basic and
supplemental Employee Savings and Investment (defined contribution) Plans.
With respect to Mr. Locke, $18,425 of his fiscal 1994 total represents
Company contributions to his defined contribution plan accounts, and
$28,286 represents the after-tax cost to the Company of a gift to him upon
retirement of the automobile previously provided by the Company for his
use.
(4) Mr. Stewart's compensation during fiscal 1992, fiscal 1993, and the first
nine months of fiscal 1994 was paid to him as President and Chief Operating
Officer of the Company.
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL EXERCISE AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS OR BASE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM
OPTIONS EMPLOYEES IN (PER EXPIRATION --------------------------------------
NAME(1) GRANTED(#) FISCAL YEAR SHARE)(2) DATE 0% 5%($)(3) 10%($)(3)
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Mr. Stewart 32,400 3.3% $ 28.29 8/26/03 -0- $ 576,442 $ 1,460,818
90,000 9.2% 35.13 3/24/04 -0- 1,988,376 5,038,936
Mr. Johnston 22,140 2.3% 28.29 8/26/03 -0- 393,902 998,226
Mr. Holmgren 12,150 1.2% 28.29 8/26/03 -0- 216,166 547,807
Mr. Gerow 12,150 1.2% 28.29 8/26/03 -0- 216,166 547,807
Mr. Stanley 12,150 1.2% 28.29 8/26/03 -0- 216,166 547,807
Mr. Locke 60,750 6.2% 28.29 8/26/03 -0- 1,080,829 2,739,034
All Shareholders N/A N/A N/A N/A -0- 2,728,144,891 6,913,654,792
All Optionees 978,480 100% 28.92 8/26/03; -0- 4,688,048 11,880,433
3/24/04
Optionee Gain as % of All N/A N/A N/A N/A N/A 0.17% 0.17%
Shareholders' Gain
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) All options held by the named individuals include limited stock
appreciation rights (LSARs), which are issued in tandem with stock options.
LSARs give the holders thereof the right to receive cash in an amount equal
to the spread between the exercise price of the related options and the
stock's fair market value during the 90-day period following a change in
control of the Company (as such term may be defined from time to time by
the Compensation Committee) in lieu of exercising the related options,
which are cancelled upon exercise of LSARs.
(2) The exercise prices shown for individual optionees are the fair market
values of the Company's common stock on the dates of grant (calculated as
the average of its high and low sales prices reported on the New York Stock
Exchange Composite Tape). The exercise price shown for all optionees is the
weighted average of all options granted in fiscal 1994. Options become
exercisable one year following the dates of grant, and exercise prices may
be paid in cash or previously owned shares of Company common stock.
(3) The amounts shown in these two columns represent potential realizable
values using the options granted and the exercise prices. The assumed rates
of stock price appreciation are set by SEC rules and are not intended to
forecast the future appreciation of Company common stock.
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT FISCAL VALUE OF UNEXERCISED IN-THE-
YEAR END(#) MONEY OPTIONS AT FISCAL YEAR
---------------------------- END($)
SHARES ACQUIRED VALUE ------------------------------
NAME ON EXERCISE (#) REALIZED($)(1) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(3) UNEXERCISABLE(4)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Mr. Stewart 149,574 $ 3,068,085 439,014 122,400 $ 5,079,438 $ -0-
Mr. Johnston 75,000 1,540,187 218,478 22,140 2,485,626 -0-
Mr. Holmgren 23,430 511,346 118,398 12,150 1,256,246 -0-
Mr. Gerow -0- N/A 77,850 12,150 779,644 -0-
Mr. Stanley 6,792 174,243 153,468 12,150 1,777,985 -0-
Mr. Locke 645,999 12,933,379 195,000 60,750 1,551,435 -0-
- -------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The average of the Company stock's high and low sales prices reported on
the New York Stock Exchange Composite Tape for the particular exercise
dates, minus the applicable exercise prices, multiplied by the number of
option shares exercised.
(2) Options in this column that were granted to the named individuals prior to
fiscal 1991 (provided they were executive officers on the grant dates)
include supplemental cash payment rights, pursuant to which payments are
made to optionees upon exercise of such options or the related LSARs
described in note (1) on page 12 in reimbursement of their income tax
liability from such exercises and payments.
