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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
For the fiscal year ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
Common Stock, par value on Which Registered
$1.00 per share New York Stock Exchange
Common Stock Purchase Rights Chicago Stock Exchange
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 29, 1997, ($79.625
per share): $1,455,933,889
Number of shares of Common Stock outstanding as of August 29, 1997:
18,284,884
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Annual Report to Stockholders for the fiscal year ended June
30, 1997: Parts I, II, and IV.
2. Portions of definitive Proxy Statement dated September 12, 1997: Parts
III and IV.
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PART I
ITEM 1. BUSINESS
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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 1997, the Company
consolidated its Space Defense and Launch Vehicle Divisions and Science and
Engineering into a single operating unit, the Propulsion Group. The
Company's management and operations at the government-owned Army ammunition
plants in Texas and Louisiana have been discontinued.
During fiscal year 1996, the Company and The Carlyle Group, a private
merchant investment firm (ACarlyle"), formed a jointly-owned company, Blade
Acquisition Corp. (ABlade"). 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
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. The call
option price is set by a purchase price valuation process set forth in the
Shareholders' Agreement or by negotiation. The Company's decision to
exercise its option to acquire the Howmet shares will be dependent on
various factors including financial and operating performance, condition of
the financial markets and the applicable valuation. The Company and Carlyle
could also agree on alternatives for the Company to increase its ownership
in Blade. 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 terms of the
Shareholders'
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Agreement, the Company may effectively lose the call option.
Equity Investment in Howmet
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Howmet is a manufacturer of investment castings for aircraft turbine
engines and components and industrial gas turbine engines. The Howmet
Cercast Group is a producer of high quality aluminum and investment
castings used in the defense electronics and commercial aerospace
industries.
Howmet's aerospace castings consist of super alloy and titanium
castings for aircraft turbine engines and structural airframe and engine
applications. Products include airfoils consisting of blades (rotating
foils) and vanes (non-rotating foils) as well as integral castings such as
turbine rotors and nozzle rings for smaller engines involving an entire set
of blades and related components cast together. Structural components
include support components of engines such as engine castings, frames, and
bearing housings and other airframe components. Howmet's aerospace castings
are designed and manufactured for commercial and military applications and
sold to original equipment aircraft manufacturers and aftermarket
customers.
Industrial gas turbine products consist of airfoils (including moving
blades and stationery vanes) for gas turbines used for power generation
primarily by the electric utility industry and mechanical drive
applications for industrial and pipeline operations, oil and gas processing
and offshore drilling.
Howmet's Cercast subsidiary produces aluminum investment castings
for the commercial aerospace and defense markets. Applications include
electronic packaging, electro-optical system housings, engine parts, pumps
and compressors.
Howmet also provides products and services to third parties including
machining components, component coating and specialty alloys. Howmet also
participates in a joint venture in Japan with Komatsu manufacturing
investment cast components for industrial gas turbine and aerospace
customers primarily in Japan and other Asian countries.
Howmet's aerospace castings represent 52%; Industrial gas turbine
castings 33%; and aluminum castings 8% of its revenues. Howmet's principal
customers are General Electric, Pratt & Whitney Aircraft Division of United
Technologies Corporation, Allied Signal, Inc., Rolls Royce plc and SNECMA,
S.A. Sales to the top ten customers represent approximately 60% of Howmet's
sales.
Howmet's major investment casting competitor is Precision Castparts
Corp. ("PCC"). Howmet competes with PCC and others primarily on
technological sophistication, quality, price, service and delivery for
orders from large, well-capitalized customers with significant market
power. Superalloy castings represent a substantial
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cost component to Howmet's and its competitor's customers who are
increasingly focused on reducing costs and responding to increased
competition in their markets. Howmet's major customers for these castings
are intensely price competitive with each other, and this price competition
increases their incentives to reduce costs from their suppliers. Aluminum
casting manufacturers also compete on the basis of price.
Howmet, based in Greenwich, Connecticut, generated annual sales of
$1.2 billion in the twelve-month period ended June 30, 1997. Howmet
operates 27 manufacturing facilities located in the United States, Canada,
France, the United Kingdom and Japan and employs approximately 10,000
people worldwide. Howmet operates a research and development facility
employing 170 people in Whitehall, Michigan.
Business Segments
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The Company operates in two business segments: (i) the Propulsion
Group; and (ii) Fastening Systems. This business segmentation reflects the
Company's consolidation of its Space, Defense and Launch Vehicle divisions
and Science and Engineering unit into one business segment, the Propulsion
Group, during fiscal year 1997.
Propulsion Group. The propulsion 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"), Department of Defense 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 $700 million remaining
through its projected completion date in fiscal year 2001. The Buy III
contract is a Acost 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, 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 are subject to
continuing NASA 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 is reorganizing the Shuttle program under one prime
contractor, United Space Alliance, to manage many of the 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 to shift to the role of a subcontractor to the prime
contractor,
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although there can be no assurance that such shift will occur. Currently,
the Company is the only qualified manufacturer of the RSRM. The Company
believes the time and cost to qualify a second source of supply would be
prohibitively expensive in light of declining government expenditures for
the space program. After completion of the Buy III contract, the Company
anticipates continuing participation in the Shuttle program under the Buy
IV contract, the terms of which are to be negotiated. The Company expects
NASA to issue a request for proposal for the Buy IV contract during early
fiscal year 1998. The Company expects to submit its proposal during the
second half of 1998 with negotiations following in fiscal year 1999. The
Company retains certain Shuttle RSRM solid rocket motor launch oversight
activities at the Kennedy Space Center.
The Company's family of CASTOR solid rocket motors is used in the
first and 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 motor, designed as a low-cost 120,000 pound
class motor for the small launch vehicle market, has been selected as the
propulsion system for the Lockheed Launch Vehicle ("LLV") and the Orbital
Science Taurus launch vehicle. The Company is under contract to provide
nine CASTOR 120 motors to Lockheed/Martin Aeronautics for its LLV family of
launch vehicles and three motors to Orbital Science. During fiscal year
1998, five CASTOR 120 motor launches are planned.
The CASTOR IVA motor is designed with 110,000 pounds of thrust for use
as a strap-on booster. The Company currently has orders for the production
of 88 motors for Lockheed/Martin Aeronautics for the Atlas IIAS program,
which also has options to purchase 32 additional CASTOR IVA motors. 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, and the
Spanish government Capricornio launch vehicle program. The Company received
federal government regulatory clearance and license to export CASTOR motor
and case technology in support of the Japanese HII-A launch vehicle. During
fiscal year 1997, there were four successful CASTOR IV motor flights,
including flights on the Atlas IIAS program. During fiscal year 1998, seven
commercial flights and one NASA flight are planned.
The Company's family of STAR motors provides upper stage propulsion
systems for a number of launch vehicle systems. The STAR motors also
provide satellite positioning for space, defense, and commercial
applications. During fiscal year 1997, the Company's STAR motors
successfully completed 22 missions including the Global Positioning
Satellites, Korea Sat, and INMARSAT. The Company's propulsion and gas
generator inflated airbags products were successfully deployed on the Mars
Pathfinder mission.
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For strategic and tactical markets, the Company produces, or is
otherwise a qualified producer, of 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. During
fiscal year 1997, program qualification test motor firings were conducted,
and production motors are being delivered. The Company utilizes the
percentage of completion method to recognize sales and profits on this
cost-plus 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 Trident production rate is expected to
decline significantly, thereby reducing sales and profitability of the
program.
The Company is positioned as the lead propulsion supplier on the
Alliant Tech Systems and TRW program teams, as prime contractor, for the
Minuteman propulsion replacement program to extend the life of the Air
Force Minuteman ICBMs. The success of this program is dependent on the
level of START treaty ICBM reductions and government funding. The Company
also participates in the Trident II and Minuteman Technical Insertion
programs. The Company remains a qualified supplier with modest levels of
activity on the HARM, MK66 and Harpoon programs.
The Company's Propulsion Group also manufactures gas generants for
space, defense and commercial applications; visible and infrared flares and
demilitarization technology has been developed for both liquid and solid
propulsion systems.
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. The Company's TCR Composites Division has been organized for
the commercial development of a lower cost carbon fiber resin technology
used for structural and recreation applications. Through a joint technical
development agreement, the Company works with Autoliv (formerly the
Automotive Safety Products Division of Morton International) on the
development of non-sodium azide gas generant airbag and initiator
technology. The Company's Propulsion Group maintains ongoing research
projects funded under various Company, commercial, and government programs.
Federal export laws, controls, and regulations impact or otherwise restrict
the export of the Company's propulsion products and technical knowledge.
Loading operations managed by the Company under contract for the
Army-owned ammunition facilities near Marshall, Texas and Shreveport,
Louisiana were discontinued during fiscal year 1997.
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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 in
both domestic and foreign markets. 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.
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
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Propulsion Group. The Company is the sole source supplier of RSRM
solid rocket motors, the only domestic human-rated solid rocket propulsion,
for NASA's Space Shuttle program. The Shuttle Buy III contract was placed
directly by NASA. The Company, as the only qualified 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. Liquid propulsion systems and excess strategic
ballistic missile inventory may be competitive with the Company's
propulsion systems, especially in the commercial launch market. Liquid
propulsion systems that may be competitive with the RSRM are under study,
but are not yet developed. For Propulsion Group 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. Commercial launch vehicle products are sold
primarily through responding to the terms and conditions of a request for
proposal or negotiated contracts in
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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 propulsion products are sold primarily on basis of
price. Reductions in Department of Defense expenditures, the decline in the
availability of new programs, and lower quantities being procured for
strategic and tactical solid rocket motor programs have substantially
increased the competitive pressure for these products. The Company's
competitive strength is also affected by the technical performance,
quality, and reliability of its solid propulsion products for space launch
applications. The Company's propulsion systems, services and related
products are competitive with Alliant Technologies, Inc., CSD, Aerojet
Division of Gen Corp., and the ARC Division of Sequa Corporation and
various liquid propulsion systems.
Fastening Systems. Fastening systems are manufactured by a number of
competitors with no one manufacturer having a major position in the
aerospace or industrial fastener markets. Alternative fastening methods
compete with the Company's threaded and non-threaded fastener systems.
Competition for orders from aerospace original equipment manufacturers is
often dependent on customer qualification of the Company's fasteners as
required by government regulations. 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 from those of its competitors. Aerospace fastener competition is
primarily through responding to requests 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
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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 $12.5 million, $13.3 million, and $15.0 million
and represented 1.4 percent, 1.5 percent and 1.6 percent of revenues for
fiscal years 1997, 1996, and 1995, respectively; the amount spent during
the same periods for customer-sponsored R&D (primarily U.S.
government-funded) was $75.7 million, $56.6 million, and $25.1 million,
respectively.
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Environmental Matters
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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 relating to environmental matters respectively were $1.1
million and $6.6 million for fiscal year 1997 and are estimated to be $1.3
million and $7.0 million for fiscal year 1998, although no assurance can be
given as to the exact amount. The Company will report "Environmental
Remediation Liabilities" under the American Institute of Certified Public
Accountants Statement of Position 96-1 for fiscal year 1998. The Company
does not expect the change in such accounting recognition of environmental
liabilities to have a material impact on the Company's existing recorded
liabilities. The Company maintains ongoing programs for environmental site
evaluations, continues its 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 in Morris County, New Jersey.
These sites were 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. At this site, the
Company's estimated cost for response costs, site remediation, and future
operation and maintenance costs is $6.2 million of which approximately $0.8
million will be spent during fiscal year 1998. In 1996, the Company
negotiated a consent decree with the State of New Jersey for the Rockaway
Township Well Field Site. At this site, the Company's estimated cost for
response costs, site remediation, and future operations and maintenance
costs is $5.1 million of which approximately $0.5 million will be spent in
fiscal year 1998.
During fiscal year 1996, the Company 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 $0.4 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 related to past operations
conducted by the Company at this site. 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 1998.
The Company estimates that the eventual cost for site remediation
matters known at this time, before any recoveries from insurance and third
party contributions
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by other responsible parties including the federal government, will be
approximately $21 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 years 1997 and 1996, the Company settled
outstanding environmental liability claims with insurance carriers and
received payments of $9.5 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 12 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 of 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 government contracts in the forward pricing on
certain of the Company's government contracts.
Employees
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The approximate number of employees of the Company on June 30, 1997,
was 5,300 compared to 5,900 on June 30, 1996. Propulsion Group employment
at June 30, 1997 was approximately 3,500 compared to approximately 4,000 at
June 30, 1996. Fastening Systems employment was approximately 1,500 on June
30, 1997, compared to approximately 1,600 on June 30, 1996. The reduced
employment level for the Propulsion Group reflects reductions as a result
of consolidating the Space and Defense, Launch, and Science and Engineering
groups and discontinued operations at the Army Ordnance operations in Texas
and Louisiana. Fastening Systems' employment levels reflect production
efficiencies being achieved as the result of manufacturing reorganization
and consolidations.
Raw Materials
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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. The Company has received notification that a major qualified
manufacturer of rayon, a material used in propulsion motor cases, will
discontinue production. The Company believes it has a sufficient inventory
of material to meet current production demand until a replacement source of
material is qualified.
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Seasonality
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The business of the Company is not subject to seasonal fluctuations.
Patents and Trademarks
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The Company has approximately 400 patents and patent applications, of
which 300 relate to the Propulsion Group business segment, and 100 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.
Approximately ninety percent of the Company's patents in the
Propulsion Group 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.
The Propulsion Group business segment patents have the following
remaining duration: approximately seventy-five percent of the patents have
a duration of more than 10 years; twenty percent, 5-10 years; and five
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 Autoliv
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 percent of the patents have a duration of
more than 10 years; thirty percent, 5-10 years; and twenty 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, AUltra-Twist" blindbolt
for box beam construction applications and "Magna-Grip" lock bolts with
patent lives remaining of more than five 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 patents 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
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segment of the business, but are not significant to the Company's
propulsion business.
Customers
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The customers of the Propulsion Group 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 sixty percent
of the Company's revenues in fiscal year 1997, 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 sales base are still developing, but are not yet
material to the Company's customer and sales base.
Backlog Orders
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The Company's backlog of propulsion systems orders on June 30, 1997,
and June 30, 1996, was $1.1 billion and $1.4 billion, respectively. The
NASA Space Shuttle solid rocket motor booster and related contracts
comprise approximately 58 percent of the backlog. It is expected that
approximately 51 percent of the orders in backlog on June 30, 1997, will be
completed by June 30, 1998; 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 $530 million in
government contracts for which funds have been approved. Although contracts
can be changed or canceled, the backlog is believed to consist of firm
contracts. The Company does not believe that a material change or
cancellation of a single contract (other than the RSRM) would be materially
significant to its' 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 $117 million on
June 30, 1997.
ITEM 2. PROPERTIES
The Company operates manufacturing, research, and development
facilities at ten locations, and administrative and sales offices,
warehouses, and service centers worldwide. The Company considers its
manufacturing facilities, warehouses, and other properties to be in
generally good operating condition and suitable for their intended
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purposes. Facilities are considered adequate and sufficient to meet the
operating needs of the Propulsion Group and Fastening Systems business
units. All Company-owned property is held in fee with no encumbrances.
Company leased property obligations are set forth in Note 13 of the
Company's consolidated financial statements. The Company's operations have
been discontinued and facilities closed at Marshall, Texas and Shreveport,
Louisiana. During fiscal year 1997, the Company relocated its fastening
systems installation tooling division to a new Company-owned facility in
Kingston, New York.
During fiscal year 1997, additions to property, plant, and equipment
totaled $33.1 million.
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The following table sets forth the Company's manufacturing
locations and the approximate square footage.
Buildings (000's Square Feet)
--------------------------------
Manufacturing Location Company Government
by Segment Owned Leased Owned Total
---------- ----- ------ ----- -----
Propulsion Group
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Northern Utah 3,192 640 6 3,838
Elkton, Maryland 378 378
Fastening Systems Segment
- -------------------------
Domestic
Branford, Connecticut 74 74
Carson, California 153 153
Kingston, New York(1) 105 105
Lakewood, California 115 115
Tucson, Arizona 67 67
Waco, Texas 371 371
International
- -------------
Us, France 61 61
Shropshire, United Kingdom 50 50
- --------------------------
(1) Land is leased.
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. On September 15, 1997, the
Ninth Circuit Court of Appeals affirmed the District Court's favorable
ruling for the Company finding the Company did not breach its contractual
obligations and thus is not liable to McDonnell Douglas. The Company
defended the suit and 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 $44.0 million for these
costs, with interest. It is the Company's position that approximately $10.1
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; but are not expected to be material. If the
Company does not prevail in this litigation, it would recognize in that
period material non-cash and cash charges. See Note 11 to the Company's
consolidated financial statements.
Sharp v. Thiokol et al. On July 22, 1997, the Company was served with
a Complaint filed in state court in Weber County, Utah. Plaintiffs Don
Sharp and Sharp Construction Co., Inc. seek certification as a class action
by all shareholders of American Pacific Corporation (AMPAC), parent of
Western Electrochemical Company ("WECCO"), during a period in 1993. WECCO
is one of two U.S. makers of ammonium perchlorate, an oxidizer used in the
production of solid rocket motor propellant.
14
<PAGE>
Plaintiffs allege that a Declaratory Judgment action filed by the Company
against WECCO in a 1993 contract dispute was so baseless as to give rise to
a claim by AMPAC's shareholders for a loss in market value of $136 million
alleged to have been the direct result of the filing of the action by the
Company. In a 1993 AMPAC class action shareholder suit, the issue of
AMPAC's disclosures to the public of its contract disputes with the Company
was litigated. The trial court and the U.S. Court of Appeals for the Ninth
Circuit found in favor of AMPAC and against the shareholders. The Company
believes the Sharp claim also is without merit and is vigorously defending
it.
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 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 1997.
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 23, 1997.
The Executive Officers of the Company on June 30, 1997, were:
Positions Held During Past Five
Name and Age Years and Terms of Office
- ------------ -------------------------------
James R. Wilson (56).................Chairman of the Board, 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).
15
<PAGE>
Richard L. Corbin (51).................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 (53)..................Executive Vice President Human
Resources and Administration since
1991; Vice President Human Resources
(1989-91).
Robert L. Crippen (59).................Vice President and President of
Propulsion Group since December 1996,
Vice President of Training Simulator
Systems, Lockheed Martin, April 1995 to
October 1996; Director of John F.
Kennedy Space Center, 1992 to January
1995.
Bruce M. Zorich (43)...................Vice President and President of Huck
International since April 1996. 1993 to
1996, Vice President, Worldwide
Automotive Operations, 1989 to 1993
Vice President & General Manager, OEM
Products, Senior Flexonics.
Joseph A. Lombardo (64)................Vice President Space Operations since
April 1992;(1989-April 1992) Assistant
General Manager Space Operations;
prior to 1989, NASA Marshall Space
Flight Center.
Winston N. Brundige (52)...............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).
Daniel S. Hapke, Jr. (51)..............Vice President and General Counsel
since February 1997. 1984 to 1997
General Dynamics Corporation including
the position of Vice President and
General Counsel of its Electric Boat
subsidiary 1994 to 1997.
16
<PAGE>
Robert K. Lund (59)....................Vice President, Science and Engineering
and Technical Director since 1991; Tech-
nical Director Advanced Technology
(1989-91).
Michael R. Ayers (46)..................Vice President and Controller since
January 1996; Vice President Strategic
Development (1994-1996); Director
Finance & Administration Space
Operations (1986-1994).
Nicholas J. Iuanow (37)................Treasurer since 1994; Assistant
Treasurer of the Company (1989-93) .
Edwin M. North (52)....................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 "Quarterly
Financial Highlights" on page 51, "Dividends and Recent Market Prices" on
page 61 of the Company's Annual Report to Stockholders for fiscal year
1997, and is incorporated herein by reference in Exhibit Number 13. As of
August 29, 1997, there were 5,455 stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five fiscal years ended June 30, 1997
is included on page 62 of the Company's Annual Report to Stockholders for
fiscal year 1997 and is incorporated herein by reference in Exhibit Number
13.
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, 1997, is
included on pages 52 through 61 of the Company's Annual Report to
Stockholders for fiscal year 1997 and is incorporated herein by reference
in Exhibit Number 13.
17
<PAGE>
The Company sets forth below ACautionary Statements" for the purpose
of the Asafe 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. Risks which may impact the accuracy of the Company's
forward-looking statements include, but are not necessarily limited to, the
following:
(i) The Company's NASA 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 ABuy III@
contract expected to continue until fiscal year 2001. 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 privatization of the Space Shuttle Program through United
Space Alliance could adversely impact the Company's RSRM contract
in the out-years. Competing propulsion systems and technology not
yet qualified could compete with or adversely impact the
Company's RSRM contract in future years. Poor Company performance
on the RSRM contract could also result in termination for default
and/or substantially lower award fees.
(ii) The Company's maintenance of non-RSRM space and defense contracts
and programs (collectively "programs") and the availability and
award of future programs 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 for 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. The Company's
business also can be affected by factors such as the degree to
which the Company successfully manages current programs, its
ability to obtain or retain new and existing programs, and the
profitability of such programs with satisfactory return on
investment on lower prices, costs, and unit volumes in a
shrinking and competitive government procurement environment.
18
<PAGE>
Competitive propulsion systems and technologies as well as
ballistic missile surplus propulsion inventory (both domestic and
foreign) can adversely impact the success of the Company's
commercial launch programs and ability to compete successfully
for government strategic and tactical propulsion programs.
(iii) The products and services 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, 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 Company's business can also be
affected by factors such as 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 factors in maintaining
customer relationships and effectively competing with other
manufacturers.
(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. The designation of the
Company as a potentially responsible party by the Environmental
Protection Agency or similar state environmental agency and
environmental claims by third parties could have a material
adverse effect on the Company's results of operations or
financial position.
19
<PAGE>
(vi) The Company's decision and timing of increasing its ownership of
Howmet will, in part, be dependent on the valuation of Howmet,
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 makes its decision to exercise.
(vii) Supplier and customer product qualifications are important to the
Company as a purchaser and as a supplier. 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. Qualified vendors,
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 materials may be limited and the loss of a major vendor as a
supplier such as the announcement by a major rayon manufacturer
to discontinue production has the potential to cause a major and
material delay in production or program performance.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets of the Company as of June 30, 1997 and
1996, and the consolidated statements of income, cash flows, and
stockholders' equity for each of the three years in the period ended June
30, 1997 and notes to consolidated financial statements are included on
pages 35 through 51 of the Company's Annual Report to Stockholders for
fiscal year 1997 and are incorporated herein by reference in Exhibit Number
13.
Quarterly financial highlights are included on page 51 of the
Company's Annual Stockholders' Report to Stockholders for the fiscal year
ended June 30, 1997, and are incorporated herein by reference in Exhibit
Number 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
20
<PAGE>
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 12, 1997, and is incorporated herein by
reference. Information concerning disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is set forth on page 8 of the Company's
definitive Proxy Statement dated September 12, 1997, and is incorporated
herein by reference.
Information concerning the Company's Executive Officers is included on
pages 15 through 17 of Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation for fiscal year 1997 is
included on pages 8 through 13 of the Company's definitive Proxy Statement
dated September 12, 1997, 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 12, 1997, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
21
<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 51 of the Company's Annual Report to Stockholders for the
fiscal year ended June 30, 1997, and are incorporated herein by reference
in Exhibit Number 13:
Consolidated Statements of Income -- Years ended June 30, 1997, 1996
and 1995.
Consolidated Balance Sheets -- June 30, 1997 and June 30, 1996.
Consolidated Statements of Cash Flows -- Years ended June 30, 1997,
1996 and 1995.
Consolidated Statements of Stockholders' Equity -- Years ended June
30, 1997, 1996 and 1995.
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.
22
<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, 1997 increasing
Board of Directors: Incorporated by reference as
Exhibit 3 to Form 10-K for fiscal year ended June 30,
1997.
(4) Instruments defining the rights of security holders including
indentures.
4.01 Rights Agreement between Thiokol Corporation and First
Chicago Trust Company of New York: Incorporated by
reference to Exhibit 4 to Form 8-A dated May 28, 1997.
4.02 See Exhibits 3.01, 3.02, and 3.03 above.
(10) Material contracts.
10.0 (1)1989 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.
10.02 (1)1989 Stock Awards Plan as amended by stockholder
approval October 15, 1993: Incorporated by reference to
the definitive Proxy Statement dated September 11,
1992.
10.03 (1)Survivor 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.
23
<PAGE>
10.04 (1)Arrangements 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.
10.05 (1)Form 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.
10.06 Amended 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.
10.07 Credit Agreement dated September 30, 1993 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.
10.08 (1)Thiokol 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.
10.09 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.
10.10 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.
10.11 Stock Purchase 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.
24
<PAGE>
10.12 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.
10.13 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.
10.14 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.
10.15 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.
10.16 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.
10.17 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.
10.18 Collateral Custodial Agreement by and among
Carlyle-Blade Acquisition Partners L.P., Thiokol
Holding Company, and the First National Bank of
Chicago: Incorporated by reference as Exhibit 10 to
Form 10-Q for the quarterly period ended December 31,
1995.
10.19 Credit Agreement dated as of May 23, 1996, among
Thiokol Corporation and The First National Bank of
Chicago. Incorporated by reference as Exhibit 10 to
Form 10-K for fiscal
25
<PAGE>
year ended June 3, 1996.
10.20 Thiokol Corporation 1996 Stock Awards Plan:
Incorporated by reference as Exhibit A to Proxy
Statement dated September 20, 1996.
10.21 (1)Thiokol Corporation Supplemental Executive
Retirement Plan amended and restated effective June 16,
1997.
10.22 Thiokol Corporation Executive Bonus Plan as amended and
restated effective June 16, 1997.
10.23 (1)Thiokol Corporation Key Executive Bonus Plan as
amended and restated effective June 16, 1997.
10.24 (1)Thiokol Corporation Key Executive Long-Term
Incentive Plan as amended and restated effective June
16, 1997.
10.25 (1)Huck International, Inc. Excess Benefit Plan for
Selected Employees amended and restated effective June
16, 1997.
10.26 (1)Thiokol Corporation Grant Agreement Incentive Stock
Option amended and restated June 16, 1997.
10.27 (1)Thiokol Corporation Grant Agreement Non-qualified
Stock Option amended and restated June 16, 1997.
(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, 1997, 1996, and
1995.
(13) Annual Report to security holders.
Applicable sections of the Annual Report to Stockholders of the
Company for fiscal year 1997 incorporated by reference.
(21) Subsidiaries of the registrant.
Subsidiaries of the Company.
(24) Consents.
Consent of Ernst & Young LLP, independent auditors.
26
<PAGE>
(27) Financial Data Schedule.
(b) REPORTS ON FORM 8-K
Form 8-K filed May 22, 1997. Item 5 - Other Events - related to the
Rights Agreement between Thiokol Corporation and First Chicago Trust
Company of New York dated May 22, 1997.
(d) SEPARATE FINANCIAL STATEMENTS OF SUBSIDIARIES NOT
CONSOLIDATED AND FIFTY PERCENT OR LESS OWNED PERSONS
Financial statements for Blade Acquisition Corp. required pursuant to
Rule 3-09 of Regulation S-X will be filed as amendment to this report
on Form 10-K within 90 days after the end of Blade Acquisition Corp.
fiscal year ending December 31, 1997.
- -------------
(1)Management contract or compensatory plan or arrangement has been filed
as an Exhibit to this Form 10-K pursuant to Item 14c.
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 24th day of September 1997.
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 24th day of September
1997.
SIGNATURE TITLE
--------- -----
/s/ James R.Wilson Chairman of the Board, President,
__________________________ Chief Executive Officer and Director
James R. Wilson (Principal Executive Officer)
/s/ Richard L. Corbin Senior Vice President and Chief
__________________________ Financial Officer(Principal Financial
Richard L. Corbin Officer)
/s/ Michael R. Ayers Vice President and Controller
__________________________ (Principal Accounting Officer)
Michael R. Ayers
28
<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/ D. Larry Moore
________________________________
D. Larry Morre 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
29
<PAGE>
EXHIBIT (11)
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
THIOKOL CORPORATION
(in thousands, except per share data)
Year Ended June 30
------------------------------
1997 1996 1995
------ ------ ------
Primary
- -------
Average shares outstanding: 18,272 18,228 18,538
Additional shares assuming exercise
of dilutive stock options--based on
treasury stock method using average
market prices: 416 338 256
------ ------ -----
Total shares: 18,688 18,556 18,794
====== ====== ======
Net income (loss): $82,429 $58,298 $47,463
Earnings per share (loss): $ 4.41 $ 3.14 $ 2.53
====== ====== =======
Fully Diluted
- -------------
Average shares outstanding: 18,272 18,228 18,538
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: 558 368 326
------ ------ ------
Total shares: 18,830 18,596 18,864
====== ====== ======
Net income (loss): $82,429 $58,298 $47,463
Earnings per share (loss): $ 4.38 $ 3.13 $ 2.52
====== ====== ======
30
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF THIOKOL CORPORATION
The following is a list of operating subsidiary corporations of
the Company as of June 30, 1997. Certain subsidiaries not
considered significant have been omitted.
State or Other
Jurisdiction
of Incorporation
----------------
Huck International, Inc............................................Delaware
Huck S.A.............................................................France
Huck International Ltd.......................................United Kingdom
Thiokol Holding Company............................................Delaware
31
<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, 1997,
included in the 1997 Annual Report to Shareholders of Thiokol Corporation.
We also consent to the incorporation by reference in the Registration
Statements Form S-3 No. 333-1753, and Form S-8, Nos. 33-18630, 33-2921,
33-10316, 2-76672, 2-90885, 33-38322, and 33-22965 pertaining to certain
Retirement Savings and Investment Plans and Stock Option Plans of Thiokol
Corporation of our report dated August 1, 1997, 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, 1997.
