<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarter Ended
MARCH 31, 1994
Commission File Number 1-8889
[LOGO] MORRISON KNUDSEN CORPORATION
A Delaware Corporation
IRS Employer Identification No. 82-0393735
MORRISON KNUDSEN PLAZA, BOISE, IDAHO 83729
208/386-5000
The registrant's common stock is registered on the New York and Pacific Stock
Exchanges.
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At March 31, 1994, 32,525,167 shares of the registrant's common stock were
outstanding (excluding 420,805 shares held in treasury and including 504,889
unallocated shares of common stock in the Employee Stock Ownership Plan Trust,
accounted for as treasury stock).
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The registrant 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 and has
been subject to such filing requirements for the past 90 days.
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<PAGE>
MORRISON KNUDSEN CORPORATION
QUARTERLY REPORT FORM 10-Q FOR
THREE MONTHS ENDED MARCH 31, 1994
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements PAGE
Statements of Income for the Three Months
Ended March 31, 1994 and 1993 I-1
Balance Sheets at March 31, 1994 and
December 31, 1993 I-2-3
Condensed Statements of Cash Flows for the
Three Months Ended March 31, 1994 and 1993 I-4
Notes to Financial Statements I-5-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations I-11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K II-1
Signatures II-1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MORRISON KNUDSEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1994 AND 1993 (UNAUDITED)
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Revenue
Engineering and construction $456,121 $470,998
Rail systems 85,180 89,197
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Total revenue $541,301 $560,195
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Operating income
Engineering and construction $10,424 $15,768
Rail systems 3,748 2,108
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Total operating income 14,172 17,876
General and administrative expense (8,725) (7,987)
Interest expense (1,356) (189)
Equity in net income (loss) of unconsolidated affiliates 113 (3,466)
Gain on subsidiary sale of stock 1,255 --
Other income, net 8,001 8,879
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Income before income taxes and minority interests 13,460 15,113
Income tax expense (5,384) (6,989)
Minority interests in net (income) loss of subsidiaries 1,576 (241)
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Net income $9,652 $7,883
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Common shares used to compute earnings per share 32,174,181 30,658,921
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Earnings per common share $.30 $.26
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Dividends per share $.20 $.20
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</TABLE>
The accompanying notes are an integral part of the financial statements.
I-1
<PAGE>
MORRISON KNUDSEN CORPORATION
CONSOLIDATED BALANCE SHEETS
AT MARCH 31, 1994 (UNAUDITED) AND DECEMBER 31, 1993 (AUDITED)
(THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS 1994 1993
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 89,020 $ 91,879
Accounts receivable including retentions of $62,861 and $62,800 201,598 231,021
Refundable federal income taxes -- 21,096
Inventories 192,535 133,350
Costs and earnings in excess of billings on uncompleted contracts 215,525 185,221
Investments in construction joint ventures 68,882 83,116
Deferred income taxes 24,956 25,019
Other 25,410 22,519
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Total current assets 817,926 793,221
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INVESTMENTS AND OTHER ASSETS
Marketable securities, at cost, market $15,052 and $53,180 15,052 51,143
Investments in unconsolidated affiliates 62,398 62,649
Goodwill and other intangibles, net 53,584 36,284
Other investments and assets 73,885 68,984
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Total investments and other assets 204,919 219,060
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PROPERTY AND EQUIPMENT, AT COST
Land and mineral rights 21,517 21,131
Buildings and improvements 162,981 153,252
Machinery and equipment 75,233 67,187
Construction equipment 220,930 226,221
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Total property and equipment 480,661 467,791
LESS ACCUMULATED DEPRECIATION (260,702) (254,122)
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Property and equipment, net 219,959 213,669
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TOTAL ASSETS $1,242,804 $1,225,950
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</TABLE>
The accompanying notes are an integral part of the financial statements.
I-2
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
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CURRENT LIABILITIES
<S> <C> <C>
Short-term and current portion of long-term debt $ 59,812 $ 37,238
Accounts payable including retentions of $40,993 and $45,951 299,823 293,746
Accrued salaries, wages and benefits 47,230 46,507
Other accrued expenses 41,157 53,372
Billings in excess of costs and earnings on uncompleted contracts 112,230 104,460
Advances from customers 148,382 147,788
Income taxes payable 4,200 --
Dividends payable -- 6,423
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Total current liabilities 712,834 689,534
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NON-CURRENT LIABILITIES
Deferred income taxes 19,705 24,189
Deferred compensation and income 23,723 13,671
Accrued workers' compensation -- 46,597
Accrued postretirement benefit obligation 26,993 26,506
Debt due after one year 22,421 9,768
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Total non-current liabilities 92,842 120,731
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COMMITMENTS AND CONTINGENCIES(Note 9)
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MINORITY INTERESTS IN SUBSIDIARIES 6,967 8,718
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STOCKHOLDERS' EQUITY
Preferred stock, par value $.10, authorized 10,000,000 shares, none issued issueded
Common stock, par value $1.67, authorized 100,000,000 shares, issued
33,450,861 and 32,698,179 shares
55,854 54,494
Capital in excess of par value 273,111 252,250
Retained earnings 130,616 127,466
Treasury stock, 925,694 and 1,080,184 shares, at cost (18,066) (19,435)
Deferred compensation for restricted stock awards (8,282) (5,837)
Cumulative translation adjustments (3,072) (1,971)
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Total stockholders' equity 430,161 406,967
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,242,804 $1,225,950
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</TABLE>
I-3
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MORRISON KNUDSEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994, AND 1993 (UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1994 1993
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<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided (used) by operating activities $(4,951) $(57,541)
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INVESTING ACTIVITIES
Short-term investments -- 3,959
Property and equipment acquisitions (13,980) (7,953)
Property and equipment disposals 4,574 7,251
Investments in unconsolidated affiliates and other non-current investments (2,609) (3,501)
Purchase of business (3,900) --
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Net cash provided (used) by investing activities (15,915) (244)
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FINANCING ACTIVITIES
Borrowing (payments) of short-term debt, net 22,045 (5,002)
Borrowings of long-term debt 10,479 --
Payments of long-term debt (1,972) (441)
Proceeds from stock issued 380 --
Dividends paid (12,925) (12,096)
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Net cash provided (used) by financing activities 18,007 (17,539)
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Decrease in cash and cash equivalents (2,859) (75,324)
Cash and cash equivalents at beginning of period 91,879 134,011
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Cash and cash equivalents at end of period $89,020 $58,687
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OTHER CASH FLOW INFORMATION
Interest paid $ 1,655 $ 612
Income taxes paid (refunded), net (13,886) (6,009)
Acquisition of business for stock:
Property and equipment and other assets 9,128 --
Goodwill and other intangibles 19,215 --
Long-term debt (4,675) --
Other liabilities assumed (4,005) --
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</TABLE>
The accompanying notes are an integral part of the financial statements.
I-4
<PAGE>
MORRISON KNUDSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly
Morrison Knudsen Corporation's financial position at March 31, 1994, and
the results of its operations and cash flows for the three months then
ended. The results of operations for the three months ended March 31, 1994
are not necessarily indicative of the results to be expected for the full
year.
2. SUBSIDIARY SALE OF STOCK
Under an option granted by MK Gold Company ("MK Gold") to the underwriters
of its initial public offering ("IPO") to purchase additional shares of
common stock to cover over-allotments, 1,350,000 shares of MK Gold's common
stock at $6.00 a share were sold on January 14, 1994. The sale decreased
the Corporation's proportionate interest in MK Gold from 50% to 46.5%. The
net proceeds to MK Gold, after deducting commissions and offering expenses,
were $7,458. The Corporation recorded a gain of $1,255 ($753 after taxes)
in recognition of the net increase in value of the Corporation's investment
in MK Gold. Beginning December 1993 the Corporation has accounted for its
investment in MK Gold by the equity method.
3. SALE OF INTEREST IN UNCONSOLIDATED AFFILIATE STOCK
On October 7, 1993, Straight Crossing Development, Inc., an unconsolidated
subsidiary ("SCDI"), entered into a development agreement with the
government of Canada to design, construct and operate for 35 years an 8.4
mile long toll bridge linking the Canadian provinces of New Brunswick and
Prince Edward Island. On March 31, 1994, the Corporation entered into an
agreement to sell a portion of its common stock investment in SCDI to a
third party for cash and a note receivable. The sale decreased the
Corporation's proportionate interest in SCDI from 45% to 36%. The
Corporation recorded a gain of $4,877 ($2,926 after taxes) on the stock
sale in the first quarter of 1994. The gain was reflected as Other Income,
net. See Note 8.
4. ACQUISITION
On January 31, 1994, the Corporation acquired all of the voting stock of
Touchstone, Inc. ("Touchstone") for $22,665 which consisted of 720,000
shares of the Corporation's common stock valued at $18,765 and $3,900 cash.
Touchstone is a supplier of new and remanufactured locomotive cooling
systems. The acquisition has been accounted for by the purchase method.
The excess of the aggregate purchase price over the estimated fair values
of the net assets acquired was $17,965 and has been recorded as goodwill,
which will be amortized over fifteen years. In addition, the Corporation
entered into noncompete agreements with certain former Touchstone
stockholders in exchange for 50,000 shares of the Corporation's common
stock valued at $1,250, which cost will be amortized on a straight-line
method over 10 years. Touchstone had total assets at December 31, 1993 of
$12,341 and net assets of $5,466. Touchstone's revenue and net income for
the year ended December 31, 1993 was $20,032 and $265, respectively.
Touchstone will operate as a subsidiary of MK Rail. See Note 12.
I-5
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5. INVENTORIES
Rail systems inventories at March 31, 1994 and December 31, 1993 are
summarized as follows:
<TABLE>
<CAPTION>
(Unaudited) (Audited)
MARCH 31, 1994 DECEMBER 31, 1993
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<S> <C> <C>
Finished goods $ 7,140 $ 4,267
Work in progress 297,180 240,097
Raw materials 136,959 120,481
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Total inventories 441,279 364,845
Payments on account of work in progress (248,744) (231,495)
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Net inventories $192,535 $133,350
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</TABLE>
6. CONSTRUCTION JOINT VENTURES
The Corporation has entered into a number of partnership arrangements
commonly referred to as "joint ventures". Generally, each construction
joint venture is formed to accomplish a specific project and is dissolved
upon completion of the project. The number of joint ventures in which the
Corporation participates and the size, scope and duration of the projects
vary between periods. Specific joint ventures change from period to
period, and the comparability of the following group financial statements
between periods may not be meaningful. Summary joint venture financial
information at March 31, 1994 and December 31, 1993 and for the three
months ended March 31, 1994 and 1993 follows:
<TABLE>
<CAPTION>
(Unaudited) (Audited)
FINANCIAL POSITION AT MARCH 31, 1994 DECEMBER 31, 1993
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<S> <C> <C>
Cash and cash equivalents $146,845 $161,084
Other current assets 144,442 197,448
Noncurrent assets 5,328 5,989
Property and equipment, net 48,230 37,776
Advances from customers (86,158) (87,777)
Other current liabilities (172,389) (208,100)
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Net assets $ 86,298 $106,420
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CORPORATION'S INVESTMENT IN CONSTRUCTION JOINT
VENTURES $ 68,882 $ 83,116
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</TABLE>
I-6
<PAGE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, (Unaudited) (Unaudited)
1994 1993
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<S> <C> <C>
Combined joint ventures, net
Revenue $262,350 $129,161
Cost of revenue (260,104) (118,620)
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Operating income $ 2,246 $ 10,541
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Corporation's share, net
Revenue $ 89,171 $ 67,473
Cost of revenue (90,285) (61,479)
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Operating income (loss) $ (1,114) $ 5,994
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</TABLE>
The accounts of SCDI and MK Gold were included in the above summary at and
for the three months ended March 31, 1994 but were not included in prior
periods.
The Corporation recognized a net operating loss from its construction joint
venture operations for the three months ended March 31, 1994 because its
proportionate share(s) of joint ventures reporting operating losses was
greater than its proportionate share(s) of joint ventures reporting
operating income.
7. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The following table presents summarized financial information of the
unconsolidated affiliates at March 31, 1994 and December 31, 1993 and for
the three months ended March 31, 1994 and 1993, on a combined 100 percent
basis. The Corporation accounts for investments in 50% or less owned
companies by the equity method. Amounts presented include the accounts of
the following principal unconsolidated affiliates: MK Gold Company (46.5%);
Straight Crossing Development, Inc. (36%); Texas TGV Corporation ("Texas
TGV") (38.2%); AmerBank (31.1%); and Westmoreland Resources, Inc. (24%).
Amounts presented for the three months ended March 31, 1993 include the
accounts of Joy MK Projects Company, a 50% owned affiliate, which became a
wholly-owned subsidiary in April 1993. MK Gold holds interests in two
producing gold mining projects in California and provides contract mining
services. Texas TGV is a development-stage company with a 50-year
franchise to provide 200 m.p.h. passenger service connecting five major
Texas cities. AmerBank is a licensed bank operating in Poland. The $6,669
investment in AmerBank is in current assets in the accompanying balance
sheets to reflect the Corporation's intent to sell a major portion of its
interest therein. Westmoreland Resources, Inc. is a mining company that
operates a surface coal mine in Montana. See Notes 2, 3 and 9.
<TABLE>
<CAPTION>
FINANCIAL POSITION AT (Unaudited) (Audited)
MARCH 31, 1994 DECEMBER 31, 1993
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<S> <C> <C>
Current assets $78,679 $91,775
Non-current assets 157,492 125,762
Current liabilities (50,101) (68,569)
Non-current liabilities (48,837) (17,058)
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Net assets $137,233 $131,910
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Corporation's investment in unconsolidated
affiliates $62,398 $62,649
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</TABLE>
I-7
<PAGE>
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS (Unaudited) (Unaudited)
THREE MONTHS ENDED MARCH 31, 1994 1993
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<S> <C> <C>
Revenue $18,335 $48,975
Operating income (loss) 1,705 (9,591)
Net income (loss) 881 (10,467)
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Corporation's equity in net income (loss)
of unconsolidated affiliates $113 $(3,466)
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</TABLE>
The Corporation recognized a loss from its investee's operations in the
first quarter of 1993 primarily because of the net loss of Joy MK Projects
Company, then a 50% owned unconsolidated affiliate. Joy MK Projects
Company has been a wholly-owned subsidiary since April 1993.
The Corporation's investment in MK Gold at March 31, 1994 was $31,302. The
aggregate market value of MK Gold's common stock held by the Corporation at
March 31, 1994 was $58,500.
8. OTHER INCOME, NET
Other income (expense) items for the three months ended March 31, 1994 and
1993 are as follows:
<TABLE>
<CAPTION>
(Unaudited)
THREE MONTHS ENDED MARCH 31, 1994 1993
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<S> <C> <C>
Interest $1,806 $4,454
Dividends 15 1,054
Gains on sales of marketable securities, net 1,564 4,565
Gain on sale of SCDI stock 4,877 --
Loss on sales of trade receivables (1,656) (694)
Underwriting income (expenses) of insurance
subsidiary, net 2,979 (753)
Miscellaneous expenses, net (1,584) 253
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Other income, net $8,001 $8,879
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</TABLE>
9. COMMITMENTS AND CONTINGENCIES
VERTAC SITE CONTRACTORS: Design, engineering, construction and pre-
production start-up costs to develop a facility for incineration of certain
hazardous wastes have been capitalized. The Corporation is a subcontractor
under a prime contract with the Federal Environmental Protection Agency
("EPA"), to process hazardous waste at an Arkansas site. The Corporation's
investment in Vertac Site Contractors at December 31, 1993 and
March 31, 1994 was $21,950 and $17,791, respectively. The Corporation will
not recover its investment under this subcontract but anticipates that it
will receive additional contracts to incinerate hazardous waste at the
Arkansas site to fully recover its investment.
I-8
<PAGE>
CF SYSTEMS: The Corporation acquired a solvent extraction processing
technology in 1990 and subsequently deferred additional design and
engineering costs in modifying the processing facility for commercial
application. The Corporation is currently negotiating a "sole source"
contract with a state agency for remediation of contaminated soil. The
contract, if awarded, should begin about mid-1994, be of approximately 36
months duration and will be principally funded by the EPA. The
Corporation's investment in CF Systems at December 31, 1993 and March 31,
1994 was $13,896 and $14,211, respectively. The Corporation will not
recover its investment under this contract but anticipates that it will
receive additional contracts to fully recover its investment.
