<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[X] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
ALLIANT TECHSYSTEMS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
ALLIANT TECHSYSTEMS LOGO
Alliant Techsystems Inc.
600 Second Street N.E.
Hopkins, MN 55343-8384
July 2, 1998
Dear Stockholder:
It is my pleasure to invite you to attend the eighth Annual Meeting of
Stockholders of Alliant Techsystems Inc. The meeting will be held at 2:00 p.m.
on Tuesday, August 4, 1998, at the headquarters of the Company, 600 Second
Street N.E., Hopkins (suburban Minneapolis), Minnesota.
The accompanying Notice of Annual Meeting and Proxy Statement describe the
proposals to be considered at the meeting. In addition, there will be a report
on the Company's business operations, and stockholders will have an opportunity
to ask questions.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, YOUR BOARD OF DIRECTORS
REQUESTS THAT YOU EITHER TAKE ADVANTAGE OF THE OPPORTUNITY TO VOTE BY TELEPHONE
(IF YOU ARE A STOCKHOLDER OF RECORD), OR THAT YOU PROMPTLY SIGN, DATE AND RETURN
THE ENCLOSED WHITE PROXY IN THE REPLY ENVELOPE PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY OF COURSE ATTEND THE MEETING AND
VOTE IN PERSON, EVEN IF YOU HAVE PREVIOUSLY VOTED BY TELEPHONE OR RETURNED YOUR
PROXY. IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN THE
ADMISSION TICKET REQUEST FORM PRINTED ON THE INSIDE BACK COVER OF THE PROXY
STATEMENT OR, IF YOU ARE A STOCKHOLDER OF RECORD WHO VOTES BY TELEPHONE,
INDICATE YOUR INTENTION TO ATTEND THE MEETING WHEN PROMPTED TO DO SO.
Your Board of Directors recommends that you vote FOR all of the Board's
nominees for election as directors, FOR approval of the ratification of the
selection of independent accountants, FOR approval of the Amended and Restated
Alliant Techsystems Inc. 1990 Equity Incentive Plan, and AGAINST the stockholder
proposal described in the Proxy Statement. The vote of every stockholder is
important and your Board of Directors appreciates your support and cooperation.
Sincerely,
RICHARD SCHWARTZ
Richard Schwartz
Chairman of the Board and
Chief Executive Officer
IMPORTANT NOTICE
ADMISSION TO THE MEETING WILL BE BY TICKET ONLY. IN ORDER TO SECURE AN ADMISSION
TICKET, PLEASE COMPLETE AND RETURN THE ADMISSION TICKET REQUEST FORM PRINTED ON
THE INSIDE BACK COVER OF THE PROXY STATEMENT OR, IF YOU ARE A STOCKHOLDER OF
RECORD WHO VOTES BY TELEPHONE, INDICATE YOUR INTENTION TO ATTEND THE MEETING
WHEN PROMPTED TO DO SO.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notice of Annual Meeting.................................... i
General Information......................................... 1
Stock Ownership............................................. 4
Election of Directors (Proposal No. 1)...................... 6
Executive Compensation...................................... 12
Ratification of Selection of Independent Accountants
(Proposal No. 2).......................................... 25
Approval of Amended and Restated Alliant Techsystems Inc.
1990 Equity Incentive Plan (Proposal No. 3)............... 25
Stockholder Proposal (Proposal No. 4)....................... 31
Additional Information...................................... 33
Appendix A.................................................. A-1
Appendix B.................................................. B-1
</TABLE>
IMPORTANT REMINDER
If you receive more than one proxy, and all of the proxies are accompanied
by return envelopes addressed to the same addressee, you may return all of your
proxies in the same envelope.
HOWEVER, IF ANY OF THE PROXIES YOU RECEIVE ARE ACCOMPANIED BY RETURN
ENVELOPES ADDRESSED TO DIFFERENT ADDRESSEES, BE SURE TO RETURN EACH PROXY IN THE
ENVELOPE THAT ACCOMPANIED IT.
<PAGE> 4
ALLIANT TECHSYSTEMS LOGO
ALLIANT TECHSYSTEMS INC.
600 SECOND STREET N.E.
HOPKINS, MN 55343-8384
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 4, 1998
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders (the "Annual Meeting") of Alliant
Techsystems Inc. (the "Company") will be held on Tuesday, August 4, 1998, at
2:00 p.m., local time, at the headquarters of the Company, 600 Second Street
N.E., Hopkins (suburban Minneapolis), Minnesota, for the following purposes:
1) To elect eleven directors;
2) To ratify the selection of Deloitte & Touche LLP as independent
accountants for the fiscal year ending March 31, 1999;
3) To approve the Amended and Restated Alliant Techsystems Inc. 1990 Equity
Incentive Plan;
4) To consider and act upon a stockholder proposal described in the
accompanying Proxy Statement, if such proposal is presented at the
meeting; and
5) To consider and act upon any other business that may properly come
before the Annual Meeting.
Only stockholders of record at the close of business on June 8, 1998, are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
thereof. A list of such stockholders will be open for examination by any
stockholder for any purpose germane to the Annual Meeting, during ordinary
business hours, for ten days prior to the Annual Meeting at the office of the
undersigned at the address of the Company.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED, REGARDLESS OF THE NUMBER OF SHARES YOU HOLD.
ACCORDINGLY, YOU ARE ENCOURAGED TO VOTE BY TELEPHONE (IF YOU ARE A STOCKHOLDER
OF RECORD) OR TO SIGN, DATE AND RETURN THE ENCLOSED WHITE PROXY AS SOON AS
POSSIBLE IN THE REPLY ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE AND
RETURN THE ADMISSION TICKET REQUEST FORM PRINTED ON THE INSIDE BACK COVER OF THE
ACCOMPANYING PROXY STATEMENT OR, IF YOU ARE A STOCKHOLDER OF RECORD WHO VOTES BY
TELEPHONE, INDICATE YOUR INTENTION TO ATTEND THE MEETING WHEN PROMPTED TO DO SO.
By Order of the Board of Directors,
Charles H. Gauck
Charles H. Gauck, Secretary
July 2, 1998
i
<PAGE> 5
ALLIANT TECHSYSTEMS INC.
600 SECOND STREET N.E.
HOPKINS, MN 55343-8384
- --------------------------------------------------------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 4, 1998
- --------------------------------------------------------------------------------
GENERAL INFORMATION
TIME AND PLACE OF THE ANNUAL MEETING
These proxy materials, which are first being mailed to stockholders on or
about July 2, 1998, are being furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors (the "Board") of Alliant
Techsystems Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held at the headquarters of the Company, 600
Second Street N.E., Hopkins (suburban Minneapolis), Minnesota, at 2:00 p.m.,
local time, on Tuesday, August 4, 1998, and all adjournments or postponements
thereof (the "Annual Meeting"). The executive offices of the Company are located
at 600 Second Street N.E., Hopkins, Minnesota 55343-8384.
PURPOSE OF THE ANNUAL MEETING
The purpose of the Annual Meeting is to consider and vote upon (i) the
election of eleven directors; (ii) the ratification of the selection of Deloitte
& Touche LLP as independent accountants for the fiscal year ending March 31,
1999; (iii) the approval of the Amended and Restated Alliant Techsystems Inc.
1990 Equity Incentive Plan; (iv) the stockholder proposal described later in
this Proxy Statement; and (v) such other business as may properly come before
the Annual Meeting.
ADMISSION TO THE MEETING
Admission to the meeting will be by ticket only. In order to secure an
admission ticket, please complete and return the admission ticket request form
printed on the inside back cover of the Proxy Statement or, if you are a
stockholder of record who votes by telephone, indicate your intention to attend
the meeting when prompted to do so.
VOTING AND RELATED MATTERS
STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING
Only stockholders of record as of the close of business on June 8, 1998,
the record date for the Annual Meeting, are entitled to notice of, and to vote
at, the Annual Meeting. Each stockholder is entitled to one vote for each share
of the Company's Common Stock, par value $.01 per share ("Common Stock"), owned
of record on the record date.
METHODS OF VOTING
Voting by Mail. Stockholders may sign, date and mail their proxies in the
postage-paid envelope provided.
1
<PAGE> 6
Voting by Telephone. Stockholders of record may vote by telephone by using
the toll-free number listed on the accompanying proxy. Telephone voting is also
available to stockholders who hold shares in a Company 401(k) plan. The
telephone voting procedure is designed to verify each stockholder's identity
through the use of a "control number" that is provided on each proxy card. This
procedure allows stockholders to vote their shares and confirm that their
instructions have been properly followed. See the proxy for specific
instructions.
VOTE REQUIRED AND METHOD OF COUNTING VOTES
As of the record date, 12,622,689 shares of Common Stock (excluding
1,240,924 treasury shares) were outstanding. At the Annual Meeting (at which a
quorum must be present), (i) the eleven nominees for election as directors who
receive the largest number of votes FOR, as cast by holders of shares of Common
Stock represented and entitled to vote at the Annual Meeting, will be elected
directors and (ii) the affirmative vote of a majority of the shares of Common
Stock represented and entitled to vote at the Annual Meeting will be required to
approve (a) the ratification of the selection of independent accountants, (b)
the Amended and Restated Alliant Techsystems Inc. 1990 Equity Incentive Plan,
(c) the stockholder proposal referred to above, and (d) any other matter that
may properly come before the Annual Meeting.
Shares of Common Stock held by a stockholder who withholds authority to
vote on the election of directors and/or abstains from voting on any other
proposal will be considered represented at the Annual Meeting for purposes of
determining a quorum. An abstention will also be considered represented at the
Annual Meeting for purposes of determining the vote required to approve any
proposal, except the election of directors. An abstention is, in effect, a
negative vote. In the election of directors, votes withheld as to a nominee will
have the effect of reducing the number of votes cast for that nominee. Broker
non-votes (i.e., shares not voted on a specific proposal by record holders due
to the absence of specific voting instructions from the beneficial owners of the
shares) will be considered represented at the Annual Meeting for purposes of
determining a quorum, inasmuch as such shares will have been voted on at least
one other proposal. Broker non-votes will not, however, be considered
represented at the Annual Meeting for purposes of determining the vote required
to approve the specific proposal to which the broker non-votes relate.
In addition, under the rules of the New York Stock Exchange, Inc., it will
be a prerequisite to listing of the additional shares of Common Stock authorized
for issuance by the Amended and Restated Alliant Techsystems Inc. 1990 Equity
Incentive Plan (Proposal No. 3 below) that the number of shares of Common Stock
voted on that proposal (including abstentions, but excluding broker non-votes)
represent more than 50% of the number of shares of Common Stock outstanding on
the record date.
VOTING OF MARKED AND UNMARKED PROXIES
Shares of Common Stock represented by a proxy in the accompanying form
which is properly executed and returned will be voted at the Annual Meeting in
accordance with the stockholder's instructions contained in such proxy.
Stockholders are encouraged to specify the way they wish to vote their shares by
marking the appropriate boxes on the accompanying proxy. In the absence of
contrary instructions, shares represented by a proxy that is properly executed
and returned will be voted FOR the Board's nominees for election as directors
(Proposal No. 1), FOR approval of ratification of the selection of independent
accountants (Proposal No. 2), FOR approval of the Amended and Restated Alliant
Techsystems Inc. 1990 Equity Incentive Plan (Proposal No. 3), AGAINST the
stockholder proposal (Proposal No. 4), and in the best judgment of the persons
named as proxies in the accompanying proxy on any other matters which may
properly come before the Annual Meeting.
OTHER BUSINESS
The Board does not intend to present any matters for a vote at the Annual
Meeting other than the proposals described in this Proxy Statement. Except for
the stockholder proposal described in this Proxy Statement (Proposal No. 4), the
Company has not received notice from any stockholder, as required by the
Company's By-Laws (see "ADDITIONAL INFORMATION--STOCKHOLDER
PROPOSALS--Discretionary Voting on Other Stockholder Proposals" below), of any
other business intended to be
2
<PAGE> 7
presented at the Annual Meeting. As a result, no stockholder may present any
other business for consideration at the Annual Meeting. Should any other
business properly come before the Annual Meeting, the persons named as proxies
in the accompanying proxy will have discretionary voting authority to vote all
proxies with respect to such business in accordance with their best judgment.
REVOKING A PROXY
Any stockholder has the power to revoke a proxy at any time before the
shares represented thereby are voted, either by executing and delivering to the
Company, attention of the Secretary, a subsequently dated proxy or a written
revocation of such proxy, or by attending the Annual Meeting and voting such
shares in person. Attendance at the Annual Meeting does not alone revoke a
proxy.
VOTING BY 401(k) PLAN PARTICIPANTS
The accompanying form of proxy (if bearing a blue stripe) will also serve
as a voting instruction by participants in the Company's 401(k) plans as to how
they wish the trustee to vote shares of Common Stock allocated to their accounts
under the plans. The trustee will vote such allocated shares as directed by
participants. The plan documents provide that the trustee will vote unallocated
shares and shares for which no participant direction is received in the same
manner and proportion as it votes shares for which the trustee receives
directions from participants in the plans.
SOLICITATION OF PROXIES
The expense of preparing, printing and mailing these proxy materials will
be paid by the Company. Proxies are being solicited principally by mail; but
proxies may also be solicited personally, by telephone, facsimile and similar
means by directors, officers and regular employees of the Company without
additional compensation. In addition, the Company has retained ChaseMellon
Shareholder Services, L.L.C. to assist in the solicitation of proxies at a fee
of $6,500 plus out-of-pocket expenses. The Company will reimburse brokers, banks
and other custodians and nominees for their reasonable expenses in forwarding
proxy solicitation materials to the beneficial owners of Common Stock.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended March 31, 1998 ("fiscal year 1998") has been mailed with this Proxy
Statement to all stockholders entitled to vote at the Annual Meeting.
3
<PAGE> 8
STOCK OWNERSHIP
PRINCIPAL STOCKHOLDERS
The Company knows of no person who, as of June 8, 1998, beneficially owned
more than five percent of the Common Stock outstanding, except as set forth
below.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------
<S> <C> <C>
Iridian Asset Management LLC and
affiliates............................... 1,218,150(1) 9.7%
David L. Cohen
Harold J. Levy
276 Post Road
West Westport, CT 06880
Sasco Capital, Inc......................... 983,400(2) 7.8%
10 Sasco Hill Road
Fairfield, CT 06430
Ryback Management Corporation.............. 841,800(3) 6.7%
Lindner Growth Fund
7711 Carondelet Avenue
Box 16900
St. Louis, MO 63105
</TABLE>
- ---------------
(1) Beneficial ownership of these shares was reported in a Schedule 13G, as
amended February 6, 1998. The Schedule 13G reported that (a) Iridian Asset
Management LLC ("Iridian"), the owner of 1,163,450 shares, is an investment
adviser that is 72.5% owned by LC Capital Management, LLC ("LC Capital"),
which in turn is 96% owned by CL Investors, Inc. ("CL Investors"); (b) David
L. Cohen ("Cohen") and Harold J. Levy ("Levy") each own 50% of CL Investors;
(c) Iridian, LC Capital and CL Investors each has sole power to vote and
sole power to dispose of the 1,163,450 shares owned by Iridian; (d) Cohen
and Levy are employed by Arnhold & S. Bleichroeder Advisers, Inc. ("A&SB"),
an investment adviser to First Eagle Fund of America, Inc. ("First Eagle"),
the owner of 54,700 shares; (e) Cohen and Levy believe that A&SB has the
authority to vote and to dispose of the 54,700 shares owned by First Eagle;
(f) Cohen and Levy have shared power to vote and shared power to dispose of
the 1,218,150 shares owned by Iridian and First Eagle; and (g) Cohen and
Levy disclaim beneficial ownership of the 54,700 shares owned by First
Eagle.
(2) Beneficial ownership of these shares was reported in a Schedule 13G, dated
January 30, 1998. The Schedule 13G reported that Sasco Capital, Inc. has
sole power to vote 582,500 shares and sole power to dispose of all 983,400
shares.
(3) Beneficial ownership of these shares was reported in a Schedule 13G, as
amended January 28, 1998. The Schedule 13G reported that Ryback Management
Corporation (a) beneficially owns 4,800 shares managed by it and has shared
voting power and shared dispositive power as to all 4,800 shares; (b) serves
as investment adviser for Lindner Growth Fund ("Lindner"), which
beneficially owns 837,000 shares held by it; and (c) has sole voting power
and sole dispositive power as to all 837,000 shares held by Lindner.
In addition, as of the record date, Fidelity Management Trust Company (the
"Trustee"), the trustee of the Company's 401(k) plans was, through its nominee,
the record holder of 674,329 shares of Common Stock (5.3% of the class).
However, the Trustee has power to dispose of these shares only in connection
with the distribution of shares to plan participants and the sale of shares to
fund withdrawals by, or loans to, plan participants. The Trustee must vote
shares allocated to the accounts of plan participants as directed by
participants. The Trustee must vote unallocated shares and shares for which no
participant direction is received in the same manner and proportion as it votes
shares for which it receives directions from plan participants. As a result, the
Trustee disclaims beneficial ownership of the shares of Common Stock held by it
in its capacity as trustee of the Company's 401(k) plans.
4
<PAGE> 9
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of June 8, 1998, the number of shares of
Common Stock beneficially owned by each director and each executive officer of
the Company named in the Summary Compensation Table below, individually, and by
all directors and current executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES EXERCISABLE TOTAL
OWNED STOCK SHARES PERCENT OF
DIRECTLY OR OPTION BENEFICIALLY SHARES
NAME/GROUP INDIRECTLY(1) SHARES(2) OWNED OUTSTANDING(3)
---------- ------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Peter A. Bukowick.......................... 10,448 27,332 37,780 --
Gilbert F. Decker.......................... 600 -- 600 --
Thomas L. Gossage.......................... 2,200 -- 2,200 --
Joel M. Greenblatt......................... 163,973(4) -- 163,973(4) 1.3%
Jonathan G. Guss........................... 2,300 -- 2,300 --
David E. Jeremiah.......................... 2,200 -- 2,200 --
Gaynor N. Kelley........................... 2,700(5) -- 2,700(5) --
Joseph F. Mazzella......................... 2,700 -- 2,700 --
Daniel L. Nir.............................. 163,373(4) -- 163,373(4) 1.3%
Richard Schwartz........................... 50,777 215,000 265,777 2.1%
Michael T. Smith........................... 600 -- 600 --
Scott S. Meyers............................ 3,656 11,500 15,156 --
Paul A. Ross............................... 1,558 9,499 11,057 --
Daryl L. Zimmer............................ 10,013 18,351 28,364 --
All directors and executive officers as a
group (23 persons)....................... 269,026(6) 334,130 603,156(6) 4.7%
</TABLE>
- ---------------
(1) Includes, in the case of directors, shares of restricted Common Stock (see
"COMPENSATION OF DIRECTORS--Restricted Stock" below under Proposal No. 1).
Includes shares of Common Stock allocated, as of April 30, 1998, to the
accounts of executive officers under the Company's 401(k) Plan. Includes
shares of Common Stock allocated, as of March 31, 1998, to the accounts of
executive officers who participate in the Company's 1997 Employee Stock
Purchase Plan. Excludes Units credited to the share accounts of participants
in the Company's Deferred Fee Plan for Non-Employee Directors referred to
below, which Units are payable solely in cash.
(2) Shares covered by stock options exercisable on June 8, 1998, or within 60
days thereafter.
(3) Percent is less than 1% unless otherwise indicated. Assumes issuance of the
Exercisable Stock Option Shares applicable to the person or group.
(4) Includes 161,773 shares beneficially owned by Gotham Capital III, L.P.
("Gotham III"). This person is a general partner of Gotham III and may be
deemed to have shared voting power and shared dispositive power as to the
161,773 shares owned by Gotham III. This person disclaims any beneficial
ownership of such shares for purposes of Rule 16a-1(a) promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise, except as to shares representing his pro rata partnership
interest in Gotham III.
(5) Excludes 542,000 shares beneficially owned by Hercules Incorporated
("Hercules"), of which Mr. Kelley is a director. In such capacity, Mr.
Kelley will not determine how to vote and/or whether to dispose of such
shares, and Mr. Kelley disclaims that he is the beneficial owner of such
shares within the meaning of Section 16 of the Exchange Act, Rule 16a-1(a)
promulgated thereunder or any other applicable rule. See "ELECTION
ARRANGEMENTS" below under Proposal No. 1.
(6) Includes the shares referred to in footnote (4) only once so as to avoid
double counting.
5
<PAGE> 10
PROPOSAL NO. 1
ELECTION OF DIRECTORS
GENERAL
The Company's Certificate of Incorporation provides for a Board consisting
of a number of directors, not less than three, as determined from time to time
by resolution of the Board. The Board currently consists of eleven directors,
all of whom were elected by the stockholders at the 1997 annual meeting of
stockholders, except Gilbert F. Decker and Michael T. Smith, who were elected
directors by the Board effective December 18, 1997, and Peter A. Bukowick, who
was elected a director by the Board effective May 11, 1998.
ELECTION ARRANGEMENTS
In March 1995, the Company acquired certain assets and operations of the
Hercules Aerospace Company division of Hercules ("HAC") pursuant to the terms of
a Purchase and Sale Agreement dated as of October 28, 1994 (the "Acquisition").
In connection with the Acquisition, the Company paid Hercules consideration that
included 3,862,069 shares of Common Stock. At the closing of the Acquisition,
the Company and Hercules entered into a stockholder's agreement, which was
amended in June 1997 (as amended, the "Stockholder's Agreement") and further
modified by an agreement (the "Disposition Agreement") entered into between the
Company and Hercules in October 1997.
Under the Disposition Agreement, (i) the Company registered, and Hercules
sold in a secondary public offering, 2,778,069 shares of Common Stock acquired
by Hercules in connection with the Acquisition; (ii) two directors who were
designees of Hercules, as required by the Stockholder's Agreement, resigned at
the closing of the secondary public offering; and (iii) Hercules was granted the
right to sell to the Company and the Company was granted the right to purchase
from Hercules during 1998, pursuant to a series of put and call options, all or
a portion of Hercules' remaining 1,084,000 shares of Common Stock at a price of
$55.325 per share, the net proceeds realized by Hercules in the secondary public
offering. The Company has since purchased 542,000 of such shares of Common Stock
pursuant to the Disposition Agreement, and, as of the record date, Hercules
still owned the remaining 542,000 shares of Common Stock.