ERNST & YOUNG LLP
Salt Lake City, Utah
September 24, 1997
32
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 24
Report of Ernst & Young LLP, Independent Auditors 25
Management's Discussion and Analysis of Financial
Condition and Results of Operations 26
Selected Financial Data 44
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Year Ended June 30
--------------------------------------------
(in millions, except per share data) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $890.1 $889.5 $956.8
Operating expenses:
Cost of sales 723.7 738.7 769.1
General and administrative 80.5 69.8 71.9
Research and development 12.5 13.3 15.0
Restructuring and impairment (2.2) 5.9 61.4
- --------------------------------------------------------------------------------------------------------
814.5 827.7 917.4
Income from operations 75.6 61.8 39.4
Equity income, Howmet 30.5 4.5
Interest income 10.9 30.2 46.2
Interest expense (1.7) (3.9) (9.3)
- --------------------------------------------------------------------------------------------------------
Income before income taxes and extraordinary item 115.3 92.6 76.3
Income taxes 32.9 34.3 24.0
- --------------------------------------------------------------------------------------------------------
Income before extraordinary item 82.4 58.3 52.3
Extraordinary item - loss on early retirement of debt (4.8)
- --------------------------------------------------------------------------------------------------------
Net income $ 82.4 $ 58.3 $ 47.5
=======================================================================================================
Net income per share:
Income before extraordinary item $ 4.41 $ 3.14 $ 2.78
Extraordinary item ( .25)
- --------------------------------------------------------------------------------------------------------
Net income $ 4.41 $ 3.14 $ 2.53
========================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
June 30
--------------------------
(in millions) 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 51.4 $ 15.1
Receivables 146.4 162.6
Inventories 84.6 91.4
Deferred income tax assets and prepaid expenses 29.3 31.4
- -----------------------------------------------------------------------------------------------
Total Current Assets 311.7 300.5
Property, Plant and Equipment
Land 17.2 17.4
Buildings and improvements 231.2 224.8
Machinery and equipment 332.7 338.9
Construction in progress 14.0 13.2
- -----------------------------------------------------------------------------------------------
595.1 594.3
Less allowances for depreciation (311.9) (307.6)
- -----------------------------------------------------------------------------------------------
283.2 286.7
Other Assets
Equity investment in Howmet 178.0 150.5
Costs in excess of net assets of businesses acquired, net 26.7 27.7
Patents and other intangible assets, net 14.1 16.4
Other noncurrent assets 40.7 36.5
- -----------------------------------------------------------------------------------------------
259.5 231.1
- -----------------------------------------------------------------------------------------------
$ 854.4 $ 818.3
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 22.7 $ 62.7
Accounts payable 36.3 25.9
Accrued compensation 43.1 42.2
Other accrued expenses and liabilities 37.4 51.0
- -----------------------------------------------------------------------------------------------
Total Current Liabilities 139.5 181.8
Noncurrent Liabilities
Accrued retiree benefits other than pensions 70.4 70.4
Deferred income taxes 41.3 39.8
Accrued interest and other noncurrent liabilities 82.1 78.4
- -----------------------------------------------------------------------------------------------
Total Noncurrent Liabilities 193.8 188.6
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 44.7 44.2
Retained earnings 514.3 445.1
- -----------------------------------------------------------------------------------------------
579.5 509.8
Less common stock in treasury, at cost
(2.1 shares at June 30, 1997 and 2.3 shares at June 30, 1996) (58.4) (61.9)
- -----------------------------------------------------------------------------------------------
Total Stockholders' Equity 521.1 447.9
- -----------------------------------------------------------------------------------------------
$ 854.4 $ 818.3
===============================================================================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30
-------------------------------------
(in millions) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 82.4 $ 58.3 $ 47.5
Adjustments to reconcile net income to net cash
provided by operating activities:
Restructuring and impairment (2.2) 5.9 61.4
Extraordinary item 4.8
Depreciation 30.0 33.0 34.5
Amortization 10.2 9.0 5.5
Equity income (30.5) (4.5)
Deferred income taxes (7.8) (11.7) 5.0
Changes in operating assets and liabilities:
Receivables 16.1 103.9 (69.5)
Inventories and prepaid expenses 6.8 41.8 (8.1)
Accounts payable and accrued expenses 1.8 (17.3) 13.0
Income taxes 9.5 (9.5) 8.7
Other -- net (2.2) (26.1) (1.3)
- ----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 114.1 182.8 101.5
INVESTING ACTIVITIES
Investment in Howmet (146.0)
Acquisition, net of acquired cash (8.9)
Purchases of property, plant and equipment (33.1) (29.1) (33.8)
Proceeds from disposal of assets 2.6 6.1 .4
- ----------------------------------------------------------------------------------------------------
Net cash used for investing activities (30.5) (169.0) (42.3)
FINANCING ACTIVITIES
Net change in short-term debt (38.0) 2.5 32.6
Repayment of long-term debt (.1) (.2) (85.7)
Premiums paid on early retirement of debt (4.8)
Purchase of common stock for treasury (4.3) (19.8)
Stock option transactions 4.0 2.5 4.2
Dividends paid (13.2) (12.4) (12.6)
- ----------------------------------------------------------------------------------------------------
Net cash used for financing activities (47.3) (11.9) (86.1)
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 36.3 1.9 (26.9)
Cash and cash equivalents at beginning of year 15.1 13.2 40.1
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 51.4 $ 15.1 $ 13.2
====================================================================================================
See notes to consolidated financial statements.
</TABLE>
<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, 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
- -------------------------------------------------------------------------------------------------------------------------------
Net income 82.4 82.4
Dividends paid (13.2) (13.2)
Exercise of stock options and related
income tax benefits .5 .2 3.5 4.0
- -------------------------------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1997 20.5 $20.5 $44.7 $514.3 (2.1) $(58.4) $521.1
===============================================================================================================================
See notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------
Basis of Consolidation and Use of Estimates: The consolidated financial
statements include the accounts of Thiokol Corporation and its wholly-owned
subsidiaries. The Company participates in teaming arrangements and records
its share of sales and profits related to such ventures on the percentage of
completion method. 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 consolidated financial statements are prepared in conformity
with generally accepted accounting principles which requires management to
make estimates and assumptions. Estimates of contract costs and revenues are
utilized in the earnings recognition process that affect reported amounts in
the financial statements and accompanying notes.
Actual results may differ from those estimates.
Revenue Recognition Under Long-Term Contracts: Propulsion systems sales
encompass 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 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 represent cash and
short-term investments that are highly liquid maturing within three months.
Inventories: Inventories are stated at the lower of cost or market.
Propulsion systems inventories include estimated recoverable costs related
to long-term fixed price contracts, including 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. The government may acquire 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.
<PAGE>
Property, Plant and Equipment: Property, plant and equipment is carried at
cost and depreciated over the assets' estimated useful lives, using either
the straight-line or accelerated methods. Building and improvements useful
lives vary between 15 and 40 years and other assets lives vary between 3 and
20 years.
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
$40.9 and $37.6 million at June 30, 1997 and 1996, respectively.
Impairment of Long-Lived Assets: In accordance with Statement of Financial
Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
records impairment losses on long-lived assets used in operations when
events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less
than net book value.
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 from third parties, insurance
carriers, or from the government. Costs allocated to commercial business or
not otherwise recoverable from third parties are expensed when the liability
is recorded. Except for current amounts receivable and payable, contingent
amounts are included in "other noncurrent assets" and in "accrued interest
and noncurrent liabilities".
Foreign Currency Translation: 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 translation exposures that arise from foreign
currency exchange rate movements over time periods 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 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.
<PAGE>
Income Per Share: Income per share is calculated based on the weighted
average common and common equivalent shares outstanding. The equivalent
shares, in thousands, for 1997, 1996, and 1995 were 18,688, 18,566, and
18,794, respectively.
In February 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 128, "Earnings per Share". This statement replaces the previous
standard, Accounting Principles Board (APB) Opinion No. 15, "Earnings per
Share". Effective for periods ending after December 15, 1997, SFAS No. 128
requires companies to report both "basic" and "diluted" earnings per share.
Beginning with the second quarter ending December 1997, the Company will
report both "basic" and "diluted" earnings per share for all periods. The
impact of SFAS No. 128 on the Company's earnings per share is not expected
to be significant.
New Accounting Standards: In June 1997, the FASB issued two new statements,
SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". The
Company believes the new standards will not have an impact the Company's
financial statements.
Reclassification: Certain reclassifications were made to the 1995 and 1996
financial statements to conform with the 1997 presentation.
NOTE 2. RESTRUCTURING AND IMPAIRMENT
- ------------------------------------
The Company's propulsion and fastening systems restructuring programs
were completed in the second quarter of fiscal year 1997. The restructuring
programs, initiated to reduce the Company's operating costs and improve
profitability, involved personnel reductions, closing of certain locations
and relocating operations in the United States and Europe. Charges included
severance, goodwill write-off and fixed assets disposals. The propulsion
system restructuring plan announced in the third quarter of fiscal 1995,
included domestic pre-tax charges of $61.4 million. The fastening system
restructuring plan announced in the second quarter of fiscal 1996 included
foreign pre-tax charges of $5.9 million. During the second quarter of 1997,
the restructuring was substantially completed and excess reserves from both
programs were closed and credited to income. The propulsion and the
fastening systems segments recognized $1.4 million and $.8 million in
income, respectively. The restructuring plan included charges for certain
issues that have not currently been resolved and the Company believes
remaining reserves will be adequate to cover future costs.
<PAGE>
NOTE 3. RECEIVABLES
- -------------------
The components of receivables are as follows:
<TABLE>
<CAPTION>
June 30
-------------------------
(in millions) 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Receivables under U.S. Government contracts and subcontracts:
Amounts billed $ 63.7 $ 48.1
Unbilled costs and accrued profits 28.7 53.9
- ------------------------------------------------------------------------------------------
Total U.S. Government receivables 92.4 102.0
Trade accounts receivable 52.8 54.3
Income tax refund receivable and related interest 5.7
Other current receivables 1.2 .6
- ------------------------------------------------------------------------------------------
$146.4 $162.6
==========================================================================================
</TABLE>
Unbilled costs and accrued profits consist primarily of revenues
recognized on contracts that have not been billed. Such amounts are billed
based on contract terms and delivery schedules. It is expected that
approximately $5 million of the unbilled amounts at June 30, 1997, will not
be billed within one year. The balance includes approximately $10.1 million
of disputed costs with the federal government related primarily to
government approved benefit costs that arose under cost reimbursement
contracts with Army ammunition plants in Texas and Louisiana. The Company
has filed a suit seeking reimbursement of these and future costs with
interest. 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 totaling $84.8 million, at June 30, 1997,
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 cost
management award fees remain at risk until contract completion and final
NASA review. The current RSRM contract is expected to be completed in fiscal
year 2001. Unanticipated program problems which erode cost management
performance could cause some or all of the recognized cost management award
fees to be reversed and would be offset against receivable amounts from the
government or be directly reimbursed. Circumstances which could erode cost
management performance include, but are not limited to, 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 safety incidents.
<PAGE>
NOTE 4. INVENTORIES
- -------------------
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 30
---------------------
(in millions) 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $27.0 $42.4
Raw materials and work-in-process 55.7 43.1
Inventoried costs related to U.S. Government and other long-term contracts 27.8 22.6
Progress payments received on long-term contracts (25.9) (16.7)
- ---------------------------------------------------------------------------------------------------
$84.6 $91.4
===================================================================================================
</TABLE>
NOTE 5. EQUITY INVESTMENT IN HOWMET
- -----------------------------------
During the second quarter of fiscal year 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. Howmet manufactures and sells its products in both
domestic and foreign markets. Carlyle owns 51 percent and Thiokol owns 49
percent of Blade voting common stock. In addition to the Company's initial
$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 Howmet acquisition was completed for
approximately $771.6 million ($746.4 million plus an additional $25.2
million of related fees and expenses). The Howmet acquisition 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, or otherwise
increase its ownership percentage.
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.
<PAGE>
A summary of Howmet financial information is as follows:
June 30
-----------------------------
(in millions) 1997 1996
- ----------------------------------------------------------------------
Current assets $ 316.6 $ 324.7
Noncurrent assets 692.0 782.2
- ----------------------------------------------------------------------
Total assets $1,008.6 $1,106.9
======================================================================
Current liabilities $ 251.8 $ 260.3
Current portion long-term debt 50.2 78.6
- ----------------------------------------------------------------------
Total current liabilities 302.0 338.9
Long-term debt 238.1 366.7
Other noncurrent liabilities 164.8 150.3
- ----------------------------------------------------------------------
Total liabilities 704.9 855.9
Preferred stock 57.4 52.5
Common stockholders' equity 246.3 198.5
- ----------------------------------------------------------------------
Total liabilities and equity $1,008.6 $1,106.9
======================================================================
July 1, 1996 December 14, 1995
to to
(in millions) June 30, 1996 June 30, 1997
- -------------------------------------------------------------------------
Net sales $1,205.0 $596.2
Cost of goods sold 898.4 463.4
Gross profit 306.6 132.8
Operating income 138.3 51.2
Net income 57.1 6.7
- -------------------------------------------------------------------------
<PAGE>
A reconciliation of Howmet's net income to the Company's equity income
and investment in Howmet follows:
June 30
--------------------------
(in millions) 1997 1996
- ---------------------------------------------------------------------------
Howmet net income $ 57.1 $ 6.7
Less preferred paid-in-kind (4.9) (2.5)
- ---------------------------------------------------------------------------
Net income available to common shareholders 52.2 4.2
- ---------------------------------------------------------------------------
Company's 49% interest in Howmet 25.6 2.0
Add preferred paid-in-kind dividend 4.9 2.5
- ---------------------------------------------------------------------------
Thiokol equity income 30.5 4.5
Less currency translation adjustment (3.0)
- ---------------------------------------------------------------------------
Beginning investment in Howmet 150.5 146.0
- ---------------------------------------------------------------------------
Ending investment in Howmet $178.0 $150.5
===========================================================================
NOTE 6. FINANCING ARRANGEMENTS
- ------------------------------
The Company has credit commitments from a group of banks aggregating $165
million under two Revolving Credit Agreements, of which $162.8 million was
available at June 30, 1997. The funds available under the credit facilities
may be used for any corporate purpose and are available through October 1997
($15 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 with various domestic and
foreign banks. The weighted average interest rate on short-term debt
outstanding was 3.37 percent and 5.15 percent at June 30, 1997 and 1996,
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.
A long term obligation is included in "accrued interest and other
noncurrent liabilities" of $1.9 and $2.4 million in 1997 and 1996
respectively.
<PAGE>
NOTE 7. INCOME TAXES
- --------------------
The provision for income taxes applicable to both domestic and foreign
operations are as follows:
(in millions) 1997 1996 1995
- ----------------------------------------------------------------------------
Current Taxes:
Federal $34.3 $39.3 $14.8
Foreign 1.1 1.4 .5
State 5.3 5.3 3.7
- ----------------------------------------------------------------------------
40.7 46.0 19.0
Deferred Taxes:
Federal (5.7) (9.6) 4.6
Foreign (1.2) (.8)
State (.9) (1.3) .4
- ----------------------------------------------------------------------------
(7.8) (11.7) 5.0
- ----------------------------------------------------------------------------
$32.9 $34.3 $24.0
============================================================================
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:
1997 1996 1995
- ----------------------------------------------------------------------------
Statutory rate 35.0% 35.0% 35.0%
Effect of:
State taxes, net of federal benefit 2.3 3.0 3.5
R&D and other credits (4.5) (11.2)
Tax refund (2.6) (.3) (11.8)
Non-deductible restructuring charge 4.1 13.1
Dividend received deduction (7.4) (1.4)
Other 1.2 1.1 2.9
- ----------------------------------------------------------------------------
Effective rate 28.5% 37.0% 31.5%
============================================================================
<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 temporary differences that give rise to
deferred tax balances are as follows:
<TABLE>
<CAPTION>
June 30
------------------------
(in millions) 1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Recognition of income on contracts reported on different
methods for tax purposes than for financial reporting $ 52.1 $ 46.3
Tax refund interest income 1.6
Depreciation expense 48.2 45.3
Employee benefit expenses 12.9 11.6
Other 5.2 3.8
- ------------------------------------------------------------------------------------------
Gross deferred tax liabilities 118.4 108.6
Provision for estimated expenses (46.0) (40.3)
Employee benefit expenses (48.3) (46.9)
Foreign losses (13.5) (14.5)
Other (9.0) (9.1)
- ------------------------------------------------------------------------------------------
Gross deferred tax assets (116.8) (110.8)
Valuation allowance 13.1 14.2
- ------------------------------------------------------------------------------------------
Net deferred tax assets (103.7) (96.6)
- ------------------------------------------------------------------------------------------
Net deferred tax liabilities $ 14.7 $ 12.0
==========================================================================================
Balance Sheet Classification:
Current assets $ (26.6) $ (27.8)
Noncurrent liabilities 41.3 39.8
- ------------------------------------------------------------------------------------------
Net deferred tax liabilities $ 14.7 $ 12.0
==========================================================================================
</TABLE>
Total income tax payments were $31.9, $55.8, and $34.8 million during
1997, 1996, and 1995, respectively.
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 received in 1996, 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.
<PAGE>
During fiscal year 1996, the Internal Revenue Service (IRS) completed
its audit of federal income tax returns for fiscal years 1986 through 1993.
Based upon anticipated final results for the years under audit, 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.
During fiscal 1997, the anticipated tax refund in the amount of $3.2
million was received, along with $20.4 million in interest. Of those
amounts, $3 million was applied to reduce 1997 income tax expense.
Approximately $8.7 million was recognized as interest income and the
remaining $11.9 million was used to increase liabilities for deferred taxes
and related interest for future tax payments.
NOTE 8. PREFERRED STOCK PURCHASE RIGHTS
- ---------------------------------------
On May 22, 1997, the Board of Directors adopted a new stockholders' rights
plan and redeemed the existing stockholders' rights under the old plan.
Under the new plan, the Company 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 $240. 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 any person or
group 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. If the Company is acquired in a merger or other business combination,
after a person has acquired 15 percent or more of the Company's common
stock, 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. 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 Company's common
stock. The Rights expire on May 22, 2007.
NOTE 9. RETIREMENT PLANS
- ------------------------
The Company has noncontributory defined benefit pension plans covering
certain employees. The benefits for participating 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 is to contribute amounts to the plans
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.
<PAGE>
The annual cost for all Company-sponsored defined benefit pension
plans, exclusive of the curtailment gain in 1995, includes the following
components:
(in millions) 1997 1996 1995
- ----------------------------------------------------------------------------
Service cost $ 12.7 $ 12.7 $ 12.6
Interest cost 41.0 37.5 36.7
Actual gain on plan assets (59.1) (115.0) (32.5)
Net amortization and deferral 8.1 66.9 (12.9)
- ----------------------------------------------------------------------------
Net pension cost $ 2.7 $ 2.1 $ 3.9
============================================================================
Reconciliation of the funded status of all defined benefit pension
plans at June 30 is as follows:
<TABLE>
<CAPTION>
(in millions) 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits:
Vested benefits $507.9 $464.1
Non vested benefits 7.7 4.7
- -----------------------------------------------------------------------------------------
Accumulated benefit obligation 515.6 468.8
Effect of projected future compensation increases 82.8 79.1
- -----------------------------------------------------------------------------------------
Projected benefit obligation 598.4 547.9
Fair value of plan assets 622.7 605.3
- -----------------------------------------------------------------------------------------
Plan assets in excess of projected benefit obligation 24.3 57.4
Unrecognized net losses 47.7 17.6
Unrecognized transition obligation (17.4) (20.9)
Unrecognized prior service cost 9.3 (.7)
- -----------------------------------------------------------------------------------------
Pension asset $ 63.9 $ 53.4
=========================================================================================
</TABLE>
The accumulated benefit obligation and the corresponding unrecognized
net experience loss and prior service cost increased in 1997 principally due
to changing the retirement age assumption and changing to the 1994 Group
Annuity Mortality table. Additional assumptions used in determining net
pension cost for all defined benefit pension plans were as follows:
1997 1996 1995
- ----------------------------------------------------------------------------
Discount rate 7.5% 7.5% 8.0%
Rate of increase in compensation levels 4.75 4.75 5.5
Expected long-term rate of return on assets 9.0 9.0 9.0
- ----------------------------------------------------------------------------
<PAGE>
Assets of the Company-sponsored plans are invested primarily in
equities and bonds. Certain pension plans contain restrictions on using
excess pension plan assets in the event of a change in control of the
Company.
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 $47.2 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 $47.2 million of deferred revenue is netted
against the pension asset in "other noncurrent assets" in the balance sheet.
Under 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 certain supplemental plan arrangements to provide
retirement benefits to specified groups of participants. Contributions are
included in an Internal Revenue Code (IRC) qualified restricted trust which
is subject to the Company's creditors.
The Company has matching and nonmatching 401 (k) savings plans for
eligible employees. Company contributions to the matching savings plans,
which are based on a limited percentage of participant contributions, were
$6.0, $6.4, and $7.3 million in 1997, 1996, and 1995, respectively.
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. The
plan is contributory, with retiree contribution levels adjusted annually,
and contains other cost-sharing features including deductibles and
coinsurance. The Company's cost for retiree medical is limited to a 4
percent annual increase for employees retiring after February 1, 1993.
Current eligibility requirements include ten years of credited service after
attaining age forty-five.
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 trusts and other trusts under IRC regulations were
established in 1994 for government contract reimbursement purposes. The
amounts funded are tax deductible in the year of contribution.
<PAGE>
The annual retiree medical and life insurance costs include the
following components:
(in millions) 1997 1996 1995
- ----------------------------------------------------------------------------
Service cost - attributed to service during
the period $ 2.6 $ 2.2 $2.3
Interest cost on accumulated postretirement
benefit obligation 8.2 8.0 7.3
Return on assets (1.3) (1.8) (.6)
Net amortization and deferral 1.5 1.9 .5
- ----------------------------------------------------------------------------
Retiree medical and life insurance costs $11.0 $10.3 $9.5
============================================================================
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) 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $106.0 $ 89.2
Fully eligible active plan participants 10.7 9.3
Other active plan participants 19.8 15.7
- -----------------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation 136.5 114.2
Plan assets at fair value, primarily listed stocks and bonds (19.2) (16.4)
- -----------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation in excess
of plan assets 117.3 97.8
Unrecognized net experience loss (46.9) (27.4)
- -----------------------------------------------------------------------------------------
Accrued retiree benefits other than pensions $ 70.4 $ 70.4
=========================================================================================
</TABLE>
Accumulated postretirement benefit obligation and the corresponding
unrecognized net experience loss increased in 1997 principally due to
changing the retirement age assumption and changing to the 1994 Group
Annuity Mortality table. Additional assumptions to measure the accumulated
postretirement obligation and cost were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.0%
Health care cost trend rate decreasing to 6% by 2001 8.0% 8.0% 9.0%
Expected long-term rate of return on assets 8.0% 8.0% 8.0%
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Increasing the assumed health care cost trend rate by one percentage
point would increase the accumulated postretirement benefit obligation at
June 30, 1997 and 1996, by approximately $6.8 and $5.7 million,
respectively, and increase retiree medical costs by approximately $.4
million each year.
NOTE 11. 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 (GOCO) Army ammunition plants in Texas
and Louisiana. The Company seeks $10.1 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
as of June 30, 1997, recognize approximately $10.1 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.
NOTE 12. 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
significant costs relating to these environmental sites. The Company has
signed a consent decree with the EPA on the Rockaway Borough Well Field site
and on the Rockaway Township Well Field site. The Company has recorded a
$11.3 million liability for response costs, site remediation, and future
operation and maintenance costs on both sites. In addition to the above
sites the Company is involved with other locations involving environmental
issues.
The Company's estimated liability for all environmental remediation is
$21 million, and is classified in "other accrued expenses and liabilities"
and "accrued interest and other noncurrent liabilities." The Company
believes that any liability exceeding amounts recorded will not have a
material adverse effect on the Company's future results of operations or
financial position. The Company has collected approximately $9.5 million in
environmental related recoveries from insurance companies through fiscal
year June 30, 1997. The Company expects to recover from the government
additional amounts as expenses are incurred. The Company estimates it will
spend approximately $2.1 and $4.2 million of the total liability,
respectively, over the next two years.
<PAGE>
NOTE 13. LEASE COMMITMENTS
- --------------------------
The Company has operating leases that are principally short-term and
primarily for building and office space and other real estate. Rental
expense charged was $14.5, $10.9, and $10.8 million in 1997, 1996, and 1995,
respectively. Renewal and purchase options are available on certain of these
leases. Future minimum rental commitments under non-cancelable operating
leases total approximately $37 million with $9.1 and $8.1 million committed
in 1998 and 1999 respectively, and in declining amounts thereafter. Certain
plant facilities and equipment are provided for use by the government under
short-term or cancelable arrangements.
NOTE 14. STOCK OPTION AND PERFORMANCE UNIT PLANS
- ------------------------------------------------
The Company's Stock Option Plans provide that grants of stock options,
shares of restricted stock, and other awards may be made to key Company
employees and its affiliates in which the Company has a direct or indirect
equity interest. Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
Weighted Average
Shares Per Share
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at June 30, 1994, (648,935 exercisable shares) 818,035 $17.04
Granted 173,500 $24.43
Lapsed (4,000) $24.44
Exercised (246,964) $14.95
- -----------------------------------------------------------------------------------------------------------------
Options outstanding at June 30, 1995, (571,071 exercisable shares) 740,571 $19.49
Granted 433,800 $35.58
Lapsed (25,175) $26.59
Exercised (104,902) $19.77
- -----------------------------------------------------------------------------------------------------------------
Options outstanding at June 30, 1996, (625,394 exercisable shares) 1,044,294 $25.97
Granted 198,024 $39.50
Lapsed (5,400) $35.95
Exercised (129,297) $23.20
- -----------------------------------------------------------------------------------------------------------------
Options outstanding at June 30, 1997, (692,021 exercisable shares) 1,107,621 $28.67
=================================================================================================================
</TABLE>
Options outstanding at June 30, 1997, have expiration dates ranging
from June 1998 to February 2007.
Limited appreciation rights were outstanding covering 84,225 option
shares. Limited appreciation rights are paid automatically in cash in lieu
of other related options upon a change in control of the Company.
<PAGE>
During fiscal year 1996, 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. 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. At June 30, 1997, this would
have resulted in a charge to earnings of $7.7 million.
Shares of common stock reserved for both outstanding and future grants
of options and other stock-based awards at June 30, 1997 and 1996 were
2,057,340 and 1,186,637 shares, respectively.
On July 1, 1996, the Company adopted SFAS No. 123 "Accounting for
Stock-Based Compensation". In accordance with the provisions of SFAS No.
123, the Company has chosen to continue to account for stock-based
compensation using the intrinsic value method under APB Opinion No. 25 and,
accordingly, does not recognize compensation cost. If the Company recognized
compensation cost based on the fair value of the options granted at grant
date as prescribed by SFAS No. 123, net income and earnings per share on a
pro forma basis would have been reduced approximately 2 percent in both 1997
and 1996.
Information regarding stock options outstanding and exercisable as of
June 30, 1997, is as follows:
<TABLE>
<CAPTION>
Price Range
- ----------------------------------------------------------------------------------------------------------------
$11.69 $24.06 $35.50 $40.94
to $15.31 to $34.38 to $38.63 to $55.69
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options Outstanding:
Number 279,791 405,730 356,800 65,300
Weighted average exercise price $14.81 $28.62 $36.96 $43.00
Weighted average remaining contractual life
4.4 years 7.3 years 8.8 years 8.9 years
Options Exercisable:
Number 279,791 405,730 0 6,500
Weighted average exercise price $14.81 $28.62 $0.00 $41.69
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 15. 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 following methods and assumptions were used in
estimating fair values:
<PAGE>
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. The carrying amount approximates fair value.
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 and also approximates the
carrying amount.
Off-balance-sheet instruments: Foreign currency exchange contracts are not
significant.
NOTE 16. OPERATIONS BY INDUSTRY SEGMENT
- ---------------------------------------
The Company previously reported its operations under three business
segments: space, defense, and fastening systems. In conjunction with the
Company's consolidation of its space and defense operations, the Company is
reporting results under two business segments: propulsion and fastenings
systems. The previously reported space and defense systems amounts have been
combined to conform with the current presentation.
The propulsion systems segment consists of solid rocket propulsion for
NASA, the Department of Defense, and various commercial customers for space
applications, as well as, gas generator and ordnance products, metal and
composite components, and services relating to such systems.
<PAGE>
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:
<TABLE>
<CAPTION>
Year Ended June 30
-----------------------------------
(in millions) 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Propulsion systems $606.1 $651.1 $729.1
Fastening systems 284.0 238.4 227.7
- ---------------------------------------------------------------------------------------------
Consolidated net sales $890.1 $889.5 $956.8
=============================================================================================
Segment operating profit (loss)
Propulsion systems(1) $ 55.1 $ 77.1 $ 25.6
Fastening systems(2) 27.0 (6.3) 19.2
- ---------------------------------------------------------------------------------------------
Segment operating profit 82.1 70.8 44.8
Equity income, Howmet 30.5 4.5
Interest income 10.9 30.2 46.2
Interest expense (1.7) (3.9) (9.3)
Unallocated corporate expense (6.5) (9.0) (5.4)
- ---------------------------------------------------------------------------------------------
Consolidated income before
income taxes, and extraordinary item $115.3 $ 92.6 $ 76.3
=============================================================================================
Total Assets
Propulsion systems $350.2 $384.6 $436.3
Fastening systems 247.5 242.7 268.1
Corporate 256.7 191.0 106.3
- ---------------------------------------------------------------------------------------------
Consolidated assets $854.4 $818.3 $810.7
=============================================================================================
Depreciation and Amortization Expense
Propulsion systems $ 27.7 $ 28.9 $ 28.5
Fastening systems 11.9 12.3 11.0
Corporate .6 .8 .5
- ---------------------------------------------------------------------------------------------
Consolidated depreciation and amortization expense $ 40.2 $ 42.0 $ 40.0
=============================================================================================
Capital Expenditures
Propulsion systems $ 10.4 $ 17.2 $ 16.5
Fastening systems 15.1 11.2 17.1
Corporate 7.6 .7 .2
- ---------------------------------------------------------------------------------------------
Consolidated capital expenditures $ 33.1 $ 29.1 $ 33.8
=============================================================================================
<FN>
- ----------
(1) Propulsion systems included a $61.4 million restructuring charge in 1995.
(2) The fastening systems loss in 1996 included a $5.9 million restructuring
charge and $12.2 million of inventory charges.
</FN>
</TABLE>
A proportionate share of Corporate general and administrative expense
is allocated and reimbursed through propulsion systems contracts.
Intersegment, foreign operations, and export sales are not material.
Net sales under government contracts and subcontracts amounted to
$543.7, $618.4, and $689.5 million for 1997, 1996, and 1995, respectively.