(3) The average of the Company stock's high and low trading prices (calculated
as in note (1) above) on the last trading day of fiscal 1994 ($25.90 per
share), minus the applicable exercise prices, multiplied by the number of
option shares held. Such values do not include the supplemental cash
payment rights described in note (2) above.
(4) No values are shown in this column since, at the end of fiscal 1994, all
unexercisable options held by the named officers had exercise prices that
were higher than $25.90 per share, the stock's market value (as defined in
notes (1) and (3) above) at that time.
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
LONG-TERM INCENTIVE PROGRAM (LTIP) -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE OR NON-STOCK PRICE-BASED PROGRAM
OTHER PERIOD -------------------------------
UNTIL MATURATION
NAME OR PAYOUT THRESHOLD TARGET MAXIMUM
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Mr. Stewart 3 years $ 360,000 $720,000 $1,440,000
Mr. Johnston 3 years 125,000 250,000 500,000
Mr. Holmgren(1) N/A N/A N/A N/A
Mr. Gerow 3 years 92,500 185,000 370,000
Mr. Stanley 3 years 90,000 180,000 360,000
Mr. Locke(2) N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------
<FN>
(1) Does not participate due to scheduled retirement on February 28, 1995.
(2) Does not participate due to retirement on March 31, 1994.
</TABLE>
Individual target incentive awards under the LTIP are percentages of
participants' salaries ranging from 60% to 100%, depending on their salary
grades, subject to 20% plus or minus adjustments authorized prior to the
beginning of the applicable performance period by the Compensation Committee.
The target awards reported in the foregoing table require a 10% compound annual
growth in Company or applicable business unit profits over the three-year
performance period beginning on July 1, 1994, and ending on June 30, 1997.
Maximum awards can be up to two times award levels to reflect 20% or greater
compound growth over the performance period, but are zero if compound growth is
less than the 5% threshold level.
Upon the occurrence of a change in control of the Company (as defined in the
LTIP), the performance periods with respect to all outstanding incentive awards
will terminate and the related incentive awards will be payable. The amount
payable with respect to any award will be equal to the percent of target based
upon the greater of (x) 100% or (y) the weighted average of (i) the percent of
target earned to the most recent fiscal quarter prior to the change of control
("Measurement Date") and (ii) 100% of target from the Measurement Date to the
end of the performance period.
14
<PAGE>
- --------------------------------------------------------------------------------
CHANGE OF CONTROL EMPLOYMENT AGREEMENTS
All individuals named in the Summary Compensation Table except Mr. Stewart
and (prior to his retirement) Mr. Locke have change of control employment
agreements with the Company ("agreements") which are effective for 3-year
periods and are automatically extended annually for additional 1-year periods
unless notice to the contrary is given. The agreements are otherwise terminable
during their periods of effectiveness only by termination of the executives'
employment. Such termination in connection with a change in control of the
Company (as defined in the agreements) will entitle an executive to benefits
under the agreements. The agreements require continued employment of the
executive following a change of control on an equivalent basis to employment
immediately before such change of control. In the event that during the
three-year period following a change of control, the executive terminates the
executive's employment for good reason (as defined in the agreements) or, during
the 30-day period commencing one year after the change of control, for any
reason, or the Company terminates the executive's employment without cause (as
defined in the agreements), the executive would be entitled to receive an
immediate lump sum payment in an amount equal to three times the sum of such
executive's then current salary, average long-term bonus and highest annual
bonus plus service and earnings credits under any Company retirement plan, which
would have been earned over, and the continuance of fringe benefits during, the
three years after such termination (except as reduced by payments under
long-term bonus plans made to an executive upon a change of control which relate
to performance periods subsequent to such termination). The agreements provide
that executives are to be made whole on an after-tax basis with respect to
excise taxes payable under Section 4999 of the Internal Revenue Code of 1986
(the "Code") as a consequence of any payments made to them (whether or not under
the agreements) being classified as "parachute payments" as defined in Section
280G of the Code.
Mr. Locke's employment agreement with the Company terminated upon his
retirement on March 31, 1994. Mr. Stewart's employment agreement extends for an
initial term beginning April 1, 1994, and ending March 31, 1999, provided three
years' advance notice of termination is given by the Company. Unless and until
such notice is given, the employment agreement will continue on a year-to-year
basis through September 30, 2003 (Mr. Stewart's normal retirement date). Mr.