As a result of the above developments, the term of the Stockholder's
Agreement has expired and the Company's only continuing obligation to Hercules
with respect to required membership on the Board is that, pursuant to the terms
of the Disposition Agreement, the Company will use all reasonable efforts to
cause a director of Hercules who is not a current or former officer or employee
of Hercules to serve as a director of the Company. The Disposition Agreement
provides that so long as Gaynor N. Kelley is a Hercules director, he will be the
Hercules director designated to serve as a director of the Company. This
obligation of the Company under the Disposition Agreement will expire upon the
earlier of (i) the date the Company has purchased the remaining 542,000 shares
of Common Stock owned by Hercules or (ii) the date of the Company's 1999 annual
meeting of stockholders.
NOMINEES
The Board, upon the recommendation of its Nominating Committee, has
nominated for election as directors the nominees listed below, all of whom are
currently directors, and each has agreed to serve if elected. As noted above,
proxies will be voted, unless authority is withheld, FOR the election as
directors of the nominees listed below to serve until the next annual meeting of
stockholders and until their respective successors shall be elected and
qualified, unless sooner displaced by prior death, resignation, retirement,
disqualification or removal from office. If any nominee should become
unavailable for election, proxies will be voted, unless authority is withheld,
for an alternate or alternates, if any, designated by the Board. The Board has
no reason to believe that any nominee will become unavailable for election.
6
<PAGE> 11
The following list of nominees includes brief statements setting forth
their present principal occupations, business experience, and other information,
including directorships in other public companies.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS OF ALL OF THE
NOMINEES LISTED BELOW (PROPOSAL NO. 1).
<TABLE>
<S> <C>
PETER A. BUKOWICK, age 54; director since May 1998.
PETER A. BUKOWICK
Mr. Bukowick has been President of the Company since May
1998, and Chief Operating Officer since September 1997. From
April 1997 until May 1998, he served as Executive Vice
President, and from March 1995 until April 1997, he was
Group Vice President--Aerospace Systems. Prior to joining
the Company in March 1995, he was President pro tempore of
HAC since January 1995, and Vice President, Technology of
HAC from 1992 until December 1994.
GILBERT F. DECKER, age 61; director since December 1997.
GILBERT F. DECKER
Mr. Decker has been a private consultant to electronics and
aerospace companies since May 1997. From April 1994 to May
1997, he served as Assistant Secretary of the
Army--Research, Development and Acquisition, where he was
responsible for all research, development and procurement of
systems and equipment required by the U.S. Army. Prior to
that he served from May 1990 until March 1994 as President
and Chief Executive Officer of Acurex Corporation, a
manufacturing company, and its successor, Xeruca Holding,
Incorporated which, through two subsidiaries, operated as an
asset management company and an environmental engineering
company. Mr. Decker is a director of Firearms Training
Systems, Inc. and Telegen Corporation. He is a visiting
lecturer and member of the Executive Institute of the
Defense Systems Management College. He is also a member of
the National Advisory Committee to the Whiting School of
Engineering of Johns Hopkins University, and the Board on
Army Science and Technology of the National Academy of
Science.
THOMAS L. GOSSAGE, age 64; director since March 1995.
THOMAS L. GOSSAGE
Mr. Gossage retired from Hercules in January 1997. He served
as a director of Hercules from 1989 until his retirement,
and as Chairman of the Board from January 1991 until his
retirement. He also served as Chief Executive Officer of
Hercules from January 1991 until August 1996, and as
President of Hercules from June 1992 until October 1995.
Prior to June 1992, he had been a Senior Vice President of
Hercules since September 1989 and President and Chief
Executive Officer of The Aqualon Group, a group of entities
wholly-owned by Hercules, since October 1989. Before joining
Hercules in 1988 as President of Hercules Specialty
Chemicals Company, he had been a Group Vice President at
Monsanto Company, a chemical producer. Mr. Gossage is a
director of The Dial Corporation and Fluor Corporation.
</TABLE>
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<TABLE>
<S> <C>
JOEL M. GREENBLATT, age 40; director since August 1994.
JOEL M. GREENBLATT
Mr. Greenblatt, who was Chairman of the Board of Directors
of the Company from August 1994 until March 1995, has been a
managing and general partner of Gotham III, an investment
partnership, and its predecessor partnerships since April
1985, where he has been responsible for the portfolio
management of the partnerships. Mr. Greenblatt has also been
the Chairman of St. Lawrence Seaway Corporation, a
publicly-owned corporation, since October 1993.
JONATHAN G. GUSS, age 39; director since August 1994.
JONATHAN G. GUSS
Mr. Guss has been a director and Chief Executive Officer of
Bogen Communications International, Inc., a producer of
sound processing equipment and telecommunications
peripherals, since December 1997. He has also been a
principal and the president of Active Management Group, Inc.
("AMG"), a firm that provides turnaround management
services, since May 1990. Since August 1992, Mr. Guss has
been a principal and the Chief Executive Officer of EK
Management Corp., the general partner of EK Associates, L.P.
(also known as Ekco/Glaco Ltd.) ("EK Associates"), a limited
partnership engaged in providing goods and services to the
baking industry. As President of AMG, Mr. Guss provides
management services to EK Associates. Prior thereto, Mr.
Guss was a consultant at Booz, Allen & Hamilton, Inc. from
September 1985 until May 1990.
DAVID E. JEREMIAH, age 64; director since April 1995.
DAVID E. JEREMIAH
Admiral Jeremiah, who retired from military service in
February 1994 after a 39-year career, is a partner and
President of Technology Strategies & Alliances Corporation,
a strategic advisory and investment banking firm engaged
primarily in the aerospace, defense, telecommunications and
electronics industries. Prior to his retirement, he served
for four years as Vice Chairman, Joint Chiefs of Staff, and
from 1987 until 1990, he was Commander in Chief of the
United States Pacific Fleet. Admiral Jeremiah is a director
of GEOBIOTICS, Inc. and Litton Industries, Inc. He is also a
director of the National Committee on U.S.-China Relations,
and a member of ManTech International Advisory Board,
Northrop Grumman Corporation (Melbourne Division) Board of
Visitors, Jewish Institute for National Security Affairs
Board of Advisors, and International Council of the George
Washington University Elliott School of International
Affairs.
GAYNOR N. KELLEY, age 67; director since March 1995.
GAYNOR N. KELLEY
Mr. Kelley retired from The Perkin-Elmer Corporation, a
manufacturer of analytical and biotechnology
instrumentation, in June 1996 after a 45-year career. He
served as a director of Perkin-Elmer from 1984 until his
retirement and as Chairman and Chief Executive Officer from
December 1990 until September 1995. Mr. Kelley is a director
of Hercules and The Prudential Insurance Company of America.
</TABLE>
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<TABLE>
<S> <C>
JOSEPH F. MAZZELLA, age 45; director since August 1994.
JOSEPH F. MAZZELLA
Mr. Mazzella has been a partner at the law firm of Lane
Altman & Owens in Boston, Massachusetts since 1985. Mr.
Mazzella joined Lane Altman & Owens as an associate in 1980
and, prior thereto, was an attorney with the Securities and
Exchange Commission in Washington, D.C. Mr. Mazzella is a
director of Inforonics, Inc. and Paragon Acquisition
Company, Inc.
DANIEL L. NIR, age 37; director since August 1994.
DANIEL L. NIR
Mr. Nir is the managing partner of Sargeant Capital
Ventures, L.L.C., an investment partnership, which he
founded in May 1997. Prior to that, he was a general partner
of Gotham III since January 1989 and a managing partner
since January 1991, where he was responsible for the
portfolio management of the partnership. Prior thereto, Mr.
Nir was a general partner of Gotham III's predecessor
partnerships. Mr. Nir has also been director of St. Lawrence
Seaway Corporation since October 1993.
RICHARD SCHWARTZ, age 62; director since March 1995.
RICHARD SCHWARTZ
Mr. Schwartz has been Chairman of the Board of the Company
since January 1997, and Chief Executive Officer since
January 1995. He also served as President from January 1995
until May 1998. Prior to joining the Company in January
1995, he was Executive Vice President of Hercules since
January 1991 and the President of HAC since October 1989. He
also served as a director of Hercules from 1989 until
January 1995. He was a Senior Vice President of Hercules
from 1989 to the end of 1990. Before joining Hercules in
1989, for several years he had been President of the
Rocketdyne Division of Rockwell International Corporation, a
producer of liquid rocket engine systems.
MICHAEL T. SMITH, age 54; director since December 1997.
MICHAEL T. SMITH
Mr. Smith has been Chairman and Chief Executive Officer of
Hughes Electronics Corporation ("Hughes"), a satellite and
wireless communications company, and a subsidiary of General
Motors Corporation, since October 1997. From 1992 until
October 1997 he served as Vice Chairman of Hughes. Mr. Smith
is a director and Chairman of the Board of PanAmSat
Corporation, an affiliate of Hughes, and a director of
American Mobile Satellite Corporation.
</TABLE>
BOARD MEETINGS AND
COMMITTEES OF THE BOARD
BOARD MEETINGS
The Board held 13 meetings during fiscal year 1998 and acted on occasion by
unanimous written consent. The number of meetings held by the committees of the
Board is set forth below. Each director attended at least 80% of the aggregate
number of meetings of the Board and the committees on which the director served.
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BOARD STANDING COMMITTEES
The Board has established the following standing committees: Audit,
Executive/Finance, Nominating, and Personnel and Compensation. Membership on the
Audit, Nominating, and Personnel and Compensation Committees consists entirely
of non-employee directors. The duties and membership of the committees are
described below.
The Audit Committee recommends to the Board the independent public
accountants to be selected to audit the Company's annual financial statements
and approves any special assignments given to such accountants. The Audit
Committee also reviews the planned scope of the annual audit and the independent
accountants' letter of comments and management's responses thereto; possible
violations of the Company's business ethics and conflicts of interest policies;
any major accounting changes made or contemplated; and the effectiveness and
efficiency of the Company's internal audit staff. The Audit Committee met three
times during fiscal year 1998. Current members of the Committee are Messrs. Guss
(Chair), Decker, Kelley, Mazzella and Smith.
The Executive/Finance Committee has all powers and authority of the Board
except those powers specifically reserved to the Board by Delaware law, the
Company's Certificate of Incorporation or the By-Laws of the Company. In
addition, the Executive/Finance Committee reviews and makes recommendations to
the Board regarding dividends, financial policies and procedures, and various
financial transactions. The Executive/Finance Committee met three times during
fiscal year 1998. Current members of the Committee are Messrs. Schwartz (Chair),
Gossage, Greenblatt, Nir and Smith.
The Nominating Committee identifies and evaluates individuals for potential
directorships and makes recommendations accordingly to the Board to fill
vacancies or new positions on the Board, as well as recommending to the Board
the slate of nominees for election as directors at the annual meeting of
stockholders. The Nominating Committee also makes recommendations regarding the
size and composition of the Board and its committees and evaluates the
performance of the Board. The Nominating Committee also recommends any
non-incumbent Chief Executive Officer, Chief Financial Officer and Chief
Operating Officer for election by the Board. The Nominating Committee met five
times during fiscal year 1998. Current members of the Committee are Messrs.
Gossage (Chair), Decker, Greenblatt, Jeremiah and Nir.
The Nominating Committee will consider individuals recommended by
stockholders to be nominees for election as directors at the annual meeting of
stockholders. Such recommendations should be sent to the Secretary of the
Company at least 120 days prior to the annual meeting of stockholders and must
be accompanied by information concerning the individual's qualifications, and
the written consent of the individual to be nominated if selected as a nominee
by the Board and to serve on the Board if elected. The Board has the sole
discretion to select director nominees. Stockholders may not nominate
individuals for election as directors at a meeting of stockholders unless they
comply with the requirements of the Company's By-Laws, a copy of the relevant
portion of which is available from the Secretary of the Company.
The Personnel and Compensation Committee approves salary actions pertaining
to top management, administers and grants awards under the Company's executive
compensation plans, approves executive compensation actions and plans and other
benefit programs that are not required by law or regulation to be approved by
the Board, sets annual incentive targets, recommends officers (other than any
non-incumbent Chief Executive Officer, Chief Financial Officer and Chief
Operating Officer) for election by the Board, reviews and assesses the
performance and capability of key management, with a view towards assuring
adequate and qualified backups, and submits the report on executive compensation
included in this Proxy Statement. The Personnel and Compensation Committee met
four times during fiscal year 1998 and acted on occasion by unanimous written
consent. Current members of the Committee are Messrs. Mazzella (Chair), Guss,
Jeremiah and Kelley. The Personnel & Compensation Committee's Section 16
Subcommittee approves certain transactions (including grants and awards, and the
acquisition of Common Stock from the Company, and the disposition of Common
Stock to the Company) not approved by the Board, if advance approval thereof by
the Board or a committee of two or more non-employee directors is required in
order to qualify the transaction under the exemption provisions of Rule
16b-3(d)and (e) under the Exchange Act. During fiscal year 1998, the Section 16
Subcommittee acted only by unanimous written consent. Current members of the
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Section 16 Subcommittee are Messrs. Kelley (Chair) and Guss. A special committee
of the Board is authorized to make limited stock awards to employees who are not
subject to Section 16 of the Exchange Act. During fiscal year 1998, the special
committee acted only by unanimous written consent. Mr. Schwartz is currently the
sole member of the special committee.
COMPENSATION OF DIRECTORS
ANNUAL RETAINER, MEETING FEES, EXPENSES AND PER DIEM PAYMENTS
Directors who are not employees of the Company receive an annual retainer
fee of $20,000, payable in quarterly installments, and meeting fees of $1,000
for each Board meeting attended and $750 ($1,000 in the case of the Committee
chair) for each Board committee meeting attended. Messrs. Greenblatt and Nir
have waived and will not accept retainer and meeting fees for their service as
non-employee directors of the Company.
The Company's Deferred Fee Plan for Non-Employee Directors permits the
deferral of all or part of a director's cash fees. Each amount deferred is, at
the director's election, either credited in cash to a "cash account," or in
Common Stock equivalents ("Units") to a "share account" (based upon the market
value of the Common Stock). Cash accounts are credited with interest quarterly
at the Company's one-year borrowing rate and share accounts will be credited
with additional Units if dividends are paid on the Common Stock. Deferred
amounts are always paid in cash (based upon the market value of the Common Stock
in the case of share accounts), either in a lump sum or in up to ten annual
installments, at the election of the director, following the director's
termination of service on the Board. Currently, two directors are participating
in this plan--Mr. Kelley, who defers his quarterly retainer fee installments
into a share account, and Mr. Smith, who defers his quarterly retainer fee
installments and meeting fees into a cash account (20%) and a share account
(80%). During fiscal year 1998, Mr. Kelley deferred all of his quarterly
retainer fee installments into his share account, which had a balance at the end
of fiscal year 1998 of 460.2181 Units, which are payable to Mr. Kelley in cash
on the first business day of the year after he ceases to be a director of the
Company. During fiscal year 1998, Mr. Smith deferred 80% of his quarterly
retainer fee installments and meeting fees into his share account, which had a
balance at the end of fiscal year 1998 of 120.1850 Units, which are payable to
Mr. Smith in cash in five annual installments, commencing on the first business
day of the year after he ceases to be a director of the Company.
Non-employee directors are reimbursed for travel and other expenses
incurred in the performance of their duties. Non-employee directors are also
eligible to be paid a $1,000 per diem (plus expenses) for any day on which the
director, in the judgment of the Company's Chief Executive Officer, has
committed a significant part of the day (outside of normal Board or Board
Committee meetings) to business issues beyond the normal scope of the director's
responsibilities as a member of the Board. During fiscal year 1998, no director
received any such per diem payments.
RESTRICTED STOCK
Under the Company's Non-Employee Director Restricted Stock Plan (the
"Directors Restricted Stock Plan"), each non-employee director receives
automatic periodic awards of Common Stock--600 shares upon first being elected
to the Board and 600 shares upon reelection at each subsequent annual meeting of
stockholders. Common Stock issued under the Directors Restricted Stock Plan
entitles participating directors to all of the rights of a stockholder,
including the right to vote the shares and receive any cash dividends. All such
shares are, however, subject to certain restrictions against sale or transfer
for a period (the "Restricted Period") starting on the date (the "Award Date")
of the restricted stock award (the "Award") and ending on the earlier of:
- the first to occur of the following: (i) the director retires from the
Board in compliance with the Board's retirement policy as then in effect;
(ii) the director's service on the Board terminates as a result of the
director's not being nominated for reelection by the Board, but not as a
result of the director's declining to serve again; (iii) the director's
service on the Board terminates because the director, although nominated
for reelection by the Board, is not reelected by the stockholders; (iv)
the director's service on the Board terminates because of (A) the
director's resignation at the request of the
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Nominating Committee of the Board, (B) the director's removal by action
of the stockholders or (C) the sale, merger or consolidation of, or a
similar extraordinary transaction involving, the Company; (v) the
director becomes unable to serve because of disabilities; or (vi) the
director dies; or
- if earlier, the third or any subsequent anniversary of the Award Date
with respect to an Award to a director if the director, at least one year
prior to such anniversary of the Award Date, gives the Company written
notice of election to end the Restricted Period with respect to such
Award on such third or subsequent anniversary.
If a director leaves the Board for any other reason prior to the expiration of
the Restricted Period, the director forfeits all rights in shares for which the
Restricted Period has not expired.
Shares of restricted stock awarded under a similar predecessor plan are
subject to the same restrictions, except that the Restricted Period, if not
sooner terminated, expires on the third anniversary of the Award Date, unless
the director has, prior to that date, agreed with the Company to extend the
restricted period to (i) a specified date at least two years after the date of
the agreement, or (ii) a date to be designated by the director in the future by
notice to the Company at least two years prior to the designated date.
Current non-employee directors presently hold the following number of
shares of restricted Common Stock still subject to the restrictions under the
above plans: Messrs. Greenblatt, Guss, Mazzella and Nir, 2,200 shares each;
Messrs. Gossage, Kelley and Jeremiah, 1,700 shares each; and Messrs. Decker and
Smith, 600 shares each. Such shares (including 600 shares awarded to each
director during fiscal year 1998 upon his election or reelection to the Board)
are included in the stock ownership table above as being owned directly by each
director.
STOCK OWNERSHIP GUIDELINE
In May 1996, the Board established a stock ownership guideline for
non-employee directors of 3,500 shares to be achieved in five years following
election to the Board. The Nominating Committee of the Board is expected to (i)
review the stock ownership of each incumbent director annually prior to the
Committee's recommendation to the Board of nominees for election as directors at
the annual meeting of stockholders and (ii) take into consideration compliance
with the stock ownership guideline, including extenuating circumstances in cases
of noncompliance, when recommending the nomination for reelection of incumbent
directors.
INDEMNIFICATION AGREEMENTS
The Company currently has indemnification agreements with its directors
that, among other things, require the Company to indemnify the directors to the
fullest extent permitted by law and to advance to the directors all related
expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. The Company must also indemnify and advance
all expenses incurred by directors seeking to enforce their rights under the
indemnification agreements, as well as cover directors under the Company's
directors' and officers' liability insurance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" and
"OTHER PLANS AND AGREEMENTS WITH EXECUTIVE OFFICERS" under "EXECUTIVE
COMPENSATION" below for information regarding certain relationships and related
transactions between the Company and its directors, executive officers and
entities in which certain directors of the Company have an affiliation or
interest.
EXECUTIVE COMPENSATION
This section provides information regarding the Company's executive
compensation program, starting with the Report of the Personnel and Compensation
Committee of the Board on Executive Compensation. The Committee's report is
followed by information on compensation committee interlocks and insider
participation, a graph comparing the performance of the Company's Common Stock
with two stock indexes over the past five years, a summary compensation table
showing the annual compensation paid to certain
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executives during the last three fiscal years, a table showing stock options
granted to those executives during the last fiscal year, a table showing the
number of shares, if any, acquired upon the exercise of stock options by each of
those executives during the last fiscal year, the value realized upon such
exercise, and the number of and value of unexercised stock options held by those
executives as of the end of the last fiscal year, and a table showing long-term
incentive plan awards to those executives during the last fiscal year. These
tables are followed by a description of the estimated retirement benefits of
those executives, change of control arrangements and related provisions under
various executive compensation plans and agreements, and other plans and
agreements with executive officers.
REPORT OF THE PERSONNEL AND COMPENSATION COMMITTEE
OF THE BOARD ON EXECUTIVE COMPENSATION
The Personnel and Compensation Committee (the "Committee") of the Board has
overall responsibility for compensation actions affecting the Company's
executive officers. The Committee's responsibilities include approving base
salaries, setting incentive targets, and administering all executive
compensation plans, and granting awards to executive officers thereunder,
subject to approval by the Board or the Committee's Section 16 Subcommittee
where required. (See the discussion of the Committee's duties under the heading
"BOARD MEETINGS AND COMMITTEES OF THE BOARD" in this Proxy Statement.) The
Committee is comprised entirely of directors who are neither current nor former
employees of the Company.
GENERAL
The goal of the Company's executive compensation program is to encourage
and reward individual and Company performance. The program has been designed (1)
to link executive compensation and (a) the Company's performance and (b)
increasing stockholder value, and (2) to recognize individual and business unit
accountability and achievement.
The components of the program are base salary, annual incentive
compensation, and long term incentive compensation. To ensure that the Company
can competitively attract and retain qualified executives, consideration is
given to the comparable practices of companies participating in two nationally
known compensation surveys. The survey data utilized represent both the
aerospace and defense industry and other industries, and are regressed to the
Company's revenue size so that the comparisons are made to the practices of
similarly sized employers.
The Company establishes target compensation levels at the median level of
those survey participants used for comparative purposes. The compensation of
individual executives will vary above or below the median market level based
upon the executive's overall accountabilities, individual performance and the
Company's performance. Individual performance assessment emphasizes objective
achievements under a Performance Accountability System which establishes
results-based accountabilities for each executive, including performance
requirements for threshold, target and outstanding performance ratings. Base
salary adjustments and annual incentive payments are directly affected by the
executive's level of performance on accountabilities. Each executive's
accountabilities are established annually and are uniquely tailored to the
executive's job responsibilities. The process for measuring individual
performance against these accountabilities is as objective as practical, but may
involve subjective assessments. The relative importance of each individual's
accountabilities varies, so no weighting can be assigned that is applicable in
all cases.