TEXAS TGV CORPORATION: Texas TGV was awarded a franchise in May 1991 to
finance, construct and operate a high speed rail system in Texas. Through
March 31, 1994, the project has been funded by its shareholders, including
the Corporation, which has a 38.2% equity investment in Texas TGV of
$14,162 at March 31, 1994, ($13,996 at December 31, 1993). The Texas High
Speed Rail Authority ("Authority") has asserted that Texas TGV is in
technical default because it failed to provide the equity financing
commitment by December 31, 1993 as required under the franchise agreement.
The Authority has requested that Texas TGV provide reasons why it is not in
default. Texas TGV has informed the Authority that it believes it is not
in default because certain delays have extended the deadline for providing
the equity financing commitment. According to the franchise agreement,
such event of default could result in the termination of the franchise. No
provision for loss, if any, of the Corporation's investment has been made
in the financial statements because the ultimate outcome of this matter is
not predictable at this time.
LETTERS OF CREDIT: The Corporation was contingently liable, in the normal
course of business, for $376,391 in standby letters of credit not reflected
in the accompanying financial statements at March 31, 1994 for contract
performance guarantees on a number of construction and rail systems
contracts.
DISCONTINUED OPERATIONS: At March 31, 1994, the Corporation was
contingently liable for $42,000 in connection with the shipbuilding
operations of National Steel and Shipbuilding Company ("NASSCO"),
discontinued in 1988. The Corporation is contingently liable up to a
maximum of $21,000 on a bank credit facility obtained by NASSCO. The
balance outstanding under NASSCO's bank credit facility at March 31, 1994
was $16,000. If NASSCO's borrowings under the bank credit facility exceed
$8,000 at July 31, 1994, NASSCO has the right to require the Corporation to
purchase NASSCO preferred stock equal to the amount of borrowings in excess
of $8,000. In addition, the Corporation has guaranteed $21,000 of NASSCO's
port facility bonds until not later than December 2002. NASSCO's floating
drydock is pledged as collateral for the bonds. At March 31, 1994, the
Corporation was contingently liable for $31,500 in connection with
commercial real estate operations discontinued in 1987. Certain real
estate assets collatoralize the bank debt. The Corporation is of the
opinion that no payments will be required and no losses will be incurred
under such contingencies.
AFFILIATE GUARANTEE: At March 31, 1994, the Corporation was contingently
liable for $20,000 borrowed by MK Gold under MK Gold's bank credit
facility.
OTHER GUARANTEES: The Corporation has also guaranteed at March 31, 1994,
$5,166 of obligations of third parties under borrowing arrangements. Where
possible, the Corporation has obtained security interests and guarantees by
the principals.
I-9
<PAGE>
10. WORKERS' COMPENSATION
In March 1994 the Corporation and an insurance company entered into an
agreement under which the Corporation prefunded its $53,829 estimated self-
insurance liability for workers' compensation claims incurred through
March 31, 1994 with cash of $44,100. The Corporation recorded a deferred
gain of $9,729 on the transaction and will recognize the gain over periods
subsequent to December 31, 1993, based on the proportion of cumulative
claims paid, to the total estimated liability for claims. The Corporation
will continue to self-insure for workers' compensation losses incurred
after March 31, 1994, through its captive insurance subsidiary and
reinsurance agreements with outside insurers. The unamortized deferred
gain is included in Deferred Compensation and Income in the accompanying
balance sheet at March 31, 1994.
11. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
The FASB has issued Statement No. 112, EMPLOYER'S ACCOUNTING FOR
POSTEMPLOYMENT BENEFITS ("FAS 112"). The statement establishes standards
of financial accounting and reporting for the estimated cost of benefits
provided to former or inactive employees after employment but before
retirement. Adoption of FAS 112 as of January 1, 1994, did not have a
material effect on the 1994 first quarter operating results and is not
expected to have a material impact on future operating results.
12. SUBSEQUENT EVENT
SUBSIDIARY SALE OF STOCK: On May 3, 1994, MK Rail Corporation, ("MK Rail")
then a wholly-owned subsidiary of the Corporation, completed an IPO of
6,000,000 shares of its common stock at an offering price of $16.00 a share
which decreased the Corporation's proportionate interest in MK Rail to 65%.
MK Rail remanufactures locomotives, manufactures new high technology
locomotives, designs, manufactures and distributes locomotive component
parts, and provides locomotive fleet maintenance services to the railroad
industry. The net proceeds to MK Rail from the IPO, after deducting
underwriters' discounts, commissions and estimated issuance costs, were
approximately $88,800. The Corporation will recognize a gain as a result
of this sale. MK Rail had total assets at December 31, 1993 of $193,132.
MK Rail's revenue and net income for the year ended December 31, 1993 was
$218,160 and $3,632, respectively.
I-10
<PAGE>
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Revenue and operating income of the engineering and construction segment in the
first quarter of 1994 decreased from the first quarter of 1993 by $14.9 million
and $5.3 million, respectively. The decrease in engineering and construction
operating income in the first quarter of 1994 compared to the first quarter of
1993 was attributable to (i) a decrease in contract earnings of $1.3 million,
(ii) an increase of $1.3 million in segment overhead, and (iii) a decrease in
additional claims income of $2.4 million. Revenue of the rail systems segment
in the first quarter of 1994 decreased from the first quarter of 1993 by $4.0
million but operating income increased $1.6 million. The increase in rail
systems operating income in the first quarter of 1994 compared to the first
quarter of 1993 was attributable to an increase in gross profit, principally
from sales of locomotive component parts of $3.4 million, reduced by an increase
of $1.8 million in segment overhead due to the consolidation of businesses
acquired in late 1993 and the first quarter of 1994.
General and administrative expense for the first quarter of 1994 increased $.7
million from the first quarter of 1993 due principally to an increase in
compensation expense.
Interest expense increased from $.2 million in the first quarter of
1993 to $1.4 million in the first quarter of 1994. The increase reflects the
rise in both short and long-term debt outstanding from $.8 million at March 31,
1993, to $82.2 million at March 31, 1994, including $4.7 million assumed debt of
Touchstone, acquired January 31, 1994, partially offset by a decline in the
weighted average interest rate from 11.3% in the first quarter of 1993 to 4.9%
in the first quarter of 1994.
The Corporation's share of investee income for the first quarter of 1994
increased from a $3.5 million loss in the first quarter of 1993 to $.1 million
income in 1994. The loss in the first quarter of 1993 was due to the
recognition by the Corporation of its share of the net loss of Joy MK Projects
Company, then a 50% owned unconsolidated affiliate. Joy MK Projects Company has
been a wholly-owned subsidiary since April 1993. See Note 7 of Notes to
Consolidated Financial Statements.
Other income for the first quarter of 1994 decreased from $8.9 million in the
first quarter of 1993 to $8.0 million in the first quarter of 1994. See Note 8
of Notes to Consolidated Financial Statements.
In January 1994, 1,350,000 shares of MK Gold's common stock were sold under an
option granted by MK Gold to its IPO underwriters to cover over-allotments. The
Corporation recognized a $1.3 million pretax gain because MK Gold's public
offering price per share exceeded the Corporation's carrying value per share.
See Note 2 of Notes to Consolidated Financial Statements.
Income taxes provided in the first quarters of 1994 and 1993 were based upon
estimated annual effective tax rates of 40.0% and 46.2%, respectively. The
46.2% effective rate in the first quarter of 1993 was higher than the
Corporation's blended statutory tax rate of 40.85% due in large part to the
recognition of taxes on foreign-source income. The 40.0% effective rate in the
first quarter of 1994 was slightly lower than the blended statutory rate because
of anticipated utilization of foreign tax credits to offset U.S. income taxes.
Minority interests in the net loss of consolidated subsidiaries in the first
quarter of 1994 consists principally of the minority interest's share of the
first quarter 1994 losses of McConnell Dowell Corporation, Ltd. ($1.3 million)
and MK Rail Systems of Argentina, S.A. ($.3 million).
Net income for the first quarter of 1994 includes aftertax gains totaling
$3,679, or $.11 per share, arising from (i) the Corporation's sale to a third
party of a portion of its stock in SCDI and (ii) the sale by MK Gold of its
common stock to the public at an offering price per share that exceeded the
Corporation's carrying value per share.
I-11
<PAGE>
FINANCIAL CONDITION
<TABLE>
<CAPTION>
Liquidity and capital resources
(thousands of dollars) March 31,
--------------------------
1994 1993
------ ------
<S> <C> <C>
CASH AND CASH EQUIVALENTS:
Beginning of period $91,879 $134,011
End of period 89,020 58,687
Total debt 82,233 771
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1994 1993
------ ------
<S> <C> <C>
NET CASH PROVIDED (USED) BY:
Operating activities $(4,951) $(57,541)
Investing activities (15,915) (244)
Financing activities 18,007 (17,539)
</TABLE>
Total capitalization at March 31, 1994 was $512.4 million, composed of $82.2
million debt and $430.2 million equity compared to total capitalization at
December 31, 1993 of $454.0 million, composed of $47.0 million debt and $407.0
equity.
The Corporation's primary sources of short-term financing in the first quarter
of 1994 were through borrowings under bank credit lines and a $21.1 million
federal income tax refund. The primary sources of the Corporation's short-term
financing in the first quarter of 1993 were through its balance of cash and cash
equivalents and rail system customer's advances.
Net cash used for operating activities in the first quarter of 1994 were
primarily to increase rail systems transit division inventories. Net cash used
for operating activities increased in the first quarter of 1993, primarily as
a result of increased trade receivables, unbilled receivables and a significant
increase in rail systems transit division inventories.
Net cash used for investing activities in the first quarter of 1994 included
acquisitions of property and equipment and the acquisition of Touchstone and
other non-current assets. Net cash used for investing activities in the first
quarter of 1993 included purchases of capital assets, marketable securities and
other non-current assets offset by cash generated from the sales of short-term
investments and fixed assets.
Net cash provided by financing activities in the first quarter of 1994 included
borrowings of short and long-term debt of $30.6 million partially offset by the
payment of $12.9 million dividends during the first quarter of 1994.
Financing activities in the first quarter of 1993 included the repayment
of assumed short-term debt of previously acquired businesses and the payment of
$12.1 million dividends. The Corporation borrowed to finance working capital
needs. The Corporation and its consolidated subsidiaries expects that they will
continue to borrow short-term to finance working capital requirements, absent
sufficient capital funds from customer advances and its cash on hand. The
Corporation believes that its balance of cash, together with funds generated
from operations and existing short-term and potential long-term borrowing
capabilities, will be sufficient to meet its operating cash requirements in the
foreseeable future.
The Corporation and its subsidiaries had available from domestic and foreign
banks $260,000 of committed unsecured credit lines of which approximately
$178,000 was unused at March 31, 1994.
I-12
<PAGE>
PART II. OTHER INFORMATION
6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
FILED IN PART I
None
FILED IN PART II
10.1 Form of registrant's Indemnification Agreement (filed as Exhibit
B to Proxy Statement dated March 23, 1987, and incorporated
herein by reference). A schedule listing the individuals with
whom the registrant has entered into such agreements is filed
herewith
10.2 The registrant's employment agreement with Larry E. Salci dated
March 22, 1994.
10.3 The registrant's Long-Term Incentive Plan for Corporate
Executives.
10.4 The registrant's Long-Term Incentive Plan for the Engineering and
Construction Group.
10.5 The registrant's Long-Term Incentive Plan for the Heavy Civil
Construction Group.
10.6 The registrant's Long-Term Incentive Plan for the Mining Group.
10.7 The registrant's Long-Term Incentive Plan for the Rail Systems
Group.
(b) Reports on Form 8-K
The Registrant filed current reports on Form 8-K to report, (i) the
acquisition on December 30, 1993 of Clark Industries, Inc., a
manufacturer of cylinder heads, pistons and liner assemblies for
railroad locomotives, (ii) the acquisition on January 31, 1994 of
Touchstone, Inc., a supplier of new and remanufactured locomotive
cooling systems and (iii) the election on February 14, 1994 of
Zbigniew Brzezinski as a director.
All other items required under Part II are omitted because they are not
applicable.
SIGNATURES
Pursuant to the requirements 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.
MORRISON KNUDSEN CORPORATION
/S/M.E. Howland
------------------------------------------------
Vice President and Controller and Principal
Accounting Officer, in his respective capacities
as such
Date: May 16, 1994
II-1
<PAGE>
MORRISON KNUDSEN CORPORATION
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBITS
- ------- --------
10.1 Form of registrant's Indemnification Agreement (filed as Exhibit B to
Proxy Statement dated March 23, 1987, and incorporated herein by
reference). A schedule listing the individuals with whom the
registrant has entered into such agreements is filed herewith.
10.2 * The registrant's employment agreement with Larry E. Salci dated March
22, 1994.
10.3 * The registrant's Long-Term Incentive Plan for Corporate Executives.
10.4 * The registrant's Long-Term Incentive Plan for the Engineering and
Construction Group.
10.5 * The registrant's Long-Term Incentive Plan for the Heavy Civil
Construction Group.
10.6 * The registrant's Long-Term Incentive Plan for the Mining Group.
10.7 * The registrant's Long-Term Incentive Plan for the Rail Systems Group.
_________________
* Filed herewith.
<PAGE>
Exhibit 10.1
MORRISON KNUDSEN CORPORATION
SCHEDULE OF INDEMNIFICATION AGREEMENTS
Name Date of Agreement
---- -----------------
Agee, William J. February 13, 1987
Arrillaga, John October 10, 1990
Brandon, Brent D. November 5, 1993
Brigham, Douglas L. August 6, 1993
Brzezinski, Zbigniew February 8, 1994
Cleary, James F. (Jr.) August 6, 1993
Fox, Lindsay E. February 28, 1992
Grant, Stephen R. May 5, 1989
Hanks, Stephen G. February 9, 1990
Hemmeter, C. B. May 5, 1989
Howland, Mark E. February 8, 1994
Lynch, Peter S. May 5, 1989
McCabe, Robert A. February 13, 1987
Peden, Irene C. August 3, 1990
Roche, Gerard R. August 3, 1990
Rogers, John W. February 5, 1993
Ueberroth, Peter V. August 3, 1989
<PAGE>
Exhibit 10.2
MORRISON KNUDSEN CORPORATION
MORRISON KNUDSEN PLAZA
P.O. BOX 73/BOISE, IDAHO U.S.A. 83729
PHONE: (208)386-6716/TELEX:368439
FAX: (208)3866421
STEPHEN G. HANKS
EXECUTIVE VICE PRESIDENT
ADMINISTRATION AND FINANCE
March 22, 1994
Mr. Larry E. Salci
3271 History Drive
Oakton, VA 22124
RE: OFFER OF EMPLOYMENT
Dear Larry:
On behalf of Morrison Knudsen Corporation (the "Company"), I am pleased to offer
you employment pursuant to the terms and conditions set forth in this letter
agreement (the "Agreement").
1. POSITION AND SERVICES TO BE RENDERED. The Company hereby agrees to employ
you as President-MK Transit Group, effective March 22, 1994 (the "Effective
Date"). You accept such employment and agree to devote your full time and
attention exclusively to rendering services to the Company. In connection
with the rendition of such services, you shall report to the Chairman and
Chief Executive Officer of the Company, Mr. William J. Agee.
2. SALARY. You will receive an annual base salary of $250,000 commencing on
the Effective Date, payable in accordance with the Company's normal payroll
practice (i.e., every two weeks). Your position will be a regular
full-time position and you will be assigned a Grade Level of 27.
3. ANNUAL CASH BONUS. You will be considered for an annual cash bonus at the
end of each calendar year. The Company shall set a targeted bonus of 50%
of annual base salary, assuming that MK Transit Group achieves
pre-specified results in the areas of cash flow, net income (after taking
into account cash bonuses) and return on capital employed. A lesser bonus
may be paid in the
<PAGE>
MORRISON KNUDSEN CORPORATION
Larry E. Salci
March 22, 1994
Page 2
event the results achieved fall below the predetermined goals. Your cash
bonus for 1994 shall not be less than 20% of base salary prorated for the
number of months of service (including partial months) rendered in 1994.
