- -----------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) Commission file number 1-6179
THIOKOL CORPORATION
Incorporated in the State of Delaware IRS Employer Identification
No. 36-2678716
Principal Executive Offices
2475 Washington Boulevard, Ogden, Utah 84401
Telephone Number: (801) 629-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange
on Which Registered
--------------------- -------------------------
Common Stock, par value New York Stock Exchange
$1.00 per share Chicago Stock Exchange
Common Stock Purchase Rights
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period than the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
Aggregate market value of Registrant's voting stock held by
non-affiliates, based upon the closing price of said stock on the New York
Stock Exchange-Composite Transaction Listing on August 30, 1996, ($44.875
per share): $818,267,039.
Number of shares of Common Stock outstanding as of August 30, 1996:
18,234,363.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Annual Report to Stockholders for the fiscal year ended
June 30, 1996: Parts I, II, and IV.
2. Portions of definitive Proxy Statement dated September 20, 1996: Parts
III and IV.
- ----------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
Thiokol Corporation (the "Company") manufactures solid rocket
propulsion systems and related products, ordnance, flares, gas generators,
and actuators, and provides services for the aerospace and defense markets
and specialty fastening systems for aerospace and industrial applications.
Founded in 1930, Thiokol Corporation and its successor, Thiokol Chemical
Corporation (old Thiokol), operated in various corporate forms until merged
in 1982 with Morton-Norwich Products, Inc., and operated thereafter as a
division of Morton Thiokol, Inc. After the 1989 spin-off of the specialty
chemicals, salt, and automotive-restraint businesses to a newly-formed
publicly-traded company, Morton International, Inc., the Company's
aerospace and defense business operated independently as Thiokol
Corporation. In 1991, the Company acquired the aerospace and industrial
fastener business of Huck Manufacturing Company. The Company operates this
fastening systems segment of the business as a wholly-owned subsidiary,
Huck International, Inc. ("Huck"). Huck acquired the threaded lock bolts,
locknuts, and related product line assets of the Deutsch Manufacturing
Company in 1994 and acquired the assets of Automatic Fastener Company,
manufacturer of blind fasteners for automotive and industrial applications,
in January 1995. The Company established the Defense and Launch Vehicles
Division in 1995 reflecting the consolidation of certain of its defense and
solid propulsion product lines.
During fiscal year 1996, the Company and The Carlyle Group, a private
merchant investment firm ("Carlyle"), formed a jointly-owned company, Blade
Acquisition Corp. ("Blade"). The Company owns 49 percent and Carlyle owns
51 percent of the outstanding Blade voting common stock. In December 1995,
Blade completed the acquisition of Howmet Corporation ("Howmet"), the
world's largest manufacturer of investment casting components consisting
primarily of turbine airfoils (both moving blades and stationary vanes)
used in aircraft and industrial gas turbine engines and the Cercast Group,
a major producer of high-quality aluminum investment castings used in the
defense electronics and commercial aerospace industry. The Shareholders'
Agreement between the Company and Carlyle provides the Company with a call
option, exercisable during a three-year period commencing the third year
from the Closing Date, December 13, 1998, to purchase all of the voting
common stock of Blade owned by Carlyle. Upon the Company's exercise of the
call option, an event the Company reasonably anticipates will occur, but
does not guarantee, at a purchase price valuation process set forth in the
Shareholders' Agreement, the Company will own all of the issued and
outstanding common stock of Blade and indirectly owns Howmet, and the
Cercast Group which will become the investment casting business segment of
the Company. The Shareholders' Agreement contains a change in control
provision which provides the Company the right to accelerate the exercise
of the call option in the event of a change of control of Carlyle. In the
event of a change of control of the Company as defined by the terms of the
Shareholders' Agreement, the Company
1
<PAGE>
will effectively lose its option for the purchase of the Carlyle equity
investment in Blade.
Business Segments
The Company operates in three business segments: (i) Space; (ii)
Defense; and (iii) Fastening Systems. This business segmentation reflects
the Company's reorganization of its defense and launch business unit during
fiscal years 1995 and 1996.
Space Systems. The space systems segment consists of solid rocket
propulsion systems and related products, research and development and
launch support services for the National Aeronautics and Space
Administration (NASA) and commercial space applications. Such systems
include the Reusable Solid Rocket Motor (RSRM) used for NASA's Space
Shuttle. The current Buy III Space Shuttle contract awarded to the Company
in 1991 to build 142 solid rocket motor boosters for the NASA Space Shuttle
program has approximately $1.0 billion remaining through its projected
completion date in fiscal year 2000. The Buy III contract is a "cost plus
award fee" contract with an award fee based on the degree of the Company's
success, as rated by NASA, of meeting contract standards relating to
program safety, management, reliability, quality assurance management,
delivery, and hardware flight performance on the contract. The Company also
receives a cost-incentive fee for meeting certain predetermined
cost-reduction targets. The delivery rate and the Company's contract
accrual rate for financial statement purposes is subject to continuing
NASA's funding, NASA's Shuttle flight scheduling (currently seven flights
per year), and program performance. The NASA contract is subject to
termination for convenience by the federal government with the Company
retaining such rights of recovery for costs and expenses provided by the
government procurement laws and regulations, and contract terms and
conditions. NASA has announced plans to restructure and reorganize the
Shuttle program to include a single prime contractor or prime contractor
group to manage many program functions now managed by NASA. Such
restructuring will occur over a transition period of several years. The
Company's position as a contractor to NASA is expected over time, most
probably with completion of the Buy III contract, to shift to the role of a
subcontractor to the prime contractor, although there can be no assurance
that such shift will occur. Since the Company is the only qualified
manufacturer of the RSRM and the time and cost to requalify a second source
of supply would be prohibitively expensive in light of declining government
expenditures for the Space program, the Company anticipates continuing
participation in the Shuttle program after completion of the Buy III
contract. The Company's service contract at the Kennedy Space Center in
Florida terminated in October 1995. The Company retains certain shuttle
RSRM solid rocket motor launch oversight activities at the Kennedy Space
Center. During fiscal year 1996, the Company substantially recovered its
costs, expenses and investments made in connection with the termination in
fiscal year 1995 of the performance of the NASA Yellow Creek, Mississippi
nozzle facility contract.
The Company's family of CASTOR solid rocket motors is used in the
first and
2
<PAGE>
second stages of a number of expendable launch vehicles and as strap-on
boosters for medium and heavy lift vehicles for space, defense, and
commercial applications.
The Company's CASTOR 120(R) motor has been designed as a low-cost
120,000 pound class motor for the small launch vehicle market. This motor
is designed for first and second stage propulsion and for strap-on booster
applications. The CASTOR 120 motor has been selected as the propulsion
system for the Lockheed Launch Vehicle and the Orbital Science Taurus(R)
launch vehicle. The application of the CASTOR 120 motor includes launch
vehicles for placement of communications, mapping, and scientific
satellites into earth orbit. The Company is currently under contract to
provide eight CASTOR 120 motors to Lockheed/Martin Aeronautics for its LLV
family of launch vehicles and three motors to Orbital Science. Although the
first demonstration launch vehicle utilizing the CASTOR 120 motor failed to
properly place the satellite payload in orbit, the Company believes, but
cannot be assured until after completion of successful demonstration
flights and testings, the technical problems associated with the launch
vehicle have been resolved. The motor loss was covered by insurance. During
fiscal year 1997, three CASTOR 120 motor launches are planned.
The CASTOR IVA motor is designed with 110,000 pounds of thrust for use
as strap- on boosters. The Company currently has orders for the production
of twenty-four CASTOR IVA motors to Lockheed/Martin Aeronautics for the
Atlas IIAS program. The Company's CASTOR IVB motors equipped with thrust
vector control deliver 100,000 pounds of thrust and have been selected to
support the United States Department of Defense's Target Critical
Measurement Program.
Production of CASTOR IVA and CASTOR IVB motors has been transferred to
the Company's Promontory, Utah, facility from the Huntsville, Alabama,
facility which has been closed.
During fiscal year 1996, there were four successful CASTOR IV motor
flights, including flights on the Atlas IIAS program. During fiscal year
1997, four flights are planned by the Air Force.
The Company's family of STAR(TM) motors manufactured at its Elkton,
Maryland, facilities provide upper stage propulsion systems for a number of
launch vehicle systems. The STAR motors also provide satellite positioning
for space, defense, and commercial applications. The Company has
successfully tested and qualified movable nozzle technology for STAR motor
applications. During fiscal year 1996, the Company's STAR motors
successfully completed fifteen missions utilizing thirty-five motors,
including the Global Positioning Satellites, Korea Sat, and INMARSAT.
3
<PAGE>
Defense Systems. The Defense Systems segment of the Company's business
consists of design, manufacturing, and related services and sale of
propulsion systems, gas generators, and ordnance to the federal government
and for qualifying foreign military sales.
For strategic and tactical markets, the Company produces or is
otherwise a qualified producer on a number of propulsion-related programs
and products. Major strategic programs include a joint venture arrangement
with Alliant Technologies, Inc., which was restructured and consolidated by
the Navy during 1995 to produce the first, second and third stages of
United States Navy submarine launched Trident II missile systems.
Consistent with industry practice, the joint venture is operated as a
teaming arrangement which is used as a billing mechanism and serves to keep
overhead expense at a minimum. The Company utilizes the percentage of
completion method to recognize sales and profits on this incentive-type
contract. Profit recognition under the contract includes the Company's and
its partner's estimate of their respective performances on such contract.
The Company has an Air Force contract to monitor the service life of
the Minuteman III Stage I motors and a development contract for the
Minuteman propulsion replacement program including the development and
qualification of new materials, propellants, and refurbishment of
components for the Minuteman Stage I.
During fiscal year 1996, the Company substantially completed the
consolidation of certain of its tactical motor manufacturing operations
from the Huntsville, Alabama, facility to the Company's facilities in
northern Utah and Elkton, Maryland. Production at the Huntsville facility
was completed during fiscal year 1996. After completion of the program
re-qualifications required as the result of such program relocations, the
Company expects to remain a qualified manufacturer of tactical propulsion
systems and related products for the Harm, Patriot, Maverick, and VT-1
Sidewinder programs at the Company's northern Utah and Elkton, Maryland
facilities. The Company maintains a sole source position on the vertical
launch ASROC and Harpoon programs. The Company's Omneco Operations in
Carson City, Nevada, manufacturer of metal parts for tactical propulsion
systems, was closed and operations discontinued during fiscal year 1996.
The Company's gas generator and ordnance operations consist of
research, development, production, and sale of solid propellant gas
generators. This family of products is designed for a variety of functions
for space, defense, and commercial applications including thrust vector
control actuation, missile launch eject and flight termination systems and
attitude control, and propulsion for dispensing ordnance and automotive
airbag application.
The Company's flare operations consist of research, development, and
production of visible and infrared illuminating and decoy flares for
primarily military applications as well as search and rescue missions.
4
<PAGE>
The Company has developed technology used for demilitarization of both
solid and liquid propulsion systems. The Company has entered into a
contract funded by the federal government's Defense Nuclear Agency for the
conversion of liquid propellant from missile systems located in the former
Soviet Union into commercial materials.
Loading operations managed by the Company under contract for the
Army-owned ammunition facilities near Marshall, Texas and Shreveport,
Louisiana have been discontinued. The Company provides maintenance services
to the Army for these facilities which will be discontinued during fiscal
year 1997. Under agreements with the Army, the Company is permitted to use
the facilities for limited third-party production contracts.
The Company continues work on a number of product developments
including support work on a heavy-lift launch vehicle system, hybrid
propulsion, booster technologies, propellant, and nozzle technology for
Theater Missile Defense applications. Development work continues in both
solid and liquid explosives technologies for both commercial and military
applications. Present technology used in conjunction with the Company's
propulsion motor case is being developed and tested for commercial
applications. During fiscal year 1995, the Company organized the TCR
Composites Division for the commercial development of a lower cost carbon
fiber resin technology. During fiscal year 1996, the Company entered into a
joint technology development agreement with Morton International, Inc. for
development of non-sodium azide gas generant airbag and initiator
technology. The Company's Science and Engineering group maintains ongoing
research projects funded under various Company, commercial, and government
programs and provides support to the Company's space and defense propulsion
system programs. Federal export laws, controls, and regulations impact or
otherwise restrict the export of the Company's propulsion products and
technical knowledge.
Fastening Systems. The fastening systems segment consists of the
development, production, and sale of threaded and non-threaded fasteners
consisting of lock bolts, blind bolts, locknuts, blind rivets, cap screws,
and product installation tooling. Fasteners and fastening systems are sold
to customers directly by the Company and through a distribution network,
domestic and foreign. The fasteners are manufactured from high strength
metal and metal alloys and are sold under various trade names and
trademarks to aerospace and industrial markets for original equipment and
other market use. Product installation tooling is also manufactured and
marketed to provide customers complete fastener installation systems. The
aerospace market consists of both commercial and military aerospace
manufacturing companies, domestic and foreign. Customer product
qualification required by domestic and foreign regulatory agencies such as
the Federal Aviation Administration as to plant and product quality and lot
traceability is important for the aerospace market acceptance of the
Company's fasteners. The Company's fasteners have been qualified by major
domestic and foreign aerospace companies in order for such customers to use
such fasteners in original equipment and aftermarket aircraft products.
5
<PAGE>
Principal domestic and foreign industrial markets include automotive,
truck, trailer, railcar, and mining applications. The construction industry
utilizes the Company's fastening systems for certain structural
applications such as bridges and building columns.
Competition
Space Systems. The Company is the sole source supplier of RSRM solid
rocket motors, the only domestically human-rated solid rocket propulsion,
for NASA's Space Shuttle program. The Shuttle Buy III contract was placed
directly with NASA. The Company, as the only qualified source of supplier
for the RSRM, does not compete with other manufacturers. The Company,
Alliant Technologies, Inc., and the CSD Division of United Technologies,
Inc. are the major suppliers of heavy-lift solid propulsion launch vehicles
for space and strategic applications and are competitive with each other
with regard to medium, light, and strap-on launch vehicles for commercial
space applications. Both foreign governments and foreign private
enterprises have solid rocket propulsion systems competitive with
propulsion systems manufactured by the Company. For Space Systems'
products, other than the RSRM solid rocket motors sold to the federal
government or federal government prime contractors, the primary method of
competition is through the Company responding to a request for proposal or
complying with other government procurement procedures under federal
acquisition regulations in competition with others responding to the terms
and conditions requested for proposal and negotiated contracts with others.
Commercial launch vehicle products are sold primarily through responding to
the terms and conditions of a request for proposal or negotiated contracts
in competition with others. Principal competitive factors are cost,
technical performance, quality, reliability, depth and capability of
personnel and adequacy of facilities. Except for the sole-sourced RSRM
solid rocket motor, the Company's Space system products are sold primarily
on price. The Company's competitive strength is also enhanced by the
technical performance, quality, and reliability of its solid propulsion
products for space launch applications.
Defense Systems. The Company's defense-related solid rocket propulsion
systems, services and related products are competitive with Alliant
Technologies, Inc. and CSD's strategic programs. The Company is also
competitive with the Aerojet Division of Gen Corp. and the ARC Division of
Sequa Corporation on a number of tactical motor programs.
Reductions in Department of Defense expenditures and in quantities
being procured for strategic and tactical solid rocket motor programs have
substantially increased the competitive pressure for these products. The
primary method of competition for defense- related products and services is
by responding to a request for proposal from the federal government or
federal government prime contractor or complying with procurement
procedures under the federal acquisition regulations in competition with
others. Price, quality, reliability, performance, depth and capability of
personnel, and adequacy of facilities are the principal competitive factors
in the defense market for strategic and tactical
6
<PAGE>
solid propulsion products. The Company's defense related products are
subject to competitive pricing and the cost structures of its competitors.
The Company's defense related products are sold primarily on price.
Fastening Systems. Fastening systems are manufactured by a number of
competitors with no one manufacturer having a major position in the
aerospace or industrial fastening markets. Competitive with the Company's
threaded and non-threaded fastening systems are alternative fastening
methods. Competition for orders from aerospace original equipment
manufacturers is often dependent on customer qualification required by
government regulations of the Company's fasteners. The Company's fastening
system products compete not only on price, but also product quality and the
Company's ability to provide customer service and delivery. Fastening
systems applications and tooling help differentiate the Company's fastening
systems products. Aerospace fastener competition is primarily through
responding to request for proposals made by major aerospace contractors and
distributors and purchase orders. Industrial fastener competition is
primarily through requests for proposals, purchase order quotations and
negotiated contracts in competition with others. The Company's fastening
systems compete on quality, delivery, price, and ability to provide
customer fastening installation solutions through specific-purpose tooling
and fasteners. The Company maintains a proprietary patented position for
certain of its fastener designs for which certain limited licenses have
been granted to competitors. The Company also manufactures certain
fasteners under licenses from competitors.
Research and Development
Company-sponsored research and development activities relate to new
products and services and improvement of existing products and services.
The Company's R&D cost was $13.3 million, $15.0 million, and $15.4 million
and represented 1.5 percent, 1.6 percent and 1.5 percent of revenues for
fiscal years 1996, 1995, and 1994, respectively; the amount spent during
the same periods for customer-sponsored R&D (primarily U.S.
government-funded) was approximately $56.6 million, $25.1 million, and
$25.5 million, respectively.
Environmental Matters
Compliance with federal, state, and local environmental requirements
with respect to the Company's facilities, including formerly owned and
operated facilities, while having the potential to be a significant cost
and liability, are not at this time expected to have a material adverse
effect on the Company's financial condition or upon the competitive
position of the Company or its subsidiaries. Capital expenditures and
amounts expensed related to environmental matters respectively were $2.6
million and $9.3 million for fiscal year 1996 and are estimated to be $3.0
million and $9.4 million for fiscal year 1997. The Company maintains
ongoing programs for environmental site evaluations, continues its
7
<PAGE>
cooperation with federal and state agencies in site investigations, and
engages in environmental remediation activities of its sites and sites of
third parties where appropriate.
The Company is involved with two Environmental Protection Agency (EPA)
superfund sites designated under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) in Morris County, New Jersey,
operated about thirty years ago by the Company for government contract
work. The Company has negotiated a consent decree with the EPA concerning
the Rockaway Borough Well Field Site ("Klockner"). At this site, the
Company's estimated cost for response costs, site remediation, and future
operation and maintenance costs is approximately $5.5 million of which
approximately $.6 million will be spent during fiscal year 1997. In 1996,
the Company negotiated a consent decree with the state of New Jersey for
the Rockaway Township Well Field Site ("Denville"). At this site, the
Company's estimated cost for response costs, site remediation, and future
operations and maintenance costs is approximately $4.6 million of which
approximately $0.55 million will be spent in fiscal year 1997.
The Company has settled a third party claim covering environmental
issues at the Woodbine, Georgia, site operated by the Company from 1963 to
1976. Under the terms of the agreement, the Company paid $.425 million for
past costs incurred by the third party relating to ownership of the site.
The Company is also investigating and remediating certain solid waste
management units (SWMU's) related to past operations conducted by the
Company. The third party retains all other environmental liability for the
site. The total estimated investigation and remediation costs for the site
is approximately $0.6 million of which approximately $0.2 million will be
spent in fiscal year 1997.
The Company believes that the eventual cost for site remediation
matters known at this time, before any recoveries from insurance and third
party contributions by other responsible parties including the federal
government, is estimated to be $19 million. The Company has established a
receivable in the amount of $2.3 million for expected reimbursement or
recovery for environmental claims, costs and expenses from third parties,
including the federal government. During fiscal year 1996, the Company
settled outstanding environmental liability claims with insurance carriers
receiving payments of $8.7 million from such carriers of which $5.3 million
was used to settle reimbursement claims with the federal government for
fiscal years 1990 through 1996. The Company's policy and accounting for
environmental matters is set forth in Note 1 and Note 13 of the Company's
consolidated financial statements. The Company believes that after
recoveries from third parties and the federal government, any net liability
for which it may ultimately be responsible in excess amounts currently
accrued, would not be material to the Company's financial condition and
results of operations.
The Company has negotiated an agreement with the federal government to
recover certain environmental costs and expenses incurred in connection
with the performance of
8
<PAGE>
government contracts in the forward pricing on certain of the Company's
government contracts.
Employees
The approximate number of employees of the Company on June 30, 1996,
was 5,900 compared to 7,200 on June 30, 1995. Space Systems and Defense and
Launch Vehicles Division employees totaled approximately 3,600 on June 30,
1996, compared to 4,800 on June 30, 1995. Fastening systems employees
totaled approximately 1,600 on June 30, 1996, compared to 1,700 on June 30,
1995. Reduced employment levels reflect lower levels of business activity
in non-Shuttle related propulsion and defense-related programs. Reductions
in Shuttle-related employment reflect continuing improvements in production
efficiencies. Ordnance-related employment levels are down due to
discontinuance of Army loading operations at the Louisiana and Marshall,
Texas, Army ammunition plants. Fastening systems' employment levels are
moderately lower reflecting lower volumes for industrial fasteners.
Raw Materials
Although most of the raw materials used by the Company are readily
available, certain key raw material suppliers (such as suppliers of
propellant raw materials and nozzle and case component materials) must be
approved by the federal government. With a limited number of such approved
suppliers, delivery of these materials could be disrupted at the supplier
level at any time and have a material adverse impact on production and
delivery schedules until government approval of alternative suppliers is
obtained.
Seasonality
The business of the Company is not subject to seasonal fluctuations.
Patents and Trademarks
The Company has approximately 373 patents and patent applications, of
which 289 relate to the Space and Defense Systems business segments, and 84
relate to the fastening systems segment. As a government contractor, the
Company conducts independent research and development (IR&D) to enable it
to maintain its competitive position. Research and development work is also
performed under contracts with the Department of Defense, NASA, and other
government agencies (Contract R&D).
Approximately eighty-six percent of the Company's patents in the Space
and Defense Systems business segment were developed under Company funded
IR&D related budgets. The Company has full ownership interest in its
patents developed under these budgets and lesser rights in the patents it
developed under Contract R&D programs.
9
<PAGE>
The Space and Defense Systems business segment patents have the
following remaining duration: approximately seventy-four percent of the
patents have a duration of more than 10 years; sixteen percent, 5-10 years;
and ten percent, less than 5 years. Patent coverage includes propulsion
system design, case, nozzle, and propellants. Patents also cover gas
generators, ordnance, flare-related products, and the Company's fiber resin
technology. Patents cover non-sodium azide gas generant technology used by
Morton International, Inc. pursuant to agreements with the Company. Under
contracts with the federal government, licenses have been granted to the
government for limited use of certain patented technology.
Fastening Systems segment patents have the following remaining
duration: approximately fifty-one percent of the patents have a duration of
more than 10 years; twenty-five percent, 5-10 years; and twenty-four
percent less than 5 years. Major aerospace fastening systems covered by
patents include a lightweight grooved proportional lock bolt and the
"Unimatic" blind bolt rivet. Major industrial fastening systems covered by
patents include "Huck-Fit" lock bolts, "Magna-Lok" blind rivets,
"Ultra-Twist" blindbolt for box beam construction applications and
"Magna-Grip" lock bolts with patent lives remaining of more than 10 years.
Certain of the Company's fastener products are manufactured under licenses
from competitors.
Although the Company believes that its present competitive position is
enhanced by its patent and its technical expertise, know-how and
proprietary information, no individual patent or group of patents is
material to the conduct of the business of the Company.
Trademarks are important for product identification in the fastening
systems segment of the business but are not significant to the Company's
propulsion business.
Customers
The customers of the Space and Defense Systems business segment are
primarily the federal government and its prime contractors and
subcontractors. Commercial propulsion customers, primarily in the light and
medium launch vehicle market, are being developed but are not yet material
to the Company's customer base. Federal government contracts and
subcontracts entered into by the Company, are by their terms, subject to
termination by the government or the prime contractor either for
convenience or default. Such contracts are also subject to funding
appropriations by Congress. Since the federal government provided, directly
and indirectly, approximately 70 percent of the Company's business in
fiscal year 1996, the termination or discontinuance of funding of a
substantial portion of such business would have a material adverse effect
on its operations. No single non-government customer is material to the
overall business conducted by the Company. Fastening systems customers
consist of industrial and aerospace original equipment manufacturers and
distributors, domestic and foreign. Foreign customers and a foreign
10
<PAGE>
sales base are still developing but are not yet material to the Company's
customer and sales base.
Backlog Orders
The Company's backlog of propulsion systems orders on June 30, 1996,
and June 30, 1995, was $1.4 billion and $2.3 billion, respectively. The
NASA Space Shuttle solid rocket motor booster and related contracts
comprise approximately 72 percent of the backlog. It is expected that
approximately 41 percent of the orders in backlog on June 30, 1996, will be
completed by June 30, 1997; and the remainder thereafter through fiscal
year 2000. The backlog represents the value of contracts for which goods
and services are to be provided and includes approximately $.5 billion in
government contracts for which funds have been approved. The backlog is
believed to consist of firm contracts and although such contracts can be
changed or canceled with the exception of the RSRM contract, no single
change or cancellation is expected to be materially significant to the
Company's business. The contract backlog consists of a combination of cost
plus award fee, cost plus fixed fee, cost plus incentive fee, fixed price
incentive fee, and firm fixed price contracts. The Company's fastening
systems backlog was approximately $64 million on June 30, 1996.
ITEM 2. PROPERTIES
The Company operates manufacturing, research, and development
facilities at 15 locations, and administrative and sales offices,
warehouses, and service centers at approximately ten locations worldwide.
The Company considers its manufacturing facilities, warehouses, and other
properties to be generally in good operating condition and suitable for
their intended purposes. All Company-owned property is held in fee with no
encumbrances. Company leased property obligations are set forth in Note 14
of the Company's consolidated financial statements.
The Company's consolidation of the Space and Defense Systems business
segment facilities was substantially completed during fiscal year 1996 and
is considered adequate and sufficient to meet operating needs. As a result
of such restructuring, the Company's operations have been discontinued and
facilities closed at Huntsville, Alabama and Carson City, Nevada.
Loading operations at the government-owned Army Ammunition plants near
Marshall, Texas, and Shreveport, Louisiana, have been completed. Under
maintenance contracts with the United States Army which will expire in
fiscal 1997, the Company maintains these plants in an inactive status.
Under agreement with the Army, the Company is permitted limited production
at these plants of defense and commercially related products under third
party contracts.
11
<PAGE>
The Fastening Systems facilities are sufficient and adequate to meet
anticipated demand in the aerospace and industrial fastening markets.
Fastening systems business segment corporate headquarters and research and
development facilities located in Irvine, California, were closed during
fiscal year 1996. The administrative functions were transferred to the
Tucson, Arizona, facilities and the research and development activities
were relocated to other manufacturing facilities. During fiscal year 1997,
the Company will relocate its installation systems division from a leased
facility to a new Company-owned facility in Kingston, New York.
During fiscal year 1996, additions to property, plant, and equipment
totaled $29.1 million.
12
<PAGE>
The following table sets forth the Company's manufacturing locations
and the approximate square footage.
<TABLE>
<CAPTION>
Buildings (000's Square Feet)
Manufacturing Location Company Government
by Segment Owned Leased Owned Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Space and Defense Systems
Segments:1
Northern Utah2 2,794 640 6 3,440
Elkton, Maryland 381 381
Huntsville, Alabama3 32 967 999
Shreveport, Louisiana4 2,731 2,731
Marshall, Texas4 1,408 1,408
Carson City, Nevada3 164 164
Fastening Systems Segment:
Domestic:
Branford, Connecticut 74 74
Carson, California 153 153
Kingston, New York5 105 105
Lakewood, California 115 115
Tucson, Arizona 76 10 86
Waco, Texas 371 371
International:
Us, France 61 61
Osterode, Germany6 25 25
Shropshire, United Kingdom 50 50
<FN>
_______________________________________________________
1The Company's Space and Defense Systems business segments share facilities
in Northern Utah and Elkton, Maryland.
2During fiscal year 1996, the Company completed the purchase of Air Force
Plant 78 at Promontory, Utah.
3Facilities closed during fiscal year 1996.
4Army ammunition facility maintenance contracts expected to expire during
fiscal year 1997.
5During fiscal year 1997, the Company will relocate to a new Company-owned
facility of approximately 142,000 sq. ft. in Kingston, New York.
6Closure of this manufacturing facility is expected to be completed during
fiscal year 1997.
</FN>
</TABLE>
13
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Litigation and Regulation
McDonnell Douglas v. Thiokol Corporation, United States District
Court, Central District of California, was filed in July 1992 by plaintiff
McDonnell Douglas claiming damages of $17 million for breach of warranty
and prejudgment interest of $19 million. The action was based upon the
failure in 1984 of two STAR 48 satellite placement motors, manufactured by
the Company in accordance with plaintiff's acceptance requirements, to lift
telecommunication satellites into geosynchronous orbit. Plaintiff sought
recovery of its costs incurred to conduct its failure analysis and motor
redesign. After trial on the merits during fiscal year 1996, the Court
ruled in the Company's favor on all counts. Plaintiff has appealed the
Court's decision to the Ninth Circuit Court of Appeals. The Company
believes that its defense verdict will be upheld by the Court of Appeals.
The Company defended this suit and is defending the appeal, under an
agreement with its insurance carrier pursuant to which the Company's past
and future costs of defense are being reimbursed subject to a reservation
of rights.
Thiokol Corporation v. The United States of America. On July 17, 1996,
the Company filed an action in the United States Court of Federal Claims
seeking payment of costs that arose under its cost-reimbursement contracts
with the Government for operation and management of Government-owned,
contractor-operated Army ammunition plants in Texas and Louisiana. The
Company seeks to recover its costs incurred for Government- approved
benefits that workers earned during their years of service at these plants.
These benefits include: (i) post-retirement health benefits; (ii) long-term
disability benefits; (iii) Workers' Compensation benefits; and (iv)
severance benefits. The Company seeks recovery of $39.9 million for these
costs, with interest. Approximately $6 million of this amount reflects
benefit claims which have been paid to employees by the Company but not
reimbursed by the Army, as required by contract. The Company's litigation
costs are unallowable expenses for government contract purposes and are not
expected to be material. The Company expects to prevail in this litigation,
but if it does not, the Company would recognize in that period material
non-cash and cash charges. See note 12 to the Company's consolidated
financial statements.
Miscellaneous
The Company is involved in a number of other pending legal and
administrative proceedings which are not expected individually or in the
aggregate to have a material adverse effect upon the Company's financial
condition.
Depending on the amount and the timing of an unfavorable resolution of
these
14
<PAGE>
matters, it is possible that the Company's future results of operations or
cash flows could be materially affected in a particular period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's stockholders during
the fourth quarter of fiscal year 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT (as required by Instruction 3. to Item
401(b) of Registration S-K)
Generally, Executive Officers are elected by the Board of Directors at
its first meeting following the Annual Meeting of Stockholders. The
officers generally serve until the next such meeting, or until their
successors are elected and qualified. The next Annual Meeting of
Stockholders will be held on October 24, 1996.
The Executive Officers of the Company on June 30, 1996, were:
Positions Held During Past Five
Name and Age Years and Terms of Office
- ------------ -------------------------
James R. Wilson (55)...............President and Chief Executive Officer since
October 1993; Executive Vice President,
Chief Financial Officer and Treasurer
(1992-October 1993); Vice President and
Chief Financial Officer (1989-92).
Richard L. Corbin (50).............Senior Vice President and Chief Financial
Officer since May 1994; Chief Financial
Officer and Vice President, Administration
Space Systems Division of General
Dynamics Corporation (1976-94).
James E. McNulty (52)..............Executive Vice President Human Resources
and Administration since 1991; Vice Presi-
dent Human Resources (1989-91).
Joseph A. Lombardo (63) . . . . . .Vice President Space Operations since
April 1992; (1989-April 1992) Assistant
General Manager Space Operations; prior
to 1989, NASA Marshall Space Flight
Center.
15
<PAGE>
Winston N. Brundige (51) . . . . . Vice President and General Manager,
Defense and Launch Vehicles Division
since July 1994; Vice President and Divi-
sion Manager Elkton Division (1991-June
1994); Director of Production (1990-91).
R. Robert Harris (62) . . . . . . .Vice President and General Counsel since
1989.
Robert K. Lund (58) . . . . . . . .Vice President, Science and Engineering
and Technical Director since 1991; Tech-
nical Director Advanced Technology
(1989-91).
Michael R. Ayers (45)...............Vice President and Controller since January
1996; Vice President Strategic Develop-
ment (1994-1996); Director Finance &
Administration (1986-1994).
Nicholas J. Iuanow (36). . . . . . .Treasurer since 1994; Assistant Treasurer
of the Company (1989-93) .
Edwin M. North (51).................Secretary since 1990.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information concerning the market for the Company's common equity and
related security holder matters is included in the section "Dividends and
Recent Market Prices" and "Quarterly Financial Highlights" on page 52 of
the Company's Annual Report to Stockholders for fiscal year 1996, and is
incorporated herein by reference in Exhibit Number 13. As of August 30,
1996, there were 6,004 stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five fiscal years ended June 30, 1996,
is included on page 62 of the Company's Annual Report to Stockholders for
fiscal year 1996 and is incorporated herein by reference in Exhibit Number
13.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the three fiscal years ended June 30, 1996, is
included on pages 53 through 61 of the Company's Annual Report to
Stockholders for fiscal year 1996 and is incorporated herein by reference
in Exhibit Number 13.
The Company sets forth below "Cautionary Statements" for the purpose
of the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. Many of the factors described below are discussed in both
current and prior Company SEC filings and to the extent not otherwise
discussed in forward-looking statements should be considered in assessing
the various risks associated with the Company's conduct of its business and
financial condition. In addition to the inherent general business risk,
including but not necessarily limited to changes in the level of economic
activity in the markets where the Company does business; governmental and
regulatory changes; the adverse outcome of litigation or claims (including
environmental) asserted against the Company; weather; availability and
price of raw materials (such as ammonium perchlorate and rayon yarn, an
oxidizer for rocket propellant fuels and an essential material for nozzle
wrapping respectively), components, fuel, utilities, and qualified
suppliers; work and transportation stoppage; foreign currency fluctuations;
events of casualty and calamity; and changes in tax laws and accounting
rules; major risks at this time which may impact the Company's
forward-looking statements include but are not necessarily limited to the
following risk factors:
(i) The Company's National Aeronautical and Space Administration (NASA)
Reusable Solid Rocket Motor (RSRM) contract for the Space Shuttle
program is subject to substantial performance and financial risks.
Without cause, the contract may be terminated for the convenience of
the U.S. Government (government). Deliveries under the contract may be
delayed or extended at the election of the government. Congress may
change the funding available to the contract. Actions by the
government or the Company may make the amount of the contract fee
already booked inappropriate, thus causing a retroactive award fee
adjustment including possible reimbursement to the government of fees
the government has paid to the Company. There is no assurance the
Company will be awarded additional RSRM contracts as a follow-on upon
completion of the current "Buy III" contract expected to continue
until fiscal year 2000. If the Company is awarded such a follow-on
contract, the profitability and cash flow from such contract may not
be at current levels. NASA's proposed privatization of the Space
Shuttle Program could adversely impact the Company's RSRM contract in
the out-years.
(ii) The Company's maintenance of non-RSRM space and defense contracts and
programs (collectively "programs") and the availability and award of
future programs
17
<PAGE>
with the government and prime contractors are subject to the risk of
termination or renegotiation by the government or failure of such
programs to be funded. The Company's ability to successfully compete
and win new programs or retain current programs is also dependent on
the availability of program funding; competition by others with the
Company for such programs on price, quality, technology, facilities,
delivery, and product performance; changes in Congressional funding
objectives; and federal agency demand and program management including
but not limited to program termination, consolidation, or
privatization. Risk factors also include the degree the Company
successfully manages current programs, obtaining or retaining new and
existing programs, and the profitability of such programs with
satisfactory return on investment on lower prices, costs, and unit
volumes of a contracting and competitive government procurement
environment.
(iii)The products and services, primarily through the Company's fastening
systems business segment and the Company's minority equity investment
in Howmet Corporation, sold by the Company to domestic and
international commercial aerospace markets are subject to the risks of
the cyclical nature of the aircraft market and the phase of such cycle
at any point in time. Delay or changes in aircraft and component
orders and build schedules may impact the future demand for Company
products, delivery, and profitability. The Company's major aerospace
customers are large and may exercise their market power among a number
of vendors, including the Company, competing for their business by
exerting pricing pressure, delivery, inventory, and unit volume
requirements. Risks to the Company include management's ability to
maintain both product and manufacturing qualifications to meet the
needs of its major customers and regulatory agencies and maintain or
improve margins and return on investment in light of competitive
pricing pressures, unit demand and product qualification, and product
substitutions by major customers. The Company's potential inability to
maintain product pricing, as well as availability, delivery, and
service are important risk factors.
(iv) The products and services sold by the Company for domestic and
international, and industrial commercial markets, primarily through
the fastening systems business segment and the Company's minority
equity investment in Howmet Corporation, are subject to the risks of
the level of general economic activity and industry capacity in mature
industrial markets, product applications, and technology associated
primarily with aircraft, automotive, transportation, power generation,
construction, and other industrial applications. The risks for the
Company include management's ability to successfully expand new and
existing product lines, to improve margins and returns on investment
by successfully implementing asset management, pricing and cost
reduction strategies. The Company's ability to maintain competitive
products, pricing, availability, delivery, and service are important
customer and competitor risk factors.
18
<PAGE>
(v) Many of the Company's products and manufacturing processes utilize
highly energetic and hazardous materials. Major liability, employee
safety, production disruptions, and asset destruction or impairment
risks exist. Unknown environmental hazards including the designation
of the Company as a responsible party in a Superfund or similar state
enforcement action by the Environmental Protection Agency and
environmental claims by third parties pose a significant risk to the
Company especially with respect to new acquisitions the Company may
make with the implementation of its diversification and growth
strategies to the extent such risks are not identified or otherwise
indemnified by third parties.
(vi) Management's ability to successfully implement and complete its
long-term diversification strategy making the Company less dependent
on government space and defense procurement is a strategic risk
factor. The exercise of the Company's option to purchase the remaining
51 percent of the Howmet acquisition will in part be dependent on the
favorable operational and financial performance, favorable economic
conditions, and the availability of financing at reasonable costs and
on reasonable terms from the capital markets at the time the Company
exercises its option to acquire the balance of the equity ownership of
Howmet from the Carlyle Group. Implementation of a successful
expansion and diversification strategy including acquisitions of new
product lines and additions to existing product lines is a challenging
risk to the Company and its long-term success. There is strategic risk
associated with the integration and management of new business, such
as Howmet, into the existing organization structure.
(vii)Supplier and customer product qualifications are important to the
Company as a supplier and as a purchaser. As a supplier, loss or
failure to maintain product or manufacturing qualifications from major
customers including the government and major commercial aerospace and
aircraft manufacturers may result in loss of markets and business for
the Company. Vendor, component parts, and raw materials qualifications
are important to the Company in the manufacture of its products
including major propulsion systems such as the RSRM. Vendor, component
parts and raw material qualifications may be limited and the loss of a
major vendor as a supplier has the potential to cause a major and
material delay in production or program management.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of the Company as of June 30, 1996 and
1995, and the consolidated statements of income, cash flows, and
stockholders' equity for each of the three years for the periods ended June
30, 1996, 1995, and 1994, and notes to consolidated financial statements
are included on pages 34 through 52 of the Company's Annual Report to
Stockholders for fiscal year 1996 and are incorporated herein by reference
in Exhibit Number 13.
19
<PAGE>
Quarterly financial highlights are included on page 52 of the
Company's Annual Stockholders' Report to Stockholders for the fiscal year
ended June 30, 1996, and are incorporated herein by reference in Exhibit
Number 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's directors and nominees for
director is included on pages 4 through 6 of the Company's definitive Proxy
Statement dated September 20, 1996, and is incorporated herein by
reference. Information concerning disclosure of delinquent files pursuant
to Item 405 of Regulation S-K is set forth on page 8 of the Company's
definitive Proxy Statement dated September 20, 1996, and is incorporated
herein by reference.
Information concerning the Company's Executive Officers is included on
pages 15 through 16 of Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation for fiscal year 1996 is
included on pages 9 through 13 of the Company's definitive Proxy Statement
dated September 20, 1996, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning beneficial ownership of the Company's common
stock is included on page 8 of the Company's definitive Proxy Statement
dated September 20, 1996, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
1. Financial Statements
The following consolidated financial statements are included on
pages 34 through 52 of the Company's Annual Report to Stockholders for the
fiscal year ended June 30, 1996, and are incorporated herein by reference
in Exhibit Number 13:
Consolidated Statements of Income -- Years ended June 30, 1996,
1995, and 1994.
Consolidated Balance Sheets -- June 30, 1996, and June 30, 1995.
Consolidated Statements of Cash Flows -- Years ended June 30,
1996, 1995, and 1994.
Consolidated Statements of Stockholders' Equity -- Years ended
June 30, 1996, 1995, and 1994.
Notes to Consolidated Financial Statements.
Management's Report on Financial Statements.
Report of Ernst & Young LLP, Independent Auditors.
2. Financial Statement Schedules
All schedules for which provision is made under the applicable
accounting regulation of the Securities and Exchange Commission are omitted
as they are either not required under the related instructions or are
otherwise inapplicable.
21
<PAGE>
3. Index to Exhibits
Exhibit
Number Description
------ -----------
(3) Certificate of Incorporation and By-Laws.
3.01 Restated Certificate of Incorporation of the Company,
effective July 3, 1989: Incorporated by reference as Exhibit
3 to Form 10-K for fiscal year ended June 30, 1989.