BASE SALARIES
Base salaries are intended to provide a foundation for attracting and
retaining key employees, and vary based upon position, responsibility and
individual performance. As a result, the base salary component of executive
compensation is the least variable with Company performance. Base salaries of
executive officers are reviewed annually during the first quarter of the fiscal
year. Base salary increases, if any, are a function of several factors: the
comparative compensation practices as determined from the surveys referred to
above; individual performance against established accountabilities; business
circumstances; and affordability.
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All of the executive officers named in the Summary Compensation Table
following this Report (defined below as the "Named Executive Officers"), except
the Chief Executive Officer, received a base salary increase during fiscal year
1998.
ANNUAL INCENTIVE COMPENSATION
All executive officers participate in the Company's Management Compensation
Plan, which provides the opportunity for annual cash and stock incentive
compensation. The goal of this plan is to motivate executives to a high level of
performance by conditioning a significant portion of each executive's annual
compensation on individual achievement and Company and business unit
performance.
Each fiscal year the Committee approves the total number of eligible plan
participants, the aggregate target incentive fund for all participants, and the
individual target incentive amounts for executive officers. Participation by,
and target incentive amounts for, individuals who are not executive officers are
subject to approval by the Chief Executive Officer. Individual target incentive
amounts are communicated to all participants at the start of the fiscal year. A
target incentive fund is established for each organizational unit within the
Company, including the Company's business units, subunits and the corporate
staff, which is equal to the sum of the individual target incentive amounts for
all of the employees in that organizational unit. An organization weighting
structure is used to determine the extent to which each organizational unit's
incentive will be affected by overall Company performance and the performance of
applicable units and subunits. For example, the corporate staff incentive fund
is determined based 100% upon overall Company performance, and each business
unit's incentive fund is determined based upon the combination of overall
Company performance (at least 20%) and the performance of the applicable
business unit and/or subunit (20% to 80%). Each organizational unit's earned
incentive fund is calculated separately after fiscal year end and can range from
zero to 200% (or 300% if determined by the Committee) of its target incentive
fund, depending upon overall Company, business unit and/or subunit performance,
as applicable. If the corporate staff earned incentive fund is zero, each
business unit's earned incentive fund is reduced by 50%.
Earned incentive funds are divided among participants based 25% upon their
relative individual performance and 75% upon applicable organizational unit
performance. The individual performance of executive officers is assessed by the
Chief Executive Officer, who makes recommendations to the Committee in
connection with its approval of incentive awards to executive officers.
Incentive awards to individuals who are not executive officers are subject to
approval by the Chief Executive Officer. The maximum incentive payable to an
individual participant is 300% of the individual's target incentive. It is the
present intention of the Committee that incentive payments to executive officers
be in cash and, to the extent that an incentive payment exceeds an individual's
target incentive, Company Common Stock (if at least 100 shares) for the
after-tax amount of such excess. The Committee may also determine that more than
the above portion of a participant's incentive will be paid in Common Stock. The
Committee believes that including a Common Stock component in the incentive
payment to executive officers will further the goal of creating a strong and
direct link between the compensation of these key executives and stockholder
value. See "Stock Ownership Guidelines" below.
The incentive compensation opportunity for the Chief Executive Officer is
established separately and is based upon the Company's performance against the
goals established for participants in the Management Compensation Plan, and the
Committee's subjective assessment as to the quality and impact of the Chief
Executive Officer's leadership and performance against established
accountabilities.
Approximately one hundred ten employees participated in the Management
Compensation Plan for fiscal year 1998. The fiscal year 1998 goals for the
Company as a whole were the achievement of net income, cash flow and orders
goals, each weighted one-third, and for each business unit were the achievement
of EBIT (earnings before interest and taxes), cash flow and orders goals, each
weighted one-third. Earnings, represented by net income and EBIT, was selected
as one of the performance goals because the Committee believes that stockholders
view earnings as an important measure of performance; earnings are an important
factor in assuring that the Company complies with the financial covenants under
its loan agreements; earnings are a strong indicator of Company health; and
earnings are a historically used measure that is easily
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communicated to and understood by participants. Cash flow was selected as a
performance goal because of the importance of generating and managing cash to
fund the Company's business activities. Orders were selected as the third
performance goal because of the importance of orders in the future growth of the
Company. The net income, EBIT, cash flow and orders goals were based upon the
Company's internal operating plan.
For fiscal year 1998, the Committee, based upon the extent to which the
Company as a whole and the relevant business units exceeded their goals,
approved incentive payments to Messrs. Bukowick, Meyers, Ross and Zimmer that
were above target.
The amount of the fiscal year 1998 annual incentive payment to the Chief
Executive Officer was determined by the Committee based upon the total Company's
performance and the Chief Executive Officer's performance against
pre-established accountabilities, including the following, without specific
weighting: strong core business performance, with significant growth in earnings
per share from continuing operations; realization of growth opportunities such
as the success of the Outrider Tactical Unmanned Aerial Vehicle, the Objective
Individual Combat Weapon program win, and the acquisition of the Motorola fuze
business; the positioning of the Company for long-term opportunities in solid
propulsion; divestiture and consolidation of former Emerging Business Group
operations; strengthening of top level management; facility consolidations;
excellent safety results throughout the Company's operations; further
implementation of process control in all businesses; and completion of the
secondary public offering of Company Common Stock held by Hercules.
LONG-TERM INCENTIVE COMPENSATION
The goal of long-term incentive compensation is to encourage long-term
Company performance, to link stockholder value creation and management
compensation, and to encourage executive retention.
Long-term incentive compensation is provided to executive officers under
the Company's 1990 Equity Incentive Plan, principally through a combination of
annual grants of market price stock options and periodic performance share
grants. The terms of each grant are determined by the Committee at the time the
grant is awarded, subject to the provisions of the plan. The Committee believes
that stock options are an appropriate means of long-term incentive compensation
because they provide value only when the Company's stockholders benefit from
stock price appreciation and that performance shares provide an effective
incentive to achieve predetermined long-term performance goals and serve as an
effective means to encourage retention of key employees.
The extent to which an executive officer retains stock acquired through
annual and long-term incentive compensation awards will be a factor in
determining the extent of the officer's participation in future long-term
incentive compensation awards. The weight given to this factor is in the sole
subjective judgment of the Committee, which gives consideration to the reasons
for an executive officer's sale of any such stock. See "Stock Ownership
Guidelines" below.
During fiscal year 1998, stock options were granted to all current
executive officers except the Chief Executive Officer. The terms of these grants
are summarized following the table labeled "OPTION GRANTS IN LAST FISCAL YEAR"
in this Proxy Statement. During fiscal year 1998, performance shares were
granted to three current executive officers, not including the Chief Executive
Officer. The terms of these grants are summarized following the table labeled
"LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR" in this Proxy Statement.
The target long-term incentive grant amount for each executive officer's award
of stock options and, where applicable, performance shares, was based upon a
percentage (based upon competitive long-term incentive values) of the grant
recipient's base salary. The Committee determined the actual size of the grants
by adjusting the target number of shares up or down, after consideration of the
subjective recommendation of the Chief Executive Officer. The size of these
grants was determined without regard to the amount and terms of stock options
already held by the grant recipients.
STOCK OWNERSHIP GUIDELINES
In furtherance of the Committee's desire to align the interests of the
Company's executive officers with those of the Company's stockholders, in early
1997 the Committee implemented Common Stock ownership guidelines for its
executive officers, to be achieved within three years. The guidelines establish
target levels of
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Common Stock ownership that are a function of each officer's base salary--stock
having a market value four times base salary in the case of the Chief Executive
Officer; two times base salary in the case of the Chief Operating Officer, the
Chief Financial Officer and all Group Vice Presidents; and one times base salary
for all other executive officers. Failure to achieve target ownership will be
taken into consideration by the Committee when it considers future long-term
incentive awards; and achievement of target ownership will eliminate the
requirement that the after-tax amount of above target annual incentive
compensation be paid in Common Stock.
LIMIT ON TAX DEDUCTIBILITY
Section 162(m) of the Internal Revenue Code places a cap of $1 million on
the amount the Company can deduct for any tax year for compensation to any
person who is the Chief Executive Officer or one of the four other highest
compensated officers as of the end of such tax year ("Covered Officers").
However, exempt from this deductibility cap are amounts payable pursuant to
certain pre-existing agreements, and amounts qualifying as performance based
compensation. In order for incentive compensation to qualify as performance
based compensation, it must be paid pursuant to pre-established objective
performance goals approved by stockholders. The Committee designs stock option
grants so that they qualify for the exemption from the deductibility cap. Other
long-term incentive awards may not qualify for exemption from the deductibility
cap, but the Committee will take into account the likelihood of such
non-deductibility when determining the amount and recipients of such awards.
Annual incentive compensation payable under the Management Compensation Plan
does not qualify for exemption from the deductibility cap because it involves
the flexibility to make subjective determinations regarding the recipients and
amounts of payments, which the Committee believes is sound executive
compensation policy and in the best interests of the Company and its
stockholders. The Committee will take into account, when making such
determinations, the extent to which any such payment may be non-deductible by
the Company. The Committee believes that the benefit of being able to evaluate
the performance of its Covered Officers on important subjective performance
measures outweighs the cost resulting from a portion of a Covered Officer's
compensation being nondeductible under the Section 162(m) limitation described
above.
Compensation payments to the Chief Executive Officer during the fiscal year
ending March 31, 1999 ("fiscal year 1999"), which will include base salary, the
incentive bonus for fiscal year 1998, as reported in the Summary Compensation
Table following this report, the value of restricted stock that becomes non-
forfeitable, and other items of compensation, will likely exceed $1 million, and
be non-deductible to the extent of such excess. No other Covered Officers are
currently expected to be paid non-exempt compensation exceeding $1 million
during fiscal year 1999.
Personnel and Compensation Committee
Joseph F. Mazzella, Chair
Jonathan G. Guss
David E. Jeremiah
Gaynor N. Kelley
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Committee is either a current or former employee of the
Company. There are no compensation committee interlocks--i.e., no executive
officer of the Company serves as a member of the board of directors or
compensation committee of another entity that has an executive officer serving
on the Board or the Committee.
The Company during fiscal year 1998 had, and may continue in the future to
have, transactions with the following directors or entities in which the
following directors have an affiliation or interest: Messrs. Decker, Jeremiah,
Mazzella and Smith. In the case of Mr. Mazzella, the transactions involved
payments for legal services provided by the law firm of Lane Altman & Owens, of
which Mr. Mazzella is a partner. The amounts involved in these transactions
during fiscal year 1998 were, in the case of each director, less than the amount
above which disclosure is required by the applicable rules of the Securities and
Exchange Commission.
16
<PAGE> 21
PERFORMANCE GRAPH
The following graph compares, for the five fiscal years ended March 31,
1998, the cumulative total return for the Common Stock with the comparable
cumulative total return of two indexes--the Standard & Poor's Composite 500
Stock Index, a broad equity market index, and the Dow Jones Aerospace & Defense
Stock Index, a published industry index. The graph assumes that, on April 1,
1993, $100 was invested in the Common Stock (at the closing price on the
previous trading day) and in each of the indexes. The comparison assumes that
all dividends, if any, were reinvested. The graph indicates the dollar value of
each hypothetical $100 investment as of March 31 in each of the years 1994,
1995, 1996, 1997 and 1998.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
STANDARD & DOW JONES
COMPANY POOR'S AEROSPACE &
MEASUREMENT PERIOD COMMON COMPOSITE DEFENSE
(FISCAL YEAR COVERED) STOCK 500 INDEX INDEX
<S> <C> <C> <C>
3/31/93 100 100 100
3/31/94 100 102 130
3/31/95 159 117 163
3/31/96 202 155 263
3/31/97 176 185 305
3/31/98 261 274 372
</TABLE>
17
<PAGE> 22
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth, for the periods
indicated, summary compensation information for the Company's Chief Executive
Officer and the four other most highly compensated individuals who were serving
as executive officers at the end of fiscal year 1998 (collectively, the "Named
Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ----------------------- -------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION (1) ($) ($)(2) ($) ($)(3) (#) ($) ($)(4)
------------------ ---- ------ ------ ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard Schwartz............. FY98 $550,000 $580,800 $8,839 -0- -0- -0- $27,702
Chairman of the Board and FY97 550,000 544,500 8,839 -0- -0- -0- 28,843
Chief Executive Officer(5) FY96 550,000 630,300 8,995 -0- -0- -0- 24,892
Peter A. Bukowick............ FY98 $289,386 $264,000 $ 491 -0- 5,000 -0- $14,112
President and Chief FY97 234,380 192,500 737 -0- 4,000 -0- 13,884
Operating Officer(6) FY96 225,000 180,000 231 -0- 8,000 -0- 3,895
Scott S. Meyers.............. FY98 $248,340 $193,600 $6,384 -0- 4,500 -0- $21,975
Vice President and FY97 240,000 173,250 7,971 -0- -0- -0- 24,726
Chief Financial Officer(7) FY96 20,000 20,000 -0- -0- 20,000 -0- -0-
Paul A. Ross................. FY98 $194,766 $200,000 -0- -0- 3,500 -0- $ 4,895
Group Vice President --
Space and Strategic
Systems(8)
Daryl L. Zimmer.............. FY98 $188,674 $ 95,000 $3,320 -0- 4,500 -0- $19,293
Vice President and FY97 180,836 90,750 2,958 -0- 4,500 -0- 19,613
General Counsel FY96 170,622 92,000 3,328 -0- 5,000 -0- 20,231
</TABLE>
- ---------------
(1) The three years reported upon in the foregoing table are the fiscal years
ended March 31, 1996 ("FY96"), March 31, 1997 ("FY97") and March 31, 1998
("FY98").
(2) The FY98 incentive bonuses for the Named Executive Officers were paid in
cash and/or Common Stock, based upon the then fair market value of the
Common Stock ($63.50), as follows: Mr. Schwartz, $330,000 and 2,509 shares;
Mr. Bukowick, $-0- and 2,642 shares; Mr. Meyers, $110,000 and 836 shares;
Mr. Ross, $80,000 and 1,214 shares; and Mr. Zimmer, $95,000 and -0- shares.
The number of shares of Common Stock paid was determined after tax
withholding from the Common Stock component of the incentive bonus.
(3) As of the end of FY98, Mr. Schwartz held 5,000 shares of restricted stock
having a value of $313,750. Since the end of FY98, all 5,000 shares of
restricted Common Stock held by Mr. Schwartz vested and 3,177 shares (net of
1,823 shares withheld to pay applicable withholding taxes) were released to
him.
(4) Includes for FY98: (a) matching Company contributions to accounts of
participants in a Company defined contribution 401(k) plan as follows: Mr.
Schwartz, $3,200; Mr. Bukowick, $5,228; Mr. Meyers, $3,250; Mr. Ross,
$4,895; and Mr. Zimmer, $3,240; (b) cash payments under the Company's
Flexible Perquisite Account Program as follows: Mr. Schwartz, $15,000; Mr.
Bukowick, $7,931; Mr. Meyers, $12,000; Mr. Ross, $-0-; and Mr. Zimmer,
$12,000; (c) financial counseling fees paid as follows: Mr. Schwartz,
$9,000; Mr. Bukowick, $500; Mr. Meyers, $6,500; Mr. Ross, $-0-; and Mr.
Zimmer, $3,600; and (d) the following dollar value of insurance premiums
paid by the Company with respect to term life insurance in the amounts
indicated in parenthesis: Mr. Schwartz, $502 ($1,500,000); Mr. Bukowick,
$453 ($750,000); Mr. Meyers, $225; $(500,000); Mr. Ross, $-0- ($-0-); and
Mr. Zimmer, $453 ($300,000). Payments under the program referred to in (b)
above represent reimbursements for certain eligible expenditures, such as
car payments, club dues, and unreimbursed business expenses. The amounts
shown in (b) above are the gross amounts payable under the program, which
are subject to tax withholding. The actual net cash payments to the
individuals were less than reported above by the amount of the applicable
tax withholding. The Company has no agreement with the executive officers
named in (d) above that they will receive or be allocated an interest in any
cash surrender value under the applicable life insurance policies.
(5) Mr. Schwartz also served as President until May 11, 1998.
(6) Mr. Bukowick became Chief Operating Officer on September 16, 1997, and
President on May 11, 1998.
(7) Mr. Meyers served as an employee of the Company for one month of FY96.
(8) Mr. Ross became an executive officer at the beginning of FY98.
18
<PAGE> 23
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes for each of the Named Executive Officers
information with respect to stock option grants during fiscal year 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
--------------------------------------------------------- -------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS GRANTED EMPLOYEES IN BASE PRICE EXPIRATION 0% 5% 10%
NAME (#)(1) FISCAL YEAR ($/SHARE) DATE ($)(2) ($)(2) ($)(2)
---- --------------- ------------ ----------- ---------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard Schwartz........ -0-
Peter A. Bukowick....... 5,000 2.7% $44.125 5-20-07 -0- $138,750 $351,619
Scott S. Meyers......... 4,500 2.4% 44.125 5-20-07 -0- 124,875 316,457
Paul A. Ross............ 3,500 1.9% 44.125 5-20-07 -0- 97,125 246,134
Daryl L. Zimmer......... 4,500 2.4% 44.125 5-20-07 -0- 124,875 316,457
</TABLE>
- ---------------
(1) Each option (a) is a non-qualified stock option for tax purposes; (b) has an
exercise price equal to the Common Stock's fair market value on May 20,
1997, the grant date; (c) may be exercised by the delivery of cash and/or
shares of Common Stock; (d) becomes exercisable to the extent of one-third
of the grant on each of the first three anniversaries of the grant date and
remains exercisable thereafter until the expiration date or earlier
expiration upon or following termination of employment; (e) may be exercised
following termination of employment to the extent exercisable upon
termination as follows: (i) for three years following death prior to
termination, (ii) for 180 days following death after termination, (iii) for
three years after termination due to layoff, retirement or disability and
(iv) for 90 days after termination for any other reason other than for
cause; and (f) becomes exercisable in the event of a "change of control"
(see "CHANGE OF CONTROL ARRANGEMENTS" below).
(2) The numbers in this column represent the potential pre-tax amount that would
be realized if the named individual exercised the option on its expiration
date, assuming that the Common Stock appreciated over the term of the option
at the annual appreciation rate indicated at the head of the column. This
amount has not been, and may never be, realized. The actual amount, if any,
realized by the named individual upon the sale of the shares issued upon the
exercise of the option will depend upon the price at which the shares are
sold.
19
<PAGE> 24
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table summarizes for each of the Named Executive Officers the
number of shares, if any, acquired during fiscal year 1998 upon the exercise of
stock options by each of the Named Executive Officers, the value realized upon
such exercise, and the number of, and the value of, the exercisable and
unexercisable stock options each of them held at the end of fiscal year 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT FY98
SHARES AT FY98 YEAR-END (#) YEAR-END ($)(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard Schwartz..... -0- -0- 215,000 -0- $7,041,250 -0-
Peter A. Bukowick.... -0- -0- 21,666 15,334 528,736 $328,889
Scott S. Meyers...... -0- -0- 10,000 14,500 151,250 235,063
Paul A. Ross......... -0- -0- 4,999 8,501 112,272 162,915
Daryl L. Zimmer...... 14,879 $359,886 13,684 9,167 517,957 175,988
</TABLE>
- ---------------
(1) This value represents the difference between the aggregate market value, on
the date of exercise, of the shares acquired, and the aggregate option price
of such shares.
(2) The value shown in this column represents the aggregate difference between
the market value of the Common Stock on March 31, 1998 ($62.75) and the
exercise price of each of the unexercised stock options, multiplied by the
number of shares issuable upon the exercise of each stock option. This value
has not been, and may never be, realized. The actual value, if any, realized
by the named individual upon the sale of the shares issued upon the exercise
of the stock option will depend upon the price at which the shares are sold.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
The following table summarizes for each of the Named Executive Officers
information with respect to long-term incentive plan awards during fiscal year
1998.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK
PRICE-BASED PLANS
NUMBER OF SHARES, PERFORMANCE OR OTHER ------------------------------
UNITS OR OTHER PERIOD UNTIL THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#)(1) MATURATION OR PAYOUT (#)(2) (#)(2) (#)(2)
---- ----------------- -------------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Richard Schwartz................ -0-
Peter A. Bukowick............... 3,500 4/1/97-3/31/00 1,500 2,500 3,500
Scott S. Meyers................. 2,700 4/1/97-3/31/00 1,300 2,000 2,700
Paul A. Ross.................... 2,000 4/1/97-3/31/00 1,000 1,500 2,000
Daryl L. Zimmer................. -0-
</TABLE>
- ---------------
(1) The numbers in this column represent the number of performance shares
awarded to the named individuals during fiscal year 1998. Performance shares
are Common Stock denominated units that are paid in shares of Common Stock
and/or cash at the discretion of the Board's Personnel and Compensation
Committee at the end of the applicable performance period if, and to the
extent that, predetermined performance objectives are achieved. The
performance objectives for the above awards are the achievement of target
earnings per share on the Common Stock. No portion of the award is payable
for less than threshold performance. A pro-rata portion of the award is
payable in the event of a "change of control" during the performance period
(see "CHANGE OF CONTROL ARRANGEMENTS" below). Awards are forfeited upon
death or termination of employment unless such event occurs at or after the
end of the performance period.
20
<PAGE> 25
(2) For Mr. Bukowick, the threshold percentage is 43% of the award, the target
percentage is 71% of the award, and the maximum percentage is 100% of the
award. For Mr. Meyers, the threshold percentage is 48% of the award, the
target percentage is 74% of the award, and the maximum percentage is 100% of
the award. For Mr. Ross the threshold percentage is 50% of the award, the
target percentage is 75% of the award, and the maximum percentage is 100% of
the award.
RETIREMENT PLANS
Messrs. Schwartz, Meyers and Zimmer are participants in the Company's
Retirement Plan (the "Retirement Plan"), and Messrs. Bukowick and Ross are
participants in the Company's Aerospace Pension Plan (the "Aerospace Plan").