4. STOCK OPTIONS. A recommendation will be made to the Executive Compensation
and Nominating Committee that you be granted options to purchase 25,000
shares of the Company's common stock under the Company's Stock Incentive
Plan (or Stock Compensation Plan if such Plan is approved by the Board of
Directors) at a price equal to the mean between the highest and lowest
selling price of such stock on the New York Stock Exchange on the effective
date of grant. Pursuant to the Stock Incentive Plan, the option shall vest
over a period of four years and shall have a life of ten years.
5. RESTRICTED STOCK. A recommendation will be made to the Executive
Compensation and Nominating Committee that you be granted 20,000 restricted
shares of the Company's common stock under the Company's Stock Incentive
Plan (or Stock Compensation Plan if such Plan is approved by the Board of
Directors). The restricted stock shall vest over a period of four years,
with 20% vesting immediately.
6. FRINGE BENEFITS. You will be entitled to relocation assistance, including
an agreement for the purchase of your present residence if that becomes
necessary to avoid your incurring a loss on the sale of your residence with
respect to your move from Virginia to Chicago (i.e., home purchase option
and reimbursement for moving expenses), 401(k) Savings Plan, group medical
and dental plan, and all other group plans and other benefits that are
normally offered to regular full-time employees.
7. 3-YEAR PLAN. You will be entitled to participate in the Company's
Long-Term Performance Compensation Benefit Plan ("3-Year Plan") to the
extent such Plan is continued by the Company.
8. 5-YEAR PLAN. You will be entitled to participate in the Company's Key
Executive Long-Term Incentive Plan ("5-Year Plan"). Upon being finalized,
the 5-Year Plan will contain your profit sharing percentages and
performance targets, which will be discussed and agreed upon in the
upcoming weeks. The employment agreement will be similar in form to the
agreement attached.
<PAGE>
MORRISON KNUDSEN CORPORATION
Larry E. Salci
March 22, 1994
Page 3
9. KEY MAN INSURANCE. You will be provided with supplemental benefits at no
cost to you which shall result in the following levels of coverage,
inclusive of any coverage generally provided by basic Company-sponsored
benefits:
a. Pre-retirement life insurance equal to three times your annual base
salary;
b. Post-retirement life insurance equal to your annual base salary as of
the date of your retirement; and
c. Disability coverage from all Company-sponsored and government sources
equal to 60% of the sum of base salary plus annual Group Incentive
Plan bonus or Executive Incentive Plan bonus, whichever is applicable,
less any offsets under the terms of such disability programs.
10. RIGHTS UPON TERMINATION.
a. During the term of this Agreement, you may be terminated by the
Company only for Cause. For purposes of this Agreement, Cause shall
mean (i) your willful refusal to follow a lawful written order of the
Chief Executive Officer of the Company or his designee, (ii) your
willful and continued failure to perform your duties under this
Agreement (except due to your incapacity because of physical or mental
illness) after a written demand is delivered to you by the Chief
Executive Officer of the Company or his designee specifically
identifying the manner in which you have failed to perform your
duties, (iii) your willful engagement in conduct materially injurious
to the Company, or (iv) your conviction for any crime involving moral
turpitude. For purposes of clauses (i), (ii) and (iii) of this
definition, no act or failure to act on your part shall be deemed
"willful" unless it was done, or omitted to be done, not in good faith
and without reasonable belief that your act or failure to act was in
the best interests of the Company. In the event you are terminated
for Cause prior to the expiration of the term hereunder, no amounts
shall be due and payable.
b. In the event of your death, total and permanent disability, retirement
or voluntary resignation during the term of this Agreement, the
Agreement shall terminate and you shall be entitled to be compensated
in accordance with the provisions of this Agreement through the date
of such termination, but shall not be entitled to receive any
compensation for the remainder of the term of the Agreement.
<PAGE>
MORRISON KNUDSEN CORPORATION
Larry E. Salci
March 22, 1994
Page 4
c. In the event your employment is terminated during the term of this
Agreement for reasons other than those identified in subparagraphs
10 a. and b. above, you shall be entitled to receive your annual base
salary for a period of two years. Such sum shall be paid in either
the normal course of the Company's payroll practices or in a single
lump sum, as determined by the Company in its sole discretion.
11. TERM. The term of this Agreement shall run from March 22, 1994 (unless the
parties mutually agree to an earlier date) through March 21, 1999.
12. PENSION BENEFITS. The Company will provide a Deferred Compensation
Agreement intended to compensate you for those pension benefits provided by
your present employer that you forfeit as a result of your resignation. The
terms of such Deferred Compensation Agreement will be determined after
analysis of your pension package and will be subject to mutual agreement.
13. CONTINGENCIES. This employment offer must be contingent upon the following
contingencies:
a. Your passing of a drug screening test, pursuant to the Company's
Substance Abuse Prevention Program, and your continued compliance with
such program. After reporting to work, you will also be required to
complete an "Employment Certification" form that complies with the
passing of the Drug-Free Workplace Act of 1988.
b. Your compliance with the following laws:
* In accordance with Public Law 99-603, The Immigration and
Naturalization Act of 1986, this offer is made pending receipt of
verifiable documentation from you confirming your eligibility for
employment under the terms and conditions of this Act. Proof of U.S.
citizenship or adequate identification is required before any hire can
be processed. You must present acceptable documents for employment
eligibility verifications when you report for your first day of work.
* In accordance with Public Law 100-679, the Office of Federal
Procurement Policy Act Amendments of 1988, the Company is prohibited
for a period of two years from hiring former government officials or
employees (military or civilian) who participated personally and
substantially in the conduct of any Federal agency procurement.
<PAGE>
MORRISON KNUDSEN CORPORATION
Larry E. Salci
March 22, 1994
Page 5
Consequently, this offer is contingent upon receipt of information
from you that your employment with the Company will not result in a
violation of the Procurement Policy Act. You will be required to
complete an employee certification form verifying your prior
employment before your employment with the Company begins.
By accepting this employment offer, you agree to the terms and conditions
established herein. To indicate your acceptance of this offer, please sign both
copies of this Agreement and return one to me. If you have any questions,
please do not hesitate to contact me.
Very truly yours,
/s/Stephen G. Hanks
Stephen G. Hanks
SGH/RDP:ac
AGREED AND ACCEPTED:
/s/Larry E. Salci
- ----------------------------------------
Larry E. Salci
Date: /March 22, 1994/
----------------------------------
<PAGE>
Exhibit 10.3
MORRISON KNUDSEN CORPORATION
LONG-TERM INCENTIVE PLAN
FOR CORPORATE EXECUTIVES
JANUARY 1993 - DECEMBER 1997
<PAGE>
TABLE OF CONTENTS
SECTION I - PURPOSE. . . . . . . . . . . . . . . . . . . . . . 1
SECTION II - PARTICIPANTS. . . . . . . . . . . . . . . . . . . 1
SECTION III - DEFINITIONS. . . . . . . . . . . . . . . . . . . 1
SECTION IV - GENERAL PLAN DESCRIPTION. . . . . . . . . . . . . 3
A. Overview . . . . . . . . . . . . . . . . . . . . . . 3
B. Sharing Percentage . . . . . . . . . . . . . . . . . 3
C. Stock Appreciation Multiplier. . . . . . . . . . . . 4
D. New Participants . . . . . . . . . . . . . . . . . . 4
E. Award Accrual. . . . . . . . . . . . . . . . . . . . 5
F. Offset to Accrued Awards for Performance Below the
6 Percent Return on Capital Threshold. . . . . . . . 5
G. Valuation Upon Termination . . . . . . . . . . . . . 5
H. Payment of Awards. . . . . . . . . . . . . . . . . . 6
I. Voluntary Deferral Option. . . . . . . . . . . . . . 6
J. Withholding Tax. . . . . . . . . . . . . . . . . . . 6
K. Term of Plan . . . . . . . . . . . . . . . . . . . . 6
L. Adjustment Upon a Change of Control. . . . . . . . . 7
M. Adjustments for Extraordinary Events . . . . . . . . 7
SECTION V - PLAN ADMINISTRATION. . . . . . . . . . . . . . . . 7
A. General Administration . . . . . . . . . . . . . . . 7
B. Designation of Beneficiaries . . . . . . . . . . . . 7
C. Amendment of Plan. . . . . . . . . . . . . . . . . . 8
D. Termination of Plan. . . . . . . . . . . . . . . . . 8
SECTION VI - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . 8
A. Unsecured Status of Claim. . . . . . . . . . . . . . 8
B. Employment Not Guaranteed. . . . . . . . . . . . . . 9
C. Right of Offset. . . . . . . . . . . . . . . . . . . 9
D. Nonassignability . . . . . . . . . . . . . . . . . . 9
E. Validity . . . . . . . . . . . . . . . . . . . . . . 9
F. Applicable Law . . . . . . . . . . . . . . . . . . . 9
G. Inurement of Rights and Obligations. . . . . . . . . 9
-i-
<PAGE>
SECTION I - PURPOSE
The purpose of the MORRISON KNUDSEN CORPORATION LONG-TERM
INCENTIVE PLAN FOR CORPORATE EXECUTIVES (the "Plan") is to
provide long-term incentive compensation to certain key
executives of Morrison Knudsen Corporation and its subsidiaries
(the "Company") who are in a position to make important
contributions toward the organization's long-term growth and
success. The Plan provides a means whereby such executives are
given an opportunity to share financially in the future value
they help to create for the Company and its stockholders.
SECTION II - ELIGIBILITY
Eligibility to participate in the Plan is limited to key
executives of the Company who, in the opinion of the Compensation
Committee of the Board of Directors, have the responsibility and
ability to significantly influence the Company's long-term
performance.
SECTION III - DEFINITIONS
"AGREEMENT" refers to the written agreement entered into between
the Company and a Participant to carry out the Plan with respect
to the Participant in accordance with the Plan's terms and
conditions.
"AVERAGE TOTAL CAPITAL" means the average of beginning and ending
Total Capital for the Company's fiscal year.
"AWARD" refers to an amount earned by, and paid in the form of
cash to, a Participant under the terms and provisions of the
Plan.
"CAUSE" means (i) willful and continued failure by a Participant
to perform his or her duties (except as a direct result of the
Participant's incapacity due to physical or mental illness) after
receiving notification by the Chief Executive Officer identifying
the manner in which the Participant has failed to perform his or
her duties, (ii) willfully engaging in conduct materially
injurious to the Company, or (iii) conviction of the Participant
of any felony involving moral turpitude.
"CHANGE OF CONTROL" means a change in control of the Company of a
nature that would be required to be reported in response to Item
6(e) of Schedule 14A, Regulation 240.14a-101 promulgated under
the Securities Exchange Act of 1934 as now in effect or, if Item
6(e) is no longer in effect, any regulations issued by the
Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934 which serve similar purposes; provided that,
without limitation, such a Change of Control shall be deemed to
have occurred if and when (a) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934) is or becomes a beneficial owner, directly or indirectly,
of securities of the Company representing 30 percent or more of
the combined voting power of the Company's then outstanding
securities, or (b)
-1-
<PAGE>
individuals who were members of the Board of Directors of the
Company immediately prior to a meeting of the stockholders of the
Company involving a contest for the election of directors shall
not constitute a majority of the Board of Directors following
such election.
"COMPENSATION COMMITTEE" OR "COMMITTEE" refers to the
Compensation Committee of the Board of Directors of the Company.
"COMPOUND ANNUAL STOCK PRICE APPRECIATION" means the compound
annual growth rate in the daily average closing price of the
Company's stock from the period of October 1, 1992 through
December 31, 1992 ("Base Period") to the period from October 1,
1997 through December 31, 1997 ("End Period").
"DISABILITY" refers to any Termination of Service as a result of
a physical or mental condition that prevents a Participant from
performing his or her normal duties of employment. If a
Participant makes application for disability benefits under the
Company's long-term disability program and qualifies for such
benefits, the Participant shall be presumed to qualify as totally
and permanently disabled under the Plan. In the absence of a
Company-sponsored long-term disability program, a Participant
will be considered totally and permanently disabled under the
Plan if, in the opinion of two doctors, one retained by the
Company and one retained by the Participant, the Participant is
considered unable to perform his or her normal duties of
employment as a result of a physical or mental condition.
"INITIAL PARTICIPANT" refers to an employee of the Company
selected by the Compensation Committee to participate in the Plan
upon the Plan's approval by the Committee.
"NET INCOME" means the annual after-tax net income of the Company
determined in accordance with Generally Accepted Accounting
Principles (GAAP). Accruals for compensation expense
attributable to Awards earned under the Plan will be deducted in
calculating Net Income.
"NEW PARTICIPANT" refers to an employee of the Company selected
by the Compensation Committee to participate in the Plan who is
not an Initial Participant as defined in this Section III.
"PARTICIPANT" refers to an executive of the Company designated by
the Compensation Committee to participate in the Plan.
"PERFORMANCE PERIOD" refers to the period over which performance
is measured to determine the size of Awards earned under the
Plan. For Initial Participants, Performance Period refers to the
period beginning January 1, 1993, and ending December 31, 1997 or
earlier upon a Termination of Service as provided for in the
Plan. For New Participants, Performance Period refers to the
period beginning with the year of initial participation of the
Plan and ending December 31, 1997 or earlier upon a Termination
of Service as provided for in the Plan.
-2-
<PAGE>
"PLAN" refers to the Company's Long-Term Incentive Plan for
Corporate Executives described in this document.
"RETIREMENT" means a Termination of Service in accordance with
the provisions of the Company's retirement plan(s) in effect for
a Participant at the time of Termination of Service.
"RETURN ON TOTAL CAPITAL" OR "ROTC" means the ratio of Net Income
to Average Total Capital.
"SERVICE" means continuous and substantially full-time employment
with the Company.
"TERMINATION OF SERVICE" refers to a termination of Service from
the Company for any reason, whether voluntary or involuntary,
including death, Retirement and Disability.
"TOTAL CAPITAL" means the sum of long-term debt, other long-term
liabilities (including deferred taxes and accruals for workers'
compensation expense) and common and preferred stockholder's
equity, determined in accordance with Generally Accepted
Accounting Principles (GAAP).
SECTION IV - GENERAL PLAN DESCRIPTION
A. OVERVIEW
The Plan provides each Participant with the opportunity to
earn a cash Award at the end of the Performance Period. The
amount of each Participant's Award opportunity is equal to
the product of:
(i) The sum obtained by adding, for each year of the
Performance Period, the product of (A) and (B), where
(A) equals a percentage ("Sharing Percentage")
established by the Committee for each Participant, and
(B) equals the amount by which the Company's cumulative
Net Income for each year of the Performance Period
exceeds (or falls below) a 6 percent Return on Total
Capital, and,
(ii) A multiplier ("Stock Appreciation Multiplier") based on
the Company's Compound Annual Stock Price Appreciation
over the Performance Period.
B. SHARING PERCENTAGE
Sharing Percentages will vary among Participants based on
the level of a Participant's responsibility. In addition,
each Participant's Sharing Percentage may vary according to
the Company's level of Return on Total Capital during each
year of the Performance Period.
-3-
<PAGE>
Sharing Percentages will be determined by the Compensation
Committee and will be communicated in an Agreement executed
between the Participant and the Company.
A Participant's Sharing Percentage may be increased or
decreased by the Compensation Committee during the
Performance Period to recognize an increase or decrease in
responsibility. In such cases, the new Sharing Percentage
will become effective beginning with the next full month
following the Sharing Percentage modification. The
Participant's Sharing Percentage for the year of
modification will represent an average of the two Sharing
Percentages for that year, weighted by the number of months
that each was in effect. The new Sharing Percentage will be
used prospectively, in that it will not alter any accrued
Award opportunity from prior periods.
C. STOCK APPRECIATION MULTIPLIER
The Stock Appreciation Multiplier ranges from 1.00 to 1.75
depending upon the Company's Compound Annual Stock Price
Appreciation (see Stock Appreciation Multiplier Table on the
following page). The Stock Appreciation Multiplier will be
applied at the end of the Performance Period to the
cumulative accrued dollar value of a Participant's Award as
determined by applying the Participant's applicable Sharing
Percentage to the amount of Company Net Income in excess of
a 6 percent Return on Total Capital for each year of the
Performance Period.