Stewart's agreement provides that in the event of his voluntary or involuntary
termination without cause following a change in control of the Company, he would
be entitled to receive an immediate payment of salary and bonuses plus credits
and benefits similar to those described in the preceding paragraph through the
then current term of his agreement.
- --------------------------------------------------------------------------------
SURVIVOR INCOME BENEFITS PLAN
All individuals named in the Summary Compensation Table participate in this
plan, under which benefits are payable to participants' surviving spouses (or
dependent children if there is no spouse) if a participant dies prior to age 65
while employed by the Company. The benefit is approximately 50% of the
participant's base pay at death and continues until the participant would have
attained age 65. Accruals were made in fiscal 1994 for aggregate potential
benefits payable under this plan, but no specific amounts for individual
participants were calculated.
- --------------------------------------------------------------------------------
POST-RETIREMENT LIFE INSURANCE PLAN
All individuals named in the Summary Compensation Table (except Mr. Gerow)
participate in this plan, under which life insurance after retirement is
provided at no cost to retirees in amounts equal to their base salaries at
retirement. Such coverage is in addition to that provided under the Company's
regular life insurance program. Accruals were made in fiscal 1994 for aggregate
potential benefits payable under all Company life insurance plans, but no
specific amounts for individual participants were calculated.
15
<PAGE>
- --------------------------------------------------------------------------------
PENSION PLANS
The following table contains estimated annual retirement benefits payable
under the Company's basic and excess defined benefit pension plans.
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 49,053 $ 65,404 $ 81,755 $ 98,119 $ 115,619
400,000 101,552 135,402 168,253 203,117 238,117
600,000 154,052 205,403 256,754 308,118 360,618
800,000 206,553 275,404 344,255 413,119 483,119
1,000,000 259,052 345,402 431,753 518,117 605,317
1,200,000 311,552 415,403 519,254 623,118 728,118
1,400,000 364,053 485,404 606,755 728,119 850,619
1,600,000 416,552 555,402 694,253 833,117 973,117
1,800,000 469,052 625,403 781,754 938,118 1,095,618
</TABLE>
All individuals named in the Summary Compensation Table participate in the
Company's pension plans. The number of full years of credited service at June
30, 1994, for each is as follows: Mr. Stewart, 21 years: Mr. Johnston, 17 years;
Mr. Holmgren, 36 years; Mr. Gerow, 4 years; and Mr. Stanley, 22 years. Mr. Locke
retired on March 31, 1994, with 17 years of credited service, but his total
pension benefits were calculated as described below.
Upon reaching age 65, pension plan participants are eligible to receive
annual retirement income, on a straight-life annuity basis, in monthly
installments for life equal to 1.75% of salary plus annual bonus (as reported in
the Summary Compensation Table), averaged over the five consecutive calendar
years during which such compensation was highest out of the last ten years
completed before age 65, for each year of credited service, less 1.67% of
primary social security for each year of credited service (up to 30 years).
Three individuals named in the Summary Compensation Table, Messrs. Stewart,
Holmgren and Stanley, participated in a predecessor company's pension plan prior
to 1984. Upon retirement, they will receive 2% of compensation (calculated as
described in the preceding paragraph), less 1.67% of primary social security,
for each year of credited service prior to 1984. For subsequent credited
service, they will receive benefits as described in the preceding paragraph.
Consequently, their benefits will slightly exceed those in the above table in
amounts varying with the extent of their pre-1984 credited service.
Two individuals named in the Summary Compensation Table, Messrs. Locke and
Johnston, participate in a supplemental executive retirement program (SERP).
Under the SERP, participants are entitled, upon normal or approved early
retirement, to receive amounts which, together with standard Company pensions
(including pensions of prior employers), equal 50% of their average compensation
(salary plus standard annual bonus) with respect to the five consecutive highest
earnings years out of the final ten years' service prior to retirement.
Consequently, unless reduced as described on page 17, the estimated total annual
pension benefits of SERP participants will approximate those shown in the column
of the foregoing pension table which sets forth benefits for employees with 30
years of credited service. Having retired on March 31, 1994, Mr. Locke, as a
SERP participant, is receiving basic and supplemental pension benefits as
described in this paragraph.