The sales as a percentage of consolidated net sales were 61, 70, and 72
percent for 1997, 1996, and 1995, respectively.
<PAGE>
Corporate assets consist principally of cash and cash equivalents;
income tax receivable; property, plant, and equipment; investment in Howmet;
and other noncurrent assets.
NOTE 18. QUARTERLY FINANCIAL HIGHLIGHTS (Unaudited)
- ---------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year 1997
Three Months Ended
-----------------------------------------------------------
(in millions, except per share data) June 30 March 31 Dec. 31 Sept. 30
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $255.6 $226.5 $210.0 $198.0
Gross profit 45.5 42.2 44.4 34.3
Net income(1) 23.7 20.8 18.7 19.2
Net income per share(1) 1.26 1.12 1.00 1.03
Cash dividends paid per share .20 .17 .17 .17
Market price
High 76.25 60.88 47.38 46.88
Low 54.88 44.50 41.25 34.63
- ---------------------------------------------------------------------------------------------------------
Fiscal Year 1996
Three Months Ended
-----------------------------------------------------------
(in millions, except per share data) June 30 March 31 Dec. 31 Sept. 30
- ---------------------------------------------------------------------------------------------------------
Net sales $227.8 $228.9 $209.9 $222.9
Gross profit 37.5 36.7 34.4 42.2
Net income(2) 13.3 9.5 22.3 13.2
Net income per share(2) .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
- ---------------------------------------------------------------------------------------------------------
<FN>
- ----------
(1) The first quarter of 1997 included the recognition of interest income
related to income taxes of $7 million and a $3 million tax credit ($7.3
million or $.39 per share after-tax). The third and fourth quarters of 1997
included recognition of interest income related to income taxes of $.8
million and $.9 million ($.5 million and $.6 million or $.03 per share
after tax in each quarter), respectively.
(2) 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 after-tax). Also
included was a restructuring charge of $5.9 million and a $12.2 million
inventory charge resulting in a net after-tax charge of $14.4 million or
$.78 per share.
</FN>
</TABLE>
<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
---------------------------
Richard L. Corbin
Senior Vice President and
Chief Financial Officer
<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, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended June 30, 1997. 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, 1997 and 1996, and the consolidated results
of its operations and its cash flows for each of the three years in the
period ended June 30, 1997, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young
- -----------------------
Ernst & Young
Salt Lake City, Utah
August 1, 1997
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
Net income for 1997 was $82.4 million or $4.41 per share, an increase
of 40 percent compared to $58.3 million or $3.14 last year. Net income for
1996 included recognition of $21.3 million after-tax ($1.15 per share) of
income related to income taxes and after-tax fastening systems charges of
$8.5 million ($.46 per share) for inventory and $5.9 million for
restructuring ($.32 per share). Net income for 1997 included after-tax
income related to income tax refunds and interest on the refunds and
restructuring credits totaling $9.7 after-tax or $.52 per share.
Summary unaudited financial information for the twelve months ended
June 30, 1997 follows:
<TABLE>
<CAPTION>
(in millions except per share data)
- -----------------------------------
Better/
1997 1996 (Worse) Percent
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales
Propulsion systems $606.1 $651.1 $(45.0) (7)%
Fastening systems 284.0 238.4 45.6 19
- ----------------------------------------------------------------------------------------------------
Total sales $890.1 $889.5 $ 0.6 - %
====================================================================================================
Operating income
Propulsion systems $ 55.1 $ 77.1 $(22.0) (29)%
Fastening systems 27.0 (6.3) 33.3 -
Unallocated corporate expense (6.5) (9.0) 2.5 28
- ----------------------------------------------------------------------------------------------------
Total Operating income 75.6 61.8 13.8 22
Equity income, Howmet 30.5 4.5 26.0 578
Interest income 10.9 30.2 (19.3) (64)
Interest expense (1.7) (3.9) 2.2 56
Income taxes (32.9) (34.3) 1.4 4
- ----------------------------------------------------------------------------------------------------
Net income $ 82.4 $ 58.3 $ 24.1 41 %
====================================================================================================
Earnings per share $ 4.41 $ 3.14 $ 1.27 40 %
====================================================================================================
Average equivalent shares outstanding 18.7 18.6 .1 -
====================================================================================================
</TABLE>
<PAGE>
Business Segment Sales and Income For The Year
- ----------------------------------------------
Propulsion systems sales declined compared to the prior year due to
defense sales being down $60 million partially offset by an increase in
space programs of $15 million.
Propulsion systems income was down $22 million compared to last year as
a result of completion of the shuttle processing contract in 1996, reduced
margins on the RSRM contract, and additional start-up and warranty costs on
commercial launch motors. Defense related programs income declined $11.2
million due to lower activity as a result of reduced government spending,
completion of several defense programs during fiscal year 1996, and closure
of two government-owned contractor-operated (GOCO) plants.
Fastening systems sales and income increased $45.6 million and $33.3
million, respectively, over the prior year. Commercial aerospace sales were
up $38.9 million. The increase in sales provided a corresponding increase in
income. Cost reductions due to plant closures and consolidations, and
closure of the subsidiary headquarters also contributed to income. The
current year's pre-tax income benefited $.8 million from the reversal of
excess restructuring reserves versus the prior year's $18.1 million pre-tax
charges for inventory and restructuring. Excluding both non-recurring items,
current year income increased 121 percent. Current year fastening systems
margins increased to 9.2 percent from 5 percent in the prior year excluding
unusual items.
Net income for 1997 included $28.3 million or $1.52 per share from the
Company's investment in Howmet Corporation.
Also affecting income was a 28.5 percent effective tax rate for the
current year compared to 37 percent for the prior year, reflecting the lower
7 percent tax rate on higher equity income from Howmet.
<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)
- -----------------------------------------------------------------------------------------------------------
1997 1997 1996 1996
After-tax Earnings After-tax Earnings
income per share income per share
------------ -------------- ------------- ------------
<S> <C> <C> <C> <C>
Income before unusual items $72.7 $3.89 $51.4 $2.77
Restructuring credit (charge) 1.3 .07 (5.9) (.32)
Huck inventory charges - - (8.5) (.46)
Income tax interest income/credits 8.4 .45 21.3 1.15
- -----------------------------------------------------------------------------------------------------------
Net income $82.4 $4.41 $58.3 $3.14
===========================================================================================================
</TABLE>
Excluding unusual items in both years, net income in the current year
increased by 40 percent or $1.12 per share.
General and administrative expense for 1997 increased 15 percent or
$10.7 million compared to the prior year. General Corporate expense
increased $7.7 million while selling and administrative costs increased $3
million in the fastening systems segment. Interest expense decreased $2.2
million as a result of the reduction in short-term debt.
Prior Years 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 operations. During the third
quarter of fiscal year 1996, the Company notified the 82 affected employees
of the Germany plant shutdown. The charge included $3.6 million of employee
severance expense and $1.7 million write down of long-lived assets.
<PAGE>
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 of Directors
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 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. During the second quarter of 1997, the restructuring was
substantially completed and excess reserves from both programs were closed
and credited to income. The propulsion and the fastening systems segments
recognized $1.4 million and $.8 million in income, respectively. The
restructuring plan included charges for certain issues that have not
currently been resolved and the Company believes remaining reserves will be
adequate to cover future costs.
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
Reductions (noncash) (5.2) (2.8) (8.0)
Payments made (.8) (.8)
- -------------------------------------------------------------------------------------
Fiscal year 1997 restructuring credit $ 1.4 $ .8 $ 2.2
=====================================================================================
</TABLE>
<PAGE>
The Company has successfully negotiated with the government for
recovery of certain of these costs. The Company estimates approximately $9
million to be recognized in Company profits during fiscal year 1998 through
fiscal year 2000.
Equity Investment in Howmet
- ---------------------------
In December 1995 the Company purchased 49 percent of Howmet
Corporation. The Company's 1997 results include equity income of $30.5
million, reflecting a full year of Howmet ownership compared to $4.5 million
of equity income for the 28 weeks of Company ownership in 1996. Howmet
experienced an 18.5 percent increase in sales for the twelve months ended
June 30, 1997, compared to the same period in the prior year, reflecting an
increased demand in the commercial aerospace market and continued strength
in the industrial gas turbine market. Howmet's income increased in 1997 due
to: sales increasing 18.5 percent, additional revenue of $9.7 million from
the finalization of a pricing adjustment with a major customer, fixed cost
containment, variable cost reduction, and other operational improvements, a
lower effective tax rate of 44 percent in 1997 compared to 60 percent in
1996, and lower interest expense due to lower debt and lower interest rates
in 1997 compared to 1996. Partially offsetting the above increases were
additional stock appreciation rights expense of $20.7 million recorded in
1997 versus 1996.
<PAGE>
1997 Fourth Quarter Results
- ---------------------------
Summary unaudited financial information for the three months ended June
30, 1997 follows:
<TABLE>
<CAPTION>
(in millions except per share data)
- -----------------------------------
Better/
1997 1996 (Worse) Percent
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales
Propulsion systems $173.8 $164.7 $ 9.1 6 %
Fastening systems 81.8 63.0 18.8 30
- -----------------------------------------------------------------------------------------------------
Total sales $255.6 $227.7 $27.9 12 %
=====================================================================================================
Operating income
Propulsion systems $ 10.8 $ 18.6 $(7.8) (42)%
Fastening systems 10.6 4.0 6.6 165
Unallocated corporate expense (1.6) (4.1) 2.5 61
- -----------------------------------------------------------------------------------------------------
Total Operating income 19.8 18.5 1.3 7
=====================================================================================================
Equity income, Howmet 11.7 2.8 8.9 318
Interest income 1.7 0.2 1.5 750
Interest expense (0.2) (0.9) 0.7 78
Income taxes (9.3) (7.3) (2.0) (27)
- -----------------------------------------------------------------------------------------------------
Net income $ 23.7 $ 13.3 $10.4 78 %
=====================================================================================================
Earnings per share $ 1.26 $ .71 $ .55 77 %
=====================================================================================================
Average equivalent shares outstanding 18.8 18.6 .2 -
=====================================================================================================
</TABLE>
Propulsion systems sales increased over the prior year due to higher
commercial launch motor and technology sales and Space Shuttle RSRM program
sales.
Partially offsetting the sales increase were lower sales on various
completed defense programs and the closing of two GOCO plants. Lower
propulsion margins and program completions reduced quarterly income compared
to the prior year. The two plant closings also contributed to the decrease
in income.
Fastening systems sales and income increased due to higher sales in
both the aerospace and industrial markets, excluding last year's charges.
Aerospace sales and income increased $14.6 million and $6.5 million,
respectively, while industrial sales and income increased $4.1 million and
$.1 million respectively. Income growth was paced by commercial aerospace
markets. Worldwide sales increases combined with emphasis on cost reduction
resulted in improved margins over both last quarter and the prior year's
quarter. Fastener margins improved to 13 percent for the quarter versus 6.3
percent for the prior year period on a recurring basis.
<PAGE>
Equity Investment in Howmet
- ---------------------------
The 1997 fourth quarter results include $10.9 million after-tax ($.58
per share) of equity income related to Thiokol's 49 percent ownership of
Howmet. This was $8.3 million higher than the 1996 fourth quarter after-tax
amount. Howmet's sales of $330.4 million in the fourth quarter of 1997 were
16.6 percent higher than 1996. Howmet operating income of $47.2 million was
81.8 percent higher than 1996 despite including a $2.1 million higher
last-in first-out (LIFO) charge and $7.2 million higher stock appreciation
rights expense. Howmet net income increased due to a 16.6 percent increase
in sales over the prior year quarter, additional revenue of $6.3 million
from the finalization of a pricing adjustment with a major customer, fixed
cost containment, variable cost reduction, and other operational
improvements, a 41 percent tax rate for the 1997 quarter compared to 60
percent in 1996, and a $2.4 million decrease in interest expense for 1997
compared to the same quarter in 1996.
<PAGE>
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 in 1995. 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:
<TABLE>
<CAPTION>
(in millions, except per share data)
- ------------------------------------
Better
1996 1995 (Worse) Percent
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sales
Propulsion systems $651.1 $729.1 $(78.0) (11)%
Fastening systems 238.4 227.7 10.7 5
- -----------------------------------------------------------------------------------------------------
Total sales $889.5 $956.8 $(67.3) (7)%
=====================================================================================================
Operating Income
Propulsion systems $ 77.1 $ 87.0 $ (9.9) (11)%
Fastening systems (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 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 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
of 1996.
<PAGE>
Business Segment Sales and Income For 1996
- ------------------------------------------
Propulsion systems sales decreased due 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 sales decrease also was caused by
significantly lower operating levels at the GOCO 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. The decrease
in income is primarily related to Castor IV(R) requalification costs ($3.6
million), lower RSRM motor production ($3.4 million), the completion of the
RSRM processing contract ($3.1 million), and lower margins in other space
programs. The 1995 income included a $6.1 million pension curtailment gain
which accounts for a portion of the 1996 decline. The decrease was partially
offset by higher RSRM income recognized as a result of higher cost
management fees ($10.1 million).
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 of 1996.
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 of fiscal year 1996 the closure of the
Germany operations.
<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 1995. 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 fiscal year 1996 Thiokol purchased 49 percent of Howmet
Corporation in December 1995. 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 1995.
Income from operations for 1996, before amortization of acquisition related
assets, was $82.1 million, a 22.4 percent increase over 1995.
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.
<PAGE>
Future Operations/Business Environment
- --------------------------------------
The Company's largest business segment is propulsion systems which
produces high-technology solid propellant motors for space and defense
applications. Production of and services for the RSRM represented 42 percent
of 1997 consolidated sales and 52 percent of consolidated operating income
before recognition of the restructuring credit. The current contract with
the NASA extends the Company's production of the RSRM through fiscal year
2001. NASA planning includes follow-on RSRM contracts with the Company and
projects replacing the shuttle program with another system in 2012. RSRM Buy
3 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 $84.8
million have been recognized on the current RSRM Buy 3 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 program problems which erode cost management performance could
cause some or all of the recognized cost management award fees to be
reversed and would be offset against receivable amounts from the government
or be directly reimbursed. Circumstances which could erode cost management
performance include, but are not limited to, 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
safety incidents.
During the year, the Company consolidated it's Northern Utah Propulsion
operations to provide a more efficient and competitive solid rocket motor
design, development, and manufacturing organization. Consolidation costs,
consisting primarily of employee severance expense, were minimal and were
offset by savings in the periods incurred.
<PAGE>
The level of United States Government funding of Space programs
including the Space Station may impact the Space Shuttle launch schedule.
Significant reductions in the launch schedule would lower the Company's
production rates and reduce related revenue and profits to the Company . The
Company participates in the commercial satellite launch business through the
Castor and Star series of motors. This business is projected to grow during
the next few years. A second Castor 120(R) flight is planned in the first
quarter of fiscal year 1998. The success of the second flight is important
to the viability of the program. During the fiscal year 1997, the Company
expanded its international participation in the commercial launch market
with contract wins in Japan and Spain.
With continuing reductions in federal government defense spending, the
Company expects its defense sales and income to continue declining in fiscal
year 1998 and begin to stabilize in 1999. Generally the industry is
characterized by significant over capacity. Decreased defense spending has
created a highly competitive pricing environment for tactical programs and
has reduced margins on existing programs and new program opportunities. In
fiscal year 1998 the Company will be competing to remanufacture the United
States' existing Minuteman ballistic missiles.
During fiscal year 1997, the Company recorded sales of $9.5 million and
a loss of $1.1 million related to the Louisiana and Longhorn GOCO
facilities. Effective June 30, 1997, the Army terminated all existing
production and maintenance contracts related to these facilities. Sales and
profits from the ordnance operations will be insignificant in 1998 as these
facilities are closed. In conjunction with the GOCO closing, the Company has
filed a $40 million legal action against the U.S. Army to recover future
expenditures for employee post retirement benefits. The Company expects a
favorable resolution of this issue with the Army.
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 significantly over last year and
are anticipated to increase again in fiscal year 1998. The industry has
historically been quite cyclical and the Company anticipates a modest
reduction in late fiscal year 1999 or fiscal year 2000. Military aircraft
spending is expected to continue at low production levels. As a result of
higher sales, continued improvements in operations, and the closure of the
Germany facility, the Company has improved operating margins in the
fastening systems segment. Industrial sales in 1998 are expected to increase
over 1997 levels if the build schedules in the transportation industry
continue to rise.
<PAGE>
Howmet is a leading manufacturer of investment cast turbine engine
components for the jet aircraft and industrial gas power generation markets.
Howmet operates in four major business areas: aerospace castings, blades and
vanes, aerospace structural components, industrial gas turbine (IGT)
castings and aluminum castings. Howmet manufactures 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 both of which are expected to continue to
increase.
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 Howmet
for the IGT market have performance and reliability requirements similar to
those produced for the aerospace market, but generally are significantly
larger in size.
Other Matters
- -------------
The Company has operating leases, the majority of which are short-term
and real estate related. Rental expense amounted to $14.5 million in 1997.
Renewal and purchase options are available on certain of these leases.
Future minimum rental commitments under non-cancelable operating leases
total approximately $37 million with $9.1 and $8.1 million committed in 1998
and 1999, respectively, and in declining amounts thereafter.
The Company is involved in various legal proceedings and uncertainties
including those related to environmental matters as discussed in Notes 11
and 12 to the consolidated financial statements.
Liquidity and Capital Resources
- -------------------------------
Cash flow provided by operations was $114.1 million compared to $182.8
million in 1996. The decrease in cash flows primarily reflects collection of
a $79.6 federal income tax receivable during fiscal year 1996. Current year
cash flow reflects a smaller positive cash flow from reductions in inventory
and prepaid expenses of $6.8 million compared to $41.8 million for 1996. The
current year benefited $8.7 million from interest income related to income
tax refunds and from a $3 million tax credit. The prior year recognition of
$27.5 million of interest income related to income taxes and the $18.1
million fastening system charge did not affect cash flow.
Investing activities consisted primarily of capital spending on
property, plant and equipment of $33.1 million compared to $29.1 million in
1996. The prior year benefited from $3.5 million of additional proceeds from
fixed asset disposals. Last year's investing activities also reflects the
Company's 49 percent investment in Howmet Corporation for $146 million.
Financing activities used $47.3 million of cash compared to cash used
in the prior year of $11.9 million. Short term debt decreased $38 million
compared to an increase in the prior year of approximately $2.5 million.
Last year also reflected the repurchase of 124,600 shares of the Company's
common stock for approximately $4.3 million.
The Company's current ratio increased to 2.2 from 1.7 and the debt to
equity ratio declined to 4.7 percent from 14.5 percent during the fiscal
year, primarily the result of a higher cash balance and a decrease in
short-term debt. Working capital of $172.2 million at June 30, 1997,
increased $53.5 million from June 30, 1996. The Company's current ratio and
working capital increased reflecting the Company's financial strength.
<PAGE>
Estimated future cash flows 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, dividend payments, and stock repurchase program. Significant
additional debt may be incurred in the event the Company exercises its
option to acquire Carlyle's 51 percent equity interest in Howmet. The
combined companies' consolidated debt would significantly increase the
Company's debt-to-equity ratio.
In May of 1997 the Board of Directors, authorized the repurchase of up
to 1.5 million additional shares of common stock in amounts and timing as
the Company deems appropriate. This authorization replaces prior outstanding
authorizations.
At June 30, 1997, the Company had available $165 million in revolving
credit facilities with $162.8 million unused. The Company's $300 million
shelf registration statement filed with the Securities and Exchange
Commission became effective October 16, 1996, and permits the Company access
to public markets to issue long-term financing with amounts, type, and
timing as considered appropriate.
Howmet Liquidity
- ----------------
Howmet generated $176.6 million cash flow from operations for the
twelve months ending June 30, 1997, and reduced long-term debt $157 million
during that period. Summary financial information is provided in Note 5 to
the consolidated financial statements. On May 6, 1997, Howmet entered into
an agreement to sell certain assets of its refurbishment business. The sale
is subject to government antitrust review under the Hart-Scott-Rodino
Antitrust Improvements Act. Howmet expects net after-tax cash proceeds of
approximately $40 million and such proceeds will be used to further reduce
debt and to fund capital expenditures. The sale transaction is not expected
to have a material effect on future net income. Howmet expects future cash
flows from operations, current financial resources, and available credit
facilities to be adequate to fund anticipated working capital requirements,
capital expenditures, and debt retirement.
<PAGE>
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 Prices
- ----------------------------------
Dividends paid were $.71 per share for 1997, including a $.01 per share
redemption of stockholders' rights and $.68 per share for 1996 and 1995. The
Company increased its annual dividend rate for 1998 to $.80 per share.
The high and low market prices of Thiokol common stock for fiscal year
1997 were $76.25 per share and $34.63 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).
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(dollars in millions, except per share data) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Summary of operations
- ---------------------
Net sales by industry segment
Propulsion systems $606.1 $651.1 $729.1 $ 868.2 $1,042.8
Fastening systems 284.0 238.4 227.7 175.7 158.9
- -----------------------------------------------------------------------------------------------------------------------------
Consolidated net sales 890.1 889.5 956.8 1,043.9 1,201.7
Operating profit (loss) by industry segment
Propulsion systems (1) $ 55.1 $ 77.1 $ 25.6 $ 86.8 $ 117.8
Fastening systems (2) 27.0 (6.3) 19.2 16.9 7.8
- -----------------------------------------------------------------------------------------------------------------------------
Segment operating profit 82.1 70.8 44.8 103.7 125.6
Income from operations (1)(2) 75.6 61.8 39.4 99.3 120.6
Equity Income, Howmet 30.5 4.5
Interest income (3)(4)(5) 10.9 30.2 46.2 12.9 6.6
Interest expense 1.7 3.9 9.3 14.4 25.5
Income before extraordinary item
and cumulative effect of accounting changes 82.4 58.3 52.3 60.3 63.8
Net income (loss) 82.4 58.3 47.5 (3.5) 63.8
Income (loss) per share
- -----------------------
Income before extraordinary item
and cumulative effect of accounting changes $ 4.41 $ 3.14 $ 2.78 $ 3.02 $ 3.13
Extraordinary item (0.25)
Cumulative effect of accounting changes (3.20)
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4.41 $ 3.14 $ 2.53 $ (.18) $ 3.13
Financial
- ---------
Total assets $854.4 $818.3 $810.7 $ 805.3 $ 834.2
Working capital 172.2 118.7 217.7 216.5 217.7
Current ratio 2.2 1.7 2.1 2.4 2.2
Short-term and long-term debt $ 24.6 $ 65.1 $ 65.4 $ 115.1 $ 149.6
Debt-to-equity 4.7% 14.5% 16.2% 29.9% 33.8%
Stockholders' equity $521.1 $447.9 $403.8 $ 384.5 $ 443.2
Stockholders' equity per share 27.88 24.12 22.14 20.52 21.94
Return on stockholders' equity (6) 18.4% 14.4% 13.6% 13.6% 16.5%
Capital expenditures $ 33.1 $ 29.1 $ 33.8 $ 21.2 $ 19.8
Provision for depreciation 30.0 33.0 34.5 36.0 38.6
Cash dividends paid 13.2 12.4 12.6 13.3 9.4
Cash dividends declared per share (7) .71 .68 .68 .68 .47
General
- -------
Average number of common
and common equivalent shares
outstanding (in thousands) 18,688 18,566 18,794 19,973 20,384
Approximate number of stockholders
of record (8) 5,500 6,000 6,500 7,000 8,500
Approximate number of employees 5,300 5,900 7,200 8,000 9,300
- -----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Includes pre-tax restructuring charge of $61.4 million in 1995.
(2) Includes pre-tax restructuring and inventory charges of $18.1 million in
1996.
(3) Includes $8.7 million of interest income from an income tax refund in 1997.
(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) The 1997 dividends included $.01 per share for redemption of stockholders'
rights.
(8) As of July 31 of the calendar year.
</FN>
</TABLE>
THIOKOL CORPORATION
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
Amended and Restated Effective June 16, 1997
<PAGE>
Table of Contents
Section Page
1 - PURPOSE OF PLAN..................................................3
2 - ESTABLISHMENT OF PLAN............................................3
3 - DEFINITIONS......................................................3
4 - ELIGIBILITY FOR PARTICIPATION....................................5
5 - BENEFITS.........................................................5
6 - DISABILITY.......................................................8
7 - DEATH............................................................8
8 - FORM OF BENEFIT PAYMENT..........................................9
9 - CHANGE OF CONTROL AND TAX GROSS UP..............................10
10 - ADMINISTRATION OF PLAN..........................................13
11 - AMENDMENT OR TERMINATION OF PLAN................................13
12 - CORPORATE SUCCESSORS............................................13
13 - PLAN NOT A CONTRACT OF EMPLOYMENT...............................13
14 - SPENDTHRIFT CLAUSE..............................................14
15 - EXPENSES........................................................14
16 - SEVERABILITY....................................................14
17 - CONSTRUCTION....................................................14
18 - GOVERNING LAW...................................................14
19 - NO REQUIREMENT TO FUND..........................................14
20 - PAYMENT DUE AN INCOMPETENT......................................15
2
<PAGE>
THIOKOL CORPORATION
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
SECTION 1 - PURPOSE OF PLAN
- ---------------------------
The Thiokol Corporation Supplemental Executive Retirement Plan has been
established by the Board of Directors as a non-tax qualified and unfunded
supplemental retirement plan for the purpose of providing benefits to:
(i)......Recruit and retain certain selected key executive employees;
(ii) Bridge and supplement loss of future retirement benefits
for such employees resulting from their leaving another
employer for the employ of the Corporation; and
(iii) Facilitate a discretionary nondiscounted supplemental
early retirement benefit for certain key employees
designated by the Chairman of the Board or President of
the Corporation.
SECTION 2 - ESTABLISHMENT OF PLAN
- ---------------------------------
The Thiokol Corporation Supplemental Executive Retirement Plan is
established effective July 1, 1992.
Effective June 16, 1997 the Plan was amended and restated.
SECTION 3 - DEFINITIONS
- -----------------------
"Accrued Benefit" means the percentage of the Normal Retirement Benefit,
Early Retirement Benefit, or Late Retirement Benefit accrued for each Year
of Service and fractional Year of Service completed to the nearest 1/12 of
a year the Participant works for the Corporation. The percentage of each
years accrued benefit is set forth in Table I. The maximum accrued benefit
is 60% of the Participant's average five highest consecutive years of
Compensation as described in Section 5 hereof.
"Board of Directors" means the Board of Directors as constituted from time
to time.
"Cause" means (i) a material breach by the Participant of his job duties
and obligations (other than as the result of an incapacity due to physical
or mental illness) which is demonstrably willful and deliberate on the
Participant's part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the
3
<PAGE>
Corporation and which is not remedied in a reasonable period of time after
receipt of notice from the Corporation or (ii) the conviction of the
Participant of a felony involving moral turpitude.
"Chairman of the Board" means the Chairman of the Board of the Corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board of Directors.
"Compensation" means a Participant's earnings as that term is defined in
Section 4.8 (a)(1) of the Corporation's Retirement Plan calculated without
regard to the limitation in Section 4.8(a)(2) of the Corporation's
Retirement Plan, plus any short term bonus award amounts subject to
deferred income taxation under the Code.
"Corporation" or "Company" means Thiokol Corporation and its subsidiaries.
"Corporation's Retirement Plan" means the Thiokol Corporation Pension Plan.
"Early Retirement Benefit" means the Accrued Benefit that may be paid to a
Participant described in Section 5.2.2 prior to the Participant's Normal
Retirement Date.
"Excess Pension Plan" mans the unfunded excess pension plan maintained by
the Corporation for payment of retirement benefits that exceed the tax
qualified and other limits of the Corporation's Retirement Plan.
"Late Retirement Benefit" means the Accrued Benefit that may be paid to a
Participant subsequent to his Normal Retirement Date as described in
Section 5.2.3.
"Normal Retirement Benefit" means the Accrued Benefit that may be paid to a
Participant subsequent to his Normal Retirement Date as described in
Section 5.2.3.
"Normal Retirement Date" means the last day in the month a Participant
attains age 65.
"Participant" means the key employee of the Corporation selected and so
designated as a participant by the Committee as described in Section 4.
"Plan" means the Thiokol Corporation Supplemental Executive Retirement Plan.
"President" means the President of the Corporation.
"Surviving Spouse" means the surviving spouse as the term is defined in the
Corporation's Retirement Plan.
4
<PAGE>
"Years of Service" means years of Benefit Service as that term is defined
in Section 4.7 of the Corporation's Retirement Plan.
SECTION 4 - ELIGIBILITY FOR PARTICIPATION
- -----------------------------------------
To be eligible for participation in the Plan, a person must be a key
employee of the Corporation designated by the Chairman of the Board or
President as a Participant and such designation acknowledged to the
Participant in writing by the Chairman of the Board or President of the
Corporation. The Participant shall remain an active Participant in this
Plan so long as he is actively employed by the Corporation and thereafter
for so long as the Participant or Participant's Surviving Spouse is
eligible to receive benefits and until all benefits to which the
Participant or Surviving Spouse are entitled have been paid.
By participating in this Plan, a person as a Participant waives his rights
to receive any benefit from the Corporation's Excess Benefit Plan. In the
event a person is no longer actively employed by the Corporation, has not
received any benefits from the Plan, and does not have a vested and
nonforfeitable right to any Accrued Benefits, the person shall be eligible
to participate in the Corporation's Excess Benefit Plan subject to the
terms and conditions of the Excess Benefit Plan.
SECTION 5 - BENEFITS
- --------------------
5.1 Benefits Formula;
Benefits payable under this Plan to a Participant who has
completed twelve Years of Service at the Participant's Normal
Retirement Date shall be an amount equal to sixty percent (60%) of
the Participant's average five highest consecutive years of
Compensation during the last ten (10) Years of Service with the
Corporation reduced by an amount equal to all benefits the
Participant is eligible to receive from any of the following
sources:
(i) The Corporation's Retirement Plan;
(ii) The defined benefit pension plans, annuities, and other
regular and recurring benefits, including supplemental
benefit plans and other nonqualifed benefit plans,
received from prior employers or entities related to
prior employers; and
(iii) Governmental and military pension plans or programs but
not including payments made under the federal social
security system.
For Years of Service less than twelve, the retirement benefit
shall be the Accrued Benefit represented by the Years of Service
and fractional years thereof computed to the nearest one-twelfth
as set forth in Table 1.