STOCK APPRECIATION MULTIPLIER TABLE (1)
<TABLE>
<CAPTION>
COMPOUND ANNUAL GROWTH STOCK APPRECIATION
IN STOCK PRICE MULTIPLIER
<S> <C>
10% or Less 1.00
20% 1.25
30% 1.50
40% or More 1.75
</TABLE>
(1) Multiplier is to be interpolated for performance
between discrete points.
D. NEW PARTICIPANTS
New Participants may be added to the Plan at any time at the
discretion of the Compensation Committee. A New Participant
will be eligible for accrue an Award beginning with the next
full month following initial entry into the Plan.
Notwithstanding the above, an individual must be a
Participant in the Plan for at least three months during a
fiscal year in order to accrue an Award for that fiscal
year.
-4-
<PAGE>
The value of an Award accrued by a New Participant will be
calculated based on the Company's Net Income and Return on
Total Capital performance beginning with the start of the
fiscal year during which the individual initially becomes a
Participant in the Plan. In cases where an individual
becomes a Participant in the Plan following the beginning of
a fiscal year, the Participant's accrued Award will be
calculated for that fiscal year by prorating the Award the
Participant would have accrued had he or she participated in
the Plan for the full fiscal year. Such proration will be
determined by dividing the number of full months of
participation in the Plan during the fiscal year by twelve.
Calculation of the Stock Appreciation Multiplier for New
Participants will be based on the Company's Compound Annual
Stock Price Appreciation as defined in Section III herein
with the exception that the Base Period will represent the
three months immediately prior to the Participant's initial
entry into the Plan, rather than the period October 1, 1992
through December 31, 1992.
E. AWARD ACCRUAL
A Participant's earned Award will accrue annually over the
Performance Period. However, payment of accrued Awards will
be deferred until after the conclusion of the Performance
Period, except as otherwise described in Section IV.G.
The cash Award available to each Participant at the end of
the Performance Period will be equal to the sum of the
accrued Award attributable to that Participant for each year
of the Performance Period adjusted by the Stock Appreciation
Multiplier. The foregoing to the contrary notwithstanding,
in no event shall the cash Award paid to Mr. Hanks under the
Plan at the end of the Performance Period exceed $1,819,125.
F. OFFSET TO ACCRUED AWARDS FOR PERFORMANCE BELOW THE 6 PERCENT
RETURN ON CAPITAL THRESHOLD
To the extent that the Company's Return on Total Capital is
less than 6 percent in any fiscal year during the
Performance Period, previously accrued Awards will be
reduced by the shortfall in Net Income multiplied by the
Participant's applicable Sharing Percentage.
Notwithstanding the above, a Participant's cumulative
accrued Award balance as of the end of the Performance
Period may not be less than zero.
G. VALUATION UPON TERMINATION
If a Participant terminates employment prior to the end of
the Performance Period for any reason except for death,
Disability or involuntary termination without Cause, any
accrued Award will be forfeited.
-5-
<PAGE>
Upon a Termination of Service due to death, Disability, or
involuntary termination without Cause, 100 percent of a
Participant's accrued Award shall become vested and payable.
The value of a Participant's accrued Award during the year
of his or her termination will be based upon the Company's
Net Income and Return on Capital for the full fiscal year.
This value will then be prorated by dividing the number of
full months of participation during the fiscal year by
twelve. The Stock Appreciation Multiplier will be
calculated as defined in Section III herein with the
exception that the "End Period" stock price will represent
the three months immediately prior to termination.
In order to facilitate the settlement of an estate following
a Termination of Service due to death, the Compensation
Committee in its sole discretion may elect to base the
Participant's Award accrual during the year of termination
upon an estimate of the Company's Net Income and Return on
Total Capital for the fiscal year.
H. PAYMENT OF AWARDS
Except in the case of death, Disability or involuntary
termination without Cause, Awards determined under the Plan
will be paid within a maximum of one hundred twenty (120)
days following the conclusion of the Performance Period.
Upon termination due to death, Disability or involuntary
termination without Cause, accrued Awards will be paid as
soon as possible following the determination of the value of
such Awards.
All Award payments will be made in cash. Any Award earned
by a Participant will be reduced to the extent payments are
made to a Participant during the Performance Period under
any other Company-sponsored cash incentive plan with a
performance measurement period longer than one year or
noncash stock incentive plan (e.g., restricted stock).
I. VOLUNTARY DEFERRAL OPTION
At his or her option, a Participant may elect to defer the
timing of payment to a later date of all or part of an Award
earned under the Plan. Deferred amounts will be credited
annually with interest at a rate to be determined by the
Compensation Committee at the time of election.
The election to defer must be made through a written
deferral agreement filed with the Company prior to the
beginning of the final year of the Performance Period. Such
Agreement will specify the length of the deferral period,
the percentage of the Award to be deferred, designated
beneficiary(ies) in the event of death, and the interest
rater to be credited to the deferred amount.
J. WITHHOLDING TAX
The Company will withhold from all payments under the Plan
an amount sufficient to satisfy any federal, state and local
tax withholding requirements.
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<PAGE>
K. TERM OF PLAN
The term of the Plan shall be for five years beginning
January 1, 1991 unless the Plan is amended or terminated by
the Board of Directors in accordance with Sections V.C. and
V.D.
L. ADJUSTMENT UPON A CHANGE OF CONTROL
Upon a Change of Control, 100 percent of a Participant's
accrued Award shall become immediately vested and payable.
Such payment will be calculated consistent with the
provisions established in Section IV.G. herein for a
Termination of Service due to death, Disability or
involuntary termination without Cause.
M. ADJUSTMENTS FOR EXTRAORDINARY EVENTS
If an event occurs during the Performance Period that
significantly influences the Net Income of the Company, and
is deemed by the Board of Directors to be extraordinary and
out of the control of management, the Compensation Committee
may, in its sole discretion, increase or decrease the Net
Income figure. Events warranting such action may include,
but are not limited to, significant acquisitions or
divestitures, changes in accounting, tax or regulatory
rulings or significant changes in economic conditions
resulting in "windfall" gains or losses.
SECTION V - PLAN ADMINISTRATION
A. GENERAL ADMINISTRATION
The Compensation Committee will administer the Plan and
related Agreements, and will interpret and apply the
provisions of the Plan and Agreements in accordance with
their terms. The interpretation and application of these
terms by the Compensation Committee shall be binding and
conclusive.
B. DESIGNATION OF BENEFICIARIES
Each Participant shall have the right at any time to
designate any person or persons as beneficiary(ies) to whom
payments earned under the Plan shall be made in the event of
the Participant's death prior to the distribution of all
benefits due the Participant under the Plan. Each
beneficiary designation shall be effective only when filed
in writing with the Company during the Participant's
lifetime, on the attached Beneficiary Designation Form.
The filing of a new Beneficiary Designation Form will cancel
all designations previously filed. Any finalized divorce or
marriage (other than a common law marriage) of a Participant
subsequent to the date of filing of a Beneficiary
Designation form shall revoke such designation, unless:
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* In the case of divorce, the previous spouse was
not designated as beneficiary, and
* In the case of marriage, the Participant's new
spouse had previously been designated as
beneficiary.
The spouse of a married Participant shall joint in any
designation of a beneficiary other than the spouse.
If a Participant fails to designate a beneficiary as
provided for above, or if the beneficiary designation is
revoked by marriage, divorce or otherwise without execution
of a new designation, then the Compensation Committee shall
direct the distribution of such benefits to the
Participant's estate.
C. AMENDMENT OF PLAN
The Compensation Committee may amend or suspend the Plan in
whole or in part at any time. However, any amendment or
suspension must be prospective in that it may not deprive
Participants of any accrued Awards earned through the date
of amendment or suspension.
D. TERMINATION OF PLAN
The Compensation Committee may terminate the Plan at any
time if, in its judgment, the continuation of the Plan is
not in the best interest of the Company. Upon such
termination, 100 percent of the accrued Award shall become
payable for each Participant. Such payment will be
calculated consistent with the provisions established in
Paragraph IV.G. for a Termination of Service due to death,
Disability or involuntary termination without Cause.
Upon termination of the Plan, a Participant shall have no
further rights under the Plan other than to receive payments
for accrued benefits as provided for in this Section.
SECTION VI - MISCELLANEOUS PROVISIONS
A. UNSECURED STATUS OF CLAIM
Participants and their beneficiaries, heirs, successors and
assigns shall have no legal or equitable rights, interests
or claims in any specific property or assets of the Company.
No assets of the Company shall be held under any trust for
the benefit of Participants, their beneficiaries, heirs,
successors or assigns, or held in any way as collateral or
security for the fulfillment of the Company's obligations
under the Plan.
Any and all of the Company's assets shall be, and shall
remain, the general, unpledged and unrestricted assets of
the Company. The Company's obligation under
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the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay monies in the future.
B. EMPLOYMENT NOT GUARANTEED
Nothing contained in the Plan nor any Agreement nor any
action taken in the administration of the Plan shall be
construed as a contract of employment or as giving a
Participant any right to be retained in the Service of the
Company.
C. RIGHT OF OFFSET
If a Participant becomes entitled to a payment under the
Plan, and if at such time the Participant has outstanding
any debt, obligation or other liability representing any
amount owing to the Company, then the Company may offset
such amount against the amount of the payment otherwise due
the Participant under the Plan.
D. NONASSIGNABILITY
No person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise
encumber, hypothecate or convey in advance of actual receipt
the amounts, if any, payable under the Plan, or any part
thereof, or any interest therein, which are, and all rights
to which are, expressly declared to be unassignable and
nontransferable. No portion of the amounts payable shall,
prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any
other person, nor be transferrable by operation of law in
the event of the Participant's or any other person's
bankruptcy or insolvency.
E. VALIDITY
In the event that any provision of the Plan or any related
Agreement is held to be invalid, void or unenforceable, the
same shall not affect, in any respect whatsoever, the
validity of any other provision of the Plan or any related
Agreement.
F. APPLICABLE LAW
The Plan and any related Agreements shall be governed in
accordance with the laws of the state of Idaho.
G. INUREMENT OF RIGHTS AND OBLIGATIONS
The rights and obligations under the Plan and any related
Agreements shall inure to the benefit of, and shall be
binding upon the Company, its successors and assigns, and
the Participants and their beneficiaries.
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<PAGE>
Exhibit 10.4
MORRISON KNUDSEN CORPORATION
LONG-TERM INCENTIVE PLAN FOR THE
ENGINEERING & CONSTRUCTION GROUP
JANUARY 1993 - DECEMBER 1997
<PAGE>
TABLE OF CONTENTS
SECTION I - PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION II - ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION III - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION IV - GENERAL PLAN DESCRIPTION. . . . . . . . . . . . . . . . . . . . 3
A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Sharing Percentage . . . . . . . . . . . . . . . . . . . . . . . . 3
C. New Participants . . . . . . . . . . . . . . . . . . . . . . . . . 4
D. Award Accrual. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
E. Offset to Accrued Awards for Performance Below the 20 Percent
Return on Capital Threshold. . . . . . . . . . . . . . . . . . . . 4
F. Valuation Upon Termination . . . . . . . . . . . . . . . . . . . . 5
G. Payment of Awards. . . . . . . . . . . . . . . . . . . . . . . . . 5
H. Voluntary Deferral Option. . . . . . . . . . . . . . . . . . . . . 5
I. Withholding Tax. . . . . . . . . . . . . . . . . . . . . . . . . . 6
J. Term of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
K. Adjustment Upon a Change of Control. . . . . . . . . . . . . . . . 6
L. Adjustments for Extraordinary Events . . . . . . . . . . . . . . . 6
SECTION V - PLAN ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 6
A. General Administration . . . . . . . . . . . . . . . . . . . . . . 6
B. Designation of Beneficiaries . . . . . . . . . . . . . . . . . . . 6
C. Amendment of Plan. . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Termination of Plan. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION VI - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 7
A. Unsecured Status of Claim. . . . . . . . . . . . . . . . . . . . . 7
B. Employment Not Guaranteed. . . . . . . . . . . . . . . . . . . . . 8
C. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . 8
E. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 8
G. Inurement of Rights and Obligations. . . . . . . . . . . . . . . . 9
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<PAGE>
SECTION I - PURPOSE
The purpose of the MORRISON KNUDSEN CORPORATION LONG-TERM INCENTIVE PLAN FOR THE
ENGINEERING & CONSTRUCTION GROUP (the "Plan") is to provide long-term incentive
compensation to key executives of the Mining Group of Morrison Knudsen
Corporation, an Ohio corporation (the "Company") who are in a position to make
important contributions toward the Group's long-term growth and success. The
Plan provides a means whereby such executives are given an opportunity to share
financially in the future value they help to create for the Company and its
stockholders.
SECTION II - ELIGIBILITY
Eligibility to participate in the Plan is limited to the Group President of the
Engineering & Construction Group and other key executives of the Company who, in
the opinion of the Compensation Committee of the Board of Directors, have the
responsibility and ability to significantly influence the Group's long-term
performance.
SECTION III - DEFINITIONS
"AGREEMENT" refers to the written agreement entered into between the Company and
a Participant to carry out the Plan with respect to the Participant in
accordance with the Plan's terms and conditions.
"AVERAGE TOTAL CAPITAL EMPLOYED" means the average of beginning and ending Total
Capital Employed for the Group's fiscal year.
"AWARD" refers to an amount earned by, and paid in the form of cash to, a
Participant under the terms and provisions of the Plan.
"CAUSE" means (i) willful and continued failure by a Participant to perform his
or her duties (except as a direct result of the Participant's incapacity due to
physical or mental illness) after receiving notification by the Chief Executive
Officer identifying the manner in which the Participant has failed to perform
his or her duties, (ii) willfully engaging in conduct materially injurious to
the Company, or (iii) conviction of the Participant of any felony involving
moral turpitude.
"CHANGE OF CONTROL" means a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A,
Regulation 240.14a-101 promulgated under the Securities Exchange Act of 1934 as
now in effect or, if Item 6(e) is no longer in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 which serve similar purposes; provided that, without limitation, such a
Change of Control shall be deemed to have occurred if and when (a) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934) is or becomes a beneficial owner, directly or indirectly, of securities
of the
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<PAGE>
Company representing 30 percent or more of the combined voting power of the
Company's then outstanding securities, or (b) individuals who were members of
the Board of Directors of the Company immediately prior to a meeting of the
stockholders of the Company involving a contest for the election of directors
shall not constitute a majority of the Board of Directors following such
election.
"COMPENSATION COMMITTEE" OR "COMMITTEE" refers to the Executive Compensation and
Nominating Committee of the Board of Directors of the Company.
"DISABILITY" refers to any Termination of Service as a result of a physical or
mental condition that prevents a Participant from performing his or her normal
duties of employment. If a Participant makes application for disability
benefits under the Company's long-term disability program and qualifies for such
benefits, the Participant shall be presumed to qualify as totally and
permanently disabled under the Plan. In the absence of a Company-sponsored
long-term disability program, a Participant will be considered totally and
permanently disabled under the Plan if, in the opinion of two doctors, one
retained by the Company and one retained by the Participant, the Participant is
considered unable to perform his or her normal duties of employment as a result
of a physical or mental condition.
"INITIAL PARTICIPANT" refers to an employee of the Company selected by the Chief
Executive Officer to participate in the Plan upon the Plan's approval by the
Committee.
"NET OPERATING INCOME" means the Group's total net contribution to the Company
determined in accordance with Generally Accepted Accounting Principles (GAAP).
Accruals for compensation expense attributable to Awards earned under the Plan
will be deducted in calculating Net Operating Income.
"NEW PARTICIPANT" refers to an employee of the Company selected by the Chief
Executive Officer to participate in the Plan who is not an Initial Participant
as defined in this Section III.
"PARTICIPANT" refers to an executive of the Company designated by the Chief
Executive Officer to participate in the Plan.
"PERFORMANCE PERIOD" refers to the period over which performance is measured to
determine the size of Awards earned under the Plan. For Initial Participants,
Performance Period refers to the period beginning January 1, 1993, and ending
December 31, 1997 or earlier upon a Termination of Service as provided for in
the Plan. For New Participants, Performance Period refers to the period
beginning with the year of initial participation of the Plan and ending
December 31, 1997 or earlier upon a Termination of Service as provided for in
the Plan.