16
<PAGE>
- --------------------------------------------------------------------------------
If approved early retirement occurs prior to age 62, the SERP pension is
reduced by 0.33% for each full month from the early retirement date to age 62.
If a change in control of the Company occurs and thereafter the employment of
the SERP participant is terminated by the Company (other than for cause as
defined in the employment agreements) or the individual's status as a SERP
participant is terminated, the SERP pension vests as though the individual had
retired early with approval on the date of such termination.
In addition, SERP participants' rights under employment agreements
concerning pension benefits following a change of control are preserved.
- --------------------------------------------------------------------------------
2. ADOPTION OF 1994 NON-EMPLOYEE DIRECTORS STOCK PLAN
On August 25, 1994, the Board of Directors adopted and recommended for
submission to shareholders for their approval the 1994 Non-Employee Directors
Stock Plan (the "Plan"). The purpose of the Plan is to provide compensation to
non-employee directors of the Company that will further link such directors'
interests with those of the Company's shareholders. If approved by shareholders,
the Plan will become effective on October 27, 1994. The following summary is
qualified in its entirety by reference to the complete text of the Plan, which
is set forth in Exhibit 1 to this proxy statement.
Participation in the Plan is limited to Company directors who are not
employees of the Company or any of its subsidiaries. An aggregate of 100,000
shares of Company common stock is reserved for issuance under the Plan. Such
number of shares may be appropriately adjusted in the event of certain changes
in the Company's capitalization, such as stock dividends, stock splits or
recapitalizations. Shares of common stock issuable under the Plan may be
authorized and unissued shares, shares held in treasury or any combination
thereof.
If the Plan is approved by shareholders, for each fiscal year beginning with
the year which commenced July 1, 1994, each non-employee director of the Company
who is elected a director at the Annual Meeting of Shareholders for such year or
who is continuing as a director as of the Annual Meeting for such year will
receive an award of 500 shares of common stock effective as of the conclusion of
such Annual Meeting. Such shares may not be sold, transferred or otherwise
disposed of for a period of six months after receipt (except in the case of the
death or disability of the director).
The Plan will be administered by the Nominating & Organization Committee of
the Company's Board of Directors or such other Board committee as may be
appointed by the Board consisting of not less than three Board members. The
Board of Directors may amend the Plan in any respect, provided that no amendment
may be made without shareholder approval that (i) would materially increase the
maximum number of shares of common stock available for issuance under the Plan,
(ii) would materially increase the benefits accruing to participants under the
Plan, or (iii) would materially modify the requirements as to eligibility for
participation in the Plan, and provided, further, that the Plan may not be
amended more than once every six months except to comport with changes in the
Internal Revenue Code of 1986, as amended (the "Code"), or the rules thereunder.
The Board of Directors also has authority to terminate the Plan at any time.
Except as provided in the following sentence, a director will recognize
ordinary income six months following the date of receipt of the shares (I.E., at
the end of the period during which the director may not sell the shares) in an
amount equal to the fair market value of the shares at that time. Within 30 days
after the date the director receives the shares, the director may elect under
Section 83(b) of the
17
<PAGE>
- --------------------------------------------------------------------------------
Code to recognize taxable ordinary income at the time of receipt in an amount
equal to the fair market value of the shares at such time. Receipt of the shares
shall be considered to have occurred as of the date of the Annual Meeting on
which the award is effective.
A director's holding period for the shares for tax purposes will begin at
the time taxable income is recognized, and the tax basis in the shares will be
the amount of ordinary income so recognized. Any dividends received on the
shares prior to the date the director recognizes income as described above will
be taxable compensation income when received. The Company is entitled to a
federal income tax deduction equal to the amounts of income recognized by a
director.
The affirmative vote of the holders of a majority of the shares of Common
Stock that are present in person or by proxy and entitled to vote at the Annual
Meeting is required for approval of the Plan.
The Board of Directors recommends a vote FOR approval of the 1994
Non-Employee Directors Stock Plan.
- --------------------------------------------------------------------------------
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation by the Audit Committee, the Board has appointed Ernst &
Young LLP as the independent auditing firm for the Company's fiscal year ending
June 30, 1995. The Company has been advised that Ernst & Young LLP has no
relationship with the Company or its subsidiaries other than that arising from
the firm's employment as auditors.