RETIREMENT PLAN
Prior to April 1, 1992, a participant's accrued benefit under the
Retirement Plan was based upon a final average earnings formula identical to
that provided under the Honeywell Retirement Benefit Plan as in effect at the
time of the spin-off of the Company's initial business operations by Honeywell
Inc. ("Honeywell") in September 1990 (the "Spin-off"). Effective April 1, 1992,
the Retirement Plan was amended to provide benefits based upon a cash balance
account established for each participant. Participants in the Retirement Plan as
of March 31, 1992 had an initial balance in their account as of April 1, 1992
equal to the present value of the benefits earned under the final average
earnings formula as of that date. Newly hired employees start with an account
balance of zero.
Each participant's cash balance account is credited monthly with a
percentage of recognized compensation (generally compensation subject to federal
income tax withholding) that increases with length of credited service from 3.5%
for newly hired employees to 8.5% for employees with at least 25 years of
service. Accounts are credited with an additional percentage of recognized
compensation in excess of the Social Security wage base. This additional
percentage increases with length of credited service from 3.5% for newly hired
employees to 5.5% for employees with at least 10 years of service. Account
balances are credited monthly with interest equal to the average one-year U.S.
Treasury Bill rate during the 12 months ending September 30 of the prior
calendar year. A participant's account balance vests after five years of
credited service. At retirement, which may occur at or after age 55, a
participant's vested account balance is payable as a monthly annuity or, if
retirement occurs at or after age 62, as an optional lump sum payment.
Participants whose age plus years of credited service equaled 50 as of
March 31, 1992, will, upon retirement, have their benefit calculated under the
prior final average earnings formula and the new cash balance formula and will
receive the higher accrued benefit. The prior final average earnings formula
provides a monthly life annuity related to years of credited service, average
recognized compensation during the highest consecutive 60 of the last
consecutive 120 months of credited service, and the participant's primary Social
Security benefit. Participants may retire on or after age 55. Benefits are
reduced on an approximately proportionate basis for credited service of less
than 30 years. Participants whose age plus years of credited service equal 85 or
more may retire on or after age 60 with no reduction in their age 65 benefit,
and with a 3/10% reduction in such benefit for each month that retirement
precedes age 60.
AEROSPACE PLAN
The Aerospace Plan covers certain employees who joined the Company in
connection with the Acquisition of HAC from Hercules, and contains provisions
identical to those of the Hercules plan that covered them prior to the
Acquisition. Retirement benefits under the Aerospace Plan are determined under a
final average earnings formula. The formula provides a monthly life annuity
related to years of credited service, average recognized compensation during the
highest five years of credited service, and the participant's primary Social
Security benefit. Participants may elect to receive up to 51% of their benefit
in a lump sum payment. Participants with at least 10 years of credited service
may retire at age 60 with no reduction in their age 65 benefit, and with a
reduced benefit on or after age 55; and participants in the Aerospace Plan
(including its predecessor Hercules plan) since on or before December 31, 1984,
may retire with a reduced
21
<PAGE> 26
benefit on or after age 50. The benefits of participants electing early
retirement are reduced 5% for each year that retirement precedes the age at
which they are entitled to an unreduced benefit, except that this reduction
percentage is decreased for each year of credited service in excess of 30 years.
SUPPLEMENTAL EMPLOYEE RETIREMENT PLANS
Retirement benefits payable from qualified defined benefit plans are
limited by the Internal Revenue Code. Amounts payable under the Retirement Plan
and the Aerospace Plan in excess of such limitations are paid by the Company
pursuant to a nonqualified supplemental employee retirement plan ("SERP"). The
Company has a similar SERP that provides retirement benefits under the prior
final average earnings formula for former Honeywell employees with respect to
deferred incentive compensation that was not considered recognized compensation.
The Company has established a grantor trust under which the Company has set
aside funds to satisfy certain of the obligations of the Company under the
SERPs. If the funds in the trust are insufficient to pay amounts payable
pursuant to the SERPs, the deficiency will be paid by the Company.
ESTIMATED RETIREMENT BENEFITS
The estimated retirement benefit payable annually as a single life annuity
at age 65 to each of the current Named Executive Officers, assuming currently
applicable interest rates, and assuming that the individuals remain employed
until age 65 at their fiscal year 1998 compensation level, including a
Management Compensation Plan annual incentive bonus equal to the average annual
bonus paid to each individual for the three fiscal years ended March 31, 1998,
is as follows: Mr. Schwartz, $53,064; Mr. Bukowick, $327,428; Mr. Meyers,
$143,580; Mr. Ross, $44,946; and Mr. Zimmer, $147,324. See "OTHER PLANS AND
AGREEMENTS WITH EXECUTIVE OFFICERS" below for a description of a supplemental
retirement benefit arrangement with Mr. Schwartz.
CHANGE OF CONTROL ARRANGEMENTS
INCOME SECURITY PLAN
In March 1997, the Board adopted the Alliant Techsystems Inc. Income
Security Plan (the "Income Security Plan"), which is intended to secure the
continued services, dedication and objectivity of management personnel in the
event of a potential change of control (as defined below), so that they are not
hindered or distracted by the resulting personal uncertainties and risks.
Participants in the Income Security Plan include all executive officers. The
Income Security Plan provides that, in the event of a Qualifying Termination (as
defined below) of a participant's employment, the participant will receive (i)
monthly payments of the participant's annual base salary and target annual
incentive bonus from the date of termination through the later of the first
anniversary of the date of termination or the second anniversary (or, in the
case of the Chief Executive Officer, the third anniversary) of the change of
control, subject to reduction by the amount of any compensation received from
another employer; (ii) welfare benefits during the compensation continuation
period, subject to reduction to reflect welfare benefits received from another
employer; (iii) continuation of any applicable executive life insurance benefits
during the compensation continuation period; (iv) reasonable legal fees and
expenses incurred to receive benefits if a court determines that the Company's
denial of such benefits was knowingly wrongful; (v) reimbursement for
outplacement expenses up to 15% of the participant's annual base salary; and
(vi) a gross-up payment necessary to cover any excise taxes payable on benefits
received. In addition, it is a condition to participation in the Income Security
Plan that participants agree that their future stock awards under the Company's
1990 Equity Incentive Plan, referred to below, not be subject to the change of
control provisions of that plan, but that, upon a Qualifying Termination,
unvested stock awards will vest and become exercisable until the earlier of
their normal expiration or the expiration of three years from the date of such
termination. Receipt of benefits is contingent upon the participant not
competing with the Company during the one-year period following the date of such
termination.
The Company estimates, based solely upon readily quantifiable information,
that, if a change of control were to have occurred on the date of this Proxy
Statement, and the employment of any of Messrs. Schwartz,
22
<PAGE> 27
Meyers, Bukowick, Ross or Zimmer were terminated on the date of the change of
control, they would receive, subject to reduction as noted above, aggregate
compensation continuation payments of the following amounts over a two-year (or,
in the case of Mr. Schwartz, three-year) period: Mr. Schwartz, $2,640,000; Mr.
Bukowick, $990,000; Mr. Meyers, $760,000; Mr. Ross, $660,000; and Mr. Zimmer,
$510,000; and if their employment were terminated more than one year (or, in the
case of Mr. Schwartz, two years), but less than two years (or, in the case of
Mr. Schwartz, three years), after the date of the change of control, they would
receive aggregate compensation continuation payments equal to one half (or, in
the case of Mr. Schwartz, one third) of the above amounts. Because the Income
Security Plan provides for some benefits that cannot be presently quantified
(such as welfare benefits), amounts that would actually be payable would be
larger than the amounts specified in the preceding sentence. The above estimates
do not include any additional amounts payable in respect of the excise taxes
referred to above, which amounts, if applicable, may be significant.
Participants' rights under the Income Security Plan are not exclusive and
participants are entitled to termination benefits under any other applicable
arrangement, so long as they do not receive the same type of payment or welfare
benefit under more than one of the Income Security Plan or such other applicable
arrangement.
The Company has established a grantor trust under which the Company will
set aside funds to satisfy the obligations of the Company under the Income
Security Plan in the event of a change of control, or earlier at the discretion
of the Board.
EXECUTIVE COMPENSATION PLAN PROVISIONS
The Management Compensation Plan, pursuant to which annual incentive
compensation is paid to executive officers (see "REPORT OF THE PERSONNEL AND
COMPENSATION COMMITTEE OF THE BOARD ON EXECUTIVE COMPENSATION" above), provides
that, in the event of a change of control during a performance period,
participants are entitled to receive a pro-rata incentive award, based upon the
elapsed portion of the performance period, assuming Company performance that
would result in payment of the target incentive fund.
Under the terms of the Company's 1990 Equity Incentive Plan (the "Equity
Incentive Plan"), upon a change of control, all stock options, whether or not
vested, become exercisable, all shares of restricted Common Stock become fully
vested, and a pro-rata portion of performance share awards becomes payable. In
addition, limited stock appreciation rights ("LSARs") granted in tandem with
stock options become exercisable for a period of 90 days following a change of
control, except for those granted during the six months immediately preceding
the change of control. Upon exercise of an LSAR, a holder may surrender the
underlying option and receive for each share subject to the option cash equal to
the excess of the "change of control value" of a share of Common Stock over the
option's exercise price. The "change of control value" of a share of Common
Stock is equal to the highest fair market value of a share of Common Stock
during the period beginning on the 180th day before the change of control and
ending on the day preceding the exercise of an LSAR or, if greater, the highest
price per share of Common Stock paid in connection with the change of control.
The Equity Incentive Plan provides that all stock options shall be granted in
tandem with LSARs unless otherwise provided in the applicable grant. None of the
stock options currently outstanding has tandem LSARs. See PROPOSAL NO. 2
(APPROVAL OF AMENDED AND RESTATED ALLIANT TECHSYSTEMS INC. 1990 EQUITY INCENTIVE
PLAN) below for information regarding proposed amendments to the Equity
Incentive Plan that would (i) modify the effects of a change of control on
future stock awards to participants in the Income Security Plan, and (ii)
eliminate the granting of LSARs.
Non-vested benefits under the Company's Retirement Plan and 401(k) plans
become fully vested immediately upon a change of control.
DEFINITIONS
For purposes of the executive compensation plans referred to above, "change
of control" means, subject to certain exceptions: an acquisition by any person
of beneficial ownership of 20% (35% in the case of grants under the Equity
Incentive Plan on or after May 25, 1994) or more of either the Common Stock or
the
23
<PAGE> 28
combined voting power of the then outstanding voting securities of the Company;
certain changes of more than 50% in the membership of the Board; stockholder
approval of (i) a merger, reorganization or consolidation which results in the
ownership by the Company's stockholders of 50% (60% in the case of grants under
the Equity Incentive Plan before May 25, 1994) or less of both the then
outstanding common stock, and the combined voting power of the then outstanding
voting securities, of the surviving corporation after the transaction, (ii) a
dissolution or liquidation of the Company or (iii) a disposition of all or
substantially all of the Company's assets. The plans further provide, however,
that no person shall be deemed to own beneficially any securities acquired
directly from the Company pursuant to a written agreement with the Company. See
PROPOSAL NO. 2 (APPROVAL OF AMENDED AND RESTATED ALLIANT TECHSYSTEMS INC. 1990
EQUITY INCENTIVE PLAN) below for information regarding proposed amendments to
the Equity Incentive Plan that would modify the change of control definition
applicable to future stock awards.
For purposes of the Income Security Plan, "change of control" means (i) the
acquisition of more than 50% of the Company's outstanding voting securities,
(ii) a reorganization, merger or consolidation of the Company, or the sale of
the Company's assets, that results in the Company's stockholders owning 50% or
less of the shares of the surviving company or (iii) any other circumstances
that the Board determines to be a change of control; "cause" means (i)
conviction of a felony, or, in certain circumstances, being charged with a
felony or (ii) a determination by the Board that a participant has defrauded the
Company or, in certain circumstances, committed a material breach of the
participant's duties and responsibilities as an officer or employee of the
Company; "Qualifying Termination" means (i) termination of employment within two
years after a change of control (a) by the Company for any reason other than
cause or on account of disability or (b) by the employee upon (1) any reduction
in base salary, incentive bonus target, or the employee's level of welfare
benefits and/or (2) change of the employee's work location by 75 or more miles,
without the employee's consent, or (ii) termination of employment within one
year of a Change Event (as described below) if (a) at the request of a third
party to negotiations or an agreement with regard to a subsequent change of
control, or (b) otherwise in connection with, or in anticipation of, such change
of control; and "Change Event" means (i) certain acquisitions of more than 15%
of the Company's voting securities, (ii) announcement of a third party's intent
to acquire the Company through a tender offer, exchange offer or other
unsolicited proposal or (iii) certain changes in the majority of the Board.
OTHER PLANS AND AGREEMENTS WITH EXECUTIVE OFFICERS
The initial stock option and restricted Common Stock awards under the
Equity Incentive Plan were conditioned upon the employee's agreeing to enter
into an "Employment Restrictions Agreement" that obligates the employee not to
divulge confidential and proprietary business information to third parties and
not to work for a competitor or solicit other employees to leave the Company for
a period of two years following the employee's termination of employment with
the Company. Mr. Zimmer is a party to such an agreement.
The Company currently has indemnification agreements with its executive
officers providing indemnification (identical to that described above under
"ELECTION OF DIRECTORS--COMPENSATION OF DIRECTORS") relating to their service as
officers of the Company.
The Company has agreed to provide Mr. Schwartz with a supplemental
retirement benefit under a SERP, which will have a minimum present value of
$300,000 at the time of his retirement. In addition, the Company has agreed to a
post-retirement consulting and retirement agreement with Mr. Schwartz under
which Mr. Schwartz will receive payments of $250,000 per year for each of the
four years following the date of his retirement, subject to Mr. Schwartz's
agreement not to compete with the Company. During the first two years of such
payments, Mr. Schwartz will be available for such consultations as may be
requested by the Company, subject to time constraints to be determined. In the
event of the death of Mr. Schwartz during the term of these payments, the
remaining payments will be paid to his spouse, if she survives him.
The Company's employment arrangement with Mr. Meyers provides for a minimum
base salary of $240,000 per year, a minimum target annual incentive of $105,000,
Flexible Perquisite Account Program reimbursement up to $12,000 per year,
financial counseling reimbursement up to $6,500 per year, and term life
insurance in the amount of $500,000.
24
<PAGE> 29
Effective October 28, 1997, the Board adopted the Alliant Techsystems Inc.
LSAR Option Loan Program, pursuant to which two executive officers of the
Company, Charles H. Gauck and Daryl L. Zimmer, were granted loans on November 5,
1997 to finance the exercise of employee stock options. The loans, which were
$149,436.03 in the case of Mr. Gauck and $439,273.57 in the case of Mr. Zimmer,
were repaid with interest at the rate of 6% per annum on December 10, 1997. No
other loans have been, or may be, granted under this Program.
PROPOSAL NO. 2
RATIFICATION OF
SELECTION OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the stockholders, the Board, upon its Audit
Committee's recommendation, has selected Deloitte & Touche LLP as independent
accountants to audit the consolidated books and accounts of the Company for the
fiscal year ending March 31, 1999. Deloitte & Touche LLP were the independent
accountants for the Company's business when it was part of Honeywell prior to
the Spin-off and have been independent accountants for the Company since the
Spin-off. A representative of Deloitte & Touche LLP will be present at the
Annual Meeting and will have the opportunity to make a statement and to respond
to appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF
DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS (PROPOSAL NO. 2).
PROPOSAL NO. 3
APPROVAL OF AMENDED AND RESTATED
ALLIANT TECHSYSTEMS INC. 1990 EQUITY INCENTIVE PLAN
INTRODUCTION
On May 11, 1998, the Board approved amendments to the Equity Incentive
Plan, described below, which are reflected in the Amended and Restated Alliant
Techsystems Inc. 1990 Equity Incentive Plan (the "Amended Plan") attached as
Appendix B to this Proxy Statement. These amendments were approved by the Board
subject to stockholder approval of the Amended Plan. Assuming such stockholder
approval at the Annual Meeting on August 4, 1998, the Amended Plan will become
effective on that date (the "Effective Date"). If the amendments are not so
approved, the current provisions of the Equity Incentive Plan will continue in
effect.
BACKGROUND
The Equity Incentive Plan was originally adopted effective September 28,
1990, at the time of the Spin-off, and was amended by the stockholders on March
3, 1995 (the "First Amendment").
The Equity Incentive Plan originally authorized the issuance of 1,000,000
shares of Common Stock in connection with future awards. In addition, 1,000,000
shares were authorized for issuance in connection with stock options awarded in
substitution for Honeywell stock options held by Company employees at the time
of the Spin-off, of which stock options for only 620,679 shares were awarded.
The remaining 379,321 shares covered by this separate substitute award
authorization may not be issued in connection with future awards. The First
Amendment increased the number of shares authorized for issuance in connection
with future awards by 1,000,000.
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<PAGE> 30
As of May 31, 1998, 892,681 shares were reserved for issuance in connection
with outstanding stock option and performance share awards, and 7,554 shares
were available for issuance in connection with future awards, as summarized in
the following table:
<TABLE>
<S> <C>
Shares authorized for issuance:
Substitute awards for Honeywell stock options*............ 620,679
Original authorization for future awards.................. 1,000,000
First Amendment authorization for future awards........... 1,000,000
----------
Total.................................................. 2,620,679
Shares issued/limited stock appreciation rights exercised... (1,720,444)
----------
Shares reserved for issuance................................ 900,235
Shares reserved for issuance in connection with outstanding
awards.................................................... (892,681)
----------
Shares available for issuance in connection with future
awards................................................. 7,554
</TABLE>
- ---------------
* Excludes 379,321 shares not needed for substitute awards that are not
available for issuance.
PROPOSED AMENDMENTS
The substantive amendments (the "Amendments") to the Equity Incentive Plan
contained in the Amended Plan, which are summarized below, accomplish several
things.
First, the number of shares authorized for issuance is increased by 700,000
in order to assure that an adequate number of shares is available for use in
furtherance of the purposes of the Equity Incentive Plan through the granting of
awards intended to:
- provide a means by which key employees can acquire and maintain stock
ownership, thereby strengthening their commitment to the success of the
Company and their desire to remain employed by the Company; and
- attract and employ key employees.
Second, several provisions are deleted or revised because they have never
been used, because a decision has been made not to use them in the future, or
because amendments to Securities and Exchange Commission ("SEC") Rule 16b-3
under the Exchange Act have made them inapplicable, unnecessary or excessively
restrictive; and other provisions are revised to make them consistent with
related provisions of other plans.
Third, the provision relating to amendments is revised to identify the
specific amendments that require stockholder approval.
Finally, provisions containing references to the original adoption date of
the Equity Incentive Plan are revised to delete or update that reference.
The summary of the Amendments below is qualified in its entirety by
reference to the copy of the Amended Plan attached as Appendix B to this Proxy
Statement.
SHARES AUTHORIZED FOR ISSUANCE INCREASED
The number of shares authorized for issuance is increased by 700,000. As a
result, approval of the Amendments would increase from 7,554 to 707,554 the
number of shares available for issuance in connection with future awards.
DISCOUNTED STOCK OPTIONS ELIMINATED
The authority to grant "discounted stock options" is deleted--i.e., the
minimum exercise price of a stock option is increased from 50% to 100% of the
fair market value of the Common Stock on the grant date.
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<PAGE> 31
SUBSTITUTE AWARDS/STOCK OPTION REPRICING ELIMINATED FOR CERTAIN EXECUTIVES
The ability of the administration committee (the "Committee") to cancel,
with the consent of a grantee, an outstanding award and substitute a new award,
including a stock option at a lower price, has been eliminated in the case of
executive officers subject to Section 16 of the Exchange Act ("Section 16
Grantees"), but retained as to all other participants.
LIMITED STOCK APPRECIATION RIGHTS ELIMINATED
The authorization to issue limited stock appreciation rights ("LSARs") is
eliminated. The Equity Incentive Plan currently provides that LSARs shall be
granted in tandem with all stock options, unless otherwise provided in the
applicable grant. None of the stock options currently outstanding was granted
with tandem LSARs. LSARs, if granted, generally permit the holder of the tandem
stock option to exercise the LSAR for a period of 90 days following a change of
control. Upon the exercise of an LSAR, the holder may surrender the underlying
stock option and receive for each share subject to the stock option cash equal
to the excess of the "change of control value" of a share of Common Stock over
the stock option's exercise price. The "change of control value" of a share of
Common Stock is equal to the highest fair market value of a share of Common
Stock during the period beginning on the 180th day before the change of control
and ending on the day preceding the exercise of the LSAR or, if greater, the
highest price per share of Common Stock paid in connection with the change of
control.
PYRAMIDING ELIMINATED
The ability to pay the exercise price of a stock option by the delivery of
shares of Common Stock simultaneously acquired in connection with the exercise
has been eliminated.
AWARD TERM SHORTENED
The maximum term of any award is shortened from 15 years to 10 years.
DEFINITIONS AND RELATED PROVISIONS CONFORMED
Change of Control. The definitions of "change of control" and related terms
applicable in the case of any award made on or after the Effective Date are
changed to be consistent with the definition contained in the Company's Income
Security Plan. See "CHANGE OF CONTROL ARRANGEMENTS--Definitions" under
"EXECUTIVE COMPENSATION" above.
Effects of Change of Control. The effects of a change of control (and
related definitions) applicable in the case of awards granted on or after the
Effective Date to participants in the Income Security Plan are changed to
conform to the provisions of the Income Security Plan. See "CHANGE OF CONTROL
ARRANGEMENTS--Income Security Plan" under "EXECUTIVE COMPENSATION" above.
ELECTIVE SHARE WITHHOLDING FACILITATED
The ability of a grantee to elect the withholding by the Company of a
portion of the shares of Common Stock otherwise deliverable upon the exercise or
payment of an award or upon restricted stock becoming nonforfeitable to pay
applicable withholding taxes is no longer contingent upon prior approval of the
Committee; but the Committee may still restrict the use of elective withholding.
AMENDMENTS REQUIRING STOCKHOLDER APPROVAL IDENTIFIED
The Board's authority to adopt amendments without stockholder approval is
specifically eliminated in the case of any amendment that would:
- except as permitted by the "anti-dilution" provisions, increase (i) the
aggregate number of shares authorized for issuance, or (ii) the maximum
number of stock appreciation rights (250,000) and performance shares
(250,000) that may be issued;
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<PAGE> 32
- increase the limitation on the maximum number of shares that may be
covered by awards to any one grantee in any calendar year (250,000);
- decrease the minimum stock option exercise price below 100% of the fair
market value of the Common Stock on the grant date; or
- eliminate the restriction against granting substitute awards to Section
16 Grantees.
In addition, stockholder approval of an amendment is required to the extent
required by applicable law or national securities exchange regulation; and any
amendment that would adversely affect any rights of any grantee will not be
effective as to any previously granted award without the grantee's consent.