3.02 Amended By-Laws of the Company: Incorporated by reference to
Annex IV to Proxy Statement/Prospectus dated May 22, 1989,
for Special Stockholders meeting held June 23, 1989.
3.03 Amended By-Laws of the Company June 19, 1993, increasing
Board of Directors: Incorporated by reference as Exhibit 3
to Form 10-K for fiscal year ended June 30, 1993.
(4) Instruments defining the rights of security holders including
indentures.
4.01 Rights Agreement dated January 26, 1989, between the Company
and The First National Bank of Chicago: Incorporated by
reference to Exhibit 1 to Form 8-A dated February 8, 1989.
4.02 Amendment dated June 22, 1989, to Rights Agreement between
the Company and The First National Bank of Chicago:
Incorporated by reference to Exhibit 2 to Form 8-K dated
July 3, 1989.
4.03 Amendment No. 2 to Rights Agreement dated January 18, 1990,
between the Company and The First National Bank of Chicago:
Incorporated by reference to Exhibit 3 to Form 8-K dated
January 18, 1990.
4.04 See Exhibits 3.01, 3.02, and 3.03 above.
(10) Material contracts.
10.01 1Key Executive Long-Term Incentive Plan effective for fiscal
year 1990: Incorporated by reference as Exhibit 10 to Form
10-K for fiscal year ended June 30, 1989.
22
<PAGE>
Exhibit
Number Description
- ------ -----------
10.02 1Key Executive Long-Term Bonus Plans effective fiscal year
1991: Incorporated by reference as Exhibit 10 to Form 10-K
for fiscal year ended June 30, 1991.
10.03 1Key Executive Annual Bonus Plan (Plan 1) effective for fiscal
year 1990: Incorporated by reference as Exhibit 10 to Form
10-K for fiscal year ended June 30, 1989.
10.04 1Staff Annual Bonus Plan effective for fiscal year 1991:
Incorporated by reference as Exhibit 10 to Form 10-K for
fiscal year ended June 30, 1990.
10.05 1Staff Executive Annual Bonus Plan (Plan 2) effective for
fiscal year 1990: Incorporated by reference as Exhibit 10 to
Form 10-K for fiscal year ended June 30, 1989.
10.06 11989 Stock Awards Plan: Incorporated by reference to
Annex VI to Proxy Statement/Prospectus dated May 22, 1989,
for Special Stockholders Meeting held June 23, 1989.
10.07 11989 Stock Awards Plan as amended by stockholder approval
October 15, 1993: Incorporated by reference to the
definitive Proxy Statement dated September 11, 1992.
10.08 1Survivor Income Benefits Plan, amended through March 24,
1983: Incorporated by reference as Exhibit 10 to Form 10-K
for fiscal year ended June 30, 1989.
10.09 1Arrangements whereby the Company compensates its
independent auditors for tax services to certain key
executives for which there is no written document:
Incorporated by reference as Exhibit 10 to Form 10-K for
fiscal year ended June 30, 1989.
10.10 1Form of Employment Agreement between the Company and
certain of its executive officers including the Chief
Executive Officer and the other four highest paid executive
officers: Incorporated by reference as Exhibit 10 to Form
10-K for fiscal year ended June 30, 1989.
23
<PAGE>
Exhibit
Number Description
------ -----------
10.11 1Amended Form of Employment Agreement between certain of its
executive officers including the five most highly
compensated: Incorporated by reference as Exhibit 10 to Form
10-K for fiscal year ended June 30, 1990.
10.12 2Consulting Agreement effective July 1, 1993, as amended,
between the Company and U. Edwin Garrison, the terms of
which are described: Incorporated by reference from the 1994
Proxy Statement dated September 23, 1994.
10.13 Note Agreement $120,000,000 dated June 19, 1990:
Incorporated by reference as Exhibit 10 to Form 10-K for
fiscal year ended June 30, 1990.
10.14 Credit Agreement dated 09/30/93 among Thiokol Corporation
and The First National Bank of Chicago, Bank of America
National Trust and Savings Association, NBD Bank, N.A., and
The Northern Trust Company: Incorporated by reference as
Exhibit 10 to Form 10-K for fiscal year ended June 30, 1994.
10.15 1,2Thiokol Corporation Pension Plan (Second Restatement
Effective January 1, 1989): Incorporated by reference as
Exhibit 10 to Form 10-K for fiscal year ended June 30, 1994.
10.16 1,2Thiokol Corporation Supplemental Executive Retirement
Plan (Effective July 1, 1992): Incorporated by reference as
Exhibit 10 to Form 10-K for fiscal year ended June 30, 1992.
10.17 Huck International, Inc. Personal Retirement Account Plan
(Second Restatement Effective as of January 1, 1992):
Incorporated by reference as Exhibit 10 to Form 10-K for
fiscal year ended June 30, 1995.
10.18 Huck International, Inc. Supplemental Executive Retirement
Plan (Effective January 1, 1992): Incorporated by reference
as Exhibit 10 to Form 10-K for fiscal year ended June 30,
1995.
10.19 Stock Purchase Agreement by and among Thiokol Holding
Company, Carlyle-Blade Acquisition Partners L.P., and Blade
Acquisition Corp. dated as of December 31, 1995:
Incorporated
24
<PAGE>
Exhibit
Number Description
------ -----------
by reference as Exhibit 10 to Form 10-Q for the quarterly
period ended December 31, 1995.
10.20 Shareholders' Agreement by and among Thiokol Holding
Company, Carlyle-Blade Acquisition Partners, L.P., and Blade
Acquisition Corp. dated as of December 13, 1995:
Incorporated by reference as Exhibit 10 to Form 10-Q for the
quarterly period ended December 31, 1995.
10.21 Registration Rights Agreement by and between Blade
Acquisition Corp., Thiokol Holding Company and Carlyle-Blade
Acquisition Partners, L.P. dated as of December 13, 1995:
Incorporated by reference as Exhibit 10 to Form 10-Q for the
quarterly period ended December 31, 1995.
10.22 Holding Management Agreement by and between Howmet
Corporation and Thiokol Holding Company dated as of December
13, 1995: Incorporated by reference as Exhibit 10 to Form
10-Q for the quarterly period ended December 31, 1995.
10.23 Thiokol Transaction Fee Agreement by and between Howmet
Holdings Acquisition Corp. and Thiokol Corporation dated as
of December 13, 1995: Incorporated by reference as Exhibit
10 to Form 10-Q for the quarterly period ended December 31,
1995.
10.24 Amended Certificate of Designations, Preferences and
Relative, Participating, Optional, and Other Special Rights
of Preferred Stock and Qualifications, Limitations, and
Restrictions thereof of 9.0% Series A Senior Cumulative
Preferred Stock of Blade Acquisition Corp.: Incorporated by
reference as Exhibit 10 to Form 10-Q for the quarterly
period ended December 31, 1995.
10.25 Standstill Agreement by and among Thiokol Holding Company,
Thiokol Corporation, Carlyle-Blade Acquisition Partners,
L.P. et al. dated as of December 13, 1995: Incorporated by
reference as Exhibit 10 to Form 10-Q for the quarterly
period ended December 31, 1995.
10.26 Collateral Custodial Agreement by and among Carlyle-Blade
Acquisition partners L.P., Thiokol Holding Company, and the
First
25
<PAGE>
Exhibit
Number Description
------ -----------
National Bank of Chicago: Incorporated by reference as
Exhibit 10 to Form 10-Q for the quarterly period ended
December 31, 1995.
10.27 Credit Agreement dated as of May 23, 1996, among Thiokol
Corporation and The First National Bank of Chicago.
10.28 Thiokol Corporation 1996 Stock Awards Plan.
10.29 Key Executive Bonus Plan, 1996 Amendments.
(11) Statement re computation of per share earnings.
Statement re computation of per share earnings of the Company and
subsidiaries for the three years ended June 30, 1996, 1995, and
1994.
(13) Annual Report to security holders.
Applicable sections of the Annual Report to Stockholders of the
Company for fiscal year 1996 incorporated by reference.
(21) Subsidiaries of the registrant.
Subsidiaries of the Company.
(24) Consents.
Consent of Ernst & Young LLP, independent auditors.
(27) Financial Data Schedule.
(99) Additional exhibits.
"Cautionary Statements" for the purpose of the "Safe Harbor"
provisions of the Private Securities Litigation Reform Act of
1995, filed in the Company's report on Form 8-K dated May 14,
1996, and are incorporated by reference.
26
<PAGE>
(b) REPORTS ON FORM 8-K
Form 8-K filed May 14, 1996, sets forth the Company's "cautionary
statements" for the purpose of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995.
_______________________________________
1Participation by the Company's Chief Executive Officer and four most
highly compensated Executive Officers as a group in the compensation plans
identified in such exhibits are described on page 9 in the Company's
definitive Proxy Statement dated September 20, 1996, which description is
incorporated herein by reference. Each management contract or compensatory
plan or arrangement has been filed as an Exhibit to this Form 10-K pursuant
to Item 14c.
2A description of these contracts is set forth in the Company's
definitive Proxy Statement dated September 20, 1996, and such contracts are
filed as Exhibits pursuant to Form 10-K, Part IV, Item 14(a)3.
27
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, as of
the 26 day of September 1996.
THIOKOL CORPORATION
(Registrant)
By /s/ RICHARD L. CORBIN
-------------------------------
Richard L. Corbin
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities indicated, as of the 26 day of September 1996.
SIGNATURE
TITLE
/s/ JAMES R. WILSON
- -----------------------------------
James R. Wilson Chairman of the Board, President,
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ RICHARD L. CORBIN
- ------------------------------------
Richard L. Corbin Senior Vice President and Chief
Financial Officer (Principal Financial
Officer)
/s/ MICHAEL R. AYERS
- --------------------------------------
Michael R. Ayers Vice President and Controller
(Principal Accounting Officer)
<PAGE>
/s/ NEIL A. ARMSTRONG
- --------------------------------------
Neil A. Armstrong Director
/s/ U. EDWIN GARRISON
- --------------------------------------
U. Edwin Garrison Director
/s/ MICHAEL P.C. CARNS
- --------------------------------------
Michael P.C. Carns Director
/s/ EDSEL D. DUNFORD
- --------------------------------------
Edsel D. Dunford Director
/s/ L. DENNIS KOZLOWSKI
- -------------------------------------
L. Dennis Kozlowski Director
/s/ CHARLES S. LOCKE
- -------------------------------------
Charles S. Locke Director
/s/ JAMES M. RINGLER
- --------------------------------------
James M. Ringler Director
/s/ WILLIAM O. STUDEMAN
- --------------------------------------
William O. Studeman Director
/s/ DONALD C. TRAUSCHT
- --------------------------------------
Donald C. Trauscht Director
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THIOKOL CORPORATION
(in thousands, except per share data)
Year Ended June 30
------------------
1996 1995 1994
-------- --------- --------
<S>
<C> <C> <C>
Primary
- -------
Average shares outstanding: 18,228 18,538 19,658
Additional shares assuming exercise of
dilutive stock options--based on
treasury stock method using average
market prices: 338 256 315
---------- --------- --------
Total shares: 18,556 18,794 19,973
========== ========= ========
Net income (loss): $ 58,298 $47,463 $(3,515)
Earnings per share (loss): $ 3.14 $ 2.53 $ (.18)
========= ========= ========
Fully Diluted
- -------------
Average shares outstanding: 18,228 18,538 19,658
Additional shares assuming exercise of
dilutive stock options--based on
treasury stock method using the year-end
market price, if higher than average
market price: 368 326 315
--------- -------- -------
Total shares: 18,596 18,864 19,973
========= ======== =======
Net income (loss): $ 58,298 $47,463 $(3,515)
Earnings per share (loss): $ 3.13 $ 2.52 $ (18)
======== ======== =======
</TABLE>
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF THIOKOL CORPORATION
The following is a list of operating subsidiary corporations of the
Company as of June 30, 1996. Certain subsidiaries not considered
significant have been omitted.
State or Other
Jurisdiction
Subsidiary of Incorporation
- ---------- ----------------
Huck International, Inc..................................Delaware
Huck S.A.................................................France
Huck International GmbH & Co.............................Germany
Huck International Ltd...................................United Kingdom
Thiokol Holding Co........................................Delaware
<PAGE>
EXHIBIT (24)
Consent of Independent Auditors
-------------------------------
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Thiokol Corporation of our report dated August 1, 1996,
included in the 1996 Annual Report to Shareholders of Thiokol Corporation.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8, Nos. 33-18630, 33-2921, 33-10316, 2-76672, 2-90885,
and 33-38322) pertaining to certain Retirement Savings and Investment Plans
and Stock Option Plans of Thiokol Corporation of our report dated July 31,
1996, with respect to the consolidated financial statements of Thiokol
Corporation incorporated by reference in the Annual Report (Form 10-K) of
Thiokol Corporation for the year ended June 30, 1996.
ERNST & YOUNG LLP
Salt Lake City, Utah
September 26, 1996
<PAGE>
CREDIT AGREEMENT
Dated as of May 23, 1996
among
THIOKOL CORPORATION
and
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and As Administrative Agent,
and
THE LENDING INSTITUTIONS PARTY HERETO
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I. DEFINITIONS.............................................................................................. 1
ARTICLE II. THE CREDITS.......................................................................................... 13
2.1. Syndicated Advances.............................................................................. 13
2.1.1. Commitments to Make Syndicated Loans................................................. 13
2.1.2. Ratable Loans........................................................................ 13
2.1.3. Syndicated Advance Rate Options...................................................... 13
2.1.4. Method of Selecting Rate Options and Interest Periods for Syndicated
Advances............................................................................. 14
2.1.5. Conversion and Continuation of Outstanding Syndicated Advances................................... 14
2.2. Competitive Bid Advances......................................................................... 15
2.2.1. Bid Option........................................................................... 15
2.2.2. Bid Quote Request.................................................................... 15
2.2.3. Invitation for Bid Quotes............................................................ 15
2.2.4. Submission and Contents of Bid Quotes................................................ 16
2.2.5. Notice to Company.................................................................... 18
2.2.6. Acceptance and Notice by Company..................................................... 18
2.2.7. Allocation by Administrative Agent................................................... 19
2.2.8. Payment on Last Day of Interest Period............................................... 19
2.3. General Facility Terms........................................................................... 19
2.3.1. Method of Borrowing.................................................................. 18
2.3.2. Minimum Amount of Each Advance....................................................... 19
2.3.3. Termination; Required Payments................................................................... 20
2.3.4. Optional Principal Payments.......................................................... 20
2.3.5. Facility Fees and Voluntary Reduction of Commitments................................. 20
2.3.6. Agency Fee and Auction Fee........................................................... 20
2.3.7. Changes in Interest Rate, etc.................................................................... 21
2.3.8. Rate after Maturity.................................................................. 21
2.3.9. Interest Payment Dates; Interest and Fee Basis....................................... 21
2.3.10. Method of Payment.................................................................... 22
2.3.11. Notes; Telephonic Notices............................................................ 22
2.3.12. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions................................................................ 23
2.3.13. Lending Installations................................................................ 23
<PAGE>
2.3.14. Non-Receipt of Funds by the Administrative Agent..................................... 24
2.3.15. Withholding Tax Exemption.............................................................24
ARTICLE III. CHANGE IN CIRCUMSTANCES; INDEMNIFICATION............................................................ 25
3.1. Yield Protection................................................................................. 25
3.2. Changes in Capital Adequacy Regulations.......................................................... 25
3.3. Availability of Interest Rate.................................................................... 26
3.4. Failure to Pay or Borrow on Certain Dates........................................................ 27
3.5. Bank Certificates; Survival of Indemnity......................................................... 27
ARTICLE IV. CONDITIONS PRECEDENT................................................................................. 27
4.1. Initial Advance.................................................................................. 27
4.2. Each Advance..................................................................................... 29
ARTICLE V. REPRESENTATIONS AND WARRANTIES........................................................................ 29
5.1. Corporate Existence and Standing................................................................. 29
5.2. Authorization and Validity....................................................................... 29
5.3. Compliance with Laws and Contracts............................................................... 30
5.4. Financial Statements............................................................................. 30
5.5. Material Adverse Change.......................................................................... 30
5.6. Taxes............................................................................................ 30
5.7. Litigation....................................................................................... 31
5.8. ERISA............................................................................................ 31
5.9. Defaults and Prepayment Event.................................................................... 31
5.10. Accuracy of Information.......................................................................... 31
5.11. Regulation U..................................................................................... 31
5.12. Pari Passu....................................................................................... 31
5.13. Investment Company............................................................................... 32
5.14. Material Laws.................................................................................... 32
5.15. Material Agreements.............................................................................. 32
5.16. Subsidiaries..................................................................................... 32
5.17. Ownership of Properties.......................................................................... 32
ARTICLE VI. COVENANTS............................................................................................ 33
<PAGE>
6.1. Affirmative Covenants............................................................................ 33
6.1.1. Financial Reporting.................................................................. 33
6.1.2. Use of Proceeds...................................................................... 35
6.1.3. Notice of Default and Prepayment Event............................................... 35
6.1.4. Conduct of Business.................................................................. 35
6.1.5. Payment of Taxes..................................................................... 36
6.1.6. Insurance............................................................................ 36
6.1.7. Compliance with Laws................................................................. 36
6.1.8. Maintenance of Properties............................................................ 36
6.1.9. Inspection................................................................................ 36
6.2. Negative Covenants............................................................................... 37
6.2.1. Dividends............................................................................ 37
6.2.2. Indebtedness of Subsidiaries......................................................... 37
6.2.3. Merger............................................................................... 37
6.2.4. Sale of Assets....................................................................... 38
6.2.5. Sale and Leaseback................................................................... 38
6.2.6. Liens................................................................................ 38
6.2.7. Funded Debt/EBITDA Ratio............................................................. 39
ARTICLE VII. DEFAULTS............................................................................................ 40
ARTICLE VIII. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES..................................................... 42
8.1. Acceleration; Allocation of Payments after Default or Prepayment Event........................... 42
8.2. Amendments....................................................................................... 43
8.3. Preservation of Rights........................................................................... 43
ARTICLE IX. GENERAL PROVISIONS................................................................................... 43
9.1. Survival of Representations...................................................................... 44
9.2. Governmental Regulation.......................................................................... 44
9.3. Taxes............................................................................................ 44
9.4. Choice of Law.................................................................................... 44
9.5. Consent to Jurisdiction.......................................................................... 44
9.6. Waiver of Jury Trial............................................................................. 44
9.7. Headings......................................................................................... 45
9.8. Entire Agreement................................................................................. 45
9.9. Several Obligations.............................................................................. 45
<PAGE>
9.10. Expenses......................................................................................... 45
9.12. Numbers of Documents............................................................................. 46
9.13. Confidentiality.................................................................................. 46
9.14. Termination of and Waiver Under Prior Agreement.................................................. 46
ARTICLE X. THE ADMINISTRATIVE AGENT.............................................................................. 47
10.1. Appointment...................................................................................... 47
10.2. Powers........................................................................................... 47
10.3. General Immunity................................................................................. 47
10.4. No Responsibility for Loans, Recitals, etc....................................................... 47
10.5. Right to Indemnity............................................................................... 47
10.6. Action on Instructions of Banks.................................................................. 47
10.7. Employment of Agents and Counsel................................................................. 48
10.8. Reliance on Documents; Counsel................................................................... 48
10.9. Administrative Agent's Reimbursement............................................................. 48
10.10. Rights as a Bank................................................................................. 48
10.11. Bank Credit Decision............................................................................. 48
10.12. Successor Administrative Agent................................................................... 49
10.13. Distribution of Information...................................................................... 49
ARTICLE XI. SETOFF; RATABLE PAYMENTS............................................................................. 50
11.1. Setoff........................................................................................... 50
11.2. Ratable Payments................................................................................. 50
12.1. Successors and Assigns........................................................................... 50
12.2. Participations................................................................................... 51
12.2.1. Permitted Participants; Effect....................................................... 51
12.2.2. Voting Rights........................................................................ 51
12.3. Assignments...................................................................................... 52
12.3.1. Permitted Assignments................................................................ 52
12.3.2. Substitution of Bank............................................................................. 52
12.3.3. Effect; Effective Date............................................................... 52
12.4. Dissemination of Information..................................................................... 53
12.5. Tax Treatment.................................................................................... 53
ARTICLE XIII. NOTICES............................................................................................ 54
<PAGE>
13.1. Giving Notice.................................................................................... 54
13.2. Change of Address................................................................................ 54
ARTICLE XIV. COUNTERPARTS........................................................................................ 54
EXHIBITS
EXHIBIT "A" - Syndicated Loans Promissory Note..................................................... 62
EXHIBIT "B" - Bid Loans Promissory Note............................................................ 64
EXHIBIT "C" - Bid Quote Request.................................................................... 66
EXHIBIT "D" - Invitation for Bid Quotes............................................................ 67
EXHIBIT "E" - Bid Quote............................................................................ 68
EXHIBIT "F" - Opinion of Counsel................................................................... 69
EXHIBIT "G" - Loan/Credit Related Money Transfer Instruction....................................... 72
EXHIBIT "H" - Assignment Agreement................................................................. 73
SCHEDULES
SCHEDULE "1" - Subsidiaries......................................................................... 83
SCHEDULE "2" - Indebtedness of Subsidiaries......................................................... 84
SCHEDULE "3" - Liens................................................................................ 85
</TABLE>
<PAGE>
THIOKOL CORPORATION
CREDIT AGREEMENT
This Credit Agreement dated as of May 23, 1996 is among Thiokol
Corporation, a Delaware corporation, each of the undersigned banks and The
First National Bank of Chicago, individually and as agent for such banks.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Absolute Rate Auction" means a solicitation of Bid Quotes setting
forth Bid Absolute Rates pursuant to Section 2.2.
"Absolute Rate Interest Period" means, with respect to a Bid Absolute
Rate Advance, a period of not more than 270 days commencing on a Business
Day selected by the Company pursuant to this Agreement. If such Absolute
Rate Interest Period would end on a day which is not a Business Day, such
Absolute Rate Interest Period shall end on the next succeeding Business
Day.
"Advance" means either a Syndicated Advance or a Bid Advance.
"Administrative Agent" means The First National Bank of Chicago in its
capacity as agent for the Banks pursuant to Article X, and not in its
individual capacity as a Bank, and any successor Administrative Agent
appointed pursuant to Article X.
"Aggregate Available Commitment" means at any time the Aggregate
Commitment at such time less the Outstandings at such time.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Banks hereunder.
"Agreement" means this credit agreement, as it may be amended from
time to time.
Page 1
<PAGE>
"Applicable Facility Fee" means a facility fee determined by reference
to the applicable Level as set forth below:
Level I: .08% per annum
Level II: .10% per annum
Level III: .125% per annum
Level IV: .15% per annum
Level V: .20% per annum
The applicable Level shall be determined from the Funded Debt/EBITDA Ratio
set forth in the schedules delivered by the Company pursuant to Section
6.1.1(d). The adjustment, if any, to the Applicable Facility Fee shall be
effective retroactively as of the first day of the fiscal quarter in which
any such schedule indicating that an adjustment is to be made is required
to be delivered (that is, as of the first day of the fiscal quarter
immediately following the fiscal quarter for which such schedule reports).
The initial Applicable Facility Fee shall be based on the Company's
certified calculation of its Funded Debt/EBITDA Ratio as of the last day of
the last complete fiscal quarter of the Company prior to the date of this
Agreement delivered to the Administrative Agent pursuant to Section 4.1(e).
"Applicable Margin" means a margin determined by reference to the
applicable Level as set forth below:
Level I: .22%
Level II: .25%
Level III: .275%
Level IV: .30%
Level V: .35%
The applicable Level shall be determined from the Funded Debt/EBITDA Ratio
set forth in the schedules delivered by the Company pursuant to Section
6.1.1(d). The adjustment, if any, to the Applicable Margin shall be
effective retroactively as of the first day of the fiscal quarter in which
any such schedule indicating that an adjustment is to be made is required
to be delivered (that is, as of the first day of the fiscal quarter
immediately following the fiscal quarter for which such schedule
Page 2
<PAGE>
reports). The initial Applicable Margin shall be based on the Company's
certified calculation of its Funded Debt/EBITDA Ratio as of the last day of
the last complete fiscal quarter of the Company prior to the date of this
Agreement delivered to the Administrative Agent pursuant to Section 4.1(e).
"Arranger" means First Chicago Capital Markets, Inc.
"Article" means an article of this Agreement unless another document
is specifically referenced.
"Authorized Representative" means the Chief Financial Officer or the
Treasurer of the Company or any other officer or employee of the Company
designated in writing as an "Authorized Representative" under this
Agreement by the Chief Financial Officer or the Treasurer of the Company.
"Bankruptcy Code" means Title 11, United States Code Sections 1 et
seq., as the same may be amended from time to time, and any successor
thereto or replacement therefor which may be hereafter enacted.
"Banks" means the banks listed on the signature pages of this
Agreement and their respective successors and assigns.
"Base Eurodollar Rate" means, with respect to a Eurodollar Rate
Advance or Bid Eurodollar Advance for the relevant Eurodollar Interest
Period, the rate determined by the Administrative Agent to be the rate at
which deposits in U.S. Dollars are offered by First Chicago to first-class
banks in the London interbank market at approximately 11 a.m. (London time)
two Business Days prior to the first day of such Eurodollar Interest
Period, in the approximate amount of First Chicago's relevant Eurodollar
Rate Loan and having a maturity approximately equal to such Eurodollar
Interest Period (for purposes of Bid Eurodollar Advances, such amount shall
be determined as if First Chicago were to participate in such Advance
ratably in proportion to its Commitment).
"Bid Absolute Rate" means, with respect to a Bid Absolute Rate Loan
made by a given Bank for the relevant Absolute Rate Interest Period, the
rate of interest per annum (rounded to the nearest 1/100th of 1%) offered
by such Bank and accepted by the Company.
"Bid Absolute Rate Advance" means a borrowing hereunder consisting of
the aggregate amount of the several Bid Absolute Rate Loans made by some or
all of the Banks to the Company at the same time and for the same Interest
Period.
Page 3
<PAGE>
"Bid Absolute Rate Loan" means a Loan which bears interest at the Bid
Absolute Rate.
"Bid Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Bid Loans made by some or all of the Banks to the
Company at the same time and for the same Interest Period.
"Bid Borrowing Notice" is defined in Section 2.2.6.
"Bid Eurodollar Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Bid Eurodollar Loans made by some or all of
the Banks to the Company at the same time and for the same Interest Period.
"Bid Eurodollar Loan" means a Loan which bears interest at the Bid
Eurodollar Rate.
"Bid Eurodollar Rate" means, with respect to a Bid Eurodollar Loan
made by a given Bank for the relevant Eurodollar Interest Period, the sum
of (a) the Base Eurodollar Rate and (b) the Bid Margin offered by such Bank
and accepted by the Company.
"Bid Loan" means a Bid Eurodollar Loan or a Bid Absolute Rate Loan.
"Bid Margin" means the margin above or below the applicable Base
Eurodollar Rate offered for a Bid Eurodollar Loan, expressed as a
percentage (rounded to the nearest 1/10,000th of 1%) to be added or
subtracted from such Base Eurodollar Rate.
"Bid Note" means a promissory note in substantially the form of
Exhibit "B" hereto, with appropriate insertions, duly executed and
delivered to the Administrative Agent by the Company and payable to the
order of a Bank in the amount of the initial Aggregate Commitment,
including any amendment, modification, renewal or replacement of such
promissory note.
"Bid Quote" means a Bid Quote substantially in the form of Exhibit "E"
hereto completed and delivered by a Bank to the Administrative Agent in
accordance with Section 2.2.4.
"Bid Quote Request" means a Bid Quote Request substantially in the
form of Exhibit "C" hereto completed and delivered by the Company to the
Administrative Agent in accordance with Section 2.2.2.
"Borrowing Date" means a date on which an Advance is made hereunder.
Page 4
<PAGE>
"Borrowing Notice" means a Syndicated Borrowing Notice or a Bid
Borrowing Notice.
"Business Day" means (a) with respect to borrowing, payment or rate
selection of Eurodollar Rate Advances or Bid Eurodollar Advances, a day
(other than a Saturday or Sunday) on which banks generally are open for
business in Chicago and New York for the conduct of substantially all of
their commercial lending activities and on which dealings in U.S. Dollars
are carried on in the London interbank market and (b) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally
are open for business in Chicago and New York for the conduct of
substantially all of their commercial lending activities.
"Capitalized Lease" of any Person means any lease or lease agreement
which creates a Capitalized Lease Obligation of such Person.
"Capitalized Lease Obligation" of any Person means the obligation of
such Person, as lessee, to pay rent for the letting, use or hire of real or
personal property which in accordance with GAAP is required to be presented
on the balance sheet of such Person as a liability.
"Commitment" means, for each Bank, the obligation of the Bank to make
Loans not exceeding the amount set forth opposite its signature below, as
such amount may be modified from time to time.
"Company" means Thiokol Corporation, a Delaware corporation.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
plus interest expense and provision for taxes based on income (in each case
to the extent deducted in determining Consolidated Net Income), adjusted by
adding thereto the amount of (i) all amortization of intangibles and
depreciation and (ii) Receivables Facility Financing Costs (to the extent
not otherwise included).
"Consolidated Funded Debt" means all Indebtedness of the Company and
its Consolidated Subsidiaries which, on the date of determination, would be
required to be shown on the Company's consolidated balance sheet prepared
in accordance with GAAP, plus all Receivables Facility Attributed
Indebtedness of the Company and its Consolidated Subsidiaries on the date
of determination regardless of its treatment under GAAP
"Consolidated Net Income" means, for any period, the consolidated net
after- tax income of the Company and its Consolidated Subsidiaries
determined in accordance with GAAP.
Page 5
<PAGE>
"Consolidated Subsidiary" means any Subsidiary that is consolidated on
a balance sheet of the Company in accordance with GAAP.
"Consolidated Total Assets" means, as at any date of determination,
the aggregate value of assets of the Company and its Consolidated
Subsidiaries determined in accordance with GAAP.
"Conversion/Continuation Notice" is defined in Section 2.1.5.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time,
changing when and as said corporate base rate changes.
"Default" means an event described in Article VII.
"Dollars" and "$" mean lawful money of the United States of America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Effective Date" means any Business Day on which the Company has
complied with all of the terms and conditions of Section 4.1, the Company
has paid all requisite fees to the Administrative Agent, the Company, the
Administrative Agent and the Banks have executed this Agreement, and the
Adminstrative Agent has notified the Company and the Banks that all such
events have occurred.
"Eurodollar Auction" means a solicitation of Bid Quotes setting forth
Bid Margins based on the Base Eurodollar Rate pursuant to Section 2.2.
"Eurodollar Interest Period" means, with respect to a Bid Eurodollar
Advance or a Eurodollar Rate Advance, a period of one, two, three, six, or
(subject to availability) nine or twelve months commencing on a Business
Day selected by the Company pursuant to this Agreement. Such Eurodollar
Interest Period shall end on the day in the succeeding calendar month which
corresponds numerically to the beginning day of such Eurodollar Interest
Period; provided, however, that if there is no such numerically
corresponding day in such succeeding month, such Eurodollar Interest Period
shall end on the last Business Day of such succeeding month. If a
Eurodollar Interest Period would otherwise end on a day which is not a
Business Day, such Eurodollar Interest Period shall end on the next
succeeding Business Day; provided, however, that if said next succeeding
Business Day falls in a new month, such Eurodollar Interest Period shall
end on the immediately preceding Business Day.
Page 6
<PAGE>
"Eurodollar Rate" means, with respect to a Eurodollar Rate Advance for
the relevant Eurodollar Interest Period, a per annum rate equal to the sum
of (a) the quotient of (i) the Base Eurodollar Rate applicable to that
Eurodollar Interest Period, divided by (ii) one minus the Reserve
Requirement (expressed as a decimal) applicable to that Eurodollar Interest
Period, if any, plus (b) the Applicable Margin. The Eurodollar Rate shall
be rounded, if necessary, to the next higher 1/100th of 1%.
"Eurodollar Rate Advance" means an Advance which bears interest at a
Eurodollar Rate.
"Eurodollar Rate Loan" means a Loan which bears interest at a
Eurodollar Rate.
"Federal Funds Rate" means, for any day, an interest rate per annum
equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is
not a Business Day, for the immediately preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations at
approximately 10 a.m. (Chicago time) on such day on such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by the Administrative Agent in its sole
discretion.
"First Chicago" means The First National Bank of Chicago in its
individual capacity and not as agent hereunder.
"Fixed Rate" means the Eurodollar Rate, the Bid Eurodollar Rate or the
Bid Absolute Rate.
"Fixed Rate Advance" means an Advance which bears interest at a Fixed
Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate.
"Floating Rate" means, for any day, a rate per annum equal to the
higher of (a) the Corporate Base Rate for such day and (b) the Federal
Funds Rate for such day plus .5% per annum.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
Page 7
<PAGE>
"Funded Debt/EBITDA Ratio" means, as at the last day of any fiscal
quarter of the Company, the ratio of (i) Consolidated Funded Debt as of
such day to (ii) Consolidated EBITDA for the four consecutive fiscal
quarters ending on such day.
"GAAP" means generally accepted principles of accounting as in effect
at the time of application to the provisions hereof.
"Guaranty" of any Person means any agreement by which such Person
assumes, guarantees, endorses, contingently agrees to purchase or provide
funds for the payment of, or otherwise becomes liable upon, the obligation
of any other Person, or agrees to maintain the net worth or working capital
or other financial condition of any other Person or otherwise assure any
creditor of such other Person against loss, and shall include, without
limitation, the contingent liability of such Person under or with respect
to any Letter of Credit.
"Howmet" means Howmet Corporation, a Delaware corporation.
"Howmet Acquisition" means the acquisition by the Company directly or
indirectly of sufficient equity interests in Howmet to make Howmet a
Subsidiary of the Company.
"Indebtedness" of any Person means, without duplication, (a) the
obligations of such Person (i) for borrowed money, (ii) under or with
respect to notes payable and drafts accepted which represent extensions of
credit (whether or not representing obligations for borrowed money) to such
Person or (iii) for the deferred purchase price of property or services
other than current accounts payable arising in the ordinary course of
business on terms customary in the trade, (b) the obligations
of others, whether or not assumed, secured by Liens on property of such
Person or payable out of the proceeds of or production from property now or
hereafter owned or acquired by such Person, (c) the Capitalized Lease
Obligations of such Person, (d) the obligations of such Person under
Guaranties by such Person of any Indebtedness (other than obligations for
borrowed money incurred to finance the purchase of property leased to such
Person pursuant to a Capitalized Lease of such Person) of any other Person,
and (e) all Receivables Facility Attributed Indebtedness of such Person on
the date of determination.
"Interest Period" means a Eurodollar Interest Period or an Absolute
Rate Interest Period.
"Invitation for Bid Quotes" means an Invitation for Bid Quotes
substantially in the form of Exhibit "D" hereto completed and delivered by
the Administrative Agent to the Banks in accordance with Section 2.2.3.
Page 8
<PAGE>
"Lending Installation" means, for each type of Loan, any office,
branch, subsidiary or affiliate of any Bank.
"Letter of Credit" of any Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon
which such Person is account party or for which such Person is in any way
liable.
"Level" means any of Level I, Level II, Level III, Level IV, or Level
V.
"Level I" means, with respect to the Company's Funded Debt/EBITDA
Ratio, a ratio less than .75 to 1.0.
"Level II" means, with respect to the Company's Funded Debt/EBITDA
Ratio, a ratio equal to or greater than .75 to 1.0 but equal to or less
than 1.5 to 1.0.
"Level III" means, with respect to the Company's Funded Debt/EBITDA
Ratio, a ratio greater than 1.5 to 1.0 but equal to or less than 2.0 to
1.0.
"Level IV" means, with respect to the Company's Funded Debt/EBITDA
Ratio, a ratio greater than 2.0 to 1.0 but equal to or less than 2.5 to
1.0.
"Level V" means, with respect to the Company's Funded Debt/EBITDA
Ratio, a ratio greater than 2.5 to 1.0.
"Lien" means, with respect to the property of any Person, any security
interest, mortgage, pledge, lien, claim, charge, encumbrance, conditional
sale agreement, title retention agreement, lessor's interest under a
Capitalized Lease or analogous instrument, in, of or on any of the property
of such Person.
"Loan" means, with respect to a Bank, such Bank's portion of any
Advance.
"Loan Documents" means this Agreement and the Notes.
"Note" means a Bid Note or a Syndicated Note.
"Obligations" means all unpaid principal and accrued and unpaid
interest under the Notes, all accrued and unpaid commitment and facility
fees and all other obligations of the Company or any Subsidiary to the
Banks or to any Bank or the Administrative Agent arising under the Loan
Documents.
"Outstandings" means at any time the aggregate of the principal
amounts of all outstanding Advances.
Page 9
<PAGE>
"Participants" is defined in Section 12.2.1.
"Payment Date" shall mean the last Business Day of each quarter,
commencing June 30, 1996.
"Permitted Lien" means any lien described in clauses (a) through (j)
of Section 6.2.6.
"Person" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, government or any
department or agency of any government.
"Plan" means a defined benefit pension plan as such term is defined in
Section 3(35) of ERISA for the unfunded liabilities of which upon
termination the Company or any Subsidiary could be held liable by the
Pension Benefit Guaranty Corporation.
"Plan Year" means a plan year as defined in Section 3(39) of ERISA.
"Prepayment Event" means the earliest to occur of (a) the date of a
public announcement that a Person or group of affiliated or associated
Persons (an "Acquiring Person") has acquired, or has obtained the right to
acquire, legal or beneficial ownership of more than 50% of the outstanding
shares of the Voting Stock of the Company, (b) the date of the commencement
of a tender offer or exchange offer that would result in an Acquiring
Person legally or beneficially owning more than 50% of the outstanding
shares of the Voting Stock of the Company, and (c) the date an Acquiring
Person acquires all or substantially all of the assets of the Company.
"Prior Agreement" means that certain Credit Agreement dated as of
September 30, 1993, among the Company, First Chicago as administrative
agent, and the banks party thereto.
"Rate Option" means the Eurodollar Rate or the Floating Rate.
"Receivables Facility Attributed Indebtedness" means the amount of
obligations outstanding under a receivables purchase facility on any date
of determination that would be characterized as principal if such facility
were structured as a secured lending transaction rather than as a purchase.
"Receivables Facility Financing Costs" means all cash fees, service
charges, and other costs, as well as all collections or other amounts
retained by purchasers of receivables pursuant to a receivables purchase
facility, which are in excess of amounts paid to the Company and its
Consolidated Subsidiaries under any
Page 10
<PAGE>
receivables purchase facility for the purchase of receivables pursuant to
such facility.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of
the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by banks for the purpose of
purchasing or carrying margin stocks applicable to member banks of the
Federal Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA.
"Required Banks" means Banks in the aggregate holding at least 51% of
the aggregate unpaid principal amount of the Syndicated Advances or, if no
Syndicated Advances are outstanding, Banks in the aggregate having at least
51% of the Aggregate Commitment. If no Syndicated Advances are outstanding
and the Aggregate Commitment has been cancelled or terminated, "Required
Banks" shall mean Banks in the aggregate holding at least 51% of the
aggregate unpaid principal amount of the Bid Advances.
"Reserve Requirement" means, with respect to a Eurodollar Interest
Period, the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under
Regulation D on Eurocurrency liabilities.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Special Absolute Rate Auction" is defined in Section 2.2.2.
"Subsidiary" of a Person means (i) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at
the time be owned or controlled, directly or indirectly, by such Person or
by one or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, association, joint venture, limited
liability company or similar business organization more than 50% of the
ownership interests having ordinary voting
Page 11
<PAGE>
power of which shall at the time be so owned or controlled. Unless
otherwise expressly provided, all references herein to a "Subsidiary" shall
mean a Subsidiary of the Company.
"Syndicated Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Syndicated Loans made by the Banks to the
Company at the same time, at the same Rate Option and for the same Interest
Period.
"Syndicated Borrowing Notice" is defined in Section 2.1.4.
"Syndicated Loan" means a Eurodollar Rate Loan or a Floating Rate
Loan.
"Syndicated Note" means a promissory note in substantially the form of
Exhibit "A" hereto, with appropriate insertions, duly executed and
delivered to the Administrative Agent by the Company and payable to the
order of a Bank in the amount of its Commitment, including any amendment,
modification, renewal or replacement of such promissory note.
"Termination Date" means May 23, 2001 or any earlier date on which the
Commitments are cancelled by the Company or otherwise terminated pursuant
to this Agreement.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Syndicated Advance, its nature as a
Floating Rate Advance or Eurodollar Advance.
"Unfunded Liabilities" means the amount (if any) by which the excesses
of the accumulated benefit obligations as determined under Financial
Accounting Standard Board Statement 87 exceeds the fair value of all such
Plan assets allocable to such benefits, as reported each year in the
Company's Annual Report to Stockholders.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Voting Stock" means Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect
the corporate directors (or Persons performing similar functions).
"Wholly-Owned Subsidiary" means any Subsidiary of which all of the
outstanding voting securities or ownership interests having ordinary voting
power are owned or controlled, directly or indirectly, by the Company or
one or more
Page 12
<PAGE>
Wholly-Owned Subsidiaries, or by the Company and one or more Wholly-Owned
Subsidiaries, or any similar business organization which is so owned or
controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. Syndicated Advances.
2.1.1. Commitments to Make Syndicated Loans. From and including the
Effective Date and prior to the Termination Date, each Bank severally
agrees, on the terms and conditions set forth in this Agreement, to make
Syndicated Loans to the Company from time to time in amounts not to exceed
in the aggregate at any one time outstanding the amount of its Commitment,
provided that in no event may the Outstandings at any one time exceed the
Aggregate Commitment as in effect at such time. Subject to the terms of
this Agreement, the Company may borrow, repay and reborrow at any time
prior to the Termination Date.