In accordance with a resolution of the Board, this selection is being
presented to the shareholders for ratification at the 1994 Annual Meeting. While
ratification by shareholders of this appointment is not required by law or the
Company's articles of incorporation or by-laws, management believes that such
ratification is desirable. In the event this appointment is not ratified by a
majority vote of shareholders, the Board will consider that fact when it
appoints independent auditors for the next fiscal year.
Ernst & Young LLP has been the independent auditing firm for the Company
since its formation in 1989. Audit services provided to the Company by Ernst &
Young LLP during fiscal 1994 consisted of the examination of the financial
statements of the Company and its subsidiaries for that year and the preparation
of various reports based thereon, as well as services relating to filings with
the SEC and employee benefit plan audits.
Representatives of Ernst & Young LLP are expected to be present at the 1994
Annual Meeting with the opportunity to make a statement if they so desire and to
be available to respond to appropriate questions relating to that firm's
examination of the Company's financial statements for fiscal 1994.
The Board recommends a vote FOR the proposal to ratify the appointment of
Ernst & Young LLP.
18
<PAGE>
- --------------------------------------------------------------------------------
4. DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
Management does not now intend to bring before the 1994 Annual Meeting any
matters other than those disclosed in the notice of the meeting. Should any
matter requiring a vote of the shareholders be properly brought before the
meeting by or at the direction of the Board, the proxies in the enclosed form
confer upon the person or persons entitled to vote the shares represented by
such proxies discretionary authority to vote such shares in respect of any such
matter in accordance with their best judgment.
For business to be properly brought before an annual shareholders' meeting
by a shareholder, timely advance written notice thereof must be received by the
Corporate Secretary of the Company at its principal executive offices in
accordance with the Company's by-laws.* No such notices were received for the
1994 Annual Meeting. For the Company's 1995 Annual Shareholders' Meeting, any
such notices must be received by the Company between July 28 and August 28,
1995.
SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Shareholder proposals intended for the proxy statement for the 1995 Annual
Shareholders' Meeting must be received by the Corporate Secretary of the Company
at its principal executive offices no later than May 23, 1995.
By Order of the Board
P. Michael Phelps
Vice President and Secretary
Chicago, Illinois
September 15, 1994
- --------
*A copy of the Company's by-laws may be obtained by written request to its
Corporate Secretary.
19
<PAGE>
EXHIBIT 1
1994 NON-EMPLOYEE DIRECTORS STOCK PLAN
OF
MORTON INTERNATIONAL, INC.
1. PURPOSE. The purpose of the 1994 Non-Employee Directors Stock Plan (the
"Plan") is to provide additional compensation to non-employee directors of
Morton International, Inc. (the "Company"), that will further link such
directors' interests with those of Company shareholders.
2. PARTICIPANTS. Participants in the Plan shall consist of directors of
the Company who are not employees of the Company or any of its subsidiaries. The
term "subsidiary" means a corporation more than 50% of the voting stock of which
is owned directly or indirectly by the Company.
3. RESERVATION OF SHARES. There shall be reserved for issuance under the
Plan an aggregate of 100,000 shares of Common Stock of the Company ("Common
Stock"), subject to adjustment as set forth in Section 8 below. Common Stock
issued under the Plan may be authorized and unissued shares, shares held in
treasury or any combination thereof.
4. ADMINISTRATION. The Plan shall be administered by the Nominating &
Organization Committee of the Board of Directors of the Company or such other
committee of the Board as may be appointed by the Board consisting of not less
than three members of the Board (the "Committee"). The Committee shall have
authority to interpret the Plan and adopt, amend and rescind rules relating to
the administration of the Plan. All such interpretations and rules shall be
conclusive and binding on all persons.
5. EFFECTIVE DATE. The Plan shall be submitted for approval at the
Company's Annual Meeting of Shareholders to be held on October 27, 1994, or any
adjournment thereof, and, if approved by the shareholders, shall be deemed to
have become effective on the date of such approval.