"PLAN" refers to the Company's Long-Term Incentive Plan for the Engineering &
Construction Group described in this document.
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<PAGE>
"RETIREMENT" means a Termination of Service in accordance with the provisions of
the Company's frozen retirement plan in effect for a Participant at the time of
Termination of Service.
"RETURN ON TOTAL CAPITAL EMPLOYED" OR "ROTCE" means the ratio of Net Operating
Income to Average Total Capital Employed.
"SERVICE" means continuous and substantially full-time employment with the
Company.
"TERMINATION OF SERVICE" refers to a termination of Service from the Company for
any reason, whether voluntary or involuntary, including death, Retirement and
Disability.
"TOTAL CAPITAL EMPLOYED" means the remainder of (A) and (B) where (A) equals
total assets dedicated to the Group and (B) equals the Group's current
liabilities, determined in accordance with Generally Accepted Accounting
Principles (GAAP).
SECTION IV - GENERAL PLAN DESCRIPTION
A. OVERVIEW
The Plan provides each Participant with the opportunity to earn a cash
Award at the end of the Performance Period. The amount of each
Participant's Award opportunity is equal to the sum obtained by adding, for
each year of the Performance Period, the product of (A) and (B), where (A)
equals a percentage ("Sharing Percentage") established by the Committee for
each Participant, and (B) equals the amount by which the Group's cumulative
Net Operating Income for each year of the Performance Period exceeds (or
falls below) a twenty percent (20%) percent Return on Total Capital
Employed.
B. SHARING PERCENTAGE
Sharing Percentages will vary among Participants based on the level of a
Participant's responsibility. In addition, each Participant's Sharing
Percentage may vary according to the Group's level of Return on Total
Capital Employed during each year of the Performance Period.
Sharing Percentages will be determined by the Compensation Committee and
will be communicated in an Agreement executed between the Participant and
the Company.
A Participant's Sharing Percentage may be increased or decreased by the
Compensation Committee during the Performance Period to recognize an
increase or decrease in responsibility. In such cases, the new Sharing
Percentage will become effective beginning with the next full month
following the Sharing Percentage modification. The Participant's Sharing
Percentage for the year of modification will represent an average of the
two Sharing Percentages for that year, weighted by the number of months
that each was in effect. The new Sharing Percentage will be used
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<PAGE>
prospectively, in that it will not alter any accrued Award opportunity from
prior periods.
C. NEW PARTICIPANTS
New Participants may be added to the Plan at any time at the discretion of
the Compensation Committee. A New Participant will be eligible for accrue
an Award beginning with the next full month following initial entry into
the Plan. Notwithstanding the above, an individual must be a Participant
in the Plan for at least three months during a fiscal year in order to
accrue an Award for that fiscal year.
The value of an Award accrued by a New Participant will be calculated based
on the Group's Net Operating Income and Return on Total Capital Employed
performance beginning with the start of the fiscal year during which the
individual initially becomes a Participant in the Plan. In cases where an
individual becomes a Participant in the Plan following the beginning of a
fiscal year, the Participant's accrued Award will be calculated for that
fiscal year by prorating the Award the Participant would have accrued had
he or she participated in the Plan for the full fiscal year. Such
proration will be determined by dividing the number of full months of
participation in the Plan during the fiscal year by twelve.
D. AWARD ACCRUAL
A Participant's earned Award will accrue annually over the Performance
Period. However, payment of accrued Awards will be deferred until after
the conclusion of the Performance Period, except as otherwise described in
Section IV.F.
The cash Award available to each Participant at the end of the Performance
Period will be equal to the sum of the accrued Award attributable to that
Participant for each year of the Performance Period. The foregoing to the
contrary notwithstanding, in no event shall the cash Award paid to Mr.
Sarsten under the Plan at the end of the Performance Period exceed $4.25
million.
E. OFFSET TO ACCRUED AWARDS FOR PERFORMANCE BELOW THE TWENTY PERCENT RETURN ON
CAPITAL THRESHOLD
To the extent that the Group's Return on Total Capital Employed is less
than twenty percent (20%) percent in any fiscal year during the Performance
Period, previously accrued Awards will be reduced by the shortfall in Net
Operating Income multiplied by the Participant's applicable Sharing
Percentage.
Notwithstanding the above, a Participant's cumulative accrued Award balance
as of the end of the Performance Period shall not be less than zero.
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<PAGE>
F. VALUATION UPON TERMINATION
If a Participant terminates employment prior to the end of the Performance
Period for any reason except for death, Disability or involuntary
termination without Cause, any accrued Award will be forfeited.
Upon a Termination of Service due to death, Disability, or involuntary
termination without Cause, 100 percent of a Participant's accrued Award
shall become vested and payable. The value of a Participant's accrued
Award during the year of his or her termination will be based upon the
Group's Net Operating Income and Total Capital Employed for the full fiscal
year. This value will then be prorated by dividing the number of full
months of participation during the fiscal year by twelve.
In order to facilitate the settlement of an estate following a Termination
of Service due to death, the Compensation Committee in its sole discretion
may elect to base the Participant's Award accrual during the year of
termination upon an estimate of the Group's Net Operating Income and Total
Capital Employed for the fiscal year.
G. PAYMENT OF AWARDS
Except in the case of death, Disability or involuntary termination without
Cause, Awards determined under the Plan will be paid within a maximum of
one hundred twenty (120) days following the conclusion of the Performance
Period. Upon termination due to death, Disability or involuntary
termination without Cause, accrued Awards will be paid as soon as possible
following the determination of the value of such Awards.
All Award payments will be made in cash. Any Award earned by a Participant
will be reduced to the extent payments are made to a Participant during the
Performance Period under any other Company-sponsored cash incentive plan
with a performance measurement period longer than one year or noncash stock
incentive plan (e.g., restricted stock).
H. VOLUNTARY DEFERRAL OPTION
At his or her option, a Participant may elect to defer the timing of
payment to a later date of all or part of an Award earned under the Plan.
Deferred amounts will be credited annually with interest at a rate to be
determined by the Compensation Committee at the time of election.
The election to defer must be made through a written deferral agreement
filed with the Company prior to the beginning of the final year of the
Performance Period. Such Agreement will specify the length of the deferral
period, the percentage of the Award to be deferred, designated
beneficiary(ies) in the event of death, and the interest rater to be
credited to the deferred amount.
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<PAGE>
I. WITHHOLDING TAX
The Company will withhold from all payments under the Plan an amount
sufficient to satisfy any federal, state and local tax withholding
requirements.
J. TERM OF PLAN
The term of the Plan shall be for five years beginning January 1, 1993
unless the Plan is amended or terminated by the Board of Directors in
accordance with Sections V.C. and V.D.
K. ADJUSTMENT UPON A CHANGE OF CONTROL
Upon a Change of Control, 100 percent of a Participant's accrued Award
shall become immediately vested and payable. Such payment will be
calculated consistent with the provisions established in Section IV.F.
herein for a Termination of Service due to death, Disability or involuntary
termination without Cause.
L. ADJUSTMENTS FOR EXTRAORDINARY EVENTS
If an event occurs during the Performance Period that significantly
influences the Net Operating Income of the Group or Total Capital Employed
by the Group, and is deemed by the Compensation Committee to be
extraordinary and out of the control of management, the Compensation
Committee may, in its sole discretion, increase or decrease the Net
Operating Income figure or Total Capital Employed figure. Events
warranting such action may include, but are not limited to, significant
acquisitions or divestitures, changes in accounting, tax or regulatory
rulings or significant changes in economic conditions resulting in
"windfall" gains or losses.
SECTION V - PLAN ADMINISTRATION
A. GENERAL ADMINISTRATION
The Compensation Committee will administer the Plan and related Agreements,
and will interpret and apply the provisions of the Plan and Agreements in
accordance with their terms. The interpretation and application of these
terms by the Compensation Committee shall be binding and conclusive.
B. DESIGNATION OF BENEFICIARIES
Each Participant shall have the right at any time to designate any person
or persons as beneficiary(ies) to whom payments earned under the Plan shall
be made in the event of the Participant's death prior to the distribution
of all benefits due the Participant under the Plan. Each beneficiary
designation shall be effective only when filed in writing with the Company
during the Participant's lifetime, on the attached Beneficiary Designation
Form.
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<PAGE>
The filing of a new Beneficiary Designation Form will cancel all
designations previously filed. Any finalized divorce or marriage (other
than a common law marriage) of a Participant subsequent to the date of
filing of a Beneficiary Designation form shall revoke such designation,
unless:
* In the case of divorce, the previous spouse was not designated as
beneficiary, and
* In the case of marriage, the Participant's new spouse had
previously been designated as beneficiary.
The spouse of a married Participant shall joint in any designation of a
beneficiary other than the spouse.
If a Participant fails to designate a beneficiary as provided for above, or
if the beneficiary designation is revoked by marriage, divorce or otherwise
without execution of a new designation, then the Compensation Committee
shall direct the distribution of such benefits to the Participant's estate.
C. AMENDMENT OF PLAN
The Compensation Committee may amend or suspend the Plan in whole or in
part at any time. However, any amendment or suspension must be prospective
in that it may not deprive Participants of any accrued Awards earned
through the date of amendment or suspension.
D. TERMINATION OF PLAN
The Compensation Committee may terminate the Plan at any time if, in its
judgment, the continuation of the Plan is not in the best interest of the
Company. Upon such termination, 100 percent of the accrued Award shall
become payable for each Participant. Such payment will be calculated
consistent with the provisions established in Paragraph IV.F. for a
Termination of Service due to death, Disability or involuntary termination
without Cause.
Upon termination of the Plan, a Participant shall have no further rights
under the Plan other than to receive payments for accrued benefits as
provided for in this Section.
SECTION VI - MISCELLANEOUS PROVISIONS
A. UNSECURED STATUS OF CLAIM
Participants and their beneficiaries, heirs, successors and assigns shall
have no legal or equitable rights, interests or claims in any specific
property or assets of the Company. No assets of the Company shall be held
under any trust for the benefit
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<PAGE>
of Participants, their beneficiaries, heirs, successors or assigns, or held
in any way as collateral or security for the fulfillment of the Company's
obligations under the Plan.
Any and all of the Company's assets shall be, and shall remain, the
general, unpledged and unrestricted assets of the Company. The Company's
obligation under the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay monies in the future.
B. EMPLOYMENT NOT GUARANTEED
Nothing contained in the Plan nor any Agreement nor any action taken in the
administration of the Plan shall be construed as a contract of employment
or as giving a Participant any right to be retained in the Service of the
Company.
C. RIGHT OF OFFSET
If a Participant becomes entitled to a payment under the Plan, and if at
such time the Participant has outstanding any debt, obligation or other
liability representing any amount owing to the Company, then the Company
may offset such amount against the amount of the payment otherwise due the
Participant under the Plan.
D. NONASSIGNABILITY
No person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, hypothecate or convey in
advance of actual receipt the amounts, if any, payable under the Plan, or
any part thereof, or any interest therein, which are, and all rights to
which are, expressly declared to be unassignable and nontransferable. No
portion of the amounts payable shall, prior to actual payment, be subject
to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person,
nor be transferrable by operation of law in the event of the Participant's
or any other person's bankruptcy or insolvency.
E. VALIDITY
In the event that any provision of the Plan or any related Agreement is
held to be invalid, void or unenforceable, the same shall not affect, in
any respect whatsoever, the validity of any other provision of the Plan or
any related Agreement.
F. APPLICABLE LAW
The Plan and any related Agreements shall be governed in accordance with
the laws of the state of Idaho.
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G. INUREMENT OF RIGHTS AND OBLIGATIONS
The rights and obligations under the Plan and any related Agreements shall
inure to the benefit of, and shall be binding upon the Company, its
successors and assigns, and the Participants and their beneficiaries.
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<PAGE>
Exhibit 10.5
MORRISON KNUDSEN CORPORATION
LONG-TERM INCENTIVE PLAN FOR THE
HEAVY CIVIL CONSTRUCTION GROUP
JANUARY 1993 - DECEMBER 1997
<PAGE>
TABLE OF CONTENTS
SECTION I - PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION II - ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION III - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION IV - GENERAL PLAN DESCRIPTION. . . . . . . . . . . . . . . . . . . . 3
A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Sharing Percentage . . . . . . . . . . . . . . . . . . . . . . . . 3
C. New Participants . . . . . . . . . . . . . . . . . . . . . . . . . 4
D. Award Accrual. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
E. Offset to Accrued Awards for Performance Below the 15 Percent
Return on Capital Threshold. . . . . . . . . . . . . . . . . . . . 4
F. Valuation Upon Termination . . . . . . . . . . . . . . . . . . . . 5
G. Payment of Awards. . . . . . . . . . . . . . . . . . . . . . . . . 5
H. Voluntary Deferral Option. . . . . . . . . . . . . . . . . . . . . 5
I. Withholding Tax. . . . . . . . . . . . . . . . . . . . . . . . . . 6
J. Term of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
K. Adjustment Upon a Change of Control. . . . . . . . . . . . . . . . 6
L. Adjustments for Extraordinary Events . . . . . . . . . . . . . . . 6
SECTION V - PLAN ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 6
A. General Administration . . . . . . . . . . . . . . . . . . . . . . 6
B. Designation of Beneficiaries . . . . . . . . . . . . . . . . . . . 6
C. Amendment of Plan. . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Termination of Plan. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION VI - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 7
A. Unsecured Status of Claim. . . . . . . . . . . . . . . . . . . . . 7
B. Employment Not Guaranteed. . . . . . . . . . . . . . . . . . . . . 8
C. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . 8
E. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 8
G. Inurement of Rights and Obligations. . . . . . . . . . . . . . . . 9
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SECTION I - PURPOSE
The purpose of the MORRISON KNUDSEN CORPORATION LONG-TERM INCENTIVE PLAN FOR THE
HEAVY CIVIL CONSTRUCTION GROUP (the "Plan") is to provide long-term incentive
compensation to key executives of the Heavy Civil Construction Group of Morrison
Knudsen Corporation, an Ohio corporation (the "Company") who are in a position
to make important contributions toward the Group's long-term growth and success.
The Plan provides a means whereby such executives are given an opportunity to
share financially in the future value they help to create for the Company and
its stockholders.
SECTION II - ELIGIBILITY
Eligibility to participate in the Plan is limited to the Group President of the
Heavy Civil Construction Group and other key executives of the Company who, in
the opinion of the Compensation Committee of the Board of Directors, have the
responsibility and ability to significantly influence the Group's long-term
performance.
SECTION III - DEFINITIONS
"AGREEMENT" refers to the written agreement entered into between the Company and
a Participant to carry out the Plan with respect to the Participant in
accordance with the Plan's terms and conditions.
"AVERAGE TOTAL CAPITAL EMPLOYED" means the average of beginning and ending Total
Capital Employed for the Group's fiscal year.
"AWARD" refers to an amount earned by, and paid in the form of cash to, a
Participant under the terms and provisions of the Plan.
"CAUSE" means (i) willful and continued failure by a Participant to perform his
or her duties (except as a direct result of the Participant's incapacity due to
physical or mental illness) after receiving notification by the Chief Executive
Officer identifying the manner in which the Participant has failed to perform
his or her duties, (ii) willfully engaging in conduct materially injurious to
the Company, or (iii) conviction of the Participant of any felony involving
moral turpitude.
"CHANGE OF CONTROL" means a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A,
Regulation 240.14a-101 promulgated under the Securities Exchange Act of 1934 as
now in effect or, if Item 6(e) is no longer in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 which serve similar purposes; provided that, without limitation, such a
Change of Control shall be deemed to have occurred if and when (a) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934) is or becomes a beneficial owner, directly or indirectly, of securities
of the
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Company representing 30 percent or more of the combined voting power of the
Company's then outstanding securities, or (b) individuals who were members of
the Board of Directors of the Company immediately prior to a meeting of the
stockholders of the Company involving a contest for the election of directors
shall not constitute a majority of the Board of Directors following such
election.
"COMPENSATION COMMITTEE" OR "COMMITTEE" refers to the Executive Compensation and
Nominating Committee of the Board of Directors of the Company.