2.1.2. Ratable Loans. Each Syndicated Advance hereunder shall consist
of Syndicated Loans made from the several Banks ratably in proportion to
the ratios that their respective Commitments bear to the Aggregate
Commitment.
2.1.3. Syndicated Advance Rate Options. The Syndicated Advances may be
Floating Rate Advances or Eurodollar Rate Advances, or a combination
thereof, selected by the Company in accordance with Sections 2.1.4 and
2.1.5.
2.1.4. Method of Selecting Rate Options and Interest Periods for
Syndicated Advances. The Company shall select the Rate Options and Interest
Periods applicable to each Syndicated Advance from time to time. The
Company shall give the Administrative Agent irrevocable notice (a
"Syndicated Borrowing Notice") not later than 10:00 a.m. Chicago time on
the Borrowing Date of each Floating Rate Advance and at least three
Business Days before the Borrowing Date for each Eurodollar Rate Advance,
specifying:
(a) the Borrowing Date, which shall be a Business Day, of such
Syndicated Advance,
Page 13
<PAGE>
(b) the aggregate amount of such Syndicated Advance, which shall be
less than or equal to the Aggregate Available Commitment,
(c) the Rate Option selected for such Syndicated Advance, and
(d) in the case of each Fixed Rate Advance, the Interest Period
applicable thereto.
2.1.5. Conversion and Continuation of Outstanding Syndicated Advances.
Floating Rate Advances shall continue as Floating Rate Advances unless and
until such Floating Rate Advances are converted into Fixed Rate Advances.
Each Fixed Rate Advance of any Type that is a Syndicated Advance shall
continue as a Fixed Rate Advance of such Type until the end of the then
applicable Interest Period therefor, at which time such Fixed Rate Advance
shall be automatically converted into a Floating Rate Advance unless the
Company shall have given the Administrative Agent a Conversion/Continuation
Notice requesting that, at the end of such Interest Period, such Fixed Rate
Advance either continue as a Fixed Rate Advance of such Type for the same
or another Interest Period or be converted into an Advance of another Type.
Subject to the terms of Section 2.3.2, the Company may elect from time to
time to convert all or any part of a Syndicated Advance of any Type into
any other Type or Types of Syndicated Advances; provided that (i) any
conversion of any Fixed Rate Advance that is a Syndicated Advance shall be
made on, and only on, the last day of the Interest Period applicable
thereto, and (ii) no Advance may be continued as or converted into a Fixed
Rate Advance at such times as a Default or Unmatured Default has occurred
and is continuing. The Company shall give the Administrative Agent
irrevocable notice (a "Conversion/Continuation Notice") of each conversion
of an Advance or continuation of a Fixed Rate Advance not later than 10:00
a.m. Chicago time on the date of the requested conversion into a Floating
Rate Advance and at least three Business Days, in the case of a conversion
into or continuation of a Eurodollar Advance, prior to the date of the
requested conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation;
(ii) the aggregate amount and Type of the Advance which is to be
converted or continued; and
(iii)the amount and Type(s) of Advance(s) into which such Advance is
to be converted or continued and, in the case of a conversion
into or continuation of a Fixed Rate Advance, the duration of the
Interest Period applicable thereto.
Page 14
<PAGE>
2.2. Competitive Bid Advances.
2.2.1. Bid Option. In addition to Syndicated Advances pursuant to
Section 2.1, but subject to the terms and conditions of this Agreement, the
Company may, as set forth in this Section 2.2, request the Banks to make
offers to make Bid Loans to the Company. The Banks may, but shall have no
obligation to, make such offers and the Company may, but shall have no
obligation to, accept any such offers in the manner set forth in this
Section 2.2.
2.2.2. Bid Quote Request. When the Company wishes to request offers to
make Bid Loans under this Section 2.2, it shall transmit to the
Administrative Agent by telecopy or telefacsimile a Bid Quote Request so as
to be received (x) in the case of a Eurodollar Auction, no later than noon
Chicago time at least four Business Days prior to the Borrowing Date
proposed therein or (y) in the case of an Absolute Rate Auction, no later
than noon Chicago time at least one Business Day prior to the Borrowing
Date proposed therein (or, in either case upon reasonable prior notice to
the Banks, such other time and date as the Company and the Administrative
Agent may agree); provided, however, that from time to time as the Company
and the Administrative Agent may agree, but not more than twice during any
one month, the Company may transmit a Bid Quote Request in the case of an
Absolute Rate Auction so as to be received on or before 10:00 a.m. Chicago
time on the Borrowing Date proposed therein (a "Special Absolute Rate
Auction"). A Bid Quote Request shall specify:
(a) the proposed Borrowing Date, which shall be a Business Day, for
the proposed Bid Advance,
(b) the aggregate amount of such Bid Advance, which shall be less than
or equal to the Aggregate Available Commitment,
(c) whether the Bid Quotes requested are to set forth a Bid Margin or
a Bid Absolute Rate, and
(d) the Interest Period applicable thereto.
The Company may request offers to make Bid Loans for more than one, but not
more than three, Interest Periods in a single Bid Quote Request. No Bid
Quote Request shall be given within five Business Days (or such other
number of days as the Company and the Administrative Agent may agree) of
any other Bid Quote Request.
2.2.3. Invitation for Bid Quotes. Promptly upon receipt of a Bid Quote
Request, the Administrative Agent shall send to the Banks by telecopy or
Page 15
<PAGE>
telefacsimile an Invitation for Bid Quotes substantially in the form of
Exhibit "D" hereto, which shall constitute an invitation by the Company to
each Bank to submit Bid Quotes offering to make the Bid Loans to which such
Bid Quote Request relates in accordance with this Section 2.2.
2.2.4. Submission and Contents of Bid Quotes.
(a) Each Bank may submit a Bid Quote containing an offer or
offers to make Bid Loans in response to any Invitation for Bid Quotes.
Each Bid Quote must comply with the requirements of this Section 2.2.4
and must be submitted to the Administrative Agent by telecopy or
telefacsimile at its offices specified in or pursuant to Article XII
as follows:
(i) in the case of a Eurodollar Auction, no later than 9:30 a.m.
Chicago time at least three Business Days prior to the
proposed Borrowing Date;
(ii) in the case of an Absolute Rate Auction, no later than 9:30
a.m. Chicago time on the proposed Borrowing Date;
(iii)in the case of a Special Absolute Rate Auction, no later
than 11:30 a.m. Chicago time on the proposed Borrowing Date;
and
(iv) in any case upon reasonable prior notice to the Banks, such
other time and date as the Company and the Administrative
Agent may agree;
provided that Bid Quotes submitted by First Chicago may be submitted,
and may only be submitted, if the Administrative Agent or First
Chicago notifies the Company of the terms of the offer or offers
contained therein as follows:
(i) in the case of a Eurodollar Auction, no later than 9:15 a.m.
Chicago time at least three Business Days prior to the
proposed Borrowing Date;
(ii) in the case of an Absolute Rate Auction, no later than 9:15
a.m. Chicago time on the proposed Borrowing Date; and
(iii)in the case of a Special Absolute Rate Auction, no later
than 11:15 a.m. Chicago time on the proposed Borrowing Date.
Page 16
<PAGE>
Subject to Article IV, any Bid Quote so made shall be irrevocable except
with the written consent of the Administrative Agent given on the
instructions of the Company.
(b) Each Bid Quote shall be in substantially the form of Exhibit
"E" hereto and shall in any case specify:
(i) the proposed Borrowing Date, which shall be the same as that
set forth in the applicable Invitation for Bid Quotes,
(ii) the principal amount of the Bid Loan for which each such
offer is being made (including, in the quoting Bank's
discretion, the minimum amount, if any, of the Bid Loan
offered by such Bank which may be accepted by the Company)
which principal amount (1) may be greater than, less than or
equal to the Commitment of the quoting Bank, (2) must be
$5,000,000 or an integral multiple of $1,000,000 in excess
thereof and (3) may not exceed the principal amount of Bid
Loans for which offers were requested,
(iii)in the case of a Eurodollar Auction, the Bid Margin offered
for each such Bid Loan,
(iv) in the case of an Absolute Rate Auction, the Bid Absolute
Rate offered for each such Bid Loan, and
(v) the identity of the quoting Bank.
(c) Any Bid Quote shall be disregarded that:
(i) is not substantially in the form of Exhibit "E" hereto or
does not specify all of the information required by Section
2.2.4(b);
(ii) contains qualifying, conditional or similar language, other
than any such language contained in Exhibit "E";
(iii)proposes terms other than or in addition to those set forth
in the applicable Invitation for Bid Quotes; or
(iv) arrives after the time set forth in Section 2.2.4(a).
Page 17
<PAGE>
2.2.5. Notice to Company. The Administrative Agent shall promptly
notify the Company of the terms (i) of any Bid Quote submitted by a Bank
that is in accordance with Section 2.2.4, (ii) of any Bid Quote described
in Section 2.2.4(c) or that otherwise fails to comply with the requirements
of this Agreement, and (iii) of any Bid Quote that amends, modifies or is
otherwise inconsistent with a previous Bid Quote submitted by such Bank
with respect to the same Bid Quote Request. Any such subsequent Bid Quote
shall be disregarded by the Administrative Agent unless such subsequent Bid
Quote is submitted solely to correct a manifest error in such former Bid
Quote. The Administrative Agent's notice to the Company shall specify the
aggregate principal amount of Bid Loans for which offers have been received
for each Interest Period specified in the related Bid Quote Request and the
respective principal amounts and Bid Margins or Bid Absolute Rates, as the
case may be, so offered.
2.2.6. Acceptance and Notice by Company. The Company shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to Section 2.2.5 as follows:
(i) in the case of a Eurodollar Auction, no later than 11:00
a.m. Chicago time at least three Business Days prior to the
proposed Borrowing Date;
(ii) in the case of an Absolute Rate Auction, no later than 11:00
a.m. Chicago time on the proposed Borrowing Date;
(iii)in the case of a Special Absolute Rate Auction, no later
than noon Chicago time on the proposed Borrowing Date; and
(iv) in any case upon reasonable prior notice to the Banks, such
other time and date as the Company and the Administrative
Agent may agree.
Promptly upon such notification, the Administrative Agent shall notify the
Banks of the Company's acceptance or non-acceptance of such offers. In the
case of acceptance, such notice (a "Bid Borrowing Notice") shall specify
the aggregate principal amount of offers for each Interest Period that are
accepted. The Company may accept any Bid Quote in whole or in part;
provided that:
(a) the aggregate principal amount of each Bid Advance may not
exceed the applicable amount set forth in the related Bid
Quote Request,
Page 18
<PAGE>
(b) acceptance of offers may only be made on the basis of
ascending Bid Margins or Bid Absolute Rates, as the case may
be,
(c) no Bid Quote may be accepted which would result in Bid
Advances being outstanding for more than ten different
Interest Periods at any one time, and
(d) the Company may not accept any offer that is described in
Section 2.2.4(c) or that otherwise fails to comply with the
requirements of this Agreement.
2.2.7. Allocation by Administrative Agent. If offers are made by two
or more Banks with the same Bid Margins or Bid Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect
of which offers are accepted for the related Interest Period, the principal
amount of Bid Loans in respect of which such offers are accepted shall be
allocated by the Administrative Agent among such Banks as nearly as
possible (in such multiples, not greater than $100,000, as the
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amount of such offers. Determinations by the Administrative Agent
of the amounts of Bid Loans shall be conclusive in the absence of manifest
error.
2.2.8. Payment on Last Day of Interest Period. Each Bid Loan shall be
paid in full by the Company on the last day of the Interest Period
applicable thereto.
2.3. General Facility Terms.
2.3.1. Method of Borrowing. Not later than 1:00 p.m. Chicago time on
each Borrowing Date, each Bank shall make available its Loan or Loans in
funds immediately available in Chicago, to the Administrative Agent at its
address specified pursuant to Article XII. The Administrative Agent will
make the funds so received from the Banks available to the Company at the
Administrative Agent's aforesaid address. Notwithstanding the foregoing
provisions of this Section 2.3.1 but subject to Section 2.1.5, to the
extent that a Loan made by a Bank matures on the Borrowing Date of a
requested Loan, such Bank shall first apply the proceeds of the Loan it is
then making to the repayment of the maturing Loan.
2.3.2. Minimum Amount of Each Advance. Each Advance shall be in the
minimum amount of $5,000,000 (and in integral multiples of $1,000,000 if in
excess thereof), provided, however, that any Floating Rate Advance may be
in the aggregate amount of the Aggregate Available Commitment.
Page 19
<PAGE>
2.3.3. Termination; Required Payments. The Commitments to lend
hereunder shall expire on the Termination Date. Any outstanding Advances
and all other unpaid Obligations shall be paid in full by the Company on
the Termination Date or, at the election of the Required Banks in
accordance with Section 8.1, upon the occurrence of a Prepayment Event.
2.3.4. Optional Principal Payments. The Company may from time to time
pay all outstanding Floating Rate Advances, or, in a minimum aggregate
amount of $5,000,000, or any integral multiple of $1,000,000 in excess
thereof, any portion of the outstanding Floating Rate Advances upon one
Business Day's prior notice to the Administrative Agent without penalty or
premium. A Fixed Rate Advance may be paid prior to the last day of the
applicable Interest Period upon three Business Days' prior notice to the
Administrative Agent; provided, however, that the Company shall indemnify
each Bank for any loss or cost incurred by it resulting therefrom in
accordance with Section 3.4.
2.3.5. Facility Fees and Voluntary Reduction of Commitments.
(a) The Company agrees to pay to the Administrative Agent for the
account of each Bank a facility fee on the daily amount of such Bank's
Commitment from the Effective Date to but not including the
Termination Date, equal to the Applicable Facility Fee as in effect
from time to time, such fee payable in arrears on each Payment Date
hereafter and on the Termination Date.
(b) The Company may permanently reduce the Aggregate Commitment
in whole, or in part ratably among the Banks in integral multiples of
$5,000,000, upon at least three Business Days' written notice to the
Administrative Agent, which shall be irrevocable and shall specify the
amount of any such reduction, provided, however, that the amount of
the Aggregate Commitment may not be reduced below the Outstandings at
the time such reduction is to take effect. All accrued facility fees
shall be payable on the effective date of any termination of the
obligations of the Banks to make Loans hereunder.
2.3.6. Agency Fee and Auction Fee.
(a) The Company shall pay to the Administrative Agent as
compensation for its services hereunder an agency fee as provided for
in a letter agreement dated March 21, 1996 between the Company and the
Administrative Agent and the Arranger.
Page 20
<PAGE>
(b) The Company shall pay an auction fee to the Administrative
Agent each time Bid Quotes are requested in the amount of $200 per
Bank per each Bid Quote Request transmitted by the Company to the
Administrative Agent pursuant to Section 2.2.2, such auction fee to be
payable in arrears on each Payment Date.
2.3.7. Changes in Interest Rate, etc. Each Floating Rate Advance shall
bear interest on the outstanding principal amount thereof, for each day
from and including the date such Advance is made or is converted from a
Fixed Rate Advance into a Floating Rate Advance pursuant to Section 2.1.5
to but excluding the date it becomes due or is converted into a Fixed Rate
Advance pursuant to Section 2.1.5 hereof, at a rate per annum equal to the
Floating Rate for such day. Changes in the rate of interest on that portion
of any Advance maintained as a Floating Rate Advance will take effect
simultaneously with each change in the Floating Rate. Each Fixed Rate
Advance shall bear interest from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of
such Interest Period at the interest rate determined as applicable to such
Fixed Rate Advance. No Interest Period may end after the Termination Date.
2.3.8. Rate after Maturity. Except as provided in the next sentence,
any Advance not paid at maturity, whether by acceleration or otherwise,
shall bear interest until paid in full at a rate per annum equal to the
Floating Rate plus 2% per annum. In the case of a Fixed Rate Advance the
maturity of which is accelerated pursuant to Section 8.1, such Fixed Rate
Advance shall bear interest until paid in full for the remainder of the
applicable Interest Period at the rate otherwise applicable to such
Interest Period plus 2% per annum and thereafter at the Floating Rate plus
2% per annum.
2.3.9. Interest Payment Dates; Interest and Fee Basis. Interest
accrued on each Floating Rate Advance shall be payable on each Payment
Date, on any date on which the Floating Rate Advance is prepaid, whether
due to acceleration or otherwise, and at maturity. Interest accrued on each
Fixed Rate Advance shall be payable on the last day of its applicable
Interest Period and on any date on which such Advance is prepaid, whether
due to acceleration or otherwise. Interest accrued on each Fixed Rate
Advance having an Interest Period longer than three months shall also be
payable on the last day of each three-month interval during such Interest
Period. Interest on Fixed Rate Advances and facility fees shall be
calculated for the actual number of days elapsed on the basis of a year
consisting of 360 days. Interest on Floating Rate Advances shall be
calculated for the actual number of days elapsed on the basis of a year
consisting of 365, or when appropriate 366, days. Interest shall be payable
for the day an Advance is made but not for the day of any payment on the
amount paid if payment is received prior to 1:00 p.m. (Chicago time) at the
place of payment. In the event any such
Page 21
<PAGE>
payment is made with the proceeds of an Advance, such payment shall be
deemed to have been made prior to 1:00 p.m. (Chicago time) on the day such
Advance is made. If any payment of principal of or interest on an Advance
or any payment of fees shall become due on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day and, in
the case of a principal payment or a payment of fees, such extension of
time shall be included in computing interest in connection with such
principal payment or in computing the amount of such payment of fees, as
the case may be.
2.3.10. Method of Payment. All payments of principal, interest, and
fees hereunder shall be made in immediately available funds to the
Administrative Agent at the Administrative Agent's address specified
pursuant to Article XIII or at any other Lending Installation of the
Administrative Agent specified in writing by the Administrative Agent to
the Company by noon (local time) on the date when due. Subject to Section
8.1(b), each such payment shall be applied to any Advances and other
amounts then due in accordance with the written instructions from the
Company to the Administrative Agent before or accompanying such payment and
shall be applied ratably among those Banks for whom any payment is then due
in proportion to the type of Advance or other payment then due. Each
payment delivered to the Administrative Agent for the account of any Bank
shall be delivered promptly by the Administrative Agent to such Bank in the
same type of funds which the Administrative Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified
in a notice received by the Administrative Agent from such Bank. The
Administrative Agent is hereby authorized to charge the account of the
Company at the office of the Administrative Agent for each payment of
principal, interest and fees as it becomes due hereunder.
2.3.11. Notes; Telephonic Notices. The Syndicated Loans shall be
evidenced by the Syndicated Notes. The Bid Loans shall be evidenced by the
Bid Notes. Each Bank is hereby authorized to record on the schedule
attached to each of its Notes, or otherwise record in accordance with its
usual practice, the date and amount of each of its Loans of the type
evidenced by such Note; provided, however, that any failure to so record
shall not affect the Company's obligations under any Note. The Company
hereby authorizes the Banks and the Administrative Agent to extend
Advances, effect Rate Option selections and submit Bid Quotes based on
telephonic notices made by any person or persons the Administrative Agent
or any Bank in good faith believes to be an Authorized Representative
acting on behalf of the Company. The Company agrees to deliver promptly to
the Administrative Agent a written confirmation of each telephonic notice
signed by an Authorized Representative. If the written confirmation differs
in any material respect from the action taken by the Administrative Agent
and the Banks, the records of the Administrative Agent and the Banks shall
govern absent demonstrable error.
Page 22
<PAGE>
2.3.12. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Administrative
Agent will notify each Bank of the contents of each commitment reduction
notice, Borrowing Notice, Conversion/Continuation Notice, and repayment
notice received by it hereunder. The Administrative Agent will notify each
Bank of the interest rate applicable to each Fixed Rate Advance promptly
upon determination of such interest rate and will give each Bank prompt
notice of each change in the Corporate Base Rate.
2.3.13. Lending Installations. Each Bank may book the Loans at any
Lending Installation selected by the Bank and may change the Lending
Installation from time to time. All terms of this Agreement shall apply to
any such Lending Installation and the Notes shall be deemed held by each
Bank for the benefit of such Lending Installation. Each Bank may, by
written notice to the Administrative Agent and the Company, designate a
Lending Installation through which Loans are made by it and for whose
account Loan payments are to be made. Each Bank shall use its best efforts
to minimize any additional cost (if any) to the Company, under Section 3.3
or otherwise, as a result of a change of Lending Installation (including,
if appropriate, a return to a prior Lending Installation at such time as
the circumstances giving rise to a change of Lending Installation are no
longer in effect), but no Bank shall be required to take or omit to take
any action which action or omission would be economically or legally
disadvantageous to such Bank. In the event that any Bank has booked its
outstanding Eurodollar Rate Loans or Bid Eurodollar Loans at such a
designated Lending Installation, the Company hereby agrees, upon the
written request of such Bank and receipt of such Bank's applicable Note, to
execute and deliver to such Bank for the account of such Bank's existing
Lending Installation and the account of such designated Lending
Installation, respectively, both: (i) as the case may be, a new Syndicated
Note which shall exclusively evidence all of such Bank's Floating Rate
Loans then and thereafter outstanding or a new Bid Note which shall
exclusively evidence all of such Bank's Bid Absolute Rate Loans then and
thereafter outstanding and (ii) as the case may be, a new Syndicated Note
which shall exclusively evidence all of such Bank's Eurodollar Rate Loans
then and thereafter outstanding or a new Bid Note which shall exclusively
evidence all of such Bank's Bid Eurodollar Loans then and thereafter
outstanding, each of said new Notes to be in substantially the form of
Exhibit "A" hereto in the case of Syndicated Notes or the form of Exhibit
"B" hereto in the case of Bid Notes with such appropriate changes in either
case as may be agreed to by such Bank, the Company and the Administrative
Agent and each of their respective legal counsel. Upon such Bank's receipt
of its new Notes, it is hereby authorized and instructed by the Company to
record on the respective schedules attached thereto all of such Bank's
Loans then outstanding of the type evidenced by each such Note.
Page 23
<PAGE>
2.3.14. Non-Receipt of Funds by the Administrative Agent. Unless the
Company or a Bank, as the case may be, notifies the Administrative Agent
prior to the date on which it is scheduled to make payment to the
Administrative Agent of (a) in the case of a Bank, the proceeds of a Loan
or (b) in the case of the Company, a payment of principal, interest or fees
to the Administrative Agent for the account of the Banks, that it does not
intend to make such payment, the Administrative Agent may assume that such
payment has been made. The Administrative Agent may, but shall not be
obligated to, make the amount of such payment available to the intended
recipient in reliance upon such assumption. If such Bank or the Company, as
the case may be, has not in fact made such payment to the Administrative
Agent, the recipient of such payment shall, on demand by the Administrative
Agent, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (a) in the case of payment by a Bank,
the Federal Funds Rate for such day or (b) in the case of payment by the
Company, the interest rate applicable to the relevant Loan.
2.3.15. Withholding Tax Exemption. At least five Business Days prior
to the first date on which interest or fees are payable hereunder for the
account of any Bank, each Bank that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will
deliver to each of the Company and the Administrative Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, certifying in either case that such Bank is entitled to receive
payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes. Each Bank which so
delivers a Form 1001 or 4224 further undertakes to deliver to each of the
Company and the Administrative Agent two additional copies of such form (or
a successor form) on or before the date that such form expires (currently,
three successive calendar years for Form 1001 and one calendar year for
Form 4224) or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Company or the Administrative Agent, in each case
certifying that such Bank is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United
States federal income taxes, unless an event (including without limitation
any change in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Bank from duly completing
and delivering any such form with respect to it and such Bank advises the
Company and the Administrative Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal
income tax.
Page 24
<PAGE>
ARTICLE III
CHANGE IN CIRCUMSTANCES; INDEMNIFICATION
3.1. Yield Protection. If any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law) which becomes effective after the date hereof,
or any interpretation thereof, or compliance of any Bank with such,
(i) subjects any Bank or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due from the
Company (excluding taxation of the overall net income of any Bank
or applicable Lending Installation), or changes the basis of
taxation of payments to any Bank in respect of its Loans or other
amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit
extended by, any Bank or any applicable Lending Installation
(other than reserves and assessments taken into account in
determining the interest rate applicable to Fixed Rate Advances),
or
(iii)imposes any other condition the result of which is to increase
the cost to any Bank or any applicable Lending Installation of making,
funding or maintaining loans or reduces any amount receivable by any Bank
or any applicable Lending Installation in connection with loans, or
requires any Bank or any applicable Lending Installation to make any
payment calculated by reference to the amount of loans held or interest
received by it, by an amount deemed material by such Bank, then, within 15
days of demand by such Bank, the Company shall pay such Bank that portion
of such increased expense incurred or reduction in an amount received which
such Bank determines is attributable to making, funding and maintaining its
Loans and its Commitment.
3.2. Changes in Capital Adequacy Regulations. If a Bank determines the
amount of capital required or expected to be maintained by such Bank, any
Lending Installation of such Bank or any corporation controlling such Bank
is increased as a result of a Change, then, within 15 days of demand by
such Bank, the Company
Page 25
<PAGE>
shall pay such Bank the amount necessary to compensate for any shortfall in
the rate of return on the portion of such increased capital which such Bank
determines is attributable to this Agreement, its Loans or its obligation
to make Loans hereunder (after taking into account such Bank's policies as
to capital adequacy). No Bank shall be entitled to demand payment under
this Section 3.2 to the extent that such payment relates to a period of
time more than 90 days prior to the date upon which such Bank first
notified the Company of the occurrence of the event entitling such Bank to
such payment. "Change" means (i) any change after the date of this
Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or
change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by any Bank or any
Lending Installation or any corporation controlling any Bank. "Risk-Based
Capital Guidelines" means (i) the risk-based capital guidelines in effect
in the United States on the date of this Agreement, including transition
rules, and (ii) the corresponding capital regulations promulgated by
regulatory authorities outside the United States implementing the July 1988
report of the Basle Committee on Banking Regulation and Supervisory
Practices Entitled "International Convergence of Capital Measurements and
Capital Standards," including transition rules, and any amendments to such
regulations adopted prior to the date of this Agreement.
3.3. Availability of Interest Rate. If any Bank determines that
maintenance of its Eurodollar Rate Loans or Bid Eurodollar Loans at a
suitable Lending Installation would violate any applicable law, rule,
regulation, or directive, whether or not having the force of law, or if the
Required Banks determine that (i) deposits of a type and maturity
appropriate to match fund Fixed Rate Advances are not available or (ii) a
Fixed Rate does not accurately reflect the cost of making or maintaining a
Fixed Rate Advance, then the Administrative Agent shall (x) suspend the
availability of the affected Rate Option and (subject to the next sentence)
require any Fixed Rate Advances outstanding under an affected Rate Option
to be converted to an unaffected Rate Option and (y) suspend the ability of
the Company to request bids for Bid Eurodollar Loans and (subject to the
next sentence) require that any outstanding Bid Eurodollar Advances bear
interest for the Interest Period applicable thereto at the Floating Rate.
Notwithstanding anything in the preceding sentence to the contrary, the
Company shall not be required to pay or convert any outstanding Fixed Rate
Loan or Fixed Rate Advance unless such payment or conversion is legally
required in accordance with the circumstances causing such unavailability.
Subject to the provisions of Article II hereof, the Company may select any
unaffected Rate Option to apply to such affected Advances other than Bid
Eurodollar Advances. If the Company fails to select a new Rate Option, the
affected Advances shall be Floating Rate Advances.
Page 26
<PAGE>
3.4. Failure to Pay or Borrow on Certain Dates. If any payment of a
Fixed Rate Advance occurs on a date which is not the last day of the
applicable Interest Period, whether because of acceleration, prepayment or
otherwise, or a Fixed Rate Advance is not made on the date specified by the
Company for any reason other than default by the Banks, the Company will
indemnify each Bank for any loss or cost incurred by it resulting
therefrom, including, without limitation, any loss or cost in liquidating
or employing deposits acquired to fund or maintain the Fixed Rate Advance.
3.5. Bank Certificates; Survival of Indemnity. To the extent
reasonably possible, each Bank shall designate an alternate Lending
Installation with respect to its Fixed Rate Loans to reduce any liability
of the Company to such Bank under Sections 3.1 and 3.2 or to avoid the
unavailability of a Rate Option or Bid Eurodollar Loans under Section 3.3,
so long as such designation is not disadvantageous to such Bank as
determined by such Bank in its sole discretion. A certificate of a Bank as
to the amount due, if any, under Sections 3.1, 3.2, or 3.4 shall be final,
conclusive and binding on the Company in the absence of manifest error.
Such certificate shall set forth in reasonable detail the basis of the
determination of amounts due under such Sections. Determination of amounts
payable under such Sections in connection with a Fixed Rate Loan shall be
calculated as though each Bank funded its Fixed Rate Loan through the
purchase of a deposit of the type and maturity corresponding to the deposit
used as a reference in determining the Fixed Rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein,
the amount specified in the certificate shall be payable on demand after
receipt by the Company of the certificate. The obligations of the Company
under Sections 3.1, 3.2, and 3.4 shall survive payment of the Obligations
and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance. No Bank shall be required to make its initial
Loan hereunder unless the Company has furnished to the Administrative Agent
with sufficient copies for the Banks:
(a) Copies of the Articles of Incorporation of the Company, together
with all amendments, and a certificate of good standing, both
certified on or within 15 days prior to the Effective Date by the
Secretary of State of Delaware.
Page 27
<PAGE>
(b) Copies, certified on the Effective Date by the Secretary or
Assistant Secretary of the Company, of its By-Laws and of its
Board of Directors' resolutions (and resolutions of other bodies,
if any are deemed necessary by counsel for any Bank) authorizing
the execution of the Loan Documents.
(c) An incumbency certificate, certified on the Effective Date by the
Secretary or Assistant Secretary of the Company, which shall
identify by name and title and bear the signature of the officers
of the Company authorized to sign the Loan Documents and to make
borrowings hereunder, upon which certificates the Banks shall be
entitled to rely until informed of any change in writing by the
Company.
(d) A written opinion of the counsel to the Company, addressed to the
Banks, in substantially the form of Exhibit "F" hereto.
(e) A certificate, dated the Effective Date, signed by the Chief
Financial Officer of the Company, stating that on the Effective
Date (i) no Default or Unmatured Default has occurred and is
continuing and (ii) no Prepayment Event has occurred and setting
forth the determination of the Company's Funded Debt/EBITDA Ratio
for the last day of the most recently ended fiscal quarter.
(f) A Syndicated Note and a Bid Note payable to the order of each of
the Banks.
(g) Evidence satisfactory to the Administrative Agent of the
termination of the Prior Agreement and payment of all obligations
outstanding thereunder.
(h) Payment of all fees due and owing to the Administrative Agent and
the Banks as at the Effective Date.
(i) Written money transfer instructions, in substantially the form of
Exhibit "G" hereto, addressed to the Administrative Agent and
signed by an Authorized Officer, together with such other related
money transfer authorizations as the Administrative Agent may
have reasonably requested.
(j) Such other documents as any Bank or its counsel may have
reasonably requested.
Page 28
<PAGE>
4.2. Each Advance. No Bank shall be required to make any Advance
unless on the applicable Borrowing Date:
(a) There exists no Default or Unmatured Default or Prepayment
Event.
(b) The representations and warranties contained in Article V,
except the representation and warranty contained in Section
5.5, are true and correct in all material respects as of
such Borrowing Date as if made on such Borrowing Date except
for changes in the Schedules hereto reflecting transactions
permitted by this Agreement.
(c) All legal matters incident to the making of such Advance
shall be satisfactory to the Banks and their counsel.
Each Borrowing Notice with respect to each such Advance shall constitute a
representation and warranty by the Company that the conditions contained in
Sections 4.2(a) and (b) have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Banks that:
5.1. Corporate Existence and Standing. Each of the Company and the
Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and each
is duly qualified and in good standing in each jurisdiction where, because
of the nature of its activities or properties, such qualification is
required and the failure so to qualify would materially and adversely
affect its business, assets, financial condition, operations or prospects
of the Company and its Subsidiaries taken as a whole.
5.2. Authorization and Validity. The Company has the corporate power
and authority and legal right to execute and deliver the Loan Documents and
perform its obligations thereunder. The execution and delivery by the
Company of the Loan Documents and the performance of its obligations
thereunder have been duly authorized by proper corporate proceedings and
the Loan Documents constitute legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms,
except as enforceability may be limited by
Page 29
<PAGE>
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
5.3. Compliance with Laws and Contracts. Neither the execution and
delivery by the Company of the Loan Documents, the consummation of the
transactions therein contemplated, nor compliance with the provisions
thereof will violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Company or any Subsidiary or the
Company's or any Subsidiary's charter, articles or certificate of
incorporation or by-laws or the provisions of any material indenture,
instrument or agreement to which the Company or any Subsidiary is a party
or is subject, or by which it, or its property, is bound, or conflict with
or constitute a default thereunder, or result in the creation or imposition
of any Lien pursuant to the terms of any such indenture, instrument or
agreement. No order, consent, approval, license, authorization, or
validation of, or filing, recording or registration with, or exemption by,
any governmental or public body or authority, or any subdivision thereof,
is required to authorize, or is required as of the date hereof in
connection with the execution, delivery and performance of, or the
legality, validity, binding effect or enforceability of, any of the Loan
Documents.
5.4. Financial Statements. The June 30, 1995 audited consolidated
financial statements of the Company and its Subsidiaries and the December
31, 1995 unaudited consolidated financial statements of the Company and its
Subsidiaries (subject to year-end adjustments) heretofore delivered to the
Banks were prepared in accordance with GAAP in effect on the dates such
statements were prepared and fairly present the consolidated financial
condition and operations of the Company and its Subsidiaries at such date
and the consolidated results of their operations for the periods then
ended.
5.5. Material Adverse Change. No material adverse change in the
business, condition (financial or otherwise), operations, performance, or
properties of the Company and the Consolidated Subsidiaries taken as a
whole has occurred since the date of the audited financial statements
referred to in Section 5.4.
5.6. Taxes. The Company and the Subsidiaries have filed all United
States federal tax returns and all other tax returns which are required to
be filed and have paid all taxes due pursuant to said returns or pursuant
to any assessment received by the Company or any Subsidiary, except such
taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. Except as provided in Section
6.2.6(a), no material tax liens have been filed and no claims are being
asserted with respect to any such taxes. The charges, accruals and reserves
on the books of the Company and the Subsidiaries in respect of any taxes or
other governmental charges are adequate.
Page 30
<PAGE>
5.7. Litigation. Except as disclosed in the Company's Form 10-K for
the year ended June 30, 1995, there is no litigation or proceeding pending
or, to the knowledge of any of their officers, threatened against the
Company or any Subsidiary which would reasonably be expected to have a
material adverse affect on the condition of the Company or the ability of
the Company to perform its obligations under the Loan Documents.
5.8. ERISA. The Unfunded Liabilities of all Plans do not in the
aggregate exceed an amount equal to 5 percent of the value (as of any date
of determination) of all Plan assets allocable to Plan benefits guaranteed
under ERISA. Each Plan complies in all material respects with all
applicable requirements of law and regulations, neither the Company nor any
of its Subsidiaries has withdrawn from any Plan or initiated steps to do
so, no steps have been taken to terminate any Plan, and no Reportable Event
has occurred with respect to any Plan, the cumulative effect of which could
have a material adverse effect on the business, operations, properties,
assets or conditions (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole.
5.9. Defaults and Prepayment Event. No Default or Unmatured Default
has occurred and is continuing. No Prepayment Event has occurred.
5.10. Accuracy of Information. No information, exhibit or report
furnished by the Company or any Subsidiary in writing to the Administrative
Agent or to any Bank in connection with the negotiation of the Loan
Documents contained any material misstatement of fact or omitted to state
any fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
5.11. Regulation U. Neither the Company nor any Subsidiary is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying "margin stock"
(as defined in Regulation U). No part of the proceeds of any Loan will be
used in a manner which would violate, or result in a violation of,
Regulation U. No part of the proceeds of any Loan will be used for
"purchasing" or "carrying" "margin stock" (each as defined in Regulation
U).
5.12. Pari Passu. All the payment obligations of the Company arising
under or pursuant to the Loan Documents will at all times rank pari passu
with all other unsecured and unsubordinated payment obligations and
liabilities (including contingent obligations and liabilities) of the
Company (other than those which are mandatorily preferred by laws or
regulations of general application).
Page 31
<PAGE>
5.13. Investment Company. The Company is not, and after giving effect
to any Advance will not be, an "investment company" within the meaning of
the United States Investment Company Act of 1940, as amended.
5.14. Material Laws. Neither the Company nor any Subsidiary has
received any notice to the effect that its operations are not in material
compliance with any of the requirements of applicable federal, state and
local environmental, health and safety statutes and regulations with
respect to, or the subject of any federal or state investigation evaluating
whether any remedial action is needed to respond to a release into the
environment of, any toxic or hazardous waste or physical substance, which
non-compliance or remedial action could have a material adverse effect on
the business, operations, properties, assets or conditions (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole.
5.15. Material Agreements. Neither the Company nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction materially and adversely affecting its business,
properties or assets, operations or condition (financial or otherwise).
Neither the Company nor any Subsidiary is in default in the performance,
observance of fulfillment or any of the obligations, covenants or
conditions contained in any agreement to which it is a party or any
agreement or instrument evidencing or governing Indebtedness, which default
might have a material adverse effect on the business, properties, financial
condition, or results of operations, of the Company and its Subsidiaries,
taken as a whole.
5.16. Subsidiaries. Schedule "1" hereto contains an accurate list of
all of the presently existing Subsidiaries of the Company, setting forth
their respective jurisdictions of incorporation and the percentage of their
respective capital stock owned by the Company or other Subsidiaries. All of
the issued and outstanding shares of capital stock of such Subsidiaries
have been duly authorized and issued and are fully paid and non-assessable.
Schedule "2" hereto accurately describes all Indebtedness of the
Subsidiaries existing on the date of this Agreement.
5.17. Ownership of Properties. Except as permitted by Section 6.2.6.,
on the date of this Agreement, the Company and its Subsidiaries will have
good title, free of all Liens, to all of the properties and assets
reflected in the financial statements referred to in Section 5.4 as owned
by the Company and its Subsidiaries.
ARTICLE VI
Page 32
<PAGE>
COVENANTS
During the term of this Agreement, unless the Required Banks shall
otherwise consent in writing:
6.1. Affirmative Covenants.
6.1.1. Financial Reporting. The Company will maintain, for itself and
the Consolidated Subsidiaries, a system of accounting established and
administered in accordance with GAAP, and furnish to the Banks:
(a) Within 90 days after the close of each of its fiscal years, an
unqualified audit report certified by independent certified
public accountants of recognized national standing, acceptable to
the Banks, prepared in accordance with generally accepted
accounting principles on a consolidated basis for itself and the
Consolidated Subsidiaries, including balance sheets as of the end
of such period, related profit and loss statements, a statement
of shareholders' equity, and a statement of cash flow,
accompanied by any management letter prepared by said
accountants.
(b) Within 45 days after the close of the first three quarterly
periods of each of its fiscal years, for itself and the
Consolidated Subsidiaries, consolidated unaudited balance sheets
as at the close of each such period and consolidated profit and
loss statements, a statement of shareholders' equity, and a
statement of cash flow for the period from the beginning of such
fiscal year to the end of such quarter (subject to normal
year-end audit adjustments), all certified by its Chief Financial
Officer or Treasurer.
(c) Together with the financial statements required hereunder, a
certificate signed by its Chief Financial Officer or Treasurer
(i) stating that no Default or Unmatured Default exists, or if
any Default or Unmatured Default exists, stating the nature and
status thereof, and stating the steps the Company is taking to
cure such Default or Unmatured Default and (ii) stating that no
Prepayment Event has occurred.
(d) As soon as available, and in any event within 45 calendar days
after the end of each quarter of each fiscal year of the Company,
a schedule, certified as being accurate by the Company's Chief
Financial Officer, Treasurer or Controller, showing, as of the
end of each such quarter, the Company's calculation, in form and
detail satisfactory to
Page 33
<PAGE>
the Administrative Agent, of the calculations required to be made
to determine the Applicable Margin, the Applicable Facility fee,
and compliance with Section 6.2.7. The schedule delivered within
45 calendar days after the end of the fourth quarter of each
fiscal year shall set forth a preliminary determination subject
to adjustment upon receipt of audited annual financial statements
and shall not be deemed to constitute a misrepresentation or
breach if prepared in good faith and the audited numbers differ
from the unaudited fourth quarter results.
(e) Promptly upon becoming available, copies of:
(i) All financial statements, reports, notices and proxy
statements sent by the Company or any Consolidated
Subsidiary to the stockholders of the Company.
(ii) All prospectuses of the Company or any Consolidated
Subsidiary filed with the Securities and Exchange Commission
or any other governmental agency succeeding to the
jurisdiction thereof.
(iii)All regular and periodic reports filed by the Company or
any Consolidated Subsidiary with any securities exchange or
with the Securities and Exchange Commission or any other
governmental agency succeeding to the jurisdiction thereof.
(f) As soon as possible and in any event within 10 days after receipt
by the Company, a copy of (i) any notice or claim to the effect
that the Company or any Subsidiary is or may be liable to any
Person as a result of the release by the Company, any of its
Subsidiaries, or any other Person of any toxic or hazardous waste
or physical substance into the environment, and (ii) any notice
alleging any violation of any federal, state or local
environmental, health or safety law or regulation with respect to
any toxic or hazardous waste or physical substance by the Company
or any Subsidiary, which would, in either case, have a material
adverse effect upon the operations of the Company and the
Subsidiaries, taken as a whole.