6. SHARE AWARDS. For each fiscal year beginning with the fiscal year which
commenced July 1, 1994, each non-employee director of the Company who is elected
a director at the Annual Meeting of Shareholders during such fiscal year or who
is continuing as a director as of the Annual Meeting for such year shall receive
an award of 500 shares of Common Stock effective as of the conclusion of such
Annual Meeting. A participant shall not be required to make any payment for any
shares of Common Stock issued under the Plan. Subject to Section 7, participant
shall have full beneficial ownership of, and rights and privileges of a
shareholder as to, awarded shares, including the right to vote and the right to
receive dividends.
7. TRANSFER RESTRICTION. No shares of Common Stock received by a
participant under the Plan may be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of for a period of six months after receipt of
such shares, except in the case of the death or disability of such participant
prior to the expiration of such six-month period.
8. ADJUSTMENTS. In the event of changes in the outstanding Common Stock of
the Company by reason of stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations or exchanges of shares, separations,
reorganizations or liquidations, the number and class of shares to be issued
under the Plan shall be appropriately adjusted by the Committee so that future
awards under the Plan will continue to bear the same proportionate relationship
to the Company's other equity capital.
9. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
deliver shares of Common Stock under the Plan shall be subject to (i) all
applicable laws, rules and regulations and such approvals by any governmental
agencies as may be required, including, without limitation, the
<PAGE>
effectiveness of a registration statement under the Securities Act of 1933, as
amended, as deemed necessary or appropriate by counsel for the Company, and (ii)
the condition that such shares shall have been duly listed on the New York Stock
Exchange.
10. AMENDMENT AND TERMINATION. The Plan may be amended by the Board of
Directors in any respect, PROVIDED that, without shareholder approval, no
amendment shall (i) materially increase the maximum number of shares of Common
Stock available for issuance under the Plan, (ii) materially increase the
benefits accruing to participants under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan, and PROVIDED,
FURTHER, that the Plan may not be amended more than once every six months except
to comport with changes in the Internal Revenue Code of 1986, as amended, or the
rules thereunder. The Plan may also be terminated at any time by the Board of
Directors.
11. NO RIGHT TO CONTINUE AS DIRECTOR. Nothing contained in this Plan shall
be deemed to confer upon any person any right to continue as a director of or to
be associated in any other way with the Company.
<PAGE>
MORTON INTERNATIONAL, INC.
CHICAGO, ILLINOIS
PROXY/VOTING INSTRUCTION CARD
- ------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING ON OCTOBER 27, 1994.
The undersigned hereby appoints Frank W. Luerssen, Raymond C. Tower, James R.
Stanley, or any of them, each with power of substitution, as proxies to vote as
specified on this card all shares of common stock of Morton International, Inc.
(the "Company") owned of record by the undersigned on August 29, 1994, at the
Company's Annual Meeting of Shareholders on October 27, 1994, and at any
adjournment thereof. Said proxies are authorized to vote in their discretion as
to any other business which may properly come before the meeting. If a vote is
not specified, said proxies will vote FOR proposals 1, 2 and 3.
Receipt is acknowledged of the Company's Annual Report to Shareholders for the
fiscal year ended June 30, 1994, and Notice and Proxy Statement for the above
Annual Meeting.
Nominees for Election as Directors:
Ralph M. Barford, William T. Creson, S. Jay Stewart
PROXY
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE) BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARE UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE SIDE
<PAGE>
4856
- -------------------------------------------------------------------------------
5057
Please mark your votes as in this example.
/x/
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, AND 3.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 1, 2, and 3.
- -------------------------------------------------------------------------------
1. Election of Directors.
(see reverse side)
For / /
Withheld as to ALL Nominees / /
To withhold authority to vote for any nominee(s), mark the FOR box and write
the name of each such nominee on the line provided below
2. Proposal to adopt the 1994 Non-Employee Directors Stock Plan
FOR / /
AGAINST / /
ABSTAIN / /
3. Proposal to ratify appointment of Ernst & Young LLP as independent auditors
for fiscal 1994.
FOR / /
AGAINST / /
ABSTAIN / /
Signature(s)______________________/____________________Date_______,1994
NOTE: Please date and sign as name appears hereon. If shares are held jointly
or by two or more persons, each shareholder named should sign. Executors,
administrators, trustees, etc., should so indicate when signing. If the signer
is a corporation, please sign full corporate name by duly authorized officer.
If a partnership, please sign in partnership name by authorized person.
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