"DISABILITY" refers to any Termination of Service as a result of a physical or
mental condition that prevents a Participant from performing his or her normal
duties of employment. If a Participant makes application for disability
benefits under the Company's long-term disability program and qualifies for such
benefits, the Participant shall be presumed to qualify as totally and
permanently disabled under the Plan. In the absence of a Company-sponsored
long-term disability program, a Participant will be considered totally and
permanently disabled under the Plan if, in the opinion of two doctors, one
retained by the Company and one retained by the Participant, the Participant is
considered unable to perform his or her normal duties of employment as a result
of a physical or mental condition.
"INITIAL PARTICIPANT" refers to an employee of the Company selected by the Chief
Executive Officer to participate in the Plan upon the Plan's approval by the
Committee.
"NET OPERATING INCOME" means the Group's total net contribution to the Company
determined in accordance with Generally Accepted Accounting Principles (GAAP).
Accruals for compensation expense attributable to Awards earned under the Plan
will be deducted in calculating Net Operating Income.
"NEW PARTICIPANT" refers to an employee of the Company selected by the Chief
Executive Officer to participate in the Plan who is not an Initial Participant
as defined in this Section III.
"PARTICIPANT" refers to an executive of the Company designated by the Chief
Executive Officer to participate in the Plan.
"PERFORMANCE PERIOD" refers to the period over which performance is measured to
determine the size of Awards earned under the Plan. For Initial Participants,
Performance Period refers to the period beginning January 1, 1993, and ending
December 31, 1997 or earlier upon a Termination of Service as provided for in
the Plan. For New Participants, Performance Period refers to the period
beginning with the year of initial participation of the Plan and ending
December 31, 1997 or earlier upon a Termination of Service as provided for in
the Plan.
"PLAN" refers to the Company's Long-Term Incentive Plan for the Heavy Civil
Construction Group described in this document.
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"RETIREMENT" means a Termination of Service in accordance with the provisions of
the Company's frozen retirement plan in effect for a Participant at the time of
Termination of Service.
"RETURN ON TOTAL CAPITAL EMPLOYED" OR "ROTCE" means the ratio of Net Operating
Income to Average Total Capital Employed.
"SERVICE" means continuous and substantially full-time employment with the
Company.
"TERMINATION OF SERVICE" refers to a termination of Service from the Company for
any reason, whether voluntary or involuntary, including death, Retirement and
Disability.
"TOTAL CAPITAL EMPLOYED" means the remainder of (A) and (B) where (A) equals
total assets dedicated to the Group and (B) equals the Group's current
liabilities, determined in accordance with Generally Accepted Accounting
Principles (GAAP).
SECTION IV - GENERAL PLAN DESCRIPTION
A. OVERVIEW
The Plan provides each Participant with the opportunity to earn a cash
Award at the end of the Performance Period. The amount of each
Participant's Award opportunity is equal to the sum obtained by adding, for
each year of the Performance Period, the product of (A) and (B), where (A)
equals a percentage ("Sharing Percentage") established by the Committee for
each Participant, and (B) equals the amount by which the Group's cumulative
Net Operating Income for each year of the Performance Period exceeds (or
falls below) a fifteen percent (15%) percent Return on Total Capital
Employed.
B. SHARING PERCENTAGE
Sharing Percentages will vary among Participants based on the level of a
Participant's responsibility. In addition, each Participant's Sharing
Percentage may vary according to the Group's level of Return on Total
Capital Employed during each year of the Performance Period.
Sharing Percentages will be determined by the Compensation Committee and
will be communicated in an Agreement executed between the Participant and
the Company.
A Participant's Sharing Percentage may be increased or decreased by the
Compensation Committee during the Performance Period to recognize an
increase or decrease in responsibility. In such cases, the new Sharing
Percentage will become effective beginning with the next full month
following the Sharing Percentage modification. The Participant's Sharing
Percentage for the year of modification will represent an average of the
two Sharing Percentages for that year, weighted by the number of months
that each was in effect. The new Sharing Percentage will be used
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prospectively, in that it will not alter any accrued Award opportunity from
prior periods.
C. NEW PARTICIPANTS
New Participants may be added to the Plan at any time at the discretion of
the Compensation Committee. A New Participant will be eligible for accrue
an Award beginning with the next full month following initial entry into
the Plan. Notwithstanding the above, an individual must be a Participant
in the Plan for at least three months during a fiscal year in order to
accrue an Award for that fiscal year.
The value of an Award accrued by a New Participant will be calculated based
on the Group's Net Operating Income and Return on Total Capital Employed
performance beginning with the start of the fiscal year during which the
individual initially becomes a Participant in the Plan. In cases where an
individual becomes a Participant in the Plan following the beginning of a
fiscal year, the Participant's accrued Award will be calculated for that
fiscal year by prorating the Award the Participant would have accrued had
he or she participated in the Plan for the full fiscal year. Such
proration will be determined by dividing the number of full months of
participation in the Plan during the fiscal year by twelve.
D. AWARD ACCRUAL
A Participant's earned Award will accrue annually over the Performance
Period. However, payment of accrued Awards will be deferred until after
the conclusion of the Performance Period, except as otherwise described in
Section IV.F.
The cash Award available to each Participant at the end of the Performance
Period will be equal to the sum of the accrued Award attributable to that
Participant for each year of the Performance Period. The foregoing to the
contrary notwithstanding, in no event shall the cash Award paid to Mr.
Granger under the Plan at the end of the Performance Period exceed $1.205
million.
E. OFFSET TO ACCRUED AWARDS FOR PERFORMANCE BELOW THE FIFTEEN PERCENT RETURN
ON CAPITAL THRESHOLD
To the extent that the Group's Return on Total Capital Employed is less
than fifteen percent (15%) percent in any fiscal year during the
Performance Period, previously accrued Awards will be reduced by the
shortfall in Net Operating Income multiplied by the Participant's
applicable Sharing Percentage.
Notwithstanding the above, a Participant's cumulative accrued Award balance
as of the end of the Performance Period shall not be less than zero.
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F. VALUATION UPON TERMINATION
If a Participant terminates employment prior to the end of the Performance
Period for any reason except for death, Disability or involuntary
termination without Cause, any accrued Award will be forfeited.
Upon a Termination of Service due to death, Disability, or involuntary
termination without Cause, 100 percent of a Participant's accrued Award
shall become vested and payable. The value of a Participant's accrued
Award during the year of his or her termination will be based upon the
Group's Net Operating Income and Total Capital Employed for the full fiscal
year. This value will then be prorated by dividing the number of full
months of participation during the fiscal year by twelve.
In order to facilitate the settlement of an estate following a Termination
of Service due to death, the Compensation Committee in its sole discretion
may elect to base the Participant's Award accrual during the year of
termination upon an estimate of the Group's Net Operating Income and Total
Capital Employed for the fiscal year.
G. PAYMENT OF AWARDS
Except in the case of death, Disability or involuntary termination without
Cause, Awards determined under the Plan will be paid within a maximum of
one hundred twenty (120) days following the conclusion of the Performance
Period. Upon termination due to death, Disability or involuntary
termination without Cause, accrued Awards will be paid as soon as possible
following the determination of the value of such Awards.
All Award payments will be made in cash. Any Award earned by a Participant
will be reduced to the extent payments are made to a Participant during the
Performance Period under any other Company-sponsored cash incentive plan
with a performance measurement period longer than one year or noncash stock
incentive plan (e.g., restricted stock).
H. VOLUNTARY DEFERRAL OPTION
At his or her option, a Participant may elect to defer the timing of
payment to a later date of all or part of an Award earned under the Plan.
Deferred amounts will be credited annually with interest at a rate to be
determined by the Compensation Committee at the time of election.
The election to defer must be made through a written deferral agreement
filed with the Company prior to the beginning of the final year of the
Performance Period. Such Agreement will specify the length of the deferral
period, the percentage of the Award to be deferred, designated
beneficiary(ies) in the event of death, and the interest rater to be
credited to the deferred amount.
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I. WITHHOLDING TAX
The Company will withhold from all payments under the Plan an amount
sufficient to satisfy any federal, state and local tax withholding
requirements.
J. TERM OF PLAN
The term of the Plan shall be for five years beginning January 1, 1993
unless the Plan is amended or terminated by the Board of Directors in
accordance with Sections V.C. and V.D.
K. ADJUSTMENT UPON A CHANGE OF CONTROL
Upon a Change of Control, 100 percent of a Participant's accrued Award
shall become immediately vested and payable. Such payment will be
calculated consistent with the provisions established in Section IV.F.
herein for a Termination of Service due to death, Disability or involuntary
termination without Cause.
L. ADJUSTMENTS FOR EXTRAORDINARY EVENTS
If an event occurs during the Performance Period that significantly
influences the Net Operating Income of the Group or Total Capital Employed
by the Group, and is deemed by the Compensation Committee to be
extraordinary and out of the control of management, the Compensation
Committee may, in its sole discretion, increase or decrease the Net
Operating Income figure or Total Capital Employed figure. Events
warranting such action may include, but are not limited to, significant
acquisitions or divestitures, changes in accounting, tax or regulatory
rulings or significant changes in economic conditions resulting in
"windfall" gains or losses.
SECTION V - PLAN ADMINISTRATION
A. GENERAL ADMINISTRATION
The Compensation Committee will administer the Plan and related Agreements,
and will interpret and apply the provisions of the Plan and Agreements in
accordance with their terms. The interpretation and application of these
terms by the Compensation Committee shall be binding and conclusive.
B. DESIGNATION OF BENEFICIARIES
Each Participant shall have the right at any time to designate any person
or persons as beneficiary(ies) to whom payments earned under the Plan shall
be made in the event of the Participant's death prior to the distribution
of all benefits due the Participant under the Plan. Each beneficiary
designation shall be effective only when filed in writing with the Company
during the Participant's lifetime, on the attached Beneficiary Designation
Form.
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The filing of a new Beneficiary Designation Form will cancel all
designations previously filed. Any finalized divorce or marriage (other
than a common law marriage) of a Participant subsequent to the date of
filing of a Beneficiary Designation form shall revoke such designation,
unless:
* In the case of divorce, the previous spouse was not designated as
beneficiary, and
* In the case of marriage, the Participant's new spouse had
previously been designated as beneficiary.
The spouse of a married Participant shall joint in any designation of a
beneficiary other than the spouse.
If a Participant fails to designate a beneficiary as provided for above, or
if the beneficiary designation is revoked by marriage, divorce or otherwise
without execution of a new designation, then the Compensation Committee
shall direct the distribution of such benefits to the Participant's estate.
C. AMENDMENT OF PLAN
The Compensation Committee may amend or suspend the Plan in whole or in
part at any time. However, any amendment or suspension must be prospective
in that it may not deprive Participants of any accrued Awards earned
through the date of amendment or suspension.
D. TERMINATION OF PLAN
The Compensation Committee may terminate the Plan at any time if, in its
judgment, the continuation of the Plan is not in the best interest of the
Company. Upon such termination, 100 percent of the accrued Award shall
become payable for each Participant. Such payment will be calculated
consistent with the provisions established in Paragraph IV.F. for a
Termination of Service due to death, Disability or involuntary termination
without Cause.
Upon termination of the Plan, a Participant shall have no further rights
under the Plan other than to receive payments for accrued benefits as
provided for in this Section.
SECTION VI - MISCELLANEOUS PROVISIONS
A. UNSECURED STATUS OF CLAIM
Participants and their beneficiaries, heirs, successors and assigns shall
have no legal or equitable rights, interests or claims in any specific
property or assets of the Company. No assets of the Company shall be held
under any trust for the benefit
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of Participants, their beneficiaries, heirs, successors or assigns, or held
in any way as collateral or security for the fulfillment of the Company's
obligations under the Plan.
Any and all of the Company's assets shall be, and shall remain, the
general, unpledged and unrestricted assets of the Company. The Company's
obligation under the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay monies in the future.
B. EMPLOYMENT NOT GUARANTEED
Nothing contained in the Plan nor any Agreement nor any action taken in the
administration of the Plan shall be construed as a contract of employment
or as giving a Participant any right to be retained in the Service of the
Company.
C. RIGHT OF OFFSET
If a Participant becomes entitled to a payment under the Plan, and if at
such time the Participant has outstanding any debt, obligation or other
liability representing any amount owing to the Company, then the Company
may offset such amount against the amount of the payment otherwise due the
Participant under the Plan.
D. NONASSIGNABILITY
No person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, hypothecate or convey in
advance of actual receipt the amounts, if any, payable under the Plan, or
any part thereof, or any interest therein, which are, and all rights to
which are, expressly declared to be unassignable and nontransferable. No
portion of the amounts payable shall, prior to actual payment, be subject
to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person,
nor be transferrable by operation of law in the event of the Participant's
or any other person's bankruptcy or insolvency.
E. VALIDITY
In the event that any provision of the Plan or any related Agreement is
held to be invalid, void or unenforceable, the same shall not affect, in
any respect whatsoever, the validity of any other provision of the Plan or
any related Agreement.
F. APPLICABLE LAW
The Plan and any related Agreements shall be governed in accordance with
the laws of the state of Idaho.
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G. INUREMENT OF RIGHTS AND OBLIGATIONS
The rights and obligations under the Plan and any related Agreements shall
inure to the benefit of, and shall be binding upon the Company, its
successors and assigns, and the Participants and their beneficiaries.
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Exhibit 10.6
MORRISON KNUDSEN CORPORATION
LONG-TERM INCENTIVE PLAN FOR THE MINING GROUP
JANUARY 1993 - DECEMBER 1997
<PAGE>
TABLE OF CONTENTS
SECTION I - PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION II - ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION III - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION IV - GENERAL PLAN DESCRIPTION. . . . . . . . . . . . . . . . . . . . 3
A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Sharing Percentage . . . . . . . . . . . . . . . . . . . . . . . . 3
C. New Participants . . . . . . . . . . . . . . . . . . . . . . . . . 4
D. Award Accrual. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
E. Offset to Accrued Awards for Performance Below the 20 Percent
Return on Capital Threshold. . . . . . . . . . . . . . . . . . . . 4
F. Valuation Upon Termination . . . . . . . . . . . . . . . . . . . . 5
G. Payment of Awards. . . . . . . . . . . . . . . . . . . . . . . . . 5
H. Voluntary Deferral Option. . . . . . . . . . . . . . . . . . . . . 5
I. Withholding Tax. . . . . . . . . . . . . . . . . . . . . . . . . . 6
J. Term of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
K. Adjustment Upon a Change of Control. . . . . . . . . . . . . . . . 6
L. Adjustments for Extraordinary Events . . . . . . . . . . . . . . . 6
SECTION V - PLAN ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 6
A. General Administration . . . . . . . . . . . . . . . . . . . . . . 6
B. Designation of Beneficiaries . . . . . . . . . . . . . . . . . . . 6
C. Amendment of Plan. . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Termination of Plan. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION VI - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 7
A. Unsecured Status of Claim. . . . . . . . . . . . . . . . . . . . . 7
B. Employment Not Guaranteed. . . . . . . . . . . . . . . . . . . . . 8
C. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . 8
E. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 8
G. Inurement of Rights and Obligations. . . . . . . . . . . . . . . . 9
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SECTION I - PURPOSE
The purpose of the MORRISON KNUDSEN CORPORATION LONG-TERM INCENTIVE PLAN FOR THE
MINING GROUP (the "Plan") is to provide long-term incentive compensation to key
executives of the Mining Group of Morrison Knudsen Corporation, an Ohio
corporation (the "Company") who are in a position to make important
contributions toward the Group's long-term growth and success. The Plan
provides a means whereby such executives are given an opportunity to share
financially in the future value they help to create for the Company and its
stockholders.
SECTION II - ELIGIBILITY
Eligibility to participate in the Plan is limited to the Group President of the
Mining Group and other key executives of the Company who, in the opinion of the
Compensation Committee of the Board of Directors, have the responsibility and
ability to significantly influence the Group's long-term performance.
SECTION III - DEFINITIONS
"AGREEMENT" refers to the written agreement entered into between the Company and
a Participant to carry out the Plan with respect to the Participant in
accordance with the Plan's terms and conditions.