INCENTIVE STOCK OPTIONS GRANT AUTHORITY EXTENDED
The last date as of which incentive stock options may be granted is changed
from 10 years after the original Equity Incentive Plan adoption date (September
28, 1990) to 10 years after the Effective Date.
PLAN TERMINATION DATE ELIMINATED
The termination date of the Equity Incentive Plan is extended from 10 years
after the original Equity Incentive Plan adoption date (September 28, 1990)
until such date as the Board may determine.
OTHER CHANGES
The following provisions are eliminated:
- the requirement that membership on the Committee be subject to such
limitations as the Board deems appropriate to permit transactions in
Common Stock to be exempt from liability under Section 16(b) of the
Exchange Act;
- the requirement that an opinion of counsel or a "no action" letter from
the SEC staff be secured in connection with the grant of "reload options"
and the use of Common Stock or restricted stock in payment of any
purchase price for restricted stock;
- the requirement that any per share purchase price(1) of restricted stock
granted to Section 16 Grantees be at least 50% of the fair market value
of the Common Stock on the grant date;
- restrictions on the timing of elective share withholding; and
- the requirement for stockholder approval of amendments necessary to
permit transactions in Common Stock to be exempt from liability under
Exchange Act Section 16(b).
OTHER PRINCIPAL FEATURES
Set forth below is a summary of other principal features not summarized
above under "PROPOSED AMENDMENTS." This summary is qualified in its entirety by
reference to the copy of the Amended Plan attached as Appendix B to this Proxy
Statement.
ELIGIBILITY
All employees and directors of the Company and its subsidiaries are
eligible to be granted awards. The Company currently has approximately 6,600
employees and directors. The Committee determines which employees are to receive
awards and the terms of those awards. The Committee's Section 16 Subcommittee
approves all awards to Section 16 Grantees. No grantee may be granted awards
identified with more than 250,000 shares of Common Stock in any calendar year.
Approximately 300 employees (but no directors) hold outstanding awards.
- ---------------
1 All restricted stock awarded to date has been for no payment, except for
the par value ($.01 per share) when treasury shares were not used. As a
result, the requirement being eliminated has never been applicable. 28
<PAGE> 33
UNDERLYING SECURITIES
The securities underlying awards are shares of Common Stock. As of June 24,
1998, the Common Stock had a fair market value of $62.6875 per share.
TYPES OF AWARDS PERMITTED
Options. Stock options allow participants to purchase Common Stock at an
exercise price determined by the Committee. Options become exercisable in one or
more installments beginning on a date specified by the Committee. The Committee
may accelerate the exercisability of any option. Options may be granted as
incentive stock options subject to the limitations of Section 422 of the
Internal Revenue Code.
Restricted Stock. Restricted stock is shares of Common Stock subject to
such restrictions as determined by the Committee. Restricted stock may be
subject to forfeiture if conditions established by the Committee are not
satisfied and is nontransferable until the restrictions imposed by such
conditions lapse. Before the grant, the Committee determines the purchase price,
if any, of such shares and the restrictions applicable to such shares. If a
grantee's shares of restricted stock are forfeited, the grantee is required to
sell such shares to the Company at the lesser of the purchase price, if any,
paid by the grantee or the fair market value of the shares on the date of such
forfeiture. The Committee may accelerate the time at which the restrictions
lapse, or remove or, with the consent of the grantee, modify the restrictions.
Stock Appreciation Rights. Stock appreciation rights provide the grantee,
upon exercise, a benefit equal to the difference between the fair market value
of one share of Common Stock on the date of the exercise and (i) in the case of
a stock appreciation right identified with a share of Common Stock subject to an
option, the option exercise price of such option or such higher price specified
in the grant or (ii) in the case of any other stock appreciation right, the fair
market value of a share of Common Stock on the grant date. Stock appreciation
rights may be granted alone or with options or shares of restricted stock. Stock
appreciation rights become exercisable not earlier than the first anniversary of
the date of grant. The Committee may accelerate the exercisability of any stock
appreciation right. Benefits upon the exercise of a stock appreciation right are
payable in cash unless the Committee determines that the benefits be paid wholly
or partly in Common Stock.
Performance Shares and Performance Units. Performance shares and
performance units provide a benefit if performance goals determined by the
Committee are achieved during the measuring period, which may not be less than
one year nor more than seven years. The Committee, before the grant of a
performance share or performance unit, determines the performance goals and
measuring period and assigns a performance percentage (which in the case of
performance units can exceed 100%) to each level of attainment of the
performance goals during the measuring period. The Committee may modify
performance goals at any time.
Performance share benefits are paid to the grantee after the end of the
applicable measuring period. The benefit for each performance share equals one
share of Common Stock multiplied by the "performance percentage" attained during
the measuring period for the performance share. Performance share benefits are
payable in shares of Common Stock unless the Committee determines that cash be
paid in lieu of some or all of such shares.
Performance units become exercisable commencing on the later of the first
anniversary of the date the performance unit was granted or the first day after
the end of the applicable measuring period. The benefit for each performance
unit exercised equals the fair market value of a share of Common Stock on the
date of grant of the performance unit multiplied by the "performance percentage"
attained during the measuring period for the performance unit. Performance unit
benefits are payable in cash unless the Committee determines that a benefit be
paid wholly or partly in shares of Common Stock. Performance units may be
granted alone or identified with shares of Common Stock subject to an option or
shares of restricted stock of the grantee.
ADMINISTRATION
Plan administration is the responsibility of a committee of not less than
three non-employee directors. Administration is currently the responsibility of
the Board's Personnel and Compensation Committee. Subject to the plan's
provisions, the Committee has broad authority to, among other things, determine
the amount of
29
<PAGE> 34
grants and when they are made; to interpret and to adopt rules relating to, the
plan; to determine the terms of the agreements relating to grants and, with the
consent of the grantee, to modify any such agreement; and to cancel existing
awards and to substitute new ones.
OTHER PROVISIONS
Payment. Payment of the option exercise price or the purchase price of
restricted stock may be made in cash or through the exchange of shares of Common
Stock owned by the grantee. The Committee may allow a grantee to defer payment
of the option exercise price, the purchase price of restricted stock or any
taxes associated with a benefit which is a non-cash benefit at the time it is
taxable, in accordance with such interest rates and such other terms and
conditions as it may determine, or may cause the Company to guarantee a loan to
the grantee in an amount equal to all or part of the option exercise price, the
purchase price of restricted stock and related taxes.
Reload Options. Subject to certain limitations, the Committee may provide
for automatic grants of additional options for shares of Common Stock equal to
the number of shares which a grantee has used to pay the exercise price of a
previously granted option and to satisfy a withholding tax liability in
connection with an option exercise.
Transferability. Unexercised options, stock appreciation rights,
performance shares and performance units may not be transferred except in
certain circumstances by will or by the laws of descent and distribution.
Anti-dilution. The aggregate number of shares of Common Stock available for
issuance, the number of shares covered by an award, the exercise price of
options, and the fair market values used to determine stock appreciation rights
and performance unit benefits, shall be adjusted by the Committee to reflect any
stock dividend, stock split, share combination, recapitalization, merger,
consolidation, asset spin-off, reorganization or similar event of or by the
Company.
Change of Control. See "CHANGE OF CONTROL ARRANGEMENTS" under "EXECUTIVE
COMPENSATION" above.
FEDERAL INCOME TAX CONSEQUENCES
Upon the grant of an award, the grantee does not realize any taxable income
and no deduction is available to the Company. Any cash received by a grantee in
connection with the exercise of a stock appreciation right or performance unit
or the payment of a performance share, and the fair market value of any shares
of Common Stock received in connection with the exercise of a stock appreciation
right or a performance unit or the payment of a performance share is taxable as
ordinary income to the grantee. Generally, a grantee recognizes taxable income
upon the exercise of an option, other than an incentive stock option, in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the option price.
In the case of an incentive stock option, the grantee incurs no income tax
liability upon exercise, other than possible alternative minimum tax liability.
The Company is not entitled to a tax deduction upon the grant or exercise of an
incentive stock option, or the subsequent transfer of shares acquired upon such
exercise, if the grantee holds such shares for at least two years after the
grant of such incentive stock option and one year after the receipt of the
shares by the grantee. If, however, the grantee transfers shares received upon
the exercise of an incentive stock option during such holding period, the
grantee recognizes taxable income when the transfer occurs.
The fair market value of restricted stock in excess of the purchase price,
if any, paid by the grantee is taxable as ordinary income to the grantee when
the restrictions lapse. However, if the grantee is not prohibited by the
Committee from electing to be taxed on such value on the date of grant and the
grantee elects such tax treatment, the grantee is taxed on such amount on the
date of grant.
The Company is entitled to a deduction at the time the grantee is taxed in
the amount of the grantee's taxable income, except that, in the case of the
Chief Executive Officer and the other four highest paid
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<PAGE> 35
executive officers, the Company may be entitled to such a deduction only to the
extent that total compensation to such grantee does not exceed $1 million in any
tax year.
The foregoing summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences.
NEW PLAN BENEFITS
FUTURE BENEFITS
Awards are made at the discretion of the Committee and, therefore, are not
generally determinable prior to actual grants. No awards have been made
contingent upon approval of the Amendments by the stockholders. Awards are
expected to be considered and made by the Committee after it is determined
whether the stockholders approve the Amendments.
FISCAL YEAR 1998 AWARDS
Option grants and long-term incentive awards to the Named Executive
Officers during fiscal year 1998 are set forth in the tables labeled,
respectively, "OPTION GRANTS IN LAST FISCAL YEAR" and "LONG-TERM INCENTIVE
PLANS--AWARDS IN LAST FISCAL YEAR" under "EXECUTIVE COMPENSATION" above.
Set forth in the following table is information regarding awards under the
Equity Incentive Plan during fiscal year 1998 to certain other groups.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NUMBER OF PERFORMANCE SHARES OF
GROUP STOCK OPTIONS SHARES RESTRICTED STOCK
----- ------------- ----------- ----------------
<S> <C> <C> <C>
All current executive officers......................... 39,500 10,200 -0-
All current non-employee directors..................... -0- -0- -0-
All employees who are not executive officers........... 100,150 -0- 24,775
</TABLE>
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED AND RESTATED
ALLIANT TECHSYSTEMS INC. 1990 EQUITY INCENTIVE PLAN (PROPOSAL NO. 3).
PROPOSAL NO. 4
STOCKHOLDER PROPOSAL
Eight stockholders, claiming beneficial ownership of an aggregate of 345
shares of Common Stock, have submitted an identical proposal for consideration
by the stockholders at the Annual Meeting. The names and addresses of the
proponents of the following proposal and the number of shares of Common Stock
owned by each are set forth on Appendix A to this Proxy Statement.
PROPOSAL AND SUPPORTING STATEMENT
WHEREAS in fiscal year 1996 Alliant Techsystems ranked number 28 among the
top 100 Department of Defense contractors with contract awards over $491,600,000
and number 43 in DOD foreign military sales totaling $16,403,000.
WHEREAS the proponents believe that Alliant Techsystems should establish
criteria to guide management in bidding for and implementing military contracts.
WHEREAS we believe that economic decision making has both ethical and
financial components, and that our company's ethical responsibilities include
analyzing the effects of its decisions with respect to employees, communities,
nations, and the world's people.
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<PAGE> 36
WHEREAS we believe decisions to develop and to produce weapons can have
grave consequences to the lives and/or freedoms of people worldwide if the
company has not considered its ethical responsibilities.
RESOLVED the shareholders request the Board of Directors to establish a
committee to research and to develop criteria for bidding, acceptance and
implementation of military contracts and to report the results of its study to
shareholders prior to the 1999 annual meeting. Proprietary information may be
omitted and cost limited to a reasonable amount.
Supporting Statement
We believe that the production, sale or use of certain weapons is immoral.
As early as 1907, the Hague Convention (Treaty) Regulations provided that "The
right of belligerents to adopt means of injuring the enemy is not unlimited"
(Article 22) and that it is "especially forbidden", among other things, "to
employ arms, projectiles or material calculated to cause unnecessary suffering"
(Article 23). Consequently, the civilized world has, by treaty, banned poison
gas and, more recently, biological and chemical weapons. The Ottawa Treaty,
December 1997, banned antipersonnel landmines. We believe that these various
weapons, as well as nuclear weapons, are unacceptable because they can cause
widespread, indiscriminate death or death to non-combatants. We therefore
believe that arms manufacturers should establish their own criteria to screen
the contracts which they will accept. This proposal does not dictate what those
criteria should be, but merely asks Alliant to establish some criteria.
We believe all human beings are called to seek justice and peace. An ethic
of care for the earth must include respect for humanity and for creation. We
believe corporate social responsibility in a successful free enterprise society
demands ethical reflection and action upon activities that are socially and
economically useful as well as financially profitable. Therefore, we recommend
Board study include these topics:
- A review of Alliant's basic canons of ethical business practice and
long-term environmental impact
- Lobbying and marketing activities, both in the U.S. and abroad, including
costs
- Arms sales to governments that repress their citizens and the connection
between arms sales and geographical or political instability
- Transfers of technology, including offset agreements, licensing, and
co-production agreements with foreign governments
- Sales of weapons and dual use parts, technology, and components to
foreign governments, other companies and individuals
- Contracts for anti-personnel landmines and components, including
self-destruct landmines.
The criteria proposed by the committee should include guidance for company
management and employees regarding these subjects.
BOARD STATEMENT IN OPPOSITION TO THE STOCKHOLDER PROPOSAL
The Company's business includes the development and production of products
under contracts with the U.S. Department of Defense ("DoD"). These products are
deemed appropriate and necessary for the defense and national security of the
United States by the DoD and the U.S. Congress that authorizes the funds for the
acquisition of these products. Products sold to allies of the United States are
approved by the U.S. government by virtue of the fact that their sale is
pursuant to export licenses granted by the U.S. government. The Company supports
these stringent controls on defense contractor international sales and complies
strictly with all applicable laws and regulations.
The Company maintains an environmental management program and an ethics
program that includes standards for business ethics and conduct. The Company
strives to ensure that all of the Company's operations adhere to the highest
standards of responsible behavior required by the policies imposed by these
programs. The Board, directly or through one of its committees, receives reports
on the Company's compliance with
32
<PAGE> 37
these policies. The Board also reviews the Company's strategic plan and receives
updates on the performance of its businesses against the plan. These reviews
provide the Board with a detailed understanding of the business direction and
pursuits of the Company. Through this oversight process the Board is also in a
position to monitor the product development, marketing and sales activities of
the Company and impose any criteria for, or limitations on, the Company's
activities that the Board deems necessary or appropriate. The Board believes
that this process is consistent with the Board's oversight and monitoring
responsibilities and is preferable to the involvement of the Board in the
establishment of bidding criteria that are best left, in the first instance, to
the Company's management.
The Board also believes that the Company's responsibility is to help the
DoD achieve its national security strategy. While reasonable people may disagree
as to the appropriateness of some of the products deemed necessary by the DoD to
defend and provide for the national security of the United States, the Board
believes that the Company's proxy statement and the Annual Meeting are not
proper forums for this debate. Views on this issue are better addressed to the
U.S. government and elected representatives who are ultimately responsible for
determining national defense and security policy and authorizing the funding for
product acquisition.
The Board believes that the efforts of the proposed Board committee with
the detailed charter set forth in the above proposal and supporting statement
would duplicate the conscientious efforts of the nation's political and military
leaders who are charged with the responsibility for determining the products
deemed necessary for the defense and national security of the United States. In
the Board's opinion, these leaders should, during the discharge of their
responsibilities, be accountable for considering the types of ethical and moral
issues of concern to the proponents of the above resolution.
THE BOARD RECOMMENDS A VOTE AGAINST THE ABOVE STOCKHOLDER PROPOSAL
(PROPOSAL NO. 4).
ADDITIONAL INFORMATION
FUTURE STOCKHOLDER PROPOSALS
The Company's 1999 annual meeting of stockholders is presently expected to
be held on August 3, 1999.
STOCKHOLDER PROPOSALS INTENDED TO BE INCLUDED IN THE COMPANY'S PROXY STATEMENT;
VOTING ON SUCH PROPOSALS
Any stockholder proposal intended to be included in the Company's proxy
statement for the 1999 annual meeting pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 (the "Exchange Act") must be received by the
Company no later than March 4, 1999. Any stockholder proposal included in the
Company's proxy statement will also be included on the Company's form of proxy
so that stockholders can indicate the manner in which they wish to vote their
shares on the proposal.
DISCRETIONARY VOTING ON OTHER STOCKHOLDER PROPOSALS
Stockholder proposals not included in the Company's proxy statement for the
1999 annual meeting will be eligible for presentation at the 1999 annual meeting
only if they comply with the requirements of the Company's By-Laws described in
the next paragraph. Under those requirements, such stockholder proposals will be
ineligible for presentation at the 1999 annual meeting if they are received by
the Company after June 14, 1999. The persons named in the Board's proxy for the
1999 annual meeting will be entitled to exercise the discretionary voting
authority conferred by such proxy on an eligible proposal received on or prior
to June 14, 1999, under the circumstances specified in Rule 14a-4(c) under the
Exchange Act.
Stockholder proposals not included in the Company's proxy statement for an
annual meeting will be ineligible for presentation at the annual meeting unless
the stockholder gives timely notice of intent to present the proposal as
required by the Company's By-Laws. In order to be timely, the stockholder's
notice must be in writing and received by the Company (attention: Corporate
Secretary) at its principal executive office at least 50 days, but not more than
75 days, prior to the annual meeting. However, if less than 65 days' notice or
prior
33
<PAGE> 38
publication of the date of the annual meeting is given or made to stockholders,
notice of the stockholder proposal must be so received by the close of business
on the 15th day following the date on which the date of the annual meeting was
mailed or publicly disclosed. The stockholder's notice must include the
following information regarding each matter that the stockholder proposes to
bring before the annual meeting: (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting; (ii) the name and record address of the
stockholder proposing the business; (iii) the class and number of shares of
capital stock of the Company which are beneficially owned by the stockholder;
and (iv) any material interest of the stockholder in the business to be
presented.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than ten percent of the Company's
Common Stock to file with the Securities and Exchange Commission and the New
York Stock Exchange, and to provide to the Company copies of, initial reports of
Common Stock (and related derivative security) ownership on Form 3 and periodic
reports of changes of Common Stock (and related derivative security) ownership
on Forms 4 and 5. Based solely upon a review of the copies of such reports
furnished to the Company, or written representations that certain reports were
not required, the Company believes that all such reports required to be filed
during fiscal year 1998 were filed in compliance with Section 16(a).
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR FISCAL YEAR 1998 WILL BE PROVIDED TO
STOCKHOLDERS WITHOUT CHARGE UPON RECEIPT OF A WRITTEN REQUEST TO: INVESTOR
RELATIONS, MN11-2015, ALLIANT TECHSYSTEMS INC., 600 SECOND STREET N.E., HOPKINS,
MN 55343-8384.
By Order of the Board of Directors,
CHARLES H. GAUCK
Charles H. Gauck, Secretary
July 2, 1998
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<PAGE> 39
APPENDIX A
PROPONENTS OF STOCKHOLDER RESOLUTION
<TABLE>
<CAPTION>
NAME AND ADDRESS OF PROPONENT SHARES
----------------------------- ------
<S> <C>
Academy of Our Lady of Lourdes.............................. 25
(a/k/a/ Sisters of St. Francis)
Box 4900
Assisi Heights
Rochester, MN 55903
Catholic Foreign Mission Society of America, Inc............ 30
(a/k/a/ Maryknoll Fathers and Brothers)
P.O. Box 306
Maryknoll, NY 10545-0306
Franciscan Sisters of Little Falls, Minnesota............... 28
116 Eighth Avenue Southeast
Little Falls, MN 56345-3597
Franciscan Sisters of Perpetual Adoration................... 20
St. Rose Convent
912 Market St.
La Crosse, WI 54601-8800
School Sisters of Notre Dame, Baltimore Province............ 100
6401 North Charles Street
Baltimore, MD 21212-1099
School Sisters of Notre Dame Cooperative Investment Fund.... 52
336 East Ripa Ave.
St. Louis, MO 63125
School Sisters of Notre Dame, Milwaukee Province............ 50
13105 Watertown Plank Road
Elm Grove, WI 53122-2291
School Sisters of Notre Dame, St. Louis..................... 40
320 East Ripa Avenue
St. Louis, MO 63125-2897
AGGREGATE OWNERSHIP......................................... 345
</TABLE>
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<PAGE> 40
APPENDIX B
AMENDED AND RESTATED
ALLIANT TECHSYSTEMS INC.
1990 EQUITY INCENTIVE PLAN
AMENDMENT AND RESTATEMENT AS OF MAY 11, 1998
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THE PLAN
The Company hereby establishes the Alliant Techsystems Inc. 1990 Equity
Incentive Plan (as set forth herein and from time to time amended, the "Plan").
This amendment and restatement of the Plan, as of May 11, 1998, shall be
effective on the date (the "Restatement Effective Date") the amendments to the
Plan contained herein are approved by the affirmative vote of a majority of the
shares of Stock represented and entitled to vote at a meeting of the
stockholders of the Company within twelve months of May 11, 1998.
1. PURPOSE
The primary purpose of the Plan is to provide a means by which key
employees of the Company and its Subsidiaries can acquire and maintain stock
ownership, thereby strengthening their commitment to the success of the Company
and its Subsidiaries and their desire to remain employed by the Company and its
Subsidiaries. The Plan also is intended to attract and employ key employees and
directors of the Company and to provide such employees and directors with
additional incentive and reward opportunities designed to encourage them to
enhance the profitable growth of the Company and its Subsidiaries.
2. DEFINITIONS
As used in the Plan, terms defined parenthetically immediately after their
use shall have the respective meanings provided by such definitions and the
terms defined in Exhibit A hereto shall have the respective meanings provided by
such definitions (such meanings to be equally applicable to both the singular
and plural forms of the terms defined).