(g) As to each Plan, within 270 days after the close of each Plan
Year of such Plan, a statement of the Unfunded Liabilities of
such Plan, certified as correct by an actuary enrolled under
ERISA.
Page 34
<PAGE>
(h) As soon as possible and in any event within 10 days after the
Company knows that any Reportable Event has occurred with respect
to any Plan, a statement, signed by the chief financial officer
of the Company, describing said Reportable Event and the action
which the Company proposes to take with respect thereto.
(i) Together with the financial statements required under Section
6.1.1(a) hereinabove, a copy of the Company's annual operating
plan.
(j) Such other information (including non-financial information) as
the Administrative Agent or any Bank may from time to time
reasonably request.
6.1.2. Use of Proceeds. The Company will, and will cause each
Subsidiary to, use the proceeds of the Advances for working capital,
capital expenditures and other general corporate purposes or to repay
outstanding Advances in accordance with the terms of Section 2. The Company
shall use the proceeds of Advances in compliance with all applicable legal
and regulatory requirements and any use shall not result in a violation of
any such applicable regulatory requirements, including, without limitation,
Regulation U, and the Securities Act of 1933 and the Securities Exchange
Act of 1934 and the regulations thereunder. If the Company uses the
proceeds of Advances to acquire a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the
election of directors or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership (in either case an
"Acquisition"), the Company will make only such an Acquisition as shall
have been consented to by the board of directors or similar governing
entity of the Person being acquired.
6.1.3. Notice of Default and Prepayment Event. The Company will, and
will cause each Subsidiary to, give prompt notice in writing to the Banks
of the occurrence of any Default or Unmatured Default and of any other
development related specifically to the business, properties or affairs of
the Company, financial or otherwise, which would be reasonably likely to
materially adversely affect the Company's business, properties or affairs
or the ability of the Company to repay the Obligations. The Company will
give written notice to the Banks of any Prepayment Event no later than five
Business Days following the occurrence of such Prepayment Event.
6.1.4. Conduct of Business. The Company will carry on and conduct its
business in the manner of a diversified industrial company with a
commitment to the aerospace industry and will cause each Subsidiary to
conduct its business in a manner consistent with the Company's objectives
as such. The Company will, and will cause each Subsidiary to, do all things
necessary to remain duly incorporated,
Page 35
<PAGE>
validly existing and in good standing as a domestic corporation in its
jurisdiction of incorporation, and maintain all requisite authority to
conduct its business in each jurisdiction where, because of the nature of
its activities or properties, such authority is required and the failure to
maintain such authority would materially and adversely affect it business,
assets, financial condition, operations or prospects.
6.1.5. Payment of Taxes. The Company will, and will cause each
Subsidiary to, pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon
any property belonging to it, and all lawful claims which, if unpaid, would
become a Lien, provided that neither the Company nor a Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim the payment
of which is being contested in good faith and by appropriate proceedings;
the Company will, and will cause each Subsidiary to, make monthly accruals
of all of the estimated liability of the Company and the Subsidiaries for
such taxes, assessments, charges and levies, determined in accordance with
GAAP, and establish adequate reserves determined in accordance with GAAP,
for such thereof as may be contested, and reflect such accruals and
reserves in all financial statements furnished hereunder.
6.1.6. Insurance. The Company will, and will cause each Subsidiary to,
maintain insurance in such amounts and covering such risks as is consistent
with sound business practice.
6.1.7. Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject.
6.1.8. Maintenance of Properties. The Company will, and will cause
each Subsidiary to, do all things necessary to maintain, preserve, protect
and keep its properties in good repair, working order and condition, and
make all necessary and proper repairs, renewals and replacements, except
for properties no longer used or useful in the respective businesses of the
Company or such Subsidiary.
6.1.9. Inspection. Except with respect to any information or
activities which are classified by the United States Government or
disclosure of which the Company reasonably believes would compromise
matters of national security, the Company will, and will cause each
Subsidiary to, permit the Banks, by their respective representatives and
agents and without cost to the Company, to inspect any of the properties,
corporate books and financial records of the Company and each Subsidiary,
to examine and make copies of the books of accounts and other financial
records of the Company and each Subsidiary, and to discuss the affairs,
finances and accounts of the Company and each Subsidiary with, and to be
advised
Page 36
<PAGE>
as to the same by, their respective officers at such reasonable times and
intervals as the Banks may designate.
6.2. Negative Covenants.
6.2.1. Dividends. The Company will not, nor will it permit any
Subsidiary to, declare or pay any dividends on its capital stock or redeem,
repurchase or otherwise acquire or retire any of its capital stock at any
time outstanding, if a Default or Unmatured Default (except any Default or
Unmatured Default described in Section 7.5 hereof) or Prepayment Event
exists or would exist as a result of such declaration, payment or
redemption.
6.2.2. Indebtedness of Subsidiaries. The Company will not permit any
Subsidiary to create, incur or suffer to exist any Indebtedness, except:
(a) Indebtedness existing on the date of this Agreement and
refinancings of such Indebtedness;
(b) Indebtedness to the Company;
(c) solely for a period of 120 days commencing on the effective date
of the Howmet Acquisition, Indebtedness of Howmet; and
(d) other Indebtedness which at any time does not exceed in the
aggregate $75,000,000 (which may include Indebtedness of Howmet
that is not retired within 120 days of the effective date of the
Howmet Acquisition).
6.2.3. Merger. The Company will not, nor will it permit any Subsidiary
to, merge or consolidate with or into any other Person, except:
(a) any Subsidiary may merge or consolidate with or into the Company
or any Wholly-Owned Subsidiary so long as in any merger or
consolidation involving the Company, the Company shall be the
surviving or continuing corporation; and
(b) the Company may consolidate or merge with any other corporation
if (i) the corporation which results from such merger or
consolidation (the "surviving corporation") is organized under
the laws of the United States or a jurisdiction thereof, (ii) the
due and punctual payment of the principal of and interest on all
of the Notes and the due and punctual performance and observance
of all of the covenants in the Notes and this Agreement to be
performed or observed by the
Page 37
<PAGE>
Company are expressly assumed in writing by the surviving
corporation and the surviving corporation shall furnish to the
Banks an opinion of counsel satisfactory to the Banks to the
effect that the instrument of assumption has been duly
authorized, executed and delivered and constitutes the legal,
valid and binding contract and agreement of the surviving
corporation enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general
equitable principles, and (iii) at the time of such consolidation
or merger and immediately after giving effect thereto, no Default
or Unmatured Default or Prepayment Event would exist.
6.2.4. Sale of Assets. The Company will not, nor will it permit any
Subsidiary to, lease, sell or otherwise dispose of all, or a substantial
portion of, its property, assets or business to any other Person except for
sales of inventory in the ordinary course of business. For purposes of this
Section, "substantial portion" means assets (valued at the higher of book
or fair market value) having a value in excess of 10% of the Company's
Consolidated Total Assets.
6.2.5. Sale and Leaseback. The Company will not, nor will it permit
any Subsidiary to, sell or transfer any property, the aggregate fair market
value of which at any time exceeds 10% of the Company's Consolidated Total
Assets, in order to concurrently or subsequently lease as lessee such or
similar property. The fair market value of any property sold or transferred
pursuant to this Section 6.2.5 shall be determined as of the date of such
sale or transfer.
6.2.6. Liens. The Company will not, nor will it permit any Subsidiary
to, create, incur, or suffer to exist any Lien in, of or on the property of
the Company or any Subsidiary, except:
(a) Liens for taxes, assessments or governmental charges or levies on
its property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in
good faith and by appropriate proceedings.
(b) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens, interests of bailors, bailees, consignors and
consignees, and other similar liens arising in the ordinary
course of business which secure payment of obligations not more
than 60 days past due.
Page 38
<PAGE>
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation.
(d) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar
character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in
the business of the Company or the Subsidiaries.
(e) Liens created in favor of the United States government or any
other Person who has purchased or contracted to purchase goods or
services from the Company or any Subsidiary with advance or
progress payments.
(f) Liens existing on the date hereof and described in Schedule "3"
hereto.
(g) Liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Company or a Subsidiary shall
at any time in good faith be prosecuting an appeal or proceeding
for a review and in respect of which a stay of execution pending
such appeal or proceeding for review shall have been secured;
(h) Liens to secure statutory obligations, surety or appeal bonds or
other liens of like general nature incurred in the ordinary
course of business and not in connection with the borrowing of
money, provided, in each case, the obligation secured is not
overdue or, if overdue, is being contested in good faith by
appropriate actions or proceedings;
(i) Liens of lessors under Capitalized Leases.
(j) Liens on property of Howmet securing Indebtedness permitted under
Section 6.2.2(c).
(k) Liens, in addition to those described in subsections (a) through
(j) hereof, to secure Indebtedness of the Company or any
Subsidiary in an aggregate amount not to exceed at any time 10%
of the Company's Consolidated Total Assets.
6.2.7. Funded Debt/EBITDA Ratio. The Company will not permit its
Funded Debt/EBITDA Ratio as at the end of any fiscal quarter to exceed 3.50
to 1.0.
Page 39
<PAGE>
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made by or on behalf of the
Company or any Subsidiary to the Banks under or in connection with any Loan
Document shall be materially false as of the date on which made.
7.2. Nonpayment of principal of the Notes when due.
7.3. Nonpayment of interest upon the Notes or of any facility fee or
other obligations under any of the Loan Documents within five days after
the same becomes due.
7.4. The breach by the Company of any of the terms or provisions of
Sections 6.1.3 or 6.2.
7.5. The breach by the Company (other than a breach which constitutes
a Default under Section 7.1, 7.2, 7.3 or 7.4) of any of the terms or
provisions of this Agreement which is not remedied or waived within fifteen
days after written notice from the Administrative Agent or any Bank.
7.6. Failure of the Company or any Consolidated Subsidiary to pay any
Indebtedness in an aggregate principal amount in excess of $10,000,000 (or
the equivalent thereof in any other currency), when due, or the default by
the Company or any Consolidated Subsidiary in the performance of any other
term, provision or condition contained in any agreement or agreements under
which Indebtedness in an aggregate principal amount in excess of
$10,000,000 (or the equivalent thereof in any other currency) was created
or is governed, the effect of which, in either case, is to cause, or to
permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or Indebtedness in
an aggregate principal amount in excess of $10,000,000 (or the equivalent
thereof in any other currency) shall be declared to be due and payable or
required to be prepaid (other than by a regularly scheduled payment), prior
to the stated maturity thereof; or the Company or any Consolidated
Subsidiary shall not pay, or admit in writing its inability to pay, its
debts generally as they become due.
Page 40
<PAGE>
7.7. The Company or any Consolidated Subsidiary shall (a) have an
order for relief entered with respect to it under the Bankruptcy Code, (b)
make an assignment for the benefit of creditors, (c) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any substantial
part of its property, (d) institute any proceeding seeking an order for
relief under the Bankruptcy Code or seeking to adjudicate it a bankrupt or
insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors
or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (e) take any corporate
action to authorize or effect any of the foregoing actions set forth in
this Section 7.7 or (f) fail to contest in good faith any appointment or
proceeding described in Section 7.8.
7.8. Without the application, approval or consent of the Company or
any Consolidated Subsidiary, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Company or any Consolidated
Subsidiary or any substantial part of its property, or a proceeding
described in Section 7.7(d) shall be instituted against the Company or any
Consolidated Subsidiary and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 60 consecutive
days.
7.9. The Company or any Consolidated Subsidiary shall fail within 30
days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $10,000,000, which is not stayed on appeal or
otherwise being appropriately contested in good faith.
7.10. The Unfunded Liabilities of all Plans shall exceed in the
aggregate an amount equal to 5 percent of the value (as of any date of
determination) of all Plan assets allocable to Plan benefits guaranteed
under ERISA.
7.11. An administrator, custodian or other representative, by or
pursuant to any legislative act, resolution or rule (other than the
Bankruptcy Code or any similar law, state or federal, whether now or
hereafter existing) or any order or decree of any court or any governmental
board or agency (other than any order or decree issued pursuant to the
Bankruptcy Code or any similar law, state or federal, whether now or
hereafter existing) shall take possession or control of all or such
portions of the property of any one or more of the Company and the
Consolidated Subsidiaries as would, in the sole opinion of the Required
Banks, materially interfere with the operation of the business of the
Company and the Consolidated Subsidiaries, on a consolidated basis, and
such possession or control shall continue for 30 calendar days.
Page 41
<PAGE>
7.12. The Company or any Subsidiary shall be the subject of any
proceeding or investigation pertaining to the release by the Company or any
of its Subsidiaries, or any other Person of any toxic or hazardous waste or
physical substance into the environment, or any violation of any federal,
state or local environmental, health or safety law or regulation with
respect to any toxic or hazardous waste or physical substance, which would,
in either case, have a material adverse effect upon the operations of the
Company and the Subsidiaries, taken as a whole.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration; Allocation of Payments after Default or Prepayment
Event. (a) If any Default described in Section 7.7 or 7.8 occurs, the
commitments of the Banks to make Advances hereunder shall automatically
terminate and the Obligations shall immediately become due and payable
without any election or action on the part of the Administrative Agent or
any Bank. If any other Default or Prepayment Event occurs, the Required
Banks may terminate the commitments of the Banks to make Advances
hereunder, or declare the Obligations to be due and payable, whereupon the
Obligations shall become immediately due and payable, or both, without
presentment, demand, protest or notice of any kind, all of which the
Company hereby expressly waives.
If, within 14 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Banks to make Loans
hereunder as a result of any Default (other than any Default as described
in Section 7.7 or 7.8 with respect to the Company) and before any judgment
or decree for the payment of the Obligations due shall have been obtained
or entered, the Required Banks (in their sole discretion) shall so direct,
the Administrative Agent shall, by notice to the Company, rescind and annul
such acceleration and/or termination.
(b) Upon the occurrence of (i) any Unmatured Default as to which the
Required Banks shall have notified the Administrative Agent that the
provisions of this Section 8.1(b) shall apply, (ii) any Default or (iii)
any Prepayment Event, the Banks shall share all collections and recoveries
of the Obligations on a pro rata basis, based on the respective amounts of
Obligations (whether or not mature and currently payable) owing to each
Bank in respect of principal and unpaid accrued interest, fees and
indemnities hereunder as of the date of occurrence of such Default,
Unmatured Default or Prepayment Event, as the case may be.
Page 42
<PAGE>
8.2. Amendments. Subject to the provisions of this Section, the
Required Banks (or the Administrative Agent with the consent in writing of
the Required Banks) and the Company may enter into agreements supplemental
hereto for the purpose of adding any provisions to the Loan Documents or
changing in any manner the rights of the Banks or the Company hereunder or
waiving any Default hereunder; provided, however, that no such supplemental
agreement shall, without the consent of all of the Banks:
(a) Modify any of the provisions of this Agreement with respect to
the amount of or the time for the payment of the principal of or
any interest on any of the Obligations or any of the fees due
hereunder,
(b) Reduce the percentage specified in the definition of Required
Banks.
(c) Change the amount of the Commitment of any Bank hereunder or the
Termination Date.
(d) Amend this Section 8.2.
No amendment of any provision of this Agreement relating to the
Administrative Agent shall be effective without the written consent of the
Administrative Agent.
8.3. Preservation of Rights. No delay or omission of the Banks or the
Administrative Agent to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and any single or partial exercise of any such right
shall not preclude other or further exercise thereof or the exercise of any
other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid
unless in writing signed by the Banks required pursuant to Section 8.2, and
then only to the extent in such writing specifically set forth. All
remedies contained in the Loan Documents or by law afforded shall be
cumulative and all shall be available to the Administrative Agent and the
Banks until the Obligations have been paid in full.
Page 43
<PAGE>
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and warranties
of the Company contained in this Agreement shall survive delivery of the
Notes and the making of the Loans herein contemplated.
9.2. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Bank shall be obligated to extend credit
to the Company in violation of any limitation or prohibition provided by
any applicable statute or regulation.
9.3. Taxes. Any taxes (excluding income taxes whether or not such
taxes are actually called "income taxes") payable or ruled payable by
Federal or State authority in respect of the Loan Documents shall be paid
by the Company, together with interest and penalties, if any.
9.4. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE
STATE OF ILLINOIS, BUT GIVING EFFECT TO APPLICABLE FEDERAL LAWS.
9.5. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS
STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENTS AND THE COMPANY HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT
FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR
ANY BANK TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY
OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE COMPANY AGAINST THE
ADMINISTRATIVE AGENT OR ANY BANK OR ANY AFFILIATE OF THE ADMINISTRATIVE
AGENT OR ANY BANK INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE
BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
9.6. WAIVER OF JURY TRIAL. THE COMPANY, THE ADMINISTRATIVE AGENT AND
EACH BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT
Page 44
<PAGE>
OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
9.7. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of
any of the provisions of the Loan Documents.
9.8. Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Company, the Administrative Agent and the Banks
and supersede all prior agreements and understandings among the Company,
the Administrative Agent and the Banks relating to the subject matter
thereof.
9.9. Several Obligations. The respective obligations of the Banks
hereunder are several and not joint and no Bank shall be the partner or
agent of any other (except to the extent to which the Administrative Agent
is authorized to act as such). The failure of any Bank to perform any of
its obligations hereunder shall not relieve any other Bank from any of its
obligations hereunder.
9.10. Expenses. The Company shall reimburse the Administrative Agent
for any and all costs and out-of-pocket expenses (including attorneys' fees
and time charges of attorneys for the Administrative Agent, which attorneys
may be employees of the Administrative Agent,) paid or incurred by the
Administrative Agent and the Arranger in connection with the preparation,
review, execution, delivery, amendment and modification of the Loan
Documents; provided, however, that such attorney's fees and time charges to
be reimbursed by the Company in connection with the preparation, review,
execution and delivery of the Loan Documents shall not exceed the amount
provided for in a letter agreement dated March 21, 1996 between the Company
and the Administrative Agent and the Arranger. The Company shall reimburse
the Administrative Agent and the Banks for any and all costs, internal
charges and out-of-pocket expenses (including attorneys' fees and time
charges of attorneys for the Administrative Agent and the Banks, which
attorneys may be employees of the Administrative Agent or the Banks) paid
or incurred by the Administrative Agent or any Bank in connection with the
collection and enforcement of the Loan Documents. The Company further
agrees to indemnify the Administrative Agent, the Arranger and each Bank,
its directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or
not the Administrative Agent, the Arranger, or any Bank is a party thereto)
which any of them may pay or incur in connection with or arising out of or
relating to this Agreement, the other Loan Documents, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder; provided, however, that
the Company shall not be liable for any of the foregoing to
Page 45
<PAGE>
the extent that they arise from a violation of law by, or the gross
negligence or willful misconduct of, the Administrative Agent, the Arranger
or such Bank, as the case may be. The obligations of the Company under this
Section shall survive the termination of this Agreement.
9.12. Numbers of Documents. All closing documents, notices and
requests hereunder shall be furnished to the Administrative Agent with
sufficient counterparts so that the Administrative Agent may furnish one to
each of the Banks.
9.13. Confidentiality. Each Bank agrees to hold any confidential
information which it may receive from the Company pursuant to this
Agreement in confidence, except for disclosure (i) to its Affiliates and to
other Banks and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to that Bank or to a
Transferee, (iii) to regulatory officials, (iv) to any Person as required
by law, regulation, or legal process, (v) to any Person in connection with
any legal proceeding to which that Bank is a party, and (vi) permitted by
Section 12.4. Each Bank will notify the Company of any disclosure under
clauses (iii) (other than disclosure pursuant to a request arising in the
course of a bank audit, notice of which such Bank shall deliver to the
Company as soon as is practicable), (iv), and (v) hereinabove before
divulging such information unless such disclosure is legally prohibited by
the terms of the request or demand for such information.
9.14. Termination of and Waiver Under Prior Agreement. By its
execution of this Agreement, the Company hereby gives notice of the
termination of that certain Credit Agreement dated as of September 30, 1993
by and among the Company, The First National Bank of Chicago as agent, and
the banks party thereto (the "Prior Agreement"), effective as of the date
the conditions precedent set forth in Section 4.1 of this Agreement have
been satisfied and all outstanding obligations of the Company to the banks
under the Prior Agreement have been paid in full. By its execution of this
Agreement, each Bank that is a "Bank" party to the Prior Agreement hereby
agrees to waive the requirement of five Business Days' written notice to
the Agent prior to termination thereof set forth in Section 2.3.5(b)
thereof. Such waiver shall become effective upon execution of counterparts
of this Agreement by sufficient Banks to constitute the "Required Banks" as
that term is defined in the Prior Agreement.
Page 46
<PAGE>
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1. Appointment. The First National Bank of Chicago is hereby
appointed Administrative Agent hereunder, and each of the Banks irrevocably
authorizes the Administrative Agent to act as the agent of such Bank. The
Administrative Agent agrees to act as such upon the express conditions
contained in this Article X. The duties of the Administrative Agent shall
be administrative in nature and the Administrative Agent shall not have a
fiduciary relationship in respect of any Bank by reason of this Agreement.
10.2. Powers. The Administrative Agent shall have and may exercise
such powers hereunder as are specifically delegated to the Administrative
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. The Administrative Agent shall have no implied duties
to the Banks, or any obligation to the Banks to take any action hereunder
except any action specifically provided by this Agreement to be taken by
the Administrative Agent.
10.3. General Immunity. Neither the Administrative Agent nor any of
its directors, officers, agents or employees shall be liable to the Banks
or any Bank for any action taken or omitted to be taken by it or them
hereunder or in connection herewith except for its or their own gross
negligence or wilful misconduct.
10.4. No Responsibility for Loans, Recitals, etc. The Administrative
Agent shall not be responsible to the Banks for any recitals, reports,
statements, warranties or representations herein or any Loans hereunder or
be bound to ascertain or inquire as to the performance or observance of any
of the terms of this Agreement.
10.5. Right to Indemnity. The Administrative Agent shall be fully
justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks pro rata
against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.
10.6. Action on Instructions of Banks. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with written instructions signed by the Required
Banks, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Banks and on all holders of
Notes.
Page 47
<PAGE>
10.7. Employment of Agents and Counsel. The Administrative Agent may
execute any of its duties as Administrative Agent hereunder by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Banks, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Administrative
Agent shall be entitled to advice of counsel concerning all matters
pertaining to the agency hereby created and its duties hereunder.
10.8. Reliance on Documents; Counsel. The Administrative Agent shall
be entitled to rely upon any Note, notice, consent, certificate, affidavit,
letter, telegram, statement, paper or document believed by it to be genuine
and correct and to have been signed or sent by the proper person or
persons, and, in respect to legal matters, upon the opinion of counsel
selected by the Administrative Agent.
10.9. Administrative Agent's Reimbursement. Each Bank agrees to
reimburse the Administrative Agent in the amount of such Bank's ratable
share of the Commitments for any expenses not reimbursed by the Company (i)
for which the Administrative Agent is entitled to reimbursement by the
Company under the Loan Documents and (ii) for any other expenses,
liabilities, obligations, losses, damages, penalties, costs, or
disbursements of any kind incurred by the Administrative Agent on behalf of
the Banks, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents; provided, however,
that no Bank shall be required to reimburse the Administrative Agent for
any such expenses to the extent that they arise from a violation of law by,
or the gross negligence or willful misconduct of, the Administrative Agent.
The obligations of the Banks under this Section 10.9 shall survive payment
of the Obligations and termination of this Agreement.
10.10. Rights as a Bank. With respect to its Commitment, Loans made by
it and the Note issued to it, the Administrative Agent shall have the same
rights and powers hereunder as any Bank and may exercise the same as though
it were not the Administrative Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Administrative Agent in
its individual capacity. The Administrative Agent may accept deposits from,
lend money to, and generally engage in any kind of banking or trust
business with the Company as if it were not the Administrative Agent.
10.11. Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Administrative Agent or any
other Bank and based on the financial statements referred to in Section 5.4
and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges
Page 48
<PAGE>
that it will, independently and without reliance upon the Administrative
Agent or any other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement.
10.12. Successor Administrative Agent. The Administrative Agent may
resign at any time by giving thirty days' written notice thereof to the
Banks and the Company and may be removed at any time with or without cause
by the Required Banks. Upon any such resignation or removal, the Required
Banks shall have the right to appoint, on behalf of the Banks but with the
consent of the Company (which consent shall not be unreasonably withheld),
a successor Administrative Agent. If no successor Administrative Agent
shall have been so appointed by the Required Banks and shall have accepted
such appointment within thirty days after the retiring Administrative
Agent's giving notice of resignation, then the retiring Administrative
Agent may appoint, on behalf of the Banks but with the consent of the
Company (which consent shall not be unreasonably withheld), a successor
Administrative Agent. Such successor Administrative Agent shall be a
commercial bank having capital and retained earnings of at least
$500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its
duties and obligations hereunder. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this
Article X shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the
Administrative Agent hereunder.
10.13. Distribution of Information. The Company authorizes the
Administrative Agent, as the Administrative Agent may elect in its sole
discretion, to discuss with and furnish to the Banks or to any other Person
having an interest in the Obligations (whether as a guarantor, pledgor of
collateral, participant, purchaser or otherwise) all financial statements,
audit reports and other information pertaining to the Company and its
Subsidiaries whether such information was provided by the Company or
prepared or obtained by the Administrative Agent; provided, however, that
if such information is non-public and confidential, the Administrative
Agent shall obtain the consent of the Company (which shall not be
unreasonably withheld) prior to delivering such information to any such
Person and such Person shall have agreed to be bound by Section 9.13 of
this Agreement.. Neither the Administrative Agent nor any of its employees,
officers, directors or agents makes any representation or warranty
regarding any audit reports or other analyses of the Company's and its
Subsidiaries condition which the Administrative Agent may elect to
distribute, whether such information was provided by the
Page 49
<PAGE>
Company or prepared or obtained by the Administrative Agent, nor shall the
Administrative Agent or any of its employees, officers, directors or agents
be liable to any person or entity receiving a copy of such reports or
analyses for any inaccuracy or omission contained in or relating thereto.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights of
the Banks under applicable law, if the Company becomes insolvent, however
evidenced, or any Default or Prepayment Event occurs, any indebtedness from
any Bank to the Company may be offset and applied toward the payment of the
Obligations owing to such Bank, whether or not the Obligations, or any part
thereof, shall then be due.
11.2. Ratable Payments. In case at any time any Bank, whether by
setoff or otherwise, has payment (other than a payment made on a Bid Loan
when there exists no Default or Prepayment Event) made to it upon its Loans
in a greater proportion than received by any other Bank, such Bank so
receiving such greater proportionate payment agrees to purchase a portion
of the Loans held by the other Banks so that after such purchase each Bank
will hold its ratable proportion of Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments
shall be made. The Company agrees that any Bank purchasing a participation
hereunder may, to the fullest extent permitted by law, exercise all its
rights of payment with respect to such participation as if such Bank were
the direct creditor of the Company in the amount of the participation.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Company and
the Banks and their respective successors and assigns, except that (i) the
Company shall not have the right to assign its rights or obligations under
the Loan Documents and (ii) any assignment by any Bank must be made in
compliance with Section
Page 50
<PAGE>
12.3. Notwithstanding clause (ii) of this Section, any Bank may at any
time, without the consent of the Company or the Administrative Agent,
assign all or any portion of its rights under this Agreement and its Notes
to a Federal Reserve Bank; provided, however, that no such assignment to a
Federal Reserve Bank shall release the transferor Bank from its obligations
hereunder. The Administrative Agent may treat the payee of any Note as the
owner thereof for all purposes hereof unless and until such payee complies
with Section 12.3 in the case of an assignment thereof or, in the case of
any other transfer, a written notice of the transfer is filed with the
Administrative Agent. Any assignee or transferee of a Note agrees by
acceptance thereof to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who at the time
of making such request or giving such authority or consent is the holder of
any Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in
exchange therefor.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Bank may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such
Bank, any Note held by such Bank, any Commitment of such Bank or any
other interest of such Bank under the Loan Documents. In the event of
any such sale by a Bank of participating interests to a Participant,
such Bank's obligations under the Loan Documents shall remain
unchanged, such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Bank
shall remain the holder of any each of its Notes for all purposes
under the Loan Documents, all amounts payable by the Company under
this Agreement shall be determined as if such Bank had not sold such
participating interests, and the Company and the Administrative Agent
shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under the Loan
Documents.
12.2.2. Voting Rights. Each agreement pursuant to which any Bank
may sell such a participation shall provide that such Bank shall
retain the sole right to approve, without the consent of any
Participant, any amendment, modification or waiver of any provision of
the Loan Documents other than any amendment, modification or waiver
with respect to any Loan or Commitment in which such Participant has
an interest which forgives principal, interest or fees or reduces the
interest rate or fees payable with respect to any such Loan or
Commitment, postpones any date fixed for any regularly-scheduled
payment of principal of, or interest or fees on, any such Loan or
Commitment, releases any guarantor of any such Loan or releases
Page 51
<PAGE>
any substantial portion of collateral, if any, securing any such Loan;
provided that such participation agreement may provide that such Bank
will not agree to any modification, amendment or waiver of this
Agreement described in Sections 8.2 (a), (c) and (d) without the
consent of the Participant.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Bank may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one bank (a "Purchaser") all (but not less than all) of
its rights and obligations under the Loan Documents. Such assignment
shall be substantially in the form of Exhibit "H" hereto or in such
other form as may be agreed to by the parties thereto. The consent of
the Company and the Administrative Agent shall be required prior to an
assignment becoming effective; provided, however, that if a Default
has occurred and is continuing, the consent of the Company shall not
be required. Such consent shall not be unreasonably withheld or
delayed.
12.3.2. Substitution of Bank. The Company may, at its sole
expense and effort, require any Bank to transfer and assign, without
recourse (in accordance with this Section 12.3) all (but not less than
all) of its interests, rights and obligations under this Agreement to
an assignee which shall assume such assigned obligations (which
assignee may be another Bank, if a Bank accepts such assignment);
provided, that (i) such assignment shall not conflict with any law,
rule or regulation or order of any court or other governmental
authority, (ii) the Company shall have received a written consent of
the Agent in the case of an entity that is not a Bank, which consent
shall not be unreasonably withheld, (iii) the Company or such assignee
shall have paid to the assigning Bank in immediately available funds
the principal of and interest accrued to the date of such payment on
the Loans made by it hereunder and all other amounts owed to it
hereunder and the fee payable to the Agent pursuant to Section 12.3.3
and (iv) nothing in the foregoing is intended or shall be construed as
obligating the Administrative Agent or any Bank to locate such an
assignee.
12.3.3. Effect; Effective Date. Upon (i) delivery to the
Administrative Agent of a notice of assignment, substantially in the
form attached as Exhibit "I" to Exhibit "H" hereto (a "Notice of
Assignment"), together with any consents required by Section 12.3.1 or
12.3.2, and (ii) payment of a $3,000 fee to the Administrative Agent
for processing such assignment, such assignment shall become effective
on the effective date specified in such Notice of Assignment. The
Notice of Assignment shall contain a representation by the Purchaser
to the effect that none of the
Page 52
<PAGE>
consideration used to make the purchase of the Commitment and Loans
under the applicable assignment agreement are "plan assets" as defined
under ERISA and that the rights and interests of the Purchaser in and
under the Loan Documents will not be "plan assets" under ERISA. On and
after the effective date of such assignment, such Purchaser shall for
all purposes be a Bank party to this Agreement and any other Loan
Document executed by the Banks and shall have all the rights and
obligations of a Bank under the Loan Documents, to the same extent as
if it were an original party hereto, and no further consent or action
by the Company, the Banks or the Administrative Agent shall be
required to release the transferor Bank with respect to the percentage
of the Aggregate Commitment and Loans assigned to such Purchaser. Upon
the consummation of any assignment to a Purchaser pursuant to this
Section 12.3.3, the transferor Bank, the Administrative Agent and the
Company shall make appropriate arrangements so that replacement Notes
are issued to such transferor Bank and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their respective Commitments, as adjusted
pursuant to such assignment.
12.4.Dissemination of Information. The Company authorizes each
Bank to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each
a "Transferee") and any prospective Transferee any and all information
in such Bank's possession concerning the creditworthiness of the
Company and its Subsidiaries; provided, however, that if such
information is non-public and confidential, such Bank shall obtain the
consent of the Company (which shall not be unreasonably withheld)
prior to delivering such information to such Person and such Person
agrees to be bound by Section 9.13 of this Agreement. No Bank may
disclose confidential information regarding the Company and its
Subsidiaries to prospective Transferees without the consent of the
Company.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the
transferor Bank shall cause such Transferee, concurrently with the
effectiveness of such transfer, to comply with the provisions of
Section 2.3.15.
Page 53
<PAGE>
ARTICLE XIII
NOTICES
13.1. Giving Notice. Any notice required or permitted to be given
under this Agreement may be given by (a) actual delivery to the
Company, the Administrative Agent or the Banks at the addresses
indicated below their signatures to this Agreement, or (b) United
States mail, postage prepaid, or telecopy or telefacsimile addressed
to the Company, the Banks or the Administrative Agent at the addresses
indicated below their signatures to this Agreement. Each such notice
shall be effective (a) if given by mail, 72 hours after such notice is
deposited in the mails with first class postage prepaid, addressed as
aforesaid, and (b) if given by any other means, when delivered at the
address specified in accordance with this Article XIII.
13.2. Change of Address. The Company and the Banks may each
change the address for service of notice upon it by a notice in
writing to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Company, the
Administrative Agent and the Banks and each party has notified the
Administrative Agent by telecopy or telefacsimile or by telephone,
confirmed in writing, that it has taken such action.
Page 54
<PAGE>
IN WITNESS WHEREOF, the Company, the Banks and the Administrative
Agent have executed this Agreement as of the date first above written.
THIOKOL CORPORATION
/s/ NICHOLAS J. IUANOW
By: ______________________________
Nicholas J. Iuanow
Treasurer
All Notices: Thiokol Corporation
2475 Washington Boulevard
Ogden, Utah 84405
Attn: Treasury Department, 4th Floor
Telephone: (801) 629-2211
Telecopy: (801) 629-2222
Page 55
<PAGE>
Commitments
$25,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Administrative Agent
By:
Karen J. Andrews
Vice President
All Notices and Credit Matters: The First National Bank of Chicago
Mail Suite 0374
One First National Plaza
Chicago, Illinois 60670-0374
Attn: Transportation Division,
Karen J. Andrews
Telephone: (312) 732-8867
Telecopy: (312) 732-3885
All Borrowing Notices: The First National Bank of Chicago
Mail Suite 0829
One First National Plaza
Chicago, Illinois 60670-0829
Attn: Michael Lorenzi
Telephone: (312) 732-8573
Telecopy: (312) 732-1158
Wire Transfer Payment Instructions:
The First National Bank of Chicago
DCS Incoming Clearing Account #247-165
Ref: Thiokol Corporation
Page 56
<PAGE>
$25,000,000 ABN AMRO BANK N.V.
By:
Name:
Title:
By:
Name:
Title:
All Notices and Credit Matters: ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, California 94111
Attn: Gina Brusatori
Telephone: (415) 984-3702
Telecopy: (415) 362-3524
Competitive Bid Advance Notices: ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, California 94111
Attn: Gloria Lee
Telephone: (415) 984-3720
Telecopy: (415) 362-3524
Syndicated Advance Notices: ABN AMRO Bank N.V.
101 California Street, Suite 4550
San Francisco, California 94111
Attn: Gloria Lee
Telephone: (415) 984-3720
Telecopy: (415) 362-3524
Wire Transfer Payment Instructions:
Federal Reserve Bank of New York
A/C: ABN AMRO New York
ABA #: 026009580
Favor: ABN AMRO San Francisco
#6510010545-41
Page 57
<PAGE>
$25,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
Name:
Title:
All Notices and Credit Matters: Credit Products #5618
Bank of America NT & SA
555 South Flower Street, 11th Floor
Los Angeles, CA 90071
Attn: Lori Y. Kannegieter, V.P.
Telephone: (213) 228-6379
Telecopy: (213) 228-2756
Competitive Bid Advance Notices: Corporate Distribution #5670
Bank of America NT & SA
555 California Street, 10th Floor
San Francisco, CA 94104
Attn: Grover A. Fitch, V. P.
Telephone: (415) 622-2064
Telecopy: (415) 662-2235
Syndicated Advance Notices: Global Payment Operations #5693
Bank of America NT & SA
1850 Gateway Blvd.
Concord, CA 94520
Attn: Elvira MacGillivray
Telephone: (510) 675-8258
Telecopy: (510) 675-7531
Wire Transfer Payment Instructions:
Bank of America NT & SA
San Francisco
ABA# 121 000 358
For Credit to: Global Payment Operations #5693
1850 Gateway Blvd.
Concord, CA 94520
Attn: Elvira MacGillivray
Ref: Thiokol Corporation
Page 58
<PAGE>
$25,000,000 BANKERS TRUST COMPANY
By:
Name:
Title:
All Notices and Credit Matters: Bankers Trust Company
130 Liberty Street
30th Floor
New York, New York 10006
Attn: Dana Klein
Telephone: (212) 250-1724
Telecopy: (212) 250-7218
Competitive Bid Advance Notices: Bankers Trust Company
130 Liberty Street
30th Floor
New York, New York 10006
Attn: Mary Jo Jolly
Telephone: (212) 250-5860
Telecopy: (212) 250-7351
Syndicated Advance Notices: Bankers Trust Company
130 Liberty Street
30th Floor
New York, New York 10006
Attn: Mary Jo Jolly
Telephone: (212) 250-5860
Telecopy: (212) 250-7351
Wire Transfer Payment Instructions:
ABA# 02100103
Bankers Trust company
A/C# 99-401-268
Attn: Mary Rodwell
Ref: THIOKOL CORPORATION
Telephone: (212) 250-2955
Telecopy: (212) 250-7351
Page 59
<PAGE>
$25,000,000 CREDIT SUISSE
By:
Name:
Title:
By:
Name:
Title:
All Notices and Credit Matters: Credit Suisse
633 West Fifth Street
Los Angeles, California 90071
Attn: Debbie Shea
Telephone: (213) 955-8276
Telecopy: (213) 955-8245
Competitive Bid Advance Notices: Credit Suisse
633 West Fifth Street, 64th Floor
Los Angeles, California 90071
Attn: Rita Asa
Telephone: (213) 955-8284
Telecopy: (213) 955-8245
Syndicated Advance Notices: Credit Suisse
633 West Fifth Street, 64th Floor
Los Angeles, California 90071
Attn: Rita Asa
Telephone: (213) 955-8284
Telecopy: (213) 955-8245
Wire Transfer Payment Instructions:
Credit Suisse
New York, New York
ABA #026009179
A/C #11674201
For Account of Credit Suisse Los Angeles
Your Reference (i.e., interest/fees)
Page 60
<PAGE>
$25,000,000 THE NORTHERN TRUST COMPANY
By:
Name:
Title:
All Notices and Credit Matters: The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois 60675
Attn: Michelle D. Griffin
Telephone: (312) 444-4571
Telecopy: (312) 630-1566
Competitive Bid Advance Notices: The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois 60675
Attn: Linda Honda
Telephone: (312) 444-3532
Telecopy: (312) 630-1566
Syndicated Advance Notices: The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois 60675
Attn: Linda Honda
Telephone: (312) 444-3532
Telecopy: (312) 630-1566
Wire Transfer Payment Instructions:
Via Federal Reserve Chicago
The Northern Trust Company, Chicago
ABA 071-000-152
Attn: Commercial Loans
Ref: Thiokol Corporation
Aggregate Commitment
- -----------------------------
$150,000,000
Page 61
<PAGE>
EXHIBIT "A"
SYNDICATED LOANS
PROMISSORY NOTE
$25,000,000 May 23, 1996
Thiokol Corporation, a Delaware corporation (the "Company"), promises
to pay to the order of (the "Bank") the lesser of the principal sum of
Twenty-Five Million and No/100 Dollars or the aggregate unpaid principal
amount of all Syndicated Loans made by the Bank to the Company pursuant to
Section 2.1 of the Credit Agreement (the "Agreement") hereinafter referred
to, whichever is less, in immediately available funds at the main office of
The First National Bank of Chicago in Chicago, Illinois, as Administrative
Agent, together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Agreement. The Company shall pay
the principal of and accrued and unpaid interest on the Loans in full on
the Termination Date.
The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or otherwise record in accordance with its usual practice,
the date and amount of each Syndicated Loan and the date and amount of each
principal payment hereunder.
This Syndicated Loans Promissory Note is one of the Notes issued
pursuant to, and is entitled to the benefits of, the Credit Agreement dated
as of May 23, 1996, among the Company, The First National Bank of Chicago,
individually and as Administrative Agent, and the banks named therein, to
which Agreement, as it may be amended from time to time, reference is
hereby made for a statement of the terms and conditions under which this
Syndicated Loans Promissory Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein
are used with the meanings attributed to them in the Agreement.
THIOKOL CORPORATION
By:
Nicholas J. Iuanow
Treasurer
Page 62
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
SYNDICATED LOANS PROMISSORY NOTE
OF THIOKOL CORPORATION
DATED MAY 23, 1996
<S> <C> <C> <C> <C>
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- -----------------------------------------------------------------------------------------------------
</TABLE>
Page 63
<PAGE>
EXHIBIT "B"
BID LOANS
PROMISSORY NOTE
$150,000,000 May 23, 1996
Thiokol Corporation, a Delaware corporation (the "Company"), promises
to pay to the order of (the "Bank") the lesser of the principal sum of One
Hundred Fifty Million and No/100 Dollars or the aggregate unpaid principal
amount of all Bid Loans made by the Bank to the Company pursuant to Section
2.2 of the Credit Agreement (the "Agreement") hereinafter referred to,
whichever is less, in immediately available funds at the main office of The
First National Bank of Chicago in Chicago, Illinois, as Administrative
Agent, together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Agreement. The Company shall pay
each Bid Loan in full on the last day of such Bid Loan's applicable
Interest Period and shall pay the principal of and accrued and unpaid
interest on the Loans in full on the Termination Date.