5
<PAGE>
5.2 Accrual of a Benefit and Vesting:
Subject to the forfeiture provisions of this Section 5.2 and
Section 6, Plan Participants shall accrue the percentage of the
Normal Retirement, Early Retirement, or Late Retirement benefit,
as the case may be, for each Year of Service with the Corporation
set forth in Table 1 below. The Participant shall have a vested
and nonforfeitable right to such Accrued Benefit upon the date of
the earliest occurrence of any one of the following events:
(i) Completion of twelve Years of Service;
(ii) Involuntary termination of employment for reasons other
than for Cause as defined in Section 3 hereof including
but not limited to a reduction in force;
(iii) Early retirement if the Participant is so selected in
writing by the Chairman of the Board, or President as set
forth in Section 5.2.2 herein;
(iv) Permanent disability;
(v) Death; or
(vi) Retirement at the Participant's Normal or Late Retirement
Date.
In no event shall a Benefit be payable to a Participant under this
Plan in a month the Participant receives Compensation from the
Corporation.
In the event a Participant voluntarily terminates employment with
the Corporation, the Accrued Benefit unless otherwise vested under
any of the vesting provisions listed in subsection (i) through
(vi) of this Section 5.2 shall be forfeited and the Participant
shall receive no benefits under this Plan. In the event that a
Participant is eligible to receive or is otherwise receiving a
benefit under this Plan and such Participant is employed or
engaged in any activity, business or enterprise alone or in
concert with others competitive with the business of the
Corporation, the Committee in its sole discretion may declare such
benefits under this Plan forfeited and cease making further
payments under this Plan.
6
<PAGE>
TABLE I
ACCRUED BENEFIT SCHEDULE
Percent of Benefit Accrual
Years of Service For Years of Service
1 8.333
2 16.667
3 25.000
4 33.333
5 41.667
6 50.000
7 58.333
8 66.667
9 75.000
10 83.333
11 91.667
12 100.000
Fractional years shall be completed to the nearest 1/12
of a year.
5.2.1 Normal Retirement Benefit -- The Normal Retirement Benefit is the
Participant's Accrued Benefit based on each Year of Service
determined from Table 1 and paid to a Participant on the last day
of the month subsequent to the date the Participant attains his
Normal Retirement Date.
5.2.2 Early Retirement -- With the written authorization and approval
solely in the discretion and not as an obligation of either the
Chairman of the Board or the President of the Corporation, an
Early Retirement Benefit may be paid to a Participant who has
attained at least age 55 and who has completed not less than five
Years of Service. Such Early Retirement Benefit shall be an
amount equal to the Participant's Accrued Benefit derived from
Table 1 as of the date of such early retirement based on each
Year of Service reduced by the rate of 3% per year and fractional
amount thereof each month that the Participant is granted early
retirement prior to the Normal Retirement Date. The early
retirement benefit shall commence the last day of the month
subsequent to the date such early retirement is authorized in
writing.
5.2.3 Late Retirement -- The Late Retirement Benefit shall be the
Participant's Accrued Benefit derived from Table 1 based on each
Year of Service payable the last day of the month subsequent to
the date the Participant retires from the Corporation after the
Participant attains his Normal Retirement Date.
5.2.4 Vested Involuntary Termination -- In the event a Participant is
involuntarily terminated from employment with the Corporation
prior to attainment of
7
<PAGE>
his Normal Retirement Date other than for Cause as defined in
Section 3 hereof or the completion of twelve Years of Service,
the Participant shall be entitled to a retirement benefit equal
to his Accrued Benefit derived from Table 1 based upon the Years
of Service with the Company on the date of such involuntary
termination. Such benefits shall commence the last day of the
month subsequent to the Participant's Normal Retirement Date. At
such time such terminated Participant is eligible to receive
Early Retirement Benefits, such Participants shall be eligible
and may elect to receive Early Retirement Benefits payable in the
form set forth in Section 8 hereof without the consent required
from the Chairman of the Board or President as set forth in
Section 5.2.2 hereof.
SECTION 6 - DISABILITY
- ----------------------
In the event the Participant is totally and permanently disabled as
hereinafter defined and remains totally and permanently disabled until
attainment of his Normal Retirement Date, the Participant shall receive a
Normal Retirement Benefit based upon the Years of Service accrued to the
Normal Retirement Date and calculated on the Compensation in effect on the
date of disability as if such compensation had continued to be paid at the
same rate until the Participant's Normal Retirement Date. In the event the
Participant recovers from such disability to return to active employment,
the period of time of such disability shall be credited towards the Years
of Service for benefit accrual purposes. In the event of death, such
disabled Participant's Surviving Spouse will be entitled to the benefits
described in Section 7 hereof. In the event that such Participant recovers
from such disability and is actively employed by another employer or
self-employed, the Participant shall be deemed to have terminated
employment on such date he would otherwise have been eligible to return to
active employment with the Corporation and such Accrued Benefit forfeited
if twelve Years of Service as of such date of the commencement of
disability had not been completed. For the purposes of the Plan, a
Participant shall be deemed to be totally and permanently disabled if
eligible for and receives long-term disability benefits from the
Corporation's long-term disability program. Eligibility for disability
retirement benefits under this Plan shall continue notwithstanding any
expiration of benefit payments due to the passage of time from the
Corporation's disability program so long as there has been no change in the
status of the total and permanent nature of the Participant's disability.
In the event the Corporation does not maintain a long-term disability
program on the date of such disability, permanent disability shall be
determined by procedures established by the Committee.
SECTION 7 - DEATH
- -----------------
If a married Participant dies while he is an active employee of the
Company, his benefits under this Plan shall be 100% vested on the date of
his death and payable to his Surviving Spouse in the form of a single life
annuity commencing on the last day of the month following the date the
Participant would have otherwise attained at age 55.
8
<PAGE>
The benefit shall be based on the Accrued Benefit (unreduced for early
retirement) that would have been paid to the Participant if he had
continued his employment with the Company and retired at his Normal
Retirement Date. Such surviving spouse may elect to receive the death
benefit provided in this Section 7 in the form of a cash lump sum
distribution of an accrued normal retirement benefit in the manner provided
in Section 8 hereof.
If a married Participant dies while he is not an active employee of the
Company, any vested Accrued Benefits to which the Participant had a vested
and nonforfeitable right the time of his death shall be paid to his
Surviving Spouse in the form of a single life annuity. Such Surviving
Spouse may elect to receive the accrued Normal Retirement, Early
Retirement, or Late Retirement Benefit, as the case may be, at the same
time and in the same manner the Participant would have been eligible to
elect to receive his Accrued Benefit if he had survived.
Any benefits payable to a Surviving Spouse shall be reduced by benefits
such Surviving Spouse shall be entitled to receive as the result of the
Participant's death from any of the following:
(i) The Corporation's Retirement Plan;
(ii) The defined benefit pension plans, annuities, and other regular
and recurring benefits, including supplemental benefit plans and
other nonqualifed benefit plans, received from prior employers or
entities related to prior employers; and
(iii)Governmental and military pension plans or programs but not
including payments made under the federal social security system.
If an unmarried Participant dies, no benefits will be paid under this Plan.
SECTION 8 - FORM OF BENEFIT PAYMENT
- -----------------------------------
The accrued Normal Retirement, Early Retirement, or Late Retirement
Benefit, as the case may be, shall be payable to a Participant in the same
form as payable to the Participant by written election under the terms of
the Corporation's Retirement Plan. Except for the Early Retirement Benefit
reduction factor described in Section 5.2.2 hereof which shall be used for
calculation of the retirement benefits from this Plan, all other actuarial
factors used to compute the Normal Retirement, Early or Late Retirement
Benefit and optional forms of benefit payments from the Corporation's
Retirement Plan shall be used to compute the retirement benefits from this
Plan.
In the event that the Accrued Benefit is payable as an Early Retirement
Benefit prior to age 65 with written authorization by the Chairman of the
Board or President of the Corporation, such Accrued Benefit shall be
reduced by the annual rate of 3% and a
9
<PAGE>
fraction thereof for each month for each year such early retirement
precedes the Participants Normal Retirement Date.
In the case of a late retirement, the Participant shall continue to accrue
Years of Service for benefit accrual purposes to the extent that the
Participant has not accrued twelve years of service as of his Normal
Retirement Date.
The Participant shall provide the Committee with such proof of benefit
payments from other retirement plans or programs both public and private as
the Committee may reasonably request. Absent such proof, the Committee may
suspend benefit payments until such proof or other verification as may be
reasonably required has been provided by the Participant.
SECTION 9 - CHANGE OF CONTROL AND TAX GROSS UP
- ----------------------------------------------
In the event of a Change in Control of the Company as hereinafter defined,
the Participant shall be entitled to receive on the date of such Change in
Control a vested nonforfeiture retirement benefit equal to 100% of the
Participant's unreduced accrued Normal Retirement Benefit based on such
Participant's compensation as of the date of such Change in Control. The
Participant shall be entitled to receive a cash lump sum distribution of
the actuarial equivalent value of such accrued Normal Retirement Benefit
without reduction for benefits received or which the Participant is
otherwise eligible to receive from other employer defined benefit plans,
government and military plans or programs. The amount of such lump sum
distribution shall be calculated without reduction for early retirement
using the actuarial assumptions used in the Corporation's Retirement Plan.
In addition to such lump sum distribution, the Participant shall also
receive as a cash payment a "Tax Gross Up" amount as hereafter described.
All such cash payments required by this Section 9 shall be paid by the
Corporation to the Participant not later than the earliest date of (i) 30
days after the date of the Change of Control; or (ii) as provided by the
terms and conditions of any Change of Control Agreement between the
Corporation and a Participant in this Plan.
In the event there is a conflict between this Plan and the terms and
conditions of a Participant's Change in Control Agreement with the
Corporation, as the case may be, the terms and conditions of the Change of
Control Agreement shall govern to the extent there is a conflict with the
terms of the Plan.
For the purposes of this Plan, a Change in Control 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 Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
15% or more of either (i) the then outstanding share of Common Stock of the
Company (the "Outstanding Company Common Stock")
10
<PAGE>
or (ii) the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"): provided, however, that the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company (excluding an acquisition by virtue
of the exercise of a conversion privilege), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company or (iv) any acquisition by a 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) of this Section 9 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, 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 stockholders of the Company of a reorganization, merge,
consolidation in each case, unless following such reorganization, merger or
consolidation, (i) more than 60% of, respectively, 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, respectivel, of the Outstanding Company
Common Stock and Outstanding Company 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, or the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no person
(excluding the Company, an employee benefit plan (or related trust) of the
Company 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% or
more of the Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be, beneficially owns, directly or indirectly,
15% 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
11
<PAGE>
of the corporaiton 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 stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% 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
Company Common Stock and Outstanding Company 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 Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) no person (excluding the
Company and any employee benefit plan (related trust) of the Company or
such corporation and any person beneficially owning, immediately prior to
such sale or other disposition, directly or indrectly, 15% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be, beneficially owns, directly or indirectly, 15% 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
direcotrs of such corporation were members of the Incumber Board at the
time of the execution of the initial agreement or action of the Board
providing for such sale or disposition of assets of the Company.
In addition to the Cash Payment for the actuarial equivalent value of the
Participant's 100% accrued Normal Retirement Benefit, the Participant shall
receive an additional cash payment in such amont as to "Gross Up" the
Participant by the amount of any and all federal, state and local income
tax the Participant is liable to pay as the result of such cash lump sum
payment required by this Section 9 together with such amount necessary to
Gross Up the Participant for all such tax Gross Up payments. In the event
that a Participant is subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code or any interest or penalties are incurred by the
Participant with respect to such excise tax (such excise tax, together with
any such interest and penalties are hereinafter collectively referred to as
the Excise Tax) the Participant shall receive a further tax Gross Up
payment in an amount that such after payment by the Participant of all
taxes (including any interests or penalties imposed with respect to such
taxes) including without limitation any such income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed on the
Gross Up Payment.
12
<PAGE>
SECTION 10 - ADMINISTRATION OF PLAN
- -----------------------------------
The Plan shall be administered by the Committee. The Committee shall have
plenary authority, subject to the express provisions hereof, to resolve any
questions arising under the Plan; to correct any defect or supply an
omission or reconcile any inconsistency; to establish amend and rescind any
rules and regulations relating to the Plan and to make all other
determinations necessary or advisable for the administration and continued
successful operation of the Plan. Any decision of the Committee in the
administration of the Plan, as described herein, shall be final and
conclusive. The Committee shall act only by a majority of its members then
in office and its actions shall be recorded in minutes of the Committee
meetings which shall be conclusive of all such actions taken. The Committee
shall have the right to delegate such Plan administration as it shall
determine to the Chairman or the Chairman's designee.
SECTION 11 - AMENDMENT OR TERMINATION OF PLAN
- ---------------------------------------------
Subject to the provisions of this Section 11, the Compensation Committee
shall have the right at any time, from time-to-time, with notice to
Participants to suspend, discontinue or amend this Plan in any respect
whatsoever. No amendment or termination of the Plan shall directly or
indirectly deprive or otherwise reduce the Accrued Benefit of any
Participant or the payment of any benefits payable to a Participant or
Surviving Spouse under the Plan which have commenced prior to the effective
date of such resolution amending or terminating the Plan. Upon termination
or discontinuance of the Plan, such Participants shall become vested in a
nonforfeitable right to their Accrued Benefits. Payment of such amount
shall be in the manner provided in the Plan on the date such Participant is
or becomes eligible to receive payment of benefits from the Corporation's
Retirement Plan.
SECTION 12 - CORPORATE SUCCESSORS
- ---------------------------------
The Plan shall not be automatically terminated by a transfer or sale of
assets of the Corporation or by the merger or consolidation of the
Corporation into or with any other corporation or other entity that is not
a Change of Control as defined and described in Section 9 hereof but the
Plan shall be continuted as a binding obligation on any successor after
such sale, merger or consolidation. In the event the Plan is not continued
by the transferee, purchaser or successor entity, then the Plan shall
terminate subject to the provisions of Section 11.
SECTION 13 - PLAN NOT A CONTRACT OF EMPLOYMENT
- ----------------------------------------------
Neither this Plan, nor participation in it, shall be construed in any
manner as a contract of continuing employment with the Corporation either
expressed or implied. Nothing in the Plan shall interfere with or limit in
any way the right of the Corporation to terminate any Participant's
employment at any time, or confer upon any Participant any right to
continue in the employ of the Corporation for any period of time or to
continue a
13
<PAGE>
Participant's 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.
SECTION 14 - EXPENSES
- ---------------------
In the event any Participant or surviving spouse incurs costs, fees or
expenses including attorney's fees in the enforcement of any rights to
receive payment of benefits under this Plan, the Company shall reimburse
such participant or surviving spouse such costs, fees and expenses to such
participant or surviving spouse is the prevailing party.
SECTION 15 - SPENDTHRIFT CLAUSE
- -------------------------------
No right, title or interest of any kind in the Plan shall be transferable
or assignable by any Participant or Surviving Spouse or be subject to
alienation, anticipation, encumbrance, garnishment, attachment, execution
or levy of any kind, whether voluntary or involuntary, nor subject to the
debts, contracts, liabilities, engagements, or torts of the Participant or
Surviving Spouse. Any attempt to alienate, anticipate, encumber, sell,
transfer, assign, pledge, garnish, attach or otherwise subject to legal or
equitable process or encumber or dispose of any interest in the Plan shall
be void.
SECTION 16 - SEVERABILITY
- -------------------------
In the event that any provision of this Plan shall be declared illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan but shall be fully severable and this
Plan shall be construed and enforced as if said illegal or invalid
provision had never been inserted herein.
SECTION 17 - CONSTRUCTION
- -------------------------
Whenever appropriate, words used in the singular shall include the plural
or the plural may be read as the singular. When used herein, the masculine
gender includes the feminine gender.
SECTION 18 - GOVERNING LAW
- --------------------------
The validity and effect of this Plan and the rights and obligations of all
persons affected hereby shall be construed and determined in accordance
with the laws of the State of Utah unless superseded by federal law.
SECTION 19 - NO REQUIREMENT TO FUND
- -----------------------------------
The Employer is not required to fund this Plan.
14
<PAGE>
SECTION 20 - PAYMENT DUE AN INCOMPETENT
- ---------------------------------------
If the Plan Administration Committee receives evidence that a Participant
or Surviving Spouse entitled to receive any payment under the Plan is
physically or mentally incompetent to receive such payment, the Committee
may, in its sole discretion, direct the payment to any other person or
trust which has been legally appointed by the courts.
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 16th day of June 1997.
/s/ James R. Wilson
By: ________________________________
Chairman of the Board, President
and Chief Executive Officer
~ Seal ~
ATTESTED:
/s/ Edwin M. North
By: ________________________________
Secretary
THIOKOL CORPORATION
EXECUTIVE BONUS PLAN
AS AMENDED AND RESTATED
EFFECTIVE JUNE 16, 1997
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1 PURPOSE OF PLAN 1
2 DEFINITIONS 1
3 ELIGIBILITY FOR PARTICIPATION 6
4 TARGET BONUS OPPORTUNITY 6
5 SETTING THE PERFORMANCE GOALS AND 8
PARTICIPANT GOALS
6 CALCULATION OF THE ACTUAL BONUS AWARD 8
7 SPECIAL PARTICIPANTS AND DISCRETIONARY
BONUS 17
8 COMPENSATION NATURE OF THE TARGET BONUS 17
OPPORTUNITY AND ACTUAL BONUS AWARD
9 METHOD OF PAYMENT OF ACTUAL BONUS AWARD 18
AND TAX WITHHOLDING
10 TERMINATION OF EMPLOYMENT, CROSS-TRANSFER, 18
PROMOTION AND DEMOTION
11 CHANGE OF CONTROL 20
12 ADMINISTRATION AND MODIFICATION OF THE PLAN 23
13 AMENDMENT OR TERMINATION OF PLAN AND 24
DURATION OF PLAN
14 PLAN NOT A CONTRACT OF EMPLOYMENT 25
15 NON-ASSIGNABILITY OF RIGHTS 25
<PAGE>
THIOKOL CORPORATION
-------------------
EXECUTIVE BONUS PLAN
--------------------
SECTION 1 - PURPOSE OF THE PLAN
- -------------------------------
The Thiokol Executive Bonus Plan is principally designed as a short-term
incentive compensation bonus plan for selected employees of Thiokol
Corporation whose positions of responsibility enable them to affect the
success and profitability of the Corporation. Adopted by the Board of
Directors of the Corporation June 18, 1992 and amended and restated June
16, 1997, the Plan provides an annual cash bonus opportunity to each
Participant based on the respective performance of the Corporation or the
Participant's Division or Operating Unit towards specific pre-determined
financial goals and the Participant's achievement of specified individual
objectives.
SECTION 2 - DEFINITIONS
- -----------------------
2.0 As used herein the terms below shall have the following meanings.
Any of these terms, unless the context otherwise requires, may be
used in the singular or plural depending upon the reference.
2.1 "Actual Bonus Award" means the actual bonus award earned by a
Participant as incentive compensation for each Plan Year
calculated in the manner described in Section 6 hereof.
2.2 "Actual Performance Results" means: (i) the actual Earnings Per
Share and Participant Goals achieved for the Plan Year for Group
A Participants; (ii) actual, Operating Unit Net Profit and
Participant Goals achieved for the Plan Year for Group B
Participants, and; (iii) the Division Net Profit and Participant
Goals achieved for the Plan Year for Group C Participants.
<PAGE>
2.3 "Base Annual Salary" means the Participant's base annualized
salary for the Salary Grade for which a Participant is assigned
by the Committee July 1 of the Plan Year. The Base Annual Salary
on which the Actual Bonus Award will be paid shall be adjusted
for the amount of any increase (or decrease) granted a
Participant within the Participant's designated Salary Grade
during the Plan Year. Such adjustment shall be the weighted
average of the Base Salary for the period comprising the number
of months in the Plan Year at the rate in effect on July 1 and
the number of months at the rate in effect subsequent to such
increase (or decrease) or increases or decreases if more than one
during the Plan Year.
2.4 "Board of Directors" means the Board of Directors of the
Corporation as constituted from time to time.
2.5 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
2.6 "Committee" means the Compensation Committee of the Board of
Directors charged with administering the Plan.
2.7 "Consolidated Balance Sheet" means the balance sheet of the
Corporation and its subsidiaries prepared on a consolidated basis
in accordance with generally accepted accounting practices.
2.8 "Consolidated Income Statement" of the Corporation means the
income statement of the Corporation and its subsidiaries prepared
on a consolidated basis in accordance with generally accepted
accounting practices.
-2-
<PAGE>
2.9 "Corporation" or "Company" means Thiokol Corporation and its
subsidiaries.
2.10 "Corporation Performance Goals" means the Earnings Per Share
performance goals set by the Committee for Group A Participants.
2.11 "Division" means a distinct measurable profit center of the
Corporation or any subsidiary, division, or a branch, domestic or
foreign, of the Corporation, designated by the Committee as a
division for the purposes of this Plan and may include the
consolidation of business units.
2.12 "Division Net Profit" means the net pre-tax profit of the
Division net of all year-end adjustments included in the
Consolidate Income Statement of the Corporation for the Plan
Year.
2.13 "Division Net Profit Goal" means the division net profit goal set
by the Committee at the beginning of the Plan Year on which the
Target Opportunity is based.
2.14 "Division Performance Goals" means the division net profit
performance goals set by the Committee for Group C Participants.
2.15 "Earnings Per Share" means the earnings per share shown on the
Corporation's Consolidated Statement of Income at the end of the
Plan Year.
2.16 "Earnings Per Share Goal" means the earnings per share goal set
by the Committee at the beginning of the Plan Year on which the
Target Bonus Opportunity is based.
-3-
<PAGE>
2.17 "Group A Participant" means those persons designated by the
Committee for the Plan Year to be Group A Participants.
2.18 "Group B Participant" means those persons designated by the
Committee for the Plan Year to be Group B Participants.
2.19 "Group C Participant" means those persons designated by the
Committee for the Plan Year to be Group C Participants.
2.20 "Operating Unit" means a distinct measurable profit center of the
Corporation or any subsidiary, division, or a branch, domestic or
foreign, of the Corporation designated by the Committee as an
operating unit for the purposes of this Plan and may include the
consolidation of business units.
2.21 "Operating Unit Net Profit" means the net pre-tax profit of the
Operating Unit net of all year-end adjustments included in the
Consolidated Income Statement of the Corporation for the Plan
Year.
2.22 "Operating Unit Net Profit Goal" means the Operating Unit Net
Profit set by the Committee at the beginning of the Plan Year on
which the Target Bonus Opportunity is based.
2.23 "Operating Unit Performance Goals" means the Operating Unit Net
Profit Goal performance goals set by the Committee for Group B
Participants.
2.24 "Participant" means any person, selected by the Committee for
participation in this Plan, as either a Group A Participant, a
Group B Participant, a Group C Participant or a Special
Participant and who has agreed to participate in this Plan as
provided in Section 3, hereof.
-4-
<PAGE>
2.25 "Performance Goals" means the Corporation Performance Goals,
Division Performance Goals and Operating Unit Performance Goals
set by the Committee as the performance goals to be achieved for
the Plan Year.
2.26 "Plan" means the Thiokol Corporation Executive Bonus Plan. The
first Plan shall be effective for the Corporation's fiscal year
beginning July 1, 1997.
2.27 "Plan Year" means the fiscal year of the Corporation July 1
through June 30.
2.28 "Salary Grade" means the salary classification to which a
Participant is assigned by the Committee.
2.29 "Special Participant" means an individual designated as a special
participant by the Committee to receive a discretionary bonus as
set forth in Section 7 hereof.
2.30 "Participant Goals" means the individual goals set forth in
writing by each Participant at the beginning of the Plan Year
approved by the Committee defining the goals and objectives for
each Participant to achieve during the Plan Year. Each of such
goal, which may be either a financial or qualitative goal or a
combination thereof for each such Participant, shall be assigned
a weight such as to rank it's relative importance in relation to
the other goals and the sum total of the weights for all such
goals shall equal one hundred (100). In the event any such goals
requires more than twelve months to complete, a written
measurable criteria shall be included in each of such goals
against which performance results towards achieving such goals
can be measured for the Plan Year. At the end of the Plan Year
the Committee shall review the goals achieved in relationship to
these goals set
-5-
<PAGE>
at the beginning of the Plan Year and determine if each such Goal
was either (i) not met; (ii) partially met; (iii) all met; or
(iv) exceed as set forth on Table 5.
2.31 "Subsidiary" means a corporation, both domestic and foreign, at
least eighty-five percent (85%) of the outstanding voting stock
of which is owned, directly or indirectly, by the Corporation or
any subsidiary of the Corporation.
2.32 "Target" means the percentage determined by the Participant's
Salary Grade, as set forth in Table 1 in Section 4 hereof, on
which the Target Bonus Opportunity is calculated.
2.33 "Target Bonus Opportunity" means the dollar value of the
incentive bonus opportunity awarded to each Participant at the
beginning of each Plan Year based upon the Participant's Base
Annual Salary, Salary Grade and corresponding Target.
SECTION 3 - ELIGIBILITY FOR PARTICIPATION
- -----------------------------------------
To be eligible for participation in the Plan, a person must be designated
either a Group A Participant, Group B Participant, Group C Participant or
Special Participant by the Committee and agree in writing to be a
participant in the Plan bound by the terms and conditions hereof by
executing the participant acknowledgment. Special Participants shall
participate upon such terms and conditions as the Committee may designate.
SECTION 4 - TARGET BONUS OPPORTUNITY
- ------------------------------------
The Target Bonus Opportunity for each Participant is set at the beginning
of each Plan
-6-
<PAGE>
Year and shall be based on the Salary Grade and Target expressed as a
percent set forth in Table 1:
==============================================================================
TABLE 1
-------
TARGET BONUS OPPORTUNITY
==============================================================================
SALARY GRADE TARGET
(PERCENT)
==============================================================================
3 30%
- ------------------------------------------------------------------------------
2 25%
- ------------------------------------------------------------------------------
1 20%
- ------------------------------------------------------------------------------
The Target Bonus Opportunity shall equal the amount of the Participant's
Base Annual Salary multiplied by the corresponding Target, expressed as a
percent set forth opposite the Participant's Salary Grade shown in Table 1.
The Target Bonus Opportunity is calculated by the following formula:
Target Bonus Opportunity = Base Annual Salary X Target(1)
_________________________________________
(1)Target expressed as a percent based on Participant's Salary Grade-Table 1.
-7-
<PAGE>
SECTION 5 - SETTING THE PERFORMANCE GOALS AND PARTICIPANT GOALS
- ---------------------------------------------------------------
At the beginning of the Plan Year the Committee shall set the Performance
Goals and approve Participant Goals.
SECTION 6 - CALCULATION OF THE ACTUAL BONUS AWARD
- -------------------------------------------------
The Actual Bonus Award that may be earned by a Participant for the Plan
Year is expressed as a percentage of the Target Bonus Opportunity based on
the Actual Performance Results achieved for the Plan Year. The Actual Bonus
Award is calculated as hereinafter described.
Group A Participants:
For Group A Participants, the amount of the Actual Bonus Award that may be
earned shall be based on an attainment of the Corporation Performance Goals
and Participant Goals expressed as a percentage of the Participant's Target
Bonus Opportunity in Table 2 and Table 5.
The value of the Actual Bonus Award Earned by Group A Participants is
defined by the following formula:
-8-
<PAGE>
EARNINGS PER SHARE
------------------
LINE A
Percentage of Target Bonus Opportunity
Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD
Award from Table 2.
PLUS OR (MINUS)
---------------
PARTICIPANT GOALS
-----------------
LINE B
Percentage of Target Bonus Opportunity
Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD
Award from Table 5.
EQUALS ___________________
------
Total Value of Actual Bonus Award (Line A + (-) Line B) = $ AWARD
-9-
<PAGE>
==============================================================================
TABLE 2
-------
GROUP A PARTICIPANTS
EARNINGS PER SHARE
PERFORMANCE GOAL
==============================================================================
Actual EPS Achieved measured against Percent of Target Bonus Opportunity
EPS Goals which may be earned as an Actual
Bonus Award
==============================================================================
Below 90% of Goal 0%
- ------------------------------------------------------------------------------
90% of Goal 25%
- ------------------------------------------------------------------------------
95% of Goal 47.5%
- ------------------------------------------------------------------------------
100% of Goal 70%
- ------------------------------------------------------------------------------
105% of Goal 97%
- ------------------------------------------------------------------------------
110% of Goal 123%
- ------------------------------------------------------------------------------
115% of Goal 150%
- ------------------------------------------------------------------------------
Above 115% of Goal 150%
- ------------------------------------------------------------------------------
For performance results between the EPS rates shown, linear interpolation
set forth in Exhibit A will be used to compute the Actual Bonus Award.
==============================================================================
-10-
<PAGE>
Group B Participants:
For Group B Participants, the amount of the Actual Bonus Award that may be
earned shall be based on attainment of both the Operating Unit Performance
Goals and Participant Goals in Table 3 and Table 5.
The value of the Actual Bonus Award Earned by Group B Participants is
defined by the following formula:
OPERATING UNIT NET PROFIT
-------------------------
LINE A
Percentage of Target Bonus Opportunity
Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD
Award from Table 3.
PLUS OR (MINUS)
---------------
PARTICIPANT GOALS
-----------------
LINE B
Percentage of Target Bonus Opportunity
Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD
Award from Table 5.
EQUALS ___________________
--------
Total Value of Actual Bonus Award (Line A + (-) Line B) = $ AWARD
-11-
<PAGE>
==============================================================================
TABLE 3
-------
GROUP B PARTICIPANTS
OPERATING UNIT NET PROFIT
PERFORMANCE GOAL
==============================================================================
Actual Operating Unit Net Percentage of Target Bonus Opportunity
Profit Achieved measured against which may be earned as an Actual
Operating Unit Net Profit Goal Bonus Award
==============================================================================
Below 90% of Goal 0%
- ------------------------------------------------------------------------------
90% of Goal 25%
- ------------------------------------------------------------------------------
95% of Goal 47.5%
- ------------------------------------------------------------------------------
100% of Goal 70%
- ------------------------------------------------------------------------------
105% of Goal 97%
- ------------------------------------------------------------------------------
110% of Goal 123%
- ------------------------------------------------------------------------------
115% of Goal 150%
- ------------------------------------------------------------------------------
Above 115% of Goal 150%
==============================================================================
For performance results between the Operating Unit Net Profit rates shown,
linear interpolation set forth in Exhibit A-1 will be used to compute the
Actual Bonus Award.