3. SCOPE OF THE PLAN
(a) An aggregate of 2,700,000 shares of Stock is hereby made available and
is reserved for delivery on account of the exercise of Awards and payment of
benefits in connection with Awards. In addition, an aggregate of up to 1,000,000
shares of Stock is hereby made available and is reserved for delivery upon
exercise of options granted pursuant to Article 16(b) to replace unexercised
Honeywell Options. Subject to the foregoing limits, shares of Stock held as
treasury shares by the Company may be used for or in connection with Awards.
(b) Subject to (i) Article 3(a) as to the maximum number of shares of Stock
available for delivery in connection with Awards and (ii) Article 3(c), up to
250,000 stock appreciation rights and 250,000 performance shares may be issued
under the Plan.
(c) If and to the extent an Award shall expire or terminate for any reason
without having been exercised in full (including, without limitation, a
cancellation and regrant of an Award pursuant to Article 4(c) (vi)), or shall be
forfeited, the shares of Stock, stock appreciation rights and performance shares
associated with such Award shall become available for other Awards.
4. ADMINISTRATION
(a) Subject to Article 4(b), the Plan shall be administered by the
Committee, which shall consist of not less than three persons who are directors
of the Company and not employees of the Company or any of its Subsidiaries.
(b) The Board may, in its discretion, delegate to another committee of the
Board any or all of the authority and responsibility of the Committee with
respect to Awards to Grantees who are not Section 16 Grantees at the time any
such delegated authority or responsibility is exercised. Such other committee
may consist of one or more directors who may, but need not be, officers or
employees of the Company or of any of its Subsidiaries. To the extent that the
Board has delegated the authority and responsibility of the Committee to such
other committee, all references to the Committee in the Plan shall be to such
other committee.
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(c) The Committee shall have full and final authority, in its discretion,
but subject to the express provisions of the Plan, as follows:
(i) to grant Awards,
(ii) to determine (A) when Awards may be granted, (B) whether or not
specific stock appreciation rights shall be identified with a specific
option or specific shares of restricted stock and, if so, whether they
shall be exercisable cumulatively or in tandem with such options or
restricted stock, and (C) whether or not specific performance units shall
be identified with a specific option or specific shares of restricted stock
and, if so, whether they shall be exercisable cumulatively or in tandem
with such options or restricted stock,
(iii) to interpret the Plan and to make all determinations necessary
or advisable for the administration of the Plan,
(iv) to prescribe, amend, and rescind rules relating to the Plan,
including, without limitation, rules with respect to the exercisability and
nonforfeitability of Awards upon the Termination of Employment of a
Grantee,
(v) to determine the terms and provisions of the written agreements by
which all Awards shall be granted ("Award Agreements") and, with the
consent of the Grantee, to modify any such Award Agreement,
(vi) subject to Article 16(a), to cancel, with the consent of the
Grantee, outstanding Awards, and to grant new Awards in substitution
therefor,
(vii) to accelerate the exercisability of, and to accelerate or waive
any or all of the restrictions and conditions applicable to, any Award,
(viii) to make such adjustments or modifications to Awards to Grantees
working outside the United States as are necessary and advisable to fulfill
the purposes of the Plan, and
(ix) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the
Committee may, before or concurrently with the grant thereof, deem
appropriate, including, without limitation, requiring simultaneous exercise
of related identified options, stock appreciation rights, performance
units, and limiting the percentage of options, stock appreciation rights,
and performance units which may from time to time be exercised by a
Grantee.
The determination of the Committee on all matters relating to the Plan or
any Award Agreement shall be conclusive and final. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Award.
5. ELIGIBILITY
Awards may be granted to any employee or director of the Company or any of
its Subsidiaries. In selecting the individuals to whom Awards may be granted, as
well as in determining the number of shares of Stock subject to, and the other
terms and conditions applicable to, each Award, the Committee shall take into
consideration such factors as it deems relevant in promoting the purposes of the
Plan.
6. CONDITIONS TO GRANTS
(a) General Conditions.
(i) The Grant Date of an Award shall be the date on which the
Committee grants the Award or such later date as specified in advance by
the Committee.
(ii) The term of each Award (subject to Articles 6(c) and 6(d) with
respect to incentive stock options and Reload Options, respectively) shall
be a period of not more than 10 years from the Grant Date, and shall be
subject to earlier termination as herein provided.
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(iii) A Grantee may, if otherwise eligible, be granted additional
Awards in any combination; provided that no Grantee may be granted Awards
identified with more than 250,000 shares of Stock in any calendar year.
(iv) The Committee may grant Awards with terms and conditions which
differ among the Grantees thereof. To the extent not set forth in the Plan,
the terms and conditions of each Award shall be set forth in an Award
Agreement.
(b) Grant of Options and Option Price. No later than the Grant Date of any
option, the Committee shall determine the Option Price; provided that the Option
Price (i) shall not be less than 100% of the Fair Market Value of the Stock on
the Grant Date and (ii) unless such option relates to treasury shares, shall not
be less than the par value of the Stock.
(c) Grant of Incentive Stock Options. At the time of the grant of any
option, the Committee may designate that such option shall be made subject to
additional restrictions to permit it to qualify as an "incentive stock option"
under the requirements of Section 422 of the Internal Revenue Code. Any option
designated as an incentive stock option:
(i) shall have an Option Price of (A) not less than 100% of the Fair
Market Value of the Stock on the Grant Date or (B) in the case of a 10%
Owner, not less than 110% of the Fair Market Value of the Stock on the
Grant Date;
(ii) shall be for a period of not more than 10 years (five years, in
the case of a 10% Owner) from the Grant Date, and shall be subject to
earlier termination as provided herein or in the applicable Award
Agreement;
(iii) shall not have an aggregate Fair Market Value (determined for
each incentive stock option at its Grant Date) of Stock with respect to
which incentive stock options are exercisable for the first time by such
Grantee during any calendar year (under the Plan and any other employee
stock option plan of the Grantee's employer or any parent or subsidiary
thereof ("Other Plans")), determined in accordance with the provisions of
Section 422 of the Internal Revenue Code, which exceeds $100,000 (the
"$100,000 Limit");
(iv) shall, if the aggregate Fair Market Value of Stock (determined on
the Grant Date) with respect to all incentive stock options previously
granted under the Plan and any Other Plans ("Prior Grants") and any
incentive stock options under such grant (the "Current Grant") which are
exercisable for the first time during any calendar year would exceed the
$100,000 Limit, be exercisable as follows:
(A) the portion of the Current Grant exercisable for the first time
by the Grantee during any calendar year which would be, when added to
any portions of any Prior Grants exercisable for the first time by the
Grantee during such calendar year with respect to stock which would have
an aggregate Fair Market Value (determined as of the respective Grant
Date for such options) in excess of the $100,000 Limit shall,
notwithstanding the terms of the Current Grant, be exercisable for the
first time by the Grantee in the first subsequent calendar year or years
in which it could be exercisable for the first time by the Grantee when
added to all Prior Grants without exceeding the $100,000 Limit; and
(B) if, viewed as of the date of the Current Grant, any portion of
a Current Grant could not be exercised under the provisions of the
immediately preceding sentence during any calendar year commencing with
the calendar year in which it is first exercisable through and including
the last calendar year in which it may by its terms be exercised, such
portion of the Current Grant shall not be an incentive stock option, but
shall be exercisable as a separate option at such date or dates as are
provided in the Current Grant;
(v) shall be granted within 10 years from the Restatement Effective
Date; and
(vi) shall require the Grantee to notify the Committee of any
disposition of any Stock issued pursuant to the exercise of the incentive
stock option under the circumstances described in
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<PAGE> 44
Section 421(b) of the Internal Revenue Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.
Notwithstanding the foregoing and Article 4(c)(v), the Committee may take any
action with respect to any option, including but not limited to an incentive
stock option, without the consent of the Grantee, in order to prevent such
option from being treated as an incentive stock option.
(d) Grant of Reload Options. The Committee may from time to time, in its
discretion, adopt a policy, which policy shall not remain in effect for longer
than 12 months at a time, but which may be adopted for successive 12-month
periods, under which each Grantee who exercises while the policy is in effect an
option for shares of Stock which have a Fair Market Value equal to not less than
100% of the Option Price for such options (or such greater percentage set forth
in the policy) ("Exercised Options") and paid the Option Price with shares of
Stock shall be granted, subject to Article 3, additional options ("Reload
Options") in an amount equal to the sum ("Reload Number") of the number of
shares of Stock tendered to exercise the Exercised Options plus, if so provided
by the Committee, the number of shares of Stock, if any, retained by the Company
in connection with the exercise of the Exercised Options to satisfy any federal,
state or local tax withholding requirements.
Reload Options shall be subject to the following terms and conditions:
(i) the Grant Date for each Reload Option shall be the date of
exercise of the Exercised Option to which it relates;
(ii) the Reload Option may be exercised at any time during the
unexpired term of the Exercised Option (subject to earlier termination
thereof as provided in the Plan and in the applicable Award Agreement); and
(iii) the terms of the Reload Option shall be the same as the terms of
the Exercised Option to which it relates, except that (A) the Option Price
shall be the Fair Market Value of the Stock on the Grant Date of the Reload
Option and (B) no Reload Option may be exercised within one year from the
Grant Date thereof.
(e) Grant of Shares of Restricted Stock.
(i) Before the grant of any shares of restricted stock, the Committee
shall determine, in its discretion:
(A) whether the certificates for such shares shall be delivered to
the Grantee or held (together with a stock power executed in blank by
the Grantee) in escrow by the Secretary of the Company until such shares
become nonforfeitable or are forfeited,
(B) the per share purchase price of such shares (which, subject to
clauses (1) and (2) of this sentence, may be zero), and
(C) the restrictions applicable to such grant;
provided, however, that the per share purchase price of all such shares
(other than treasury shares) shall be greater than or equal to the par
value of such shares.
(ii) Payment of the purchase price (if greater than zero) for shares
of restricted stock shall be made in full by the Grantee before the
delivery of such shares and, in any event, no later than 10 days after the
Grant Date for such shares. Such payment may, at the election of the
Grantee, be made in any one or any combination of the following:
(A) cash,
(B) Stock valued at its Fair Market Value on the business day next
preceding the date of payment, or
(C) with the approval of the Committee, shares of restricted stock,
each valued at the Fair Market Value of a share of Stock on the business
day next preceding the date of payment;
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<PAGE> 45
provided that:
(1) in the discretion of the Committee and to the extent permitted
by law, payment may also be made in accordance with Article 11; and
(2) if the purchase price for restricted stock ("New Restricted
Stock") is paid with shares of restricted stock ("Old Restricted
Stock"), the restrictions applicable to the New Restricted Stock shall
be the same as if the Grantee had paid for the New Restricted Stock in
cash unless, in the judgment of the Committee, the Old Restricted Stock
was subject to a greater risk of forfeiture, in which case a number of
shares of New Restricted Stock equal to the number of shares of Old
Restricted Stock tendered in payment for New Restricted Stock shall be
subject to the same restrictions as the Old Restricted Stock, determined
immediately before such payment.
(iii) The Committee may, but need not, provide that all or any portion
of a Grantee's Award of restricted stock shall be forfeited:
(A) upon the Grantee's Termination of Employment within a specified
time period after the Grant Date, or
(B) if the Company or the Grantee does not achieve specified
performance goals within a specified time period after the Grant Date
and before the Grantee's Termination of Employment.
(iv) If a share of restricted stock is forfeited, then:
(A) the Grantee shall be deemed to have resold such share of
restricted stock to the Company at the lesser of (1) the purchase price
paid by the Grantee (such purchase price shall be deemed to be zero
dollars ($0) if no purchase price was paid) or (2) the Fair Market Value
of a share of Stock on the date of such forfeiture;
(B) the Company shall pay to the Grantee the amount determined
under clause (A) of this sentence as soon as is administratively
practical; and
(C) such share of restricted stock shall cease to be outstanding,
and shall no longer confer on the Grantee thereof any rights as a
stockholder of the Company, from and after the date of the Company's
tender of the payment specified in clause (B) of this sentence.
(v) Any share of restricted stock shall bear an appropriate legend
specifying that such share is non-transferable and subject to the
restrictions set forth in the Plan. If any shares of restricted stock
become nonforfeitable, the Company shall cause certificates for such shares
to be issued or reissued without such legend.
(f) Grant of Stock Appreciation Rights. When granted, stock appreciation
rights may, but need not, be identified with shares of Stock subject to a
specific option or specific shares of restricted stock of the Grantee (including
any option or shares of restricted stock granted on or before the Grant Date of
the stock appreciation rights) in a number equal to or different from the number
of stock appreciation rights so granted. If stock appreciation rights are
identified with shares of Stock subject to an option or with shares of
restricted stock, then, unless otherwise provided in the applicable Award
Agreement, the Grantee's associated stock appreciation rights shall terminate
upon (i) the expiration, termination, forfeiture, or cancellation of such option
or shares of restricted stock, (ii) the purchase of shares of Stock subject to
such option, or (iii) the nonforfeitability of such shares of restricted stock,
as the case may be.
(g) Grant of Performance Units and Performance Shares.
(i) Before the grant of any performance unit or performance share, the
Committee shall:
(A) determine performance goals applicable to such grant,
(B) designate a period, of not less than one year nor more than
seven years, for the measurement of the extent to which performance
goals are attained (the "Measuring Period"), and
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<PAGE> 46
(C) assign a "Performance Percentage" to each level of attainment
of performance goals during the Measuring Period, with the percentage
applicable to minimum attainment being zero percent (0%) and the
percentage applicable to maximum attainment to be determined by the
Committee from time to time (but not to exceed 100% in the case of
performance shares).
(ii) In establishing performance goals, the Committee may consider
such performance factor or factors as it deems appropriate, including,
without limitation, net income, growth in net income, earnings per share,
growth of earnings per share, return on equity, or return on capital. The
Committee may, at any time, in its discretion, modify performance goals in
order to facilitate their attainment for any reason, including, but not
limited to, recognition of unusual or nonrecurring events affecting the
Company or a Subsidiary or changes in applicable laws, regulations or
accounting principles. If a Grantee is promoted, demoted or transferred to
a different business unit of the Company during a performance period, the
Committee may adjust or eliminate the performance goals as it deems
appropriate.
(iii) When granted, performance units may, but need not, be identified
with shares of Stock subject to a specific option or specific shares of
restricted stock of the Grantee in a number equal to or different from the
number of the performance units so granted. If performance units are
identified with shares of Stock subject to an option or shares of
restricted stock, then, unless otherwise provided in the applicable Award
Agreement, the Grantee's associated performance units shall terminate upon
(i) the expiration, termination, forfeiture, or cancellation of such option
or shares of restricted stock, (ii) the purchase of shares of Stock subject
to such option, or (iii) the nonforfeitability of such shares of restricted
stock, as the case may be.
7. GRANTEE'S AGREEMENT TO SERVE
Each Grantee who is granted an Award shall, by executing such Grantee's
Award Agreement, agree that such Grantee will remain in the employ of the
Company or any of its Subsidiaries for at least one year after the Grant Date.
No obligation of the Company or any of its Subsidiaries as to the length of any
Grantee's employment shall be implied by the terms of the Plan, any grant of an
Award hereunder or any Award Agreement. The Company and its Subsidiaries reserve
the same rights to terminate employment of any Grantee as existed before the
Effective Date.
8. NON-TRANSFERABILITY
Each Award (other than restricted stock) granted hereunder shall by its
terms not be assignable or transferable other than by will or the laws of
descent and distribution and may be exercised, during the Grantee's lifetime,
only by the Grantee. Each share of restricted stock shall be non-transferable
until such share becomes nonforfeitable.
9. EXERCISE
(a) Exercise of Options. Subject to Articles 4(c)(vii), 10 and 15 and such
terms and conditions as the Committee may impose, each option shall be
exercisable in one or more installments commencing not earlier than the Grant
Date of such option. Each option shall be exercised by delivery to the Company
of written notice of intent to purchase a specific number of shares of Stock
subject to the option. The Option Price of any shares of Stock as to which an
option shall be exercised shall be paid in full at the time of the exercise.
Payment may, at the election of the Grantee, be made in any one or any
combination of the following:
(i) cash,
(ii) Stock valued at its Fair Market Value on the business day next
preceding the date of exercise, or
(iii) with the approval of the Committee, shares of restricted stock,
each valued at the Fair Market Value of a share of Stock on the business
day next preceding the date of exercise.
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In the discretion of the Committee and to the extent permitted by law,
payment may also be made in accordance with Article 11.
If restricted stock ("Tendered Restricted Stock") is used to pay the Option
Price for Stock, then a number of shares of Stock acquired on exercise of the
option equal to the number of shares of Tendered Restricted Stock shall be
subject to the same restrictions as the Tendered Restricted Stock, determined as
of the date of exercise of the option. If the Option Price for restricted stock
is paid with Tendered Restricted Stock, and if the Committee determines that the
restricted stock acquired on exercise of the option is subject to restrictions
that cause it to have a greater risk of forfeiture than the Tendered Restricted
Stock, then notwithstanding the preceding sentence, all the restricted stock
acquired on exercise of the option shall be subject to such restrictions.
(b) Exercise of Stock Appreciation Rights. Subject to Articles 4(c) (vii),
10 and 15 and such terms and conditions as the Committee may impose, each stock
appreciation right shall be exercisable not earlier than the first anniversary
of the Grant Date of such stock appreciation right, to the extent the option
with which it is identified, if any, may be exercised and to the extent the
restricted stock with which it is identified, if any, is nonforfeitable, unless
otherwise provided by the Committee. Stock appreciation rights shall be
exercised by delivery to the Company of written notice of intent to exercise a
specific number of stock appreciation rights. Unless otherwise provided in the
applicable Award Agreement, the exercise of stock appreciation rights which are
identified with shares subject to an option or shares of restricted stock shall
result in the cancellation or forfeiture of such option or shares of restricted
stock, as the case may be, to the extent of such exercise.
The benefit for each stock appreciation right exercised shall be equal to
the difference between:
(i) the Fair Market Value of a share of Stock on the date of such
exercise
and
(ii) an amount equal to:
(A) in the case of a stock appreciation right identified with a
share of Stock subject to an option, the Option Price of such option,
unless the Committee in the grant of the stock appreciation right
specified a higher amount, or
(B) in the case of any other stock appreciation right, the Fair
Market Value of a share of Stock on the Grant Date of such stock
appreciation right;
provided that the Committee, in its discretion, may provide that the
benefit for any stock appreciation right shall not exceed a stated
percentage (which may exceed 100%) of the Fair Market Value of a share of
Stock on such Grant Date. The benefit upon the exercise of a stock
appreciation right shall be payable in cash, except that the Committee,
with respect to any particular exercise, may, in its discretion, pay
benefits wholly or partly in Stock.
(c) Exercise of Performance Units. Subject to Articles 10 and 15 and such
terms and conditions as the Committee may impose, if, with respect to any
performance unit, the minimum performance goals have been achieved during the
applicable Measuring Period, then such performance unit shall be exercisable
commencing on the later of (i) the first anniversary of the Grant Date or (ii)
the first day after the end of the applicable Measuring Period. Performance
units shall be exercised by delivery to the Company of written notice of intent
to exercise a specific number of performance units; provided, however, that
performance units not identified with an option or shares of restricted stock
shall be deemed exercised on the date on which they first become exercisable.
Unless otherwise provided for in the applicable Award Agreement, the exercise of
performance units which are identified with an option or shares of restricted
stock shall result in the cancellation or forfeiture of such option or shares of
restricted stock, as the case may be, to the extent of such exercise.
The benefit for each performance unit exercised shall be an amount equal to
the product of:
(i) the Fair Market Value of a share of Stock on the Grant Date of the
performance unit multiplied by
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(ii) the Performance Percentage attained during the Measuring Period
for such performance unit.
The benefit upon the exercise of a performance unit shall be payable
as soon as is administratively practicable after the later of (i) the date
the Grantee exercises or is deemed to exercise such performance unit, or
(ii) the date (or dates in the event of installment payments) as provided
in the applicable Award Agreement. Such benefit shall be payable in cash,
except that the Committee, with respect to any particular exercise, may, in
its discretion, pay benefits wholly or partly in Stock. The number of
shares of Stock payable in lieu of cash shall be determined by valuing the
Stock at its Fair Market Value on the business day next preceding the date
such benefit is to be paid.
(d) Payment of Performance Shares. Subject to Articles 10 and 15 and such
terms and conditions as the Committee may impose, if the minimum performance
goals specified by the Committee with respect to an Award of performance shares
have been achieved during the applicable Measuring Period, then the Company
shall pay to the Grantee of such Award shares of Stock equal in number to the
product of the number of performance shares specified in the applicable Award
Agreement multiplied by the Performance Percentage achieved during such
Measuring Period, except to the extent that the Committee in its discretion
determines that cash be paid in lieu of some or all of such shares of Stock. The
amount of cash payable in lieu of a share of Stock shall be determined by
valuing such share at its Fair Market Value on the business day next preceding
the date such cash is to be paid. Payments pursuant to this Article 9(d) shall
be made as soon as administratively practical after the end of the applicable
Measuring Period. Any performance shares with respect to which the performance
goals have not been achieved by the end of the applicable Measuring Period shall
expire.
10. EFFECTS OF A CHANGE OF CONTROL
(I) The following provisions of this Article 10 shall apply to Awards not
covered by Article 10(II) below.
(a) Notwithstanding any other provisions of the Plan, after a Change of
Control:
(i) all options, stock appreciation rights, and performance units
granted under the Plan shall immediately be fully exercisable;
(ii) all shares of restricted stock shall immediately be
nonforfeitable and freely transferable; and
(iii) the Company shall, within three business days after the date of
the Change of Control, pay a benefit with respect to all performance shares
computed pursuant to Article 10(I)(c).
(b) In the event of a Change of Control, the benefit, if any, payable with
respect to any performance unit for which the Measuring Period has not ended
shall be equal to the product of:
(i) the Fair Market Value of a share of Stock on the Grant Date of the
performance unit multiplied successively by each of the following:
(ii) a fraction, the numerator of which is the number of months
(including as a whole month any partial month) that have elapsed since the
beginning of such Measuring Period until the date of the Change of Control
and the denominator of which is the number of months (including as a whole
month any partial month) in the Measuring Period (the "Time Proration
Factor"); and
(iii) the Performance Percentage specified in the applicable Award
Agreement for the achievement of "on plan" performance as of the end of the
Measuring Period (the "On-Plan Performance Factor").