"AVERAGE TOTAL CAPITAL EMPLOYED" means the average of beginning and ending Total
Capital Employed for the Group's fiscal year.
"AWARD" refers to an amount earned by, and paid in the form of cash to, a
Participant under the terms and provisions of the Plan.
"CAUSE" means (i) willful and continued failure by a Participant to perform his
or her duties (except as a direct result of the Participant's incapacity due to
physical or mental illness) after receiving notification by the Chief Executive
Officer identifying the manner in which the Participant has failed to perform
his or her duties, (ii) willfully engaging in conduct materially injurious to
the Company, or (iii) conviction of the Participant of any felony involving
moral turpitude.
"CHANGE OF CONTROL" means a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A,
Regulation 240.14a-101 promulgated under the Securities Exchange Act of 1934 as
now in effect or, if Item 6(e) is no longer in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 which serve similar purposes; provided that, without limitation, such a
Change of Control shall be deemed to have occurred if and when (a) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934) is or becomes a beneficial owner, directly or indirectly, of securities
of the Company representing 30 percent or more of the combined voting power of
the Company's
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then outstanding securities, or (b) individuals who were members of the Board of
Directors of the Company immediately prior to a meeting of the stockholders of
the Company involving a contest for the election of directors shall not
constitute a majority of the Board of Directors following such election.
"COMPENSATION COMMITTEE" OR "COMMITTEE" refers to the Executive Compensation and
Nominating Committee of the Board of Directors of the Company.
"DISABILITY" refers to any Termination of Service as a result of a physical or
mental condition that prevents a Participant from performing his or her normal
duties of employment. If a Participant makes application for disability
benefits under the Company's long-term disability program and qualifies for such
benefits, the Participant shall be presumed to qualify as totally and
permanently disabled under the Plan. In the absence of a Company-sponsored
long-term disability program, a Participant will be considered totally and
permanently disabled under the Plan if, in the opinion of two doctors, one
retained by the Company and one retained by the Participant, the Participant is
considered unable to perform his or her normal duties of employment as a result
of a physical or mental condition.
"INITIAL PARTICIPANT" refers to an employee of the Company selected by the Chief
Executive Officer to participate in the Plan upon the Plan's approval by the
Committee.
"NET OPERATING INCOME" means the Group's total net contribution to the Company
determined in accordance with Generally Accepted Accounting Principles (GAAP).
Accruals for compensation expense attributable to Awards earned under the Plan
will be deducted in calculating Net Operating Income.
"NEW PARTICIPANT" refers to an employee of the Company selected by the Chief
Executive Officer to participate in the Plan who is not an Initial Participant
as defined in this Section III.
"PARTICIPANT" refers to an executive of the Company designated by the Chief
Executive Officer to participate in the Plan.
"PERFORMANCE PERIOD" refers to the period over which performance is measured to
determine the size of Awards earned under the Plan. For Initial Participants,
Performance Period refers to the period beginning January 1, 1993, and ending
December 31, 1997 or earlier upon a Termination of Service as provided for in
the Plan. For New Participants, Performance Period refers to the period
beginning with the year of initial participation of the Plan and ending
December 31, 1997 or earlier upon a Termination of Service as provided for in
the Plan.
"PLAN" refers to the Company's Long-Term Incentive Plan for the Mining Group
described in this document.
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"RETIREMENT" means a Termination of Service in accordance with the provisions of
the Company's frozen retirement plan in effect for a Participant at the time of
Termination of Service.
"RETURN ON TOTAL CAPITAL EMPLOYED" OR "ROTCE" means the ratio of Net Operating
Income to Average Total Capital Employed.
"SERVICE" means continuous and substantially full-time employment with the
Company.
"TERMINATION OF SERVICE" refers to a termination of Service from the Company for
any reason, whether voluntary or involuntary, including death, Retirement and
Disability.
"TOTAL CAPITAL EMPLOYED" means the remainder of (A) and (B) where (A) equals
total assets dedicated to the Group and (B) equals the Group's current
liabilities, determined in accordance with Generally Accepted Accounting
Principles (GAAP).
SECTION IV - GENERAL PLAN DESCRIPTION
A. OVERVIEW
The Plan provides each Participant with the opportunity to earn a cash
Award at the end of the Performance Period. The amount of each
Participant's Award opportunity is equal to the sum obtained by adding, for
each year of the Performance Period, the product of (A) and (B), where (A)
equals a percentage ("Sharing Percentage") established by the Committee for
each Participant, and (B) equals the amount by which the Group's cumulative
Net Operating Income for each year of the Performance Period exceeds (or
falls below) a twenty percent (20%) percent Return on Total Capital
Employed.
B. SHARING PERCENTAGE
Sharing Percentages will vary among Participants based on the level of a
Participant's responsibility. In addition, each Participant's Sharing
Percentage may vary according to the Group's level of Return on Total
Capital Employed during each year of the Performance Period.
Sharing Percentages will be determined by the Compensation Committee and
will be communicated in an Agreement executed between the Participant and
the Company.
A Participant's Sharing Percentage may be increased or decreased by the
Compensation Committee during the Performance Period to recognize an
increase or decrease in responsibility. In such cases, the new Sharing
Percentage will become effective beginning with the next full month
following the Sharing Percentage modification. The Participant's Sharing
Percentage for the year of modification will represent an average of the
two Sharing Percentages for that year, weighted by the number of months
that each was in effect. The new Sharing Percentage will be used
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prospectively, in that it will not alter any accrued Award opportunity from
prior periods.
C. NEW PARTICIPANTS
New Participants may be added to the Plan at any time at the discretion of
the Compensation Committee. A New Participant will be eligible for accrue
an Award beginning with the next full month following initial entry into
the Plan. Notwithstanding the above, an individual must be a Participant
in the Plan for at least three months during a fiscal year in order to
accrue an Award for that fiscal year.
The value of an Award accrued by a New Participant will be calculated based
on the Group's Net Operating Income and Return on Total Capital Employed
performance beginning with the start of the fiscal year during which the
individual initially becomes a Participant in the Plan. In cases where an
individual becomes a Participant in the Plan following the beginning of a
fiscal year, the Participant's accrued Award will be calculated for that
fiscal year by prorating the Award the Participant would have accrued had
he or she participated in the Plan for the full fiscal year. Such
proration will be determined by dividing the number of full months of
participation in the Plan during the fiscal year by twelve.
D. AWARD ACCRUAL
A Participant's earned Award will accrue annually over the Performance
Period. However, payment of accrued Awards will be deferred until after
the conclusion of the Performance Period, except as otherwise described in
Section IV.F.
The cash Award available to each Participant at the end of the Performance
Period will be equal to the sum of the accrued Award attributable to that
Participant for each year of the Performance Period. The foregoing to the
contrary notwithstanding, in no event shall the cash Award paid to Mr.
Tinstman under the Plan at the end of the Performance Period exceed $1.625
million.
E. OFFSET TO ACCRUED AWARDS FOR PERFORMANCE BELOW THE TWENTY PERCENT RETURN ON
CAPITAL THRESHOLD
To the extent that the Group's Return on Total Capital Employed is less
than twenty percent (20%) percent in any fiscal year during the Performance
Period, previously accrued Awards will be reduced by the shortfall in Net
Operating Income multiplied by the Participant's applicable Sharing
Percentage.
Notwithstanding the above, a Participant's cumulative accrued Award balance
as of the end of the Performance Period shall not be less than zero.
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F. VALUATION UPON TERMINATION
If a Participant terminates employment prior to the end of the Performance
Period for any reason except for death, Disability or involuntary
termination without Cause, any accrued Award will be forfeited.
Upon a Termination of Service due to death, Disability, or involuntary
termination without Cause, 100 percent of a Participant's accrued Award
shall become vested and payable. The value of a Participant's accrued
Award during the year of his or her termination will be based upon the
Group's Net Operating Income and Total Capital Employed for the full fiscal
year. This value will then be prorated by dividing the number of full
months of participation during the fiscal year by twelve.
In order to facilitate the settlement of an estate following a Termination
of Service due to death, the Compensation Committee in its sole discretion
may elect to base the Participant's Award accrual during the year of
termination upon an estimate of the Group's Net Operating Income and Total
Capital Employed for the fiscal year.
G. PAYMENT OF AWARDS
Except in the case of death, Disability or involuntary termination without
Cause, Awards determined under the Plan will be paid within a maximum of
one hundred twenty (120) days following the conclusion of the Performance
Period. Upon termination due to death, Disability or involuntary
termination without Cause, accrued Awards will be paid as soon as possible
following the determination of the value of such Awards.
All Award payments will be made in cash. Any Award earned by a Participant
will be reduced to the extent payments are made to a Participant during the
Performance Period under any other Company-sponsored cash or incentive plan
with a performance measurement period longer than one year or noncash stock
incentive plan (e.g., restricted stock).
H. VOLUNTARY DEFERRAL OPTION
At his or her option, a Participant may elect to defer the timing of
payment to a later date of all or part of an Award earned under the Plan.
Deferred amounts will be credited annually with interest at a rate to be
determined by the Compensation Committee at the time of election.
The election to defer must be made through a written deferral agreement
filed with the Company prior to the beginning of the final year of the
Performance Period. Such Agreement will specify the length of the deferral
period, the percentage of the Award to be deferred, designated
beneficiary(ies) in the event of death, and the interest rater to be
credited to the deferred amount.
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I. WITHHOLDING TAX
The Company will withhold from all payments under the Plan an amount
sufficient to satisfy any federal, state and local tax withholding
requirements.
J. TERM OF PLAN
The term of the Plan shall be for five years beginning January 1, 1993
unless the Plan is amended or terminated by the Board of Directors in
accordance with Sections V.C. and V.D.
K. ADJUSTMENT UPON A CHANGE OF CONTROL
Upon a Change of Control, 100 percent of a Participant's accrued Award
shall become immediately vested and payable. Such payment will be
calculated consistent with the provisions established in Section IV.F.
herein for a Termination of Service due to death, Disability or involuntary
termination without Cause.
L. ADJUSTMENTS FOR EXTRAORDINARY EVENTS
If an event occurs during the Performance Period that significantly
influences the Net Operating Income of the Group or Total Capital Employed
by the Group, and is deemed by the Compensation Committee to be
extraordinary and out of the control of management, the Compensation
Committee may, in its sole discretion, increase or decrease the Net
Operating Income figure or Total Capital Employed figure. Events
warranting such action may include, but are not limited to, significant
acquisitions or divestitures, changes in accounting, tax or regulatory
rulings or significant changes in economic conditions resulting in
"windfall" gains or losses.
SECTION V - PLAN ADMINISTRATION
A. GENERAL ADMINISTRATION
The Compensation Committee will administer the Plan and related Agreements,
and will interpret and apply the provisions of the Plan and Agreements in
accordance with their terms. The interpretation and application of these
terms by the Compensation Committee shall be binding and conclusive.
B. DESIGNATION OF BENEFICIARIES
Each Participant shall have the right at any time to designate any person
or persons as beneficiary(ies) to whom payments earned under the Plan shall
be made in the event of the Participant's death prior to the distribution
of all benefits due the Participant under the Plan. Each beneficiary
designation shall be effective only when filed in writing with the Company
during the Participant's lifetime, on the attached Beneficiary Designation
Form.
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The filing of a new Beneficiary Designation Form will cancel all
designations previously filed. Any finalized divorce or marriage (other
than a common law marriage) of a Participant subsequent to the date of
filing of a Beneficiary Designation form shall revoke such designation,
unless:
* In the case of divorce, the previous spouse was not designated as
beneficiary, and
* In the case of marriage, the Participant's new spouse had
previously been designated as beneficiary.
The spouse of a married Participant shall joint in any designation of a
beneficiary other than the spouse.
If a Participant fails to designate a beneficiary as provided for above, or
if the beneficiary designation is revoked by marriage, divorce or otherwise
without execution of a new designation, then the Compensation Committee
shall direct the distribution of such benefits to the Participant's estate.
C. AMENDMENT OF PLAN
The Compensation Committee may amend or suspend the Plan in whole or in
part at any time. However, any amendment or suspension must be prospective
in that it may not deprive Participants of any accrued Awards earned
through the date of amendment or suspension.
D. TERMINATION OF PLAN
The Compensation Committee may terminate the Plan at any time if, in its
judgment, the continuation of the Plan is not in the best interest of the
Company. Upon such termination, 100 percent of the accrued Award shall
become payable for each Participant. Such payment will be calculated
consistent with the provisions established in Paragraph IV.F. for a
Termination of Service due to death, Disability or involuntary termination
without Cause.
Upon termination of the Plan, a Participant shall have no further rights
under the Plan other than to receive payments for accrued benefits as
provided for in this Section.
SECTION VI - MISCELLANEOUS PROVISIONS
A. UNSECURED STATUS OF CLAIM
Participants and their beneficiaries, heirs, successors and assigns shall
have no legal or equitable rights, interests or claims in any specific
property or assets of the Company. No assets of the Company shall be held
under any trust for the benefit
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of Participants, their beneficiaries, heirs, successors or assigns, or held
in any way as collateral or security for the fulfillment of the Company's
obligations under the Plan.
Any and all of the Company's assets shall be, and shall remain, the
general, unpledged and unrestricted assets of the Company. The Company's
obligation under the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay monies in the future.
B. EMPLOYMENT NOT GUARANTEED
Nothing contained in the Plan nor any Agreement nor any action taken in the
administration of the Plan shall be construed as a contract of employment
or as giving a Participant any right to be retained in the Service of the
Company.
C. RIGHT OF OFFSET
If a Participant becomes entitled to a payment under the Plan, and if at
such time the Participant has outstanding any debt, obligation or other
liability representing any amount owing to the Company, then the Company
may offset such amount against the amount of the payment otherwise due the
Participant under the Plan.
D. NONASSIGNABILITY
No person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, hypothecate or convey in
advance of actual receipt the amounts, if any, payable under the Plan, or
any part thereof, or any interest therein, which are, and all rights to
which are, expressly declared to be unassignable and nontransferable. No
portion of the amounts payable shall, prior to actual payment, be subject
to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person,
nor be transferrable by operation of law in the event of the Participant's
or any other person's bankruptcy or insolvency.
E. VALIDITY
In the event that any provision of the Plan or any related Agreement is
held to be invalid, void or unenforceable, the same shall not affect, in
any respect whatsoever, the validity of any other provision of the Plan or
any related Agreement.
F. APPLICABLE LAW
The Plan and any related Agreements shall be governed in accordance with
the laws of the state of Idaho.
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G. INUREMENT OF RIGHTS AND OBLIGATIONS
The rights and obligations under the Plan and any related Agreements shall
inure to the benefit of, and shall be binding upon the Company, its
successors and assigns, and the Participants and their beneficiaries.
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Exhibit 10.7
MORRISON KNUDSEN CORPORATION
LONG-TERM INCENTIVE PLAN FOR THE RAIL SYSTEMS GROUP
JANUARY 1993 - DECEMBER 1997
<PAGE>
TABLE OF CONTENTS
SECTION I - PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION II - ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION III - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION IV - GENERAL PLAN DESCRIPTION. . . . . . . . . . . . . . . . . . . . 3
A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
B. Sharing Percentage . . . . . . . . . . . . . . . . . . . . . . . . 3
C. New Participants . . . . . . . . . . . . . . . . . . . . . . . . . 4
D. Award Accrual. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
E. Offset to Accrued Awards for Performance Below the 40 Percent
Return on Capital Threshold. . . . . . . . . . . . . . . . . . . . 4
F. Valuation Upon Termination . . . . . . . . . . . . . . . . . . . . 5
G. Payment of Awards. . . . . . . . . . . . . . . . . . . . . . . . . 5
H. Voluntary Deferral Option. . . . . . . . . . . . . . . . . . . . . 5
I. Withholding Tax. . . . . . . . . . . . . . . . . . . . . . . . . . 6
J. Term of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
K. Adjustment Upon a Change of Control. . . . . . . . . . . . . . . . 6
L. Adjustments for Extraordinary Events . . . . . . . . . . . . . . . 6
SECTION V - PLAN ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 6
A. General Administration . . . . . . . . . . . . . . . . . . . . . . 6
B. Designation of Beneficiaries . . . . . . . . . . . . . . . . . . . 6
C. Amendment of Plan. . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Termination of Plan. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION VI - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 7
A. Unsecured Status of Claim. . . . . . . . . . . . . . . . . . . . . 7
B. Employment Not Guaranteed. . . . . . . . . . . . . . . . . . . . . 8
C. Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Nonassignability . . . . . . . . . . . . . . . . . . . . . . . . . 8
E. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . 8
G. Inurement of Rights and Obligations. . . . . . . . . . . . . . . . 9
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SECTION I - PURPOSE
The purpose of the MORRISON KNUDSEN CORPORATION LONG-TERM INCENTIVE PLAN FOR THE
RAIL SYSTEMS GROUP (the "Plan") is to provide long-term incentive compensation
to key executives of the Rail Systems Group of Morrison Knudsen Corporation, an
Ohio corporation (the "Company") who are in a position to make important
contributions toward the Group's long-term growth and success. The Plan
provides a means whereby such executives are given an opportunity to share
financially in the future value they help to create for the Company and its
stockholders.