The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or otherwise record in accordance with its usual practice,
the date and amount of each Bid Loan and the date and amount of each
principal payment hereunder.
This Bid Loans Promissory Note is one of the Notes issued pursuant to,
and is entitled to the benefits of, the Credit Agreement dated as of May
23, 1996, among the Company, The First National Bank of Chicago,
individually and as Administrative Agent, and the banks named therein, to
which Agreement, as it may be amended from time to time, reference is
hereby made for a statement of the terms and conditions under which this
Bid Loans Promissory Note may be prepaid or its maturity date accelerated.
Capitalized terms used herein and not otherwise defined herein are used
with the meanings attributed to them in the Agreement.
THIOKOL CORPORATION
By:
Nicholas J. Iuanow
Treasurer
Page 64
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
BID LOANS PROMISSORY NOTE
OF THIOKOL CORPORATION
DATED MAY 23, 1996
<S> <C> <C> <C> <C>
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ----------------------------------------------------------------------------------------------------
</TABLE>
Page 65
<PAGE>
EXHIBIT "C"
BID QUOTE REQUEST
___________________, 19__
To: The First National Bank of Chicago,
as agent (the "Administrative Agent")
From: Thiokol Corporation
Re: Credit Agreement (the "Agreement") dated as of May 23, 1996 among
Thiokol Corporation, the Banks listed on the signature pages thereof
and the Administrative Agent
We hereby give notice pursuant to Section 2.2.2 of the Agreement that
we request Bid Quotes for the following proposed Bid Advance(s):
Borrowing Date: ____________ , 19__
Principal Amount1 Interest Period2
- ----------------- ----------------
$
Such Bid Quotes should offer a Bid [Margin] [Absolute Rate]. [The
applicable base rate is the Base Eurodollar Rate.]
Terms used herein have the meanings assigned to them in the Agreement.
THIOKOL CORPORATION
By:
Title:
--------------------------------
1 Amount must be $5,000,000 or a larger multiple of $1,000,000.
2 One, two, three or six months (Eurodollar Auction) or and up to
270 days (Absolute Rate Auction), subject to provisions of
definitions of Eurodollar Interest Period and Absolute Rate
Interest Period.
Page 66
<PAGE>
EXHIBIT "D"
INVITATION FOR BID QUOTES
To: [Name of Bank]
Re: Invitation for Bid Quotes to
Thiokol Corporation (the "Company")
Pursuant to Section 2.2.3 of the Credit Agreement dated as of May 23,
1996 among the Company, the Banks parties thereto and the undersigned, as
Administrative Agent, we are pleased on behalf of the Company to invite you
to submit Bid Quotes to the Company for the following proposed Bid
Advance(s):
Borrowing Date: ______________, 19__
Principal Amount Interest Period
- ------------------ ----------------
$
Such Bid Quotes should offer a Bid [Margin] [Absolute Rate]. [The
applicable base rate is the Base Eurodollar Rate.]
Please respond to this invitation by no later than [9:30 a.m.] [10:30
a.m.] Chicago time on , _______________19__.
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
By:
Authorized Officer
Page 67
<PAGE>
EXHIBIT "E"
BID QUOTE
To: The First National Bank of Chicago, as Administrative Agent
Attn: Michael Lorenzi
Re: Bid Quote to Thiokol Corporation (the "Company")
In response to your invitation on behalf of the Company dated_________ ,
19__ ,
we hereby make the following Bid Quote on the following terms:
1. Quoting Bank:_________________________
2. Person to contact at Quoting Bank: ___________________________
3. Borrowing Date:___________ , 19__ 1
4. We hereby offer to make Bid Loan(s) in the following principal
amounts, for the following Interest Periods and rates:
Principal Amount2 Interest Period3 Bid [Margin]4 [Absolute Rate5]
- ----------------- ---------------- ------------- ----------------
$
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit
Agreement dated as of May 23, 1996 among the Company, the Banks listed on
the signature pages thereof and yourselves, as Administrative Agent,
irrevocably obligates us to make the Bid Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:________________, 19__ By:
Authorized Officer
- -------------------------
1 As specified in the related Invitation.
2 Principal amount bid for each Interest Period may not exceed principal
amount requested. Bids must be made for $5,000,000 or a larger multiple
of $1,000,000.
3 One, two, three, six, nine, or twelve months and up to 270 days, as
specified in the related Invitation.
4 Margin over or under the Base Eurodollar Rate determined for the
applicable Interest Period. Specify percentage (rounded to the nearest
1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
5 Specify rate of interest per annum (rounded to the nearest
1/100th of 1%).
Page 68
<PAGE>
EXHIBIT "F"
OPINION OF COUNSEL
May 23, 1996
The Administrative Agent and the Banks who are parties to the Credit
Agreement described below.
Ladies and Gentlemen:
This is in regard to the Credit Agreement dated as of May 23, 1996 among
Thiokol Corporation (the "Company"), the Banks named therein and The First
National Bank of Chicago, as Administrative Agent (the "Credit Agreement").
Unless the context otherwise requires, all terms used in this opinion which
are specifically defined in the Credit Agreement shall have the meanings
given such terms in the Credit Agreement.
I am the Vice President and General Counsel of the Company and have acted
as such in connection with the Credit Agreement. In so acting, I have
examined originals (or copies thereof certified to my satisfaction) of such
corporate and other documents of the Company (including certificates of
officers of the Company on which I have relied) and such statutes and
regulations as I have deemed relevant and necessary in order to give the
following opinion; the certificate of incorporation and by-laws of the
Company and its Subsidiaries as set forth on Schedule 1 of the Credit
Agreement; the corporate proceedings and other actions taken by the Company
and its Subsidiaries as set forth on Schedule 1 of the Credit Agreement to
qualify, and maintain its good standing, in the jurisdiction of its
incorporation and in those jurisdictions in which the Company and its
Subsidiaries are qualified as foreign corporations; and the corporate
proceedings of the Company taken to authorize the execution, delivery and
performance of the Credit Agreement and the Notes and the borrowings under
the Credit Agreement.
+Based upon the foregoing, it is my opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. The Company
has all corporate power required to carry on its ordinary course of
business.
2. The Company has no other subsidiaries except as set forth on Schedule
1 of the Credit Agreement. Each domestic subsidiary set forth on
Schedule 1 of the Credit Agreement is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Incorporation set forth on Schedule 1.
Page 69
<PAGE>
3. The Company and its Subsidiaries are each duly qualified as a foreign
corporation in good standing to do business in all jurisdictions where
the failure to so qualify would have a material adverse effect on the
business of the Company and the subsidiaries taken as a whole. The
Company is duly qualified as a foreign corporation in good standing in
the States of [Alabama, California, Florida, Louisiana, Maryland,
Mississippi, New Jersey, Texas, Utah, and Virginia]. to be
supplemented as necessary
4. The execution and delivery of the Credit Agreement and the Notes by
the Company, the borrowings by the Company under the Credit Agreement
and the performance by the Company of its obligations under the Credit
Agreement and the Notes have been duly authorized by all necessary
corporate action and proceedings on the part of the Company and do not
at this time:
(a) require any consent of the Company's shareholders;
(b) contravene, or constitute a default under, any provision of any
law or regulation applicable to the Company or of the certificate
of incorporation or by-laws of the Company or of any material
contract, agreement, judgment, order, decree, adjudication or
other instrument binding upon the Company, or by which the
Company or its property may be bound or affected, or result in
the creation of any Lien on any property now owned by the Company
or any Subsidiaries pursuant to the provisions of any agreement,
indenture or other instrument binding upon it.
5. The Credit Agreement and the Notes have been duly executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their terms,
except as such enforceability may be limited by bankruptcy or similar
laws and by laws and judicial decisions relating generally to the
enforcement of creditors' rights and subject also to the availability
of equitable remedies and to general principles of equity.
6. Except as otherwise set forth in the Company's Form 10-K as of June
30, 1995, a copy of which has been previously delivered to you, there
is as of the date hereof no action, suit, proceeding or investigation
of which I am aware pending or threatened against or affecting the
Company or any subsidiary before any court, regulatory commission,
arbitration tribunal, governmental department, administrative agency
or instrumentality which, would be reasonably expected to have a
material adverse effect on the business, condition (financial or
otherwise) or operations of the Company and its Subsidiaries as a
whole.
7. Neither the Company nor its Subsidiaries is in default or violation in
any respect which would have a material adverse effect on the business
or condition (financial or otherwise) of the Company and its
Subsidiaries as a whole with respect to any law,
Page 70
<PAGE>
rule, regulation, order, writ, judgment, injunction, decree,
adjudication, determination or award presently in effect and
applicable to it.
8. No approval, authorization, consent adjudication or order of any
governmental authority, which has been obtained by the Company, is
required to be obtained by the Company as of the date hereof in
connection with the execution and delivery of the Credit Agreement,
the Notes, the borrowings under the Credit Agreement or in connection
with the performance by the Company of its obligations under the
Credit Agreement and the Notes.
9. The Company is not engaged principally or as one of its important
activities in the business of extending credit for the purpose of
purchasing or carrying any "margin stock" (as such term is defined in
Regulation U of the Board of Governors of the Federal Reserve System).
10. The Company is not an "investment company," within the meaning of the
Investment Company Act of 1940, as currently in effect.
Very truly yours,
R. Robert Harris
Page 71
<PAGE>
EXHIBIT "G"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago, as Administrative Agent (the
"Administrative Agent") under the Credit Agreement Described Below.
Re: Credit Agreement, dated May 23, 1996 (as the same may be amended or
modified, the "Credit Agreement"), among Thiokol Corporation (the
"Company"), the Administrative Agent, and the Banks named therein
- ------------------------------------------------------------------------------
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Credit Agreement.
The Administrative Agent is specifically authorized and directed to act
upon the following standing money transfer instructions with respect to the
proceeds of Advances or other extensions of credit from time to time until
receipt by the Administrative Agent of a specific written revocation of
such instructions by the Company, provided, however, that the
Administrative Agent may otherwise transfer funds as hereafter directed in
writing by the Company in accordance with Section 13.1 of the Credit
Agreement or based on any telephonic notice made in accordance with Section
2.3.11 of the Credit Agreement.
Facility Identification Number(s)____________________________________________
Customer/Account Name _______________________________________________________
Transfer Funds To__________________________________________________________
__________________________________________________________
For Account No. ___________________________________________________________
Reference/Attention To _______________________________________________
Authorized Officer (Customer Representative) Date
_________________________ _________________________________
(Please Print) Signature
Bank Officer Name Date ____________________________
_______________________ __________________________________
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
Page 72
<PAGE>
EXHIBIT "H"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between__
_________________________(the "Assignor") and ______________________(the
"Assignee") is dated as of , 19 . The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit
Agreement (which, as it may be amended, modified, renewed or extended from
time to time is herein called the "Credit Agreement") described in Item 1
of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein
and not otherwise defined herein shall have the meanings attributed to them
in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, all of the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee
shall have purchased pursuant to this Assignment Agreement the percentage
interest specified in Item 3 of Schedule 1 of all outstanding rights and
obligations under the Credit Agreement relating to the facilities listed in
Item 3 of Schedule 1 and the other Loan Documents. The aggregate Commitment
(or Loans, if the applicable Commitment has been terminated) purchased by
the Assignee hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement
(the "Effective Date") shall be the later of the date specified in Item 5
of Schedule 1 or two Business Days (or such shorter period agreed to by the
Agent) after a Notice of Assignment substantially in the form of Exhibit
"I" attached hereto has been delivered to the Agent. Such Notice of
Assignment must include any consents required to be delivered to the Agent
by Section 12.3.1 or 12.3.2 of the Credit Agreement. In no event will the
Effective Date occur if the payments required to be made by the Assignee to
the Assignor on the Effective Date under Sections 4 and 5 hereof are not
made on the proposed Effective Date. The Assignor will notify the Assignee
of the proposed Effective Date no later than the Business Day prior to the
proposed Effective Date. As of the Effective Date, (i) the Assignee shall
have the rights and obligations of a Lender under the Loan Documents with
respect to the rights and obligations assigned to the Assignee hereunder
and (ii) the Assignor shall relinquish its rights and be released from its
corresponding obligations under the Loan Documents with respect to the
rights and obligations assigned to the Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Agent all payments of principal,
interest and fees with respect to the interest assigned hereby. The
Assignee shall advance funds directly to the Agent with respect to all
Loans and reimbursement payments made on or after the Effective Date with
respect to the interest assigned hereby. [In consideration for the sale and
assignment of Loans
Page 73
<PAGE>
hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date,
an amount equal to the principal amount of the portion of all Floating Rate
Loans assigned to the Assignee hereunder and (ii) with respect to each
Fixed Rate Loan made by the Assignor and assigned to the Assignee hereunder
which is outstanding on the Effective Date, (a) on the last day of the
Interest Period therefor or (b) on such earlier date agreed to by the
Assignor and the Assignee or (c) on the date on which any such Fixed Rate
Loan either becomes due (by acceleration or otherwise) or is prepaid (the
date as described in the foregoing clauses (a), (b) or (c) being
hereinafter referred to as the "Payment Date"), the Assignee shall pay the
Assignor an amount equal to the principal amount of the portion of such
Fixed Rate Loan assigned to the Assignee which is outstanding on the
Payment Date. If the Assignor and the Assignee agree that the Payment Date
for such Fixed Rate Loan shall be the Effective Date, they shall agree to
the interest rate applicable to the portion of such Loan assigned hereunder
for the period from the Effective Date to the end of the existing Interest
Period applicable to such Fixed Rate Loan (the "Agreed Interest Rate") and
any interest received by the Assignee in excess of the Agreed Interest Rate
shall be remitted to the Assignor. In the event interest for the period
from the Effective Date to but not including the Payment Date is not paid
by the Company with respect to any Fixed Rate Loan sold by the Assignor to
the Assignee hereunder, the Assignee shall pay to the Assignor interest for
such period on the portion of such Fixed Rate Loan sold by the Assignor to
the Assignee hereunder at the applicable rate provided by the Credit
Agreement. In the event a prepayment of any Fixed Rate Loan which is
existing on the Payment Date and assigned by the Assignor to the Assignee
hereunder occurs after the Payment Date but before the end of the Interest
Period applicable to such Fixed Rate Loan, the Assignee shall remit to the
Assignor the excess of the prepayment penalty paid with respect to the
portion of such Fixed Rate Loan assigned to the Assignee hereunder over the
amount which would have been paid if such prepayment penalty was calculated
based on the Agreed Interest Rate. The Assignee will also promptly remit to
the Assignor (i) any principal payments received from the Agent with
respect to Fixed Rate Loans prior to the Payment Date and (ii) any amounts
of interest on Loans and fees received from the Agent which relate to the
portion of the Loans assigned to the Assignee hereunder for periods prior
to the Effective Date, in the case of Floating Rate Loans or fees, or the
Payment Date, in the case of Fixed Rate Loans, and not previously paid by
the Assignee to the Assignor.]1 In the event that either party hereto
receives any payment to which the other party hereto is entitled under this
Assignment Agreement, then the party receiving such amount shall promptly
remit it to the other party hereto.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the
Assignor a fee on each day on which a payment of interest or facility fees
is made under the Credit Agreement with respect to the amounts assigned to
the Assignee hereunder (other than a payment of interest or commitment fees
for the period prior to the Effective Date or, in the
- --------
1 Each Assignor may insert its standard payment provisions in lieu
of the payment terms included in this Exhibit.
Page 74
<PAGE>
case of Fixed Rate Loans, the Payment Date, which the Assignee is obligated
to deliver to the Assignor pursuant to Section 4 hereof). The amount of
such fee shall be the difference between (i) the interest or fee, as
applicable, paid with respect to the amounts assigned to the Assignee
hereunder and (ii) the interest or fee, as applicable, which would have
been paid with respect to the amounts assigned to the Assignee hereunder if
each interest rate was of 1% less than the interest rate paid by the
Company or if the facility fee was of 1% less than the facility fee paid by
the Company, as applicable. In addition, the Assignee agrees to pay % of
the recordation fee required to be paid to the Agent in connection with
this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim created by the
Assignor. It is understood and agreed that the assignment and assumption
hereunder are made without recourse to the Assignor and that the Assignor
makes no other representation or warranty of any kind to the Assignee.
Neither the Assignor nor any of its officers, directors, employees, agents
or attorneys shall be responsible for (i) the due execution, legality,
validity, enforceability, genuineness, sufficiency or collectability of any
Loan Document, including without limitation, documents granting the
Assignor and the other Banks a security interest in assets of the Company
or any guarantor, (ii) any representation, warranty or statement made in or
in connection with any of the Loan Documents, (iii) the financial condition
or creditworthiness of the Company or any guarantor, (iv) the performance
of or compliance with any of the terms or provisions of any of the Loan
Documents, (v) inspecting any of the Property, books or records of the
Company, (vi) the validity, enforceability, perfection, priority,
condition, value or sufficiency of any collateral securing or purporting to
secure the Loans or (vii) any mistake, error of judgment, or action taken
or omitted to be taken in connection with the Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment Agreement, (ii) agrees that it
will, independently and without reliance upon the Agent, the Assignor or
any other Bank and based on such documents and information at it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents, (iii) appoints and
authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably
incidental thereto, (iv) agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Loan Documents
are required to be performed by it as a Bank, (v) agrees that its payment
instructions and notice instructions are as set forth in the attachment to
Schedule 1, (vi) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are
"plan assets" as defined under ERISA and that its
Page 75
<PAGE>
rights, benefits and interests in and under the Loan Documents will not be
"plan assets" under ERISA, [and (vii) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying that the Assignee
is entitled to receive payments under the Loan Documents without deduction
or withholding of any United States federal income taxes].2
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the
Assignor in connection with or arising in any manner from the Assignee's
non-performance of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee
shall have the right pursuant to Section 12.3.1 of the Credit Agreement to
assign the rights which are assigned to the Assignee hereunder to any
entity or person, provided that (i) any such subsequent assignment does not
violate any of the terms and conditions of the Loan Documents or any law,
rule, regulation, order, writ, judgment, injunction or decree and that any
consent required under the terms of the Loan Documents has been obtained
and (ii) unless the prior written consent of the Assignor is obtained, the
Assignee is not thereby released from its obligations to the Assignor
hereunder, if any remain unsatisfied, including, without limitation, its
obligations under Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement
and the Effective Date, the percentage interest specified in Item 3 of
Schedule 1 shall remain the same, but the dollar amount purchased shall be
recalculated based on the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached
Notice of Assignment embody the entire agreement and understanding between
the parties hereto and supersede all prior agreements and understandings
between the parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered)
shall be the address set forth in the attachment to Schedule 1.
- -------------
2 to be inserted if the Assignee is not incorporated under
the laws of the United States, or a state thereof.
Page 76
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above
written.
[NAME OF ASSIGNOR]
By: _______________________________________
Title: _______________________________________
_______________________________________
[NAME OF ASSIGNEE]
By: ________________________________________
Title:________________________________________
_________________________________________
__________________________________________
Page 77
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
Credit Agreement by and among Thiokol Corporation, The First National
Bank of Chicago, as Administrative Agent, and the Banks party thereto
dated May 23, 1996.
2. Date of Assignment Agreement: ______________, 19__
3. Amounts (As of Date of Item 2 above):
a. Total of Commitments (Loans)*
under Credit Agreement $_______
b. Assignee's Percentage
of Facility purchased
under the Assignment
Agreement** _______%
c. Amount of Assigned Share in
Facility purchased under
the Assignment
Agreement $________
4. Assignee's Aggregate Loan
Amount)* Commitment Amount
Purchased Hereunder: $_________
5. Proposed Effective Date: ___________________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: _________________________ By: ________________________________
Title: ______________________ Title: _______________________________
- --------------------------------------
* If a Commitment has been terminated, insert outstanding Loans in
place of Commitment
** Percentage taken to 10 decimal places
Page 78
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
Page 79
<PAGE>
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
_________________, 19__
To: Thiokol Corporation
2475 Washington Boulevard
Ogden, Utah 84405
Attn: Treasury Department, 4th Floor
The First National Bank of Chicago
Mail Suite 0362
One First National Plaza
Chicago, Illinois 60670-0362
Attn: Transportation Division,
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1").
Capitalized terms used herein and not otherwise defined herein shall have
the meanings attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to
the Company and the Agent pursuant to Section 12.3.3 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of_______ , 19__ (the "Assignment"), pursuant to which,
among other things, the Assignor has sold, assigned, delegated and
transferred to the Assignee, and the Assignee has purchased, accepted and
assumed from the Assignor the percentage interest specified in Item 3 of
Schedule 1 of all outstandings, rights and obligations under the Credit
Agreement relating to the facilities listed in Item 3 of Schedule 1. The
Effective Date of the Assignment shall be the later of the date specified
in Item 5 of Schedule 1 or two Business Days (or such shorter period as
agreed to by the Agent) after this Notice of Assignment and any consents
and fees required by Sections 12.3.1, 12.3.2, and 12.3.3 of the Credit
Agreement have been delivered to the Agent, provided that the Effective
Date shall not occur if any condition precedent agreed to by the Assignor
and the Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Company and the
Agent notice of the assignment and delegation referred to herein. The
Assignor will confer with the Agent before the date
Page 80
<PAGE>
specified in Item 5 of Schedule 1 to determine if the Assignment Agreement
will become effective on such date pursuant to Section 3 hereof, and will
confer with the Agent to determine the Effective Date pursuant to Section 3
hereof if it occurs thereafter. The Assignor shall notify the Agent if the
Assignment Agreement does not become effective on any proposed Effective
Date as a result of the failure to satisfy the conditions precedent agreed
to by the Assignor and the Assignee. At the request of the Agent, the
Assignor will give the Agent written confirmation of the satisfaction of
the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before
the Effective Date the processing fee of $3,000 required by Section 12.3.3
of the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Agent prepare and cause the
Company to execute and deliver new Notes or, as appropriate, replacements
notes, to the Assignor and the Assignee. The Assignor and, if applicable,
the Assignee each agree to deliver to the Agent the original Note received
by it from the Company upon its receipt of a new Note in the appropriate
amount.
7. The Assignee advises the Agent that notice and payment instructions
are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and
that its rights, benefits, and interests in and under the Loan Documents
will not be "plan assets" under ERISA.
Page 81
<PAGE>
9. The Assignee authorizes the Agent to act as its agent under the
Loan Documents in accordance with the terms thereof. The Assignee
acknowledges that the Agent has no duty to supply information with respect
to the Company or the Loan Documents to the Assignee until the Assignee
becomes a party to the Credit Agreement.*
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
Title: Title:
ACKNOWLEDGED AND CONSENTED TO ACKNOWLEDGED AND CONSENTED TO
BY THE FIRST NATIONAL BANK OF CHICAGO BY THIOKOL CORPORATION
By: By:
Title: Title:
[Attach photocopy of Schedule 1 to Assignment]
+
- -------------------------
* May be eliminated if Assignee is a party to the Credit Agreement prior to
the Effective Date.
Page 82
<PAGE>
SCHEDULE "1"
SUBSIDIARIES
(See Section 5.16)
(Ownership interests are 100% unless otherwise indicated.)
Page 83
<PAGE>
SCHEDULE "2"
INDEBTEDNESS OF SUBSIDIARIES
(See Section 5.16)
Page 84
<PAGE>
SCHEDULE "3"
LIENS
(See Section 6.2.6)
There are no Liens outstanding by the Company or any Subsidiary except
Liens permitted pursuant to Section 6.2.6 of the Credit Agreement.
Page 85
<PAGE>
THIOKOL CORPORATION
1996 Stock Awards Plan
1. Purpose. The purpose of the Thiokol Corporation 1996 Stock Awards
Plan (the "Plan") is to promote the long term financial interests and
growth of Thiokol Corporation (the "Company") by (a) attracting and
retaining executive personnel, (b) motivating executive personnel by means
of growth-related incentives, (c) providing incentive compensation
opportunities that are competitive with those of other major corporations;
and (d) furthering the identity of interests of Participants with those of
the stockholders of the Company.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" means any entity in which the Company has a
direct or indirect equity interest which is so designated by the
Committee.
"Award Limit" means 400,000 shares of Common Stock.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statue.
"Committee" means a committee of two or more directors of
the Company who are "outside directors" as such term is used in
Section 162(m) of the Code and Non-Employee Directors for
purposes of Rule 16b-3.
"Common Stock" means the common stock, $1.00 par value, of
the Company or such other securities as may be substituted
therefore pursuant to paragraph 6(e).
"Employee" means any officer or other employee (as defined
in accordance with Section 3401(c) of the Code) of the Company,
or of any Affiliate.
The "Fair Market Value" of a share of Common Stock means the
average between the highest and lowest quoted selling prices of
the common stock on the New York Stock Exchange on pertinent
option grant date or exercise date.
"Participant" means any key Employee of the Company or an
Affiliate selected by the Committee.
1
<PAGE>
"QDRO" means a qualified domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder.
"Rule 16b-3" means such rule adopted under the Securities
Exchange Act of 1934, as such rule is amended from time to time,
or any successor rule.
3. Limitation on Aggregate Shares. The number of shares of common
stock with respect to which awards may be granted under the Plan shall not
exceed 1,000,000 shares. Such 1,000,000 shares of common stock may be
either previously authorized but unissued shares, treasury shares, or a
combination thereof, as the Committee shall determine. The maximum number
of shares of common stock respect to which awards may be granted under the
Plan during any calendar year to a single Participant may not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the
Award Limit and if, after grant of an Option, the price of shares subject
to such Option is reduced, the transaction is treated as a cancellation of
the Option and a grant of a new Option and both the Option deemed to be
canceled and the Option deemed to be granted are counted against the Award
Limit. Furthermore, to the extent required by Section 162(m) of the Code,
if, after grant of a Stock Appreciation Right ("SAR"), the base amount on
which stock appreciation is calculated is reduced to reflect a reduction in
the Fair Market Value of the Company's Common Stock, the transaction is
treated as a cancellation of the SAR and a grant of a new SAR and both the
SAR deemed to be canceled and the SAR deemed to be granted are counted
against the Award Limit.
4. Add-back of Options and Other Rights. If any Option, other
right to acquire shares of Common Stock under this Plan, or any other
award, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by this Plan, the
number of shares subject to such Option or other right but as to which such
Option or other right was not exercised prior to its expiration,
cancellation or exercise may again be optioned, granted or awarded
hereunder, subject to the limitations of Section 3. Furthermore, any shares
subject to Options or other awards which are adjusted pursuant to Section
6(e) and become exercisable with respect to shares of stock of another
corporation shall be considered cancelled and may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 3.
Shares of Common Stock which are delivered by the Participant or withheld
by the Company upon the exercise of any Option or other award under this
Plan, in payment of the exercise price thereof, may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 3. If
any share of Restricted Stock is forfeited by the Participant or
repurchased by the Company pursuant to Section 5(c)(iii) hereof, such share
may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 3. Notwithstanding the provisions of this Section 4,
no shares of Common Stock may again be optioned, granted or awarded if such
action would cause an Incentive Stock Option to fail to qualify as an
incentive stock option under Section 422 of the Code.
2
<PAGE>
5. Awards. The Committee may grant stock options ("Options"), to
Participants, in accordance with this paragraph 5 and the other provisions
of the Plan.
(a) Options.
(i) Option Grants. Options granted under the Plan may be incentive
stock options ("ISOs") within the meaning of Section 422 of the Code or any
successor provision, or in such other form, consistent with the Plan, as
the Committee may determine.
(ii) Option Exercise Price. The exercise price of an Option shall be
fixed by the Committee at not less than 100% of the Fair Market Value of a
share of common stock on the date of grant.
(iii) Option Term. The term of an Option shall be set by the Committee
in its discretion; provided, however, that in the case of ISOs, the term
shall not be more than ten (10) years from the date the ISO is granted.
(iv) Exercisability. Options shall be exercisable at such time or
times as the Committee shall determine at or subsequent to grant.
(vi) Exercise of Options. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect
to fractional shares and the Committee may require that, by the terms of
the Option, a partial exercise be with respect to a minimum number of
shares. Options shall be exercised in whole or in part by providing (A)
written notice to the Company (to the attention of the Corporate Secretary)
complying with the applicable rules established by the Committee; (B) such
representations and documents as the Committee deems necessary or advisable
to effect compliance with all applicable laws or regulations; (C) in the
event that the Option shall be exercised pursuant to Section 6(d) by any
person or persons other than the optionee, appropriate proof of the right
of such person or persons to exercise the Option; and (D) payment in full
of the option price. Payment of the option price may be made, at the
discretion of the optionee, and to the extent permitted by the Committee,
(1) in cash (including check, bank draft, or money order), (2) in Common
Stock with a Fair Market Value on the date of delivery equal to the
aggregate exercise price of the Option or exercised portion thereof, (3) by
a combination of cash and common stock, or (4) with any other good and
valuable consideration.
(vii) Rights as Stockholders. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in
respect of any shares purchasable upon the exercise of any part of an
Option unless and until certificates representing such shares have been
issued by the Company to such holders.
(viii) Ownership and Transfer Restrictions. The Committee may impose
such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate. Any
such restriction shall be set forth in the respective Stock Option
3
<PAGE>
Agreement and may be referred to on the certificates evidencing such
shares. The Committee may require the Employee to give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of
an ISO within (i) two years from the date of granting such Option to such
Employee or (ii) one year after the transfer of such shares to such
Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.
(b) Stock Appreciation Rights.
(i) Grant and Price of SAR. Subject to such terms and conditions not
inconsistent with this Plan as the Committee shall impose and shall be
evidenced by a written Stock Appreciation Right Agreement, an SAR shall
entitle its holder to receive from the Company, at the time of exercise of
such right, an amount equal to the excess of the Fair Market Value (at the
date of exercise) of a share of common stock over the SAR price multiplied
by the number of shares as to which the holder is exercising the SAR. The
SAR price shall be fixed by the Committee at not less than 100% of the Fair
Market Value of a share of common stock on the date of grant. SARs may be
in tandem with any previously or contemporaneously granted Option or
independent of any Option.
(ii) Tandem SARs. An SAR in tandem with an Option shall be related to
a particular Option and shall be exercisable only when and to the extent
the related Option is exercisable. An SAR in tandem with an Option may be
granted to the Participant for no more than the number of shares subject to
the simultaneously or previously granted Option to which it is coupled.
(iii) Amount Payable by Company. The amount payable may be paid by the
Company in common stock (valued at its Fair Market Value on the date of
exercise), cash or a combination thereof, as the Committee may determine,
which determination shall be made after considering any preference
expressed by the holder.
(iv) Exercise of SAR. An SAR shall be exercised by written notice to
the Company (to the attention of the Corporate Secretary) at any time prior
to its stated expiration, subject to any timing or other restrictions with
respect to a SAR, including a window period limitation, as may be imposed
by the Committee.
(c) Restricted Stock.
(i) Restricted Stock Award. The Committee may award to any Participant
shares of common stock, including shares earned under any of the Company's
compensation plans, subject to this paragraph 5(c) and such other terms and
conditions as the Committee may prescribe (such shares being called
"Restricted Stock"), which restrictions may include, without limitation,
restrictions concerning voting rights and transferability and restrictions
based on duration of employment with the Company, Company performance and
individual performance. Each certificate for Restricted Stock shall be
registered in the name of the Participant and deposited,
4
<PAGE>
together with a stock power endorsed in blank, with the Company.
(ii) Restrictions. There shall be established for each Restricted
Stock award a restriction period (the "Restriction Period") of such length
as shall be determined by the Committee. Shares of Restricted Stock may not
be sold, assigned, transferred, pledged or otherwise encumbered, except as
hereinafter provided, during the Restriction Period. Unless otherwise
provided by the Committee, except for such restrictions on transfer and
such other restrictions as the Committee may impose, the Participant shall
have all the rights of a holder of common stock as to such Restricted
Stock. The Committee, in its sole discretion, may permit or require the
payment of cash dividends to be deferred and, if the Committee so
determines, reinvested in additional Restricted Stock or otherwise
invested. At the expiration of the Restriction Period, the Corporation
shall redeliver to the Participant (or the Participant's or designated
beneficiary under Section 6(h), or, if none, the Participant's legal
representative) the certificates deposited pursuant to this paragraph.
(iii) Forfeiture/Repurchase of Restricted Stock. Except as provided by
the Committee at the time of grant or otherwise, upon a termination of
employment for any reason during the Restriction Period all shares still
subject to restriction shall be forfeited by the Participant or at the
discretion of the Committee may be repurchased by the Company at a price to
be determined by the Committee.
6. Miscellaneous Provisions.
(a) Administration. The Plan shall be administered by the Committee.
Subject to the limitations of the Plan, the Committee shall have the sole
and complete authority to: (i)select Participants in the plan; (ii) subject
to Section 3, to make awards in such forms and amounts as it shall
determine, including the determination as to whether such Options are to be
ISOs; (iii) to impose such limitations, restrictions and conditions upon
such awards as it shall deem appropriate, (iv) to interpret the Plan and
the agreements pursuant to which Options, Restricted Stock or SARs are
granted or awarded, and to adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan, (v) to
correct any defect or omission or to reconcile any inconsistency in the
Plan or in any award granted hereunder and (vi) to make all other
determinations and to take all other actions necessary or advisable for the
implementation and administration of the Plan. Any such interpretations and
rules with respect to ISOs shall be consistent with the provisions of
Section 422 of the Code. The actions and determinations of the Committee or
its delegates on matters within its authority shall be conclusive and
binding upon the Company, all the Participants and all other interested
persons, subject to such allocation to its Affiliates and operating units
as it deems appropriate. The Committee may, to the extent that any such
action will not prevent the Plan from complying with the Rule 16b-3 or
Section 162(m) of the Code, delegate any of its authority hereunder to such
persons as it deems appropriate.
(b) Professional Assistance; Good Faith Actions. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne
5
<PAGE>
by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers, or other persons. The Committee, the
Company and the Company's officers and Directors shall be entitled to rely
upon the advice, opinions or valuations of any such persons. No members of
the Committee or Board shall be personally liable for any action,
determination or interpretation made in good faith with respect to this
Plan, Options, awards of Restricted Stock or SARs, and all members of the
Committee and the Board shall be fully protected by the Company in respect
of any such action, determination or interpretation.
(c) Written Agreement Each award shall be evidenced by a written
agreement, which shall be executed by the Participant and an authorized
officer of the Company and which shall contain such terms and conditions as
the Committee shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain
such terms and conditions as may be necessary to meet the applicable
provisions of Section 162(m) of the Code. Stock Option Agreements
evidencing ISOs shall contain such terms and conditions as may be necessary
to meet the applicable provisions of Section 422 of the Code.
(d) Non-Transferability. Subject to the provisions of paragraph 6(h),
no award under the Plan and no interest therein, shall be transferable by
the Participant otherwise than by will or the laws of descent and
distribution or pursuant to a QDRO, unless and until such rights or awards
have been exercised, or the shares underlying such rights or awards have
been issued, and all restrictions applicable to such shares have lapsed.
All awards shall be exercisable or received during the Participant's
lifetime only by the Participant or the Participant's legal representative.
Any purported transfer contrary to this provision will nullify the award.
During the lifetime of the Participant, only he may exercise an Option or
other right or award (or any portion thereof) granted to him under the
Plan, unless it has been disposed of pursuant to a QDRO. After the death of
the Participant, any exercisable portion of an Option or other right or
award may, prior to the time when such portion becomes unexercisable under
the Plan or the applicable Stock Option Agreement or other agreement, be
exercised by his beneficiary designated under 6(h) or, if none, his
personal representative or by any person empowered to do so under the
deceased Participant's will or under the then applicable laws of descent
and distribution.
(e) Adjustments Upon Certain Changes. In the event of a
reorganization, recapitalization, spinoff, stock dividend, stock split,
combination, reclassification, reverse stock split, merger, consolidation,
split-up, spin-off, repurchase, liquidation, dissolution, or sale,
transfer, exchange or other disposition of all or substantially all of the
assets of the Company, or exchange of Common Stock or other securities of
the Company, issuance of warrants or other rights to purchase Common Stock
or other securities of the Company, or other similar corporate transaction
or event or other increase or reduction in the number of issued shares of
common stock, the Committee may, in order to prevent the dilution or
enlargement of rights under awards, make such adjustments in the number and
type of shares authorized by the Plan, the number and type of shares
covered by, or with respect to which payments are measured under,
outstanding awards and the exercise prices specified therein as may be
determined to be appropriate and
6
<PAGE>
equitable. In the event of any of the events or transactions described in
the preceding sentence, a change in control, or similar transaction by the
Company or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, if the Committee determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with
respect to any option, right or other award under this Plan, to facilitate
such transactions or events or to give effect to such changes in laws,
regulations or principles, the Committee in its discretion is hereby
authorized to provide in the agreement evidencing any award or by action
taken prior to the occurrence of such transaction or event: (i) for
adjustments to such award in order to prevent the dilution or enlargement
of rights thereunder or to provide for acceleration of benefits thereunder;
(ii) for either the purchase of any such Option, SAR, or any Restricted
Stock for an amount of cash equal to the amount that could have been
attained upon the exercise of such option, right or award or realization of
the Participant's rights had such option, right or award been currently
exercisable or payable or fully vested or the replacement of such option,
right or award with other rights or property selected by the Committee in
its sole discretion; (iii) that it cannot be exercised after such event;
(iv) that upon such event, such option, right or award be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares
and prices; and (v) that the restrictions imposed under a Restricted Stock
Agreement upon some or all shares of Restricted Stock may be terminated,
and some or all shares of such Restricted Stock may cease to be subject to
repurchase or forfeiture under Section 5(c)(iv) after such event. With
respect to Options and SARs intended to qualify as performance-based
compensation under Section 162(m), no adjustment or action described in
this Section 6(e) or in any other provision of the Plan shall be authorized
to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code or would cause such Option or SAR to
fail to so qualify under Section 162(m), as the case may be, or any
successor provisions thereto. Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Committee determines that the option or
other award is not to comply with such exemptive conditions.
(f) Tax Withholding. The Committee shall have the power to
withhold, or require a Participant to remit to the Company, an amount to
satisfy any withholding or other tax due with respect to any amount payable
and/or shares issuable under the Plan, and the Committee may defer such
payment or issuance unless indemnified to its satisfaction. Subject to the
consent of the Committee, a Participant may make an irrevocable election to
have shares of common stock otherwise issuable under an award withheld,
tender back to the Company shares of common stock received pursuant to an
award or deliver to the Company previously-acquired shares of common stock
having a fair market value sufficient to satisfy all or part of the
Participant's estimated tax obligations associated with the transaction.
Such election must be made by a Participant prior to the date on which the
relevant tax obligation arises. The Committee may disapprove of any
7
<PAGE>
election and may limit, suspend or terminate the right to make such elections.
(g) Listing and Legal Compliance. The Committee may suspend the
exercise or payment of any award so long as it determines that securities
exchange listing or registration or qualification under any securities laws
is required in connection therewith and has not been completed on terms
acceptable to the Committee. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon
the exercise of any Option or portion thereof prior to fulfillment of all
of the following conditions:
(i) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(ii) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body which the Committee or Board shall, in its absolute
discretion, deem necessary or advisable;
(iii) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be neces sary or advisable;
(iv) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience; and
(v) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
The Committee may, in its absolute discretion, also take whatever
additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and
issuing stop-transfer notices to agents and registrars.
(h) Beneficiary Designation. Subject to paragraph 6(d), Participants
may name, from time to time, beneficiaries (who may be named contingently
or successively) to whom benefits under the Plan are to be paid in the
event of their death before they receive any or all of such benefit. Each
designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee, and will be effective only
when filed by the Participant in writing with the Committee during the
Participant's lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the
Participant's estate.
8
<PAGE>
(i) Rights of Participants. Nothing in the Plan shall interfere with
or limit in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to
continue in the employ of the Company for any period of time or to continue
his or her present or any other rate of compensation. No employee shall
have a right to be selected as a Participant, or, having been so selected,
to be selected again as a Participant.
(j) Amendment, Suspension and Termination of Plan. This Plan will
terminate and no Options, SARs or Restricted Stock may be granted after
August 14, 2006. The Board of Directors or the Committee may suspend or
terminate the Plan or any portion thereof at any time before August 14,
2006 and may amend it from time to time in such respects as the Board of
Directors or the Committee may deem advisable; provided, however, that no
such amendment shall be made without stockholder approval to the extent
such approval is required by law, agreement or the rules of any exchange
upon which the common stock is listed. No such amendment, suspension or
termination shall impair the rights of Participants under outstanding
awards without the consent of the Participants affected thereby or make any
change that would disqualify the Plan, or any other plan of the Company
intended to be so qualified, from the exemption provided by Rule 16b-3. No
such amendment shall be made that would cause the options and the SARs from
qualifying as performance based compensation as that term is used Section
162(m) of the Code.
The Committee may amend or modify any award in any manner to the
extent that the Committee would have had the authority under the Plan to
initially grant such award. No such amendment or modification shall impair
the rights of any Participant under any award without the consent of such
Participant.
(k) Effective Date of Plan. The Plan shall become effective on August
15, 1996. This Plan will be submitted for the approval of the Company's
stockholders within twelve months after the date of the Board's initial
adoption of this Plan. Options, and SARs may be granted and Restricted
Stock may be awarded prior to such stockholder approval, provided that such
Options and SARs shall not be exercisable and such Restricted Stock shall
not vest prior to the time when this Plan is approved by the stockholders,
and provided further that if such approval has not been obtained at the end
of said twelve-month period, all Options or SARs previously granted and all
Restricted Stock previously awarded under this Plan shall thereupon be
canceled and become null and void.