(c) In the event of a Change of Control, the number of shares of Stock to
be delivered, if any, with respect to any performance shares shall be equal to
the number of performance shares granted multiplied successively by each of the
following:
(i) the Time Proration Factor; and
(ii) the On-Plan Performance Factor.
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(d) After a Change of Control, Article 7 shall not be construed to prevent
the exercise of, or the payment of benefits pursuant to, a Grantee's Award or
the nonforfeitability of a Grantee's shares of restricted stock, whether or not
such Grantee remains employed for one year after the applicable Grant Date.
(II) The following provisions of this Article 10 shall apply to Awards
granted on or after the Restatement Effective Date to any Grantee who is or
becomes a Participant in the Alliant Techsystems Inc. Income Security Plan (the
"Income Security Plan") and shall be applicable so long as such Grantee is a
Participant in the Income Security Plan. In the event a Grantee ceases to be a
Participant in the Income Security Plan, the provisions of Article 10(I) shall
apply to Awards held by such Grantee. In the event the Income Security Plan is
terminated or amended so as to adversely affect the rights of Participants
thereunder, the provisions of Article 10(I) shall apply to all Awards held by
all Grantees.
In the event of a Qualifying Termination of a Participant in the Income
Security Plan, (a) any unvested Award shall thereupon vest and (i) in the case
of options, shall be exercisable for the lesser of the normal expiration date or
three (3) years after the Date of Termination, and (ii) in the case of
performance shares shall vest as of the Date of Termination on a pro rata basis
according to the expired portion of the total measuring period over which the
performance for such award is to be measured, and based upon deemed attainment
of the target performance, or if greater, based upon the actual performance
achieved, and (b) if the Stock ceases to be listed for trading on the New York
Stock Exchange, American Stock Exchange or the National Market List of the
National Association of Securities Dealers, Inc., Automated Quotation System (a
"Trading System") and any such Award is not replaced with an award for
securities which are traded on a Trading System (which replacement award shall
have the same or greater current value, as determined in good faith by the
Board, or the Board of Directors of the Company's successor), then the
Participant shall be entitled to receive the value of any such Award (including
any pro rata portion of performance shares, as described above) in cash (within
ten (10) days of the date on which the Stock ceases to be traded on a Trading
System) in an amount calculated based upon the highest price paid for the
purchase of shares of Stock by a Person as of any date within six (6) months
before or subsequent to a Change of Control (as defined in paragraph (g) (ii) of
Exhibit A.
11. LOAN AND GUARANTEES
The Committee may, in its discretion:
(a) allow a Grantee to defer payment to the Company of all or any portion
of (i) the Option Price of an option, (ii) the purchase price of a share of
restricted stock, or (iii) any taxes associated with a benefit hereunder which
is not a cash benefit at the time such benefit is so taxable, or
(b) cause the Company to guarantee a loan from a third party to the
Grantee, in an amount equal to all or any portion of such Option Price, purchase
price, or any related taxes.
Any such payment deferral or guarantee by the Company pursuant to this
Article 11 shall be, on a secured or unsecured basis, for such periods, at such
interest rates, and on such other terms and conditions as the Committee may
determine. Notwithstanding the foregoing, a Grantee shall not be entitled to
defer the payment of such Option Price, purchase price, or any related taxes
unless the Grantee (i) enters into a binding obligation to pay the portion of
the Option Price, purchase price, or any related taxes which is deferred and
(ii) pays upon exercise of an option or grant of shares of restricted stock, as
the case may be, an amount equal to or greater than the aggregate par value of
all shares of Stock (other than treasury shares) to be then delivered. If the
Committee has permitted a payment deferral or caused the Company to guarantee a
loan pursuant to this Article 11, then the Committee may, in its discretion,
require the immediate payment of such deferred amount or the immediate release
of such guarantee upon the Grantee's Termination of Employment or if the Grantee
sells or otherwise transfers the Grantee's shares of Stock purchased pursuant to
such deferral or guarantee.
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12. NOTIFICATION UNDER SECTION 83(B)
If the Committee has not, on the Grant Date or any later date, prohibited
such Grantee from making the following election, and a Grantee shall, in
connection with the exercise of any option, or the grant of any share of
restricted stock, make the election permitted under Section 83(b) of the
Internal Revenue Code (i.e., an election to include in such Grantee's gross
income in the year of transfer the amounts specified in Section 83(b) of the
Internal Revenue Code), such Grantee shall notify the Company of such election
within 10 days of filing notice of the election with the Internal Revenue
Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Section 83(b) of the Internal Revenue
Code.
13. MANDATORY WITHHOLDING TAXES
(a) Whenever under the Plan, cash or shares of Stock are to be delivered
upon exercise or payment of an Award or upon a share of restricted stock
becoming nonforfeitable, or any other event with respect to rights and benefits
hereunder, the Company shall be entitled to require as a condition of delivery
(i) that the Grantee remit an amount sufficient to satisfy all federal, state,
and local withholding tax requirements related thereto, (ii) the withholding of
such sums from compensation otherwise due to the Grantee or from any shares of
Stock due to the Grantee under the Plan or (iii) any combination of the
foregoing.
(b) If any disqualifying disposition described in Article 6(c) (vi) is made
with respect to shares of Stock acquired under an incentive stock option granted
pursuant to the Plan or any election described in Article 12 is made, then the
person making such disqualifying disposition or election shall remit to the
Company an amount sufficient to satisfy all federal, state, and local
withholding taxes thereby incurred; provided that, in lieu of or in addition to
the foregoing, the Company shall have the right to withhold such sums from
compensation otherwise due to the Grantee or from any shares of Stock due to the
Grantee under the Plan.
14. ELECTIVE SHARE WITHHOLDING
(a) Unless otherwise provided by the Committee on or after the Grant Date,
and pursuant to Article 14(b), a Grantee may elect the withholding ("Share
Withholding") by the Company of a portion of the shares of Stock otherwise
deliverable to such Grantee upon the exercise or payment of an Award or upon a
share of restricted stock's becoming nonforfeitable (each a "Taxable Event")
having a Fair Market Value equal to:
(i) the amount necessary to satisfy required federal, state, or local
withholding tax liability attributable to the Taxable Event; or
(ii) with the Committee's prior approval, a greater amount, not to
exceed the estimated total amount of such Grantee's tax liability with
respect to the Taxable Event.
(b) Each Share Withholding election by a Grantee shall be subject to the
following restrictions:
(i) any Grantee's election shall be subject to the Committee's right
to revoke its approval of Share Withholding by such Grantee at any time
before the Grantee's election; and
(ii) the Grantee's election shall be irrevocable.
(c) The elective share withholding provisions of this Article 14 shall be
available with respect to any Award, including Awards granted prior to the
Restatement Effective Date.
15. TERMINATION OF EMPLOYMENT
(a) Restricted Stock and Performance Shares. Except as otherwise provided
by the Committee on or after the Grant Date, a Grantee's shares of restricted
stock that are forfeitable shall be forfeited upon the Grantee's Termination of
Employment, and a Grantee's performance shares that have not become deliverable
shall terminate upon the Grantee's Termination of Employment.
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(b) Other Awards. An unexercised option, stock appreciation right, or
performance unit shall terminate upon the Grantee's Termination of Employment,
except that the Committee may provide on or after the Grant Date that:
(i) if the Grantee's Termination of Employment is caused by the death
of the Grantee, then any unexercised option, stock appreciation rights, or
performance units, to the extent exercisable on the date of the Grantee's
death, may be exercised, in whole or in part, at any time within one year
after the Grantee's death by the Grantee's personal representative or by
the person to whom the option, stock appreciation rights, or performance
units are transferred by will or the applicable laws of descent and
distribution;
(ii) if the Grantee's Termination of Employment is as a result of
retirement, then any unexercised option, stock appreciation rights, or
performance units, to the extent exercisable at the date of such
Termination of Employment, may be exercised, in whole or in part, at any
time within 90 days after such Termination of Employment; provided that, if
the Grantee dies after such Termination of Employment and before the end of
such 90-day period, such option, stock appreciation rights, or performance
units may be exercised by the deceased Grantee's personal representative or
by the person to whom the option, stock appreciation rights, or performance
units are transferred by will or the applicable laws of descent and
distribution within one year after the Grantee's Termination of Employment;
(iii) if the Grantee's Termination of Employment is on account of the
Disability of the Grantee, then any unexercised option, stock appreciation
rights, or performance units, to the extent exercisable at the date of such
Termination of Employment, may be exercised, in whole or in part, at any
time within one year after the date of such Termination of Employment;
provided that, if the Grantee dies after such Termination of Employment and
before the end of such one-year period, such option, stock appreciation
rights, or performance units may be exercised by the deceased Grantee's
personal representative or by the person to whom the option, stock
appreciation rights, or performance units are transferred by will or the
applicable laws of descent and distribution within one year after the
Grantee's Termination of Employment, or, if later, within 180 days after
the Grantee's death.
(c) Other Exceptions at the Discretion of the Committee. If the Grantee has
a Termination of Employment for any reason, other than conviction of the Grantee
of any felony or other crime involving dishonesty, fraud or moral turpitude, or
the Grantee's habitual neglect of his duties, the Committee may provide on or
after the Grant Date (including after a Grantee's Termination of Employment, but
before the expiration of the term specified in the applicable Award Agreement)
for one or more of the following:
(i) that any unexercised option, stock appreciation rights, or
performance units, to the extent exercisable on the date of such
Termination of Employment, may be exercised, in whole or in part, at any
time within a period specified by the Committee after the date of such
Termination of Employment;
(ii) that any option, stock appreciation rights, or performance units
which are not exercisable on or before the date of such Termination of
Employment (A) will continue to become exercisable, as if such Termination
of Employment had not occurred, after such date for a period specified by
the Committee and, (B) to the extent such option, stock appreciation
rights, or performance units have become exercisable during such period,
may be exercised, in whole or in part, at or before the end of such period;
(iii) that any shares of restricted stock that have not become
nonforfeitable on or before the date of such Termination of Employment, and
any performance shares that have not become deliverable on or before the
date of such Termination of Employment may become nonforfeitable or
deliverable, as the case may be, as if such Termination of Employment had
not occurred after such date for a period specified by the Committee; or
(iv) that if the Grantee dies after such Termination of Employment and
before the expiration of the period specified under clause (i) or (ii) of
this Article 15(c), such option, stock appreciation rights, or performance
units may be exercised by the deceased Grantee's personal representative or
by the person to whom the option, stock appreciation rights, or performance
units are transferred by will or the applicable
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laws of descent and distribution within the specified period after the
Grantee's Termination of Employment, or, if later, within 180 days after
the Grantee's death.
(d) Maximum Extension. Notwithstanding the foregoing, no Award shall be
exercisable beyond the maximum term permitted under the original Award Agreement
unless the Committee explicitly extends such original term, in which case such
term shall not be extended beyond the maximum term permitted by the Plan.
16. SUBSTITUTE AWARDS
(a) In the case of an Award to a Grantee who is not a Section 16 Grantee,
the Committee may cancel, with the consent of a Grantee, any such Award, and may
substitute a new Award therefor. The Committee may also, in its discretion,
provide that the Grant Date of the canceled Award shall be the date used to
determine the earliest date or dates for exercising the new substituted Award
under Article 9 hereof so that the Grantee may exercise the substituted Award at
the same time as if the Grantee had held the substituted Award since the Grant
Date of the canceled Award.
(b) Options ("Replacement Options") shall automatically be granted under
the Plan to each Transferred Employee (as defined in the Distribution Agreement
dated as of September 24, 1990 between Honeywell and the Company (the
"Distribution Agreement")) who holds unexercised options granted under the
Honeywell Plans ("Honeywell Options") at the Distribution Date (as defined in
the Distribution Agreement); provided that such person executes an agreement
before the Distribution Date or as of such later date as the Committee shall
permit, providing for the substitution of Replacement Options for Honeywell
Options, and enters into such additional agreements as the Committee shall
determine to be necessary or appropriate to cancel such person's right to
exercise any Honeywell Options.
(i) The Option Price for a Replacement Option shall be determined by
the following formula:
A = B X C
-----
D
Any fraction of a cent shall be rounded down (up in the case of an
incentive stock option) to the next full cent.
(ii) The number of shares of Stock for which the Replacement Option is
exercisable shall be determined in accordance with the following formula:
Number of shares = E(D - B)
--------
C - A
Any fractional share shall be rounded up (down in the case of an incentive
stock option) to the next full share.
(iii) In the foregoing formulas,
"A" is the Option Price,
"B" is the option exercise price for a Honeywell Option,
"C" is the average of the fair market values of the Stock for each of the
first three consecutive trading days on which the Stock is traded (regular
way) on the New York Stock Exchange,
"D" is the fair market value of a share of Honeywell stock on the
Distribution Date (without giving effect to the Distribution (as defined in
the Distribution Agreement)), and
"E" is the number of shares of Honeywell stock for which the Honeywell
Option was exercisable.
Solely for purposes of this Article 16(b), the fair market value of a
security as of a date shall be the average of the high and low sale prices of
such security on such date (as reported on the New York Stock Exchange Composite
Tape).
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(iv) Each Replacement Option shall have the same terms and conditions
(other than the Option Price and the number of shares of Stock) as, and not
give the Grantee any benefits which he did not have under, the
corresponding Honeywell Option.
17. SECURITIES LAW MATTERS
(a) If the Committee deems necessary to comply with the Securities Act of
1933, the Committee may require a written investment intent representation by
the Grantee and may require that a restrictive legend be affixed to certificates
for shares of Stock.
(b) If based upon the opinion of counsel for the Company, the Committee
determines that the exercise or nonforfeitability of, or delivery of benefits
pursuant to, any Award would violate any applicable provision of (i) federal or
state securities law or (ii) the listing requirements of any national securities
exchange on which are listed any of the Company's equity securities, then the
Committee may postpone any such exercise, nonforfeitability or delivery, as the
case may be, but the Company shall use its best efforts to cause such exercise,
nonforfeitability or delivery to comply with all such provisions at the earliest
practicable date. The Committee's authority under this Article 17(b) shall
expire on the date of any Change of Control.
18. FUNDING
Benefits payable under the Plan to any person shall be paid directly by the
Company. The Company shall not be required to fund, or otherwise segregate
assets to be used for payment of, benefits under the Plan.
19. NO EMPLOYMENT RIGHTS
Neither the establishment of the Plan, nor the granting of any Award shall
be construed to (a) give any Grantee the right to remain employed by the Company
or any of its Subsidiaries or to any benefits not specifically provided by the
Plan or (b) in any manner modify the right of the Company or any of its
Subsidiaries to modify, amend, or terminate any of its employee benefit plans.
20. RIGHTS AS A STOCKHOLDER
A Grantee shall not, by reason of any Award (other than restricted stock)
have any right as a stockholder of the Company with respect to the shares of
Stock which may be deliverable upon exercise or payment of such Award until such
shares have been delivered to him. Shares of restricted stock held by a Grantee
or held in escrow by the Secretary of the Company shall confer on the Grantee
all rights of a stockholder of the Company, except as otherwise provided in the
Plan. The Committee, in its discretion, at the time of grant of restricted
stock, may permit or require the payment of cash dividends thereon to be
deferred and, if the Committee so determines, reinvested in additional
restricted stock to the extent shares are available under Article 3, or
otherwise reinvested. Stock dividends and deferred cash dividends issued with
respect to restricted stock shall be treated as additional shares of restricted
stock that are subject to the same restrictions and other terms as apply to the
shares with respect to which such dividends are issued. The Committee may, in
its discretion, provide for crediting to and payment of interest on deferred
cash dividends.
21. NATURE OF PAYMENTS
Any and all grants, payments of cash, or deliveries of shares of Stock
hereunder shall constitute special incentive payments to the Grantee and shall
not be taken into account in computing the amount of salary or compensation of
the Grantee for the purposes of determining any pension, retirement, death or
other benefits under (a) any pension, retirement, profit-sharing, bonus, life
insurance or other employee benefit plan of the Company or any of its
Subsidiaries or (b) any agreement between the Company or any Subsidiary, on the
one hand, and the Grantee, on the other hand, except as such plan or agreement
shall otherwise expressly provide.
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22. NON-UNIFORM DETERMINATIONS
Neither the Committee's nor the Board's determinations under the Plan need
be uniform and may be made by the Committee or the Board selectively among
persons who receive, or are eligible to receive, Awards (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, to enter into non-uniform and
selective Award Agreements as to (a) the identity of the Grantees, (b) the terms
and provisions of Awards, and (c) the treatment, under Article 15, of
Terminations of Employment. Notwithstanding the foregoing, the Committee's
interpretation of Plan provisions shall be uniform as to similarly situated
Grantees.
23. ADJUSTMENTS
The Committee shall make equitable adjustment of:
(a) the aggregate numbers of shares of Stock, performance shares, and stock
appreciation rights, available under Articles 3(a) and 3(b),
(b) the number of shares of Stock, shares of restricted stock or
performance shares covered by an Award,
(c) the Option Price, and
(d) the Fair Market Value of Stock to be used to determine the amount of
the benefit payable upon exercise of stock appreciation rights or performance
units
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, asset spin-off,
reorganization or similar event of or by the Company.
24. AMENDMENT OF THE PLAN
The Board may from time to time in its discretion amend or modify the Plan
without the approval of the stockholders of the Company, except to the extent
required by applicable law or national securities exchange regulations, and
except that, without stockholder approval, no amendment or modification will (a)
except as permitted by Article 23, increase either (i) the aggregate number of
shares of Stock made available and reserved for delivery on account of the
exercise of Awards and payment of benefits in connection with Awards, as set
forth in Article 3(a), or (ii) the maximum number of stock appreciation rights
and performance shares that may be issued under the Plan, as set forth in
Article 3(b), (b) increase the limitation set forth in Article 6 (a) (iii) on
the maximum number of shares of Stock that may be covered by Awards to any one
Grantee in any calendar year, (c) decrease the minimum Option Price set forth in
Article 6(b) (i), or (d) eliminate the restriction against granting substitute
Awards to Section 16 Grantees, as set forth in Article 16(a). In addition, no
amendment of modification will adversely affect any of the rights of any
Grantee, without such Grantee's consent, under any Award previously granted
under the Plan.
25. TERMINATION OF THE PLAN
The Plan shall terminate on such date as the Board may determine. Any
termination, whether in whole or in part, shall not affect any Award then
outstanding under the Plan.
26. NO ILLEGAL TRANSACTIONS
The Plan and all Awards granted pursuant to it are subject to all laws and
regulations of any governmental authority which may be applicable thereto; and
notwithstanding any provision of the Plan or any Award, Grantees shall not be
entitled to exercise Awards or receive the benefits thereof and the Company
shall not be obligated to deliver any Stock or pay any benefits to a Grantee if
such exercise, delivery, receipt or payment of benefits would constitute a
violation by the Grantee or the Company of any provision of any such law or
regulation.
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27. CONTROLLING LAW
The law of the State of Minnesota, except its law with respect to choice of
law, shall be controlling in all matters relating to the Plan.
28. SEVERABILITY
If all or any part of the Plan is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any portion of the Plan not declared to be unlawful or
invalid. Any Article or part of an Article so declared to be unlawful or invalid
shall, if possible, be construed in a manner which will give effect to the terms
of such Article or part of an Article to the fullest extent possible while
remaining lawful and valid.
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EXHIBIT A
DEFINITIONS
(a) "Annual Base Salary" means a Participant's annual, regular rate of cash
compensation excluding all other elements of compensation such as, without
limitation, incentive or other bonus awards, perquisites, stock options or stock
awards, and retirement and Welfare Benefits.
(b) "Award" means options, shares of restricted stock, stock appreciation
rights, performance units, or performance shares granted under the Plan.
(c) "Award Agreement" has the meaning specified in Article 4(c)(v).
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means:
(i) a Participant's conviction of a felony (or guilty or nolo
Contendere plea in connection therewith) or the indictment of a Participant
on, or the Participant being charged with, a felony charge if either (x)
such charge relates to the Company's business or any activities engaged in
by the Participant while on Company premises or while engaged in activities
related to the Company's business, or (y) such charge remains outstanding
for thirty (30) days or more; or
(ii) a determination by the Board that a Participant has defrauded the
Company; or
(iii) a determination by the Board that a Participant has committed a
material breach of the duties and responsibilities of the Participant as an
officer or employee of the Company, which breach is (i) demonstrably
willful and deliberate, or committed in bad faith or without reasonable
belief that the activity undertaken by the Participant is in the best
interests of the Company and (ii) if subject to cure, not remedied within
thirty (30) days after receipt of written notice from the Company
specifying such breach.
(f) "Change Event" means:
(i) the acquisition after the Restatement Effective Date by any Person
(other than the Company or a Subsidiary, or any Company employee benefit
plan (including its trustee)) of "beneficial ownership" (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of securities of the
Company directly or indirectly representing fifteen percent (15%) or more
of the total number of shares of the Company's then outstanding Voting
Securities (excluding the sale or issuance of such securities directly by
the Company, or where the acquisition of such securities is made by such
Person from five (5) or fewer shareholders in a transaction or transactions
approved in advance by the Board);
(ii) the public announcement by any Person of an intention to acquire
the Company through a tender offer, exchange offer, or other unsolicited
proposal; or
(iii) the individuals who, as of the Restatement Effective Date, are
members of the Board (the Incumbent Board"), cease for any reason to
constitute at least a majority of the Board; provided, however, that if the
nomination for election of any new director was approved by a vote of a
majority of the Incumbent Board, such new director shall, for purposes of
this definition, be considered a member of the Incumbent Board.