==============================================================================
-12-
<PAGE>
Group C Participants:
For Group C Participants, the amount of the Actual Bonus Award that may be
earned shall be based on attainment of the Division Performance Goals and
Participant Goals expressed as a percentage of the Participant's Target
Bonus Opportunity in Table 4 and Table 5.
The value of the Actual Bonus Award Earned by Group C Participants is
defined by the following formula:
DIVISION NET PROFIT
-------------------
LINE A
Percentage of Target Bonus Opportunity
Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD
Award from Table 4.
PLUS OR (MINUS)
---------------
PARTICIPANT GOALS
-----------------
LINE B
Percentage of Target Bonus Opportunity
Target Bonus Opportunity X which may be earned as an Actual Bonus = $ AWARD
Award from Table 5.
EQUALS ___________________
------
Total Value of Actual Bonus Award (Line A + (-) Line B) = $ AWARD
-13-
<PAGE>
==============================================================================
TABLE 4
-------
GROUP C PARTICIPANTS
DIVISION UNIT NET PROFIT
PERFORMANCE GOAL
==============================================================================
Actual Division Net Profit Percentage of Target Bonus Opportunity
measured against Division which may be earned as an Actual Bonus
Net Pre-Tax Profit Goal Award
==============================================================================
Below 90% of Goal 0%
- ------------------------------------------------------------------------------
90% of Goal 25%
- ------------------------------------------------------------------------------
95% of Goal 47.5%
- ------------------------------------------------------------------------------
100% of Goal 70%
- ------------------------------------------------------------------------------
105% of Goal 97%
- ------------------------------------------------------------------------------
110% of Goal 123%
- ------------------------------------------------------------------------------
115% of Goal 150%
- ------------------------------------------------------------------------------
Above 115% of Goal 150%
==============================================================================
For performance results between the Division Net Profit, linear
interpolation set forth in Exhibit A-2 will be used to compute the Actual
Bonus Award.
==============================================================================
-14-
<PAGE>
Participant Goals:
- ------------------
For Group A Participants, Group B Participants and Group C Participants,
the Actual Bonus Award that may be earned by Participants is set forth in
Table 5 based on attainment of Participant Goals. Either the attainment or
failure to attain the Participant Goals, as the case may be, is
interrelated to the amount of the Actual Bonus Award earned and paid. Based
on the level of Participant success in achieving Participant Goals, the
Committee may declare either a positive or negative bonus amount based on
the level of Participant Goals achieved by the Participant as (i)
"objectives not met"; (ii) "objectives partially met"; (iii) "objectives
all met"; and (iv) "objectives all exceeded" as set forth on Table 5. In
the event of poor performance in achieving Participant Goals, the Committee
award of a negative bonus amount will be subtracted from any Bonus
Opportunity earned for achievement of Performance Goals in calculating the
Actual Bonus Award earned. In the event Participant Goals are not met, no
Actual Bonus Award will be earned.
-15-
<PAGE>
==============================================================================
TABLE 5
-------
GROUP A, GROUP B AND GROUP C PARTICIPANTS
PARTICIPANT GOALS
==============================================================================
Actual Participant Goals Percentage of Target Bonus Opportunity
Achieved measured against which may be earned as an Actual Bonus
Participant Goals Set Award
==============================================================================
Goals Not Met -175%(1)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Goals Partially Met -50% to 15%
- ------------------------------------------------------------------------------
Goals All Met 16% to 30%
- ------------------------------------------------------------------------------
Goals All Exceeded 31% to 50%
- ------------------------------------------------------------------------------
The Committee shall determine the Percentage of the Target Bonus
Opportunity, either positive or negative as the case may be, which may be
earned as an Actual Bonus Award for each level of Participant Goals
achieved.
(1) No Bonus will be paid when Goals are not met.
==============================================================================
-16-
<PAGE>
Maximum and Minimum Bonus Award:
The Maximum Actual Bonus Award paid from this Plan is 175% of the Target
Bonus Opportunity based on the Performance Goals and Participant Goals
achieved. No Actual Bonus Award will be paid if Participant Goals are not
met and the Actual Bonus Award will be partially reduced if a Participant's
performance in achieving Participant Goals is poor or otherwise
unsatisfactory as determined by the Committee.
SECTION 7 - SPECIAL PARTICIPANTS AND DISCRETIONARY BONUS
- --------------------------------------------------------
7.0 The Committee may designate Special Participants for Plan
participation on terms and conditions as may be determined from
time to time by the Committee. Such individuals designated as
Special Participants shall be Participants upon agreeing in
writing to the terms and conditions set by the Committee for such
participation.
7.1 The Committee may pay a discretionary bonus to any such
individual or group of individuals on such terms and conditions
as the Committee may determine.
SECTION 8 - COMPENSATION NATURE OF THE TARGET BONUS OPPORTUNITY
- ---------------------------------------------------------------
AND ACTUAL BONUS AWARD
- ----------------------
The Target Bonus opportunity granted to a Participant at the beginning of
the Plan Year as incentive compensation and payable to the Participant at
the end of the Plan Year in the amount of the Actual Bonus Award earned is
a binding compensation obligation of the Corporation to the Participant for
the Plan Year in which the Actual Bonus Award is earned.
-17-
<PAGE>
SECTION 9 - METHOD OF PAYMENT OF ACTUAL BONUS AWARD AND TAX
- -----------------------------------------------------------
WITHHOLDING
- -----------
The amount of the Actual Bonus Award earned by a Participant shall be paid
by the Corporation to the Participant in cash within sixty (60) days
subsequent to the end of the Plan Year. The Corporation shall withhold all
applicable federal, state and local income taxes and other amounts required
by law to be withheld for compensation.
SECTION 10 - TERMINATION OF EMPLOYMENT, CROSS-TRANSFER,
- -------------------------------------------------------
PROMOTION AND DEMOTION
- ----------------------
10.1 In the event a Participant terminates employment either
voluntarily or involuntarily including by retirement under the
terms of the Corporation's retirement program, death or permanent
disability prior to January 1 of the Plan Year, the Participant
shall receive no Actual Bonus Award.
10.2 In the event a Participant terminates employment either
voluntarily or involuntarily (other than by Cause as hereinafter
defined) including by retirement under the terms of the
Corporation's retirement program, death or permanent disability,
subsequent to January 1 of the Plan Year, the Participant shall
be eligible to receive a pro rata Actual Bonus Award based on the
number of months completed in the Plan Year. Such pro rata
payment, if any, shall be made in the manner set forth in Section
9 and paid at the end of the Plan Year in accordance with the
terms of this Plan. A Participant who is terminated during the
Plan Year for Cause shall receive no Actual Bonus Award.
10.3 For the purposes of this Plan, (i) a Participant shall be
considered permanently disabled on the date that such Participant
qualifies for long-
-18-
<PAGE>
term disability payments under the Corporation's long-term
disability program: and (ii) "Cause" means (a) a material breach
by the Participant of his job duties and obligations (other than
as the result of an incapacity due to physical or mental illness)
which is demonstrably willful and deliberate on the Participant's
part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the
Corporation and which is not remedied in a reasonable period of
time after receipt of notice from the Corporation or (b) the
conviction of the Participant of a felony involving moral
turpitude.
10.4 In the event a Participant is cross-transferred to the
Corporation, to another Division or to another Operating Unit
("Location") at the same Salary Grade, the Participant will
continue participating in the Plan but the Actual Bonus Award
will be pro rated based on the time and performance results
achieved at each Location. The Participant will become an active
Participant in the corresponding Plan for the Corporation,
Division or the Operating Unit to which the Participant is
transferred at the beginning of the next Plan if selected by the
Committee as a Participant.
10.5 In the event a Participant is promoted to a new Salary Grade, the
Participant's participation in the Plan will continue until the
end of the Plan Year and will be eligible to receive an Actual
Bonus Award as provided by the terms of the Plan. The Participant
will become an active Participant at the new Salary Grade in the
corresponding Plan for the Corporation, Division or Operating
Unit to which the Participant is promoted at the beginning of the
next Plan Year if selected by the Committee.
10.6 In the event of a demotion to a lower Salary Grade the
Participant will continue participating in such Plan until the
end of the Plan Year and receive an Actual Bonus Award as
provided by the terms of the Plan. The
-19-
<PAGE>
Participant will become an active Participant in such Plan in
effect at the new Salary Grade for the Corporation, Division or
Operating Unit as a result of such demotion at the beginning of
the next Plan Year if selected by the Committee as a Participant.
SECTION 11 - CHANGE OF CONTROL
- ------------------------------
In the event of a Change of Control of the Company as hereinafter defined
below in this Section 11, not withstanding any other provision of this Plan
to the contrary the greater of either the Target Bonus Award or Actual
Bonus Award, for the Plan in which a Participant participates, shall become
irrevocably due and payable to Participants on the date of such Change of
Control. Payment shall be made to the Participant not later than thirty
days after such Change of Control.
For the purposes of this agreement, a "Change of Control" 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 Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
15% or more of either (i) the then outstanding shares of Common Stock of
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by a corporation pursuant to a
reorganization, merger
-20-
<PAGE>
or consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and (iii) of
subsection (c) of this Section 13 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, 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 stockholders of the Company of a reorganization,
merger, consolidation in each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% 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 Company
Common Stock and Outstanding Company 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, or the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no person
(excluding the Company, an employee benefit plan (or related trust) of the
Company or such corporation resulting from such reorganization, merger or
consolidation and any person beneficially owning, immediately prior to such
-21-
<PAGE>
reorganization, merger or consolidation, directly or indirectly, 15% or
more of the Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be, beneficially owns, directly or indirectly,
15% 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 stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% 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
Company Common Stock and Outstanding Company 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 Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) no person (excluding the
Company and any employee benefit plan (related trust) of the Company or
such corporation and any person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 15% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be, beneficially owns, directly or indirectly, 15% or more
of, respectively the then outstanding shares of Common Stock of such
corporation and the combined voting power of the then
-22-
<PAGE>
outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) a 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 disposition of assets of the
Company.
SECTION 12 - ADMINISTRATION AND MODIFICATION OF THE PLAN
- --------------------------------------------------------
12.1 The Plan shall be administered by the Committee. The Committee
shall have plenary authority, subject to the express provisions
hereof, to resolve any questions arising under the Plan; to
correct any defect or supply an omission or reconcile any
inconsistency; to establish amend and rescind any rules and
regulations relating to the Plan and to make all other
determinations necessary or advisable for the administration and
continued successful operation of the Plan. The Committee will
have discretion at any time, or from time to time, to accelerate
the time at which and the extent to which the Actual Bonus Award
may be payable to Participants. Any decision of the Committee in
the administration of the Plan, as described herein, shall be
final and conclusive. The Committee shall act only by a majority
of its members then in office and its actions shall be recorded
in minutes of the Committee meetings which shall be conclusive of
all such actions taken.
12.2 The Committee shall have the right but not an obligation to
modify the Plan and to adjust Performance Goals, including but
not limited to Earnings Per Share to reflect non-recurring
financial changes or changes in business structure or
organization including by way of illustration and not as a
limitation changes in accounting methods or requirements;
accounting adjustments not in the usual and ordinary course of
business resulting in non-recurring charges or additions in
income, assets, liabilities or stockholders equity; tax
-23-
<PAGE>
rates and Corporate reorganizations including: recapitalization, mergers,
acquisitions, divestitures and spin-offs.
12.3 Unless otherwise amended by resolution of the Committee, the
Chairman, who shall not be a Participant in the Plan, shall have
the administrative power to act on behalf of the Committee to:
(i) select and designate individual Participants for Plan
Participation as either Corporate Participants, Operating
Unit Participants, or Division Participants;
(ii) set Participant Salary Grades and Base Annual Salary;
(iii) set Performance Goals;
(iv) approve Participant Goals; and
(v) determine the level of Participant Objectives achieved for
the purpose of determining the percentage of the Target
Bonus Opportunity achieved or not achieved, as the case may
be, with respect to Participant Goals.
The Chairman may delegate such administration to the Vice
President of Human Resources and Administration as the Chairman
determines.
SECTION 13 - AMENDMENT OR TERMINATION OF PLAN AND DURATION OF PLAN
- ------------------------------------------------------------------
13.1 Subject to the provisions of subsection 13.2 below, the
Compensation Committee shall have the right at any time, from
time to time, without notice
-24-
<PAGE>
to Participants to suspend, discontinue or amend this Plan in any
respect whatsoever, except that administration of the Plan cannot
be removed from the Compensation Committee.
13.2 Upon termination or discontinuance of the Plan, such Participants
shall receive a pro rata amount of the Actual Bonus Award for the
Plan Year based on the number of months completed in the Plan
Year as of the date of the termination. Payment of such amount
shall be in the manner provided in the Plan.
13.3 This Plan is an annual Plan and there is no obligation for the
Committee or the Board of Directors to renew such Plan each Plan
Year.
SECTION 14 - PLAN NOT A CONTRACT OF EMPLOYMENT
- ----------------------------------------------
Neither this Plan, nor participation in it, shall be construed in any
manner as a contract of employment either expressed or implied. Nothing in
the Plan shall interfere with or limit in any way the right of the
Corporation to terminate any Participant's employment at any time, or
confer upon any Participant any right to continue in the employ of the
Corporation for any period of time or to continue a Participant's 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.
SECTION 15 - NON-ASSIGNABILITY OF RIGHTS
- ----------------------------------------
No Participant's interest in the Plan shall be sold, assigned, transferred,
hypothecated, pledged, or otherwise disposed of by a Participant prior to
the actual receipt of such payment except by Will, the law of decent and
distribution or a qualified domestic relations order as defined by the
Employee Retirement Income Security Act of 1974. Participants may name,
from time to time, beneficiaries (who may be named
-25-
<PAGE>
contingently or successively) to whom benefits the Plan will be paid in the
event of their death before they receive any or all such benefit. Each
designation will revoke all prior designations by the same Participant,
shall be in the form prescribed by the Committee, and will be effective
only when filed by the Participant with the Committee during the
Participant's life time. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to the
Participant's estate. Except as otherwise permitted by action taken by the
Committee, the rights of any Participant under the Plan will immediately
terminate if such Participant: (i) attempts to, or does sell or assign,
transfer, hypothecate, pledge or otherwise dispose of any right hereunder
prior to the right to receive payment except as permitted above or (i)
becomes insolvent or bankrupt, or becomes involved in any matter which in
the opinion of the Committee might result in a Participant's rights under
the Plan being taken to satisfy the Participant's debts or liabilities.
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 16th day of June 1997.
/s/ James R. Wilson
By:________________________________
Chairman of the Board, President
and Chief Executive Officer
-Seal-
ATTESTED:
/s/ Edwin M. North
By:__________________________
Secretary
-26-
<PAGE>
==============================================================================
THIOKOL CORPORATION
EXECUTIVE BONUS PLAN
EXHIBIT A
LINEAR INTERPOLATION CHART
GROUP A PARTICIPANTS
EARNINGS PER SHARE
PERFORMANCE GOAL
==============================================================================
ACTUAL EPS ACHIEVED MEASURED PERCENTAGE OF TARGET BONUS
AGAINST EPS GOAL OPPORTUNITY WHICH MAY BE
EARNED AS AN ACTUAL BONUS
AWARD
- ------------------------------------------------------------------------------
90% 25%
- ------------------------------------------------------------------------------
91% 29.5%
- ------------------------------------------------------------------------------
92% 34%
- ------------------------------------------------------------------------------
93% 38.5%
- ------------------------------------------------------------------------------
94% 43%
- ------------------------------------------------------------------------------
95% 47.5%
- ------------------------------------------------------------------------------
96% 52%
- ------------------------------------------------------------------------------
97% 56.5%
- ------------------------------------------------------------------------------
98% 61%
- ------------------------------------------------------------------------------
99% 65.5%
- ------------------------------------------------------------------------------
100% 70%
- ------------------------------------------------------------------------------
101% 75.3%
- ------------------------------------------------------------------------------
102% 80.7%
- ------------------------------------------------------------------------------
103% 86%
- ------------------------------------------------------------------------------
104% 91.3%
- ------------------------------------------------------------------------------
105% 96.6%
- ------------------------------------------------------------------------------
106% 102%
- ------------------------------------------------------------------------------
107% 107.3%
- ------------------------------------------------------------------------------
108% 112.6%
- ------------------------------------------------------------------------------
109% 118%
- ------------------------------------------------------------------------------
110% 123.3%
- ------------------------------------------------------------------------------
111% 128.6%
- ------------------------------------------------------------------------------
112% 134%
- ------------------------------------------------------------------------------
113% 139.3%
- ------------------------------------------------------------------------------
114% 144.6%
- ------------------------------------------------------------------------------
115% 150%
- ------------------------------------------------------------------------------
-27-
<PAGE>
==============================================================================
THIOKOL CORPORATION
EXECUTIVE BONUS PLAN
EXHIBIT A-1
LINEAR INTERPOLATION CHART
GROUP B PARTICIPANTS
OPERATING UNIT NET PROFIT
PERFORMANCE GOAL
==============================================================================
ACTUAL OPERATING UNIT NET PROFIT PERCENTAGE OF TARGET BONUS
ACHIEVED MEASURED OPPORTUNITY WHICH MAY BE
AGAINST OPERATING UNIT EARNED AS AN ACTUAL BONUS
NET PROFIT GOAL AWARD
- ------------------------------------------------------------------------------
90% 25%
- ------------------------------------------------------------------------------
91% 29.5%
- ------------------------------------------------------------------------------
92% 34%
- ------------------------------------------------------------------------------
93% 38.5%
- ------------------------------------------------------------------------------
94% 43%
- ------------------------------------------------------------------------------
95% 47.5%
- ------------------------------------------------------------------------------
96% 52%
- ------------------------------------------------------------------------------
97% 56.5%
- ------------------------------------------------------------------------------
98% 61%
- ------------------------------------------------------------------------------
99% 65.5%
- ------------------------------------------------------------------------------
100% 70%
- ------------------------------------------------------------------------------
101% 75.3%
- ------------------------------------------------------------------------------
102% 80.7%
- ------------------------------------------------------------------------------
103% 86%
- ------------------------------------------------------------------------------
104% 91.3%
- ------------------------------------------------------------------------------
105% 96.6%
- ------------------------------------------------------------------------------
106% 102%
- ------------------------------------------------------------------------------
107% 107.3%
- ------------------------------------------------------------------------------
108% 112.6%
- ------------------------------------------------------------------------------
109% 118%
- ------------------------------------------------------------------------------
110% 123.3%
- ------------------------------------------------------------------------------
111% 128.6%
- ------------------------------------------------------------------------------
112% 134%
- ------------------------------------------------------------------------------
113% 139.3%
- ------------------------------------------------------------------------------
114% 144.6%
- ------------------------------------------------------------------------------
115% 150%
- ------------------------------------------------------------------------------
-28-
<PAGE>
==============================================================================
THIOKOL CORPORATION
EXECUTIVE BONUS PLAN
EXHIBIT A-2
LINEAR INTERPOLATION CHART
GROUP C PARTICIPANTS
DIVISION UNIT NET PROFIT
PERFORMANCE GOAL
==============================================================================
ACTUAL DIVISION NET PROFIT PERCENTAGE OF TARGET BONUS
ACHIEVED MEASURED AGAINST OPPORTUNITY WHICH MAY BE
DIVISION NET PRE-TAX EARNED AS AN ACTUAL BONUS
PROFIT GOAL AWARD
- ------------------------------------------------------------------------------
90% 25%
- ------------------------------------------------------------------------------
91% 29.5%
- ------------------------------------------------------------------------------
92% 34%
- ------------------------------------------------------------------------------
93% 38.5%
- ------------------------------------------------------------------------------
94% 43%
- ------------------------------------------------------------------------------
95% 47.5%
- ------------------------------------------------------------------------------
96% 52%
- ------------------------------------------------------------------------------
97% 56.5%
- ------------------------------------------------------------------------------
98% 61%
- ------------------------------------------------------------------------------
99% 65.5%
- ------------------------------------------------------------------------------
100% 70%
- ------------------------------------------------------------------------------
101% 75.3%
- ------------------------------------------------------------------------------
102% 80.7%
- ------------------------------------------------------------------------------
103% 86%
- ------------------------------------------------------------------------------
104% 91.3%
- ------------------------------------------------------------------------------
105% 96.6%
- ------------------------------------------------------------------------------
106% 102%
- ------------------------------------------------------------------------------
107% 107.3%
- ------------------------------------------------------------------------------
108% 112.6%
- ------------------------------------------------------------------------------
109% 118%
- ------------------------------------------------------------------------------
110% 123.3%
- ------------------------------------------------------------------------------
111% 128.6%
- ------------------------------------------------------------------------------
112% 134%
- ------------------------------------------------------------------------------
113% 39.3%
- ------------------------------------------------------------------------------
114% 144.6%
- ------------------------------------------------------------------------------
115% 150%
- ------------------------------------------------------------------------------
-29-
THIOKOL CORPORATION
KEY EXECUTIVE BONUS PLAN
AS AMENDED AND RESTATED
EFFECTIVE JUNE 16, 1997
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1 PURPOSE OF THE PLAN 1
2 DEFINITIONS 1
3 ELIGIBILITY FOR PARTICIPATION 7
4 TARGET BONUS OPPORTUNITY 7
5 SETTING THE PERFORMANCE GOALS 8
6 CALCULATION OF THE ACTUAL BONUS AWARD 9
7 SPECIAL PARTICIPANTS AND DISCRETIONARY
BONUS 19
8 COMPENSATION NATURE OF THE TARGET BONUS
OPPORTUNITY AND ACTUAL BONUS AWARD 19
9 METHOD OF PAYMENT OF ACTUAL BONUS AWARD
AND TAX WITHHOLDING 20
10 TERMINATION OF EMPLOYMENT, CROSS-
TRANSFER, PROMOTION AND DEMOTION 20
11 CHANGE OF CONTROL 22
12 ADMINISTRATION AND MODIFICATION OF
THE PLAN 25
13 AMENDMENT OR TERMINATION OF PLAN
AND DURATION OF PLAN 26
14 PLAN NOT A CONTRACT OF EMPLOYMENT 27
15 NON-ASSIGNABILITY OF RIGHTS 27
<PAGE>
THIOKOL CORPORATION
KEY EXECUTIVE BONUS PLAN
SECTION 1 - PURPOSE OF THE PLAN
- -------------------------------
The Thiokol Key Executive Bonus Plan is principally designed as a
short-term incentive compensation bonus plan for selected key executive
officers and employees of Thiokol Corporation whose positions of
responsibility enable them to significantly affect the success and
profitability of the Corporation. Adopted by the Board of Directors of the
Corporation, June 18, 1992 and amended and restated June 16, 1997, the Plan
provides an annual cash bonus opportunity to each Participant based on the
respective performance of the Corporation, or the Participant's Division or
Operating Unit towards specific pre-determined financial goals and the
individual Participant's achievement of specified Strategic Goals.
SECTION 2 - DEFINITIONS
- -----------------------
2.0 As used herein the terms below shall have the following meanings.
Any of these terms, unless the context otherwise requires, may be
used in the singular or plural depending upon the reference.
2.1 "Actual Bonus Award" means the actual bonus award earned by a
Participant as incentive compensation for each Plan Year
calculated in the manner described in Section 6 hereof.
2.2 "Actual Performance Results" means: (i) the actual Earnings Per
Share and Corporate Strategic Goals achieved for the Plan Year
for Group A Participants; (ii) actual Earnings Per Share,
Operating Unit Net Profit and Operating Unit Strategic Goals
achieved for the Plan Year for Group B
1
<PAGE>
Participants, and; (iii) the Operating Unit Net Profit, Division Net
Profit, and Division Strategic Goals achieved for the Plan Year for Group C
Participants.
2.3 "Base Annual Salary" means the Participant's base annualized
salary for the Salary Grade for which a Participant is assigned
by the Committee July 1 of the Plan Year. The Base Annual Salary
on which the Actual Bonus Award will be paid shall be adjusted
for the amount of any increase (or decrease) granted a
Participant within the Participant's designated Salary Grade
during the Plan Year. Such adjustment shall be made by the
weighed average of the Base Salary for the period comprising the
number of months in the Plan Year at the rate in effect on July 1
and the number of months at the rate in effect subsequent to such
increase (or decrease) or increases or decreases if more than one
during the Plan Year.
2.4 "Board of Directors" means the Board of Directors of the
Corporation as constituted from time to time.
2.5 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
2.6 "Committee" means the Compensation Committee of the Board of
Directors charged with administering the Plan.
2.7 "Consolidated Balance Sheet" means the balance sheet of the
Corporation and its subsidiaries prepared on a consolidated basis
in accordance with generally accepted accounting practices.
2.8 "Consolidated Income Statement" of the Corporation means the
income statement of the Corporation and its subsidiaries prepared
on a
2
<PAGE>
consolidated basis in accordance with generally accepted
accounting practices.
2.9 "Corporate Strategic Goals" means the written and weighted
Strategic Goals of the Corporation for each Group A Participant
approved by the Committee for the Plan Year.
2.10 "Corporation" or "Company" means Thiokol Corporation and its
subsidiaries.
2.11 "Corporation Performance Goals" means the performance goals set
by the Committee for Group A Participants comprised of two
components: (i) the Earnings Per Share Goal and (ii) the
Corporate Strategic Goals.
2.12 "Division" means a distinct measurable profit center of the
Corporation or any subsidiary, division or a branch, domestic or
foreign, of the Corporation, designated by the Committee as a
division for the purposes of this Plan and may include the
consolidation of business units.
2.13 "Division Net Profit" means the net pre-tax profit of the
Division net of all year-end adjustments included in the
Consolidate Income Statement of the Corporation for the Plan
Year.
2.14 "Division Net Profit Goal" means the division net profit goal set
by the Committee at the beginning of the Plan Year on which the
Target Opportunity is based.
2.15 "Division Performance Goals" means the performance goals set by
the Committee for Group C Participants comprised of three
components: (i) the Operating Unit Net Profit Goal, (ii) Division
Net Profit Goal, and (iii) the Division Strategic Goals.
3
<PAGE>
2.16 "Division Strategic Goals" means the written and weighted
Strategic Goals of the Division of the Corporation for each Group
C Participant approved by the Committee for the Plan Year.
2.17 "Earnings Per Share" means the earnings per share shown on the
Corporation's Consolidated Statement of Income at the end of the
Plan Year.
2.18 "Earnings Per Share Goal" means the Earnings Per Share Goal set
by the Committee at the beginning of the Plan Year on which the
Target Bonus Opportunity is based.
2.19 "Group A Participant" means those persons designated by the
Committee for the Plan Year to be Group A Participants.
2.20 "Group B Participant" means those persons designated by the
Committee for the Plan Year to be Group B Participants.
2.21 "Group C Participant" means those persons designated by the
Committee for the Plan Year to be Group C Participants.
2.22 "Operating Unit" means a distinct measurable profit center of the
Corporation or any subsidiary, division, or a branch, domestic or
foreign, of the Corporation designated by the Committee as an
operating unit for the purposes of this Plan and may include the
consolidation of business units.
2.23 "Operating Unit Net Profit" means the net pre-tax profit of the
Operating Unit net of all year-end adjustments included in the
Consolidated Income Statement of the Corporation for the Plan
Year.
4
<PAGE>
2.24 "Operating Unit Net Profit Goal" means the Operating Unit Net
Profit set by the Committee at the beginning of the Plan Year on
which the Target Bonus Opportunity is based.
2.25 "Operating Unit Performance Goals" means the performance goals
set by the Committee for Group B Participants comprised of three
components (i) the Earnings Per Share Goal, (ii) Operating Unit
Net Profit Goal and (iii) the Operating Unit Strategic Goal.
2.26 "Operating Unit Strategic Goals" means the written and weighted
Strategic Goals of the Operating Unit for each Group B
Participant approved by the Committee for the Plan Year.
2.27 "Participant" means any person, selected by the Committee for
participation in this Plan, as either a Group A Participant, a
Group B Participant, a Group C Participant or a Special
Participant and who has agreed to participate in this Plan as
provided in Section 3, hereof.
2.28 "Performance Goals" means the Corporation Performance Goals,
Division Performance Goals and Operating Unit Performance Goals
set by the Committee as the performance goals to be achieved for
the Plan Year.
2.29 "Plan" means the Thiokol Corporation Key Executive Bonus Plan.
The first Plan shall be effective for the Corporation's fiscal
year beginning July 1, 1997.
2.30 "Plan Year" means the fiscal year of the Corporation July 1
through June 30.
5
<PAGE>
2.31 "Salary Grade" means the salary classification to which a
Participant is assigned by the Committee.
2.32 "Special Participant" means an individual designated as a special
participant by the Committee to receive a discretionary bonus as
set forth in Section 7 hereof.
2.33 "Strategic Goals" means the Corporate Strategic Goals, Division
Strategic Goals and Operating Unit Strategic Goals. The Strategic
Goals are the strategic goals set forth in writing for each
Participant at the beginning of the Plan Year approved by the
Committee defining the Strategic Goals and direction of the
Corporation for each Group A Participant, the Operating Unit for
each Group B Participant and Division for each Group C
Participant and the specific goals to be achieved by each such
Participant. Each of such Strategic Goals, which may be either a
financial or qualitative goal or a combination thereof for each
such Participant, shall be assigned a weight such as to rank it's
relative importance in relation to the other Strategic Goals and
the sum total of the weights for all such goals shall equal one
hundred (100). In the event any such goals requires more than
twelve months to complete, a written measurable criteria shall be
included in each of such goals against which performance results
towards achieving such goals can be measured for the Plan Year.
At the end of the Plan Year the Committee shall review the
Strategic Goals achieved in relationship to these Strategic Goals
set at the beginning of the Plan Year and determine if each such
Strategic Goal was either (i) not met; (ii) partially met; (iii)
substantially met or (iv) all met as set forth in Table 7 hereof.
2.34 "Subsidiary" means a corporation, both domestic and foreign, at
least eighty-five percent (85%) of the outstanding voting stock
of which is owned, directly or indirectly, by the Corporation or
any subsidiary of the
6
<PAGE>
Corporation.
2.35 Target" means the percentage determined by the Participant's
Salary Grade, as set forth in Table 1 in Section 4 hereof, on
which the Target Bonus Opportunity is calculated.