(l) Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State
of Delaware without regard to conflicts of laws thereof.
(m) Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, this Plan,
and any Option, SAR, or Restricted Stock granted, to any individual who is
then subject to Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive rule under
9
<PAGE>
Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such
exemptive rule. To the extent permitted by applicable law, the Plan,
Options, SARs and Restricted Stock granted hereunder shall be deemed
amended to the extent necessary to conform to such applicable exemptive
rule. Furthermore, notwithstanding any other provision of this Plan, any
Option or SAR intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall be subject to any
additional limitations set forth in Section 162(m) of the Code (including
any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to
conform to such requirements.
(n) Consideration. In all cases, legal consideration shall be required
for each issuance of Options, Restricted Stock ans SARs.
IN WITNESS WHEREOF, the Board of Directors has caused this Plan to be
signed by its duly appointed officers and its corporate seal to be hereunto
affixed as of this 15 day of August 1996.
By: /s/ JAMES R. WILSON
_______________________________
Chairman of the Board, President
and Chief Executive Officer
-Seal-
Attested:
By: /s/ EDWIN M. NORTH
______________________________
Corporate Secretary
10
THIOKOL CORPORATION
G R A N T A G R E E M E N T
Incentive Stock Option
AGREEMENT, made this 1st day of August 1996 between Thiokol
Corporation, a Delaware corporation ("Company") and Employee whose name
appears on the Notice of Grant of Stock attached hereto ("Employee").
WHEREAS, the Committee (as defined in Section 1.4), has determined
that it would be to the advantage and best interest of the Company and its
stockholders to grant the stock option provided for herein to the Employee
in consideration of Employee's services to the company or a Company
Subsidiary and as an incentive for increased efforts during the Employee's
service to the Company or a Company Subsidiary, and has advised the Company
thereof and instructed the undersigned officers to issue said Option;
WHEREAS, the stock option subject to this agreement is granted
pursuant to the terms of the Thiokol Corporation 1996 Stock Awards Plan
dated August 15, 1996.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Whenever the following terms are used in this Agreement, they shall
have the meaning specified below unless the context clearly indicates to
the contrary. Capitalized terms which are not defined below shall have the
meaning specified in the Plan.
Section 1.1 - Beneficiary
- -------------------------
"Beneficiary" shall mean the person or persons properly designated by
the Employee, including his spouse or heirs at law, to exercise such
Employee's rights under the Plan in the event of the Employee's death, or
if the Employee has not designated such person or persons, or such person
or persons shall all have pre-deceased the Employee, the executor or
administrator of the Employee's estate. Designation, revocation and
redesignation of Beneficiaries must be made in writing in accordance with
rules established by the Committee and shall be effective upon delivery to
the Committee.
1
<PAGE>
Section 1.2 - Board
- -------------------
"Board" shall mean the Board of Directors of the Company.
Section 1.3 - Code
- ------------------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.4 - Committee
- -----------------------
"Committee" shall mean the Committee of the Board appointed as
provided in the Plan.
Section 1.5 - Company
- ---------------------
"Company" shall mean Thiokol Corporation, a Delaware corporation.
Section 1.6 - Company Subsidiary
- --------------------------------
"Company Subsidiary" shall mean any corporation in an unbroken chain
of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock
possessing fifty (50%) or more of the total combined voting power of all
classes of stock in one (1) of the other corporations in such chain.
Section 1.7 - Exchange Act
- --------------------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.8 - Option
- --------------------
"Option" shall mean the incentive stock option to purchase Common
Stock of the Company granted under this Agreement.
Section 1.9 - Plan
- ------------------
"Plan" shall mean the Thiokol Corporation 1996 Stock Awards Plan.
Section 1.10 - Rule 16b-3
- -------------------------
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended in the future.
2
<PAGE>
Section 1.11 - Securities Act
- -----------------------------
"Securities Act" shall mean the Securities Act of 1933, as amended.
ARTICLE II
GRANT OF OPTION
---------------
Section 2.1 - Grant of Option
- -----------------------------
In consideration of Employee's services to the Company or Company
Subsidiary, Thiokol Corporation grants to Employee the option to purchase
shares of its Common Stock (par value $1 per share) at a purchase price set
forth on the Notice of Grant of Stock attached hereto (the fair market
value of such shares on the Date of Grant), subject to the conditions of
this Agreement.
Section 2.2 - Adjustments in Option
- -----------------------------------
Subject to Section 5.3, in the event that the Committee determines
that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities or property) of a reorganization,
recapitalization, spinoff, stock dividend, stock split, combination,
reclassification, reverse stock split, merger, consolidation, split-up,
spin-off, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the
Company, or exchange of Common Stock or other securities of the Company, or
other similar corporate transaction or event or other increase or reduction
in the number of issued shares of Common Stock, affects the Common Stock
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available with respect to the Option the
Committee may, in order to prevent the dilution or enlargement of rights
under awards, make such adjustments in any and all of the number and type
of shares covered by the option, or with respect to which payments are
measured under, outstanding awards and the exercise price specified herein
as may be determined to be appropriate and equitable, to the end that after
such event the Optionee's proportionate interest shall be maintained as
before the occurrence of such event.. Such adjustment in the Option shall
be made without change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the Option price per share; provided,
however, that each such adjustment shall be made in such manner as not to
constitute a "modification" within the meaning of Section 424(h)(3) of the
Code. Any such adjustment made by the Committee shall be final and binding
upon the Employee, the Company, and all other interested persons.
3
<PAGE>
ARTICLE III
PERIOD OF EXERCISABILITY
------------------------
Section 3.1 - Commencement of EXERCISABILITY
- --------------------------------------------
(a) Subject to subsection (b) and Section 3.4, the Option shall become
exercisable on the first business day following the expiration of one year
from the Date of Grant set forth on the Notice of Grant of Stock attached
hereto. No part of the Option will be exercisable prior to the first
business day following the expiration of one year from the Date of Grant
set forth on the Notice of Grant of Stock attached hereto.
(b) No portion of the Option which is unexercisable at termination of
employment shall thereafter become exercisable.
Section 3.2 - Duration of Exercisability
- ----------------------------------------
After the Option becomes exercisable pursuant to Section 3.1, the
Option shall remain exercisable until it has been exercised or until it
becomes unexercisable under Section 3.3.
Section 3.3 - Expiration of Option.
- -----------------------------------
(a) The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten (10) years from the date the Option was
granted; or
(ii) Except in the event of a Change in Control of the Company as
defined in Section 3.4 below or as otherwise provided herein, the
expiration of three (3) months from the date of the Employee's
termination of employment unless such termination of employment
results from his death or his retirement pursuant to the terms of
a pension plan of the Company; provided, however, if during the
first two years following a Change in Control of the Company,
Employee's employment terminates other than pursuant to the terms
of a pension plan of a Company and Employee's Option was
exercisable on the date of termination of Employee's employment,
it will remain exercisable for a period of six months and one day
after termination of Employee's employment, or until the
Expiration Date, whichever occurs first.
(iii)Except in the event of a Change in Control of the Company as
defined in Section 3.4 below, the close of business in the office
of the Corporate Secretary of the Company ten years from the date
of Grant set forth on the Notice of Grant of Stock attached
hereto (the "Expiration Date"); provided, however, if Employee
should die while actively employed by
4
<PAGE>
the Company prior to the Expiration Date, Employee's Option will
remain exercisable for a period of three months after the date of
Employee's death.
(iv) Except as provided in subsection (c), the expiration of two (2)
years from the date of Employee's death while an employee of the
Company or after Employee's retirement pursuant to the terms of a
pension plan of the Company, as the case may be.
(v) The effective date of the Committee's action under Section 5.3
(ii), (iii) or (iv) (except in the case of an action providing
for assumption of the Option).
(b) If Employee's employment with the Company terminates prior to the
Expiration Date because of Employee's retirement pursuant to the terms of a
pension plan of the Company, Employee's Option will remain exercisable
until the Expiration Date so long as Employee is alive until the Expiration
Date.
Section 3.4 - Acceleration of Exercisability Upon Change in Control of the
- --------------------------------------------------------------------------
Company
- -------
Notwithstanding any provision herein to the contrary, to the extent
the Employee's Option has not been exercised previously, Employee's Option
shall be exercisable from and after the occurrence of a Change in Control
of the Company; provided, however, that this acceleration of exercisability
shall not take place if this Option becomes unexercisable under Section 3.3
prior to the occurrence of a Change of Control of the Company; and
provided, further, that no Option shall be exercisable by any Employee who
is then subject to Section 16 of the Exchange Act until the expiration of
the period ending six months and one day after the later of date the Option
is granted or deemed regranted. A Change in Control of the Company shall
mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 15 percent or more
of either (i) the then outstanding shares of Common Stock of the
Corporation (the "Outstanding Corporation Common Stock") or (ii)
the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the
election of directors (the "Outstanding Corporation Voting
Securities"); provided, however, that the -------- -------
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Corporation (excluding an
acquisition by virtue of the exercise of a conversion privilege);
(ii) any acquisition by the Corporation; (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by
the Corporation; or (iv) any acquisition by any corporation
pursuant to a
5
<PAGE>
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described
in clauses (i), (ii) and (iii) of subsection (c) below are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Board") of the Corporation (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 Corporation'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 either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation: (i) more
than 60 percent of, respectively, the then outstanding shares of
Common Stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be;
(ii) no Person (excluding the Corporation, any employee benefit
plan (or related trust) of the Corporation or such corporation
resulting from such reorganization, merger or consolidation and
any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly,
15 percent or more of the Outstanding Corporation Common Stock or
Outstanding Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 15 percent or more of,
respectively, the then outstanding shares of Common Stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation, entitled to
vote generally in the election of directors; and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
6
<PAGE>
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation; or (ii) the sale
or other disposition of all or substantially all of the assets of
the Corporation, other than to a corporation, with respect to
which following such sale or other disposition: (A) more than 60
percent of, respectively, the then outstanding shares of Common
Stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities
immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting
Securities, as the case may be; (B) no Person (excluding the
Corporation and any employee benefit plan (or related trust) of
the Corporation or such corporation and any Person beneficially
owning, immediately prior to such sale of other disposition,
directly or indirectly, 15 percent or more of the Outstanding
Corporation Common Stock or Outstanding Corporation Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 15 percent or more of, respectively, the then
outstanding shares of Common Stock of such corporation and the
combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors; and (C) at least a majority of the members of the
board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other
disposition of assets of the Corporation. The Committee may make
such determinations and adopt such rules and conditions as it, in
its absolute discretion, deems appropriate in connection with
such acceleration of exercisability, including, but not by way of
limitation, provisions to ensure that any such acceleration and
resulting exercise shall be conditioned upon the consummation of
the contemplated corporate transaction.
Section 3.5 - Incentive Stock Options
- -------------------------------------
The Company intends that the Option shall be treated as an "incentive
stock option" (within the meaning of Section 422 of the Code) to the extent
permitted by the Code. To the extent that the Code does not permit the
Option to be treated as an "incentive stock option," the Option shall be
treated as a non-qualified option.
Section 3.6 - Special Tax Consequences
- --------------------------------------
The Employee acknowledges that, to the extent that the aggregate fair
market value of stock with respect to which "incentive stock options"
(within the meaning of Section 422 of the Code, but without regard to
Section 422(d) of the Code), including the Option, are exercisable for the
first time by the Employee during any calendar year (under the Plan and all
other incentive stock option plans of the Company and any Company
Subsidiary) exceeds $100,000, such options shall be treated as not
qualifying under Section 422 of the Code but rather shall be treated as
non-qualified options to the extent required by Section 422 of the Code.
The Employee further acknowledges that the rule set
7
<PAGE>
forth in the preceding sentence shall be applied by taking options into
account in the order in which they were granted. For purposes of these
rules, the fair market value of stock shall be determined as of the time
the option with respect to such stock is granted.
ARTICLE IV
EXERCISE OF OPTION
------------------
Section 4.1 - Person Eligible to Exercise
- -----------------------------------------
During Employee's lifetime, Employee's option is exercisable only by
Employee unless it has been disposed of pursuant to a Qualified Domestic
Relations Order ("QDRO"). After the death of the Employee, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3, be exercised by his Beneficiary.
Section 4.2 - Partial Exercise
- ------------------------------
Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.3.
Section 4.3 - Procedure for Exercise
- ------------------------------------
The Option may be exercised with respect to shares of the Company's
Common Stock granted to Employee in the amount specified ("Option Shares")
at any time from the date the Option becomes exercisable pursuant to
Section 3.1 or 3.4 until the Option expires pursuant to Section 3.3 by: (i)
delivery of written notification of exercise and payment in full either in
cash or in Common Stock of the Company delivered to the Corporate Secretary
of the Company for all Option Shares being purchased plus the amount of any
federal and state income taxes required to be withheld by reason of the
exercise of Employee's option; and (ii) if requested, within the specified
time set forth in any such request, delivery to the Company of such written
representations and undertakings as may, in the opinion of the Company's
legal counsel, be necessary or desirable to comply with federal and state
tax and securities laws and (iii) if requested, a bona fide written
representation and agreement, in a form satisfactory to the Committee,
signed by the Employee or other person then entitled to exercise such
Option or portion, stating that the shares of stock are being acquired for
his own account, for investment and without any present intention of
distributing or reselling said shares or any of them except as may be
permitted under the Securities Act and then applicable rules and
regulations thereunder, and that the Employee or other person then entitled
to exercise such Option or portion will indemnify the Company against and
hold it free and harmless from any loss, damage, expense or liability
resulting to the Company if any sale or distribution of the shares by such
person is contrary to the representation and agreement referred to above.
The record date of Employee's ownership of all Option Shares purchased
under this option shall be the date upon which the above-described
notification and payment are received by the Company, provided that any
requested representations, undertakings and agreements are delivered within
the time specified. In the event the Option or portion shall be exercised
pursuant to Section 4.1 by any person or persons other than the Employee,
appropriate proof of the right of such person or persons to exercise the
Option.
8
<PAGE>
The Committee may, in its absolute discretion, take whatever
additional actions it deems appropriate to insure the observance and
performance of such representations, undertakings and agreements and to
effect compliance with the Securities Act and any other federal or state
securities laws or regulations. Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it
to the effect that any subsequent transfer of shares acquired on an Option
exercise does not violate the Securities Act, and may issue stop-transfer
orders covering such shares. Share certificates evidencing stock issued on
exercise of this Option shall bear an appropriate legend referring to the
provisions of this subsection and the representations, undertakings and
agreements referenced herein.
Section 4.4 - Securities Law Restrictions
- -----------------------------------------
Employee understands and acknowledges that applicable securities laws
govern and may restrict Employee's right to offer, sell, or otherwise
dispose of any Option Shares. Employee may not offer, sell or otherwise
dispose of any Option Shares unless Employee's offer, sale or other
disposition thereof is registered under the Securities Act of 1933 (the
"1933 Act") or an exemption from the registration requirements of the 1933
Act, such as the exemption afforded by Rule 144 of the Securities and
Exchange Commission ("SEC"), is available. Employee further understands and
acknowledges that one of the requirements of Rule 144 is that there shall
be available adequate current public information with respect to the
Company at the time of the proposed disposition of the Option Shares, and
that the Company is not obligated hereunder to file reports with the SEC or
otherwise make current public information available for such purpose or to
take any other action to make available an exemption from the registration
requirements of the 1933 Act. Employee agrees that Employee will not offer,
sell or otherwise dispose of any Option Shares in any manner which would
(i) require the Company to file any registration statement with the SEC;
(ii) require the Company to amend or supplement any registration statement
which the Company at any time may have on file with the SEC; or (iii)
violate the 1933 Act, the rules and regulations promulgated thereunder or
any other state or federal law.
Section 4.5 - Conditions to Issuance of Stock Certificates
- ----------------------------------------------------------
The shares of stock deliverable upon the exercise of the Option, or
any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company.
Such shares shall be fully paid and nonassessable. The Company shall not be
required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of the Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental
regulatory body, which the Committee shall, in its sole and absolute
discretion, deem necessary or advisable; and
9
<PAGE>
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its sole and
absolute discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which, under federal, state or local tax law, it is required to
withhold upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may from time to time esta blish for reasons
of administrative convenience.
Section 4.6 - Rights as Stockholder
- -----------------------------------
The holder of the Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company
to such holder.
ARTICLE V
OTHER PROVISIONS
Section 5.1 - Administration
- ----------------------------
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and
binding upon the Employee, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan
or the Option. In its sole and absolute discretion, the Board may at any
time and from time to time exercise any and all rights and duties of the
Committee under the Plan and this Agreement except with respect to matters
which under Rule 16b-3 or Section 162(m) of the Code are required to be
determined in the sole discretion of the Committee.
Section 5.2 - Non-Transferability
- ---------------------------------
Employee's option is personal to Employee and shall not be
transferable by Employee otherwise than by will or the laws of descent and
distribution or pursuant to a QDRO. Neither the Option nor any interest or
right therein or part thereof shall be liable for the debts, contracts or
engagements of the Employee or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect; provided, however, that this Section 5.2 shall
not prevent transfers by will or by the applicable laws of descent and
distribution or pursuant to QDRO.
10
<PAGE>
Section 5.3 - Changes in Common Stock or Assets of the Company, Acquisition
- ---------------------------------------------------------------------------
or Liquidation of the Company and Other Corporate Events
- ----------------------------------------------------------
Subject to the provisions of this Section 5.3, in the event of any
transaction or event described in Section 2.2, a change in control, or
similar transaction by the Company or any unusual or nonrecurring
transactions or events affecting the Company, any affiliate of the Company,
or the financial statements of the Company or any affiliate, or of changes
in applicable laws, regulations, or accounting principles, if the Committee
determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to the Option to facilitate such
transactions or events or to give effect to such changes in laws,
regulations or principles, the Committee in its discretion is hereby
authorized to provide for such terms as it deems appropriate by action
taken prior to the occurrence of such transaction or event: (i) for
adjustments to the Option in order to prevent the dilution or enlargement
of rights thereunder or to provide for acceleration of benefits thereunder;
(ii) for either the purchase of the Option for an amount of cash equal to
the amount that could have been attained upon the exercise of such option
or realization of the Participant's rights had the Option been currently
exercisable or payable or fully vested or the replacement of such Option
with other rights or property selected by the Committee in its sole
discretion; (iii) that it cannot be exercised after such event; (iv) that
upon such event, the Option be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted for
by similar options, rights or awards covering the stock of the successor or
survivor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices. No adjustment
or action described in this Section 5.3 or in any other provision of this
Agreement shall be authorized to the extent that such adjustment or action
would cause the Agreement or the Plan or the Option to violate Section
422(b)(1) of the Code or would cause the Option to fail to so qualify under
Section 162(m), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent
such adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions or Rule 16b-3 unless
the Committee determines that the option or other award is not to comply
with such exemptive conditions.
Section 5.4 - Shares to Be Reserved
- -----------------------------------
The Company shall at all times during the term of the Option reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
Section 5.5 - Notices
- ---------------------
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Corporate
Secretary, and any notice to be given to the Employee shall be addressed to
him at the address maintained by the Corporation in its business records.
By a notice given pursuant to this Section 5.5, either party may hereafter
designate a different address for notices to be given to him. Any notice
which is required to be given to the Employee shall, if the Employee is
then deceased, be given to the Employee's personal representative if such
representative has previously informed the Company of his status and
address by written notice under this Section 5.5. Any notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed
11
<PAGE>
as aforesaid, deposited (with postage prepaid) in a post office or branch
post office regularly maintained by the United States Postal Service.
Section 5.6 - Titles
- --------------------
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
Section 5.7 - Approval by Shareholders
- --------------------------------------
This grant is made pursuant to the 1996 Stock Awards Plan adopted by
the Board of Directors on April 18, 1996. The Plan is subject to approval
by the Shareholders within 12 months after April 18, 1996. Should the
stockholders of the Company not approve such Plan, this Stock Option Grant
Agreement shall become null and void and you shall have no rights
hereunder.
Section 5.8 - Notification of Disposition
- -----------------------------------------
The Employee shall give prompt notice to the Company of any
disposition or other transfer of any shares of stock acquired under this
Agreement if such disposition or transfer is made (a) within two (2) years
from the date of granting the Option with respect to such shares or (b)
within one (1) year after the transfer of such shares to him. Such notice
shall specify the date of such disposition or other transfer and the amount
realized, in cash, other property, assumption of indebtedness or other
consideration, by the Employee in such disposition or other transfer.
Section 5.9 - Governing Law
- -----------------------------
This Grant Agreement and the Plan shall be construed in accordance
with and governed by the laws of the State of Utah.
Section 5.10 - Conformity to Securities Laws
- --------------------------------------------
The Employee acknowledges that the Plan is intended to conform to the
extent necessary with all provisions of the Securities Act and the Exchange
Act and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, including without limitation Rule 16b-3.
Notwithstanding anything herein to the contrary, the Plan shall be
administered, and the Option is granted and may be exercised, only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.
Section 5.11 - Amendments
- -------------------------
This Agreement and the Plan may be amended without the consent of the
Optionee provided that such amendment would not impair any rights of the
Optionee under this Agreement. No amendment of this Agreement shall,
without the consent of the Optionee, impair any rights of the Optionee
under this Agreement.
Section 5.12 - Conformity With Plan
- -----------------------------------
Employee's option is intended to conform in all respects with the
Plan, a copy of which is attached hereto. Inconsistencies between this
Grant Agreement and the Plan shall be resolved in accordance with the terms
of the Plan. All definitions stated in the Plan shall be fully applicable
to this Grant Agreement.
Section 5.13 - Employment and Successors
- ----------------------------------------
Nothing herein or in the Plan confers any right or obligation on
Employee to continue in the employ of the Company or Company Subsidiary or
shall affect in any way Employee's right or the right of the Company or
Company Subsidiary,
12
<PAGE>
as the case may be, which are hereby expressly reserved, to terminate
Employee's employment at any time. Employee agrees that Employee is an
Employee at will and can be terminated by the Company or Company
Subsidiary, as the case may be, at any time. Nothing herein or in the Plan
is to be interpreted as an express or implied contract of employment. This
Grant Agreement and the Plan shall be binding upon any successor or
successors of the Company.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of this 22nd day of August 1996.
THIOKOL CORPORATION EMPLOYEE
By: ______________________________ By: ________________________
Corporate Secretary
13
THIOKOL CORPORATION
G R A N T A G R E E M E N T
Nonqualified Stock Option
AGREEMENT, made this 1st day of August 1996 between Thiokol
Corporation, a Delaware corporation ("Company") and Employees whose name
appears on the Note of Grant attached hereto ("Employee").
WHEREAS, the Committee (as defined in Section 1.4), has determined
that it would be to the advantage and best interest of the Company and its
stockholders to grant the stock option provided for herein to the Employee
in consideration of Employee's services to the Company or Affiliate and as
an incentive for increased efforts during the Employee's service to the
Company or Affiliate, and has advised the Company thereof and instructed
the undersigned officers to issue said Option;
WHEREAS, the stock option subject to this agreement is granted
pursuant to the terms of the Thiokol Corporation 1996 Stock Awards Plan
dated August 15, 1996.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Whenever the following terms are used in this Agreement, they shall
have the meaning specified below unless the context clearly indicates to
the contrary. Capitalized terms which are not defined below shall have the
meaning specified in the Plan.
Section 1.1 - Affiliate
- -----------------------
"Affiliate" shall mean any entity in which the Company has a direct or
indirect equity interest which is so designated by the committee.
Section 1.2 - Beneficiary
- -------------------------
"Beneficiary" shall mean the person or persons properly designated by
the Employee, including his spouse or heirs at law, to exercise such
Employee's rights under the Plan in the event of the Employee's death, or
if the Employee has not designated such person or persons, or such person
or persons shall all have pre-deceased the Employee, the executor
1
<PAGE>
or administrator of the Employee's estate. Designation, revocation and
redesignation of Beneficiaries must be made in writing in accordance with
rules established by the Committee and shall be effective upon delivery to
the Committee.
Section 1.3 - Board
- -------------------
"Board" shall mean the Board of Directors of the Company.
Section 1.4 - Code
- ------------------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.5 - Committee
- -----------------------
"Committee" shall mean the Committee of the Board appointed as
provided in the Plan.
Section 1.6 - Company
- ---------------------
"Company" shall mean Thiokol Corporation, a Delaware corporation.
Section 1.7 - Exchange Act
- --------------------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.8 - Option
- --------------------
"Option" shall mean the nonqualified stock option to purchase Common
Stock of the Company granted under this Agreement.
Section 1.9 - Plan
- ------------------
"Plan" shall mean the Thiokol Corporation 1996 Stock Awards Plan.
Section 1.10 - Rule 16b-3
- -------------------------
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended in the future.
Section 1.11 - Securities Act
- -----------------------------
"Securities Act" shall mean the Securities Act of 1933, as amended.
2
<PAGE>
ARTICLE II
GRANT OF OPTION
---------------
Section 2.1 - Grant of Option
- ------------------------------
In consideration of Employee's services to the Company, Thiokol
Corporation grants to Employee the option to purchase shares of its Common
Stock (par value $1 per share) at a purchase price set forth on the Notice
of Grant of Stock attached hereto (the fair market value of such shares on
the Date of Grant), subject to the conditions of this Agreement.
Section 2.2 - Adjustments in Option
- ------------------------------------
Subject to Section 5.3, in the event that the Committee determines
that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), a reorganization,
recapitalization, spinoff, stock dividend, stock split, combination,
reclassification, reverse stock split, merger, consolidation, split-up,
spin-off, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the
Company, or exchange of Common Stock or other securities of the Company, or
other similar corporate transaction or event or other increase or reduction
in the number of issued shares of Common Stock affects the Commons Stock
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available with respect to the Option, the
Committee may, in order to prevent the dilution or enlargement of rights
under awards, make such adjustments in any and all of the number and type
of shares covered by the Option and the exercise price specified herein as
may be determined to be appropriate and equitable, to the end that after
such event the Optionee's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in the Option shall be
made without change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in the Option price per share. Any such
adjustment made by the Committee shall be final and binding upon the
Employee, the Company and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
------------------------
Section 3.1 - Commencement of Exercisability
- --------------------------------------------
(a) Subject to subsection (b) and Section 3.4, the Option shall become
exercisable on the first business day following the expiration of one year
from the Date of Grant set forth on the Notice of Grant of Stock attached
hereto. No part of the Option will be exercisable prior to the first
business day following the expiration of one year from the Date of Grant
set forth on the Notice of Grant of Stock attached hereto.
3
<PAGE>
(b) No portion of the Option which is unexercisable at termination of
employment shall thereafter become exercisable.
Section 3.2 - Duration of Exercisability
- -----------------------------------------
After the Option becomes exercisable pursuant to Section 3.1, the
Option shall remain exercisable until it has been exercised or until it
becomes unexercisable under Section 3.3.
Section 3.3 - Expiration of Option
- ----------------------------------
(a) The Option may not be exercised to any extent by anyone after the
first to occur of the following events:
(i) The expiration of ten (10) years from the date the Option was
granted; or
(ii) Except in the event of a Change in Control of the Company as
defined in Section 3.4 below or as otherwise provided herein, the
expiration of three (3) months from the date of the employee's
termination of employment unless such termination of employment
results from his death or his retirement pursuant to the terms of
a pension plan of the Company; provided, however, if during the
first two years following a Change in Control of the Company,
Employee's employment terminates other than pursuant to the terms
of a pension plan of a Company and Employee's Option was
exercisable on the date of termination of Employee's employment,
it will remain exercisable for a period of six months and one day
after termination of Employee's employment, or until the
Expiration Date, whichever occurs first.
(iii)Except in the event of a Change in Control of the Company as
defined in Section 3.4 below, the close of business in the office
of the Corporate Secretary of the Company ten years from the Date
of Grant set forth on the Notice of Grant of Stock attached
hereto (the "Expiration Date"); provided, however, if Employee
should die while actively employed by the Company prior to the
Expiration Date, Employee's Option will remain exercisable for a
period of three months after the date of Employee's death.
(iv) Except as provided in subsection (c), the expiration of two (2)
years from the date of Employee's death while an employee of the
Company or after Employee's retirement pursuant to the terms of a
pension plan of the Company, as the case may be.
(v) The effective date of the Committee's action under Section
5.3(ii), (iii) or (iv) (except in the case of an action providing
for assumption of the Option).
4
<PAGE>
(b) If Employee's employment with the Company terminates prior to the
Expiration Date because of Employee's retirement pursuant to the
terms of a pension plan of the Company, Employee's Option will
remain exercisable until the Expiration Date so long as Employee
is alive until the Expiration Date.
Section 3.4 - Acceleration of Exercisability Upon Change in Control of
- ----------------------------------------------------------------------
the Company.
- ------------
Notwithstanding any provision herein to the contrary, to the extent
the Employee's Option has not been exercised previously, Employee's Option
shall be exercisable from and after the occurrence of a Change in Control
of the Company; provided, however, that this acceleration of exercisability
shall not take place if this Option becomes unexercisable under Section 3.3
prior to the occurrence of a Change of Control of the Company; and
provided, further, that no Option shall be exercisable by any Employee who
is then subject to Section 16 of the Exchange Act until the expiration of
the period ending six months and one day after the later of date the Option
is granted or deemed regranted. A Change in Control of the Company shall
mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 15 percent or more
of either (i) the then outstanding shares of Common Stock of the
Corporation (the "Outstanding Corporation Common Stock") or (ii)
the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the
election of directors (the "Outstanding Corporation Voting
Securities"); provided, however, that the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
directly from the Corporation (excluding an acquisition by virtue
of the exercise of a conversion privilege); (ii) any acquisition
by the Corporation; (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation; or
(iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described
in clauses (i), (ii) and (iii) of subsection (c) below are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Board") of the Corporation (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 Corporation'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 either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated
5
<PAGE>
underthe Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation: (i) more
than 60 percent of, respectively, the then outstanding shares of
Common Stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or
consolidation, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be;
(ii) no Person (excluding the Corporation, any employee benefit
plan (or related trust) of the Corporation or such corporation
resulting from such reorganization, merger or consolidation and
any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly,
15 percent or more of the Outstanding Corporation Common Stock or
Outstanding Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 15 percent or more of,
respectively, the then outstanding shares of Common Stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation, entitled to
vote generally in the election of directors; and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation; or (ii) the sale
or other disposition of all or substantially all of the assets of
the Corporation, other than to a corporation, with respect to
which following such sale or other disposition: (A) more than 60
percent of, respectively, the then outstanding shares of Common
Stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation
Common Stock and Outstanding Corporation Voting Securities
immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding
Corporation Common Stock and
6
<PAGE>
Outstanding Corporation Voting Securities, as the case may be;
(B) no Person (excluding the Corporation and any employee benefit
plan (or related trust) of the Corporation or such corporation
and any Person beneficially owning, immediately prior to such
sale of other disposition, directly or indirectly, 15 percent or
more of the Outstanding Corporation Common Stock or Outstanding
Corporation Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 15 percent or more of,
respectively, the then outstanding shares of Common Stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors; and (C) at least a majority of the
members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of
the initial agreement or action of the Board providing for such
sale or other disposition of assets of the Corporation.
The Committee may make such determinations and adopt such rules
and conditions as it, in its absolute discretion, deems
appropriate in connection with such acceleration of
exercisability, including, but not by way of limitation,
provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon consummation of the Change of
Control of the Company.
ARTICLE IV
EXERCISE OF OPTION
------------------
Section 4.1 - Person Eligible to Exercise
- -------------------------------------------
During Employee's lifetime, Employee's option is exercisable only by
Employee unless it has been disposed of pursuant to a Qualified Domestic
Relations Order ("QDRO"). After the death of the Employee, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3, be exercised by his Beneficiary.
Section 4.2 - Partial Exercise
- ------------------------------
Any exercisable portion of the Option or the entire Option, if then
wholly exercisable, may be exercised in whole or in part prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.3.
Section 4.3 - Procedure for Exercise
- ------------------------------------
The Option may be exercised with respect to shares of the Company's
Common Stock granted to Employee in the amount specified ("Option Shares")
at any time from the date the Option becomes exercisable pursuant to
Section 3.1 or 3.4 until the Option expires pursuant to Section 3.3 by: (i)
delivery of written notification of exercise and payment in full either in
cash or in Common Stock of the Company delivered to the Corporate Secretary
of the Company for all Option Shares being purchased plus the amount of any
federal and state income taxes required to be withheld by reason of the
exercise of Employee's option; and (ii) if requested, within the specified
time set forth in any such request, delivery to the Company of such written
representations and undertakings as may, in the opinion of the Company's
legal counsel, be necessary or desirable to comply with federal
7
<PAGE>
and state tax and securities laws and (iii) a bona fide written
representation and agreement, in a form satisfactory to the Committee,
signed by the Employee or other person then entitled to exercise such
Option or portion, stating that the shares of stock are being acquired for
his own account, for investment and without any present intention of
distributing or reselling said shares or any of them except as may be
permitted under the Securities Act and then applicable rules and
regulations thereunder, and that the Employee or other person then entitled
to exercise such Option or portion will indemnify the Company against and
hold it free and harmless from any loss, damage, expense or liability
resulting to the Company if any sale or distribution of the shares by such
person is contrary to the representation and agreement referred to above.
The record date of Employee's ownership of all Option Shares purchased
under this option shall be the date upon which the above-described
notification and payment are received by the Company, provided that any
requested representations, undertakings and agreements are delivered within
the time specified. In the event the Option or portion shall be exercised
pursuant to Section 4.1 by any person or persons other than the Employee,
appropriate proof of the right of such person or persons to exercise the
Option.
The Committee may, in its absolute discretion, take whatever
additional actions it deems appropriate to insure the observance and
performance of such representations, undertakings and agreements and to
effect compliance with the Securities Act and any other federal or state
securities laws or regulations. Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it
to the effect that any subsequent transfer of shares acquired on an Option
exercise does not violate the Securities Act, and may issue stop-transfer
orders covering such shares. Share certificates evidencing stock issued on
exercise of this Option shall bear an appropriate legend referring to the
provisions of this subsection and the representations, undertakings and
agreements referenced herein.
Section 4.4 - Securities Law Restrictions
- -----------------------------------------
Employee understands and acknowledges that applicable securities laws
govern and may restrict Employee's right to offer, sell, or otherwise
dispose of any Option Shares. Employee may not offer, sell or otherwise
dispose of any Option Shares unless Employee's offer, sale or other
disposition thereof is registered under the Securities Act of 1933 (the
"1933 Act") or an exemption from the registration requirements of the 1933
Act, such as the exemption afforded by Rule 144 of the Securities and
Exchange Commission ("SEC"), is available. Employee further understands and
acknowledges that one of the requirements of Rule 144 is that there shall
be available adequate current public information with respect to the
Company at the time of the proposed disposition of the Option Shares, and
that the Company is not obligated hereunder to file reports with the SEC or
otherwise make current public information available for such purpose or to
take any other action to make available an exemption from the registration
requirements of the 1933 Act. Employee agrees that Employee will not offer,
sell or otherwise dispose of any Option Shares in any manner which would
(i) require the Company to file any registration statement with the SEC;
(ii) require the Company to amend or supplement any registration statement
which the Company at any time may have on file with the SEC; or (iii)
violate the 1933 Act, the rules and regulations promulgated thereunder or
any other state or federal law.
8
<PAGE>
Section 4.5 - Conditions to Issuance of Stock Certificates
- ----------------------------------------------------------
The shares of stock deliverable upon the exercise of the Option, or
any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company.
Such shares shall be fully paid and nonassessable. The Company shall not be
required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of the Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental
regulatory body, which the Committee shall, in its sole and absolute
discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its sole and
absolute discretion, determine to be necessary or advisable; and
(d) The payment to the Company (or other employer corporation) of all
amounts which, under federal, state or local tax law, it is required to
withhold upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may from time to time establish for reasons
of administrative convenience.
Section 4.6 - Rights as Stockholder
- -----------------------------------
The holder of the Option shall not be, nor have any of the rights or
privileges of, a stockholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company
to such holder.
ARTICLE V
OTHER PROVISIONS
----------------
Section 5.1 - Administration
- ----------------------------
The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation
and application of the Plan as are consistent therewith and to interpret or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and
binding upon the Employee, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan
or the Option. In its sole and absolute discretion, the Board may at any
time and from time to time exercise any and all
9
<PAGE>
rights and duties of the Committee under the Plan and this Agreement except
with respect to matters which under Rule 16b-3 or Section 162(m) of the
Code are required to be determined in the sole discretion of the Committee.
Section 5.2 - Non-Transferability
- ---------------------------------
Employee's option is personal to Employee and shall not be
transferable by Employee otherwise than by will or the laws of descent and
distribution or pursuant to a QDRO. Neither the Option nor any interest or
right therein or part thereof shall be liable for the debts, contracts or
engagements of the Employee or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect; provided, however, that this Section 5.2 shall
not prevent transfers by will or by the applicable laws of descent and
distribution or pursuant to QDRO.
Section 5.3 - Changes in Common Stock or Assets of the Company, Acquisition
- ---------------------------------------------------------------------------
or Liquidation of the Company and Other Corporate Events
- -----------------------------------------------------------
Subject to the provisions of this Section 5.3, in the event of any
transaction or event described in Section 2.2, a change in control, or
similar transaction by the Company or any unusual or nonrecurring
transactions or events affecting the Company, any affiliate of the Company,
or the financial statements of the Company or any affiliate, or of changes
in applicable laws, regulations, or accounting principles, if the Committee
determines that such action is appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan or with respect to the Option to facilitate such
transactions or events or to give effect to such changes in laws,
regulations or principles, the Committee in its discretion is hereby
authorized to provide for such terms and conditions as it deems
appropriate, by action taken prior to the occurrence of such transaction or
event: (i) for adjustments to such award in order to prevent the dilution
or enlargement of rights thereunder or to provide for acceleration of
benefits thereunder; (ii) for either the purchase of the Option for an
amount of cash equal to the amount that could have been attained upon the
exercise of the Option or realization of the Participant's rights had such
option been currently exercisable or the replacement of such option, right
or award with other rights or property selected by the Committee in its
sole discretion; (iii) that it cannot be exercised after such event; (iv)
that upon such event, such option, right or award be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares
and prices. No adjustment or action described in this Section 5.3 or in any
other provision of the Agreement shall be authorized to the extent that
such adjustment or action would cause the Option to fail to qualify under
Section 162(m), as the case may be, or any successor provisions thereto.
Furthermore, no such adjustment or action shall be authorized to the extent
such adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions or Rule 16b-3 unless
the Committee determines that the option or other award is not to comply
with such exemptive conditions.
10
<PAGE>
Section 5.4 - Shares to Be Reserved
- -----------------------------------
The Company shall at all times during the term of the Option reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
Section 5.5 - Notices
- ---------------------
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Corporate
Secretary, and any notice to be given to the Employee shall be addressed to
him at the address maintained by the Corporation in its business records.
By a notice given pursuant to this Section 5.5, either party may hereafter
designate a different address for notices to be given to him. Any notice
which is required to be given to the Employee shall, if the Employee is
then deceased, be given to the Employee's personal representative if such
representative has previously informed the Company of his status and
address by written notice under this Section 5.5. Any notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office
or branch post office regularly maintained by the United States Postal
Service.
Section 5.6 - Titles
- --------------------
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of this Agreement.
Section 5.7 - Approval by Shareholders
- --------------------------------------
This grant is made pursuant to the 1996 Stock Awards Plan adopted by
the Board of Directors on April 18, 1996. The Plan is subject to approval
by the Shareholders within 12 months after April 18, 1996. Should the
stockholders of the Company not approve such Plan, this Stock Option Grant
Agreement shall become null and void and you shall have no rights
hereunder.
Section 5.8 - Notification of Disposition
- -----------------------------------------
The Employee shall give prompt notice to the Company of any
disposition or other transfer of any shares of stock acquired under this
Agreement if such disposition or transfer is made (a) within two (2) years
from the date of granting the Option with respect to such shares or (b)
within one (1) year after the transfer of such shares to him. Such notice
shall specify the date of such disposition or other transfer and the amount
realized, in cash, other property, assumption of indebtedness or other
consideration, by the Employee in such disposition or other transfer.
Section 5.9 - Governing Law
- ---------------------------
This Grant Agreement and the Plan shall be construed in accordance
with and governed by the laws of the State of Utah.
Section 5.10 - Conformity to Securities Laws
- --------------------------------------------
The Employee acknowledges that the Plan is intended to conform to the
extent necessary with all provisions of the Securities Act and the Exchange
Act and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, including without limitation Rule 16b-3.
Notwithstanding anything herein to the contrary, the Plan shall be
administered, and the Option is granted and may be exercised, only in such
a manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.
11
<PAGE>
Section 5.11 - Amendments
- -------------------------
This Agreement and the Plan may be amended without the consent of the
Optionee provided that such amendment would not impair any rights of the
Optionee under this Agreement. No amendment of this Agreement shall,
without the consent of the Optionee, impair any rights of the Optionee
under this Agreement.
Section 5.12 - Conformity With Plan
- -----------------------------------
Employee's option is intended to conform in all respects with the
Plan, a copy of which is attached hereto. Inconsistencies between this
Grant Agreement and the Plan shall be resolved in accordance with the terms
of the Plan. All definitions stated in the Plan shall be fully applicable
to this Grant Agreement.