(g)(i) "Change of Control", in the case of any Award granted prior to the
Restatement Effective Date, means any of the following:
(A) the acquisition by any person or group of beneficial ownership of
20% (35% in the case of any Award granted on or after May 25, 1994) or more
of either the then outstanding Stock or the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors, except that (1) no such person or
group shall be deemed to own beneficially (x) any securities acquired
directly from the Company pursuant to a written agreement with the Company
or (y) any securities held by the Company or a Subsidiary or any employee
benefit plan (or any related
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trust) of the Company or a Subsidiary, and (2) no Change of Control shall
be deemed to have occurred solely by reason of any such acquisition by a
corporation with respect to which, after such acquisition, more than 60%
(50% in the case of any Award granted on or after May 25, 1994) of both the
then outstanding common shares of such corporation and the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors are then
beneficially owned, directly or indirectly, by the persons who were the
beneficial owners of the Stock and voting securities of the Company
immediately before such acquisition in substantially the same proportion as
their ownership, immediately before such acquisition, of the then
outstanding Stock and the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election
of directors, as the case may be;
(B) individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board; provided that any individual who becomes a director
after the Effective Date whose election, or nomination for election by the
Company's stockholders, was approved by a vote or written consent of at
least two thirds of the directors then comprising the Incumbent Directors
shall be considered as though such individual were an Incumbent Director,
but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company (as such
terms are used in Rule 14a-11 under the 1934 Act): or
(C) approval by the stockholders of the Company of (1) a merger,
reorganization or consolidation with respect to which the individuals and
entities who were the respective beneficial owners of the Stock and voting
securities of the Company immediately before such merger, reorganization or
consolidation do not, after such merger, reorganization or consolidation,
beneficially own, directly or indirectly, more than 60% (50% in the case of
any Award granted on or after May 25, 1994) of, respectively, the then
outstanding common shares and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of the corporation resulting from such merger, reorganization or
consolidation, (2) a liquidation or dissolution of the Company or (3) the
sale or other disposition of all or substantially all of the assets of the
Company.
For purposes of this definition, "person" means such term as used in
Section 14(d) of the 1934 Act, "beneficial owner" means such term as defined in
Rule 13d-3 under the 1934 Act, and "group" means such term as defined in Rule
13d-5(b) under the 1934 Act.
(g)(ii) "Change of Control" in the case of any Award granted on or after
the Restatement Effective Date means any of the following:
(A) the acquisition by any "person" or group of persons (a "Person"),
as such terms are used in Section 13(d) and 14(d) of the 1934 Act (other
than the Company or a Subsidiary or any Company employee benefit plan
(including its trustee)) of "beneficial ownership" (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of securities of the
Company representing, directly or indirectly, more than fifty percent (50%)
of the total number of shares of the Company's then outstanding Voting
Securities;
(B) consummation of a reorganization, merger or consolidation of the
Company, or the sale or other disposition of all or substantially all of
the Company's assets (a "Business Combination"), in each case, unless,
following such Business Combination, the individuals and entities who were
the beneficial owners of the total number of shares of the Company's
outstanding Voting Securities immediately prior to both (1) such Business
Combination, and (2) any Change Event occurring within twelve (12) months
prior to such Business Combination, beneficially own, directly or
indirectly, more than fifty percent (50%) of the total number of shares of
the outstanding Voting Securities of the resulting corporation, or the
acquiring corporation, as the case may be, immediately following such
Business Combination (including, without limitation, the outstanding Voting
Securities of any corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the total number of shares of the Company's outstanding
Voting Securities; or
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<PAGE> 58
(C) any other circumstances (whether or not following a "Change
Event") which the Board determines to be a Change of Control for purposes
of this Plan after giving due consideration to the nature of the
circumstances then represented and the purposes of this Plan. Any such
determination made by the Board shall be irrevocable except by vote of a
majority of the members of the Board who voted in favor of making such
determination.
For purposes of this definition, a "Change of Control" shall not
result from any transaction precipitated by the Company's insolvency,
appointment of a conservator, or determination by a regulatory agency that
the Company is insolvent.
(h) "Change of Control Date" means the first date on which a Change of
Control (as defined in paragraph (g)(ii) of Exhibit A) occurs.
(i) "Committee" means the committee of the Board appointed pursuant to
Article 4.
(j) "Company" means Alliant Techsystems Inc., a Delaware corporation.
(k) "Date of Termination" means the date on which a Participant's
employment with the Company or a Subsidiary terminates, including by reason of a
Qualifying Termination.
(l) "Disability" means, as relates to the exercise of an incentive stock
option after Termination of Employment, a disability within the meaning of
Section 22(e) (3) of the Internal Revenue Code, and for all other purposes, a
mental or physical condition which, in the opinion of the Committee, renders a
Grantee unable or incompetent to carry out the job responsibilities which such
Grantee held or the tasks to which such Grantee was assigned at the time the
disability was incurred, and which is expected to be permanent or for an
indefinite duration. "Disability" means, as relates to Article 10(II), with
respect to a Participant, a determination by the Board that such Participant has
become disabled within the meaning of the Company's long term disability plan in
effect at that time.
(m) "Effective Date" means September 28, 1990.
(n) "Fair Market Value" of any security of the Company or any other issuer
means, as of any applicable date:
(i) if the security is listed for trading on the New York Stock
Exchange, the closing price, regular way, of the security as reported on
the New York Stock Exchange Composite Tape, or if no such reported sale of
the security shall have occurred on such date, on the next preceding date
on which there was such a reported sale, or
(ii) if a security is not so listed, but is listed on another national
securities exchange or authorized for quotation on the National Association
of Securities Dealers Inc.'s NASDAQ National Market System ("NASDAQ/NMS"),
the closing price, regular way, of the security on such exchange or
NASDAQ/NMS, as the case may be, or if no such reported sale of the security
shall have occurred on such date, on the next preceding date on which there
was such a reported sale, or
(iii) if a security is not listed for trading on a national securities
exchange or authorized for quotation on NASDAQ/NMS, the average of the
closing bid and asked prices as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or, if no such
prices shall have been so reported for such date, on the next preceding
date for which such prices were so reported, or
(iv) if the security is not listed for trading on a national
securities exchange or is not authorized for quotation on NASDAQ/NMS or
NASDAQ, the fair market value of the security as determined in good faith
by the Committee.
(o) "Grant Date" means the date of grant of an Award determined in
accordance with Article 6.
(p) "Grantee" means an individual who has been granted an Award.
(q) "Honeywell" means Honeywell Inc., a Delaware corporation.
B-19
<PAGE> 59
(r) "Honeywell Option" has the meaning specified in Article 16(b).
(s) "Honeywell Plans" means the 1988 Honeywell Stock and Incentive Plan,
the 1984 Honeywell Key Employee Stock Option Plan and the 1979 Honeywell Key
Employee Stock Option Plan.
(t) "Income Security Plan" has the meaning specified in Article 10(II)
(u) "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and regulations and rulings thereunder. References to a particular
section of the Internal Revenue Code shall include references to successor
provisions.
(v) "Measuring Period" has the meaning specified in Article 6(g)(i)(B).
(w) "1934 Act" means the Securities Exchange Act of 1934, as amended.
References to a particular section of, or rule under, the 1934 Act shall include
references to successor provisions.
(x) "Option Price" means the per share purchase price of (i) Stock subject
to an option or (ii) restricted stock subject to an option.
(y) "Participant" means each elected incumbent corporate officer, and each
other individual or group of individuals as designated from time to time by the
Committee as being entitled to the benefits provided under the Income Security
Plan. Unless otherwise determined by the Committee, a Participant shall cease to
be covered by the Income Security Plan automatically if such Participant ceases
to be an elected corporate officer, or otherwise within a designated Participant
group, provided that such change of status occurs prior to a Change of Control
(as defined in paragraph (g) (ii) of Exhibit A).
(z) "Performance Percentage" has the meaning specified in Article
6(g)(i)(C).
(aa) "Plan" has the meaning specified in the introductory paragraph.
(bb) "Qualifying Termination" means any of the following:
(i) A termination of a Participant's employment by action of the
Company or a Subsidiary, as applicable, within two (2) years after a Change
of Control Date, for any reason other than a termination for Cause or on
account of a Participant's Disability;
(ii) A termination of employment by written election of the
Participant, delivered within two (2) years after a Change of Control Date,
for one or both of the following reasons specified by such Participant:
(A) Change of Compensation. A reduction by the Company or a
Subsidiary, as applicable, in such Participant's Annual Base Salary or
Target Annual Incentive Award below the rates in effect immediately
prior to such Change of Control (as defined in paragraph (g) (ii) of
Exhibit A) or the failure by the Company and such Subsidiary to continue
Participant's eligibility in any Welfare Benefits in which such
Participant was participating immediately prior to such Change of
Control unless such Welfare Benefits are terminated by the Company in
their entirety, or the elimination of eligibility affects all employees
of status comparable to the Participant, or such Participant is
permitted to participate in other plans providing materially comparable
Welfare Benefits to such Participant;
(B) Change of Location. The Company or a Subsidiary, as applicable,
requiring such Participant to be based anywhere other than such
Participant's work location immediately prior to the Change of Control
Date, as it may be changed thereafter with Participant's consent, or a
location within 75 miles from such location; unless such relocation is
agreed to in writing by both the Company and the Participant, or is
permitted by the terms of such Participant's employment agreement with
the Company;
provided that, in the case of any such termination of employment by the
Participant pursuant of paragraphs (A) or (B) above, such termination
shall not be deemed a Qualifying Termination unless the Company receives
written notice of such Participant's claim of a Qualifying Termination
B-20
<PAGE> 60
within sixty (60) days after the occurrence of the events constituting
the Participant's reason for such termination and the Company or
Subsidiary does not within thirty (30) days after receipt of such notice
cure the stated reason therefor; or
(iii) A termination of a Participant's employment by the Company or
a Subsidiary within twelve (12) months after a Change Event if the
Participant can demonstrate that such termination or reason for
termination (A) was at the specific request of a third party with which
the Company or the Subsidiary has entered into negotiations or an
agreement with regard to a subsequent Change of Control; or (B)
otherwise occurred in connection with, or in anticipation of, such
Change of Control.
In the event that upon a Change of Control (as defined in paragraph (g)(ii)
of Exhibit A) the Company ceases to be a publicly traded corporation, (x)
such event will not, in and of itself constitute a reason for a Qualifying
Termination under paragraph (ii) above unless one of the reasons set forth
in paragraphs (ii)(A) or (B) above also occurs; and (y) Participants shall
be entitled to the benefits of Article 10(II)(b), if applicable, whether or
not there has been a Qualifying Termination. For purposes of this Plan, a
termination of a Participant's employment by Retirement shall not
constitute a Qualifying Termination.
(cc) "Reload Option" has the meaning specified in Article 6(d).
(dd) "Restatement Effective Date" has the meaning specified in the
introductory paragraph.
(ee) "Retirement" means the voluntary retirement of a Participant pursuant
to a retirement plan of the Company or any relevant Subsidiary.
(ff) "SEC" means the Securities and Exchange Commission.
(gg) "Section 16 Grantee" means a person subject to potential liability
with respect to equity securities of the Company under Section 16(b) of the 1934
Act.
(hh) "Stock" means common stock of the Company, par value $.01 per share.
(ii) "Subsidiary" means a corporation as defined in Section 424(f) of the
Internal Revenue Code with the Company being treated as the employer corporation
for purposes of this definition.
(jj) "Target Annual Incentive Award" means Participant's target annual cash
incentive bonus award as determined at the start of the Company's fiscal year in
which the Change of Control (as defined in paragraph (g)(ii) of Exhibit A)
occurs.
(kk) "10% Owner" means a person who owns stock (including stock treated as
owned under Section 425(d) of the Internal Revenue Code) possessing more than
10% of the total combined voting power of all classes of stock of the Company.
(ll) "Termination of Employment" occurs the first day an individual is for
any reason no longer employed by the Company or any of its Subsidiaries, or with
respect to an individual who is an employee of a Subsidiary, the first day the
Company no longer owns voting securities possessing at least 50% of the
aggregate voting power of such Subsidiary's outstanding voting securities.
(mm) "Voting Securities" means any shares of the capital stock or other
securities of the Company that are generally entitled to vote in elections for
directors.
(nn) "Welfare Benefits" means coverage and benefits to the Participant
under the Company's then applicable health, disability, executive placement or
life insurance programs or under a retirement plan generally applicable to
employees of status comparable to a Participant.
B-21
<PAGE> 61
(Cut off along dotted line)
- --------------------------------------------------------------------------------
ADMISSION TICKET REQUEST
ALLIANT TECHSYSTEMS INC.
ANNUAL MEETING OF STOCKHOLDERS
2:00 P.M., LOCAL TIME, AUGUST 4, 1998
If you plan to attend the 1998 Annual Meeting, which will be held at the
headquarters of the Company, 600 Second Street N.E., Hopkins (suburban
Minneapolis), Minnesota, you may request an admission ticket for yourself and
members of your immediate family by completing and returning this form or, if
you are a stockholder of record who votes by telephone, by indicating your
intention to attend the meeting when prompted to do so. Admission tickets will
be mailed in response to requests received by July 28, 1998. All other admission
tickets may be picked up at the Annual Meeting.
Your Name (Please Print):
-------------------------------------------------------
Address:
------------------------------------------------------------------------
(Street)
- --------------------------------------------------------------------------------
(City, State, Zip Code)
Additional admission tickets requested for the following immediate family
members:
- --------------------------------------------------------------------------------
YOU MAY RETURN THIS FORM WITH YOUR
PROXY IN THE ENVELOPE PROVIDED; BUT
IT IS RECOMMENDED (PARTICULARLY IF
YOUR SHARES ARE HELD BY YOUR BROKER
IN "STREET NAME") THAT YOU MAIL IT
DIRECTLY TO: ALLIANT TECHSYSTEMS INC.
MN11-2214
600 SECOND STREET N.E.
HOPKINS, MN 55343-8384. --------------------------------
(Signature of Stockholder)
<PAGE> 62
[ALLIANT TECHSYSTEMS LOGO]
Alliant Techsystems Inc.
600 Second Street N.E.
Hopkins, MN 55343-8384
Date: July 2, 1998
Subject: VOTING INSTRUCTIONS TO THE TRUSTEE OF THE ALLIANT
TECHSYSTEMS INC. 401(k) PLANS (the "Plans")
To: Participants in the Plans
As a participant in one of the above Plans, you are entitled to vote shares
of Alliant Techsystems Inc. common stock ("Company Stock") allocated to your
Plan account(s). In order for you to vote these shares at the 1998 annual
meeting of stockholders of Alliant Techsystems Inc. (the "Company"), you must
give your voting instructions to Fidelity Management Trust Company, which, as
Trustee under the Plans, is (through its nominee) the record owner of the
Company Stock held by the Plans.
Enclosed for your consideration and use in this regard are the following
items:
1. The Notice of Annual Meeting of Stockholders and Proxy Statement for the
Company's 1998 annual meeting.
2. A white proxy (bearing a blue stripe) upon which you are invited to
record your confidential voting instructions to the Trustee with respect
to your Plan shares of Company Stock. IF YOU DO NOT VOTE YOUR PLAN
SHARES (WHICH REQUIRES THAT YOUR PROXY OR TELEPHONE VOTE BE RECEIVED BY
JULY 28, 1998), YOUR SHARES WILL BE VOTED BY THE TRUSTEE IN THE SAME
MANNER AND PROPORTION AS IT VOTES SHARES FOR WHICH IT RECEIVES VOTING
INSTRUCTIONS FROM OTHER PARTICIPANTS IN THE PLANS.
3. A self-addressed, postage-paid envelope for your use in returning the
enclosed white proxy to the Company's transfer agent, which is
tabulating the voting instructions for the Trustee. You may also vote by
telephone as explained on the proxy and in the Proxy Statement.
NOTE: THE ENCLOSED PROXY CANNOT BE VOTED AT THE MEETING, BUT IS VALID ONLY
TO INSTRUCT THE TRUSTEE HOW TO VOTE YOUR PLAN SHARES. The enclosed proxy is in
addition to any proxy you may receive with respect to other Company Stock you
may own.
IMPORTANT NOTICE
ADMISSION TO THE MEETING WILL BE BY TICKET ONLY. IN ORDER TO SECURE AN ADMISSION
TICKET, PLEASE COMPLETE AND RETURN THE ADMISSION TICKET REQUEST FORM PRINTED ON
THE INSIDE BACK COVER OF THE PROXY STATEMENT OR, IF YOU VOTE BY TELEPHONE,
INDICATE YOUR INTENTION TO ATTEND THE MEETING WHEN PROMPTED TO DO SO.
<PAGE> 63
PROXY [ALLIANT TECHSYSTEMS LOGO]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard Schwartz and Peter A. Bukowick
as proxies, each with the power to act alone and with full power of
substitution and revocation, to represent and vote, as specified on the other
side of this proxy, all shares of Common Stock of Alliant Techsystems Inc.
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
to be held at 2:00 p.m., local time, on Tuesday, August 4, 1998 at the
headquarters of the Company at 600 Second Street N.E., Hopkins (suburban
Minneapolis), Minnesota, and all adjournments thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED ON THE
OTHER SIDE. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS
1, 2 AND 3, AND AGAINST PROPOSAL 4. THE PROXIES ARE AUTHORIZED, IN THEIR
DISCRETION, TO VOTE SUCH SHARES UPON ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT OF
THE COMPANY.
(Continued and to be signed on the other side,
which also includes instructions on how to vote by telephone.)
- --------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
[ALLIANT TECHSYSTEMS LOGO]
IMPORTANT NOTICE: ADMISSION TO THE ANNUAL MEETING WILL BE BY
TICKET ONLY. IN ORDER TO SECURE AN ADMISSION
TICKET, PLEASE COMPLETE AND RETURN THE ADMISSION
TICKET REQUEST FORM PRINTED ON THE INSIDE BACK
COVER OF THE PROXY STATEMENT OR, IF YOU ARE A
STOCKHOLDER OF RECORD WHO VOTES BY TELEPHONE,
INDICATE YOUR INTENTION TO ATTEND THE MEETING
WHEN PROMPTED TO DO SO.
CORPORATE HEADQUARTERS AND 600 Second Street N.E.
ANNUAL MEETING SITE: Hopkins, MN 55343-8384
(telephone: 612-931-6000; web site:www.ATK.com)
STOCKHOLDER INQUIRIES: Send inquiries concerning transfer of shares,
lost certificates or address changes to the
Company's Transfer agent/registrar, ChaseMellon
Shareholder Services, 450 West 33rd Street, New
York, NY 10001-2697 (telephone toll free:
1-800-851-9677; web site: www.chasemellon.com)
INVESTOR RELATIONS: Inquiries from stockholders, securities analysts
and others in the professional investment
community should be directed to Richard N.
Jowett, Vice President - Investor Relations and
Public Affairs, Alliant Techsystems Inc., 600
Second Street N.E., Hopkins, MN 55343-8384
(telephone: 612-931-6080; e-mail:
[email protected])
<TABLE>
<CAPTION>
Please mark
your votes as [X]
indicated in
this example
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors Recommends a Vote FOR Proposals 1,2 and 3.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PROPOSAL 1. ELECTION OF DIRECTORS NOMINEES: (01) Peter A. Bukowick, (02) PROPOSAL 2. RATIFICATION PROPOSAL 3. APPROVAL OF
FOR all AUTHORITY Gilbert F. Decker, (03) Thomas OF SELECTION OF DELOITTE & AMENDED AND RESTATED
Nominees WITHHELD L. Gossage, (04) Joel M. Greenblatt, TOUCHE LLP AS INDEPENDENT ALLIANT TECHSYSTEMS
except as to all (05) Jonathan G. Guss, (06) David E. ACCOUNTANTS INC. 1990 EQUITY
as noted Nominees Jeremiah, (07) Gaynor N. Kelley, (08) INCENTIVE PLAN
Joseph F. Mazzella, (09) Daniel L.
Nir, (10) Richard Schwartz, and (11)
Michael T. Smith
(To withhold authority to vote for FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] any individual nominee, write the [ ] [ ] [ ] [ ] [ ] [ ]
nominee's name on the line below.)
-----------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors Recommends a Vote AGAINST Proposal 4.
- ------------------------------------------------------------ =====================================================================
PROPOSAL 4. APPROVAL OF STOCKHOLDER PROPOSAL *** IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS
BELOW***
=====================================================================
FOR AGAINST ABSTAIN
[ ] [ ] [ ] THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
SIGN, DATE AND MAIL THIS PROXY TODAY.
You are encouraged to specify your choice by
marking the appropriate boxes, but you need
not mark any boxes if you wish to vote in
accordance with the Board of Directors
recommendations.
Dated: , 1998
---------------------------------
Signature:
-----------------------------------
---------------------------------------------
Please sign as name appears hereon. Joint
owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such. If
a corporation, please sign as full corporate
name by authorized officer. If a
partnership, please sign in partnership name
by authorized person.
- ------------------------------------------------------------------------------------------------------------------------------------
/\ FOLD AND DETACH HERE /\
YOU ARE ENCOURAGED TO VOTE BY TELEPHONE.
YOUR TELEPHONE VOTE WILL AUTHORIZE THE NAMED PROXIES
TO VOTE YOUR SHARES IN THE SAME MANNER AS IF YOU HAD
MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
- - If you have a touch-tone telephone, call 1-800-840-1208. This is a TOLL-FREE call, for which you will not be charged. You may
call 24 hours a day through August 3, 1998.
- - You will be asked to enter the Control Number located in the box at the lower right hand corner of this form. You will have two
voting options, which are described below.
- - After you have voted, you will also be asked if you plan to attend the annual meeting, which will be held at the Company's
headquarters in Hopkins, Minnesota.
- - After you have completed the voting option you select, you will be asked to confirm your vote, and after you have indicated
whether you plan to attend the meeting, your call will end.
VOTING OPTION #1: If you wish to vote as the Board of Directors recommends on ALL proposals, you will be instructed to press 1.
VOTING OPTION #2: If you wish to vote on each proposal separately, you will be instructed to press 0, and then instructed on how
to vote on each proposal, as explained below.
- ------------------------------------------------------------------------------------------------------------------------------------
Proposal 1: Election of Directors: To vote FOR all nominees, press 1; to WITHHOLD authority to vote for all nominees, press 9; to
WITHHOLD authority to vote for any individual nominee, press 0. If you press 0, you must enter the two digit number
that appears at the top of this form in front of the name of each nominee for whom you do not wish to vote, and then
press 0 again after you have completed voting on the election of directors.
- ------------------------------------------------------------------------------------------------------------------------------------
Proposals 2, These proposals are indentified at the top of this form. To vote FOR a proposal, press 1; to vote AGAINST a proposal,
3 and 4: press 9; and to ABSTAIN from voting on a proposal, press 0.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
IF YOU VOTE BY TELEPHONE, THERE IS NO NEED
TO RETURN YOUR PROXY CARD BY MAIL.