2.36 "Target Bonus Opportunity" means the dollar value of the
incentive compensation bonus opportunity awarded to each
Participant at the beginning of each Plan Year based upon the
Participant's Base Annual Salary, Salary Grade and corresponding
Target.
SECTION 3 - ELIGIBILITY FOR PARTICIPATION
- -----------------------------------------
To be eligible for participation in the Plan, a person must be designated
either a Group A Participant, Group B Participant, Group C Participant or
Special Participant by the Committee and agree in writing to be a
participant in the Plan bound by the terms and conditions hereof by
executing the participant acknowledgment. Special Participants shall
participate upon such terms and conditions as the Committee may designate.
SECTION 4 - TARGET BONUS OPPORTUNITY
- ------------------------------------
The Target Bonus Opportunity for each Participant is set at the beginning
of each Plan Year and shall be based on the Salary Grade and Target
expressed as a percent set forth in Table 1:
7
<PAGE>
==============================================================================
TABLE 1
TARGET BONUS OPPORTUNITY
==============================================================================
SALARY GRADE TARGET
- ------------------------------------------------------------------------------
7 70%
- ------------------------------------------------------------------------------
6 55%
- ------------------------------------------------------------------------------
5 50%
- ------------------------------------------------------------------------------
4 40%
- ------------------------------------------------------------------------------
3 30%
- ------------------------------------------------------------------------------
The Target Bonus Opportunity shall equal the amount of the Participant's
Base Annual Salary multiplied by the corresponding Target, expressed as a
percent set forth Opposite the Participant's Salary Grade shown in Table 1.
The Target Bonus Opportunity is calculated by the following formula:
Target Bonus Opportunity = Base Annual Salary X Target(1)
SECTION 5 - SETTING THE PERFORMANCE GOALS
- -----------------------------------------
At the beginning of the Plan Year, the Committee shall set the Performance
Goals consisting of the Corporate Performance Goals for Group A
Participants; the Operating Unit Goals for Group B Participants; and the
Division Goals for Group C Participants.
__________________________________________
(1) Target expressed as a percent based on Participant's Salary Grade-Table 1.
8
<PAGE>
SECTION 6 - CALCULATION OF THE ACTUAL BONUS AWARD
- -------------------------------------------------
The Actual Bonus Award that may be earned by a Participant for the Plan
Year is expressed as a percentage of the Target Bonus Opportunity based on
the Actual Performance Results achieved for the Plan Year. The Actual Bonus
Award is calculated as hereinafter described.
Group A Participants:
- ---------------------
For Group A Participants, the amount of the Actual Bonus Award that may be
earned shall be based on an attainment of the Earnings Per Share Goals and
Participant Strategic Goals expressed as a percentage of the Participant's
Target Bonus Opportunity in Table 2 and Table 7.
The value of the Actual Bonus Award Earned by Group A Participants is
defined by the following formula:
9
<PAGE>
EARNINGS PER SHARE
------------------
LINE A
Percent of Target Bonus
Target Bonus Opportunity X Opportunity which may be earned =$ Award
as an Actual Bonus Award from Table 2
PLUS OR MINUS
-------------
CORPORATE
STRATEGIC GOALS
---------------
LINE B
Percent of Target Bonus
Target Bonus Opportunity X Opportunity which may be earned =$ Award
as an Actual Bonus Award from
Table 7
--------
EQUALS
------
Total Value of Actual Bonus Award (Line A +(-) Line B) = $ Award
10
<PAGE>
==============================================================================
TABLE 2
GROUP A PARTICIPANTS
EARNINGS PER SHARE
PERFORMANCE GOAL
==============================================================================
Actual EPS Achieved measured against Percentage of Target Bonus Opportunity
EPS Goal which may be earned as an Actual Bonus
Award
- ------------------------------------------------------------------------------
Below 90% of Goal 0%
- ------------------------------------------------------------------------------
90% of Goal 35%
- ------------------------------------------------------------------------------
95% of Goal 67.5%
- ------------------------------------------------------------------------------
100% of Goal 100%
- ------------------------------------------------------------------------------
105% of Goal 133%
- ------------------------------------------------------------------------------
110% of Goal 167%
- ------------------------------------------------------------------------------
115% of Goal 200%
- ------------------------------------------------------------------------------
Above 115% of Goal 200%
- ------------------------------------------------------------------------------
For performance results between the EPS rates shown, linear interpolation
set forth in Exhibit A will be used to compute the Actual Bonus Award.
==============================================================================
Group B Participants:
For Group B Participants, the amount of the Actual Bonus Award that may be
earned shall be based on attainment of the Earnings Per Share Performance
Goal, Operating Unit Net Profit Performance Goal, and Operating Strategic
Goal expressed as a percentage of the Participant's Target Bonus
Opportunity in Table 3, Table 4 and Table 7.
The value of the Actual Bonus Award Earned by Group B Participants is
defined by the following formula:
11
<PAGE>
EARNINGS PER SHARE
------------------
LINE A
Percent of Target Bonus
Target Bonus Opportunity X Opportunity which may be earned = $Award
as an Actual Bonus Award from
Table 3
PLUS
----
OPERATING UNIT
NET PROFIT
LINE B
Percent of Target Bonus
Target Bonus Opportunity X Opportunity which may be earned = $ Award
as an Actual Bonus Award from
Table 4
PLUS OR MINUS
-------------
OPERATING UNIT
STRATEGIC GOALS
---------------
LINE C
Percent of Target Bonus
Target Bonus Opportunity X Opportunity which may be earned = $ Award
as an Actual Bonus Award
from Table 7
--------
EQUALS
------
Total Value of Actual Bonus Award (Line A + Line B +(-) Line C) = $ Award
12
<PAGE>
==============================================================================
TABLE 3
GROUP B PARTICIPANTS
EARNINGS PER SHARE
PERFORMANCE GOAL
==============================================================================
Actual EPS Achieved measured Percentage of Target Bonus Opportunity
against EPS Goal which may be earned as an Actual Bonus
Award
- ------------------------------------------------------------------------------
Below 90% of Goal 0%
- ------------------------------------------------------------------------------
90% of Goal 10%
- ------------------------------------------------------------------------------
95% of Goal 17.5%
- ------------------------------------------------------------------------------
100% of Goal 25%
- ------------------------------------------------------------------------------
105% of Goal 33%
- ------------------------------------------------------------------------------
110% of Goal 42%
- ------------------------------------------------------------------------------
115% of Goal 50%
- ------------------------------------------------------------------------------
Above 115% of Goal 50%
- ------------------------------------------------------------------------------
For performance results between the EPS rates shown, linear interpolation
set forth in Exhibit A-1 will be used to compute the Actual Bonus Award.
==============================================================================
13
<PAGE>
==============================================================================
TABLE 4
GROUP B PARTICIPANTS
OPERATING UNIT NET PROFIT
PERFORMANCE GOAL
==============================================================================
Actual Operating Unit Net Percentage of Target Bonus
Profit Achieved measured Opportunity which may be earned
against Operating Unit as an Actual Bonus Award
Net Profit Goal
- ------------------------------------------------------------------------------
Below 90% of Goal 0%
-----------------------------------------------------------------------------
90% of Goal 25%
- ------------------------------------------------------------------------------
95% of Goal 50%
- ------------------------------------------------------------------------------
100% of Goal 75%
- ------------------------------------------------------------------------------
105% of Goal 100%
-----------------------------------------------------------------------------
110% of Goal 125%
- ------------------------------------------------------------------------------
115% of Goal 150%
- ------------------------------------------------------------------------------
Above 115% of Goal 150%
-----------------------------------------------------------------------------
For performance results between the Operating Unit Net Profit rates shown,
linear interpolation set forth in Exhibit A-2 will be used to compute the
Actual Bonus Award.
==============================================================================
Group C Participants:
For Group C Participants, the amount of the Actual Bonus Award that may be
earned shall be based on attainment of the Operating Unit Net Profit
Performance Goal, Division Net Profit Performance Goal and Participant's
Strategic Goals expressed as a percentage of the Participant's Target Bonus
Opportunity in Table 5, Table 6 and Table 7.
The value of the Actual Bonus Award Earned by Group C Participants is
defined by the following formula:
14
<PAGE>
OPERATING UNIT NET PROFIT
-------------------------
LINE A
Percent of Target Bonus
Target Bonus Opportunity X Opportunity which may be earned = $ Award
as an Actual Bonus Award
from Table 5
PLUS
----
DIVISION
NET PROFIT
----------
LINE B
Percent of Target Bonus
Target Bonus Opportunity X Opportunity which may be earned = $ Award
as an Actual Bonus Award
from Table 6
PLUS OR MINUS
-------------
DIVISION
STRATEGIC GOALS
---------------
LINE C
Percent of Target Bonus
Target Bonus Opportunity X Opportunity which may be earned = $ Award
as an Actual Bonus Award
from Table 7
--------
EQUALS
------
Total Value of Actual Bonus Award (Line A + Line B +(-) Line C) = $ Award
15
<PAGE>
==============================================================================
TABLE 5
GROUP C PARTICIPANTS
OPERATING UNIT NET PROFIT
PERFORMANCE GOAL
==============================================================================
Actual Operating Unit Net Percentage of Target Bonus
Profit Achieved measured against Opportunity which may be earned
Operating Unit Net Profit Goal as an Actual Bonus Award
- ------------------------------------------------------------------------------
Below 90% of Goal 0%
- ------------------------------------------------------------------------------
90% of Goal 10%
- ------------------------------------------------------------------------------
95% of Goal 17.5%
- ------------------------------------------------------------------------------
100% of Goal 25%
- ------------------------------------------------------------------------------
105 % of Goal 33%
- ------------------------------------------------------------------------------
110% of Goal 42%
- ------------------------------------------------------------------------------
115% of Goal 50%
- ------------------------------------------------------------------------------
Above 115% of Goal 50%
==============================================================================
For performance results between the Operating Unit Net Profit rates shown,
linear interpolation set forth in Exhibit A-3 will be used to compute the
Actual Bonus Award.
==============================================================================
16
<PAGE>
==============================================================================
TABLE 6
GROUP C PARTICIPANTS
DIVISION NET PROFIT
PERFORMANCE GOAL
==============================================================================
Actual Operating Unit Net Profit Percentage of Target Bonus
Achieved measured against Operating Opportunity which may be earned
Unit Net Profit Goal as an actual Bonus Award
==============================================================================
Below 90% of Goal 0%
- ------------------------------------------------------------------------------
90% of Goal 25%
- ------------------------------------------------------------------------------
95% of Goal 50%
- ------------------------------------------------------------------------------
100% of Goal 75%
- ------------------------------------------------------------------------------
105% of Goal 100%
- ------------------------------------------------------------------------------
110% of Goal 125%
- ------------------------------------------------------------------------------
115% of Goal 150%
- ------------------------------------------------------------------------------
Above 115% of Goal 150%
==============================================================================
For performance results between the Division Net Profit rates shown, linear
interpolation set forth in Exhibit A-4 will be used to compute the Actual
Bonus Award.
==============================================================================
17
<PAGE>
Strategic Goals:
For Group A Participants, Group B Participants and Group C Participants,
the Actual Bonus Award that may be earned by Participants based on
attainment of Strategic goals is set forth in Table 7. Either the
attainment or failure to attain the Strategic Goals, as the case may be, is
independent and separate from the Actual Bonus Award paid for the
attainment of the Earnings Per Share Goal for Group A Participants;
attainment of the Earnings Per Share and Operating Unit Net Profit Goal for
Group B Participants; and attainment of the Operating Unit Net Profit Goal
and Division Net Profit Goal for Group C Participants. No Actual Bonus
Award will be earned is Strategic Goals are not met.
==============================================================================
TABLE 7
GROUP A, GROUP B AND GROUP C PARTICIPANTS
STRATEGIC GOALS
==============================================================================
Actual Strategic Goals Achieved Percentage of Target Bonus
measured against Strategic Goals Set Opportunity which may be earned
as an Actual Bonus Award
- ------------------------------------------------------------------------------
Goals Not Met -200%(1)
- -----------------------------------------------------------------------------
Goals Partially met Minus 50% - 14%
- ------------------------------------------------------------------------------
Goals Substantially Met 15% - 20%
- ------------------------------------------------------------------------------
Goals All Met 21% - 25%
- ------------------------------------------------------------------------------
The Committee shall determine the Percentage of the Target Bonus
Opportunity which may be earned as an Actual Bonus Award within each goal
range achieved.
==============================================================================
(1) No Bonus will be paid when goals are not met.
18
<PAGE>
Maximum Bonus Award:
The Maximum Actual Bonus Award paid from this Plan is 200% of the Target
Bonus Opportunity.
No Bonus Award:
No Bonus Award will be paid from the Plan if Strategic Goals are not met.
SECTION 7 - SPECIAL PARTICIPANTS AND DISCRETIONARY BONUS
- --------------------------------------------------------
7.0 The Committee may designate Special Participants for Plan
participation on terms and conditions as may be determined from
time to time by the Committee. Such individuals designated as
Special Participants shall be Participants upon agreeing in
writing to the terms and conditions set by the Committee for such
participation.
7.1 The Committee may pay a discretionary bonus to any such
individuals or group of individuals on such terms and conditions
as the Committee may determine.
SECTION 8 - COMPENSATION NATURE OF THE TARGET BONUS OPPORTUNITY
- ---------------------------------------------------------------
AND ACTUAL BONUS AWARD
- ----------------------
The Target Bonus Opportunity granted to a Participant at the beginning of
the Plan Year as incentive compensation and payable to the Participant at
the end of the Plan Year in the amount of the Actual Bonus Award earned is
a binding compensation obligation of the Corporation to the Participant for
the Plan Year in which the Actual Bonus Award is earned.
19
<PAGE>
SECTION 9 - METHOD OF PAYMENT OF ACTUAL BONUS AWARD AND TAX
- -----------------------------------------------------------
WITHHOLDING
- -----------
The amount of the Actual Bonus Award earned by a Participant shall be paid
by the Corporation to the Participant in cash within sixty (60) days
subsequent to the end of the Plan Year. The Corporation shall withhold all
applicable federal, state and local income taxes and other amounts required
by law to be withheld for compensation.
SECTION 10 - TERMINATION OF EMPLOYMENT, CROSS-TRANSFER,
- -------------------------------------------------------
PROMOTION AND DEMOTION
- ----------------------
10.1 In the event a Participant terminates employment either
voluntarily or involuntarily including retirement under the terms
of the Corporation's retirement program, death or permanent
disability prior to January 1 of the Plan Year, the Participant
shall receive no Actual Bonus Award.
10.2 In the event a Participant terminates employment either
voluntarily or involuntarily (other than for Cause as to
hereinafter defined) including by retirement under the terms of
the Corporation's retirement program, death or permanent
disability, subsequent to January 1 of the Plan Year, the
Participant shall be eligible to receive a pro rata Actual Bonus
Award based on the number of months completed in the Plan Year.
Such pro rata payment, if any, shall be made in the manner set
forth in Section 9. A participant who is terminated during the
Plan Year for Cause shall receive no Actual Bonus Award.
10.3 For the purposes of this Plan, (i) a Participant shall be
considered permanently disabled on the date that such Participant
qualifies for long- term disability payments under the
Corporation's long-term disability program, and (ii) "Cause"
means (a) a material breach by the Participant of
20
<PAGE>
his job duties and obligations (other than as the result of an
incapacity due to physical or mental illness) which is
demonstrably willful and deliberate on the Participant's part,
which is committed in bad faith or without reasonable belief that
such breach is in the best interests of the Corporation and which
is not remedied in a reasonable period of time after receipt of
notice from the Corporation or (b) the conviction of the
Participant of a felony involving moral turpitude.
10.4 In the event a Participant is cross-transferred to the
Corporation, to another Division or to another Operating Unit
("Location") at the same Salary Grade, the Participant will
continue participating in the Plan, but the Actual Bonus Award
will be pro rated on the time and performance results achieved at
each Location. The Participant will become an active Participant
in the corresponding Plan for the Corporation, Division or the
Operating Unit to which the Participant is transferred at the
beginning of the next Plan if selected by the Committee as a
Participant.
10.5 In the event a Participant is promoted to a new Salary Grade, the
Participant's participation in the Plan will continue until the
end of the Plan Year and will be eligible to receive an Actual
Bonus Award as provided by the terms of the Plan. The Participant
will become an active Participant at the new Salary Grade in the
corresponding Plan for the Corporation, Division or Operating
Unit to which the Participant is promoted at the beginning of the
next Plan Year if selected by the Committee.
10.6 In the event of a demotion to a lower Salary Grade the
Participant will continue participating in such Plan until the
end of the Plan Year and receive an Actual Bonus Award as
provided by the terms of the Plan. The Participant will become an
active Participant in such Plan in effect at the new Salary Grade
for the Corporation, Division or Operating Unit as a result of
such
21
<PAGE>
demotion at the beginning of the next Plan Year if selected by
the Committee as a Participant.
SECTION 11 - CHANGE OF CONTROL
- ------------------------------
In the event of a Change of Control of the Company as hereinafter defined
below in this Section 11, not withstanding any other provision of this Plan
to the contrary the greater of either the Target Bonus Award or Actual
Bonus Award, for the Plan in which a Participant participates, shall become
irrevocably due and payable to Participants on the date of such Change of
Control. Payment shall be made to Participants not later than thirty days
after the date of such change in control otherwise made pursuant to the
terms of a Change of Control Agreement between the Company and the
Participant. In the event there is a conflict between this Plan and the
terms and conditions of a participant's Change in Control Agreement with
the Corporation, as the case may be, the terms and conditions of the Change
of Control Agreement shall govern to the extent there is a conflict with
the terms of the Plan.
For the purposes of this agreement, a "Change of Control" 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 Securities Exchange Act of 1934, as
amended (the "Exchange Act") (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or
more of either (i) the then outstanding shares of Common Stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"): provided, however, that the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
22
<PAGE>
Company or (iv) any acquisition by a 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) of this Section 11 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, 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 stockholders of the Company of a reorganization,
merger, consolidation in each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% 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 Company
Common Stock and Outstanding Company 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, or the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no person
(excluding the Company, an employee benefit plan (or
23
<PAGE>
related trust) of the Company 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% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be, beneficially
owns, directly or indirectly, 15% 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 stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% 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
Company Common Stock and Outstanding Company 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 Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (13) no person (excluding
the Company and any employee benefit plan (related trust) of the Company or
such corporation and any person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 15% or more of the
Outstanding
24
<PAGE>
Company Common Stock or Outstanding Company Voting Securities, as the case
may be, beneficially owns, directly or indirectly, 15% 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) a 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 disposition of assets of the Company.
SECTION 12 - ADMINISTRATION AND MODIFICATION OF THE PLAN
- --------------------------------------------------------
12.1 The Plan shall be administered by the Committee. The Committee
shall have plenary authority, subject to the express provisions
hereof, to resolve any questions arising under the Plan; to
correct any defect or supply an omission or reconcile any
inconsistency; to establish amend and rescind any rules and
regulations relating to the Plan and to make all other
determinations necessary or advisable for the administration and
continued successful operation of the Plan. The Committee will
have discretion at any time, or from time to time, to accelerate
the time at which and the extent to which the Actual Bonus Award
may be payable to Participants. Any decision of the Committee in
the administration of the Plan, as described herein, shall be
final and conclusive. The Committee shall act only by a majority
of its members then in office and its actions shall be recorded
in minutes of the Committee meetings which shall be conclusive of
all such actions taken.
12.2 The Committee shall have the right but not an obligation to
modify the Plan and to adjust Performance Goals including but not
limited to Earnings Per Share to reflect non-recurring financial
changes or changes in business structure or organization
including by way of illustration and not as a limitation changes
in accounting methods or requirements; accounting adjustments not
in the usual and ordinary course of business resulting in
25
<PAGE>
non-recurring charges or additions in income, assets, liabilities
or stockholders equity; tax rates and Corporate reorganizations
including: recapitalization, mergers, acquisitions, divestitures
and spin-offs.
12.3 Unless otherwise amended by resolution of the Committee, the
Chairman shall have the power to act on behalf of the Committee
with respect to individuals Salary Grade 3 and below under this
Plan to: (i) select Participants and designate such Participants
as Group A, Group B and Group C Participants; (ii) set the Salary
Grade and Base Annual Salary for each such Participant; (iii) set
the Performance Goals; (iv) Adjust Target Bonus Opportunities;
and (v) Assess Strategic Goals achievement.
SECTION 13 - AMENDMENT OR TERMINATION OF PLAN AND DURATION OF
- -------------------------------------------------------------
PLAN
- ----
13.1 Subject to the provisions of subsection 13.2 below, the
Compensation Committee shall have the right at any time, from
time to time, without notice to Participants to suspend,
discontinue or amend this Plan in any respect whatsoever, except
that administration of the Plan cannot be removed from the
Compensation Committee.
13.2 Upon termination or discontinuance of the Plan, such Participants
shall receive a pro rata amount of the Actual Bonus Award for the
Plan Year based on the number of months completed in the Plan
Year as of the date of the termination. Payment of such amount
shall be in the manner provided in the Plan.
13.3 This Plan is an annual Plan and there is no obligation for the
Committee or the Board of Directors to renew such Plan each Plan
Year.
26
<PAGE>
SECTION 14 - PLAN NOT A CONTRACT OF EMPLOYMENT
- ----------------------------------------------
Neither this Plan, nor participation in it, shall be construed in any
manner as a contract of employment either expressed or implied. Nothing in
the Plan shall interfere with or limit in any way the right of the
Corporation to terminate any Participant's employment at any time, or
confer upon any Participant any right to continue in the employ of the
Corporation for any period of time or to continue a Participant's 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.
SECTION 15 - NON-ASSIGNABILITY OF RIGHTS
- ----------------------------------------
No Participant's interest in the Plan shall be sold, assigned, transferred,
hypothecated, pledged, or otherwise disposed of by a Participant prior to
the actual receipt of such payment except by Will, the law of decent and
distribution or a qualified domestic relations order as defined by the
Employee Retirement Income Security Act of 1974. Participants may name,
from time to time, beneficiaries (who may be named contingently or
successively) to whom benefits the Plan will be paid in the event of their
death before they receive any or all such benefit. Each designation will
revoke all prior designations by the same Participant, shall be in the form
prescribed by the Committee, and will be effective only when filed by the
Participant with the Committee during the Participant's life time. In the
absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate. Except as
otherwise permitted by action taken by the Committee, the rights of any
Participant under the Plan will immediately terminate if such Participant:
(i) attempts to, or does sell or assign, transfer, hypothecate, pledge or
otherwise dispose of any right hereunder prior to the right to receive
payment except as permitted above or (i) becomes insolvent or bankrupt, or
becomes involved in any matter which in the opinion of the Committee might
result in a Participant's rights under the Plan being taken to satisfy the
Participant's debts or liabilities.
27
<PAGE>
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 16th day of June 1997.
/s/ James R. Wilson
By:______________________________
Chairman of the Board, President
and Chief Executive Officer
ATTESTED: --Seal--
/s/ Edwin M. North
By:________________________________
Corporate Secretary
28
<PAGE>
==============================================================================
THIOKOL CORPORATION
KEY EXECUTIVE BONUS PLAN
EXHIBIT A
LINEAR INTERPOLATION CHART
GROUP A PARTICIPANTS
EARNINGS PER SHARE
PERFORMANCE GOAL
==============================================================================
ACTUAL EPS ACHIEVED MEASURED PERCENTAGE OF TARGET BONUS
AGAINST EPS GOAL OPPORTUNITY WHICH MAY BE EARNED
AS AN ACTUAL BONUS AWARD
- ------------------------------------------------------------------------------
90.0% 35.0%
- ------------------------------------------------------------------------------
91.1% 42.2%
- ------------------------------------------------------------------------------
92.0% 48.0%
- ------------------------------------------------------------------------------
94.0% 61.0%
- ------------------------------------------------------------------------------
95.0% 67.5%
- ------------------------------------------------------------------------------
96.0% 74.0%
- ------------------------------------------------------------------------------
97.0% 80.5%
- ------------------------------------------------------------------------------
98.0% 87.0%
- ------------------------------------------------------------------------------
99.0% 93.5%
- ------------------------------------------------------------------------------
100.0% 100.0%
- ------------------------------------------------------------------------------
101.0% 106.7%
- ------------------------------------------------------------------------------
102.0% 113.3%
- ------------------------------------------------------------------------------
103.0% 120.0%
- ------------------------------------------------------------------------------
104.0% 126.7%
- ------------------------------------------------------------------------------
105.0% 133.3%
- ------------------------------------------------------------------------------
106.0% 140.0%
- ------------------------------------------------------------------------------
107.0% 146.7%
- ------------------------------------------------------------------------------
108.0% 153.4%
- ------------------------------------------------------------------------------
109.0% 160.0%
- ------------------------------------------------------------------------------
110.0% 166.7%
- ------------------------------------------------------------------------------
111.0% 173.4%
- ------------------------------------------------------------------------------
112.0% 180.0%
- ------------------------------------------------------------------------------
113.0% 186.7%
- ------------------------------------------------------------------------------
114.0% 193.4%
- ------------------------------------------------------------------------------
115.0% 200.0%
==============================================================================
29
<PAGE>
THIOKOL CORPORATION
KEY EXECUTIVE BONUS PLAN
EXHIBIT A-1
LINEAR INTERPOLATION CHART
GROUP B PARTICIPANTS
EARNINGS PER SHARE
PERFORMANCE GOAL
==============================================================================
ACTUAL EPS ACHIEVED MEASURED PERCENTAGE OF TARGET BONUS
AGAINST EPS GOAL OPPORTUNITY WHICH MAY BE
EARNED AS AN ACTUAL BONUS AWARD
==============================================================================
90.0% 10.0%
- ------------------------------------------------------------------------------
91.0% 11.5%
- ------------------------------------------------------------------------------
92.0% 13.0%
- ------------------------------------------------------------------------------
93.0% 14.5%
- ------------------------------------------------------------------------------
94.0% 16.0%
- ------------------------------------------------------------------------------
95.0% 17.5%
- ------------------------------------------------------------------------------
96.0% 19.0%
- ------------------------------------------------------------------------------
97.0% 20.5%
- ------------------------------------------------------------------------------
98.0% 22.0%
- ------------------------------------------------------------------------------
99.0% 23.5%
- ------------------------------------------------------------------------------
100.0% 25.0%
- ------------------------------------------------------------------------------
101.0% 26.7%
- ------------------------------------------------------------------------------
102.0% 28.3%
- ------------------------------------------------------------------------------
103.0% 30.0%
- ------------------------------------------------------------------------------
104.0% 31.7%
- ------------------------------------------------------------------------------
105.0% 33.3%
- ------------------------------------------------------------------------------
106.0% 35.0%
- ------------------------------------------------------------------------------
107.0% 36.7%
- ------------------------------------------------------------------------------
108.0% 38.3%
- ------------------------------------------------------------------------------
109.0% 40.0%
- ------------------------------------------------------------------------------
110.0% 41.7%
- ------------------------------------------------------------------------------
111.0% 43.3%
- ------------------------------------------------------------------------------
112.0% 45.0%
- ------------------------------------------------------------------------------
113.0% 46.7%
- ------------------------------------------------------------------------------
114.0% 48.3%
- ------------------------------------------------------------------------------
115.0% 50.0%
==============================================================================
30
<PAGE>
==============================================================================
THIOKOL CORPORATION
KEY EXECUTIVE BONUS PLAN
EXHIBIT A-2
LINEAR INTERPOLATION CHART
GROUP B PARTICIPANTS
OPERATING UNIT NET PROFIT
PERFORMANCE GOAL
==============================================================================
ACTUAL OPERATING UNIT NET PROFIT PERCENTAGE OF TARGET BONUS
ACHIEVING MEASURED AGAINST OPPORTUNITY WHICH MAY BE
OPERATING UNIT NET PROFIT GOAL EARNED AS AN ACTUAL BONUS AWARD
- ------------------------------------------------------------------------------
90.0% 25.0%
- ------------------------------------------------------------------------------
91.0% 30.0%
- ------------------------------------------------------------------------------
92.0% 35.0%
- ------------------------------------------------------------------------------
93.0% 40.0%
- ------------------------------------------------------------------------------
94.0% 45.0%
- ------------------------------------------------------------------------------
95.0% 50.0%
- ------------------------------------------------------------------------------
96.0% 55.0%
- ------------------------------------------------------------------------------
97.0% 60.0%
- ------------------------------------------------------------------------------
98.0% 65.0%
- ------------------------------------------------------------------------------
99.0% 70.0%
- ------------------------------------------------------------------------------
100.0% 75.0%
- ------------------------------------------------------------------------------
101.0% 80.0%
- ------------------------------------------------------------------------------
102.0% 85.0%
- ------------------------------------------------------------------------------
103.0% 90.0%
- ------------------------------------------------------------------------------
104.0% 95.0%
- ------------------------------------------------------------------------------
105.0% 100.0%
- ------------------------------------------------------------------------------
106.0% 105.0%
- ------------------------------------------------------------------------------
107.0% 110.0%
- ------------------------------------------------------------------------------
108.0% 115.0%
- ------------------------------------------------------------------------------
109.0% 120.0%
- ------------------------------------------------------------------------------
110.0% 125.0%
- ------------------------------------------------------------------------------
111.0% 130.0%
- ------------------------------------------------------------------------------
112.0% 135.0%
- ------------------------------------------------------------------------------
113.0% 140.0%
- ------------------------------------------------------------------------------
114.0% 145.0%
- ------------------------------------------------------------------------------
115.0% 150.0%
==============================================================================
31
<PAGE>
==============================================================================
THIOKOL CORPORATION
KEY EXECUTIVE BONUS PLAN
EXHIBIT A-3
LINEAR INTERPOLATION CHART
GROUP C PARTICIPANTS
OPERATING UNIT NET PROFIT
PERFORMANCE GOAL
==============================================================================
ACTUAL OPERATING UNIT NET PROFIT PERCENTAGE OF TARGET BONUS
ACHIEVED MEASURED AGAINST OPERATING OPPORTUNITY WHICH MAY BE
UNIT NET GOAL EARNED AS AN ACTUAL BONUS AWARD
- ------------------------------------------------------------------------------
90.0% 10.0%
- ------------------------------------------------------------------------------
91.0% 11.5%
- ------------------------------------------------------------------------------
92.0% 13.0%
- ------------------------------------------------------------------------------
93.0% 14.5%
- ------------------------------------------------------------------------------
94.0% 16.0%
- ------------------------------------------------------------------------------
95.0% 17.5%
- ------------------------------------------------------------------------------
96.0% 19.0%
- ------------------------------------------------------------------------------
97.0% 20.5%
- ------------------------------------------------------------------------------
98.0% 22.0%
- ------------------------------------------------------------------------------
99.0% 23.5%
- ------------------------------------------------------------------------------
100.0% 25.0%
- ------------------------------------------------------------------------------
101.0% 26.7%
- ------------------------------------------------------------------------------
102.0% 28.3%
- ------------------------------------------------------------------------------
103.0% 30.0%
- ------------------------------------------------------------------------------
104.0% 31.7%
- ------------------------------------------------------------------------------
105.0% 33.3%
- ------------------------------------------------------------------------------
106.0% 35.0%
- ------------------------------------------------------------------------------
107.0% 36.7%
- ------------------------------------------------------------------------------
108.0% 38.3%
- ------------------------------------------------------------------------------
109.0% 40.0%
- ------------------------------------------------------------------------------
110.0% 41.7%
- ------------------------------------------------------------------------------
111.0% 43.3%
- ------------------------------------------------------------------------------
112.0% 45.0%
- ------------------------------------------------------------------------------
113.0% 46.7%
- ------------------------------------------------------------------------------
114.0% 48.3%
- ------------------------------------------------------------------------------
115.0% 50.0%
==============================================================================
32
<PAGE>
==============================================================================
THIOKOL CORPORATION
KEY EXECUTIVE BONUS PLAN
EXHIBIT A-4
LINEAR INTERPOLATION CHART
GROUP C PARTICIPANTS
DIVISION NET PROFIT
PERFORMANCE GOAL
==============================================================================
ACTUAL NET PROFIT ACHIEVED PERCENTAGE OF TARGET BONUS
MEASURED AGAINST DIVISION NET OPPORTUNITY WHICH MAY BE
PRE-TAX PROFIT GOALS EARNED AS AN ACTUAL BONUS AWARD
- ------------------------------------------------------------------------------
90.0% 25.0%
- ------------------------------------------------------------------------------
91.0% 30.0%
- ------------------------------------------------------------------------------
92.0% 35.0%
- ------------------------------------------------------------------------------
93.0% 40.0%
- ------------------------------------------------------------------------------
94.0% 45.0%
- ------------------------------------------------------------------------------
95.0% 50.0%
- ------------------------------------------------------------------------------
96.0% 55.0%
- ------------------------------------------------------------------------------
97.0% 60.0%
- ------------------------------------------------------------------------------
98.0% 65.0%
- ------------------------------------------------------------------------------
99.0% 70.0%
- ------------------------------------------------------------------------------
100.0% 75.0%
- ------------------------------------------------------------------------------
101.0% 80.0%
- ------------------------------------------------------------------------------
102.0% 85.0%
- ------------------------------------------------------------------------------
103.0% 90.0%
- ------------------------------------------------------------------------------
104.0% 95.0%
- ------------------------------------------------------------------------------
105.0% 100.0%
- ------------------------------------------------------------------------------
106.0% 105.0%
- ------------------------------------------------------------------------------
107.0% 110.0%
- ------------------------------------------------------------------------------
108.0% 115.0%
- ------------------------------------------------------------------------------
109.0% 120.0%
- ------------------------------------------------------------------------------
110.0% 125.0%
- ------------------------------------------------------------------------------
111.0% 130.0%
- ------------------------------------------------------------------------------
112.0% 135.0%
- ------------------------------------------------------------------------------
113.0% 140.0%
- ------------------------------------------------------------------------------
114.0% 145.0%
- ------------------------------------------------------------------------------
115.0% 150.0%
==============================================================================
33
THIOKOL CORPORATION
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN
AS AMENDED AND RESTATED
EFFECTIVE JUNE 16, 1997
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1 - PURPOSE OF PLAN 1
2 - DEFINITIONS 2
3 - ELIGIBILITY FOR PARTICIPATION 9
4 - TARGET INCENTIVE AWARD 9
5 - SETTING THE BONUS OPPORTUNITIES AND
PERFORMANCE GOALS 10
6 - CALCULATION OF THE VALUE OF THE ACTUAL INCENTIVE
AWARD EARNED BY PARTICIPANTS 10
7 - SPECIAL PARTICIPANTS AND GRANDFATHER PARTICIPANTS 14
8 - COMPENSATION NATURE OF THE TARGET INCENTIVE
AWARD AND ACTUAL INCENTIVE AWARD 14
9 - METHOD OF PAYMENT OF THE ACTUAL INCENTIVE AWARD 15
10 - COMMON STOCK AWARD UNDER THE PLAN 15
11 - TAX WITHHOLDING FROM THE CASH AWARD AND
COMMON STOCK 17
12 - TERMINATION OF EMPLOYMENT, CROSS TRANSFER, PROMOTION
AND DEMOTION 18
13 - DEFERRAL OF ACTUAL INCENTIVE AWARDS 20
14 - CHANGE IN CONTROL 20
15 - ADMINISTRATION AND MODIFICATION OF THE PLAN 24
16 - AMENDMENT OR TERMINATION OF PLAN AND DURATION
OF PLAN 25
17 - PLAN NOT A CONTRACT OF EMPLOYMENT 26
18 - NON-ASSIGNABILITY OF RIGHTS 26
<PAGE>
THIOKOL CORPORATION
-------------------
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN
--------------------------------------
SECTION 1 - PURPOSE OF PLAN
- ---------------------------
The Thiokol Corporation Key Executive Long-Term Incentive Plan is
principally designed to provide long-term compensation incentives for
selected key executive officers and employees of Thiokol Corporation and
its subsidiaries who have substantial control and responsibility for the
overall profitability, rate of return and growth of the Corporation. The
Plan was adopted by the Board of Directors June 18, 1992 and was amended
and restated June 16, 1997. The plan provides for bonus awards in the form
of cash and/or grants of the Corporation's stock with the following
objectives:
(i) Create incentives for executive actions which enhance long-
term shareholder value;
(ii) Promote executive decisions compatible with longer-term
strategic and performance goals;
(iii) Provide executive compensation at levels sufficient to
attract and retain highly qualified senior executives; and
(iv) Encourage ownership by executives of the Corporation's
Common Stock.