Section 5.13 - Employment and Successors
- ----------------------------------------
Nothing herein or in the Plan confers any right or obligation on
Employee to continue in the employ of the Company or any Affiliate or shall
affect in any way Employee's right or the right of the Company or any
Affiliate, as the case may be, which are hereby expressly reserved, to
terminate Employee's employment at any time. Employee agrees that Employee
is an Employee at will and can be terminated by the Company or any
Affiliate at any time. Nothing herein or in the Plan is to be interpreted
as an express or implied contract of employment. This Grant Agreement and
the Plan shall be binding upon any successor or successors of the Company.
IN WITNESS WHEREOF, this Agreement has been executed and delivered
by the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of this 22nd day of August 1996.
THIOKOL CORPORATION EMPLOYEE
By: __________________________ By: ________________________
Corporate Secretary
12
Changes to Key Executive Bonus Plan
-----------------------------------
RESOLVED, that the revised strategic goal achievement guidelines for
the Key Executive Bonus Plan set forth in the following table are hereby
adopted by this Committee as an amendment to the Key Executive Bonus Plan:
Achievement Level % of Target Bonus Earned
----------------- ------------------------
Not Met No Bonus
Partial Achievement -50% - +14%
Substantially Met 15% - 20%
All Met 21% - 25%
FURTHER RESOLVED, the Chairman of the Board, President and Chief
Executive Officer of this Corporation and his designee are hereby
authorized to amend and recodify the Key Executive Bonus Plan to
incorporate these strategic goal achievement guidelines consistent with the
purpose of the foregoing resolution.
<PAGE>
FINANCIAL INFORMATION
- ---------------------
Consolidated Statements of Income 2
Consolidated Balance Sheets 3
Consolidated Statements of Cash Flows 4
Consolidated Statements of Stockholders' Equity 5
Notes to Consolidated Financial Statements 6
Management's Report on Financial Statements 32
Report of Ernst & Young LLP, Independent Auditors 33
Management's Discussion and Analysis of Financial
Condition and Results of Operations 34
Selected Financial Data 51
1
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------
Year Ended June 30
--------------------------------------------------
(in millions, except per share data) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $889.5 $956.8 $1,043.9
Operating expenses:
Cost of sales 738.7 769.1 859.6
General and administrative 69.8 71.9 69.6
Research and development 13.3 15.0 15.4
Restructuring and impairment 5.9 61.4
------ ------ --------
827.7 917.4 944.6
Income from operations 61.8 39.4 99.3
Equity income, Howmet 4.5
Interest income 30.2 46.2 12.9
Interest expense (3.9) (9.3) (14.4)
------ ------ --------
Income before income taxes, extraordinary item
and cumulative effect of accounting changes 92.6 76.3 97.8
Income taxes 34.3 24.0 37.5
------ ------ --------
Income before extraordinary item and
cumulative effect of accounting changes 58.3 52.3 60.3
Extraordinary item - loss on early retirement of debt (4.8)
Cumulative effect of accounting changes (63.8)
------ ------ --------
Net income (loss) $ 58.3 $ 47.5 $ (3.5)
====== ====== ========
Net income (loss) per share:
Income before extraordinary item and cumulative
effect of accounting changes $ 3.14 $ 2.78 $ 3.02
Extraordinary item ( .25)
Cumulative effect of accounting changes (3.20)
------ ------ --------
Net income (loss) $ 3.14 $ 2.53 $ (.18)
====== ====== ========
- -----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ---------------------------
June 30
-------------------------
(in millions) 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 15.1 $ 13.2
Receivables 162.6 268.1
Inventories 91.4 135.0
Deferred income tax assets 27.8
Prepaid expenses 3.6 4.1
------- -------
Total Current Assets 300.5 420.4
Property, Plant and Equipment
Land 17.4 17.4
Buildings and improvements 224.8 221.2
Machinery and equipment 338.9 358.7
Construction in progress 13.2 21.2
------- -------
594.3 618.5
Less allowances for depreciation (307.6) (321.0)
------- -------
286.7 297.5
Other Assets
Equity investment in Howmet 150.5
Costs in excess of net assets of businesses acquired, less amortization 27.7 28.8
Patents and other intangible assets 16.4 19.0
Other noncurrent assets 36.5 45.0
------- -------
231.1 92.8
------- -------
$818.3 $810.7
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 62.7 $ 62.8
Accounts payable 25.9 38.6
Accrued compensation 42.2 43.4
Other accrued expenses and liabilities 51.0 52.9
Current portion of deferred income taxes 5.0
------- -------
Total Current Liabilities 181.8 202.7
Noncurrent Liabilities
Long-term debt 2.2 2.5
Accrued retiree benefits other than pensions 70.4 72.8
Deferred income taxes 39.8 26.8
Accrued interest and other noncurrent liabilities 76.2 102.1
------- -------
Total Noncurrent Liabilities 188.6 204.2
Commitments and Contingent Liabilities
Stockholders' Equity
Common stock (par value $1.00 per share)
Authorized - 200 shares
Issued - 20.5 shares including shares in treasury 20.5 20.5
Additional paid-in capital 44.2 44.5
Retained earnings 445.1 399.2
------- -------
509.8 464.2
Less common stock in treasury, at cost
(2.3 shares at June 30, 1996 and 1995) (61.9) (60.4)
------- -------
Total Stockholders' Equity 447.9 403.8
------- -------
$818.3 $810.7
======= =======
- ---------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
Year Ended June 30
--------------------------------------------
(in millions) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 58.3 $47.5 $ (3.5)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Restructuring and impairment 5.9 61.4
Extraordinary item 4.8
Cumulative effect of accounting changes 63.8
Depreciation 33.0 34.5 36.0
Amortization 9.0 5.5 5.0
Equity income (4.5)
Changes in operating assets and liabilities:
Receivables 103.9 (69.5) 26.3
Inventories and prepaid expenses 41.8 (8.1) (.1)
Accounts payable and accrued expenses (17.3) 13.0 7.4
Income taxes (9.5) 8.7 1.6
Other -- net (26.1) (1.3) (5.2)
Deferred income taxes (11.7) 5.0 1.4
------ ----- ------
Net cash provided by operating activities 182.8 101.5 132.7
INVESTING ACTIVITIES
Investment in Howmet (146.0)
Acquisitions, net of acquired cash (8.9) (12.1)
Purchases of property, plant and equipment (29.1) (33.8) (21.2)
Proceeds from disposal of assets 6.1 .4 1.2
------ ----- ------
Net cash used for investing activities (169.0) (42.3) (32.1)
FINANCING ACTIVITIES
Net change in short-term debt 2.5 32.6 (2.0)
Repayment of long-term debt (.2) (85.7) (34.7)
Premiums paid on early retirement of debt (4.8)
Purchase of common stock for treasury (4.3) (19.8) (51.7)
Stock option transactions 2.5 4.2 9.8
Dividends paid (12.4) (12.6) (13.3)
------ ----- ------
Net cash used for financing activities (11.9) (86.1) (91.9)
------ ----- ------
Increase (decrease) in cash and cash equivalents 1.9 (26.9) 8.7
Cash and cash equivalents at beginning of year 13.2 40.1 31.4
------ ----- ------
Cash and cash equivalents at end of period $ 15.1 $13.2 $40.1
====== ===== ======
- ----------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -----------------------------------------------
Additional Total
Common Stock Paid-In Retained Treasury Stock Stockholders'
----------------- -----------------
(in millions) Shares Amount Capital Earnings Shares Amount Equity
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1993 20.5 $20.5 $ 48.7 $381.1 (.3) $ (7.1) $ 443.2
---- ----- ------- ------ ---- ------- ----------
Net loss (3.5) (3.5)
Dividends paid (13.3) (13.3)
Purchase of common stock for treasury (2.0) (51.7) (51.7)
Exercise of stock options and related
income tax benefits (2.5) .5 12.3 9.8
---- ----- ------- ------ ---- ------- ----------
BALANCE, JUNE 30, 1994 20.5 20.5 46.2 364.3 (1.8) (46.5) 384.5
---- ----- ------- ------ ---- ------- ----------
Net income 47.5 47.5
Dividends paid (12.6) (12.6)
Purchase of common stock for treasury (.7) (19.8) (19.8)
Exercise of stock options and related
income tax benefits (1.7) .2 5.9 4.2
---- ----- ------- ------ ---- ------- ----------
BALANCE, JUNE 30, 1995 20.5 20.5 44.5 399.2 (2.3) (60.4) 403.8
---- ----- ------- ------ ---- ------- ----------
Net income 58.3 58.3
Dividends paid (12.4) (12.4)
Purchase of common stock for treasury (.1) (4.3) (4.3)
Exercise of stock options and related
income tax benefits (.3) .1 2.8 2.5
---- ----- ------- ------ ---- ------- ----------
BALANCE, JUNE 30, 1996 20.5 $20.5 $ 44.2 $445.1 (2.3) $(61.9) $ 447.9
==== ===== ======= ====== ==== ======= ==========
- ---------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------
BASISOF CONSOLIDATION AND USE OF ESTIMATES: The consolidated financial
statements include the accounts of Thiokol Corporation and its wholly-owned
subsidiaries. The Company's minority interest in Howmet is accounted for
under the equity method. All significant intercompany accounts and
transactions have been eliminated from the consolidated financial
statements. The preparation of consolidated financial statements, in
conformity with generally accepted accounting principles, requires
management to make estimates and assumptions, in particular estimates of
anticipated contract costs and revenues utilized in the earnings
recognition process, that affect the reported amounts in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
REVENUE RECOGNITION UNDER LONG-TERM CONTRACTS: Space and defense systems
sales encompass propulsion and ordnance products and services performed
principally under contracts and subcontracts with various United States
Government (government) agencies and aerospace prime contractors. Sales
under cost-type contracts are recognized as costs are incurred and include
a portion of the total estimated earnings to be realized in the ratio that
costs incurred relate to estimated total costs. Sales under
fixed-price-type contracts are recognized generally on the percentage of
completion method, when deliveries are made or upon completion of specified
tasks. Cost or performance incentives are incorporated into certain
contracts and are generally recognized when awards are earned, or when
realization is reasonably assured and amounts can be estimated. Adjustments
in estimates, which can affect both revenues and earnings, are made in the
period in which the information necessary to make the adjustment becomes
available. Provisions for estimated losses on contracts are recorded when
identified.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of cash and
short-term investments that are highly liquid with maturities of less than
three months.
6
<PAGE>
INVENTORIES: Inventories are stated at the lower of cost or market. Space
and defense systems inventories include estimated recoverable costs related
to long-term fixed price contracts and include direct production costs and
allocable indirect costs, less related progress payments received. In
accordance with industry practice, such costs include amounts which are not
expected to be realized within one year. Under the provisions of certain
contracts, the government acquires title to, or a security interest in,
certain inventories as a result of progress payments made on contracts and
programs. Inventories for the fastening systems segment are determined by
the first in, first out (FIFO) method.
PROPERTY, PLANT, AND EQUIPMENT: Property, plant and equipment is carried at
cost and depreciated over the estimated useful lives of the various classes
of properties, using either the straight-line or accelerated methods.
INTANGIBLES: Costs in excess of the net assets acquired (goodwill),
patents, and other intangible assets are being amortized on a straight-line
basis over periods between 10 and 40 years. Accumulated amortization
amounted to $37.6 and $33.9 million at June 30, 1996 and 1995,
respectively.
IMPAIRMENT OF LONG-LIVED ASSETS: In 1995, the Company adopted SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The standard requires the Company to evaluate
the net book value of long-lived assets including property, plant and
equipment and related goodwill whenever events or changes in circumstances
indicate the net book value may not be recoverable. Under the standard, an
assessment is made to determine if the sum of the expected future
undiscounted cash flows from the use of the assets and eventual disposition
is less than the net book value. If the sum of the expected undiscounted
cash flows is less than net book value, an impairment loss is recognized.
The impairment loss is determined by measuring the excess of net book value
over fair value (as estimated by projected future discounted cash flows
from the applicable operation).
7
<PAGE>
CONTINGENT MATTERS: The Company accrues costs for contingent matters when
it is probable that a liability has been incurred and the amount can be
reasonably determined. At the time a liability is recognized, a receivable
is recorded for the estimated future recovery of the costs from third
parties, insurance carriers, or from the government. Except for current
amounts receivable and payable, contingent amounts are included in other
assets and in noncurrent liabilities. Costs allocated to commercial
business or not otherwise recoverable from third parties are expensed when
the liability is recorded. A portion of environmental costs, which are not
recovered from insurance carriers or other third parties, will be recovered
through pricing of the Company's products and services to the government.
TRANSLATION OF FOREIGN CURRENCIES: The financial statements of the
Company's foreign operations are translated into United States dollars in
accordance with SFAS No. 52, "Foreign Currency Translation." Foreign
exchange gains and losses incurred on foreign currency transactions are
included in net income. The Company operates its business in various
foreign currencies. As a result, it is subject to the translation exposures
that arise from foreign currency exchange rate movements over periods of
time which generally do not exceed three months. The Company enters into
forward exchange contracts to hedge identifiable export sales and purchases
with any resulting gain or loss being deferred and accounted for as part of
the transaction. Foreign currency exchange contracts are not significant.
INCOME TAXES: Provisions for federal, state, local, and foreign income
taxes are calculated based on current tax laws. The provision for income
taxes includes, in the current period, the cumulative effect of any changes
in tax rates from those used previously in determining deferred tax assets
and liabilities. Deferred taxes are provided to recognize the income tax
effects of amounts which are included in different reporting periods for
financial statement and tax purposes.
INCOME PER SHARE: Income per share is calculated based on the average
number of common and common equivalent shares outstanding. The equivalent
shares, in thousands, for 1996, 1995, and 1994 were 18,566, 18,794, and
19,973, respectively.
8
<PAGE>
NOTE 2. RESTRUCTURING AND IMPAIRMENT
- ------------------------------------
As a result of a comprehensive review of the Company's operating
performance in Europe, a pre-tax restructuring charge of $5.9 million was
recognized in the second quarter of 1996 relating to the anticipated
shutdown of the fastening system's Germany manufacturing operations.
Approximately $1 million of additional unaccrued period costs will be
incurred over the next 12 months relating to the transfer of production
equipment for continuing product lines to be manufactured at the Company's
plant in France. During the third quarter, the Company notified the 82
affected employees of the Germany plant shutdown. The charge includes $3.6
million of employee severance expense and $1.7 million write down of
long-lived assets.
The severance benefits are included under "accrued compensation" in
the consolidated balance sheet and relate to the 82 employees classified as
follows:
- -----------------------------------------------------------------------------
Remaining Identified
Terminations Terminations
June 30, 1996 December 31, 1995
------------- -----------------
Production 55 57
Administration and finance 18 18
Sales 6 7
-- --
79 82
== ==
- -----------------------------------------------------------------------------
During the 1993-1994 defense industry down turn, pricing pressures
required the Company to reduce operating costs to remain competitive.
During the third quarter of 1995, the Board determined a consolidation of
the Company's manufacturing facilities and associated write down of assets
was required. The Company recorded a $61.4 million pre-tax defense systems
restructuring and related impairment charge including a $20 million write
down for impaired long-lived assets and a $23.6 million write down of
goodwill. Fair value of goodwill and fixed asset write downs was determined
by estimating discounted cash flows from future defense and non-shuttle
vehicle operations. Also included was an estimated restructuring loss of
$10.5 million on the disposition of fixed assets from two manufacturing
facilities (Huntsville and Omneco), and a $7.3 million cash restructuring
charge for costs related to the facility closures including $2.3 million of
9
<PAGE>
employee severance costs. The restructuring included 360 employee
terminations. Fair value of the Huntsville and Omneco assets was based on
estimated cash proceeds from asset sales net of the costs of disposal. The
closure of the Omneco facility is complete, except for the sale of the land
and building. The closure of the Huntsville facility is expected to be
completed in the second quarter of fiscal year 1997.
The severance benefits included in the consolidated balance sheet
relate to the 360 employees classified as follows:
- -----------------------------------------------------------------------------
Remaining Identified
Terminations Terminations
June 30, 1996 March 31, 1995
------------- --------------
Production 39 267
Administration and finance 26 93
-- ---
65 360
== ===
- -----------------------------------------------------------------------------
A summary of restructuring reserve activity by program follows:
<TABLE>
<CAPTION>
U.S. Germany
Plants Plant
(in millions) Shutdown Shutdown Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reserve Balance at March 31, 1995 $17.8 $17.8
Reductions (noncash) (.5) (.5)
Payments made (.3) (.3)
----- -----
Balance at June 30, 1995 17.0 17.0
Fastening Systems restructuring $5.9 5.9
Reductions (noncash) (8.7) (2.3) (11.0)
Payments made (.9) (.9)
----- ---- -----
Balance at June 30, 1996 $ 7.4 $3.6 $11.0
===== ==== =====
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Cash related restructuring charges of $4.7 million are expected to be
paid over the next three quarters. The remaining expenses are expected to
be paid over future periods. The Company is negotiating with the government
for recovery of certain of these costs. The Company estimates a savings of
approximately $2.3 million in amortization and depreciation and
approximately $7 million in overhead reduction occurred during the year.
10
<PAGE>
NOTE 3. RECEIVABLES
- -------------------
The components of receivables are as follows:
<TABLE>
<CAPTION>
June 30
-------------------------------
(in millions) 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Receivables under U.S. Government contracts
and subcontracts:
Amounts billed $ 48.1 $ 57.1
Unbilled costs and accrued profits 53.9 71.3
------ ------
Total receivables under U.S. Government contracts
and subcontracts 102.0 128.4
Income tax refund receivable and related interest 5.7 85.4
Trade accounts receivable 54.3 50.5
Other current receivables .6 3.8
------ ------
$162.6 $268.1
====== ======
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Unbilled costs and accrued profits consist principally of revenues
recognized on government contracts for which billings have not been
presented. Such amounts are billed on the basis of contract terms and
delivery schedules. It is expected that $6.9 million of the unbilled
amounts at June 30, 1996, will not be billed within one year. Cost and
incentive-type contracts and subcontracts are subject to government audit
and review. It is anticipated that adjustments, if any, will not have a
material effect on the Company's results of operations or financial
condition.
Cost management award fees of $58.6 million, at June 30, 1996, have
been recognized on the current Space Shuttle Reusable Solid Rocket Motor
(RSRM) contract. Realization of such fees is reasonably assured based on
actual and anticipated contract cost performance. However, all of the cost
management award fees remain at risk until completion of the current
contract and final NASA review. The current RSRM contract is expected to be
completed no earlier than fiscal year 2000. Unanticipated program problems
which erode cost management performance could cause a reversal of some or
all of the recognized cost management award fees and would be offset
against receivable amounts from the government or be directly reimbursed.
11
<PAGE>
Circumstances which could erode cost management performance include a
failure of a Company supplied component, performance problems with the RSRM
leading to a major redesign and/or requalification effort, manufacturing
problems including supplier problems which result in RSRM production
interruptions or delays, and major industrial safety incidents. RSRM fee
advances in excess of related costs of $24.9 and $23.4 million at June 30,
1996 and 1995, respectively, are included in "other accrued expenses and
liabilities" in the balance sheet.
NOTE 4. INVENTORIES
- -------------------
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 30
--------------------------------
(in millions) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $42.4 $ 61.4
Raw materials and work-in-process 43.1 52.9
Inventoried costs related to U.S. Government
and other long-term contracts 22.6 27.8
Progress payments received on long-term contracts (16.7) (7.1)
----- ------
$91.4 $135.0
===== ======
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5. EQUITY INVESTMENT IN HOWMET
- -----------------------------------
During the second quarter of 1996, the Company and the Carlyle Group
(Carlyle), a private merchant investment bank, formed a jointly owned
company, Blade Acquisition Corp. (Blade), to acquire Howmet Corporation and
the Cercast Group of companies, referred to collectively in the financial
statements as Howmet. Carlyle owns 51 percent and Thiokol owns 49 percent
of the Blade voting common stock. In addition to the Company's $96 million
equity investment in Blade voting common stock, the Company also invested
$50 million in Blade for 9 percent paid-in-kind non-voting preferred stock.
The Company accounts for its 49 percent minority investment in Blade using
the equity method.
12
<PAGE>
On December 13, 1995, the acquisition of Howmet, the world's largest
manufacturer of investment casting components for aircraft and industrial
gas turbine engines, was completed for approximately $771.6 million ($746.4
million plus an additional $25.2 million of related fees and expenses). The
acquisition of Howmet by Blade was accounted for by the purchase method.
The acquisition was financed by a $250 million equity investment from the
Company and Carlyle, $470.2 million of Howmet nonrecourse debt, and a $51.4
million receivable facility. The Company has a three year option to acquire
Carlyle's interest in Howmet at fair market value beginning after December
13, 1998. Subject to favorable Howmet financial and operating performance
and favorable conditions in the financial markets, the Company expects to
exercise its option.
As part of the purchase, Howmet received indemnifications from the
seller, secured by bank letters of credit, for liabilities over amounts
reserved relating to environmental and certain other obligations existing
at the purchase date.
A summary of Howmet financial information is as follows:
(in millions) June 30, 1996
- --------------------------------------------------------------------------
Current assets $ 324.7
Noncurrent assets 782.2
--------
Total assets $1,106.9
========
Current liabilities $ 338.9
Noncurrent liabilities 517.0
--------
Total liabilities 855.9
Preferred stock 52.5
Common stockholder's equity 198.5
--------
Total liabilities and equit $1,106.9
========
- ---------------------------------------------------------------------------
13
<PAGE>
(in millions) For the Period of December 14, 1995 to June 30, 1996:
- ---------------------------------------------------------------------------
Net sales $ 596.2
Cost of goods sold $ 463.4
Gross profit $ 132.8
Operating income $ 51.2
Net income $ 6.7
- ---------------------------------------------------------------------------
A reconciliation of Howmet's net income to the Company's equity income
and investment in Howmet at June 30, 1996, follows:
(in millions)
- ---------------------------------------------------------------------------
Howmet net income $ 6.7
Less preferred paid-in-kind dividend (2.5)
------
Net income available to common shareholders 4.2
------
Company's 49% interest in Howmet 2.0
Add preferred paid-in-kind dividend 2.5
------
Thiokol equity income 4.5
Thiokol investment in Howmet at December 13, 1995 146.0
------
Thiokol equity investment in Howmet at June 30, 1996 $150.5
======
- ---------------------------------------------------------------------------
The unaudited consolidated pro forma results of operations for the
year ended June 30, 1996 and 1995, assuming the acquisition of Howmet as of
July 1, 1994, are as follows:
Year Ended
(in millions, except per share data) June 30
- ---------------------------------------------------------------------------
1996 1995
---- ----
Net income $50.7 $5.2
Net income per share $2.73 $.28
- ---------------------------------------------------------------------------
14
<PAGE>
The pro forma income in 1995 includes the Company's 49 percent share
($23.2 million) of a Howmet write-off for goodwill. The unaudited pro forma
financial information is not necessarily indicative of the results that
would have occurred had the acquisition of Howmet taken place for the
periods presented nor are future results of operations assured.
NOTE 6. FINANCING ARRANGEMENTS
- ------------------------------
The Company has credit commitments from a group of banks aggregating
$190 million under three Revolving Credit Agreements, of which $166.3
million was available at June 30, 1996. The funds available under the
credit facilities may be used for any corporate purpose and are available
through October 1996 ($40 million) and May 2001 ($150 million). The credit
agreements contain covenants restricting, among other things, the Company's
ability to incur funded debt, limitations on sale and leaseback
transactions, and the sale of assets.
Short-term debt consisted of borrowings on both committed and
uncommitted bank lines of credit for both domestic and foreign subsidiary
borrowings with various domestic and foreign banks. The weighted average
interest rate on short-term debt outstanding at June 30, 1996 and 1995, was
5.15% and 6.11%, respectively.
In March 1995, the Company retired $85.5 million of private placement
notes which were due to mature on June 30, 1996 ($37 million) and June 30,
1999 ($48.5 million). An extraordinary loss of $4.8 million (net of a tax
benefit of $2.9 million) was recorded for the payment of redemption
premiums and expenses.
Long-term debt consisted of the following:
June 30
--------------------------
(in millions) 1996 1995
- ----------------------------------------------------------------------------
Notes payable $2.4 $2.6
Less current maturities .2 .1
---- ----
$2.2 $2.5
==== ====
- ----------------------------------------------------------------------------
15
<PAGE>
Interest paid on borrowings was $3.9, $9.3, and $14.4 million in 1996,
1995, and 1994, respectively.
NOTE 7. INCOME TAXES
- --------------------
The provisions for income taxes applicable to both domestic and
foreign operations are as follows:
(in millions) 1996 1995 1994
- ----------------------------------------------------------------------------
Current Taxes:
Federal $39.3 $14.8 $31.6
Foreign 1.4 .5 .4
State 5.3 3.7 4.1
----- ----- -----
46.0 19.0 36.1
Deferred Taxes:
Federal (9.6) 4.6 1.7
Foreign (.8) (.5)
State (1.3) .4 .2
----- ----- -----
(11.7) 5.0 1.4
----- ----- -----
$34.3 $24.0 $37.5
===== ===== =====
- ----------------------------------------------------------------------------
A reconciliation of the United States statutory rate to the effective
income tax rate applicable to income before the cumulative effect of
accounting changes follows:
1996 1995 1994
- ----------------------------------------------------------------------------
Statutory rate 35.0% 35.0% 35.0%
Effect of:
State taxes, net of federal benefit 3.0 3.5 3.1
R & D and other credits (4.5) (11.2) (.8)
Tax refund (.3) (11.8)
Retroactive federal tax increase 1.5
Non-deductible restructuring charge 4.1 13.1
Dividend received deduction (1.4)
Other 1.1 2.9 (.5)
---- ---- ----
Effective rate 37.0% 31.5% 38.3%
==== ==== ====
- ----------------------------------------------------------------------------
16
<PAGE>
Deferred income taxes arise because of differences in the treatment of
income and expense items for financial reporting and income tax purposes.
Deferred income taxes are not provided on certain unremitted earnings of
international subsidiaries as the earnings are deemed to be indefinitely
reinvested and the effect of such taxes would not be significant after
foreign tax credits. The effect of the temporary differences that give rise
to deferred tax balances are as follows:
June 30
---------------------------
(in millions) 1996 1995
- ----------------------------------------------------------------------------
Recognition of income on contracts reported on
different methods for tax purposes than for
financial reporting $ 46.3 $ 53.8
Tax refund interest income 1.6 17.1
Depreciation expense 45.3 42.8
Employee benefit expenses 11.6 9.9
Other 3.8 2.4
------ ------
Gross deferred tax liabilities 108.6 126.0
Provision for estimated expenses (40.3) (40.5)
Employee benefit expenses (46.9) (47.3)
Foreign losses (14.5) (9.4)
Other (9.1) (6.2)
------ ------
Gross deferred tax assets (110.8) (103.4)
Valuation allowance 14.2 9.2
------ ------
Net deferred tax assets (96.6) (94.2)
------ ------
Net deferred tax liabilities $ 12.0 $ 31.8
====== ======
Balance Sheet Classification:
Current assets $(27.8) $ 5.0
Non-current liabilities 39.8 26.8
------ ------
Net deferred tax liabilities $ 12.0 $ 31.8
====== ======
- ----------------------------------------------------------------------------
Total income tax payments were $55.8, $34.8, and $36 million during
1996, 1995, and 1994, respectively.
In connection with the transfer on July 1, 1989, of certain assets and
liabilities to Morton International, Inc., the Company and Morton entered
into a Tax Sharing Agreement which generally provides that each entity will
retain federal, state and local income tax liabilities applicable to their
pre-July 1, 1989, operations.
17
<PAGE>
Due to the completion of a Federal tax audit of fiscal years 1983
through 1985, the Company recorded, in 1995, a refund receivable, including
interest, of $85.4 million. After provision for payment of taxes on the
interest to be received, the Company netted approximately $65 million in
cash. The refund related primarily to additional research and development
tax credits and the timing of certain income and deduction items. A portion
of the refund ($17.5 million) was applied to reduce the 1995 income tax
expense and $43.5 million of the refund was recognized as interest income
in 1995. The remainder of the refund ($24.4 million) related to timing
issues and was used to increase liabilities for deferred taxes and related
interest for future tax payments.
The Internal Revenue Service (IRS) has completed its audit of federal
income tax returns for fiscal years 1986 through 1993. Based upon
preliminary understandings, the Company anticipates a tax refund including
interest of an amount significantly less than the refund recorded in 1995.
A portion of the anticipated refund will be recognized as income when the
audit is finalized. Based upon anticipated final audit results for the
years in question and considering that the Company is essentially current
in its federal income tax audits, interest accruals were decreased in 1996
resulting in recognition of $27.5 million of interest income. Also, as a
result of substantial audit completion, $4.2 million of research and other
tax credits were recognized.
NOTE 8. PREFERRED STOCK PURCHASE RIGHTS
- ---------------------------------------
The Company has declared a dividend distribution of one Preferred
Share Purchase Right for each outstanding common share. Each Right entitles
its holder to buy one one-hundredth of a share of a new series of the
Company's preferred stock at an exercise price of $60. The Rights will only
become exercisable if a person or group acquires or makes an offer to
acquire 15 percent or more of the Company's common stock. If the Company is
acquired in a merger or other business combination, each Right will entitle
the holder to purchase common stock of the acquiring company having a
market value of twice the exercise price of the Right. If any person
18
<PAGE>
acquires 15 percent or more of the Company's common stock, each Right will
entitle the holder (other than such acquirer) to purchase common stock of
the Company having a market value of twice the exercise price of the Right.
The Rights may be redeemed by the Company at the price of $.01 per Right
prior to the acquisition of 15 percent or more of the outstanding shares of
the Company's common stock. The Rights expire on February 28, 1999, unless
renewed by the Board of Directors of the Company.
NOTE 9. RETIREMENT PLANS
- ------------------------
The Company has noncontributory defined benefit pension plans covering
most of its employees. The benefits for most employees are based on an
average of the employee's highest five consecutive years' earnings during
the ten years preceding retirement and on credited service.
The Company's funding policy for the plans is to contribute amounts
sufficient to meet the minimum funding requirements of the Employee
Retirement Income Security Act of 1974, plus any additional amounts which
the Company may determine to be appropriate.
The annual cost for all Company-sponsored defined benefit pension
plans, exclusive of the curtailment gain in 1995, includes the following
components:
(in millions) 1996 1995 1994
- ----------------------------------------------------------------------------
Service cost $ 12.7 $ 12.6 $ 14.8
Interest cost 37.5 36.7 36.2
Actual gain on plan assets (115.0) (32.5) (22.4)
Net amortization and deferral 66.9 (12.9) (19.9)
------- ------ ------
Net pension cost $ 2.1 $ 3.9 $ 8.7
======= ====== ======
- ----------------------------------------------------------------------------
19
<PAGE>
The reconciliation of the funded status of all defined benefit pension
plans at June 30 is as follows:
(in millions) 1996 1995
- ----------------------------------------------------------------------------
Actuarial present value of benefits:
Vested benefits $464.1 $397.8
Nonvested benefits 4.7 2.6
------ ------
Accumulated benefit obligation 468.8 400.4
Effect of projected future compensation increases 79.1 83.5
------ ------
Projected benefit obligation 547.9 483.9
Fair value of plan assets 605.3 518.2
------ ------
Plan assets in excess of projected
benefit obligation 57.4 34.3
Unrecognized net losses 17.6 40.2
Unrecognized transition obligation (20.9) (24.0)
Unrecognized prior service cost (.7) (.8)
------ ------
Pension asset $ 53.4 $ 49.7
====== ======
- ----------------------------------------------------------------------------
The accumulated benefit obligation increased in 1996 principally due
to the change in the discount rate assumption and the change to the 1983
Group Annuity Mortality unloaded table. Additional assumptions used in the
determination of the net pension cost for all defined benefit pension plans
were as follows:
1996 1995 1994
- ----------------------------------------------------------------------------
Discount rate 7.5% 8.0% 8.0%
Rate of increase in compensation levels 4.75 5.5 5.5
Expected long-term rate of return on assets 9.0 9.0 9.0
- ----------------------------------------------------------------------------
The assets of the Company-sponsored plans are invested primarily in
equities and bonds. Certain pension plans contain restrictions on the use
of excess pension plan assets in the event of a change in control of the
Company.
20
<PAGE>
Generally pension costs charged to and recovered through government
contracts approximate amounts contributed to pension plans. Pension costs
for financial statement purposes are calculated in conformity with SFAS No.
87, "Employers' Accounting for Pensions." Historically, the annual amount
of pension cost recovered through government contracts and included in
sales has exceeded the amount of pension cost included in the financial
statements. As a result, the Company has deferred $38.7 million of revenues
to provide a better matching of revenues and expenses. This revenue will be
recognized when the financial statement pension cost exceeds amounts
charged to contract pension cost. The $38.7 million of deferred revenue is
netted against the pension asset in "other noncurrent assets" in the
balance sheet.
Under the provisions of SFAS No. 88, "Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination
Benefits," workforce reductions and benefit freezes resulted in the
recognition of $6.1 million of net curtailment gains in 1995.
The Company sponsors a defined contribution money purchase plan
covering certain employees. The Company makes contributions on behalf of
each participant at a specified percentage of base pay. The annual cost of
the defined contribution plan was $.2 million in 1996, and $.8 million in
1995 and 1994. In addition, the Company sponsors certain supplemental plan
arrangements to provide retirement benefits to specified groups of
participants. Contributions are included in an Internal Revenue Code
qualified restricted trust which is subject to the claims of the Company's
creditors.
The Company has matching and nonmatching savings plans (401-K plans)
for eligible employees. Company contributions to the matching savings
plans, which are based on a limited percentage of participant
contributions, were $6.4, $7.3, and $7.6 million in 1996, 1995, and 1994,
respectively.
21
<PAGE>
NOTE 10. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
- ----------------------------------------------------
The Company provides certain nonvested health care and life insurance
benefits for substantially all of its retirees and eligible dependents.
During 1992, the plan was ammended for employees retiring after February 1,
1993. The current plan is contributory, with retiree contribution levels
adjusted annually, and contains other cost-sharing features including
deductibles and coinsurance. Under the ammended plan, the Company's cost
for retiree medical is limited to a 4 percent annual increase. Current
eligibility requirements include ten years of credited service after
attaining age forty-five.
Effective July 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions." The Company
recognized the transition obligation as a one-time charge to earnings of
$81.9 million in 1994. The effect on 1994 earnings and shareholders' equity
was $51.6 million ($2.59 per share) after a deferred income tax benefit of
$30.3 million. A significant portion of the charge is expected to be
recovered in future years as amounts are funded and allocated to government
contracts. The Company's policy is to fund the cost of retiree medical
benefits at management's discretion or as amounts are expended. Voluntary
Employees' Beneficiary Association (VEBA) trusts and other trusts under
Internal Revenue Code regulations were established in 1994 for government
contract reimbursement purposes. The amounts funded are tax deductible in
the year of contribution.
The annual retiree medical and life insurance costs include the
following components:
(in millions) 1996 1995 1994
- ----------------------------------------------------------------------------
Service cost - attributed to service during the period $ 2.2 $2.3 $2.4
Interest cost on accumulated postretirement benefit
obligation 8.0 7.3 6.5
Return on assets (1.8) (.6)
Net amortization and deferral 1.9 .5
----- ---- ----
Retiree medical and life insurance costs $10.3 $9.5 $8.9
===== ==== ====
- ----------------------------------------------------------------------------
22
<PAGE>
The following table reconciles the plan's funded status to the amount
included in the Company's balance sheet at June 30:
<TABLE>
<CAPTION>
(in millions) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 89.2 $ 80.4
Fully eligible active plan participants 9.3 9.5
Other active plan participants 15.7 14.4
------ ------
Total accumulated postretirement benefit obligation 114.2 104.3
Plan assets at fair value, primarily listed stocks and bonds (16.4) (11.5)
------ ------
Accumulated postretirement benefit obligation in excess of
plan assets 97.8 92.8
Unrecognized net experience loss (27.4) (19.7)
Unrecognized prior service cost (.3)
------ ------
Accrued retiree benefits other than pensions $ 70.4 $ 72.8
====== ======
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Assumptions used to measure the accumulated postretirement obligation
and cost were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 8.0% 8.0%
Health care cost trend rate decreasing to 6% by 2001 8.0% 9.0% 10.0%
Expected long-term rate of return on assets 8.0% 8.0%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Increasing the assumed health care cost trend rate by one percentage
point would increase the accumulated postretirement benefit obligation at
June 30, 1996 and 1995, by approximately $5.7 and $5.6 million,
respectively and increase retiree medical costs by approximately $.4
million each year.
23
<PAGE>
NOTE 11. POSTEMPLOYMENT BENEFITS
- --------------------------------
Effective July 1, 1993, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits." This accounting standard requires
the Company to accrue the expected cost of postemployment benefits provided
to former employees or their beneficiaries rather than the prior policy of
charging the costs against earnings as the amounts were paid. The
liability, which relates to long-term disability benefits and medical
benefits recognized at July 1, 1993, was $19.3 million. The cumulative
effect on 1994 earnings and shareholders' equity was $12.2 million ($.61
per share) after a deferred income tax benefit of $7.1 million.
NOTE 12. CONTINGENT MATTERS
- ---------------------------
On July 17, 1996, the Company filed an action seeking payment of
government-approved benefits costs that arose under its cost-reimbursement
contracts with the government for operation and management of
government-owned, contractor-operated Army ammunition plans in Texas and
Louisiana. The Company seeks $6 million for costs incurred to date and
$33.9 million for future estimated payments with interest. The Company
expects to prevail in this litigation, but if it does not, the Company
would recognize as of June 30, 1996, approximately $6 million in non-cash
charges.
The Company is also currently involved in a number of lawsuits and
other contingencies which are not expected individually or in the aggregate
to have a material adverse effect upon the Company's financial condition.
However, depending on the amount and timing of an unfavorable resolution of
these contingencies, it is possible that the Company's future results of
operations or cash flows could be materially affected in a particular
period.
24
<PAGE>
NOTE 13. ENVIRONMENTAL MATTERS
- ------------------------------
The Company is involved with two Environmental Protection Agency (EPA)
superfund sites in Morris County, New Jersey formerly operated by the
Company for government contract work. The Company has not incurred any
material costs relating to these environmental matters. The Company has
negotiated and signed a consent decree with the EPA on both the Rockaway
Borough Well Field ("Klockner") site, as well as on the Rockaway Township
Well Field ("Denville") site. With respect to the Company's liability for
response costs, site remediation, and future operation maintenance costs on
both sites, the Company has recorded a $10.1 million liability. In addition
to the above sites the Company is involved with other locations involving
environmental issues.
The current estimated liability for all of the Company's environmental
remediation is $20 million, and is classified in "accrued interest and
other". The Company believes that any liability beyond the above amount
recorded will not have a material adverse effect on the Company's future
results of operations or financial position. The Company collected
approximately $8.7 million from insurance companies during fiscal year
1996. The Company expects to recover from insurance, third parties and the
government additional amounts as remediation expenses are incurred. The
Company estimates it will spend approximately $2.1 and $3.7 million of the
total liability, respectively, over the next two years.
NOTE 14. LEASE COMMITMENTS
- --------------------------
The Company has operating leases which are principally short-term and
primarily for building and office space and other real estate. Rental
expense charged was $10.9, $10.8, and $9.9 million in 1996, 1995, and 1994,
respectively. Renewal and purchase options are available on certain of
these leases. Future minimum rental commitments under non-cancelable
operating leases as of June 30, 1996, were not material. Certain plant
facilities and equipment are provided for use by the government under
short-term or cancelable arrangements.
25
<PAGE>
NOTE 15. STOCK OPTION AND PERFORMANCE UNIT PLANS
- ------------------------------------------------
The Company's Stock Option Plans provide that grants of stock options,
and shares of restricted stock and other awards, as deemed appropriate, may
be made to key employees of the Company and its affiliates in which the
Company has a direct or indirect equity interest. Certain options granted
prior to fiscal year 1992 provide for supplemental cash payments upon
exercise for the purpose of reimbursing the employee income tax liabilities
incurred as a result of such exercise. Stock option activity is summarized
as follows:
<TABLE>
<CAPTION>
Shares Per Share
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at June 30, 1993 1,224,196 $10.86 to $15.81
Granted 221,100 $21.63 to $26.13
Lapsed (40,000) $21.63
Exercised (587,261) $11.25 to $15.81
-----------------------------------------
Options outstanding at June 30, 1994
(648,935 exercisable shares) 818,035 $10.86 to $26.13
Granted 173,500 $24.06 to $24.44
Lapsed (4,000) $24.44
Exercised (246,964) $10.86 to $26.13
-----------------------------------------
Options outstanding at June 30, 1995
(571,071 exercisable shares) 740,571 $10.86 to $26.13
Granted 433,800 $34.88 to $41.69
Lapsed (25,175) $15.31 to $34.38
Exercised (104,902) $11.69 to $26.13
-----------------------------------------
Options outstanding at June 30, 1996
(625,394 exercisable shares) 1,044,294 $11.69 to $41.69
=========================================
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Options outstanding at June 30, 1996, have expiration dates ranging
from June 1998 to April 2006.
In addition, limited appreciation rights were outstanding covering
109,133 option shares. Limited appreciation rights are paid automatically
in cash in lieu of other related options upon a change in control of the
Company. As of June 30, 1996, supplemental cash payment rights were
outstanding with respect to 17,408 option shares, payable upon exercise of
options or limited appreciation rights.
26
<PAGE>
During the year, 230,000 stock options were contingently granted to
certain Howmet employees. Such options were granted at $35.50 per option
(190,000) and $40.94 per option (40,000), the market price on the date of
grant, but will only vest if the Company acquires 100 percent of Howmet
Corporation. In the event the Company does acquire 100 percent of Howmet,
any increase in market price from the date of grant to the date of
acquisition (vesting date) will be expensed by the Company.