SECTION II - ELIGIBILITY
Eligibility to participate in the Plan is limited to the Group President of the
Rail Systems Group and other key executives of the Company who, in the opinion
of the Compensation Committee of the Board of Directors, have the responsibility
and ability to significantly influence the Group's long-term performance.
SECTION III - DEFINITIONS
"AGREEMENT" refers to the written agreement entered into between the Company and
a Participant to carry out the Plan with respect to the Participant in
accordance with the Plan's terms and conditions.
"AVERAGE TOTAL CAPITAL EMPLOYED" means the average of beginning and ending Total
Capital Employed for the Group's fiscal year.
"AWARD" refers to an amount earned by, and paid in the form of cash to, a
Participant under the terms and provisions of the Plan.
"CAUSE" means (i) willful and continued failure by a Participant to perform his
or her duties (except as a direct result of the Participant's incapacity due to
physical or mental illness) after receiving notification by the Chief Executive
Officer identifying the manner in which the Participant has failed to perform
his or her duties, (ii) willfully engaging in conduct materially injurious to
the Company, or (iii) conviction of the Participant of any felony involving
moral turpitude.
"CHANGE OF CONTROL" means a change in control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A,
Regulation 240.14a-101 promulgated under the Securities Exchange Act of 1934 as
now in effect or, if Item 6(e) is no longer in effect, any regulations issued by
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 which serve similar purposes; provided that, without limitation, such a
Change of Control shall be deemed to have occurred if and when (a) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934) is or becomes a beneficial owner, directly or indirectly, of securities
of the Company representing 30 percent or more of the combined voting power of
the Company's
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then outstanding securities, or (b) individuals who were members of the Board of
Directors of the Company immediately prior to a meeting of the stockholders of
the Company involving a contest for the election of directors shall not
constitute a majority of the Board of Directors following such election.
"COMPENSATION COMMITTEE" OR "COMMITTEE" refers to the Executive Compensation and
Nominating Committee of the Board of Directors of the Company.
"DISABILITY" refers to any Termination of Service as a result of a physical or
mental condition that prevents a Participant from performing his or her normal
duties of employment. If a Participant makes application for disability
benefits under the Company's long-term disability program and qualifies for such
benefits, the Participant shall be presumed to qualify as totally and
permanently disabled under the Plan. In the absence of a Company-sponsored
long-term disability program, a Participant will be considered totally and
permanently disabled under the Plan if, in the opinion of two doctors, one
retained by the Company and one retained by the Participant, the Participant is
considered unable to perform his or her normal duties of employment as a result
of a physical or mental condition.
"INITIAL PARTICIPANT" refers to an employee of the Company selected by the Chief
Executive Officer to participate in the Plan upon the Plan's approval by the
Committee.
"NET OPERATING INCOME" means the Group's total net contribution to the Company
determined in accordance with Generally Accepted Accounting Principles (GAAP).
Accruals for compensation expense attributable to Awards earned under the Plan
will be deducted in calculating Net Operating Income.
"NEW PARTICIPANT" refers to an employee of the Company selected by the Chief
Executive Officer to participate in the Plan who is not an Initial Participant
as defined in this Section III.
"PARTICIPANT" refers to an executive of the Company designated by the Chief
Executive Officer to participate in the Plan.
"PERFORMANCE PERIOD" refers to the period over which performance is measured to
determine the size of Awards earned under the Plan. For Initial Participants,
Performance Period refers to the period beginning January 1, 1993, and ending
December 31, 1997 or earlier upon a Termination of Service as provided for in
the Plan. For New Participants, Performance Period refers to the period
beginning with the year of initial participation of the Plan and ending
December 31, 1997 or earlier upon a Termination of Service as provided for in
the Plan.
"PLAN" refers to the Company's Long-Term Incentive Plan for the Rail Systems
Group described in this document.
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"RETIREMENT" means a Termination of Service in accordance with the provisions of
the Company's frozen retirement plan in effect for a Participant at the time of
Termination of Service.
"RETURN ON TOTAL CAPITAL EMPLOYED" OR "ROTCE" means the ratio of Net Operating
Income to Average Total Capital Employed.
"SERVICE" means continuous and substantially full-time employment with the
Company.
"TERMINATION OF SERVICE" refers to a termination of Service from the Company for
any reason, whether voluntary or involuntary, including death, Retirement and
Disability.
"TOTAL CAPITAL EMPLOYED" means the remainder of (A) and (B) where (A) equals
total assets dedicated to the Group and (B) equals the Group's current
liabilities, determined in accordance with Generally Accepted Accounting
Principles (GAAP).
SECTION IV - GENERAL PLAN DESCRIPTION
A. OVERVIEW
The Plan provides each Participant with the opportunity to earn a cash
Award at the end of the Performance Period. The amount of each
Participant's Award opportunity is equal to the sum obtained by adding, for
each year of the Performance Period, the product of (A) and (B), where (A)
equals a percentage ("Sharing Percentage") established by the Committee for
each Participant, and (B) equals the amount by which the Group's cumulative
Net Operating Income for each year of the Performance Period exceeds (or
falls below) a forty percent (40%) percent Return on Total Capital
Employed.
B. SHARING PERCENTAGE
Sharing Percentages will vary among Participants based on the level of a
Participant's responsibility. In addition, each Participant's Sharing
Percentage may vary according to the Group's level of Return on Total
Capital Employed during each year of the Performance Period.
Sharing Percentages will be determined by the Compensation Committee and
will be communicated in an Agreement executed between the Participant and
the Company.
A Participant's Sharing Percentage may be increased or decreased by the
Compensation Committee during the Performance Period to recognize an
increase or decrease in responsibility. In such cases, the new Sharing
Percentage will become effective beginning with the next full month
following the Sharing Percentage modification. The Participant's Sharing
Percentage for the year of modification will represent an average of the
two Sharing Percentages for that year, weighted by the number of months
that each was in effect. The new Sharing Percentage will be used
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prospectively, in that it will not alter any accrued Award opportunity from
prior periods.
C. NEW PARTICIPANTS
New Participants may be added to the Plan at any time at the discretion of
the Compensation Committee. A New Participant will be eligible for accrue
an Award beginning with the next full month following initial entry into
the Plan. Notwithstanding the above, an individual must be a Participant
in the Plan for at least three months during a fiscal year in order to
accrue an Award for that fiscal year.
The value of an Award accrued by a New Participant will be calculated based
on the Group's Net Operating Income and Return on Total Capital Employed
performance beginning with the start of the fiscal year during which the
individual initially becomes a Participant in the Plan. In cases where an
individual becomes a Participant in the Plan following the beginning of a
fiscal year, the Participant's accrued Award will be calculated for that
fiscal year by prorating the Award the Participant would have accrued had
he or she participated in the Plan for the full fiscal year. Such
proration will be determined by dividing the number of full months of
participation in the Plan during the fiscal year by twelve.
D. AWARD ACCRUAL
A Participant's earned Award will accrue annually over the Performance
Period. However, payment of accrued Awards will be deferred until after
the conclusion of the Performance Period, except as otherwise described in
Section IV.F.
The cash Award available to each Participant at the end of the Performance
Period will be equal to the sum of the accrued Award attributable to that
Participant for each year of the Performance Period. The foregoing to the
contrary notwithstanding, in no event shall the cash Award paid to Mr.
Smith under the Plan at the end of the Performance Period exceed $2.888
million.
E. OFFSET TO ACCRUED AWARDS FOR PERFORMANCE BELOW THE FORTY PERCENT RETURN ON
CAPITAL THRESHOLD
To the extent that the Group's Return on Total Capital Employed is less
than forty percent (40%) percent in any fiscal year during the Performance
Period, previously accrued Awards will be reduced by the shortfall in Net
Operating Income multiplied by the Participant's applicable Sharing
Percentage.
Notwithstanding the above, a Participant's cumulative accrued Award balance
as of the end of the Performance Period shall not be less than zero.
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F. VALUATION UPON TERMINATION
If a Participant terminates employment prior to the end of the Performance
Period for any reason except for death, Disability or involuntary
termination without Cause, any accrued Award will be forfeited.
Upon a Termination of Service due to death, Disability, or involuntary
termination without Cause, 100 percent of a Participant's accrued Award
shall become vested and payable. The value of a Participant's accrued
Award during the year of his or her termination will be based upon the
Group's Net Operating Income and Total Capital Employed for the full fiscal
year. This value will then be prorated by dividing the number of full
months of participation during the fiscal year by twelve.
In order to facilitate the settlement of an estate following a Termination
of Service due to death, the Compensation Committee in its sole discretion
may elect to base the Participant's Award accrual during the year of
termination upon an estimate of the Group's Net Operating Income and Total
Capital Employed for the fiscal year.
G. PAYMENT OF AWARDS
Except in the case of death, Disability or involuntary termination without
Cause, Awards determined under the Plan will be paid within a maximum of
one hundred twenty (120) days following the conclusion of the Performance
Period. Upon termination due to death, Disability or involuntary
termination without Cause, accrued Awards will be paid as soon as possible
following the determination of the value of such Awards.
All Award payments will be made in cash. Any Award earned by a Participant
will be reduced to the extent payments are made to a Participant during the
Performance Period under any other Company-sponsored cash incentive plan
with a performance measurement period longer than one year or noncash stock
incentive plan (e.g., restricted stock).
H. VOLUNTARY DEFERRAL OPTION
At his or her option, a Participant may elect to defer the timing of
payment to a later date of all or part of an Award earned under the Plan.
Deferred amounts will be credited annually with interest at a rate to be
determined by the Compensation Committee at the time of election.
The election to defer must be made through a written deferral agreement
filed with the Company prior to the beginning of the final year of the
Performance Period. Such Agreement will specify the length of the deferral
period, the percentage of the Award to be deferred, designated
beneficiary(ies) in the event of death, and the interest rater to be
credited to the deferred amount.
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I. WITHHOLDING TAX
The Company will withhold from all payments under the Plan an amount
sufficient to satisfy any federal, state and local tax withholding
requirements.
J. TERM OF PLAN
The term of the Plan shall be for five years beginning January 1, 1993
unless the Plan is amended or terminated by the Board of Directors in
accordance with Sections V.C. and V.D.
K. ADJUSTMENT UPON A CHANGE OF CONTROL
Upon a Change of Control, 100 percent of a Participant's accrued Award
shall become immediately vested and payable. Such payment will be
calculated consistent with the provisions established in Section IV.F.
herein for a Termination of Service due to death, Disability or involuntary
termination without Cause.
L. ADJUSTMENTS FOR EXTRAORDINARY EVENTS
If an event occurs during the Performance Period that significantly
influences the Net Operating Income of the Group or Total Capital Employed
by the Group, and is deemed by the Compensation Committee to be
extraordinary and out of the control of management, the Compensation
Committee may, in its sole discretion, increase or decrease the Net
Operating Income figure or Total Capital Employed figure. Events
warranting such action may include, but are not limited to, significant
acquisitions or divestitures, changes in accounting, tax or regulatory
rulings or significant changes in economic conditions resulting in
"windfall" gains or losses.
SECTION V - PLAN ADMINISTRATION
A. GENERAL ADMINISTRATION
The Compensation Committee will administer the Plan and related Agreements,
and will interpret and apply the provisions of the Plan and Agreements in
accordance with their terms. The interpretation and application of these
terms by the Compensation Committee shall be binding and conclusive.
B. DESIGNATION OF BENEFICIARIES
Each Participant shall have the right at any time to designate any person
or persons as beneficiary(ies) to whom payments earned under the Plan shall
be made in the event of the Participant's death prior to the distribution
of all benefits due the Participant under the Plan. Each beneficiary
designation shall be effective only when filed in writing with the Company
during the Participant's lifetime, on the attached Beneficiary Designation
Form.
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The filing of a new Beneficiary Designation Form will cancel all
designations previously filed. Any finalized divorce or marriage (other
than a common law marriage) of a Participant subsequent to the date of
filing of a Beneficiary Designation form shall revoke such designation,
unless:
* In the case of divorce, the previous spouse was not designated as
beneficiary, and
* In the case of marriage, the Participant's new spouse had
previously been designated as beneficiary.
The spouse of a married Participant shall joint in any designation of a
beneficiary other than the spouse.
If a Participant fails to designate a beneficiary as provided for above, or
if the beneficiary designation is revoked by marriage, divorce or otherwise
without execution of a new designation, then the Compensation Committee
shall direct the distribution of such benefits to the Participant's estate.
C. AMENDMENT OF PLAN
The Compensation Committee may amend or suspend the Plan in whole or in
part at any time. However, any amendment or suspension must be prospective
in that it may not deprive Participants of any accrued Awards earned
through the date of amendment or suspension.
D. TERMINATION OF PLAN
The Compensation Committee may terminate the Plan at any time if, in its
judgment, the continuation of the Plan is not in the best interest of the
Company. Upon such termination, 100 percent of the accrued Award shall
become payable for each Participant. Such payment will be calculated
consistent with the provisions established in Paragraph IV.F. for a
Termination of Service due to death, Disability or involuntary termination
without Cause.
Upon termination of the Plan, a Participant shall have no further rights
under the Plan other than to receive payments for accrued benefits as
provided for in this Section.
SECTION VI - MISCELLANEOUS PROVISIONS
A. UNSECURED STATUS OF CLAIM
Participants and their beneficiaries, heirs, successors and assigns shall
have no legal or equitable rights, interests or claims in any specific
property or assets of the Company. No assets of the Company shall be held
under any trust for the benefit
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of Participants, their beneficiaries, heirs, successors or assigns, or held
in any way as collateral or security for the fulfillment of the Company's
obligations under the Plan.
Any and all of the Company's assets shall be, and shall remain, the
general, unpledged and unrestricted assets of the Company. The Company's
obligation under the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay monies in the future.
B. EMPLOYMENT NOT GUARANTEED
Nothing contained in the Plan nor any Agreement nor any action taken in the
administration of the Plan shall be construed as a contract of employment
or as giving a Participant any right to be retained in the Service of the
Company.
C. RIGHT OF OFFSET
If a Participant becomes entitled to a payment under the Plan, and if at
such time the Participant has outstanding any debt, obligation or other
liability representing any amount owing to the Company, then the Company
may offset such amount against the amount of the payment otherwise due the
Participant under the Plan.
D. NONASSIGNABILITY
No person shall have any right to commute, sell, assign, transfer, pledge,
anticipate, mortgage or otherwise encumber, hypothecate or convey in
advance of actual receipt the amounts, if any, payable under the Plan, or
any part thereof, or any interest therein, which are, and all rights to
which are, expressly declared to be unassignable and nontransferable. No
portion of the amounts payable shall, prior to actual payment, be subject
to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person,
nor be transferrable by operation of law in the event of the Participant's
or any other person's bankruptcy or insolvency.
E. VALIDITY
In the event that any provision of the Plan or any related Agreement is
held to be invalid, void or unenforceable, the same shall not affect, in
any respect whatsoever, the validity of any other provision of the Plan or
any related Agreement.
F. APPLICABLE LAW
The Plan and any related Agreements shall be governed in accordance with
the laws of the state of Idaho.
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G. INUREMENT OF RIGHTS AND OBLIGATIONS
The rights and obligations under the Plan and any related Agreements shall
inure to the benefit of, and shall be binding upon the Company, its
successors and assigns, and the Participants and their beneficiaries.
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