1
<PAGE>
SECTION 2 - DEFINITIONS
- -----------------------
2.0 As used herein, the terms below shall have the following
meanings. Any of these terms, unless the context otherwise
requires, may be used in the singular or plural depending upon
the reference.
2.1 "Accounts Payable" means the accounts payable net of reserves
shown on the books of the Division.
2.2 "Accrued Liabilities" means the accrued liabilities net of
reserves shown on the books of the Division.
2.3 "Actual Incentive Award" means the actual bonus award earned (50%
Cash and 50% in shares of the Company's Common Stock) by a
Participant as long-term incentive compensation for each Plan in
which a Participant participants calculated in the manner
described in Section 6 hereof.
2.4 "Actual Performance Results" means the actual Earnings Per Share
and Return on Total Capital results achieved by the Corporation
during each year of the Performance Period and the actual Growth
in Net Pre-Tax Profit and Return on Total Investment achieved by
each Division during each year of the Performance Period.
2.5 "Base Annual Salary" means the Participant's base annualized
salary for the Participant's Salary Grade in effect on each
respective July 1, and shall not include any pending salary
increases or future salary increases during a Plan's Performance
Period.
2.6 "Board of Directors" means the Board of Directors of the
Corporation as constituted from time to time.
2
<PAGE>
2.7 "Bonus Opportunity" means the Threshold Bonus Opportunity, Target
Bonus Opportunity and Maximum Bonus Opportunity set by the
Committee in relationship to the Performance Goals for each year
of the Performance Period.
2.8 "Committee" means the Compensation Committee of the Board of
Directors charged with administering the Plan. The Compensation
Committee shall be comprised of two (2) or more disinterested
directors of the Corporation, as required by Rule 16b-3(c)(1),
under Section 16 of the Securities Exchange Act of 1934,
appointed from time to time by the Board of Directors, who are
not, and were not at any time within one (1) year prior to
appointment, eligible for selection as Participants in the Plan
or any other program or plan of the Corporation or any of its
affiliates providing for the allocation or granting thereunder of
stock, stock options or stock appreciation rights.
2.9 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
2.10 "Common Stock" means the $1.00 par value common stock of the
Corporation.
2.11 "Consolidated Balance Sheet" means the balance sheet of the
Corporation and its subsidiaries prepared on a consolidated basis
in accordance with generally accepted accounting practices.
2.12 "Consolidated Income Statement" means the income statement of the
Corporation and its subsidiaries prepared on a consolidated basis
in accordance with generally accepted accounting practices.
2.13 "Corporate After-Tax Net Income" means the consolidated after-tax
net
3
<PAGE>
income set forth on the Corporation's Consolidated Balance Sheet
for each year of the Performance Period.
2.14 "Corporation" or "Company" means Thiokol Corporation and its
subsidiaries.
2.15 "Corporation Performance Goals" means the performance goals set
by the Committee for Group A Participants and are comprised of
two components: (i) Earnings Per Share ("EPS") and (ii) Return on
Total Capital ("ROTC") each weighted fifty percent (50%) with
respect to each such goal's relative importance.
2.16 "Debt" means all debt including short-term, long-term, and
capitalized lease obligations shown on the Corporation's
Consolidated Balance Sheet for each year of the Performance
Period.
2.17 "Division" means a distinct measurable, profit center of the
Corporation or any subsidiary, division, or a branch, domestic or
foreign, of the Corporation designated by the Committee as a
division for the purposes of the Plan and may include the
consolidation of other business units.
2.18 "Division Net Pre-Tax Profit" means the net pre-tax profit of the
Division net of all year-end adjustments as reflected in the
Consolidated Income Statement of the Corporation for each year of
the Performance Period.
2.19 "Division Performance Goals" means the performance goals set by
the Committee for Group B Participants and are comprised of two
components: (i) Growth in Net Pre-Tax Profit ("GNP") and (ii)
Return on Total Investment ("ROTI") each weighted fifty percent
(50%) with respect to each such goal's relative importance.
4
<PAGE>
2.20 "Earnings Per Share" means the earnings per share shown on the
Corporation's Consolidated Statement of Income for each year
during the Performance Period.
2.21 "Group A Participant" means those persons designated by the
Committee as Group A Participants.
2.22 "Group B Participant" means those persons designated by the
Committee as Group B Participants.
2.23 "Growth in Net Pre-Tax Profit" ("GNP") means the growth in
Division Net Pre- Tax Profit measured from the base year
beginning on June 30 of the fiscal year preceding the beginning
of each Performance Period and ending June 30 of each Performance
Period as set forth on Exhibit B for Group B Participants.
2.24 "Interest Expense" means the interest expense shown on the
Corporation's Consolidated Statement of Income for each year of
the Performance Period.
2.25 "Market Value" means the average of the high and low price of the
Common Stock as reported on the New York Stock Exchange composite
tape on the day such Market Value is to be determined, or if no
sales were reported that day, then on the next preceding day on
which there were reports of sales of Common Stock on such
Exchange.
2.26 "Maximum Bonus Opportunity" means the maximum Actual Incentive
Award that may be earned by a Participant based upon achievement
of the maximum EPS and ROTC performance goals set forth on
Exhibit A for Group A Participants and the maximum GNP and ROTI
Performance Goals set forth on Exhibit B of Group B Participants.
5
<PAGE>
2.27 "Participant" means persons, selected by the Committee for
participation in this Plan, as either a Group A Participant,
Group B Participant, or a Special Participant, and who has agreed
to participate in this Plan as provided in Section 3, hereof.
2.28 "Performance Goals" means the Corporation Performance Goals and
the Division Performance Goals set by the Committee as the
respective performance goals to be achieved for each year of the
Performance Period.
2.29 "Performance Period" means the three-year period for each of the
Plans established hereunder, unless sooner terminated pursuant to
the provisions hereof.
2.30 "Plan" or "Plans" means respectively the Thiokol Corporation Key
Executive Long-Term Plan and any or all of the three-year Key
Executive Long-Term Plans established by the Committee hereunder.
The first Plan shall be for the period July 1, 1997 through June
30, 2000.
2.31 "Return on Total Capital" ("ROTC") means the ratio the numerator
of which is the Corporate Net Income multiplied by one minus the
Tax Rate plus Interest Expense multiplied by one minus the Tax
Rate and the denominator of which is Stockholder Equity plus all
Debt. ROTC is expressed by the following formula:
ROTC =(Corporate Net Income)(1 - Tax Rate)+(Interest Expense)(1 - Tax Rate)
- ---------------------------------------------------------------------------
Stockholder Equity + Debt
2.32 "Return on Total Investment" ("ROTI") means the ratio the
numerator of which is the Division Net Pre-Tax Profit and the
denominator of which is Total Division Assets minus Accounts
Payable and Accrued Liabilities, net
6
<PAGE>
of adjustments included in the Consolidated Balance Sheet of the
Corporation for each year of the Performance Period. ROTI is
expressed by the following formula:
ROTI =
Division Net Pre-Tax Profit
------------------------------------------------------
Total Division Assets - (Accounts Payable + Accrued Liabilities)
2.33 "Salary Grade" means the salary classification to which a
Participant is assigned by the Committee.
2.34 "Special Participant" means an individual designated by the
Committee as a special participant to receive a bonus opportunity
on such terms and conditions as the Committee determines pursuant
to Section 7.
2.35 "Stockholders Equity" means the Stockholders Equity shown on the
Corporation's Consolidated Balance Sheet for each year of the
Performance Period.
2.36 "Subsidiary" means a corporation, both domestic and foreign, at
least eighty-five percent (85%) of the outstanding voting stock
of which is owned, directly or indirectly, by the Corporation or
subsidiary of the Corporation.
2.37 "Target" means the percentage determined by the Participant's
Salary Grade, as set forth in Table 1 in Section 4 hereof, on
which the Target Incentive Award is calculated.
2.38 "Target Bonus Opportunity" means the Actual Incentive Award that
may be earned by a Participant based on achievement of target EPS
and ROTC performance goals set forth on Exhibit A for Group A
Participants and the Target GNP and ROTI performance goals set
forth on Exhibit B for Group
7
<PAGE>
B Participants.
2.39 "Target Incentive Award" means the value (denominated 50% in Cash
and 50% in shares of the Company Common Stock) of the long-term
incentive compensation bonus opportunity awarded to each
Participant at the beginning of each Performance Period based
upon the Participant's Base Annual Salary, Salary Grade and
corresponding Target at the beginning of the Performance Period.
The number of shares of Company Common Stock shall be determined
by dividing 50% of the dollar value of the Target Incentive Award
by the Market Value of the Company's Common Stock on the date of
the beginning of the Performance Period.
2.40 "Tax Rate" means the effective tax rate as set forth in the Notes
to the Consolidated Financial Statements of the Corporation for
each year of the Performance Period and if not in such Notes, as
declared by the Committee.
2.41 "Threshold Bonus Opportunity" means the minimum Actual Incentive
Award that may be earned by a Participant based on achievement of
the minimum EPS and ROTC performance goals set forth on Exhibit A
for Group A Participants and the minimum GNP and ROTI Performance
Goals set forth on Exhibit B for Group B Participants.
2.42 "Total Division Assets" means the total assets of the Division or
Subsidiary included in the Consolidated Balance Sheet of the
Corporation for each year of the Performance Period.
8
<PAGE>
SECTION 3 - ELIGIBILITY FOR PARTICIPATION
- -----------------------------------------
To be eligible for participation in the Plan, a person must be designated
either a Group A Participant, Group B Participant, or a Special Participant
by the Committee or the Chairman, as the case may be, and agree in writing
to be a participant in the Plan bound by the terms and conditions hereof by
executing a participant acknowledgment. Special Participants shall
participate upon such terms and conditions as the Committee may designate.
SECTION 4 - TARGET INCENTIVE AWARD
- ----------------------------------
The Target Incentive Award for each Participant set at the beginning of
each Performance Period for each Plan shall be based on the Salary Grade
and Target expressed as a percent set forth in Table 1:
===========================================================================
TABLE 1
TARGET INCENTIVE AWARD
===========================================================================
SALARY TARGET
GRADE (PERCENT)
7 100%
- ---------------------------------------------------------------------------
6 95%
- ---------------------------------------------------------------------------
5 85%
- ---------------------------------------------------------------------------
4 75%
- ---------------------------------------------------------------------------
3 65%
===========================================================================
For each Plan, the dollar amount of the Target Incentive Award (denominated
as 50% in Cash and 50% in shares of Company Common Stock) shall equal the
amount of the Participant's Base Annual Salary multiplied by the
corresponding Target, expressed as a percent set forth opposite the
Participant's Salary Grade shown in Table 1. For each Plan, the amount of
the Target Incentive Award for Group A
9
<PAGE>
Participants shall be set forth on Exhibit A and for Group B Participants
set forth on Exhibit B. In its discretion, the Committee or the Chairman,
as the case may be, may adjust a Participants' Target Incentive Award in a
range of plus or minus twenty percent (20%). The Target Incentive Award is
calculated by the following formula:
Target Incentive Award = Base Salary X Target1
SECTION 5 - SETTING THE BONUS OPPORTUNITIES AND PERFORMANCE
- -----------------------------------------------------------
GOALS
- -----
At the beginning of the Performance Period for each Plan, the Committee
shall set the Performance Goals and the Bonus Opportunity for each year of
the Performance Period consisting of the Threshold Bonus Opportunity,
Target Bonus Opportunity and Maximum Bonus Opportunity that must be
achieved by the Actual Performance Results when measured against the
Performance Goals in order for an Actual Incentive Award to be earned by a
Participant. The Performance Goals and Bonus Opportunities shall be set
forth on Exhibit A for Group A Participants and Exhibit B for Group B
Participants. Actual Performance Results shall be recorded on Exhibit A and
Exhibit B for each year of the Performance Period.
SECTION 6 - CALCULATION OF THE VALUE OF THE ACTUAL INCENTIVE AWARD
- ------------------------------------------------------------------
EARNED BY PARTICIPANTS
- ----------------------
The Actual Incentive Award that may be earned by a Participant is expressed
as an percentage of the Target Incentive Award. If the Actual Performance
Results achieved by either the Corporation for Group A Participants or a
Division for Group B Participants meet the Performance Goals set for the
Bonus Opportunity an Actual Incentive Award may be earned.
- --------------------------------
(1)Target expressed as a percent based on Participant's Salary Grade -Table 1
10
<PAGE>
The measurement of the Actual Performance Results achieved against the
Performance Goals is expressed as a percent of the Target Incentive Award
that may be earned as an Actual Incentive Award for each Bonus Opportunity
set forth in Table 2.
===========================================================================
TABLE 2
BONUS OPPORTUNITY
===========================================================================
Actual Performance Achieved Percent of Target Incentive Award
measured against Performance which may be earned as an Actual
Incentive Award
===========================================================================
Below Threshold Bonus
Opportunity 0%
- ---------------------------------------------------------------------------
Threshold Bonus Opportunity 25%
- ---------------------------------------------------------------------------
Target Bonus Opportunity 100%
- ---------------------------------------------------------------------------
Maximum Bonus Opportunity 200%
- ---------------------------------------------------------------------------
For Actual Performance Results between the threshold and maximum bonus
opportunity, linear interpolation, as set forth in Exhibit C, will be used
to compute the Actual Incentive Award.
===========================================================================
The value of the Actual Incentive Award earned by Group A and Group B
Participants is determined by the following formula:
11
<PAGE>
GROUP A PARTICIPANTS
--------------------
Earnings Per Share ("EPS")
--------------------------
Line A
Percent of Target Incentive
Target Incentive Award X 50% X Award which may be earned = $ Award
as an Actual Incentive Award
from Table 2(2)
Plus
----
Return on Total Capital ("ROTC")
--------------------------------
Line B
Percent of Target Incentive
Target Incentive Award X 50% X Award which may be earned = $ Award
as an Actual Incentive Award
from Table 2(3)
EQUALS -------------
------
Total Value of the Actual Incentive Award Earned (Line A + Line B) = $ Award
The value of the Actual Incentive Award that is paid pursuant to Section 9
hereof shall consist of 50% cash and 50% in shares of the Company's Common
Stock. The number of shares of Company Common Stock shall be determined by
dividing 50% of the dollar value of the Actual Incentive Award by the
Market Value of the Company's Common Stock on the date of the beginning of
the Performance Period.
_____________________________________________
(2) Actual EPS performance results measured against the Threshold, Target and
Maximum Bonus opportunity.
(3) Actual ROTC perfromance results measured against the Threshold, Target and
Maximum Bonus opportunity.
12
<PAGE>
GROUP B PARTICIPANTS
- --------------------
Growth in Net Pre-Tax Profits ("GNP")
-------------------------------------
Line A
Percent of Target Incentive
Target Incentive Award X 50% X Award which may be earned = $ Award
as an Actual Incentive Award
from Table 2(4)
Plus
----
Return on Total Investment ("ROTI")
-----------------------------------
Line B
Percent of Target Incentive
Target Incentive Award X 50% X Award which may be earned = $ Award
as an Actual Incentive Award
from Table 2(5)
EQUALS _________________
------
Total Value of the Actual Incentive Award Earned (Line A + Line B) = $ Award
The value of the actual Incentive Award that is paid pursuant to Section 9
hereof shall consist of 50% cash and 50% in shares of the Company's Common
Stock. The number of shares of Company Common Stock shall be determined by
dividing 50% of the dollar value of the Actual Incentive Award by the
Market Value of the Company's Common Stock on the date of the beginning of
the Performance Period.
_______________________________________
(4) Actual GNP perfromance results measured against the Threshold, Target and
Maximum Bonus opportunity.
(5) Actual ROTI performance results measured against the Threshold, Target and
Maximum Bonux opportunity.
13
<PAGE>
The maximum Actual Incentive Award earned by a Participant in the Plan
shall not exceed two-hundred percent (200%) of the Participants' Target
Incentive Award. If the threshold Bonus Opportunity is not achieved by
Actual Performance Results then no Actual Incentive Award shall be paid for
such component of the Performance Goal not achieved.
SECTION 7 - SPECIAL PARTICIPANTS AND GRANDFATHER PARTICIPANTS
- -------------------------------------------------------------
The Committee may designate Special Participants for Plan participation on
terms and conditions as may be determined from time to time by the
Committee. Such individuals designated as Special Participants shall be
Participants upon agreeing in writing to the terms and conditions set by
the Committee for such participation. The Actual Incentive Award shall be
calculated based on the terms and conditions of participation set by the
Committee.
The Committee may designate certain participants as Special Participants
under this Plan who shall participate on the terms and conditions of the
Plan in effect on the date prior to the Plan's June 16, 1997 Amendment and
Restatement ("Grandfather Participants"). Such Grandfather Participants
shall participate on the terms of the Plan effective June 18, 1992. The
terms and conditions for such Grandfather Participants are incorporated
herein by reference.
SECTION 8 - COMPENSATION NATURE OF THE TARGET INCENTIVE AWARD
- -------------------------------------------------------------
AND ACTUAL INCENTIVE AWARD
- --------------------------
The Target Incentive Award granted to a Participant at the beginning of
each Plan, as long-term incentive compensation, is contingent compensation.
It is only payable to the Participant at the end of the Performance Period
for each Plan in the amount of the Actual Incentive Award if it is earned.
14
<PAGE>
No Actual Incentive Award is payable under this Plan for a Participant
terminated for Cause. For the purpose of this Plan forfeiture, "Cause"
means (i) a material breach by the Participant of his job duties and
obligations (other than as the result of an incapacity due to physical or
mental illness) which is demonstrably willful and deliberate on the
Participant's part, which is committed in bad faith or without reasonable
belief that such breach is the best interests of the Corporation and which
is not remedied in a reasonable period of time after receipt of notice from
the Corporation or (ii) the conviction of the Participant of a felony
involving moral turpitude.
SECTION 9 - METHOD OF PAYMENT OF THE ACTUAL INCENTIVE AWARD
- -----------------------------------------------------------
At the end of the Plan Period, the Actual Incentive Award earned by a
Participant shall be paid in two parts: (i) cash and (ii) shares of Company
Common Stock.
Cash Award:
The amount of the Cash Award shall be determined before adjustment for tax
withholding by multiplying the total value of the Actual Incentive Award
Earned by 50%.
Common Stock Award:
The number of shares of Company Common Stock comprising the stock award
shall be determined by dividing 50% of the value of the Actual Incentive
Award earned by the Market Value of the Company's Common Stock on the date
of the beginning of the Performance Period.
SECTION 10 - COMMON STOCK AWARD UNDER THE PLAN
- ----------------------------------------------
The Common Stock awarded to Participants under the Plan shall be made from
the
15
<PAGE>
Common Stock authorized under the Corporation's 1989 and 1996 Stock Awards
Plans ("Stock Awards Plan") as amended from time to time and the terms,
conditions and restrictions thereunder. The shares of the Common Stock
shall be contingently awarded to Participants at the beginning of each Plan
Period. Such contingency shall lapse when the Actual Incentive Award is
earned at the end of each Performance Period. Participants shall bear the
risk of loss and recognize any gain or loss of Market Value of the Company
Common Stock during the contingency period. Participants by participating
in this Plan waive and shall have no claim against the Company and the
Company shall have no liability or obligation to Participants with respect
to changing Market Value of the Company's Common Stock including without
limitation any loss in market value caused by delay in delivery of Common
Stock or loss sustained by nontransferability or other restriction on
transferability imposed by the Company under this Plan, the Stock Awards
Plan or federal or state securities laws. The Company reserves the right to
hold the Common Stock awarded for the benefit of the Participant for a
period of six months and one day from the end of the Performance Period for
each Plan before delivery of the certificates of the Common Stock to
Participants. Participants in whose name such Common Stock shall be
registered during the restriction period shall be entitled to vote such
shares, to receive such cash and other distributions declared payable to
stockholders of record during the restriction period. The Company reserves
the right to place such restrictive legends on the shares of Common Stock
issued to Participants as the Company deems necessary for compliance with
Federal and State Securities laws. No Participant shall sell or otherwise
transfer, assign, pledge, hypothecate, encumber, sell short or otherwise
dispose of such shares of Common Stock during such restriction period.
Within thirty (30) days of the lapse of the restriction period the
Corporation will deliver the certificate of Common Stock to Participants
conditioned upon the Corporation's receipt of a written undertaking by the
Participant with respect to compliance with the federal and state
securities laws. Such Common Stock shall be subject to the requirements and
the limitations on distribution imposed by the Requirements of the
16
<PAGE>
Securities Act of 1933, Rule 16(b) of the Securities and Exchange Act of
1934 and the exemption from registration requirements under Rule 144 of the
Securities and Exchange Commission. The delivery of such Common Stock to
Participants under the terms of this Plan shall not in any manner obligate
the Corporation to file any registration statement with the Securities and
Exchange Commission or require the Corporation to supplement or amend any
registration statement which the Corporation may have on file with the
Securities and Exchange Commission. The Committee may suspend delivery of
any certificates of Common Stock to Participants, so long as the Committee
determines that securities exchange listings or registrations or
qualifications under any Securities Law is required in connection therewith
and has not been completed on terms acceptable to the Committee.
The number of shares of Common Stock contingently granted under the Plan
shall be adjusted to reflect any stock split, stock dividend or any other
changes in the Company's Common Stock during the Performance Period. No
dividend will be paid on the Common Stock until the first record date that
such Common Stock is registered in the name of the Participant on the stock
book of the Company.
SECTION 11 - TAX WITHHOLDING FROM THE CASH AWARD AND COMMON STOCK
- -----------------------------------------------------------------
From the cash portion of the Actual Incentive Award payment, the
Corporation shall withhold all applicable federal, state, and local income
tax and other amounts required by law ("withholding obligations") to be
withheld based on the total value of the Actual Incentive Award payable to
a Participant. The net proceeds of the cash payment portion of the Actual
Incentive Award shall be payable within sixty (60) days subsequent to the
end of the Performance Period of each Plan.
In the event that the cash portion of the Actual Incentive Award is not
sufficient to satisfy the withholding obligation, shares of Common Stock
may be used to satisfy such
17
<PAGE>
withholding obligation in a manner prescribed by the Committee. At the
Participant's election, to the extent permitted by the Federal and State
Income Tax laws, such withholding obligation may be satisfied by a
Participant making payment to the Company before the date such withholding
obligation is due for deposit by the Company with Federal and State tax
authorities and before the Company transfers the Common Stock to the
Participant.
SECTION 12 - TERMINATION OF EMPLOYMENT, CROSS TRANSFER,
- -------------------------------------------------------
PROMOTION AND DEMOTION
- ----------------------
12.1 In the event a Participant terminates employment either
voluntarily or involuntarily other than by retirement under the
terms of the Corporation's retirement program, death or permanent
disability prior to the end of the Performance Period for each
such Plan in which the Participant is participating, the
Participant shall receive no Actual Incentive Award.
12.2 In the event the Participant terminates employment due to death,
permanent disability or retirement either an early, normal or
late retirement under the terms of the Corporation's retirement
program, the Participant shall be eligible to receive a pro rata
award for each Plan in which the Participant is participating at
the date of such termination, based on the number of years and
fractional years, computed to the nearest one-twelfth of a year,
completed in each such Plan bears to the years remaining to be
completed in each such Plan. Such pro rata amount of the Actual
Incentive Award for each such Plan shall be paid following the
end of the Plan Period in the manner described in Section 9,
Section 10, and Section 11. For the purposes of this Plan, a
Participant shall be considered permanently disabled on the date
that such Participant qualifies for long-term disability payments
under the Corporation's long-term disability program.
18
<PAGE>
12.3 In the event a Participant is cross-transferred to another
Division or to another position within the Corporation at the
same Salary Grade, the Participant will continue participating in
each Plan in which participating on the effective date of such
cross-transfer and the Participant shall become an active
Participant in the Plan for the Division or the location within
the Corporation to which the Participant is transferred on the
date of the next Plan. At the end of the Performance Period for
each such Plan in which the Participant was participating at the
date of such cross-transfer, the Participant shall receive an
Actual Incentive Award based on the Target Bonus Opportunity,
Performance Goals and Actual Performance Results for each such
Plan. For each such Plan in which the Participant becomes an
active Participant as the result of the cross-transfer, at the
end of the Performance Period for each such Plan, the Participant
shall receive an Actual Incentive Award based on the Target Bonus
Opportunity, Performance Goals and Actual Performance Results for
each such Plan.