Shares of common stock reserved for both outstanding and future grants
of options and payment of appreciation rights and other stock-based awards
at June 30, 1996 and 1995 were 1,186,637 and 1,310,221 shares,
respectively.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation." As permitted by SFAS
No. 123, the Company currently plans to continue following the guidance of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," for measurement and recognition of stock-based transactions
with employees. The Company will adopt the disclosure provisions of SFAS
No. 123 in fiscal 1997.
NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------
Under SFAS No. 107, "Fair Value Disclosures about Financial
Instruments," the Company is required to disclose the fair value of
financial instruments, including off-balance-sheet financial instruments,
when fair value can be reasonably estimated. The values provided are
representative of fair values only as of June 30, 1996 and 1995, and do not
reflect subsequent changes in the economy, interest and tax rates, and
other variables that may impact determination of fair value. The following
methods and assumptions were used in estimating fair values:
Cash and cash equivalents: The carrying amount approximates fair
value.
Receivables: The fair value of receivables, due to the collection of
certain receivables over an extended period, is based on the discounted
value of expected future cash flows.
Short-term and long-term debt: The carrying value of short-term debt
approximates fair value. The fair value of long-term debt is estimated
based on the current borrowing rates for similar issues.
Off-balance-sheet instruments: Foreign currency exchange contracts are
not significant.
27
<PAGE>
The carrying amounts and estimated fair values of the Company's
financial instruments at June 30 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- -----------------------
Carrying Fair Carrying Fair
(in millions) Amount Value Amount Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 15.1 $ 15.1 $ 13.2 $ 13.2
Receivables 162.6 160.9 268.1 264.1
Short-term debt 62.7 62.7 62.8 62.8
Long-term debt 2.4 2.4 2.6 2.6
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 17. OPERATIONS BY INDUSTRY SEGMENT
- ---------------------------------------
The Company and its subsidiaries design, develop, manufacture, and
sell products classified in three industry segments.
The space systems segment consists of solid rocket propulsion for
NASA, the Department of Defense and various commercial customers for space
applications.
The defense systems segment consists of solid rocket propulsion, gas
generator and ordnance products, metal and composite components, and
services relating to such systems, principally under contracts and
subcontracts with the Department of Defense and aerospace prime
contractors, for use in defense applications.
The fastening systems segment consists of specialty fastening systems
for a broad range of aerospace and industrial applications worldwide. The
following table summarizes segment information:
28
<PAGE>
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------
(in millions) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
Space Systems $ 410.0 $ 467.4 $ 500.8
Defense Systems 241.1 261.7 367.4
Fastening Systems 238.4 227.7 175.7
------- ------- ---------
Consolidated net sales $ 889.5 $ 956.8 $ 1,043.9
======= ======= =========
- ----------------------------------------------------------------------------------------------------------------------
Segment operating profit (loss)
Space Systems $ 55.5 $ 60.4 $ 51.5
Defense Systems(1) 21.6 (34.8) 35.3
Fastening Systems(2) (6.3) 19.2 16.9
------- ------- ---------
Segment operating profit 70.8 44.8 103.7
Equity income, Howmet 4.5
Interest income 30.2 46.2 12.9
Interest expense (3.9) (9.3) (14.4)
Unallocated corporate
expense (9.0) (5.4) (4.4)
------- ------- ---------
Consolidated income before
income taxes, extraordinary
item and cumulative effect of
accounting changes $ 92.6 $ 76.3 $ 97.8
======= ======= =========
- ----------------------------------------------------------------------------------------------------------------------
Total Assets
Space Systems $ 250.6 $ 268.0 $ 267.6
Defense Systems 134.0 168.3 243.8
Fastening Systems 242.7 268.1 238.3
Corporate 191.0 106.3 55.6
------- ------- ---------
Consolidated assets $ 818.3 $ 810.7 $ 805.3
======= ======= =========
- ----------------------------------------------------------------------------------------------------------------------
Depreciation and Amortization Expense
Space Systems $ 15.4 $ 15.9 $ 16.1
Defense Systems 13.5 12.6 15.8
Fastening Systems 12.3 11.0 8.5
Corporate .8 .5 .6
------- ------- ---------
Consolidated depreciation and
amortization expense $ 42.0 $ 40.0 $ 41.0
======= ======= =========
- ----------------------------------------------------------------------------------------------------------------------
Capital Expenditures
Space Systems $ 8.0 $ 13.2 $ 11.2
Defense Systems 9.2 3.3 1.8
Fastening Systems 11.2 17.1 7.8
Corporate .7 .2 .4
------- ------- ---------
Consolidated capital expenditures $ 29.1 $ 33.8 $ 21.2
======= ======= =========
- ----------------------------------------------------------------------------------------------------------------------
<FN>
(1) The defense systems loss in 1995 included a $61.4 million
restructuring charge.
(2) The fastening systems loss in 1996 included a $5.9 million
restructuring charge and $12.2 million of inventory charges.
</FN>
</TABLE>
29
<PAGE>
A proportionate share of Corporate general and administrative expense
is allocated and reimbursed through space and defense systems contracts.
Intersegment, foreign operations, and export sales are not material.
Net sales under government contracts and subcontracts amounted to
$618.4, $689.5, and $813.4 million for 1996, 1995, and 1994, respectively.
The sales as a percentage of consolidated net sales were 70, 72, and 78
percent for 1996, 1995, and 1994, respectively.
Corporate assets consist principally of cash and cash equivalents;
income tax receivable; property; plant and equipment; investment in Howmet;
and other noncurrent assets.
<TABLE>
<CAPTION>
Fiscal Year 1996
Three Months Ended
-----------------------------------------------------------------------
(in millions, except per share data) June 30 March 31 Dec. 31 Sept. 30
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $227.8 $228.9 $209.9 $222.9
Gross profit 37.5 36.7 34.4 42.2
Net income (loss)(1) 13.3 9.5 22.3 13.2
Net income per share(1) .71 .52 1.20 .71
Cash dividends paid per share .17 .17 .17 .17
Market price
High 44.75 44.63 35.88 37.13
Low 38.50 32.38 32.88 29.75
- -------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 1995
Three Months Ended
-----------------------------------------------------------------------
(in millions, except per share data) June 30 March 31 Dec. 31 Sept. 30
- -------------------------------------------------------------------------------------------------------------------------------
Net sales $267.4 $232.6 $218.6 $238.2
Gross profit 52.2 48.0 42.2 45.3
Income (loss) before extraordinary item 61.8 (35.1) 11.3 14.3
Net income (loss)(2) 61.8 (39.9) 11.3 14.3
Income (loss) per share before extraordinary item 3.29 (1.87) .60 .76
Net income (loss) per share(2) 3.29 (2.12) .60 .76
Cash dividends paid per share .17 .17 .17 .17
Market price
High 31.88 28.75 28.25 26.25
Low 27.25 25.38 22.75 23.75
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The second quarter of 1996 included the recognition of interest income
related to income taxes of $27.5 million and $3.5 million related to
research and other tax credits ($20.6 million or $1.11 per share
after-tax). Also included was a restructuring charge of $5.9 million
and $12.2 million inventory charge, resulting in a net after-tax
charge of $14.4 million or $.78 per share.
2) The third quarter of 1995 included a restructuring charge of $61.4
million resulting in a net after-tax charge of $49.2 million or $2.62
per share and an extraordinary loss on early retirement of debt of
$4.8 million or $.25 per share. The fourth quarter of 1995 included
the recognition of an income tax refund resulting in a $17.5 million
reduction in current income tax expense and $43.5 million of interest
income ($44.5 million or $2.37 per share after-tax).
</FN>
</TABLE>
30
<PAGE>
Management's Report on Financial Statements
- -------------------------------------------
Management has prepared, and is responsible for, the consolidated
financial statements and all related financial information contained in the
Annual Report. The consolidated financial statements, which include amounts
based on estimates and judgments, were prepared in accordance with
generally accepted accounting principles appropriate in the circumstances
and applied on a consistent basis. Other financial information in this
report is consistent with that in the consolidated financial statements.
Management maintains an accounting system and related internal
controls which it believes provide reasonable assurance, at appropriate
cost, that transactions are properly executed and recorded, that assets are
safeguarded, and that accountability for assets is maintained. An
environment that provides an appropriate level of control is maintained and
monitored and includes examinations by an internal audit staff.
Management recognizes its responsibilities for conducting the
Company's affairs in an ethical and socially responsible manner. The
Company has written standards of business conduct, including its business
code of ethics which emphasize the importance of personal and corporate
conduct, that demands compliance with federal and state laws governing the
Company. The importance of ethical behavior is regularly communicated to
all employees through ongoing education and review programs designed to
create a strong compliance environment.
The Audit Committee of the Board of Directors is composed of five
outside directors. This Committee meets periodically and also meets
separately with representatives of the independent auditors, Company
officers, and the internal auditors to review their activities.
The consolidated financial statements have been examined by Ernst &
Young LLP, independent auditors, whose report follows.
/s/ Richard L. Corbin
---------------------------
Senior Vice President and
Chief Financial Officer
31
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
- -------------------------------------------------
To the Stockholders and Board of Directors
Thiokol Corporation:
We have audited the accompanying consolidated balance sheets of
Thiokol Corporation as of June 30, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Thiokol Corporation at June 30, 1996 and 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the
period ended June 30, 1996, in conformity with generally accepted
accounting principles.
As discussed in Notes 10 and 11, in 1994 the Company changed its
method of accounting for postretirement benefits other than pensions and
postemployment benefits.
ERNST & YOUNG LLP
Salt Lake City, Utah
August 1, 1996
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Results of Operations Fiscal Year 1996 Compared to Fiscal Year 1995
- -------------------------------------------------------------------
Net income for 1996 was $58.3 million or $3.14 per share, an increase
of 11 percent compared to $52.3 million or $2.78 per share before an
extraordinary charge last year. Income for 1996 included recognition of
$21.3 million after-tax of income related to income taxes or $1.15 per
share after-tax. Results for 1996 also reflected fastening systems charges
of $12.2 million for inventory and $5.9 million for restructuring. Income
for 1995 included a refund of income taxes of $17.5 million and related
interest income of $43.5 million, resulting in a net after-tax impact of
$44.5 million or $2.37 per share. Results for 1995 were also impacted by a
defense systems restructuring charge of $61.4 million or $2.62 per share.
Net income for 1995 was $47.5 million or $2.53 per share including an
extraordinary loss of $4.8 million related to the early retirement of debt.
Summary unaudited financial information for the twelve months ended
June 30 follows:
33
<PAGE>
<TABLE>
<CAPTION>
(in millions except per share data)
- ---------------------------------------------------------------------------------------------------------------------
Percent
1996 1995 Change Change
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
Space systems sales $ 410.0 $ 467.4 $ (57.4) (12)
Defense systems sales 241.1 261.7 (20.6) (8)
Fastening systems sales 238.4 227.7 10.7 5
-------- -------- -------- -----
Total sales $ 889.5 $ 956.8 $ (67.3) (7)
======== ======== ======== =====
Space systems income $ 55.5 $ 60.4 $ (4.9) (8)
Defense systems income 21.6 26.6 (5.0) (19)
Fastening systems income (0.4) 19.2 (19.6) (102)
Restructuring and impairment (5.9) (61.4) 55.5 (90)
Unallocated corporate expense (9.0) (5.4) (3.6) 67
-------- -------- -------- -----
Operating income 61.8 39.4 22.4 57
Equity income, Howmet 4.5 4.5
Interest and other income 30.2 46.2 (16.0) (35)
Interest expense (3.9) (9.3) 5.4 (58)
Income taxes (34.3) (24.0) (10.3) 43
-------- -------- ------- -----
Income before extraordinary item 58.3 52.3 6.0 11
=====
Extraordinary item - debt retirement (4.8) 4.8
-------- -------- ------- -----
Net income $ 58.3 $ 47.5 $ 10.8 23
======== ======== ======= =====
Earnings per share $ 3.14 $ 2.53 $ .61 24
======== ======== ======= =====
Average equivalent shares outstanding 18.6 18.8 (.2) (1)
======== ======== ======= =====
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Operating income was favorably impacted by recognition of cost
management fees on the Space Shuttle Reusable Solid Rocket Motor (RSRM)
Contract, and lower general and administrative and research and development
costs. Adversely impacting operating income were lower margins and the
restructuring charges and inventory write down for the fastening systems
segment, Castor IV(R) motor requalification costs and completion of the
Shuttle Processing Contract during the first quarter.
34
<PAGE>
Business Segment Sales and Income For The Year
- ----------------------------------------------
The space systems sales decrease is due primarily to NASA reducing the
RSRM flight sets from eight to seven per year, continued Company emphasis
on cost reductions on the RSRM program ($30 million), as well as the first
quarter termination of the RSRM processing work at the Kennedy Space Center
($22.5 million). Castor IV(R) motor and Castor 120(R) motor sales also
declined while STAR motor sales increased. The decrease in income is
primarily related to Castor IV(R) requalification costs ($3.6 million),
lower RSRM motor production ($3.4 million), and the completion of the RSRM
processing contract ($3.1 million), offset by higher RSRM income recognized
as a result of higher cost management fees ($10.1 million).
Defense systems 1996 sales of $241.1 million decreased 8 percent while
operating income of $21.6 million increased 5 percent or $1.1 million
before recognition of the prior year's restructuring charge and pension
curtailment gain. Including the 1995 restructuring charge of $61.4 million
and $6.1 million curtailment gain, the defense systems loss in 1995 was
$34.8 million. The sales decrease was caused by significantly lower
operating levels at the government owned, Company operated (GOCO's)
ammunition plants ($17.8 million), and lower Standard missile ($12.6
million) and Trident ($11.5 million) production. A sales increase in flares
($19.2 million) and Minuteman sales ($8.6 million) partially offset the
decrease. Defense profit margins were 9 percent for the year compared to
7.8 percent in the prior year excluding the curtailment gain and the
restructuring charge in 1995.
Fastening systems income for 1996 decreased 38 percent to $11.8
million, excluding $18.1 of inventory and restructuring charges, from $19.2
million in 1995. Domestic and international aerospace sales increased
significantly in 1996. Earnings from aerospace continue to be impacted by
losses at the Lakewood facility due to manufacturing inefficiencies. The
Lakewood losses declined significantly in the fourth quarter. Industrial
operating results were impacted by weak transportation markets. Lower
international operating margins resulted from the Germany plant losses,
lower margin sales, and new product marketing costs. The Company announced
in the second quarter, the closure of the Germany operations and expects it
to be completed in the third quarter of fiscal year 1997.
35
<PAGE>
The following unaudited table summarizes the impact on earnings and
earnings per share of major unusual items affecting both years:
<TABLE>
<CAPTION>
(in millions, except per share data)
- ------------------------------------------------------------------------------------------------------------------------
1996 1996 1995 1995
After-tax Earnings After-tax Earnings
Income Per Share Income Per Share
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Income before charges $ 51.4 $ 2.77 $ 57.0 $ 3.03
Restructuring charges (5.9) (.32) (49.2) (2.62)
Fastening systems inventory charges (8.5) (.46)
Income tax interest income/credits 21.3 1.15 27.0 1.44
Income tax refund 17.5 .93
-------- -------- --------- ---------
Income before extraordinary item $ 58.3 $ 3.14 $ 52.3 $ 2.78
-------- -------- --------- ---------
Extraordinary item-debt retirement (4.8) (.25)
-------- -------- --------- ---------
Net income $ 58.3 $ 3.14 $ 47.5 $ 2.53
======== ======== ========= =========
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
General and administrative expense for 1996 of $69.8 million decreased
3 percent or $2.1 million compared to the prior year. General Corporate
expense decreased $3.9 million while selling and administrative costs
increased $1.8 million in the fastening systems segment. Interest expense
decreased $5.4 million as a result of the reduction in long-term debt in
the third quarter of 1995.
During the year Thiokol purchased 49 percent of Howmet Corporation
(see "Equity Investment in Howmet" following and Note 5 in the consolidated
financial statements). The investment in Howmet is accounted for on the
equity method and equity income of $4.5 million was recognized in 1996.
Howmet sales of $1,017.1 million for the twelve months ended June 30, 1996
increased $127.4 million from $889.7 million or 14.3 percent over the prior
year. Income from operations for the twelve month period, before
amortization of acquisition related assets, was $82.1 million, a 22.4
percent increase over the prior year.
Also impacting income was a 37 percent effective income tax rate
compared to 31.5 percent for 1995 reflecting lower research tax credits,
refunds and nondeductible restructuring charges.
36
<PAGE>
1996 Fourth Quarter Results
- ---------------------------
Summary unaudited financial information for the three months ended
June 30 follows:
<TABLE>
<CAPTION>
(in millions except per share data)
- -------------------------------------------------------------------------------------------------------------------
Percent
1996 1995 Change Change
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
Space systems sales $ 109.4 $ 130.0 $ (20.6) (16)
Defense systems sales 55.3 73.1 (17.8) (24)
Fastening systems sales 63.0 64.3 (1.3) (2)
------- ------- ------- ------
Total sales $ 227.7 $ 267.4 $ (39.7) (15)
======= ======= ======= ======
Space systems income $ 15.0 $ 18.4 $ (3.4) (18)
Defense systems income 3.6 7.1 (3.5) (49)
Fastening systems income 4.0 5.4 (1.4) (26)
Unallocated corporate expense (4.1) (1.4) (2.7) 193
------- ------- ------- ------
Operating income 18.5 29.5 (11.0) (37)
Equity income, Howmet 2.8 2.8
Interest and other income 0.2 43.6 (43.4) (100)
Interest expense (0.9) (1.1) 0.2 (18)
Income taxes (7.3) (10.2) 2.9 (28)
------- ------- ------- ------
Net income $ 13.3 $ 61.8 $ (48.5) (78)
======= ======= ======= ======
Earnings per share $ .71 $ 3.29 $ (2.58) (78)
======= ======= ======= ======
Average equivalent shares outstanding 18.6 18.7 (.1) (1)
======= ======= ======= ======
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Net income for the fourth quarter of $13.3 million or $.71 per share
decreased $4 million from the prior year's $17.3 million or $.92 per share,
before recognition of an income tax refund and related interest income in
1995. Net income including the tax refund for the fourth quarter of 1995
was $61.8 million or $3.29 per share. Quarterly net income was negatively
affected by the completion of the RSRM processing contract in the first
quarter. An adjustment in accrued disability health care costs, a decrease
in fastening system's industrial income, and lower RSRM motor production
reduced earnings. The current quarter income was favorably impacted by
higher RSRM cost management fees, favorable GOCO margins, and lower general
and administrative expense. Restructuring and Impairment
37
<PAGE>
As a result of a comprehensive review of the Company's operating
performance in Europe, a pre-tax restructuring charge of $5.9 million was
recognized in the second quarter of 1996 relating to the anticipated
shutdown of the fastening system's Germany operations. Approximately $1
million of additional unaccrued period costs will be incurred over the next
12 months relating to the transfer of production equipment for continuing
product lines to be manufactured at the Company's plant in France. During
the third quarter, the Company notified the 82 affected employees of the
Germany plant shutdown. The charge includes $3.6 million of employee
severance expense and $1.7 million write down of long-lived assets.
The severance benefits are included under "accrued compensation" in
the consolidated balance sheet and relate to the 82 employees classified as
follows:
- ---------------------------------------------------------------------------
Remaining Identified
Terminations Terminations
June 30, 1996 December 31, 1995
------------- -----------------
Production 55 57
Administration and finance 18 18
Sales 6 7
-- --
79 82
== ==
- ---------------------------------------------------------------------------
During the 1993-1994 defense industry down turn, pricing pressures
required the Company to review operations and reduce operating costs to
remain competitive. During the third quarter of 1995, the Board determined
a consolidation of the Company's manufacturing facilities and associated
write down of assets was required. The Company adopted SFAS No. 121,
"Accounting For The Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" to utilize the most current accounting standards
to properly account for the impairment. The Company recorded a $61.4
million pre-tax defense systems restructuring and related impairment charge
including a $20 million write down for impaired long-lived assets and a
$23.6 million write down of goodwill. Fair value of goodwill and fixed
asset write downs was determined by estimating discounted cash flows from
future defense and non-shuttle vehicle operations. Also included was an
estimated restructuring loss of $10.5 million on the disposition of fixed
assets from two manufacturing facilities (Huntsville and Omneco), and a
$7.3 million cash restructuring charge for costs related to the facility
closures including $2.3 million of employee severance costs. The
restructuring included 360 employee terminations. Fair value of the
Huntsville and Omneco assets was based on estimated cash proceeds from
asset sales net of the costs of disposal. The closure of the Omneco
facility is completed, except for the sale of the land and building. The
closure of the Huntsville facility is expected to be completed in the
second quarter of fiscal year 1997.
38
<PAGE>
The severance benefits included in the consolidated balance sheet
relate to the 360 employees classified as follows:
- ---------------------------------------------------------------------------
Remaining Identified
Terminations Terminations
June 30, 1996 March 31, 1995
------------- --------------
Production 39 267
Administration and finance 26 93
-- ---
65 360
== ===
- ---------------------------------------------------------------------------
A summary of restructuring reserve activity by program follows:
<TABLE>
<CAPTION>
(in millions)
- ---------------------------------------------------------------------------------------------------------------------
U.S. Germany
Plants Plant
Shutdown Shutdown Total
-------- -------- -----
<S> <C> <C> <C>
Reserve Balance at March 31, 1995 $17.8 $17.8
Reductions (noncash) (.5) (.5)
Payments made (.3) (.3)
----- -----
Balance at June 30, 1995 17.0 17.0
Fastening Systems restructuring $5.9 5.9
Reductions (noncash) (8.7) (2.3) (11.0)
Payments made (.9) (.9)
----- ---- -----
Balance at June 30, 1996 $ 7.4 $3.6 $11.0
===== ==== =====
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
Cash related restructuring charges of $4.7 million are expected to be
paid over the next three quarters. The remaining expenses are expected to
be paid over future periods. The Company is negotiating with the government
for recovery of certain of these costs. The Company estimates a savings of
approximately $2.3 million in amortization and depreciation and
approximately $7 million in overhead reduction occurred during the year.
Equity Investment in Howmet
- ---------------------------
During the second quarter of 1996, the Company and the Carlyle Group
(Carlyle), a private merchant investment bank, formed a jointly owned
company, Blade Acquisition Corp. (Blade), to acquire Howmet Corporation and
the Cercast Group of companies, referred to collectively in the financial
statements as Howmet. Carlyle owns 51 percent and Thiokol owns 49 percent
of the Blade voting common stock. In addition to the Company's $96 million
equity investment in Blade voting common stock, the Company also invested
$50 million in Blade for 9 percent paid-in-kind non-voting preferred stock.
The Company accounts for its 49 percent minority investment in Blade using
the equity method.
On December 13, 1995, the acquisition of Howmet, the world's largest
manufacturer of investment casting components for aircraft and industrial
gas turbine engines, was completed for approximately $771.6 million ($746.4
million plus an additional $25.2 million of related fees and expenses). The
acquisition of Howmet by Blade was accounted for by the purchase method.
The acquisition was financed by a $250 million equity investment from the
Company and Carlyle, $470.2 million of Howmet nonrecourse debt, and a $51.4
million receivable facility. The Company has a three year option to acquire
Carlyle's interest in Howmet beginning after December 13, 1998, at fair
market value. Subject to favorable Howmet financial and operating
performance and favorable conditions in the financial markets, the Company
expects to exercise its option.
As part of the purchase, Howmet received indemnifications from the
seller, secured by bank letters of credit, for liabilities over amounts
reserved relating to environmental and certain other obligations existing
at the purchase date.
40
<PAGE>
Results of Operations Fiscal Year 1995 Compared to Fiscal Year 1994
- -------------------------------------------------------------------
Net income for 1995 was $52.3 million or $2.78 per share before an
extraordinary item, a decrease of 13 percent compared to $60.3 million or
$3.02 per share before accounting changes in 1994. Net income for 1995 was
$47.5 million or $2.53 per share including an extraordinary loss of $4.8
million compared to a net loss of $3.5 million or $.18 per share in 1994
after recognition of accounting changes. Net income for 1995 included a
refund of income taxes of $17.5 million and related interest income of
$43.5 million resulting in a net after-tax benefit of $44.5 million or
$2.37 per share. Results for 1995 also reflected a pre-tax defense systems
restructuring charge of $61.4 million. Earnings per share were favorably
impacted (6 percent) in 1995 due to the reduction in outstanding shares as
a result of the share repurchase program.
Income from operations in 1995, excluding the restructuring charge,
would have been $100.8 million compared to $99.3 million in 1994. Operating
income for 1995 when compared to 1994 was favorably affected by: higher
RSRM income due to recognition of higher cost management fees; a pension
curtailment gain; a reduction in accrued health care costs due to
reductions in personnel; and higher fastening systems income. Operating
income for 1995 when compared to 1994 was adversely affected by: the
restructuring charge; the absence of Trident flight incentive fees and
reduced Trident missile production; and significantly lower operating
levels at the government owned, Company operated ammunition plants.
Sales for 1995 of $956.8 million decreased 8 percent or $87.1 million
compared to $1,043.9 million in 1994. A continuing decline in defense
systems sales ($105.6 million) and lower RSRM sales were partially offset
by an increase in fastening systems sales ($51.9 million). The majority of
the defense systems sales decline resulted from lower operating levels at
the GOCO's ($63.9 million) and lower Trident missile production ($26.3
million).
The after-tax extraordinary loss of $4.8 million or $.25 per share
resulted from redemption premiums and expenses paid for the early
retirement of $85.5 million of privately placed long-term debt.
Business Segment Sales and Income For 1995
- ------------------------------------------
Space systems 1995 sales of $467.4 million decreased 7 percent or
$33.4 million compared to 1994 while operating income increased 17 percent
or $8.9 million to $60.4 million. The sales decrease was due primarily to
continued emphasis on cost reductions and increased efficiency on the RSRM
program. STAR motor and Castor IV motor sales also declined. The rise in
income was primarily the result of an increase over 1994 of approximately
$13.5 million of additional RSRM cost management incentive fee recognized,
of which approximately $11.5 million related to fee earned on prior years'
costs.
41
<PAGE>
Defense systems 1995 sales of $261.7 million decreased 29 percent
while operating income of $26.6 million (before recognition of the
restructuring charge ) decreased 25 percent or $8.7 million. Including the
restructuring charge of $61.4 million the defense systems loss was $34.8
million. The sales decrease was caused by significantly lower operating
levels at the GOCO's and on the Trident program. The decrease in income,
before the restructuring charge, resulted primarily from the sales decline
and the absence of Trident incentive fees in 1995 compared to $9.3 million
recognized in 1994. Partially offsetting the lower defense systems income
was a $6.1 million pension curtailment gain associated with the downsizing
of certain defense operations.
Fastening systems 1995 sales of $227.7 million increased 30 percent
from $175.7 million in 1994 and income increased 14 percent to $19.2
million. Significantly higher domestic industrial sales, small acquisitions
in 1994 and 1995, and improved foreign operations were the principal
sources of the sales increase. Industrial profit margins increased over
1994. Aerospace operating results were negatively impacted by the slow
commercial aerospace market and higher than anticipated production and
product qualification costs at the Lakewood, California facility which was
purchased in 1994. As a result, profit margins in 1995 were 8.4 percent
compared to 9.6 percent in 1994.
General and administrative expense for 1995 of $71.9 million increased
3 percent or $2.3 million compared to 1994. General Corporate expense
remained flat while selling and administrative costs increased in the
fastening systems segment as a result of the sales increases. Interest
expense decreased $5.1 million as a result of the reduction in long-term
debt.
The lower 1995 effective income tax rate of 31.5% compared to 38.3% in
1994 resulted from the income tax refund ($17.5 million) offset in part by
the effect of approximately $29 million of goodwill write down and other
non-deductible costs included in the restructuring charge.
1995 Fourth Quarter Results
- ---------------------------
Net income for the fourth quarter of 1995 of $61.8 million or $3.29
per share increased $45.7 million over $16.1 million, or $.84 per share in
1994. The increase is due to the recognition of a refund of income taxes
and related interest income following the finalization of the Internal
Revenue Service's audit of tax years 1983-1985. The refund involved
research and development tax credits and the timing of certain income and
deduction items. The effect on the 1995 fourth quarter net income from the
tax refund was $44.5 million or $2.37 per share. Net income for the quarter
excluding the tax refund would have been $17.3 million. The quarter was
favorably impacted by lower interest expense and higher RSRM cost
management fees and Kennedy Space Center RSRM processing fees. Quarterly
net income was negatively affected by lower Trident production and
incentive fees and lower operating levels at the GOCO's in comparison to
1994. Sales for the quarter of $267.4 million decreased 4% or $12.1 million
from 1994.
42
<PAGE>
Future Operations/Business Environment
- --------------------------------------
The Company's major business is the production of high-technology
solid propellant motors for space and defense applications. Production of
and services for the RSRM represented 44 percent of 1996 consolidated sales
and 82 percent of consolidated operating income before recognition of the
restructuring charge. The current contract with the National Aeronautics
and Space Administration ("NASA") extends the Company's production of the
RSRM through fiscal year 2000. NASA planning includes follow-on RSRM
contracts with the Company and projects replacing the shuttle program with
another system in 2012. During the year, NASA reduced the RSRM production
rate from 8 to 7 per year, however, the reduction in future revenues and
profits will not be material. The Company's contract to perform RSRM
processing work at the Kennedy Space Center (KSC) was not renewed and was
completed at the end of the first quarter of fiscal year 1996. Revenues and
profits lost from the processing contract at KSC in 1996 were $22.5 and
$3.1 million, respectively. In addition to the reduced launch rate and
termination of the RSRM processing contract, NASA's continued emphasis on
cost containment to control its budget combined with the Company's emphasis
on cost reduction produced a decrease in RSRM sales in fiscal year 1996.
However, contract incentives to reduce costs over the life of the contract
should result in higher incentive fees in the future based on actual and
anticipated contract cost performance. Cost management award fees of $58.6
million have been recognized on the current (RSRM) contract. Realization of
such fees is reasonably expected based on actual and anticipated contract
cost performance. However, all of the cost management award fees remain at
risk until completion of the current contract and final NASA review.
Unanticipated problems which erode cost management performance could cause
a reversal of some or all of the recognized cost management award fees.
Circumstances which could erode cost management performance include a
failure of a Company supplied component, performance problems with the RSRM
leading to a major redesign and/or requalification effort, manufacturing
problems including supplier problems which result in RSRM production
interruptions or delays, and major industrial safety incidents.
43
<PAGE>
The level of United States Government funding of Space programs
including the Space Station may impact the Space Shuttle launch schedule.
Further significant reductions in the launch schedule would lower the
Company's production rates and reduce related revenue and profits to the
Company. As a result of the 1995 restructuring, space systems income was
negatively impacted in 1996 by approximately $3.6 million of costs to
transfer equipment and requalify the Castor IV program from the Huntsville,
Alabama plant to the Northern Utah facility. An additional $2.4 million was
expended for capital to move the program. During fiscal year 1996, the
first Castor 120(R) flight failed. The second flight is planned in the
second quarter of fiscal year 1997. The success of the second flight is
important to the viability of the program.
With continuing reductions in federal government defense spending, the
Company expects its defense systems sales and income to continue declining
in fiscal year 1997 and 1998. The Standard Missile, Patriot, Sidewinder and
Hellfire motor production were completed during 1996. Decreased defense
spending has created a highly competitive pricing environment for tactical
programs and has significantly reduced margins on existing programs and new
program opportunities.
On June 20, 1996, the Army announced that it was terminating, for
convenience, all existing production contracts effective immediately and
its maintenance contracts at the Louisiana and Longhorn GOCO facilities
effective June 30, 1997. Sales ($30 million in 1996) and profits ($1
million in 1996) from the ordnance operations will be insignificant in 1997
as a result of the closure of these facilities.
The fastening systems segment operates in both aerospace and
industrial markets. The aerospace segment is greatly influenced by build
schedules of commercial aircraft which have increased over last year and
are anticipated to increase over the next several years. Military aircraft
spending is expected to continue at low production levels. As a result of
continued improvements in operations and the closure of the Germany
facility, the Company expects to see improvement in the fastening systems
operating margins. Industrial sales in 1997 will be lower than 1996 levels
as the build schedules in the transportation industry are declining.
44
<PAGE>
Howmet is a leading manufacturer of investment cast turbine engine
components for the jet aircraft and industrial gas power generation
markets. The Company operates in four major business areas: aerospace
castings, industrial gas turbine (IGT) castings, aluminum castings, and
refurbishments. The Company also manufacturers airfoils for every major jet
aircraft turbine engine program currently in production or under
development by its major customers. The aerospace castings market is
strongly influenced by both the level of new aircraft construction and
demand for commercial air travel.
Howmet is also a leading producer of airfoils for land-based
industrial gas turbine engines. These engines are primarily used in utility
power generation, as well as in mechanical drive applications for oil and
gas processing and off-shore drilling. Airfoil products manufactured by the
Company for the IGT market have performance and reliability requirements
similar to those produced for the aerospace market, but generally are
significantly larger in size. Market growth for industrial gas turbines
approximates that for gross product throughout the world.
The Internal Revenue Service completed an examination of the Company's
federal income tax returns for fiscal years 1986 through 1993. Based on
preliminary audit results, the Company anticipates a tax refund including
interest of an amount substantially less than the refund received in 1996.
A portion of the anticipated refund, if realized, will be recognized as
income when the audit is finalized.
Other Matters
- -------------
The Company has operating leases, the majority of which are short-term
and real estate related. Rental expense amounted to $10.9 million in 1996.
Renewal and purchase options are available on certain of these leases.
Future minimum rental commitments under non-cancelable operating leases are
not significant.
The Company is involved in various legal proceedings and uncertainties
including those related to environmental matters as discussed in Notes 12
and 13 to the consolidated financial statements.
45
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Cash flow provided by operations was $182.8 million compared to $101.5
million in 1995. The difference resulted principally from a decrease in
receivables due to the receipt of $79.6 million of income tax refunds
received in 1996. A $41.8 million decrease in inventory and prepaid
expenses in 1996 also contributed positive cash flow. The $27.5 million of
interest income related to income taxes and the $18.1 million fastening
systems charge did not affect cash flow.
Investing activities, which consumed $169 million in cash in 1996,
included the $146 million Howmet investment and $29.1 million of purchases
of property, plant and equipment compared to $33.8 million in 1995.
Cash used for financing activities of $11.9 million compares to $86.1
million in 1995. The $74.3 million decrease reflects the early retirement
of $85.5 million of long-term debt in the third quarter of fiscal year
1995, through cash on hand and lower interest bearing short-term credit
lines. During 1996, the Company repurchased 124,600 shares of common stock
($4.3 million) under the 1.5 million share repurchase program compared to
710,162 shares ($19.8 million) in 1995. Under the current 1.5 million
repurchase authorization 625,400 shares remain to be repurchased. The
Company anticipates no purchases under the authorization until after
completion of the Howmet acquisition.
The Company's current ratio decreased to 1.7 from 2.1 and the debt to
equity ratio declined to 14.5 percent from 16.2 during the fiscal year.
Working capital of $118.7 million at June 30, 1996, decreased $99 million
from June 30, 1995. The Company's current ratio and working capital were
reduced reflecting the equity investment in Howmet. The Company may incur
significant additional debt at such time it elects to purchase the
remaining equity interest in Howmet. The Company's debt to equity ratio
would significantly increase subsequent to such a purchase.
The Company has current outstanding authorizations for capital
expenditures of approximately $26 million.
46
<PAGE>
Estimated future cash flow from operations, current financial
resources, and available credit facilities are expected to be adequate to
fund the Company's anticipated working capital requirements, capital
expenditures, and dividend payments. The Company has filed a $300 million
shelf registration with the Securities and Exchange Commission, which after
its effective date, will permit the Company to issue debt and other
securities as considered appropriate. As of June 30, 1996, the Company had
available revolving credit facilities of $190 million, of which $166.3
million remained unused.
Risk Factors
- ------------
Except for the historical information contained herein, certain
statements in this annual report are "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995, which
involve risks and uncertainties, including but not limited to changing
economic and political conditions in the United States and in other
countries, changes in governmental spending and budgetary policies,
governmental laws and regulations surrounding various matters such as
environmental remediation, contract pricing, and international trading
restrictions, outcome of union negotiations, customer product acceptance,
and continued access to capital markets. All forecasts and projections in
this report are "forward-looking statements," and are based on management's
current expectations of the Company's results, based on current information
available pertaining to the Company and its products including the
aforementioned risk factors. Actual future results and trends may differ
materially from projections made herein.
Dividends and Recent Market Price
- ---------------------------------
Dividends paid were 68 cents per share for 1996, 1995, and 1994.
The high and low market prices of Thiokol common stock for fiscal year
1996 were $44.75 per share and $29.75 per share, respectively. The
principal market for the Company's common stock is the New York Stock
Exchange and prices are based on the Composite Tape (ticker symbol TKC).
47
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
- -----------------------
(dollars in millions,
except per share data) 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
- ---------------------
Net sales by industry segment
Space Systems $ 410.0 $ 467.4 $ 500.8 $ 519.3 $ 555.6
Defense Systems 241.1 261.7 367.4 523.5 649.2
Fastening Systems(1) 238.4 227.7 175.7 158.9 106.9
------- ------- -------- -------- --------
Consolidated net sales 889.5 956.8 1,043.9 1,201.7 1,311.7
Operating profit (loss) by industry
segment
Space Systems 55.5 60.4 51.5 61.4 58.5
Defense Systems(2) 21.6 (34.8) 35.3 56.4 61.2
Fastening Systems(1)(3) (6.3) 19.2 16.9 7.8 8.7
------- ------- -------- -------- --------
Segment operating profit 70.8 44.8 103.7 125.6 128.4
Income from operations(2)(3) 61.8 39.4 99.3 120.6 116.8
Equity income, Howmet 4.5
Interest income(4)(5) 30.2 46.2 12.9 6.6 9.2
Interest expense 3.9 9.3 14.4 25.5 24.2
Income before extraordinary item
and cumulative affect of
accounting changes 58.3 52.3 60.3 63.8 63.0
Net income (loss) 58.3 47.5 (3.5) 63.8 63.0
INCOME (LOSS) PER SHARE
- -----------------------
Income before extraordinary item
and cumulative effect of
accounting changes 3.14 2.78 3.02 3.13 3.12
Extraordinary item (.25)
Cumulative effect of accounting
changes (3.20)
------- ------- -------- -------- --------
Net income (loss) $ 3.14 $ 2.53 $ (.18) $ 3.13 $ 3.12
- ----------------------------------------------------------------------------------------------------------------------
FINANCIAL
- ---------
Total assets $ 818.3 $ 810.7 $ 805.3 $ 834.2 $ 956.1
Working capital 118.7 217.7 216.5 217.7 138.8
Current ratio 1.7 2.1 2.4 2.2 1.4
Short-term and long-term debt $ 65.1 $ 65.4 $ 115.1 $ 149.6 $ 245.8
Debt-to-equity 14.5% 16.2% 29.9% 33.8% 63.5%
Stockholders' equity $ 447.9 $ 403.8 $ 384.5 $ 443.2 $ 387.3
Stockholders' equity per share 24.12 22.14 20.52 21.94 19.44
Return on stockholders' equity(6) 14.4% 13.6% 13.6% 16.5% 19.3%
Capital expenditures $ 29.1 $ 33.8 $ 21.2 $ 19.8 $ 37.4
Provision for depreciation 33.0 34.5 36.0 38.6 39.0
Cash dividends paid 12.4 12.6 13.3 9.4 7.2
Cash dividends declared per share .68 .68 .68 .47 .36
GENERAL
- -------
Average number of common and
common equivalent shares
outstanding (in thousands) 18,566 18,794 19,973 20,384 20,151
Approximate number of
stockholders of record(7) 6,000 6,500 7,000 8,500 9,100
Approximate number of
employees 5,900 7,200 8,000 9,300 11,200
- ----------------------------------------------------------------------------------------------------------------------
<FN>
1) Represents operations for an eight-month period in 1992.
2) Includes pre-tax restructuring charge of $61.4 million in 1995.
3) Includes pre-tax restructuring and inventory charges of $18.1
million in 1996.
4) Includes $27.5 million of interest income relating to income taxes in
1996.
5) Includes $43.5 million of interest income from an income tax refund in
1995.
6) Based on income before an extraordinary item in 1995 and the
cumulative effects of an accounting change in 1994 and calculated on
beginning of year stockholders' equity.
7) As of July 31 of the calendar year.
</FN>
</TABLE>
48
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Thiokol
Corporation financial statements incorporated by reference as Exhibit 13
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 15,122
<SECURITIES> 0
<RECEIVABLES> 163,846
<ALLOWANCES> 1,251
<INVENTORY> 91,400
<CURRENT-ASSETS> 300,498
<PP&E> 594,266
<DEPRECIATION> 307,582
<TOTAL-ASSETS> 818,347
<CURRENT-LIABILITIES> 181,753
<BONDS> 2,360
<COMMON> 20,538
0
0
<OTHER-SE> 427,276
<TOTAL-LIABILITY-AND-EQUITY> 818,347
<SALES> 889,490
<TOTAL-REVENUES> 924,278
<CGS> 738,660
<TOTAL-COSTS> 761,213
<OTHER-EXPENSES> 66,451
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,988
<INCOME-PRETAX> 92,626
<INCOME-TAX> 34,328
<INCOME-CONTINUING> 58,298
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,298
<EPS-PRIMARY> 3.14
<EPS-DILUTED> 3.13
</TABLE>