12.4 In the event a Participant is promoted to a new Salary Grade, the
Participant's participation in each Plan in which participating
shall continue on the effective date of such promotion and the
Participant shall become an active Participant at the new Salary
Grade in the Plan for the Division or the location within the
Corporation to which the Participant is promoted on the date of
the next Plan. At the end of the Performance Period for each such
Plan in which the Participant was participating at the date of
such promotion, the Participant shall receive an Actual Incentive
Award based on the Target Bonus Opportunity, Performance Goals
and Actual Performance Results for each such plan. For each such
Plan in which the Participant becomes an active participant as
the result of the promotion, at the end of the Performance Period
for each such Plan, the Participant shall receive an Actual
Incentive Award based on the Target Bonus Opportunity,
Performance Goals and Actual Performance Results for each such
Plan.
19
<PAGE>
12.5 In the event of a demotion to a lower Salary Grade the
Participant will continue participating in each such Plan as of
the date of such demotion and shall become an active Participant
on the date of the next Plan in effect at the new Salary Grade
for the Division or location within the Corporation as a result
of such demotion. The Participant shall receive the Actual
Incentive Award for each of the Plans in which the Participant
was participating prior and subsequent to the demotion in Salary
Grade determined in the same manner as for promotions described
in the immediately preceding paragraph.
SECTION 13 - DEFERRAL OF ACTUAL INCENTIVE AWARDS
- ------------------------------------------------
At the Committee's discretion and not as an obligation, the Committee may
provide that a Participant may irrevocably elect to defer the payment of
the Actual Incentive Award for the Plan for which the election to defer was
made. Such deferral will be for such period of time as the Committee may
determine.
Such election must be in writing and delivered to the Committee prior to
January 1 of the year for which each such Plan begins. Deferred amounts
will be subject to such terms and conditions and shall accrue such earnings
thereon as the Committee may determine. Payment of deferred amounts may be
in cash, common stock or a combination thereof, as the Committee may
determine. Deferred amounts shall be considered an award under the Plan.
The Committee may establish a trust to hold deferred amounts or any portion
thereof for the benefit of Participants. All such amounts deferred by
Participants shall be subject to the general claims of creditors of this
Corporation and such amounts when paid pursuant to the terms of this Plan
shall be from the general assets of the Corporation. Neither the
Participant nor the Participant's designated beneficiary shall have any
specified claim on any assets of this Corporation.
20
<PAGE>
SECTION 14 - CHANGE IN CONTROL
- ------------------------------
In the event of a Change of Control of the Company as hereinafter defined
below in this Section 14, not withstanding any other provision of this Plan
to the contrary the greater of either of (i) the Target Incentive Award, or
(ii) the Actual Incentive Award earned for each Plan in which a Participant
participates, shall become irrevocably due and payable to Participants in
cash as of the date of such Change of Control. Payment shall be made to
Participants not later than thirty days after the date of such change in
control otherwise made pursuant to the terms of a Change of Control
Agreement between the Company and the Participant. In the event there is a
conflict between this Plan and the terms and conditions of a Participant's
Change in Control Agreement with the Corporation, as the case may be, the
terms and conditions of the Change of Control Agreement shall govern to the
extent there is a conflict with the terms of the Plan.
For the purposes of this agreement, a "Change of Control" 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 Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
15% or more of either (i) the then outstanding shares of Common Stock of
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"): provided, however, that the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by a corporation pursuant
21
<PAGE>
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) of this Section 14 are
satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board)) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's stockholders, 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-1 1 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 stockholders of the Company of a reorganization,
merge, consolidation in each case, unless, following such reorganization,
merger or consolidation, (i) more than 60% 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 Company
Common Stock and Outstanding Company 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, or the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no person
(excluding the Company, any employee benefit plan (or related trust) of the
Company or such corporation resulting from such reorganization,
22
<PAGE>
merger or consolidation and any person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 15% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 15% 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 stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% 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 Company
Common Stock and Outstanding Company 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 Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no person (excluding the Company and
any employee benefit plan (related trust) of the Company or such
corporation and any person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly, 15% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, 15% or more
of, respectively, the then outstanding shares of
23
<PAGE>
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 Company.
SECTION 15 - ADMINISTRATION AND MODIFICATION OF THE PLAN
- --------------------------------------------------------
15.1 The Plan shall be administered by the Committee. The Committee
shall have plenary authority, subject to the express provisions
hereof, to resolve any questions arising under the Plan; to
correct any defect or supply an omission or reconcile any
inconsistency in any of the Plans; to establish, amend and
rescind any rules and regulations relating to any of the Plans
and to make all other determinations necessary or advisable for
the administration and continued successful operation of the
Plan. The Committee will have discretion at any time, or from
time to time, to accelerate the time at which and the extent to
which any Actual Incentive Award under any Plan may be payable to
Participants. Any decision of the Committee in the administration
of the Plan, as described herein, shall be final and conclusive,
except as provided in Section 16 hereof. The Committee shall act
only by a majority of its members then in office and its actions
shall be recorded in the minutes of the Committee meetings which
shall be conclusive of all such actions taken. The Committee may,
to the extent that any such action will not prevent the Plan from
complying with Rule 16-b, delegate any of its authority,
hereunder to such persons as it deems appropriate.
The Committee shall have the right but not an obligation to
modify any Plans in which a Participant is participating and to
adjust Performance Goals
24
<PAGE>
or the Target Bonus Opportunity to reflect non-recurring
financial changes, including but not limited to earnings per
share or changes in business structure or organization including
by way of illustration and not as a limitation changes in
accounting methods or requirements; accounting adjustments not in
the usual and ordinary course of business resulting in an
non-recurring charges or additions in income, assets, liabilities
or stockholders equity; tax rates; and Corporate reorganizations
including: recapitalization, mergers, acquisitions, divestitures
and spin-offs.
Unless otherwise amended by resolution of the Committee, the
Chairman shall have the power to act on behalf of the Committee
with respect to individuals Salary Grade 3 and below under this
Plan to (i) select Participants and designate such Participants
as Group A or Group B Participants, (ii) set the Salary Grade and
Base Annual Salary for each such Participant, and (iii) set the
Target Bonus Opportunities for such Participants.
SECTION 16 - AMENDMENT OR TERMINATION OF PLAN AND DURATION OF
- -------------------------------------------------------------
PLAN
- ----
16.1 Subject to the provisions of subsection 16.2 below, the
Compensation Committee shall have the right at any time, from
time to time, without notice to Participants to suspend,
discontinue or amend this Plan in any respect whatsoever, except
(i) administration of the Plan cannot be removed from the
Compensation Committee and (ii) no person shall be eligible for
membership who shall not qualify as a disinterested director of
the Corporation as required by Rule 16b-3(C)(1) under Section 16
of the Securities Exchange Act of 1934.
16.2 Upon termination or discontinuance of the Plan, each
Participant's rights will
25
<PAGE>
be determined as of the date of termination by pro-rating all
Performance Periods for each Plan in which the Participant
participates on the date of termination for such Plans, such
Participants shall receive a pro-rata amount of the Actual
Incentive Award for the Performance Period for each such Plan
completed as of the date of the termination. Payment of such
amount shall be in the manner provided in the Plan.
16.3 The Plan shall continue in effect until the date of occurrence of
the earliest event (i) termination of the Plan by the
Compensation Committee or (ii) termination of the Corporation's
1996 Stock Awards Plan as amended with respect to the payment of
awards in Common Stock.
SECTION 17 - PLAN NOT A CONTRACT OF EMPLOYMENT
- ----------------------------------------------
Neither this Plan, nor participation in it, shall be construed in any
manner as a contract of employment either expressed or implied. Nothing in
the Plan shall interfere with or limit in any way the right of the
Corporation to terminate any Participant's employment at any time, nor
confer upon any Participant any right to continue in the employ of the
Corporation for any period of time or to continue a Participant's 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.
SECTION 18 - NON-ASSIGNABILITY OF RIGHTS
- ----------------------------------------
No Participant's interest in any Plan in which such Participant
participates may be sold, assigned, transferred, hypothecated, pledged, or
otherwise disposed of by a Participant prior to the actual receipt of such
payment except by Will, the laws of decent and distribution or a qualified
domestic relations order as defined by the Employee Retirement Income
Security Act of 1974. Participants may name, from time to time,
beneficiaries (who may be named contingently or successively) to whom
26
<PAGE>
benefits under any Plan in which a Participant participates 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.
Except as otherwise permitted by action taken by the Committee, the rights
of any Participant under any Plan in which the Participant participates
will immediately terminate if such Participant: (i) attempts to, or does
sell or assign, transfer, hypothecate, pledge or otherwise dispose of any
right hereunder prior to the right receive payment except as permitted
above or (ii) becomes insolvent or bankrupt, or becomes involved in any
matter which in the opinion of the Committee might result in a
Participant's rights under this Plan or Plans being taken to satisfy the
Participant's debts or liabilities.
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 16th day of June 1997.
/s/ James R. Wilson
By:______________________________
Chairman of the Board, President
and Chief Executive Officer
-Seal-
ATTESTED:
/s/ Edwin M. North
By:______________________________
Secretary
27
<PAGE>
EXHIBIT A
(Logo)
_______________
Plan Year
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN EXHIBIT A
(Covering Fiscal years ____, ____,____)
CORPORATE - Performance Objectives for:
Name_____________________ Title________________________Unit__________________
TARGET INCENTIVE AWARD
Base Salary @ Beginning of performance Period:_________________
Target Award percentage ____________% Target Incentive Award:_____________
Adjusted Target Incentive Award:______________________________
INCENTIVE OPPORTUNITY
At Threshold (25% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock)
At Target (100% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock)
At Maximum (200% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock)
_____________________
*TKC Stock @ $______
EPS GROWTH
Base Year: GOAL BY YEAR (000's) ACTUALS BY YEAR (000's)
FY_______
$___ (EPS) 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL
Threshold ___ ___ ___ ____ ___ ___ ___ _____
Target ____ ____ ____ ____
Maximum ____ ____ ____ ____
RETURN ON TOTAL CAPITAL (ROTC)
Base Year: GOAL BY YEAR (000's) ACTUALS BY YEAR (000's)
FY_______
________%ROTC 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL
Threshold ____ ____ ____ _____ ____ ____ ____ _____
Target ____ ____ ____ ____
Maximum ____ ____ ____ ____
28
<PAGE>
EXHIBIT B
(Logo)
_______________
Plan Year
KEY EXECUTIVE LONG-TERM INCENTIVE PLAN EXHIBIT A
(Covering Fiscal years ____, ____,____)
OPERATING UNIT - Performance Objectives for:
Name_____________________ Title________________________Unit__________________
TARGET INCENTIVE AWARD
Base Salary @ Beginning of performance Period:_________________
Target Award percentage ____________% Target Incentive Award:_____________
Adjusted Target Incentive Award:______________________________
INCENTIVE OPPORTUNITY
At Threshold (25% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock)
At Target (100% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock)
At Maximum (200% of Adjusted Target Incentive Award)_____(Cash) ____*(Stock)
_____________________
*TKC Stock @ $______
PROFIT GROWTH
Base Year: GOAL BY YEAR (000's) ACTUALS BY YEAR (000's)
FY_______
$___ (EPS) 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL
Threshold ___ ___ ___ ____ ___ ___ ___ _____
Target ____ ____ ____ ____
Maximum ____ ____ ____ ____
RETURN ON TOTAL INVESTMENT (ROTI)
Base Year: GOAL BY YEAR (000's) ACTUALS BY YEAR (000's)
FY_______
________%ROTC 1st 2nd 3rd TOTAL 1st 2nd 3rd TOTAL
Threshold ____ ____ ____ _____ ____ ____ ____ _____
Target ____ ____ ____ ____
Maximum ____ ____ ____ ____
29
<PAGE>
EXHIBIT C
LINEAR INTERPOLATION CHART
The Committee or its designee shall prepare for each Plan the linear
interpolation charts for each table set forth in the Plan. Such linear
interpolation charts for each Plan shall be filed with the Plan and become
an integral part hereof.
30
HUCK INTERNATIONAL, INC.
EXCESS BENEFIT PLAN FOR SELECTED EMPLOYEES
(Effective November 1, 1991)
(Amended and Restated Effective June 16, 1997)
<PAGE>
Table of Contents
Section Page
1 - PURPOSE OF PLAN.............................................. 3
2 - ESTABLISHMENT OF PLAN........................................ 3
3 - DEFINITIONS.................................................. 3
4 - ELIGIBILITY FOR PARTICIPATION................................ 4
5 - BENEFITS..................................................... 4
6 - DEATH........................................................ 6
7 - INCOME TAX WITHHOLDING....................................... 6
8 - NO REQUIREMENT TO FUND....................................... 6
9 - ADMINISTRATION OF PLAN....................................... 7
10 - LIMITATION OF PARTICIPANT'S RIGHTS........................... 7
11 - AMENDMENT OR TERMINATION OF PLAN............................. 8
12 - SPENDTHRIFT CLAUSE........................................... 8
13 - PAYMENT DUE AN INCOMPETENT................................... 8
14 - CONSTRUCTION................................................. 8
15 - SEVERABILITY.......................-......................... 9
16 - GOVERNING LAW................................................ 9
2
<PAGE>
HUCK INTERNATIONAL, INC.
EXCESS BENEFIT PLAN
FOR SELECTED EMPLOYEES
SECTION 1 - PURPOSE OF PLAN
The Huck International, Inc. Excess Benefit Plan for Selected Employees has
been established to supplement the retirement benefits of certain key
Employees who participate in the Huck International, Inc. Personal
Retirement Account Plan ("PRA"), a tax-qualified retirement plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended, by
expanding the compensation on which benefits are calculated, by providing a
higher contribution rate than the PRA, and by providing benefits that
cannot be paid by the PRA on account of limitations in the Internal Revenue
Code.
SECTION 2 - ESTABLISHMENT OF PLAN
Effective November 1, 1991, Huck International, Inc., a wholly owned
subsidiary of Thiokol Corporation, adopted the Huck International, Inc.
Excess Benefit Plan for Selected Employees . This Plan is amended and
restated effective June 16, 1997.
SECTION 3 - DEFINITIONS
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Thiokol Corporation Plan Administration Committee.
"Effective Date" means November 1, 1991.
"Employee" means an employee of Huck International, Inc.
"Employer" means Huck International, Inc.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Participant" means a key Employee of the Employer selected as a
Participant by the Committee as described in Section 4.
"Plan" means the Huck International, Inc. Excess Benefit Plan for Selected
Employees.
"Plan Compensation" means the employee's base salary (without regard to any
salary reduction agreements under Code Sections 401(k) or 125), plus any
amount awarded to the employee under one of Thiokol Corporation's executive
bonus plans, other than
3
<PAGE>
the long-term incentive program and stock options exercised and paid during
the Plan Year, and the Huck International, Inc. Profit Sharing Incentive
Plan.
"Plan Year" means the 12-month period ending December 31.
"PRA" means the Huck International, Inc. Personal Retirement Account Plan.
"Prior Plan" means the Federal-Mogul Corporation Supplemental Executive
Retirement Plan.
Terms not defined herein shall be construed in reference to the same or
similar terms as used in the PRA.
SECTION 4 - ELIGIBILITY FOR PARTICIPATION
Effective June 16, 1997, new Participants in the Plan must be eligible to
participate in the PRA and be a key Employee of the Employer designated by
the Committee as a Participant.
Prior to June 16, 1997 the Employees listed on Appendix A were Participants
in the Plan and continue to be eligible to participate in the Plan so long
as they are active Employees of the Employer.
Employees who participated in the Prior Plan on November 1, 1991 had the
value of their accrued benefit in the Prior Plan transferred to this Plan
as of the Effective Date, if they were still employed by the Employer on
the Effective Date.
SECTION 5 - BENEFITS
5.1 Benefits formula
A separate unfunded book account is maintained for each Participant. A
Participant's accrued benefit under the Plan is equal to the
Participant's account balance. A Participant's account balance will
equal the sum of the amounts in subsections (i), (ii), and (iii), and
reduced by the amount in subsection (iv).
(i) As of the Effective Date, an amount shall be credited to the
Participant's account equal to the accrued benefit, if any, of
the Participant in the Prior Plan plus interest for the period
from November 1, 1991 to the Effective Date at the rate that was
in effect under the Prior Plan on November 1, 1991.
(ii) As of the last day of each calendar month of active Participation
under the PRA, the following amount shall be credited to the
Participant's account:
4
<PAGE>
(a) 2-1/2 percent of Plan Compensation received by the Participant
for each such calendar month which ends prior to his attainment
of age 30;
(b) 3-3/4 percent of Plan Compensation received by the Participant
for each such calendar month which ends prior to his attainment
of age 40 but subsequent to his attainment of age 30;
(c) 5 percent of Plan Compensation received by the Participant
for each such calendar month which ends prior to his attainment
of age 50 but subsequent to his attainment of age 40;
(d) 7-1/2 percent of Plan Compensation received by the Participant
for each such calendar month which ends prior to his attainment
of age 60 but subsequent to his attainment of age 50; and
(e) 10 percent of Plan Compensation received by the Participant
for each such calendar month subsequent to his attainment of age
60.
(iii)Until January 1, 1997 a Participant's account balance shall
receive a credit as of the last day of each calendar month equal
to the product of (1) the interest rate used by the PBGC to value
lump sum benefits for plans terminating as of the first day of
the Plan Year, compounded monthly at a simple annual rate and (2)
the Participant's account balance as of the last day of the
calendar month. After January 1, 1997 a Participant's account
balance shall receive a credit as of the last day of each
calendar month equal to the product of the average yield on
1-year Treasury Constant Maturities for November of the preceding
Plan Year plus 100 basis points and (2) the Participant's account
balance as of the last day of the calendar month.
(iv) A Participant's account balance shall be reduced by the account
balance payable under the PRA (after taking into account the
limitations imposed by Code Section 415).
5.2 Vesting and Forfeiture
The vested percentage of a Participant's benefit under this Plan
shall be equal to the vested percentage of the Participant's
accrued benefit under the PRA; however, a Participant shall
forfeit all benefits under the Plan if --
(i) the Participant engages in a willful, deliberate, or gross
act of commission or omission which is injurious to the
finances or reputation of the Employer or any of its
affiliates;
5
<PAGE>
(ii) prior to age 65, the Participant serves as a director,
officer, partner, employee, consultant, agent, or
representative of any business entity which sells any
product or service in direct competition with any product or
service sold by the Employer or any affiliate; or
(iii) the Participant breaches any agreement with the Employer.
In the event a Participant voluntarily terminates employment with
the Employer, any benefits under this plan, unless vested under
the vesting provisions of this Plan at the time the Employee
terminates, shall be forfeited, and the Participant shall receive
no benefits.
5.4 Payment of Benefits
A Participant's entire account balance will be distributed in the
form of a lump sum payment at the same time a Participant elects
under the terms of the PRA to receive the first PRA benefit
payment. In no event shall a benefit be payable to a Participant
in a month the Participant receives Plan Compensation from the
Employer.
SECTION 6 - DEATH
If a married Participant dies before his account balance is distributed to
him, his account balance shall be 100% vested on the date of his death and
the entire account balance shall be payable to his spouse at the same time
the spouse elects under the terms of the PRA to receive the first PRA
benefit payment. If an unmarried Participant dies before his annuity
starting date, the vested portion of his account balance shall be paid to
his estate or beneficiary, as appropriate.
SECTION 7 - INCOME TAX WITHHOLDING
The Employer shall deduct from all payments under this Plan the amount of
any applicable income and employment tax withholding requirements.
SECTION 8 - NO REQUIREMENT TO FUND
The entire cost of providing benefits under the Plan shall be paid by the
Employer out of its current operations, and the Employer's obligations
under the Plan shall be an unfunded and unsecured promise to pay. The
Employer shall not be obligated under any circumstances to fund its
obligations under the Plan. No contributions by Participants are required
or permitted under the Plan.
6
<PAGE>
SECTION 9 - ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
plenary authority, subject to the express provisions hereof, to select
Employees eligible to participate in the Plan; resolve any questions
arising under the Plan; to correct any defect or supply an omission or
reconcile any inconsistency; to establish amend and rescind any rules and
regulations relating to the Plan and to make all other determinations
necessary or advisable for the administration and continued successful
operation of the Plan. Any decision of the Committee in the administration
of the Plan, as described herein, shall be final and conclusive. The
Committee shall act only by a majority of its members then in office and
its actions shall be recorded in minutes of the Committee meetings which
shall be conclusive of all such actions taken. The Committee shall have the
right to delegate such Plan administration as it shall determine to the
Chairman or Chairman's designee.
SECTION 10 - LIMITATION OF PARTICIPANT'S RIGHTS
10.1 Plan not a Contract of Employment
Neither this Plan, nor participation in it, shall be construed in
any manner as a contract of continuing employment with the
Corporation either expressed or implied. Nothing in the Plan
shall interfere with or limit in any way the right of the
Corporation to terminate any Participant's employment at any
time, or confer upon any Participant any right to continue in the
employ of the Corporation for any period of time or to continue a
Participant's 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.
10.2 Unsecured Creditor
The rights of any Participant or any person claiming through the
Participant under the Plan shall be solely those of an unsecured
general creditor of the Employer. Any Participant, or any person
claiming through the Participant, shall only have the right to
receive from the Employer those payments as specified in this
Plan. Each Participant agrees that he or any person claiming
through him shall have no rights or interests in any assets of
the Employer.
10.3 No Trust
No asset used or acquired by the Employer in connection with the
liabilities it has assumed under the Plan shall be deemed to be
held under any trust for the benefit of any Participant. Nor
shall any such asset be considered security for the performance
of the obligations of the Employer, but shall be, and remain, a
general unpledged and unrestricted asset of the Employer, except
as provided by separate agreement and as permitted under Internal
Revenue Service and
7
<PAGE>
Department of Labor rules and regulations for unfunded
supplemental retirement plans.
10.4 Plan Binding
The Plan is binding on the beneficiaries, executor, and
administrator of the Participant, and upon the successors (by
sale or otherwise) of the Company who succeed to substantially
all the assets and the business of the Company.
SECTION 11 - AMENDMENT OR TERMINATION
Subject to the provisions of this Section 11, the Committee shall have the
right at any time, from time-to-time, with notice to Participants to
suspend, discontinue or amend this Plan in any respect whatsoever. No such
amendment or termination shall reduce or otherwise affect the benefits
payable to or on behalf of any Participant that have accrued prior to such
amendment or termination without the written consent of the Participant (or
beneficiary, if applicable). In addition, the complete or partial
termination of this Plan shall have the same effect on the vesting of
benefits accrued to date under this Plan as in the case of a complete or
partial termination of the PRA.
SECTION 12 - SPENDTHRIFT CLAUSE
No right, title or interest of any kind in the Plan shall be transferable
or assignable by any Participant or Surviving Spouse or be subject to
alienation, anticipation, encumbrance, garnishment, attachment, execution
or levy of any kind, whether voluntary or involuntary, nor subject to the
debts, contracts, liabilities, engagements, or torts of the Participant or
Surviving Spouse. Any attempt to alienate, anticipate, encumber, sell,
transfer, assign, pledge, garnish, attach or otherwise subject to legal or
equitable process or encumber or dispose of any interest in the Plan shall
be void.
SECTION 13 - PAYMENT DUE AN INCOMPETENT
If the Plan Administration Committee receives evidence that a Participant
or Surviving Spouse entitled to receive any payment under the Plan is
physically or mentally incompetent to receive such payment, the Committee
may, in its sole discretion, direct the payment to any other person or
trust which has been legally appointed by the courts.
SECTION 14 - CONSTRUCTION
Whenever appropriate, words used in the singular shall include the plural
or the plural may be read as the singular. When used herein, the masculine
gender includes the feminine gender.
8
<PAGE>
SECTION 15 - SEVERABILITY
In the event that any provision of this Plan shall be declared illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan but shall be fully severable and this
Plan shall be construed and enforced as if said illegal or invalid
provision had never been inserted herein.
SECTION 16 - GOVERNING LAW
The validity and effect of this Plan and the rights and obligations of all
persons affected hereby shall be construed and determined in accordance
with the laws of the State of Utah unless superseded by federal law.
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 16th day of June, 1997.
/s/ Bruce M. Zorich
By: ___________________________
President
~ Seal ~
ATTESTED:
/s/ Edwin M. North
By: ___________________________
Secretary
THIOKOL CORPORATION
G R A N T A G R E E M E N T
Incentive Stock Option
Amended and Restated June 16, 1997
AGREEMENT, made this 26th day of August 1997 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 - Date of Grant
- ----------- ---------------
"Date of Grant" shall mean the date on which the Board grants the
option hereunder and from which the Anniversary Date set forth in the
Vesting Schedule shall be determined.
Section 1.8 - Exchange Act
- --------------------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.9 - Option
- --------------------
"Option" shall mean the incentive stock option to purchase Common
Stock of the Company granted under this Agreement.
Section 1.10 - Plan
- -------------------
"Plan" shall mean the Thiokol Corporation 1996 Stock Awards Plan.
Section 1.11 - Rule 16b-3
- -------------------------
2
<PAGE>
"Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended in the future.
Section 1.12 - 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, spin-off, 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 optionees' 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 (vested) as follows:
OPTION VESTING
SCHEDULE
First Business Day Following the Portion of the Option Become Exercisable
Anniversary Date from Date of Grant (Vested) on Such Anniversary Date
- ----------------------------------- ---------------------------------
One year from date of grant 33.3 percent
Two years from date of grant 66.6 percent
Three years from date of grant 100.0 percent
No fractional share of a vested option is exercisable until such
anniversary date from the date of grant as the remainder of such fractional
share becomes exercisable.
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) Subject to the exception for retirement set forth in Section
3.3(b), no portion of the Option (including any portion of the Option not
yet vested under Section 3.1(a) 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(a), 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 (or any portion of the Option not yet vested under
Section 3.1(a) as the case may be) 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
4
<PAGE>
(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 (b), 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. Any portion of the Option not yet vested at the Employee's Date of
Retirement will automatically vest with the passage of time (as if the
retired employee had remained actively employed) pursuant to the Option
Vesting Schedule set forth in Section 3.(a) so long as the Employee is
alive.
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 or any
portion of such Option has not yet vested under Section 3.1(a), Employee's
Option shall become immediately and fully vested and 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
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<PAGE>
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 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,
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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 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
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<PAGE>
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 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 (AQDRO@).
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 that any
portion of the Option described in the Vesting Schedule set forth in
Section 3.1(a) becomes exercisable pursuant to Section 3.1(a) 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
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<PAGE>
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.
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
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<PAGE>
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
(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
10
<PAGE>
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.
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
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<PAGE>
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 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
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<PAGE>
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, 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 21st day of August 1997.
THIOKOL CORPORATION EMPLOYEE
By: ______________________________ By: _______________________
Corporate Secretary
THIOKOL CORPORATION
G R A N T A G R E E M E N T
Nonqualified Stock Option
Amended and Restated June 16, 1997
AGREEMENT, made this 21st day of August 1997 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
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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.
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 - Date of Grant
"Date of Grant" shall mean the date on which the Board grants the
option hereunder and from which the Anniversary Date set forth in the
Vesting Schedule shall be determined.
Section 1.8 - Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
Section 1.9 - Option
"Option" shall mean the nonqualified stock option to purchase
Common Stock of the Company granted under this Agreement.
Section 1.10- Plan
"Plan" shall mean the Thiokol Corporation 1996 Stock Awards Plan.
Section 1.11 - 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.
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Section 1.12 - 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, 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, spin-off, 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
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(a) Subject to subsection (b) and Section 3.4, the Option shall
become exercisable (vested) as follows:
OPTION VESTING
SCHEDULE
First Business Day Following the Portion of the Option Become Exercisable
Anniversary Date from the Date of Grant (Vested) on Such Anniversary Date
- -------------------------------------- ---------------------------------
One year from date of grant 33.3 percent
Two years from date of grant 66.6 percent
Three years from date of grant 100.0 percent
No fractional share of a vested option is exercisable until such
anniversary date from the date of grant as the remainder of such fractional
share becomes exercisable.
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) Subject to the exception for retirement set forth in Section
3.3(b), no portion of the Option (including any portion of the Option not
yet vested under Section 3.1(a) which is unexercisable at termination of
employment shall thereafter become exercisable.
Section 3.2 - Duration of Exercisability. After any portion of the Option
becomes exercisable pursuant to Section 3.1(a), 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 (or any portion of the Option not yet vested under
Section 3.1(a) as the case may be) 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
4
<PAGE>
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 (b), 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. Any portion of the Option not
yet vested at the Employee's date of retirement will
automatically vest with the passage of time (as if the retired
Employee had remained actively employed) pursuant to the Option
vesting schedule set forth in Section 3.(a) so long as the
Employee is alive.
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 or any
portion of such Option has not yet vested under Section 3.(a), 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
5
<PAGE>
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 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
6
<PAGE>
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 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.
7
<PAGE>
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 that any
portion of the Option described in 3.(a) becomes exercisable pursuant to
Section 3.1(a) 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) 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,
8
<PAGE>
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
(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
9
<PAGE>
(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 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
10
<PAGE>
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.
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.
11
<PAGE>
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 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.
12
<PAGE>
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 21st day of August 1997.
THIOKOL CORPORATION EMPLOYEE
By: __________________________ By: ________________________
Corporate Secretary
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Thiokol
Corporation's Consolidated Balance Sheet at June 30, 1997, and Consolidated
Statements of Operations at June 30, 1997, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 51,369
<SECURITIES> 0
<RECEIVABLES> 148,235
<ALLOWANCES> 1,841
<INVENTORY> 84,595
<CURRENT-ASSETS> 311,612
<PP&E> 595,034
<DEPRECIATION> 311,864
<TOTAL-ASSETS> 854,363
<CURRENT-LIABILITIES> 139,492
<BONDS> 1,920
<COMMON> 20,538
0
0
<OTHER-SE> 500,584
<TOTAL-LIABILITY-AND-EQUITY> 854,363
<SALES> 890,129
<TOTAL-REVENUES> 931,534
<CGS> 723,689
<TOTAL-COSTS> 745,554
<OTHER-EXPENSES> 68,940
<LOSS-PROVISION> 874
<INTEREST-EXPENSE> 1,728
<INCOME-PRETAX> 115,312
<INCOME-TAX> 32,883
<INCOME-CONTINUING> 82,429
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,429
<EPS-PRIMARY> 4.41
<EPS-DILUTED> 4.38
</TABLE>
